Model Online Promotion Test For Bank Officers On Banking Law & Practice

The priority of mortgages is generally determined based on the date of execution. In this case, the mortgage deed executed by Canara Bank on 08.01.2004 was registered on 10.01.2004, while the equitable mortgage created by Syndicate Bank was also created on 10.01.2004. Since the mortgage deed by Canara Bank was executed earlier, it will have priority over the equitable mortgage created by Syndicate Bank. Therefore, Canara Bank will have priority in this situation.

A minor can be admitted to the benefits of a Partnership firm. This means that even though a minor cannot be a full-fledged partner and share in the Capital, Liabilities, or Responsibilities of the firm, they can still enjoy certain benefits such as a share in the profits. This allows minors to have a financial interest in the partnership without taking on the legal responsibilities and liabilities associated with being a partner.

The statement is false because nomination facility is not available for loan accounts under banking services. Nomination facility is typically available for deposit accounts like savings accounts, fixed deposits, etc., where the account holder can nominate a person to receive the funds in case of their demise. However, loan accounts do not have a nomination facility as they involve borrowing money from the bank rather than depositing money into the account.

A cheque specially crossed to a particular bank cannot be paid to any bank participating in clearing. The crossing on a cheque indicates that the funds should only be deposited into the account of the specified bank. Therefore, the cheque can only be paid to the particular bank mentioned in the crossing and not to any other bank participating in clearing.

The statement is false because safe deposit locker services are generally not provided to minors, regardless of their age. Minors do not have the legal capacity to enter into contracts, and therefore, they cannot be held responsible for the contents of the locker or any liabilities associated with it. Hence, banks usually require customers to be at least 18 years old to avail of safe deposit locker services.

The correct answer is that as per the NI Act, the arrest of a person does not result in stopping operations in the account. Therefore, the cheque can be passed. This means that the bank is not legally obligated to stop the operations in the arrested person's account based on the information given by the Public Prosecutor. Passing the cheque without considering this information does not make the bank complicit in the cheating case and will not lead to any legal consequences for the bank.

The effect of non-registration of charge with ROC in case of limited company advances is that the charge on the assets will become void against the liquidator of the company and also against other creditors. Although the company is bound by the charge, the liquidator is not bound by the same. Additionally, the bank will rank as an unsecured creditor along with other creditors. However, it is possible to subsequently register the charge with the payment of a penalty. Therefore, the correct answer is A & B above.

Probate is the authorization given by the court to give effect to the will. This means that after someone passes away, the court reviews the will and officially recognizes it as valid. The court then grants probate, which allows the executor of the will to carry out the instructions and distribute the deceased person's assets according to their wishes. This process ensures that the will is legally binding and provides a legal framework for the distribution of the deceased person's estate.

The Registrar of companies may not be registering "pledge" as a charge for two reasons: Firstly, because pledge involves the bailment of goods where the actual or constructive possession is with the bank, which means that the bank has control over the goods and can exercise its rights as a pledgee without being affected by the claims of other creditors. Secondly, it may be a matter of convention as bankers typically lend under hypothecation, where the goods remain in the possession of the borrower, and therefore pledge is not usually registered.

The correct answer is that the right of lien is not barred by limitation. This means that there is no specific time limit within which a person can exercise their right of lien. Lien is a legal right that allows a person to retain possession of someone else's property until a debt or obligation is paid. Since there is no limitation period, a person can exercise their right of lien at any time, as long as the debt or obligation remains unpaid.

Any citizen can request for information from the Bank under the RTI Act 2005. This means that any individual who is a citizen of India has the right to seek information from the Bank through the provisions of the Right to Information Act. This allows for transparency and accountability in the functioning of the Bank, as citizens have the right to access information regarding its operations.

The effect of non-registration of a charge on the assets of a company by the financing bank is that the bank will become an unsecured creditor. This means that in the event of the company's insolvency or liquidation, the bank will not have priority over other creditors who have registered their charges. However, it is important to note that in the case of a mortgage, registration is not required as the mortgage is considered supreme. Additionally, in the case of a pledge of goods, registration is also not required. Therefore, options A, B, and D are correct.

The answer B and C above is correct because the right of set off cannot be exercised for contingent liability against the debt of the firm. In this case, the TDR has been taken as security for a Bank Guarantee issued by the Bank on behalf of the firm, which means it is a contingent liability. Additionally, the deposit is only payable on the date of maturity to meet the garnishee order. Therefore, the Branch Manager should proceed further with not honoring the garnishee order.

The correct answer is "It is an Inchaote instrument . Any Bearer can fill it and the payment can be made and viewed as payment in due course." This means that even though the cheque was presented without a date, it can still be filled in by any bearer and considered valid for payment.

In this case, the bank will adjust the TOD (Term deposit) against the claim received from the Official Receiver. This means that the bank will deduct the amount of the TOD from the deposit and pay the remaining balance to the Official Receiver. This is because the depositor, Mr. A, has been adjudged as insolvent and the Official Receiver has a legal claim on the deposit. Therefore, the bank is required to adjust the TOD and pay the balance amount to the Official Receiver.

The correct answer is "By A & B Above." This means that both the methods of elongating the limitation period of equitable mortgage, which are Supplemental Narration and Redeposit of Title Deeds, can be used together to achieve the desired outcome. These methods involve providing additional documentation or reaffirming the security of the mortgage, thereby extending the time within which legal action can be taken.

The bank can revive a time-barred debt by using any of the mentioned methods. They can grant a fresh loan after adjusting the original loan, take an express promissory note with adequate stamping, take revival letters for the broken periods, or verify the repayment vouchers in the loan. If the borrower has remitted under their signature, the limitation will run from that date. Therefore, all of the above methods can be used by the bank to revive a time-barred debt.

The correct answer is C & D Above. The nominee's signature is not obtained in the Deposit account opening form because the contract is between the depositor and the bank only, and there is no privity of contract between the nominee and the bank. This means that the nominee does not have any legal obligations or rights with the bank. Additionally, not obtaining the nominee's signature allows the depositor to maintain secrecy and change the nominee at a subsequent date if desired.

A garnishee order is not applicable for future credits. A garnishee order is a legal order that allows a creditor to collect a debt by deducting money directly from a debtor's wages or bank account. It is used to enforce an existing debt and cannot be applied to future credits. Therefore, the correct answer is Garnishee Order.

The correct answer is "Any Notified Centre in India". This is because the creation of an equitable mortgage does not depend on the physical location of the property, bank branch, registered office, or factory. As long as the centre is notified by the relevant authorities, the equitable mortgage can be created there.

If a suit is filed before the document expires, both Mr A and Mr B are liable because they both signed the joint and several promissory note. However, if the suit is filed after the expiry of limitation, only Mr A is liable as he alone signed the revival letter. The bank cannot proceed against Mr B in this case. Therefore, the correct answer is that both options A and B are correct.

In the case of a Telegraphic Transfer (TT), the relationship between a Remitting Customer and Banker can be described as Principal and Agent. The Remitting Customer acts as the principal, giving instructions to the Banker (the agent) to transfer funds on their behalf. The Banker carries out this task as per the customer's instructions, making them the agent in this transaction. Therefore, the correct answer is Principal and Agent.

The correct answer is SARFAESI Act. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 in India defines the concept of hypothecation. This act allows banks and financial institutions to enforce their security interest in case of default by borrowers, including the right to take possession and sell the hypothecated assets. It provides a legal framework for the recovery of non-performing assets and helps in the resolution of bad loans in the banking system.

The correct answer suggests that the cheque can still be passed if there are sufficient funds in the account, despite the death of the Power of Attorney (POA) holder who signed the cheque. This implies that the authority to pass the cheque is based on the availability of funds rather than the presence of the POA holder.

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When a banker becomes aware that the security hypothecated for an advance is at risk of being disposed of by the customer, the appropriate action to be taken by the bank is to convert the hypothecation into a pledge and take possession of the security. By doing so, the bank can ensure that it has control over the security and can protect its interests in case of default by the customer. This action allows the bank to have a stronger position in recovering the loan amount and mitigating potential losses.

Banks insist on a registered memorandum nowadays because it is mandatory and helps protect the bank's interest. A registered memorandum ensures that the bank's name is reflected as the mortgagee in the Encumbrance certificate, providing legal evidence of the bank's claim on the property. This protects the bank in case of any default or legal disputes related to the mortgage. Additionally, the registered memorandum helps increase transparency and accountability in the banking system, ensuring that all transactions are properly recorded and regulated.

The correct answer suggests that all securities can be given to the guarantor in the right of subrogation. This means that the guarantor, who has cleared the liability of the principal borrower, can claim the securities lodged with the bank as their own. Subrogation refers to the substitution of one person or entity for another in relation to a claim or right, in this case, the guarantor is being substituted for the principal borrower in terms of the securities. Therefore, the bank can transfer the securities to the guarantor as per their right of subrogation.

The effect of non-registration of a document is that it cannot be admitted as evidence. Registration of a document is a legal requirement that provides authenticity and validity to the document. If a document is not registered, it cannot be presented as evidence in a court of law. Therefore, the non-registration of a document has the effect of rendering it inadmissible as evidence.

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Clayton's Rule is a principle that applies to all running accounts, including TOD (Temporary Overdraft), CC (Cash Credit), Bills, and PC (Purchase Contract). It is also applicable to non-fund based facilities, such as guarantees and letters of credit. Additionally, Clayton's Rule applies to term loans and demand loans. Therefore, the correct answer is "All the above."

Garnishee Order is a legal order issued by a court to freeze or attach funds in a bank account of a debtor to satisfy a debt. In the case of a Cash Credit Limit, the borrower has the flexibility to withdraw funds as needed, up to the approved limit. However, the unutilized portion of the Cash Credit Limit is not considered as funds in a bank account and therefore cannot be frozen or attached by a Garnishee Order. Hence, the correct answer is "No."

The correct answer is that the request to cancel the names of A and B will be declined as any one of the original names should be maintained. This is because joint accounts require at least one of the original account holders to remain on the account. If all the original names are canceled, it would essentially result in the closure of the joint account.

The bank cannot exercise the right of set off in respect of contingent debt. Contingent debt refers to a liability that may or may not arise in the future, depending on the occurrence of a specific event. Since the debt is uncertain and not yet ascertained or quantifiable, the bank cannot offset it against any other existing debts or credits. The right of set off allows the bank to offset mutual debts and credits between the bank and its customer, but contingent debt does not fulfill the criteria for set off.

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A negative lien is a letter given by a company to their financing banker, in which they undertake not to charge any of their assets to any other financial institution or bank. This means that the company assures the banker that they will not use their assets as collateral for any other loans or debts.

Limited Liability Partnership (LLP) is a separate legal entity that is liable to the full extent of its assets. It is a body corporate and a legal entity separate from its partners, with perpetual succession. The liability of the partners in an LLP is limited to their agreed contribution, and no partner is liable for the independent or unauthorized actions of other partners. This allows individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct. Additionally, there is no maximum limit on the number of partners in an LLP.

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A financial lease is a type of lease where the lessee does not get the benefit of depreciation. In a financial lease, the lessor retains ownership of the asset and the lessee makes regular lease payments for the use of the asset. Since the lessor retains ownership, they are entitled to claim the depreciation expense for tax purposes. Therefore, the lessee does not receive the benefit of depreciation in a financial lease.

Section 35 of the Banking Regulation Act empowers the Reserve Bank of India (RBI) to conduct inspections of banks. This section gives the RBI the authority to inspect the books, accounts, and other relevant documents of banks to ensure their compliance with banking regulations and to assess their financial soundness. The RBI conducts inspections to maintain the stability of the banking system and protect the interests of depositors. Therefore, the correct answer is Sec 35 of the Banking Regulation Act.

Insurance of stocks is done in the joint names of the Bank and the borrower because the Bank has an insurable interest in the stock as the creditor. This means that if there is a loss, the Bank can make a claim directly to the insurance company. This arrangement ensures that both parties are protected in case of any damage or loss to the stocks. The doctrine of "Uberimo Fidaei" also supports this practice, emphasizing the utmost good faith between the parties involved. Therefore, options A and B above are correct explanations for why insurance of stocks is done in the joint names of the Bank and the borrower.

The correct answer is "Overdraft availed at Bank." An actionable claim refers to a legal right to claim or demand something from someone. A term deposit receipt, life insurance policy, and book debt are all examples of actionable claims as they represent a legal right to receive a specific amount of money or benefit. However, an overdraft availed at a bank is not considered an actionable claim because it is a facility provided by the bank to withdraw more money than what is available in the account, and it does not involve a legal right to claim a specific amount of money.

The given question is asking for the term used to describe an industrial company that has been registered for at least five years and has accumulated losses at the end of any financial year that are equal to or exceed its entire net worth. This term is known as a "Sick Industrial Company" under the SICA Act 1985. The SICA Act was enacted in India to provide for the identification and rehabilitation of sick industrial companies.

The correct answer is F 237 A. This format is used in our bank for obtaining a debit confirmation letter from a guarantor.

If the reply received under the RTI Act is not satisfactory, the person seeking information can approach the Appellate Authority. The Appellate Authority is responsible for entertaining and disposing appeals against the decision of the Central Public Information Officer (CPIO) as required under the Act. In this case, a General Manager has been designated as the Appellate Authority in the bank for this purpose.

The Articles of Association is the correct answer because it is a legal document that outlines the internal rules and regulations of a company. It specifies the powers and limitations of the company, including its borrowing powers. By examining the Articles of Association, the auditor can determine whether the company has the authority to borrow money as requested in the proposal. This document is an important source of information for verifying the company's borrowing powers.

The correct answer is C & D above. According to the RTI Act 2005, the fees payable for getting information includes Rs 10 only as well as Rupees two for each page (in A-4 or A-3 size paper) created or copied. Additionally, there is an actual charge or cost price for copies in larger size paper, samples or models, and for inspection of records. There is no fee for the first hour of inspection, but a fee of rupees five for each subsequent hour or fraction thereof.

The correct answer is A & B above. This means that the liability of the introducer of the bank account in case of fraud committed against the bank by the account holder is none under the NI Act, but under Criminal Law and KYC/AML regulations, the introducer can be subjected to investigation. This implies that while the introducer may not be directly liable under the NI Act, they can still be held accountable under other laws and regulations.

The conversion of a bearer cheque into an order cheque is not a material alteration. Material alteration refers to any change made to a negotiable instrument that modifies the rights and obligations of the parties involved. Converting a bearer cheque into an order cheque does not alter the fundamental characteristics of the instrument or affect the rights and obligations of the parties. Therefore, it is not considered a material alteration.

Banks prefer hypothecation charge while lending to companies instead of pledge because hypothecation can be registered with the Registrar of Companies (ROC) under Section 125 of the Companies Act. This registration serves as a notice to third parties, providing a legal safeguard for the bank. On the other hand, there is no provision to register a pledge with the ROC under the Companies Act. Additionally, companies do not prefer pledge as they may need to use the goods for their high volume of transactions at any time. Therefore, both options A and B are correct explanations for why banks prefer hypothecation charge over pledge.