JJA Aiiiib B M MA AD DE E S Siim MP PL LE E: Legal & Regulatory Legal & Regulatory Aspects of Banking Aspects of Banking

JAIIB MADE SIMPLE
LEGAL & REGULATORY

ASPECTS OF BANKING
( JA II B PAPE R - 3 )
Version 2.0
(FOR MAY- JUNE 2016 EXAM.)
(A Very useful book for Day to Day Banking and all

Knowledge Based Examinations )
COMP
COMPIL
ILED
ED BY
Sanjay Kumar Trivedy (Divisional Manager )

Canara Bank, Government Link Cell, Nagpur, PGNS Complex, Modi No. 3, First Floor,
Sitabuldi, Nagpur-440012,: 0712 – 2522271,2522272 / 07774069639
E-mail:: linkcellnagpur@canarabank.com; sanjaytrivedy@canarabank.com
E-mail

Preface
Dear Friends,
Banking/Financial sector in our country is witnessing a sea change & banker’s business has
be co me m or e co mp l ex & di f fi c ul t in th i s dr i ve n er a of kn ow
owll e dg e & t ec hn ol og y. Th er e a re
mass retirements happening due to super annuation & many new recruits are joining the Bank.
More than 40% staff strength is newly recruit
recruited
ed in last three to four years. An official
working in the Banking sector has to keep pace with Updated knowledge, skills & attitude, as
the same is requir
required
ed everywher
everywhere.
e. There is need to issue a comprehens
comprehensive
ive book covering all
the aspects so that new recruits get updated very fast without
without referring many voluminou
voluminouss
bo ok s.
This book
book titled “ JAIIB MAD
MADE
E SIMPLE
SIMPLE ” has many un
unique
ique fea
features
tures to it
itss credit & consists
consists
of all topics
topics/syllab
/syllabus
us re
required
quired for JAIIB
JAIIB examination
examination with clear concept
concept & simple
simple language
language
with latest changes during 2015-16 (upto 31.12.2
31.12.2015
015 as per IIBF/ JAIIB exams. requirement)
also includ
included.
ed. This Boo
Book
k is divided into four Mod
Modules
ules namely A,B
A,B,C
,C & D & Practice Teat
Papers / Teat Yourself based on latest IIBF syllabus for JAIIB examination.
The Book also covers the full syllabus

syllabus ( latest ) of JAIIB examination
examination and also recalled
recalled
questions
questions ( on
onee line ap
approach
proach & MCQ ( b based
ased on IIBF
IIBF examination
examination Pattern ) w
will
ill be helpful
helpful
to all aspirants
aspirants who are taking
taking up JAIIB exam
examination
ination
During
Durin g prepara
preparation
tion of this bo
book,
ok, I have receiv
received
ed tremen
tremendous
dous sup
support
port from man
manyy friends
friends &
colleagues
colleagues especially my wife Mrs Renu, who is also a banker, my son Master Ritwiz Aryan
& our clerk Mr Sanjeev V Karamch
Karamchandan
andani.
i. Special thanks to Sri B P Desai Sir (Our Ex. AGM
& now Facul
Faculty
ty on Contract at RSTC
RSTC,, Mumbai ) for vetting & compilation
compilation of this book.
As any work
work will hav
havee scope for so
some
me impro
improvemen
vement,
t, I shall be gra
grateful
teful if any fe
feedback
edback is
pr ov i de d fo r im pr ov e me nt i n co nt en t s of th e bo ok .
I wish you all the best for the written test & hope the study material
material will help in achieving
achieving the
goal.
Place : Mumbai SANJAY KUMAR TRIVEDY

Date : 16.05.
16.05.2016
2016 Divisional Manager, Government Link Cell, Nagpur
Nagpur
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt. Link Cell, Nagpur 1 | P a g e

CONTENTS
TOPIC PAGE NO.
1. ABOUT JAIIB EXAMINATIO

EXAMINATION
N ……………
…………………….
……….………03
………03-04
-04
2. MODU
MODULE
LE : A ( REGU
REGULA
LATI
TION
ONS
S & CO
COMP
MPLI
LIAN
ANCE
CE).
).….
…..0
.05-
5-30
30
3. MODULE
MODULE : (L. A. OF BANKING
BANKING OPERATIONS
OPERATIONS )……..31-58
)……..31-58
4. MOD
ODU
ULE : C ( BA
BANK
NKIN
ING
G RELA
RELATE
TED
D LA
LAW
WS ) .. ....……
……59
59-9
-97
7
5. MODU
MODULE
LE : D ( COM
COMME
MERC
RCIAL
IAL LA
LAWS
WS-- BA
BANK
NKIN
ING
G )...
)...98
98-1
-135
35
6. PRACTICE
PRACTICE TE
TEST
ST PAPERS
PAPERS ..............
....................
......……………
……………136-1
136-173
73
7. ME
MEMOR
MORY
Y BAS
BASED
ED REC
RECALLE
ALLED
D QUESTI
QUESTION
ON ………
………174
174-18
-183
3

ABOUT
ABOUT JAI
JAIIB
IB EXA
EXAMIN
MINATI
ATION
ON
OBJECTIVE: JAIIB aim
aimss at provid
providing
ing re
requir
quired
ed level
level of basic
basic kno
knowl
wledg
edge
e in ban
bankin
king
g and financ
financial
ial ser
servic
vices,
es,
banki
banking
ng tec
techno
hnolog
logy,
y, cus
custom
tomer
er re
rela
latio
tions
ns,, basic
basic accoun
accountan
tancy
cy and leg
legal
al aspect
aspectss necess
necessary
ary for carry
carrying
ing out day
day
to day bankin
banking
g ope
opera
ratio
tions.
ns.
MEDI
ME DIUM
UM OF EXAM
EXAMIN INAT
ATIO N : Eit
ION ithe
herr in Hind
Hindii or Engl
Englis
ish
h
Cut-
Cut-off
off Da
Date
te of Guide
Guideli
lines
nes / Im
Impo
porta
rtant
nt Dev
Devel
elopm
opmen
ents
ts fo
forr Exami
Examinat
natio
ions
ns
In respe
espect
ct of th
the
e exam
examss to be co
cond
nduc
ucte
ted
d by th
the
e In
Inst
stit
itut
ute
e duri
during
ng Ma
Mayy / Ju
June
ne of a ca
cale
lend
ndar
ar year,
ear, inst
instru
ruct
ctio
ions
ns /
guideli
guide lines
nes issued
issued by the regula
regulator
tor(s)
(s) and imp
imporortan
tantt deve
develop
lopme
ments
nts in ban
bankin
kingg and fin
financ
ancee up to 31st
31st
Dece
De cemb
mberer of th
thee pr
prev
eviou
iouss year
year wi
will
ll only
only be cons
consid
ider
ereded for
for th
the
e pu
purp
rpos
osee of incl
inclus
usio
ionn in th
the
e qu
ques
esti
tion
on pa
pape
pers
rs..
In re
resp
spec
instru
ins ect
tructi t of/th
ctions
ons the
e ex
guiexam
guide ams
delin sestoissued
lines beued
iss cond
conduc
byucte
ted
the dre
by th
the
regul e In
gulatoInst
ator(sstit
)itut
r(s) ute
ande imp
duri
during
ngant
import Novem
Nov
ortan embe
t de ber
devel r / De
velopm Dece
opment cemb
entss mberer of
in ban
banki a
ngcale
kingcaand
lend
an ndar
d fiar
finanyear
yece
nance ar,up
,
to 30 June
June of th
that
at ye
year
ar will
will on
only
ly be th
the
e cons
consid
ider
ered
ed for th
thee purp
purpos
ose
e of incl
inclus
usio
ion
n in th
thee qu
ques
esti
tion
on pa perrs.
pape
Refer
Re feren
ence
ce:: IIBF
IIBF Monthly
MonthlyMag Magazi
azine
ne : VISIO
VISION.
N.
PATTER
PATT ERNN OF EXAMIN
EXAMINAT ATIO IONN : Each
Each Quest
Question
ion Paper
Paper will
will con
conta
tain
in app
approx
roxima
imatel
tely
y 12
1200 object
objective
ive typ
type e
mult
mu ltip
iple
le choi
choice
ce ques
questi
tion
ons,s, carr
carryi
ying
ng 100
100 mark
markss in
incl
clud
udin
ingg ques
questi
tion
onss base
based d on case
case st
stud
udyy / case
case le
lets
ts.. The
The
In
Inst
stit
itut
ute
e may,
may, howe
howeve
ver,r, vary
vary th
the
e nunumb
mber
er of ques
questi
tion
onss to be as
aske
kedd for
for a su
subj
bjec
ect.
t. Th
Ther
ere
e will
will NO
NOTT be nenega
gati
tive
ve
marki
mar king
ng for wrong
wrong ans
answewers.
rs.
TYPE
TYPES
S OF QU
QUES
ESTI
TION
ONS
S
120 Obje
120 Objectctiv
ive
e Type
Type Mul
Multi
tipl
ple
e Ch
Choi
oice
ce Ques
Questi
tion
onss - carr
carryi
ying
ng 10
100 0 mark
markss – 12
1200 minu
minutetess an
and
d ques
questi
tion
on wi
will
ll be
based
based on Knowl
Knowledg
edgee Testi
Testing,
ng, Conce
Conceptu
ptual
al Gr
Grasp
asp,, Analyt
Analytica
icall / Logica
Logicall Exp
Exposi
ositio
tion,
n, Pro
Proble
blem
m Sol
Solvin
vingg & Cas
Casee
Analysis.
Typ
Type of Que
uest
stio
ions
ns – Ba
Basi
sica
call
lly
y four
four type
types
s of Mult
Multip
iple
le Ch
Choi
oice
ce Ques
Questi
tion
ons
s aske
asked
d in Exam
Exam of
Which Typ
Type – A : Concnceept base
sed
d Straight Questio
tions ( 70-71 QUES - 0.5 MARKS EACH ) ;
Typ
Ty pe – B : Pro
robl
blem
ems s & Solu
olutio
tions (2
(20-
0-2
25 QUES
UES - 1.0 MA
MARK
RKS
S EACH
EACH);
); Ty
Type
pe – C : App
Appli
lied
ed
theo
theory
ry base
basedd Que
ueststio
ions
ns (1
(10-
0-115 QUES
UES - 2.0
2.0 MAR
ARKSKS EA
EACCH) ; Type
Type – D : Ca
Case
se Stud
tudy & Ca
Case
se--
let
ets
s based
sed Quesesti
tio
ons ( 10-1
10-15 5 QUES
UES - 2.0
2.0 MAR
ARKS
KS EACH
EACH )
QUES
QUESTIO
TIONS
NS MODE
MODELS
LS : TY
TYPE
PES
S OF QU
QUES
ESTI
TION
ONS
S
Type – A : MU
Type MULT LTIPIPLE
LE CHOI
CHOICE CE – QUES
QUESTI TIONONS S & ANSWANSWER ERS S
The
Th e Best
Best Me
Meth thod
od for
for as
asse
sess
ssin
ingg work
workin ingg capi
capita tall li
limi
mitt us
useded by ththe e bank
bank forfor seas
season onal
al Indu
Induststri
ries
es is :
1. Ope
perarati
ting
ng CyCycl
cle
e Me
Meththod
od,, 2. Proj
Projecectetedd Ne
Netw twororki
king
ng Me
Meth thod
od,, 3. Proj
Projececteted d Turn
Turn over
over Me
Meththodod & 4. Ca Cash
sh
Budget
Budg et Method
Type
Ty pe – B : MUL
MULTI TIPLPLE
E CH
CHOIOICE
CE – PROBPROBLE LEMS MS & SO SOLULUTI TION
ONS S
Mr.. Ra
Mr Ramm KuKumamarr is havi
having
ng ov
over
erdr
draf
aftt ac
accou
count nt wi
withth Ca
Cananarara bank
bank up uptoto Rs
Rs.1
.100
00,0 ,000
00.. The
The pr
pres
esen
entt Debi
Debitt BaBala
lanc
nce
e
in the
the ac
acco
coununtt wa
wass Rs.
Rs. 80
8055
550.0.00
00.. The
The ba banknk has
has re rece
ceiv
ived
ed at
atta
tach
chmementnt or
orde
derr fr
from
om Inco
Income
me tatax
x de
deptptt.
t. For Rs
Rs..
16,2
16 ,200
00.0
.00.
0. What
What can can th
the
e bank
bank do in th this
is si
situ
tuat
atio
ion n?
- Unle Unless ss th
thee bank
bank is a debt
debtoror,, th
ther
eree can
can be no at atta
tachm
chmen entt an
and d an unut
unutil iliz
ized
ed ov
over
erdr
draf
aftt ac
acco
coununtt do
does
es
nott rend
no renderer th
thee ba
banknk a debto
ebtorr ( but
but cr
crededit
itor
or ) & he hencnce e ca
can n not
not atatta
tach
ch..
Type
Ty pe – C : MUMULT LTIP IPLE
LE CHOI
CHOICE CE – APPLI PPLIED ED THEORHEORY Y – QUES
QUES.. & ANS ANS
Fina
Financncia
iall In
Inst
stit
itut
ution
ion wi
wish
sh to have
have ththe e mone
money y le
lent
nt by th them
em rerepa
paidid in time
time.. Se
Secu cure
redd ad
advavanc
nces
es sa
sancncti
tion
oned
ed by
bank
bankss poss
posses esss what
what ki kind
nd of sesecur
curit
ityy?
- SecureSecured d Adv
Advancances
es hav
have e impers
impersona onall sec
secururity
ity i.e.
i.e. Tangi
Tangibleble Sec
Securiurity
ty
Type
Ty pe –D : MU MULT LTIP IPLE
LE CHOI
CHOICE CE – CASE
CASE ST STUDUDIE IES S & CA
CASE SE LETS
LETS (PRO(PROBL BLEMEMS S & SOLU
SOLUTI TION
ONS S)
Econ
Economomic ic de
devevelo
lopmpmen
entt of a coun
countr tryy to a lalarg
rgee ex
extetent
nt de
depepend
ndss upon
upon Ag Agri ril.
l. & Indu
Induststri
rial
al se
sect
ctor
ors.
s.
Devel
Dev elopm
opment ent of agril.
agril. Dep
Depend
endss upon
upon irr irriga
igatio
tionn facili
facilitie
tiess while
while indindust
ustria
riall dev
develoelopme
pment nt on ava
availailabil
bility
ity of
power
pow er,go
,goodod trans
transporportt and fa
fast
st commun
communica icatio
tionn fa
facil
ciliti
ities.
es. All
All these
these ar aree called
called infras
infrastru
tructu
cture
re.. Read
Read the ca casel
selet
et
& exp
expla
lain
in which
which indust
industrie
riess consti
constitut
tute e infras
infrastru tructu
cturere ?
a. Ener
Energy gy,, Tr
Tranansp
spor
ortt & Comm
Commun unicicat
atio
ionn
b. Irr
Irrigat
igatio
ion,
n, co
cons
nstr
truc
ucti
tion
on of brbrididge
gess & damsams ov overer Ri
Rive
vers
rs & stab
stablele govt
govt.. at Ce Cent
ntrre.
c. Av
Ava ail
ila
abili
bility
ty of Fund
unds for PMEG MEGP , SJSR SJSRY Y & Ind ndiira Awas Yoja ojana

DURAT
DURATION
ION OF EXA
EXAMINA
MINATIO N: Th
TION: The
e dura
durati
tion
on of th
the
e ex
exam
amin
inat
atio
ion
n wi
will
ll be of 2 hour
hours.
s.
JAIIB
JAII B EXAMINATIO
EXAMINATION N – May 2016
(Last date for applying for examination : 15.03.2016 )
ONLINE MODE
Examination DATE TIME SUBJECTS
15.
15.05.
05.201
2016
6 Su
Sund
nday
ay ONLI
ONLINE
NE - Will
Will be gi
give
ven
n in the
the admi
admitt Lett
Letter
er Pr
Prin
inci
cipl
ples
es & Pr
Prac
acti
tice
cess of Ba
Bank
nkin
ing
g
22.
22.05.
05.201
2016
6 Su
Sund
nday
ay ONLI
ONLINE
NE - Will
Will be gi
give
ven
n in the
the admi
admitt Lett
Letter
er Acco
Accoun
unti
ting
ng & Fina
Finance
nce for
for Ba
Bank
nker
erss
29.
29.05.
05.201
2016
6 Su
Sund
nday
ay ONLI
ONLINE
NE - Will
Will be gi
give
ven
n in the
the admi
admitt Lett
Letter
er Lega
Legall & Regu
Regula
lato
tory
ry Aspe
Aspect
ctss of Ba
Bank
nkin
ing
g
Last Date for receipt

receipt of Change of Centre Requests
Requests at the respecti
respective
ve Zonal Offi
Offices
ces for the JAIIB Examination
Examination schedule
scheduled
d for
May 2016 : 31.03.2016
( Examination
Examination fee Inclusiv
Inclusive
e Servi
Service
ce Tax @14.50% wef 15.11.2015 - Eligible
Eligible for Membe
Members
rs Only )
Sr. No. Name of the Exam Attempts Fee (Rs)
1 JAIIB First Block of 2 attempts 2748
Se
Seco
cond
nd Bl
Bloc
ock
k of 2 att
ttem
emp
pts 2748
2748
PERIODICI
PERIOD ICITY
TY AND EXAMIN
EXAMINATI
ATION
ON CENTR
CENTRESES ; Th
The
e exam
examin
inat
atio
ion
n wi
will
ll be co
cond
nduc
ucte
ted
d norma
normall
lly
y tw
twice
ice a
year
year in May / June
June and Nove
Novemb
mber
er / Dece
Decemb
mber
er on Su
Sund
nday
ays.
s.
Pass : Mi
Pass Mini
nimu
mumm ma
mark
rkss for
for pa
pass
ss in ev
ever
ery
y subj
subjec
ectt - 50 out
out of 100
100 mark
marks.
s.
Cand
Ca ndid
idat
ate
e se
secu
curi
ring
ng at leas
leastt 45 mark
markss in each
each subj
subjec
ectt wi
with
th an ag
aggr
gregegat
ate
e of 50%
50% mar arks
ks in all
all
subj
subjec
ectsts of JAII
JAIIB
B ex
exam
amininat
atio
ionn in a sing
single
le at
attetemp
mptt wi
will
ll also
also be de
decl
clar
ared
ed as ha
havi
ving
ng pa
pass
sseed JAII
JAIIBB
Examination.Ca Cand
ndid
idat
ates
es wi
will
ll be al
allow
lowed
ed to re
reta
tain
in cr
cred
edits
its for the subje
subject/
ct/ss they
they ha
have
ve passe
passed
d in one at
atte
temp
mpt
t
till
till the
the ex
expir
piry
y of the time
time limit
limit fo
forr passi
passing
ng th
the
e examin
examinat
ation
ion as me
menti
ntion
oned
ed be
bell
llow
ow..
TIME
TIME LI LIMIT
MIT FOR
FOR PASS
PASSING
ING THE
THE EXAM
EXAMIN INAT
ATIO
ION
N
Ca
Cand
ndididat
ates
es wi
willll be re
requ
quir
ired
ed to pa
pass
ss JAII
JAIIB B ex
exam
amin inat
atio
ionn wi
withthin
in a time
time limi
limitt of 2 year
yearss (i.e
(i.e.. 4 cons
consec ecututiv
ive
e
at
atte
temp
mpts ts).
). In
Init
itia
iall
lly
y a cand
candididat
atee wi
willll have
have to pa pay y ex
exam
amininat
atio
ionn fe
feee for
for a bloc
blockk of one
one year
year i.e.
i.e. for
for tw
two o at
atte
temp
mpts
ts..
In ca
case
se a cacand
ndidida ate is not
not able
able to pa
pass ss JA
JAIIIIB
B exam
examin inat
atio
ion
n with
within in 1st
1st bloc
block k of 2 at
atte
temp
mpts ts,, he / she
she cacan
n ap
appe
pear
ar
for
for a fu
furt
rthe
herr pe
peri riod
od of 1 year
year (2(2nd
nd bl
bloc
ock)k) i.
i.e.
e. 2 at
atte
temp
mptsts on papaym
ymen entt of re
requi
quisi
site
te fe
fee.
e. Ca
Candndididat
ates
es who
who have
have
exhaus
exh austed
ted the first
first blo
blockck of 2 at
attem
temptspts,, should
should necess
necessar arily
ily sub
submitmit the ex exami
aminanatio
tion
n applic
applicatiation
on for
formm for the
ne
next
xt at
atte
tempmpt,t, wi
withthou
outt an
any y ga
gap.
p. If th
they
ey do no nott su
submbmit it th
the
e ex
exam
amin inat
atio
ion
n form
form imme
immedi diat
atel
ely
y afafte
terr ex
exha
haus
usti
ting
ng
the
the firs
firstt bloc
block,k, th
thee ex
examamin
inatatio
ionn cond
conduc uctetedd wi
willll be coun
counte tedd as at
atte
temp
mpts ts of the se
seco
cond
nd block
block for for th
thee purp
purposose
e
of time
time li limi
mitt for
for papass
ssin
ing.
g.
Cand
Candid idat
ateses not able
able to pass
pass JAIIB
JAIIB exam
examina inatio
tion n withi
within n the stipu
stipulalate
tedd time
time peri
period
od of tw
two o ye
year arss ar
aree re
requi
quire
redd to
re-en
re-enrorollll them
themse selve
lvess af
afres
resh h by submit
submittin ting g fr
fres
esh h Examin
Examinat ation
ion Ap
Applplica
icatio
tionn Form
Form.. Suc
Suchh ca
candi
ndidadatetess will
will not be
gr
gran
antetedd cred
creditit/s
/s fo
forr su
subj
bjec
ect/
t/ss pa
pass
ssed
ed,, if an
any,y, ea
earlrlie
ier.
r. Attempts
Attempts will be counted from the date of
applic
app licati
ationon irre
irrespespecti
ctive
ve of whethe
whetherr a candidat
candidate e appear
appearss at any exa examinminati
ation
on or otherw
otherwise ise..
“C
“CLA
LASSSS OF PAPASSSS”” CR
CRITITER
ERIAIA
The
Th e In
Insti
stitut
tute e wi
will
ll consid
considerer th
the e FI
FIRST
RST PH
PHYSI
YSICA
CAL L ATT
ATTEMP
EMPT T of th
thee ca
cand
ndida
idate
te at the exam
examinainatio
tion
n as firs
first
t
atte
attemp
mptt fo
forr aw
awarardi
ding
ng cl
class
ass.. In other
other word
words,s, th
the
e candi
candida
date
te should
should notnot ha
haveve at
atte
temp
mpte ted
d an
anyy of th
thee subjec
subject/ t/ss
pe
pert
rtai
aini
ning
ng to ththee conc
concer erne
nedd exexam
amininat
atio
ionn an
anyy ti
time
me in ththe
e pa
past
st an
andd has
has to pa
pass
ss al
alll th
thee su
subj
bjec
ects
ts as pe
perr th
thee
passi
passing
ng cr
crite
iteri
ria
a an
and d se
secur
curee pres
prescrcribe
ibed
d mar
marksks foraw
for awarardi
ding
ng clas
class.
s. Cand
Candididat
atee re
re-en
-enroroll
lling
ing for the ex
examamina
inatio
tion
n
after
afterex
exhahaust
usting
ing al
alll perm
permiss
issibl
ible
e at
atte
temp
mptsts as per
per ththe
e time
time limit
limit rule
rule will
will not
not be con
considsider
ered
ed for award
awarding ing clas
class.
s.
First
Fir st C
Clas
lasss : 60
60% % or m more
ore marks
marks in aggr
aggrega
egatete and pas
passs in all
all the sub
subjec
jects
ts in tthe
he F FIR
IRST
ST PHY
PHYSICSICALAL
ATTEMPT.
First
Fir st Cl
Clas
asss with
with Dist
Distinc
incti
tion
on : 70%
70% or more
more marmarks ks in aggr
aggregegatatee and 60 or mormore e marks
marks in ea eachch subje
subject ct
in the
the FI
FIRST
RST PHYSI
PHYSICAL CAL ATTEM
ATTEMPT. PT. C
Candid
andidateate who have been grant granted
ed exemption
exemption in the the sub
subject
ject/s
/s will
be given
given "Pass
"Pass ClaClass"
ss" onl
only.
y.

Module: A
Regulations and Compliance
Syllabus
1) Legal Framework of Regulation of Banks - Business of Banking;
Banking; Constitution
Constitution of
Banks; RBI Act, 1934; Banking Regulation Act, 1949; Role of RBI; Govt. as a
Regulator of Banks; Control over Cooperative Banks; Regulation by other Authorities.
2) Control Over Organization of Banks - Licensing of Banking Companies; Branch
Licensing; Paid up Capital and Reserves; Shareholding in Banking Companies;
Subsidiaries of Banking Companies; Board of Directors; Chairman of Banking
Company; Appointment of Additional Directors; Restrictions on Employment; Control
over Management; Corporate Governance; Directors and Corporate Governance.
3) Regulation of Banking Business - Power of RBI to Issue Directions; Acceptance of
Deposits; Nomination; Loans and Advances; Regulation of Interest Rate; Regulation of
Payment Systems; Internet Banking Guidelines Regulation of Money Market
Instruments; Banking Ombudsman; Reserve Funds; Maintenance of CRR, SLR; Assets
in India.
4) Returns Inspection, Winding up, Mergers & Acquisitions - Annual Accounts &
Balance Sheet; Audit & Auditors; Submission of Returns; Preservation of Records and
Return of Paid Instruments; Inspection and Scrutiny; Board for Financial Supervision;
Acquisition of Undertakings; Amalgamation of Banks; Winding up of Banks; Penalties
for offences.
offences.
5) Public Sector Banks and Cooperative Banks - SBI and its Subsidiaries; Regional
Rural Banks; Nationalized Banks; Application of BR Act to Public Sector Banks;
Disinvestment of Shares by Govt.; Cooperative Banks
6) Financial
Financial Sector Legislative Reforms - Need, Approach for Financial Sector
Sector Legislative
Legislative Reforms; Important Reforms
7) Recent Legislative Changes in RBI Act - Recent Legislative Changes in RBI Act,
Need thereof
8) Financial Sector Development Council - Role and Functions of Financial Sector
Development Council

LEGAL FRAMEWORK OF REGULATION OF BANKS

What is banking : (Section 5-b of Banking Regulation Act 1949) Banking means the accepting, for
the purpose of lending or investment, of deposits of money from the public, repayable on demand or
otherwise, and withdrawable by cheque, draft, order or otherwise. As per Section 7, no firm,
individual or group of individuals and no company other than a banking company shall use, as part of
its name or, in connection with its business, any of the words "bank", "banker" or "banking" and no
company shall carry on the business of banking in India unless it uses as part of its name, at least
one of such words.
What is a banking Company : (Section 5-c BR Act ) It means any company which transacts the business
of banking in India. Any company which is engaged in the manufacture of goods or carries on any trade
and which accepts deposits of money from the public merely for the purpose of financing its business as
such manufacturer or trader, shall not be deemed to transact the business of banking.
Corresponding new bank : (Section 5-da BR Act): It means a correspondin

corresponding
g new bank consti
constituted
tuted
under section 3 of the Banking
Banking Companies (Acquisi
(Acquisition
tion and Transfer of Undertakings)
Undertakings) Act, 1970, or
under section 3 of the Banking
Banking Companies (Acquisi
(Acquisition
tion and Transfer of Undertakings)
Undertakings) Act, 1980.
Demand liabilities : (Section 5-f BR Act) : The liabilities which must be met on demand, and "time
liabilities" means liabilities which are not demand liabilities;
Secured
Secure advances : (Section 5-n BR Act) A loan or advance made on the security of
d loan or advances
assets the market value of which is not at any time less than the amount of such loan or advance.
Unsecured loan or advance means a loan or advance not so secured;
Business Of Banking Companies (Section 6 — BR Act)

No banking company shall engage in any form of business other than those referred to as business
of banking and any one or more of the following forms of business, namely- (a) the borrowing, raising,
or taking up of money; the lending or advancing of money either upon or without security; and
drawing, making, accepting,
accepting, disco
discounting,
unting, buying, selling, collect
collecting
ing and dealing in bills of exchange,
exchange,
hundies,, promis
hundies promissory
sory notes, coupons
coupons,, drafts, bill of ladin
lading,
g, railw
railway
ay receipts, warrants,
warrants, debentures,
certificates,
certificates, scrips and other instruments,
instruments, and securi
securities
ties whether transferable
transferable or negotiable or not; the
granting and issuing of letters
letters of credi
credit,
t, travellers' cheques and circular notes; the buying, selling and
dealing in bullion and specie the buying and selling of foreign exchange including foreign bank notes; the
acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures,
debenture stock, bonds, obligations,
obligations, secur
securities
ities and inves
investments
tments of all kinds; the purchasing
purchasing and selling
selling of
bonds, scrips or other forms of securities on behalf of constituents or others; the negotiating of loan and
advances; the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or
otherwise;
otherwi se; the providing
providing of safe deposit vaults; the collecting and transmitting
transmitting of money and securities;
securities;
(b) acting as agents for any government or local authority or any other person or persons; the
carrying on of agency business of any description including the clearing and forwarding of goods,
giving of receipts and discharges and otherwise acting as an attorney on behalf of customers, but
excluding the business of a Managing Agent or Secret Secretary
ary and Treasu
Treasurer
rer of a company;
company;
(c) contracting
contracting for public and private loans and negotia
negotiating
ting and issuing the same;
(d) the effecting, insuring,
insuring, guaranteeing, underwri
underwriting,
ting, participating
participating in managing and carrying
carrying out of any
issue, public or private, of State, municipal or other loans or of shares, stock, debentures or
debenture stock of any company, corporation or association and the lending of money for the
purpose of any such issue;
(e) carrying
carrying on and transacti
transacting
ng every kind of guarante
guarantee e and indemnity
indemnity business;
business;
(f) managing,
managing, selling and realising
realising any property which may come into the possessi
possession
on of the company in
satisfaction
satisfaction or part satisfacti
satisfaction
on of any of its clai
claims;
ms;
(g) acquiring and holding and generally dealing with any property or any right, title or interest in any such
property which may form the security or part of the security for any loans or advances or which may
be connected
connected with any such secursecurity;
ity;
(h) undertaking and executing trusts;
(i) undertak
undertaking
ing the administ
administration
ration of estates as executor
executor,, trustee or otherwise;
(j) establis
establishing
hing and supporting or aiding in the establishment and support of associations,
associations, institutions,
institutions,

funds, trusts, and conveniences calculated to benefit employees or ex-employees of the company
or the dependents or connections of such persons; granting pension and allowances and making .
payments towards insurance; subscribing to or guaranteeing moneys for charitable or benevolent
object or for any exhibition or for any public, general or useful object;
(k) the acquisition,
acquisition, construc
construction,
tion, maintena
maintenance
nce and alteration
alteration of any building
building or works necessary
necessary or
convenient for the purpose of the company;
(I) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning
into account or otherwise dealing with all or any part of the property and rights of the company;
(m) doing all such other things as are incidental or conducive to the promotion or advancement of the
business of the company;
(o) any other form of business which the Central Government may, by notification in the Official Gazette,
specify as a form of business in which it is lawful for a banking company to engage. Prohibition of
business (Section 8 — BR Act)
No banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except
in connection with the realization of security given to or held by it, or engage in any trade, or buy, sell or
barter goods for others otherwise than in connection with bills of exchange received for collection or
negoti
neg otiati
ation
on or with
with such
such of it
its
s busi
busines
ness.
s. For thi
this
s purpos
purposes,
es, "goods
"goods"" mea
means ns every
every kind
kind of mova
movable
ble
property, other than actionable claims, stock, shares, money, bullion and specie and all instruments.
Non-banking
Non-ba nking assets (Section 9)
No banking company can hold any immovable property howsoever acquired, except such as is required
fo
forr its ownown ususe,
e, for
for any
any peperi
riod
od ex
exce
ceed
ediing 7 yea ears
rs from
from the
the ac
acqu
quiisi
siti
tion
on ther
thereo
eoff or from
from the,
the,
commencement of this Act, whichever is later or any' extension of such period as in this section provided,
and such property shall be disposed of within such period or extended period, as the case may be:
The banking company may, within the period of 7 years as aforesaid, deal or trade in any such property
for the purpose of facilitating the disposal thereof:
Reserve Bank may in any particular case extend the aforesaid period of 7 years by such period not
exceeding 5 years where it is satisfied that such extension would be in the interests of the depositors of
the banking company.
BOARD OF DIRECTORS
Composition
Composition of Board of Direc
Directors
tors (Section 10A)
Not less than 51% of the total number of members of the Board of Directors of a banking company shall
consist of persons, who shall have special knowledge or practical experience in respect of one or more,
namely, accountancy, agriculture and rural economy, banking, co-operation, economics, finance, law,
small-scale industry, any other matter the special knowledge of, and practical experience, which would,
in the opinion of the Reserve Bank, be useful to the banking company:
Out of the aforesaid number of Directors, not less than 2 shall be persons having special knowledge or
practical experience in respect of agriculture and rural economy, co-operation or small-scale industry;
Term of director : No Director of a banking company, other than its Chairman or whole-time Director, by
whatever name called, shall hold office continuously for a period exceeding 8 years. A Chairman or
other whole-time Director of a banking company who has been removed from office as such Chairman,
or whole-time Director shall also not be eligible to be appointed as a Director of such banking company,
whether by election or co-option or otherwise, for a period of 4 years from the date of his ceasing to be
the Chairman or whole-time Director.
If, in respect of any banking company, the above requirements are not fulfilled at any time, the Board of
Di
Direc
rector
tors
s of su
such
ch ban
bankinking
g comp
company
any shall
shall re-co
re-cons
nstit
titute
ute suc
such
h Board
Board so as to ensur
ensure
e that
that the sa
said
id
requirements
requirem ents are fulfill
fulfilled.
ed.
RBI's role in case of Board of Directors : Where the Reserve Bank is of opinion that the composition
of the Board of Directors of a banking company is such that it does not fulfil the above requirements, it
may, after giving a reasonable opportunity, direct the banking company to re-constitute its Board of
Directors to ensure that the requirements are fulfilled and, if within 2 months from the date of receipt of
that order, the banking company does not comply with the directions, remove such person from the
office of the Director and appoint a suitable person as a member of the Board of Directors in the place of
the person so removed.Every Director elected or, as the case may be, appointed under this section shall
hold office until the date up to which his predecessor would have held office, if the election had not been
held.
Whole-time Chairman ( Section 10B)
Every banking company shall have one of its Directors, who may be appointed on a whole-time or a
part-time basis as Chairman of its Board of Directors. Where he is appointed on a whole-time basis as
Chairman of its Board of Directors, he shall be entrusted with the management of the whole of the affairs
of the banking company:
Where
Whe re a Ch
Chair
airman
man is ap appoi
pointe
nted
d on a part-
part-ti
time
me basis
basis such
such appoi
appointm
ntment
ent shall
shall be with
with the previ
previous
ous
approval of the Reserve Bank and be subject to such conditions as the Reserve Bank may specify while
giving such approval:

Terms of office of Chairman : Every Chairman of the Board of Directors and Managing Director shall
be in the whole-time employment and shall hold office for maximum period of not exceeding five years,
but shall subject to the provision of this section, be eligible for reelection or re-appointment.
Power of-Reserve Bank to appoint Chairman of a banking company (Section 10 BB)
Where the office of the Chairman or the Managing Director is vacant, the Reserve Bank may, appoint a
person eligible to be the Chairman of the Board of Directors or a Managing Director. Where the person
so appointed is not a director of such banking company, he shall, so long as he holds the office of the
Chairman of the Board of Directors appointed on a whole-time basis or a Managing Director, be deemed
to be a Director of the banking company. The Chairman and Managing Director so appointed by the Reserve Bank shall
be in the whole-time employment of the banking company and shall hold office for such period not exceeding three years, as
the Reserve Bank may specify, but shall, be eligible for reappointment.
Chairman, certain Directors & qualification shares (Section 10C)

A Chairm
Chairman
an of the Board of Directors
Direct ors who is appo
appointed
inted on a whole-time
whole- time basis or a Managing
Manag ing Director
Direct or
of a banking company (by whomsoever appointed) and a director of a banking company (appointed by
the Reserve Bank under section LOA) shall not be required to hold qualification shares in the banking
company.
Election of new Directors (Section 12A)
(1) The Reserve Bank may,
may, by order, require any banking company to call a general meeting
meeting of the
shareholders of the company within such time, not less than 2 months from the date of the order, as
may be specified in the order or within such further time as the Reserve Bank may allow in this behalf,
to elect fresh Directors, and the banking company shall be bound to comply with the order.
(2) Every
Every Director elected as above shall hold office
office until the date up to whic
which
h his predecessor woul
would
d have
held office, if the.election had not been held.
Prohibition of common Directors (Section 16)
No banking company incorporated in India shall have as a Director in its Board of Directors any
person
Directorswho is athan
more Director of any other
3 Directors banking
who are company.
Directors Further which
of companies such banking company shall
among themselves arenot have
entitled
to exercise voting rights in excess of 20% of the total voting rights of all the shareholders of that
banking company. Nothing shall apply to, or in relation to, any Director appointed by the Reserve
Bank.
Restrictions on certain forms of employment (Section 10)
No banking company shall employ or be managed by a Managing Agent; or shall employ or continue
the employment of any person who is, or at any time has been, adjudicated insolvent, or has
suspended payment or has compounded, with his creditors, or who, is or has been, convicted by a
criminal court of an offence involving moral turpitude; or whose remuneration or part of whose
remuneration takes the form of commission or of a share in the profits of the company, whose
remuneration is, in the opinion of the Reserve Bank, excessive;
MINIMUM PAID-UP CAPITAL AND RESERVES (Section 11)
No banking company in existence on the commencement
commencement of this Act, shall shall,, after the expiry of 3
years from such commencement
commencement or of such further period not exceeding one year as the Reserve
Bank, having regard to the interests of the depositors of the company, may think fit in any
particular
parti cular case to allow, carry on busines
business s in India, and no other banking company shall, shall, after the
commencement of this Act, commence or carry on business in India, unless it complies with such of the
requirements
require ments of this section as are appli
applicable
cable to it.
Capital of Banking company incorporated outside India (Foreign Banks)
(a) the aggregate v value
alue of its paid-
paid-up
up capital and reserve
reserves
s shall not be less than
than Rs.15 lac and if it has a
place or places of business in the city of Bombay or Calcutta or both, Rs.20 lac; and
(b) the banking com
company
pany shal
shalll deposit and keep deposited
deposited with
with the Reserve Bank
Bank either in cash or in
the form of unencumbered approved securities, or partly in cash and partly in the form of such securities
an amount which shall not be less than the minimum required by clause (a); and an amount calculated at
20% of its profit for that year in respect of all business transacted through its branches in India, as
disclosed in the profit and loss account. It can at any time replace any securities so deposited by cash or
by any other unencumbered approved securities or partly by cash and partly by other such securities, so
however, that the total amount deposited is not affected; OR any cash so deposited by unencumbered
approved securi
approved securities
ties of an equal value.
value.
Central Government 'May, on the recommendation of the Reserve Bank, and having regard to the
adequacy of the amounts already deposited and kept deposited by a banking company, in relation to

its deposit liabilities in India declare by order in writing that the above provisions shall not apply to
such banking company for such period as may be specified in the order.
Other Banking Companies (Indian Banks)
For other banks, the aggregate value of its paid-up capital and reserves shall not be less than -
(i) if it has places of of busines
businesss in more than one State
State,, Rs.5 lac, and if any such
such place or places o
of f
business is or are situated in the city of Bombay or Calcutta or both, Rs.10 lac;
(ii) if it has all its plac
places
es of business in one State none of whic
whichh is situated in the city of Bomba
Bombayy or
Calcutta, Rs.1 lac in respect of its principal place of business, plus Rs.10000 in respect of each of
its other places of business, situated in the same district in which it has its principal place of
business,
busines s, plus Rs.20000 in respect of each place of busine
businessss situated elsewhere in the State
otherwise than in the same district:
No banking company to which this applies shall be required to have paid-up capital and reserves
exceeding an aggregate value of five lakhs of rupees. FURTHER no banking company to which this
clause applies and which has only one place of business, shall be required to have paid-up capital
and reserves exceeding an aggregate value of Rs.50000: In case case of every banking
banking com
company
pany to which
which
this clause applies and which commen commencesces banking business for the first time after the commencement
commencement of
the Banking Companies (Amendment) Act, 1962 (36 of 1962), the value of its paid-up capital shall not be
less than Rs.5 lac
(iii
(iii)) if it has all its places of business in one State, or more of which
which is or are situated in the city of
Bombay or Calcutta,
Calcutta, Rs.5 lac , plus Rs.25000
Rs.25000 in respect
respect of each place of business situated
situated
outside
outsid e the city of Bombay or Calcutta, as the case may be:
No banking company to which this clause applies shall be required to have paid-up capital and
reserves exceeding an aggregate value of Rs.10 lac.
Regulation of paid-up, subscribed and authorised capital and voting rights of shareholders
(Section 12)
(1) No banking company shall carry on business in India, unless iitt satisfies that the subscrib
subscribed
ed
capital of the company is not less than one-hal
capital one-halff of the authori
authorised
sed capital and the paid-
paid-up
up capital is
not less than one-half of the subscribed capital. Further, that the capital of the company consists of
ordinary shares only or of ordinary shares or equity shares and such preferential shares as may
have been issued prior to theist day of July, 1944:
(2) No person holding shares in a banking company shall, in respec
respectt of any shares held by him,
exercise voting rights in excess of 10% of the total voting rights of all the shareholders of the
banking company.
SUMMARY OF MINIMUM PAID UP CAPITAL
Foreign Indian Indian Indian Indian
Bank Banks Banks Banks Banks
Aggregat
Aggregate
e Busine
Business
ss Busin
Business
ess in Business
Business in Business
Business in
of aid u in m o re one State one State one State
craesie
tarvl easn:d thaS
n tateone anladce noof anladce noof aonfdbusinelascse
Normal = Nomal = 5 business in business in in Mumbai
15 lac lac Mumbai or Mumbai or or Kolkata
If branch in in Business Kolkata Kolkata Nomal = 5
Mumbai or place in Nomal = 1 Noma! = 1 We
Kolkata = Mumbai or lac lac + For each
20 lac Kolkata = + For each + For each lace of
+ Rs.10 lac place of place of business
20% of In business in business in =25000
rofit f a re ate same other In
that ear to max: Rs.5 district district a re ate
Be lac =10000 =25000 max: Rs.10
de osited In In lac
with RBI aggregate aggregate
max
ma x: Rs.5
Rs.5 max
ma x: Rs.5
Rs.5
lac lac
If one place of if one place of
business max business max
Rs.50000 Rs.50000

Return : Every Chairman, Managing Director or Chief Executive Officer by whatever name called of a
banking company shall furnish to the Reserve Bank returns containing full particulars of the extent
and value of his holding of shares, whether directly or indirectly, in the banking company and of any
change in the extent
extent of such holdin
holding
g or any variation
variation in the rights
rights attaching theret
thereto
o and such other
information relating to those shares as the Reserve Bank may, by order, require
Restriction on nature of subsidiary companies (Section 19)
A bankin
bankingg compa
companyny shall not form any subsidiary
subsid iary company
compan y except
excep t for undertaking
undert aking of any business
busin ess
which, under clause (a) to (o) of sub-section (1) of section 6, is permissible for a banking company to
undertake,, or with RBI permission,
undertake permission, the carrying
carrying on of the business of banking exclusiv
exclusively
ely outside
India, or such other business, which the Reserve Bank may, with the prior approval of the Central
Government,
necessary
necess consider
ary in the publicto be conducive
interes
interest.
t. to the spread of banking in India or to be otherwise useful or
Shareholding in other companies {Section 19(2)} No banking company shall hold shares in any
company, whether as pledgee, mortgagee or absolute owner, of an amount exceeding 30% of the paid-
up share capital of that company or 30% of its own paid-up share capital and reserves, whichever is
less. Further a banking
banking compan
company y shall not, hold shares, whether as pledg
pledge,e, mortgagee or absol
absolute
ute
owner, in any company in the management of which any Managing Director or Manager of the banking
company is in any manner concerned or intereinterested.
sted.
CONTROL OVER MANAGEMENT
MANAGEMENT
Power of Reserve Bank to remove managerial and other persons from office (Section 36AA)
Where the Reserve Bank is satisfied that it is necessary so to do, the Reserve Bank may, for reasons
to be recorded in writing, by order, remove from office, with effect from such date as may be specified
in the order, any Chairman, Director, Chief Executive Officer (by whatever name called) or other
officer or employee of the banking company. Such person, within 30 days from the date of
communication to him of the order, prefer an appeal to the Central Government. The decision of the
Central Government on such appeal, and subject thereto, the order made by the Reserve Bank, shall
be final and shall not be called into question in any court. Where an order has been made for removal,
the Reserve Bank may, by order in writing, appoint a suitable person in place of the Chairman or
Director or Chief Executive Officer or other officer or employee who has been removed from his office,
with effect from such date as may be specified in the order.
Any person appo
appointed
inted as Chairman,
Chairm an, Direct
Directoror or Chief Executive
Executi ve Officer
Off icer or other
othe r off
officer
icer or employee
employe e
under this section, shall hold office during the pleasure of the Reserve Bank and subject thereto for a
period not exceeding 3 years or such further periods not exceeding three years at a time as the
Reserve
Reserv e Bank may specify
specify;;
Power of Reserve Bank to appoint additional Directors (Section 36AB)

If the Reserve Bank is of opinion that in the interest of banking policy or in the public interest or in
the interests of the banking company or its depositors it is necessary so to do, it may, from time to
time by order in writing, appoint, with effect from such date as may be specified in the order, one or
more
A n y persons
An p e r s o n to
a phold
p o i noffice
t e d aas
s aadditional
d d i t i o n a Directors
l D i r e c t oof
r ithe banking company.
n pursuance of this section shall hold
h old office
during the pleasure of the Reserve Bank and subject thereto for a period not exceeding 3 years or such
further periods not exceeding 3 years at a time as the Reserve Bank may specify and shall not be
required to hold qualification-shares in the banking company.
BANK LICENCING Licens
Licensing
ing of banking companies (Section 22)
No company shall carry on banking business in India unless it holds a licence issued in that behalf by the
Reserve Bank and any such licence may be issued subject to such conditions as the Reserve Bank may
think fit to impose.
Before granting any licence, the Reserve Bank may require to be satisfied by an inspection of the books
of the compan
company y or otherwise
otherwise that the following
following conditions
conditions are fulfilled, namely
namely:-
:-
(a) that the company is or will be in a position to pay its present or future depositors in full as their claims
accrue;
(b) that the affairs of the company are not being, or are not likely to be, conducted in a manner detrimental
to the interes
interests
ts of its pres
present
ent or future depositors;]
depositors;]
(c) that the general character of the: proposed management of the company will not be prejudicial to
the public interest of its present or future deposi
depositors;
tors;

(d) that the company has adequate capital struc

structure
ture and earning
earning prospec
prospects;
ts;
(e) that the public interest will be served by the grant of a licence to the company to carry on banking
business in India;
(f) that having regard to the bankin
banking g facilitie
facilities
s available in the propos
proposed ed principal area of operati
operations
ons of the
company, the potential scope for expansion of banks already in existence in the area and other
relevant factors the grant of the licence would not be prejudicial to the operation and consolidation of
the banking
banking system consi
consistent
stent with monetary stability
stability and economic
economic growth;
(9) any other condition, the fulfillment of which would, in the opinion of the Reserve Bank, be necessary to
ensure that the carrying on of banking business in India by the company will not be prejudicial to the
public
public interest
interest or the intere
interests
sts of the depositors
depositors.].]
Further, before granting any licence to a company incorporated outside India, the Reserve Bank may
require to be satisfied by an inspection of the books of the company or otherwise that the conditions
specified above are fulfilled and that the carrying on of banking business by such company in India will be
in the public interest and that the government or law of the country in which it is incorporated does not
discriminate
discri minate in any way against banking companies regis registered
tered in India and that the company complies
complies
with all the provi
provisions
sions of this Act applicable to banking
banking compani
companies es incorporated
incorporated outside
outside India.
Cancellation of licences: The Reserve Bank may cancel a licence granted to a banking company
under this section:
(a) if the company c ceases
eases to car
carry
ry on banking bus business
iness in India;
India; or
(b) if the company at any time fail fails
s to comply with any of the condition
conditions s imposed upon it; or
(c) if at any time, any of the conditions referred
referred to above is not fulfilled:
fulfilled:
Before cancelling a licence on the ground that the banking company has failed to comply with or has
failed to fulfil any of the conditions referred to therein, the Reserve Bank, unless it is of opinion that
the delay will be prejudicial to the interests of the company's depositors or the public, shall grant to
the company on such terms as it may specify, and opportunity of taking the necessary steps for
complying
App
Appeal: with
eal: Any or ing
banking
bank fulfilling
comp such
company condition.
any aggrieve
agg rieved
d by the decis
decision
ion of the Reserve
Rese rve Bank canc
cancellin
elling
g a licence
licen ce
under this section may, within 30 days from the date on which such decision is communicated to it,
appeal to the Central Government. The decision of the Central Government where an appeal has
been preferred to it or of the Reserve Bank where no such appeal has been preferred shall be final.
Restrictions on opening of new, and transfer of existing, places of business (Section 23)
Without obtaining the prior permissions of the Reserve Bank:
1. no banking company shal
shalll open a new place of business (i.e. sub-o
sub-office,
ffice, pay office,
office, sub-pay office and
any place of business at which deposits are received, cheques cashed or moneys lent) in India or
2. change otherw
otherwise
ise than within
within the same city, town or villa
village,
ge, the location of an existi
existing
ng place of
business
business situated in India; and
3. no banking co
company
mpany inc
incorporate
orporatedd in India shall op
open
en
a new place of business outside India or change, otherwise than within the same city, town or village
in any country
country or area outside India, the location of an existing place of business situated in that
or area:
Exception : The above condition would not apply to the opening for a period not .exceeding
.exceeding one
month of a temporary place of business within a city, town or village or the environs thereof within
which the banking company already has a place of business, for the purpose of affording banking
facilities to the public on the occasion of an exhibition, a conference or a mela or any other like
occasion.
Withdrawal of permission for branch : Where, in the opinion of the Reserve Bank, a banking
company has, at any time, failed to comply with any of the conditions imposed on it under this
section, the Reserve Bank may, by order in writing and after affording reasonable opportunity to
the banking company for showing cause agai against
nst the acti
action
on proposed
proposed to be taken
taken against
against it, revoke
revoke
any permission granted under this section.
section.
Branches by RRBs : Any Regional Rural Bank requiring the permission of the Reserve Bank under
this section shall forward its application to the Reserve Bank through the National Bank which shall
give its comments on the merits of the application and send it to the Reserve Bank. Regional Rural
Bank shall also send an advance copy of the application directly to the Reserve Bank.
Reserve
Reserve Bank of India Act, 1934
Reserve
Reserve Bank of India Act, 1934 extends
extends to the whole of India. It was constitute
constituted
d for the purposes of

taking over the management

taking management of the currency from the Central GoverGovernment
nment and of carrying
carrying on the
business
busine ss of banki
banking
ng in accor
accordance
dance with the provisions
provisions of this Act. RBI is a body corpor
corporate
ate by the name
of the Reserve Bank of India, having perpetual succession and a common seal.
Capital of the Bank : The capital of the bank shall be five crores of rupees.
Offices, branches and agencies : The Bank shall as soon as may be, establish offices in Bombay,
Calcutta,
Calcut ta, Delhi and Madr
Madrasas and may establi
establish
sh branches or agencies in any other place in India or,
with the previous sanction of the Central Government elsewhere.
Management : The Centr
Central
al Government
Government may from time to time give such direcdirections
tions to the Bank as it
may, after consultation with the Governor of the Bank, consider necessary in the public interests. The
general superinte
superintendence
ndence and directio
direction
n of the affairs and business of the Bank are entrusted to a
Central Board
Board of Directo
Directors
rs which may exercise all powers and do all acts and things which may be
exercised or done by the Bank.
exercised
The Governor and in his absence the Deputy Governor nominated by him in his behalf, shall also
have powers of general superintendence and direction of the affairs and the business of the Bank,
and may exercise all powers and do all acts and things which may be exercised or done by the
Bank.
Composition of the Central Board, and term of office of directors
The Central Board shall consist of the, a Governor and not more than four Deputy Governors to be
appointed
appointe d by the Central Govern
Government,
ment, four Directors to be nominated by the Central Government
Government,, one
from each of the four Local Boards; ten Directors to be nominated by the Central Government; and one
Government
Governm ent official to be nominated by the Central Government.
Government.
The Governor and a Deputy Governor shall hold office for such term not exceeding 5 years as the
Central Government
Government may fix when appointing them, and shall be eligible for re-appointmere-appointment.nt. A Direc
Director
tor
shall hold office for a period of four years and thereafter until his successor shall have been nominated.
Local Boards, their constitution and functions
A Loca
Locall Boar
Board d shal
shalll be const
constitut
ituted
ed for each of the foufourr area
areass specified
spec ified in Schedule
Sched ule I and shall
sha ll consist
cons ist
of five members to be appointed by the Central Government to represent, as far as possible,
territorial and economic interests and the interests of co-operative and indigenous banks. The
members of the Local Board shall elect from amongst themselves one person to be the Chairman of
the Board. Every member of a Local Board shall hold office for a term of four years and thereafter
until his successor shall have been appointed and shall be eligible for re-appointment.
Business which the Bank may transact (Section 17)
The Bank shall be authorised to carry on and transact the several kinds of business hereinafter
specified, namely:-
(1) the accepti
accepting
ng of money on deposit without inte interest
rest from, and the coll
collection
ection of money for,
for, the Central
Government,
Governm ent, the State Governmen
Governments, ts, local authorities,
authorities, banks and any other persons;
persons;
(2) (a) the purchase
purchase,, sale and rediscoun
rediscountt of bills of exchange and promis
promissory
sory notes,
notes, drawn on and
payable in India and arising out of bona fide commercial or trade transactions bearing two or more good
signatures, one of which shall be that of a scheduled bank or a State cooperative bank or any financial
institution,
insti tution, which is predominantly
predominantly engaged in the acceptance
acceptance or discountin
discounting g of bills of exchange
exchange and
promissory notes and which .is.. approved by the Bank in this behalf and maturing-
(i) in the case of bills of exchange and promissory notes arising out of any such transaction relating to
the export of goods from India, within one hundred and eighty days, and (ii) in any other case, within
ninety days, from the date of such purchase or rediscount exclusive of days of grace;
(b) the purchase, sale and rediscount of bills of exchange and promissory notes, drawn and payable in
India and bearing two or more good signatures, one of which shall be that of a scheduled bank or a
State cooperative
cooperative bank or any financial instituti
institution,
on, which is predominantly
predominantly engaged in the acceptance
acceptance
or discounting of bills of exchange and promissory notes and which is approved by the Bank in this
behalf and drawn or issued for the purpose of financing agricultural operations or the marketing of
crops, and maturing within fifteen months from the date of such purchase or rediscount, exclusive exclusive of
days of grace;
(bb) the purchas
purchase, e, sale and redis
rediscount
count of bill
bills
s of excha
exchangenge and promissory
promissory notes drawn and
payable in India and bearing two or more good signatures, one of which shall be that of a State co-
operative
engaged inbank
the or a State
accept
acceptance
ancefinancial corporation
or disco
discounting or any
unting of bills financial
of exchange
exch institution,
ange and whichnotes
promissory
promissory is predominantly
and which is
approved
approv ed by the Bank in this behalf, and drawn or issued for the purpos
purpose e of financing
financing the
production or marketing activities of cottage and small scale industries approved by the Bank and

maturing within twelve months from the date of such purchase or rediscou
maturing rediscount,nt, exclusive
exclusive of days of
grace, provided
provided that the payment of the princip
principal
al and interest
interest of such bills
bills of
exchange or promissory notes is fully guaranteed by the State Government; (c) the purchase, sale and
rediscount of bills of exchange and promissory notes drawn and payable in India and bearing the
signature of a scheduled bank, and issued or drawn for the purpose of holding or trading in
securities of the Central Government or a State Government, and maturing within ninety days from
the date of such purchase or rediscount, exclusive of days of grace;
(3) (a) the purchase from and sale to scheduled banks of foreign exchange;
exchange;
(b) the purchase, sale and rediscount of bills of exchange (including treasury bills) drawn in or on any
place in any country
country outside India which is a member
member of the International
International Monetary
Monetary Fund and
maturing,-
maturi ng,- (i) in the case of bills of exchange
exchange arisin
arising
g out of any bona fide transaction
transaction relating
relating to the
export days,
ninety of goods
fromfrom
the India,
date ofwithin
suchone hundre
hundred
purchase ord rediscount:
and eighty days
days,, and (ii(ii)) in any other case,
case, within
within
(11) acting as agent for the Central Government or any State Government or any local authority or the
Industrial
Industri al Finance -Corporation
-Corporation of India or any other body corporate which is establishe established
d or constituted
by or under any other law or the government of any such country outside India or any such person or
authority as may be approved in this behalf by the Central Government in the transaction or any of the
following kinds of business, namely:-
(a) the purchase
purchase and sale of gold or sil silver
ver or foreign exchange;
exchange;
(b) the purchase, sale, transfer
transfer and custody of bills of exchange, securisecurities
ties or shares in any company;
(c) the collecti
collection
on of the procee
proceeds,
ds, whether princi
principal,
pal, interes
interestt or divi
dividends,
dends, of any securities
securities or shares;
shares;
(d) the remittance
remittance of such proceeds
proceeds,, at the risk of the principal,
principal, by bills
bills of exchange payable
payable either in
India or elsew
elsewhere;
here;
(e) the manage
management
ment of public debt;
(f) the iss
issue
ue and mamanagement
nagement of of bonds and debentures;
Business which the bank may not transact (Sect
(Section
ion 19) ; The bank may not-
(1) engage in trade or otherwise have a direct interes
interestt in any commercial,
commercial, industrial,
industrial, or other undertaking
undertaking
except such interest as it may in any way acquire in the course of the satisfaction of any of its claims:
PROVIDED
PROVID ED that all such interests shall be dispos
disposed
ed of at the earliest possible
possible moment
moment;;
(2) purchas
purchase e the shares of any bankin
bankingg company or of any other company
company,, or grant loans upon the
security
securi ty of any such shares;
advance money on mortgage of, or otherwise on the security of, immovable property or documents of title
relating thereto, or become the owner of immovable property, except so far as is necessary for its own
business
busine ss premi
premises
ses and resid
residences
ences for its officers and servan
servants;
ts;
(3) make loans or advances;
(4) draw or accept bills payable
payable otherwise than on demand;
(5) allow interest on deposits or current
current amounts.
CENTRAL BANKING FUNCTIONS

Obligation to transact government business (Section 20)
The Bank shall undertake to accept monies for account of the Central Government and to make
payments up to the amount standing to the credit of its account, and to carry out its exchange,
remittance
remitt ance and other banking operations
operations,, including the management
management of the public debt of the Union.
Right to transact government business in India (Section 21)
Central Government shall entrust the Bank, on such conditions as may be agreed upon, with all its
money, remittance, exchange and banking transactions in India, and, in particular, shall deposit free
of interest all
a ll its cash balances with the Bank. Nothing shall prevent the Central Government from
carrying on money transactions at places where the Bank has no branches or agencies, and the
Central Government may hold at such places such balances as it may require.
Bank to transact government business of States on agreement (Section 21A)
RBI may by agreement with the government of any state undertake all its money, remittance, exchange
and banking transactions in India, including in particular, the deposit, free of interest, of all its cash
balances with the Bank; and the management of the public debt of, and the issue of any new loans by,
that State.
Right to issue bank notes (Section 22)
RBI shall have the sole right to issue bank notes in India, and may, for a period which shall be fixed by

the Central Government on the recommendation of the Central Board, issue currency notes of the
Government of India supplied to it by the Central Government, and the provisions of this Act applicable to
bank notes shall, unless a contrary intention appears, apply to all currency notes of the Government of
India issued either by the Central Government or by the Bank in like manner as if such currency notes
were bank notes, and references in this Act to bank notes shall be construed accordingly.
Denominations of notes (Section 24) Bank notes shall be of the denominational values of two rupees,
five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one
thousand
thousa nd rupees
rupees,, five thousa
thousand
nd rupees and ten thousand
thousand rupees or of such other denomination
denominational
al
values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of
the Central Board, specify in this behalf. The Central Government may, on the recommendation of
the Central Board, direct the non-issue or the discontinuance of issue of bank notes of such
denominational
denomin ational values
values as it may specify in this behalf.
Legal tender character of notes (Section 26)
Every bank note shall be legal tender at any place in India in payment or on account for the amount
expressed therein, and shall be guaranteed by the Central Government. On recommendation of the
Central Board, the Central Government may, declare that, any series of bank notes of any
denomination shall cease to be legal tender save at such office or agency of the Bank and to such
extent as may be specified in the notification.
Recovery of notes lost, stolen, Mutilated or imperfect (Section 28)
No person shall of right be entitled to recover from the Central Government or the Bank, the value of
any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note. RBI with
the previous sanction of the Central Govern
Government,
ment, may prescribe the circumstances
circumstances in and the
conditions and limitations subject to which the value of such currency notes or bank notes may be
refunded as of grace.
Bank exempt from stamp duty on bank notes (Section 29)
The Bank
1899), shall not
in respect ofbe liable
bank to the
notes payment
issued by it. of any stamp duty under the Indian Stamp Act, 1899 (2 of
Issue of demand bills and notes (Section 31)
No person in India other than the Bank, or, as expressly authorised by this Act the Central
Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or
engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any
sum or sums of money on the bills, hundis or notes payable to bearer on demand of of any such person:
Cheques or drafts, including hundis, payable to bearer on demand or otherwise may be drawn on a
person's account
account with a banker, shroff or agent. Notwi
Notwithstandi
thstanding
ng anything
anything contained in the Negotiable
Instrument Act, 1881 (26 of 1881), no person in India other than the Bank or, as expressly authorised by
this Act, the Central Government shall make or issue any promissory note expressed to be payable to the
bearer of the instrument
instrument..
Assets of the issue department (Section 33) : The assets of the issue department shall consist of
gold coin, gold bullion, foreign securities, rupee coin and rupee securities to such aggregate amount
as is not
coin, goldless thanand
bullion the foreign
total of securities
the liabilities
heldofas
theassets
issue and
department. The aggregate
the aggregate
the value
value of the goldof coin
the gold
and
gold bullion so held shall not at any time be less than Rs.200 cr and Rs.115 cr, respectively.
Transactions in foreign exchange (Section 40)
RBI shall self to or buy from any authorised person who makes a demand in that behalf at its office in
Bombay, Calcutta, Delhi or Madras or at such of its branches as the Central Government may, by order,
determine, foreign exchange at such rates of exchange and on such conditions as the Central
Government may from time to time by general or special order determine, having regard so far as rates
of exchange are concerned to its obligations to the International Monetary Fund. No person shall be
entitled to demand to buy or sell foreign exchange of a value less than two lakhs of rupees.
Cash reserves of scheduled banks to be kept with the Bank (Section 42)
Every bank included in Scheduled II shall maintain with the Bank an average daily balance the amount
of which shall not be less than three per cent of the total of the demand and time liabil liabilitie
ities
s in India of
such bank. RBI may, by notific
notification
ation in the Gazette
Gazette of India, incrincrease
ease the said rate to such higher
higher rate as
may be speci
specified
fied in the notifi
notificatio
cation
n so however
however that the rate shall not be more than twenty per cent of
the total of the demand and time liabilities.
For the purposes
purposes of this section liabil
liabilities
ities shall not include-
(i) the paid-up capital
capital or the rese
reserves
rves or any cred
credit
it balan
balance
ce in the profit and loss
loss account of the bank;

- -
(ii) the amount of any lo
loan
an taken from the ban
bank
k or from the Develop
Develop her it Bank or from the Exi
Exim
m Bank
or from the Reconstruction Bank or from the National Housing Bank or from the National Bank or from
the Small Industries Bank;
(iii) in the case of a State co-opera
co-operative
tive bank, also any loan
loan taken by such bank from a State
Government
Govern ment or from the National Co-operative
Co-operative Development
Development Corporation
Corporation established under the
Nationall Co-operative Development
Nationa Development Corporation Act, 1962 (26 of 1962) and any deposit of money with
such bank representing the reserve fund or any part thereof maintained with it by any co-
operative
operativ e society within its area of operation;
operation;
(iv) in the case of a State co-operative bank, which has granted an advance against any balance
maintained with it, such balance to the extent of the amount outstanding in respect of such advance;
(v) in the case of a Region
Regional al Rural Bank, also any loan
loan taken by such bank from its Sponsor Ban
Bank;
k;
COLLECTION AND FURNISHING OF CREDIT INFORMATION Collection of credit information

(Section 45B) : RBI may collect, in such manner as it may think fit, credit information from banking
companies; and furnis
companies; furnish
h such information
information to any banking
banking company in accordance
accordance with the provisions
provisions of
section 45D.
Power to call for returns containing credit information (Section 45C)
(1) For the purpose of enabling the bank to discharge its functions under this chapter, it may at any
time direct any banking company to submi submitt to it such statements relating to such credit informat
information
ion
and in such form and within such time as may be specified by the Bank from time to time.
(2) A banking company shall, notwithstanding anything to the contrary contained in any law for time
being in force or in any instrument regulating the constitution thereof or in any agreement executed by
it, relating to the secrecy of its dealings with its constituents, be bound to comply with any direction
issued under sub-section (1).
REGULATION OF BANKING BUSINESS RESERVE FUND (Section 17)
Banks in India are to create a reserve fund out of the balance of profit of each year, before any
dividend is declared by transfer to the reserve fund, not less than 20% of such profit. Central
Government on the recommendation of the Reserve Bank (after ascertaining adequacy of the paid-up,
capital and reserves in relation to its deposit liabilities), allow a bank that these provisions shall not
apply. In that case the amount in the reserve fund together
together with the amount in the share premium
account should
should not be less than the paid-up capital of
of the banking company.
Appropriate from reserve fund : Where a banking company appropriatesappropriate s any sum from the reserve
fund or the share premium account, it shall, within 21 days from the date of such appropriation, report
the fact, to the Reserve Bank, explaining the circumstances leading to such appropriation. Reserve
Bank may extend the period of 21 days by such period as it thinks fit or condone any delay in the
making the report.
Cash reserve for Non-scheduled banks (Section 18 ) Every banking company, not being a scheduled
bank, shall maintain in India, by way of cash reserve with itself OR
OR by way of balance
balance in a current
account with the Reserve Bank OR OR by way of net
net balance in current accounts or in one or more of the
aforesai
aforesaidd ways
ways,
of the second , minim
minimum
preceding umfortnight.
3% of the total of its demand and time liabilities in India as on the last Friday
Submission of return : Bank shall submit to the Reserv Reserve e Bank, before the 20n day of every month, a
return
retur n showing the amoun
amountt so held on alternate Fridays during a month with particulars of its demand
and time liabilities in India on such Friday. If any such Friday is a public holiday under the Negotiable
Instrument
Instruments s Act, 1881 , then; at the close of business on the preceding
preceding working
working day.
Maintenance of a percentage of assets (Statutory Liquidity Ratio) (Section 24)
A scheduled bank, in addition to the average daily balance which it is, or may be, required to maintain
under section 42 of the Reserve Bank of India Act, 1934 (i.e. CRR), shall maintain in India an amount
which shall not, at the close of business on any day, be less than 25% or such other percentage not
exceeding 40% as the Reserve Bank may, from time to time, by notification in the Official Gazette,
specify, of the total of its demand and time liabilities in India, as on the last Friday of the second
pre ced ing for tn ight . RBI can cha ng e the stip stipul
ulat
atio
ion
n of SL
SLR
R (wit
(withi
hin
n 25
25%
% and
and 40%)
40%)..
Components of SLR.The following assets are included:
Cash would include:
(i) the deposi
depositt required unde
underr section 11 to be made with RBI by a banki
banking
ng company incorpora
incorporated
ted
outside India;
(ii) any cash or bal
balances
ances maintaine
maintained
d in India by a

banking company other than a scheduled bank with itself or with the RBI or by way of net balance in
current account in excess of the cash or balance or net balance required to be maintained under
section 18;
(iii) any balance maintai
maintained ned by a scheduled bank with the Rese Reserverve Bank in excess for the balance
required to be maintained by it under section 42 of the Reserve Bank of India Act, 1934 (i.e. CRR)
(iv) the net balance in current accounts main maintained
tained in India by a schedul
scheduled ed bank;
(v) any balance
balance maintained by a Regional Rural Ba Bank
nk in call or fixed deposi
depositt with its sponsor bank,
bank,
Others would include:
Gold valued at a price not exceeding the current market . price or
Unencumbered approved securities valued with reference to cost price, market price, book value or
face value, as may be specified by the Reserve Bank from time to time,
Classificat
Class ification
ion of demand/
demand/timetime liabil
liabilities
ities Demand and time liabil
liabilities
ities for SLR purpose are same as in
case of CRR. When it is to be maintained ?
SLR is to be maintained as at the close of business on every day i.e. on daily basis based on the
DTLs as obtaining on the last Friday of the 2nd preceding Fortnight.
Penalties
If a bank fails to maintain the required amount of SLR, it shall be liable to pay to RBI in respect of that
default, the penal interest for that day at the rate of 3 per cent per annum above the bank rate on the
shortfall and if the default continues on the next succeeding working day, the penal interest may be
increased to a rate of 5 percent per annum above Bank Rate for concerned days of default on
shortfall. The penalty shall be paid within a period of fourteen days from the date on which a notice
issued by the Reserve Bank demanding payment of the same is served. In the event of failure to pay
the same within such period, the penalty may be levied by a direction of the civil court only upon an
application made by the Reserve Bank in this behalf to the court;
Further if after payment of penalt penalty,y, the amount required
required to be maintained
maintained is still below,
below, the
prescribed minimum, every Director, Manager or Secretary of the banking company, who is
knowingly
knowi ngly and wilfu
wilfully
lly a party to the default,
default, shall be punis
punishable
hable with fine which
which may extend to
Rs.500 and with a further fine which may extend to Rs. Rs.500
500 for each
each subsequ
subsequent
ent altern
alternate
ate Fri
Friday
day or the
preceding working day, as the case may be, on which the default continues.
Return in Form VIll : A return in form VIII showing the amounts of SLR held on alternate Fridays
during immediate preceding month with particulars of their DTL in India held on such Fridays is to be
submitted to RBI before 20th day of every month. In addition, a statement as annexure to form VIII
giving daily position of (a) value of securities held for the purpose of compliance with SLR and (b) the
excess cash balances maintained by them with RBI is to be submitted.
CASH RESERVE RATIO
CRR refers to the ratio of bank's cash reserve balances with RBI with reference to the bank's net
demand and time liabilliabilities
ities to ensure the liquidity and solvency of the scheduled banks.
Extent of CRR
Under RBI Act 1934 (Section 42 (1) all scheduled banks are required to keep certain minimum cash
reserves with RBI. There is no minimum or maximum percentage as per the Act and RBI is
empowered
(Saturday to to vary CRR
following as per
Friday- 14its discretion.
days) It isng
on reporting
reporti toFriday
be maintained
(advisedatbyfortnightly
RBI ...to, average
.banks atbasis
the
commence of the year). On a daily basis it should be minimum 70% of the average balance wef Dec
28, 2002. Wef January 12, 2002, RRBs also to maintain same CRR as applicable for SCBs.
Demand liabilitie
liabilities
s
mean Current deposits, Demand liabilities portion of saving fund deposits, margins held against
LC/LG, Balances in overdue FD, cash certificate and RD, Outstanding TTs, MTs and DDs, Unclaimed
deposits, Credit balances in CC accounts and Deposits held as security for advances which are
payable on demand.
Time liabilities mean Fixed deposits, cash certificate, cumulative and RDs, time liabilities portion of saving
bank deposits, staff security deposits,
deposits, margins against LC not payable on demand, deposit held as
securities
securities for advances and India Dev Bonds.
Other demand and time liabilities include interest accrued on deposits, bills payable, unpaid dividends,
sundries
sundries accoun
accountt balanc
balances,
es, participati
participation
on certificat
certificates
es issue
issuedd to other banks, net credit balance in branch
adjustment
adjustm ent account, margin held on billsbills purchased
purchased or discounted.
Liabilities not to be included for DTL / NDTL computation
a. Paid up capital, reserves, any credit balance in the Profit & Loss Account , amount availed of as
refinance from RBI, and apex institutions like Exim Bank, OBI, NABARD, NHB, SIDBI etc.
b. Provision for income tax in excess of actual estimated liabilities.

c. Amount received from DI

DICGC
CGC pending adjustments thereof.
d. Amount received
received from ECGC by invoking the guarantee
guarantee..
e. Amount received
received from insurance company on ad-hoc settlemen
settlementt of claims
claims pending Judgment of the
Court.
f. Amount rece
received
ived from the Court Rece
Receiver.
iver.
Interest payment : RBI does not pay any interest on cash balance kept with RBI.
Penalties.The interest payable is reduced by an amount calculated at the rate of 25 % p.a. on the amount
of shortfall. In a situation where shortfall exceeds the level at which no interest becomes payable on
eligible balances held by a bank on net basis i.e. (after interest deduction on the amount of CRR shortfall)
the penal interest under subsection (3) of Section 42 of the RBI Act, 1934 is made applicable.
Fortnightly return in Form 'A'
Under section 42 (2) of RBI Act, 1934, SCBs are to submit to RBI a provisional return in Form 'A' within
7 days and final Form 'A' within 20 days from expiry of the relevant fortnight.
CRR & SLR AT A GLANCE
CRR SLR
In ter
terms of whic
hich Ac
Actt Sec 42(1
42(1)) RBI
RBI Act
Act 1934
1934 Sec
Sec 24 (2-a
(2-a)) Ban
anki
king
ng Regu
Regullat
atiion Act
Act 194
949
9
Min & Max RBI discretion RBI discretion -40%

Present 4% 21.50%
Kept as Cash balance with RBI Cash in Hand, gold and investment in
approved securities
Basis As % of N DTL At fortnightly As % of NDTLs. On daily basis on NDTL
average basis on last Friday of 2nd preceding fortnight.
Interest Nil As per investment made in
different securities.
Pe n a l t y Intt. Payable reduced by Penal in
Penal intt
tt.. for
for the da
day
y on whi
hich
ch no
nott
an amount calculated
calculated at maintained at 3% p.a. above bank rate. For
25% p.a. on amount of shortfall. next day 5%.
Return to Form A Form VIII (2 0 of
.RBI (fortnightly) every month)
Assets in India (Section 25)

The assets in India of every banking company at the close of business on the last Friday of every
quarter shall not be less than 75% of its demand and time t ime liabilities
liabilities in India.
Return
Retu rn ooff such
such ass
assets
ets : EvEvery
ery banking
banking comp
company
any
shall, within one month from the end of every quarter, submit to the Reserve Bank a return of the assets
and liabilities as at the close of business on the last Friday of the previous quarter, or, if that Friday is a
public holiday, at the close of business on the preceding working day.
Unclaimed deposits (Section 26) : Every banking company shall, within 30 days after the close of
each calendar year, submit a return to the Reserve Bank as at the end of such calendar year of all
accounts in India which have not been operated upon for ten years. In the case of money deposited for a
fixed period the
the said term of ten years shall be reckoned from the date of the expiry of such fixed period.
Preservation of records (Section 45Y)
The Central Government may, after consultation
consultation with the Reserve Bank and by notification
notification in the Official
Gazette, make rules specifying
specifying the periods for which
which a banking
banking company
company shall preserve its books,
accounts and other documents;
documents; and a banking company shall preserve and keep with itself itself different
different
instruments
instrum ents paid by it.
Return of paid instruments (Section 45Z) Where a banking company is i s required by its customer to
return to him a paid instinstrumen
rumentt before the expiry
expiry of the period specified
specified by rules made under secti section
on
45Y, the banking company shall not return the instrument except after making and keeping in its
possession a true copy of all relevant parts of such instrument. The banking company shall be entitled
to recover from the customer the cost of making such copies of the instrument.
NOMINATION : Nomination came into force by a notification dated 29th March 1985 as per new Sections
45Z A to 45Z F of the Banking Regulations Act, 1949 with following rovisions

Particulars Acceptance Noticeof claim of other persons is not

of nomination receivablei.e. payment to nominee only.
Deposits Section
Section 45 ZA Section
Section 45 ZB
Safe custody Se c t i o n 4 5 Z C Secti
Section
on 45 ZD
Lockers Section 45 ZE Section
Section 45 ZF
DEPOSIT ACCOUNTS
Types of account - Nomination is available only for deposit accounts in individual capacity
irrespective of their nomenclature. It is not available for representative capacity accounts including
partnership,
Proprietorship trust, limited company,
accounts - Availableclub
Available if theetc.
soleorproprietor
loan etor
propri accounts.
is an individual
individual..
Joint accounts - Available for joint account of individuals.
Minor accounts — Nominati
Nominationon by guardian in account
account operated by guardian.
Pension accounts: This nomination facility is distinct from the Pension (Nominati (Nomination)
on) Rules 1983.
Nomination under Pension will not be valid for the deposit accounts for which a separate
nomination will have to be taken. Non-Resident accounts - Available in respect of both
residents as well as non-residents.
Time for nomination - At any time during which the deposit is held with the bank including for old
accounts.
Renewal of deposits - Continues on renewal of term deposit deposit unless cancelled
cancelled or changed.
changed.
Who can be nominee - Nominee has to be an individual only including a minor or NRI. A firm, club,
company,, trust, etc., cannot act as nominee.
company
How to nomin
nominate ate - By getting form DA-I signed from the depositor (witnessed by two, in case of
illiterate). Minor as nominee - A third person is appointed to act on behalf of the minor for receiving
money, who may be anybody. After attaining attaining majority
majority,, the minor himself can receive the money.
Status of nominee - The nominee is treated as an Trustee for receiving money after death. He is
not the owner. He is duty-bound to pass on the money to the legal heir. So the legal heir can claim
money from the nominee
nominee but the bank, on payment to nominee, nominee, is fully discharged.
discharged. Premature
payment to the nominee before due date is a valid discharge to bank in case of deceased account.
By granting loan to the nominee before maturity of deposits against deposit, bank does not get valid
discharge.
Variation recancellation in nomination - Nomination can be changed any number of times. In case
of a deposit held in name of more than one depositor, the cancellation (form No. DA2) or. variation
(form No. DA3) will be valid only if signed by all. This is applicable
applicable to deposits
deposits having instructions
instructions
Either or Survivor.
More than one accounts - Separate nomination for each term deposit having separate account
opening form should be taken.
Change in style of accounts — Where the changes in the style of account is made due to
addition/deletion etc., the nomination stands cancelled.
Procedure on death of depositor - On death of a person, if 6 months lapse and no person turns up,
the bank has to inform the nominee about nomination in case of deposit accounts. This information is
to be given within three months in case of locker account.
Safe custody :Nomina
Nomination
tion is available
available where articles are held in single name (not available
available for joint
name) of individual
individual accounts. Only one person can be appoint appointed
ed to receive
receive the articles.
articles. Separate
nomination form is to be obtained for each lodgement.
Safe deposit lockers : There could be more than one nominee in case of joint locker accounts (one for
each holder). Contents are deliverable to nominee along with the surviving joint hirer in case of joint hirer.
Other issues in nomination — Nominati
Nominationon facili
facility
ty is obligator
obligatory
y ffor
or banks.
Mentioning
Menti oning of number,
number, date and regisregistratio
tration
n of nomination is obligatory
obligatory,, but mentioning
mentioning the name of
nominee is optional.
Summary of Nomination Provisions
Type of a/c Nature of a/c No. of Nominees
Deposit Single/joint One only

Safe Only single One only
custody

Lockers Sing le / Joint ; E or S One only / One only

Lockers
Lockers Joint- F or S One only
Lockers Joint operation More than one (as per IBA Max 2)
Nomination Forms
Ac c o u n t R eg is tra t ion Can cel l at i Var ia ti o n
DEPOSIT DA-1 DA-2 DA-3
SAFE CUSTODY SC-1 SC-2 SC-3
LOCKERS SL-1 OR SL1A JOINT SL-2 SL-3 OR

SL3A JOINT
Restrictions on loans and advances (Section 20)
No banking company shall grant any loans or advances on the security of its own shares, or enter into any
commitment for granting any loan or advance to or on behalf of-
(i)) any of its Direc
(i Director
tors,
s,
(ii) any firm in whi which
ch any of its DirecDirectors
tors is interested
interested as Partner, Man Manager,
ager, Employe
Employee e or Guarantor, or
(iii) any comcompan
pany y of whi
which
ch any of the Direct
Directors
ors of the bankin
banking g company
company is a Direc
Directortor,, Ma
Managi
naging
ng Agent,
Agent,
Manage
Man ager,
r, E
Empl
mploye
oyeee or Guar
Guarant
antor
or or iin
n which
which he holds
holds substa
substantintial
al inter
interest
est,, or
(iv) any indiv
individual
idual in respec
respectt of whom any of its Direc Directors
tors is a partner or guarant
guarantor. or.
Non-repay
Non- repayment
ment of loan by the dire director
ctor : Where any loan or advance payab payable le by any person,
person, has not been
repaid to the banking company within the period specified in that sub-section, then, such person shall, if he
is a Director of such banking company on the date of the expiry of the said period, be deemed to have
vacated his office as such on the said date.
Restrictions on power to remit debts (Section 20A)
A banking
banking company shall shall not, exce
except pt with the prior appapproval
roval of the Reser
Reserve ve Bank, rem remit it in whole or in part
any debt due to it by any of its Directors, or any firm or company in which any of its Directors is interested as
Director, Partner, Managing Agent or Guarantor, or any individual if any of its Directors, is his Partner or
Guarantor. Any remission made in contravention of the above shall be void and of no affect.
Restriction
Restri ction on comm
commissiission,
on, brokerage,
brokerage, discount, etc., on sale of shares (Section (Section 13)
No banking company shall pay out directly or indirectly by by way of commi
commissiossion, n, brokerage,
brokerage, discount or
remuneration in any form in respect of any shares issued by it, any amount exceeding in the aggregate
2.5% of the paid-up value of the said shares. Prohibiti Prohibitionon of charge on unpaid capital capital (Section 14) No
banking
bankin g company shall create any char chargege upon any unpaid capital of the company, and any such charge
shall be invalid. Further,
Further, no banking company shall create a ffloati loating
ng charge on the undertaking
undertaking or any
property
proper ty of the company or any part thereof, unless the creation of such floating floating charge
charge is certified
certified in writing
writing
by the Reserve
Reserve Bank as not being detrim detrimental
ental to the interests
interests of the depositors
depositors of such company company.. Any such
charge created without obtainingobtaining the certi certificate
ficate of the Reserve Bank shall be invalid.
Any banbankinkingg comp
companyany aggr
aggriev
ieved ed by the refusal
refusal of cercerti
tific
ficate
ate may,
may, within
within 90 days
days from the date on which
rom the which such
such
ref
refusa
usall is com
communmunica
icated
ted to it
it,, appe
appealal to the Central
Central Govern
Governmen ment.t. The decisio
decision n of
of the
the Centra
Centrall Govern
Government
ment
where
whe re an appe
appealal has been prefe
preferre rred
d or of the Res
Reservervee Ban
Bank k where
where no such
such appea
appeall has beenbeen preferre
preferred
d shall
shall
be fifinal
nal.. Restri
Restrictions
ctions as to payment of dividend (Section (Section 15) No bankinbanking g company shall pay any dividend
on its shares until all its capitalised expenses (including preliminary expenses, organisation expenses,
share Gelling commission,
commission, brokera brokerage, ge, amounts of losses incur incurred
red and any other item of expenditure not
represented
represen ted by tangible assets) have been completely completely writtwritten
en off.
CONTROL OVER ADVANCES
Powers of Reserv Reserve e Bank to control
control advances by banking banking companies (Section 21)
Reserve
Reserv e Bank
Bank,, in the public
public interest or in the interests
interests of depositors
depositors or banking
banking policy, may determine the
policy in relation to advances to be followed by banki bankingng companies general
generally ly or by any banking
banking company in
particular,
partic ular, and when the policy has been so determined, determined, all banking
banking companies shall be bound to follow the
policy.
poli cy. Reserve
Reserve Bank may g giveive direction
directions s to banking
banking companies,
companies, either generally or to any banking
company or group of banking companies in particular particulars, s, with regard to
(a) the purposes for
for which advan
advances
ces may or may not be made;
(b) the margins to be maintained
maintained in respect of secured
secured advances;
( c) the maximum amount
amount of advances or other

financ
financial
ial acc
accomm
ommodaodatio
tion
n whi
which,
ch, hav
havining
g reg
regard
ard to the pai
paid-u
d-upp capit
capital,
al, res
reserv
erveses an
andd deposi
deposits
ts of a bankin
banking
g
co
compmpan
anyy and
and oth
other
er relev
relevant
ant co
cons nsid
ider
erat
atio
ions
ns,, ma
may y be made
made by that
that bank
bankining
g cocomp
mpany
any to any on
onee co
comp
mpan
any,
y,
fir
firm,
m, associ
associati
ation
on to perso
persons
ns or ind
indivi
ividual
dual;;
(d) the maximum amount amount up to which, guaran guaranteestees
may
ma y be give
givenn (hav
(havin
ing
g regar
regard
d to the
the co
cons
nsid
ider
erat
atio
ions
ns refe
referr
rred
ed to iin
n clau
clause
se (c))
(c)),, by a banki
banking
ng com
compapany
ny on
behalf
beh alf of any one com
companpany,
y, fir
firm,
m, ass
associ
ociati
ation
on of persons
persons or indi
indivi
vidual
dual;; and
the rate of interest and other terms and conditions on which advances or other financial
accommodation may be made or guarantees may be given.
Rate of interest & scrutiny by courts (Section 21A) A transaction between a banking company and its
debtor shall not be reopened by any court on the ground that the rate of interest charged by the banking
company in respect of such transaction is excessive.
DIFFERENT KINDS OF BANKS AND THEIR REGULATION
Banks in India fall in 3 categories
categories that include:
1. Banks being body corpor
corporates
ates constitu
constituted
ted under special Acts the Parli
Parliament
ament such as SBI
2. Banks bein
beingg companies reregistered
gistered under Companie
Companies s Act 1956 or a foreign company
company such as UT1
Bank Limited
3. Banks regi
registered
stered as Cooper
Cooperative
ative Societies
Societies under Central
Central or State Act
Public Sector Banks: These banks include:
(a) Nationalised Bank : Constituted under Banking Companies (Acquisition and Transfer of
Undertakings)
Undertaki ngs) Act 1970 or Banking Companies (Acqui (Acquisition
sition and Transfer of Undertaki
Undertakings)
ngs) Act
1980, which were took over by Central Govt. in 1969 (14 banks) and in 1980 (6 banks). There are
19 such banks (New Bank of India
merged with PNB) - -
(b) State Bank group banks : Constitute
Constituted
d under SBI Act 1955 and State Bank (Subsidiary
(Subsidiary Banks) Act
1959.There
1959.Ther e are 6 such banks includin
including
g SBI.
(c) RRBs : Constituted under Regional Rural Banks Act 1976.
2005. The no. of such banks cam
camee down subsequen
subsequentt to Sept 30,There
2005 are
as a196 banks
result as on Sept
of merger 30,
of few
banks with other RRBs.
Banking Companies : The banks constituted under section 3 of Companies Act 1956 and foreign
company as per Section 591 of Companies Act, are the private banks which are governed by various
provision of Companies Act as far as their constitution is concerned. But for their banking business,
RBI Act and Banking Regulation Act is applicable_
Cooperative Banks: Constituted as Cooperative Societies registered under Central Act (in case of
Multistate cooperative Banks) and State Acts (in case of single state banks). Banking Laws
(Application to Cooperative Societies) Act 1965 extended certain provisions of Banking Regulation
Act and RBI Act to coopcooperat
erative
ive banks.
bank s. Afte
Afterr Supreme
Supr eme Court jud
judgeme
gement
nt of 2004 in case of Apex
Coop Bank (that multi-state coop societies cannot be licensed as coop banks), Banking Regulation
(Amendment) and Misc. Provision Act 2004 was passed to permit licensing of multi-state cooperative
banks. Under the provisions of the Act, a multi-state cooperative bank means a multi-state
cooperative society.
FUNCTIONS OF RESERVE BANK OF INDIA (RBI) RBI established on April 1, 1935 under RBI Act
1934 {on the recommendations of John Hilton Young Commission 1926 — called Royal Commission
on Indian Currency and Finance), is the central bank of the country and was nationalised wef wef Jan
01,1949. Prior to its existence, Imperial Bank of India from SBI was conducting the Central Bank's
functions. Originally it was a shareholders' bank which was taken over by the Central Govt. under
Reserve Bank (Transfer of Public Ownership) Act 1948 (paid up capital Rs.5 cr). RBI's central office
is in Mumbai.
2 RBI is managed by a Central Board of Directors. It has four local board at Mumbai, Delhi, Calcutta
and Chennai. It has one Governor, provision for 4 Dy. Governors and 15 other directors.
3 It performs following functions:
a Issuance of currency : U/s 22 of RBI Act 1934, RBI has the sole agency/authority in India to issue
currency notes (called bank notes)
notes) under signatures of Governor, except for one rupee note or coins
(which
(which is issue
issued
d by the Central Govt. - signed by Finance Secretary).
Secretary). (more details availabl
available
e on
Indian currency in the later part of this Chapter).
Issue Deptt is responsible for issue of fresh notes against security which consists of gold coins,
bullion, rupee coins foreign securities, eligible promiSsory notes and other approved securities
(aggregate value of gold and foreign exchange reserves should not be less than Rs.200 crore ou outt
of which, gold (coins and bullion) should not be less than Rs.115 crore) (Sec 33). The Banking

Department undertakes all banking activities and holds stock of currency, which is distributed with
the help of currency chests spread all over the country.
b Banker to the Govt
U/s 20 for (Central Govt) and u/s 21-A (for State Govt), Central Bank transacts govt. business and
manages
manag es public debt. Where it does not have office,
office, SBI or any other public sector bank is
appointed its Agent for this purposes. It advises Govt. on all monetary matters and also provides
Ways & Means advances (Section 17(5).
c Bankers' bank
It keeps deposits of commercial banks and acts as lender of last resort by providing financial
assistance in various ways. Section 17 (2) and {3) enable banks to approach RBI for rediscounting,
refinance
refinan ce etc. It provi
provides
des export refinance to the extent of 15% of outstanding export credit eligible
nd
for refinance as at the wef
endJune
of 2 05,preceding fortnight
2000 (details (wef May
provided 05, st2001)
in the and also Liquidity
Adjustment Facility l Chapter).
d Controller of Banks
Every bank which wants to conduct banking business in India has to obtain licence from RBI. RBI also
acts as controller of banks by including the banks in India in 2nd Schedule of the Act (such banks
which are incorporated under Companies Act or under any other law in force in India or outside
including State Coop Banks and which are included in 2nd Schedule of RBI Act 1934 are called
scheduled
schedul ed banks). It grants licences
licences to carry on banking busines
business. s. It issues directi
directions,
ons, carries
inspection
inspe ction (on-site as well as off-site)
off-site) and exerci
exercises
ses management control.
e Controller of credit
U/s 21 and 35A, RBI can fix interest rates (including Bank Rate) and also exercise selective credit
controls in order to control inflation and money supply for ensuring growth of the economy &
ensuring price stability. Various methods such as change in cash reserve ratio, stipulation of
margin on securities, directed credit guidelines etc. are used for this purpose. These are also
called quantitative and qualitative methods. It also carries sale and purchase of securities which
are known as open market operations.
f: Statutory ReservesBanks
ReservesBanks also maintain certain certain %age of their assets in liquid/cash form under
SLR/CRR
SLR/CR R requir
requirements
ements (detail
(detailss of given in the Chapter Credit Opn).
g: Collection
Collection of information RBI collects information (U/s 45-C) information on borrowers
collects credit information
enjoying credit limits up to Rs.10 lac on secured basis and Rs.5. lac on unsecured basis) and can
share this information with other banks (Sec 45-0). Besides, RBI obtains information on suit-filed
accounts and BSR returns.
h. Maintenance of external value : RBI is responsible also for maintaining external value of Indian
currency as well as the internal value. Foreign exchange reserves are held by RBI and it has
wide powers to regulate foreign exchange transactions under Foreign Exchange Management
Act (FEMA)
(FEMA)..
i. Other functions include acting as promoter of financial institutions, as policy maker, collection and
publication of data etc. Instruments of monetary control used by RBI are variable CRR and SLR,
bank rate, open market operations, refinance policy changes, selectiselective ve credit control
control and moral
suasion.
BOARD FOR FINANCIAL SUPERVISION
BFS came into existence under RBI's (US) Regulations 1994 u/s 58 of RBI Act, wef Nov. 16, 1994 with
RBI Governor being its ex-officio Chairman. Narasimham Committee had recommended formation of
BFS which has jurisdiction over banks/banking companies. It exercises powers of supervision and
inspection under RBI Act and Banking Regulation Act. It is assisted by Deptt. of Supervision in RBI.
Its functions include empanelment
empanelment and selection of Statutory
Statutory Auditors for banks and exercise
exercise integrated
supervision
superv ision over commercial banks, Fls and NBFCs and other para-banking
para-banking ffinanci
inancial
al institutions.
institutions. The
supervision
superv ision is both the on-site (through inspectio
inspection)
n) and off-site
off-site (through DSB returns
returns).
). DSB returns were
introduced wef April 01, 1996, which are submitted on a quarterly basis.
GOVT. ROLE AS REGULATOR OF BANKS

Banks are not directly regulated by Govt. but under RBI Act and Banking Regulation Act, Central Govt.
has been conferred vast powers. Details of some of them are as under:
 Entire share capital
capital of RBI is held by Central Govt. It can appoint and remove the members of Central
Board of RBI. It also appoints Governor RBI.
 Central Govt. can issue directions
directions to RBI and indirectly
indirectly influence the decision making.
making.

 Central Govt.
Govt. is appellate authority
authority in a no. of cases, concerni
concerning
ng RBI powers with regard to banks
such as remov
removalal of manager
managerial
ial personnel, cancell
cancellation
ation of banking
banking licence
licence etc.
 Central Govt.
Govt. can suspe
suspendnd the operation of Banking Regulati
Regulation
on Act and can give exemption
exemption from any
provisions of Banking Regulation Act, on RBI's recommendations.
 Central Govt. notifies
notifies the forms of banking business u/s 6(1)(o)
6(1)(o)..
 Central Govt. has the author
authority
ity under Section 45Y to make rules regardi
regarding
ng preservation
preservation of records
and Section 52 regarding making of rules under of Banking Regulation Act.
 Central Govt.
Govt. approves formation
formation of subsid
subsidiary
iary for certain business
business u/s 19 of B R Act.
 Central Govt. issues
issues notificati
notification
on regarding purpose of maintenance of assets u/s 24(2) and with
regard to accounts and balance sheet u/s 29.

Central Govt.
Govt. can issue dir
direction
ection to RBI for inspection
inspection of Banks u/s 35 of B R Act
 U/s 36 AE of B R Act, the Central Gov
Govt.
t. can acquire undert
undertakings
akings of bank
banks.
s.
 It can also suspend the business
business and amalgama
amalgamationtion of banks u/s 45 of B R Act.
SUMMARY OF RBI ROLE AS REGULATOR OF BANKS
Banks are directly regulated by RBI mainly under Banking Regulation
Regulation Act. Besi
Besides
des there are few
provisions
provis ions in RBI Act (CRR) under which RBI exercises regulatory
regulatory control over banks. Summary of
some of them are-as under:
 RBI has the authority to give licence
licence to the banks (u/s 22 of B R Act),Act), without which no banks can
undertaking banking functions.
 RBI can also cancel the licence subject
subject to fulfillment
fulfillment of certain requirements.
requirements.
 RBI can appoint
appoint and remov
removee certain personnel and Directors including
including Chairman and Managing
Director.
 RBI can regulate the business of banks that includ
includee deposits, advances
advances etc.

RBI can give directions to Banks u/s 35 A of B R Act
 RBI can conduct inspection of banks u/s 35 of B R Act.
RBI can conduct scrutiny and also order audit and sp speci
ecial
al audi
auditt under
under B R Ac
Act.
t.
 RBI can collect credit information and also disseminate the collected information.
 RBI can initiate
initiate the proce
process
ss of morator
moratorium,
ium, amalga
amalgamation
mation and winding up
 RBI
RBI can
can im impos
posee pen
penal
alti
ties
es und
under
erce
certa
rtain
in ci
circ
rcum
umst
stanc
ances
es..
RETURNS, INPSECTION AND WINDING-UP

ANNUAL ACCOUNTS - Accounts and balance-sheet (Section 29)
On expiration of each calendar years or at the expiration of a period of 12 months ending with such
date as the Central Government may specify (at present being March 31 every year wef March 1989),
every banking company shall prepare a balance-sheet and profit and loss account as on the last
working day of the year or the period, in the Forms set out in the Third Schedule (it is Form A for
balance sheet and Form B for profit and loss account) or as near thereto as circumstances admit.
Central Government after giving not less than 3 months' notice, may from time to time, amend the
Forms.
Who is to sign the balance sheet : The balance-sheet and profit and loss account shall be signed,
in the case of a banking company incorporated in India, by the manager or • the principal officer of
the company and where there are more than three Directors of the company, by at least three of
those Directors, or where there are not more than three Directors, by all the Directors, and in the
case of a banking company incorporated outside India by the Manager or Agent of the principal
office of the company in India.
Audit of accounts (Section 30)
The balance-sheet and profit and loss account prepared in accordance with section 29 shall be
audited by a person duly qualified under any law for the time being in force to be an Auditor of
companies. Every banking
banking company shall
shall,, before appointing,
appointing, reappointi
reappointing
ng or removing any Auditor or
Auditors, obtain the previous approval of
of the Reserve Bank.
Special audit : Where the Reserve Bank is of opinion that it is necessary so to do, it may direct that
the special audit of the banking company's accounts, for any such transaction or class of
transactions or for such period or periods, shall be conducted. It may appoint a person duly qualified,
to be an Auditor of companies or direct the Auditor of the banking company himself to conduct such
special audit. The Auditor shall comply with such directions and make a report of such audit to the

Reserve Bank and forward a copy thereof to the company.

Submission
Submission of annual accounts (balanc
(balance
e sheet and profit and loss account (Section 31)
The accounts and balance-sheet together with the Auditor's report shall be published in
the prescribed manner and three copies thereof shall be furnished as returns to the
Reserve Bank within three months from the end of the period
period to wh
which
ich they refer.
refer. Rese
Reserve
rve
Bank may in any case extend the said period of 3 months by a further period not exceeding 3
months. Copies of balanc
balance-sheet
e-sheets
s and accounts
accounts to Registrar
Registrar of Companies
Companies ( Section
Section 32)
Where a banking company in any year furnished its accounts and balance-sheet in accordance with the
provisions
provisions of secti
section
on 31, it shall at the same time send to the RoC, 3 copies of such accounts and
balance-sheet
balance -sheet and of the Audito
Auditor'sr's report.
Display of audited balance-sheet by companies incorporated outside India (Foreign Banks) (Sec
33) Every banking company, incorporated outside India shall, not later than the first Monday in
August of any year in which it carries on business, display in a conspicuous place in its principal
office and in every branch office in India a copy of its last audited balance-sheet and profit and loss
account prepared under section 29. It shall keep the copy so displayed until replaced by a copy of the
subsequent balance-sheet and profit and loss account.
Monthly
Monthl y returns and powers to call for other returns and infor
information
mation (Section
(Section 27)
Statement of Assets and liabili
liabilities
ties : Every banking company shall
shall,, before the close of the month
succeeding that to which it relates, submit to the Reserve Bank a return showing its assets and
liabilities in India as at the close of business on the last Friday of every month or if that Friday is a
public holiday, at the close of business on the preceding working day. Statement of Investments and
classification of advances : Reserve Bank may direct a banking company to furnish it within such
time as may be specified by the Reserve Bank, information every half-year regarding the
investments of a banking company and the classification of its advances in respect of industry,
commerce and agriculture
agriculture..
Power to publish information (Section 28) : Reserve Bank or the NABARD, or both, may publish any
information obtained by them under this Act in such consolidated form as they think fit.
INSPECTION OF BANKS (Section 35) : Reserve Bank by itself or on being directed by the Central
Government
Government can, conduct an inspection by its officers, of any banking company and books and
accounts. Reserve Bank shall supply to the banking . company, a copy of its report on such
inspection.
inspec tion. Reserve Bank, may also conduct a scrutiny by by its officers, of the affairs of any banking
company and its books and accounts. A copy of the report of the scrutiny shall be furnished to the
banking company if the banking company makes a request OR if any adverse action is contemplated
against the banking company on the basis of the scrutiny.
Duty to make available books and accounts : It shall be the duty of the banking company to produce
to the officer making an inspection or a scrutiny, all such books, accounts and other documents and to
furnish him with any statements and information relating to the affairs of the banking company as the
said officer may require.
Inspection on direction of Central Govt .: Reserve Bank shall, if it has been directed by the Central
Government
Govern ment to conduct an inspection shall report to the Central Government in relation to inspection inspection
or scrutiny made. Central Government,
Government, if it is of opinion
opinion after considering
considering the report that, the affai
affairs
rs of
the company are being conducted to the detriment of the interests of its depositors, may, after giving
such opportunity to the banking company to make a representation by order in writing-
(a) prohibit
prohibit the banking
banking company from receiv
receiving
ing fresh deposits;
deposits;
(b) direct the Reserve
Reserve Bank to apply under sectisection
on 38 for the winding up of the banking company:
Power of the Reserve Bank to give directions (Section 35 A)
Where the Reserv
Reserve e Bank is satisfied that it is necessary to issue direc
direction
tion (to bankin
bankingg companies
companies
generally
general ly or to any banking company in particular
particular):
):
 in the public iinterest
nterest or
 in the inte
interest
rest of bankin
banking g policy
policy;; OR
 to prevent the affair
affairs
s of any banking company beingbeing conducted in a manner detrimdetrimental
ental to the
interests
interes ts of the depositor OR


in
to a manner
secure theprejudi
prejudicial
propercial
mantoagement
the interes
managementinterests
oftsany
of the banking
banking company;
company
company
comp ; ORly;
any general
generally;
it may issue directions and the banking company shall be bound to comply with such directions.
Reserve Bank may modify or cancel any direction issued, and impose conditions subject to which

the modification or cancellation shall have effect.

RBI has issued directives relating to Ombudsman, Know Your Customer (KYC) and clean note policy,
under these provisions.
Further powers and functions of Reserve
Reserve Bank (Section
(Section 36)
(a)) Reserve Bank may c
(a caution
aution or prohibit banking
companies
compani es ggeneral
enerally
ly or any banking compan
company y in particular against entering into any particular
particular
transaction
transaction or class of transactio
transactions,
ns, and generally
generally give advice
advice to any banking company;
(b)) Reserve
(b Reserve Bank may on a re request
quest by the c
compani
ompanies es
concerned
concer ned and subjec
subjectt to the provisions of section 44A, assist, as interm
intermediary
ediary or otherwise, in
proposals
proposal s ffor
or the amalga
amalgamation
mation of such banking companies;
(c ) Reserve
Reserve Bank may give assistanc
assistance
e to any banking company
company by means of the grant
grant of a loan or
(d)) advance
(d Reserve under
Reserve Bank section 18 ofthe
may require
require theban
Reserve
banking Bankany
of India
king company
comp to Act, 1934.
call a meeting of its Directors for the purpose, of considering any matter relating to or arising out
of the affairs of the banking company, or require an officer of the banking company to discuss
any such matter with an officer of the Reserve Bank.
(e) Reserve Bank may dep depute
ute one or more of its officer
officers
s to watch the proceedings at any meeting
meeting
of the Board of Directors of the banking company or of any committee or of any other body
constituted by it; require the banking company to give an opportunity to the officers so deputed
to be heard at such meetings and also require such officers to send a report of such
proceedings to the Reserve Bank;
(f) Reserv
Reserve e Bank may require the Board of Directors
Directors of the banking compan
company y or any committee or any
other body constituted by it to give in writing to any officer specified by the Reserve Bank in this
behalf at his usual address all notices of, and other communications relating to, any meeting of the
Board, committee
committee or other body constituted by it;
(9) Reserve Bank may appoint one or more of its officers to observe the manner in which the affairs
of the banking company or of its officers or branches are being conducted and make a report
thereon;
(h) Reserve Bank may require the banking company to make, within such time as may be specified in
the order, such changes in the management as the Reserve Bank may consider necessary
ACQUISITION, AMALGAMATION & LIQUIDATION Power of Central Government to acquire

banking undertakings (Section 36 AE)
If, upon receipt of a report from the Reserve Bank, the Central Government is satisfied that a
banking company has, on more than one occasion, failed to comply with the directions given to it in
writing under section 21 or section 35A, or is being managed in a manner detrimental to the interests
of its deposito
depositors
rs and it is necess
necessary
ary to acquire
acquire such bankin
banking
g company,
company, the Central Government
Government may,
after consultation
consultation with the Reserv
Reservee Bank, acquire
acquire the undertaking
undertaking of such company with effect from
such date as may be specified in this behalf by the Central Government.
Such acquiring
acquiring shall be after banking
banking company has been given a reasonable
reasonable opportunity of showing
cause against the proposed
proposed action
action..
Power of the Central Government to make scheme (Section 36 AF)
The Central Government may, after consultation
consultation with the Reserve Bank, make a scheme in relation relation
to any acquir
acquired
ed bank. The scheme may provide for the following matters namely:- namely:-
(a)) the corporation
(a corporation,, or the company incorporated
incorporated for
the purpose, to whic
which
h the undertaking including
including the property
property,, assets and liabilities
liabilities of the acquired
bank may be transferred
transferred,, and the capi
capital,
tal, constitution,
constitution, name and office thereof;
(b)) the consti
(b constitution
tution of the first board of managem
management ent
(by whatever name called) of the transferee bank, and all such matters in connection therewith or
incidental
incid ental thereto as the Central Government may consider to be necessary or expedient; expedient;
(c) the continua
continuancence of the services
services of all the employees of the acquired bank (exc (exceptin
eptingg such of them
as, not being workm
workmenen within the meaning of the Industri
Industrial
al Disputes Act,
Act, 1947 (14 of 1947),
1947), are
specifically mentioned in the scheme) in the Central Government or in the transferee bank, as the
case may be, on the same terms and conditions so far as may be, as are specified in clause (i)
and (j) of sub-sec
sub-section
tion (5) of section
section 45;
(d) the continuance
continuance of the right of any person who, on the appointe
appointed d day, is entitled to or is in receipt
of, a pension or other superannuation or compassionate allowance or benefit, from the acquired
bank or any provident,
provident, pension or other fund or any authority
authority administerin
administeringg such fund, to be paid
by, and to receive from the Central Govern
Government
ment or the transfe
transferee
ree bank, as the case may be, or

any provident, pension or other fund or any authority administering such fund, the same pension,
allowance or benefit so long as he observes the conditions on which the pension, allowance or
benefitt was granted
benefi granted,, and if any question
question arises whether he has so observed
observed such conditions
conditions,, the
question shall be determined by the Central Government and the decision of the Central
Government thereon shall be final;
(e) the manner of payment of the compensation
compensation payable in accordance with the provisions
provisions of this
Part to the shareholders of the acquired bank, or where the acquired bank is a banking company
incorporated outside India, to the acquired bank in full satisfaction of their, or as the case may
be, its, claims;
(f) the provision,
provision, if any, for comple
completing
ting the effectual transfer
transfer to the Central Government
Government or the
transferee bank of any asset or any liability which forms part of the undertaking of the acquired
bank in any country outside India;
(g) such incidental,
incidental, consequ
consequential
ential and suppleme
supplemental
ntal matter
matterss as may be necessary
necessary to secure that the
transfer of the business, property, assets and liabilities of the acquired bank to the Central
Government or transferee bank, as the case may be, is effectual and complete.
The Central Government may, after consultation with the Reserve Bank, add to, amend or vary any
scheme made - under this section. Every scheme, shall be published
published in the Official Gazette.
Compensation to be given to shareholders of the acquired bank (Section 36 AG)

Every
Ever y person who, is regist
registered
ered as a holder
holder of shares,
shares, shall be given by the Central
Central Government,
Government, or
the transferee bank, such compensation as is determined in accordance with the principles contained
in the Fifth Schedule. If the amount of compensation offered is not acceptable to any person to whom
the compensation is payable, such person may, before such date as may be notified by the Central
Government
Govern ment in the Official Gazette
Gazette,, request the Central Government in writing, to have the matter
referred
referred to the Tribunal.
Constitution
Constitution of the Tribunal (Section 36 AH)
(1) The Central Government may, constitute
constitute a Tribunal which shall c
consist
onsist of a Chairman and two
other members.
(2) The Chairman
Chairman shall be a person who is, or has been, a Judge of a High Court Court or of the Supre
Supreme
me
Court, and, of the two other members, one shall be a person, who, in the opinion of the Central
Government, has had experience of commercial banking and the other shall be a person who is a
chartered accountant within the meaning of the Chartered Accountants' Act, 1949.
(3) The Tribunal may,
may, choose one or more persons having
having special know
knowledge
ledge or experience
experience of any
relevant
relev ant matter to assi
assist
st it in the determinatio
determination
n of such compen
compensation
sation..
Powers of the Tribunal : (Section 36A1) : The Tribunal shall have the powers of a civil court, while trying
a suit, under the Code of Civil Procedure, 1908 in respect of summoning and enforcing the attendance of
any person and examining him on oath; requiring the discovery and production of documents; receiving
evidence on affidavits; issuing commissions for the examination of witnesses or documents.
SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES

ion of business (Section 37) The High Court may on the application of a
Suspension
Suspens a banking company
which is temporarily unable to meet its obligations, make an order (a copy of which it shall forward to
the Reserve Bank staying the commencement or continuance of all actions and proceedings against
the company for a fixed period of time, and may from time to time extend the period. The total period
of moratorium shall not exceed 6 months.
Application shall be maintainable only when it is accompanied by a report of the Reserve Bank indicating
that in the opinion of the Reserve Bank the banking company will be able to pay its debts if the
application is granted.
Role of RBI : Where the Reserve Bank is satisfied that the affairs of a banking company, in respect of
which an order has been made by High Court, are being conducted in manner detrimental to the
interests of the depositors, may make an application to the High Court for the winding up of the
company. Where any such application is made, the High Court shall not make any order extending the
period.
Winding up by High Court (Section 38) High Court shall order the winding up of a banking
company if the banking company is unable to pay its debts; or if an application for its winding up
has been made by the Reserve Bank under section 37 or this section. Reserve Bank may make an

application under this section for the winding up of a banking company:

(a)
(a) if the
the bank
bankin
ing
g co
comp
mpanany-y-
(i) has failed to co comply
mply with the require
requirements
ments
specified
speci fied in secti
section
on 11; or
(ii) has by reason of the p provi
rovisions
sions of section
section
22become
22becom e disen
disentitled
titled to carry on banking business in India; or
(iii) has been prohibited
prohibited from re receivi
ceiving
ng fresh deposi
deposits
ts by an order sec
section
tion 35 or section
section 42 of the
Reserve Bank of India, Act, 1934 or
(iv) having failed
failed to comply with any re requirement
quirement of this Ac
Actt other than the requireme
requirements
nts laid down in
section 11, has continued such failure, or, has continued contravention beyond specified period
(b)
(b) if in th
the
e opin
opinio
ion
n of th
the
e Res
Reser
erve
ve Ba
Bank
nk--
(i) sata isfac

satis co
comp mpro
factor romi
torilmise
ily sethor
y with
wi orarra
arwi
rang
withongem
thout emen
ut ent.
modifi
mod t.ificat
sa
sancncti
catiotion
oned
ions;
ns;ed
or by a co
cour
urtt in resp
respec ectt of the
the bank
bankin
ing
g co
compmpan
any y ca
cann
nnotot be wo
work
rked
ed
(ii) the returnsreturns,, statemen
statements ts or inform
information ation furnished
furnished to it under or in pursuance
pursuance of the provisions
provisions of this
this Act
disclose
discl ose that the banking com company
pany is unable to pay its debts; or
(iii) the continuan
continuance ce of the banking company is preju prejudici
dicialal to the interest of its depositors.
depositors.
When
Wh en a bank
bankin ingg co
comp
mpan any y is deem
deemed edto to be un
unaable
ble to pay
pay its
its debt
debts s
A banking company shall be deemed to be unable to pay its debts
 if it has refused to meet any lawful demand made at any of its offices or branches within 2 workin working g days if
such demand is made at a place where there is an office, branch or agency of the Reserve Bank, or
 within 5 workinworking g days if such demand is made elsewh elsewhere,ere, and
 if the Reserve Bank certifie certifies s in writing that the banking company is unable to pay its debts.
Court liquidator (Section 38A)
There shall be attached to every High Court a court liquidator to be appointed by the Central Government for
the purpose of conducting conducting all proceedings for the winding up of banking companies and performing performing such other
duties in reference
reference thereto as the High Court may impose. impose.
Rese
Re serv rvee BaBanknk as offic
official
ial liq
liquid
uidat
atoror (Sec
(Sectio
tionn 39)
39)
Where
Whe re in any proc proceed
eedin ingg fo
forr the
the windi
winding ng up
up by the Hi High
gh Co
Cour urtt of a bank
bankin ing
g comp
companany,y, an appl
applicicat
atio
ion
n is made
made by
the
the ResReser erve ve Ba
Bank nk,, the Reser
Reserve ve Ba
Bank nk,, the
the Stat
State
e Bank of Indi
India a or any other
other ban
bankk notif
notifieied
d by the Cent
Central
ral
Gover
Gov ernmnmen entt or any indi
indivividu
dualal sh
shal
alll be appoi
appointnted
ed as the
the offi
offici
cial
al liqui
liquida
dator
tor of the ba
bank
nkin
ingg co
comp
mpany
any and
and ththe
e
liquidator
liqui dator,, functionin
functioning g in such proceproceeding
eding shall vacate
vacate off
office
ice upon such appointmen
appointment. t.
Applicat
Appl icationion of Compa
Companies nies ActAct to liquidator
liquidators s (s
(se
e 39A)
39A) AlAlll the provis
provisionionss of the Compani
Companies es Ac
Act,t, 1956,
1956, rel
relati
ating
ng
to a liliqu
quididato
ator,
r, in
in so far
far as thethey y are
are not iinc ncon
onsi
sist
sten
entt wit
with
h thi
thiss Act,
Act, shshal
alll apply
apply to or in
in relat
relatio
ionn to a liqu
liquid
idat
ator
or
appoin
app ointed
ted under
under sec
sectiotionn 38A or Sectio
Section n 39.
Stay
Sta y of proproce ceed
eding
ings s (Secti
(Section on 40) : High Court shaft make an order stayi staying
ng the proceedin
proceedings gs of winding up
where
wher e it is sati
satisfie
sfiedd that a ann arr
arrange
angemen mentt has been made whereby the company can pay its depositors in
full as their claims accrue.
Prefer
Pre ferenti
ential al pay
paymen
ments ts to dep
deposit ors (Se
ositors (Secti
ction
on 43A)
 within 3 months from the date of the winding winding up order, the preferen
preferential tial paymen
payments ts shall be made by the official
liquidator
liquida tor or adequate provisionprovision for such pay payments
ments shall be made by him u/s 530 of Companies Act Act

after prefer
preferential
ential payments,
payments, depositors of saving bank account up to Rs.250
 then other depositors up to Rs.250 (maximum amount to be paid to one person when he is saving bank
& other deposit account holder with balance up to Rs.250, would be Rs.250).
 the balance would be utilized to pay to general creditors
 then to the due amount to other depositors.
Where full payment cannot be made, every depositor would be paid on a pro rata basis.
Deposits covered with D1CGC insurance cover are not covered under these rules.
Volu
Volunt
ntar
ary
y win
windi
ding
ng up (S
(Sec
ecti
tion 44) : No banking company may be voluntaril
on 44) voluntarily
y wound up unless the Reserve
Bank certifies
certifies in writing that the company is able to pay in full all its debts to its creditors as they accrue. High
Court, may, make an order that the voluntary winding up shall continue, but subject to the supervision of the
court.
Amalgam
Ama lgamatio
ationn of banking
banking companie
companies s (Se
(Secti
ction
on 44A)
44A) No ban
bankin
king
g company
company shall
shall be amalga
amalgamat
mated
ed wit
with
h another
another
bankin
ban kingg com
company
pany,, unl
unless
ess a sch
scheme
eme c cont
ontain
aining
ing the
the ter
terms
ms of such
such amalga
amalgamati
mation
on has been
been placed
placed in
in draft,
draft, bef
before
ore
th
thee sh
shar
areh
ehol
olde
ders
rs of each
each bankin
banking g co
comp
mpan
anyy se
sepa
para
ratel
tely,
y, and appr
approv
oved
ed by the
the reso
resolu
luti
tion
on pass
passeded by a majo
majoririty
ty in
number represen
representing
ting two-
two-thir
thirds
ds in value
value of the shareho
shareholde rs of each
lders each company,
company, present
present either
either in person
person or by
pr
prox
oxyy at a meeti
meeting
ng calle
called
d for
for the
the purp
purpos
ose.
e.
If the scheme is approved, it shall be submitted to the Reserve Bank for sanction. If sanctioned by the

Reserve Bank it will be binding on the banking companies concerned and also on all the shareholders thereof.
Any shareholder,
sh areholder, who has voted against the scheme or has g given
iven notice that he dissents from
f rom the
t he
scheme, he shall be entitled, to claim from the banking company concerned their value as determined by
the Reserve Bank when sanctioni
sanctioning
ng the scheme
scheme..
Sanction of scheme : On the sanctioning of a scheme by the Reserve Bank, the property of the
amalgamated banking company shall, be transferred to and the liabilities of the company shall become the
liabilities of the banking company.
Where a scheme is sanctioned by the Reserve Bank, it may, direct that the amalgamated banking
company will cease to functio
function,
n, shall stand disso
dissolved
lved wef a particular
particular date.
Restri
Res tricti
ction
on on compro
compromis
mise
e or arrang
arrangemement
ent betwee
betweenn bankin
bankingg co
compa
mpanyny and creditors (Se
creditors (Secti
ction
on 44
44B)
B) No
High Court shall sanction
sanction a compromise
compromise or arrangement
arrangement between a banking
banking company and its creditors
creditors
and its members

modification, only when
is certified theReserve
by the compro
compromise
mise
Bankorinarrangement
arrangement
writing as notunless
being the compromise
compromise
incapable or worked
of being arrangement
and asor
not being detrimental to the interests of the depositors of such banking company.
Power of Reserve Bank to apply to Central Government for suspension of business by a
banking company and to prepare scheme of reconstitution or amalgamation (Section 45): Where it
appears to the Reserve Bank that there is good reason so to do, it may apply to the Central Government
for an order of moratorium in respect of a banking company. The Central Government may make an
order of moratorium for a fixed period of time and may extend the period. Maximum total period of
moratorium shall not exceed six months. The banking company shall not during the period of moratorium
make any payment to any depositors
depositors or discharge
discharge any liabi
liabilities
lities or obligations to any other creditors.
creditors.
During the period of moratorium, if the Reserve Bank is satisfied it may prepare a scheme for the
reconstruction of the banking company, or for the amalgamation of the banking company with any other
banking
bankin g insti
institution
tution.. Status of the employ
employees:
ees: The scheme
scheme,, inter alia, provide for the conti
continuance
nuance of the
services of all the employees of the banking company in the transferee bank at the same remuneration
and on the same terms and conditions of service, which they were getting or, as the case may be, by
which they were being governed, immediately before the date of the order of moratorium:
PENALTIES (Section 46) : False statement : Whoever in any return, balance- sheet or other document
or on any information required or furnished under this Act, wilfully makes
makes a statement, which is false in
any or wilful
wilfully
ly omits to make a material
material statement, shall be punishable
punishable with imprisonment
imprisonment for a term which
may extend to 3 years and shall also be liable to fine.
Failure to produce books : If any person fails to produce any book, accoun accountt or other documents
documents or to
furnish any statement or information which is his duty to produce or furnish, or to answer any question
relating
relating to the business of a banking
banking company which he is asked by an officer making
making insp
inspectio
ection
n or
scrutiny
scruti ny under that secti
section,
on, he shall
shall be punishable
punishable with fine which may extend to Rs.25
Rs.2500 in respect
respect of
each offence, and if he persists in such refusal, to further fine which may extend to Rs.100 for every
day during which the offence continues.
ptance of deposits : If any deposi
Acceptance
Acce deposits
ts are received
received by a banking comp
company
any in contravention
contravention of an
order under section 35, every Director or other officer of the banking company, unless he proves that
the contravention took place without his knowledge or that he exercised all due diligence to prevent it,
shall be deemed to be guilty of such contravention and shall be punishable with a fine which may
extend to twice the amount of the deposits so received. Contravention of provisions of the Act : If any
other provision of this Act is contravened or if any default is made in complying with any requirement of
this Act or of any order, rule or direction made or condition imposed there-under,
such person shall be punishable with fine which may extend to Rs.50000 or twice the amount involved in
such contravention
contravention or defaul
defaultt where such amount is quantifi
quantifiable,
able, whiche
whichever
ver is more, and where a
contravention or default is a continuing one, with a further fine which may extend to Rs.2500 for every
day, during which the contravention
contravention or defaul
defaultt continues.
continues.
Power to exempt in certain cases (Section 53) : The Central Government may, on the
recommendation of the Reserve Bank, that any or all of the provisions of this Act shall not apply to any
banking company or institution
institution or to any class of banking companies either generally or for such period
as may be specified.
CORPORATE GOVERNANCE : Corporate Governance is a dynamic concept. It involves promotion

of corporate fairness, transparency and accountability in the interest of shareholders, employees,
customers and other stakeholders. First major study on Corporate Governance was done by Cadbury
Committee in 1992. It can be seen as the way in which boards oversee the running of a company by its
managers,
manage rs, and how board members are in turn accountable
accountable to shareholders
shareholders and the company
company and it

has implications for company behaviour towards employees, shareholders, customers, banks and other
stakeholders. It also plays a role in ensuring integrity and efficiency of financial markets.
OECD Principles of Corporate Governance, 2004
1. Ensuring
Ensuring the basi
basis s for an eeffectiv
ffective
e corporate
corporate governance
governance fr framewor
amework:
k: The corporate
governance
framework
framew ork should promote transparent and effic efficient
ient markets
markets,, be consistent with the rule of law and
clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement
authorities.
2. The rights
rights of sha
shareholde
reholdersrs and key ownership
ownership func
functions:
tions: The corporate
governance framewor
framework k
should protect and facil
facilitate
itate the exerc
exercise
ise of shareho
shareholders'
lders' rights.
3. The equitable
equitable tr
treatment
eatment of shareh
shareholders
olders:: The cor
corporate
porate governance
governance framework
framework shoul
should d ensure the
equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders
4. should
Thehave
role thestake
role of opportunity
opportunitys to
stakeholder
holders in obtain effecti
effective
corporate
corporate govve redress
governance
ernance: for violation
: The viol
coration
corporateof governanc
porate their
gov rights.
ernance e framework
framework should
should
recognise the rights of stakeholder
recognise stakeholderss established
established by law or through mutual agreeme
agreementsnts and encourage
encourage
active
active co-operation
co-operation between corporations and stakeh stakeholder
olderss in creating wealth, jobs, and the
sustainability of financially sound enterprises.
Disclosure
Discl osure and transpar
transparency
ency:: The corpor
corporate
ate governance framewor
framework k should ensure that timel
timely
y and
accurate disclosure
disclosure is made on all material matters regardin
regarding g the corporation
corporation,, including
including the financial
financial
situation,
situation, performance,
performance, ownership,
ownership, and governance
governance of the company
company..
6_ The responsibil
responsibilities
ities of the board: The corpor
corporate
ate governance framewo
framework rk should ensure the strategic
guidance of the company, the effective monitoring of management by the board, and the board's
accountabili
accounta bility
ty to the company
company and the shareholders.
shareholders.
te Governance and Banks : The Basel Committee on Banking Supervision has issued
Corporate
Corpora
guidelines in 2006 for promoting the sound practices of Corporate Governance by banks. These
guidelines highlight importance of :
1. Role of Board of Directors and Senior Management
2. Effective Management of Conflict of interest
3. Role of internal and external auditors
4. Governing in a transparent manner
5. Role of supervisors in promoting sound corporate governance practices.
Reserve Bank's Approach Committees set up include —A.S. Ganguly Committee in Nov 2001 ,
Advis ory Grou
Advisory Groupp on corp
corporat
orate
e gov
governa
ernance
nce head
headed
ed by R.I-1,
R.I- 1, Pati
Patill in March 2001,
2001 , Advisory
Adviso ry group
grou p on
banking supervision headed by M S Verma in Jan 2003. RBI guidelines on ownership and governance
in private sector banks released on Feb 28, 2005 provide as under: Shareholding
1. The RBI guidelines on acknowledgement
acknowledgement for acquisiti
acquisition
on or transfer
transfer of shares issue
issued
d on February
February 3,
2004 will be applicable for any acquisition of shares of 5 per cent and above of the paid up capital of
the private sector bank.
2. In the interest of diversified
diversified ownership of banks, the objective
objective will be to ensure that no single entity
or group of related entities has shareholding or control, directly or indirectlyindirectly,, in any bank in excess
of 10 per cent of the paid up capital of the private sector bank. Any higher level of acquisition will
be with the prior approval of RBI and in accordance with the guidelines of February 3, 2004 for
grant of acknow
acknowledgeme
ledgement nt ffor
or acquisiti
acquisition
on of shares.
shares.
3. Where ownership
ownership is that of a corporate entityentity,, the objective will be to ensure that no single
individual/entity has ownership and control in excess of 10 per cent of that entity. Where the
ownership is that of a financial entity the objective will be to ensure that it is a well established
regulated
regulat ed entity,
entity, widel
widely
y held, publi
publicly
cly listed and enjoys
enjoys g
good
ood standing in the financial community.
community.
4. Banks (including
(including foreign banks having branch presen presence
ce in India)/Fls
India)/Fls should not acquire any fresh
stake in a bank's equity shares
shares,, if by such acquisition,
acquisition, the inves
investing
ting bank's/FI's
bank's/FI's holding exceeds 5 per
cent of the investee bank's equity capital as indicated in RBI circular dated July 6, 2004.
5. As per existing policy, large industrial houses will be allowed to acquire, by way of strategic
investment, shares not exceeding 10 per cent of the paid up capital of the bank subject to RBI's prior
approval.
approv al. Furthermor
Furthermore,e, such a limitation
limitation will also be considered
considered if appropriate,
appropriate, in regard to important
shareholders with other commercial affiliations.
6. In case of restructuring of problem/weak banks or in the interest of consolidation in the banking
sector, RBI may permit a higher level of shareholding, including by a bank.
Directors and Corporate Governance


1. The Board of Directors should ensure that the responsibilities of directors are well defined and the
banks should arrange need-based training for the dir direct
ectors
ors in ththis
is regard
regard.. While
While the resp respect ectivive
e
entitie
entitiess shou
shouldld pe
perfo
rform
rm th
the
e rol
roles
es envisa
envisaged
ged for
for them,
them, ppriv
rivate
ate secto r ban ks will be req uir ed to
ensu
en surere that
th at the
th e direc
directors
tors on ttheir
heir Boa
Boards
rds repr
representi
esenting
ng speci
specific
fic sector
sectorss as provided
provided tinder
tinder the B.R. B.R.
Act, are indeed repr
represen
esentat
tatives
ives of those
tho se sectors
sect ors in a demonstr
dem onstrableable f a s h io n , t h e y f u lf i l t h e
criteria
criteri a under corporate
go ver na nce no rms pro vid ed by the Ga ng uly Co Comm
mmit itte
tee
e an
andd they
they al
also
so fulf
fulfil
il th
the
e cri
crite
teririaa
applicable
appli cable for determining
determining 'fit and proper' status of Important Sharehold
Shareholders ers (i.e., shareholdi
shareholding ng of 5 per
cent and above).-as laid down in RBI Circular dated June 25, 2004.
2. As a matter of desirable practice, not more than one member of a family or a close relative (as defined
under Section 6 of the Companies
Companies Act, 1956) or an associate (partner, employ employee,ee, director, etc.)
should be on
3. Guidelines thebeen
have Board of a bank.
provided in respect of 'Fit and Proper' criteria for directors of banks by RBI
circular dated June 25, 2004 in accordance with the recommendations of the Ganguly Committee
on Corporate Governance. For this purpose a declaration and undertaking is required to be
obtained from the proposed / existing directors.
4. Being a Directo
Director,
r, the CEO should satisfy the requirements of the 'fit and proper'
proper' criteria applicable
applicable
for directors.
directors. In addition, RBI may apply any additi
additional
onal requireme
requirements
nts for the Chairman and CEO. The
banks will be required to provide all information that may be required while making an application to
RBI for approv
approvalal of appoin
appointment
tment of Chair
Chairman/CE
man/CEO.O.
For public sector banks, princ principles
iples of corpor
corporate
ate governance have been recognized by Banking
Companies
Compani es (Acquisition
(Acquisition and Transfer of Undertakings)
Undertakings) Act and as per Act, the shareh
shareholder
older directors
should be a person having 'fit and proper' status.
PUBLIC SECTOR BANKS AND CO-OPERATIVE BANKS
Introduction: The Public Sector Banks, namely State Bank of India and its subsidiaries, Nationalised
Banks, Regional Rural Banks are established
established by special statutes and these statutes provide
provide the powers,
functions and management of these Banks and the BR Act* is applicable to them in a limited way. Co-
operative
operative Banks are created and governed by laws relatirelating
ng to co-operativ
co-operative
e societies,
societies, if they operate in
one state only, the state act and in different states, Central act applies. BR Act* is applicable in a
Modified manner.
SBII and
SB and its Su
Subsi
bsidia
diaries: SBI was form
ries: formed
ed in
in19
1955
55 by
byth
the
e 5131
5131 ac
actt taki
taking
ng ov
over
er imper
mperia
iall Bank
Bank an
and
d carr
carry
y on the
the bu
busi
sin
ness
ess.. It
isa
is a body
body co corp rpor
orat
atee wi
with
th perp
perpetetua
uall su
succ
cces
essi
sion
on and
andcocomm
mmonon se seal
al.. Maj
ajor
oritity
y of sh
shar
ares
es are
are
he
helld by Go
Govt vt of Indi
India,
a, no othe
otherr shar
share e ho
hold
lder
er othe
otherr than
than GO
GOII cancan exexer
erci
cise
se vo voti
ting
ng rig
ght
ht ab
abov
ove
e ten
ten pe
perc
rcen
ent.
t. SBI
SBI ha
has
s its
its
cent
centra
rall of
offifice
ce at Mu
Mumbmbaiai an
and d lo
loca
call head
head offi
office
ce at Mumumba
bai,i, Ko
Kolk
lkat
ata,
a, Ch
Chen
enna naii an
andd othe
otherr pl
plac
aces
es.. The po
powe
wersrs ar
are
e vest
vested
ed
with
with Cent
Centra rall Bo
Boar
ard.
d. Ce
Cent
ntra
rall Go
Govt
vt gi
give
ves
s di
dire
rect
ctio
ions
ns on ma
matt
tter
erss of po
polilicy
cy afte
after r
consul
con sultat
tatio
ion n wi
with
th RBI
RBI Gov
Gover
ernor
nor and SBSBII chair
chairman
man..
Board: Co
Cons
nsis
ists
ts of Chai
Chairm
rman
an,, Vi
Vice
ce Ch
Chai
airm
rman
an not mo
more
re than
than two MDs
MDs ap
appoi
point
nted
ed by Cent
Central
ral Govt,
Govt, Pres
Presid
iden
ents
ts of Lo
Loca
call
Boar
Bo
pl ards
placeds
ace an
and
wher
wh deothe
ereot
thher
therreDire
ere Di
isrect
actor
ors.
loc s.he
ocal
al Ch
Chai
airm
head
ad rman
an
officean
officeand
todex
Merci
Ds
exer are
areal
cise
se allap
appopoin
l po inte
powe ted
wers
rsdan
for
fodr pe
and a pe
peri
perf riod
rfor
ormod ofncti
m fu
func5tion
ye
year
ars.
s s.
ons an
andLo
Loca
callties
d duti
du Bo
Boar
es ards
ofds
theare
thearBank
e se
Ba set
nk.t.up at ea
each
ch
Busi
Busine
ness
ss of SBI: SB
SBI: SBII ac
actt as an agen
agentt of Rese
Reserv
rve
e Ba
Bank
nk for
for tr
tran
ansa
sact
ctiing Govt
Govt bu
busi
sine
ness
ss an
and
d othe
otherr bu
busi
sine
ness
ss
entrusted to it by RBI. The State Bank may transact the work through its subsidiaries or as an agent
approved
approve d by Reserve Bank.
Accoun
Ac counts
ts and Au dit: SB
Audit: SBII ha
has
s to clos
close
e its ac
accocoun
unts
ts an
and
d prep
prepar
are
e Ba
Bala
lanc
nce
e Shee
Sheett an
and
d P & L ac
acco
coun
untt as on
st
31 MaMarc
rch
h every
everyye
year
ar and
and sh
shouould
ld be su
subm
bmititte
ted
d to RBI.
RBI.
Subsidia
Subsidiary Banks: Th
ry Banks: The
e Sub
Subsid
sidia
iary
ry Ban
Banks
ks of tthe
he Stat
State
e Ban
Bank
k of India
India w
were
ere establ
establis
ished
hed by differ
different
ent
st
stat
atut
uteses.. Ev
Ever
ery
y subs
subsididia
iary
ry Bank
Bank is a body
body corp
corpor
orat
atee wi
with
th perp
perpet etua
uall su
succ
ccesessision
on an
andd co
commmmonon se
seal
al.. The
The majo
majori
rity
ty of the
the
issu
issued
ed Shar
Share e Capi
Capitatall of the
the Su
Subs
bsid
idia
iary
ry Ba
Bank
nkss is he
held
ld by SBSBI. I. The
The shar
shareses of the
the subs
subsid idia
iary
ry
Bank
Ba nks s are
are fr
free
eely
lytr
tran
ansfe
sferarabl
ble.
e. Ho
Howe
wevever,
r, the
the SB
SBII is
isno
nott enti
entitltled
ed to tran
transf
sfer
er th
the e sh
shar
ares
es if su
such
ch tran
transf
sfer
er wo
woululd
d
re
resu
sultlt in redu
reduci
cing
ng its shar
share e hold
holdin
ing
g to le
less
ss than
than 50%
50% of the the is issu
sued
ed capi
capita
tall.
Management: Ve
Vest
sts
s in its
its boar
board
d of dire
direct
ctor
ors,
s, Bo
Boar
ard
d co
cons
nsis
ists
ts of Ch
Chai
airm
rman
an,, MD and
and othe
otherr Dire
Direct
ctor
ors.
s.
SBI ap
SBI appo
poiint
nts
s the
the MD wiwith
th ap
appr
prov
oval
al of RBI.
RBI.
Business: A sub ubs sidiar
diary
y Ba
Bannk has
has to ac
actt as an agent
gent of SBI. A sub
ubs
sidi
diar
ary
y Ban
ank
k ha
hass al
als
so to act as an
ag
agen
entt of RBI
RBI to tr
tran
ansa
sact
ct Go
Govt
vt bu
busi
sine
ness
ss an
and d othe
otherr wo
work
rks
s en
entr
trus
uste
ted
d by RBI.
RBI. A su
subs
bsiidi
diar
ary
y Bank
Bank sh
shal
alll al
also
so

transact the business of general banking as well. SBI is empowered under Sec.47 to inspect the
subsidiary Banks.
Regional Rural Rural Ban Banks (RRBs):: RRB
ks (RRBs) RRBs s are p public
ublic sector
sector insinstituti
titutions,
ons, regionally
regionally based,
based, rural orie oriented
nted and
en
enga
gageged d in comm
commer erci
cial
al Bank
Bankin
ing.g. They
They we
were
re fifirs
rstt form
formed
ed by an ordi
ordinanancncee in 191975
75 an
andd la
late
terr or
ordi
dina
nanc nce
e was
was
an
andd at
attititu
tude
de of the
the ex
exis
istiting
ng pu
publ
bliic sect
sector
or Bank
Bankss we were re not
not full
fully
y cond
conducucivive
e to meet
meet the
the cred
creditit ne
need
edss of the
the re
repl
plac
aced
ed by RRB
RRB
act
act 19
197676.. The
The form
formatatiion of RRBs
RRBs was was the
the resu
resultltofof the
the grow
growin ing
g re
real
alis
isat
atio
ion
n that
that the
the etho
ethoss
ru
rura
rall peop
people le.. The
The ob
obje
ject
ct of sett
settin
ingg up of RRBs
RRBs is istoto de
deve
velo
lopm
pmenentt of ag
agriricu
cultltur
ure,
e, trad
trade,
e, co
comm
mmer erce
ce,, in
indu
dust
stry
ry an
and
d othe
other
r
producti
prod uctive ve acti
activi
vitie
ties
s in rura
rurall areas.
areas.
Sponsor
Spo nsor Bank:Bank: is a Bank by which an RRB is sponsored and it holds 35% of the issued capital of RRB
while the central Govt holds 50% and the state Govt holds the remaining 15% of the issued capital. Every
RRB is a body corporate with perpetual succession and common seal with power to acquire hold or
dispose of property. Generall
dispose Generally
y an RRB is allotted
allotted a compact
compact area of operation comprising
comprising a few distri
districts
cts
with homogeneous agro-climati
agro-climatic
c conditions
conditions and rural clientele.
clientele. These Banks may accept all types of
deposits from public and engage in the business of Banking.
Management: Consists of chairman appointed by Sponsor Bank. The power vests in the board of
directors.
Business: All Banking business as per BR Act*. However the main thrust of the business would be
granting of loans and advances to small and marginal farmers in rural areas.
Nationalised Banks: 14 Private Banks were nationalised in 1969 another 6 Banks in 1980. The Bank
nationalizati
national ization
on act 1970 transferred the underta
undertakings
kings of the existing private Banks to the correspondi
corresponding
ng
new Banks called
called as Nationalised
Nationalised Banks. Originally
Originally the entire paid up capita
capitall of the Nationalised
Nationalised Banks
were held by Central Govt. Some of these Banks have recently made public issues of shares but central
Govt still holds the majority of shares of not less than 51%. Every Nationalised Bank is a body corporate
having perpetual succession and common seal and power to acquire, hold and dispose of property and
enter into contracts. They can carry all Banking business; they also act as agents of Reserve Bank.
Management: vests in the Board of Directors. The Central Govt issues directions to the Bank in the
discharge of its functions on matters of policy.
discharge policy.
Directors: are nomin
nominated
ated by the Central
Central Govt or electe
elected
d from the share holders. RBI may appoint one
or more additional directors on the board.
Accounts and audit: close its accounts as on 31 st March every year. Balance sheet and P&L account to
be audited and the audited balance sheet to be submitted to RBI.

Module: B
Legal aspects of Banking Operations
Syllabus
1) Different Types
Types of Borrowers - Types of Borrowers; Limited
Limited Liability
Liability Partnership
2) Types of Credit
Credit Facili
Facilities
ties - Cash Credit,
Credit, Overdraft,
Overdraft, Dem
Demand
and Loans, Term L Loans,
oans, Bil
Billl
Finance
3) Secured and
and Unsecur
Unsecured
ed Loans, Registra
Registration
tion of Firms
Firms and Incorporati
Incorporation
on of Companies
Companies -
Definition of Secured and Unsecured loans; Need for Secured Loans; Registration of Firms;
Consequences
Consequ ences of Non-registra
Non-registration
tion of Firms;
Firms; Incor
Incorporatio
poration
n of a Compa
Companyny
4) Indemnities
Indemnities - Defin
Definition
ition of Contr
Contract
act of Indemnity;
Indemnity; Featu
Features
res of Indemnity
Indemnity Contract
Contract &
Gu
Guara
arante
Banker;ntee;
e; Sc
Scope
ope an
Precaution and
& dRights
Ap
Applplic
icat
ofatio
anion
n of Inde
Indemn
Indemnity mnitity
y Cont
Holder Contracractsts to Ba
Banknks;
s; Obli
Obliga
gatitions
ons of a
5) Bank Guarantees
Guarantees - Defi
Definitio
nition n and Types of Bank Guarantees;
Guarantees; Banker's
Banker's Duty to to Honor
Guarantee; Precautions to be taken for Issuance of Bank Guarantee; Precautions to be taken
for Payment under Bank Guarantee; Invocation & Enforcement.
6) Letter
Letterss of Credit - Genera
Generall ConConsid
sidera
eratio
tions
ns of Let
Letter
terss of credit;
credit; Parties
Parties to a Letter
Letter of
credit; Types of Letters of credit; Documents under a Letter of credit; UCPDC 600; Banks
obligation for payment of Letter of credit.
7) Deferred
Deferred Paym
Paymentent Guarantees
Guarantees - Purpose
Purpose ofof DPGs; Methods
Methods of Payment
Payment
8) Laws Relating
Relating to Bi
Bill
ll Finance - Cla
Class
ss of Bills and Laws
Laws Governi
Governingng Bills; C
Classif
lassificati
ication
on
of Bills; Categories of Bill Finance; Bill Finance and Legal Position of Banker
9) Variou
Variouss Ty
Types
pes of Sec
Securi
uritie
tiess - Typ
Types
es of Sec
Securi
uritie
ties;
s; Escrow
Escrow Arra
Arrangem
ngements
ents;; Trust
Trust and
Retention Arrangements.
10) Law
awss Rel
Relati
ating to Sec ecur
urit
itie
iess and Modes
odes of Cha harg
rginingg – I - Mortortgag
gage; Type
Typess of
Mortgage; Enforcement of Mortgages
11) Laws Relating
Relating to Securi
Securities
ties and Modes of Chargi
Chargingng – II - Lien; Pledge;
Pledge; Hypothecatio
Hypothecation; n;
etc.
12) Regi
Regist
stra
rati
tion
on and
and Sati
Satisf
sfac
acti
tion
on of ChChararge
gess - Defi
Defininiti
tion
on of ChChar
arge
ge;; Proc
Procededur
uree for
for
Registration of Charge; Effect of Non-registration of Charges; Provisions of Law relating to
Registration of Charges
13) Case Laws on Responsibilit
Responsibility y of Paying Bank - Negoti
Negotiable able Instr
Instruments
uments Act and Paying
Banks; Liability
Liability of Payin
Payingg Banker
Banker;; Payment
Payment in due course; Payment in Good Faith; Whethe Whether r
Payment under Mistake Recoverable
14) Case Laws on Resp

Responsi
onsibil
bility
ity of Col
Collec
lectin
ting
g Bank
Bank - Statut
Statutory
ory protect
protection
ion to Collec
Collecti
ting
ng
Bank; Duties of Collecting Bank

LEGAL ASPECTS OF BANKING OPERATIONS

DIFFERENT TYPES OF BORROWERS
The bank grants loans and advances to different types of borrowers, individuals, partnership firms,
HUF, companies and other Corporates.
IndIndividual: An indi indivi

vidu
dualal bo
borr
rro owe
werr is one of th the
e co
cons
nsti
tittuent
uentss of a ba bank
nk.. Whe hen n bank
banks s len
lend to an indindivividu
dual
al,,
th
thee ba
bank
nker
er sh
shou
ould
ld se
seee whet
whethe herr he ha has s the
the cacapa
paci
city
ty to co
contntra
ract
ct..
A minor is not competent to contract. Therefore, if a banker lends money to a minor, then the same
ca
cann
nnoot be re
reco
cove
verered,
d, if the
the mino
minorr fa fail
ils
s to re
repa
pay.
y.
Exceptions: if a bankbank le lend
nds s mo
mone ney y to a minminoror to mee
meett the exp
expen ense
sess for ppurc
urcha
hasin
singg nec
neces
essi
sitie
ties
s of lif
life,
e, th
the
e bank
bank
ca
cann re
reco
cove
verr th
thee mone
money y fro
from ththe e estat
state e of th
thee mi
mino
nor.
r. Like
Likewiwise
se babanknkss sho
houluldd not
not lend
lend momoneney y to
in
indi
divi
vidu
dual
als
s no
nott of sosoun
und d mind
mind,, pepers rson
ons s de
declclar
ared
ed as inso
insolv
lven
entt un
unde derr th
the
e in
inso
solvlven
encycy la
law.
w.
ship firm: A part
Partnership
Partner partne
nersrshi
hipp is ththee re
rela
lati
tion
on betw
betwe een pers
perso ons wh who o have
have agre
agreed ed to sh
shar
aree the pro rofi
fitts of a
business, carried on by all or any of them acting for all. The relationship between the partners is governed by
partners
part nership
hip deed.
deed.
Regist
Reg istrat
ration
ion of par
partne
tnersh
rship firm: Though registration of partnership firm is not mandatory, it is prudent
ip firm:
on the banbank's
k's part to those
those firms which which are regist
registere
ered.
d. The acts
acts of a partne
partnerr shall
shall be bindin
binding g on the firm if theythey
are
are do
done
ne in the ususuauall busi
businenesss of th the
e part
artne
ners
rshhip an
andd were do done
ne as a pa part
rtne
ner, r, i.e.,
.e., on beh
behalalff of th
the
e
fi
firm
rm and
and nonott so
sole
lely
ly on hi
hiss be
beha
halflf..
Business
Busine ss of Partn
Partnersh
ershipip firm: The right rights s an
andd du
duti
ties
es of th the e pa
part
rtne
nersrs are de deteterm
rminined
ed by th the e deed
deed of
partnership, like opening of bank accounts, borrowing powers, signing cheques etc. Generally the
mana
ma nagiging
ng pa
part
rtne
nerr may
may be do doin
ingg the
the busi
busineness
ss on be
beha
half
lf of th
thee fi
firm
rm as per
per ththee part
partne
nersrshi
hipp dee
deed.
Transaction in immovable property: A banker taking a mortgage security of firm's immovable property should
ensure that the partner creating the charge has the authority to do so, if not, all the partners have to jointly create
the mortgage.
Insolvency of the firm: The banker on receiving notice of insolvency of the firm must immediately stop any
further transactions in the account irrespective of whether it is in debit or credit. If one of the partners become
insolvent, and in case the account is in debit, then further transactions in the account should be stopped so
that the rule in Clayton's case does not apply (i.e., the first credit will go to wipe of the first debit)
Death of the partner: Since the death of a partner dissolves the partnership firm, banks should stop further
transactions in a running account like Cash Credit, Overdraft to crystallize the liability of the deceased partner
and make his estate liable for its dues. Banks allow transactions in a separate account so that the business of
the firm is not adversely affected.
Hindu Undivided Family (HUF) is creation of Customary Law among Hindus. A joint Hindu Family consists of
male
mal e member
members s fro
from
m a comm
commonon male
male ancest
ancestor
or tog
togeth
etherer wit
with
h their
their moth
mothers
ers,, wiv
wives,
es, wid
widows
ows and unm
unmarrarried
ied
daughters bound together. It is purely a creature of law and cannot be created by an act of parties.
In a joint Hindu Family, the senior most male member of the family is entitled to manage the family properties.
He is called 'Manager' or 'Karta' of the joint family. The Karts looks after the whole business; the position of
Karta
powers comes to a person
to manage or sell by
thebirth and not
property, by thefor
account consent of thefor
the income other
the Co-parceners. The Karta
benefit of the family. has unlimited
The application to
open
ope n an ac accou
count
nt mus
mustt be signed
signed by all the memb
membersers,, and all ad
adult
ult memb
members
ers should
should be mad
madee jointl
jointly
y an
and
d
severally liable for any borrowings, if the account gets overdrawn.
Companies: A Company is a juristic person created by law, having a perpetual succession and common seal
distinct from its members. As per the Companies Act, 1956 all companies are to be registered. An association of
more than ten persons in the case of banking business and more than twenty in case of other business shall be
registered under the companies act. It not registered, it will be illegal.
For for
formin
ming g a Compan
Company y two impor
importan
tantt doc
docume
umentsnts cal
called
led 'Me
'Memomoran
randu
dumm of Ass
Associ
ociati
ation
on'' an
and
d 'Ar
'Artic
ticles
les of
Association' (AOA) are necessary.
MOA: It is the charte
charterr of the com
compa
pany.
ny. It ena
enable
bless the sha
share
rehol
holde
ders,
rs, credit
creditor
ors
s to kno
knoww per
permit
mitted
ted ran
range
ge of
busine
bus iness.
ss. MOA
MOA conta
contains
ins,, name
name of the co
compa
mpany
ny,, reg
regist
ister
ered
ed off
office
ice of the com
compan
pany,
y, obj
object
ects
s of the compan
company,y,
liability of its members and share capital and its division.
AOA: Rules and regulations governing the internal management of the company, define powers of the officers,
number of directors, borrowing powers of the company, Board of Directors, officers of the company and other
details. Company: A private company is one which has following provisions in its AOA
Private Company:
a) Res
Restric
triction
tions
s on the rig
right
ht to tran
transfer
sfer its sha
shares
res

b) Limit
Limitat
atio
ion
n on nu
numb
mber
er of me
memb
mber
ers
s to
to 20
200.
0.
c) Proh
Prohibiti
ibition
on as tto
o partici
participati
pation
on by
by ge
genera
nerall public
public in its
its capita
capitall requir
requiremen
ements
ts
Public Company: is one which is not a private company,

a) Share
Shares
s are fre
freely
ely tra
transf
nsfer
erabl
able
e
b) No restri
restricti
ction
on on nu
numbe
mberr of member
members
s
c) Publ
Public
ic can particip
participate
ate in its shar
share
e capit
capital.
al.
Company: Liabi
Limited Company: Liability
lity of the members
members is limite
limited
d to thei
theirr contrib
contribution
ution of capi
capital.
tal.
Unlimited
Unlimi Company: Liability of members is not limited.
ted Company:
Company: Centr
Govt. Company: Central
al Gover
Governme
nmentnt or State
State Gover
Governme
nment nt or bot
bothh have more than than 51% of the share
capital.
Statutory Corporat ions: are fo
Corporations: forme
rmedd by an Act Act of Par
Parlia
liame
mentnt Eg.,
Eg., SB
SBII forme
formed d un
unde
derr th
the
e SB
SBII Act
Act 1955
1955,,
Nationaliz
Natio nalized
ed Banks are establishe
established
d unde
underr the Bank
Banking
ing Comp
Companie
aniess Act
Act,, 1970. Likewise,
Likewise, clubs,
clubs, Societie
Societies,
s,
Co-op societ
societies,
ies, Trusts,
Trusts, Wakf
Wakf Board etc.
etc. are forme
formed d und
underer va
vario
rious
us acts
acts of St
State
ate or Ce
Cent
ntral
ral Gover
Governm
nmenentt
( For additional
additional stu
study
dy pleas
please
e go through Module
Module – B of JaiJaiib
ib Paper First
First pp 68 – 73 )
TYPES OF CREDIT FACILITIES

Lending
Lending is the princi
principal
pal activity
activity of a Bank.
Bank. Banks
Banks are offeri
offering
ng various
various credi
creditt faciliti
facilities
es to its clientel
clientele.
e. These
These
creditt fa
credi facil
cilit
itie
ies
s are cl
clas
assif
sifie
ied
d into
into:: a) Fun
Fund
d base
based
d cred
credit
it fac
facili
ilitie
ties;
s; b) No
Non
n fu
fund
nd base
based d cre
credit
dit facili
facilitie
ties.
s.
Fund ba
Fund based
sed cred
credit
it facilities: Involve the outflow of funds, ie. direct money is going out, lending out to the
facilities:
cu
cust
sto
omers
mers li
like
ke:-
:- a) Ca
Cash
sh Cred
Creditit// Ov
Over
erdr
draf
aft;
t; b) Term
Term Loan
Loans/
s/ Wo
Work
rkin
ing
g Capi
Capita
tal;
l; c) Bi
Bill
ll Fi
Fina
nanc
nce
e
Non fund based credit facilities: In this, the bank's funds are not directly lent to the customers:- a)
Bank
Bank Guar
Guaranante
tee
e ,b
,b)) Le
Lett
tter
er of Cred
Credit
it,, c) Accep
Acceptan
tance
ce Facilit
Facility
y
case: The Cash Credit/ Overdraft account is a running account. Whenever the
Rule in Clayton's case: The
customer withdraws money, the account being debited and whenever he remits to his account, the
account being credited. Under the law, each item of debit is a separate loan and each credit as a
repayment of the earliest debits. This aspect was enunciated in a case called the "Clayton's case". In that
case, the Court held that the first sum of money paid into the account, is deemed to repay the first item
recorde
recordedd on the deb
debitit side of the accou
account.nt. In anot
anothe
herr word
words, "the fi
s, "the firs
rstt cred
credit
it wi
will
ll go to wi
wipe
pe of th
the
e fi
firs
rstt debi
debit"
t"..
Bank not to ter

Bank termin
minate
ate OD fac
facili
ilitie
tiess witho
without
ut no
notice: Once a bank grants an Overdraft facility, then there
tice:
is a cont
ntra
rac
ct betw
betwe
een th
the
e ban
ankk and the cucus
sto
tome
merr tha
hatt it is not to be can
ance
cell
lle
ed uni
nillat
ate
era
rallly
ly..
Term Loan/ Demand Loan: Are granted to customers to meet the capital expenditure needs of the
business. Term loans are granted in one lump sum and are allowed to be repaid over a period in
installments as per the repayment schedule.
Demand loans are those which are repayable on demand through a repayment schedule as agreed upon
by the Bank. Term loans are further classified into :- 1. Short term loans, 2.Medium term loans ;3.Long term
loans. Short term
term loans
loans — repayable
repayable within
within one year , Mediu
Mediumm term loans — repayable within one to seven
years , Long time loans
loans — repay
repayable
able above
above seven year
The limitation period for filing a suit in case of term loans is 3 years from the date of default of a particular
installment. In the case of demand loan the time limit is 3 years from the date of default.
Bill Finance: Bill Financing is conducted through discounting of Bills of Exchange drawn by the borrower on
the cus
custom
tomers
ers of borro
borrowe
wer.
r. Bil
Billl Finan
Financin
cing
g is cla
classi
ssifie
fied
d into
into 3 cat
catego
egori
ries
es :- a Bil
Billl discou
discounti
nting
ng and bill
purchase; b. Drawee bill acceptance,
acceptance, c Bills Co-a
Co-acceptan
cceptancece
In all these cases, Bank undertakes an obligation. The first two are fund based and the third is a non fund
based facility.
Non fund based facility: NFBF do not involve an immediate outflow of funds. The banker undertakes a risk
to pay the amounts on happening of a contingency. They are :-
a) Guarantee b) Letter of Credit c) Underwriting and Guarantee
a) Guar
Guara
antee:: In the event of the principal debtor defaults, the bank undertakes to make the payment
ntee
b) Le
Lett
tter
er of credit:: the banker undertakes to pay on presentation of documents of title to goods subject to
credit
terms of LC.
c) Und
Under
erwri
writin
ting
g an
and
d Credit
Credit Gua
Guara
rantee: Now this facility is on the decline.
ntee:

Other Credit Facilities: Many banks are extending Housing loans, Car loans and other Consumer loans.
These are called consumer credit which contributes significantly to increase the profit of banks.
SECURED AND UNSECURED LOANS

Secured Loans: These loans are given by a banker not merely based on his confidence on the
borrower's future financial
borrower's financial strength,
strength, but based on his net worth. The Banker accepts securitie
securities
s such as
LIC bond, fixed deposit receipts, shares, mortgage of land and building etc.
Unsecured Loans: The loans which are given without any tangible security or assets but merely on the
str
streng
ength
th of the integrit
integrity
y or the "credi
"creditt wor
worthi
thine
ness"
ss" of the borrow
borrower.
er. In oth
other
er wor
words
ds cre
credit
dit worthi
worthine
ness
ss is the
confidence of a Banker on the future solvency of a person. They are also called clean loans.
Why secured loans: The recovery of the loan is mostly depended on the economic success of the borrower.
Success or failure of an economic activity depends on various macro and micro economic factors. The banker
cannot predict success or failure of the activity. So the bank asks for further security in the form of charge on
property of the borrower. This charge acts as a cushion to absorb the shocks of economic failure of the borrower,
and the bank can sell the properties and recover the money.
Registration of firms: It is in the interest of the partners to get their partnership firm registered. For registration,
the prescribed application along with all details such as name of firm, principal place of business, business, names and
addres
add resse
sess of part
partne
ners
rs etc.
etc. to be se
sentnt tto
o Re
Regis
gistra
trarr of firms
firms remit
remitti
ting
ng the presc
prescrib
ribed
ed fees
fees.. The regi
regist
stra
ratio
tion
n of fi
firm
rm
is optio
optiona
nall and
and no
nott co
comp
mpul ulso
sory.
ry. So a me merere no
non-n-reg
regisistr
trat
atio
ion
n would
would not
not affec
affectt in carry
carryin
ing
g on busi
busine
ness.
ss. The
The
Partner
Part nershi
ship
p Act cont
contemp
emplat lates
es the regis
registrat
tration
ion of firm
firms,s, not the partner
partnershi
ship
p deed.For
deed.For making any alterations
altera tions
in the name of firm, shift shifting
ing of place of busibusiness
ness etc, for that also appli applic
catio
ation
n in th
the
e pres
prescr
criibed
bed form
format
at to be
se
sent
nt to the
the Regi
Regist
stra
rar.
r. The
The Regi
Regist
stra
rarr has
has po
powe
werr to ma
make ke any
any rect
rectif
ific
icat
atio
ion
n entr
entry
y in the
the Re
Regi
gist
ste
er of fi
firm
rmss in conf
confor
ormi
mityty
with
with the
the docu
documement
nts
s re
rela
lati
ting
ng to that
that fi
firm
rm alre
alread
adyy fi
file
led
d
with
with him.
him.
Effect
Effect of non
non-re
-regis
gistration:: Se
tration Sec
c 69 of In
Indi
dian
an Part
Partne
ners
rshi
hip
p Act,
Act, 19
1932
32 sets
sets ou
outt th
the
e effe
effect
ct of no
non-
n-re
regi
gist
stra
rati
tion
on..
Suits by Part
Suits Partner
ners s in betwe
between en thems
themselv es:: If the firm is not
elves not regis
registe
tere
red
d the par
partne
tners
rs can
can not
not fil
file
e a su
suit
it
agai
agains
nstt any
any othe
otherr pa
part
rtne
nerr or agai
again
nst the fi
firm
rm in the
the even
eventt of any
any prob
proble
lem
m aris
arises
es..
Suit by the
Suit the fir
irm
m again
gains st thir
third
d part es: Th
partiies: The
e fi
firm
rm ca
cann
nno
ot fi
file
le a su
suit
it agai
agains
nstt any
any th
thir
ird
d part
partie
ies
s to sett
settle
le any
any clai
claim
m
or re
reco
cove
veri
ring
ng any
any du
dues
es fr
from
om thir
third
d part
partie
ies.
s.
Filing of su
Filing suit
it by thithird
rd paparti
rties
es ag
againainst
st the fir
firm: Whether the firm is registered or not, third parties are not
m: Whether
re
rest
stri
rict
cted
ed fr
fro
om fifili
ling
ng sui
uitt agai
agains
nstt the fifirm
rm or any
any othe
otherr part
partnener(
r(s)
s).. That
That is,
is, eve
even if the
the fi
firm
rm is not
not regi
regist
ste
ered,
red,
third parties have no bar in filing suit against the firm. It is not the look out of third parties whether the firm is
re
regi
gist
ster
ered
ed or no
not.
t. But for
for the
the fi
firm
rm,, if it want
ant to fi
file
le a su
suiit agai
gains
nstt th
the
e partn
artneers or agai
againnst Thi
hird
rd parti
artiees it is
man
ma ndat
datory that the fi firm
rm shouhould be a re reg
gist
istere
red
d one. In other words, it is in the intere teresst of the fi
firm
rm or it its
s pa
part
rtne
ners
rs
to
to.h
.hav
avee th
the
e fi
firm
rm re regi
gist
steere
red.
d. Th
Thisis is the mos
most im
impo
port
rtan
antt part
part to be rereck
ckooned
ned with
with..
In
Inco
corp rpor
orat
atio
ion
n of a Comp
Compananyy
A company is an artificial person, since it is created by law. It is clothed with many of the rights,
Company: A company
liabilit
liab ilities
ies,, pow
powers
ers and duties
duties pre
prescri
scribed
bed by law
law.. Amo
Among
ng the two importa
important
nt charac
characterterist
istics
ics of a compan
company,
y, one is
its separate individuality and the other is perpetuity within the limits prescribed by law. It can do all acts as a
natu
na turarall pe
pers
rson
on ma
may y do
do..
A co
comp
mpan anyy ha
hass a 'c'cor
orpopora
rate
te pers
person onal
alit
ity'
y' se
sepa
para
rate
te fr
from
om alalll the
the memb
member ers
s wh
who o have
have form
formed
ed it unli
unlike
ke a
pa
part
rtne
ners
rshi
hip
p fi
firm
rm.. Beca
Becaususe e of this
this,, a co
comp
mpanany y incu
incurs
rs all
all the
the li
liab
abil
ilit
itie
ies
s and
and poss
possesesse
sess al
alll ri
righ
ghts
ts of a na
natu
tura
rall pers
person
on
su
subj
bjec
ectt to th
thee re
regi
gist
stra
rati
tion
on of law.
law.
The
Th e ma
main in ch
char
arac
acte
teri
rist
stic
ics
s of a co
comp
mpan anyy are
are su
summ
mme ed up as un unde
der: r:--
a) Co
Compmpan any
y is a vol
volun
unta
tary
ry asso
associ
ciaatio
tion of pers
person
onss who
who have
have cocomeme to toge
getthe
herr to carry
arry on so some
me bubusi
sine
ness
ss for
for
profit.
b) It has a peperpe
rpetu
tual
al exist
existen
ence
ce and
and thou
thoughgh mem
membe bers
rs ma
may y co
comeme and and me
memb mberers
s may go, go, the co
comp
mpan
any y
contin
con tinues
ues forever.
forever. Change
Change in its mem memberbers s or in the
theirir identity
identity does
does not affect
affect the legal exis existen
tence
ce or its
id
iden
enti
tity
ty.. Onl
Only la
law
w can disdissol
olve
ve it,
it, sin
since it is a cre
creatio
ationn of law.
law.
The
pers
pe shares
rso
on, a coof
mjoint
com panystock
pany ticompanies
is entitled to own are
tled andfreely
hold ptransferable
rop rty in itsunlike
roperty own naame.
private
me . A colimited
mp
mpan ycompany.
any being a As a corporate
body corporate can sue and be sued in its own name. In brief, the most striking features of a company are its
dist
distin
inct
ct le
lega
gall pers
perso
ona
nali
lity
ty,, th
the
e easy
easy tran
transf
sfer
erab
abil
ilit
ity
y of its
its shar
shares
es,, and
and th
the
e li
limi
mite
ted
d li
liab
abil
ilit
ity
y of it
its
s memb
member
ers.
s.

Name of co
Name comp
mpan y: A co
any: comp
mpanany
y is know
known n by its
its na
name
me.. So befo
before
re re
regi
gist
stra
rati
tion
on,, th
the
e Regi
Regist
stra
rarr of Co
Comp
mpan
aniies
will see whether there is any company identical with or too nearly resembles the name of an existing
company. conclu
conclusive
sive eviden
evidence
ce tha
thatt eve
everyth
rything
ing is in orde
orderr as rega
regards
rds reg
regist
istrati
ration
on and tha
thatt the company
company has
come.
Certificate
Certifica te of Incorp
Incorporation: The cer
oration: The certifi
tificat
cate
e of incorpo
incorporati
ration
on issued
issued by the Regist
Registrar
rar of Com
Compan
panies
ies is into
into
existence.
Certificate of commencement of business: Private Companies and a company having no share capital can start
the busines
businesss act
activi
ivity
ty aft
after
er the obt
obtent
ention
ion of certif
certificat
icatee of incorp
incorpora
oratio
tion.
n. Bu
Butt for a Pub
Public
lic Compa
Companyny,, ano
anothe
ther
r
certificate called Certificate of Commencement of Business is to be obtained from the Registrar of Companies.
(ROC) but now changed as per company act 2013 and now all company has to file compliance certificate.
REGIS
REGISTR
TRAT
ATION
ION AND
AND SAT
SATISF
ISFAC
ACTIO
TION
N OF CHAR
CHARGE
GES
S
What is a charge: the word 'charge'
'charge' is used to mean any form of security or debt. Sec 125(4) of the Companies
Companies
Act, 1956 provides the following charges of a Company are to be registered with Registrar of Companies:-
a) A charge
charge for the purpo
purpose
se of security
security debent
debentures
ures,, b) A cha
charge
rge on unc
uncalle
alled
d Cap
Capita
itall of the Com
Compan
pany,
y, c) A
charge on immovable
immovable pro
property
perty ; d) A charge on book debts
debts e) Charge on asset in or outside India
Fixed charge: Also called 'specific charge'. It extends over a specific property of the company. It gives
right to the creditor to sell the property and claim the proceeds towards the dues payable by the Company.
Floating charge: Means a charge that is general and not specific.

a) Floats
Floats over the presen
presentt and future property
property of the Comp
Company,
any, and it do not attach any specific proper
property.
ty.
b) On happening of an event or contingency, crystallizes
crystalli zes as a fixed charge. A floatin
floatingg charge is an equitable
charge which does not attach on any specific property but covers the whole of the company's property.
Effect of floating charge becoming fixed charge: When a floating charge becomes fixed charge, it constitutes
a charge upon all the property or assets then belonging to the company.
Registration of charge: All the charge created by the Company shall be filed with the ROC within 30 days of
its creation.
creation. It can be extended
extended by Registra
Registrarr of Compa
Company
ny for another 270 days.
days.
The registr
registrati
ation,
on, mod
modifi
ificat
cation
ion and satis
satisfac
factio
tion
n of char
charge
ge are to be filed in form No CHG
CHG – 1& CHG-4
CHG-4 in
MOC21. Recently Government of India has introduced electronic filing of returns.
Effect of non-registration: If the charge created is not registered with ROC, the charge would not be valid
against the liquidator and any other creditor of the Company in the event of winding up of the company, as
against the company itself. So long as the company does not go into liquidation, the mortgage or charge is
good and may be enforced.
Sec 142 empowers ROC to impose penalty on the Company if it fails to comply with the provisions relating to
registration of charge.
Sec 144 provides that any creditor or member of company can inspect the books relating to charges created
by the Company and it is the duty of the Compan
Companyy to keep the regist
register
er of charges open to inspec
inspection.
tion.
INDEMNITIES
Indemnity: ThThe
e wo
wordrd indem
demnity
nity me
meanans
s "to save
ave fr
fro
om lo
los
ss"
s".. The lo
loss
ss coululdd be eit
ithe
herr due to the act
act of th
the
e party
arty
giving the indemnity or due to the act of a third party. Sec. 124 & 125 of Indian Contracts Act deals with the
laws
law s of in
indem
demnit
nity.
y. A con
contra
tract
ct of indem
indemnit
nity
y is a con
contin
tinge
gent
nt con
contra
tract,
ct, i.e
i.e.. its perfor
performan
mancece is made
made dep
depend
enden
entt
upon
up on th
the
e happ
happe
eni
ning
ng or non
non ha
happ
ppe
ening
ning of so
some
me even
event.
t.
Sec 124 defines: A contract by which one party promises to save the other from loss caused to him by the
co
cond
nduc
uctt of the pr
pro
omiso
misorr hims
himsel
elf,
f, or by the
the co
con
ndu
duct
ct of any
any oth
ther
er pers
perso
on is ca
call
lle
ed a co
con
ntr
tra
act of in
inde
demn
mnit
ity.
y.
The person giving the promise is called the 'indemnifier' and the person to whom the promise is
made is called the 'indemnified' or the indemnity holder.
A co
cont
ntra
ract
ct of in
inde
demn
mnit
ity
y thou
though
gh simi
simila
larr to a co
cont
ntra
ract
ct of guar
guaran
ante
tee
e di
diff
ffer
ers
s on vari
vario
ous co
coun
unts
ts..

: 1) Tw
INDEMNITY : Two
o parti
artie
es — In
Inde
demn
mniifi
fie
er & the ind
nde
emnif
mnifie
ied
d ; 2) Ris
Risk
k is contin
contingen
gentt ; 3) In
Inde
demni
mnifie
fiers
rs li
liabi
abilit
lity
y is
pri
prima
mary
ry;; Onl
nly
y one co
cont
ntra
ract
ct betw
betwee
een
n tw
two
o pa
part
rtie
ies
s , 5 ) Pu
Purp
rpo
ose is for
for th
the
e re
reim
imb
bur
urse
sem
ment of a lo
los
ss
GUARANTEE
Thre
Three
e part
partie
ies
s — debt
debtoror,, cred
credititor
or & sure
surety
ty Liab
Liabil
ilit
ity
y is subs
subsis
isti
ting
ng.. Suret
Surety's
y's li
liabi
abili
lity
ty is secon
secondar
dary
y
Three
Three co
contr
ntract
act : 11.. D
Deb
ebtotorr and
and cred
credit
itor
or 2. Cred
Credititor
or and
and Su
Sure
rety
ty,, 3. Sure
Surety
ty and
and debt
debtor
or
Guar
Guaran
ante
tee
e is for
for the
the se
secu
curirity
ty of the
the cred
credit
itor
or
Scope of indemnity in banks: Cu Cust

stom
omerers
s wh
when
en they
they have
have lo
lost
st dema
demandnd draf
draft,
t, tr
trav
avel
eler
er's
's ch
cheq
eque
ue etc.
etc.
appr
approa
oach
ch th
the
e ba
bank
nk for
for du
dupl
plic
icat
ate.
e. Th
They
ey are
are re
requ
quir
ired
ed to give
give an in
inde
demn
mnit
ity
y befo
before
re issu
issuan
ancece of du
dupl
plic
icat
ate
e DD
DD.. In
so
some
me ca
case
sess over
over and
and abov
above
e the
the inde
indemn
mnit
ity,
y, bank
banks s will
will ask
ask for
for su
sure
rety
ty espe
especi
cial
ally
ly wh
when
en th
thee amou
amountnt is huge
huge..
In
Inde
demn
mnitity
y bond
bonds s are
are in
insi
sist
sted
ed wh
whilile
e issu
issuin
ingg du
dupl
plic
icat
atee FD
FDR'
R's,
s, sett
settli
ling
ng deat
death h clai
claims
ms etc.
etc.
In
In_t
_the
he in
inde
demnmnit
ity
y ta
take
kenn by the
the bank
bank,, the
the cucust
sto
ome
merr un
unde
dert
rtak
akes
es to prot
protec
ectt th
the
e bank
bank fr
fro
om any
any lo
loss
ss or dama
damage
ge and
and
for costs incurred. These indemnities are stamped as an agreement, and if they are witnessed, they would be
trea
treate
ted
d as in
inde
demn
mnit ity
y bo
bond
nd be
bein
ing
g liab
liable
le fo
forr paym
paymenentt of ad valo
valore
rem
m stam
stamp
p du
dutty.
Rights of an indemnity holder when sued:The indemnity holder can recover all damages, all costs, and all
sums he may have paid under the terms of any compromise of any such suit, provided he has to prove that he
has no
nott act
acted
ed beyond
beyond the scope
scope of thi
this
s aut
autho
horit
rity
y and he did no
nott con
contra
traven
vene
e the speci
specific
fic dir
direct
ectio
ions
ns of the
the
promisor.
BAILMENT
As per Section
Sect ion 148 of Indian
Ind ian Cont
Contract
ract Act 1872,
187 2, bailment
bailm ent is the delivery
del ivery of goods
good s by one person
pers on to
another for some purpose. When the purpose is accomplished, the goods are returned or otherwise
disposed
disposed of acco
accordin
rding
g to the direction
directions
s of the person deliver
delivering
ing them. The person
person deliverin
delivering
g the goods
is called if
Further, thea "bailor". The person
person already to whom of
in possession they
theare delivered
goods is called
of another the "bailee".
person to hold them as a bailee, he
thereby becomes the bailee, and the owner becomes the bailor of such goods, although they may not
have been delivered by way of bailment.
Faults in goods (Section 150) : The bailor is bound to disclose to the bailee, the faults in the bailed
goods, of which the bailor is aware, and which materially interfere with the use of them, or expose the
bailee to extraordinary risk. If he does not make such disclosure, he is responsible for damage arising to
the bailee directly
directly from such faults.
faults. For instance,
instance, A lends a horse, which he knows to be vicious,
vicious, to B and
does not disclose the fact that the horse is vicious. The horse runs away. B is thrown and injured, A is
responsible to B for damage sustained. Similarly, A hires a carriage of B which is unsafe, though B is not
aware of it. If A is injured, B is responsible to A for the injury.
Duties of the bailee (Section 151) : Bailee is bound to take as much care of the goods, as a man of
ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quantity
and value as the goods bailed.
Termination
Term ination of bailment
bailment by bailee's
bailee's act inconsistent
inconsistent with cond itions (Section 153) : A contract of
conditions
bailment is voidable at the option of the bailor, if the bailee does any act, inconsistent with the conditions of
the bailment.
This is, at the For instance,
option A lets to B, for
of A, a termination hire,
of the a horse of his own riding B drives the horse in his carriage.
bailment.
Liability of bailee making unauthorised use of goods bailed (Section 154): If the bailee makes any
use of the goods bailed which is not according to the conditions of the. bailment, he is liable to make
compensation to the bailor for any damage arising to the goods from or during such use of them. For
instance, A lends a horse to B for his own riding only. B allows C, a member of his family, to ride the
horse. C rides with care, but the horse accidentally falls and is injured. B is liable to make compensation
to A for the injury done to the horse.
Repayment
Repay expenses (Section 158): Where the goods are to be kept or to be carried, or to have
ment of expenses
work done upon them by the bailee for the bailor, and the bailee is to receive no remuneration, the
bailors shall repay to the bailee the necessary expenses incurred by him for the purpose of the bailment.
Expiration of time or accomplishment of purpose (Section 160): It is the duty of the bailee to return, or
deliver according to the bailor's directions, the goods bailed, without demand, as soon as the time for which
they were bailed has expired, or the purpose for which they were bailed has been accomplished.
When goods are not returned (Section 161): If by the fault of the bailee, the goods are not returned,
delivered or tendered at the proper time, he is responsible to the bailor for any loss, destruction or
deterioration of the goods from that time.
Defective title of the Bailor (Section 164): The bailor is responsible to the bailee for any loss which the
bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the
goods, or to give direc
directions,
tions, respect
respecting
ing them.

Right of third person claiming goods (Section 167): If a person, other than the bailor, claims goods
bailed, he may apply to the court to stop delivery of the goods to the bailor, and to decide the title to
the goods.
When finder of thing commonly on sale may sell it (Section 169): When a thing which is commonly
the subject of sale is lost, if the owner cannot with reasonable diligence be found, or if he refuses upon
demand, to pay the charges of the finder, the finder my sell it-
(1) when the thing iiss in danger o off perishing
perishing or
or of llosing
osing the grea
greater
ter part
part of its
its val
value,
ue, or
(2) whe
whenn the law
lawful
ful char
charges
ges of the finder,
finder, in respe
respectct of the thing found,
found, amount
amount to two-third
two-thirds
s of its
value.
PLEDGE
U/s 172 of Indian Contracts Act, pledge is bailment or delivery of goods as security for payment of a debt
or performance
claims (Sec 2(7)ofof
a Sales of It
promise. may be
Goods remembered
Act) that only
can be pledged. Thegoods
bailor(movable assets
in this case excluding
is called actionable
the "pawnor or
pledger
pledger".
". The bai
bailee
lee is cal
called
led "paw
"pawnee
nee or pledgee
pledgee". ". Pledge
Pledge is differe
different
nt fro
from
m bai
bailme nt. Bailment is
lment.
deliv
del ivery
ery of go
good
ods s by one pe pers
rson
on to ananot
othe
herr for
for some
some pu purp
rpos
osee whil
whilee the purpose in pledg
pledgee is
performance
performan ce of a specific
specific prom
promise
ise or security
security for a debt. The pledgee
pledgee can sell the goods pledged after
giving notice to the pledger while in bailment the goods can be retained or bailer can be sued for
charges.
Who can pledge ?
The owner of goods, the agent of the owner, the joint owner with the consent of other co-owner and a
person having limited interest in the goods (to the extent of his interest), can pledge the securities.
Pledge by mercantile agent : U/s 178, where a merc mercantil
antile
e agent is, with the consent of the owner, in
possession of goods or the documents of title to goods, any pledge made by him, when acting in the
ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised
by the owner of the goods to make the same; provided that the pawnee acts in good faith and has not at
the time of the pledge notice that the pawnor has no authority to pledge.
Pledge by person in possession under voidable contract : When the pawnor has obtained obtained possessio
possession
n
of other
time goods
of the pledged
pledge, the by him under
pawnee a contract
acquires a good voidable, butgoods,
title to the the contract has he
provided notacts
beeninrescinded
good faithatand
the
without notice of the pawnor's defect of title.
Pledge where pawnor has only a limited interest : As per Section 179, where person pledges goods in
which he has only a limited interest, the pledge is valid to the extent of that interest.
Rights of pledgee
The pledgee gets the rights of a bailee which include:
Right to retain (Section 173) : The pawnee may retain the goods pledged, not only for payment of the
debt or the performance of the promise, but for the interests of the debt, and all necessary expenses
incurred
incurr ed by him in respect of the possession or for the preservation of the goods pledged.
U/s 174, the pawnee shall not (in the absence of a contract to that effect), retain the goods pledged for any
debt or promise of other than the debt or promise for which they are pledged.
Right as to extraordinary expenses incurred : U/s 175, the pawnee is entitled to receive from the
pawnor extraordinary
extraordinary expenses incurre
incurred
d by him for the preservation
preservation of the goods pledged.
Right where pawnor makes default : As per Section 175, if the pawnor makes default in payment of
the debt, or performance, at the stipulated time, the pawnee may:
 bri
bring
ng a sui
suitt agai
agains
nstt the pawn
pawnor
or upon the debt or promi promise
se and retain
retain the goods
goods pledged
pledged as a
collateral security; or
 he may sell tthe
he thing pl
pledged,
edged, on giv
giving
ing the pawnor
pawnor reasona
reasonable
ble notice
notice of the sale.
 If the proc
proceed
eeds s of such sale
sale are
are le
less
ss than the amou
amountnt due in respec
respectt of the debt
debt or promis
promise,e, the
pawnor is still liable to pay the balance. If the proceeds of the sale are greater than the amount so due, the
pawnee shall pay over the surplus to the pawnor.
Law of limitation : The rights of pledgee
pledgee are not limited by Law of Limitation.
Banker's right and other dues : Bank's right of pledge prevails over any other dues including Govt.
dues (Supreme Court State of Bihar vs Bank of Bihar)"ex
Bihar)"except
cept workers' wages.
Duties of the pledgee
a to return the goods (along with accretion to goods if any) once the money is paid back by the pledger.
b to take that much care of the goods, which he would have been taking, had the goods belonged to him.
HYPOTHECATION/PLEDGE - DISTINCTION
Hypothecation Pledge
Defined in SRFA
FAE
ESI Act 2
200
002
2 (Se
(Sec 2 n) Indian
Indian Contract
Contract Act 1872
1872 (Se
(Section
ction 172)
172)

Definition Charge on movable property Bailment of goods as security for payment

in fa
favo
vour
ur of secu
secure
red
d cre
redi
dito
torr with
withou
outt of a debt
debt or per
perform
formance
ance of promise
promise
delivery of possession
Parties: -Borrower -
Bank
Hypoth
Hypothec
ecat
ator
or Hy
Hypo
poth
theecate
cateee Pled
Pledge
ger/
r/pa
pawn
wnoror Pled
Pledge
gee/
e/pa
pawn
wneeee
Nature of securities Movable assets such as stocks, Good
Go odss (c
(con
onsi
sist
stin
ing
g of movab
ovable
le
machinery, vehicles assets as in case of
hypotheca
hypo thecation)
tion) Leg
Legalal fixed char
charge
ge
Nature of Equitable charge
Ow char
nersehip Borrower Borrower
Possession Borrower (in .trust for bank).. – Bank Posse
Possessio
ssionn with bank till repa
repayme
yment
nt of
cannot take possession
possession withou
withoutt consent of the loan. Bank has to pres
preserv
ervee the
the borrower.
borrower. On takin
takingg possessio
possession
n go
good
odss cacare
refu
fully
lly and
and re retu
turn
rn the
the sa
same
me,,
bank gets rights of pledgee and can sell the if loa
loan
n is re
repai
paid.
d.
assets without
without intervention of court.
Delivery of Borrower to deliver Possession can

goods The securitie
securitiess if deman
demanded
ded by the
the bank
bank Be actual or con
constructive.
structive.
Right of sale Avail

ilaable through courto
ton
nly. Under Available by giving notice, throug
through
h
SARFAESI
SARF AESI Act, sale is possibl
possiblee public auction.
after possession.
Registrat
Registration
ion of charge U/s 77 of Companies Act 2013
charge No registration required
with ROC
Limitation 3 years Not applicable
General lien Not available Available u/s 171 of Indian Contract Act.
Obligations Borrower's duty is to keep the Bank's duty is to keep the goods in
secu
securi
ritie
tiess in go
good
od cond
conditi
ition
on an
and
d proper condition and return back, when
Handover the same to bank loan is fully repaid.
when demanded
demanded
AGENCY & AGENTS : As per Sectio Sectionn 182,

182, an "agent
"agent"" is a person
person empl
employe
oyedd to do any act for another
another
person, while dealings with third persons. The person (who employs and agent) for whom such act is done,
or represented, is called the "principal". As per Section 185 no consideration is necessary to create an
agency. Who may employ agent (Section 183) : Any person who is of the age of majority and who is of
sound mind, may employ an agent.
Who may be an agent (Section 184) : As between the. principal and third persons, any person may
become an agent. If the agent is to be liable to the principal, he should of the age of majority and sound
mind.
Agent's authority (Section 186) : The authority of an agent may be express or implied.
Express authority : An authority is said to be express when it is given by words spoken or written.
Implied authority: An authority is said to be implied when it is to be inferred from the circumstances
of the case; and things spoken or written, or the ordinary course of dealing, may be accounted
circumstances
circum stances of the case.
For example A owns a shop in Serampur, living himself in Calcutta, and visiting the shop occasionally.
The shop is managed by B, and he is in the habit of ordering goods from C in the name of A for the
purpos es of the shop, and of paying for them out of A's funds with A's knowledge.
purposes knowle dge. B has an implied
authority from A to order goods from C in the name of A for the purpose of the shop.
Extent of authority (Section 188) : An agent, having an authority to do an act, has authority to do
every lawful thing which is necessary in order to do such act. An agent having an authority to carry on
a business, has authority to do every lawful thing necessary for the purpose, or usually done in the
course, of conducting such business.
For instance, A is employed by B, residing in London, to recover at Bombay a debt due to B. A may adopt

any legal process necessary

necessary for the purpose of recoverin
recovering
g the debt, and may give a valid
valid discharg
discharge
e for the
same.
Authority in an emergency (Section 189) : An agent has authority, in an emergency, to do all such
acts for the purpose of protecting his principal from loss and would be done by a person or ordinary
prudence, in his own case, under similar circumstances.
For example, A consigns goods to be at Calcutta, with direction to send them immediately to C, at Cuttack.
may sell the goods at Calcutta, if they will not bear the journey to Cuttack without spoiling.
Delegation by the agent (Section 190): An agent cannot lawfully employ another person to perform
acts which he has undertaken to perform personally, unless by the ordinary custom of trade a sub-
agent must, be employed.
Sub-agent : A "sub-agent" is a person employed by, and acting under the control of, the original agent in
Sub-agent
the business of the agency.
Sub-agent appointed without authority (Section 193) : Where an agent, without having authority to do
so, has appointed a person to act as a sub-agent, the agent is responsible for his acts both to the principal
and to third person. The principal is not responsible for the acts of the person so employed, nor is that
person responsible
responsible to the principal.
principal.
Acts without his authority and effect of ratification : U/s 196, where acts are done by one person on
behalf of another, but without his knowledge or authority, he may elect to ratify or to disown such acts. If he
ratifies them, the same effects will follow as if they had been performed by his authority. Ratification may be
express or may be implied in the conduct of the person on whose behalf the acts are done. Further, as per
Sect
Se ctio
ion
n 199,
199, a pers
person
on rati
ratify
fyin
ing
g any
any unau
unauth thor
oris
ised
ed act
act done
done on hihis
s beha
behalf
lf,, rati
ratifi
fies
es th
the
e whol
whole
e of th
the
e
transaction.
Termination of agency : U/s 201 an agency is terminated by the principal revoking his authority, or by
the agent renouncing the business of the agency; or by the business of the agency being completed; or
by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated
an insolvent.
Where agency cannot-be terminated : U/s 202 where the agent has himself an interest in the property
which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract,
be terminated to the prejudice of such interest.
For example, A consigns 1,000 bales of cotton to B, who has made advances to him on such cotton, and
desires B to sell the cotton, and to repay himself out of the price the amount of his own advances. A cannot
revoke this authority, nor is it terminated by his insanity or death.
Revocation where authority has been partly exercised : As per Section 204, the principal cannot
revoke the authority given to his agent after the authority has been partly exercised, liability of principal
arise from acts already done in the agency.
For example A authorises B to buy 1,000 bales of cotton on account of A, and to pay for it out of A's
money remaining in B' s hands. B buys 1,000 bales of cotton in A' s name. A can not revoke B's authority
to pay for the cotton.
Termination of sub-agent's authority : As per Section 210, the termination of the authority of an agent
automatically terminates the authority of all
all sub-agents appointed by the agent..
Agent's duty in conducting principal's business : As per Section 211, an agent is bound- to conduct
the business of his prin
principal
cipal acco
according
rding to the dir
direction
ections
s given by the principal.
principal. In the absence of any such
directions, it is to be conducted according to the customs which prevails in doing business of the same
kind
goodat the
the place
loss where
to his the agent
principal and ifconducts
any profitsuch business.
accrues, When
he must the agent
account for it. acts otherwise, he must make
Agent dealing on his own account, in business of agency without principal's consent : If an an agent
deals
dea ls on his
his own accou
accountnt in the busin
busines
esss of the agenc
agency,y, witho
without
ut firs
firstt obtai
obtaini
ning
ng the co
cons
nsent
ent of hi his
s
principal and acquainting him with all material circumstances which have come to his own knowledge on
the subject, u/s 215, the principal may repudiate the transaction. Further u/s 216, where an agent,
without the knowledge of his principal, deals in the business of the agency on his own account instead
of on account to his principal, the principal is entitled to claim from the agent any benefit which may
have resulted to him from the transaction.
Remu
Re mune
nera
ratio
tion
n for bu busin
sines
esss misco
miscondu
nduct ed : As pe
cted perr Sect
Sectio
ion
n 220,
220, an agenagentt wh
whoo is guil
guilty
ty of
misconduct in the business of the agency, is not entitled to any remuneration in respect of that part of
the business which he has rnisconducted.
Agent to be indemnified against consequences of acts done in good faith : U/s 223, where the
agent does the act in good faith, the employer is liable to indemnify the agent against the consequences
of that act. For example, A, a decree-holder and entitled to execution of B's goods requires the officer of
the court to seize certain goods, representing them to be the goods of B. The officer seizes the goods,
and is sued
ed toby
compelled
compell C, to
pay theC,true owner of nce
in conseque the goods.
consequence A isA's
of obeying liable to indemnify
directions.
directions. the officer for the sum which he is
Enforce
Enfo rcemen
mentt and consequ
consequencences
es of agent'
agent's
s contrac parties:: As per Section 226, the
contractt with 3rd parties
contracts entered into through an agent, and obligations arising from acts done by an agent, may be

enforced
enforc ed in the same
same manne
manner,r, and will
will have the same legal consequences
consequences as if the contracts
contracts had been
entered into the acts done by the principal in person.
When agent exceeds authority : U/s 227, when an agent does more than he is authorised to do, and
when the part of what he does, is within his authority and can be separated from the part which is
beyond his authority, the principal is bound for that portion what he does within his authority.
Effe
Effect
ct,, on agre
agreem
emen
ent,
t, of misr
misrep
epre
rese
sent
ntat
atio
ion
n or frfrau
aud
d by ag entt : As per Sectio
agen tion 238,
38, the
the
misrepresentation made or fraud committed, by agent have the same effect on agreements made by such
agents as if such frauds had been committed by the principals.
For example, A, being B's agent for the sale of goods, induces C to buy them by a misrepresentation, which
he was not authorised by B to make. The contract is voidable, as between B and C, at the option of C.
HYPOTHECATION
As per Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act
2002 (Sec 2 (n)), hypothecation has been defined as 'a charge in or upon any movable property,
existing or future, created by a borrower in favour of a secured creditor without delivery of possession
of the movabl
movable e pro
proper
perty
ty to such
such credi
creditor
tor,, as sec
securi
urity
ty for fin
financ
ancial
ial assis
assistanc
tancee and inclu
includes
des flo
floati
ating
ng
charge and crystall
crystallizati
ization
on of such charg
charge e into fixed on movable
movable property'
property'.. A cash credit
credit accou
account
nt like an
overdr
ove rdraft
aft accoun
account, t, is a runn
running
ing accoun
accountt but wi with
th a fix
fixed
ed drawi
drawing
ng lilimit
mit withi
within
n the sancti
sanctione
onedd lilimi
mit.
t.
Drawing
Drawi ng lim
limit
it is fixed periodi
periodicall
cally,
y, on the basis of value of the security
security.. In such advances
advances the ownership
ownership
as well
well as posse
possess ssio
ion
n of the
the se
secu
curi
rity
ty rema
remaininss wi
with
th the borr
borrow
ower
er.. A ca cash
sh credi
creditt acco
accoun
untt is vevery
ry
convenient for the borrowers.
Advantages
a the customer can deposit and withdraw money as per his convenience unlike a demand loan account,
where money can be withdrawn only once.
b being
being a runnin
running g acc
accoun
ount,
t, doc
docume
uments
nts are obtobtain
ained
ed only
only onc
once,
e, unlik
unlikee a demand
demand loan wherewhere on
adjustment of the account, fresh documents have to be taken if the loan is to raised again.
c interest in the account is charged on the actual debit balance on day to day basis and is debited on a
quarter
quar terly
ly bas
basisis whi
whichch beco
becomes
mes pay
payabl
ablee imm
immedi
ediatel
ately.
y. Banks
Banks are also
also entitled
entitled to char
charge ge commit
commitmen
mentt
charge for unutilized
Securities amount
: Cash credit of cash
accounts credit
may limits.
limits. hypothecation of stocks of raw material, stock in process
be against
or finished goods or stores, spares etc.
These loans are sanctioned by the banks generally to those customer who are actually involved in some
economic
economi c activ
activity
ity of a contin
continuous
uous basis, such as traders, manufacturers
manufacturers etc.
Stock statement and margins
The borrowers are required to submit to the bank a statement of stocks and other securities charged
to the bank on pre-fix
pre-fixed
ed intervals, say fortnightly or monthly.
The banks maintain margin on the security which differs from case to case depending upon the nature of
security and other considerations.
Documents
In order to secure themselves, the banks obtain cash credit agreement which create charge on the
goods and other securities against which the loans are granted.
Renewals
Cash credit limits are sanctioned by the banks for a period of one year where after it can be extended for
further period also on review
review..
Precautions
a firm is not enjoying similar facilities with other banks on the security of same goods.
b borrower enjoys facilities from one bank only and an undertaking in writing should be obtained from
him.
c bank name board should be displayed where the securities are located stating that bank has charge
over such goods.
d recurring inspection should be conducted by the bank to see that the level of goods being maintained
is same as the one declared by the borrower and as per his books.
e borrower should submit a stock statement periodical
periodically,
ly,
f such
such stocks should be insured for fire and other risks. Legal aspects in Hypothecation
Possession & sale : Hypothecation is an equitable charge, where the borrower keeps the possession
of ththe
e secu
securi
rity
ty on be
beha
half
lf of the
the cred
credit
itor
or.. If the
the bo
borr
rrow
ower
er fails
fails to retu
return
rn the
the ad
adva
vanc
nce
e again
against
st the
the
hypoth
hyp otheca
ecatio
tionn of sec
secur
uriti
ities
es,, the bank
bank can tak takee pos
posses
sessio
sion
n of the securi
securitie
ties
s with
with consen
consentt of the
borrow
bor rower
er and becom
becomeses a pledge
pledgee.
e. On bec
becomi
omingng pledge
pledgee,e, the bank
bank get all the right
rights
s of a ple
pledge
dge
including right to sell without intervention of the court. Under Securitisation Act, the bank also has got
the right to sell the hypothecated securities without intervention of the court, subject to compliance of
certain legal formalitie
formalities.
s.
MORTGAGE : What is a mortgage :As per section 58 of Transfer of Property Act 1882, mortgage is
transfer of interest in specific immovable property for the purpose of securing the payment of money
advanced or to be.advanced by way of loan, an existing or future debt or the performance of an

engagement which may give rise to pecuniary liability.

Interest in the property & possession : The mortgagor only parts with the interest in the property and
not the ownership. Mortgage is not merely a contract but it is conveyance of interest in the mortgaged
property. As regards the possession, except for usufructuary mortgage, the possession remains with the
mortgager. immovable property (IP) : As per Sec 3 of General Clauses Act, IP includes land, benefit
arising out of land and things attached, permanently fastened to earth. Mortgagor and Mortgagee :The
transferor is called a mortgagor and the transferee a mortgagee.
Mortga
Mor tgage
ge mon
moneyey and Mortga
Mortgagege dee
deed d : The pri
princ
ncip
ipal
al money
money and the the ininte
tere
rest
st of whwhic
ich
h pa
paym
yment
ent is
secured are called the mortgage money and instrument, if any, by which the transfer is affected, is called
the mortgage deed.
Essential features of mortgages
a Mort
Mortga
gages
ges can
can be creat
created
ed to co
cove
verr gen
generaerall balan
balances
ces,, existi
existing
ng paymen
paymentt as wel welll as future
future loan
loanss or
advances.
b Relationship : there must be a creditor and debtor relationship (or contract of guarantee) between the
bank and the mortgagor at the time of deposit.
c Fu
Futu
ture
re debt
debt : acactua
tuall ex
exis
isten
tence
ce of the de debi
bitt is no
nott ne
neces
cessar
sary.
y. Even
Even an ap appl
plic
icati
ation
on for deb
debtt and its
its
acceptance establishes this relationship.
d Effec
Effecti
tive
ve da
date
te : a regis
registe
tered
red mortga
mortgage ge (an
(and d equit
equitabl
ablee mort
mortgagage)
ge) be
beco
comes
mes effec
effecti
tive
ve from
from datdate
e of
mortgage
mortga ge (Section
(Section 47 & 48 of Indian Registratio
Registration n Act).
e Enha
Enhance
ncedd limit
limits
s : To cover
cover the enhance
enhanced d bank limi
limits,
ts, a supple
supplemen
mental
tal registrati
registration
on deed is require
requiredd
because the mortgage already does not cover the enhanced amount.
f Repayment of loan : On repayment of debt, the mortgage does not remain valid.
KINDS OF MORTGAGES There are six forms/kinds of mortgages:

a: Simple mortgage - Sec 58(b):
When mor
When mortga
tgagor
gor wi
witho
thout
ut deliv
deliveri
ering
ng the pos
posses
sessision,
on, bin
binds
ds hi himse
mselflf perso
personal
nally
ly to pay the mormortga
tgage ge
money and agrees that in the event of his failure to pay the mortgage money, the mortgagee shall
have a right to cause the property to be sold. Features are:
 Mortga
Mortgagee
gee has no pow
power er to sell the property
property witho
without
ut court
court interventi
intervention.
on.
 Mortga
Mortgagee
gee has no rright
ight to get any payments
payments out of the rentrents s and produce
produce ofof the mortgage
mortgage property.
property.
 Mortgagee is not put in possession of the property.
 Registration of the mortgage is compulsory.
 Mortgagor is personally liable also.
b: Mortg
Mortgage
age by condit
conditiona
ionall sasale 58(e) : In this, the mortgagor ostensibly sells the mortgaged
le : Sec 58(e)
property on conditions that on default of payment of the mortgage money, the sale shall become absolute
or on such payment being made, the sale shall become void or or the buyer shall transfer the property to the
seller.
Features are:
 Sale is ostensible and not real.
 If money rremain
emains s unpaid as per agreeagreement,
ment, the s sale
ale becomes
becomes absolute.
absolute. The
The mortgagee
mortgagee by applying
applying
to court can get decree in his favour where after the mortgagor loses the right of redemption.
 Mortgagee can sue for foreclosure.
 No personal liability for repayment of the loan.
c: Usufructuary mortgage : Sec 58 (d) - Where the mortgagor delivers the possession and authorises the
mortgagee to retain possession until payment of the mortgage money and to receive the rents and profits
accruing from property or any part of such property to appropriate the same in lieu of interest or the
mortgage
mortga ge money. Features are:
 Mortga
Mortgagee
gee in a
actual
ctual llegal
egal possess
possessionion of the property,
property, till dues are repaid.
repaid.
 Mortga
Mortgagee
gee has the right
right to receiv
receivee rents and pro
profits
fits ac
accruin
cruing g from the property.
property.
 No personal liability of the mortgager.
 No time limit specified
 .Sale in not allowed.
d: English mortgage : Sec 58(e) - Where the mortgagor binds himself to repay the mortgage money on
a certain date and transfer the mortgaged property absolutely to the mortgagee, but subject to the
condition that mortgagee will re-transfer the property to the mortgagor upon payment of the mortgage
money, as agreed. Important features are:
 Personal liability to pay on a specified date
 Absol
Absolute
ute transfer
transfer of property to the mo mortgagee
rtgagee,, subject to re- re-convey
conveying
ing (re-transfer
(re-transfer)) the property ifif the
debt is repaid.
e: Equitable mortgage: (U/s 58 (f) Where the mortgagor delivers (at notified places) to the mortgagee,
the documents of title to immovable property with intention to create a security thereon to secure a loan.
The transaction is not to be reduced to writing. In case of non-payment, the mortgagee can sue for sale
but he cannot foreclose the mortgaged property. According to Section 58 (f) of Transfer of Property Act
1882, where a person delivers to a creditor or his agent documents of title to immovable property, with
the intent to create a security thereon, the transaction is called a mortgage by deposit of title deed.

However the Act makes the provisions of this Section applicable only to Bombay, Calcutta, Madras and
such other towns as may be notified by the State Govts by notification in the Official Gazette. Important
features are:
 Deposi
Depositt can be made at Ca Calcutta,
lcutta, Bombay
Bombay and M Madras
adras or at plplaces
aces notified
notified by State
State govt. only.
only.
 This ter
territo
ritorial
rial res
restric
triction
tion does not affect
affect the locati
location
on of the property i. i.e.
e. property
property can be located
any where. '
 There shoul
should d be deposit of title deed (preferably
(preferably original)
original) of the property
property with
with intention to secure a
debt. U/s 96, the provisions which apply to a simple mortgage shall, so far as may be, apply to a mortgage
by deposit of title-deeds.
f: Anomalous mortgage:
A mortgage which is not of any of the above five kinds, is called an anomalous mortgage (Sec 58(g). U/s
98, in the case of an anomalous mortgage the rights and liabilities of the parties shall be determined by
their contract as evidenced in the mortgage-deed, and, so far as such contract does not extend by local
usage.
Duplicate title documents
Where an original title deed in equitable mortgage is not available, a true copy certified by the Sub-registrar
can be deposited where it is proved that original is either not in existence or has been lost. A public notice
of creation
creation of mortgage
mortgage is also desirabl
desirable e in such circum
circumstances
stances..
Registration of mortgage
According
Accord ing to Section 59 of Transfer
Tran sfer of Property
Prope rty Act 1882, where the principalprincip al money secured
secur ed is Rs.100
or momore
re,, a mo
mortrtga
gage
ge,, othe
otherr than
than a mo mortrtga
gage
ge by de depo
posi
sitt of titl
title
e de
deed
eds
s can
can be ef effe
fect
cted
ed ononly
ly by a
registered instrument signed by the mortgagor and attested by at least two witnesses_ In case the
instrument is not duly attested and registered, the mortgage will be void. U/s 23 of Indian Registration
Act 1908, such docu document
ment is to be presented
prese nted within 4 months
month s from date of execution,
execut ion, for regist
registration
ration to
Sub-Registrar
Sub-Re gistrar of Assurances.
Assurances. Further in case case of a co comp
mpan y, separate
any, separate registr
registrati
ation
on of mortgag
mortgage e is
required u/s 125 of Companies Act, within 30 days.
Enhancement of existing limits
The momortrtgag
gagor
orss woul
wouldd be requi
require
red
d to ex
exec
ecute
ute mort
mortgag
gagee deeds
deeds for the amounamountt ovover
er and ababov
ovee the
the
amount
amou nt of limit
limit before enhanc
enhancemeement.
nt. In case
case of equiequitabl
table
e mortgag
mortgage, e, entry
entry is made in the title-dee
title-deedd
registerr for the enhanced portion of the limit, by follow
registe f ollowing
ing the precautions
precautions as specified
specified above.
Second mortgage
A mortgagor after giving 1st mortgage, can create 2nd and even subsequent mortgage on the same
property. The mortgage will rank in priority according to dates of their creation.
Summary of Rights under Mortgages

Particulars
Simple Conditional Sale Usufructuary English Equitable
Possession with M M B M
Ownership M M M B M
Right to sel
Right selll withou
withoutt No No No Yes No
court permission
Personal Liability of Yes No No Yes Yes

mortgage
mortga ge r
Mortg
Mo rtgage
agee's
e's right
right No No Yes No No
To get income of IP
Righ
Rightt to susue
e for
for Yes No No Yes Yes
sale of IP I
Regi
Re gist
stra
rati
tion
on with
with Yes Yes Yes Yes No
Sub-registrar
How created MD MD MD MD Or a l
Right of foreclosure No Available No No No
( M= Mortgager B=BankMD = Mortgage deed i.e. a written document *Right of possession becomes
available to the mortgagee due to transfer of ownership from mortgager to mortgagee )
RIGHT OF FORECLOSURE (Sec 67) : On default by the mortgagor, the mortgagee in certain types of
mortgages, has right to obtain a decree (before decree has been made or money has been paid) from a
court to the effect that the former be debarred for ever to get back the mortgage property. Such a right is
called the Right of Foreclosure. A suit for foreclosure must be filed within 30 years from date of mortgage

money becomes dues.

RIGHT OF REDEMPTION (Sec 60): On liquidation of the debt, the mortgagor has the right to get back
(redeem) the document relating to mortgaged property, where possession has been given, to get back
the possession and where title has been transferred, to get retransferred. This right is known as right of
redemption, which can be exercised at any time before the decree for sale or foreclosure has been
passed by the court.
MARSHALL
MARS HALLINGING : U/s 81 of TPA, if owner of one or more IPs mortgages to one person and then
mortgages one or more of them to another, the subsequent mortgagee is entitled to have prior mortgage
debit satisfied out of the IPs not mortgaged to him (without prejudice to right of prior mortgagee).
Limitation : Limitation period for mortgage is 12 years from date mortgage money becoming due. For right
of foreclosure and right of redemption it is 30 years.
TRANSFER OF PROPERTY ACT, 1882 : The Transfer of Property Act, 1882 came into force on the
first day of July,
July, 1882.
Transfer of property (Sec 5): An act by which a living person conveys property, in present or in future,
to one or more other living persons, or to himself and one or more other living persons; and "to transfer
property" is to perform such act. As per Section 7, every person competent to contract and entitled to
transferable property, or authorised to dispose of transferable property not his own, is competent to
tran
transfsfer
er such
such propproper
erty
ty ei
eith
ther
er whwhololly
ly or in papart
rt,, an
andd ei
eith
ther
er ab
abso
solu
lute
tely
ly or cond
condit
itio
iona
nalllly,
y, in th the
e
circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in
force. Further as per Section 9, a transfer of property may be made without writing in every case in
which a writ
writing
ing is not expressly requi
required
red by law.
Conditi
Con ditiona
onall tra
transf
nsfer
er (Se c 25) : An interest created on a transfer of property and dependent upon a
(Sec
condition fails if the fulfilment of the condition is impossible, or is forbidden by law, or is of such a nature
that, if permitted, it would defeat the provisions of any law, or is fraudulent, or involves or implies injury to
the pepers
rson
on or prope
propert
rty
y of anoth
anotherer,, or the cour
courtt regar
regardsds it as im
immo
mora
rall or oppos
opposed
ed to pub
publilic
c po
polilicy
cy.. For
For
example A gives Rs. 500 to B on condition that he shall marry As daughter C. At the date of the transfer C
was dead.by
Transfer Theostensible
transfer is void.
Owner (Sec 41) : Where, with the consent, express or implied, of the persons
interested in immovable property, a person is the ostensible owner of such property and transfers the
same for consideration, the transfer shall not be voidable on the ground that the transferor was not
authorised to make it. The transferee, after taking reasonable care to ascertain that the transferor had
power to make the transfer, has acted in good faith.
Registration of mortgage : (Section 59): Where the principal money secured is Rs.100 or upwards, a
mort
mo rtga
gage
ge othe
otherr than
than a mort
mortgag
gagee by depo
deposi
sitt of ti
titl
tle
e dee
deeds
ds ca
cann be effe
effect
cted
ed only
only by a regi
regist
ster
ered
ed
instrument signed by the mortgagor and attested by at least two witnesses. Where the principal money
secured is less than Rs.100, a mortgage may be effected either by a registered instrument signed and
attested
attested as afores
aforesaid
aid or (except in the case of a simpl
simplee mortgage) by deliver
delivery
y of the property.
property.
Right of mortgagor to redeem (Sec 60): At any time after the principal money has become due, the
mortgagor has a right, on payment or tender, at a proper time and place, of the mortgage-money, to
require the mortgagee (a) to deliver to the mortgagor the mortgage-deed and all documents relating to
the mortgaged property which are in the possession or power of the mortgagee, (b) where the
mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor,
and (c) at
person asthe
he cost
may of the mortgagor
direct, either
or to execute to re-transfer
and (where thethe mortgaged
mortgage has property to him by
been effected or to such third
a registered
inst
instru
rume
ment)
nt) to have
have reg
regis
ister
tered
ed an ackno
acknowlwledg
edgemement
ent in writ
writin
ing
g that
that any right
right in de
dero
rogat
gatio
ion
n of hi
his
s
interest transferred to the mortgagee has been extinguished. The right conferred by this section has
not been extinguished by the act of the parties or by decree of a court.
Further u/s 61, a mortgagor who has executed two or more mortgages in favour of the same mortgagee
shall, in the absence of a contract to the contrary, when the principal money of any two or more of the
mortgages has become due, be entitled to redeem any one such mortgage separately, or any two or
more of such mortgages
mortgages together.
Obligation to transfer to third party instead of re-transference to mortgagor (Sec 60A)
Mortgagor on payment of the debt, may require the mortgagee, instead of re-transferring the property, to
assign the mortgage debt and transfer the mortgaged property to such third person as the mortgagor may
dir
direct;
ect; and the mortgag
mortgagee
ee shal
shalll be boun
bound d to ass
assign
ign and transf
transfer
er accord
accordingl
ingly.
y. The provi
provisio
sions
ns of this
this
section do not apply in the case of a mortgagee who is or has been in possession.
Right to inspection and production of documents (Sec 60B)
A mortgagor, as long as his right of redemption subsists, shall be entitled at all reasonable times, at his
request and at his own cost, and on payment of the mortgagee's cost and expenses in this behalf, to
inspect and make copies or abstracts of, or extracts from, documents of title relating to the mortgaged
property which are in the custody or power of the mortgagee.
Acces
Acc essio
sionn to mortg
mor tgag
aged
ed prop
pr oper
erty
ty (S
(Sec
ec 63
63)) : W hehere
re mortgaged property in possession of the

mortgagee has, during the continuance of the mortgage, received any accession, the mortgagor, upon
redemption shall, in the absence of a contract to the contrary, be entitled as against the mortgagee to such
acce
access
ssio
ion.
n. Furth
Further
er,, wh
where
ere mort
mortgag
gaged
ed prop
propert
ertyy in posse
possess
ssion
ion of the momort
rtgag
gagee
ee has,
has, duri
during
ng the
the
continuance of the mortgage, been improved, the mortgagor, upon redemption, shall, in the absence of
a contract to the contrary, be entitled to the improvement; and the mortgagor shall not, be liable to pay
the cost thereof.
Renewal
Ren ewal of mormortga
tgaged
ged lea
lease
se (Sec 64):: Where mortgaged property is a lease, and the mortgagee
(Sec 64)
obtains a renewal of the lease, the mortgagor, upon redemption, shall, in the absence of a contract by
him to the contrary, have the benefit of the new lease.
lease.
Waste by mortgagor in possession (Sec 66) : A mortgagor in possession of the mortgaged property
is not liable to the mortgagee for allowing the property to deteriorate; but he must not commit any act
which is destructive or permanently injurious thereto, if the security is insufficient or will be rendered
insuffic
insufficient
Right ofient by such act.
mortgagee to foreclosure or sale (Sec 67) : In the absence of a contract to the contrary,
the mortgagee has, at any time after the mortgage- money has become due to him, and before a
decree has been made for the redemption of the mortgaged property, or the mortgage-money has
been paid or deposited as hereinafter provided, a right to obtain from the court a decree that the
mortga
mor tgagor
gor sha
shall
ll be absolu
absolutel
tely
y debarr
debarred
ed of his right
right to redeem
redeem the proper
property,
ty, or a decree
decree that the
property be sold. A suit to obtain a decree that a mortgagor shall be absolutely debarred of his right to
redeem the mortga
mortgaged
ged property is calle
called
d a suit for foreclosure
foreclosure..
Mortgagee when bound to bring one suit on several mortgages (Sec 67A): A mortgagee who holds
two or more mortgages executed by the same mortgagor in respect of each of which he has a right to
obtain the same kind of decree under section 67, and who sues to obtain such decree on any one of the
mortgages, shall, in the absence of a contract to the contrary, be bound to sue on all the mortgages in
respect of which the mortgage-mo
mortgage-money ney has becom
become e due.
Right to sue for mortgage-money (Sec 68): The mortgagee has a right to sue for the mortgage-money in
the following cases and no others,
others, namel
namely,-
y,-
(a) where the mortgagor bi binds
nds himself
himself to repay the same;
same;
(b) where
where,,property
mortgaged by any is
cau
cause
se other
whollyother than thedestroyed
or partially wr
wrong
ongful
ful act or de
or the defau
fault
lt ofisthe
security mortga
mortgagor
rendered gor or mort
mortgag
insufficientgagee
ee,, the
within the
meani
mea ning
ng of sect
sectio
ion
n 66,
66, and
and the momortrtga
gagee
gee has gi give
venn the
the mo
mort
rtgag
gagoror a rea
reaso
sona
nabl
ble
e opport
opportun
unity
ity of
providing further security enough to render the whole security sufficient, and the mortgagor has failed to
do so;
where the mortgagee is deprived of the whole or part of his security by or in consequence of the wrongful
act or default of the mortgagor;
(c) wher
where,
e, the mortgagee being
being entitle
entitled
d to possessi
possession
on of the mortgaged
mortgaged property,
property, the mortgagor
mortgagor fails
fails to
deliver the same to him, or to secure the possession thereof to him without disturbance by the mortgagor or any
person claiming under a title superior to that of the mortgagor: Liabilities of mortgagee in possession (Sec 76) :
When, during the continuance of the mortgage, the mortgagee takes possession of the mortgaged property,
(a) he must manage the prope

property
rty as a person of ordinary prudence
prudence would manage
manage it if it were his own;
(b) he must try his be
best
st endeav
endeavours
ours to colle
collect
ct the rents and profi
profits
ts thereof
thereof;;
(c) he must,
must, in the absen
absence
ce of a contract
contract to the contr
contrary
ary,, out of the income
income of the proper
property,
ty, pay the
government revenue, all other charges of a public nature and all rent accruing due in respect thereof
during such possession, and any arrears of rent in default of payment of which the property may be
summarily sold;
(d) he must in the absence of a contract to the contrary
contrary,, make such necessar
necessary y repairs of the property
property as
he can pay for out of the rents and profits thereof after deducting from such rents and profits the payments
mentioned in clause (c) and the interest on the principal money;
(e) he must not commit any act whi which
ch is destructive
destructive or permanently
permanently injurious
injurious to the property;
(f) where he has insured
insured the w whole
hole or any part of the
the property against
against loss
loss or damage by fire,
fire, he must,
must, in
case of such loss or damage, apply any money which he actually receives under the policy or so much
thereof as may be necessary, in reinstating the property, or, if the mortgagor so directs, in reduction or
discharge of the mortgage-money;
(g) he must keep clear
clear,, full and accurate accounts
accounts of all sums received
received and spent by him as mortgagee,
mortgagee,
and, at any time during the continuance of the mortgage, give the mortgagor, at his request and cost, true
copies of such accounts and of the vouchers by which they are supported;
(h) his recei
receipts
pts from the mortgaged property,
property, or, where such
such property is personally
personally occupied
occupied by him, a
fair occupat
occupation
ion-re
-rent
nt in res
respecpectt thereof,
thereof, shall,
shall, after
after deducti
deducting
ng the expense
expenses s properl
properlyy incurr
incurreded for the
management of the property and the collection of rents and profits and the other expenses mentioned in
clauses (c) and (d), and interest thereon, be debited against him in reduction of the amount (if any) from
time to time due to him on account of interest and, so far as such receipts exceed any interest due, in
reduction or discharge of the mortgage-money; the surplus, if any, shall be paid to the mortgagor;
(i) when the mortgagor
mortgagor tenders,
tenders, or deposits iinn the manner herei
hereinafter
nafter provided,
provided, the amoun
amountt for the time
being due on the mortgage, the mortgagee
must, notwithstanding the provisions in the other clauses of this section, account for his receipts from the

mortgaged property from the date of the tender or from the earliest time when he could take such amount
out of court, as the case may be, and shall not be entitled to deduct any amount therefrom on account of
any expenses incurred after such date or time in connection with the mortgaged property.
Loss occasioned by his default- If the mortgagee fails to perform any of the duties imposed upon him by
this sectio
section,
n, he may,
may, whe
whenn acc
accoun
ounts
ts are taken in pursua
pursuance
nce of a decree
decree made under
under this Chapter,
Chapter, be
debited with the loss, if any, occasioned by such failure.
Postponement of prior mortgagee (Sec 78) : Where, through the fraud, misrepresentation or gross
neglect of prior mortgagee, another person has been induced to advance money on the security of the
mortgaged property, the prior mortgagee shall be postponed to the subsequent mortgagee.
Mortgage to secure uncertain amount when maximum is expressed (Sec 79) : If a mortgage made
to se
secu
cure
re fut
futur
uree adv
advanc
ances
es,, the
the pe
perfo
rform
rman
ance
ce of an engag
engagem
emen
entt or the
the balan
balance
ce of a rurunni
nning
ng
account, expresses the maximum to. be secured thereby, a subsequent mortgage of .the same
property shall, if made with notice of the prior mortgage, be postponed to the prior mortgage in
respect of all advances or debits not exceeding the maximum, though made or allowed with notice
of the subsequent mortgage.
Contribution to mortgage-debt (Sec 82) : Where property subject to a mortgage belongs to two or
more persons having distinct and separate rights of ownership therein, the different shares in or parts of
su
such
ch pr
prope
operty
rty owned by suc suchh per
person
sons
s are
are,, in the abse
absence
nce of a cocontr
ntrac
actt to the cocontr
ntrar
ary,
y, li
liabl
able
e to
contribute rateably to the debt secured by the mortgage, and, for the purpose of determining the rate at
which each such share or part shall contribute, the value thereof shall be deemed to be its value at the
date of the mortgage after deduction of the amount of any other mortgage or charge to which it may
have been subject on that date.
Where, of two properties belonging to the same owner, one is mortgaged to secure one debt and then both
are mort
mortgag
gaged
ed to sesecucure
re ano
anothe
therr debt,
debt, and thethe for
former
mer de debt
bt is paid
paid ou
outt of the former
former prprope
opert
rty,
y, ea
each
ch
property is, in the absence of a contract to the contrary, liable to contribute rateably to the latter debt after
deducting the amount of former debt from the value of the property out of which it has been paid.
Power to deposit in court money due on mortgage (Sec 83): At any time after the principal money
payabl
pay able
e in resp
respecectt of an
anyy mort
mortgagage
ge hahas
s bebeco
come
me dudue e an
andd be
befo
fore
re a suit
suit for
for rede
redempmptition
on of the
the
mortgaged property is barred, the mortgagor, or any other person entitled to institute such suit, may
deposit, in any court in which he might have instituted such suit, to the account of the mortgagee, the
amount remaining due on the mortgage.
Right to money deposited by mortgagor -The -The court shall thereupon cause written notice of the deposit to
be serve
served
d on the mortmortga
gagee
gee,, and the mort
mortgagagee
gee mamay, y, on prese
present
ntin
ingg a petit
petitio
ionn (v
(ver
erif
ifie
ied
d in mann
manner
er
prescribed by law for the verification of plaints) stating the amount then due on the mortgage, and his
willingness to accept the money so deposited in full discharge of such amount, and on depositing in the
same court the mortgage-deed
and all documents in his possession or power relating to the mortgaged property, apply for and receive the
money, and the mortgage-deed, and all such other documents so deposited shall be delivered to the
mortgagor
mortga gor or such other person as aforesaid
Person
Per sonss who maymay sue sue for rerede
dempt
mption
ion (S
(Sec 91) : Besid
ec 91) Besides
es the mor
mortga
tgagor
gor,, any of the followi
following
ng
persons may redeem, or institute a suit for redemption of, the mortgaged property, namely,-
(a) any person (o (other
ther than th
thee mortgage
mortgagee e of the intere
interest
st sought to be redeemed)
redeemed) who who has any interest
interest
in, or charge upon, the property mortgaged or in or upon the right to redeem the same;
(b) any sur
surety
ety for tthe
he payme
payment
nt of the mortgage-
mortgage-debtdebt or a any
ny part thereof; or
or
(c) any credi
for sale of creditor
tor of the mortg
the mortgaged mortgagor
agor who has in a suit for the ad
property. adminis
ministration
tration of his
his estate obtained
obtained a decree
Subrogation (Sec 92) : Any of the persons referred to in section 91 (other than the mortgagor) and any
co-m
co-mor ortg
tgag
agor
or shal
shall,
l, on rede
redeem
emining
g prop
proper
erty
ty subj
subjec
ectt to th
the
e mort
mortga
gage
ge,, ha
hav
ve, so far
far as rega
regard
rds
s
redemption.
foreclosure or sale of such property, the same rights as the mortgagee whose mortgage he redeems
may have against the mortgagor or any other mortgagee.The right conferred by this section is called the
ri
righ
ghtt of subro
subrogat
gatio
ion,
n, an
and
d a pe
pers
rson
on acqui
acquiri
ring
ng the
the sa
same
me is sa
said
id to be su
subro
brogat
gated
ed to the rights
rights of the
the
mortgagee whose mortgage he redeems.A person who has advanced to a mortgagor money with which
the mortgage has been redeemed shall be subrogated to the rights of the mortgagee whose mortgage has
been redeemed, if the mortgagor has by a registered instrument agreed that such persons shall be so
subrogated..
Lease of immovable property (Sec 105): A lease of immovable property is a transfer of a right to
enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a
price paid or promised, or of money, a share of crops, service or any other thing of value, to be
rendered periodically or on specified occasions to the transferor by the transferee, who accepts the
transfer
is called on
thesuch terms.The
premium, transferor
and the is called
money, share, the lessor,
service thething
or other transferee is rendered
to be so called theislessee, therent.
called the price
Rights and liabilities of lessor and lessee (Sec 108) ;
(A) Rights and liabilities of the lessor : The lessor is bound to disclose to the lessee any material

defect in the property, with reference to its intended use, of which the former is and the latter is not
aware, and which the latter could not with ordinary care discover;
(a) the lessor is bound on the lessee'
lessee's
s request to put him in possession
possession of the property;
(b) the lessor shal
shalll be deemed to contract with the les
lessee
see that, if the latter pays the rent reser
reserved
ved by the
lease and performs the contracts binding on the lessee, he may hold the property during the time limited
by the lease without interruption.
interruption.
(B) Rights and liabilities of the lessee
(c) If during the continuance of the lease any accession
accession is made to the property, such accession
accession (subjec
(subjectt
to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;
(d) if by fire, tempest or flood, or viol
violence
ence of an army or of a mob, or other irr irresisti
esistible
ble force, any materi
material
al
part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes
for which it was let, the
(e) lea
lease
default sethe
of shall
shall,
, at the
lessee, heopti
option
onbe
shall of entitled
the lessee,
lessto
ee, be himself
avail void.
void. If of
thethe
inquiry
inquiry beofoccasi
benefit occ
thisasioned
oned by the wrongfu
provision; wrongfull act or
(f) if the lessor neglects to make, within
within a reasonable time after notinotice,
ce, any repairs whi
which
ch he is bound to
make to the property, the lessee may make the same himself, and deduct the expense of such repairs with
interest from the rent, or otherwise recover it from the lessor;
(g) if the lessor neglec
neglects
ts to make any payment which he is bound to make, and which, if not made by him,
is recoverable from the lessee or against the property, the lessee may make such payment himself, and
deduct it with interest from the rent, or otherwise recover it from the lessor;
(h) the less
lessee
ee may even
even afte
afterr the determ
determininati
ation
on of the lease
lease remo
remove
ve,, at any time
time whil
whilst
st he is in
possession of the property leased but not afterwards all things which he has attached to the earth;
provided he leaves the property in the state in which he received it;
Duration of lease for a year: Where the time so limited is a year or a number of years, in the absence of
an express agreement to the contrary, the lease shall last during the whole anniversary of the day from
which such time commences.
TRANSFERS
TRANSFERS OF ACTIONA
ACTIONABLE
BLE CLAI
CLAIMS
MS
Actionable claim : Actionable claim means a claim to any debt, other than a debt secured by mortgage of
immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in
movable property not in the possession, either actual or constructive, of the claimant, which the civil courts
recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing,
conditional or contingent;
Transf
Tra nsfer
er of act
actiona
ionableble claim
claim (Sec 130): The transfer shall be effected only by the execution of an
(Sec 130):
in
inst
strum
rumenentt in wr
writ
itin
ing
g signe
signed
d by the trans
transfer
feror
or or hi
his
s duly
duly aut
author
horiz
ized
ed agent,
agent, shall
shall be comple
complete
te and
effectual upon the execution of such instruments, and thereupon all the rights and remedies of the
transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice
of the transfer as is hereinafter provided be given or not. Accordingly, the transferee may sue or institute
proceedings foi the same in his own name without obtaining the transferor's consent to such suit or
proceeding
proceedi ng and without making him a party thereto.
For example, A effects a policy on his own life with an insurance company and assigns it to a bank for
securing the payment of an existing or future debt. if A dies, the bank is entitled to receive the amount of
the policy and to sue on it without the concurrence of A's executor, subject to the proviso in sub-section
(1) of section 130 and to provisions of section 132.
Notice to be in writing, signed (Sec 131) : Every notice of transfer of an actionable claim shall be in
writing, signed by the transferor or his agent duly authorised in this behalf, or, in case the transferor
refuses to sign, by the transferee or his agent, and shall state the name and address of the transferee.
Liability of transferee of actionable claim (Sec 132) : The transferee of an actionable claim shall take it
subject to all the liabilities and equities and.tp which the transferor was subject in respect thereof at the
date of the transfer.
LAWS RELATING TO BILL FINANCE
BILL OF EXCHANGE (Section 5)
A bill of Exchange (BOE) is an instrument (a) in writing, (b) containing an unconditional order, (c) signed
by the maker, (d) directing a certain person to pay (e) a certain sum of money only (f) to, or to the order of,
a certain person or to the bearer of the instrument.
Parties to a BOE: U/s 7
Drawer: The person who orders to pay (say seller of goods). He is the creditor. (It can be a minor also
without any personal liability)
Drawee: Who is directed to pay (say a buyer of goods). He is the debtor. A minor cannot be drawee as he
cannot incur liability.
Acceptor: The drawee becomes acceptor on acceptance of BOE for payment.
Payee: Who is authorised to obtain the payment.

Lost Bill of exchange : Where a bill is just, the drawer is under obligation (Sec 45A) to issue a duplicate
bill.
Types of Bills Of Exchange : The bills are of following kinds:
a inland bills and foreign bills; b time bills and demand bills; c trade bills and accommodation bills
d clean bills and documentary bills. Inland bills (Instruments) (Section 11)
A BoE drawn or made in India and made payable in or drawn upon any persons resident in India, is an
inland instrument. (Explanation: (1) It should be drawn in India. (2) If it is payable in India, it can be paid by
a resident or a foreigner. If it is payable abroad, it should be paid by a resident in India).
Foreign bills : As per Section 12 of NI Act, any bill which is not an inland bi 1 is a foreign bill.
Examples of Inland and Foreign Bills

Drawn in
in Payable Type
New Delhi In Mumbai by Ram Lal a Inland
resident or by John Major, a foreigner
New Delhi In London, by Ramesh Inland

Kumar, a resident Indian
New Delhi In London, by John Major, a foreigner Foreign
London In Delhi, by Ashok a resident India Foreign
Accommodation bills : It is not a genuine trade bill. It is drawn to accommodate a known party without
actual sale of goods. Such bill drawn by seller and accepted by another person purporting to be buyer, it
becomes an accommodation bill. This is also called kite-flying.
Demand/Usance Bills of Exchange Demand Bills is payable on demand. The Usance Bills is payable in
future on a pre-decided date. The demand bills are purchased and usance bills are discounted. While the
demand bills are normally secured, the usance bills become unsecured as the documents are handed
over to the drawee on acceptance.
Bill of exchange in sets : When the bills are in sets, (i.e first, second or third copy) as in case of foreign
trade transactions, the stamp duty is paid only on one part and only one part is required to be accepted.
Hundi : Hundies are bills of exchange generally written in vernacular and governed by local usage and
practi
pra ctice
ces.
s. The
These
se may be DarDarsha
shani
ni Hundi
Hundi (sim
(simil
ilar
ar to demand
demand bil bills
ls payabl
payablee at si
sight
ght),
), Mi
Miadi
adi Hundi
Hundi
(similar to usance bills), Namyog Hundis (similar to order instruments) and Khokha (which has been
paid and cancelled).
Acceptance : The acceptance of a bills means signing by the drawer of a bill, on face with or without the
words accepted and delivery thereof or giving notice of signing, to the holder of the bill.
There are 2 types of acceptances i.e. general acceptance and qualified acceptance. In cages of several
drawees not being partners, each of them can accept it for himself but not others without their authority
(Sec 34).
Presentation for acceptance : As per Section 61, a usance bill payable after sight and bills payable on
a fixed date (and not demand bills) require to be presented to drawee for acceptance to make him liable
and also for calculation of due date.
Usance promissory notes are also required to be presented for determining the due date. Presentation
for acceptance need not be done where the drawee is not competent, he cannot be found with reasonable
search, he is dead or is insolvent or acceptance is refused.
Reasonable
Reasonab le time
The presentation should be within a reasonable period from receipt. The non-presentation discharges the
drawer and all endorsers
endorsers.. While calcul
calculating
ating the reasonable
reasonable time, public holidays are to be excluded.
excluded.
Time period for accep
acceptance
tance :
As per Section
Secti on 83, a draw
draweeee is allowed
allo wed 48 hou
hours
rs exclu
exclusive
sive of public
publ ic holidays
holi days,, to decide
decid e whether
whet her to
accept or to reject. Where the acceptance is not conveyed in such time, it is treated as dishonoured
for non-acceptance.
Days of grace
Under Section 22, every usance promissory note or bill of exchange is to be allowed 3 days after-the
day on whic
which
h it is expres
expressed
sed to be paya
payable.
ble. For instruments
instruments payab
payable
le in instalments, the days of grace
are to be allowed for each instalment. Where grace period is stated as 'grace period not given', no
grace days are to be allowed. Where the due date is already given by the drawer, no grace period to

be given. In case of Commercial Paper or Certificate of Deposit (which are usance promissory notes), due
date is already given. Hence no grace period is added. Where days of grace are stated to be more, these
are restricted to 3 only.
Due date calculation
Due date is calculated to get payment both for usance bills and promissory notes and not for demand bills
or demand promissory notes.
Important - Due date can be from date of bill or from date of acceptance, depending upon what is
stated on the bill. When not to be calculated from date of the bill, it is to be calculated from date of
acceptance.. The expressi
acceptance expression
on after sight means, after acceptance. (Sec 21).
Rules of due date calculation

A. Payable after so many months: (Sec 23) Becomes payable on the corresponding date of the month,.
after the stated number of months. For example, in case of a bill dated 21.11.02 payable 3 months after
date, 3 months shall complete on 21.02.03 i.e. the same date of the corresponding month. But it will be on
3rd day i.e. 24.02.03.
B. Payable after so many months, where month has no corresponding date:
If the month has no corresponding date, the period shall be held to terminate on the last day of such
month. For example, for a bill of exchange dated 22.01.03 accepted on 31.01.03 payable one month
after the date of acceptance, the one month shall be held to terminate on 28.02.03 (as there is no date
corresponding to the 31st day (i.e. date of acceptance) in the month of February 2003) and the maturity
date will be 3rd March
March 2003, after adding 3 days of ...grace.
C.Payable after so many days (Sec 24) In calculating the date of maturity of a bill or note payable so
many days after date or sight or presentment or acceptance, the day of that date is excluded. For
example, if a bill dated 21.08.03 is payable 6 days after date, for calculating 6 days, the date 21st
is excluded and 22nd August is counted as the 1st day, thus 6 days terminate on 27.08.03 and the
bill will be at maturi
maturity
ty on 3rd day from 27.08.03 i.e. 30.08.03 (Section
(Section 24).
When maturity date is a public holiday
As per Sect
Section
ion 25 such instr
instrument
ument shal
shalll be payable
paya ble on the next precedin
prec eding
g business
bus iness day (i.e.
(i.e . the
previous business day).
Declaration of Public Holiday : U/s 25 of NI Act, 1881, the public holiday includes Sunday and any
other day declared by the Central Govt. by notification in the Official Gazette (power delegated to
State Governments on 8 June, 1957). When Central Govt. itself notifies a day as "public holiday"
there is no need for banks to wait for the State Government notification.
Examples of Due date calculation
Date
Da te of bil
bill Presented on Accepted On Payment Due date
26.12.07 26.12.07 28.12.07 2 months after pre
presentat
atiion Mar 03,2008
26.02.08 27.02.08 28.02.08 3 months after acceptance May 31,2008
31,2008
20.12.07 21.12.07 23.12.07 1 months after presentation Jan 25, 2008++

26.12.07 26.12.07 28.12.07 45 days after presentation Feb 14,2008
26.02.08 27.02.08 28.02.08 30 days after acceptance Apr 01,2008
++ due date shifted to next preceding business day due to Jan 26, being a public holiday.
Interest Payment on BOE or PN
When ROI is specified, it shall be charged at specified rate (sec 79) on principal amount due from
date of instrument to date of payment. If interest is mentioned to be payable but rate is not mentioned,
interest @ 18% p.a. shall be calculated (sec 80).
Presentment for payment
It is compulsory for all cheques, demand drafts, PNs & BOE.
Liability on the usance bill of exchange
U/s 32, a drawee becomes liable on a bill of exchange only when he accepts it for payment. The drawer is
primarily
primarily liable before acceptance . After acceptance
acceptance his liability
liability is secondary liability
liability
Dishonour of Bill of Exchange
A bill of exchange is said to be dishonoured either by non-acceptance (when drawee defaults in
acceptance) or by non-payment (when the acceptor/drawee makes default in payment). Similarly where

the drawee is incompetent to contract or acceptance is qualified, the bill is said to be dishonoured (Section
91 & 92).
Notice of dishonor : When a bill is dishonoured, the holder thereof must give notice that the instrument
has been so dishonoured to all parties whom the holder seeks to make jointly liable thereon.
It is not necessary to give notice to the maker of the dishonoured promissory note, or the drawee or
acceptor of the dishonoured bill of exchange or cheque (Section 93).
Noting of Bills of Exchange (Section 99) Noting is a process of creating legal evidence of dishonour
through the Notary Public.As per Section 99, where a bill or promissory note is dishonoured by non-
acceptance or nonpayment, the holder should get such fact noted on the bill or a paper enclosed to the
bill, by a Notary Public (generally an Advocate appointed by the State Govt. under Notary Public Act).
Noting should provide date of and reasons for dishonour. Where noting has taken place for an inland
bill,, there is no need to send another notice
bill notice of dishonour
dishonour to the drawee, to make him liable.
Protesting (Section 100)
After noting the bill could also be got protested. Protest is a certificate from a Notary Public containing
facts
fac ts of the dishdishono
onour
ur.. Prot
Protes
estt is co
cons
nsid
ider
ered
ed an authe
authent
ntic
ic an
and
d sasati
tisf
sfac
actor
toryy ev
evid
idenc
ence
e of di
dish
shon
onour
our..
Protesting is compulsory for foreign bill where the law of the place requires it to be protested. Drawee in
case of need. A drawee in case of need is a person to whom the holder can look forward in the event of
the dishonour of instrument.
Accepto torr fo
forr hono ur : Aft
nou After
er nonoti
tin
ng/pr
g/prot
otes
esti
ting
ng,, an
any
y per
person
son who ac acccep
epts
ts for
for ho
hono
nour
ur of the
the
drawer/endorsees).
Stamp duty on bills : The advalorem stamp duty is payable on usance bill (i.e. as per amount and
usance period). Following usance bills are exempted from payment of stamp duty (a) with usance
period up to 90 days, where bank is a party to the bill since
1989 (b) export bills 2004. On demand bills the stamp duty is exempted.
Paymen
Pay mentt of int intere
erest
st by banks for delay
delays s in collec
collectio
tion
n of bil ls ; The lodger's bank should pay
bills
interest
inter est to the lodger for the delay
delayed
ed period in respect of collectio
collection
n of bills
bills at the rate of 2% p.a. above
the rate of interest payable on balances of Savings Bank accounts. The delayed period should be
reckoned
recko ned after making allowance
allowance for normal
normal transit period based upon a time frame of 2 days each for
(i) Despatch of bills; (ii) Presentation of bills of drawees (iii) Remittance of proceeds to the lodger's
bank (iv) Crediting the proceeds to drawer's account
Post-Sale Finance or Trade Finance While companies can use the Cash Credit and Demand Loan
facilities to finance thqii requirements
facilities requirements over the entir
entire
e worki
working
ng capital
capital cycle from purcha
purchasese of raw materi
materials
als
to recovery of sale proceeds from debtors, for financing the post sale requiremen
requirements,
ts, for financi
financing
ng credit
sales, more efficient facilities
facilities are available.
available. They are more effic
efficient
ient because repayment can be monitored
better and as a result of the lower risk involver], the rate of interest could be lower for the customer.
Cheque Purchase Cheques issued by purchaser of goods have to be sent for clearing or collection and
this entails delay of one to several da34 in getting the funds. Banks agree to lend the amount of the
cheque as soon as the cheque is deposited and the advance is recovered when the cheques are realised.
At
for the
the time of giving
cheque gto
iving
be the advance
realized, say itself
for 7 the bank
days. If it will
takesrecover their
longer, interestinterest
additional for
f or the estimated time
is recovered it will
from thetak
take
e
proceeds of the cheque. NormalNormally,
ly, interest is not refunded if the cheque is realized earlier than estimated.
In case the cheque is returned unpaid, the amount is recovered from the customer. This facility is called
cheque purchase.
purchase.
Nowadays,
Nowaday s, Cheque Purc
Purchase
hase facility is given as part of the Cash Management
Management Services.
Services. Under CMS, the
hank may agree to credit the amounts of cheques deposited by the customer, even before they are
collected.
colle cted. This is equivalent to cheque purchase.
Bill Purchase Banks also give advanc

advance
e against Documen
Documentary
tary Bills for Collectio
Collection
n and recover the amount
when the drawee pays the amount. (Please see the chapter on Bills Collection Service for details of the
various documents to be submitted to the bank and their importance.)
In the case of a demand bills the date on which it will be paid is uncertain. The drawee may pay the bill as
soon as it is presented to him or he may take a few days to do so. Hence, as in the case of cheque
purchase, interest for the estimated time for realization of the bill, say for 15 days, is recovered at the time
of the
to purchase.
purcha se. number
actual Additional inter
interest
of days est is recovered
taken recov ered or
to realize theexcess
exces s interest
bill. In case of refunded
dishonouron
ofrealization
realization
the bill, theofamount
the bill is
according
recovered from the customer.

Billl Discou
Bil nt : In the case of a Usance Bill,
Discount Bill, the
the date of payment
payment is certain
certain as it becomes
becomes payable
payable after a
certain number of days after it is accepted or from the date of the bill. Hence the able to calculate the
exact amount of interest due on the bill and recover it upfront.Interest recovered at the time of advance is
called
called "discount".
"discount". When money is against a usance bill for collection,
collection, it is called
called Bill Discounting.
Discounting. In the
case of bill
bills
s purchase also interes
interestt is recovered at the time of advanc
advance.e. However, it is only an estim
estimated
ated
amount and not the exact amount due. Hence it is called commission and not discount.
Bills Discounting and Purchase less risky than CC facility for the following reasons :—
Self-Liquidating - Bills will be repaid when the buyer pays the bills on the due date
Easy to monitor -
monitor - If the bill is not paid on the due date it will be known immediately and the
bank can speedily taken further action for recovery of the advance
More secure - The goods covered
covered by demand bill
bills
s can be taken delivery of by the buyer only
after paying
paying the bill. Hence, if the bill is not repaid the bank can take delive
delivery
ry of the goods and
sell it to recover
recover the advan
advance.
ce. In the case of a usance bill, the bank can proceed agains
againstt the
seller
seller and the buyer for recov
recover.
er. Further, since a :bill is'a negotiab
negotiable
le instrument,
instrument, on filing
filing a suit,
considerati
consi deration
on need not be prove
proved.
d.
The risk involved
involved in Bill financ
financing
ing are, the seller (borrow
(borrower)
er) submitting
submitting bogus LR or RR and the
buyer taking delivery of the goods in conniv
connivance
ance with the transport
transport operator, without payment of
the bill. Risk of the borrower defrauding the bank is no greater than in the case of cash credit. In
fact, frauds in bill finance are likely to surface earlier. To guard against buyers taking delivery
fraudulently, banks have to ensure that L are issued by reputed transport operators who are on
the approved list of IBA (Indian Banks Association
Association).).
BANK GUARANTEES
During the course of business, banks are often required to furnish guarantees on behalf of their own
customers
custome rs in lieu of their obliga
obligations,
tions, performance
performance or other requirements.
requirements. A bank guarantee is a
guarantee given by a bank to a 3 rd party to pay him a certain amount on behalf the applicant, in case
the applicant fails to fulfill his commitment, towards the said 3 rd party.
Parties in a bank guarantee : The person on whose the guarantee is issued is called applicant and in
whose favour it is issued, is called beneficiary
beneficiary..
Basis
Ba sis of is
issu
suee of a babanknk gua
guararantee : A bank guarantee is issued on the basis of an underlying
ntee
transaction or contract between the applicant and the beneficiary.
Indian Contract Act, 1872, defines guarantees as a contract to perform the promise or
Section 126 of Indian
discharge the liability of a third person in case of his default.
Types of guarantees
Financial Guarantees: These are direct credit
Financial credit substitutes
substitutes wherein a bank, irrev
irrevocably
ocably undertakes
undertakes to guarantee the
repayment of a contractual financial obligation. Financial guarantees essentially carry the same credit risk as a
direct extension of credit I.e., the risk of loss is directly linked to the creditworthiness of the counterparty against
whom
wh om a pote
potent
ntia
iall clai
claim
m is acqu
acquirired
ed..
An indica
indicative
tive list of financia
financiall guar
guarante
antees:
es:
a. Guaran
Guarantee teess for cre
crediditt fac
facililitities
ies;;
b. Guarantees in lieu o off repayment of financial - se secu
curi
riti
ties
es;;
c. Guarantees
Guarantees iin n lieu
lieu ooff mar
margin gin requirements
requirements of exchanges
exchanges;;
d. Guarantees
Guarantees for mobi mobilisa lisation tion advan
advance, ce, advanc
advance e money befo before
re the commencemen
commencementt of a project
project and
for money to be received
received in various various stages of Project implemen implementation;
tation;
e. Guarante
Guarantees es towar
towards ds reve
revenue nue dues, tax taxes,
es, dutie
duties,
s, levies
levies etc. in favour of Tax/ Cust
Customs
oms / Port / Exc
Excise
ise
Authori
Auth orities
ties and
and foi disp
disputed
uted liliabil
abiliti ities
es for litigat
litigation
ion pendin
pending g at courts;
courts;
f. Credit Enhanceme
Enhancements; nts;
g. Liquidi
Liquidityty facili
facilitie
ties
s for sec
securi uritis
tisatio
ationn tra
transa
nsacti
ctions
ons;;
h. Acceptances (including endorsements with the character of acceptance);
i. Deferr
Deferreded paym
payment ent guarantees
guarantees..
Performance
Performa Guarantees:: These are transaction-related contingencies that involve an irrevocable undertaking
nce Guarantees
to pay a third party, in the event the counterparty counterparty fails to fulfill or perform a contrac
contractual
tual non-financi
non-financial
al obligation.
obligation. An
indicativ
indicative e list of such guarantees
guarantees is as under:
a. Bidbonds;
Bidbond s;
b. Performance bonds and export performance guarantees;
c. Guarantees in llieu
ieu of s
security
ecurity deposits / earnest money depo
deposits
sits MAD)
MAD) for participating
participating in tenders;
d. Retention
Retention money
moneyguara
guarantee
ntees;
s;

Warranties, indemnities and standby letters of credit related to particular transaction.

Banker's
Banke r's obligation to honour the guaranguarantee:
tee:
A bank guarantee is an independent contract separate from the underlying transaction, in spite of the fact
that the guarantee is issued on the basis of such underlying transaction or contract. Hence bank remains
liable on the guarantee in terms of the conditions of the guarantee in the following situations:
 Whe
Where re the applicant
applicant fai
fails
ls to meet the obligatio
obligation
n under the contra
contractct and the beneficia
beneficiary
ry sends
sends the
notice of invocation.
 Where th the
e bank is unable to recover
recover the due a
amount
mount from
from the app
applican
licant,
t, for any reasons
reasons..
 Where the c company
ompany for which tthehe guarantee
guarantee was given has been liquidated
liquidated oror is in the process
process of
of
liquidation.
Expiry of guarantees
On expiry of the validity period of guarantee, a registered acknowledgement due notice should be sent to
the beneficiary advising that the liability of the bank under the guarantee has been discharged and no
claim from the beneficiary on the basis of the guarantee has been received by the bank. This should be
followed to get back the guarantee bond or a discharge letter from the beneficiary.
Invocation
The amount claimed under the guarantee should be immediately paid to the beneficiary if invocation is in
accordance with the terms and conditions of the guarantee. Withholding payment merely at the instance of
the customer should not be done as it results in nonfulfillment of the obligation undertaken by the bank and
also affects bank's image. If the amount of demand as a result of payment by the bank to beneficiary in not
paid by the customer within a reasonable period, the recovery process is to be initiated.
Limitation clause :
In a letter of guarantee, the extent of monetary liability and the period of validity should be specific. The
limitation clause is inserted in the letter of guarantee for this purpose.
Limitation period in a guarantee
Section 28 of the Indian Contract Act 1872 pertaining to limitation clause of the guarantee has been
amended wef 08.01.97. Due to this amendment, even when the period of liability is specified in the
guarantee, the beneficiary can enforce his remedies till the limitation period is alive i.e. 30 years where
the bene
benefi
fici
ciary
ary is Go
Govtvt.. and 3 ye year
ars
s in othe
otherr case
casess fr
from
om the stip
stipul
ulat
ated
ed expi
expiry
ry date
date / in
invo
voca
cati
tion
on,,
whichever is earlier.
RBII INST
RB INSTRU
RUCT
CTIO
IONS
NS ON BA
BANK
NK GUARA
GUARANT
NTEE
EES
S
Tenure- No bank guarantee should normally have a maturity of more than 10 years.
Unsecur
Unsec ured
ed gua
guara
rante
ntees
es:: The restr
restric
icti
tion
on of 20
20%% on unsec
unsecure
ured
d guara
guarante
ntees
es has beebeen
n withd
withdraw
rawn
n (w(wef
ef
17.6.2
17. 6.2004
004)) by RB
RBII an
andd banks
banks'' boa
boards
rds have bebeen
en giv
given
en the freedo
freedomm to fix
fix their
their own
own polic
policie
ies
s on thei
their
r
unsecured exposures.
Precautions for averting frauds: Banks should refrain from issuing guarantees on behalf of customers
who do not enjoy credit facilities with them.
Ghosh committee recommendations : Banks should implement the following recommendations:
i. In order to preve
preventnt unacco
unaccounted
unted iss
issue
ue of guarantee
guarantees,
s, as well as fake guarantee
guarantees,
s, as suggested
suggested by
IBA, bank guarantees should be issued in serially numbered security forms.
ii. Banks
Banks shou
should,
ld, whi
while
le forw
forwardi
arding
ng guarante
guarantees,
es, caution
caution the bene
benefic
ficiar
iaries
ies that they should,
should, verify
verify the
genuineness
Internal controlof the guarantee
systems withguarantees
: Bank the issuing bank.
issued for Rs.50,000/- and above should be signed by two
officials jointly.
Guara
Gua rant
ntee
eess on be beha
half
lf of sh shar
are
e anandd st
stoc
ock k brbrok
oker
ers/
s/ comm
commod odit
ity
y brbrok
oker
erss : Bank
Bankss may
may isissu
sue e
gu
guar
aran
ante
tees
es in favfavou
ourr of stoc
stockk ex
exch
chan
ange
ges
s in li lieu
eu of secu
securirity
ty de
depo
posi
sitt an
andd al
also
so in li
lieu
eu of ma
margrgiin
requirements. Banks to obtain a minimum margin of 50% (including 25% cash margin) while issuing
su
such
ch guaran
guaranteetees.
s. Thi
This
s mamargi
rgin
n co
cond
nditi
ition
on al
also
so appli
applies
es to guaran
guaranteetees
s is
issu
sued
ed by banks
banks on behal
behalff of
commodity brokers in favour of the national level commodity exchanges, viz., National Commodity &
Derivatives Exchange (NCDEX), Multi Commodity Exchange Of India Limited (MCX) and National Multi-
Commodity
Commodi ty Exchange Of India Limited (NMCEIL), in lieu of margin requirements requirements
Restric
Res trictions
tions on guaranguaranteestees of inter-c
inter-comp
ompany any deposits
deposits/loa ns : Ban
/loans Banks
ks sho
should
uld not execu
execute te
gua ran tee s co coveveri
ring
ng ininter
ter-c
-com
ompan
panyy dep
depos
osit
its/
s/lo
loans
ans the
there
reby
by guara
guarantnteei
eeingng refun
refund d of depos
deposit
its/l
s/loan
oans s
accepted by NBFC/fIrms from other NEWC/firms.
Restriction an guarantees for placement of funds with NBFCs : Guarantees should not be issued for
the purpose of indirectly enabling the placement of deposits with NBFCs. Inter-institutional guarantees:
Banks may Issue guarantees favouring other banks/ Fls/ lending agencies for loans extended by the
latte
latter.
r. The gua
guara
rante
nteei
eing
ng ban
bank
k shou
should
ld assu
assume
me a fun
funded
ded expo
exposur
sure
e of at le
leas
astt 10%
10% of the expo
exposu
sure
re
guaranteed.
Infrastructure
Infrastr ucture projec ts: Banks can issue guarantees favouring other lending agencies, in respect of
projects

infrastructure projects alone, subject to the conditions that the bank issuing the guarantee takes a
funded share
share in the project
project at least
least to the extent of 5 percent of the project
project cost and undertakes
undertakes normal
credit appraisal, monitoring and follow-up of the project.
Payme
Pay mentnt of invoke
invoked d gua
guaran
rantees: Where
tees Where guaran
guarantee
teess are
are in
invo
voked
ked,, payme
paymentnt sh
shoul
ould
d be made
made to thethe
beneficiaries without delay and demur,
The Suprem
Supreme e Cou
Courtrt had obs
observ
erved
ed (U.P.
(U.P. Co-ope
Co-operatrativ
ive
e Fede
Federa
rati
tion
on Priva
rivate
te Lt
Ltd.
d. ve
vers
rsus
us Singh
ngh
Consultants and Engineers Private Ltd. (1988 IC SSC 174)] that the commitments of the banks must be
honoured, free from interference by the courts. In exceptional cases such as fraud or any case where
irre
irretr
trie
ieva
vabl
ble
e inju
injust
stic
ice
e wo
woul
uld
d be do
done
ne if bank
bank gua
guara
rante
nteee is alallo
lowe
wedd to be encas
encashed
hed,, the co
cour
urtt shoul
should
d
interfere'.
Bank Guarantee beyond 10 years : In terms of RBI circular circular date July 1, 2008 on Guarantees
Guarantees and Co-
acceptances, no bank guarantee should normally have a maturity of more than 10 years. In view of the
changed scenario of the banking industry where banks extend tong term loans for periods longer than 10
years for various projects, RBI decided (April 22, 2009) to allow banks to issue guarantees for periods
beyond 10 years under a policy approved by their Board of Directors
Importan
Impo rtantt Provision
Provisions s in Indian Contra
Contract ct Act relatin
relating g to Guaranto
Guarantors rs
Section Provision in Summary Form
126 Gua
Guaran
rantee
tee is a con
contra
tract
ct to p
perf
erform
orm the promis
promisee or disch
discharg
argee the
the li
liabi
ability
lity of a 3rd perso
person
n in case
case ooff hi
hiss
default
12
127
7 Cons
Considider
erat
atio
ion—
n— anyt
anythi
hing
ng do
done
ne or pr
prom
omis
ised
ed ma
madede fo
forr the
the be
bene
nefi
fitt of the
the prin
princi
cipa
pall de
debto
btor
r
128 Surety's liability is co-extensive with that of the principal debtor
129 Contin
Continuin
uing
g guaran
guarantee
tee is one
one wh
which
ich extend
extendss to a se
serie
riess of transa
transacti
ctions
ons.. It can be rev
revoke
okedd as to future
future
transactions by notice to the creditor (Section 130)
133 Any varian
variance
ce made
made in the terms
terms of the contra
contract,
ct, wit
withou
houtt sur
surety
ety's
's consen
consent,t, sha
shall
ll dis
discha
charge
rge the sur
surety
ety
for transa
transacti
ctions
ons subseq
subsequen
uentt to the varia
variance
nce..
13
134
4 Sure
Surety
ty is di
disc
scha
harg
rged
ed by any
any co
cont
ntra
ract
ct by whic
whichh pr
prin
inci
cipa
pall de
debt
btor
or is re
rele
leas
ased
ed by the
the cr
cred
edito
itor.
r.
137
137 Re
Refu
fusa
sall of th
thee cr
cred
edit
itor
or to sue
sue pr
prin
inci
cipa
pall debt
debtor
or or en
enfo
forc
rcee an
anyy othe
otherr re
rem
medy
edy ag
agai
ains
nstt him
him, does
does
not discharge the surety
136 Release of one co-sure
retty by the credito
itor, does not disc
ischarge the
the others
140 On paym
payment
ent o
off the guarante
guaranteed
ed debt
debt by
by the surety,
surety, he is invested
invested with all tthe
he rights
rights which the ccredit
reditor
or had
had
against the principal debtor. Surety will have benefit of every
Security
Sec urity which
which creditor
creditor has against
against the princ
principal
ipal debto
debtorr (righ
(rightt of subro
subrogatio
gation).
n).
146 Co-s
Co-suretie
uretiess eithe
eitherr jointly
jointly or severally
severally ,are liab
liable
le betwe
betweenen them
themselve
selves,
s, to p
pay
ay eac
each
h aan
n eequal
qual shar
sharee of
of th
thee
whole debt, if it remains unpaid by the principal debtor. Co-sureties bound in different sums are liable to
pay equally within the limits of their
t heir respective obligations permit.
DEFERRED
This is a guarantee for a payment which has PAYMENT
been deferred GUARANTEE
or postponed. In case of purchase of capital
goods like machinery, the necessity to issue deferred payment guarantee arises. In such guarantees, the
banks are undertaking to pay the instalments due under the deferred payment schedule. Unlike all other
LGs here the payment will have to be made by the banks on the accepted due dates and thereafter the
instalment
instalment is recov
recovered
ered from the party.
Advance payment under DPG: The terms of payment for the purpose of such guarantee, are normally
advance payment of 10-15% of the price of the capital goods and payment of another 10-15% on receipt
of the goods/documents. The balance amount, along with interest, is payable in instalments spread over a
period of 1-7 years, which is secured by the deferred payment guarantee.
Appraisal for DPG: The appraisal of a proposal involving issue of deferred payment guarantee has to
be undertaken as it is done in case of a term loan to see the long term viability of the operations, since
the payment is to made out of the future cash generatio
generation
n from the activity.
activity.
Payme
Pay ment
nt Mechan
Mechanismism under DPG: As rega
under DPG: regards
rds the paymen
paymentt mechani
mechanism,
sm, normal
normally
ly the seller
sellers
s draw
usance bills of exchange which are accepted by the buyer and counter-accepted by the buyer's bank
(bank giving the guarantee). These bills are discounted by the seller with his bank and on due date the
seller's
Where thebank presents
buyer's the
accountbills
account doesfor payment,
not which
permit such the bank
debit, issuehas
bank
to pays to due
pay the the debit
amountof buyer's account.
and initiat
initiate
e steps
to recover the payment from the buyer.
Security : Banks secure such guarantees by having charge on the assets purchased and also counter
guarantee of the buyers.

LETTER OF CREDIT
A letter of credit is a commercial instrument of assured payment and widely used by the business
commu
com muninity
ty for it
its
s va
vari
riou
ous
s adva
advant
ntage
ages.
s. In an LC,
LC, a bank
bank under
underta
takes
kes to make
make payme
payment nt to a se
sellller
er on
production
production of documents stipulated in the credit.
Parties to LCs
a: Applicant- The buyer / importer of the goods (generally borrower of the issuing bank). The applicant has
to make payment if documents as per LC are delivered, whether the goods are as per contract between the
buyer and beneficiary or not.
b: Issuin
Issuing g bank - Importer's or buyer's bank who lends its name or credit. It is liable for payment once
the docume
documents
whether it isnts under
unde
able tor recover
LC are thereceiv
received
ed by itfrom
payment fromapplicant
nomin
nominated
ated
or (negotiati
(negoti
not. It ating)
ng) 5bank,
gets bank, irresp
irrespecti
banking ective
days ve
to of the the
check fact
documents.
c: Adv ising bank - Issuing bank's branch (or correspondent in exporter's country) to whom the letter of
Advising
credit is sent for onward transmission to the seller or beneficiary,-after authentication of genuineness of the
credit. Where it is unable to verify the authenticity, it can seek instructions from the opening bank or can
advise the LC to beneficiary, without any liability on its part. This bank has no obligation to negotiate the
documents.
d. Benefic iary - The
Beneficiary The papart
rty
y to who
whomm the
the cred
creditit is addre
address
ssed
ed i.e.
i.e. seller
seller or supplier
supplier or exporter.
exporter. It gets
payment against documents as per LC from the nominated bank within validity period for negotiation,
maximum 21 days from date of shipment.
e: Negotia
Negotiatin tingg bank - The bank to whom the beneficiary presents the documents for negotiation. It
clai
claims
ms payme
payment nt fro
from
m the
the rei
reimb
mbur
ursi
sing
ng bank
bank or openi
opening
ng bank
bank an and
d gets
gets 5 banki
banking
ng days
days to ch
chec
eck
k the
the
documents.
f: Reimbursing bank- 3rd bank which repays, settles or funds the negotiating bank at the request of its
principal, the issuing bank.

Confirming bank - The bank adding confirmation to the credit, which undertakes the responsibility
g: Confirming
of payment by the issuing bank and on his failure to pay. The confirmation is added on request of the
opening bank.
TYPES OF LETTERS OF CREDITS
DA (Usance) or DP LCs: DA LCs are those, where the payment is to be made on the maturity
date in terms of the credit. The documents of title to goods are delivered to applicant merely on
acceptance of documents for payment. He makes the payment on due date. To that extent these
are unsecu
unsecured.
red.
DP LCs are those where the payment is made against documents on presentation.
Irrevocable & Revocable LCs: An irrevocable LC is one, which can be cancelled or amended with
consent of beneficiary,
beneficiary, appli
applicant
cant bank and confirming
confirming bank, if any.
A revocable
of the credit isary.
benefici oneIIffthatthe
beneficiary. can be tiating
nego cancelled
negotiatin orm
g bank amended
makes at any ttime
akes a paymen
payment without
to the seller the
seller prior
prior
prior knowledge
to receiving
receiving
notice of cancellation or amendment, the issuing bank must honour the liability. If nothing is stated, the
LC is irrevocable.
With or without recourse LCs: Where the beneficiary holds himself liable to the holder
Of the
the bil
billl ifif dis
dishono
honoure
ured,
d, iitt is conside
considered
red
with-recourse LC. Where he does not hold hi himself
mself liable,the
liable,the credit
credit is said
said to be without-recourse.
without-recourse.
As per RBI directive (Jan 23, 2003), banks should not open such LCs. Under LC, the Banks can
negotiate bills bearing the 'without recourse' clause.
A restricted LC is one wherein a specified bank is designated to pay, accept or negotiate.
paymentt will
paymen will be made. The confir confirming
ming bank's liabil
liability
ity is similar
similar to the issuing bank. The confirming
confirming
bank has to negotiate documents if tendered by the beneficiary beneficiary..
Transferable LCs: It is an LC, where the beneficiary is entitled to transfer the LC, in whole or in part,
to the 2nd beneficiary/s (supplier of beneficiary). The 2'd beneficiary, however, cannot transfer it further,
but can
can trans
transfer fer the
the un
unuse
usedd por
portio
tion,
n, ba
back
ck to
to the ori
origina
ginalbene
lbenefic
ficiar
iary.
y. It
It is ttran
ransfe
sferabl
rable
e only
only once.
once.
1 d
A back to back credit is the 2' LC opened by the original beneficiary in favour of the r beneficiary
who is his local supplier. He tenders the original LC to the bank in his country as a cover for opening
1
the 2' LC. The terms of such credit would be identical except that the price may be lower and validity
earlier.

A red clause credit also referred to a packing or anti

antici
cipa
pato
tory
ry cred
credit
it,, has a claus
clause
e permi
permitti
tting
ng tthe
he
correspondent bank in the exporter's country to grant advance
correspondent advance to beneficiary
beneficiary at issuing
issuing bank's
responsibil
respons ibility.
ity. These advanc
advances
es are adjuste
adjusted d from proceeds of the bills negotiated.
A green clause LC permits the advances for storage of goods in a warehouse in addition to pre-
shipment advance. It is an extension of the red clause LC.
Standby credits is similar to performance bond or guarantee, but issued in the form of LC. The
beneficiary
beneficiary can submit his clai
claim
m by means of a draft accompanied
accompanied by the requisite documentary
documentary
evidence
evidence of performance,
performance, as stipulated in the credit.
credit.
Documentary Credits:
When LC specifies that the bills drawn under LC must - accompany documents of title to goods such
as RRs or MIRs or Bills of lading etc. it is termed as Documentary Credit. If any such documents are
not called, the credit is said to be Clean Credit.
Revolving Credits:
These LCs provide that the amount of drawings made there under would be reinstated and made
available
avail able to the beneficiar
beneficiaryy again and again for further drawings
drawings during
during the currency of credit
credit provided
provided
the applicant makes the payment of docume documentsnts earlier negotiated
negotiated.. At times
times,, an overall turnover cap is
also stipulated.
Instalment Credit:
It is a letter of credit for the full value of goods but requires shipments of specific quantities of goods
within
withi n nominated
nominated period and allowallowss for part-shipmen
part-shipment. t. In case any one instalment
instalment of shipment
shipment is
missed,
misse d, credit will not be available
available for that and subse
subsequent
quent instalmen
instalmentt unles
unlesss LC permits
permits it.
DOCUMENTS UNDER LETTER OF CREDIT
Liability of an opening bank in a letter of credit arises, when the beneficiary delivers the documents
strictly drawn as per terms of the letter of credit. These documents include the following:
exchange: This is the basic document which requires to oe discharged
Bill of exchange: discharged by makin
makingg the
payment.. It is defined
payment defined u/s 5 of NI AcAct.
t. The right
right to draw thi this
s document is availabl
available
e to beneficiary
beneficiary and
and
the amount, tenor etc. has to be in terms of the credit.
Invoice : This document provides relevant details of the sale transaction, which is made in the name of
the applicant, by the beneficiary. The details regarding, quantity, price, specification etc. should be same
as mentioned in the letter of credit.
Transport documents: It evidences the despatch of the goods by the beneficiary, by handing over the
goods to the agent of the appli
applicant
cant,, whic
whichh may be a sh ship
ip,, rail
railwa
ways
ys or a tran
transp
spor
ortt oper
operat
ator
or,, who
who
issu
issues
es do
docu
cume
mentnts
s such
such as such
such as bi
billl of lad
adining,
g, rai
railway rece
receiipt,
pt, tran
transspo
port
rt rece
receipipt.
t.
Other documents could be Airw Airway
ay Bill or Postal or courier receipt.
Insurance : The
The dedesp
spat
atch
ched
ed go
good
ods s are
are requ
requiired
red to be ininsu
sureredd for transi
transit.
t. Ins
Insur
uranc
ancee polic
policyy or
insurance certificate should be signed by the company or underwriter or their agent. Amount, kinds of risk
etc. should be same as mentioned in the letter of credit.
Other documents: The letter of credit may also specify other documents to be presented along with the
above
abov e doc
docume
uments
nts whic
which
h may includ
include
e cer
certifi
tificate
cate of or
origi
igin,
n, certi
certific
ficate
ate ffrom
rom heal
health
th autho
authorit
rities
ies etc.
etc.
UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS (UCPDC-600)
Uniform Customs
Customs and Practi
Practices
ces for Documentary
Documentary Credits - 600 (referred to as UCP-600), prepared by
ICC, Paris (by revising the UCPDC-500), has been implemented wef July 01, 2007. It is 6th revision
of the Rules since first promulgation in 1933. The new document has 39 Articles (against 49 of
UCPDC-500) with supplement for Electronic • Presentation covering 12 eArticles. UCPDC-600, shall
be applicable
applicable to LCs that expres
expressly
sly indicat
indicate
e that these are subjectsubject to UCPDC-600.
UCPDC-600.
ARTICLES OF UCPDC-600
Article-I : UCPDC-600 apply to any LC when its text expressly indicates that it is subject to these
rules. The rules are bindi
bindingng on all partie
parties
s thereto unless expres
expressly
sly modified or excluded by the credit.
Article-3 Interpretations:
A credit is irrevocable even if there is no indication to that effect.
On or about — Such expression will be interpreted as a stipulation that an event is to occur during a
period of 5 calendar days before until 5 calendar days after the specified date, both start and end
dates included.
The words `to', 'until', 'from' and 'between' when used to determine a period of shipment include the
date mentioned and the words 'before' and 'after' exclude the date mentioned.
The words 'from' and 'after' when used to determine a maturity date exclude the date mentioned.
The terms 'first half' and 'second half' of a month shall be construed respectively as the 1st to the
15th and the 16th to the last day of the month, all dates inclusive.
The terms 'beginning', 'middle' and 'end' of a month shall be construed respectively as the 1st to

10th, the 11th to the 20th and the 21st to the last day of the month, all dates inclusive.
Branches in different countries are considered to be separate banks.
The date of issuance of the transport documents will be deemed to date of despatch, taking in
charge or shipped on board and the date of shipment. If the transport document indicates, by stamp
or notation, a date of despatch taking in charge or shipped on board, this date will be deemed to the
date of shipment.
Trans-shipment means unloading from one means of conveyance and reloading to another means
of conveyance
conveyance (whethe
(whetherr or not in different modes of transport)
transport) during the carriage, 'fro
'from
m the place of
dispatch taking in charge or shipment to the place of final destination stated in the credit.
A clean transport documents is one bearing no clauseclause of notation expressly declaring
declaring a defective
defective
condition of the goods or their packaging.
If there is no indication in the credit about insurance coverage, amount of insurance coverage
must be at leas
leastt 110% of CIF or CIP value of the goods.
Documents v. Goods: Banks deal with documents and not with goods, services or performance to
which documents relate (Article-5)
Advising of Credits and Amendments: A credit and any amendment may be advised to a
beneficiary through an advising bank. An advising bank advises the credit and any amendment
without any undertaking to negotiate. By advising the credit, the advising bank signifies that it has
satisfied itself as to the apparent authenticity of the credit and the advice accurately reflects the
terms and conditions of the credit or amendment received.
Amendment: A credit can neither be amended nor cancelled without the agreement of the issuing
bank, the confirming bank and the beneficiary. Partial acceptance is not allowed and will be deemed
to be notification of rejection of the amendment.
Standard for Examination of Documents (Art-14)
A nominated bank and issuing bank shall ea each
ch have a maximum of 5 banking days following the day
of presentation to determine if documents are in order.
A presentation must be made by or on behalf of the ben beneficiary
eficiary not later than
tha n 21 calendar days after
the date of shipment as described in these rules, but in any event not later than the expiry date of the
credit.
(c) A document may be dated prior to the issuance date of the credit, but must not be dated later than
its date of presentatio
presentation.n.
Tolerance in Credit Amount, Quantity and Unit Prices (Article-30):
The words "about" or ''appne used in connection with the amount of LC or the quantity or the unit
price stated in the LC are to be construed as allowing a tolerance not to exceed 10% more or 10%
less than the amount, the quantity or the unit price to which they refer.
A maximum to tolerance
lerance of 5% more or 5% less th than
an the quantity of the
t he goods is allowed, where the
credit does not state quantity in terms of a stipulated no. of packing units or individual items and the
total amount of the drawings does not exceed the amount of LC.
Even when partial shipments
shipments are not allow
allowed,
ed, a toler
tolerance
ance not to exceed
exceed 5% less than the amount
amount of
the credit is allowed, provided
provided that the quantity of the goods, if stated in the credit, is shipped in full
and a unit price,
price, if stated in the credit,
credit, is not reduced or that sub-ar
sub-articl
ticle
e 30 (b) is not applicable.
applicable.
DEFINITIONS USED IN UCPDC-600
Advising Bank : The bank that advises the credit at the request of issuing bank.
Applicant : The party on whose request the credit is issued.
Banking day : A day when bank is regularly open at the place at which an act, subject to UCPDC
rules, is to be performed.
Beneficiary : The party in whose favour a credit is issued.
Complying presentation : A presentation that is in accordance with the terms and conditions of the
credit, the applicable provisions of UCPDC rules and international standard banking practices.
Confirmation : A definite undertaking of the confirming bank, in addition to that of the issuing bank,
to honour or negotiate a complying presentation.
Confirming bank : The bank that adds its confirmation to a credit upon the issuing bank's
authorization or request.
Credit (or LC) : Any arrange
arrangement,
ment, however named or descri
described,
bed, that is irrevocable
irrevocable and thereby
constitutes
consti tutes a defini
definite
te undertaking of the issuing bank to honour a complying
complying presentation.
presentation.
Honourr : (a) to pay at sight if the credit is available
Honou
by sight payment. (b) to incur a deferred payment undertaking and pay at maturity if the credit is
available by deferred payment (c) to accept a bill of exchange (draft) drawn by the beneficiary and
pay at maturity if the credit is available by acceptance.

Issuing bank : Bank issuing LC at request of an applicant or on its own behalf.

Issuing
Negotiation Purchase by the nominated bank of drafts (drawn on a bank other than the nominated
bank) and/or documents under a comply
complying
ing presentation,
presentation, by advancing
advancing or agreeing to advance
advance ffunds
unds
to the beneficiary on or before banking day on which reimbursement is due to the nominated bank.
Nominated bank : The bank with which the credit is available or any bank in case of a credit
available
available with any bank.
Presentation : Either the delivery of documents under a credit to the issuing bank or nominated bank
or the docum
documents
ents so deliv
delivered.
ered.
Presenter : A beneficiary, bank or other party that makes a presentation.
Discounting of Bills by Banks under LC As per extant guidelines of RBI (Master Cir dated July
02, 2010) the banks are require
required
d to purc
purchase
hase / disc
discount
ount / negoti
negotiate
ate bills under Letter of Credit (LC)
only in respect of genuine commercial and trade transactions of their borrower constituents who
have been sanctioned regular credit facilities by the banks. RBI has reviewed the above instructions
(Aug 03, 2007) and decided as under:
In cases where negotiation of bills drawn under LC is restricted to a particular bank, and the
beneficiary of the LC is not a constituent of that bank, the bank concerned may negotiate such an LC,
subject to the condition that the proceeds will be remitted to the regular banker of the beneficiary.
However, the prohibition regarding negotiation of unrestricted LCs of non-constituents will continue to
be in force. The banks may negotiate bills drawn under LCs, on 'with recourse' or 'without recourse'
basis, as per their discretion and based on their perception about the credit worthiness of the LC
issuing bank. However, the restriction on purchase/discount of other bills (the bills drawn otherwise
than under LC) on 'without recourse' basis will continue to be in force.
Case Laws on Responsibility of Paying Bank
The negotiable
negotiable instr
instrument
umentss Act 1881 lays down the rules relating relating to payment of custo customers
mers cheque and
various subsections deal with the protection available to the paying Banker.
When customer deposits money with the bank, the customer is creditor and bank is a debtor. Therefore
whenever the customer demands back the money, the bank has the duty to pay back the money, in default
of such payment, must compensate the drawer for any loss or damage. The bank has to honour the cheque
provided, the cheque is properly drawn, duly signed by the maker and there should be "properly available
fund" in his account. The funds may not be available to pay the cheque if:-
a) the banker has exercised his right of set off for amounts due from the customer or
b) th
ther
ere
e is an at
atta
tach
chme
ment
nt or
orde
derr fr
from
om cour
court,
t, In
Inco
come
me Tax
Tax of
offi
fice
cerr or an
any
y ot
othe
herr la
lawf
wful
ul auth
author
orit
ity
y rest
restra
rain
inin
ing
g the
the ba
bank
nk from
from pa
payi
ying
ng
the
the money.
money.
Protection to paying banker: to
banker: to claim protection under N.I.
under N.I. Act,
Act, the criteria are, it should be a
"payment in due course". In case bank refuses payment wrongfully, then the bank is liable only to the
drawer and not to endorsee or holder.
Payment in due course: Sec. N.I. Act. says payment in due cour
course: Sec. 10 of N.I. Act. course
se means paymepayment nt accordin
accordingg to
the apparent tenor of the instrument
instrument in good faith and without without negligence
negligence to any persoperson n in possessio
possessionn
thereof under circumstances which does not afford a reasonable ground for believing that he is not entitled
to receive
receive payment of the amou amount nt therei
therein n mentioned
mentioned.. Sec 85 conditions
conditions to be satisfied
satisfied for being a payment
payment
in due course.
a ) accordance with the apparent tenor of the instrument , b) in good faith
c) Withou
Withoutt negligen
negligence,ce, d) To the person in poss possess
ession
ion of the instrumen
instrumentt
e) The banker should not have any reasons to "disbelieve" the integrity/honesty of the possessor, i.e. no
reasons to think that he is not entitled to receive the payment.
Sec. 85 of the N.1 Act provides protection to the paying banker.
1) An order cheque if endorsed by or on behalf of the payee, the banker is discharged by payment in due
course
2) Once a bearer
bearer cheque, always a bearer bearer cheque.
cheque. The bank banker er is discharged
discharged if in a bearer
cheque,
cheq ue, payment is made to the bearer, not withstandin withstanding g any endorsement
endorsement.. Sec. 89 of N.I Act
states the effect of making payment on which alteration is not apparent, the banker is
discharged.
Signature
mandate to of
thethe drawer
bank to pay.isAs
forged:
such a When
bankerthe customer's
is not signature
entitled to oncustomer's
debit the the chequeaccount
is forged,
on there
such is no
forged cheque. A cheque in which drawer's signature is forged, that is not at all a cheque. It is nullify, avoid
instrument.

servant or agent, i.e.

i. e. payment must be made in due course. Sec. 89 of the N.I
N.I Act
Act gives protection to
the paying banker of a cheque which has been materially altered but does not appear to have been so
Sec 85 of N.1 Act says that a banker can seek protection where payment has been made to the holder, his
altered, if payment was made according to the apparent tenor at the time of payment and otherwise in due
course. In one case, the court was held the view that bank cannot be held guilty if on visual examination no
sign of forgery or tampering with the writings on the cheque could be detected. But this cannot be taken as
a general rule. Each situation or case has to be scrutinized on individual merit, and the bank cannot be fully
absolved from the liability of negligence.
Payment by bank under mistake whether recoverable
The question whether a bank paying a forged cheque can recover the same from the payee. On different
occasions, several courts have expressed different opinion. There are instances where the signature as well
as other writings on the cheque was forged. The forgery was so perfect that it was not possible even for a
trained eye to detect it. One court held the view that, so long as the status quo is maintained and the payee
has not change
PROTEC
PRO TECTION
TION TO BANKE
BANKERS RS
85-1 Paying banker protected
protected by payment in due course of order
order cheque that bears regular
endorsement.
Genuin
Genu inen
enes
ess s of endo
endorsrsem
emen
entt is not to be en
ensu
sured
red by.t
by.the
he pay
payin
ing
g ba
bank
nk..
85-2 Pr
Prot
otec
ecti
tion
on to payi
paying
ng bank
banker er in ca
case
se of a beare cheque.. Endo
bearerr cheque Endors rsem
emenentt on a bear
bearer
er ch
cheq
eque
ue to be igno
gnored.
85-A Pr
Prot
otec
ectition
on to pa
payi
ying
ng ba
bank nker
er in ca
case
se of Ba
Banknk drafts
drafts..
89 Prot
Protec
ecti
tion
on to pay
payin
ingg ba
bank
nk for mat
materia
erially
lly alte
altered
red instrume
instrument. nt.
128 Pr
128 Prot
otec
ecti
tion
on for
for paym
paymen entt in due
due co
cour
urse
se of crossed
crossed cheques
cheques
131 Pro
131 Protec
tection
tion to colle
collectin
cting g bank for
for cros
crosse
sed d ch
chequ
eques
es subj
subjec
ectt to co
compl
mplia
ianc
ncee of condit
conditio
ions
ns
131-A Pr
Prote
otecti
ction
on to coll
collec
ectiting
ng ba
bank
nk for cros
crossed
sed banbank
k drafts
drafts..d his position to his detriment, he must repay the
money back to the payer.
CASE LAWS ON RESPONSIBILITY OF COLLECTING BANK

Collecting banker: The bank (agent) who collects the cheque and credits to his customer's account
(Principal). Sec.131 of the N.l Act provides certain protection to the collecting banker. A banker, who has, in
good faith and without negligence, received payment for a customer of a cheque crossed generally or
specially to himself shall not, in case the title to the cheque proves defective, incur any liability to the true
owner of the cheque by reason only of having received such payment.The protection under Sec. 131 is
conditional, he (Bank) has to satisfy certain conditions: - The collecting banker should have acted in good
faith. He should have acted without negligence,He should receive payment for a customer, The cheque
should be crossed generally or specially to himself.The bank should not have been negligent; the bank will
have to prove that it has taken all precautions that would be required of a prudent banker in collection of a
cheque.
Opening of account: The bank should open an account of a new customer only after the new account
holder has been properly introduced. Besides introduction, photograph, sufficient documentary proof for
constitution and address to be obtained under the applicable KYC norms.
Proper introduction: The practice of banks in India is to obtain introduction from the existing account
holders. The bank has to obtain references from the known persons of the locality. As per KYC norms, the
bank has to obtain copy of passport, PAN card, voters ID card, Ration card, Electricity bill, telephone bill,
Copy of Bank pass book with photo of any bank where the customer maintains account etc.etc:
General crossing and special crossing: Before accepting a cheque for collection, the bank should ensure
that the cheque is either crossed generally or specially crossed to the collecting bank itself. If the cheque is
crossed to another bank, then such cheque should not be accepted for collection. Similarly a cheque meant
for collection and credit to a particular account should not be collected and credited to another account.
Cheques favouring a firm or a limited company should not be credited to the personal account of the MD's,
Directors or Partners. It will amount to negligence on the part of the collecting banker and will lose
protection under 131.
Status of the customer's account: The collecting banker is required to take into account the status of the
customer and the various transactions taking place in his account to observe the standard of living
conditions of the customer. If a man of small means and small income tenders cheques for huge amounts,
Natur
atural
allly th
the
e bank
banke
er sho
houl
uld
d ma
make
ke disc
discre
ree
et en
enqu
quir
irie
ies
s as to the so
sour
urce
ce of inc
nco
ome,
me, and
and th
the
e bank
banke er sh
shou
oulld
de
desi
sist
st
Chequ
Che fr
fro
quesompa
es hand
hayabl
ndli
paya ling
ng
ble su
such
e toch
thich
cheq
thirdeque
rd ues.
s. es:
parti
pa It ma
rties: may
yelead
The
Th leco
adllec
coll toting
ectine
negl
ngglig
igen
ence
nkce
bank
ba haor
has co
conv
s to nver
maersi
makesio
ke on.cess
nece
ne ssar
ary
y enqu
enquir
irie
ies
s befo
before
re any
any
th
thiird part
partyy ch
cheq
eque
ues
s are
are co
coll
llec
ecte
tedd on beha
behallf of its
its cu
cust
sto
ome
mer.
r. As per
per th
the
e pra
ract
ctic
ice
e prev
preval
alen
entt in Ind
ndiia, as far
far as
possi
possible
ble,, bank
bankss sho
should
uld no
nott co
coll
llec
ectt third
third part
partyy cheq
chequeues.
s.

Non — negoti
negotiabl
able
e crossing: In ce
crossing: cert
rtai
ain
n cheq
cheque
ues
s we can
can se
see
e the
the wo
word
rdin
ing
g "n
"non
on - nego
negoti
tiab
able
le",
", espe
especi
cial
ally
ly some
some
ch
cheq
eque
ues s dr
draw
awn n by LIC.
LIC. Non
Non — nenego
goti
tiab
able
le cro
cross
ssiing is only
nly an in
indi
dica
cati
tion
on to th
thee co
coll
llec
ecti
ting
ng bank
banke er and
and it has
no
noththin
ing
g to do with
with the
the payi
paying
ng bank
banker
er.. No
Nonn ne
nego
gotitiab
able
le cros
crossi
sing
ng does
does not
not rest
restri
rict
ct th
thee tr
tran
ansf
sfer
erab
abil ilit
ity
y of
ch
cheq
eque
ues,s, but
but ththe
e onl
nly
y thing
hing is that
that the tran
transf
sfe
ere
ree e will
will no
nott get
get a bett
betteer ti
titl
tle
e th
than
an wh
whatat th
the
e tra
rans
nsfe fero
rorr had.
had. In
other
her words,ds, if it is a stolen or fo
forg
rge
ed cheq
heque
ue,, the trans
ansfefere
reee or the "ho
hold
ldeer in du
duee course
rse" will
ill al
also
so get
get a
defectiv
defe ctive
e title.
title.
( ( For addit
additional
ional stu
study
dy pleas
pleasee go through
through Module – B of Jai Jaiib
ib Paper )

Module: C
Banking Related Laws
Syllabus
1) Recovery of Debts due to Banks and Financial Institutions Act, 1993(DRT Act) -
Objective of the Act, Constitution of Tribunal, Procedure to be followed, Enforcement
process
2) Securitisation and Reconstruction of Financial Assets and Enforcement of
Securities Interest Act (SARFAESI) - Constitutional Validity; Definitions;
Regulation & Reconstruction; Enforcement of Security Interest; Central Registry;
Offences & Penalties; Miscellaneous Provisions
3) Banking Ombudsmen Scheme - Purpose; Extent; Definitions; Establishment; Powers;
Procedure for Redressal Grievance
4) Bankers Books Evidence Act, 1891 - Applicability; Definition; Important Provisions
5) The Legal Services Authorities Act, 1987 - Lok Adalats- Organisation; Jurisdiction;
Disposal of Cases; Awards
6) The Consumer Protection Act, 1986 and CERSAI - Preamble, Extent & Definitions;
Consumer Protection Councils; Consumer Disputes Redressal Agencies; Objectives
and important provisions of Central Registry of Securitisation Asset Reconstruction
and Security Interest of India
7) The Law of Limitation - Definition; Computation of Limitation; Important Provisions
in schedule to the Limitation Act
8) Tax Laws - Income Tax; Fringe Benefit Tax; Banking Cash Transaction Tax; Service
Tax
9) Negotiable Instruments Act, 1881 - Applicability; Definition; Important Provisions
10)) Paymen
10 Paymentt & Settlements
Settlements Systems
Systems Act, 2007 - Applicability; Definition; Important
2007
Provisions

BANKING RELATED LAWS

BANKERS' BOOK EVIDENCE ACT 1891
The Bankers' Books Evidence Act, 1891 extends to the whole of India except the State of Jammu and
Kashmir.
Bankers' books include : Bankers'
Bankers' books include ledgers, day-boo
day-books,
ks, cash-books,
cash-books, account-books
and all other books used in the ordinary business of a bank whether kept in the written form or as
printouts of data stored in a floppy, disc, tape or any other form of electromagnetic data storage device.
Certified copy: Certified copy means when the books of a bank,-
(a) If maintain
maintained form, a copy of any
ed in written form, any entry
in such
such books
entry, thattogether with
such entry is acontained
certificate
in written at the
one of the foot ofbooks
ordinary such of
copy
the that
bankit and
is a was
truemade
copy in
of
the usual and ordinary course of business and that such books is still in the custody of the bank,
and where the copy was obtained by mechanical or other process which in itself ensured the
accuracy of the copy, a further certificate to that effect, but where the book from which such copy
was prepared has been destroyed in the usual course of the bank's business after the date on
which the copy has been so prepared, a further certificate to that effect, each such certificate
being dated and subscribed by the principal accountant or manager of the bank with his name and
official
official title; and
(b) If consists of printouts of data stored in a floppy, disc, tape or any other electro-magnetic data
storage device, a printout of such entry or a copy of such printout together with such statements
certified
certified in accord
accordance
ance with the provisions
provisions of section
section 2A.
Conditions in the printout (2A)
A printout of entry or a copy of o f printout shall b
bee accompanied by thet he following, namely :-
(a) a certificate to the effect that it is a printout of such entry or a copy of such printout by the principal
accountant or branch manager ; and
(b) a certificate by a person in-charge of computer system containing a brief descriptions of the
computer system and the particulars of-
(A) the safeguards
safeguards adop
adoptedted by sys
systemtem to ensure
ensure that data is entered
entered or any other
other oper
operati
ation
on
performed
performe d only by authorised
authorised persons;
(B) the safeguards
safeguards adopted to prevent
prevent and detect unau unauthorise
thorisedd change of data;
(C) the safeguards
safeguards ava
availa
ilable
ble to retr
retrievieve
e data that is lostlost due to systemi
systemicc failure
failure or any other
reasons;
(D) the manner in whic
which h data is transferred
transferred from the system
system to removable
removable media like floppies,
floppies, disc
discs,
s,
tapes or other electro-magnetic data storage devices;the mode of verification in order to ensure
that data has been accurately
accurately transferred to such removablremovable e media;
(E) the mode of identifi
identification
cation of
of such data sto storage
rage dev
devices;
ices;
(F) the arrangements
arrangements for the sto storage
rage and custod
custody y of such stora
storage
ge devices;
devices;
(G) the safeguar
safeguards
ds to prevent and dete detectct any tampering
tampering with the sys system;
tem; and
(H) any other factor whi
which
ch will vouch for the integri
integrity
ty and accuracy
accuracy of the system.
(c) a further certificate from the person in-charge of the computer system to the effect that to the best
of his knowledge and behalf, such computer system operated properly at the material time, he was
provided with all the relevant data and the printout in question represents correctly, or is appropriately
derived
derive d from, the relevant data.]
Powerr to ext
Powe extend
end provisio
provisionsns of Ac Actt (Sec 3) The State Government may, from time to time, by
notification in the Official Gazette, extend the provisions of this Act to the books of any partnership
or individual carrying on the business of bankers within the territories under its administration, and
keeping a set of not less than three ordinary account books, namely, a cash book, a day-book or
jogrhal,
jog rhal, and a ledger,
ledg er, and may in like man manner ner rescind
resc ind any such notificat
not ification.
ion.
Mode
Mod e of pro
proof
of of en
entr
tries
ies in banke
bankers'rs' books (Sec 4) A certified copy of any entry in a banker's
books shall in all legal proceedi
proceedingsngs be receiv
received ed as prim
primaa facie evidence
evidence of the existence
existence of such entry,
and shall be admitted as evideevidence
nce of the matters, transaction
transactions s and accounts therein recorded
recorded in every
case where, and to the same extent as, the original entry itself is now by law admissible, but not
further or otherwise.
Case
in anyin which
legal officer oftobank
proceeding not
which compellable
the bank is not to produce
a party books (Secto
be compellable : No officer
5)produce anyof a bank book
banker's shall
the contents
contents of whic
which
h can be proved under this Act, or to appear as a witness to prove the
matters, transactions and accounts therein recorded, unless by order of the Court or a Judge made for

special cause.
Inspection of books by order of Court or Judge
(1) On the application of any party to a legal proceeding the Court or a Judge may order that such
party be at liberty to inspect and take copies of any entries in a banker's book for any of the
purposes
purpo ses of suc
suchh proceedin
proceeding,
g, or may order the bank to prepare and produce,
produce, within
within a time to be
specified in the order, certified copies of all such entries accompanied by a further certificate
that no other entries are to be found in the books of the bank relevant to the matters in issue in
such
such proc
procee
eedi
ding
ng,, an
and
d such
such furt
furthe
herr cert
certif
ific
icat
ate
e shal
shalll be da
date
ted
d an
andd su
subs
bscr
crib
ibed
ed in mann
manner
er
hereinbefore directed in reference to certified copies.
An order under this or the preceding section may be made either with or without summoning the
bank, and shall be served on the bank three clear days (exclusive of bank holidays) before the same
is to be obeyed, unless the Court or Judge shall otherwise direct.
(3) The bank may at any time before the time limited for obedience to any such order as aforesaid either
offer to produce their books at the trial or give notice of their intention to show cause against such
order, and thereupon the same shall not be enforced without further order.
Costs (Sec 7)
(1) The costs of any application to the Court or a Judge under or for the purposes of this Act and the
costs of anything done or to be done under and order of the Court or a Judge made under or for the
purposes of this Act shall be in the discretion of the Court or Judge, who may further order such
co
cost
sts
s or any
any part
part ther
thereo
eoff to be paid
paid to anyany part
party
y by ththe
e bank
bank if th
they
ey hav
have
e been
been in
incu
curr
rred
ed in
consequence of any fault or improper delay on the part of the bank.
(2) Any order made under this section for the payment of costs to or by a bank may be enforced as if
the bank were a party to the proceeding.
(3) Any order under this section awarding costs may, on application to any Court of Civil Judicature
designated in the order, be executed by such Court as if the order were a decree for money
passed by itself
Provided that nothing in this sub-section shall be construed to derogate from any power which the
Court or Judge making the order may possess for the enforcement of its or his directions with
respect to the payment of costs.
Order of court to be construed to be order made by specified officer (Sec 8)
In the application of sections 5, 6 and 7 to any investigation or inquiry, the order of a court or a Judge
referred to in the said sections shall be construed as referring to an order made by an officer of a
rank not lower than the rank of a Superintendent of Police as may be specified in this behalf by the
appropriate Government.
BANKING OMBUDSMAN SCHEME 2006

RBI notified the Banking Ombudsman Scheme 2006 (on Dec 26, 2005), in partial modification of its
Banking
Banking Ombudsma
Ombudsman n Scheme 2002 to enlar
enlarge
ge the extent and scope of the authori
authority
ty and functions
functions of
the Ombudsman,
Ombudsman, u/s 35A of Bank
Banking
ing Regulati
Regulation
on Act, 1949. The scheme
scheme that comes into force wef Jan
01, 2006 covers all commercial banks, regional rural banks and scheduled primary co-operative banks.
Objective: To facilitate
facilitate the resolut
resolution
ion of complaints
complaints relating to Banking
Banking services
services through conciliati
conciliation
on and
mediation between the bank and the aggrieved parties OR by passing an Award.
Who can be Ombudsman : CGM/GM —RBI (not exceeding 3 years at a time). Cost borne by RBI.
Who can file a Complaint : A person himself /his authorised representative (other than an advocate)
can file the complaint on paper OR through electronic media (entail) OR forwarded by RBI or Central
Govt. (For Credit card jurisdiction with reference to Ombudsman having jurisdiction over the billing
address of the card holder).
Conditions: Complaints can be made when:
a: the complaint was made to the bank and bank had rejected it OR no reply was received within a
period of one month OR the complainant is not satisfied with the reply given by the bank;
b: period of more than one year has not lapsed after receipt
receipt of bank reply.
c: the complaint is not for issues already settled/dealt with Ombudsman OR for which proceedings
before court, tribunal or arbitrator or any other forum is pending or a decree or Award or order has
been
d: thepassed
passed;
;
complaint is within limitation
limitation period under Indian Limitation
Limitation Act 1963.
Rejection of Complaint by Ombudsman Ombudsman can reject a complaint where it is frivolous,
vexatious, beyond jurisdiction of Ombudsman etc. Customer can appeal against grounds of rejection

to Appellate Authority within 30 days of receipt of communication regarding rejection.

Process of redressal of grievance
By sesendi
nding
ng cop
copy
y of the comp
complalain
intt to the ba
bank
nk and end
endeav
eavour
our sh alll-be made
shal made for a sesett
ttle
lemen
mentt by
agreementt through conciliatio
agreemen conciliation
n or mediation.
mediation. The proceedi
proceedings
ngs shall be summary in nature.
Award by the Ombudsman : Where a complaint is not settled by agreement within a period of one
month from the date of receipt of the complaint, Ombudsman may pass an Award or reject the complaint,
on the basis of evidence, the principles of banking law and practice, directions and guidelines issued by
RBI.
Amount of award : Award shall specify the amount, to be paid by bank as compensation, not more
than actual loss suffered as direct consequence of act of omission or commission of the bank OR Rs.10
lac, whichever is lower. A copy of the Award shall be sent to the complainant and the bank.
Effect of award : Award shall be binding on a bank only if the complainant sends acceptance of in full
and final settlement, within 15 days from the date of receipt of the Award. Ombudsman may extend this
period up to 15 days.
Implementation: Customer is to send acceptance of the award within 30 days of date of receipt of
th
the
e awawar
ard.
d. Ba
Bank
nk is to impl
implem
emen
entt the
the aw
awar
ardd .w
.wit
ithi
hin
n on
one
e mont
monthh from
from thethe da
datete of rece
receipiptt of the
the
acceptance
accepta nce from the complainan
complainantt and intimate compliance to the Banking Ombudsman.
Ombudsman.
Rejection of complaint : Rejection can be at any stage if it appears to be frivolous, vexatious,
maiafide; OR without sufficient cause; OR not pursued by the complainant with diligence; OR there
is no loss or damage or inconvenience caused to the complainant; or is beyond the pecuniary
jurisdict
juris diction
ion of Ombud
Ombudsman.
sman. Apea
Apeall : The cust
customer
omer file an appeal
app eal Appellate
Appel late Authorit
Auth ority
y (Dy. Gove
Governor
rnor
RBI) within 30 days of the date of receipt of the Award (could be extended by 30 days by Appellate
Authorit
Auth ority).
y). For bank 30 days periperiod
od begins
begi ns from date of rece
receipt
ipt of customer
cust omer's's accepta
acce ptance.
nce... The
appeal by banks should be ffiled
iled with sanction of the CMD /E /ED
D / CEO. The App Appell
ellate
ate Author
Authority
ity m
mayay
dismiss/allow the appeal; OR set aside the Award; OR remand the matter to Ombudsman for fresh
disposal or modify the Award or pass any order as it may deem fit. Display of salient features of the
scheme : The banks shall prominently display in all offices/branches of the bank and the name/address
of Ombudsman. The banks shall appoint Nodal Officers at their RO/ZO and inform the the Ombudsman,
who shall represen
representt the bank/furnish
bank/furnish informinformation
ation to the Ombudsman.
Ground of complaint : A complaint may relate to following aspects including loans and advances
alleging deficiency in banking or other services:
a non-payment
non-payment or inordinate delay in the payment or collection collection of cheques, drafts, bil bills
ls etc.;
b non-acceptance
non-acceptance of small small denomi
denomination
nation note
notes s tendered for any pu purpose,
rpose, and fo'fo'rr charging
charging of
commission in respect thereof;
c non-acceptance, without sufficient cause, of coins tendered and for charging of commission in respect
thereof;
d non-pay
non-payment ment or dela
delayy in paypayment
ment of, inward
inward remit
remittances
tances ;
e f ai
a i lu
l u rre
e or de ell ay
a y t o i ss s s ue
u e o f d ra r a ft
f t s,
s, p a ay
y o rd
rd eerr s o r b a ann ke
k e rs
r s ' c heh e qu
q u es
e s ; f n onon -
adherence to presc crr i b e d w o r k i n g h o u r s ;
g failu
failurere to honour guarantee
guarantee or letter of credit credit commi
commitments
tments ;
h failure/dealy
failure/dealy to provide
provide a banking
banking facility (othe
(otherr than loans) promised
promised in writing by a bank or its direct direct
selling agents;
i delays, non-credit of proceeds
proceeds to parties'
parties' accounts, non-payment
non-payment of deposit
deposit or non-observance
non-observance of RBI
directives, applicable to rate of interest on deposits in any savings, current or other a/c
j delays in receipt of export proceeds,proceeds, handling of export bills, bills, collecti
collection
on of bills
bills etc., for exporters
provided
provi ded the said compla
complaintsints pertain to the bank's operations in India;
k complaints from NRIs having a/cc in India for their remittances from abroad, deposits and other bank
related matters;
I refusal to open deposidepositt a/c w without
ithout any
any valid
valid reason
reason for refusal;
refusal;
rn levying of charges without adequate prior notice to the customer;
n no
non-a
n-adhe dheren
rence
ce by the bank bank or it its
s subs
subsid idia
iari
ries
es to the in inst
stru
ruct
ctio
ions
ns of RBIRBI on ATM/ ATM/De Debi
bitt ca
card
rd
operations or credit card operations: non-disbursement or delay in disbursement of pension
(to the extent the grievance can be attributed to the action on the part of the bank
concerned, but not with regard to its employees);
p refu
refusa
sall to ac
acce
cept
pt or de
Bank/Government; dela
lay
y in acce
accept
ptin
ing
g pay
payment
ment towa
toward
rds
s ta
taxe
xes,
s, as requ
requir
ired
ed by Rese
Reserv
rve
e
q refusal to issue or delay in issuing, or failure to service or delay in servicing or redemption of
Government securitie
securities;
s;

r forced closure of deposit a/cwithout due notice/sufficient reason;

s refusal to close
close or delay in closi
closing
ng the accou
accounts;
nts;
t non-adherence to fair practices code as adopted by the bank;
Complaints pertaining to loans and advances
a non-observance of RBI Directives on interest rates;
b delays
delays in sanction, disbursement
disbursement or non-observ
non-observance
ance of time schedule for disposal of loan applications;
applications;
c non-acceptance of application without furnishing valid reasons
d non-obs
non-observanc
ervancee of any other direction
direction of RBI.
Non-implementation of award: Customer Service Committee of the Board -
Bank
Banks
s ha
have
ve be
been
en advi
advise
sed
d by RBI
RBI to en
ensu
sure
re that
that the
the Awar
Awards
ds of the
the Bank
Bankin
ing
g Ombu
Ombuds
dsme
men
n are
are
imple
implemen
mented
ted immed
immedia iatel
tely
y and wi
with
th activ
active
e in
invol
volvem
vemen
entt of Top Manag
Manageme
ement
nt.. With
With a vie
view to
enhancing the effectiveness of the Customer Service Committee, banks have been advised by RBI
to place all the awards before the Customer Service Committee to enable them to address issues of
systemic deficiencies existing in banks, if any, brought out by the awards. Further, banks are to
place
place all the awa
awards
rds rem
remain
ainin
ing
g uni
unimpl
mpleme
emente
ntedd for more
more than
than 3 month
months,s, before
before the Customer
Customer
Service Committee to enable the Customer Service Committee to report to the Board such delays in
implementation without valid reasons and for initiating necessary remedial action.
CONSUMER
CONSUMER PR
PROTEC
OTECTION
TION ACT
ACT ( COPRA )
The Ac
The Actt was
was init
initia
iall
lly
y enac
enacte
ted
d duri
during
ng 1986
1986 and
and im
implplem
emen
ente
ted
d wef
wef Ap
Apri
rill 15,
15, 1987
1987 to enabl
enablee th
the
e
consumers
consum ers to enforce
enforce rights as consumer through a simpl
simple
e legal procedure
procedure (not applicable
applicable in J&K). A
comprehensive amendment (The Consumer Protection (Amendment) Act 2002) has been passed on
Dec 17, 2002 (im(imple
plemen
mented
ted wef
wef Mar
March
ch '15
'15,, 2003
2003,, the World Consu
Consumer
mer Right
Rights
s Day):
Day): The majo
major
r
provisions of the amended Act are as under:
Who is a consumer ? A person who buys goods or hires services for consideration for his/her use (and
not for resale) is a consumer. Any user of such goods and services, with the permission of the buyer, is
also a consu
consumer.
mer.
rage : All good
Coverage
Cove goodss and service
services
s includ
including
ing bank
bankin
ing,
g, insuran
insurance,
ce, transpo
transport,
rt, process
processing
ing,, electr
electrici
icity
ty,,
physicians etc. in private, public and cooperative sector, are covered under the Act. All banking services
are covered due to their being essential serv
services)
ices)
Who can file a complaint - A consumer individually or jointly, any voluntary consumer organisation,
central or state Govt.
Limitation period :Two years from the date of cause of action.
Pecuniary
Pecunia ry (financial) jurisdiction of different
different authorities
authorities is as under:
Distt Forum (Distt.Judge)* Up to Rs. 20 lac (prey. up to Rs. 5 lac)
State Com
State Commis
missio
sion
n Up to Rs.
Rs. 100
100 la
lac
c (pre
(prey
y up to Rs.
Rs. 20 la
lac)
c)
(High Court Judge)*
National Commission Above Rs.100 lac (Prey above Rs.
(Supreme Court Judge)* 20 lac)
*Powers
*Powe rs of Pres
President
ident of the forum equal to
Time limits for disposal - Endeavour is made to decide the complaint within the following time
frame:
A: Admissibi
Admissibility
lity of the complaint from date of receipt of the complaint
complaint : within 21 days.
B: Decision
Decision on complaint
complaint:Withou
:Withoutt analysis
analysis or testing of commo
commoditidities
es : 3 months
C WithWith an
anal
alys
ysisis or testi
testing
ng of comm
commod odiiti
ties
es : 5 mo
mont
nths
hs
Requirement to file a complaint : A written complaint in duplicate, with name and address of the
complainant and opposite party, facts of the complaint, copies of supporting documents and relief
sought, is enough. No court fee is charged. Engaging- -a - lawyer in not compulsory. Consumer or
any one can represent his case. To protect his rights, a consumer should obtain proper receipt/cash
memo for purchase made and guarantee/warranty card duly stamped and signed by the seller, wherever
applicable.
Relief : Relief includes removal of defect from goods, removal of deficiencies in services, replacement
by new goo goods
ds fre
freee fro
from
m dedefec
fect,
t, refun
refundd of pric
price/c
e/cha
harge
rges,
s, award
award of co comp
mpens
ensati
ation
on for loloss
ss of in
injur
jury
y
suffere
suf fered,
d, dis
discon
continu
tinuanc
ance/no
e/non-r
n-repet
epetiti
ition
on of unfa
unfair
ir and restri
restricti
ctive
ve trade
trade practi
practices
ces,, prohibi
prohibitio
tionn of sale
sale of

goods of hazardous nature and providing for adequate cost to party.

Penalty for frivolous nature or for non-compliance of orders : Imprisonment for not less than one
month and up to three years or fine not less than Rs. 2000 and up to Rs. 10000 or both.
Appeals - No appeal
appeal by a pers
person
on (requir
(required
ed to pay any amount in terms
terms of order
order of Dis
Distt
tt forum)
shall be entertained by State Commission unless the appellant has deposited 50% of that
amou nt or Rs. 25000,
250 00, whichever
whichever is lless
ess.. In ca
case
se of appeal
appeal in Nation
National
al Commi
Commissi
ssion
on against
against an
an order
order of
State Commission the amount to be deposited should be 50% of that amount or Rs. 35000, whichever is
less. In case of appeal in Supreme
Supreme Court against an order of National Commissio
Commission n the amount to be
deposited should be 50% of that amount or Rs. 50000, whichever is less. The period for appeal is limited
to 30 days.

Certain
Objective of CPA enactment other important
: Better protection aspects
of the interests of the consumers.
consumers.
Who is a consumer : A person who buys goods or hires and services, for payment / consideration.
What are various councils under the Act : Central Consumer
Consumer Protection Council,
Council, known as Central
Council.. One at each State lev
Council level
el called
called Sta
State
te Coun
Council
cil and another
another at Distri
District
ct lev
level
el called
called Distri
District
ct
Council.
Who can be president of Distt. Forum and what is composition : Person qualified to be Distt.
Judge is the President. There are two members, one of them being a woman.
 Where the complaint can be made : Within local limits of the Distt. Forum where the opposite party
Where the
resides, carries on business or cause of action has arisen.
Whet
Whethe
herr tran
transf
sfer
er of a co
comp
mpla
lain
intt on
once
ce ad
admi
mitt
tted
ed is allo
allowed : It is permi
wed permitt
tted
ed by Natio
National
nal
Commission.
What is composition of State Commission : President, who is or has been Judge of High Court and
two members, one of whom to be a woman.. Age criteria for the President is 5 years or till age of 67
years, whichever is earlier.
In how much period, the appeal can be disposed off : Within 90 days of its admission.
What is composition of National Commission : President, who is or has been Judge of Supreme
Court and four members,
members, one of whom to be a woman.
woman.
 Who makes appointments at Distt forum, State Commission and National Commission : State
Govt., State Govt. and Central Govt. respectively.
 Can a complaint be entertained after the expiry of limitation period : At the discretion of Distt.
Forum, State Commission
Commission or National Commission,
Commission, if sufficient cause is shown
shown for delay
delay..
If a persons fails to comply with the order, what are powers of the consumer courts : Property of
the person not complying with the order, can be attached. On request of the person entitled to the
amount, the consumer court issues a certificate to the Distt. Collector. Distt. Collector recovers the
amount as arrears of land revenue.
DEBT RECOVERY TRIBUNALS ( DRT )

RECOVERY OF DEBTS DUE TO BANKS AND FINANCIAL INSTITUTIONS ACT, 1993
This Act extends to the whole of India except the State of Jammu and Kashmir and came into force on
the 24th day of June, 1993.
Where applicable : Where the amount of debt due to any bank or financial institution or to a consortium
of banks or financial institutions is Rs. 10 lakh or above or such other amount, being not less than Rs.1
lakh, as the Central Gover
Government
nment may, by notificati
notification,
on, specify.
specify.
Debt : debt means any liability (inclusive of interest) which is claimed as due from any person by a
bank or a financial institution or by a consortium of banks or financial institutions during the course
of any business activity undertaken by the bank or the financial institution or the consortium under
any
an y law
law for the
the time
time bei
beingng in forc
force,
e, in ca
cash
sh or othe
otherw
rwis
ise,
e, wheth
whetherer se
secu
cure
red
d or unse
unsecu
cure
red,
d, or
assigned,
assigned, or whether payable under a decree decree or order of any civilcivil court or any arbitration
arbitration award
award or
otherwise or under a mortgage. It should be legally recoverable on, the date of the application.
Presiding Officer of DRT: A person shall be qualified for appointment as the Presiding Officer of a
Tribunal (called President) if he is, or has been, or is qualified to be, a District Judge. He shall hold
office for a term of 5 years from the date on which he enters upon his office or until he attains the

age of 62 year years,

s, whi
whiche
cheve verr is earli
earlier
er.. Presid
Presiding
ing office
officerr of Appel
Appellat late
e Tribuna
Tribunall (DRAT ): An
(DRAT):
Appell
App ellat
ate
e Trib
Tribun
unal
al shall
sha ll consist
con sist of one per person
son on
only
ly (Ch
(Chair
airper
person
son)) to be appointed, by the Central
Government. He shall hold office for a term of 5 years from the date on which he enters upon his
office or until he attains the age of 65 years. Whichever is earlier.
A . person shall be qualified for appointment as the Chairperson of an Appellate Tribunal if he :
(a) is, or has been, or is qual
qualified
ified to be, a Judge of a High Court; or
(b ) has been a member of the Indian Legal Service and has held a post in Grade I of that
service for at least three years; or
(c ) has held office as the Presidi
(c) Presiding ng Officer of a Tribunal for at least three years.
Resignation : The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal
may resign
sooner, he his office.
shall Unless
continue to permitted
hold officebyuntil
the Central Government
the expiry to relinquish
of 3 months his office
from the date of receipt of
such notice or until a person duly appointed as his successor enters upon his office or until the
expiry of his term of office, whichever is the earliest.
Removal : The Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal shall
not be removed from his office except by an order made by the Central Government on the
ground of proved misbehaviour or incapacity after inquiry,
(a) in the case of the Presi
Presiding
ding Offic
Officer
er of a Tribunal made
made by a Judge of a High Court;
(b) in the case of the Chairp
Chairperson
erson of an Appellate
Appellate Tribunal,
Tribunal, made by a Judge of the Supreme
Supreme
Court, in which the Presiding Officer of a Tribunal or the Chairperson of an Appellate Tribunal
the Presiding Officer concerned has been informed of the charges against him an d given a
reasonable opportunity of being heard in respect of these charges.
JURISDICTION, POWERS AND AUTHORITY OF TRIBUNALS
Jurisdiction, powers and authority of Tribunals Section 17
(1) DRT shall exerci
exercise,se, on and from the appointed day, the jurisdi
jurisdiction,
ction, powers
powers and authority
authority to entertain
and decide applications from the banks and financial institutions for recovery of debts due to such
banks and financial institutions.
(2) DR
DRAT
AT sha
shallll exerc
exercis
ise,
e, on and frfrom
om the appoi
appointnted
ed day,
day, the ju
juri
risdi
sdict
ctio
ion,
n, powers
powers and au autho
thori
rity
ty to
entertain appeals against any order made, or deemed to have been made, by a Tribunal under this
Act.
Powerr of Cha
Powe Chairpeirperso
rson n of Ap
Appel
pellate Tribunall (Secti
late Tribuna (Sectionon 17A)
17A) The ChairChairper
perso
sonn of DRAT
DRAT shalshalll
exercise general power of superintendence and control over the Tribunals under his jurisdiction
inclu
inc ludi
ding
ng the
the pow
power er of ap appra
prais
isin
ing
g the
the wo
work
rk and rec record
ordin
ing
g the
the annual
annual confi
confiden
denti
tial
al repo
reports
rts of
Presiding
Presidi ng Office
Officers rs of DRTs.
Transfer of cases from one DRT to another : The Chairperson of an Appellate Tribunal having
jurisdi
jur isdictio
ctionn over the Trib Tribuna
unals
ls may, on the applica
app lication
tion of any of the par partie
ties
s or on his own motion
mot ion
after notice to the parties, and after hearing them, transfer any case from one Tribunal for disposal
to any other Tribunal.
Jurisdiction
court or otherof other courts
authority over or
shall have, eligible cases
be entitled (Sec 18)any
to :exercise, On jurisdiction,
and from thepowers
appointed day, no
or authority
(except the Supreme Court, and a High Court exercising jurisdiction under Articles 226 and 227 of
the Constitution) in relation to the matters specified in section 17.
PROCEDURE OF TRIBUNALS
Where the application to be made : (19-1) Where a bank or a financial institution has to recover
any debt from any person, it may make an application to the Tribunal within the local limits of
whose jurisdiction-
(a) the defen
defendant
dant,, or each of the defendan
defendants ts where there
there are more
more than one, at the time of making
making the
application,
application, actually and voluntarily resides
resides,, or carries on business,
business, or personally
personally works for gain; or
(b) any of the defend
defendants,
ants, wher
where e there are more than one, at the time of making the applic applicatio
ation,n,
actually and voluntarily resides, or carries on business, or personally works for gain; or
(c) the cause of acti
action,
on, wholly o
orr in part, arises.
arises.
Joining
Joini ng the proc
proceedi
eedings
ngs by other bank banks/Fl s: (19-2) Where a bank or a financial institution,
s/Fls:
which has to recover its debt from any person, has filed an application to the Tribunal under sub-
section (1) and against the same person another bank or financial institution also has a claim to
recover its debt, then, the later bank or financial institution may join the applicant bank or financial
in
inst
stit
itut
utio
ion
n at an
anyy stag
stagee of the
the proc
procee
eedi
ding
ngs,
s, be
befor
fore
e the
the final
final orde
orderr is pass
passed
ed,, by maki
makingng an

application to that Tribunal.

Issue of summons: On receipt of the application as above, DRT shall issue summons requiring
the defendant to show cause within 30 days of the service of summons as to why the relief prayed
for should not be granted.
Written statement by the defendant: Defendant shall, at or before the first hearing or within such time
as the Tribunal may permit, present a written statement of his defence.
Claim
Cla im by defen
defendant
dant : Where
Where the defendant
defendant claclaims
ims to set- set-off
off agains
againstt the appli
applicant
cant's
's demand
demand any
ascertained sum of money legally recoverable by him from such applicant, the defendant may, at the
first hearing of the application, but not afterwards unless permitted by the Tribunal, present a written
statement containing the particulars of the debt sought to be set-off.
Effect of claim by defendant: The written statement shall have the same effect as a plaint in a cross-suit
so as to enable the Tribunal to pass a final order in respect both of the original claim and of the set-off.
Counter claim claim by defend
defendantant : A defendant in an applapplicati
icationon may, in addition
addition to his right of pleading a
setoff as above, set up, by way of counter-clcounter-claim
aim agains
againstt the claimclaim of the applican
applicant,t, any right or claim in
respect of a cause of action accruing to the defendant against the applicant either before or after the
filing of the application but before the defendant has delivered his defence or before the time limited
for delivering his defence has expired, whether such counter-claim is in the nature of a claim for
damages or not.
Effect of counter claim by defendant: A counterclaim shall have the same effect as a cross-suit so
as to enable the Tribunal to pass a final order on the same application, both on the original claim and
on the counter
counter-clai
-claim.
m.
Answer
Ans wer to count
counter-c
er-claim
laim by applicant
applicant bank /Fls: The applicant shall be at liberty to file a written
bank/Fls:
statement in answer to the counter-claim of the defendant within such period as may be fixed by the
Tribunal.
Exclusion of counter claim from the main suit: Where the defendant sets up a counter-claim and the
applicant contends that the claim thereby raised ought not to be disposed of by way of counter-claim but
in an independent action, the applicant may, at any time before issues are settled in relation to the
counter-claim, apply to the Tribunal for an order that such counter-claim may be excluded, the Tribunal
may, on the hearing of such application make such order, as it thinks fit.
interim Order by -DRT: The Tribunal may make an interim order (whether by way of injunction or stay
or attachment) against the defendant to debar him from transferring, alienating or otherwise dealing with,
or disposing of, any property and assets belonging to him without the prior permission of the Tribunal.
Furnishin
Furn ishing g of othe
otherr sec
securit
urities
ies by the defendan
defendant: t: Where, at any stage of the proceedings, the
Tribunal is satisfied, by affidavit or otherwise, that the defendant, with intent to obstruct or delay or
frustrate the execution of any order for the recovery of debt that may be passed against him,
(i) is about to dispose of the whole or any part of his property; or
(ii) is about to remove the whole or any part of his property from the local lim limits
its of the jurisdiction
jurisdiction of the
Tribunal or
(iii) is likely to cause any damage or mischief to the property or affect its value by misuse or creating
third party interest, the Tribunal may direct the defendant, within a time to be fixed by it, either to
furnish security, in such sum as may be specified in the order, to produce and place at the
disposal of the Tribunal, when required, the said property or the value of the same, or such
portion thereof as may be sufficient to satisfy the certificate for the recovery of debt, or to appear
and show cause why he should not furnish security.
At
Attac
tachmehment nt by DRT on failur failuree of def
defend ant: Where the defendant fails to show cause why he
endant:
shoul
should d not
not fur
furni
nish
sh se
secu
curi
rity
ty,, or fai
fails
ls to furni
furnish
sh the se secucuririty
ty requi
require
red,
d, withi
withinn the
the time
time fixe
fixed
d by ththe
e
Tribunal, the Tribunal may order the attachment of the whole or such portion of the properties claimed
by the applicant as the properties secured in his favour or otherwise owned by the defendant as
appears sufficient
sufficient to satisfy
satisfy any certificate
certificate for the recovery
recovery of debt.
Further the applicant shall, unless the Tribunal otherwise directs, specify the property required to be
attached and the estimated value thereof. The Tribunal may also in the order direct the conditional
attac
att achmhmenentt of the whol
whole e or an any
y porti
portion
on of the proper
property ty.. If an order
order of attac
attachm
hment
ent is made
made witho
withoutut
complying
comply ing with the provisions
provisions of above requirem
requirement,
ent, such attachment
attachment shall be void.
Disobedience of order of DRT: In the case of disobedience of an order made by the Tribunal or
breach of any of the terms on which the order was made, the Tribunal may order the properties of the
person guilty of such disobedience or breach, to be attached and may also order such person to be
detained in the civil prison for a term not exceeding three months, unless in the meantime the Tribunal

directs his release.

Appointment of receiver etc: Where it appears to the Tribunal to be just and convenient, the Tribunal
may, by order -
(a) appoint a receiver
receiver of any property, whether befo
before
re or after grant of certificate
certificate for recovery ooff debt;
(b) remove any person frfrom
om the possession
possession or custody
custody o
off the property;
property;
(c) commit
commit the same to the posses
possession,
sion, cus
custody
tody or management
management of the receiver;
receiver;
(d) confe
conferr upon the recei
receiver
ver all such power
powers,s, as to bringi
bringing
ng and defendin
defending g suits
suits in the courts
courts or
filing
filing and defen
defending
ding applica
applicatio
tions
ns before
before the Trib
Tribunal
unal and for the realiza
realizatio
tion,
n, manageme
management, nt,
protection, preservation and improvement of the property, the collection of the rents and
Profits thereof,
(e) the application
application and disposal of such
such rents and profit
profits,
s, and the execution of documents
documents as the
ownerr hims
owne himselelff ha
has,
s, or susuch
ch of thos
thosee powe
powersrs as the
the Tr
Triibuna
bunall thi
think
nks
s fit;
fit; an
and
d appoi
point a
Commis
Com missio
sioner
ner for prep
prepara
aration
tion of an inv
invento
entory
ry of the proper
propertie
ties
s of the defenda
defendant nt or for the sale
sale
thereof.
(f) Where a certificate of recovery is issued against a company registered under the Companies Act,
1956, .the Tribunal may order the safe proceeds of such company to be distributed among its secured
creditors in accordance with the provisions of section 529A of the Companies Act, 1956 and to pay the
surplus, if any, to the company.
(g) The Tribunal may, after giving the applicant and the defendant an opportunity of being heard,
pass such interim or final order, including the order for payment of interest from the date on or
befo
before
re whic
which h papaym
ymenentt of the
the am
amou
ount
nt is foun
foundd du
due
e up to ththe
e da
datete of real
realis
isat
atio
ion
n or ac
actu
tual
al
payment, on the application as it thinks fit to meet the ends of justice.
Copy to applicant and defendant: The Tribunal shall send a copy of every order passed by it to the
applicant and the defendant. Certificate of recovery: The Presiding Officer shall issue a certificate under
his signature
of debt specifion
ed the
specified basis
in the officate.
certi the order of the Tribunal to the Recovery Officer for recovery of the amount
certificate.
Copy
Co py of or orde
derr to ot
othe
herr DR
DRTs Ts: Where the Tribunal, which has issued a certificate of recovery, is
satisfied
satisfied that the prope
property
rty is situated within the focal lim
limits
its of the jurisdiction
jurisdiction of two or more Tribunals,
Tribunals, it
may send the copies of the certificate of recovery for execution to such other Tribunals where the
property
proper ty is situa
situated.
ted. In case where the Tribunal
Tribunal to whic
whichh the certificate
certificate of recovery
recovery is sent for exec
execution
ution
finds that it has no jurisdiction to comply with the certificate of recovery, it shall return the same to the
Tribunal which has issued it.
Time limit for decision : The application made to the Tribunal shall be dealt with by it as expeditiously
as possible and endeavour shall be made by it to dispose of the application finally within 180 days from
the date of receipt of the application.
Appeal to the Appellate Tribunal (Section 20)
Any pers
personon aggr
aggrieve
ievedd by an order
ord er made,
made , or deemed
deem ed to have been made, made , by a Tribunal
Trib unal under
unde r this
Act, may pref
prefer
er an appe
appealal to an Appellate
Appe llate Tribunal
Tribu nal having
havi ng jurisdicti
juris diction
on in the matter.
matt er. No appeal
app eal shall
shal l
lie to the Appellate Tribunal from an order made by a Tribunal with the consent of the parties.
Period of appeal : Every appeal shall be filed within a period of 45 days from the date on which a
copy of the order made, or deemed to have been made, by the Tribunal is received by him and it shall
be in such form and be accompanied by such fee as may be prescribed. DRAT may entertain an
appeal after the expiry of the said period of forty five days if it is satisfied that there was sufficient
cause for not filing it, within that period.
Powers of DRAT: On receipt of an appeal, the Appellate Tribunal may, after giving the parties
to the appeal, an opportunity of being heard, pass such orders thereon as it thinks fit, confirming,
modifying or setting aside the order appealed against. DRAT shall send a copy of every order made
by it to the parties to the appeal and to the concerned Tribunal.
Time limit for decision : The appeal filed before the Appellate Tribunal shall be dealt with by it as
expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within 6
months from the date of receipt of the appeal.
Deposit of amount of debt due, on filing appeal (Section 21) : Where an appeal is preferred by any
person fromofwhom
consortium banksthe
or amount
financialofinstitutions,
financial debt is appeal
such due to ashall
banknot
or be
a financial institution
entertained or a
by the Appellate
Tribunal unless such person has deposited with the Appellate
Appellate Tribunal 75%
75% of the amount
amount of debt so
due from him as determined by the Tribunal under section 19. DRAT may, for reasons to be recorded
in writing, waive or reduce the amount to be deposited under this section.
Procedure and powers of the Tribunal and the Appellate Tribunal (Sec 22)
DRT/DRAT shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of
1908), but shall be guided by the principles of natural justice. The Tribunal and the Appellate Tribunal
shall have powers to regulate their own procedure including the places at which they shall have their
sittings.
DRT/DRAT shall
shall hav
have,
e, for the pur
purpos
poses
es of di
disch
scharg
arging
ing their functi
functions
ons under
under thi
this
s Act,
Act, the same
same
powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in
respect of the following matters, namely,-
(a) summoning and enforcing the attendance of any person and examining him on oath;
(b) requiring the discovery and production of documents;
(c) receiving evidence on affidavits;
(d) issuing commissions for the examination of witnesses or documents;
(e) reviewing its decisions;
(f) dismi
dismissing
ssing an applic
application
ation for defaul
defaultt or deciding it ex parte;
(g) setting aside any order of dismissal of any application for default or any order passed by it ex
parte;
(h) any other matter which may be prescribed.
Stat
Status
us of pr
proc
ocee
eedi
ding
ng at DRT/
DRT/DR
DRA
AT : Any
Any proc
proceed
eedin
ing
g befor
before
e the Tribu
Tribunal
nal or the
the
Appell ate Tribun
Appellate Tribunal
al shall be deeme
deemedd to be a judicial
judicia l proceeding
proce eding within the
meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code, and
the Tribunal or the Appellate Tribunal shall be deemed to be a civil court for all the purposes of section
195 and Chapter XXVI of the Code of Criminal Procedure, 1973.
Engagement of advocates etc (Section 23)

A bank or a financial institution making an application to a Tribunal or an appeal to an Appellate
(1)
Tribunal may authorise one or more legal practitioners or any of its officers to act as Presenting
Offi
Office
cers
rs an
and
d evevery
ery pe
pers
rson
on so au auth
thor
oris
ised
ed by it may
may pres
presen
entt its
its case
case be
befo
fore
re the Trib
Tribun
unal
al or the
the
Appellat
App ellatee Tribunal.
Trib unal.
(2) The defendant may either appear in person or authorise one or more legal practitioners or any of his
or its officers to present his or its case before the Tribunal or the Appellate Tribunal.
Limitation (Sec 24) : The provisions of the Limitation Act, 1963, shall, as far as may be, apply to an
application made to a Tribunal.
RECOVERY OF DEBT DETERMINED BY TRIBUNAL

Modes of recovery of debts (Sec 25)
The Recovery Officer shall, on receipt of the copy of the certificate, proceed to recover the amount of
debt specified in the certificate by one or more of the following modes, namely,-
(a) attachment
attachment and sale of the movable or immovable
immovable property of the defendant;
(b) arrest of the defendant and his detention in prison;
(c) appointing
appointing a s6ceiver
s6ceiver for the management
management of the movable
movable or immov
immovable
able properties of the defendant.
Validity of certificate and amendment thereof (Sec (Sec 26)
(1) It shall not be open to the defendant to dispute before the Recovery Officer the correctness of the
amount specified in the certificate, and no objection to the certificate on any other ground shall also
be entertained by the Recovery Officer.
(2) The Presiding Officer shall have power to withdraw or cancel the certificate or correct any clerical or
arithmetical
arithm etical mista
mistake
ke in the certificate
certificate by sendin
sendingg an intimation to the Recovery Officer.
Stay of proceedings under certificate and amendment or withdrawal thereof (Sec 27) :
(1) Presiding Officer may grant time for the payment of the amount, and thereupon the Recovery
Officer shall stay the proceedings until the expiry of the time so granted.
(2) Presiding Officer shall keep the Recovery Officer informed of any amount paid or time granted for
payment,
paymen t, subsequent to the issue of such certifi
certificate
cate to the Recovery Officer.
(3) Where the order giving rise to a demand of amount for recovery of debt has been modified in
appeal and, as a consequence thereof the demand is reduced, the Presiding Officer shall stay the
recovery of such part of the amount of the certificate as pertains to the said reduction for the
period for which the appeal remains pending.

Where
Whe re a cert
certif
ific
icate
ate for the reco
recove
very
ry of de
debt
bt has
has been
been rerece
ceiv
ived
ed by the Reco
Recovevery
ry Offic
Officer
er an
and
d
subsequently the amount of the outstanding demands is reduced or enhanced as a result of an
appeal, the Presiding Officer shall, when the order which was the subject-matter of such appeal has
become final and conclusive, amend the certificate or withdraw it, as the case may be.
Other modes of recovery (Sec 28)
(1) Where a c certifi
ertificate
cate has been is
issued
sued to the Recov
Recovery
ery Officer,
Officer, the Recov
Recovery
ery Officer
Officer may,
may, without
without
prejudice to the modes of recovery specified in section 25, recover the amount of debt by any one or
more of the modes provided under this section.
(2) If any a amoun
mountt is due fro
from
m any person
person to the de
defenda
fendant,
nt, the Recov
Recovery
ery Officer
Officer m
may
ay require
require such
such
person to deduct, from the said amount, the amount of debt due from the defendant under this Act
and such person shall comply with any such requisition and shall pay the sum so deducted to the
credit of the Recovery Officer: Nothing in this sub-section shall apply to any part of the amount
exempt from attachment in execution of a decree of a civil court under section 60 of the Code of
Civil Procedure, 1908 (5 of 1908).
3 (i) The Recovery Officer may, at any time or from time to time, by notice in writing, require any person
from whom money is due or may become due to the defendant or to any person who holds or may
subsequently hold money for or on account of the defendant, to pay to the Recovery Officer either
forthwith upon the money becoming due or being held or within the time specified in the notice (not being
before the money becomes due or is held), so much of the money as is sufficient to pay the amount of
debt due from the defendant or the whole of the money when it is equal to or less than that amount.
(ii) A notice under this sub-s
sub-sectio
ectionn may be issued to any person who holds or may subsequently
subsequently
hold any money for or on account of the defendant jointly with any other person and for the
purposes
purpos es of this sub-s
sub-sectio
ection
n the shares of the joint holders in such amount shall be presumed,
presumed,
until the contrary
contrary is proved,
proved, to be equal.
(iii) A copy of the notice shall be forwarded to the defendant at his last address known to the
Recovery Officer and in the case of a joint account to all the joint holders at their last addresses
known to the Recovery Officer
Officer..
(iv) Save as otherwi
otherwise
se provided
provided in this sub-
sub-secti
section,
on, every person to whom a notice
notice is issued
issued under
this sub-section shall be bound to comply with such notice, and, in particular, where any such
noti
notice
ce is issu
issued
ed to a post
post offi
office
ce,, bank
bank,, financ
financia
iall in
inst
stit
itut
utio
ion,
n, or an in
insu
sure
rer,
r, it sh
shal
alll not
not be
necessary
neces sary for any pass book, deposit receipt
receipt,, poli
policy
cy or any other document to be produced for
the purpose of any entry, endorsement or the like to be made before the payment is made
notwithstanding any rule, practice or requirement to the contrary.
(v) Any claim respe
respecting
cting any property in relation
relation to which a notice
notice under this sub-secti
sub-section
on has been
issued arising after the date of the notice shall be void as against any demand contained in the
notice.
(vi) Wher
Where e a pers
person
on to whom a notice underunder this sub-se
sub-sectiction
on is sent objects
objects to it by a stateme
statementnt
on oath that the sum demanded or the part thereof is not due to the defendant or that he does
not holdshall
section any money for ortoon
be deemed account
require of the
such defendant,
person then,
to pay any nothing
such sum or contained in thisassub-
part thereof, the
case may be, but if it is discovered that such statement was false in any material particular,
such person shall be personally liable to the Recovery Officer to the extent of his own liability
to the defendant on the date of the notice, or to the extent of the defendant's liability for any
sum due under this Act, whichever is less.
(vii) The Recovery Officer may, at any time or from time to time, amend or revoke any notice under
this sub-section or extend the time for making any payment in pursuance of such notice.
(viii) The Recovery Officer shall grant a receipt for any amount paid in compliance with a notice
issued under this sub-section, and the person so paying shall be fully discharged from his
liabili
liability
ty to the defendant to the extent of the amoun
amountt so paid.
(ix) Any perso
person n dis
dischar
charging
ging any liabil
liability
ity to the defendant
defendant after the recei
receipt
pt of a notice
notice under thi
this
s
sub-section shall be personally liable to the Recovery Officer to the extent of his own liability
to the defendant so discharged or to the extent of the defendant's liability for any debt due
under this Act, which
whichever
ever is less.
(x) If the
the pe pers
rson
on to wh
whom
om a notinotice
ce ununde
derr this
this subs
subsec
ecti
tion
on is sent
sent fail
fails
s to make
make papaym
ymenentt in
pursuance thereof to the Recovery Officer, he shall be deemed to be a defendant in default in
respect of the amount specified in the notice and further proceedings may be taken against
him for the realisation of the amount as if it were a debt due from him, in the manner provided
in sections 25, 26 and 27 and the notice shall have the same effect as an attachment of a debt
by the Recovery Officer in exercise of his powers under section 25.
(3) The Rec Recover
overyy Offi
Officer
cer ma
mayy apply to th thee court inin whose cucustod
stodyy there
there is money
money belongin
belonging g to
the defendant for payment to him of the entire amount of such money, or if it is more than the
amount of debt due, an amount sufficient to discharge the amount of debt so due.
(4A) The Recovery Officer may, by order, at any stage of
the execution of the certificate of recovery, require any person, and in case of a company, any of its
of
offic
ficer
ers
s aga
again
inst
st wh
whom om or whic
which
h the certi
certific
ficat
ate
e of rec
recov
over
ery
y is is
issue
sued,
d, to decla
declare
re on affi
affida
davi
vitt the
particulars of his or its assets.
(5) The Recovery Officer may recover any amount of debt due from the defendant by distraint and sale of
his movable property in the manner laid down in the Third Schedule to the Income Tax Act, 1961.
Application of certain provisions of Income Tax Act (Sec 29)
The provisions
provisions of the Seco
Second nd and Third Sche
Schedule
dules s to the Income Tax Act, 1961, and the Income Tax
(Certificate Proceedings) Rules, 1962, as in force from time to time shall, as far as possible, apply
with necessary modifications as if the said provisions and the rules referred to the amount of debt
due under this Act ins instead
tead of to the Incom
Income e Tax Act: Any refere
reference
nce under the said provisio
provisionsns and the
rules to the "assessee" shall be construed as a reference to the defendant under under this Act.
Appeal
Appe al against the ordeorderr of Recovery
Recovery Officer (Sec 30)
(1) Any person aggri
aggrieved
eved by an order of the Recovery Officer Officer made under- thithis
s Act may, within
within 30 days
from the date on which a copy of the order is issued to him, prefer an appeal to the Tribunal.
(2)) On recei
(2 receipt
pt of an appeal, the Tribu
Tribunal
nal may, after
giving an opportunity to the appellant to be heard, and after making such enquiry as it deems fit,
confirm, modify or set aside the order made by the Recovery Officer in exercise of his powers
under sections 25 to 28 (both inclusive).)
MISCELLANEOUS Transfer of pending cases (Sec 31)
(1) EvEverery
y suit
suit or othe
otherr proc
procee
eedi
ding
ng pepend
ndin
ingg bebefo
fore
re an
anyy cour
courtt imme
immedidiat
atel
ely
y be
befo
fore
re the
the da date
te of
establishment of a Tribunal under this Act, being a suit or proceeding the cause of action whereon it is
based is such that it would have been, if it had arisen after such establishment, within the jurisdiction
of such Tribunal, shall stand transferred on that date to such Tribunal. Nothing in this sub-section shall
apply to any appeal pending as aforesaid before any court.
(2) Where any suit or other proceedproceeding
ing stands transferred
transferred from any court to a Tribunal under subs subsectio
ectionn
(1):
(a) the court shall
shall,, as soon as may be after such transfer, forw forward
ard the records of such sui suitt or other
proceeding
proceedi ng to the Tribunal; and
(b) the Tribunal may
may,, on recei
receipt
pt of such records,
records, proceed to deal with such suit or other proceedin
proceeding, g,
so far as may be, in the same manner as in the case of an application made under section 19 from the
stage which was reached before such transfer or from any earlier stage as the Tribunal may deem fit.
Power of Tribunal to issue certificate of recovery in case of decree or order (Sec 31A)
Where
(1)Deb
Debts a decree
ts Due to Ba or
nksorder
Banks andwas
Fin passed
Financ
ancial by tutions
anyons
ial Instituti
Insti court before
(Amendme
(Amen the
nt)commencement
dment) Act, 2000 and of
2000 hasthenot
Recovery
ye of
yett bee
been
n
executed, then, the decree-holder may apply to the Tribunal to pass an order for recovery of the
amount.
(2) On receipt of an application under sub-section (1), the Tribunal may issue a certificate for recovery
to a Recovery
Recovery Officer.
(3) On receipt of a certificate under sub-section (2), the Recovery Officer shall proceed to recover the
amount as if it was a certificate in respect of a debt recoverable under this Act.
Overriding effect of the Act(Sec 34)
The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in
any other law for the time being in force or in any instrument having effect by virtue of any law other
than this Act.
THE SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS &

ENFORCEMENT OF SECURITY INTEREST (SARFAESI) ACT, 2002
The Securitisati
Securitisation
on and Reconstructio
Reconstruction Financial Assets- and Enforcement of Security Interest Act,
n of Financial
2002, extends to the whole of India. It shall be deemed to have come into force on the 21st day of
June, 2002.
Asset reconstruction means acquisition by any securitisation
securitisation company or reconstruction
reconstruction company of
any right or interest of any bank or financial institution in any financial assistance for the purpose of
realisation of such financial assistance;
Borrower means any person who has been granted financial assistance by any bank or financial
institution or who has given any guarantee or created any mortgage or pledge as security for the
financial assistance granted by any bank or financial institution and includes a person who becomes
borrower
borrow er of a securi
securitisati
tisation
on company or recons
reconstruction
truction company consequen
consequentt upon acquisition
acquisition by it of
any rights or interest
interest of any bank or financial institu
institution
tion in relation
relation to such financial assistance;
assistance;
Default means non-payment of any any principal debt or interest thereon or any other amount payable
by a borrower to any secured creditor consequent upon which the account of such borrower is
classified as non-performing asset in the books of account o the secured creditor in accordance
with the directions or guidelines issued by the Reserve Bank;
Financial asset means debt or receivables and includes
(i) a claim to
to any debt or receiv
receivables
ables or part th thereof,
ereof, wwhether
hether secu
secured red or unsecured;
unsecured; or
(ii) any debt or recei
receivable
vabless secured by by,, mortgage of, or cha charge
rge on, immo
immovable
vable property;
property; or a mortgage,
mortgage,
charge, hypothecation
hypothecation or pledge of movabl movable e property
property;; or
(iii) any right or interest
interest in the secu
security
rity,, whether full or par
partt underly
underlyinging such debt or receivables;
receivables; or
any beneficial interest in property, whether movable or immovable, or in such debt, receivables,
whether such intere
interest
st is existing, future, accruing,conditi
accruing,conditionalonal or contingent;
contingent; or
(iv) any financial assis
assistance;
tance;
Hypothecation m e an an s a c h ha
a rg
rg e i n o r u po po n a n y m ov ov a
abb lle
e p ro
r o pe
pe rt
rt y
y,, e x xii s
stt in
in g o r f u tu
tu re
re ,
created by a bor borro
rowewerr in fafavo
vour
ur of a se secucureredd credi
credito
torr with
withou
outt deli
delive
very
ry of po poss sses essi
sion
on of thethe
movabl
mov able
e pro
proper
perty
ty to suc suchh credi
creditor
tor,, as a securi
security ty for financ
financial
ial assis
assistanc
tance e and includ includes es floati
floating
ng
charge and crystallization of such charge into fixed charge on movable property;
Non-performing asset means an asset or account of a borrower, which has been classified by a bank or
financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or
under guidelines relating to asset classifi classifications
cations issued by the Reserve Reserve Bank;
Obligor means a person liable to the originator, whether under a contract or otherwise, to pay a financial
asset or to discharge any obligation in respect of a financial asset, whether existing, future, conditional or
contingent
continge nt and incl
includes
udes the bo rower;
Originator
Origin ator mean
means s the ow owner
ner of a fi fina
nanci
ncial
al as
assesett whic
whichh is acacqui
quired
red by a se secucuri
riti
tisat
satio ionn co
comp
mpan
any y or
reconstruction company for the purpose of securitisation or asset reconstruction;
Property means-
(i) immovable
immovableproperty
property;;
(ii) movable
movableproperty
property;;
(iii) any debt or any ri right
ght to rec
receive
eive pa
payment
yment o off money, whether
whether sec
secured
ured or unsecur
unsecured; ed;
(iv) receiva
receivables,
bles, whether existin
existing
g or future;
(v) intangible
(v) intangible assets
assets,, being know-how
know-how,, patent, copyr copyright,
ight, trade mar
mark, k, licence,
licence, franchise
franchise or any other
business or commercial right of similar nature;
Qualifiedinstitutional
corporation,
corporati al means
buyer
on, state industri
industrial a financial
development
developm institution,
ent corporati
corporation, insurance
on, trus
truste
tee
e or ancompany,
any
y as
asse bank,
sett manage
man state
ageme
ment financial
nt co
comp
mpany
any
making
maki ng inve
investstme
ment
nt on be
behal
halff o
off mut
mutual
ual fun
fund
d or
or pro
provi
viden
dentt fund
fund or gratui
gratuity
ty fund
fund or pepensi
nsion
on fund
fund or a
foreign institutional investor registered under the Securities and Exchange Board of India Act, 1992 (15 of
1992) or regulations made there-under, or any other body corporate as may be specified by the Board ;
Reconstr
Rec onstructio
uctionn comp
company means a company
any means company form formed ed and regist
registere
eredd under
under the Compan Companie ies
s Act,
Act,
1956 (1 of 1956) for the purpose
purpose of asset reconstructi
reconstruction; on;
Secu
Se curi
riti
tisa
sati
tion
on me
meanans
s acqu
acquis isit
itio
ion
n of fi fina
nanc ncia
iall asse
assetsts by any any sesecu cuririti
tisa
sati
tion
on cocomp
mpananyy or
r econs tr uction c o ommppa
a ny
ny f rro om an nyy o rrii g in
in at
at o
orr , w h et
et he
he r b y r a iis
s iin
n g o f f un un ds
ds b y s u uc
ch
securiti
secu ritisati
sation
on comp
company
any or reconst
reconstruct
ruction
ion company
company from qualifi qualified
ed institu
institution
tionalal buyers
buyers by
issue of secur ity recei pts repr esent ing undiv ndiviided
ded ininte
tere
rest
st in su
succh fina
financnciial asse
assetsts or oth
ther
erw
wis
ise;
e;
Securitisation company means any company formed and registered under the Companies Act, 1956 (1 of
1956) for the purpose of securitisation;
Secured
Secur ed creditor
creditor means any bank or financial institution or any consortium or group of banks or
financial institutions and includes-
(i) debenture ttrustee
rustee appointed
appointed by ananyy bank or financial
financial institution;
institution; or
(ii) securitisation company or reconstruc
reconstruction
tion company; or
(iii)
any other truste
trusteee holding
holding securi
securities
ties on behalf of a bank or financia
financiall institution,
institution, in whose
whose favour
favour security
security
interest is created for due repayment by any borrower of any financial assistance;
Security interest means right, title and interest

Security interest of any kind whatsoever
whatsoever upon property,
property, created in favour of
any secured creditor and includes any mortgage, charge, hypothecation, assignment other than those
specified
speci fied in secti
section
on 31;
Security receipt means a receipt or other security, issued by a securitisation company or reconstruction
company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or interest in
the financial asset involved in securitisation; acquisition by the holder thereof, of an undivided right,-
title or Sponsor means any person holding not less than ten per cent. of the paid-up equity capital of a
securitisation company or reconstruction company;
REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS

Securitisation & Reconstruction Companies : No securitisation company or reconstruction company
shall commence or carry on the business of securitisation or asset reconstruction without obtaining a
certificate
certific ate of registr
registration
ation granted under this this section; and having the owned fund of not less than Rs.2 cr or
such other amount not exceeding 15% of total financial assets acquired or to be acquired by the
securitisatio
securi tisationn company or reconstr
reconstruction
uction company, as the Reserve Bank may, by notification, notification, specify.
specify.
Reserve Bank may, by notification, specify different amounts of owned fund for different class or classes of
securitisation companies or reconstruction companies.
Existing companies : A se secu
curi
riti
tisa
sati
tion
on co
comp
mpan
any y or reco
reconsnstr
truc
ucti
tion
on co comp
mpanyany,, ex
exis
isti
ting
ng on the
the
commencement of this Act, shall make an application for registration to the Reserve Bank before the
expiry of six months from such commencement and notwithstanding anything contained in this sub-section
may continue to carry on the business of securitisation or asset reconstruction until a certificate of
registration is granted to it or, as the case may be, rejection of application for registration is communicated
it.
Regis
Re gistra
tratio
tion
n with
with RBRBII : Every
Every securi
securitis
tisati
ation
on compan
company y or recons
reconstru
tructi
ction
on company
company shall make
make an
application for registration to the Reserve Bank in such form and manner as it may specify.
Process to the followed at RBI : Reserve Bank may, for the purpose of considering the application for
registration of a securitisation company or reconstruction company to commence or carry on the
business of securitisation or asset reconstruction, as the case may be, require to be satisfied, by an
inspec
ins pectiotion
n of recrecor
ords
ds or boo books ks of such
such secsecuri
uritis
tisati
ation
on cocompa
mpany ny or rec recons
onstru
tructi
ction
on compan
company, y, or
otherwise, that the following conditions are fulfilled, namely:-
(a) that the securitisation company or reconstruction company has not incurred losses in any of the three
preceding financial years;
(b) tha
thatt suc
suchh sec
securi
uritis
tisati
ation
on com
companypany or rec recons
onstru
tructi
ction
on com
company
pany has made adeq adequatuate
e arr
arrang
angeme
ements
nts for
realisation of the financial assets acquired for the purpose of securitisation or asset reconstruction and
shall be able to pay periodical returns and redeem on respective due dates on the investments made in
the company by the qualified institutional buyers or other persons;
(c) th
that
at the dire
direct
ctor
ors
s of secu
secuririti
tisa
sati
tion
on comp
compan anyy or recon
econststru
ruct
ctiion compa
ompany ny ha
havve
adequate professional experience in matters related to finance, securitisation and reconstruction;
(d) that the board of directors of such securitisation company or reconstruction company does not consist
of more
more than
than ha
halflf of it
its
s total
total nunumbmberer of direc
director
tors
s who
who ar are
e ei
eithe
therr no
nomiminee
nees s of an
anyy spons
sponsoror or
associated
(e) that any of itsindirectors
any manner
has with the sponsor
not been or any
convicted of its
of any subsidiaries;
offence involving moral turpitude;
(f) that a sponsor, is not a holding company of the securitisation company or reconstruction company, as
the case may be, or, does not otherwise hold any controlling interest in such securitisation company or
reconstruction company;
(g) that securitisation company or reconstruction company has complied with or is in a position to comply
wi
with
th pruden
prudenti tial
al nor
normsms spec
specif
ifie
iedd by the Reser
Reserve
ve Ba
Banknk.. (4)
(4) The Reser
Reserve
ve Bank
Bank may,
may, after
after bei
being
ng
satisfied
satisfied that the conditions specified
specified in subsection
subsection (3) are fulfilled,
fulfilled, grant a certificate of registration
registration to
the sec
securi
uritis
tisati
ation
on comcompan
panyy or the rec
reconst
onstruc
ructio
tion
n com
company
pany to commen
commence ce or carry
carry on busine
businessss of
securitisati
securi tisation
on or asset reconstructi
reconstruction,
on, subject to such conditions,
conditions, which it may consider, fit to impos
impose.e.
Rejection of application by RBI : Reserve Bank may reject the application made if it is satisfied that the
conditions
conditions are not fulfille
fulfilled.
d. Before rejecting
rejecting the appli
application
cation,, the applicant shall be given a reasonable
reasonable
opportunity
opportuni ty of being heard.
Change in management/locat
management/location ion : Every securitisation company or reconstruction company, shall obtain
prior approval of the Reserve Bank for any substantial change in its management or change of
location of its registered office or change in its name. The decision of the Reserve Bank, whether the
change
change in manmanage
agemen
mentt of a sec
securi
uritis
tisati
ation
on company
company or a recons
reconstru
tructi
ction
on company
company is a substa
substanti
ntial
al
change in its management or not, shall be final.
Cancellat
Canc ellation
ion of certifica
certificate
te of regis
registrat ion: Reserve
tration: Reserve Bank
Bank may cancel
cancel a certifi
certificat
cate
e of reg
regist
istrati
ration
on
granted to a secursecuritisa
itisation
tion company or a reconstruction
reconstruction company, if such company-
company-
(a) ceases to carry on the busin
business
ess of secur
securitisa
itisation
tion or asset recons
reconstructi
truction;
on; or
(b) ceases to receiv
receivee or hold any investment from a qualified
qualified institutional
institutional buyer; or
(c) has failed
failed to com
complyply with any c
conditi
onditions
ons subject
subject to whic
whichh the certifi
certificate
cate of regi
registr
strati
ation
on has been
granted to it; or
(d) at any time fails to fulfill any of the conditions referred to in clauses (a) to (g) of sub-section (3) of
section 3; or
(e) fails to-
(i) compl
comply y with any direction issued by the Reserve Bank under the provisi provisions
ons of this Act; or
(ii) maintain accounts in accordance with the requirements of any law or any direction or order issued by
the Reserve Bank under the provisions of this Act; or
(iii) submit or offer for inspection its books of account or other relevant documents when so demanded
by the Reserve Bank;
(iv) obtain prior approval of the Reserve Bank required under sub-section (6) of section 3:
Appeal for cancellation of registration : A securitisation company or reconstruction company
aggrieved by the order of rejection of application for registration or cancellation of certificate of
registration may prefer an appeal, within a period of thirty days from the date on which such order
of rejection or cancellation is communicated to it, to the Central Government. Before rejecting an
appeal such company shall be given a reasonable opportunity of being heard.
Circumstances when such companies would continue despite cancellation : A securitisation

company or reconstruction company, which is holding investments of qualified institutional buyers
and whose application for grant of certificate of registration has been rejected or certificate of
registration has been cancelled shall , notwithstanding such rejection or cancellation be deemed
to be a securitisation company or reconstruction company until it repays the entire investments
held by it (together with interest, if any) within such period as the Reserve Bank may direct.
Acquisition of rights or interest in financial assets: A securitisation
securitisation company or reconstructi
reconstructionon
company may acquire financial assets of any bank or financial instituti institution-
on-
(a) by issuing a debenture or bond or any other security in the nature of debenture, for consideration
agreed upon between such company and the bank or financial institution, incorporating therein such
terms and conditions as may be agreed upon between them;
(b) by ent
enteri
ering
ng into
into an agreem
agreemenentt wi
with
th susuch
ch bank
bank or finan
financi
cial
al in
insti
stitut
tutio
ion
n for the trans
transfer
fer of su
such
ch
financial assets to such company on such terms and conditions as may be agreed upon between
them.
Status of company on asset acquisition : If the bank or financial financial institutio
institutionn is a lender
lender in relation
relation
to any financial assets acquired under sub-section (1) by the the sec
securi
uritisa
tisati
tion
on co
comp
mpan
anyy or the
recon
rec onst
stru
ruct
ctio
ion
n cocompa
mpanyny,, such
such secu
securi
riti
tisa
sati
tion
on co
comp
mpany
any or reco
reconsnstru
truct
ctio
ion
n co
comp
mpanyany shshal
all,
l, on such
such
acquisition, be deemed to be the lender and all the rights of such bank or financial institution shall vest in
such company in relati
relation
on to such financia
financiall assets.
States of covenants prior to purchase : All contracts, deeds, bonds, agreements, powers-of-
at
anyto law
rn eyor, gran
grants ts of legal
otherwise legal other
and repr
repres
esen
entat
tatio
ion,
n, permi
instruments per
ofmiss
ssio
ions
ns,, ap
whatever provals,
nature consents
which relate toorthe no-objections
said financial under
asset
and whic
which haare
re subs ist ing or havi ng eff ect imme diat ely bef ore the acqui acquisisiti
tion
on of finan
financi
cial
al asset
asset and
to which the concerned bank or financial institution is a party or which are in fa our of such bank
or financial institution shall, after the acquisition of the financial assets, be of as full force and
effect against or in favour of the securitisation company or reconstruction company, as the case
may be, and may be enforced or acted pan as fully and effectually as if, in the place of the said bank or
fin
financ
anciaiall inst
instit
ituti
ution,
on, sesecu
curi
riti
tisa
sati
tion
on comp
company any or
or recon struction company, as the case may be, had
been
bee n a parparty
ty theret
theretoo or as if they
they had bee been
n is
issue
suedd in fav
favour
our of secur
uriitis
tisatio
tion companyany o
reconstructi
reconst ruction
on company, as the case may be.
Notice to obligor and discharge of obligation of such obligor: The bank or financial institution may,
if it considers appropriate,
appropriate, give a notice of acquisition
acquisition of fina
financ
ncia
iall asse
assets ts by any
any se
secu
curi
riti
tisa
sati
tion
on
company or reconstruction company, to the concerned obligor and any other concerned person and to
the concern
concerned ed regis
register
tering
ing autauthor
hority
ity (inclu
(includin
dingg Reg
Regist
istrar
rar of Com
Compan
panies
ies)) in whose
whose juris
jurisdic
dictio
tion n the
mortgage, charge, hypothecation, assignment or other interest created on the financial assets had
been registered.
Obligation of obligor : Where a notice of acquisition
acquisition of financi
financial
al asset under sub-section (1) is given by
a bank or financial institution, the obligor, on receipt of such notice, shall make payment to the
concerned securitisation company or reconstruction company, as the c se may be, and payment made to
such company in discharge of any of the obligations in relation to the financial asset specified in the
notice shall be a full discharge to the obligor making the payment from all liability in respect of such
payment.
issue of security receipts : A securitisation company or reconstruction company, may, after acquisition
of any financial asset offer security receipts to qualified institutional buyers (other than by offer to public)
for subscription
subscription in accord
accordance
ance with the provisions
provisions of those Acts.
Raising of funds by ARC : A securitisation company or reconstruction company may raise funds
from the qualified institutional buyers by formulating schemes for acquiring financial assets and shall
keep and maintain separate and distinct accounts in respect of each such scheme for every financial
asset acquired out of investments made by a qualified institutional buyer and ensure that realisations
of such financial asset is held and applied towards redemption of investments and payment of returns
assured on such investments
investments under the relev
relevant
ant scheme.
Rights
Right s of Qualif
Qualified
ied Inst
Institution
itutional buyers : In the event of non-realisation of financial assets, the
al buyers
qualified institutional buyers of a securitisation company or reconstruction company, holding security
receipts of not less than 75%. of the total value f the security receipts issued by such company, shall
be entitled to call a meeting of all the qualified institutional buyers and every resolution passed in
such meeting shall be binding on the company. These buyers shall, at a meeting follow the same
pr
prococed
edur
ure,
e, as ne
neararly
ly as poss
possib
ible
le as is foll
follow
owed
ed at me meet
etin
ings
gs of the
the bo
boar
ard
d of didire
rect
ctor
ors
s of the
the
securitisatio
securi tisation
n company or recons
reconstructio
tructionn company;
company; as the case may be.
Exemption from registration of Security Receipt: A security receipt issued by the securitisation
company or reconstruction company, as the case may be, and not creating, declaring, assigning,
limiting or extinguishing any right, title or interest, to or in immovable
property except in so far as it entitles the holder of the security receipt to an undivided interest
afforded by a registered instrument; or any transfer of sec securi
urity
ty receip
receipts,
ts, shall
shall not requir
requiree compuls
compulsory
ory
registration.
Measures for assets reconstruction: A securitisation company or reconstruction company may,
for the purposes of asset reconstruction, having regard to the guidelines framed by the Reserve
Bank in this behalf, provi
provide
de for any one or more of the followi
following
ng measures,
measures, namely:-
namely:-
(a)) the proper management of the business
(a business of the borr borrow
owerer,, by chan
change
ge in,
in, or take
take over
over of,
of, the
management of the business of the borrower;
(b)) the sale or lease
(b lease of a part or whole
whole of the business
business of the borrower;
borrower;
(c)) rescheduling
(c rescheduling of payment
payment of debts p payabl
ayablee by the borrow
borrower;
er;
(d)) enforcement
(d enforcement of security iinterest
nterest in accordance
accordance with the provi
provisions
sions of this Act;
(e)) settlement
(e settlement of dues payabfe.b
payabfe.byy the borrower
borrower;;
(f)) taking possessi
(f possessionon of secured asassets
sets in accordance
accordance with the the provisions of this Act.
Act.
Other functions of securitisation company or reconstruction company: A securitisation company or
reconstruction company may:
(a) act as an agen
agentt for any bank or financi
financial
al instituti
institution
on for the purpose
purpose of recove
recovering
ring their
their dues
from the borrower on payment of such fees or charges as may be mutually agreed upon between the
parties;
(b) act as a manager
man ager referr
referred
edthe
to parties;
in clause
clau;se (c) of subsecti
subsection on (4) of sectio
section n 13 on such fee as may be
mutuall
mutually y agreed upon between parties
(c) act as rec
receiv
eiver
er if appo
appoint
inted
ed by any cou court
rt or tri
tribuna
bunal:
l: Pro
Provi
vided
ded that
that no securi
securitis
tisati
ation
on compan
company y or
reconstructi
reconst ruction
on company shall act as a manager if acting as such gives rise to any pecuniary liability. liability.
However, no securitisation company or reconstruction company granted a certificate of registration shall
commence or carry on, without prior approval of the Reserve Bank, any business other than that of
securitisation or asset reconstruction:
R e s o l u ti
ti o n o f d i s p u t e es
s : Wh e re a n y di s p ut e rela relati
ting
ng to
to se
secucuri
riti
tisa
sati
tion
on or reco
recons
nstr
truc
ucti
tion
on or
non- payment of any amount due including interest arises amongst any of the parties, namely, the bank,
or fi
fina
nanc
nciial inst
instiituti
tution
on,, or secu
secuririti
tisa
sati
tion
on comp
compan anyy or reco
recons
nstr
truc
ucti
tion
on compcompananyy or qu qualaliified
fied
institu
institution
tional
al buye
buyer,
r, such disp
dispute
ute shal
shalll be settled
settled by conc
concili
iliation
ation or arbitrati
arbitration
on as providedin
providedin the
Arbitration and Conciliation Act, 1996 (26 of 1996), as if the parties to the dispute have consented in
writing for determination of such dispute by conciliation or arbitration and the provisions of that Act shall
apply accordingly.
ENFORCEMENT
ENFORCE SECURITY INTEREST Notwithstanding the provisions in Section 69 or section
MENT OF SECURITY
69A of the Transfer of Property Act, 1882 (4 of 1882), any security interest created in favour of any
secured creditor (charge created) may be enforced (security may be sold), without the intervention of
the court or tribunal, by such creditor in accordance with the provisions of this Act.
Issue of notice for payment of dues: Where any borrower, who is under a liability to a secured
cr
cred
edit
itor
or unde
underr a secu
securi
rity
ty ag
agrereem
emen
ent,
t, make
makes
s any de
defa
faul
ultt in repay
repaymement
nt of secu
secure
red
d de
debt
bt or any
instalment thereof, and his account in respect of such debt is classified by the secured creditor as
non-performing asset, the secured creditor may require the borrower by notice in writing to discharge
in full his liabilities to the secured creditor within 60 days from the date of notice failing which the
secured creditor shall be entitled to exercise all or any of the rights under this Act.
Contents of the notice : The notice shall give details of the amount payable by the borrower and the
se
secu
cure
redd asse
assetsts inten
intended
ded to be enforc
enforced
ed by the se
secu
cured
red credi
creditor
tor in the event
event of non-p
non-pay
ayme
ment
nt of
secured debts by the borrower.
Failu
Fa ilure
re of the
the boborr owerr : In case the borrower fails to discharge his liability in full within the
rrowe
stipulated period, the secured creditor may take recourse to one or more of the following measures
to recover his secured debt, namely:-
a) take possession of the secured assets of the borrower including the right to transfer by
way of lease, assignment or sale for realizing the secured asset;
(b) take over the managem
management ent of the secure
secured d assets of the borrborrower
ower incl
includin
udingg the right
right to tran
transfer
sfer
by way of lease, assignment or sale and realise the secured asset;appoint any person (hereafter
r ef er r e d to as t he manager), to manage the secured assets the
possession of which has been taken over by the secured creditor;
(c) require
require at any time by notice in writing, writing, any person who has acquireacquired d any of the secured assets
assets
from the borrower and from whom any money is due or may become due to the borrower, to pay
the secured creditor,
creditor, so much of the money as is suffici sufficient
ent to pay the secured debt.
if borrower makes the payment : Any payment made by any person to the secured creditor shall
give such person a valid discharge as if he has made payment to the borrower.
Ef
Effe
fect
ct of posspossesessi
sion
on by th the
e secu
secureredd cr
cred
edit or : Any tran
itor transf
sfer
er of sesecu
cure
red
d asse
assett afte
afterr taki
taking
ng
possession
posses sion thereo
thereoff or take over of manageme
management, nt, by the secured credi
creditor
tor or by the manager
manager on behalf
behalf
of the secured creditor shall vest in the transferee all rights in, or in relation to, the secured asset
transferred
trans ferred as if the transfe
transferr had been made by the owner of such secur secureded asset.
Costs and charges : Where any action has been taken against a borrower under the above
provisions, all costs, charges and expenses which, in the opinion of the secured creditor, have been
properly incurred by him or any expenses incidental thereto, shall be recoverable from the borrower
and the money which is received by the secured creditor shall, in the absence of any contract to the
contr
contraryary,, be hel
held
d by hi him
m in trust
trust,, to be appli
applied,
ed, fi
firs
rstl
tly,
y, in pay
payme
mentnt of su
such
ch co
cost
sts,
s, ch
char
arges
ges and
and
expenses and secondly, the dues of the secured creditor and the residue of the money so received
shall be paid to the person entitled thereto in accordance with his rights and interests.
Payment of dues after possession but before sale : If the dues of the secured creditor together
with all costs, charges and expenses incurred by him are tendered to the secured creditor at any
time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by
the secured creditor, and no further step shall be taken by him for transfer or sale of that secure
asset.
Sale of assets in case of consortium : In the case of financing of a financial asset by more than
one secure
secured d cre
credit
ditors
ors or joint
joint financi
financingng of a financ
financial
ial asset by secured
secured creditors
creditors,, no sesecur
cured
ed
creditor
credi
right tor shall beupon
is agreed entitled to exercise
by the exercise creditors
secured any or all representing
of the rights conferred
conferredthan
not less on him
60%unless exercise
exerc
in value ise amount
of the of such
outstanding as on a record date and such action shall be binding on all the secured creditors. In the
case of a company in liquidation, the amount realised from the sale of secured assets shall be
distributed in accordance with the provisions of section 529A of the Companies Act, 1956 (1 of 1956):
Companies in liquidation : In case of companies in liquidation, the liquidator shall intimate the secured
creditor, the workmen's dues in accordance with the provisions of section 529A of the Companies Act,
1956 (1 of 1956) and in case such workmen's dues cannot be ascertained, the liquidator shall intimate
the estimated amount of workmen's dues under that section to the secured creditor and in such case the
secured creditor may retain the sale proceeds of the secured assets after depositing the amount of such
estimate dues with the liquidator:
Dues of Workmen: In case the secured creditor deposits the estimated amount of workmen's dues,
such creditor shall be liable to pay the balance of the workmen's dues or entitled to receive the
excess amount, if any, deposited by the secured creditor with the liquidator. The secured creditor
shall furnish an undertaking to the liquidator to pay the balance of the workmen's dues, if any.
Where liability is not discharged fully : Where dues of the secured creditor are not fully satisfied with
the sale proceeds of the secured assets, the secured creditor may file an application in the form and
manner as may be prescribed to the Debts Recovery Tribunal having jurisdiction or a competent court,
as the case may be, for. recovery of the balance amount from the borrower. Secured creditor shall be
entitled to proceed against the guarantors or sell the pledged assets without first taking any of the
measures in relation to the secured assets under this Act.
Who shallshall exerc
exercise ise the rights
rights of secursecured ed cre
credit or:: (Sec 12): The rights may be exercised by
ditor
officers authorised in this behalf in such manner as may be prescribed (Chief Manager in a Public
Sector Bank has been presc prescribed
ribed by the Govt.).
Govt.).
Restrictions on the borrower to deal with the assets : No borrower shall, after receipt of notice,
transfer by way of sale, lease or otherwise (other than in the ordinary course of his business) any of
his secured assets referred to in the notice, without prior written consent of the secured creditor.
Possession of assets : Role of Chief Metropolitan Magistrate or District Magistrate : Where the
possession of any secured assets is required to be taken by the secured creditor or if any of the
secured assets is required to be sold or transferred by the secured creditor under the provisions of
thi
this s Ac
Act,
t, the secure
secured d credit
creditoror may
may,, for the purpos
purpose e of takin
takingg posses
possessi sion
on or concontro
troll of any such
secured assets, request, in writing, the Chief Metropolitan Magistrate or the District Magistrate within
whose jurisdiction any such secured asset or other documents relating thereto may be situated or
found, to take possession thereof. Chief Metropolitan Magistrate or as the case may be, the District
Magistrate shall, on such request being made to him-
(a) take possession of such asset and documents relating thereto; and (b) forward such asset and
documents
document s to the secured creditor.F
creditor.For or the purpose of securing compliance wit withh the above, the Chief
Metropolitan Magistrate or the District Magistrate may take or cause to be taken such steps and use, or
cause
caus e to be used, suc suchh forc
force,e, as may,
may, in his opi opinio
nion,
n, be neces
necessar sary.
y. Manner and effect of take over of
management: When the management of business of a borrower is taken over by a secured
creditor, the secured creditor may, by publishing a notice in a newspaper published in English
language
langua ge and in a newsp newspaper aper publ shed in an Indian language language in circ circulati
ulation on in the place where the
principal office of the borrower is situated, appoint as many persons as it thinks fit-
(b) in a case in which the borrower is a company as defined in the Companies Act, 1956 (1 of 1956), to
be the directors of that borrower in in a
acc
ccor
ordan
dancece wi
with
th tthe
he prov
provis isio
ions
ns of
of that
that AcAct; t; o
orr in an y ot he r ca se ,
to be the
( i ) A d m i n is
is t r a t o r o f t h e b u s i n e s s o f t h e b o r r o
oww e r . O n p u b l i c a t i o n o f a n o t i ce
ce a s a b o v e :
-
(a) in any case where where the borrower is a comp company any as defin
defineded in the Companie
Companies s Act, . 1956 (1 of 1956),
(b) all persons holding
holding office as direc directors
tors of the company and in any other case, all persons persons holding any
offic
office e hav
havining
g pow power er of super
superininten
tende
dencnce,
e, didire
rect
ctio
ionn an
and d co cont
ntro
roll of the
the bu busisines
ness
s of thethe bo
borr
rrow
ower
er
immediately before the publication of the notice under sub-section (1), shall be deemed to have vacated
their offices as such;
(c) any contract of managemenmanagementt between the borrower and any director or manager thereof holdin holding g
office as such immediately before publication of the notice under sub-section (1), shall be deemed to
be termin
terminated;
ated;
(d) the directors
directors or the adminis administrator
trators s appointed under this secti sectionon shall take such steps as may be
necessary to take into their custody or under their control all the property, effects and actionable
claims to which the business of the borrower is, or ppears to be, entitled and all the property and
effects of the business of the borrower shall be deemed to be in the custody of the directors or
administrat
admini
(e) thestrators,
ors,tors
direc
director as
s the
appcase
appoin may
ointed
ted be,erasthis
under
und from
thi sethe
s sect date
ctio
ion shofall,
n shall the publica
publication
, for tion ofses,
all purpo
purpose the
s, notice;
be the di
dire
recto
ctors
rs of the
the
company of the borrower and such directors or as the case may be, the administrators appointed
under this section, shall alone be entitled to exercise all the powers of the directors or as the case
may be be,, of the
the perso
personsns ex
exer
erci
cisi
sing
ng power
powerss of super
superin inten
tenden
dence
ce,, di
direc
rectio
tion
n and contr
control
ol,, of the
the
business of the borrower whether such powers are derived from the memorandum or articles of
association of the company of the borrower or from any other source whatsoever.
(i)Position after management takeover : Where the management of the business of a borrower, being a
co
compmpanany
y as defi
define
ned
d in the
the Co
Compmpan
anieiess Ac
Act,
t, 1956
1956,, is ta
take
ken
n over
over by the
the se
secu
cure
red
d cre
redi
dito
tor,
r, then
then,,
notwithstanding anything contained such borrower, in the said Act or in the memorandum or articles of
as
assosoci
ciati
ation
on of it shal
shalll not
not be la
lawfu
wfull for the shshare
arehol
holde
ders
rs of su
such
ch co
comp
mpany
any or an
anyy other
other perso
person n to
nominate or appoint any person to be a director of the company;
(ii) no resolution passed at any meeting of the shareholders of such company shall be given effect to
unless approved by the secured credicreditor;
tor;
(iii) no proceeding for the winding up of such company or for the appointment of a receiver in respect
thereof shall lie in any court, except with the consent of the secured creditor.
Restoration of management : Where the management of the business of a borrower had been
taken
taken over
over by the se secur
cured
ed credi
creditor
tor,, the secure
secured
d credit
creditor
or sha
shall
ll,, on reali
realisa
satio
tion
n of his debt in ful
full,
l,
restore the management of the business of the borrower to him.
Compensation to directors for foss of office: No managing director or any other director or a manager
or any person in charge o management of the business of the borrower shall be entitled to any
compensation for the loss of office or for the premature termination under this Act of any contract of
management
manageme nt entered into by him with the borrower.
BIFR cases — The cases already referred to BIFR can be called back if the majority of the lenders (75%
in terms of value) agree for that.
Amoun
Am ountt Ce
Ceilin g — Loans with outstanding up to Rs.1 lac will not be covered under the provisions.
iling
Similarly, the security interest created in agriculture land and in those cases where the borrower has
already paid 80% of the total dues to secured creditor, are also excluded from the purview.
Receipt of notice by the borrower : If, on receipt of the notice from the creditor, the borrower makes
any representation or raises any objection, the secured creditor shall consider such representation or
objection.
objecti on. If the secure
secured d cre
credit
ditor
or comes
comes to the conclus
conclusion
ion that repres
representa
entatio
tionn or object
objection
ion is not
ac
accecepta
ptabl
ble
e or ten
tenabl
able,
e, he shal
shalll comm
communiunica
cate
te wi
withi
thin
n 15 days
days of rece
receipiptt of su
suchch re
repr
pres
esent
entat
atio
ion
n or
objection,
objecti on, the reasons for nonacceptanc
nonacceptance e of the representation
representation or objection
objection to the borrower.
Application by the borrower to DRT against possession : The borrower may make an application
along with such fee as may be prescribed, to DRT, without deposit of any amount.
Action by DRT : On receipt of an application from the borrower. DRT shall consider whether any of the
measu
me asure
res
s take
takenn by the se secu
cured
red credi
creditor
tor for enfor
enforce
ceme
ment
nt of se
secu
curi
rity
ty are in ac acco
cord
rdanc
ance
e with
with the
the
provisions of this Act and fee rules made thereunder. lf, DRT comes to the conclusion that any of the
measures taken by the secured creditor are not in accordance with the provisions of the Act, it may
by, order, declare the recourse to any one or more measures taken by the secured assets as invalid
and restore the possession of the secured assets to the borrower.
If, DRT declares the recourse taken by a secured creditor is in accordance with the provisions of this Act
and the rules made there-under, then, notwithstanding anything contained in any other law for the time
being in force, the secured creditor shall be entitled to take recourse to one or more of the measures to
recover his secured debt.
Appe
Ap peal
al to DR
DRATAT and dep depososit
it of amoun
amountt befbefore appeall : No appeal shall be entertained by
ore appea
Appe
Ap pella
llate
te Tr
Tribu
ibuna
nall un
unles
less
s the
th e bo
borro
rrower
wer ha
hass de
depo
posit
sited
ed with
wit h Appell
App ellat
atee Tribu
Tri buna
nall 50% of the amoun
amo untt
of debt due from him. as claimed by the secured creditors or determined by the DRT, whichever is
less. The Appellate Tribunal may reduce the amount to not less than 25% of debt.
(An earlier provision Borrowers aggrieved by any action of a lender shall be able to approach DRTs
but by depositing 75% of dues up front before appeal has been dispensed with by Supreme Court in
its judgement dated April 09, 2004 while up-holding the constitutional validity of the Act)
Summary of Time Periods in SARFAESI. Act

Notice before possession 60 days
Reply to objection by borrower 15 days
Borrower can approach DRT ag
against possession notice 45 days
Appeall to DRAT against
Appea against decisi
decision
on of DRT 30 days
Ne
P ortiicoed boef fboarelasnaclee payment 75% by the buyer of assets 3
105d
daayyss
Important Section in SARFAESI Act

60 days notice before possession Sec 13 (2)
Assistance by Chief Metropolitan Magistrate or Distt. Magistrate in Sec 14
taking possession
Application to DRT against possession no
notice
tice issued by the
th e bank Sec 17
Appeal againstDRT to DRAT by depositing 50% amount Sec 18
SALE OF CHARGED SECURITIES

Ministry of Finance notified (during Sept 2002) the rules for taking possession and subsequent sale of
assets of defaulters called Securities Interest (Enforcement) Rules, 2002. Under these rules:
 lenders
lenders hav
have'be
e'beenen per
permit
mitted
ted to dispos
dispose e off the assets
assets that
that hav
have
e been
been taken
taken po
poss
sses
essi
sion
on of,
of, bot
both
h
through private treaty and public
public auction.
auction.
 Possession : Prior to _the ., sale of any immovable secured asset, an authorised officer of the lender
would have to take possession of the same by service of a 60 days possession notice
 Sale - Sale by way of publi
publicc tenders or through public auction
auction has to be backed by public notices in in two
newspapers.
 Mini
Minimu
mumm noti
notice
ce peri
period
od : A mi mini
nimu
mum m 30 days
days'' noti
notice
ce to be gi give
venn to the
the owne
ownerr afte
afterr taki
taking
ng ththe
e
possession
possess ion by the authorised officer and the eventual sale of both movable and immo immovable
vable properties.
properties.
 Designate
Designated d Offi
Official
cial - The autho
authorise
risedd officer has to be an officer
officer equivalent
equivalent to a Chief Manager of a
PSB or such person specified by the Board of the lenders. The Board can also appoint a manager
who would manage the secured assets taken possession of by the lenders.
 Reserve price - Both for the movable and immovable assets the lenders would have to make proper
valu
valuati
ation,
on, prior
prior to sa
sale
le.. The rese
reservrve
e pric
price
e wou
wouldld hav
havee to be arri
arrive
vedd at only
only aft
after
er the vavalu
luati
ation
on
exercise:
Valuation of securities- In case of movable secured assets, authorized officer will simply obtain an
estimat
estimated
ed value,
value, for immov
immovablablee prop
propert
erty
y valuati
valuation
on to be obtain
obtained
ed from
from a valuer
valuer app
approv
roved
ed by the
lenders' Board of Directors.
Offer price - In case where a price higher than the reserve price cannot be obtained, the asset can
be disposed off at a lower
lower price with the consent
consent of both the borrower and lender except where the
assets could have natural decay or where the cost of possession might exceed the value of sale.
Sale will be conficonfirmed
rmed after deposi
depositt of 25% by the hi high
ghes
estt bi
bidd
dder
er.. Bala
Balanc
ncee with
within
in 15 days
days of
confirmation of sale.
Right to appeal (Sec 17) Any person (including borrower), aggrieved by any of the measures taken by
the secured creditor or his authorised officer, may prefer an appeal to the Debts Recovery Tribunal
having jurisdiction in the matter within forty-five days from the date on which such measure had been
taken.
(2) Where an appeal is preferre
preferred d by a borrower, such appeal shall not be entertained
entertained by the Debts
Recovery Tribunal
per cent. of unless
the amount the borrower
claimed has deposited
in the notice with
referred to in the Debts Recovery
sub-section o sectiionTribunal
off sect 13
13:: seventy-five
Provided that the Debts Recovery Tribunal may, for reasons to be recorded in writing, waive or reduce the
amount to be deposited under this section.
Save (3) provided in this Act, the Debts Recovery Tribunal shall, as far as may be, dispose of the
appeal in accordance with the provisions of the Recovery of Debts - Due to Banks and Financial
Institutions Act, 1993 (51 of 1993) and rules make thereunder.
Appeal to Appellate Tribunal (Sec 18): Any person aggrieved, by any order made by the Debts
Recovery Tribunal under section 17, may prefer an appeal to the Appellate Tribunal within 30 days
from the date of receipt of the order of Debts Recovery Tribunal. The Appellate Tribunal shall, as far as
may be, dispose of the appeal in accordance with the provisions of the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 and rules made there under.
Right of borrower to receive compensation and costs in certain cases: If the Debts Recovery
Tribunal or the Appellate Tribunal, as the case may be, on an appeal filed under section 17 or section
18 holds the possession of secured assets by the secure creditor as wrongful and directs the secured
creditor
paymenttoofreturn such secured assets
such compensation to the
and costs as concerned borrower,by
may be determined such borrower
such Tribunalshall be entitled to
or Appellate
Tribunal.
Central Registry
Central Registry of Securi
Securitisat
tisation
ion Asset
Asset Reconstruct
Reconstruction
ion and Securi
Security
ty Interes
Interestt
of India (CERSAI)
Central Registry of Securitisation Assets Reconstruction & Security Interest of India Govt. of India
established the Central Registry of Securitisation Asset Reconstruction and Security Interest of
India (CERS
(CERSAI),
AI), a Govt. Company,
Company, U/S 25 of Compani
Companieses Act, 1956 on Mar 31, 2011. It
operates/maintains Central Registry functions as per SARFAESI Act 2002 under the
superintendence and direction of Central Registrar. The majority shareholding (51%) is with
Central Govt., Public Sector Banks and National Housing Bank.
Central Government may, set up a registry to be known as the Central Registry with with its own seal for the
purposes
purposes of regi
registr
strati
ation
on of tran
transac
sactio
tion
n of sec
securi
uritiz
tizati
ation
on and reconstr
reconstruct
uction
ion of financi
financial
al assets
assets and
creation of security interest under this Act. Central Government may define the territorial limits within
which an office of the Central Registry may exercise its functions. The provisions of this Act pertaining to
the Central Registry shall be in addition to any of the provisions contained in the Registration Act, 1908
(16 of 1908), the Compan
Companies ies Act, 1956 (1 of 1956), the Merchant ShipShipping
ping Act, 1958 (44 of 1958),
the Patents Act, 1970 (39 of 1970)
1970),, the Motor Vehi
Vehicles
cles Act, 1988 (49 of 1988),
1988), and the Designs
Designs
Act , 2000
Act, 20 00 (16
(1 6 of 2000
20 00)) or any
an y ot
other
her law requre quirinirin g reg ist
istra
ratio
tion
n of charge
cha rge s anandd sh
shall
all not affe af fect
ct the
th e
priority of charges or validity thereof under those Acts or laws.
Centra
Cen tralRe
lRegis
gistra
trarr (Se
(Secc 21): CentCentra rall Go
Gov vernm
ernmen entt may
may appo appoiint a pers personon for for the the purp
purposose e of
registration of transactions relating to securitisation, reconstruction of financial assets and security
interest created over properties, to be known as the Central Registrar. Central Government may
appoint such other officers under the superintendence and direction of the Central Registrar.
Registe
Regi sterr of securiti
securitisati
sation,
on, reco
reconst
nstruct
ructionion and secu security
rity interest
interest tran transac
saction
tionss (Sec 22) : A rec record
ord
called the Central Register shall be kept at the Head Office of the Central Registry (wholly or partly
in computer, floppies, diskettes or in any other electronic form) for entering the particulars of the
transactions relating to securitisation of financial assets;reconstrassets;reconstruct uction
ion of financi
financialal assets
assets;; and
creation
creatio n of security
security inter
interest.
est.
Filing of trans
transactio
actions
ns of securitisatio
securitisation, n, reconstru
reconstruction ction and creacreation tion of security
security interest
interest (Sec 23)
The particulars of every transaction of securitisation, asset reconstruction or creation of security
interest shall be filed, with the Central Registrar on payment of prescribed fee, within 30 days after
the dat e of s uc h t r a n sa ct i o n or cr e a t i o n of s e c u r i t y, by th e
securitisati
securi tisation
on company or reconstructi
reconstruction on company or the secured creditor, as the case may be. Central
Registrar may allow the filing of the particulars of such transaction or creation of security within 30
da
days
ys nenexxt foll
follow
owin
ing
g the
the ex
expipiry
ry of the
the said
said pe peririod
od of 30 da daysys on pa paym
ymenentt of ad addi diti
tion
onal
al fees
fees nonott
exceeding 10 times the amount of such fee.
Modific
Mod ificati
ation
on of securi
security
ty intere
interest
st regist
registereered d under
under this Ac Actt (Sec (Sec 24) : Whenever the terms or
conditions, or the extent or operation of any security interest registered under this Chapter are or is
reconstruction company or the secured creditors, as the case may be, to send to the Central Registrar,
the particulars of such modification, and the provisions of this Chapter as to registration of a security
interest shall apply to such modification modified, it shall be the duty of the securitisation company or
the of such security
security interest.
Securitisation company
security interest or The
(Sec 25): reconstruction company or secured
securitisation/reconstruction creditors
company to report
or the secured satisfaction
creditors, shall of
give intimation to the Central Registrar of the payment or satisfaction in full within 30 days from the date
of su
such
ch pay
paymen
mentt o
orr sati
satisfa
sfacti
ction.
on. The Ce
Centr
ntral
al Regi
Regist
stra
rarr shall
shall,, send
send a no
noti
tice
ce to the
securitizat
securi tization
ion /reconstruc
/reconstruction
tion company or the secured creditors calling
calling to show cause within a time not
exceeding fourteen days as to why payment
payment or satisfacti
satisfaction
on should not be recorded as intimated
intimated to the
Central Registrar. If no cause is shown, the Central Registrar shall order that a memorandum of
satisfaction shall be entered in the Central Register.
Right to inspect particulars of securitisation, reconstruction and security interest transactions
(Sec 26): The particulars of securitisation or reconstruction or security interest entered in the Central
register of such transactions kept under section 22 shall be open during the business hours for inspection
by any person on payment of such fees as may be prescribed. The Central Register maintained in
electronic form, shall also be open during the business hours for the inspection of any person through
electronic media on payment of such fees as may be prescribed.
OFFENCES AND PENALTIES
Penalties (Sec 27): If a default is made in filing under section 23, the particulars of every transaction of
any securitisation or asset reconstruction or security interest created by a securitisation company or
reconstruction company or secured creditors; or in sending under section 24, the particulars of the
modification referred to in that section; or in giving intimation under section 25, every company and
every officer of the company or the secured creditors and every officer of the secured creditor who is in
default, shall be punishable with fine which may extend to Rs.5000 for every day during which the
default continues.
Pena
Pe nalti
lties
es for non-co
non-compl
mplian
iance
ce of direc
directition
on of Rese
Reservrve
e Bank
Bank (Sec 28): If any securiti
(Sec 28): securitisati
sation
on
company or reconstruction company fails to comply with any direction issued by the Reserve Bank
under section 12, such company and every officer of the company who is in default, shall be
punishable with fine which may extend to Rs.5 lac and in the case of a continuing offence, with an
additional fine which may extend to Rs.10000 for every day during which the default continues.
Offences (Sec 29): If any person contravenes or attempts to contravene or abets the contravention of the
provisions of this Act or of any rules made there under, he shall be punishable with imprisonment for a
term
term whi
which
ch may
may extend
extend to
to one y
year,
ear, or wi
with
th fine,
fine, or
or with
with both.
both. No cour
courtt inferi
inferior
or to that
that ooff a Me
Metrop
tropoli
olitan
tan
Magistrate
Magis trate or a Judic
Judicial
ial Magistr
Magistrate
ate of the first class shall try any offence punishable under this Act.
MISCELLANEOUS : What kind of loans are not covered (Sec 31): Provisions of this Act not to apply in
case of:
(a) a lien on aany
ny goods, money o orr security.
security.
(b) a ple
pledge
dge ooff movables;
movables;
(c) creation of any security in any aircraft;
(d) creation of security interest in any vessel;
(e) any conditi
conditional
onal sale, hire-p
hire-purchase
urchase or lease or any other contrac
contractt in which no security interes
interestt has
been created
created;;
(f) any rights of unpaid
unpaid seller
seller under secti
section
on 47 of the Sale of Goods Act, 1930 ((3 3 of 1930);
(g) any properti
properties
es not liable to attachm
attachment
ent or sale under Section
Section 60 of the Code of Civil Procedure,
Procedure, 1908;
(h) any securit
securityy interest for securi
securing
ng repayment of any financial asseassett not exceeding
exceeding Rs.1 lac;
(i) any security interest created in a agricultural
gricultural land;
(j) any case in which
which the amount due is les less
s than 20% of the princi
principal
pal amount and in interest
terest the
thereon.
reon.
Civil court not to have jurisdic
jurisdiction
tion (Sec 34): No civil court shall have jurisdiction
jurisdiction to entertain any
suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate
Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court
or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or
under this Act or under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993.
Limitation (Sec 36):No secured creditor shall be entitled to take all or any of the measures section
13,, un
13 unle
less
ss his
his clai
claim
m in re resp
spec
ectt of the
the fi
fina
nanc
ncia
iall as
asse
sett is made
made wi with
thin
in the
the peri
period
od of lilimi
mita
tati
tion
on
prescribed
prescri bed under the Limitation Act, 1963.
Power of Central Government to make rules (Sec 38): The Central Government may make rules
for carrying out the provisions of this Act. Such rules may provide for all or any of the following
matters, namely:-
(a) the form and manner in whic which
h an appli
application
cation may be file
filed
d under section 13;
(b) man
mannerner in whi
which
ch the rirights
ghts of a sec
secured
ured credit
creditor
or may be exerci
exercised
sed by one or more of his officerofficers
s
under section 13;
(c) the safeguards
safeguards subject to whic which
h the records may be kept under section 22;
(d)
such manner in which parti
transaction; particular
culars
s of transaction of secur
securitisa
itisation
tion shall be filed under sec 23 and fee for filing
(e) the fee for inspecting
inspecting particul
particulars
ars of transactions
transactions kept ufs 22 and entered in Central Register
Register section
26;
(f) the fee for inspecting
inspecting the Central Register
Register maintai
maintained
ned in electroni
electronic
c form under section
section 26;
Type
Type of tra
transa
nsactions - It regi
ctions register
sters
s tran
transac
saction
tions
s rel
relatin
ating
g to securi
security
ty interes
interestt ove
overr propert
property
y and
transactions of securitization and asset reconstruction. With registration of these transactions, a
publ
pu blic
ic data
data base
base is cr
crea
eated
ted ab
abououtt enc
encumb
umbra
ranc
nces
es cr
crea
eated
ted on prprop
oper
ertie
ties
s to secu
securere lo
loan
anss an
andd
adva
ad vanc
nces
es given
given by banks
banks/F /FIs
Is,, as also
also tran
transa
sact
ctio
ions
ns of se
secu
curi
ritiz
tizat
atio
ion
n or asse
assett re
reco
cons
nstr
truc
uctio
tion
n
undertaken under provisions of the SARFAESI Act.
The following transactions are not covered : (1) Securitization or asset reconstruction done
outside the provisions of the SARFAESI Act ; or (2) Security interest created in favour of any lender
not included in the definition,of bank or, FI as per SARFAESI Act. Who is covered : The secured
.
creditors mandatorily which include: (1) Banks
(2) Financinotified
Financial under
al Instituti
Institutions theDebenture
ons (3) SARFAESI Act are
trustees to nted
file the
appointed
appoi by details
any Bank or FIs (4) Securitizati
Securitization
on Company
or Reconstruction Company (5) Any other trustee holding securities on behalf of a bank of Fl. Others, not
notified can also file their records. Time limit for filing details for registration:
(a)Within 30 days of date of transaction.
(b)For delay
de lay up t o next 30 da days,
ys, permission of Central
Central Registr
Registrar
ar a
and
nd th
there
ere afte
after,
r, p
perm
ermiss
ission
ion of Centra
Centrall
Govt. is required.
The right to enforce security U/S 13 of SARFAESI Act is not linked to the registration with the Central
Registry and such enforcement can be done even if there is no registration with the Central Registry.
The registration under SARFAESI Act is additional and does not affect the requirement of registration
under Companies Act or Indian Registration Act. Search of records: The records maintained by the
Central Registry are available for search by any lender or any other person, by paying fee of Rs.50.
Forms:
Actt or Ind
Ac Indian
ian Regis
Registratratio
tion
n Act. Search
Search of recor records:
ds: The record
records s maintai
maintained
ned by the Central
Central
Registry are available for search by any lender or any other person, by paying fee of Rs.50. Forms:
Form- 1 : For regi
registrati
stration
on and modification
modification
Form- 2 : For sat
satisfac
isfaction
tion
Form- 3 : For registration
registration and modifica
modification
tion of Securitizati
Securitization/Reco
on/Reconstruc
nstruction
tion transactions
transactions
Form-4: Fo Forr sati
satisfac
sfactio
tion
n of Securi
Securitiza
tizatio
tion/R
n/Reco
econstr
nstruct
uction
ion transa
transactio
ctions
ns
FEE
Within days of transaction Up to Rs.5 lac Above Rs.5 lac
1st - 30 h day Rs.250 Rs.500

Addition
Additional
al fee for dela :
After date of Up to
to R
Rss.5 lla
ac Above Rs
Rs.5 lla
ac
transaction
31st- 40 h day Rs.500 Rs.1000
41st- 50 h day Rs.1200 Rs.2500
51st - 60h day Rs.2500 Rs.5000
LOK ADALAT
Lok Adalt is similar to a civil court which can be organized by the State Authority, the Distt.
Authority, the Supreme Court
Co urt • Legal Service Committee or High Court Legal Services
Committee,
Commit tee, at such interv
intervals.
als. and places as deemed appropriate. The Lok Adalts are created
under Legal Serv
Services
ices Authority Act 1987.
Jurisdiction and types of case : A Lok Adalt has jurisdiction to determine and arrive at a compromise or
settlement between the parties to the dispute. It deals with the cases where (a) the parties to the dispute
agree to refer the issue to Lok Adalt; (b) one of the parties approaches the Lok Malt and Lok Adalt is
satisfied that there are chances of settlement. In such case, the Adalt issues notice to the other party; (c)
in the opinion of the Lok Adalt, the cognizance of the dispute can be taken. Cases that cannot be taken
up: The offences, which are compoundable under any Law, cannot be brought within the purview of the
Lok Adalt. This implies that the Lok Adalt has no authority of its own, to pass judgements.
Awards of Lok Adalt: T Their
heir awards are in the form of consent decrees. NO appeal lies against
aga inst such
Awards which is binding on all parties.
p arties. procedure and powers: Civil Procedure Code is applicable
ap plicable which
means
determinethe court
Lok Adalt can send
procedures. summons,
Where take evidence
compromise on oath,The
is not reached: initiate
initiate ex-parte
caseex-par
shalltebeproceedings,
returned backand
to the
court from which the reference was received for continuing with the case, there.
RBI GUIDELINES ON LOK ADALTS
To make increa
increasing
sing use of the forum of Lok Adalats
Adalats to settle
settle banking
banking disputes
disputes involving
involving smaller
smaller amounts,
RBI during April 2001 advised
advised banks and financial insti
institutions
tutions to follow the following
following guidelines
guidelines for
implementation:
I. Amount - Cases involving an amount up to Rs.20 lakh (R131 enhanced it from Rs.5 lac, Aug 03, 2004)
may be referred to Lok Adalats.
2. Borrowers : All NPA accounts (other than time barred), both suit filed and non-suit filed, which are in
"doubtful" and "loss" category. No cut off date is suggested since Lok Adalat is an on-going process.
3. Settlement Formula : It would be flexible with following essential parameters:
a A decree should be sought from the Lok Adalat for the principal amount and interest claimed in the suit,
and after full payment of decree amount, a discharge certificate should be issued by the bank /
financial institution.
b Repayment period to be within 1-3 years.
c The negotiated agreement should contain a default clause. If borrower does not pay due amount
regularly, within the repayment period, entire debt will fall due for payment & bank may initiate legal
proceedings.
d The representing
representing Officers should have sufficien
sufficientt powers to accept the compromises
compromises worked out within
bank policy framework
framework and should respond pro-activ
pro-activelyely to the suggestion of the Presi
Presiding
ding Officer of
the Lok Adalat.
DRT LOK ADALATS
Banks can take up matters where outstanding exceed the ceiling of Rs.20 lac, with Lok Adalats organised
by the Debt Recovery Tribunals
Tribunals / Debt Recovery Appel
Appellate
late Tribunals.
Tribunals.
Supreme Court suggestion :Supreme Court has suggested that personal loan cases up to Rs.10 lac
should preferably settled through Lok Adalats.
Organisational arrangements
The individual banks and financial
financial institutions
institutions should be more pro-active
pro-active and should take the responsibil
responsibility
ity
of organising Lok Adalats. The institutions should get in touch with State / District / Taluk level Legal
Services
Servi ces Authoritie
Authorities
s for organising
organising Lok Adalat
Adalats.
s. The banks should report the progres
progress
s to RBI, at quarter
q uarterly
ly
intervals
intervals within one month from the quarters ending March, June, September and December. RBI
monitors
monitors the progre
progress
ss made by the institutions
institutions in effecting recovery
recovery under the scheme
LIMITATION ACT 1963
Definition: "Peri
"Period
od of lilimi
mitat
tatio
ion"
n" means
means the pe
peri
riod
od of lilimi
mitat
tatio
ion
n presc
prescri
ribed
bed for any su
suit
it,, ap
appea
peall or
applica
appli cati
tion
on by the Sc Sche
hedul
dule,
e, and "pres
"prescr
crib
ibed
ed peri
period
od"" mea
meansns the peperi
riod
od of lilimi
mitat
tatio
ion
n co comp
mpute
uted
d in
accordance
accordan ce with the provisio
provisions
ns of this Act.
Limitation and its computation : As per Section 3 of the Act, Act, every suit instituted
instituted,, appeal preferred,
preferred,
and application made after the prescribed period shall be dismissed although limitation has not been set
up as a defence. For the purposes of this Act, a suit is instituted, when the plaint is presented to the
proper officer. Any claim by way of a set off or a counter claim, shall be treated as a separate suit and
shall be deemed to have been instituted-
instituted- (i) in the case of a set off, on the same date as the suit in
which the set off is pleaded; (ii) in the case of a counter claim, on the date on which the counter claim is
made in courtcourt..
Computation of period of limitation :
1. When the prescribed limitation period expires on a day when the court is closed, the suit, appeal or
application may be instituted, preferred or made on the day when the court re-opens.
2. Any ap appea
peall or any
any ap
appli
plica
cati
tion,
on, other
other than
than an appli
applica
cati
tion
on other
other than
than exexec
ecuti
ution
on pepeti
titi
tions
ons may
may be
admitted after the prescribed period if the appellant or the applicant satisfies the court that he had
sufficient
suffic ient cause for not preferrin
preferringg the appeal or making the application
application within
within such period.
3. In computing the period of limitation for any suit or application for the execution of a decree, the
institution or execution of which has been stayed by injunction or order, the day on which it was
issued
issu ed or made, and the day on whic which
h it was withdrawn,
withdrawn, shall be excluded.
4. In computing the period of limitation for any suit of which notice has been given, or for which the
previous consent of
the requirements or any
sanction of the
law for the Government
time being in or any other
force, authority
the period is required,
of such notice or,inas
accordance
the case maywith
be, the time required for obtaining such consent or sanction shall be excluded.
arranged by DRT, cases involving amount of more than Rs 20 lakh can also be filed
1. In order to make a definite
definite impact
impact on reducti
reduction on of NPA
NPAs,s, the scheme
scheme may include
include all NPA accounts,
accounts,
both
both susuit
it file
filed
d and
and non-
non-su
suit
it fi
file
led
d acco
accoununts
ts,, wh
whicich
h are
are in "dou
"doubtbtfu
ful"
l" and
and "los
"loss"
s" cacate
tego
gory
ry,, with
with
outstanding balance up to Rs.20 lakh. No cut off date is suggested since Lok Adalat is an on-going
process.
2. Repayment
Repayment should be preferably by down payment and within a maximum period period of 'Ito 3 years.
3. Civil
Civil Procedure Code is applicable and they are civil courts for this purpose.
4. Filing
Filing a case with Lok Adalat does not extend limita limitation
tion period.
5. . In computing the period of limitation for any suit the time during which the defendant has been
absent
abs ent from India and fromfrom the territ
territori
ories
es out
outsi
side
de Indi
Indiaa under
under the admini
administr
strati
ation
on of the Centra
Centrall
Government, shall be excluded.
6. Extension of Limitation Period : Period of limitation limitation can be extended by Acknowledgemen
Acknowledgementt of debt
or part payment. In both cases, limitation period will start from the date of Acknowledgement or part
payment. The acknowledgment or part payment should be by the borrower himself or his agent
specifically authorized for this purpose; Acknowledgement or part payment should be before the
expiry of limitation period. Once the limitation expires it can not be extended by part payment or
ac
ackno
knowl
wledg
edgemement
ent of debt;
debt; The stamp
stamped ed acackno
knowl
wled
edgem
gement
ent of debt
debt by the borrow
borrowerer bebefor
fore
e the
expiry of documents does not automatically extend the period of limitation against the guarantor.
Similarly, the acknowledgement of debt signed by the principal debtor and a surety does not bind
an
anoth
other
er surety
surety who has no nott joi
joined
ned in si signi
gning
ng the ac ackno
knowle
wledge
dgemement
nt / reviv
revival
al le
lette
tterr of de
debt;
bt; An
admission of debt in the balance sheet filed by a firm before the I.T. Authority also extends the
period of limitation from the date of (signing) the balance sheet. Such an acknowledgement does
not require to be stamped. The balance sheet constitutes sufficient acknowledgement of debt in
writing; in case limitation expires in a particular case, the liability can be revived by obtaining fresh
promise to pay the outstanding debt. As per section 25 (3) of Indian Contract Ac, a time barred debt
is a valid consideration. Limitation period of various documents is given below:
Description
Temporary Overdraft without DPN 3Period
years froof
m Limitation
date of loan
Demand Lo
Loan 3 years from the date of loan
Demand P
Prromissory No
Note 3 years from date of DPN
Bill of exchange payable on demand 3 years from date of Bill.
Usance bill
bill of exch
exchange
ange or prom
promissor
issory
y note 3 years fro
from
m the due date of the bill
bill or promisso
promissory
ry
note
Term Loans payable by instalments where 3 years from due date of each instalment
creditor has no right to recall the advance for
the reason of defaul
defaultt
Mortgage 12 yea
earrs fro
from the
the du
due
e da
datte of the loa
oan
n
Right of foreclo
foreclosure
sure by the mortgagee
30 years from the date when money became due
Right of rredemp
edemption
tion 30 years from the date when the right to recover
recover
accrues.
For the balance due on a 3 years
years fro
from
m close
close of the fin
financ
ancial
ial year
year in
in which
which last item
item
mutual, open and curren
currentt entere
ent ered
d in the accoun
accountt is admitted
admitted or proved
proved
account like cash credit
Any suit by State/Central Government 30 years from the date when limitation would start
Mone de osited a able on 3 ears from date of demand
demand like SB , Current A/c

Appeal
Appeal to be filed
filed to High
High Cou
Courtrt aga
again
inst
st the 90 days from the date of decree
judgem
judgementent of Lowe
Lowerr Court.
Court.
Appea
Appeall to be filed
filed to other
other courts
courts on the decree
decree 30 days from the date of decree
at Lowe
Lowerr Co
Cour
urtt
Execution of Decree 12 years from the date of decree
Reco
Recove
very
ry of loss
loss ca
caus
used
ed by fr
frau
aud
d 3 ye
year
ars
s from
from the
the date
date of dete
detect
ctio
ion
n of frau
fraud
d
TAX LAWS
TAX DEDUCTED AT SOURCE
Interest on deposits with banks:
a) No tax is deducted at source on interes
interestt payable on saving bank deposi
deposits.
ts.
b) TDS on interest on deposits wil
willl be deducted only if the interest
interest paid or payable
payable credited or to be
credited in a financial year exceeds Rs.10,000.
credited
c) Rate of TD
TDS S : 10%
d) Interest paid on NRE, FCNR accounts is exempt from incom incomee tax and therefore
therefore no deduction
deduction of
tax at source.
e) Submi
Submissi
ssion
on of For
Formm No.15G/15H
No.15G/15H : No deducti
deductionon shall be made in the case of individu
individual
al who
is resident in India who furnishes a declaration in writing in duplicate in the prescribed form
15G (in.. the case of other than senior citizens) or on 15H in the case of senior citizens and
satisfy the following conditions: (a) Depositor is a person other than a company or Firm. (b)
Tax on the estima
estimatedted income of the deposit
depositoror for the financi
financial
al year will
will be NIL. (c) The amount
of intere
interest
st on secsecuri
uritie
ties,
s, div
divide
idends
nds,, Int
Intere
erest
st oth
other
er than
than in
inter
teres
estt on sesecur
curiti
ities,
es, pay
paymen
mentt in
respect of deposits under National Savings Scheme and income in respect of units credited or
paid during the previous year does not exceed the maximum amount, which is not chargeable
to income-tax. Condition at (c) is not applicable, if the depositor is a resident individual whose
age is 65 years or more at any time during the financial year.
f) In cases whe
wherere the deduct
deducteeee who furnis
furnishes
hes For
Formm No. 15G or 15H but does not provideprovide PAN
PAN,,
TDS will be deductible @ 20% w.e.f 01.04.2010.
g) Dec
Declar
larati
ation
on obtained
obtained on For
Form
m 15G or 15 H is to be obtai
obtained
ned at the beginnin
beginning
g of the eve
every
ry
financial year or before the deduction of Tax at source. The declaration will remain valid only for
one Assessment year. One copy of form 15G/15H is to be delivered by the branch/office to the
Income Tax Office on or before the seventh day of the succeeding month. In case the Forms are
dispatched through post or courier or through any other medium, the same should reach the
Assessing Officer latest by seventh day of succeedin
succeeding g month.
In case of joint account, and in the absence of any information to the contrary, both the persons can
be treated as payees for the purposes of TDS. In such cases, the interest on a joint account may be
aggregated with
with the inter
interest
est on deposits in the individual
individual account
account that has higher interest
interest income.
i) Where the depositor submits certificate from the Income Tax Assessing Officer for deducting tax at a
lower rate or for not deducting tax at all, then, the bank will act as per the certificate issued by the
Assessing Officer. The certificate is valid only for the person named therein and will remain valid for
A.Y. so specified in certificate.
j) Quarterly Return: As per amendment made in section 194 A (3) (1), the quarterly return u/s 206A
shall have to be furnished if the payment of interest to a resident does not exceed Rs. 10,000/-
where the payer is a banking company or a co-operative society .
2. Payment to Resident Contractors:
a) The deduction will be made only where the amount of any sum credited or paid or likely to be
credited or paid to the account of, or to, the contractor or sub-contractor exceeds Rs.30,000/- or
more in a single payment or Rs.75,000/- in the aggregate during the financial year.
b) Rate of TDS: 1% if the paypayment
ment is to an indiv
individua
iduall or a HUF and 2% for payment to others. TDS is
not deductible if contractor is engaged in transport business if PAN is furnished.
3. Brokerage/Commission other than Insurance Commission
a) Tax will be deducted at source if the amount credited or paid or likely to be credited or paid
exceeds
exceed s Rs.5,000/- in a financial
financial year. (b) Rate of TDS: 10%
4. Rent:
a) Tax will be deducted at source if the amount of rent credited/paid during the financial year exceeds
Rs.180000.
b) fittings:
Rate of10%
TDS:(i)Rent of Plant or machinery or equipment: 2%; (ii) Rent of land, building furniture or
c) If there are a number of payees each having definite and ascertainable share in the property, the
limitt of Rs.1,80,000/- will
limi will apply to each of the payee/co-owner
payee/co-owner separately.
separately.
d) The Tax Deducted at source under this section shall be required to be made on the amount of rent'
paid/payable without including service tax.
5. Fees for professional or technical services 'or Royalty:
a) Tax will be deducted at source if the payment
payment in a Financial
Financial year is more than Rs 30,000.
b) Rate of Tax: 10%
c) If a consolidated bill is given by a professional/ consultant for his fess as well as out of pocket
expenditure, then the entire amount is subject to TDS. If a separate bill is given for reimbursement of
out of pocket expendi
expenditure,
ture, then reimbursement
reimbursement of expenditure is not subject
subject to tax deduction.
deduction.
6. IntIntere
erest
st Payme
Paymentsnts Mad
Made e To Non-Re
Non-Resid
sidents Tax will
ents will be de
deduc
ducte
ted
d at sosour
urce
ce on in
inter
teres
estt on
deposits
deposit s irres
irrespectiv
pective
e of type of accoun
accountt and amount of interest.
a) Rates of TDS: (i) if the recipient is a non resident non corporate person:. 30% plus education cess
2% and
and se seco
cond
ndar
ary
y and
and hi
high
gher
er educ
educat
atio
ion
n ce
cess
ss 1% i.e.
i.e. to
tota
tall TDS
TDS at th
the
e rate
rate of 30.9
30.90%
0%.. No
surcharge to be charged (ii) If the recipient is a non domestic company: 40% plus education cess
@ 2% and secondary and higher education cess @1%. Further surcharge will be charged at 2.5%
if aggregate payment or credit exceeds Rs 1 crore. (Total TDS will be 41.20% or 42.23%)
7. Time Limit For Depositing of TDS, Issuing TDS Cert. and Filing of Quarterly Return:
a) Tax deducted should be deposited within one week from the last day of the month in which tax is
deducted.
b) However, if interest or amount of rent or commission or payment to contractor is credited to the
account of the payee during March then TDS can be deposited upto 30 th April.
c) The statement of TDS should be sent on form 24 Q in the case of salaries, on form 26 Q in all other
payments to residents and on form 27Q for all payments to non residents.
th th
d) The statement of TDS should be sent within 15 days from the end of quarter i.e. 15 July, 15
October, 15th January. In the case of last quarter of financial year, the return can be sent within 45
days i.e. by 15th May.
e) The TDS certificate except in the case of salary should be issued in form No. 16A within 15 days
from the due date of the quarterly statement. In the case of TDS on salary, the same should be
issued on Form No. 16 and 12BA by 31 s' May immediately following the financial year in which the
income was paid and tax deducted.
deducted.
f) Quar
Quarterl
terly
y TDS return shoul
shouldd be submit
submitted
ted in ele
electro
ctronic
nic form. Form No.27A
No.27A is to be furnish
furnished
ed in
paper form by deductor along with the e-TDS Return. It is a summary of e-TDS Returns which
contains control totals of amount paid and income tax deducted at source. A separate form No. 27A
is to be furnished for each e-TDS Return i.e. one each for Form Nos.24Q, 26Q and 27Q.
8. Consequence of failure to deduct and pay Sec. 201: As per section 201 of the Income Tax Act, if
a person who is required to deduct tax at source does not deduct the same or after deducting fails to
pay the tax, then, such person shall be deemed to be an assessee in default in respect of such tax
and shall be liable to pay simple interest at the rate of 18% per annum w.e.f. financial year 2010-11on
the amount of such tax from the date on which such tax was deductible to the date on which such tax
is actually paid. Further, such person shall be liable to pay, by way of penalty, a sum equal to the
amount of tax which such person failed to deduct or pay as aforesaid.
9. Failure to comply
comply with prov provisions
isions rega rding TAN: If the
regarding the person required to deduct tax at source, tails to
apply for TAN or after allotment of such number fails to quote such number wherever required then he shall be
liliab
able
le for
for pena
penalt
lty
y of a su
sum
m wh
whic ich
h may
may exte
extend
nd to Rs
Rs.1
.10,
0,00
000/
0/-.
-.
10.. Failure
10 Failure to issue cert
certifica
ificate,
te, or submit return,
return, statem ent, etc. : If any person fails to furnish
statement, furnish in due time
time
annual return for tax deducted; or furnish certificate of tax deducted at source; or furnish in due time quarterly
statement of TDS deposited, then, he shall be liable for penalty which shall be Rs.100 for every day during
which the failure continues subject to a maximum of the amount of tax deductible.
11.Prosecution under section 276B: If a person fails to pay to the credit of the Central Government, the tax
deducted at source by him, then he shall be punishable with rigorous imprisonment for a sum which shall not be
le
less ss th
than
an thre
three
e mo
montnths
hs but
but wh
whic
ich
h may
may exte
extend
nd to sev
seven year
yearss an
andd with
ith fine
fine..
12.TDS
12.T DS on pay paymen
mentt of InteInteres
restt on Non ResResiden
identt (Ord
(Ordina
inary)A
ry)Accou nt: India
ccount: India has entere
enteredd int
into
o Double
Double
Taxation Avoidance Agreement (DTAA) with many countries, in order to to grant relief in the tax payable on the
same income in both the countries (i.e. the country of residence of the non-resident as well as India). As per
Section 90 of the Income Tax Act, the tax should be deducted at the rate provided in the Finance Act of the
relevant year or the rate provided in the DTAA with that country, whichever is more beneficial to the assesses.
ANNUAL INFORMATION RETURN

AIR is a mechanism through which tthe
he Income Tax Deptt is looking to ensure automatic flow of
information on the material financial transactions entered into by the tax payers with other persons. The
information is to be utilized by the Revenue Deptt for widening/ deepening of tax base.CBDT has specified 7
categories of persons who are required to file AIR with the Income Tax Deptt, which include:
Banks — on cash deposits aggregating to Rs.10 lac or more in a year in any savings accounts of a persons
 Companies, banks or institutions issuing credit cards — payments made by any person against bills raised
in respect of a credit card issued to that persons, aggregating to Rs.2 lac or more in a year
Mutual Funds — receipt of an amount of Rs.2 lac or more for acquiring units of that fund.
 Companies for shares - transactions where company has received from any person an amount of Rs.1 lac
or more for acquiring shares issued by the company.
 Companies or insti
institutions
tutions for bonds — receipt of an amount of Rs.5 lac or more for acquiring bonds or
debentures issued by the company or institution. Sub-registrar — purchase or sale, by any person, of
immovable property valued at Rs.30 lac or more.
RBI — receipt of an amount aggregating to Rs.5 lac or more in a year for bonds issued by RBI.
DEDUCTION OF TAX AT SOURCE

Interest on Term Deposits (Sec-194A) Deposits on which tax to be deducted: Fixed deposit /Time
Deposit includi
Deposit including
ng Recurri
Recurring
ng Deposi
Deposit.
t. (RD w.e.f. 1.6.15).
Amount on which to be deducted: Interest paid/ credited or likely to be paid /credited to the customer or
interest payable account or suspense account etc. during the financial year from all his term deposits
accounts in a bank (including a cooperative bank), should be taken for reckoning the cut of limit of Rs
10,000, w.e.f. 01.06.2015. Non-resident a/c: Interest on NRE, and FCNR accounts is exempt from
TDS. For NRO a/c, TDS applicable
applicable for all interes
interestt payments in all accounts.
accounts. (if funds are in the form
f orm of
inward remittance from abroad, deduction would be 20% instead of normal 30% + 10% surchage).
Joint Accounts & minor's account: Interest would be accounted in the hands of first named joint
holder. In the absence of any information to the contrary, aggregate the interest of a joint account
with the interest
accounts on deposit
in the name in the
of minors, theindividual
deductionaccount
to be madewhoinhas
the higher
name ofinterest
parentsincome. In case of
/ guardians.
TDS
TD S at lower
lower rate
rates
s : If a depo
deposit
sitor
or submit
submits
s cer
certifi
tificate
cate from the Income
Income Tax Assess
Assessing
ing Officer
Officer for
deduCting tax at a lower rate or for not deducting tax at all, then, the bank will act as per the certificate
issued by the Assessing Officer. Issue of TDS certificate : Banks are to issue TDS certificate within one
month from the end of the quarter in which credit is given or the amount is paid.
Where deduction is not to be made
1.
1.Wher
Where e the agg
aggreg
regate
ate amount
amount of in inter
teres
estt dur
durin
ing
g the financ
financial
ial year
year doe
doess not exceed
exceed Rs.100
Rs.10000/
00/-.
-.
2.
2.Wher
Where e inter
interest
est is credi
credited
ted or pai
paid
d to any bankin
bankingg compan
company, y, co-
co-op
op socie
society
ty engage
engaged d in banki
banking
ng
business, public financial institutions, LIC, UTI, a company or a co-operative society carrying on the
business of insurance.
3.Where interest is credited or paid in respect of deposits (other than time deposits) with a banking
company or (interest to non-members) with a cooperative society engaged in carrying on business of
banking.
4. Where interest is credited/paid for deposits (by non-members) with a primary agricultural credit society
or co-operative
co-operative land mortgage bank or cooperative
cooperative land developme
development nt bank.
Submission
Submi ssion of Form No.15G/15H
Under section 197A (i) of the Income Tax Act, no deduction shall be made in the case of an
individual
indiv idual who is reside
residentnt in India and furnis
f urnishes
hes a declar
declaration
ation in writing
writing in duplicate,
duplicate, in the prescribed
prescribed form
i.e. 15G (15H for senior citizens of 60 years and above) and satisfied the following conditions:
1.Depositor is other than a company or Firm.
2.Tax on the estimated income of the depositor of the financial year will be NIL.
3. The amount of interest on securities, dividends, Interest other than interest on securities, payment
in respect of deposits under National Savings Scheme and income in respect of units credited or paid
during the previous year does not exceed the maximum amount, which is not chargeable to income-tax.
This condition is not applicable, if the depositor is a resident individual whose age is 60 years or
more at any time during the financial year, in such case he will have to submit form 15H in duplicate to
the bank. Action Points for receiving Form 15G/15H
(a) Declaration
Declaration is vali
valid
d for one financial yyear.
ear.
(b) Form to be delivered
delivered to Income Tax Office on or before the 7th day of the succeedin
succeeding
g month.
Payments To Cont
Payments Contrac
ractors
tors ( Section
Section-194 C) Wher
-194C) Where
e the
the bank
bank is pay
payin
ing
g any
any su
summ to a resi
reside
dent
nt
contra
con tracto
ctor,
r, at the time
time of pay
paymen
ment/c
t/cred
redit
it of such
such sum
sum to the con
contra
tract
ctor,
or, ban
bankk should
should deduct tax. The
deduction will be made where the amount of any sum credited or paid or likely to be credited or paid to the
account of, or to, the contractor or sub-contractor exceeds Rs. 20,000/- (Rs.30000 wef 1.7.10) or more in a
single payment or Rs.50000/- (Rs.75000 wef 1.7.10)in the aggregate during the financial year .
No TDS is to be deducted where Contractor or sub-contractor brings an appropriate certificate for non-
deduction of tax from the Assessing Officer. Further, no deduction of tax is to be made at source in case
of payment to Government, RBI, Corporation established under Central Act whose income is exempt
from income tax or from a mutual fund specified u/s. 10(23D) of the InCome Tax Act.
Rent (Section 194 I)
No tax is ded
deducucti
tibl
ble
e if the amoun
amountt of rent
rent cred
credit
ited
ed/pa
/paid
id du
duri
ring
ng the finan
financi
cial
al ye
year
ar does
does no
nott ex
exce
ceed
ed
Rs.180000/-
Rs.18000 0/- (Rs.120000 up to 30.06.20
30.06.2010).
10).
If there are a number of payees each having definite and ascertainable share in the property, the limit of
Rs. 1,80,000/- will apply to each of the payee /co-owner separately.
No deduction of tax is to be made at source in case of payment to Government. No tax is to be deducted
at source in case of local authorities and statutory authorities referred to Section 10(20A)/10(20) subject
to submission
submission of Tax Exemption Certific
Certificate
ate by the said authori
authorities.
ties.
Payment For Professional Or Technical Services (Section-194))
Where the Bank is paying to a resident any sum exceeding Rs. 30,000/- (Rs.20000 up to 30.0.6.10) in a
Financial Year by way of fee for professional services, or fee for technical services, bank shall, at the
time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by
issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount as specified in
the table given above of such sum as income-tax on income comprised therein.
Penalties — Income Tax & Service Tax
 Failur
Failure
e to ensure payment
payment of FDR of Rs.20000
Rs.20000 or above,
above, not in cash : penalty
penalty equal to sum of the
payment (Sec 271E, IT Act)
 Failure
Failure to furnis
furnish
h Annual Informatio
Informationn Return : penalty
penalty of Rs.100 for each day during which
which the failure
failure
continues (Sec 271FA , IT Act)
 Failure
Failure to furnish return of inco
income
me : penalty of Rs.5000 (Sec 271F , IT Act)
Non-deduction of TDS on interest on deposits, by a bank w.e.f. 1.7.12: Bank shall be assessee in default
in respect of that amount, pay from date TDS was Form 26QAA used for quarterly return on non-TDS
accounts to be submitted by July 31, Oct 31, Jan 31 and June 30.
TDS RATES FOR VARIOUS TAXES
Nature of Transaction Rate
Interest on Term Deposits:
Individual, HUF, AOP 10%
Partnership 10%
Domestic Companies 10%
Payment of Rent:
Partnership 10%
Domestic Companies 10%
Paym
aymenentt tto
o con
ontr
tra
act
cto
or (oth
(othe
er tha
than advertisement):
Individual, HUF, AOP up to Rs.10 lac or for partnership 1%
Partnership 2%
Companies 2%
Payment
Pay ment of Broke
Brokerage
rage and Profess
Professiona
ionall fee
Partnership 10%
Companies 10%
1) TDS at 20% to be deducted if the dedu

deductee
ctee does not provide
provide PAN to the deduct
deductor.(u/s
or.(u/s 20
206AA)
6AA)
2) Surcha
Surcharge
rge on tax is not deductibl
deductible/coll
e/collectibl
ectible
e at source in case of resident indiv
individual/
idual/ HUF /Firm/ AOP
/ BOI/Domesti
BOI/Domesticc Company
Company for payments other than salary.
3) Sur
Surchar
charge
ge @12% on TOS is appl applica
icable
ble on paymen
paymentt made to nonresident
resident other than company,
company, if
payment is in excess of Rs.1 cr.
4) Edu
Educat
cation
ion Cess
Cess is not dedu
deducti
ctible
ble/co
/colle
llecti
ctible
ble at sou
source
rce for res
reside
ident
nt Individ
Individual/
ual/HUF
HUF/Fi
/Firm/
rm/ AOP
AOP// BOI
BOI//
Domestic
Domesti c Compan
Company y for payment
payment other than salary.
salary.
For a company other than domestic company, surcharge of 2% to be levied when taxable income is above
Rs.1 cr to Rs.10 and 5%, when above Rs.10 cr.
Education Cess @ 2% plus secondary & Higher Education Cess @ 1% is deductible in case of non-
residents and foreign company.
5) Advance
Advance tax is payable if the tax liabil
liability
ity is Rs.10000
Rs.10000 or more from 2009-10.
Income Tax Rates for FY 2015-16
Type of Assessee
Assessee and No Tax up to Upto 5 lac Above 5 lac to Above 10 lac
amount ++ 10 lac
Normal 250000 10% 20% 30%
Women 250000 10% 20% 30%
Senior Citizen 300000 10% 20% 30%
Aged
Aged ab
abov
ovee 60 yea
earsrs
Very
Ve ry SeSeni
nior
or citi
citize
zens(
ns( 80 500000 - 20% 30%
Years and above )
++ to get tax credit of Rs.2000.
Corpor
Cor porate
ate Tax
Tax rat
rateses 20
2015-16 — Partnership 30%, Domestic Company 30%, Foreign company 40%.
15-16
Surcharge on domestic company 5% and other companies 2%, if income > Rs.1 cr.
SERVICE TAX
The provisions
provisions relatin
relating
g to Serv
Service
ice Tax were brought into force with effect from 1st July 1994.
These extend to whole of India except the state of Jammu & Kashmir. The tax is payable on all
services except the services in negative list. Service Tax & Banking Services. Service tax is
payable on a no. of banki
payable banking
ng services
services such as proce
processing
ssing charges,
charges, commission
commission on different
different services,
services,
charges.
Important Features : Adminis
Administered
tered by Central Board of Excise
Excise & Customs,
Customs, being indirect
indirect tax.
Responsibil
Respons ibility
ity of paymen
paymentt of tax is that of service provider
provider.. Service
Service provider to issue invoi
invoice
ce within 14 days
of providing the service.
Small Service provider with turnover up to Rs.10 lac exempted. But registration (form ST-1) is required if
turnover exceeds Rs.9 lac.
Rate of tax is 14% for 2015-16 (earlier 12% + education cess and higher & secondary education cess)
Tax to be paid on quarterly basis by individuals, proprietors, partnerships and on monthly basis by others.
It to be deposited by 5 th (6th in case of electronic payments) of the next month.
Return HY on Form ST 3 to be sent by 25 th of the next month after close of HY.
ROI for delayed payment : 1 st 6 m = 18%, next 6 m 24%, more than 12 months = 30%.deductible to actual
date of deduction @ 1% p.m. For delayed deposit of TDS up to actual date of deposit @ 1.5% p.m.
 Imprisonment
Imprisonment for failure to deduc
deductt tax — U/s 276 (B) :
3 months to 7 years. Penalty equal to amount of tax not deducted.
 Delay in filing TDS return
return (Section 234E) — Late fee w.e.f. 1/.12 Rs.200 per day max = TDS amount.
Section 271-H : If information is not submitted within one year or incorrect information is given, min
Rs.10000 and max Rs.1 lac.
 Non compliance of provision
provision of PAN = Rs.10000

Delay in deposit
deposit of serv
service
ice tax — Intt 13% pa penalty @ 200 per day or 2% per month of tax liability,
liability,
whichever higher. Maximum it could be up to amount of service tax.
 Delay in filing service tax return — late fee up to Rs.20000 (delay up to 15 days —
Rs.500. Del ay >15d to 30d — Rs.1000. >30 d — Rs.1000 pl us Rs.100 per day)
CASH CEILINGS FOR IMPORTANT TRANSACTIONS

TRANSACTIONS
Transaction Ceiling
Payment of FDR including interest for in cash LessThan RS.20000
RS.20000
Issue of demand drafts
drafts and TTs/M
TTs/MTs
Ts lessthan RS.50000
RS.50000
Payment of demand draft
Payment Lessthan Rs.20000++
++ DD of Rs,20000 can be issued crossed as account payee.
Issue of foreign currency in cash up to RS.50000
Maintenance
Mainte nance of records of large cash transaction
transactions
s Rs.1
Rs.100 lac anand
d ab
abov
ove
e
Payment
Payment of inter
interest
est in cash LessThan Rs.10000
Rs.10000
PAN / GIR quoting for term deposit Above RS.50000
PAN quoting for deposit of cash with a banking company 50000 OR above
TEST YOUR SELF

01 Deduction of tax at source provisions for payments other than salaries are covered
un
unde
derr sect
sectiion of __ ___ _ Ac
Act:t: a Se
Sectiction
on 192 of Inc Incomome e Tax
Tax Act,
Act, b Se Sect
ctio
ion
n 194 of Incom
Income e Tax
Tax Act
Act
c Secti
Section
on 192 of FiFina
nancnce e Ac
Actt 199
1994, 4, d Se
Sect ctio
ion
n 194
194 of Fi Finan
nancece Act
Act 19
199494
02 On payment to contractors, TDS is to be deducted when the amount of total payment in a financial
yea
ear:
r: a is Rs.5
Rs.500000000 or momore re , b is more
more thanthan Rs.5
Rs.5000000
00
c is Rs Rs.75
.75000
000 or more
more,, d is mor more e tha
than n Rs.75
Rs.75000 000
03 TDS rate
rate on paymen
paymentt to contra
contractoctors
rs isis:: a 1% for for al
alll pa
paym
ymenents
ts,, b 1% for pa paym
yment
ent to in indi
divi
vidua
duals
ls
and 2% for pay paymement
nt to othe
others rs , c 2% for al alll pa
paym
ymenentsts
d 2% fo forr pay
paymen
mentt to indiv
individua
idualsls and
and 1% for for paym
payment ent to other
otherss
04 On rent payment, TDS is to be deducted when the amount of total payment in a financial year:
a is Rs.Rs.180
180000
000 or mor
more e , b is mor
more e th
than
an Rs. Rs.1800
180000 00
c is Rs.120
Rs.120000 000 or mor
more, e, d is more
more thathan n Rs.
Rs.1200
120000 00
05 TDS rate on on ren
rentt payment
payment iis: s: a 10 10%% for for all
all payme
payment nts,
s, b 10
10%
% fo
forr p
pay
ayme
mentnt to ind
indiv
ivid
idua
ualls aand
nd 2020%
%
fo
forr pa
paym
ymenentt to othe
others
rs,, c 20
20%% for
for al
alll payme
payments nts
d 20% for pay paymen
mentt to iindi
ndivid
vidual
ualss and
and 10% for paym payment ent to oth
others
ers
06 On payment of professional fee, TDS is to be deducted when the amount of total payment in a financial
ye
year
ar:: a is Rs.2
Rs.200000000 or more
more,, b is more
more thanthan Rs.2
Rs.200
000000
c is Rs Rs.3.300
000000 or mo
more re,, d is moremore than
than Rs.3Rs.300 000000
07 TDS rate on profe professio
ssional
nal fee payme
payment nt is
is:: a 10% for for all paymen
payments ts ,b 10%
10% for
for ppay
ayme
mentnt to
to indi
indivi
vidu
dual
als
s
an
and d 20%
20% for
for pay
paymen
mentt to othe
othersrs , c 20% for al alll paym
paymentents s
d On
08 20% for pay
paymentpaymen
ment t to iindi
ndivid
of brokerage, vidual
uals
TDSs and
an
isdto10% for paym
payment
be deducted ent
whento oth
others
theers
amount of total payment in a financial year:
a is Rs
Rs.50
.5000
00 or momore re ,b is more
more than
than Rs.5
Rs.500000
0 c is Rs
Rs.2
.250
5000 or more
more
d is mo
more
re than
than Rs
Rs.2
.250
500 0
09 TDS rate
rate on brok
brokera
erage ge pay
payment
ment is: a 10 10%% for
for al
alll pa
paym
ymen
ents
ts,, b 10
10%
% for
for pa
paym
ymen
entt to in
indi
divi
vidu
dual
als
s
and 20% for payment

payment to others
others , c 20% ffor
or al
alll payme
payments nts d 20% for papayment
yment to individuals
individuals and
and 10% for
payment to others
10 If PAN
PAN details
details a are
re not p provi
rovided,
ded, tthe
he TDS rate iis: s: a 10% 10% iinn all
all ca
case
sess , b 20%
20% iin n cas
cases
es
c 20% in all cases cases with lless ess than 20%
20% TDS rate rate,, d 20%
20% in ththos
osee ca
case
ses s whe
where
re the
the tate
tate is 1.0%
1.0%
11 In which of the following deposit accounts, the interest payment is subject to TDS:
a if interest on FD/RD payment exceeds
Rs.10000 in a financi
financial
al year
b any amount of interest payment, if it is an
NRO account
c any amount of interest payment, on NRO
saving
sav ing ban
bank k acco
account
unt d all the above
above
12 If a citizen of 62 years, wants exemption from deduction of tax at sources, he is required to
sub
ubmm it:
it: a Form No.24 b Form No.15-H, c Form No.15 G d Form No.26
1 3 F or m 15 - G i s r eq u ir e d t o be s u bm itt e d b y for claiming exemption from
deduc
ded ucti
tion
on ooff tax
tax at sour
source
ce:: a a perso
personn aged
aged bel
belowow 60,
60, b a pers on age d bel ow 65
c a persperso on aged
ged up to 60 d a per
person
son agedged bel elow
ow 55
14 Which of the following statement regarding, Form No.15-G or 15-H, is not correct:
a these a re to be required to be obtained for
ea
each
ch fina
financnciial year
ear afr
fres
esh,
h, b it cancan be subm
submiitt tted
ed by in
indi
divi
vidu
dual
alss on
only
ly,, c it is to be se sent
nt to
Income Tax Department, d within a period of 7 days from its receipt receipt e none of of the above
above
15 If X has a term deposit account with the bank which is subject to TDS provisions and X does not
provide PAN details, the rate of TDS shall be: a 10% b 15% c 20% d 25%
16 Tax deduc
deducted ted at sosourc
urcee is to be deposi
deposited
ted by thethe bank withi
within:
n: a7
a 7 days
days from the close
close of the month
month in
which deduction is made, b 7 days from the date on which deduction is made, c 30 days from the
close of the month in which deduction is made, d30 days from the date on which deduction is made
17.For the month of March, the TDS is required to be deposited latest by:
a April 7 b April 15, c April 30 d May 31
18 The quarterly return on Form 26Q, of TDS is to be submitted: a within 15 days, but for March by May
15, b withi
within
n 15 day
days,
s, but for Marc
March h by May 31 c withi
within
n 30 days,
days, but for March
March by May 15 , d within
within 30
days, but for March by May 31
19. What is the penalty for delay in furnishing of TDS return: a Rs.50 per day, b Rs.200 per day,
c Rs.500 per day maximum Rs.1000, d. Rs.1000 per day maximum Rs.1000
20. As per Section 269-1 of Income Tax, the cash payment of FDR can be made for an amount:
a up to Rs.2
Rs.200
0000
00 exclu
excludi
ding
ng int
inter
eres
est,
t, b up to Rs.2
Rs.2000
0000 0 in
incl
clud
udin
ing
g in
inte
tere
rest
st , c le
less
ss than
than
Rs.20000 excluding interest,
interest, d less than Rs.20000 including
including interes
interestt
21.If cash payment of FDR is made for the amount above the prescribed limit the: a penalty can be up
to 100% of the payment made, b. penalty can be up to 50% of the payment made, c penalty can be up
to 10% of the payment made, dthere is no penalty
22 Service
Service Tax is payabl
payablee by a specifi
specified
ed service
service provider, if the amount of annual turnover
is
is:3: .aRabo
2 above
ateve
of Rs.10 lac,
se r vi c e taxb, above
presenRs.15
tly is lac,
lac
a ,5c%above Rs.20b 10 % lac,
lac,,c d 1
above
2% Rs.25
12 d lac15%
24 Service tax is to be deposited electronically on a mandatory basis, if the amount is ____ in a FY:
a Rs.100 Rs.100 llac
ac an
and d abov
above; e; b Rs.50
Rs.50 lalacc and ab
above
ove c Rs.
Rs.2525 lac
lac and
and above
above,, d Rs.10
Rs.10 lac
lac and above
above
25 Which
Which of tthe
he follow
followinging s state
tatemen
mentt regard
regarding
ing d depo
eposit
sit of
of Ser
Servi
vice
ce Tax
Tax is not
not corre
correct:
ct: a serservi
vice
ce tax is to
be deposit
deposited
ed by 5th o off next
next mo
month
nth b in case case of electroni
electronic c deposit,
deposit, the
the serv
service
ice tax
tax is to be deposited
deposited
by 6th of next month, c service tax for the month of March is to be
deposited within the month of March itself, d none of the above
26 Which of the following statement regarding Service Tax is not correct: a statement is a hal f yearly
statem
statement
ent , b sta
statem
tementent is to bebe sent
sent by 25t25th Oct and 25th April c statement is to be sent on Form
h Oct
No. ST2, d no
nonene of the ababovovee
27 A depositor has interest income of above Rs.10000 though he does not have any taxable income. Can
he be allowed non-deduction of tax at source: a no, He has to seek refund by filing a return
b Yes, by obtaining an appropriate declaration on form No.15F & 15 H
c Yes, by obtaining a declaration on form No.] 5G if age is below 60 years
d Yes, by obtain
obtaining
ing a decl
declarat
aration
ion on for
formm No.15
No.15H H if age is 60 yeayearsrs and above
above , e c and d above abo ve
28 Which of the following is correct with regard to penalties: a for non-deduction of TDS on interest on
deposits the bank shall be assessee in default in respect of that amount. b Imprisonment in failure to
pay tax 3 months
months to 7 years. years. c Delay in fi filin
ling
g TDS return
return — Rs.Rs.100
100 per dayday,, d all the abo
above
ve
29 Which among the following is not correct for penalties: a. If a person fails to ensure payment of FDR of
Rs.20000 or above, not in cash : penalty equal to sum of the payment , b Failure to furnish Annual
Information Return : penalty of Rs.100 for each day during which the failure continues, c If a person fails
to furnish
furnish retu
return
rn of inc
income
ome : penalty
penalty of Rs.1
Rs.10000
0000,, d none of the above
abov e
30 For deduction of tax at source the interest payment ceiling of Rs.10000, is: a Banking system-wise,
b Bank as a wholewhole – wise,
wise, c Bra nch-wise, d None of the above
31 Payment of interest on fixed deposit, in cash, above Rs.10000 is restricted as per provisions of:
a Reserve Bank of India , b Banking Regulation Act Income Tax Act
d Pract
Practice
ice being followed by banks
32 Under Section 269-T of Income Tax Act, which of the following term deposit would be paid in cash on
maturi
maturity:
ty: a FD of Rs.19600 and interest Rs.2500, b FD of Rs.20000 and interest of Rs.2700
c FD of Rs.17
Rs.17000000 and inter
interest
est of Rs.2500
Rs.2500,, d FD of Rs.20
Rs.20000
000 and in
intere
terest
st of Rs.3000,
Rs.3000,e
e all the abov e
33 What is the prescribed time period for deposit of income tax deducted on salary:
a within the month during which deducted , b within one week of close of the month during which
deducted , c within one week of date of deduction of tax
d iimm
mmedi
ediat
atel
elyy on deduc
deducti tion
on in ca
case
se of onlin
online
ep pay
ayme
ment
nt e c a n d d
34 TDS ce cert
rtif
ific
icate
ate is to be is
issu
sued
ed in ca
case
ses
s oth
other
er than salary wi
within
thin on form No.
a Within one month from deduction on form No.1 6 A
b Within one week from deduction on Form No.16
c Within one month from close of the quarter on Form no. 16A
d Within one month from deduction on Form No.16 or 16 AA
35 Which of the following is not correct with regard to TDS provisions:
a Section 192 – salary, b Section 194 A — Interest payments other than interest on securities ,
c Section 194-C — Payment to contractor or sub-contractor , d Section 194-D — insurance commission,
e Section 194-D — Payment of brokerage
Answers : Test your self
01 b 02 d 03 b 04 b 05 a
06 d 07 a 08 b 09 a 10 c
d 12 b 13 a 14 c 15 c
16 a 17 c 18 a 19 b 20 d
21 a 22 a 23 c 24 d 25 d
26 c 27 e 28 d 29 c 30 c
31 c 32 c 33 b 34 c 35 e
PERMANENT ACCOUNT NUMBER

The Central Board of Direct Taxes (CBDT) made it mandatory to quote PAN or General Index Number (GIR) on
specified transactions (specified as per Rule 114B) with a view to ensure voluntary compliance of the income tax
proce
pro cedur
dureses.. The quotin
quoting g PA
PAN N bec
becamame e man
mandat
datory
ory wiwith
th effec
effectt from
from 01.11.
01.11.1991998. 8.
What is PAN : A PAN PAN is a 10 ch char
arac
acte terr alph
alphananum
umer eric
ic numb
number er al
allo
lott
tted
ed by th the
e In
Inco
come
me Ta Tax x Dept
Deptt,
t, to a tax
tax pay
payer w who
ho
is eligible
eligible to file the income tax retur return.
n. First 3 character
characters s are Alphabeti
Alphabetic c series. 4th is status
status of PAN holder.
holder. 5th is the
1st
1st ch char
arac
acte
terr of PAPAN N hold
holderer's
's name
name.. Nex Next 4 areare spspececia
iall se
seququen
entitial
al numb
number erss and
and the
the la
last
st one
one is alalph
phab
abet
etic
ic ch
chec eck.
k.
Who must have a PAN? (1) All existing assesses or taxpayers or persons who are required to furnish a return of
inco
income me,, eveven
en on be behal
halff of oth
other ers,
s, (i
(ii)
i) Any
Any perso
person, n, who
who in inte
tends
nds to en enter
ter in
into
to finan
financicial
al trans
transac acti
tion
on wher
where e quo
quoti ting
ng PAN
PAN
is mandatory (details given below). The Assessing Officer may allot PAN to any person either on his own or on a
speci
spe cifi
fic
c reque
request st fr
from
om such
such peperso
rson.n.
Transactions where quoting PAN is mandatory As per Rule 114B, it is compulsory to quote PAN in all documents
pertai
per taining
ning to finan
financi cial
al tr
trans
ansac
actio
tions
ns noti
notifie
fiedd from
from titime-
me-toto-ti
-tim
me e by CB
CBDT DT,, whic chh in
incl
clude
ude thefol
the follo
lowi
wing:
ng:
(a) sa
salele or purc
purcha hase
se of any
any im
immomova vabl
blee prop
propererty
ty va
valu
lued
ed at Rs Rs.5.5 la
lacc or more
more;;
(b) sale
(b) sale or purpurchas
chase e of a mot
motor or vehic cle
le or vehic cle,
le, which
which requir
requireses registr
registrati
ation
on by a regis sterin
teringg authori
authority
ty (exclu
(excludindingg two
wheeled vehicle es);
s);
a titime
me depos
depositit,, exce
exceedi
edingng Rs
Rs.5 .5000
0000,0, wi
withth a ban
banki king
ng comp
company anyto to wh
whic ich
h the
the Ba
Banknkin
ingg Regu
Regula latition
on Act,
Act, 19
1949
49 ap
appl
pliies
es;;
(c) a de depos
positit,, abo
aboveveRs
Rs.5.5000
0000,0,inin any
anyac accou
count
nt wi
withthPo
PoststOf
Offifice
ceSa
SavivinngsBa
gs Bank nk;;
(d) a cont
contra
rac
ct of a• val
value exce
exceed
ediing Rs.10
s.1000
0000
00 for
for sal
ale
e or pu
purc
rcha
hase
se of secu
securi
rities
ties as de
defifine
ned
d in sec
section
tion 2 of the
the Secu
Securi
rititie
es
s
Contracts(Re
Contracts (Regula
gulation
tion)) Act,
Act, 1956;
1956;
(0 opening an account not being a time-deposit referred to in clause (c) with a banking company to which the Banking
Regula
Reg ulatio
tion
n Act,
Act, 194
1949 9 app
applilies;
es;
(g) appliicatio
cation n forins
for instaltallat
lation
ionofof a teleephone/c
phone/cell elluular
lar tel
teleph
ephone
onecon connec nection
tion;;
(h) paymen
paymentt tohot to hotel els/r
s/rest
estaur
aurant
ants
s forbil
for billlsabo
s above veRs Rs.200
.20000 00atatany
anyone onetitime;
me;
(i) pay
payme ment nt in cas
cash for for pu
purcrcha
hase
se of bank
bank drafdraftsts or paypay orde
ordersrs or ba bank
nkererss cheq
chequeues s from
from a ba
bank
nkiing compa
ompany ny to which thethe
Banki
Ba nkin ngg Regul
Regulatio ationn Act,
Act, 19
1949 49 ap
appl
plie
ies s for
foran
anam amou ountntagg
aggre regat
gatin
ingg Rs.5
Rs.500000000 or more
moredu durin
ring
g an
any
y oneday
one day;;
(j) depo
deposi sitt in ca
cash
sh aggr
aggreg egatatin
ing
g Rs.5
Rs.500 000000 or mo more re,, wi
with
th a bank
bankin ing
g com
compa panyny to whic
whichh the
the Bank
Bankining
g Regu
Regula latition
on Ac
Act,
t, 1949
1949
appl
applie ies
s duri
duringngan anyy one
one day day;
(k) cash
cashpay paymenmentt forfor
for foreieigntr
gn trave
avel,l,exc
exceed
eedin ing
g Rs.25
Rs.25000 000at atany
anyoneonetitime.me.
(I) ma
(I) maki kin
ng g an ap appl
plicicat
atio
ion
n to an anyy ba
bank nkiing comp
compan any y to whi hich
ch BR Act, 19 1949
49 ap appl
pliies or to an
anyy othe
otherr co
comp
mpaany or ins nsti
titu
tuti
tion
on,,
fo
forr issu
issue e of a cred credititca
cardrd;;
(m) papay yment
ment of Rs Rs.5 .500
0000 00 ormo
or morereto to a Mutua
utuall Fund
Fund for for pu
purcrcha
hase seof of its
its un
uniits;
ts;
(n) paym
paymen entt of Rs
Rs.5 .500
0000 00 or momorere to a co compmpan anyy forac
for acqu quir
irin
ingg itits
s sh
shar
areses;;
(o) payme
payment ntofof Rs
Rs.5 .500
000000 ormo
or morereto to a co
co/i/inst
nstitituti
utio
onfor
n forde debe
bentu
nture
res s orbo
or bonds
nds;;
(p) papay yment
ment of Rs Rs.5 .500
0000 00 ormo
or morereto to RBI,
RBI,fo forr acqu
acquir iriing bo
bond
nds s issssueued
d bybyitit::
From 1 January 2005 it is mandatory to quote PAN on challans for any payments due to Income Tai
Department.
Responsibility to obtain PAN : It is statutory responsibility of a person receiving document relating to economic or
fina
financnciaiall tr
tran
ansa sactctio
ionsns nonotitifi
fied
ed by the
the CB CBDTDT to en ensusure re that
that PAPAN N ha hass bebeen
en du duly
ly qu
quot
oted
ed in th
the
e do
docu
cume
ment
nt..
Minor's bank account: Where a person, opening an account as per clause (c) and (f) above, is a minor not having
any income chargeable to income-tax, he shall quote the permanent account number of his father or mother or
guardian.
Persons
Per sons without PAN/GIR PAN/GIR - Persons who were not allotted the PAN are to make a declaration in form No.60
giving their in, the particulars of such transaction. Persons with agricultural income and those who are not in receipt
of any
any inco
income me ch char
argegeab ablele to tax
tax, hav
have to ma make ke a decl
declar arat
atio
ion
n in Fo Formrm NoNo.. 6161..
Non-residents who enter into any of the above transactions are required to furnish a copy of their
passport.
Exemptions - PAN is not needed if the payment is via crossed cheque.

Penal
Penalty
ty for non
non-co
-compl
mpliance : Rs.50
iance .500 to Rs
Rs.1
.100
0000
00 u/s
u/s 27
272A
2A of Inco
Income
me Ta
Tax
x Act
Act 19
1961
61..
TEST YOURSELF : PERMA

PERMANENT
NENT ACCOUN
ACCOUNT
T NUMBERS (PA
(PAN)
N)
1 The quotin
quoting
g of PAN has been intr
introduced
oduced to ensure:
a that bank accounts are opened by the customers by following proper proce procedures
dures only.
b that bank accounts
accounts provide informatio
information
n about tax revenue
c that more people are brought under tax net and voluntary compliance of tax procedures is ensured
d all the above.
2 Quoting of PAN is mandatory in respec
respectt of following
following transactions:
transactions:
a sale or purchase of any immovable property valued at Rs.5 lac or more
b a time deposit exceeding Rs.50000 with a banking company.
c A deposit exceeding Rs.50000 in any account with a post office saving bank
d Opening an accoun
accountt with a banking company to which Banking Banking Regulation Act 1949 applies
e all the above
3 Persons who are not allotted PAN are to make declaration: a on form No.60,b on form No.61
c on form No.60-A,
No.60-A, d on form No.60-B
No.60-B
4 Non-residents who enter into any of the prescribed transactions are required to furnish:
a form No.60 ,b copy of visa, c copy of pass-port, d form no.61
5 The declara
declaratio
tions
ns or copies
copies of documen
documentsts are to be sub
submit
mitted
ted to: a a reg isteri
ist eri ng off icer
b any manager or officer of banking company, c post master,
d stoc
stock
k broke
brokers/s
rs/sub-br
ub-broker/
oker/share
share trans
transfer
fer agent e all the abo ve
A n sw
sw er
er : 1 c 2 e 3 a 4 c 5 e
NEGOTIA
NEGOTIABLE
BLE INSTRUM
INSTRUMENTS
ENTS AC
ACT
T 1881
Definition of NI: U/s 13, NI means and incl
Definition includes
udes promis
promissory
sory note (PN), bill of exchan
exchange
ge (BOE) and cheque.
cheque.
Information
Inform ation Technology
Technology act. Has also been made applicable
applicable to NI act and thus electronic
electronic Cheques
Cheques & digital
signatures
signatures statutory
statutory recognition.
recognition. IT act will not apply to bill of exch
exchange
ange & promissory
promissory note & thus these two
can
can not be eele
lect
ctro
roni
nic
c mea
means.
ns. IIn
n IIndia,
ndia, the Negotiable Instruments Act was passed during 1881 which
came into force wef March 01, 1882. It has 147 sections and 17 Chapters (Section 138 to 142 were
added in 1988 - wef April 01, 1989 and Section 143 to 147 were added during December 2002,
implemented in Feb. 2003 ). The Act is applicable to entire India.
Categories of Negotiable Instruments 1. As per the NI Act :
1. Promissory
Promissory note (including certifi
certificate
cate of deposit and commerci
commercial al paper) (2) Bill of Exchange (3)
Cheque (4) Demand Draft. 2. U/s 137 of Transfer of Property Act:
The documents of Title to goods are negotiable which include Bill of lading,
lading, Railway
Railway Receipts, Dock
warrant,, Warehouse Receipt, GRs approv
warrant approved ed by IBA, Wharfinger
Wharfinger certificate.
certificate. These are also the document
document
of title to goods under Sale of Goods Act.
1. The Negotiable Instruments Act iis
s applicable in whole
whole of India including Jammu
Jammu & Kashmir.
2. As per Section 13 of the Act, promis
promissory
sory notes
notes,, bills of exchange and chequ
chequeses are the
negotiable instruments.
3. As per practice and usage and as per court decisi
decisions,
ons, certain instrumen
instruments'
ts' such as Treasury
Bills, Certificate of Deposit, Commercial Paper, Govt. Promissory Note are also Negotiable
instruments.
4. Some instru
instruments
ments like Rai
Railway
lway Receipt,
Receipt, Bill of Lading, Warehouse ReceipReceiptt etc are also treated
as Negotiable instruments
instruments as per Section 137 of Transfer of Property
Property Act.
5. The main feature of a negotiabl
negotiable
e instrument is that
that it is freely transferable
transferable and the title of the
transferee
transfe ree will be better than the transfe
transferor
ror .
Promissory note: As per Sec 4, PN is in writing, containing unconditional undertaking or promise, signed
by the maker, to pay a certacertain
in sum of money to or to the order of a certain
certain pers
person
on or to the bearer thereof.
thereof.
It requires payment of stamp duty and can be demand PN or usance PN. There are 2 parties (maker &
payee). Currency/bank
Currency/bank notes are excluded
excluded from the defini
definition
tion of promissory
promissory notes. Writing
Writing the words "I
owe you Rs 1000' does not constitute PN bull owe you Rs 1000 payable on demand constitute PN.
Bill of exchange: As per Sec 5, BoE is an instrument in writing, containing an unconditional order, signed
by maker, directing a certain person to pay a certain sum of money only or to the order of a certain person
or to the bearer of the instrument In a Bill of Exchange, the person ordering for payment is called Drawer
and the person directed to pay is called Drawee. The beneficiary is called payee.
Cheque is defined in Sec 6 of NI Act.Cheque is a bill of exchange but always payable on demand and
drawee is always a banker. It also includes truncatruncated
ted cheque and electronic cheque. A cheque is
similar to a bill of exchange. Any bill of exchange which is payable on demand and in which drawee is a
banker will be called cheque.
The promissory note or bill of exchange can be payable on demand or after some time. If no time is
mentioned then the same will be treated as Demand promissory note or Demand Bill of Exchange.
A negotiable instrument can be payable to bearer or order. If neither bearer nor order is written it is
treated as payable to order. if both bearer or order are written it is treated as payable to bearer.
As per Section 31 of RBI Act, no person other than Central Government or Reserve Bank of India or
any other person authorized in this behalf can issue bearer promissory notes and demand bills of
exchange
exchan ge payable
payable to bearer.
bearer.
Assignment of Negotiable Instruments Negotiable Instruments can be either negotiated under NI Act or
can be assigned
assigned under Transfer of Proper
Property
ty Act by followin
following
g the given procedure for assignment.
assignment.
Instruments payable to bearer by persons other than Central Govt. & RBI RBI Act 1934 (Sec 31)
states that in India, person other than RBI or Central Govt. can not draw, accept, make or issue any bill
of exchange or promissory note (or demand draft) payable to bearer on demand. Section 31(2) puts a
restriction
restri ction on making a promissory
promissory note payable to bearer by a person other than RBI/Central
RBI/Central Govt.
PRESUMPTIONS WITH REGARD TO NEGOTIABLE INSTRUMENTS
Section 118 provides
provides certain
certain presumptions
presumptions as to Nis, until the contra
contrary
ry is proved
proved::
a: NI was made, drawn, accepted, endors endorsed
ed and negotiated or transferred
transferred for considerati
consideration.
on.
b: It bears the dadatete on whic
whichh it was made/ draw
drawn n
e: It was accepted within a reasonable time after its date and before maturity.
d: Transfer of N NIsIs was made before maturity.
maturity.
e: Endors
Endorsements
ements appearing
appearing on NI were made in the order in which they appear thereon.thereon.
f: It was duly s stamped
tamped and stamp duly cancelled, when the NI stands lost
g. Holder is holder in due course.
The burden of proof that the instrument is contrary to all/any of the above presumptions, is with the
person, who challenges such presumption.
More than one payee : An instrument can be made payable to two or more persons jointly or payable to
one of two or one or some of several payees. (Explanation to Section 13 NI Act).
WHAT IS NEGOTIABILITY?
NEGOTIABILITY?
Negotiability means transfer of right in a negotiable instrument to another person so as to constitute him
the holder. Elements of Negotiation:
1 Further transfer without any restriction.
2 Transferee getting the instrument for value and in good faith, gets defect-free and absolute title
despite any defect in the title of the transferor (call
(called
ed endorser).
endorser).
Negotiation of Bearer cheque (instrum
(instruments)
ents) is completed by delivery
delivery (Sec 47) and that of Order
Order cheque
by delivery and endorse
endorsement
ment (Sec 48).
Inchoate Instruments: As per section 20 of the NI Act, an instrument on which date, payee or amount
is not menti
mentioned
oned is calle
called
d as inchoate or incom
incomplete
plete instrum
instrument.
ent. Incomplete cheque can be compl
completed
eted
by the Holder and the completion
completion so made will not be treated as material
material alteration.
alteration.
An instrumen
instrumentt without si
signatur
gnatures
es is not treated as an instrument
instrument at all.
Ambiguous instruments: As per section 17 of the NI Act, an instrument which can be bill of
exchange or promissory note. Holder can treat it either of these .
Presumption: U/s -118 Nis are presumed to be (a) made for consideration, (b) bear date on which
they are made. (c) Every holder is a holder in due course.
Holder : defined in section 8 of the
the NI Act. Holder of a promissory note, bill of exchange or cheque
means any person entitled in his own name to the possession thereof and to receive the amount due
thereon from parties thereto.
Holder in Due Course: defined in Section 9 pf the NI Act. Holder in due course is a person who
became possessor of a NI for valuable consideration, in good faith, before becoming due, and without
having
having any reason to beli
believe
eve that the person transferring
transferring the instrument
instrument was not entitled
entitled thereto.
Transfer of a Negotiable Instrument and Endorsement
Transfer of (under
Negotiation NI Act).instrument: by assignment (under Transfer of Property Act) or by
a Negotiable
Negotiation of a Bearer instruments: A bearer instrument is negotiated by mere delivery and no
endorsement is required.
Negotiation of an order instrument: An order instrument
instrument can be negotiated by endorse
endorsement
ment
followed by delivery. It may be noted that legal heirs cannot complete the negotiation of a negotiable
instrument with endorsement by the deceased merely by delivery.
Endorsement: Signing of an instrument on the back or face thereof or on a slip of paper annexed
thereto for the purpose of negotiation is called endorsement (Section
(Section 15). The person who transfers
transfers
the instrument is called endorser and the person to whom it is transferred is called endorsee.
Blank Endorsement: In a blank endorsement
endorsement the endorser just signs his name wi without
thout indicating
indicating
endorsee.. It can be converted into
endorsee into full by writing name of a person above signatures. The effect of an
endorsement in blank is that it makes an instrument dawn originally payable to order to bearer
instrument
instrument for the purpos
purpose
e of negotiation which can be further negotiated by mere delivery.
Endorsement in Full: When, the endorser indicates the name of the endorsee it is called full
endorsement.
Sans Recourse Endorsement: An endorsement in which endorser excludes his liability is termed 'sans
recourse'
recours e' or withou
withoutt recourse endorsement.
endorsement. In case of dishon
dishonourour of instrument,
instrument, the amount
amount cannot be
recovered from such endorser.
Facultative: An endorse
endorsement
ment in which
which endorser waives
waives the notice of dishonour
dishonour is called
called Facultative
Facultative
endorsement
endorse ment But this is not appli
applicable
cable to other parties to the instrument
instrument .
Restrictive endorsement: An endorsement
endorsement which restric
restricts
ts further right of negotiation is called as
restrictive endorsement. For example if it is written in the endorsement as "Pay to Hari for my use" it
is restrictive endorsement.
Conditional Endorsement: When along with endorsement, condition condition is imposed
imposed by endorser. For
example, pay to C on completion of studies. Paying bank not to ensure compliance of condition.
Condition
Condit ion binds endorse
endorserr and endorsee
endorsee only.
Back to Back Endorsement: An endorsement in which the endorser endorser himself becomes endorsee is
called as back to back endorsement and in such a case, the endorsee can recover the amount only
from parties prior to his own endorsement.
Negotiation Back: When the drawer of a cheque himself becomes endorsee, it is called "Negotiation
Back" and this cheque is treated as satisfied.
satisfied.
Partial Endorsement: The endorsement can be made only for full amount but in case part payment
has been received and a note to that effect is made on the instrument, then the same can be
endorsed for the balance amount.

endorsed
Forged Endorsement: When endorsement is made by a person other than Holder by forging
signatures of Holder Title does not pass to any person on the basis of such endorsement. A person
getting
getting instrument
instrument after such endorsement
endorsement does not become holder.
Regularity of endorsement: Paying bank gets protection u/s 85(1) only when endorsement is
regularr (may not be genuine).
regula genuine).
SUMMARY OF VARIOUS SECTIONS OF NEGOTIABLE INSTRUMENT

ACT (Section number given in Bold)
01 Indian Paper Cu
Currency
rrency Ac
Actt 1871 not to be affected
by the provisions of this Act.
04 Promissory note defined
05 Bill of ex
exchange
change defined
defined
06 Cheque defined (also inc include
lude electronic
electronic cheque and truncated cheque)
07 Drawer
Drawer,, drawee in case of need, acceptor, acc acceptor
eptor for honour, pay
payee
ee defined
08 Holder defined
09 Holder in due course defined. defined.
10 Payment in due course : Paying banker's banker's protection iiff payment is made in due course.
11 Inland inst
instruments
ruments defined — drawn and made payable payable in India
12 Foreign instruments defined.
13 Negotiable instruments defined indirectly
14 Negotiation defined.
15 Endorse
Endorsementment and e endorser
ndorser defined
16 Endorse
Endorsementment in blablanknk and in ful fulll and endors
endorsee ee defined
defined..
17 Ambiguous instruments
18 Diffe
Difference
rence inin amount in wo wordsrds and figu
figures.
res. Amount
Amount in wordswords to be paid
20 Inchoate stamped iinstruments
nstruments - Holder has iimplied mplied authority to complete
complete the instrument..
21 At sight
sight,, on present
presentment ment and afte afterr sight defined.
defined.
22 3 days of grace are allowed on an usance Bill of Exchange/Pro Exchange/Promisso
missory
ry note. Also maturity
maturity defined.
defined.
23, 24 Calculati
Calculationon of matur
maturity ity date of BoE/Promissory
BoE/Promissory note after so many months or date
25 When a BOE/ BOE/PN PN matu
maturesres on a holiday
holiday — due date on the next preceding preceding working day.
26 A minor can draw, endors endorse e and deliver and negotia
negotiate te a negoti
negotiable
able instrument
instrument so as to bind all parties
except himself.
27-28-29: Status of agent, powers & restr restrictio
ictions,
ns, liabilities
liabilities of agent and legal representative
representative..
30 Liabi
Liability
lity of the dra
drawer
wer to pay w where
here presented,
presented, defi defined.
ned.
31 Banker'
Banker's s obligati
obligationon to pay cheque & compensate draw drawerer for wrongful dishonour.
dishonour.
32 Liability of maker of n note
ote and acceptor of a bill bill..
33 Several drawees of a bill. bill. Not to be considered
considered partners.
partners.
35 Liability
Liability of endorser — to compensate
compensate holder for d dishonou
ishonour.r.
36 Liability of prior parparties
ties to holder in due course. course.
37 Liability
Liability of maker, drawer
drawer (of BoE)BoE) till accepted and and acceptor, is that of a principal.
38 Prior par
party,
ty, a pri
principal
ncipal to subsequent parties. parties.
40 Discharge of en endorser's
dorser's liabili
liability.
ty.
41 Liabi
Liability
lity of acc
acceptor
eptor in ca casese of forged end endorsem
orsement ent
42 Acceptance o off bill drawn in fictitious name.
43 NI without consideration
44 & 45 Partial absence of consideration, partial failure of money consideration and consideration not
consisting of money.
45-A Holder's right to obtain a duplicate of lost bill. Drawer can be compelled to do so.
46 Delivery and its status in negotiation.
47 Negotiation
Negotiation by del
delivery
ivery — bearer iinstrument
nstruments s
48 Negotiabil
Negotiability
ity by endorsement order in
instrument
strument
49 Conversion of blank to full endorsement
50 Effect of endor
endorsement
sement — transfer of property
property in the instrument
instrument
51 Who can negotiate
negotiate — sole ma
maker,
ker, drawer,
drawer, payee, endorsee
52 Sans rec
recourse
ourse endors
endorsement
ement O
Orr conditi
conditional
onal endorsement
53 Holder deriv
deriving
ing title from Holder in due course
54 Endorsement in blank
55 Conversion
Conversion of blank endorseme
endorsement
nt into end
endorsemen
orsementt in full
56 Endorsement for part of the sum due
due
57 Endorsement
Endorsement by a deceased peperson
rson and de
delivery
livery by legal heir does not complete negotiation.
58 Instrument obtained by unlawful means/consideration
means/consideration — no tititle
tle passes
59 Instrument ac
acquired
quired after dishonour or when overdue. Remedy av
available
ailable on accommodation bill or
promissory note.
60 Instrument negotiable till payment or satisfaction.
61 BoE — presentmen
presentmentt for acceptance
acceptance at at acceptor's
acceptor's place
62 Present
Presentment
ment of promi
promissory
ssory not
note
e for sight
63 Drawer to be al
allowed
lowed 48 hour
hourss to accept
64 Presentment for payment essential.
65 Present
Presentment
ment for acceptanc
acceptance e to be made during the usual business
business hours.
hours.
66-77 Presentment of instruments in various situations
78 Payme
Payment
nt to be made to holder to get disch
discharge.
arge.
79 Interest rate when specified from date of instrinstrument.
ument.
80. If no interest
interest rate mentio
mentionedned in the Promissory
Promissory Note intere
interest
st @ 1B% p.a. is to be paid
paid..
82-83 Discharge from liabilities
liabilities — by cancellati
cancellation,
on, release & payment
payment and allowing more time than 48
hours to accept
84 When cheque not duly presented and drawer damaged thereby.
85-1 Paying banker protected by payment in due course of an order cheque which is properly endorsed
by the payee or his agent.
85-2 Protection to paying banker in case of a bearer cheque.
85-A Protect
Protection
ion to paying banker in case of Bank draftsdrafts..
87 Material alteration renders N,I renders void,
void,
88 Acceptor/endorser bou bound
nd not withstanding previ
previous
ous alteration.
89 Protection to paying banker for materially altered instrument.
instrument.
91 Dishon
Dishonour
our by non-ac
non-acceptan
ceptancece of BoE
92 Dishonour by non-payment
93 Dishonour — notice by w whom
hom and to who
whom m
98 When noti
notice
ce of dishon
dishonour
our not neces
necessary
sary
99 Noting — m must
ust for forei
foreign
gn instrumen
instrumentsts
100 Protest — must for foreign instruments
101 Protest — content
contents,s, notice, foreign bill
105-107 Reasonabl
Reasonable e time — for presentm
presentment,
ent, dishonour and transmission o
off notice
108-112 Acceptance for honour and liability of accep acceptor
tor ffor
or h
honour.
onour.
113-116 Payme
Paymentnt for hhonour
onour and
and drawee
drawee in ca
case
se of need
need
117 Rules for compen
compensation
sation for dishon
dishonour
our
118-119 Presumptions
Presumptions at to NIsNIs
120-122 Estoppel — validity, capacity of payee, si signature
gnature of payee
123 General crossin
crossing g
124 Special crossing
125 Who can crass - holder, banker
126-127 Payment of cheque crossed generally or specially

128 Payment in due course of crossed cheques
129 Paying banker liable to the true owner for loss when payment not made in due course.
130 'Not Negotiable' crossing — transferee does not get better title than that of transferor.
131 Protectio
Protectionn to collecting
collecting bank for cross
crossed
ed cheques subject to compl
compliance
iance of conditions
conditions
131-A Protecti
Protection
on to coll
collecting
ecting bank for cross
crossed
ed bank drafts.
drafts.
134-137 International Law
138 Drawer's liability
liability for cheque returne
returnedd unpaid for insu
insufficie
fficient
nt funds
139 Unless proved otherwis9, it will be presumed that the cheque has been issued for the discharge of
a debt/liability.
140 The drawer cannot plead that he did not expect the cheque to be dishonoured.
141 Offences by companies 1.42 Cognizance of offences
143 Power of courts to try cares summarily,
144 Code of service of summons
145 Evidence of affidavit,
146 Bank slip prima facie evidence of certain facts
147 Offences to be compoundable
THE PAYMENT AND SETTLEMENT SYSTEMS ACT, 2007

The PSS Act, 2007 came into force with effect from Aug 12, 2008.
Objective : Regulation and supervision
supervision of payme
paymentnt systems and designates
designates RBI as authority.
Regulations : Two Regulations have been made by RBI w.e.f. Aug 12, 2008. (1) The Board for
Regulation
Regulation and Supervision
Supervision of Payment and Settlement System
Systems s Regulation,
Regulation, 2008 (2) Payment and
Settlement Systems Regulations, 2008. Board for Regulation and Supervision of Payment and
Settlement System (BPSS), a Committee of the Central Board of Directors of RBI has been constituted.
BPSS exercises
exercises powers on behalf of RBI for regulation
regulation and supervisio
supervision.n. Licence for operating a
payment system: Only RBI can operate or commence a payment system. Unauthorized operation of a
payment system by any person is an offence liable for penal action. Application fee for authorization:
Rs 10,000. The period for disposal of application by RBI is 6 months from the date of their receipt.
Revocation of authorization : RBI can revoke the authorizat
authorization,
ion, if the system provider contravenes
contravenes the
provisions of Act/Regulations, fails to comply with conditions of authorization. Appeal: The aggrieved
applicant or aggrieved system provider can appeal to the Central Govt. within 30 days from the date of
order conveyed. Authorisation fees and security deposit : RBI can collect authorizat
authorization
ion fees.
Returns and information : RBI can call the returns, documents and other informat
information.
ion.
Standards : RBI can prescribe
prescribe format of payment instructions,
instructions, size & shape of instructions
instructions,, manner of
funds transfer, criteria for membership etc.
Inspection: RBI can depute an officer to enter premises where a payment system is being operated,
inspectt any equipment, includi
inspec including
ng any computer system or document.
document.
Issue of directions : RBI is authorized
authorized to issue directions
directions to a payment system or syste
system
m participant
participant and
general directions.
Mechanism
Mecha nism for settlement
settlement of dispute
disputess : Where disputes arise between system participant and system
provider or between system providers, such disputes are required to be referred to RBI for adjudication.
In cases where RBI, in its capacity either as a system participant or system provider, is a party to the
dispute, such cases are to be referred to Central Govt. for adjudication.
Consequences of dishonour of electronic fund transfer (section 25) : Dishonour of EFT due to
insufficiency of funds in an account, is an offence, punishable with imprisonment (up to 2 years) or with
fine (up to double the amount) or both, on similar conditions as in case of dishonour of a cheque under
Negotiable Instruments Act 1881.
Penalties or punitive' action : Under the Act, RBI can initiate
initiate criminal prosecution
prosecution and also impose fine
for certain contraventions.
Netting and settlement finality : The PSS Act 2007 states that a settlemen
settlement,
t, will be final and
irrevocable as soon as the money, securities, foreign exchange or derivatives or other transactions
payable
payabl e as a result
result of such settle
settlement
ment is determined, whether or not such money, securities or foreign
exchange or other transactions is actually paid.
Electronic
Electronic Payment System
S ystems
s
ACCESS CRITERIA FOR PAYMENT SYSTEMS The revis
revised
ed access criteria came into force w.e.f. Oct
01, 2011. There are two sets of access criteria (1) for centralised payment systems (CPS) and (2) for
decentralised payment systems (DPS).
Access criteria for CPC : The CPC include Real Time Gross Settle Settlement
ment (RTGS) System
System,, National
Electronic Fund Transfer (NEFT) system and National Electronic Clearing Service (NECS). The
membership
members hip is open to all license
licensed
d banks. The access criteria are given below:
a.Minimum CRAR of 9% (latest balance sheet); b Net NPAs below 5% (latest balance sheet);c Minimum
net-worth of Rs. 25 crore; and
Criteria for decentralised payment systems DPS include Clearing Houses at MICR centres (including
Cheque Truncation System centres) and Electronic Clearing Service (ECS) including the Regional
Electronic
Electronic Clearing Service (RECS). The membership is open to all licensed banks. The access crite criteria
ria
are: a. Minimum CRAR of 9% (latest balance sheet); b. Net NPAs below 5% (latest balance sheet).(On Mar
15, 2012, RBI decided to grant automatic membership
membership to entities
entities which are direct
direct participants
participants of
centralised payment systems like RIGS, NEFT & NECS).
Module: D
Commercial Laws with reference to Banking Operations
Syllabus
1) Indian Contract Act, 1872 - Meaning and essentials of contract; Contract of
Indemnity & Rights of Indemnity Holder; Contract of Guarantee; Contract of Bailment;
Contract
Contra ct of Pledge;
Pledge; Contr
Contract
act of Agency
2) The Sale of Goods Act, 1930 - Features; Sale & Agreement to Sell; Conditions and
Warranties; Express & Implied; Rights of Unpaid Seller
3) Indian Partnership Act, 1932 - Defi
Definitio
nitionn & Types of Partnerships;
Partnerships; Relation of
partners to one another & to third Parties; Minor admitted to benefits of partnership;
Dissolution of a firm; Effect of non registration; Limited liability partnerships-
formation, registration, rights and liabilities of partners
4) Definition and features of a company - Definition & Features of a Company;
Distinction between Company and Partnership
5) The Companies Act, 1956 - Defin
Definitio
ition,
n, Features & Types of companies;
companies;
Memorandum and Articles of Association; Doctrine of Ultra Vires, Constructive
Notice, Indoor Management; Membership of Company- Acquisition, Cessation,
Register, Rights & Duties of Members, Prospectus; Directors; Winding up of
Companies
6) Foreign Exchange Management Act, 1999 - Important Terms; Powers of RBI,
Regulation and Management; Directorate of Enforcement

7) Transfer of Property Act, 1882 - Sale, Mortgage of Immovable Property; Types of
Mortgages; Sale with and without court intervention; Lease of Immovable Property
8) The Right to Information Act, 2005 - Applicability; Definition; Important Provisions
9) Right To Information and Obligation of Public Authorities - Obligations;
Procedure; Disposal; Appeal; Orders; Penalties.
10)) The Preve
10 Prevention
ntion of Mone
Money Laundering Act, 2002 - Obligations; Records to be
y Laundering
Maintained; Procedure for Maintaining & Furnishing Information; Maintenance &
Verifications of Records of Identity of Clients.
11)) Informa
11 Information
tion Tec
Technolog
hnologyy Act, 2000 - Definitions; Electronic Governance;
Certifying Authorities; Digital Signature Certificates; Penalties; Appeal
INDIAN CONTRACT ACT, 1872

In the process of conducting banking business, the customers and banks enter into various kinds of
contracts. Law of Contracts in India is guided by various Acts and prominent among them is Indian
Contract Act 1872 (ICA 1872).
Contract — As per Section 10 of ICA 1872 all agreements are contracts if they are made by the free
consent of the parties, competent to contract, for a lawful consideration and with a lawful object and
are not expressly declared to be void". In other words, all agreements are contract and
and a contract has
following important elements:
 Parties should be c
competent
ompetent to contract
contract
 Contract should be made
made with free consent
consent

Consideration
Consideration should be lawful
 Contract should be for a lawful
lawful object
object
 Contract should not
not be decl
declared
ared to be void.
Agreement — U/ U/s
s 2(e)
2(e) of ICICA
A 181872
72 an agagre
reem
emen
entt is 'a prom
promis
ise
e or set
set of prom
promis
ises
es,, form
formin
ing
g
consideration for each other". Promise in this case means a proposal from one person. When a
proposal is accepted, by another person, it becomes an agreements.
Proposal — As per Section 2(a) 'when a person signifies to another his willingness to do or to abstain
from doing anything, with a view to obtaining the assent of that other (person) to such act or abstinence,
he is said to make a proposal".
Acceptance — As per Section 2 (b), when a proposal is accepted by another person, it becomes a
promise. As per Section 7 an acceptance should be made with in a reasonable period, it should be
absol
abs olute
ute and un
unqua
qualilifie
fied,
d, shoul
should d be expr
express
essed
ed in us
usual
ual and re
reas
asona
onabl
ble
e manne
mannerr or in the mann
manner
er
prescribed by the proposal.
Communication of proposal and acceptance — The acceptance of the proposal should be conveyed
to the proposer to make both the parties sure of what the other party intended, as per Section 3. Section
4 defines the requirement as to how the communication is complete. On completion of communication, an
agreement comes into existence.
Revocation of proposal and acceptance — As per Section 5, a proposal can be revoked at any time
before the commun
communicati
ication
on of its acceptance
acceptance is complete
complete as against the proposer. Similarly
Similarly the
acceptance
accepta nce can be revoked at any time before the communicatio
communicationn of acceptance
acceptance is complete as
against the acceptor.
acceptor.
Competence of the parties — Section 11 of the act provides that every person is competent or capable
to make a contract if:
1. He is of the age of majority unde
underr the law appli
applicabl
cable
e to hi
him
m an
and
d
2. He is of sound mind
mind and 3.He is not disqual
disqualified
ified to make a contract
contract by any law applicabl
applicable
e to him.
In other words, a minor who has not reached the age of majority, a person who is of not sound mind
(idio
(idiots
ts and lunat
lunatic
ics
s dur
durin
ingg the period
period of lunacy
lunacy)) and who is disqua
disquali
lifie
fiedd by law (undi
(undisc
schar
harged
ged
insolvent) or a citizen of declared enemy country, cannot enter into an agreement.
Free consent — As per Section 13, consent means when two or more persons agree upon the same
thing in the same sense. A free consent (as per Section 14) means that it is not obtained by (a)
coercion, (b) undue influence, (c) fraud, (d) misrepresentation and (e) mistake of the other party (say
threat to kill, a religious advice etc.).
Lawful consideration — Consideration as per Section 2(d) means an act when at the desire of the
promi
pro misor
sor,, the pro
promi
mise
see
e does
does or abstai
abstains ns from
from doidoing
ng or pro
promis
mises
es to do or abstai
abstains
ns from
from doing
doing
some
somethi
thing
ng.. A cons
consid
ider
erati
ation
on to be la lawf
wful
ul shou
should ld not,
not, be forb
forbid
idde
denn by la law,
w, doe
doess no
nott de
defe
feat
at the
the
provisions of any law, is not fraudulent and is not immoral or opposed to public policy (saying to pay
bribe).
Lawful object — It means that the result of the agreement should not be forbidden by the law or
violative of the law or fraudulent or immoral or opposed to public policy (say an agreement to murder
someone).
Void agreements — ICA 1872 declar
declares
es the agreements
agreements in following
conditions,, as void:
 Both parties committed
committed a mistake as to a fact essential
essential to the agreement.
agreement.
 Consideration is not lawful
 Agreement is without consideration.


Agreement
Agreement
Agreement is
is in
in restraint
restraint of
of trade, professi
profession
on or calling of the other.
legal proceedings.
 Terms of agreement are uncertain
 Agreement
Agreement can be void if it is purely betting or waging.
Discharge of a contract — Discharge of a contract means that the rights and obligations of the
respective parties come to an end. Discharge can be the result of: -
 Perfor
Performance
mance of the contract
contract
 Death of the parties, if the contract is o
of f personal
personal nature
 Breach of contract
 Performance being impossible
 Agr
Agreem
eementent or consen
consentt to ter
termin
minate
ate (includi
(including ng novati
novation
on i.e.
i.e. substi
substituti
tution
on with
with the consent
consent of the
parties, by a new valid contract, before breach of the old contract).
 Operati
Operation
on of law
Different types of contracts — There are two kinds of contracts i.e. General and Special.
General contract
contract includes
includes (a) concluded
concluded contract, (b) executory
executory contract, (c) contin
contingent
gent contract and
(d) quasi contract. Special contracts
contracts include (a) contract
contract of guarantee, (b) contract of indemnity,
indemnity, (c)
contract of agency, (d) contract of bailment and (e) contract of pledge.
Contingent contract — A contract which is to be performed subject to some happening. Section 31
defines such contract as a contract not to do something, if some event, collateral to be contract, does or
does not happen (such as a contract of insurance of house).
Quasi Contract — When law assumes creation of some contract due to circumstances even though
the parties did not make offer or conveyed acceptance. Say supply of necessaries to a minor, the
cost of which, the supplier can recover from the property of the minor. As per Section 68 to 72,
following
following situation give rise to quasi contracts:
 Claim
Claim for necessari
necessaries
es suppli
supplied
ed to a person inc
incapabl
apable
e of contra
contracting
cting on his account
account (Section 68)
 Reim
Reimbur
burse
semen
mentt to perso
personn pay
payin
ing
g money
money due by an anoth
other
er,, in paymen
paymentt of whic
which
h he is in
inter
teres
este
ted
d
(discharge
(discharge of other's obligat
obligation
ion — Section
Section 69).
 Obligation
Obligation of person enjoyi
enjoying
ng non-gratuitous
non-gratuitous act (S
(Section
ection 70)
 Finder of lost
lost goods (Section 71)

Liability
Liability of perso
person
n receiv
receiving
ing payment or thi
things
ngs under mistake
mistake (Sec
(Section
tion 72)
IMPORTANT TERMS IN THE LAW OF CONTRACTS Void agreement : The agreement which is not
enforceable in law (say for unlaw
enforceable unlawful
ful consideratio
consideration)
n)
Void
Voi d ab init io : Which is void from the very beginning, such as agreement with a minor.
initio
Void contract : Contrac
Contractt that becomes unenforc
unenforceable
eable by law
law
Viodable contract : A contract that is enforceable at the instance of one party and not the other party
(say a contract
contract with a Parda-Nashi
Parda-Nashin n women)
women)..
Contingent contract : A _contract
_contract the performance of which is dependent on the happening or non-
happening of an event.
Executed contract : A contract where an offer has become a promise on being accepted by the
person to whom it is made.
Executory
Exec utory contr act : A contract where the offer made by one person is yet to accepted by the other
contract
party to whom it is made.
Coercion : Threat to commit an act forbidden by law
Considera
Cons tion : Some value received or to be received in exchange of a promise
ideration
Contract : An agreement enforceable by law
Invitation
Invitation to offer : It is different from offer and means calling upon parties to make offer (say tenders,
to offer
quotations etc.)
Misreprese
Misre presentati on :Untrue statement
ntation statement with or without
without intention
intention to deceive
deceive other person
CONTRACT OF INDEMNITY
As per Section 124 a contract by which one party promises to save the other from loss caused to him
by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of
indemnity. In such contract one party promises to compensate the other for loss or damage and this
loss or damage may be due to act or omission of the promisor or other party. The promisor is called
indemnifier and the promisee is called indemnified. A contract of insurance is contract of indemnity.
For example X contracts to indemnify Y against the consequences of any proceedings which Z may take
against Y in respect of a certain sum of 200 rupees. This is a contract of indemnity.
Right of indemnity-holder when sued :
The promisee in a contract of indemnity, acting within the. scope of his authority,is entitled to recover
from the promisor-
(1) all damages which he may be compelled to pay in any suit in respect of any matter to which the
promise to indemnify applies;
(2) all costs which
which he may be compelled to pay in any such suit, if in bringing
bringing or defending it, he did not
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt. Link Cell, Nagpur 100 |
Page
contravene the orders of the promisor, and acted as it would have been prudent for him to act in the
absence of any contract of indemnity, or if the promisor authorised him to bring or defend the suit;
(3) all sums wh
whic
ich
h he ma
mayy hav
have
e pai
paidd und
under
er the term
termss of an
any
y co
comp
mproromi
mise
se of any such
such su
suit
it,, if the
the
compromise was not contrary to the orders of the promisor, and was one which it would have been
pruden
pru dentt for the pro
promi
mise
seee to ma
make
ke in the absen
absence
ce of an
any
y co
cont
ntrac
ractt of in
indem
demni
nity
ty,, or if the promi
promisor
sor
authorised
authoris ed him to comp
compromis
romisee the suit.
CONTRACT OF GUARANTEE
U/s 126, the guarantee is defined as a contract to perform the promise, or discharge the liability, of a
third person in case of his default. The person who gives guarantee is called guarantor, on whose
behalf the guarantee is given is called principal debtor and in whose favour the guarantee is given
called creditor. Sections 126 to 147 of the Indian Contract Act deal with contracts of guarantee. A
guarantee may be either oral or written.
Parties : Three parties are involved in guarantees namely the borrower, the bank and the guarantor.
Consideration : The contract of guarantee is the consequence of the agreement between the borrower
and the bank. As per section 127 of Indian Contract Act, anything done, or promise made, for the benefit
of the principal debtor may be sufficient consideration to the surety for giving the guarantee.
Who can give a guarantee: Persons (individuals, partnership firms, joint stock companies) other than
minors, insane or insolvent can give a valid guarantee. In case of a partnership firm guarantee signed
by a single partner cannot bind the firm or other partners, if the business of the partnership firm is not
to give guarantee. Similarly, in case of guarantee by a company, its Memorandum of Association
should clearly express that the company can give guarantee.
Nature of guarantor's liability : U/s 128, the liability of the guarantor is co-extensive with that of the
principal debtor. In other words, the guarantor is liable only for what the principal debtor is liable and
guarantors' liability cannot be more than that of the principal debtor. In continuing guarantees the liability
extends to all transac
transactions
tions within
within the guaranteed limit and time.
Continu
Con tinuing
ing gua
guarant
rantee
ee (Se
(Sectio
ction 129): A gua
n 129): guaran
rantee
tee whi
which
ch extend
extends
s to a serie
series
s of transa
transacti
ction,
on, is
called,
called, a "con
"continui
tinuing
ng guarantee
guarantee".
". For example,
example, A gua
guaran
rantee
tees
s paymen
paymentt to B, a tea-de
tea-deale
aler,
r, to the
amount of Rs.1
amount Rs.10000,
0000, for any tea he may from time to time supply to C. B suppli supplieses C with tea to above
above
th
the
e valu
valuee of Rs
Rs:1
:100
000000,, and
and C papays
ys B for for it
it.. Afte
Afterw
rwar
ardsds,, B supp
suppli lies
es C wi
withth tea
tea to th
the
e valu
value
e of
Rs.2
Rs .200
0000
00.. C fail
fails
s to papay y. The
The gu guar
aran
ante
teee gi
giveven n by A wa wass a co contntin
inui
uing
ng guar
guaran
ante
tee,
e, and
and he is
accordingly-liable to B to the extent of Rs.10000.
Revocatio
Rev ocation n of conti
continuing
nuing guarantee
guarantee (Section 130) 130):: A continuing guarantee may at any time be
re
revo
voke
ked
d by thethe sure
suretyty,, as to futu
future
re trtran
ansasact
ctioions
ns,, by no noti
tice
ce to thethe cred
credit
itor
or.. For
For ex
exam
ampl
ple,
e, A, in
consideration of B's discounting, at, A's request, bills of exchange for C, guarantees to B, for twelve
months, the due payment of all such bills to the extent of 5,000 rupees. B discounts bills for C to the
exten
extentt of 2,0
2,000
00 rupee
rupees. s. Af
After
terwa
wards
rds,, at the end
end of threethree months
months,, A revo revokes
kes the guara
guarante
ntee.
e. This
This
revocat
rev ocation
ion discharge
discharges s A from all liability
liability to B for any subseque
subsequent nt discount.
discount. But A is liable to B for the
2, 000 rupees, on default of C.
Determination of liability : Liability of the guarantor crystallizes when the principal debtor defaults.
The guarantor's liability is also determined by revocation (withdrawal as to future transactions) of
guarantee by him or his death, insolvency or lunacy OR death & insolvency of the borrower and
change
cha nge in the conconsti
stitut
tution
ion of princi
principal
pal debtor
debtor,, li liqui
quidat
datioion
n of a compan
company y (chang
(change e of name
name by the
company
comp any is not chanchangege in constitu
constitution
tion).
). In order
order to av avoioid
d ap
appl
plic
icati
ation
on of ru
rule
le in Clay
Clayton
ton case,
case, the
the
operations in the account are stopped by the bank.
Surety's death (Section 131) : The death of the surety operates, in the absence of any contract to the
contrary,
contrar y, as a revocation of a continuing
continuing guarantee, so far as regards future transactions.
transactions.
Variance in terms of contract (Sec 133) : Any variance made without the surety's consent, in the terms of
the contract between the principal debtor and the creditor, discharges the surety as to transactions
subsequent to the variance. For example, A becomes surety to C for B's conduct as manager in C's
bank. Afterwards, B and C contract, without A' s consent, that B' s salary shall be raised, and that he
shall become liable for one-fourth of the losses on overdrafts. B allows a customer to overdraw, and the
bank loses a sum of money. A is discharged from his suretyship by the variance made without his
consent,
consen t, and is not liable
liable to make good this loss.
Release or discharge of principal debtor (Section 134) : The surety is discharged by any contract
between the creditor and the principal debtor, by which the principal debtor is released, or by any act
or omission of the creditor, the legal consequence of which is the discharge of the principal debtor.
For example
afterwards BA gives a guarantee
becomes embarrassedto Cand
for goods to be
contracts supplied
with by C to(including
his creditors B. C supplies
C) togoods
assigntotoB,them
and
his property in consideration of their releasing him from their demands. Here B is released from his
debt by the contracts with C, and A is discharged from his suretyship. Creditor compounding with,
Page
giving time to, or agreeing not to sue, principal debtor (Section 135) : A contract between the creditor
and the principal debtor, by which the creditor makes a composition with, or promises to give time to,
or no
nott to sue,
sue, the
the prin
princi
cipa
pall de
debt
btor
or,, di
disc
scha
harg
rges
es the
the sure
surety
ty,, un
unle
less
ss the
the sure
surety
ty as
asse
sent
nts
s ' to such
such
contract.
Creditor's refusal to sue the debtor (Section 137) : Mere refusal by the creditor to sue the princip
principal
al
debtor or to enforce any other remedy against him, does not, in the absence of any provision in the
guarantee to the contrary, discharge the surety. For instance, B owes to C a debt guaranteed by A.
The debt becomes payable. C does not sue B for a year after the debt has become payable. A is not
discharged from his suretyship.
Release of one co-surety (Section 138) : Where there are co-sureties, a release by the creditor of one
of them does not discharge the others neither does it free the surety so released from his responsibility
to the other sureties.
Creditor's act or omission impairing surety's eventual remedy (Section 139) : If the creditor does
any act which is inconsistent with the right of the surety, or omits to do any act which his duty to the
surety
sur ety requires
requires him to do, and the eventual remed
remedy y of the surety himself
himself against the principa
principall debtor
debtor is
thereby impaired, the surety is discharged. For example B contracts to build a ship for C for a given
sum, to be paid by instalments as the work reaches certain stages. A becomes surety to C for B's due
performance of the contract. C, without the knowledge of A, prepays to B the last two instalments. A is
discharged by the prepayment.
Rights of surety on payment or performance (Section 140) : Where a guaranteed debt has become
due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety upon
payment or performance of all that he is liable for, is invested with all the rights which the creditor had
against the principal debtor. This right is called right of subrogation.
Surety's right to benefit of creditor's securities (Section 141): A surety is entitled to the benefit of
every security which the creditor has against the principal debtor at the time when the contract of
suretyship entered into, whether the surety knows of the existence of such security or not; and if the
creditor loses, or without the consent of the existence of such security or not; and if the creditor loses,
or without the consent of the surety, parts with such security, the surety is discharged to the extent of
the value of the security. For example C advances to B, his tenant, 2,000 rupees on the guarantee of
A. C has also furt
further
her security
securit y for the 2,000 rupees
rupee s by a mortgage
mortg age of B's furn
furniture
iture.. C, cancels the
mortgaged. B becomes insolvent and C sues A on his guarantee. A is discharged from liability to the
amount of the value of the furniture.
Guarantee
Guara ntee obtained
obtained b by
y misrepresentation/concealment is invalid - 143): Any
i nvalid (Section 142 -143):
guarantee which has been obtained by means of misrepresentation made by the creditor, or with his
knowledge and assent, concerning a material part of the transaction, is invalid. Similarly any
guarantee which the creditor has obtained by means of keeping silence as to material circumstances,
is invalid. For example A engages B as clerk to collect money for him. B fails to account for some of
his receipts and A in consequence call upon him to furnish security for his duly accounting. C gives
his guarantee for B's duly accounting. A does not acquaint C with B's previous conduct. B afterwards
makes default. The guarantee is invalid.
Implied
Implie d promis
promise e to indemn
indemnifyify sure
surety (Section 145) : In every contract of guarantee there is an
ty (Section
implied promise by the principal debtor to indemnify the surety, and the surety is entitled to recover
from thepaid
he has principal debtor whatever
wrongfully. sumBheishas
For instance rightfully
indebted to paid under
C, and A isthe guarantee,
surety for thebut no sums
debt. which
C demands
payment from A, and on his refusal sues him for the amount. A defends the suit, having reasonable
grounds for doing so, but he is compelled to pay the amount of the debt with costs. He can recover
from B the amount paid by him for costs, as well as the principal debt.
Co-sur
Co- sureti
eties
es liable
liable to contrib
contribute
ute equ
equally
ally (Secti
(Section 146): Where two or more persons are co-
on 146):
sureties for the same debt or duty, either jointly or severally, and whether under the same or
different contracts, and whether with or without the knowledge of each other, the co-sureties, in
the absence of any contract to the contrary, are liable, as between themselves, to pay each an
equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor.
For example A, B and C are sureties to D for the sum of 3,000 rupees lent to E. E makes default in
payment. A, B and C are liable, as between themselves, to pay 1.000 rupees each.
JOINT STOCK COMPANIES

COMPANIES
What
What is a comp
company : A comp
any compan
any
y is a grou
group
p of pers
person
ons
s who
who have
have co
come
me toge
togeth
ther
er or wh
who
o have
have
contributed money for some common purpose and who have incorporated themselves into a distinct
legal entity in the form of a company for that purpose. Supreme Court of India has held in the case of
State Trading Corporation of India v/s CTO that a company cannot have the status of a citizen under the
Page
Constitution of India.
Characteristics of the company : A company as an entity has several distinct features which together
make it a unique organiz
organization.
ation. The following are the important characteristi
characteristicscs of a company
company :-
Separa
Sep arate
te Legal
Legal Ent ity :A comp
Entity company
any is a separ
separate
ate lelegal
gal entity
entity.. It is di
differ
fferen
entt and di
disti
stinc
nctt from
from its
its
members. It has its own name and its own seal, its assets and liabilities are separate and distinct from
those of its members. It is capable of owning property, incurring debt, borrowing money, having a bank
account, employing people, entering into contracts and suing and being sued separately.
Liability
Liabi lity of memb
membersers or sharehold ers: The liability of the members of the company is limited to
shareholders:
contribution to the assets of the company up to the face value of shares held by him. A member is
liable to pay only the uncalled money due on shares held by him when called upon to pay and nothing
more, even if liabilities of the company far exceeds its assets. Once the members have paid all their
dues towards the shares held by them in the comp company,
any, they do not have other liability.
liability.
Perpetual Succes sion :A company does not die or cease to exist unless it is specifically wound up
Succession
or the task for which it was formed has been complcompleted.
eted. Membe
Membership
rship of a company
company may keep on
changing
changi ng from time to time but that does not affect life of the company.
company. Death or insolvency
insolvency of member
does not affect the existence
existence of the comp
company.
any.
Transferability of Shares :Shares in a company are freely transferable,
transferable, subject to certain
certain conditions.
When a member transfers his shares to another person, the transferee steps into the shoes of the
transferorr and acqui
transfero acquires
res all the rights of the transferor
transferor in respect of those shares.
Common Seal :A com compan
panyy is a artifi
artifici
cial
al person
person and does
does not
not have
have a physi
physical
cal presenc
presence.
e. It acts
acts
through its Board of Directors for carrying out its activities and entering into various agreements.
Such contracts must be under the seal of the company. The common seal is the official signature of
the company. The name of the company must be engraved on the common seal. Any document not
bearing the seal of the company may not be accepted as authentic and may not have any legal force.
Capacity to sue and being sued :A company can sue or be sued in its own name as distinct from its
members.
Separate
Board Management
of Directors. :A company is
The shareholders areadministered and managed
simply the holders by its managerial
of the shares in the companypersonnel i.e. the
and need not
be necessaril
necessarilyy the manage
managers rs of the company.
Minimum
Minim um numb
number er of member
members s : A public company must have at least 7 members whereas a
private company may have only 2 members. If the number of members fall below the statutory
minimum
mini mum and the compcompanyany carrie
carries s on its business
business beyond a period
period of six months after the number
has so fallen, the reduction of number of members below the legal minimum is a ground for the
winding up of the company.
TYPES OF COMPANIES
1. Public Company means a company which is not a private company.
2. Private Company means a company which by its Articles of Association: -
a. Restric
Restricts
ts the right of mem
members
bers to transfer
transfer its shares
b. Limit
Limits
s the number of its members to 200. In determi determining
ning this number of 200, employee-membe
employee-members rs
and ex-employee
ex-employee members are not to be considered.
c. Prohibits an invitation to the public to subscribe to any shares in or the debentures of the
company. If a private company contravenes any of the aforesaid three provisions, it ceases to be
private company and loses all the exemptions and privileges which a private company is entitled.
Deemed
Dee med pub
public
lic limite
limitedd compan
company y : A priv
private
ate compa
company
ny will
will be trea
treate
tedd as a deeme
deemed d publi
public
c lilimi
mited
ted
company in any of the follow
following
ing circumstan
circumstances ces :-
1 .Where at least 25% of the paid up share capital of a private company is held by one or more bodies
corporate, the private company shall automatically become the public company on and from the date
on which the aforesaid percentage is so held.
2.Where the annual average turnover of the private comp companyany durin
during
g the perperio
iod
d of three
three
consecutive financial years is not less than Rs 25 crores, the private company shall be, irrespective
of its paid up share capital, become a deemed public company.
3.Where not less than 25% of the paid up capital of a public public company
company limi
limited
ted is held
held by the
the private
private
company,
compan y, then the private
private company shall becom become e a public company on and from the date on which the
aforesaid percentage is so held.
4. Where a private company accepts deposits after the invitation is made by advertisement or renews
deposits from the public (other than from its members or directors directors or their relativ
relatives),
es), such companies
shall become public company on and from date such acceptance or renewal is first made.
Limited and Unlimited companies : Companies may be limited or unlimited companies. Company may
be limited by shares or limited by guarantee.
Company limited
share capital. by shares
No member : In this case,
of company thebyliability
limited of members
the shares is limited
can be called upontotothe
payamount of uncalled
more than the face
value of shares or so much of it as is remaining unpaid. Members have no liability in case of fully paid up
shares.
Page
Company
Company lim
limited
ited by the guarantee : A company limited by guarantee is a registered company
guarantee
having the liability of its members limited by its Memorandum Of Association to such amount as the
members may respectively thereby undertake to pay if necessary on liquidation of the company. The
liability of the members to pay the guaranteed amount arises only when the company has gone into
liquidation and not when it is a going concern. A guarantee company may be a company with share
capital or without share capital.
Unlimited Company : The liability of members of an unlimited company is unlimited. Therefore their
liability is similar to that of the liability of the partners of a partnership firm.
Companies without the word Limited : Under the Companies Act, 1956, the name of a public limited
company must end with the word 'Limited' and the name of a private limited company must end with the
word 'Private Limited'. However, under Section 25, the Central Government may allow companies to
remove the word "Limited
"Limited / Private
Private Limited" from the .name if the following
conditions are satisfied
satisfied :-
1. The company is formed for promoting
promoting commerce
commerce,, science, art, reli
religion,
gion, charit
charity
y or other socially
socially useful
objects
2. The company does
does not intend to pay div
dividend
idend to its members
members but apply its pr
profits
ofits and other income
income in
promotion of its objects.
Holding and Subsidiary companies : A company
company shall be deemed to be subsidiary
subsidiary of another company
if :-
1. That other company

company cont
controls
rols the comp
compositi
osition
on of its board of directors
directors ; or
2. That other
other company holds more than half in face value of its equity share capital
3. Where the first mentioned
mentioned company is subsidiary
subsidiary co company
mpany of any company of which that other's
subsidiary e.g. Company B is subsidiary of the Company A and Company C is subsidiary of
Company B, therefore Company C is subsidiary
subsidiary of Company A.
The control of the composition of the Board of Directors of the company means that the holding
compan
com pany y has the pow
power
er at it
its
s dis
discr
creti
etion
on to appoin
appointt or rem
removove
e all or majori
majority
ty of di
direc
rector
tors
s of the
subsidiary company without consent or concurrence of any other person.
Governmentt Compani
Governmen es: Means any company in which not less than 51% of the paid up share
Companies:
capita
cap itall is held
held by the Centr
Central al Govern
Governmenmentt or any State Governm
Government
ent or par
partly
tly by the Centra
Centrall
Government and partly by the one or more State Governments and includes a company which is
a su
subs
bsididia
iary
ry of a gov
gover
ernm
nmenentt comp
compan any.
y. Gove
Governrnme
ment
nt Comp
Compan anie
ies
s ar
are
e al
also
so gov
govererned
ned by the
the
provi
pro visi
sions
ons of the Com
Compani
panies
es AcAct.
t. Howeve
However, r, the Cen
Central
tral Gov
Govern
ernmen
mentt may direc
directt that
that certa
ertaiin
provisions of the Companies Act shall not apply or shall apply only with such exceptions, modifications
and adaptions as may be specified
specified to such government
government companies.
Foreign Companies : Means a company incorporated in a country outside India under the law of
that other country and has established the place of business in India.
PRIVATE AND PUBLIC COMPANIES
Particulars Private Public
Public com
company
pany
company
Minimum members 2 7
Maximum members 200 No ceiling
Minimum directors 2 3
Maximum directors No ce
ceiling No ceiling+
Start b
buusiness on Cert
Certif
ific
icat
ate
e of in- Certi
Ce rtific
ficate
ate of in
inco
corpo
rporat
ratio
ion
n and
the basis of corporation Certificate of commencement
Certificate commencement ofof business
Transfer of shares Restrictions N o r e st r ic t i o n

Words to be used with Name 'private' limited public' limited
Listing of shares No listing Listing could be on stock exchange
Minimum paid up capital Rs.1 lac Rs.5 lac
+Such companies can appoint any no. of directors but if the no. goes beyond 15, they need to
pass a special resolution.
IMPORTANT DOCUMENTS IN RELATION TO A COMPANY

The promoters must make a decision regarding the type of company i.e. a public company or a private
company or an unlimited company, etc and accordingly prepare the documents for incorporation of the
compan
com pany.
y. In thi
this
s co
conne
nnecti
ction
on the Memo
Memoran
randum
dum and Arti
Articl
cles
es of Asso
Associ
ciati
ation
on (MA
(MA & AA
AA)) are
are cr
cruc
ucia
iall
documents
document s to be prepared.
Memorandum of Association of a company
No co
comp
mpananyy ca
cann be regi
regist
ster
ered
ed unde
underr the
the Co
Comp
mpan
anie
ies
s Act,
Act, 2013
2013 with
withou
outt the
the Memor
emoran
andu
dum
m Of
Page
Association. The Memorandum Of Association of every company comp any must contain the following clauses :-
Name clause : The name of the company is mentioned in the name clause. A public limited company
mustt end with
mus with the word
word 'Li
'Limi
mited
ted'' and a priva
private
te lilimi
mited
ted compan
company y must
must end with
with the words
words 'Priv
'Private
ate
Li
Limi
mite
ted'
d'.. Th
The
e co
comp
mpany
any ca
cann
nnot
ot have
have a name
name whwhic ich
h in the
the opin
opinio
ion
n of the
the Cent
Centrarall Gove
Govern
rnme
mentnt is
undesirable. A name which is identical with or the nearly resembles the name of another company in
existence will not be allowed. A company cannot use a name which is prohibited under the Names and
Emblems (Prevention of Misuse) Act, 1950 or use a name suggestive of connection to government or
State patronage.
Domicile or Registered office clause : The State in which the registered office of company is to be
situated is mentioned in this clause. If it is not possible to state the exact location of the registered
office,, the compa
office companyny must state to provide
provide the exact address
address either on the day on which
which commences its
business or within 30 days from the date of incorporation of the company, whichever is earlier. Notice
in
of form no 18 must
the company. be givenany
Similarly, to the Registrar
change in theof Companies
registered within
office 30also
must days beofintimated
the date of incorporation
in form no 18 to
the Registrar
Registrar of Compani
Companieses within 30 days.
days. The regis
registered
tered office
office of the company
company is the official address
of the company where
where the statutory books and records must be normally be kept. Every company must
affix or paint its name and address of its registered office on the outside of the every office or place at
which its activities are carried on in. The name must be written in one of the local languages and in
English.
Objects clause : This clause is the most important clause of the company. It specifies the activities which
a company can carry on and which it cannot carry on. The company cannot carry on any activity which is
not authorised by its MoA. This clause must specify
ii. Main obje
objects
cts of the co
company
mpany to be pu
pursued
rsued by the ccompany
ompany on itsits incorporati
incorporation
on Objects
incidental or ancil
incidental ancillary
lary to the attainment of the main objects
iii. Other objects of the company not included in (i)
and (ii) above.
In case of the companies other than trading corporations whose objects are not confined to one State, the
States to whose territories
territories the objects of the compa
companyny extend must be specified.
Liability clause A declaration that the liability of the members is limited in case of the company limited
by the shares or guarantee must be given. The MoA of a company limited by guarantee must also
state
st ate that
that each
each me membmberer under
undertak
takes
es to co
contr
ntrib
ibute
ute to the asse
assets
ts of the
the co
compa
mpany ny su
such
ch amoun
amountt not
not
exceeding specified amounts as may be required in the event of the liquidation of the company. A
declaration that the liability of the members is unlimited in case of the unlimted companies must be
given. The effect of this clause is that in a company limited by shares, no member can be called upon
to pay more than the uncalled amount on his shares. If his shares are already fully paid up, he has no
liabilty
liabil ty towards the company
company..
The following are exceptions to the rule of limited liability of members :-
1. If a member agrees in writing to be bound by the alteration of MA / AA requiring him to take more
shares or increasing his liability, he shall be liable upto the amount agreed to by him.
2. If every member agrees in writing to re-register the company as an unlimited company and the
company is re-registered as such, such members will have unlimited liability.
3. If to the knowledge of a member, the number of
shareholders has fallen below the legal minimum, (7 in the case of a public limited company
and 2 in case of a private limited company ) and the company has carried on business for
more
mo re tuting
consti than
than 6
constituting themo
montnths
hs,, wh
company whil
ile
e the
would the
benu
numb
mber
er is liable
personally so redu
reduce
forced,
d, debts
the the
the memb
me
of mber
theers
s fo
forr the
company thecontracted
time
time be
bein
contracteding
g
during that time.
Capital clause The amount of share capital with which the company is to be registered divided into
shares
sha res must be spe speci
cifie
fied
d giving
giving det
detail
ails
s of the number
number of shares
shares and types
types of shares
shares.. A com
compan
panyy
cannot issue share capital greater than the maximum amount of share capital mentioned in this clause
without altering the memorandum.
Association clause A declaration by the persons for subscribing to the Memorandum that they desire to
form into a company and agree to take the shares placed against their respective name must be given
by the promoters.
Articles of Association : The Articles of Association (AA) contain the rules and regulations for internal
management
manageme nt of the company.
company.
 The AA is nothing but a contract between the company and its members and also between the
members themselves that they shall abide by the rules and regulations of internal management of
the company specified in the AA. It specifies the rights and duties of the members and directors.
The provisions of the AA must not be in conflict with the provisions of the MA. In case such a
conflict arises, the MA will prevail.

Normally, every company has its own AA. However, if a company does not have its own AA , the
model AA specified in Schedule I - Table A will apply. A company may adopt any of the model
forms of AA, with or without modifications. The Articles Of Association should be in any of the one
Page
form specified in the tables B,C,D and E of Schedule 1 to the Companies Act, 1956. Form in Table
B is applicable in case of companies limited by the shares , form in Table C is applicable to the
companies limited by guarantee and not having share capital, form in Table D is applicable to
company limited by guarantee and having a share capital whereas form in table E is applicable to
unlimited companies. However, a private company must have its own AoA.
 The impor
important
tant ite
items
ms cov
covered
ered by the AA includ include e powers
powers,, duties,
duties, rights
rights and lia
liabil
biliti
ities
es of Direct
Directors
ors,,
powers
pow ers,, duties,
duties, righ
rights
ts and liliabi
abilit
lities
ies of mem
member bers,
s, rules
rules for Mee
Meetin
tings
gs of the Company
Company,, Divide
Dividends
nds,,
Borrowing powers of the company, Calls on shares, Transfer & transmission of shares, Forfeiture of
shares, Voting
Voting powers of members,
members, etc
Alteration
Alter ation of articles
articles of assoassociati
ciation
on : A company can alter any of the provisions of its AA,
subj
subjec
ectt to prov
provis
isio
ions
ns of the Co Comp mpan
anie
ies
s Act
Act and su subj
bjec
ectt to the
the cocondi
nditi
tion
ons s co
conta
ntain
ined
ed in the
the
Memorandum of Association of the company. A company, by special resolution at a general meeting
of members,
publi
pub lic
c limi
limite dalter
ted co
compitsany
mpan articles
y in to provided
into a privatethat
private co
comp such
mpan
anyalteration
y un
unle ss does
less hasnotbeen
it has have
bee therove
n appro
app effect
ved of converting
d by the Cent
Centraal
ral
Government.
The articles must be printed, divided into paragraphs and numbered consequently and must be signed

by each subscriber to the Memorandum of Association who shall add his address, description and
occupation in presence of at least one witness who must attest the signature and likewise add his
address, description and occupation. The articles of association of the company when registered bind
the company and the members thereof to the same extent as if it was signed by the company and by
each member.
Certificate of Incorporation : Once all the above documents have been filed and they are found to
be in order,
order, the Regi
Registr
strar
ar of Comp
Compani
anies
es wiwillll issue
issue Cer
Certifi
tificat
cate
e of Incorpo
Incorporati
ration
on of the Compan
Company.y. This
This
document is the birth certificate of the company and is proof of the existence of the company. Once, this
certificate is issued, the company cannot cease its existence unless it is liquidated by order of the Court.
Commencement of Business : A priva privatete company or a company having no share capital

capital can
commence
commence its business immedia
immediately
tely after it has been incorporate
incorporated.
d. However,
However, other compan
companies
ies can
commence
commence their activities
activities only after they have obtained Certifi
Certificate
cate of Commencement
Commencement of Business.
Business. For
this purpose, the follow
f ollowing
ing additional formali
formalities
ties have to be complied with :-
1. If a company has share capital and has issued a prospectus, then :-
a. Shares upto the amo amount
unt of minimum
minimum subcripti
subcription
on must be alloted
alloted
b. Every director has paid to the company on each
of the shares which he has taken the same amount as the public have paid on such shares
c. No money iis s or may bec
become
ome payabl
payablee to the applicants
applicants of shares
shares or debentures
debentures for failure
failure to
apply for or to obtain permission to deal in those shares or debentures in any recognised stock
exchange.
d. A statu
statutory
tory declar
declaration
ation in Fo
Form
rm 19 sisigned
gned by one didirector
rector or the employee - company
secretary or a Company secretary in whole time practice that the above provisions have been
complied
compl ied with Must be filed.
2. If a
a company has share capital but has not issued a prospectus, then :-
a. It must file a stateme
statementnt in lieu of prospectus
prospectus with the Registrar of Compani
Companieses
b. Every director has paid to the company on
each of the shares which he has taken the same amount as the other members have paid on such
shares
c A statutory dec declarat
laration
ion in Form 20 signed by one director or the emplo employee
yee - company secret
secretary
ary or a
Company secretary in whole time practice that the above provisions have been complied with must be
filed Once the above provisions have been complied with, the Registrar of Companies grants "Certificate
of Commencement of Business" after which the company can commence its activities.
Capital of a Company : Capital refers to the amount invested in the company so that it can carry on
its activities. In a company capital refers to "share capital". The capital clause in Memorandum of
Association
Associa tion must state the amoun
amountt of capita
capitall with which company
compan y is registered
regis tered giving details
detail s of
number of shares and the type of shares of the company. A company cannot issue share capital in
excess of the limi
limitt specified in the Capital clause without
without altering the capital clause
clause of the MA.
The following different terms are used to denote differ different
ent aspects of share capital:-
capital:-
1.Norn
1.N ornina
inal,
l, author
authoris ised
ed or regis
registe
tered
red capit
capital
al means
means the su sum
m mentio
mentioned
ned in the capit
capital
al claus
clause e of
Memorandum of Association. It is the maximum amount which the company can raise by issuing the
shar
shares
es andand on whicwhichh the
the regis
registr
trat
atio
ion
n fee
fee is paid.
paid. ThThis
is li
limi
mitt cann
cannotot be exexce
ceed
eded
ed ununle
lessss the
the
Memorandum of Association is altered.
2.Issued
2.Issued capital means that part of the authorisauthorised
ed capital
capital which has been offered for subscri
subscriptio
ption
n to
members and includes shares alloted to members for consideration in kind also.
3.Subscribed capital means that part of the issued capital at nominal or face value which has been
subscribed or taken up by purchaser of shares in the company and which has been alloted.
4.Called-up capital means the total amount of called up capital on the shares issued and subscribed
Page
by the shareholders on capital account. Le if the face value of a share is Rs. 10/- but the company
requires only Rs. 2/-at present, it may call only Rs. 2/- now and the balance Rs.8/- at a later date. Rs. 2/-
is the called up share capital and Rs. 8/- is the uncalled share capital.
5.Paid-up
5.Paid -up capi tal means
capital means the total
total am
amoun
ountt of ca
calllled
ed up sh
shar
are
e ca
capi
pital
tal which
which is ac
actua
tualllly
y paid
paid to the
company by the member
members.s.
In India, there is the concept of par value of shares. Par value of shares means the face value of the
shares. A share under the Companies act, can either of Rs10 or Rs100 or any other value which may
be the fixed by the Memorandum of Association of the company. When the shares are issued at the
price which is higher than the par value say, for example Par value is Rs10 and it is issued at Rs15
then Rs5 is the premium amount i.e, Rs10 is the par value of the shares and Rs5 is the premium.
Similarly when a share is issued at an amount lower than the par value, say Rs8, in that case Rs2 is
discount
disco unt on shares and Rs10 will be par value.
Types of shares : Shares in the company may be similar i.e they may carry the same rights and liabilities
and confer on their holders the same rights, liabilities and duties. There are two types of shares under
Indian Company Law :-
1.Equity shares means that part of the share capital of the company which are not preference shares.
2.Preference Shares means shares which fulfill the following 2 conditions. Therefore, a share which
does not fulfill both these conditions is an equity share.
a. It carries Preferential rights in respect of
Dividend at fixed amount or at fixed rate i.e. dividend payable is payable on fixed figure or
percent and this dividend must be paid before the holders of the equity shares can be paid
dividend.
b. It also carries preferential right in in regard to
payment of capital on winding up or otherwise. It means the amount paid on preference share
must
mu st be papaid
id back
back to prefprefer
eren
ence
ce shar
shareh
ehol
olde
dersrs be
befo
fore
re an
anyt
ythi
hing
ng in pa paid
id to the
the eq
equi
uity
ty
sh
share
arehol
holder
ders.
s. In oth
other
er word
words,s, prefe
prefere
renc
ncee shar
share e ca
capi
pital
tal has
has prio
priori
rity
ty bot
bothh in rep
repay
ayme
ment
nt of
dividend as well as capital.
DOCTRINE OF THE ULTRA-VIRES : Any trans transaction
action which is outside
outside the scope of the powers specified
specified
in the objects clause of the MA and are not reasonable incidentally or necessary to the attainment of
objects, is ultra-vires the company and therefore void. No rights and liabilities on the part of the company
arise out of such transactions and it is a nullity even if every member agrees to it.
Consequences of an ultra-vires transaction :-
1. The company cannot sue any person for enforce enforcement
ment of any of its rights.
2. No person can sue the com company
pany for enforc
enforcement
ement of its rights.
rights.
3. The director
directors
s of the company
company may be held personally
personally liabl
liable
e to outside
outsiders
rs for an ultra vires However,
the doctrine of ultra-vires
ultra-vires does not apply in the following cases :-
1. If an act is ultra-vires
ultra-vires of powers the directors but intra-vires
intra-vires of company,
company, the company is liable.
liable.
2. If an act is ultra-
ultra-vires
vires the articles
articles of the company but it is intra-vir
intra-vires
es of the memorandum,
memorandum, the articles
articles
can be altered to rectify the error.
3. If an act is within the powers of the company but is irregul irregularly
arly done, consent
consent of the shareholder
shareholders s will
validate it.
4. Where there is ultrultra-vi
a-vires
res borrowi
borrowingng by the company
or it obtains deliver of the property under an ultravires contract, then the third party has no claim
against the company on the basis of the loan but he has right to follow his money or property if it
exist as itthat
provided is and obtain an injunction
he intervenes from the
before is money Court
spent -
on-restraining theof
or the identity company from
rty isparting
the property
prope lost. with it
5. The fende
fenderr of the money
money to a company
company unde
underr the ultr
ultra-v
a-vire
ires
s contract
contract has a rig
right
ht to make
make dir
direct
ector
or
personally liable.
DOCTRINE OF CONSTRUCTIVE NOTICE OF MOA & AOA

MOA and AOA are registered with ROC that can be inspected by any member of the public. Hence while
dealing with a company, any person is assumed to have notice of contents of MOA and AOA that is
known as constructive notice of MOA and AOA.
The effect of this doctrine is that there is presumption that a person dealing with the company knows
the contents and it stops the person from contending that he had no notice of the contents.
The doctrine of constructive notice protects a company from outsiders as the outsiders are presumed to
have notice of contents of MOA and AOA.
DOCTRINE OF INDOOR MANAGEMENT

The doctrine of indoor management saves the outsiders from the inside management. The person
dealing with a company can presume that the company and its officials understands all the rules and
regulations under which the company is to be managed. Hence the outsider is not bound to inquire
into regularity of internal functioning of the company. Hence, the outsider would not be affected by
any internal irregularity on the part of the company or its officials. This is known as doctrine of indoor
management.
Page
DIRECTORS
Minimum number of directors : Every public company ( other than a deemed public company ) must
have at least three directors. Every other company must have at least two directors.
Board of Directors. The directors of a company collectively are referred to as the "Board of directors" or
"Board".. Only individual
"Board" individualss can be appointed
appointed as directors.
directors. No body corporate,
corporate, association
association or firm can be
appointed
appointe d direc
director
tor of a Company
Company..
Firstt dire
Firs directo rs : In case
ctors case the first
first dir
direct
ectors
ors are not appoi
appointe
nted
d by the pro
promot
moters
ers of a cocompa
mpanyny,,
subscribers of the memorandum who are individuals, shall be deemed to be the directors of the
company, until the directors are duly appointed.
Appointment of directors and proportion of those who are to be retire by rotation : Unless articles
provide for the retirement of all directors at every annual general meeting, at least two-thirds of the total
number
num ber of dire
direct
ctor
ors
s of a pu
publ
blic
ic compa
company ny,, or of a priv
private
ate co
compa
mpany
ny whic
which h is su
subs
bsid
idia
iary
ry of a pupubl
blic
ic
company, must
(a) retire by rotation
(b) be app
appoi
oint
nted
ed by the cocomp
mpanany y in gen
gener
eral
al me
meeti
eting
ng,, exce
exceptpt wh
wher
eree othe
otherw
rwis
ise
e prov
provid
ided
ed by the
the
Companies
Compani es Act. The remaining
remaining direc
directors
tors in the case of any such company,
company, and the directors
directors general
generally
ly
in the case of a priv privat
ate
e comp
companyany which
which is not a su subs
bsid
idia
iary
ry of a pu
publ
blic
ic co
comp
mpan
any,
y, mu
must
st al
also
so be
appointed by the company in general meeting, unless otherwise provided in any regulations in the
articles of the company.
Ascertainment of directors retiring by rotation and filling of vacancies
At every annua
annuall gener
generalal meeting of a public company,
compan y, or a private company which is a subsidiary
subsidiar y of a
public company, one-third of the directors liable to retirement by rotation or if their number is not three
or a multiple of three, then, the number nearest to one-third, shall retire from office.
The directors to retire by rotation at every annual general meeting shall be those who have been
longest in office since their last appointment, but as between persons who became directors on the
same day, those who will have to retire is to be determined by lot, unless otherwise agreed to among
themselves.
At the annual general meeting at which a director retires as aforesaid the company may fill up the
vacancy
vac ancy by appo
appoint
inting
ing the reti
retirin
ring
g dir
direct
ector
or or some
some othe
otherr person
person theret
thereto.
o. In othe
otherr words,
words, a retiri
retiring
ng
directorr is eligi
directo eligible
ble for re-app
re-appointmen
ointmentt at the same meeting
meeting..
If the place of the retiring director is not so filled up and the meeting has not expressly resolved not
to fill the vaca
vacancy,
ncy, the meeting shall stan
stand d adjourned
adjourned till the same day in the next week, at the sam
same e
time and place, or if that day is a public holiday, till the next succeeding day which is not a public
holiday, at the same time and place.
If at the adjourned meeting also, the place of the retiring director is not filled up and that meeting also
has not expressly resolved not to fill the vacancy the retiring director shall be deemed to have been re-
appointed
appointe d at the adjourned
adjourned meeting,
meeting, unless
i a resolu
resolution
tion for the re-ap
re-appointme
pointmentnt of such director
director has been put to the meeti
meeting
ng and lost
ii. the retiring director, has by a notice in writing
addressed to the company or its Board of directors, expressed his unwillingness to be so re-
appointed
iii. he is not qualified or is disqualified for appointment
iv. a resolution, whether special or ordinary, is
required
require d for his appointmen
appointmentt or re-appointm
re-appointment
ent in virtue
virtue of any provisi
provisions
ons of this Act.
Right of persons other than retiring directors to stand for directorship

A person who is not a retiring director shall, subject to the provisions of this Act, be eligible for
appoint
appo intmen
mentt to the offic
officee of direct
director
or at any general
general meetin
meeting,g, if he or some
some member
member in intend
tending
ing to
propose him has, given notice in writing to the company at its registered office of at least 14 days
before the meeti
meeting,
ng, signifying
signifying his candidature
candidature for the offi
office
ce of director
director or the intention
intention of such member
to propose him as a candidate for that office
office along with a deposit of rupees five hundred refundable
refundable on
successful election ).
The company must inform its members of such candidature by giving at least 7 days prior notice.
Such notice may not be required if the company advertises such candidature at least 7 days before
the meeti
meeting
ng in at leas
leastt 2 new
newsp
spape
apersrs ci
circ
rcula
ulati
ting
ng in the pl
plac
acee wher
wheree the regi
registe
stere
red
d offi
office
ce of the
company is situated, one of which must be in English and the other in the regional language.
This provision shall not apply to a private company, unless it is a subsidiary of a public company.
Right
Right of com
compan
pany
y to inc
increa
rease
se or reduce
reduce the number
number of direct
directors : A company, at a general
ors
meeting may,
fixed in that by ordinary
behalf resolution,
by its articl
articles.
es. increase or reduce the number of its directors within the limits
Increa
Inc rease
se in num
number
ber of direc
director
tors
s to requir
require
e Govern
Governmen
mentt sanct ion : In the
sanction the case
case of a pu
publ
blic
ic
comp
company
any,, or a priv
private
ate co
comp
mpany
any whic
whichh is a su
subs
bsidi
idiary
ary of a publ
public
ic compa
company ny,, any increas
increase
e in the
Page
number of its directors, beyond the maximum number of directors permitted by the Articles of the
Company as first registered, shall not have any effect unless approved by the Central Government
and shall become void if, and in so far as, it is disapproved by that Government. However, where
such permissible maximum is 12 or less, no approval of the Central Government is required provided
the increase does not increase the number of directors beyond 12.
Addition
Add itional
al dire
directors : The Board of directors may appoint additional directors if such power is
ctors
conferred on it by the articles of the company. Such additional directors shall hold office only up to
the date of the next annual gener
generalal meeting of the company.
company. Provi
Provided
ded further that the number
number of the
directors and additional directors together shall not exceed the maximum strength fixed for the Board
by the articles.
Filling of casual vacancies among directors : In the case of a public company or a private company
which
meetingis is
a subsidiary of a his
vacated before public
termcompany, if the
of office will office
expire in of
theany director
normal appointed
course, by thecasual
the resulting company in general
vacancy may,
in default of and subject to any regulations in the articles of the company, be filled by the Board of directors at a
meeting of the Board. Any person so appointed shall hold office only up to the date up to which the
director in whose place he is appointed would have held office if it had not been vacated as aforesaid.
Alternate
Alter director : The Board of directors of a company may, if so authorised by its articles or by a
nate director
resolution passed by the company in general meeting, appoint an alternate director to act for a director
during his absence for a period of not less than three months from the State in which meetings of the
Board are ordinarily held. An alternate director so appointed shall not hold office for a period longer than the
period for which the original director hold office and vacate office if and when the original director returns to the
State in which meetings of the Board are ordinarily held.
Consent of candidate for directorship to be filled with Registrar : A person shall not act as director of a
company unless he has, by himself or by his agent authorised in writing, signed and filed with the Registrar, a
consent in writing to act as such director within 30 days of his appointment. This provision shall not apply to a
private company
company unless it is a subsidiary of a public company.
Option to company to adopt proportional representation for the appointment of directors : if the articles of a
company provide for the appointment of not less than two-thirds of the total number of the directors of a
publilic
pub c comp
companyany or of a priva private
te comp
compan any y whic
which h is a subs
subsid
idia
iary
ry of a publi
publicc co
compmpan
any,
y, ac
acco
cordi
rding
ng to the
princ
principiple
le of prop
propororti
tion
onal
al,, repr
repres
esen
enta
tati
tion
on,, whet
whethe
herr by the sisingl
nglee tran
transf
sfer
erab
able
le vote
vote or by a syst
system
em of
cumulative voting or otherwise. Such appointments may be made once in every three years and interim
casual vacancies being filled by the Board of Directors as Casual Vacancies. This may enable minority
shareholders
sharehol ders to have a propoproportional
rtional representati
representation on on the Board of Directors of the company.
Qualification shares : These are the minimum number of shares a person must own, as provided in the
articles of the company, in order to qualify to become a director of the company. Qualification shares must be
acquired by a a director within 2 months of his appointment. The articles cannot require a director to acquire
qualilific
qua ficati
ation
on sha
shares
res wiwithi
thinn a shorte
shorterr per
period
iod.. The face
face value
value of the qualifi
qualificat
catio
ion
n shares
shares cannot
cannot exceed
exceed
Rs.5000, or if the face value of one share is more than five thousand rupees, then the qualification share will
be one qualification share.
Every
Eve ry director,
director, not being a techni
technical
cal director
director or a director
director appointe
appointed,
d, by the Central
Central or a State Government,
Government, shall
within two months after his appointment file with the company a declaration specifying the qualification shares
held by him. If, after the expiry of the said period of two months, any person acts as a director of the
company when he does not hold the qualification shares, he shall be punishable with the fine which may
extend
The above to Rs.50 for every
provisions do day between
not apply to asuch expirynot
company andhaving
the lasta day oncapital;
share which he acted as
a private a director.a company
company;
which was a private company before becoming a public company; or a prospectus issued by or on behalf of
a company after the expiry of one year from the date on which the company was entitled to commence
business. Managing Directors : Managing Director means a person who, by virtue of an agreement with the
company or of a resolution passed by the company in a general meeting or by its Board of directors or by
virtue of its memorandum or articles of association, is entrusted with substantial powers of management
whic
wh ich
h coul
couldd no
nott oth
other
erwi
wise
se be exexer
erci
cisa
sabl
ble
e by him
him and in incl
clude
udess a di
dire
rect
ctor
or oc
occu
cupy
pyin
ing
g the poposisiti
tion
on of a
managing director, by whatever name called. The power merely to do administrative acts of a routine nature,
when so authorised by the Board such as the power to affix the common seal of the company on any
document or to draw and endorse any cheque on the account of the company in any bank or to draw and
endorse any negotiable•instrument or to sign any share certificate or to direct registration of share transfers
will not be deemed to be included within substantial powers of management. The managing director must
exercise his powers subject to the superintendence, control and direction of the Board.
Disqualifications of directors : A person shall not be capable of being appointed director of a company,
if,
a. he has been found to be of unsound mind by a Court of competent
competent jurisdi
jurisdiction
ction and the finding is in
force
b. he is an un-discharged insolvent
c. he has applied to be adjudicate
adjudicatedd as an insolvent
insolvent and his application
application is pending
pending d he has been
convicted by a Court of any offence
Page
involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a
peri
period
od of 5 y yea
ears
rs hhas
as not
not elap
elapse
sed d fr
from
om the
the date
date of expi
expiryry of tthe
he se
sent
ntenc
encee
d. he has not pai paidd any call in respe
respect ct of shares
shares of the comp company any held by him, whether
whether alone or jointly
jointly with
with others,
others,
an
and d 6 mont
monthshs ha
havve elap
elapsesedd fr
from
om thethe la
last
st da
day
y fi
fix
xed forfor the
the pa
pay yme
ment
nt of the
the cal
call
e. an order disquali
disqualifying
fying him for appointme
appointment nt as
director has been passed by a court and is in force unless the leave of the court has been
obtained for his appoint
appointment
ment in pursuance
pursuance of that section.
The Central Government may, by notification notification in the Official
Official Gazette, remove :-
i.t
i.the
he dis
disqual
qualifi
ifica
catio
tion
n inc
incurr
urred
ed by any per person
son iinn vi
virtu
rtuee of claus
clause e (d) eit
either
her general
generally
ly or in rel
relati
ation
on to any
any
co
compmpananyy or co
compmpan anie
ies
s sp
spececif
ifie
ied
d in the not
notifific
icati
ation
on;; or
ii.the
ii.th e disqual
disqualifica
ification
tion incurred by any person in virtue of clause (e)
A private company which is not a subsidiary of a public company may, by its articles, provide that a
person shall be disqualified for appointment as a director on any grounds in addition to those specified
above.
No person to be a director of more than 15 companies : Where a person already holding the office of
director in 15 companies is appointed, as a director of any other company, the appointment :-
a. shall not take effect unless such person has, within 15 days thereof, effectively vacated his office as
director in any of the companies in which he was already a director; and
b. shall
shall bec
becomome e void
void imme
immedi diate
atelyly on the ex expi
piry
ry of the 15 days days if he ha has
s not,
not, bebefor
foree su
such
ch ex
expi
piry
ry
effectively
effecti vely vacated his office as director director in any of the other companies afores aforesaid.
aid.
In calculating the number of companies of which a person may be a director, the following companies
shall be excluded :-
a. a private company which which is neither a subsidiary
subsidiary nor a holding company of a public company company
b. an unlimited company
c. an associati
association on not carrying on business for profit or which prohibits prohibits the payment of dividend
d. a company in which such person is only an alternate director, that is to say, a director who is only
qualified to act as such during the absence or incapacity of some other director.
Any person who holds office, or acts, as a director of more than 15 companies in contravention of the
foregoing provisions shall be punishable with fine which may extend to Rs.5000 in respect of each of
those companies after the first 15.
Vacation of office by directors : The office of a director shall become vacant if :-
a. he fails to obtobtain
ain within
within the time time spespeci
cified
fied ( 2 months
months ) or at any time ther thereaf
eafter
ter ceases
ceases to hold, the
share qualification, if any, required of him by the articles of the company
b. he is found to be of unsound mind by a Court of competent jurisdic jurisdiction
tion
c. he applies to be adjudica
adjudicated ted an insolven
insolventt
d. he is adjudged an insolvent
e. he is convicted by a Court of any offence involving moral turpitude and is sentenced in respect
thereof to imprisonment for not less than six months
f. he fails to pay any call in resp respect ect of shares of the
company held by him, whether alone or jointly with others, with in six months from the last date fixed
for the payment of the call unless the Central Government has, by notification in the Official Gazette
removed such disqualification.
g. he absents himself from three consecutive consecutive meetings
h. of the Board of directors,
directors, or from all meeti meetings ngs of the Board, for a continuo
continuousus period of three monthmonths,s,
whichever is longer, without obtaining leave of absence from the Board he, whether by himself or by
any person
company for hishe
of which benefit or on his
is a director, account
accepts or any
a loan, firmguarantee
or any in which he is a partner
or security for a or anyfrom
loan, private
the
company in contravention
contravention of section
section 295 ( without due authorization
authorization of the Central
Government )
i. he acts in contravention of section 299 ( failure to disclose interest in any transaction with the company
he becomes disqualified by an order of Court under section 203
j. he is removed by the members by- rresolution esolution at a g
general
eneral meeting
k. having been appointed a director by virtue of his holding any office or other employment in the
company, he ceases to hold such office or other employment in the company.
The disqualification referred to in clauses (d). (e) and (j) shall not take effect,-
a. for 30 days fromfrom the date o off the adjudic
adjudication
ation sentence
sentence or ororder
der
b. where any appeal or pe petitio
titionn is preferr
preferreded withi
within
n the
30 days aforesaid against the adjudication, sentence or conviction resulting in the sentence, or order
until the expiry of 7 days from the date on which such appeal or petition is disposed of
c. where within
within the 7 days aforesaforesaid,
aid, any further
appeal or petition is preferred in respect of the adjudication, sentence, conviction, or order, and the
appeal or petition, if allowed, would result in the removal of the disqualification, until such further
appeal or petition is disposed of.
If a pers
personon funct
functioions
ns as a dire
directctor
or,, knowi
knowing
ng that
that hi
his
s offic
office
e hahas
s va
vaca
cated
ted on accoun
accountt of the ab
abov
ove
e
provisions, shall be liable to a fine upto Rs. 500/- per day of default.
Page
A private company which is not a subsidiary of a public company may, by its articles, provide, that the
office of director shall be vacated on any grounds in addition to those specified in above
Removal of directors : A company may, by ordinary resolution, remove a director (not being a director
appointed by the Central Government in pursuance of section 408) before the expiry of his period of
office.
A vacancy created by the removal of a director if he had been appointed by the company in general
meeting or by the board in on a casual vacancy, be filled by the appointment of another director in his
stead by the meeting at which he is removed, provided special notice of the intended appointment has
been given.
A director so appointed shall hold office until the date up to which his predecessor would have held office
if he had not been removed as aforesaid.
MEMBERS
According
Acco rding to SectSection
ion 41, memb
member er means
mean s a perspersonon who is:
o subscribers of the memorandum of a company whose name shall be entered as members in its register
of members.
o Every other person who agrees, in writing, to become a member of a company and whose name has been
entere
ent eredd as mem
member ber in its reg
regis
ister
ter of member
members. s.
o A person holding equity shares and whose name has been entered as member in its register of
members. How a person can become a member :
 By subscription to MoA
 By get
gettin
tingg sha
shares
res allott
allotted
ed whe
when n com
company
pany mad
made e an offe
offerr to is
issue
sue such
such shares
shares,, includ
includin
ing
g joi
joint
nt member
membershi
ship.
p.
 By purchase of shares from marke markett and gettin
getting g them transferred in his name.
 By getting these shares as legal heirs, as part of the estate of a deceased shareholde shareholder. r.
Who can become a member :
a Any person competent to contract including nonresident person
 A company, bein being g a legal person
 R e g i s t e r e d s o c i e t y,
y, h a v i n g a c q u i r e d t h e l e g a l s t a t u s a s a p e r s o n W h o c a n n o t
become a member :

A partner
partnershishipp firm
firm
 Minor, insolv
insolvent,
ent, insane persons
 Fictitious person (a person making application in a fictitious name is punishable with imprisonment up
to 5 years.
When does a person ceases to be a member :
 When he transfers his share in the name of some other person or when he surrenders his shares, if
such surrender is allowed.
 When his shares hav havee been forfeited
 When shares are sold in execution of a court decree
 When the rescinds the contract due to
misrepresentation in the prospectus a When he is adjudicated insolvent
 When he expires (in that situation situation,, the shares would
would be transferred
transferred in the name of legal heirs)
Register of members for shares and debentures Every company keeps a register of members that
contains
contai ns details about shareholders.
shareholders. The regis registerter is kept at the registered
registered office or at other place in the
same town, city or village where the registered office is located.
Closure of register of members
The register can be closed by giving minimum 7 days notice as advertisement. The closure can be maximum
fo
forr 45 da days
ys.. At
At on
onee po
poiint of
of ti
time
me,, the
the cl clos
osurure
e coul
couldd be for
for max
maximum
imum of 3 30
0 da
days
ys..
Rights of members
members
 Priori
Priorityty in new shares issued by the company.
 Righ
Rightt to trans
transfer
fer shares
shares
 Right to receive
receive notice of meetings
meetings and voti voting
ng rights
 Right to receiv
receive e copies of annual account accounts s
 Right to inspect the register of member members s and copies of annual returreturns
ns
 Right to apply to Company Law Board to call annual general general meeting.
 Rig
Right ht to con
conven
vene e ext
extra-
ra-ord
ordinainary
ry gen
genera erall meetin
meeting g
 Right to file petiti
petition
on to the High Court to order winding winding up of the company.
company.
 Righ
Rightt to receive
receive divi
dividend
dends, s, if decl
declare ared d by the comcompan
pany y
 Right to participate in the distri distribution
bution of asset in case of liquidation of the company. Liability
of member
members s
 If company is limitelimited d by shares, to the extent of unpaid amount of the shares.
 If the
the cocomp
mpan anyy is limi
limite
ted
d by guar
guaranante tee,
e, to the
the exte
extent
nt of guar
guaran
ante
teed
ed by th
the
e memb
member
er
 If it is unli
unlimi
mite
ted
d co
comp
mpanany,
y, the
the liliab
abililiity is to full
full ex
exte
tent
nt of debt
debts
s of the
the co
comp
mpananyy.
PROSPECTUS
Page
A prospectus
prospectus is any docum document ent that is descr
described
ibed or is issueissuedd as a prospectus
prospectus and incl includes
udes any notice,
notice, circul
circular,
ar,
adver
adv ertis
tisem
ement
ent or otherother docume
document nt,, in
invi
viti
ting
ng depos
deposit it fro
fromm the pub publilic
c or ininvi
vitin
tingg offer
offers
s from
from ththee publi
public
c for
subsc
sub scri
ripti
ption
on / purcpurchas
hase e of sh shar
ares
es or deben
debentu ture
re of a bodybody co corpo
rporatrate.
e. Pr
Priv
ivate
ate comcompapani
nies
es canno
cannott isissue
suedd
prospec
pros pectus
tus as thes
these e cannot invite
invite depos
depositsits nor they can offer sha sharesres to the public.
public.
Where prospectus is not required to be issued:
 Wh
Wher
ere e a pers
personon has
has ente
entere redd in
into
to an unde
underw rwririti
ting
ng a agr
gree
eemement
nt to pu
purc
rchahase
se or su
subsbscr
crib
ibe
e th
the
e sh
shar
ares
es..
 Where shares are offered to existing existing sharehold
shareholders ers or debenture
debenture holders only
 Whe
Where re the
the offer
offer,, in all
all resp
respec
ects
ts is uni
unifor
form
m wit
with h the
previously issued shares and debentures and these
are liste
listedd on a rec
recogn
ogniz ized
ed sto
stock
ck ex
excha
change
nge.. Impor
Importan tantt asp
aspect
ects
s of the prospe
prospectctus
us::
 Time of issue : It can be issued only after incorpor incorporationation of the company.
 Con
Conten
tents
ts : It sho
should
uld con
contaitain
n the inf
inform
ormati
ation
on as sti stipul
pulate
atedduu/s
/s 56 and SchedScheduleule lI of Compani
Companies es Act
Act
 Date of publicati
publication on : It must be dated.
 Signatu
Signaturesres of director : Each person mentioned as director, director, must sign it.
 Applicati
Applicationon form : Every applica application
tion should be accompanied by a copy of the prospectus.
 Stat
Stateme
ement nt by expert
experts s : A statem
statementent purpo
purporti
rting
ng to be made by an expert can be is issued
sued only if the company
company
hold
holdss writ
writte
tenn co
cons
nsenentt of the
the expe
expertrt and
and he hashas not not wi
with
thdr
draw
awnn it.
 Regis
Registra
tratio
tion
n of the proprosp spect
ectus
us Bef
Before
ore isissue
sue,, it
should be delivered to ROC for registration alongwith other documents.
Wrong statements in the prospectus:
A person induced to buy shares shar es of debentures has ffollowing ollowing rremedies:
emedies:
 Against the compan
company: y: To rescind the contract and claim damages. damages.
 Against the person
persons: s: The directors or person respon responsible
sible would can be punished with fine or
imprisonment or both.
REGISTRATION, MODIFICATION AND SATISFACTION OF CHARGE
U/s 77 of Companies Act 2013, every charge created by a company on its assets, shall be held void
against the liquidator
liquidator and any'c any'credi tor of, a company unless the prescribed particulars of the charge
reditor
(toget
(to gethe
herr with
with co copy
py of inst instru
rume
mentnt,, by wh whic
ich h the
the ch char
arge
ge in cr creat
eated ed)) ar
are
e filed
filed with
with the Regi
Registstra
rar,
r, for
registration within 30 days, after date of its creation. In case of charge created outside India, 30 days
shall begin on receipt of instrument in India. Delay in filing details for registration : The registrar can
extend the perioperiod d by 270 days. Beyond that, Central Govt. permi permission
ssion is required.
Certificate of registration : The Registrar shall give a certificate of registration of any charge registered,
stating
statin g the amount thereb thereby y secured
secured.. The certi certificate
ficate is conclusive
conclusive evidence that requirement requirement of registratio
registrationn
has been fulfilled. Who is to file the particulars: It shall be duty of a company to file the particulars of every
charge but the registration of any such charge may also be effected on the application of any person
interested therein.
Right to inspect copies of instruments : The copies of the instruments creating charges shall be available
for inspection to any creditor or member of a company without fee, at their registered office.
Search at the office of ROC: As part of due diligence, a search can be carried out at the office of ROC
before granting loan to a company, to ensure that the assets or securities offered, are not already charged
to any other party.
Filing particulars of charge
The charge is to be filed electronically by using MCA-21 on the following forms:
New loan (new charge) CHG-1
Modification of the existing charge CHG-1
Satisfaction of charge (on loan adjustment) CHG-4
Priority of charge
It would be determined by the date of execution of documents (where a charge has been re istered),
rather than the date of regist
registration
ration..
Bank-A Bank-B
Date of Documents Jan 24, 2014 Feb 14, 2014
Date of Registration of charge Feb 22, 2014 Feb 18, 2014
Bank A has got the priority.
Other Provisions in summary, of Companies Act 2013

Registered office: A company shall, within 15 days of its incorporation, to have a registered office and
furnish its verification to ROC, within 30 days. Commenceme
Commencement business: A company with share
nt of business:
capital can commence business or exercise borrowing powers after a declaration is filed with ROC that
Page
the Paid-up capital is not less than Rs. 5 lac (public company) and Rs.1 lac (private company).
Board and Governance
Number of directors: Minimum : Public company -3 Private -2 , OPC-1. Maximum no. of directors : 15
(earlier
(earlier 12). More can be added by special resolut
resolution
ion without approval of Central Govt.
Woman director: At least one woman director shall be on Board.
Resident Director: A company to have min one director who has stayed in India for min 182 days in
previous calendar year.
Independent Directors: All listed companies shall have min one-third as independent directors.
Board meeting : At least 7 days' notice is required to be given for a Board meeting. For a Meeting at
shorter notice, at least one independent director shall be present at the meeting.
Managerial Year ending: Maximum

Remuneration
Financial Year: March 31. limit of 11% (of net profits) has been retained.
Corporate Social Responsibility : A company with net worth of Rs. 500 crore or more, or turnover of Rs.
1000 crore or more or a net profit of Rs. 5 crore or more during any financial year (FY), shall constitute a
Corporate
Corporat e Social Responsibi
Responsibility
lity Committ
Committee
ee (with 3 or more direc
directors
tors - at least one shall be
an independent director). The company should spend in every FY at least 2% of average net profits
during 3 immed
immediately
iately preced
preceding
ing FY in pursuance of its CSR policy.
Auditors : A company shall appoint an auditor at AGM to hold office till conclusion of 6th AGM.
The maximum number in which a person may be appointed as auditor is 20 companies.
Penalty for fraud related offences: Imprisonment up to 6 months which may extend to 10 years and fine
up to the amount involved which may extend to 3 times the amount involved. In fraud involving public
interest,
interes t, imprisonment
imprisonment shall be min 3 years
National Financial Reporting Authority (NFRA) : Central Govt. can constitute NFRA for matters related
to acc
account
ountin
ing
g and auditi
auditing
ng sta
standar
ndards.
ds. NFRA hav
have e powers
powers simil
similar
ar to a civil
civil cou
courtrt unde
underr Code
Code of Civil
Civil
Procedure, 1908, for trying a suit. NFRA can impose min penalty of Rs.1 lac, which may extend to 5 times
in case of individuals; and min Rs.10 lac, which may extend to 10 times of the fees received, in case of
firms.
Seriou
Ser iouss Fra
Fraud
ud Inves
Investig
tigat
ation
ion Office
Office (SF IO) : Investi
(SFIO) Investigati
gation
on report
report of SFI
SFIOO filed
filed with
with the Court
Court for
framing
frami ng of char
charges
ges shall be treated
treated as a report filed
filed by a Police
Police Officer
Officer.. SFIO can make arrest for certain
certain
offences, which attract the punishment for fraud. Nationa Nationall Company
Company Law Tribuna Tribunall and Appella
Appellate
te
Tribunal : The Central Government shall, constitute these Tribunals.
REGISTRATION OF CHARGE (COMPANIES ACT 2013) :

Sec 77 - Duty to register charges : Every company creating a charge within or outside India, on its
assets or undertakings, whether tangible or otherwise, and situated in or outside India, is to register the
particulars
particulars of the charge with Registrar
Companies (ROC) within 30 days of its creation
creation..
ROC may allow the registration within a period of 300 days of such creation. For period beyond 300 days,
the company shall seek extension of time. On registration,
registration, ROC shall issue a certificate
certificate of registratio
registration.
n.
Effect
Effect of non
non-re
-regis
gistration : Charge
tration Charge created
created by a co compa
mpany
ny shall
shall not be taken
taken in into
to accoun
accountt by the
liquidator or any other for
Sec 78 - Application creditor, if it is not
registration ofregistered and a a
charge: Where certificate
companyoffails
registration is within
to register not given by ROC.
the specified
period, the creditor may apply to the Registrar within prescribed period. ROC, within 14 days, after giving
notice to the company, allow such registration.
Sec 80 - Notice of charge : If a charge is registered, a person acquiring such assets shall be deemed to
have notice of charge from date of registration.
Sec 81 - ROC Register of charges : ROC shall keep a register of charges registered, which shall be
open to inspection by any person on payment of fees.
Sec 82 - Satisfaction of charge : A company shall give intimation to ROC of the payment or satisfaction
in full, of any charge registered, within a period of 30 days from the date of such payment or satisfaction.
ROC shall send a notice to creditor to show cause within such time not exceeding 14 days, as to why
payme
pay mentnt or sa
sati
tisf
sfac
acti
tion
on in ful
fulll shoul
should d not be reco
record
rded.
ed. If no cacaus
use
e is shown
shown,, ROC sh shal
alll enter
enter the
the
satisfaction
satis faction in register of charges kept by ROC.
Sec 86 - Punishment for contravention : If a company contravenes these provision, the company
shall be punishable
punishable with fine which shall not be less than Rs.1 lakh but which which may extend to Rs.10 lakh. lakh.
Every officer of the company who is in default, shall be punishable with imprisonment for a period up to
6 months or with finefine,, not be less than Rs.25000 but which may extend to Rs.1 lakh, or with both.
Page
PARTNERSHIP FIRMS
The law relating to Partnership firms is codified in Indian Partnership Act 1932.U/s 4, "Partnership" is the
relation between persons who have agreed to share the profits of a business carried on by all or any of
them acting for allall.. Persons
Persons who have entered into partn
partnershi
ership
p with one another
another are called individually
individually
"partners and collectively a "firm", and the name under which their business is carried on is called the
"firm
"firm name"
name".. As per Section
Section 5, the relation of partnership
partnership arises
arises from contract
contract and not from status
status (say
the members of a Hindu undivided family carrying on a family business as such are not partners).To
enter into a partnership, there has to be a contract which may be oral or in writing (called Partnership
deed - required to be stamped as per State govt. notification). Where there is no partnership deed, the
rights and liabilities of the partners shall be as per Partnership Act.
Competence of parties to become a partner : Being a legal contract, only persons having legal
capacity
capaci ty to contr
contract
act (minors, insolvents,
insolvents, alien enemy excluded) can enter into a partnership.
partnership.
No. of partners (Sec 11 of Companies Act)
Banking Business : Max 10, Business other than banking : Max 20,Minor admitted for the benefits not
to be counted towards the no. of members. The no. exceeding the above will make the firm an illegal
association. Where a firm is a partner in another firm, the individual no. partners will be counted for
the purpose of total no. of partners.
No. of partners (Sec 464 of Companies Act 2013)
The no. of partners can be 100. (Section 464 Companies 'Act 2013. As per Companies Act 1956, the
number was max 10 for Banking Business and 20 for other business)
Joint Stock Company can become a partner in a firm and in such cases the banker needs to ensure
that they are eligible to become partner.
HUE as partner — HUF cannot enter into a partnership as per Supreme Court judgement of 1998.
Minors admitted to the benefits of partnership : U/s 30,
(1) Amay
person who is a minor
be admitted to the may not be
benefits a partner in a firm, but, with the consent of all the partners he
of partnership.
(2) Such minor has a right to such share of the property and of the profits of the firm as may be
agreed upon, and he may have access to and inspect and copy any of the accounts of the
firm.
3
( ) Such minor's share is liable for the acts of the firm, but the minor is not personally liable for any
such act.
Minor attaining majority:
(4) At any time within 6 months of his attaining majority, or of his obtaining knowledge that he had
been admitted to the benefits of partnership, whichevwhichever er date later, such person may give
date is later,
public notice that he has elected to become or that he has elected not to become a partner in
the firm, and such notic
notice
e shall determine
determine his positi
position
on as regards the firm. If he fails to give such
notice, he shall become a partner in the firm on the expiry of the said 6 months.
(5) Where such person (who was a minor earlier) becomes a partner-
(a) He becomes perso
personally
nally liable
liable to third parties for all acts of the firm done since
since he was admitted
to the benefits of partnership, and
(b) his share
share in the property and profits of the firm sh shall
all be the share to which he was entientitled
tled as
a minor.
minor.
( 6) Where such person elects not to become become a partne
partner,-
r,-
(a) his rights and lia
liabili
bilities
ties shall continue
continue to be those of a minor under this sectisection
on up to the date on
which he gives public notice
notice,,
(b) his share sh
shall
all not be liabl
liable
e for any acts of the firm done after
after the date of the notice
notice,, and
Duties of partners : As per Section 9, the partners are :
 bound to carry on the busines
business s of the firm to the greatest common advantage,
advantage,
 to be just and fafaithful
ithful to each other
other,, and
 to render true acco
accounts
unts and full infor
informati
mation
on of all thin
things
gs affecting
affecting the firm to any partn
partner
er or his lega
legall
representative.
 Furthe
Further,r, as per Section 10, every partner shall shall indemni
indemnifyfy the firm for any loss caused to it by his fraud
in the conduct of the business of the firm.
Conduct of the business of the firm: As per Section 12, subject to contract between the partners,-
(a) every partner
partner has a right to take part in the conduc
conductt of the business;
business; ' • "
(b) every partner
partner is bound to attend dili diligently
gently to his duties in the conduc
conductt of the business;
business;
(c) any difference arising as to ordinary matters connected with the business may be decided by a
majority
majo rity of the partners
partners,, and every part partner
ner shall have the right to express his opinion, before the
matterr is deci
matte decided,
ded, but no change may be made in the nature of the business business without the consent
of all the partners; and
(d) every partner
partner has a right to have access to and to inspect and copy any of the books of the firm.
Page
Mutual rights and liabilities (i.e. amongst partners) : U/s 13, subject to contract between the
partners,-
(a) a partner is not entitled
entitled to receiv
receive e remunerati
remuneration on for taking part in the conduct of the business;
(b) the partners are entitled to share equally the profit profits
s earned, and shall contribute equally equally to the losses
losses
sustained
sustai ned by the firm;
(c) where a partner is entitledentitled to interest
interest on the capital subscrisubscribedbed by him such interest shal shalll be payabl
payable e
only out of profits;
(d) a partner making, for the purposes of the business, any payment or advance beyond the amount of
capital he has agreed to subscribe, is entitled to interest thereon at the rate of 6% per annum;
(e) the firm shall indemnify a partner in respect of payment payments s made and liabiliti
liabilities
es incurred by him-
(i) in the ordi
ordinary
nary and proper
proper conduct
conduct of the busi business,
ness, and
in doing such act, in an emergency, for the
purpose of protecting the firm from loss, as would be done by a person of ordinary prudence, in his
own case, under similar circumstanccircumstances; es; and
(f) a partner shall indemnify the firm for any foss caused to it by his wilful neglect in the conduct of the
business
busine ss of the firm.
Relations of Partners To Third Parties As per Section 18, a partner is the agent of the firm for the
purpose of the business of the firm.
Powers of partners : U/s 19 (1), the acts of a partner to carry on business of the firm in a usual way, bind
the firm and a partner is an agent of the firm for the purpose of business of the firm (called implied authority).
In order to bind the firm by his acts, a partner must sign for and on behalf of the firm (and not as an
individual). It should be for the usual business of the firm, no restriction should have been imposed by the
other partners/partnership deed and the firm should be in existence. All partners should sign in the
event of a firm giving guarantee (unless giving the guarantee is a normal business).
When implied authority cannot be exercised U/s 19 (2), the implied authority of a partner does not cover
the following (in such circumstances, the acts. have to be taken by all the partners jointly):
a submission of a dispute to arbitration,
b open an account in his own name for the firm's business
c promise or relinquish claim of the firm
d withdrawal of suit filed on behalf of the firm.
e admit any liability
liability in a suit agains
againstt the firm,
f acquire
acquire immovable property on behalf of firm
g transfer immovable property belonging to firm
h enter into a partnership on behalf of the firm.
Authority in an emergency : u/s 21, a partner has authority, in an emergency, to do all such acts for
the purpose of protecting the firm from loss as would be done by a person of ordinary prudence, in his
own case, acting under similar similar circumstanc
circumstances, es, and such acts bind the firm.
Effe
Effectct of ad admimissssio
ions
ns by a pa part rtne
nerr and
and no noti
tice
ce to a part partnenerr : As per
per Sect
Sectio ion
n 23,
23, an admi admiss
ssio
ionn on
re
reprpres
esen
enta
tati
tion
on mamadede by a papartrtne
nerr conc
concererni
ning
ng the
the affa
affair
irs
s of th
thee firm
firm is ev
eviide
denc
ncee ag
agai
ains
nstt the
the firm
firm,, if it is ma
made
de in the
the
ordinary course of business. Further, u/s 24, a notice to a partner, who habitually acts in the business of the firm
of any matter relating to the affairs of the firm operates as notice to the firm, except in the case of a fraud on the
fi
firrm com
commimitt
tted
ed by or wit ith
h the
the cons
consen entt of tha
that pa
parrtner
tner..
Liability of a partner for acts of the firm : U/s 25 every partner is liable, jointly with all the other partners and
al
alsoso sev
several
erally
ly,, for
for all
all ac
acts
ts of the
the fi
firm
rm dodone
ne whil
while
e he is a part
partne
nerr. Fu
Furt
rthe
herr as pe
perr Sect
Sectio
ion
n 26
26,, whe
here
re,, by the
the wron
wrongf
gfuul
act or omission of a partner acting in the ordinary course of the business of a firm, or with the authority of his
partners, loss or injury is caused to any third party, or any penalty is incurred, the firm is liable therefor to the
sa
same me exte
extent
nt as the
the part
partne
ner.
r.
As per Section
Section 49, on diss dissolut
olution
ion of a firm,
firm, its assets are fir first
st used to pay its debts (and surpl surplusus if any, is used
for payment of individual debts of the partners). Similarly the partner's assets are first used for his personal
liability and if there is surplus, it is used to repay the debt of the firm.
DI
DISS
SSOL
OLUT
UTION
ION OF TH
THE
E FI
FIRM
RM
Dissolutio n takes place (a) by mutual agreement am
Dissolution amonongs
gstt the
the part
partne
ners
rs to di
diss
ssol
olvve,
(b) de
death
ath/i/ins
nsol
olve
venc
ncy/y/re
reti
tire
reme
ment
nt of a par
partne
tner,
r, (c)
(c) ope
opera
ratio
tionn of la
law
w (i.e
(i.e.. in
inso
solv
lvenc
encyy of al
alll pa
part
rtne
ners
rs bu
butt on
one,
e, busin
business
ess
becom
bec ominingg unl
unlaw
awful
ful or disso
dissolu
luti
tion
on by a comp
compete
etent
nt co
cour
urt)
t) an
andd (d)
(d) au
autom
tomatiatic
c di
diss
ssol
olut
utio
ion
n (in
(in ca
case
se of pa
partn
rtner
ersh
ship
ip for
sp
spececiific
fic time
time).). By agreement (Sectio(Sectionn 40) : A firm may be dissolved
dissolved with the consent of all the partners or
in accordance with a contrac contractt between
between the partners.
Compulsory dissolution (Sec 41) : A firm is dissolved by the adjudication of all the partners or of all the
partners but one as insolvent,
insolvent, or by the happening of any event which makes it unlawful for the business of the
firm to be carried on or for the partners to carry it on in partnership.
Dissolution on the happening of certain contingencies (Sec 42) : Subject to contract between the partners
a firm
firm is dis
dissol
solved
ved--
(a) if constituted for a fixed term, by the expiry of that term;
Page
(b)) if co
(b cons
nsti
titu
tute
ted
d to ca
carr
rry
y out
out one
one or mo
more
re adve
advent
ntur
ureses or unde
undert
rtak
akin
ings
gs,, by th
the
e co
comp
mple
leti
tion
on th
ther
ereo
eof;
f;
(c)) by the
(c the deat
death h of a par
partne
tner; and
(d)) by the
(d the adju
adjudidica
cati
tion
on of a part
partne
nerr as an insol
nsolve
vent
nt..
Di
Diss
ssol
olut
utio
ion
n by no
noti
tice
ce of part
partne
ners
rshi
hip will (S
p at will (Sec
ec 43
43))
(1)) Where the partnership is at will, the firm may be dissolved by any partner giving notice in writing to all the
(1
other
other par
partne
tners
rs of his inte
intenti
ntion
on to dissol
dissolve
ve the fir
firm.
m.
(2)) The firm is dissolved as from the date mentioned in the notice as the date of dissolution or, if no date is so
(2
menti
me ntion
oned
ed,, as fr
from
om the
the date
date of the
the co
comm
mmun unic
icat
atio
ion
n of the
the noti
notice
ce..
Disso
Dis solut
lution
ion by ththe court (S
e court (Sec
ec 44)
44)
At the suit
suit of a par
partner
tner,, the court
court may dissol
dissolve
ve a fir
firm
m on the grounds
grounds such
such as that a partner
partner has become
become of
unsound mind or permanently incapable of performing his duties as partner or is guilty of conduct which is
likely at
save to aaffect prejudicially the carrying on of the business that the business of the firm cannot be carried on
foss etc.
Liability
Liab ility for acts of partpartners
ners d done
one after
after di
disso lution (Se
ssolution (Secc 45)
45) : Des
Despipite
te the diss
dissololut
utio
ion
n of a firm
firm,, the
the part
partneners
rs
cont
contin inue
ue to be llia
iabl
blee as such
such to thir third
d pa
part
rtie
ies
s for
for any
any ac
actt do
done
ne bby
y an
anyy of them
them whi
whichch wou
would ld ha
havve been
been an act act of
the firm
firm if don
doneebbefo
efore
re the disdissol
soluti
ution,
on, until
until publi
publicc noti
notice
ce is giv
given
en of the dissol
dissoluti
ution.
on. Furthe
Further, r, u/s 47, aft
after
er the
di
diss
ssol
oluti
ution
on of a firm
firm the
the au
authothori
rity
ty of e
eac
achh pa
partn
rtner
er to bind
bind the
the firm
firm,, and
and the
the othe
otherr mu
mututual
al righ
rights
ts and
and obl
oblig
igati
ation
onss of
the
the partn
partner ers
s cont
contininue
ue notw
notwit iths
hsta
tand
ndin
ing
g the
the diss
dissol
olut
utio
ion,
n, so far as may
may be ne nece
cess
ssar
aryy to wind
wind up the the aff
affai
airr of the
firm
firm and
and to co compl
mpleteete tr
tran
ansasact ctio
ions
ns begu
begun n but
but un
unfi
fini
nish
shed
ed at the time of the dissolution,
dissolution, but not otherwise.
Effec
Eff ectt of disso dissolu lutio
tion
n : On dissol dissoluti
ution,
on, a partne
partner's
r's au
autho
thori
rity
ty to bibind
nd other
other partn
partners
ers cease
ceases. s. The
dissol
dis soluti ution
on brings
brings an end to relati relations
onshiphip (of being
being priprinci
ncipal
pal and agentagent to each each other)
other) bet betwee
ween n
partners. All partners remain liable jointly and severally for the debt of the firm outstanding at the
time
tim e of dissoldissoluti
ution,
on, til
tilll such
such debts
debts are dischdischarg
arged.
ed. U/s 47,
47, the autho
authoritrity
y to bi bind
nd othe
otherr partn
partnererss
continues for the purpose of winding up the affairs of the firm.
Settlement of accounts between partners : As per Section 48, in settling the accounts of a firm after
dissolution, the following rules shall, subject to agreement by the partners, be observed-
(a) losses, including deficiencies of capital, shall be paid first out of profits, next out of capital, and,
lastly, if necessary, by the partners individually in the proportions in which they were entitled to
share profits;
(b) the assets of the firm, including any sums contributed by the partners to make up deficiencies of
capital,, shall be applied in the followi
capital followingng manner and order-
(i) in paying the debts o off the firm to third parties;
parties;
(ii) in paying to each partner rateably what is due to him from the firm for advances as disti distinguishe
nguished d
from capital;
(iii) in paying to each partne partnerr rateably what is due to him on account of capital; and
(iv) the residue, if any, shall be divided among the partners in the proportions in which they were
entitled
entitl ed to share profits.
REGISTRATION OF FIRMS : Appl Applicat
ication
ion for reg
registra
istration
tion : U/s 58, the registra
regi stration
tion of a firm may be
effected at any time by sending by post or delivering to the Registrar of the area in which any place of
business of the firm is situated or proposed to be situated, a statement in the prescribed form and
accompanied by the prescribed fee, stating (a) the firm name, (b) the place or principal place of
business of the firm, (c) the names of any other places where the firm carries on business, (d) the
da
date
te when
when eaeach
ch pa
part
rtne
nerr jo
join
ined
ed the fi
firm
rm,, (e
(e)) the
the naname
mes s in full
full an
andd pe
perm
rman
anen
entt ad
addr
dres
esse
ses
s of the
the
partners,
The statementand (f)shall
the be
duration
signedofbythe
all firm.
the partners, or by their agents specially authorised in this behalf.
Effect of non-registration (Sec 69):
(1) No suit to enforce a right arising from a contract or
conferred by this Act shall be instituted in any court by or on behalf of any person suing as a
partner
partn er in a firm agai
against
nst the firm or any pers
person
on allege
alleged d to be or to have been a partner
partner in the firm
unless the firm is registered and the person suing is or has been shown in the register of firms as
a partner in the firm.
No suit to enforce a right a rising from a contract shall be instituted in any court by or on behalf of a
fir
firm
m against
against any third
third party unless
unless the firm is registered
registered and the persons suing are or have been
shown in the register of firms as partners in the firm.
(2) The provisions
provisions of sub-sections
sub-sections (1) and (2) shall apply also to a claim of set-off or other proceedin
proceeding g to
enforce a right arising from a contract, but shall not affect-
(a) the enfor
enforcem
cement
ent of any rig
right
ht to sue for the disso
dissoluti
lution
on of a firm or for accounts
accounts of a dissol
dissolved
ved
firm, or any right or power to realise the property of a dissolved firm, or
(b) the powers of an offic
official
ial assignee,
assignee, receiver or court under the Presi
Presidency-
dency-towns
towns Insolvency
Insolvency Act,
1909 (3 of 1909) or the Provincial insolvency Act, 1920 (5 of 1920) to realise the property of an
insolvent partner.
BANK ACCOUNTS OF PARTNERSHIP FIRMS
Accounts can be opened by banks by obtaining a copy of the partnership deed (or partnership
declaration letter if no deed is available) which indicates formation of partnership, operating powers for
Page
the account and undertaking about any reconstitution of the firm), account opening form and specimen
signatures.
a account should be in the name of the firm' and not in the name of the partners and account opening
form should be signed by all the partners (except the minor who is admitted for the benefits. Minor or
his guardian need not sign the AOF).
b Account opening Form (AOF) should state as to who will operate the account and how it will be
operated (jointly or singly).
Signatur
 Signatures
es : Whil
Whilee operatin
operatingg the account,
account, partner
partners
s will sign for the firm and not as an individ
individual
ual
(Sec. 22).
Operations
 Operations : In case the authority is not given to any particular
particular partner/s to operate the account, all
partners will jointly operate the account. No operation to be allowed by the partner, in whose favour

authority
Withdrawal is not
of available.
Authority given to partner/s for operation, can be withdrawn by any partner singly,
whether he has the authority to operate the account or not. Once this authority is withdrawn, it can
be restored only when all of them sign again.
 3rd party mandate : Authority to operate the account can be given in favour of a 3 rd person, who is
not a partner, but it should be given by all partners.
Delegation : A partner cannot delegate the authority given to him for operation of the account.
c Minor partners : particul
particulars
ars of the minor partner, particula
particularly
rly the date of majority,
majority, should be properly
properly
recorded, as on the said date, a letter will have to obtained from him that he joins the firm.
d Cheques payable to the firm or endorsed to the firm cannot be credited in the personal account of a
partner as that would amount to conversion. But a cheque in the personal name of any partner can be
credited to the firm's account.
e: Stop Payment : Any of the partners can stop the payment of a cheque issued by another partner/s.
f In casecase of dea death/
th/re
reti
tirem
rement
ent or in insol
solve
vency
ncy of a pa partn
rtner
er,, ope
operat
ratio
ions
ns in the accoun
accountt shoul
shouldd be
stopped, if the balance is in debit and a fresh account be opened after sanction of fresh limits.
g Cheques signed by insane, insolvent and dead partner should not be paid. U/s 34, an insolvent
ceases to be a partner from the date of order of adjudication and firm is not liable for his actions.
Dispute between partners: In case of dispute between partners, one of them may revoke the authority
against other partners to operate the account and in such accounts the banker should stop the
operations after receiving such letter.
Actio
Act ionn on the
th e pa
part
rt of the
th e bank
ba nk in case of dissolution:
 When the account is in credit, the remaining partners can operate the account normally for winding up
or alternatively remaining partners should open new account or ask for continuation of the account on
the basis of fresh mandate. If they decide to close the account the balance lying in the account can be
paid to the remaining partners and the legal heirs of the deceased partner.
 If the account is in debit, bank should stop operations (particularly withdrawals) to avoid application
of rule in Clayton's Case and to decide/determine deceased partner's liability.
 A cheque issued by the deceased partner, prior to his death, but presented after bank's receiving a
notice shall not be paid.
 A cheque issued
issued by an ins insolv
olvent
ent partner
partner sho
should
uld not be paid
paid as his estate is not lia liable
ble for any act after
date of adjudication as insolvent.
Retireme
Reti rement nt - When a partner
partner retire
retires,
s, any chequ
cheque e iss
issued
ued by the retiring
retiring partner can be paid from the new
account only after obtaining proper letter from all the partners including retiring partner. When the
ac
accou
countnt is in deb
debitit and whe
when n one partne
partnerr ret
retir
ires
es,, stop
stop operat
operation
ions
s to avavoi
oid
d opera
operatio
tions
ns of rule
rule in
"Clayton's Case" and to ascertain retiring partner's liability. A retiring partner has to give a public notice
on retirement to absolve himself of any liability to 3 rd parties after his retirement. He continues to be
liable for the liabilities of the firm outstanding at the time before his retirement, unless released by the
creditors.
Lunacy - In the event of lunacy of one of the partners if the firm does not dissolve, (to be on the safer
side)
sid e) che
cheques
ques shoul
should d not be paid
paid signed
signed by insane
insane partner
partner with
without
out written
written consent
consent of all the oth other
er
partners.
Action by the bank in case of reconstitution of the firm:
On death,
death, insol
insolven
vency
cy,, ret
retir
irem
ement
ent,, expul
expulsi
sion
on of an existi
existingng partne
partner,
r, if the parpartne
tnersh
rship
ip deed
deed
provides for continuation of the firm, the firm is said to be reconstituted. Similarly on admission of
a new partner, the firm is reconstituted. On reconstitution bank may accept the reconstitution or it
may refuse to accept. Bank's acceptance of reconstitution discharges the outgoing partner/s. Bank
should obtain consent letter (balance confirmation) from remaining partners and guarantors/mortgagers
if any, if there is debit balance. Where bank does not recognise the reconstitution, bank will initiate
the loan recovery proceedings by giving notice to outgoing partners/their legal heirs, other partners,
guarantors/mortgagers.
In case of admission of a new partner, he can be made liable u/s 31, only by obtaining an undertaking
for liability of the firm in the form of a letter to the bank
Page
Limited Liability Partnership (LLP)

LLP, governed by Limi Limited
ted Liability Partnership
Partnership Act 2008, was introduced in India wef
Apr 1, 20 2009
09.. It com bin es ad
adva
vant
ntag
ages
es of ea
easese of runn
ru nning
ing a pa
part
rtne
ners
rshi
hipp an
andd se
sepa
para
rate
te
legal entity status and limited liability aspect of a company. Main Features
 RoC has jurisdiction
jurisdiction over the incorporation of LLP.
 LLP is a legal entity separate
separate from its partners.
partners. It can own assets in its name, sue and be sued.
 It has perpetual succession
succession (death of partner does not affect the existence of LLP).
 Partners
Partners have the right to manage the business dir directly
ectly (in a company sharehol
shareholders
ders do not).
 A partner is not liable for another partner's misconduct or negli
negligence,
gence, except in certain cases.

Liability of a partner is limited to the extent of his contribution in the LLP. No exposure of personal
assets of the partner, except in cases of fraud.
 Mi
Minimu
nimum m 2 indivi
individual
dual Design
Designated
ated Partn
Partners
ers shoul
shouldd be there. At lea
least
st one of them should
should be resident
resident in
India. No limit on maximum no. of partners.
 Resident
Resident indivi
individuals,
duals, a company or an LLP can be partners (but not an NBFC).
 The rights and duties, are governed by an agreement between partners. partners. If no agreement
agreement is made, the
rights & duties as prescribed under Schedule I to the LLP Act shall be applicable.
 LLP shall maintain
maintain annual accoun
accounts.ts.
 Firms and companies
companies can get themselve
themselves s converted into LLP.
 30 days notice is required
required to be given by a partner to other partners,
partners, to resign from LLP
LLP..
Limitations:
1. LLP cannot raise funds from Public.
2. Any act of the partner
partner without the consent
consent of other, may bi
bind
nd the LLP.
3. No se aration
aration of MMane
ane ernen
ernentt from ow
owners
ners
SALE OF GOODS
Sale of Goods Act 1930, extends to the whole of India except the State of Jammu and Kashmir and
came into force on theist day of July, 1930. BUYER means a person who buys or agrees to buy
goods; Delivery means voluntary transfer
transfer of possession from one person to another;
Docu
Do cumement
nt of tititle goods includes
tle to goods includes bil
billl of lading
lading dock-wa
dock-warran
rrant,
t, ware
warehous
house
e keeper's
keeper's certifi
certificat
cate,
e,
wharfin
wha rfingers
gers'' certifi
certificate
cate,, rail
railway
way receipt,
receipt, multimo
multimodal dal transpor
transportt document
document,, warrant
warrant or order
order for the
delivery of goods and any other document used in the ordinary course of business as proof of the
possession or control of goods or authorising or purporting to authorise, either by endorsement or by
delivery, the possessor of the document to transfer or receive goods thereby represented;
Mercantile agent means an agent having authority either to sell goods, or to consign goods for the
purposes of sale, or to buy goods, or to raise money on the security of goods (in the customary
agent); Seller means
course of business as such agent);Seller means a person who sells or agrees to sell goods;
Sale and agreement to sell (Sec 4)
Contract of Sale : A contract of sale of goods is a contract whereby the seller transfers or agrees to
transfer the property in goods to the buyer for a price. There may be a contract of sale between one
part-owner and another. A contract of sale may be absolute or conditional. (Absolute means where
no conditions to be fulfilled by the seller or the purchasers and conditional means where the parties
agree that the sale shall be final only on fulfillment of certain conditions either before or after the
conclusion of the contract of sale).
Sale : Where under a contract of sale the property in the goods is transferred from the seller to the
buyer, the contract is called a sale.
Agreement to sell: Where the transfer of the property in the goods is to take place at a future time or
subjectt to some condition
subjec condition thereafter to be fulfilled,
fulfilled, the contract
contract is called
called an agreement to sell.
sell.
When agreement becomes sale : An agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is to be transferred.
How Contract of sale is made (Sec 5) : A contra contract

ct of sale is made by an offer to
to buy or sell goods
for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the
goods or immediate payment of the price of both, or for the delivery or payment by instalments, or that
the
worddelivery or payment
of mouth, or writing
or partly in both shall
andbe postponed.
partly by word A
ofcontract
mouth orofmay
salebe
may be made
implied from in writing
the or by
conduct of
the partie
parties.
s.
Feature
Featur e of a contrac
contractt of sale :
Page
1. It is bilat
bilateral
eral contract involvin
involving
g two persons
persons,, the buyer and seller.
2. Sale is of movable
movable property (stocks
(stocks,, vehicles etc.) and not of immovabl
immovable
e property (land and building).
building).
3. There is no particular form for the contract.
4. The contract may be oral or in wri writing
ting
5. The delivery of goods may b be
e immediate or latelaterr on.
6. The payment for the goods may be immed immediate
iate or later on.
Existing or future goods (Sec 6) : The goods which form the subject of a contract of sale may be
either existing goods, owned or possessed by the seller, or future goods. There may be a contract for the
sale. of goods, the acquisition of which by the seller depends upon a contingency which may or may not
happen. Where by in a contract of sale, the seller purports to effect a present sale of future goods, the
contractt operates as an agreement to sell the goods.Goods
contrac goods.Goods perishi
perishing
ng before making
making of contract
contract (Sec 7):
Where there is a contract for the sale of specific goods, the contract is void if the goods, without the
knowledge of the seller have, at the time when the contract was made, perished or become so damaged,
as no longer to answer to their description in the contract.Goods perishing before sale but after agreement
to sell (Sec 8) : Where there is an agreement to sell specific goods, and subsequently the goods, without
any fault on the part of the seller or buyer, perish or become so damaged as no longer to answer to their
description in the agreement before the risk passes to the buyer, the agreement is avoided.
Ascertainment of price (Sec 9) : The price in a contract of sale may be fixed by the contract or
may be left to be fixed in manner thereby agreed or may be determined by the course of dealing
between the parti
parties.
es. Where the pric
pricee is not deter
determined
mined in accordance
accordance with the foregoing
foregoing provisio
provisions,
ns, the
buyer shall pay the sell
seller
er a reasonable
reasonable price. What is a reasonable
reasonable price is a question
question of fact dependen
dependentt
on the circumstances of each particular case.
Agreement to sell at valuation (Sec 10)
Where there is an agreement to sell goods on the terms that the price is to be fixed by the valuation of
a third party and such third party cannot or does not make such valuation, the agreement is thereby
avoided. If the goods or any part thereof have been delivered to, and appropriated by, the buyer, he
shall pay a reasonable price therefor. Where such third party is prevented from making the valuation by
the fault of the seller or buyer, the party not in fault may maintain a suit for damages against the party
in fault.
Sale and agreement to sell - distinction
S ales Ag r eem e nt t o s e l l
Partieshave
Par tieshave alralready
eady perfo
performe
rmed
d th
their
eir obligatio
obligation.
n. Par
Partie
ties
s are
are yet
yet to
to perfo
perform
rm thei
theirr obli
obligati
gation.
on.
Owne
Ow nersh
rshipip in goo
goods
ds stand
standss tr
tran
ansf
sfer
erre
red
d to Owne
Ow ners
rshi
hip
p wou
oulld pass
pass after
fter ful
fulfil
filment
ment of
buy
bu yer, irresp
especti
tiv
ve of pay
aym
ment the conditions
conditions agreed upon
whether made or not. between
between the arties
arties..
Risk will that of the buyer. Risk is still is with the seller.
If sel
elllerdo
erdoes
es no
nott de
delliv
iver
er the goods, buyer For non-delivery of goods, the buyer can only claim
can file suit and demand specific performance damages and not delivery
delivery
and
and deli
delive
very
ry of good
goods.
s.
In case of, non-payment by the buyer,the seller can The seller can sue for damages only.
file the suit and demand price. He can also stop the
delivery of goods in transit or resell the goods.
CONDITIONS AND WARRANTIES

As per Section 12, a stipulation in a contract of sale with reference to goods may be a condition or a
warranty. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case
on the construction of the contract. A stipulation may actually be a condition, though called a warranty in
the contract.
What is a condition : A condition is a stipulation essential to the main purpose of the contract. Its
breach gives rise to a right to treat the contract as repudiated. What is a warranty: A warranty is a
stipulation collateral to the main purpose of the contract. Its breach gives rise to a claim for damages
but not to a right to reject the goods and treat the contract as repudiated.
When condition
condition to be treated as warranty (Sec 13)
(1) Where a contract of sale is subjec
subjectt to any conditi
condition
on to be fulfilled
fulfilled by the seller, the buyer may waive
the condition or elect to treat the breach of the condition as a breach of warranty and not as a
ground for treati
treating
ng the contrac
contractt as repudiated.
(2) Where a contract of sale is not severable
severable and the buyer has accepted
accepted the goods or part thereof, the
breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and
not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a
Page
term of the contract, express or implied, to that effect.
Implied conditions and warranties

Title of the seller (Sec 14) : In a contract of sale there is-
(a) an impli
implied
ed condi
condition
tion on the part of the seller tha
that,
t, in the case of a sale, he has a right to sell the
goods.. In the case of an agreeme
goods agreementnt to sell,
sell, he will have a right
right to sell the goods at the time when
the property is to pass;
(b) an implied war
warranty
ranty that the buyer shall hav
have
e and enjoy quiet possess
possession
ion of the goods;
(c) an implied
implied warranty that the goods shall be free from any charge or encumbrance
encumbrance in favour of any
third party not declared or known to the buyer before or at the time when the contract is made.
Sale by description of goods (Sec 15) : Where there i is s a contract for the
the sale -of goods by
description, there is an implied condition that the goods shall correspond with the description; and, if
the sale is by sample, it is sufficient that the bulk of the goods correspond with the sample.
Quality or fitness (Sec 16) : There is no implied warranty or condition as to the quality or fitness for
any particular purpose of goods supplied under a contract of sale, except as follows:-
(1) Where the buyer, expressly
expressly or by impl
implicatio
ication,
n, makes known to the seller,
seller, the particular purpose
purpose for
which the goods are required, so as to show that the buyer relies on the seller's skill or judgement,
and the goods are of a description which it is in the course of the seller's business to supply, there is
an implied condition that the goods shall be reasonably fit for such purpose. In the case of a contract
for the sale of a specified article under its patent or other trade name, there is no implied condition as
its fitness for any particula
particularr purpose.
purpose.
(2) Where goods are bought by description
description from a seller who deals in goods of that description
description (whether
(whether
he is the manufacturer or producer or not), there is an implied condition that the goods shall be of
merchantable quality. If the buyer has examined the goods, there shall be no implied condition as
regards defects which
which such examination
examination ought to have revealed.
revealed.
Sale by sample (Sec 17) : In the case of a contract for sale sale by sample there is an implied condition-
(a) that the bulk shall correspond
correspond with
with the sample in quality;
(b) that the buyer shall have a reasonable
reasonable opportuni
opportunity
ty dering
of comparin
comparing
(c) that the goods sha
shallll be free from any defect,
defect, renderi
ren ng themgunmerc
the erchan
unm bulk with
hantablthe
table, sample;
e, which
which would not be
apparent on reasonable examination
examination of the sample.
EFFECT OF THE CONTRACT AS BETWEEN SELLER AND BUYER

Goods must be ascertained (Sec 18) : Where there is a contract for the sale of uriascertained
goods, no property in the goods is transferred
transferred to the buyer unless and untiuntill the goods
goods are
are
ascertained.
Property passes when intended to pass (Sec 19)
(1) Where there is a contract for the safe of specific or ascertained goods the property in them is
transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaini
ascertainingng the intention of the parties regard shall be had to the terms of
the contract, the conduct of the parties and the circumstances of the case.
(3) Unl
Unles
ess
s a diffe
differen
rentt in
inten
tenti
tion
on app
appea
ears
rs,, the rul
rules
es co
cont
ntai
aine
ned
d in se
sect
ctio
ions
ns 20 to 24 ar are
e rule
rules
s for
for
ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the
buyer.
Specific goods in a deliverable state (Sec 20)
Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property
in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of
payment of the price or the time of delivery of the goods, or both, is postponed.
Specific goods to be put into a deliverable state (Sec 21)
Where there is a contract for the sale of specific goods and the seller is bound to do something to the
goods for the purpose of putting them into a deliverable state, the property does not pass until such thing
is done and the buyer has notice thereof.
Spec
Sp ecifi
ific
c good
goodss in a de
deliv
liver
erab
able
le stat
state,
e, when
when ththe
e selle
sellerr ha
hass to do any
anyth
thing
ing th
ther
eret
eto
o in or
orde
derr to
ascertain price (Sec 22)
Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to
weigh,measure, test or do some other act or thing with reference to the goods for the purpose of
ascertaining the price, the property does not pass until such act or thing is done and the buyer has
notice thereof.
TRANSFER OF TITLE
Sale by person not the owner (Sec
(Sec 27): The buye
buyerr acquires no better title to the goods than the seller
seller
had, unless the owner of the goods is, by his conduct, precluded from denying the seller's authority to
sell.
Sale by Mercantile agent : Where a mercantile agent is, with the consent of the owner, in possession
of the goods or of a document of title to the goods, any sale
made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if
Page
he were expressly authorised by the owner of the goods to make the same; provided that the buyer
acts is good faith and has not at the time of the contract of safe, notice, that the seller has no
authority to sell.
Sale
Sa le by on onee of jo join
intt owne rs (Sec
owners (Sec 28)
28) : If on
onee of seve
severa
rall jo
join
intt owne
owners
rs of go
good
odss has the so
sole
le
possession of them by permission of the co-owners, the property in the goods in transferred to any
person who buys them, of such joint owner, in good faith and has not at the time of the contract of sale
notice that the seller has no authority to sell.
Sale by person in possession under voidable contract (Sec 29) . When the seller of goods
has obtained possession thereof under a contract voidable under section 19 or section 19A of the
Indian Contract Act, 1872, but the contract has not been rescinded at the time of the sale, the buyer
acquires a good title to the goods, provided he buys them in good faith and without notice of the
seller's defect of title.
Seller or buyer in possession after sale (Sec 30)
(1) Where a person, having sold goods is in possession of the goods or of the documents of title to the
goods, the delivery or transfer, of the goods or documents of title under any sale, pledge or other
disposition thereof to any person receiving the same in good faith and without notice of the previous
sale,
sale, sha
shallll hav
havee the sam
same
e effec
effectt as if the per
person
son makin
making
g the deliv
delivery
ery or transf
transfer
er were
were expres
expressly
sly
authorised
autho rised by the owner of the goods to make the same.
(2) Where a person, having bought or agreed to buy goods, obtains with the consent of the seller,
possession of the goods or the documents of title to the goods, the delivery or transfer by that person
or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or
other disposition thereof to any person receiving the same in good faith and without notice of any lien
or other right of the original seller in respect of the goods shall have effect as if such lien or right did
not exist.
Doctrine of Caveat Emptor
The person purchasing the goods should take due care/precaution while purchasing the goods. After
purchase of the goods, if the goods do not serve his purpose or he makes a bad choice, the seller
cannot be blamed for sale of such goods.
RIGHTS OF UNPAID SELLER AGAINST THE GOODS The seller of goods is deemed to be an unpaid
seller within the meaning of this Act:
(a) When the whole of the price has not been paid or tendered;
(b) Whe
When
n a bill
bill of exch
exchang
ange e or other
other negot
negotia
iabl
ble
e in
instr
strum
umen
entt has been
been rece
receiv
ived
ed as co
cond
nditi
itiona
onall
payment,
payme nt, and the
the condi
conditi
tion
on on whic
which
h it was
was recei
receive
ved
d has
has not
not been
been ful
fulfi
fill
lled
ed by reaso
reason
n of the
the
dishonour
dishonour of the instrument or otherwi
otherwise.
se.
Rights of an unpaid seller (Sec (Sec 46) Notwithstanding that the property in the goods may have passed to
the buyer, the unpaid seller of goods, as such, has by implication of law-
(a) a lien on the goods for the pric
price
e while he is in possession of them;
(b) in case of the insolvency of the buyer, a right of stopping the goods in transit after he has parted
with the possession of them;
(c) a right of re-sale as limi
limited
ted by this Act.
Where the property in goods has not passed to the buyer: The unpaid seller has, in addition to his
other remedies, a right of withholding
withholding delivery
delivery similar to and co-extensive
co-extensive with his rights of lien and
stoppage in transit where the property has passed to the buyer.

Unpaid Seller's lien (Sec 47)
The unpaid seller of goods who is in possession of them is entitled to retain possession of them until
payment or tender of the price, in the following cases, namely:-
(a) where the goods have been sold withowithout
ut any stipulation
stipulation as to credit;
(b) where the goods have been sold on credit, but the term of credicreditt has expired;
(c) where the buyer bec
becomes
omes insol
insolvent.
vent.
Further, the seller may exercise his right of lien notwithstanding that he is in possession of the goods as
agent or bailee for the buyer.
Part delivery (Sec 48)
Where an unpaid seller has made part delivery of the goods, he may exercise his right of lien on the
remai
rem aind
nder,
er, unl
unles
esss suc
suchh par
partt deli
delive
very
ry has been
been made
made under
under susuch
ch ci
circu
rcums
mstan
tance
ces
s as to show
show an
agreement to waive the lien.
nation of lien (Sec 49)
Termination
Termi
The unpaid seller of goods loses his lien thereon-
(a) when he delivers
delivers the goods to a carrier or other ba
bailee
ilee for the purpose
purpose of transmis
transmission
sion to the buyer
(b) without
when the reserving
buyer orthe
buyer of llawfull
of
hisright
agent disposal
awfully of thes goods;
y obtains
obtain posses
possession
sion of the goods;
goods;
(c) by waiver thereof.
The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has
Page
obtained a decree for the price of the goods.

Right of stoppage in transit (Sec 50)
When the buyer of goods becomes insolvent, the unpaid seller who has parted with the possession of
the goods has the right of stopping them in transit, that is to say, he may resume possession of the
goods as long as they are in the course of transit, and may retain them until payment or tender of the
price.
Summary of rights of unpaid seller
Right against goods where the property in Right against the buyer personally
goods
Passed to buyer:  Suit for price
Lien,stoppage
Lien,stoppage in transi
transit,resal
t,resale
e of goods.  Suit for damage
Not pas passe
sedd- tobuyer: 
Repudiation of contract
Withholding ofdelivery and stoppage in transit.  Suit for interest
TRANSFER OF PROPERTIES ACT 1882

58 (a) Mortga
tgage a) a char
harge on im m movovab
ablle pr
propoper erti
ties
es
b) as security for a loan or performance
c) for an existing or future debt
58 (b) S i m p le - Personal undertaking to pay
M o r t g ag e - P o s s e s s i o n wi t h t h e M o r t g ag o r
- Security personal & Property
- Right of Sale — with court intervention
58 (c) Cond
Condiition
tional
al > No personal Obl bliiga
gati
tioon
Mortgage  Possession
Possession with M Mnrtgagor
nrtgagor
> Sale or redeem
> If in
in writing
writing requires registr
registration
ation
58 (d)
(d) Us
Usuf
ufru
ruct
ctua
uary
ry > Possession with Mortgagee
Mortgage  Rent
Rents s / Pr
Profi
ofits
ts to mor
mortga
tgagee
gee
> No foreclosure by mortgagee
> Redeemable within 30 years
58 (e) En g l i s h > Similar to mortgage gage by conditio tional Sal
alee
Mortg
Mo rtgag agee > Poss
osses
ess sion with mortgagee 4
> acquisition
acquisition of property without court interven intervention
tion
>Right to sell without court intervention
58 (f) Eq u
uiitab le > Only at specified centres
Mortg
ortga age > A oral
oral mort
mortgagagege with
withou
outt mo
mortrtga
gage ge Deed
Deed
> mortgage
mortgage by by deposi
depositt of ti
title
tle deeds
deeds
> requir
requireses two witwitnes
nesses
ses
>Does not attract Registration & stamp duty but governed by state act
> Possession
Possession with mortg mortgagor
agor
> No right
right to sesellll without
without Court interv
interventio
entionn
> SARFAESI
SARFAESI Act — over overrules
rules the aboveabove condition
5 8 (g ) Anam
Anamol olou
ouss > Comb
Combin inat
atio
ion
n of anyany on
onee or more
more thanthan one
one of the
the type
types
s of
M o r t g ag e m or t g ag es o r
>A mortgage not defined in the earlier types of mortgages are called
Anomalous Mortgages
59 Registration
Registration of >Except
>Except Oral / Equitabl
Equitable e Mortgages,
Mortgages, all Written deeds
Charges of I.P. conveyin
conveying g a charge on Immovable
Immovable property require
Registration (Sec-59)
> Registration Act — Sec-17 requires registration of
> Mortg
Mot rtgage
> Gift
Gif age
ds agr
Deeds
Dee agreem
eement
of IP ents/
es/Dee
/ Sale
Sal Dee
Deeds
ds/ of
Deeds
ds WiIP
Will
lls
s
> Lease
Lease Deeds
Deeds eexc
xceedi
eeding
ng One
One year
year ofof IP
> Assignment of IP & Rents
Page
> Transfe
Transferr of
of in
intere
terests
sts in IP
Charges on Immova
Immovableble Properties
Properties
RIGHT
RIGHT TO IN
INFOR
FORMA
MATIO
TION
N ACT
ACT
Objective: To provide for setting out the practical regime of right to information for citizens to secure access to
information under the control of public authorities, in order to promote transparency and accountability in the
working
work ing ooff eve
every
ry publi
publicc authori
authority.
ty.
Applicability: It extends to the whole of India except the State of Jammu and Kashmir. The Act came into
force on 12th October 2005 and on coming into force of this Act, the Freedom of Information Act 2002, has
been repeale
repealed. d.
Definitions:
1. "appropriate Government" means a public authority
which is establ
established,
ished, constitute
constituted, d, owned, controll
controlled
ed or substantiall
substantially y financed by funds provided directly
or indi
indirerect
ctly
ly (i)
(i) by the the Ce
Cent ntra
rall Gove
Governrnme
mentnt or th thee UnUnioion n te
terr
rrit
itor
oryy admi
admini
nist
stra
rati
tion
on,, the
the Cent
Centra
rall
Government;
Governm ent; (ii) by the State Government,
Government, the State Governmen
Government; t;
2. "Centr
"Central al Info
Informa
rmatio
tionn Commis
Commissio sion"
n" mea
meansns the Central
Central Informa
Informatio tionn Commis
Commissiosion
n consti
constitute
tutedd by the
central Government.
3. Central Public Information Officer" means the Central Public Information Officer designated by a public
authority and includes a Central Assistant Public Information Officer.
"i
"info
nform
rmatiation"
on" memeansans an any
y mate
materi
rial
al in any for form,
m, inincl
clud
udin
ingg reco
records
rds,, dodocu
cume
ment
nts,
s, memo
memos, s, e-e-ma
mailils,
s,
opinions,
opini ons, advices,
advices, press releases,
releases, circulars,
circulars, orders,
orders, lo logb
gbooooksks,, co
cont
ntra
ract
cts,
s, repo
report
rts,
s, pape
papers
rs,, sa
samp
mple
les,s,
models, data material held in any electronic form and information relating to any private body which can be
acce
accesssseded by a publ
publicic auth
author
orit
ity
y under
under any other
other la
law
w for th
thee time
time bebeining
g in forc
force;
e;
4. "p
"publ
ublic
ic auautho
thori
rity
ty"" me
meananss an
anyy auautho
thori
rity
ty or body
body or in insti
stitu
tuti
tion
on of self-
self- govern
governmen
mentt es estab
tablilish
shed
ed or
constituted (a) by or under the Constitution; (b) by any other law made by Parliament; (c) by any other
la
laww made
made by St Stat
atee Legi
Legislslat
atur
ure;
e; (d)
(d) by noti notififica
catition
on is issu
sued
ed or orde orderr made made by the the appr
appropopri
riat
ate
e
Gove
Go vernrnme
ment nt,, and in incl
clude
udes s any
any— — (i (i)) body
body ow owned
ned,, cocont ntro
rolllled
ed or su subsbstantanti
tial
ally
ly finan
financed
ced;; (ii)
(ii) no
non-
n-
Governm
Gov ernment ent organi
organizat zation
ion subs
substant
tantial
iallyly financed
financed,, dir directl
ectly y or indire
indirectl
ctlyy by funds provide provided d by the
appropriate Government;
5. "right to information
information"" means the right to information accessibl accessible e under this Act which is held by or under the
con
ontrtrol
ol of an
any y publ
publicic au
auththor
orit
ity
y and
and inc
nclu
lude
des s the
the ririgh
ghtt to—
to— (i)
(i) inspe
pecction
tion of wor
ork
k, doc
ocum
umenentts,
re
reco
cord
rdss (ii)
(ii) taki
taking
ng note
notes,s, extr
extrac
acts
ts or ce
cert
rtif
ifie
iedd co
copi
pies
es of docdocumumen ents
ts or reco
record
rds;
s; (iii
(iii)) taki
taking
ng cecert
rtif
ifie
ied
d
samples of material; (iv) obtaining information in the form of diskettes, floppies, tapes, video cassettes or in
any other electronic
electronic mode or throug throughh print
printouts
outs where such informatio
information n is stored in a computer
computer or in any other
deVice:'
6. "State Informat
Information ion Commission"
Commission" means the State Information Information Commission
Commission constituted
constituted by the State
Government.
Time for supplying information (Section 7):
The Central Public Information Officer or State Public Information Officer, on receipt of a request under section 6
of the Act shall, provide information as expeditiously as possible, and in any case within thirty days of the receipt
of the request or reject the request specifying reasons for the same. However, where the information sought for
concerns the fife or liberty of a person, the same shall be provided within forty-eight hours of the receipt of the
request.
Delay in supplying
supplying information
information (Section 20):
If the Central Public Information Officer refuses to receive an application for information or has not furnished
information within the time specified under section 7 or malafidely denied the request for information or knowingly
given
giv en incorr
incorrect
ect,, inc
incomp
ompletlete
e or misle
misleadi
ading
ng inf inform
ormati
ation
on or destroy
destroyed ed inform
informati
ation,on, the CenCentra
trall Informa
Informatition
on
Commission may impose a penalty of two hundred and fifty rupees each day for period of delay with a maximum
of Rs
Rs twenty-five
twenty-five thousa
thousand nd rrupees
upees..
Section 4: Every public authority shall maintain all its records duly catalogued and indexed in a manner and
the form
form wh
whic
ich
h fac
facililit
itate
ates
s the ri
right
ght to in
infor
forma
mati
tion
on under
under this
this Ac
Actt an
and
d en
ensu
surere that
that al
alll reco
records
rds that
that are
are
appropr
app ropriat
iate
e to be compute
computeris rised
ed are,
are, within
within a reason
reasonabl
able
e time
time and subjec
subjectt to availa
availabil
bility
ity of resour
resources
ces,,
computerised and connected through a network all over the country on different systems so that access to
such records is facilitated.
Obligations of Public Authorities (Section 5):
1. Every public authority shall, designate the Central Public Information Officers in all administrative
Page
un
unit
its
s or offi
office
ces
s as ma
mayy be ne nece
cess
ssar
ary
y to prov
provid
ide
e in
info
form
rmat
atio
ion
n to pe
pers
rson
ons
s requ
reques
esti
ting
ng for
for the
the
information
informa tion under this Act.
2. Every Public Information
Information Office
Officer,
r, shall deal with requests from persons seeking information and render
reasonable assistance to the persons seeking such information.
3. A person, who desires to obtain any information under this Act, shall make a request in writing or
through electronic means in English or Hindi or in the official language of the area in which the
application
applic ation is being made, accompany
accompanying ing such fee as may be prescribed,
prescribed, to PIO.
4. Where such request cannot be made in writing, the PIO shall render all reasonable assistance to the
person making the request orally to reduce the same in writing.
5. An applicant making request for information shall not be required to give any reason for requesting the
information
inform
6. Where ation or any other
an application personal
is made to a details except those
public authority that may
requesting forbe
annecessary
necess ary for contacting
information,— contac ting him.
(i) which is held by
an
anoth
other
er pu
publ
blic
ic autho
authori
rity
ty;; or (i
(ii)
i) the subj
subjec
ectt ma
matte
tterr of whic
which
h is more
more cl
clos
osel
ely
y connec
connecte
ted
d with
with the
the
functions of another public authority, the public authority, to which such application is made, shall
transfer the application to such authority within five days from the date of receipt of the application to
that other public
public authority
authority and inform the applicant immediately
immediately about such transfer.
transfer.
7. The Public Information Officer shall supply information as early as possible but within a maximum
period of thirty days of the receipt of the request, or reject the request for any of the reasons
specified in sections 8 and 9 of the Act However, where the information sought for concerns the
life or liberty of a person, the same shall be provided within forty-eight hours of the receipt of the
request.
8. If the Public Information Officer fails to give decision on the request for information within the period
specified, he shall be deemed to have refused the request.
9. The fee prescribed for information and copies of various records shall be reasonable and no such fee
shall be charged from the persons who are of below poverty line as may be determined by the
appropriate
appropria te Government.
10.Where a request has been rejected, the Public Information Officer shall communicate to the person
making
makin g the request, (i) the reasons for such rejection;
(ii)
(ii)the
the period withi
within
n which an appeal against such
rejection
reject ion may be preferred; and (iii
(iii)) the partic
particulars
ulars of the appellate authority.
authority.
11.PIO shall supply information in the form in which it is sought unless it would disproportionately
divert the resources of the public authority or would be detrimental to the safety or preservation of the
record in questi
question.
on.
12.If information sought has been supplied to PIO by a third party and has been treated as confidential
by that third party, the PIO shall give notice to such third party within five days from the receipt of the
request, and take its representation into consideration. Third party will be given ten days to make
such representation. In such cases, the PIO shall, make a decision within forty days after receipt of-
the request as to whether or not to disclose the information or record or part thereof and give in
writing the notice of his decision to the third party.
Fees: As per Right to InformaInformation
tion Rules, the application
application seeking information
information shall be accompanied
accompanied by a
fees of Rs 10 which may be paid in cash or through Demand draft, banker's cheque or Indian Postal
Order.
Information
Informati on Exempted from Disclo
Disclosure:
sure:
(a) information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the
security, strategic, scientific or economic interests of the State, relation with foreign State or lead to
incitement
inci tement of an offence;
(b) information which has been expressly forbidden to be published by any court of law or tribunal or the
disclosure
discl osure of which may constitute contempt of court;
(c) information, the disclosure of which would cause a breach of privilege of Parliament or the State
Legislature;
(d) information including commercial confidence, trade secrets or intellectual property, the disclosure of
which would harm the competitive position of a third party, unless the competent authority is satisfied
that larger public intere
interest
st warrants
warrants the disclosure
disclosure of such informati
information;
on;
(e) information available to a person in his fiduciary relationship.
(g)information n,received in confidence from foreign Government;

(f)
informa
informatio
tion, the dis
disclo
closur
sure
e of whi
which
ch would
wou ld enda
endanger
nger the lilife
fe or physic
physical
al safety
safety of any person or
identify the source of information or assistance given in confidence for law enforcement or security
purposes;
Page
(h) informa
informatio
tion
n whi
which
ch wou
would
ld impede
impede the proces
process
s of inv
investi
estigati
gation
on or app
appreh
rehens
ension
ion or prosec
prosecuti
ution
on of
offenders;
(1) cabinet papers including records of delibdeliberations
erations of the Council of Mini
Ministers,
sters, Secretaries
Secretaries and other
officers:
6) information which relates to personal information the disclosure of which has no relationship to any
public
publi c activity or interes
interest,
t, or whic
which
h would cause unwarranted invasion
invasion of the privacy of the individual.
individual.
Rejection of request: PIO may reject a request for information where such a request for providing access
would
woul d inv
involv
olve
e an infring
infringemen
ementt of copyri
copyright
ght subsis
subsisting
ting in a person
person other
other than the State.
State. How
Howeve
ever,
r,
where a request is rejected on the ground that it is in relation to information which is exempt from
di
disc
sclo
losu
sure,
re, the
then,
n, acce
access
ss ma
may y be provi
provide
dedd to that
that part
part of the
the record
record which
which does
does not cocont
ntain
ain any
any
information
ord,, the which
record
rec PI
PIO isall
O shal
sh exempt
l give afrom
give disclosure
notice to the under
notice appl
applic this, Act.
icant
ant, in
infor Where
forming— access
ming— (a) thatis only
(a) that granted
on parttoofa the
ly part part reco
ofcord
re the
rd
requested, after severance of the record containing information which is exempt from disclosure, is
being provided; (b) the reasons for the decision, including any findings on any material question of
fact, referring to the material on which those findings were based; (c) the name and designation of the
person giving the decision; (d) the details of the fees calculated by him or her and the amount of fee
which the applicant is required to deposit; and (e) his or her rights with respect to review of the
decision regarding non-disclosure of part of the information, the amount of fee charged or the form of
access provided.
Appeal: The Central and Sta State
te Governments have the powers to constitute a body known as the Central
Information Commission or State Information Commission. The Central and State Information Commission
have the authority to reeei'ie' and inquire into a complaint from any person:
1. who has been unable to submit a request to a Central Public Information Officer or because his the
Central Assistant Public Information Officer or State Assistant Public information Officer, as the case
may be, has refused to accept his or her application for information or appeal under this Act for
forwarding the same to the Central Public information Officer or State Public Information Officer or
seniorr offic
senio officer
er specifi
specified
ed in sub-secti
sub-section
on (1) of section 19 or the Central
Central Informati
Information
on Commission
Commission or the
State information Commission, as the case may be;
2. who has been refused access to any information reque requested
sted under this Act;
3. who has not been given a response to a request for information or access to information within the
time limit specified under this Act;
4. who has been required to pay an amount of fee which he or she considers unreas unreasonable
onable;;
5. who believes that he or she has been given incomplete, misleading or false information under this
Act; and
6. in respect of any other matter relating to requesti
requesting ng or obtaining access to records under this Act.
Act.
Any person who, does not receive a decision within the time specified above, or is aggrieved by a
decision of the PIO, can prefer an appeal to such officer who is senior in rank to the PIO in each public
authority within thirty days from the expiry of such period or from the receipt of such a decision. The
appellate authority can condone the delay in filing the appeal if he is satisfied that the appellant was
prevented by sufficient cause from filing the appeal in time. If the appeal is against an order made by a
PIO to disclose third party information, the appeal by the concerned third party shall be made within
thirty days from the date of the order.
A second appeal
appe al again
against
st the decisio
decisionn of the Appella
Appellatete Authority
Author ity can be made to Central
Centr al Information
Info rmation
Commission within ninety days from the date on which the decision should have been made or was
actually
actuall y received. Central Information
Information Commissio
Commission n may condone the delay in filing the appeal. The
appeal to appellate authority or to Central Information Commission shall be disposed of within thirty
days of the receipt of the appeal or within such extended period not exceeding a total of forty-five days
from the date of filing
filing thereof. The decisio
decisionn of the Central Information Commission
Commission or State Information
Commission,
Commi ssion, as the case may be, shall be binding. The Central Informa Information
tion Commission
Commission has the power
to (a) require the public authority to take any such steps as may be necessary to secure compliance
with the provisions of this Act (b) require the public authority to compensate the complainant for any
loss or other detriment suffered; (c) impose any of the penalties provided under this Act; (d) reject the
application.
Penalties: If the Central information Commission is of the opinion that the PIO, has, without any
reasonable cause, refused to receive an application for information or has not furnished information
within the time specified or malafidely denied the request for information or knowingly given incorrect,
incomplete or misleading information or destroyed information which was the subject of the request, it
shall impose a penalty of two hundred and fifty fifty rupees each day till application is received or
Page
information is furnished with a maximum of Twenty-five thousand rupees. However, PIO shall be
given a reasonable opportunity of being heard before any penalty is imposed on him.
FOREIGN EXCHANGE MANAGEMENT ACT, 1999

The Foreign Exchange Management Act 1999 (FEMA) was enacted on December 02, 1999 to replace
Foreign Exchange Regulation Act (FERA) 1973. The Act came into on June 01, 2000 and extends to the
entire country, all branches, offices, agencies outside India - those owned or controlled by a person
residing in India.
Objective of FEMA : (i) Facili Facilitating
tating external trade and paymen
payments ts and (ii) for promoting
promoting the orderly
orderly
development
devel opment and maintenance
maintenance of foreign exchange market in IndiaThe Foreign Exchange Manageme Management nt
Act, 1999, extends to the whole of India. It shall also applies to all branches, br anches, offices and agencies outside
India owned or controlled by a person resident in India. It came into force wef June 01, 2000.
Important terms and definitions
Authorised person means an authorised dealer, money changer, off-shore banking unit or any other
person being authorised to deal in foreign exchange or foreign securities, by RBI, Currency includes all
currency
curr ency notes, posta
postall notes
notes,, post
postal
al orders,
orders, money
money order
orders,
s, cheq
cheques,
ues, drafts, travell
travellers'
ers' cheques, letters of
credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be
notified by the Reserve Bank.
Currency notes means and includes cash in the form of coins and bank notes;Current account transaction
means a transa
transaction
ction other than a capit
capital
al account transaction
transaction and includes,-
includes,-
(i) pay
paymen
mentsts due in conconnec
nectiotion
n with
with fore
foreign
ign trade, other curcurren
rentt busine
business,
ss, services
services,, and short-
short-ter
termm
banking
bankin g and credit faciliti
facilities
es in the ordinary course of busines
business, s,
(ii) paymen
payments ts due as interes
interestt on loans and as net income fro from
m invest
investments,
ments,
(iii) remit
remittances
tances for living
living expenses of parents, spouse and children children residing abroad
abroad,, and
(iv) exp
expens
enses
es in con
connect
nection
ion with foreign
foreign trave
travel,
l, educati
education
on and medical
medical care of parents
parents,, spouse
spouse and
children;
Foreign exchange from whom : As per Section 5, any person may sell or draw foreign exchange to or from an
rised person if suc
authorised
autho such
h sa
sale
le or dra
drawal
wal is a curren
currentt acc
accoun
ountt tra
transa
nsacti
ction.
on. Cen
Centra
trall Govern
Governme
ment
nt may,
may, in
consultation with the Reserve Bank, impose such reasonable restrictions for current account transactions.
Export, with its grammatical variations and cognate expressions means, the taking out of India to a place
outsi
out side
de India
India any goo goodsds anand d provi
provisision
on of se serv
rvicices
es fro
from m Indi
Indiaa to any perso
person n ou
outsi
tside
de India
India;; Forei
Foreigngn
currency
currenc y means any currency other than Indian curren currency; cy;
Foreign exchange means foreign currency and incl includes,-
udes,-
(i) deposi
deposits, ts, credit
credits s and balances pay payable
able in any foreign
foreign currency,
currency,
(ii) drafts, trav
travellers
ellers'' cheques, letters of credicreditt or bills of exchange, expressexpressed ed or drawn in Indian currency but
payable in in any foreign c currency
urrency,,
(iii) drafts
drafts,, travel
traveller
lers
s che
cheques
ques,, letters
letters of cr
credi
editt or bi
bills
lls of exchan
exchange ge drawn by banks,
banks, institutions
institutions or persons
outside India, but payable in Indian currency; Foreign security means any security, in the form of shares,
stocks, bonds, debentures, or any other instrument denominated or expressed in foreign currency and
includes securities expressed in foreign currency, but where redemption or any form of return such as
interestt or divi
interes dividends
dends is payabl
payable e in Indian currency;
currency;
Import, with its grammatical variations and cognate expressions, means bringing into India any goods, or
services;
Person resident in India means -
(I) a person
person resresidi
iding
ng iin
n India
India for more
more tthan
han 1 182
82 days
days d duri
uringng the
the course
course of thethe preced
precedinging financi
financial
al year
year
but does not include-
(A) a person who has gone out of India or who stays outside India, in either case- (a) for or on taking up
employment outside India, or (b) for carrying on a business or vocation outside India, or (c) for any other
purpos
pur pose,
e, in such
such circu
circumst
mstanc
ances es as would
would indic
indicate
ate his int
intent
ention
ion to stay
stay outsid
outsidee India
India for an uncert
uncertain
ain period
period;;
(B) a person who has come to stay in India, in either case, otherwise than- (a) for or on taking up
employment in India, or (b) for carrying on a business or vocation in -India, or (c) for any other purpose, in such
ci
circ
rcum
umst
stan
ancecess as woul
would d in
indi
dica
cate
te his
his in
inte
tent
ntio
ion
n to stay
stay in Indi
India
a for
for an unce
uncert
rtai
ain
n perio
period;
d;
(ii) any person
person or body corporate
corporate regiregistered
stered or incorp
incorporated
orated in India,
India,
(iii) an office, branch
branch or agency iin n India owned or contr controlled
olled by a person re resident
sident outoutside
side India,
India,
(iv) an offioffice
ce,, bran
branch
ch or agagen
enc cy ou
outs
tsid
idee Indi
Indiaa owne
owned d or con
ontrtrol
ollled by a pe
pers
rson
on resi
reside
dentnt in Indi
India;
a;
Person resident outside India means a person who is not resident in India.
Regulation And Management Of Foreign Exchange Dealing in foreign exchange (Sec 3): No person shall-
(a) d
dea
eall in or tr
tran
ansfsfer
er any
any fore
foreig
ignn exch
exchan
angege or fore
foreig
ignn se
secu
curi
rity
ty to any
any pers
person
on not
not bein
beingg an auth
author
oriz
ized
ed pers
person
on;;
(b) make any payment to or for the Credit of any person resident outsi outside
de India in any manner;
(c)) receive otherwise through an authorised person, any payment by order or on behalf of any person
(c
resident
reside nt outsi
outsidede India in any manner;
(d) enter into any financial transaction
transaction in India as consideration
consideration for or in association
association with acquisition or
Page
creation or transfer of a right to acquire, any asset outside India by any person.
Holding of foreign exchange: No person resident in India shall acquire, hold, own, possess or transfer any
for
forei
eign
gn exc
exchan
hange,
ge, for
foreig
eign
n secur
security
ity or any im
immov
movabl
able
e proper
property
ty situat
situated
ed outsid
outside
e India,
India, unless
unless per
permitt
mitted
ed by RBI.
Holding of foreign currency by Residents: A person resident in India may hold, own, transfer or invest in
foreign currency, foreign security or any immovable property situated outside India if such currency, security
or property was acquired, held or owned by such person when he was resident outside India or inherited
from a person who was resident outside India.
Holding of foreign currency by non-residents A person resident outside India may hold, own, transfer or
invest in Indian currency, security or any immovable property situated in India if such currency, security or
property was acquired, held or owned by such person when he was resident in India or inherited from a
person who was resident in India.
Capital
Capital account
account transactions A transa
transactions transacti
ction
on whi
which
ch alters
alters the ass
assets
ets or lia
liabil
biliti
ities,
es, includ
includin
ing
g contin
contingen
gentt
liabilities, outside India of persons resident in India or assets or liabilities in India of persons resident outside
India, is called capital account transaction. As per Section 6 any person may sell or draw foreign exchange
to or from an authorised person for a capital account transaction. Reserve Bank may, in consultation with
the Central Government,
Government, specify :
(a) any class or classes of capital account transactions which are permi permissible;
ssible;
(b) the limit up to whic
which
h foreign exchange shall be admiss
admissible
ible for such transactions:
transactions:
Reserve Bank shall not impose any restriction on the drawal of foreign exchange for payments due on
account of amortisation
amortisation of loans or for depreciatio
depreciation
n of direct investments in the ordinary
ordinary course of
business. transaction. As per Section 6 any person may sell or draw foreign exchange to or from an
authorised
authori sed person for a capital account transaction.
transaction. Reserve Bank may, in consultation
consultation with the Central
Government, specify :
(c) any class or classes of capital account transactions which are permi permissible;
ssible;
(d) the limit up to whic
which
h foreign exchange shall be admiss
admissible
ible for such transactions:
transactions:
Reserve Bank shall not impose any restriction on the drawal of foreign exchange for payments due
on account of amortisation of loans or for depreciation of direct investments in the ordinary course of
business
Restriction on capital account transactions Reserve Bank may, by regulations, prohibit, restrict or
regulate the following-
(a) transfe
transferr or iss issue
ue of any fforei
oreigngn securi
security
ty by a pers
person
on reside
residentnt in India;
India;
(b) tran
transfesferr or iissu
ssuee of any
any ssecu
ecuritrity
y by a per
person
son res
reside
ident
nt outsi
outside
de IIndi
ndia;
a;
(c) transfe
transferr o orr iissue
ssue of a
any
ny securi
security ty or foreign
security by any branch, office or agency in India of a person resident outside India;
(d) any borrowborrowing ing or lendi
lending
ng in foreign exchan
exchange ge in
whatever
whatev er form
f orm or by whatever name called; called;
(e) any borr borrowing
owing or lending
lending in rupee
rupees s in whatever
whatever formform or by whatever
whatever name called
called between
between a
person resident in India and a person resident outside India;
(f ) deposits
deposits be between
tween persons resident
resident iinn IIndia
ndia and persons
persons resident
resident outsid
outside
e India;
India;
(9) export,
export, imp importort or holdin
holding
go off curren
currencycy or currenc
currency y notes
notes;;
(h) transfer of immovable property outside India,
other than a lease not exceeding five years, by a person resident in India;
(i) acquisition or transfer of immovable property in
India, other than a lease not exceeding five years, by a person resident outside India;
(j) givi
givingng of a guarantee or surety in respec respectt ooff any
debt, obligation or other liability incurred-
(i) by a person resident in Indi Indiaa and owed to a person reside resident
nt outside India;
India; or
(ii) by a person residresident
ent outside
outside India.
Reserve Bank's powers to issue directions to authorised person (Section 11) : Reserve Bank,
may give to the authorised persons, any direction in regard to making of payment or the doing or
desist from doing any act relating to foreign exchange or foreign security, direct any authorised person
to furnish such information, in such manner, as it deems fit.
Penalty on authorized person : Where any authorised person contravenes any direction given by the
Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank
may, after giving reasonable opportunity of being heard, impose on the authorised person a penalty which
may extend to Rs.10000 and in the case of continuing contravention with for every day during which such
contravention
contraven tion continues.
Power ofBank
Reserve Reserve
may Bank to inspect
undertake authorised
an inspection person
of the (Sec
business of12)
any authorised person for the purpose of
verifying the correctness of any statement, information or particulars furnished to the Reserve Bank,
obtaining any information or particulars which such authorised person has failed to furnish on being
Page
called upon to do so.
CONTRAVENTION AND PENALTIES : Penalties (Sec 13) : If any person contravenes any provisions
of this Act, or contravenes any rule, regulation, notification, direction or order issued in exercise of the
powers under this Act, or contravenes any condition subject to which an authorisation is issued by the
Reserve Bank, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in in such
contravention where such amount is quantifiable, or up to Rs.2 lac where the amount is not quantifiable.
Such contravention is a continuing one, further penalty which may extend to Rs.5000 for every day after
the first day during which the contravention continues.
If any person fails to make full payment of the penalty imposed on him under section 13 within a period
of 90 days from the date on which the notice for payment of such penalty is served on him, he shall be
liable to civil imprisonment u/s 14.
Power to compound contravention : U/s 15, any contravention under section 13 may, on an
application
appli cation made by the person commi committing
tting such contraventi
contravention, on, be compounded
compounded within 180 days from the
date of receipt of application by the Director of Enforcement or such other officers of the Directorate of
Enforcement and officers of the Reserve Bank as may be authorised in this behalf by the Central
Government.
ADJUDICATION AND APPEAL
U/s 16 Central
U/s Central Governmen
Governmentt may appoint appoint offic
officers
ers of the Cen Central
tral Governmen
Government, t, as the Adjudi
Adjudicati
cating
ng
Authorities for holding an inquiry. Adjudicating Authority may direct the said person to furnish a bond or
guarantee,
 No Adjudicating Authority shall hold an enquiry except
upon a complaint in writing made by any officer authorised by a general or special order by the Central
Government.
Govern ment. Adjudicating
Adjudicating Authority shall have the powers of a civil civil court.
All proceedings before it shall be deemed to be judicial proceedings within the meaning of sections
193 and 228 of the Indian Penal Code.
 Adjudicating Authority shall deal with the complaint to dispose of the complaint finally within one year
from the date of receipt of the complaint:
Appellate
Appe llate Tribu nal (Sec
Tribunal (Sec 18): The Cen Central
tral Gover
Governmenmentnt shal
shall,
l, establ
establish
ish an Appell
Appellate
ate Tribuna
Tribunall to be
known
kno wn as the Appel
Appella late
te Tri
Tribun
bunal
al for Fo
Forei
reign
gn Excha
Exchangenge to he hearar appea
appeals ls again
against
st the ororde
ders
rs of the
the
Adjudicating Authorities and the Special Director (Appeals). Appellate Tribunal shall
consist of a Chairperson and such number of Members as the Central Government may deem fit.
Restriction on capital account transactions Reserve Bank may, by regulations, prohibit, restrict or
regulate the following-
(a)transfer or issue of any foreign security by a person resident in India;
(b ) transfer or issue of any security by a person
resident outside India;
(f) transfer or issue of any security or foreign
security by any branch, office or agency in India of a person resident outside India;
(g) any borrowing or lending in foreign exchange in
whatever
whatev er form
f orm or by whatever name called;called;
(h) any borrowing or lending in rupees in whatever
form or by whatever name called between a person resident in India and a person resident
outside India;
deposits
deposi ts between persons resident in India and persons
persons resident outside India;
(9 ) export, import or holding of currency or currency
notes;
(k) transfer of immovable property outside India,
other than a lease not exceeding five years, by a person resident in India;
(l) acquisition or transfer of immovable property in
India, other than a lease not exceeding five years, by a person resident outside India;
(m) giving of a guarantee or surety in respect of any
debt, obligation or other liability incurred-
(iii) by a person resid
resident
ent in India and owed to a person resident
resident outside India; or
(iv) by a person resid
resident
ent outside India.
Reserve Bank's powers to issue directions to authorised person (Section 11) : Reserve Bank,
may give to the authorised persons, any direction in regard to making of payment or the doing or
desist from doing any act relating to foreign exchange or foreign security, direct any authorised person
to furnishon
Penalty such information,
authorized in such
person manner,
: Where as it
any deems fit.person contravenes any direction given by the
authorised
Reserve Bank under this Act or fails to file any return as directed by the Reserve Bank, the Reserve Bank
Page
may extend to Rs.10000 and in the case of continuing contravention with an additional penalty which may
extend to Rs.2000.Appeal to High Court (Sec 35) : No civil court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which an Adjudicating Authority or the Appellate Tribunal or the Special
Director (Appeals) is empowered. Any person aggrieved by any decision or order of the Appellate Tribunal
may file an appeal to the High Court within 60 days from the date of communication of the decision or order of
the Appellate Tribunal to him on any question of law arising out of such order:
DIRECTORATE
DIRECTORATE OF ENFORCEMENT : U/S 36, Cen
ENFORCEMENT Centra
trall Govern
Governmen
mentt shall
shall establ
establis
ish
h a Direc
Director
torate
ate of
Enforcement with a Director and other officers. U/s 37, the Director of Enforcement and other officers of
Enforcement, not below the rank of an Assistant Director, shall take up for investigation, the contravention
referred to in section 13.
Empowering other officers : U/s 38, Central Government may authorise any officer of customs or any
Centr
Ce ntral
al Exci
Excise
se Of
Offi
fice
cerr or any polic
policee offi
office
cerr or any
any oth
other
er of
offic
ficer
er of the Ce
Centr
ntral
al Gove
Governm
rnmen
entt or a State
State
Government to exercise such of the powers and discharge such of the duties of the Director of Enforcement
or any other officer of Enforcement under this Act. The officers shalt exercise the like powers which are
conferr
con ferred
ed on the inco
income-
me-tax
tax authorit
authorities
ies unde
underr the Incom
Income
e Tax Act, 1961
1961..
Power to make regulations : U/s 47, Reserve Bank may, make regulations to carry out the provisions of
this Act and the rules made there-under. Such regulations may provide for ,-
(a) the permissible clas
classes
ses of capital account transactions, the limits of admissibility
admissibility of foreign exchange for
such transactions, and the prohibition, restriction or regulation of certain capital account transactions
under section 6;
(b) the manner and the form in which the declaration is to be furnished under cla clause
use (a) of sub-sectio
sub-section
n
(1) of section 7;
(c) the period withi
within
n which and the manner of repatriati
repatriation
on of foreign exchange
exchange under section 8;
(d) the limit up to whic
whichh any person may possess foreign curren
currencycy or foreign coins under clause (a) of
section
sectio n 9;
(e) the class
clause (b)of
ofperson
persons
sections9;
and the limi
limitt up to whi
which
ch foreign
foreign currenc
currency y account
account may be held or operate
operated
d under
(f) the limit up to which foreign exchange acquired may be be exempted
exempted under
under clause
clause (d) of
of section
section 9;
(9) the limit up to which foreign exchange acquired may be retained under clause (e) of section 9;
(h)) an
(h any
y othe
otherr ma
matt
tter
er wh
whiich is re
requ
quiired
red to be,
be, or may
may be
be,, spec
speciified
fied..
PREVENTION OF MONEY LAUNDERING ACT

The Prevention of Money Laundering Act, 2002 (PMLA) forms the core of the legal framework put in place
by India to combat money laundering. PMLA and the Rules notified there under came into force with effect
from July 1, 2005. Director, FIU-IND and Director (Enforcement) have been conferred with exclusive and
concurrent powers under relevant sections of the Act to implement the provisions of the Act. The PMLA
and rules notified thereunder impose obligation on banking companies, financifinancial
al institutions
institutions and
intermediaries to verify identity of clients, maintain records and furnish information to PMLA defines money
laundering
launder ing offence and provi
provides
des for the freezing, seizure and confi
confiscati
scation
on of the proceeds of crime.
crime.
Applicability: Prevention of Money La Laundering
undering Act extends to the whole of India.
Offence
per ofon
Secti
SectionMoney-Laundering
3 of the Act, who (Section
whosoe ver3):
soever Money
directl
dire y orLaundering
ctly in
indir
directly has
ectly not sbeen
attempt
attempts defined
to in
indulge in
dulge orthe Act.ingly
knowingl
know However,
y assistas
assists
s or
knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime
and projecting it as untainted property shall be guilty of offence of money laundering.
Punishment for Money

Punishment Money Laundering
Laundering (Sectio
(Section
n 4): Whoev
Whoever er com
commits
mits the offenc
offence
e of money-l
money-launderi
aunderingng shall
shall be
punishable with rigorous imprisonment for a term which shall not be less than three years but which may
extend to seven years and shall also be liable to fine which may extend to five lakh rupees. However, if the
proceeds of crime involved in money-
money-launder
laundering
ing relates to any offence under the Necro
Necrotic
tic Drug and
Psychotropic
Psyc hotropic Substan
Substances
ces Act, 1985, the maxim
maximumum punishment could extend to 10 years.
years.
Obligatio
Obligations
ns of Bank
Banking
ing Companies,
Companies, Fina
Financial
ncial Insti
Institutio
tutions
ns and Intermedi
Intermediarie
aries
s of securiti
securities
es market:
market: (Sec
(Section
tion
12): Every banking company, financial institution and intermediary shall -
(a) mai
maintai
ntain
n a rec
record
ord of all transac
transactio
tions,
ns, the nature
nature and value
value of which may be pre prescr
scribe
ibed,
d, whether
whether
such transactions comprise of a single transaction or a series of transactions integrally connected to
each other, and where such series of transactions take place within a month;
(b) furnish infor
informatior
matiorii of transactions refer
referred
red to in clause (a) to the Director
Director within such time as may
be prescribed;
( c ) verify and maintain the records of the identity of all its clients, in such a manner as may be prescribed.
The re
The reco
cord
rds
s of tr
tran
ansa
sact
ctio
ions
ns as requ
requir
ired
ed unde
underr (a)
(a) and (b)
(b) sh
shal
alll be ma
main
inta
taiine
ned
d for
for a peperi
riod
od of ten year
years
s from
from the
the
date
dat e of trans
transac
actio
tions
ns betw
between
een the cli
client
ents
s and the bankin
bankingg comp
companyany or fin
financ
ancial
ial inst
instit
ituti
ution
on or
in
inter
terme
medi
diar
ary.
y. Th
The
e reco
record
rds
s re
refe
ferr
rred
ed to in
in clau
clause
se (c)
(c) sha
shallll be
be main
mainta
tain
ined
ed for
for a peri
period
od of tten
en yea
years
rs from
from th
the
e date
date of
Page
cessation
cessat ion of trans
transacactio
tions
ns betwe
between
en the cli
clients
ents and the banki
banking
ng company
company or finfinanc
ancial
ial instit
instituti
ution
on or in
inter
termed
mediar
iary.
y.
Accord
Acc ording
ingly,
ly, banks
ban ks shoshould
uld mai
mainta
ntain
in for at least
lea st ten
te n years
yea rs from
fr om th
thee date
dat e of transa
tra nsacti
ction
on betwee
bet ween
n the
bank and the client, all necessary records of transactions, both domestic or international, which will
permit reconstruction
reconstruction of indivi
individual
dual transactions (includ
(including
ing the amounts and types of currency
involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in
criminal
crimi nal activity
activity.. Banks shoul
should
d ensure that records pertaining to the identific
identification
ation of the customer and his
address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills
etc.) obtained while opening the accouaccount nt and durin
during g the course of business
business relationship,
relationship, are proper
properly
ly
preserved for at least ten years after the business relationship is ended.
The Director appointed by Central Government, may call for records records and may make such inquiry or
cause such
institution
institution orinquiry to bediary
made,
an intermediary
interme as he
or any ofthinks fit.rs
its officers
office If the
hasDirector, finds that
failed to comply a banking
with company,
the provi
provisions financial
sions contained in
the Act, then, he may, levy a fine on such banking company or financial institution or intermediary
which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.
The banking compani
companies,
es, financial instituti
institutions,
ons, intermedia
intermediaries
ries and their officers shall not be liable
liable to any
civil proceedings against them for furnishing information,
Record
Reco rdss to be ma main
inta
tain
ineded (nat
(natur
uree and
and va
valu
lue)
e):: Ru
Rule
le 3 of the
the Pr Prev
even
entition
on of Money
oney-l
-lau
aund
nder
erin
ing
g
(Mai
(M ainte
ntena
nanc
nce e of ReReco
cord
rds s of the Natur
Naturee an
andd Valu
Value e of Tra
Trans
nsact
actio
ionsns,, the Proc
Procededur
ure
e and Manne
Mannerr of
Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the
Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005
la
lays
ys dow
down n fol
follo
lowi
wing
ng ob
obliligat
gatio
ions
ns for main
mainten
tenan
ancece of re
reco
cord
rds.
s. Ever
Every y banki
banking ng co
compa
mpany
ny or fin
finan
anci
cial
al
institution or intermediary, as the case may be, shall maintain the record of all transactions including the
record of:
(A) all cash transactions
transactions of the valuvalue
e of more than rupees ten lakhs or its equivalent
equivalent in foreign currency;
currency;
(B) all series of cash transactions integrally connected to each other which have been valued below
rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place
within a month and the aggregate value of such transactions exceeds Rupees Ten Lakh;
(BA) all transactions involving receipts by non-profit organisations of value more than rupees ten lakh, or
its equivalent in foreign currency;
(C) all cash transactions where forged or counterfeit currency notes or bank notes have been used as
genuine or where any forgery of a valuable security or a document has taken place facilitating the
transactions;
(D) all suspicious transactions whether or not made in cash and by way of
(i) deposits and credits, withdrawals into or from any accounts in whatsoever name they are referred to
in any currency maintained by way of :
(a) cheques including
including third party chequ
cheques,
es, pay orders, demand drafts,
drafts, cashiers chequ cheques
es or any other
instrument of payment of money including electronic receipts or credits and electronic payments or
debits,, or
debits
(b) travellers
travellers che
cheques,
ques, or
(c) transfe
transferr from one account within the same banking company company,, financ
f inancial
ial institution
institution and intermediar
intermediary,y,
as the case may be, including from or to Nostro and Vostro accounts, or
(d) any other modemode in whatsoev
whatsoever er name it is rreferred
eferred to;
(ii)
anycredits or debits
currency into
maintai nedorbyfrom
maintained the any non-monetar
non-monetary
banking y accounts
company, such as d-mat
financial institution
institution account, security
and intermedia
intermediary, account
ry, as the in
case may
be;
(iii) money transfer or remittances in favour of own clients or non-clients from India or abroad and to
third party beneficiaries in India or abroad including transactions on its own account in any currency
by any of the following:-
(a) payment orders, or
(b) cashiers cheques, or
(c) demand drafts, or
(d) telegraphic or wire transfers or electronic remittances or transfers, or
(e) internet transfers, or
(f) Automated Clearing House remittances, or
(g) lock box driven transfers or remittances, or
(h) remittances for credit or loading to electronic cards,
(i) any other mode of money transfer by whatsoever name it is called;
(iv) loans and advances including credit or loan substitutes, investments and contingent liability by
way of:
(a) subscri
subscripti
ption
on to debt instru
instrument
ments
s such
such as com
commer
mercia
ciall paper,
paper, cer
certif
tifica
icate
te of depo
deposit
sits,
s, prefere
preferenti
ntial
al
shares,
shar es, debe
debentur
ntures,
es, sec
securi
uritiz
tized
ed partici
participati
pation,
on, int
interba
erbank
nk partic
participa
ipation
tion or any other
other investm
investment
ents
s in
securities or the like in whatever form and name it is referred to, or
Page
(b) purchase
purchase and negotiation of bills,
bills, cheques and other instr
instruments
uments,, or
(c) for
forei
eign
gn ex
exch
chan
ange
ge cont
contra
racts
cts,, curr
currenc
ency,
y, in
inte
teres
restt rate
rate and commo
commodi dity
ty an
and
d any other
other de
deri
riva
vati
tive
ve
instrument in whatsoe
instrument whatsoeverver name it is called,
called, or
(d) letters of credit, standby letters
letters of credit, guarantees,
guarantees, comfort letters, solvency
solvency certificates
certificates and any
other instrument for settlement and/or credit support;
(v)collection services in any currency by way of collection of bills, cheques, instruments or any other
mode of collection in whatsoever name it is referred to.
Information contained in Records: The records shall contain all necessary information specified by the
Regulator
Regulat or to permi
permitt reconstructio
reconstruction n of indiv
individual
idual transaction including* the following
following information:-
information:-
(a) the nature of the transact
transactions;
ions;
(b) the amount of the transacti
transaction
on and the currency in which
which it was denominated;
(c) the date on which
which the trans
transaction
action wa
wass conducted;
conducted;
(d) the parti
parties
es to the transaction."
transaction."
Procedure for maintaining information: Every banking company, financial institution and intermediary,
as the case may be, shall maintain information in respect of transactions with its client in accordance
with the procedure and manner as may be specified by its Regulator including RBI, SERI or IRDA from
time to time. Every banking company, financial institution and intermediary is required to evolve an
internal mechanism for maintaining transactional details in such form and at such intervals as may be
sp
spececifi
ified
ed by the
the Re
Rese
servrve
e Bank
Bank of India
India,, or the
the Se
Secu
curi
ritie
ties
s and
and ExExcha
change
nge Boar
Board d of India
India,, or the
Insurance Regulatory Development Authority as the case may be, from time to time. It shall be the
duty of every banking company, financial institution and intermediary, as the case may be, to observe
the procedure and the manner of maintaining information information as specified
specified by its Regulator.
Reporting to Financial Intelligence Unit — India: Banks are required to report information relating to
cash and suspicious transactions and all transactions involving receipts by non-profit organisations of
value
value mor
moree than
than rup
rupees
ees ten lak
lakhh or its equ
equiv
ivale
alent
nt in for
forei
eign
gn curren
currency
cy to the Direc
Director
tor,, Fin
Financ
ancia
iall
Intellige
Intelligence
nce Unit
Unit-Indi
-India
a (FIU-IND
(FIU-IND).
). The Cash Transac
Transaction
tion Report
Report (CTR
(CTR)) for each month should
should be
submi
sub mitte
tted
d to FIU
FIU-IN
-IND
D by 15th
15th of the suc
succee
ceedin
ding
g mon
month.
th. All
All ca
cash
sh transa
transacti
ctions
ons,, whe
where
re for
forged
ged or
counte
cou nterfe
working rfeit
it Indian
daysInd ian the
from curren
currency
datecy ofnot
noteses have
have bee
occurrence been n used
of suchuse d as genuin
genuine
transactions. e should
shofiling
While uld be repor
repdetails
CTR, orted
ted withi
wi
ofthinn seven
seven
individual
transactions below Rupees Fifty thousand need not be furnished. The Suspicious Transaction Report
(STR) should be furnished within 7 days of arriving at a conclusion that any transaction, whether
cash or non-cash, or a series of transactions integrally connected are of suspicious nature. Banks
should not put any restrictions on operations in the accounts where an STR has been made. Banks
and their employees should keep the fact of furnishing of STR strictly confidential. The report of all
transactions involving receipts by non- profit organizations of value more than rupees ten lakh or its
equivalent in foreign currency should be submitted every month to the Director, FIU-IND by 15th of
the succeeding month.
Verification of Records of Identity of Clients
Section 12 of the Prevention of Money Laundering Act, 2002 and rules thereunder require every
banking company, financial institution and intermediary to verify and maintain the records of the
identity of all its clients, in such manner as may be prescribed. Every banking company, financial
instit
ins titutio
ution
n and int interme
ermediadiary
ry shal
shalll at the time
time of commen
commencem cement
ent of an account
account-ba-based
sed relatio
relationshi
nship,
p,
identify its clients, verify their identity and obtain information on the purpose and intended nature of
the busi
busines
ness s rela
relati
tions
onshihip.
p. In al alll other
other ca
cases
ses,, id
iden
entitity
ty shshoul
ouldd be ve veri
rifi
fied
ed whil
whilee ca
carry
rryiningg out
out (i)
(i)
transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single
trans
transacacti
tion
on or sevsevera
erall trans
transac
acti
tions
ons that
that appear
appear to be co conn
nnec
ected
ted,, or (ii)
(ii) any ininter
ternat
natio
ional
nal money
money
transfer operations. If it is not possible to verify the identify at the time of opening the account or
exec
executiuting
ng the trans
transacactio
tion,
n, the banki
banking
ng cocomp
mpany
any shshalalll ve
veri
rify
fy the identi
identity ty of the clclie
ient
nt with
within
in a
reasonable time after the account has been opened or the transaction has been executed. Every
banking company, financial institution and intermediary, as the case may be, shall determine whether
a client is acting on behalf of a beneficial owner , identify the beneficial owner and take all reasonable
steps to veri
verify
fy his identi
identity.
ty. Beneficial -owner means the natural person who ultimately owns or controls controls
a client and or the person on whose behalf a transaction is being conducted, and includes a person
who exercise ultimate effective
effective control over a judicial
judicial person... '
Documents
Document s needed for verificatio
verificationn of various
various types of clients:
clients:
1. individuals: (a) One certified copy of an 'officially valid document' containing details of his identity
and address One recent photograph and such other documents including in respect of the nature
of business and financial status of the client as may be required by the banking company or the
financial institution or the intermediary. Photograph need not be submitted by a client who does
not have account-based relationship. Officially valid document means the passport, the driving
li
licen
cence
ce,, the Perman
Permanent ent Accou
Account nt Num
Number
ber (PA
(PAN)N) Card,
Card, the Voter'
Voter's
s Identi
Identity
ty Card
Card is
issue
suedd by the
Elec
Electi
tion
on Comm
Commis issi
sion
on of Indi
India a or any othe
otherr do
docu
cume
ment
nt as may
may be requrequir
ired
ed by the
the ba
bank
nkin
ing
g
co
compa
mpanyny,, or financ
financial
ial in
insti
stitut
tution
ion or in
inter
termed
mediaiary.
ry. The Narega
Narega ca
cardrd and Adhar
Adhar car
cardd is
issue
sued
d by
UIDAI will also be officially valid documents.
Page
2. Company:
Company: Certi
Certificate
ficate of incorporati
incorporation;
on; Memorandum and Artic
Articles
les of Associati
Association;
on; A resolu
resolution
tion from the
Board of Directors and power of attorney granted to its managers, officers or employees to transact on
its behalf; and an officially valid document in respect of managers, officers or employees holding an
attorney to transact on its behalf.
3. Partnership Firm:
Firm: Registration certificate; Partnership deed; and an officially
officially valid document in
respect of the person holding an attorney to transact on its behalf.
4. Trust Documents:
Documents: Registration
Registration certificate;
certificate; Trust deed; and an official
officially
ly valid document in respect of the
person holding an attorney to transact on its behalf.
5. Assoc
Associatio
iation
n of Persons (ADP) or Body of Individuals
Individuals (BOI):Resol
(BOI):Resolution
ution of the managing body of such
association or body of individuals; Power of attorney granted to him to transact on its behalf; an
official
offi cially
ly valid documen
documentt in respect of the person holding an attorney
attorney to trans
transact
act on its behalf; and
such information as may be required by the banking company or the financial institution or the
interm
intermediediary
ary to coll
collect
ectiv
ively
ely establ
establisish
h the lelegal
gal exi
existe
stence
nce of such
such an associ
associati
ation
on or body
body of
individuals.
INFORMATION
INFORMATION T
TECHNO
ECHNOLOGY
LOGY ACT ( CYBER LAW )
Information
Information Technology
Technology Act 2000 or Cyber Law in India is based on Informati
Information
on Technolo
Technology
gy Act 2000
which extends to whole of India. The Act has been drawn on the lines of Model Law on Electronic
Commerce adopted in 1996 by UN Commission on International Trade Law (UNCITRAL). The Act has
been amended wef Oct 27, 2009
Background: The General Assembly of the United Nations passed a resolution in 1997 adopting the
Model Law on Elect
Electronic
ronic Commer
Commerce
ce adopted by the Unite
Unitedd Nations
Nations Commissio
Commission n on Internationa
Internationall Trade
Law. The said resolution recommends inter alia that all States give favourable consideration to the said
Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable
to
co alternatives
cons
nsid
ider
ered
ed neceto ssar
necesspaper-cased
ary
y to givemethods
give effectt toof the
effec communication
sa
said
id re
reso
solu and
lution storage
tion and to of information.
prom
promot
ote
e effi
effici Therefore,
cien
ent
t deli
deliveryit of
very is
Government services by means of reliable electronic records.
Objective: To provi
provide
de le
legal
gal recogn
recognit
ition
ion for tra
transa
nsacti
ctions
ons carri
carried
ed out by means
means of elect
electron
ronic
ic data
data
interc
interchan
hange
ge and oth
other
er means
means of electr
electroni
onic
c commun
communic icati
ation,
on, co
commo
mmonly
nly refer
referred
red to as "elect
"electron
ronic
ic
commerce", which involve the use of alternatives to paper-based methods of communication and
storage of information, to facilitate electronic filing of documents with the Government agencies and
further to amend the Indian Penal Code, the Indian Evidence Act, 1872, the Bankers' Books Evidence
Act, 1891
189 1 and the Reserve
Rese rve Bank of IndIndia
ia Act, 193
1934 4 and for matters
matt ers connecte
conn ected
d therewith
ther ewith or incident
incid ental
al
thereto.
The Act was passe
passedd by Parliam
Parliament
ent in May 2000. The Act aims to provide the legal infrastr
infrastructur
ucture
e for e
commerce in India. It shall extend to the whole of India and, it applies also to any offence or
contravention thereunder committed outside India by any person.
Definitions: In this Act, unless the context otherw

otherwise
ise requires
requires,, —
1. in"acc
"a
instcces
ess"
struc
ructi s" with
ting
ng wi
orthcoit
its
comms gram
gr
mmuniammat
matic
unica
catingical
ting al
wi thvari
with variati
ations
the ons
lo
logi and
anl,d arit
gica
cal, co
cogna
ar gnate
ithm
hmetteical
etic ex
expr
, press
al, oressio
ions
ns
memo
me morymeans
mefunct
ry ans
fun gaini
gai
ction ning
ion ng
re
reso en
entr
sour try
urce
cessy of
in
into
to,
a,
computer, computer system or computer network;
2. "addressee"
"addressee" means a person person who is intended by the originator to receive receive the electroni
electronic c record but
does not include
include any intermediary;
intermediary;
3. "adjudicating
"adjudicating officer"
officer" means an adjudicating
adjudicating officer appointed
appointed under subsection
subsection (1) of section
section 46;
4. "affixing
"affixing digital signature"
signatu re" with its grammatical
grammatic al variations
variations and cognate expressions
expres sions means adoptio
adoptionn of
any methodology or procedure by a person for the purpose of authenticating an electronic record by
means of digita
digitall signature;
5. "appropr
"appropriate
iate Government"
Government" means as respects any matter,—( matter,—(i)
i) Enumerated
Enumerated in List Il of the Seventh
Sched
Sc hedulule
e to the Cons Consti titut
tutio
ion;
n; (i
(ii)
i) relati
relating
ng to an
any
y State
State la
law
w en
enact
acted
ed under
under LiList
st III
III of the Seve
Seventnth
h
Schedule
Schedul e to the Consti
Constitution,
tution, the State Government and in any other case, the Central Government;Government;
6. "as
"asymm
ymmetr etric
ic cryp
cryptoto sys
system
tem"" means
means a system
system of a secure
secure key pair consis
consistin
ting
g of a priprivat
vatee key for
creating a digital signature and a public key to verify the digital signature;
7. "Ce
"Certi
rtifyi
fying
ng Author
Authority
ity"" mea
means ns a per
person
son who has been granted
granted a lilicenc
cence
e to issue
issue a Digita
Digitall Sig
Signat
nature
ure
Certificate
Certificate under sectisection
on 24;
8. "certific
"certification
ation practice statement"
statement" means a statement issued by a Certifying Authori Authorityty to specify the
practices that the Certifying Authority employs in issuing Digital Signature Certificates;
9. "computer" means any elect
electronic
ronic magnetic, optical or other high-speed
high-speed data processing device or
system which performs logical, arithmetic, and memory functions by manipulations of electronic,
Page
magnetic
magnet ic or optoptic
ical
al im
impul
pulses
ses,, and inc inclu
ludes
des all inp
input,
ut, out
output
put,, proce
processi
ssing,ng, sto
storag
rage,
e, comput
computer
er
software, or communication facilities which are connected or related to the computer in a computer
system or computer network;
10."com
10."computeputerr networ
network"
k" mea
means ns the in interc
terconne
onnecti
ction
on of one or more computers
computers through—(i
through—(i)) the use of
satelli
sate llite,
te, mic
microw
rowave
ave,, terr
terrest
estria
riall line
line or othe
otherr commun
communicaicatio
tion
n media;
media; and (ii
(ii)) termina
terminals
ls or a comple
complexx
consisting of two or more interconnected computers whether or not the interconnection is continuously
maintained;
11."computer
11."com puter resource" means comput computer, er, computer syste
system,
m, computer
computer network,
network, data,computer
data,computer data base
or softwa
software; re;
12."computer system" means a device or collection of devices, including input and output support
device
dev ices s and excexclud
luding
ing calcul
calculatoatorsrs which
which are not pro progra
gramma
mmableble and capabl
capable e of being
being used
used in
conjunction
conjun ction with external filesfiles,, which
which contain
contain comput
computerer programmes
programmes,, elect
electronic
ronic instructions,
instructions, input
data and output data, that performs logic, arithmetic, data storage and retrieval, communication
control and other functions;
13."Cont
13."Controllroller"
er" means
means the Control
Controller ler of Certif
Certifyin
ying
g Aut
Authori
horitie
ties
s appointe
appointedd under
under sub-sec
sub-sectio
tion
n (I) of
section 17;
14 "Cyber Appellate Tribunal" means the Cyber Regulations Appellate Tribunal established under sub-
section (1) of section 48;
15."data" means a representation of information, knowledge, facts, concepts or instructions
which are being prepared or have been prepared in a formalised manner, and is intended to be
processed, is being processed or has been processed in a computer system or computer network,
and may be in any form (including computer printouts magnetic or optical storage media, punched
cards, punched tapes) or stored internally in the memory of the computer;
16."di
16."digita
gitall signatu
signature"
re" mea
means
ns authenti
authenticatication
on of any electr
electroni
onic
c record
record by a subscri
subscriberber by means
means of an
electronic
electro nic method or procedu
procedure re in accordance
accordance with the provi
provisions
sions of section 3;
17."Digital Signature Certificate" means a Digital Signature Certificate issued under subsection (4) of
section 35;
18."electronic form" with reference to information means any information generated, sent, received or stored
in media,
media, magn
device; magnetic
etic,, optical,
optical, computer
computer memory
memory,, micro
micro film,
film, comp
computer
uter generated micro fiche
fiche or simila
similar
r
19."Electroni
19."El ectronic c Gazette
Gazette"" means the Official Gazette published in the electronic electronic form;
20."electronic record" means data, record or data generated, image or sound stored, received or sent in
an electronic
electronic form or micro film or computer
computer generated micro fiche;
21."function", in relation to a computer, includes logic, control arithmetical process, deletion, storage and retrieval
and commun
communic icati
ation
on or tel
telec
ecomm
ommuni
unicat
cation
ion fro
from
m or wi
withi
thin
n a comput
computer;er;
22."information" includes data, text, images, sound, voice, codes, computer programmes, software and
databases or micro film or computercomputer generated micro fiche:
23. "intermediary" with respect to any particular electronic message means any person who on behalf of
another person receives, stores or transmits that message or provides any service with respect to that
message;
24."key pair", in an asymmetric crypto system, means a private key and its mathematically related public key,
whic
wh ichh are
are so re
rela
late
ted
d that
that the
the publ
public
ic key
key can
can veri
erify a di
digi
gita
tall si
sign
gnat
atur
ure
e cr
crea
eate
ted
d by the
the pri
private
ate ke
key
y;
25."law" includes any Act of Parliament or of a State Legislature, Ordinances promulgated by the President
or a
a Governor
Governor,, as the case may be. RegulaRegulations
tions made by the President
President under article
article 240, Bills
Bills enacted as
President's Act under sub-clause (a) of clause (1) of article 357 of the Constitution and includes rules,
regulations, byelaws and orders issued or made thereunder;
26. "licence" means a lic licence
ence granted to a Certifying Authority
Authority under section
section 24;
27."originator" means a person who sends, generates, stores or transmits any electronic message or causes
any electronic
electronic message to be sent, genera
generated,
ted, stored or trans
transmitt
mitted
ed to any other person but does not include
an intermediary;
28."prescribed"
28."pres cribed" means prescribed
prescribed by rules made under this Act;
29."private key" means the key of a key pair used to create a digital signature;
30."public key" means the key of a key pair used to verify a digital signature and listed in the Digital
Signature Certificate;
31."secure system" means computer hardware, software, and procedure that— (a) are reasonably secure
from unauthorised access and misuse; (b) provide a reasonable level of reliability and correct operation;
(c) are reasonably suited to performing the intended functions; and (d) adhere to generally accepted
security procedures;
32."sec
32."securi
urity
ty pro
procedu
cedure"
re" means
means the secsecuri
urity
ty pro
procedu
cedure
re pres
prescri
cribed
bed under
under sectio
section n 16 by the Central
Central
Government;
33."subscriber
33."subs criber"" means a person in whose name the Digital Signa Signature
ture Certificate
Certificate is issued;
issued;
34."verify" in relation to a digital signature, electronic record or public key, with its grammatical variations
and cog nat
nate e exp
expres
ressio
sions
ns mea
meansns to determ
det ermine
ine whethe
whether—r— (a)
(a) th
the
e init
initial
ial el
elect
ectron
ronic
ic record
record was affi
affixe
xed
d
with
wit h the dig
digital
ital s
signa
ignature
ture by the use ooff private
private key corresponding to the public key of the subscriber; (b)
the initial electronic
electronic record is retai
retained
ned intact or has been altered since such electronicelectronic record was so
affixed with the digital signature.
Page
DIGITAL SIGNATURE:
1. Authentication of electronic records: Any subscriber may authenticate an electronic record by affixing
his digital signature.
2. The authentication of the electronic record shall be effected by the use of asymmetric crypto system and
hash function which envelop and transfo
transform
rm the initial electroni
electronic
c record into another electronic
electronic record.
ELECTRONIC GOVERNANCE : Legal rec recogni

ognitio
tion
n of el
elect
ectron
ronicic record
records:s: Where
Where any lawlaw pro
provi
vides
des that
that
infor
informat
mation
ion or any oth
otherer mat
matter
ter sha
shallll be in
in writ
writing
ing or in the typewr
typewritt
itten
en or pri
printe
ntedd fo
form,
rm, the
then,
n, such
such requir
requireme
ement nt
sh
shal
alll be deem
deemed ed to have
have been
been satis
satisfie
fied
d if such
such ininfor
forma
matition
on or ma
matte
tterr is
is—
— (a)
(a) rende
renderered
d or made
made avai
availa
labl
ble
e in an
electr
ele ctroni
onicc for
form;
m; and (b) acce
access
ssib
ible
le so as to b be
e usabl
usable e for
for a su
subs
bseq
equen
uentt refe
refere
renc
nce.
e.
1. Legal recognition of digital signatures: Where any law provides that information or any other matter shall be
authenticated by affixing the signature or any document shall be signed or bear the signature of any person
such requirement shall be deemed to have been satisfied, if such information or matter is authenticated by
means
me ans of digit
digital
al signat
signature
ure..
REGULATION OF CERTIFYING AUTHORITIES
1 The Central Government may, appoint a Controller of Certifying Authorities and may also appoint such
number of Deputy Contr Controllers
ollers and Assistant Control
Controllers
lers as it deems fit.
2. The Con
Contro
trollller
er may perfor
perform
m all or any of the fol
follow
lowing
ing functio
functions
ns,, n
name
amely
ly:—
:— (a) exerci
exercisi
sing
ng superv
supervisi
ision
on over
over
the activities of the Certifying Authorities; (b) certifying public keys of the Certifying Authorities; (c) laying down
the standards
standards to be maintain
maintained
ed by the Certifying
Certifying Authorities;
Authorities; (d) specifyi
specifying
ng the qualificati
qualifications
ons and experience
experience
which
which emp
employ loyees
ees of the Certi
Certifyi
fying
ng Author
Authoriti
ities
es sho
should
uld possess
possess;; (e) specifyi
specifying
ng the conditions
cond itions subject to
which the Certifying Authorities shall conduct their business; (g) specifying the form and content of a
Digitall Signat
Digita Signature ure Certifica
Certificate
te and the key.
3. Controller
Controller may recognise any foreign Certi Certifying
fying Authority as a Certifying
Certifying Authority for the purposes
purposes of
this Act
4. The Controller
Controller shall be the repository of all Digital SignatuSignaturere Certifica
Certificates
tes issued under this Act.
DIGITAL SIGNATURE CERTIFICATES

1 Any person may make an application to the Certifying Authority for the issue of a Digital Signature
Certificate alongwith fee not exceeding twenty five thousand rupees.
2. No Digital Signature Certificate shall be granted unless the Certifying Authority is satisfied that— (a) the
appl
applic
ican
antt hold
holds
s the
the priv
privat
ate
e ke
key
y co
corr
rres
espo
pond
ndin
ing
g to the
the publ
public
ic ke
keyy to be lilist
sted
ed in the
the Digi
Digital
tal Signa
Signatur
ture
e
Certificate: (b) the applicant holds a private key. which is capable of creating a digital signature; (c) the
public key to be listed in the certificate can be used to verify a digital signature affixed by the private key
held
held by the appl
applica
icant.
nt.
DUTIES OF SUBSC
SUBSCRIBER
RIBERS
S
1. Where any Digital Signature Certificate, the public key of which corresponds to the private key of that
subscriber which is to be listed in the Digital Signature Certificate has been accepted by a subscriber,
then, the subsc
subscriber
riber shall generate the key pair by applying the security
security procedure.
2. Every subscriber shall exercise reasonable care to retain control of the private key corresponding to the
public key listed in his Digital Signature Certificate and take all steps to prevent its disclosure to a person
not authorised to affix the digital signature of the subscriber.
PENALTIES AND ADJUDICATION

1. If any person without permission of the owner accesses or secures access to such computer, computer
syste
systemm or co compu
mputeterr ne
netw
twor
ork;
k; dow
downlnloa
oads,
ds, copi
copies
es or ex
extra
tract
cts
s an
any
y data,
data, co
compu
mputeterr da
data
ta ba
base
se or
informa
informatio
tion
n from
from such
such compute
computer,r, compute
computerr system
system or com
comput
puter
er network
network;; int
introdu
roduces
ces any compute
computer
r
contaminant or computer virus into any computer, computer system or computer network; damages
any com
compute
puter,r, com
compute
puterr sys
system,
tem, data,
data, residi
residing
ng in suc
such
h comput
computerer sys
system
tem;; dis
disrup
rupts
ts any comput
computer
er
system; denies access to any person authorised to access any computer system by any means he
shall be liable to pay damages by way of compensation not exceeding one crore rupees to the person
so affecte
affected.
d.
2_ The Central Government shall, appoint any officer not below the rank of a Director to the Government
of India to be an adjudicating officer for holding an inquiry regarding contravention of any provision of
the Act,-
APPELLATE TRIBUNAL
The Central Government shall, establish one or more appellate tribunals- to be known as the Cyber
Regulations Appellate Tribunal. A person shall not be qualified for appointment as the Presiding Officer
of a Cyber
Appellate Tribunal unless he (a) is, or has been or is qualified to be, a judge of a High Court; or (b) is or
has been a member of the Indian Legal Service and is holding or has held a post in Grade I of that
Service
Servi ce ffor
or at leas
leastt three years,
No appeal shall lie to the Cyber Appellate Tribunal from an order made by an adjudicating officer with
the consent of the parties.
Page
OFFENCES
1. Tampering with computer source documents: If a person knowingly or intentionally conceals, destroys or
alters any computer source code used for a computer system shall be punishable with imprisonment up to
three years, or with fine which may extend up to two lakh rupees, or with both.
2. Hacking with computer system: If a person with the intent to cause or knowing that he is likely to cause
wrongful
wron gful loss or damage to the public or any person destroy
destroyss or delete
deletes s or alte
alters
rs any informati
information
on residing in
a computer resource or diminishes its value or utility or affects it injuriously by any means, commits hack.
Such person shall be .punished with imprisonment up td three years, or with fine which may extend upto
two
two lak
lakh
h rupe
rupees
es,, or wi
with
th both.
both.
3. Publishing of information which is obscene in electronic form: The person concerned shall be punished on
first conviction with imprisonment of either description for a term which may extend to five years and with
fine which may
imprisonment ofextend to one lakhfor
either description rupees
a termand in the
which mayevent of to
extend a second or and
ten years subsequent
also with conviction with
fine which may
extend to two lakh rupees.
Page
TEST YOUR SELF
PRACTICE TEST PAPERS

(BASED ON IIBF TEST PATTERN)
LEGAL & REGULATORY ASPECTS OF BANKING
(JAIIB PAPER - 3)
Page
PRACTI
PRACTICE
CE TEST
TEST PAPE
PAPER
R NO. 1 ( TEST
TEST Y
YOUR
OUR SEL
SELF
F)
01 Bank A issued a bank guarantee on behalf of one of its clients, a public limited company, which later on went
into liquidation. The beneficiary demanded the money from the bank but bank asked the liquidator to meet the
liability, who went to a court for stay on the payment to be made to the beneficiary.
a th
thee bank
bank wi
willll not
not be liliab
able
le sinc
sincee comp
compan anyy is under
under li
liqu
quididati
ation
on,, b as princ
principa
ipall debtor
debtor is not
not lliabl
iable
e to pay (the
company, which has gone into liquidation) bank also not liable as its liability is coexistent
c bank is liable irrespective whether the company has gone in
liquidation or not
d bank is liable since company ahs gone into liquidation and is not
able to pay.
02 Where
Where the compan
company y und
underta
ertaken
ken certain
certain acti
activit
vity
y whic
which h does not fall within its object object clau
clause
se it is called.
called. The
extent
ext ent of liab
liabili
ility
ty o off th
thee com
compan
pany y for
for such
such actactiv
ivity
ity is :
a intra-vires, fully liable, b ultra-vires, no liability, c ultra-vires, company liable, d
intra-vires, liability to be determined by RUC.
03 Complaint can be made to Banking Ombudsman only in case of the following:
a wher
where e ban
bank di did
d not sesennd an
anyy re
repl
ply
y fo
forr a peri
period
od of at le
leas
astt 2 mon
monthths,
s, b th
thee is issu
sue
e has
has lo
look
okeded in
into
to by th the
e
Ombu
Om buds
dsma
man n but
but cus
customtomer is not sati
satisf
sfie
ied,
d, c th
thee comomp pla
lain
intt rela
lattes to loan
loan wher
wheree ban
ank k is dema
deman ndin
ing
g
collateral
se
secu
curi
rity
ty of a va
valu
luee high
higherer th
than
an th
thee sanc
sancti
tion
oneded am
amouount
nt,, d where
where b bank
ank is not complyin
complying g with the Fair PracPractice
tice
Code for Lenders' Liability
04 Unde Underr Sect
Sectionion of TraTransfe
nsferr of Pr
Property
operty Act, the m mortgag
ortgage e is transf
transfer
er of tto
o sec
secure
ure a loan wwhich
hich can b be
e
existing and loan:- a 58, immovable property, future, b 58, interest in
specific immovable property, future, c 130, movable assets, all, d
130, interest in specific movable property, future
05 A certified copy of an entry in a bank's book is received as a prima facie evidence of the existence of such
entry, in all legal proceeds under the provisions of:- a Indian Evidence Act, b Civil Procedure
code, c Banking Regulation Act, d Bankers' Book Evidence Act
06 Re
Regional Rural Banks are:- a cooperative society, b compa
mpanies created under
Compan
Comp aniies Ac
Act,t, e body
body co corp
rpor
orat
ates
es cr
crea
eate
ted
d unde
underr a spspec
ecia
iall stat
statut
ute,
e, d publi
ublic
c se
sect
ctor
or unde
undert
rta
aking
king of
Central Govt.
07 A bank is offered the following securities by a borrower to secure his loan. Which of these will be given preference
over th thee other securit rities:
ies:-- a mor
mortgage of a comm mme erc
rciial show ro roo
om valui uin
ng 200 00%% of l o a n
amount, b hypothecation of stocks of goods valuing 150% of loan amount, c shares of
a re
repuputeted
d cocomp
mpan any y list
listed
ed on a st stoc
ock
k exch
exchan
ange
ge bein
being g 200
200% of loan oan amou
amount nt,, d life
life in
insu
sura
ranc
nce
e poli
policy
cy
issued by LIC of India being 125% of loan amount.
08 Which
Which among
among the follow following
ing cann
cannot ot acce
acceptpt dep
depososit
its
s from
from pu publ
blic
ic excep
exceptt rel
relati
ative
ves
s u/s 45- 45-S S of RB
RBII Ac
Actt : (a
(a))
indivi
ind ividua
dualsls (b) firms
firms (c) uninco
unincorpor
rporate
atedd ass
associa
ociatio
tionn of person
persons s (d) primary
primary credit
credit society
society,, whose
whose prin
principa
cipall
business is lending or acceptance of deposits:- a a to c all, b a, b and d only, c b, c and
d only, d a to d all.
09 The major objective of formation of RBI by enacting RBI Act 1934 was to (a) regulate the issue of bank notes (b)
keep reserves for securing monetary stability in India (c) to operate the currency and credit system of India (d)
to ke
keepep cocontntro
roll over
over ththe
e ca
capi
pita
tall ma
mark
rket
et and
and fo
fore
reig
ign
n exch
exchan angege mark
market ets:
s:-- a a to d al alll, b b, c anand
d d
only, c a, c and d only, d a to c only
10 For banking
banking business,
business, the ba
banking
nking Co
Companies
mpanies are
are license
licensed
d by (a
(a)) RBI (b) Company Law Board (c) Registrar of
Comp
mpa anies (d) Secu
Securi rity
ty an
and d Ex
Exc change Boa oardrd of India
dia:- a a to d all, b only a to c,
coon
nly a and d, d only a
11 For an Indian bank, as per Sec 11 of B R Act the minimum paid up capital and reserves should be (a) Rs.5 lac if the
bank is having business in more than one state (b) Rs.10 lac if business is in more than one State and includes
Mumbai or Kolkata or both (c) Rs.2 lac, if place of business is in one State and does not included Mumbai or Kolkata
A a to c all correct, ba and b only correct, c b and c only c correct,
orrect, d a and c only correct
c orrect
12 Which of the following instruction has been issued by RBI u/s 35A of B R Act (a) KYC Guidelines (b) Clean Note
Policy
Poli cy (c)
(c) Fraud
Fraud Report
Reportinging (d)
(d) Ombu
Ombudsm dsman:an:-- a a to d all,
all, b a, b and and c only
only,, c a, b andand d only,
only, d b, c and d only
only
13 If a borrower
borrower h has
as been outside
outside India
India for some
some time, for th thee purpo
purpose
se of calculation
calculation ofof limitati
limitation,
on, that period
period :
a shall be included, b shall be included if bank could not prove his absence, c shall be
exclud
exc luded,
ed, d shall
shall be e excl
xclude
uded d iiff th
the
e ban
bank k could
could pro
proveve his
his ab
absensence
ce
14 In computing the period of limitation, limitation, the day from which such period period is tto
o be reck
reckoneonedd shall
shall be:
a excluded, b included, c taker into account, d none of the above
15 Bank B sanctioned a term loan to a XYZ repayable in 28 quarterly instalments. The party did not pay few due
instalments
instal ments and bank wants to file suit. Which of the following following is most appropriate answer: answer:
a bank
bank ca
cann file
file th
the
e su
suit
it with
within
in 3 years
ears fo
forr th
thee enti
entire
re am
amou
ount nt,, b ba
bank
nk ca
cann file
file the suit
suit with
within
in 3 ye
years
ars fo
for
r
in
inst
stalm
almenents
ts not
not pai
paidd from
from due due date
date of resprespec
ectitive
ve inst
instal
alme
mentnt,, c ba
bank
nk ca
cann file
file the suit
suit withi
within
n 3 ye
years
ars fo
for
r
instalments
instalments not paid from due date of respec respectivetive instalmen
instalmentt and also the balancebalance amount if the agreement
agreement provides
for that
that,, d ban
bank
k ca
can
n ffilile
e sui
suitt ffor
or due amo
amoun
untt and
and for the balanc
balance
e amou
amount
nt bank
bank will
will have
have to wait
wait
Page
16 RBI issues
issues ins
instruc
truction
tions
s on rate of interest
interest to banks.
banks. The provisi
provisions
ons u/s 21A of B R Act relate
relate to:
to:-- a maximum
maximum
interest rate ceiling imposed by RBI, b method for fixing BPLR, c Rat
Rate of in
inte
tere
rest
st fixe
fixed
d by
banks
ban ks as per RBI gui guidel
deline
iness are not su subj
bjec
ectt to sc
scru
ruti
tiny
ny by co
cour
urts
ts,, d in ca
case
se of NPA
NPA acco
accoun
unts
ts,, in
inte
tere
rest
st
can be debited only when it is recovered.
17 The proces
process s where
where the nonnon-li
-liqui
quidat
dated
ed fina
financi
ncial
al assets
assets (say NPAs)
NPAs) are converted
converted into marketab
marketable
le secu
securities
rities i.e.
i.e.
se
secu
curi
rity
ty re
rece
ceip
ipts
ts,, is ca
call
lled
ed:-
:- a liqu
liquididat
atio
ion
n of NP
NPAsAs,, b fa
fact
ctor
oriing of NPAs
NPAs,, c securitization of
NPAs, d reconstruction of NPAs
18 RBI
RBI c can
an remov
remove e th
the
eC Chai
hairma
rmanno orr Dir
Direc
ecto
torr of
of a bank
bank unde
underr Act agai
against
nst which
which appe
appeal
al can
can be
be made
made to
Cent
Ce ntral
ral Go
Govt
vt.. withi
within n day
dayss fr
from
om date
date of co comm
mmun uniica
cati
tion
on of su
such
ch or
orde
der:r:-- a RBI Ac Act,
t, 45 day
days, b B R AcAct,
t, 30
days, c B R Act, 45 days, d RBI Act, 30 days
19 copies of of Balance sheetsheet and profit
profit and loloss
ss account
account prepared
prepared by banks, are to submitted
submitted to RBI within
within months.
Ba
Banknkin
ingg co
compmpan
anieiess ar
aree also
also to su
subm
bmitit th
thre
reee co
copipies
es to ____
______
________
____ a 2 co copi
pies
es,, 2 mont
monthhs, SEBI
SEBI,, b 3
co
copi
pies
es,, 3 mo
montnths
hs,, SEBI
SEBI,, c3 co
copi
pies
es,, 3 mo
mont nths
hs,, Regi
Regist
stra
rarr of Co
Comp
mpananiies,
es, d 2 co
copipies
es,, 3 mont
month hs,
Company Law Board
20 Banks are required to obtain licence from RBI for commencing operati operations
ons due to whic whichh of the fol
follow
lowing
ing
reasons:
a to make
make th thee pro
rovi
visi
sion
on of Ba
Bank
nkiing Re
Regu gula
lati
tion
on Act
Act appl
applic
icab
ablle, b to pr
prev
even
entt in
indi
disc
scri
rimi
mina
natete fo
form
rmat
atiion
of banking compa mpanies, c to regregulate the forma mattion of a banking company ny,, d all the above
21 Which of the the fol
followi
lowing.ri
ng.rights
ghts are
are availa
available
ble tto
o unpaid
unpaid seller
seller of g
goods
oods (a) a lien on goods while he is in p possession
ossession of
goods (b) in case of buyer's insolvency to stop goods in transit if possession parted with by the seller (c) to re-sell the
goods:- a a and b only, b b and c only, c a and c only, d a alll the above
22 Which of the foll followin
owing gs state
tatement
ment is false:-
false:- a An acquired
acquired bank
bank's
's undertaki
undertakingng is ves
vested
ted in Central
Central Govt,
Govt, b
RBI or SBI can be appointed liquidator of a banking company, c RBI can prepare a scheme for
re
reco
cons
nstr
truc
ucti
tion
on or amal
amalgagama
matition
on of a bank
bank und
underer mor
morat
atori
orium
um u/
u/s
s 45 of B R Act,
Act, d On windin
winding g up of a bank,
bank,
all depositors as a class get the first preference for payment.
23 To get protection for any payment made by the bank, the payment should be in due course. Which among the
following element is not essential for compliance of Section 10 of NI Act relating to payment in due course:
a pay
ayme
pay
pa men
yment
me nt tin
nt o good
theod
go pefa
rsith
faitohnand
indpwith
an osthou
wi seout
sstio n glig
negl
ne oigen
f tence
hece,
in,strume
rumen nt,d b yme
pa
pay ment ntponly
ayly
on men
me thnroug
throt augh
s hpeclreari
apring
clea png
are
rennt tenor, c
24 U/s U/s 1 10 0BBBB of of Ban
Banki king
ng Regu
Regula lati
tion
on Act:
Act:-- a RBI can ap appoin
pointt an eligibl
eligiblee person
person as ChairmanChairman of a bankin banking g
co
comp
mpanany y, b Ce
Centntra
rall Govt
Govt.. ca
cann appo
appoin intt an elig
eligib
ible
le pers
person
on as Chai
Chairmrmanan of a bank bankining g co
comp
mpananyy
c Central Govt. can appoint an eligible per s on as Director of a
banking company, d all the above
25 RBI can can impo
impose se ce
certai
rtainn fines onon banks u u/s
/s 46, foforr failing
failing to compl
comply y with requirements
requirements of Banking Regulatio Regulation n Act.
Which, ooff tthe
he fo
follllow
owining
g is not
not co
corre
rrect
ct:-
:- a mak
makin ingg fa
fals
lse
e stat
stateme
ement nts
s in re
retu
turn
rns s or balanc
balance e sh
sheet
eet — 3 years
years
impri
impriso
sonmnmen entt and
and finefine,, b will
willfu
full om
omiissio
ssion n to ma
makeke ma
mateteri
rial
al stat
statem
emen entt — 3 yea earsrs impri
mpriso
sonmnmen
entt
and fi
fin
ne, c fail
failur
uree to prod
produc ucee book
books s or otothe
herr docu
documementntss u/
u/ss 35 (2
(2)) fo
forr ininsp
spec ecti
tion
on fine
fine up to RsRs.2.2 la
lac
c
d Acceptance of deposit despite RBI's prohibition — fine twice t he
amount of deposit deposit accepted
26 The service provider need not pa y service t ax if the annual
tu
turn
rnovoverer :- a is up to Rs. s.5
5 lac,
lac, b is up to Rs. s.88 lac,
lac, c is up to Rs.1
Rs.10 0 lac,
ac, d is up to Rs.15 s.15 la
lacc
27 A contract of indemnity differs from a contract of guarantee (a) there are 2 parties in indemnity and 3 in case of
guarantee (b) the liability in case of indemnity is contingent and in case of guarantee it is subsisting (c) in case of
indem
indemninity
ty th
ther
eree is
is o
only
nly on
onee con
contr
trac
actt but
but in case
case of guguar
aran
antetee
e the
there
re ar
aree thr
three
ee co
cont
ntra
ract
cts:-
s:- a a to
to c al
alll cor
corre
rect
ct,, b a
and b only are correct, c b and c only correct, d a and c only are correct
28 A company is under liquidation and the liquidator sells certain ass assets
ets withi
withinn his
his auth
author
orit
ity
y for
for wh
whicichh paym
paymen entt is
received through a cheque. The liquidator obtains the payment across the counter and misappropriates the money. Later
on, the next liquidator informs about misappropriation and requests the bank to reverse the entry.
a bank is not liabiable for this paym
yme ent obtaine
ined by the liq
liquid
idaator, b bank
bank is li
lia
abl
blee as it shshou
ouldld have
have
seen that the liquidator does not misappropriates the amount, c bank is liab
liable
le as payment
payment shou should ld have
have been
been
collected by opening a bank account because the payment was on behalf of the company
d bank is liable as the company has suffered foss du e to liquidator's
misappropriation
29 Usurious
Usurious Loans
Loans Act 1918:-
1918:- a res
estr
tric
icts
ts len
lendidin
ng by ban
banks to cer
erttain cat
categor
gories of bor orrrowe
werrs,
b proh
ohiibits lending
ing by bankinging at exorbitaitant rates, c deals wi
with
th usu
sufr
fruc
ucttuary
uary mo
morrtga
tgage, d
puts a ceiling on maximum rate of interest, that banks can charges
30 When ever a bank guarantee expires, the banks insist on return of the guarantee bond or demand a certificate from the
beneficiary that there is no liability on the guarantee, despite the fact that the bank incorporate limitation clause
restricting the period of liability and period for making claim. Why?
a so that they could release the security obtained by them from the
applicant
applicant to secure themselves.
b so that they could reverse the entry in their books to avoid
maintenance
mainten ance of capita
capitall adequ
adequacy
acy on the expired guarantee
c so that guarantee is not invoked by the beneficiary within the
Page
normal limitation period of 3 years instead of limitation period incorporated in the guarantee bond
d so tha
thatt the bond
bond is not
not mis
misused
used by by the a applic
pplicantant for
for another
another ttrarans
nsa actio
ction.
n.
31 Sectio
Section n 17 (1) of Banking
Banking Regula
Regulationtion Act ddeals
eals wit
withh which asaspect
pect ooff b
ban
anki king :- a
ng:- tr
tran
ansf
sfer
er of a par
part of pr
prof
ofit
its
s to
a Stat
Statut
utor
oryy Rese
Reserv
rve,
e, b su
subm
bmis issi
sion
on of in
info
form
rmatatio
ion
n abou
aboutt uncl
unclai
aime
med d depodeposisits
ts
c lo
loan
anss by RB
RBII to ba
bank
nkss un
unde
derr Repo
Repo ar arra
rang
ngem
emenent,t, d dire
direct
ctio
ions
ns by RB RBII to bank
banks s on divi
divide
dendnd paym
paymenentt
rd
32 3 SchSchededul
ule
e of Banki
Banking
ng Re
Regu
gulat
latio
ion n Act is as
asso
soci
ciat
ated
ed with:
with:-- a lilisti
sting
ng of nam
name e of a ban
bankk to ma
make
ke it
scheduled bank, b format for preparing Balance Sheet of a bank, c for
format for submission of
annual
ann ual sta
statem
tement
ent of assets
assets and lia
liabil
biliti
ities
es to RBI,
RBI, d for
forma
matt for applyi
applyingng for ob obtai
tainin
ning
g a bran
branch
ch lilicen
cence.
ce.
33 Regional Rural Banks have been created created under RRB Act 1976 and the their
ir c capit
apital
al held is to the ext
extent
ent of % by
sponsor bank, ° A by Central Govt. and % by State Govt:
a 35, 50, 15, b 33, 34, 33, c 50, 35, 15, d 40, 40,20
34 An agreement between two parties by which one party (the promisor) saves the other (promisee) from the loss
caused to one party due to conduct of the promisor or any other person is called:-
a conversion, b subrogation, c promissory note, d indemnity
35 Banks
Banks submit
submit a re return
turn tto
o RBI rrelat
elating
ing to maint
maintenan
enance ce of CRR
CRR (a) iitt is a fortnightly return i.e. on alternative Friday
(b) return is submitted within 7 days (c) where alternative Friday is not the last Friday, a special return is to be
submitted for that Friday (d) if the alternative Friday is a holiday, return is submitted for the succeeding working day.
W hich of thes e is not correct:- a a and d, b b and c, c only b, d only d
36 In a bill
bill of exchang
exchange e (a) holder
holder is the the person
person who is entitled
entitled to the possession of the bill (b) holder in due course course
is the person who is in possession of the instrument for a valuable consideration (c) holder for value, is the bank
when a bill is purchased or discounted.
a a to c all correct, b a and b only are correct
correct,, c b and c only are correct, d a
and c only are correct
37 The
The appea eall agai
gainst
nst awawarrd of whichich of the fol ollo
lowi
winng is not allo llowewedd:- a D R T , b Co Cons
nsum
umerer cou
ourt
rt,,
c Lo k A d a l t, d H i g h C o u rt
38 What is the maximum amount of compensation that Ombudsman can allow, for a case referred to it in respect of
credit card:- a Rs. 1 l ac, b R s. 2 l a c, c Rs .6 l ac , d R s . 8 l a c, e
Rs.10 lac
39 A bank receives a cheque issued by a society and signed by two authorized office bearers of the society. Later on it
is claimed by the society that signatures of one of the authorized signatory are forged.
a the so
sociciet
etyy conti
ontinu
nues
es to be lia liabl
ble
e as ononee sig
igna
natture
ure is genu
genuin ine,
e, b the 2nd signatory is personally liable
nd
as hi
hiss sign
signat
atur
ures
es are
are genu
genuin ine,
e, c ssoc
ocie
iety
ty an
andd the
the 2 signatory are liable, d bank is liable for making the
payment without proper mandate
40 A system of a secure key pair consisting of a private key for creating a digital signature and a public key to verify the
digitall signat
digita signature,
ure, is called:
called:
a digital signature, b asymmetric crypto system, c elelectronic monitoring, d e-
commerce
41 Popu lar Bank has iss ued a ba nk g uara ntee on b ehal f of its cust custome
omer. r. The
The b ban
ank
k has
has giv
given
en th
this
is gu
guar
aran
ante
teee
to cover the security deposit which the govt. deptt. has asked for, to cover performance of a contract. The guarantee is
a: a legal guarante e, b financial guarantee, c performance guarantee, d
performance-cum-financial guarantee
42 Whic
Which h of the foll
follow
owin
ingg LC dodoeses not
not ma matc
tch
h its
its expl
explan anat
atio
ion:
n:-- a red cla
clause
use LC — where
where provisi
provision
on
for pre-shipm
pre-shipment ent credit
credit and sto stora
ragege at the
the po
port
rt of ship
shipmementnt,, b ba
back
ck to babackck — whewhere
re an
anotothe
herr LC is iss
issue
ued d
on the request of the beneficiary on the strength of original LC transferable credit — where original LC can be
transferred by the beneficiary through endorsement. a credit where the negotiation can take place within a
limit again and again if the previous bills are paid — revolving LC
43 Under Consumer
Consumer Pr Protection
otection Act
Act (a) Distt. Forum
Forum is establ
established
ished by the
the St
State
ate Gov
Govt.t. ((b)
b) Sta
State
te Comm
Commis issi
sion
on is
establis
esta blished
hed by CenCentral
tral Govt. (c) Nat
Nation
ional
al Commis
Commission sion is establishe
established d by Central
Central Govt. and has jurisdic
jurisdiction
tion over
over enti
entire
re India.
India.
Which ofof th
these statements are co correct? a a and b, b a and c, c b and c, d a
to c all
44 Whic
Which h of the
the fofoll
llow
owin
ing
g is a capi
capitatall ac
acco
coun
untt tran
transa
sact
ctio
ion:
n:-- a paym
paymen entt of in
inte
tereresst on lo
loan
an ta
takken from
from a
relative outsi
tside India, b remittanc
remittance e made
made o outsi
utsidede India
India for
for mainte
maintenanc
nance e expens
expenses es of
of ppar
aren
entsts li
livi
vinng
abroad, c ex expe
pensnses
es in
incu
curr
rred
ed in conn
connec ecti
tion
on wi
with
th ed
educ
ucat
atio
ionn of a chil
childd ab
abro
road
ad,, d purc
purchahasese of shshar
ares
es
by a foreign investor on Indian stock market
45 A usanc
usance e bil
billl of exc
exchan
hangege is acc
accept
epted
ed by the pow power er of attorn
attorney
ey holder
holder of the drawee drawee Mr. Sudh Sudhir. ir.
Su
Subse
bsequequentl
ntly,
y, the said pow power er of attorne
attorney y is revoke
revoked d by Mr. Su Sudh
dhir
ir bef
before
ore the bill fal falls
ls due
due for
payment. Which of the following is correct ?
a the bill is deemed to have been accepted on which the principal
sh
shal
alll re
rem
mai
ain n liab
liablle, b the bill is deemed to have not been accepted, c the dra raw wer can
ha
have
ve re reco
cour
urse
se ag
agai
ains
nstt the
the powe
powerr of at atto
torn
rney
ey ho
hold
lder
er onlyly,, d Su
Sudh
dhir
ir is just
justif ifie
iedd in rerefu
fusi
sing
ng ththe e
payment.
46 Within how much period, the negotiating bank is supposed to scrutinise the documents tendered to it
by the beneficiary:- am
ama aximum 7 days, b minimum 7 days, c maximum
bankin
ing
g days 5 days, d minimum banking days 5 days
47 A buyer of goods gets additional period for payment of documents, in a letter of credit, called:
Page
a demand LC, b irrevocable LC, c Red clause LC, d usance LC

48 An equitable mortgage of an immovable property can be created (where
(where it is lo
locate
cated
d / any where
where)) but the place
place
where
wher e it is cr
crea
eatetedd shshou
ould
ld be or noti
notifi
fied
ed by ththee GoGovt
vt.:
.:
a where
where it is lo locat
cated,
ed, pre
presid
sidenc
ency y tow
town, n, no
noti
tifie
fied
d town,
town, State,
State, b any where
where,, presid
presiden
ency
cy town,
town, notif
notified
ied tow
town,
n,
State
c where
where it is lo locat
cated,
ed, pre
presid
sidenc
ency y tow
town, n, no
noti
tifie
fied
d tow
town, n, Centra
Central, l, d any where
where,, presid
presiden
ency
cy town,
town, notifi
notified
ed town,
town,
Central or State.
49 Under a contract
contract of guarantee, the liability liability of the bank for giving a bank guara guarantee
ntee on behalf of its customer
customer,,
which of the follow
following ing is correct
correct::
a the primary liability to pay under the guarantee, is that of t he
borrower
b the primary
primary lia liabili
bility
ty to pay
pay u under
nder the guarguarante
antee,e, iis
s th
that
at o
off the
the bank
bank
c the primary liability to pay und er the guarantee, is that of t he bo borro
rrowe
werr and
and secon
secondary
dary liabi
liabilility
ty is of the bank.
bank.
d the primary liability to pay under the guarantee, is that of t he
borrower and bank.
50 Whi
Which of th thee fo
foll
llow
owining
g is ca
calllled
ed th
thee not
otif
ify
ying
ing bank
bank:- :- a re
reim
imbu
burs
rsin
ingg bank
bank,, b open
openin ingg bank
bank,,
c corre
rresp
spo ondent bank, d adadvisisinng bank
51 If in a partnership
partnership firm, a partner makes makes certain payments
payments or incurs certain liabilities, he can recover it from the
firm (a) if it is done in ordinary course of business (b) if it is done in emergency to protect the firm from loss (c) if it
done for the firm within or outside the implied authority. Which one is correct:
a a and b only, b a and c only, c b and c only, d a to c all
52 The banks are required to take legal action including including filing of suit in a courtcourt withi
withinn the available
available limitation
limitation pe period
riod
under provisions of:- a Limi
mittation Act 1963, b Sec
Securi
uritiz
tizati
ation
on and Recons
Reconstru tructi
ctionon of Financ
Financialial
As sets
se ts an d Enforcemen
Enforcementt of Security Interest Act 2002, c Recovery of Debts Due to Banks and
Fina
Financ
ncia
iall In
Inst
stit
itut
utio
ions
ns Ac
Actt 1993,
1993, d allall th
thee abov
above e
53 Bankin
Banking g Re
Regul
gulati
ation
on Act
Act 19
194949 wwasas en
enact
acteded wwith
ith the object
objective
ive of (a)
(a) creating banks in Ind ia (b ) r egulating
banking companies (c) regulation of acceptance of deposit from public (d) allowing loans to large companies:
a atodall, b onl y a t o c , c only a a nd d , d only a
54 ABC has been allowed a temporary overdraft of Rs.30000 regularly by the bank without any formal document for
the last about 2 years. The balance in the account is Rs.18900. A cheque of Rs.6000 is presented for payment
but bank does not pay. The customer claims damages for wrongful dishonour.
a the bank can terminate the overdraft facility any time, due to which
it is not liable.
b the bank can terminate the facility after giving notice which bank
has not done in this case, hence liable.
c it iis
snnot
ot a dep
deposi
ositt acco
account
unt,, due
due ttoowwhic
hichh bank
bank is not lia liabl
blee
d there
there isis no for
formal
mal sancti
sanctionon ofof OD due to w whic
hich
h bank
bank iis s not
not liabl
liable
e
55 There is regular trade between two parties par ties through letter of credit but they w want
ant ththat
at they may n not
ot be rrequire
equiredd to
open a letter of credit again and again. What type of LC is suitable for them:
a irrevocable LC, b revolving LC, c red clause LC, d confirmed LC
56 Which of the following charges in case of a company do not require to be registered u/s 125 of Companies Act:
a a char
chargege on book
book debt
debts s of th
the
e comp
compan any,
y, b a fl
floa
oati
ting
ng char
chargege on st stoc
ocks
ks of the
the co
comp
mpan
any y
c a char
chargege on imimmo
mova vabl
blee pr
prop
oper
erty
ty of th
the
e comp
compan any,
y, d a ch
char
arge
ge rela relati
ting
ng to co cont
ntin
inge
gent
nt liabi
liabili
liti
ties
es of the
the fir
firm
m
like letter of credit or bank guarantee
57 License of of a bank is cancelled by RBI on the grounds grounds that (a) the bank cea ceases
ses to carry on banki
banking ng business in
India (b) the bank at any time failed to comply with the conditions imposed u/s 22 subsection — 1 of B R Act (c) bank
did not comply with the conditions stipulated u/s 22 subsection 3 or 3 A of B R Act (d) bank has defaulted to pay back
the deposit due to maturity mismatch on some occasion:- a a to
to d
daa lll l , b a, b and c only, c
b, c and d only, d a, c and d only
58 In the concontext
text of Debt
Debt Recovery
Recovery Tribunal,
Tribunal, which o off the following
following sta
statem tement
ent is corr
correct
ect:-
:-
a presiding officer of Qebt Recovery Appellate Tribunal is called
President
b presiding officer of D eb t Recovery Tribunal is appointed for 5
years or till he completes age of 62 years, whichever is earlier
c presiding officer of Debt Recovery Appellate Tribunal appointed for
5 years or till he reaches the age of 62 years, whichever is earlier
d presiding officer of Deb t Recovery Tribunal is a person who is
qualified to be appointed as a High Court Judge.
59 A bank can invest in the shares of a company as pledge, mortgagee or absolute owner maximum to the extent of:
a 30% of the paid up capital of the bank OR 30% of the paid up
capital of the company, whichever is lower.
b 30% of the paid up capital of the bank OR 30% of the paid up
capital & reserves of the company, whichever is lower.
c 30
3 0% of the paid up capital & reserves of the bank OR 30% of the
Page
paid up capital of the company, whichever is lower.

d 30% of the paid up capital of the bank OR 30% of the paid up
capital of the company, whichever is higher.
60 The document
document issue issued d by the secursecuritiza
itization
tion compa
company ny to quali
qualified
fied in inst
stit
itut
ution
ional
al bu
buye
yers
rs (QIB
(QIBs)
s),, to re
repr
prese
esent
nt
ownership in the financial assets is called: a deb ent ure , b pass-through certificate, c
secu
securirity
ty rerece
ceip
ipt,
t, d co
conv
nvererti
tibl
ble
e pr
pref
efer
eren
ence
ce shar
sharee
61 Whic
Which h of th thee fo
foll
llow
owiningg docu
docume
mentntss is call
called
ed char
charte
terr of the
the comp
companany:
y:-- a Ce
Cert
rtif
ifica
icate
te of Co Comme
mmencenceme
mentnt of
Bus
Busines
iness,s, b C Cer
erttifi
ifica
catte of Inco
ncorporat
oratioion
n, c Ar
Arti
ticl
cles
es of Ass
ssoc
ocia
iattio
ion,
n, d Memo
Memorrandum
ndum of Asso
Associ
cia
ati
tion
on
62 If a pers
person on comm
commit itss ofoffe
fenc
ncee unde
underr Pr Prev
even
enti
tion
on of MoneMoney y Laun
Launde deriring
ng Ac Actt 20
2002
02,, he shshal
alll be li
liab
able
le for
for
i m p ri s o n m e n t u p t o : - a three years, b five years, c five to 10 years, d
three to seven years.
63 A bank at the time of sanction, wants that in case of non-payment the loan could be adjusted immediately by
realization of securities. Which will be the better security in th that
at case:- a stocks, b life in
insu
surranc
ance
policy, c national saving certificates, d book debts
64 On the basis of principal pay as you earn', the tax payer is requ requir
ired
ed to mak
make pay
paymemen nt o
of:
f:--
a advance tax, b income tax, c assessed tax, d minimum alternative tax
65 Under SARFAESI Act, the period for filing particulars of transactions of securitization, reconstruction or creation
of secu
curi
ritty in
inte
tereres
st is da
dayys. The
The del
elay
ay can be con condodonned by on payment of fee not more than
time
times s of the
the prpres
esccri
ribe
bedd fe
fee:
e:-- a 45 dadayys, Regi
Regist
stra
rarr of Compa
ompan nie
ies,
s, 2 ti
tim
mes,
es, b 30 da dayys, Centr
entral
al
Regi
Regisstrar
trar,, 10 times
imes,, c 15 da
dayys, Ce
Cen
ntral
tral Regegis
istr
trar
ar,, 5 ti
tim
meses,, d 30 da
days
ys,, SEBI,
BI, 3 titime
mes s
66 Wh
Which
ich of the fol follow
lowing
ing tax has bee been n withd
withdraw
rawn n with
with eff
effect
ect from
from April
April 01, 200
2009:-
9:- a frin
fringe
ge ben
benef efit
it ta
tax,
x, b
ba
bank
nkin
ing g cash
ash tran
transa
sact
ctio
ionn ta
tax
x, c comm
commo oditi
dities
es tran
transa
sac cti
tion
ons
s ta
taxx, d secu
ecuri
riti
ties
es tran
trans sac
acti
tion
on ta
tax
x
67 Which of the statements is correct in the context of charges:-
a hy
hypo
poth
thec
ecatatio
ionn is de
defi
fine
ned d in In
Indi
dian
an Cont
Contra
ract
ct Ac
Act,
t, b pl
pled
edgege is de
defifine
ned
d in Tr
Tran
ansf
sfer
er of Prop
Proper ertyty Act
Act
c in mortg
mortgage,
age, in interes
terestt in specific
specific immo
immovabl
vablee proper
propertyty is transferre
transferred d to secure a loan
d in pledge the possession is with the borrower and ownership with
the bank
68 Banks are to maintain records of which of the following transactions as per Prevention of Money Laundering
Act 2002:- a all transactions of the value of more than Rs.10 lac or it s
equi
equiva
vale
len
nt in fore
foreig
ignn curr
curren
ency
cy,, b al
alll ca
cash
sh ttra
rans
nsac
acti
tion
ons
s of the
the va
valu
lue
e of more
more than
than RRs.
s.10
10 llac
ac o
orr its
eq
equ
uival
ivalen
entt in forei
oreign
gn currrren
enc
cy, c al
alll cas
cash tran
trans
sac
acti
tion
ons
s of the
the val
aluue of Rs.
Rs.10 la
lac
c ababo
ove or its
equivalen
equiv alentt in forei
foreign
gn curr
currency
ency,, d all fofore
reign
ign curre
currenc
ncy
y tra
trans
nsac
actio
tions
ns of th
thee value
value Rs
Rs.1
.10
0 lac above
above
69 if a partners becomes
becomes insolvent
insolvent and the account
account is in debit, tthe he ban
bankk stops
stops the
the p
pay
ayment
ment to av
avoid:
oid:
a application of right of set off, b application of rule of subrogation, c application of rule
in Cl
Clayt
ayton
on case,
case, d appli
applicat
cation
ion of rule
rule of redemp
redempti tion
on
70 A company obtained a loan of Rs.10 cr from a bank about 75 days earlier but it failed to file the particulars of charge
with
with Regi
Registstrar
rar of Compa
Compani nies
es.. With
With wh
whos
osee permi
permiss
ssioion
n th
the
e cha
charge
rge can
can be re
regi
gist
stere
ered:
d:-- a Compa
Company ny La
Laww
Board, b Registrar of Companies, c Financing Bank, d Company's Board
of Directors
71 Before sale of property
property after possession,
possession, unde
underr SARFAESI Act, what type of notice out of the following following is
required to be given (a) a 30-days notice to the owner of the asset (b) a public notice if the sale is by public auction
or inviting of tenders (c) public notice should be published in at least 2 newspapers, one of which should be
ve
vern
rnac
acul
ular
ar (d
(d)) a noti
notice
ce to th
the
e Re
Regi
gist
stra
rarr of Co
Comp
mpananie
ies
s or ReRegigist
stra
rarr of as
assu
sura
ranc
nces
es:-
:- a a an
and
d b only
only,, b a
to c only, c b to d only, d a to d all
72 DRT has passed an order and issued recovery certificate for property property ofof the defend
defendant
ant which
which is
is located
located
outside
outsi de the jurisdi
jurisdiction
ction of the DRT:
a Recov
Recoveryery off
offic
icer
er of the DRT will will proce
proceed ed aga
again
inst
st the said
said pro
proper
perty
ty,, b Recov
Recovery
ery offic
officer
er of the other
other DRT,
DRT,
to whom this certificate is to be sent, under whose jurisdiction the property falls will proceed with the recovery
c Recovery certificate will be sent to the other DRT in whose
jurisdiction the
th e property falls, for execution
d Recovery certificate will be sent to DRAT f or forwarding this the
DRT in whose jurisdiction, the property falls
73 Auth
Authen
entiticat
catio
ion
n of an electro
electroninicc rec
recorord
d by a subs
subscri
cribe
berr by means
means of an electro
electronic
nic method
method of proced
procedureure in
acco
accordrdan
ance
ce with
with pro
provi
visio
sions
ns of Sect
Sectioion
n 3 of InInfo
forma
rmati
tion
on Techn
Technolology
ogy Act,
Act, is calle
called:
d:-- a el elec
ectr
tron
onic
ic si
sign
gnat
atur
ure,
e,
b asymmetric crypto system, c electronic monitoring, d key pair
74 Bank-B made a payment of a cheque which later on was found to be materially a:'.ered, when the cheque was
examined through ultra violet lamp. Bank had exercised due care while making the payment but alteration was not
visible.
a ba
bank
nk is lia
liable
ble for mate
materia
riall al
alter
terat
ation
ion
b tthe
at he bank
ban
timek is
time of liabl
of lipayment,
able
paym e ent,
as it fail
failed
ced to ban
e
exam
xamine
bankk ine
is
is n the
thelia
not
ot ch
chequ
eque
liable
ble e thr
and through
getough
getss pro adva
advance
protect nce
tection
ion u/stechnol
tech nology
89 of ogy
NI Actw
which
hich
as thewas
alt a
avai
vailab
altern lable
ernation le
ation wi
with
was th
notthe
thvisi
e ban
bank
ble..k
visible
d bank is not liable since bank cannot provide ultra-violet lamp at all
branches
Page
75 Complaint can be made by a customer to Ombudsman when (a) bank rejects customer's complaint (b) bank sends
reply and customer is not satisfied (c) customer lodged complaint and bank sends no reply for one month (d)
bank asks the customer to refer the matter to Ombudsman. Which of the following options is correct in the
ab
abov
ovee conn
connec ecttion:
ion:-- a a, b, d, b a, b, c, c b, c, d, d a, c, d
76 Banks are required to make payment of guaranteed amount once the guarantee is invoked by the beneficiary.
There are two exception to this rule (a) case of fraud (b) special equity in favour of debtor (c) when applicant
refuses to honour (d) when the beneficiary does not give the reasons for invocation and proof of bank's liability:
a only a and b, b only b and c, c only a and c, d only b and d
77 Actions of a partne
partnerr in a Partnership firm
firm are deemed to be actions of the firm (i. (i.e.
e. all partner
partners)
s) provide
providedd the action is
(which of the fo
foll
llo
owing is not true):- a in ththe
e usual
ual busi
sin
ness of the fi
firrm, b in the usual course, c on
be
behal
halff of the firm
firm as a partne
partner,
r, d within
within or outoutsid
sidee the aut
author
hority
ity of the par
partn
tner
er
78 a Distt.
be The Distt.
JudgeForum under
(c) two membthe
members Consumer
ers (d) one ofProtection Act consists
two members should of a(a)
should be President
women a a(b)
to president
d all
all correshould
correct
ct,, be
qualified
b ato
and c only correct, e a and b only correct, d b and c only correct
79 If a person seeking
seeking information
information is
is not provi
provided
ded information
information with
within
in the pres
prescribed
cribed period
period (norma
(normally
lly 30 day
days),
s), he
can make an appeal :- a within 30 days, b within 50 days, c within 6 months,
d within
thin on
one
e year
80 The person
person giv
given
en licence
licence to issue
issue digi
digital
tal sign
signatur
aturee certif
certificat
icate
e uts 24 of Information
Information Tech
Technolog
nologyy Act is called:
a Certifying authority, b DGC Authority, c Digital Signature Controller, d
Controller of Certifying Authorities
81 Unde
Underr SAR
SARFAFAESESII Ac
Act,t, where
where tthe
he bborr
orrow
ower
er fails
fails to pay
pay inin full,
full, aft
after
er issue
issue of notice for pos possess
session
ion of secu
security,
rity,
whic
wh ich
h of the
the foll
follow
owiningg op
optition
onss are
are not av
avaiaila
labl
ble
e to th
thee bank
bank:- :- a ta
tak
ke poss
posse ess
ssiion of th
the
e asse
set,
t, b
take
ake over managanagem eme ent of th
thee secureredd assets,
ts, c appo
appoin
intt a per
ersson to mananag
agee th
the
e se
secu
curirity
ty
as
asse
sett tthe
he poss
possesessi
sion
on of whic
which h ha
hass been
been tatake
ken,
n, d to s sell
ell the securi
security
ty witho
withoutut going
going to tthehe court
court a afte
fterr
possession without giving any notice before safe
82 For taking possession of the assets under provisions of SARFAESI Act, the banks can seek help of which of the
following agency/institution:
agency/institution:
a Distt. Magistrate or Chief Metropolitan Magistrate, b Recovery officer of DRT, c
Loca
Locall Polic
olice,
e, d CRPF and
and oth ther
er centr
entral
al fo
forc
rces
es
83 Under Consumer Protection Act, the consumer can file complaint with a consumer court if the deficiency is not
remove
rem ovedd by the servic
service e provid
provider.
er. The
The defici
deficien
encycy inc
includ
ludes
es (a) defaul
defaultt (b) imp
imperf
erfect
ection
ion (c) sho
shortc
rtcomi
omingng (d)
inadequacy in quality:- a a to d all, b only b to d, c only a, b and d, d
only a, c and d
84 The
The pr
pres
esid
idin
ing
g off
offic
icer
er of DRAT
DRAT is ca call
lled
ed , who
who is appo
appoin inted by for
ted for or unti
untill he achi
achiev
eves
es age
age of
a President, Central Govt., 5 years, 65 years, b President, High Court., 5 years, 62 years, c
Chairperson,
Chairper son, Centra
Centrall Govt., 3 years, 6 62
2 years, d Chairperson,
Chairperson, Central Central Govt., 5 years, 6 65
5 years
85 Which of the following document in respect of a company is a conclusive proof of existence of a company:
A Memorandum of Association, b Articles of Association,
Ass ociation, c Certificate of Incorporation, d
Certificate of Commencement of Business
86 When a suit is filed by bank in DRT under RDDB Act, after receipt of the case from applicant, the court
issues summons to the borr borrowe
owerr wit
within
hin daysdays asking
asking h him
im as to why why the relrelief
ief s shou
hould ld
not be given to the bank:- a 45 days, b 30 days, c 21 days, d 14 days
87 Unde
Underr Sale of Goods Goods Act, which
which of the follofollowing
wing is not corr correct:
ect:-- a goodgoods s incl
include
ude share
share,, stoc
stocks
ks but not
actionable claims, b in an agagrereememenentt to sesellll,, th
the
e ow
owne ners
rshi
hipp is yeyett to tr tran
ansf
sfer
er to the
the buyer, c in
ca
case
se of sasale
le,, th
the
e ri
risk
sk in good
goodss is wi
with
th th
the
e se
sellller
er and
and in cacasese of agree
agreeme mentnt to se
sellll,, it is wi
with
th the
the buye
buyer,r, d a
contract of sale of goods is a bilateral contract
8 8 Bank -B al low ed a cash cred it a dvan ce t o a p arty whic h is guar guaran anteteed
ed by G. Such
Such guar
guaranante
tee
e co
cove
veri
ring
ng a
seri
series
es of tr
tran
ansa sact
ctio
ions
ns is call
calle
ed: a unliunlimmit
ited
ed li
liab
abil
ilit
ity
y guar
guaran
antetee,
e, b defe
deferrred
red pay
payme
mentnt guar
uarante
antee,
e,
cc
ccon
onti
tinu
nuin
ingg gu
guararanante
tee,
e, d perf
perfor
orma
manc ncee guar
guarananteteee
89 The doc
doctritrine
ne of Caveat
Caveat EmpEmptortor states
states that:-
that:- a guar
guaranantotorr st
stepeps s into
into sh
shoeoess of cr
creedito
ditorr when
hen he makes
akes
pa
paym
ymenentt of the loanloan,, b the mo
mortrtgag
gage e pr
prop
oper
erty
ty ca
can n be tak
taken
en ba
back
ck on pa paym ymen entt of mo
mortrtga
gage
ge
money ey,, c the bu buy yer of goo
oodds shohouuld be ca cauutio
iouus whi
while pur urch
cha asing the goodgoods s, d the
the bank
bank shou
shouldld
never change the terms of a loan without consent of the guarantor.
90 (a) if one p artner c auses d amage to a c ustome r of the fi rm, all partn partners ers are liab
liable
le (b) reg
registr
istrati
ation
on of firm wit
with
h
Registrar of Firm is optional (c) it is compulsory to make a partnership deed as a proof of partnership (d) the authority used
by pa
part
rtne
nersrs as agagenentt of
of eac
eachh oth
other
er is call
called
ed impli
implied
ed au
auth
thor
oritity.
y. Which
Which of thesthesee is
is ccororre
rect
ct:-
:- a a to to d allb
allb a, b a
and
nd c
only, c a, b and d only d b, c and d only
91 A bank has opened new branch in a town where the bank is not already established. In order to comply with KYC
norms on introduction which of the following would be in order for the bank to follow, for the first few deposit accounts to
be open
opened ed by the bank bank:- :- a bank
bank wil
willl insist
insist on int
introd
roduct
uction
ion fro
fromm the loca
locall MLA or MP in each
case
case,, b bank
bank wi
will
ll open
open acco
accoun unts
ts af
afte
terr poli
police ce ver
verif
ific
icat
atio
ionn of the
the custcustomomer ers,
s, c bank will open the
account on the basis of introduction given by local local respec
respectabl tablee persons
persons of the locality locality and its veri
verificat
fication,
ion, d
bank will open the first few accounts without without any introd
introduction
uction lookin
looking g into the peculiar circu circumstanc
mstances es
92 Which of the following Act has statutorily recognised the principles of corporate governance:-
A Banking Companies (Acquisition and Transfer of Undertakings) Financial Institutional Laws (amendment) Act, b
Banki
kin
ng Com
ompa
pan
nies
ies Ac
Acq
quisi
siti
tio
on and Tr
Tran
ansf
sfe
er of Unde
Underrtaki
kin
ngs Act
ct,, c Banking
ing Regu
egulat
lation
ion Act, d
Page
Reserve Bank of India Act

93 The
The sh
shar
ares
es issu
issueded by co
compmpan
anie
ies
s ar
are
e wi with
thin
in th
the
e mean
meanin
ing
g of Sale
Sale of Good
Goods s Ac
Act:
t:-- a se
secucuri
riti
ties
es,, b
goods, c movable assets, d all the above
94 The maximum no. of directors in a public limited company, as per Companies Act 1956, has to be restricted to,
whiich of th
wh thee fo
folllo
low
win
ing:
g:-- a 20, b 15, c 12, d no ceililin
ng. But if no. goes
oes beyo yon nd 12, CeCenntr
tra
al Govt
ovt
permission is require
required.d.
95 On securitization of NPA accounts, the security receipts are
purchased by specialized institutions such as financial institutions, insurance companies etc. which are called:
a Asse
Assett Reco
Recons nstr
truc
ucti
tion
on Comp
Compananie
ies,
s, b Pass
Pass Thr
Throug
oughh Cer
Certif
tifica
icate
te Buyers
Buyers,, c Qual
Qualififie
iedd Inst
Instit
itut
utio
iona
nall
Buy
Buyers
ers d Secu
Securi
riti
tisa
sati
tion
on Co
Comp
mpan
anie
ies
s
96 The 'fit and prop
proper'er' criteria
criteria is used :- aby co compan
mpanies ies while
while cond
conducti
ucting
ng the sharehol
shareholders
ders'' me
meeti eting,
ng, b by
compa
compani nies
es wh
while
ile ap
appoi
pointi
nting
ng direct
director ors,
s, c by com compa pani
nies
es wh
whilile
e appoin
appointi ting
ng the manag
managin ing
g di
direc
rector
tor,, d by
companies passing resolutions by the Board members
97 If a securitizat
securitization ion compan
company y fails to comp
comply ly with
with RBI guidelines,
guidelines, under
under SARFAE
SARFAESI SI Act
Act,, who c can
an impose
impose
pena
penalti
lties
es and
and up to wh whatat ext
extenent:t:-- a RBI,
RBI, fifine
ne up to Rs.5
Rs.5 la
lacc and
and if defa
defaul
ultt cont
contin
inue
ues s Rs.1
Rs.100 000000 pe
perr da
dayy,
b SEBI, fine up to Rs.5 lac, c RBI, fine up to Rs.1 lac, d SEBI, fine up to Rs.5 lac
and if default continues Rs.10000 per day
98 Whi Which of ththee fo
foll
llow
owiningg is not
not susuit
itab
ably
ly matc
matchehedd :- a Secti
Se ction
on -8 of B R Act : pr prohohibi
ibiti
tions
ons foforr a banki
bankingng
company for tra tradi
ding
ng acacti
tivi
vitie
ties,
s, b Sectio
Section n — 9 of B R Act : holdin holding g immovab
immovable le pro
proper
pertyty for per
period
iod exceed
exceedinging
7 years
ears exce
except
pt fo
forr its
its ow
own n use,
use, c A bank
bankin ing
g co
comp
mpan anyy ca
can n be pr
prom
omot
oted
ed unde
underr a sp spececia
iall stat
statut
utee or
company
comp any registe
registered
red undunder er Bankin
Banking g Regula
Regulatio
tion
n Act
Act,, d Auth
Authororit
ity
y to spec
specify
ify th
thee ac
acti
tivi
viti
ties
es ththat
at can
can be
undertaken by a bank u/s 5 (o) of Banking Regulation Act — Central Govt.
99 RBI can make application to High Court for winding up of a bankin banking g co
compa
mpany ny (a) if govgovt.t. dir
direc
ects
ts RRBI
BI to
to do
so (b) company fails to maintain minimum paid up capital and reserves as per Sec 11 of B R Act (c) RBI has
prohibited the bank to accept fresh deposits u/s 35-4 of B R Act (d) bank has fail to remain entitled to carry on
banking activities
a a to d all correct, b a, c and d are correct, c b, c and d are correct, d a, b and d
are correct
100 SecSection
tion 45S
45S of RBI Act Act relat
relateses to which
which of thethe followi
following:-
ng:- a prohibits
prohibits unincorporate
unincorporated d associations
associations of persons
from
from acce
accept ptin
ingg depo
deposi sits
ts from
from publpubliic, b proh
prohibibit
its
s bank
banks s from
from acceacceptptin
ingg depo
deposi sits
ts from
from publ
public ic,, c
al
allow
low gov
govt.t. compa
companie nies s fo
forr accep
acceptin
ting
g dep
deposiosits
ts from
from pu publiblic, c, d rerestr
stric
ictt the ba
banks nks to pay count
counter er in
inter
teres
estt
101 Your client M/s M/s Tushir E Exports
xports receives
receives a letter of c credit
redit for exp exportort of han
hand-tools
d-tools to UK. The let letter
ter of cr credit
edit
provides
provid es for allowin
allowing g pre-shipm
pre-shipment ent credit on the strength of the letter of credit for shipmen shipmentt of the hand-tool
hand-tools s ordere
ordered d by the
import
imp orter
er in
in UK
UK.. Which
Which o off the followi
following ng ty
types
pes of cr credi
edits,
ts, it can
can b be e classi
classified
fied:-:- A re
revoc
vocablable
e fette
fetterr of
of cr
credi
edit,
t, b conf
confirm
irmeded
letter of credit, c back to back credit, d green clause letter of credit, e red clause letter of
credit
102 An exporter gets a letter of credit for export of garments to US but the expiry date of the credit falls on January 26,
which is a public holiday. In such situatio situationn the docume
documents nts for negoti
negotiationation can be submit
submitted ted to the negotiati
negotiating ng bank on:
A the succeeding working day, b the succeeding business day, c the succeeding banking day
D the preceding business day, the preceding banking day
103 Corporate Bank opens a letter of credit in favour of an Exporter in Japan on the request of their import customer
Nishikawa
Nishika wa Tradin
Trading g Company
Company which is in lieu of a bank guarante guarantee. e. Such letter
letter of credit is know
known n as:- a back to back letter
of cred
redit, b clean le lettter of credit, c standby ndby lett
etter of cr cred
edit
it,, d ir
irrrev
evoocab
cable tr tran
ansf sfeerable let
letter
ter of
credi
credit,t, e non
none e of the above,
above, as it is cal called
led foreig
foreignn guaran
guarantee tee
104 Your branch has received a letter of credit from an overseas Bank, in favour of M/s Rama Exports which provides
for allowing the exporter the advance advance at pre-spre-shipmen
hipmentt stage and also the warehouse facilit facilityy to the exporter. Which among
the following
following is the classificatio
classification n of this letter of credit
credit? ? A Transferable letter of Credit, b Stand by letter of credit,
c Bac
Back k to back
back letletter
ter of cre
creditdit,, D Re Redd Clause
Clause letletter
ter of Cre
Credidit,
t, e Gre Green en Clause
Clause let letter
ter of cre
credit
dit
105 An export client M/s Shanbeg Exports of your branch receives an export order for export of handcraft items to
US under a letterletter of credit of $ 30000. It is stated that your bank can issue another credit credit in favour of local
supplier/manufacturer from whom the exporter is to procure the material. Under which of the following categories, such
le
lett
tter
er of crcred
edit
it can
can be clasclassi sifi
fied
ed:-:- A red clclau
ause
se lelett
tter
er of cr
cred
edit it,, b gree
green n clclau
ause
se lett
letter
er of cr
cred
edit it,, c
st
stan
andd by le lett
tter
er of cr cred
edit
it,, d tr
tran
ansfsfer
erab
ablele le
lett
tter
er of cr cred
edit
it,, e back back to backback lett
letter
er of cr cred
edit
it
106 Your branch had sanctioned a pre-shipment credit to an exporter who has sent the goods for shipment but so far he
has not han handed
ded oveoverr the bill of lad lading,
ing, alt
althou
houghgh shi
shipme
pment nt has taken
taken placplace e few wee
weeks ks back:-
back:- a if it not pre
presen
sentedted to
bank
ban kw withi
ithinn 7 day
days s of
of shipm
shipment ent it will become
become stal stale,
e, bif it is is no
nott nego
negotia tiated
ted wit
within
hin 10 ban
banking
king day
days s it cannot
cannot be
negotiated, c if it is not presented to the bank for negotiation within 21 days of date of shipme shipment, nt, it wil
willl
become stale, d if it not presented for negotiati negotiationon within 21 days of date of shipment shipment it will be claused bill of lading, lading,
e none
none of th thee abov
above e
107 International Bank Limited negotiated document documents s worth Euro 15000 15000 aga again
inst
st a with
withouout-
t-rec
recou ourserse irre
irrevo
voca
cablble
e
letterr of credit issued
lette issued by a bank in UK. When the documents documents were sent to the opening opening bank in UK, these were returned
with the reason that the bill of lading lading and the insurance certi certificat
ficate e attached to the documents are fake. Opening bank
also refused to make the payment against these documents, documents, which are otherw otherwiseise as per terms of the letter of credit. credit.
What is the pos positiition
on of Int
Intern
ernatiationa
onall Bank
Bank L Limi
imited
ted?? a Bank has acted negligently negligently by accepti accepting ng ffake
ake document
documents s
due to which it cannot recover the money from opening bank, bBank has tthe
he option
option to
to recove
recoverr the money
money from
from the
opening bank under UCF)DC
seller who has tendered fake documents, c Bank can rightly claim the money from opening
Page
provisions since the bank was to see the regularity of the documents and was not responsible for their being fake d
Bank
Bank will
will have
have to appr
approa oach
ch inte
intern
rnat
atio
iona
nall cour
court, t, e a an
and d b abov
above e
108 State Bank Bank opened a lette letterr of credit
credit on behal
behalff of its cu custome
stomerr M/s Devki
Devki Lai and Company for purchase purchase of
goods for trading purpose. Their managing partner comes to your branch and informs that their booking agent has
informed him over phone that the supplier has sent the goods of a different specification, which are substandard
also. He makes a request to the bank not to make payment of the documents when received from the negotiating
bank:-
ban k:- a the request
request of the partyparty willwill bbe
ea acce
ccepted
pted by the bank bank sinc
sincee the
the bank
bank has
has to dealdeal wwith
ith the party
party for
business.
B bank can accept the request of the party since it is a fraud both on
the borrower and also the bank.
c bank cannot accept th e request of t he party s i nc e all th e par t i e s
deal with documents in letter of credit instead of goods and services
d borrower can be advised to file a suit in a court of law and bring a
stay from court.
109 Bank International sanctioned cash credit pledge limit of Rs.40 lac to M/s International Traders Limited. The pledge
agreement provided for sale of securities charged to the bank without intervention of a court and without notice of sale
to the borrower. On default by the borrower in repayment of the loan, the bank sold the goods pledged to the bank
without approaching the court and without issuing a notice to the party. The party challenged the sale and claimed that
they would have preferred to pay the dues of the bank than sale of the securities, had the bank given a notice to them:
a) the sale
sale is valk
valk as bank h has
as sold the securiti
securitieses in terms of the agreem agreementent wi
without
thout any no notice,
tice, b) the sal sale
e is vvalid
alid as
as
no court
court interventio
interventionn is needed
needed in in terms
terms of the agree agreementment despite
despite notice not is issued,
sued, c) the sale sale is not valid
valid as court
intervention
interv ention has take
takenn place subsequently
subsequently the sale is not valid as it has been done without without issue of a notice to the
borr
borrow
owerer,, e th
the
e sale
sale is valid
alid
110 A company is allowed an advance of Rs.30 lac by your branch as a cash credit pledge. While inspecting the branch,
the inspecting official
official observe that the branch has not got the charge registered registered with Registrar of CompaniesCompanies within the
pr
pres
escr
crib
ibed
ed pe
peri
riod
od of 30 dadays
ys.. How
How yo you u will
will re
rect
ctif
ify
y th
this
is er
errororr ? a by obta
obtaininin
ing
g a fr
fres
esh
h se
sett of docu
documement nts,
s, b
by ma
maki
king
ng a rerequ
ques
estt to Nati
Nation
onal al Comp
Compan anyy La
Law w Trib
Tribununal
al to co
cond
ndononee the
the dela
delay,
y, c by gett
gettin
ing
g the
the loan
loan
account
acco unt adj
adjuste
usted,
d, d fresh
fresh loa
loan n wi
willll b
be
e allow
alloweded iin
n consi
consider derati
ation
on of
of the
the pr
previ
evious
ous loa
loan,
n, e thethere
re is n
no
o need
need ttoo ge
gett th
the
e
charge
111 Your registered
branch in Chandigarh
Chandigarh decides to sanction workin working g capital limit
limits
s to a public limited company and propos proposeses to
obtain equitable
equitable mortgage of immov immovable
able property of the company located located in Jaipur
Jaipur.. The regist
registration
ration of the mortg
mortgage
age will be
requ
requirired
ed to be do done
ne:-:- a with
with th
the
e Regi
Registstrararr of Comp
Compan anie
ies
s ha
havi
ving
ng juri
jurisd
sdic
icti
tion
on over
over Chan
Chandi diga
garhrh,, b wi
with
th the
the
regist
reg istrar
rar hhavi
aving
ng juris
jurisdic
diction
tion ovover
er Jaipur
Jaipur if it
its
s registe
registered
red office
office is
is in Jaipur
Jaipur,, c wit with
h both
both th
thee reg
registr
istrars
ars,, d witwith
h any of th the
e
regist
reg istrar
rars,
s, e nonenone of th the
e abov
above e
112 A mortgage under which the mortgagor undertakes to repay the mortgage money on a fixed date, he also transfers
the property to the mortgagee under the condition that on repayment of mortgage money the mortgagee will retransfer
the prope
property rty to the mortg
mortgagor
agor,, is called:-
called:- a) Si Simp
mple
le mo
mortrtga
gage
ge,, b: Usuf
Usufru
ructctua
uary
ry mo
mortrtga
gage
ge,, c: Eng
Englilish
sh mo
mort
rtga
gagege,, d:
mortgage
mortg age by condit
conditiona
ionall sa
sale,
le, e: None None of th thee abo
above
ve
113 Mr. Vikaram Samanth is sanctioned a loan of Rs.10 lac for purchase of built flat by United Bank under bank's
housing finance scheme. Due to failure of the borrower to repay the dues in time, bank filed a suit in a court which
decreed the case in favour of the bank. When bank initiated the decree execution the borrower plead that he has only
one house which he uses for residence residence purpose, hence it shou should ld not be subject matter of sale:- A the p plea
lea of tthe
he
borrower
borro wer is not justi
justified
fied since thethe property
property is mortg
mortgaged
aged and.it is primary
primary se security
curity for tthe
he bank loan, b the borro borrower's
wer's pleplea
a
is justif
justified
ied as the res reside
identia
ntiall proper
propertyty cann
cannot ot be sub
subjec
jectt matt
matter
er of decree
decree exe
executcution
ion if the
there
re is only one houhouse, se, c if
the bor
borrow
rowerer proves
proves thatthat he
he h has
as only
only oone
ne hou
house,se, his reques
requestt wou
would ld be acc
accept
epteded by the banbank,
k, d it is discret
discretion
ion of the
co
court
11urt
4 to allo
aUllow
niw
tedor di
disal
sallow
Blow
ankhi
his
s reque
reh
quest,
ad st, geranone
nted of the a abo
above ve
loan of Rs.12 lac under its housing
finance scheme for construction of a house to Mr. Atul Ghosh, by mortgaging the house. On repayment of the loan the
bank had shown its inability to release the mortgage. Under which of the following rights, Mr. Ghosh can force the bank
to rele
releas
ase e th
the
e mor ortg
tgag
aged
ed prprop
oper
erty
ty?
? a ri righ
ghtt of appr
approp
opririat
atio
ion,
n, b right
ight of se
sett off
ff,, c ri
righ
ghtt of su
subr
brog
ogatatio
ion,
n,
d ri
righ
ghtt of fo
fore
recl
clos
osur
ure,
e, e ri righ
ghtt of re
redem
demptiption
on
115 An equitable mortgage has been created in favour of bank A on February 01, 2005, which has not been registered,
where as a registered mortgage was created in favour of bank B on January 28, 2005 but it was registered on
Febr
Februauaryry 11
11,, 20
200505.. Prio
Priori
rity
ty woul
would d be of
of:-
:- a bank
bank A be beca
caus
use
e regi
regist
stra
rati
tion
on of mo mort rtgagage
ge by bank
bank B tooktook plac
place e
later than, b bank A because equitable mortgage has always prior iority, c bank B because
se,, its
mortgage
mort gage is reg register
istered,
ed, which has priority
priority d bank
bank B becau
because,
se, its mmortg
ortgage
age hahass been cr create
eated
d first both the banks
have pro-rata charge
116 A partnership
partnership firm with three partners,
partners, named M/s Durani Brothers opened a current current account with Corpor
Corporateate Bank with
the operational instruction that 151 two partners will operate the account. The firm received a cheque in its favour and in
order to meet the urgent payment requirement, on behalf of M/s Durani Brothers, the 3Ni partner endorsed the same in
favour of anot
another
her fifirm
rm M/s
M/s Shivani
Shivani Cables,
Cables, from
from whom
whom the raw material
material was pur
purchased:
chased:-- a Shivani Cables will b become
ecome
rd
holder in due course
course if it is not known
known to them tha thatt the 3 parpartne
tners
rs has no aut
author
hority
ity to end
endors
orse, e, b Shiv
Shivani
ani Cab
Cables
les wil
willl
st nd
not become
becom
Sheivani
holder
Shiva ni Cain
Cabledue
bles'
s's cou
course
s title rse
title willll ifremai
wi they
rem nknow
ain dou that
doubtful inonly
btful 1 cumsta
all cir andstanc
circum 2 nces,
partner
partn
es, erdhave authori
authority
a and b, ty to eoperat
and operate
a to ec the
the bank account
account,, c
117 Universal Bank has granted cash credit limit of Rs:10 lac to M/s Kale Trade
Traders,
rs, a p
part
artner
nership
ship ffirm
irm.. The a
accou
ccount
nt is
showing a debit balance of Rs.9.50 lac when the notice is received about the insolvency of one of the partners. Which
Page
among
amon g th
thee follo
followi
wingng ste
steps
ps sh
shou
ould
ld be in
initi
itiat
ated
ed by th thee ba
banknk to saf
safeg
egua
uard
rd it
its
s int
inter
erest
est?? a account sh ould be
recalled
recal led and party be asked to adjus adjustt the
the acc
accouountnt,, b oper
operat atio
ions
ns in the
the ac
acco
coun
untt to be ststop
oppe
pedd and
and bala
balanc
ncee
confir
con firmat
mation
ion letter
letter to be obtain
obtained
ed fro
from
m all the parpartne
tners,
rs, c ope
operatration
ionss in the acc
account
ount to be stopstopped
ped and noti
notice
ce
of de
demamand nd to be issu
issued
ed on th
thee re
rema
main
ining
ing part
partneners
rs,, d notice ab out the outstandin g dues to be sent to the
official assi
assign
gneeee in whom
whom th
thee esta
estate
te of th
the
e ininso
solv
lven
entt part
partnenerr has
has been
been ve veststed
ed,, e c and
and d abov
abovee
118 Your branch maintains a current account in the name of M/s Site Ram Gita Ram & Sons. A new partner, the
younger son of Mr. Gita Ram joins the firm and bank gets information about this development. Which among the
following actions would be more appropriate to deal with this account:- A operatio operations ns in the accou
account nt should
should be sto
stoppe
ppedd
failing which
which the rule in Clayton
Clayton case can apply, B account should be closed and new account shou shouldld be opened
observing all formalities
C new partner can be admitted with the approval approval of the bank only. Hence the firm should be advised to obtained obtained
pe
perm
rmiss
issio
ion
n fro
fromm th
the e ba
bank,
nk, d ba
banknk ca
can n ob
obta tain
in ne
neww pa
part
rtne
ners
rship
hip de
decl
clar
arat
ation
ion lett
letter
er an
and d allo
allow
w opoper
erat
ation
ionss as pe
per
r
new mandate
mandate,, e bank can insist
insist on for nenew w partnershi
partnership p deed duly registered
registered withwith Reg
Registrar
istrar of firms
firms
119 Two partners of a partnership firm M/s Hyderabad Trading Company with three partners, approaches you to
open a current account with initial deposit of Rs.10 lac and promise that the signatures on the account opening, form
shall be obtained on the return of 3 rd partner from abroad, although the said partner is not to actively engage himself
in the busine
business ss and he will function
function as a dormant partn partner.er. They also do not have have any partnershi
partnership p deed in writing.
rd
A the bank will open the account as the 3 partner is not to operate the account
rd
B the bank will open the account and will not permit any withdrawaltill the 3 partner signs the account opening form
C the account will be opened but cheque book will be given when the 3rd part partner
ner returns,
returns, D the account will not be
opened
ope ned unless
unless al
alll the par
partner
tnerss hav
have e signe
signed,d, E none of tthe he abo
aboveve
120 Capital Bank maintains a current account of M/s Bihari Lal Sham Lai with the same name partners having
operating instructions as 'any one can operate'. Mr. Sham Lai informs the bank that due to some dispute amongst the
partners, the cheques signed by Mr. Bihari Lal should not be paid as he has acquired the whole share from Mr. Bihari
Lal and is shortly introducing another partner. Meanwhile a cheque signed by Mr. Sham Lal is presented for payment.
What should the bank do? A The opera operatio
tions
ns in the accoun
accountt will be stopp
stopped ed and the manmandat
datee for operatio
operation n of the
accountt by any one, shall beco
accoun becomeme inoperative,
inoperative, B The operat operations
ions in the account will be stoppedstopped only afterafter receipt
receipt of the
notice from both of them.
C The cheque signed by Mr. Sham Lal shall be passed since he has acquired the whole share now, D The partners will be
advised to sort out the issue quickly and meanwhile the cheques signed by any of them will be honoured.
ANSW
ANSWER
ER PR
PRAC
ACTI
TICE
CE TE
TEST
ST NO
NO.. 1
1 C 2 B
D 4 3 B 5 D 6 C 7 D 8 A 9 D 10 D

11 B 12 C 13 C 14 A 15 C 16 C 17 C 18
18 B 19 C 20 B
19
21 D 22 D 23 D 24 A 25 C 26
26 C 27 A 28 C
28 29 B 30 C
31 A 32 B 33 A 34 D 35 D 36 A 3
37
7 C 38
38 A 3
39
9 D 40 B
41 B 42 A 43 B 44 D 45 A 46
46 C 47 D
47 48 B 49 B 50 D
51 A 52 D 53 D 54 B 55
55 B 56
56 D 57 B
57 58 B 59 C 60 C
61 D 62 D 63 B 64 A 65
65 B 66
66 B 67 C
67 68 B 69 C 70 A
71 B 72 C 73 A 74 C 75 B 76
76 A 77
77 D 78 A 79 A 80 A
81 D 82 A 83 A 84 D 85 C 86
86 B 87 C
87 88 C 89 C 90 C
91 C 92 A 93 B 94 D 95 C 96
96 B 97 A
97 98 C 99 A 10
100 A
101 E
101 102 E 10
103 C 10
104 E 105 E 106 C 107 C 108 C 109 D 11
110 E
111 B
111 112 C 1
11
13 A 11
114 E 115 D 116 E 117 E 118 D 119 D 12
120 A
PRACTI
PRACTICE
CE TEST
TEST PAPE
PAPER
R NO. 2 ( TEST
TEST Y
YOUR
OUR SEL
SELF
F)
01Implied authority
authority of th
the
e pa
partner,
rtner, can be usedused by him iin n which
which of the
the ffoll
ollowi
owing
ng cir
circums
cumsta tance
nces:-
s:- a withdwithdrawraw a su
suitit
pend
pendin
ing
g in a cocour
urt,
t, b acqu
acquir ire
e or tr
tran
ansf
sfer
er im
immo
movavabl
ble
e pr
prop
opererty
ty on be
beha
half
lf of he firm
firm,, c open
open ba bank
nk acco
accoun untt
on be
beha
half
lf of th
thee firm
firm in hi
his
s own
own name,
name, d ap
appo
poin
intt agen
agentt with
with th
thee conse
consent
nt of th
the
e ot
othe
herr pa
partn
rtner
erss
02 In case of a mortgmortgage
age suit,
suit, fo
forr tthe
he suit
suit filed in a C
Civil
ivil Cour
Court,
t, the de
decr
cree
ee of mort
mortgagage
ge is
is:-
:- a in init
itia
iall de
decre
cree
e an
and d
absolute decrcreee, b prel
relimin
minary decree ree and fifin
nal decre
ree e, c prelimin
minary decre reee and abso sollute
decr
decree
ee,, d init
initia
iall decr
decree
ee and
and fi
fina
nall decr
decree
ee
03 In an agre
ree
emen
ment to sell, the risk of goods is:
s:-- a with the buy
uye
er, b with the seller, c with buy
uye
er
Page
or sell
seller
er at th
thei
eirr di
disc
scre
reti
tion
on,, d with
with buy
buyer
er if paymen
paymentt is made made an andd with
with sel
selle
ler,
r, if paymen
paymentt is no
nott made
04. A power of attorney is given on Jan 1, 2006 by X to Y. Y signed 3 cheques dated as Dec 25, 2005, Jan 12, 2006
and Jan 31, 2006. On Jan 17, 2006 his authority is cancelled by X. Cheques are presented for payment on
January 31, 2006:- A cheque cheque dat
dated
ed Dec 25 and Jan 12 sha shallll be paid,
paid, b chequ
cheque e dated
dated Jan 12 an
andd Jan 31 sh
shall
all
be paid, cc:: cheq
cheque
ue date
dated d De
Decc 25 and
and Jan
Jan 12,
12, shal
shalll be re
retu
turn
rneded,, d all
all the
the cheq
chequeues
s wou
would be paid
paid
05 Which of th thee fol
follo
lowi
wing
ng mo
mortrtga
gage
ges,
s, do
does
es no
nott re
requ
quir
ire
e re
regis
gistr
trat
atio
ion
n with
with Regi
Regist
stra
rarr of Assur
Assuranances
ces:-
:- a Equit
Equitab
able
le
mor
orttga
gage
ge,, b Englisish
h Mortgagee, c Usufructuary Mortgage, d S Siimple Mortgage
06 RBI can issue direction
direction to banks u/s u/s 21 and u/s 35A of Banking Regula Regulation
tion Act for (a) Sec 21 in public inte
interest
rest
(b) Sec 35A in public interest (c) Sec 21 relating to loans (d) Sec 35A relating to loans. Which of these is correct:
a a and b only, b a and c only, c b and c only, d none of the above
07 Out of of the under notednoted statements
statements,, which
which is not c correct:-
orrect:- a Lice Licence
nce from
from RBI is essential
essential to open
open a bank — Sec
t22
hanB R AcAct,
t, ba Ev Every
ery banki
babnking
ankng
ingcompa
companyny has
comto pause
us
nye the word
wordcabank
ban
n k as papart
rt
usof
e its
its na
nameme,,the c No
wordcomp
compananyy ot
othe
baher
nkr
or ban
bankekerr as part
part of its na
name
me,, d A fifirm
rm,, grou
roup of in ind
divi
vidu
dual
als
s ca
cann use th the
e wordrds
s banki
ankin
ng compampany as
part of their name or for the purpose of business, by giving a public notice
08 The date of dobuments of a loan is January 25, 2006. The prescribed limitation period is three years. The suit
can be filed latest by: a January 25, 2009, b January 24, 2009, c January
26, 2009, d January 27, 2009
09 The
The ob
objejec
ctiv
tive of ena
nact
ctiing Ban
anki
kin
ng Reg
egul
ula
atition
on Act was to: a regulate banking companies, b
creation of banking system, c regulating acceptance of deposits from public, d all the
above
10 As per Sale of Goods Act, the unpaid seller of goods in possession of the goods, is entitled to retain the possession
of the goods
goods unti
untill payment
payment of the price
price is made
made,, in the fol
follow
lowing
ing cas
cases:
es:-- a if th
the
e good
goods
s have
have been
been sold
sold wit
withou
houtt
any
any stip
stipul
ulat
atio
ion
n as to crcred
ediit, b if th
the
e gogood
ods
s ha
have
ve been
been so sold
ld on crcred
edit
it,, bu
butt tthe
he ter
term
m of
of cred
credit
it has
has exp
expir
ired
ed,,
c if the buy uyeer becomesmes insolvent, d any of the above
11 Who can sus suspen
pend d the opeoperat
ration
ion of banking
banking com companpany y aand
nd on who
whosese recomme
recommenda ndatio
tions:
ns:-- a R151, on
the recommendations of Central Govt, b RBI, on its own, c Central go govt. onon iitts owown, d
Central Govt. on recom recommenda
mendations
tions of RBI
12 For specific performance of a contract, what is the limitation period:- a 1 years, b 2 years,
c 3 years, d 12 years
13 Whic
Which h of th
the
e fo
foll
llow
owiningg stat
statem
emenents
ts is co
corr
rrec
ect:
t:-- a Publ
Public
ic sect
sector
or ba
banknks s ha
have
ve bebeen
en crcrea
eate
tedd ununde
derr a spec
specia
iall
statute, b banking companies are registered under B R Act, c Subsidiaries of State
bank
ban k are comcompan
panieies
s reg
registe
istered
red und
underer Comp
Compananieies
s Act,
Act, d Accepting deposits for safe custody falls under
the defin
definiti
ition
on of bank
bankining.
g.
14 in in which of the following situations, the limitation period is not three
years:- a m mooney payable for money lent, b on a promissory note, c on a mortgage, d
on arrears of rent
15 Trad
Tradiing in share
hares s of a bank ank at Na
Natition
onaal St
Stoc
ock k Exch
Exchan ange
ge,, is regu
regullat
ateded by:y:-- a Company Law
Board, b Security Exchange Board of India, c Controller of Capital Issue, d all
the above
16 In whicwhich h of the following
following cases,
cases, the limi
limitation
tation perio
periodd shall
shall not get ex
exten
tendedded:-
:- a borro
borrowe
wer's
r's ag
agent
ent deposi
depositeted
d
cash in the account within limitation
period, b borrower acknowledged the liability in its balance sheet within the
limita
mitati
limi
li tation
tion
on peri
period
period,
od,, dc borall
in ro
allw eer abov
th
the ae
aboveckcase
noses
ca wlsedged the liability by signing a letter after the
17 Sectio n 12 of Banki ng Regu latio n Act stipula tes that the subs ubscrib
cribed
ed ca
capi pita
tall o
off a ban
bankk can
canno
nott be
be lles
ess
s
than
tha n % ofof its autho
authoriz
rized
ed c capi
apital
tal and paid
paid up capita
capitall cann
cannot
ot be
be lless than _ % of its
ess than its subscribed capital.
a 10%, 50%, b 25%, 25%, c 50%, 50%, d 50%, 10%
18 When RBI decides to refuse to grant license for banking banking busin
business,
ess, the refusal should be based on relevant and
materia
mate riall matters,
matters, (a) the refusal should be based on germane consid consideratio
erations
ns (c) the refusal cannotcannot be assailed (d)
courts
cou rts can interve
intervene
ne in such
such deci
decision
sion in of situati
situations:
ons:-- a onl
only
y a and b is correc
correct,t, b on only ly b an
andd c is corr
correct
ect,,
c only c is correct, d o on nly d is not correct
19 As per provisions of Income Tax Act 1961, the taxation of income of an assessee is on the basis of (which is not
co
corrrrec
ect)t):-
:- a hi
his
s pl
plac
ace
e of sosour urce
ce of inco
income me,, b his
his re
resi
side
dencnce,e, c ju
juri
risd
sdic
icti
tion
on of th the
e in
inco
come
me tatax
x
authority, d none of the above
20 Th The e inco
income
me of pers
person
on ca calllled
ed,, asse
assessssee
ee is ta
taxe
xedd on th
the
e basi
basiss of
of:-:- a ca
cale
lend
ndar
ar year,
ear, b
asse
assess ssmement
nt year,
ear, cfi
cfina
nancncia
iall year,
ear, d any
any of th
thee abov
above,e, at the
the ch
choi
oice
ce of tie
tie asse
assessssee
ee
21 RBI can appoi appoint
nt a new director
director in a banking
banking cocompany
mpany in place of another
another director.
director. The person
person so appointed
appointed
sh
shal
alll co
cont ntin
inue
ue to be in of
offi
fice
ce:-:- a fo forr 3 years
ears,, b till
till th
the
e date
date up to whic
whichh hi
hiss prpred
edec
eces
esso
sorr woul
wouldd have
have
held office, c till the date up to which RBI issues another ord rdeer, d till the date, the Board re-
appoints him
22 Returns relating to shareholding of the Chairman, Chairman, Mg. Dire
Director
ctor or Chief Executive Officer of every banking
co
comp
mpananie
ies
s ar
are
e to be se
sent
nt to (a)
(a) RBI
RBI (b)
(b) SEBI
SEBI (c
(c)) Regi
Regist
stra
rarr of Co
Comp
mpan
anie
ies:
s:-- a a, b and
and c al
alll, b b and
and c
only, c a and b only, d not b and c
Page
23 X purchases a hot water bottle from Z, the retailer. On request of X, Z confirms that the bottle is meant to hold hot
water. X is injured when hot hot water is puputt in the bott
bottle
le as bott
bottlele is burst
burst.. Under SaleSale of Goo
Goodsds Act, thi this
s is a:- a breach o of f
condition, b breach of warranty, c breach of an implied, d breach of an implied
warranty
24 If a b bank
ank fails
fails to main
maintain
tain CRR as per per Se
Sectio
ction
n 42 (1) of R RBI
BI ((a)
a) RRBI
BI ca
can n char
chargege pe
penal
nal in
intere
terestst of 3
3%
% OBR for tthe he
rd
first fortnight (b) 5% OBR for the next fortnight (c) if the shortfall persist for 3 fortnight also every director, manager or
secretary of the bank is punishable with fine (d) RBI can impose penalty for non-maintenance or non-reporting which is
requ
requirired
ed to be paidpaid wit ithi
hin
n 30 day
days fr
from
om date
date of demdemand.
and. A a to d all all corr
correc
ect,
t, b a, b and
and c corrcorrecect,
t, c a,
b an
andd d co
corrrre
ect,
ct, d a, c anandd d cor
correct
25 Whic
Which h of ththee ffol
ollow
lowing
ing provi
provisio
sions
ns of B R Act Act d
do
o not
not ma
matc tch:-
h:- a LicenLicensese for opopen
enin
ing
g of bran
branch ch — SeaSea 2 23,
3, b
Paym
Paymen entt of div
dividen
idend d — SecSec 15,
15, c Paid
Paid up ca
capi
pita
tall an
andd re
rese
serv
rves
es — Sec
Sec 12,12, d Inve
Invest stme
mentnt in sh
shar
ares
es of
companies — Sec 19 (2)
26 Banks
Banks a are
re requ
requireiredd to m make
ake d dedu
eductio
ction
n of tax
tax at sou
source
rce but b befor
eforee the
theyy sho
should
uld have
have / obt
obtain
ain ::-- a perm
permanen
anentt acco
account
unt
number (PAN), b tax deduction account number (TAN), c tax identification
ion number, d all the
above
27 Wh Whic ich
h of ththe e fo
foll
llow
owiningg is not
not co
corr
rrec
ect:t:-- a Sectio
Section n 21
21 of
of Banking
Banking Regu
Regulation
lation Act a autho
uthorize rizess RBI to iissue
ssue
guidel
gui deline
ines s on credit
credit by banbanks,
ks, b Secti
Section
on 35 35-A
-A of B R Act au auth thor
oriz
izes
es RB
RBII to iss
issue ue dir
direct
ectiv
ives
es to ba
bank
nkss
in public
public intintere
erest,
st, c Section
Section 26 of B R Act stip stipula
ulates
tes submissi
submission on of loan relrelate
atedd sta
statemtement
entss by ban
bankk to RBI
RBI,,
d none of the the abov
above e
28 A borrower has an immovable property and he is not repaying the loan. Bank wants to recover the loan by sale of this
property:-
a bank can sell the property without filing suit, after taking
possession, under provisions of SARFAESI Act,
b bank can sell the property without filing suit, after taking
possession,
posses sion, under provisions
provisions of SARFAESI
SARFAESI Act if the prope property
rty is mor
mortg
tgag
ageded to th
thee bank
bank,,
c bank can sell the property without filing suit, after taking
possession, under provisions of Transfer of Property Act,
d bank can sell the property without filing suit, after taking
possession, under provisions of Indian Contract Act.
29 Board for Financial Supervisio Supervision n of RBI is (a) a committee es esta
tabl
bliished
shed u und
nderer RRBI
BI (BF
(BFS)
S) R Reg
egul
ulat
atio
ions
ns (b)(b) has
has
juri
jurisd
sdiictio
ctionn ov
over
er the ban
banki king
ng com
compa pani
nies
es,, nati
nation
onalaliized
zed babank
nkss and
and Stat
Statee ba
bank
nkss (c(c)) is es
esta
tabl
blis
ish
hed with
with a vi view
ew to supe
superv rviise
and inspect bankt (d) Board holds meeting every month):- a a to d are correct, b a, b and c are
corr
correcect,
t, c b, c an andd d are
are corr
correc
ect,
t, da,
da, c and
and d ar aree corr
correc
ectt
30 ServService
ice tax
tax is to be depos
depositeited
d by ban
banksks within
within:: (whi
(which
ch one
one is mor
more e appr
appropri
opriate)
ate):-:- a 5 daysdays of close
close of the
the
month, b 7 days of close of the month, c 5 days of close of the mon month in case of electronic
deposi
dep ositt and
and 6 d day
ayss in
in ccas
aseeo off ma
manu
nual
al de
depo
posi
sit,
t, d 6d day
ayss of
of c
clo
lose
se of the
the mon
month th in case
case of el
elecectr
tron
onic
ic de
depoposisitt
and 5 days in case case of manual depo deposit
sit
31 Whic hich of the
the fo
folllo
lowi
winng doeoess not matc
match h in th
thee conte
ontext
xt of nomi mina
nati
tion
on prov
ovisisiion
onss:- a Nomi
Nominnatio
ation n in loc ockekerr —
Sec
Sectitio
on 45 ZE to ZF, ZF, b Nomi
Nomina nati
tion
on in ca casese of joint
joint saf
safee depos
deposit it of artartic
icle
les
s — only
only on one,
e,n
nomin
minati tio
on is
allowed, c Nomination in deposit — Insolvent or minor can be nominee, d Nomination in non-
resident accounts - Permitted
32 RBI can canc cancel
el the regis
registration
tration of a Secu
Securitizati
ritization
on Compan
Company, y, without giving opportunity to such
company in certain circumstances. Which one is wrong answer:- a compan company y cease
ceases s to carr
carry y on busi
busine
ness ss of
of
secu
securi riti
tiza
zati
tion
on,, b comompapanny cea
ceases
ses to hold
old anyany ininve
vest
stme
men nt from
from quauallifi
ified insnsti
titu
tuti
tio
ona
nall buye
buyers
rs,, c fa
fail
ils
s to
co
comp
mply
ly wi
with
th di
dire
rect
ctio
ion
n of RB
RBI,
I, d can
cancel
cellati
lation
on with
without
out giv
giving
ing opport
opportuni
unity
ty cannot
cannot be done,
done, a as
s it is ille
illega
gal.
l.
33 Cen
enva
vatt credit can be avail
ailed of in respect of tax paid on :- a certa
ertaiin spe
peci
cifi
fied
ed servi
ervic
ces
es,, b
certain specified input services, c all input services, d all services
34 Under the Banking Ombudsman scheme of RBI, the Ombudsman follows the procedure laid in the
sc
scheheme
me reread
ad wi
with
th pr
prov
ovis
isioions
ns of of:-
:- a Ban
Bankiking
ng Regu
Regulalati
tion
on AcAct,
t, b ArbiArbitr
trat
atio
ion
n and
and Conc
Concililia
iati
tion
on
Act
c RBI Act, d all the above
35 If the provisions of Transfer of Property Act and SARFAESI Act relating to an immovable property are
di
diff
ffer
eren
ent:
t:-- a prov
provis isioions
ns of Tran
Transf
sfer
er of Pr
Prop
opererty
ty Ac
Actt would
ould prprev
evai
ail,
l, b 'p
'pro
rovi
visi
sion
onss of
SARFAE
SAR FAESI SI Act would
would prepreva vailil,, c provisions o off Transfer o off Property Act or SARFAESI Act Act would
prevailil at the discre
preva discretion
tion of the the credito
creditor,
r, d provisions
provisions o off Trans
Transfer
fer of Property
Property Act or SARFAESI Act
would prevail at the discretion of the debtor
36 Which of the f ollowing statement is not correct in r elation to a Securi Securitiz
tizat
ation
ion Co
Compa
mpany ny und
underer SARFAE
SARFAESI SI
Act:
a it is a co
comp
mpan any
y re
reggis
iste
tere
red d with Regi egistr
strar of Comp
Compa anies
nies,, b it requires registration with Reserve
Ban k fo r co ndu cti ng sec secururititiz
izat
atio
ionn busi
busine
nessss,, c it ca cann set up sesepa
parat
rate
e trus
trusts,
ts, for sepa
separa
rate
te secu
securi ritiz
tizati
ation
on
transactions, d none of the above
37 A nor
normal
mal Lok Adai
Adaitt (other
(other tha
than
n org
organiz
anized
ed by DRT)
DRT) can ent
entert
ertain
ain dispute
disputes
s involvi
involving:
ng:-- a up to Rs.20
Rs.20
lac, b up to Rs.15 lac, c up to Rs.10 lac, d up to Rs.5 lac
38 Lok
Lok Ad
Adal
altt is org
rgan
aniized by:-
by:- a St
Stat
ate
e auth
autho
ority
rity or dis
isttric
rict au
auth
thor
oriity,
ty, b Su
Supr
pre
eme Cou
Court legal
egal
Page
serv
rviice
ces
s committee, c High Court legal services commit
mittee, d any of the above
39 To ensure that the banks are maintaining SLR, RBI calls for a monthly return from banks, which is to be
submitted by banks within of close of the month:- a 7 days, b 10 days, c 15
days, d 20 days
40 When a securitization company issues a security receipt that is purcha purchasedsed by
by qual
qualifi
ified
ed in
insti
stituti
tutional
onal buyers
buyers::
a it requires registratitio
on with Reg
Registrar of Companies, b it require
res
s re
reg
gistra
rattion with
with Centr tra
al Re
Reggistry
c it requires registratitio
on with Reg
Registrar of Assurances, d it does not require an anyy re
reggistra
rattion
41 If a ca
case
se is refer
referrered
d to LLok
ok Adal
Adaltt an
andd ther
theree is
is no settl
settleme
ementnt o
off the
the ca
case
se:-:- a the case
case shal
shalll be di
dismi
smisse
ssed,
d,
b the
the case sha
halll be dec
decidided
ed in due cou
ours
rsee of tim
time, cthe
cthe case shall be rem emiitte
ted
d back to th
thee court that refe ferr
rre
ed the
matter to Lok Adal
Adalt,t, d any of th
the
e abov
above e, at discretio
tion of the
the Lok Ada
Adaft
42 Secti
Section
on 43 A o off B
Banki
anking
ng Regul
Regulation
ation Act deals with:
with:-- a no
notif
tific
icati
ation
on of rules
rules for prese
preserv rvati
ation
on of rec
record
ords,
s,
b rules governing nomi minnatio
tion, c vo
volluntary winding up of.af.a banki
kin
ng compa
mpany, d pre
refe
ferrenti
tia
al
payment
pay ments s on liquida
liquidatio
tionn of a ban
bankk
43 The additional directors in a company appointed by the Board of Directors by passing a resolution, can
re
rema
main in in of
offi
fice
ce:-
:- a as per the term fixed in their appointment by the Board, b up to the date of
next annual general meeting, c maximum for one year, d maximum for 6 months
44 A .transaction that results in change in asset or liability position out outside
side Indi
India
a of a per
person
son resident
resident in India
India or
positi
sitio
on in In
Indi
dia
a of a pers
person
on resid
sident abroad
road is call
alled
ed::- a curren
entt ac
acc
cou
ounnt tra
rans
nsac
acti
tio
on, b bal
alan
anc
ce of
payment, c capital account transaction, d tra
trade balance
45 Dis
Disput
putes
es aarisi
rising
ng iin
n cas
cases
es u
unde
nderr SAR
SARFAE
FAESISI Act,
Act, ca
can
n be rrefe
eferre
rred
d to which
which of the
the follow
following
ing:-
:- a
Lok Adalt, b Distt. Courts and High Courts, c DRT and-DRAT, d any of the
above
46 Wh Whicich
h of th
the
e fol
follo
lowi
wing
ng is no
nott a curre
current
nt ac
acco
coun
untt tran
transa
sact
ction
ion:-
:- a a trans
transact
actio
ion
n which
which is no
nott capita
capitall ac
accou
count
nt
tr
tran
ans sacti
ction,
on, b export and import of goods or services es,, c expenses incurred in connection with travel abroad,
d none
none of th
the
e abo
bovve
47 Popular Bank makes payment to Y, of a bearer crossed cheque across the counter. The cheque is drawn in
fa
fav
vou
ourr of X. In th
thiis ca
case
se:-
:- a ban
bank is liabl
able to th
the
e draw
drawer
er fo
forr a wro
ron
ngfu
full pa
pay
yment
ment,, b bei
eing
ng a
bear
bearerer ch
cheq
eque
ue,, bank
bank cacan n make
make ca cash
sh paypayment
ment o anyany one,
one, c bank
bank is liab liable
le to X, th
thee true
true owne
owner, r, d
bank is liable both to the drawer and the true owner
48 Unde
Underr FEFEMA
MA 1999
1999,, if a ques
questi tion
on of law
law is invo
involvlved
ed,, th
thee appe
appeal al ca
cann be made
made to to:-
:- a Dire
Direct
ctor
or – Appe
Appeal als,
s,
b Appellate Tribunal, c High Court, d any of the above
49 The security interest created under SARFAESI Act requires to be satisfied on payment of full amount. The
reporting
reporti ng is required
required to be done:- a by the secu securitritiz
izati
ation
on company
company within within 30 days
days of the payment
payment in ful full,
l,
b by the recon
reconstr
struc
ucti
tion
on cocompa
mpany ny withi
within n 30 days
days of th the
e pay
paymenmentt in fu
fullll,, c by th
the e secu
securered
d cr
cred
edititor
or
with
within
in 30 day
days of ththe
e pay
paymementnt in fufull
ll,, d any
any of th thee abov
above,e, as th the
e ca
case
se may
may bf
bf--
50 If there is a contraven
contravention
tion of prov
provision
isions s of FEMA 1999 by a person and and the amount is quantifiable,
quantifiable, penalty can be
levied:- a up to Rs. s.2
2 lac, b up to amo mou unt involved in su suc
ch contra ravvention, c up to two times of
amou
am oun
nt in
invo
vollve
vedd in su
such
ch co
cont
ntra
rave
vent
ntioion,
n, d up to ththri
rice
ce th
thee amou
amount nt in
invo
volv
lved
ed in su
suchch co
cont
ntra
rave
ventntio
ion
n
51 X the director
director of XYZ Limited
Limited has been sanc sanctioned
tioned a loan
loan of Rs.10 lac lac by XYZ Limited. It requires approval approval of:
a Reserve Bank, b S E B I , c Central Govt, d Registrar of Companies
52 Unde
Underr FEMA
FEMA 1991,
1991, the con contra
traveventi
ntion
ons s can be inves
investig
tigate
ated d by
by:-
:- a direct
director or of en
enfor
forcem
cement
ent only,
only, b
depu
deputyty di
dire
rect
ctor
or of enfo
enforcrcem
emenentt only
only,, c assi
assist
stan
antt dire
directo
ctorr of enfo
enforce
rceme ment
nt on
only
ly,, d any of th thee abov
above e
53 Zto
was handed over a blank
be ascertained laterrcheque
late andto
on and amMr.
amou X for
ount
nt wa
waspayment
s to be fi
fillagainst
lled
ed acc
accorcertain
ordinglly. goods
ding X howepurchased
howeve
ver,
r, filled aby
filled Z.
chThe
much
mu value
high
higher
er amof
amou goods
ount
nt than
than
th
the
e valu
valuee of gogoodods.s. Ba
Banknk acco
accordrdin
ingl
gly
y ma
madede ththee pa
paym
ymenentt and
and Z clclai
aime
med d da
damamage ges
s from
from the
the babanknk for
for wron
wrong g papaym
ymen entt of a
high
highe
er amoun
mount: t:-- a - Z is not liable for this payment, which bank should restore, bBank is liable for this
pa
payme
ymentnt as
as the
the cheq
chequeue was issueissuedd orig
origina
inallylly as a bblan
lankk ch
chequ
eque, e, c Bank
Bank iiss not
not liabl
liablee fo
forr p
pay
aymementnt as
as at
at the
the time
time
of pa
paym
ymen entt of the
the chehequ que,e, the
the cheq
chequeue wa
was s com
omplplet
ete,
e, d Ba
Bannk is liable for a cheque where vi vis
sibly it is complete ted
d
throug
throughh two handwr
handwriti itings
ngs..
54 For obtaining
obtaining a ce certifi
rtificate
cate of co
commenc
mmencement ement of bu busin
siness,
ess, a pub
publiclic limited
limited ccompa
ompany ny rerequi
quires
res to file,
file, which
which o of
f
th
the
e fo
foll
llow
owining
g docu
docume ment nts
s with
with ReRegi
gist
stra
rarr of Comp
Compan anie
ies:
s:-- aa pr pros
ospe
pect
ctus
us,, b a st
stat
atem
emen entt in lieu
lieu of a pr pros
ospepect
ctus
us,,
c decl
declararat
atiion of ststatatut
utor
oryy compl
ompliiance
ances, s, d anyany of a or b in ad addi
diti
tion
on to c
55 As per FEMA 1999, 1999, an offi office
ce or bran
branch
ch or an age agency
ncy in India thathatt is owned
owned and controcontrollelled
d by a person
person reside
resident nt
outside In
Ind dia, fa
fallls under the cate teg
gory of:f:-- a non-re resi
sid
dent pers rsoons,
ns, b persrsoons res
esiide
den nt in Indi
Indiaa,
c foreigner, d foreign company
56 Wh
Whic ich
h ofof tthe
he fo
foll
llow
owin
inggd doe
oess not
not mat
match ch its
its e
exp
xpla
lana
nati
tion
on:-:- a clclea
eann bill
bills
s — wh
wherere
e the
the bill
bill is not
not supp
suppororteted
d by anyany
documen entt of titl
title
e to goods
oods,, b supply
ply bills
lls — whe
where ththee bil
bill is drawn on the basi basiss of tr
tra
ansasaccti
tio
on with
with the Govt vt.. or govtvt..
underta
rtaki
kin
ng, c accommodati
accommodation on bill — a bill which is drawn without any considerati consideration on or witho
withoutut any sale or
purcha
pur chasese of googoods, ds, d foreign bill — a bill which is drawn in India and payable abroad by a resident in Ind India.
57 When foreign exchange is brought to India and sold to an authorised person, as per FEMA 1999, it is
called:- a repatriation, b re
repatriation from India, c repatriation to India, d
expatriation
58 Whic
Which
h of th
the
e fol
follo
lowi
wing
ng grou
group
p ca
can
n be a pa
partn
rtner
er in a Limi
Limited
ted Liab
Liability Partne
ility Partnership:-
rship:- a reside
resident
nt individua
individual,
l, m
minor,
inor, a
Page
comp
companany y, b resid
esiden
entt in
indi
divi
vidu
dual
al,, an LLP,
LLP, a com
company
pany,, c resi
reside
dent
nt indi
indivi
vidu
dual
al,, an LLP,
LLP, an HU HUF F, d
any individual person, an LLP, a company
59 A pledge is bailment of goods to secure a loan. The goods are delivered by the owner to the creditor. These
pa
part
rtie
ies
s as pe
perr Se
Sect
ctio
ion n 172 of Indndia ian
n Cont
Contraract
ct Ac
Actt ar
aree ca
calllled
ed:-
:- a bailor and bailee, b bail
ile
ee and
bailor, c pledger and pledgee, d pawner and pawnee
60 Right to infor
information
mation available to IndianIndian citizen
citizen under
under RTI
RTI Act 2005 d does
oes not include the fo following
llowing right:- a
inspection of documents or records, b taking notes of documents, c taking certified
sa
samp
mple
less of th
the
e mate
materirial
al,, d no nonene of th
the
e ab
abovovee
6 1 The Boar d of Direc tors of a compa ny cann ot pass a vali d res resol
olut
utio
ionnuunl
nlesess
s iitt iis
sppas
asse
sed
d in a m
mee
eeti
ting
ng in
respect
res pect of which
which of the foll
followi
owing:
ng:-- a issu
issuee of deb
debent
enture
ures,
s, b invest
invest the fund
fundss of the com
companypany,, c bor
borrow
row or lend
mone
mo ney,
y, d no
none
ne of th
the e ab
abov
ovee
62 Un
Under
der RTI Act
Act 2005
2005 the
the informa
information
tion can be obtain
obtained
ed by:-
by:- a any per
person
son in IIndi
ndia
a ininclu
cludin
ding
g arartifi
tificia
ciall perso
persons,
ns,
b companies, firms, corporations etc, c Indian citizens, d all the above
63 In a limited liability partnership, the rights and obligations of the partners partners ar are
e as per:-
per:- a cercertif
tificat
icate e of incorp
incorpora
oration
tion,,
b Schedul
Schedule e II to the LLP Act, c agreement between partners only, d agreement between
partners and if there is no such agreement as per Schedule I to the LLP Act
64 A trust is governed by (a) Trust Act 1882, if it is a private trust (b) Public Trust Act, if it is a public trust (0) Wakf Act if it
a Musl
Muslimim tr
trus
ustt (d
(d)) tr
trus
uste
teee of a Musl
Muslim
im Trus
Trustt is ca
call
lled
ed Mu
Mutatawa
walili:-
:- a a to d are are co
corr
rrec
ect,
t, b a, b and
and c are
are
correct, c a, c and d are correct, d b, c and d are correct
65 In pledge the possession of goods is with the creditor (pawnee) which can be (a) actual — where the goods are
actually in possession with the creditor (b) symbolic — where the pawnor hands over the control of the goods to the
pawnee without actual delivery (c) trust receipt — where the goods are released to the pawnor without payment, by
th
the
e pawn
pawneeee on the basi basiss of an under
nderttakin
aking:
g:-- a a and c only are cor orrrect,
ct, b b and c only are cor orrrec
ectt, c
a and c only are correct, d a to c all are corre ct
66 If information does not relate his organisation, the Central As Assi
sist
stan
antt pub
publi
licc info
inform
rmatatio
ion n of
offi
fice
cerr has
has tto
o forw
forwar
ard d
the requesestt for infororma
mattio
ionn to the concerned public auth uthorit
ority
y withith in:- a 5 days, b on
onee week ek,, c 21
days, d 30 days
67 Which
Which of the follo following
wing charac
characterteristi
istics
cs ooff a compa
company ny is
is not trutrue:-
e:- a lia liabili
bility
ty of the sshar harehol
eholder
derss is to to the
the extent
extent of
no
nomi
minanall va
valu
lue
e of ththe
e shar
shareses he
held
ld by them
them,, b a co
compmpananyy is a grgrou
oup p of shar
sharehehololde
dersrs an
andd is nonott di
diffffer
eren
entt fr
from
om
them
them,, c compcompan any y is cr
creat
eated
ed thro
througugh h a leg
legal
al pr
proc
ocess
ess calle
called d in
incor
corpor
porat
atio
ionn which
which is complcomplet eted
ed by iss issue
ue of
Cert
Certifi
ifica
cate
te of In
Incocorp
rpora
orati
tion
on by RoRoC,C, d a compa
company ny,, bei
being
ng lelega
gall pe
persrson
on,, has
has alalll th
thee ri
righ
ghtsts an
and d oblig
obligatation
ion to susue e
or to be sued.
68 If a banking company fails to ensure compliance of obligations under under Pr Preve
eventio
ntion n of Mon
Money ey Laund
Launderi ering
ng Act 2002,
2002,
the
the Di
Direrect
ctor
or ca
cann impo
impose se a fine
fine of
of:-
:- a Min
Mi n Rs
Rs.1
.100
0000
00 and
and ma max x Rs
Rs.1
.1 la
lac,
c, b Mi Minn Rs Rs.5
.500
000000 an and d maxmax Rs Rs.2
.2 la lac,
c,
c Min R s. 50000 and m ax R s.5 lac, d Min R s. 10000 and m ax Rs.10 lac
69 Which of the following is more appropriat appropriate e differenc
difference e between a defer deferredred paymen
paymentt guaraguarantee
ntee and and a term
term loan:
loan:
a te
term
rm lo
loan
an is sanc
sanctition
oned
ed foforr pu
purcrcha
hasese of fixe
fixedd as
asse
sets
ts an
andd DPG
DPG forfor pu
purc
rchahase
se of cu currrren
entt as
assesets
ts,, b TL is a
fund based loan and DPG is semi-fund based loan c In TL funds
funds ou outla
tlayy is imm
immed ediat
iatee but in DPG it is contin contingengent,t,
d In TL appraisa
appraisall is more detailed compared to appraisal appraisal of D DPG
PG p pro
ropo
posasall
70 A company may be (a) public company (b) private company (c) company limited by shares (d) company limited by
gu
guar
aran
antetee e with
with or wit'
wit'io
iout
ut shar
share e capi
capitatal.
l. Wh
Whic ich
h of th
thes
esee is co
corrrrec
ect?t? a a, b and
and c onlyonly,, b a, c and
and d only
only,,
c b, c and d only, d a to d all
71 If a perso n com mits off ence u nder Prev entio n of Money Laun Launde deri ring
ng AcActt 2002
2002,, he sh shal alll be li
liab
able
le for
for fi
fine
ne
:
a up to Rs.10 lac, b up to Rs.5 lac, c up to Rs.2 lac, d up to Rs.1 lac
72 For opening account of a company, under Prevention of Money Laundering Act 2002, which of the following documents
is not mandatory:- a officially valid document in respect of person to operate the
acco
accoun unt,
t, b Ce Cert
rtif
ific
icat
atee of ininco
corp
rpor
orat
atio
ionn & Re
Resosoluluti
tion
on frfrom
om Boar
Board d of DiDirerect
ctor
ors,s, c Me
Memo morarand
ndumum of
Association and Articles of Association, d none of the above.
73 If a b anki ng com pan y is fou nd to he not com ply ing with requ requir irem
emenentt o off P
Prreve
eventio
ntion n o off M
Mononey
ey Laun
Laundederring
ing
Act 2002, the Director can impose a fine of:- a Rs.10000, b Rs.20000, c Minimum Rs.100 Rs.10000 00
an
andd max axim
imumum Rs.1
Rs.1 lacac,, d Mininim
imum
um Rs.1 .100
000000 and maxi ximmum Rs. s.66 lac
lac
74 SARFAESI Act is applicable in case of (a) al l secu rities (b) secur securit itie
iess wher
where e se
secu
curirity
ty int
inter
eres
estt is c cre
reat
ated
ed for
for
repaym
rep ayment ent of the loan
loans s (c) all securi
securitietiess except
except agr agricu
icultu
lture
re land
land (d) all loan
loans s exc
exceptept agr
agricu
icultu
lture
re loa
loans:-
ns:- a a to d all
correct, b a, b and c correct, c b and c correct, d a, c and d are not correct
7 5 Wh en the sel ler s s ell the goo ds to gov t. or pub lic sec tor unde undert rtak
akinings
gs,, the
the trtran
ansasact
ctio
ion
n is co cove
vereredd thro
throug
ugh: h:
a bill
bills
s di
disc
scou
ountntin g, b
ing, bills purchasing, c supply bills, d documentary bills
76 What is the func

function
tion of the priv
private
ate key
key,, out of the pair
pair of keys
keys used in an electron
electronic
ic signatu
signature:-
re:- a to create
create
an el
elec
ectr
tron
oniic sign
signat
aturure,
e, b to ve
veri
rify
fy an elec
electr
tron
onic
ic si
sign
gnat
atur
ure,
e, c to cr
crea
eate
te an
and
d ver
erif
ify
y an el
elec
ectrtron
oniic
sign
signat
atur
ure,
e, d al
alll th
the
e abov
abovee
77 Director under Prevention of Money Laundering Act 2002 is app appoi
oint
nted
ed by
by:-
:- a Rese
Reserv
rve
e Bank
Bank of InIndi
dia,
a,
b Financial Intelligence Unit – India, c Govt. of India, d Security and Exchange Board of
India
Page
78 Which of the
the followi
following
ng iis
s auth
authorise
orised
d to prescribe
prescribe re
records
cords to be maint
maintai
aine
ned
d by ban
banks:
ks:-- a RBIRBI ononly
ly,,
b SEBI only, c RBI and Ministry of Finance, d RBI and SEBI
79 In case ofof a securiti
securitization
zation company,
company, when the financia financiall asset iis
s purchase
purchased: d: (which
(which one
one is is not
not tr
true):
ue):-- a
th
the
e compa
company ny ha
hass to for
formul
mulate
ate a reali
realiza
zatition
on plan
plan withi
withinn 12 month
months,s, b acco
account
unt will
will be standard
standard account
account
during
during this plan peri
period
od where
where aftafter
er the it will
will be NPA aftafter
er 90 days
days del
delin
inque
quency
ncy pe
perio
riod,
d, c accoun
accountt will
will be
sub-s
sub-stan
tandar
dard
d as
asset
setss max fo
forr 12 month
months, s, d whe
when n tthe
he asset
asset is acquire
acquired d for
for reco
reconst
nstruct
ruction
ion,, there
there is
is limi
limitt of
of 10
10
years for such reconstruction
80 Under
Under Righ
Rightt to Info
Informat
rmation
ion Act
Act,, the inf
informa
ormatiotion
n can be obtaine
obtained
d in the form of:- a diskett
diskettes es or floppie
floppies, s,
b tapes
pes and video ca cas
sse
settte
tes
s or any oth theer ele
electroni
ronic
c mo
mod de, c prinrintouts, d any of these
81 Which among the following is not correct regarding pecuniary (fina (financia
ncial)
l) jurisdic
jurisdictio
tion
no off Debt
Debt Recovery
Recovery
Tribunals:
a under Recovery
Recovery of Debt due to Banks & Financial Financial Instit
Institutions
utions Act 1 1993
993 itit begins
begins from Rs.10 lac and above above
b unde
underr SA
SARFRFAE
AESISI Ac
Actt it st
star
arts
ts fr
fro
om abov
above e Rs
Rs.1
.1 lac,
lac, c und
under LokLok Ad
Adal
altt pr
pro
ovisi
vision
ons s it begi
beginsns from
from
Rs.10 lac, d none of the abov above e
82 If the service provider fails to com comply
ply with the order of a Distt. Fo Forum
rum u under
nder the Consu
Consumer mer P Prote
rotectio
ctionn Act,
Act, the
pu
puni
nish
shmement
nt ca
cann be
be:-
:- a fi
fin
ne up to Rs. s.1100
0000
00 an
andd im
impr
pris
ison
onmment up to 3 years ars, b fi
fin
ne up to Rs. s.1
10000
0000
and imprisoson
nment up to 2 years, c fine up to Rs.5000 and imp impriso sonnment up to 3 years, d
fine up to Rs.1000 and imprisonment up to 1 years
83 The expiry. date for sh shipme
ipment nt in a letter
letter of credit
credit is mentio
mentionedned as ''onon aand
nd a abov
bove'
e' Dec
Dec 31, 2002007:-
7:- a the
the L
LC
C iis
s
not valid, b the date will be treated as 5 calendar days, before or after, c the date will be
trea
treate
ted
d as 7 cacale
lend
ndar
ar da
days
ys,, be
befofore
re or af
afte
ter,
r, d th thee date
date wi
will
ll be tr
trea
eateted
d as 10 days
days,, befo
before
re or afte
after
r
84 Under SARFAESI Act, the Central Register shall register the follow followinging ty
types
pes of ttran
ransa
sacti
ction
onss (wh
(whicich
h is not
not
correct):
a secur
curit
itiz
iza
ation
ion of fin
financiaiall asse
setts, b reco
con
nst
stru
rucctio
ion
n of finan
inanc cial
ial ass
sse ets, c cr
crea
eattion
ion of secu
securrit
ity
y
interest, d sale of financial assets
85 Under provisions of Right to Information Act, the person requesting for information has to- pay prescribed fee, which which
ca
cann be in th
the
e for
form
m of (whic
(whichh on
one e if no
nott co
corr
rrect
ect):
):-- acash aga againinst
st pro
proper
per rece
receipt
ipt,, b che
cheque
que fr
from
om thethe acc
accoun
ountt of
the information seeker, c demand draft or bankers' cheque, d Indian postal order
86 The constitutional validity of Securitisation and Reconstruction of Financial Assets and Enfor
Enforcement
cement of Security
Interest
Interest Act was question
questioned
ed befor
before
e the Supreme
Supreme Court in which of of the following
following case
cases:-
s:- a Tra
Transcor
nscoree vs Unio
Union n of Indi
India,
a,
b Ma
Mard
rdia
ia Ch
Chem
emic
ical
als
s vs Un
Unio
ion
n of In
Indi
dia,
a, c Madu
Madura
raii Chem
Chemic
ical
als
s vs Unio
Unionn of Indi
India,
a, d Ma
Marsrsha
hall Chem
Chemic ical
als
s
vs ICICI bank
Page
87 Bank-B failed to file an an appeal against DRT order to DRAT within the manda mandatory
tory 45 days
days pperiod.
eriod. Which o off the
fol
follow
lowing
ing reme
remedy dy is av
avail
ailab
able:
le:-- a bank
bank has no optionoption exc
exceptept to fol
follow
low the decdecree
ree pas
passed
sed by DRTDRT,, b ba
bank
nk can ma make
ke
a requ
reques estt to DR
DRT T to exte
extend
nd th
thee peri
period
od,, wh
whicich
h it can
can cons
consid ider
er,, c bank can request
request DRAT explai explaining
ning the
circumstances and if satisfie fied, DRAT ma may y permit the bank, d bank can request High court which has the
authority
author ity to permit
permit ththe
e bank
88 In which of the following mortgages, the possession of the immovable property is delivered to the bank, by the
mortgager:- a simple mortgage, b equitable mortgage, c English mortgage, d none
of these
89 As per Information Techno Technology logy Act 2000, the penalty for damage to computers, computer systems etc. has been fixed
fo
forr da
damamage gess up to by way of co compmpe ensa sati
tion
on to affffe
ected perso sonn:- a Rs.1 lac, b Rs.10 lac, c Rs.100
lac, d Rs.1000 lac
90 The Informatio
Information n Technology
Technology Act was was introduced
introduced in Ind Indiaia on the iniinitiativ
tiative
e of which o off the following:-
following:- a Re Rese
servrvee Bank,
Bank,
b Information Technology Ministry, c UN Commission on International Trade Law, d
Parliament of India
91 Which of the following is no nott correct with regard to tthe he pecuniary jurisdiction of the consumer consumer court courts:-
s:- a Dlst
Dlsttt Fo
Forum
rum —
cla
claims up to Rs.20 lac, b Stat
St atee Commi
Commiss ssio
ion n — ClClai
aims
ms of Rs.2
Rs.200 la
lac
c and
and abov
above e less
less th
thanan Rs.1
Rs.10000 lac,
ac,
c National Co
Commmmiissio
sion — clclaaims
ims above Rs. s.1
100 lac, d none of the abovabove e
92 Under Right to Information Act, the public information officer can be departmentally proceeded against under certain
circumstances, on the recommendations of:- a Reserve Bank, b Public Authority, c Central
Informamattion Commimmission, d Central Govt.
93 Mr. Ashok Kumar issues a power of attorney in favour of Mr. Amit Kumar on July 31, 2006 and dies on December 03,
2006. Your branch receives (on Dec 26, 2006) through clearing house, two cheques, one of which is signed by Mr.
Ashok Kumar on Nov 25, 2006 and another is signed by Mr. Amit Kumar, on Dec 12, 2006. W hich cheques will b bee paid
pa id ?
a Bo
Both th th
the
e cheq
chequeuess will
will be paid
paid,, if th
ther
ere e is bala
balanc
ncee in ththe e acco
accoununt,t, b Both
Both th the
e cheq
chequeuess will
will be re
retu
turn
rneded
c Cheq
Cheque ue signe
signed d by Mr. AsAsho
hokk Kumar
Kumar will will be paid
paid as th the
e ch
cheq
eque ue was
was sig
signed
ned bebefor
foree death
death,, d Ch
Cheqequeue
signed by Mr. Amit Kumar will be paid, as he is alive
94 If appeal
appeal is to be made by tthe he liable
liable party to ne next xt court, under
under Consu
Consumermer Prote
Protecti ction
on Ac
Actt it can
can be made withi withinn
days
day s of by deposit
depositinging of the amountamount of decree,
decree, with with varying
varying maximaximum
mum amount
amount:- :- a 15
15,, da
date
te of or
orde
der,r, 50%,
50%,
b 30,
30, date
date of or
orde
der,
r, 50%,
50%, c 30, 30, date
date of orde
order,
r, 75%,
75%, d 30,
30, date
date of re
rece
ceip
iptt of or
orde
der,
r, 50
50%
%
95 Li
Lien
en of unpa
unpaid
id se
sellller
er is te
term
rmin
inat
ated
ed wh
whenen:-
:- a th
thee buy
buyer gets
gets po
poss
sses
essi
sion
on of ththe
e go
good
ods,
s, b th the
e se
sellller
er ge
gets
ts
possession of the goods, c the buye
uyer leaves the poss
sse
essi
sio
on of the good, d none of the above
96.Which of the following is correct statements in the context of acceptance of deposits by banks (a) banks can
refuse to accept deposit from undesirable persons (b) for opening an account, introductory reference is not mandatory
(c) for opening of an account, identification is essential (d) banks can accept deposit of money only.
a a, b and c only, b b, c and d only, c a, c & d only, d a to d all.
97 Under Sal Sale e of Goods Act, if the sal sale
e is by descript
descriptionion of goods
goods,, the goods shal
shalll correspond
correspond with the des descripti
cription.
on. If
these do not corresp
correspond
ond with the description:
description:
a buy
uyeer ha
hass to bu
buyy th
the
e go
gooods,
ds, b se
selller
ler has
has to su
supp
pply
ly th
the
e goo
oods
ds as pe
perr co
contntra
ractct,, c buyer can
rejects the goods and cl cla
aim back the paymen ment, d any of these
98 TheThe period
riod of limi
limita
tati
tion
on is usu
sua ally
lly with refe
refere
rennce toto::- a th
thee typ
type of se
secu
curi
rity
ty,, b th the
e do
docu
cumen
mentt whwhicich
h
entitles
entitles the beneficiary
beneficiary to take action
action in a co cour
urtt of law,
law, c type
type of lo
loan
an accou
account nt,, d all the above
99 Foreign banks' paid up capital and other funds should be (a ) minimum minimum Rs.1
Rs.15 5 llac
ac in the for form
m of dep
deposi
ositt wit
with
hRRBI
BI
(b) the amount would be Rs.20 lac if the place of business is Mumbai or Kolkata or both (c) 20% of the profit for each year
should be deposited with an Indian bank (d) Central Govt. can relax this condition of its own:
a a to d all correct, b a to e only correct, c a and b only correct, d c and d only correct
100. U/s 9 of Banking Regulation Act, a bank ing company can hold immovab immovable le prope
property rty other
other than for iits
ts own
own use
for a period
period of 7 years. ButBut if the banking
banking comp
company
any fails ttoo do so, RBI may extend th this
is period
period by years: years:
a 3 years b 5 years, c 7 years, d any period on merits of the case
101 If a shareholder
shareholder sends a notice of dissent against
against the merger schschem
eme e of
of a ba
bank
nk,, wwha
hatt o
opt
ptio
ion
n he
he has
has::
a can
can cla
claim
im the val
value
ue of his
his sha
shareh
rehold
olding
ing fro
from
m tthe
he ba
bank
nk if scheme
scheme is sancti
sanctione
onedd by RBI
RBI
b the value
value of shareh
shareholdi
olding
ng would
would be as approve
approved d by the majorit
majority
y shareho
shareholdi
lding
ng
c the value of the shareholding would be as approved by RBI, d a to c all, e a and c
102
with
with reg If da to
regar
ard scheme
sche
theme of cts
aspe amal
amalgama
aspects regamatio
rela
latingtion
ting tonemp
iis
s pre
emploprepar
pared
loye
yees
esed:-ffor
or a
a bank,
bank,
co
contw
what
ntinhat
inua
uatiis true
tion
on true
of th
the
e work
workme
menn and
and ot
othe
herr staf
staff,
f, b
co
contntiinuat
nuatio
ion
n on the
the sa
same
me te
term
rms s and
and co
cond
ndiiti
tion
ons,
s, c within 3 years
years these employees
employees should be
be at
par w ith t he employ
employee
ees
s of tr
tran
ansf
sfere
eree
e bank
bank in te
terms
rms of pay an
and
d ot
othe
herr condi
conditi
tion
ons,
s, d if there
there is any disput
dispute
e
regarding rank and status etc. of an
Page
employ
empl oyee
ee,, RB
RBII deci
decisi sion
on would
ould be fifina
nal,
l, e all
all th
thee abov
above e
103 What options are available to High Court when approached by a bank for temporary moratorium:-
a Requ
Reques estt can
can be cons
consid ider
ered
ed if RBI'
RBI's s repo
report
rt is th
ther
ere
e fo
forr the
the rel
relie
ief,
f, b Reque
Request st ca
can
n be cons
consid ider
ered
ed if RB
RBI's
I's
report is not there, but High Court is satisfied, c RB RBII re
repo
port
rt wo
woululdd be ca
calllled
ed by High
High Co
Cour
urtt if or
orde
derr fo
forr morat
morator
oriu
ium
m
is
gi
givven,
en, d If RBI
RBI appli
applies
es for wind
winding
ing up th the
e ban
bank, k, High
High Court
Court wowoululdd no
nott
exte
extendnd th
thee mo
morarato
tori
rium
um,, e all
all th
the
e abov
above e
104 If a bank makes willful
willful o
omissio
mission noorr makes false statem
statement ent in
in any return, balance
balance sheet
sheet or or other
other documents,
documents,
th
thee pe
pena
nallty un
unde
derr th
thee pr
prov
ovis
isiions
ons of B R Ac Act,t, woul
ould be:-
be:- a he cacan n be fine
fined d on
only
ly,, b of
offi
fici
cia
al ma
maki
king
ng
such
suc h state
statement
ment can be iimpri
mprisonsoned
ed uupp to 3 years
years on
only
ly,, cthere
cthere cancan be fine
fine and
and impr
impris ison
onmen
mentt u
up
p tto
o 3 year
years, s, d
there
the re can be either
either fine or impri
imprison
sonment
ment,, e none o off the above
105 A ban
bankk offi
official
cial fails
fails to an
answer
swer the questi
questions
ons relati
relating
ng to busin
business
ess of
of the bankin
banking
g company
company durin
during
g inspect
inspection
ion of
of the
bank. What pe
bank. penalty
nalty can be imp impose
osed:-
d:- a he can
can be fine
fined
d up to Rs
Rs.2
.200
000,
0, b It can
can be fi
fine
ned
d up to Rs
Rs.5
.500
000,
0,
c If offence continues the fine could be Rs.100 for each day, d a and c, e b and c
106 Mr. Ravi was granted a loan of Rs.2 lac on the guarantee of Mr. Ravinder on January 01, 2000. The limitation in
this case expired due to non obtention of acknowledgement letter from Ravi. On March 31, 2003, Mr. Ravinder signs a
letter promising to pay Rs.20000 towards the repayment of loan. What is the remedy available to the bank ?
a th
thee limit
limitat
ation
ion has
has expi
expire
redd wh
which
ich cann
cannotot be revi
revive
ved,
d, b ththe
e li
limit
mitat
ation
ion can
can be re
revi
vive
vedd only
only if Ra
Ravi
vi al
also
so joi
joins
ns
him.
the limitation against the guarantor is available, due to which the loan can be recovered, after making the dues
re
reco
cove
vera
rabl
ble
e from
from hihimm by reca
recall
ll,, d no ac acti
tion
on is po
poss
ssib
ible
le ag
agaiains
nstt Ravi
Ravind
nder
er,, e loan
loan cann
cannotot be re
reco
cove
vere
red
d fr
from
om
any body
107: A payee of a cheque requests for stop payment of a particular cheque because he has lost it:
Th
Thee bank
bank wil
willl comp
complyly wit
with,h, b The ban
bank
k will
will exerc
exercise
ise the cau
caution
tion and seek the confirma
confirmatio
tionn fr
from
om the
the dr
drawe
awer.r. In
In th
the
e
mean time if the cheque is presented for payment it should be returned with the remarks cheque reported lost,
confir
con firmat
mation
ion is awa
awaited
ited,, b The bankbank will ign
ignore
ore the reque
requestst,, c one of th the
e ab
abov
ove e
108 Your customer Mr. Kishore issues a cheque of Rs.12500 in favour of Mr. Kishan who endorses the cheque in
favour of Mr. Kiran
endorsement
endors ement of Mr.whoKiranmisplaces the cheque.
and obtains payme
payment ntThe
fromcheque falls in
the bank. Mr.the handsand
Kishore of Mr.
Mr.Kanahiya who forges
Kiran request theto reverse
the bank
the entry,
entry, as payment has been been made on the bas basis
is of a forged endendorsement
orsement:- :- a bank is liable
liable on the
the paymen
paymentt and
wi
will
ll re
reve
vers
rse
e th
the
e en
entr
try,
y, b ba
bank
nk is liab
liable
le on the
the papaym
ymen
entt but
but wi
will
ll re
refu
fuse
se th
thee reve
revers
rsal
al of th
the
e en
entr
try,
y, c
bank
bank is
is n
not
ot liable
liable as the pay
paying
ing ban
bank k is
is pprot
rotecte
ected daagai
gainst
nst a fforg
orgeded endors
endorseme
ement,
nt, d any of the above,
above, e
none of the above
109 Mr. Suri
Surinder
nder Prakash,
Prakash, Company
Company Secr
Secretar
etary y ooff M/s
M/s Surya Limit ed, which are having current account with your
Limited,
branch, comes to you at 4.40 p.m. for encashment of a cheque, issued by his colleague from saving bank account in
his name, of Rs.5000. The branch is normally closed by the bank for customer service at 3 p.m. He insists for
payment which is very urgently needed by him as he has to proceed the same evening to Kolkata. How will you
accommodate
accommo date the
the pay
payee?
ee? a) the cheq cheque ue bein
beingg of smal
smalll amoun
amountt ca
cann be paid,
paid, b) the chequecheque can can be paid
paid as this is
is
not only of small amount but but to an employe
employee e of a know
known n company,
company, c) the cheque cheque canno
cannott be paidpaid after close
close of the
the
business
busine ss hour
hourss as that will notnot be conconsidered
sidered a paymen
paymentt in due coursecourse,, d) the chequecheque when paid, paid, can be entered
entered
in the records
records of the b bank
ank in next day day by following
following the usual
usual pro
procedure,
cedure, e) none none of the the abov
above e
110. A chequ
cheque e in fa
favour
vour ofof Lord K Krishna
rishna or ordeorderr is p presente
resented d for payment:-
payment:- a) Bank Bank ca cann pay,
pay, b) BankBank sh
should
ould
refuse
refu se to pay, c) It can be paid only only to drawe
drawerr or it can be cre credited
dited to the trust
trust account
account in the name name of Lord Krishna,
Krishna,
d) Bank can pay to the the prese
presente
nter,r, e) None of the abo above.
ve.
111. Your branch maintains a current account of Mr. Bachan Lal for which a minimum balance of Rs.3000 is to be
maintained as per terms of the account opening form. The account is showing a balance of Rs.14570 and a cheque
is presented for Rs.14570 through clearing. The cheque is returned since the minimum balance balance condition is not
complied with on payment of the cheque. Bachan Lal claims damages from the bank for wrongful dishonour by the
bank.
a bank is liable for wrongful dishonour s i nc e there w as sufficient
balance in the account to meet the amount of the cheque
b bank
bank is not lialiable
ble for the dishonou
dishonourr as as the
the customer
customer has not ensuredensured comp
compliliance
ance of thethe condit
condition
ion of minimum
minimum
balanc
bal ance,e, c ban
bank k cannot
cannot be be hel
held d liliabl
able
e as wwith
ith the p pass
assing
ing of tthe
he chequ
cheque,
e, the
the accoun
accountt will
will s
start
tart show
showing
ing zero
zero
balance, d a and c, e none of the above
112 An advocate comes to your branch with a bearer cheque for payment from the account of another customer. He
however refuses to sign on the back side of the cheque as the cheque is payable to bearer. How would you handle
su
such
ch situ
situat
atio
ion
n? a pay
paymemen nt would
ould be ma made
de with thou
outt insis
nsisti
ting
ng on th
the
e sign
signat
aturures
es,, b pay
payme
ment
nt woul
ould be
made only after he signs the cheque, c payment would would be made by obtaining a separate money receipts
duly
dul y sta
stampe
mpedda as
s per Stamp
Stamp ActAct,, d drawer
drawer w will
ill be advised
advised not to issue
issue cheque
cheque in in favo
favourur of
of an advoca
advocate.
te.
drawer's instructions shall be sought
113 Mr. Kumar comes to meet the manager of the branch around 2 p.m. and at 10 minutes past 3 p.m. he comes out
of manager's cabin and makes a request to you for payment of a cheque issued by another customer of your branch,
which you pay. Branch timings are 11 a.m. to 3 p.m. Next morning there is stop payment instruction from the account
holder.. What iis
holder s the position
position of the
the bank ? a This
This will
will be con
consid
sidered
ered a pay
payment
ment in due course
course and stop
stop p
pay
ayment
ment
Page
will
will not
not be acce
accept
pted
ed,, b Thi
This s will
will not
not be consi
consider
dered
ed a paypaymen
mentt in du
due
e cocour
ursese,, henc
hence e the
stop
sto p pay
payment
ment will
will have
have to be accept
accepted, ed, c The los
lossswwill
ill have to be suffere
suffered d by the clerk
clerk who posted
posted the
cheque,,
cheque d the los loss
s will
will be suf
suffere
fered d by the offi
officer
cer who
who pas
passed
sed the che
cheque
que,, e loss will be s suffered
uffered by the
the ccustomer
ustomer
114. A cheque dated Oct 12, 2004 is presented for payment on Oct 27, 2004. It is however observed that the cheque
book from which the cheque was issued was issued to the customer on Oct 22, 2004 only. What would the bank do
with
with th
the
e ch
cheq
eque
ue?? a th
this
is is ante
ante date
datedd ch
cheq
eque
ue and
and wo woul
uld
d be paid
paid,, if ot
othe
herw rwis
ise
e in or
orde
der
r
b th
the
e cheq
chequeue woul
would d be paid
paid,, if draw
drawerer conf
confir
irms
ms th
that
at he put
put ththe
e date
date in
inte
tent
ntio
iona
nalllly
y, c th
the
e cheq
cheque
ue would
ould
be return
returned,
ed, as appare
apparent nt tenor
tenor of the dra drawe
werr is not cle
clear,
ar, d the cheque
cheque being
being post-da
post-dated
ted cheq
cheque ue would
would be
returned
the cheque being ante-dated would be returned.
115 Cre
Credit
dit Ba
Bank,
nk, wh
which
ich start
started
ed functi
functionin
oning g in the
the rece
recentnt months
months in a town,
town, opened
opened a savingsaving bank
bank accou
account
nt in the
the
name of Mr. Radhe
and withdraw small Krishan
amountswithout
of money anyforintroduction
some timewith andcash
also deposit
deposited of Rs.1000.
a cheque The depositordrawn
of Rs.65000 continued
in histofavour,
deposit
which the bank collected. The collected money was subsequently withdrawn. After a month or so, the bank receives a
notice from one Mr. Radhe Krishan stating that the cheque of Rs.65000 was his property and was stolen by Mr. Radhe
Kr
Krish
ishan
an an
and d de
depoposit
sited
ed with
with th
thee ba
bank.
nk. He de dema
mandsnds ththee mo
moneneyy fr
from
om the
the ba
bank
nk :- a ba
bank
nk hahas
s no
nott act
acted
ed in go
good
od
faith while collecting
collecting the cheque as no
in
intr
trod
oduc
uctition
on was
was obta
obtainined
ed,, b ba bank
nk acaccocoun
untt was
was oper
operatated
ed by the
the acco
accoun untt hold
holder er for
for so
some
me titime
me
satisfa
sat isfactor
ctorily
ily due to which
which banbankk wa
was s not
not neg
neglige
ligent,
nt, c banbank kaacted
cted in goo
good d ffaith
aith by all
allowiowingng col
collec
lection
tion of che
cheque
que afte
after
r
so
someme titime
me,, du
duee to which
which ba bank
nk is no
nott liabl
liable,
e, db ban
ankk can
can ign
ignore
ore the nonotic
tice
e rec
receiv
eived
ed ti
tillll a cou
courtrt order
order is rec
receiv
eived,
ed, e
b and c
116 A cheque of Rs.15000 issued in favour of M/s Manish Kumar & Sons is deposited by the proprietor of the firm Mr.
Manish Kumar in his person personal al saving bank accoun
account, t, which the collecting
collecting bank refuse
refuses s to collect
collect,, to guard itself against
conver
con versio
sion,
n, while
while Manish
Manish Kumar
Kumar insists
insists on tha
that:-
t:- a the stan
stand d tak
taken
en by the banbank k is correc
correctt sin
since
ce the cheq
cheque
ue
belonging
belong ing toto the
the fi
firm
rm cannot be c collect
ollected
ed for
for the
the account
account of individu
individual,al, b the stand taken by Manish Kumar is wr wrong
ong as
it is discretion of the
ba
banknk to dedecicide
de wh
whetethe
herr tto
o col
colle
lect
ct or no
not,t, c stand
stand ta
take
ken n by
by tthe
he ba
bank
nk is incor
incorre
rect
ct since
since in the the c cas
asee of
of
proprietorship, the account of the firm and that of the individual are considered in the same name and same capacity
d cheq
cheque ue ca
cann be cocollllec
ecte
ted d only
only if Mani
Manishsh Kuma
Kumarr prprov
ovid
ides
es an inde
indemn mnit ity,
y, e non
none e of the aboaboveve
117 A contract
contractoror has re receiv
ceived ed a contrac
contractt from a mu multina
ltination
tional
al company
company to c cons
onstru
truct
ct a bu
buildi
ilding
ng accord
accordinging tto
o
international standards. The multinational company wants guarantee that the building would be constructed in time and as
pe
perr sp
spec
ecif
ific
icat
atio
ion.
n. What
What kikind
nd of gu guararan
anteteee woul
would d be is
issu
sued
ed by th the
e bank
banks: s:-- a fi
fina
nanc
ncia
iall guar
guaran
ante
tee,
e, b
performance guarantee, c statutory guarantee, d deferred payment guarantee,
e all the above
above
118 Customs
Customs depttdeptt.. has issued a notice notice on D for recov
recoveryery of some duty w which
hich D finds iis s not lawful
lawful.. He a approac
pproaches hes the
court for stay. Court has given stay against this recovery subject to D's furnishing a guarantee to be available during the
penden
pen dency
cy of the case
case.. What kind of gua guaranrantee
tee wou
would
ld be issued
issued by the ban bank:- k:- A fina
financia
nciall guarante
guarantee, e, b
pe
perforform
rman
ance
ce gu
guararant
antee,
ee, c stat
statut
utor
ory
y gu
guar
aran
ante
tee,
e, d defe
deferr rred
ed pa
paymymenentt gu
guar
aranante
tee,
e, e allall the
the ab
abovovee
119 A company has gone in liquidation and the bank has given guarantee on behalf of this company, which has been
invoked.
invo ked. What the bank should should do:- A si since
nce cocomp
mpananyy ha
hass go
gone
ne in liliqu
quidaidati
tion
on,, ba
bank
nk shshou
ould
ld no
nott pa
pay,
y, b
bank
bank sh shou
ould
ld no
nott pa
pay y ti
till
ll li
liqu
quid
idat
atoror gi
give
ves s an un
undedert
rtak
akin
ing,
g, c bank shou
should ld make the paym payment ent since
contract of guarantee
guarantee is ind indepe
epende ndentnt,, d babank
nk sh
shou
ould
ld aw
awaiaitt cou
court
rt orde
order, r, e non
none e of the
the ababov
ove
e
120 An exporter M/s Delhi Exports dealing with your branch receives an export order for export of certain spices. As per
terms of the contract for sale of which a letter of credit is to be received subsequently, the goods are to be delivered by the
exporter to the shipping company without putting the goods on board the ship (i.e. to be kept by the side of the ship).
Which of the following kinds of contra contract ct it will be termed? A Free on Board (FOB), b Ex-Quay, c
Cost
Cost an and
d fr
frei
eigh
ghtt (C
(C&F&F),
), d Free
Free alalon
ongs
gsid
idee th
thee sh
ship
ip (F
(FAS
AS), ), e Ex Ex-w
-wororks
ks
ANSW
ANSWER
ER PR
PRAC
ACTI
TICE
CE TE
TEST
ST NO
NO.. 2
1 D 2 B 3 B 4 C 5 A 6 C 7 D 8 A 9 10 D
A
11 D 12 D 13 A 14 C 15 B 16
16 C 17 C 18
18 D 19 C 20 B
19
21 B 22 D 23 A 24 B 2
25
5 C 26
26 B 27
27 C 28 B
28 29 A 30 D
31 B 32 D 33 B 34 B 35 B 36
36 D 37 A 38
38 D 3
39
9 D 40 D
41 C 42 D 43 B 44 C 45 C 46
46 D 47 C
47 48 C 49 D 50 D
51 C 52 D 53 C 54 D 55 B 5
566 D 57 C
57 58 B 59 D 60 D
61 D 62 C 63 D 64 A 65 D 66
66 A 67
67 B 68 A 69 C 70 D
71 B 72 D 73 C 74 D 75 C 76
76 A 77 C
77 78 D 79 D 80 D
81 C 82 A 83 B 84 D 85 B 86
86 B 87 A
87 88 D 89 C 90 C
Page
91 B 92 C 93 B 94 B 95
95 A 9
96
6 C 97 C
97 98 B 99 C 10
100 B
101 E
101 102 E 1
10
03 E 10
104 C 105 D 106 C 107 B 108 C 109 C 11
110 C
111 A
111 112 C 11
113 B 11
114 A 115 A 116 C 117 B 118 C 119 C 12
120 D
PRACTI
PRACTICE
CE TEST
TEST PAPE
PAPER
R NO. 3 ( TEST
TEST Y
YOUR
OUR SEL
SELF
F)
Section 49-A of Banking Regulation Act makes provisions for (a) declaration of bank rate (b) restrictions on the type
of
witbusiness
withdra
hdrawab
wable that
le by the
chebanks
que (d)cannot
cheque accept undertake
acceptanc
anceeo off d (c) sits
depo
epositnosperson banother
by banks. than
ks. - aa onlay,bank
only, is authorized
b a and only, c to
c only, accept
c on ly,, deposits
only d b on
onlyly
02 Under
Under Prevent
Prevention ion of Mon
Moneyey Lau
Launde
nderingring Act 2002 2002,, the ban banks
ks are required
required to maintamaintain
in reco
record rd of cash
cash
transactions
transa ctions o off the value ofof -
a Rs.500
Rs.50000 00 and aboabove,
ve, b Rs.1
Rs.1 lac and abo above,ve, c Rs. Rs.10
10 lac and abo
above,
ve, d AbovAbove e Rs.10
Rs.10 La
Lac
c
03 Banks can undertake
undertake permitted
permitted business activitie
activities s u/s 6(1) of B R Regulation
Regulation such as (a) buying or selling of
bullion
bullion (b) underta
undertake ke and execute
execute trusts (c) undertake the administration
administration of estates as executors, trustee (d)
providing of safe deposit vaults – a a, b and c only, b b, b, c and d only, c a, c and d only, d a
to d all
04 Where tthe he parties are yet to perform
p erform theirt heir mutual
mutua l promises
promises,, in respe
respect ct of
of sa
sale
le & purcha
purchasese ofof goods
goods,, it is
called: a sale, b agreement to sell, c intention to sell, d contract of sale
05 Which of the following Statute and constitution of the respective bank bank does
does not matc
match:
h:
a Nat
atiiona
onaliz
lized ban
banks — Banki ankin
ng Compmpan aniies Act 19691969,, b Sta
tatte Bank
ank of Indi
ndia — SB
SBII Ac
Actt 1955
955
c Stat
State e Bank
Bank Asso
Associciat
ate
e Bank
Banks s — Stat
State e Bank
Bank (Sub
(Subsisidi
diar
aryy Bank
Banks)s) Act,
Act,191955
55,, d RRBs RRB Act 1976
06 For For ththe
e pu
purprpos
osee of Li
Limi
mita
tati
tion
on Act,
Act, fi
fili
ling
ng of su suit
it in
incl
clud
ude:
e:-- a a su
suit
it in a co
cour
urt,
t, b appe
appealal agai
against
nst the
the decr
decreeee
of a court, c applications, d all the above
07 Under provisions of Prevention of Money Laundering Act 2002, who appoints the director for tracking
mone
mo ney
y la
laun
undederi
ring
ng trtran
ansa
sact
ctio
ions
ns:: a Re
Reseserv
rve
e Bank
Bank of In Indi
dia,
a, b Cent
Centra
rall Bure
Bureau
au of Inve
Invest stig
igat
atio
ion,
n,
c Central Govt, d Each State Govt. concerned
08 WhiWhich ch of ththee fo
follo
llowin
winggs stat
tateme
ement nt reg
regard
arding
ing RBI is not cor corre
rect:
ct:-- a RBI has the autauthorhority
ity to iss
issue
ue lic
licens
ensee to
to
banks,
ban ks, b Ent
Entireire capita
capitall of RBI is heldheld by CenCentratrall Govt.
Govt. & Sta
Statete Go
Goververnme
nments
nts,, c Central Govt. appoints the
Gove
Go vern
rnor
or of RBRBI, I, d Ce
Centntra
rall Go
Govt
vt.. can
can isissu
sue e di
dire
rect
ctio
ions
ns to RB
RBII unde
underr RB
RBII AcActt
09 Centr
Central al Govt.
Govt. has certa certainin powers
powers tto o rregulat
egulate e banks.
banks. Which of the follo followi
wing
ng is not sucsuch h pow
power: er:-- a sus
suspen
pendd
th
the
e oper
operatatio
ions
ns of Ba Bank nkin
ingg Re
Regugulalati
tion
on Ac
Act,t, b notification. of other other forms of business
business which the banks may
un
under
derta
take
ke u/ u/s
s 6 (o) of RB RBII Act
Act,, c Ma
Makin
kingg of rurule
less for va
vari
riou
ous s ba
banki
nkingng op
oper
erat
atioions
ns u/s
u/s 52 an and d 45
45-Y-Y of
B R Act,
ct, d Su
Suspspen
enssio
ion
n of bu
bus sin
ineess an
and d amal
amalga gammatio
ationn of ban
banks
10 Wh Whic ich
h of ththee fo
foll
llow
owin
ing
g stat
statem
emenents
ts ar
aree co
corr
rrec
ect:
t:-- a Cent
Centrarall Go
Govt
vt.. ca
can
n give
give dire
directctio
ionn to RB
RBI, I, b B
Ban
anki
king
ng
bu
busin
sines
esss ofof all
all ty
types
pes is regregula
ulated
ted by RBI
RBI,, c The pr prima
imary
ry regu
regulat
lator
or of ban
banksks is Centr
Centralal Gov
Govt. t. an
anddR RBI,
BI, d If
a banking license is cancelled, the appeal lies to RBI.
11 A cooperative bank undertakes banking business as (a) a primary cooper cooperative
ative bank (b) (b) ce
central
ntral cooper
cooperative
ative bank (c)
(c)
state cooperative bank:- a a, b and c all, b a and b only, c b and c only, d b only.
12 Which of the following Act has been enacted in India on account of initiative of UN Commission on
In
Inte
ternrnat
atio
iona
nall Tr
Tradade e La
Law:w:-- a Pr
Preve
eventi
ntion
on of Money
Money LaundeLaunderi ring
ng Act b Infor
Informa
matio
tionn Te
Techn
chnolo
ology Act,, c
gy Act
Righ
Rightt to InInfo
form
rmatatio
ion
n Act,
Act, d none
none of thes
these e
13 If the limitation
limitation period
period is not prescribed
prescribed in th the
e Limitat
Limitation ion Act for a transaction, the limitation period is:- a 3 years years,,
b 12 years, c 30 years, d at discretion of the court
14 in case
case of reside
residentsnts in India,
India, whic
which h of the folfollow
lowinging incincome
ome is taxtaxable
able:-
:- a earn earneded in Indi
diaa only
only,, b
earned while outside
outside In India
dia only
only,, c earned ou outside
tside IIndia,
ndia, wwhile
hile in IIndia
ndia only,
only, d all the above
15 For rais
raising
ing ccapi
apital
tal,, a bankin
banking g com
compan
pany y can pay
pay (a(a)) commissi
commission on (b
(b)) bro
broker
kerage
age (c)
(c) disco
discount
unt ((d)
d) remun
remunera
eratio
tion,
n, at of
the paid up value of the shares res:- a a to d all, 2.5%, b a to c only 2.5%, c b to c on ly 2% , d a and c
only 2%
16 .Which of the following Act recognizes the electronic signatures and records equal to physical signatures and records:
A Information Technology Act, b Negotiable Instruments Act, c Indian Evidence Act, d all the above
17 Which of th thee following
following is not not cor
correct
rect with rregard
egard to Boa Boardrd ooff Dir
Direc
ecto
tors
rs of a babank
nk:-
:- a at le
leas
astt 51%
51% of
tota
totall nno.
o. of didire
rect
ctors
ors sh
shal
alll h
hav
ave e spe
specicial
al knowl
knowled edge
ge or prpracactitica
call exp
exper
erien
ience
ce in bank
bankining
g rrela
elate
ted
d ar
areas
eas,, b RBI can
can
remove
rem ove any
any direct
director,
or, if the
the bank
bank does
does not re recons
constit
titute
ute ththee Boar
Board d of Direct
Director,
or, on
on RBI's
RBI's poin
pointt out,
out, c maximum
maximum p peri
eriod
od for
which
whi ch a dir
direc
ecto
torr can
can hold
hold ofoffic
fice
e is
is 6 year
years,s, d If a Chairm
Chairman an or whole-time
whole-time director
director is removed
removed fromfrom office
office,, he
ceasess to be director of the bank an
cease and
d is not eligible for furthe furtherr appointm
appointment ent as directo
directorr for 4 years.
18 The ass assessm
essment
ent off
officer
icer ca
cann scrut
scrutinize
inize tthe
he retu
return
rn subm
submitte
itted
d by the assesses and complete the assessment which
is cal
called
led:: a veri
verifi
fied
ed as
asse
sess
ssme
ment
nt,, b sc
scru
ruti
tiny
ny as
asse
sess
ssment,, c veri
ment verific
ficati
ation
on as
asses
sessme
sment
nt,, d as
asse
sessm
ssmen
entt by
verification
19 Advance tax is payable in 4 stages by an assessee. It should be paid as under. Which one is not correct:-
Page
abby
y Ju
June 1 155 — 15
15%, b by SSe ept 15
15 — 3 30
0%, c by De
Der; 1616 — 7 766%, d by Ma
Mar 15 —100%
20 U/sU/s 26 of Bank
Bankin ing
g Regu
Regulalati
tion
on Act
Act th the
e bank
banks s subm
submit it to RBI,
RBI, a re
retu
turn
rn on basis,
basis, within
within from close
close of the
said
said per
perio
iod,
d, rel
relat
atin
ing
g toto:-
:- a Ha Half lf ye
year
arly
ly,, one
one mo
mont nth,h, inop
inoper
erat
ativ
ive
e de
depo
posi sits
ts,, b yeyeararly
ly,, 30 da
days
ys,, un
uncl
clai
aime
med
d
depo
deposi sits
ts;; c yearl
early y, 15 day
days, inop
inoper erat
ativ
ive
e depo
deposi sits
ts,, d HY,
HY, 30 da dayys, un
uncl
clai
aime
med
d depo
deposi sits
ts
21 Which of .the following
following provisions do not match, in the context of loans by a bank:-
a banks cannot grant loans on the security of their own shares — Sec
20 of B R Act, b banks cannot commit themselves f or granting loans on behalf of
th
thei
eirr di
dire
rectctor
orss — SeSec c 20 of B R Ac Actt , c For For remi
remittttin
ing g a loanloan in th thee name
name of a di dire
rect
ctor
or,, RBI
RBI perm
permis issi
sion
on is
-required
-requi red — Sec 20-A of B R Act ,d RB
RBII ca
cann use
use selselect
ectiv
ive
e cred
creditit con
contro
troll oover
ver ba
banks
nks — Sec
Sec 36A
36A B R Ac Actt
22 BanksBanks mai mainta
ntain
in cash
cash res
reserv
ervee wit
with h RBI u/s
u/s 42 of RBI Act, Act, (a) w
whic
hich h is called cash reserve ratio ratio (b) it is maintained
maintained
at minimum of 3% and maximum of 20% of NOTLs (c) no interest is paid by RBI on this amount (d) it is maintained
as a fo
fortni
rtnightl
ghtlyy average
average balanc
balance ewwith
ith RBI:-
RBI:- a a tto o d all
all cor
correc
rect,
t, b a, b andand c correc
correct, t, ca a,, b an
and d d corre
correct,
ct, d a, c
and d correct
23 Under the provisions of Right to Information Act, the Public Autho Authorit
rity
y me
mean
ans s any auth
authoriority
ty estab
establilishe
shed d :-
A by or under the Constitution of India, b by any other law made by the Parliamen Parliamentt or State legislature,
legislature, c by
no
noti
tific
ficati
ation
on is
issue
suedd or order
order made
made by the approp
appropria riatete Gov
Govt,t, d any of ththee ab
abov
ove e
24 Which of the following statements is not correct in comection with balance sheet of a bank:- a for public sector
banks it is prepared as per 3rd Sth Sthedu
edulele of BR Ac Act,t, b for ban
bankin
king
g com
compan
paniesies i.e.
i.e. priv
private
ate banbanks,ks, it is prepar
prepareded as
per Part I of Schedule VI of Companies Act, c it is pr prep
epar
ared
ed fo
forr the
the last
last day
day of the
the fi
fina
nancncia
iall ye
yearar,, d the
provisions
provision s for preparation of balance sheet are contained in Sec Sec 29 of B R Act.
25 Banks submit various returns to RBI under RBI Act or B R Act. Whic Which h of the fofollo
llowin
wing g is not on one e suc
such h retu
return:
rn:
a monthly
monthly return
return of lliqui
iquid
d assets
assets u/s 24 (3 (3)) of B
B R Ac
Act,
t, b quar
quartterly
erly retur
eturnn of NP
NPA A adv
advanceances s u/s
u/s 42 of RB
RBII Ac
Actt
c retu
return
rn of uncl
unclai
aime
med d de
depoposi
sits
ts u/
u/s
s 26 of B R Act,
Act, d fort
fortni
nigh
ghtl
tly
y retu
return
rn on ca cash
sh rese
reserv rves
es u/s
u/s 42 of RB
RBII Act
Act
26 As regards the inspection of banks (a) RBI has the authority to inspect the branches of banks u/s 35 of B R Act (b)
RBI can inspect the branches of banks u/s 35A of B R Act (c) Central Govt. can direct RBI to inspect the banks.
a aa and
nd b a are
re correc
correct,t, b b an andd c ar
aree co
corrrrect
ect,, c a and and c are
are cor
corre
rect
ct,, d a to c all all co
corrrrect
ect
27 Under Right to Inform ation Act, the infor mation that can be acce accessssed
ed sho
shoululdd be h hel
eldd by o orr un
unde
derr co
cont
ntro
roll of
of::
a govt.
govt. aut
authorhority
ity,, b public
public author
authorityity,, c publ
public
ic or pri
privat
vate e aut
author
horityity,, d gov
govt.
t. auth
authority
ority,, publi
public caautho
uthority
rity or private
private
authority
28 A banking company can be acquired by Central Govt. if one of the following conditions is satisfied (which one is
not corr
correct)
ect):-:- a ban bank k fail
failed
ed on mormore
e than
than one occasio
occasion n toto com
complyply wit
withh RBI dir
directi
ection
on u/s 21 and 35 of B R
Act
b banbank k iis
s bein
being gm mana
anaged
ged in a man
manner ner detrime
detrimental
ntal to inte
interes
restt of
of depo
deposito
sitors,
rs, c acquis
acquisition
ition is e essent
ssential
ial for
safeguardin
safegu arding g in
intere
terest
st of the depos
depositors
itors,, d acq
acquisit
uisition
ion wil
willl benefi
benefitt the
the shar
sharehol
eholders
ders and the gov govt.t. both
both
29 In a contract of sale, (a) the seller transfers property in goods to buyer for a price (b) the seller agrees to transfer
the roperty in goods to the buyer for a price (c) when the goods are transferred from seller to the buyer, the contract
becomes
beco mes a sale:-
sale:- a stat stateme
ements
nts (a) and (c) only are correct,
correct, b stat statemen
ementsts (a
(a)) an
and
d (b) only are c corre
orrect,
ct, c sta statem
tement
ent
of (b) and (c) are correct, d all statements are correct
30 Ra Rate te of seserv
rvicice
e ta
taxx is:
is: a 14 14%,
%, b 1100% , c 7 . 5 , d 5 %
31 When one or more more bank is merged
merged with another
another bank or two or m moreore ban
banksks decide to mermergege to forformm a new
co
comp
mpanany, y, it is ca
call
lled
ed:-
:- a merger,
merger, b amalga
amalgama matio
tion,
n, c liquidat
liquidation
ion,, d win
windin
ding-u
g-up p
32 A bank is under obligation to make payment of cheque is sued by its cust custome
omerr uu/s
/s 331,
1, ifif th
the
e fo
follow
llowing
ing cond
conditio
itions
ns
ar
are
e sasatis
tisfie
fied
d (whi
(which
ch on onee is no
nott co
corr
rrect
ect):
):-- a there
there are suffic
sufficien
ientt fun
funds
ds in the acc
accoun
ount,t, b the funds are
pr
prop
oper
erly
ly avai
availa
labl
ble
e for pa
paym
ymenentt of th
thee sa
said
id ch
cheq
eque
ue,, c the
the si
sign
gnat atur
ures
es of the
the cucusto
stomemerr are,
are, as per
per reco
record
rds
s of
th
the
e bank
bank,, d cheq
cheque ue shou
should ld be dr
draw
awn n in one
one in
ink,
k, one
one hand
handwr
writitin
ing
g and
and one
one scscriript
pt..
33 If bank refuses
refuses payment
payment of thethe cheque
cheque issued by tthe he cust
customer
omer and la later
ter on it is w
wound
ound up, th the
e bank is liliable
able to
to::
a drawer for any loss, b the payee for any loss, c the holder who becom becomes es a creditor entitled
to make a claim, d none of the the par
parties
ties as that would be decided by th the
e liquidator
34 The offences that are compoundable under any law, can not be brought within the purview of, which of the following:
a Lok Adalt, b DRT, c Civil Court, d High Court,
35 The Transfer of PropertyProperty Act contains provisions relating to tr tran
ansfsfer
er of :- a ac
acti
tion
onab
able
le cl
clai
aim
ms, b
movable assets, c goods, d none of the above
36 For a bank to get protectio
protectionn again
againstst conversion
conversion of a chequ
cheque e (a) the collec
collectio
tion
n should
should be ffor or cu
custom
stomerer (b
(b)) the
collection
collection should be of crossed cheque crossed before falling into the hands of collecting bank (c) the collection should be
in good faith (d) the collection,
collection, sh
shou
ouldld be wi
with
thou
outt ne
negl
glig
igen
ence
ce:-
:- a a to d shou
shouldld be fu
fulf
lfil
ille
led,
d, b a to c shshouould
ld be
fulfilled, c a, c an
andd d shou
shouldld be fu
fulf
lfil
ille
led,
d, d a, b an
andd d should
ould be fu
fulf
lfil
ille
led
d
37 Wh
Which
ich of the
the follow
following
ing is a cor
correc
rectt st
state
atemen
ment:-t:- a protect
protectionion availabl
available
e to a bank
bank ffor
or conv
convers
ersion
ion is as
as per Sec 10
of NI Act, b prot
protec
ecti
tion
on agai
agains
nstt conv
converersi
sion
on fo
forr dema
demand nd dr
draf
aftt is as per
per Sec
Sec 131
131 of NI Ac
Act,
t, c Bank get
protection
protec tion for conversion
conversion as per Sec 131 in case of cheque cheque and Section 131A for Demand draft, draft, as per Bankin
Bankingg
rd
Regulatio
Regulation
n Act, d conconversi
ersion
on me
mean
ans
s unau
unauth
thor
oriz
ized
ed in
inte
terf
rfer
eren
ence
ce in prop
proper
erty
ty of a 3 party
38 Whi
Whichch of the follow
following
ing is the obj
object
ective
ive of Foreig
Foreign n Exc
Exchan
hangege Man
Managem
agemenentt Act (F
(FE
EMA)
MA) 1999:-
9:- a to
co
con
nse
serv
rve
e for
ore
eign
ign ex
exch
chan
angge, b to man
anaage foreign
ign exc
exchange
ange,, c to fa
faci
cili
lita
tate
te ex
exte
tern
rnal
al trad
trade
e an
and
d
prom
promot
ote
e orde
orderl
rly
y deve
develo
lopm
pmen
entt of forex markets in India, d all th
the
e above
Page
39 Which of the following is not correct in case of contract of in ind

demnity or gu guaaran
rantee
ee::-
a in inde
indemn
mnit
ity
y the
the loss
loss is to be made
made good
good as soon
soon as it occu
occurs
rs,, b in c
case
ase ofof guara
guarante
nteee surety
surety's's liab
liabili
ility
ty is
secondary and principal debtor'
debtor'ss lia
liabi
bilit
lity
y is pr
prima
imary
ry,, c an inindem
demninity
ty is for
for the reimb
reimburs
urseme
ementnt of lloss
oss
d a guarantee is for bearin
bearingg the loss caused due to the action of pr prin
inci
cipa
pall d
deb
ebto
torr or any
any ooth
ther
er part
partyy
40 A bank guarantee has been issued by the bank in lieu of the customer being required to deposit cash
security.
secu rity. Such guarantee
guarantee is called:-
called:- a cash
cash guara
guarant
ntee,
ee, b fi
fina
nanc
ncial
ial gu
guar
aran
antee
tee,, c perf
perfor
orma
manc
nce
eggua
uaran
rante
tee,
e, d
deferred payment guarantee
41 The sale
sale becomes
becomes abs
absolute
olute in case of mortga
mortgagege by c
condit
onditional
ional safe
safe,, when
hen:- a borr
borrow
owerer ma
make
kes
s paym
paymen
entt of
th
the
e du
due
e amou
oun
nt, b borrower
ower fai
ails
ls to ma
mak
ke paym
ayment of th
the
e du
due
e amou nt, when loan is re-
oun re-stru
structur
ctured,
ed, d
when limitation escpires
42 In the con
context
text of lett
letter
er of credit,
credit, which among
among the following
following does
does no
nott m
mat
atch
ch:-
:- a) tthe
he par
party
ty on whos
whose
e req
reque
uest
st the
the
LC is issued
issued is called
called - beneficiary
beneficiary b) the ban bank k that makes
makes the payme payment nt to th
the e benefi
beneficiary
ciary a against
gainst d documen
ocuments ts and claims
payment from issuing bank is called — negotiating bank, c bank that has the final liabili
payment liability
ty on the
the LC if dodocumen
cuments ts
are received
received in order
order — Iss Issuing
uing bank,
bank, d) if a bank giv gives
es guarantee
guarantee on LC fo forr the paym
paymentent to be ma made,
de, in case is issuing
suing
bank fails to pay — confirming bank
43 Under
Under FEMA FEMA 19991999,, ther
there e is pr
provisi
ovision on of
of appeal.
appeal. TheThe fir first
st suc
such h app
appea eall can
can be ma madede to:-
to:- a Di Dire
rect
ctor
or –
Appeals, b Appellate Tribunal, c High Court, d Supreme Court
44 A bban
ankk iss
issue
ued daan
nL LC,
C, wh
whicich
h iis
s tto
o exp
expir
ire
e on
on J June
une 30 ap appx
px.. IIts
ts ex
expipiry
ry da
datete falls
falls on : a 10th July or 20th June,
b (+) or (-) 5 cale lenndar days, c (+) or (-) 10 cal calenda
endarr day
days, d such LC is not valid
45 A guarantee which is issued by a bank, guaranteeing the timely payment payment of in insta
stallm
llment
ent toto the ssupp
upplier
lier,, by th the
e
applica
app licant
nt (borro
(borrower
wer),), for the mac
machine hinery
ry pur
purchas
chaseded on a long ter term
m credit
credit fro
fromm the sup supplie
plierr is cal
called
led:-
:- a stan
standby dby
guar
guaranante
tee,
e, b per perfo
form
rmanance
ce guar
guaran ante
tee
e, c defe
deferrrred
ed paym
paymen entt guar
guaran ante
tee,e, d st
stat
atut
utor
ory
y guar
guaran
antetee
e
46 Whi Which ch of th
the
e follow
following
ing pa
partrtie
iess in a bi
billll of ex
exch
chan
angege do no nott ma
match
tch:-
:- a ma
make
kerr — the
the dedebt
btor
or who
who is to ma make
ke
the pay
paymen
ment, t, b drawer
drawer — who mak makes es the bill of exc
exchanhangege and ord orders
ers the dra drawee
wee to makmake e paym
payment,
ent, c
pa
payeyeee — ththe
e pe
persrson
on who
who is to ob obta
tain
in papaym
ymenentt as per order
order of the the draw
drawer er,, d draw
drawee ee-- the
the de
debt
btoror,, liable
liable on
the bill to pay.
47 A pers personon re
resi
sidi
ding
ng In
Indi
dia:
a:-- a can own foreign
foreign currency
currency or imm immovabovable le pro
proper
pertyty if it was helheldd when he
was resi
residen
dentt outside
outside Ind India
ia .. b can transfe
transferr fore
foreign
ign curr
currency
ency immovab
immovable le prop
property
erty if it was heldheld when
when he was
resident
resid ent outside
outside India,
India, c can invest invest in foreig
foreignn currency immovable
immovable property
property if it was held
held when he he was resident
resident
outside India, d all the above
48 Which of th thee followi
followingng stastateme
tement nt is not corre
correct
ct in tthe
he context
context of
of sa
sale
le of go
good
ods?s? a a con contra
tractct of sale
sale can
can be
absolute, b a contract of sale can be co connditional, c in ab
abso
sollute con
onttract, th
the
ere are no
condit
con dition
ionss to be ful
fulfill
filled
ed by the sell
seller
er or buy
buyer,
er, d in a con
condit
dition
ional
al contrac
contract,t, the goods
goods are trantransfer
sferred
red later
later but
the sale takes place beforehand.
49 Which of the following documents is a document of title to goods (a) bill of lading (b) warehouse receipt (c)
delive
veryry order (d
(d)) ai
airw
rwayay bill
bill::- a a to d all, b a to c only, c a, c and d only, d b, c and d only
50 (a) mortgage deed does not requi require
re to be witnessed
witnessed or registered
registered (b) debentures provide voting rights to the
holders of the debentures (c) assignee of the life policy can sue in his own name (d) borrowers can pledge the
documemen nts of title to goods:- a a to d are correc
rect, b a, b and c are correct, c a, c and d are
co
corr
rrec
ect,
t, d b, c and and d are
are cocorr
rrec
ectt
51 In case of mortgages (a) the limita tion perisd aga inst the mo mortgrtgag
agor
or for perso
persona
nall liabi
liabilility
ty is year
yearss (b
(b))
against the mortgaged property it is years and (c) for foreclosure it is years:- a 12, 12, 30, b 3,
12, 30, c 12, 12, 12, d 3, 12, 12
52 Which of the foll
followin
owing
g is not a capital
capital acco
account
unt tran
transact
saction:
ion:-- a an Indian
Indian comp
companyany purchase
purchased d office
office space
space
ou
outsi
tside
de India
India,, b Ind
Indian
ian Gov
Govt. t. made rep repayme
ayment nt of instal
instalment
ment of a loan
loan taken
taken fro
from
m US Go Govt vt.. c an
indivi
ind ividual
dual ppurch
urchased
ased shares
shares on a st stock
ock e exch
xchange
ange in in Lond
London,on, d exp
export
ort o
off goods
goods made on on a deferred
deferred p payme
ayment nt basis
basis
53 In case of creation
creation of equitable
equitable mortgag
mortgage, e, the prope
propertyrty which is to be e equit
quitably
ably mortgage
mortgaged, d, must
must be lo locate
cated d in:
a notified towns only, b Chennai, Mumb mba al or Kolkata only, c any place, d a
or b
54 Compared to a public company, a private limited company is at a disadvantage because (a) it can not invite
public to subscribe to its shares (b) it has to observe restrictions on transfer of its shares because the no.
of members is limited (c) its shares cannot be listed on a stock exchange (d) it cannot obtain loan from a
bank.
a a to d are corre
rrect, b a, b and c are co corrrre
ect
ct,, c a, c and d are co corrrre
ect,
ct, d b, c and d are co corrre
rec
ct
55 Under RTI Act 2005, the information can be accessed under control of a public authority. For this purpose,
th
the
e publ
publicic auth
author
orit
ity
y me
mean
anss any
any auth
authororit
ity
y esta
establ blis
ishe
hed:d:-- a by or under
nder th the e Cons
Consti
titu
tuti
tion
on,, b by
any ot
othe
herr la
law
w made
made by th the
e Pa
Parl rlia
iame
mentnt of In
Indi
dia a or by th thee St
Stat
ate
e le
legi
gisl
sla
atu
turere,, c by any any noti notifi
fica
cati
tion
on
issu
issued
ed or order
order made
made by the appro
appropr pria
iate
te gov
govt,t, d all
all th
the
e ab
abov
ovee
56 SARF
SARFAESAESII Act 2002
2002 is a app
pplilica
cabl
blee to hou
housising
ng fifinan
nancece co compa
mpaninies
es whos
whose e name
names s are noti
notifi
fied
ed by by:-
:- a
Reserv
Reserve
e Bank
Bank,, bNati
bNation
onal
al Hous
Housin
ing
g Bank,
Bank, c Cent
Central
ral Gov
Govt,
t, d State
State Govt.
Govt. conce
concerne
rned
d
57 An un-registered
un-registered partnersh
partnership
ip firm (a) ca
can
n file suit
suit for enforce
enforcement
ment of contrac
contracts
ts entered with 3rd parties
entered into by it with
(b) cannot
cannot file suit
suit on its own partners
partners (c) oth
other
er parti
parties
es canno
cannott file sui
suitt on unregistered
unregistered firm:-
firm:- a a to c all correct
correct,, b a
and c are incorrect, c a and b only are correct, d b and c are correct
Page
58 A private company has two shareholders who are directors of the company also. They die in an accident:
A the company will be run by tthei heirr le
legal
gal hheir
eirs,
s, b the company will invite public to be shareh shareholders
olders who will chose,
new director
directors,
s, c the com
company
pany will
will be compu
compulsor
lsorily
ily wound
wound up, d the adv advice
ice of Co
Compa
mpany
ny Law Bo
Board
ard wi
willll be sou
sought.
ght.
59 Unde
Underr RT
RTII Act 20
2005
05,, th
thee pe
perio
riodd for pr
prov
ovid
idin
ingg in
infor
forma
mati
tion
on is: a 5 da
days
ys,, b ononee week
week,, c 21 da
days
ys,, d 30 da
days
ys
60 (a) Certificate ofof Incorporation iis s birth certificate
certificate of a company
company (b) Certificate of Incorporation is conclusive
evidence
eviden ce of creation of a company (c) on the basis of certificate of incorporat
incorporationion bank can open account without any
other introduction
introduction (d) certifica
certificate
te of commenc
commencementement is requir
required
ed both by the public and private companies
a a to d are correct, b a, b and c are correct, c a, c and d are correct, d b, c and d are
correct
61 A company can commence its business (a) without obtaining certi certifica
ficate
te of comm
commencem
encement
ent ooff busi
business
ness if it iis
s
a private company (b) without obtaining certificate of commencement of business if it is a company without any share
capital (c) after obtaining certificate of commencement of business u/s 125 if it is a public company. Which of these is
c o r rec t : a a to c all, b a and b only, c b and c only, d a and c only
(as per provisions of Companies Act 2013, certificate of commencement of business, is required by all companies)
62 Wh
Whic
ich
h of th
the
e fo
foll
llow
owin
ing
g stat
statem
emen
ents
ts ar
are
e not
not tr
true
ue:-
:- a a par
partne
tnershrship
ip fir
firm
m can be regis register
tered
ed u/s 58 of Ind Indian
ian
Pa
Part
rtne
ners rshi
hipp Ac
Act,t, b a comp
compan anyy is a le
lega
gall pers
person on cr
crea
eate tedd thro
througugh h inco
incorprpor
orat
atioion,
n, c ce cerrti
tifi
fica
cate
te of
co
comm
mmen enceceme
mentnt of bubusin
sines
esss is co
conc nclu
lusi
sive
ve ev
evid
iden
ence
ce of exi existe
stence
nce of a com companpany, y, d wher
where e 2 or more
more per persosonn
agree to share profits from business, it is called a partnership partnership..
6 3 The lease for a purposepurpose other than for agricultural
agricultural and manufacturing
manufacturing purposes purposes is deemed
deemed to be a lease from
and it can be terminated
terminated by giving notice:- notice:- a) year to year, b) 2 months year to year, year, c) 3 months mon month th to month,
d) 30
30 days
days d) d) month
month to to mo
month,
nth, e) 15 15 da
daysys
64 Where a company creates charge on its assets and fails to get the charge particulars filed and registered (a) any
person interested in the charge can file and get it registered (b) if charge is not filed and registered, the creditor
becomes unsecured creditor in the event of liquidation of the company (c) if the charge remains unregistered, the
loan become
become due immediately
immediately (d) it is resp responsib
onsibility
ility of the compa
company ny to file the charge withi withinn given time period:-
period:- a)
a to d all are correct, b) a, c and d are correct, c) a, b and c are correct, d) b, c and d
are correct
65 SARFAESI Act 2002, is applicable (a) in the entire India including J&K (b) it provides for sale of security without court
intervention
interv ention subjec
subjectt to fulfillm
fulfillment
ent of certai
certain n conditions (c) it provides
provides for setting up of Centr Centralal Registry for registration of
securit
secu ritiza
izatio
tion
n ttran
ransact
saction
ionss ((d)
d) it covers
covers all typestypes of loa
loann acco
accountunt:-
:- a a to to d all corr
correct,
ect, b a, b and and c ononly ly corr
correct,
ect,
c a, c an andd d only
only corre
correct,
ct, d a, b and d only only a are
re correct
66 As per SARFAESI Act, hypothecation means (a) a charge on movable assets (b) in favour of secured creditor (c)
without delivery of- possession (d) giving right to the creditor to sell the assets. Which among these are the
essential parts of the defi ni tion:- a a to d all, b a,a , b and c only, c a, b and d only, d b,
c and d only
67 In Mardia Chemicals vs Union of India and others, the Supreme Cou Court rt had d decid
ecided
ed tha
that:-
t:- a SARF
SARFAESIAESI A Act
ct is fu
fully
lly
invalid, b c o n d it
it i o n o f d e p o si
si t o f 7 5 % a m o u n t b y b o r r ow ow e r b e f o rre
e approaching DRT against
posses
pos sessiosionn noti
notice ce by banks,
banks, is invali
invalid, d, c co
condnditi
ition
on of de
depo posisitt of 75
75% % am
amouountnt by boborr
rrowe
owerr be
befor
fore
e app
approroac
achihing
ng
DRAT,
DRA T, agains
againstt deci
decisio
sionn of DRT,
DRT, is invalid
invalid,, d condition
condition of 60 days noti noticece before
before posse
possession
ssion is correct
correct
68 Which Which of th thee fol
follow
lowing
ing fac
facts ts is nonott corre
correctct so far as a SecutSecutiti itisat
sation
ion comp
company any is conc
concer ernened:
d:-- a it is a
company registere
registered d und
underer Companies
Companies Act, b it ha
has s tto
o obtain
obtain regist
registration
ration with SEBI for undertaking
undertaking securitiz
securitization,
ation,
c it can
can set
set up sepasepara rate
te tr
trus
ustt fo forr diff
differ
eren
entt sche
schememes s of secu
securi riti
tiza
zatition
on,, d its minminimuimum m paid
paid up capita
capitall is
Rs.100 cr and net worth at least 15% of the acquired assets
69 The Preventio
Prevention n of Mon
Money ey Laundering
Laundering Act 2002 was enacte enacted d with th thee following
following objective
objective:- :- a to p prev
revent
ent mone
money y
c lto
aupr
ndeven
prev erent
ingt ,use
use of bank b ing
bankin g syto
syst pro
provi
stem
em vide
fo
forrdemofo
for
mone r yconf
ney colaund
nfis
au iscat
cation
ndererinion
g, of pr
ing, prope
operty
drtyalde
deriv
all rived
l th
the e edbofrom
abovefro
vem mon
money ey laundering
70 Befo
Before re enenforce
forcement
ment of sesecuri
curity
ty iintere
nterestst i.
i.e.
e. sale
sale o off sec
securi
urity,
ty, the
the ccredi
reditor
tor,, to show his intenti
intentionon tto
o take
take
possession,
posses sion, is require
required d to obtain possess
possession ion of th
thee security
security by gi giving:-
ving:- a a reasonabreasonable le period
period notice,
notice, b a notice
notice
of 15 days, c a notice of 30 days, d a notice of 60 days
71 In a lease lease of immova
immovable ble pro
property
perty,, whic
which h of the follow
following
ing does
does not mat match
ch:-
:- a the tran transfer
sferor
or is called
called ththe
e les
lessor
sor,,
b the transfer
transferee ee is
is ca
calle
lled
d th
the
e le
lessee
ssee,, c the price
price iin n a lea
leasese iis
s calle
calledd th
the
e lease
lease rental,
rental, d nonnone e of
of the
the abov
abovee
72 Where a company has been financed by a consortium of banks, the decision to take possession and sell the
secu
securi rity
ty unde
underr SARSARFAEFAESISI Act
Act is to be ta taken
ken:- :- a by th
thee ba
bank
nkss hahaviving
ng 75%
75% shshar
aree by val
value on th
thee
record date, in the consortium, b by all
all th
thee ma
majo
jorr ban
anks
ks financnciing ththee compa
mpanyny,, c by th
the
e le
lead
ad
bank
ban k in the con consosorti
rtium,
um, d by the banksbanks ha haviving
ng 60
60% % shar
share e by valu
value e on ththee recor
recordd da
date
te,, in th
the
e conso
consortrtiu
iumm
73 As per Prevention of Money Laundering Act 2002, the banks are required to maintain record of specified
transaction for a period:- a of 20 years, b of 10 years, c of 5-8 years, d of 5 year years s
4 Under provisions of SARFAESI Act, which of following transactions do not require registration with Central Registry?
A securitization, b reconstruction, c creatio
creation n of securit
securityy interest,
interes t, d none of the above
75 A custom
customer er filed a complaint with the Ombud Ombudsman sman which was reject rejected.
ed. What remed
remedy y is available
available to the customer:
a The grounds
grounds of rrejec
ejection
tion can not be appealed
appealed against
against by the cus
custom
tomer,
er, b cust
custom
omer
er can
can only
only fi
file
le suit
suit
in a co
cou
urt of law c cu st om er ca n r eq ue st fo r r ev ie w, d grounds of rejections ca
can
n be appealed
against within 30 days.
76 Registration of a part
partnership
nership firm under
under provisions of Indian Par
Partn
tner
ersh
ship
ip Act
Act 1932
1932 can
can be:-
be:- a wi
with
th the
the
Page
Re
Regis
gistr
trar
ar of Fi
Firm
rmss of th
thee ar
area
ea in wh
which
ich ththe
e bu
busisine
ness
ss of ththe
e fir
firm
m is cocond
nducucte
ted,
d, b with
with the
the Regi
Registstra
rarr of Fi
Firm
rms
s
of the
the area
area in w which
hich the rregi
egiste
stered
red o offic
ffice
e of firm
firm iis
s locate
located,d, c wit
with
h the Reg
Registr
istrarar o
off Com
Companpanies
ies o
off the area
area iinn which
which
the busi
business
ness of the firfirm
m is conduc
conductedted,, d wit
withh the Reg
Registr
istrar
ar of Com
Compan panies
ies of the are area
a in whic
which h the reg
registe
istered
red
office of firm is located
77 Recove
Recovery ry of Debt due to Banks & Financ Financialial Institutions
Institutions Act 1993 Section 2(g) provides definition definition of 'debt'
'debt',, which inclu
include
de
(which
(wh ich is not
not ccorr
orrect)
ect):-
:- a any liabil
liability
ity inclusi
inclusiveve of intere
interest
st which
which is s secured
ecured,, b any lia liabilit
bility
y inclusiv
inclusive e of intere
interestst
which
whi ch iis
s not
not secur
secured,
ed, c any lia liabil
bility
ity payabl
payable e un
under
der a decre
decree e or ord
order
er ooff a civ
civilil c
cour
ourt,t, d any lia bili ty reco vera ble
by the bank from its employee who committed a fraud
78 Banks are required to maint maintain
ain records under Prevention of Money Laundering Laundering Act 2002 which should contain
followi
following
ng info
informa
rmatio
tion
n (which
(which is not cor
correc
rect):
t):-- a natur
nature e of the tran
transactio
saction,n, b amou amount nt of the tran
transacti
saction
on and
th
the
e cu
curr
rren
ency
cy,, c da
date
te on whic
which h trtran
ansa
sactcted
ed an
and d th
thee pa
part
rtie
iess to the
the tr
tran
ansasact
ctio
ion,n, d none
none of thethe abov
above e
79 Under provisio
provisions
ns of Transfer
Transfer of Property
Property Act,
Act, subject
subject to agre
agreeme
ementnt between parties, a property can be sold
without
without intervent
intervention
ion of cour
court,
t, if it lo
loca
cate
ted
d at
at:: a any place
ce,, b Chennai, Mumbai and Kolkata only,
c Tow
Towns ns nnoti
otifie
fied
d by the
the Stat
State
e Govt.
Govt. oonly
nly,, d b o orr c
80 A suit has been filed by Bank-B in DRT located at place Z. Now the bank wants to transfer this case to another DRT
lo
loca
cate
tedd at pl
plac
acee y. Who
Who cacann pe
perm
rmit
it th
this
is tr
tran
ansf
sfer
er:-
:- a High
High Cour
Court,
t, b Pres
Presid iden
entt of the
the DR
DRT T wiwith
th co
cons
nsen
entt of
Pr
Pres
esididen
entt of th
thee ot
otheherr DRT
DRT, c Ch
Chaiairp
rper
erso
son n of DRAT
DRAT havi
having
ng juri
jurisd
sdic
icti
tion
on over
over both
both DRDRT Ts, d
Chairperson of DRAT irrespective of jurisdiction over both DRTs
81 Peri
Periodod for DRT decisio
decision noon
n the
the appl
applicat
ication
ion filed
filed by
by the bank is:- a it must
must be be ddecid
ecideded with
within
in 90 days from date
of first hearing, b DRT to make effort
effort to dispose off the application
application within maximum of 180 days from date of
receipt
rece ipt of applic
applicatio
ation,
n, c it is bin
binding
ding on
on DRT to to deci
decidede the
the matter
matter wi
within
thin 180
180 da
daysys fr
from
om date
date of itits
s rec
receip
eipt,
t, d DRT iis s not
bound to abide by any time limit.
82 If a ny false information is pro vided to Registrar of Firms in conne connect ctio
ion
nwwit
ith
h rreg
egis
istr
trat
atio
ion
no off a fi
firm
rm,, the
the pena
penaltlty
y
is:
a im
imprpris
ison
onm ment
ent up to oneone mo
montnth
h or fifine
ne or both
both,, b im
impr
pris
ison
onmment
ent up to 2 month onths s or fi
fine
ne or both
both,,
c im
imprpris
ison
onm ment
ent up to 3 mo mont
nths
hs or fi
fine
ne or both
both,, d im
impr
pris
ison
onmment
ent up to 6 month onths s or fi
fine
ne or both
both
83 Any perso
person n aggrieved
aggrieved by th the
e order
order of Recover
Recovery y Officer
Officer may
may appeal
appeal tto
o with
within in dadays
ys fro
from:
m:-- a Pres Presideident
nt of DRT
DRT,,
30 day
days, recei
eceipt pt of copy
copy of or orde
derr of RO
RO,, b Pr Pres
esid
iden
entt of DRT,
DRT, 45 days
days,, date
date of orde
orderr of RORO,, c Pr
Presesididen
entt
of DRT,
DRT, 30 da daysys,, da
date
te of or
orde
derr of RO,
RO, d Pres
Preside
ident
nt of DRTDRT,, 15 day
days,s, recei
receipt
pt of cop
copy y of order
order of RO
84 For the purpose of application of Bankers' Book Evidence Act, the bankers' book inclu include de (a) records
records kept as back up
(b)
(b) re
reco
cord
rdss av
avai
ailab
lable
le as didisa
saste
sterr re
recov
covery
ery (c
(c)) re
recor
cords
ds on micr
microo fil
film
m (d)
(d) recor
recordsds in ph
phys
ysica
icall form:
form:-- a on
onlyly d, b
only c and d, c only a, c and d, d a to d all,
85 Which of the following is is correct in the context of Consumer Consumer Pr Prot
otec
ecti
tion
on Ac
Act:
t:-- a) co
comp
mplalain
intt ca
cann be fifile
led
d by
the consumer
consumer himself as on his behalf no consumer consumer association
association can file the complaint, b) retailer who buy goods to sell to
ot
othe
herr co
consu
nsumemers rs ca
cann fil
file
e th
the
e cocomp
mplalain
int,
t, c) the conconsum
sumerer cou
courtrts
s are
are qua
quasi-
si-jud
judici
icial
al in na
natur
ture,e, d) Con su mer
Protection Act has been enacted to protect the manufacturers and service providers from the consumers
86 Limited Liability
Liability Partnerships
Partnerships are regulated
regulated under provisions
provisions of which of the following Act:- a Indian Partnership Act,
b Co
Comp mpananie
iess Ac
Act,t, c InIndi
dian
an Con
Contratract
ct Ac
Act,
t, d no
none
ne of the givgiven
en op
optio
tions
ns
87 involv
involves
es promotion
promotion of corporate fairness fairness,, transpare
transparencyncy and accountability
accountability in the interes
interestt of all stake holder
holders: s:
a risk management, b corporate risk management, c corporate strategies, d corporate
governance
88 A contra
contract ct is valid,
valid, if the considerati
consideration on is lawful
lawful when at the desiredesire of the promi
promisor,
sor, tthe
he promise
promise (a)(a) has d done
one or
abstained from doing (b) does or abstains from doing (c) promises to do or abstains from doing something. Which of these
is correct:- a a to c all, b a and b only, c b and c only, d c and a only
89 In a mortgage suit, the preliminary decree becom becomes es the final de decr
cree
ee:-
:- a when
when the the req
reque
uestst is ma
made de by thethe
ba
bank
nk as crecredit
ditor,
or, b when
when the bor borrow
rowerer fai
fails
ls to pay the decdecret
retal
al amo
amount unt,, c when
when the cou court
rt takes
takes a de deci
cisio
sion n on
th
the
e basi
basis s of it
its
s disc
discrereti
tion
on,, d wh
when en th
thee re
requ
quesestt come
comes s fr
from
om thethe bank
bank and
and the
the borr
borrow
ower
er
90 XYZ were allowed certain credit facilities facilities on the guarantee of G. La Later
ter on the
the aaccou
ccount nt w
was
as g
got
ot ssecur
ecured
ed by by
equitable mortgage of the property. But for certain reasons, the bank released the equitable mortgaged. When the account
became difficult of recovery and money was demanded from G also, he took the plea that he stands discharged to the
extent
ext ent tthe
he valu
value e of mmort
ortgag
gage,
e, wh
which
ich has
has b been
een relrelease
eased d by the b bank:
ank:-- a gua
guaran
rantor
tor is no
nott di
discha
scharge
rged d as the mormortgatgage
ge
was taken subsequent
subsequent to the date of guarantee,guarantee, b guaraguarantor
ntorss is not disc
discharg
hargeded as he is liable as long as borrower borrower is
liable c guarantor is discharged to the extent of value of equitable mortgage, as bank has put the guarantor to
loss,, d guarantor
loss guarantor is discharge
discharged
d since value
value of security in the account
account has come down.
91 In a contract of bailment, if the bailee does something inconsistent to the contract, the bailor can: (which is not
co
corr
rrec
ect)
t):-
:- a dema
demandnd th
the
e dama
damage ges
s suf
suffe
fere
red:
d: b cont
contra
ract
ct beco
become
me void
voidab
able
le at th
the
e op
opti
tion
on of th
the
e bail
bailor
or,, c deman
demand
d
compensation
compe nsation for
for any damage, d none of the aboveabove
92 For actions
actions of a par
partner
tner in
in a Limited
Limited Liabilit
Liability
y Partners
Partnership:-
hip:- a all the partners
partners become
become autom
automatical
atically
ly liable,
liable,
b the
the LLP
LLP do
does
es beco
become
mes s liab
liable
le,, c oth
other pa
part
rtn
ners
ers do not be
beco
com
me li
liab
able
le exce
except
pt in sp
spec
ecia
iall case
cases,
s, d
none of the given options is correct
93 Which of the followi
following
ng right is not available to unpaid selle
sellerr where the prop
property
erty has
has passed
passed on the buyer:
buyer:
a a li
lien
en on g
goo
oods
ds ffor
or p
pric
rice
e wh
while
ile he iis
s in poss
posses
essi
sion
on o
off the
the go
goodods,
s, b in cas
case
e of iins
nsol
olve
venc
ncy
y of th
the
e buye
buyer,
r, a rrig
ight
ht o
off
a a li
lien
en on goo
goods
ds for
for p
pric
ricee wh
while
ile he iis
s in poss
posses
essi
sion
on o
off the
the good
goods,
s, b in cas
case
e of iins
nsol
olve
venc
ncyy of th
the
e bu
buye
yer,
r, a rrig
ight
ht o
of
f
stoppi
stopping
ng th
the
e goods
goods in tra
transi
nsitt after
after he has
has parte
parted
d with the pposs
ossess
ession
ion of them,
them, c a rig
right
ht of resa
resale,
le, d non
none
e of the
the
above
Page
94 Which
Which of tthe
he foll
followi
owing
ng can be a direct
directoror o
off a com
compan
panyy :- a X, ABABC C Limi
Limited
ted,, ABC
ABC Fi
Firm
rm,, b X, ABC
ABC F
Firm
irm,, c X,
ABC Limited, d X only
95 A stip
stipula
ulatio
tion
n col
collat
lateral
eral to the main
main ppurp
urpose
ose of a cont
contrac
ract,
t, un
under
der the Sale
Sale of Goods
Goods A Act
ct iis
s called
called:-
:- a a con
condition
dition
b a warranty, c a guarantee d an undertaking
96 What
What is the min
minimum
imum and and maxim
maximumum no. of partpartners
ners in a Limited
Limited Liability
Liability Partners
Partnership:-
hip:- a mi
mini
nimu
mumm 2 and
and
maximum no limit, b minimum 2 and maximum 50, c minim
minimum um 2 and maximu
maximum m 20
20
d min
minimum
imum 2 and
and ma
maxxim
imum
um 10,
10,
97 Which among the following is a necessary condition for declaring it a govt. company under the provisions of
Compan
Com panies 1956? A it sh
ies Act 1956? shou
ould
ld be fu
full
lly
y owne
owned d by th
the
e Cent
Centrarall Go
Govt
vt,, b It shoul
should d be fully
fully owne
ownedd by the
the
Centrral an
Cent and
d St
Sta
ate Gov
ovtt, c) a att lea
east
st 50% of th
the
e paid up ca
cap
pit
ita
al should
ould be own
wne
ed by the gov
ovtt, d) at
least 51% of the paid up capital
capital should be owned by the govt.
98 In a pu
public
blic limited
limited compan
company,
y, m
maxim
aximum
um a
and
nd minim
minimum
um no
no.. of s
shar
hareho
eholde
lders
rs is:-
is:- a) 50 and 10, b) No limit
an
andd 7, c) 10 1000 an
and d 2, d) any numbumber at th the
e discr
cret
etiion of the co
commpany
99 A company has been sanctioned enhanced credit limits by its bank. For m modificat
odification
ion of charge
charge with the R Registr
egistrar
ar of
Comp
Compan anie
ies,
s, whic
which h am
amon ongg th
thee fo
foll
llow
owin
ing
g foform
rmss are
are to be used
used:-
:- a Fo
Formrm 8 and
and 10 b Fo
Form
rm 8 and
and 17,
17, o
Form 8 d Form 10 and 17
10
1000 The copy of memorandum of association and articles of association of a company is kept with office of RoC
and can be insp inspec
ectetedd by any
any pe pers
rson
on du
due e to whic
whichh it is kn
know
own n as:-
as:- a doct
doctri
rine
ne of ind
indoo
oorr ma
mananage
geme
ment
nt,, b
ultr
ultra-
a-vvires
ires,, c do
doct
ctrrine of co
connst
stru
ruccti
tiv
ve no
nottice
ce,, d doct
doctrrine
ine of outd
outdoo
oorr ma
mananage
gem
ment
ent
101. There is a fixed deposit of Rs. 100000 in the name of Mr. A & B. A is requesting for a loan of Rs. 50000 on
the security of the fixed deposit. B (12 years old) is a minor son of A and A is signing as the guardian of the
minor. Which one of the followingfollowing additional document is required required? ?
a) Birth Certificate
Certificate giving
giving the date of birth
b) School cert
certificate
ificate that
that B is a student
c) Declarat
Declarationion by A that the loan will be use for minor's benefit.
Declaration by the minor himself that he has no objection to the loan taken by the father.
102 Mr. Shekhar has approached the bank for an emergency loan of Rs. 50000 immediately. He is offering the
following securities.
securities. Please select the most appropriat appropriate e one among them to grant immediatimmediate e finance:
a) Same bank's d deposit
eposit of Rs. 75000
b) Post Office National Savin Savingsgs Certificate
Certificates s (NSCs) of Rs. 100000
c) Life Insuran
Insurance ce Policies of the Face Value Rs. 50000 500000 0
d) His flat value
valued d at Rs. 2500000
103. Assuming that the bank is going to charge all the securities, which of the following is true?
a) In respect of a deposit the bank will have hypothecati hypothecation. on.
b) In respect of NSC NSCs s the bank will have pledge.pledge.
c) In respect of LIC policie
policies s the bank will have mortgage
d) In respect of the Flat the bank will have an agreem agreementent to mortgage
104. Mr. Shenker has a loan account fully overdue with a balance of Rs.32000 and also a Savings Bank account
in the same bank that shows a credit balance of Rs. 60000. He is not responding to the bank's due notices to
repay. Which among the following will be the best course available to the bank_
a) Contact personally and obtain a cheque drawn on the Savings Account, in favour of the bank.
b) Issue a Vakil Notice and threa threatenten legal action if not paid fort forthwith.
hwith.
c) File a suit in the courcourtt of law to teach him a lesson lesson
d)In Exercise
105. the above banke
banker's
r's instead
case, right of set off on thehaving
of Shankar Savings Account Account
a Savings balance
balance and
withclose the loan
our bank, he account once forwith
has an account all.
another bank with a fixed deposit of Rs. 60000 in that bank. The other day when he called on the manager,
inadvertently on the manager's table an envelope that contained the FD receipt of the other bank. The bank can
a) Exercise its lien on the rece
receipt
ipt and get the proceeds to close the loan.
b) Cann
Cannotot exercise
exercise the lien as the rec receipt
eipt has not come in the norma
normall cour
course
se of bank
banking
ing busin
business,
ess, say for
collection
c) Lien cannot be exerci
exercised
sed on some other bank's rece receipt
ipt
d) Lien can be exercised only on its own depo deposits.
sits.
106. "A" has an overdue loan with a balance of Rs. 27000. There is also a Recurring Deposit with a balance of
Rs. 60000 in the name of Mr. & Mrs. A repayable to Either or Survivor. The Bank can
a) exercise the lien
b) cannot exerci
exercise
se the lien because the liability and assets are not in the same right and capacity.
c) 50% of the deposit can be deeme deemed d to belong
belong to "A" and the bank can adjuadjustst the dues even withou
withoutt the
lien.
d) Approach a Court of law and obtain the their
ir permission to adjus
adjust.
t.
107 A jewel loan of Rs. 6000 was granted on the pledge of ornaments valued at Rs. 10000. The borrower could
not repay even after three years and so the bank sold the ornaments by public auction. After adjusting the dues
there was a surplus of Rs. 2000. The surplus should be treated by the bank as
a) Profit to
to the bank
bank
b) Borrower'
Borrower's s property to be handed over with a proper acco
account
unt
Page
c) An incentive to be given to the bank staff for recov

recovery
ery of loans
d) A credit to some other overdue borrborrowing
owing account to reduce
reduce NPAs
108. Ramesh Lal is a SB Account holder for last several years. He has approached the bank manager with his
li
life
fe poli
policy
cy of th
thee face
face value
value of Rs. 1000
100000 00 wi
with
th a premi
premium
um paid of Rs
Rs.. 100
10000
00 to gran
grantt him the maxi
maximum
mum
permissible loan. Select among the following the basis for granting the loan.
a) Face value of Rs. 100000
100000
b) Premium paid Rs. 10000
c) Surrender VaValue
lue of the policy to be ascertained from
from the Insurance Company
Company
d) Surrender vavalue
lue plus accrued bonus
109. State which of the following is true?
a) A bank never grants loans agaiagainst
nst life policies
policies
b) The mode of charging LIC as a security is assi assignment
gnment
c) The bank will have its name includ included
ed as a Nominee when a loan is granted against LIP
110.The following business enterprises
enterprises have approac
approached hed the bank for 'advanc
'advances
es against book debts'
debts'.. W hich one
among them is suitable for availing the finance?
a) P ro
ropri et
et a
arr y c on
onc er
ern b ) P ar
art ne
ne rrs
s hi
hip fi rrm
m
c) Hi
Hind
ndu
u Undi
Undivi vide
dedd Fa
Famimily
ly d) li
limi
mite
tedd liliab
abil
ilit
ity
y comp
compan
any
y
111.Rajesh & Co., a partnership firm is dealing in timber. However, they approach the bank, for a loan of
Rs.500000 to acquire gold coins and keep with the bank as a security till the prices will go up and then sell and
make profits. They are not in jewellery business but ask for the loan with a profit motive. They feel gold is an
extremely good and safe security and the bank can very well sanction without any hesitation. The Manager
however is not inclined to sanction and has jotted down the following reasons of which he/she wants to select
the most appropriate one and convey. The appropriate reason is
a) The bank does not have have a night watchman
watchman
b) The bank does not de deal
al in gold.
c) The purpose o off the advance is unproductive.
unproductive.
d) Only jewellery m merchants
erchants can avail
avail loans against gold.
112.Mr.
loan Naresh,
of Rs. 50000the Chief the
against Accountant
shares ofofRs.
a Private
125000Limited Company The
of his company. drawing a handsome
company has thesalary
accountis asking
with thefor a
bank
in which there is always substantial balance.he audited balance sheet of the Private Limited Company also reveals
that the company is financially very sound. The bank
a ) Cannot sanction the loan because the shares cannot be sold in the market in the case of an eventuality.
b ) Can buy the shares and hold for Reserve purposes.
c ) Sanction the loan because the audited statements reveal financial soundness. soundness.
d ) Obtain Registrar
Companies permission and then sanction the loan
113 A loan of Rs. 10,00,000 was granted to a small scale industrialist against the hypothecation of machinery of
Rs. 15,00,000. The industry is closed and the loan is fully overdue. Owing to the change in the technology
the machinery has become a junk with a scrap value of Rs. 25000. The bank has issued a notice both to
the borrower
borrower and the guarant
guarantoror to rep
repay
ay forthw
forthwith
ith.. The borborro
rower
wer has no me means
ans to repay
repay.. Whe
When n the
guarantor is called upon to repay he requests the bank sell the machinery and simultaneously file a suit
against the borrower. He says he will definitely repay if the borrower fails to repay. What us should the
bank do?
a ) Guarantor'
Guarantor's s request can be acceded
acceded to
b ) Gua
Guara
rant
ntor'
or's
s re
reque
questst can
can not be accede
acceded d to becau
because se his/h
his/herer liabil
liability
ity is co-ext
co-extens
ensive
ive with
with that
that of the
borrower's and upon his/her default, the Guarantor has to repay.
c ) Bank can not recover from Guarantor as the machinery has become jun junk.
k. It is neither his/her fault
fault nor the
borrower's
d ) Bank can not recover from the borr borrower
ower also as the industry has becomebecome sick.
114.Mr. A has taken a loan of Rs. 20000 with the joint and several guarantee of Mr. B & Mr. C. . There is no
other security. The loan has become overdue. The Bank sends recall notice to the guarantors. In reply Mr. B
remits Rs. 10000 as his share and Mr. C Rs. 5000 stating that he is unable to pay more. Both Mr. A and C
expressed that they are in great financial difficulties. The Bank can
a ) Try to compel Mr. A to rem remit
it at least the balance
balance of Rs. 5000.
b ) Ask Mr. B, to remit the balance of Rs. 5000 as the liabilitliability
y is joint and several.
c ) Ask Mr. C to raise through some source Rs. 5000 and pay to cover his his 50% of the guaranteed amount.
d ) Write off the bal
balance
ance of Rs. 5000 as a LossLoss Asset.
115.Lords & Co. are merchandise traders. They send goods up country by trucks, obtain lorry receipts and on
their buyers draw usance bills of 60 days period with Documents to be delivered against Acceptance of
the drawers. The bank finances by discounting such bills. In respect of one bill of Rs. 60000 drawn on
Sound & Co., Mysore, though accepted and documents delivered, came back dishonoured. The bank
demand
dem anded
ed payme
paymentnt fro
from
m Lord
Lords s & CoCo.. And they cam came e up wi with
th the
the follo
followin
wing
g repl
replies
ies.. Whic
Whichh one is
acceptable to the bank?
a ) The bank has committed a mistake in releasing the documents against
against Acceptance.
b ) Bank should re-pr
re-present
esent the bill again and try to collect the money
money..
Page
c ) Grant them a week's time to reimburse reimburse the amount. They are respo responsible
nsible for repay
repayment.
ment.
d ) The bank should file a suit against the Accepto Acceptorr as he/she is in possession of the goods covered by Lorry
Receipt.
116. Corporate Bank had granted a term loan of Rs.20 lac to M/s Kawal Society Limited which is not being repaid.
The company is not signing the balance confirmation letter despite the fact that it has been sent three times. Bank
sends a legal notice for repayment of the loan which shows balance of Rs.27 lac now. Company confronts bank's
claim of Rs.27 lac by way of a letter stating that they have already paid Rs.5 lac due to which the amount should
be Rs.15 lac only:- only:- a the letter wil willl serve the purpose purpose of acknowledacknowledgementgement lettletter
er and extend th the
e limitation p period
eriod
for the entire
entire amoun
amount, t, b the letter
letter could
could extend
extend the the limitat
limitation ion period
period if it werweree duly st stampe
amped, d, c the let letter
ter is no nott an
ac
acknknow
owleledg
dgememenentt it is on only ly a de
deninialal of babank nk's 's cl
clai
aim,
m, d any
any of the the abov
above e
117. Your branch had granted a loan to Mr. Sachin Kumar and Sohan Kumar with joint and several liability clause.
On scrutiny of the documents it is found that the limitation of the documents is about to expire, the bank
approaches them for signing the balance confirmation letter but at that time, Mr. Sachin Kumar is out of town.
Hence the BC letter is signed by Mr. Sohart Kumr alone. Mr. Sachin Kumar returns to the town after the limitation
period
peri od expires
expires and ref refuses
uses to sign the balance balance conf confirmairmationtion:-
:- a limi
limitat
tation
ion is exte
extende
nded d agai
againstnst both of them them,,
b limi
limitati
tation
on is extende
extended d agai
againstnst Sohan
Sohan Kumar, Kumar, c Absence Absence of Mr. Sach Sachin in Kuma
Kumarr from the town wil willl be
e xclu de d f rroo m t h e c a l c u l a t i o n o f t h e l i m i t a t i o n p e ri o d , d all t he a bo ve, e I t i s pa r t i al
acknowledgement and does not bind any of them
118. Your branch had granted an overdraft to Mr. Ravi Kumar G on the basis of demand promissory note on July
12, 2001. Which among the following is the last day for the bank to file a case in a court of law to recover its
mone
mo ney,
y, in cacase
se Ravi
Ravi Ku Kuma marr G is no nott ab
able le to pa payy th
the e du
dues es? ? a July
July 12,12, 2004
2004,, b 1st
1st day
day of reop reopen en of cour
courtt
af te
te r J ul
ul y 1 2,
2, if t he
he c ou ou rrtt is c llo
os ed
ed o n J ul ul y 12, 200 4, 4, c Juull y 11, 20 04
04 , d a and b ab ov ove
119.Your branch had allowed an advance on January 12, 1999 to Mr. Suresh Kumar and for that purpose, had
obtained the simple mortgage of his commercial property and also secured it by having guarantee of his brother in
law Mr. Jyoti Babu. Mr. Suresh Kumar failed to repay the loan despite regular demand notice issued on him during
the first year itself. In this process the limitation against him has expired. What remedy is available with the bank
for recov
recovery ery of ththee dues
dues:- :- a lim
limitaitatition
on has has expir
expired ed due
due to which
which the the loa
loann can
cannonott be recov
recovereered,d, B sin since
ce the
loan cannot be recoveredrecovered from the b borrower
orrower the gua guarantor
rantor is als also
o not liable C the loan can be recov recoveredered by
enforcing the mortgage where the
limita
lim itatio
tionn is st
still
ill availa
available ble,, d bank
bank can pro proceeceeds ds agai
against
nst the
the guara
guaranto
ntorr by recal
recalli
ling
ng the loaloan n fro
from m himhim
a nd
nd maki n ngg hi m l iaia bl
ble fo r pa ym yme ntnt, e c a nd nd d a bo bo ve
ve
120.Your branch had granted certain credit facilities to M/s bulari Enterprises but due to non repayment of the loan
by the promoters, the account became non-performing advance and with a view to recover the same, the bank
decides to file a suit on January 25, 2004. It was observed that the limitation is expiring on January 26, 2004 and
bank is closed on January 27, 2004.
A bra
branch
nch sh shoul
ouldd immedi
imm edi ately ate ly seek
see k gui
guidandance ce fro m the their ir Region
Reg ional al Off
Office
ice,, B ban
bank k can app roaroach
ch the Jud Judici ici al
Officer at his residence
residence on January 25, 2004 itself and try to convi convince
nce the Judge for filing the suit on January 28,
c suit can be filed filed o on n Jan
Jan 27, 2004 whe when n tthe
he court
court willwill open afte
afterr tthe
he pub
public
lic holiday
holiday on Jan 26, 2004, 2004,
d bank bran
branch ch can make a rreque equest st to tthe he borrower
borrower to sign a fres freshh ackno
acknowle
wledgem
dgementent to exte
extend nd the limi limitati
tation
on
period.
ANSW
ANSWER
ER PR
PRAC
ACTI
TICE
CE TE
TEST
ST NO
NO.. 3
1 C 2 D 3 D 4 B 5 A 6 A 7 C 8 B 9 B 10 A
11 A 12 B 1 13
3 A 14 D 15 A 16
16 A 17 C 18 B 19 C 20 B
21 D 22 D 23 D 24 B 2
25
5 B 26
26 C 27 B 28 D 29
28 D 30 A
31 B 32 D 33 C 34 A 35 A 36
36 C 37 D 38
38 C 3
39
9 D 40 B
41 B 42 A 43 A 44 B 45 C 4
46
6 A 47 D
47 48 D 49 B 50 C
51 B 52 D 53 C 54 B 55
55 D 5
56
6 C 57 B
57 58 C 59 D 60 B
61 B 62 C 63 D 64 A 65
65 B 6
66
6 B 67 B
67 68 B 69 D 70 D
71 C 72 D 73 D 74 D 75 D 76
76 A 77 D
77 78 D 79 D 80 C
81 B 82 C 83 A 84 D 85 C 8
86
6 D 87
87 D 88 A 89 B 90 A
91 D 92 C 93 D 94 D 95 B 96
96 A 97 D
97 98 B 99 C 10
100 C
101 C
101 102 A 10
103 T 10
104 D 105 B 106 B 107 B 108 D 109 F 11
110 D
111 C
111 112 A 11
113 B 11
114 B 115 C 116 A 117 A 118 B 119 B 12
120 C
PRACTI
PRACTICE
CE TEST
TEST PAPE
PAPER
R NO. 4 ( TEST
TEST Y
YOUR
OUR SEL
SELF
F)
Page
01 Which of the following are two essential functions of banks as indicated in Section 5(b) of Banking Regulation Act
(a) accept deposits & to lend or invest such deposits(b)
deposits(b) accept deposit & undert undertake
ake non-fund based business (c) accept
de
depo
posi
sitsts an
and
d un
undedert
rtak
akee re
remi
mitt
ttan
ance
ce busi
busine
ness
ss (d
(d)) le
lend
nd & ininve
vest
st an
and
d is
issu
suee lett
letter
erss of cr
cred
edit
it:-
:- a a and
and d only,
only, b a
and c only, c c onl y, d a onl y
02 Which of the following
following group
group iis
s not included
included in the term goods,goods, as pe perr Sal
Sale
e of Go
Goods
ods Act
Act:-
:- a sha
shares
res & sto
stocks
cks,, b
gra
grass anandd sh
shararees, c act
ctio
iona
nabble cl
cla
aim
ims s and
and sto
stock, d st
stoc
ockk and
and gras
grasss
03 A sui
suitt is dee
deemed
med to hav
havee bee
been
n instit
institute
utedd (fi
(filed
led)) in a court
court:-
:- a whe
when n the cou
court
rt fee has been
been pai
paid,
d, b , when
plaint is presented
presented to the proper officer in th thee court,
court, c when plaplaint
int has been
been ack
acknownowled
ledged
ged by the cou
court,
rt, d
any of the above
04
which can Other than the/ decided
be prescribed business
businessby specified u/sGovt.
(a) Central 6 (1) (b) o
off Banking
RBI (c) BoardRegulation
Regulatio
of then Bank
Act,
Act, a(d)
ban
bank k ca
can
nu
Ministry unde
nderta
of rtake
ke a
Corporateany
nyAffairs.
o
othe
therr b
busin
usiness
ess
a a and b only, b b and c only, c d only, d a onl y
05 Private Sector banks are regulated by (a) Companies Act 1956 (b) Banking Regulation Act 1949 (c) RB I Act 1934
(d) Banki ng Co Compmpan
anie iess (A
(Acqu
cquis
isit
itio
ion
n & Tran
Transfsferer of Unde
Undert rtak
akin
ings
gs)) Act 1970
1970:- :- a a; :.b and c only, b b, c and d
only, c a, c and d only, d a t od al l
06 As per Sale of G Good
oods s Act
Act,, the
the goo
goodsds m
mean
ean the goo goodsds ide
identified
ntified and
and agreed upo upon,
n, at the time of a co contract
ntract of sal
salee is
made:- a future, b specific, c movable, d immovable
07 Time required for obtaining a copy of the order or award shall be excluded while computing the limitation period for
a fili
filing
ng revie
evieww appl
appliicati
cationon,, b fi
fillin
ingg revisio ionn, c fi fili
ling
ng an appl
applic
icaati
tion
on to se
sett asi
side
de the
the awar
award,
d, d all
all the
the
above
08 Which of the following are regulated by Banking Regulation Act 1949 (a) Public Sector Banks (b) State Bank Group Banks
(c) RRBs (d) Coop Land Mortgage Banks a a tto od a l l , b a to c only, c a, b and d only, d a,-
c and d only
09 In the context of Cooperative Banks, which of the following statements are correct (a) coop bank operating in one
State obtains registration
registration under State Coop Societies Act (b) for Coop banks operatin operating g in more than one State, CentraCentrall
Govt. appoints Registrar (c) Coop banks are under purview of B R Act u/s 56 (d) Where Coop bank is registered under
DICGC Act, RBI can order its winding up:- a atod al l , b a to c only, c a, c and d only,
d b anand d d on
onlyly
10 Which
Which of th thee follow
following
ing stat
statem
emen
entt is a nonott corre
correct: ct:-- a Coop Bank oper operating
ating in more than one state is
registere
regi steredd under MultMulti-i-Sta
State
te Co
Coopop SoSocie
cieti
ties
es Ac
Act, t, b Govt
Govt.. ca
can
n exe
exempmptt a babank
nk fro
from
m prov
provisi
ision
ons
s of Bank
Banking
ing
Regulation
Act, on its own, c The company mattersmatters relating to a banking company are regulated regulated by an authority under the
Companies Act, d Banks undertake trading in shares subject to regulation by SEBI.
11 For foreclosure of a mortgage, the limitation period is 12 years fr fro
om:- a date of loan document, b
date of mortg
ortgag
age,
e, c da datete wh
whenen th
thee mon
money sec
secured
ured by th
the
e mort
mortga
gag
ge be
beco
come
mes s du
due,
e, d an
any
y of th
the
e
above dates, whichever is earlier
12 Whi
While
le is
issui
suing
ng a bank
banking
ing llice
icense
nse ffor
or a foreig
foreign
n banks
banks RBI,
RBI, in
in addit
addition
ion to
to usual
usual cons
conside
iderati
ration
on ta
takes
kes int
into
o accoun
accountt (a)
whether the business will be carried by the company in public interest (b) whether the law of the country where the bank
originated discriminates against Indian banks (c) whether the company complies with provisions of B R Act, as applicable
to foreign companies: a a to c all, b a and b only, c b and c only, d a and c
only
13 As
As pe
perr Sa
Sale
le of
of Goods
Goods Act
Act,, th
the
e goods
goods wh which
ich are to be man
manuf ufact
acture
uredd by the seller
seller aft
after
er makin
makingg of contra
contractct of
sale:- a future, b specific, c movable, d i mm
m m ovov aabb lle
e
14Which of the following statements are not 'correct in connection with shareholding in an Indian bank under provision of
BR Ac
Act:
t: a ther
there e is no ceil
ceilin
ingg on a pers
person
on's
's ho
hold
ldin
ing
g of shar
shares
es,, b no shar
shareh
ehol
olde
derr ca
can
n ex
exer
erci
cise
se vo
voti
ting
ng righ
rights
ts in
ex
exce
cess
ss of 10
10%% of tota
totall voting' rig hts, cth
cthe
e prov
provis
isio
ion
n of 1010%
% ceilceilin
ing
g rest
restri
rict
cts
s th
the
e tran
transf
sfer
er an
and d re
regi
gist
stra
rati
tion
on of
such transfer, d the provisions of Companies Act also govern transfer of shares of
banking
bankin g companies.
companies.
15 Bef
Befor
oree de
decla
clarin
ring
g a div
divide
idend
nd a ban bankin
king g comp
compan anyy has
has to re reduducece from
from its profi
profits
ts (a) prelim
prelimin
inary
ary or share
share selli
selling
ng
expenses
expens es (b) orga
organiz
nizatio
ationn exp
expens
enses
es (c) brokerag
brokerage e and loss incurr
incurred ed (d) bad debts
debts for whiwhich
ch adequa
adequatete provisi
provision
on has
been made: a only a to c, b only b to d, c only a and d, d ononly b and c
16 In ca
case
se of no
non-
n-re
resi
side
dentnt pe
persrson
ons, s, wh
whicich
h of the
the fo
foll
llow
owin
ingg in
inco
come
me is tatax
xabl
ble:
e:-- a ea
earnrned
ed in In
Indi
diaa only
only,,
b ea
earn
rned
ed whil
whilee ou
outs
tsiide India
dia on
onlyly,, c earne
earned d ou
outs
tsid
idee In
India
dia,, wh
while
ile in Indi
Indiaa on
only
ly,, d all the abo
above
ve
17 RBI ca
can
n appoin
appointt Chai
Chairman
rman o off a bank (a) (a) if the
the office
office is lyi
lying
ng vavacan
cantt and not
not fi
fill
lled
ed imm
immedediat
iatel
ely
y (b)
(b) if in th
the
e opin
opinioion
n
of RBI such vacant position is to be against interest of the banking company (c) such appointment shall be maximum for a
pe
perio
riod
d of 5 years
years (d) there
there is prprov
ovis
isio
ionn fo
forr re-ap
re-appoi
point
ntme
mentnt af
after
ter th
thee in
initi
itial
al pe
perio
riod:
d:-- a a to d all correct,
correct, b a, b an
anddd
are correct, c a, b and c are correct, d b, c and d are correct
18 In th
the
e cont
contex
extt of c
cap
apit
ital
al o
off a ban
bank k (a
(a)) the
the auth
authori
orize
zedd capi
capitatall me
meananss the maximum
maximum limit limit of share capital
capital which
the bank is authorized to have under its memorandum (b) the amount of share capital which is subscribed and
received is called paid up capital (c) the amount of share capital which is issued and paid up is called subscribed
capital):
a a to c all correct, b a and b only are correct, c a and c only are correct, d b and c
Page
only are correct

19 Under S Sale
ale of Goo
Goodsds Act, iiff the sale iis s by sample,
sample, whic
which h of the foll
follow
owining
g iimp
mpli
lied
ed cond
condit
itio
ionn iis
s not
not ccorr
orrec
ect:
t:-- a
bu
bulk
lk shal
shalll corr
corres
espo
pon
nd wi
with
th th
the e sampl
ample e in th
the
e qu
qual
alit
ity
y, b bu
buyer
yer shall
shall have
have an op oppor
portun
tunity
ity to
co
comp
mpar
are
e the
the bulk
bulk wi
with
th the
the sam
ampple
le,, c go
good
ods s shal
shalll be free
free from
from any
any defe
defectct,, re
rend
nder
eriningg th
them
em
un- merchantable, which would not be apparent on reasonable examination of the sample, d none of
the above
20 Bank
Banks s are
are req
requiuire
red
d to de
depo
posi sitt th
the
e amou
amount nt of TDS
TDS,, in thethe go
govt
vt.. account:- a wit
ith
hin one
one month
onth from
from da date
te
of deduction, b within 7 days from date of deduction, c within 7 day ays s from close of the month th,,
during which deduction is made,made, d withi
within n one month
month from closeclose of the month,
month, durin
during g which
which deduc
deductio
tionn is made
made..
21 RBI can
cannot
not ggive
ive dir
direction
ections s to ba banks
nks foforr loans and advance
advances s in rres
espe
pect
ct of wh
whic
ich
h of th
the
e fo
foll
llow
owining:
g:-- a purp
purpose
ose
for
for wh
whic
ich
h the
the loan
loan can
can be alallo
low
wed,
ed, b ma
marg
rgin
in to be main
maintatain
ined
ed fo
forr secu
securered
d adv
advananc es, c
ces, maximum
amount of loan that may be sanctioned to one company, firm or association of persons or individual
d none of the above
22 As peperr Sa
Salele of Good
Goods s Act,
Act, th
the
e of the selseller
ler is ter
termi
mina
nate
tedd when
when the buy buyer
er get
gets
s poposse
ssessi
ssion
on of the goods:
goods:-- a
warranty, b condition, c ______ lien, d agreement
23 Banks are are require
required d to transfer
transfer a part o off their profits
profits to a Reserv
Reserve e Fund
Fund (a)
(a) u/s
u/s 17-
17-11ooff B R AAct
ct (b)
(b) the
the am
amou
ount
nt to
be transfer is 20% of such profits (c) profits for this purpose are after payment of dividend (d) Central Govt. can exempt a bank
from
from such
such trtran
ansf
sfer
er on RBRBII re
reco
comm
mmen enda
dati
tion
ons.
s. Wh
Whic ich
h of th
thesesee is corr
correc
ect:
t:-- a a to d all,
all, b a, b andand c only
only,,
c a, b and d only, d b, c and d only
following infor
informatio
mation n regard
regardinging retur
return n of
of sservice
ervice tax is correc
correct:-
t:- a ret
return
urn is to be subm
submitte
itted
d on hal
half f
ye
yearl
arly
y ba
basis
sis on Form
Form ST-ST-3,3, b retreturn
urn is to be sub
submi
mittetted
d on qu
quart
arterl
erly
y ba
basis
sis on For
Form m ST-
ST-5,5, c retur
return
n is to be
subm
submititte
ted
d on half
half year
yearlyly fo
forr Ma
Marr and
and DeDec,c, d alalll th
thee abov
above e
25 If a secu
securi rity
ty is in posses
possessio sionn of
of a ba
bank,
nk, it can be sol soldd by
by the ban
bank:-
k:- a by fil
filing
ing su
suitit unde
underr SARF
SARFAESAESII Act,
Act,
b by givin
ivingg 60 dadayys nototiice unde
nder prprov
oviisi
sio
ons of SA
SAR RFAESI
ESI Act, c by giving reaso
reasonable
nable time notice under
pro visi ons of Indi an Co Contr
ntrac
actt Act,
Act, d eit
eithe
herr un
unde
derr prprov
ovisi
ision
onss of SARF
SARFAE AESI
SI Act or Indi
Indian
an Cont
Contra
ract
ct Act
Act,, at the
the
discretion
discre tion of the bank
26 Ce
Cent
ntra
rall Govt
Govt.. can
can make
make rurules
les fo
forr pr
pres
eser
erva
vati
tion
on of re
reco
cordrds
s / book
books s u/s
u/s of B R AcAct,t, RB
RBII can
can ma
makeke rule
ruless u u/s
/s
of B R Act and banks can return the paid instruments to customers u/s of B
R Act:- a 45Z, 35, 45Y, b 45Y, 35A, 45Z, c 21A, 35A, 51Z, d 21A, 35A, 45Z
27 A b ank ing com pan y ca n ama lga mat e wi th an oth er b ank ing co commpany
pany of it its
s own,
wn, ca
callled
led am
amalalga
gammatio
ation.
n.
Central Govt. can also
also ord
order
er ama
amalglgama
amatiotionn of two ban
bankin
kingg com
companpanieies
s u/
u/ss 396 of in co
consnsul
ulta
tati
tion
on wi
with
th
a voluntaryry,, RBI Act, SEBI, b voluntaryry,, Companies Act, RBI, cvo
cvolluntary, RBI Act, RBI
d vol
olun
unta
tary
ry,, Co
Compmpananieies
s Ac
Act,
t, SEBI
SEBI
28 Which of the following provisions of SARFAESI Act were amended in the year 2004 after Mardia Chemicals vs
Union
Union of India
India and others,
others, judgeme
judgement nt of Supreme
Supreme Court:
Court:-- a Sec
Sec 17 (2(2),
), rel
relati
ating
ng to is
issu
sue e of po
posse
ssessi
ssion
on no
noti
tice
ce of
60 days
days,, b Sec
Sec 13 (2 (2),
), re
rela
lati
ting
ng to is
issu
suee of poss
possesessi
sion
on noti
notice
ce of 60 daydays, c Se
Secc 17 (2
(2),), re
rela
lati
ting
ng to dep
deposi
ositt of
75% amount
amount by borro
borrowewerr before
before ap apprproa
oach
chin
ing
g DIRT
DIRT,, d Sec '13 (2), rel relati
ating
ng toto deposi
depositt of 75% amount
amount by by borro
borrower
wer
before approaching DRT
29 Under
Under provis
provisionsions of SBI ActAct 1955,
1955, SBI is manag
managed ed by (a)(a) Board
Board consis
consistinting
g of
of Chai
Chairman
rman,, Vice
Vice Chai
Chairman
rman,,
maximum two Mg. Directors etc (b) Chairman and Mg. Director are appointed for a period not exceeding 5 years (c)
Local Boards are set up where the bank has Local HO (d) Local Boards consists of Chairman and other elected and
nomin
minated memb
membe ers
rs::- a a to d are correcrect, b a to c only are correct, c b, c and d are co corrrect,
d
30 a
A, Lok
c aknAdal
Lo d daltat rhas
Ad e csojuri
ha rrrisd
ju esdic
ct icti
tion
on :- a to deci decidede a ca case
se as peperr its
its own
own ju
judg
dgem
emenent,
t, b to de dete
term
rmin
ine
e and
and arri
arrive
ve at a
comp
compro romimise
se or se
settttle
lemement nt,, c to decide
decide a case as pe perr its own judgejudgement
ment based
based on evidence
evidence,pr ,prod
oduc
uced
ed befo
beforere it,
it,
d any of the above
31 Whi
Which of th the e fo
follllow
owining
g does
does notnot ma
matc
tch:
h:-- a a corr
corresespopondndin
ingg new
new babank
nk est
estabablilish
sheded un
unde
derr Bank
Bankin ing
g
Companies
Compa nies (Acquis
(Acquisitioition n and
and Transf
Transfer er of U
Unde
ndertaki
rtakings)
ngs) Act 1970-
1970- St State
ate Bank,
Bank, b a princi
principal
pal coop
coop bank
bank in a dist
distt.
t. —
Cent
Ce ntra
rall Coop
Coop Bank
Bank,, c a coop society, the primary objective o off which is to finance its its mem
membe bers
rs — coop
coop cr cred
edit
it
soci
societ
etyy, d bank
bank whi hich
ch prom
promototes
es an RR
RRB B — spon
sponso sorr bank
bank
32 Unde
Underr provi
provisi sion
ons s of SARFA
SARFAES ESII Act,
Act, th
thee secur
securit ity
y recei
receipt
pt ev
evid
iden
ence ces:-
s:- a un
undiv
dividided
ed right
right or inter
interes
estt of the
purc
purchahase
ser,r, in th
the
e se
secu curirity
ty,, b inde
indepe
pend
nden
entt righ
rightt or inte
intere
rest
st of th
the e purc
purcha
hase
ser,
r, in th
the
e secu
securi rity
ty,, c excl
exclususiv ive
e
rightt or int
righ interes
erestt of the pu purcha
rchaser,
ser, iinn the securi
security,
ty, d exclusive
exclusive ri right
ght or interest
interest of the se
seller
ller,, in the securi
security
ty
33 A bank has made payment across the counter, of a cheque issued as a crossed cheque and the holder claims
damages
dama ges fro
fromm the
the bank.
bank. Under Under suc suchh circ
circumst
umstanc
ances,es, the bank
bank isis liab
liable:
le:-- a to the drawer
drawer of the cheque, cheque, b to
the tru
truee owner
owner of the cheque cheque i.e i.e.. holder
holder,, c to the drawe
drawerr andand also
also the payee,
payee, d all the above
above
34 A bank makes payment of two cheques on which, later it is found that the signatures of the drawer are forged. The
first account is that of a company and the 2 nd account is a joint account in which signatures of one of the account holders
nd
a
careser,eal:- a b
ba
a
bnk bisank islialbialeble fofo
r rboth tthhee chefiq
rsutes, cheq
ue c a nd
bank fis
orliabl ethe
liable hafirst
for the lf cheque
chaeque
mounand
t nd not
a in liable
the for
liable 2
for the
nd
2 cheque, d ba
bank nk is no
nott liab
liable
le fo
forr an
anyy of th
thee cheq
chequeue,, if pa
payyme
mentnt is in du
duee courses
35 Und
Under
er FEMA,
FEMA, the term
term author
authorise
isedd person
person mean
means:-s:- a authauthor
oris
ised
ed de
deal
aler
ers,
s, mone
money y ch
chan
angegers
rs,, al
alll bank
banks, s, b
auth
author
oriise
sed
d deal
dealer
ers
s and
and al
alll bank
banks,
s, c auth
author
oris
ised
ed dea
deale
lers
rs and mone
money y ch
chan
ange
gers
rs,, d al alll th
the
e abov
above
e
Page
36 Banks can issue notice for enforce

enforcement
ment of security
security interest
interest under SARFAES
SARFAESII Act wh
when:
en:-- a there is default by
borr
borrow
ower
er and
and se
secu
curi
rity
ty is in poss
possesessi
sion
on of th the
e bank
bank,, b th
the
e accccou
ountnt is NP
NPAA and
and sesecu
curi
rity
ty is in po
poss
sses
essi
sio
on of
th
thee bank
bank,, c th
thee acc
ccouount
nt is su
suiit fi
file
led
d and
and sesecu
curi
rity
ty is in poss
possesessi
sion
on of ththe
e ba
bank
nk,, d the account is suit filed
and security is in possession of the borrower
37 X appointed Y as his agent to operate his account and route business transactions through Y's personal account
also. Y misappropriated the proceeds of a cheque in the name of X but deposited by Y in his personal account. X sends
notice to the bank for negligence and conversion:- a bank is liable for the conversion as Y has done something that
bank
bank shshou
ouldld not
not have
have appa
apparerent
ntly
ly,, b bank
bank is liab
liable
le si
sinc
ncee it is a ca
casese of co
conv
nver
ersi
sionon,, c bank is not
lia
liable
ble because,
because, X h had
ad given
given specific
specific auth
authori
ority
ty to Y to us
usee his
his pe
pers
rson
onal
al ac
acco
coununtt al
also
so.. d bank
bank is not liable because
because
for agent's action, the principal liable.
38 Whi Whichch of the
the fo
foll
llowi
owing
ng is not correc
correctt with
with regar
regard d to a defer
deferred
red pay
payment
ment guar
guaran
ante
tee:
e:-- a guar
guaran
ante
tee
e
is
of issued
issu
termedlo
term normal
norand
loan
an mally
an dlyapprai
forraisal
app purcha
pur
salchases se
iis alsof
also capita
capeital
o done
don lilke
likeass
assets
a ets
te
term
rm onloan,
lolon
long
an,g ter
term
mcdiffere
credi
creditt fro
from
cdifference m the
nce suppli
supnplier,
betwee
between er, and such
TL suchbguarante
bguara
guara ntee
guarantee
nteee is
iis issued
issoutlay
s of ued
out inof
lay lieu
lieu
funds
fun ds,, d ba bank
nk rerecocord
rdss such
such guar
guaran antetees
es in ththe
e bala
balanc
nce e shee
sheett un
unde
derr th
the
e TL in Sched
Schedul ulee 9 of bank
bank bal
balan
ance
ce sheet
sheet
39 Bank X gives a bank guarantee on behalf of one of its customers against against some payment
payment to be deposited
deposited by the the
customerr in a pending court case. Such guarantee can be classified
custome classified as (a) financial guarantee
guarantee (b) performance
guaranrantee (c) defe ferr
rre
ed payayme men nt guarantee (d) statu tuttory gu
guaaranteteee:- a a or d, b only a, c
only d, d b or e
40 As per FEMA 1999 1999,, the ter term
m foreign
foreign exchexchange
ange does not includ include e which
which of the fol
follow
lowing
ing:-
:- a amoun
amountt payabl
payable e in
fo
fore
reig
ign
n cu
curr
rren
ency
cy,, b DD draw drawn n in In
Indi
dian
an cu curr
rren
ency
cy but
but pay
payable
able in fo
fore
reiign cu
curr
rren
ency
cy,, c DD dr draw
awn n abro
abroadad bu butt
paya
payabl blee in In
Indi
dian
an cucurr
rren
encycy,, d nonenone of th thee abov
above e
41 For a securitization company, whi which
ch of the following condition is applicable
applicable forfor th
their
eir capital and capital adequacy
ratio:-
ratio:- a minimu
minimum m capital Rs.2 Rs.200 00 cr and capital adequa adequacy cy ratio of 15% of the financial asset assets s acquired by the compa
company, ny,
b minimum
minimum capita
capitall Rs.100
Rs.100 cr and cap capita
itall a
adequ
dequacyacy ratio
ratio ofof 1
15%
5% of the financia
financiall aasset
ssets s acq
acquir
uired
ed by the company
company,,
c minimum
minimum cap capita
itall R
Rs.10
s.1000c crr and
and capita
capitall a adequ
dequacyacy ratio
ratio ofof 1
10%
0% of the financ
financial
ial assets
assets acqacquir
uired
ed by the company
company,,
d minimum
minimum capi capital
tal Rs.
Rs.200200 cr a and
nd capi
capital
tal adequa
adequacy cy rrati
atio
o of 10% of the
the finan
financia
ciall a
ass
ssets
ets acq
acquir
uired
ed by the compa
company ny
42 To enable the beneficiary to rely on the authenticity and genuineness of the LC, the letter of credit is received by
tneg
hegot
ne beiati
otianting
engficiban
aryn:k,
ba - which is toama
hich make thyrme
ke pay
pa ougnth also
ment ad
al vi,sing bank,d tthro
so, b h diconfi
hroug
ugh rectfirmi
con lyrming
frong
m thbank
e ink
ba ssuito
ng bmak
anke, su
make cre th
sure atfropay
that m mentt
paymen
would be definitely received.
43 In an LC the documedocuments nts are to be negot
negotiated
iated in the beg
beginning
inning of Se Septe
ptember
mber which
which mea
means ns that
that docum
document
entss can be
st 1h st
presented for negotiation during:- a first week, b first two days, c 1 to 10 of the month, d l
to 15th of the month
44 If there
there is a contraventio
contravention n of pro
provision
visionss of FEM
FEMA A 1999 by a pers person
on and the amount
amount is not
not quaquantifiab
ntifiable,
le, penalty
penalty can
can
be levied:- a up to Rs.2 lac, b up to amount involve lved in such contravention, c up to two times of
amount
amo unt invo
involved
lved in su such
ch contr
contrave
aventi
ntion,
on, dup to to th
thrice
rice the amo
amount unt invo
involved
lved in su
such
ch contr
contrave
aventio
ntion n
45
45 A se
secur
curity
ity interes
interestt ccrea
reated
ted under
under SARF
SARFAES
AESII Ac
Actt requi
requiring
ring reg
regist
istrat
ration
ion with Centra
Centrall Regis
Registry
try with
withinin a period
period of:- a 15
days, b 30 days, c 45 days, d 60 days
46 If a bil
billl of exc
exchange
hange is disdishonou
honoured
red (a
(a)) the drawer
drawer is liable
liable to tthehe holder
holder (b) drawer's
drawer's liability
liability is secondary
secondary ifif it is
accepted (c) drawer's liability is primary when it has not been accepted (d) drawee is liable whether he accepts the bill or
not in all circum stances. Which of the se is corre ct:- a a, b and c only, b aa,, b and d only, c b,
c and d only, d a to d all
47 Which
Which of the followi
followingng types
types of cha
charge
rgess on the fol
followi
lowing
ng securi
securities
ties does match:-
match:- a book deb debtsts – assignm
assignment,
ent,
b bank deposits – assignment, c immovable property – mortgage, d national saving certificates -
pledge
48 (a) an
an equit
equity
y shar
share
e is a share
share whic
which
h is not a pref
preferenc
erence
e share (b) a preference
preference share
share is one
one which gets regular
regular
dividend irrespective of profit position and preference in case of liquidation (c) debenture is document by which a company
acknowledges its indebtedness (d) trust receipt is a document is an undertaking by the borrower when the goods are released
by the bank to the borrower without payme
ayment
nt bei
being made
made by the borrow
rroweer:-
r:- aa to d are corre
rrect, b a, b and c
are correct, c a, c and d are correct, d b, c and d are correct
49 Which Which of th the
e fo
follllow
owining
g st
stat
atem
emenentt is co
corrrrec
ect:
t:-- a ce
cert
rtifi
ifica
cate
te of in
inco
corpo
rpora
rati
tion
on is re
requ
quir
ired
ed by a pu
publi
blic
c
compa
company ny onl
only y and
and not
not by a priv privat
ate
e co
comp
mpanany y, b cecerti
rtifi
fica
cate
te of co
comme
mmencnceme
ement nt of busi
busine
nessss is conc
conclulusi
sive
ve
proof of
existence of a company, c certi
certificate
ficate of incorporatio
incorporation n is conclusive proof of exist existence
ence of a company
D certificate of commencement of business is required by a private
company only
50 The mor
mortgatgage
ge in which
which the mortgag
mortgager er transf
transfersers the posses
possessiosion n tto
o th
thee mortg
mortgag
agee is calle
calledd mortg
mortgagage.
e. In such
such
mortgage,
mortgag e, ((there
there is) / (t
(there
here is no), personal
personal liliability
ability of the the mortgager
mortgager:- :- a Engl English,
ish, the
there
re is,
is, b Mortgage by
condiditi
tio
ona
nall sal
ale
e, th
the
ere is no no,, c si
simp
mplle mo morrtgage
gage,, ther
here is no, d usufru
fructutua
ary mor
mortgag age,
e, th
the
ere is no
51th
with
wi A mortgage
withi
within
n mo
mont when
nths
hs,
, if thcreated
the
e va
valu e through
lue of mort angeinstrument
mortga
gage instrumen
mo
mone y ist in
ney Rswriting
Rs.. :- a (called
Regi
Registmortgage
stra
rarr of Fi
Firmdeed)
rms, isnths
s, 4 mo
montrequired
hs,, 10
100 to mo
0 or be re,
registered
more , b
Regi
Re gist
strar
rar of Assur
Assuranc
ances,
es, 4 month
months,
s, 100 or more,
more, c Regi
Regist
strar
rar of Compa
Companinies,
es, 3 month
months,
s, 100 or more,
more,
d Regi
Regist
stra
rarr of Assu
Assuraranc
nce,
e, 3 mo
mont
nths
hs,, mo
more
re th
than
an Rs.1
Rs.100
00
52 Which of tthehe following
following feature of llimited
imited liabil
liability
ity partnership
partnership is not correct
correct as per LLP Act 2008:-
2008:- a LLP is a
Page
se
sepa
para
rate
te legal
egal enti
entity
ty,, b LLP is se
sepapara
rate
te fr
from
om it
its
s part
partne
ners
rs,, c LLP has perpetual succession.
Death
eath of part
partne
nerr does
does not
not af
affe
fect
ct th
the
e LLP
LLP, d none
none of ththe
e abov
above e
53 XYZ created equitable mortgage in favour of Bank A on Jan 14, 2007 (not registered), a simple mortgage with Bank B
on Jan 28, 2007 (and registered on Mar 12, 2007) and a simple mortgage with Bank C on Feb 10, 2007 (and registered on
Fe
Febb 28, 20
200707).
). The prprior
iority
ity of mortg
mortgage
age in thi
this
s cas
casee wo
woululd
d be in the fol
follow
lowing
ing ord
order
er:: - a Bank
Bank C, Bank
Bank B an
and
d Bank
Bank
A, b Bank B, Bank C and Bank A, c Ba
Bank
nk,, B, BaBank
nk A an
andd Ba
Bank
nk C, d Ba
Bank
nk a, Ba
Bank
nk B an
and
d Ba
Bank
nk C
54 Un
Undederr RTI Act
Act 2005
2005,, the
the in
info
forrma
mattio
ion
n can
can be tak
taken in the
the for
form of:-
of:- a di
disk
sket
ette
tess or flflop
oppi
pies
es,, b
tape
tapess or vi
vide
deo
o ca
cass
sset
ette
tes,
s, cprin
cprinto
tout
utss or in any
any othe
otherr el
elec
ecttroni
ronicc form,
orm, d al
alll th
thee abo
bove
ve
55 In ca case
se of hyp
hypot
othec
hecat
ation
ion,, whi
which
ch of the follow
following
ing is not a cor
correc
rectt st
stat
atem
emen
ent:
t:-- a it is define
definedd as pe
perr
S AR F AE S I Ac t, b the ownership remains with the borrower, c the possession remains with
the cr
creeditor
itor,, d the cr
creeditor
itor has
has the
the rig
ight
ht to demaman nd po
poss
sses
esssio
ion
n
56 Where forged notes or counterfeit currency has been used as genuine, record of such transactions is required to be
maintain
maintained
ed if th
thee am
amouountnt of su
such
ch tran
transa
sact
ction
ion is
is:-
:- a Rs.
Rs.500
5000000 or abo
above,
ve, b Rs.1 Rs.1 lac or above,
above, c Rs.Rs.10
10 lac or above,
above,
d all transac
transaction
tionss irres
irrespect
pective
ive of amount
amount
57 Whic
Whichh a
amon
mong g th
thee fo
follo
llowin
wing g can
can not
not be deem
deemeded to be a cont
contin
ingen
gentt cr
cred
edit
it faci
facilit
lity:
y:-- a lelett
tter
er of cr
cred
edit
it,, b bank
bank
guarantee, c co-acceptance , d overdraft which is not availed.
58 In the context of partnership firms, which of the following is not tr true
ue:-
:- a partner
partnershi
shipp are regist
registere
eredd with
Registrar
Registrar of Firms and
and not the partnersh
partnershipip deeds
deeds,, b Regist
Registration
ration of Part
Partnership
nership firms is not compulsory
compulsory.. It is optiona
optional,
l, c
Registered
Regis tered ffirms
irms havhavee certain advant
advantages
ages ovover
er the unre
unregiste
gistered
red fir
firm,
m, d Non-r
Non-regegis
istr
trat
ation
ion of the
the fir
firm
m
adversely affect the capacity of the partners to carry on the business
59 If a perperson
son seek
seekss info
informa
rmation
tion from
from a public
public aut
author
hority
ity:-
:- a he has to give reasons
reasons for seeking
seeking the informat
information,
ion,
b he has
has nonott to gi
givve re
reas
ason
onss for
for se
seek
ekin
ingg the
the info
inform
rmat
atio
ion,
n, e if reas
easons
ons are gigive
ven,
n, it can
can he
helplp in qu
quic
ick
k
di
disp
spos
osal
al of th
the
e re
requ
ques
estt fo
forr in
info
form
rmat
atio
ion,
n, d inf
informa
ormatiotion
n can not be provid
provided ed by the public
public author
authority
ity withou
withoutt
knowing the reasons for seeking information
60 Under Prevention of Money Laundering Act 2002, which of the following can prescribe the nature of records to be
maintained by a bank:- a RBI and State Govt, b Central Govt. and State Govt, c SEBI and
RBI,
RB I, d SEBI
SEBI and
and St
Stat
ate
e Govt
Govt..
61 If a company
company does not not want
want to ininclude
clude in itits
s name,
name, the w words
ords `li
`limit
mited
ed',', it ca
cannddoo so
so u/s
u/s 25 of Co
Compampani nies
es Act
1956, after obta taiining license frfro
om:-
m:- a SEBI, b Company Law Board, c Registrar of Compa mpany ny,,
d Regional Director (as per provision
provisions
s of Companies
Companies Act 2013, the relevant
relevant section
section is 8)
62 A charge which is created by a company on its present or future assets and is not attached to a particular assets is
called: a Exclusive charge, b Pari-passu charge, c Floating charge, d
fixed charge
63 SARFAESI Act has been declared declared valid by Supreme Co Court
urt but it stru
struckck down
down Sectio
Section n of th the
e Act,
Act, in thethe case
case of
VS , whi
which
ch provided for deposit
deposit of 75% of the amount due to the bank before approaching approaching DR DRT: T:
a 13,
13, Mard
Mardia ia Chem
Chemicical
alss vs IC
ICIC
ICII Bank
Bank LtLtd,
d, b 17(2
17(2),
), Ma
Mardrdia
ia Chem
Chemic ical
alss vs Un
Unioionn of In
Indi
dia
a & ot
othe hers
rs
c 13,
13, Mard
Mardia ia Chem
Chemicical
alss vs Unio
Union n of In
Indi
dia
a & ot
othe
hersrs,, d 17
17,, Mard
Mardiaia Chem
Chemic ical
als
s vs Unio
Unionn Ba
Bank
nk of In Indi
diaa
64 To bring them in tune with the Information Technology Act 1999, which of the following Act has not been amended by
IT Ac
Actt 19
19999:
9:-- a Indian
ian Pe
Pena
nall Code 1860
1860,, b India
dian Ev
Eviide
den nce AcActt and Ba Bannke
kersrs'' Boo
ookk Ev
Evid
iden
enc ce Act, c
RBI Act 1934, d Compa mpanie
nies Act 1956
65 Where
Where a per person
son wants
wants to file a ccase
ase under
under SA SARFAES
RFAESII Act, iitt will app approaroach
ch and foforr appeal
appeal,, it wil
willl go tto
o
a Distt Court, High Court, b High Court, Supreme Court, c Debt Recovery Tribunal, Debt
Recov
ecoverery
y Ap
Appepell
llat
ate
e Tri
Tribuna
bunall, d De
Debt
bt Re
Recocove
veryry Trib
Tribun
unal
al,, High
High Court
ourt
66 The
The te
term
rm 'sec
'secu uri
rity
ty in
inte
tererest
st'' does
does not
not in
incl
clud
udee th
the
e fo
foll
llow
owin
ing,
g, as fa farr as SARFA
SARFAESIESI AcActt is co
conce
ncern
rned:
ed:-- a MortgMortgag
age,
e,
b Hypothecation, cPPlledge & lien, d A ss
s s ig
ig n
nm me ennt
67 In the process of securitizati
securitization on of NPA accounts, the qualified in insti
stitut
tutio
ional
nal buye
buyersrs ar
aree eli
eligi
gible
ble to purc
purcha
hase
se
securi
sec urity
ty receip
receipts
ts iss
issued
ued by the secuir
secuiriti
itisati
sation
on company.
company. QIB does not includ include:-
e:- a financia
financiall instit
institutio
ution
no orr insura
insurance
nce
company, b banks, mutual funds, c stat tate fin
financi ciaal cor
orp
porat
atiions
ons / stattate industri rial
al
development, cor corpopora
rati
tion
ons,
s, d join
jointt stoc
stockk co
comp
mpananie
ies
s
68 Which of the following has the authority under SARFAESI Act to prescribe income recognition, accounting standards,
pr
prov
ovisisio
ioni
ning
ng norm
norms s fo
forr Secu
Secuririti
tisa
sati
tion
on or ReReco
cons
nstr
truc
ucti
tion
on Comp
Compan anie
ies:
s:-- a RBI,
RBI, b R o C , c SEBI, d
Company Law Board
69 What is the function of the public key out of th thee pair of keys used in an elec ectr
tro
onic sign
gna ature:
e:-- a to cre
rea
ate
an electronic signature, b to verify an electronic signature, c to create and verif rify an electronic
signature, d all the above
70 When
When sale
sale of secur
securityity is mad
made e by the creditor
creditor under SARFAE
SARFAESI SI ActAct,, the sale proceeds
proceeds are to be utiliz utilized
ed (a) first
towards costs incidental to preservation and protection of security (b) dues of the secured creditor (c) surplus to person
entitled there to in accordance with the rights and interests:- a a to c all correct, b onl
only a and b
correct, c only b and c correct, d only a and e correct
71 in a sec
securi
uritiz
tizati
ation
on transa
transactiction
on the follo
followin
wingg doc
docume
uments
nts are req
requir
uired
ed (a) offer
offer documen
documentt (b) debentur
debenture
e (c)
agre
agreem
emen
entt (d)
(d) se
secu
curi
rity
ty rece
receip
iptt (e
(e)) di
disc
scha
harg
rge
e cert
certif
ific
icat
ate
e by th
the
e NPA
NPA sesell
llin
ing
g ba
bank
nk:-
:- a ononly
ly a to d, b on
only
ly b to d,
only c to e a to e all
72 After receipt of notice of possession from the bank, if the borrower transfers, other than in normal course of business,
Page
any of his assets without consent

consent of the bank, what is the punishment under SARFAESI Act:- ther there e is punishmen
punishmentt in the
for
form
m of fine only there is punishment
punishment in the form of imprisonment
imprisonment up to 2 years the punishment can be in the form of fine
and imprisonment up to I year or both there is no provision of any punishment
73 When a rereques
questt fo
forr infor
informati
mation on iis
s re
reject
jected
ed by Public
Public Informat
Information
ion Offi
Officer
cer under
under Righ
Rightt to Informat
Informationion Act,
Act, he is
not
not re
requ
quir
ired
ed to co
comm
mmun unic
icat
atee to th
thee requ
reques esteter:
r:-- a th
the
e reas
reasonons
s fo
forr re
reje
ject
ctiion,
on, b th
the
e peri
period
od wi
with
thin
in whic
which
h an
appe
appealal ca
cann be pr
pref
efer
erre
red,
d, c th thee part
partic icul
ular
ars
s of appe
appellllat
ate
e auth
author
orit
ity
y, d an ap
apol
olog
ogyy fo
forr not
not pr
prov
ovid
idin
ing
g
information
74 As per Rules under Prevention of Money Laundering Act 2002, the banks are not required to obtain which the
following documents while opening account of a company:- a Certificate of Incorporation, b
Memorand
Memo randum
um ofof As
Associ
sociatio
ationn an
andd Art
Articl
icles
es of of Ass
Associ
ociatio
ation,
n, c Board resolutio
resolution n and official
official valid document
document in respect
respect
of th
thee pe
pers
rson
on op
oper
eraati
tin
ng th
thee acco
accou unt
nt,, d none
one of the abo bovve
75 The prov
provisiisions
ons of SARFAESI
SARFAESI Act are appl applica
icable
ble in whi
which ch of the folfollow
lowing
ing transact
transaction
ions:-
s:- a a lien
lien or
or pledg
pledge
e on
any
any good
goods s as per
per In
Indi
dian
an Cont
Contra
ract
ct Act,
Act, b secu
securi rity
ty inte
interes
restt cre
creat
ated
ed on agriagricu
cult
ltur
ural
al la
landnd
c loa
oan n amo
moun
untt is ab
abov
ove
e Rs
Rs.1 .1 lac,
ac, d bala
balancnce e amou
amount nt is le
less
ss th than
an 20
20%% of ththe e pr
prin
inci
cipa
pall am
amou
ount
nt an
and
d
interest.
rd
76 Under
Under prov
provisi
isions
ons of Rig
Right
ht to Informa
Informatiotionn Act
Act,, where
where the inf inform
ormati
ation
on is suppli
supplied
ed by a 3 party and is treated as
confidential by that 3 rd party and this information is sought by any person, the Public Information Officer shall give a
rd
noti
notice
ce wi
with
thin
in from
from date
date of recreceieipt
pt of such
such reque
request st,, to su
such
ch 3 party about his intention
intention to disclose the information:
information:
a 5 days, b one week, c 10 days, d no such notice is required
77 A complaint that is made to Ombudsman should not relate to issue(a)alreadysettledbyOmbudsman(b)pendingwithacoup
(c)
(c) already
readydec
decidided
edby
byaa court
court(d)
(d)wh
where
erelilim
mitat
itation
ionper
perio
iod
d has exp
xpiired.Which of thefo
hefolllowing op
optitionsiscor
nsiscorre
rect
ct::- a a, b, c only, b b, c, d
only, c a, c, d only, d a, b, c, d all
78 The pr
pres
esid
iding
ing offic
officer
er of DR
DRTT is
is call
called
ed ____
____ , who
who is appoin
appointed
ted by for or until he achieves achieves age of
a Pre
resi
side
dent
nt,, Centra
rall Gov
Govt., 5 years,
rs, 62 years
ears,, b Pre
resi
side
dent
nt,, Hig
igh
h Cou
ourtrt.., 5 years,rs, 62 yea
ears
rs
c Pre
resi
side
dent
nt,, Centra
rall Gov
Govt., 3 years,
rs, 62 years
ears,, d Chairpe pers
rson
on,, Cen
enttra
rall Govovt.
t.,, 5 yea
ears
rs,, 62 yea
earrs
79 When suit is filed by the bank with DRT, DRT summons th e defendant defendant requiring him to show cause within
days
days from
from as to why
why th the
e reli
relief
ef pray
prayed
ed by ththe
e bank
bank,, sh
shou
ould
ld not
not be gr
gra
ant
nted
ed:-
:- a 30 day
days, date
date of su summ
mmo ons, b
45 day
days, rerece
ceip
iptt of summ
summon ons,
s, c 30 day
days, serv
serviice of su
summ
mmo ons, d 45 day days, dadate
te of summ
summon onss
80 In which
which of the fol followlowing
ing mort
mortgag
gages,
es, the propert
propertyy is tran
transfer
sferred
red by the mortgager absolutely
absolutely with a condition
condition for
retransfer by the mortgagee:- a simple mortgage, b English mortgage, c equitable
mort
mo rtga
gage
ge,, d usuf
usufru ruct ctua
uary
ry mo
mortrtga
gage
ge
81 Where
Where the the borrowe
borrowerr w want
ants
s to
to fil
file
eaan
n appe
appeal al agai
against
nst orde
orderr ofof D
DRT
RT (whic
(which h is not corre
correct)
ct):-
:- a it can do so withwithinin
45 days
days of re recei
ceipt
pt of order
order by him him,, b it can do so by dep deposi
ositin
ting
g 75% of the amount
amount of or order
der
c it ca
cann do so by fi filling an appeppeal with High Court ourt or DRAT,AT, d it ca
cann do so wiwith
thou
outt depo
deposisiti
ting
ng any
any
amount when permitted b y DRAT DRAT
82 Which amongam ong the following is a correct statement:- a DRT jjuri urisdi
sdicti
ction
on for
for di
diffe
fferent
rent banks
banks is with
with re
refere
ference
nce to the
the
lo
loca
cati
tion
on of HO of th thee rres
espe
pect ctiv
ive
eb ban
ank,
k, b Appeal again
againstst DRT ord orderer can made
made either
either to DRAT
DRAT or to High High Court c
Where
Wher e a sui
suitt ha
has
s bebeen
en file
filed d by
by oone
ne bank
bank in DRT,
DRT, other
other bank hav having
ing int
intere
erest
st in
in the
the cacase,
se, can joi
join,
n, d DRT is nnot
ot a civi
civill
court due to which it cannot pass interim orders like attachment attachment or injunction
injunction
83 Bank B has received a notice from Recovery Officer of DRT attaching the balance lying in current account of XYZ Pvt Ltd.
A the bank will ignore the notice as such authority is i s not vested with Recovery OfficerOf ficer of DRT
B the bank will inform the Recovery Officer that his order cannot be complied with as he has no such authority
C the bank will follow the order as Recovery Officer can issue such order similar to the one given u/s 226 of Income Tax Act.
D the bank will follow the order, because the recovery of due amount of some other bank is involved.
84 When a bank is to send a certified copy of bank records to a court, the bank is to give a certificate that should contain
(which is not correct):- a the entry is true copy, b entry is contained in bank books, c entry was
made
ma de in ord
ordinainaryry course
course of busine
business,ss, d such
such recor
recordd iis
s not
not in the cuscustod
todyyooff the
the bbank
ank
85 The lease for an agricultural and manufacturing purposes is deem deemed ed to be a le lease
ase fr
from
om yeyearar to ye
year
ar and iitt can
be terminated by gi giving notice:- a 2 months, b 3 months, c 6 months, d 12
months
86 Which
Which o off tthe
he functi
functiononss of
of p
pub
ublic
lic and priva
privatete key mat
match:
ch:-- a priv
privat
ate
e key ver
verifi
ifies
es the
the digi
digita
tall sig
signa
natu
ture
ressaand
nd pu
publblic
ic
ke
keyy crea
create
tess th
the e digita
digitall sig
signat
naturure,
e, b pu
publi
blic
c ke
key y ve
veririfie
fies
s the
the digit
digital
al sig
signa
natu
ture
ress an
andd priv
privat
ate e ke
keyy cr
crea
eate
tes
s the
the dig
digita
itall
si
sign
gna atu
turre, c pr
privivat
ate
e key
key and
and publ
public
ic key
key arare
e used
used to veri
verify
fy th
thee digi
digita
tall si
sign
gnatatur
ures
es,, d priv
privat
atee ke
keyy and
and publ
publicic
key are used to create the digital signatures
87 Dis
Distt.
tt. For
Forus us is headed
headed by by a pers
personon who bebe or has
has been q qual
ualified
ified to be a Jud
Judge.
ge. The
The otherm
othermemb
embersers of
of not less
less tthan
han
years:- a Distt, 3, 35 years, b Distt, 3, 27 years, c Distt., 2, 35 years, d High Court,
3, 35 years
88 An ag re
re e m e n t th aatt ca nnot b e e nforce a ab
b le b y law i s cal le
le d: a quasi-agreement, b void
agreement, c voidable agreement, d immoral agreement
89 A contract is valid only when there

there is valid consideration
consideration but in in case of contract
contract of guarant
guarantee,
ee, no
consideration
consideration passe
passess between
between th
the
e bank
bank and
and the
the guara
guarante
ntee.
e. The con
contra
tract
ct is sstil
tilll valid
valid be
becau
cause
se:-
:- a gu
guar
aran
antor
tor has
has
sign
signed
ed the
the con
ontr
trac
actt wit
with hi
hiss fr
free
ee will
will,, b gu
guar
aran
anto
torr is a ma
majo
jorr pe
pers
rson
on anand
d cont
contra
ract
ct with
with a major
major pe
pers
rson
on is
valid
valid,, c anyany thing
thing done
done foforr the
the bene
benefi
fitt of the
the borr
borrowe
owerr is a su
suff
ffici
icien
entt ..:I
..:I consi
conside
dera
rati
tion
on for
for th
the
e gu
guar
aran
antor
tor,, d
guarantor's liability is secondary (as borrower is primarily liable), hence no consideration is required.
Page
90 Wh
Whicich
h of the fo follo
llowin
wingg is true
true in the
the fofoll
llowi
owingng case
cases:-
s:- a bailor is the
the person
person who receive
receivess the goods as a
security for the loan, b when
when doc
docume
umentsnts are
are d
deliv
elivere
eredd by a cuscustom
tomer
er fo
forr safe
safe custo
custody
dy to
to the ban
bank
k and
and bank
bank tatakes
kes due
care but there is loss to documents, bank is liable to the customer, c if the
the bailor
bailor has knowledge
knowledge about about the
the defect
defect
in the
the go
good
odss due
due to whwhicichh ba
baililee
ee suff
suffer
erss fo
foss
ss,, the
the ba
baililor
or is liab
liable
le,, d bail
bailee
ee ca
can
n us
use e th
thee go
good
odss as he lilike
kess an
and
d is
not liable for damages for such use
91 In th
thee execution
execution of mortgage
mortgage dec decree,
ree, the
the decr
decreeee hold
holderer can bring the mortgag
mortgageded proper
propertie
tiess tto
o safe
safe::
a wi
with
thou
outt firs
firstt seek
seekiningg an orde
orderr of atta
attachchme
ment nt of cocour
urt,
t, b after
fter se
seek
ekin
ingg an orde
orderr of atta
attach
chme
ment nt of cour
courtt
c after obtaining an order the court, d none of the above
92 As a part of corporate governance, the concept of 'fit and proper' relates to which of the following aspects:
a appointment of directors of banks, b manage ment of banks, c to management of banks
d staff of banks
93 Und
Under
er Sale
Sale Of Good
Goodss Act,
Act, the term 'caveat
'caveat empto
emptor'
r' stan
stands
ds ffor:-
or:- a it is an
an instr
instruct
uction
ion to the
the b
buyer
uyer to buy
buy only
only if
likes, b it is a cond
condit
itio
ion
n bi
bind
ndin
ing
g the
the buye
buyerr an
and
d se
sell
ller
er to agre
agree e to cert
certain conditions of the sale
ain
c it is a wa
warni
rning
ng for the buyer
buyer to be cautio
cautious
us wh whilile
e buy
buying
ing,, d it is a right
right of the seller
seller,, w
whet
hether
her to sell
sell the goods
goods or
not
94 X sold certain goods to Y for which he is yet to be paid. As long as the payment is not made by Y, X has (a) lien on
the goods for the price of the goods the possession of which is with X (b) if Y becomes insolvent, to stop the goods in
transit if X has parted with the possession (c) right of re-sale if goods are in possession of X. Which of these is
correct:- a a and b only, b b and c only, c a and c only, d a to c all
95 A partnership is a contract with following features (which one is not correct correct):-
):- a contract can be oral contract also,
b cont
contrac
ractt is to carry
carry any tytype
pe of busi
busines
ness, s, lawf
lawfulul or oth
otherw
erwis
ise,
e, c bu busi
sines
nesss is to be carri
carried
ed to make
make prprofi
ofits
ts and
share
sha re profi
profits,
ts, dmutu
dmutual al relation
relationship
ship betw
between
een part
partners
ners is of agency
agency
96 X, the natural guardian of M, the minor, wants to mortgage the property in the name of M to secure a loan for the
bene
benefi fitt of th
thee mi
mino
nor:r:-- a the
the prop
proper
erty
ty in ththee name
name of M ca cann
nnotot be mort
mortga
gage
ged,
d, b th the
e pr
prop
opererty
ty in th
the
e name
name
of M c canan be mortg
mortgaged
aged if the loan is for ben benefi
efitt of the minor
minor,, c the p prop
roperty
erty in tthe
he name
name of M can be be mortga
mortgaged
ged
if th
the
e lo
loanan is fo
forr ben
enefefiit of th
the
e mino
minorr wit
ith
h perm
permisissision
on of cocour
urtt only
nly, d th
the
e pr
propoper
erty
ty in
in the
the name
name of of M
can be mortgaged if the loan is for benefit of the minor with permission of Registrar of Assurances
97 Board
the Thofe a public
provlimited
isions company
in orresubsidiary
spect ofa public
of enhlimited
ancing company,the by theborrshareholders,
owing poare
wersgiven in of
Section ... of the Companies Act 1956:- a: 12 125 b: 293, c: 29
293(1)(d) d: 134
98 As per SEBI guidelines, the minimum %age of independent di dire
rect
ctor
ors
s out
out of to
tota
tall, sh
shou
ould
ld be , of a
company:- a 25%, public company, b 50%, public company, c 50%, listed company, d
25%, listed company
99 Your branch is approached by a public limited company to open a current account in their name. For the purpose of
opening the account, they submit the Memorandum and Articles of Association and other papers alongwith a resolution
passed by the Board of the company in a duly held meeting. It is observed from the Articles of Association that the Board
of the company should have five directors for the purpose of business decisions, but the resolution has been passed by
4 directors, as the 5 th one is away to UK in connecticonnectionon with a b busin
usiness
ess trip:-
trip:- a since
since minim
minimum um no
no.. is 3 dire
direct
ctor
ors
s for a
public
pub lic lim
limite
ited
d com
compan
pany,
y, the acco
account
unt can be ope
opened
ned,, b sinc
sincee maj
majori
ority
ty of the dir
directo
ectors
rs wer
were e pre
presen
sentt at the mee
meeting
ting,, the
account
acco unt sho
should
uld be ope
opened,
ned, c ban
bankk can obt
obtain
ain anothe
anotherr res
resolu
olutio
tion
n and in the mea
meanti
ntime
me ope
open n the accoun
accountt to increa
increasese
its busi
business
ness,, d the rresol
esolutio
ution
n in its
its pr
prese
esentnt form
form is no
nott a pr
prope
operr res
resolu
olution
tion due tto
o whi
which
ch ac
accoun
countt can
cannot
not b be
e ope
opened
ned
100 Every public limited company must have a managing director or whole time director, where the paid up share capital is:
a above Rs.2 cr b Rs.2 cr and above, c Rs.5 cr and above d Rs.10 cr
and above
ANSW
ANSWER
ER PR
PRAC
ACTI
TICE
CE TE
TEST
ST NO
NO.. 4
1 D 2 C
B 4 3 D 5 A 6 B 7 D 8 B 9 A 10 B

11 C 12 A 1 13
3 A 14 C 15 A 16
16 A 17 B 18
18 B 19 D 20 C
19
21 D 22 C 23 C 24 A 2
25
5 C 26
26 B 27
27 B 28 C
28 29 A 30 B
31 A 32 A 33 B 34 B 35 C 36
36 B 3
37
7 C 38
38 D 3
39
9 C 40 D
41 B 42 A 43 C 44 A 45
45 B 4
46
6 A 47 D
47 48 C 49 C 50 D
51 B 52 D 53 D 54 D 55 C 56
56 D 57 D
57 58 D 59 B 60 C
61 D 62 C 63 B 64 D 65 C 66
66 C 6
67
7 D 68 A 69 B 70 A
71 A 72 C 73 D 74 D 75 C 7
76
6 A 77 D
77 78 A 79 C 80 B
81 C 82 C 83 C 84 D 85 C 86
86 B 87
87 C 88 B 89 C 90 C
91 A 92 A 93 C 94 D 95 B 96
96 C 97 C
97 98 C 99 D 10
100 c
Page
PRACTI
PRACTICE
CE TEST
TEST PAPE
PAPER
R NO. 5 ( TEST
TEST Y
YOUR
OUR SEL
SELF
F)
01 Acceptance of deposits is regulated by Central Govt. under Compa Companie
niess (A
(Acc
ccep
epta
tanc
ncee of D Depepososit
it)) Ru
Rule
les
s 19
1975 75
in respect of:- a banks, b co mpa ni es, c non-bank finance companies, d all the above
02 Which ofof the fo
followin
llowing
g definition
definition aass per S
Sales
ales of Goods Act
Act is not
not correc
correctly
tly stated:-
stated:- a buyer is a person who
agrees to buy goods, b s eleller is a person who sells goods, c v ol
ol un
un ta
ta ry
ry t rra
anns
s ffe
e r o f p os
os s
se
e ss
ss iio
on
from seller
seller to buyer
buyer means
means deliv
iveery, d no
none
ne of th
the
e abov
above e
03 No company other than a banking company can use the word 'bank' as part of its name. Which of the following is
ex
exem
empt
a t opted
ced
a l l ,from
from this
this requir
requirem
bemena ent
antd(a)b oanlygovt
govt.
, . comp
compan
c any
by a(b)
nd subsid
sub
c onsidia
ly,iary
ry ofda bank a a(c)
(c) pri
nd prima
c omary
nlyry cre
credit
dit socie
society ty:-
:- a
04 As per LimLimita itation
tion Act 1961963,
3, if a suit is filedfiled aft
after
er the exp
expiry
iry per
period
iod of lim
limitat
itation
ion it shal
shalll be:- a enter
entertained
tained at
disc
discrret
etio
ion
n of ththee co cour urt,
t, b if cas ase
e is ge
genunuin
ine,
e, it ca
can
n be fifile
ledd as a matteatterr of right
ight,, c dism
dismisisse
sed d by the
the
court , d any of the above
05 The Bank
Banking ing Laws (Applica(Application
tion to Co Coopera
operative
tive Societies)
Societies) Act
Act 1965, extends
extends cercertain
tain provisions
provisions ooff (a) Companies
Companies Ac Actt
1956 (b) BaBan nking Regulat lation Act (c) RBI Act, to co coooperative banki kin
ng sect
secto or:- a atoca ll, b a and and b
only, c b and c only, d a and c onl y
06 As per Sale of Goods A ct, the seller of goods is deemed to be unpa unpaid id se
sell
ller
er,, when
when the
the has
has not
not been
been paid
paid::
a interest, b price, c penalty, d d am a ge s
07 If th thee cou
court,rt, where
where the sui suitt iis
s ffililed
ed is clo
closed
sed on the datdate
e of ex expi
piry
ry of limit
limitati
ation,
on, the suit:-
suit:- a can be filed
filed a day
day
before, b suit can not be filed at all, c suit can be filed on first day of re-open of the court,
d suit
suit can be filed filed at didiscr
screti
etion
on of the court court
08 Unde Underr the provi provisisions
ons of Secti
Section on 22 of RBI Act Act:-
:- a RBIRBI reg regul
ulate
ates s the banks,
banks, b RBI
RBI con
conduc
ductsts gov
govt.t.
business, c RBI is tthe he sole
sole authority
authority to issue
issue and manage currency in India, d RBI iissues ssues note refund
rules
09 Which of the foll followin
owing g stat
statemen
ements ts is not correct
correct:-:- a Central
Central govt
govt.. holds
holds the entire
entire capital
capital of RBI, b Central
Central
Govt. app
Govt. appoin
ointsts go
goveverno
rnorr and othother
er off
offic
icia
ials
ls of RB
RBI,I, c Centr
Centralal govt.
govt. can is issue
sues s di
direc
recti
tion
onss to RBI,
RBI, d Cent
Centralral
govt. appoints the members on RBI board and can remove them
10 As
As pe
perr Sal
Sale eo off Goods
Goods Act, if thertheree is breach
breach of w warra
arrantynty,, w
whic
hich
h of the fol
follow
lowing
ing would
would be be ttrue:
rue:-- a th
theep par
artie
ties
s
can
can re
rejeject
ct th
thee good
goods, s, b th
the
e part
partieiess ca
cann tr
trea
eatt th
thee co
contntra
ract
ct as re
repu
pudi
diat
ated
ed,, c th
the
e part
partie
ies
s ca
can
n cl
clai
aim
m
damag
mages, d all the above reme med dies are available
11 Section
Section 6 (1) (0) (0) of Banking
Banking Regulat
Regulation ion Act
Act deals
deals w with
ith which
which of the follow
followinging aspects:-
aspects:- a RBI powers to
re
reco
comm
mmenend d am
amalalga
gama
mati tion
on of a bank
bank,, b Central
Central Govt.
Govt.,, autho
authority
rity to noti
notify
fy othe
otherr forms of busi
business
ness of a
banking company, c Central Govt. authority to order merger of a bank, d RBI powers to
supercede the management of a bank.
12 The company matters of a bank are regulated by (a) SEBI (b) RBI (c) Ministry of Corporate Affairs (d) Authorities
under Companies Act a a and d, b a,a, c and d, c only c, d only d
13 The period of 'imitation can be got extended by the creditor, in which of the fol owing situations (which one is more
appr
approp
opririat
ate)
e):-
:- a if th thee borr
borrow
owerer has
has ackn
acknowowle
ledg
dgeded th
thee debt
debt,, b if the
the borr
borrow
ower
er has
has ac
ackno
knowlwled
edge
gedd
th
thee debt
debt wiwith
thin
in th
the
e lim
limit
itat
atio
ion
n peri
period
od,, c if th
the
e borr
borrowower
er has
has acackn
know
owle ledg
dged
ed the
the debt
debt ev
even
en afte
afterr the
the
limitation
limitation peperiod,
riod, d if the borrower
borrower has has acknowled
acknowledged ged the debt within
within o
orr after the lilimitati
mitation
on period
period
nd
14 X
sthad
stolenpurchased
olen one. pera
one. As pe 2 lehand
r Sale
Sa car
of Go
Good
odssfrom
Act,Zth
Act, and
this made
is am
amou
ountthe
nts to::payment.
s to - a The car
breachisoftaken
breach co
cond inion,
ndit
itiopossession
n, bby the police
breach ofaswarr
breach it rran
wa was a,
anty
ty,
c br
brea
each
ch of an imimpl
plie
ied
d cond
condit itio
ion,
n, d br
brea
each
ch of an im impl
plie
ied
d war
warrant
rantyy
15 The banking companies that are allo wed to operate in a very lim limite
ited
d geogr
geographaphica
icall area
area,, are
are know
known naas:-
s:-
a narrow banks, b regional rural banks, c local area banks, d shell banks
16 Wh Wher ere
e lice
licenc
ncee of a bank
bankin ing
g com
companypany is canc
cancel elle
led,
d, it can
can make ake an appe
appeal al to:-
to:- a Cent
Centrarall Go
Govvt, b
RBII Bank
RB Bank,, c Hi
High
gh CoCoururtt in wh
whos osee ju
juri
risd
sdic
icti
tion
on,, th
the
e regi
regist
ster
ered
ed offi
office
ce of the
the bank
bank fall
falls,
s, d Supr
Suprememee
Court only
17 In wh which
ich of the fol
follow
lowing
ing cases
cases,, the lim limita
itati
tion
on per
period
iod is 30 ye years
ars:-
:- a to enfo rce the paymen t of mone y
secu red by a mort gage or otherwis otherwise e cha
charge
rgedd upo
upon n immove
immoveabl ablee pro
proper
perty,
ty, b for po posse
ssess
ssion
ion of imm
immovaovable
ble
pr
prop
oper
erty
ty,, c an
any y su
suit
it fo
forr wh
whic ich
h no peperi
riod
od of lilimi
mita
tati
tion
on is prov
provid
ided
ed in the
the sc
schehedu
dulele to the
the Li
Limi
mita
tati
tion
on Act,
Act, d all all
the above
18 Fo Forr acti
action
on unde
underr SA
SARRFAES
FAESII Ac Act,t, th
thee acco
accoun untt shou
should ld be NPA:
NPA:-- a as per
per disc
discre
reti
tion
on of the
the bank
bank,, b as
per dire
directio
ctionsns framed
framed by Reserve
Reserve Bank of of India,
India, cas pe perr rules
rules framed
framed by RB RBII and C Centr
entral
al Gov
Govt,t, d as pe perr pro
procedu
cedurere
given under SARFAESI Act
19 With a view to to ensure th that
at the controlling
controlling interest
interest in a banking
banking c com
ompan
pany yd doe
oessn not
ot ch
chanange
ge hahand
nds sw
with
ithou
outt the
the
kno
knowled
wledge
amount
amo geshares
unt of andes
shar approv
app roval
m al
from
fro oneof RBI
RBI:-
:- toaano
party
party therthe
another parban
banking
ty, king com
party, compan
b panies
theies
banhave
hav
bankinge to
king comrefe
refer
compan r the
ies mat
panies matter
havterto
have
e totorefe
RBI
refer tbefo
before
r the re ter
he mat transf
trato
matter nsfer
er of&any
RBI SEBI
SEBI
before transfer
transfer of
of subs
substantia
tantiall am
amount
ount ooff share
sharess fro
from
m one party to an
another
other party, c the b
banking
anking compa
companies
nies h
have
ave to re
refer
fer
the mat
matter
ter to RBI
RBI befo
before
re tra
transfe
nsferr of
of a sti
stipula
pulated
ted per
percent
centage
age of shar
shares
es from one par
party
ty to a
anot
nother
her par
party,
ty, d the ban
banking
king
companies
compan ies have to refer the matter to RBI, SEBI and Company
Company Law Board before transfer of a stipulated perpercentag
centage e of
Page
shares from one party to anotheranother party

20 Ban
Bank k has to
to fi
file
le a suit
suit on tthe
he b basis
asis of a prom
promisso
issory
ry note
note d date
atedd Sep
Septt 22, 200
2006.
6. Ba
Bank
nk ma
madede th
the
e dem
demand and fforor paym
payment
ent
on Nov 10, 2006. The suit can be filed latest by:- a Nov 09, 2009, b Sept 22, 2009, c Sept 21,
2009, d Nov 10, 2009
21 When a security
security intere
interest
st is crea
created
ted in favour of a bank, it requi
requires
res reg
registr
istratio
ation
n with , unde
underr prov
provisioisions
ns of
SARFAESI Act:- a Registrar of Companies, b Debt Recovery Tribunals, c Registrar of
Assurances (Sub-registrar), d Central Registry
22 if an offici
official
al of a ban
bank k iis
s rrem
emove
oved d ffrom
rom off
offic
ice
e by
by RBI,
RBI, he is:
is:-- a en enti
title
tled
d to
to c
com
ompepensa
nsati
tion
on for loss
loss of offic
office,e, b
not ententitle
itled
d tto
o comp
compensaensatiotionn for
for los
loss s of office,
office, even
even whenwhen it is ststaated
ted in the
the se
servrvic
ice
e co
cont
ntra
ract
ct,, c
en
entititle
tled
d to co
comp
mpen ensatsatio
ion
n for lo
loss
ss of of
offic
fice,
e, wh
when
en it is state
stated d in the
the ser
servi
vice
ce co
cont
ntra
ract
ct,, d no
nott en
entit
title
led
d to
compensation
compen sation for loss of office, when not stated in the servi service
ce contract
23 Every
requ
requir
ired per
person
ed to son
file
file hiswhose
hiswhos
retuerntotal
re by duincome
incom e uin/saofprevio
e date previous
comus
Incom e Tyear
x:- exceeds
ax:- excee
a ds Sthe
ectiomaxim
maximum
n 10, um amount
b which
Sectionis13
not
1, liable to
c Stax,
ectiois
n
133, d Section 139
24 When
When RBI mak makeses bor
borrow
rowining
g costly
costly for certai
certain
n purpo
purposes
ses or sti
stipul
pulate
ates
s hi
highe
gherr mar
margin
gins
s for certai
certain
n type
type of
adva
advan nce
ces,
s, this
this is part
part of
of:-
:- a credit policy directive ives, b control over bank advances, c selective
cr
cred
edit
it co
con
ntrol
trol,, d cre
redi
ditt deli
deliv
ver
ery
y mech
mechananis
ism
m
25 Which of the following is a function of a securitization company, und
under
er provision
provisions s of SAR
SARFAES
FAESII Act:-
a to acqu
acquir
ire
e loan
oans and
and secuecuri
riti
ties
es fr
from
om ba
bannks, b to help th
the
e ba
ban
nks in rec
recove
overy of ththe
eir loan
oans
c to ac
acqu
quir
ire
e fina
financ
ncia
iall as
asse
sets
ts fr
from
om the
the or
orig
igin
inat
ator
ors,
s, d to he
help
lp bank
bankss to in
init
itia
iate
te le
lega
gall ac
acti
tion
on in NP
NPA
A lo
loan
ans
s
26 Where a bank has been charging interest rate from a borrower at rates prescribed by RBI, such rates
of interest cannot be questioned in a court of law under the provisions of which of the following:-
a RBI directives, b Section 16 Usurious Loans Act, c Section 21 A Banking
Regulation Act, d Usurious Loans Act 1918
27 The benefits
benefits provided
provided by an employ
employer er to its emplo
employees
yees attra
attract
ct paymen
paymentt of tax, which
which is called:- a in inco
come
me tax
tax,,
b perquisites tax, c ffrringe benefit tax, d super-benefit tax
28 : The provisions of SARFAESI Act are not applicable in case of a loan account in which the amount due is
a 20% or less of principal amount, b less than 20% of principal amount, c 20% or less of
principal amount and interest, d less than 20% of pr
principal
incipal amount
amount and interest
29 Name of a bank bank can
can be included
included in th e 2nd schedule of RBI Act to make it a scheduled bank if (a) it is state coop
the
bank (b) company defined u/s 3 of Companies Act (c) an institution notified by the Central Govt. in this behalf (d)
company incorporated outside India under the foreign law:- a a to d all, b a to c only, c b
to c only, d a, c and d onl only
y
30 To fulfill fulfill its SLR requireme
requirement, nt, a bank, a among
mong others,
others, can in invest
vest in approv
approveded securi
securities
ties,, which
which mean
means s the
securities:
a u/s 12 of Banking Regulation Act, b u/s 20 of Indian Trust Act, c u/s 18 of Govt.
Se
Secu
cuririti
tie
es AcAct,
t, d u/ u/s
s 343
343 of Co Comp mpan anieies
s Ac
Actt
31 The Lok Ad Adalt
alt is constitu
constitutedted under
under provis
provisions
ions of which
which of the the foll
follow
owin
ing
g Act:
Act:-- a Cons
Consti titu
tuti
tion
on of Lo
Lok k Ada
Adalt lt
Act, b SARFAESI
SARFAESI Act, c Legal Services Authority Act, d Recovery of Debts due to
Bank and Fl Act
32 In
In which
which o off th
thee follow
following ing case
cases, s, the
the SARFAE
SARFAESI SI Ac
Actt provis
provision
ionss are applica
applicableble:-
:- a creati
creation
on ofof ssecu
ecurit
rity
y iinte
nteres
restt
in any
any ve vess
sselel,, b cr crea
eatition
on of se secu
curi
rity
ty int
nter
eres
estt in any
any airc
aircra
raft
ft,, c cr
crea
eatition
on of se
secu
curi
rity
ty in
inte
tere
rest
st in la
land
nd,,
d none
none of th thee abov
above e
33 Which among the following statement is not correct with regard to publication of accounts and balance sheet of a
bank:
bank:-- a publ
publicicati
ation
on has
has to be in a new newsp spape
aperr in cicirc rcul
ulat
atio
ion
n at th
thee pl
plac
acee where
where th thee pr
prin
incip
cipal
al of
offi
fice
ce of
the bankin
banking g company
company is locate located, d, b publica
publicatio tion
n within
within 6 monthsmonths frofromm end of the periodperiod to which
which the
acco
accoun untt and
and bala
balancnce e she
sheet et rela
relate,
te, c publ
publicicat
atio
ion n on
onlyly in a news
newspa papeperr th
that
at is pu
publblis
ishe
hedd ever
every y day
day,
d publicatio
publication n u/s 31 of B R Act. Act.
34 Who performs the functions and exercises the powers of supervision and inspection of banks under RBI Act and
BR ActAct:- a S E B I , b BFS, c Board of Governors, d Inspection
Deptt. of RBI
35 Action
Action under provisions
provisions of of SARFAESI
SARFAESI Act Act ca
cannot
nnot be iinitiat
nitiated
ed by which of the the followin
following:-g:- a commer
commercia ciall banks,
banks,
b fifin
nan
anccial
ial inst
stiitut
utiions, c reg
regional ruralral banks, d securit
ritiz
izat
atiion compampaniniees and
and
reconstruction companies
36 Whic
Which ha amon
mong g tthe
he fol
follo
lowi
wing
ng sta
statem
temen entt iis
snnot
ot corre
correct:
ct:-- a windi
winding ng up means
means closin
closing g a compa
company ny and settl
settling
ing
the accou ount nts
s, b morato
moratoriu riumm mea
means ns a leg
legalal aut
authorhority
ity to a debtor
debtor to postpo
postpone, ne, payment of dues for a
specifie
spe cified d time
time,, c amalgam
amalgamatio ationn mea
means ns bre
breakin
akingg a comcompan
pany y int
intoo two or mor
more e par
partsts for better
bettermen
mentt of the comcompanpany,
y,
d none of the above
37 Majority of share capital in RBI is held by:- a public, b Central Govt, c RBI, d financial
institutions
38 Where a bank is wound up, the holder of a cheque (issued by the customer of bank having sufficient funds), becomes:
a trustee, b beneficiary, c debtor, d creditor
39 Which
Which of tthehe ffollo
ollowing
wing is n
not
ot ccorre
orrect
ct regar
regarding
ding FEMA
FEMA 199
1999:-
9:- a it repl
replac
aced
ed FE
FERA
RA 1973
1973,, b It
It exte
extend
nds
s to who
whole
le
of India, c it applies to branches of banks outside India also, d none of the above
Page
40 Whi
Whichch of ththe
e fo
foll
llow
owiningg is no
nott corr
correct
ect in th
thee co
cont
ntex
extt of pr
prot
otec
ecti
tion
on to payi
paying
ng bank
bank:-:- a Sect
Sectioion
n 85-A
85-A prov
provid
ides
es
protection for payment of an endorsed
ch
cheq
eque
ue,, b Se
Sectction
ion 85
85-1 -1 pr
prov
ovid
ides
es prprot
otect
ectioion
n for pa
paym
ymen entt of a be
bear
arer
er en
endo
dors
rsed
ed ch
cheq
eque
ue,, c Secti
Section
on 89 prov
provid
ides
es
protection for payment of a materially altered
ch
cheq
eque
ue,, d Se
Sectction
ion 128 provi
provides
des protec
protectio
tionn for paymen
paymentt of a crocrosse
ssed d cheque
cheque..
41 A bank makes payment of a cheque bearing forged endorsement of the payee. Later on it is found that bank has made
pa
paym
ymen
entt tto
o a wr
wron
ong g per
person
son on th the
e bas
basisis of for
forge
gery
ry:-
:- a ba
banknk is not
not liabl
liablee for fo
forg
rgery
ery if iitt appear
appears s to be by th
the
e paye
payee,e,
b bank is liable foforr the forgery, as it is not a cheque or endorsement at all, c bank is not liable for a
fo
forg
rged
ed endo
endorrseme
sement nt,, where
here it is regul
egularar,, d bank
bank is lia
liabl
ble
e for the forgforged
ed end
endor orsem
semen entt but not for th
the
e forg
forged
ed
signatures of the drawer.
42 Which of the following Act, is not related to registration of certain
ch
char
arge
gess or tr
tran
ansa sact
ctio
ions
ns:-
:- a Regi
Registstra
end Patent Acts 1970, c Design
ignrati
Ation
on Act
ct Act 19
001908
200
20 08 and
and Mand Comp
otoCo
otor Vmpan
ehiianie
eh cleies
cle ssAAc
Actt 1956
ct 119 56,,
988,
88 , db Me
Merc
nonrcha
ehant
ofnt
thShip
Shippi
e aboping
vng
e Act
Act 1958
1958
43 Universal Bank made payment of a cheque of large amount which was later on found to be materially altered.
The alteration was not visible. But when the cheque was put before ultra-violet lamp, the alteration was visible. The
drawer claimed that the bank was negligent for not examining the cheque before the ultra-violet lamp.
a bank not liable as bank is not required to examine eac h cheque
befo
before
re th
thee ul
ultr
traa vi viol
olet
et la
lamp
mp,, b bank bank is liab iable to ththee par
party as th thee chcheq
eque
ue was of a la larg
rgee amoun
mountt and
and
bank has not taken adequate precaution, c bank and party are liable liable on pro-
pro-rata
rata basi
basis,
s, d alteration
alteration does
not give any protection
protection to the bank, hence bank is liable liable..
44 A person to be trea treated
ted as resident should be residiresidingng in India for , during tthe he preceding
preceding financial
financial yyear,
ear, in
addi
additi
tion
on to fu
fulflfilillme
lmentnt of ot
other
her co
cond
ndit
itio
ions
ns:-
:- a 180
180 day
days, b mo morre than 180 day ays s, c 182 days,
d mor
more than 182 day ayss.
45 X deposi
deposited ted a cheque
cheque of Rs.1000
Rs.1000 with his bank bank for colcollectio
lectionn from anoth
anotherer bank. The account
account is is being
conducted satisfactorily for 10 months. At the time of deposit of cheque with the collecting bank it was an uncrossed
cheque. The collecting bank, by putting its own stamp, collected the cheque. Later on it turned out to be a case of
conversion
conve rsion ((collec
collectiontion of cheque for a w wrong
rong customer)
customer):: What will be the liability
liability of
of the bbank:-
ank:- a the bank is not
not
liliab
cro
cr able
oslese
as
sed it has
d ch
cheqha
equsuecoll
co, llec
ecte
ted
d th
the
ec cheq
chequeueth
fo
for
er bank
the a cust
bacu
nkstom
omer
is er,,le as th
liab
liable thee ch
cheq bueth
eque the
e ba
wa
wasbanknk tiscr
s no
not not
no
crost sed
osseliab
liable
d le
atas
th
the
eit ha
hass co
time
time coll
ofllec
ecte
ted
dep
de pdoasittsp
si spec
ecia
by iall
thelly
the y
cust
cu stom
omer er,, d the ban
bankk is liable
liable as babank
nk is neglige
negligent nt iin
n not
not getti
getting
ng the
the ch
cheque
eque cross
crosseded from
from the
the cucuststome
omerr bef befor
ore
e
receiving the cheque for collection.
46 A signs a contract in which he assures B that if B suffers loss on account of legal action initiated by C in a court
agai
agains nstt B, A will ill make
make good
good ththee loss
loss:-
:- a th
thiis not
not a va
vali
lid
d co
cont
ntra
ract
ct,, b th this
is is a co
contntra
ract
ct of guar
guaran anteteee and
and a
valilid
va d co
cont
ntra
ract
ct,, c this
this is a co
cont
ntra
ract
ct of insu
insura
ranc nce e and
and a va
valilid
d co
cont
ntra
ract
ct,, d th
this
is is a cont
contraract
ct of in
inde
demnmnit ity
y and
and a
valid contract
47 In a contra
contractct of indemn
indemnity ity,, th
thee per
personson who makesmakes the pr promi
omise
se to sa save
ve a pers
personon fr
from
om loss
loss is ca call lled
ed and
and the
the
person who is entitled to be compensated is called:- a surety, indemnifi fie
er, b ind
indemnit ity
y holder,
inde
in demnmnif ifie
ier,
r, c inde indemn mnififie
ier,
r, in
inde
demnmnit ity
y hold
holder er,, dinde
dindemnmnit
ity
y hold
holderer,, sure
suretyty
48 Under provisio
provisions ns of Companies
Companies Act 1956, it is mandatory mandatory to add the the wor
word d ''lim
limite
ited'
d' or 'priva
'private te lim
limiteited'
d' wit
with
h tthe
he nam
name e
of a company.
company. Which compan company y is exempted
exempted from from u use
se ofof th
these
ese w words
ords and with
with wwhose
hose permi
permission:-
ssion:- a Section 25
Co
Comp mpanyany with
with a licen
licencece frfrom
om Mini
Ministr
stryy of Corp
Corpor orat
ate e Affai
Affairs
rs,, b SecSectio
tionn2 255C Comp
ompanyany with
with a lic
licenc
ence e from
from Reg
Region
ional
al
Di r ect or , c Section 25 Company with a licence from Registrar of Companies, d There
cannot be any such company (similar provisions are as per Sec 8 of Companies Act 2013)
49 Un
Unde
derr FEM
FEMA 19 1999
99,, whic
which h of th
thee fo
follllow
owin
ing g is no
nott a pe
perrson:
son: a an ind
indivivid
idua
uall or an HU HUF, F, b _ a firm
firm
or a company
company,, c an as asso
soc cia
iattio
ionn of pe pers
rsononss or bobod dy of indi
indiv
vidua
idualls, d none
none of the
the abov
above e
50 A bank guarantee was issued and the validity period of the guarantee has expired. Bank did not get any claim from
the beneficiary within a period of one month, given to the beneficiary, for lodging claim. Later on, after a year, the
beneficiary makes a demand on the bank against the guarantee as cause of action had arisen during the validity
p e r io d: - a the bank is liable on the guarantee within the period specified in
the guarantee bond, b bank is not liable now as the claim was not made by the
be
bene
nefi fici
ciar
ary
y du
duriring
ng th
thee time
time,, gi
give
venn fo
forr lo
lodg
dginingg th
the
e clai
claim,
m, c bank
bank is lialiabl
ble
e on thethe guguar
aranante
tee e iiff th
the e c
cla
laim
im is mad
made e
wi t hi n 3 years
from
from datedate of caus
cause e of acti
action
on th
that
at has
has ararisisen
en duri
duringng th
thee vali
validi
dity
ty peri
period
od,, d ba
bank
nk is li liab
able
le on the the guar
guaran
antetee
e if
t he cl ai m is made within 1 year
from date of cause of action that has arisen during the validity period
51 Whi Which ch of the followfollowinging auth
author ority
ity has the jurisdi jurisdict ction
ion for incor
incorpo
porat
ration
ion of Lim Limite
ited
d LiaLiabi
bilit
lityy ParPartne
tners
rshi
hip:-
p:- a
Registrar of Firms, b Registrar of Companies c Regis egistr
tra
ar of Limi
Limiteted
d Lia
iabi
bilility
ty Pa
Part
rtne
nerrships
hips,,
d Regi
Registra
strarr of Assu
Assuranc
rances
es
52 Bank only forwards
forwards the letter of cred
credit
it to the benefi
beneficiary
ciary and has no obligation
obligation to make payment against
against
th
the
e do
docu
cume
ment
nts
s pres
presen
ente
ted
d by th
the
e be
bene
nefi
fici
ciar
ary:
y:-- a confirming bank, b advising bank, c opening
bank, d negotiating bank
Page
53 A bank which is appointed by the opening bank to make payment on behalf of the opening bank, to the negotiating
bank when documents are presented on due date, is called:- a reimbursing bank, b confirming
bank, c c
co
orrespondent bank, d opening bank
54 Whic
Which h of the foll
followin
owing g iis
s not
not cor
correct
rect rega
regardin
rdingg tto
o RRigh
ightt to Information Act 2005:- a R1-1 Ac Actt came into
force wef Oct 12, 2005, b RTI Act replaced Freedom of Information Act 2002, c RTI Act extends to
whole of India including J & K, d Obje
Objectctiv
ive
e of RT
RTII Act
Act is to enenab
ablele Indi
Indian
an ci
citi
tize
zens
ns to ac
accecess
ss,,
e ininfo
form
rmat
atio
ionn un
unde
derr co
cont
ntro
roll of pu
publblic
ic au
auth
thor
orit
ity
y
55 In
InLC
LC,, th
the
e be
bene
nefifici
ciar
aryy tran
transfsfer
ers
s hi
his
s righ
rights
ts in th
the
e lett
letter
er of cred
creditit to 33 parties:- a irre
rev
vocabl
able LC,
b transferable. LLC
C, c green clause LC, d red clause LC
56 Th
Thee term
term mone
money y llau
aundndererin
ingg hahass been
been de defin
fined
ed in whwhicich
h of the
the fo
follllowi
owing
ng Ac
Act:
t:-- a Cri
Crimi
minnal Pro
Procedure
Code, b Companies Act 1956, c Prevention of Money Laundering Act 2002, d none of
these
57 The
The document, in an LC, that gives deta taiils of the safe is called ed::- A bill of exchange, b
invoice, c bill of lading, d certificate of origin
58 When suppli
supplier er of machin
machinery ery is ready
ready to to supply
supply the m machin
achineryery to tthe
he bubuye
yerr o
on
n lo
long
ng term
term paypaymement nt ba
basis
sis,, o onn the
the
paym
paymen entt guar
guaran
anteteee fr
from
om th
thee bank
bank,, such
such bank
bank guar
guaran ante teee is call
called
ed:-
:- a ter
term loan
loan guar
guaranante
tee,
e, b fi
fina
nancncia
iall
guarantee, c performance guarantee, d deferred payment guarantee
59 Unde
Underr RTI
RTI Act 20 2005
05,, th
thee in
info
form
rmatatio
ion
n dodoes
es nonott ininclu
clude
de,, wh
which
ich of the
the follow
followin ing:
g: a e-Mae-Mailils,
s, b press
press relereleas ases,
es,
c logbooks, d none of the above
60 Which of the following is not tr true
ue in the context of bills of e exc
xch hange:- a inl
inland bil illl is a bil
illl which is
dr
draw
awn n in In
India
dia an
and d pa
paya
yable
ble in In
India
dia or by so some
me perperso son n reside
residentnt in India
India,, b cl
clea
ean n bill
bill is a bill
bill which
which do does es not
ca
carr
rry
y an
any y defe
defect
ct,, c docum
document entaryary bil
billl is a bil
billl to which
which do docum
cument ent of tit
title
le to goo
goodsds are
are atta
attachched
ed,, d demademand nd
bills are also called sight bills.
61 A bill of exchange
exchange is payabpayable le after sight.
sight. Its due date shall be ca calclcul
ulat
ated
ed wi
with
th refe
refere
rencncee to:-
to:- a date
date of bill
bill,,
b date of presentation, c date of acceptance, d date of sight
62 Under provisions of Information
Information Technology Act, which o off the foll
followowin
ingg is the
the au
auth
thor
ority
ity is to ex
exer ercis
cisee
super
sup ervi
visio
sionn ov
over
er ththe
e activ
activit
itie
ies
s of ce
certrtif
ifyi
ying
ng au
auththor
orit
ities
ies isissu
suing
ing Di
Digi
gital
tal sig
signanatu
ture
res:-
s:- a Sup
Super ervi
visor
sory y of Cer
Certif tifyi
ying
ng
Authorities, b Controller of Certifying Authorities,
Authoritie s, c Commissioner of Certifying Authorities, d
Director of Certifyi
Certifying
ng Authorities
63 An evidence in writwriting
ing as a proof of possession or control control of goods author
authorizing
izing to receive the goods is called:-
a do
document of title to goods, b b biill of exchange, c invoice, d any of the above
64 A bank releases document of title to the goods to the borrower without payment. To cover such transaction, the banks
obtain:- a mortgage deed, b hypothecation fetter, c pledge agreement, d
trust receipt
65The
65T he def
defini
initi
tion
on of mo
mone
neyy lau
laund
nder
ering
ing is giv
given
en in:
in:-- a Pre
Preveventi
ntion
on of Mon
Money ey Launde
Launderin
ring
g Act,
Act, b Narcoti
Narcoticc Drug
Drugss and
Psychotropic
Psychot ropic Substances Act 1985, c Fore
Foreig
ign
n Ex
Exch
chan
ange
ge Mana
Manag gemen
ementt Act
Act, d none of the above
66 The mortgage property is transferred in the name of the bank with the condition that it will be re-transferred on
repayment of the loan, in case of mortgage :- a English mortgage, b Usufructuary mortgage,
simple mortgage, d anomalous mortgage
67 Wh
Whic
ich
h of th
the
e mort
mortgagage
ge is ne
nega
gattiv
ivel
ely
y dedefi
fine
ned d ou
outt of the foll
follow
owin
ing:
g:-- a Engl
Englis
ish
h mort
mortga
gage
ge,, b
Usufructuary mortgage, c simple mortgage, d anomalous mortgage
following Act has been repealed
repealed by the Right to Infor Information
mation Act:- a Right to Freedom
Freedom of Information
Information Act
2001, b Right of Expression of Information Act 1981, c Freedom of Information Act 2002,
d
69Freedom
Which of tothe
Speech
th Actng
e followi
following 1976
stat
statement
ement is not
not true witwithh regar
regard d to a pa part
rtne
ners rshi
hip
p ffir
irm:
m:-- a re
regi
gist
stra
rati
tion
on of fi
firm
rm is
optiona
opt ionall and not co compu
mpulsor
lsory,
y, b a regi
registe
stered
red fifirm
rm is pre
prefer
ferred
red foforr fina
financin
ncing g by the banksbanks as it is in a better
better positi
position
on to
recover it itss due amount, nt, c ban
bank cacan
n file
ile suit only if the firm
irm is regegiistered one, d registratio
ion
n of firm
can take place with registrar of firms
70 Banks are to maintain records of all series of cash transactions integr integrall
allyy connecte
connected d to eac
each
h other wh which
ich have
have been
valued belowbelow Rs.10 lac where suc such
h series of transactions
transactions havhave e taken place , as per Prevention of Money Laundering Act
2002:- A on a particular day, b during a particular week, c within a month, dwithin 10 weeks
71 Which
Which among among the follow
following
ing sta
statem
tement
ents
s do
do not matmatch:
ch:-- a a go
govtvt.. com
compapany ny — where
where at leas
leastt 50
50%
% shshar
ares
es are
are
he
held
ld by govtgovt,, b holding
holding company
company — whichwhich is hold
holding
ing more
more than 50% shar shares es of anot
anotheherr co
comp
mpanany,
y, c susubs
bsid
idia
iary
ry
company
compan y — a company whose majority shareholding
shareholding is with another company company,, d private company — which cannot
invite public
public to subscribe
subscribe its shares
72 Under Right to Information Act, the responsibility to give information is that of the Public Information Officer
de
desi
siggna
nate ted d by
by:-
:- aCent ntrral Gov
ovt,
t, b Stat
atee Go
Govvt, c Cent
Centra rall Info
Inform
rmat ation
ion Comm
Commis issi
sion
on,, dPubl
dPublic
ic
Authority
Author ity concerned
concern ed
73 Whi
Whichch of th
the
e fol
follow
lowing
ing is not corre
correct
ct in con
connec
nectiotion
n wit
with
h a Mus
Muslimlim Trus
Trust: t:-- a it ca
call
lled
ed Wak
Wakf,f, b the
the tr
trus
ustetee
e
is ca
calllled
ed Mut uta
awali
wali,, c it is re
regu
gula
late
ted
d by Wa
Wak kf Boa
oarrd, d none
none of the the abov
above e
74 A tem
temporar
porary y overdra
overdraft
ft is allowed
allowed by
by the
the ba
bank
nk to a par
partner
tnership
ship firm for quite some time
time.. The chequ
cheques
es issued by
the firm are paid t
too the debit of this overdraft occasionally. A cheque is returned by the bank stating arrangement
exceed although there was no debit balance in the overdraft account at the time of returning of the cheque. The bank
had not given any prior notice to the customer for not allowing such facility any more. The firm claims damages from
the bank
Page
a bank is liable for the damages as it has breached an implied

contr
con tract
act with
withou
outt givin
giving
g a not
notic ice
e to th
thee pa
partrty,
y, b be
being
ing temp
temporaorary
ry ovoverd
erdra
raftft,, ba
bank
nk is nonott un
under
der obli
obliga
gatio
tion
n to cont
continu
inue
e
the overdraft for a long period, c party cannot claim any damages, d party could not claim
damages as it was a temporary overdraft.
75 Cybe Cyberr LaLaws
ws in In
Indi
dia a ar
are
e co
cont
ntai
aine
ned d in whic
whichh of th
thee fo
foll
llow
owin
ing:
g:-- a Cy
Cybe berr Te
Tech
chno
nolologi
gies
es Act
Act 2000
2000,, b
In
Info
form
rmatatio
ion
n Tech
Technonolology
gy Act
Act 20
200000,, c In Info
form
rmat
atio
ion
n and
and Cy
Cybe
berr Te
Tech chnonolo
logy
gy Ac
Actt 2000
2000,, d Cybe
Cyberr Law
Law of Indi
India
a
76 Which of the following statement is not correct regarding assignment of actionable claim: a as assi
signm
gnmen entt can
can be
in wr
writitin
ing
g only
only,, b send
sendining
g no
notitice
ce o off as
assi
sign
gnme
ment nt tto
o th
thee or
orig
igin
inal
al deb
debto tor,
r, bef
befor
oree crea
creatition
on,, of assi
assigngnme
mentnt is a
mandatory requirem
requirement,ent, c in case of default, the bank can recover the loan from original
debtor, d suit can be be filed by the bank against original debtor without making
the transferor of actionable, a party to the suit
77 A charge
charge on the as asset
setss of a company
company tha thatt is not fas
fastene
tened/a
d/atta
ttached
ched to sspec
pecific
ific aasset
ssetss is called:-
called:- a pari-pa
pari-passu
ssu cha
chargerge,,
b fflloating charge, c fixed charges, d exclusive charge
78 Sec
Sectio
tion n 134 of Compan
Companies ies Act 1956 dea dealsls wit
withh whic
which h of the folollo
lowi
win
ng aspec ectts:- a registrati
tio
on of
char
charge ge by th
thee comp
compan anyyw whe
herere its
its ass
asset
etss are
are char
chargeged
d tto
o a cr
cred
edititor,
or, b pr
prior
iority
ity of charg
chargee iiff a
an
n ass
assetet is char
charge
ged d iin
n
favo
favour ur of 2 cr
cred
edit
itor
orss, c dut
duty of the
the comompa pany
ny to get
get the
the cha
harrge reregi
gist
ster
ered
ed,, d main
mainte tena
nanc
ncee of re
regi
gisste
terr of
charges at its principal office
79 Whi Which
ch of the follow
following
ing are
are the
the obj
object
ective
ivess of Inform
Informati
ation
on Tec
Technohnolog
logyy Act:
Act:-- a to provid
providee ffor
or leg
legal
al infrast
infrastruct
ructure
ure for
e-com
e-c ommemerc
rce,
e, b to faci
facilit
litat
atee elec
electr
tron
onicic filing
filing of docu
docume
ments
nts of Govt
Govt,, c to faci
facilit
litat
ate
e amen
amendm dmen entt to the re
relev
levan
antt Laws
Laws,,
d all tthehe abov
above e
80 Un
Under
der provis
provision
ionss of Secur
Securiti
itisat
sation
ion and
and R Reco
econst
nstruc
ructio
tionn o
off Finan
Financia
ciall Assets
Assets and Enforcemen
Enforcementt of Security
Security Interest
Interest
Act, tran
transact
saction
ionss of creation of security interest are required to be registered with:- a Registrar of Companies,
b Ce
C entral Registry, c Reserve Bank of India, d SEBI
81 If public company is having paid up capital of Rs.5 cr or more, as per Companies Act 1956, it must have:
A minimum 2 directors, b minimum 3 directors, c minimum 4 directors, d minimum 5 directors
82 A rig right,
ht, title
title or int
intere
erest
st of any kind creat createded by a borrow
borrowerer in a security in favour of the secured creditor under
provisions
se
seccurit y, of SA
ity dRaFnAyEoSf IthAectaib
sove
caelled:-
ov a security receipt, b security interest, c charg e on
83 Under provisions of SARFAESI Act, where the borrower wants to approach DRT against the bank to stop the bank from
taking possession of the charged asset it can do so within:- a 7 days b 30 days, c 45 days d
60 days
84 A 60 days notice
notice is given to the owner owner of assets under under SARFAESI
SARFAESI Act before taking taking ove
overr the possess
possession:-
ion:- a u/s 10 (3),
buu//s 13 (2), c u/s 14 (4), d u/s 17 (1)
85 A private key and its mathematically related p public
ublic key which are so rela related
ted tha
thatt the pub
publiclic key ca
can
n verify
verify a digital
digital
sign
signat
atur
uree cr
crea
eate
tedd by ththe
e pr
privivat
atee key,
key, is call
called
ed:-:- a dig
digit
ital
al si
sign
gnat
atur
ure,
e, b asym
asymmemetr tric
ic cr
cryp
yptoto sy
syst
stem
em,, c
electronic monit ito
oring, d ke
keyy pa
paiir
86 Where an assets is sold under provisions of SARFAESI Act, the sale certificate issued by the bank is: (a) conveyance
of immo
immova vable
ble pr
prop
opererty
ty (b
(b)) it requi
requireres
s pa
paym
ymen
entt of stam
stamp p dut
dutyy (c)
(c) it is on
only
ly an ag
agre
reem
emenentt to se
sell:
ll:-- a a an
and
d b on
only
ly bb
and c only, c a, b and c all d a and c only
87 In which of the following loans, the eligible security can be sold under provisions of SARFAESI Act:-
a Pl edge, b Lien, c Outstanding in the account is up to Rs.1 lac, d agriculture loan
88 A company wants to appoint X, Y and Z as the directors in the same meeting. How many resolutions are required to be
pass
passeded?? a it can
can be th thro
roug
ugh h one
one re
reso
soluluti
tion
on,, b it can be throug through h one resolution or through through separ
separate
ate
resolutions
c it ca
cann be,
be, as pr
prov
ovid
ided
ed in th thee Arti
Articl
cles
es of Asso
Associa
ciatition
on,, d it has
has to be se sepa
pararate
te reso
resolu
luti
tion
on,, for each
each diredirect
ctor
or to
be appointed.
89 Under provisi
provisions
ons of Right to Inform
Information information is sought by way of inspection of records, the
ation Act, when information
char
ch arge
ges s ar
are:
e: '- aRs.
aRs.2 2 fo
forr firs
firstt hour
hour and
and Rs.5
Rs.5 foforr each
each 15 mi minn or part
part thther
ere
e of
of,, b Rs.2
Rs.2 fo forr firs
firstt ho
hour ur and
and Rs.5
Rs.5
fo
forr each
each 30 mimin n or part
part th
ther
ere e of
of,, c no ch chararge
ge foforr ffir
irst
st hour
hour and
and Rs.Rs.55 fo
forr ea
eachch 15 mi min
n or pa
partrt th
ther
eree ofof,, d no
charge for first hour and Rs.5 for each one hour or part there of
90 Which of the following statement is not correct in the context of DRTs: DRTs:-- a a decree
decree of a foreign
foreign courcourtt
cannot
cann ot be execute
executed d by DRT, b within
within his jjuris
urisdicdiction
tion,, the Ch Chairp
airperso
erson n of DRAT
DRAT can tran transfer
sfer a case
case fromfrom one DRT to to
another
anot her DRT, c for the matters tthat hat fall
fall under jurisdic
jurisdiction
tion o off DRT, the the normal civilcivil courts do not have have jurisdictio
jurisdiction n d
all the above
91 Which of the following committee is not associated with corporate governance, directly or indirectly:
A AS Ganguly
Ganguly Committee, b M S Varma Committee,
Committee, c R H Patil Committee, d none of the above
92 Which of the following is not within within the authority of Recovery Off Offic
icer
er of DRT:
DRT:-- a at atta
tach
chme
ment nt of pr prop
oper
erty
ty,,
b sa
salele of im
immo
movavabl
ble
e pr
prop
oper
ertyty,, c arre
arrest
st of defe
defend ndanantt and
and detedetentntio
ion
n in prpris
ison
on,, d none
none of th the e ab
abov ove
e
93 Which of the following persons can be appointed director of a comp companyany:-:- a th the
e perso
person n found
found to be be of uns
unsouound nd
mi
mindnd by a cour
court,
t, b th thee pers
person on is un-d
un-disisch
char
arge
gedd inso
insolv lven
ent, t, c the person
person convicted
convicted by a court of any office
involving moral tu turp
rpit
itud
ude e and
and sent
senten
ence
ced d in resp
respec ectt th
ther
eree of to im impr
pris
ison
onme
mentnt,, d none
none of th the e ab
abov ove
e
following is correct
correct in the context of Consumer
Consumer Prot
Protec
ecti
tion
on Ac
Act:
t:-- a th
thee Ac
Actt ha
has
s been
been
passed to safegu
passed safeguard
ard interes
interestt of the manufact
manufacture
urers
rs and serv
service
ice provide
providers,
rs, b a volu
volunt
ntary
ary as
asso
soci
ciat
atio
ion
n of
consu
consumer
merss can
can file
file a comp
compla
lain
intt on beha
behalf
lf o th
the
e consu
consume
mer,
r, c for the goods
goods purcha
purchasedsed for re-
re-sal
sale,
e, the provis
provision
ions
s
Page
of the Act are applicable, d all the above

95 If the no. of sma
smallll sha
shareh
rehol
older
ders
s is , they
they can ele
elect
ct a direc
director
tor from
from smal
smalll shshar
areh
ehol
olde
ders
rs:-
:- a 100100 or more
more b
500 or more, c 1000 or more d 5000 or more
96 Under Sale of Goods Act, there is an implied condition that the goods shall correspond with the description, if:-
A sale of goods is by sample, b sale of goods is with the help of a 3rd pa
party
rty,, c sa
sale
le of go
good
ods
s is by de
desc
scri
ript
ptio
ion,
n, d
none of the above
97 An agreement in whichwhich a party to the agreement has the option to treat the agreement
agreement illegal is called:-
called:- A void
agreement, b voidable agreement, c illegal agreement, d quasi-legal agreement
rd
98 A contract to perform the promise or discharge the liability of a 3 party, if the 3 party defaults, is called, a contract
rD
a iin
nsurance, b guarantee, c indemnity, d a ss
s s ur
ur a n c ce
e
99 Loan account of Mr. X had been running irregular and Y agrees to guarantee the loan under the impression that
account is being conducted satisfactorily. Bank did not provide correct information to Y when Y asked the bank about
the status ofof account:
account:-- A Y is not liable on the guarantee
guarantee as bank kept si silence
lence on the material
material facts,
facts, b Y
is not lia
liable
ble bec
becaus
ausee guarant
guarantee
ee has bee
beenn obt
obtain
ained
ed for irregul
irregular
ar account
account,, c Y is lia
liable
ble since
since it was up to him to
give
give tthe
he guaran
guarantee
tee or not,
not, d Sin
Since
ce X is
is liab
liable,
le, Y is
is liab
liable
le for the loan
loan bein
being
g a guarant
guarantor.or.
100 Mo
Mortrtga
gage
ge ca
cann be cr
crea
eate
tedd to se
secu
cure
re (whi
(which
ch one
one is wrong
rong):
):-- a an exis
existi
ting
ng lo
loan
an,, b a loloan
an to be
dvanced, c a future debt, d nonone of these
ANSW
ANSWER
ER PR
PRAC
ACTI
TICE
CE TE
TEST
ST NO
NO.. 5
1 B 2 D 3
C 4 C 5 C 6 B 7 C 8 C 9 B 10 C

11 B 12 D 13 B 14 C 15 C 16 A 17 D 18
18 B 19 C 20 B
19
21 D 22 B 23 D 24 C 25 C 2
26
6 C 27
27 C 28 D
28 29 A 30 B
31 C 32 D 33 C 34 B 3
35
5 C 36
36 C 37 D 38
38 D 3
39
9 D 40 A
41 C 42 D 43 A 44 D 45 B 46
46 D 47 C
47 48 B 49 D 50 C
51 B 52 B 53 A 54 C 55 B 56
56 D 57 B
57 58 D 59 D 60 B
61 C 62 B 63 A 64 D 65 D 6
66
6 A 67
67 D 68 C 69 C 70 C
71 A 72 D 73 D 74 A 75 B 7
76
6 B 77 B
77 78 C 79 D 80 B
81 B 82 B 83 C 84 B 8
85
5 D 86
86 A 87 D
87 88 D 89 C 90 A
91 D 92 D 93 D 94 B 95
95 C 9
96
6 C 97 B
97 98 B 99 A 10
100 D
Page
MEMORY
MEMORY BASED RECA
RECALLED
LLED QUESTION
QUESTIONS
S ON JAIIB
JAIIB PAPER -3 ( LRAB )
1. MEMORY
MEMORY BAS
BASED
ED QUESTIONS ON BANKING LAWS - NI,BR & RBI ACT
QUESTIONS
1. As per section
section 26 of the Negotia
Negotiable
ble Instru
Instrumen
ments
ts Act,
Act, a Minor
Minor can draw,
draw, endors
endorse,e, accept
accept a
negotiable
negotiable instrume
instrument
nt but he can not : bind himself
2. Ah has
as grant
granted
ed Irrevo
Irrevocabl
cablee P
Pow
owerer of Attorn
Attorney
ey in favour
favour of B for on
onee year
year.. Afte
Afterr 3 mon
months
ths,, A
revokes the Power of Attorney. A cheque signed by B is presented for payment_ What will you do?
The cheque will not be paid because POA can be withdrawn before maturity and once it is
revoked, no cheque signed by agent can be debited to account of Principal
3.
beyond What
Whobject
the at is thetheofDoctr
Dothe ctrininee of Ul
company Ultr tra
isa considered
Vi
Vire
ress in ththee ultra
co
conte
ntextxt
viresof athelimit
limcompany
ited
ed co compmpany any?:
and ?:company
Any act by thebound
is not directors by
such act.
4. A min
minor or who was adm admitteittedd to the ben benefiefits
ts of partner
partnership ship has bec becomeome majo major. r. Within
Within how muc much h
period, he has to de decidecide to remain partner in the firm fi rm or not?: within 6 months of attaining majority or 6
months of knowing that he is the partner in the firm whichever is later.
5. If on a ccheq heque ue wor
words ds "Accoun
"Accountt P Paye
ayee" e" is written
written between
between two parallel parallel lines lines or or with
with the nam namee of a
bank, then: the cheque can not be endorsed.
6. Whi
Which ch type
type of crossin
crossing g is requir
required ed to be don donee iiff tthehe dra
drawer
wer wants
wants tha thatt iinn case of endorse
endorsemen ment, t, the
title of transferee of the cheque should not be better than the title of the transferor: Not Negotiable Crossing
7. In the case of dishono dishonour ur of a cheq cheque ue due to insuffic
insufficien ientt fund
funds, s, for enforc
enforcing ing rig rights
hts und
under er section
section 138
of the Negot
Negotiable
iable Instrumen
Instruments ts Act 1881,
1881, the holder holder should send a notice to the drawer within: within: 30 days from
the date of receipt of notice regarding dishonour of the instrument.
8. The Li Limita
mitatio tionn per
periodiod for filing
filing case in case of dishono dishonour ur of cheque
cheque due to insuff insufficieicient
nt funds
funds is: 1
month from the date of cause of action.
9. Objeject
ctiives forfor whic ichh a cocommpany has been formed are are giv iven
en in: MemMemoran orandum dum of Associatio
Association n
10. Fulll form
Ful form of BC BCB BS is Bas Basel el Com
Commit mittee
tee on Bankin
Banking g Sup
Super ervis
vision
ion..
11. Dire
recct Impact of increa rease in CRR is : Cont Control rolling
ling Liquidit
Liquidity y
12. Ban
ankks can not is isssue Dema man nd Draft aft pay
ayab
ablele to Beare arer as per prov rovisisiions of : SectSectio ionn 31 of th thee RB
RBII Act
Act
13
13.. Grac
Gracee Peri
Period od is al allolowe
wed d in ththee case
case of : Usance Bills and Usance Promissory Notes
14
14.. Ind
ndia
iann Banks
anks ar aree req
requi uire
redd to main
mainta tain
in min inim
imum um Ca Cap pitital
al Ade
Adequ quacacy y Ra
Rati tio
o of : 9%
15. In the casecase o off indiv
individu idualsals and
and H HUF,
UF, tax will will b bee deduc
deducted ted at ssourource ce if the inte interest
rest on ttermerm depdeposi
ositt in
a financial year is : more than Rs 10,000
16. If Power of Atto ttorne
ney y is execu
xecute tedd outsi side
de India it sho should be sta tamp
mped ed wit ith
hin
in::90 days
days of its its fir
first arri
arrivavall in
India
17. For
For its
its imple
implemen mentati tation,
on, the com compla plaina
inant nt sshou
hould ld accept
accept tthe he awa
award rd g give
iven n by Ombuds
Ombudsman man withwithin:
in: 30
days of the receipt of the copy of the award.
18. When
When proc proceed eedss of of chequ
chequee ar aree g given
iven before
before clearanc
clearancee o off th
thee chequ
chequee th thee bank
banker er wwill
ill be call
called:
ed:
Holder for Value
19. In the
the cacasese of WroWrongf ngful dis ish
honour of cheq chequ ue, to whom th thee bank
ank is li liab
able
le?:?: Draw
rawer
20. If dat
atee on a cheque is pri rio
or to ththee date of it itss prese
resen nta
tattio
ionn, it is ca
callle
ledd: Ante Date ted
d cheque
21. What
What is mino inor's li liaabilility
ty in HUF Acc ccoount: Minor is not li liab
able
le
22
22.. When
When doe oess the
the right
ight of nomi mineneee st star
arts
ts in res
respepectct of a de depo
posisitt acco
accou unt? t?:: Af
Afteterr death
eath of al alll depo
eposisito
tors
rs
23.
23. For inje
inject ctin
ing g mo
mone ney y in ththee ma
mark rket
et whic
which h ty
type
pe of tr tran
ansasactctio
ionn is under
nderta take
ken?n?:: (a)
(a) ReRepo po (b
(b)) Re
Revevers
rsee Re
Repopo
24. RBI con
contro trols money oney sup supply th throrouugh: cha hangngee in CR CRR R
25. Loan given iven to a di direreccto
torr ca
cann be waivwaived ed:: afte
afterr peperrmis issi
sioon of RBIRBI.
26. Under
der the
the Omb mbu udsme
dsmen n sche
scheme
me,, th thee Bank
ank hashas to repreply to th thee obje ject
ctio
ionn of th thee com
compla lain
inan
antt witith
hin
in:: one
one momon nth
27. A post date tedd cheque is pass assed in the acco cou unt of a cu cussto
tommer. But anoth theer cheque whic ichh was in order was
disho
dis hono
nourured
ed du
duee to insuf
insuffi fici
cien
entt fufund
nds.s. Wh
What at is th
thee liabi
liabilitlity
y of the Ba Banknkerer?:
?: Ba
Bank nk is li liab
able le to the dr dra awer
wer forfor pa
payiying
ng
post
post dadatetedd cheq
cheque ue as ba bank nk is no nott ju
just
stififie
iedd in papayi
yingng popostst da
date ted
d che
cheququee. TheThe ba banknk wi willll be liliab
ablele to dr
drawawerer for
for
dama
damage gess on acaccocoununtt of wronwrongf gfulul di
dish
shon onou ourr of chcheqeque ue..
28. Which
Which type type of prefere
preferentia ntiall shar
shares es are trea
treatedted as part of Tier Tier I capital
capital of the Bank?: Bank?: Perpetual Non
Cumulative Preference Shares.
29.
29. As per
per RB RBII guid
guidel elin
ineses,, all
all bank
bankss are are requ
requirired
ed clas
classisify
fy busi
busin ness
ess in va vari
riou
ouss busi
busine ness
ss seg
segment
mentss with
with effe
effect
ct fr
from
om
31-03
31-03-20-200808.. Th
Thee segmen
segments ts are
are:: (a(a)) Treas
Treasury ury (b(b)) Corpo
Corpora ratete / Whole
Wholesa sale
le Ba
Bankinking,ng, (c)
(c) ReReta tail
il Ba
Banki
nking,
ng, (d)
(d) Other
Other
Banking
Bank ing Busines
Business. s. The geogra
geographic phical al segment
segmentss are 'domest 'domestic' ic' and 'inte
'interna
rnationtional'.
al'.
30. Custo
stomer of your bank ank askssks for
for cash ash papayymen
ment of cro crosssseed DD. Wha What would you do? Gene eneral
rally pa
pay yment
ent only
thro
throug
ugh h bank
bank acaccocoununt. t. Howe
Howeve ver,r, ba
bank
nk can
can pay afte afterr du
dulyly sati
satisfy
sfying
ing ththee genu
genuin inenenesesss of ththee draf
draftt an
andd pay
payeeee but
but ba
bank
nk will
will
contin
con tinue
ue to be li liab
ablele to true
true own wner er if reci
recipi pien
entt is not
not trtrue
ue owownener.r.
31. A cheq
cheque ue is p prese
resente nted d fo
forr pa
paym ymentent in w whic
hich h th
thee amoun
amountt in wor words ds andand figures
figures is d diffe
ifferen
rent.t. Bank
Bank
should pay which amount?: amount?: amount amount written in words words will be paid.
32.
32. Wh
Whet ethe
herr a Priv
Privat atee Limit
imitededcocomp
mpan any y can
can be
beaa part
partnenerr wi
with th Publ
Public ic Limit
imitededco compmpanany y to
tofoform
rmaa Part
Partne
nersrshi
hip?
p?Ye
Yess
33. In the form.
on nomination con
context
text of Nom
Nomina
inatio
Nominee's tion,
namen,should
whi
which
ch be
is ccorr
orrect
ect stateme
statement?:
mentioned nt?:Sig
on FDR Signat
if nature
uress by
agreed of
of the
nomin
nominee
ee n
not
ot rrequ
customer. equire
ired
d
34
34.. A beaeare
rerr ch
cheequ
quee of Rs.
Rs.7,
7,0
000/
0/-- was prese
resennte
ted.
d. Th
Thee cash
cashie
ierr in
info
forrme
med d th
thaat th
thee che
chequ
quee can
can not be papass
ssed
ed as
the
the bala
balanc
ncee is le
less
ss by Rs.7
Rs.7000/
0/-.
-. The
The tend
tendererer
er cred
credit
ited
ed th
thee am
amou
ount
nt of sh
shor
ortf
tfal
alll and
and th
thee cheq
cheque
ue wa
wass paid
paid.. Cu
Cust
stom
omer
er
disp
disput
uted
ed the
the tran
transa
sact
ctio
ion.
n. Wh
Whetethe
herr bank
bank is li
liab
able
le?:
?: Ye
Yes.
s. For
For di
disc
sclo
losi
sing
ng bala
balanc
ncee to ththir
ird
d part
party
y, bank
bank is li
liab
able
le to
Page
account holder
holder..
35. When
When an an oorde
rderr passe
passed d by Bankin
Banking g Ombuds
Ombudsmanman is aaccepccepted
ted by the com
complaplaina
inant,
nt, the sam
samee
should be complied within:
within: 1 month from the date of receipt of acceptance acceptance from the complain
complainant.ant.
36
36.. Penalty for dela layy is per day if in
infformatio
ionn is not furnished with thin
in prescr
scribed time
ime under Right to
In
Info
form
rmat
atio
ion
n Ac
Act:t: Rs
Rs.. 250
250 per
per day
day with
with ma
maxi
ximu
mum m bein
being
g Rs
Rs.. 25,0
25,00000//
37
37.. A cr
cros
ossed
sed DD wa wass pai
paid d by cash.
cash. What
What ririsk
sk is th
ther
eree for
for th
thee Ban
Bank:
k: Bank will be liable to true
owner of the DD if payment made to a person other than true owner (Section 129 of N I Act).
38. A cheque
cheque is writwritten
ten in English
English and Reg Region
ional
al Langu
Language age.. W
Whethether
her it can be paid
paid?:
?: Yes. A cheque
written in different language can be paid if otherwise in order.
39. Who
Who can annnot bececoome a pa
partrtn
ner in a fi
firm
rm as per sup
supreme
reme cocour
urtt ju
jud
dgmen
entt HUF
40. Introd
Introduce
ucers
rs liab
liability
ility / rrespo
esponsi
nsibili
bility
ty in case of an accaccounountt hhold
older
er defrau
defrauding
ding Bank
Bank iiss : To assist
the
4 1. BankNin omlocating
ination - theMinor
Min a/c
or caholder
can n be a-nomine
doesinee.
nom not
e. have legal liability
42. Inop
noper
eraativ
tive acccco ounts: 2 Ye Year arss & ababovovee no
nott op
opererat ated
ed..
43. RTI Act - party seeking information need not disclose the reasons for which the information
sought for.
44. Counte
Counterfe rfeit
it notes
notes retureturned
rned after
after police
police verific
verificatioation,n, the same has to be preserved for 3 years
subject to half yearly verification.
45. Valid
lidity
ity per
erio
iodd of cheque red reducecedd to 3 momon nth
thss fro
from 1. 1.44.12 as peperr : RB
RBII Gui uide
deliline
ness un
undederr sec
sec 35A
35A of B R
Actt
Ac
46. Cro
Crossed
ssed cheque
cheque pay paymen
mentt ac acros
rosss th
thee count
counter er to
to the
the autho
authorize
rizeddO Offic
fficer
er ofof collec
collectin tingg Bank
Bank - ca cannb bee
made and there are no violation as per NI Act. 255.
47. The con
conseqsequen
uence ce of non registr
registratio
ationn of
of Partn
Partnersh
ership ip - ffirm
irm cannot
cannot sue othe others rs ffor
or its due
duess.
48. Banks
Banks aare re rrequ
equire iredd to impleme
implement nt the
the awa
award rd ooff OOmbu
mbudsm dsman an unl
unless
ess a dedecis
cision
ion is take
taken n to appeal
appeal
againstt the same within one month
agains month from the date of receipt receipt of acceptance o off the award by the
complainant.
49. Accoun
Accountt holdeholderr A & B wan wantt to sub substit
stitute
ute the
theirir nname
ame with
with thethe name
name of theirtheir so sons
ns C & D in the the
account. What should the bank do?: Substitution of all names is not allowed. At least one of the
original account holder should be retained in the account.
50. When
When only only image
image of of ch
chequ
equee is sent
sent to the pay paying ing bank
bank w whil
hilee se
send
nding
ing cheque
cheque for collect
collectionion
instead of sending the physical cheque, cheque, the process is called: Cheque Truncation -
51
51.. A Cheq
Cheque ue pa
partrtly
ly wr
writ
itte
tenn in Eng
Engli lish
sh & papart
rtly
ly in reg
regio iona
nall la
lang
nguauage
ge is pres
presenente
tedd for
for pay
paymenmentt What
What
sh
shou
ouldld the
the bank
bank do?:
do?: MaMay y be papaidid,, if othe
otherw rwiseise in order
order an and d the la lang
nguauagege othe
otherr
than.English
than.Eng lish is the regional lang uage of the area wh
language whereere the ch cheq
equeue is prese
presente
nted. d.
52
52.. An auth
authororit
ity
y ha
hass been
been grgranante
ted
d in an acco
accou unt Yo
You u hahave
ve rece
receiv
ived
ed in
info
form
rmatatio
ion
n abou
aboutt th thee de
deat
ath
h of th
thee
Pr
Prin
inci
cipa
pal.l. To
Todadayy, you re rece
ceivivee a cheq
cheque ue si
sign
gneded by ththee agen
agentt wh whic ich
h is date
dated d prio
priorr to th
thee deat
death h of ththee Pr
Prin
inci
cipa
pal.
l. What
What
sh
shou
ould
ld the
the bank
bank do?do? : Che hequ quee can no nott be paid
paid as au autthor
horit ityy of age
agent come
comess to end with with the deat deathh of the
the
Principal.
53. You ar aree maiain
nta
taininin
ing
g cu
curr
rreent accocou unt in the name of the Trust. You rec eceeiv
ivee noticicee of death of one of th thee
trus
truste
tees
es.. Afte
Afterr this
this noti
notice
ce,, a cheq
chequeue sisign
gneded by ththee dece
deceasased
ed trtrus
uste
teee is pres
presen
enteted
d fo
forr pay
paymement nt.. Wh
What at sh
shou
ouldld th
thee bank
bank
do?: ChCheeququee mamay y be papaidid,, if ot
othe
herwrwisisee in or
orde
der.
r.
54. As per Consum
Consumer er Protec
Protectiontion Act
Act,, tthe
he per
period
iod for filing
filing app
appeal
eal to Sta
State
te Comm
Commissi ission
on again
against st
decision
decisio n of the District Forum is: maximum 30 days
55
55.. Who
Who ca cann not
not be fullfull fl
fled
edgeged d part
partne
ner:
r: Minor
56
56.. Can
Can Kart
Kartaa of HU HUF F appo
appoin intt Ag
Agenentt or dele
delega
gate
te th
thee powe
powers rs to ot
othe
herr co
co-p
-par
arce
cen ner:
er: Yes,
Yes, he can do so.
57. Money dep epoosi
sitted afte
afterr rec
eceieiv
ving ordorder may be at attatach
ched
ed in ththee ca
case
se of:
of: attac
attachment
hment orde orderr
original
58. should
Origin
Originalal
be& returned.
duplica
duplicate te ddraft
raft presen
presentedted simu
simultanltaneou
eously
sly for paymen
payment: t: D
Dupluplica
icate
te shoul
should d be
be paid
paid &
59. Compan
Company yh has
as rregi
egister
stered
ed o offi
ffice
ce atat De
Delhilhi,, fa
facto
ctoryry at Kolk
Kolkata ata & loan
loan tak
taken
en aatt Mumba
Mumbai. i. F
For
or creating
creating
equitable
equita ble mortgage title deeds can be depo depositedsited at: any notified city.
60. Reason
Reasonss forfor aavoi
voiding
ding advanc
advancee to Un-Reg
Un-Registe istered
red Partner
Partnershi shipp Firm:
Firm: FirFirmm can
can not sue aga agains
instt
anyone for recovery of its debts but anyone can sue against the firm.
61. What
What is the effect
effect o off 'Not
'Not Negot
Negotiable
iable Cross
Crossing ing'?:
'?: T
Transf
ransferee
eree does not get betterbetter ttitle
itle than the transferor
transferor..
62. Pay
ayme
men nt of cheqheque cacan n be ststop
oppe
ped d by
by:: only Drawer of the chequ chequee
63. Acc
ccooun
untt pa
payyee crcro
oss
ssin
ingg defi
defin ned in:
in:-N
-Not ot de
defin
fineded any
any whe
where re
64. What is the current rate of interest paid on CRR?: NI NILL
65
65.. How
How ca can
n be the
the tran
transf
sfer
erab
abiili
lity
ty of Bililll of exch
exchan angge can
can be rest
restri
rict
cted
ed?? By ma
makinking g restr
restrict
ictive
ive endor
endorsem sement
ent
66
66.. If on a Bill-
ill-of
of Exch
Exchan angge, two
two papararall
llel
el li
line
ness are
are drawn
rawn andand nonott ne
nego
goti
tiab
able
le is writ
writte
ten
n be
betw
tweeeenn th
thee li
line
nes,
s,
what
wh at kin
kind
d of the crcros
ossising
ng will
will b bee there
there:: Pr
Provis
ovisionsions rela
relating
ting tto
o crossin
crossing g are not appapplica
licable
ble to Bill o off Exchang
Exchange. e.
67.
67. Wi
With
thin
in prio
priori
rity
ty sect
sector
or,, wh
what
at is th
thee al
allo
locacati
tion
on to weak
weakerer sect
sectioion?
n?:: 25%
25%
68.
68. Ma
Maxximu
imum ti time
me wit ithi
hinn whic
which h rep
reply must
must be giv iven
en unde
underr Ri
Rigght to in
info
form
rmatatio
ionn act?
act? 30 days
days
69. What is the status of Nomin ineee? Trustee of Leg Legal al heir
heirss
70
70.. Safe
Safe de
depo
posi
sitt vau
ault
lt is gover
overne nedd by prov
provis isio
ions
ns of:
of: Tran
Transfsfer
er of Pro
Proper
perty
ty act
71
71.. A ch
cheq
eque
ue sig
signenedd by agagen
entt has been
een pres
preseent nted
ed afte
afterr hi
hiss deat
death h for
for pay
ayme
mentnt.. Wh
Whatat sh
shou
oulld th
thee ba
banknk do
do?:?: Th
Thee
cheque will
72. wiPurpo
ll be
Pur paid
se ofifstar
pose otherwis
othseries
erwise
ser e in order.
orde
ies notes:
no tes: Tor.
rep
replace
lace def
defect
ectivel
ively
y pri
printe
nted
d notes
notes
73.
73. Cu
Cust
stom
omer
er-b
-ban
ank
k rela
relati
tion
onsh
ship
ip in lo
lock
cker
er acco
accoun
unt:
t: Le
Less
ssee
ee-L
-Les
esso
sor
r
74.
74. Up
Upto
to wh
what
at amou
amountnt Dist
Distri
rict
ct foru
forum
m can
can be appr
approa
oach
ched
ed unde
underr Co
Consnsu
umer
mer Pr
Prot
otec
ecti
tion
on Ac
Act?
t?:: Rs.2
Rs.20
0 Lacs
acs
75. Appeal
Appeal agains
againstt the
the aaward
ward of Ombuds
Ombudsmanman can be m made
ade by the ban
bank
kw withi
ithin:
n: 30
30 days
days of rrecei
eceiving
ving
Page
the acceptance from the compla complainant.

inant.
76. Cheque is issu
sueded by dir ireect
ctor
or of a company an and d pre
presen
sente ted d after
ter his dea eath
th wil
illl be: PaPasssed
sed if in order
rder
77
77.. What
What would
would be the acti actionon o off centra
centrall ba bank
nk in rreces
ecessionsion?: ?: create
create liq liquid
uidityity by decreas
decreasing ing CRR and
lower the repo rate.
78
78.. Ante
Ante dated
ated cheq
chequ ue li
like
ke cheq
chequ ue dated ated 15. 5.12
12..07 is pres
presen ente
ted d for
for pay ayme
mentnt on 1. 1.11.0
.088 wherehereasas__ th
thee acco
accoun
untt was
op
open
ened
ed on 20.12.07
20.12.07 : Cheque shou should be passed
ld be passed
79. If amou
amount nt in w word
ordss an andd fi
figu
guresres difdiffer
fer on a chequ
chequee an and d amou
amount nt writt
written
en in in wo
wordsrds is h high
igher
er than the
amountt written in figures, then as per sec.18 of NI Act, which amo
amoun amount unt should be paid?: amount amount written in
words
80.
80. Nomin
Nominati ation
on fac
facili
ility
ty is not
not avail
availab ablele in ththee cas
casee of : Trust A/c.
81
81.. cust
custom
omer er se
servrvic
icee Comm
Commit itte
teee meet
meetin ing
g he
held
ld on : Monthly basis
82. A perso
person nw want
antss to opeopen n a jojoint
int accaccounountt with
with his
his wife
wife in such such a way tha thatt th thee acc
accou ountnt can
can be opeoperate
ratedd
by him only during his lifetime and she should be able to t o operate the account only afte afterr his death. The T he
account has to be opened with the instructions: 'Former or survivor'.
83.
83. Fo
Forr wron
wrongf gful
ul dis
disho
hononourur of the cheq cheque ue the bank
bank is lialiablblee to
to:: the drawer of the cheque
84. Banks
Banks p prin
rintt ch
chequ
equee b book
ookss havin
having g simil
similar ar parti
particul
culars.ars. The for format
mat of cheq
cheque ue iiss pr
presc
escrib
ribed
ed b byy whic
which h
Act : Not defined in any Act. It is as per practice. CTS 2010 advised by RBI
85. Which
Which cro crossin
ssing g tak
takeses aaway
way the feat feature
ure of assu
assumpt
mption ion of defecti
defective ve free titltitlee avai
availablable
le to the
transferee
transfe ree : Not negotiable crossing
86.
86. Wh
Who o is appo
appoin inte
tedd to tack
tacklele publ
public ic comp
complai laint
ntss agai
againsnstt th
thee publ
public ic auth
authororit
itie
iess : Ombudsman
87. The faci
facility
lity of nomina
nomination tion is not availab available le to Trust
Trust accoun
accountt b becau
ecausese it is accoaccount unt : Non-individual
(facility of nomination
nomination is availa available ble only in the case of indiv individual(
idual(s). s).
88. The tru
truee o owne
wnerr of of a cheque
cheque has bee been nd depr
eprive
ivedd of his right right b by
y coll
collecti
ectionon of the the checheque
que for a
different
differ ent person. This is called Conversion
89. As per recent
recent RBI RBI/Go/Govt. vt. guide
guideline lines,s, pensio
pensionersners can open open acco accountunt jointly
jointly withwith:: spouse, to be
operated as either or survivor or former or survivor.
90. While
While p payi
aying
ng a beare
bearerr ch chequ
eque, e, ssign
ignatu
atures
res aarere obtaine
obtained do on
n th thee b
back
ack sid
sidee of the cheque cheque.. Wh Why y ? : As
evidence of payment
91.
91. Whet
Whethe herr Mi
Mino norr can
can nomi
nomina natete ? no. On his behalf nomination will be done by a person legally
competent to act on his behalf.
92. Cheque is date tedd befo
efore date of it itss presenentatati
tioon is cal
allled:
ed: Ante
Antedatedated d che
cheque
que
93. An endors rseementent in whic ich
h en
end dors rserer excl
excluude
dess his li
liab
abililiity is call lleed : san
sanss recour
recourse se
94.
94. Wh
When en a comp
compan anyy is fi
fina
nannced
ced agai
agains nstt th
thee secu
securirity
ty of hypo
hypoth thec
ecat
atioionn or mort
mortgagagege of it itss mo
mova vabl
blee pro
propert
perty
y, th
thee
co
comp
mpan
anyy is re
requ
quirired
ed to fifile
le pa
parti
rticu
cular
larss of chchar arge
ge wi
withth:: Reg
Registr
istrar
ar of Companie
Companiess
95.
95. Who
Who is call calleded as Ho Hold lder
er as perper N I Act? Act?:: Who is entitled to possession of the instrument in his
own name (actual possession is not necessary).
96. If a cheq
cheque ue isis di
disho
shonounouredred due to iinsu nsuffic
fficien
ientt fu
funds
nds,, thenthen as as per
per sec
sectio
tion n 13
138 8 of N I A Act,
ct, cour
courtt may
award imprisonment up to: 2years
97. On the face of a cheque, the name of a bank is writte tenn without two parallel lines. This will amount to : special
crossing
98
98.. A/
A/cc pa
payyee cr crooss
ssin
ingg is defin
efineded in : it is not defined in any Act. It is as per practice
99
99.. Nomi
Nomina natition
on fa
facicili
lity
ty for
for depo
deposi sitt ac
accocoununtsts is avai
availa
labl
blee un
undeder:r: 45ZA & 45 ZB of the BR act
100. Maximum
Maximum amount amount of deposi depositt wh whichich a b bank
ank may ask w while
hile allowing
allowing locker facility to a custom customer: er:
Advance rent for 3 years and locker breaking charges
101. A sol
solic
iciitor
tor ha
hass acc
accoun
ount in his name and in th thee name of hi hiss clie
clien nt. Ga
Garnrnis
ishe
heee order
rder is recreceieivved in th
thee name
name of
the
th
saeme
same soli
sorigh
lici
ricito
tor.
ghtt r.
an
andWh
Whet
d saethe
same
meherrca
the
thpaci
capae city
same
saty.
me . will
will be appl
applic icab
able
le in ththee name
name of clie client
nt also
also:: No becabecaususee tw
two o acco
accoun untsts are
are not
not in th
thee
10
102.
2. Whic
Which h of the
the fol
ollolowwiningg is not a ma mate teri
riaal alte
altera
rati
tioon? Chan ang gin
ing
g bear
bearer er to or
orde
der
r
10
103.
3. A bill
bill iss
ssue
ued d wit itho
houut co
cons nsid
ider
eratatio
ion
n is call
calleded:: Acco
Accomo mod dat
atio
ionn Bililll
104. Ther
eree is a joint
int account in th thee name of A &B. A cheque is drawn by A but the alte terratio
ionn in the amount is
au
auth
then
entic
ticate
ated d by B. WhWhet ethe
herr ba
banknk can
can pay th thee ch
cheqeque
ue:: Ye
Yess prov
provid ided
ed th
thee oper
operat atio
ion
n is eith
either
er or susurvrviv
ivor
or..
105..
105 The ter
termm used
used for convers
conversion ion or transfer
transfer of prop property
erty der
derived
ived fromfrom a criminal
criminal offens offensee fo forr the
the
purpose of concealing, or disguising, the illicit origin of the property iiss called: Money laundering
106..
106 In which
which of the fol follow
lowing ing situatio
situations ns bank
bank w will
ill not be a holder
holder in due due cour
course?:se?: WheWhen n bank
bank crecredits
dits
the account of the custom customer er after receipt of funds on account account of chequecheque sent s ent for collection
107. The ra
rate
te at whichich RB RBII redis
edisccounts th thee usan
sance bil illls of ban
banks is call
called
ed:: Banankk Ra
Ratete
108. In the
the case of IPO, th thee company is requir ireed to allot shares or make refu efund with thiin: 30 day ayss of th
thee closure of
the
the issu
issuee in cacase
se of fixe
fixed d pric
pricee pub ublilicc is
issu
suees; 15 da dayys in case
case of boo ookk buiuilt
lt iss
ssue
uess and
and 15 da day ys in case
case of ri rig
ght is
issu
sues
es
11
112.
2. Bank
Bankca can
n ch
charg
argee colle
collecti
ction
onchcharg
arges
esofofno
nott mo
morereth
than
anfoforr _o
_out
utsta
statio
tion
n cheq
cheque
uess of
ofRs
Rs10
10000000 to
toRs
Rs11 la
lacc in
insav
savin
ingg bank
bank:: Rs.
Rs. 10
100
0
113. Whic
Which h of the follo low wing cheques can not be paid by th thee bank? : A cheque on whic ich
h si
siggnatures of draw rawer
have
have been
been forg
forged
ed irre
irresp
spececti
tive
ve of th thee clclev
ever
erne
nessss in forg
forger eryy and
and th thou
ough
gh th
thesesee appe
appear ar to be same
same as th that
at of th
thee drawe
rawer.r.
114. FIU stands for : Financ Financial ial Intelligence
Intelligence Unit (India)
115.
115. Tw
Two o cheq
cheque uess have
have been
been preseresent nted
ed to you as pay payin
ing g bank
bankerer.. On
Onee is date
dated d prio
priorr to open
openin ingg th
thee acco
accoununtt and
and
othe
otherr is date
dated d prio
rior to isissu
suee of cheq
cheque ue boo
book. Wh What at will
will you do as pay payin
ingg bank
banker er?:
?: Bo
Bothth ch
cheqequeuess will
will be paid
paid..
116.
116. KY
KYC C and
and FIU
FIU in In
Indi
diaa are assoc
associat
iated
ed wit
with:
h: preventing money laundering
117..
117 Art
Article
icless of Ass
Associa
ociation
tion mention
mentions:s: directo
directors'
rs' powers
powers
118. Garnishee
Garnishee order is not
not applicab
applicable
le o
on:
n: (a)cash received after two hours
hours of receipt of Garnish
Garnishee
ee o
order
rder
Page
(b) amount received for safe custody (c) undraw undrawn n balances in cash credit accounts
119. A person
person having locker has expired expired.. T Thehe nomin
nominee ee ccomes.
omes. A sealed
sealed cover is fo found.
und. What will you you
do ? : It will be delivered to him as part of locker contents without opening the packet.
120. A bill
bill wa
wass prepresented
sented on 10.5.10.5.2005
2005 and accepte
accepted do on
n 12
12.5.20
.5.2005.05. The bill was was d due
ue fo
forr payment
payment on
29.07.200
29.07 .20055 and was returned. The last date for filing suit in this case is : 29.07.2008 29.07.2008
12
121.
1. A list
listed
ed bank
ank hahass to pr
prep
epar
aree and
and publ
publisish
h ba
bala
lanc
ncee sh
shee
eett on quart
uarter
erly
ly ba
basi
siss as pe
per:
r: SE
SEBIBI gu
guid
idelelin
ines
es
122.
122. Th
Thereree ar
aree ce
cert
rtai
ainn in
inst
stru
rume
men nts defi
define
nedd as nego
negoti tiab
able
le in
inst
stru
rume
mentntss unde
underr lalaw
w and
and cert
certai
ainn in
inst
stru
rume
ment ntss used
used as
nego
negotitiab
able
le inst
instru
rume
ment ntss as per
per prac
practitice
ce.. Whic
Which h of th
thee fo
foll
llow
owiningg is not
not a nego
negotitiab
able
le in
inst
stru
rume
ment nt as per
per NI Ac Act:t: Divi
Divide
dendnd
warrant
123.
123. On rerepa
payyme
mentnt of_d
of_deb
ebtt of a comp
compan anyy, sati
satisf
sfac
actition
on of char
charge
ge sh
shbu
buld
ld be fifile
led
d with
with RO
ROC C with
withinin:: 30 day
days
124..
124 A Trust
Trust De Deeded is sisilen
lentt abo
about ut lo
loans
ans b byy th
thee trust.
trust. T The
he trustee
trustee aappr
pproac
oaches
hes foforr a loan.
loan. Under
Under th these
ese
circumstances
circum stances what should the bank do?: No loan can be raised
125..
125 Whic
Which h of the following
following un/und
un/under-st
er-stampe
amped dd docum
ocumentent can not be rrevalievalidate
datedd by pay
paying
ing pena
penalty:
lty: None of
these as all documents can be revalidated. (However, (However, as per question Demand Promisory note cannot be
revalidated).
12
126.
6. A pererso
sonn of 65 years
ears of age
age can
can not nonomi
min nat
atee whicichh of th
thee foll
follow
owin
ing g perso
ersonns: Tr
Tru ust
0
127..
127 The agg
aggregregate
ate limi
limitt ffor
or capital
capital market
market exposu
exposure re of a B Bank
ank is: 40 /0 of net worth at the end of previous
year
128..
128 A minor
minor appro
approachacheses for a loan
loan.. Whi
Which ch type
type of loanloan can b bee given
given to h him:
im: loan
loan can
can not b bee sanctio
sanctioned
ned
other than for necessities.
129..
129 Whic
Which hooff the
the following
following doesdoes not
not matc
match h in ban
banker/c
ker/custo
ustomer
mer relation
relation : Lo Locker
cker facility
facility - Ba
Bailee/
ilee/Bailo
Bailor
r
130. Comm
Committee ittee on Procedure
Proceduress an andd Perform
Performance ance Audi
Auditt of Public
Public S Servic
erviceses (CPPA
(CPPAPS) PS) was headed
headed by:
S.S. Tarapore
131..
131 Cus
Customtomer er serv
service
ice cod
codee has been men mentiontioned ed in : Banking Codes and Standards Board of India.
132..
132 Cheque
Cheque rece receive
ivedd in cclear
learing
ing ssign
igned
ed by whowhom m wil
willl not be p passe
assed d out
out of the
the follo
followin
wing: g: signed by a
person who has ' been declared insolvent.
133. Whether
Whether a customer
customer can approach
approach Ombudsman
Ombudsman without without first approaching
approaching the Bank : Approaching
the bank first is a pre-condition.
134..
134 In case
case a forforged
ged not
notee is detecte
detected d in th
thee cash tendtendered
ered aatt ban
bank k co
counte
unter,r, wh
whatat should
should thethe babanknk do?:
do?:
The
135. NoteIfshould
a gua
guardianbe impounded
rdian is apappoin
pointed and
ted bynot returned
court,
court minorto
, minor thebecome
will tenderer.
beco me m major
ajor at the
the agagee of
of:: 18years
136..
136 A Cheque
Cheque with forged forged signsignatu
atures
res is p prese
resententedd for p pay
ayment
ment aandnd is p paid
aid.. Ban
Bank k will
will be liable
liable to:
to:
Customer (Drawer of the cheque)
13
137.
7. Prot
Protectio
ection n is avai
available
lable to the collectin
collecting g bank
banker er in case of : Crossed cheques
138..
138 Whi
Which ch is not
not a Gen Genera erall Cro
Crossissing
ng:: Name of a bank written between two parallel lines
139. If time is n not
ot ment
mentione ioned d on
on a Bill of Excha Exchange,
nge, it will
will be payable:
payable: on demand
140..
140 In an account
account o off Club
Club with
with you,
you, chchequ
equee has b been
een been
been prese
presente
ntedd for p paym
aymentent sisign
gneded by the
secretary who has died. What should the bank do?: It will be paid if it not dated subsequent to date of death.
141..
141 Garn
Garnishee
ishee orde
orderr is aapplpplicabl
icablee for:
for: credit
credit balanc
balancee in O ODD and not for cchequ
hequee sent
sent for collectio
collection. n.
142..
142 Ban
Bank k Guarantees
Guarantees are issued issued as per provprovision
isionss of
of : IIndia
ndian n Contract
Contract Act
143. cheque
cheque truncatio
truncation n means: conve converting
rting physical
physical cheque to electro electronic
nic image and stoppi stopping ng physical
physical
flow of a paper cheque
cheque.. 660_ Foreign currency paid to taxi driver, driver, shop keeper, can be accepted by:
Authorised persons.
144..
144 A bank
bank cann
cannot ot acacqui
quirere either
either as owner
owner o orr as pledg
pledgee ee sh
shares
ares inin a compa
company ny mo
more re th an:.. 10 % of paid
than: paid
capital of the company or 10% of the•p the•paid
aid up capital and reserves of the bank, which whichever ever is lower.
145. For forma
formationtion of a co company
mpany,, Registra
Registrarr of Companies
Companies will issue : ce certifica
rtificate
te ooff incorpo
incorporatioration
n
146..
146 Co is in liquidat
liquidation ion,, ffund
undss aare
re at the disp
disposal
osal of : Liqui
Liquidat
dator
or
147..
147 Gua
Guardirdian
an appoin
appointed ted by will of the fatherfather is called
called:: ttest
estame
amenta
ntary
ry gua
guardi
rdian
an
148. Which of the follow following ing documents
documents does not constituteconstitute document
document of title to good goods:Airway
s:Airway bill
149..
149 DD can be revali revalidatdateded within
within:: aany
ny time (pract
(practice
ice may differ
differ In diff
differe
erent
nt bank
banks) s)
150..
150 Whic
Which h cro
crossing
ssing is a S Specia
peciall Crossing
Crossing : NameName of Bank Bank is wr written
itten in th
thee cheque
cheque w with
ith oorr withou
withoutt par
parallel
allel
lines
151. Sup
Supervervisio
ision n of b bank
ankss is do done
ne by RBI u unde
nderr whi
whichch act:
act: RBI Act / BR BR Act / JilanJilanii ComCommitmittee
tee RRepo
eportrt
/ NI Act: Banking Reg Regululat
atioion
n Ac
Actt
152. A minor
minor is aged 15 years, years, w who
ho is illiterate.
illiterate. Whic
Which h type
type of self opera
operated
ted a/c can be be opopened
ened -SB/ RD /
FD none
153. Which of the follow following ing can open SB a/c? State Electricity Electricity Board/
Board/ Indian
Indian Bank Association/
Association/
Municipal corporation: Indian Bank Association.
154.
154. In a Flyin
lying g cl
club
ub,, th
thee Secr
Secret
etar
ary
y & Tr
Treaeasu
sure
rerr are
are auth
author
orizized
ed to si
sig
gn. A ChCheq
equeue is pres
preseent
nted
ed foforr pay
payment
ment acro
across ss
the
the co
coun
unte
ter.
r. In be
betw
tweeeenn it ha
hass be
beenen in
info
form
rmed
ed th
that
at Se
Secr
cret
etar
ary
y has
has di
died
ed,, what
what you wi will
ll do
do?? : Wi
Willll be paid
paid,, if othe
otherwrwis
isee in
order
155..
155 Rev
Revivaivall of limi
limitati
tationon for recove
recovery ry ooff a time barred
barred lloanoan is p possi
ossible
ble byby:: obtaining fresh promise to
pay under provisions of Indian Contract Act.
As per
per Su
Supr
prem
emee cocour
urtt de
deci
cisi
sion
on,, HU
HUF F cann
cannot
ot be a papartrtne
nerr be
beca
caus
use:e: HU
HUF F is no
nott a na
natu
tura
rall or lega
legall peperrson
son
156. As per
per P Prevent
reventionion of Money
Money launde
launderingring Act, preserv
preservation
ation of records
records relating to cclosed losed accounts
accounts
upto: 5 yr from date of closure of account.
157.
157. Ba
Bank
nkss ca
can
n prov
provid
idee in
info
form
rmat
atio
ion
n abou
aboutt th
thee cust
custom
omer
er to anot
anothe
herr Ba
Bank
nk:: Genera
Generall in n
natu
ature,
re, without
without any
responsibility
158. Board of D Directors
irectors want to boborrow
rrow money in eexcess
xcess ooff pa
paid
id up
up capital
capital and
and reserves
reserves of th
thee company
company::
Page
can be done through a resolution passed by shareholders in the general meeting

159. Ot
Othe
herr than
than a Bill ill of ex
exch
chan
ange
ge or pro
promimiss ssororyy no
notete,, th
thee do
docucumementnt whic
which h was
was exexec
ecut
uted
ed ab
abroroad
ad is requ
requirired
ed to be
be--
st
stam
ampepedd on its arrival in i n India within: 3 months of its arrival
160..
160 Admini
Administra strator
tor is appoin
appointedted in case of: to realize assets and pay off liabilities of a person who has
died without writing a will.
161. UndeUnderr Om Ombu budsdsman
man schscheme
eme,, which
which typ typee of cascasee nonott en
entertertai
taine
ned?:
d?: adadvo
voca
cate
te rep
repre resent
senting
ing the cuscustomtomerer
162. Which of tthe he ffollowi
ollowing ng is not a valid valid ccheque
heque for paymen paymentt by the bank-l) bank-l)differe
different nt ink
ink & handwriting
handwriting
2) cheque with prior prior date 3) cheque with impossible impossible date 4) Mutilated Mutilated cheque: Mutilated cheque
163..
163 The liab
liability
ility of th thee drawer
drawer of b bills
ills of of exchan
exchange ge is p prime
rime till iitt is not not accepte
accepted d by tthehe drawe
draweee afteafter
r
that prime liability becomes of Drawee. Drawee.
16
164.
4. Wh
Whet ethe
herr Pvt
Pvt Ltd.td. Co.
Co. can
can be papart rtne
nerr wiwithth Par
Partntnerersh
ship
ip Fir irm
m: Yes
Yes
165.
165. Co
Coununteterf
rfei
eitt note
ote rece
receivived
ed at th
thee coun
counte terr wh
whatat to be donedone?: ?: Imp
mpo ound
und th thee curr
curren
encycy note
note..
166. No notingting on cur curren
rency note,te, dir
irec
ectitioons is issu
sueed by RBI RBI under sec sectitio
on 35A of BR Ac Act. t.
167. Cross
ross chcheqequ ue ca
can n be pai
paid at coun unteterr if pres
presenentted by oth theer bankank.
16
168.
8. Pay
Paymemen nts of a forgforgeded draf
draft.
t. Wh
Who o wil illl lo
lodg
dgee FIR
FIR payin aying g or coll
collec
ectiting
ng ba
ban nk: Pa
Paying
ying Ban Bank. k.
169.
169. Bo
Borrrrow
owin ingg powe
powers rs of boar
board d of di
direrect
ctororss are
are cont
contai aine
nedd inin:: Arti
Articlcles
es of AsAssosoci
ciat
atio
ionn
170. Locke
ockerr cacann be brok roken open
open afte
afterr not
noticicee to ththee hirirer
er if th
thee same
ame is not operoperatated
ed for:
or: moreore ththan
an th
thrree years
ears fo
for
r
mediur -n ririsk
sk ca
cate
tego
gory
ry or on onee year
ear for
for a hi
high
gherer ririsk
sk cate
categogoryry,, an
andd th
thee lo
lock
cker
er-h
-hir
irer
er do
does
es no
nott resp
responond d no
norr op
opererat
ates
es th
thee
locker.
17
171.
1. If a comp
compla lain
inan
antt is no
nott sat
satis
isfi
fied
ed wit ith
h ththee awar
award d or his com omp pla
lain
intt is reje
rejeccted
ted by th thee Ban anki
kin
ng ombumbuds dsme
men,n, he
ca
cann pref
prefer
er an appe
appeal al to DeDepuputyty Go
Govevern
rnor
or,, RB
RBII withwithin in:: 30 day
days of th thee of th
thee date
date of rece
receipiptt of comm
commun unicicat
atio
ion
n
regar
reg ardin
ding
g awa
awardrd or reject
rejectio ion n of the co
compmpla lain
int.
t.
172.
172. In ca
case
se of wron
wrongf gfulul di
dish
shon
onou
ourr of cheq
cheque ue,, bank
bank is li liab
able
le toto:: acco
accoununtt hold
holder er only
only
17
173.
3. Who
Who ca cann se
seek
ek info
informrmatatio
ion
n un
unde
der.r.Ri
Righghtt to Infor
nforma mati tion
on Act:
Act: AnyAny citicitize
zenn of InIndi
diaa can
can ask
ask for
for info
informrmatatio
ionn
174. The Garni
Garnishee shee Order is app applicable
licable on the accoun accountt of a customer customer when the relation relationshipship betwee
between n
banker customer is: Debtor & Creditor. Cre ditor.
175.
175. A priv
privatatee limi
limite tedd comp
compan anyy with
with Re Reg gisiste
tere
red
d offic
fficee at Bang
Bangal alor
oree has
has rais
raised
ed lo
loan
an frfrom
om a bran branch
ch lo
loca
cate
ted
d at
Mumb
Mu mbaiai.. Fo
Forr cr
creaeati
ting
ng eqequiuita
tabl
blee mo
mortrtga
gagge, tititl
tlee de
deed
edss can
can be de depo
posisite
tedd at:
at: Mumb
Mumbai, ai, Kolk
Kolkat atta
ta,, Ch
Chenenna
nall or any ot othe
her
r
notified
noti fied place
place..
176.
17 6. rdss isAmen
in word
wo cheq
chn
me eque
tiue
tion is pres
oned
ed pr
asesen
ente
Rs ted
Te
Tendnfo
for
larkh
lakhpayme
ay ment
only
on ly..ntInintew
termhi
hich
rms schofam
amo ount
sect un
sectio nt in
ion 18fi
fig
gures
ofur
thes
theeN is Iment
me
Acntio
t,ione
Act, ned
d as
what
wh at sh Rsld10,00
shou
ould 0,
th000
the 0 wh
e ban
ba whererea
eas
nk do?:
do ?:sTth
the
e am
he amoo
amou unt
un
ountntt
wr
writ
itte
ten
n in wo
word
rdss sh
shou
ouldld be pa
paid
id..
177. When a letter
letter is signe
signed d by the borrowborrower er and
and bas
baseded on that lletter
etter bank deliver
deliverss the document
document of title title
to goods to the borrower, such letter is called as: Trust Receipt
178. How much charge chargess are charged
charged iin n aadditio
ddition n to normal collect
collectionion charges
charges and out of pocket pocket expenses
expenses
for providing instant credit facility for outstation cheques:Nil
179. A li
limited
mited company
company has register registered ed office
office at C Chenna
hennaii whwhereas
ereas loan has been raised from bank branch
at Mumbai. The charge will be registered with the ROC at: Chennai
180. Ap partner
artnership
ship firm conducting
conducting business business otherother than the bank bankinging business
business hashas momorere than
than 20 member
memberss
as partners. Whether this is allowe allowed?: d?: Such association is called illegal association as per Compa Companies nies Act
181. Under
Under Preventio
Prevention no off Money
Money Laund Laundering ering Act, banks are requir requireded toto se
send
nd cash transaction
transaction report in
respect of cash deposit or withdrawal of more than Rs 10 lakh in a month from one account within: 15 days
from the close of the month.
182..
182 Who is pr primar
imarilyily liab
liable le on Bill
Bill o off exchan
exchange ge whwhich
ich h has
as been
been ac accep
cepted?:
ted?: Accepto
Acceptorr (Drawee)
(Drawee) o off the
Bill.
183..
183 A chequ
chequee crocrossed
ssed spec
specially
ially to a bank bank is pr presen
esented
ted by
by the
the same
same ba bank
nk toto paying
paying b bank
ank for
for cash
cash
payment. What should the paying bank do? Bank can make cash payment.
184. Who can make nominationnomination in the the deposi
depositt acco
accountunt o off a minor
minor?: ?: Guardian
Guardian on behalf of the the
minor.
185..
185 Who can be a nomine nominee?: e?: Only
Only an ind indivi
ividua
duall
186. If a depo
depositor
sitor dies, payment
payment to nomi nominee nee oror leg
legalal heirs
heirs shoul
should d be made withinwithin:: 15 days of
completion of formalities.
187..
187 What
What is the rela relatio
tionsh
nship ip betwe
between en ba bank
nk and
and cucustom
stomer er if hhee has left
left certai
certain n go
goods
ods with
with the
the bank
bank by
mistake:: Bank is trustee and Customer is beneficiary
mistake
188..
188 Appeal
Appeal ag again
ainstst th
thee aw
awardard o off the Ban Bankinking g Ombud
Ombudsma sman n can be made made to Dep Deputyuty Governo
Governor, r, RBI
RBI
within days of the rreceipt eceipt of of copy of award award from the Om Ombudsma
budsman: n: 30 days
189. A cheque
cheque was disho dishonoured
noured despite
despite sufficient
sufficient balance
balance in the accoun account. t. T The
he bank will be liable to:
Drawer of the cheque and not to the payee.
190. Maximum
Maximum amount amount of fine fine uunder
nder section 138 of N I Act for dishonour dishonour of ch cheque
eque due to in insufficie
sufficient nt
funds is: twice the amount
amount of cheque.
191. Bea
earrer uncros
rossesed
d cheque can can be paid aid to whom : To th thee bear
earer
192..
192 On, oth
other
er than
than a nego
negotiabtiablele instru
instrumen ment, t, wh
whatat is the
the time period
period for for paymen
paymentt of sta stamp
mp duty,
duty, ifif the
document is executed outside India : 3 months
193. May I help
help you coucounteterr is to be proprovid ided
ed by bank
bank bran
branchchees oth
ther
er th
thaan : Sm
Smalalll bran
ranches
ches
194.
194. In ca
case
se of a join
jointl
tly
y oper
operat ated
ed jo
join
intt acco
accou unt
nt,, th
thee nom
omininee
ee can
can obta
obtainin payme
ayment nt,, when
when : none
one of th
thee acco
accoun
untt hol
olde
der
r
is aliv
alivee
195. A bank
bank branch receiv
receives
es a counterfeit
counterfeit note of Rs.10
Rs.1000,
00, which custo
customer
mer wants back. What the bank
should do : Imp
Impound
ound the currency note but credit full amount
amount to custom
customer.
er. Receipt not to be issued to
depositor.
Page
196.
196. Wh
When
en rat
ratee of int
intere
erest
st is expres
expressed
sed by adj
adjust
usting
ing the impact
impact of inflat
inflation
ion,, thi
thiss is called
called : Real
Real rrate
ate of
Interest
197. Bank
anks ca
can
n ask for
for deposi
sitt of advance rent
ent on hir
iriing a lo
lock
ckeer for
for a perio
eriodd up to : 3 year
ears
198. The cr
cro
ossing
sing on a che
cheque
que is requ
equir
ired
ed to be canc
cancelelle
led
d. Who can
can do so
so:: Dr
Draw
awer er
2. MEMORY BASED QUESTIONS ON CUSTOMERS & THEIR ACCOUNTS

01. Relaxat
Relaxation
ion in KKYC
YC n norm
ormss is p
perm
ermitte
itted
d if the dep
deposi
ositor
tor und
undert
ertake
akess tha
thatt th
thee balanc
balancee ou
outsta
tstandi
nding
ng in
his account will not be mo
morre th
than
an an
and
d cred
credit
itss in a fi
fin
nan
anci
cial
al yea
earr will
will no
nott ex
exce
ceed
ed . Rs
50,000; Rs 100,000
02. Min
02. Minim
imum
um Ma
Matuturi
rity
ty Pe
Perio
riod
d for
for Cer
Certif
tifica
icate
te of De
Depo
posit
sit is : 7 day
days
03.
To prevent Why KYC Laundering
Money guide
guidelineliness have
ha-ve b been
een issued
issued b byyRRBI
BI u unde
nderr sesectio
ctionn 35
35 A of thethe Banki
Banking ng Regu
Regulatilation
on Act:
Act:
04. If pay
04. ayme
men nt of Rs 200 00000/- is mad
made in ca cash
sh in case of FDR FDR what is the penalt nalty
y: e
equ
qualal to the
the am
amou ountnt pa
paidid
05.
05. In Se
Seni
nior
or Citi
Citize
zenn Sav
Savin ingg Sc
Sch hem
emee acco
accou unt
nt,, wh
who o can
can be jojoin
intt acco
accoununtt hold
holder
er?:
?:Sp
Spou
ouse
se
06. TDS not depositdeposited ed in ttime.
ime. What
What is the interesinterestt ppaya
ayable?:
ble?: _Bank
_Bank to pay the amount amount with int intere
erestst ©
1.5% per month simple.
07. What is the special feature of Basic banking Account? Account can be opened with nil or very
small amount and there are no requirement of minimum balance.
08. Current
08. Current balance
balance is Rs. Rs.6000
6000/-./-. A cheq
cheque ue of Rs.18,00
Rs.18,000/-0/- is prese
presented
nted.. Branc
Branch h passed th thee cheque by allowallowing
ing
TOD. After
After few day days, s, fixed depo
depositsit of the same party matu maturedred and TOD was cleared by credi crediting
ting the proce
proceeds
eds to CA.
Customer
Cust omer disp
disputes
utes the transa
transaction
ction.. Whether bank is having right right in doin
doing g so? : Normally no without specific request
of the
the part
party.y. Ho
Howe wevever,
r, if ban
bank k has
has a sp spec
ecif
ific
ic claus
clausee in the accoaccoun untt open
openiningg form
form to al allo
loww over
overdrdraf
aftt in suc
suchh cacase
sess
and customer has consented to such clause, then temporary overdraft can be allowed and recover the same
from
from the
the acco
accoun untt hold
holder er ev
evenen if ther
theree is no sp spececifific
ic re
requ
ques
estt from
from the the part
party.y.
09
09.. TD
TDS S ccol
ollec
lectetedd to
to b bee dep
depososite
iteddw with
ith ththee Inc
Incom
omee Tax
Tax DeptDepttt w with in:: 7th day of succeeding month
ithin
during
durin g which it is colleccollected.
ted.
10. TDS
TDS at th thee rat
ratee of 10%
10% iiss to be be dedu
deduct cted
ed atat so
sour
urce
ce in ccasasee of indi
indivi
vidu
dual
alss and HUF
HUF„„ if thethe rent
rent pay
payabl
ablee in a
fina
finanncial
cial yea
earr exceed
exceedss : Rs.1,
Rs.1,80,0
80,000 00
11. You are maintai
trustees. After this maintaining
notice, ning curren
current t accoun
account
by tthe in deceased
the
the nametrustee
of
of the isTr
Trust.
ust. You
You receiv
receive e noti
notice
ce What
of death
deashould
th of o one
ne
theof the
the
11.
a cheque signed presented for payment. bank
do?: Ch
Cheequ
quee mamay y be papaidid,, if ot
othe
herwrwisisee in or
orde der.
r.
12.
12. Quarterly
Quar terly statement
statem ent for TDS on salary should
shou ld be sub
submitte
mitted d on form 24-Q within:within: 15days of the close of the
quarter
13. Pensio
Pensioner ner acc
accoun
ountt cacann be
be oopen
peneded jointl
jointly y with
with?? Spous
Spousee as Eit Either
her of S Surv
urvivo
ivorr o
orr Form
Former er oorr S
Surv
urvivo
ivor. r.
14
14.. Ph
Phototog
ograraph
ph is o obtbtai
aine
ned d at thethe time
time of open opening
ing tthe
he a/ca/c.. Wha
Whatt is the the purpo
purpose se fo
forr the samsame?:
e?: ffor
or
identification of the prospective customer
15. AmountAmount that can no nott be paid in cash in resp respect
ect of tertermm depdeposit
osit by the bank
bank as per IIncome
ncome Tax Tax rule
rules:s:
Rs 20,000 and above.
16. Int
16. Inter
eres
estt ra
rate
te on Sav
Savin ingg Bank
Bank is fi fixe
xedd by : Ban Banksks themse
themselve lvess w.e
w.e.f.
.f. 25.
25.10.
10.11
11
17. A, hav
17. having
ing SB a/c a/c with you,
you, deposited
deposited Rs.2500
Rs.25000. 0. A pupublic
blic Prosecutor
Prosecutor se sent
nt notice to bank informing
informing that Mr
A is involved in forgery and requested not to permit withdrawal in the a/c. In between one cheque of Rs.20000 has
been
be en presen
presentedted for pay paymen
ment. t. What
What should
should be do donene by the ba bank
nk?:?: Pay the cheque as Public Prosecutor is not
auth
authororiz
ized
ed to free
freezeze the
the a/c.
a/c.
18. There is an SB a/c in the the name of of A & B .They have g given
iven power
power of Attorney to 'C' fo forr opera
operation
tion in
A/C, The cheque signed by the 'C' is presented in the bank after death of 'B' :
cheque
19. will
Enca not
cash mbe
shm enpassed
t of FDR with inter terest
est - payaymment can be mad adee in cash
cash if it is le
lesss than Rs 20000
20
20.. Ther
Theree is a cr
cred
edit
it bala
balannce in th
thee sa
sav vin
ing
g acco
accou unt and th ther
eree is a overdr
erdraf
aftt in th
thee curr
curreent acco
accouunt amo
amoun
unti
ting
ng to Rs
555. Both accounts are in the same name. Bank wants to adjust credit balance of saving bank account towards
paymen
pay mentt of ov
overd
erdraf
raft.
t. As pe
perr whic
whichh right
right,, ba
banknk can
can do ththis?
is?:: Right
Right of Se Sett Of
Off.
f.
21. Maximum
Maximum amou amount nt of deposit
deposit underunder Tax SaverSaver fixed
fixed deposit
deposit is: Rs 150,00 150,000 0
22. Themi
he min nimum
mum & ma max xim
imum
um peri
periood of cer
certi
tifi
fica
cate
te of depo
deposisitt is : 7 day
days, 12 monmonths
23.
23. Ca
Callll mo
mon ney dep
deposit
osit is par
part of th
thee sect
secto or : Orgrgan
anisised
ed sec
secto
tor
r
24. The teterm
rmss use
sedd for hidin
ing
g money to av avooid ta
tax
x is : Money la lauunderin
eringg
25. Whi
Which of thethe fol
follow
lowing forms wil illl be used
sed for allo
allow
wining
g exemp
xempti tio
on to a depepoosi
sito
torr aged 61 years
ears : Form 15 H
26.
26. Mi
Missi
ssing
ng person
person treat
treated
ed as hav
havining
g exp
expir
ired
ed if mis
missi
sing
ng for:
for: 7 years
years
27.
27. Supe
Superr se
seni
nior
or ci
citiz
tizen
en af
afte
ter:
r: 80 ye
yearars
s of age
age
28.
28. DD of Rs.5
Rs.500
0000
00/-
/- in ca
cash
sh : not
not allo
allowe
wedd
29. For the
the pu
purpose
rpose of KYC rules any additi addition
on & modific
modification
ation on which
which recommendation
recommendation:: Financial Action Task
Force
30. In case
case of Minor
Minor what
what is wro
wrong?
ng? Minor can make himself
himself liable
liable for his actions.In case of a Deposits
actions.
account
31. customer
In case wants
case Fix
Fixed Dthe
ed Depo Nomination
eposit
sits
s ac
accountintthe
count hisrate
he account.
rate of inteWhat
interes is mentioned
restt fixed
fixed whom:on
by whom: Pass
Board
Boa ofbook
rd o f Direct
Directors
ors of resp
respect
ectiv
ive
e ban
bank.
k.
32.
32. In a
an
n acc
accou
ount
nt Mr.
Mr. X Gives
Gives irirre
revo
voca
cabl
blee pow
power
er of
of att
attor
orne
ney
y to Y for 1 yr.
yr. After
After 4 Mo
Montnth,
h, X with
withdr
draw
aw the
the
irrevocable
irrevocable power of attorney.
attorney. What is action of th
the
e Bank? Bank will rely the revocabl
revocable
e application
application of the Hence the
cheque signed by Y retu
returned.
rned.
Page
33.
33. In ca
case
se of Depo
Deposi
sitt In
Insu
suran
rance
ce whet
whethe
herr it man
manda
dato
tory
ry or not
not:: It is Mandatory for all banks.
34. in w
whic
hichh ty
type
pe of
of accou
account nt whe
where
re TDS
TDS notnot dedu
deduct
ct in
in fixed
fixed Deposi
Deposits
ts A
Acco
ccount
unt:: NRE
NRE a
and
nd FCNR(B
FCNR(B)) on
only
ly..
35. BC work as : Bank’s Agent
36. Cas
Cash h Transact
Transaction
ion Repo
Report rt ( CTR)
CTR) sho
should
uld be submitt
submitteded to FIU within
within how much period:
period: 15
days of the close of the month.
37. Whic
Whichh of these
these rates
rates are per
period
iodica
ically
lly rev
review
iewed
ed by RBI?:
RBI?: Repo rate, Bank rate, but not
Savings Bank Rate.
38. Intere
Interest
st rate on Savings accoun
accounts:
ts: Not regulated by RBI
39. As per RBI guidelines,
guidelines, Demand draft of Rs 50,000 and above should be issued
issued against
against : b
byy
debit to account but not against cash
40.
40. If pan
pan no not
not su
submi
bmitt
tted
ed rate
rate of TD
TDS
S will
will be:
be: 20%
20%
41.
41. Acco
Accoununtt is treat
treated
ed as inope
inopera rati
tive
ve if th
ther
ere
e is no opera
operatition
on for : 24 month
months s
42. If a custome
customerr makes
makes nominat
nomination ion,, th
the
e bank
bank iis
s re
requi
quired
red to rregi
egister
ster in its
its b
books
ooks the nominat
nomination ion,, and
and shoul
shouldd give
give
acknowledgement to the depositor in writing. The bank should also indicate the fact of nomination on the face of
passbook/deposit receipt with the legend (a) Nomination Registered (b) Nomination marked (c) Nomination done (d)
Nomination acknowledged: Nomination Registered
43. Which
Which of the fol follow
lowing
ing faci
faciliti
lities
es are
are alallow
lowed
ed tto
o visual
visually
ly impai
impaired
red per
person
sonss who
who open
open accou
account nt with
with bank – issue
issue
of cheque book, ATM card, interninternet
et banking: All of these
44. What is the the main motive
motive of
of financ
financialial in
inclusio
clusionn – (a) to gi
give
ve loans
loans to poor persons
persons (b)
(b) to issue
issue credi
creditt card (c) to
provide banking services to distressed persons at affordable cost: Ans is C
45. Banks are are required
required to deduct ttax ax at source
source from
from interest
interest payable
payable to an individual
individual if the iinteres
nterestt credi
credited
ted or to
be credited in a financial year is more than Rs 10,000. This is as per provisions of (a) Income Tax Act (b) Goods and
Service Tax Act (c) Service Tax Act (d) RBI Act: Income Tax Act
46. Tax isis not
not deduc
deductedted at sourc
source e in resp
respect
ect of which
which of the
the ffoll
ollowi
owing
ng inco
income
me – (a)
(a) Inte
Interes
restt on Bank deposi
depositsts ((b)
b)
Rent on land and building (c) Brokerage (d) Dividend paid by listed company: Dividend Dividend paid by list listed
ed company
company
(However Dividend u/s 2(22)(e) is taxable for shareholder and thus TDS rate on such dividend is 10%)
47.
47. Wh
Whic
promissory ich
h of bill
note, th
thee of
fo
foll
llow
owin
ing
g ca
exchangecan
norbecheque
done
done by
soaas
mi
mino
to r?:: Aall
nor?
bind minor may
parties draw,himself
except indorse,
. deliver and negotiate a
48.
48. Wha
Whatt is th
the
e res
respon
ponsi
sibi
bilility
ty of a
an
n intro
introduc
ducer
er in a ann accoun
accountt opene
openedd by a pers
person
on with
with a bank
bank – (a)
(a) he is leg
legal
ally
ly
liable (b) he is morally liable (c) he is bound to trace the account holder: He is morally liable.
49. Direct
Direct Tax Code willwill replace
replace whi whichch of the followin
following g – Inco
Income
me Tax Act, Corp
Corporate
orate Tax Act: Income Tax Act.
50.
50. As pe
perr KYC Gui
Guidel
delin
ines
es,, Recor
Recordsds of ttran
ransa
sact
ctio
ions
ns to be be mai
maint
ntai
aine
nedd for at
at least
least ten
ten ye
year
ars
s from
from the datdateo
eof
f
transaction, instead of _________from the date of cessation of transactions, and records pertaining to identification of
the customer and his address to be preserved for at least ten years after the business relationship is ended: ten years
51.
51. Wha
Whatt typ
type
e of acti
activi
vity
ty can
can be perforperformed
med by B Bus
usin
ines
ess s Cor
Corre
resp
spond
onden
entt - (a) proces
processising
ng and
and submis
submissi sion
on of
application
applic ations
s to banks; (b) disbursal of small value credit, (c) recovery recovery of principal
principal / colle
collection
ction of intere
interest
st (iv) collection
collection of
small value deposits: All of these
th
52. E TDS - 26Q (tax (tax deduct
deduction ion oother
ther sala
salarie
ries)
s) to be fi filed
led for
for the month
month of Septemb
September, er, before
before:: 15 October
(Statement of TDS to be submitted within 15 days from close of quarter)
53. A Minor
Minor has extende
extended
d Guarant
Guarantee
ee to a loa
loan.
n. It can be
be rati
ratified
fied by whom?
whom? It cannot be ratified by any
one.
54. In Limited
Limited Liability
Liability Partnersh
Partnership ip account,
account, who are not eligible
eligible for becoming
becoming partners:
partners: a) H
HUF
UF b) Mi
Minor
nor c) body
body
corporate?: Ans: a & b
55.
55. In
Insu
sura
ranc
nce
e of depos
depositit is done
done by DICG
DICGC C up to
to:: Rs 1 lac per depositor per bank .
56. What is tthe he periodicity
periodicity of review
review of risk
risk classifi
classificatio
cation
n of customer
customers?:
s?: Every six months
57. Which is not a proof of Identi Identity?:
ty?: Ration card.
58. A custome
customerr who does
does not comple
complete te all KYC no norms
rms,, what
what type of accou
account
nt is opene
opened d for him? No Frill
Frill
acco
account
unt in which
which cann
cannotot be more
more ththan
an Rs.50
Rs.5000
0000 and credits
credits in the Fina
Financi
ncial
al Yea
Yearr ca
canno
nnott be more
more tha
than
n
Rs.100000.
59. There were were thr
three
ee cash withdrawals
withdrawals of Rs 5.80
5.80 lac
lac ,Rs 4
4.90
.90 lac
lac & 0.25
0.25 lacs from an account
account in a month.
Which of these transactions is/are will be reported to Financial Intelligence Unit as part of CTR? Cash withdrawals
withdrawals
of Rs 5.8 lac and Rs 4.9 lac.
60. Under Preventi
Prevention
on of Money
Money Laun
Laundering
dering Ac
Act,
t, banks are required
required to preserve
preserve records relati
relating
ng to opening
opening the
accountt for how much period
accoun period?:
?: 10 years from date of closure of account.
61. As per KYC Norms,
Norms, ban
banks
ks are required
required to up
update
date record
record of customer regarding
regarding proof
proof of address,
address, and identity
identity
etc. of medium risk customers within how many yrs?: 2 year
62.
62. Whi
Which
ch of tthe
he fo
follllow
owin
ing
g is no
nott the key
key el
eleme
ement
nt o
off KYC po
polilicy
cy a) Cus
Custo
tomer
mer Acc
Accept
eptan
ance
ce Poli
Policy
cy;; b) Cu
Custo
stome
mer
r
Identification Procedures; c) Monitoring of Transactions; d) Risk Management e) Customer Awareness Policy: Ans is
E i.e. Customer Awareness Policy.
63. What is the the distance
distance criteria for o
office
ffice of Busines
Business
s Corre
Corresponde
spondent?:
nt?: The distance between the place of
Page
business of a retail outlet/sub-agent of BC and the base branch should ordinarily not exceed 30 kms in rural,
semi-urban and urban areas and 5 kms in metropolitan centers.
64. On whose
whose rerecommenda
commendations,
tions, KYC no
norms
rms came into force? (a) Go
Goiporia
iporia Committee
Committee (b
(b)) Ghosh Committ
Committee
ee (c)
FATF: Ans is FATF
65. Under
Under KYC Norms, Docume
Documentsnts rel
relati
ating
ng to openin
opening
g the account
account like proof
proof of address
address and identity
identity and
and
photograph should be taken again at what interval? (a) once in 5 years for low risk customer (b) once in 2 years for
medium risk customers (c) once in 1 year for high risk customers (d) Both (a) and (b): Ans is (d)
66. Record
Record of cacash
sh recei
receipt
pt a
and
nd payme
payment
nt under
under KYC to b
be
e mainta
maintained
ined if cash
cash receip
receiptt or payment
payment in a single
single day
from one account is more than Rs 10 lakh.
67. Banks
Banks s shou
hould
ld have
have the resp
respons
onsibil
ibility
ity of c
curre
urrency
ncy manageme
managementnt entr
entruste
usted
d to a nodal
nodal o offic
fficial
ial of tthe
he rank
rank not
not
less than that of a General Manager and will be accountable for the obligations cast upon currency chests by the
Reserve Bank.
4. MEMORY BASED QUESTIONS ON LOANS AND ADVANCES

1. Charg
Charged ed ccreated
reated by B Bailmen
ailmentt of goods goods to secure payme payment nt of a debt
debt is called: Pledge
2. Guarantee is defined in: Indian Contract Act
3. If on a letter of credit credit it is n not
ot men
mentioned
tioned whether
whether it is revocable
revocable o orr irrev
irrevocable
ocable,, then as UCPDC
UCPDC 600, 600,
it will be treated as : Irrevocable LC
4. A dir directo
ectorr of a bank bank wantwantss to raiseraise loan of of Rs 10 la lakh
kh frfrom
om his bankbank agai
against
nst LLife
ife Insura
Insurancence Policy
Policy
with surrender value of more than Rs 15 lakh. What will be done?: Bank can sanction.
5. In whi which ch of the fol follow
lowinging cases,
cases, the do docum
cument ent is req
requir
uireded to be attested
attested by tw twoo witne
witnesses
sses?:
?: (a)
Pledge (b) Hypothecation (c) Mortgage (d) Lien
6. A docu documenmentt was execu executed ted by th three
ree par partner
tnerss in diffe
differen
rentt dates. When When shall
shall the limi
limitati
tation
on period
period
start?: The limitation period will start from the last date i.e. when the document was executed by the
last partner.
7. Loan to a co company
mpany engagengaged ed in constru
construction ction of pro projects,
jects, which
which method
method of finanfinancing
cing iiss to bbee used:
used:
Cash Budget method.
8. What
What is the the memeananing
ing of Grou
Group p in Ex Expoposusure re No
Norm rms:s: Com
Commonality
monality of mana management
gement
9. TheThe proc
procededururee use
used d for
for asce
ascerta
rtain
ininingg Cu
Custostomemers rs Credi
Creditt worth
worth is callecalled:
d: Cre
Creditdit Rating
Rating
10. Gree Green n fiel
fieldd proj
projec
ectt is rela
relate
ted
d to : setsetti
ting
ng up new proje projectctss
11. What is Real Rate of Interest?: Interest?: Prevaili
Prevailing ng interest
interest rate minus inflation rate
12. The The main
main dist
distin
inct
ctio
ionn betw
betwee eenn Hy
Hypo poththec
ecat atio
ionn and
and PlPled
edge
ge is on ac acco
coun
unto
toff : Possession
13. In Letter Of Credit jmporter
jmport er is called: Opener of Letter of Credit
14. Cash Cash Budg
Budget et me
meththodod is used
used for
for sanc
sancti tion
onin ingg wo
workrkin
ing
g capi
capitatall li
limi
mits
ts to : Seasonal Industries
15.. Bank'
15 Bank'ss chchararge
ge ov
over
er LIC
LIC PoPoli
licy
cy is crea
create
tedd byby:: As
Assi
sign
gnmen
mentt
16.. Guar
16 Guaran anteteee is
issu
sued
ed by a bankbank whwhic ichh is st
stil
illl outs
outstatand
ndining
g is sh
show
own n in th
thee Ba
Bala
lanc
ncee Sh
Shee
eett as:
as: Co
Connti
ting
ngen
entt Lia
iabi
bilility
ty..
17. Why Why loanloan agai
againsnstt Part
Partlyly Paid
Paid Shar
Shares es are
are notnot prefe
preferrrred
ed by bank
banks?: s?: Beca
Becauseuse part
partly
ly paid
paid sh
shar
ares
es repr
repres
esen
entt
contin
con tingen
gentt liab
liabili
ility
ty.. In cas
casee com
companpany y mak
makes es demand
demand and the bo borro
rrower
wer does
does nnot
ot p
pay
ay the amount
amount thenthen the ban
bank k wil
willl
have
have to pay
pay the amou
amount nt othe
otherw rwise
ise sh
share
are may be fo forf
rfei
eite
ted.
d. More
Moreov overer it is proh
prohib
ibite
itedd by RB
RBII
18. Return
Return on Inves Investme
tment nt is calcul
calculate atedd to asc ascert
ertain
ain of the unit.
unit.:: Profit
Profitabi
ability
lity
19. For ascertain
ascertaining ing that
that a firm w willill be able
able to generate
generate suffici
sufficient ent pro
profit
fit to rrepay
epay instalmen
instalments ts of term
term
loan, which ratio is compu computed?: ted?: Debt Service
Service Coverage Ratio
20
20.
21.. InFinathe
thnce
e Bala
Finance Bafor
lanc
fo rnce
coenstruc
Sh
Shee
const eetttion
ofna of
ructio bank,
an
rok,adCo
road Cont
an
andntin
dinge
pogent
rtntisLcla
port iabi
iabili
classiliti
ties
ssifie esd are
fied ar
as:e sh
show
own
Infra n as:
Infrastr as
struct : ure
fo
foo
ucture otntnot
Fiote
Fina ence.
to th
nance the
. e Ba
Balalanc
ncee Sh
Shee eet.
t.
22
22.. Bank
Bankss ar aree re
requ
quire
iredd to de
decla
clare
re th
thei
eirr fi
fina
nanc
ncial
ial resu
resultltss quar
quarte terly
rly as peperr prov
provis isio
ions
ns of : SEBI
SEBI
23
23.. Loanoan was
was ra rais
ised
ed from
from ththee bank
bank agai
againsnstt NS
NSC C by Mr Mr.. X andand not otin
ing g to th
this
is effe
effectct wa
wass reco
recordrdeded in th
thee is
issu
suin
ing
g
Post
Post Offi
Office
ce.. X dies
dies.. ThThee nomi
nomine neee appr
approa oach
cheses post
post offi
office
ce fo
forr pay
paymement nt of NS
NSC. C. Who
Who will will have
have prio
prioririty
ty i.
i.e.
e. bank
bank or
no
nomimine
nee?:
e?: Bank
Bank wi willll ha
have
ve prio
priorr clai
claimm agagai
ains
nstt NSC.
NSC.
24. HypotHypothec hecati
ationon can be conconververted
ted to plepledg
dgee by
by:: tak
taking
ing pos
possess
session
ion wiwithth the consen
consentt of the borrow
borrower. er.
25.. What
25 What char
charge ge to be crea
create
tedd for
for dema
dematt sh shar
areses with
with bank
bank as secu securirity
ty:: Lie
ienn
26.. Perp
26 Perpetetua
uall bond
bondss and
and perp
perpet
etua
uall non
non cumu
cumula lati
tive
ve pr
pref
efer
erenence
ce sh
sharares
es as part
part of
oftitier
er I capi
capita
tall can
can be up to% to% of ti tier
er I capi
capita
tal:
l:
40%
27. Provisions
Provisions on on stan
standard
dard A Assets
ssets are shown under which h head
ead in th thee balance
balance sheet o off the BaBank?:
nk?: Other
Liabilities and Provisions on Liabilities side.
28. For classifica
classification tion ofof assets in consortium
consortium aaccoun ccounts, ts, whic
which h of thethe following
following is to be cconsid onsidered?:
ered?:
In consortium
consortium accounts, each bank will classify the account as per its record of recovery. recovery.
29.. Who
29 Who is bou bound to fi file
le part
particicul
ular
arss of char
chargege with
with ththee Reg
Regisistr
trar
ar of Comp
Compan anieiess unde
underr MC
MCA A 21,
21, whwhen en a
co
compmpan
any
y cr
crea
eate
tess ch
char
argege of so
some
mebo
body dy on ititss mova
movabl blee or im
immomova vablblee prop
propererty
ty ex
exceceptpt by wawayy of plpled
edgege?:
?: offi
officia
cials
ls of
the comp
company
any..
30.. Cred
30 Creditit of Rs.2
Rs.20, 0,0
000/-
00/- wa
wass tatake
kenn as Rs.2
Rs.200000/0/-- an
andd as a resu
resultlt a ch
cheqeque
ue wa
wass retu
return
rned
ed in th
thee acco
accoun untt fo
forr wa
wantnt
of fund
funds.
s. Ba
Banknk ha
hass al
alre
ready
ady sent
sent state
statemen
mentt of acco
accoununtt to th
thee de
depoposi
sito
torr wh
who o has
has ackn
acknow owle ledg
dged
ed rece
receipiptt of th
thee sta
statem
temenentt
of acc
accou
ount
nt.. Wh
Whetethe
herr ba
bank
nk is li
liab
able?
le?:: Ye
Yes.s. Li
Liab
ablele to draw
drawer
er of cheq
cheque
ue..
31.. Adva
31 Advancncee to a comp
companany y agai
againsnstt Tr
Trus
ustt rece
receip
iptt wh
wher
eree do
docu
cume
mentnt of ti
titl
tlee good
goodss tr
tran
ansf
sfer
erre
red
d to ba
bank
nk and
and good
goodss to be
rel
releas
eased
ed again
against
st pay
paymen
mentt by ththee comp
compan any.
y.Whe
Whethe therr a char
charge
ge is to be reg
regist
istere
ered d with
with th
thee Re
Regi
gistr
strar
ar of Co
Comp
mpananie
iess unde
under
r
MCA21
MCA 21?:
?: No
Nott Requ
Requireired
d
Page
32. Unde
Underr mumultiltipl
plee bank
banking
ing syste
system,m, exch
exchan ange
ge of ininfo
form
rmat
atio
ionn betw
betwee een n th
thee bank
bankss is to be donedone fo forr th
thee li
limi
mits
ts of
cror
crores
es and abo
above ve an
and d period
periodiciticity y is : Rs.5
Rs.5 crocrores
res and
and QQuar
uarterly
terly
33.. If a LC co
33 cont
ntai
ains
ns a clau
clausese "abo
"aboutut"" reg
regardi
arding
ng th
thee amou
amountnt an
and d qu
quananti
tity
ty of go
good
ods,s, ho
howw much
much to tole
lera
ranc
ncee is
perm
pe rmit
itte
ted?
d?:: 10
10%%
34.. What
34 What is th thee type
type of li liab
abil
ilit
ity
y fo
forr th
thee bank
bank on acco accoun
untt of is
issu
suee of Ba
Bank nk Guar
Guaran ante
tee?
e?:: Continge
Contingent nt Liability
35. To ar arri
riv
ve at group
roup conc
concer ern,
n, fact
factororss to be lolook
oked
ed in
into
to are
are : com
commonmonalitalityy of mana
managem gement
ent + effec
effective
tive
control.
36. The The limita
limitatio
tions
ns of fin
financ
ancial
ial statem
statemen ents
ts are
are : only quaquanti
ntitat
tative
ive not qualit
qualitatiative.
ve.
37.. Hypothecatio
37 Hypothecation n describ
described ed under SARFE
SARFEASI ASI Act.
Act.
38. Off BalanceBalance sheet / On Balance Balance sheet exposure-
exposure- if alter
altereded ththee risk
risk will be Cre Creditdit Ris
Risk.k.
39. Guarantors Liability: Recall the a/c and cause demand against th thee borrower and guarantor.
Balance in guarantor's SB a/c cannot be appropriated directly.
40. Excess of curren currentt lliability
iability over current
current assets
assets means the firm may face difficulties in meeting its
financial obligations in short term.
41. If documen
documents ts are to be pres presented
ented iin n abo
aboutut July month:
month: these can be presente presented d with
within in 5 days
days before
or 5 days after.
42. PledgPledgee is defined in: Indian Contract Contract Act
43. When limitation
limitation will not exten extend: d: Bala
Balancence Confirm
Confirmatioation n sign
signeded after
after exp
expiry
iry of limit
limitatio
ation n peri
periodod
45. On matu
maturrity
ity of babannk guara
uaran nte
tee,
e, an ininti
tima
mattio
ionn is send
send to cus
custo
tome
merr and
and if no resp
respo ons
nsee rece
receivived
ed in 30 dadayys,
vouc
vouchehers
rs ar
aree revers
reversed.ed. This is done for following following reason? Bank has to maintain capital on Bank
Guarantee for the purpose of capital adequacy norms.
46. Whic
Which h of the
the foll
followowiningg is not a di disa
sadv
dvan
anta
tage
ge of CC acco
accoun unt?
t? Is
Issu
suan
ancece of cheq
cheque ue boo
ook k
47. In case of rreva evalualuatio
tionno off fixed
fixed asse
assets,
ts, what
what percen
percentag
tagee of revalua
revaluatio tionn reser
reserveve wwill
ill be add
addeded to T Tier
ier
II capital of the bank?: 45%
48. When
When a loa loan n iiss recov
recovereered d ffrom
rom guaran
guarantor tor for dues
dues pa paya
yable
ble by the Pri Princi
ncipal
pal Deb
Debtortor,, debt
debtor
or
becomes entitled to all rights and remedies which tthe he creditor had aagainstgainst the
t he Principal Debtor. This right
of guarantor is called: Right of subrogation.
49.
49. in ca
case
se of loan
loan again
againstst bank
bank deposi
depositt charg
chargee is create
created d by:
by: assignment
50.
50. in cas
casee of loan
loan again
against st NSC,
NSC, charchargege is creat
createded by:
by: assignment
51. W
52. Whyhat fund
is cash lossstatement
flow : net loss before
is takendepreciation
from the borrower?:(Net loss To minusknow depreciation)
sources from where funds have
been raised and how funds have been utilized and to know changes in net working capital position.
53
53.. Stan
Stand d by LC is ju just
st li
likke : Financial guarantee (A guarantee of payment issued by a bank on behalf
of a client that is used as "payment of last resort" should the client fail to fulfill a contractual commitment
with a third party. Standby letters of credit are created as a sign of good faith in business transactions, and
are proof of a buyer's credit quality and repayment abilities)
54. Banks
Banks p prov
rovide
ide term loa loansns aand
nd deferre
deferred d pay
paymenmentt gu guara
arantee
ntee to finance
finance cap capital
ital asse
assetsts like
like pla
plant
nt aand
nd
machinery.
machin ery. What is the difference betwee between n these two: Outlay of funds.
55. For the purporpose of crea
creatitio
on of eqequ uita
tab
ble mortgortgagagee, th
thee pl
plaace for dep epo osi
sitt of th
thee ti
titl
tlee deed
deed is not
notif
ifie
iedd by :
56. Number
Number of days days allo
allowed
wed to o open
peninging bank
bank an and dn nego
egotiat
tiating
ing bank
bank to verifyverify that that doc
docume
umentsnts aare
re as
as per
terms of LC is: 5 banking days each
57. In the
the case
case of hypothecatio ionn : both possession
possession &owners&ownership hip is with borrower
58. If stoc
stock k st
statem
atement ent is nonott su
submi
bmitted
tted for 3 month monthss from from itsits ddue
ue date
date aandnd DP is is all
allowe
owed d on the bas basis is oof
f
old stock report, then the account account will be considered NPA after:90 days
59. Limit
imitaatio
tion pe
peririood for
for mor ortg
tgag
agee :1
:122 year
yearss
60. Loan
Loan is iin n th
thee name
name of A A&B&B.. Both
Both h have
ave signed
signed doc documeuments nts.. A signs
signs thethe Balan
Balance ce CConf
onfirma
irmatiotionnb but
ut B
does not. In this case limitation will extend against: both
61
61.. Wh
What at is nenegagativ
tivee LLien
ien?:
?: A decldeclararati
ation
on by borr borrow ower er th
that
at he willwill no nott sell
sell o orr crea
create
te chcharg
argee ofof anyany
body on a particular asset without consent of the t he bank
62
62.. Wh
Why y ba
bank
nkss d do
o no
nott gran
grantt lloa
oan n to a minor
minor?: ?: A minor
minor is no nott comcompe petetent
nt to co cont
ntra
ract
ct There
Therefo fore
re,, Ioan
Ioan
given to a minor can not be recovered.
63.
63. Norma
Normally lly bank
bank ca cannn not
ot gran
grantt advan
advance ce tto
o its
its dire
directo
ctors.
rs. How
Howeve ever, r, the
therere are
are cert
certain
ain exe
exempmptio
tions
ns to tthis
his rule.
rule.
Thus
Th us a ba
bank
nk ca
cann gran
grantt a loan
loan to it
itss di
dire
recto
ctorr ag
agaiains
nstt th
thee secu
securirity
ty of:
of: Gove
Govern rnme
ment nt sec
secur
urit
itie
ies,
s, lif
lifee in
insu
sura
ranc
ncee po
poli
lici
cies
es or fi fixe
xedd
deposit;
64. If on
on a Let
Letter
ter of C Cred
redit,
it, date is m ment
ention
ioneded as ""endend of tthe he mon
month" th",, th
then
en as p per
er UUCPD
CPDC C 60600,0, it w
willill
mean: 21st to last day of the month.
65. A minor
minor was g give
ivenn lo
loan.
an. On attainin
attaining gm majoajority
rity he ackn
acknowl owledgedges es hhavi
avingng take
taken n lo
loan
an and
and promise
promisess to
pay. Whether the loan ccan an be recovered? : He can not ratify the th e contra
contract. ct. Hence rrecovery
ecovery not possible.
66. A loan
loan was sanc sanctiotioned
ned agai
against
nst a vaca
vacant nt lland
and.. S Subs
ubsequ
equententlyly a house
house w was
as cconsonstru
tructed
cted at thethe site
site..
What security is available now to the bank? : Both
67.
67. Preo
Preopepera
rati
tive
ve expe
expens nses
es fo
form
rmss part
part of th thee fo
follo
llowi
wing
ng:: Inta
Intangngib
ible
le asse
assets ts
68. A and
and B ra rais
ised
ed a loloaan jo
joinintl
tlyy and both are are li
liaable jo
join
intl
tly
y an
and d seve
severrall lly
y. Wh
When en th
thee li
limi
mittat
atiion peri
eriod is
ap
appr
proa
oach
chin
ing,
g, A acackn
know
owledledge
gess th
thee de
debt
bt wh
whil ilee B was
was away
away fr from
om Indi
India.
a. Li
Limi
mitatati
tion
on exexpi
pire
ress be
befo fore
re B cocome
mess to Indi
Indiaa anand d
af
afte
terr co
comi
ming
ng,, he de
deni
nies
es ac
ackn
know
owleledg
dginingg th
thee de
debtbt.. Ba
Banknk can
can proc
proceeeedd for
for rec
recov
overyery of ththee lo
loan
an as perper li
limi
mita
tati
tion
on act
act from
from::
Both
69. An L/C
L/C is expirin
expiring
g on
on 10
10.05
.05.20
.2008.
08. A commo
commotion
tion tak
takes
es p
place
lace in tthe
he aarea
rea aand
nd bank
bank cou
could
ld n
not
ot open
open..
Under these circumstances
circumstances can the LC be negot
negotiated?:
iated?: The L/C can not be negotiated
negotiated because expiry date of
LC can not be extended if banks are closed for reasons beyo
beyond nd their control.
70. A loan
loan is g
give
iven
n by the bank on hy
hypot
potheca
hecatio
tion
no off stock
stock to M
Mr.r. A. Ban
Bank k recei
receives
ves seiz
seizure
ure order
order ffrom
rom
Page
State Govt. What should should bank do?: Bank will first adjust its dues and surplus if any wilt be shared with
the Govt.
71. 3 partners
partners signed
signed a documen
documentt on 3 differ differentent dates.
dates. LimiLimitatio
tation n period
period starts from: from: Date of last
signatures.
72. Ackno
Acknowle wledg dgeme
ement nt of Deb
Debtt ccan an be obtai
obtainedned for ho how w man
many y number
number of time timess : No limit
73. In the case of adv advance
ance to a limilimited
ted com
compan pany y for purcha
purchase se of vehvehicle
icle,, the charge
charge is reg register
istered
ed wit
with h
Regional Transport Authority in addition to registration of charge with . Registrar of Companies. Why this is
done?:So that borrower can not sell the vehicle without intimation to the bank
74
74.. Wh
Why y ba
banknkss pref
preferer fi
fina
nanc
ncining g of bi
bill
lls?:
s?: because the advance is self liquidating
75. Formati
Formation on of cons
consortiu
ortium,m, when
when essenessential
tial : When bank touc touches
hes its exposure
exposure ceilceiling
ing
76. A lette
letterr of cred
creditit w
which
hich is isissued
sued on requ
requestest of tthe
he b benef
eneficia
iciaryry in favo
favour ur of hhis
is suppl
supplier: ier: Back
Back tto o Back
Back
LC
77. As per
per iinte
nterna
rnall policy
policy of certai
certain n ba
banks
nks,, the net wor worth th o off a firm
firm does
does no nott includ
include: e: aa.. Paid
Paid up up capit
capitalal b
b..
Free Reserve c. Share Premium d. Equity received from Foreign Investor : Revaluation Reserves
78
78.. A lalady
dy w whoho has
has ttak
aken
en a demdeman and d loan
loan aaga gain
inst
st FD
FD come
come tto o the
the br
bran
anchch and
and w wanants
ts to ad addd name
name o off her
her
minor son, as joint a/c holder. What you will do?: Name can be added only after adjustment of the loan.
79
79.. Guar
Guaran antee
tee issu
issued
ed by a bankbank in favoufavourr of CusCustotomm depart
departme ment nt that
that party
party wilwilll fulf
fulfil
illl expor
exportt obl
obligigat
atio
ionn for
av
avai
aili
ling
ng ex
exem
empt ptio
ionn from
from cucust
stom
om duduty
ty regar
regardiding
ng ta
tax.
x. Su
Suchch gu
guar
aran
ante
teee is call
calleded:: Financia
Financiall Guarantee
Guarantee
80
80.. Pa
Parti
rticu
cular
larss of satisf
satisfac
actio
tion
n of chcharg
argee by a cocompmpany
any are
are to be fi filed
led with
within
in:: 30 days from date of adjustment
of loan
loan..
81.
81. In a comp
compan any y, th
thee reg
regis
istr
trat
atio
ionn of char
charge gess is requ
requir ired
ed fo for:
r: a)l
a)loaoann agai
againsnstt FD b)li b)lienen on Govt
Govt
Securities c) assignment of Book Debts d) lien on Shares : Book Debts
82. Loa
oann Deli
Deliv very
ery Sy
Syst
steem is not appli lica
cab
ble to
to:: a) Loa
oann to Sof
Soft ware are in
inddust
stry
ry b) expo
xport cred
reditit:: exp
export
ort cre
credit
dit
83.
83. Stamp
Stamp duty duty in usa
usanc ncee b
bill
ill of excha
exchangnge:e: 0.25
0.25 per 1000/
1000/ 0. 0.75
75 per 10001000 / 1 per 100 1000 0 / none
none : It is
according to value and time i.e. Advalorem (it is Rs 0.65-per Rs 1000 up to 3 months usance)
84.
84. Pro
Proper
perty
ty equit
equitabl
ablyy mortg
mortgage
aged d on 08/03
08/03/08
/08.. A registe
registered
red mor
mortgatgaged
ged ccrea
reated
ted oon
n this
this pro
proper perty,
ty, on
on 05/03
05/03/20
/2008
08
whic
wh ich
h wa
wass go
gott re
regi
giste
stere
redd on 08
08/0/03/
3/20
2008
08.. Whic
Which h wi
will
ll ha
have
ve prio
prioririty
ty:: regis
registetere
red d mo
mortrtga
gage
ge as it was creat created
ed earli
earlier
er..
85.
85. The
The Bank
Bank di did
d not
not di disc
sclo
losese all mat
mater eria
iall fact
factss reg
regardi
ardingng loan
loan to the guar guaran antotorr whwhililee obta
obtaininin
ingg
guarantee. Can guarantor escape liability?: Guarantor cannot escape from his liability as it is not necessary
to disclose
86. allksthe
Banks
Ban ar
arematerials
e requi
requiredredfacts owith
to obta inregards
btain aaudi tedtofin
udited the
financloan.
ancialial p pape
apers rs ffrom
rom non corp corpora
oratete borr
borrowe
owers rs for
for gran
granting
ting
working capital limit of: Rs.25 lakh &above
87.
87. In th
thee ca
case
se of Hy
Hypo poth
thec
ecatatio
ion:
n: neit
neithe
herr poss
posses essi
sion
on nor
nor owners nershi hipp come
come to Bank Bank..
88
88.. Ne
Nega gativ
tivee lie
lienn means
means:: Undert
Undertak aking
ing b byy the
the borborro rowewerr not to to sell
sell or cr crea
eatete charg
chargee on a partic particulular
ar
property without consent of the Bank.
89
89.. Rece
Recent ntly
ly RB
RBII warn
warned ed babank
nkss ag
agai
ains
nstt ch
charargi
ging
ng:: ex
excecess
ssivivee in
inte
tere
restst to smal
smalll bo borr
rrow
owerers.
s.
90. Which
Which o off th
thee ffollo
ollowin
wing g is correct
correct regardi
regarding ng reverse
reverse mor mortga tgage?:
ge?: The sch scheme
eme is avaiavailablable
le tto
o senio
senior r
citizens only;
only; the properproperty ty should be self occup occupied ied by the owner owner..
91. What are the rules relating relating to advanceadvance against
against K Kisan
isan Vikas Petra?: Petra?: IItt can be grantedgranted prov provided
ided
KVP is assigned to the bank.
92
92.. Ba
Bail ilme
ment nt of gogood odss to secur
securee a de debtbt is calle
called: d: plplededgege..
93. Deferr
Deferred ed pay
paymen
mentt guara
guarante nteee iissu
ssueded by a bank bank is a : Con Contin tingen
gentt L Liabi
iability
lity..
94. When
When mort mortg gag
agee is crea
create tedd by a pepersrson
on by de depo
posi sitt of tititl
tlee deed
deed oralorallyly,, it is call
calleded mort
mortga gage
ge :
Equitable
95. For the purpo rpose of crea
creatitio
on of eqequuitatab
ble mortgortgag
agee, th
thee plplaace for dep epoosi
sitt of th
thee ti
titl
tlee deed
deed is not
notififie
ied
d by : StStat
atee
Govt.
96. Under SARF SARFA AESI Act 2002 th thee bank
anks giv ivee noti
ticce for paym ayment of due amount to th thee borrow
rower / owner of
charged
char ged assets
assets
97. Act
Actionion under
under SARFASARFAESI ESI Act can be ttake akenn ssimu
imultan ltaneoueouslysly in DRT/Su
DRT/Suit it file
filedd cases
cases witwithou
houtt ttaki
aking
ng
permission from the Competent Court
98. For
For enforc
enforcing ing rig
right
ht u unde
nderr SASARFERFESAI SAI Act,Act, in the case case of con consorsortium
tium advanc
advances, es, consent
consent of whic which h
bankers is i s required?: consent of 60% bankers by value is required.
99.
99. Supe
Superv rvisisor
ory y Re
Revi view
ew acco
accord rdin
ingg to whwhic ichh Ce
Centntra
rall Bank
Bank of th thee coun
countr try
y is to ensu
ensurere th
that
at prop
properer capi
capita
tall has been
been
pr
prov
ovid
ided
ed for
for
risk
risk ex
expo
posusurere an
and d main
mainta tain
in prop
proper er sy
syst
stem
em foforr th
thee same
same is prov
provid ideded ununde
der?r?:: Pil
illa
larr II of BaBasesell IL
100.
100. Ch
Char arge
ge wher
wheree SA SARF RFAEAESI SI acti
action
on cancan not
not take
taken:
n: Pledge
10
101.
1. For tataki
king
ng acacti
tion
on undnder er SARF
SARFAE AESI SI,, th
thee oututst
stan
andiding
ng shou
should ld be:
be: MoMore re than
than RsRs.1 .1.00
.00 lac
lac
10
1022. Limimitit for
for fili
filing
ng suit
suit in DRDRT T: Rs.10 lacs and above
10
103.
3. Fo
Forr acq
acqui uiri
ring
ng secur
securitiities
es charg
charged ed to th thee bank
bank un undederr SASARF RFAE AESI SI,, nonotic
ticee of days
days is requi
require red
d to be
give
given n to the
the boborro
rrower
wer and for sal salee of sec
securiuritie
tiess so acquir
acquired ed not
noticeice of days
days is 60 & 30 days
104.
104. As per a re rece
cent
nt judg
judgem
emen entt of th
thee Su
Suprprememee Cour
Court,t, whil
whilee in init
itia
iati
ting
ng act
actio
ionn und
under SA
SARF RFAEAESISI,, th
thee posit
ositioion
n in case
case
of su
suit
it file
filedd in DRT would ould be:
be: th
that
at no perm
permis issi
sio
on is req
requi
uire
redd from
from DRT DRT and and acti
actionon unde
underr SA
SARF RFAEAESISI can
can be in init
itia
iate
tedd as
both
bo th the
the ca
casesess ca
cann run
run tog
togetethe
her.
r.
10
105.
5.
106. Forcase
In ta
taki
king
ng
of ac
acti
tion
SARFon uAESI
SARFAESInd
nder
er SARF
SARFAE
Ac
Act, AESI
t, bef SI,, th
before
ore the
eo
pre ut
utst
stan
andi
preferring
ferringding
ng shou
should
appeal toldDRAT
be:
be: Mo
More
DRAT,, re
howthan
than
m Rs
Rs.1
much
uch.1.00
.00 lac
amo la
amountc is to be deposite
unt deposited
d

JJA Aiiiib B M MA AD DE E S Siim MP PL LE E: Legal & Regulatory Legal & Regulatory Aspects of Banking Aspects of Banking

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JJA Aiiiib B M MA AD DE E S Siim MP PL LE E: Legal & Regulatory Legal & Regulatory Aspects of Banking Aspects of Banking

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JAIIB MADE SIMPLE

LEGAL & REGULATORY

(A Very useful book for Day to Day Banking and all

Sanjay Kumar Trivedy (Divisional Manager )

The Book also covers the full syllabus

Place : Mumbai SANJAY KUMAR TRIVEDY

TOPIC PAGE NO.

1. ABOUT JAIIB EXAMINATIO

Examination DATE TIME SUBJECTS

Last Date for receipt

1 JAIIB First Block of 2 attempts 2748

LEGAL FRAMEWORK OF REGULATION OF BANKS

Corresponding new bank : (Section 5-da BR Act): It means a correspondin

Business Of Banking Companies (Section 6 — BR Act)

Chairman, certain Directors & qualification shares (Section 10C)

Power of Reserve Bank to appoint additional Directors (Section 36AB)

(d) that the company has adequate capital struc

taking over the management

CENTRAL BANKING FUNCTIONS

COLLECTION AND FURNISHING OF CREDIT INFORMATION Collection of credit information

c. Amount received from DI

Min & Max RBI discretion RBI discretion -40%

Assets in India (Section 25)

Particulars Acceptance Noticeof claim of other persons is not

Deposit Single/joint One only

Lockers Sing le / Joint ; E or S One only / One only

LOCKERS SL-1 OR SL1A JOINT SL-2 SL-3 OR

GOVT. ROLE AS REGULATOR OF BANKS

RETURNS, INPSECTION AND WINDING-UP

Reserve Bank and forward a copy thereof to the company.

the modification or cancellation shall have effect.

ACQUISITION, AMALGAMATION & LIQUIDATION Power of Central Government to acquire

Compensation to be given to shareholders of the acquired bank (Section 36 AG)

SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES

application under this section for the winding up of a banking company:

(i) sata isfac

and its members

CORPORATE GOVERNANCE : Corporate Governance is a dynamic concept. It involves promotion

Directors and Corporate Governance

PUBLIC SECTOR BANKS AND CO-OPERATIVE BANKS

14) Case Laws on Resp

LEGAL ASPECTS OF BANKING OPERATIONS

IndIndividual: An indi indivi

Public Company: is one which is not a private company,

TYPES OF CREDIT FACILITIES

Bank not to ter

SECURED AND UNSECURED LOANS

Floating charge: Means a charge that is general and not specific.

Scope of indemnity in banks: Cu Cust

Definition Charge on movable property Bailment of goods as security for payment

Delivery of Borrower to deliver Possession can

Right of sale Avail

AGENCY & AGENTS : As per Sectio Sectionn 182,

any legal process necessary

engagement which may give rise to pecuniary liability.

KINDS OF MORTGAGES There are six forms/kinds of mortgages:

Summary of Rights under Mortgages

Personal Liability of Yes No No Yes Yes

Right of foreclosure No Available No No No

money becomes dues.

(a) he must manage the prope

Examples of Inland and Foreign Bills

New Delhi In London, by Ramesh Inland