SLO

Banking Awareness: Banking Function and Business: Part-1

1.

If an account holder withdraws more money from a bank account than has been deposited in it, then it is called __:

[A]Cash credit

[B]Advance

[C]Overdraft

[D]Demand Draft

Overdraft
If an account holder withdraws more money from a bank account than has been deposited in it, then type of facility is called overdraft facility.

2.

If a person gives instruction to his bank to pay a set amount at regular intervals to another (payee) account; it will be known as __:

[A]Standing order

[B]Demand Draft

[C]Cheque

[D]Overdraft

Standing order
A standing order is an instruction a bank account holder (payer) gives to his or her bank to pay a set amount at regular intervals to another’s (payee’s) account for fixed bills to pay rent, mortage, etc, then this type of instruction is also known as a banker’s order. The standing order is not suitable for paying variable bills viz. credit cards or gas and electricity bills, as they are used mainly when the amount is fixed to pay.

3.

In context with banking in India, a Custodial Account is created for __:
[A]Illiterates
[B]Women
[C]Minor persons
[D]Senior Citizens

Minor persons
Custodial account is created for the benefit of a minor with an adult as the custodian.

4.

In terms of Banking Industry, Consolidation Loan refers to __:
[A]Taking a loan from more than one banks
[B]Combining the loans taken from different banks into a single loan account
[C]Taking loans to pay a previously unpaid loan
[D]Taking loans by mortgaging real estate

Combining the loans taken from different banks into a single loan account
A person, if owes money to several creditors, he / she can combine payments and balances into a single account with one creditor. This is called Loan Consolidation or Debt Consolidation. This can be done in several ways. For example, one can transfer several high interest credit card balances onto one card with a lower rate. If one owns a home, , he / she can consolidate the debt with a low-interest home equity loan. Or, can get a loan specifically designed for this purpose.

5.

Which among the following terms is used for property or other items that are pledged to pay off a loan if payments are not made according to the contract?
[A]Annuity
[B]Collateral
[C]Commodate
[D]Lease

Collateral
Collateral is an asset pledged to a lender to guarantee repayment. Collateral could include savings, bonds, insurance policies, jewellery, property or other items that are pledged to pay off a loan if payments are not made according to the contract. Collateral is not required for unsecured credit card accounts.

6.

In context with banking, a dormant account is a bank account in which there have not been any transactions for __:
[A]1 year
[B]2 years
[C]3 years
[D]5 years

2 years
A dormant account or an inoperative account is a bank account in which there have not been any transactions for two years.

7.

In context with banking, the Average daily balance is a term related to__:
[A]Fixed Deposits
[B]Loans
[C]Credit Cards
[D]Current and Saving Accounts

Current and Saving Accounts
The average balance in a deposit account, equals the sum of the daily account balances during an accounting period, usually a monthly or a quarterly cycle, divided by the number of days in the accounting period. Banks normally specify certain minimum average daily balance to be maintained in current and savings accounts.

8.

In context with the Current Account, consider the following statements:
1. It is used for commercial purposes
2. It attracts no rate of interest
3. The banks generally charge a maintenance on such accounts
4. There are no limits of transactions
Which among the above statements is / are correct?
[A]Only 1 & 2
[B]Only 2 & 3
[C]Only 1 & 3
[D]1, 2, 3 & 4

1, 2, 3 & 4
An account used for commercial purpose. It attracts no rate of interest and is generally charged by the bank with maintenance charges. There is no limit to the number of transactions in this type of account.

9.

A customer’s financial profile with high Debt Ratio would indicate that __:
[A]The customer is in good financial health
[B]The customer’s overall level of debt is low
[C]The customer’s overall level of debt is high
[D]The customer is credit worthy

The customer’s overall level of debt is high
An amount of money you owe to banks or credit issuers. It is the percentage of your income that goes to paying your debts every month. Debt ratio usually gives a clear picture of your overall financial well-being. To calculate your debt ratio, first add up all your monthly income including take-home pay (after taxes). Then add up all your monthly payments for interest bearing loans and accounts, such as mortgages, student loans, credit cards and car loans. If you rent your home, include that amount, but do not include utilities and telephone charges because they can vary on a monthly basis. Finally, divide your monthly payments by your income. Multiply the result by 100 and that number is your debt ratio percentage. • A low ratio is under 20%, which means that you are in good financial health and are doing a good job of managing your money. • A moderate ratio is between 21% and 40%. This means that you should look carefully at your monthly payments and start decreasing your overall level of debt, including credit cards. A high debt burden is over 40%. You should immediately stop accumulating debt and start looking for ways to decrease your debt or increase your income.

10.

Which among the following work as assets of banks?
[A]Deposits made by public
[B]Funds received from RBI under Liquidity Adjustment Facility
[C]Loans advanced to customers
[D]Current & Saving Accounts of Customers

Loans advanced to customers
The key business of the banks is to accept different types of deposits from the public and then lend these funds to the borrowers. This is called Financial intermediation. In terms of the banks, the deposits represent the “liabilities” of the banks while loans advanced and investments made by banks represent their “assets”.

Comments

  • Dusmanta Sahoo
    Reply

    Sir/Madam,
    This question is very useful for us,i also learn very much,thank you very much……

  • utkarsh pathak
    Reply

    these quizzes are very useful …and capable enough to enhence knowledge or surrounding environment…thanks allot