JAIIB LEGAL VERY IMPORTANT 3 BANKING LAWS - NI,BR & RBI ACT

 BANKING LAWS - NI,BR & RBI ACT

1. As per section 26 of the Negotiable Instruments Act, a Minor can draw, endorse, accept a
negotiable instrument but he can not : bind himself
2. A has granted Irrevocable Power of Attorney in favour of B for one year. After 3 months, A
revokes the Power of Attorney. A cheque signed by B is presented for payment_ What will you do?
The cheque will not be paid because POA can be withdrawn before maturity and once it is
revoked, no cheque signed by agent can be debited to account of Principal
3. What is the Doctrine of Ultra Vires in the context of a limited company?: Any act by the directors
beyond the object of the company is considered ultra vires the company and company is not bound by
such act.
4. A minor who was admitted to the benefits of partnership has become major. Within how much
period, he has to decide to remain partner in the firm or not?: within 6 months of attaining majority or 6
months of knowing that he is the partner in the firm whichever is later.
5. If on a cheque words "Account Payee" is written between two parallel lines or with the name of a
bank, then: the cheque can not be endorsed.
6. Which type of crossing is required to be done if the drawer wants that in case of endorsement, the
title of transferee of the cheque should not be better than the title of the transferor: Not Negotiable Crossing
7. In the case of dishonour of a cheque due to insufficient funds, for enforcing rights under section 138
of the Negotiable Instruments Act 1881, the holder should send a notice to the drawer within: 30 days from
the date of receipt of notice regarding dishonour of the instrument.
8. The Limitation period for filing case in case of dishonour of cheque due to insufficient funds is: 1
month from the date of cause of action.
9. Objectives forwhich a company has been formed are given in:Memorandumof Association
10. Full formof BCBS is Basel Committee on Banking Supervision.
11. Direct Impact of increase in CRR is : Controlling Liquidity
12. Banks can not issue Demand Draft payable to Bearer as per provisions of : Section 31 of the RBI Act
13. Grace Period is allowed in the case of : Usance Bills and Usance Promissory Notes
14. Indian Banks are required tomaintainminimumCapital AdequacyRatio of : 9%
15. In the case of individuals and HUF, tax will be deducted at source if the interest on term deposit in
a financial year is : more than Rs 10,000
16. If Power of Attorney is executed outside India it should be stamped within:90 days of its first arrival in
India
17. For its implementation, the complainant should accept the award given by Ombudsman within: 30
days of the receipt of the copy of the award.
18. When proceeds of cheque are given before clearance of the cheque the banker will be called:
Holder for Value
19. In the case ofWrongful dishonour of cheque, towhomthe bank is liable?:Drawer
20. If date on a cheque is prior to the date of its presentation, it is called: Ante Dated cheque
21. What isminor's liability in HUF Account:Minor is not liable
22. When does the right of nominee starts in respect of a deposit account?: After death of all depositors
23. For injectingmoney in themarket which type of transaction is undertaken?: (a) Repo (b) ReverseRepo
24. RBI controlsmoney supply through: change in CRR
25. Loan given to a director can be waived: after permission of RBI.
26. Under theOmbudsmen scheme, theBank has to reply to the objection of the complainantwithin: onemonth
27. A post dated cheque is passed in the account of a customer. But another cheque whichwas in orderwas
dishonoured due to insufficient funds.What is the liability of the Banker?: Bank is liable to the drawer for paying
post dated cheque as bank is not justified in paying post dated cheque. The bank will be liable to drawer for
damages on account ofwrongful dishonour of cheque.
28. Which type of preferential shares are treated as part of Tier I capital of the Bank?: Perpetual Non
Cumulative Preference Shares.
29. As per RBI guidelines, all banks are required classify business in various business segments with effect from
31-03-2008. The segments are: (a) Treasury (b)Corporate /WholesaleBanking, (c)Retail Banking, (d)Other
Banking Business. The geographical segments are 'domestic' and 'international'.
30. Customer of your bank asks for cash payment of crossedDD.What would you do? Generally payment only
through bank account.However, bank can pay after duly satisfying the genuineness of the draft and payee but bankwill
continue to be liable to true owner if recipient is not true owner.
31. A cheque is presented for payment in which the amount in words and figures is different. Bank
should pay which amount?: amount written in words will be paid.
32. Whether aPrivateLimited companycan be a partnerwith PublicLimited companyto formaPartnership?Yes

33. In the context of Nomination, which is correct statement?:Signatures of nominee not required
on nomination form. Nominee's name should be mentioned on FDR if agreed by the customer.
34. A bearer cheque of Rs.7,000/- was presented. The cashier informed that the cheque can not be passed as
the balance is less byRs.700/-. The tenderer credited the amount of shortfall and the chequewas paid. Customer
disputed the transaction.Whether bank is liable?: Yes. For disclosing balance to third party, bank is liable to
account holder.
35. When an order passed by Banking Ombudsman is accepted by the complainant, the same
should be complied within: 1 month from the date of receipt of acceptance from the complainant.
36. Penalty for delay is per day if information is not furnishedwithin prescribed time under Right to
Information Act: Rs. 250 per daywithmaximumbeing Rs. 25,000/
37. A crossed DD was paid by cash. What risk is there for the Bank: Bank will be liable to true
owner of the DD if payment made to a person other than true owner (Section 129 of N I Act).
38. A cheque is written in English and Regional Language. Whether it can be paid?: Yes. A cheque
written in different language can be paid if otherwise in order.
39. Who cannot become a partner in a firm as per supreme court judgmentHUF
40. Introducers liability / responsibility in case of an account holder defrauding Bank is : To assist
the Bank in locating the a/c holder - does not have legal liability
41. Nomination -Minor can be a nominee.
42. Inoperative accounts: 2 Years&above not operated.
43. RTI Act - party seeking information need not disclose the reasons for which the information
sought for.
44. Counterfeit notes returned after police verification, the same has to be preserved for 3 years
subject to half yearly verification.
45. Validity period of cheque reduced to 3months from1.4.12 as per : RBI Guidelines under sec 35A of B R
Act
46. Crossed cheque payment across the counter to the authorized Officer of collecting Bank - can be
made and there are no violation as per NI Act. 255.
47. The consequence of non registration of Partnership - firm cannot sue others for its dues.
48. Banks are required to implement the award of Ombudsman unless a decision is taken to appeal
against the same within one month from the date of receipt of acceptance of the award by the
complainant.
49. Account holder A & B want to substitute their name with the name of their sons C & D in the
account. What should the bank do?: Substitution of all names is not allowed. At least one of the
original account holder should be retained in the account.
50. When only image of cheque is sent to the paying bank while sending cheque for collection
instead of sending the physical cheque, the process is called: Cheque Truncation
51. A Cheque partlywritten in English &partly in regional language is presented for-paymentWhat
should the bank do?:May be paid, if otherwise in order and the language other
than.English is the regional language of the area where the cheque is presented.
52. An authority has been granted in an account You have received information about the death of the
Principal. Today, you receive a cheque signed by the agent which is dated prior to the death of the Principal.What
should the bank do? : Cheque can not be paid as authority of agent comes to end with the death of the
Principal.
53. You aremaintaining current account in the name of the Trust.You receive notice of death of one of the
trustees. After this notice, a cheque signed by the deceased trustee is presented for payment.What should the bank
do?: Chequemay be paid, if otherwise in order.
54. As per Consumer Protection Act, the period for filing appeal to State Commission against
decision of the District Forum is: maximum 30 days
55. Who can not be full fledged partner:Minor
56. Can Karta of HUF appoint Agent or delegate the powers to other co-parcener: Yes, he can do so.
57. Money deposited after receiving order may be attached in the case of: attachment order
58. Original & duplicate draft presented simultaneously for payment: Duplicate should be paid &
original should be returned.
59. Company has registered office at Delhi, factory at Kolkata & loan taken at Mumbai. For creating
equitable mortgage title deeds can be deposited at: any notified city.
60. Reasons for avoiding advance to Un-Registered Partnership Firm: Firm can not sue against
anyone for recovery of its debts but anyone can sue against the firm.
61. What is the effect of 'Not Negotiable Crossing'?: Transferee does not get better title than the transferor.
62. Payment of cheque can be stopped by: only Drawer of the cheque
63. Account payee crossing defined in:-Not defined anywhere
64. What is the current rate of interest paid on CRR?:NIL
65. How can be the transferability of Bill of exchange can be restricted? Bymaking restrictive endorsement
66. If on a Bill-of Exchange, two parallel lines are drawn and not negotiable is written between the lines,
what kind of the crossing will be there: Provisions relating to crossing are not applicable to Bill of Exchange.
67. Within priority sector,what is the allocation toweaker section?: 25%
68. Maximumtimewithinwhich replymust be given under Right to information act? 30 days
69. What is the status of Nominee? Trustee of Legal heirs

70. Safe deposit vault is governed by provisions of: Transfer of Property act
71. A cheque signed by agent has been presented after his death for payment.What should the bank do?: The
chequewill be paid if otherwise in order.
72. Purpose of star series notes: To replace defectively printed notes
73. Customer-bank relationship in locker account: Lessee-Lessor
74. Uptowhat amount District forumcan be approached under Consumer ProtectionAct?: Rs.20 Lacs
75. Appeal against the award of Ombudsman can be made by the bank within: 30 days of receiving
the acceptance from the complainant.
76. Cheque issued by director of a company and presented after his death will be: Passed if in order
77. What would be the action of central bank in recession?: create liquidity by decreasing CRR and
lower the repo rate.
78. Ante dated cheque like cheque dated 15.12.07 is presented for payment on 1.1.08whereas_ the account was
opened on 20.12.07 : Cheque should be passed
79. If amount in words and figures differ on a cheque and amount written in words is higher than the
amount written in figures, then as per sec.18 of NI Act, which amount should be paid?: amount written in
words
80. Nomination facility is not available in the case of : Trust A/c.
81. customer service Committee meeting held on :Monthly basis
82. A person wants to open a joint account with his wife in such a way that the account can be operated
by him only during his lifetime and she should be able to operate the account only after his death. The
account has to be opened with the instructions: 'Former or survivor'.
83. For wrongful dishonour of the cheque the bank is liable to: the drawer of the cheque
84. Banks print cheque books having similar particulars. The format of cheque is prescribed by which
Act : Not defined in any Act. It is as per practice. CTS 2010 advised by RBI
85. Which crossing takes away the feature of assumption of defective free title available to the
transferee : Not negotiable crossing
86. Who is appointed to tackle public complaints against the public authorities : Ombudsman
87. The facility of nomination is not available to Trust account because it is account : Non-individual
(facility of nomination is available only in the case of individual(s).
88. The true owner of a cheque has been deprived of his right by collection of the cheque for a
different person. This is called Conversion
89. As per recent RBI/Govt. guidelines, pensioners can open account jointly with: spouse, to be
operated as either or survivor or former or survivor.
90. While paying a bearer cheque, signatures are obtained on the back side of the cheque. Why ? : As
evidence of payment
91. Whether Minor can nominate ? no. On his behalf nomination will be done by a person legally
competent to act on his behalf.
92. Cheque is dated before date of its presentation is called: Antedated cheque
93. An endorsement inwhich endorser excludes his liability is called : sans recourse
94. When a company is financed against the security of hypothecation ormortgage of itsmovable property, the
company is required to file particulars of chargewith: Registrar ofCompanies
95. Who is called as Holder as per N I Act?: Who is entitled to possession of the instrument in his
own name (actual possession is not necessary).
96. If a cheque is dishonoured due to insufficient funds, then as per section 138 of N I Act, court may
award imprisonment up to: 2years
97. On the face of a cheque, the name of a bank is writtenwithout two parallel lines. Thiswill amount to : special
crossing
98. A/c payee crossing is defined in : it is not defined in any Act. It is as per practice
99. Nomination facility for deposit accounts is available under: 45ZA&45 ZB of the BR act
100. Maximum amount of deposit which a bank may ask while allowing locker facility to a customer:
Advance rent for 3 years and locker breaking charges
101. Asolicitor has account in his name and in the name of his client.Garnishee order is received in the name of
the solicitor.Whether the samewill be applicable in the name of client also: No because two accounts are not in the
same right and same capacity.
102. Which of the following is not amaterial alteration? Changing bearer to order
103. A bill issued without consideration is called: Accomodation Bill
104. There is a joint account in the name ofA&B.Acheque is drawn byAbut the alteration in the amount is
authenticated byB.Whether bank can pay the cheque: Yes provided the operation is either or survivor.
105. The term used for conversion or transfer of property derived from a criminal offense for the
purpose of concealing, or disguising, the illicit origin of the property is called: Money laundering
106. In which of the following situations bank will not be a holder in due course?: When bank credits
the account of the customer after receipt of funds on account of cheque sent for collection
107. The rate at which RBI rediscounts the usance bills of banks is called: Bank Rate
108. In the case of IPO, the company is required to allot shares ormake refundwithin: 30 days of the closure of
the issue in case of fixed price public issues; 15 days in case of book built issues and 15 days in case of right issues
112. Bankcanchargecollectionchargesofnotmorethanfor_outstationchequesofRs10000toRs1lacinsavingbank:Rs.100
113. Which of the following cheques can not be paid by the bank? : Acheque onwhich signatures of drawer
have been forged irrespective of the cleverness in forgery and though these appear to be same as that of the drawer.
114. FIU stands for : Financial Intelligence Unit (India)
115. Two cheques have been presented to you as paying banker.One is dated prior to opening the account and
other is dated prior to issue of cheque book.What will you do as paying banker?: Both chequeswill be paid.
116. KYC and FIU in India are associated with: preventing money laundering
117. Articles of Association mentions: directors' powers
118. Garnishee order is not applicable on: (a)cash received after two hours of receipt of Garnishee order
(b) amount received for safe custody (c) undrawn balances in cash credit accounts
119. A person having locker has expired. The nominee comes. A sealed cover is found. What will you
do ? : It will be delivered to him as part of locker contents without opening the packet.
120. A bill was presented on 10.5.2005 and accepted on 12.5.2005. The bill was due for payment on
29.07.2005 and was returned. The last date for filing suit in this case is : 29.07.2008
121. A listed bank has to prepare and publish balance sheet on quarterly basis as per: SEBI guidelines
122. There are certain instruments defined as negotiable instruments under lawand certain instruments used as
negotiable instruments as per practice.Which of the following is not a negotiable instrument as perNIAct: Dividend
warrant
123. On repayment of_debt of a company, satisfaction of charge shbuld be filedwith ROCwithin: 30 days
124. A Trust Deed is silent about loans by the trust. The trustee approaches for a loan. Under these
circumstances what should the bank do?: No loan can be raised
125. Which of the following un/under-stamped document can not be revalidated by paying penalty: None of
these as all documents can be revalidated. (However, as per question Demand Promisory note cannot be
revalidated).
126. A person of 65 years of age can not nominate which of the following persons: Trust
127. The aggregate limit for capital market exposure of a Bank is: 40 0/0 of net worth at the end of previous
year
128. A minor approaches for a loan. Which type of loan can be given to him: loan can not be sanctioned
other than for necessities.
129. Which of the following does not match in banker/customer relation : Locker facility - Bailee/Bailor
130. Committee on Procedures and Performance Audit of Public Services (CPPAPS) was headed by:
S.S. Tarapore
131. Customer service code has been mentioned in : Banking Codes and Standards Board of India.
132. Cheque received in clearing signed by whom will not be passed out of the following: signed by a
person who has ' been declared insolvent.
133. Whether a customer can approach Ombudsman without first approaching the Bank : Approaching
the bank first is a pre-condition.
134. In case a forged note is detected in the cash tendered at bank counter, what should the bank do?:
The Note should be impounded and not returned to the tenderer.
135. If a guardian is appointed by court, minor will become major at the age of: 18years
136. A Cheque with forged signatures is presented for payment and is paid. Bank will be liable to:
Customer (Drawer of the cheque)
137. Protection is available to the collecting banker in case of : Crossed cheques
138. Which is not a General Crossing: Name of a bank written between two parallel lines
139. If time is not mentioned on a Bill of Exchange, it will be payable: on demand
140. In an account of Club with you, cheque has been been presented for payment signed by the
secretary who has died. What should the bank do?: It will be paid if it not dated subsequent to date of death.
141. Garnishee order is applicable for: credit balance in OD and not for cheque sent for collection.
142. Bank Guarantees are issued as per provisions of : Indian Contract Act
143. cheque truncation means: converting physical cheque to electronic image and stopping physical
flow of a paper cheque. 660_ Foreign currency paid to taxi driver, shop keeper, can be accepted by:
Authorised persons.
144. A bank cannot acquire either as owner or as pledgee shares in a company more than:. 10 % of paid
capital of the company or 10% of the•paid up capital and reserves of the bank, whichever is lower.
145. For formation of a company, Registrar of Companies will issue : certificate of incorporation
146. Co is in liquidation, funds are at the disposal of : Liquidator
147. Guardian appointed by will of the father is called: testamentary guardian
148. Which of the following documents does not constitute document of title to goods:Airway bill
149. DD can be revalidated within: any time (practice may differ In different banks)
150. Which crossing is a Special Crossing : Name of Bank is written in the cheque with or without parallel
lines
151. Supervision of banks is done by RBI under which act: RBI Act / BR Act / Jilani Committee Report
/ NI Act: Banking RegulationAct
152. A minor is aged 15 years, who is illiterate. Which type of self operated a/c can be opened -SB/ RD /
FD none
153. Which of the following can open SB a/c? State Electricity Board/ Indian Bank Association/
Municipal corporation: Indian Bank Association.
154. In a Flying club, the Secretary&Treasurer are authorized to sign.ACheque is presented for payment across

the counter. In between it has been informed that Secretary has died,what youwill do? :Will be paid, if otherwise in
order
155. Revival of limitation for recovery of a time barred loan is possible by: obtaining fresh promise to
pay under provisions of Indian Contract Act.
As per Supreme court decision,HUF cannot be a partner because:HUF is not a natural or legal person
156. As per Prevention of Money laundering Act, preservation of records relating to closed accounts
upto: 5 yr from date of closure of account.
157. Banks can provide information about the customer to another Bank: General in nature, without any
responsibility
158. Board of Directors want to borrow money in excess of paid up capital and reserves of the company:
can be done through a resolution passed by shareholders in the general meeting
159. Other than aBill of exchange or promissory note, the documentwhichwas executed abroad is required to bestamped
on its arrival in India within: 3 months of its arrival
160. Administrator is appointed in case of: to realize assets and pay off liabilities of a person who has
died without writing a will.
161. Under Ombudsman scheme, which type of case not entertained?: advocate representing the customer
162. Which of the following is not a valid cheque for payment by the bank-l)different ink & handwriting
2) cheque with prior date 3) cheque with impossible date 4) Mutilated cheque: Mutilated cheque
163. The liability of the drawer of bills of exchange is prime till it is not accepted by the drawee after
that prime liability becomes of Drawee.
164. Whether Pvt Ltd. Co. can be partnerwith Partnership Firm: Yes
165. Counterfeit note received at the counterwhat to be done?: Impound the currency note.
166. No noting on currency note, directions issued byRBI under section 35Aof BR Act.
167. Cross cheque can be paid at counter if presented by other bank.
168. Payments of a forged draft.Who will lodge FIR paying or collecting bank: Paying Bank.
169. Borrowing powers of board of directors are contained in: Articles of Association
170. Locker can be broken open after notice to the hirer if the same is not operated for:more than three years for
mediur-n risk category or one year for a higher risk category, and the locker-hirer does not respond nor operates the
locker.
171. If a complainant is not satisfied with the award or his complaint is rejected by the Banking ombudsmen, he
can prefer an appeal to DeputyGovernor, RBIwithin: 30 days of the of the date of receipt of communication
regarding award or rejection of the complaint.
172. In case ofwrongful dishonour of cheque, bank is liable to: account holder only
173. Who can seek information under.Right to InformationAct:Any citizen of India can ask for information
174. The Garnishee Order is applicable on the account of a customer when the relationship between
banker customer is: Debtor & Creditor.
175. Aprivate limited companywith Registered office at Bangalore has raised loan froma branch located at
Mumbai. For creating equitablemortgage, title deeds can be deposited at:Mumbai,Kolkatta, Chennal or any other
notified place.
176. Acheque is presented for payment inwhich amount in figures ismentioned asRs 10,000whereas the amount
inwords ismentioned as Rs Ten lakh only. In terms of section 18 of theNIAct,what should the bank do?: The amount
written inwords should be paid.
177. When a letter is signed by the borrower and based on that letter bank delivers the document of title
to goods to the borrower, such letter is called as: Trust Receipt
178. How much charges are charged in addition to normal collection charges and out of pocket expenses
for providing instant credit facility for outstation cheques:Nil
179. A limited company has registered office at Chennai whereas loan has been raised from bank branch
at Mumbai. The charge will be registered with the ROC at: Chennai
180. A partnership firm conducting business other than the banking business has more than 20 members
as partners. Whether this is allowed?: Such association is called illegal association as per Companies Act
181. Under Prevention of Money Laundering Act, banks are required to send cash transaction report in
respect of cash deposit or withdrawal of more than Rs 10 lakh in a month from one account within: 15 days
from the close of the month.
182. Who is primarily liable on Bill of exchange which has been accepted?: Acceptor (Drawee) of the
Bill.
183. A cheque crossed specially to a bank is presented by the same bank to paying bank for cash
payment. What should the paying bank do? Bank can make cash payment.
184. Who can make nomination in the deposit account of a minor?: Guardian on behalf of the
minor.
185. Who can be a nominee?: Only an individual
186. If a depositor dies, payment to nominee or legal heirs should be made within: 15 days of
completion of formalities.
187. What is the relationship between bank and customer if he has left certain goods with the bank by
mistake: Bank is trustee and Customer is beneficiary
188. Appeal against the award of the Banking Ombudsman can be made to Deputy Governor, RBI
within days of the receipt of copy of award from the Ombudsman: 30 days
189. A cheque was dishonoured despite sufficient balance in the account. The bank will be liable to:

Drawer of the cheque and not to the payee.
190. Maximum amount of fine under section 138 of N I Act for dishonour of cheque due to insufficient
funds is: twice the amount of cheque.
191. Bearer uncrossed cheque can be paid towhom: To the bearer
192. On, other than a negotiable instrument, what is the time period for payment of stamp duty, if the
document is executed outside India : 3 months
193. May I help you counter is to be provided by bank branches other than : Small branches
194. In case of a jointly operated joint account, the nominee can obtain payment,when : none of the account holder
is alive
195. A bank branch receives a counterfeit note of Rs.1000, which customer wants back. What the bank
should do : Impound the currency note but credit full amount to customer. Receipt not to be issued to
depositor.
196. When rate of interest is expressed by adjusting the impact of inflation, this is called : Real rate of
Interest
197. Banks can ask for deposit of advance rent on hiring a locker for a period up to : 3 years
198. The crossing on a cheque is required to be cancelled.Who can do so:Drawer

JAIIB LEGAL VERY IMPORTANT 2 CUSTOMERS & THEIR ACCOUNTS

 01. Relaxation in KYC norms is permitted if the depositor undertakes that the balance outstanding in

his account will not be more than and credits in a financial year will not exceed . Rs
50,000; Rs 100,000
02. MinimumMaturity Period for Certificate ofDeposit is : 7 days
03. Why KYC guidelines have been issued by RBI under section 35 A of the Banking Regulation Act:
To prevent Money Laundering -
04. If payment of Rs 20000/- ismade in cash in case of FDR what is the penalty: equal to the amount paid
05. In Senior Citizen Saving Scheme account,who can be joint account holder?:Spouse
06. TDS not deposited in time. What is the interest payable?: _Bank to pay the amount with interest ©
1.5% per month simple.
07. What is the special feature of Basic banking Account? Account can be opened with nil or very
small amount and there are no requirement of minimum balance.
08. Current balance is Rs.6000/-. A cheque of Rs.18,000/- is presented. Branch passed the cheque by allowing
TOD. After few days, fixed deposit of the same party matured and TOD was cleared by crediting the proceeds to CA.
Customer disputes the transaction.Whether bank is having right in doing so? : Normally no without specific request
of the party. However, if bank has a specific clause in the account opening formto allow overdraft in such cases
and customer has consented to such clause, then temporary overdraft can be allowed and recover the same
fromthe account holder even if there is no specific request fromthe party.
09. TDS collected to be deposited with the Income Tax Deptt within: 7th day of succeeding month
during which it is collected.
10. TDS at the rate of 10% is to be deducted at source in case of individuals and HUF„ if the rent payable in a
financial year exceeds : Rs.1,80,000
11. You are maintaining current account in the name of the Trust. You receive notice of death of one of the
trustees. After this notice, a cheque signed by the deceased trustee is presented for payment.What should the bank
do?: Chequemay be paid, if otherwise in order.
12. Quarterly statement for TDS on salary should be submitted on form 24-Q within: 15days of the close of the
quarter
13. Pensioner account can be opened jointly with? Spouse as Either of Survivor or Former or Survivor.
14. Photograph is obtained at the time of opening the a/c. What is the purpose for the same?: for
identification of the prospective customer
15. Amount that can not be paid in cash in respect of term deposit by the bank as per Income Tax rules:
Rs 20,000 and above.
16. Interest rate on Saving Bank is fixed by : Banks themselves w.e.f. 25.10.11
17. A, having SB a/c with you, deposited Rs.25000. A public Prosecutor sent notice to bank informing thatMr
A is involved in forgery and requested not to permit withdrawal in the a/c. In between one cheque of Rs.20000 has
been presented for payment. What should be done by the bank?: Pay the cheque as Public Prosecutor is not
authorized to freeze the a/c.
18. There is an SB a/c in the name of A & B .They have given power of Attorney to 'C' for operation in
A/C, The cheque signed by the 'C' is presented in the bank after death of 'B' :
cheque will not be passed
19. Encashment of FDR with interest - payment can bemade in cash if it is less than Rs 20000
20. There is a credit balance in the saving account and there is a overdraft in the current account amounting to Rs
555. Both accounts are in the same name. Bank wants to adjust credit balance of saving bank account towards
payment of overdraft. As per which right, bank can do this?: Right of Set Off.
21. Maximum amount of deposit under Tax Saver fixed deposit is: Rs 150,000
22. Theminimum&maximumperiod of certificate of deposit is : 7 days, 12months

23. Call money deposit is part of the sector : Organised sector
24. The terms used for hidingmoney to avoid tax is :Money laundering
25. Which of the following formswill be used for allowing exemption to a depositor aged 61 years : Form15H
26. Missing person treated as having expired if missing for: 7 years
27. Super senior citizen after: 80 years of age
28. DD of Rs.50000/- in cash : not allowed
29. For the purpose of KYC rules any addition & modification on which recommendation: Financial Action Task
Force
30. In case of Minor what is wrong? Minor can make himself liable for his actions.In case of a Deposits
account customer wants the Nomination in his account. What is mentioned on Pass book
31. In case Fixed Deposits account the rate of interest fixed by whom: Board of Directors of respective bank.
32. In an account Mr. X Gives irrevocable power of attorney to Y for 1 yr. After 4 Month, X withdraw the
irrevocable power of attorney. What is action of the Bank? Bank will rely the revocable application of the Hence the
cheque signed by Y returned.
33. In case of Deposit Insurance whether it mandatory or not: It is Mandatory for all banks.
34. in which type of account where TDS not deduct in fixed Deposits Account: NRE and FCNR(B) only.
35. BC work as : Bank’s Agent
36. Cash Transaction Report ( CTR) should be submitted to FIU within how much period: 15
days of the close of the month.
37. Which of these rates are periodically reviewed by RBI?: Repo rate, Bank rate, but not
Savings Bank Rate.
38. Interest rate on Savings accounts: Not regulated by RBI
39. As per RBI guidelines, Demand draft of Rs 50,000 and above should be issued against : by
debit to account but not against cash
40. If pan no not submitted rate of TDS will be: 20%
41. Account is treated as inoperative if there is no operation for : 24 months
42. If a customer makes nomination, the bank is required to register in its books the nomination, and should give
acknowledgement to the depositor in writing. The bank should also indicate the fact of nomination on the face of
passbook/deposit receipt with the legend (a) Nomination Registered (b) Nomination marked (c) Nomination done (d)
Nomination acknowledged: Nomination Registered
43. Which of the following facilities are allowed to visually impaired persons who open account with bank – issue
of cheque book, ATM card, internet banking: All of these
44. What is the main motive of financial inclusion – (a) to give loans to poor persons (b) to issue credit card (c) to
provide banking services to distressed persons at affordable cost: Ans is C
45. Banks are required to deduct tax at source from interest payable to an individual if the interest credited or to
be credited in a financial year is more than Rs 10,000. This is as per provisions of (a) Income Tax Act (b) Goods and
Service Tax Act (c) Service Tax Act (d) RBI Act: Income Tax Act
46. Tax is not deducted at source in respect of which of the following income – (a) Interest on Bank deposits (b)
Rent on land and building (c) Brokerage (d) Dividend paid by listed company: Dividend paid by listed company
(However Dividend u/s 2(22)(e) is taxable for shareholder and thus TDS rate on such dividend is 10%)
47. Which of the following can be done by a minor?: A minor may draw, indorse, deliver and negotiate a
promissory note, bill of exchange or cheque so as to bind all parties except himself.
48. What is the responsibility of an introducer in an account opened by a person with a bank – (a) he is legally
liable (b) he is morally liable (c) he is bound to trace the account holder: He is morally liable.
49. Direct Tax Code will replace which of the following – Income Tax Act, Corporate Tax Act: Income Tax Act.
50. As per KYC Guidelines, Records of transactions to be maintained for at least ten years from the dateof
transaction, instead of _________from the date of cessation of transactions, and records pertaining to identification of
the customer and his address to be preserved for at least ten years after the business relationship is ended: ten years
51. What type of activity can be performed by Business Correspondent - (a) processing and submission of
applications to banks; (b) disbursal of small value credit, (c) recovery of principal / collection of interest (iv) collection of
small value deposits: All of these
52. E TDS - 26Q (tax deduction other salaries) to be filed for the month of September, before: 15th October
(Statement of TDS to be submitted within 15 days from close of quarter)
53. A Minor has extended Guarantee to a loan. It can be ratified by whom? It cannot be ratified by any
one.
54. In Limited Liability Partnership account, who are not eligible for becoming partners: a) HUF b) Minor c) body
corporate?: Ans: a & b
55. Insurance of deposit is done by DICGC up to: Rs 1 lac per depositor per bank.
56. What is the periodicity of review of risk classification of customers?: Every six months
57. Which is not a proof of Identity?: Ration card.
58. A customer who does not complete all KYC norms, what type of account is opened for him? No Frill
account in which cannot be more than Rs.50000 and credits in the Financial Year cannot be more than
Rs.100000.
59. There were three cash withdrawals of Rs 5.80 lac ,Rs 4.90 lac & 0.25 lacs from an account in a month.
Which of these transactions is/are will be reported to Financial Intelligence Unit as part of CTR? Cash withdrawals
of Rs 5.8 lac and Rs 4.9 lac.
60. Under Prevention of Money Laundering Act, banks are required to preserve records relating to opening the
account for how much period?: 10 years from date of closure of account.
61. As per KYC Norms, banks are required to update record of customer regarding proof of address, and identity
etc. of medium risk customers within how many yrs?: 2 year
62. Which of the following is not the key element of KYC policy a) Customer Acceptance Policy; b) Customer
Identification Procedures; c) Monitoring of Transactions; d) Risk Management e) Customer Awareness Policy: Ans is
E i.e. Customer Awareness Policy.
63. What is the distance criteria for office of Business Correspondent?: The distance between the place of
business of a retail outlet/sub-agent of BC and the base branch should ordinarily not exceed 30 kms in rural,
semi-urban and urban areas and 5 kms in metropolitan centers.
64. On whose recommendations, KYC norms came into force? (a) Goiporia Committee (b) Ghosh Committee (c)
FATF: Ans is FATF
65. Under KYC Norms, Documents relating to opening the account like proof of address and identity and
photograph should be taken again at what interval? (a) once in 5 years for low risk customer (b) once in 2 years for
medium risk customers (c) once in 1 year for high risk customers (d) Both (a) and (b): Ans is (d)
66. Record of cash receipt and payment under KYC to be maintained if cash receipt or payment in a single day
from one account is more than Rs 10 lakh.
67. Banks should have the responsibility of currency management entrusted to a nodal official of the rank not
less than that of a General Manager and will be accountable for the obligations cast upon currency chests by the
Reserve Bank.

JAIIB LEGAL VERY IMPORTANT 1

 

JAIIB LEGAL VERY IMPORTANT 1

1. Charged created by Bailment of goods to secure payment of a debt is called: Pledge 2. Guarantee is defined in: Indian Contract Act 3. 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 4. 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. 5. In which of the following cases, the document is required to be attested by two witnesses?: (a) Pledge (b) Hypothecation (c) Mortgage (d) Lien 6. A document was executed by three partners in different dates. When shall the limitation period start?: The limitation period will start from the last date i.e. when the document was executed by the last partner. 7. Loan to a company engaged in construction of projects, which method of financing is to be used: Cash Budget method. 8. What is the meaning of Group in Exposure Norms: Commonality ofmanagement 9. The procedure used for ascertaining Customers Creditworth is called: CreditRating 10. Green field project is related to : setting up new projects 11. What is Real Rate of Interest?: Prevailing interest rate minus inflation rate 12. Themain distinction between Hypothecation and Pledge is on accountof : Possession 13. In Letter Of Credit jmporter is called: Opener of Letter of Credit 14. Cash Budgetmethod is used for sanctioningworking capital limits to : Seasonal Industries 15. Bank's charge over LIC Policy is created by: Assignment 16. Guarantee issued by a bankwhich is still outstanding is shown in the Balance Sheet as: Contingent Liability. 17. Why loan against Partly Paid Shares are not preferred by banks?: Because partly paid shares represent contingent liability. In case companymakes 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 18. Return on Investment is calculated to ascertain of the unit.: Profitability 19. 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 20. In the Balance Sheet of a bank, Contingent Liabilities are shown as: footnote to the Balance Sheet. 21. Finance for construction of road and port is classified as: Infrastructure Finance.

22. Banks are required to declare their financial results quarterly as per provisions of : SEBI

23. Loanwas raised fromthe bank against NSC byMr.Xand noting to this effect was recorded in the issuing

PostOffice.Xdies. The nominee approaches post office for payment ofNSC.Whowill have priority i.e. bank or

nominee?: Bankwill have prior claimagainstNSC.

24. Hypothecation can be converted to pledge by: taking possession with the consent of the borrower.

25. What charge to be created for demat shares with bank as security: Lien

26. Perpetual bonds and perpetual non cumulative preference shares as part of tier I capital can be up to%of tier I capital:

40%

27. Provisions on standard Assets are shown under which head in the balance sheet of the Bank?: Other

Liabilities and Provisions on Liabilities side.

28. 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.

29. Who is bound to file particulars of chargewith theRegistrar of Companies underMCA21,when a

company creates charge of somebody on itsmovable or immovable property except byway of pledge?: officials of

the company.

30. Credit ofRs.20,000/-was taken asRs.2000/- and as a result a chequewas returned in the account forwant

of funds. Bank has already sent statement of account to the depositorwho has acknowledged receipt of the statement

of account.Whether bank is liable?:Yes. Liable to drawer of cheque.

31. Advance to a companyagainstTrust receiptwhere document of title goods transferred to bank and goods to be

released against payment by the company.Whether a charge is to be registeredwith theRegistrar ofCompanies under

MCA21?:NotRequired

32. Under multiple banking system, exchange of information between the banks is to be done for the limits of

crores and above and periodicity is : Rs.5 crores and Quarterly

33. If a LC contains a clause "about" regarding the amount and quantity of goods, howmuch tolerance is

permitted?: 10%

34. What is the type of liability for the bank on account of issue of BankGuarantee?:Contingent Liability

35. To arrive at group concern, factors to be looked into are : commonality ofmanagement + effective

control.

36. The limitations of financial statements are : only quantitative not qualitative.

37. Hypothecation described under SARFEASI Act.

38. Off Balance sheet / On Balance sheet exposure- if altered the risk will be Credit Risk.

39. 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.

40. Excess of current liability over current assets means the firm may face difficulties in meeting its

financial obligations in short term.

41. If documents are to be presented in about July month: these can be presented within 5 days before

or 5 days after.

42. Pledge is defined in: Indian Contract Act

43. When limitation will not extend: Balance Confirmation signed after expiry of limitation period

45. Onmaturity of bank guarantee, an intimation is send to customer and if no response received in 30 days,

vouchers are reversed. This is done for following reason? Bank has to maintain capital on Bank

Guarantee for the purpose of capital adequacy norms.

46. Which of the following is not a disadvantage of CC account? Issuance of cheque book

47. In case of revaluation of fixed assets, what percentage of revaluation reserve will be added to Tier

II capital of the bank?: 45%

48. When a loan is recovered from guarantor for dues payable by the Principal Debtor, debtor

becomes entitled to all rights and remedies which the creditor had against the Principal Debtor. This right

of guarantor is called: Right of subrogation.

49. in case of loan against bank deposit charge is created by: assignment

50. in case of loan against NSC, charge is created by: assignment

51. What is cash loss : net loss before depreciation (Net loss minus depreciation)

52. 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.

53. 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)

54. 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.

55. For the purpose of creation of equitablemortgage, the place for deposit of the title deed is notified by :

56. Number of days allowed to opening bank and negotiating bank to verify that documents are as per

terms of LC is: 5 banking days each

57. In the case of hypothecation : both possession&ownership is with borrower

58. 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

59. Limitation period formortgage :12 years

60. 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 61. What is negative Lien?: A declaration by borrower that he will not sell or create charge of any body on a particular asset without consent of the bank 62. 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. 63. Normally bank can not grant advance to its directors. However, there are certain exemptions to this rule. Thus a bank can grant a loan to its director against the security of: Government securities, life insurance policies or fixed deposit; 64. 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. 65. 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. 66. 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 67. Preoperative expenses forms part of the following: Intangible assets 68. Aand B raised a loan jointly and both are liable jointly and severally.When the limitation period is approaching,Aacknowledges the debtwhile Bwas away fromIndia. Limitation expires before B comes to India and after coming, he denies acknowledging the debt. Bank can proceed for recovery of the loan as per limitation act from: Both 69. 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. 70. 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. 71. 3 partners signed a document on 3 different dates. Limitation period starts from: Date of last signatures. 72. Acknowledgement of Debt can be obtained for how many number of times : No limit 73. 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 74. Why banks prefer financing of bills?: because the advance is self liquidating 75. Formation of consortium, when essential :When bank touches its exposure ceiling 76. A letter of credit which is issued on request of the beneficiary in favour of his supplier: Back to Back LC 77. 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 78. 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. 79. Guarantee issued by a bank in favour of Custom department that party will fulfill export obligation for availing exemption fromcustomduty regarding tax. Such guarantee is called: FinancialGuarantee 80. Particulars of satisfaction of charge by a company are to be filed within: 30 days from date of adjustment of loan. 81. 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 82. LoanDelivery Systemis not applicable to: a) Loan to Soft ware industry b) export credit: export credit 83. Stamp duty in usance bill of exchange: 0.25 per 1000/ 0.75 per 1000 / 1 per 1000 / none : It is according to value and time i.e. Advalorem(it is Rs 0.65-per Rs 1000 up to 3 months usance) 84. Property equitably mortgaged on 08/03/08. A registered mortgaged created on this property, on 05/03/2008 whichwas got registered on 08/03/2008.Whichwill have priority: registeredmortgage as itwas created earlier. 85. 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. 86. Banks are required to obtain audited financial papers from non corporate borrowers for granting working capital limit of: Rs.25 lakh &above 87. In the case ofHypothecation: neither possession nor ownership come to Bank. 88. Negative lien means: Undertaking by the borrower not to sell or create charge on a particular property without consent of the Bank. 89. RecentlyRBIwarned banks against charging: excessive interest to small borrowers. 90. Which of the following is correct regarding reverse mortgage?: The scheme is available to senior citizens only; the property should be self occupied by the owner. 91. What are the rules relating to advance against Kisan Vikas Petra?: It can be granted provided KVP is assigned to the bank. 92. Bailment of goods to secure a debt is called: pledge. 93. Deferred payment guarantee issued by a bank is a : Contingent Liability. 94. When mortgage is created by a person by deposit of title deed orally, it is called mortgage : Equitable

95. For the purpose of creation of equitablemortgage, the place for deposit of the title deed is notified by : State Govt. 96. Under SARFAESIAct 2002 the banks give notice for payment of due amount to the borrower / owner of charged assets 97. Action under SARFAESI Act can be taken simultaneously in DRT/Suit filed cases without taking permission from the Competent Court 98. For enforcing right under SARFESAI Act, in the case of consortium advances, consent of which bankers is required?: consent of 60% bankers by value is required. 99. SupervisoryReviewaccording towhich Central Bank of the country is to ensure that proper capital has been provided for risk exposure andmaintain proper systemfor the same is provided under?: Pillar II of Basel IL 100. Chargewhere SARFAESI action can not taken: Pledge 101. For taking action under SARFAESI, the outstanding should be:More than Rs.1.00 lac 102. Limit for filing suit in DRT: Rs.10 lacs and above 103. For acquiring securities charged to the bank under SARFAESI, notice of days is required to be given to the borrower and for sale of securities so acquired notice of days is 60 & 30 days 104. As per a recent judgement of the Supreme Court,while initiating action under SARFAESI, the position in case of suit filed in DRT would be: that no permission is required fromDRT and action under SARFAESI can be initiated as both the cases can run together. 105. For taking action under SARFAESI, the outstanding should be:More than Rs.1.00 lac 106. In case of SARFAESI Act, before preferring appeal to DRAT, how much amount is to be deposited by the borrower with DRAT?: 50% of the claim amount which can be reduced to 25% by the DRAT. For making application to DRT, no amount is to be deposited

Various Acts, sections and descriptions.

 Various Acts, sections and descriptions.

Banking Regulation Act 1949
Sec.5(b) Banking: Banking means the acceptance of deposit for the purpose of lending or investment, the deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.
Sec.5(c) Banking Company: It means any company, which transacts the business of Banking in India.
Sec.8 Prohibition on Trading: No banking company shall directly or indirectly deal on the buying or selling of goods (every kind of movable property other than actionable claim), except in connection with realization of security held by it.
Sec.9 Disposal of Non-Banking Assets: No bank shall hold any immovable property howsoever acquired (except for its own use) for any period exceeding 7 years. RBI may extend the period by 5 years where it is satisfied that such extension would be in the interest
Sec.17(1) Reserve Fund: Stipulation that a bank must create reserve fund equivalent to not
less than 20% of profits out of the balance of profit of each year, before any dividend is declared (RBI has enhanced it to 25% of net profit w.e.f. 31st March 2001).
Sec.18 Cash Reserve: Every banking company, not being a scheduled bank shall maintain 3% of demand and time liabilities by way of cash reserve with itself or by way of balance in current account with RBI.
Sec.20 Restriction on advances against own shares: No banking company shall grant loans/advances on the security of its own shares, since it shall amount to purchase of its own capital.
Sec.21(a) Rate of Interest charged by banks not to be subject to scrutiny by Courts: A transaction between the banking company and its debtor shall not be reopened by any court on the ground of excessive charging of rate of interest.
Sec.24 Maintenance of SLR: A banking company is required to maintain at the close of business on any day a certain percentage of its total demand and time liabilities in India in form of cash, gold and unencumbered approved securities. This is known as SLR. Minimum SLR 25% and Maximum 40% to be maintained. SLR to be maintained with reference to Total Demand and Time Liabilities as on last Friday of the second preceding fortnight.
Sec.45(y) Preservation of Bank Records: Central Govt. in consultation with RBI has power to frame rules regarding preservation of books, accounts and other documents.
Sec.45 Z Returns of Paid Instruments to Customer: Guidelines for returning the paid instruments to customer by keeping a true copy.
Sec.45 ZA Nomination: For nomination in Deposit accounts.
Sec.45 ZC Nomination: For nomination in Safe Custody accounts.
Sec.45 ZE Nomination: For nomination in Locker accounts

General banking bits

 General banking  bits

1. A customer Mr Sharma had credit balance 40,000 in his saving ac and also had an OD ac with
overdue Debit balance of 20,000.Bank debits his saving account and adjusts OD ac. The bank is
said to have exercised Right of: Set-off
2. A Minor has extended Guarantee to a loan. It can be ratified by whom? It cannot be ratified by
any one.
3. A savings account becomes inoperative when it not operated for: 2 years
4. A term deposit of a HUF has become due. At the time of renewal, the Karta of HUF informs that
he has become Senior Citizen. What rate of interest will be given on term deposit? : Normal
interest rate. No benefit of senior citizen to be given
5. Additional interest is paid to senior citizens on which time FD: All fixed deposits (may vary from
bank to bank)
6. After Nomination in an account, what is the status of the nominee?: Trustee of legal heirs
7. An account of a customer can be closed in normal course on the request of the customer.
What are the other methods for closing account of a customer – (a) By negotiation; (b) As per
provisions of law; (c) After notice to customer in respect of undesirable accounts: Ans is C
8. An Illiterate person is generally not allowed to open which account – saving, term deposit,
recurring deposit, small account, Current Account: Current account.
9. As per RBI guidelines, Demand draft of Rs 50,000 and above should be issued against : by debit
to account but not against cash
10. As per RBI guidelines, minimum amount of deposit to open BSBDA account is: NIL
11. As per Sukanya Samridhi Account (SSA) the tenure of deposit is for years from the date of
opening of the account: 21 years
12. Bank is not required to produce original book of records but true copy can be submitted when
court has demanded as per which act? a) Civil procedure code b) Registration act c) B.R. Act d)
RBI act e) Banker Books Evidence Act.
13. Banker Customer relationship for deposits is ____: Debtor – Creditor.
14. Banker customer relationship in Safe Custody: Bailee Bailor.
15. Banker customer relationship in standing instruction: Agent – Principal
16. Bankers prefer Saving Deposits than Term deposits. Why?: Because cost of deposits for SB is
less.
17. Banks can decide interest rates of NRI, NRO or Term Deposits: Yes
18. Banks can raise what type of deposits?: Term and Demand Deposits
19. Banks should have the responsibility of currency management entrusted to a nodal official of the
rank not less than that of a General Manager and will be accountable for the obligations cast
upon currency chests by the Reserve Bank.
20. BC work as : Bank’s Agent
21. Business Correspondent can be identified by whom?: BDO,Post Master, Head of Village
Panchayat, other BC.
22. Business correspondents for banking for : serving weaker sections of society
23. Call money deposit is part of the sector : Organised sector
24. Complaints under Consumer forum should be dealt with within (Where no testing of commodities
is required) : 90 days.
25. Customer OD A/c has overdrawn Rs 2000/-. Saving A/c has balance Rs 3000. The bank adjusts
the OD A/c by which right: Set off.
26. DD of Rs.50000/- in cash : not allowed
27. Death claim settlement in how many days?: 15 days
28. Deposits held in Joint accounts; b) Corporate Deposits; c)
Inter-Bank deposit; d) Deposits of HUFs: Ans is Inter-Bank deposits.
29. Deposits which are not claimed for__years are required to be transferred by banks to
RBI: 10 years
30. DICGC cover is available in which of the following cases a) Credit balance in Cash Credit Account
b) Overdue Deposit c) Deposit of Government Department?: A & B
31. Differential rate of interest can be paid on fixed deposit if single deposit is for: Rs.1.00 crore
and above
32. Direct Tax Code will replace which of the following – Income Tax Act, Corporate Tax Act: Income
Tax Act.
33. Encashment of FOR with interest - payment can be made in cash if it is less than Rs 20000
34. Financial Inclusion means: providing banking services at affordable cost to the poor/distressed.
35. FULL FORM OF CASA? : CURRENT ACCOUNT & SAVING ACCOUNT
36. Garnishee order is not applicable to: a) Savings b) Current c) FD d) CC/OD with debit
balance: CC/OD with debit balance.
37. Govt. has decided to demonetize all the coins of paise 25 and below w.e.f. 30-6-2011.
38. How much amount can be deposited in a small account in a financial year?: Rs one lac
39. How much amount can be withdrawn from a small account in a month?: Rs 10,000
40. If in Garnishee Order no amount is mentioned, what should the bank do? Full amount to be
attached.
41. If payment of Rs 20000/- is made in cash in case of FDR what is the penalty: equal to the
amount paid
42. Illiterate account holder, how many witness for nomination: two
43. In Basic Savings Bank Deposit Account in all their accounts taken together and the total credit in
all the accounts taken together is not expected to exceed _____ in a year has been simplified to
enable those belonging to low income groups without documents of identity and proof of
residence to open banks accounts: 1,00,000/-.
44. In case Fixed Deposits account the rate of interest fixed by whom: Board of Directors of
respective bank.
45. In case of a/c transfer, with in how many days the address proof has to be submitted in the
transferee branch? Six Months
46. In case of an illiterate customer, process of nomination requires witnesses by how many
persons?: Thumb impression requires 2 witnesses.
47. In case of Deposit Insurance whether it mandatory or not: It is Mandatory for all banks.
48. In case of Deposit Insurance, Insurance premium is paid to DICGC by bank and depositor in
which ratio?: Entirely by bank.
49. In case of insurance of deposits by DICGC, premium is paid by: Bank. 100% of the premium
is paid by the bank and not by depositor.
50. In case of insurance of deposits by DICGC, what is the premium sharing ratio between bank and
depositor?: 100% of insurance premium is paid by the bank.
51. In case of Minor what is wrong? Minor can make himself liable for his actions.
52. IN CASE OF TRANSFER OF ACCOUNT, WITHIN HOW MANY DAYS, THE ACCOUNT HOLDER
SHOULD ADVISE NEW ADDRESS?: TWO WEEKS
53. In how many years of no transaction does a saving and current account become inoperative? :
two years
54. In Limited liability Partnership what is the liability of partner?: Amount agreed to be
contributed by partner at the time of joining partnership.
55. In saving accounts, interest is calculated on the basis of: daily product basis.
56. In Senior Citizen Saving Scheme account, who can be joint account holder?:Spouse

57. In small accounts as per RBI- No min. balance, nil/minimal charges etc
58. In small accounts monthly withdrawals to be upto- Rs.10000/-
59. Insurance of deposit is done by DICGC up to: Rs 1 lac per depositor per bank.
60. Interest rate on Saving Deposit is decided by : Banks individually
61. Interest rate on Savings accounts: Not regulated by RBI
62. Max amt for tax saver FD: Rs 150000
63. Maximum amount of deposit in Tax Saving Scheme of the bank can be: Rs 1,50,000
64. Maximum deposit for allocating a locker: 3 year advance rent plus locker breaking charges
65. Maximum period of NRE deposit: Bank Discretion.
66. Minimum and Maximum amount that can be deposited in PPF account is _____: Minimum Rs.
500/- & Maximum Rs. 1.50 lacs.
67. Minimum Lock in period for Tax saver FDR: 5 Years
68. Minimum Maturity Period for Certificate of Deposit is : 7 days
69. Missing person treated as having expired if missing for: 7 years
70. No Frills Accounts are opened for: Financial Inclusion
71. No of digits in Aadhar : 12
72. Non Resident (External) fixed deposit is normally accepted for a period of (a) 1 year to 3 year
(b) 1year to 5 year (c) 1 year to 4 year (d) 1 year to 7 year (e) 6 months to 3 year: 1 year to 3
year (As per RBI it is minimum 1 year and maximum bank discretion)
73. OD in PMJDY account upto: Rs. 5,000/-.
74. On a cheque presented for payment, amount is written in words but all other items are written in
Regional Language. What should the bank do?: Pay the cheque
75. Pensioner account can be opened jointly with? Spouse as Either of Survivor or Former or
Survivor.
76. Rate of Interest in Sukanya Samridhi Account for 2015-16: 9.20% & 8.6% FOR 2016-17
77. Relation between bank and judgment debtor: debtor & creditor.
78. Safe custody of Articles comes under which Act: Indian Contract Act.
79. Star series note can be issued in denomination of Rs 100 also. (earlier only Rs 10, 20 & 50)
80. Super senior citizen after: 80 years of age
81. The balance in the account is Rs 15000. A cheque of Rs 30000 was sent for collection. Before it
is realized a cheque for Rs 20000 has been presented for payment. What should the bank do –
(a) Return with reason effects not yet cleared. Present again; (b) Pay the cheque; (c) Return
with reason exceeds arrangement; (d) Return with reason Refer to Drawer; (e) Return with
reason Insufficient Funds: Insufficient Funds
82. The minimum & maximum period of certificate of deposit is : 7 days, 12 months
83. There is a credit balance in the saving account and there is a overdraft in the current account
amounting to Rs 555. Both accounts are in the same name. Bank wants to adjust credit balance
of saving bank account towards payment of overdraft. As per which right, bank can do this?:
Right of Set Off.
84. Under Sukanya Samridhi Account (SSA) the maximum period upto which the deposits can be
made is for ___ years from the date of opening of the account: 14 years
85. Under Sukanya Samridhi Account (SSA) the minimum amount of deposit is Rs 1,000 and Under
Sukanya Samridhi Account (SSA), the bank account will be opened for a girl child upto the age
of: 10 years
86. Under Sukanya Samridhi Account (SSA), the current rate of interest on deposits is which is the
highest amongst all other Govt. Saving Schemes: 9.20% & 8.6% FOR 2016-17
87. What are the Service charges for using ATMs of other banks for balance enquiries: Rs.20 for
Financial & Rs. 10 for Non- Financial upto 5 transactions ( 3 at Metros)
88. What documents are required for opening a small account?: Self attested photo and address
89. What is the bankers-customer relationship in case of deposits? Debtor – Creditor
90. What is the distance criteria for office of Business Correspondent?: The distance between the
place of business of a retail outlet/sub-agent of BC and the base branch should ordinarily not
exceed 30 kms in rural, semi-urban and urban areas and 5 kms in metropolitan centers.
91. What is the maximum amount of loan that can be granted against FCNR deposit? No limit.
92. What is the periodicity of review of risk classification of customers?: Every six months
93. What is the rate of interest payable on an overdue FD for overdue period if customer demands
payment and does not renew the same?: Saving Bank Rate
94. What is the special feature of Basic banking Account? Account can be opened with nil or very
small amount and there are no requirement of minimum balance.
95. What type of account can be opened in the name of NRI jointly with residents? NRO /NRE/FCNR

(earlier only NRO)
96. What type of activity can be performed by Business Correspondent - (a) processing and
submission of applications to banks; (b) disbursal of small value credit, (c) recovery of principal /
collection of interest (iv) collection of small value deposits: All of these
97. When a person wants to open an account with a bank but does not have proof of identification
and address, what type of account can be opened?: Small account
98. When Letter of Administration issued: When the person dies without leaving the Will- Intestate.
99. Whether “WILL” has to be registered? Not required.
100. Which form is used for cancellation of nomination in deposit accounts?: DA -2
101. Which is not a proof of Identity?: Ration card.
102. Which is the most important document for opening a Trust Account?: Trust Deed
103. Which of the following forms will be used for allowing exemption to a depositor aged 61 years
: Form 15 H
104. Which of these rates are periodically reviewed by RBI?: Repo rate, Bank rate, but not Savings
Bank Rate.
105. While opening account, a bank, in addition to observing various provisions of Indian Contract
Act should also – exercise utmost care and attention; look at profitability from account; exercise
due diligence: Due diligence
106. While opening the account with a bank, prospective customer is required to submit – PAN No
or Form 60 or 61
107. Who are eligible for preferential rate of interest under NRE deposits: a) Staff b) Senior citizen
c) Staff cum Senior Citizen d) none of these?: None of these
108. Who can do nomination in the account of a Minor?: Can be done by guardian not by
minor
109. Who of the following can exercise nomination – HUF, limited company, trust, Partnership firm,
sole proprietorship firm?: Sole Proprietorship firm.

JAIIB – LRAB (LEGAL & REULATORY ASPECTS OF BANKING)

 

JAIIB - Legal & Regulatory Aspects of Banking - Mod - A - Regulations and
Compliance
Unit - 1 : Legal Framework of Regulation of Banks
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Banking means acceptance of deposits of money from the public for lending or investment.
Such deposits may be repayable on demand or may be for a period of time as agreed to, by
the banker and the customer, and may be repayable by cheque, draft or otherwise.
Apart from banking, banks are authorised to carry on other business as specified in Section 6
of the Banking Regulation Act.
Banks are, however, prohibited from undertaking any trading activities.
Banks are constituted as companies registered under the Companies Act, 1956, statutory
corporations constituted under Special Statutes or Co-operative societies registered under the
Central or State Co-operative Societies Acts. The extent of applicability of the regulatory
provisions under the Banking Regulation Act and the Reserve Bank of India Act to a bank
depends on the constitution of the bank.
Reserve Bank of India is the central bank of the country and the primary regulator for the
banking sector.
The government has direct and indirect control over banks. It can exercise indirect control
through the Reserve Bank and also act directly in appealsarising from decisions of the Reserve
Bank under the various provisions of the Banking Regulation Act.
In public sector banks like the State Bank of India and its subsidiaries, nationalised banks and
the regional rural banks, 50% or more of their shares are held by the Central Government.
Central Government has substantial control over the management of these banks. Only
certain provisions of the BR Act are applicable to these banks as indicated in that Act.
Co-operative banks operating in one state only are registered under the State Co-operative
Societies Act and are subject to the control of the State Government as also the Reserve
Bank.
In the case of non-banking business of the banks, they are subject to control by other
regulatory agencies.
Constitution Of Bank
-------------------------
Banks in India fall under one of the following categories:
1. Body corporate constituted under a special statute;
2. Company registered under Companies Act, 1956 / foreign company
3. Cooperative Society registered under a central and state enactment on cooperative
societies.
Reserve Bank as Central Bank
The Reserve Bank was constituted under Section 3 of RBI Act. The Central Govt holds the
whole capital of RBI.
1. Regulating the issue of bank notes
2. Keeping of reserves for ensuring monetary stability
3. Generally to operate the currency and credit system of the country to its advantage.
RBI: Regulator and Supervisor
1. Power to License
2. Power to appointment and removal of banking boards/personnel
3. Power to regulate the business of banks
4. Power to give directions
5. Power to inspect and supervise banks
6. Power regarding audit of banks
Government as a Regulator of Banks
The Reserve Bank is primary regulator of banks. But Central govt. has also been conferred
extensive powers under the RBI Act and the BR Act either directly or indirectly over the
banks.
Unit - 2 : Control Over Organisation Of Banks
-------------------------------------------
A company wanting to commence banking business requires prior licence from the Reserve
Bank.
The Reserve Bank has the discretion to reject licence or approve the licence on such
conditions as it thinks fit. Before granting licence, Reserve Bank has to be satisfied by
inspection or otherwise of the suitability of the company for licence.
A licence once given may also be cancelled after giving the bank an opportunity to be heard.
Further, for opening new branches or shifting branches outside a city, town or village,
permission of the Reserve Bank is required.
Banking companies have to have minimum capital and reserves as specified in the Banking
Regulation Act. The shareholders of a banking company are entitled to dividends only after all
the capitalised expenses are written off.
The commission or brokerage payable on selling shares is restricted to two and half per cent
of the paid-up value of the shares.
The board of directors of a bank has to be constituted with persons having special knowledge
or experience in accountancy, banking, economics, law, etc., as stipulated. The directors
should not have substantial interest in other companies or firms.
The maximum period of office is limited to eight years continuously.
Authorized Capital the maximum limits of share capital which a company is authorised to have
under its Memorandum.
Paid-up Capital The amount of share capital of a company is subscribed and paid-up.
Subscribed Capital The amount of share capital of a company, which is issued and subscribed.
The Reserve Bank is empowered to reconstitute the board, if the board is not properly
constituted. Every banking company should have a full-time chairman (or a full-time
managing director, if there is no fulltime chairman) with the specified qualifications.
The Reserve Bank has powers to remove the chairman and appoint a suitable person in his
place in certain cases. The Reserve Bank also has powers to remove the directors or
managerial personnel or other employees of banking companies.
The principles of corporate governance including the 'fit and proper' criteria for directors apply
to banking companies as well as public sector banks.
A Temporary branch for less than 30 days in a town where a bank has an existing branch
does not require permission from RBI.
Unit - 3 : Regulation Of Banking Business
------------------------------------------------
The Banking Regulation Act empowers the Reserve Bank to issue directions to banking
companies in public interest, in the interest of banking policy and in the interest of depositors.
Section 21 provides for the issue of directions to regulate loans and advances by banking
companies. This may be done by regulating the purposes of lending, margins in respect of
secured loans, rate of interest and terms and conditions of lending.
Section 35A gives wide general powers to issue directions. The Reserve Bank issues
directions from time to time under Section 21 (read with Section 35 A) regulating acceptance
of deposits and lending.
Under Section 21A of the Act, the rate of interest on loans and advances contracted
between a bank and its customer is not liable to be reopened by a court of law.
Section 20 of the Act imposes restrictions on loans and advances to directors, and
companies and firms in which directors are interested as director, partner, etc.
A banking company which is a scheduled bank has to maintain a certain percentage of the
time and demand liabilities as cash reserve with the Reserve Bank under Section 42 of the
Reserve Bank of India Act, as notified by the Reserve Bank from time to time.
Failure to do so renders the banking company liable to penalty. For non-scheduled banking
companies, Section 18 of the BR Act provides for cash reserve.
Banking companies have also to maintain a certain percentage of their demand and time
liabilities in liquid assets as stipulated under Section 24 of the BR Act. These assets may be
maintained to the extent and in the form and manner as notified by the Reserve Bank. Apart
from this, banking companies are required to maintain such assets in India at not less than
seventy five per cent of demand and time liabilities as at the close of business of the last
Friday of every quarter.
Banking companies also have to transfer to the reserve fund twenty per cent of their annual
profits as disclosed in the profit and loss account.
Regulation of credit to different sectors of the economy is known as Selective Credit Control.
While General Credit Controls operate on the cost and volume of credit, Selective credit
controls aim at regulating the distribution or direction of bank resources to particulars sectors
of the economy.
Selective Credit Control seeks to influence the demand for credit by
i. Making borrowing costly for certain purposes, which are relatively inessential
ii. By imposing stringent conditions on lending for such purposes
iii. By giving concessions for certain desired types of activities
The tools employed for exercising selective credit control are
i. Minimum margins for lending against selected commodities
ii. Ceiling on the levels of credit
iii. Charging minimum rate of interest on advances against specified commodities Scheduled
Banks
A scheduled bank is a bank included in the second schedule of the RBI Act. Section 42(6) of
the Act. RBI may include any bank in the second schedule
if it satisfies the following requirements.
a. It has paid-up capital and reserves of an aggregate value of not less than Rs. 5 Lakhs.
b. It satisfies the Reserve Bank that it affairs are not conducted in a manner detrimental to
the interests of depositors; and
c. It is
(1) State cooperative Bank
(2) A company defined in section 3 of the companies act
(3) An institution notified by central govt.
Cash Reserve : The penalty which is payable by a banking company which is scheduled
bank for failure to maintain cash reserve in any week for the first time is 3% of over bank
rate. For 2nd time 5% over bank rate.
Unit - 4 : Returns, Inspection, Winding Up, Mergers & Acquisitions
-------------------------------------------------------------------------------
Every banking company has to prepare its balance sheet and profit and loss account annually
as at the end of the calendar year or at the end of twelve months as on a date notified by the
Central Government.
The accounts have to be audited by auditors duly qualified to be auditors of companies.
Three copies of the balance sheet, profit and loss account and the auditor's report have to be
submitted as returns to the Reserve Bank and to the Registrar of Companies.
Banking companies have also to furnish other returns like return on maintenance of cash
reserve, maintenance of liquid assets, etc.
The Reserve Bank is authorised to inspect or conduct, scrutiny of banking companies, their
books and accounts.
The Board for Financial Supervision set up by the Reserve Bank by statutory regulations
framed under the Reserve Bank of India Act supervises the affairs of banking companies.
The Government may acquire the undertakings of banking companies in certain circumstances
based on a report from the Reserve Bank.
The Central Government may also order moratorium on banking companies on the application
of the Reserve Bank. During moratorium, the Reserve Bank may prepare a scheme for
amalgamation, which may be sanctioned by the Central Government. Such an amalgamation
scheme will have overriding effect on any laws, agreements, etc.
The Reserve Bank may also apply to the High Court for winding up of a banking company
when it is not able to pay its debts and also in certain other circumstances.
The Reserve Bank of India Act and the Banking Regulation Act impose certain penalties for
contravention or default committed by banking companies or other persons.
Board for Financial Supervision
It is constituted by RBI. The board consists of Chairman (Governor of RBI), Vice Chairman
(one of the Dy. Governor of RBI), Four directors from the Central Board. The board performs
functions and exercises the powers of supervision and inspection under the RBI Act and the
BR Act.
The board meets at lease once in a month. Three members of whom one Chairman / vicechairman
shall form a quorum for the meeting.
Unit - 5 : Public Sector Banks and Cooperative Banks
----------------------------------------------------------------
The public sector banks, namely, State Bank and its subsidiaries, the Nationalised banks and
the regional rural banks are statutory corporations (or body corporate) established under
special statutes.
State Bank and its subsidiaries
State Bank and its subsidiaries, as Nationalised banks, are commercial banks engaged in the
business of banking and other forms of business permissible for banking companies.
State Bank Of India was established under Section 3 of the State Bank Of India Act, 1955 for
taking over the undertaking of the Imperial Bank Of India. The majority of shares are held by
Reserve Bank. Although shares are freely transferable, the Reserve Bank cannot transfer the
shares if such transfer would result in reducing its holding below 50% of the issued capital.
No shareholder other than Reserve Bank can exercise voting rights above 10%.
The chairman and Managing Director are appointed for a period not exceeding 5 years and
are eligible for reappointment. Their services can be terminated by the Central Govt. by giving
3 months notice or notice pay in lieu thereof after consultation with the Reserve Bank.
The State Bank and its subsidiaries and the Nationalised banks also act as agents of the
Reserve Bank to transact the banking business of the Central Government.
Subsidiary Banks
SBH State Bank of Hyderabad Act, 1956
SBS Saurashtra State banks(amalgamation) Ordinance, 1950
All other banks State Bank Of India (Subsidiary Banks) Act, 1959
The majority of shares are held by State Bank Of India. Shares are freely transferable as
provided in Section 18 of the Act, However State Bank is not entitled to transfer the shares if
such transfer would result in reducing its shareholding to less than 50%.
Management of Subsidiary Bank
The Board consists of Chairman of the State Bank (ex-officio chairman), Managing Director
and other directors. The state bank appoints Managing Director after consulting the board of
subsidiary bank and with the approval of Reserve Bank.
Business of Subsidiary Bank
A subsidiary bank has to act as a agent of State Bank under Section 36 of the SBI Subsidiary
Act.
Regional Rural Banks
They were first set up in 1975 under the RRB Ordinance 1975. The ordinance was later
replaced by RRB Act, 1976. Section 3 of the RRB Act authorised Central Govt. to establish
RRB by notification in the official gazette at the request of Sponsor Bank.
Issued Capital ratio (50:35:15) (Cental Govt:SponsorBank:state govt.)
The regional rural banks are also commercial banks but operating in limited local areas to
cater to rural industries, trade, farmers, artisans, etc.
Nationalised Banks
The Bank Nationalisation Act 1970 and Banking companies (Acquisition and Transfer of
Undertaking) Act 1980. Transferred the undertaking of existing private banks to the
corresponding new banks popularly knows as Nationalised banks.
Paid-up Capital – Originally entire Paidup Capital was held by Central govt., some of these
banks have recently made public issue of shares, but the Central Govt. still holds majority of
shares in all these banks. The Shares other than those held by the Central Govt. are freely
transferrable.
SBI Act 4 Divide capital into shares of Rs.10 each instead of Rs.100
Restriction on voting rights (being 200 shares only) was modified upto 10 % of the Issued
Capital and restriction on dividend deleted BC(A&T) 3 Authorised Capital of Rs.1,500 crore
divided into shares of Rs.10 each.
The Banking Companies (Acquisition and Transfer of Undertakings)
All public sector banks are governed by their respective, statutes and the rules, regulations or
schemes made under these statutes. In addition to this, these banks are also governed by
certain provisions of the Banking Regulation Act as stipulated in Section 51 of that Act. The
provisions of the Reserve Bank of India Act are also applicable to them.
Cooperative Banks
A Cooperative Bank is a cooperative society engaged in the business of banking.
The co-operative banks, functioning in one state only are registered under the state laws on
co-operative societies.