Jaiib legal aspectsofbankingmodab

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    by Prof. NS Toor http://www.wiziq.com/course/11944-jaiib-banking-exam-mock-tests-cd-s-by-prof-n-s-toor
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Jaiib legal aspectsofbankingmodab

  1. 1. LEGAL ASPECTS OF BANKING OPERATIONS INDIAN INSTITUTE OF BANKING & FINANCE MODULE A & B 10.10.07
  2. 2. <ul><li>**.. Banking is defined in the Banking Regulation Act. </li></ul><ul><li>Primary function to accept deposit, lend and invest. </li></ul><ul><li>Secondary functions include opening of Letters of credit , Issuing Bank guarantees, Demand Drafts </li></ul><ul><li>Mail Transfers, Telegraphic Transfers, Collection of instruments </li></ul><ul><li>Executor Trustee services, Dealing in Forex related transactions </li></ul>
  3. 3. <ul><li>Offering Safe Deposit Locker facilities, accepting Safe custody articles and so on </li></ul><ul><li>Oflate bankers offer other services like </li></ul><ul><li>ATM, Debit, Credit and other plastic cards </li></ul><ul><li>Accepting Electricity, Telephone bills , and extending services on behalf of the Service providers </li></ul>
  4. 4. <ul><li>Bancassurance, cross selling of various financial products and so on </li></ul><ul><li>While the bank is making a person as their customer due care has to be shown taking into consideration the latest provisions of KYC norms </li></ul><ul><li>A banker should be able to justify beyond doubt that his customer has become his customer after following all the procedures, norms and he has acted as a prudent banker. </li></ul>
  5. 5. <ul><li>01.Bank license is issued by Reserve Bank of India based on the provisions of </li></ul><ul><li>A.. Banking Regulation Act </li></ul><ul><li>B.. Reserve Bank of India Act </li></ul><ul><li>C.. Both a & b </li></ul><ul><li>D.. Neither Banking Regulation Act nor Reserve Bank of India Act </li></ul>
  6. 6. <ul><li>02.. Reserve Bank of India Act,1934 was enacted to constitute the Reserve Bank of India </li></ul><ul><li>a.. To regularize issue of Bank notes </li></ul><ul><li>b.. To Regulate the issue of Bank notes </li></ul><ul><li>c.. For directing the banks when they err </li></ul><ul><li>d.. To consolidate and amend the law relating to banking </li></ul>
  7. 7. <ul><li>**. Reserve Bank of India act was introduced in 1934 and since then amended from time to time to include the latest requirements. </li></ul><ul><li>A provision was inserted by the Information Technology Act,2000 to enable RBI to make regulations for regulating payment systems of banks and financial institutions </li></ul>
  8. 8. <ul><li>03..Identify the Act which puts restrictions on the shareholding, directorship, voting rights and other aspects of banking companies. </li></ul><ul><li>a.. Companies Act </li></ul><ul><li>b.. Banking Regulation Act </li></ul><ul><li>C.. Reserve Bank of India Act </li></ul><ul><li>D.. All the above mentioned Acts </li></ul>
  9. 9. <ul><li>04..Identify which one is not part of the Banking Regulation act </li></ul><ul><li>a. To regulate business of banking companies </li></ul><ul><li>b. To control over the management of banking business </li></ul><ul><li>c. To wind up a banking business </li></ul><ul><li>d. To keep reserves for securing monetary stability in India </li></ul>
  10. 10. <ul><li>05..Private banks are governed by the Companies Act. In respect of their business of banking and by the RBI Act for their constitution. </li></ul><ul><li>a. The above is not incorrect </li></ul><ul><li>b. The above is incorrect </li></ul><ul><li>c. For Constitution, Companies Act and banking business provisions of both Banking Regulation Act and Reserve Bank of India Act </li></ul><ul><li>d. There is no role for Companies Act </li></ul>
  11. 11. <ul><li>**. RBI’s whole capital is held by the Central Government. </li></ul><ul><li>.. The board has one Governor and not more than 4 Deputy Governors appointed by the Central Govt </li></ul><ul><li>.. RBI alone can issue and mange currency in India as per the provisions of RBI act. </li></ul>
  12. 12. <ul><li>RBI as regulator of banking sector is mainly by virtue of the provisions of the Banking Regulation Act </li></ul><ul><li>RBI inspects banks and exercise supervisory powers and may issue directions in public interest </li></ul><ul><li>RBI also collects credit information and make available the same </li></ul><ul><li>RBI also imposes penalties wherever applicable </li></ul>
  13. 13. <ul><li>06..Other than the Governor, Deputy Governors of RBI, the other directors are </li></ul><ul><li>a.. Appointed </li></ul><ul><li>b.. Nominated </li></ul><ul><li>c.. Selected </li></ul><ul><li>d.. Elected </li></ul>
  14. 14. <ul><li>07..Reserve Bank of India has the powers to issue currency notes in denominations of </li></ul><ul><li>a.. Rs.2/- </li></ul><ul><li>b.. Rs.50/- </li></ul><ul><li>c.. Rs.10,000/- </li></ul><ul><li>d.. All the above </li></ul>
  15. 15. <ul><li>08..The co-operative banks are under the regulatory purview of the Reserve Bank of India. This is due to the amendment to </li></ul><ul><li>a . Reserve Bank of India Act </li></ul><ul><li>b . Cooperative Act </li></ul><ul><li>C . Banking Regulation Act </li></ul><ul><li>d . Both a & b </li></ul>
  16. 16. <ul><li>**The refusal of licence to a company would make it ineligible to undertake banking business, but still the company can carry on other business like money lending </li></ul><ul><li>. . RBI can stipulate a higher requirements of capital for the purpose of licensing a banking company, the RBI has to be satisfied that the company has adequate capital structure and earning prospects </li></ul>
  17. 17. <ul><li>In addition to the conditions applicable to domestic banks, for foreign banks RBI will look into </li></ul><ul><li>a. Whether the carrying on of banking business by the company in India will be in public interest. </li></ul><ul><li>b. Whether the government of the law of the country in which the company is incorporated discriminates in any way against banking companies </li></ul><ul><li>C.. Whether the company complies with the provisions of the BR Act as applicable to foreign companies </li></ul>
  18. 18. <ul><li>** The Banking Regulation Act authorizes the RBI to cancel the license granted to any banking company. The cancellation may be </li></ul><ul><li>on account of </li></ul><ul><li>a.. The company ceases to carry on banking business in India </li></ul><ul><li>b.. The company at any time fails to comply with any of the conditions imposed or the company does not fulfill at anytime any of the conditions referred in the act. </li></ul>
  19. 19. <ul><li>**As per the BR act, a foreign bank (banking company incorporated outside India) operating in India has to deposit and keep deposited with RBI an amount of Rs.15 lacs (for such banks having places of business in Mumbai or Kolkata or both Rs.20 lacs) </li></ul><ul><li>.. In addition to above, 20% of profit to be remitted with RBI </li></ul>
  20. 20. <ul><li>09..The amount of deposit with RBI by foreign banks to be kept in </li></ul><ul><li>a.. Cash </li></ul><ul><li>b.. Unencumbered approved securities </li></ul><ul><li>c.. Partly in both </li></ul><ul><li>d.. None of the above </li></ul>
  21. 21. <ul><li>**As per the provisions of the BR act, the subscribed capital of a banking company shall not be less than half of its authorised capital and the paid up capital shall not be less than half of its subscribed capital. </li></ul><ul><li>.. No shareholder can exercise voting rights in respect of the shares held by him in excess of 10% of the total voting rights of all the shareholders of the banking company. </li></ul>
  22. 22. <ul><li>10..Which one is in correct </li></ul><ul><li>a.. Banking companies are permitted to have only ordinary shares </li></ul><ul><li>Preference shares issued before 01.07.1944 can be allowed to continue </li></ul><ul><li>Banking companies are not permitted to have equity shares </li></ul><ul><li>Banking companies are not permitted to have special preference shares </li></ul>
  23. 23. <ul><li>11..As per the provisions of the BR act, </li></ul><ul><li>a.. No dividend is payable until all capitalized expenses are completely written off. </li></ul><ul><li>b.. This also includes preliminary expenses and share selling commission </li></ul><ul><li>c.. Both a & b are correct </li></ul><ul><li>d.. Both a & b are incorrect </li></ul>
  24. 24. <ul><li>**At least 51% of the total number of directors shall be persons who have special knowledge or practical experience in respect of accountancy, agriculture and rural economy, banking, co-operation and so on </li></ul><ul><li>..The directors of a banking company not to hold office for more than 8 years continuously </li></ul><ul><li>..The whole –time Chairman and a Managing Director shall hold office for a period not exceeding 5 years </li></ul>
  25. 25. <ul><li>..The Whole-time Chairman or the Managing Director of a banking company should have special knowledge or practical experience of the working of a banking company or State Bank of India or a subsidiary bank or a financial institution or financial, economical or business administration. </li></ul>
  26. 26. <ul><li>12..A banking company can not have this </li></ul><ul><li>person as the head of their institution </li></ul><ul><li>a.. Managing Director </li></ul><ul><li>b.. Chairman </li></ul><ul><li>c.. Managing Agent </li></ul><ul><li>d.. Whole Time Chairman </li></ul>
  27. 27. <ul><li>13..As per the provisions of the Reserve Bank of India Act, the Whole time Chairman or the Managing Director of a banking company to hold qualification shares of minimum 50. </li></ul><ul><li>It is not 50 but 100 </li></ul><ul><li>They need not hold any qualification shares </li></ul><ul><li>They need to have minimum qualification shares of 10 as per the provisions of Banking Regulation act and not RBI act </li></ul><ul><li>None of these </li></ul>
  28. 28. <ul><li>**Banks have to file a return on their unclaimed deposit within 30 days of the end of each calendar year. </li></ul><ul><li>.. All deposits not operated in 10 years </li></ul><ul><li>.. For term deposits, the period of 10 years starts from the expiry of the period of the deposit </li></ul>
  29. 29. <ul><li>14.. Rajkumar has nominated his brother Radhakrishn as the nominee for his Savings Bank account. Nominee will not be entitled to get the money on this account from the bank </li></ul><ul><li>a.. As long as Rajkumar is alive </li></ul><ul><li>b.. If Rajkumar is closing the said account. </li></ul><ul><li>c.. If Rajkumar has changed the nomination in some one’s favour </li></ul><ul><li>d.. In all the above cases </li></ul>
  30. 30. <ul><li>**RBI issues directions from time to time regulating the lending operations of banking companies </li></ul><ul><li>..The tools employed for exercising Selective Credit Control are </li></ul><ul><li>Minimum margins for lending against selected commodities </li></ul><ul><li>ceilings on the levels of credit and </li></ul><ul><li>charging of minimum rate of interest on advances against specified commodities </li></ul>
  31. 31. <ul><li>RBI is authorized to regulate interest rates on loans and advances as well as deposits. </li></ul><ul><li>The Usurious Loans Act. 1918 prohibits lending at exorbitant rates. The law has been made to protect the weaker borrowers from the powerful moneylenders </li></ul><ul><li>..RBI has issued guidelines in respect of internet banking. These cover a.. Technology and Security issues b.. Legal issue and c . Regulatory and supervisory issues </li></ul>
  32. 32. <ul><li>**Banking Ombudsman is an authority established under the Banking Ombudsman Scheme, 1995 by the RBI. The purpose is to resolve and settle the complaints of banking public against the commercial banks and the scheduled primary cooperative banks without resorting to courts. </li></ul>
  33. 33. <ul><li>** Banking Ombudsman scheme applicable to all commercial banks, RRBs and schedules primary co-operative banks. </li></ul><ul><li>.. Disputes between two banks can also be taken up with the Banking Ombudsman </li></ul><ul><li>..A banking ombudsman may act as an arbitrator </li></ul>
  34. 34. <ul><li>15..identify the odd one (Banking ombudsman) </li></ul><ul><li>a.. Observance of Reserve Bank directives on interest rates </li></ul><ul><li>Non-acceptance of application for loans without assigning valid reasons to the applicant </li></ul><ul><li>Non-issuance of Demand Drafts to non-customers </li></ul><ul><li>Non-adherence to prescribed working hours by branches </li></ul>
  35. 35. <ul><li>16..Every year a sum equivalent to not less than 15% of profits to be transferred to the reserve fund by a bank. Such transfer to be made not before any dividend is declared. </li></ul><ul><li>a.. Yes b.. No </li></ul><ul><li>c.. Partly true d.. Fully in correct </li></ul>
  36. 36. <ul><li>**Appropriation of any amount from the reserve fund or the share premium account has to be reported to RBI within 21 days of such appropriation. </li></ul><ul><li>.. Every scheduled bank has to submit a return to RBI showing the demand and time liabilities and borrowings from banks in India </li></ul>
  37. 37. <ul><li>**In the case of banking companies which are not scheduled banks, as per the provisions of BR act, the cash reserve need not be maintained with RBI. It may be with the bank itself, or in a current account with RBI or byway of net balance in current accounts or in one or more of these ways </li></ul>
  38. 38. <ul><li>17..For a non scheduled bank cash reserve balance should not be less than 20% of the demand and time liabilities as on the last Friday of the second preceding fortnight. </li></ul><ul><li>a.. True b.. False </li></ul><ul><li>c.. It is not 20% but 30% </li></ul><ul><li>d.. These banks need not have any cash reserve </li></ul>
  39. 39. <ul><li>18.. A bank has to submit a Friday statement to RBI . The said Friday(18 th of a particular month) has not been declared as holiday under the Negotiable Instruments Act, but the previous working day was declared . Then the statement to be prepared as on </li></ul><ul><li>a.. 16 th of that month b.. 17 th of that month </li></ul><ul><li>c.. 18 th of that month d.. 20 th of that month </li></ul>
  40. 40. <ul><li>**Every banking company has to maintain in India certain amount of assets as per the provisions of BR act. </li></ul><ul><li>.. At the close of business on the last Friday of every quarter, such assets shall not be less than 75% of the demand and time liabilities of the banking company in India. </li></ul>
  41. 41. <ul><li>19..As per the provisions of the BR Act, a return regarding the assets maintained in India to be submitted to RBI, within 14 days from the end of every quarter. </li></ul><ul><li>a.. Not 14 days b.. It is 20 days </li></ul><ul><li>c.. It is 15 days not 20 days </li></ul><ul><li>d.. One month </li></ul>
  42. 42. <ul><li>**Every banking company has to submit 3 copies of its balance sheet and profit and loss account to RBI within 3 months from the end of the period to which it relate. The period may be extended by the RBI by a further period not exceeding 3 months. </li></ul>
  43. 43. <ul><li>20..A banking company need not submit copies of balance sheet and auditor’s report to the Registrar of Companies. </li></ul><ul><li>a. Yes. b. No </li></ul><ul><li>C. The banking company has to submit to Registrar of Companies also </li></ul><ul><li>D.. Since they are submitting to RBI there is no need to submit to Registrar Companies separately </li></ul>
  44. 44. <ul><li>21..Foreign banks (banking companies incorporated outside India) operating in India have to display in a conspicuous place in their principal office a copy of the last audited balance sheet and profit and loss account. This has to be done not later than </li></ul><ul><li>a.. The First of July of the year in which it carries on business </li></ul><ul><li>b.. The First Monday in August </li></ul><ul><li>c.. The First Friday in October </li></ul><ul><li>d.. The Last Friday in November </li></ul>
  45. 45. <ul><li>**RBI is empowered to order special audit of the accounts of any banking company. </li></ul><ul><li>The expenses relating to the special audit to be borne by the concerned banking company. </li></ul><ul><li>.. Every month, a banking company has to submit to the RBI a return showing its assets and liabilities in India as at the close of business on the last Friday of the previous month </li></ul>
  46. 46. <ul><li>..A bank is authorized to return paid instruments to their customers even before the end of the preservation period without any charges. </li></ul><ul><li>.. The inspecting officer is authorized to examine any director or officer of a banking company on oath. </li></ul>
  47. 47. <ul><li>22..It is not mandatory to give a copy of the report to the banking company. </li></ul><ul><li>a.. Inspection report b.. Scrutiny report </li></ul><ul><li>c.. Search report d.. All these reports </li></ul>
  48. 48. <ul><li>23.. To order amalgamation of two banking companies under the provisions of Companies Act rests with </li></ul><ul><li>a.. Central Government </li></ul><ul><li>b.. Reserve Bank of India </li></ul><ul><li>c.. Central Government with the consultation </li></ul><ul><li>of Reserve Bank of India </li></ul><ul><li>d.. Company Law Board </li></ul>
  49. 49. <ul><li>24..Authroisation under the law for a debtor to postpone payment of dues for a specified time </li></ul><ul><li>a.. Holiday period b. Gestation period </li></ul><ul><li>c.. Moratorium d.. None of these </li></ul>
  50. 50. <ul><li>**State Bank of India was established under sec 3 of the State Bank of India Act,1955 to take over the undertaking of the then Imperial Bank and to carry on the business of banking and other business in accordance with that act. </li></ul><ul><li>.. The Central Government can give directions to SBI on matters of policy involving public interest in consultation with the Governor of RBI and the Chairman of the State Bank. </li></ul>
  51. 51. <ul><li>25..State Bank of India Chairman and Managing Director are appointed for a period of 7 years. </li></ul><ul><li>A.. For Chairman it is 7 years, but for MD it is 5 years </li></ul><ul><li>B.. For both it is not to exceed 5 years </li></ul><ul><li>C. For both it is not to exceed 6 years </li></ul><ul><li>D.. For Managing Director it is 7 years but for Chairman it is only 5 years </li></ul>
  52. 52. <ul><li>**The State Bank will act as an agent of RBI at the places where it has a branch and where RBI has no branch. </li></ul><ul><li>.. To handle government and other business as required by RBI. </li></ul><ul><li>.. The terms and conditions shall be as agreed between them. </li></ul>
  53. 53. <ul><li>**The Central Government may after consultation with the SBI and RBI by order in writing authorize a subsidiary bank to undertake other form of business. </li></ul><ul><li>..The State Bank is empowered to inspect the subsidiary banks </li></ul><ul><li>..The auditors are appointed by State Bank of India in consultation with RBI </li></ul>
  54. 54. <ul><li>Regional Rural Banks have the holding pattern such as Central Government 50% , Sponsor Bank 35% and State Government 15% </li></ul><ul><li>Two or more RRBs may be amalgamated by the Central Government by notification in the Official Gazette. </li></ul>
  55. 55. <ul><li>26..Regional Rural Bank cannot </li></ul><ul><li>a.. Open deposit accounts </li></ul><ul><li>b.. Lend to Agriculturalists </li></ul><ul><li>c.. Extend Credit to an Artisan </li></ul><ul><li>d.. None of the above </li></ul>
  56. 56. <ul><li>**In respect of Nationalised Banks, the shares other than those held by the Central Government are freely transferable. No shareholder other than the Central Government can exercise voting rights in excess of 1 % of the total voting rights of all the shareholders. </li></ul>
  57. 57. <ul><li>**The directors of Nationalised banks are nominated by the Central Government or elected from shareholders. </li></ul><ul><li>.. Among others one Chartered Accountant with not less than 15 years of experience nominated in consultation with RBI. </li></ul><ul><li>.. Not more than 6 directors to be nominated by Central Government </li></ul>
  58. 58. <ul><li>State Bank of India act was amended to divide capital into shares of Rs.10 each instead of Rs.100/- </li></ul><ul><li>The Banking Companies (Acquisition and Transfer of Undertakings )Act amended to facilitate public holdings of shares. </li></ul><ul><li>Authorized capital could be up to Rs.1500/- crore divided into shares of Rs.10/-each and also to increase or reduce the authorized capital between Rs.1500 crore and Rs.3000 crore </li></ul>
  59. 59. <ul><li>**The minimum paid up capital and reserves to start banking business by a cooperative bank is not less than Rs.1.00 lac </li></ul><ul><li>.. A co-operative bank not to lend on its own shares/ unsecured loans or advances to its directors/ any company or associates wherein the director has interest </li></ul>
  60. 60. <ul><li>**Restrictions not applicable for unsecured loans/ advances made by a co-operative bank against bills for supplies or services made to government or bills of exchange arising out of bona fide, commercial or trade transactions. </li></ul><ul><li>.. A co-operative bank to get permission of RBI to open a branch in a new place. </li></ul>
  61. 61. <ul><li>27..Three copies of balance sheet and other connected documents along with the auditor’s report to be submitted to Reserve Bank of India by a Co-operative bank within </li></ul><ul><li>a.. 6 weeks b.. 3 months </li></ul><ul><li>c.. 6 months d.. 9 months </li></ul>
  62. 62. <ul><li>**When the customer’s signature on the cheque is forged there is no mandate to the bank to pay. As such a banker is not entitled to debit the customer’s account on such forged cheque. </li></ul><ul><li>.. The drawee of a cheque having sufficient funds of the drawer in his hands properly applicable to the payment of such cheque must pay the cheque when duly required to do so, and, in default of such payment, must compensate the drawer for any loss or damage caused by such default. </li></ul>
  63. 63. <ul><li>** “Payment in due course” means payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances which does not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned. </li></ul>
  64. 64. <ul><li>28..A cheque has been received by the drawee bank in local clearing. At that time the account has clear balance to meet the cheque amount. However, it has been observed that the Words and Figures differ. The cheque contained Rs Twenty two thousand two hundred and twenty two in words but in figures read as Rs.2222/- Bank has to </li></ul><ul><li>a. Make the payment </li></ul><ul><li>b. Return the instrument </li></ul><ul><li>c.. Make payment for only Rs22222/- as per words </li></ul><ul><li>d.. Act as a prudent banker </li></ul>
  65. 65. <ul><li>29.. A cheque has been received in clearing on 29 th of this month bearing the date as 27 th of two months ago. The cheque to be returned on the grounds </li></ul><ul><li>a. Stale Cheque </li></ul><ul><li>b.. Ante Dated Cheque </li></ul><ul><li>c.. Should not be returned </li></ul><ul><li>d.. Post Dated </li></ul>
  66. 66. <ul><li>30.. A cheque has been received for collection. The Collecting banker has given his necessary certificates on the reverse of the cheque, which had more than two endorsements. </li></ul><ul><li>a. It is the responsibility of the collecting banker to verify the regularity of endorsements </li></ul><ul><li>b. It is not the responsibility of the paying bank to verify the regularity of endorsements </li></ul><ul><li>c.. The Collecting bank as well as the paying bank are responsible to verify the regularity of endorsements </li></ul><ul><li>d.. None of the above </li></ul>
  67. 67. <ul><li>31.. A cheque has been received by the drawer’s banker. On scrutiny it has been observed that the word bearer was altered into order again re-altered into bearer. The drawer has signed only the cheque. </li></ul><ul><li>a.. The drawee bank to make payment. </li></ul><ul><li>b.. The paying banker will be in order to return the same </li></ul><ul><li>with a reason Material alteration requires drawer’s </li></ul><ul><li>authentication </li></ul><ul><li>c.. The above is not a material alteration. </li></ul><ul><li>d.. The responsibility lies with the collecting banker and not </li></ul><ul><li>the paying banker. </li></ul>
  68. 68. <ul><li>** A paying banker should not act in a casual manner. To get appropriate protection under the provisions of NI Act,1881, he should act in good faith. He should not have any doubt that the payment is being made to the incorrect person. He should act without negligence. </li></ul>
  69. 69. <ul><li>**A Collecting banker should act in good faith. </li></ul><ul><li>He should collect cheques only for his customer </li></ul><ul><li>Cheques should have been crossed (Generally or specially) </li></ul><ul><li>Without negligence he should act. </li></ul>
  70. 70. <ul><li>**The banker to understand his customer properly and the collecting banker should not act in a haste or in a causal manner. </li></ul><ul><li>The proper identification and opening of account with due care assumes lot of importance. </li></ul><ul><li>A collecting banker cannot avoid his responsibility, even at a later date, when it is proved that the account opened was not properly opened. </li></ul>
  71. 71. <ul><li>** There is no bar as such to collect a third party cheque. However, an account payee crossed cheque, the collecting banker not to collect for a third party. </li></ul><ul><li>He has to make necessary enquiries before any third party cheques are collected on behalf of its customer. </li></ul>
  72. 72. <ul><li>32.. A collecting banker has collected an uncrossed cheque for his customer. However, before collecting he has affixed his bank’s crossing seal (using the rubber stamp) .The banker </li></ul><ul><li>a.. Will get protection </li></ul><ul><li>b.. Will not get protection </li></ul><ul><li>c.. Will get protection since the act allows a special crossing also </li></ul><ul><li>d.. Will not get protection since the original cheque was uncrossed </li></ul>
  73. 73. <ul><li>33..A cheque has been collected by Bank A. But the cheque bore the crossing in favour of Bank B. </li></ul><ul><li>a.. The paying bank can make the payment since it has been collected by a bank. </li></ul><ul><li>b.. The drawee bank not to honour </li></ul><ul><li>c.. The Collecting bank is not in order in collecting such a crossed cheque </li></ul><ul><li>d.. Both b & c </li></ul>
  74. 74. <ul><li>34.. Customer G of a bank has lost the Demand Draft purchased. The bank issued a duplicate draft on G executing an indemnity and completing the other formalities. G is known as </li></ul><ul><li>a.. Surety b.. Guarantor </li></ul><ul><li>c.. Indemnified d.. None of these </li></ul>
  75. 75. <ul><li>** A contract of indemnity has two parties. </li></ul><ul><li>.. The indemnifier has to make good the loss as soon as it occurs. </li></ul><ul><li>.. There are only two parties to a contract of indemnity and hence only one contract. </li></ul><ul><li>.. An indemnity is for the reimbursement of loss </li></ul>
  76. 76. <ul><li>35.. IN an indemnity the risk is subsisting whereas in a guarantee the liability is contingent. </li></ul><ul><li>a.. The above is correct </li></ul><ul><li>b.. The above is incorrect </li></ul><ul><li>c.. For indemnity the risk is contingent and for </li></ul><ul><li>guarantee the liability is subsisting </li></ul><ul><li>d.. For both risk contingent and liability subsisting </li></ul>
  77. 77. <ul><li>**Issuing of Bank guarantees is one of the functions of a banker. </li></ul><ul><li>It is a Non fund based finance extended </li></ul><ul><li>The bank to secure the bank guarantee in addition to necessary securities will have to obtain a Counter guarantee or Counter indemnity to safe guard their interest </li></ul>
  78. 78. <ul><li>**Bank guarantee is the commitment given by the issuing bank (Guarantor) to the beneficiary. </li></ul><ul><li>If the claim is made by the beneficiary within the guarantee period and as per the terms and conditions of the bank guarantee, then the bank should make the payment without fail and also without any delay. </li></ul>
  79. 79. <ul><li>**Courts will not interfere in the functions of a banker with regard to bank guarantees issued by them. </li></ul><ul><li>The Courts will not prevent the bank from making the claim amount on the bank guarantee. </li></ul><ul><li>The Courts will interfere only when there is a mala fide intention or fraud or forgery takes place. </li></ul>
  80. 80. <ul><li>36.. A bank guarantee has been issued by Bank K on behalf of its customer L in favor of R. The guarantee amount being Rs.2.75 lacs. When the claim received by Bank K from R, the bank has a balance of Rs.3.28 in the current account of L. Then the bank K </li></ul><ul><li>a.. Can debit L’s current account with the claim amount and make a demand draft in favour of R and send. </li></ul><ul><li>Before doing so Bank K to consult L and take his permission. </li></ul><ul><li>Bank K to discuss with R </li></ul><ul><li>Can not debit the current account of L but extend an advance in favour of L and then make the payment </li></ul>
  81. 81. <ul><li>37.. A bank guarantee has to be paid on invocation by the beneficiary. At that time the bank has a balance of Rs.3 lacs (Fixed deposit) as collateral security and not substantial balance in the current account of the party. The claim amount is Rs.5 lacs. </li></ul><ul><li>a.. The bank will close Fixed deposit and make payment </li></ul><ul><li>b.. For the balance amount the bank can request the beneficiary for some more time </li></ul><ul><li>c.. The bank need not honour, since the balance of the collateral security will not be sufficient to meet the claim amount </li></ul><ul><li>d.. None of these </li></ul>
  82. 82. <ul><li>**Banks generally issue Performance guarantees. </li></ul><ul><li>Advance payment , Deferred payment and Statutory guarantees are also being issued by banks </li></ul><ul><li>Before issuing a bank guarantee, the bank will go through the draft copy and after satisfying with the contents they agree to issue. </li></ul><ul><li>Besides the documents for various types of securities, appropriate counter guarantee also to be taken. </li></ul>
  83. 83. <ul><li>**Amount of guarantee, period, protective clause, claim period , beneficiary are some of the important aspects which are to be clearly understood and put in place to avoid complications at a later date. </li></ul><ul><li>.. If claim has come from the beneficiary utmost importance to be given and due action to be taken. </li></ul>
  84. 84. <ul><li>** A Letter of Credit is a commitment by the LC opening bank to the beneficiary (Exporter or Seller) to make payment. </li></ul><ul><li>.. Banks under a LC deal in documents </li></ul><ul><li>.. LC terms and conditions should not be vague . </li></ul>
  85. 85. <ul><li>**A Negotiating banker (the bank in the beneficiary / Exporter’s country) negotiates the bills (makes payment on the bills drawn by the seller and accepts the documents). He is also known as Nominated or Paying banker. </li></ul><ul><li>.. A confirming banker has to undertake on its part the liabilities of the credit vis-à-vis the beneficiary or the Negotiating bank. </li></ul><ul><li>.. Reimbursing bank is appointed by the issuing bank to make reimbursement to the Negotiating, Paying or Confirming bank </li></ul>
  86. 86. <ul><li>38.. The bank in the Beneficiary / Exporters country through which the LC is advised to the beneficiary is called Advising bank. The other name for advising bank is </li></ul><ul><li>a.. Notifying bank b.. Nominated bank </li></ul><ul><li>c.. Paying bank d.. Notified bank </li></ul>
  87. 87. <ul><li>**LCs could be Revocable / Irrevocable /Confirmed / With recourse or without recourse/ Transferable and Back – to Back Credits </li></ul><ul><li>.. The other types include Red clause and Green Clause LCs. </li></ul>
  88. 88. <ul><li>39..Anticipatory Letter of Credit means </li></ul><ul><li>a.. Red Clause LC </li></ul><ul><li>b.. Blue Clause LC </li></ul><ul><li>c.. Green Clause LC </li></ul><ul><li>d.. Both a or c </li></ul>
  89. 89. <ul><li>** LC documents include Bill of exchange, Invoice, Transport documents (like Airway bill, Bill of Lading, LR,RR,) Post parcel receipts, Insurance documents, Packing list, Certificate of Origin, Quality certificate and so on </li></ul>
  90. 90. <ul><li>**As in the case of Bank guarantee, the payment under the LC – Banks obligation is primary. </li></ul><ul><li>.. Exceptional cases the Court would interfere with the machinery of irrevocable obligations assumed by the banks, such as, clear cases of fraud of which the banks have notice. </li></ul>
  91. 91. <ul><li>**Bills are classified into inland, foreign, demand, Usance, Clean, Documentary. </li></ul><ul><li>.. Demand bills are always purchased whereas time bills are discounted. </li></ul><ul><li>.. Bills can also be accepted by banks on collection basis </li></ul>
  92. 92. <ul><li>40.. A bill dated 12 th of last month accepted 27 th of last month for 75 days is known as </li></ul><ul><li>a.. At sight bill b.. On demand bill </li></ul><ul><li>c.. After sight bill d.. None of these </li></ul>
  93. 93. <ul><li>41.. A customer has tendered an outstation cheque to his banker who accepted on collection basis. After sending the cheque for collection, at the request of the customer the bank has purchased the same. Then the relationship between the banker and customer would be </li></ul><ul><li>a.. Agent – Principal b.. Creditor – Debtor </li></ul><ul><li>c.. Debtor – Creditor d.. Principal - Agent </li></ul>
  94. 94. <ul><li>42.. A cheque purchased has been returned with the reason “Funds insufficient”. Then the bank which advanced finance has to </li></ul><ul><li>a.. Recover the finance from the drawer </li></ul><ul><li>b.. Recover the finance from the drawee </li></ul><ul><li>c.. Recover the finance from the payee </li></ul><ul><li>d.. Forego the advance lent </li></ul>
  95. 95. <ul><li>**Various types of Bank securities include Land/ Real Estate, Stocks and Shares, Debentures, Goods, Documents of Title to goods, Trust receipts, Life Policies, Post office NScs,, Term deposits, Book debts and so on. Banks also consider Supply Bills finance as well. </li></ul>
  96. 96. <ul><li>**Depending upon the nature, value of securities accepted by the banks, necessary/ appropriate Loan documents are to be taken to secure the securities/ money lent and also to protect the interest of the bank. </li></ul><ul><li>.. If proper / adequate precautions are not taken bank not only loose the security but also the chances of recovery. </li></ul>
  97. 97. <ul><li>43..Life policy as security will involve </li></ul><ul><li>a.. Pledge </li></ul><ul><li>b.. Hypothecation </li></ul><ul><li>c.. Assignment </li></ul><ul><li>d.. Both a & c </li></ul>
  98. 98. <ul><li>44.. A bank has considered a loan on their Fixed deposit. The deposit holder is M and the loan has been given to N. Then N would give </li></ul><ul><li>a.. Letter of Pledge </li></ul><ul><li>b.. Third Part Letter of Pledge </li></ul><ul><li>c.. Demand Promissory Note </li></ul><ul><li>d.. Duly discharged Fixed deposit receipt </li></ul>
  99. 99. <ul><li>45..XYA (P) Ltd company has been sanctioned a Supply Bills limit of Rs.7 lacs. </li></ul><ul><li>a.. The Charge need not be registered with the </li></ul><ul><li>Registrar of Companies since Supply Bills is </li></ul><ul><li>treated as an unsecured finance </li></ul><ul><li>b.. The Charge has to be registered </li></ul><ul><li>c.. The Charge has to be registered since Book debts </li></ul><ul><li>are considered as Collateral security </li></ul><ul><li>d.. No connection with the Registrar of Companies </li></ul><ul><li>since the bank only gives the finance </li></ul>
  100. 100. <ul><li>46.. A depositor wish to transfer his fixed deposit to his uncle’s name. </li></ul><ul><li>a.. Not possible since it is already printed on the deposit receipt as Not transferable </li></ul><ul><li>b.. Possible by way of proper endorsement </li></ul><ul><li>c.. Possible by closing the deposit before maturity and with that open a new account in the name of the depositor’s uncle </li></ul><ul><li>d.. None of the above </li></ul>
  101. 101. <ul><li>47..As part of documentation the Irrevocable Power of Attorney is also insisted in respect of </li></ul><ul><li>a.. Life Policy Loan b.. Fixed Deposit Loan </li></ul><ul><li>c.. Clean OD d.. Supply Bills Finance </li></ul>
  102. 102. <ul><li>** There are 6 types of Mortgages. </li></ul><ul><li>The Transfer of Property Act discusses about the Mortgages. </li></ul><ul><li>The basic requirements include </li></ul><ul><li>An intention to create mortgage by the owner of the property (mortgagor) in favour of the Mortgagee (Creditor) to secure a debt </li></ul>
  103. 103. <ul><li>48..(1) The sale is ostensible and not real. (2) The mortgagee has the right to receive rent on the property mortgaged (3) Mortgage is put through in a Notified area (4) Private Sale possible- Identify the mortgages </li></ul><ul><li>a.. Simple Mortgage/ English Mortgage/ Equitable Mortgage/ Anomalous Mortgage </li></ul><ul><li>b.. Mortgage by way of Conditional Sale/ Usufructuary Mortgage / Mortgage by way of Deposit of Title deeds / English Mortgage </li></ul><ul><li>c.. Registered Mortgage / English Mortgage / Equitable Mortgage / Simple Mortgage </li></ul><ul><li>d.. Mortgage by way of Conditional Sale / Equitable Mortgage / Usufructuary Mortgage / English Mortgage </li></ul>
  104. 104. <ul><li>49..Identify the correct mode of charge in respect of(1) Vehicle loan,(2) Cash Credit, (3)Gold ornaments loan & (4) Flat purchase. </li></ul><ul><li>a.. Pledge / Hypothecation / Hypothecation/ Mortgage </li></ul><ul><li>b.. Hypothecation / Assignment / Pledge / Mortgage </li></ul><ul><li>c.. Pledge / Mortgage / Hypothecation / Hypothecation </li></ul><ul><li>d.. None of the above </li></ul>
  105. 105. <ul><li>**As per the provisions of the Registration Act,1908, a registered document operates, not from the date of its registration , but from the time of its execution. Thus a Mortgage document executed earlier, though registered later than another, has priority over the documents executed later </li></ul>
  106. 106. <ul><li>**The limitation period for filing a suit for sale of mortgaged property is 12 years from the date the mortgage debt becomes due. </li></ul><ul><li>.. The limitation period for filing suit for foreclosure is 30 years form the date the money secured by mortgage becomes due.. </li></ul><ul><li>.. Foreclosure means the loss of the right possessed by the mortgagor to redeem the mortgaged property. </li></ul><ul><li>.. Under the Mortgage by way of conditional sale, the mortgagee can sue for foreclosure, but not sale of the property. </li></ul>
  107. 107. <ul><li>50.. A Ltd company has availed finance by way of Simple Mortgage. Then there </li></ul><ul><li>a.. Will be two types of Registrations </li></ul><ul><li>b.. One with the Registrar of Companies </li></ul><ul><li>c.. Another with the Sub Registrar of </li></ul><ul><li>Assurances in whose jurisdiction the </li></ul><ul><li>mortgaged property is situated </li></ul><ul><li>d.. All of these </li></ul>
  108. 108. <ul><li>51..A property mortgaged (Equitable mortgage) is in a village which is not a notified area. The bank branch which gave the loan is in a Notified area. If the bank wish to file a suit, then </li></ul><ul><li>a.. Suit has to be filed in the district headquarters of the bank branch </li></ul><ul><li>b.. Suit to be filed with the Mortgage court </li></ul><ul><li>c.. Such loan not possible (Property in a different area and the lending bank in another area) </li></ul><ul><li>d.. None of these </li></ul>
  109. 109. <ul><li>52.. Which one is possible </li></ul><ul><li>a.. A hypothecation can become pledge </li></ul><ul><li>b.. Pledge and third party pledge there is no difference </li></ul><ul><li>c.. A mortgage is applicable to Vehicle as security </li></ul><ul><li>d.. For transfer of goods assignment is used </li></ul>
  110. 110. <ul><li>**Hindu Undivided family is governed by personal laws. In Bengal and other parts of erstwhile Bengal province, a Hindu undivided family is governed by Dayabhag Law in other parts of India, it is governed by Mitakshara Law. </li></ul><ul><li>While lending to the HUF business banker has to be very careful in protecting the interest of the bank </li></ul>
  111. 111. <ul><li>**Trusts, Clubs, Co-operative societies , Schools, Colleges etc., lending has to be properly understood then to be given. </li></ul><ul><li>.. The appropriate documents, such as deed, agreements, bye laws, resolutions to be carefully gone through and then proceed. </li></ul>
  112. 112. <ul><li>53.. Which one does not attract registration as per the provisions of the Companies Act, with the Registrar of Companies. </li></ul><ul><li>a.. A charge on any book debts of the company </li></ul><ul><li>b.. A charge on called capital of the company </li></ul><ul><li>c.. A floating charge on the undertaking or any property of the company including stock-in-trade </li></ul><ul><li>d.. A charge on a copy right </li></ul>
  113. 113. <ul><li>54..Who should maintain the Index of Register of Charges as per the Companies Act. </li></ul><ul><li>a.. Registrar of Companies </li></ul><ul><li>b.. Lending Bank </li></ul><ul><li>c.. Creditor </li></ul><ul><li>d.. Debtor Company </li></ul>
  114. 114. <ul><li>**As per the provision of the Companies Act, any creditor or member of company can inspect the books relating to charges created by the company and it is the duty of the company to keep the Register of Charges open to inspection </li></ul>
  115. 115. <ul><li>55.. A Limited Company applied for Working finance on 23 rd of July. Received the sanction letter on 12 th of August and executed the loan documents on 18 th of August. Availed the finance on 3 rd of September only. The charge has been registered with the Registrar of Companies on 15 th of September. </li></ul><ul><li>a.. The Registration is in order </li></ul><ul><li>b.. The Registration is not in order </li></ul><ul><li>c.. The Charge should have been filed within 1 month from the date of sanction </li></ul><ul><li>d.. Since the finance has been taken only on 3 rd of September, time to be calculated from that date to file the charge </li></ul>
  116. 116. <ul><li>THANKS & ALL THE BEST </li></ul><ul><li>T.M.C.VASUDEVAN </li></ul><ul><li>09819500380 </li></ul><ul><li>02227606208 </li></ul><ul><li>[email_address] </li></ul><ul><li>[email_address] </li></ul>

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