Friday, April 25, 2014

MODEL QUESTIONS LEGAL ASPECTS OF BANKING

01.         A Blue Chip means
a)            Excellent Management Professional
b)           Shares of good Companies
c)            Reinforced Concrete
d)            Blue Coloured Precious Stones

02.         A Bridge finance is extended for overcoming
a)            Delay in getting of the public issue
b)           Delay in disbursement of term loan
c)            Delay in disbursement of working capital for completing the documentation
d)            For A & B
e)            A, B & C

03.         As per SEBI guidelines , any entity /person engaged in the marketing and selling of mutual funds  products is required to pass a certification test and obtain a registration number from case of
a)            SEBI  (Securities and Exchange Board of India)
b)           AMFI  (Association of Mutual Funds in India )
c)            NSE    (National Stock Exchange)
d)            A, B & C

04.         Interest charged in advance accounts as per RBI directive can not be subject to scrutiny by court.  This is provided in
a)            Section 35A of BR Act
b)           Section 21(A) of BR Act
c)            Of BR Act
d)            Section 26 of RBI Act


05.         A floating charge means
a)            Charge at the time or before the company is floated
b)           Charge on all floating assets of the company
c)            An equitable charge on all assets of the company
d)            Any of the above.

06.         The charge by way of lien over goods belonging to a company must be registered with Registrar of Companies within a period of
a)            30 days of creation of law
b)           This charge need not be registered as this is not hypothecation, mortgage etc
c)            30 days of default in repayment
d)            A or C whichever is earlier


07.         Hypothecation is defined in
a)            Hypothecation Act
b)           Indian Contract Act
c)            Transfer of Property Act
d)            SARFAESI Act

08.         The State Govt. wants to seize the goods pledged to bank as the borrower has defaulted in payment of tax.  In this case,
a)            Govt dues enjoys priority over bank dues
b)           Bank dues enjoys priority over Government dues
c)            Both enjoys equal priority
d)            The Government cannot seize the goods.

09.         The auctionable claim is assigned in favour of more than one assignee  at different points of time.  The priority of charge is determined with reference to date of

a)            Execution of notice of assignment
b)           Execution of the written instrument for assignment
c)            Receipt of notice of assignment
d)            NoA

10.         A Mortgage cannot be enforced in the absence of

a)            Delivery of the title deeds
b)           Legal Opinion
c)            Narration in Title deeds register
d)            Pecuniary obligation.

11.         A simple mortgage need be registered when
a)            The Loan amount exceed Rs.100/-
b)           Value of mortgaged property exceeds Rs.100/-
c)            A or B whichever exceeds Rs.100/-
d)            Both A & B


12.         A Mortgage of the mortgaged property is called
a)            Sub-mortgage
b)           Second Mortgage
c)            Re-mortgage
d)            Fraudulent Mortgage

13.         For determining the advance amount the shares will be valued on the basis of
a)            Current market price
b)           Average market price for the last 12 months
c)            Face Value
d)            A or B whichever is lower.

14.         Assignment of LIC policy is done as per section…… of ……. Act.
a)            132 of Transfer of Property Act
b)           38, Indian Insurance Act 1938
c)            138 of Contract Act
d)            NOA

15.         Government Promissory notes should be sent to public debt office to confirm genuiness of
a)            The Promissory note
b)           Endorsement
c)            Alternations, if any
d)            All the above.

16.         Gold Loans are given only to properly introduced persons because of
a)            RBI’s directives
b)           Bank will lose the right to sell the gold if the pledgee’s title is defective
c)            Sec.131 of Negotiable Instrument Act
d)            All the above.

17.         Reserve created out of profit from business operation is known as
a)            Capital Reserve          b)       Profit Reserve
c)         Revenue Reserve           d)       Free Reserve

18.         The following is a Term Liability
a)            Debentures payable within a year from the date of Balance Sheet
b)           Preference Shares payable within a period of one year from the date of Balance Sheet
c)            Term Loan instalments payable in a year
d)            Deposit from public payable in 2 years time.

19.        Investment in Shares of other companies can be classified as Current Asset only when the  
             shares are
a)            Quoted
b)           Relate to trade investment
c)            A &B
d)            Shares cannot be classified as Current Assets

20.      The following is not usually classified as Other Non Current Assets
a)            Advance given to Directors
b)           Tender Deposit
c)            Receivable outstanding beyond 12 months
d)            Preliminary and Pre operative expenses

21.       A unit is showing a net profit of Rs.46,000/-.  Dividend received Rs.8000/-.  Operating        
            expenses is Rs.96000/-.  Find the gross profit
a)       134000          b) 150000               c) 142000

22.      A firm paid Rs.16 lacs for purchase of a business with machinery worth Rs.10 lacs and     
           other assets worth Rs.4 lacs.  In this case the difference of Rs.2 lacs is treated as
a)            P&L Loss on purchase of asset
b)           Goodwill Intangible Asset
c)            Fixed Asset by inflating the value of fixed asset
d)            Current Asset by inflating the value of current asset

23.      If a sum of Rs10,000/accumulates to Rs16,000/after 3 years at simple Interest , what is the rate of Interest.
a)            16%
b)           25%
c)            23%
d)            20%

24.       The Net Working Capital refers to
a)            Liquid surplus
b)           Borrowers Contributions from long term source to short term use
c)            Excess Current Asset over Current Liability
d)            All the above.


25.         The duration of an operating cycle in 30 days.  The operating cycle in this case repeats……. times a year
a)            30 times
b)           12 times
c)            10 times
d)            52 times

26.         The following is not a chargeable current assets
a)            Book debt
b)           Spares
c)            Work in process
d)            Construction work in progress

27.         As per RBI guidelines, a bank is required to assess the working capital on the basis of the following method
a)            Turnover Method
b)           Cash Budget Method
c)            MPBF of Tandon Method
d)            Any Method as decided by the individual banks

28.         As per the Second method of lending the borrowers contribution from long term source
a)            is minimum 25% of total current assets
b)           is restricted to 25% of working capital gap
c)            is 25% of other current liabilities
d)            any amount which the unit can bring

29.         Total Current Asset of a unit is Rs.300 lacs.  Other Current Liabilities is Rs.200 lacs.  The MPBF as per Ist Method & 2nd method can be
a)            75 and 25 lacs
b)           25 lacs and 75 lacs
c)            Rs.100 lacs & Rs.150 lacs
d)            Rs.20 lacs & Rs.80 lacs

30.         A borrower need not bring any matching contribution from long term sources in respect of
a)            Export Receivables
b)           Finished goods produced for a specific export order
c)            Adhoc limits
d)            A & B

31          A Company makes a single product with a sales price of Rs.10/- and a marginal cost of      
            Rs.6/-. Fixed Cost are Rs.60000/- p.a.  In this case,
          Number of units at break even     
a)    15000
b)   10000
c)    6000
d)    none of the above.

32.     In the above problem,  Profit Volume Ratio                           
a)    30%
b)   40%
c)    50%
d)    60%



33.   The long term use is 120% of long term source.  This indicates the unit has
a)            CR 1.2
b)           Negative TNW
c)            Low Capital
d)            Negative NWC

34.  Tangible Networth is computed by
a)            Total Tangible Asset less outside liabilities
b)           Capital, free reserves & surplus less Intangible Asset
c)            Networth less Intangible Asset
d)            All the above.

35.  A company has a networth of Rs.5 lacs.  Term liability Rs.10 lacs, Fixed Asset of Rs.16 lacs and Current Asset Rs.25 lacs.  There is no intangible asset or ONCA.  It's net working capital is
a)    Rs. 10 lakhs
b)   Rs.  1 lakh
c)    Rs.  9 lakh
d)    Rs.  (-) 1 lakh

36.      Financial leverage means
a)            use leveraged lease to plan tax liability
b)           High degree of solvency
c)            Law bank finance
d)            Use of more debt capital to increase profit.

37.      Diversion means
a)            Diversifying to activities not related to main business
b)           Retrenching employees
c)            Use of Current Assets for payment of Term Liability
d)            Use of Current Liabilities for long term use

Examine the following balance sheet to answer the question thereafter:

Liability                                                         Asset

Equity Capital                                              200                 Gross Block              1000
                                                                   Less: Dep                 200
                                                                                                -------         
Preference Share Capital                100              Net Block                                  800
Term loan                                  600              Inventory                                 300
Bank Overdraft                            400              Investment in Govt. security          50
Sundry Creditors                          100              Preliminary expenses                    100
                                               -------             Receivables                                150                                                                                                                        -------
                                              1400                                                            1400


38.     Capital Gearing Ratio                   
a)    0.78             
b)   1.20
c)    0.67
d)    0.87
39.     Debt Equity Ratio is
a)    2:1
b)   3:1
c)    4:1
d)    1:1

40.     Total Outside Liability/TNW          
a)    3.67:1
b)   5.50:1
c)    12 : 1
d)    6 : 1

41.     Net working capital            
a)    100
b)   NIL
c)    200
d)    Cannot be calculated

42.     Quick Ratio                                
a)    0.4:1
b)   2.1:1
c)    1.5:1
d)       1:1

43.     Total Tangible Asset                    
a)    1400
b)   1300
c)    1500
d)    1600

44.         Opening stock of raw material is Rs.30 lacs, closing stock is Rs.50 lacs.  Annual purchase is Rs.500 lacs.  What is the average period of holding of Raw Materials?
a)            2 M
b)           1.5 M
c)            1 M
d)            NOA

45.         Holding period of Receivables is calculated with reference to
a)            Cost of Sales
b)           Cost of Production
c)            Gross Sales
d)            NOA.

46.         Creditors Velocity expresses the
a)            Maximum period for which credit is given
b)           Average period of credit enjoyed
c)            Minimum period of credit given
d)            Minimum period for which credit enjoyed.

47.         The following is a “Means of Finance” for the cost of project
a)            Leasing
b)           Subsidy
c)            Deferred Credit from Suppliers
d)            All the above.

48.         For a large and medium units DSCR should be
a)       Maximum 2:1           (b)     Maximum 1.5:1
c)       Minimum 2:1            (d)      Minimum 1.5:1

49.      Variable Cost and Sale Price remaining the same, a rise in fixed cost result in
a)            High BEP ( High Break even point)
b)           Low BEP
c)            High Margin of Safety
d)            B&C

50.     What is the formula for charging compound interest with Annual Compounding.
a)            I = Pnr
b)           P+I
c)            A = P( 1+r)n
d)            Any of the 3

51.    What is the minimum period to be allowed to drawee to decide on acceptance / rejections of
        a usance bill
a)            2 Days
b)           48 Hours
c)            48 Hrs including public holidays
d)            48 hrs excluding public holidays

52.    Ramesh deposited Rs 10,000/ for 3 years . The Interest is compounded annually at 10% . What will be the amount receivable by Ramesh at the end of 3 year period.
a)            13,310
b)           13,000
c)            12,000
d)            13,300

53.    While calculating the value of  (1+.10)3 (to the power of 3) the same can be calculated   
a)            manually
b)           using calculator
c)            using MS Excel
d)            all the above

54.     Annuities are
a)            The annual interest payable or receivable in a debt or an investment.
b)           Lumpsum payment made any time during the course of a fixed period of time.
c)            The total amount payable annually  in respect of a debt  or investment
d)            Series of payments  (many number of cash flows) made at a specified frequency  over the course of a fixed period of time
55.    An Annuity is an ordinary Annuity  if,
      
a)            Payments  are required to be made at the beginning of each period.
b)           Payments are required to be made at the middle of each period
c)            Payments are required to be made at ordinary installments
d)            Payments are required to be made at the end of each period.

56.    The Marine Insurance Policy should be expressed in
a)            Rupees
b)           US Dollars
c)            Same Currency in which the LC is drawn
d)            Any foreign currency.
57.    The discount rate which equals the present value  of promised flow to the current  market
   price /purchase price. This is known as 
a)            Yield to maturity 
b)           NPV
c)            IRR
d)            Treasury bills

58.   The value which the bond holder gets on maturity is called 
a)            Maturity value
b)           NAV
c)            the redemption value
d)            IRR

59.     This is the amount by which an asset is expected to lose its value. What is this
a)            Market value
b)           Wear and tear
c)            Depreciation
d)            NAP

60.         EEFC can be opened in
a)            Rupees
b)           Any one of the four designated currencies
c)            One of the permitted currencies
d)            AMUS

61.         A method of calculating depreciation of an asset , which assumes that the asset will lose an equal amount of value each year  is known as 
a)            Salvage value
b)           Depreciation
c)            Straight line Method of calculation
d)            Accumulated Depreciation

62.      A credit facility will be classified as NPA if……… remains past due for one quarter
a)            Interest
b)           Instalment
c)            A or B
d)            A & B

63.    As per Prudential Accounting Norms prescribed by RBI, assets are classified into …… type
a)            3
b)           8
c)            4
d)            5

64.     The home currency price  of one unit  of a foreign currency is quoted eg USD 1 = Rs43.20 
a)            Indirect quotation
b)           Exchange rate
c)            Rate of USD
d)            Direct quotation



65.      If the rate of a currency A is known in terms of currency B and rate of Currency B in terms of Currency C , we can derive the rate of currency  A interms of Currency C  using the technique of cross currency.
a)            Exchange rate
b)           Cross rate
c)            Forward rate
d)            None of the above

66.      As per NABARD guidelines the minimum Internal Rate of Return for Agricultural Project is
a)            15%
b)           25%
c)            30%
d)            18%

67.      In case of Direct quotation  if the forward rate is more than spot rate the base currency is called as being at -----
a)            Discount
b)           Forward rate
c)            Spot rate
d)            Premium

68.     An operation by which one can make risk free profits making use of the interest differentials between two places is called. 
       
a)            Open market operation
b)           Profitability
c)            Free market
d)            Arbitrage

69.         If the forward rate is less than the spot rate the base currency is said to be at
a)            Discount
b)           Premium
c)            At par
d)            None of the above.

70.         The amount which  the owner of the business has invested in the firm and can claim from the firm is known as ------
a)            Capital
b)           Loan
c)            Term Loan
d)            Fixed Asset.

71.         The amount which the firm owe to outsiders
a)            Assets
b)           Capital
c)            Liabilities
d)            Intangible assets

72.         A  person who owes money to a firm , mostly on account of credit sales of goods is called.
a)    Creditor
b)   Debtor
c)    Borrower
d)    lender

73.         The balance sheet represents an expansion of the equation as Assets = Liabilities +Capital This statement is
a)            Cannot be relied
b)           false
c)            Not acceptable
d)            True

74.         Assets minus  original capital = Liability
a)            True                                  b)       False
c)       can be accepted       d)       None of the above.


75.     If a firm borrows money its capital  would be reduced
a)            This statement is false
b)           This statement is true
c)            The same is acceptable
d)            None of the above

76.     ---------- is the value of an established business over and above the value represented by it’s tangible assets .
a)            Assets
b)           Liabilities
c)            Goodwill
d)            None of the above.

77.     If the partnership does not mention any method of maintaining  capital account  then -------  method of capital has to be used. 
a)            Fluctuating capital account
b)           Partners Current account
c)            Capital account
d)            Fixed capital account

78.     The joining of a new person into the existing partnership as a partner is called
a)       Retirement of a partner                
b)       Resolution of a partnership
c)       Good will                                   
d)       Admission of a partner

79.     Under the -------- capital method two accounts are maintained for each partner viz current account and capital account.
a)            Fixed Capital Method
b)           Fluctuating capital method
c)            Equity capital Method
d)            Preference share capital

80.      As per new guidelines both SLR and non SLR securities are to be classified into 
a)            Held to maturity.
b)           Available for sale
c)            Held for trading
d)            All the above .





81.     Amount of Investment under Securities held to maturity should not exceed --------- of Bank’s  total investment
a)             Twenty  percentage of the Bank’s total investment   (20% of total investment)
b)            Twenty five percentage of the Bank’s total investment   (25% of total investment)
c)             forty nine  percentage of the Bank’s total investment   (49% of total investment)
d)             forty percentage of the Bank’s total investment   (40 % of total investment)

82.     The form of Balance sheet and Profit and loss account of a Banking Company is prescribed in forms A and B of --------------  schedule of the Banking Regulation Act 1949. 
a)            Second
b)           Third
c)            First
d)            Fourth

83.      The Companies Act prohibits issue of any preference share that is -----------
a)            cumulative
b)           redeemable
c)            both a and b
d)            Irredeemable
84.     The capital which is stated in the Memorandum of Association is known as
a)            Memorandum Capital
b)           Paid up capital
c)            Authorised capital
d)            Issued capital

85.      Authorised capital is also known as
a)            Nominal or Registered Capital
b)           Equity capital
c)            Preference share capital
d)            All the above

86.     When shares are issued at higher than the face value of the shares they are said to be issued at a
a)       Discount -               b)       Par-              c)       Premium
e)            None of the above

87.      Issue of shares at a discount should be authorized by the members by passing a resolution
           in the general meeting and resolution of members should specify the rate of discount
           which should not exceed 10% of the face value of the shares Further this is subject to
a)            Obtention of sanction from Company Law Board
b)           These shares must be issued with in 2 months
c)            Both (a) and (b)
d)            None of the above

88.      According to section 79A inserted by Companies Amendment Act 1999 --------- shares 
      means equity shares issued by the company to employees or directors at a discount or
      for consideration other than cash for providing know how or making available right in the
      intellectual property rights or value addition, by whatever name called.
a)            Employees stock option
b)           Equity  shares
c)            Sweat equity
d)            None of the above.

89.      A scheme under which the company grants option (A right but not an obligation ) to an
     employee to apply for shares of the company at a pre determined price is known as
a)            Employees Stock Option Scheme  (ESOS)
b)           Equity shares
c)            Sweat Equity
d)            None of the above.

90.     The formation of a company is governed by the rules and regulations as contained in 
a)            Indian Companies Act
b)           RBI act
c)            BR Act
d)            None of the above.

91.      Profit and Loss Account is one of the Final Accounts prepared by a Company. What is the
     other one.
a)            Schedules to P&L accounts
b)           Balance sheet
c)            Trading Account
d)            None of the above.

92.     Liabilities that will arise on the happening of certain event
a)            Current liabilities
b)           Term Liabilities
c)            Contingent Liabilities
d)            None of the above


93.     Schedule VI of the Companies Act prescribes the form of
a)            Balance sheet
b)           Trading Account
c)            Balance sheet
d)            None of the above.

94.     A computer Accounting system runs based on a set of instructions called the software
    programmes developed by a person who is a computer software professional and he is
    called -------
a)            Programmer
b)           Software Engineer
c)            IT man
d)            None of the above.

95.      Accounting software may be written  in any one of the computer languages such as 
a)            Windows,  UNIX etc
b)           JAVA C+ etc
c)            COBOL,  Foxpro etc
d)            None of the above.


96.     Computers are basically classified into
a)            Analogue Computers and Digital computers
b)           Hardware and software
c)            Wipro and Infosysis
d)            All the above

97.      A Customer Service Meet should be organized at every Branch
a)    Once in a Fortnight
b)   Once in a Quarter
c)    Once in a Month
d)    Once in a Half-Year

98.      Who cannot file a complaint under Consumer Protection Act?
a)    Banks
b)   State Government
c)    Public Interest Litigation Group
d)    Persons receiving services free of charge

99.       Banking Ombudsman is appointed by
a)    Central Government / Ministry of Finance
b)   State Government
c)    IDBI
d)    RBI

100.        DRT has jurisdiction relating to cases pertaining to Banks, Financial Institutions with debt
            amount of
a)    Rs. 1 lakh and above
b)   Rs. 5 lakh and above
c)    Rs. 10 lakh and above
d)    Rs. 20 lakh and above

ANSWERS

1) b             2) d             3) b               4) b             5) c           6) b

7) d             8) b             9) b             10) d          11) a          12) a

13) d          14) b          15) d          16) b          17) c           18) d

19) c           20) d          21) a          22) b          23) d          24) d

25) b          26) d          27) d          28) a          29) a          30) a

31) a          32) b          33) d          34) d          35) d          36) d

37) d          38) a          39) b          40) b          41) b          42) a

43) b          44) c           45) c           46) b          47) d          48) c

49) a          50) c           51) d          52) a          53) b          54) d

55) d          56) c           57) a          58) c           59) c           60) c

61) c           62) c           63) c           64) d          65) b          66) a         

67) d          68) d          69) a          70) a          71) c           72) b         

73) d          74) b          75) a          76) c           77) d          78) d         

79) a          80) d          81) b          82) b          83) d          84) c

85) a          86) c           87) c           88) c           89) a          90) a

91) b          92) c           93) a          94) a          95) c           96) a         

97) d          98) d          99) d          100) c