MODULE-A (BOOK BACK QUESTIONS) Chapter-1 TRUE OR FALSE 1.

RBI has direct supervision over depositories and mutual funds. 2. Monetary control is exercised through cash reserve ratio and statutory liquidity ratio. 3. Primary dealers mainly deal in shares, mutual fund units etc. 4. issue and servicing of government debt is managed by commercial banks. 5. The decrease in statutory liquidity ratio contracts the credit creation.

CHOOSE THE CORRECT ANSWER 1. Depositories hold securities in ________form. (demat, physical) 2. Cash reserve ratio is the ____________deposit to be held by banks with RBI. (voluntary, mandatory) 3. The ___________provide clearing house facilities for netting of payments and securities delivery. (primary dealers, stock exchanges) 4. Urban cooperative banks are controlled by _________and_________. (NABARD, State Governments, RBI,SEBI) 5. Leasing, hire purchase and bill discounting are the domain of_________. (Non-Banking Finance Companies, mutual funds, commercial banks)

ANSWERS: TRUE OR FALSE 1)F 2)T 3)F

4)F

5)F

CHOOSE a) Demat b) Mandatory c)Stock exchanges d)State governments and RBI e)Non-Banking Finance companies

Chapter-2 TRUE OR FALSE RBI is the regulator of banks and the securities market in India. RBI started functioning from 1934 and onwards. RBI maintains the financial stability of financial institutions in India. Notes in the denomination from rupee 1 to rupees 1000 are issued by RBI. RBI appoints the CEOs of private sector banks. RBI has no power to amalgamate weaker banks with strong banks. Credit Authorisation and Consortium of Finance schemes of RBI are still mandatory for commercial banks in India. 8. RBI currently draws its powers of regulating exchange control from FERA, 1973. 9. All scheduled bank branches can handle foreign exchange transactions. 10. SLR is lower than CRR. 11. As there is no sub-target for the SSI sector, it does not comprise the Priority Sector. 1. 2. 3. 4. 5. 6. 7.

FILL IN THE BLANKS 1. The Indian Banking System is regulated in terms of the provisions of _________,_________act, 1934 and _______________ act, 1949. 2. In USA and Uk, the banking regulators are __________ and __________ respectively. 3. RBI is a _______owed institution. 4. The Central Board of Directors of RBI comprises one ________, four _________ and fifteen __________. 5. New and reissuable notes are stored in ________ mainted by banks as _________ of RBI. 6. RBI acts as the ______ to the central and _______Governments. 7. In the Indian Banking System, RBI acts as the _________ bank and also as lender of the ______________. 8. A decrease in the bank rate is likely to lead to a _________in interest rates of banks. 9. Monetary and Credit policy is issued by _________ each year_______ times. 10. A decrease in CRR will ________ the liquidity in the banking system. 11. To control inflationary situation in the economy, RBI can increase one or more of these monetary tools _______,or/and_________or/and________. FULL FORM OF THE ACRONYMS FERA FEMA ADs CRR SLR DTL OMO SCC PSA SSI DRI Foreign Exchange Regulation Act Foreign Exchange Management Act Authorised Dealers Cash Reserve Ratio Statutory Liquidity Ratio Demand and Time Liabilities Open Market Operations Selective Credit Control Priority Sector Advances Small Scale Industries Differential Rate of Interest

ANSWERS: TRUE OR FALSE 1)F 2)F 3)T

4)F

5)T

6)F

7)F

8)F

9)F

10) F 11)F

FILL IN 1)Reserve Bank of India; Banking Regulation 2)Federal Reserve Board 3)State 4)Governor;Deputy Governors;Directors 5)currency chests;chests 6)Banker;state resort 8)Decrease 9)RBI;2 10)Improve 11)CRR;SLR;Bank Rate Chapter-3 CHECK YOUR PROGRESS

7)Bankers;last

1. The loan values (amount of loan) under retail lending normally range between a) Rs. 20,000 to Rs.100 lakh b) Rs.100 lakh to Rs.10 Crore c) More than Rs.10 Crore d) None 2. The retail loans given by commercial banks are generally for duration of a) 5 to 7 years with housing loans granted for a longer duration of 10-20 years

b) Less than 5years only c) Less than 1year only d) None 3. The experience of banks in India in recent years under retail lending has shown that the following loans had the least level of impairment(defaults) a) home loans portfolio b) consumer loans portfolio c) vehicle loans portfolio d) none 4. Wholesale banking refers to doing banking business with a) individuals b) industrial and business entities-including government and public sector companies c) only companies registered under the companies act d) large borrowers irrespective of their category 5. A Depository Receipt(DR) is a type of a) negotiable(transferable) financial instrument that is traded on a local stock exchange of a country but represents a security, usually in the form of equity that is issued by a foreign publicly listed company. b) negotiable(transferable) financial instrument that is traded on a stock exchange of a foreign country but represents a security, usually in the form of equity that is issued by a foreign publicly listed company. c) negotiable(transferable) financial instrument that is traded on a local stock exchange of a country but represents a security, usually in the form of equity that is issued by local publicly listed company. d) Receipt given by a depository participant of a depository. 6. Overseas Depository Bank means a) a bank authorised by the issuing company to issue Global Depository receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company. b) a bank authorised by the government to issue Global Depository receipts against issue of Foreign Currency Convertible Bonds or ordinary shares of the issuing company. c) a bank authorised by the issuing company to issue Global Depository receipts against receipt of Foreign Currency. d) A bank where deposits in foreign currencies can be made. 7. Participatory notes are like contract notes issued by a) Foreign Institutional Investors(FIIs) to entities that want to invest in the Indian stock market but do not want to register themselves with the SEBI. b) Commercial banks to their investors c) Government of India to banks d) None 8. On recommendation from Lahiri Committee, in 2004, SEBI passed a regulation that derivative, instruments like Participatory Notes against underlying Indian securities can be issued. a) Only to regulated entities and further transfers, if any, can also be to other regulated entities only. b) Only to foreign banks c) Only to FIIs registeed with SEBI d) None

ANSWERS: 1)a 2)a

3)a

4)b

5)a

6)a

7)a

8)a

Chapter-4 CHECK YOUR PROGRESS 1. a. b. c. d. The main function of SEBI is to protect the interests of investors in securities to promote the development of the securities market to regulate securities market all the above

2.SEBI in respect of certain matters, has the same powers: a) as are vested in a civil court under the Code of Civil Procedure, 1908( 5 of 1908), while trying a suit b) as are vested in a criminal court under the Criminal Procedure Code while trying a suit c) as the Company Law Board d) none 3. One of the following categories of investors need not obtain a certificate of registration from SEBI in order to buy, sell or deal in securities: a) stock broker b) portfolio manager c) investment adviser d) retail investor 4. The ownership, management and trading functions of a stock exchange are clearly segregated in respect of a: a) Demutualised exchange b) corporatized exchange c) Any stock exchange d) none 5. The issue of new securities to existing shareholders at a ratio to those already held is known as: a) Rights Issue/Rights Shares b)Bonus Issue c)Preference issue d) none 6. Initial Public Offering(IPO) means ___________ that an unlisted company makes to the public for the first time: a) a fresh issue of securities b) offers its existing securities for sale c) both the above d) none 7.As per SEBI guidelines, in a Book Building process the cap in the price band a) should be atleast 10% of the floor price b) should not be more than 20% of the floor price c) no limits d) none 8. Retail Individual Investor means an investor who applies or bids a) for securities of or for a value of not more than Rs. 1,00,000 b) for securities of face value of not more than Rs. 1,00,000 c) for securities of 1000 units d) none 9. a) b) c) d) 10. a) b) A per SEBI guidelines, safety net arrangements can be made available only to: all original resident individual allottees limited up to a maximum of 1000 shares per allottee all original allottees limited up to a maximum of 1000 shares per allottee all share holders limited up to a maximum of 1000 shares per allottee none Red Herring Prospectus is a prospectus which is issued in red colour which contains some clauses in red colour

c) which does not have details of either price or number of shares being offered or the amount of issue d) none ANSWERS: 1)d 2)a Chapter-5 CHECK YOUR PROGRESS 1. A mutual fund is set up in the form of: a) trust b) a Company incorporated under the Indian Companies Act c) by an Act of Parliament d) none 2. A mutual fund has, apart from its sponsors: a) Trustees b) Asset Management Company c) Custodian d) All of the above 3. The main functions of an Asset Management Company is to: a) hold the securities of various schemes b) manage the funds by making investments in various types of securities c) hold its property for the benefit of the unit holders d) all the above 4. NAV is required to be disclosed by the mutual funds on a ________ basis: a) daily b) weekly c) depending on the type of scheme d)none 5. A Fund of Funds is a scheme that invests primarily: a) in money market instruments b) in other schemes of the same mutual fund or other mutual funds c) in the bullion market d) only in in primary market. 6. The aim of balanced funds is to provide: a) growth(capital appreciation) b) regular income c) both growth and regular income d) none 7. As per SEBI guidelines, any entity/person engaged in the marketing aand selling of mutual fund products is required to pass a certification test and obtain a registration number from: a) SEBI b)AMFI c)NSE d)none. ANSWERS: 1)a 2)d Chapter-6 CHECK YOUR PROGRESS 1. The first insurance company was started in India in 1818 at: a) Kolkata b) Chennai c) Mumbai d) New Delhi 2. The entry level capital requirement for a new Issurance Company in India is: a) Rs. 100 Crore b) Rs. 50 Crore c) Rs. 500 Crore d) none 3. As on 31 March 2006, the total number of insurance companies in the life insurance business is: a) 15 b)14 c) 1 d) none 4. The primary legislation that deals with insurance business in India is: a) Insurance Act, 1938 b) Insurance Regulatory and Development Authority Act, 1999 c) Both Insurance act, 1938 and IRDA Act , 1999 d) LIC of India Act

3)d

4)a

5)a

6)c

7)b

8)a

9)a 10)c

3)b

4)c

5)b

6)c

7)b

5. Bancassurance is an arrangement whereby: a) branches of commercial banks distribute to their customers as corporate agents, insurance products developed by the insurance companies b) branches of Insurance Companies distribute to their customers as corporate agents, insurance products developed by the insurance companies c) both (a) and (b) d) none ANSWERS: 1)a 2)a

3)b

4)c

5)a

CHAPTER 7 CHOOSE THE BEST ANSWER 1.Factoring service means : a)collection of bills b) discounting of bills c) Maintenance of account books d) all the above 2.The type of arrangement under which a bank pays the seller the value of the bill and later collects it from the buyer on the due date is called a) Bill discounting b)Factoring c) Fotfaiting d) none 3.The type of factoring under which the factor collects back from the seller the amount paid by him in case of non-payment of the bills on the due is called a) Recourse factoring b) Non-recourse factoring c)Bills discounting d) Bills purchased 4. under domestic factoring the payment of bills that the seller gets from the factor is: a)100 per cent of the value of the bills immediately on submission b) nearly 80 percent of the bill amount upon tendering the bill and balance on due date c) nearly 80 percent of the bill amount upon tendering the bill and balance on due date after collecting it from the buyer d) 100 per cent of the value of the bill only after collection from the buyer 5. In international factoring the number of factors will be: a) 2 b)1 c) 1 or 2 d) more than 2 6. Forfaiting provides finance against the export receivables to an exporter a) with recourse to the exporter b)without recourse to the exporter c) both d) either one 7. Forfaiter is : a) an intermediary between an exporter and importer b)an exporter c)an importer d)a bank

8. Forfaiting provides to the exporter against receivables a) 100 percent financing b) 80 percent financing c) depending on the contract with the forfeiter d) none 9. Forfaiting enables the exporter to avoid the following risks: a) interest-rate risk b) currency risk c) credit risk and political risk d)all 10. Bank Guaranteees are issues by: a)any bank b)only specified banks c) only banks permitted to do this type of business d) none 11. In a bank guarantee,the number of parties involved in the agreement are: a) three b)two c)many d)one 12) Letter of credit is defined in the : a)Indian contract Act b)Negotiable instruments Acct c) Transfer of property Act d)none 13.A revolving letter of credit is one which provides that the amount of drawing stipulated in it will be available to the beneficiary: a) again and again as may be agreed between the buyer and seller within a stipulated period b) any number of times c) one once d) none 14. A forward exchange contract is a firm contract for the purchase/sale of a specified quantity of a stated foreign currency at a pre-determined exchange rate between the bank and its : a) exporters b ) importers c) both f) none ANSWERS 1.(d) 2.(a) 3.(a) 4.(c) 5.(a) 6.(b) 7.(a) 8.(a) 9.(d) 10.(a) 11.(a) 12.(d) 13.(a) 14.(c) CHAPTER 8 CHOOSE THE BEST ANSWER A.1. One of the following forms may not result in credit risk : a) in the case of direct lending : principal and/or interest amount may not be repaid b) in the case of guarantees or letters of credit : funds may not be forthcoming from the constituents upon crystallization of the liability c) in case of securities trading businesses : funds/securities settlement may not be effected d) none 2. Operational risk is the risk of loss arising from various types of : a) human error

b) failed systems and procedures in the bank c) breakdown in internal controls d) all the above B.1. The Basel committee on banking Supervision is a committee of banking supervisory authorities that was established by: a) the central bank governors of the group of ten countries b) European countries c) India d) all the above 2. Under the Base I Accord,BCBS fixed the minimum requirement of capital funds for banks at: a) 8 percent of the total risk weighted assets b) 9 percent of the total risk weighted assets c) 10 percent of the total risk weighted assets d) none 3.On how many pillars is the Basel I Framework based ? a) 4 b)3 c) 2 d) 1 4. The risks considered for capital requirements under Basel II are : a) credit risk, market risk and operational risk b) credit risk, interest rate risk and foreign exchange risk c) credit risk, political risk and country risk d) None 5. The first pillar under Basel II talks about: a) minimum capital requirements b) supervisory review c) market discipline d) disclosure norms 6. As per Basel II Framework, the total of Tier 2 capital is permitted up to maximum of : a) 100 per cent of Tier 1 capital b) 250 per cent of Tier 1 capital c) 80 per cent of Tier 1 capital d) 50 per cent of Tier 1 capital 7.Tier I capital of a bank consists of its a) paid up equity capital b) issued and fully paid ordinary shares/common stock and perpetual non-cumulative preference shares and disclosed reserves c) authorized capital d) none 8. Subordinated term debt will be limited to a maximum of: a)50 per cent of Tier 1 elements b) 100 per cent of Tier 1 elements c) 85 per cent of Tier 1 elements d) none 9. Tier 3 capital will be limited to : a) 250 per cent of a banks Tier 1 capital that is required to support market risks b)100 per cent of a banks Tier 1 capital

c) 250 per cent of a banks Tier 1 capital d) none ANSWERS A.1. (d) 2.(d) B. 1. (a) 2.(a) 3.(b) 4.(a) 5.(a) 6.(a) 7.(b) 8.(a) 9.(a) CHAPTER 9 CHOOSE THE CORRECT ANSWER 1.In case of Strategic Alliances a) the partners will remain as separate entities b) the partners will lose their individual identities c) one partner will get merged with the other d) none 2. Three mid-sized public sector banks have entered into a strategic alliance in Oct 2006.They are a) Indian Bank, Corporation Bank and Oriental Bank of Commerce b) Indian Bank , Punjab National Bank and Canara bank c) Union Bank of India, Syndicate Bank and Corporation Bank d) Canara Bank ,Syndicate Bank and Corporation Bank 3.Combining of two or more companies into a single company where one survives with its name and the others lose their corporate existence is called a) Merger b) Alliance c) Consolidation d)Acquisition 4.In 1921, the three presidency banks the bank of Bengal, the Bank of Bombay and the Bank of Madras were amalgamated into one Bank which is now called the : a) State bank of India b) Reserve Bank of India c) Indian Bank d) none ANSWERS 1. (a) 2. (a) 3. (a) 4. (a) CHAPTER 10 CHOOSE THE CORRECT ANSWER 1. One of the following does not own 10 per cent equity stake in the capital of CIBIL a) HDFC b)SBI c) ICICI Bank d) Standard Chartered Bank 2. CIBIL as a credit bureau caters to : a) consumer segments b) commercial segments c) Both commercial and consumer segments d) none 3. The consumer credit bureau covers credit availed by : a) individuals b) proprietary concerns c) private and public limited companies d) banks

4. Credit information reports can be accessed by : a) only those members who have provided all their data to CIBIL b) By any bank c) By any Indian citizen d) None 5. In case of receipt of request for transfer of borrowal account, the consent or objection of the lender, if any, should be conveyed within : a) twenty- one days from the date of receipt of request b) fifteen days from the date of receipt of request c) Immediately on receipt of request d) None 6) The banking codes and standards board of India was registered on 18 Feb., 2006 under: a) RBI Act b) Banking Regulation Act c) The Societies Registration Act, 1860 d) None 7) The Bankers Fair Practice code was brought out in June 2004 by: a) IBA b) RBI c) Government of India d) None ANSWERS 1. (d) 2. (c) 3. (a) 4. (a) 5. (a) 6. (c) 7. (a) CHAPTER 11 CHOOSE THE CORRECT ANSWER 1. In the call/notice money market the following participants are allowed to trade: a) All corporate b) All banks, Primary Dealers and Mutual funds c) Only banks d) None 2. The minimum maturity period of certificates of deposit (CDs) with effect from 29 April 2005 is: a) 8days b) 15 days c) 21 days d) None 3. Scheduled commercial banks (SCBs) and primary dealers (PDs) have been allowed with effect from November 2006, to cover their short positions within an extended period of: a) five trading days b) two trading days c) short sales not permitted d) none 4. Resident individuals are free to remit in a financial year for any current or capital account transaction or a combination of both up to : a) US$ 25,000 b) US$50,000 c) US$ 10,000 d) none ANSWERS: 1) C 2) A 3) A 4) B