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JAIIB QUESTIONS AND MODEL QUESTION PAPER
1) If number of partners in a firm is 22 in respect of trading activity the fir
m is
1) Limited company
2) Large partnership
3) Illegal association
4) None of these
2) Mandate given by the illiterate account holder should be
1) Attested by manager who confirms and certifies thee same.
2) Attested by Notary public or Magistrate.
3) It is enough if we ask for a Mandate letter with LTI which has to be atteste
d an authorised official.
4) We cannot accept a mandate from an illiterate customer at all.
3) A joint account is operated by A and B as both or survivor. A dies and a che
que signed by A and B are presented for payment. The cheque
1) Can be paid.
2) Can be paid after getting confirmation from B.
3) Can be paid after getting the consent of the legal heirs of A.
4) None of the above.
4) IT authorities have seized a deposit receipt from a customer. The deposit ha
s matured. Now the deposit receipt is presented by IT authorities for payment al
ong with over due interest
1) Overdue interest can be paid if the deposit is renewed for a further period
of 15 days.
2) Overdue interest can be paid because the receipt is IT authorities.
3) The branch can pay interest after getting permission from R.O.
4) None of the above.
5) The combination of two or Companies into a single Company where one survives
with its name (or a combined new name) and others lose their corporate existence
is known as
1) Merger or Amalgamation
2) Diversification.
3) Combination.
4) All the above
6) Mergers are of 4 types. 1) Vertical mergers 2) Conglomerate mergers 3) Conce
ntric Merger What is the 4th type.
1) Practical mergers
2) Horizondal Mergers
3) Typical mergers
4) Foreign Merger
7) A formal and mutually agreed commercial collaboration between Companies is k
nown as
1) Merger
2) Amalgamation
3) Strategic Alliance
4) Subsidiary
8) Combining of two existing Companies into a new Company in which the both the
existing companies extinguish and a new Company is made or created is known as
1) Consolidation.
2) Merger
3) Strategic Alliance
4) Acquisition
9) In 1921 three Presidency Banks in India The Bank of Bengal, The Bank of Bomb
ay, and Bank of Madras were amalgamated into one Bank which is now called.
1) Reserve Bank of India
2) United Bank of India
3) State Bank of India.
4) UCO bank
10) The minimum period for which commercial papers can be issued is
1) 12 months
2) 1 month
3) 3 months
4) CP can be issued for maturity from 7 days to 1 year
11) According to Section 130 of Transfer of Property Act the transfer of an act
ionable claim can be effected only by the execution of an instrument in writing
signed by transferor or by his duly authorized agent This mode of transfer of an
actionable claim is known as --------
1) Assignment
2) Lien
3) Mortgage
4) Hypothecation
12) A bill is drawn on 16th Feb, 2001 which is payable after 30 days. It will m
ature on
1) 13.3.2001
2) 15.3.2001
3) 20.3.2001
4) None of these.
13) Mr.Rao wants to give mandate to his minor son
1) It cannot be accepted since the mandate is to be given in favour of a minor
2) It can be accepted as the minor can act as an agent
3) Mandate can be accepted to operate only credit transactions and no debit sho
uld be allowed
4) None of the above.
14) Executors and administrators can delegate their powers to a third party to
operate the account
1) By mandate
2) By power of attorney
3) By obtaining permission from RO.
4) None of the above
15) Registration of a society is required
1) To sue in its own name as a separate legal entity.
2) To open a bank account.
3) To facilitate receipt of donations/grants from foreign countries.
4) None of the above.
16) Coupon rate refers to
1) Bank rate
2) PLR
3) The annual interest rate specified on bonds
4) All the above.
17) Mr. Subramanian who is an Ordinary SB account holder of your branch wants t
o nominate Mr. Alfred Clinton, an U.S. national, who is his friend. Is that allo
wed?
1) Yes it is freely permitted
2) Yes it is freely permitted, but at the time of settlement of claim and repat
riation to the nominee, branch has to take RBI permission
3) Yes it is freely permitted, subject to Regional office approval
4) Yes it is freely permitted, subject to CO approval
18) Section 171 of Indian Contract 1872, gives to a Banker an absolute right of
general lien on all goods and securities received by the Banker. The Bankers Li
en is -----------
1) Set off
2) An Implied Pledge.
3) Mortgage
4) Hypothecation
19) Nomination rules for deposit accounts have been introduced under the follow
ing rules of Banking Regulation Act, 1949:
1) Sec. 45
2) Sec. 45ZA F
3) Sec. 45ZA B
4) None of the above
20) In one of the joint Savings Bank accounts, you as a Branch Manager received
information that one of the depositors had been declared as Insolvent? The depo
sitors other than the undischarged insolvent claim the balance lying in the SB a
ccount. Can you pay?
1) You can pay to the other deposit holders jointly
2) You can pay to the other deposit holders, dividing the balance proportionate
ly
3) You can pay as per instruction jointly signed by the solvent depositors and
the official receiver of the undischarged insolvent
4) You can pay to the other deposit holders, dividing the balance proportionate
ly, after taking RO permission
ANSWERS
1) 3 2) 2
3) 2 4) 4 5) 2 6) 4 7) 2 8) 3
9) 2 10) 1 11) 1 12) 1 13) 2 14) 3
15) 1 16) 3 17) 4 18) 4 19) 1 20) 4
========================================================
JAIIB Principles and Practices of Banking
1. According to you what are the most important functions of Reserve
Bank of India?
Ans:
a. RBI is the Central Bank of the Country
b. Acts as a Note Issuing Authority
c. Acts as a Banker's Bank
d. Acts as Banker to Government
e. Supervise and Control Banks and financial Institute
f. RBI is controlling inflation through Monetary and Credit Policy
g. Regulates transactions in foreign exchange
2. As per the Section 20 and Sec 21 of RBI Act RBI is obliged to tran
sact banking business and mange the Public Debt of Central Government Can you el
aborate the Role of RBI in the Public Debt
Ans: Public Debt can be by way of long term bonds and or by way of Treasury Bil
ls
a. At present Treasury Bills are issued for periods of 91 days and 36
4 days.
b. The Treasury Bills are issued for meeting the Short Term requireme
nts where as the Long Term Bonds are issued for various periods for meeting long
term investments.
3. What do you know by the Term Ways and Means Advances?
Ans: As per Section 17 (5) of RBI Act, Bank can give the Central and State Go
vernment Advances which are repayable within 3 months. This is thus a short ter
m finance and bridge the interval between expenditure of the Government and the
flow of revenue planned in the budget.
4. Y.V.Reddy Committee has come out with a new concept of Monetary Ag
gregates and also Liquidity Aggregates. What are they?
Ans: M0, M1, M2, M3 are called Monetary Aggregage
and L 1, L2, L3 are called Liquidity Aggregates.
5. What is Broad Money?
Ans: M3 is known as Broad Money.
M1 - is known as Narrow Money and is
M1 = Currency is circulation + Bankers Deposit with RBI + other deposits with R
BI.
M3 =M1 + Certificate of Deposit issued by Banks + Term Deposit (excluding FCNR (
B) with maturity upto one year + Term Deposti excluding FCNR (B) of more than on
e year + call borrowing by Banks from Non Depository Financial Corporate.
6. What is L1, L2, L3 Liquidity Aggregates.
L1 = M3 + all deposits (Excluding NSEs)
L2 = L1 + Term Deposits/Term Borrowing/Certificate pf Deposits Issued by Term Le
nding Institution/Refinancing Institute.
L3 = L2 + Public Deposit of NBFCs.
7. What is meant by Open Market Operation of RBI.
Ans: The Buying and Selling of securities or other Assets like Foreign Exchan
ge Gold by the Central Bank to alter the liquidity of the Banks is known as open
Market Operation. When RBI buys Government Securities from Banks the liquidity
portion of the Banks increases. Alternatively, when the Reserve Bank sells the
securities to be Banks, the banks liquidity position is reduced.
8).What are the Quantitative Credit Control measures exercised by RBI.
Ans:
a. Bank Rate
b. Reserve Requirement
c. Open Market Operation
d. Interest Rate Policy
9). What is the Qualitative Control measures used by RBI.
Selective Credit Control is used by RBI to regulate cost and quantum of credit t
o select sectors.
10. As per Section 45 ( c ) RBI has powers to direct Banks to submit
details of credit extended by them - Elaborate.
Ans:
RBI collects information on all the borrowers enjoying Secured Credit Limit of R
s.10 lacs and above and unsecured Credit Limit of Rs.5 lacs and above.
RBI also collects the details of all doubts loss of suit filed account with aggr
egate outstanding of RS.1 Crores and above and circulate the details to all Bank
s.
11. What information is provided through BSR - I Return.
Ans: BSR - I Part ( A ). Branches are required to resort particulars of all
borrowal accounts enjoying credit limit above of Rs.2 lacs.
BSR - I part B, details of limits of RS.2,00,000 and less are to be furnished.
12. What are the components of NDTL.
Ans:
The Time, Savings and Current Depends, Sundry Creditors, Interest Accrual, Inter
est Accrued and Payable, Net of Liability to Banking System.
However, the same exclude the inside liability like, claim received from ECGC, a
mount received pending final adjustment towards the dues etc.,
13. CRR is to be maintained as per RBI Act ------ Elaborate on this.
Ans:
a. Cash Reserve Ratio as per Sec 42 of RBI Act.
b. As per the latest Monetary Policy CRR is to be maintained @ 6% of
NDTL for Scheduled Commercial Banks
c. The Required Amount under CRR is to be kept with RBI in their Curr
ent Account in the case of Schedulesd Banks
14. What is the mode of maintaining CRR
a. CRR is to be maintained in the form of balance with CA of RBI.
15. What are the major recommendations of Narasimhan Committee.
Ans:
a. Introduction of Prudential Norms viz., Asset Classification, Incom
e Recognition, Provisioning and Capital Adequacy norms
b. Reduction of SLR to 25% and CRR to a low level.
c. Privatisation of Public Sector Banks. Government Capital to be re
duced to 51% in the first stage and then to 33% in the second stage.
d. Introduction of new legal set up. Set up DRT.
e. Entry for Foreign Banks and also setting up of New Private Sector
Banks.
f. Recommended for setting up. Board for Financial Supervision.
16. What are the functions of Board for Financial Supervision
a. Integrated Supervision over Commercial Banks, Financial Institutio
n, Non Banking Financial Intermediaries. etc.,
b. The Supervision will be both "on site" and "off site Supervision".
c. For Off Site supervision RBI has introduced DSB Returns
17. How many DSB Returns are introduced by RBI and which all areas they cover.
Ans: There are seven types of DSB Returns. Cover, Details of Assets and Liab
ility of Banks, Capital Adequacy, NPA Assets, and Quality of Assets, Position of
Unreconciled entries etc., etc.,
18. What are the circumstances where disclosure of customers account is permitt
ed
Ans: Disclosure can be allowed as per order of court
a. Order of Court
b. As per sec 4S of Bankers Books Evidence Act 1891
c. As per Income Tax ACt 1961 Sec 131 and Sec 133.
d. As per Criminal Procedure Code
e. As per Directions from Police Department, CBI etc.,
f. FEMA and Money Laundering Act
g. As per Companies Act 1956 as per Sec 251
h. As per Sec 45 ( C ) of RBI Act, where credit information has to be
disclosed
i. Disclosure to another bank
j. Disclosure in Public Interest
19. What is the procedure to be followed when Garnishee Order Is received. Also
explain what is Garnishee Order
a. Order from Court called order Nishi.
b. The order Nishi would instruct Bank to recover and Remit balance i
n the account of its creditors to court.
c. Branch has to block the Account if it is not encumbered and then r
eport to RO for further instruction.
d. Branch has to intimate the customer also on the same.
e. Branch has to then advise the details of Balance etc., to court.
f. On receipt of final order from Court which is known as Order Abso
lute, branch has to remit the amount to court.
20. What is the Speciality of Income Tax attachment order compared to Garnishe
e Order.
Ans:
a. Garnishee order can be applied in the same capacity account
b. Garnishee order does not attach account of Insolvent and Deceased
customers account
c. Only balance in account at the time of receipt attached. Income t
ax attachment order on the other hand attaches,
d. Deceased and also insolvent customers
e. Inrespect of Joint account the order attaches 50% of the due
f. Attach the available and also pipe line credits.
21. What are the difference between Mandate and Power of Attorney.
Ans: a. Mandate is a simple letter of authority given by an Account H
older to another person to operate his account on his behalf. To make, draw etc
., of Bills or Negotiable Instruments.
b. Power of Attorney is a general document used to convey powers for many other
purposes besides the operation in the account.
a. Mandate is given in Plain Paper
b. Power of Attorney is given on a stamp paper
c. Power of Attorney has to be executed in presence of a Notary Publi
c.
d. Power of Attorney can be Registered or Unregistered.
22. What are the salient features of Capital Gains Tax Account 1988.
Ans:
a. For persons, firms and others, who have capital gain and wish to i
nvest the same in house property etc., within a period of 3 years the mount of g
ain can be kept in an account known as Capital Tax Account.
b. The Account can be either SB or Term Deposit.
c. Nomination facility is available.
23. What is a Probate.
"A copy of will certified under the seal of court of competent jurisdiction conf
irming that the will has been duly executed and is the valid one".
24. What is the difference between Letter of Administration and Probate.
Ans: Letter of Administration is issued where the party has not created a Wil
l.
Probate is the certified approved will and is issued when the party has left a w
ill.
25. What is the present procedure for settlement of claim of deceased constitue
nt.
Ans:
1. Where ever Banks hold nominations in respect of deposit account ho
lders, settlement should be done as per nominations.
2. Where the settlement is sought as per Legal representation the sam
e can be settled as per Court decisions.
3. In other cases where Bank wish to settle without legal representat
ions, Bank can call for
a. Death Certificate
b. Consent Letter
c. Affidavit
d. Enquiry forms
e. Legal Heir Certificate
f. Stamped Receipt
g. Indemnity
26. What are the important section of Negotiable Instrument which has relevance
to day to day banking transactions.
Ans:
a. Section 4,5,6 which define Promissory Note, Bill of Exchange and C
heque.
b. Section 10 which defines payment in due course
c. Section 31. Obligation of a banker to meet customers mandate
d. Section 85, 85 D - Protection to a paying banker paying an order i
nstrument
e. Section 89 - giving protection to a banker paying instruments with
material alterations which are not apparent.
f. Sec 128, which gives protection to a banker paying a crossed cheq
ue.
g. Sec 131 gives protection to a banker collection a crossed cheque f
or a customer.
h. Sec 138 - 142 Dishonour of cheque for want of Funds.
27. What are the new guidelines on the NI Act relating to Sec 138 - 142.
Ans:
a. The Amendment includes, imprisonment for 2 years and penalty twice
amount of cheque.
b. Time for initiating criminal action 30 days from the date of intim
ation of dishonour of cheque by the payee.
28. What are the salient features of latest decided cases in respect of Dishono
ur of cheques under Section 138 - 142 of NI Act.
Ans:
The section is applicable to return of cheques
a) By repeated presentations at the request of drawer
b) In case of closure of account
29. Which are committees constituted for improving Customer Services in Banks
a. Talwar Committee
b. Goiporia Committee
c. Tarapore Committee
30. What do you know of COPRA - 1986.
Ans:
1. Consumer Protection Act 1986, provide the Consumer, a simple speed
y and inexpensive way of redressal of grievance in case of any deficiency/defect
in goods and services bought/used by him for a consideration.
2. There are 3 types of agencies
a. District Level Consumer Disputes redressal forum which can handle
disputes upto Rs.20 lacs.
b. State Consumer Disputes redressal commission which can handle disp
utes greater than20 lacs to Rs.100 lacs
c. National Consumer Disputes Redressal Commission which can handle d
isputes exceeding RS.1 Crores
d. The complaint has to be lodged within 2 years from the date of cau
se of action.
e. No stamp duty is payable
31. What is meant by credit clearing under Electronic Clearing Service (ECS)
Ans:
a. This clearing service is introduced as per Saraf Committee Recomme
ndations for handling repetitive or low value transactions like Interest dividen
d, pension etc., etc., For example - Dividend by UTI, its US 64 monthly interes
t on UTI schemes etc.,
32. What is meant by ESC Debit clearing?
Ans:
This is for debit transactions like payment of electricity bills, telephone bill
s etc.,
33. What is the importance of electronic funds transfer
Ans:
a. Saraf Committee recommended for the Introduction of EFT.
b. Under EFT, funds can be transferred between branches of a bank and
also between banks (via) electronic media
c. RBI has recently developed a new EFT Special Electronic Funds tran
sfer for transfer of Large Value Transaction.
34. Elaborate on the back-stop facility declared in the Monetary Policy 2003-04
.
Ans:
a. Back stop interest rate will be at the reverse repo cut off rate a
t which funds were injected earlier.
b. Where no reverse repo bid is accepted as per repo auction, the bac
k stop interest will be 2% points over rep cut off rate of Pre-day under LAF.
c. On days when no bids for repo or reverse repo auctions are receive
d/accepted the back stop interest rate will be decidd by RBI on an ad-hoc basis.
35. What is the purpose of the Information Technology Bill 2000
Ans:
a. The Bill provide the legal frame work necessary for electronic com
merce.
b. Facilitate electronic filing of documents with Government agencies
and
c. Amend the Indian Penal Code, The Evidence Act, The Banker's Book o
f Evidence Act and The Reserve Bank of India Act.
36. What all areas are covered by Information Technology Bill 2000
a. Recognises, Authentication of Electronic records by the use of Asy
mmetric Cryptosystem and hash functions.
b. It allows for information to be submitted to Government Department
in electronic form.
c. The Act recognises an electronic record which has been signed with
a digital signature.
d. It lays down the broad authority structure for implementing Public
Key Infrastructure.
37. What is RBS?
Ans:
a. Risk based Supervision, which is developed as per Basle Committee
Recommendations to strengthen the Banking System.
b. What are the three Pillars of Basle II Accord.
Pillar I - Capital Adequacy Requirements
Pillar II - Supervisory Review
Pillar III - Market Discipline
38. What is the quantum of Economic Capital that is stipulated by RBI.
Ans: 12% of the Regulatory Capital
39. Under Standadised approach what is the risk weight that is to be allowed f
or various Asset
Ans:
a. Sovereign Asset 0% to 150%
b. Banks 20% to 150%
c. Others (Corporates) 20% to 150%
depending on the rating of the Asset
40. Under Internal Rating Based approach of rating the risk of various Assets,
what are the types of credit risk considered.
a. Corporates
b. Banks
c. Sovereign
d. Retail
e. Project Finance
f. Equity
41. What is the Fiscal Deficit
Fiscal Deficit = Revenue Deficit + Capital Expenditure -
Disinvestment receipts and loan Recoveries
42. What is meant by Primary Fiscal Deficit
Ans: Gross Fiscal Deficit - Interest Payment
43. What do you know about CDR.
CDR is also known as Corporate Debt Restructuring
1. It is a non statutory voluntary mechanism
2. It is set up by Bank and Financial Institutional under advice to R
BI
3. It is to provide timely support to viable entities facing financia
l problems
4. There is legal binding in this through debtor - creditor aggrement
s.
44. What are the categories of accounts covered under CDR.
Ans:
a. Accounts covered are those under Multiple Banking /Syndication/Consor
tium.
c. Accounts with outstandings of Rs.10 Crores and above to Banks and
Financial Institutions.
d. The outstanding exposure may be fund based and non fund based
e. Provides Restructuring to Standard and Substandard category and al
so for Doubtful category accounts including suitfiled and BIFR accounts
f. Wilful defaulters not covered
g. Atleast 75% of the lenders by value should agree for CDR package
45. What are the structural Tiers of CDR
a. CDR Standing Forum
This consist of CMD of IDBI, Chairman of SBI, ICICI Bank IBA and CMD's of all pa
rticipating Banks/Financial Institutions
46. What are the most important categories of risks for Bankers
Ans:
1. Credit Risk
2. Market Risk
3. Operational Risk
47. What are the important factors of Credit Risk
Ans:
Credit Risk is a combination of Portfolio Risk + Transaction Risk
48. What is Migration Risk ( a form of Credit Risk)
Ans:
The Risk associated with Migration of an Asset from Standard to Substandard.
49. What are the tools available for Mitigating Credit Risk
Ans:
a. Prudential Exposure Norms viz., Single Borrower exposure @ 15% etc
.,
b. Delegation of Power
c. Multilayer Sanction
d. Portfolio Selection
e. Sector Allocation of Credit
50. What are the major market Risk for a banker
Ans:
a. Liquidity Risk
b. Interest Rate Risk
c. Exchange Rate Risk
51. What are the hedging tools that are available for hedging Interest Rate Ris
k
Ans:
a. Forward Rate Agreement
b. Interest Rate Swap
52. What are the hedging tools that are available for hedging exchange rate
Ans:
a. Swaps
b. Option
c. Forward Rate Contract
d. Futures
53. What is the Periodicity of Inspection of "A" rated Branch
Ans:
a. 18 months duration is allowed. For B Rated or C Rated Branches it
will be 12 months.
54. What is the Prudential exposure limit for a single borrower and group borro
wer.
Ans:
a. Single Borrower 15%
b. Group Borrower 40%
c. Single Borrower Infrastructure 20%
d. Group Infrastructure 50%
of the Tier I and Tier II Capital of the Bank.
55. What is the cut off limit for conducting Stock Audit
Ans:
a) For NPA accounts with outstanding of Rs 5 crores and above once in a year i
n Dec.
b) For new borrowal accounts of funds based working capital for 5 crores to 1
0 crores once in a year in Dec .
c) For new borrowal accounts with working capital facilities of rs 10 crores
and above two times a year in June and December .
d) For existing borrowal accounts enjoing facilities of Rs 5 crores and above
for a period exeeding Two yearsonce in a year in Dec
56. What is the credit limit for SSI units which no collateral security should
be insisted
Ans:
For facilities under SSI upto Rs.5 lacs no Security to be insisted.
For advances for SSI upto Rs.25 lacs. We need not insisted provided the party h
as got a good track record.
Advance to MSE sector up to Rs1.00 Crore covered under CGTMSE
List out few credit derivatives
Ans:
a. Credit Default Swap
b. Credit Default Linked Notes
c. Credit Forward Contract
d. Credit Default Option
57. What do you know by Corporate Governance
Ans:
These are meant for
a. Ensuring compliance with regulatory requirement and also for becom
ing responsive to the expectation of stake holders.
b. Transparency of the system
c. Audit and control of transaction in the organisation
58. Into how many Liquidity buckets Assets and Liability are classified
Ans: Into 8 liquidity buckets with additional grouping of the first bucket in
to 1 day bucket, 2-7 days bucket and 8- 14 days bucket.
59. Into which liquidity bucket the doubtful assets are grouped
Ans:
In the greater 5 year Asset Bucket