MSME :: ( Most imp Exam point of view) MCQs

MSME :: ( Most imp Exam point of view)

1. A Small Manufacturing Enterprise unit is considered as Sick Industrial Unit: when account remains sub
standard for more than six months or there is erosion in the net worth due to accumulated cash losses to
the extent of 50% or more of its net worth during the previous accounting year and the unit has been in
commercial production for at least two years
2. A small scale unit (manufacturing) can be treated as micro unit if the original investment in plant and
machinery does not exceed : Rs.25 lac
3. A unit in service enterprise is considered as medium if the investment in equipment is: more than Rs 2
crore but up to Rs 5 crore.
4. A Unit will be called as Small Service Enterprise if investment in equipments is up to: Rs 2 crore.
5. Amount of maximum loan given to micro and small enterprises that is covered under-CGFTMSEscheme
: Rs.200 lac
6. As per Micro, small and medium enterprise development Act 2006, a small manufacturing enterprise is
one in which original investment in plant and machinery is: more than Rs 25 lakh and up to Rs 5 crore.
7. As per RBI guidelines, banks are required to provide__% of advance to small enterprises to units in
which original investment in plant & machinery does not exceed Rs 10 lac in the case of manufacturing
units and does not exceed Rs 4 lac in equipment in the case of service enterprises: 40%
8. As per RBI guidelines, Loans to Agro and food processing Units are eligible to be classified under
Agriculture Ancillary Activity under Agril. Finance Priority Per borrower Rs. 100.00 crores.
9. Bank limit for working capital based on turn over method: 20% of the projected sales turnover
10. Banks are required to make 40% of advance to Micro and Small enterprises to manufacturing units
with investment up to Rs 10 lakhs and/or service enterprises with investment in equipment up to: No
criteria (earlier Rs 4 lakh) and now Micro has to reach 7.00% by March 2016 & 7.5% by March
2017 of ANBC/ceobe which ever is higher.
11. Banks will not obtain collateral security in respect of loans to micro and small enterprises which are
covered by Credit Guarantee Scheme for Micro and Small enterprises?: Rs 1 crore
12. CGTMSE fee: For North East & women; Loan up to Rs 5 lakh – 0.75% p.a.; Loan more than
Rs 5 lakh – 0.85% p.a.
13. Composite loan limit for Small Manufacturing enterprises: Rs.1.00 crore
14. For being defined as Medium enterprise, the original investment in plant & machinery should be: More
than Rs 5 crore and up to Rs 10 crore.
15. For being eligible to be classified as small (service) enterprise, the original investment in equipment
should not exceed: Rs 2 crore.
16. Full form of CGTSME: Credit Guarantee Fund Trust for Micro & Small Enterprises.
17. If a small enterprise in manufacturing has a good track record, collateral security can be waived up
to: 25.00 lacs
18. If an MSME units holds a margin of Rs.20 lac and its projected sales are Rs.400 lac, its working
capital limit will be : Rs.80 lacs
19. In case of advance granted to Micro and small enterprises, banks will not obtain collateral security up
to: Rs 10 lakh
20. In case of advance to Micro and Small manufacturing enterprises, working capital limit by a bank as
per turnover method is calculated as: 20% of projected annual turnover.
21. In case of loan guaranteed under CGTMSE, what is the extent of cover for loan upto 50 lac granted to
a women?: 80% of amount in default.
22. In case of loan to micro and small enterprises guaranteed by CGTMSE, no collateral security is
required for loans up to: Rs 100 lac.
23. Khadi Village Industry part of MSE; irrespective of investment in P&M.
24. Maximum Guarantee coverage for loans guaranteed by CGTMSE if loan up to Rs 5 lakh: 85% of the
amount in default with a maximum of Rs 425000.
25. Micro, Small and Medium Enterprises is under which Ministry: Ministry of Micro Small & Medium
Enterprises.
26. SMERA stands for: Small & Medium Enterprises Rating Agency.
27. The definition of Micro and Small enterprise in the manufacturing Sector is based on investment in :
Plant and Machinery.
28. Under CGFT scheme for MSE, for loans up to Rs 50 lac, 80% coverage is not available for: SC/ST

29. What is the maximum amount of loan covered guarantee scheme of CGTMSE for loans made to micro
and small enterprise: Rs.00.00 Lac

30. What is the rate of guarantee fees charged under CGSMSE for loan of more than Rs 5 lac to a
women?: 0.85% p.a. of limit sanctioned.
31. Advantages of Cluster based finance to MSMEs: Risk mitigation.

Risk Management ::( Very important content read everyone)

Risk Management ::( Very important content read everyone)

The growing sophistication in banking operations, online electronic banking,
improvements in information technology etc, have led to increased diversity and
complexity of risks being encountered by banks. These risks can be broadly grouped
into Credit Risk, Market Risk and Operational Risk. These risks are
interdependent and events that affect one area of risk can have ramifications for a
range of other risk categories.
Basel-I Accord: It was introduced in the year 2002-03, which covered capital
requirements for Credit Risk. The Accord prescribed CRAR of 8%, however, RBI
stipulated 9% CRAR. Subsequently, Banks were advised to maintain capital charge
for Market Risk also.
Basel-II New Capital Accord: Under this, banks have to maintain capital for Credit
Risk, Market Risk and Operational Risk w.e.f 31.03.2007. The New Capital Accord
rests on three pillars viz., Minimum Capital Requirements, Supervisory Review
Process & Market Discipline. The implementation of the capital charge for various risk
categories are Credit Risk, Market Risk and Operational Risk. Analysis of the bank’s
CRAR under should be reported to the Board at quarterly intervals.
Internal Ratings Based (IRB) Approach: Under this approach, banks must
categorise the exposures into broad classes of assets as Corporate, Sovereign, Bank,
Retail and Equity. The risk components include the measures of the Probability of
Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective
Maturity (M). There are two variants i.e Foundation IRB (FIRB) and Advanced IRB.
Under FIRB, banks have to provide their own estimates of PD and to rely on
supervisory estimates for other risk components (like LGD, EAD) while under
Advanced IRB; banks have to provide their own estimates of all the risk components.
It is based on the measures of Expected Losses (EL) and Unexpected Losses (UL).
Expected Losses are to be taken care of by way of pricing and provisioning while the
risk weight function produces the capital requirements for Unexpected Losses.
Market Risk: It is a risk pertaining to the interest rate related instruments and
equities in the Trading Book i.e AFS (Available For Sale) and HFT (Held for Trading)
positions and Foreign Exchange Risk throughout the bank (both banking & trading
books). There are two approaches for measuring market risk viz., Standardized
Duration Approach & Internal Models Approach.
Operational Risk: Banks have to maintain capital charge for operational risk under
the new framework and the approaches suggested for calculation of the same are –
Basic Indicator Approach and The Standardized Approach. Under the first approach,
banks must hold capital equal to 15% of the previous three years average positive
gross annual income as a point of entry for capital calculation. The second approach
suggests dividing the bank’s business into eight lines and separate weights are
assigned to each segment. The total capital charge is calculated as the three year
average of the simple summation of the regulatory capital charges across each of the
business lines in each year.
Advanced Measurement Approach (AMA): Under this, the regulatory capital
requirement will equal the risk measure generated by the bank’s internal operational
risk measurement system using certain quantitative and qualitative criteria. Tracking
of internal loss event data is essential for adopting this approach. When a bank first
moves to AMA, a three-year historical loss data window is acceptable.
Pillar 2 – Internal Capital Adequacy Assessment Process (ICAAP): Under this,
the regulator is cast with the responsibility of ensuring that banks maintain sufficient
capital to meet all the risks and operate above the minimum regulatory capital
ratios. RBI also has to ensure that the banks maintain adequate capital to withstandthe risks such as Interest Rate Risk in Banking Book, Business Cycles Risk, and
Credit Concentration Risk etc. For Interest Rate Risk in Banking Book, the regulator
may ensure that the banks are holding sufficient capital to withstand a standardized
Interest Rate shock of 2%. Banks whose capital funds would decline by 20% when
the shock is applied are treated as ‘Outlier Banks’. The assessment is reviewed at
quarterly intervals.
Pillar 3 – Disclosure Requirements: It is aimed to encourage market discipline by
developing a set of disclosure requirements which will allow market participants to
assess the key pieces of information on the capital, risk exposures, risk assessment
processes and hence the capital adequacy of the institution. Banks may make their
annual disclosures both in their Annual Reports as well as their respective websites.
Banks with capital funds of `500 crore or more, and their significant bank
subsidiaries, must disclose their Tier-I Capital, Total Capital, total required capital
and Tier-I ratio and total capital adequacy ratio, on a quarterly basis on their
respective websites. The disclosures are broadly classified into Quantitative and
Qualitative disclosures and classified into the following areas:
Area Coverage
Capital Capital structure & Capital adequacy
Risk Exposures &
Assessments
Qualitative disclosures for Credit, Market, Operational,
Banking Book interest rate risk, equity risk etc.
Credit Risk General disclosures for all banks.
Disclosures for Standardised & IRB approaches.
Credit Risk Mitigation Disclosures for Standardised and IRB approaches.
Securitisation Disclosures for Standardised and IRB approaches.
Market Risk Disclosures for the Standardised & Internal Models
Approaches.
Operational Risk The approach followed for capital assessment.
Equities Disclosures for banking book positions
Interest Rate Risk in
the Banking Book
(IRRBB)
Nature of IRRBB with key assumptions. The increase /
decrease in earnings / economic value for upward /
downward rate shocks.
The Basel-II norms are much better than Basel-I since it covers operational risk.
However, risks such as Reputation Risk, Systemic Risk and Strategic Risk (the risk of
losses or reduced earnings due to failures in implementing strategy) are not covered
and exposing the banks to financial shocks. As per Basel all corporate loans attracts
8 percent capital allocation where as it is in the range of 1 to 30 percent in case of
individuals depending on the estimated risk. Further, group loans attract very low
internal capital charge and the bank has a strong incentive to undertake regulatory
capital arbitrage to structure the risk position to lower regulatory risk category.
Regulatory capital arbitrage acts as a safety valve for attenuating the adverse effects
of those regulatory capital requirements that activity’s underlying economic risk.
Absence of such arbitrage, a regulatory capital requirement that is inappropriately
high for the economic risk of a particular activity could cause a bank to exit that
relatively low-risk business by preventing the bank from earning an acceptable rate
of return on its capital.
Nominally high regulatory capital ratios can be used to mask the true level of
insolvency probability. For example – Bank maintains 12% capital as per the norms
risk analysis calls for 15% capital. In a regulatory sense the bank is well capitalized
but it is to be treated as undercapitalized from risk perspective.
Basel-III is a comprehensive set of reform measures developed to strengthen the
regulation, supervision and risk management of the banking sector. The new
standards will considerably strengthen the reserve requirements, both by increasing
the reserve ratios and by tightening the definition of what constitutes capital. The

new norms will be made effective in a phased manner from 1st July 2013 and
implemented fully by 31st March 2019 and banks should maintain minimum 5.5% in
common equity (as against 3.6% now) by 31st March 2015 and create a Capital
Conservation Buffer (CCB) of 2.5% by 31st March 2019. Further, banks should
maintain a minimum overall capital adequacy of 11.5% by 31st March 2019 and
supplement risk based capital ratios by maintaining a leverage ratio of 4.5%. These
measures will ensure well capitalization of banks to manage all kinds of risks besides
to bring in more clarity by clearly defining different kinds of capital.
Counter Cyclical Capital Buffer (CCCB): The objective of CCCB is twofold viz., it
requires banks to build up a buffer of capital in good times which may be used to
maintain flow of credit to the real sector in difficult times and also to achieve the
broader macro-prudential goal of restricting the banking sector from indiscriminate
lending in the periods of excess credit growth that have often been associated with
the building up of system-wide risk. It may be maintained in the form of Common
Equity Tier-1 capital or other fully loss absorbing capital only and the amount of the
CCCB may vary from 0 to 2.5% of total risk weighted assets of the banks. RBI
intends banks to have a sustainable funding structure. This would reduce the
possibility of banks’ liquidity position eroding due to disruptions in their regular
sources of funding thus increasing the risk of failure leading to broader systemic
stress. The Basel committee on banking supervision framed two ratios viz., Liquidity
Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) as part of global
regulatory standards on liquidity to be implemented from 1st January 2018.
i) Liquidity Coverage Ratio (LCR): In order to promote short-term resilience of
the liquidity risk profile of banks, RBI has introduced LCR in a phased manner,
starting with a minimum requirement of 60% from 1st January 2015, and reaching a
maximum of 100% by 1st January 2019. The LCR will ensure that banks have an
adequate stock of unencumbered high-quality liquid assets that can be converted
easily and immediately in private markets into cash to meet their liquidity needs for
a 30-calendar day liquidity stress scenario.
 ii) Net Stable Funding Ratio (NSFR): The ratio seeks to ensure that banks
maintain stable source of funding with respect to the profile of their assets (loans
and investments) and off-balance sheet activities such as extending asset
management and brokerage services to the clients. The NSFR should be 100% on an
ongoing basis. It limits over reliance on short-term wholesale funding, encourages
better assessment of funding risks across all assets and off-balance sheet items and
promotes funding stability.
Tier – I capital consists of Paid up Equity Capital + Free Reserves + Balance in
Share Premium Account + Capital Reserves (surplus) arising out of sale proceeds of
assets but not created by revaluation of assets MINUS Accumulated loss + Book
value of Intangible Assets + Equity Investment in Subsidiaries+ Innovative Perpetual
Debt instruments.
Tier – II consists of Cumulative perpetual preferential shares & other Hybrid debt
capital instruments + Revaluation reserves + General Provisions + Loss Reserves
(up to maximum 1.25% of weighted risk assets) + Undisclosed Reserves +
Subordinated Debt + Upper Tier-II instruments. Subordinated Debts are unsecured
and subordinated to the claims of all the creditors. To be eligible for Tier-II capital
the instruments should be fully paid, free from restrictive clauses and should not be
redeemable at the instance of holder or without the consent of the Bank supervisory
authorities. Subordinated debt usually carries a fixed maturity and they will have to
be limited to 50% of Tier-I capital.
However, due to the stress on account of rollover of demonetization and GST, the
implementation of Basel-III norms may slightly be delayed and the regulator likely to
inform the timeframe shortly.

Economic Capital (EC) is a measure of risk expressed in terms of capital. A bank
may, for instance, wonder what level of capital is needed in order to remain solvent
at a certain level of confidence and time horizon. In other words, EC may be
considered as the amount of risk capital from the banks’ perspective; therefore,
it differs from Regulatory Capital (RC) requirement measures. It primarily aims to
support business decisions, while RC aims to set minimum capital requirements
against all risks in a bank under a range of regulatory rules and guidance. So far, EC
is rather a bank-specific or internal measure of available capital and there is no
common domestic or global definition of EC. The estimates of EC can be covered by
elements of Tier-1, 2 & 3, or definitions used by rating agencies and/or other types
of capital, such as planned earning, unrealized profit or implicit government
guarantee. EC is highly relevant because it can provide key answers to specific
business decisions or for evaluating the different business units of a bank.
Dynamic Provisioning: At present, banks generally make two types of provisions
viz., general provisions on standard assets and specific provisions on non-performing
assets (NPAs). The present provisioning framework does not have countercyclical or
cycle smoothening elements. Though the RBI has been following a policy of
countercyclical variation of standard asset provisioning rates, the methodology has
been largely based on current available data and judgment, rather than on an
analysis of credit cycles and loss history. Since the level of NPAs varies through the
economic cycle, the resultant level of specific provisions also behaves cyclically.
Consequently, lower provisioning during upturns, and higher provisioning during
downturns have pro-cyclical effect on the real economy. However, few banks have
started making floating provisions without any predetermined rules; many banks are
away from the concept which has become difficult for inter-bank comparison. In the
above backdrop, RBI introduced dynamic provisioning framework for Indian banks to
address pro-cyclicality of capital and provisioning to meet the international
standards. Recently, RBI has allowed banks to recognize some of their assets like
real estate, foreign currency and deferred tax, reducing the extra capital needs of
state-owned banks by 15 per cent. The move is aimed to align the regulatory capital
of banks with the Basel-III standards.
Leverage Ratio: It is the tier-1 capital divided by the sum of on-balance sheet
exposures, derivative exposures, securities financing transaction exposures and off-
balance sheet items. This ratio is calibrated to act as a credible supplementary
measure to the risk based capital requirements with the objective to constrain the
build-up of leverage in the banking sector to avert destabilizing deleveraging
processes for the sound financial economy and to reinforce the risk based
requirements with a simple, non-risk based “backstop” measure. The desirable
exposure should be within 25 times of tier-1 capital.
Banks in India need substantial capital funds in the ensuing years mainly to fund the
credit growth which is likely to grow at around 15% to 20% p.a. and banks are
required to set aside a portion of capital for the said purpose. Banks also need
additional capital to write off bad loans as well as to meet the operational risks on
account of weaker implementation of systems and procedures. More importantly, the
implementation of Basel-III norms warrants pumping of substantial capital funds.
Raising these funds, though, will require several steps, apart from legislative
changes as Public Sector Banks can not dilute its equity below 51%. Attracting
private capital warrants minimum governance and structural reforms. It is also
proposed to create an independent Bank Holding Company to invite private capital
without diluting the equity to address the issue.

Risk Management MCQs

Risk Management::(Most Important)

01 RBI implemented the Basel-III recommendations in India, w.e.f:
a) 01.01.2013, b. 31.03.2013, c. 01.04.2013, d. 30.09.2013
02 Basel III recommendations shall be completely implemented in India by:
31.03.2020, b. 31.03.2019 c. 31.03.2618 d. 31.03.2017
03 Basel III capital regulations were released by Basel Committee on Banking Supervision (BCBS) during as a
Global Regulatory Framework for more resilient banks and banking systems:
December 2010, b. March 2011, c. December 2011, d. December 2012
04 Basel III capital regulations are based on 3 mutually reinforcing pillar. These pillars are (1) Pillar-1 minimum capital standards (2)
supervisory review of capital adequacy (3) risk management.
all the 3 are correct, b. only 1 and 2 are correct, c. only 1 and 3 are correct, d. only 2 and 3 are correct Under Basel II,
05.Under Basel II the option available to compute capital for credit risk are:-
standardized approach, b. risk management approach, c. advance measurement approach, d. standardized approach,
06. Under Basel III, the options available to compute capital for operational risk are :
standardized approach, b) risk management approach, c) advance measurement, approach, d) basic indicator
approach,
07.Under Basel III, the options available to compute capital for market risk are :
standardized approach, b) risk management approach, c) advance, measurement approach, d) basic indicator approach
08.Certain specific prescription of Basel II capital adequacy framework will continue to apply along with Basel III (parallel run), till:
31.03.2019, b) 31.03.2018, c) 31.03.2017, d) 31.03.2016
09. A bank in India is to comply with capital adequacy ratio requirements at :(1) consolidated (group) level after consolidating the
assets liabilities of its subsidiaries / joint ventures (2) solo level (3) overseas operations of the bank under (I) and (2).
a)1 and 2 only correct, b) 1 and 3 only correct, c) 2 and 3 only correct, d) 1 to 3 all correct.
10. In India, the banks are required to maintain a minimum Pillar 1 capital to risk weighted assets ratio (or minimum total
capital to risk weighted assets ratio) of a s o n
a) 8%, 31' Mar each year, b) 9%, 31" Mar each year, c) 8%, ongoing basis, d) 9%, ongoing basis.
11. The banks in India are required to compute Basel III capital ratios in the following manner (1) Common equity Tier I capital ratio (2)
Tier I capital ratio (3) Tier 2 capital ratio (4) Total capital to risk weighted asset ratio a) I to 4 all, b) 1,2 and 4 only, c) 1, 3
and 4 only, d) 1 and 4 only
12. To calculate capital adequacy ratio, the banks are to take into account, which of the following risk:
credit risk and operational risk only, b) credit risk and market risk only, c) market risk and operational risk only, d)
credit risk, market risk and operational risk.
13.Which of the following statement regarding the Total regulatory capital under Basel III is correct:
total regulatory capital is sum total of Tier I capital and Tier 2 capital, b) Tier I capital is called `aning-concern' capital and Tier 2
capital is called 'gone-concern' capital, c) Tier I capital comprises common equity Tier I and additional Tier I, d) all the above.
14 As per Basel III implementation in India, Common Equity Tier 1 capital must be % of
risk weighted assets on ongoing basis: a: 5.5% b: 7%, c: 9% d: 11%
15. As per Basel III implementation in India, minimum Tier 1 capital must be % of risk weighted assets on ongoing basis:
a: 5.5% . b: 7%, c: 9% d: 11%
16. As per Basel III implementation in India, within the minimum Tier 1 capital, the additional Tier capital can be:
a: min 5.5% of risk weighted assets (RWA), b: max 5.5% of RWA, c: min 1.5% of RWA, d: max 1.5% of RWA
17. As per BaselIII implementation in India, within total capital of 9% of risk weighted assets, the Tier 2 capital can be:

a: max equal to Tier I capital, b) min equal to Tier I capital c) max equal to 2% of risk weighted assets, d) min equal to 2%
of risk weighted assets
18. Which of the following statements is not correct regarding Basel III implementation in India:
a) minimum common equity Tier I ratio should be 5.5% of RWAs, b) capital conservation buffer, c) (CCB) consisting of
common equity, should be 2.5% of RWAs, d) maximum additional tier 1 capital should be 1.5% of RWAs, e) minimum common
equity Tier I ratio plus capital conservation buffer should be 7%
19. Which of the following statements is not correct regarding Basel III implementation in India:
a) minimum Tier I capital ratio should be 8%, b) Tier 2 capital should be max 2%, c) minimum total capital ratio should be 9%, d)
minimum total capital ratio plus capital conservation buffer should be 11.5%
20. As per Basel III, which of the following is an element of Common Equity component of Tier I (1) common shares i.e. paid
up equity capital (2) stock surplus i.e. share premium (3) statutory reserves (4) capital reserves representing surplus arising
out of sale proceeds of assets (5) balance in profit and loss account at the end of the previous year.
a) 1 to 5 all, b) I to 4 only, c) 1,4 and 5 only, d) 1, 2 and 3 only
21. As per Basel III, which of the following can be included in Additional Tier I capital (1) Perpetual Noncumulative Preference
shares — PNCPS (2) stock surplus or share premium resulting from issue of Additional Tier I instruments (3) Debit capital
instruments eligible to be included in additional Tier I.: a) 1 to 3 all, b) 1 and 2 only, c) 1 and 3 only, d) 2 and 3 only
22. As per Basel III, Tier 2 capital comprises which. of the following (1) general provisions and loss reserves (2) debt capital
instruments issued by bank (3) preference share capital instruments with redeemable or cumulative feature (4) revaluation reserve
(5) stock surplus i.e. share premium resulting from issue of Tier 2 eligible instruments.
a) 1 to 5 all, b) 1 to 4 only, c) 1, 4 and 5 only, d) 1, 2 and 3 only.
23. As per Basel III, general provisions and loss reserves are included in Tier-2 capital maximum to the extent of: 1.25% of total risk
weighted assets under standardized approach and 0.6% of total risk weighted assets under IRB approach
a) 0.6% of total risk weighted assets under standardized approach and 0.6% of total risk weighted assets under IRB approach
b) 0.6% of total risk weighted assets under standardized approach and 1.25% of total risk weighted assets under IRB approach
c) 1.25% of total risk weighted assets under standardized approach and 1.25% of total risk weighted assets under IRB approach.
24 As per Basel III, the value of revaluation reserve is to be taken at % discount to include in Tier 2 capital:-
a: 60% b: 55%, c: 50% d: 45%
25 As per Basel III, adjustments / deductions are required to be made from Tier I and Tier 2 capital, relating to which of the following
(1) goodwill and other intangible assets (2) deferred tax assets (3) Investment in own shares (treasury stock) (4) investment
in capital of banking, financial or insurance entities :
1 to 4 all, b) 1 and 2 only, c) 1 and 3 only, d) 1 only
26 As per Basel III, the investment of a bank in the capital of a banking or financial or insurance entity is restricted to which of the
following: a) 10% of capital funds (after deductions) of the investing bank, b) 5% of the investee bank's equity capital, c
30% of paid up capital and reserves of the bank or 30%, of paid up capital of the company, whichever is lower. d all the above
27 The net stable funding ratio (NSFR) under Basel-III will be implemented in India from:
a 01.01.2017, b 01.04.2017, c 01.01.2018, d 01.04.2018
28. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach, does not match in respect
of which of the following:
a. Fund & non-fund based claims on Central Govt. 0%, b Fund and non-fund based Central Govt. guaranteed claims — 0%, c
Fund and non-fund based State Govt. guaranteed claims — 0%
D Fund and non-fund based claims on State Govt. — 0%.
29 Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach, does not match in respect
of which of the following:
a) Claims on RBI or DICGC 0%, b) Claims on Credit Guarantee Fund Trust for MSE — 0%, c) Claims on Credit Risk
Guarantee Fund Trust for Low Income Housing — 0%, d) Claims on ECGC — 0%.
30. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach, does not match for claims
on foreign governments (based on rating of international rating agencies such as S & P, Fitch, Moody's Rating), in respect of which of
the following:
AAA to AA rating — 0%, b: BBB rating — 20%, c: Below B rating — 150%, d: unrated — 100%
31. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach, does not match for claims
on foreign public sector enterprises (based on rating of S & P, Fitch, Moody's Rating), in respect of which of the following:
a: AAA to AA rating — 20%, b: A rating — 20%, c: BBB to BB rating — 100%, d: unrated — 100%.
32. Under Basel III, what is the risk weight for capital charge for credit risk on the basis of standardized approach, for claims on
Bank for International Settlements, International Monetary Fund, Multi lateral Development Banks:
a: 0% b: 10%, c: 20%d: 50%.
33. Under Basel III, the risk weight is % for capital charge for credit risk on the basis of standardized approach, for claims
on banks incorporated in India and foreign bank branches in India, where they meet the level of common equity Tier I capital

and applicable CCB: a: 0% b: 10%, c: 20% d: 50%
34.Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach, does not match for claims
on foreign banks (based on rating of international rating agencies such as S & P, Fitch, Moody's Rating), in respect of which of the
following: a) AAA to AA rating — 20% b) BBB rating — 50%, c) Below B rating — 150% d) unrated — 150%,
35. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach for long term loans, does
not match for claims on domestic corporates, AFC and NBFC-IFC (based on rating of internal rating agencies such as CRISIL, CARE,
ICRA etc.), in respect of which of the following:
a) AAA rating — 20%, b) A rating — 50%, c) BBB —100%, d) unrated — 150%
36. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach for short term loans, does
not match for claims on domestic corporates, AFC and NBFC-IFC (based on rating of internal rating agencies such as CRISIL, CARE,
ICRA etc.), in respect of which of the following: a) Al+ - 20%, b) A2 — 50%, c) A3 — 75%, d) A4 —150%
37. Under Basel III, the risk weight is % for capital charge for credit risk on the basis of standardized approach, for
claims included in regulatory retail portfolio: a 20% b: 50%, c 75% d: 100%
38. Under Basel III, which of the following is part of the regulatory retail portfolio (1) mortgage loans which qualify as claim
secured by residential property or commercial real estate (2) consumer credit or personal loans or credit card receivables
(3) capital market exposure (4) venture capital exposure.
a) I and 3 only, b) 2 and 4 only, c) 1 to 4 all, d) none of the above
39. Under Basel III, to consider a claim as part of regulatory retail portfolio, which of the following condition is stated correctly:
(1) orientation criteria i.e. the exposure to individual person or to small business, where total average annual turnover in small
business is less than Rs.50 or (2) granularity criteria i.e. no aggregate exposure to one counterpart is more than 02% of overall
regulatory retail portfolio (3) maximum retail exposure to one counterpart does not exceed the threshold limit of Rs. I cr.
a) 1 to 3 all, b) 1 and 2 only c) I and 3 only, d) 2 and 3 only
40. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach for home loan up to Rs.20
lac where loan to value (LTV) ratio is 90% is : a) 20% b) 50%, c) 75% d) 100%.
41. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach for home loan of above
Rs.20 lac up to Rs.75 lac, where loan to value (LTV) ratio is 80% is : a) 20% b: 50%, c 75% d: 100%
42. Under Basel III, the risk weight for capital charge for credit risk as per standardized approach for home loan
of above Rs.75 lac, where loan to value (LTV) ratio is 75% is :- a) 20% b: 50%, c 75% d: 100%
43. Under Basel III, the risk weight is for capital charge for credit risk on the basis of standardized approach
for commercial real estate — residential housing: a) 20% b: 50%, c) 75% d: 100%.
44. Under Basel III, the risk weight is for capital charge for credit risk on the basis of standardized approach for exposure to
commercial real estate:- 20% b: 50%, c: 75% d: 100%.
45. Under Basel III, for home loan purpose, the loan to value ratio (LTV) ratio is calculated as :
a) (principal + other charges) / (realizable value of mortgage property), b) (principal + accrued interest + other charges) /
(realizable value of mortgage property) c) (principal + accrued interest) / (realizable value of mortgage property), d) (principal +
accrued interest + other charges) / (cost of mortgage property)
46. Bank's exposure for dwelling unit to an individual shall be treated as exposure to commercial real estate, as per Basel III:- a:
2nd
b: 3rd, c 4th d: 5th
47. As per BaselIII implementation, the risk weight for unsecured portion of NPA for credit risk as per standardized approach is
% if the specific provision is less than 20% of the outstanding in NPA account:- a. 150%, b: 100%, c: 75% d: 50%
48. As per BaselIII implementation, the risk weight for unsecured portion of NPA for credit risk as per standardized approach is
% if the specific provision is at least 20% of the outstanding in NPA account:- a 150% b: 100%, c: 75% d: 50%
49. As per BaselIII implementation, the risk weight for unsecured portion of NPA for credit risk as per standardized approach is
% if the specific provision is at least 50% of the outstanding in NPA account:- a 150% b: 100%, c: 75% d: 50%
50. Under Basel III, the risk weight for capital charge for credit risk on the basis of standardized approach for which of the following
exposure, does not match: a) venture capital — 150% b) consumer credit or personal loans— 125%, c) credit card -
125%, d) capital market exposure 100

Ans::

1 C 2 B 3 A 4 B 5 C 6 B 7 C 8 C 9 D 10 D
11 B 12 D 13 D 14 A 15 B 16 D 17 C 18 D 19 A 20 A
21 A 22 A 23 A 24 B 25 A 26 D 27 C 28 C 29 D 30 B
31 B 32 C 33 C 34 D 35 D 36 C 37 C 38 D 39 B 40 B
41 B 42 C 43 C 44 D 45 B 46 B 47 A 48 B 49 D 50 D

FOREX FOR INDIVIDUAL MCQs

FOREX FOR INDIVIDUAL:
1. Under liberalized remittances by resident individuals upto ............................ for any permitted current or capital account transaction or a combination of both.
a) $ 150000 per financial year
b) $ 250000 per financial year
c) $ 150000 per calendar year
d) $ 250000 per calendar year

2. Capital account transaction refers to transaction which …………………………of a person resident in India.
a) alters the asset outside India
b) alters the asset within India
c) alters the liability outside India
d) alters the liability within India

3. Current account transactions means………………….
a) Transactions other than capital account
b) Transactions done through current account
c) Transactions done through saving account
d) Transactions done for business purpose

4. Release of foreign exchange above ……………… requires RBI permission in current account transactions.
a) $ 150000 b.$ 250000 c.$ 300000 d.$ 500000

5. For private visit to any country (except Nepal and Bhutan), any resident individual can obtain foreign exchange upto ……………………. In a financial year
a)150000 b)200000 c)250000  d)No such restriction,( any amount as per need)

6. For private visit to any country (except Nepal and Bhutan), any resident individual can obtain foreign exchange upto $ 250000 In a financial year but the number of trip should not be more than…………….
a) 5 b)10 c)12 for each month d)No such restrictions

7. For private visit to Nepal and Bhutan any resident individual can obtain foreign exchange upto ……………. In a financial year
a)$ 150000 b.$ 250000 c.$ 300000
d) No foreign currency could be released

8. Any resident individual may remit upto ………………….. in one Financial Year as gift to a person residing outside India
a)$ 250000 b.$ 200000 c.$ 150000 d.None of the above

9. A person going abroad for employment may draw foreing exchange upto ………………….. in one Financial Year
a)$ 100000 b.$ 150000 c.$ 250000 d.None of the above

10. Any resident individual may remit upto ………………….. in one Financial Year as donation to an organization outside India
a)$ 100000 b.$ 250000 c.$ 300000 d.None of the above

11. A person wanting to emigrate can draw foreign exchange upto
a)$ 100000 b.$ 250000 c.$ 300000
d).Amt prescribe by the country of emigration

12. A resident individual can remit upto …………………… per financial year towards maintenance of close relatives.
a.$100000 b.$200000 c.$250000 d.None of the above

13. Relative for business purpose aur official purpose has been defined in
a) Indian contract act
b) Indian Family dispute settlement act
c) Indian company act
d) Indian evidence act

14. For business trip to any foreign country, resident individuals can avail foreign exchange upto …………. during financial year.
a)$ 100000 b.$ 250000 c.$ 300000 d.None of the above

15. For medical treatment, Authorised dealer  may release foreing exchange upto an amount of …........... per Financial Year without insisting on any estimate from a hospital/doctor.
a) $ 100000 b.$ 250000 c. $ 300000 d.none of the above

16. Who overseas the foreign exchange Market in India?
a) RBI
b) Ministry of Finance, Govt of India
c) Ministry of External Affairs, Govt of India
d) FEDAI

17. FEMA 1999 was enacted to replace FERA 1973. FEMA came into effect from
a) 1st April 1999 b) 1st October 1999
c) 1st June 2000 d) 1st October 2000

18. Prevention of Money Laundering Act 2000 came into effect from
a) 1st April 2005 b) 1st July 2005
c) 1st April 2006 d) 1st July 2006

19. FII are allowed to invest in all equity securities traded in the primary and second-ary market. the  total investment by all the FII put together should not exceed ….............. of the issued and paid up capital of a company  which  can be raised up to the level of the prescribed sectorial cap.
a) 10% b)24% c)51% d)49%

20. Any Indian entity can make investment in an overseas joint venture or in a wholly owned subsidiary upto ….......... of its net worth?
a) 100% b) 200% c) 300% d) 400%

21. Foreign Inward Remittance Certificate (FIRC) is not required for any of the remit-tances to India if they involve relatives of NRI. However, For business purpose, one need FIRC for getting Tax concessions.
a) True
b) False
c) Can’t Say
d) FIRC is required for all the purpose

22. As per Income tax provision, a person will be treated as non-resident, if he/she stays outside India for
a) Less than 182 days in the preceding financial year
b) More  than 182 days in the preceding financial year
c) Less than 182 days in the preceding calendar year
d) More than 182 days in the preceding calendar year

23. Foreign exchange is to be surrendered to AD within……………… from the date of receipt
a) 60 days b)90 days c)120 days d)180 days

24. Foreign exchange due or accrued as remuneration for services rendered whether in or outside India or in settlement of any lawful obligation or an income on asset held outside India or as inheritance settlement of gift is to be surrendered to AD with-in……………… from the date of receipt
a) 60 days b)120 days c)90 days d)180 days

25. AD can issue FIRC on security stationary only in respect of which of the following cases
a) Advance payment for exports
b) Receipt of export proceeds by an AD other than the one who handles EDF
c) Inward remittance covering FDI/FII
d) All of the above

What is the difference between forex exchange for individuals and forex operations ?

IIBF certifications maximum members getting this doubt??

What is the difference between forex exchange for individuals and forex operations ??

1.Both Certifications are different

2.Foreign remittance facilities for individuals is a part of forex operations.

3. First one deals only with retail operations but in forex operations you will be learning about trade as well as trade finance

4. If you want to learn trade you can try forex operations.

BCSBI

Banking Codes and Standards Board of India (BCSBI)::

In November 2003, Reserve Bank of India (RBI) constituted the Committee on Procedures and Performance Audit of Public Services under the Chairmanship of Shri S.S.Tarapore (former Deputy Governor) to address the issues relating to availability of adequate banking services to the common person. The mandate to the Committee included identification of factors that inhibited the attainment of best customer services and suggesting steps to improve the quality of banking services to individual customers. The Committee felt that in an effort to continuously upgrade the package of services that banks offered to their customers, there was a need for benchmarking of such services. After an in-depth study at the grass-roots level, the Committee concluded that there was an institutional gap for measuring the performance of banks against a bench mark reflecting the best practices (Code and Standards). Therefore, the Committee recommended setting up of the Banking Codes and Standards Board of I ndia (BCSBI). BCSBI was set up to ensure that the common person as a consumer of financial services from the banking Industry is in no way at a disadvantageous position and really gets what he/she has been promised.

The Scheme of Banking Ombudsman, which has been functioning for quite some time, does not look into systemic issues with a view to enforcing a prescribed quality of service. Ideally, such a function should be performed by a Self-Regulatory Organisation (SRO) but in view of the existing framework of the banking sector in India, it was felt that an independent, autonomous Board will be best suited for the function. Therefore, Dr. Y.V. Reddy, Governor, Reserve Bank of India, in his Monetary Policy Statement (April 2005) announced setting up of the Banking Codes and Standards Board of India in order to ensure that a comprehensive code of conduct for fair treatment of customers was evolved and adhered to.

The Banking Codes and Standards Board of India was registered as a society under the Societies Registration Act, 1860 in February 2006. It functions as an independent and autonomous body. Membership of BCSBI is voluntary and open to scheduled banks. Initially the membership of BCSBI was open to scheduled commercial banks and has now been extended to include Regional Rural Banks and select Urban Co-operative Banks.

The general superintendence, direction and control of the affairs and funds of the Society is vested in the Governing Council (constituted by RBI) consisting of members drawn from different disciplines such as banking, economics, service etc. The first Governing Council relinquished office in December 2011 after which a new Governing Council was constituted.

The main objectives of the BCSBI are

To plan, evolve, prepare, develop, promote and publish comprehensive Codes and Standards for banks, for providing for fair treatment to their customers.

To function as an independent and autonomous body to monitor, and to ensure that the Codes and Standards adopted by banks are adhered to, in letter and spirit, while delivering services to their customers.

BCSBI has in collaboration with the Indian Banks' Association (IBA), evolved two codes - Code of Bank’s Commitment to Customers and the Code of Bank’s Commitment to Micro and Small Enterprises - which set minimum standards of banking practices for member banks to follow when they are dealing with individual customers and micro and small enterprises. These Codes are subject to periodical review and revision.. The central objective of these Codes is promoting good banking practices, setting minimum standards, increasing transparency, achieving higher operating standards and above all, promoting a cordial banker-customer relationship which would foster confidence of the common man in the banking system. The Codes lay great emphasis on transparency and providing full information to the customer before a product or service is sold to him. The Codes are not only commitments of banks to their customers but also in a sense a Charter of Rights for the common person. By setting the minimum standards of customer service, the Codes make the customer aware of he can expect each bank to deal with the his / her day-to-day requirements,

BCSBI monitors the implementation of the Codes through the following methods:

Obtains from member banks an Annual Statement of Compliance (ASC)

Visits branches to find out the status of ground-level implementation of Codes

Studies complaints received from customers and orders / awards issued by Banking Ombudsmen / Appellate Authority to find out whether there is any system-wide deficiency

Organizes an annual Conference with Principal Code Compliance Officers of the Member banks to discuss implementation issues.

BCSBI also

Undertakes campaigns and initiatives to spread awareness of the Codes amongst customers and banks

Provides faculty support to training establishments of banks

Participates in on-location workshops held by / for member banks to increase coverage

associates with customer awareness programmes conducted by Banking Ombudsmen

provides credit counselling services in Mumbai

publishes quarterly newsletter entitled ‘Customer Matters’, containing matters of interest to customers

BCSBI is not a forum for redressal of individual grievances. BCSBI, however, examines each compliant to identify any systemic issue that may exist and takes up the matter with the respective bank to ensure that systems and procedures are suitably amended so that such complaints do not recur.

Treasury Management Article

Treasury Management ::
 (Read nice article)
Banks not only lend money to customers but also invest in securities such as Bonds and
Debentures of Government as well as Corporates. These instruments are easily tradable
in the capital and money market. The tradability of securities makes investments an
attractive option for banks for deployment of their funds. Further, banks buy securities
not only to trade but also to hold them till maturity to take advantage of the attractive
returns with relatively lower risk. Banks are allowed to invest in shares of companies.
However, the volumes are low due to associated high risk besides regulatory restrictions.
The investment portfolio of the banks broadly divided into three groups viz.,
Trading Book – Securities purchased with the intention of selling them within 90 days
are held in the trading book. Trading opportunities arise in the market on account of
fluctuation in interest rates and arbitrage opportunities.
Available for Sale (AFS) – Securities which are bought with the intention of selling
them but not necessarily within 90 days is considered to be AFS securities. They are also
part of the trading portfolio of the bank but only the time frame is different. Both the
trading and AFS securities have to be “Marked to Market” every quarter while finalization
of quarterly results.
Held to Maturity (HTM) – These securities are meant to be held till their date of
maturity and the purpose investing in them is to earn reasonable steady income. These
securities are carried in the books at cost or purchase price till maturity. Hence, HTM
securities need not be “Marked to Market” as the bank is certain of receiving the
maturity value on the specified date. Banks are not allowed to shift securities freely from
trading and AFS to the HTM book as this may lead to overstating of profit figures.
However, banks can opt for shifting only once in a year to adjust their overall portfolio.
Banks are permitted to exceed the limit of 25% of total investments under HTM category
provided (a) the excess comprises of only of SLR securities and (b) the total SLR
securities held in the HTM category is not more than 23% by March 2014.
Call Money Markets: Call and notice money market refers to the market for short term
funds ranging from overnight funds to funds for a maximum tenor of 14 days. Under Call
money market, funds are transacted on overnight basis where as in case of notice
money market; funds are transacted for the period of 2 days to 14 days.
Coupon Rate: It is a rate at which interest is paid, and is usually represented as a
percentage of the par value of a bond. It refers to the periodic interest payments that
are made by the borrower (who is also the issuer of the bond) to the lender (the
subscriber of the bond) and the coupons are stated upfront either directly specifying the
number (e.g.8%) or indirectly tying with a benchmark rate (e.g. MIBOR+0.5%).
Zero Coupon Bond / Deep Discount Bond: The bond is issued at a discount to its
face value, at which it will be redeemed. When such a bond is issued for a very long
tenor, the issue price is at a steep discount to the redemption value. The effective
interest earned by the buyer is the difference between the face value and the discounted
price at which the bond is bought. The essential feature of this type of bonds is the
absence of intermittent cash flows.
Commercial Paper (CP): It is a short-term instrument to enable non-banking
companies to borrow short-term funds through liquid money market instruments. CPs is
therefore part of the working capital limits as set by the maximum permissible bank
finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to time
stipulating term, eligibility, limits and amount and method of issuance. CP can be issued
for maturities between a minimum of 7 days and a maximum up to one year from the
date of issue. The maturity date of the CP should not go beyond the date up to which the
credit rating of the issuer is valid. CP can be issued in denominations of `5 lakh and
multiples thereof. It is mandatory that CPs should be rated by credit rating agencies. In
a bid to make CPs attractive, the RBI has allowed issuers to buyback these instruments
through the secondary market before maturity. It attracts stamp duty.
Certificates of Deposits (CDs): It is a negotiable money market instrument and
issued in dematerialized form or as a Usance Promissory Note, for funds, deposited at a
bank or other eligible financial institutions to raise short-term resources within the
umbrella limit fixed by RBI. CDs may be issued at a discount on face value. CDs differ
from term deposit as they involve the creation of paper, and hence have the facility for
transfer and multiple ownerships before maturity. Banks use the CDs for borrowing
during a credit pickup, to the extent of shortage in incremental deposits. Minimum
amount of a CD should be one lakh and in multiples thereof. The maturity period of CDs
should be not less than 7 days and not more than one year. However FIs are allowed to
issue CDs not exceeding 3 years from the date of issue. Banks have to maintain the
appropriate reserve requirements (CRR/SLR) on the issue price of the CDs. It attracts
stamp duty. Banks/Fis cannot grant loans against CDs.
Mumbai Inter Bank Offered Rate (MIBOR) - Currently there are two calculating
agents for the benchmark viz., Reuters and the National Stock Exchange (NSE). The NSE
MIBOR benchmark is the more popular of the two and is based on rates polled by NSE
from a representative panel of 31 Banks / Institutions / Primary Dealers. It is used by
different Indian banks either for interbank lending of the surplus funds or for interbank
borrowing for meeting their short term liquidity requirements. MIBOR has been in use as
a reference/benchmark rate by the financial institutions for deciding interest rates for
the different financial instruments like Interest Rate Swaps, Forward Rate Agreements,
Floating Rate Debentures and Term Deposits, Loans of different maturities and
mortgages, etc. It is also the benchmark for the Call Money Market Rates.
Securitization is an effective tool to reduce the mismatches in the maturities of assets
and liabilities. It is a financing technique that involves pooling and re-packing of illiquid
financial assets in to marketable securities. There are six players viz., Borrowers,
Lending Banker (who becomes an originator for the Securitization transaction), Special
Purpose Vehicle (SPV), Credit Rating Agency, Investors and Service Providers. The
process of securitization involves identification of financial assets, rating of these assets
by the rating agency, creation of a SPV for handling the securitization transaction,
assignment of future receivables in favour of the SPV, issuance of marketable securities
based on these underlying financial assets and selling the same to the investors. The
service providers recover the amount periodically and remit to the SPV and who in turn
pass the benefit to the investors.
Asset and Liability Management – RBI Guidelines: Of late, it is observed that PSBs
have been accepting Bulk Deposits/Certificate of Deposits route to increase balance
sheet size at very high interest rates, adversely affecting the profitability besides
exposing the banks to ALM Risk. RBI directed banks not to accept Bulk Deposits beyond
10% of the total deposits and the total of Bulk Deposits & Certificates of Deposits should
not exceed 15% of total deposits of the bank at any given point of time. An appropriate
time-bound strategy for reduction of such existing bulk deposits should be put in place.
Adjusted Net Bank Credit (ANBC) denotes Net Bank Credit plus investments made
by banks in non-SLR bonds held in HTM category. However, investments made by banks
in the Recapitalization Bonds and Inter-bank exposures will not be taken into account for
the purpose of priority sector lending targets/sub-targets.
Subordinate Debt is a debt owed to an unsecured creditor that in the event of
liquidation can only be paid after the claims of secured creditors have been met.
Normally, subordinate debt ranks below other secured loans with regard to claims on
assets or earnings.

TREASURY MANAGEMENT MCQs2

Treasury Management::

1) Leverage means ability of a business concern:
a) To with stand pressures in the times of crisis
b) To meet its liabilities in time
c) To borrow or build up assets on the basis of given capital d) none of these
2) In case of banks, lev-erage is expressed by:
a) Return on Assets b) Net NPA ratio c) Capital adequacy ratio
d) Capital to outside liabilities e) None of these
3) Treasury deals are normally done over phone or over a dealing screen_ The deal
terms are-con-firmed in writing by
a) Front office b) back office c) middle office d) any of these
4) Delivery versus payment means one account is debited and another is credited:
a) on the same day b) by next day c) at the same time d) none of these
5) lh Treasury Operations, the term 'carry' means
a) Interest cost of funds locked in a trading position
b) Carrying forward the contract to next trading period
c) Carrying forward the settlement to next day d) none of these
6) "Marked to Market" means valuation of trading positions applying
a) Purchase price b) current market value
c) current market value or purchase price whichever is lower d) None of these
7) Mismatch refers to:
a) Difference in interest rates paid and received
b) Difference in sale and purchase price
c) Difference in duration of assets and liabilities d) all of these a) None of these
8) Which of the following is a reason for importance of Treasury risk management
a) Adverse market movements may result in instant losses
b) Treasury transactions are of high value needing relatively low capital
c) Large size of transactions done at the sole discretion of the Treasurer
d) Both (a) & (b) only e) All of these
9) High leverage means:
a) Very low capital requirement
b) Very high capital requirement
c) Very high profits compared to capital
d) Very high productivity e) None of these
10) Which of the following is/are not a conventional tool of management control on a
treasury function
a) Back office which checks all transactions of dealers
b) Exposure limits for counterparties avoiding concentration risk
c) Intra day and overnight ceiling on open positions and stop loss limits
d) Value at risk and duration techniques e) None of these
11) Which of the following is not a function of Back office of a treasury
a) Generating deals i.e. purchase and sale of foreign exchange, securities etc.
b) Settling the trade after verifying internal controls
c) Obtaining independent confirmation of deal from the counterparty
d) Verifying that rates / prices mentioned in the deal slip are conforming to the market
rates at the time of the deal e) None of these
12) Which of the following is responsible for ensuring compliance with various risk limits
imposed by the Management and RBI as well as accuracy and objectivity of the transaction?
a) front office b) back office c) middle office
d) both (a) & (b) only e) All of these
13) Middle office in a treasury is responsible for:
a) Validating deal wise information from accounting point of view
b) Overall risk management and MIS
c) Both (a) & (b) d) None of these
14) Default risk in Treasury means:
a) Failure of the borrowing bank in the call money market to repay the amount on due date to the lending bank
b) Possible failure of the counterparty to the transaction to deliver I settle their part of transaction
Compiled by Sanjay Kumar Trivedy, ChiefManager, Canara Bank, Shrigonda,Ahmed Nagar, Maharashtra 61 | P a g e
c) Both (a) & (b) d) None of these
15) The exposure limits for counterparties are fixed on the basis of counterparty's
a) net worth b) market reputation c) track record
d) size of treasury operations e) all of these
16) The Exposure limits for counterparties are:
a) Vary in relation to period of exposure
b) Remain same irrespective of period
c) Fixed only as per net worth irrespective of period d) none of these
17) In which of the following areas trading limits are not fixed by management?
a) limits on deal size b) limits on open position c) stop loss limits
d) all of these e) None of these
18) Open Position refers to:
a) Trading positions where the buy / sell positions are not matched
b) Trading positions where the securities are bought in the open market
c) Open market operations d) none of these
19) Limit on open positions are fixed because
a) There may be loss if there is adverse movement in rates
b) There is 'carry' cost
c) Both (a) & (b) d) None of these
20) Which of the following is incorrect regarding open position in forex?
a) Position limits are prescribed currency wise as also for aggregate position in Rupees
b) There are separate limits for 'day light' and 'over night' c) None of these

ANS::1 C 2 C 3 B 4 C 5 A 6 B 7 C 8 E 9 A 10 D
11 A 12 D 13 B 14 C 15 E 16 A 17 E 18 A 19 C 20 C

TREASURY MANAGEMENT MCQs 1

TREASURY MANAGEMENT ::

1. RBI pays interest on the cash balances in excess of which of the following to bank, of their
NDTL?
a) 2%
b) 3%
c) 5%
d) 6%
ans: b
2. while the exposure limits are generally left to the banks discretion. RBI has imposed
which ceiling of total business in a year with individual brokers.
a) 2%
b) 5%
c) 10%
d) 15%
ans : b
3. Ability of a business concern to borrow or build up assets on the basis of a given capital
is called.
a) debt service coverage ratio
b) good will
c) reputation
d) Leverage
ans: D
4. Protection of risk in a transaction usually through derevatives product is called.
a) insurance
b) swap
c) hedge
d) arbitrage
ans: c
5. For the organization point of view treasury is considered to be
a) Investment centre
b) Fund management department
c) service centre
d) commercial bank
e) Non of these

ans: c
6. A treasury transaction with a customer is known as…..
a) Marchant banking business
b) Trading business
c) investment business
d) commercial banking
e) Retail banking
Ans: a
7. Which act relating to foreign exchange has replace earlier one?
a) Foreign Exchange Management Act
b) Foreign Exchange Regulation Act
c) Both the above
d) none of these
ans :a
8. RBI has permitted banks to borrow and invest through their overseas correspondents
in foreign currency subject to which of the following ceilings.
a 25% of there Tier-I Capital
b 25% of there Tier-I Capital or USD 10 million
c 25% of there Tier-I Capital or USD 10 million whichever Is higher.
d 25% of there Tier-I Capital or USD 10 million whichever Is lower
ans-: c
9. The treasury is run by a few specialist staff engaged in high value transaction per trn size
generally not being below:
a Rs 10 million
b Rs 20 “
c Rs 50 “
d None of these
Ans : c
10 Treasury has open position which is also known as
a Trading position
b Open position
c Proprietary position
d) a & C both
e) a
ans : d

11. Security dealars deals with of the following market.
A primary mkt
B secondary mkt
C Open mkt
D OTC
E all of these
Ans: b
12. What is the minimum marketable investment in treasury…….
A Rs 5 crore
B Rs 10 “
C Rs 20 “
D Rs 50 “
E non of these
Ans ; A
13. which of the following is not a free currency in the foreign exchange market ?
A USD
B Rupee
C EUR
D All of these
Ans : b
14. which of following statement is not correct relating to TOD and TOM
A Rates are generally quoted at discount to the spot rate
B Rates are less favorable to the buyer of the currency
C Rates are generally quated at a premium to the spot rate
D Non of these
Ans : c
15 The interest rate differential is added to the spote rate of
A Low interest yielding currency
B high interest yielding currency
C Both
D non of these
Ans A
16. Buying of USD (with Rupees) in the market and selling same in forward market or vice
versa is called
A spot trn

B Forward tsn
C swap tsn
D convertible tsn
Ans: c
17 Call money refers to placement of fund……..
A same day
B overnight
C next day
D Two days
E Non of these
Ans: b
18. Notice money refers to placement of funds for period not exceeding……
A over night
B two days
C 7 days
D 10 days
E 14 days
Ans : e
19. Term money refers to placement of funds for period not exceeding…
A 01 yr
B 02 yr
C 03 yr
D 05 yr
 Ans ;A
20. Treasury Bills are issued by whom
A RBI
B State PSUs
C GOI
D IMF
E IRDA
Ans :C
21 treasury bill is issued for 91 days to 364 days by GOI 91 days t bill is auction on
weekly basis for amount Rs………….crore.
A 100

B 200
C 500
D 1000
Ans : c read qtn carefully total three qtns aare there..
22. 364 t bill is auction on fourthnightly basis for amt of RS ……….crore by GOI
A 500
B 1000
C 1500
D 2000
Ans : c
23. A commercial paper carried credit risk , issued for period of 14 days to 01 yr for
minimum amt of 05 lakh and face value of Rs 100 only by………………….and it
should be in D mat form. ( Read QTN care fully)
A RBI
B corporate
C commercial bank
D central govt
Ans : b
24. ECB( external commercial borrowings) indian companies can borrow ................without
approval of RBI
a. usd 500 mn up to minimum period of 5 yrs
b. usd 20 mn upto minimum period of 3 yrs
c. both a and b are correct
d. without RBI approval they cannot borrow at all
ans C
.page no 333 bfm
25individuals are now permitted to remit overseas freely without rbi approval upto
a. 100000 usd/year
b. 200000 usd/yr
c. 300000 usd/yr
d. not possible without rbi approval
 ans : b page 334 b pe
26. certificate of deposit is a negotiable debt instrument has maturity period of 07 to 1 yr
and minimum amt is Rs 01 lakh basically issued by……….
A RBI
B Banks
C Treasury
D Corporate
E None

Ans : b
27 the difference between buying and selling rate is called
a) spread
b) profit
c) a only
d) a& b
Ans:d
28 placement of funds for overnight is called
a) notice money
b) call money
c) term money
d) all the above
Ans : b
29. Treasury discount bills of exchange, of short term nature with a tenure of
A 1 to 3 month
B 3 to 6 m
C 6 to 9 m
D 9 to 12 m
Ans : b
30. govt security are issued by..
A central finance ministry
B ministry of commerce
C central govt
D RBI
Ans : d
31. The basis point value is associated with
A risk pricing
B risk measurement
C risk mitigation
D risk control
 Ans: b
32. Deventures are governed by
A Law of contract
B Company Law
C Negotiable instrument
D non of these
Ans: b
33. all exposure limit are reviewed ….
A once in a qtr
B once in half yr
C once in a yr
D no limit
Ans: c

34 interest cost of funds locked in a trading position is called
A swap
B pre-settlement
C carry
D speculation
E options
Ans:c
35. A situation where the depoiter of abank lose confidence in the bank and withdraw therir
balances immediately, is called
A liquidation of the bank
B falilue of bank
C run on the bank
D out of the money
Ans: c
36. The capacity of abank oa business organization to absorb losses on account of market
risk.
 A risk absorption capacity
B risk aversion capacity
C risk taking capacity
D risk appetite
Ans:d

Loans and Advances::(Useful for Certified credit officers( professionals) , Caiib also)) very important for bankers

Loans and Advances::(Useful for Certified credit officers( professionals)  , Caiib also)) very important for bankers

1. ˜Credit Rating Agencies in India are regulated by: RBI
2. ˜CRISIL stands for: Credit Rating Information Services of India Ltd.
3. ˜Deferred Payment Guarantee is : Guarantee issued
when payment by applicant of guarantee is to be made in installments over a period of time.
4. ˜If Break Even Point is high, it can be construed that the margin of safety is ____: Low.
5. ˜Long Term uses – 12; total Assets – 30; Long Term source 16; What is net working capital : 4
6. ˜On which one of the following assets, depreciation is applied on Straight line method: Computers.
7. ˜Projected Turnover is Rs.400 lacs, margin by promoter is Rs. 20 lacs. What is maximum bank
finance as per Annual Projected Turnover method: 80 lakhs.
8. ˜Rohit was a loanee of the branch and news has come that he has expired. On enquiry, it was
observed that he left some assets. Upto what extent the legal heirs are liable to the Bank? Legal heirs are
liable for the liabilities upto the assets inherited by them.
9. ˜The appraisal of Deferred Payment Guarantee is same as that of a) Demand Loan b) OD c) Term
Loan d) CC : Term Loan.
10. A cash credit account will be treated as NPA if the CC limit is not renewed within ___days from the
due date of renewal: 180 days.
11. A director of a bank wants to raise loan of Rs 10 lakh from his bank against Life Insurance Policy with
surrender value of more than Rs 15 lakh. What will be done?: Bank can sanction.
12. A firm is allowed a limit of Rs.1.40 lac at 30% margin. It wants to avail the limit fully. How much will
be the value of security : Rs.2 lac
13. A guarantee issued for a series of transactions is called: Continuing guarantee
14. A lady who has taken a demand loan against FD come to the branch and wants to add name of her
minor son, as joint a/c holder. What you will do?: Name can be added only after adjustment of the loan.
15. A letter of credit which is issued on request of the beneficiary in favour of his supplier: Back to Back
LC
16. A loan is given by the bank on hypothecation of stock to Mr. A. Bank receives seizure order from
State Govt. What should bank do?: Bank will first adjust its dues and surplus if any wilt be shared with
the Govt.
17. A loan was sanctioned against a vacant land. Subsequently a house was constructed at the site.
What security is available now to the bank? : Both
18. A minor was given loan. On attaining majority he acknowledges having taken loan and promises to
pay. Whether the loan can be recovered? : He can not ratify the contract. Hence recovery not possible.
19. A negotiating bank and issuing bank are allowed days each for scrutiny of documents drawn
under Letter of credit to ensure that documents are as per LC: 5 banking days each.
20. Age limit staff housing loan: 70 years;
21. An L/C is expiring on 10.05.2008. A commotion takes place in the area and bank could not open.
Under these circumstances can the LC be negotiated?: The L/C can not be negotiated because expiry date
of LC can not be extended if banks are closed for reasons beyond their control.
22. As per internal policy of certain banks, the net worth of a firm does not include: a. Paid up capital b.
Free Reserve c. Share Premium d. Equity received from Foreign Investor : Revaluation Reserves
23. Authorised capital is Rs.10 lac. Paid up capital Rs.6 lac. The loss of previous year is Rs.1 lac. Loss in
current year is Rs3 _ lac. The tangible net worth is : Rs.2 lac
24. Authorised capital= 10 lac, paid-up capital = 60%, loss during current year = 50000, loss last year =
2 lacs, what is the tangible net worth of the company? : 3.5 lac
25. Bailment of goods by a person to another person, to secure a loan is called : Pledge
26. Balance outstanding in a CC limit is Rs.9 lakh. Value of stock is Rs.5 lakhs. It is in doubtfUl for more
than two years as on 31 March 2012. What is the amount of provision to be made on 31-03-2013?: Rs.9
lakhs (100% of liability as account is doubtful for more than 3 years)
27. Balance Sheet of a firm indicates which of the following – Balance Sheet indicates what a firm
owes and what a firm owns as on a particular date.
28. Bank limit for working capital based on turn over method: 20% of the projected sales turnover
accepted by Banks
29. Banks are required to declare their financial results quarterly as per provisions of : SEBI
30. Banks are required to maintain -a margin of ___ for issuing Guarantee favouring stock exchange on
behalf of share Brokers.
31. Banks are required to obtain audited financial papers from non corporate borrowers for granting
working capital limit of: Rs.25 lakh &above
32. Banks provide term loans and deferred payment guarantee to finance capital assets like plant and
machinery. What is the difference between these two: Outlay of funds.
33. Benchmark Current Ratio under turn over method is: 1.25
34. Break Even Point: No profit no loss. ( TR-TC=Zero)
35. Calculate Debt Equity ratio – Debenture – Rs 200, capital 50; reserves – 80; P& L account credit
balance – Rs 20: 4: 3 ( 200 divided by 150).
36. Calculate Net working capital– Total assets 1000; Long Term liabilities 400; Fixed assets, Intangible
assets and Non current assets (i.e. long term uses) Rs 350; What is net working capital : 400- 350= Rs
50
37. Calculate Tangible Net Worth: Land and building: 200 Lacs; Capital:80000 intangible asset:15000:
65,000
38. CALCULATION OF INTEREST IN LOAN ACCOUNT: MONTHLY
39. CARE stands for : Credit Analysis & Research Ltd
40. Cash Budget method is used for sanctioning working capital limits to : Seasonal Industries
41. CC limit Rs 4 lacs. Stock 6 lacs. Margin 25% . What is drawing power? : NOTIONAL - 4.5 lacs, BUT
ACTUAL Rs. 4 LAC.
42. Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI) is a
government company licensed under Section 25 of the Companies Act, has been incorporated to operate
and maintain the Central Registry under the provisions of _____: SARFAESI Act 2002.
43. CIBIL is the agency that provides information to the member banks on (i) Credit Rating (ii)
Information on credit History: Information on Credit History of borrowers
44. Contribution means : profit + fixed cost
45. Current Assets 600, Long Term sources - 600, Total Assests1000, what is NWC and Current Ratio: CR
1.5 : 1; NWC = 200 .
46. Current Liabilities are those liabilities which are to be paid: within one Year
47. Current Ratio = 2:1, Net working Capital=60000, What is the Current Liability of the firm? : 60000
48. Current ratio indicates: Liquidity of the firm (ability of a firm to pay current liabilities in time)
49. Current Ratio is 1.33:1, Current Assets is 100, what will be the amount of Current Liability: 75 lakhs

50. Debt Equity Ratio indicates: Long term solvency or capital structure of the firm.
51. Debt Securitization refers to: Conversion of receivables into debt instruments.
52. Debt Service coverage ratio is used for: Sanction of Term Loans
53. Deferred Payment guarantee is: Financial Guarantee
54. Deferred payment guarantee issued by a bank is a : Contingent Liability.
55. Difference between Long Term Source and Long Term Use is called: Net Working capital.
56. DSCR indicates: Ability of firm to repay term loan instalments
57. DSCR is for evaluating: Term Loan repayment-surplus generating capacity.
58. Duty of confirming bank: Only to verify the genuineness of L/C.
59. Equitable Mortgage is created by deposit of title deeds with bank at – (a) any where in India; (b)
state capital; (c) only at Mumbai, Chennai or Kolkatta; (d) Any place notified by state government for this
purpose: Correct answer is (d).
60. Excess of current liability over current assets means the firm may face difficulties in meeting its
financial obligations in short term.
61. Expand CRILC: Central Repository of Information on large credits.
62. Expand IRR : Internal Rate of Return
63. Finance for construction of road and port is classified as: Infrastructure Finance.
64. For ascertaining that a firm will be able to generate sufficient profit to repay instalments of term
loan, which ratio is computed?: Debt Service Coverage Ratio
65. For assessing Fund Based Working Capital limit for MSME upto _______Turnover method is followed
under Nayak committee: Rs.5 crore.
66. For classification of assets in consortium accounts, which of the following is to be considered?: In
consortium accounts, each bank will classify the account as per its record of recovery.
67. For Takeover of accounts from other Banks, the account copies of all the borrower accounts with the
present bankers / financial institution shall be obtained at least for the last ______: 12 months.
68. Formation of consortium, when essential : When bank touches its exposure ceiling
69. Full form of DSCR: Debt Service coverage ratio;
70. Gold is pledged with bank as security for a Bank Guarantee by a borrower. Bank Guarantee stands
expired. Whether a temporary overdraft availed by the borrower which is overdue can be got adjusted by
selling the Gold held as security for issue of guarantee: Yes, because Bankers lien is a general lien and is
an implied pledge. Further, the Gold was deposited in the ordinary course of business.
71. Green field project is related to : setting up new projects
72. Guarantee issued by a bank in favour of Custom department that party will fulfill export obligation for
availing exemption from custom duty regarding tax. Such guarantee is called: Financial Guarantee
73. Guarantee issued by a bank which is still outstanding is shown in the Balance Sheet as: Contingent
Liability.
74. Guarantors Liability: Recall the a/c and cause demand against the borrower and guarantor. Balance
in guarantor's SB a/c cannot be appropriated directly.
75. Holiday period given for repayment of installements in a loan is termed as: Moratorium period
76. How DSCR is calculated?: (Profitafter tax + Depreciation + Interest on Term Loan) divided by (Annual
instalment of term loan+ interest on term loan)
77. How much additional risk weight has been provided on restructured loans?: 25%
78. Hypothecation can be converted to pledge by: taking possession with the consent of the borrower.
79. Hypothecation described under SARFEASI Act.
80. If a businessman start a business with a Capital investment of Rs.3,00,000/- and withdraw
Rs.25,000/- later. If Net Profit is Rs.1,20,000/- and income tax paid thereon is Rs.30,000/-, what is the
position of capital account (net worth) at the end of the year – 395000; 365000; 360000; nil:
Rs.3,65,000/-
81. If a LC contains a clause "about" regarding the amount and quantity of goods, how much tolerance is
permitted?: 10%
82. If current ratio is 2:1, net working capital is Rs 20,000, current asset will be: Rs 40,000
83. If debtors are Rs 4 lac, annual sale is 60 lac, what is the Debt collection period: 0.8 months
84. If Debtors velocity ratio increases, it means debt collection period has increased or sales have
decreased.
85. If documents are to be presented in about July month: these can be presented within 5 days before
or 5 days after.
86. If in a Guarantee issued is silent, what will be the limitation period: 3 yrs and in case of Govt
guarantee it is 30 years.
87. If in a LC words around is written with date then variation of is allowed in the period: +/- 5 calendar
days
88. If limit is 3 lacs, margin is 25% what should be stock to avail full limit?: Rs4 lac
89. If on a letter of credit it is not mentioned whether it is revocable or irrevocable, then as UCPDC 600, it
will be treated as : Irrevocable LC
90. If on a Letter of Credit, date is mentioned as "end of the month", then as per UCPDC 600, it will
mean: 21st to last day of the month.
91. If stock statement is not submitted for 3 months from its due date and DP is allowed on the basis of

old stock report, then the account will be considered NPA after:90 days
92. If the projected sale of a-small (manufacturing) enterprise is Rs 80 lakh, margin available with the
borrower is Rs 4 lakh, then as per turnover method, working capital limit will be: Rs 16 lakh.
93. If working capital limit to a borrower is Rs 10 crore and above, then as per RBI guidelines, the loan
component should be at least: as per bank's discretion.(earlier it used to be 80%).
94. In a company, the registration of charges is required for: a)loan against FD b)lien on Govt Securities
c) assignment of Book Debts d) lien on Shares : Book Debts
95. In A current account OD of Rs. 12000 is made. The FDR has become due later on if the right of
appropriation can be used. The borrower has objected that he never requested for overdraft, hence
payment can not be appropriated. The customer is right.
96. In a letter of credit, it is written that documents can be negotiated about 30th June. In this case, the
documents can be negotiated: Before or after 5 clays of 30th June.
97. In case of a loan under consortium, each bank can have Maximum working capital limit of Rs-No
rule in this regard. Rules of consortium to be framed by members of consortium.
98. In case of loan given by more than one bank under a consortium, how the asset classification is done
by various banks?: Each bank will classify the account based on its record of recovery.
99. In case of revaluation of fixed assets, what percentage of revaluation reserve will be added to Tier
II capital of the bank?: 45%
100. In Letter Of Credit jmporter is called: Opener of Letter of Credit
101. In project finance, Debt Equity Ratio requirement for other than Infrastructure finance is: 2:1
102. In respect of a project report, the feasibility which is given least importance by the preparers of the
report, but very important for a banker is : a) Commercial b) Technical c) economic d) financial Ans: C
103. In the Balance Sheet of a bank, Contingent Liabilities are shown as: footnote to the Balance Sheet.
104. In the case of advance to a limited company for purchase of vehicle, the charge is registered with
Regional Transport Authority in addition to registration of charge with. Registrar of Companies. Why this is
done?:So that borrower can not sell the vehicle without intimation to the bank
105. Interest rate on advances is related to – Bank rate; Base Rate; PLR: MCLR Rate
106. Limit sanctioned Rs 5 lac; Stock Rs 6 lac; Margin 25%; What will be Drawing power: Rs 4.5 lac
107. Loan Delivery System is not applicable to: a) Loan to Soft ware industry b) export credit: export
credit
108. Loan Delivery System suggested by Rashid Mani Committee is applicable on borrowers with working
capital limits of: Rs 10 crore and above
109. Loan is in the name of A&B. Both have signed documents. A signs the Balance Confirmation but B
does not. In this case limitation will extend against: both
110. Lorry Receipts issued by Transport Operators approved by IBA are preferred. The reason is the
Transport Operators will take care of: Carriers Risk.
111. Stand by LC is just like : Financial guarantee (A guarantee of payment issued by a bank on behalf of a
client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment with
a third party. Standby letters of credit are created as a sign of good faith in business transactions, and are
proof of a buyer's credit quality and repayment abilities)
112. Standard Score under CIBIL: 300 to 900
113. Stock Audit is required in respect of loans of : Rs.1.00 crore & above
114. Subordinate Debt is shown as part of in the Balance Sheet of a bank: Other Liabilities and
Provisions
115. Tangible Net Worth (TNW) is calculated as: Total paid up capital + Reserves – Intangible Assets.
116. The appraisal of deferred payment guarantee is similar to term loan: The difference is outlay of funds.
117. THE APPRAISAL OF DEFERRED PAYMENT GUARANTEE IS SIMILAR TO: TERM LOAN
118. The Audited Balance sheet for the latest financial year is to be obtained within ______ to finalise
credit rating and re-fix interest accordingly: 6 months.
119. The Bank did not disclose all material facts regarding loan to the guarantor while obtaining
guarantee. Can guarantor escape liability?: Guarantor cannot escape from his liability as it is not
necessary to disclose all the materials facts with regards to the loan.
120. The Borrower has to bring funds as his contribution for loan from: Long term Sources
121. The charge on stocks is created by: Hypothecation ( also by pledge or lien)
122. The concept of Base Rate is not applicable in the case of: Loan against Bank’s own deposit
123. The limitations of financial statements are : only quantitative not qualitative.
124. The long term liability to tangible net worth ratio implies : Long term solvency of the firm .
125. The main distinction between Hypothecation and Pledge is on accountof : Possession
126. The Meaning of Debtor Velocity Ratio is: Cycle of Debt Collection Period
127. The procedure used for ascertaining Customers Credit worth is called: Credit Rating
128. Time Limit for registration of equitable mortgage with CERSAI: 30 days from date of deposit of
title deeds. (Normally 30days and then delay can be condoned up to 30days on payment of penalty).
129. To improve Current Ratio of 2:1, what has to be done? a) Recover cash from Receivables b) Cash
sales c) Decrease the Bills payables.
130. Total Indebtedness Ratio is represented by: Total outside liabilities divided by Tangible Net Worth
131. What is "pari passu" means: Sharing in the ratio of outstanding.
132. What is a Break even point-The level of sales at which a firm does not earn any profit and does not
incur any loss.
133. What is cash loss : net loss before depreciation (Net loss minus depreciation)
134. What is Deffered Payment Guarantee?: Guarantee issued when payment by applicant of
guarantee is to be made in instalments over a period of time.
135. What is Mortgage? Transfer of interest in specific immovable property to secure an existing
or future debt.
136. What is nature of Banker's Lien?: It is implied pledge because Banker can dispose-off the goods after
giving notice to the borrower.
137. What is Pari Passu charge?: In case of consortium advance sale proceeds of security will be
shared among banks in proportion to their outstanding.
138. What is Real Rate of Interest?: Prevailing interest rate minus inflation rate
139. What is the meaning of Group in Exposure Norms: Commonality of management & Effective Control
140. What is the relationship between bank and customers in case of overdraft?: Creditor and Debtor
141. What is the risk weight for Personal Loans? 125%
142. What is the risk weight for Unrated companies?: 100%
143. What is the type of liability for the bank on account of issue of Bank Guarantee?: Contingent Liability
144. What type of bank gaurentee bank gives when a customer purchases a machine on instalment basis?:
Deferred Payment guarantee.
145. What type of Guarantee is Deffered Payment Guarantee: Financial Guarantee
146. What type of liability is represented by Bank Guarantee?: Contingent Liability and shown as a
footnote in the Balance Sheet.
147. What will be the tangible net worth if total assets are Rs 35 crore; total outside liability Rs 30 crore;
intangible assets Rs 3 crore: Rs 2 crore
148. What will happen in case of negative working capital limit: Current Liabilities are more than
Current Assets
149. Which is not a Credit Rating Agency – CRISIL, CARE, SMERA, ICRA, CIBIL: CIBIL
150. Which is not found in operating expenses statement of P&L statement - Salaries, Rent, Power: Power
151. Which is not included in Contingent liability – Bank Guarantee; Letter of Credit; Forward Contract;
Bills Payable: Bills payable
152. Which of the following is a contingent liability – deposits, borrowings, capital, guarantee: Bank
Guarantee
153. Which of the following is a Credit Information company – CIBIL, FIMDA, AMFI, CRISIL: CRISIL
154. Which of the following is part of the Solvency Ratios: debt equity ratio.
155. Which of the following represent Debt Service Coverage Ratio: (Net Profit after tax + Depreciation
+ Interest on Term loan) divided by (Annual instalment of term loan + interest on term loan)
156. Which of the items will not be an asset in banks bal sheet: Advances/Fixed Asset / Deposits :
Deposits
157. Which one of following is credit information company?: Equifax
158. Which system replaced Benchmark Prime Lending rate in banks: Base Rate
159. While arriving Drawing Power for financing against book debts, only Book Debts _____and below are
to be taken in to consideration. (other than MSME advances): 90 days
160. While doing Project Appraisal, sensitivity analysis is useful for: Viability and sustainability of project.
161. While financing for TL, Bank should look for the ability of the firm to generate the income to service
the debt
162. While granting loans to a partnership, banks generally insist that the firm should be registered
whereas registration of a partnership firm is optional. What is the reason for the same?: An
unregistered firm can not sue its debtors for recovery of its dues whereas other can sue the
firm for recovery of their dues
163. While undertaking technical appraisal, the following is not considered: cost of production and sales (it
is used for economic viability).
164. Who is bound to file particulars of charge with the Registrar of Companies under MCA 21, when a
company creates charge of somebody on its movable or immovable property except by way of
pledge?: officials of the company.
165. Why banks do not grant loan to a minor?: A minor is not competent to contract Therefore, Ioan given
to a minor can not be recovered.
166. Why banks ensure that charge created on any asset of the company should be registered with ROC
within stipulated period?: If charge is not registered, bank will become unsecured creditor.
167. Why banks prefer financing of bills?: because the advance is self liquidating
168. Why fund flow statement is taken from the borrower?: To know sources from where funds have been
raised and how funds have been utilized and to know changes in net working capital position.
169. Why loan against Partly Paid Shares are not preferred by banks?: Because partly paid shares
represent contingent liability. In case company makes demand and the borrower does not pay the
amount then the bank will have to pay the amount otherwise share may be forfeited. Moreover it is
prohibited by RBI
170. Working capital requirement of a firm is required to be met through : Short term sources and surplus

KYC AML MCQs

Study notes for NISM V-A

NISM SERIES -X-A

NISM SERIESVI Depository operations

NISM SERIES V-C MFD

NISM SERIES V-A

CAIIB PAPER 2 BFM Recollected questions

BFM Recollected questions::

Daily votality is 5% 2.5 Find modified duration - Ans is 2.38

STRIPS (Separate Trading of Registered Interest and Principal Securities) is a ...... zero-coupon securities

Which is not a derivative product ? - Repo (Swap, Option, Forward, Repo)

ECB limit - USD 500 mn up to minimum period of 5 years and USD 20 mn up to minimum period of 3 years without prior approval of RBI

ECB is denominated in which currencies.....USD, Euro or JPY

Consessive rate of interest on postshipment rupee export credit to gold card status holder can be extended maximum - 365 days

One importer want import one machine from China.He has to open lc. The exporter wants advance payment. What type lc - red clause

Value at risk is a measure of? Gap risks in foreign exchange operations

Which office not under treasury ? Options given r Mid office, back office, front office, legal office*, 

Under standard assets, provision for loss, RSV should be?? Ans - less than 10%

If interest of principle is not serviced for 90 days, what is the position of account? ans- outof order

Basel 3 teir 1 components. (Plz remember that Revaluation reserve is also now under Teir 1)

If treasury assets r withdrawn before maturity, what type of risk is it? ,

A 91 Day T bill of 93.21 wl have yield of? 

If 91 days treasury is 88., then its implied yield is?

ICAAP is related to? 

ADR related question

Double forward is called what ?

Related to Nro account

Nro account can be opened as sb,CA,FD type

Derivatives also lot of questions

Advising bank roles ... Like what he can do what can't

INCOTERM

IRS

Swap

Risk weightage

Lot of RWAs questions

Which is not included in calculation of NDTL/DTL for CRR/SLR

Component of tier 1

Rwa as per Basel III for housing loan based on LTV

Many questions sellect correct or incorrect about NRO NRE FCNR ECB EEFC CCIL

Estimated occurence of probability

Questions on currency derivatives, forwards, swaps

Forex market characteristics

One question related to embedded option risk

As per basic indicator approach calculation of capital charge 15% of average gross income over there years given but one of the year is having negative one that we have to ignore.

8.83GS2023price100.49 with yield 8.75 .....just it is given and based on this statement he asked for 5marks

Crystallization period for export

One question on American and europian option

Capital charge on operational risk based on standardized approach and basic indicator approach

Questions on ADR AND GDR

Questions on option and forward contact, future

Loan To Value Ratio

Risk Weight %

Swap Defination , ADR and INCOTERMS

RWA calculation for operational risk under Standardized approach

DGAP

Conceptual question on FCNR, RFC, NRO, NRE

Operational risk calculation all approaches

Modified duration

Tier 1 n tier 2 numerical

LC based case studies for 5 marks

Basic inducater appoach market risk 5 number

Modified duration of equity5 ques

Calculations of capital adequacy ratio quite a few questions

10 questions at from various risks associated with Treasury operations

Interest rate swap 5 questions

Bill buying 5 questions

EXCHANGE RATE

AAA A BB Rating Chart Questions for Risk Weighted Calculations

Yield Calculation

W RSA,RSL NUMERICAL

RATED BOND NUMERICAL

Yeild of bond numerical

BASIC INDICATOR APPROACH NUMERICAL

BPV

Forex t.bill 

Leverage 

Forward contact

CRAR

Operational risk

Treasury theoritical

60question theory easy

No ques from volatility and bpv

Call risk problems

packing credit problems

Rsl. Rsa.. Md problems

Leveage ratio related case study

BASEL III Tier 1 Tier 2 capital Minimum equity ratio related 

BFM Book page no 415 ICCAP related question

BFM Book page no 443 stock approach related 05 question

BFM Book page no 477 - RSL/RSA/DGAP/Modified Duration Gaps

BFM Book page no 20 - Export Bill 5 marks

BFM Book page no 295 - Estimated level of Operational Risk 

Case study numerical-TEIR 1 TEIR 2 CAPITAL CONVERSION BUFFER QUESTION BASEL ON BASEL3

Case study on RFC account 5 marks

Case study on forex exchange buying commission etc 5marks

Case study on mkdified duration gap 5marks

VAR - 1 QUESTION 

TEIR 1 COMPONENT-2 QUESTION

CBLO- 1 QUESTIOn

Case Studies on

1. Cancellation of contract

2. NRE/NRO POA

3. RWA

4. MEAN & SD

5. SLR

6. YTM

7. SHORT LERM & LONG TERM GAP ASSET VS Liabilities

8. NII & NIM

9. Tier1, Tier2

10. Capital adequecy

11. Nostro Vostro Loro

12. Daily volatilty

13. Stop loss limit

14. Operational risk case study

15. Foreign exchange numericals

16. Swap numericals

17. Liquidity case study

18. Forward rate agreement 25 crore 3 month swap, three year three business line calculate yield and risk weightage

19. Calculate CET Basel 3

20. Calculate Aadditional tier 1

...........................................

2 to 3 question duration

5 question export bill(cancellation of contract rate, margin amount,rebook rate,etc)

5 question on capital adequacy (balance sheet provided, compute equity capital, tier 1 capital, total rw, capital adequacy, buffer capital)

5 question on nostro,loro vostro

5 question on FRA 

5 question on net interest margin 

2-3 question on bonds

3-4 question on LC

some 2-3 sums on bpv

...........................................

1. Rate qoute 1 ques

2.LC partial delivery UCPDC rule

3.FRA 6*9 dates of delivery and maturity

4.case study on rules and guidelines regarding NRE, NRO and FCNR accounts- amt of loan,POA,remittance,fund transfer limit etc

5.coupon swaps,forward contracts

6.securitization-SPV or Commercial bank allocation of assets 

7.Case study on NII,NIM,EER

8.Case study on Cash flows,deviation during years,SD/mean

9.ECGC insurance premium bear by?

10.CHIPS-USA

11.treasury risk management 4-5 ques

12.European put option

13.Authorises person categ 2

14. ques on BOP expansion 

15.bank margin calculation from rates 

16.Stop loss given- asked whether buy or sell at what rate to book profit or stop loss

17.monthly volatility given-calculate daily volatility 

18.modified duration calculation 

19.case study on Nostro Vostro and Loro and Mirror accounts

20.which is not an off balance sheet item of following 

21.crystallisation of sight bills 30 days

22.LC date expired due to bank closed due to hurricane UCPDC rule

23.standard ECGC policy cover-political risk

24.basel III - tier 2 capital req of total risk wtd assets, pillar 3 def

25.standardised approach and basic indicator approach and AMA all methods for operational risk calcualtion

24. volatility can also be measured by?

25.price volatility depends on yield volatility,BPV,Yield and price

26.VaR related 2 ques theoretical

27.derivatives hedge underlying risks

28.call risk

29.Maturity ladder or baskets case study

30.provision coverage ratio def

31.asset liability mismatch

32. Bond ytm,current yield 2-3 ques