Banking Licensing and Credit Control Quiz

Banking and Finance

• A banking company whose license is cancelled may appeal to the Central Government.
• The RBI (Reserve Bank of India) controls credit in India.
• RBI grants short, medium, and long-term finance for agricultural purposes.
• The apex institution in agricultural finance is NABARD (National Bank for Agriculture and Rural Development).
• Development banks are institutions that provide term finance to industries.
• IFCI (Industrial Finance Corporation of India) was established in 1948 and has its registered office in New Delhi.
• National Industrial Development Corporation Ltd was established in 1954.
• LIC (Life Insurance Corporation) was set up in 1956.
• ICICI (Industrial Credit and Investment Corporation of India) was incorporated in 1955.

Negotiable Instruments

• Negotiable instruments are defined under Section 13 of the Negotiable Instruments Act, 1881.
• The maker is primarily liable on a promissory note.
• A cheque is always payable on demand.
• The banking which attracts deposits and lending for only short periods is known as commercial banking.
• Deposit banking is also called commercial banking.

RBI and Banking

• Every scheduled bank has to maintain with RBI a cash balance equivalent of all the deposit liabilities called the cash reserve ratio.
• In 1969, 14 banks were nationalized.
• In 1980, 6 banks were nationalized.
• The SBI (State Bank of India) acts as an agent of the RBI.
• The Nayak Committee recommended the establishment of private sector banks in India.
• RBI was set up in 1935 and has been constituted as a corporate body having perpetual succession and a common seal.
• The Indian money market is the market in which short-term funds are borrowed and lent.

Banking Operations

• The bill market first developed in London.
• The obligation of a banker to honour his customer's cheque is extinguished on receipt of an order of the court, known as a garnishee order.
• The drawer can cancel the crossing on a cheque.
• A banker should not refuse payment of a cheque if the cheque contains an apparent material alteration which is not properly authenticated by the drawer.
• The acceptor for honour bears the liability similar to the person for whose honour he accepts the bill.
• The cause of dishonour of a cheque must be insufficiency of funds in the account.
• REPO facility means borrowing against securities on repurchase basis.
• Aggregate capital market exposure for banks is prescribed as 40% of net worth.
• The best-suited deposit for the trading community is a current deposit.

Pledge and Security

• A pledge can be made in respect of shares.
• A collecting banker is given the statutory protection only when he acts as a holder in due course.
• The law of limitation applies to a savings deposit account from the date of demanding it.
• The most liquid asset is cash.

Other Banking Concepts

• Discounting of bills of exchange is a clean advance.
• Expansion of SWIFT is Society for Worldwide Interbank Financial Telecommunication.
• Expansion of NEFT is National Electronic Fund Transfer.
• Expansion of SBI is State Bank of India.
• A negotiable instrument not drawn or made in India is called a foreign instrument.
• A term loan is not secured by a pledge of goods.
• According to Section 19(b) of the Banking Regulation Act, a bank can hold shares in a company not exceeding 30%.
• For issuing a duplicate demand draft, the purchaser is required to submit an indemnity bond.
• The relationship between the hirer of a locker and banker is that of lessee and lessor.
• A debit card holder makes payment for purchases immediately through his account.
• Credit information furnished by a credit information company to a bank can be used by it for taking credit decisions.