jaiib caiib exams

LEGAL ASPECTS OF BANKING

01.
a)
b)
c)
d)

A Blue Chip means

Excellent Management Professional
Shares of good Companies
Reinforced Concrete
Blue Coloured Precious Stones

02.
a)
b)
c)
d)
e)

A Bridge finance is extended for overcoming

Delay in getting of the public issue
Delay in disbursement of term loan
Delay in disbursement of working capital for completing the documentation
For A & B
A, B & C

03.

As per SEBI guidelines , any entity /person engaged in the marketing and
selling of mutual funds products is required to pass a certification test and
obtain a registration number from case of
SEBI (Securities and Exchange Board of India)
AMFI (Association of Mutual Funds in India )
NSE (National Stock Exchange)
A, B & C

a)
b)
c)
d)
04.
a)
b)
c)
d)

Interest charged in advance accounts as per RBI directive can not be subject
to scrutiny by court. This is provided in
Section 35A of BR Act
Section 21(A) of BR Act
Of BR Act
Section 26 of RBI Act

05.
a)
b)
c)
d)

A floating charge means

Charge at the time or before the company is floated
Charge on all floating assets of the company
An equitable charge on all assets of the company
Any of the above.

06.

The charge by way of lien over goods belonging to a company must be

registered with Registrar of Companies within a period of
30 days of creation of law
This charge need not be registered as this is not hypothecation, mortgage etc
30 days of default in repayment
A or C whichever is earlier

a)
b)
c)
d)

07.
a)
b)
c)
d)

Hypothecation is defined in
Hypothecation Act
Indian Contract Act
Transfer of Property Act
SARFAESI Act

08.

The State Govt. wants to seize the goods pledged to bank as the borrower has
defaulted in payment of tax. In this case,
Govt dues enjoys priority over bank dues
Bank dues enjoys priority over Government dues
Both enjoys equal priority
The Government cannot seize the goods.

a)
b)
c)
d)
09.

The auctionable claim is assigned in favour of more than one assignee at

different points of time. The priority of charge is determined with reference
to date of

a)
b)
c)
d)

Execution of notice of assignment

Execution of the written instrument for assignment
Receipt of notice of assignment
NoA

10.

A Mortgage cannot be enforced in the absence of

a)
b)
c)
d)

Delivery of the title deeds

Legal Opinion
Narration in Title deeds register
Pecuniary obligation.

11.
a)
b)
c)
d)

A simple mortgage need be registered when

The Loan amount exceed Rs.100/Value of mortgaged property exceeds Rs.100/A or B whichever exceeds Rs.100/Both A & B

12.
a)
b)
c)
d)

A Mortgage of the mortgaged property is called

Sub-mortgage
Second Mortgage
Re-mortgage
Fraudulent Mortgage

13.
a)
b)
c)
d)

For determining the advance amount the shares will be valued on the basis of
Current market price
Average market price for the last 12 months
Face Value
A or B whichever is lower.

14.

Assignment of LIC policy is done as per section of . Act.

a)
b)
c)
d)

132 of Transfer of Property Act

38, Indian Insurance Act 1938
138 of Contract Act
NOA

15.
a)
b)
c)
d)

Government Promissory notes should be sent to public debt office to confirm

genuiness of
The Promissory note
Endorsement
Alternations, if any
All the above.

16.
a)
b)
c)
d)

Gold Loans are given only to properly introduced persons because of

RBIs directives
Bank will lose the right to sell the gold if the pledgees title is defective
Sec.131 of Negotiable Instrument Act
All the above.

17.
a)
18.
a)
b)
c)
d)

Reserve created out of profit from business operation is known as

Capital Reserve
b)
Profit Reserve
c)
Revenue Reserve
d)
Free Reserve
The following is a Term Liability
Debentures payable within a year from the date of Balance Sheet
Preference Shares payable within a period of one year from the date of
Balance Sheet
Term Loan instalments payable in a year
Deposit from public payable in 2 years time.
19.

a)
b)
c)
d)
a)
b)
c)
d)

Investment in Shares of other companies can be classified as Current

Asset only when the
shares are
Quoted
Relate to trade investment
A &B
Shares cannot be classified as Current Assets

20.
The following is not usually classified as Other Non Current Assets
Advance given to Directors
Tender Deposit
Receivable outstanding beyond 12 months
Preliminary and Pre operative expenses
21.

A unit is showing a net profit of Rs.46,000/-. Dividend received

Rs.8000/-. Operating
expenses is Rs.96000/-. Find the gross profit
a)
134000
b) 150000
c) 142000

22.

A firm paid Rs.16 lacs for purchase of a business with machinery worth
Rs.10 lacs and

a)
b)
c)
d)

other assets worth Rs.4 lacs. In this case the difference of Rs.2 lacs is
treated as
P&L Loss on purchase of asset
Goodwill Intangible Asset
Fixed Asset by inflating the value of fixed asset
Current Asset by inflating the value of current asset
23.

a)
b)
c)
d)
a)
b)
c)
d)
25.

If a sum of Rs10,000/accumulates to Rs16,000/after 3 years at simple

Interest , what is the rate of Interest.
16%
25%
23%
20%

24.
The Net Working Capital refers to
Liquid surplus
Borrowers Contributions from long term source to short term use
Excess Current Asset over Current Liability
All the above.

a)
b)
c)
d)

The duration of an operating cycle in 30 days. The operating cycle in this

case repeats. times a year
30 times
12 times
10 times
52 times

26.
a)
b)
c)
d)

The following is not a chargeable current assets

Book debt
Spares
Work in process
Construction work in progress

27.

As per RBI guidelines, a bank is required to assess the working capital on the
basis of the following method
Turnover Method
Cash Budget Method
MPBF of Tandon Method
Any Method as decided by the individual banks

a)
b)
c)
d)
28.
a)
b)
c)
d)
29.
a)

As per the Second method of lending the borrowers contribution from long
term source
is minimum 25% of total current assets
is restricted to 25% of working capital gap
is 25% of other current liabilities
any amount which the unit can bring
Total Current Asset of a unit is Rs.300 lacs. Other Current Liabilities is Rs.200
lacs. The MPBF as per Ist Method & 2nd method can be
75 and 25 lacs

b)
c)
d)

25 lacs and 75 lacs

Rs.100 lacs & Rs.150 lacs
Rs.20 lacs & Rs.80 lacs

30.

A borrower need not bring any matching contribution from long term sources
in respect of
Export Receivables
Finished goods produced for a specific export order
Adhoc limits
A&B

a)
b)
c)
d)

a)
b)
c)
d)
a)
b)
c)
d)

a)
b)
c)
d)

31
A Company makes a single product with a sales price of Rs.10/- and
a marginal cost of
Rs.6/-. Fixed Cost are Rs.60000/- p.a. In this case,
Number of units at break even
15000
10000
6000
none of the above.

a)
b)
c)
d)

32.
In the above problem, Profit Volume Ratio
30%
40%
50%
60%

33. The long term use is 120% of long term source. This indicates the unit
has
CR 1.2
Negative TNW
Low Capital
Negative NWC
34. Tangible Networth is computed by
Total Tangible Asset less outside liabilities
Capital, free reserves & surplus less Intangible Asset
Networth less Intangible Asset
All the above.
35. A company has a networth of Rs.5 lacs. Term liability Rs.10 lacs, Fixed Asset
of Rs.16 lacs and Current Asset Rs.25 lacs. There is no intangible asset or
ONCA. It's net working capital is
a) Rs. 10 lakhs
b) Rs. 1 lakh
c) Rs. 9 lakh
d) Rs. (-) 1 lakh

a)

36.
Financial leverage means
use leveraged lease to plan tax liability

b)
c)
d)
a)
b)
c)
d)

High degree of solvency

Law bank finance
Use of more debt capital to increase profit.
37.
Diversion means
Diversifying to activities not related to main business
Retrenching employees
Use of Current Assets for payment of Term Liability
Use of Current Liabilities for long term use
Examine the following balance sheet to answer the question
thereafter:
Liability
Equity Capital
Block

Asset
200

Gross

1000
Less: Dep

Preference
Block
Term loan
Bank
Overdraft
security
50
Sundry
expenses

Share
800

Capital
600
400

Creditors
------1400

a)
b)
c)
d)

38.
Capital Gearing Ratio
0.78
1.20
0.67
0.87
39.
Debt Equity Ratio is
2:1
3:1
4:1
1:1

a)
b)
c)
d)

40.
Total Outside Liability/TNW
3.67:1
5.50:1
12 : 1
6:1
41.

Inventory
Investment
100

Net

in

300
Govt.

Preliminary

100

0
-----

a)
b)
c)
d)

200
------100

Net working capital

Receivables

15
-140

a)
b)
c)
d)

100
NIL
200
Cannot be calculated

42.
Quick Ratio
a) 0.4:1
b) 2.1:1
c) 1.5:1
d)
1:1
a)
b)
c)
d)
44.

43.
Total Tangible Asset
1400
1300
1500
1600

a)
b)
c)
d)

Opening stock of raw material is Rs.30 lacs, closing stock is Rs.50

lacs. Annual purchase is Rs.500 lacs. What is the average period of holding
of Raw Materials?
2M
1.5 M
1M
NOA

45.
a)
b)
c)
d)

Holding period of Receivables is calculated with reference to

Cost of Sales
Cost of Production
Gross Sales
NOA.

46.
a)
b)
c)
d)

Creditors Velocity expresses the

Maximum period for which credit is given
Average period of credit enjoyed
Minimum period of credit given
Minimum period for which credit enjoyed.

47.
a)
b)
c)
d)

The following is a Means of Finance for the cost of project

Leasing
Subsidy
Deferred Credit from Suppliers
All the above.

48.

For a large and medium units DSCR should be

a)
Maximum 2:1
(b)
Maximum 1.5:1
c)
Minimum 2:1
(d)
Minimum 1.5:1
49.

a)
b)

Variable Cost and Sale Price remaining the same, a rise in fixed cost result
in
High BEP ( High Break even point)
Low BEP

c)
d)

High Margin of Safety

B&C
50.

a)
b)
c)
d)

What is the formula for charging compound interest with Annual

Compounding.
I = Pnr
P+I
A = P( 1+r)n
Any of the 3

51.
a)
b)
c)
d)

What is the minimum period to be allowed to drawee to decide on

acceptance / rejections of
a usance bill
2 Days
48 Hours
48 Hrs including public holidays
48 hrs excluding public holidays

52.
a)
b)
c)
d)

Ramesh deposited Rs 10,000/ for 3 years . The Interest is compounded

annually at 10% . What will be the amount receivable by Ramesh at the end
of 3 year period.
13,310
13,000
12,000
13,300

53.
a)
b)
c)
d)
a)
b)
c)
d)

a)
b)
c)
d)
a)
b)
c)
d)

While calculating the value of (1+.10)3 (to the power of 3) the same can
be calculated
manually
using calculator
using MS Excel
all the above

54. Annuities are

The annual interest payable or receivable in a debt or an investment.
Lumpsum payment made any time during the course of a fixed period of time.
The total amount payable annually in respect of a debt or investment
Series of payments (many number of cash flows) made at a specified
frequency over the course of a fixed period of time
55. An Annuity is an ordinary Annuity if,
Payments are required to be made at the beginning of each period.
Payments are required to be made at the middle of each period
Payments are required to be made at ordinary installments
Payments are required to be made at the end of each period.
56. The Marine Insurance Policy should be expressed in
Rupees
US Dollars
Same Currency in which the LC is drawn
Any foreign currency.

57.
a)
b)
c)
d)
a)
b)
c)
d)

The discount rate which equals the present value of promised flow to the
current market
price /purchase price. This is known as
Yield to maturity
NPV
IRR
Treasury bills

58. The value which the bond holder gets on maturity is called
Maturity value
NAV
the redemption value
IRR
59.

a)
b)
c)
d)

This is the amount by which an asset is expected to lose its value. What is
this
Market value
Wear and tear
Depreciation
NAP

60.
a)
b)
c)
d)

EEFC can be opened in

Rupees
Any one of the four designated currencies
One of the permitted currencies
AMUS

61.

A method of calculating depreciation of an asset , which assumes that the

asset will lose an equal amount of value each year is known as
Salvage value
Depreciation
Straight line Method of calculation
Accumulated Depreciation

a)
b)
c)
d)

62.
a)
b)
c)
d)

A credit facility will be classified as NPA if remains past due for one
quarter
Interest
Instalment
A or B
A&B

63.
a)
b)
c)
d)

As per Prudential Accounting Norms prescribed by RBI, assets are classified

into type
3
8
4
5

64.
a)

The home currency price of one unit of a foreign currency is quoted eg

USD 1 = Rs43.20
Indirect quotation

b)
c)
d)

Exchange rate
Rate of USD
Direct quotation

65.
a)
b)
c)
d)

If the rate of a currency A is known in terms of currency B and rate of

Currency B in terms of Currency C , we can derive the rate of currency A
interms of Currency C using the technique of cross currency.
Exchange rate
Cross rate
Forward rate
None of the above

66.
a)
b)
c)
d)

As per NABARD guidelines the minimum Internal Rate of Return for

Agricultural Project is
15%
25%
30%
18%

67.
a)
b)
c)
d)

In case of Direct quotation if the forward rate is more than spot rate the
base currency is called as being at ----Discount
Forward rate
Spot rate
Premium

68.

An operation by which one can make risk free profits making use of the
interest differentials between two places is called.

a)
b)
c)
d)

Open market operation

Profitability
Free market
Arbitrage

69.
a)
b)
c)
d)

If the forward rate is less than the spot rate the base currency is said to be at
Discount
Premium
At par
None of the above.

70.
a)
b)
c)
d)

The amount which the owner of the business has invested in the firm and can
claim from the firm is known as -----Capital
Loan
Term Loan
Fixed Asset.

71.
a)

The amount which the firm owe to outsiders

Assets

b)
c)
d)

Capital
Liabilities
Intangible assets

72.

A person who owes money to a firm , mostly on account of credit sales of

goods is called.
Creditor
Debtor
Borrower
lender

a)
b)
c)
d)
73.
a)
b)
c)
d)
74.
a)

a)
b)
c)
d)

The balance sheet represents an expansion of the equation as Assets =

Liabilities +Capital This statement is
Cannot be relied
false
Not acceptable
True
Assets minus original capital = Liability
True
b)
False
c)
can be accepted
d)
None of the above.
75. If a firm borrows money its capital would be reduced
This statement is false
This statement is true
The same is acceptable
None of the above
76.

a)
b)
c)
d)

---------- is the value of an established business over and above the value
represented by its tangible assets .
Assets
Liabilities
Goodwill
None of the above.

77.
a)
b)
c)
d)

If the partnership does not mention any method of maintaining capital

account then ------- method of capital has to be used.
Fluctuating capital account
Partners Current account
Capital account
Fixed capital account

78.

The joining of a new person into the existing partnership as a partner is

called
a)
Retirement of a partner
b)
Resolution of a partnership
c)
Good will
d)
Admission of a partner

79.
a)
b)
c)
d)

Under the -------- capital method two accounts are maintained for each
partner viz current account and capital account.
Fixed Capital Method
Fluctuating capital method
Equity capital Method
Preference share capital

80.
a)
b)
c)
d)

As per new guidelines both SLR and non SLR securities are to be classified
into
Held to maturity.
Available for sale
Held for trading
All the above .

81.
a)
b)
c)
d)

Amount of Investment under Securities held to maturity should not exceed

--------- of Banks total investment
Twenty percentage of the Banks total investment (20% of total investment)
Twenty five percentage of the Banks total investment (25% of total
investment)
forty nine percentage of the Banks total investment (49% of total
investment)
forty percentage of the Banks total investment (40 % of total investment)

82.
a)
b)
c)
d)

The form of Balance sheet and Profit and loss account of a Banking
Company is prescribed in forms A and B of -------------- schedule of the
Banking Regulation Act 1949.
Second
Third
First
Fourth

a)
b)
c)
d)

83.
The Companies Act prohibits issue of any preference share that is ----------cumulative
redeemable
both a and b
Irredeemable
84. The capital which is stated in the Memorandum of Association is known as
Memorandum Capital
Paid up capital
Authorised capital
Issued capital

a)
b)
c)
d)

85.
Authorised capital is also known as
Nominal or Registered Capital
Equity capital
Preference share capital
All the above

a)
b)
c)
d)

86.
e)

When shares are issued at higher than the face value of the shares they
are said to be issued at a
a)
Discount b)
Parc)
Premium
None of the above

87.

a)
b)
c)
d)

Issue of shares at a discount should be authorized by the members by

passing a resolution
in the general meeting and resolution of members should specify the
rate of discount
which should not exceed 10% of the face value of the shares Further
this is subject to
Obtention of sanction from Company Law Board
These shares must be issued with in 2 months
Both (a) and (b)
None of the above

88.

a)
b)
c)
d)

According to section 79A inserted by Companies Amendment Act 1999

--------- shares
means equity shares issued by the company to employees or directors at
a discount or
for consideration other than cash for providing know how or making
available right in the
intellectual property rights or value addition, by whatever name called.
Employees stock option
Equity shares
Sweat equity
None of the above.

89.

a)
b)
c)
d)

A scheme under which the company grants option (A right but not an
obligation ) to an
employee to apply for shares of the company at a pre determined price is
known as
Employees Stock Option Scheme (ESOS)
Equity shares
Sweat Equity
None of the above.

90.
a)
b)
c)
d)

The formation of a company is governed by the rules and regulations as

contained in
Indian Companies Act
RBI act
BR Act
None of the above.

91.
a)
b)
c)

Profit and Loss Account is one of the Final Accounts prepared by a

Company. What is the
other one.
Schedules to P&L accounts
Balance sheet
Trading Account

d)

None of the above.

a)
b)
c)
d)

92. Liabilities that will arise on the happening of certain event

Current liabilities
Term Liabilities
Contingent Liabilities
None of the above

a)
b)
c)
d)

93. Schedule VI of the Companies Act prescribes the form of

Balance sheet
Trading Account
Balance sheet
None of the above.
94.

a)
b)
c)
d)

A computer Accounting system runs based on a set of instructions called

the software
programmes developed by a person who is a computer software
professional and he is
called ------Programmer
Software Engineer
IT man
None of the above.

95.
a)
b)
c)
d)

a)
b)
c)
d)

Accounting software may be written in any one of the computer

languages such as
Windows, UNIX etc
JAVA C+ etc
COBOL, Foxpro etc
None of the above.

96. Computers are basically classified into

Analogue Computers and Digital computers
Hardware and software
Wipro and Infosysis
All the above
97.
A Customer Service Meet should be organized at every Branch
a) Once in a Fortnight
b) Once in a Quarter
c) Once in a Month
d) Once in a Half-Year
98.
Who cannot file a complaint under Consumer Protection Act?
a) Banks
b) State Government
c) Public Interest Litigation Group
d) Persons receiving services free of charge

99.
Banking Ombudsman is appointed by
a) Central Government / Ministry of Finance
b) State Government
c) IDBI
d) RBI
100. DRT has jurisdiction relating to cases pertaining to Banks, Financial
Institutions with debt
amount of
a) Rs. 1 lakh and above
b) Rs. 5 lakh and above
c) Rs. 10 lakh and above
d) Rs. 20 lakh and above

ANSWERS
1) b

2) d

3) b

4) b

7) d

8) b

9) b

10) d

13) d

14) b

15) d

16) b

19) c

20) d

21) a

22) b

25) b

26) d

27) d

28) a

29) a

30) a

31) a

32) b

33) d

34) d

35) d

36) d

37) d

38) a

39) b

40) b

41) b

42) a

43) b

44) c

45) c

46) b

47) d

48) c

49) a

50) c

51) d

52) a

53) b

54) d

55) d

56) c

57) a

58) c

59) c

60) c

61) c

62) c

63) c

65) b

66) a

67) d

68) d

69) a

70) a

71) c

72) b

73) d

74) b

75) a

76) c

77) d

78) d

79) a

80) d

81) b

82) b

83) d

84) c

85) a

86) c

87) c

88) c

91) b

92) c

93) a

94) a

64) d

5) c
11) a
17) c
23) d

89) a
95) c

6) b
12) a
18) d
24) d

90) a
96) a

97) d

98) d

99) d

100) c

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