LEGAL ASPECTS OF BANKING 01. a) b) c) d) 02.

a) b) c) ntation d) e) A Blue Chip means Excellent Management Professional Shares of good Companies Reinforced Concrete Blue Coloured Precious Stones A Bridge finance is extended for overcoming Delay in getting of the public issue Delay in disbursement of term loan Delay in disbursement of working capital for completing the docume For A & B A, B & C

03. As per SEBI guidelines , any entity /person engaged in the marketing and selling of mutual funds products is required to pass a certification test and obtain a registration number from case of a) SEBI (Securities and Exchange Board of India) b) AMFI (Association of Mutual Funds in India ) c) NSE (National Stock Exchange) d) A, B & C 04. Interest charged in advance accounts as per RBI directive can not be subject to scrutiny by court. This is provided in a) Section 35A of BR Act b) Section 21(A) of BR Act c) Of BR Act d) Section 26 of RBI Act 05. a) b) c) d) A floating charge means Charge at the time or before the company is floated Charge on all floating assets of the company An equitable charge on all assets of the company Any of the above.

06. The charge by way of lien over goods belonging to a company must be registered with Registrar of Companies within a period of a) 30 days of creation of law b) This charge need not be registered as this is not hypothecation, mo rtgage etc c) 30 days of default in repayment d) A or C whichever is earlier 07. a) b) c) d) Hypothecation is defined in Hypothecation Act Indian Contract Act Transfer of Property Act SARFAESI Act

08. The State Govt. wants to seize the goods pledged to bank as the borr ower has defaulted in payment of tax. In this case, a) Govt dues enjoys priority over bank dues b) Bank dues enjoys priority over Government dues c) Both enjoys equal priority d) The Government cannot seize the goods.

09. The auctionable claim is assigned in favour of more than one assigne e at different points of time. The priority of charge is determined with refer ence to date of a) b) c) d) 10. a) b) c) d) 11. a) b) c) d) 12. a) b) c) d) 13. basis of a) b) c) d) 14. a) b) c) d) Execution of notice of assignment Execution of the written instrument for assignment Receipt of notice of assignment NoA A Mortgage cannot be enforced in the absence of Delivery of the title deeds Legal Opinion Narration in Title deeds register Pecuniary obligation. A simple mortgage need be registered when The Loan amount exceed Rs.100/Value of mortgaged property exceeds Rs.100/A or B whichever exceeds Rs.100/Both A & B A Mortgage of the mortgaged property is called Sub-mortgage Second Mortgage Re-mortgage Fraudulent Mortgage For determining the advance amount the shares will be valued on the Current market price Average market price for the last 12 months Face Value A or B whichever is lower. Assignment of LIC policy is done as per section 132 of Transfer of Property Act 38, Indian Insurance Act 1938 138 of Contract Act NOA of . Act.

15. Government Promissory notes should be sent to public debt office to confirm genuiness of a) The Promissory note b) Endorsement c) Alternations, if any d) All the above. 16. a) b) efective c) d) 17. a) c) Gold Loans are given only to properly introduced persons because of RBI s directives Bank will lose the right to sell the gold if the pledgee s title is d Sec.131 of Negotiable Instrument Act All the above. Reserve created out of profit from business operation is known as Capital Reserve b) Profit Reserve Revenue Reserve d) Free Reserve

18. The following is a Term Liability a) Debentures payable within a year from the date of Balance Sheet b) Preference Shares payable within a period of one year from the date of Balance Sheet c) Term Loan instalments payable in a year d) Deposit from public payable in 2 years time. 19. Investment in Shares of other companies can be classified as Current Asset only when the shares are a) Quoted b) Relate to trade investment c) A &B d) Shares cannot be classified as Current Assets 20. a) b) c) d) The following is not usually classified as Other Non Current Assets Advance given to Directors Tender Deposit Receivable outstanding beyond 12 months Preliminary and Pre operative expenses

21. A unit is showing a net profit of Rs.46,000/-. Dividend received Rs.8 000/-. Operating expenses is Rs.96000/-. Find the gross profit a) 134000 b) 150000 c) 142000 22. A firm paid Rs.16 lacs for purchase of a business with machinery worth Rs.10 lacs and other assets worth Rs.4 lacs. In this case the difference of Rs.2 la cs is treated as a) P&L Loss on purchase of asset b) Goodwill Intangible Asset c) Fixed Asset by inflating the value of fixed asset d) Current Asset by inflating the value of current asset 23. If a sum of Rs10,000/accumulates to Rs16,000/after 3 years at simple In terest , what is the rate of Interest. a) 16% b) 25% c) 23% d) 20% 24. a) b) c) d) The Net Working Capital refers to Liquid surplus Borrowers Contributions from long term source to short term use Excess Current Asset over Current Liability All the above.

25. The duration of an operating cycle in 30 days. The operating cycle in this case repeats . times a year a) 30 times b) 12 times c) 10 times d) 52 times 26. a) b) c) The following is not a chargeable current assets Book debt Spares Work in process

d)

Construction work in progress

27. As per RBI guidelines, a bank is required to assess the working capi tal on the basis of the following method a) Turnover Method b) Cash Budget Method c) MPBF of Tandon Method d) Any Method as decided by the individual banks 28. As per the Second method of lending the borrowers contribution from long term source a) is minimum 25% of total current assets b) is restricted to 25% of working capital gap c) is 25% of other current liabilities d) any amount which the unit can bring 29. Total Current Asset of a unit is Rs.300 lacs. Other Current Liabili ties is Rs.200 lacs. The MPBF as per Ist Method & 2nd method can be a) 75 and 25 lacs b) 25 lacs and 75 lacs c) Rs.100 lacs & Rs.150 lacs d) Rs.20 lacs & Rs.80 lacs 30. A borrower need not bring any matching contribution from long term s ources in respect of a) Export Receivables b) Finished goods produced for a specific export order c) Adhoc limits d) A & B 31 A Company makes a single product with a sales price of Rs.10/- and a marginal cost of Rs.6/-. Fixed Cost are Rs.60000/- p.a. In this case, Number of units at break even a) 15000 b) 10000 c) 6000 d) none of the above. 32. In the above problem, Profit Volume Ratio a) 30% b) 40% c) 50% d) 60%

33. s a) b) c) d)

The long term use is 120% of long term source. This indicates the unit ha CR 1.2 Negative TNW Low Capital Negative NWC

34. Tangible Networth is computed by a) Total Tangible Asset less outside liabilities b) Capital, free reserves & surplus less Intangible Asset c) Networth less Intangible Asset d) All the above.

35. A company has a networth of Rs.5 lacs. Term liability Rs.10 lacs, Fixed As set of Rs.16 lacs and Current Asset Rs.25 lacs. There is no intangible asset or ONCA. It's net working capital is a) Rs. 10 lakhs b) Rs. 1 lakh c) Rs. 9 lakh d) Rs. (-) 1 lakh 36. a) b) c) d) 37. a) b) c) d) Financial leverage means use leveraged lease to plan tax liability High degree of solvency Law bank finance Use of more debt capital to increase profit. Diversion means Diversifying to activities not related to main business Retrenching employees Use of Current Assets for payment of Term Liability Use of Current Liabilities for long term use

Examine the following balance sheet to answer the question thereafter: Liability Equity Capital 1000 200 ------Preference Share Capital 800 Term loan 300 Bank Overdraft ecurity 50 Sundry Creditors 100 150 ------1400 1400 38. Capital Gearing Ratio a) 0.78 b) 1.20 c) 0.67 d) 0.87 39. Debt Equity Ratio is a) 2:1 b) 3:1 c) 4:1 d) 1:1 40. Total Outside Liability/TNW a) 3.67:1 b) 5.50:1 c) 12 : 1 100 600 400 100 ------Net Block Inventory Investment in Govt. s Preliminary expenses Receivables 200 Asset Gross Block Less: Dep

d)

6 : 1

41. Net working capital a) 100 b) NIL c) 200 d) Cannot be calculated 42. Quick Ratio a) 0.4:1 b) 2.1:1 c) 1.5:1 d) 1:1 43. Total Tangible Asset a) 1400 b) 1300 c) 1500 d) 1600 44. Opening stock of raw material is Rs.30 lacs, closing stock is Rs.50 lacs. Annual purchase is Rs.500 lacs. What is the average period of holding of Raw Materials? a) 2 M b) 1.5 M c) 1 M d) NOA 45. a) b) c) d) 46. a) b) c) d) 47. a) b) c) d) 48. a) c) Holding period of Receivables is calculated with reference to Cost of Sales Cost of Production Gross Sales NOA. Creditors Velocity expresses the Maximum period for which credit is given Average period of credit enjoyed Minimum period of credit given Minimum period for which credit enjoyed. The following is a Means of Finance Leasing Subsidy Deferred Credit from Suppliers All the above. for the cost of project

For a large and medium units DSCR should be Maximum 2:1 (b) Maximum 1.5:1 Minimum 2:1 (d) Minimum 1.5:1

49. Variable Cost and Sale Price remaining the same, a rise in fixed cost r esult in a) High BEP ( High Break even point) b) Low BEP c) High Margin of Safety d) B&C 50. ng. a) What is the formula for charging compound interest with Annual Compoundi I = Pnr

b) c) d)

P+I A = P( 1+r)n Any of the 3

51. What is the minimum period to be allowed to drawee to decide on acceptanc e / rejections of a usance bill a) 2 Days b) 48 Hours c) 48 Hrs including public holidays d) 48 hrs excluding public holidays 52. Ramesh deposited Rs 10,000/ for 3 years . The Interest is compounded annu ally at 10% . What will be the amount receivable by Ramesh at the end of 3 year period. a) 13,310 b) 13,000 c) 12,000 d) 13,300 53. While calculating the value of (1+.10)3 (to the power of 3) the same can be calculated a) manually b) using calculator c) using MS Excel d) all the above 54. Annuities are a) The annual interest payable or receivable in a debt or an investme nt. b) Lumpsum payment made any time during the course of a fixed period o f time. c) The total amount payable annually in respect of a debt or invest ment d) Series of payments (many number of cash flows) made at a specifie d frequency over the course of a fixed period of time 55. An Annuity is an ordinary Annuity if, a) b) c) d) Payments are required to be made at the beginning of each period. Payments are required to be made at the middle of each period Payments are required to be made at ordinary installments Payments are required to be made at the end of each period.

56. The Marine Insurance Policy should be expressed in a) Rupees b) US Dollars c) Same Currency in which the LC is drawn d) Any foreign currency. 57. The discount rate which equals the present value of promised flow to the current market price /purchase price. This is known as a) Yield to maturity b) NPV c) IRR d) Treasury bills 58. a) b) c) The value which the bond holder gets on maturity is called Maturity value NAV the redemption value

d) 59. This is this a) b) c) d) 60. a) b) c) d)

IRR is the amount by which an asset is expected to lose its value. What Market value Wear and tear Depreciation NAP EEFC can be opened in Rupees Any one of the four designated currencies One of the permitted currencies AMUS

61. A method of calculating depreciation of an asset , which assumes tha t the asset will lose an equal amount of value each year is known as a) Salvage value b) Depreciation c) Straight line Method of calculation d) Accumulated Depreciation 62. arter a) b) c) d) A credit facility will be classified as NPA if Interest Instalment A or B A & B remains past due for one qu

63. As per Prudential Accounting Norms prescribed by RBI, assets are classifi ed into type a) 3 b) 8 c) 4 d) 5 64. The home currency price of one unit of a foreign currency is quoted eg USD 1 = Rs43.20 a) Indirect quotation b) Exchange rate c) Rate of USD d) Direct quotation

65. If the rate of a currency A is known in terms of currency B and rate of Currency B in terms of Currency C , we can derive the rate of currency A inter ms of Currency C using the technique of cross currency. a) Exchange rate b) Cross rate c) Forward rate d) None of the above 66. As per NABARD guidelines the minimum Internal Rate of Return for Agricu ltural Project is a) 15% b) 25% c) 30% d) 18%

67. In case of Direct quotation if the forward rate is more than spot rate the base currency is called as being at ----a) Discount b) Forward rate c) Spot rate d) Premium 68. An operation by which one can make risk free profits making use of the i nterest differentials between two places is called. a) b) c) d) Open market operation Profitability Free market Arbitrage

69. If the forward rate is less than the spot rate the base currency is said to be at a) Discount b) Premium c) At par d) None of the above. 70. The amount which the owner of the business has invested in the firm and can claim from the firm is known as -----a) Capital b) Loan c) Term Loan d) Fixed Asset. 71. a) b) c) d) The amount which the firm owe to outsiders Assets Capital Liabilities Intangible assets

72. A person who owes money to a firm , mostly on account of credit sal es of goods is called. a) Creditor b) Debtor c) Borrower d) lender 73. The balance sheet represents an expansion of the equation as Assets = Liabilities +Capital This statement is a) Cannot be relied b) false c) Not acceptable d) True 74. a) c) 75. a) b) c) d) Assets minus original capital = Liability True b) False can be accepted d) None of the above. If a firm borrows money its capital would be reduced This statement is false This statement is true The same is acceptable None of the above

76. ---------- is the value of an established business over and above the va lue represented by it s tangible assets . a) Assets b) Liabilities c) Goodwill d) None of the above. 77. If the partnership does not mention any method of maintaining capital a ccount then ------- method of capital has to be used. a) Fluctuating capital account b) Partners Current account c) Capital account d) Fixed capital account 78. The joining of a new person into the existing partnership as a partner i s called a) Retirement of a partner b) Resolution of a partnership c) Good will d) Admission of a partner 79. Under the -------- capital method two accounts are maintained for each p artner viz current account and capital account. a) Fixed Capital Method b) Fluctuating capital method c) Equity capital Method d) Preference share capital 80. As per new guidelines both SLR and non SLR securities are to be classif ied into a) Held to maturity. b) Available for sale c) Held for trading d) All the above .

81. Amount of Investment under Securities held to maturity should not exceed --------- of Bank s total investment a) Twenty percentage of the Bank s total investment (20% of total i nvestment) b) Twenty five percentage of the Bank s total investment (25% of tota l investment) c) forty nine percentage of the Bank s total investment (49% of tot al investment) d) forty percentage of the Bank s total investment (40 % of total in vestment) 82. The form of Balance sheet and Profit and loss account of a Banking Compa ny is prescribed in forms A and B of -------------- schedule of the Banking Reg ulation Act 1949. a) Second b) Third c) First d) Fourth 83. -----The Companies Act prohibits issue of any preference share that is -----

a) b) c) d) 84. a) b) c) d) 85. a) b) c) d)

cumulative redeemable both a and b Irredeemable The capital which is stated in the Memorandum of Association is known as Memorandum Capital Paid up capital Authorised capital Issued capital Authorised capital is also known as Nominal or Registered Capital Equity capital Preference share capital All the above

86. When shares are issued at higher than the face value of the shares they are said to be issued at a a) Discount b) Parc) Premium e) None of the above 87. Issue of shares at a discount should be authorized by the members by pa ssing a resolution in the general meeting and resolution of members should specify the r ate of discount which should not exceed 10% of the face value of the shares Further t his is subject to a) Obtention of sanction from Company Law Board b) These shares must be issued with in 2 months c) Both (a) and (b) d) None of the above 88. According to section 79A inserted by Companies Amendment Act 1999 -------- shares means equity shares issued by the company to employees or directors at a d iscount or for consideration other than cash for providing know how or making availab le right in the intellectual property rights or value addition, by whatever name called. a) Employees stock option b) Equity shares c) Sweat equity d) None of the above. 89. A scheme under which the company grants option (A right but not an obli gation ) to an employee to apply for shares of the company at a pre determined price is kn own as a) Employees Stock Option Scheme (ESOS) b) Equity shares c) Sweat Equity d) None of the above. 90. The formation of a company is governed by the rules and regulations as c ontained in a) Indian Companies Act b) RBI act c) BR Act d) None of the above.

91. Profit and Loss Account is one of the Final Accounts prepared by a Comp any. What is the other one. a) Schedules to P&L accounts b) Balance sheet c) Trading Account d) None of the above. 92. a) b) c) d) 93. a) b) c) d) Liabilities that will arise on the happening of certain event Current liabilities Term Liabilities Contingent Liabilities None of the above Schedule VI of the Companies Act prescribes the form of Balance sheet Trading Account Balance sheet None of the above.

94. A computer Accounting system runs based on a set of instructions called the software programmes developed by a person who is a computer software professional and he is called ------a) Programmer b) Software Engineer c) IT man d) None of the above. 95. Accounting software may be written in any one of the computer language s such as a) Windows, UNIX etc b) JAVA C+ etc c) COBOL, Foxpro etc d) None of the above. 96. a) b) c) d) Computers are basically classified into Analogue Computers and Digital computers Hardware and software Wipro and Infosysis All the above

97. A Customer Service Meet should be organized at every Branch a) Once in a Fortnight b) Once in a Quarter c) Once in a Month d) Once in a Half-Year 98. Who cannot file a complaint under Consumer Protection Act? a) Banks b) State Government c) Public Interest Litigation Group d) Persons receiving services free of charge 99. Banking Ombudsman is appointed by a) Central Government / Ministry of Finance b) State Government

c) d)

IDBI RBI

100. DRT has jurisdiction relating to cases pertaining to Banks, Financia l Institutions with debt amount of a) Rs. 1 lakh and above b) Rs. 5 lakh and above c) Rs. 10 lakh and above d) Rs. 20 lakh and above ANSWERS 1) b 6) b 7) d 12) a 13) d d 19) c d 25) b 31) a 37) d 43) b c 49) a d 55) d ) c 61) c ) a 67) d b 73) d d 79) a 85) a ) a 91) b a 97) d 8) b 14) b 20) d 26) d 32) b 38) a 44) c 50) c 56) c 62) c 68) d 74) b 80) d 86) c 92) c 98) d 9) b 15) d 21) a 27) d 33) d 39) b 45) c 51) d 57) a 63) c 69) a 75) a 81) b 87) c 93) a 99) d 16) b 22) b 28) a 34) d 40) b 46) b 52) a 58) c 64) d 70) a 76) c 82) b 88) c 94) a 100) c 10) d 17) c 23) d 29) a 35) d 41) b 47) d 53) b 59) c 65) b 71) c 77) d 83) d 89) a 95) c 11) a 18) 24) 30) a 36) d 42) a 48) 54) 60 66 72) 78) 84) c 90 96) 2) d 3) b 4) b 5) c