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WBBSE Madhyamik Banking & Financial Services (Vocational) study materials
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WBBSE Madhyamik Banking & Financial Services (Vocational) practice questions

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Question 1Introduction to Banking

What is the primary function of a bank when it accepts deposits from the public and lends a portion of those funds to borrowers?

  1. Currency printing
  2. Stock exchange listing
  3. Insurance underwriting
  4. Financial intermediation Correct answer.

Explanation

Banks act as financial intermediaries: they pool idle savings from depositors and channel them as loans to borrowers who need funds. This mobilisation of savings into productive credit is the core economic role of commercial banking. Printing currency is done by the central bank, not commercial banks.

Question 2Introduction to Banking

Which type of account is normally opened by a trader who needs to make and receive many payments each day and wants unlimited withdrawals?

  1. Recurring deposit account
  2. Fixed deposit account
  3. Savings bank account
  4. Current account Correct answer.

Explanation

A current account is designed for business use: it allows frequent deposits and withdrawals without restriction on the number of transactions. Unlike savings accounts it usually pays no interest, because the bank provides transaction convenience instead. Fixed and recurring deposits are meant for saving, not daily payments.

Question 3Introduction to Banking

In banking terminology, what does KYC stand for?

  1. Key Yield Certificate
  2. Know Your Customer Correct answer.
  3. Knowledge of Yearly Credit
  4. Keep Your Currency

Explanation

KYC means Know Your Customer, the process by which a bank verifies a client's identity and address before opening an account or granting credit. It is a mandatory anti-money-laundering safeguard required by the regulator. Correct identity records help prevent fraud and the misuse of banking channels.

Question 4Introduction to Banking

A customer deposits a cheque into their account. Which party is the person who writes and signs the cheque?

  1. The endorser
  2. The drawer Correct answer.
  3. The drawee
  4. The payee

Explanation

In cheque terminology the drawer is the account holder who writes and signs the instrument and thereby orders the bank to pay. The bank on which the cheque is drawn is the drawee, and the person to whom payment is made is the payee. An endorser is someone who signs over a cheque to another person.

Question 5Introduction to Banking

Which of the following is a liability of a commercial bank?

  1. Deposits held for customers Correct answer.
  2. Cash in hand
  3. Loans given to customers
  4. Investments in government securities

Explanation

Customer deposits are money the bank owes back to its depositors, so they appear as liabilities on the bank's balance sheet. Cash in hand, loans advanced and investments are assets because they represent funds the bank owns or is owed. This distinction underpins the bank's liquidity management.

Question 6Introduction to Banking

What is the main purpose of a passbook issued by a bank?

  1. To serve as a loan agreement
  2. To act as a cheque book
  3. To prove ownership of bank shares
  4. To record the customer's transactions and balance Correct answer.

Explanation

A passbook is a small booklet in which the bank records deposits, withdrawals and the running balance of the account. It lets the customer verify entries against their own records. It is not a negotiable instrument and cannot be used to draw money.

Question 7Introduction to Banking

Which institution in India is responsible for issuing currency notes and acting as banker to the government?

  1. Reserve Bank of India Correct answer.
  2. Nabard
  3. State Bank of India
  4. Securities and Exchange Board of India

Explanation

The Reserve Bank of India is the central bank: it issues currency notes, manages monetary policy and acts as banker to the government and to commercial banks. State Bank of India is a commercial bank, not the currency issuer. Nabard handles rural development finance and SEBI regulates securities markets.

Question 8Introduction to Banking

A customer wants to send money to a friend's account in another bank the same day using an electronic system. Which facility is designed for this purpose?

  1. Fixed deposit renewal
  2. Safe deposit locker
  3. Real Time Gross Settlement (RTGS) Correct answer.
  4. Standing instruction for a recurring deposit

Explanation

RTGS is a real-time electronic funds transfer system used for high-value, same-day interbank transfers. The money moves from the remitter's bank to the beneficiary's bank in real time through the central bank's settlement system. Deposit renewal, standing instructions and lockers do not transfer funds to another bank.

Question 9Introduction to Banking

A customer keeps ₹50,000 in a savings bank account that pays simple interest at 4% per annum. What interest is credited for one full year?

  1. ₹2,000 Correct answer.
  2. ₹500
  3. ₹5,000
  4. ₹200

Explanation

Simple interest is calculated as principal × rate × time, so ₹50,000 × 4/100 × 1 = ₹2,000. The rate is applied to the full principal for the entire year. Options showing ₹200 or ₹500 result from misplaced decimal points.

Question 10Introduction to Banking

For an Indian scheduled commercial bank, what does the Cash Reserve Ratio (CRR) require?

  1. Insure deposits up to a fixed amount
  2. Lend a fixed share of deposits to priority sectors
  3. Maintain a minimum capital-to-risk ratio
  4. Maintain cash balances with the RBI as a prescribed percentage of net demand and time liabilities Correct answer.

Explanation

In this stated Indian banking context, CRR is a prescribed ratio applied to net demand and time liabilities, with the required cash balances maintained at the Reserve Bank of India. It is distinct from deposit insurance, capital adequacy and priority-sector lending.

Question 11Introduction to Banking

A bank customer writes 'Not Negotiable' across a cheque before depositing it. What effect does this have?

  1. The cheque can be transferred freely to any holder
  2. The cheque becomes invalid and cannot be paid
  3. The cheque must be paid in cash over the counter
  4. The cheque can only be paid into the named payee's account Correct answer.

Explanation

Crossing a cheque 'Not Negotiable' does not stop payment, but it strips the instrument of negotiability: a transferee cannot acquire a better title than the transferor had. In practice the cheque must be credited only to the payee's account. It remains a valid cheque and cannot be cashed across the counter.

Question 12Introduction to Banking

What is a 'stale cheque' in banking practice?

  1. A cheque drawn on an outstation branch
  2. A cheque with a cancelled signature
  3. A cheque written in pencil
  4. A cheque presented after its validity period has expired Correct answer.

Explanation

A cheque is valid for a limited period, currently three months from the date written, and one presented after that period is called stale and is returned unpaid. Banks reject stale cheques because the drawer's intention to pay can no longer be assumed. A pencil-written or outstation cheque is not automatically stale.

Question 13Introduction to Banking

A customer has ₹80,000 in a savings account and withdraws ₹30,000. If the account pays 3% interest on the minimum balance maintained, what is the minimum balance figure on which interest is commonly computed for that period?

  1. ₹1,10,000
  2. ₹50,000 Correct answer.
  3. ₹80,000
  4. ₹30,000

Explanation

Interest on a savings account is generally calculated on the lowest balance held between the tenth and the last day of the month. After the withdrawal the balance becomes ₹80,000 − ₹30,000 = ₹50,000, which is the figure used. The pre-withdrawal balance and the withdrawal amount are not the minimum balance.

Question 14Introduction to Banking

Which of these best describes a 'demand deposit'?

  1. A deposit that earns no interest under any circumstances
  2. A deposit made only by the government
  3. A deposit repayable only after a fixed term
  4. A deposit repayable on demand through cheque or withdrawal Correct answer.

Explanation

Demand deposits are funds that the customer can withdraw at any time on demand, typically through a cheque, ATM or electronic instruction. Savings and current accounts are demand deposits. Fixed deposits, which are repayable only after a term, are time deposits.

Question 15Introduction to Banking

A bank lends ₹1,00,000 at 10% per annum for two years on simple interest. What total amount will the borrower repay at the end of two years?

  1. ₹1,21,000
  2. ₹1,02,000
  3. ₹1,20,000 Correct answer.
  4. ₹1,10,000

Explanation

Simple interest for two years is ₹1,00,000 × 10/100 × 2 = ₹20,000. Adding this to the principal gives ₹1,00,000 + ₹20,000 = ₹1,20,000. The figure ₹1,21,000 would arise only if interest were compounded annually.

Question 16Introduction to Banking

What is the role of a 'nominee' in a bank deposit account?

  1. To guarantee repayment of a loan
  2. To audit the bank's records
  3. To receive the deposit proceeds after the depositor's death Correct answer.
  4. To operate the account during the depositor's lifetime

Explanation

A nominee is a person named by the depositor to receive the balance of the account in the event of the depositor's death. Nomination eases settlement of claims by the family and avoids delay. A nominee does not automatically get the right to operate the account while the depositor is alive.

Question 17Introduction to Banking

A customer's cheque is dishonoured because of insufficient funds. Which term describes this situation?

  1. Cheque collection
  2. Cheque truncation
  3. Cheque returned for want of funds Correct answer.
  4. Cheque endorsement

Explanation

When a cheque is presented but the account lacks sufficient balance, the drawee bank returns it unpaid, commonly described as return for want of funds. The drawer may also face penal consequences under the law for issuing such a cheque. Endorsement, collection and truncation are unrelated processes.

Question 18Introduction to Banking

Which of the following is the best example of 'Know Your Customer' being applied at account opening?

  1. Issuing a cheque book immediately
  2. Accepting a deposit without any identification
  3. Obtaining and verifying proof of identity and address Correct answer.
  4. Charging a fee for account maintenance

Explanation

KYC requires the bank to obtain and verify documents that establish the customer's identity and address before opening an account. This protects the bank against fraud and money laundering. Simply accepting a deposit or issuing a cheque book does not satisfy the identification requirement.

Question 19Introduction to Banking

A bank's 'Cash Reserve Ratio' is reduced by the central bank. What is the most likely immediate effect?

  1. Interest rates on fixed deposits automatically double
  2. The bank must close some branches
  3. Banks can lend more because fewer funds are locked with the central bank Correct answer.
  4. Banks must hold more cash and lend less

Explanation

A lower CRR means banks must keep a smaller share of deposits as cash with the central bank, freeing funds for lending. This expands credit availability and is an expansionary monetary measure. It does not automatically change deposit rates or require branch closures.

Question 20Introduction to Banking

Which of these instruments is a written unconditional order to a bank to pay a specified sum to a named person or bearer?

  1. Cheque Correct answer.
  2. Promissory note
  3. Fixed deposit receipt
  4. Bill of exchange drawn on a bank

Explanation

A cheque is defined as a bill of exchange drawn on a specified banker and payable on demand. It contains an unconditional order by the drawer directing the bank to pay a certain sum to the payee or bearer. A promissory note is a promise to pay, and a fixed deposit receipt is merely an acknowledgement of a deposit.

Question 21Introduction to Banking

A customer wants to make a large payment to a supplier but does not want to reveal their bank balance to the supplier. Which feature of a cheque should they use?

  1. A cheque with a general crossing only
  2. An open cheque payable to bearer
  3. A cheque crossed 'Account Payee' Correct answer.
  4. An uncrossed cheque endorsed in blank

Explanation

An 'Account Payee' crossing directs the collecting bank to credit the cheque only to the payee's account, so it cannot be encashed by someone else. This protects the drawer against fraud if the cheque is lost in transit. An open or bearer cheque can be encashed by whoever presents it.

Question 22Introduction to Banking

A bank's assets include loans of ₹500 crore and cash of ₹100 crore, while its liabilities include deposits of ₹550 crore. What does this indicate about the bank's position?

  1. The bank cannot calculate its net worth
  2. The bank has zero liabilities
  3. The bank has negative net worth of ₹50 crore
  4. The bank has positive net worth of ₹50 crore Correct answer.

Explanation

Net worth is assets minus liabilities: (₹500 crore + ₹100 crore) − ₹550 crore = ₹50 crore. A positive figure means the bank has a cushion of owned funds over what it owes. The bank's liabilities are clearly stated, so a net-worth calculation is possible.

Question 23Introduction to Banking

Why does a bank generally pay lower interest on a savings account than it charges on a loan?

  1. Because the difference, called the spread, covers the bank's costs and profit Correct answer.
  2. Because loans carry no risk
  3. Because the central bank forbids equal rates
  4. Because savings accounts are illegal

Explanation

The gap between the interest paid to depositors and the interest charged to borrowers is the spread, which funds the bank's operating costs, risk of default and profit. This intermediation margin is central to how a bank earns income. Loans do carry risk, which is one reason their rate is higher.

Question 24Introduction to Banking

A customer signs the back of a cheque and writes 'Pay to Ramesh only'. What has the customer done, and what is the effect?

  1. Cancelled the cheque
  2. Made a restrictive endorsement, preventing further transfer Correct answer.
  3. Made a general endorsement, making the cheque bearer
  4. Guaranteed the cheque will be honoured

Explanation

Signing the back with words that restrict further transfer creates a restrictive endorsement. The cheque can then be paid only as directed and cannot be negotiated onward by the endorsee. A general endorsement, by contrast, leaves the cheque freely transferable.

Question 25Banking Operations and Services

A customer deposits ₹50,000 in a savings bank account. Under the KYC norms of Indian banks, which document is accepted as 'Officially Valid Document' (OVD) for proof of identity and address?

  1. A valid passport issued by the Government of India Correct answer.
  2. A self-declared affidavit on plain paper
  3. A shop visiting card printed by the customer
  4. A rent receipt signed only by the landlord

Explanation

The Reserve Bank of India's Master Direction on KYC lists a valid passport as one of the Officially Valid Documents that banks may accept for identity and address verification. Self-declared affidavits, shop cards and private rent receipts are not OVDs, though they may sometimes support other address proofs subject to bank policy.

Question 26Banking Operations and Services

In a bank's books, the 'Cash Credit' facility given to a trader is best classified as which type of account?

  1. A nominal income account
  2. An asset account of the bank Correct answer.
  3. A deposit liability account
  4. A contingent liability account

Explanation

Cash credit is a loan arrangement in which the bank allows the borrower to draw funds up to a sanctioned limit against security. Because the bank has a claim on the borrower for the amount drawn, it is recorded as an asset (advance) in the bank's books.

Question 27Banking Operations and Services

A customer wants to transfer funds to a beneficiary in another bank using only the beneficiary's mobile number and a UPI ID. Which payment system is designed for this purpose?

  1. Unified Payments Interface (UPI) Correct answer.
  2. Immediate Payment Service (IMPS)
  3. National Electronic Funds Transfer (NEFT)
  4. Real Time Gross Settlement (RTGS)

Explanation

UPI is a real-time mobile payment system that allows transfers using a virtual payment address or UPI ID, often linked to a mobile number. RTGS, NEFT and IMPS all require account details such as the account number and IFSC code rather than a UPI ID.

Question 28Banking Operations and Services

Which of the following is the primary function of a commercial bank?

  1. Issuing currency notes on behalf of the government
  2. Fixing the repo rate for the banking system
  3. Regulating the securities market
  4. Accepting deposits and lending money to borrowers Correct answer.

Explanation

The primary function of a commercial bank is to accept deposits from the public and to lend those funds as loans and advances, earning a margin between the two rates. Currency issue, repo rate setting and securities regulation belong to the central bank or market regulator.

Question 29Banking Operations and Services

A savings bank account holder wants to nominate a person to receive the balance on the holder's death. Under the Banking Regulation Act, 1949, which statement is correct?

  1. Only a legal heir can be nominated
  2. Nomination is permitted only for current accounts
  3. A nomination may be made in the prescribed form and can be cancelled or changed Correct answer.
  4. Nomination requires prior approval of the RBI in every case

Explanation

Section 45ZA of the Banking Regulation Act, 1949 allows a depositor to nominate a person in the prescribed form; the nomination can be varied or cancelled by the depositor. No prior RBI approval is needed, and the nominee need not be a legal heir.

Question 30Banking Operations and Services

A bank issues a cheque book to a customer. Which of the following is the correct meaning of 'crossing' a cheque?

  1. Drawing two parallel transverse lines on the face of the cheque Correct answer.
  2. Signing the cheque twice on the reverse
  3. Writing the amount in words above the figures
  4. Attaching a revenue stamp to the cheque

Explanation

Crossing a cheque means drawing two parallel transverse lines across its face, generally with or without the words 'account payee' or the bank's name. A crossed cheque must be collected through a bank account and cannot be encashed across the counter.

Question 31Banking Operations and Services

Under the RBI's guidelines on 'Basic Savings Bank Deposit Account', which facility must be provided free of charge?

  1. Unlimited free foreign remittances
  2. A minimum of four free withdrawals per month including ATM withdrawals Correct answer.
  3. Overdraft of ₹1 lakh to every holder
  4. Free locker facility for all holders

Explanation

A Basic Savings Bank Deposit Account must offer at least four free withdrawals per month, including ATM and other modes, without any minimum balance requirement. Other facilities such as lockers or overdrafts are not part of the mandatory free services.

Question 32Banking Operations and Services

A customer presents a cheque dated 1 January for payment on 20 January of the same year. Under RBI guidelines, what is the validity period of a cheque?

  1. Six months from the date of the cheque
  2. Three months from the date of the cheque Correct answer.
  3. One month from the date of the cheque
  4. Fifteen days from the date of the cheque

Explanation

The RBI has prescribed that a cheque is valid for presentation for three months from the date mentioned on it. A cheque presented after this period is a stale cheque and is returned unpaid.

Question 33Banking Operations and Services

A firm maintains a current account with a bank and wants an overdraft. Which feature distinguishes an overdraft from a cash credit?

  1. An overdraft is always granted against hypothecation of stock
  2. An overdraft cannot be secured by any asset
  3. An overdraft is normally granted on a running account without a fixed repayment schedule Correct answer.
  4. An overdraft is available only to individuals

Explanation

An overdraft is a facility on a running current account that allows the customer to draw beyond the credit balance up to a sanctioned limit, usually without a fixed repayment schedule. It may be secured or unsecured, and it is available to firms as well as individuals.

Question 34Banking Operations and Services

A customer wants to make a high-value interbank payment of ₹2 crore that must be settled on the same day in real time. Which system should the bank use?

  1. RTGS Correct answer.
  2. UPI
  3. NEFT
  4. IMPS

Explanation

RTGS is a real-time gross settlement system used for high-value interbank payments, with a minimum transaction value of ₹2 lakh. It settles each transaction individually in real time, unlike NEFT's batch settlement.

Question 35Banking Operations and Services

A bank receives a cheque with the words 'Account Payee' written inside the crossing. What is the effect of this marking?

  1. The proceeds must be credited only to the payee's bank account Correct answer.
  2. The cheque can be paid in cash across the counter
  3. The cheque becomes invalid after one month
  4. The cheque can be endorsed to any third party freely

Explanation

An account payee crossing restricts the collecting bank to crediting the proceeds to the payee's account; it cannot be paid in cash or negotiated to a third party. The collecting bank must verify the payee's identity before crediting.

Question 36Banking Operations and Services

A customer deposits ₹10,000 in cash into a savings account. The bank credits the amount but the passbook shows a lower balance. Which of the following is the most appropriate first step for the customer?

  1. File a police complaint against the bank
  2. Approach the banking ombudsman immediately
  3. Submit a written complaint to the branch manager with the deposit slip Correct answer.
  4. Close the account without informing the bank

Explanation

The customer should first raise the discrepancy with the branch in writing, supported by the deposit slip, so the bank can verify its records. Only if the complaint is not resolved within the prescribed period should the customer approach the RBI's Integrated Ombudsman Scheme.

Question 37Banking Operations and Services

Which of the following best describes a 'Non-Performing Asset' (NPA) in a bank?

  1. A cheque returned for insufficient funds
  2. A deposit that has not been operated for ten years
  3. A loan granted to a new customer without security
  4. A loan on which interest and principal are overdue for more than 90 days Correct answer.

Explanation

An asset becomes non-performing when interest or principal remains overdue for more than 90 days, in line with RBI's income recognition and asset classification norms. It is not defined by the absence of security or by deposit inactivity.

Question 38Banking Operations and Services

A customer wants to open a fixed deposit in the name of a minor. Which statement is correct under RBI guidelines?

  1. A minor above ten years can open and operate the FD independently
  2. A minor cannot hold a fixed deposit in any circumstance
  3. A minor's FD can be opened and operated by a guardian, and a minor above ten years may operate it independently Correct answer.
  4. A minor's FD can only be opened jointly with a sibling

Explanation

RBI permits a minor's deposit account to be opened by a natural or legal guardian, and a minor above ten years may be allowed to operate the account independently. This flexibility applies to savings and fixed deposits subject to bank policy.

Question 39Banking Operations and Services

A customer's cheque is returned unpaid with the remark 'funds insufficient'. Under Section 138 of the Negotiable Instruments Act, 1881, what is the primary condition for the payee to initiate action?

  1. The payee must first file a civil suit for recovery of the amount
  2. The cheque must be for an amount exceeding ₹1 lakh
  3. The cheque must have been presented within three months of its date and a written demand notice must be issued within 30 days of the return memo Correct answer.
  4. The cheque must have been crossed as 'account payee' and endorsed by two witnesses

Explanation

Section 138 applies when a cheque is dishonoured for insufficiency of funds, provided it was presented within its validity period and the payee issues a written demand notice within 30 days of receiving the return memo. The drawer is then given 15 days to pay before a complaint can be filed.

Question 40Banking Operations and Services

A bank's balance sheet shows 'Investments' under assets. Which of the following is typically included in a bank's investment portfolio?

  1. Loans given to priority sector borrowers
  2. Government securities and bonds held for statutory liquidity Correct answer.
  3. Cash balances with the RBI
  4. Furniture and fixtures in branches

Explanation

A bank's investment portfolio mainly consists of government securities, bonds and other approved securities held to meet statutory liquidity requirements and to earn returns. Loans, fixed assets and cash balances are shown under separate heads.

Question 41Banking Operations and Services

A customer has an account in a bank that is not a member of the deposit insurance scheme. What protection does the customer have?

  1. Full protection of deposits by the RBI
  2. Cover limited to ₹5 lakh per depositor
  3. Cover limited to ₹1 lakh per depositor
  4. No deposit insurance cover from DICGC Correct answer.

Explanation

Deposit insurance is provided by the DICGC only to depositors of insured banks, which are those covered under the scheme. If the bank is not an insured institution, the customer has no DICGC cover, and the deposit is unprotected by insurance.

Question 42Banking Operations and Services

A customer wants to remit money to a foreign country for education. Which of the following is the correct facility under the Liberalised Remittance Scheme?

  1. Remittance is allowed only for medical treatment
  2. Any resident individual may remit up to USD 250,000 in a financial year for permitted purposes Correct answer.
  3. Only companies may remit funds abroad under the scheme
  4. Any resident individual may remit unlimited amounts without documentation

Explanation

Under the RBI's Liberalised Remittance Scheme, resident individuals may remit up to USD 250,000 per financial year for permitted current and capital account transactions, including education and medical treatment. The scheme applies to individuals, not companies.

Question 43Banking Operations and Services

A bank customer wants to close a savings account and transfer the balance to another bank. Which of the following is the most appropriate instrument for the transfer?

  1. A demand draft or NEFT transfer to the other bank account Correct answer.
  2. A post-dated cheque to the customer
  3. A bearer cheque drawn in cash
  4. A cancelled cheque leaf

Explanation

A demand draft or NEFT transfer ensures the funds reach the customer's account in the other bank securely and with a clear audit trail. A bearer cheque in cash or a post-dated cheque creates risk and is not suitable for interbank transfer of the closing balance.

Question 44Banking Operations and Services

A bank wants to classify a loan account as a 'Sub-standard Asset'. Which condition must be satisfied?

  1. The loan has been overdue for more than 36 months
  2. The loan has been overdue for more than 12 months
  3. The loan has been overdue for more than 24 months
  4. The loan has been overdue for more than 90 days but not more than 12 months Correct answer.

Explanation

Under RBI's asset classification norms, a loan becomes a sub-standard asset when it has remained an NPA for a period not exceeding 12 months. Beyond that, it is classified as doubtful.

Question 45Banking Operations and Services

A customer has a dispute with a bank over an unauthorised electronic transaction. Under RBI's customer protection guidelines, what is the bank's liability if the fraud is due to the bank's own negligence?

  1. The loss is shared equally
  2. The bank bears the entire loss Correct answer.
  3. The customer bears the loss up to ₹25,000
  4. The customer bears the entire loss

Explanation

RBI's guidelines on customer protection for unauthorised electronic transactions place the entire loss on the bank where the deficiency lies with the bank, such as a system failure or negligence. The customer has zero liability in such cases.

Question 46Banking Operations and Services

A bank sanctions a term loan for a project and the borrower fails to repay. The bank wants to enforce its security interest outside the court. Which legal framework allows this?

  1. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Correct answer.
  2. The Banking Regulation Act, 1949
  3. The Recovery of Debts Due to Banks and Financial Institutions Act, 1993
  4. The Negotiable Instruments Act, 1881

Explanation

The SARFAESI Act, 2002 allows secured creditors to enforce their security interest without the intervention of a court or tribunal, subject to the prescribed procedure. The RDDBFI Act provides for recovery through debt recovery tribunals but does not by itself permit out-of-court enforcement.

Question 47Banking Operations and Services

A bank's CRR is 4% and SLR is 18%. A bank has net demand and time liabilities of ₹1,000 crore. What is the approximate amount it must maintain as SLR?

  1. ₹40 crore
  2. ₹400 crore
  3. ₹220 crore
  4. ₹180 crore Correct answer.

Explanation

SLR is calculated as a percentage of net demand and time liabilities. At 18% of ₹1,000 crore, the required SLR is ₹180 crore. CRR would be ₹40 crore at 4%, and the combined figure would be ₹220 crore.

Question 48Banking Operations and Services

A customer wants to open a joint account with a 'former or survivor' mandate. What does this mean?

  1. The account is frozen on the death of either holder
  2. Only the second holder can operate the account
  3. The first holder operates the account during his lifetime, and the survivor operates it after his death Correct answer.
  4. Both holders must sign every cheque

Explanation

A 'former or survivor' mandate allows the first-named holder to operate the account during his lifetime, with the second holder operating it after the first holder's death. It differs from a 'either or survivor' mandate, where either holder can operate.

Question 49Banking Operations and Services

A bank wants to hedge its exposure to interest rate risk on its government securities portfolio. Which of the following is the most appropriate measure of the portfolio's sensitivity to interest rate changes?

  1. Yield to maturity of the portfolio
  2. Duration of the portfolio Correct answer.
  3. Coupon rate of the securities
  4. Face value of the securities

Explanation

Duration measures the sensitivity of a bond portfolio's value to changes in interest rates, so it is the standard hedge metric for interest rate risk. Yield to maturity, coupon rate and face value do not directly measure price sensitivity.

Question 50Banking Operations and Services

A customer wants to open a savings bank account. Which of the following documents is primarily required by a bank for KYC verification?

  1. A recent passport-size photograph only
  2. A copy of the latest electricity bill
  3. A valid proof of identity and address Correct answer.
  4. A letter from a friend confirming the customer's address

Explanation

Banks are required to verify the identity and address of customers under the Know Your Customer (KYC) norms. A valid proof of identity and address, such as Aadhaar, passport, or voter ID, is essential for opening an account. Other documents like utility bills may be accepted as address proof in some cases but are not the primary requirement.