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[Objective GK for Banking Examinations] Negotiable Instruments Quiz-2

1. In context of promissory note, consider the following statements:
a) Defined in section 4 of the negotiable Act, 1881
b) Must contain a promse to pay money only
c) May be payable on demand or after a cetain period
d) Promise to pay must be unconditional
Choose the correct option:
[A]b & c
[B]a & c
[C]a, b & d
[D]a, b, c & d

a, b, c & d
A promissory note is a legalinstrument, in which one party (the maker or issuer) promises in writing to pay a determinate sum of money to the other (the payee), either at a fixed or determinable future time or on demand of the payee, under specific terms. If the promissory note is unconditional and readily salable, it is called a negotiable instrument.

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2. Consider the following statements in context of Bill of Exchange:
a) Conditional order
b) Signed by the maker
c) Must be oral
d) Must be payable to a certain person
e) Payable either on demand or on the expiry of a fixed period of time
Choose the correct option:
[A]b, d & e
[B]a, b & d
[C]b, d & e
[D]a, c & d

b, d & e
The bill of exchange is an unconditional order, signed by the maker and must be payable to a certain person either on demand or on the expiry of a fixed period of time. It must be in written form.

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3. Which of the following is / are reasons to dishonour a cheque by a banker?
a) undated cheque
b) stale cheque
c) if a cheque is not free from reasonable doubt
d) if the banker receives notice of the customer’s insolvency or lunacy
e) if the customer countermands the payment of cheque
Choose the correct option:
[A]a & c
[B]b, d & e
[C]a, b & c
[D]All follow

All follow
Following are the reasons to dishonour a cheque by a banker:
1. If the cheque is undated.
2. If it is stale i.e. if it has not been presented within reasonable period.
3. If the cheque is not free from reasonable doubt.
4. If the cheque is post-dated and represented for payment before its ostensible date.
5. If the customer’s funds in the banker’s hands are not “properly applicable” to the payment of cheque drawn by the former. Thus, should the funds in the banker’s hands be subject to a lien or should the banker be entitled to a set-off in respect of them, the funds cannot be said to be “properly applicable” to the payment of the customer’s cheque, and the banker would be justified in refusing payment.
6. If the customer has credit with one branch of a bank and he draws a cheque upon another branch of the same bank in which either he has account or his account is overdrawn.
7. If the banker receives notice of the customer’s insolvency or lunacy.
8. If the customer countermands the payment of cheque, the banker’s duty and authority to pay on a cheque ceases.
9. If a garnishee or other legal order from the court attaching or otherwise dealing with the money in the hand of the banker is served on the banker.
10. If the authority of the banker to honour a cheque of his customer is undermined by the notice of the latter’s death.

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4. As per which section of the Negotiable Instrument Act, 1881, a case of dishonour of cheque for insufficiency of funds in the account takes place?
[A]Section 138
[B]Section 238
[C]Section 338
[D]Section 438

Section 138
As per section 138 of the Negotiable Instrument Act, 1881, a case of dishonour of cheque for insufficiency of funds in the account takes place.

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5. Consider the following statements in context of Cheque Truncation system:
a) Eliminates the time, money and manpower wasted during physical movement of cheques
b) Cheque Truncation system increases the scope for clearing-related frauds
c) There is fear of losing cheque in transit
d) Maximizes transaction cost
Choose the correct option:
[A]Only a
[B]a, b & c
[C]a, b & d
[D]b, c & d

Only a
Features of Cheque Truncation system (CTS):
a) It eliminates the time, money and manpower wasted during physical movement of cheques (from banks to clearing house).
b) Cheque Truncation system reduces the scope for clearing-related frauds.
c) There is no fear of losing cheque in transit.
d) Minimizes transaction cost.

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6. A cheque issued by a bank on its own account for a customer for payment to a third party is called a
[A]Cashier’s cheque
[B]Treasurer’s cheque
[C]Bank cheque
[D]All of the above

All of the above
A cheque issued by a bank on its own account for a customer for payment to a third party is called a cashier’s cheque, a treasurer’s cheque, a bank cheque or a bank draft.

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7. Which of the follolwing are the types of cheques?
1. Open cheque
2. Crossed cheque
3. Bearer cheque
4. Order cheque
Choose the correct option:
[A]1, 2 & 4
[B]2 & 4
[C]Only 3
[D]All of the above

All of the above
The cheques are of four types.
1. Open cheque
2. Crossed cheque
3. Bearer cheque
4. Order cheque.

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8. Rahul is going to purchse a property and according to banks’ valuation report the value of the property is less than the purchase price. In such scenario, what can bank do?
[A]Bank will purchase that property instead of Rahul
[B]Bank will strictly deny to give any kind of help
[C]Bank will advise Rahul not to purchase that property
[D]Bank will remain inadvisable to the proposed property purchase

Bank will remain inadvisable to the proposed property purchase
In the ususal course, the bank is entitled to prefer its’ own interest to those of the customer. That’s why, bank will remain inadvisable to the proposed property purchase.

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9. Mr. Raju promises to pay Rs. 5 lakh to Mr. Farhan Qureshi. If Mr. Qureshi tranfers that amount in favor of Mr.Wangdu as he need money for his scientific invention, then Mr.Wangdu will become
[A]Drawer
[B]Payee
[C]Maker
[D]None of the above

Payee
Mr. Raju promises to pay Rs. 5 lakh to Mr. Farhan Qureshi. If Mr. Qureshi tranfers that amount in favor of Mr. Wangdu as he need money for his scientific invention, then Mr. Wangdu will become payee.

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10. Consider the following statements in context of cheque:
a) it’s a bill of exchange
b) an unconditional order
c) payable on demand
d) Must bear a date
Choose the correct option:
[A]a & b
[B]a, c & d
[C]c & d
[D]All follows

All follows
As per the Negotiable Instruments Act, 1881, a cheque is an order by the account holder of the bank directing his banker to pay on demand, the specified amount to the order of the person named therein or to the bearer.

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Comments

  • md Aftab
    Reply

    Awesome collection of bank related questions.

  • sagy
    Reply

    bole toh ek dum JHAKSSSSSSSSSS…