1 Assignment

Corporate Banking and credit Appraisal

Open Book Practice assignment –Corporate Banking 2019

SECTION : A MCQs

1. "Banking Company" is defined as per:

a) Reserve Bank of India Act, 1935

b) Banking Regulation Act, 1949

c) Both of the above

d) None of the above

2. A "Banking Company" means

a) Any company which accepts the deposits of money from public for the
purpose of financing its business

b) Any NBFC raising deposits from pubic and also lending to public.
c) Any company which transacts the business of banking in India

d) All of the above

e) none of the above

3. Which one is a unique feature of banking compared to any other financial institutions?

a) Accepting of deposits from the public

b) Lending of funds

c) Investment of funds
d) Allowing withdrawal of deposits by cheques

e) All of the above

4. Which one is correct to become a a 'Scheduled Bank'

a) A bank included in the Banking Schedule of the RBI Act, 1934.

b) A bank included in the Schedule 2 of the Banking Regulation Act, 1934.

c) It must have a paid up capital and reserves of an aggregate value of not less
than Rs.500 lakh;
d) Its affairs are not being conducted in a manner detrimental to the interests of its
shareholders;
e) Must be any of the following: Indian or Foreign Commercial Bank, State
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 Cooperative Bank, Urban Cooperative Bank, Regional Rural Bank.

5. Which one is a liability of becoming a "Scheduled Bank”

a) Becomes eligible for availing of facility of loan assistance from RBI.

b) Enjoys reputation as well run and regulated bank

c) Has to maintain CRR and SLR with RBI

d) None of the above

e) All of the above

6. Which one is a characteristic of Corporate Loans?

a) High operational cost of larger value but smaller number of loans

b) Corporate Loans are less Risky because of economic cycles

c) Corporate loans have much lower NPAs and Losses

d) All of the above

e) None of the above

7. Which one is correct is respect of Bill of Exchange:

a) It is a negotiable instrument governed by Bill of Exchange Act 1988

b) It is an instrument in writing, to pay a certain sum of money to a certain person or
to the bearer of the instrument.
c) It is used to settle a trade payment or debt.

d) Buyer draws a bill of exchange on seller of goods to make payment to his bank named
in the Bill of Exchange.

e) Once accepted, it creates legal liability on the drawer for payment.

8. Which one is correct in respect of bill of exchange?

a) A bill of exchange payable on the presentation of the bill to the drawee is called
a “Presentation bill”.
b) Demand bill is payable within 24 hours on demand on the drawee.

c) A B/E payable after a certain period mentioned on the bill is called Usance bill
d) A B/E payable any time before or after the date of bill is called Time Bill.

e) None of the above

9. Which one is correct in respect of a Documentary Bill of Exchange?

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 a) Accompanied by Invoice
b) Accompanied by Packing list

c) Accompanied by Airway Bill

d) Accompanied by Inspection certificate

e) Accompanied by Quality Certificate

10. Which one is correct in respect of a Clean Bill:

a) A bill not accompanied by any documents like invoice, packing list, quality
certificate, inspection certificate.

b) In case of a clean bill, the documents of title to goods with other documents if
any, must be sent to the buyer, through the seller’s bank only.

c) Clean bill is drawn when the seller has total faith on buyer about payment of
goods in time as per past experience.

d) Clean bill is drawn when full advance payment has not been received by the
seller.

e) All of the above

11. Which one is correct in respect of a bill of exchange?

a) DP terms mean the release of documents of title to goods against acceptance of bill
b) DA terms mean the release of documents against payment of bill.

c) Bill of exchange can be used to settle payment of trade transactions and not for
settlement of debt.

d) It facilitates for the seller in getting bills drawn on buyer discounted

from the bank to improve cash flow for operations.

12. Which one is correct in respect of a bill of exchange?

a) The Bank buys the bill before it is due and credits the value of the bill less a
discount charge to the customer's account.

b) The discount represents the interest on the advance from the date of purchase
of the bill until it is paid.

c) Usance bill is discounted against the legal liability of the drawee of the bill of
exchange who accepted the bill and his financial standing as per its credit report.

d) The transaction is an advance against the security of the goods covered by the
documents of title to goods with the documentary Usance bill

e) All of the above

f) none of the above

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 13. The extent of amount the Bank advances against value of the bill depends on

a) The past record of the bank’s customer (the drawer of the bill)
b) The reputation and financial standing of the buyer (drawee of the bill) as
reflected by credit report from its banker
c) The % margin (borrower’s contribution) fixed by the bank

d) All of the above

e) None of the above

14. Which one is correct for discounting of a sales bill of exchange?

a) A bill must be a demand bill.

b) Has been accepted by the drawer or its bank jointly.

c) The Banks normally do not discount genuine trade bills.

d) Banks majorly discount the sales bills of the company drawn on reputed buyers.

e) none of the above

SECTION - B
Mark following statements as True and False

Sr Statement T F

a An overdraft is a facility whereby a company borrower can overdraw their

savings account up to a pre-approved limit.
b Overdraft is an efficient form of borrowing

c Interest is calculated daily on the end of the day balance but charged at the
end of the year.
d OD amounts fluctuate between debit and credit over a period that depends
on the nature of business.
e Cash credit account is not as efficient form of borrowing as the Overdraft

f Cash credit and overdraft facilities are granted for a period up to one year
g Cash credit line can be granted against stocks of goods or debtors or both
h Term loan account is as efficient form of borrowing as the overdraft line
i Once Term Loan limit is fully availed, there will be no debits other than
interest and service charges debits in the term loan account,
J Cash credit account can fluctuate between credit and debit balance
depending upon the need of the borrower to draw funds or deposit sale
proceeds realized.

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k Overdraft is granted against security of shares/bonds/Fixed deposits or it can
be sometimes clean advance for reputed corporate borrowers
l Drawing Power (DP) is the value of paid and current stocks eligible for DP or
the credit line/limit whichever is higher.
m Banks give loan/advance against the security of old stocks because these can
sold quickly in case of default by borrower
n Banks do not give credit line against the security of unpaid stocks because it
will become double financing and over financing as one of the reasons.
0 Banks do not give credit line against the security of unpaid stocks because
the unpaid seller has the first charge on unpaid stocks and bank cannot sell
them in case of default of borrower as one of the reasons.