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Punjab PSEB Matric NSQF BFSI study materials
Punjab PSEB Matric NSQF BFSI study resources

Punjab PSEB Matric NSQF BFSI practice questions

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Question 1Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

Under the Pradhan Mantri Jan Dhan Yojana, a basic savings account opened for a customer who provides only an officially valid self-declaration of address is best described as which type of account?

  1. A minor account operated only by a guardian
  2. A dormant account that cannot receive any deposits
  3. A small account with a lifetime balance cap of ₹1 lakh Correct answer.
  4. A full KYC-compliant account with no balance restrictions

Explanation

A small account can be opened using a self-declaration of address and limited identity proof, but it carries restrictions on total credits and balance. Once the customer submits full KYC documents, the account is upgraded to a normal savings account.

Question 2Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank customer wants to deposit money for a fixed period and receive a guaranteed return, while keeping the deposit in a bank rather than a market instrument. Which product fits this requirement?

  1. A recurring deposit of variable value
  2. A fixed deposit with a bank Correct answer.
  3. An equity mutual fund
  4. A term insurance plan

Explanation

A fixed deposit is a bank liability where the customer places a lump sum for a chosen tenure at a contracted interest rate. The return is known in advance and the principal is repaid at maturity, subject to the bank's terms.

Question 3Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

In the BFSI sector, the term 'KYC' most directly refers to which activity?

  1. Filing the bank's annual income tax return
  2. Verifying a customer's identity and address before opening an account Correct answer.
  3. Calculating the interest payable on a loan
  4. Recording the daily cash balance in the branch

Explanation

Know Your Customer is the process by which a regulated entity identifies a customer and verifies identity and address using officially valid documents or a permitted self-declaration. It is the foundation for monitoring transactions and reporting suspicious activity.

Question 4Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

Which of the following is best classified as a 'life insurance' product in the BFSI sector?

  1. A fire policy covering a shop building
  2. A health indemnity policy covering hospitalisation
  3. A term plan that pays the sum assured on the death of the insured Correct answer.
  4. A marine policy covering cargo in transit

Explanation

Life insurance contracts pay a benefit on the death of the life assured, sometimes with a maturity benefit depending on the plan. Fire, marine and health policies are general insurance products covering property or medical events.

Question 5Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A candidate is preparing for an NSQF BFSI role and is asked which set of documents is typically accepted as an 'officially valid document' for identity proof. Which set is most appropriate?

  1. A handwritten self-declaration and a business card
  2. A library membership card and a school report card
  3. Passport, Aadhaar and voter identity card Correct answer.
  4. Rent agreement, electricity bill and a photograph

Explanation

Officially valid documents for identity include government-issued photo identity documents such as the passport, Aadhaar and voter identity card. Utility bills and rent agreements are generally used for address proof rather than as primary identity proof.

Question 6Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank customer wants to send money to a beneficiary but does not want to disclose bank account details to the sender. Which payment instrument is designed for this?

  1. A UPI virtual payment address Correct answer.
  2. A cheque payable to bearer
  3. A pay-in slip
  4. A demand draft

Explanation

A virtual payment address acts as an alias linked to the customer's bank account, so the sender can transfer funds without knowing the account number or IFSC. It is a feature of the UPI payment system.

Question 7Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

Which institution is the primary regulator of banks in India?

  1. Securities and Exchange Board of India
  2. Reserve Bank of India Correct answer.
  3. Insurance Regulatory and Development Authority of India
  4. Ministry of Corporate Affairs

Explanation

The Reserve Bank of India regulates banks and payment systems under the Banking Regulation Act and the RBI Act. SEBI regulates securities markets, IRDAI regulates insurers, and the Ministry of Corporate Affairs administers company law.

Question 8Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer opens a savings bank account and is told that the interest earned on the account is calculated on the daily closing balance. Which statement is correct about the interest on savings deposits in India?

  1. Interest is exempt from income tax for every customer regardless of income
  2. Interest is paid only if the customer maintains a fixed deposit alongside
  3. Interest is credited at the rate fixed by the bank within RBI guidelines, usually at quarterly intervals Correct answer.
  4. Interest is fixed by the customer at the time of opening the account

Explanation

Banks pay interest on savings deposits at rates determined by the bank within the RBI's regulatory framework, and it is typically credited quarterly. The rate is not chosen by the customer, and tax treatment depends on the customer's overall income and applicable provisions.

Question 9Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer with a savings account wants to make a fixed monthly payment into a deposit scheme for two years to build savings. Which product should the bank suggest?

  1. A current account
  2. A credit card
  3. A fixed deposit
  4. A recurring deposit Correct answer.

Explanation

A recurring deposit allows the customer to deposit a fixed amount every month for a chosen tenure and earn interest on the accumulated balance. A fixed deposit involves a single lump sum rather than monthly instalments.

Question 10Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank customer receives an SMS claiming to be from the bank asking for an OTP to 'unblock' the account. What is the most appropriate action under BFSI safety practices?

  1. Reply with the account number and wait for a call back
  2. Forward the OTP to the bank's customer care number
  3. Share the OTP only after confirming the caller's name
  4. Ignore the message and report it to the bank's official channel without sharing the OTP Correct answer.

Explanation

OTPs are confidential and are never requested by genuine bank staff over phone, SMS or email. The safe response is to ignore the message, not share any credential, and report the attempt through the bank's official grievance or fraud-reporting channel.

Question 11Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants to nominate a family member for a bank deposit. Which statement correctly describes the role of a nominee?

  1. The nominee receives the deposit proceeds on the depositor's death, subject to the bank's claim process Correct answer.
  2. The nominee becomes the owner of the deposit during the depositor's lifetime
  3. The nominee replaces the need for a will in all cases
  4. The nominee can withdraw the deposit at any time without the depositor's consent

Explanation

A nomination authorises the bank to release the deposit to the nominee on the depositor's death, after the prescribed claim formalities. It does not transfer ownership during the depositor's lifetime and does not override succession law.

Question 12Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer deposits a cheque drawn on another bank into their savings account. Which statement best describes the clearing process?

  1. The collecting bank presents the cheque through the clearing house and credits the account after realisation Correct answer.
  2. The cheque is cleared only if the drawer personally visits the collecting branch
  3. The collecting bank credits the account immediately as soon as the cheque is received
  4. The paying bank must honour the cheque even if the account has insufficient funds

Explanation

Cheque clearing involves the collecting bank presenting the instrument to the paying bank through the clearing mechanism. The customer's account is credited only after the cheque is realised, and payment depends on sufficient funds and a valid mandate.

Question 13Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A small business owner needs an account for frequent business receipts and payments with no restriction on the number of transactions and no interest. Which account is most suitable?

  1. A current account Correct answer.
  2. A recurring deposit
  3. A savings bank account
  4. A fixed deposit

Explanation

A current account is designed for business use and generally pays no interest, allowing unrestricted transaction volume. Savings accounts usually carry transaction limits or conditions, while deposits are savings instruments rather than payment accounts.

Question 14Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants to transfer funds to a beneficiary's bank account using the account number and IFSC code through a bank-operated retail payment system. Which system is designed for this?

  1. Bharat BillPay
  2. NEFT Correct answer.
  3. Aadhaar Enabled Payment System
  4. UPI Lite

Explanation

NEFT is a retail funds transfer system operated by the RBI in which transfers are settled in batches using the beneficiary's account number and IFSC. It is distinct from UPI, AEPS and bill payment systems, which serve other purposes.

Question 15Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank is assessing a loan applicant's ability to repay a personal loan. Which factor is most directly relevant to the credit decision?

  1. The number of years the applicant has held a mobile phone
  2. The applicant's choice of savings account interest rate
  3. The applicant's preferred branch location
  4. The applicant's regular income and existing repayment obligations Correct answer.

Explanation

Repayment capacity is assessed from regular income, stability of employment or business, and existing debt obligations relative to income. These factors indicate whether the applicant can service an additional loan.

Question 16Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants protection against hospitalisation costs arising from an accident. Which insurance product best matches this need?

  1. A fire insurance policy on the home
  2. A health insurance policy with accident-related hospitalisation cover Correct answer.
  3. A motor third-party liability policy
  4. A term life insurance policy

Explanation

Health insurance indemnifies medical expenses arising from illness or injury, including hospitalisation after an accident. A term plan pays only on death, and property and motor policies cover other risks.

Question 17Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer is comparing two deposit offers: one at 7% per annum compounded annually for one year and another at 7% per annum simple interest for one year. Which statement is correct?

  1. The simple interest option yields more because no compounding occurs
  2. Both options yield exactly the same amount in every case
  3. The compounded option yields slightly more because interest is added to the principal before the year ends Correct answer.
  4. The compounded option yields less because the rate is applied twice

Explanation

Compound interest earns interest on interest once the interest is credited to the principal, so for the same nominal rate and tenure it produces a slightly higher maturity value than simple interest. The effect grows with the number and frequency of compounding periods.

Question 18Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank employee notices a customer making several cash deposits just below the reporting threshold on consecutive days. What is the most appropriate action under anti-money-laundering practices?

  1. Ignore the transactions because each one is individually within limits
  2. Close the account immediately without any internal review
  3. Record and escalate the pattern as a possible attempt to avoid reporting thresholds Correct answer.
  4. Inform the customer of the exact threshold so future deposits can be planned

Explanation

Structuring involves splitting transactions to stay below reporting thresholds and is itself a red flag under anti-money-laundering rules. The employee should record the pattern and escalate it through the bank's compliance process rather than act unilaterally.

Question 19Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer's fixed deposit is pledged as security for a loan. Which statement correctly describes the bank's position?

  1. The deposit earns no interest once it is pledged
  2. The bank can adjust the deposit proceeds against the loan if the borrower defaults Correct answer.
  3. The customer may withdraw the pledged deposit freely at any time
  4. The loan automatically becomes unsecured on maturity of the deposit

Explanation

Pledging a deposit creates a charge in the bank's favour, giving it a right of set-off against the deposit if the borrower defaults. The deposit generally continues to earn interest and remains under lien until the loan is repaid.

Question 20Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants to make a payment to a merchant using a QR code displayed at the shop, without entering the merchant's account number. Which payment mechanism is being used?

  1. A banker's cheque
  2. A UPI QR-based merchant payment Correct answer.
  3. A demand draft
  4. An NEFT transfer

Explanation

UPI QR codes encode the merchant's payment address, allowing the customer to scan and pay without typing account details. NEFT, demand drafts and banker's cheques are not QR-based merchant payment mechanisms.

Question 21Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A candidate is asked to distinguish between 'bank rate' and 'repo rate'. Which statement is correct?

  1. The repo rate is the rate paid by customers on fixed deposits
  2. The bank rate is the rate at which banks lend to each other overnight without collateral
  3. The repo rate is the rate at which the RBI lends short-term funds to banks against securities, while the bank rate is a longer-term signalling rate Correct answer.
  4. The repo rate and bank rate are always identical by law

Explanation

The repo rate is the policy rate for short-term lending by the RBI to banks against eligible securities. The bank rate is a separate longer-term rate used for certain facilities and as a penal rate, and the two are not required to be equal.

Question 22Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank customer wants to open a joint account where either holder can operate it, with the balance payable to the survivor on death. Which instruction should the bank record?

  1. A minor account with the guardian as sole operator
  2. Joint account with either-or-survivor operation Correct answer.
  3. A single account with a nominee who cannot operate it
  4. Joint account with former-or-survivor operation

Explanation

An either-or-survivor mandate allows any joint holder to operate the account during their joint lives and passes the balance to the survivor on death. The former-or-survivor mandate requires all holders to operate while alive.

Question 23Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank is designing a financial literacy session for first-time account holders under a government inclusion drive. Which content is most aligned with BFSI vocational outcomes?

  1. Training participants to audit bank financial statements
  2. Teaching advanced equity derivatives pricing
  3. Coaching participants to sell insurance without a licence
  4. Explaining account operation, safe digital payments and grievance redressal channels Correct answer.

Explanation

Financial literacy for newly included customers focuses on practical account operation, safe use of digital payments and knowing how to raise complaints. Advanced derivatives, statutory audit and unlicensed selling fall outside that scope and may breach regulatory requirements.

Question 24Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer's cheque is dishonoured for insufficient funds. Which statement best describes the bank's obligation to the customer?

  1. The bank must inform the payee directly and arrange funds
  2. The bank returns the cheque with a reason and may charge the applicable dishonour fee as per its schedule Correct answer.
  3. The bank must pay the cheque and create an overdraft without any agreement
  4. The bank can retain the cheque permanently without returning it

Explanation

A cheque may be dishonoured when the drawer's account lacks sufficient funds, and the bank records a return reason and may levy charges under its published schedule. The bank is not obliged to create an unauthorised overdraft or to arrange funds for the customer.

Question 25Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer with a monthly income of ₹40,000 has existing loan instalments of ₹12,000 and applies for a new loan with an instalment of ₹10,000. Using a common fixed-obligation-to-income ratio guideline of 50%, what is the most accurate assessment?

  1. The application exceeds the guideline because total obligations would be ₹22,000 against a ₹20,000 ceiling Correct answer.
  2. The application is automatically approved because income exceeds ₹30,000
  3. The application is comfortably within the guideline because the new instalment is below ₹12,000
  4. The application cannot be assessed without the customer's branch code

Explanation

A 50% ceiling on a monthly income of ₹40,000 permits total obligations of ₹20,000. Adding the proposed ₹10,000 instalment to the existing ₹12,000 gives ₹22,000, which exceeds the ceiling and signals repayment strain.

Question 26Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

Under the BFSI NSQF vocational course, a student is told that a bank accepts public deposits and lends money to borrowers. Which pair of functions best describes this core banking activity?

  1. Providing only locker facilities to customers
  2. Regulating securities markets and stock exchanges
  3. Accepting deposits and advancing loans Correct answer.
  4. Issuing currency notes and minting coins

Explanation

The defining function of a bank is financial intermediation: it mobilises savings by accepting deposits and channels those funds to borrowers as loans. Currency issue and market regulation are central bank and securities regulator functions, not those of an ordinary commercial bank.

Question 27Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A student preparing for the BFSI course is asked what a KYC procedure requires when a new customer opens an account. Which action is part of KYC compliance?

  1. Obtaining the customer's income tax returns for the last five years
  2. Checking the customer's credit score before accepting the deposit
  3. Asking the customer to submit a guarantor's salary certificate
  4. Verifying the customer's identity and address using official documents Correct answer.

Explanation

KYC (Know Your Customer) requires a bank to establish and verify the identity and address of every customer using acceptable official documents such as Aadhaar, passport or a utility bill. Credit scores and income tax returns relate to lending assessment, not to basic identity verification.

Question 28Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A candidate is asked about the role of a Business Correspondent (BC) appointed by a bank. Which statement describes this role?

  1. A broker who trades government securities on the bank's behalf
  2. An officer who audits the bank's internal accounts annually
  3. An agent who provides basic banking services in areas without a bank branch Correct answer.
  4. A director who votes at the bank's annual general meeting

Explanation

Business Correspondents are individuals or entities engaged by a bank to deliver basic services such as account opening, deposits and withdrawals at locations lacking a formal branch. They act as extensions of the bank under a defined agreement, which supports financial inclusion.

Question 29Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer asks what 'nominal interest rate' means in a deposit advertisement. Which description is correct?

  1. The penalty rate applied when a deposit is withdrawn early
  2. The stated rate before adjusting for the effect of compounding Correct answer.
  3. The rate charged by the central bank on emergency lending
  4. The rate actually earned after compounding over the year

Explanation

The nominal rate is the headline rate quoted in the advertisement and does not account for compounding within the year. The effective (or annualised) yield is higher when interest is compounded more frequently than once a year.

Question 30Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

In the BFSI syllabus, what distinguishes a 'term deposit' from a 'demand deposit'?

  1. A term deposit is available only to companies, while a demand deposit is only for individuals
  2. A term deposit can be operated by cheque, while a demand deposit cannot
  3. A term deposit is locked for a fixed period, while a demand deposit is repayable on demand Correct answer.
  4. A term deposit earns no interest, while a demand deposit earns interest

Explanation

A term deposit such as a fixed deposit is placed for a specified tenure and generally cannot be withdrawn before maturity without penalty. A demand deposit, such as a savings or current account balance, is repayable whenever the customer demands it.

Question 31Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A student reads that an insurance contract is based on the principle of 'insurable interest'. What does this principle require?

  1. The premium must be paid in a single lump sum at the start
  2. The policyholder must benefit financially from the continued existence of the insured subject Correct answer.
  3. The policyholder must be a citizen of the country where the insurer operates
  4. The insured subject must be located within the insurer's home city

Explanation

Insurable interest means the policyholder would suffer a genuine financial loss if the insured person or property were lost or damaged. It distinguishes insurance from a wager and must exist when the policy is taken.

Question 32Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A candidate is asked which document a bank issues to a depositor as proof of a fixed deposit. What is the usual answer?

  1. A share certificate
  2. A mutual fund statement of account
  3. A debenture certificate
  4. A fixed deposit receipt or advice Correct answer.

Explanation

When a customer places a fixed deposit, the bank issues a fixed deposit receipt or advice showing the amount, tenure, rate and maturity details. It serves as the customer's record of the deposit contract with the bank.

Question 33Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

What is the main purpose of the Pradhan Mantri Jan Dhan Yojana (PMJDY) in the context of Indian banking?

  1. Providing subsidised crop loans to large farmers
  2. Offering tax-free bonds to high-income investors
  3. Opening basic savings accounts for unbanked households with simplified KYC Correct answer.
  4. Insuring all bank deposits without any limit

Explanation

PMJDY is a national financial inclusion programme that encourages unbanked households to open basic savings accounts with simplified KYC and access to a RuPay card and overdraft facility. It is not a crop loan or investment scheme.

Question 34Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer has a savings account and wants to know how a UPI transaction differs from an NEFT transfer. Which statement is accurate?

  1. UPI transfers are settled only once a week, while NEFT settles instantly
  2. NEFT requires a smartphone app, while UPI requires a branch visit
  3. UPI works in real time through a mobile app using a virtual payment address, while NEFT operates in batches Correct answer.
  4. UPI can be used only for amounts above one lakh rupees, while NEFT has no minimum

Explanation

UPI is an instant, app-based system that uses a virtual payment address or QR code and settles in real time. NEFT is a bank-to-bank transfer that is processed in half-hourly batches and requires account details such as account number and IFSC.

Question 35Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer needs to send money urgently to a beneficiary's bank account and wants immediate settlement using account number and IFSC. Which system should be used?

  1. Automated Teller Machine cash withdrawal
  2. National Electronic Funds Transfer (NEFT)
  3. Point of Sale terminal transaction
  4. Real Time Gross Settlement (RTGS) Correct answer.

Explanation

RTGS settles high-value interbank transfers individually in real time, so funds reach the beneficiary bank immediately during working hours. NEFT is batch-based and may take a little time, while ATM and POS are not funds transfer systems.

Question 36Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A student is asked to explain the 'cash reserve ratio' (CRR) maintained by banks. Which statement is correct?

  1. It is the interest rate at which banks lend to their best customers
  2. It is the share of net demand and time liabilities that banks must keep as cash with the central bank Correct answer.
  3. It is the fee charged to customers for using an ATM
  4. It is the amount of capital a bank must raise from shareholders

Explanation

CRR is the proportion of a bank's net demand and time liabilities that must be maintained as cash balances with the central bank, and it earns no interest. It is a monetary policy tool used to influence liquidity in the banking system.

Question 37Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank's loan officer is assessing a borrower who has no credit history. Which step best helps the bank evaluate the borrower's creditworthiness?

  1. Requiring the borrower to sign a blank cheque
  2. Charging a higher processing fee on the loan
  3. Obtaining a credit information report from a credit bureau Correct answer.
  4. Asking the borrower to open a savings account

Explanation

A credit bureau report shows the borrower's past repayment behaviour across lenders, which is the standard tool for assessing creditworthiness. Opening a savings account or charging a fee does not reveal repayment capacity or intent.

Question 38Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants to buy a life insurance policy that pays a lump sum to the family if the insured dies during the policy term, with no savings component. Which product fits?

  1. Money-back policy
  2. Term life insurance Correct answer.
  3. Annuity plan
  4. Endowment policy

Explanation

Term insurance provides pure risk cover for a specified period and pays the sum assured only on death during the term, with no maturity or savings benefit. Endowment and money-back policies combine protection with savings and return money on survival.

Question 39Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A depositor wants to know the maximum amount protected by deposit insurance in India. What is the correct limit per depositor per bank?

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

Explanation

Deposit insurance in India covers deposits up to five lakh rupees per depositor per bank, covering both principal and interest. This limit was raised from the earlier one lakh rupees to strengthen depositor confidence.

Question 40Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants a loan against the security of gold ornaments. Which type of advance is this?

  1. Clean overdraft without security
  2. Secured loan with gold as pledge Correct answer.
  3. Bill discounting facility
  4. Unsecured personal loan

Explanation

When gold ornaments are handed over to the bank as security, the loan is a secured advance created by pledge, and the bank holds the ornaments until repayment. An unsecured loan or clean overdraft has no such collateral.

Question 41Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A candidate is asked how a bank's 'base rate' or 'MCLR' is used in pricing a floating-rate home loan. Which statement is correct?

  1. The loan rate is the benchmark rate plus a spread that may change with the benchmark Correct answer.
  2. The loan rate equals the repo rate exactly in all cases
  3. The loan rate depends only on the borrower's age
  4. The loan rate is fixed for the entire tenure and never changes

Explanation

Floating-rate loans are priced as a benchmark such as MCLR or the external benchmark plus a spread, so the rate moves when the benchmark changes. The spread reflects the borrower's risk profile and is set at the time of sanction.

Question 42Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A policyholder's car is damaged in an accident and the insurer pays the repair cost after deducting a fixed amount. What is this deduction called?

  1. Premium loading
  2. Surrender value
  3. Excess or deductible Correct answer.
  4. Grace period

Explanation

The excess or deductible is the portion of a claim that the policyholder bears, and the insurer pays only the amount above it. It reduces small claims and encourages careful risk behaviour by the insured.

Question 43Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer wants to make a fixed monthly investment into a mutual fund scheme over a long period. Which facility matches this requirement?

  1. Systematic Withdrawal Plan
  2. Switch transaction
  3. Systematic Investment Plan Correct answer.
  4. Lump-sum purchase

Explanation

A Systematic Investment Plan allows an investor to invest a fixed amount at regular intervals into a mutual fund scheme, which averages out purchase cost over time. A withdrawal plan does the opposite by paying out money periodically.

Question 44Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A small trader wants a short-term facility to finance purchase of goods before sale and repay after sale proceeds come in. Which product is designed for this need?

  1. Fixed deposit
  2. Cash credit facility Correct answer.
  3. Home loan
  4. Life insurance policy

Explanation

A cash credit facility allows a borrower to draw funds up to a sanctioned limit against stock or receivables and repay as sales proceeds arrive, making it suitable for working capital. It charges interest only on the amount actually used.

Question 45Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A student is asked to distinguish a 'cheque' from a 'demand draft'. Which statement is correct?

  1. A cheque is always payable at a future date, while a demand draft is payable immediately
  2. A cheque is issued by a bank, while a demand draft is issued by a customer
  3. A demand draft can be drawn only by a company, while a cheque can be drawn by any person
  4. A cheque is drawn by a customer on a bank, while a demand draft is issued by a bank on itself Correct answer.

Explanation

A cheque is an instrument drawn by an account holder on the bank to pay a specified sum, whereas a demand draft is a prepaid instrument issued by a bank branch and payable at another branch or bank. The option that reverses the issuer of each instrument is wrong.

Question 46Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank's customer wants to make a high-value payment to a supplier but is worried about the risk of the supplier not delivering the goods. Which payment mechanism reduces this risk?

  1. Telegraphic transfer without conditions
  2. Cheque marked as bearer
  3. Letter of credit Correct answer.
  4. Cash payment at the supplier's office

Explanation

A letter of credit is a bank undertaking to pay the supplier only when specified documents showing shipment or delivery are presented. It protects the buyer against non-delivery and the seller against non-payment in trade transactions.

Question 47Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A customer's loan account is classified as a non-performing asset (NPA). What does this mean?

  1. The loan was sanctioned without any security
  2. Principal or interest has remained overdue for more than ninety days Correct answer.
  3. The borrower has repaid the loan before the due date
  4. The loan has been transferred to another bank

Explanation

A loan becomes an NPA when principal or interest has been overdue for more than ninety days, indicating that the borrower has stopped servicing the debt as agreed. The bank must then make provisions and follow a recovery process.

Question 48Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

An insurer is deciding how to price a fire insurance policy for a warehouse storing flammable goods. Which factor is most relevant to setting the premium?

  1. The distance of the owner's residence from the warehouse
  2. The number of employees working in the warehouse
  3. The age of the owner of the warehouse
  4. The risk of loss estimated from the nature of goods and fire protection measures Correct answer.

Explanation

Fire insurance premiums are based on the probable maximum loss, which depends on the hazard of the stored goods, fire-fighting arrangements and construction of the building. Employee count, owner's age and residence do not measure the insured risk.

Question 49Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank customer receives a request from a caller claiming to be a bank officer who asks for remote access to the customer's phone to 'update KYC'. Which action is most appropriate?

  1. Send a screenshot of the account statement to the caller
  2. Refuse and verify the request only through the bank's official branch or helpline Correct answer.
  3. Share the screen but avoid revealing the account number
  4. Install the app and complete the update quickly

Explanation

Banks do not ask customers to install remote-access apps or share screen control to update KYC, so such a request is a fraud attempt. The customer should refuse and verify through the official branch or helpline before taking any action.

Question 50Banking, Financial Services and Insurance (NSQF vocational sector) - official sub-domain breakdown and weights not published in the source

A bank is reviewing its loan portfolio and finds that a large share of defaulting loans was sanctioned without proper income verification. Which control most directly addresses this weakness?

  1. Increasing the interest rate on all new loans
  2. Mandatory income documentation and verification before sanction Correct answer.
  3. Reducing the number of branches in rural areas
  4. Extending the loan tenure for all borrowers

Explanation

The weakness is a failure of credit appraisal at sanction, so the direct control is to require and verify income documents before approving loans. Raising rates, closing branches or extending tenure does not fix the root cause of poor appraisal.