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Bank quiz
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What is a Bank?
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A financial institution licensed as the receiver of deposits
and lends them to the prospective borrowers as well as allows the depositors
to withdraw their money from the accounts by cheque is a bank. There are two
types of banks. They are
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Commercial Banks
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Investment Banks
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What are Commercial
Banks?
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Commercial banks manage deposit accounts, such as checking and
savings accounts, for individuals and businesses. They make loans to the
public using the money held on deposit.
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What are Investment
Banks?
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Investment banks differ strongly; these institutions
facilitate the buying and selling of stocks, bonds and other investments, as
well as helping companies to go public with initial public offerings (IPO).
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What is a Non-Banking
Financial Company?
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Non-Banking Financial Company (NBFC) is a company registered
under the Companies Act, 1956 engaged in the business of loans and advances,
acquisition of shares or stocks or bonds or debentures or securities issued
by Government or local authority or other marketable securities of a like
nature, leasing, hire-purchase, insurance business, chit business but does
not include any institution whose principal business is that of agriculture
activity, industrial activity, purchase or sale of any goods (other than
securities) or providing any services and sale or purchase or construction of
immovable property.
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What is difference
between banks & NBFCs?
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NBFCs lend and make investments and hence their activities are
akin to that of banks; however there are a few differences as given below:
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NBFC cannot accept demand deposits.
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NBFCs do not form part of the payment and settlement system
and cannot issue cheques drawn on itself.
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Deposit insurance facility of Deposit Insurance and Credit
Guarantee Corporation is not available to depositors of NBFCs, unlike in case
of banks.
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What is meant by Priority
Sector?
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Priority sector refers to those sectors of the economy which
may not get timely and adequate credit in the absence of this special
dispensation. Typically, these are small value loans to farmers for
agriculture and allied activities, micro and small enterprises, poor people
for housing, students for education and other low income groups and weaker
sections.
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What are the different
categories under Priority Sector?
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Priority Sector includes the following categories:
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Agriculture
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Micro and Small Enterprises
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Education
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Housing
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Export Credit
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Others
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What is meant by MSME?
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MSME stands for Micro, Small and Medium Enterprises.
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The Government of India has enacted the Micro, Small and
Medium Enterprises Development (MSMED) Act, 2006.
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A micro enterprise is an enterprise where investment in plant
and machinery does not exceed Rs. 25 lakh.
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A small enterprise is an enterprise where the investment in
plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore.
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A medium enterprise is an enterprise where the investment in
plant and machinery is more than Rs.5 crore but does not exceed Rs.10 crore.
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What is meant by Basis
Points?
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A basis point is a unit of measure to describe the percentage
change in the value or rate of a financial instrument. One basis point is
equivalent to 0.01% (1/100th of a percent). In most cases, it refers to
changes in interest rates and bond yields.
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For example, if the RBI has announced that it reduced current
SLR 22 by 25 basis points, it means the new SLR will be 21.75.
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What is meant by NPA?
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NPA stands for Non-Performing Assets. An asset, including a
leased asset, becomes non-performing when it ceases to generate income for
the bank.
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The net non-performing assets (NPAs) of banks had gone up 51%
in FY13 to RS.92825/- crores. According to a recent CRISIL report, the gross
NPAs of banks are slated to increase from 3.3% in March 2013 to 4% by March
2014.
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Who is a Wilful
Defaulter?
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A person is declared “Wilful Defaulter” when he defaults in
repayment obligations by him to the lender even though he has the capacity to
honour the said obligations or when he diverted the funds for other purposes
or when he siphoned off the funds so that the funds have not been utilized
for the specific purpose for which finance was availed of, nor are the funds
available with the person in the form of other or when he disposed off or
removed the movable fixed assets or immovable property given by it for the
purpose of securing a term loan without the knowledge of the bank/lender.
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What is meant by SARFAESI
Act?
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SARFAESI stands for Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest. The Act was passed on
2002.
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This Act empowers banks and financial institutions to auction
properties (residential and commercial) when borrowers fail to repay their
loans. This Act helps the bank to recover the bad loans.
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SARFAESI Act was based on recommendation of two Committees.
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1. Committee on Banking Sector Reforms – Narasimhan Committee
II.
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2. Restructuring of weak Public Sector Banks – Verma
Committee.
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What is meant by
Amortization?
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Payment of a loan in installments by the borrower. It is
usually done in an agreed period and every installment includes a part of the
total loan plus the interest.The term is used for two separate processes.
They are,
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Amortization of loans
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Amortization of intangible assets.
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What is meant by Asset?
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Any item of economic value owned by an individual or
corporation, especially that which could be converted to cash. Asset can be
divided into three types.
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Tangible Asset – The assets which are in the material form
such as land, machinery, building etc.
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Intangible Assets – All non-physical/immaterial assets such as
brand names, knowledge etc.
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Financial Assets – All financially valid valuables other than
tangibles and intangibles such as currencies, bank deposits, bonds,
securities, shares, etc.
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What is meant by Crony
Capitalism?
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An economy that is nominally free-market, but allows for
preferential regulation and other favorable government intervention based on
personal relationships. In such a system, the false appearance of “pure”
capitalism is publicly maintained to preserve the exclusive influence of
well-connected individuals.
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A description of capitalist society as being based on the
close relationships between businessmen and the state.
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What is meant by Market Capitalization?
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The total market value of all of a company’s outstanding
shares is called Market Capitalization and it can be calculated by
multiplying a company’s shares outstanding by the current market price of one
share. It is also referred as Market Cap.
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If a company has 35 thousand shares outstanding, each with a
market value of Rs 100, the company’s market capitalization is Rs.
35.00,000/- (Rs Thirty Five Lakh)
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What is meant by Free
Trade?
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The international trade among an agreed-upon group of countries
without any barriers (such as tariffs, quotas, forex controls, etc.),
promoted with the objective of securing international specialisation and an
edge in their foreign trade. Free trade is exemplified by the European Union
/ European Economic Area and the North American Free Trade Agreement, which
have established open markets.
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What is Macro and Micro
Economics?
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Macroeconomics (‘macro’ means ‘large’) looks at the behaviour
of the economy as a whole such as the issues like inflation, rate of
unemployment, economic growth, balance of trade,
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etc.
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Microeconomics (‘micro’ means ‘small’) looks on the behaviour
of the units i.e. the individual, the households, the firms, a specific
industry–which together make up the economy.
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What is meant by Usury?
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The practice of lending money and charging the borrower
interest, especially at an exorbitant or illegally high rate is called as
Usury. It is common on all parts of India and Government has imposed many
laws to restrict this practice.
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What is meant by
Animal-Spirit?
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The term “animal spirits” is used to describe human emotion
that drives consumer confidence. This term used by John Maynard Keynes used
in one of his economics books.
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What is meant by Balance
of Payments?
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Balance of Payments or BOP is a statement that summarizes an
economy’s transactions with the rest of the world for a specified time
period. The BoB encompasses all transactions between a country’s residents
and its nonresidents involving goods, services and income; financial claims
on and liabilities to the rest of the world; and transfers such as gifts.
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What is meant by
Liquidity?
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The degree to which an asset or security can be bought or sold
in the market without affecting the asset’s price is called Liquidity. It is
characterized by a high level of trading activity. Assets that can be easily
bought or sold are known as liquid assets.
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In simple words, Liquidity is the ability to convert an asset
to cash quickly. It is also known as “marketability“.
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What is a Commercial
Paper?
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Commercial Paper (CP) is an unsecured money market instrument
issued in the form of a promissory note. It is not usually backed by any form
of collateral, so only firms with high-quality debt ratings will easily find
buyers without having to offer a substantial discount (higher cost) for the
debt issue.
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It was introduced in India in 1990 with a view to enable
highly rated corporate borrowers to diversify their sources of short-term
borrowings and provide an additional instrument to the investors. The
maturity period ranges from a minimum of 7 days to a maximum of one year from
the date of issue.
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What are Treasury Bills?
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Treasury bills (T-bills) offer short-term investment
opportunities, generally up to one year. They are thus useful in managing
short-term liquidity. At present, the Government of India issues three types
of treasury bills through auctions, namely, 91-day, 182-day and 364-day.
There are no treasury bills issued by State Governments. Treasury bills are
available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000.
Treasury bills are issued at a discount and are redeemed at par. Treasury
bills are also issued under the Market Stabilization Scheme (MSS).
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What is NEFT?
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NEFT stands for National Electronic Funds Transfer. It is a
nation-wide payment system facilitating one-to-one funds transfer. Under this
Scheme, individuals can electronically transfer funds from any bank branch to
any individual having an account with any other bank branch in the country
participating in the Scheme.
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There is NO MINIMUM LIMIT and NO MAXIMUM LIMIT.
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What is RTGS?
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RTGS stands for Real time gross settlement systems. It is a
fund transfer system where transfer of money or securities takes place from
one bank to another on a “real time” and on “gross” basis. Settlement in
“real time” means payment transaction is not subjected to any waiting period.
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MINIMUM and MAXIMUM LIMIT of RTGS is 2 lakh.
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What is IFSC Code?
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IFSC Code stands for Indian Financial System Code. It is an
alphanumeric code that uniquely identifies a bank-branch participating in the
two main Electronic Funds Settlement Systems in India: the RTGS and the NEFT
Systems.
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IFSC Code is an 11 digit code with the first 4 alpha
characters representing the bank, The 5th character is 0 (zero), and the last
6 characters representing the particular bank branch.
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What is NOSTRO and VOSTRO
Account?
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A NOSTRO account is maintained by an Indian Bank in the
foreign countries and a VOSTRO account is maintained by a foreign bank in
India with their corresponding bank.
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What is a Clearing House?
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A clearing house is a place for exchange of cheques by banks;
it facilitates transfer of funds from one bank to another, which represents
the proceeds of cheques. It is as a central meeting place for bankers to
exchange the cheques drawn on one another and claim funds for the same. Such
operations are called as clearing operations.
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How does RBI regulate
payment systems?
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The Board for regulation and supervision of Payment and
Settlement Systems (BPSS) is a sub-committee of the Central Board of the RBI
and is the highest policy making body on payment system. The Board has been
entrusted with the responsibility to authorize, prescribe policies and set
standards for all existing and future payment systems in the country. The
Board also has the powers to determine membership criteria to these systems
and related policies.
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What is Certificate of
Deposit?
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Certificate of Deposit (CD) is a negotiable money market
instrument and issued in
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dematerialised form or as a Usance Promissory Note against
funds deposited at a bank or other eligible financial institution for a
specified time period.
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What is MICR?
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MICR stands for Magnetic Ink Character Recognition. MICR Code
is a 9 numeric digit code which uniquely identifies a bank branch
participating in the ECS Credit scheme.
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The first 3 digits in MICR code represent the city, next 3
digits represent the bank, and last 3 digits represent the branch.
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