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JAIIB RBWM practice questions

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Question 1Retail Banking

Under the RBI's fair practices code for retail lending, a bank must convey the sanction of a loan to the borrower in writing. Which document primarily serves this purpose?

  1. Disbursement voucher
  2. Loan agreement
  3. Repayment schedule
  4. Sanction letter Correct answer.

Explanation

The sanction letter is the written communication through which a lender conveys its decision to grant credit, including amount, rate, tenor and key conditions. The loan agreement is the subsequent contract signed by both parties, while the schedule and voucher relate to repayment and disbursement rather than to the approval itself.

Question 2Retail Banking

A customer wants a savings account that offers cheque book facility and higher transaction limits than a basic savings deposit account. Which product should the bank typically offer?

  1. Recurring deposit account
  2. Current account
  3. Basic Savings Bank Deposit Account
  4. Savings bank account with cheque facility Correct answer.

Explanation

A regular savings bank account with cheque book facility suits individuals who need payment convenience along with interest on balances. The Basic Savings Bank Deposit Account is a no-frills product with limited free transactions, while current accounts are meant for business entities and recurring deposits are term products without cheque access.

Question 3Retail Banking

In a retail home loan, what does the loan-to-value ratio measure?

  1. The share of the property cost funded by the borrower's own contribution
  2. The ratio of interest paid to principal repaid in the first year
  3. The ratio of monthly income to monthly instalment
  4. The proportion of the property value financed by the lender Correct answer.

Explanation

Loan-to-value expresses the loan amount as a percentage of the value of the mortgaged property, so it measures how much of the property the lender finances. The remaining portion is the borrower's margin or down payment. Income-to-instalment and interest-to-principal measures are different ratios used elsewhere in credit appraisal.

Question 4Retail Banking

A bank issues a demand draft payable at a branch in another city. Which characteristic distinguishes it from a cheque?

  1. It always carries a maturity period of one year
  2. It can be stopped by the purchaser after issue
  3. It is drawn by one branch on another and is payable on demand Correct answer.
  4. It is drawn by the customer on the bank

Explanation

A demand draft is an instrument drawn by one bank branch on another and is payable on demand, which makes it a bank-guaranteed payment instrument. A cheque is drawn by a customer on the bank and can be stopped by the drawer before payment, whereas a draft cannot be stopped at the purchaser's will.

Question 5Retail Banking

A salaried individual wants to save a fixed sum every month by automatic debit from salary for three years. Which product matches this requirement?

  1. Recurring deposit Correct answer.
  2. Liquid mutual fund
  3. Savings bank account
  4. Fixed deposit

Explanation

A recurring deposit allows a fixed amount to be deposited at regular intervals, usually monthly, for a chosen tenor and earns term deposit interest. A fixed deposit requires a lump sum at the outset, and a savings account does not enforce disciplined periodic saving.

Question 6Retail Banking

What is the principal purpose of know your customer norms in retail banking?

  1. To increase the bank's fee income from account holders
  2. To prevent the banking system from being used for money laundering and terrorist financing Correct answer.
  3. To reduce the interest rate paid on savings accounts
  4. To restrict branch banking to high net worth customers

Explanation

KYC norms require banks to identify and verify customers so that the financial system is not misused for money laundering or terrorist financing. They also support risk management and fraud prevention, but they are not a revenue or pricing measure.

Question 7Retail Banking

A borrower repays a retail loan through equated monthly instalments. In the early part of the tenor, what is the typical composition of each instalment?

  1. Only interest is paid and principal is repaid at maturity
  2. Interest is higher and principal repayment is lower Correct answer.
  3. Principal repayment is higher and interest is lower
  4. Principal and interest are equal in every instalment

Explanation

Under the reducing balance method used for EMIs, interest is charged on the outstanding balance, which is largest at the start. Therefore early instalments contain a larger interest component and a smaller principal component, and the proportion reverses over the tenor.

Question 8Retail Banking

A customer holds a jointly operated savings account with the instruction that it be operated by either holder. What does this mean?

  1. Only the first-named holder can operate the account
  2. Both holders must sign every cheque
  3. Operations require a mandate from a court
  4. Either holder can operate the account alone Correct answer.

Explanation

An either-or-survivor or either-holder operation mandate allows any one of the joint holders to transact on the account without the signature of the other. This is distinct from a joint operation mandate, which requires all holders to sign.

Question 9Retail Banking

A customer's credit card bill shows an amount payable of 40,000 and a minimum amount due of 2,000. If the customer pays only the minimum amount due, what is the consequence?

  1. No interest is charged because the minimum due has been paid
  2. Interest is charged on the entire outstanding from the transaction date, subject to the card's terms Correct answer.
  3. The outstanding is converted into an EMI automatically
  4. The card is immediately blocked for non-payment

Explanation

Paying only the minimum amount due avoids immediate default but does not grant an interest-free period. Interest is levied on the outstanding balance, generally from the transaction or statement date as per the cardholder agreement, until full payment.

Question 10Retail Banking

A bank assesses a retail loan applicant using the fixed obligation to income ratio. Which figure does this ratio place in the numerator?

  1. Total monthly income of the applicant
  2. Total monthly obligations including the proposed instalment Correct answer.
  3. Net worth of the applicant
  4. Only the proposed loan instalment

Explanation

The fixed obligation to income ratio divides all fixed monthly obligations, including existing loan instalments and the proposed new instalment, by gross monthly income. It shows the share of income already committed to debt servicing and is a key repayment capacity indicator.

Question 11Retail Banking

A retail customer wants to nominate a beneficiary for a fixed deposit. What is the main effect of a valid nomination?

  1. The deposit cannot be renewed after maturity
  2. The nominee must be a blood relative only
  3. The nominee receives the deposit proceeds on the depositor's death, subject to settlement of claims Correct answer.
  4. The nominee becomes the absolute owner of the deposit during the depositor's lifetime

Explanation

A nomination directs the bank to pay the deposit proceeds to the nominee on the depositor's death, but it does not transfer ownership during the depositor's lifetime. The nominee receives the amount as a trustee for the legal heirs, and the bank is protected by a valid discharge.

Question 12Retail Banking

A customer with a savings account wants to make a high-value interbank payment that must be settled on the same day during banking hours. Which payment system should the bank use?

  1. National Automated Clearing House
  2. Unified Payments Interface
  3. Real Time Gross Settlement Correct answer.
  4. Cheque clearing through the local clearing house

Explanation

RTGS settles high-value interbank transactions individually and in real time, so funds are credited on the same day during operational hours. NACH and cheque clearing are batch or deferred processes, while UPI is designed for small-value retail payments.

Question 13Retail Banking

A bank markets a home loan with a teaser rate. What is the key risk the borrower should understand?

  1. The initial concessional rate resets to a higher floating rate after a specified period Correct answer.
  2. The loan amount is reduced after the teaser period
  3. The borrower can prepay only after the teaser period
  4. The rate remains fixed for the entire tenor

Explanation

A teaser rate is a lower introductory rate for an initial period, after which the loan switches to the applicable floating rate linked to a benchmark. Borrowers must plan for higher EMIs after the reset, and the bank is required to disclose this clearly.

Question 14Retail Banking

A customer wants overdraft protection linked to a savings account so that a temporary shortfall is met without a separate loan application. Which facility fits this need?

  1. Bill discounting
  2. Demand loan against securities
  3. Personal loan
  4. Overdraft facility on the savings account Correct answer.

Explanation

An overdraft linked to a savings or current account allows the customer to draw beyond the available balance up to a sanctioned limit, with interest charged only on the amount and period of use. It is suited to short-term cash flow gaps, unlike a term loan or a bill discounting facility.

Question 15Retail Banking

A bank is calculating interest on a savings account under the daily balance method. What does this method require?

  1. Interest is calculated only on the first day of the quarter
  2. Interest is calculated on the closing balance of the half year
  3. Interest is calculated on the lowest balance in the month
  4. Interest is calculated on the end-of-day balance for each day and summed over the period Correct answer.

Explanation

Under the daily balance method, interest is computed on the end-of-day outstanding balance for each day and aggregated for the period, then credited at the prescribed frequency. This produces a fairer result than older methods based on the minimum or closing balance.

Question 16Retail Banking

A customer receives a suspicious email asking for card details and one-time passwords, claiming to be from the bank. What should the bank's retail staff advise?

  1. Never share OTP or card credentials and report the communication to the bank Correct answer.
  2. Forward the email to friends as a warning
  3. Share the OTP only if the caller quotes the correct card number
  4. Reply to the email asking for written confirmation

Explanation

Banks never ask customers to disclose OTPs, PINs or full card credentials, and such requests are typical of phishing attempts. The correct action is to refuse disclosure and report the incident so that the bank can act and the customer can be protected.

Question 17Retail Banking

A bank evaluates a personal loan applicant whose income is irregular and who cannot provide formal income proof. Which approach is most appropriate under retail lending practice?

  1. Sanction the loan on the basis of self-declared income only
  2. Reject the application without any assessment
  3. Sanction a loan larger than requested to compensate for risk
  4. Assess through alternative documentation and bank statement analysis with suitable risk pricing Correct answer.

Explanation

For customers without formal income proof, banks may use alternative methods such as bank statement analysis, assessed income or surrogate profiling, and price the risk appropriately. Accepting self-declaration alone or sanctioning a larger amount would violate prudent credit assessment.

Question 18Retail Banking

A customer holds a term deposit and wants a loan without breaking the deposit. Which facility is designed for this?

  1. Gold loan
  2. Loan against the term deposit Correct answer.
  3. Home loan
  4. Personal loan

Explanation

A loan against a term deposit is secured by the deposit itself, so the customer retains the deposit's interest while obtaining liquidity, usually at a rate a few percentage points above the deposit rate. Unsecured personal loans or other secured loans would not leverage the existing deposit.

Question 19Retail Banking

A retail customer with a floating rate home loan wants to reduce the tenor without increasing the EMI. What should the bank do with a part prepayment?

  1. Park the amount in a suspense account
  2. Keep the EMI unchanged and reduce the outstanding principal, thereby shortening the tenor Correct answer.
  3. Reduce the EMI and keep the tenor unchanged
  4. Convert the loan to a fixed rate loan

Explanation

When a borrower opts to keep the EMI unchanged after part prepayment, the reduced principal is repaid over fewer instalments, so the tenor shortens. Reducing the EMI instead would keep the tenor broadly unchanged. The choice is normally recorded in the prepayment request.

Question 20Retail Banking

A bank wants to offer a retail product where the borrower pays interest regularly and repays principal as a lump sum at maturity. Which structure is this?

  1. Bullet repayment loan Correct answer.
  2. Equated monthly instalment loan
  3. Step-up loan
  4. Bridge loan

Explanation

A bullet repayment structure involves periodic interest servicing with the entire principal repaid at maturity. It differs from an EMI loan where principal is amortised over the tenor, and from step-up or bridge structures that alter instalment timing for specific purposes.

Question 21Retail Banking

A customer's savings account shows an unauthorised electronic debit. Under RBI's customer protection framework, what is the bank's primary obligation once the customer reports the fraud within three working days?

  1. The bank may refuse to investigate without a police complaint
  2. The bank bears the entire loss and must reverse the unauthorised debit Correct answer.
  3. The loss is shared equally between bank and customer
  4. The customer bears the entire loss

Explanation

Where an unauthorised electronic transaction is reported within three working days, the customer has zero liability and the bank must credit the amount back. The limited liability framework applies only when the report is delayed beyond the specified timelines.

Question 22Retail Banking

A customer wants to open a small savings account using a simplified procedure with minimal documentation. Which facility is intended for this purpose?

  1. Basic Savings Bank Deposit Account Correct answer.
  2. Overdraft account
  3. Non-resident external account
  4. Current account

Explanation

The Basic Savings Bank Deposit Account is a simplified, low-documentation savings product aimed at financial inclusion, with no requirement of a minimum balance and limited free transactions. Current, NRE and overdraft accounts serve different customer categories and purposes.

Question 23Retail Banking

A bank is pricing a retail fixed rate loan. Which factor most directly explains why the fixed rate is usually higher than the initial floating rate on a comparable loan?

  1. Fixed rate loans carry no credit risk
  2. The borrower forfeits the right to prepay
  3. The lender charges a premium for bearing interest rate risk over the tenor Correct answer.
  4. Fixed rate loans are always unsecured

Explanation

In a fixed rate loan the lender cannot reprice the asset when market rates rise, so it builds in a premium for assuming interest rate risk. Credit risk exists in both fixed and floating loans, and prepayment rights are governed separately by the loan agreement.

Question 24Retail Banking

A customer has a credit card outstanding of 60,000 and receives a fresh purchase offer of a 0 per cent interest EMI scheme. Which analysis best captures the risk of accepting the scheme while carrying an existing balance?

  1. The existing balance is automatically written off
  2. The scheme converts the entire outstanding into a single instalment
  3. The existing outstanding may continue to attract interest and the new EMI adds to monthly obligations Correct answer.
  4. The new purchase is always interest free regardless of the existing balance

Explanation

A no-cost EMI scheme normally applies only to the specified new transaction, while any pre-existing revolving balance continues to attract interest under the card terms. The added EMI also raises the customer's fixed monthly obligations, which must be assessed against income.

Question 25Retail Banking

A retail borrower has a floating rate loan benchmarked to an external benchmark. If the benchmark rises but the borrower's EMI is kept unchanged by the bank, what happens to the loan tenor?

  1. The tenor decreases because interest is capitalised
  2. The loan is automatically converted to a fixed rate
  3. The tenor increases because the same EMI now covers more interest Correct answer.
  4. The tenor remains exactly the same

Explanation

When the benchmark rises and the EMI is held constant, a larger share of each instalment goes towards interest, leaving less for principal. As a result, the outstanding is cleared more slowly and the residual tenor extends, unless the borrower opts for a higher EMI instead.

Question 26Retail Banking

A retail customer opens a basic savings bank deposit account under RBI's simplified norms. Which restriction applies to this account until the customer completes full KYC verification?

  1. The account can be operated only by a joint holder
  2. The customer must maintain a minimum monthly average balance of 10,000
  3. Total credits are capped and the account is treated as a small account Correct answer.
  4. The customer cannot make any deposit into the account

Explanation

A small account opened with simplified KYC has statutory limits on aggregate credits and balance, and its operation is time-bound until full KYC is completed. If the customer does not complete KYC within the permitted period, the account is frozen for further credits. These limits are a regulatory customer-protection measure rather than a bank-specific product feature.

Question 27Retail Banking

A bank prepares a loan proposal for a retail borrower and computes the loan-to-value ratio for a housing loan. Which amount does the denominator of this ratio represent?

  1. The market value of the property being financed Correct answer.
  2. The sanctioned loan amount
  3. The borrower's net monthly income
  4. The borrower's total outstanding liabilities

Explanation

Loan-to-value expresses the loan amount as a proportion of the value of the asset offered as security. For a home loan the denominator is therefore the property's assessed value, against which the lender fixes a maximum permissible funding level. A higher LTV means the bank carries a larger exposure relative to the security's worth.

Question 28Retail Banking

A retail customer wants to receive funds from an overseas relative into a savings account. Under the liberalised remittance scheme framework, which statement about inward remittances is accurate?

  1. Inward remittances are prohibited into ordinary savings accounts
  2. Inward remittances can be credited only to an NRE account
  3. Inward remittances are permitted and are credited through the banking channel with proper purpose coding Correct answer.
  4. Inward remittances require prior RBI approval in every case

Explanation

Inward remittances into resident savings accounts are allowed and are processed through authorised dealer banks with the correct purpose code and documentation. The LRS ceiling applies to outward remittances by residents, not to money coming in. Banks must still apply KYC and, where relevant, foreign contribution checks.

Question 29Retail Banking

A retail bank customer wants to link a standing instruction so that a fixed monthly amount moves from savings to a recurring deposit on a chosen date. What should the bank set up?

  1. A standing instruction or e-mandate on the savings account Correct answer.
  2. A letter of credit opened in the customer's name
  3. A demand draft in favour of the customer
  4. A banker's cheque issued each month

Explanation

A standing instruction is a standing authority to the bank to debit the account and credit another account or product on specified dates. For recurring deposits this automates the monthly instalment without the customer visiting the branch. An e-mandate is the digital form of the same authority.

Question 30Retail Banking

A customer is issued a debit card with contactless capability. What is the standard security feature that applies to contactless transactions above the prescribed limit?

  1. The customer must enter the PIN for the transaction to proceed Correct answer.
  2. The transaction is declined permanently
  3. The merchant absorbs the amount as a chargeback
  4. The card is automatically blocked for a month

Explanation

Contactless payments are permitted without a PIN only up to a prescribed value per transaction. Above that threshold the terminal prompts for PIN entry, providing a second authentication factor. This balances convenience with the need to prevent misuse of a lost card.

Question 31Retail Banking

A retail customer wants to know the difference between a fixed deposit and a recurring deposit. Which feature distinguishes a recurring deposit?

  1. The deposit cannot be pledged as security for a loan
  2. The entire principal is deposited at one time at the start
  3. Periodic instalments are deposited over the tenor and interest accrues on each instalment Correct answer.
  4. Interest is paid only at maturity and never compounded

Explanation

A recurring deposit accepts fixed instalments at regular intervals, and each instalment earns interest for the period it remains with the bank. A fixed deposit instead places the whole sum at the outset. Both can generally be pledged to secure a loan.

Question 32Retail Banking

A bank customer wants to send money to a beneficiary using the Unified Payments Interface. What identifies the beneficiary in a UPI transfer?

  1. The beneficiary's cheque number
  2. The beneficiary's credit card number
  3. A virtual payment address or UPI ID linked to the beneficiary's account Correct answer.
  4. The beneficiary's permanent account number

Explanation

UPI uses a virtual payment address, also called a UPI ID, which maps to the beneficiary's bank account without disclosing account details. The payer authenticates the transfer with a UPI PIN. Transfers are near-instant and available around the clock.

Question 33Retail Banking

A retail customer wants a single account that combines savings, term deposit and loan information with a common customer identification. Which concept does this describe?

  1. A customer relationship or single customer view under core banking Correct answer.
  2. A escrow account for project payments
  3. A nostro account maintained with a foreign bank
  4. A correspondent banking arrangement

Explanation

Core banking systems maintain a unique customer identification that links all accounts and facilities held by that customer. This gives the bank and customer a consolidated view of deposits, loans and charges. It supports cross-selling, risk aggregation and easier servicing.

Question 34Retail Banking

A retail customer with a savings account wants to set a limit so that no single ATM withdrawal exceeds 15,000 even though the card permits more. Which facility should the bank enable?

  1. A standing instruction
  2. A card control or transaction limit setting on the debit card Correct answer.
  3. A lien on the savings account
  4. A chargeback registration

Explanation

Debit and credit cards allow the customer to set channel-wise and amount-wise limits through card controls. These controls restrict ATM, POS and online usage to the customer's comfort level. A lien would block funds entirely rather than cap a transaction.

Question 35Retail Banking

A customer's savings account is debited twice for the same merchant transaction because of a terminal error. Under the RBI's harmonised turn-around-time framework for failed transactions, what is the bank's obligation once the error is established?

  1. The bank must close the account to prevent recurrence
  2. The bank must refer the customer to the merchant without any action
  3. The bank must reverse the erroneous debit and pay compensation for the delay beyond the prescribed TAT Correct answer.
  4. The bank may retain the duplicate amount as service charges

Explanation

Where a failed or erroneous transaction is established, the bank must reverse the erroneous debit without delay. If the reversal exceeds the prescribed turn-around time, the bank pays compensation as specified in the framework. The customer should not bear the cost of a system error.

Question 36Retail Banking

A retail borrower has a home loan with a remaining tenor of 15 years and wants to prepay part of the principal. For a floating rate home loan taken by an individual borrower, what does the regulatory framework generally provide?

  1. Prepayment attracts a penalty equal to three months' interest
  2. No prepayment penalty is chargeable for individual borrowers on floating rate home loans Correct answer.
  3. Prepayment is permitted only if the tenor is extended
  4. Prepayment is allowed only after five years

Explanation

For floating rate home loans to individual borrowers, lenders cannot levy foreclosure or prepayment charges. This lets borrowers reduce interest cost when rates rise or surplus funds become available. Fixed rate loans may carry a prepayment charge, subject to the applicable terms.

Question 37Retail Banking

A bank's retail recovery team is dealing with a borrower who has defaulted but is willing to settle. Which approach is consistent with a fair recovery practice?

  1. Recovering the amount from a relative without any legal authority
  2. Contacting the borrower at any hour, including late night, to press for payment
  3. Following a documented and time-bound recovery process with recorded communication and no harassment Correct answer.
  4. Publishing the borrower's photograph in the locality to create pressure

Explanation

Recovery must follow a documented process with reasonable contact hours, recorded communication and no intimidation. RBI's fair practices code requires banks to treat defaulting borrowers with dignity. Third-party recovery agents act under the bank's authority and must comply with the same standards.

Question 38Retail Banking

A retail customer wants to open a locker with a bank. Under RBI's locker guidelines, what is the primary responsibility of the bank regarding the contents of the locker?

  1. The bank does not know the contents and is not liable for their value, but must exercise due care and provide a locker agreement Correct answer.
  2. The bank is the bailee and is liable for the full value of the contents if lost
  3. The bank insures the contents against all risks
  4. The bank can open the locker at will for inspection

Explanation

A locker is a safe custody facility where the bank does not know the contents and therefore cannot be liable for their value. The bank must, however, exercise due care, execute a written agreement and follow the prescribed procedure for any forced opening. Locker hire is not a bailment of the contents.

Question 39Retail Banking

A bank is assessing a retail customer for a credit card upgrade. The customer has a good repayment record but a high utilisation ratio on the existing card. Why does a high utilisation ratio matter to the bank?

  1. It suggests greater reliance on credit and can indicate higher repayment stress Correct answer.
  2. It proves the customer has no other bank accounts
  3. It shows the customer has never used the card
  4. It automatically reduces the customer's income

Explanation

Credit utilisation measures the proportion of the available limit that is actually drawn. A consistently high ratio suggests dependence on borrowed funds and can signal repayment strain. Bureaus and issuers therefore treat it as a risk indicator in limit and upgrade decisions.

Question 40Retail Banking

A retail customer wants to remit money abroad for a child's education and asks about the Liberalised Remittance Scheme. Which statement is correct for a resident individual?

  1. The scheme applies only to companies and not to individuals
  2. The scheme permits remittances up to a prescribed annual ceiling per financial year, subject to purpose codes and documentation Correct answer.
  3. The scheme permits unlimited remittances without any declaration
  4. The scheme applies only to remittances for medical treatment

Explanation

The LRS allows resident individuals to remit up to a specified ceiling each financial year for permitted current and capital account purposes. Each remittance carries a purpose code and, where required, a declaration and documentation. The ceiling is reviewed by RBI from time to time.

Question 41Retail Banking

A customer maintains a savings account with a bank and also has a fixed deposit with the same bank. The bank is permitted to set off the deposit against an unpaid loan of the customer. What is this right called?

  1. Assignment
  2. Novation
  3. Banker's right of set-off Correct answer.
  4. Subrogation

Explanation

The banker's right of set-off allows the bank to adjust a customer's deposit against an outstanding debt due to the bank. It is exercised subject to the terms of the contract and applicable notice requirements. Subrogation and novation are different legal concepts.

Question 42Retail Banking

A retail customer's account is classified as dormant because there have been no customer-induced transactions for the prescribed period. What should the bank do before allowing normal operations again?

  1. Reactivate only after due diligence and verification of the customer's identity and instructions Correct answer.
  2. Close the account and return the balance
  3. Transfer the balance to the government immediately
  4. Charge a penalty equal to the entire balance

Explanation

Inoperative accounts are reactivated after the bank conducts due diligence and verifies the customer's identity and instructions. This protects the customer from unauthorised reactivation. Banks cannot simply close the account or appropriate the balance.

Question 43Retail Banking

A bank offers a retail loan where the interest rate is reset periodically against a reference benchmark plus a spread. What is the main advantage of this structure for the borrower when the benchmark falls?

  1. The loan tenor is fixed permanently
  2. The principal outstanding is waived
  3. The EMI automatically becomes zero
  4. The interest rate and hence the interest burden reduce in line with the benchmark Correct answer.

Explanation

In a floating rate loan, the rate is the benchmark plus a spread, and it resets when the benchmark changes. When the benchmark falls, the applicable rate falls, reducing interest cost, and the bank adjusts the EMI or tenor. The principal is not waived.

Question 44Retail Banking

A retail bank wants to launch a product for salaried customers that provides a pre-approved credit line accessible through a card or app, repayable on demand. Which product best matches this description?

  1. A personal overdraft or line of credit Correct answer.
  2. A letter of credit
  3. A recurring deposit
  4. A term loan with a fixed repayment schedule

Explanation

A personal overdraft or line of credit gives a pre-sanctioned limit that the customer can draw and repay flexibly. Interest is typically charged on the amount actually used. It differs from a term loan, which is disbursed once with a fixed schedule.

Question 45Retail Banking

A customer wants to make a payment to a merchant through UPI and is asked to scan a QR code. What precaution should the customer take before approving the payment?

  1. Verify the payee name shown against the intended merchant before entering the UPI PIN Correct answer.
  2. Approve any collect request received without checking the amount
  3. Enter the UPI PIN first and check the payee afterwards
  4. Share the UPI PIN with the merchant to confirm the amount

Explanation

The payee name is displayed before the PIN is entered, and the customer should confirm it matches the intended merchant. A PIN should never be shared, and collect requests should be checked for amount and payee. These steps prevent misdirected or fraudulent payments.

Question 46Retail Banking

A retail customer holds a savings account and wants a loan against the balance in that account without breaking the deposit relationship. Which facility is most suitable?

  1. A clean personal loan with no security
  2. A demand loan against the security of the savings balance, with a lien marked Correct answer.
  3. A gold loan
  4. A bill discounting facility

Explanation

A loan against a deposit is secured by marking a lien on the deposit, so the customer retains the deposit while accessing funds. The rate is usually lower than an unsecured personal loan because the bank holds security. The deposit is released once the loan is repaid.

Question 47Retail Banking

A bank is reviewing a retail customer's request to increase the credit limit on a card. The customer's repayment history is clean but the bank's internal policy caps exposure based on income. Which action is most appropriate?

  1. Reject the request without any assessment
  2. Close the card and issue a new one without review
  3. Increase the limit beyond policy because the repayment record is clean
  4. Assess income and existing obligations, then increase the limit within the policy cap Correct answer.

Explanation

A limit enhancement should be based on an assessment of income, existing obligations and repayment behaviour, applied within the bank's credit policy. A clean record supports the request but does not override exposure caps. The decision should be documented.

Question 48Retail Banking

A retail bank is designing a grievance redressal process. Under RBI's integrated ombudsman framework, what is the first step a customer must generally take before escalating a complaint?

  1. Approach the RBI ombudsman directly without complaining to the bank
  2. File a written complaint with the bank and allow the prescribed period for resolution Correct answer.
  3. File a case in the consumer court immediately
  4. Approach the banking regulator's board

Explanation

The customer must first raise the complaint with the regulated entity and give it the prescribed period to respond. If the complaint is not resolved or the response is unsatisfactory, the customer may escalate to the RBI ombudsman. Direct escalation without approaching the bank is generally not entertained.

Question 49Retail Banking

A retail customer has a floating rate loan benchmarked to an external benchmark. The bank wants to change the spread over the benchmark after sanction. Under the regulatory framework, when can the spread be changed?

  1. At any time at the bank's discretion
  2. Never, once the loan is sanctioned
  3. Only when the benchmark rises
  4. Only in circumstances specified in the loan contract, such as a change in the borrower's credit risk profile Correct answer.

Explanation

The external benchmark itself resets automatically, but the spread over it can change only in circumstances specified in the loan contract. These typically include a material change in the borrower's credit risk profile. This protects borrowers from arbitrary repricing.

Question 50Retail Banking

A retail bank notices that a customer's account has received several small credits from unrelated senders followed by a large debit to a newly added beneficiary. Which risk does this pattern most likely indicate?

  1. A routine interest credit
  2. Possible layering or money-mule activity requiring enhanced monitoring Correct answer.
  3. A standard standing instruction execution
  4. A legitimate salary credit cycle

Explanation

Multiple small credits from unrelated parties followed by a rapid large debit to a new beneficiary is a classic layering or mule-account pattern. It suggests funds are being passed through the account to obscure their origin. The bank should apply enhanced due diligence and report where required.