CBSE Class 11 Business Studies Commercial Bank Worksheet

Question. Explain the various functions of Commercial Bank.
Answer: Functions of Commercial Banks are:
1. Collection of Deposits: One of the basic functions of commercial banks is that they accept deposits from their customers. Depositors can withdraw their money from their accounts in the form cash or through cheques and drafts. The banks pay interest to their customers on the deposits etc.
These deposits are generally taken through:
a) Opening saving account.
b) Opening current account.
c) Accepting recurring Deposits.
2. Granting Loan: The second basic primary function of commercial bank is granting loan. The banks grant loans. The banks lend the money which they get in the form of deposits from their customers. The funds help in the development of Trade, industry.
3. Collection of Cheques and Bills: The banks collect the cheques for their customers drawn on other banks. To collect cheques banks have clearing houses. The banks also accept bills of exchange and encash them by charging commission called discount before the maturity date.
4. Agency Functions : Banks pay insurance premimum on behalf of their clients. Banks also collect dividend, premium, interest, pension etc. on behalf of customers and put the same in their accounts. Banks also buy shares, debentures and bonds of different companies on behalf of the customers.
5. Remittance Facility : A person can send money to another person at distant place with the help of demand draft , pay orders etc . can be enchased by the receiver by presenting the draft in the bank branch of his city. The bank charges some commission for issue of draft.

Question. What is e-banking ?
Answer: E-banking is electronic banking , with the help of internet ,mobile phones,etc.
E-banking services :
a) Electronic Fund Transfer (EFT) : Under EFTthe fund is directly transferred from one account to the other. Generally employer transfers the wages and salary of employees from company’s account to the individual accounts of employees.
b) Automated Teller Machine (ATM) : ATM is an electronic machine which is operated by the customer himself to make deposits , withdraw money etc. To use an ATM insert a plastic card in the machine and enter your identification code. It code matches, the machine responds by giving cash, taking deposits etc.
c) Debit Card: These cards are issued to the customers if they have sufficient amount in their accounts. Instead of paying cash, these plastic cards can be used to make the payments at the time of purchase. When the banks receive the bills from showrooms , they debit the account of the customer with particular amount .
d) Credit Card : Credit card is like a bank account without having balance in it. Bank issues the credit card upto a certain limit . Credit card is a substitute of cash. It is a plastic card with the signature identity of the own. It also includes the name of issuing and validity period of the card.

Question. What are the advantages of e-banking?
Or
“E-banking has added value to banking relationship.” Comment.
Answer: E-banking is electronic banking, with the help of internet ,mobile phones,etc.
ADVANTAGES OF E-BANKING
1. E-banking provides 24 hours , 365 days a year services to the customer of the bank
2. It helps in taking the banking facilities from home , office , travelling .
3. Loads on branches is reduced .
4. Transactions are done very fast and chances of error is also less as everything is managed by computers
E-banking provides competitive advantage to the banks.

INSURANCE
The important terms used in insurance contract are :
1. Insurance: Is the individual or firm known as insurance company which agrees to compensate to the loss of insured.
2. Insurer: A person or company offering insurance policies in return for premiums
3. Insured: Is the individual who gets compensation of loss. The person who pays premium.
4. Happening of the event: It refers to the subject matter of policy or the kinds of losses covered under the policy, for example in fire insurance, the loss is compensated only if it is due to fire.
5. Premium: It refers to an amount paid quarterly, half-yearly or annually by the insured to insurer for getting compensation at the time of loss.

MEANING OF INSURANCE
Insurance provides financial protection against a loss arising out of happening of an uncertain event like fire, theft etc. A person can avail this protection by paying premium to an insurance company. Any loss to the insured in case of happening of an uncertain event is paid by the insurance company. So, Insurance is a contract between the insurer and insured and this agreement or contract is in writing and is known as insurance policy.

Functions of Insurance
1.Protection: Insurance provides protection against risk of loss .Insurance gives a sense of security to the insured. With the sense of security the insured can perform the business with more peace of mind and confidence.
2.Distribution of Risk: Loss is not actually paid by the insurer himself. He only distributes the loss suffered by an insured person among other persons who suffered to a similar risk and have insurance against such risk. So actually insurance is an arrangement of pooling of risk. All the people pay premium amount to insurance company and out of the premium fund the insured who suffered loss is compensated.
3.Competitiveness: Insurance provides peace of mind to the insured. As a result the insured can fully concentrate on his business and can face the competition more strongly.
4.Specialization: Insurance enables the businessman to concentrate on his activities and get specialization in them without wasting his energy and talent by worrying about the losses or risks.
5.Better utilization of capital: In the absence of insurance facility businessmen will have to maintain large capital to meet the loss. Insurance avoids the needs to keep the huge fund as reserves because insurer gives compensation at the time of loss. The reserves can be utilized in more productive activities which mean better utilization of capital.
6.Promotes Foreign Trade: There are heavy risks involved in sending the goods through air ways or ships to other countries. Insurance provides protection from such risk, so the business can involve themselves in import and export without worrying about risk of loss of goods.
7.Loan facility : The Insurance policy is accepted as a security by banks for giving loan or advances.
8.Capital formation: By collecting premium from insured the insurance companies collect huge amounts of funds. The insurance companies invest these funds in industries and corporate sector, thus resulting in formation of capital.
9.Social Welfare: The insurance provides social security to common man as many policies offer pension at old age, funds for children’s education, marriage etc.

Principles of Insurance:
The basic Principles of insurance are:

1. Principle of utmost good faith :
According to this principle insurance is a contract based on faith. The insured and insurer must disclose all the material facts to each other and both the parties should not hides any fact related to insurance policy from each other. If the insured hides any material fact from the insurance company and later on the insurer comes to know about it, then he can refuse to pay compensation.

For example : if ay person has taken a Life Insurance Policy by hiding the fact that he is a heart patient and later on if the insured dies of a heart attack then the insurance company can refuse to pay the compensation because a material fact was hidden by the insured.

2. Principle of Insurance Interest :
The principle of insurable interest states that the person getting insured must have insurable interest in the object of insurance. A person has an insurable interest when the physical existence of the insured object gives him some gain but its non-existence will give him a loss. In simple words, the insured person must suffer some financial loss by the damage of the insured object.

For example :- The owner of a taxicab has insurable interest in the taxicab because he is getting income from it. But, if he sells it, he will not have an insurable interest left in that taxicab.
From above example, we can conclude that, ownership plays a very crucial role in evaluating insurable interest.

3. Principle of Indemnity :
Indemnity means security, protection and compensation given against damage, loss or injury.
According to this principle insurance is a contract of making profit. The purpose of insurance is to bring back the insured in the same financial position as he was before the loss.
For Example : A person insured his factory for Rs. 2 Lakhs against Due to fire he suffered a loss of Rs. 1 lakh, then the insurance company compensate him Rs. 1 lakh only and not the policy amount that is Rs. 2 Lakh because the purpose of insurance is to compensate for loss and not earning profit. The principle of indemnity is not applicable of Life insurance policy because one cannot estimate the loss due to the death of a person.

4. Principle of Contribution :
According to this principle if a person takes more than one insurance policy for the same property then the insurer will contribute the amount of loss and compensate him for the actual amount of loss. Separately he cannot claim total loss from insurer.

For Example : Mr. John insures his property worth $ 100,000 with two insurers "AIG Ltd." for $ 90,000 and "MetLife Ltd." for $ 60,000. John's actual property destroyed is worth $ 60,000, then Mr. John can claim the full loss of $ 60,000 either from AIG Ltd. or MetLife Ltd., or he can claim $ 36,000 from AIG Ltd. and $ 24,000 from Metlife Ltd.
The formula used to determined the compensation amount is:
Sum assured with a particular insurer × Actual Loss/ Total sum insured
The principle of contribution is not applicable on life Insurance Policy.

5. Principle of Subrogation:
Subrogation means substituting one person for another
According to the principle of subrogation, when the insured is compensated for the losses due to damage to his insured property, then the ownership right of such property shifts to the insurer.
For example : if a person has taken fire insurance policy of his factory, due to fire he suffered a loss of Rs. 1,00,000 and he gets the compensation for the same. Later on half burnt goods were sold for Rs. 10,000 then these 10,000 will be kept by insurance company and not by insured because insured has already got full compensation for the loss.

6. Principle of Cause promixa :
Proximate cause means nearest cause
The loss can be caused by more than one cause. But the property can be insured against some causes and not against all causes. So according to this principle, the proximate cause or nearest cause of loss is to be found out. And then it will be decided that whether the company is liable for the loss or not.
For Example: If a person has taken marine insurance policy for sending the wheat bags and on the way if a rat spoiled the wheat then no compensation will be given because under Marine Insurance the cause of loss should be sea perils and not the rat. On the other hand if the rat makes a hole in this ship through which water enters and spoils the wheat bags then compensation will be given because the loss of wheat is due to sea water.

7. Principle of Mitigation of Loss :
According to this principle the insured must take care of his property in the same way as he would take care without taking the insurance policy. The insured should not be careless of his property after taking insurance policy. It is the duty of the insured to make a reasonable effort and take available precautions to save the insurance property.

For example: if a person has taken fire insurance policy for his house and when fire breaks out should take all the measures to stop the fire and minimize the loss rather than watching the fire because he will get compensation from insurance company.

Question. Spurious coins detected at the counter are sent to _____
A. RBI
B. GOI
C. IBRD
D. Mint
E. None of the Above

Answer : D. Mint
Explanation: when Spurious coins tendered over the counter, it should be cut and handed over to the tenderer. If the tenderer disputes it, the coins should be sent to the mint at his cost, for examination.

Question. On a Cheque instead of two parallel lines only bank‟s name is written is known as_________
A. Payable to bearer
B. General Crossing
C. Special Crossing
D. Both (B) and (C)
E. None of the Above

Answer : C. Special Crossing
Explanation: When a particular bank‘s name is written in between the two parallel lines the cheque is said to be specially crossed.The effect of special crossing is that the bank makes payment only to the banker whose name is written in the crossing. Specially crossed cheques are more safe than a generally crossed cheques.

Question. Minimum period of reinvestment deposits is _______
A. 2 months
B. 3 months
C. 6 months
D. 9 months
E. E. None of the Above

Answer : C. 6 months
Explanation: A Reinvestment Deposit Plan basically allows you to reinvest the interest earned on your deposit. Period of deposit 6 months to 10 years.

Question. What is the minimum limit in reinvestment deposits?
A. 100
B. 500
C. 1000
D. 5000

Answer : C. 1000
Explanation: E. None of the Above
The minimum deposit amount is Rs. 1,000/-. Initially deposits should be made only in multiples of Rs. 100/-. Renewals can be made in any amount.

Question. The paid-up capital of non-scheduled bank is less than _____
A. Rs. 10 lakh
B. Rs. 20 lakh
C. Rs. 15 lakh
D. Rs. 5 lakh
E. None of the Above

Answer : D. Rs. 5 lakh
Explanation: Banks not under in the second schedule of RBI Act, 1934 are called non-scheduled banks.
Banks with a reserve capital of less than 5 lakh rupees qualify as non-scheduled banks.Unlike scheduled banks, they are not entitled to borrow from the RBI for normal banking purposes, except, in emergency or ―abnormal circumstances. Jammu & Kashmir Bank is an example of a non-scheduled commercial bank.

Question. The paid up capital and collected funds of scheduled bank must not be less than_________
A. Rs. 10 lakh
B. Rs. 20 lakh
C. Rs. 15 lakh
D. Rs. 5 lakh
E. None of the Above

Answer : D. Rs. 5 lakh
Explanation: Banks under in the second schedule of RBI Act, 1934 are called scheduled bank.To qualify as a scheduled bank, the paid up capital and collected funds of the bank must not be less than Rs.5 lakh. Scheduled banks are eligible for loans from the Reserve Bank of India at bank rate, and are given membership to clearing houses.

Question. Co-operative banks are regulated by the Reserve Bank of India under _________
A. Banking Regulation Act, 1949
B. Banking Laws (Application to Co-operative Societies) Act, 1965
C. Both (A) and (B)
D. Negotiable Instrument Act–1881
E. None of the Above

Answer : C. Both (A) and (B)
Explanation: Co-operative banks are regulated by the Reserve Bank of India under the Banking Regulation Act, 1949 and Banking Laws (Application to Co-operative Societies) Act, 1965

Question. All banks registered under the ___________ are considered co-operative banks.
A. Banking Regulation Act 1949
B. The Bankers‘Books Evidence Act–1891
C. Cooperative Societies Act, 1912
D. Both (B) and (C)
E. None of the Above

Answer : C. Cooperative Societies Act, 1912
Explanation: Co-operative banks operate in both urban and non-urban areas. All banks registered under the Cooperative Societies Act, 1912 are considered co-operative banks. These are banks run by an elected managing committee with provisions of members‘ rights and a set of ―communally developed and approved bylaws and amendments.co-operative banks work on a ―no profit, no loss‖ basis.

Question. _______ refers to the system in which two are more banks are brought under common control by a device other than the holding company?
A. Chain Banking
B. Group Banking
C. Mixed Banking
D. Branch Banking
E. None of the Above

Answer : A. Chain Banking
Explanation: Chain Banking refers to the system in which two are more banks are brought under common control by a device other than the holding company.

Question. A charge where there is neither the transfer of ownership nor the possession is called _______
A. Pledge
B. Hypothecation
C. Mortgage
D. Lien
E. None of the Above

Answer : B. Hypothecation
Explanation: A charge against property for an amount of debt where neither ownership nor possession is passed to the creditor.

Question. Which of the following is/are correct about the “Operational Risk” as used in the field of banking?
A. Risk of loss due to inadequate or failed internal process
B. Risk of loss due to natural calamities
C. Loss occurred due to non-compliance of legal procedures
D. All of the Above
E. None of the Above

Answer : A. Risk of loss due to inadequate or failed internal process
Explanation: The Basel Committee defines the operational risk as the ―risk of loss resulting from inadequate or failed internal processes, people and systems or from external events‖.

Question. What is/are the characteristics of „Hot Money‟?
A. The term is used for fresh currency notes issued by RBI
B. It is the fund which inflows in the market to take advantage of high interest rates
C. It is the fund which is thrown in the market to create imbalance in the stock markets
D. All of the Above
E. None of the Above

Answer : B. It is the fund which inflows in the market to take advantage of high interest rates
Explanation: Hot money is currency that moves regularly, and quickly, between financial markets so investors ensure they are getting the highest short-term interest rates available.

Question. Which of the following is the most active segment of the money market in India?
A. Commercial Paper(CP)
B. Certificate of Deposit(CD)
C. Call Money
D. All of the above
E. None of the Above

Answer : C. Call Money
Explanation: Call money is short-term finance repayable on demand, with a maturity period of one to fourteen days or overnight to fortnight.

Question. SEPA Stands for ______
A. Scottish Environment Protection Agency
B. Single Euro Payments Area
C. Scottish Environment Protection Area
D. Single Euro Payments Agency
E. None of the Above

Answer : B. Single Euro Payments Area
Explanation: The Single Euro Payments Area (SEPA) is a payment-integration initiative of the European Union for simplification of bank transfers denominated in euro.

Question. The Central Statistical Office (CSO) is located in _____
A. Mumbai
B. New Delhi
C. Noida
D. Chennai
E. Hyderabad

Answer : B. New Delhi
Explanation: The Central Statistics Organisation is responsible for coordination of statistical activities in the country, and evolving and maintaining statistical standards. Its activities include National Income Accounting, etc.

Question. National Sample Survey Organization(NSSO) is an organization under the________
A. Ministry of Finance
B. Ministry of Statistics
C. Ministry of Commerce
D. All (B) and (C)
E. None of the Above

Answer : B. Ministry of Statistics
Explanation: The National Sample Survey Organisation (NSSO), now known as National Sample Survey Office, is an organization under the Ministry of Statistics of the Government of India. It is the largest organisation in India conducting regular socio-economic surveys. It was established in 1950.

Question. In the Capital market, the term arbitrage is used with reference to ______
A. Purchase of securities to cover the sale
B. Sale of securities to reduce the loss on purchase
C. Simultaneous purchase and sale of securities to make profits from price
D. Variation in different markets
E. None of the Above

Answer : C. Simultaneous purchase and sale of securities to make profits from price
Explanation: Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in the price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms. Arbitrage exists as a result of market inefficiencies.

Question. Head quarters of National Council of Applied Economic Research(NCAER) is located in ______
A. Mumbai
B. New Delhi
C. Hyderabad
D. Chennai
E. None of the Above

Answer : B. New Delhi
Explanation: National Council of Applied Economic Research or NCAER is a New Delhi based nonprofit think tank of economics.

Question. When a corporate entity wishes to raise money from the market it can do that by issuing
A. Treasury Bills
B. Kisan Vikas Patra
C. National Savings Certificate
D. Commercial Papers
E. None of the Above

Answer : D. Commercial Papers
Explanation: Commercial paper is an unsecured, short-term debt instrument issued by a corporation,typically for the financing of accounts receivable, inventories and meeting short-term liabilities.

Question. When an agent asks a customer to invest in a Mutual Fund product without telling him/her about the risks involved in the investment, the process is termed as ______
A. Mis-selling
B. Undertaking
C. Misappropriation of Funds
D. cross selling
E. None of the Above

Answer : A. Mis-selling
Explanation: The act of selling something that is not suitable for the person who buys it.

Question. Under which Act are the KYC norms implemented?
A. SEBI Act 1992
B. Foreign Contribution and Regulation Act, 1976
C. Prevention of Money laundering Act 2002
D. Banking Regulation Act, 1949
E. Both C and D

Answer : C. Prevention of Money laundering Act 2002
Explanation: KYC guidelines/instructions are issued under under Prevention of Money laundering Act PMLA, 2002.

Question. In Bank‟s balance sheet, which of the following is an asset?
A. Its paid up capital
B. Its saved deposits
C. Its instrument in government securities
D. Its accumulated Reserve Funds
E. Its Current Deposits

Answer : C. Its instrument in government securities
Explanation: Bank assets comprises cash, money at short notice, bills and securities discounted, bank‘s investments in government securities, loans sanctioned by the bank.

Question. When a customer deposits cheque to a bank, the bank is a(n)
A. Drawer
B. Agent
C. Principal
D. Drawee
E. Bailee

Answer : B. Agent
Explanation: When a customer deposits cheque to a bank then that particular bank acts as an agent for the customer. Collection occurs when the drawee bank (the bank ordered by the cheques to make payment) takes funds from the account of the drawer (its customer who has written the cheque) and presents it to the collecting bank.

Question. Which of the following is a receipt, declaring ownership of shares of a foreign company. which can be listed in India and traded in rupees?
A. ADR
B. GDR
C. IDR
D. EDR
E. None of the Above

Answer : C. IDR
Explanation: An IDR(Indian Depository Receipts)is a receipt, declaring ownership of shares of a foreign company. These receipts can be listed in India and traded in rupees.

Question. What is the term for a bank without any branch network that offers its services remotely?
A. Internet only Banks
B. Direct Bank
C. Lending Institution
D. Indirect Bank
E. Online Bank

Answer : B. Direct Bank
Explanation: A direct bank is a bank without any branch network that offers its services remotely via online banking and telephone banking and may also provide access via ATMs (often through interbank network alliances), mail and mobile. By eliminating the costs associated with bank branches, direct banks can make significant savings which they may pass on to clients via higher interest rates or lower service charges.

Question. Derivatives contract which gives the buyer/holder of the contract the right(but not the obligation) to buy/sell the underlying asset at a predetermined price within or at end of a specified period is known as
A. Futures contract
B. Option Contract
C. Index Futures contract
D. Mini Derivative contract
E. None of the Above

Answer : B. Option Contract
Explanation: Options Contract is a type of Derivatives Contract which gives the buyer/holder of the contract the right (but not the obligation) to buy/sell the underlying asset at a predetermined price within or at end of a specified period.

Question. For expanding access to banking services, the RBI has advised banks to open branches with minimum infrastructure support of 8 to 10BC units at a reasonable 3-4km. Such branches are known as _______
A. White Label ATMs
B. Ultra Small Branches
C. Banking Kiosks
D. CBS Terminals
E. ICT Hubs

Answer : B. Ultra Small Branches
Explanation: Ultra Small Branches may be set up between the base branch and BC locations so as to provide support to about 8-10 BC Units at a reasonable distance of 3-4 kilometres. These could be either newly set up or by conversion of the BC outlets. Such Ultra Small Branches should have minimum infrastructure such as a Core Banking Solution (CBS) terminal linked to a pass book printer and a safe for cash retention for operating large customer transaction and would have to be managed full time by bank officers/ employees.

Question. Alterations, if any, on cheques are required to be authenticated by the signature of_______
A. Payee
B. Depositor
C. Drawer
D. Endorse
E. All of the above

Answer : C. Drawer
Explanation: Alterations, if any, on cheques are required to be authenticated by the drawer‘s signature against each such alteration.

Question. According to the Income Tax act of 1961, the age of Super senior Citizens should be _______
A. 60 years
B. 70 years
C. 80 years
D. 75 years
E. 65 years

Answer : C. 80 years
Explanation: According to the Income Tax act of 1961, the age of Super senior Citizens is 80 years.

Question. Part of company‟s earning or profit which is paid out to share holders is known as_______
A. Premium
B. Dividend
C. Bonus
D. Sum Assured
E. Return

Answer : B. Dividend
Explanation: A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, it can re-invest it in the business (called retained earnings), and pay a fraction of the profit as a dividend to shareholders.

Question. Which of the following is the most liquid money?
A. M1
B. M2
C. Securities
D. M3
E. Call Money

Answer : A. M1
Explanation: The most liquid portions of the money supply are measured by M1 because it contains currency and assets that can be converted to cash quickly. ―Near money‖ and ―near, near money,‖ which fall under M2 and M3, cannot be converted to currency as quickly.

Question. Which of the following can issue commercial paper for raising short term funds?
A. Corporates
B. Primary Dealers
C. All-India Financial Institutions
D. Both B and C
E. All of the Above

Answer : E. All of the Above
Explanation: A Commercial Paper (CP) is an unsecured money market instrument issued as a promissory note. It is a short-term funding tool that highly rated companies, primary
dealers (PDs), and all-India financial institutions (AIFIs) can use, typically to meet shortterm funding and working capital requirements.

Question. What is the purpose of KYC in banking?
A. It is used for customer identification
B. It is used for increasing the CRR of banks
C. It is used against money laundering
D. It is used by the central bank to control liquidity
E. Both A and C

Answer : E. Both A and C
Explanation: Know your customer (KYC) is the process of a business verifying the identity of its clients. Know your customer policies are becoming much more important globally to prevent identity theft, financial fraud, money laundering and terrorist financing.

Question. Who amongst the following is the regulator in the financial system of the country?
A. Other than those given as options
B. SEBI
C. CRISIL
D. TRAN
E. CERC

Answer : B. SEBI
Explanation: The financial system in India is regulated by independent regulators in the field of banking, insurance, capital market, commodities market, and pension funds. Example of Financial Regulators: RBI, IRDAI, SEBI, PFRDA.

Question. Which of the following types of cards is free from credit risk?
A. Credit card
B. Debit Card
C. Prepaid Cards
D. Charge Cards
E. Both C and D

Answer : B. Debit Card
Explanation: A debit card a safe, convenient, risk-free alternative to cash and has no credit risks attached.

Question. Which of the following types of economy is an example of sustainable economy?
A. Capitalist Economy
B. Mixed Economy
C. Socialist Economy
D. Traditional Economy
E. None of the Above

Answer : D. Traditional Economy
Explanation: Traditional economies are considered sustainable because they are less harmful to the environment.

Question. In International Banking terms,”Appreciation” of Rupee means ________
A. Excess of exports over imports
B. Purchasing power of rupee has come down
C. Availability of less foreign currency vis-a-vis rupee
D. Excess of imports over exports
E. Availability of more foreign currency vis-a-vis rupee

Answer : C. Availability of less foreign currency vis-a-vis rupee
Explanation: Currency Appreciation refers to increase in the value of domestic currency in terms of foreign currency. The domestic currency becomes more valuable and less of it is required to buy the foreign currency.

Question. Section 80E of the Income Tax Act provides for deduction of interest paid on Education or study loan taken for higher education. Deduction under section 80E is available for _____
A. 2 years
B. 4 years
C. 8 years
E. 10 years

Answer : C. 8 years
Explanation: An education loan can not only fund your higher studies but also help save tax. The interest paid on the education loan can be claimed as deduction, as per Section 80E of the Income Tax Act, 1961.The deduction on education can be claimed only when you start the repayment and is available up to eight years, or until the payment of interest in full,whichever is earlier.

Question. A financial contract that derives its value from another asset or an index of asset values is known as __________
A. Insurance Policy
B. Security
C. Derivative
D. Share
E. None of the above

Answer : C. Derivative
Explanation: In finance, a derivative is a contract that derives its value from the performance of an underlying entity.

Question. Inflation refers to a fall in the value of money. Which of the following is the key measure of inflation in India?
A. Consumer Price Index
B. Wholesale Price Index
C. Personal Consumption Expenditures Price Index
D. GDP Deflator
E. All of the above

Answer : B. Wholesale Price Index
Explanation: Inflation rates in India are usually quoted as changes in the Wholesale Price Index, for all commodities. Many developing countries use changes in the Consumer Price Index (CPI) as their central measure of inflation.

Question. What does amortization mean?
A. Spreading payments over multiple periods
B. Buying a financial instrument in order to sell the same instrument at a higher price in another market
C. Issuance approval,by a credit card issuer
D. Buying the underlying securities at a specified excercise price
E. None of the Above

Answer : A. Spreading payments over multiple periods
Explanation: Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time.

Question. What is the duration of Public Provident Fund (PPF) account?
A. 3 years
B. 5 years
C. 9 years
D. 15 years
E. 18 years

Answer : D. 15 years
Explanation: A PPF account matures in 15 years, but you can extend the tenure in blocks of five years after maturity. The balance continues to earn interest at the normal rate. The minimum investment of Rs 500 has to be maintained even for accounts extended beyond 15 years.

Question. Poverty line is expressed in terms of an overall _______
A. Per capita Income
B. Per Capita consumption expenditure
C. Per Capita entertainment expenditure
D. Per Capita development expenditure
E. Per Capita GDP

Answer : B. Per Capita consumption expenditure
Explanation: In India consumption-expenditure has been made the basis for the measurement of the minimum standard. The usual method is to fix a poverty level. This level is expressed in terms of an overall per capita consumption-expenditure.

Question. The ratio of deposits to loans of a bank is known as _______
A. NPA coverage Ratio
B. Return on asset ratio
C. Asset Coverage ratio
D. CD Ratio
E. Other than those given as options

Answer : E. Other than those given as options
Explanation: The loan to deposit ratio is used to calculate a lending institution‘s ability to cover withdrawals made by its customers.

Question. Which of the following is the negotiable instrument?
A. Fixed Deposit of a Bank
B. Share certificate issued by a PSU
C. Demand Draft issued by a bank
D. Debenture of a company
E. Airway Receipt

Answer : C. Demand Draft issued by a bank
Explanation: A demand draft is a negotiable instrument similar to a bill of exchange. A bank issues a demand draft to a client (drawer), directing another bank (drawee) or one of its own branches to pay a certain sum to the specified party (payee).

Question. A non performing Asset in Banking Business means ________
A. A fixed asset of Bank is not been utilized
B. A portion of deposits not been utilized
C. A loan asset on which interest and/or instalments remain unchanged.
D. All of the Above
E. None of the Above

Answer : C. A loan asset on which interest and/or instalments remain unchanged.
Explanation: A nonperforming asset (NPA) refers to a classification for loans on the books of financial institutions that are in default or are in arrears on scheduled payments of principal or interest. In most cases, debt is classified as nonperforming when loan payments have not been made for a period of 90 days.

Question. Earlier in July, which of the following companies was upgraded to a high safety grade by Crisil?
A. Manappuram Finance Limited
B. Mahindra Finance
C. Muthoot Finance
D. Kosamattam
E. None of these

Answer : C. Muthoot Finance
Explanation: Ratings firm Crisil has upgraded Muthoot Finance‘s long-term debt rating to a high safety grade of AA/stable from AA-/stable earlier. Under Crisil scale, AA rating will fall under high safety category and carries very low credit risk.

Question. Which of the following US-based life and health reinsurer has received the approval regulator IRDAI to set up a branch in the country?
A. Swiss Reinsurance America Corporation
B. Everest Reinsurance Company
C. Reinsurance Group of America
D. National Indemnity Company
E. None of these

Answer : C. Reinsurance Group of America
Explanation: US-based life and health reinsurer Reinsurance Group of America (RGA) has received the first level approval regulator Irdai to set up a branch in the country, a company official said today.
The Insurance Regulatory and Development Authority of India (Irdai) has approved R-1 (requisition for registration) application of the company

Question. In the field of banking, what does ADF stand for?
A. Additional Dearness Allowance
B. Automated Data Flow
C. Additional Deposit Allowance
D. Automated Deposit Allowance
E. None of the Above

Answer : B. Automated Data Flow
Explanation: The Automated Data Flow (ADF) is a unique initiation by RBI aimed at the purpose of meeting the needs for accurate and consistent flow of data. Automated Data Flow ensures that the data submitted from the banks to Reserve Bank of India is correct and consistent without any kind of manual intervention.

Question. Which of the following insurance companies has launched a series of Youtube videos for insurance reminders to its customers?
A. Coverfox Insurance Broking Pvt. Ltd.
B. Max Life Insurance Co. Ltd.
C. Shriram Life Insurance Co. Ltd.
D. IDBI Federal Life Insurance Co. Ltd.
E. None of these

Answer : A. Coverfox Insurance Broking Pvt. Ltd.
Explanation: Online insurance portal Coverfox.com on Tuesday launched a series of small films on youtube to engage people and alert them to renew their insurance.
The campaign was created in collaboration with BBH India a digital innovation on Youtube.

Question. In case of failed ATM transactions, if the amount is not credited to customer‟s account within 7 working days from the date of receipt of the complaint. Banks have to pay compensation at the rate of Rs.________ per day.
A. 150
B. 200
C. 100
D. 10
E. 50

Answer : C. 100
Explanation: Reconciliation of failed transactions at ATMs – For any failure to re-credit the customer‘s account within 7 working days from the date of receipt of the complaint, the bank will pay compensation of Rs.100/-, per day, to the aggrieved customer.

Question. Which of the following forms of securing a loan is the safest one?
A. Lien
B. Assignment
C. Pledge
D. Hypothecation
E. Mortgage

Answer : C. Pledge
Explanation: A pledged asset is collateral pledged by a borrower to a lender (usually in return for a loan). The lender has the right to seize the collateral if the borrower defaults on the obligation.

Question. Which of the following has approved $500 million loan for bridge over Ganga River in Bihar?
A. World Bank
B. Asian Development Bank
C. International Monetary Fund
D. European Development Bank
E. None of these

Answer : B. Asian Development Bank
Explanation: Asian Development Bank accorded $500 million to build bridge over India‘s longest river bridge which is in Bihar having distance of 9.8 km road.

Question. In July, the UK government‟s development finance unit, CDC announced to infuse Rs 1,000 crore into its Finance unit in India to boost people‟s access to affordable housing. This finance unit is
A. SKS Microfinance Ltd
B. India Infoline Finance
C. IDF Financial Services Pvt Ltd
D. YVU Financial Services Pvt Ltd
E. None of these

Answer : B. India Infoline Finance
Explanation: Diversified financial services company IIFL Holdings announced that UK governmentowned CDC Group will invest about Rs 1,000 crore in its unit India Infoline (IIFL)
Finance.CDC‘s investment will help the group in expanding its financing business and address the capital needs of under-served segments through diversified offerings, IIFL Holdings said in a release.

Question. Which of the following companies has set up two wholly owned subsidiaries in July 2016, one for its broker business and another for insurance business?
A. EXIM Bank
B. Religare Enterprises
C. Muthoot Finance
D. Sahara Asset Management Company
E. None of these

Answer : B Religare Enterprises
Explanation: Religare Enterprises has set up two wholly owned subsidiaries – Religare Broking Limited and Religare Insurance Ltd – as part of its restructuring plan.

Question. The merger process of State bank subsidiaries with State Bank of India will be completed by
A. December 2017
B. March 2017
C. April 2017
D. July 2017
E. None of these

Answer : C April 2017
Explanation: Ihe country‘s largest lender State Bank of India, which started the process of merging all its subsidiaries with itself about three months back, would become a single entity by April next, indicating the speed at which the administration is moving to revitalise the banking system.

Question. Bank Holidays are covered by which of the following?
A. As per the order of the GOI
B. As per the order of the IBA
C. Negotiable Instruments Act
D. RBI Act
E. Other than those given as options

Answer : C. Negotiable Instruments Act
Explanation: Bank Holidays are declared by Central/State Governments/ Union Territory under the Negotiable Instruments (NI) Act, 1881.

Question. RBI has eased norms in cheque dishonour cases of Rs ______ and above.
A. 50 lakh
B. 1 crore
C. 1 lakh
D. 10 crore
E. 5 crore

Answer : B 1 crore
Explanation: Relaxing chequebook norms, the Reserve Bank today left it to the lender‘s discretion on whether to issue fresh chequebooks or not in cases of dishonour of Rs 1 crore and above.As per the existing directive, banks are not allowed to issue fresh chequebooks in the event of cheque dishonour valuing Rs 1 crore and above on four occasions during a financial year for want of sufficient funds.

Question. Which of the following has/have received „certificate of registration‟ from insurance regulator IRDAI to commence insurance business in the country?
A. Sahayog Microfinance Ltd
B. Aditya Birla group
C. Edelweiss Financial Services
D. Both A and B
E. Both B and C

Answer : E. Both B and C
Explanation: Aditya Birla Health Insurance Co today said it has received ‗certificate of registration‘ from regulator Irda, moving a step closer to commencing business.
The company is a step down subsidiary of Aditya Birla Nuvo Edelweiss Financial Services has also informed BSE that Irda has accepted the registration application form IRDA /R1, for setting up a General Insurance Company in India, filed by Edelweiss General Insurance Company, a wholly owned subsidiary.

Question. As per RBI said in its statement, banks have to seek whose permission before selling stake in stressed companies?
A. GOI
B. CVC
C. RBI
D. CBI
E. Both B and D

Answer : E Both B and D
Explanation: Following the central bank‘s directive to banks to ensure that stake sales in stressed companies under the strategic debt restructuring (SDR) does not get to fronts of the original promoters, lenders are initiating permissions from the Central Bureau of Investigation (CBI) and the Central Vigilance Commission (CVC) before closing such deals, people familiar with the development said.