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HPSCB Junior Clerk study materials
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HPSCB Junior Clerk practice questions

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Question 1General Awareness and Banking Awareness

Which institution regulates commercial banks in India and issues the country's currency notes?

  1. Life Insurance Corporation of India
  2. Reserve Bank of India Correct answer.
  3. National Bank for Agriculture and Rural Development
  4. Securities and Exchange Board of India

Explanation

The Reserve Bank of India is the central bank, established in 1935 and nationalised in 1949; it supervises commercial banks and holds the sole right to issue currency notes except one-rupee notes. SEBI regulates securities markets, NABARD handles rural credit, and LIC is an insurer.

Question 2General Awareness and Banking Awareness

The Himachal Pradesh State Cooperative Bank functions under which tier of the short-term cooperative credit structure?

  1. State Cooperative Bank Correct answer.
  2. Urban Cooperative Bank
  3. Primary Agricultural Credit Society
  4. District Central Cooperative Bank

Explanation

The short-term cooperative credit structure is three-tiered: Primary Agricultural Credit Societies at the village level, District Central Cooperative Banks at the district level, and the State Cooperative Bank at the apex state level. HPSCB is the apex state cooperative bank for Himachal Pradesh.

Question 3General Awareness and Banking Awareness

Under the RBI's know-your-customer norms, a customer's identity is normally verified through which combination?

  1. Aadhaar and PAN together Correct answer.
  2. A voter list entry without photograph
  3. A ration card alone
  4. Only a self-declaration of identity

Explanation

KYC requires documentary proof of identity and address from officially valid documents. Aadhaar and PAN together are the standard combination accepted for identity and address verification, and PAN is mandatory for most banking transactions above threshold limits.

Question 4General Awareness and Banking Awareness

In a cheque, the words 'account payee' written across the top-left corner imply that the cheque is:

  1. Transferable by simple endorsement
  2. Payable to the bearer on demand
  3. Collectible only through the payee's bank account Correct answer.
  4. Payable only in cash over the counter

Explanation

An account payee crossing directs the collecting bank to credit the proceeds only to the payee's account and not to pay cash across the counter. It restricts negotiability and acts as a safeguard against fraud and theft.

Question 5General Awareness and Banking Awareness

Which of the following is a liability of a commercial bank in its balance sheet?

  1. Fixed deposits accepted from customers Correct answer.
  2. Investments in government securities
  3. Loans advanced to borrowers
  4. Cash held in its vault

Explanation

Deposits are funds owed by the bank to its customers, so they appear on the liabilities side of the balance sheet. Cash in hand, loans and investments are assets because they represent resources owned or amounts receivable by the bank.

Question 6General Awareness and Banking Awareness

The maximum deposit insurance cover per depositor per bank under the DICGC scheme is currently:

  1. One lakh rupees
  2. Two lakh rupees
  3. Five lakh rupees Correct answer.
  4. Ten lakh rupees

Explanation

The Deposit Insurance and Credit Guarantee Corporation insures deposits up to five lakh rupees per depositor per bank, covering principal and interest combined. This limit was raised from one lakh rupees in 2020 to strengthen depositor confidence.

Question 7General Awareness and Banking Awareness

A bank customer wants a fixed amount debited from her account every month for a recurring insurance premium. Which standing instruction does the bank set up?

  1. A bank guarantee
  2. A standing instruction or ECS mandate Correct answer.
  3. A letter of credit
  4. A demand draft purchase

Explanation

A standing instruction authorises the bank to debit a fixed sum periodically, and ECS mandates perform the same function through electronic clearing. Demand drafts, letters of credit and guarantees are one-time instruments used for payments or trade security.

Question 8General Awareness and Banking Awareness

Under the Negotiable Instruments Act, 1881, a cheque becomes stale and is not payable by a bank after how many months from its date?

  1. Three months Correct answer.
  2. Six months
  3. One month
  4. Two months

Explanation

The RBI has prescribed a validity period of three months from the date of a cheque, after which banks treat it as stale and return it unpaid. The period was reduced from six months to three months effective April 2012.

Question 9General Awareness and Banking Awareness

Which scheme was launched to provide accident insurance and life cover to savings bank account holders through a nominal annual premium?

  1. Pradhan Mantri Mudra Yojana
  2. Pradhan Mantri Jan Dhan Yojana
  3. Pradhan Mantri Suraksha Bima Yojana Correct answer.
  4. Atal Pension Yojana

Explanation

Pradhan Mantri Suraksha Bima Yojana offers accidental death and disability cover to bank account holders who enrol and pay a small annual premium through auto-debit. Jan Dhan Yojana promotes financial inclusion accounts, Atal Pension Yojana provides pensions, and Mudra Yojana funds micro-enterprises.

Question 10General Awareness and Banking Awareness

The priority sector lending target for domestic scheduled commercial banks in India is:

  1. 20 percent of net bank credit
  2. 50 percent of gross advances
  3. 30 percent of net bank credit
  4. 40 percent of adjusted net bank credit Correct answer.

Explanation

Domestic scheduled commercial banks must lend 40 percent of adjusted net bank credit to priority sectors such as agriculture, micro-enterprises, education and housing for weaker sections. The 40 percent target is computed on adjusted net bank credit, not gross advances.

Question 11General Awareness and Banking Awareness

A customer deposits a cheque for collection into her account. In this relationship, the bank acts as:

  1. Agent of the customer Correct answer.
  2. Guarantor of the drawer
  3. Lessee of the customer
  4. Debtor to the customer

Explanation

When collecting instruments, the bank acts as the customer's agent and must exercise reasonable care in presenting the cheque and obtaining payment. In the deposit-taking relationship the bank is a debtor, but that role is distinct from collection.

Question 12General Awareness and Banking Awareness

Which of these instruments is issued by a bank on payment of the amount plus commission and is payable at a specified branch?

  1. Traveller's cheque
  2. Promissory note
  3. Demand draft Correct answer.
  4. Bill of exchange

Explanation

A demand draft is a prepaid negotiable instrument drawn by one branch of a bank on another, payable on demand to a named payee. It is purchased by remitting the amount plus commission, which makes it a secure mode of transferring funds.

Question 13General Awareness and Banking Awareness

In the context of Indian banking, 'CRR' refers to the portion of a bank's deposits that must be:

  1. Kept as cash with the RBI Correct answer.
  2. Held as gold in the bank's vault
  3. Invested in government securities
  4. Lent to priority sectors

Explanation

The Cash Reserve Ratio is the share of net demand and time liabilities that a bank must maintain as cash balances with the Reserve Bank of India. It is distinct from SLR, which requires investment in approved securities.

Question 14General Awareness and Banking Awareness

A bank earns interest income on which of the following activities?

  1. Selling a mutual fund product
  2. Charging locker rent
  3. Advancing a housing loan Correct answer.
  4. Levying a cheque return charge

Explanation

Interest income arises when the bank lends funds and receives interest from the borrower, as with a housing loan. Locker rent, penal charges and commission on product distribution are fee-based income rather than interest income.

Question 15General Awareness and Banking Awareness

Which body recommends the monetary policy decisions that the RBI's Monetary Policy Committee announces?

  1. The Union Finance Ministry
  2. The Indian Banks' Association
  3. The Board for Financial Supervision
  4. The Monetary Policy Committee itself Correct answer.

Explanation

The Monetary Policy Committee, chaired by the RBI Governor, deliberates and votes on the policy repo rate and stance, and its decisions are binding on the RBI. The Finance Ministry, the Board for Financial Supervision and the IBA have no vote in setting the policy rate.

Question 16General Awareness and Banking Awareness

Which of the following is an example of a 'near money' asset held by a bank?

  1. Treasury bills maturing in 91 days Correct answer.
  2. Deposits with other banks payable on demand
  3. Cash in the till
  4. Fixed assets such as the bank's building

Explanation

Near money assets are highly liquid but not cash, such as short-dated treasury bills that can be converted into cash quickly with minimal loss. Cash in the till is actual cash, buildings are illiquid fixed assets, and demand deposits with other banks are treated as balances rather than near money.

Question 17General Awareness and Banking Awareness

A bank's gross non-performing assets are best described as loans where the borrower has failed to repay principal or interest for more than:

  1. 60 days
  2. 30 days
  3. 90 days Correct answer.
  4. 180 days

Explanation

An asset is classified as non-performing when interest or principal remains overdue for more than 90 days, following RBI's income recognition and asset classification norms. Sub-standard, doubtful and loss assets are further stages beyond this initial classification.

Question 18General Awareness and Banking Awareness

Which committee is associated with the reform of the cooperative banking structure in India and recommended a three-tier setup for rural cooperative credit?

  1. Narasimham Committee Correct answer.
  2. Vaghul Committee
  3. Malegam Committee
  4. Tandon Committee

Explanation

The Narasimham Committee on financial system reforms examined cooperative banking and supported a three-tier rural credit structure of PACS, DCCBs and State Cooperative Banks. The Malegam Committee dealt with microfinance, the Tandon Committee with working capital, and the Vaghul Committee with money markets.

Question 19General Awareness and Banking Awareness

In a bank's balance sheet, 'advances' appear on which side and why?

  1. Liabilities side, because they must be repaid
  2. Liabilities side, because they are borrowed funds
  3. Assets side, because they generate income for the bank Correct answer.
  4. Assets side, because they are amounts owed to depositors

Explanation

Advances are funds lent out by the bank and are therefore assets that earn interest income for it. Deposits and borrowings sit on the liabilities side because they represent the bank's obligations to outsiders.

Question 20General Awareness and Banking Awareness

Which of the following best explains the difference between a savings account and a current account in India?

  1. Savings accounts earn interest while current accounts normally do not Correct answer.
  2. Savings accounts are meant only for businesses
  3. Current accounts require a minimum balance while savings accounts do not
  4. Current accounts restrict the number of withdrawals

Explanation

Savings accounts are designed for individuals and earn interest, whereas current accounts are meant for businesses and typically carry no interest but allow unrestricted transactions. Minimum balance rules and withdrawal limits vary by bank and are not the defining distinction.

Question 21General Awareness and Banking Awareness

A customer wants to remit money to a beneficiary using the Unified Payments Interface. Which identifier is used to route the payment?

  1. A demand draft number
  2. A cheque leaf number
  3. A locker number
  4. A virtual payment address Correct answer.

Explanation

UPI payments are routed using a virtual payment address, which maps to the beneficiary's bank account without exposing account details. Draft numbers, cheque numbers and locker numbers have no role in UPI routing.

Question 22General Awareness and Banking Awareness

The RBI's 'repo rate' is best described as the rate at which:

  1. Banks lend to their best corporate customers
  2. The RBI lends short-term funds to banks against government securities Correct answer.
  3. Banks lend to each other without collateral
  4. The government borrows from the public through bonds

Explanation

The repo rate is the policy rate at which the RBI provides short-term liquidity to banks against the collateral of government securities under repurchase agreements. The reverse repo is the rate at which the RBI absorbs liquidity, and the marginal standing facility is a penal window.

Question 23General Awareness and Banking Awareness

Which of the following is a correct statement about the 'bank rate' as distinct from the repo rate?

  1. The bank rate is always lower than the repo rate
  2. The bank rate applies only to cooperative banks
  3. The bank rate is a penal rate for accommodation beyond the repo window Correct answer.
  4. The bank rate is used only for long-term development lending

Explanation

The bank rate is the rate at which the RBI lends long-term funds without collateral or penalises banks for shortfalls, and it is aligned to the marginal standing facility rate. It is a penal rate and is normally higher than the repo rate, applying to all eligible banks.

Question 24General Awareness and Banking Awareness

A customer's account shows a debit entry for 'minimum balance non-maintenance charges'. This is an example of:

  1. A contingent liability
  2. Fee-based income for the bank Correct answer.
  3. A capital receipt
  4. Interest income for the bank

Explanation

Charges levied for not maintaining the minimum balance are service fees and form part of the bank's fee-based income, also called non-interest income. They are not interest, contingent liabilities or capital receipts.

Question 25General Awareness and Banking Awareness

In a bank's capital adequacy framework, 'Tier I capital' primarily consists of:

  1. Fixed deposits and borrowings
  2. Government securities held as investments
  3. Subordinated debt and loan loss provisions
  4. Paid-up equity capital and disclosed reserves Correct answer.

Explanation

Tier I capital, or core capital, comprises paid-up equity, disclosed reserves and retained earnings that can absorb losses without the bank being forced to close. Subordinated debt and some provisions qualify as Tier II capital, while deposits and securities are not capital at all.

Question 26General Awareness and Banking Awareness

Under the Banking Regulation Act, 1949, a banking company must maintain what minimum percentage of its demand and time liabilities as cash reserve with the RBI (subject to RBI notification)?

  1. 3 per cent
  2. 4.5 per cent Correct answer.
  3. 18 per cent
  4. 10 per cent

Explanation

Section 42 of the RBI Act requires scheduled banks to keep a cash reserve ratio with the RBI, and the statutory floor historically set is 4.5 per cent of net demand and time liabilities, with the RBI empowered to raise it. The 3 per cent figure relates to the minimum SLR floor under the Banking Regulation Act.

Question 27General Awareness and Banking Awareness

A savings bank account holder in India earns interest on the balance maintained. Under RBI directions, how is this interest calculated and credited?

  1. Calculated on the minimum balance between the 10th and the last day of each month
  2. Compounded quarterly on the lowest balance between the 10th and last day of the month
  3. Calculated on the daily balance and credited monthly only for senior citizens
  4. Calculated on the daily closing balance and credited quarterly Correct answer.

Explanation

RBI mandated that savings deposit interest be computed on the daily balance maintained in the account and credited at quarterly intervals. The older practice of using the minimum balance between the 10th and the last day of the month was discontinued.

Question 28General Awareness and Banking Awareness

Which of the following is the correct expansion of the term 'KYC' as used in Indian banking operations?

  1. Know Your Customer Correct answer.
  2. Know Your Credit
  3. Keep Your Collateral
  4. Key Yield Certificate

Explanation

KYC stands for Know Your Customer, the RBI-mandated process by which banks verify the identity and address of customers before opening accounts or allowing certain transactions. It is a core component of anti-money-laundering compliance.

Question 29General Awareness and Banking Awareness

A customer opens a fixed deposit with a bank for two years. Which of the following best describes the bank's obligation in accounting terms?

  1. Part of the bank's Tier I capital
  2. A time liability payable on maturity with agreed interest Correct answer.
  3. A demand liability repayable on immediate notice
  4. A contingent liability disclosed only in notes to accounts

Explanation

A fixed deposit is a time liability of the bank because it becomes payable only after the agreed term, and the bank pays interest as per the contracted rate. It is recorded as part of deposits in the balance sheet, not as capital or a contingent liability.

Question 30General Awareness and Banking Awareness

When a bank issues a demand draft, the amount is first collected from the applicant and held before the draft is paid. Which type of risk does the bank primarily avoid by this practice?

  1. Interest rate risk
  2. Operational risk of staff fraud
  3. Liquidity risk of the branch
  4. Credit risk on the purchaser of the draft Correct answer.

Explanation

Because the bank collects funds from the purchaser before issuing the draft, it does not extend credit to that person and therefore avoids credit risk on the instrument's buyer. The bank merely acts as a conduit for payment to the beneficiary.

Question 31General Awareness and Banking Awareness

Which of the following is the regulator responsible for licensing and supervising primary (urban) cooperative banks in India?

  1. IRDAI
  2. Reserve Bank of India Correct answer.
  3. SEBI
  4. NABARD

Explanation

The Reserve Bank of India licenses and regulates urban cooperative banks under the Banking Regulation Act, as applicable to cooperative societies, following amendments. NABARD's supervisory role is mainly in the rural cooperative and agricultural credit structure.

Question 32General Awareness and Banking Awareness

A customer's cheque is returned unpaid with the remark 'funds insufficient'. Under the Negotiable Instruments Act, 1881, which offence may arise if the cheque was issued for discharge of a legally enforceable debt?

  1. Dishonour of cheque under Section 138 Correct answer.
  2. Forgery under Section 463
  3. Breach of trust under Section 405
  4. Cheating under the Indian Penal Code only

Explanation

Section 138 of the Negotiable Instruments Act deals specifically with dishonour of a cheque issued for discharge of a debt or liability due to insufficient funds or exceeding arrangement. It provides a criminal remedy after the statutory notice period.

Question 33General Awareness and Banking Awareness

A bank customer wishes to nominate a person to receive the deposit balance in the event of her death. Under RBI guidelines, which of the following is true about nomination in deposit accounts?

  1. Nomination is mandatory for all term deposits
  2. Nomination is permitted only for joint accounts
  3. Nomination requires prior probate of a will
  4. Nomination can be made in single as well as joint accounts Correct answer.

Explanation

RBI guidelines permit nomination facilities in deposit accounts, whether single or joint, and the nominee receives the balance on the depositor's death. Nomination is optional and does not require probate.

Question 34General Awareness and Banking Awareness

A bank's 'base rate' was replaced by which benchmark for pricing loans to borrowers, introduced by RBI in 2016?

  1. Repo Rate
  2. Prime Lending Rate
  3. Marginal Cost of Funds based Lending Rate Correct answer.
  4. Bank Rate

Explanation

RBI introduced the Marginal Cost of Funds based Lending Rate (MCLR) in 2016 to replace the base rate system and improve transmission of policy rate changes. Later, external benchmarks were also permitted for certain loans.

Question 35General Awareness and Banking Awareness

A person deposits Rs 50,000 in a bank and the bank lends Rs 40,000 of it to a borrower. Which function of the bank does this illustrate?

  1. Creation of credit Correct answer.
  2. Safe custody of valuables
  3. Issuance of currency notes
  4. Foreign exchange dealing

Explanation

Banks create credit by lending out a portion of the deposits they receive while retaining a fraction as reserves. This process multiplies deposits across the banking system and is a core function of commercial banking.

Question 36General Awareness and Banking Awareness

Which of the following best describes the role of a 'lead bank' in the Lead Bank Scheme of the RBI?

  1. It acts as the sole lender in a district and bars other banks
  2. It coordinates credit planning and branch expansion for a district among banks Correct answer.
  3. It supervises cooperative societies in the district
  4. It sets the repo rate for its district

Explanation

Under the Lead Bank Scheme, one bank is designated as the lead bank for each district and coordinates with other banks and government agencies on credit planning and branch expansion. It does not exclude other banks from lending there.

Question 37General Awareness and Banking Awareness

A customer uses a debit card at a merchant outlet. Which of the following correctly distinguishes a debit card from a credit card in Indian banking?

  1. A debit card always offers an interest-free credit period, while a credit card does not
  2. A debit card can be used only for online transactions, while a credit card works at merchant outlets
  3. A debit card draws funds immediately from the customer's own account, while a credit card creates a short-term loan Correct answer.
  4. A debit card is issued only by cooperative banks, while a credit card is issued only by commercial banks

Explanation

A debit card authorises immediate debit to the customer's savings or current account, whereas a credit card allows purchases on credit with a repayment period. This distinction affects liability and interest implications for the customer.

Question 38General Awareness and Banking Awareness

Which of the following is the correct meaning of 'SLR' in Indian banking?

  1. The share of net demand and time liabilities held in approved liquid assets such as government securities Correct answer.
  2. The share of deposits held as cash with RBI
  3. The minimum capital required for a new bank licence
  4. The share of profits transferred to the government

Explanation

The Statutory Liquidity Ratio requires banks to hold a prescribed portion of their net demand and time liabilities in approved assets such as cash, gold or government securities. It is maintained with the bank itself rather than with the RBI.

Question 39General Awareness and Banking Awareness

A bank's priority sector lending shortfall can be deposited with which institution under the applicable RBI framework for domestic scheduled commercial banks?

  1. SEBI
  2. SIDBI only for all categories
  3. NABARD Correct answer.
  4. RBI's Deposit Insurance Fund

Explanation

Domestic scheduled commercial banks that fall short of priority sector targets can place the shortfall amount with NABARD for on-lending to eligible sectors. This mechanism supports rural and agricultural credit flows.

Question 40General Awareness and Banking Awareness

Which of the following is a correct statement about the 'Cash Deposit Machine' service provided by banks?

  1. It allows withdrawal of cash using a passbook only
  2. It allows customers to deposit cash directly into their account without visiting a teller counter Correct answer.
  3. It is used only for paying utility bills
  4. It issues demand drafts to customers

Explanation

A Cash Deposit Machine accepts cash from a customer and credits it to the account after verification, reducing the need for counter service. It is a self-service channel and does not issue drafts or pay bills by itself.

Question 41General Awareness and Banking Awareness

A bank records a loan account as a sub-standard asset. Under RBI's asset classification norms, what does a sub-standard asset mean?

  1. A loan that has been restructured at a concessional rate
  2. A loan that has been repaid within the moratorium period
  3. A loan secured by government guarantee
  4. A loan that has remained a non-performing asset for a period of up to 12 months Correct answer.

Explanation

Under RBI norms, a sub-standard asset is one that has remained a non-performing asset for a period of up to 12 months, after which it is treated as doubtful. Classification drives provisioning requirements for the bank.

Question 42General Awareness and Banking Awareness

A bank wants to raise funds by issuing unsecured bonds that qualify as regulatory capital. Which of the following instruments meets the criteria for Tier II capital?

  1. Subordinated debt with a minimum original maturity of five years Correct answer.
  2. Free reserves created out of profits
  3. Perpetual non-cumulative preference shares
  4. Equity share capital

Explanation

Under Basel III capital norms applicable in India, subordinated debt instruments with an original maturity of at least five years can qualify as Tier II capital, subject to limits. Tier I capital, in contrast, consists mainly of equity and disclosed reserves.

Question 43General Awareness and Banking Awareness

A customer receives an SMS claiming to be from her bank asking her to share an OTP to unblock her account. Which of the following is the most appropriate response from a bank clerk's perspective?

  1. Advise the customer to share the OTP since the SMS appears to be from the bank
  2. Suggest the customer call the number given in the SMS to verify
  3. Ask the customer to reply to the SMS with her account number
  4. Inform the customer that banks never ask for OTPs and that the message is a phishing attempt Correct answer.

Explanation

Banks do not ask customers to share OTPs, PINs or passwords over calls or messages, and such requests are typical phishing attempts. The correct guidance is to ignore the message and report it through official channels.

Question 44General Awareness and Banking Awareness

Which of the following correctly describes the 'Small Industries Development Bank of India' (SIDBI) in the Indian financial system?

  1. A stock exchange for small-cap companies
  2. A mutual fund asset management company
  3. A principal financial institution for promotion, financing and development of MSMEs Correct answer.
  4. A commercial bank that accepts retail deposits

Explanation

SIDBI is the principal financial institution for the promotion, financing and development of micro, small and medium enterprises in India. It provides refinance and direct credit support to the MSME sector.

Question 45General Awareness and Banking Awareness

A bank's customer wants to transfer funds to a beneficiary using NEFT. Which of the following is true about NEFT settlement?

  1. Settlement takes place only for amounts above two lakh rupees
  2. Settlement takes place only once a day after banking hours
  3. Settlement takes place in real time on a gross basis
  4. Settlement takes place in batches at half-hourly intervals throughout the day Correct answer.

Explanation

NEFT operates on a deferred net settlement basis, with transactions settled in batches at half-hourly intervals, and it runs 24x7 including holidays. RTGS, in contrast, settles real time on a gross basis.

Question 46General Awareness and Banking Awareness

A customer wants to make an RTGS transfer. What is the minimum transaction amount specified for RTGS in India?

  1. Five lakh rupees
  2. Ten lakh rupees
  3. Two lakh rupees Correct answer.
  4. One lakh rupees

Explanation

RTGS is meant for large-value payments and the minimum amount per transaction is two lakh rupees. There is no upper limit set for RTGS transactions.

Question 47General Awareness and Banking Awareness

Which of the following is the correct order of the three tiers recommended for the cooperative credit structure?

  1. Reserve Bank of India, NABARD, primary agricultural credit society
  2. Primary agricultural credit society, state cooperative bank, district central cooperative bank
  3. District central cooperative bank, primary agricultural credit society, state cooperative bank
  4. State cooperative bank, district central cooperative bank, primary agricultural credit society Correct answer.

Explanation

The short-term cooperative credit structure operates through primary agricultural credit societies at the village level, district central cooperative banks at the district level and state cooperative banks at the apex state level. Each tier supports the one below it.

Question 48General Awareness and Banking Awareness

A bank lends money against the security of a life insurance policy. Which type of charge does the bank create over such a movable security?

  1. Hypothecation
  2. Mortgage
  3. Pledge
  4. Assignment Correct answer.

Explanation

When a life insurance policy is offered as security, the bank takes an assignment of the policy so that the proceeds can be claimed in the event of default or maturity. Mortgages apply to immovable property, while pledge and hypothecation concern goods.

Question 49General Awareness and Banking Awareness

Which of the following best explains why banks maintain a 'statutory reserve' out of profits under the Banking Regulation Act, 1949?

  1. To build a reserve fund before declaring dividends to shareholders Correct answer.
  2. To fund priority sector lending targets
  3. To meet the daily cash requirements of branches
  4. To pay dividends to shareholders every year

Explanation

The Banking Regulation Act requires banking companies to transfer a portion of profits to a statutory reserve before any dividend is declared. This strengthens the bank's capital base and protects depositors.

Question 50General Awareness and Banking Awareness

A customer's account is debited for a 'locker rent' charge by the bank. Which type of service does this relate to?

  1. Term deposit renewal
  2. Safe deposit locker facility Correct answer.
  3. Standing instruction for loan repayment
  4. Bill discounting

Explanation

Locker rent is charged for the safe deposit locker facility, under which the bank provides secure storage space to the customer. The charge is a fee for the service and is distinct from interest or loan-related debits.