CAIIB ABM MODULE D 60 MCQs

CAIIB ABM MODULE D 60 MCQs

01. Statutory corporations are controlled by which act for credit management.

a) Indian contract act

b) Company act

c) Act that created them

d) Indian partnership act

e) Indian trust act and public act

Ans: c

02. Which one of the following is not a non fund base credit?

a) Letter of credit

b) Bill discounting

c) Co-acceptance of bills

d) Forward contract

e) Derivatives

Ans: b

03. Mr. Shyam has a house in a rural village, very near to Agra. His house is very old and

required some repairing work. So, Mr. Shyam visited Agra main branch for a loan, how much

amount of loan he can avail from bank under housing finance.

a) 1 lakh

b) 2 Lakh

c) 5 Lakh

d) 10 Lakh

e) 20 Lakh

Ans: a

04. Small enterprises advance and export credit does not financed by both public sector and

PSU (export does not comes under priority sector advance) what percentage of small

enterprises advance and export credit is supposed to be given ___ and ___ respectively.

a) 40 and 32 %

b) 18 and 10%

c) 10 and 12%

d) No target and 12%

e) 10% and no target

Ans: c

05. RBI to free the landing rates of scheduled commercial banks for credit limit over ___.

a) 01 Lakh

b) 02 Lakh

c) 05 lakh

d) 10 Lakh

e) 20 Lakh

Ans: b

06. BPLR system of lending rates replaced by base rate system it was effected from ____.

a) 01 Jun 2010

b) 01 Jul 2011

c) 01 Jan 2010

d) 01 Jul 2010

e) 01 Jul 2003

Ans: d

07. No penal interest should be charged with effect from 10 Oct 2000 to borrower�s loan

under priority sector up to Rs _____.

a) 10000

b) 20000

c) 25000

d) 50000

Ans: c

08. No collateral security is required loan under MSME both manufacturing and production and

providing or rendering of services up to Rs ___.

a) 1 lakh

b) 2 lakh

c) 5 lakh

d) 10 lakh

e) 20 lakh

Ans: C

09. Which accounting standard makes it mandatory for some enterprises to prepare cash Flow

Statement for the accounting period?

a) AS-1

b) AS-3

c) AS-9

d) AS-17

Ans: b

10. Industries & business enterprises whose turnover for the accounting period exceeds Rs.

50 crore has to submit segment-wise reporting as per _____.

a) AS-3

b) AS-7

c) AS-17

d) AS-21

e) AS-22

ANS: C

11. MR. Rohit want to invest some money in XYZ co., he want to purchase some stocks of this

co. How Mr. Rohit can assess to financial statement of the XYZ co.

a) By balance sheet

b) By EPS

c) By financial statement

d) all

Ans: d (EPS- earning per Share)

12. Basic concept used in preparing of financial statements is given below pick up the odd

one.

a) Entity concept

b) Money market concept

c) Going concern concept

d) Dual aspect concept

e) Accrual concept

ANS: b

13. As per company act the maximum period of financial period is 15 months, MR Charles is

GM of ABC co. due to some contingency he is unable to prepare his Financial statement so he

want to extend his financial to another 03 months i.e. 18 months maximum period of financial

statement so MR Charles has to approach to whom for such extension.

a) Income Tex office

b) Reserve bank of India

c) Accountant general of region

d) Registrar of company

Ans: d

14. The companies Act classifies liabilities which shown on the left side of the horizontal form

pick up the odd one.

a) Share capital

b) Reserve & surplus

c) Miscellaneous expenditure

d) Secured & unsecured loans

e) Current liability & provisions

Ans: c

15. Revenue reserve represents accumulated retained earnings from the profits of normal

business operations. These are held in various forms that are given below pick up odd one

___.

a) General reserve

b) Investment allowance reserve

c) Advance payment received

d) Capital redemption reserve

e) Dividend equalization reserve

Ans: c

16. 17. Current liabilities and provisions as per classification under the co. act consist of the

following except one given below.

a) Advance payments received

b) Accrued expenses

c) Pre-paid expenses

d) Unclaimed dividend & dividends

e) Provisions for taxes

f) Gratuity and pensions

Ans: c

17. Which committee has prescribed inventory norms for various industries?

a) Narasimham committee

b) Raghawan committee

c) Tandon committee

d) Chakraborty committee

Ans: c

18. ____ % of small enterprises advances should go to micro enterprises in case of foreign

banks.

a) 20

b) 40

c) 60

d) 80

Ans: c

19. In order to avoid the problem in delay in realization of bills, bank may take advantage of

improved computer/communication network ___.

a) GUI

b) SFMS

c) ETF

d) SWIFT

ANS: b

20. Bank guarantee should normally have a maturity of more than ___.

a) 5 years

b) 10 years

c) 15 years

d) 20 years

e) 25 years

Ans: b

21. The conduct of LC business is governed by����..

a) RBI

b) IRDA

c) UCPDC 600

d) AMFA

e) GOI

Ans: c

22. What should bank do if the owner of the collateral security is someone other than the

borrower?

a) Reject the loan

b) Transfer security to the name of borrower

c) He should become first guarantor of the loan and create charge over the security

d) Security should be hypothecated to the banker

Ans: c

23. What bank should do to avoid asset-liability maturity mismatch that may arise out

extending long tenor to infrastructure projects.

a) Return on investment

b) break- even analysis

c) Liquidity support from IDFC

d) Take-out financing arrangement

e) Sensitivity analysis

Ans: d

24. Frequency of review should vary depending on the magnitude of risk for the average risk

account.

a) 01 month

b) 03 months

c) 06 Months

d) 12 Months

Ans: c

25. In case of company, the charge should be registered with ROC within ___ days from the

date of execution of documents.

a) 15 days

b) 30 days

c) 45 days

d) 2 m

Ans: b

26. What is Priority sector target of Direct & Indirect Agriculture for Domestic banks?

a) 13.5% of ANBC or Off Balance Sheet Items whichever is higher. 4.5% for Indirect Agri.

b) 10% of anbc or 6% for indirect agri

c) 12% of anbc or 4.5% for indirect agri

d) No target

Ans: a (it is 18% in total 13.5 % is direct Ans 4.5% is indirect agric)

27. What are targets and sub-targets of DRI advances?

a) 1% of total outstanding advances of previous year

b) Out of which 40% should go to SC/St

c) 2/3rd must route though Rural and Semi Urban branches

d) All of these

ANS: d

28. What are prudential norms for individuals and Groups as per RBI guidelines? Pick up odd

one.

a) Individuals Groups General 15% of Capital Funds

b) 40% of Capital Funds of borrower group

c) Infrastructure 20% of Capital Funds single borrower

d) 50% of Capital Fund to gp infrastructure project

e) Oil Companies 25% of Capital Funds

f) All correct

ANS: f

29. Monetary and Credit policy is issued by RBI how many times in a year?

a) Monetary Policy is issued annually

b) With quarterly review

c) Credit Policy twice a year

d) All of these

Ans: d

30. RBI has restricted bank to finance against/to _______________.

a) Bank�s own shares

b) Relatives of Directors and Senior Officers

c) Sensitive commodities under selective control measures

d) FDRs of other banks, CDs, Companies for buy back of shares and Industries consuming

Ozone Depleting Substance (ODS)

e) All of these

Ans: e

31. Explain Delivery of credit for WC limits of 10 crore and above.

a) CC component -20% & WCTL component-80%

b) WCTL component-80% & CC Components-20%

c) WCTL components-50% & CC Components-50%

d) CC Components-15% & WCTL components-85%

ANS: a- The proportion is not fixed but is flexible according to requirement of borrower.

32. What are provisioning norms for Standard Assets? Pick up odd one.

a) Direct SME and Direct Agriculture 0.25%

b) Others 0.40%

c) Commercial Real Estate 1%

d) Teaser Housing Loans 2%

e) None of these

Ans: e (It is Classification Rate of provision)

33. In how many years, Foreign banks with 20 branches and above in India need to achieve

PS target of 40%?

a) 2 years

b) 3 years

c) 4 years

d) 5 years

e) 7 years

Ans: d -starting from 1.4.2013 up to 1.4.2018.

34. What is ANBC?

a) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + Investment

in Non-SLR bonds under HTM category + other investments eligible to be treated as PS

b) Bank Credit in India + Investment in Non-SLR bonds under HTM category + other

investments eligible to be treated as PS

c) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + Investment

in Non-SLR bonds under HTM category

d) Bank Credit in India + Bills Rediscounted with RBI/other approved institutions + other

investments eligible to be treated as PS.

Ans: b

(Now amended) as per http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7460&Mode=0

35. Base Rate is determined in each bank by ___.

a) ALCO

b) BPLR

c) ALM

d) DSCR

e) SFMS

Ans: a (Asset Liability Management Committee)

36. The target given for advances to weaker sections in percentage of ANBC is ___.

a) 10% for domestic banks

b) 12% for foreign banks

c) No target for domestic banks

d) 10% for foreign banks

Ans: a

37. Mark the incorrect statement.

a) No target is given to domestic banks for small enterprise advances

b) No target is given for agriculture advances in for foreign banks

c) Export credit does not form a part of priority sector for domestic banks

d) Export credit does not form a part of priority sector for foreign banks

Ans: d

38. Gain on revaluation of asset is a ____.

a) General reserve

b) Investment allowance reserve

c) Capital reserve

d) Revenue reserve

Ans: c

39. Banks can file a civil suit for recovery of their dues in civil courts. This option is used for

dues ____.

a) Up to 5 lacs

b) Up to 10 lacs

c) Above 10 lacs only

d) Above 20 lacs only

Ans: c

40. What are provisioning norms for NPAs? Classification of assets Provision on Secured

Provision on Unsecured

a) Sub-Standard 15% 25%

b) Doubtful (D1) 25% 100%

c) Doubtful (D2) 40% 100%

d) Doubtful (D3) 100% 100%

e) Loss Assets 100% 100%

f) All correct

Ans: f

41. You are a loan in charge of ABC one of your a/c of personal loan in the name of Mr.

subhash is not paying his dues in time lots of reminder have been send by you for recovery ,

you have approached him for rehabilitation, he has agreed for that. What will be next step?

a) Rescheduling/restructuring

b) Legal action

c) Exit from the account

d) Compromise

e) Write off

Ans: d

42. Lok adalat (peoples� court) at present resoling issue of NPAs, the enhanced limit from

Aug 2004 is ___.

a) 5 lakh

b) 10 lakh

c) 20 lakh

d) 25 lakh

e) 25 lakh above

Ans: 20

43. Banks and FIs for expediting the recovery cases to DRTs (Debt Recovery Tribunals) for

NPAs value in excess of ___.

a) 05 lakh

b) 10 lakh

c) 20 lakh

d) 25 lakh

e) 25 lakh above

Ans: b

44. SARFAESI Act 2002 has been extended to cover co-operative banks by notitification dated

___.

a) 21 June 2002

b) 21 Jul 2002

c) 21 Jul 2010

d) 28 Jan 2003

e) 01 Jan 2003

Ans: d

45. CDR is a ____ mechanism.

a) Statutory

b) Non-statutory

c) Core

d) None of these

Ans: b (Corporate Debt Restructuring)

46. Define Small Business on the basis of annual Turnover?

Ans. Whose Annual turnover is less than 50 crore.

47. How will you define Retail Customers?

Ans. Borrowers with exposure of more than 5.00 crore

48. What is Priority sector target of Direct & Indirect Agriculture for Domestic banks?

Ans. 13.5% of ANBC or Off Balance Sheet Items whichever is higher. 4.5% for Indirect Agri.

49. What are targets and sub-targets of DRI advances?

Ans. 1% of total outstanding advances of previous year. Out of which 40% should go to SC/St

and 2/3rd must route though Rural and Semi Urban branches.

50. Priority Sector Target For Housing Loan

Ans. Housing Loan ----Rs. 25 lac for Metro stations having population 10.00 lac and above. Rs.

15 Lac for other cities.

For Repair-----------up to 2.00 (Rural and SU) and Rs. 5.00 lac (Urban and Metro)

51. Define Small and Marginal farmer.

Ans. Farmers having land up to 1 hector are Marginal Farmers and others having land up to 2

Hector are Small Farmers.

52. Define Micro, Small and medium for manufacturing and service units.

Ans. Investment in Plant and Machinery for Manufacturing Units

Investment in Equipment For Service Units

Micro Up To Rs. 25 lac Up To Rs. 10 lac

Small Up To Rs. 5.00 crore Up to Rs. 2.00 crore

Medium Up To Rs. 10.00 crore Up To Rs. 5.00 crore

53. What are provisioning norms for NPAs?

Classification of assets Provision on Secured Provision on Unsecured

Sub-Standard 15% 25%

Doubtful (D1) 25% 100%

Doubtful (D2) 40% 100%

Doubtful (D3) 100% 100%

Loss Assets 100% 100%

54. What are Prudential norms for individuals and Groups as per RBI guidelines?

Ans. Individuals Groups

General 15% of Capital Funds 40% of Capital Funds

Infrastructure 20% of Capital Funds 50% of Capital Funds

Oil Companies 25% of Capital Funds

55. How much amount of loan can be sanctioned to Agriculture and SME without Collateral?

Ans. Agriculture --------------1.00 lac

SME----------------------10.00 lac

56. Monetary and Credit policy is issued by RBI how many times in a year?

Ans. Monetary Policy is issued annually with quarterly review and credit Policy twice a year.

57. RBI has restricted bank to finance against/to _______________?

Ans.

1. Bank�s own shares

2. Relatives of Directors and Senior Officers.

3. Sensitive commodities under selective contro measures.

4. FDRs of other banks, CDs, Companies for buy back of shares and Industries consuming

Ozone Depleting Substance (ODS)

58. Explain Delivery of credit for WC limits of 10 crore and above.

Ans. CC component --------20%

WCTL component-----80%

The proportion is not fixed but is flexible according to requirement of borrower.

59. What are provisioning norms for Standard Assets?

Ans. Classification Rate of provision

Direct SME and Direct Agriculture 0.25%

Others 0.40%

Commercial Real Estate 1%

Teaser Housing Loans 2%

60. What are PS targets for Micro and Small Enterprises?

Ans. All MSE loans will be treated as PS. But sub-targets within overall MSE loans are as

under:

40% 20% 40%

Manufacturing units

having Investment in Plant and Machinery

Up to Rs. 5.00 lac

Above 5.00 up Rs. 25.00 lac

Above 25.00 lac

Service Units having Investment in Equipment

Up to Rs. 2.00 lac

Above Rs. 10.00 lac

Above Rs. 10.00 lac

61. What are PS targets for Foreign Banks having less than 20 branches in India?

Ans. Total Priority Sector 32% of ANBC or Off Balance Sheet Items (Higher)

Agriculture No specific target but forms part of Total PS

MSE units No specific target but forms part of Total PS

Export No specific target but forms part of Total PS

Weaker sector No specific target but forms part of Total PS

62. In how many years, Foreign banks with 20 branches and above in India need to achieve

PS target of 40%?

Ans. 5 years starting from 1.4.2013 up to 1.4.2018.

63. What are PS targets of weaker sector for Domestic banks and Foreign banks having 20

and above branches in India?

Ans. 10% of ANBC or Off Balance Sheet Items whichever is higher.

64. What is ANBC?

Ans. Bank Credit in India + Bills Rediscounted with RBI/other approved institutions +

Investment in non-SLR bonds under HTM category + other investments eligible to be treated

as PS.

65. Base Rate is determined in each bank by ____.

Ans. Asset Liability Management Committee (ALCO)Top of Form

Bcsbi recollected questions

1) Garnishee Order received for Rs 10,000/- The minimum balance as per bank rule is Rs 3,000/- What is the course of action?

2) Right of appropriation is as per which act?

3) A teacher for the purpose of teaching enquiring bank regarding her rish categorization, as in what risk her account is classified?

4) Mr. X is having gold loan with our bank. He stand as a guarantor for Mr. Y. Now Mr. Y defaulted the loan and the account is NPA. Whether bank can hold the pledge ornaments?

5) How many CIC a bank should have membership as per guidelines ?

6) Which among the following is not CIC?

7) Which among the following is not Officially valid Documents (Answer was Ration Card)

8) Major complain received in Ombudsman for the credit card? (Wrong Billing)

9) What facility we cannot extend to Minor account ? (Overdraft facility )

10) What precaution bank take while accepting the power of attorney, Chooser the wrong answer (Power of attorney unstamped)

11) Maximum term of FCNR (B) deposit?

12) Full form of CORE in CBS?

13) Which among the following is implied needs? (Ans: Extra Attention to the service need)

14) Customer approaching for getting a pass sheet print in terms of passbook? Whether bank will issue apart from passbook?

15) The bank came to know that Mr. A, customer of your branch died on 01.09.2018. Mr. B is approaching the bank on 05.09.2018, to deposit money to that account. What will be the course of action?

16) Customer Delight Illustration by an example choosing from the options

17) Recently what and all deficiency are added to the purview of Ombudsman? (Bancassurance to ineligible/in appropriate customer & Non displaying of redressed/Ombudsman details at branch)

18) Who will appoint CEO in BCSBI?

19) Number of women representatives in various redressal forums under Consumer Protection Act?

20) How branch guide for a customer who is having a complaint? (Ans: TAT, Ombudsman details, etc)

21) The stop payment is issued, however bank honor the cheque, what will be the implication on the bank in terms of this deficiency?

22) Order cheque requires (Endorsement, Delivery or both ?)

23) Which among is not principles of banking? (Insolvency, trust, transparency etc )

24) A reduced customer complaint and increased business is a sign of (Good progress in business )

25) Example of social media marketing? (Advt in press/Internet etx)

26) Implication of a bank which is not a member of BCSBI ? (Less Image in public )

27) Mr. X an employee of the bank collects from neighbors everyday money not deposited to their account? What will be the implication ( Bank’s Image will go low, The staff will be punished, No implication on bank as the collection done not in branch time etc)

28) In terms of promotional materials internet, the bank’s ethics (Like not misleading, giving transparency, information etc)

29) Which among the given option is not a rating parameter for BCSBI for bank’s rating?

30) As per the BR act, who is having the power to conduct inspection of SCBs (NABARD)

31) Which among the following is not required to disclose as per the BCSBI codes to the person who do Forex transfer? (Answer was interest rate of beneficiary country for the term deposits)

32) A non - customer approached you for the remittance of Rs 60,000/- vide NEFT to his father in different town for the medical purpose. What will be the course of action as per BCSBI codes?

33) Mr. X issued a cheque in favor of Mr. Y in different city. He has presented to clearing to Bank. Mr. X now demanding for the original cheque to confirm the particulars entered. (Bank can give the image of cheque only)

34) The bank has send the returned cheque vide ordinary post to the payee. The same is lost in transit. How the case can be dealt to ?

35) Which among the given option is not retail banking?

36) Calculation of eligible loan by giving project cost, Reg Charge, Stamp Duty & Cost of Project @ given LTV of 90%

37) Who can authorize the alterations in the Cheque when it is presented over the counter for the payment?

38) The remittance above what amount o be strictly routed through A/c

39) The demand draft above what value to be credited or passed through account payee options?

40) What is the limit to which no processing charges for MSE loan? (Ans: 5 Lacs)

41) As per MSME CODE till what amount bank will give collateral free loan?

42) The loan given for ITI Education. The loan value is Rs 1.50 Lacs. It is a one year course Maximum moratorium can be ?

43) Demerits of credit card ( Overspending)

44) An unsolicited card is issued to a person. The bank charged Rs 100/- as fees. What is the course of action bank need to take?(Charge and Twice Value of the charges reversed)

45) Code of conduct of DSA : Which among is wrong?

46) Mr. X who is to be approached by our recovery agent old the agent to come to his company near the tea shop in the ground floor of his office, What the agent should do (Ans: No other way go only J )

47) Within how many days the customer can approach the appellate authority if they are not satisfied with the award given by Ombudsman?

48) Which among the following is not an advantage of demat services?

49) Which among the given option is not feature of endorsement?

50) The cheque given for the collection is returned unpaid, the notice is not given in 24 Hours to the party. The customer came to know after 2 months. How to compensate /deal with this situation?

51) Who controlling body for the the tele marketing ?

52) What is the pre requisite required while hiring a tele marketer for the bank?

53) The time limit for transfer of account from one branch to another branch same bank?

54) Which committee on customer service recommended that the passbook should be issued to FD holders like we issue for SB account ?

55) All the details in cheque is filled with ink, the signature is done with pencil. What will be the course of action?

56) As per the CPPAPS Committee, the evaluations are based on whose sense ? (Regulator, RBI, IBA or Customer. Answer is Customer )

57) Time frame for the settlement of death claim

58) Which among the following is not a BSBDA Account Features?

59) Time frame for the recovery agent to visit customers place ( 07:00 to 19:00)

60) As per the Copra Act, the redressal forum is (Quasi Judicial Machinery)

61) Which among to following is not right of customer as per COPRA act ( Giving criminal complaint on the service deficiency)

62) Which among the following conforms that the receiver is an active listener? (Ask question to understand the content)

63) In the following which is not the components of active listening?

64) Which is the following is not the duty of CEO of BCSBI?

65) Total number of members in Governing council of BCSBI?

66) The Change of charges if notified in 30 days, the customer is having option with in how many days to close/switch his account?

67) How many times an individual will get free credit report from CIBIL in a year ? (No free reports)

68) Time frame to give notice to the probable customers whose account to be converted to dormant/inoperative account ?

69) Notice of how many months is to be given when a branch is getting shut down where there is no branch of any bank.

70) When the usance bill is payable?

71) Nursing / restructuring of debts happen after how many days of NPA?

72) Which of the choices are not a post disbursement requirements bank do to MSE borrowers ? (Comparison with other units I guess is the answer)

73) Which is the primary distribution outlets for the banking services (Answer: Branches)

74) The ATM failed transaction beyond the stipulated waiting period of 7 days will have to be reimbursed to the customer by Onus settlement of (Card Issuing Bank, The bank whose ATM customer uses, None of these etc. )

75) Mr. X a recently current account opened customer issued with a cheque book initially. He is asked for 25 cheque books as he said some payments he need to give to group of people . What will be the course of action (Monitor the account for the issued cheque, how and what amount issued etc)

76) The time frame to rectify every breach in the code by BCSBI and reporting of the same (Ans: with in 7 days reporting and remedial action in 15 days )

77) Failure to submit the duly completed annual statement of annual compliance attracts fine not exceeding (Ans: Rs 1000/- per day )

78) Which of the following is the uses of CTS cheque clearing ( Ans: was all of these)

Regards

Ravikumar

Credit Rating Agencies in India

Credit Rating Agencies in India

A credit rating agency is a company which rates the debtors on the basis of their ability to pay back the debt in timely manner.

There are three big credit rating agencievvs in the world which are
 1.Standard & Poor's (S&P) – Headquarter – New York, US
 2.Moody's – Headquarter - New York, US,
 3.Fitch Ratings- New York, US


There are mainly 5 credit rating agencies in India which are

CARE (Credit Analysis and Research):Founded: 1993,Mumbai  It is the second-largest credit rating agency in india


CRISIL (Credit Rating Information Servicesof India Limited):Founded: 1987,mumbai. It is the largest credit rating limited company.with a market share of
greater than 60%.
*CRISIL’s majority
shareholder is
Standard & Poor’s.

ICRA ( Investment information andcredit rating agency)Founded: 1991 at Gurgaon
It is public limited company .Majority share holder is Moodys

SMERA( SME Rating Agency of India Ltd):Founded: 2005 ,mumbai
*SMERA is a full   service credit rating sector
 agency in India, exclusively set up MSME

ONICRA Gurgaon. It is a Pvt sector agency  set up by onida finance

TERMS RELATING TO MONEY MARKET FINANCIAL PRODUCTS

TERMS RELATING TO MONEY MARKET FINANCIAL PRODUCTS
Derivatives: A derivative is a financial contract that derives its value fromanother financial product/commodity (say spot rate) called underlying (thatmay
be a stock, stock index, a foreign currency, a commodity). Forward contract in forex, a simple formof a derivative.
Option : It is contract that provides a right but does not impose any obligation to buy or sell a financial instrument, say a share or security. It can be
exercised by the owner. Options offer the buyers, profits from favourablemovement of prices say of shares or foreign exchanqe.
Variants of option: There are two variants of options i.e. European (where the holder can exercise his right on the expiry date) and American (where
the holder can exercise the right, anytime between purchase date and the expiry date).
Call option : Owner (buyer), has the right to purchase and the seller has the obligation to sell, a specified no. of instruments (say shares ) at a specified
date during the time prior to expiry date.
Put Option : Owner or the buyer has the right to sell and the seller has the obligation to buy during a particular period
Futures: The futures are the contracts between sellers and buyers under which the sellers (termed 'short') have to deliver, a pre-fixed quantity, at a
pre-fixed time in future, at a pre-fixed price, to the buyers (known as long'). Themain features of a futures contract are that these are traded in
organised exchanges, regulated by institutions such as SEBI, they need onlymargin payment on a daily basis. Futures contract aremade primarily
for hedging, speculation, price determination and allocation of resources.
Forwards: The forward on the other hand is a contract that is traded off-the-stock exchange, is self regulatory and has certain flexibility unlike future
which are traded at stock exchange only, do not have flexibility of quantity and quality of commodity to be delivered and these are regulated by
SEBI, RBI or other agencies.

ASSET - LIABILITY MANAGEMENT IN BANKS

ASSET - LIABILITY MANAGEMENT IN BANKS :

It has been implemented wef April 01, 1999.

What is ALM : ALM is the management of structure of balance sheet (liabilities and assets) in such a way that the net earning
from interest is maximised within the overall risk-preference (present and future) of the institutions.
Maturity buckets are different time intervals (10 for the time being, namely next day, 2-7 days, 8-14 days, 15- 28, 29-90, 91-
180, 181-365 days, 1-3 years, 3-5 and above 5 years), in which value of an asset or liability is placed desending upon its
residual maturity
Mismatch position : When in a particular maturity bucket, the amount of maturing liabilities or assets does not match, such position is
called a mismatch position, which creates liquidity surplus or liquidity crunch position and depending upon the interest rate movement,
such situation may turnout to be risky for the bank.
Ceiling on mismatch position : Mismatches for cash flows for next day to 15-28 days' buckets to be kept to minimum (not to
exceed 5% for next day, 10% for 2-7 days, 15% for 8-14 days and 20% for 15-28 days, each of cash outflows for those
bRuoclekeotfsA).LCO : Asset-Liability Committee is the top most committee to oversee implementation of ALM system, to be headed by CMD
or ED. ALCO would consider product pricing for both deposits and advances, the desired maturity profile of the incremental assets and
liabilities in addition to monitoring the risk levels of the bank. It will have to articulate current interest rates view of the bank and base
its decisions for future business strategy on this view.

Call Money Money lent for one day
Notice Money Money lent for a period of 2-14 days
TermMoney Money lend for 15 days ormore in Inter-bankmarket
Held till maturity Govt. securities which are notmeant for sale and shall be kept till maturity by the banks.
Held for trading Govt. securities acquired by the banks with the intention to trade by taking advantage of the short-term
price/ interest ratemovements.
Available for sale Govt. securities which do not fall within the above two categories i.e. HTM or HFT.
Yield to maturity Expected rate of return on a security during the period, it is held by an investor which may
include capital gains and losses also.
Coupon Rate Specified interest rate on a fixedmaturity security, fixed at the time of issue.
Gilt Edged security Government security.
Dated securities Govt. security instruments which have tenure over one year.
Prudential limits For
money
call Borrowing : On a fortnightly basis, maximum 100% of capital fund of latest audited balance
sheet. It can go up to 125% on any particular day.
Lending: On a fortnightly basis, maximum 25% of capital fund of latest audited balance sheet.
It can go up to 50% on any particular day.
Inter-bank liability ceilings Max 200%of its net-worth as on 31st March of the previous year. Banks with CRAR is at least 25%more
than theminimum CRAR (9%) i.e 11.25%up to 300%of the net worth for IBL.

Sovereign Gold Bond

Sovereign Gold Bond : SGB is issued by RBI on behalf of Government of India, denominated in multiples of grams of gold with a
basic unit of 1 gram. Price of Bond will be fixed in Indian Rupees on the basis of previous week's (Monday-Friday) simple average of closing
price of gold of 999 purity published by the Indian Bulllion and Jewellers Association Ltd (IBJA) . The Bonds are restricted for sale to resident
Indian entities, including individuals, HUFs, Trusts, Universities, Charitable Institutions. Minimum permissible investment is 1 gram of
gold. The maximum LIMIT subscribed be - 4kg for Individuals/HUF. 20 kg for trust and similar entities notified by government from time to
time for fiscal year(April – March) provided that Annual ceiling will include bonds subscribed under different tranches during initial
issuance by Government and those purchased from the secondary market; and b) The ceiling on investment will not include the
holdings as collateral by banks and other Financial Institutions. In case of joint holding, the investment limit of will be applied to
the first applicant only. The tenor of the Bond will be for a period of 8 years with exit option from 5th year to be exercised on the
interest payment dates. The issue price of the Gold Bonds will be Rs 50 per gram less than the nominal value to those investors
applying online and the funds supporting the application is paid through digital mode. The rate will be communicated to the
branches on weekly basis once RBI communicates the same to the Bank. The Subscription of the Gold Bond under this Scheme
shall be open from Monday to Wednesday of every week (both days inclusive)


ref : RBI circullers

Banker’s BankRights

Banker’s BankRights:hasthree rights namely (i) Right of Lien (ii) Right of Set Off (iii) Right of Appropriation

Right of Lien:Lien is the right of creditor to retain possession of goods and securities belonging to the debtor till the debts due to
him (creditor) are paid. This right is available only on goods and securities and not on balances in the accounts. Lien entitles
retention of possession of goads but the creditor cannot sell the goods. Lien can be Particular lien (Sec 170 of the Indian Contract
Act) or General Lien. Right of General Lien, is available only to bankers, factors, wharfingers, attorneys (Section 171 of the Indian
Contract Act). Banker's Lien is also a general lien but it is an implied pledge because the banker has right to retain as well as sell
goods of the borrower after giving him reasonable notice.
For exercising right of lien, (a) the goods or securities and debt should be in the same right and same capacity (b) Loan should be
due or overdue and lawful (c) Reasonable notice is given. Further, Right of Lien is available on the goods and securities received in
the ordinary course of business. It is not available when the goods or securities have been deposited for a specific purpose; goods
received for safe custody or lying in safe deposit vault or goods left by the debtor negligently.
However, in the case of loans against pledge of jewellery, bank can exercise right of general lien on the ornaments left in the
possession of the bank after adjustment of the jewellery loan in case some other advance is outstanding.


Negative lien is a declaration from the borrower to the effect that securities/goods offered as security are not encumbered and
that the borrower will not create any charge over them without bank's permission. This undertaking does not create any charge in
favour of the bank and therefore advance against negative lien are treated as dean advance.


Right of Set off: Set off is the right to combine two or more accounts having debit and credit balance. It is not defined in any Act.
This right arises when two parties are debtor as well as creditor to each other i.e. one account should be in debit and another
account should be in credit. In the case of banks, this right arises when wants to combine its loan due from a borrower with his
deposit accounts. For exercising right of set off following conditions should be satisfied (i) Both accounts should be in same right
and same capacity (ii) The debt should be due and not accruing due. Reasonable notice should be sent to the depositor before
exercising set off. Right of set off can be exercised even in case of loans which are time barred. It can be applied on fixed deposit
when it matures and not on FD which is not due as yet. Similarly it can’t be applied for adjusting term loan or CC or overdraft
which are regular and not overdue. If a loan is in the name of an individual, set off can be exercised on credit balance in his
individual account and sole proprietorship account. Set off can not be exercised on deposit accounts which are held jointly with
other individuals, or partnership in which the borrower is partner, or client account maintained by a solicitor or account of minor
under guardianship where borrower is the guardian or on the credit balance of a trust in which borrower is trustee. If loan is in
joint names, set off can be exercised on credit balance in joint account as well as credit balance in individual accounts of joint
borrowers. If loan is in the name of a partnership firm then set off can be exercised on credit balance in the name of firm, partners
and any other partnership firm which has just same partners as are in the borrowing firm. For exercising right of set off, all
branches of a bank are considered as one.

POSITION OF AVAILABILITY OF RIGHT OF SET-OFF TO BANK

Single person.. Jointly with others (Available)
Partner in a firm ...Partnership Firm ...Available
Single name ....Same name ...Available
Proprietor ...Proprietorship firm ...Available
Joint Account ...One of joint holder ...Not available
Partnership Firm ...One of partners... Not available
Trust ...Trustee ...Not available
Trustee.... Trust Not available
Dividend a/c of Co. ..................Loan a/c of co. Not available
Minor (u/g,ship a/c) ....Guardian Not available
Single person.... Single person but different
capacity say trustee..Not available

Role concept and analysis

Role concept and analysis
Role refers to a set of expected behaviour patterns attributed to someone occupying a given position in an
organization. Role and position are different concepts. Role is a position a person occupies in an
organization and it is an obligational concept . Position is a relational and power related concept.
The concept of role widens the meaning of work and relationship of the employee with other significant
persons in the system. There are few important aspect of role such as role stagnation, inter-role distance,
role set conflict (which has various forms such as role ambiguity, role expectation conflict, role overload, role
erosion, role inadequacy, personal inadequacy etc.)
Important aspect of Role
Role stagnation When a person is promoted, he assumes a new role but if he fails in the new role, he
experiences role stagnation, even though he occupies a new role. In turn this causes
role stress. A senior clerk, when promoted as officer, may find himself in such a
situation, at times.
Inter-role distance If an individual occupies more than one role, there could be conflicts between the
roles. A branch manager also performs the role of husband and father at home.
When he is not able to give time to family, this creates stress.
Role set conflicts Different people have different expectation from one role. There is possibility of
incompatibility amongst expectation of others. It may then result into role ambiguity, role
expectation conflict, role overload etc.
Role ambiguity
When the individual is not clear about the expectations from him about the role this
is called role ambiguity. It may be in relation to activities, responsibilities, priorities or
general expectations.
Role expectation
conflict
When there are conflicting expectations or demand from a role, the role occupant
experiences conflict and stress. These expectations may come from boss, customer,seers
or subordinates.
Role overload When a role occupants finds that there are toomany expectations from the role. it may
occur when the role occupant lacks power or where there are large variations in the
expected output.
Role erosion
.
Where the role occupants finds that certain functions that he is perform are being
performed by someone else, having a different rol. It is individual's subjective feeling. In a
small bank an additional post of general manager has been created. earlier there was one
GMonly. The existing GM may start feeling that there is role erosion.
Resource inadequacy When the resources required for performance of a role are not adequacy, the role
occupant may experience the resource inadequacy.
When the role occupant finds that he does not have adequate skills, knowledge or
experience to perform the role effectively.
Personal inadequacy
Role isolation When role occupant finds that certain roles are closer to him and other at a distance,
the main criteria being the frequency and ease with which he could perform the role.

Theories of motivation very important for CAIIB ABM exam

Theories of motivation very important for CAIIB ABM exam

There are various theories of motivation such as:

Scientific management or Rational EconomicView

FW Taylor contributed much to this theory. Theory states that:
-Physical work could be scientifically studied to determine the optimal method of
performing a job.
-Workers can be made efficient by giving prescription.
-Workers would be willing to accept these prescriptions, if paid on a differential piece
work basis.


Human Relations Model


As per Elton Mayo, social contracts at workplace are important in addition to money.
Workers can be motivated by acknowledging their social needs and making them feel
useful and important.

Abraham
Maslow's
Need
Hierarchy Theory
He identified five levels of needs:
1:Physiological needs: Food, rest, exercise, shelter etc.
2:Safety needs: Protection against danger, threat, deprivation.
3:Social needs: Need for belonging, for association, for acceptance, for giving
and receiving friendship and love.
4:Ego/esteem needs: Need For self confidence, for dependence, for achievement,
for knowledge and need for status, recognition, appreciation.
5:Self-fulfillment or self-actualisation needs: To realise one's own potentialities, to
experience continued self-development, to be creative.

Frederick Herzberg's
Two Factor Theory
It states that there are two sets of motivating factors i.e. hygiene or maintenance
factors relating to job environment and other the motivators relating to contents of the
job.
Motivational factors include recognition, advancement, responsibility, achievement,
possibility of growth & work itself.
Maintenance factors include company policy and administration, technical
supervision, salary, job security, personal life, working conditions, status, interpersonal
relations with peers and supervisors.
It is based on existence, relatedness and growth (ERG). People have needs in a
hierarchy and these-needs determine the human behaviour. ERG theory has three
levels of needs compared to 5 in case of Maslow. As per ERG theory, more than oneneed
may be operative at one point of time rather than only one need as per Maslow
theory.


Clayton Alderfer's
ERG Theory

It is based on existence, relatedness and growth (ERG). People have needs in a
hierarchy and these-needs determine the human behaviour. ERG theory has three
levels of needs compared to 5 in case of Maslow. As per ERG theory, more than oneneed
may be operative at one point of time rather than only one need as per Maslow
theory.

Achievement
Motivation Theory

According to DC McCelland, there are three needs i.e. for achievement, for power and
for affiliation.

Victor H Vroom's
Expectancy Model

This theory is known by other names also such as instrumentality theory, path-goal
theory, valence-instrumentality-expectancy theory. As per theory, motivation is
determined by the nature of reward people expect to get as a result of their job. Man
being rational tries to maximize his perceived value of such rewards. There are three
elements in the model i.e. expectancy, instrumentality and valence (value a person
assigns to the desired reward).

James Stacy Adams'
Equity Theory

Theory proposes that motivation to act, develops after the person compares the
inputs / outcomes with the identical ratio in comparison to the other person. Upon
feeling inequity, the person is motivated to reduce it.


Lyman W Porter and
Edward E Lawler—
Performance
satisfaction Model
It states that the motivation does not equal satisfaction and performance. These are
all separate variables. Effort does not lead to performance directly. The reward that
follows will determine the satisfaction.


Reinforcement Theory. The consequences of an individual's behaviour in one situation influences that
individual's behaviour in a similar situation.

Personality Theories

Personality Theories


There are certain common patterns and variable that determine the personality of the people. Experts have
developed certain personality theories.

Psychoanalytical
Theory
Based on Freudian concept of unconscious nature of personality. Human behaviour
and motivation is outcome of psychoanalytic elements i.e. id, the ego and the super
ego.
Id is the foundation of unconscious.
Ego is conscious in nature and relates the conscious urges to the outside world.
Id demands immediate pleasure and Ego controls it. Super ego supports the Ego.
Trait Theory
There are many traits common to all but there are few traits that are unique to few.
On the basis of traits, people are described as aggressive, loyal, pleasant, flexible,
humorous, sentimental, impulsive etc.
Self-concept theoryPersonality and behaviour is determined by the individual himself. We have our own
image and our actions are consistent with such image (Carl Rogers). An employee
with a self concept of high intelligence, independence and confidence may not look
for such reinforcement techniques as monetary rewards.
Social learning
theory
Personality development is more a result of social variables than biological factors.
Much of human behaviour is learnt or modified by learning. Personality is the sum
total of all that a person has learned.

Emotional intelligence

Emotional intelligence
As per Daniel Goleman link between IQ test scores and the achievements in life is dwarfed (dusted) by the
totality of other characteristics that one brings to life. These characteristics are called emotional intelligence
(i.e. abilities such as being able to -motivate oneself and persist in the face of frustration, to control the impulse
and dealy gratification, to regulate one's moods and keep away distress from swamping the ability to think.
There are five components of emotional intelligence:
Self awareness: ability to recognize, understand, emotions and their effect on others.
Self regulation:ability to control disruptive impulse, to think before acting.
Motivation:Passion to work for reasons that go beyond money or status.
Empathy: Ability to understand emotions of others and treat people according to their
emotional reactions.
Social skills:Proficiency in managing relationships and building networks and ability to fund
common ground and build rapport.

ECONOMICS TERMS

ECONOMICS TERMS
1. Closed Economy - An economy having no economic relations with the rest of the world i.e. it
doesn't have trade, financial or investment relations with other countries.
2. Open Economy : An economy having economic relations with the rest of the world, i.e. it has
trade, financial and investment relations with other countries.
3. National Income : It refers-to the money value of all goods and services produced within the
domestic territory of a country plus net factor Income from abroad in a year.
4. Per capita income : It refers to the average income of a resident of a country and is calculated by
dividing the national income by the population of the country.
5. Gross Domestic Product (GDP) : It is the money value of all final goods and services produced
in the domestic territory of country in a year.
6. Net Domestic Product : obtained by reducing consumption of fixed capital (depreciation) from the
GDP.
7. Gross National Product (GNP) : It is calculated by adding net factor income from abroad (NFIA) to
GDP.
8. Law of Demand: It states that other things being equal, more of a commodity is demanded at a
lower price and less of it at a higher price.
9. Elasticity of Demand : It is the responsiveness of a demand to a change in a any factor of demand.
10. F
actors affecting elasticity of Demand : (a) Nature of Commodity (b) Availability of substitute goods
(c) Share in the total expenditure (d) Diverse uses of the commodity (e) Consumer's behaviour etc.
11. Supply curve: A graph of the relationship between the price of a good and the amount supplied at
different prices
12. Consumer surplus: The difference between what a consumer would be willing to pay for a good
or service and what that consumer actually has to pay.
13. Sunk costs: When what is done cannot be undone. Sunk costs are costs that have been incurred
and cannot be reversed.
14. Marginal Cost : It is the addition to the total cost as a result of unit increase in production.
15. Propensity to Consume: The relationship between change in income and the resultant change in
consumption.
16. Fiscal Measures : Measures to correct excess /deficient demand thorugh budget proposals of
government are called fiscal measures. These include tax changes, increase /reduction in government
expenditure etc.
17. Fiscal Policy: Fiscal policy is that part of government economic policy which deals with taxation,
expenditure, borrowing, and the management of public debt in the economy.
18. Fiscal deficit is the gap between the government's total spending and the sum of its revenue
receipts and non-debt capital receipts. It represents the total amount of borrowed funds required by the
government to completely meet its expenditure
19. Budget Deficit: Budget may take a shape of deficit when the public revenue falls short to public
expenditure. Budget deficit is the difference between the estimated public expenditure and public revenue.
The government meets this deficit by way of printing net currency or by borrowing.
20. Primary Deficit: Fiscal Deficit minus Borrowings.
21. Inflation: A situation of a steady and sustained rise in general prices is usually known as inflation.
Inflation is a state in which the value of money is falling i.e. prices are rising.
22. Cost-push Inflation: It arises due to an increase in production cost. Such type of inflation is
caused by three factors: (i) an increase in wages, (ii) an increase in the profit margin and (iii) imposition of
heavy taxation.
23. Deflation: Deflation is the reverse case of inflation. Deflation is that state of falling prices which
occurs at that time when the output of goods and services increases more rapidly than the volume of
money in the economy. In the deflation the general price level falls and the value of money rises.
24. Recession: A period of slow or negative economic growth, usually accompanied by rising
unemployment.
25. Stagnation: A prolonged recession, but not as severe as a depression.
26. Disinflation: A fall in the rate of inflation. This means a slower increase in prices but not a fall in
prices.
27. Depression: A prolonged recession in economic activity. The textbook definition of a recession is
two consecutive quarters of declining outpur. A depression is an even deeper and more prolonged slump.
28. Duopoly: A market structure in which two producers of a commodity compete with each other.
29. Monopoly A market situation in which a product that does not have close substitutes is being
produced and sold by a single seller.
30. Perfect competition A market situation characterized by the existence of very many buyers and
sellers of homogeneous goods or services with perfect knowledge and free entry so that no single buyer
or seller can influence the price of the good or service.
31. Buyer's market: A market in which supply seems plentiful and prices seem low; the opposite of a
seller's market.
32. Tax haven: A country or designated zone that has low or no taxes,
33. Tax avoidance: A legal action designed to reduce or eliminate the taxes that one owes.
34. Tax evasion: An illegal strategy to decrease tax burden by underreporting income, overstating
deductions, or using illegal tax shelters.
35. Monetary policy: The regulation of the money supply and interest rates by a central bank in order to
control inflation and stabilize currency.
36. HDI: HDI (Human Development Index) is a composite index measuring average achievement in three
basic dimensions of human life-a long and healthy life, knowledge and a decent standard of living.
37. Engel's Law: This law was formulated by Ernst Engel. This law states that, with given taste and
preference, the portion of income spend on food diminishes as income increases. According to this law,

smaller a person's income, the greater the proportion of it that he will spend on food and vice versa.
38. Giffin Goods: Giffin goods have the positive relationship between price and quantity demanded and
as a result demand curve of Giffin goods slopes upward from left to right.
39. Gresham's Law: Bad money (if not limited in quantity) drives good money out circulation
40. Laffer Curve: It represents relationship between total tax revenue and corresponding tax rates.
41, Lorenz Curve: The Lorenz curve is a graphical representation of the cumulative distribution function of
a probability distribution. This curve shows the degree of inequalities of a frequency distribution in a
graphical manner.
42. Pareto efficiency: A situation in which nobody can be made better off without making somebody
else worse off.
43. Pigou effect: A fall in the price level increases the real value of people's savings making them feel
wealthier and thus causing them to spend more. This increase in demand can lead to higher employment
44. Okun's Law: A relationship between an economy's GDP gap and the actual unemployment rate. The
relationship is represented by a ratio of 1 to 2.5. Okun found that an annual 2.5% increase in the rate of
real growth above the trend growth results in a 1% decrease in the rate of unemployment.
45. Philips Curve: Inflation and unemployment have a stable and inverse relationship. The theory states
that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.
46. Say's Law: Supply creates its own demand.
47. Real exchange rate: An exchange rate that has been adjusted to take account of any difference in
the rate of inflation in the two countries whose currency is being exchanged.
48. Real interest rate: The interest rate less the rate of inflation.
49. Tobin tax: A proposal to reduce speculative cross-border flows of capital by levying a small tax on
foreign exchange transactions.
50. Predatory pricing: Charging low prices now so you can charge much higher prices later.
51. PPP: Purchase Power Parity is the exchange rate that equates the price of a basket of identical traded
goods and services in two countries.
52. Crowding out: When the state does something it may discourage, or crowd out, private-sector
attempts to do the same thing. At times, excessive Government borrowing has been blamed for low privatesector
borrowing.
53. Currency board: A means by which some countries try to defend their currency from speculative
attack. A country that introduces a currency board commits itself to converting its domestic currency on
demand at a fixed exchange rate.
54. Currency peg: When a Government announces that the exchange rate of its currency is fixed against
another currency or currencies.
55. Dumping: Selling something for less than the cost of producing it.
56. Fiscal drag: is the tendency.of revenue from taxation to rise as a share of GDP in a growing
economy.
57. Fiscal neutrality: When the net effect of taxation and public spending is neutral, neither stimulating
nor dampening demand
58. Hard currency: A hard currency is expected to retain its value, or even benefit from appreciation,
against softer currencies.GLOSSARY OF ECONOMIC TERMS
59. Aggregate demand is the sum of all demand in an economy. This can be computed by adding the
expenditure on consumer goods and services, investment, and not exports (total exports minus total
imports):
60. Aggregate supply is the total value of the goods and services produced in a country, plus the value of
imported goods less the value of exports.
61. Base year: In the construction of an index, the year from which the weights assigned to the different
components of the index is drawn. It is conventional to set the value of an index in its base year equal to
100.
62. Boom: A state of economic prosperity
63. Broad sectors of an Economy : In India Primary Sector-Agriculture, Secondary Sector - Industry,
Tertiary Sector-Service.
64. Capitalism : Economic system featuring private property in means of production, commodity
production and profit as the guiding motivation force of production.
65. Competition : A market phenomenon indicating rivalry amongst buyers and sellers of goods or
resources classified as perfect (or pure) competition and where market power is widely diffused and free
mobility in and out of the industry exists.
66. Cost-Push Inflation : A situation of general rise in prices in which costs (payment made to factors
owners) increase
than productivity or efficiency. Familiar examples, wage-push and profit-push
inflation.

67. Centrally planned economy: An economic system in which the production, pricing, and
distribution of goods and services are determined by the government rather than market forces. Also
referred to as a "non market economy." Former Soviet Union, China, and most other communist nations
are examples of centrally planed economy
68. Demand-Pull Inflation : A state of rising prices brought about by increase in aggregate demand in
the face of short supply.
69. Depression : A phase of the business cycle in which economic activity is at a low ebb and there is
unemployment/under employment of resources; prices, profits, consumption and rate of capital investment
are also at a low level.
70. Economic development: The process of improving the quality of human life through increasing
per capita income, reducing poverty, and enhancing individual economic opportunities.
71. Economic Growth : Rate of increase of an economy's real incomes over a period, expressed in
terms of GNP or NNP as total or per capita.
72. Economic policy: A statement of objectives and the methods of achieving these objectives (policy
instruments) by government, political party, business concern, etc. Some examples of government
economic objectives are maintaining full employment, achieving a high rate of economic growth, reducing
income inequalities and regional development inequalities, and maintaining price stability.
73. Equilibrium Price : Price of a commodity in the market at which supply equals demand; the point
of intersection of supply and demand curve; price at which a firm's profits are maximized (or losses
minimized if the firm has to produce at a loss).
74. Equilibrium Quantity : Quantity of a commodity at which demand equals supply; quantity of a
commodity at which a firm's profits are maximized.
75. Hyper Inflation : A situation in which general prices are rising sharply with no or little increases in
output, also called 'runway' or 'galloping inflation'.
76. Inflation : Rise in the general or average price level of goods and services; consequently, a decline
in the value of money-doubling of the general price level means halving the value of money.
77. Indirect tax: A tax you do not pay directly, but which is passed on to you by an increase in your
expenses. For instance, a company might have to pay a fuel tax. The company pays the tax but can
increase the cost of its products so consumers are actually paying the tax indirectly by paying more for the
merchandise.
78. Macroeconomics The branch of economics that considers the relationships among broad
economic aggregates such as national income, total volumes of saving, investment, consumption
expenditure, employment, and money supply. It is also concerned with determinants of the magnitudes of
these aggregates and their rates of change over time.
79. Market mechanism: The system whereby prices of commodities or services freely rise or fall when
the buyer's demand for them rises or falls or the seller's supply of them decreases or increases.
80. Microeconomics: The branch of economics concerned with individual decision units--firms and
households--and the way in which their decisions interact to determine relative prices of goods and factors
of production and how much of these will be bought and sold. The market is the central concept in
microeconomics.
81. Money supply: the total stock of money in the economy; currency held by the public plus money in
accounts in banks. There are various measures of money supply, including M1, M2, M3 and L; these are
referred to as monetary aggregates.
82. Market Economy : Economy system in which the central problems of an economy-what, how and
for whom are decided by the operation of free market forces of supply and demand.
83. Mixed Economy : An economy in which both the state and the private sector co-exit; decisions on
what how and for whom are made partially by the market and particularly by the state or any other public
authority; many consider it essentially a transitory form.
84. Money : Anything which is acceptable in a economy as medium of exchange, measure of value, a
standard for deferred payments, and a store of value; different things used as money at different times.
85. Open economy An economy that encourages foreign trade and has extensive financial and
nonfinancial contacts with the rest of the world in areas such as education, culture, and technology.
86. Planned Economy : Economic system in which basic decisions in an economy are made according
to a plan.
87. Price : Value of a commodity in terms of money.
88. Real Income : Purchasing power of money income; quantity of real goods and services that money
income can buy; contrasted with money income.
89. Recession : Down swing of business activity in a trade cycle. Income prices, profits and
employment are falling during this phase of the trade cycle.

90. Closed economy: An economy in which there are no foreign trade transactions or any other form
of economic contacts with the rest of the world.
91. Direct Tax : Tax that cannot be shifted; the burden of direct tax is borne by the person on whom it
is initially fixed. Examples: personal income tax, social security tax paid by employees, death tax, etc.

GDP concepts

Gross Domestic Product (GDP): It is the total market value of all the final goods and services produced
within the territorial boundary of a country, using domestic resources, during a given period of time,
usually one year. Gross National Income (GNU) at Market Prices = GDP at market prices + taxes less
subsidies on production and imports (Net receivable from abroad) + Compensation of Employees (Net
receivable from abroad) +property income (Net receivable from abroad)
Gross National Product (GNP) is equal to GDP (+) total capital gains from overseas investment (-)
income earned by foreign national domestically
GNP = GDP + NR (Net income from assets abroad (Net Income Receipts)
GDP Computation
. According to the National Income Accounting, there are three ways to compute GDP:
1. Expenditure wise: Calculating the total expenditure of all the entities.
2. Income Wise : Calculating the total incomes received by factors of production — land, labour, capital
and entrepreneur.
3. Product Wise : Calculating the total production.
Expenditure Method: As per this method, GDP = consumption + Gross investment + Government
spending + - (Exports-Imports). GDP = C+I+G+ (X-M).
Consumption: This includes personal expenditures pertaining to food, households, medical expenses,
rent, etc. Gross Investment: Business investment as capital which includes construction of a new mine,
purchase of machinery and equipment for a factory, purchase of software, expenditure on new houses,
buying goods and services but investments on financial products is not included as it falls under savings.
Government spending : It is sum of government expenditure on final goods and services. It includes
salaries of public servants, purchase of weapons for the military, and any investment expenditure by a
government. It does not include any transfer payments, such as social security or unemployment
benefits.
Exports: This includes all goods and services produced for overseas consumption.
Imports: This includes any goods or services imported for consumption and it should be deducted to
prevent from calculating foreign supply as domestic supply.
Income Approach: As per this method, GDP is the sum of the following major components: (i)
Compensation of employees (ii) Property income (iii) Production taxes and depreciation on capital.
Compensation of Employees : It represents wages, salaries, and other employee supplements.
Property Income: It constitutes corporate profits, proprietor's incomes, interests, and rents.
Product Approach: As per this method, GDP is the value of final goods produced in the economy.
Real GDP or GDP at constant price: It is the value of today's output at some base year. Real GDP is
calculated by tracking the volume or quantity of production after removing the influence of changing
prices or inflation. It reflects the real growth.
Nominal GDP or GDP at current prices: represents the total money value of final goods and services
produced in a given year, where the values are expressed in terms of the market prices of eduh year.
Simply it is the value of today's output at today's price.
GDP at market prices measures the value of output at market prices after adjusting for the effect of
indirect taxes and subsidies on the prices. Market price is the economic price for which a good or service is
offered in the market place.
GDP at Factor Cost measures the value of output in terms of the price of factors used in its production.
Factors of production are land, labour, capital and entrepreneur they get remunerations in the form of
rent, wages, salaries, interest and profits are respectively.
GDP at factor cost = GDP at market prices — (indirect taxes — subsidies).
UTILITY OF GDP CONCEPTS
1. GDP is an 'aggregate' measure. it does not indicate any thing about how the GDP is distributed
among the population of the country. Per capita income, another derivative of GDP, also does not
indicate the pattern of income distribution. Thus, a country may have high GDP but much skewed
distribution of income. Such inequality in income distribution often leads to social tensions.
2. Like the inequality of income distribution among population, there could be regional disparity in GDP
with a few developed states contributing the most to the country's GDP and a majority of less
developed state economies contributing a meager.
3. Higher GDP does not necessarily imply higher welfare. Welfare is a wider concept which
encompasses development in all aspects of the society, e.g., health, education, sanitation, etc. India
has over time grown from a low GDP nation to high GDP nation, yet its social development indicators
are not commensurately favourable. Therefore, interpretation of GDP should always be
supplemented by_ some kind of Human Development Index (HDI) as developed by the.World Bank.
4. GDP does not reflect the total income of a country if the country is an export-oriented
=
economy like one of those South-East Asian economies. Gross National Product (GNP) is a more
accurate measure in this context, as it factors in earnings from the external sector.
5. Concept like GDP does not throw light on how much of the population is financially excluded or
included. Lower level of financial inclusion is today a global malady and therefore GDP measures
should be evaluated accordingly.
6. One of the newest concepts in GDP today is the 'green' GDP. A country may be achieving high GDP
but at the cost of its environmental degradation. Environmental issues in growth are quite pertinent
and sensitive matters today. Statisticians all over the world are busy with developing models which
can measure 'green' GDP.

MODERN THEORY: HICKS — HANSEN SYNTHESIS: IS-LM CURVE MODEL

MODERN THEORY: HICKS — HANSEN SYNTHESIS: IS-LM CURVE MODEL
1. Modern theory was propounded by Hicks and Hensen.
2. According to the theory, the interest depends upon saving, investment, liquidity preference and income.
3. The rate of interest according to the theory is determined by monetary equilibrium and income
equilibrium.
4. This theory is a synthesis between the Classical and Keynes' theories of interest.
5. It has propounded an adequate and determinate theory of interest through the intersection of what are
called IS and LM curves.
6. According to Hicks and Hansen, the classical and loanable funds theories amount to the same thing. The
difference between these two theories, i.e. classical and loanable funds, lies only in the meaning of savings.
7. IS curve is derived from various saving curves at various income levels together with the given
investment demand curve. This IS curve tells us what will be the various rates of interest at different levels of
income, given the investment demand curve and a family of saving curves at different levels of income.
8. LM curve is obtained from Keynes' formulation. The LM curve is obtained from a family of liquidity
preference curves corresponding to various income levels together with the given stock of money supply.
This is because as the level of income increases, people would like to hold more money under the
transactions motive. That is, the higher the level of income, the higher would be the liquidity preference
curve. With the given supply of money, the different levels of liquidity preference curves corresponding to
various levels of income would determine different rates of interest. This yields LM curve, which depicts the
various combinations of interest and income level, at which money market is in equilibrium.
9. Hicks and Hansen show that with the intersection of IS and LM curves, both the interest and income
are simultaneously determined. Thus the classical and Keynes' theories taken together help us in obtaining
as adequate and determinate theory of interest.
DERIVATION OF THE IS CURVE:
1 As the income rises, the savings curve shifts to the right and the rate of interest, which equalizes savings
and investment, falls.
2. Since, as income increases, rate of interest falls, the IS curve slopes downward.
3. IS curve relates the rates of interest with the levels of income at which intended savings and investment
are equal. In other words, the IS curve depicts the various combinations of levels of interest and income at
which, intended savings equal investment; goods-market is in equilibrium.
4. Since with the increase in income the savings curve shifts to the right, its intersection with the
investment demand curve will lower the rate of interest.
5. The level of income and rate of interest are inversely related. That is, the IS curve slopes downward.
6. Further, the steepness of the IS curve depends upon the elasticity or sensitiveness of investment
demand to the changes in rate of interest. A given change in interest will produce a large change in
investment and thereby cause a large change in the level of income.
7. Thus when investment demand is greatly elastic or highly sensitive to the rate of interest, the IS curve
will be flat (i.e. less steep). On the other hand, when investment demand is not very sensitive to the changes
in rate of interest, the IS curve will be relatively steep.
8. The *position of IS curve and changes in its level are determined by the level of autonomous
expenditure
such as government expenditure, transfer payments, autonomous investment. If the government
expenditure or any other type of autonomous expenditure increases, it will increase the equilibrium level of
income at the given rate of interest. This will cause the IS curve to shift to the right. A reduction in
government expenditure or transfer payments will shift the IS curve to the left.
DERIVATION OF THE LM CURVE FROM KEYNES' LIQUIDITY PREFERENCE THEORY
1. The LM curve can be derived from the Keynesian liquidity preference theory of interest.
2. Liquidity preference or demand for money to hold depends upon transaction motive and speculative
motive.
3. It is the money held for transactions motive which is a function of income. The greater the level of

income, the greater the amount of money held for transactions motive and, therefore, the higher the level of
liquidity preference curve.
4. A family of liquidity preference curves can be drawn at various levels of income. The intersection of
these various liquidity preference curves, corresponding to different income levels with the supply curve of
money fixed by the monetary authority, would give the LM curve that relates the rate of interest with the level
of income as determined by money-market equilibrium corresponding to different levels of liquidity
preference curve.
5. The LM curve tells us what the various rates of interest will be (given the quantity of money and the
family of liquidity preference curves) at different levels of income. But the liquidity preference curves alone
cannot tell us what exactly the rate of interest will be.
6. As income increases, liquidity preference curve shifts outward and therefore the rate of interest, which
equates supply of money with demand for money, rises.
THE SLOPE AND POSITION OF THE LM CURVE
1. The LM curve slopes upward to the right. This is because with higher levels of income, demand for
money (that is, the liquidity preference curve) is higher and consequently the money-market equilibrium, that
is, the equality of the given money supply with liquidity preference curve occurs at a higher rate of interest.
This implies that rate of interest varies directly with income
2. Factors that determine the slope of the LM curve include (i) Responsiveness of demand for money (i.e.
Liquidity Preference) to the changes in income and (ii) Elasticity or responsiveness of demand for money
(i.e., liquidity preference for speculative motive) to the changes in rate of interest.
3. As the income increases, demand for money would increase for being for transactions motive. This
extra demand for money would disturb the money-market equilibrium, and in order to restore the equilibrium
the rate of interest will rise to the level where the given money supply curve intersects the new liquidity
preference curve corresponding to the higher income level.
4. In the new equilibrium position, with the given stock of money supply, money held under the
transactions motive will increase whereas the money held for speculative motive will decline. The greater the
extent to which demand for money for transaction motive increases with the increase in income, the greater
the decline in the supply of money available for speculative motive.
5. Given the liquidity preference schedule for speculative motive, the higher the rise in the rate of interest,
the steeper the LM curve consequently.
6. According to Keynes' liquidity preference theory, r = f (M2,L2) where M2 is the stock of money available
for speculative motive and L2 is the money demand or liquidity preference function for speculative motive.
7. The second factor which determines the slope of the LM curve is the elasticity or responsiveness of
demand for money (i.e., liquidity preference for speculative motive) to the changes in rate of interest. The
lower the elasticity of liquidity preference with respect to the changes in interest rate, the steeper will be LM
curve.
8. On the other hand, if the elasticity of liquidity preference (money-demand function) to the changes in
the rate of interest is high, the LM curve will be relatively flat or less steep.
What brings about shifts in the LM curve?:
1. An LM curve is drawn with a given stock of money supply. Therefore, when the money supply
increases, given the liquidity preference function, it will lower the rate of interest at the given level of income.
This will cause the LM curve to shift down and to the right. On the other hand, if money supply is reduced,
given the liquidity preference (money; demand) function, it will raise the rate of interest at the given level of
income and therefore cause the LM curve to shift above and to the left.
2. The other factor that causes a shift in the LM curve is the change in liquidity preference (money
demand function) for a given level of income. If the liquidity preference function for a given level of income
shifts upward, this, given the stock of money, will lead to the rise in the rate of interest. This will bring about
a shift in the LM curve above and to the left. On the contrary, if the liquidity preference function for a given
level of income declines, it will lower the rate of interest and will shift the LM curve down and to the right.
Intersection of the IS and LM curves: Simultaneous determination of interest rate and income
1. The IS curve and the LM curve relate the two variables: (a) income, and (b) the rate of interest.
2. Income and the rate of Interest determined together at the equilibrium rate of interest are, at the point
of intersection of IS and LM curve.
3. At this point, income and the rate interest stand in relation to each other such that (1) investment and
saving are in equilibrium, and (2) the demand for money is in equilibrium with the supply of money (Le., the
desired amount of money is equal to the actual supply of money).
4. Thus, a determinate theory of interest is based on: (1) the investment-demand function, (2) the saving
function (or, conversely, the consumption function), (3) the liquidity preference function, and (4) the quantity
of moneyor, conversely, the consumption function),
5. According to Hicks and Hansen, both monetary and real factors, namely, productivity, thrift, and the
monetary factors, that is, the demand for money (liquidity preference) and supply of money play a part in
determining of the rate of interest. Any change in these factors will cause shift in IS or LM curve and will
therefore change the equilibrium level of the rate of interest and income.

INFLATION & RELATED TERMS

INFLATION & RELATED TERMS

1. Inflation: A situation of a steady and sustained rise in general prices is usually known as inflation.

Inflation is a state in which the value of money is falling i.e. prices are rising.

2. Cost-push Inflation: It arises due to an increase in production cost. Such type of inflation is caused by

three factors: (i) an increase in wages, (ii) an increase in the profit margin and (iii) imposition of heavy

taxation.

3. Demand- push Inflation: It arises as a result of strong consumer demand. When many individuals are

trying to purchase the same good, the price will inevitably increase. When this happens across the

entire economy for all goods, it is known as demand-pull inflation

4. Deflation: Deflation is the reverse case of inflation. Deflation is that state of falling prices which occurs

at that time when the output of goods and services increases more rapidly than the volume of money in

the economy. In the deflation the general price level falls and the value of money rises.

5. Disinflation: A fall in the rate of inflation. This means a slower increase in prices but not a fall in prices

6. Recession: A period of slow or negative economic growth, usually accompanied by rising

unemployment.

7. Stagnation: A prolonged recession, but not as severe as a depression.

8. Disinflation: A fall in the rate of inflation. This means a slower increase in prices but not a fall in prices.

9. Depression: A prolonged recession in economic activity. The textbook definition of a recession is two

consecutive quarters of declining outpur. A depression is an even deeper and more prolonged slump.

CAIIB ABM TODAY EXAM 55 QUESTIONS RECOLLECTED by Srinivas Kante

CAIIB ABM TODAY EXAM 55 QUESTIONS RECOLLECTED 

1.Hicks -Hansen synthesis
2.Basic difference between IS and LM curve
3.Increase in money supply Lowe interest rate and raising inflation
4.NDP @factor cost
5.Demand –pull inflation means
6.Erosion as per the role
7.Climate Survey
8.Case study one related to Budget
9.Central limit theorem
10.sampling methods .
11. job erosion
12 curreneaccountdefficit
13 Gross deficit etc.
case
14..standard deviations mean related
15  .Case 3 Xyz jewellery shop
Related
But the level oh complexity is very high..n ..
16  fiscal policy ,monetary policy
17.demand supply curve etc...
18.Correlation and regression numerical
19.NNP @ factor cost
20working capital
21. bank guarantee
22.Performance Appraisal
23. Halo effect Tendency..
24.NNP at market price
25.In correct characteristics in Business cycle
26 Notional income also known as..
27.Least squre method used in..
28.Fctoring of services the factor
29.Lender to sensitising test and scenerion analysis..Type of loans
30. Debt to equity of enter prises raatio is.05 its...
31.Bank Gaurantee to commoidity brokarage (margin %)..
32.find P(x bar >/85)  ?
33Std error of the mean is????
34 Estimate of the population proportion is..
35 Commericial paper issued multiples of..
36.Commericial paper issued maximum period
37.Find P(88|
39.HRM
40.monetary policy
41.Annuity due prblems
42. Future Value problem
43.Estimation
44.Bond price
45.Revenue dediciat problem
46.Job evealution Job specfication case study
47. Turn over methodeapplied on leass than 5 cr
48. Factor of Supply schedule
49.Lional econmic statement.
50. GDP calculation
51. GNP at amrket price calculation
52. Sampling Methodes
53.Hallo effect
54 Cov(X,Y)=150 mean X=20 mean Y=10 standard deviation x=25 then equation of regression line is
55. 3 questions from HRM 5 marks each



Thank you all,

Srinivas Kante  https://iibfadda.blogspot.com/2018/06/caiib-abm-recollected-june-2018-today.html

Current Affairs on 26.11.2018

Today's Headlines from www:

*Economic Times*

📝 Prices of TV, home appliances may go up 7-8 per cent from next month

📝 Khadi sales jump 4-fold in FY18; KVIC to run 'Khadi Express' train to boost sales

📝 Welspun India aims 50% revenue from innovation-based products by 2022

📝 RBI may hold the rates baton till March: report

📝 Jio tops chart in terms of AGR in September quarter: TRAI data

📝 216 railway projects report cost overrun of Rs 2.46 lakh crore

📝 JNPT SEZ eyes Rs 900-1,000 crore from land auction

📝 Andhra Bank puts up Rs 1,553-cr NPAs for sale, prefers cash bids

*Business Standard*

📝 Social commerce platform Meesho targets 20 million resellers by 2020

📝 IndiGo and SpiceJet make web check-in paid service, flyers tweet protest

📝 I-T department sells Cairn Energy's shares in Vedanta to recover tax

📝 Lots Wholesale Solutions plans to invest Rs 10 bn in India over next 5 yrs

📝 UAE to offer long-term visa schemes to rich and educated foreigners

📝 MFs add 7.7 mn accounts in Apr-Oct, take total to all-time high of 80 mn

📝 Working overtime to meet BS-VI norm ahead of April 2020 deadline: Maruti

*Financial Express*

📝 Qbera: Startup aims to provide quick, hassle-free personal loans

📝 Wind energy: Capacity addition likely to rebound after a lean FY18

📝 CAIT raises various demands in letter to PM Narendra Modi

📝 Freecharge co-founder to roll out Cred by December-end, raises $25 million from Sequoia, others

📝 JSW Steel revamps operations, product mix to align with climate change goals

📝 Six firms bid for advising FinMin on two M&A deals

*Mint*

📝 EU leaders seal Brexit deal, urge Britons to back PM May

📝 Bitcoin falls further below $4,000; crypto continues plunge

📝 Oil PSUs to allot 65,000 petrol pumps ahead of general elections

📝 Finance ministry expects 3-4 banks to be out of PCA this fiscal: Report

📝 FPIs infuse Rs 6,310 crore in November so far

📝 Bankrupt firms in India to get a new and quick rescue option

📝 Standard Chartered Bank moves NCLT against CoC selecting Arcelor for Essar Steel

📝 CDC Group plans Ayana stake sale to raise $100 million.