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

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


This Test is on Banking Law and Practice in India. Questions on various Fundamental Laws �which are of daily relevance are included.
Please take Quiz Password by e Mailing to rajatvk@indiatimesmail. Com your full particulars like Name,Age,Place of Work/Study,Designation/Course,Phone/Mobile No and Address
N RangarajanSenior Manager
of a Public Sector Based Bank @ Trichy


Questions and Answers
  • 1. 

    Mr A and B signed a joint and several promissory note to avail a Loan from Bank. Within a month the document is getting time barred. Mr A alone signs the revival letter and Mr B refuses to sign the RL.What is the position of liability of the borrowers?

    • A.

      If a suit is filed before the document expires, then Both A and B are liable.

    • B.

      If the suit is filed after the expiry of limitation, then A alone is liable and Bank cannot proceed against B

    • C.

      Once RL is not signed by both borrwers, the Bank has no option than to write off.

    • D.

      A & B both correct

    • E.

      None of the above

    Correct Answer
    D. A & B both correct
    Explanation
    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.

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  • 2. 

    What is the type of lease under which the lessee does not get the benefit of depreciation?

    • A.

      Financial Lease

    • B.

      Rental Lease

    • C.

      Optional Lease

    • D.

      Dry Lease

    • E.

      Usufructuary Lease

    Correct Answer
    A. Financial Lease
    Explanation
    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.

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  • 3. 

    A mortgage deed was ezxecuted on 08.01.2004 and a simple mortgage deed was registered by Canara Bank on 10.01.2004 and subsequentltly an equitable mortgage was created by Syndicate Bank on the same property on 10.01.2004. Which mortgage has priority?

    • A.

      Depends upon Court Judgement

    • B.

      Priority of Mortgage is decided based on the date of execution.Hence Canara Bank will have priority

    • C.

      EM is superior as it is widely followed in India

    • D.

      None of the above

    Correct Answer
    B. Priority of Mortgage is decided based on the date of execution.Hence Canara Bank will have priority
    Explanation
    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.

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  • 4. 

    Bank Branch is at Mumbai. The registered Office of the company is at Chennai. The factory of the company is at Hyderabad.The property is situated at Bangalore.Equitable Mortgage of the property can be created 

    • A.

      Mumbai to have better control

    • B.

      Bangalore as the property is situated there

    • C.

      Chennai as the company's registered office is situated there

    • D.

      Hyderabad

    • E.

      Any Notified Centre in India

    Correct Answer
    E. Any Notified Centre in India
    Explanation
    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.

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  • 5. 

    The relationship between a Remitting Customer and Banker in case of  TT

    • A.

      Consumer and Banker

    • B.

      Agent and Principal

    • C.

      Principal and Agent

    • D.

      Trustee and Beneficiary

    • E.

      All the above

    Correct Answer
    C. Principal and Agent
    Explanation
    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.

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  • 6. 

    Banker's duty of Secrecy is defined in..........

    • A.

      Bankers Book Evidence Act

    • B.

      Civil Procedure Code

    • C.

      Banking Regulation Act 1949

    • D.

      Indian Contract Act

    • E.

      Banking Comapnies Acquisition and Transfer of Undertaking Act 1970

    Correct Answer
    E. Banking Comapnies Acquisition and Transfer of Undertaking Act 1970
    Explanation
    The correct answer is the Banking Companies Acquisition and Transfer of Undertaking Act 1970. This act defines the banker's duty of secrecy, which is the obligation of bankers to keep their customers' information confidential. This duty ensures the privacy and security of customers' financial information and helps maintain trust between banks and their customers.

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  • 7. 

    What is the effect of Non Registration of Charge on the assets of a company by the financing Bank?

    • A.

      Bank will be an unsecured creditor

    • B.

      Those creditors who have registered their charges will get priority

    • C.

      Only the mortgage is supreme . In such case registration of charge is not required

    • D.

      In case of pledge of goods, registration is not required.

    • E.

      A,B and D Correct

    Correct Answer
    E. A,B and D Correct
    Explanation
    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.

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  • 8. 

    Which Act defines Hypothecation?

    • A.

      SARFAESI Act

    • B.

      It is only Banking Convention.

    • C.

      Sale of Goods Act

    • D.

      Indian Contract Act

    • E.

      Transfer of Property Act

    Correct Answer
    A. SARFAESI Act
    Explanation
    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.

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  • 9. 

    A and B are holders of joint deposit. At their request, C and D are added as additional names. After some time all the four request by a signed letter, to cancel the names of A and B. What is your reaction?

    • A.

      Can be acceded.

    • B.

      Will be declined as any one of the original names should be maintained.

    • C.

      Will refer to Regional Office Law Department.

    • D.

      Additon of Name is permitted but deletion is not permitted as per Banking Codes and Standards Board of India guidelines.

    • E.

      All the above

    Correct Answer
    B. Will be declined as any one of the original names should be maintained.
    Explanation
    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.

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  • 10. 

    A guarantor clears the liability of Pricipal Borrower in the Bank. He claims the securities lodged with the Bank.What is your reaction?

    • A.

      If the secuirities are the property of guarantor, it can be parted with.

    • B.

      All securities can be given to the guarantor in the right of subrogation.

    • C.

      The right of substitution permits the same

    • D.

      If the securities are in the name of borrower,we will refer to higher authorities.

    • E.

      Can be released against indemnity.

    Correct Answer
    B. All securities can be given to the guarantor in the right of subrogation.
    Explanation
    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.

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  • 11. 

    Right of set off cannot be exercised by the Bank in respect of

    • A.

      Regular Debt

    • B.

      Time barred Debt

    • C.

      Revived Debt

    • D.

      Ascertained and quantifiable debt

    • E.

      Contingent Debt

    Correct Answer
    E. Contingent Debt
    Explanation
    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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  • 12. 

    What is the limitation period for exercising the right of lien?

    • A.

      3 years from the date of Demand

    • B.

      12 years from the date of Cause of Action

    • C.

      30 Years for Foreclosure

    • D.

      Right of Lien is not barred by Limitation

    • E.

      None of the above

    Correct Answer
    D. Right of Lien is not barred by Limitation
    Explanation
    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.

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  • 13. 

    Mr A has availed TOD against Term deposit. Later he is adjudged as insolvent.A claim is received from the Official receiver. In this case the Bank will,........

    • A.

      Pay the full amount of Deposit to Official receiver, as this is a claim from court of law.

    • B.

      Adjust the the TOD and pay balance amount to depositor, who will will in turn pay the official receiver

    • C.

      Pay the full amount of deposit to the depostor.

    • D.

      Adjust the TOD and Pay balance amount to Official Receiver

    • E.

      All the above may be applied on a case to case basis

    Correct Answer
    D. Adjust the TOD and Pay balance amount to Official Receiver
    Explanation
    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.

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  • 14. 

    Which one of the following is not an actionable claim?

    • A.

      Term Deposit Receipt

    • B.

      Life Insurance Policy

    • C.

      Book Debt

    • D.

      Overdraft availed at Bank

    • E.

      None of the above

    Correct Answer
    D. Overdraft availed at Bank
    Explanation
    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.

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  • 15. 

    Clayton's Rule will be applicable to

    • A.

      All running accounts like TOD,CC,Bills and PC

    • B.

      Non Fund Based Facility

    • C.

      Term Loan

    • D.

      Demand Loan

    • E.

      All the above

    Correct Answer
    A. All running accounts like TOD,CC,Bills and PC
    Explanation
    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."

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  • 16. 

    Safe Deposit Locker Service can be provided to Minors above the age of 12 and up to 18 (Special Minors)

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    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.

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  • 17. 

    As per Hindu Succession Act amendment  in September 2005, Who gets coparcenery rights?

    • A.

      All Major Male Members.

    • B.

      The daughters of coparceners are also getting coparcenery rights

    • C.

      All female members in the family

    • D.

      Staus quo continues as per old provisions

    • E.

      None of the above

    Correct Answer
    B. The daughters of coparceners are also getting coparcenery rights
  • 18. 

    Nomination facility is available for Loan accounts under Banking Services

    • A.

      True

    • B.

      False

    Correct Answer
    B. False
    Explanation
    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.

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  • 19. 

    Partners have ----------------------- liability as per Section ------------- of Indian Partnership Act.

    Correct Answer
    Unlimited , 25
    unlimited , 25
    Explanation
    As per Section 25 of the Indian Partnership Act, partners have unlimited liability. This means that they are personally responsible for all the debts and liabilities of the partnership. There is no limit to the amount of money they can be held liable for. Therefore, the correct answer is "unlimited, 25".

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  • 20. 

    A minor can be admitted to ____    ________  of a Partnershio firm

    • A.

      The Capital

    • B.

      The Liabilities

    • C.

      The Responsibilities

    • D.

      The Deed

    • E.

      The Benefits

    Correct Answer
    E. The Benefits
    Explanation
    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.

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  • 21. 

    Under Which Act RBI can conduct inspection of  Banks?

    • A.

      Sec 46 of Banking Regulation Act

    • B.

      Sec 35 of Banking Regulation Act

    • C.

      Sec 31 of RBI Act

    • D.

      Sec 26 of Banking Regulation Act

    • E.

      None of the above

    Correct Answer
    B. Sec 35 of Banking Regulation Act
    Explanation
    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.

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  • 22. 

    An industrial company registered for not less than five years have accumulated losses at the end of any financial year , equal to or exceeding its entire net worth.This is known as

    • A.

      Erosion of Net Worth

    • B.

      Negative Net Worth

    • C.

      Break Even

    • D.

      Sick Industrial Company under SICA Act 1985

    • E.

      Company to be put under nursing / rehabilitation programme

    Correct Answer
    D. Sick Industrial Company under SICA Act 1985
    Explanation
    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.

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  • 23. 

    What type of action can be brought under Consumer Protection Act against the Bank?

    • A.

      Deficiency of service

    • B.

      Deficiency of service that is fully paid for

    • C.

      Deficiency of service, even if it is partly paid for

    • D.

      Any delay in service

    • E.

      Not Granting Loan in Time

    Correct Answer
    B. Deficiency of service that is fully paid for
    Explanation
    Under the Consumer Protection Act, a consumer can bring an action against a bank for deficiency of service that is fully paid for. This means that if a consumer has paid for a service from the bank and the service is not provided or is not up to the expected standard, they can file a complaint under the Consumer Protection Act. This allows consumers to seek compensation or resolution for any issues they face with fully paid services from the bank.

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  • 24. 

    Why Banks insist for Regd memorandum nowadays?

    • A.

      It is mandatory

    • B.

      To increase the revenue of Govt

    • C.

      To reflect the Bank's name as mortgagee in the Encumberance certificate

    • D.

      To protect the interest of the Bank

    • E.

      A & C above

    Correct Answer
    E. A & C above
    Explanation
    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.

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  • 25. 

    How will you elongate the limitation period of equitable mortgage?

    • A.

      By Supplemental Narration

    • B.

      By Redeposit of Title Deeds

    • C.

      By taking endorsement in the reverse of F 379

    • D.

      By security confirmation letter

    • E.

      By A & B Above

    Correct Answer
    E. By A & B Above
    Explanation
    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.

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  • 26. 

    What is the effect of non registration of a document?

    • A.

      No Effect

    • B.

      Cannot be admitted as evidence

    • C.

      It is statutory

    • D.

      It will not confer right

    • E.

      None of the above

    Correct Answer
    B. Cannot be admitted as evidence
    Explanation
    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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  • 27. 

    What is the format in our Bank for obtaining debit confirmation letter from guarantor?

    • A.

      F 237

    • B.

      F 237 A

    • C.

      F 301 B

    • D.

      F 16

    • E.

      F 301

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

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  • 28. 

    The comprehensive document in our Bank which covers hypothecation of goods / Machinery/ Book Debts is _ ____ _

    Correct Answer
    F 110 E
    f 110 e
    Explanation
    The comprehensive document in our Bank which covers hypothecation of goods, machinery, and book debts is F 110 E or f 110 e.

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  • 29. 

    What is Limited Liability Partnership?

    • A.

      The LLP will be a separate legal entity, liable to the full extent of its assets.LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.

    • B.

      The liability of the partners would be limited to their agreed contribution in the LLP

    • C.

      No partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner�s wrongful business decisions or misconduct

    • D.

      There is no maximum limit in the number of partners

    • E.

      All the above

    Correct Answer
    E. All the above
    Explanation
    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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  • 30. 

    How the Bank can revive the time Barred debt?

    • A.

      By granting fresh loan after adjusting the original loan

    • B.

      By taking express promissory note and adequately stamping it

    • C.

      By taking revivival letters for the broken periods

    • D.

      By verifying the reapyment vouchers in the loan and if he has remitted under his isgnature, limitation will run from that date

    • E.

      All the above

    Correct Answer
    E. All the above
    Explanation
    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.

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  • 31. 

    A garnishee order has been received attaching the TDR of a firm.The TDR has been taken as a security for a Bank Guarantee issued by the Bank on behalf of the firm.The Branch Manager wants to set off the deposit for the guarantee and does not want to honour the garnishee order. He has referred to you at Regional Office.Please guide

    • A.

      We will refer to Central Office as there are no guidelines vailable in Banks Book of Instructions.

    • B.

      Right of Set Off cannot be exercised for contingent liability aginst the debt of the firm.

    • C.

      However the deposit is payable only on the date of maturity to meet the garnishee order.

    • D.

      B and C above

    • E.

      We concur the opinion of Branch Manager and advise him to proceed further.

    Correct Answer
    D. B and C above
    Explanation
    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.

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  • 32. 

    In Terms of Sec 370 of Indian Succession Act, a succession certificate is apllicable to

    • A.

      Liabilities

    • B.

      Assets

    • C.

      Contingent Liability

    • D.

      Debts and Securities

    • E.

      All the above

    Correct Answer
    D. Debts and Securities
    Explanation
    According to Section 370 of the Indian Succession Act, a succession certificate can be applied for debts and securities. This means that if a person passes away and leaves behind debts or securities, the successor can obtain a succession certificate to claim and manage these assets. The succession certificate serves as proof of the successor's entitlement to the debts and securities left by the deceased.

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  • 33. 

    The Probate issued by which court is valid throughout India irrespective of the value of property as per Sec 223 of Indian Succession Act?

    • A.

      Munsiff Court

    • B.

      Sub Court

    • C.

      District Sessions Court

    • D.

      High Court

    • E.

      Supreme Court

    Correct Answer
    D. High Court
    Explanation
    The Probate issued by the High Court is valid throughout India irrespective of the value of property as per Section 223 of the Indian Succession Act. This means that the Probate granted by the High Court has legal authority and recognition in all parts of the country, regardless of the worth of the property involved.

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  • 34. 

    What is satisfaction of charge?

    • A.

      If all terms and conditions are satisfactorily met as specified in the charge documents, it is called as satisfaction of charge.

    • B.

      The satisfactory reply given by the delinquent employee to the charge sheet given to him by the management

    • C.

      After repayment of all loans granted to the limited company we have to remove the charge we have created at the ROC by filing Form 17

    • D.

      Satisfaction of a particular charge like hypothecation or mortgage by the limited company and recording the same thereof at ROC

    • E.

      None of the above

    Correct Answer
    C. After repayment of all loans granted to the limited company we have to remove the charge we have created at the ROC by filing Form 17
  • 35. 

    A SB account is in the name of " Mr X and or Mr Y" with E or S mandate. A cheque favouring Z was signed by X for Rs 5000/= but it was altered as Rs8000/= by Mr Y is presented across the counter for payment.The clerk seeks your valuable guidance.

    • A.

      Refuse Payment as alteration should be done by the same person who originally signed the cheque.

    • B.

      Better to call for the confirmation of MR X alongside the alteration and then pay.

    • C.

      Refer to Law Officer at Regional Office over phone and pay.

    • D.

      Take the second signature of accountant and thereafter pay.

    • E.

      None of the above

    Correct Answer
    E. None of the above
    Explanation
    The correct answer is "Refuse Payment as alteration should be done by the same person who originally signed the cheque." This is because according to banking rules, any alteration made on a cheque should be done by the same person who originally signed it. In this case, Mr. Y altered the cheque signed by Mr. X, which is not allowed. Therefore, the clerk should refuse payment and seek further guidance on how to proceed.

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  • 36. 

    What is the procedure for filing of charge with ROC at present?

    • A.

      Send Form 8 and Form 13 duly filled in alonwith xerox copies of charge creating documents and the requisite fee to ROC of jurisdiction by registered

    • B.

      At present only E Filing of charges by adding digital signature of the comapny and bank alongwith scanned copies of charge creating documents.

    • C.

      Only through the comapny's auditor who will produce the charge certificate

    • D.

      We can employ consultants for this job for a small fee

    • E.

      We have to visit the ROC in person and do it

    Correct Answer
    B. At present only E Filing of charges by adding digital signature of the comapny and bank alongwith scanned copies of charge creating documents.
  • 37. 

    What is the effect of Non Registration of Charge with ROC in case of Limited company advances?

    • A.

      Our charge on the assets will become void against the liquidator of the comapny also against the other creditors.

    • B.

      Though the company is bound by the charge, the liquidator is not bound by the same and the Bank will rank as an unsecured creditor alongwith other

    • C.

      Charge can be subsequently registered with payment of penalty

    • D.

      A & B above

    • E.

      None of the above

    Correct Answer
    D. A & B above
    Explanation
    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.

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  • 38. 

    A customer was arrested in a cheating case.The Public Prosecutor informs the Bank of the arrest and request the Bank to stop operations in the arrested person's account.Meanwhile cheque signed by the person is oresented across the counter fo Rs 10000/- and there is sufficient balance in the account.The clerk refers the matter to you for a decision.

    • A.

      Matter now sub judice.We should not pass the cheque.

    • B.

      If we pass the cheque without taking into account the information given by the Public Prosecutor, we may also be accused of complicity and then arrested.

    • C.

      As per NI Act, the arrest of a person will not result in stopping operation in the account.Cheque can be passed.

    • D.

      Refer to Law Officer at Regional Office

    • E.

      Refer to Panel Lawyer.

    Correct Answer
    C. As per NI Act, the arrest of a person will not result in stopping operation in the account.Cheque can be passed.
    Explanation
    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.

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  • 39. 

    What is doctrine of Inddor Management?

    • A.

      Management Philosophy propunded by Peter Druckker which says knowledge coupled with motivation will bring better results

    • B.

      It is a theory developed by Stephen R Covey on Team Spirit,Leadership and Time Management

    • C.

      It is the Marketing guru Zig Zaglar's idea of greater targets will bring great efforts

    • D.

      C.K.Prahlad's Corporate Governance Policy wherein Middle Level Shop Floor Engineers are trained in house in the art of Management

    • E.

      This is related to Memorandum and Article of Association of a company

    Correct Answer
    E. This is related to Memorandum and Article of Association of a company
  • 40. 

    The insurance document is

    • A.

      An indemnity

    • B.

      An Affidavit

    • C.

      A Guarantee

    • D.

      An Actionable Claim with a Contingent Liability for the deposit taker

    • E.

      Contract of utmost good faith

    Correct Answer
    E. Contract of utmost good faith
    Explanation
    The correct answer is "Contract of utmost good faith." A contract of utmost good faith is a principle in insurance that requires both the insurer and the insured to disclose all relevant information honestly and accurately. This means that both parties must act in good faith and provide complete and truthful information to each other. This principle ensures that there is transparency and fairness in the insurance agreement, allowing both parties to make informed decisions and avoid any potential disputes or misunderstandings.

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  • 41. 

    While lending to a limited company we want to verify whether the company has the powers to Borrow Money, requested under the proposal.Where will you search for the same?

    • A.

      The auditor will search for the prior charges in the Registrar of companies and submit a search report to confirm that there are no prior charges.After our lending and creation of charge, we will call for second search report to confirm that we are the sole charge holders.

    • B.

      Certificate of Incorporation

    • C.

      In the Power of Attorney given to the Managing Director

    • D.

      Memorandum of Association

    • E.

      Articles of Association

    Correct Answer
    E. Articles of Association
    Explanation
    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.

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  • 42. 

    What is a Probate?

    • A.

      Will attested by Notary Public

    • B.

      Will Registered at the Registrar of Assuarances

    • C.

      Will Affirmed by the Testator

    • D.

      Intestate

    • E.

      Authorisation given by the court to give effect to the will.

    Correct Answer
    E. Authorisation given by the court to give effect to the will.
    Explanation
    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.

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  • 43. 

    The Ceiling on advances against company shares is prescribed under

    • A.

      Sec 19 of BR act

    • B.

      Lenders Liability Act

    • C.

      Sec 14 of Companies Act

    • D.

      Sec 31 of RBI Act

    • E.

      None of the above

    Correct Answer
    A. Sec 19 of BR act
    Explanation
    The correct answer is Sec 19 of BR act. This section of the Banking Regulation Act prescribes the ceiling on advances against company shares. It sets the limit on the amount of money that banks can lend against shares held by companies. This provision is important for regulating the lending practices of banks and ensuring the stability of the financial system.

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  • 44. 

    Banker comes to know that the security hypothecated for an advance is likely to be disposed off by the customer. What action is to be taken by the Bank?

    • A.

      File a police complaint

    • B.

      File a suit in court to enforce collateral security.

    • C.

      Remain helpless

    • D.

      Convert Hypothecation into Pledge and take possession.

    • E.

      Employ Recovery Agents and teach a borrower a strong lesson.

    Correct Answer
    D. Convert Hypothecation into Pledge and take possession.
    Explanation
    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.

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  • 45. 

    It is a letter given by a company to their financing banker under taking not to charge any of their assets to any other financial institution or bank. What is its name?

    • A.

      No Lien Letter

    • B.

      Negative Lien

    • C.

      Specific or Particular Lien

    • D.

      Unavailed Bankers Lien

    • E.

      Letter of Estoppel

    Correct Answer
    B. Negative Lien
    Explanation
    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.

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  • 46. 

    A cheque is presented across the counter after the death of POA holder who had signed the cheque. The Principal (A/C holder) is alive. The cheque is referred to you by the counter clerk.Please convey your decision.

    • A.

      As the signatory has passed away, there is no mandate for the Bank to pass the cheque.

    • B.

      Can be passed subject to availability of funds inthe account.

    • C.

      We can refer to Law Deaprtment at Regional Office and then decide.

    • D.

      Safely return the cheque with the reason "Signature differs with Specimen provided to Bank"

    • E.

      None of the above

    Correct Answer
    B. Can be passed subject to availability of funds inthe account.
    Explanation
    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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  • 47. 

    Why insurance of stocks is done in the joint names of the Bank and the borrower?

    • A.

      Bank has insurable interest in the stock as creditor.

    • B.

      This will enable the Bank to make a claim directly to the insurance company in case of loss

    • C.

      Doctrine of "Uberimo Fidaei"

    • D.

      All the above

    • E.

      A & B above

    Correct Answer
    E. A & B above
    Explanation
    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.

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  • 48. 

    What is the repercussion of lending to an unregistered partnership firm?

    • A.

      Bank cannot sue the firm for nonpayment of debt.

    • B.

      Others can sue the firm.

    • C.

      Bank cannot sue the counterparties of the firm

    • D.

      Firm cannot sue their debtors for recovery

    • E.

      An unregistered Partnership firm is not a legal entity and any contract entered with it is "ab initio void" in the eyes of law.

    Correct Answer
    D. Firm cannot sue their debtors for recovery
    Explanation
    Since an unregistered partnership firm is not a legal entity, it does not have the legal standing to sue its debtors for recovery. Without registration, the firm does not have the necessary legal recognition and protection to enforce its rights in court. Therefore, the correct answer is that the firm cannot sue their debtors for recovery.

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  • 49. 

    Why Banks prefer Hypothecation Charge while lending to companies, in stead of pledge?

    • A.

      Under Sec 125 of Companies Act, Hypothecation cane be registered with ROC which serves as notice to third parties.

    • B.

      There is no provision to register pledge with ROC under Companies Act.

    • C.

      Companies do not prefer pledge as they require the goods anytime because of the high volume of transaction.

    • D.

      All the above

    • E.

      A & B above

    Correct Answer
    E. A & B above
    Explanation
    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.

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  • 50. 

    What is the liability of introducer of the bank account in case of fraud committed against the Bank by the account holder?

    • A.

      None under NI Act.

    • B.

      Under Criminal Law,KYC/AML the introducer can be subjected to investigation.

    • C.

      Introduction is only a formality without any implications.

    • D.

      A & B above

    • E.

      All the above

    Correct Answer
    D. A & B above
    Explanation
    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.

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  • Mar 21, 2023
    Quiz Edited by
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  • Feb 23, 2011
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