sample question on principle & practice of banking(JAIIB) by B.P.Sarkhel (Ex-bank faculty for 29 years in stc of a leading psb, Banking Hub, kolkata, jaiib-caiib coaching

1. Principle & Practice of Banking_ Test Series-5
1 | P a g e
MCQ No. MCQs Options Answer
1 Whichof the followingisnotassociated
withLetterof Credit(LC)
1. It is a creditarrangement
2. An undertakinggivenbythe
buyer’sbankonbehalf of the
buyerto the seller
3. Issuingbankundertakestopay
the amountof bill drawnbythe
supplierunderLC
4.Paymentissubjectto
presentmentof documents
withinastipulateddate
5. All are associatedwith
5.
2 Whichof the followingissuesLC 1. Seller’sbank
2. Buyer’sbank
3. Negotiatingbank
4. Advisingbank
5. Confirmingbank
2.
3 LC openingbankaddsitscreditstanding
to that of the seller
1. True
2. False
2.
4 The supplierorthe shipperisthe
beneficiaryunderLC
1. True
2. False
1.
5 Negotiatingbankof anLC is alwaysthe
confirmingbank
1.True
2. False
2.
6 The suppliergetsthe bill underLC
discountedatthe bankknownas
1. Confirmingbank
2. Advisingbank
3. Reimbursingbank
4. Negotiatingback
5. None of these
4.
7 Advisingbankif undertakestonegotiate
the billsunderLCcan be consideredas
1. Confirmingbank
2. Negotiatingbank
3. Reimbursingbank
4. Either1 or 2
5. None of these
4.
8 The bank advisesthe creditunderLC&
any amendmentwithoutanyundertaking
isknownas
1. Advisingbank
2. Negotiatingbank
3. Confirmingbank
4. Reimbursingbank
5. None
1.
9 Advisingbankadvisesthe creditunderLC
at the requestof
1. Beneficiary
2. Buyer
3. Negotiatingbank
4. Openingorissuingbank
5. None
4.
10 The presentICCbrochure enforce is
knownas
1. UCPDC 500
2. UCPDC 600
3. UCP500
5.

2. Principle & Practice of Banking_ Test Series-5
2 | P a g e
4. UCP600
5.2 & 4 are relevant
11 UCPDC ispreparedby 1. World Chamberof Commerce
(WCC)
2. Global Chamberof Commerce
(GCC)
3. Universal Chamberof
Commerce (UCC)
4. International Chamberof
Commerce (ICC)
5. AmericanChamberof
Commerce (ACC)
4.
12 The numberof articles&e-Articlesunder
UCPDC 600 are respectively
1. 49 , 12
2.39 , 12
3.59 , 12
4.69 , 12
5. None
2.
13 An amendmentinLCcan be made with
the consentof
1. Issuingbankonly
2. Beneficiaryonly
3. Confirmingbankonly
4. Bias only
5. (1+2+3)
5.
14 Irrevocable LCisalsoknownas without
recourse
1.True
2. False
1.
15 An irrevocable LCwithoutthe consentof
beneficiary/seller(Tickthe incorrect)
1. Cannot be cancelledbythe
buyer
2. Cannot be revokedbythe
issuingbank
3. Once the beneficiaryisadvised
he shouldgetthe drafts drawn
underLC paidby the issuingbank
if documentsare inconformity
withLC
4. Once billsare paidthere can
have no recourse againstthe
beneficiary
5. None isincorrect
5.
16 Revocable LCcan be modifiedor
cancelledwithoutthe consentof the
beneficiary
1. True
2.False
1.
17 If the bill underLCacceptedor
negotiatedpriortothe notice of
cancellationreceivedthe issuingback
cannot howeverdishonorto paybackthe
amountunderLC to the negotiatingbank
1. True
2. False
1.
18 Revocable LCor withrecourse LC isat
presentnotallowedtobe opened
1. True
2. False
1.

3. Principle & Practice of Banking_ Test Series-5
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19 RevolvingLCprovidesthatthe amountof
drawingstipulatedwill be available tothe
beneficiaryonlyonce withinthe
stipulatedperiod
1. True
2. False
2.
20 Thougha revolvingLCmay revolved
again& againwithinastipulatedperiod
as agreedbetweenbuyer’s&suppliers,
the provisionof controllingof frequency
of the drawingcan be made withinthe
due date
1. True
2. False
1.
21 Bank can insistthata protective clause or
re-instatementclause isincorporatedin
revolvingLC
1.True
2.False
1.True
22 Functionof riskmanagement 1.it isa organizational structure
2. comprehensivestructure
3. risk managementpolicies
approvedbythe board,which
shouldbe consistentwiththe
broaderbusinessstrategies,
capital strength,management
expertiseandoverall willingness
to assume risk
4.strong MIS for reporting,
monitoringandcontrollingrisks
5. all the above
5
23 Objective of loanreview
mechanism(LRM)
1. promptlyidentifyloanswhich
developcreditweaknessand
initiate timelycorrectiveaction
2. evaluate portfolioqualityand
isolate potential problemareas
3. provide informationfor
determiningadequacyof loan
lossprovision
4. assessthe adequacyof and
adherence toloanpoliciesand
procedures,andtomonitor
compliance withrelevantlaws
and regulations
5. all the above
5
24 Creditriskforms; 1. directlending
2. guaranteesor lettersof credit
3. treasuryoperations
4. securitiestradingbusinesses
5. all are above
5
25 Market riskforms; 1. liquidityrisk

4. Principle & Practice of Banking_ Test Series-5
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2.interestrate risk
3. foreignexchange rate risk
4. commodityprice risk
5. all the above
5
26 Operational riskhassome formof link
betweencreditandmarketrisk;
1. true
2. false
1
27 Pillarsof Basel 2; 1. minimumcapital requirements
2.supervisoryreview process
3. market discipline
4. (1+2)
5. (1+2+3)
5
28 Deductionsfromthe capital base; 1. investmentinunconsolidated
bankingandfinancial subsidiary
companies
2. investmentinthe capital of
otherbanksand financial
institutions
3. significantminorityinvestment
inthe otherfinancial entities
4. (1+2)
5.(1+2+3)
5
29 What isthe minimummaturityperiodof
subordinatedtermdebt;
1. 2 years
2. 3 years
3. 5 years
4. none of these
3
30 What isthe conditionof short- term
subordinateddebtforthe sole purpose
of meetingaproportionof the capital
requirementsforthe marketrisk?
1. banks will be entitledtouse
Tier3 capital solelytosupport
marketrisks
2. Tier 3 capital will be limitedto
250 % of a bank’sTier1 capital
that isrequiredto support
marketrisk
3. the national authoritieswill
have the discretiontorefuse the
use of short- termsubordinated
debtfor individual banksortheir
bankingsystems
4. (1+2)
5. all the above
31 Benefitsof strategicalliances; 1. increase incapital for research
and productdevelopmentand
yetlowerrisk
2. decrease inproductleadtimes
and life cycles
3. abilitytobringtogether
complementaryskill andassets
that neithercompanycould
5

5. Principle & Practice of Banking_ Test Series-5
5 | P a g e
easilydeveloponitsown
4. access to knowledgeand
expertisebeyondcompany
borders
5. all the above
32 Objective of motivatemergers 1. diversitythe areasof activities
2. improve profitability
3. serve the customerbetter
4. remove certainkeyfactorsand
otherbottlenecksof input
supplies
5. all the above
33 Advantage of merger; 1. bringsin synergyinoperations
and economicsof scale ininputs,
productionanddeliverywhich
resultincost savingforthe
acquirer
2. due to increase size,the
growthin the top line and
bottomline are signification
3. createsopportunitiesto
penetrate markets
4. enablestoachieve world-class
standardin theirline of business
5. all the above
34 Disadvantage of merger; 1. mergerof twotype companies
may resultindilutionof
competitioninthe market,
adverselyaffectingconsumer’s
interest
2. mat resultinabuse of market
power
3. higherconcentrationarising
out of consolidationcouldhave
largerpotential forsystemicrisk
4.(1+2)
5.(1+2+3)
35 Functionof creditinformationbureau
limited
1. minimize instanceof
concurrentand serial defaultsby
providingcreditinformation
2. pertainingtonon-individual
borrowerssuchas publiclimited
companies,private limited
companies,partnershipfirms
3. it maintaina central database
of informationas receivedfrom
itsmember
4. (1+2)

6. Principle & Practice of Banking_ Test Series-5
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5.(1+2+3)
36 CIBIL wasestablishedbySBIand HDFC 1. true
2. false
1
37 General guidelinesforapplicationfor
loanand theirprocessing;
1. loan applicationformin
respectof prioritysectorand
advancesof up to Rs. 2 lakh
shouldbe comprehensive
2. banks andfinancial institutions
shall give acknowledgementfor
receiptof all loanapplications.
the time frame,withinwhich
loanapplicationuptoRs. 2 lakh
will be disposedshouldalsobe
indicatedinacknowledgementof
such application
3.banks/financialinstitutions
shouldscrutinise the loan
applicationwithinareasonable
periodof time
4.(1+2)
5.(1+2+3)
5
38 General guidelinesforLoanappraisal and
terms;
1. lendersshouldensure thatthe
creditproposal isproperty
appraisedafterassessingthe
creditworthinessof the
applicants
2. terms andconditionandother
caveatsgoverningcreditfacilities
are arrivedat afternegotiation
withthe borrowershouldbe
reducedinwritingandduly
certificatedby the authorized
official
3. the lendershouldconveyto
the borrowerthe sanctionof
creditlimitalongthe termand
conditionthereof andkeepthe
borrowersacceptance of these
termsand conditiononrecord
4. (1+2)
5.(1+2+3)
38 Post-disbursementsupervisionby
lenders,particularlyinrespectof loans
up to Rs 2 lakh,shouldbe constructive
witha viewtotakingcare of anylender-
relatedgenuinethatthe borrowermat
face
1. true
2. false
1

7. Principle & Practice of Banking_ Test Series-5
7 | P a g e
39. The bankingcodesand standardsboard
of Indiaestablishedin
1. 18th
February2006
2. 18th
February2006
3. 18th
march 2006
4. 18th
July2006
5. none of these
1
40 Functionof BCSBI 1. To ensure adherence tothe
code of bank’scommitmentto
customers’
2. code of bankscommitmentto
customerisvoluntary andsets
minimumstandardof banking
practice for the banksto follow
whentheyare dealingwith
individualcustomerintheirday-
to-dayoperations
3. generate awarenessinthe
commonman aboutthe rightas
a consumerof bankingservice
4(1+2+3)
5. none of these
4
41 The discountand finance house of India
Ltd. setup jointlybythe reserve bankof
India,publicsectorbanksandfinancial
institutions,commencedoperationsin
April 1988
1. true
2. false 1
42 Liquidityadjustmentfacility(LAF) started
functioningfrom5June 2000
1. true
2. false
1
43 A screen-basednegotiatedquote-driven
systemforall dealingsincall/notice and
termmoneymarketwasoperationwith
effectfrom18th
September2006
1. true
2. false
1
44 InformationonCP issuance asreported
by the IssuingandPayingAgentsonthe
NDS platformhasbeenmade available
on the Reserve BankOf Indiawebsite
witheffectfromJuly2005
1. true
2. false
1
45 Certificate of depositintroducedinIndia
on;
1. 1988
2. 1998
3. 1989
4.1987
5. none of these
3
46 The minimummaturityperiodof
certificate of depositwasreducedfrom
15 days to 8 days witheffectfrom29th
April 2005
1. true
2. false
1
47 SHCIL refersto 1. Stock HoldingCorporationOf
IndiaLtd. 1

8. Principle & Practice of Banking_ Test Series-5
8 | P a g e
2. Stock holding communitiesof
India
3. share holdingcorporationof
India
4. none of these
48 ‘whenissued’marketingovernment
securitieswasintroductionandtradingin
thismarkethad commencedfromAugust
2006
1. true
2. false 1
49 Allowingshortsale beyond intra-day
settlementcycle waspermittedfrom
February2006
1. true
2. false 1
50 LERMS referstoLiberalizedExchange
Rate ManagementSystem
1. True
2. false 1
51 The introductionof ‘post-shipment
exportcreditinforeigncurrencyin
November1993
1. true
2. false 1
52 The reserve bank,inconsultationwith
the governmentof India,hadappointeda
committee onFullerCapital Account
Convertibilityon20 march 2006
1. true
2. false 1
53 ‘FCAC’meansFullerCapital Account
Convertibility
1. true
2. false 1
54 At organizational level,the taskof overall
riskmanagementisassenttoinbank; tick
the correct
1. Risk ManagementCell
2. Risk ManagementCommittee
3. Risk ManagementCouncil
4. Risk MitigationCommittee
5. none
2
55. Whichof the followingare notfalling
underthe activatesof RiskManagement
Committee Of The Bank
1. IndentifyingRisk
2. MonitoringRisk
3. DevolvingPolicies
4. VerifyingThe ModelsFor
PricingComplex Product
5. all of these
5
56 A ProperCreditGradingSystemshould
be there underLRM forevaluatingthe
portfolioqualityandestablishingloan
lossprovision
1. true
2. false 1
57 CreditRiskisthe riskof possible losses
associatedwithdiminutioninthe credit
qualityof counterparties
1. true
2. false 1
58 Loss inBank CreditPortfoliomayarise
due to ;tickthe incorrect
1. Inabilityof the Browertopay
back
2. Willful default
3. Reductioninportfoliovalue
4. (1+2+3)
5. none is incorrect
5

9. Principle & Practice of Banking_ Test Series-5
9 | P a g e
59 The availabilityand fee transferredof
ForeignCurrencyFundcasedor restricted
by the sovereigniscalledthe riskof;
1. Exchange Variation
2. InterestRate Variation
3. Cause Border Expose
4. all
5. none
3
60 Market Riskraisesfromadverse
movementin
1. InterestRate
2. Exchange Rate
3. Stock and CommoditiesPrice
4. all
5. none
4
61 Whichof the followingisnotunder
Market Risk
1. Forex Risk
2. InterestRate Risk
3. LiquidityRisk
4. EquityAnd CommodityRisk
5. all are Market Risk
5
61 Operational Risk;whichof the following
isincorrect
1. Break DownIn Operational
Control
2. ImproperCorporate
Governance
3. Fault InOperation
4. Human or Technical Error
5. all
5
62 Operational Riskmaybe consider
synonymouswith;tickthe incorrect
1. Settlementof PaymentRisk
2. Risk forBusinessIntegration
3. AdministrativeandLegal Risk
4. Foggedor EmblementsRisk
5. none is incorrect
5
63 An operational Hassledinbusiness
transactionputtriggerare creditof
Market Risk
1. true
2. false
1
64 BCBS standfor 1. Basel Committee OnBanking
System
2. Basel Committee OnBanking
Services
3. Basel Committee OnBanking
Supervision
4. Basel Committee OnBanking
Structure
5. none
3
65 Whichof the followingcountriesisnot
associatedwith BCBSwhichwas
establishedin1985 forprescribingcapital
adequacynormsfor the banksdoing
businessinthe globe
1. Australia
2. Japan
3. china
4. (2+3)
5. (1+2+3)
5
67 BIS standfor 1. Bank For International
Settlement
2. Bank For Indian Settlement
1

10. Principle & Practice of Banking_ Test Series-5
10 | P a g e
3. Bank For International Services
4. Bank For International
Supervision
5. none
68 BCBS introduce firsttime capital accord
for banksinthe year
1. 1985
2. 1988
3. 1995
4. 2000
5. 2004
2
69 Whichcommittee recommendedfor
implementation of Basel Accord1 in
Indianbankingsystemanditwas
implementwitheffectfrom –----------i.e
for the firstaccountingyearending --------
--
1. S.S Tarapore committee,
1.4.1998, 31.3.1999
2. Verma Committee,1.4.1997,
31.3.1998
3. Narashinamcommittee,
1.4.1988, 31.3.1989
4. Narashinamcommittee,
1.4.1992, 31.3.1993,
5. none
4
70 In Basel Accord1, the creditriskelement
and otherrisk,at the initial stage includes
(tickthe incorrect)
1. FundedCredit
2. Non FundCredit
3. Other Off Balancing Exposer
4. Other Nominal Assets of the
Banks
5. none is incorrect
5
71 Whichof the followingriskwasincluded
at the latterstage of Basel accord 1
1. operational risk
2. market risk
3. creditrisk
4. (2+3)
5.none
2
72 RiskWeightedAssets(RWA)orrisk
adjustedassets(RAA) mean
1. aggregate of all assets
2. aggregate of fundedandnon
fundedassets
3. weightedaggregate of assets
4. weightedaggregate of funded
and foundfundedassets
5. all are similar
4
73 In whichcategory of assets Conversion
Factor(CVF) hasto be appliedfirstbefore
applyingriskfactor
1. fundeditem
2. non founditem
3. both
4. onlyinvestmentportfolio
5. all
6. none
2
73 Basel accord bothunderaccord I and
accord II has prescribedCapital Adequacy
Ratio(CAR) or Capital To RiskAdjusted
Ratioat the rate of ---------%butRBIhas
prescribedforbanksat the rate of ------%
1. 9,9
2. 9,8
3. 8,9
4. 8,8
5. none,none
3

11. Principle & Practice of Banking_ Test Series-5
11 | P a g e
74 Minimumcapital requirementof banks
underBasel accord I isthe sumof (tick
the incorrect)
1. capital requirementforcredit
Exposure excludingitems
comprisingtradingbookbut
includingcounterpartycreditrisk
on all OverThe Counter(OTC)
Derivativesconvertedtorisk
weightedassets
2. RiskWeightedAssetsfor
marketrisk
3. Risk WeightedAssetsfor
operational risk
4. (1+2+3)
5. none is incorrect
3
75 SCBS broughtouta reporttitled
”International Convergence Of Capital
MeasurementAndCapital Standard –are
ravishedfame work2004 is commonly
called--------
1. Basel accord I
2. Basel accord II
3. Basel accord III
4. one andtwo are same
5. none
2
76 Market riskwas includedinBasel accordI
inthe year
1. 1995
2. 1996
3. 1997
4. 1998
5. 2000
2
77 Under Basel accord II,three pillarshave
got importance where;(matchthe
following)
pillar pertain to;
A. I i) Market Discipline
B. II ii)Supervisioneryreview
Process
C. III iii) MinimumCapital
Requirement
1. Ai,Bii,Ciii
2. Aii,Biii,Ci
3. Aiii,Bi,Cii
4. Aiii,Bii,Ci
5.Aii,Ci,Biii
4
78 Measurementof creditrisk;whichof the
followingapproachisincorrect
1. Standard Approach
2. Internal Rattingbased
approach
3. Internal RiskBasedApproach
4.Basic IndicatorApproach
5.(3+4)
5

12. Principle & Practice of Banking_ Test Series-5
12 | P a g e
79 Whichapproach isassociatedwith
marketrisk?
1. Standard Approach
2.Internal RiskBasedApproach
3. Internal RattingBased
approach
4.advance measurement
approach
5. (1+2)
5
80 Whichof the followingisnotassociated
withOperational Risk?
1. Basic indicatorapproach
2. standard approach
3. advance measurement
approach
4. internal riskbasedapproach
5. all are associated
4
81 Whichapproach iscommon tocreditrisk,
marketriskand operational risk?
1. internal rattingbased
approach
2. internal riskbasedapproach
3. standard approach
4. basic indicatorapproach
5. none is common
3
82 Standardapproach includes ---------and---
------forassessingmarketrisk
1. maturitymethod
2. durationmethod
3. foundationmethod
4. advance method
5. (1+2)
5
83 Whichof the followingcapital has been
mentionunderBasel accordI
1. tier1
2. tier2
3. tier3
4. (1+2)
5. (1+2+3)
4
84 Whichof followingcomponentof capital
have mentioningbothinBasel accordII
and III
1. tier1
2. tier2
3. tier3
4. (1+2)
5. (1+2+3)
5
85 Tier1 capital comprises;tickthe incorrect 1. fullypaidupequity
2. statutoryreserve
3. general reserve
4. other disclosedreserve
5. none is incorrect
5
86 Perpetual non-emulative preferences
share is the example of tier1capital
1. true
2. false
1
87 Tier1 capital ispermanentisnature and
readily availabletomeetthe unexpected
exegencies
1. true
2. false
1
88 Whichof the followingisnotassociated 1. revaluationreserve 5

13. Principle & Practice of Banking_ Test Series-5
13 | P a g e
withtier2 capital 2. undisclosedreserve
3. general provision/general
loan/lossreserve
4. subordinateddate andhybrid
capital
5. all are associated
89 Subordinateddebtisnothingbut -----
capital fromIndiancompaniesactpoint
of view
1. quasi capital
2. debenture
3. longterm loan
4. (1+2)
5. none
1
90 A bankhas issuedbond.Itwill come
under
1. hybridcapital
2. subordinateddebt
3. equity
4. (1+3)
5. none
2
91 Provisiononstandardassetsisfollowing
under-------- capital aslossreserve
subjecttomaximum ----------% of RWA
1. tier1, 1.25
2. tier2, 1.25
3. tier1, 50%
4. tier2, 50%
5. none,none
2
92 Subordinateddebtasone of the
components of tier2 capital wouldbe
reconfor the purpose of capital for
determiningCARat
1. face value
2. redemptionvalue
3. market price
4. discounted face value
5. discountedmarketprice
4
93 Discountrate on subordinateddebtis
dependingupon
1. Residual periodof maturity
2. term to maturity
3. Duration
4.ModifiedDuration
5. none
1
94 Discountrate for subordinateddebtis
decreasingin descendingorderof
residual periodof maturity
1. true
2. false
1
95 Whenresidual periodof maturityof
subordinate debtisfive yearsandabove
the discountrate is --------% andwhenit
islessthan one yearthe discountrate is -
---------%
1. 0, 100
2. 100, 0
3. 0, 60
4. 60, 0
5. none
1
96 Revaluationreserve asof the component
of tier2 capital has to be discountedat
the rate of ---------% toreconastier2
component of capital
1. 0
2. 25
3. 50
4. 55
5. 75
4
97 As perBasel I & II,Tier I capital shouldbe 1. 50, 100, 100

14. Principle & Practice of Banking_ Test Series-5
14 | P a g e
minimum-------------------% of bothTierI
& II whichimpliesitshouldbe min. --------
-------%of TierIIand italsoimpliesthat
TierII capital can be maximum--------------
% of Tier I
2. 50,50, 100
3. 50 100, 50
4. 100, 100, 100
5. none
1
98 Basel IIhas beenimplementedfrom ------
---------- inphasedmanner&the
implementationprocesshastobe
completedby ------------------ whenasper
Basel the minimumcapital adequacy
Ratiowill be-----------------%outof which
Capital ConservationBuffer,the new
entryinBasel Accord, shouldbe ------------
% and forIndianContextasperRBI
directives,minimumCARshouldbe -------
-----%includingCapital Conservation
Ratioof -------------------%
1. 1-4-2013, 31-03-2018, 10.5,
2.5, 11.5, 2.5
2. 1-4-2013, 31-03-2018, 11.5 ,
2.5, 11.5, 2.5
3. 1-4-2013, 31-03-2018, 11.5,
2.5. 10.5, 2.5
4. 1-4-2013, 31-03-2017, 10.5,
2.5, 11.5, 2.5
5. None
1
99. Under Basel IImin.tierI capital shouldbe
------------- of min9% for Indiancontext
but underBasel IIIitshouldbe min --------
----%of min.11.5 %
1. 6, 6
2. 6, 7
3. 5, 6
4. 5, 7
5. 6, 8
2
100 To complywithBasel IIIfor IndianPublic
SectorBanks,it has beenestimatedthat
by 31-03-2018, theywouldneed
additional capital fundof min.
approximately ------------ crore
1. 1 lakh
2. 1.5 lakhs
3. 1.75 lakhs
4. 2.00 lakhcore
5. 2.5 lakhscrore
5