All About Banking in India

Important Banking Awareness Questions :

1. MICR code consists of how many digits?
Ans: 9 digits.
(First three digits denotes city, next three digits representing the bank and the last three digits representing the bank branch)

2. What is the minimum limit in RTGS system?
Ans: 2 lakhs (there is no upper limit in RTGS)

3. What is full form of CTS?
Ans: Cheque Truncation System

4. Under which service, customers may access their bank account and perform basic transactions from any of the member branch offices.
Ans: Core Banking Solution (CBS)

5. Exchange of cash flow in different currency is known as:
Ans: Currency Swap

6. Assets or loans which stop performing after 90 days is known as:
Ans: Non Performing Asset (NPA)

7. Who controls the Monetary Policy in India?
Ans: RBI (Reserve Bank of India)

8. Which card is issued by NPCI (National Payments Corporation of India)?
Ans: RuPay Card

9. Definition of Current Account deficit
Ans: A measurement of a country's trade in which the value of goods and services it imports exceeds
the value of goods and services it exports.

10. Full form IFSC ?
Ans: Indian Financial System Code

11. Commercial paper can be issued for a maximum period of ?
Ans: 365 days or 1 year.

12. The Mutual funds in India follow accounting standards laid by ?
Ans: SEBI (Securities and Exchange Board of India)

13. Minimum amount for Certificate of Deposit has been fixed at?

Ans: Rs. 1 Lakh

14. AML is a term mainly used in the financial and legal industries. Expand the term AML:
Ans: Anti Money Laundering

15. PIN is a number allocated to an individual and used to validate electronic transactions. Expand
PIN:
Ans: Personal Identification Number

16. What is Repo rate?
Ans: It is the rate is the rate at which RBI lends money to the commercial banks.

17. What is Stale Cheque?
Ans: A cheque which is presented to a bank after 3 months from date of issue is considered as stale
cheque and will often not be honored for cash or deposit at a bank.

18. What is Bancassurance?
Ans: The selling of life assurance and other insurance products and services by banking institutions.
19. The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. What is the full form of KYC?
Ans: Know Your Customer (KYC)

20. Know Your Customer (KYC) guidelines are issued under?
Ans: Section 35A of the Banking Regulation Act,1949

21. In BSBDA (Basic Savings Bank Deposit Account) the credits in a financial year does not exceed
rupees:
Ans: Rs. 1 lakh

22. In BSBDA (Basic Savings Bank Deposit Account) the balance at any point of time does not exceed rupees:
Ans: Rs. 50,000

23. In BSBDA (Basic Savings Bank Deposit Account) the withdrawals and transfers in a month does not exceed rupees:
Ans: Rs. 10,000

24. At which rate RBI give loans to commercial banks?
Ans: Repo rate

25. Full form of CASA?
Ans: Current Account Saving Account

26. In what denominations Commercial Paper (CP) can be issued?
Ans: Rs. 5 lakh

27. What is the minimum denomination of Treasury bills to issue in India?
Ans: Rs. 25,000

28. Who cannot issue Certificate of Deposit (CD)?
Ans: Regional Rural Banks (RRBs) and Local Area Banks (LABs)

29. Expand ASBA:
Ans: Application Supported by Blocked Amount

30. Depositor Education and Awareness Fund (DEAF) is maintained with:
Ans: RBI

31. Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with:
Ans: Central Bank (RBI)

32. What is the maximum amount per transaction NEFT limit for cash-based remittances to Nepal?
Ans: Rs. 50,000

33. What does CAR stands for?
Ans: Capital Adequacy Ratio

34. IFSC code consists of _____ alpha numeric
code.
Ans: 11 digits
(The IFSC is an 11 digit alpha numeric code, with the first four digits identifying the bank, fifth is
numeric (kept 0) and the last six digits represent the bank branch.)

35. When money is lent or borrowed for one day or on overnight basis it is known as:
Ans: Call Money

36. When money is lent or borrowed for between 2 days and 14 days it is known as:
Ans: Notice money

37. When money is lent or borrowed for a period of more than 14 days, it is known as:
Ans: Term money

38. Treasury Bills and Certificate of Deposit are considered as the ____instruments.
Ans: negotiable money market

39. Commercial Paper (CP) is an unsecured money market instrument issued in the form of a _____.
Ans: Promissory note.

40. What is the upper limit in Public Provident Fund (PPF)?
Ans: Rs. 1.5 lakhs

41. As per RBI guidelines, with effect from April 1, 2012, the validity period of Cheques, Demand
Drafts, Pay Orders and Banker's Cheques is _____.
Ans: 3 months

42. What is the time limit for an asset or loan to be declared as Non-Performing Asset?
Ans: 90 days

43. Deposit Insurance and Credit Guarantee Corporation (DICGC) does not cover:
Ans: Primary co-operative societies

44. RBI measure to liquidate the market?
Ans: Repo rate.

45. Full form of EFT:
Ans: Electronic Fund Transfer

46. Fastest mode of transaction:
Ans: RTGS

47. Alphanumeric code on cheque is known as:
Ans: Indian Financial System Code (IFSC)

48. Bank pays interest on savings account?
Ans: Daily Basis

49. What is the loan limit for education under priority sector for studies abroad?
Ans: Rs. 20 lakh (Loans to individuals for educational purposes including vocational courses upto Rs.10 lakh for studies in India and Rs. 20 lakh for studies abroad are included under priority sector.)

50. RuPay Card is an Indian version of credit/debit card is launched by which organization:
Ans: NPCI (National Payments Corporation of India)

51. Fixed Deposit (FD)Account may be opened for a minimum period of:
Ans: 7 days

52. What is the minimum amount required to open a Fixed Deposit (FD)?
Ans: Rs.1000

53. The Banks has converted all ‘no - frills' accounts’ into:
Ans: Basic Savings Bank Deposit Accounts

54. 'Pradhan Mantri Jan Dhan Yojana' is a Scheme for:
Ans: Financial inclusion

55. How much overdraft facility to be provided in 'Pradhan Mantri Jan Dhan Yojana' scheme?
Ans: Rs. 5,000

56. In CBS, C stands for:
Ans: Core

57. In CRAR, A stands for:
Ans: Assets (Capital to Risk Weighted Assets Ratio)

58. IMPS - Immediate Payment Service is an interbank electronic instant mobile money transfer
service through mobile phones in India, the facility is provided by:
Ans: NPCI (National Payment Corporation of India)

59. The Central Bank of India has adopted new measure of inflation:
Ans: Consumer Price Index (CPI)

60. When a cheque is torn into two or more pieces and presented for payment, such a cheque is
called:
Ans: mutilated cheque

61. How much fee charged to file a complaint under Banking Ombudsman? 

Ans: Banking Ombudsman does not charge any fee

62. Who is the appellate authority in BankingOmbusdsman?
Ans Deputy Governor of RBI 

63. If any customer is not satisfied by the decision of Banking Ombudsman, customer can appeal against the award before the appellate authority within how many days from the date of receipt?
Ans 30 days

64. ATMs or Cash Dispensing machine which are owned and operated by Non-Banking Financial
Companies are called:
Ans: White Label ATMs.

65. RBI gave in-principle for Banking license to:
Ans: IDFC and Bandhan

66. Minimum capital requirement for new banks in private sector is:
Ans: Rs. 500 crore

67. A Non-Banking Financial Company (NBFC) is a company registered under the:
Ans: Companies Act, 1956

68. Minimum capital requirement for Non-Banking Financial Company (NBFC) is:
Ans: Rs. 500 crore

69. The NBFCs are allowed to accept/renew public deposits for a minimum period of:
Ans: 12 months ( and maximum period of 60 months)

70. A NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI? What is
the present ceiling?
Ans: 12.5 per cent per annum

71. Minimum capital requirement for Foreign banks that want to set up operations in India is:
Ans: Rs. 500 crore

72. What is the minimum paid-up capital requirement of both small banks and payments
banks in India?
Ans: Rs. 100 crore

73. RBI extended the timeline for full implementation of Basel III norms till:
Ans: 31 March 2019

74. SLR ((Statutory Liquidity Ratio)is the amount a commercial banks needs to maintain in the form
of _______before providing credit to its customers.
Ans: cash, or gold, or govt. approved securities (Bonds)

75. _______ is the rate at which banks borrow funds overnight from the Reserve Bank of India
(RBI) against approved government securities.
Ans: Marginal Standing Facility (MSF)

76. Who issues Treasury bills (T-bills) in India?
Ans: Government of India

77. Treasury bills are available for a minimum amount of:
Ans: Rs. 25,000

78. Minimum & Maximum Limit of NEFT:
Ans: no limit

79. What is the rate of interest rate on provident fund for the current fiscal?
Ans: 8.75%

80. Govt. to implement GST (Goods & Services Tax) new indirect tax regime from:
Ans: 1st April 2016

81. RBI extends deadline for exchanging pre-2005 currency from June 30, 2015 to
Ans: December 31, 2015

82. How much amount RBI allows in 'Tap and pay' transactions without PIN?
Ans: Rs. 2000

83. RBI lifted a ban on carrying Indian bank notes of Rs 1,000 and Rs. 500 denominations to and
from:
Ans: Nepal and Bhutan

84. C stands for in "KYC":
Ans: Customer

85. Pension scheme for unorganized sector:
Ans: Swavalamban

86. Full form of REIT:
Ans: Real State Investment Trust

87. Forward Market Commission merge with:
Ans: SEBI

88. Purpose of starting Minor account for 10 years children:
Ans: Financial inclusion

89. Full form of CVV:
Ans: Card Verification Value

90. Bank of International Settlement headquarter:
Ans: Switzerland

91. Who appoints Banking Ombudsman officer?
Ans: RBI

92. IFRS full form:
Ans: International Financial Reporting Standards.

93. Corporate Social Responsibility committee headed is by 

Ans: Anil Baijal

94. Which is the Regulatory body for RRBs?
Ans: NABARD

95. RBI policy related to money laundering?
Ans: Know Your Customer

96. Mutual funds regulated by:
Ans: SEBI (Securities and Exchange Board of India)

97. What is the full form of MTSS?
Ans: Money Transfer Service scheme

98. How much amount of money can RBI lend to a bank?
Ans: 2% of NDTL

99. What RBI does to Increase its Monetary Base?
Ans: OMO Open Market Operations
100. Which rate does RBI Reduces to Increase liquidity in market?
Ans: Repo Rate

101. After completion of 15 years, Public Provident Fund (PPF) can be extended up to how many
years?
Ans: 5 years

102. Short term Money lending process is known as:
Ans: Call Money

103. Treasury bill tenure:
Ans: 91 days, 182 days, 364 days

104. Minimum limit for medium scale enterprises is Rs. 5 Cr. what is maximum limit?
Ans: 10 Cr.

105. Prime Lending Rate is replaced by:
Ans: Base rate

106. Banks cannot grant Loan below which rate:
Ans: Base Rate

107. If RBI reduces CRR, what happens:
Ans: Credit Supply increases, loans get cheaper.

108. Name the scheme to include every people under banking system:
Ans: Financial Inclusion

109. Special Drawing Right (SDR) is a monetary unit of:
Ans: IMF

110. Cheque which is not crossed is called:
Ans: Open cheque

111. Teaser rates are related to which type of loans:
Ans: Home loans

112. What is Teaser loan?
Ans: If a bank offers a slightly lower rate in the initial years and higher rate in later years, it is
called a teaser loan.

113. The RBI policy rate which is purely an indicative rate used by RBI to signal long – term
outlook on interest rates is:
Ans: Bank rate

114. The term ‘pre – shipment’ finance relates to:
Ans: export credit

115. A receipt listed in India and traded in rupees declaring ownership of shares of a foreign
company:
Ans: Indian Depository Receipt (IDR)

116. With effect from July 2012, for calculating of lending rates, the RBI has advised banks to switch
over to the:
Ans: Base Rate systems

117. Mobile banking fund transfer limit in a day:
Ans: Rs. 50,000

118. The seed capital of Bhartiya Mahila Bank is:
Ans: Rs.1000 crore

119. “Lender of the Last Resort” by Banks is known as:
Ans: RBI

120. “Fixed deposit” is also referred to as:
Ans: Term Deposit

121. The holidays for the banks are declared as per:
Ans: Negotiable Instruments Act

122. In banking business, when the borrowers avail a term Loan, initially they are given a repayment
holiday and this is referred as:
Ans: Moratorium

123. Regulator of Micro, Small and Medium enterprises in India:
Ans: SIDBI (Small Industries Development Bank of India)

124. A worldwide financial messaging network which exchanges between banks and financial institutions is known as:
Ans: Structured Financial Messaging System (SFMS)

125. The term “Smart Money” refers to:
Ans: Credits Card

126. The maximum deposit amount insured by DICGC?
Ans: Rs. 1 lakh per depositors across all banks

127. With reference to a cheque which is the ‘drawee bank’?
Ans: The bank upon which the cheque is drawn

128. In which of the following fund transfer mechanisms, can funds be moved from one bank to
another and where the transaction is settled  instantly without being bunched with any other
transaction?
Ans: RTGS

129. Bad advances of a Bank are called:
Ans: Non – performing Asset

130. By increasing repo rate, the economy may observe the following effects:
Ans: rate of interest on loans and advances will be costlier

131. Increased interest rates, as is existing in the economy at present will:
Ans: mean higher cost of raw materials

132. The sole authority to issue and manage currency in India:
Ans: RBI

133. In India, one- rupee coins are issued by:
Ans: Govt. of India

134. Fixed deposits and recurring deposits are:
Ans: repayable after an agreed period

135. When a bank returns a cheque unpaid, it is called:
Ans: dishonour of the cheque

136. What is ‘Demat Accounts’?
Ans: Accounts in which shares of various companies are traded in electronic form

137. When the rate of inflation increases:
Ans: purchasing power of money decreases

138. Banks in India are regulated under:
Ans: Banking Regulation Act, 1949

139. Banking sector falls under which of the following sectors?
Ans: Service Sector

140. ASBA scheme is related to the purchase of:
Ans: IPO

141. In a bank, which of the following are the usual types of accounts?
Ans: Current accounts, Savings bank accounts and Term deposit accounts

142. The most powerful tool used by the Reserve Bank of India to control inflation is to:
Ans: raise interest rates

143. NEFT and RTGS in banking terminology speak of:
Ans: electronic fund transfer from bank to bank

144. The ownership of public sector banks rests:
Ans: jointly with the Government of India and the shareholders from the public

145. If a cheque is postdated, the bank on which it is drawn:
Ans: will not honour the cheque before the date of the cheque

146. Regulator of Capital Market in India:
Ans: SEBI

147. First Indian Bank to introduce credit card:
Ans: Central Bank of India

148. RBI nationalized in:
Ans: 1949

149. Loans of very small amounts given to low income groups is called:
Ans: Micro Credit

150. RBI established in:
Ans: 1935.

NBFC transfer

Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2015’.

        The prior written permission of the Reserve Bank of India shall be required for –

a) any takeover or acquisition of control of an NBFC, which may or may not result in change of management;

b) any change in the shareholding of an NBFC, including progressive increases over time, which would result in acquisition/ transfer of shareholding of 26 per cent or more of the paid up equity capital of the NBFC.

Provided that, prior approval would not be required in case of any shareholding going beyond 26% due to buyback of shares/ reduction in capital where it has approval of a competent Court. The same is to be reported to the Bank not later than one month from its occurrence;

c) any change in the management of the NBFC which would result in change in more than 30 per cent of the directors, excluding independent directors.

Provided that, prior approval would not be required in case of directors who get re-elected on retirement by rotation.

RBI COMPOUNDING

Compounding of Contraventions under FEMA, 1999📢

🔵Meaning of the word ‘compound’ or ‘compounding’ not defined in the Act or in the Rules.

🔵The expression ‘Compounding’ has been explained in Law Lexicon as “arranging, coming to terms; condone for money.

🔵Section 15 of FEMA 1999 covers powers to compound contraventions and empowers the Compounding Authority to compound the contraventions.

🔵Section 13 of FEMA covers penalties in respect contraventions which are compounded

🔵The Government of India has, in consultation with the Reserve Bank placed the responsibilities of administering compounding of cases with the Reserve Bank, except under Section 3(a) of FEMA, 1999.

🔵Compounding is a voluntary process and refers to admitting a contravention, pleading guilty and seeking remedy. The application is liable to be disposed off/compounded with a period of 180 days from the date of its submission.

An application for 🔵compounding of a contravention to be submitted to the Compounding Authority either on being advised of a contravention through a memorandum or suo moto on being made or becoming aware of the contravention.

🔵Further, if Contraventions relating to any transaction under FEMA but requiring approval or permission from the Government Department concerned or any Statutory Authority as the case may be, would not be compounded UNLESS the required approval is obtained from the authorities concerned.

🔵What are the contraventions?

Contravention may be of the following👇

• Provisions of the Act
• Rules made under the Act
• Regulations
• Notifications
• Direction or order issued in exercise of the powers under the Act.

🔵Penalties-Quantum of penalty 💸-

• Compounding may be subject to a penalty up to thrice the sum involved in such contravention where such amount is quantifiable,

or

• up to Rs 2 Lakhs where the amount is not quantifiable,

and

• where such contravention is a continuing one, further penalty which may extend to Rs 5000/-for every day after the first day during which the contravention continues.

🔵Advantages of compounding-📝

• It is a voluntary process • Compounding makes one clean of the past mistakes and look forward to the future
• After compounding, the contravener is absolved of the contravention and can concentrate on the business opportunities

• It saves time and energy One application – One hearing – One order.

• The existence of such facility provides comfort while undertaking global transactions since FEMA facilitates compounding of any contraventions which are not malafide.

I hope the article on acceptance of default i.e compounding was useful.

Transferable Development Rights

Transferable Development Rights (TDRs) means a certificates issued in respect of category of land acquired for public purpose either by central or state government in consideration of surrender of land by the owner without monetary compensation, which are transferable in part or whole.

The Reserve Bank of India may, in consultation with the central government, specify:-

• any class or classes of capital account transactions which are permissible
• the limit up to which foreign exchange shall be admissible for such transactions.

Foreign Investment in India by Foreigner, Non-resident Indian (NRI) and Foreign institutional investor (FII) is prohibited in "Trading in  Transferable Development Rights (TDRs)"

And also Indian parties are prohibited in for making an investment in foreign entity engaged in the business of real estate or Trading in  Transferable Development Rights (TDRs) without prior approval of Reserve Bank of India.

Consolidated FDI policy 2013

Department of Industrial policy and promotion board has issued the Consolidated Foreign Direct Investment(FDI) policy for year 2013 on April 5th, 2013.

The following is the latest FDI secretarial caps, Reporting norms and procedure for the approval of the FDI

http://dipp.nic.in/English/Policies/FDI_Circular_01_2013.pdf

Establishment of Liaison Office In India

           Foreign companies engaged in manufacturing or trade activities can establish the Liaison office(LO) in India to

• Representing in India the parent company or group companies registered outside India.
• Promoting Exports or Imports
• Promoting Technical or Financial Collaborations between parent / Group companies or with their Joint ventures in India.
• Acting as a communication channel between the parent company and Indian companies.

Foreign Insurance company should obtain prior approval from Insurance Regulatory and Development authority to establish Liaison office.

Reserve Bank of India will  scrutinize the application based on the following criterion

- Whether  100% FDI is allowed in the sector
- Profit making track record of the foreign company during the immediate three financial years.
- Net-worth not less than USD 50,000 or its equivalent
- Place of Liaison office in India
- Liaison office should not earn any profit in India through any sources
- all the Expenses of the Liaison of office shall be paid by the parent company and the amount should be routed through Authorized dealer banks.

Establishment of Branch office in India

Foreign company's engaged in manufacturing and trading activities can establish the Branch office in India to

• Export / Import of Goods
• Rendering professional services
• Carrying out research activities
• Promoting technical or financial collaborations
• Representing the parent company In India

Foreign Company shall obtain the prior permission from the Reserve Bank of India for establishing the Branch office.

RBI will scrutinize the application based on the following criterion

-Whether 100% FDI is allowed in the sector

- Profit making track record during the immediate five financial years

- Net-worth not less than USD 1,00,000 or its equivalent 

- Place of Branch office in India

- Profits of the Branch office can be  repatrible after the net taxes in India.

Bangladesh Nationality can open NRO Account in India

The Reserve Bank Of India has permitted to All Authorized dealer banks to open/ Maintain Non-Resident Ordinary Rupee Accounts (NRO) by Bangladesh Nationality(an Individual who is a resident in Bangladesh) without any approval, subject to the conditions laid down in the Circular, A.P.(DIR Series) Circular No.82 dated 11th Feb, 2013.

General approval is given only to the Individual.However Entity/ies registered in Bangadlesh need prior approval of the Reserve Bank Of India to open an NRO account.

Here is the RBI's circular with the particulars and conditions required to open an NRO account.

http://www.rbi.org.in/scripts/BS_CircularIndexDisplay.aspx?Id=7855

Checklist for NBFC's Registration

Reserve bank of India has published circular no.319 dated on December 2012 issued Checklist for NBFCs, Non Banking Financial Company-Micro Finance Institutions (NBFC-MFIs), Non Banking Financial Company-Factoring Institutions (NBFC-Factors) and Core Investment Companies (CICs).

with reference to the Application for seeking Certificate of Registration from the Reserve Bank and the list of documents mentioned therein that is required to be submitted .

Click below for complete details of the circular

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7737&Mode=0

Amendment in Rationalisation of Form Overseas Direct Investment(ODI)

The Reserve Bank of India on August 21st, 2012 has issued a circular by revising the ODI forms for Indian entities making in investments in aboard.

An Indian party is required to submit to the Reserve bank of India(Regional office where company registered office is situate) through the Authorised Dealer every year within 60 days from date  of expiry of the statutory period of audited accounts  of the Joint venture (JV) / Wholly Owned Subsidiary (WOS) outside India, an Annual peromance report (APR) in Form ODI Part III in respect of each JV or WOS set up or acquired by the Indian party.

Further, an Indian party is allowed to undertake overseas direct investments under general permission route (Automatic Route) subject to compliance to the Regulation 6  or Regulation 7 of the notification. as per Regulation 6(2) (iv) requires that the India party has to submit the APR in respect of all its overseas investments  in the format given in part III of the Form ODI.

The Following items in section 'E'  and 'F' of form ODI part I, to be submitted by every Indian party in terms of Regulation 6(2) (vi) of the Notification, while undertaking ODI transactions

a) In Section 'E' after item (c), item (d) wherever applicable, the Annual permanence Report (APR), as required in terms of Regulations 15 iii of the notification no.FEMA 120/ RB-2004 dated July, 2004 , as amended from  time to time in respect of all the existing JV or WOS of the Indian party has submitted.

b)  In Section 'F' , after item (v) a clause "Further , certified that, wherever applicable, the Annual performance Report, as required in terms of Regulation 15(iii) of the Notification ibid, in respect of all the existing JV or WOS of the Indian party has been submitted."

 THE REVISED ODI FORMS ARE IN THE  BELOW RBI CIRCULAR: 

RBI/2012-13/171 A.P(DIR Series) circular No.15

http://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=7518&Mode=0