GOODWILL AND METHOD OF ITS VALUATION

GOODWILL AND METHOD OF ITS VALUATION

Goodwill is the value of an established business over and above the value represented by its tangible assets. It is the reputation that the firm has built up in the course of its business. It is also the value attached to the super profit earning capacity of a business arising from its wide connections and long standing in the business. Goodwill is the value of the good name of a firm, which attracts more customers and helps it earn more profits. It is an intangible fixed asset built up slowly by the owners of the business over a period of time and is very often recorded in the books of account. Unlike a fictitious asset, which has no realisable value, Goodwill has a realisable value and can be bought and sold in the market.
Necessity: The necessity for valuation of goodwill in a firm arises in the following cases:
1. Change in profit sharing ratio.
2. Admission of a new partner.
3. Retirement, expulsion or death of a partner
4. Sale of business
There are mainly three methods of valuation of goodwill, viz. (i) Average Profit Method
(ii) Super Profit Method
(iii) Capitalisation of Profit Method
(i) Average Profit Method
In this method, goodwill is valued on the basis of the average profits of past few years (normally abnormal increase or decrease in profit is left out). Average profit (simple or weighted), so arrived at, is multiplied by an agreed multiplier factor (called number of years’ purchase) and the amount so arrived is taken as the amount of goodwill.


(ii) Super Profit Method
Under this method, goodwill is calculated on the basis of the number of years’ purchase of Super Profits. Super Profit is the difference between the Actual Profit and the normal expected profit in the trade.

Super profit is multiplied by a certain multiplier, as in the simple average method.

 (iii) Capitalisation of Profit Method
Under this method, value of goodwill is arrived at after capitalising the normal profit at a given reasonable or normal rate of return. Profit, when divided by the normal rate of return, gives the amount, which should have been invested in the business of the firm in the form of capital. This value is compared with the net assets of the firm. The value of goodwill is the excess of capitalised value over the net assets of the firm.


ADMISSION OF A PARTNER

A new partner may be admitted into an existing partnership for the purpose of securing additional capital or additional skill or for any other purpose. When a new partner is admitted in an existing firm, the new partner will get certain benefits such as:
•     Share in the assets and liabilities of the firm.
•     Share in the profit/loss of the firm.
•     Share in the goodwill enjoyed by the firm.


All these advantages are derived by the new partner at the initial sacrifice of the old partners. Thus, at the time of admission of a new partner, the following steps are required to be taken by the firm:
1. Revaluation of assets and liabilities

2. Treatment of goodwill

3. Decision regarding amount of capital to be brought in by the new partner

4. Adjustment regarding accumulated losses and reserves

5. Capital accounts of the partner.

1. Revaluation of Assets and Liabilities
A new partner, admitted into a partnership, gets a share in the profits as well as the assets of the business. On the date of admission of the new partner, the real value of assets of the firm may be more or less than the value appearing in the books of account. This increase or decrease in value belongs entirely to the old partners and hence, has to be adjusted before the admission of the new partner. Similarly, the liabilities existing on the date of admission of the new partner may also need revision.
When the asset value increases, there is a profit and when it goes down, there is a loss. When liabilities increase, there is a loss and when liabilities decrease, there is a profit. This increase or decrease in assets and liabilities is adjusted to the accounts of the old partners through an account called the
‘Revaluation Account’ or ‘Profit and loss Adjustment Account’. The entries recorded in this account are on the principle that when there is a loss, debit profit and loss adjustment account and when there is a gain, credit profit and loss adjustment account. The difference in the two sides of this account will show either profit or loss, which is transferred to the accounts of the old partners in old profit sharing ratio.

2. Treatment of Goodwill
A. Admission of a Partner
When a new partner is admitted to partnership, adjustments of goodwill is necessary because goodwill has been built up by the old partners over a period of years for which they have worked hard and they would not like to just pass on a part of it to the new partner. The new partner also gets a share in profits of the firm from the date of his admission, which is sacrificed by the existing partners. The existing partners would not like to just pass on this benefit to the new partner without a consideration.

B. Retirement or Death of a Partner
On retirement or death of any partner, the portion of goodwill of the firm belonging to the retiring partner or the partner who died, has to be paid by the continuing/surviving partners, to the retiring partner or the heirs of the deceased partner, as the case may be. As the continuing/surviving partners gain in terms of increase in share of profits due to death/retirement of a partner, they bear this amount of goodwill paid, in the gain ratio.
                                   
3. Capital to be brought in by a New Partner
The new partner brings in capital, in addition to goodwill, to get a share in the firm’s assets, liabilities and profits. It can be in the form of cash or assets.


4. Adjustment Regarding Accumulated Losses and Reserves
Normally, the profits of the partnership are divided between the partners at the end of each year. In case, a part of the profits is kept in reserve, to take advantage of it in bad times, then the old partners would not like the newly admitted partner to share the benefit of this reserve or undistributed profits. Therefore, the said amount is divided by the old partners amongst themselves in the old profit sharing ratio.
Sometimes, losses of the earlier years are carried by the partnership under the head profit and loss account. They also belong entirely to the old partners and the new partner would definitely not bear this loss.

5. Adjustment of Capital Accounts of Partners
Sometimes, it may be decided that after the admission of a new partner, the old partners’ capitals should also be adjusted according to the new profit sharing ratio. This is because old partners’ capital balances may have changed considerably due to revaluation of assets and liabilities, transfer of reserves, adjustment of goodwill, etc. For this purpose, generally, the new partner’s capital and his share of profit are taken as the basis for calculation and the old partners’ capitals are ascertained according to the future profit sharing ratio. The amounts so arrived at are compared with the capitals standing to the credit of their capital accounts. Excess may be paid off by the firm to the old partners and deficiency, if any, may be required to be made up by them by bringing in additional cash.


RETIREMENT AND DEATH OF A PARTNER


A. Retirement of a Partner
Retirement of a partner means that the partner breaks off his/her relations with all other partners and withdraws himself/herself from the firm.
Reasons of Retirement
(a) Due to old age
(b) Retiring partner may not have faith in the future prospects of the firm or in other partners
(c) Difference of opinion with other partners
(d) Retiring partner may migrate or shift from the place of business
(e) Voluntarily decides to retire
(f) As per terms of partnership deed.
According to Section 32 of the Indian Partnership Act, 1932, a partner may retire: (a) with the consent of all the partners,
(b) in accordance with the terms of the partnership agreement, or
(c) by giving a notice to all the partners of his intention to retire, when the partnership is ‘At Will’.
In case of retirement, a retiring partner is interested in collecting his share in the various activities of the business of which he was a part owner till the date of his retirement.

B. Death of a Partner
In retirement, a partner breaks off his/her relation with the firm voluntarily, i.e. on his own. Death of a partner automatically terminates such relationship. Unlike retirement, which is on a specific convenient date mutually agreed upon with other partners, death of a partner can occur at any time during the accounting year.

C. New Profit Sharing Ratio of Continuing Partners
After retirement or death of a particular partner, the continuing partners may agree to share the profits in the same old ratio or in a new agreed ratio. The ratio in which the continuing partners gain or benefit from the share of the retiring or dead partner is called the ‘Gaining ratio’. Gaining ratio is equal to the new ratio minus the old ratio.

D. Joint Life Policy
In order to provide for the cash in contingency like the death of a partner, etc., a firm may decide to take a joint life policy on the lives of partners so that the proceeds received from the insurance company may be utilised to make payments of the dues of a deceased partner and the firm is saved from financial hardship.


SLEEPING PARTNER AND QUASI PARTNER


Sleeping Partner
In a partnership, very often, some partners agree to work while others are interested in merely investing the capital and getting a share of profits. Such partners are normally not interested in the day-to-day working of the partnership and are called sleeping partners. The other partners who work for the business of the firm are called working partners or active partners. However, it must be noted that law makes no difference between a sleeping partner and a working partner and the sleeping partner will be equally responsible to the third parties for all acts or omissions of a working partner.

Quasi or Nominal Partner
Sometimes, some prominent persons lend their names to a firm in order to allow the firm to enjoy their goodwill in furtherance of its business. Likewise, in some cases, a person’s name may be used by the partnership firm showing him/her to be a partner, whereas the person is, in fact, not a partner in the firm. In such cases, although no relationship of partnership exists, the law stops a person from disclaiming his/her status as partner vis-à-vis third parties, if he/she keeps quiet, in spite of being fully aware of the fact that his/her name is utilised as partner. Such a quasi-partnership protects the third parties who may make a non-partner liable in these circumstances.

 

Important accounts related numericals

1.
Find total assets if DER = 2:1, CL = 8 lac, equity = 4 lac.

Since total assets = debt + equity + liability
=> total assets = debt + 4 + 8
=> debt = TA - 12

Since DER = debt / equity
=>2:1 = (TA - 12) / 4
so, TA = 20 lacs Ans

2.
Find equity, given assets = 200 lac, DER = 2:1, CL = 56 lac.

Since DER = debt / equity
=> 2:1 = debt / equity
so, debt = 2 × equity

Since total assets = debt + equity + liability
=> 200 = 2 × equity+ equity + 56
So, equity = 48 lacs Ans

3.
Find NWC, given CR = 2.5:1 & CA = 30 lac.

Since CR = CA / CL & NWC = CA - CL
=> 2.5:1 = 30 / CL
=> CL = 12
and NWC = 30 - 12 = 18 lac Ans

4.
Suppose CR is 4:1, NWC is Rs 30000/-, what is CA?

Since CR = CA / CL & NWC = CA - CL => CL = CA - NWC
=> 4:1 = CA / (CA - 30000)
so, CA = Rs 40000 Ans

5.
An account became NPA on 05042009. The outstanding in the account is 10 lacs. Realisable value of security is 7 lacs. The balance including Rs 50000 as recorded and suspended interest. How much provision is required to be made on 31032010?


6.
Total current assets of a company is Rs 32 crore and the NWC is Rs 8 crore. The ratio is ___.
(Note:
Current asset = stock, debtors, loans etc
Total asset = current assets + non current assets
Non Current Assets = goodwill, preliminary exp)

Sol:
NWC = CA - CL
so, CA = 32 - 8 = 24
Current Ratio = Current Assets ÷ Current Liability
= 32÷24 =1.33:1 Ans

_______________________
Acronyms used:
NWC = Net Working Capital
TA = Total Assets
CL = Current Liability
CA = Current Assets
CR = Current Ratio

Balance sheet related numerical

Balance sheet related  numerical

Q.1  X Ltd., has a current ratio of 3.5:1 and quick ratio of 2:1. If excess of current
assets over quick assets represented by inventories is Rs. 24,000, calculate
current assets and current liabilities.
Solution:
Current Ratio = 3.5:1
Quick Ratio = 2:1
Let Current liabilities = x
Current assets = 3.5x
and Quick assets = 2x
Inventories = Current assets – Quick assets
24,000 = 3.5x – 2x
24,000 = 1.5x
x = Rs.16,000
Current Liabilities = Rs.16,000
Current Assets = 3.5x = 3.5 × Rs. 16,000 = Rs. 56,000.
Verification :
Current Ratio = Current assets : Current liabilities
= Rs. 56,000 : Rs. 16,000
= 3.5 : 1
Quick Ratio = Quick assets : Current liabilities
= Rs. 32,000 : Rs. 16,000
= 2 : 1

Balance Sheet

Balance Sheet
A balance sheet is a statement of a business’s assets, liability and net worth. It is normally laid out according to the
Companies Act formats although some bookkeeping and accounting systems produce documents in alterative layouts.
The purpose of a balance sheet is to show the type of assets a business has and then to describe how these have been
financed.
Fixed Assets
Assets shown on a balance sheet can be sub-divided in to intangible and tangible groupings. The former category
contains items such as goodwill, trademarks and research and development expenditure.
The valuation of these items is subjective as their true worth can only be known following a successful sale of either
the asset separately or the business as a whole.
Prudence and caution in assigning amounts to intangible assets might result in the balance sheet displaying them with
conservative valuations, far removed from what they are actually worth.
Tangible assets typically attract far more objective valuations as they exist usually as a result of a measurable transfer
or exchange on which a monetary value can be assigned.
Items within the category include furniture, machinery, computers and other assets which are typically used in a
business for a number of years.
Depreciation and Amortisation
Both intangible and tangible assets are usually subject to depreciation or amortisation which represents the usage of
those items during the year.
Different classes of assets may have varying periods over which they can be used, for example, a building will be
capable of serving the business for a longer time than a desktop computer would.
The depreciation of the computer would therefore be faster than the amortisation of the building. The reduction in the
asset’s value shown of the balance sheet would therefore reflect the expected useful life over and benefit which would
typically accrue to the business.
Current Assets
The term current assets is used to describe items which are held in cash or which have a high liquidity rate, for
example, shares and trade debtors.
This class of assets are shown below fixed items on the balance sheets and represent the working capital of the
business. Cash and other current assets are used to pay suppliers and other short term creditors so that the operations
remain solvent.
Where current assets are not available for this purpose, the business will be forced to liquidate some from the fixed
category which may in turn significantly curtain its ability to conduct its operations in the longer term.
Liabilities
For the purposes of this article liabilities will be used to describe all items involved in financing the business including
shareholders funds.
In order for the business to have commenced its operations it would have had to have received an injection of funds
from some source. This might have been from the entrepreneur’s own savings or alternatively from an external body
such as a bank or suppliers in the form of credit.
At any one time, it is likely that the business owes money to creditors for purchases it has made and perhaps to other
financiers of its operations. These amounts are depicted either current or long term liabilities.
Generally, those amounts form any source which are repayable within one year will be shown as current and those
which are due after this period will be described as long term.
Some money might be owed to the shareholders, partners or sole trader who provided the business with its initial
financing and expansion capital.
The distinction between owner l iabilities and those which are owed to third parties in reality show the amounts which
the business has some discretion over. It is unlikely that the owners would demand repayment of the sums of owed to

them to the detriment of the operations.
Other third party creditors however wo uld more likely be driven by self interest and would not have the long term
future of the business at the forefront of the decision of whether to claim payments for amounts owed to them.
Fixed Assets are the assets of permanent nature that a business acquires. Examples include machinery and equipment,
building, furniture, vehicles etc. These assets are not sold or purchased occasionally and therefore considered fixed.
You usually get them when starting your business and retain them for the life-time of your business or company (but it
depends on the asset life, too). However, these assets have more life than the long-term assets that usually last for a
year or more.
Current Assets are the receivables that are expected to be received within a year as per balance sheet. These include
any assets that are to be converted into cash within a financial year. Examples include cash, accounts receivables,
short-term investments, and other cash-equivalents.
Current Liabilities are the liabilities (or the business obligations/debts) that are payable within a year as per balance
sheet. These are the payments that are to be paid by a company within a financial year. Examples include accounts
payable, and short-term debts.
Tax Liability is the amount of tax payable on your annual income, sale of an asset etc. and is different from other types
of liabilities. Fixed assets have no direct influence on tax liability but if planned properly can reduce the overall tax
liability of a firm. If this liability is payable in a year, then tax liability is a current liability.

Caiib Latest Provisioning Vs Accelerated Provisioning

Latest Provisioning Vs Accelerated Provisioning
Please don't get confused with Accelerated Provisioning to the latest
provisioning norms
What is Accelerated Provisioning?
Refer : RBI/2015-16/101, DBR.No.BP.BC.2/21.04.048/2015-16 dated
01.07.2015 at "https://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?
Id=9908"
As a measure to ensure adherence to the proposals made in RBI guidelines
as also to impose disincentives on borrowers for not maintaining credit
discipline, accelerated provisioning norms are being introduced.
In cases where banks fail to report SMA status of the accounts to CRILC or
resort to methods with the intent to conceal the actual status of the accounts
or evergreen the account, banks will be subjected to accelerated provisioning
for these accounts and/or other supervisory actions as deemed appropriate
by RBI.
In all other cases, the existing provisioning norms will only apply.
Sub-Standard (Secured) - 15%
Sub-Standard (Unsecured) - 25% (other than infrastructure loans)
Sub-Standard (Unsecured) - 20% (infrastructure loans)
Doubtful-I (Secured) - 25%
Doubtful-I (Unsecured) - 100%
Doubtful-II (Secured) - 40%
Doubtful-II (Unsecured) - 100%
Doubtful-III (Secured) - 100%
Doubtful-III (Unsecured) - 100%
Loss - 100%
Accelerated Provisioning (only applicable if banks fail to report SMA status of
the accounts to CRILC or resort to methods with the intent to conceal the
actual status of the accounts or evergreen the account)
Sub-Standard (Secured-upto 6 months) - 15%
Sub-Standard (Secured-6 months to 1 year) - 25%
Sub-Standard (Unsecured-upto 6 months) - 25%
Sub-Standard (Unsecured-6 months to 1 year) - 40%
Doubtful-I (Secured) - 40%
Doubtful-I (Unsecured) - 100%
Doubtful-II (Secured) - 100%
Doubtful-II (Unsecured) - 100%
Doubtful-III (Secured) - 100%
Doubtful-III (Unsecured) - 100%
Loss - 100%

UCP 600

UCP 600

Why Documentary Credits
• Exchange of goods and services across national boundaries brings greater problems
to both buyer and seller than does domestic business.
• Diversity of customs, standards, currencies, local regulations, languages and legal
systems
• The Documentary Letter of Credit is widely used to reduce the financial risks of
trade.
• Importer wants to ensure performance while exporter wants to secure payment.
• Few of the rules are subject to any national or international law. Provisions of
International Chamber of Commerce & Industry (ICC) important, but not foolproof.
• Generally adopted set of rules for credits known as the Uniform Customs and
Practice for Letters of Credit (UCP) issued by ICC, publication no.600, 2007 (earlier
version no. 500, 1993).
Introduction
• This revision of the Uniform Customs and Practice for Documentary Credits
(commonly called "UCP") is the sixth revision of the rules since they were first
promulgated in 1933.
• The objective of UCP, since attained, was to create a set of contractual rules that
would establish uniformity in that practice, so that practitioners would not have to
cope with a plethora of often conflicting national regulations. The universal
acceptance of the UCP by practitioners in countries with widely divergent economic
and judicial systems is a testament to the rules' success.
• It is important to recall that the UCP represent the work of a private international
organization, not a governmental body.

Important Articles
Article 1 Application of UCP
• The Uniform Customs and Practice for Documentary Credits, 2007 Revision, ICC
Publication no. 600 ("UCP") are rules that apply to any documentary credit ("credit")
(including, to the extent to which they may be applicable, any standby letter of
credit) when the text of the credit expressly indicates that it is subject to these rules.
They are binding on all parties thereto unless expressly modified or excluded by the
credit.
Article 2: Definitions
• Advising bank means the bank that advises the credit at the request of the issuing
bank.
• Applicant means the party on whose request the credit is issued.
• Beneficiary means the party in whose favour a credit is issued.

Confirmation means a definite undertaking of the confirming bank, in addition to
that of the issuing bank, to honour or negotiate a complying presentation.
Confirming bank means the bank that adds its confirmation to a credit upon the
issuing bank's authorization or request.
• Issuing bank means the bank that issues a credit at the request of an applicant or on
its own behalf.
• Negotiation means the purchase by the nominated bank of drafts (drawn on a bank
other than the nominated bank) and/or documents under a complying presentation,
by advancing or agreeing to advance funds to the beneficiary on or before the
banking day on which reimbursement is due to the nominated bank.
• Nominated bank means the bank with which the credit is available or any bank in
the case of a credit available with any bank.
Article 3: Interpretations
• The expression "on or about" or similar will be interpreted as a stipulation that an
event is to occur during a period of five calendar days before until five calendar days
after the specified date, both start and end dates included.
• The words "to", "until", "till", "from" and "between" when used to determine a
period of shipment include the date or dates mentioned, and the words "before"
and "after" exclude the date mentioned.
• The terms "first half" and "second half" of a month shall be construed respectively as
the 1st to the 15th and the 16th to the last day of the month, all dates inclusive.
• The terms "beginning", "middle" and "end" of a month shall be construed
respectively as the 1st to the 10th, the 11th to the 20th and the 21st to the last day
of the month, all dates inclusive.
Article 4: Credits vs Contracts
• A credit by its nature is a separate transaction from the sale or other contract on
which it may be based. Banks are in no way concerned with or bound by such
contract, even if any reference whatsoever to it is included in the credit.
Article 5: Documents v. Goods, Services or Performance
• Banks deal with documents and not with goods, services or performance to which
the documents may relate.
Article 6 Availability, Expiry Date and Place for Presentation
• A credit must state the bank with which it is available or whether it is available with
any bank. A credit available with a nominated bank is also available with the issuing
bank.
• A credit must state whether it is available by sight payment, deferred payment,
acceptance or negotiation.
• A credit must state an expiry date for presentation.
• The place of the bank with which the credit is available is the place for presentation.

Article 9 Advising of Credits and Amendments
• A credit and any amendment may be advised to a beneficiary through an advising
bank. An advising bank that is not a confirming bank advises the credit and any
amendment without any undertaking to honour or negotiate.
• By advising the credit or amendment, the advising bank signifies that it has satisfied
itself as to the apparent authenticity of the credit or amendment and that the advice
accurately reflects the terms and conditions of the credit or amendment received.
• A bank utilizing the services of an advising bank or second advising bank to advise a
credit must use the same bank to advise any amendment thereto.
Article 10 Amendments
• The terms and conditions of the original credit (or a credit incorporating previously
accepted amendments) will remain in force for the beneficiary until the beneficiary
communicates its acceptance of the amendment to the bank that advised such
amendment. The beneficiary should give notification of acceptance or rejection of an
amendment. If the beneficiary fails to give such notification, a presentation that
complies with the credit and to any not yet accepted amendment will be deemed to
be notification of acceptance by the beneficiary of such amendment. As of that
moment the credit will be amended.
• Partial acceptance of an amendment is not allowed and will be deemed to be
notification of rejection of the amendment.
Article 11 Teletransmitted and Pre-Advised Credits and Amendments
• An authenticated teletransmission of a credit or amendment will be deemed to be
the operative credit or amendment, and any subsequent mail confirmation shall be
disregarded.
• If a teletransmission states "full details to follow" (or words of similar effect), or
states that the mail confirmation is to be the operative credit or amendment, then
the teletransmission will not be deemed to be the operative credit or amendment.
The issuing bank must then issue the operative credit or amendment without delay
in terms not inconsistent with the teletransmission.
Article 13 Bank-to-Bank Reimbursement Arrangements
• An issuing bank must provide a reimbursing bank with a reimbursement
authorization that conforms with the availability stated in the credit. The
reimbursement authorization should not be subject to an expiry date.
• An issuing bank will be responsible for any loss of interest, together with any
expenses incurred, if reimbursement is not provided on first demand by a
reimbursing bank in accordance with the terms and conditions of the credit.
• A reimbursing bank's charges are for the account of the issuing bank.
Article 14 Standard for Examination of Documents
• A nominated bank acting on its nomination, a confirming bank, if any, and the issuing
bank must examine a presentation to determine, on the basis of the documents
alone, whether or not the documents appear on their face to constitute a complying
presentation.

• A nominated bank acting on its nomination, a confirming bank, if any, and the issuing
bank shall each have a maximum of five banking days following the day of
presentation to determine if a presentation is complying. This period is not curtailed
or otherwise affected by the occurrence on or after the date of presentation of any
expiry date or last day for presentation.
• A presentation must be made by or on behalf of the beneficiary not later than 21
calendar days after the date of shipment as described in these rules, but in any event
not later than the expiry date of the credit.
Article 16 Discrepant Documents, Waiver and Notice
• When a nominated bank acting on its nomination, a confirming bank, if any, or the
issuing bank determines that a presentation does not comply, it may refuse to
honour or negotiate.
• When an issuing bank determines that a presentation does not comply, it may in its
sole judgement approach the applicant for a waiver of the discrepancies.
• When a nominated bank acting on its nomination, a confirming bank, if any, or the
issuing bank decides to refuse to honour or negotiate, it must give a single notice to
that effect to the presenter.
• The notice must state:
• i. that the bank is refusing to honour or negotiate; and
• ii. each discrepancy in respect of which the bank refuses to honour or negotiate; and
• iii. a) that the bank is holding the documents pending further instructions from the
presenter; or
• b) that the issuing bank is holding the documents until it receives a waiver from the
applicant and agrees to accept it, or receives further instructions from the presenter
prior to agreeing to accept a waiver; or
• c) that the bank is returning the documents; or
• d) that the bank is acting in accordance with instructions previously received from
the presenter.
• The notice required in sub-article 16 (c) must be given by telecommunication or, if
that is not possible, by other expeditious means no later than the close of the fifth
banking day following the day of presentation.
Article 20 Bill of Lading
• A bill of lading, however named, must appear to:
• i. indicate the name of the carrier and be signed by:
• the carrier or a named agent for or on behalf of the carrier, or
• the master or a named agent for or on behalf of the master.
• ii. indicate that the goods have been shipped on board a named vessel at the port of
loading stated in the credit by:
• pre-printed wording, or
• an on board notation indicating the date on which the goods have been shipped on
board.
• be the sole original bill of lading or, if issued in more than one original, be the full set
as indicated on the bill of lading.

Other Transport Documents
• Non-Negotiable Sea Waybill (Article 21)
• Charter Party Bill of Lading (Article 22)
• Multimodal Transport Document (Article 19)
• Air Transport Document (Article 23)
• Road, Rail or Inland Waterway Transport Documents (Article 24)
• Courier Receipts, Post Receipt or Certificate of Posting (Article 25)
Article 26 "On Deck”
• A transport document must not indicate that the goods are or will be loaded on
deck. A clause on a transport document stating that the goods may be loaded on
deck is acceptable.
Article 27 Clean Transport Document
• A bank will only accept a clean transport document. A clean transport document is
one bearing no clause or notation expressly declaring a defective condition of the
goods or their packaging. The word "clean" need not appear on a transport
document, even if a credit has a requirement for that transport document to be
"clean on board".
Article 28 Insurance Document and Coverage
• Cover notes will not be accepted.
• The date of the insurance document must be no later than the date of shipment,
unless it appears from the insurance document that the cover is effective from a
date not later than the date of shipment.
• The insurance document must indicate the amount of insurance coverage and be in
the same currency as the credit.
• If there is no indication in the credit of the insurance coverage required, the amount
of insurance coverage must be at least 110% of the CIF or CIP value of the goods.
Article 29 Extension of Expiry Date or Last Day for Presentation
• If the expiry date of a credit or the last day for presentation falls on a day when the
bank to which presentation is to be made is closed for reasons other than those
referred to in article 36, the expiry date or the last day for presentation, as the case
may be, will be extended to the first following banking day.
Article 30 Tolerance in Credit Amount, Quantity and Unit Prices
• The words "about" or "approximately" used in connection with the amount of the
credit or the quantity or the unit price stated in the credit are to be construed as
allowing a tolerance not to exceed 10% more or 10% less than the amount, the
quantity or the unit price to which they refer.
• A tolerance not to exceed 5% more or 5% less than the quantity of the goods is
allowed, provided the credit does not state the quantity in terms of a stipulated
number of packing units or individual items and the total amount of the drawings
does not exceed the amount of the credit.

Article 31 Partial Drawings or Shipments
• Partial drawings or shipments are allowed.
Article 34 Disclaimer on Effectiveness of Documents
• A bank assumes no liability or responsibility for the form, sufficiency, accuracy,
genuineness, falsification or legal effect of any document, or for the general or
particular conditions stipulated in a document or superimposed thereon; nor does it
assume any liability or responsibility for the description, quantity, weight, quality,
condition, packing, delivery, value or existence of the goods, services or other
performance represented by any document, or for the good faith or acts or
omissions, solvency, performance or standing of the consignor, the carrier, the
forwarder, the consignee or the insurer of the goods or any other person.
Article 35 Disclaimer on Transmission and Translation
• A bank assumes no liability or responsibility for the consequences arising out of
delay, loss in transit, mutilation or other errors arising in the transmission of any
messages or delivery of letters or documents, when such messages, letters or
documents are transmitted or sent according to the requirements stated in the
credit, or when the bank may have taken the initiative in the choice of the delivery
service in the absence of such instructions in the credit.
• If a nominated bank determines that a presentation is complying and forwards the
documents to the issuing bank or confirming bank, whether or not the nominated
bank has honoured or negotiated, an issuing bank or confirming bank must honour
or negotiate, or reimburse that nominated bank, even when the documents have
been lost in transit between the nominated bank and the issuing bank or confirming
bank, or between the confirming bank and the issuing bank.
• A bank assumes no liability or responsibility for errors in translation or interpretation
of technical terms and may transmit credit terms without translating them.
Article 36 Force Majeure
• A bank assumes no liability or responsibility for the consequences arising out of the
interruption of its business by Acts of God, riots, civil commotions, insurrections,
wars, acts of terrorism, or by any strikes or lockouts or any other causes beyond its
control.
• A bank will not, upon resumption of its business, honour or negotiate under a credit
that expired during such interruption of its business.
Article 37 Disclaimer for Acts of an Instructed Party
• A bank utilizing the services of another bank for the purpose of giving effect to the
instructions of the applicant does so for the account and at the risk of the applicant.
• An issuing bank or advising bank assumes no liability or responsibility should the
instructions it transmits to another bank not be carried out, even if it has taken the
initiative in the choice of that other bank.
Article 38 Transferable Credits
• A bank is under no obligation to transfer a credit except to the extent and in the
manner expressly consented to by that bank.

• Transferable credit means a credit that specifically states it is "transferable". A
transferable credit may be made available in whole or in part to another beneficiary
("second beneficiary") at the request of the beneficiary ("first beneficiary").
• Transferring bank means a nominated bank that transfers the credit or, in a credit
available with any bank, a bank that is specifically authorized by the issuing bank to
transfer and that transfers the credit. An issuing bank may be a transferring bank.
Transferred credit means a credit that has been made available by the transferring
bank to a second beneficiary.
• A credit may be transferred in part to more than one second beneficiary provided
partial drawings or shipments are allowed.
• A transferred credit cannot be transferred at the request of a second beneficiary to
any subsequent beneficiary. The first beneficiary is not considered to be a
subsequent beneficiary.
• Any request for transfer must indicate if and under what conditions amendments
may be advised to the second beneficiary. The transferred credit must clearly
indicate those conditions.
• The transferred credit must accurately reflect the terms and conditions of the credit,
including confirmation, if any, with the exception of:
- the amount of the credit,
- any unit price stated therein,
- the expiry date,
- the period for presentation, or
- the latest shipment date or given period for shipment,
any or all of which may be reduced or curtailed.
• The first beneficiary has the right to substitute its own invoice and draft, if any, for
those of a second beneficiary for an amount not in excess of that stipulated in the
credit, and upon such substitution the first beneficiary can draw under the credit for
the difference, if any, between its invoice and the invoice of a second beneficiary.
Summary of Major Issues in LC Transactions
Check List for Issuing/Accepting L/C
• Quality of Issuing Bank
• Method of Payment: Sight or Deferred Basis
• Transport Documents
• Other Documents
• Documents: Banks deal in documents not in goods, services or performance
• Should not refer to underlying contract
• Timing: UCP norm is max. 21 days after shipment date for presentation of
documents
Responsibilities and Obligations of Banks
• Irrevocable unless otherwise mentioned
• Issuing Bank: Prime obligation
• Advising Bank: Only obligation to authenticate the credit and passing it on promptly
to beneficiary

• Confirming Bank: takes over payment responsibilities of the issuing bank as far as the
beneficiary is concerned
• Reimbursing Bank: Responsibility of Issuing Bank to provide proper reimbursement
instructions
• Applicability of Force Majeure clause limiting banks’ liability on account of Acts of
God, riots, etc.
• Banks have five banking days to examine documents after receipt of documents
• Banks will examine documents with reasonable care
• Documents should be consistent with each other and complete
• Documents should conform with the terms of the credit
• Documents should comply with the provisions of UCP
Common Defects in Documentation
Commonly found discrepancies between the letter of credit and supporting documents
include:
• Letter of Credit has expired prior to presentation of draft.
• Bill of Lading evidences delivery prior to or after the date range stated in the credit.
• Stale dated documents.
• Changes included in the invoice not authorized in the credit.
• Inconsistent description of goods.
• Insurance document errors.
• Invoice amount not equal to draft amount.
• Ports of loading and destination not as specified in the credit.
• Description of merchandise is not as stated in credit.
• A document required by the credit is not presented.
• Documents are inconsistent as to general information such as volume, quality, etc.
• Names of documents not exact as described in the credit. Beneficiary information
must be exact.
• Invoice or statement is not signed as stipulated in the letter of credit.
Options for Banks dealing in Discrepant Documents
• Ask beneficiaries to make corrections
• Accept minor discrepancies and pay under reserve
• Obtain indemnity from seller
• Telex/fax details of discrepancies to the issuing bank and request permission to pay
• Send the documents on collection
Marine or Ocean Bill of Lading
• They are documents of title. Should be signed by ship’s master or his named agent
• If stated that goods are on board, then dated
• Load port and disport should be named
• `On Deck’ transport document not allowed
• Clean Transport Document
• Quasi-negotiable: transferable by endorsement and physical delivery, but no
recourse
• Transhipment allowed unless prohibited in L/C

Other Transport Documents
• Some multi-modal transport operators (MTOs) also issue negotiable documents for
transport operations where the goods are carried by several different modes of
transport.
• Today goods often travel faster than the related documents. Rail, road and air
transport documents are issued only in non-negotiable form with the goods
consigned direct to a named consignee. Usually this will be the buyer unless the
goods are consigned to a bank
Non-Transport Documents
• Insurance Documents (Article 28): Same currency as the Credit, Minimum amount to
be CIF or CIP plus 10%,
• Commercial Invoices (Article 18)
• Consular Invoice
• Certificate of Origin
• Weight List
• Packing List
• Inspection or Survey Certificate
• Test Certificates

Current affair s on 18.05.2019

Today's Headlines from www:

*Economic Times*

📝 Forex reserve up by $1.36 billion at $420.05 billion

📝 Saudi Aramco to supply extra 2 mln barrels/month to Indian Oil from July

📝 Telecom woes: BSNL expects normalcy in liquidity position by September quarter

📝 Piramal Realty FY'19 sales booking jumps nearly 4-fold to Rs 3,400 cr

📝 Uzbekistan eyes $1.7 billion FDI including from India

📝 Tata International exits trailer manufacturing biz by selling its arm to Canyon Point for Rs 305 cr

📝 Ujjivan to become a mass market bank under Nitin Chugh, says current CEO Samit Ghosh

📝 NCLAT annuls lenders' voting on NBCC's bid to acquire Jaypee Infratech

*Business Standard*

📝 Aircel lenders agree to take 99% haircut on dues worth Rs 20,000 crore

📝 Jet Airways board dysfunctional as Etihad's nominee director quits

📝 Bharti Airtel's Rs 24,939-crore rights issue fully subscribed

📝 IHCL, GIC strike Rs 4,000-crore deal to acquire premium hotels in India

📝 Indian Oil Corp Q4 net profit rises 17% on inventory, exchange gains

📝 India's apparel exports to UAE decline 33% on higher import duty

📝 NBFCs see no sign of liquidity crisis easing, await RBI's rescue act

📝 Iron ore powers above $100 as supply crisis roils global market

📝 Amazon leads $575-million investment in food delivery startup Deliveroo

📝 China signals lack of interest in resuming trade talks with US

*Financial Express*

📝 Crunch in CIL supplies: CERC order unlocks Rs 17,000 crore for power firms

📝 Spencer’s buys Nature’s basket in Rs 300-crore deal

📝 Dr Reddy’s net profit up 44 per cent in Q4

📝 Refurbished mobile imports certified by BIS get govt nod

📝 Nestle likely to focus on low-cost products to gain rural share

📝 Sundaram-Clayton opens first overseas plant in US

📝 Truck rentals take huge hit on drop in freight

📝 US tariffs on China big opportunity for Indian textile industry: CITI

📝 City Union Bank net rises 15% to Rs 175 crore in Q4

*Mint*

📝 Indian Navy successfully test-fires MRSAM missile

📝 Elon Musk to personally examine, review all Tesla expenses

📝 Corporation Bank Q4 net loss widens to ₹6,581 crore as provisioning doubles

📝 Brexit talks collapse as UK Opposition blames 'weak' Theresa May

📝 Nestle India chief flags concern for industry over lower-than-expected monsoons

📝 Sensex soars 537 points; Nifty reclaims 11,400-mark

📝 Bajaj Auto Q4 net at ₹1,306 crore, shares jump 5%.

LC and BG difference

Difference between Letter of Credit and Bank Guarantee
Difference between Letter of Credit and Bank Guarantee
📣📣📣📣📣📣📣
Introduction🏙
⬅⬅⬅⬅⬅⬅⬅⬅
This two terminology looks similar but both are very different. When one wants to expand the business means beyond the national boundary or within, one needs assurance from the buyer side that after delivery of goods or services the payment will receive and this can be done by the bank only.

In short, both these terms are used while doing business or transactions with domestic or international companies.
So, both these services are facilitated by the bank but in a different way as per the need of seller party.
Letter of Credit🏙
⬅⬅⬅⬅⬅⬅⬅⬅⬅
It is used while there is a high level of risk involves in business.It is used while doing import and export transactions with international companies.L/C is a written commitment issued by the bank or some other financial institutions for payment assurance to the seller party from buyer’s request.In L/C, the seller gets a guarantee of payment from the buyer’s banks on the due date payment will receive only if the seller meets all the conditions of deal like timely delivery etc.Banks offer a service like L/C on the basis of proof provided by the buyer’s party.If the buyer fails to make payment to the seller, the bank pays on behalf of a buyer and then the bank will recover it from a buyer anyhow.Banks will charge fees for this type of facilities.So in short, letter of credit is beneficial when product or service is delivered and payment is not done.It eliminates the financial risk involved in the business.

Types of Letter of Credit🎎
⬅⬅⬅⬅⬅⬅⬅⬅⬅⬅⬅
🗼Irrevocable Letter of Credit:
It is not modified or cancelled without the concern of all the parties.
🗼Revocable Letter of Credit:
In it, the issuing bank can revoke or cancel the letter of credit any time without prior notice to the seller.
🗼Confirmed Irrevocable Letter of Credit:
In it, the confirming bank gives more assurance to seller same as issuing bank.
🗼Unconfirmed Irrevocable Letter of Credit:
In it, an advisory bank from the seller's side performs as an agent for the issuing bank without any responsibility to the seller.
🗼Revolving Letter of Credit
This type of letter is used if in case regular transactions take place and remain valid for a long term without issuing the another letter of credit.

Bank Guarantee🏙
⬅⬅⬅⬅⬅⬅⬅⬅⬅⬅
🏦 guarantee is a service by which bank gives a guarantee to the seller on behalf of his client for assurance of payment.
🏢So, Bank guarantee has the same function as a letter of credit but with some differences.
🏦 guarantee generally used in domestic transactions.
🏦 guarantee is beneficial when contractual obligations are not fulfilled by the other seller party.
🏦 guarantee is used in infrastructure and real estate projects to reduce risk level.
⤵Letter of Credit V/s 🎎Bank Gurantee
Basis🎟
⤵Letter of CreditBank Guarantee-DefinitionA letter of credit is an obligation by the bank to the seller if the criteria met, the bank will make payment.

🎎In bank guarantee, if the opposing party doesn’t fulfil contractual obligations the Bank will make payment.
Boundary🎟
⤵It is used internationally.
🎎It is used domestically.
Protection🎟
⤵It protects both parties but favours exporter.
🎎It also protects both but favours buyer.
Industry🎟
⤵It is used by merchants.
🎎It is used by real estate and infrastructure developer.
L/Cs are frequently used in international transactions compared with bank guarantees. When comparing the two instruments, the market for bank guarantees is much larger than that for L/Cs.

CAIIB RETAIL

CAIIB RETAIL

01 Retail banking refers to banking in which banking institutions execute transactions directly with
consumers, rather than corporations or other entities
a) Consumers b) corporates c)Business entities d)None of these
02Which of the following is incorrect?
a) Retail Banking is a banking service that is geared primarily toward individual consumers.
b) Retail banking focuses strictly on consumermarkets c)Retail banking is, generally mass-market driven
d)None of these
03 he delivery model of retail banking is both physical and virtual
a) Only physical b) Only virtual c)Both physical and virtual d) None of these
04Which 'of the following is not the advantage of retail banking?
a) Client base will be large and therefore risk is spread over large customer base.
b) Customer Loyalty is strong and customers generally do not change fromone bank to another.
c) There are attractive interest spreads, since customers are too fragmented to bargain effectively.
d) None of these
05 Which of the following is the advantage of retail banking?
a) Credit risk tends to be well diversified, as loan amounts are relatively small
b) There is less volatility in demand compared to large corporates
c) Large numbers of clients can facilitate marketing, mass selling.
d) All of these
06 The study conducted by Capgemini, ING and the European Financial Management Marketing
Association related to which of the following?
a) Pricing of Banking services b)Delivery Channels c) Both (a) and (b) d)None of these
07 Which of the following is not correct about findings of the study conducted by Capgemini, ING and the
European Financial` Management Marketing Association on pricing of banking services?
a) In a given region, prices varied according to usage pattern, with a ratio of up to one to 4.6 between prices paid by
very active and less active users.
b) Banks are increasing remote channel prices in order to drive greater customer use.
c) Price of seldom-used products have steadily increased.
d) For Banking services prices decline with maturity
08Which of the following is not correct about findings of the study conducted by Capgemini, ING and the European
FinancialManagement Marketing Association on Delivery Channel Strategies?
a) Sales through branch format have decreased.
b) Sales through web and phone have increased.
c) Earlier branch used to be the main point of sale but now sales are mainly through internet banking.
d) Selling through the branch channel is still the main format.
09 In US, which of the following is not the characteristic of the traditional Image of the bank?
a) office onMain Street. b) the branch manager does not understand the local market.
c)the manger has strong customer relationships. d) None of these
10What has been the impact of technology and regulatory changes in the 1990s in banking in US?
a) Automated tellermachines(ATMs) proliferated after the national ATMnetworks dropped a ban on surcharges.
b) Banks also developed centralized call centers to handle customer service issues and to initiate transactions,
including deposits and loans.
c) Many banks shifted some activities like small-business loan approval from branch to regional or Head
Offices.
d) The role of the traditional bank branch reduced in the delivery of retail banking services.
e) All of these
11What has been the impact of Deregulation and the Riegle-Neal Act of 1994 & GrammLeach-Bliley Act 1999
regarding banking in US?
a) It contributed to bank consolidation that focused on reducing costs to boost profits
b) It allowed banks to branch and merge across state lines.
c) The declining number of banks and rising number of branches have resulted in greater consolidation of branches
and deposit's in the nation's larger banks.
d) All of these
12 For the banks, the consolidation of brancheswithin large branch networks has implications in terms of :
a) Cost b) business focus c) profitability d) All of these
13Market surveys suggest that customers:
a) place a premiumon convenience i.e. location when choosing a bank. B) are indifferent to location of branch
c) place premium on branches in commercial areas d) None of these
14 The evolution of retail banking in India can be traced back to the entry of:
a) Newprivate sector banks. b)Foreign banks c) Non Banking Finance companies d) All of these
15Which of the following were the pioneers in introducing retail banking products in India?
a) Axis Bank b)ICICI Bank c) HDFC Bank d) Standard Chartered Bank and Grindlays Bank
16 Which of the following were two early players in the credit card business among public sector banks?
a) State Bank of India and PNB b)Bank of Baroda and PNB
c)Bank of Baroda and Andhra Bank d) Andhra Bank and Corporation Bank
17 Which of the following created a new approach to retail banking by banks?
a) Foreign banks b) Non Banking Finance Company
c) Entry of newgeneration private sector banks d)Old private sector banks
18 New private sector banks had a clear positioning for retail banking due to which of the following reasons?
a) Professional and experiencedtop management. b) The advantage of technology right fromstart.
b) They were not equipped for large scale lending. d)None of these
19. In India, now which group of banks have emphasis on retail banking?
a) Foreign banks b) New private sector banks c) Public sector banks d) All of these
20.Which of the following is not the reason for emergence of retail banking in India?
a) Strong economic fundamentals. b) growing rural population
c) higher disposable incomes d) None of these
21. Which of the following is not the reason for emergence of retail banking in India ?
a) emergence of new customer segments b) rise in old population
c) huge untapped potential for retail banking in India d) explosion of service economy
22. The contribution of retail assets to Gross Domestic Product (GDP) of India is and is comparatively lesser than that of
other Asian counterparts likeChina (15%),Malaysia (33%), Thailand (24%) and Taiwan (52%).
a) 3%, b)6%, c)10%, d)12%
23. The retail asset growth slided down to 4%in 2009. The segments which suffered most were:
a) Consumer Durable Loans, b) Auto Loans, c) Housing Loans, d) Both (a) and (b) only, e)None of these
24. During • slowdown of 2008-09, themost affected segment in the retail liabilities space was
a) Term Deposits, b) InstitutionalDeposits c) PurchasedDeposits d) CASA deposits.
25. In case of Indian Banks, the share of interest income has almost remained steady at about%and the share of non
interest income also is almost stable at around %.
a)84%;16% b) 75%;25% c) 65%;35% d) 15%;85%
26. As per a study by Boston Consulting Group, Retail segment brings in nearly % of the
total banking revenues worldwide
a) 30%, b) 40%, c) 50%, d) 60%
27. Which of the following is not the finding fom report by McKinsey & Company on ‘Emerging Challenges to
the Indian Financial System’?
a) With rising income levels, India will not remain attractive market for retail financial products.
b) With rising income levels, India will not remain attractive market for retail financial products
c) There is huge potential available for personal financial services.
d) In addition to consumer credit, payment products such as credit and debit cards will drive growth.
28. As per report by Mc Kinsey & Company on ‘Emerging Challenges to the Indian Financial System’, by
2010, the number of high net worth individuals (annual income greater than US $1 million) in India will grow
to _____
a) 100,000 b) 200,000 c) 300,000 d) 400,000 e) None of These
29. Which of the following statements is not correct in the context of Indian Banking?
a) There has been growth in deposits and credits almost consistently
b) Banking access remains limited to a few sections of the population.
c) There is no disparity in the penetration of banking products among the different classes
d) None of these
30 As per a study by Boston Consulting Group, which of the following is correct?
a) Retail banks are facing tougher competition and continuously decliningmargins.
b) Retail banks are facing tougher competition but continuously increasingmargins
c) Retail banks are facing less competition but continuously declining margins
d) None of these
31 The retail banking objectives of any bank wouldmainly focus on which of the following?
a) Generating superior returns on assets
b) Acquiring sufficient funding
c) Enhancing riskmanagement
d) Understanding customers and regaining their trust , e) All of these
32 The business models for retail banking adopted by banks among the public sector, private sector and
foreign banks:
a) are same, b) vary, c) are almost same, d) are almost same but vary to very little extent.
33. Which of the following approaches are adopted by banks for Retail banking?
a) Strategic Business Unit (SBU) b) Approach Departmental Approach, c) Integrated Approach (part of
the overall business plan), d) Any of these
34. Public Sector Banks in India generally have adopted the Approach as their retail banking business model.
a) Strategic Business Unit (SBU), b) Approach Departmental Approach, c) Integrated Approach (part of the
overall business plan), d) None of these
35.Which approach is adopted by old generation private sector banks for retail banking?
a) Strategic Business Unit (SBU) Approach b) Departmental Approach, c) As a part of overall business plan d)
None of these
36.Which of the following type of banks use Strategic Business Unit Model for Retail Banking with defined
business focus?
a) New Private Banks, b) Foreign Banks, c) All big public sector banks, d) Both (a) and (b)
e) All of these
37. Banks generally structure their retail banking models mainly on a positioning platform and
to be the best/ top among the peer group players or across players.
a) Two, b) three, c) five, d) ten
38. In retail banking, the new generation private banks want to be in the top slot across all
class of banks. These banks have advantage of which of the following?
a) Technology, b) strategy, c) customer and business initiatives, d) aggressive positioning
e) All of these
39.Which of the following banks exited retail and credit card business when it was found that these were not viable?
a) BNP Paribas, b) American Express, c) Bank of Tokyo, d) Both (a) and (b), e) All of These
40 Banks adopt different models for implementing their retail banking initiatives.Which of the following
are themost common strategies?
a) end to end outsourcing b) predominant outsourcing c) partial outsourcing
d) in house sourcing e) Any of these
41 Businessmodel adopted by a particular bank for Retail Banking does not depend on which of the following?
a) product range b) process requirements c) technology preparedness d) delivery capabilities
e) None of these
42 Public sector banks use which of the following models for retail banking?
a) end to end outsourcing b) predominant outsourcing c) partial outsourcing d)in house sourcing
43 Most of the Public sector banks, use only in house resources for retail banking. However, some of the activities
are outsourced.Which of the following type of activities is not outsourced?
a) ATM b) Credit Card c) KYC compliance d) None of these e) All of these
44 In case of new generation private sector banks, which implementation model for retail banking is
adopted?
a) end to end outsourcing b) in house sourcing c) predominant in house sourcing
d)mix of outsourcing and in house, though a little tilted towards outsourcing
45 There are four broadly defined processmodels relating to Retail Banking which are implemented across banks.
Thesemodels are defined based on which of the following?
a) Technology b) Customer interface capabilities of the banks c) Both (a) and (b) d)None of these
46 Which of the following models is not used by banks for retail banking? a) Horizontally Organised
Model, b) Vertically Organised Model c) Diagonally Organised Model d) None of these
47. Which of the following is/are features of Horizontally organised model in retail banking?
a) It is a modular structure using different process models for different products.
b) It offers end to end solutions product wise.
c) It provides functionality across products with customer data base orientation.
d) Centralised customer data base is used across products.
e) Both (a) and (b)
48.Which of the following is/are features of Vertically organisedmodel in retail banking?
a) It provides functionality across products with customer data base orientation.
b) Centralised customer data base is used across products.
c) It is a modular structure using different process models for different products.
d) It offers end to end solutions product wise.
e) Both (a) and (b)
49.Which of the following statements is correct regarding implementationmodels adopted by banks in retail banking?
a) Horizontally organised model is a modular structure using different process models for different products
offering end to end solutions product wise.
b) Vertically organisedmodel provides functionality across products with customer data base orientation and centralised
customer data base is used across products.
c) Predominantly horizontally organisedmodel ismostly product oriented with common customer information for some
products.

d) In predominantly vertically organisedmodel, common information is available formost of the products.
e) None of these
50.Which of the following is incorrect regarding Predominantly horizontally organisedmodel for retail banking?
a) ismostly product oriented with b) It ismostly product oriented.
c) In thismodel common customer information is available for some products.
d) In this model, common information is available for most of the products. e) None of these
51. Which of the following model is generally adopted by public sector banks for retail banking?
a) Vertically organisedmodel, b) Predominantly horizontally organizedmodel, c) Horizontally organizedmodel, d)
Predominantly vertically organizedmodel.
52 Which of the following model is generally adopted by new private sector banks for retail banking?
a) Vertically organised model b) Predominantly horizontally organisedmodel
c)Horizontally organised model d) Predominantly vertically organisedmodel
53 in foreign banks, mostly predominantly vertically organised model is adopted for retail banking which
implies that retail banking initiatives are attempted with:
a) scattered data base b)using different processmodels for different products.
c) customer information with different set of officials. d)common customer information across products.
54 Certain segments constitute the basic structure of retail banking. Which of the following, has emerged as
one of the important constituents of retail banking initiatives of banks?
a) retail asset products b) retail liability products c) marketing of third party products. d) All of these
55 Liability products offered by banks to retail banking customers are which of the following?
a))Saving Accounts, Current Accounts and Term Deposit accounts. b) Saving Accounts, Current Accounts,
Term c)Deposit accounts and Housing Loans. d)Housing Loans, Vehicle Loans and Personal Loans. e) Safe
Deposit Vault, Safe custody
56 Product differentiation amongliability products is achieved by banks by:
a) Attractive packaging b) Attractive branch layout c)Expanding the scope of generic products from a plain
vanilla account to a value enriched account d) None of these
57 In today's context, which of the following can be called as value enrichment to an account?
a) ATM cards b) Debit Cards c) Multi City Cheques d) None of these as all of these have become generic
features
58 Which of the following is considered as enriching the value to a liability product?
a) tagging group insurance products in the life and non life segment at a very competitive premium
b) providing sweep facilities from savings or current accounts to fixed deposit accounts above a certain specified
level resulting in increase in the earning potential of the deposit balances
c) auto overdraft facility d) All of these e)None of these
59 In case of liability products, Internet Banking, Telephone Banking, andMobile Banking are considered as:
a) enriching value to a liability product. b) essential value additions. c) generic feature.
d) None of these
60 In case of liability products, the product differentiation among banks is wafer thin and only value differentiation is the
key factor across banks.Which of the followingmake difference in this regard?
a) Technology b) Process c) Delivery efficiency d) All of these e) Only (a) and (b)
61Which of the following value additions are generally not offered by almost all banks in case of fixed deposits with
banks?
a) provision formonthly, quarterly or cumulative interest payment options.
b) Facility of partial withdrawal without disturbing the entire amount is inbuilt
c) ixed deposits with built in overdraft facilities. d) the group life cover and health cover.
62 For retail assets, which of the following is not a major issue?
a) Product b)price c) process d) delivery innovations e)None of these
63 Which of the following is not a major advantage of retail assets?
a) the stability of the asset base because of the large customer base. b) the better spreads in income.
c) risk diversification. d) scope for capturing additional revenue streams fromother avenues. e) Cheap source
of funds
64 Which of the following is not standard retail asset products offered by banks?
a) Housing loans and consumer loans. b) Car Loans and Personal loans.
c) Credit cards d) Debit cards e) None of these
65 Which of the following is not a retail asset product?
a) loan against rental receivables b) salary overdrafts c) loan against securities
d) loans for traders in the personal segment e) None of these
66 Retail products other than liability products and asset products, which aremeant for providing process and delivery
efficiencies to clients include which of the following?
a) Credit Cards, Debit Cards, and ATM Cards.
b)Telephone Banking, Mobile Banking, Internet Banking. c)Depository Service and Broking
Services. d) Both (a) and (b) only. e) All of these
67 Which of the following products and services are offered with objectives of satisfying customer's multiple
needs and also to augment fee based income?
a) life and non life policies, mutual funds, retail sale of gold coins, bill payment services.
b) payment gateway for rail, air ticket bookings. c) wealthmanagement services, portfoliomanagement services
and private banking. d)Only (a) and (b) e) All of these
68 Banks offer various services like distribution of third party products like life and non life policies, mutual funds,
retail sale of gold coins etc.What is the objective of providing these services?
a) satisfying customer'smultiple needs b)—to augment fee based income c) to augment interest income
d) Both (a) and (b) only e) All of these
69 Which of the following products is offered by almost all public sector banks?
a) Debit Cards b) ATM cards c) Credit Cards d) Both (a) and (b) e) All of these
70 Many Public Sector banks are not in the credit card business. What is the reason for this?
a) It is a big volume game. b) It needs process efficiencies. c) Lack of trained staff.
d)Both (a) and (b) e) All of these
71Which of the following services is generally offered bymost of the public sector banks?
a) Corporate Agency for Life and Non Life Insurance. b) Distribution of mutual funds.
c)Sale of gold coins d)Both (a) and (b) e)All of these
72 Which of the following types of service is generally not offered by ublic Sector Banks?
a) Wealth Management b) Portfolio Management Services c) Bill Payment services
d)Both (a) and (b) e) All of these
73 Product Development is done by banks in different ways. In this regard which of the following is not
correct regarding In house product development strategy?
a) The product is developed independently based on research and on the market dynamics.
b) The best features in the products available in themarket are incorporated along with additional value engineering.
c)No background research is undertaken. d) None of these
74 In case of product development, various strategies are adopted by banks. Which of the following
strategies is generally not relevant?
a) In House product development strategy. b) Follow the leader c)Top Management instructions
d)RBI instructions e) None of these
75 Which of the following is not the feature of 'Follow the leader approach' in product development?
a) In thismethod, product development is based purely onmarket conditions and customer segments.
b) No background research is conducted. c) Product is developed on the same lines as that of leader. d)
None of these
76 In banks, the basis for product development, is on which of the following?
a) The segmentation approach b) Geography based approach c) Classification based approach
d)Approach based on specific customer segments like NRI, HNI, Mass Affluent, Salaried, Professionals,Women etc.
e) Any of these
77Which of the following is not a feature of product development inmost of the PSBs?
a) Product development is done in house incorporating the market dynamics.
b) The market conditions and customer segments of the bank are factored in the development.
c) The views and instructions of the Top Management are the prime drivers of product development in PSBs.
d)Both (a) and (b) e) None of these
78 In the case of public sector banks, which of the following is not given importance for product
development?
a) Geographical area b) Type of branch and centre c) Business potential d) Both (a) and (b)
e)None of these
79 In private sector banks, which of the following factor are considered for product development?
a) Market dynamics. b) Segmentation, classification, customer segments
c)The product positioning adopted by other players. d) All of these
80Which of the following sequence is generally adopted in product development?
a) conducting amarket survey, identifying the needs, pilot testing, getting feed back, fine tuning the product based on
feedback, developing the product, final roll out of the product.
b) identifying the needs, conducting amarket survey, pilot testing, getting feed back, fine tuning the product based
on feedback, developing the product, final roll out of the product
c) conducting a market survey, developing the product, identifying the needs, pilot testing, getting feed
back, fine tuning the product based on feedback, final roll out of the product.
d) conducting a market survey, identifying the needs, developing the product, pilot testing, getting feed
back, fine tuning the product based on feedback, final roil out of the product.
81 In Public sector banks, market survey is generally done through:
a) in house resources b) outsourcing c) through specialists in service industry d) None of these
82 There are various approaches to processing of products and services in retail banking.Which of the following is
not correct in this regard? (i), (ii); (iii)
a) The entire processing is done through in house resources.
b) Some products processed in house and for some products outsourcing is done for process.
c) Outsourcing of entire process subject to prescribing process standards.
d) Outsourcing of entire process without any guideline as it is given to specialists.
e) None of these
83 In Public sector banks and old private banks generally the process for products and services are done
through:
a) Outsourcing b) In house resources c) Major portion is in house with some outsourcing.
d)Major portion is outsourced with some in house processing.
84 What approach is generally adopted in foreign banks, for processing of products and services?
a) The entire process is outsourced and normally happens through a dedicated back office covering the
entire gamut of retail banking services
b) The entire process for products and services is done through in house resources but in some banks, process part
of some products are outsourced.
c) Outsourcing is attempted partially for some process areas.
d) None of these.
85 Banks adopt different process models for retail asset products and the focus is on which of the following?
a) Reducing the risk to maximum possible extent. b)Earningmaximuminterest c) To achieve the best
process efficiencies for capturing the customers. d) None of these
86 For retail assets, the common formof processmodels are Centralised Retail Assets Processing Centres.What are
the features of thismodel?
a) All the retail loans sourced at the branches and marketing team are processed at a single point. b) Retail
loans are financed through that centre only. c) Processing alone is done at the centre and financing can be
done through that centre or at the branches. d) Both (a) and (b) e) Both (a) and (c)
87 In public sector banks, which of the followingmodels is generally adopted for processing of retail asset products?
a) Centralised retail loan processing centre. b) Regional processing centres
c)Standalone processing at branches d) Regional processing centres or branches or a blend of both.
88 In which of the following bank groups, centralised processing is the norm for retail asset processing?
a) Public sector banks b) New Private sector banks c) Foreign banks d) Both (b) and (c)
89 In the centralizedmodel for processing liability products, for opening a saving bank account, which of the following
activities is/are not carried out at a single point?
a) filling the Account opening form b) opening of account, c)Issue of Pass Book and Cheque Book
d)Issuing ATMcard/ Debit card,—PinMailers for the cards. e) None of these
90 In almost all Public sector banks, which of the following method is generally adopted for processing
liability products?
a) Centralized processing model b) Regional Processing Model. c) Stand alone processing model
d)Any one of these
91 In most of the Public Sector banks, which of the following activity is generally done centrally?
a) Opening of accounts. b) KYC compliance c) issue of cheque books
d) issue of ATM/Debit Cards e) None of these
92 Process models differ for products which require single stage process and multi stage process.Which of the
following involves a single stage process?
a) Opening a fixed deposit and issuing receipt. b) Giving car loans c) Housing Loan
d)Both (a) and (b) e)None of these
93. Process models differ for products which require single stage process andmulti stage process.Which of
the following involves a multi stage process?
a) Opening Saving accounts b) Opening Current accounts c) Housing Loans
d)Both (a) and (b) only e) All of these
94.Since process Time is business sensitive and customer sensitive, banks implement process time prescriptions for
different retail asset products. Inmost of the PSBs, the process time is prescribed and varies from days to
days depending upon whether it is processed at the branch or regional hub or centralised processing.
a) 3 days to 7 days b) 5 days to 10 days c) 7 days to 15 days d) 15 days to 30 days
95. Banks consider various factors for designing a Pricing model of products and services.Which of the
following is not considered for pricing?
a) Market dynamics, risk perception, return expectations. b) Tenor or duration
c)RBI guidelines d) Asset Liability Management practices e) None of these
96. In Public sector banks, though pricing is market driven and competitive, in almost all the banks,
pricing is mainly driven on the basis of which of the following?
a) The asset liability management practices of the banks. b) Regulatory advices
c)Feedback fromthe field d) Both (a) and (b) e) All of these
97.Which of the following public sector banks, started implementing aggressive pricing strategies in Housing
Loan segment between 2008 and 2010.
a) Punjab National Bank b) Bank of Baroda c) State Bank of India d) All of these e) None of these
98. Which of the following approach is/are are adopted by banks for Price structuring for products and
services?
a) Stand alone pricing for different products and services is the basic structure.
b) Basic structure is fine tuned as per quantum and volumes.
c) Price preference/ price rebatesmay be given for high value deposits and advances.
d) Both (a) and (b) only e) All of these
99 Which of the following is correct regarding price bundling?
a) Price bundling is a part of price structuring.
b) In price bundling, if a customer avails number of products, then the total price proposition ismade attractive than the
stand alone pricing for the individual products of the bundle.
c) This structuring is a cross selling strategy to entice the customer to availmore products so that profitability per
customer is enhanced. d) All of these e) None of these
100 What is the objective of Price bundling?
a) It is a cross selling strategy. b) 'To entice customer to avail more products.
c) To enhance profitability per customer. d) All of these
ANSWER
1 A 2 D 3 C 4 D 5 D 6 C 7 B 8 C 9 B 10 E
11 D 12 D 13 A 14 A 15 D 16 C 17 C 18 B 19 D 20 B
21 B 22 B 23 D 24 D 25 A 26 D 27 B 28 D 29 C 30 A
31 E 32 B 33 D 34 B 35 B 36 D 37 B 38 E 39 D 40 E
41 E 42 D 43 C 44 D 45 C 46 D 47 E 48 E 49 E 50 C
51 C 52 A 53 D 54 C 55 A 56 C 57 D 58 D 59 B 60 D
61 D 62 E 63 E 64 D 65 E 66 E 67 E 68 D 69 D 70 D
71 D 72 E 73 C 74 D 75 D 76 E 77 E 78 A 79 D 80 D
81 A 82 D 83 C 84 A 85 C 86 E 87 D 88 C 89 E 90 C
91 D 92 D 93 E 94 C 95 E 96 D 97 C 98 E 99 D 100 D

International banking recollected

INTERNATIONAL BANKING RECOLLECTED QUESTIONS



bullet repayment

IMF

negative pledge

bahamas routing offshore known as

ratio covenants

value at risk

urc 522

restoration of confidence in intt trade and invstment

sterling denominated foreign bonds

world bank group

leveraged buy out

floating rate notes

risk collaps of barings bank

oldest credit rating agency

straight debt

numericals asked frm call option, dealer, bill negotiation n crystalization, post n pre shipment



1)Oldest rating agency

2)what is IMF

3)5 marks case study on residential status

4)5 marks case study on conversion of currency directly quoted,TT Buying or selling

5)5 marks case study on conversion indirectly quoted

6)2 questions on INCOTERMS

7)Syndication financing

8)Off sheet balance

9)IEC code

10)EEFC

11)Predecessor of World Bank

12)3 questions on LC

13)Popular Off shore location for resident and non resident

14)Euronote

15)AD is the member of....?

SNRR a/c



1)Leveraged buy outs

2)Management buy out

3)correspondent banking

4)balance of payment

5)A case study on NRI NRO PIO

6)ADR GDR level movement

7)syndication definition

8)World Bank

9)a case study on ECGC

10)Offshore banking

11)Export Import duration after shipment

12)Letter of credit theory

13)A case study on parties of LC

14)A Case study on cross rate transaction

15)A case study on margin selling or buying

16)Authorised Dealer

17)IMF 2 questions

18)Theoretical case study on ECB

19)Straddle

20)URR522







....

Credit Management important mcqs

Credit Management Important MCQs:::



1. An account will be classified as substandard if it remains NPA for a

period not exceeding----months.

A. 18

B. 12

C. 24

D. 6

E. 36

Ans B



2. An account which remains in NPA category for a period of more than --

--- months will be classified as doubtful assets.

A. 18

B. 12

C. 24

D. 6

E. 36

Ans. B

3. An account guaranteed by state government will become NPA if the

interest and or instalment remain overdue for a period of

A. 90 Days

B. 180Days

C. It does not become NPA

D. Depends on case to case basis

E. As per government’s instructions

Ans A

4. In case of a consortium advance account the asset classification has to

be done on the basis of record of recovery with the

A. Bank concerned

B. Leader Bank

C. Majority of Banks

D. Majority of Banks by number

E. Majority of Banks by Share

Ans A

5. In accounts where the erosion of the value and the realizable value is

less than 10% of the outstanding, the account will be classified as

A. Substandard asset

B. Doubtful asset

C. Loss asset

D. No such guideline

E. On case to case basis

Ans C

6. In case of doubtful asset which has remained doubtful for more than 3

years the provision to be made against the secured portion is -----% of

the secured amount.

A. 20

B. 30

C. 50

D. 75

E. 100



7. In case of unsecured exposures in substandard category the provision

to be made is ----% of the total exposure.

A. 15

B. 25

C. 12.5

D. 10

E. 100

Ans B

8. What is the time limit prescribed by the DRT act for final disposal of

application filed for recovery of dues

A. 180 Days from date of receipt of application

B. No such limit is fixed

C. 180days for clean loans and 240 days for secured loans

D. 180days from close of evidence of both the sides

E. 60 Days from date of receipt of application

Ans A

9. The DRT are constituted by

A. RBI

B. Supreme court

C. High courts of respective states

D. Central Government

E. Lok adalats

Ans D

10. What is the minimum pecuniary jurisdiction of DRT

A. There is no such minimum stipulation

B. Rs.10 lacs

C. Rs.100 lacs

D. Rs.5 lacs

E. Rs.25 lacs

Ans B

11. With regard to DRT, find the incorrect-

A. The act extends to the whole of India except the state of Jammu

and Kashmir

B. Debts secured by mortgage of immoveable property are not

covered under DRT

C. The presiding officer of the tribunal is appointed by the Government

of India

D. The RRBs’ can also file suit with DRT for recovery of debt.

E. The minimum pecuniary jurisdiction of DRT is Rs.10 lac

Ans B

12. With regard to DRT an appeal to the Appellate Tribunal is to be made

within -----days of the order of the DRT.

A. 30 days

B. 45 Days

C. 60Days

D. 90Days

E. 120Days

Ans B

13. Which types of accounts fall under the CDR category

A. Standard,substandard,doubtful

B. Substandard only

C. Any kind of NPA account



D. Standard and doubtful only

E. Standard and substandard only

Ans A

14. The following organisations purchase non-performing assets from

Banks with a purpose to resolve the same.

A. Asset Management Companies

B. Asset reconstructuin companies

C. Asset recovery companies

D. Debt Recovery tribunal

E. DRAT

Ans B







15. As per RBI guideline a Bank purchasing a Non performing asset has to

hold the same for atleast a period of -----before selling the same to

another Bank.

A. 6 Months

B. 12 Months

C. 15 Months

D. 18 Months

E. 24 Months

Ans C

16. As per sec 13(2) of the SARFAESI Act,2002, how much time is required

to be given in the demand notice for payment of the amount?

A. 30 Days

B. 60Days

C. 90Days

D. 45 Days

E. 120 Days

Ans B

17. As per SARFAESI act 2002,if the borrower raises any objection to the

demand notice,what is time limit within which the Bank is bound to

reply the same.

A. 30 Days

B. 7 Days

C. 15 Days

D. 45 Days

E. 60 Days

Ans B

18. As per SARFAESI act 2002 what is the notice period for selling a

property which is taken possession of

A. 30 Days

B. 7 Days

C. 15 Days

D. 45 Days

E. 60 Days

Ans A

19. As per SARFAESI act 2002 what is the time limit for filing appeal with

the DRT?

A. 30 Days

B. 7 Days

C. 15 Days

D. 45 Days

E. 60 Days

Ans D

20. As per SARFAESI act 2002,while preferring appeal with the DRT the

borrower is required to deposit------% of the amount payable

A. 75

B. 50

C. 25

D. Nil

E. As per DRT Instructions

Ans D

21. The borrower is having facilities with more than one bank under

consortium where lending banks have entered into Joint Lending

Agreement. Out of these, account with our bank has become NPA while

the accounts with other banks are in order.

A. The facility with our bank only has to be treated as NPA

B. All the facilities with all the banks be treated as NPA

C. If majority of facilities becomes NPA, all facilities are to be treated

as NPA.

D. No need to classify any account as NPA as the security is sufficient

E. Account with us to be treated as NPA if borrower’s Net worth is not

adequate

Ans B

22. An account which remains overdue in between 90 days to 12 months

and where there is no Realizable Value of Security [RVS]. The account

should be treated as:

A. Sub-standard asset

B. Doubtful asset

C. Loss asset

D. Restructured

E. Irregular

Ans C

23. In an O/D Account, in between 1st October to 31st December 2014,

outstanding is less than drawing power / sanction limit, the interest

debited during the period is not recovered or credit entries / credit

turnover is not sufficient to cover the interest debited. The A/C could

be classified as on 31.03.2015 as.

A. Standard

B. Sub Standard

C. Doubtful

D. None of these

E. Loss

Ans B

24. A credit / investment facility backed by state government guarantee

where instalment / principle amount is over due to the bank for period

exceeding 90 days will be treated as;

A. Performing [Standard] Asset

B. Exempted Asset

C. 180 days norms for NPA

D. NPA

E. Irregular25. In a Cash Credit (Hypothecation of stock) account, if stock statements

are not received continuously for a specified period, the a/c will be

classified as NPA, even though the account is otherwise in order. This

specified period is

A. Three months

B. Six months

C. 90 days

D. 180 days

E. 30 days

Ans. C

26. On standard assets in respect of Agriculture & SME, general provision

of

A. 0.50% is made

B. 0.25% is made

C. 0.40% is made

D. 2.00% is made

E. 2.50% is made

Ans. B

27. On Substandard (secured) NPA Assets, provision to be made is

A. 15% of the outstanding balance

B. 100% of the shortfall in security + 50% of Realisable value of

security

C. 100% of the shortfall in security + 60% of Realisable value of

security

D. 25% of the outstanding balance

E. 20% of the outstanding balance

Ans. A

28. NPAs in India Card attracts provision of

A. 25% of the outstanding balance for overdue less than a year

B. 100% of the outstanding balance irrespective of the age of overdue

C. 60% of the outstanding balance for overdue less than 2 years

D. 50% of the outstanding balance for overdue less than 3 years

E. No provision is required

Ans. B

29. In case of Earmarked limits, provision at the branch where limit is

earmarked is decided by the

A. Branch where earmarked account of the borrower is maintained

B. Zonal Office

C. Head Office

D. Parent Branch where main account of the borrower is maintained

E. Both the branches with regard to respective balance outstanding

with them

Ans. D

30. Any NPA Account can be upgraded upon

A. Receipt of partial overdue amount

B. Once NPA, always NPA

C. On receipt of Court order in that regard

D. Receipt of entire overdue amount

E. Borrower submitting definite plan of repayment

Ans. D

31. Loss asset is one where realisable value of security is

A. 50% of the outstandingB. 60% of the outstanding

C. Less than 10% of the outstanding

D. Nil

E. Nominal

Ans. C

32. Which of the following are called as ‘Soft NPA’s’

A. Loss Assets

B. Doubtful under Asset Code 31

C. Doubtful under Asset Code 33

D. Substandard Assets

E. Doubtful under Asset Code 32

Ans. D

33. SMA stands for

A. Substandard Marked Account

B. System Maintained Account

C. Special Mention Account

D. Secured by Margin Account

E. Specially Marked Account

Ans. C

34. SMA – 1 stands for Account where Principal or Interest is overdue for

A. Up to 30 days

B. Between 61 to 90 days

C. Between 91 to 180 days

D. Between 31 to 60 days

E. Between 60 to 90 days

Ans. D

35. Which of the following is ineligible for Restructuring/Re-Schedulement

A. Loss Asset

B. Substandard Asset

C. Standard Asset

D. Doubtful Asset

E. Irregular Account

Ans. A

36. Provision for Doubtful Asset (32) will be

A. 15% of the Outstanding Balance

B. 100% of the Outstanding Balance

C. 100% of the shortfall in security + 40% of Realisable Value of

Security (RVS)

D. 100% of the shortfall in security + 50% of Realisable Value of

Security (RVS)

E. 25% of the Outstanding Balance

Ans. C

37. Outstanding in a Cash Credit account is within drawing limit. However,

the credits in the account are inadequate to cover the interest charged

to the account for a period of 90 days. The account to be treated as

A. Standard Account

B. Standard but irregular

C. Bad & Doubtful

D. NPA

E. Loss Asset

Ans. D

38. Account is treated as NPA if not reviewed for more thanA. 30 days from due date for review

B. 60 days from due date for review

C. 180 days from due date for review

D. 90 days from due date for review

E. 1 year from due date for review

Ans. C

39. For Loan against Gold ornaments

A. NPA criterion as applicable to Agriculture is applicable

B. Exempt from NPA norms

C. Normal 90 days criterion meant for normal Term loan is applicable

D. NPA norms are applicable only in cases where value of gold is less

than outstanding

E. Borrower need not repay loan in instalments

Ans. C

40. NPA provision for debit balance in charge account for India Card is

A. 15 %

B. 25 %

C. 50 %

D. 100 %

E. No provision is required

Ans. D

41. Debt Recovery Tribunals are meant for Accounts

A. With suit amount of over Rs.50 lakh

B. With suit amount of Rs.10 lakh & above

C. With suit amount of over Rs.10 lakh

D. With suit amount of over Rs.100 lakh

E. Any amount

Ans. B

42. To be eligible under SARFAESI Act, minimum recoverable dues should

be

A. Rs. 1.00 lac

B. Exceeding Rs.1.00 lac

C. Rs.10.00 lac

D. Rs.100 lac

E. Any amount

Ans. B

43. Which is exempt under SARFAESI Act

A. Agricultural Land

B. Residential Property

C. Commercial Property

D. Any Landed Property

E. Leasehold Property

Ans. A

44. Notice period under SARFAESI Act is of

A. 30 days

B. 60 days

C. 90 days

D. 15 days

E. 45 days

Ans. B

45. Notices under SARFAESI Act are to be signed by

A. Authorised officer not less than General Manager

B. Authorised officer not less than Zonal Manager

C. Authorised officer not less than Senior Manager

D. Authorised officer not less than Chief Manager

E. Authorised officer not less than Branch Manager

Ans. D

46. Abbreviation ‘ARC’ under NPA Recovery methods stands for

A. Asset Recovery Company

B. Asset Reconstruction Company

C. Asset Restructuring Company

D. Asset Recovery Corporation

E. Advance Recovery Company

Ans. B

47. Decree of Lok Adalat has force of

A. Decree of High Court

B. Decree of Criminal Court

C. Decree of Special CBI Court

D. Decree of Civil Court

E. Decree of Supreme Court

Ans. D

48. Bank’s dues under Revenue Recovery Act (RRC) are recoverable as

A. Dues of Bank concerned

B. Arrears of Land Revenue

C. Dues of State Govt.

D. Dues of Central Govt.

E. Dues of Local Govt.

Ans. B

49. Registration Of Equitable Mortgage charge is mandatory with CERSAI

under SARFAESI act

A. Within reasonable time from date of creation of charge

B. Within 30 days from sanction of advance

C. Within 30 days from date of disbursement of advance

D. Within 30 days from date of creation of charge

E. Within 30 days from the post-sanction inspection

Ans. D

50. The SARFAESI Act empowers the bank to

A. Recover, by following the procedure prescribed under the act, those

of its overdue and NPA loans, which are backed by security of

mortgage of property/assets

B. Straightaway obtain possession of the mortgaged property to

realize its overdue loans

C. Side-track the usual legal process for expeditiously realizing its

dues but with a compulsion to forego the right to resort to legal

process

D. Appoint a recovery agent to take and complete the action

prescribed under the act, but prohibits the bank from taking the

action itself

E. Arrest the customer and put the borrower/s in Civil Prison



1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

B B A A C E B A D B B B A B C

16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

B B A D D B C B D C B A B D D

31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

C D C D A C D C C D B B A B D

46 47 48 49 50

B D B D A