LEGAL & REGULATORY ASPECTS OF BANKING A & B jaiib

1. LEGAL & REGULATORY ASPECTS OF BANKINGA & Bjaiib

2. 01..Day to day banking involves a number of aspects. Utilizing the various provisions of various Acts assumes greater significance in the Banking field. Knowledge about the same is very important.

3. 02..To function as a Bank and to obtain a license from the Reserve Bank of India. Such license is issued as per the provisions of a.. Reserve Bank of India Act b.. Banking Regulation Act c.. Constitution d.. Both a & b

4. 03..Under the provisions of the Banking Regulation Act, no organization other than a bank is authorized to accept deposits with drawable by cheque. The Savings Bank Scheme run by the government, a Primary credit society and any other person or firm notified by the government are exempted from this prohibition.

5. 04..Which one is the permitted business of banks a.. Opening and maintaining CASA b.. Issuing of Postal stamps c.. Selling of coins d.. Selling Railway tickets

6. 05..Which statement is incorrect. (Banking business) a.. Carry on and transact guarantee and indemnity business b.. Acquire, construct and maintain any building for its own purpose. c.. Collecting and transmitting of money and securities d.. None

7. 06..Identify the Public Sector Banks a.. Union Bank of India b.. State Bank of Mysore c.. Central Bank of India d.. All the above

8. 07.. CFD is an urban co-operative bank. E customer of that bank wish to nominate for his locker & Deposit facilities. a.. Possible b.. Not possible c.. Nomination facility is only applicable for Public sector banks d.. Bank to suggest to E to have joint facility instead of nomination

9. 08.. Ways and Means Advances are provided by a.. Nationalized Banks b.. Public Sector Banks c.. Regional Rural Banks d.. Reserve Bank of India

10. 09.. Identify the power not pertaining to Reserve Bank of India a.. Power to license b.. Power regarding audit of banks c.. Power to impose penalties d.. None of these

11. 10.. There is a co-operative bank facing winding up. The said co-operative bank is registered under the Deposit Insurance and Credit Guarantee Corporation Act. Then who has the power to order its winding up. a.. Reserve Bank of India b.. State Government c.. Registrar of Co-operatives d.. None of them

12. 11. The Reserve Bank of India is the primary regulator of banks. But the Central Government has also been conferred extensive powers under the RBI Act and BR Act either directly or indirectly over the banks.

13. 12.. Co-operative Banks come under the control of RBI by virtue of certain provisions of a.. Reserve Bank of India Act b.. Banking Laws (Application to Co-operative Societies) Act,1965 c.. Banking Regulation Act d.. All the above

14. 13.. In respect of the terms and conditions of service of its workmen, opening and closing of its branch premises, a bank is answerable to a.. Its Corporate Office b.. Reserve Bank of India c.. Labor Authorities d.. Its Head Office

15. 14..RKL A Co-operative Bank has secured permission to have branches in other states as well. a.. Multi purpose Co-operative Bank b.. Multi State Co-operative Bank c.. Multi Dimensional Co-operative Bank d.. Multi Co-operative Bank

16. 15.. Identify the odd one a.. State Bank of Mysore b.. Yes Bank c.. Reserve Bank of India d.. Postal Bank

17. 16..Which one is not appropriate a.. A Commercial bank can sell mutual fund products b.. An urban co-operative bank cannot sell general insurance products c.. A Private Sector bank can provide Safe deposit locker services d.. A Nationalized bank is not prohibited to accept articles under safe custody

18. 17..Accepting deposit receipt of another bank under safe custody article is the secondary business of a commercial bank. a.. True b.. Customer service c.. False d.. In fact it is the Primary business

19. 18.. Identify which one is not the liability of a commercial bank a.. Fixed deposit b.. Home Loan which is under NPA c.. Both a & b d.. None of these

20. 19.. These are banking companies operating only in a limited geographical area. a.. State Co-operative Bank b.. District Co-operative Bank c.. Foreign Bank d.. None

21. 20.. A banking company, whose license is cancelled can appeal to Banking Ombudsman within a period of 30 days from the date of the order rejecting the license. a.. True b.. Not Banking Ombudsman, but RBI Governor c.. False d.. Neither Banking Ombudsman nor RBI Governor but RBI Main Office

22. 21.. Banks should submit their request for new branches, administrative offices, ATMs for consideration of RBI a.. As and when needed b.. Once in a year c.. Once in every six months d.. Once in a quarter

23. 22.. Who cannot approach directly RBI for branch licensing a.. Regional Rural Banks b.. Urban Co-operative Banks c.. Nationalized Banks d.. Private Sector Banks

24. 23..A Foreign Bank which has a branch in Calcutta has to a.. Deposit and keep deposited with RBI a sum of Rs.20 lacs b.. Deposit an amount of 20% of the profit each year as disclosed in the profit and loss account with RBI c.. Both a & b d.. Deposit a token amount as stipulated by RBI from time to time

25. 24.. The Central Government can exempt any foreign bank from the requirements on the recommendations of RBI for a specific period if the amounts deposited already by it are considered adequate. On the cessation of business by any foreign bank for any reason, these deposits shall from part of the assets of the company on which the creditors in India shall have the first charge.

26. 25..A commercial bank (existing) has a place of business in both Kolkata & Mumbai minimum paid up capital and reserves a.. Rs. 5 lacs b.. Rs.10 lacs c.. Rs.15 lacs d.. Rs.100 lacs

27. 26..Identify the Act which stipulates that the subscribed capital of a banking company shall not be less than half of its authorized capital and the paid up capital shall not be less than half of its subscribed capital. a.. Companies Act b.. Reserve Bank of India Act c.. Banking Regulation Act d.. All these Acts

28. 27..A bank when it receives more than the specified % of their shares for transfer to one party, the bank’s board has to refer the matter to RBI. The Bank shall not transfer the shares a.. Without intimating RBI b.. Without receiving RBI’s acknowledgment c.. Without intimating Finance Ministry d.. Without intimating Company Law Board

29. 28.Banks can raise their capital even in the form of a.. Innovative debt instruments b.. Perpetual instruments c.. Perpetual non cumulative preference shares d.. Any one of the above

30. 29..Declaration of dividend by banks require a minimum 9% of CAR and Net NPAs not exceeding 7%. The quantum of dividend that can be declared is based on the levels of net NPAs and in a graded level (Maximum 40%pay out ratio) and can be paid only from current year’s profits

31. 30.. Suresh, a director of a banking company wish to hold office continuously for more than 8 years. a.. He can b.. He cannot c.. He can hold only up to 7 years d.. None

32. 31..RBI may appoint an additional director/s in the interest of a.. Public b.. Banking policy c.. Depositors of the company d.. All of these

33. 32.. On the Reserve Bank of India passing a removal order, the concerned person ceases to hold office which he/she was holding till then. Further he/she is prohibited, from directly or indirectly taking part in the management of any banking company for a period not exceeding 5 years as may be specified in the order. Contraventions of the order is punishable with a find of Rs.250 for each day during which the contravention continues.

34. 33..When the board of a banking company is ordered to be reconstituted as per the provisions of the Banking Regulation Act, directors will not be removed for the purpose of reconstitution by a.. Lots b.. Majority decision c.. Both a and b d.. None

35. 34.. The shareholders of a banking company are entitled to dividends only before all the capitalized expenses are written off. a.. True b.. False c.. It is after not before d.. There is no connection with the capitalized expenses and declaring of dividends

36. 35.. Other than the Governor, Deputy Governors of RBI, the other directors are a.. Appointed b.. Nominated c.. Selected d.. Elected

37. 36.. RBI issues directions from time to time regulating the lending operations of banking companies * The tools employed for exercising Selective Credit Control are • Minimum margins for lending against selected commodities • ceilings on the levels of credit and * charging of minimum rate of interest on advances against specified commodities

38. 37.. RBI is authorized to regulate interest rates on loans and advances as well as deposits. • The Usurious Loans Act. 1918 prohibits lending at exorbitant rates. The law has been made to protect the weaker borrowers from the powerful moneylenders • RBI has issued guidelines in respect of internet banking. These cover a.. Technology and Security issues b.. Legal issue and c . Regulatory and supervisory issues

39. 38..The first major study by Cadbury Committee in 1992 led to the introduction of a.. Corporate Culture b.. Corporate Governance c.. Corporate Social Responsibility d.. Corporate Sector

40. 39..Reserve Bank of India constituted a Consultative Group in November 2001 with a view to strengthening the internal supervisory role of the boards of banks under the Chairmanship of a.. Dr.R.H.Patil b.. Dr.A.S.Ganguly c.. Dr. Rangarajan d.. Dr.Chakraborthy

41. 40.. Identify the Committee which issued guidance for promoting the adoption of sound practices of corporate governance by banking institutions. a.. The Basel Committee on Banking Supervision b.. The Advisory Group on Banking Supervision headed by Shri M.S.Verma c.. The Advisory Group on Corporate Governance headed by Dr.R.H.Patil d.. Narasimham Committee on Banking Reforms

42. 41..Based on various recommendations of different committees and the cross-country experience, the Reserve Bank of India has initiated several measures to strengthen the corporate governance in Indian Banking sector including the concept of this for directors of the banks. a.. Disclosure clause b.. Fit and Proper criteria c.. Non disclosure clause d.. Due diligence measures

43. 42..The way in which boards oversee the running of a company by its managers, and how board members are in turn accountable to shareholders and the company and its implications for company behavior towards employees, shareholders, customers, banks and other stakeholders a.. Corporate Culture b.. Corporate Value & Responsibility c.. Corporate Integrity d.. None

44. 43..The guidance (Basel committee) entitled Enhancing Corporate Governance for Banking Organizations highlights the importance of the roles of boards of directors (with a focus on the role of independent directors) and senior management. . effective management of conflicts of interest . the roles of internal and external auditors, as well as internal control functions . governing in a transparent manner, especially where a bank operates in jurisdictions, or through structures, that may impede transparency and the role of supervisors in promoting and assessing sound corporate governance practices

45. 44..In India the Corporate Governance involves a.. Reserve Bank of India b.. Securities and Exchange Board of India c.. Department of Company Affairs d.. a, b & c

46. 45..Not a term deposit. a.. Reinvestment plan b.. Overdue Term deposit c.. Flexi Recurring Deposit d.. Daily collection account

47. 46.. Identify which is the most appropriate one. a.. Presently RBI decides the bank deposits rates of interest b.. Presently RBI decides the rate of interest on Savings Bank deposits c.. Presently RBI decides the rate of interest on all types of lending by banks d.. Presently RBI decides the rate of interest on both deposits as well as lending without any freedom for the banks

48. 47..Banks have to file a return on their unclaimed deposit within 30 days of the end of each calendar year. .. All deposits not operated in 10 years .. For term deposits, the period of 10 years starts from the expiry of the period of the deposit

49. 48.. Rajiv has not nominated for his Recurring deposit a.. Still he can nominate b.. Since at the time of opening/ investing he has not done, now not possible c.. He should have nominated then and there only d.. Nomination facility, if not utilized by the customer, then bank should be held responsible

50. 49..For a joint account of W & Y the account holders appointed J as nominee. The settlement condition on this term deposit being Either or Survivor. If W dies before the maturity of the subject deposit, then a.. Bank will delete the name of W after completing formalities and allow Y to continue as the depositor b.. Bank will take the consent of J before doing so as mentioned in (a) c.. Bank will settle the claim by closing the deposit before maturity in favor of the claimants d.. Since J is the nominee and the condition is not Jointly, the bank would make the payment to J