Banking Finance and Economy - questions for bank recruitment
Banking Finance and Economy - questions for bank recruitmentQ1. What is Inflation?
Ans. The rise in the prices of goods or service in an economy over a certain period of time is known as inflation.
Q2. Name the types of “Inflation”?
Ans. Following are the types of inflation:-
- Wage inflation
- Price power inflation
- Cost-push inflation
- Sectorial inflation
- Mild inflation
Q3. What are the effects of “Inflation”?
Ans. Following are the effect of inflation:-
- It decreases the real value of money
- It discourage investment and savings
- It leads to shortage of goods
- Mitigate economic recessions
- Reduces the level of debt
Q4. What is “Stagflation”?
Ans. It is the situation in which inflation rises continuously even though there is recession in the economy.
Q5. What is “Deflation”?
Ans. Deflation is the theory which deals with the general reduction in the price level of particular goods.
Q6.What is non-performing assets (NPA)?
Ans. Non-performing assets mean an asset or account of borrowers which has been classified by the bank as sub-standard, doubtful and loss assets.
Q7. According to KYC guidelines which are the three documents that are mandated by RBI?
Ans. Following are the documents that are mandated by RBI in accordance to KYC guidelines:-
- Proof of identity
- Proof of address
Q8. What are the three parameters on which CAR depends?
Ans. Following are the three parameters on which CAR depends:-
- Tier 1 capital
- Tier 2 capital
- Risk weighted ratio
Q9.What is “Overseas Banking”?
Ans. Domestic banks if working out of the country then it is called as overseas banking.
Q10. What are the advantages of “Off-shore Banking”?
Ans. Following are the advantages of off-shore banking:-
- Strong privacy
- Less restrictive legal regulation
- Low or no taxation
- Easy access to deposits
- Protection against local political or financial instability
Q11. What is “Merchant Banking”?
Ans. The private equity activity of the bank is known as merchant banking.
Q12. What is “Universal Banking”?
Ans. It is a kind of investment service that includes services related to savings and loan.
Q13. What services are provided by “Virtual Banking”?
Ans. Following are the services provided by virtual banking:-
- Telephone banking
- Online banking
- Automated teller machine (ATM)
- Mail banking
- Mobile banking
Q14. What are the indicators of good SHGs (Self Help Groups)?
Ans. Following are the indicators of good SHGs:-
- Homogeneous membership
- No discrimination
- Small membership
- Regular attendance
- Transparency in functions
- Set of byelaws
- Utilising savings for loaning
Q15. How many “Bullion Markets” are there in India?
Ans. There are four bullion markets in India:-
- National commodity and derivative exchange limited (NCDEX)
- National multi-commodity exchange of India limited (NMCEIL)
- Multi-commodity exchange of India (MCX)
- Indian bullion market
Q16. What are “Carbon Funds”?
Ans. Work to develop viable, flexible market mechanisms to reduce greenhouse gas emissions under the Kyoto protocols.
Q17. What is “Cheap Money”?
Ans. It indicates a scenario when bank rate and other rate of interest are low.
Q18. What is “Buy Side”?
Ans. It is the part of securities business in which institutional order generates.
Q19. What is “Demand Draft”?
Ans. It is the bill of exchange payable at sight.
Q20. Classify the balance of payment?
Ans. Balance of payment is classified into two parts:-
- Current account
- Capital account
Q21. What is “CCIL”?
Ans. Acronym for CCIL is clearing corporation of India limited. It is the clearing agencies of government securities. It acts as central counter party (CCP) for all transaction in government securities by interposing itself between two counterparties during settlement.
Q22. What is “Tier 1 Capital”?
Ans. Tier 1 capital is a core capital that includes equity capital and disclosed reserves.
Q23. What is “Equity Capital”?
Ans. An equity capital includes instruments that cannot be redeemed at the option of holder.
Q24. What is “Tier 2 Capital”?
Ans. It is the secondary bank capital that includes item such as undisclosed reserves, general loss reserves, subordinated term debt etc.
Q25. What is the acronym of “MIBOR”?
Ans. Acronym for MIBOR is “Mumbai Inter-Bank Offer Rate”.
Q26. What is the capital structure of RRBs?
Ans. Following shows the capital structure of RRBs:-
- 50% with government of India
- 15% with the state government
- 35% with the sponsor bank
Q27. What is “Door-to-Door Banking”?
Ans. Delivering banking and financial service at doorsteps of the common man is known as door-to-door banking.
Q28. What is “Laghu Udhami Credit Card (LUCC) Scheme and its features?
Ans. “Laghu Udhami Credit Card Scheme is a hassle-free credit facility for small business, retail traders, self-employed and small industrial unit. It was launched on 21 Nov 2001 by Government.
Features of LUCC Scheme:
- Existing customers with satisfactory track record with working capital limit up to 2 lac fir the last three years are eligible for the card.
- The credit cards limit is fixed at 20% of the annual turnover declared for tax purpose.
- For professional the card limit is 50% of the gross annual income.
- Maximum per party limit is Rs. 2 lac
- The credit card limit is valid for three years.
- The banks will conduct internal reviews annually.
- Enhancement of limit is based on the operations by the bank.
Q29. What is Credit Guarantee Funds for SSIs and its features?
Ans. Credit Guarantee Funds for SSIs was introduced in 2000-01 and later extended by lending institutions to eligible borrowers has been formed by Central Government and SIDBI for covering collateral free credit facilities.
Following are the features of Credit Guarantee Funds for SSIs:
- Eligible borrowers are the new or existing SSI units including IT and software industries. The amount of credit facilities are based on the way of working capital not exceeding 25 lacs.
- Guarantee cover is the maximum cover available per eligible borrower which shall not exceed 75% of the amount in default in respect of credit facilities.
- Account of default would mean the principle amount of outstanding in the account of the borrower for Working capital or Term Loan including interest.
- The lending institution has to apply for a guarantee cover within 90 days from the date of sanction.
- Trust can terminate its liabilities in certain cases such borrower becoming ineligible.
- Lending institutions shall submit statements or information’s as required by the trust.
Q30. What are “Benami” transactions?
Ans. In this type of transaction any property, movable or immovable is transferred by one person to another for a consideration paid by a 3rd person. This type of transaction is prohibited under Benami Transaction (Prohibition) Act 1998.
Q31.What is PAN number and where we can use PAN number?
Ans. A PAN is a 10 character alphanumeric number allotted to a tax payer who is eligible to file the income tax return. The PAN number is used for the following financial transactions:
- Sale or purchase of any immovable property valued 5 lac or more.
- Sales or purchase of Motor Vehicle or Vehicle.
- One time deposit exceeding Rs. 50000 with banking company.
- A contract of value exceeding Rs. 10 lac for sale or purchase of securities.
- Opening an account with a banking company.
- Payment to hotel bills against an amount of 25000 at one time.
Q32. What is “State Development Loans (SDL)”?
Ans. SDLs are the market borrowing by state government. RBI co-ordinates the actual process of selling these securities. Each state is allowed to issue securities up to certain limit each year.
Q33. What is “Nostro Account”?
Ans. A Nostro account is a bank account established in foreign country usually in the currency of that country for the purpose of carrying out transaction there.
Q34. What is “DEMAT Account”?
Ans. DEMAT account is used for buying and selling of stocks.
Q35. Name the types of money?
Ans. Following are the types of money:-
- Commodity money
- Representative money
- Fiat money
- Commercial bank money
- Narrow bank money
Q36. How many types of cheques are there?
Ans. There are four kinds of cheques:-
- Open cheque
- Crossed cheque
- Bearer cheque
- Order cheque
Q37. How many series of consumer price index (CPI) are there?
Ans. There are four series of consumer price index:-
- CPI UNME (urban non-mutual employee)
- CPI AL (agricultural labourer)
- CPI RL (rural labourer)
- CPI IW (industrial worker)
Q38. What is “Reflation”?
Ans. Reflation is the act of simulating the economy by increasing the money supply or by reducing taxes.
Q39. What is “Biflation”?
Ans. Biflation is a state of economy where the process of inflation and deflation occurs simultaneously.
Q40. Name the methods used to “Control the Inflation”?
Ans. Following are the methods that are used to control the inflation:-
- Monetary policy
- Fixed exchange rates
- Gold standard
- Wage and price control
Q41. What is “Funding Volatility Ratio”?
Ans. It is the ratio of liquid assets to current and savings deposits.
Q42. What is “ALCO”?
Ans. Acronym for ALCO is “asset-liability management committee”. It is a strategic decision making body, formulating and overseeing the function of asset liability and management (ALM) OF BANK.