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Banking Function & Business General Knowledge Questions

1.

In context of banking, what does ‘BBB’ stands for__?
[A]Bank Broadcast Bureau
[B]Bank Beneficial Bureau
[C]Bank Blogger Bureau
[D]Bank Board Bureau

Bank Board Bureau
The Union Government has decided to set up Bank Board Bureau (BBB) for Public Sector Banks (PSBs), where each bank would be monitored on the basis of key performance indicators. The Bank Board Bureau will recommend appointment of directors in PSBs and advise on ways for raising funds and mergers and acquisitions to the lenders.

2.

A syndicated loan is a form of lending in which__:
[A]a group of lenders collectively extend a loan to a single borrower
[B]a lender extend a loan to group of borrowers
[C]a loan made by a single lender to a single borrower
[D]a group of lenders collectively extend a loan to group of borrowers

a group of lenders collectively extend a loan to a single borrower
Syndicated lending is a form of lending in which a group of lenders collectively extend a loan to a single borrower. The group of lenders is called a syndicate. The loan is called a syndicated loan.

3.

In which year, Foreign Currency Non-Resident Account Bank or FCNR (B) was first introduced?
[A]1991
[B]1993
[C]1995
[D]1996

1993
Foreign Currency Non-Resident Account Bank or FCNR (B) was first introduced in 1993. While NRERA Account is a rupee account and the depositor is exposed to the Currency rates risk; FCNR is opened in foreign currency only. Currently, FCNR Account can be opened in six designated currencies viz. US Dollar (USD), Great Britain Pound (GBP), Euro (EUR), Japanese Yen (JPY), Canadian Dollar (CAD) and Australian Dollar (AUD).

4.

In which among the following accounts, no cheque book is issued?
[A]Minor Account
[B]Joint Account
[C]Illiterate Account
[D]Non Resident Account

Illiterate Account
Illiterate accounts are opened on discretion of the banks if the person personally goes to the bank along with a witness already known to the bank and the depositor. No cheque books are issued for such accounts. Any withdrawal is done by a thumb impression of the depositor in presence of the bank officer who is able to verify the identity

5.

“No Risk, No reward”. This quote is most closely associated with__?
[A]Risk Diversification
[B]Collateral Damage
[C]Risk-return trade-off
[D]None of the above

Risk-return trade-off
The principle of Risk-return trade-off says that higher the potential return, higher is the risk. Low risk is associated with low potential returns, whereas high risk is associated with high potential returns.

6.

Which of the following is NOT a correct statement?
[A]Interest rates on unsecured loans is higher than the secured loans
[B]Mortgage Loan is a kind of secured loan
[C]Credit Card is a kind of secured loan
[D]Unsecured loans are given out on the basis of credit worthiness of the borrowers

Credit Card is a kind of secured loan
In unsecured loans, the borrowers assets are not pledged as collateral. Examples of such loans are personal loans, education loans, credit cards etc. They are given out on the basis of credit worthiness of the borrowers.

7.

Which of the following is also known as Contingent Liability of the banks?
[A]Cash Credits
[B]Non-fund based lending
[C]Fund Based lending
[D]Cash Reserve Ratio

Non-fund based lending
In Non-fund based lending, bank does not make any funds outlay but only gives assurance. The “letter of credit” and “bank guarantees” fall into the category of non-funding loans. The non-funding loan can be converted to a fund-based advance if the client fails to fulfil the term of contract with the counterparty. In banking language, the non-funding advances are called Contingent Liability of the banks.

8.

Which of the following is / are examples of Credit Creation by banks?
[A]Advancing loans
[B]Purchasing securities
[C]Selling securities
[D]Only A and B

Only A and B
Credit is created by commercial banks in two ways- advancing loans and by purchasing securities.

9.

NABARD administers a fund called Rural infrastructure Development Fund (RIDF). What is the major source of its funding?
[A]Penalties levied on domestic commercial banks who fail to meet PSL targets
[B]Penalties levied on foreign banks (with less than 20 branches) who fail to meet PSL targets
[C]Penalties levied on Central Government who fail to meet PSL targets
[D]None of the above

Penalties levied on domestic commercial banks who fail to meet PSL targets
The penalties levied on domestic commercial banks who fail to meet PSL targets is the major source of Rural infrastructure Development Fund (RIDF) funding. It is administered by NABARD.

10.

Who monitors Priority Sector Lending (PSL) in commercial banks?
[A]Reserve Bank of India (RBI)
[B]Small Industries Development Bank of India (SIDBI)
[C]National Bank for Agriculture and Rural Development (NABARD)
[D]Government of India (GOI)

Reserve Bank of India (RBI)
The priority sector lending by commercial banks is monitored by Reserve Bank of India (RBI) through periodical returns received from them.

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