1. Foreign Exchange Management Act (FEMA) is administered by:
(a) RBI (b) Govt. of India (c) SEBI (d) Both (a) & (b) (d) All of these
2. A license to deal in foreign exchange to authorized dealers is issued by :
(a) DGFT (b) FEDAI (c) RBI (d) EXIM Bank(e) both (a) & (c)
3. All foreign exchange transactions in India are governed by :
(a) Foreign Exchange Regulation Act, 1973 (b) Reserve Bank of India Act, 1934
(d) Foreign Exchange Management Act, 1999 (e) Banking Regulation Act,1949
4. Restricted money changers are the firms/ organizations authorized to undertake :
(a) sale of foreign currency notes, coins and travellers' cheques to the public
(b) purchase of foreign currency notes, coins and travellers' cheques from the public
(c) issue of letters of credit for their importer customers
(d) both safe and purchase of foreign currency notes, coins, travellers' cheques to / from the public
(e) either (a) or (b) above
5_ Full fledged money changers are the firms/ organizations authorized to undertake :
(a) sale of foreign currency notes, coins and travellers' cheques to the public
(b) purchase of foreign currency notes, coins and travellers' cheques from the public
(c) issue of letters of credit for their importer customers
(d) both sale and purchase of foreign currency notes, coins, travellers' cheques to I from the public
(e) either (a) or (b) above
6. Forward transaction in foreign exchange means a transaction :
(a) that is to be settled on the same day
(b) in which delivery of foreign exchange takes place on the second working day of the contract
(c) in which delivery of foreign exchange takes place on the next working day of the contract
(d) in which delivery of foreign exchange takes place beyond second working day of the contract
(e) in which delivery of foreign exchange takes place after at least 90 days beyond the day of the contract
7. Forex transactions are classified according to date of-deal and date of delivery. Which of the following is not correct regarding
type of exchange transaction?
(a) cash: which is to be settled on the same day
(b) spot: delivery of foreign exchange takes place on the second working day of the contract
(c) TOM: delivery of foreign exchange takes place on the next working day of the contract
(d) Forward: delivery of foreign exchange takes place beyond second working day of the contract
(e) None of these
8. For the purpose of foreign exchange transactions, foreign banks maintain accounts with ADs in India in
Indian rupees. In their mutual communications, Ads in India refer to such accounts as _______________ accounts.
(a) Loro (b) FCNR (c) Vostro (d) Nostro (e) Escrow
9. Account of a bank in India with a foreign correspondent bank abroad in foreign currency is called:
(a) Loro (b) FCNR (c) Vostro (d) Nos
10. Which of the following is not correct regarding classification of correspondent accounts?
(a) Nostro: Our account with you (b) Vostro: Your account with us
(c) Lore: Their account with them (d) None of these
11. Bank of India maintains Nostro account with Citibank in New York. Bank of Baroda also maintains Nostro account with Citibank
New York. If Bank of India wants to transfer funds from its Nostro a/c to Nostro a/c of BoB, then account of BoB is called as :
(a) Nostro (b) Vostro (c) Loro (d) Kerb (e) None of these
EXCHANGE RATES
12. When Foreign currency is fixed and value of home currency is variable, it is called:
(a) Direct Rate (b) Indirect Rate (c) Cross Rate (d) Variable Rate (e) None of these
13_ When home currency is fixed and value of foreign currency is variable, it is is called:
(a) Direct Rate (b) Indirect Rate (c) Cross Rate (d) Variable Rate (e) None of these
14_ In India, which type of rate is applied?
(a) Direct Rate (b) Indirect Rate (c) fixed rate (d) Variable Rate (e) None of these
15. In India, exchange rates are decided by whom?
(a) RBI (b) FEDAI (c) IBA (d) market forces (e) None of these
16. The quotation US $ 1 = Rs. 44.40 - Rs. 44.50 is:
(a) average rate (b) indirect rate (c) direct rate (d) cross rate (e) none of these
17. When Nostro account of the bank is credited before the payment to the tenderer of foreign exchange, which of the following
rates will be applied?
(a) TT Buying Rate (b) Bills Buying Rate (c) TT Selling Rate (d) Bills Selling Rate
18. When Nostro account of the bank is credited later than the payment to the tenderer of foreign exchange, which of the following
rates will be applied?
(a) TT Buying Rate (b) Bills Buying Rate (c) TT Selling Rate (d) Bills Selling Rate
19. When there is outward remittance and handling of import bills is involved, which of the following rates will be applied?
(a) TT Buying Rate (b) Bills Buying Rate (c) TT Selling Rate (d) Bills Selling Rate
20. When there is sale of foreign exchange, but import bills are not handled, which rate will be applied?
(a) Clean Selling Rate (b) Cheque Selling Rate (c) TT Selling Rate (d) Bills Selling Rate
21. Why exchange rate for purchase or sale of foreign currency are most unfavourable?
(a) Holding cost of currency is high (b) Bank does not get any exchange commission
(c) Bank runs the risk of counterfeit currency (d) Both (a) & (c) (e) All of these
22. The difference between buying and selling rate quoted by an Authorised Dealer is called:
(a) Dealer's Margin (b) Dealer's spread (c) Dealer's commission (d) None of these
23. A customer wants to subscribe to a magazine published in Paris. The exchange rate for draft will be :
(a) TT buying (b) TT selling (c) Bills selling (d) Bills buying (e) none of these
24. Your non-resident customer presents a draft in foreign currency for which cover has already been provided in Nostro account.
The rate of exchange to be applied to the transaction will be :
(a) TT buying (b) Bills selling (c) Bills buying (d) TT selling (e) none of these
25. Your importer customer has to retire his import bill. The rate of exchange to be applied will be:
(a) Bills buying (b) TT selling (c) Bills selling (d) TT buying (e) none of these
26. You had negotiated an export bill of your customer in May,2009. This bill has been returned by the overseas buyer for some
reasons and the AD has to debit his customer's account with Indian rupees. The rate to be applied will be :
(a) Bills buying (b) TT selling (c) TT buying (d) Bills selling (e) none of these
27. On which of the following TT buying rate will not be applied?
(a) Payment of DD drawn on the paying bank (b) cancellation of outward TT, MT
(c) Conversion of proceeds of instruments sent for collection (d) purchase of foreign DD drawn abroad
28. On which of the following TT Selling rate will not be applied?
(a) crystallization of overdue export bills (b) crystallization of over-
dile import bills
(c) Issue of foreign DD/MT (d) cancellation of outward TT/MT (e) Both (b) & (d)
LETTER OF CREDIT
29. Letters of credit transactions subject to provisions of :
(a) exchange control manual of RBI (b) UCPDC, 600 (c) UCPDC,500
(d) Foreign Trade Policy, 2009 (e) 1NCOTERMS
30. Full form of UCPDC is:
(a) Uniform Contract & Practices for Documentary Credit
(b) Universal Customs & Practices for Documentary Credit
(c) Uniform Customs & Practices for Documentary Credits
(d) Universal Customs & Provisions for Documentary Credits
31. For letter of credit transactions in international trade, under UCPDC (ICC publication 600) branches of a bank in different
countries are considered :
(a) another bank (b) units of the same bank (c) associate banks
(d) either (a) or (b) as per choice of beneficiary (e) either (a) or (c) as per choice of negotiating bank
32. If a credit does not indicate whether it is revocable or irrevocable, as per UCPDC, 600, it will be treated as :
(a) irrevocable (b) revocable (c) either revocable or irrevocable as per choice of beneficiary
(d) either revocable or irrevocable as per choice of applicant of the credit
(e) either (a) or (b) as per mutual consent of beneficiary and advising bank
33. If a letter of credit and UCPDC have contradictory provisions which of the following statements will be true ' in this regard:
(a) Provisions of UCPDC will prevail over those of Credit
(b) Provisions of Credit will prevail over those of UCPDC
(c) Better of the provisions of UCPDC or Credit as applicable to beneficiary will prevail
(d) Better of the provisions of UCPDC or Credit as applicable to applicant of Credit will prevail
(e) It beinga disputed matter the matter will haveto be referred to ICC,Paris
34. Which of the following feature(s) do/does not apply to a 'Transferable Credit'?
(a) Transferable L/C is one which is expressly written to be 'Transferable'.
(b) Transferable VC can be transferred only once but can be transferred to more than one parties.
(c) In a 'Transferable Credit' the first beneficiary has the right to substitute his own invoice(s) and draft for those of the second
beneficiary.
(d) Transfer of such Credit by second beneficiary back to first beneficiary is not permitted
35. A 'Revolving Credit' means a letter of credit :
(a) which is available for use in any country
(b) covering many shipments up to a particular period of time or a particular amount or both
(c) which can be easily transferred by the beneficiary to his suppliers
(d) which allows the beneficiary packing credit in foreign currency
36. A 'Red Clause' LC is one in which :
(a) the beneficiary can avail pre-shipment finance up to the amount specified in LC.
(b) negotiation is restricted to a particular bank (c) all clauses are compulsorily printed in red
(d) there are certain restrictive clauses as to period of shipment / negotiation of bills etc
37. A 'Back to Back' letter of credit is :
(a) one on the strength of which another bank's guarantee is obtained
(b) a second set of fresh LC opened in favour of second beneficiary on the strength of original LC
(c) one backed by the government guarantee
(d) a set of two LCs printed on the back of each other (e) none of these
38. A 'Green Clause' letter of credit is an extension of: (a) transferable credit (b) confirmed irrevocable credit (c) red clause
credit (d) revolving credit (e) all of the above
39. A 'Claused bill of lading' means bill of lading :
(a) containing special clauses as required under letter of credit
(b) with a clause that shipping company has a right to increase freight
(c) giving the importer right to refuse payment of freight if goods are damaged on board
(d) indicating defective condition / packing of goods (e) any one or more of the above
40. The expiry of a letter of credit is 15.07.2009. The last date of shipment mentioned in the LC is 30.06.2009. The shipment was actually made on
17.06.2009 and documents were presented on 15.07.2009. Choose the best option out of the following as per provisions of UCPDC, 600.
(a) The documents should have been presented within 7 days from date of shipment
(b) The documents can be accepted as they are presented within the validity of the letter of credit
(c) The documents should have been presented within 15 days from date of shipment
(d) The documents should have been presented within 21 days from date of shipment
(e) none of the above
41. PNB received a letter of credit Opened by a bank in Germany. It is not in a position to verify the apparent authenticity of L/C. Which of the
following is true with reference to the L/C as per UCPDC,600 ?
(a) PNB must advise the credit to the beneficiary without disclosing the facts
(b) PNB may elect not to advise the credit and must so inform the issuing bank without delay
(c) PNB may elect to advise the credit to the beneficiary without recourse
(d) either (b) or (c) (e) either (a) or (b)
42. A letter of credit was issued on 1.8.2009. The bill of lading presented on 10.8.2009 under LIC was dated 25.07.2009. The LIC is
silent on this aspect. AD should :
(a) accept the bill of lading, if otherwise in order (b) not accept a document dated prior to date of L/C
(c) refer the matter to the applicant of UC (d) refer the matter to issuing bank (e) none of these
43. A manufacturer exporter will prefer:
a) Transferable LC b) Irrevocable LC c) Irrevocable Confirmed LC d) Revocable LC
44. As per UCPDC 600, the words "about" or "approximately" used in connection with the amount of the credit or the quantity or the unit price
stated in the credit are to be construed as allowinga tolerance not to exceed
________ % more or less than the amount, the quantity or the unit price to which they refer.
(a) 10% (b) 5% (c) 1% (d) No variation is allowed
45. In a set of documents submitted under letter of credit the date of shipment is 30. 3.2009 whereas the insurance policy is dated
3.4.2009. In this case :
(a) we may accept the documents provided necessary cover has been provided in the policy effective from date of shipment.
(b) we must refuse the documents as it is a discrepancy
(c) the date of insurance policy must be changed to be prior to the date of shipment
(d) either (b) or (c) (e) none of the above
46. The beneficiary of an irrevocable letter of credit which was advised by us requests us to add our confirmation. Under the
circumstances :
(a) confirmation is added at the request of opening bank and will be done only as per the arrangement.
(b) we may do so as confirmation is usual course of business only and there is no commitment of the bank which adds the
confirmation.
(c) we must add our confirmation as it was advised by us
(d) we should decline it as no confirmation is necessary on the irrevocable letter of credit and only a revocable letter
of credit needs confirmation.
(e) we may do so only after obtaining indemnity from the issuing bank.
47. Our bank opened an irrevocable letter of credit and our correspondent bank abroad negotiated the bills under this LC and got the
reimbursement. When the documents were presented to our importer customer, he refused to pay on the plea that-
goods were not as per the
contract. In this case :
(a) we will verify the goods and take them into our possession
(b) we cannot recover the money from the negotiating bank because as per UCPDC we deal in documents and not in goods and
will proceed to recover the amount from the importer.
(c) we will request the correspondent bank to pay back the money.
(d) either (a) or (b) (e) none of the above.
48. A letter of credit was opened by us stipulating for 'clean on board bill of lading'. While scrutinizing documents under the UC we
find that the notation 'some packages torn' appears on the bill of lading. We should :
(a) accept the bill of lading as it is as per terms of UC
(b) try to rectify the irregularity with the shipping agent
(c) wait until the ship arrives and verify the goods
(d) immediately on receipt of documents, inform the negotiating bank by telex that documents are discrepant and they are held
at the risk and responsibility of the negotiating bank
(e) either (b) or (c)
49. A letter of credit is opened in US dollars. The insurance document can be in :
(a) US dollars only if not otherwise stipulated in the Credit. (b) in any freely convertible currency
(c) in Indian rupees only (d) in US dollars only (e) either (b) or (c)
50. As per UCPDC 600, if there is no indication in the credit of the insurance coverage required, the amount of
insurance coverage must be at least ______________ value of the goods.
(a) 110% of CIF value (b)110% of FOB value (c)100% of FOB value (d) 100% of CIF value (e) None
51. An UC calls for commercial invoice not exceeding US $ 2,00,000. As per UCPDC, 600, the invoice can be for : (a) US $ 2,00,000
(b) Upto US $ 2,20,000 (c) Upto US $ 2,10,000
(d) Upto $ 2,02,000 (e) none of the above.
52. Bank of Tokyo advised an UC to the beneficiary in India through BOB. It intends to advise an amendment through SBI. Under
UCPDC :
(a) it is choice of issuing bank to select any bank for advising amendment.
(b) it has to advise amendment only through BOB
(c) it has to advise amendment through RBI only. (d) either (a) or (c ) (e) none of these.
53. If a credit contains conditions without stating document(s) to be presented in compliance therewith, what should the bank
do?
(a) have to seek clarification from opening bank (b) disregard the conditions as not stated
(c) obtain documents in their discretion which appear to satisfy these conditions.
(d) either (a) or (c)
Answers::
1 D 2 C 3 D 4 B 5 D 6 D 7 E 8 C 9 D 10 D
11 C 12 A 13 B 14 A 15 D 16 C 17 A 18 B 19 D 20 C
21 A 22 B 23 B 24 A 25 C 26 B 27 D 28 E 29 B 30 C
31 A 32 A 33 B 34 D 35 B 36 A 37 B 38 C 39 D 40 D
41 D 42 A 43 C 44 A 45 A 46 A 47 B 48 D 49 A 50 A
51 A 52 B 53 B
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