APPENDIX

Objective-Type Questions on Commercial Banking

Tick √ Yes or no for the following statements.

1. Retail banking means managing of individual customers on both assets and liabilities side.

   Yes        No

2. Customer segmentation refers to classification of customers into different groups for the purpose of identifying their financial requirements.

   Yes        No

3. The Basel II Accord deals in capital adequacy norms to be fulfilled by the banks.

   Yes        No

4. Bundling of products means availability of various options within the main product/service.

   Yes        No

5. The success of retail lending depends on assessment of future requirements of customer needs and to prepare for the same now.

   Yes        No

6. Housing loan can be sanctioned to a property situated in any industrial area.

   Yes        No

7. Housing loan can also be considered for the purchase of a plot.

   Yes        No

8. The maximum moratorium under a housing loan is 30 months.

   Yes        No

9. Stamp duty/registration charges do not form a part of the project cost in housing loans.

   Yes        No

10. Under the flip method, the installments are graduated with a rise in the income level of the borrower.

    Yes        No

11. The maximum IRR (installment to recovery ratio) to be considered is 25 per cent under housing loans.

    Yes        No

12. A third party can join as co-applicant in the case of housing loans.

    Yes        No

13. There is no restriction on the number of co-applicants in housing loans.

    Yes        No

14. The house/property proposed to be purchased/constructed on banks finance need not be held jointly by all the applicants.

    Yes        No

15. Cross guarantee under group housing scheme can be permitted.

    Yes        No

16. Delay in payment or instalment attracts penal interest in the case of housing loans.

    Yes        No

17. Second charge on house/property for extending finance under housing loan scheme can be permitted, subject to certain terms and conditions.

    Yes        No

18. Finance to state-owned corporations and involved housing projects and statutory bodies like housing boards can be treated as ‘direct housing finance’.

    Yes        No

19. Finance to firms/companies under the vehicle loan scheme may be permitted.

    Yes        No

20. Consumer durable loans backed by hypothecation of assets can be termed as ‘secured’ personal loan.

    Yes        No

21. Margin under clean personal loan is 25 per cent.

    Yes        No

22. Loan against mortgage (LAP) can be permitted to meet any purpose/requirement.

    Yes        No

23. The minimum margin under loan against mortgage is 50 per cent.

    Yes        No

24. The maximum quantum of loan under the education loan scheme is ₹15 lakh.

    Yes        No

25. Loans above ₹4 lakh under education loan require tangible security.

    Yes        No

26. Minimum margin under education loan in 25 per cent.

    Yes        No

27. The repayment period under education loan is study period plus one year or study period plus 6 months after securing employment, whichever is earlier.

    Yes        No

28. The allowable expenses under education loans include the amount paid towards development fund.

    Yes        No

29. A loan of ₹100 lakh to a corporate or firm for business purposes fall within the definition of retail lending (as per Basel II norms).

    Yes        No

30. Loan against shares will be considered only if the shares are in the demat form.

    Yes        No

31. Loan can be granted against pledge of share of any company.

    Yes        No

32. Maintaining pension account is not mandatory in case loan is to be considered for a senior citizen.

    Yes        No

33. Top-up loans are a kind of supplementary finance extended to home loan borrowers.

    Yes        No

34. Loan against rent receivables is granted against total rent receivable for the unexpired lease period.

    Yes        No

35. Recovery in loans against rent receivables is ensured by debiting the customers account.

    Yes        No

36. The security under loan against rent receivable, the collateral security should necessarily be the same property from which the lease rentals are derived.

    Yes        No

37. The maximum repayment tenure allowed in the case of loan against rent receivables is to the extent of unexpired period of lease or 84 months, whichever is earlier.

    Yes        No

38. Banks’ individual credit policy governs the internal policies and control with regard to credit dispensation.

    Yes        No

39. Finance can be extended even to those activities which are declared as low priority in credit policy of individual banks.

    Yes        No

40. Rating of the borrower is one of the risk mitigating tools and therefore it is mandatory in respect of all credit proposals.

    Yes        No

41. Verification of authenticity of various documents is a part of due diligence exercise.

    Yes        No

42. The EMI can be permitted up to 50 per cent of gross monthly income.

    Yes        No

43. Floating rate of interest varies as and when there is change in interest rate without a change in the BPLR.

    Yes        No

44. Credit monitoring function is to ensure constant vigil on conduct and operations of loan account.

    Yes        No

45. By crediting the loan amount to the account of the customer, end use of funds can be ensured.

    Yes        No

46. Management information system (MIS) can be used as one of the credit monitoring tools.

    Yes        No

47. Drawing the sanctioned limit to full extent and operating the account near sanctioned limit is an indication of diversion of funds and low level of activity.

    Yes        No

48. Non-security documents, such as application forms and letters of undertaking can be admitted as the main documents of evidence in the court of law.

    Yes        No

49. In the case of DP note executed by a partnership firm, the words jointly and severally need to be inserted.

    Yes        No

50. The liability of guarantor arises only in the event of failure of the principal borrower.

    Yes        No

51. The limitation period in the case of guarantee commences from the date of execution of the guarantee itself.

    Yes        No

52. Even if the principal borrower is absolved of his liability by virtue of the DP noted getting time barred, the guarantor shall continue to be liable for the debt.

    Yes        No

53. Equitable mortgage does not attract any stamp duty, though, of date, some of the state governments introduced stamp duty even on equitable mortgage to increase revenue.

    Yes        No

54. Search report and non-encumbrance certificate are not required for creation of mortgage.

    Yes        No

55. Security charged as prime security in the case of one loan account can be extended as collateral security in the case of another loan.

    Yes        No

56. Physical inspection of assets charged to the bank is necessary to corroborate with the information furnished by the customer.

    Yes        No

57. If two mortgages are created on the same property—one is by way of simple mortgage and another by way of equitable mortgage, the second mortgage can enforce his right only after the debt secured by the first mortgage is fully satisfied.

    Yes        No

58. NEFT is an electronic fund transfer facility and came into force with effect from 1 June, 2006.

    Yes        No

59. Facility under NEFT is available only at select branches.

    Yes        No

60. NEFT is distinct from RTGS.

    Yes        No

61. Transaction under NEFT is on a gross settlement basis.

    Yes        No

62. ECS facilitates bulk payment system easier.

    Yes        No

63. Transactions under ECS are cleared through the National Clearing House of the RBI.

    Yes        No

64. RTGS is an electronic fund transfer system amongst different bank’s branches.

    Yes        No

65. RTGS system eliminates settlement system deficiencies.

    Yes        No

66. Transaction under RTGS are materialises the very next day.

    Yes        No

67. Each bank is allotted a code under RTGS called ‘IFS code’.

    Yes        No

68. Service under RTGS is not available on three national holidays namely 26 January, 15 August and 25 December.

    Yes        No

69. The settlement under RTGS is carried through a settlement account called the RTGS settlement account.

    Yes        No

70. In the case of shortfall in the RTGS settlement account, the RBI will not give any liquidity support.

    Yes        No

71. The first ATM was installed in 1967 in the USA.

    Yes        No

72. The present day ATMs in many of the places are only cash dispensing machines.

    Yes        No

73. Motorized card system is convenient from the customer’s point of view as it enables transaction in a row without requiring the card to be inserted every time.

    Yes        No

74. The transaction in the ATM is routed through the ATM switch of the individual bank.

    Yes        No

75. The transactions effected through service provider like VISA/MasterCard/AMEX are settled on a monthly basis.

    Yes        No

76. Alliance with other banks for sharing ATMs is a part of the strategic management of banks.

    Yes        No

77. Considering the ATM network in China and South-East Asian countries like South Korea, the ATM network in India is adequate.

    Yes        No

78. All settlements of transactions through VISA are settled through a ‘settlement account opened for this purpose’.

    Yes        No

79. ATM-cum-debit card tagged to VISA/MasterCard can be used in any ATM without any extra charge.

    Yes        No

80. Credit card business is not a profitable venture.

    Yes        No

81. The full form of CVV is credit value verification and being a secret code, it should neither be disclosed nor made accessible to others.

    Yes        No

82. The credit card contains 18 digits on the fact of it eight digits of which are allotted by VISA/Master Card/AMEX and the rest by the individual bank concerned.

    Yes        No

83. Card limit will be fixed on the basis of the income level of the customer.

    Yes        No

84. The cash withdrawal limit does not exceed 10 per cent of the total limit of the credit card.

    Yes        No

85. The POS will be provided by the card-issuing bank at the merchant establishments.

    Yes        No

86. Commission earned through POS will be passed on to the card issuing bank in full.

    Yes        No

87. Details of customer name, card limit and cash withdrawal limit are encrypted on the magnetic tape on the back side of the card.

    Yes        No

88. Customers enjoy 2 months credit under credit cards.

    Yes        No

89. Transaction cost and finance charges under credit card are low.

    Yes        No

90. USP stands for Unique Selling Proposition, which refers to distinct features of a product, which are not available in the contemporary market with the competitors dealing in the same product or service.

    Yes        No