JAIIB Mock Test

English हिंदी
1. Which of the following statements regarding a "Banker's General Lien" is INCORRECT?
It is often described as an "Implied Pledge".
It is a statutory right provided under Section 171 of the Indian Contract Act, 1872.
It extends to all goods and securities entrusted to the banker as a bailee for a specific purpose.
It is not applicable to Safe Deposit Lockers.
Explanation:
General Lien does NOT apply when goods/securities are entrusted for a specific purpose (like safe custody or selling shares). In such cases, the banker acts as a Bailee/Trustee, and the specific purpose overrides the general right of lien.
2. In a Hindu Undivided Family (HUF) account, what happens upon the death of the Karta?
The eldest female member automatically becomes the Karta in all cases.
The bank allows the remaining coparceners to operate the account as usual.
The account operations are stopped until a new Karta is appointed or the eldest coparcener takes over.
The HUF account is compulsorily closed and funds distributed.
Explanation:
Upon the death of the Karta, the bank must stop operations to determine the new Karta (usually the next eldest coparcener). While recent laws allow daughters to be coparceners and potentially Karta, the succession must be formally established before operations resume to avoid legal disputes.
3. Under PMLA rules, who is considered the "Beneficial Owner" in case of a partnership firm?
Only the Managing Partner.
Any individual holding more than 25% of profit/capital.
The partner holding the maximum capital.
Any individual who essentially holds more than 15% of profit/capital or exercises control.
Explanation:
For partnership firms, the threshold for identifying the beneficial owner is ownership of/entitlement to more than 15% of capital or profits of the partnership, or who exercises control through other means.
4. A Power of Attorney (PoA) granted to operate a bank account stands automatically revoked in which of the following scenarios? I. Death of the Principal (Account Holder). II. Insanity of the Principal. III. Death of the Agent (Attorney).
All I, II, and III
Only I and II
Only I and III
Only I
Explanation:
A Power of Attorney is an agency relationship. It is terminated automatically upon the death, insanity, or insolvency of either the Principal or the Agent. Therefore, in all three cases, the PoA ceases to be valid.
5. Which essential condition must be met for a bank to exercise the "Right of Set-off"?
The debts must be in different names.
The bank must always give 30 days notice.
One debt must be accrued and the other contingent.
There must be mutuality of debts (same parties, same right, same capacity).
Explanation:
For Set-off, debts must be mutual: between the same parties, held in the same right and capacity. A bank cannot set off a customer's personal credit balance against a debit balance in their trust account or a joint account (unless all joint holders are liable).
6. Under Section 6 of the Hindu Minority and Guardianship Act, 1956, who is the natural guardian of a Hindu minor boy?
Both Father and Mother jointly and simultaneously.
The Grandfather.
The Father alone, and after him, the Mother.
The Mother alone, and after her, the Father.
Explanation:
The Act specifies the Father as the primary natural guardian. The Mother becomes the natural guardian only after the Father. (Note: This applies to boys and unmarried girls; for illegitimate children, the Mother is the primary guardian).
7. Regarding "Nomination" in deposit accounts, which of the following statements is TRUE?
Nomination once made cannot be cancelled or changed.
A minor can be a nominee.
Nomination can be made in favor of a Trust or HUF.
Nomination facility is available for accounts held in representative capacity (e.g., Trust accounts).
Explanation:
A minor can be appointed as a nominee. However, if the depositor dies while the nominee is still a minor, the payment is made to a person appointed by the depositor to receive the amount on behalf of the minor. Nomination is valid only for individuals, not Trusts/HUFs.
8. An account is classified as "Inoperative" or "Dormant" if there are no customer-induced transactions for a period of:
12 months
24 months
5 years
3 years
Explanation:
If a savings or current account witnesses no customer-induced transactions (credit or debit) for a continuous period of 2 years (24 months) , it is classified as inoperative/dormant to prevent fraud.
9. Before closing a customer's account due to "Undesirable Behavior", the bank is legally obligated to:
Give "Reasonable Notice" to the customer to make alternative arrangements.
Close the account immediately without notice.
Forfeit the balance in the account.
Obtain permission from RBI.
Explanation:
Based on the principle of natural justice and legal precedents (like Prosperity Ltd vs Lloyds Bank), a bank must provide reasonable notice to the customer before closing an account to allow them time to clear cheques and make alternate arrangements.
10. When a customer deposits sealed boxes or valuables with the bank for "Safe Custody", the relationship between the bank and customer is:
Trustee and Beneficiary
Debtor and Creditor
Bailee and Bailor
Lessor and Lessee
Explanation:
In safe custody, the goods are entrusted to the bank for a specific purpose (safety) to be returned later. The customer is the Bailor (owner), and the bank is the Bailee (custodian). This differs from a Locker where the bank is a Lessor.
11. A cheque drawn on a Partnership Firm's account is presented for payment after the death of one partner. The cheque is dated before the partner's death. The bank should:
Pay the cheque if there is sufficient balance.
Return the cheque marked "Partner Deceased".
Return the cheque marked "Refer to Drawer".
Pay only 50% of the amount.
Explanation:
Normally, the death of a partner dissolves the firm. However, regarding old transactions (cheques issued before death), the bank can pay them to avoid dishonor, provided the account has funds and the surviving partners don't object. The estate of the deceased partner remains liable for acts done before death.
12. For "High Risk" customers, banks are required to carry out periodic updation of KYC (Re-KYC) at least once in every:
2 Years
8 Years
10 Years
5 Years
Explanation:
According to RBI KYC norms: High Risk - Every 2 years; Medium Risk - Every 8 years; Low Risk - Every 10 years.
13. Simplified Due Diligence (SDD) is permissible for:
Politically Exposed Persons.
Foreign Portfolio Investors.
High Net Worth Individuals.
Self-Help Groups (SHGs) for their savings account.
Explanation:
SDD is allowed for low-risk customers like SHGs to promote financial inclusion. For SHG savings accounts, CDD of all members is not required; CDD of office bearers suffices.
14. When a bank collects a cheque and the proceeds are held pending instructions from the customer for investment, the bank stands in the capacity of:
Agent
Creditor
Debtor
Trustee
Explanation:
Normally, a bank collecting a cheque is an Agent. However, if the money is collected and held specifically *in trust* for a specific purpose (like investment) and not just credited to the general account, the relationship shifts to Trustee-Beneficiary.
15. In a joint deposit account with "Either or Survivor" mandate, if one holder dies, can the survivor nominate a new person?
Yes, but only with the consent of the legal heirs of the deceased.
No, nomination can only be made by all joint holders together.
Yes, the survivor can make a fresh nomination.
No, the account must be closed.
Explanation:
Upon the death of one joint holder in an E or S account, the title to the deposit passes to the survivor. Being the sole owner now, the survivor has the right to cancel old nominations and make a fresh nomination.
16. Which of the following best describes the risk category of Politically Exposed Persons (PEPs)?
Exempt from KYC
Medium Risk
High Risk
Low Risk
Explanation:
PEPs are individuals who are or have been entrusted with prominent public functions (e.g., Heads of State, politicians). Due to potential involvement in bribery and corruption, they are classified as High Risk customers requiring Enhanced Due Diligence (EDD).
17. Which document is the "Charter" of a company and defines its constitution and scope of powers?
Board Resolution
Memorandum of Association (MoA)
Certificate of Incorporation
Articles of Association (AoA)
Explanation:
The Memorandum of Association (MoA) defines the company's relationship with the outside world and sets the limits (scope) of its operations. Any act outside the MoA is "Ultra Vires" (void). AoA defines internal rules.
18. A Cash Transaction Report (CTR) must be submitted to FIU-IND for aggregate cash deposits/withdrawals exceeding what amount in a month?
?50,000
?10 Lakh
?2 Lakh
?5 Lakh
Explanation:
Banks must report all cash transactions of the value of more than ?10 Lakh or its equivalent in foreign currency (integrally connected series of transactions in a month) to FIU-IND by the 15th of the succeeding month.
19. A Garnishee Order Nisi creates a charge on the customer's account, but:
It applies only to future deposits.
The customer can still withdraw funds.
The bank must stop payment from the account but need not pay the court until the order is made Absolute.
The bank must pay the amount to the court immediately.
Explanation:
Order Nisi is a preliminary order asking the bank to freeze the funds and explain why they shouldn't be paid. Only after the Order is made "Absolute" does the bank pay the court.
20. The Banker-Customer relationship is terminated in all of the following cases EXCEPT:
Closure of the account by the customer.
Insanity of the customer.
Garnishee Order served on the account.
Death of the customer.
Explanation:
A Garnishee Order suspends the operation of the account (freezes it) but does not terminate the relationship. The account can become active again if the order is revoked or satisfied. Death, closure, or insanity typically end the active contract.
21. When opening an account for an Illiterate Person, which of the following is NOT a standard safeguard?
Thumb impression must be witnessed.
Account can only be operated jointly with a literate person.
A photo must be affixed to the account opening form.
Cheque book should ideally not be issued.
Explanation:
An illiterate person CAN open a single account. While joint operation is allowed, it is not mandatory that they must open a joint account. The other safeguards (witness, photo, no cheque book) are standard.
22. Which of the following customers would typically be classified as "Low Risk"?
Non-Face-to-Face customers.
Salaried employees with well-defined salary structure.
Jewelers and Bullion Dealers.
High Net Worth Individuals (HNIs).
Explanation:
Salaried employees, government departments, and small amounts balances are generally Low Risk. HNIs, Jewelers, and Non-face-to-face customers are usually Medium or High Risk due to higher money laundering potential.
23. In a "Former or Survivor" (F or S) joint account, who has the right to operate the account during the lifetime of the Former?
Either of them.
Only the Former.
Both Former and Survivor jointly.
Survivor can operate if Former consents.
Explanation:
In an F or S account, only the first named person (Former) can operate the account as long as they are alive. The Survivor gets rights only after the death of the Former.
24. A customer gives a Mandate to his agent. Later, the customer becomes insane. The bank is aware of this. What should the bank do with a cheque signed by the agent presented after the insanity?
Ask the agent to re-sign.
Pay up to a limited amount.
Pay the cheque as the agent is sane.
Dishonor the cheque.
Explanation:
The insanity of the Principal (customer) automatically terminates the agency/mandate. The agent's authority ceases immediately. Therefore, the bank must stop operations and dishonor the cheque to protect the principal's funds.
25. An STR (Suspicious Transaction Report) must be filed with FIU-IND within how many days of arriving at a conclusion that a transaction is suspicious?
30 days
15 days
3 days
7 days
Explanation:
While CTRs are filed monthly (by 15th), STRs must be filed within 7 working days of the bank's Principal Officer determining that a transaction is suspicious.
26. The Rule in Clayton's Case relates to:
Safe custody of articles.
Appropriation of payments in a running account (like Cash Credit).
Secrecy of customer accounts.
Right of Lien.
Explanation:
Clayton's Rule states that in a running account, the first debit is discharged by the first credit (FIFO - First In, First Out), unless there is a contrary intention. This is vital for determining liability in overdrafts when guarantees are revoked.
27. Unregistered Clubs and Societies are not legal entities. Therefore, banks should typically avoid opening accounts for them to avoid issues related to:
KYC compliance.
Unlimited liability of members.
Deposit insurance.
Suing and being sued (Legal capacity).
Explanation:
Since an unregistered body has no separate legal existence, it cannot be sued in its own name. If the account goes into debit/overdraft, recovering money becomes legally complex as the bank has to sue individual members.
28. An entry in the passbook is generally considered:
Conclusive proof of the transaction.
Irrelevant in a court of law.
Prima facie evidence, but not conclusive proof.
Valid only if signed by the manager.
Explanation:
Entries in a passbook are strong evidence (prima facie) against the bank, but they are not conclusive. A bank can prove an entry was made by mistake (e.g., wrong credit) and reverse it, provided the customer hasn't altered their position based on that entry.
29. Which of the following is NOT an "Officially Valid Document" (OVD) for KYC purposes as per RBI?
Aadhaar Card
PAN Card
Ration Card
Passport
Explanation:
The 6 OVDs are: Passport, Driving License, Voter ID, MGNREGA Card, Aadhaar, and NPR Letter. PAN Card is mandatory for financial transactions but is technically not listed as an OVD for *address proof* in the core list, and Ration Card is definitely not an OVD anymore.
30. If a bank receives a Garnishee Order attaching a customer's account, but the bank already has a prior right of set-off against a due loan from the same customer:
The Garnishee Order takes precedence over the bank's right.
The Bank's right of Set-off takes precedence over the Garnishee Order.
The account is frozen and decision is left to the court.
Both share the amount equally.
Explanation:
The bank has the right to combine accounts and set off dues BEFORE complying with the Garnishee order, provided the bank's debt was due and recoverable at the time the order was served.
31. Which of the following is NOT a privilege of a "Holder in Due Course" (HDC) under the NI Act, 1881?
He gets the instrument free from all defects of title of the transferor.
He can sue all prior parties to the instrument.
He gets a valid title even if the instrument is forged.
The instrument is presumed to be validly delivered to him.
Explanation:
While an HDC gets a better title than the transferor (curing defects like fraud or lack of consideration), Forgery is a nullity . A forged signature does not convey any title, and even an HDC cannot acquire a valid title on a forged instrument.
32. Which of the following alterations on a cheque does NOT require the drawer's full signature for confirmation (i.e., it is not a material alteration avoiding the instrument)?
Converting an "Order" cheque to a "Bearer" cheque.
Converting a "Bearer" cheque to an "Order" cheque.
Changing the amount.
Changing the date to a later date.
Explanation:
Section 87 of NI Act: Converting a Bearer cheque to Order is allowed and restricts the negotiability safely, so it is not considered a material alteration that voids the cheque. However, converting Order to Bearer is material and needs signature.
33. A Paying Banker gets statutory protection under Section 85(1) of the NI Act for payment of an "Order Cheque" only if:
The endorsement is regular and payment is in due course.
The cheque is crossed specially.
The customer has confirmed the payment on phone.
The payment is made to the true owner.
Explanation:
Section 85(1) protects the paying banker for order cheques if the endorsement purports to be regular (even if forged), provided the payment is made in Due Course (good faith and without negligence).
34. If an endorser signs his name and adds the words "Sans Recourse", it means:
The instrument cannot be endorsed further.
He waives his right to receive notice of dishonor.
He assumes liability only if the primary debtor fails.
He specifically excludes his own liability on the instrument to any subsequent holder.
Explanation:
"Sans Recourse" means "without recourse". By adding this, the endorser denies liability to any subsequent holder if the instrument is dishonored.
35. Under the revised RBI guidelines for Safe Deposit Lockers, if the contents of a locker are lost due to fire, theft, or building collapse (negligence of bank), the bank's liability is limited to:
10 times the annual rent of the locker.
Value of the contents declared by the customer.
No liability as it is a Lessor-Lessee relationship.
100 times the annual rent of the locker.
Explanation:
The revised guidelines (2021) state that in case of incidents like fire, theft, burglary, or building collapse attributable to the bank's deficiency, the liability shall be 100 times the prevailing annual rent of the locker.
36. In a Joint Account with "Jointly" operation instruction, if a cheque is issued signed by all, but one account holder sends a "Stop Payment" instruction:
The bank should ignore it as the cheque is validly signed by all.
The bank requires all holders to sign the stop payment request.
The bank must stop payment based on the mandate of a single holder.
The bank pays 50% of the amount.
Explanation:
The authority to *draw* funds is joint, but the authority to *revoke* the mandate (stop payment) is individual. Any single joint holder can stop payment to protect the funds.
37. Which of the following is a key difference between NEFT and RTGS?
There is a minimum limit for NEFT but no minimum limit for RTGS.
RTGS is only for cross-border transfers.
RTGS operates 24x7, NEFT does not.
NEFT works on a Deferred Net Settlement (DNS) basis; RTGS is Gross Settlement.
Explanation:
NEFT transactions are settled in batches (DNS), whereas RTGS transactions are settled individually and continuously (Real-Time Gross). Now both operate 24x7.
38. A "Small Account" (opened without full KYC) has certain limitations. Which of the following is correct?
Foreign remittances are allowed up to ?10,000.
Total credits in a financial year cannot exceed ?1 Lakh.
Aggregate withdrawals in a month cannot exceed ?50,000.
Balance cannot exceed ?1 Lakh at any time.
Explanation:
Limitations of Small Accounts: Total credits in a FY = ?1 Lakh; Balance at any point = ?50,000; Withdrawals in a month = ?10,000. No foreign remittances allowed.
39. Cash Management Services (CMS) offered by banks primarily aim to help corporates in:
Evading taxes legally.
Optimizing liquidity by speeding up receivables and managing payables.
Managing employee provident funds.
Printing currency notes.
Explanation:
CMS products focus on efficient inflow and outflow of funds (Collection and Payment services) to minimize idle cash and improve working capital management.
40. Section 131 of the NI Act protects the Collecting Banker only if:
He credits the account after the cheque is cleared.
The cheque is uncrossed.
The cheque is an open cheque.
He acts in good faith and without negligence for a customer.
Explanation:
Protection to Collecting Banker (Section 131) applies only for crossed cheques collected for a customer in good faith and without negligence .
41. What is the primary difference between a Mandate and a Power of Attorney (PoA) regarding bank accounts?
Mandate is revocable, PoA is irrevocable.
Mandate is a simple letter of authority for bank operations, while PoA is a formal legal document for broader acts.
Mandate is for companies, PoA is for individuals.
PoA needs to be stamped, Mandate does not.
Explanation:
A Mandate is usually specific to a bank account and given on the bank's standard form. A PoA is a general legal document drafted on stamp paper that can cover various acts, including property and legal representation, beyond just banking.
42. When opening an account for an Executor/Administrator, the bank must inspect the:
Power of Attorney.
Probate or Letter of Administration.
Memorandum of Understanding.
Partnership Deed.
Explanation:
An Executor derives authority from the Will (confirmed by Probate). An Administrator is appointed by the court (Letter of Administration) if there is no will. These documents validate their legal standing.
43. Can a Garnishee Order issued in the name of Mr. A attach the funds in a Joint Account held by "Mr. A and Mr. B"?
No, a joint account cannot be attached for an individual debt of one holder.
Yes, the entire amount.
Yes, but only 50%.
Yes, if Mr. A is the first holder.
Explanation:
A Garnishee Order can only attach funds that solely belong to the judgment debtor. A joint account (A & B) cannot be attached for A's individual debt because the debt is not due to A alone. However, the reverse is true (A's account can be attached for a joint debt of A & B).
44. A cheque crossed "Not Negotiable" implies that:
The cheque cannot be transferred at all.
It is no longer a valid instrument.
The cheque can be transferred, but the transferee cannot get a better title than the transferor.
The cheque must be paid only to the payee named.
Explanation:
"Not Negotiable" does NOT restrict transferability. It restricts the property of "Negotiability" (the ability to give better title). Even a bona fide holder for value cannot get a good title if the transferor had a defective title (e.g., stolen cheque).
45. The Central KYC Records Registry (CKYCR) is managed by:
RBI
IBA
CERSAI
CIBIL
Explanation:
The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) manages the CKYCR to reduce the burden of producing KYC documents every time a customer opens a new relationship with a financial entity.
46. For settlement of claims in deceased depositor accounts without nomination/survivorship clause, the bank should generally insist on Succession Certificate only if:
The account is a current account.
The amount is very small.
The deceased was a minor.
The amount exceeds the threshold limit (policy) and there is a dispute among legal heirs.
Explanation:
RBI advises banks to settle claims simply on indemnity for small amounts. Legal representation (Succession Certificate) should be insisted upon only in cases of large amounts or disputes to avoid harassment of heirs.
47. According to the rule of appropriation (Section 60-61 Contract Act), if a debtor makes a payment without specifying the debt to be discharged, and there are multiple debts:
It must be applied to the most recent debt.
It must be returned to the debtor.
The creditor can apply it to any lawful debt, including time-barred debt.
The creditor must apply it to the principal first.
Explanation:
If the debtor doesn't intimate, the creditor has the discretion to appropriate the payment to any lawful debt actually due, even if it is barred by the law of limitation.
48. Why do banks generally not pay interest on Current Accounts?
Because of the high cost of servicing these accounts due to unlimited transactions.
Current accounts are only for poor people.
It is prohibited by the Constitution.
RBI has strictly banned it for all banks.
Explanation:
Current accounts offer fluidity and unlimited transactions (cheques, transfers) which incurs high operational costs for banks. Hence, no interest is paid (though RBI deregulated this, most banks still don't pay to maintain margins).
49. A Demand Draft (DD) cannot be countermanded (stopped) by the purchaser because:
It is illegal to stop a DD.
It is a prepaid instrument.
The purchaser is not the drawer.
It is a bill of exchange drawn by a bank on its own branch (commitment of the bank).
Explanation:
Once issued, a DD is a direct commitment of the bank to pay. The purchaser is not the drawer; the bank is. Therefore, the purchaser cannot simply stop payment like a personal cheque unless there is a court order or loss of instrument.
50. In case of an unauthorized electronic banking transaction where the fault lies with the bank, the customer's liability is:
Limited to ?5,000.
50% of the transaction amount.
Limited to ?10,000.
Zero.
Explanation:
As per RBI guidelines on limiting customer liability, if the fraud/negligence/deficiency is on the part of the bank, the customer has Zero Liability , regardless of when they report it.
51. Which of the following is considered a Material Alteration making the cheque void?
Altering the amount.
Filling a blank endorsement.
Conversion of bearer to order.
Crossing a cheque.
Explanation:
Changing the amount (sum payable) alters the character and liability of the instrument significantly. Without the drawer's authentication, this is a material alteration under Section 87, rendering the cheque void.
52. Foreign students studying in India can open an NRO account. What is the monthly withdrawal cap imposed on such accounts before full KYC verification?
?10,000
No limit
?50,000
USD 1,000
Explanation:
For foreign students, pending verification of local address, the account is operated with a condition that withdrawal should not exceed ?50,000 per month and total credits should not exceed ?1 Lakh in the financial year.
53. In a "Jointly" operated account of A and B, if A dies, can the bank pay the balance to B (Survivor)?
Yes, if the account opening form had a Survivorship clause (E or S).
Yes, B is the owner.
No, the rule of survivorship does not apply to Jointly operated accounts.
No, the money belongs to the survivor and the legal heirs of the deceased jointly.
Explanation:
Unless there is a specific survivorship mandate (like Either or Survivor), a simple "Jointly" operated account implies joint ownership. Upon death, the contract ends, and the balance is payable jointly to the Survivor (B) and the Legal Heirs of A.
54. When a minor attains majority, what action must the bank take regarding his account operated by a guardian?
Continue the account as is.
Obtain a fresh signature and confirmation of balance from the minor-turned-major to operate the account himself.
Ask the guardian to continue for 1 more year.
Close the account and open a new one.
Explanation:
The guardianship terminates automatically when the minor attains majority. The bank must stop the guardian's operations and take fresh instructions and specimen signatures from the erstwhile minor.
55. In the Cheque Truncation System (CTS), the physical cheque is truncated by:
The RBI
The Customer
The Collecting Bank
The Paying Bank
Explanation:
In CTS, the Presenting/Collecting Bank captures the image of the cheque and sends the electronic data to the Paying Bank. The physical movement of the cheque is stopped (truncated) at the Collecting Bank's end.
56. When a borrower pledges a Life Insurance Policy as security for a loan, the relationship is created through:
Nomination
Assignment
Lien
Hypothecation
Explanation:
Assignment involves the transfer of rights, title, and interest in the policy from the policyholder (assignor) to the bank (assignee). It is the correct mode for creating security on insurance policies.
57. Can a bank exercise "General Lien" on a Fixed Deposit Receipt (FDR) deposited by the customer?
Yes, if there is a specific contract.
Yes, always.
No, Lien applies to goods/securities, not money/debts.
No, only Set-off applies.
Explanation:
Technically, "Lien" is the right to retain goods. An FDR represents money (a debt owed by the bank). You cannot have a lien on your own debt. The correct legal concept for adjusting FD against a loan is "Set-off". However, loosely in banking, it is often called lien.
58. A locker is hired by A and B jointly with instructions "Either or Survivor". A dies. B wants to remove the contents. What should the bank do?
Allow B to remove contents after taking an inventory in the presence of A's heirs.
Allow B to operate and remove contents freely.
Allow B only to view but not remove contents.
Freeze the locker and ask for succession certificate.
Explanation:
In a locker with a survivorship clause ("Either or Survivor"), the bank is validly discharged by allowing the survivor to access and remove contents. The bank need not insist on the presence of legal heirs unless there is a court order restraining it.
59. A "Certificate of Commencement of Business" is required to open a bank account for:
Proprietorship Firms.
Private Limited Companies.
Partnership Firms.
Public Limited Companies.
Explanation:
Under the Companies Act, a Public Limited Company needs a Certificate of Commencement of Business in addition to the Certificate of Incorporation to start operations and borrow money. Private companies only need Incorporation cert.
60. A Power of Attorney holder generally CANNOT do which of the following acts on behalf of the Principal unless specifically empowered?
Sign cheques.
Operate the account.
Stop payment of cheques.
Overdraw the account (borrow).
Explanation:
A general mandate to operate an account does not imply the authority to borrow money or overdraw the account, which creates a debt liability for the principal. This power must be explicitly stated.
61. Under Section 85(2) of the Negotiable Instruments Act, 1881, a paying banker is discharged from liability for payment of a bearer cheque even if:
The cheque is crossed specially.
It bears a forged endorsement at the back.
The drawer's signature is forged.
The payment is not made in due course.
Explanation:
Section 85(2) provides that where a cheque is originally expressed to be payable to bearer, the banker is discharged by payment in due course to the bearer of the instrument, notwithstanding any endorsement whether in full or in blank appearing thereon. This means the banker need not verify the regularity of endorsements on a bearer cheque because the title passes by delivery, and endorsements are legally superfluous for negotiation.
62. As per the revised RBI guidelines on Safe Deposit Lockers (2021), banks must ensure that the locker agreement is stamped according to the Stamp Act of the respective state. Who bears the cost of the stamp paper and execution of the agreement?
Shared equally by Bank and Customer.
The Bank.
The Locker Hirer (Customer).
Waived for existing customers.
Explanation:
In a significant shift for consumer protection, the revised RBI guidelines mandate that the Bank shall bear the cost of stamp paper and other expenses related to the execution of the locker agreement for both new and existing locker hirers. This ensures standardization and removes the financial burden of documentation from the customer.
63. The "Maker-Checker" principle in a Core Banking Solution (CBS) environment is primarily designed to:
Allow remote access to the system.
Reduce the workload of the branch manager.
Speed up transaction processing time.
Prevent fraud and errors by ensuring no single individual can complete a transaction from start to finish.
Explanation:
The Maker-Checker principle acts as a critical internal control mechanism. It mandates that for any transaction (especially financial or sensitive data changes), there must be at least two individuals involved: one to initiate/create (Maker) and another to verify/authorize (Checker/Authorizer). This segregation of duties minimizes the risk of internal fraud, unauthorized transactions, and human error.
64. When opening an account for a registered Society or Club, which document is critical for determining the authorized signatories and their powers?
The Resolution of the Managing Committee.
The Bye-laws of the Society/Club.
The Annual Report.
The Certificate of Registration.
Explanation:
While the Resolution of the Managing Committee specifies who will operate the account *currently*, the Bye-laws are the fundamental governing rules that define the *constitution* of the society, the powers of the committee, election rules, and the procedure for appointing signatories. The bank must verify that the resolution passed is consistent with the powers conferred by the Bye-laws.
65. If a bank detects 5 or more counterfeit notes in a single deposit transaction at the counter, what is the mandatory reporting procedure?
Destroy the notes in front of the customer.
Impound the notes and include them in the monthly report to RBI only.
Impound the notes and file an FIR with the Police immediately.
Return the notes to the customer with a warning.
Explanation:
As per RBI guidelines, if 5 or more counterfeit notes are detected in a single transaction, the Nodal Bank Officer must file an FIR (First Information Report) with the local police station immediately. For less than 5 notes, a consolidated report is sent to the police at the end of the month. In all cases, notes must be impounded and stamped "COUNTERFEIT BANKNOTE"; they must never be returned to the depositor.
66. If a customer's account is debited during an ATM transaction but cash is not dispensed, the bank must reverse the amount within T+5 days. If it fails to do so, what is the compensation payable to the customer?
?100 per day of delay.
Interest at Saving Bank rate.
No compensation if reversed within 30 days.
?50 per day of delay.
Explanation:
The RBI mandates that banks must resolve failed ATM transactions (wrong debits) within 5 calendar days (T+5) from the date of transaction. Beyond this period, the bank is liable to pay a compensation of ?100 per day of delay to the account holder, without waiting for a formal complaint/claim from the customer.
67. Clayton's Rule is particularly significant for banks in the case of:
Term Loans with fixed EMIs.
Safe Deposit Lockers with overdue rent.
Running accounts (like Cash Credit) where a guarantee or partnership is terminated.
Fixed Deposits nearing maturity.
Explanation:
Clayton's Rule (First-In-First-Out for appropriation) implies that subsequent credits into a running account discharge the earliest debits. If a guarantee is revoked or a partner dies (terminating liability), the bank must break the account (stop operations) immediately. If they continue the account, new credits will pay off the old "guaranteed" debt, while new debits will create a new "unsecured" debt, leaving the bank exposed.
68. If a bank delays the issuance of a duplicate Demand Draft (in lieu of a lost one) beyond a fortnight (14 days) from the receipt of the request and necessary documents, what is the penalty?
No penalty if the delay is due to verification.
A lump sum penalty of ?500.
Interest at Savings Bank rate for the delay period.
Interest at Fixed Deposit rate for the delay period.
Explanation:
To protect customers, RBI mandates that a duplicate DD must be issued within 14 days. If there is a delay beyond this period, the bank must pay interest at the rate applicable for Fixed Deposits of corresponding maturity to the purchaser, to compensate for the loss of use of funds.
69. If a bank lends money to a Trust for a purpose NOT authorized by the Trust Deed, and the Trustees default, can the bank recover the money from the Trust's assets?
No, the loan is Ultra Vires the Trust, and Trust assets are not liable.
Yes, but only up to 50% of the loan value.
Yes, the Trust is always liable for acts of Trustees.
Yes, because the bank acted in good faith.
Explanation:
Trustees have only those powers granted by the Trust Deed. If they borrow for an unauthorized purpose, the act is Ultra Vires (beyond powers). The Trust estate cannot be bound by such acts. The bank can only look to the trustees personally for recovery, making it a high-risk situation.
70. Which of the following complaints is NOT maintainable before the RBI Integrated Ombudsman?
Refusal to open a deposit account without a valid reason.
Levying of charges without prior notice.
Disputes related to commercial decisions of the bank (e.g., rejection of a loan proposal based on credit score).
Non-payment or delay in payment of inward remittances.
Explanation:
The Ombudsman scheme aims to resolve "Deficiency in Service." It specifically excludes complaints arising from the commercial judgment/decisions of the bank, such as whether to grant a loan or the interest rate charged (unless not as per RBI guidelines), to avoid interfering in business autonomy.
71. Section 131A of the Negotiable Instruments Act extends the protection available to a collecting banker (under Section 131) to which other instrument?
Treasury Bills
Bills of Exchange
Demand Drafts
Promissory Notes
Explanation:
Section 131 protects a banker collecting crossed cheques. Section 131A explicitly applies this chapter to Demand Drafts drawn by one branch of a bank upon another, ensuring that collecting bankers get the same protection for DDs as they do for cheques.
72. If an NEFT transaction cannot be credited to the beneficiary account (due to invalid account number, etc.), the destination bank must return the funds to the originating bank within:
24 hours.
T+1 day.
End of the day.
2 hours of receipt of the batch.
Explanation:
RBI guidelines mandate that if the beneficiary account cannot be credited for any reason, the destination bank must return the transaction to the originating bank within 2 hours of the completion of the batch in which the transaction was processed (B+2).
73. According to the BCSBI Code/RBI Guidelines, settlement of claims in respect of deceased depositors and release of payments to survivors/nominees should be made within a period not exceeding _____ from the date of receipt of the claim with all necessary documents.
30 Days
7 Days
21 Days
15 Days
Explanation:
To ensure timely service to the bereaved family, banks are mandated to settle claims in deceased accounts within 15 days of receiving the claim application complete in all respects. This applies to accounts with nomination/survivorship clauses as well as those without.
74. Can a bank exercise its Right of Set-off against the contents of a Safe Deposit Locker for the recovery of dues from the hirer?
Yes, after giving notice.
Yes, if the dues are related to locker rent.
No, because the contents are not "Debts" due to the customer.
Yes, always.
Explanation:
The Right of Set-off applies only to financial debts (money owed by bank vs money owed to bank). The contents of a locker are physical goods entrusted for safe custody (Lease/Bailment relationship), not a sum of money owed by the bank to the customer. Therefore, Set-off is legally impossible; the bank cannot just open the locker and take the contents.
75. If a customer attempts to open an account but refuses to provide the required KYC documents, the bank should:
Open the account and give 3 months to submit documents.
Open the account but restrict transactions.
Refuse to open the account and consider filing a Suspicious Transaction Report (STR).
Charge a penalty and open the account.
Explanation:
RBI Guidelines are strict: No account can be opened without proper KYC ("No KYC, No Account"). Furthermore, refusal to provide standard information or non-cooperation is a red flag for potential money laundering, warranting the bank to consider filing an STR with FIU-IND.
76. Under Section 10 of the NI Act, "Payment in Due Course" requires payment to be made in accordance with the apparent tenor of the instrument, in good faith, and:
In cash only.
Before maturity.
To the holder only.
Without negligence.
Explanation:
The definition of Payment in Due Course (Sec 10) has three pillars: 1. Payment according to apparent tenor. 2. Payment in good faith. 3. Payment without negligence to any person in possession thereof. If the bank is negligent (e.g., ignores a visible alteration), it is not Payment in Due Course and protection is lost.
77. An Attachment Order from the Income Tax Department typically attaches:
Only funds in excess of ?10,000.
Only the clear balance available at the time of receipt.
The balance at the time of receipt AND any future credits deposited until the order is revoked.
Only Fixed Deposits, not Savings accounts.
Explanation:
Unlike a court Garnishee Order (which usually attaches only present balances), Income Tax Attachment Orders (under Sec 226(3) of IT Act) are generally "continuing" in nature. They bind the bank to remit any funds held *at that time* OR *subsequently held* for the assessee until the tax demand is met or the order is revoked.
78. Which account allows Returning Indians (NRIs returning to India for permanent settlement) to hold their foreign earnings in foreign currency?
RFC (Resident Foreign Currency) Account
FCNR (B) Account
NRO Account
NRE Account
Explanation:
The Resident Foreign Currency (RFC) account is specifically designed for returning NRIs to park their foreign currency earnings (pension, savings abroad) without converting them to Rupees, protecting them from exchange rate risk. NRE/FCNR accounts must be closed/converted upon return.
79. Under RBI guidelines for "Doorstep Banking" for Senior Citizens (>70 years) and Differently Abled persons, which of the following services is the bank mandated to provide?
All of the above.
Delivery of Demand Drafts.
Pick up of cash and instruments.
Delivery of cash against withdrawal.
Explanation:
To support vulnerable groups, RBI mandates banks to provide basic banking services at the doorstep for senior citizens over 70 and differently-abled persons. This includes pick-up of cash/instruments, delivery of cash, KYC documents pickup, and delivery of DDs/cheque books.
80. An endorsement where the endorser signs his name and adds a direction to pay the amount to a specific person is called:
Blank Endorsement
Restrictive Endorsement
Full / Special Endorsement
Conditional Endorsement
Explanation:
A "Full" or "Special" endorsement specifies the person to whom or to whose order the money is to be paid (e.g., "Pay to B or Order" signed A). This converts a bearer instrument back into an order instrument, adding security.
81. Who among the following can be a Co-parcener in a Hindu Undivided Family (HUF) governed by Mitakshara Law?
Daughter-in-law of the family.
Both sons and daughters born in the family.
Wife of the Karta.
Only male members born in the family.
Explanation:
Post the Hindu Succession (Amendment) Act, 2005, daughters have the same rights as sons and are considered Co-parceners by birth in their own right. Wives and daughters-in-law are members but not co-parceners (they cannot demand partition).
82. What is the Limitation Period for a customer to file a suit for the recovery of money deposited in a Savings Bank Account?
3 years from the date of demand and refusal by the bank.
3 years from the date of deposit.
There is no limitation period for deposits.
12 years from the date of last transaction.
Explanation:
Under Article 22 of the Limitation Act, 1963, the period is 3 years. Crucially, time starts running NOT from the deposit date, but from the date the customer makes a demand for payment and the bank refuses it. Until a demand is made, the limitation does not expire.
83. In the Video Customer Identification Process (V-CIP), which of the following is a mandatory security requirement?
The official conducting V-CIP must be a bank official, not an agent.
Only PAN card can be used as ID proof.
The customer must be physically present in the bank branch.
The video call can be originated from the customer's domain.
Explanation:
RBI guidelines strictly specify that the V-CIP must be operated by officials of the Regulated Entity (Bank) only. Business Correspondents (BCs) or Direct Selling Agents (DSAs) are NOT authorized to conduct the video interaction to ensure data security and accountability.
84. While a blind person is legally competent to contract, banks usually take extra precautions. Which of the following is NOT a valid restriction/rule for a blind person's account?
Cash withdrawals should be made in person.
They cannot be issued an ATM/Debit Card.
The mark/signature should be witnessed.
They can open a cheque-operated account.
Explanation:
This is incorrect. RBI has mandated that banking facilities including ATM/Debit Cards and Net Banking should be offered to visually impaired persons without discrimination. Banks must ensure ATMs are accessible (talking ATMs). Denying a card is a violation.
85. A cheque becomes "Stale" and cannot be paid by the bank if it is presented after:
3 months from the date of issue.
30 days from the date of issue.
12 months from the date of issue.
6 months from the date of issue.
Explanation:
As per RBI directive (effective April 1, 2012), the validity period of Cheques, Drafts, Pay Orders, and Banker's Cheques is reduced from 6 months to 3 months from the date of the instrument.
86. Section 148 of the Indian Contract Act defines "Bailment". In the context of a bank, which transaction creates a bailment?
Safe Custody of Articles.
Safe Deposit Locker.
Fixed Deposit.
Demand Draft issuance.
Explanation:
Bailment involves the delivery of goods from one person to another for a specific purpose. In Safe Custody, the customer delivers the goods to the bank. In a Locker, there is no delivery of goods (the customer retains control), so it is Lease, not Bailment. FD is a debt.
87. How frequently are NEFT batches settled currently (as of 24x7 operation)?
Every 15 minutes.
Real-time (continuously).
Every 60 minutes.
Every 30 minutes.
Explanation:
Since December 2019, NEFT operates on a 24x7x365 basis with half-hourly batches. There are 48 half-hourly batches every day. (Note: RTGS is real-time, NEFT is batch-wise).
88. Each bank must have a Board-approved "Compensation Policy". This policy typically covers compensation for:
Transaction failure in ATMs.
Unauthorized electronic debits.
All of the above.
Loss of interest due to delay in collection of cheques.
Explanation:
The Comprehensive Compensation Policy aims to cover various deficiencies in service, including delays in cheque collection, ATM failures, unauthorized debits, and payment of interest for delays in returns, ensuring customer rights are protected.
89. Which section of the Unlawful Activities (Prevention) Act (UAPA) is relevant for banks regarding freezing of assets of designated terrorists?
Section 45
Section 51A
Section 13
Section 3
Explanation:
Section 51A of UAPA empowers the Central Government to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of, or at the direction of any individual or entity listed as a terrorist.
90. If a Principal grants a "Special Power of Attorney" to an agent, the agent's authority is:
Valid even after the death of the Principal.
Limited to a specific act or a specific transaction mentioned in the deed.
Transferable to another person.
Unlimited across all banking operations.
Explanation:
A Special PoA is restricted to the specific act mentioned (e.g., selling a specific property or operating a specific account). It contrasts with a General PoA, which gives broader powers. The bank must verify the specific limits.
91. A "Small Account" is initially valid for 12 months. It can be extended for another 12 months if:
The branch manager approves the extension.
The account holder provides a self-declaration of having applied for an Officially Valid Document (OVD).
The balance in the account is less than ?10,000.
The account holder deposits ?50,000.
Explanation:
A Small Account (opened without full KYC) can be extended for another 12 months if the customer provides proof that they have applied for any of the OVDs (like Voter ID, NREGA card, etc.) during the first 12 months.
92. In which of the following scenarios is Clayton's Rule (First-In-First-Out appropriation) NOT applicable?
A Term Loan account.
A Current Account with an overdraft limit.
An Overdraft account where the guarantor revokes the guarantee.
A running Cash Credit account where a partner retires.
Explanation:
Clayton's Rule applies specifically to running accounts (like Cash Credit, Overdraft) where debits and credits are continuous. In a Term Loan, the account is not a running account; payments are appropriated towards interest first and then principal, not based on FIFO of debits.
93. In a Hindu Undivided Family (HUF) account, who has the implied authority to sign cheques and bind the family?
Any male member above 18.
The Karta and the eldest son.
All adult coparceners jointly.
Only the Karta.
Explanation:
Only the Karta (Manager) has the implied authority to operate the account and bind the family/firm. Other coparceners can operate only if the Karta grants them a specific mandate/power of attorney.
94. Which of the following alterations is allowed under the NI Act without the drawer's signature (i.e., it is not a material alteration)?
Altering the name of the payee.
Changing the date to a future date.
Changing "Order" to "Bearer".
Converting a general crossing into a special crossing.
Explanation:
Section 125 of the NI Act permits a holder to convert a general crossing into a special crossing. This enhances security and is not considered a material alteration that voids the instrument.
95. If a locker hirer defaults on rent payment for 3 consecutive years, what action can the bank take as per RBI guidelines?
Transfer the contents to the hirer's savings account.
Break open the locker after giving due notice to the hirer.
Sell the contents immediately.
Forfeit the contents to the government.
Explanation:
The bank has the discretion to break open the locker after following due procedure (giving notice, allowing reasonable time). The contents must be inventoried in the presence of independent witnesses and kept in safe custody.
96. A customer deposits money with a bank with specific instructions to use it for buying government bonds. If the bank fails to buy the bonds and the bank goes into liquidation, the customer is a:
Preferential Creditor (Trustee relationship).
Debtor.
General Creditor.
Secured Creditor.
Explanation:
Since the money was entrusted for a specific purpose, the bank holds it as a Trustee. In liquidation, trust money does not form part of the bank's general assets, so the customer has a preferential claim over general creditors.
97. Under the "Combating of Financing of Terrorism" (CFT) guidelines, banks must screen their customer database against the list of designated individuals/entities circulated by:
Reserve Bank of India (RBI) based on UN Security Council Resolutions.
Local Police.
SEBI.
Central Bureau of Investigation (CBI).
Explanation:
Banks must ensure they do not have any accounts in the names of individuals/entities appearing in the lists of terrorists approved by the UN Security Council (e.g., Al-Qaida Sanctions List), as circulated by the RBI.
98. Can a Partner in a partnership firm execute a Power of Attorney (PoA) authorizing a third party to operate the firm's bank account?
Yes, if the partnership deed allows it.
Yes, any partner can do so.
Yes, but only with the consent of all other partners.
No, a partner is an agent of the firm and "Delegatus non potest delegare".
Explanation:
A partner acts as an agent for the firm. An agent cannot delegate his authority to another (sub-agent) unless expressly authorized. Therefore, a PoA for operating the firm's account requires the joint consent/signature of all partners.
99. If a bank wrongfully dishonors a customer's cheque due to a clerical error, the bank is liable to compensate the customer for:
Damages for loss of credit/reputation and mental agony.
No compensation if the error was unintentional.
Only the amount of the cheque.
A fixed penalty of ?100.
Explanation:
Under Section 31 of the NI Act, a banker is liable to compensate the drawer for any loss or damage caused by wrongful dishonor. This includes damages for injury to the customer's credit and reputation in the market.
100. Can a minor be appointed as an Agent to operate a bank account on behalf of a Principal (Adult)?
Yes, a minor can be an agent, but the Principal is liable for the minor's acts.
Yes, but only for deposit transactions.
No, banks do not allow minors as agents.
No, a minor cannot contract.
Explanation:
Under Section 184 of the Contract Act, a minor can be an agent between the principal and third parties. The minor is not personally liable, but their acts bind the Principal. Banks usually discourage this due to risk.
101. If a cheque is crossed "Account Payee Only", the collecting banker acts negligently if he:
Collects it for the payee named in the cheque.
Credits the proceeds to the payee's account.
Verifies the identity of the payee.
Collects it for an endorsee (transferee).
Explanation:
An "Account Payee" crossing directs the collecting banker to credit the proceeds ONLY to the account of the payee named. If the banker collects it for someone else (an endorsee), they lose statutory protection under Section 131 because it is considered negligence.
102. Which of the following is NOT considered an "Officially Valid Document" (OVD) for KYC, but is accepted as a "Deemed OVD" for low-risk customers if it contains the address?
Voter ID Card.
Utility Bill (Electricity/Telephone) not more than 2 months old.
Passport.
Aadhaar Card.
Explanation:
The 6 core OVDs are Passport, Driving License, Voter ID, NREGA Card, Aadhaar, NPR Letter. Utility bills are "Simplified Measures" or Deemed OVDs allowed primarily for address proof for low-risk customers when OVD doesn't have the current address.
103. If a Standing Instruction (SI) for payment of insurance premium fails due to insufficient funds in the account:
The bank is liable to pay the premium to the insurance company.
The bank must inform the customer immediately.
The bank must grant an overdraft.
The bank is not liable, as the customer failed to maintain funds.
Explanation:
An SI creates an agency relationship where the bank agrees to pay "subject to availability of funds." If funds are insufficient, the bank is not obligated to pay or create an overdraft, and thus is not liable for the lapsed policy.
104. Once a "Liquidator" is appointed for a company by the court, the powers of the Board of Directors regarding the bank account:
Are transferred to the shareholders.
Continue as usual.
Cease immediately, and the Liquidator takes control.
Are shared with the Liquidator.
Explanation:
Upon the appointment of a Liquidator, the directors become functus officio (lose their office/powers). The bank must stop the operation of the account by directors and allow operations only by the Liquidator.
105. In a "Simple Mortgage", the possession of the property remains with:
The Mortgagee (Bank)
The Mortgagor (Borrower)
The Court
A third-party Trustee
Explanation:
In a Simple Mortgage (Section 58(b) of Transfer of Property Act), the mortgagor binds himself personally to pay the debt but does NOT deliver possession of the property to the mortgagee.
106. If a banker pays a cheque before the date mentioned on it (Post-Dated Cheque), the payment is:
Valid if the amount is small.
Payment in Due Course.
Valid if the customer consented verbally.
Not Payment in Due Course.
Explanation:
Payment in Due Course must be "in accordance with the apparent tenor". A post-dated cheque becomes payable only on or after the date on its face. Paying it earlier violates the tenor and is negligent, stripping the bank of statutory protection.
107. The Goiporia Committee is associated with recommendations on:
NPA Management
Priority Sector Lending
Computerization in Banks
Customer Service in Banks
Explanation:
The Goiporia Committee (1990) was a landmark committee that recommended time norms for various banking transactions and measures to improve customer service in banks.
108. If neither the debtor nor the creditor makes an appropriation of payment, the rule in Clayton’s case applies to running accounts. For distinct debts, Section 61 of the Contract Act says the payment shall be applied to:
Proportionately to all debts.
The debts in order of time, excluding time-barred debts.
The debt with the highest interest rate.
The debts in order of time (Oldest first), including time-barred debts.
Explanation:
Where neither party appropriates, the law applies the payment to discharge debts in chronological order (oldest first), irrespective of whether they are time-barred or not.
109. Records of the identity of clients (KYC documents) must be maintained for a period of ____ after the business relationship has ended.
2 Years
8 Years
5 Years
10 Years
Explanation:
PMLA rules mandate that identification records (KYC) must be preserved for 5 years from the date of cessation of the relationship with the client.
110. Can a resident Indian holding a Power of Attorney for an NRE account holder repatriate funds outside India from that account?
No, generally not allowed.
Yes, if the PoA holder is a relative.
Yes, up to USD 250,000.
Yes, freely.
Explanation:
A resident PoA holder in an NRE account can operate it for local payments in India. However, they are generally NOT allowed to repatriate funds abroad, except in very specific cases like remitting to the account holder himself.
111. Endorsement "in blank" means:
The endorser signs his name without specifying the endorsee.
The endorser signs on a separate paper.
The endorser prohibits further negotiation.
The endorser specifies the person to whom payment is to be made.
Explanation:
An endorsement in blank (just the signature) converts an Order instrument into a Bearer instrument, meaning it can now be transferred by mere delivery.
112. Can a Safe Deposit Locker be hired by a minor?
Yes, independently.
Yes, if the minor is above 14 years.
Yes, jointly with a guardian (Natural/Legal).
No, not even with a guardian.
Explanation:
Banks typically do NOT allow lockers to be hired by minors (even with guardians) because a minor cannot be bound by the locker contract (lease agreement). Locker facility is for adults who can contract.
113. For an Overdraft or Cash Credit account, the limitation period of 3 years is calculated from:
Date of default notice.
Date of sanction of the limit.
Date of each individual debit.
Date of the last operation/transaction on the account (revival).
Explanation:
Every deposit (credit) by the borrower or debit (withdrawal) acts as an acknowledgment of the continuing relationship, resetting the limitation clock. Thus, it is 3 years from the last operation.
114. In a banking environment, a "Data Warehouse" is primarily used for:
Connecting ATMs to the network.
Historical data analysis, reporting, and decision support (OLAP).
Real-time transaction processing (OLTP).
Storing cheque images only.
Explanation:
While the Core Banking System handles day-to-day transactions (OLTP), the Data Warehouse stores historical data from various sources to facilitate analysis, MIS reporting, and strategic decision-making (OLAP).
115. When opening an account for a "Public Trust", in addition to the Trust Deed, the bank should ask for:
Certificate of Incorporation.
Letter of Administration.
Certificate of Registration with the Charity Commissioner.
Partnership Deed.
Explanation:
Public Trusts are required to be registered under the Public Trusts Act in many states. The Certificate of Registration issued by the Charity Commissioner is a key KYC document confirming the legal existence of the Public Trust.
116. A "Paying Banker" is protected under Section 85(1) of the NI Act against a forged endorsement on an "Order Cheque" because:
The bank has verified the signature with the drawer.
Forgery is valid in banking.
The customer is always liable.
Banks are not expected to know the signatures of payees/endorsees.
Explanation:
A banker is bound to know the drawer's signature (their customer) but cannot possibly know the signatures of all payees and endorsees in the world. Hence, statutory protection is given if the endorsement appears regular.
117. An "Actionable Claim" (like a fixed deposit or insurance policy) is transferred from one person to another by:
Nomination.
Assignment in writing.
Mere Delivery.
Endorsement and Delivery.
Explanation:
Under Section 130 of the Transfer of Property Act, the transfer of an actionable claim can only be effected by the execution of an instrument in writing signed by the transferor (Assignment).
118. The Cash Transaction Report (CTR) for a month must be submitted to FIU-IND by the:
30th of the succeeding month.
End of the quarter.
15th of the succeeding month.
7th of the succeeding month.
Explanation:
Banks must file the CTR for transactions occurring in a calendar month by the 15th day of the following month.
119. Can a bank charge a fee for executing Standing Instructions?
No, it is a free service.
No, RBI prohibits it.
Yes, but only for corporate customers.
Yes, as per the bank's service charge policy.
Explanation:
Executing SIs involves administrative effort and liability. Banks are permitted to levy reasonable service charges for setting up and executing SIs, provided these are transparently communicated.
120. The authority of an "Administrator" to deal with the deceased's estate commences from:
The date of filing the application.
The date of death of the deceased.
The date of grant of Letter of Administration by the Court.
The date of the Will.
Explanation:
Unlike an Executor (whose authority starts from death), an Administrator is appointed by the Court. Therefore, their legal authority commences strictly from the date the Letter of Administration is granted.
121. While assessing Working Capital requirements under the Turnover Method (Nayale Committee), banks typically assess the requirement at:
25% of the Projected Annual Turnover.
15% of the Projected Annual Turnover.
20% of the Projected Annual Turnover.
10% of the Projected Annual Turnover.
Explanation:
Under the Turnover Method (recommended for limits up to ?5 Crore), the working capital requirement is assessed at 25% of the projected turnover. Out of this, the bank provides 20% as limits, and the borrower brings in 5% as margin.
122. Which of the following banks have a Priority Sector Lending (PSL) target of 75% of their Adjusted Net Bank Credit (ANBC)?
Public Sector Banks only.
Regional Rural Banks (RRBs) and Small Finance Banks (SFBs).
Foreign Banks with 20 branches and above.
Domestic Scheduled Commercial Banks.
Explanation:
While Domestic Commercial Banks and Foreign Banks (20+ branches) have a target of 40% of ANBC, RRBs and SFBs have a higher mandatory target of 75% of ANBC to ensure credit flow to underserved sectors.
123. As per RBI guidelines on "Loan System for Delivery of Bank Credit", for borrowers with aggregate fund-based working capital limits of ?150 Crore and above, what is the minimum component that must be in the form of a Working Capital Loan (WCL)?
75%
60%
50%
40%
Explanation:
To enforce credit discipline, RBI mandates that for large borrowers (= ?150 Cr), at least 60% of the working capital limit must be utilized as a WCL (Demand Loan) and the balance 40% as Cash Credit (CC).
124. Which type of mortgage can be created by simply delivering the title deeds of the property to the creditor in notified towns, without a written deed or registration?
Mortgage by Deposit of Title Deeds (Equitable Mortgage)
English Mortgage
Usufructuary Mortgage
Simple Mortgage
Explanation:
Equitable Mortgage is created under Section 58(f) of the Transfer of Property Act by delivery of title deeds with an intent to create security. It is popular due to low cost (no registration needed) but can only be created in notified towns.
125. An enterprise with an Investment in Plant and Machinery of ?8 Crore and Annual Turnover of ?45 Crore will be classified as:
Large Enterprise
Small Enterprise
Medium Enterprise
Micro Enterprise
Explanation:
Classification criteria for Small Enterprise: Investment = ?10 Cr AND Turnover = ?50 Cr. Since both conditions are met (8 < 10 and 45 < 50), it is a Small Enterprise.
126. Under the Kisan Credit Card (KCC) scheme, the short-term credit limit for the first year is determined based on:
Market value of the crop.
Scale of Finance for the crop + Insurance + 10% for post-harvest/household + 20% for repairs/maintenance.
Credit score of the farmer.
Value of the land owned.
Explanation:
The KCC limit is scientific: It considers the Scale of Finance (fixed by District Level Technical Committee) multiplied by area, plus a 10% margin for household expenses and 20% for farm asset maintenance.
127. How should a bank recognize income on a Non-Performing Asset (NPA)?
50% on accrual and 50% on cash basis.
On Cash basis (only when actually realized).
Based on the collateral value.
On Accrual basis (as it becomes due).
Explanation:
Income Recognition and Asset Classification (IRAC) norms state that income from NPAs is not recognized on an accrual basis but is booked as income only when it is actually received (Cash basis).
128. Which of the following beneficiaries is NOT classified under "Weaker Sections" for Priority Sector Lending purposes?
Small and Marginal Farmers.
Self Help Groups (SHGs).
Medium Enterprises.
Scheduled Castes and Scheduled Tribes.
Explanation:
"Weaker Sections" include small/marginal farmers, SC/STs, SHGs, distressed farmers, and artisans. Medium Enterprises are part of the MSME category but not the "Weaker Sections" sub-target.
129. Which ratio is the primary indicator of a firm's long-term solvency and ability to meet long-term obligations?
Gross Profit Ratio
Current Ratio
Inventory Turnover Ratio
Debt-Equity Ratio
Explanation:
The Debt-Equity Ratio (Total Debt / Shareholder's Equity) measures the leverage of a company. A lower ratio indicates higher solvency and financial stability in the long run.
130. In a "Pledge", the possession of the goods is with the _____ and the ownership remains with the _____.
Borrower; Borrower
Bank (Pledgee); Borrower (Pledgor)
Bank; Bank
Borrower; Bank
Explanation:
Pledge involves the bailment (delivery of possession) of goods as security for a debt. The Bank (Pledgee) holds possession, while the Borrower (Pledgor) retains ownership rights.
131. Under DAY-NRLM (Deendayal Antyodaya Yojana - National Rural Livelihoods Mission), what is the maximum collateral-free loan amount for Self Help Groups (SHGs)?
?10 Lakh
?20 Lakh
?1 Lakh
?5 Lakh
Explanation:
RBI guidelines mandate that no collateral and no margin will be charged for loans to SHGs up to ?10 Lakh. Recently, the collateral-free limit for SHGs under NRLM was enhanced to ?20 Lakh.
132. In a Letter of Credit (LC) transaction, who is the "Applicant"?
The Importer (Buyer)
The Issuing Bank
The Advising Bank
The Exporter (Seller)
Explanation:
The LC is opened by the Issuing Bank at the request of the Buyer (Importer). Therefore, the Buyer is the Applicant who instructs the bank to open the credit in favor of the seller (Beneficiary).
133. Before taking possession of the secured asset under the SARFAESI Act, the secured creditor must issue a demand notice to the borrower under Section 13(2), giving them how much time to discharge the liability?
90 Days
60 Days
30 Days
15 Days
Explanation:
Section 13(2) notice is the first step. It gives the borrower a period of 60 days to pay the dues. If they fail, the bank can take possession under Section 13(4).
134. Loans to individuals for the purchase of a dwelling unit in metropolitan centers are eligible for Priority Sector classification if the loan amount does not exceed:
?45 Lakh
?25 Lakh
?50 Lakh
?35 Lakh
Explanation:
For Metros (population >= 10 lakh), the housing loan limit for PSL is ?35 Lakh (provided the total cost of the dwelling unit does not exceed ?45 Lakh). For other centers, the loan limit is ?25 Lakh.
135. Can a Garnishee Order attach the unutilized portion of a Cash Credit/Overdraft limit?
No, because it is not a "Debt" due from the bank to the customer.
Yes, entirely.
Yes, up to the sanctioned limit.
Yes, if the limit is fully drawn.
Explanation:
A Garnishee Order attaches debts owed BY the bank TO the customer (credit balance). An unutilized CC/OD limit is a facility to borrow; it represents money the customer CAN borrow, not money the customer OWNS. Hence, it cannot be attached.
136. The implementing agency for the Prime Minister's Employment Generation Programme (PMEGP) at the national level is:
District Industries Centre
KVIC (Khadi and Village Industries Commission)
SIDBI
NABARD
Explanation:
KVIC is the single nodal agency at the national level for the PMEGP scheme. At the state level, it is implemented through State KVIC Directorates, State KVIBs, and DICs.
137. An asset is classified as "Sub-standard" if it has remained NPA for a period less than or equal to:
3 years
5 years
12 months
90 days
Explanation:
After becoming NPA (overdue > 90 days), an asset enters the "Sub-standard" category. It stays in this category for up to 12 months. If it remains NPA beyond 12 months, it moves to "Doubtful" category.
138. Hypothecation is defined under which Act?
Transfer of Property Act, 1882
SARFAESI Act, 2002
Indian Contract Act, 1872
Banking Regulation Act, 1949
Explanation:
Surprisingly, Hypothecation was not defined in Indian law until the SARFAESI Act, 2002 (Section 2(n)). It refers to a charge on movable property without delivery of possession.
139. In "Consortium Lending", the bank that takes the largest share and leads the arrangement is called the:
Arranger Bank
Participating Bank
Lead Bank
Merchant Bank
Explanation:
The Lead Bank assesses the borrower's needs, appraises the project, and coordinates with other member banks for documentation and disbursement.
140. A "Financial Guarantee" issued by a bank essentially secures:
The timely delivery of goods.
The repayment of a financial debt or obligation.
The performance of a contract (e.g., building a bridge).
The quality of goods exported.
Explanation:
Guarantees are of two types: Performance (ensuring work is done) and Financial (ensuring money is paid). A Financial Guarantee assures the beneficiary that the debt will be repaid if the borrower defaults.
141. Loans to individuals for educational purposes, including vocational courses, are eligible for Priority Sector Lending up to:
?25 Lakh
?10 Lakh
?15 Lakh
?20 Lakh
Explanation:
Loans to individuals for educational purposes, including vocational courses, not exceeding ?20 lakh will be considered as eligible for priority sector classification.
142. Banks can file an application for recovery of dues in the Debt Recovery Tribunal (DRT) only if the debt amount due is not less than:
?1 Crore
?20 Lakh
?10 Lakh
?50 Lakh
Explanation:
The pecuniary jurisdiction of DRTs applies to cases where the debt due to any bank or financial institution is ?20 Lakh or above.
143. Assignment is the appropriate mode of creating a charge on which type of asset?
Movable Goods (Stock)
Actionable Claims (LIC Policy, Book Debts)
Immovable Property
Vehicles
Explanation:
Assignment involves the transfer of rights to claim a debt or benefit. It is used for Actionable Claims like insurance policies and book debts. (Immovable = Mortgage; Goods = Pledge/Hypothecation).
144. Which lending rate system replaced the Base Rate system for new loans to ensure better monetary transmission?
MCLR (Marginal Cost of Funds based Lending Rate)
PLR (Prime Lending Rate)
EBLR (External Benchmark Lending Rate)
BPLR (Benchmark Prime Lending Rate)
Explanation:
MCLR replaced Base Rate in 2016. Note: EBLR later replaced MCLR for retail/MSME loans in 2019, but MCLR specifically replaced Base Rate as the internal benchmark.
145. Under the MSMED Act, 2006, if a buyer fails to make payment to a micro or small enterprise supplier within 45 days, they are liable to pay compound interest at:
SBI Base Rate + 2%
Bank Rate
Repo Rate
Three times the Bank Rate notified by RBI
Explanation:
This penal provision is designed to ensure timely payments to MSMEs. The interest is compounded with monthly rests at 3 times the Bank Rate.
146. Farmers who repay their short-term crop loans promptly (up to ?3 Lakh) get an additional interest subvention of:
1%
4%
2%
3%
Explanation:
The standard interest subvention is 2%, making the effective rate 7%. Prompt repayment gets an additional 3% subvention, bringing the effective interest rate down to 4%.
147. What is the provisioning requirement for the "Secured portion" of a loan classified as "Doubtful (Up to 1 year)"?
15%
25%
100%
40%
Explanation:
For Doubtful Assets (D1 - up to 1 year), the provision on the secured portion is 25%. For the unsecured portion, it is always 100%.
148. In the "5 Cs of Credit", which "C" refers to the borrower's willingness to repay the loan and their reputation/integrity?
Collateral
Capital
Character
Capacity
Explanation:
Character refers to the borrower's integrity and intent to repay. Capacity refers to ability (cash flow). Capital is their own contribution. Collateral is security. Conditions refer to economic factors.
149. A Deferred Payment Guarantee (DPG) is typically used for:
Overdraft protection.
Working capital finance.
Purchase of capital goods/machinery on long-term credit.
Export of consumables.
Explanation:
DPG secures the payment of installments for capital goods purchased on credit. If the buyer defaults on an installment, the bank pays.
150. Lok Adalats can handle bank recovery cases where the amount involved is up to:
?20 Lakh
?1 Crore
?10 Lakh
?50 Lakh
Explanation:
Lok Adalats are an effective forum for settling smaller NPA cases (suit-filed or pre-litigation) up to a ceiling of ?20 Lakh, offering a quick and low-cost resolution.
151. To calculate the "Adjusted Net Bank Credit" (ANBC) for Priority Sector targets, which of the following is ADDED to the Net Bank Credit (NBC)?
Only Inter-bank deposits.
Investments in SLR securities.
Investments in Non-SLR categories (HTM category).
Investments in Non-SLR bonds in the Held to Maturity (HTM) category + Other investments eligible for priority sector status.
Explanation:
ANBC is defined as Net Bank Credit (NBC) plus investments made by banks in non-SLR bonds held in the HTM category, plus other investments eligible to be treated as priority sector. This ensures that banks don't shift assets to investments to lower their lending targets.
152. Under DAY-NULM (Deendayal Antyodaya Yojana - National Urban Livelihoods Mission), what is the maximum loan subsidy provided on interest for Self-Employment Programme (SEP) loans?
100% interest waiver.
5% interest subsidy.
Flat ?50,000 subsidy.
The difference between the bank's lending rate and 7%.
Explanation:
Under DAY-NULM, an interest subsidy is provided on loans to the urban poor for setting up individual or group enterprises. The subsidy is the amount of interest charged by the bank over and above 7% per annum.
153. Is "Udyam Registration" mandatory for MSMEs to avail benefits under Priority Sector Lending?
Only for Medium Enterprises.
No, it is optional.
Only for Manufacturing Enterprises.
Yes, it is mandatory.
Explanation:
For classification as MSME and to avail benefits under the PSL norms (and other government schemes), obtaining Udyam Registration is mandatory. Without it, the unit cannot be classified as MSME by the bank.
154. The validity of the Kisan Credit Card (KCC) limit is generally for:
5 Years
10 Years
1 Year
3 Years
Explanation:
The KCC limit is sanctioned for a period of 5 years, subject to an annual review. The cardholder can draw funds within this limit as per their cropping pattern and requirements.
155. Under "Social Infrastructure", bank loans up to a limit of _____ per borrower for building schools, drinking water facilities, and sanitation facilities are eligible for PSL.
?1 Crore
?10 Crore
?50 Crore
?5 Crore
Explanation:
Loans up to ?5 crore per borrower for setting up schools, drinking water facilities, and sanitation facilities in Tier II to Tier VI centers are classified as Priority Sector Lending.
156. Which type of charge is most suitable for a company's "Book Debts" (Receivables)?
Hypothecation
Mortgage
Pledge
Lien
Explanation:
Book debts are movable current assets. Since possession cannot be handed over to the bank (unlike pledge), a charge is created by way of Hypothecation of book debts. (Assignment is also a legal mode, but Hypothecation is the common banking practice for working capital limits against receivables).
157. Banks lend to Self Help Groups (SHGs) based on the group's corpus. What is the typical ratio of Loan to Corpus for a mature SHG (2+ years old)?
1:4 (First dose) up to 1:8 (Later doses)
1:1
1:2
1:10 always
Explanation:
According to NABARD/RBI guidelines, the loan amount can be 4 times the corpus for the first dose, rising to 8 times (or ?20 Lakh, whichever is higher) for mature SHGs with a good repayment track record.
158. What is the maximum credit facility amount covered under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme (Revised 2023)?
?200 Lakh
?500 Lakh
?1000 Lakh
?100 Lakh
Explanation:
The coverage limit under CGTMSE was enhanced from ?2 Crore to ?5 Crore (?500 Lakh) to encourage lending to the MSE sector without collateral.
159. Why do banks obtain a "Letter of Continuity" for Cash Credit accounts?
To ensure the interest rate remains fixed.
To prevent the Demand Promissory Note (DP Note) from being treated as satisfied by repayments in a running account.
To waive the limitation period.
To automatically renew the limit every year.
Explanation:
In a running account (CC/OD), credits reduce the debit balance. Without a Letter of Continuity, these credits could be legally argued to have discharged the original DP Note. This letter confirms that the security continues to cover the fluctuating balance.
160. For Domestic Commercial Banks, Export Credit is eligible for Priority Sector classification only if:
It is in the form of Pre-shipment credit only.
It is up to 2% of ANBC.
It is up to 40% of ANBC.
It is not eligible at all (except for specific small limits).
Explanation:
For Domestic Banks, "Export Credit" is allowed as PSL only up to 2% of ANBC or CEOBE (Credit Equivalent of Off-Balance Sheet Exposure), whichever is higher. This is much lower than the limit for Foreign Banks.
161. A "Sale Deed" requires compulsory registration under the Registration Act, 1908 if the value of the immovable property is:
Any value.
?1 Lakh or more.
?10,000 or more.
?100 or more.
Explanation:
Section 17 of the Registration Act mandates that any non-testamentary instrument transferring interest in immovable property of value ?100 or upwards must be registered to be legally valid.
162. Loans under Pradhan Mantri Mudra Yojana (PMMY) are classified into Shishu, Kishore, and Tarun. What is the loan limit for the "Kishore" category?
Above ?5 Lakh and up to ?10 Lakh
Up to ?50,000
Above ?10 Lakh
Above ?50,000 and up to ?5 Lakh
Explanation:
The categories are: Shishu (up to ?50k), Kishore (> ?50k to ?5 Lakh), and Tarun (> ?5 Lakh to ?10 Lakh). This classification targets different stages of business growth.
163. Under the Prudential Framework for Resolution of Stressed Assets, an account is classified as "SMA-1" if the principal or interest payment is overdue for:
1-30 days
31-60 days
61-90 days
More than 90 days
Explanation:
Special Mention Accounts (SMA) categorization helps in early recognition of stress. SMA-0 (1-30 days), SMA-1 (31-60 days) , and SMA-2 (61-90 days).
164. While assessing the limit for Letter of Credit (LC), which factor is the most critical determinant?
The bank's profit margin.
The borrower's export sales only.
The exchange rate volatility.
The borrower's annual consumption of raw materials to be imported/purchased and the lead time.
Explanation:
The LC limit is non-fund based. It depends on the estimated annual purchase of material (consumption) and the time taken from placing the order to the receipt of goods/retirement of bills (Lead Time/Usance period).
165. Loans for "Agriculture Infrastructure" (like storage godowns, soil conservation) are eligible for PSL up to an aggregate sanctioned limit of:
?100 Crore per borrower
No limit
?50 Crore per borrower
?10 Crore per borrower
Explanation:
Under Priority Sector norms, loans for agriculture infrastructure (warehousing, market yards, cold chains) are capped at ?100 crore per borrower from the banking system.
166. What is the limitation period for filing a suit for the enforcement of a Mortgage (Foreclosure or Sale of mortgaged property)?
No Limitation
30 Years
12 Years
3 Years
Explanation:
Article 62 of the Limitation Act, 1963 provides a limitation period of 12 years for suits relating to payment of money secured by a mortgage or charge upon immovable property, calculated from when the money becomes due.
167. Short Review of working capital limits is typically done:
Quarterly/Half-yearly
Every 2 years
Only when the account becomes NPA
Daily
Explanation:
While a full renewal/assessment is annual, banks conduct Short Reviews (Quarterly or Half-yearly) to monitor the account's performance and ensure compliance with terms, based on QIS statements.
168. "Packing Credit" is a type of Pre-shipment Finance given to exporters for:
Discounting the export bill after shipment.
Shipping the goods to the destination.
Paying customs duty in the importing country.
Purchasing raw materials, processing, and packing goods meant for export.
Explanation:
Packing Credit is a working capital advance provided *before* shipment to enable the exporter to procure raw materials, manufacture, and pack the goods based on a confirmed export order.
169. The "Udyam Registration Certificate" (URC) is valid for:
1 Year
Lifetime (unless cancelled)
3 Years
5 Years
Explanation:
Udyam Registration is a one-time registration process. The certificate issued is valid for a lifetime, provided the enterprise updates its details annually.
170. For "Loss Assets", the provisioning requirement is:
50%
Variable based on collateral
100%
10%
Explanation:
A Loss Asset is one where loss has been identified by the bank or auditors and the asset is considered uncollectible. The entire amount (100%) must be provided for, irrespective of any collateral (since its value is negligible).
171. The "Stock Statement" submitted by a borrower is a key tool for monitoring which type of facility?
Cash Credit / Working Capital
Bank Guarantee
Housing Loan
Term Loan
Explanation:
In Cash Credit, the Drawing Power (DP) is calculated based on the value of stocks and receivables declared in the monthly Stock Statement. It ensures the loan is backed by sufficient current assets.
172. The "Credit Linked Subsidy Scheme" (CLSS) is a component of which government scheme?
Stand Up India
Pradhan Mantri Awas Yojana (PMAY)
PM-KISAN
Mudra Yojana
Explanation:
CLSS provides interest subsidy on housing loans to eligible beneficiaries (EWS/LIG/MIG) under the PMAY (Urban) mission to promote affordable housing.
173. Lok Adalats have jurisdiction to settle banking disputes where the amount involved is:
Up to ?50 Lakh
Up to ?20 Lakh
Up to ?10 Lakh
Any amount
Explanation:
For bank recovery cases, the monetary ceiling for Lok Adalat jurisdiction is ?20 Lakh . Cases above this limit usually go to DRT.
174. A "Negative Lien" is an undertaking by the borrower that:
He will not sell his assets.
The bank has a lien on all his assets.
He will not create any charge or encumbrance on his assets in favor of another creditor without the bank's permission.
His assets are already pledged to another bank.
Explanation:
Negative Lien is a negative covenant. It does not create a charge for the bank but prevents the borrower from pledging the assets to someone else, keeping them free for the bank if needed later.
175. Loans to Startups (as defined by Ministry of Commerce) are eligible for Priority Sector Lending up to:
?5 Crore
?100 Crore
?50 Crore
?10 Crore
Explanation:
Bank loans up to ?50 crore to Startups (as per definition of Ministry of Commerce and Industry) are eligible for finance under the priority sector.
176. A loan account classified as NPA can be upgraded to "Standard" asset category only if:
The bank manager approves it.
The borrower pays 10% of the overdue amount.
The entire arrears of interest and principal are paid by the borrower.
The account is restructured.
Explanation:
RBI norms specify that an NPA account can be upgraded to Standard only when the entire overdue interest and principal are paid, bringing the account fully current.
177. A "Bridge Loan" is sanctioned to:
Provide temporary finance pending the disbursement of a sanctioned term loan/equity issue.
Finance working capital permanently.
Bridge the gap between export and import.
Build bridges.
Explanation:
Bridge loans are temporary, short-term loans meant to tide over the period until the long-term funding (like IPO proceeds or Term Loan disbursement) is received.
178. An "Acknowledgment of Debt" (AOD) in writing obtained from the borrower before the expiry of the limitation period:
Extends the limitation period by another fresh term (e.g., 3 years) from the date of AOD.
Reduces the limitation period.
Has no effect on limitation.
Makes the debt time-barred.
Explanation:
Under Section 18 of the Limitation Act, a written acknowledgment of liability signed by the borrower before the expiration of the prescribed period starts a fresh period of limitation from the time of signing.
179. The "Debt Service Coverage Ratio" (DSCR) is used to assess the borrower's ability to:
Service interest and principal installments of Term Loans.
Repay short-term overdrafts.
Manage inventory.
Generate sales.
Explanation:
DSCR measures the cash flow available to pay current debt obligations (Interest + Principal). DSCR < 1 means negative cash flow. Banks typically look for DSCR > 1.5 or 2 for Term Loans.
180. RBI has mandated banks not to accept collateral security for loans to MSE units up to:
?5 Lakh
?50 Lakh
?20 Lakh
?10 Lakh
Explanation:
Banks are mandated not to accept collateral security in the case of loans up to ?10 lakh extended to units in the MSE sector. For loans above ?10 lakh up to ?2 crore, banks can use the CGTMSE guarantee cover instead of collateral.
181. Under the Tandon Committee recommendations (Method II of lending), the Maximum Permissible Bank Finance (MPBF) for working capital is calculated as:
(75% of Current Assets) - Current Liabilities.
75% of (Current Assets - Current Liabilities).
75% of (Current Assets - Other Current Liabilities).
Total Current Assets - Total Current Liabilities.
Explanation:
Under Method II (which is more conservative and ensures a higher current ratio of 1.33:1), the borrower must finance 25% of the *Total Current Assets* from long-term sources. Hence, MPBF = (0.75 * CA) - CL.
182. A borrower is classified as a "Wilful Defaulter" if they have defaulted in meeting their repayment obligations to the lender AND:
They have siphoned off the funds or utilized them for purposes other than those for which the loan was sanctioned.
They have suffered a genuine business loss.
The market conditions were unfavorable.
The management has changed.
Explanation:
Wilful default implies deliberate non-payment despite having the capacity to pay, diverting funds for other uses, or siphoning off funds without creating assets. Genuine business failure is not wilful default.
183. Any person aggrieved by the measures taken by a secured creditor under Section 13(4) of the SARFAESI Act can file an appeal to the Debt Recovery Tribunal (DRT) within:
30 Days
90 Days
60 Days
45 Days
Explanation:
Under Section 17 of the SARFAESI Act, an appeal against the bank's enforcement action (like taking possession) must be filed with the DRT within 45 days from the date on which such measure was taken.
184. Factoring transactions "with recourse" basis for MSMEs are eligible for Priority Sector classification. What does "with recourse" mean here?
The Bank guarantees the payment.
The Factor takes the full credit risk of the buyer.
The Seller (MSME) remains liable to the Factor if the Buyer defaults.
The Buyer must pay in advance.
Explanation:
In "With Recourse" factoring, the factor advances money against invoices but does not indemnify the seller against bad debts. If the customer fails to pay, the factor reclaims the advance from the seller.
185. To create a valid Equitable Mortgage (Mortgage by Deposit of Title Deeds), which of the following is essential?
The deposit of title deeds must be made in a notified town.
The mortgage deed must be registered.
The property must be located in a notified town.
The borrower must be a resident of a notified town.
Explanation:
The critical condition under Section 58(f) of the Transfer of Property Act is that the act of delivery of title deeds must take place in a town notified by the State Government. The property itself can be located anywhere in India.
186. The "Break-Even Point" (BEP) analysis is most critical for the appraisal of:
Bill Discounting.
Project Loans / Term Loans.
Overdraft limits.
Letter of Credit.
Explanation:
BEP analysis determines the level of sales volume at which the project makes neither profit nor loss (covers all costs). It assesses the viability and risk of a long-term project, making it crucial for Term Loan appraisal.
187. The "Stand Up India" scheme targets which specific beneficiary groups?
Rural artisans only.
SC/ST and Women entrepreneurs.
All women entrepreneurs.
Only SC/ST entrepreneurs.
Explanation:
Stand Up India facilitates bank loans between ?10 lakh and ?1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise.
188. A "Letter of Comfort" is typically issued by:
An Exporter to an Importer.
The RBI to the Government.
A Bank to another Bank on behalf of a subsidiary.
A Borrower to the Bank.
Explanation:
It is a document issued by a parent company (or bank) to a lender, indicating its support for a subsidiary's loan obligations, but it falls short of a legally binding financial guarantee.
189. Is there any ceiling on the expenses for studies in India or abroad for a loan to be classified as Priority Sector Lending (PSL)?
Yes, ?10 Lakh for India, ?20 Lakh for abroad.
No, there is no ceiling on expenses, only the loan limit (?20 Lakh) applies.
Yes, ?20 Lakh for India, ?30 Lakh for abroad.
Yes, ?50 Lakh overall.
Explanation:
Previously, there were expense ceilings. Currently, under PSL norms, there is no cap on the total cost of education. Only the loan amount eligible for PSL classification is capped at ?20 Lakh.
190. Does the Debt Recovery Tribunal (DRT) have the power to pass an interim order of injunction/stay against the borrower?
Only if the loan amount exceeds ?1 Crore.
Yes, it can issue interim orders to prevent the borrower from disposing of assets.
Only if the High Court permits.
No, only final orders.
Explanation:
The DRT Act empowers the Tribunal to pass interim orders (like attachment before judgment or injunction) to protect the interests of the bank and prevent the borrower from selling assets during the pendency of the case.
191. On the TReDS platform, once an invoice is financed by a financier, the obligation to pay on the due date lies with:
The Corporate Buyer.
The MSME Seller.
The TReDS Platform Operator.
The Reserve Bank of India.
Explanation:
Financing on TReDS is "without recourse" to the seller. Once financed, the debt is assigned to the financier, and the Corporate Buyer is legally obligated to pay the financier on the due date.
192. Can a bank convert a "Hypothecation" charge into a "Pledge" charge?
No, a new loan agreement is required.
Yes, by simply sending a notice.
Yes, by taking physical possession of the hypothecated goods with the consent of the borrower or under a contract term.
No, it is illegal.
Explanation:
Hypothecation agreements typically contain a clause empowering the bank to take possession of the goods in case of default. Once possession is taken, the charge converts from Hypothecation to Pledge.
193. Banks are required to charge interest on loans at what periodicity?
Half-yearly rests.
Yearly rests.
Quarterly rests (or shorter but not longer).
Daily rests.
Explanation:
As per RBI directives, interest on loans should be charged at quarterly or shorter rests (like monthly). Charging interest at longer rests (like yearly) is not permitted as it reduces the effective yield.
194. For Foreign Banks with less than 20 branches, which specific sub-target under Priority Sector Lending is NOT applicable?
MSME Target.
Total Priority Sector Target (40%).
Export Credit Target.
Agriculture and Weaker Sections Targets.
Explanation:
Foreign banks with less than 20 branches have a total target of 40% of ANBC, but they are exempted from specific sub-targets for Agriculture and Weaker Sections. They can achieve their target largely through Export Credit.
195. A "Technical Write-off" of an NPA loan implies:
The borrower is released from liability.
The loan is removed from the asset side of the Balance Sheet but retained in the branch books for recovery.
The collateral is returned to the borrower.
The loan is waived off by the government.
Explanation:
Technical Write-off is an accounting entry to clean the balance sheet and reduce tax liability. It does NOT mean waiver of the debt; the bank continues its recovery efforts against the borrower.
196. Before extending a bank loan to an SHG, the bank conducts a grading exercise. Which of the following is a key parameter for SHG grading?
Regularity of meetings and savings.
Political affiliation.
Asset size of individual members.
Education level of members.
Explanation:
The critical parameters for SHG grading (Panchasutra) are: Regular Meetings, Regular Savings, Regular Internal Lending, Regular Recoveries, and Maintenance of Books of Accounts.
197. Which document is essential for assessing the technical feasibility of a project for a Term Loan?
GST Returns
Project Report / TEV Study
Balance Sheet
CIBIL Report
Explanation:
A Techno-Economic Viability (TEV) study or Project Report details the technical aspects (technology, location, machinery) and economic viability, crucial for long-term funding decisions.
198. The limitation period for filing a suit on a Demand Promissory Note (DP Note) is:
No limitation.
3 years from the date of the note.
12 years from the date of the note.
3 years from the date of demand.
Explanation:
For a DP Note (payable on demand), the limitation is 3 years from the date of the note , not from the date of demand (Article 35, Limitation Act).
199. When a Life Insurance Policy is assigned to a bank as security, notice of assignment must be given to:
The Insurance Company
The Nominee
The Policyholder
RBI
Explanation:
Under Section 38 of the Insurance Act, 1938, notice of assignment must be served to the Insurer to register the bank's interest. Without this, the assignment is not binding on the Insurer.
200. When a bank takes over a loan from another bank, it must obtain:
Consent of the District Magistrate.
Credit Information Report from the existing bank.
Foreclosure letter and list of documents held by the existing bank.
No Objection Certificate (NOC) from the RBI.
Explanation:
For a smooth takeover, the new bank needs the exact outstanding amount (Foreclosure letter) and details of security documents to ensure proper transfer of liability and collateral.
201. SARFAESI Act proceedings cannot be initiated if the outstanding dues are less than:
20% of the principal and interest.
?1 Lakh
?50,000
10% of the principal and interest.
Explanation:
SARFAESI action cannot be taken if the amount due is less than ?1 Lakh OR if the remaining debt is less than 20% of the original principal and interest (Section 31(j)). This prevents misuse for small balances.
202. The "Cluster Approach" in MSME financing aims to:
Lend only to rural clusters.
Lend only to one large industry in a city.
Provide comprehensive financial services to a clearly defined group of industries concentrated in a specific location.
Group all NPA accounts into a cluster.
Explanation:
Cluster-based financing allows banks to assess risks better, reduce transaction costs, and provide tailored services to similar units located in a geographical cluster (e.g., Tirupur textile cluster).
203. For housing loans up to ?30 Lakh, the maximum Loan-to-Value (LTV) ratio permitted by RBI is:
100%
75%
80%
90%
Explanation:
To promote affordable housing, RBI allows an LTV ratio of up to 90% for loans up to ?30 Lakh. For loans between ?30L-?75L, it is 80%.
204. In a consortium arrangement, the "Pari-Passu" charge implies that:
The charge is valid for only 1 year.
The Lead Bank has the first right over the assets.
The borrower cannot sell the assets.
Lenders share the security rights in proportion to their outstanding debt.
Explanation:
Pari-Passu means "on equal footing". It ensures that in case of liquidation or asset sale, all member banks share the proceeds proportionally to their dues, without any priority to one over the other.
205. For matters falling under the jurisdiction of the Debt Recovery Tribunal (DRT), the jurisdiction of Civil Courts is:
Available only for appeals.
Available if the amount is disputed.
Barred (Excluded).
Available concurrently.
Explanation:
The RDDBFI Act bars Civil Courts from entertaining any matter which the DRT is empowered to determine, to ensure speedy recovery through the specialized tribunal.
206. In the PMEGP scheme, the margin money subsidy received from the government is kept in a separate account known as:
Subsidy Reserve Account
Term Deposit Receipt (TDR) with a lock-in period
Suspense Account
Current Account
Explanation:
The subsidy is kept in a TDR in the name of the beneficiary for a lock-in period of 3 years. It is adjusted against the loan only after successful verification of the unit after 3 years.
207. If the Sanctioned Limit of a CC account is ?10 Lakh and the Drawing Power (DP) calculated based on stock is ?8 Lakh, the borrower can withdraw up to:
?8 Lakh
?2 Lakh
?9 Lakh (Average)
?10 Lakh
Explanation:
Availability of funds is the lower of the Sanctioned Limit or the Drawing Power. Since DP (backed by assets) is lower, the borrower can only draw up to ?8 Lakh.
208. A "Particular Lien" allows the creditor to retain goods:
Only against the specific debt incurred for services rendered on those specific goods.
Even after the debt is paid.
Against future debts.
Against any general balance of account.
Explanation:
Particular Lien (e.g., repairer's lien) is restricted to the specific goods on which labor/skill was exercised, unlike Banker's General Lien which extends to general balance.
209. Bank credit to Non-Banking Financial Companies (NBFCs) for on-lending to Agriculture is eligible for Priority Sector classification up to:
5% of bank's total lending.
an average of 5% of individual bank’s total priority sector lending.
10% of the bank's total priority sector lending.
It is not eligible.
Explanation:
Bank credit to NBFCs (excluding MFIs) for on-lending is allowed under PSL up to an overall cap of 5% of the individual bank's total priority sector lending.
210. The "Revolving Fund" provided to SHGs under NRLM is primarily meant to:
Pay the bank manager's fees.
Inculcate the habit of thrift and internal lending, and augment the corpus.
Repay old debts.
Buy land for the village.
Explanation:
Revolving Fund (RF) is a seed capital given to SHGs to supplement their own savings, allowing them to lend more internally and build financial discipline before accessing larger bank loans.
211. In the context of DAY-NRLM, the "Community Investment Support Fund" (CISF) is provided to:
Individual beneficiaries.
Self Help Groups (SHGs) directly.
Commercial Banks.
Cluster Level Federations (CLFs) or Village Organizations (VOs).
Explanation:
CISF is a corpus fund provided to community institutions like CLFs or VOs (not directly to SHGs) to be used for lending to SHGs for their livelihood plans and socio-economic development.
212. Once a Recovery Certificate is issued by the Presiding Officer of a DRT, who is responsible for its execution (recovery of money)?
The High Court Registrar.
The Recovery Officer attached to the DRT.
The District Magistrate.
The Bank Manager.
Explanation:
The Recovery Officer (RO) is the statutory authority within the DRT framework empowered to execute the Recovery Certificate by attaching and selling the debtor's assets.
213. For Renewable Energy projects, bank loans up to a limit of _____ are eligible for Priority Sector classification.
?50 Crore
?30 Crore
?15 Crore
?10 Crore
Explanation:
Loans up to ?30 crore to borrowers for purposes like solar based power generators, biomass-based power generators, wind mills, micro-hydel plants, etc., are eligible for PSL.
214. The "Working Capital Gap" (WCG) is defined as:
Gross Working Capital - Net Working Capital.
Total Current Assets - Total Current Liabilities.
Total Current Assets - Current Liabilities excluding Bank Finance.
Long Term Sources - Long Term Uses.
Explanation:
WCG represents the portion of current assets that needs to be financed. It is calculated by subtracting "Other Current Liabilities" (excluding bank borrowings) from Total Current Assets. The bank finances a part of this gap.
215. Can a company grant a loan against the security of its own shares?
Yes, if approved by the Board.
No, it is prohibited under the Companies Act, 2013 (Section 67).
Yes, if approved by RBI.
Yes, but only to employees.
Explanation:
A public company is strictly prohibited from giving any financial assistance for the purchase of its own shares or lending against the security of its own shares (Buy-back is a separate process). Banks also cannot lend against their own shares (BR Act Sec 20).
216. RBI guidelines on "Penal Charges" (effective 2024) state that penalty for non-compliance with loan terms should be levied as:
Penal Interest added to the interest rate.
Compound Interest.
A percentage of the loan amount deducted upfront.
Penal Charges (fixed amount), not Penal Interest.
Explanation:
RBI has directed that penalties should be treated as "Penal Charges" and not "Penal Interest" that gets added to the interest rate and capitalized. This ensures fairness and prevents capitalization of penal components.
217. Any dispute regarding delayed payment to MSMEs can be referred to:
Micro and Small Enterprises Facilitation Council (MSEFC).
NCLT.
Debt Recovery Tribunal (DRT).
Civil Court.
Explanation:
The MSMED Act establishes the MSEFC to arbitrate and settle disputes related to delayed payments. MSEFC awards are binding and have the effect of a court decree.
218. Priority Sector Lending Certificates (PSLCs) expire on:
One year from the date of purchase.
3 years from the date of purchase.
31st March of the financial year in which they are purchased.
They do not expire.
Explanation:
PSLCs are valid only for the financial year in which they are traded. Their validity expires on March 31st, and banks must buy fresh certificates for the next year if shortfalls persist.
219. Banks are required to report credit information, including classification of an account as SMA (Special Mention Account), to the Central Repository of Information on Large Credits (CRILC) for exposures of:
?5 Crore and above.
?50 Crore and above.
?1 Crore and above.
?10 Crore and above.
Explanation:
CRILC reporting is mandatory for all borrowers having aggregate fund-based and non-fund-based exposure of ?5 Crore and above. This helps in early stress detection.
220. Under Pradhan Mantri Awas Yojana (Urban), the house constructed/acquired with central assistance must be in the name of:
The male head of the family only.
The female head of the household or in the joint name of the male head and his wife.
Any adult member.
The eldest son.
Explanation:
PMAY mandates female ownership (sole or joint) to promote women empowerment. The house must be registered in the name of the female head or jointly with the male head.
221. In Project Finance, "Debt Service Reserve Account" (DSRA) is created to:
Pay dividends to shareholders.
Fund the project cost overrun.
Provide a cushion for repayment of loan installments in case of cash flow mismatch.
Buy raw materials.
Explanation:
DSRA typically holds an amount equal to 3-6 months of debt service obligations (Interest + Principal). It acts as a safety buffer to ensure timely repayment even if project cash flows are temporarily disrupted.
222. The limitation period for filing a suit against a Guarantor is 3 years from:
The date of default by the principal borrower.
The date when the guarantee is invoked (demand is made) by the bank.
The date of the guarantee deed.
The date of the loan agreement.
Explanation:
For a continuing guarantee, the liability arises only when the guarantee is invoked. The limitation period starts running from the date the bank issues a demand notice to the guarantor invoking the guarantee.
223. Which of the following cannot be subject to a Lien?
Fixed Deposit Receipt.
Goods left for safe custody.
Bills for collection.
Shares and Securities.
Explanation:
Goods left for safe custody are entrusted for a specific purpose, making the bank a Bailee. This specific purpose overrides the general lien. A bank cannot exercise lien over items in safe custody or lockers.
224. If a beneficiary invokes a Bank Guarantee (BG) properly within the validity period, the bank must pay:
Regardless of any dispute between the borrower and the beneficiary.
Only if the borrower consents.
Only if the borrower has funds in their account.
Only after the dispute is settled in court.
Explanation:
A Bank Guarantee is an independent contract. The bank is obligated to pay upon proper invocation "without demur," irrespective of underlying disputes between the parties. The bank is dealing with documents, not goods or disputes.
225. Which of the following is NOT considered a Priority Sector category?
Education
Housing
Export Credit
Loans to Large Corporates for CSR activities
Explanation:
Priority Sector includes Agriculture, MSME, Export Credit, Education, Housing, Social Infrastructure, Renewable Energy, and Others (Weaker Sections). CSR loans to corporates are not part of this.
226. For the purpose of MSME classification, which component is EXCLUDED from the calculation of "Turnover"?
Domestic sales.
Inter-state sales.
Export of goods or services or both.
Sales to government.
Explanation:
To encourage exports, the government has mandated that "Exports of goods or services or both" shall be excluded while calculating the turnover for MSME classification purposes.
227. If a standard asset is restructured, its classification generally changes to:
Loss Asset.
Sub-standard immediately.
It remains Standard.
Doubtful.
Explanation:
Upon restructuring (changing terms due to financial difficulty), a standard asset is immediately downgraded to Sub-standard . It can be upgraded to Standard only after satisfactory performance during the "specified period" (usually 1 year).
228. In "Fund Flow Analysis", which of the following is a "Source" of funds?
Net Loss from operations.
Decrease in Current Liabilities.
Decrease in Current Assets.
Increase in Current Assets.
Explanation:
A decrease in assets (like selling stock or collecting debtors) releases cash, so it is a Source of funds. An increase in assets consumes cash (Use).
229. Under the SARFAESI Act, can a bank enforce security interest on "Hypothecated" goods without court intervention?
Yes, provided the goods are in the possession of the borrower.
No, only mortgaged property is covered.
No, hypothecation is not a security interest.
Yes, but only if the goods are surrendered voluntarily.
Explanation:
The SARFAESI Act definition of "Security Interest" includes hypothecation. Banks can take possession of hypothecated movables (like vehicles, stock) directly after issuing the Section 13(2) notice and waiting for 60 days.
230. RBI has mandated that banks cannot charge foreclosure charges/pre-payment penalties on floating rate term loans sanctioned to:
Large Corporate Borrowers.
Partnership Firms.
Individual Borrowers for purposes other than business.
All SME Borrowers.
Explanation:
To protect consumers, banks are prohibited from levying foreclosure charges on floating rate term loans sanctioned to individual borrowers for non-business purposes (e.g., Home Loans, Auto Loans).
231. Under DAY-NRLM, "Community Resource Persons" (CRPs) are:
Experienced SHG members who help form and nurture new SHGs.
NGO workers.
Bank officials deputed to villages.
Government officers.
Explanation:
CRPs are community members (usually women from successful SHGs) who provide support to new groups, driving the community-driven implementation model of NRLM.
232. Loans for setting up "Agri-Clinics and Agri-Business Centers" (ACABC) fall under which category of Priority Sector?
Agriculture Infrastructure
Ancillary Activities
Micro Enterprises
Farm Credit
Explanation:
ACABC loans are classified under Ancillary Activities within the Agriculture sector, as they provide professional extension services to farmers.
233. Registration of charge with the Registrar of Companies (RoC) is mandatory for which of the following created by a company?
Guarantee given by Director.
Lien on Fixed Deposits.
Hypothecation of vehicles.
Pledge of shares.
Explanation:
Under Section 77 of the Companies Act, 2013, charges on a company's assets (movable or immovable) must be registered with RoC. However, Pledge is exempted from this requirement. Hypothecation and Mortgage charges must be registered.
234. If the interest billed on March 31 is not paid, the account becomes NPA on:
June 30 (after 90 days)
June 29 (90th day)
April 1
March 31 itself
Explanation:
An account becomes NPA if interest/principal remains overdue for a period of more than 90 days. If unpaid on March 31, the 90-day period ends on June 29. It becomes NPA on June 30 (91st day).
235. If a borrower exceeds the Sanctioned Limit in a Cash Credit account temporarily, the excess amount is called:
Ad-hoc Limit / TOD (Temporary Overdraft)
Overdue amount
Term Loan component
NPA amount
Explanation:
Banks may allow borrowers to draw beyond the limit for urgent needs. This is known as a Temporary Overdraft (TOD) or Ad-hoc limit, usually charged at a higher interest rate.
236. A "Pawnee" (Pledgee) has the right to sell the pledged goods:
Immediately upon default.
Only with the Pawnor's written consent.
After giving reasonable notice of sale to the Pawnor.
Only after filing a suit.
Explanation:
Under Section 176 of the Contract Act, if the Pawnor defaults, the Pawnee may sell the thing pledged on giving the Pawnor reasonable notice of the sale . No court order is needed.
237. The "Internal Rate of Return" (IRR) of a project is the discount rate at which:
Total Profit is maximum.
Benefit-Cost Ratio is greater than 1.
Cost of Capital is minimum.
Net Present Value (NPV) is zero.
Explanation:
IRR is the break-even discount rate that equates the present value of cash inflows with the present value of cash outflows (NPV = 0). If IRR > Cost of Capital, the project is viable.
238. For opening a savings account of an SHG, what are the KYC requirements?
No KYC is required as it is a group.
PAN card of the SHG is mandatory.
KYC of all members is required.
KYC of only the office bearers is sufficient.
Explanation:
To simplify financial inclusion, RBI guidelines state that KYC verification of only the authorized office bearers (representatives) is sufficient to open an SHG account. KYC of all members is not needed.
239. What is the PSL loan limit for individual households for renewable energy purposes (e.g., rooftop solar)?
?20 Lakh
?1 Crore
?50 Lakh
?10 Lakh
Explanation:
While the limit for firms/borrowers is ?30 Crore, for individual households , the loan limit for renewable energy purposes is capped at ?10 Lakh per borrower.
240. After taking possession of the secured asset under SARFAESI, how much notice period must the bank give to the borrower before selling the asset?
90 Days
60 Days
15 Days
30 Days
Explanation:
Under the Security Interest (Enforcement) Rules, the authorized officer must serve a 30-day notice to the borrower informing them of the sale of the immovable property.
241. Which network topology provides the highest level of redundancy and reliability for critical banking servers, where every node is connected to every other node?
Ring Topology
Bus Topology
Star Topology
Mesh Topology
Explanation:
In a Full Mesh Topology, every device has a dedicated point-to-point link to every other device. If one link fails, data can take an alternative path, ensuring zero downtime for critical systems.
242. In a Core Banking Solution (CBS), what is the primary function of the "Parameter File"?
To define rules and configurations (e.g., interest rates, product codes) that drive the software's behavior.
To generate daily balance sheets.
To store customer transaction data.
To store employee attendance records.
Explanation:
Parameter files act as the rulebook for the CBS. Changes in interest rates or product features are made here without altering the source code, allowing flexibility.
243. Under the Cheque Truncation System (CTS-2010), which of the following is NOT a mandatory security feature?
QR Code containing account details
Bank's logo in ultra-violet ink
Watermark with "CTS-INDIA"
Void Pantograph
Explanation:
While some banks add QR codes, it is not a mandatory standard feature prescribed under CTS-2010 standards (unlike Void Pantograph, UV Logo, and Watermark).
244. A "Brown Label ATM" is one where:
The ATM is owned and operated entirely by a non-bank entity.
The ATM is located inside a bank branch.
The ATM is owned by the RBI.
The hardware is owned by a service provider, but cash management and connectivity are provided by a sponsor bank.
Explanation:
In Brown Label ATMs, the machine and lease are owned by a third party, but the branding and cash handling are done by the sponsor bank. (White Label ATMs are fully non-bank owned).
245. Which unique code is essential for mapping a customer's bank account to their Aadhaar number for AePS transactions?
IFSC Code
MICR Code
IIN (Issuer Identification Number)
SWIFT Code
Explanation:
The IIN is a 6-digit number issued by NPCI that identifies the bank to which the customer's Aadhaar is linked, enabling Aadhaar-based routing.
246. INFINET (Indian Financial Network) is a Closed User Group (CUG) network mainly used for:
ATM connectivity for general public.
Linking rural branches to Head Office.
Stock market trading.
Inter-bank communication and RBI payment systems (RTGS/NEFT).
Explanation:
INFINET is the communication backbone for the Indian Banking and Financial Sector, managed by IDRBT. It secures critical inter-bank applications like RTGS, NEFT, and NDS.
247. Which technology enables "Smart Contracts" that self-execute when conditions are met?
Cloud Computing
Big Data Analytics
Robotic Process Automation (RPA)
Blockchain / DLT
Explanation:
Blockchain (Distributed Ledger Technology) allows for programmable contracts (Smart Contracts) that automatically execute, enforce, and verify the terms of an agreement without intermediaries.
248. In the context of cybersecurity, "Phishing" refers to:
Physical theft of hardware.
Malicious software that encrypts data.
Fraudulent attempts to obtain sensitive information (like passwords) by disguising as a trustworthy entity.
Overloading a server with traffic.
Explanation:
Phishing typically uses spoofed emails or fake websites to trick users into revealing credentials. It is a "Social Engineering" attack.
249. What is the maximum transaction limit per day for UPI (Unified Payments Interface) for normal transactions (as of standard NPCI guidelines)?
?5 Lakh
?2 Lakh
?1 Lakh
?50,000
Explanation:
The standard UPI limit is ?1 Lakh per day. (Note: For specific categories like IPOs, Retail Direct Scheme, and Medical/Education, the limit has been enhanced to ?5 Lakh, but the general limit remains ?1 Lakh).
250. What is "Day End Process" (EOD) in a CBS system?
Closing the branch shutters.
A system process to validate transactions, calculate interest, update GL, and generate reports for the day.
Sending staff home.
Turning off the servers.
Explanation:
EOD is a critical batch process that runs at the end of the business day to ensure all transactions are posted, accounts balanced, and system date is moved to the next working day.
251. In the context of RTGS, what does "STP" stand for?
Short Term Payment
Secure Transfer Protocol
Straight Through Processing
Standard Transaction Protocol
Explanation:
STP means the payment message flows from the remitting bank to the RBI and then to the beneficiary bank automatically without any manual intervention, ensuring speed and accuracy.
252. Which of the following is a "Card Not Present" (CNP) transaction?
Withdrawing cash from an ATM.
Online purchase using Credit Card credentials.
Using a Contactless Card at a shop.
Swiping card at a POS terminal.
Explanation:
In online transactions, the physical card is not presented to a merchant. Authentication relies on details (Card No, CVV, Expiry) and 2FA (OTP), making it a CNP transaction.
253. Two-Factor Authentication (2FA) requires a user to provide two out of three types of credentials. Which is NOT one of them?
Something you want (Desire)
Something you know (Password/PIN)
Something you are (Biometrics)
Something you have (Card/Phone)
Explanation:
2FA combines: 1. Knowledge (PIN/Password), 2. Possession (Card/Token/Phone), 3. Inherence (Fingerprint/Iris). "Desire" is not an authentication factor.
254. The "Bharat Bill Payment System" (BBPS) is an integrated bill payment system offering interoperable bill payment service. Who operates BBPS?
SBI
RBI
India Post
NPCI
Explanation:
The National Payments Corporation of India (NPCI) functions as the Bharat Bill Payment Central Unit (BBPCU) responsible for setting standards and operating the BBPS.
255. Which protocol is standard for secure communication over a computer network (like internet banking)?
HTTPS
HTTP
FTP
SMTP
Explanation:
Hypertext Transfer Protocol Secure (HTTPS) uses TLS/SSL encryption to secure the data transferred between the user's browser and the bank's server, preventing eavesdropping.
256. Artificial Intelligence (AI) in banking is predominantly used for:
Chatbots, Fraud Detection, and Credit Scoring.
Manual ledger posting.
Cash loading in ATMs.
Printing passbooks.
Explanation:
AI algorithms analyze vast data for patterns (Fraud Detection), interact with customers (Chatbots), and assess risk profiles (Credit Scoring) efficiently.
257. Positive Pay System involves re-confirming key details of large value cheques. What is the threshold above which banks may make it mandatory?
?10 Lakh
?50,000
?2 Lakh
?5 Lakh
Explanation:
While the facility is available for cheques of ?50,000 and above, banks have the discretion to make it mandatory for cheques for amounts of ?5 Lakh and above to prevent high-value fraud.
258. Which identifier is unique to every customer in a CBS system and links all their accounts?
Cheque Number
CIF / Cust ID
Transaction ID
Account Number
Explanation:
The Customer Information File (CIF) or Customer ID is the unique key assigned to a customer. Multiple accounts (Savings, Loan, FD) are linked to this single CIF to provide a 360-view of the customer relationship.
259. What is "Skimming" in the context of ATM/Card security?
Trapping the cash in the dispenser.
Using a device to copy data from the magnetic stripe of the card.
Guessing the PIN.
Stealing the physical card.
Explanation:
Skimming involves placing a discreet device over the card slot to read the magnetic stripe data, which is then used to clone the card for fraudulent use.
260. Which entity regulates the "Prepaid Payment Instruments" (PPIs) like Mobile Wallets in India?
SEBI
TRAI
NPCI
RBI
Explanation:
The Reserve Bank of India regulates PPIs under the Payment and Settlement Systems Act, 2007. Issuers must obtain authorization from RBI.
261. A "Trojan Horse" in computer security is:
A type of antivirus.
A malicious program disguised as legitimate software.
A hardware device to boost speed.
A firewall setting.
Explanation:
Like the mythical wooden horse, a Trojan appears useful/harmless to trick the user into installing it, after which it executes malicious code (stealing data, creating backdoors).
262. What is the primary purpose of a "Firewall" in a banking network?
To store backup data.
To prevent physical fire damage.
To monitor and control incoming/outgoing network traffic based on security rules.
To speed up internet connection.
Explanation:
A firewall acts as a barrier between a trusted internal network and untrusted external networks (internet), blocking unauthorized access while permitting legitimate traffic.
263. In database terms, what is "Data Integrity"?
The cost of data storage.
The accuracy, consistency, and reliability of data throughout its lifecycle.
The size of the database.
The speed of data retrieval.
Explanation:
Data integrity ensures that data remains unaltered during storage, transmission, and processing, which is vital for banking financial records.
264. What is the maximum transaction limit for IMPS (Immediate Payment Service) as per current NPCI guidelines?
?1 Lakh
?2 Lakh
?10 Lakh
?5 Lakh
Explanation:
The limit for IMPS transactions was enhanced from ?2 Lakh to ?5 Lakh to facilitate larger instant transfers.
265. Which banking channel typically has the lowest cost per transaction for the bank?
Internet/Mobile Banking
ATM
Branch Banking
Phone Banking (Call Center)
Explanation:
Digital channels (Internet/Mobile) have negligible marginal costs compared to physical infrastructure (Branch/ATM) or human-assisted channels.
266. What is the main difference between Symmetric and Asymmetric Encryption?
Asymmetric is less secure.
Symmetric uses no keys.
Symmetric uses one key for both encryption and decryption; Asymmetric uses a public-private key pair.
Symmetric is slower than Asymmetric.
Explanation:
Asymmetric encryption (Public Key Infrastructure) is crucial for digital banking security (like SSL/TLS) because it allows secure exchange of data without sharing the private secret key.
267. e-NACH (Electronic NACH) mandate authentication is primarily done using:
Physical Signature
Voice recognition
Visiting the branch
Netbanking or Debit Card credentials
Explanation:
e-NACH reduces the turnaround time for mandate registration by using electronic authentication via Netbanking or Debit Card, replacing physical paper mandates.
268. Why is "Batch Processing" used for interest application in CBS?
It allows processing large volumes of accounts simultaneously during off-peak hours.
It is the only way to calculate interest.
It requires manual calculation.
It is required by law.
Explanation:
Interest calculation for millions of accounts is resource-intensive. Batch processing runs this as a background job (usually at night) to avoid slowing down the system during banking hours.
269. Video Customer Identification Process (V-CIP) is a method of:
Face-to-face onboarding at the branch.
Non-face-to-face digital onboarding treated at par with face-to-face KYC.
Phone banking authentication.
ATM surveillance.
Explanation:
V-CIP uses video chat and geotagging to verify the customer remotely. RBI treats it as equivalent to physical KYC, allowing full account functionality.
270. UPI LITE is an on-device wallet feature designed for:
International transfers.
Crypto trading.
High value transactions.
Small value transactions without PIN.
Explanation:
UPI LITE allows users to make small value transactions (up to ?500) without entering a UPI PIN, improving success rates and reducing load on the core banking system.
271. Most modern Core Banking Solutions (CBS) are built on "Service-Oriented Architecture" (SOA). What is the primary advantage of SOA?
It allows different services (like loan processing, payments) to communicate with each other via standard protocols, enabling modularity and reusability.
It stores all data in a single flat file.
It works only on mainframe computers.
It requires manual coding for every new product.
Explanation:
Service-Oriented Architecture (SOA) breaks down banking functions into distinct, self-contained units ("services") like account validation, interest calculation, etc. These services can be reused across different channels (Mobile, ATM, Net Banking), reducing development time for new products and ensuring consistency across the bank's technology ecosystem.
272. The global financial messaging standard "ISO 20022", which SWIFT and RTGS systems are migrating to, primarily enables:
Richer, structured data exchange (XML format) to improve compliance and automation.
Lower bandwidth usage.
Voice messages between banks.
Sending physical cheques internationally.
Explanation:
ISO 20022 uses the MX message format (based on XML), which carries much more data than the older MT format. This "rich data" allows banks to transmit detailed remittance information, improve anti-money laundering (AML) screening, and automate reconciliation processes, significantly reducing errors in cross-border payments.
273. In the context of "UPI AutoPay" for recurring payments, what is the transaction limit up to which the UPI PIN is NOT required for execution (after the mandate is set)?
?2,000
?5,000
?15,000
?1 Lakh
Explanation:
Initially set at ?5,000, the RBI enhanced the limit for e-mandates on cards and UPI for recurring payments (like subscriptions, insurance premiums) to ?15,000 without the need for Additional Factor of Authentication (AFA/PIN) during the transaction execution, improving convenience for users.
274. How does "Pharming" differ from "Phishing"?
There is no difference.
Phishing involves voice calls; Pharming involves SMS.
Pharming attacks servers; Phishing attacks ATMs.
Phishing lures victims to fake sites via email; Pharming redirects users to fake sites via DNS poisoning (even if they type the correct URL).
Explanation:
Pharming is more dangerous because it manipulates the DNS (Domain Name System) server or the user's host file. Even if the user types the correct website address (e.g., www.bank.com), they are redirected to a fraudulent site without clicking any suspicious link, making it harder to detect than Phishing.
275. Contactless Cards use "NFC" technology for transactions. What does NFC stand for and what is the typical range?
Network Frequency Control; up to 10 meters.
Near Field Communication; up to 4 cm.
Near Frequency Chip; up to 100 meters.
Non-Financial Card; physical contact required.
Explanation:
NFC (Near Field Communication) is a short-range wireless connectivity standard. It allows two devices (the card and the POS terminal) to communicate when they are brought within a few centimeters (typically < 4 cm) of each other, enabling "Tap and Pay".
276. In the Bharat Bill Payment System (BBPS), the entity that onboards the Biller is known as:
Agent Institution
Customer Operating Unit (COU)
Biller Operating Unit (BOU)
Central Unit (BBPCU)
Explanation:
BBPS has a tiered structure. The Biller Operating Unit (BOU) is the entity responsible for onboarding billers (like electricity boards, telecom companies) into the BBPS ecosystem. The Customer Operating Unit (COU) interacts with the customer (payer).
277. What is the difference between "Data Warehousing" and "Data Mining" in banking?
They are the same thing.
Warehousing is searching for patterns; Mining is storing data.
Warehousing is the process of compiling and organizing data into one common database; Mining is the process of extracting meaningful patterns from that data.
Mining happens before Warehousing.
Explanation:
A Data Warehouse acts as a central repository of integrated historical data. Data Mining uses algorithms on this warehoused data to discover hidden patterns, correlations, and insights (e.g., predicting which customers are likely to default or identifying cross-selling opportunities).
278. In Cloud Computing, "SaaS" stands for:
Security as a Service
Storage as a Service
System as a Service
Software as a Service
Explanation:
SaaS is a cloud model where software applications are hosted by a vendor and made available to customers over the internet (e.g., Google Drive, CRM software), eliminating the need for banks to install and maintain the software locally.
279. A "Distributed Denial of Service" (DDoS) attack differs from a simple DoS attack because:
It physically destroys the server.
It uses a network of multiple infected computers (Botnet) to flood the target from many sources.
It targets multiple servers at once.
It uses a single computer to launch the attack.
Explanation:
In a DDoS attack, the traffic comes from hundreds or thousands of sources (zombie computers/bots), making it nearly impossible to stop the attack simply by blocking a single IP address. This makes DDoS much more destructive and harder to mitigate than simple DoS.
280. As per RBI guidelines on "Card-on-File Tokenization" (CoFT), who is authorized to save the actual Card details?
The Payment Aggregator
The Merchant (e.g., Amazon, Flipkart)
Anyone with customer consent
Only the Card Issuer (Bank) and Card Network (Visa/Mastercard)
Explanation:
To enhance security, RBI mandated that merchants and payment aggregators cannot save actual card details (Card-on-File). They must use "Tokens" generated by the Card Network/Issuer. Only the Issuer and Network can store the real data.
281. RuPay is India's indigenous card scheme. It was launched by:
Reserve Bank of India (RBI)
National Payments Corporation of India (NPCI)
State Bank of India (SBI)
Ministry of Finance
Explanation:
NPCI launched RuPay to provide a domestic, cost-effective alternative to international card schemes like Visa and Mastercard, reducing the reliance on cross-border payment processing.
282. In a "Star Topology" network, if the central hub fails:
Data travels to the next node automatically.
Only one computer is affected.
The entire network fails.
The network switches to Ring topology.
Explanation:
In Star Topology, all nodes connect directly to a central device (hub/switch). It is a single point of failure; if the hub goes down, communication between all connected nodes stops.
283. What is the difference between "NACH Credit" and "NACH Debit"?
NACH Credit is for payouts (e.g., Salary, Dividend); NACH Debit is for collections (e.g., Loan EMI, SIP).
NACH Credit requires PIN; NACH Debit does not.
NACH Credit is for collections (e.g., Bill payments); NACH Debit is for payouts (e.g., Salary).
There is no difference.
Explanation:
NACH Credit is a "Push" system used to distribute funds to many beneficiaries (One-to-Many) like subsidies or salaries. NACH Debit is a "Pull" system used to collect funds from many payers (Many-to-One) like utility bills or loan repayments.
284. The "Zero Trust" security model in banking IT infrastructure is based on the principle:
Trust devices, verify users.
Never trust, always verify.
Trust but verify.
Trust internal employees, verify external users.
Explanation:
Zero Trust assumes that threats exist both inside and outside the network. It requires strict identity verification for every person and device trying to access resources, regardless of whether they are sitting within the network perimeter or outside.
285. The recent "PPI interoperability through UPI" allows customers to:
Use their Bank Account to pay via Wallet QR codes.
Use their Prepaid Wallets (like Paytm/PhonePe Wallet) to pay at any UPI QR code.
Send money from Wallet to Wallet only.
Withdraw cash from wallets at ATMs.
Explanation:
This feature allows Full-KYC Wallet users to scan any standard UPI QR code of a merchant and pay using their wallet balance, breaking the closed-loop restriction of wallets.
286. What is the role of a "Delivery Channel Interface" in a CBS?
It delivers physical cheque books.
It connects the bank employees to the database.
It connects the CBS to external channels like ATM, Internet Banking, and Mobile Banking.
It calculates interest.
Explanation:
The Delivery Channel Interface allows transactions initiated at various touchpoints (ATMs, Phones) to be routed to the Core Banking System for processing and response.
287. As per RBI Digital Lending Guidelines, a "Lending Service Provider" (LSP) is:
An agent of the borrower.
An agent of the Regulated Entity (Bank/NBFC) who carries out functions like customer acquisition, pricing support, or recovery.
The Bank/NBFC itself.
A software company making the app.
Explanation:
LSPs act as the interface for digital loans. RBI mandates that LSPs must be monitored by the Regulated Entities, and the loan disbursal/repayment must flow directly between the RE and the borrower, bypassing the LSP's pool account.
288. What is the purpose of the "Void Pantograph" on a cheque?
To make the cheque look attractive.
To prevent photocopying of the cheque.
To help blind persons identify the cheque.
To store digital data.
Explanation:
The Void Pantograph is a hidden feature. When a cheque is photocopied or scanned, the word "VOID" or "COPY" clearly appears on the copy, making it impossible to use the copy for fraud.
289. Which type of malware restricts access to a computer system (encrypts files) and demands payment to remove the restriction?
Ransomware
Adware
Worm
Spyware
Explanation:
Ransomware (like WannaCry) encrypts the user's data and demands a ransom (usually in crypto) for the decryption key. It is a major threat to banking data availability.
290. FASTag uses which technology for electronic toll collection?
QR Code
NFC (Near Field Communication)
Bluetooth
RFID (Radio Frequency Identification)
Explanation:
FASTag is a reloadable tag employing RFID technology. It is affixed on the vehicle's windscreen and enables automatic deduction of toll charges when the vehicle passes through the toll plaza.
291. A Virtual Private Network (VPN) allows bank employees to:
Access the internet faster.
Securely access the bank's internal network over a public network (internet).
Bypass all firewalls.
Browse anonymously on the dark web.
Explanation:
VPN creates an encrypted "tunnel" over the internet. It is essential for Work From Home scenarios or connecting remote branches securely to the CBS without a dedicated leased line.
292. What is "mPOS" (Mobile Point of Sale)?
A mobile banking app.
A smartphone or tablet transformed into a payment terminal using a card reader attachment.
A large ATM machine.
A prepaid mobile recharge shop.
Explanation:
mPOS is a cost-effective alternative to traditional bulky POS machines. It allows small merchants to accept card payments using their mobile phones linked to a small card reader.
293. The "e-Rupee" (e?) launched by RBI is a:
Central Bank Digital Currency (CBDC).
Prepaid Wallet.
Cryptocurrency like Bitcoin.
UPI App.
Explanation:
e-Rupee is the digital form of legal tender issued by the RBI. Unlike cryptocurrencies (which are private and volatile), CBDC is sovereign currency and exchanges 1:1 with cash.
294. In CBS security, the principle of "Least Privilege" means:
Managers have no privileges.
Users are granted only the minimum levels of access necessary to perform their job functions.
Users are given maximum access to all modules.
Customers have the least priority.
Explanation:
This principle ensures that a teller can only access cash modules, while a loan officer accesses loan modules, preventing unauthorized access and potential fraud.
295. How many NEFT batches are available for settlement in a day (24-hour cycle)?
24
96
48
12
Explanation:
NEFT operates in half-hourly batches throughout the day (24x7). In a 24-hour cycle, there are 48 batches (00:30 to 00:00).
296. Which standard is used to secure credit/debit card data during transmission and storage?
IFRS 9
Basel III
PCI-DSS
ISO 9001
Explanation:
Payment Card Industry Data Security Standard (PCI-DSS) is a set of security standards designed to ensure that all companies that accept, process, store or transmit credit card information maintain a secure environment.
297. A "Bharat QR" code differs from a standard UPI QR code because:
It requires a physical machine.
It supports payments via Cards (Visa/Mastercard/RuPay) in addition to UPI.
It is slower.
It only works for SBI customers.
Explanation:
Bharat QR is an interoperable QR code solution that enables customers to pay using their debit/credit cards (by scanning via banking app) without needing a physical POS terminal.
298. The "3 Vs" that define Big Data are:
Volume, Velocity, Variety
Voice, Video, Virtual
Verification, Validation, Value
Value, Vision, Victory
Explanation:
Big Data is characterized by high Volume (amount of data), high Velocity (speed of data generation), and high Variety (structured and unstructured data types).
299. A network that connects computers across a city is typically called a:
WAN (Wide Area Network)
PAN (Personal Area Network)
LAN (Local Area Network)
MAN (Metropolitan Area Network)
Explanation:
LAN covers a building; WAN covers countries; MAN covers a city (like a cable TV network or city-wide bank branch connectivity).
300. India's Cheque Truncation System (CTS) is divided into how many grids?
One Single National Grid
Three Grids (North, South, West)
State-wise Grids
Four Grids (Metros)
Explanation:
Currently, CTS operates in 3 grids: Northern Grid (New Delhi), Southern Grid (Chennai), and Western Grid (Mumbai). All cheques are cleared through one of these grids.
301. The "Digital Payments Index" (RBI-DPI) measures the extent of digitization of payments across the country. What is the base period for this index?
April 2016
March 2011
March 2018
January 2020
Explanation:
The RBI-DPI comprises 5 broad parameters: Payment Enablers, Payment Infrastructure (Demand-side factors), Payment Infrastructure (Supply-side factors), Payment Performance, and Consumer Centricity. The Base Period for the index has been set as March 2018 (Score = 100). It helps in mapping the deepening of digital payments in India accurately.
302. In biometric authentication, what does "False Acceptance Rate" (FAR) refer to?
The rate at which an unauthorized user is incorrectly accepted/verified.
The rate at which an authorized user is rejected.
The rate at which the system fails to scan.
The speed of biometric matching.
Explanation:
FAR is a critical security metric. It measures the likelihood that the biometric security system will incorrectly accept an access attempt by an unauthorized user. In high-security banking applications (like vaults or server rooms), the system is tuned to have an extremely low FAR, even if it means a slightly higher False Rejection Rate (FRR).
303. Why did the RBI mandate the migration from Magnetic Stripe cards to EMV Chip and PIN cards?
To support contactless payments only.
To reduce the cost of printing cards.
To increase the storage capacity of the card.
Because Magnetic Stripe data is static and easily cloned (Skimming), whereas EMV chips use dynamic authentication.
Explanation:
EMV (Europay, Mastercard, and Visa) is the global standard for chip-based debit and credit cards. Unlike magnetic stripes which contain static data that can be easily copied/skimmed to create counterfeit cards, EMV chips generate a unique transaction code for every transaction, making cloning extremely difficult and enhancing security.
304. What is the key difference between a "Payment Gateway" and a "Payment Aggregator" (PA)?
Aggregators are unregulated; Gateways are regulated.
Gateways handle funds; Aggregators only provide technology.
Gateways work only with Credit Cards; Aggregators work with UPI.
Gateways provide technology infrastructure; Aggregators handle funds settlement and onboard merchants.
Explanation:
A Payment Gateway acts as a technological pipe to transmit data. A Payment Aggregator (PA) facilitates merchants to accept various payment instruments without the need for the merchant to create a separate payment integration system of their own. PAs handle the actual funds, settling them to merchants, and are thus regulated by RBI (Guidelines on PA/PG).
305. "Vishing" is a form of social engineering attack where:
Attackers redirect web traffic to fake sites.
Attackers send SMS with malicious links.
Attackers use telephone calls (Voice) to trick users into revealing personal financial details.
Attackers physically steal ATM cards.
Explanation:
Vishing stands for "Voice Phishing." Criminals pose as bank officials, RBI agents, or tech support over a phone call to create a sense of urgency (e.g., "Your card is blocked") and manipulate victims into sharing OTPs, PINs, or passwords. Smishing involves SMS; Phishing involves Email.
306. Robotic Process Automation (RPA) in banking is best suited for:
Complex credit appraisal requiring judgment.
High-volume, repetitive, rule-based tasks (e.g., KYC data entry, reconciliation).
Designing new loan products.
Strategic decision making.
Explanation:
RPA uses software "bots" to mimic human actions for routine tasks. It is ideal for processes that are repetitive, prone to human error, and follow strict rules (like account opening forms processing, reconciliation of ATM transactions), freeing up humans for higher-value work.
307. Why do most banks prefer Multi-Protocol Label Switching (MPLS) networks for connecting branches to the Data Center?
It is the cheapest option available.
It requires no hardware at the branch.
It allows data to be public.
It offers prioritized data traffic (QoS), security (VPN), and high speed suitable for real-time CBS.
Explanation:
MPLS is a routing technique that directs data based on short path labels rather than long network addresses. It is highly reliable, secure (acts like a private network), and supports Quality of Service (QoS), ensuring that critical banking transactions get priority over other traffic like emails.
308. As per RBI Guidelines on Digital Lending (2023), what is the cap on "First Loss Default Guarantee" (FLDG) provided by a Lending Service Provider (LSP) to a Regulated Entity (Bank)?
0% (Not allowed)
10% of the loan amount
5% of the outstanding portfolio
20% of the outstanding portfolio
Explanation:
RBI permits FLDG arrangements between Regulated Entities (Banks/NBFCs) and their partner LSPs (Fintechs), subject to a strict cap of 5% of the amount of the loan portfolio. This ensures the lender still holds the primary credit risk while allowing fintech innovation.
309. In network security, what is the purpose of a "Honeypot"?
To act as a decoy system to attract and trap cyber attackers to study their behavior.
To encrypt passwords.
To speed up the server.
To store sweet deals for customers.
Explanation:
A Honeypot is a security mechanism set up to detect, deflect, or counteract attempts at unauthorized use of information systems. It consists of a computer, data, or network site that appears to be part of a network, but is actually isolated and monitored, looking like a valuable target to hackers.
310. What is the current maximum limit for a UPI transaction for specific categories like IPO subscriptions and Retail Direct Schemes?
?2 Lakh
?10 Lakh
?5 Lakh
?1 Lakh
Explanation:
While the general UPI transaction limit is ?1 Lakh, NPCI has enhanced the limit to ?5 Lakh for specific use cases like IPO applications, RBI Retail Direct Scheme, and payment for educational/medical institutions to encourage digital adoption for high-value payments.
311. Banks typically host their Core Banking Solution in a "Tier 4" Data Center. What does Tier 4 imply?
99.671% availability with single path for power.
99.995% availability with 2N+1 redundancy (Fault Tolerant).
Low security but high speed.
Data stored in the cloud only.
Explanation:
Data Centers are rated from Tier 1 to Tier 4 based on uptime and redundancy. Tier 4 is the highest standard, offering Fault Tolerance (no single point of failure), independent dual-powered cooling/power paths, and 99.995% uptime guarantee, crucial for 24x7 banking operations.
312. An Information Systems (IS) Audit distinguishes between "System Audit" and "Process Audit". What does a Process Audit focus on?
Checking the source code of the software.
Technical configuration of firewalls.
Validating that the business procedures and controls (SOPs) around the IT system are being followed by staff.
Testing the battery life of UPS.
Explanation:
A System Audit looks at the technical aspects (hardware, software, security settings). A Process Audit looks at the human/operational aspect—whether users are following the Standard Operating Procedures (SOPs), like password hygiene, maker-checker discipline, and authorization workflows.
313. Which technological initiative in banking directly contributes to "Green Banking"?
Printing receipts for every balance enquiry.
E-Statements and Digital Wallets reducing paper usage.
Installing more Air Conditioners in branches.
Using diesel generators for power backup.
Explanation:
Green Banking aims to reduce the carbon footprint. Technologies that promote paperless transactions (Net banking, E-Statements, Mobile Wallets) directly support this by saving paper and reducing the need for physical transport.
314. As per RBI guidelines on Outsourcing of IT Services, banks CANNOT outsource which of the following functions?
Core Management functions (like policy formulation and internal audit).
Application testing.
Data entry work.
ATM maintenance.
Explanation:
RBI allows outsourcing of non-core activities (like IT support, hardware maintenance). However, Core Management Functions , including decision-making regarding credit, policy formulation, internal audit, and compliance, cannot be outsourced as it compromises the bank's control and accountability.
315. In the context of Blockchain technology, what is a "Smart Contract"?
Self-executing code on a blockchain that automatically enforces terms when conditions are met.
A paper contract scanned into PDF.
A legal document signed digitally.
A contract between the bank and the internet provider.
Explanation:
Smart contracts are digital protocols (code) deployed on a blockchain. They automatically execute transactions (like releasing funds) only when specific pre-defined conditions are triggered (e.g., goods delivered), eliminating the need for intermediaries and increasing trust.
316. The Indian Financial System Code (IFSC) is an 11-character code. What does the 5th character always represent?
The Bank Code.
The State Code.
The digit "0" (Zero).
The Branch Code.
Explanation:
The IFSC structure is: First 4 chars = Bank Code (Alphabetic); 5th char = 0 (Zero) (Reserved for future use); Last 6 chars = Branch Code (Numeric/Alphabetic). Example: SBIN0001234.
317. Under the Cheque Truncation System (CTS), what is the format of the cheque images transmitted from the collecting bank to the paying bank?
JPEG, Grayscale only.
TIFF format with three images (Front Gray, Front Binary, Back Binary).
PDF document.
Raw Bitmap.
Explanation:
CTS standards mandate using the TIFF (Tagged Image File Format) . Three images are captured: 1. Front Grayscale (for visual details), 2. Front Black & White (Binary, for MICR reading), 3. Back Black & White (Binary, for endorsements).
318. In an IMPS (Immediate Payment Service) transaction using Mobile Number and MMID, the length of the MMID (Mobile Money Identifier) is:
6 digits
4 digits
7 digits
10 digits
Explanation:
MMID is a 7-digit random number issued by the bank to the customer upon registration for mobile banking. The first 4 digits represent the unique bank code, and the last 3 digits identify the user account. It enables fund transfers using just Mobile No + MMID, preserving privacy of account details.
319. The RSA algorithm is a classic example of which type of encryption?
Asymmetric (Public Key) Encryption
Hashing Algorithm
Symmetric Key Encryption
Data Masking
Explanation:
RSA (Rivest–Shamir–Adleman) is the most widely used Asymmetric Encryption algorithm. It uses two different keys: a Public Key to encrypt data and a Private Key to decrypt it. This is the foundation of secure internet communication (SSL/TLS).
320. In Banking CRM (Customer Relationship Management), "Analytical CRM" primarily focuses on:
Mining customer data to identify patterns, segmentation, and profitability to design targeted marketing campaigns.
Storing customer complaints.
Automating the sales force.
Direct interaction with customers (Call centers, branches).
Explanation:
Operational CRM handles customer touchpoints. Analytical CRM works in the backend, analyzing the vast data generated by Operational CRM to provide insights (e.g., "Which customer is likely to buy a home loan?") using Data Mining and BI tools.
321. The "NETC" program which governs FASTag operations stands for:
National Electronic Toll Collection
New Electronic Toll Clearing
National Express Transport Corporation
Network for Electronic Transfer of Cash
Explanation:
NETC (National Electronic Toll Collection) is the flagship program of NPCI developed to meet the electronic tolling requirements of the Indian market using RFID technology (FASTag).
322. A key feature of the Central Bank Digital Currency (CBDC) or e-Rupee is that:
It is a liability of the Commercial Bank.
It earns high interest for the holder.
It appears as a liability on the Central Bank's (RBI) balance sheet, just like physical cash.
It is highly volatile like Bitcoin.
Explanation:
CBDC is sovereign currency in digital form. Unlike bank deposits (liability of the commercial bank), CBDC is a direct claim on the Central Bank. It does not typically earn interest (to prevent it from competing with bank deposits) and exchanges at par with cash.
323. In an ATM, what is the function of "Cassettes"?
To capture video footage.
To print receipts.
To read the card details.
To store currency notes of specific denominations for dispensing.
Explanation:
Cassettes are the removable boxes inside the ATM safe where cash is loaded. Typically, an ATM has 4 cassettes, each configured for a specific denomination (e.g., ?500, ?100, ?200).
324. In the SWIFT messaging system, which message type (MT) is used for a "Single Customer Credit Transfer"?
MT 700
MT 103
MT 202
MT 940
Explanation:
MT 103 is the standard format for cross-border customer wire transfers. MT 202 is for bank-to-bank transfers. MT 700 is for Letter of Credit issuance.
325. Which Cloud Deployment Model is considered most suitable for banks to store sensitive Core Banking Data due to privacy and security concerns?
Open Cloud
Private Cloud
Public Cloud
Community Cloud
Explanation:
A Private Cloud is dedicated infrastructure for a single organization. It offers the highest level of security and control, which is essential for core banking data where data privacy regulations are strict. Public cloud is shared and generally used for non-critical apps.
326. How does Machine Learning (ML) improve Fraud Detection in banking?
By hiring more security guards.
By manually checking every cheque.
By identifying anomalies and patterns in transaction data that deviate from a user's normal behavior in real-time.
By encrypting emails.
Explanation:
ML models learn the customer's spending behavior over time. If a transaction occurs that is unusual (e.g., huge amount, strange location, odd time), the ML system flags it instantly as potential fraud, far faster and more accurately than rule-based systems.
327. As per RBI guidelines, Payment Aggregators (PAs) must maintain the funds collected from customers in an escrow account. The funds from this account must be settled to the merchant within:
7 days
30 days
Whenever the merchant asks
T+0 or T+1 day
Explanation:
To protect merchant funds, RBI mandates strict settlement timelines. For PAs, the final settlement to the merchant must happen typically by T+1 (where T is the date of transaction capture) to ensure liquidity for the merchant.
328. The "Account Aggregator" (AA) ecosystem in India uses which technology standard to share financial data securely with user consent?
Email Attachments
Open APIs (Application Programming Interfaces)
Blockchain
FTP (File Transfer Protocol)
Explanation:
The AA framework is built on standardised Open APIs. These APIs allow Financial Information Providers (Banks) to share data with Financial Information Users (Lenders) securely and in real-time, only after the customer gives digital consent via the AA handle.
329. Data Loss Prevention (DLP) solutions are deployed by banks primarily to:
Scan for viruses.
Block spam emails.
Detect and prevent unauthorized transmission of sensitive data (like customer credit card info) outside the corporate network.
Speed up internet access.
Explanation:
DLP tools monitor data in motion (network traffic), data at rest (storage), and data in use (endpoints) to ensure that sensitive/confidential data is not leaked, emailed, or uploaded to unauthorized external locations.
330. RBI's Regulatory Sandbox operates in "Cohorts" (groups). The First Cohort launched by RBI was focused on which theme?
Prevention of Financial Frauds
Cross Border Payments
Retail Payments
MSME Lending
Explanation:
RBI launches thematic cohorts to encourage innovation in specific areas. The first cohort (2019) was "Retail Payments" (e.g., offline payments), the second was "Cross Border Payments", the third was "MSME Lending", and fourth was "Prevention of Financial Frauds".
331. What is the primary objective of "Penetration Testing" (Pen Testing) in banking security?
To monitor employee internet usage.
To install antivirus software.
To check the speed of the network.
To simulate a cyber-attack on the system to find exploitable vulnerabilities before hackers do.
Explanation:
Vulnerability Assessment and Penetration Testing (VAPT) is a proactive security measure. While Vulnerability Assessment identifies potential weak points, Penetration Testing goes a step further by actively trying to exploit them to see how deep an attacker can get into the system, helping banks patch holes before real attacks occur.
332. In an IMPS transaction, if the remitter uses "P2A" (Person-to-Account) mode, what details are mandatory?
Beneficiary Aadhaar Number.
Beneficiary Account Number and IFSC Code.
Beneficiary UPI ID.
Beneficiary Mobile Number and MMID.
Explanation:
IMPS offers two main modes: P2P (Person-to-Person) using Mobile Number + MMID, and P2A (Person-to-Account) using Account Number + IFSC. P2A is useful when the beneficiary is not registered for mobile banking but has a bank account.
333. In Business Continuity Planning, "Recovery Point Objective" (RPO) defines:
The cost of data recovery.
The maximum time allowed to recover the system.
The maximum acceptable amount of data loss measured in time.
The time taken to switch to the DR site.
Explanation:
RPO determines how much data the bank can afford to lose in a disaster. For example, if RPO is 15 minutes, it means backups must be done every 15 minutes, so at most 15 minutes of data is lost. Zero RPO means real-time data replication.
334. Why might a bank adopt a "Hybrid Cloud" strategy?
To keep critical/sensitive data on a Private Cloud (security) while bursting non-critical workloads to a Public Cloud (scalability).
Because it is free of cost.
To store all data publicly.
To avoid using the internet.
Explanation:
Hybrid Cloud offers the best of both worlds. Banks can maintain strict compliance and security for core customer data on on-premise/private clouds, while leveraging the massive computing power and lower cost of public clouds for testing, analytics, or peak loads.
335. In digital security, "Non-Repudiation" ensures that:
The sender cannot deny having sent the message/transaction.
The message is encrypted.
The system never fails.
The receiver cannot read the message.
Explanation:
Non-repudiation provides proof of the origin and integrity of data. Digital Signatures provide non-repudiation because only the sender has the private key to sign it; thus, they cannot later claim they didn't send it.
336. Which subsidiary of NPCI is responsible for taking UPI and RuPay products to international markets?
NPCI Digital Solutions
NPCI International Payments Ltd (NIPL)
NPCI Bharat BillPay Ltd (NBBL)
National Switch of India
Explanation:
NIPL was incorporated in 2020 as a wholly-owned subsidiary of NPCI to internationalize India’s indigenous payment offerings like UPI and RuPay cards, partnering with countries like Singapore, UAE, and Nepal.
337. What is the difference between a MAC Address and an IP Address?
MAC is a physical address assigned to the NIC card; IP is a logical address assigned to the connection.
MAC is software-based; IP is hardware-based.
MAC is used for routing; IP is used for local identification.
MAC is a temporary address; IP is permanent.
Explanation:
Media Access Control (MAC) address is a unique hardware identifier burned into the network card (Layer 2). Internet Protocol (IP) address is a software-assigned address that can change depending on the network location (Layer 3).
338. In an Open Banking architecture, what is the function of an "API Gateway"?
To act as a single entry point for managing, securing, and routing API calls between external apps and internal banking systems.
To provide physical cash.
To generate monthly statements.
To store customer passwords.
Explanation:
The API Gateway sits between the outside world (Fintech apps) and the bank's core systems. It enforces security (authentication, rate limiting), traffic management, and analytics for all incoming API requests.
339. A "Keylogger" is a type of spyware that:
Locks the keyboard physically.
Encrypts keys.
Records every keystroke made by the user to steal passwords and credit card numbers.
Logs the user out of the system.
Explanation:
Keyloggers run silently in the background, capturing everything typed on the keyboard. This is a common method used to steal Netbanking login credentials.
340. In the NETC FASTag ecosystem, the "Acquirer Bank" is responsible for:
Issuing FASTag to vehicle owners.
Setting the toll rates.
Managing the toll plaza infrastructure and processing transactions sent by the toll plaza.
Manufacturing the RFID tags.
Explanation:
The Issuer Bank issues the tag to the customer (vehicle owner). The **Acquirer Bank** onboards the Toll Plaza operator and acquires the transaction when a vehicle passes through, routing it to the Issuer for debit.
341. Which framework is commonly used for distributed storage and processing of Big Data in banking?
Hadoop
Excel
Tally
Swift
Explanation:
Apache Hadoop is an open-source software framework used for distributed storage and processing of huge datasets (Big Data) using the MapReduce programming model.
342. In AePS, an "Off-us" transaction means:
A transaction where the customer and the Business Correspondent (BC) belong to the same bank.
An offline transaction.
A failed transaction.
A transaction where the customer and the BC belong to different banks.
Explanation:
"On-us" means the card/account and the terminal belong to the same bank. "Off-us" means they are different (e.g., SBI customer using an HDFC Bank BC point), requiring routing through the NPCI switch.
343. "Pretexting" is a social engineering technique where the attacker:
Hacks the Wi-Fi.
Guesses the password.
Sends a virus via email.
Creates a fabricated scenario (a pretext) to gain the victim's trust and obtain information.
Explanation:
In Pretexting, the attacker impersonates someone else in authority (e.g., "I am calling from the Bank's Fraud Dept") to manipulate the victim into divulging sensitive data like OTPs.
344. What is "User Acceptance Testing" (UAT) in CBS implementation?
Testing the hardware speed.
Testing done by developers.
Final phase of testing done by actual end-users (bank staff) to verify if the system meets business requirements before going live.
Testing by the RBI.
Explanation:
UAT is crucial to ensure the software handles real-world scenarios correctly. It validates the business logic and usability from the perspective of the people who will actually use the system.
345. In the BBPS framework, "Agent Institutions" are:
Entities that act as aggregators for a network of agents (like shopkeepers) who offer bill payment services to the public.
The Billers themselves.
The RBI offices.
The Tech support team.
Explanation:
Agent Institutions recruit and manage physical agents (human touchpoints) to allow cash-based bill payments for customers who are not digitally savvy.
346. The "Internet of Things" (IoT) in banking can be used for:
Issuing cheque books.
Asset monitoring (e.g., tracking financed vehicles) and personalized customer offers via connected devices.
Writing loan policy.
Printing currency.
Explanation:
IoT refers to a network of physical objects embedded with sensors. Banks use it for collateral management (tracking smart warehouses/vehicles) and transforming payment experiences (smartwatches, cars).
347. Which of the following is an example of "Inherence" factor in Multi-Factor Authentication (MFA)?
Fingerprint or Retina Scan
OTP sent to mobile
Password
Smart Card
Explanation:
Inherence refers to something the user "is" (Biometrics). Password is "Knowledge" (something you know). OTP/Card is "Possession" (something you have).
348. Chatbots in banking use "NLP" to understand customer queries. What does NLP stand for?
Natural Language Processing
Network Layer Protocol
Neural Link Process
New Loan Processing
Explanation:
NLP is a branch of AI that gives computers the ability to understand, interpret, and respond to text and spoken words in the same way human beings can.
349. Why do PPI issuers (Wallet companies) maintain an "Escrow Account"?
To earn high interest.
To invest in the stock market.
To ensure that funds collected from customers are secured and available for redemption/payment to merchants, preventing misuse.
To pay salaries to employees.
Explanation:
RBI mandates that the core funds of customers in a PPI must not be co-mingled with the company's own funds. An Escrow Account ensures these funds are ring-fenced and used only for settled payments.
350. VSAT technology uses satellites for communication. It is particularly useful for banking connectivity in:
Metro cities with fiber optics.
Remote, hilly, and rural areas where terrestrial lines (cables) are difficult to lay.
Inside the Data Center.
Between two adjacent buildings.
Explanation:
Very Small Aperture Terminal (VSAT) allows data transmission via satellite, bypassing the need for physical cables, making it ideal for connecting ATMs and branches in difficult terrains.
351. The "Begin of Day" (BOD) process in CBS ensures:
That the date is changed to the current working date and the system is ready for transactions.
That all reports are printed.
That the vault is open.
That all staff have logged in.
Explanation:
BOD is a mandatory process run before any transaction can take place. It updates the system date, checks system health, and enables transaction posting for the new day.
352. "Spear Phishing" is a targeted attack where:
Hackers attack with spears.
The network is flooded with data.
Emails are sent to millions of random users.
Fraudulent emails are customized and sent to a specific individual or organization to make them look highly credible.
Explanation:
Unlike generic phishing (casting a wide net), Spear Phishing targets specific victims using personalized information (name, role) to increase the success rate of the deception.
353. How will 5G technology primarily benefit banking operations?
By eliminating the need for servers.
By providing ultra-low latency and high speed, enabling seamless mobile banking, AR/VR services, and IoT connectivity.
By reducing the cost of electricity.
By printing money faster.
Explanation:
5G allows for faster data transfer with minimal delay (latency). This is crucial for real-time fraud detection, high-frequency trading, and immersive customer experiences.
354. The Online Dispute Resolution (ODR) system is mandatory for which payments ecosystem?
Locker Operations
Digital Payments (UPI, Cards, PPIs)
Cheque Clearing
Cash Transactions
Explanation:
RBI mandated authorized Payment System Operators (PSOs) to implement an ODR system for resolving disputes and grievances related to failed transactions in a transparent, rule-based, and automated manner.
355. A "Neobank" is best described as:
A bank for neon sign manufacturers.
A digital-only financial entity without physical branches, often partnering with traditional banks to offer services.
A traditional bank with a new name.
A rural cooperative bank.
Explanation:
Neobanks operate entirely online/mobile. In India, since RBI does not yet issue virtual banking licenses, they typically partner with licensed scheduled banks to hold customer deposits while providing a superior UI/UX layer.
356. The "Lock Icon" in the browser address bar indicates that the connection is secured using:
SSL/TLS Encryption
HTML
HTTP
Java
Explanation:
SSL (Secure Sockets Layer) or its successor TLS (Transport Layer Security) encrypts the link between the web server and the browser, ensuring privacy and data integrity. It turns HTTP into HTTPS.
357. In CBS implementation, "Big Bang Migration" refers to:
Moving all branches and data to the new system simultaneously in one go.
An explosion in the server room.
Moving only savings accounts first.
Moving data branch-by-branch over a year.
Explanation:
Big Bang involves switching the entire bank to the new system at once (usually over a weekend). It is riskier but faster than the Phased approach.
358. What is the main benefit of "SWIFT gpi" (Global Payments Innovation)?
It allows domestic transfers only.
It makes payments free.
It offers speed, transparency, and end-to-end tracking of cross-border payments.
It eliminates the need for banks.
Explanation:
SWIFT gpi transformed cross-border payments by providing a unique tracking reference (UETR) that allows banks to track the status of the payment in real-time across the correspondent banking network.
359. Why is "Quantum Computing" considered a potential threat to current banking security?
It makes computers slower.
It consumes too much electricity.
It is too expensive.
It could potentially break current encryption standards (like RSA) used to secure data.
Explanation:
Quantum computers can solve complex mathematical problems much faster than classical computers. This capability could allow them to crack asymmetric encryption algorithms (like RSA) that currently underpin banking security, necessitating a move to Post-Quantum Cryptography.
360. What is "SIM Swap Fraud"?
Fraudsters obtaining a duplicate SIM card of the victim's number to intercept OTPs.
Selling SIM cards illegally.
Using dual SIMs in a phone.
Exchanging old SIM for a new one legally.
Explanation:
In SIM Swap, the attacker convinces the mobile operator to issue a new SIM card for the victim's number. Once activated, the attacker receives all SMS/OTPs intended for the victim, bypassing 2FA security.
361. Which of the following statements best distinguishes "Ethics" from "Morality"?
Ethics and Morality are synonymous and interchangeable in all contexts.
Ethics is personal; Morality is professional.
Ethics is religious; Morality is secular.
Morality refers to an individual's own principles regarding right and wrong, while Ethics refers to rules provided by an external source (e.g., codes of conduct).
Explanation:
Ethics is often defined as the rules of conduct recognized in respect to a particular class of human actions or a particular group or culture (external). Morality is more internal, referring to personal beliefs about right and wrong.
362. A bank employee uses confidential information about a corporate client's upcoming merger to buy shares before the news is public. This is an example of:
Whistleblowing
Insider Trading
Money Laundering
Ethical Investing
Explanation:
Insider Trading involves trading in a public company's stock by someone who has non-public, material information about that stock. It is illegal and unethical.
363. Which of the following actions constitutes "Sexual Harassment" at the workplace under the POSH Act, 2013?
Physical contact and advances, or a demand or request for sexual favors.
Valid criticism of work performance.
Denying leave due to staff shortage.
Assigning extra work to a female employee.
Explanation:
The POSH Act defines sexual harassment to include unwelcome physical contact, sexually colored remarks, showing pornography, or any other unwelcome physical, verbal or non-verbal conduct of sexual nature.
364. The "Whistleblower Policy" in a bank is designed to protect employees who:
Resign without notice.
Report unethical or illegal activities happening within the organization to the management or regulator.
Leak trade secrets to competitors.
Complain about low salary.
Explanation:
Whistleblowing is the act of drawing attention to perceived wrongdoing, misconduct, corruption, fraud, or unethical activity within a public or private organization. The policy protects them from retaliation.
365. An ethical dilemma involves a situation where:
Legal rules provide a direct answer.
The decision involves financial loss.
There is a clear right and wrong choice.
One must choose between two or more conflicting options, neither of which is unambiguously acceptable.
Explanation:
An ethical dilemma arises when values conflict (e.g., Loyalty to a friend vs. Truthfulness to the employer). There is often no single "perfect" solution.
366. Which principle is NOT considered a core pillar of Good Corporate Governance?
Fairness
Transparency
Profit Maximization at any cost
Accountability
Explanation:
Corporate Governance focuses on ethical conduct, transparency, accountability, and fairness to all stakeholders. While profit is a goal, "at any cost" (ignoring ethics) violates governance principles.
367. A "Conflict of Interest" occurs when:
A customer complains about service.
Two departments compete for budget.
An employee disagrees with their boss.
An individual's personal interests interfere, or appear to interfere, with their professional duties and responsibilities.
Explanation:
Conflict of interest creates a risk that professional judgment or actions will be biased by a secondary interest (e.g., a loan officer approving a loan for their own relative).
368. The "Code of Bank’s Commitment to Customers" was issued by:
RBI
IBA
BCSBI (Banking Codes and Standards Board of India)
SEBI
Explanation:
BCSBI was set up to ensure that the banking system provides fair and transparent treatment to its customers. It issued codes setting minimum standards of banking practices.
369. The "Golden Rule" of ethics states:
The end justifies the means.
Survival of the fittest.
Do unto others as you would have them do unto you.
Maximize shareholder wealth.
Explanation:
The Golden Rule is a principle of treating others as one wants to be treated. It is a common maxim found in many religions and ethical systems.
370. A person of "Integrity" is best described as someone who:
Changes their principles based on the situation.
Adheres to moral and ethical principles consistently, even when no one is watching.
Is always successful in business.
Never makes a mistake.
Explanation:
Integrity involves honesty and consistency of character. It implies acting according to one's values regardless of the circumstances or lack of supervision.
371. "Window Dressing" of a balance sheet by a bank is considered unethical because:
It is done only once a year.
It reduces the profit of the bank.
It presents a distorted and more favorable view of the financial position than reality to mislead stakeholders.
It involves decorating the bank branch.
Explanation:
Window dressing involves manipulating financial statements (e.g., temporarily boosting deposits at year-end) to make the company look better performing than it actually is. This violates the principle of transparency.
372. A strong "Work Ethic" is characterized by:
Doing the bare minimum required to keep the job.
Dedication, reliability, productivity, and taking pride in one's work.
Focusing solely on salary.
Competing aggressively with colleagues.
Explanation:
Work ethic is a value based on hard work and diligence. It includes being reliable, showing initiative, and maintaining high standards of quality.
373. The ethical theory of "Utilitarianism" advocates for:
Actions that follow universal moral laws regardless of consequences.
Actions that serve self-interest.
Actions that produce the greatest good for the greatest number of people.
Actions based solely on tradition.
Explanation:
Utilitarianism (associated with Jeremy Bentham and John Stuart Mill) is a consequentialist theory. It suggests that the moral worth of an action is determined by its contribution to overall utility (happiness/welfare).
374. A banker’s "Fiduciary Duty" implies a relationship of:
Buyer and Seller.
Trust and Confidence.
Employer and Employee.
Policeman and Thief.
Explanation:
A fiduciary relationship is one of trust, where one party (the banker) is duty-bound to act in the best interest of the other party (the customer), especially when managing their funds or giving advice.
375. Which ethical theory emphasizes "Duty" and rules over consequences? (e.g., "Do not lie even if it saves a life")
Utilitarianism
Egoism
Virtue Ethics
Deontology
Explanation:
Deontology (associated with Immanuel Kant) focuses on moral duties and rules. It argues that some acts are inherently right or wrong, regardless of their consequences.
376. In banking, a "Chinese Wall" refers to:
A physical barrier in the branch.
A firewall in the IT system.
An information barrier designed to prevent the exchange of confidential information between different departments (e.g., Investment Banking and Equity Research).
A ban on trading with Chinese companies.
Explanation:
The Chinese Wall policy is critical to manage conflicts of interest. It ensures that sensitive information obtained by one department does not leak to another department that could use it for unfair trading or advice.
377. Under the Companies Act, 2013, eligible companies are required to spend what percentage of their average net profits on Corporate Social Responsibility (CSR)?
2%
1%
5%
10%
Explanation:
Section 135 mandates that companies with a certain net worth, turnover, or profit must spend at least 2% of their average net profits of the immediately preceding three financial years on CSR activities.
378. The "Fair Practice Code for Lenders" mandates that:
Banks must lend to everyone who applies.
Banks cannot charge interest.
Recovery agents can use any means to recover dues.
Loan applications must be acknowledged, and reasons for rejection must be conveyed in writing.
Explanation:
The code ensures transparency in lending. It requires banks to provide comprehensive information about fees, charges, and terms, and to communicate reasons for loan rejection to avoid discrimination.
379. "Moonlighting" refers to:
Taking up a second job or project in addition to one's primary employment, usually without the employer's knowledge.
Working at night shifts.
Studying while working.
Working overtime in the same office.
Explanation:
Moonlighting raises ethical concerns regarding loyalty, conflict of interest, and misuse of company time/resources. Many employment contracts prohibit it.
380. Aristotle's "Virtue Ethics" focuses on:
The character of the moral agent.
Consequences of actions.
Rules and Duties.
Social contracts.
Explanation:
Virtue ethics emphasizes the development of virtuous character traits (like courage, honesty, wisdom). It asks "What sort of person should I be?" rather than "What should I do?"
381. "Mis-selling" in banking primarily refers to:
Selling counterfeit notes.
Selling bank assets to recover loans.
Selling products at a discount.
Selling a product to a customer that is unsuitable for their needs or without explaining the risks, often to meet targets.
Explanation:
Mis-selling is a major ethical issue where employees prioritize their sales targets or commissions over the customer's best interest (e.g., selling a long-term insurance policy to an elderly person who needs liquidity).
382. The "Triple Bottom Line" (TBL) concept implies that businesses should report on:
Past, Present, and Future performance.
Profit, Revenue, and Expenses.
People, Planet, and Profit.
Assets, Liabilities, and Equity.
Explanation:
TBL suggests that companies should focus on social responsibility (People) and environmental sustainability (Planet) in addition to their economic performance (Profit).
383. Why do banks have strict policies regarding acceptance of gifts by employees from customers?
To prevent bribery, conflict of interest, and compromised objectivity.
Because gifts are taxable.
To ensure the bank doesn't lose revenue.
To encourage employees to buy their own things.
Explanation:
Accepting significant gifts can create a sense of obligation in the employee towards the customer, leading to biased decisions (like approving a risky loan) and potential corruption.
384. Which statement correctly describes the relationship between Ethics and Law?
Law defines the maximum standards of behavior, while ethics defines the minimum.
Ethics and Law are exactly the same.
If an action is illegal, it might still be ethical (e.g., civil disobedience).
If an action is legal, it is always ethical.
Explanation:
Law provides the "floor" (minimum standards) of conduct enforced by the state. Ethics often sets a higher standard ("ceiling"). Something can be legal but unethical (e.g., adultery, breaking a promise), or illegal but ethical (e.g., breaking an unjust law).
385. Strict adherence to KYC/AML norms is not just a legal requirement but an ethical one because:
It increases paperwork.
It allows banks to sell customer data.
It slows down account opening.
It helps prevent the banking system from being used for criminal activities like terrorism financing.
Explanation:
Ethically, bankers have a duty to society to ensure their platforms are not exploited to harm the public or the nation. Negligence in KYC can facilitate crime.
386. Stakeholder Theory suggests that a company should create value for:
The Government only.
All parties affected by the business (employees, customers, suppliers, community, shareholders).
Shareholders only.
Customers only.
Explanation:
Unlike Shareholder Theory (Friedman) which focuses on profit for owners, Stakeholder Theory (Freeman) argues that a business has a responsibility to all groups that have a stake in its operations.
387. Under the POSH Act, every organization with 10 or more employees must constitute an "Internal Committee" (IC). The Presiding Officer of this IC must be:
A senior male employee.
An external lawyer.
A senior female employee.
The CEO of the company.
Explanation:
To ensure sensitivity and fairness in handling complaints of sexual harassment against women, the Act mandates that the IC must be headed by a senior woman employee.
388. A bank sharing customer data with a third-party marketing firm without the customer's explicit consent violates the ethical duty of:
Competence
Integrity
Objectivity
Secrecy/Confidentiality
Explanation:
Banks have an implied contract of secrecy with their customers (Tournier's Case). Revealing information without consent or legal compulsion is a breach of trust and ethics.
389. Aristotle's "Golden Mean" suggests that virtue lies:
In the extreme deficiency.
In the extreme excess.
In following orders blindly.
In the middle ground between excess and deficiency.
Explanation:
For example, Courage is the golden mean between Cowardice (deficiency) and Rashness (excess). Ethical behavior is about balance.
390. Values are internal; Ethics are ________.
Also internal
External/System of rules
Irrelevant
Emotional
Explanation:
Values are personal beliefs. Ethics are often external standards provided by institutions, groups, or culture to which an individual belongs (e.g., legal ethics, medical ethics).
391. "Creative Accounting" refers to:
Designing colorful balance sheets.
Writing accounts in poetry.
Innovating new accounting software.
Using accounting loopholes to portray a better financial image than reality.
Explanation:
It is an unethical practice where accountants use their knowledge of accounting rules to manipulate the figures reported in the accounts of a business.
392. A healthy work ethic environment requires a mechanism for employees to voice concerns. This is called:
Grievance Redressal Mechanism
Marketing Strategy
Performance Appraisal
Customer Service
Explanation:
An internal grievance redressal mechanism allows employees to report unfair treatment or harassment, ensuring justice and maintaining high morale and ethics.
393. If a bank's proprietary trading desk bets against a client's position based on confidential info, it violates:
HR policy
Integrity and Fairness
None of the above
Marketing rules
Explanation:
This is a classic conflict of interest and a breach of fiduciary duty. The bank is prioritizing its own profit over the client's interest using privileged information.
394. Compliance is about following the law. Ethics is about:
Making maximum profit.
Following orders.
Avoiding punishment.
Doing the right thing even when not legally required.
Explanation:
Ethics goes beyond legal compliance ("Letter of the law") to the "Spirit of the law" and moral obligations.
395. A "Code of Ethics" in a company typically serves to:
Provide guidelines on acceptable behavior and decision-making aligned with core values.
Guarantee profits.
List all the laws of the country.
Restrict employee freedom completely.
Explanation:
A Code of Ethics outlines the mission and values of the business, how professionals are supposed to approach problems, and the ethical principles based on the organization's core values.
396. A manager forcing a subordinate to falsify reports under threat of firing is an example of:
Mentorship
Abuse of Official Position/Power
Leadership
Teamwork
Explanation:
This involves using one's authority to coerce others into unethical acts, which is a severe ethical violation.
397. Which of the following is NOT a fundamental right of an employee in the workplace?
Right to be free from discrimination.
Right to a safe working environment.
Right to fair compensation.
Right to use company resources for personal business.
Explanation:
Employees have a duty to use company assets for business purposes. Misusing them for personal gain is unethical and often illegal theft.
398. Opening a "Benami" account facilitates which unethical activity?
Customer convenience
Efficient banking
Money Laundering and Tax Evasion
Tax transparency
Explanation:
Benami accounts are used to hide the true identity of the beneficial owner, enabling the hiding of black money and evasion of taxes.
399. "Moral Myopia" refers to:
Being short-sighted in business planning.
Inability to see ethical issues clearly or creating rationalizations to justify unethical behavior.
Ability to see ethical issues clearly.
Strict adherence to rules.
Explanation:
It is a distortion of moral vision that keeps ethical issues from coming into focus, often allowing individuals to act unethically without feeling guilty.
400. In banking, "Reputation Risk" is primarily caused by:
High interest rates.
Competition.
Market fluctuations.
Negative public opinion resulting from unethical practices, failed services, or legal violations.
Explanation:
Reputation is a bank's most valuable asset. Unethical behavior destroys trust, leading to loss of customers and business, which is reputation risk.
401. The Internal Committee (IC) for sexual harassment must have at least what percentage of women members?
100%
25%
50%
33%
Explanation:
The POSH Act mandates that at least one-half of the total members of the Internal Committee so nominated shall be women.
402. Professionalism in banking includes:
Wearing expensive clothes.
Ignoring minor rules to get work done.
Competence, accountability, integrity, and respect for others.
Socializing with clients after hours.
Explanation:
Professionalism is about conduct, behavior, and attitude. It requires possessing the necessary skills (competence) and adhering to ethical standards (integrity).
403. In the age of AI and Big Data, "Algorithmic Bias" in lending refers to:
Algorithms calculating wrong interest.
Algorithms giving loans to everyone.
Algorithms systematically discriminating against certain groups based on biased historical data.
Algorithms working too fast.
Explanation:
This is a new ethical challenge. If AI models are trained on biased past data (e.g., discriminating against a specific pin code or gender), the AI will replicate that bias, leading to unfair lending practices.
404. Which value is essential for a banker to maintain the "Secrecy" of customer accounts?
Aggressiveness
Creativity
Ambition
Confidentiality/Discretion
Explanation:
Confidentiality is the ethical value that directly supports the legal duty of secrecy. Without discretion, trust is broken.
405. Accepting a "Kickback" (commission) from a vendor for approving their contract is:
A standard business practice.
A valid incentive.
A sign of good negotiation.
An act of corruption and bribery.
Explanation:
Kickbacks are illegal payments made in return for a service or favor. It compromises the objectivity of the decision-maker.
406. Green Banking initiatives are primarily driven by which ethical concern?
Data Privacy
Employee Welfare
Profitability
Environmental Sustainability
Explanation:
Green Banking addresses the ethical obligation of businesses to protect the planet by reducing carbon footprints and funding eco-friendly projects.
407. "Time Theft" at the workplace includes:
Taking authorized leave.
Working from home with permission.
Taking long unauthorized breaks, excessive personal phone calls, or surfing social media during work hours.
Working overtime.
Explanation:
Time theft occurs when an employee accepts pay for time they have not actually worked or have used for personal matters.
408. The "Protected Disclosure Scheme" of RBI is related to:
Disclosure of interest rates.
Whistleblowing in Private and Foreign Banks.
Disclosure of NPA list.
Disclosure of bank charges.
Explanation:
RBI introduced this scheme to provide a channel for employees/public to report corruption/misuse of power in Private Sector and Foreign Banks, similar to the CVC mechanism for PSBs.
409. The term "Work-Life Balance" is ethically significant because:
It prevents employees from working hard.
It increases costs for the company.
It recognizes the employee as a whole person with rights to well-being outside of economic utility.
It is a legal mandate.
Explanation:
From a deontological (duty) and virtue ethics perspective, respecting an employee's need for rest and family life treats them as ends in themselves, not just means to profit.
410. "Nepotism" in the workplace refers to:
Firing incompetent employees.
Promoting based on merit.
Hiring the most qualified candidate.
Favoritism shown to relatives or friends, especially by giving them jobs.
Explanation:
Nepotism undermines fairness and meritocracy, leading to poor organizational performance and resentment among other employees.
411. What is the primary purpose of the "Code of Conduct for Insider Trading"?
To ban all employees from investing.
To encourage employees to trade shares.
To tax share trading.
To prevent employees from using unpublished price-sensitive information for personal gain.
Explanation:
This code helps maintain market integrity by ensuring that those with privileged access to data do not exploit it at the expense of the general public.
412. Which of the following is an indicator of "Poor Work Ethic"?
Consistent lack of punctuality and procrastination.
Helping colleagues.
Taking responsibility for mistakes.
Asking for clarification on tasks.
Explanation:
Reliability and timeliness are core components of a good work ethic. Constantly being late or delaying work shows a lack of respect for the job and others.
413. The "Right to Suitability" means that bankers have an ethical obligation to:
Sell the most profitable product.
Offer products that match the customer's needs and risk profile.
Offer products that are easiest to explain.
Offer only government schemes.
Explanation:
Selling a high-risk product to a conservative investor violates the principle of suitability. Ethics demands that the product fits the customer, not just the bank's sales target.
414. The "Newspaper Test" or "Sunshine Test" in ethical decision-making asks:
Will this make money?
What will my boss say?
Is this legal?
How would I feel if my action was published on the front page of a newspaper tomorrow?
Explanation:
This test relies on public scrutiny and shame. If you are uncomfortable with the public knowing your action, it is likely unethical.
415. Spreading false rumors about a competitor bank to gain market share is a violation of:
Cyber Security
Money Laundering
Insider Trading
Fair Competition Ethics
Explanation:
Ethical competition involves competing on merit (product, service) rather than sabotage or deception. Spreading lies is unethical and potentially illegal (defamation).
416. The "Ethical Climate" of an organization is primarily determined by:
The location of the office.
The behavior and example set by Top Management (Tone at the Top).
The salary of employees.
The number of rules in the handbook.
Explanation:
Employees look to leaders for cues on acceptable behavior. If leaders act unethically, employees will follow suit, regardless of written policies.
417. Which trait describes an employee who takes ownership of their actions and results?
Procrastination
Accountability
Indifference
Delegation
Explanation:
Accountability is the willingness to accept responsibility for one's actions, decisions, and outcomes, whether good or bad.
418. When a banker faces a conflict between meeting a sales target and acting in the customer's best interest, the ethical choice is to:
Prioritize the customer's interest.
Meet the target by any means.
Quit the job.
Hide the risks from the customer.
Explanation:
Long-term trust and reputation are more valuable than short-term targets. Ethical banking requires putting the customer first.
419. Ethical behavior that comes from internal conviction rather than fear of punishment is known as:
Forced obedience
External compliance
Legal obligation
Self-regulation / Moral Agency
Explanation:
True ethics is self-imposed. It involves doing the right thing because it is right, not just because it is the rule.
420. Under the Companies Act, 2013, the Corporate Social Responsibility (CSR) Committee of the Board must consist of at least three directors, out of which:
One must be a Government Nominee.
All must be Independent Directors.
At least one must be an Independent Director.
At least two must be Executive Directors.
Explanation:
To ensure unbiased oversight of CSR activities, the Act mandates that the CSR Committee must include at least one Independent Director among its minimum three members.
421. The unethical practice where a broker/dealer executes orders on a security for their own account while taking advantage of advance knowledge of pending orders from customers is called:
Short Selling
Front Running
Price Rigging
Insider Trading
Explanation:
Front Running is unethical because the broker profits at the expense of the client by stepping in front of the client's large order, which might have moved the market price.
422. The "Charter of Customer Rights" issued by RBI includes the "Right to Privacy". This means:
Customers can refuse to pay charges.
Customers personal information must be kept confidential unless disclosure is required by law or has customer consent.
Banks cannot ask for PAN card.
Customers can hide their identity from the bank.
Explanation:
This right reinforces the ethical and legal duty of confidentiality. Banks must secure customer data against unauthorized access and misuse.
423. A bank manager decides to fund a polluting factory because it creates thousands of jobs for the local community. Which ethical theory is he primarily applying?
Utilitarianism (Consequence-based)
Kant's Categorical Imperative
Virtue Ethics
Deontology (Duty-based)
Explanation:
He is weighing the consequences: the "greater good" (jobs/economic welfare) vs the harm (pollution). Utilitarianism looks at the net benefit to the maximum number of people.
424. Creating a "Hostile Work Environment" refers to:
Strict attendance rules.
Conduct (verbal/physical) that is severe or pervasive enough to create an intimidating, offensive, or abusive environment.
Setting high targets.
Not having air conditioning.
Explanation:
Hostile work environment is a form of harassment where an employee feels unable to perform their duties due to the negative behavior of others (bullying, sexual harassment, discrimination).
425. Which committee in India gave comprehensive recommendations on "Corporate Governance" in 2003?
Narayana Murthy Committee
Rangarajan Committee
Gadgil Committee
Narasimham Committee
Explanation:
The SEBI Committee on Corporate Governance constituted under the chairmanship of N.R. Narayana Murthy helped refine governance norms in India (Clause 49 of Listing Agreement).
426. Evergreening of loans is considered unethical because:
It masks the true asset quality by granting new loans to pay off old defaulted loans, delaying problem recognition.
It helps the customer.
It increases the bank's profit too much.
It reduces the loan portfolio.
Explanation:
Evergreening is a deceptive practice used to prevent a loan from being classified as NPA. It misleads stakeholders about the bank's health and eventually leads to bigger losses.
427. The component of "Attitude" that relates to feelings and emotions is called:
Cognitive Component
Affective Component
Behavioral Component
Rational Component
Explanation:
Attitudes have three components (ABC Model): Affective (Feeling), Behavioral (Action), and Cognitive (Belief/Thought). Affective deals with emotions (like/dislike).
428. Hiding "Hidden Charges" in fine print violates the ethical principle of:
Efficiency
Profitability
Secrecy
Transparency and Fair Dealing
Explanation:
Banks have an ethical obligation to be transparent about all costs associated with a product. Hiding charges deceives the customer and violates fair dealing norms.
429. Treating an employee unfavorably because of their gender, race, or religion is defined as:
Performance Management
Discrimination
Affirmative Action
Diversity Management
Explanation:
Discrimination involves making unjustified distinctions between human beings based on the groups, classes, or other categories to which they are perceived to belong.
430. Using unlicensed software on bank computers is an ethical violation related to:
Intellectual Property Rights (IPR) infringement
Insider Trading
Customer Privacy
Money Laundering
Explanation:
Software piracy violates the copyright of the creator (IPR). Banks must ensure all software used is legally licensed to maintain ethical standards.
431. The primary responsibility for setting the "Tone at the Top" regarding ethics rests with:
The Auditors
The Board of Directors and Senior Management
The HR Department
The Regulators
Explanation:
"Tone at the Top" refers to the ethical atmosphere created by the leadership. If leaders demonstrate high ethical standards, it trickles down to the entire organization.
432. Which of the following is a key principle of the "Model Policy on Grievance Redressal" in banks?
Customers should be treated fairly at all times.
Only written complaints should be accepted.
Customers should not be informed of avenues to escalate complaints.
Complaints are a nuisance.
Explanation:
The policy emphasizes fairness, transparency, and accessibility. Customers must be informed of their rights and the mechanism to resolve disputes.
433. A "Belief" differs from a "Value" in that:
Beliefs are about money; values are about people.
Belief is a descriptive thought that something is true; Value is a judgment about what is important or good.
There is no difference.
Values are temporary; beliefs are permanent.
Explanation:
Belief: "I believe lying is risky." Value: "I value honesty." Values guide behavior and are deeply held convictions about priorities.
434. Which action demonstrates good "Cyber Ethics" by a bank employee?
Sharing password with a colleague to get work done faster.
Opening email attachments from unknown sources.
Using office email for personal subscriptions.
Locking the computer screen when stepping away from the desk.
Explanation:
This prevents unauthorized access to sensitive bank data. Sharing passwords or opening suspicious emails violates security policies and ethics.
435. The main function of an "Ethics Committee" in an organization is to:
Organize office parties.
Investigate ethical breaches and advise on ethical standards.
Approve loans.
Maximize sales.
Explanation:
The committee oversees the implementation of the Code of Ethics, resolves dilemmas, and ensures that the organization adheres to its ethical commitments.
436. Printing 500 pages of a personal ebook using the office printer is an example of:
Testing the printer
Resourcefulness
Misuse of Company Resources/Theft
Employee benefit
Explanation:
Using company assets (stationery, tech, funds) for personal gain without permission is unethical and constitutes theft of company property.
437. Under which circumstances can a banker ethically and legally disclose customer affairs?
Where there is a duty to the public to disclose (e.g., financing terrorism).
When a neighbor asks.
When the banker wants to gossip.
When the customer is rude.
Explanation:
Exceptions to secrecy (Tournier's rules) include: 1. Compulsion of law 2. Duty to the public 3. Interest of the bank 4. Customer's consent.
438. What is the ethical difference between a "Gift" and a "Bribe"?
The value: Gifts are always cheap.
Bribes are given in cash; Gifts in kind.
There is no difference.
The intent: Bribes are given with the intent to influence a decision; Gifts are gestures of goodwill without expectation of return.
Explanation:
While the line can be thin, the key is "Expectation of Reciprocity." If it's given to sway a business outcome, it's a bribe (unethical).
439. Which branch of ethics deals with the practical application of moral considerations (e.g., Business Ethics, Bioethics)?
Meta-ethics
Descriptive Ethics
Normative Ethics
Applied Ethics
Explanation:
Applied Ethics examines specific controversial issues (like abortion, animal rights, corporate corruption) and uses ethical theories to resolve them.
440. For Public Sector Banks (PSBs), the Central Vigilance Commission (CVC) receives whistleblower complaints under which resolution?
RTI Act
Banking Regulation Act
Whistleblower Protection Act, 2014 (only)
PIDPI Resolution (Public Interest Disclosure and Protection of Informers)
Explanation:
The Government of India authorized CVC as the "Designated Agency" to receive written complaints for disclosure on any allegation of corruption or misuse of office under PIDPI Resolution.
441. Information that is "Price Sensitive" and "Unpublished" is known as:
UPSI (Unpublished Price Sensitive Information)
Trade Secret
General Knowledge
Public Information
Explanation:
Trading based on UPSI is the core of Insider Trading violations. It includes financial results, dividends, mergers, etc., that have not yet been made public.
442. The principle of "Transparency" in the Charter of Customer Rights means the bank must:
Share details of other customers.
Ensure that product information is clear, easily understandable, and discloses all risks and fees.
Display its profits on the notice board.
Allow customers to enter the strong room.
Explanation:
Transparency prevents information asymmetry. Customers must know exactly what they are buying, including the fine print, to make informed decisions.
443. Malicious gossip and spreading rumors in the workplace are ethical violations because:
They damage professional reputations, lower morale, and create a toxic environment.
They help team bonding.
They increase productivity.
They are fun.
Explanation:
While some social interaction is normal, malicious rumors can destroy careers and teamwork (defamation). It violates the principle of respect for colleagues.
444. "Ethical Relativism" claims that:
There are universal moral truths applicable to everyone.
Moral principles are not universal but depend on culture, society, or individual choice.
Ethics is defined by the law only.
God determines all ethics.
Explanation:
It suggests that "When in Rome, do as the Romans do." What is ethical in one culture (e.g., bribery as "gift giving") might be unethical in another.
445. A company follows all laws but exploits its workers by paying minimum wage for dangerous work without safety gear (where no law specifies safety gear). This company is:
Compliant but Unethical.
Illegal.
Compliant and Ethical.
Non-compliant and Unethical.
Explanation:
It follows the letter of the law (compliance) but violates basic human rights and moral duty of care (ethics). This highlights the gap between law and ethics.
446. To manage Conflict of Interest effectively, an employee should:
Hide the conflict.
Ask a friend to make the decision.
Disclose the conflict to the management and recuse themselves from the decision-making process.
Proceed with the decision if it benefits them.
Explanation:
Transparency (Disclosure) and Recusal (stepping back) are the standard ethical procedures to handle conflicts of interest.
447. The "Right to Grievance Redressal and Compensation" ensures that:
Banks must pay compensation for every complaint.
Customers are always right.
Banks are accountable for their mistakes and must have a robust mechanism to resolve complaints.
Customers can sue banks for any reason.
Explanation:
It mandates that banks must have a clearly laid out policy for redressal and compensate customers for financial loss due to the bank's deficiency.
448. Why is "Personal Grooming and Etiquette" considered part of professional ethics in banking?
It is mandatory by RBI.
It shows off wealth.
It helps in dating.
It projects a positive image of the bank and shows respect for the customer and the profession.
Explanation:
As service providers, bankers represent their institution. Professional appearance and polite behavior build trust and confidence in customers.
449. "Altruism" is the ethical principle of:
Self-interest.
Rule-following.
Logic and reason.
Selfless concern for the well-being of others.
Explanation:
Altruism is the opposite of egoism. It involves acting to benefit others, sometimes at a cost to oneself.
450. A bank sanctioning a loan to a company owned by the Chairman's spouse without disclosing the relationship violates regulations on:
Digital Payments.
Related Party Transactions.
Priority Sector Lending.
Foreign Exchange.
Explanation:
Transactions with related parties (relatives of directors) must be at "Arm's Length" (fair market terms) and fully disclosed to prevent conflict of interest and favoritism.
451. Adopting "ESG" norms in business stands for:
Efficiency, Speed, Gain
Environmental, Social, and Governance
Equity, Shares, Gold
Economy, Sales, Growth
Explanation:
ESG is a framework used to assess the sustainability and ethical impact of a company. Investors increasingly use ESG criteria to screen investments.
452. "Quid Pro Quo" harassment means:
This for That: Demanding sexual favors in exchange for work benefits (promotion, raise).
Making offensive jokes.
Creating a hostile environment.
Stalking a colleague.
Explanation:
Quid Pro Quo involves an authority figure making employment decisions contingent on the employee's submission to sexual advances.
453. Discriminating against a customer based on their religion or caste while opening an account is:
Unethical and Illegal.
A standard risk management practice.
Permitted if the bank wants.
Allowed for private banks.
Explanation:
RBI guidelines and the Constitution prohibit discrimination in access to banking services based on caste, creed, religion, or gender. It violates the Right to Fair Treatment.
454. Which question is NOT part of the "Blanchard and Peale" model for resolving ethical dilemmas?
Will I get caught?
How will it make me feel about myself?
Is it balanced (fair)?
Is it legal?
Explanation:
The 3 questions are: 1. Is it legal? 2. Is it balanced? 3. How does it make me feel about myself? "Will I get caught" is a question based on fear of punishment, not ethics.
455. An employee leaves their computer unlocked, leading to a data breach. This is a failure of:
Accounting standards.
Professional Competence and Due Care.
Marketing ethics.
Environmental ethics.
Explanation:
Due care involves taking reasonable steps to prevent harm. Negligence in basic security hygiene violates the duty of care towards customer data.
456. An "Ethical Audit" is:
Checking employee attendance.
A systematic evaluation of an organization's ethics program and performance.
A financial audit of accounts.
Calculating taxes.
Explanation:
It measures the consistency between the organization's stated values and its actual behavior to identify areas for improvement.
457. Taking credit for a colleague's work is:
Smart career move.
Encouraged by management.
Unethical and destroys trust.
A leadership trait.
Explanation:
It involves dishonesty (lying about contribution) and theft (stealing credit). It erodes team cohesion.
458. RBI guidelines on Recovery Agents prohibit:
Sending legal notices.
Visiting the borrower's office.
Calling the borrower.
Using abusive language, physical threats, or calling at odd hours.
Explanation:
Banks are ethically and legally responsible for the conduct of their recovery agents. Harassment violates the customer's right to dignity and privacy.
459. Personal values are primarily formed by:
Family, culture, education, and life experiences.
Government laws.
Company policy.
Stock market trends.
Explanation:
Values are deep-seated beliefs shaped by early socialization (family/school) and later environment (culture/experience).
460. If a whistleblower reports a fraud anonymously, the ethics committee should:
Delete the complaint.
Ignore it because it is anonymous.
Try to find the identity of the person to fire them.
Investigate the merit of the allegation objectively.
Explanation:
While anonymity makes investigation harder, the substance of the complaint matters. Ignoring it could allow fraud to continue. Retaliation (C) is unethical and illegal.
461. A "Compliance Officer" in a bank ensures:
That the bank adheres to all internal policies, regulatory guidelines, and laws.
That employees are dressed well.
That the bank makes maximum profit.
That customers are happy.
Explanation:
The Compliance Officer acts as the conscience keeper of the bank, mitigating regulatory and reputational risk.
462. Blind loyalty to a supervisor becomes unethical when:
The supervisor asks you to work late.
The supervisor retires.
The supervisor asks you to conceal their fraud or illegal acts.
The supervisor gives constructive feedback.
Explanation:
Loyalty to the organization and ethical principles supersedes loyalty to an individual. "Following orders" is not a defense for illegal acts.
463. Before selling a complex derivative product to a small business, a bank must ensure:
The customer understands the risks and the product is suitable for their risk appetite.
The customer signs a waiver blindly.
The product is sold quickly.
The product has a high profit margin for the bank.
Explanation:
This is the "Right to Suitability." Selling inappropriate complex products violates this right (e.g., the 2008 derivatives misselling cases).
464. Consequentialism assesses the morality of an action based on:
The motive behind the action.
The outcome or result of the action.
Character of the person.
Established rules.
Explanation:
Utilitarianism is a form of Consequentialism. It holds that the "ends" determine the rightness of the "means".
465. If a client offers a bank employee an expensive watch to expedite a loan application, the employee should:
Accept it quietly.
Politely refuse, explaining the bank's policy against gifts.
Accept it and donate it.
Ask for cash instead.
Explanation:
Accepting valuable gifts creates a conflict of interest and resembles bribery. Refusal maintains integrity.
466. Why is having "Independent Directors" on the Board important for ethics?
They provide objective, unbiased oversight and protect minority shareholders' interests.
They work for free.
They increase the share price.
They are friends of the CEO.
Explanation:
Independent directors are not part of the management team and have no pecuniary relationship with the company, allowing them to hold the management accountable without conflict of interest.
467. Ignoring safety protocols (e.g., leaving the strong room open) to save time is:
Flexibility.
Innovation.
Negligence and an ethical violation of duty of care.
Efficiency.
Explanation:
Employees have a duty to protect the bank's assets. Shortcuts that compromise safety are unethical and negligent.
468. Unethical "Cross-Selling" involves:
Selling products at list price.
Offering a credit card to a customer who asks for it.
Bundling products without consent (e.g., forcing insurance with a locker).
Informing customers about new products.
Explanation:
Forced bundling exploits the customer's need for one product to sell another unwanted product. This restricts customer choice and is an unfair trade practice.
469. A lawyer defending a client they know is guilty is acting based on:
Lack of integrity.
Personal Morality (Internal beliefs).
Professional Ethics (External rules).
Greed.
Explanation:
Legal ethics require a lawyer to provide the best defense for their client, regardless of personal belief in their guilt. This illustrates how professional ethics can differ from personal morality.
470. Banks usually restrict employees from frequent speculative trading in the stock market to avoid:
Loss of personal money.
Competition with customers.
Distraction from work and potential conflicts of interest.
Market crash.
Explanation:
Excessive trading distracts from duties and may lead employees to use bank resources or information for personal gain.
471. Transparency in corporate reporting builds:
Trust and Confidence among stakeholders.
Secrets.
Confusion.
Legal cases.
Explanation:
When companies openly disclose information (good or bad), stakeholders (investors, customers) trust them more, reducing the cost of capital and enhancing reputation.
472. Equal Pay for Equal Work mandates that:
Everyone gets the same salary.
Men get paid more than women.
Employees performing the same job with equal skill and effort should be paid equally, regardless of gender.
Senior employees get paid more regardless of work.
Explanation:
This is a fundamental human right and ethical principle to prevent gender-based wage discrimination.
473. Ethical banking involves "Customer Education". This means:
Telling customers which stocks to buy.
Teaching customers how to read.
Ignoring customer queries.
Educating customers about safe banking practices (e.g., not sharing OTPs) and financial literacy.
Explanation:
Empowering customers with knowledge prevents fraud and helps them make better financial decisions, which is a duty of the bank.
474. Which of the following is a "Personal Value"?
The Law of Contract.
Honesty and Compassion.
GDP growth rate.
GAAP principles.
Explanation:
Personal values are internal beliefs about what is right and wrong, such as honesty, courage, and kindness.
475. Altering data in a loan application to make a borrower appear eligible is:
Standard procedure.
Data Fraud and Unethical.
Helping the customer.
Creative thinking.
Explanation:
Falsifying data compromises the bank's risk management and integrity. It is fraud.
476. What is the purpose of a "Business Responsibility and Sustainability Report" (BRSR) mandated by SEBI?
To report only financial profits.
To disclose non-financial performance related to ESG (Environment, Social, Governance).
To advertise products.
To list employee salaries.
Explanation:
BRSR encourages companies to be accountable for their social and environmental impact, moving beyond just financial reporting.
477. When dealing with a difficult colleague, the ethical approach is to:
Ignore them completely.
Sabotage their work.
Address the issue professionally and respectfully, focusing on the work.
Gossip about them.
Explanation:
Respect and professionalism are key to resolving workplace conflicts ethically.
478. If a bank fails to resolve a complaint within 30 days, the customer has the right to approach:
The Media.
The Banking Ombudsman (RBI Integrated Ombudsman).
The World Bank.
The Police.
Explanation:
This external grievance redressal mechanism ensures that customers have a recourse if the bank's internal mechanism fails.
479. The "Sleep Test" in ethics refers to:
Testing mattresses.
Ignoring the problem.
Working until you fall asleep.
Asking "Can I sleep well at night after making this decision?"
Explanation:
This is a simple intuition test. If a decision causes guilt or anxiety (preventing sleep), it violates one's conscience and is likely unethical.