Banking Questions & Answers 71
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(Prepared by RamaKrishna Vadlamudi, Hyderabad):
1) As per Reserve Bank of India (RBI), what rate of interest banks pay on overdue domestic term deposits?
Savings account rate or the contracted interest rate on matured term deposit, whichever is lower.
2) What are India's latest foreign exchange reserves?
USD 612 billion or Rs 46 lakh crore (approximate figure)--exact figure is USD 611.90 billion or Rs 45.67 lakh crore as on 9th of July, 2021.
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Read more: Fed Tapering is Postponed
3) What is the current Bank Rate?
4.25 per cent (set by Reserve Bank of India)
4) What is the full form of LIBOR?
London Inter-bank offered rate.
5) What is the full form of MCLR?
Marginal cost-of-fund-based lending rate.
6) Banks charge interest rate on loans and advances at monthly rests except in the case of which advances?
Agricultural. Banks charge interest on agricultural loans based on crop / harvesting/ marketing seasons.
7) Name the bank into which Lakshmi Vilas Bank (LVB) was amalgamated in Nov2020 .
DBS Bank India Ltd.
8) Which entities will take over the troubled Punjab & Maharashtra Coop Bank Ltd?
PMC Bank will be taken over by Centrum Financial Services Ltd and Bharat Pe. This as per the 'in-principle' approval given by Reserve Bank of India in June 2021.
9) What currency is abbreviated as CHF?
Swiss Franc
10) As per Reserve Bank of India, what is the maximum balance in savings bank account a customer can have in a payment bank (like Paytm Payments Bank Ltd)?
Rs 2 lakh per individual customer (limit raised in April 2021 from Rs 1 lakh).
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11) What is a Bad Bank?
In the Union Budget for 2021-22, the Government of India announced a proposal for setting up the National Asset Reconstruction Company Limited (NARCL), popularly termed as a “bad bank”, to consolidate and take over non-performing assets (NPA) from banks.
12) What is maximum limit of RBI's Liberalised Remittance Scheme (LRS) under which resident individuals can send money abroad?
Maximum limit is USD 250,000 per financial year (April to March in India)
13) As per RBI, what is a substandard advance?
A substandard advance is one, which remains non-performing for a period less than or equal to 12 months.
14) As per RBI, what are unclaimed deposits?
All accounts in India which have not been operated for 10 years.
15) What are risk weighted assets (RWA)?
Risk weighted assets are calculated as per risk weights given to each asset (funded/ non-funded) as per RBI norms.
16) What is credit risk?
When the credit quality of borrowers or counterparties is decreased, a bank is exposed to possible losses. This is the credit risk for banks.
17) How do you define short-term credit facilities?
Short term facilities are credit facilities (funded and / or non-funded) for less than one year.
18) What is a slippage in relation to NPAs?
Slippage refers to new accretion to non-performing assets (NPAs) during a period.
19) What is pre-shipment credit?
Pre-shipment credit means any bank loan or advance to an exporter for financing the manufacturing or packing of goods prior to shipment (basically, working capital expenses).
20) Is TDS (tax deduction at source) applicable on interest paid by bank on NRO (Non Resident Ordinary) accounts?
Yes, as per Income Tax Act. (TDS is not applicable on interest paid on NRE accounts).
21) What is the minimum term for which a bank customer has to make a fixed deposit which is eligible for Section 80C tax deduction?
Five years. And maximum amount is Rs 1.50 lakh in a financial year per individual.
22) What is a PSLC?
Priority sector lending certificates (PSLCs) are certificates that are issued against priority sector loans for banks. They allow banks to meet any shortfall in targets set by RBI under priority sector lending.
23) What is net interest income?
Net interest income is the difference between the interest income and the interest expenses.
24) What are bulk deposits?
Rupee term deposits of Rs. 1 Crore and above on which banks are permitted to offer differential rates of interest.
25) What is the minimum tenor of a term deposit?
It's seven days as per Reserve Bank of India.
26) What are the timings of RTGS?
RTGS (Real Time Gross Settlement) is available 24x7x365 (throughout all 24 hours, every day of the week and year) with effect from December 14, 2020.
27) Does Reserve Bank of India maintain IMPS (Immediate Payment Service)?
No. IMPS is maintained by NPCI (National Payments Corporation of India).
28) What is the maximum amount a customer can deposit in a PPF (Public Provident Fund) account?
Rs 150,000 in a financial year.
29) Which body recommends high-level public sector bank appointments to Government of India?
Banks Board Bureau, headquartered in Bombay.
30) What is the current rate of interest on India Post Office savings account?
Four per cent per annum.
31) What is the minimum threshold of default for filing CIRP (corporate insolvency resolution process) under IBC (Insolvency and Bankruptcy Code, 2016)?
Rs one crore (raised from Rs 1 lakh in March 2020)
32) Which company acquired Dewan Housing Finance Corp Ltd (DHFL) under CIRP (corporate insolvency resolution process) of IBC (Insolvency and Bankruptcy Code, 2016)?
Piramal Enterprises Ltd acquired DHFL in June 2021.
33) When was Reserve Bank of India (RBI) established?
RBI was established in 1935.
34) A bank's revaluation reserves are part of___:
Tier 1 capital. In March 2016, Reserve Bank of India allowed banks to treat revaluation reserves as part of Tier 1 capital, subject to conditions.
35) What is the maximum insured amount for bank deposits under DICGC (Deposit Insurance and Credit Guarantee Corporation)?
Rs 500,000 for each depositor in each bank.
36) A commercial paper can be issued for a minimum maturity of how many days?
Seven.
37) Name of the key financial ratio used by a bank for term loan (e.g., equipment finance).
DSCR. It is debt-service coverage ratio used for term loans.
38) What is the current statutory liquidity ratio (SLR) for banks set by RBI?
18 per cent.
39) What raw material is used for printing banknotes (paper currency) in India?
100% cotton is used for printing of banknotes in India.
40) Who has created Rupee Symbol?
The symbol for Indian Rupee was designed by Dr Dharmalingam Udaya Kumar.
41) How many public sector banks (PSBs) are there in India?
As of July 2021, there are 12 PSBs in India. They are: (please click on the image for better view) >
42) What is ‘paripassu’ charge?
A ‘paripassu’ charge gives lenders a right to the property on which a charge is created in proportion to the amount lent to the debtor.
43) When were interest rates on bank SB account deregulated?
Reserve Bank of India (RBI) deregulated savings bank deposit (SB) interest rates effective October 25, 2011.
44) Due to Corona Virus Pandemic, interest on interest charged by banks and NBFCs was waived by Govt of India in 2020. How much amount did Govt of India propose to spend on this?
Rs 6,500 crore.
45) What is the minimum threshold of default for filing CIRP (corporate insolvency resolution process) under IBC (Insolvency and Bankruptcy Code, 2016)?
Rs one crore (raised in March 2020 from Rs 1 lakh)
46) Which company acquired Essar Steel Ltd under CIRP (corporate insolvency resolution process) of IBC (Insolvency and Bankruptcy Code, 2016)?
ArecelorMittal Nippon Steel India Ltd.
47) What is IBBI?
The Insolvency and Bankruptcy Board of India. It regulates insolvency professionals and processes under IBC (Insolvency and Bankruptcy Code, 2016).
48) Who is the chairman of IBBI (The Insolvency and Bankruptcy Board of India)?
Dr M.S.Sahoo
49) What is the current interest rate offered for savings bank accounts by India's premier bank State Bank of India?
It is 2.70 per cent per annum, paid at quarterly rests.
50) When was MCLR (Marginal-cost of funds based lending rate) system introduced?
MCLR was introduced with effect from April 1, 2016. Base Rate System (BRS) was effective from July 1, 2010 and was replaced by MCLR. BPLR (Benchmark Prime Lending Rate) was effective from November 2003 and was replaced by BRS.
51) What is PCA framework?
PCA framework is Prompt Corrective Action process whereby Reserve Bank of India (RBI) takes action against troubled banks, when the fundamentals of a bank start deteriorating. PCA is based on certain parameters like, capital adequacy ratio, profitability, asset quality and leverage.
52) In case of fraud accounts, how much provisioning for the amount involved has to be made by banks as per RBI guidelines?
100% provisioning is needed for fraud accounts.
53) As part of Yes Bank Reconstruction Scheme approved by Government of India, bonds worth nearly Rs 8,400 crore issued by Yes Bank were written down in March 2020 causing huge loss to bondholders. Name the bonds.
Additional Tier 1 bonds or AT1 bonds.
54) To attract more deposits, a bank wants to pay interest on savings bank accounts at monthly rests. Can the bank pay interest at monthly rests?
Yes, it can. RBI mandates banks to pay interest on domestic savings bank accounts at quarterly or shorter intervals.
55) What is the maximum insured amount for bank deposits under DICGC?
Rs 500,000 for each depositor.
56) What is a quick ratio?
Quick ratio simply means current assets excluding inventories divided by current liabilities. It denotes the ability of a company or firm to meet short-term liabilities from the available liquid assets.
57) You are a branch manager of Union Bank of India. A valued customer of your branch approaches you for a personal loan against the security of your bank (Union Bank of India) shares. Can you give a loan against that shares?
No. As per Banking Regulation Act, 1949, a bank cannot sanction a loan against the security of its own shares.
58) As per nomination rules, the signature of a depositor in a nomination form is to be attested by how many witness(es)?
No witness is required. Only in case of illiterate depositors, signature of two witnesses is required.
59) Who regulates insolvency professionals and processes under IBC (Insolvency and Bankruptcy Code, 2016)?
IBBI or The Insolvency and Bankruptcy Board of India.
60) A 'digital signature' is defined under which Act?
Information Technology Act, 2000. A digital signature is authentication of any electronic record through an electronic method.
61) Name the governor of Reserve Bank of India who started Asset Quality Review (AQR) to clean up banks' balance sheets.
Raghuram Rajan in April 2015.
62) Is the following statement correct? Housing loans provided to banks' own employees can be included under priority sector advances.
Incorrect. Reserve Bank of India does not allow considering housing loans given to banks' own staff to be part of priority sector advances.
63) Under the MSMED Act (Micro,Small and Medium Enterprises Development Act, 2006), what is the definition of a small enterprise?
A small enterprise is an entity where the investment in Plant and Machinery or Equipment does not exceed Rs 10 crore and annual turnover does not exceed Rs 50 crore.
64) What is the risk weight for credit risk prescribed by Reserve Bank of India for a bank's investment in central government security?
Nil. Central government security carries sovereign guarantee, hence practically there is no default risk.
65) Which bank in India is the largest by market capitalisation?
HDFC Bank is India’s largest bank by market capitalisation with a market cap of Rs 799,000 crore, followed by ICICI Bank (Rs 452,600 crore) and State Bank of India (Rs 376,000 crore)—figures as at the end of 22nd of July, 2021.
66) What is the name of the QR (quick response) code recently developed by NPCI (National Payments Corporation of India), Visa, MasterCard and Amex?
Bharat QR. It is a common standard enabling merchants to accept payments without a POS (point of sale) machine introduced in India. It's world's first fully interoperable QR code payment system. It's a low-cost method. It was launched in February 2017.
67) What is the maximum amount of banknote that was demonetised in Independent India?
Rs 10,000 banknote was demonetised, along with Rs1,000- and Rs 5,000-notes, in January 1978.
68) What is the maximum amount that can be remitted through NEFT (National Electronic Fund Transfer) system?
No, there is no minimum or maximum limit imposed by the RBI (Reserve Bank of India) for funds transfer through NEFT system. NEFT works 24x7x365.
69) Which entity maintains and controls UPI (Unified Payments Interface) payment system in India?
NPCI or National Payments Corporation of India, which is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).
70) What is the shareholding of State Bank of India in the paid-up capital of private sector bank Yes Bank Ltd?
It is 30 per cent as of 30th of June, 2021.
71) In the second week of July 2021, Reserve Bank of India (RBI) banned a credit card company from issuing cards to new customers. Name the card company.
MasterCard Inc. RBI banned MasterCard from issuing cards (debit, credit or prepaid) in India owing to non-adherence of RBI norms on data storage.
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Correction: Questions 49 and 53 were repeated elsewhere; hence they were replaced with new ones by me on 23Jul2021.
Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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He blogs at:
https://ramakrishnavadlamudi.blogspot.com/
Twitter @vrk100
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