Banking Law and Practice - Mcqs

BANKING LAW AND PRACTICE - MCQs
SET I
1. The relationship between a banker and customer is............
a) That of a debtor and creditor
b) That of a creditor and debtor
c) Primarily that of a debtor and a creditor
d) That of an agent and principal
2. When a customer has availed loan from the bank the relationship between the banker and the
customer is
a) That of a debtor and creditor
b) That of a creditor and debtor
c) Primarily that of a debtor and a creditor
d) That of a principal and agent
3. The banker has a lien on........
a) Bonds given for collection
b) Bonds given for safe custody
c) Bonds left by mistake
d) (a) and (b) together
4. In executing the standing instructions, there exists a relationship of........
a) debtor and creditor
b) Trustee and Beneficiary
c) Bailee and Bailor
d) Agent and Principal
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5. To constitute a person as a customer.......
a) There must be frequency of transactions
b) There must be a dealing of a banking nature
c) There must be some sort of an account
d) There must be a single transactions of any nature
6. The banker has a statutory obligation to.........
a) Honour customers' cheque
b) Exercise lien
c) Maintain secrecy of his customers' accounts
d) Honour customers' bill
7. The following one is a negotiable instrument, negotiable by usage or custom............
a) Bill of Exchange
b) Accommodation Bill
c) Promissory Note
d) Share warrant
8. The document drawn by a debtor on the creditor agreeing to pay a certain sum is
called............
a) Cheque
b) Promissory Note
c) Bill of Exchange
d) Draft
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9. The most important feature of a negotiable instrument is......
a) Freely transferable without defect
b) Transferable always with defect
c) Right to sue
d) No right to sue
10. The reasonable period allowed in India for the presentation of a cheque is.............
a) 1 Year
b) 3 Months
c) 9 months
d) Depending upon banking custom
11. Not negotiable crossing is a warning to the...........
a) Paying banker
b) Collecting banker
c) Holder
d) Payee
12. A Not negotiable crossing restricts............ of the cheque
a) Transferability
b) Negotiability
c) Neither transferability nor Negotiability
d) Both transferability and Negotiability
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13. The following one is absolutely essential for a special crossing.
a) Two parallel transverse lines
b) Words 'And Company'
c) Words 'Not Negotiable'
d) Name of a banker
14. The safest from of crossing is
a) General crossing
b) Special crossing
c) Double crossing
d) A/c Payee crossing
15. A cheque which is not crossed is called:
a) Uncrossed cheque
b) open cheque
c) order cheque
d) Bearer Cheque
16. An order cheque can be converted in to a bearer cheque by means of........
a) Sans recourse endorsement
b) Special endorsement
c) Blank endorsement
d) Sans fairs endorsement
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17. Negotiability gives to the transferee......... title of the transferor.
a) The same title
b) no title
c) no better title
d) better title
18. A cheque is payable to Mr.Kanagaraj or order. He has endorsed the cheque by making his
signature only at the back side of the cheque. The type of endorsement is
a. Partial endorsement
b. San recourse endorsement
c. Blank endorsement
d. Restricted endorsement
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SET II
1. ____________ is a loan or advance made on the security of assets, the market value of
which is not at any time less than the amount of such loan or advances
a) Unsecured Advance
b) Secured Advance
c) Partly secured advance
d) Guaranteed Advance
2. Secured advance is a loan or advance

a) made on the security of assets, the market value of which is not at any time less than
the amount of such loan or advances
b) made on the security of assets, the market value of which is less than the amount of
such loan or advances
c) where the borrower is not required to create a charge on his assets in favour of the
banker.
d) Made on the security of a personal guarantee of a person of high reputation and sound
financial position
3. Which of the following is not true of Unsecured advances

a) Unsecured advances are granted without asking the borrower to create a charge on his
assets in favour of the banker
b) Security happens to be the personal obligation of the borrower regarding repayment
of the loan
c) Such loans are granted to parties enjoying high reputation and sound financial
position
d) The bank is a secured creditor
4. ___________ is a contract to perform the promise or discharge the liability of third

person is case of his default, as per Indian Contract Act 1872
a) Loans and Advances
b) Guarantee
c) Indemnity
d) Agreement
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5. Type of charge(s) used for securing raw materials

a) Pledge or hypothecation
b) Assignment
c) Mortgage
d) Lien
6. Type of charge used for registering security interest on a vehicle

a) Pledge
b) Hypothecation
c) Assignment
d) Mortgage
7. Type of charge used for registering security interest over land and building
a) Pledge
b) Hypothecation
c) Assignment
d) Mortgage
8. Type of charge used for registering security interest over book debts and receivables
a) Pledge
b) Hypothecation
c) Assignment
d) Mortgage
9. Type of charge used for registering security interest over shares / debentures
a) Pledge
b) Lien
c) Assignment
d) Mortgage
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10. Who among the following is not a party to a contract of guarantee?

a) Principal Debtor
b) Guarantor
c) Guarantee
d) Creditor
11. Mr.Mahi is purchasing some consumer durables from Mr.Shaji. For that he was
sanctioned with a loan of Rs.1,00,000/ by a bank against personal guarantee of one
Mr.Sahi, who is also a friend of Mr.Shaji.
A. Who is the Principal Debtor ?
a. Mahi
b. Shaji
c. Sahi
d. The bank
B. Who is the Creditor ?
a. Mahi
b. Shaji
c. Sahi
d. The bank
C. Who is the guarantor ?

a. Mahi
b. Shaji
c. Sahi
d. The bank
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SET III
1. _________________ is the first principle of lending, because banks give loan out of
the funds belonging to the customers.
a. Liquidity
b. Profitability
c. Safety
d. Security
2. Banks should no lay all the eggs in one basket i.e. banks should not concentrate their
lending only to a particular industry, is the principle of
a. Safety
b. Liquidity
c. Diversification
d. Security
3. A bank must offer advances to different firms belonging to different industries, which
are not situated over different geographical areas, so that he may not be badly
affected by the failure of one industry or a few big borrowers. This is principle of
a. Safety
b. Liquidity
c. Diversification
d. Security
4. Banks would generally give loans for productive purposes. This is the principle of
a. Safety
b. Purpose
c. Diversification
d. Security
5. No banker will and should ordinarily think of an advance without a satisfactory

margin between the lending and borrowing rates. This is principle of
a. Safety
b. Profitability
c. Diversification
d. Security
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6. An advance given for productive purposes in all probability will be repaid because
the grant of the loan will generate additional income for the borrower which will
increase the borrower’s __________
a. Wealth
b. Credit rating
c. Creditworthiness
d. Repaying capacity
7. Bank deposits are made available to the business in the form of
a. Loans
b. Credit and investment
c. Loans and Advances
d. Deposits
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BANKING THEORY LAW AND PRACTICE
MCQs for revision
1. Negotiable instruments are defined under ______.

A. Section 52 of the Banking regulation act, 1949
B. Section 25 of the Reserve bank of India act, 1934.
C. Section 13 of the Negotiable instruments act, 1881.
D. Section 14 of the companies act, 1956.
ANSWER: C
2. Who is primarily liable on a promissory note?

A. Holder.
B. Maker.
C. Drawee.
D. Endorser.
ANSWER: B
3. A Cheque is always payable on _______.

A. demand.
B. a specified future date
C. the last day of the grace.
D. the will of the paying banker.
ANSWER: A
4. In a promissory note the words or order are ______.

A. necessary to insert.
B. not necessary to insert
C. not necessary but it is usual to insert
D. necessary it is usual
ANSWER: C
5. Bill of exchange can be drawn payable _______.

A. to bearer on demand
B. either on demand or after a fixed time
C. to bearer in presence
D. to bearer not in presence.
ANSWER: B
6. Until a bill of exchange is accepted, primary liability there on is that of _____.

A. Payee.
B. Drawee.
C. Drawer.
D. Acceptor.
ANSWER: C
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7. Negotiable gives to the transferee _____.

A. the same title
B. no title
C. no better title
D. better title
ANSWER: D
8. __________ is a dead cheque.

A. Post dated cheque
B. Stale cheque.
C. Ante dated cheque.
D. Pre dated cheque
ANSWER: B
9. RBI refers to _________.

A. Reserve Bank of India.
B. Revenue Bank of India.
C. Rupee Bank of India
D. Regional Bank of India
ANSWER: A
10. Name the person to whom the amount of the cheque is payable?
A. Drawer.
B. Payee.
C. Drawee.
D. Acceptor
11. A pledge can be made in respect of _____.

A. building.
B. shares.
C. motor car.
D. book debts
ANSWER: B
12. The right of set – off is nothing but a ______.

A. right to sell.
B. right to retain.
C. right to combine
D. right to appropriate
ANSWER: C
13. Discounting of bills of exchange is ____.

A. clean advance
B. secured advance
C. neither clean advance nor secured advance.
D. unsecured advance
ANSWER: C

14. Dishonour of cheque by a banker without any justifiable reason is called ___________.
A. Valid dishonour of cheques
B. Unmindful dishonour of cheques
C. Negligence dishonour of cheques
D. Wrongful dishonour of cheques
ANSWER: D
15. A cheque with Not negotiable crossing _____.

A. cannot be negotiated
B. can be negotiated and the endorsee title is not affected in any case.
C. can be negotiated but the holder of the cheque will not have title better than that of the
person from whom he took it.
D. is always deemed as crossed specially
ANSWER: C
16. Who can cancel the crossing on a cheque?

A. The payee.
B. The paying banker.
C. The endorser.
D. . The drawer.
ANSWER: D
17. Which is not possible for the payee of a cheque?

A. To convert a bearer cheque into an order cheque.
B. . To convert an open cheque into a crossed cheque.
C. To convert general crossing into special crossing
D. To make a specially crossed cheque into generally crossed cheque.
ANSWER: D
18. A banker should not refuse payment of a cheque if ________.

A. . the cheque is a post dated cheque.
B. . the cheque is drawn on another branch of the same bank.
C. the cheque contains an apparent material alteration which is not properly authenticated by
the drawer.
D. . the cheque bears more than two endorsements
ANSWER: D
19. —— is an endorsement in which the endorser merely signs his name on the back of the
instrument without mentioning the name of the person to whom the instrument is endorsed
A. Blank Endorsement
B. Restrictive Endorsement
C. Qualified Endorsement
D. San Frais Endorsement
ANSWER: A

20. Blank endorsement is otherwise called as

A. Full Endorsement
B. Qualified Endorsement
C. General Endorsement
D. Special Endorsement
ANSWER: C
21. Special damages refers to damages payable by a banker to his customer for the actual ———
—- loss suffered by customer
A. Financial
B. Special
C. Unpecuniary
D. Unfinancial
ANSWER: A
22. he idea behind the bankers right to set-off is to enable the banker to reduce the ————–
amount due to him from a customer
A. Gross
B. Net
C. Partial
D. None of the above
ANSWER: B
23. ———- is the right of a person to retain the property of another person in his possession
untill the debt from that owner of that property is repaid
A. Lien
B. hypothecation
C. mortgage
D. assignment
ANSWER: A
24. The bank can consider —————— lien as their protection against loss on loan or
overdraft which was given to its customers
A. Special
B. Particular
C. General
D. Lending
ANSWER: C
25. Which one of the following is material alteration?

A. Alteration of the date of the date
B. Alteration of amount
C. Alteration of crossing
D. all the above
ANSWER: D

26. The right of set-off customers account can be exercised only by a

A. Creditors
B. Debtors
C. Banker
D. Customer
ANSWER: C
27. Expansion of ECS_________.

A. Electronic Clearing system
B. Electronic centered system.
C. Electronic cross systems
D. Electronic conversion systems.
ANSWER: A
28. A banker should not stop operation of the account if the customer ____.
A. dies.
B. becomes insolvent
C. changes his business premises.
D. becomes insane
ANSWER: C
29. The ATM installed at bank premises is called as ——– ATM

A. Off-site
B. Branch
C. On-site
D. mobile
ANSWER: D
30. A debit card holder makes payment for purchases ______.

A. After 15 days.
B. . After 20 days.
C. After a month.
D. Immediately through his account.
ANSWER: D
31. KYC means

A. Know Your Card
B. Know Your Cost
C. Know Your Customer
D. Know Your Creditor
ANSWER: C

32. A debit card holder makes payment for purchases ______.

A. After 15 days.
B. . After 20 days.
C. After a month.
D. Immediately through his account.
ANSWER: D
33. The debit card offers _______.

A. . revolving credit for certain period.
B. . payoff the entire amount of card usage.
C. on-line recover of amount of card usage.
D. only amount.
ANSWER: C
34. The credit card offers _______.

A. . revolving credit for certain period.
B. payoff the entire amount of card usage.
C. on-line recover of amount of card usage.
D. only amount.
ANSWER: A
35. Which of the Act requires to provide information on transactions to FIU-IND ?
A. Banking Regulation Act

B. Reserve Bank of India Act
C. Finance Act
D. Prevention of Money Laundering Act
ANSWER : D
36. All cash transactions of ______________ need to be reported

A. Rs.10 lacs or above
B. Above Rs.10 lacs
C. Rs. 5 lacs or above
D. Above Rs.5 lacs
ANSWER : A
37. Cash Transaction Report should be submitted on ___________ basis

A. Monthly
B. Weekly
C. Quarterly
D. Fortnightly
ANSWER : A

38. Suspicious transaction means a transaction whether or not made in cash which, to a
person acting in good faith
A. gives rise to a reasonable ground of suspicion that it may involve the proceeds of
crime;
B. appears to be made in circumstances of unusual or unjustified complexity;
C. appears to have no economic rationale or bonafide purpose.
D. Any one of the above
ANSWER : D
39. The Principal Officer of a banking company must furnish the information of the
suspicious transactions to Director, FIU-IND not later than ____________working
days from the date of occurrence of such transactions.
A. Three
B. Ten
C. Fifteen
D. Thirty
ANSWER : A
40. STR means

A. Security Transaction Report
B. Security Transaction Register
C. Suspicious Transaction Report
D. Suspicious Transaction Register
ANSWER : C
41. Following is not an address proof for KYC purpose

A. Voter ID
B. Passport
C. PAN Card
D. Driving Licence
ANSWER : C
42. Following is not an ID proof

A. Telephone Bill
B. Passport
C. PAN Card
D. Driving Licence
ANSWER : A

43. For opening of Bank account which is not mandatory

A. Introduction of an existing account holder
B. Valid ID proof
C. Valid Address Proof
D. KYC documents
ANSWER : A
44. Which of the following is not related to risk categorisation of accounts with bank ?
A. Low Risk
B. High Risk
C. Credit Risk
D. Medium Risk
ANSWER : C
45. Which one of the following is not a stage in money laundering activity
A. Placement
B. Amalgamation
C. Layering
D. Integration
ANSWER : B
46. The Cash Transaction Report (CTR) of banks is required to be submitted to

A. Reserve Bank of India
B. Financial Intelligence Unit – India
C. Financial Action Task Force
D. Ministry of Finance-Government of India
ANSWER : B
47. One rupee currency bears the signature of

A. Finance Minister
B. Finance Secretary
C. RBI Governor
D. President of India
ANSWER : B
48. Full form of ATM

A. Automated Teller Machine
B. Any Time Money
C. Automated Transaction Machine
D. Anywhere Teller Machine
ANSWER : A

49. Full for of CTS

A. Cheque Transfer System
B. Cheque Transaction System
C. Cheque Truncation System
D. Clearing Transaction Service
ANSWER : C
50. Which of the following statements is false?

A. Nomination has to be done in prescribed manner
B. Minor cannot be nominated
C. The nominee is entitled to receive the deposit in case of death of the customer
D. Bank gets valid discharge if they make payment to the nominee after the death of
the customer.
ANSWER : B
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Karunya Institute of Technology and Sciences, Karunya Nagar
Multiple Choice Question Bank – III
1. A issued a open cheque for Rs.10000/- dated 31.01.2020 to B. B is visiting the

drawee bank on 01.11.2020 for enchasing. The bank will
a. Dsihonour the cheque since it is stale
b. Make payment
c. will request the B to correct the date as 01.11.2020 before making payment
d. make payment after getting confirmation from A.
2. If cheque is crossed an account payee, this is direction of __________ to _______.

A. Payee, paying banker
B. Payee, collecting bank
C. Drawer, paying bank
D. Drawer, collecting bank
3. Which of the following is not correct about ATM:

a) ATM is a computer which is dedicated to perform certain specific Jobs
only
b) ATM is a user friendly machine and the customer does not require any training
to use it
c) ATM is totally menu driven which displays instructions to the customers step
by step for operating the same
d) ATM is Automated Teller Machine operated by the bank teller for making
cash payments to the customers.
4. When ATM machine installed in the bank is out of order, it is called:

a) Operational Risk
b) Electronic Default
c) ATM Auto Default
d) ATM failure risk
5. Mahendran , a customer of a bank, wants to transfer a sum of 1000 US dollar to

his son in USA. The bank will use the following to do the transaction.
a) NEFT
b) RTGS
c) SWIFT
d) Net Transfer
6. Javed & Co is a partnership firm in Chennai having their bank account with SBI.
They want to make payment of Rs.12,50,000 to their suppliers who are at Delhi.
They can remit the funds through
a) NEFT
b) RTGS
c) Either NEFT or RTGS d) SWIFT
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7. When a holder or payee of Negotiable Instrument signs at the back side of the
instrument , transferring the title to the other person, it is called
Endorsement
Transfer of title
Crossing
Negotiatiation
8. One of the disadvantage of Debit Cards is

a) It is a Debt Trap
b) Difficult to dispute fraudulent transactions
c) It does not earn rewards
d) It cannot be used for international transactions
9. If you use credit cards for impulse purchases or unaffordable items if you cannot
pay it off within a reasonable amount of time
Statement A : It will be useful to build your credit history
Statement B : It will be a debt trap
a) Both Statement A and B are correct

b) Only Statement A is correct
c) Only Statement B is correct
d) Both Statements A and B are wrong
10. Magnetic Stripe Cards have been replaced with EMV chip cards. EMV stands for
a) Electro Magnetic Velocity
b) Electro Magnetic Variation
c) Euro pay, Master Card and Visa
d) Electro Motive Vibration
11. With fraudulent activities on the rise and more dependence on plastic money with
each passing day, it is important that you switch to smart cards and make your
hard earned money safer.
Statement A : The microprocessor in smart cards makes it almost impossible to be

breached due to cryptographic algorithms
Statement B : Now RBI has made it mandatory all the banks to issue smart cards with
EMV chip
a) Both Statement A and B are correct

b) Only Statement A is correct
c) Only Statement B is correct
d) Both Statements A and B are wrong
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12. The latest trend in technology in banking is

a) ATM and POS banking
b) Net Banking and Mobile Banking
c) E-lobby and Digital Branches
d) Phone Banking
13. The latest technologies in the banking sector

a) Artificial Intelligence
b) Block Chain Technology
c) Robotic Automation Process
d) All of the above
14. Digital Video Wall, Digital Account Opening, Video Banking, etc are provided in
a) E-lobby
b) Multifunction Kiosk Banking
c) Digital Branches
d) Kiosk Banking
15. Legal Risk in alternate delivery channel of banking is

a. the risk of lawsuits arising between any of the players involved in the channel
b. fraud/theft committed via the channel, failure to manage the liquidity of agents
and ATMs, etc
c. insecure data storage, weak back-office security, insufficient communication
protection, etc
d. the risk of fines or loss of license as a result of noncompliance with laws or
regulations, including AML, CFT, Agency Banking, Mobile Money, Consumer
Protection, Regulatory Reporting.
16. Operational risk in alternate delivery channel of banking is
b. fraud/theft committed via the channel, failure to manage the liquidity of
agents and ATMs, etc
protection, etc
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17. Technological risk in alternate delivery channel of banking is

and ATMs, etc
protection, etc
18. Compliance risk in alternate delivery channel of banking is

and ATMs, etc
protection, etc
regulations, including AML, CFT, Agency Banking, Mobile Money,
Consumer Protection, Regulatory Reporting.
19. Reputational risk in alternate delivery channel of banking is

a. fraud/theft committed via the channel, failure to manage the liquidity of agents
and ATMs, etc
b. insecure data storage, weak back-office security, insufficient communication
protection, etc
c. the risk of fines or loss of license as a result of noncompliance with laws or
Protection, Regulatory Reporting
d. a loss of customer and market share as a result of the occurrence of any of
the risks
20. In banking parlance ADC is

a. Agricultural Development Credit
b. Asian Development Credit
c. Alternate Delivery Channel
d. Alternate Delivery Credit
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21. Raju is having his bank account with State Bank of India. He has issued a cheque
favouring Kumar , drawn on State Bank of India. Kumarm deposits the cheque
with his banker Canara Bank. He is also having Savings Bank account with Axis
Bank and HDFC Bank.
Who is the collecting Banker ?
a. Axis Bank
b. HDFC Bank
c. Canara Bank
d. State Bank of India
22. A has issued a cheque for Rs.12500 to B with Account Payee Crossing. B has
purchased goods worth Rs.12500/- from C. In order to make payment to C , B
endorses the cheque given by A. The cheque was drawn on Canara Bank –
Concerning this endorsement which of the following statements are true ?
a. B cannot endorse the cheque since it bears Account Payee Crossing
b. B can endorse the cheque by cancelling the Account Payee crossing with his
full signature
c. B can endorse the cheque , since he is holder in due course
d. B can endorse the cheque provided drawee bank is ready to pay to C
23. What is the full form of CBS?

a) Core Banking Solution
b) Core Banking Software
c) Core Banking System
d) Core Banking Service
24. Core banking is a __________ branch computerization model.

A. decentralized
B. centralized.
C. unified
D. ATM
25. ATMs are primarily used for performing the __________ functions.
A. infrastructure
B. computer-based
C. banking
D. hospitalized
26. Expansion of ECS_________.

A. Electronic Clearing system
B. Electronic centered system.
C. Electronic cross systems
D. Electronic conversion systems.
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27. ________ is a technology that allows you to access your bank account from a
mobile device.
A. Home banking
B. Mobile banking
C. Internet banking.
D. Television banking
28. MICR refers to ______.

A. Magnetic Ink Character Recognition
B. . Magnetic Ink Company Recognition
C. Magnetic Ink Cross Recognition.
D. Magnetic Ink Community Recognition.
29. A banker should not refuse payment of a cheque if ________.

A. . the cheque is a post dated cheque.
B. . the cheque is drawn on another branch of the same bank.
C. the cheque contains an apparent material alteration which is not properly
authenticated by the drawer.
D. . the cheque bears more than two endorsements
30. A cheque dated subsequent to the date of its issue is ___________.

A. post dated cheque
B. blank cheque
C. crossed cheque
D. account payee cheque
31. A cheque date before the date of its issue is ___________.

A. ante dated cheque.
B. full worth cheque
C. preemptive cheque.
D. worth cheque
32. A drawer can also be a _________.

A. Payee.
B. paymaster.
C. banker
D. creditor
33. Expansion of SWIFT is ______.

A. Society for worldwide inter bank financial telecommunication
B. Security for worldwide inter bank financial telecommunication
C. Secured for worldwide inter bank financial telecommunication
D. Safety for worldwide inter bank financial telecommunication.
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34. Expansion of NEFT_______.

A. National Electronic Fund Transfer.
B. Neutral Electronic Fund Transfer.
C. Nominal Electronic Fund Transfer.
D. Natural Electronic Fund Transfer.
35. Expansion of EFT_________.

A. Electronic Fund Transfer
B. Economic Fund Transfer.
C. European Fund Transfer
D. Electric Fund Transfer.
36. RTGS system works _________ days in a year

A. 365.
B. 362
C. 300.
D. 305
37. RTGS means _______.

A. Real Time Gross Settlement.
B. Real Turn Gross Settlement.
C. Real Technique Gross Settlement
D. Real Towards Gross Settlement
38. A convenient way of making a purchase or paying for a service without holding
cash is called as
A. Electronic Payment System
B. Electronic Clearing Service
C. National Electronic Fund Transfer
D. Electronic Fund Transfer
39. _________________constitutes the foremost element of an electronic payment

system
A. Banker
B. Customer
C. Merchant
D. Shopping mall 39.
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40. An electronic payment device that involves the use of networking services where
by the e-customer issues digital cheques to e-merchant malls to settle transactions
carried over the internet is known as
A. Electronic cash
B. e-purse
C. Electronic cheques
D. Electronic card
41. Electronic cash is also called as

A. Hot money
B. Digital money
C. Instant money
D. Easy money
ANSWER: B
42. ———-is popularly known as Plastic cards or Plastic money
A. Smart cards
B. Electronic cards
C. Credit cards
D. Debit cards
43. Which of the following is not the form of E-banking?
A. Internet Banking
B. Direct Deposit in Bank
C. Electronic cheque conversion
D. Mobile banking
44. In both cases of RTGS and NEFT, the service charges are decided by
A. Customer
B. RBI
C. Banker
D. Transferee
45. Cheque is payable on

A. Demand
B. Usage
C. Fixed future date
D. After sight
46. Electronic payment system is a/an _____________.

A. Software
B. Hardware
C. Application
D. Package
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47. A _________ card is used to obtain cash, goods or services automatically debiting
the payments to the cardholders bank account instantly up to the credit balance
which exists in the customers bank account.
A. Credit
B. Gold
C. Debit
D. Business
48. ———-are workstations that act as a nucleaus of the functioning of the telephone
banking system operated through fully computer-integrated telephone system
A. Telephone centre
B. Enquiry centre
C. Computer centre
D. Call centre
49. Which one of the following is material alteration?

A. Alteration of the date of the date
B. Alteration of amount
C. Alteration of crossing
D. all the above
50. In India, the law regulating the Negotiable instruments are

A. Banking Regulation Act 1949
B. Reserve Bank of India Act 1934
C. Negotiable Instruments Act 1881
D. Companies Act 1956
*********************
9|Page
QUESTION BANK - FIRST INTERNAL 2020-21 Even
1. Which of the following is the best explanation of a commercial bank?
a. A bank that accepts deposits and lends or invests money
b. A bank that services only businesses
c. A bank whose primary activity is raising capital by selling securities in an IPO for
new business start-ups
d. A bank that regulates the banking system
2. Banks accept deposits from
a. Individuals, households, Businesses, Governments, etc
b. Individuals and households only
c. Business and Governments only
d. Working Individuals
3. Bank accepts deposits of money from the public, which are
a) Payable on demand and withdrawable by cheque or otherwise
b) Converted into redeemable preference shares
c) Not payable until the maturity date
d) Repayable in the form of fixed maturity bonds
4. The Section 22 of Banking Regulation Act articulates that to carry out business of
banking in India, one has to take license from
a. Central Government of India
b. Central Bank of India
c. Reserve Bank of India
d. Ministry of Banking affairs
5. The term “_____________” of a bank is not defined by law
a. Agent
b. Banking
c. Bank
d. Customer
6. The following person cannot open a bank account

a. Illiterate
b. Minor
c. Insolvent
d. Drunkard
7. No overdrawing shall be allowed in the accounts of a/an

a. Joint stock company
b. Minor
c. Partnership firm
d. Individual
8. No banker will knowingly open an account for

a. A minor
b. A married woman
c. A Drunkard
d. An insane or lunatic
9. Which of the following is true of a Joint Account ?

a. Account opened by only two persons
b. Account opened by two or more persons
c. Account opened by only husband and wife
d. Account opened by only one person
10. Raja one of the customers of a bank wants to open a Savings Bank Account with his bank
in the name of his minor son Madhesh aged 8 years
a) The bank can open the account in the name of the minor Madesh and the guarding
Mr.Raja and the account shall be operated by guardian only
b) The banker will refuse to open the account since any contract with a minor is void
c) The bank can open the account in the name of the minor with Mr.Mahdu as his guardian
and the account shall be operated by the minor
d) The bank can open the account in the name of the minor and the minor can operate the
account
11. A , B and C have opened a Joint account with the mandate as “Anyone or Survivor”. On
death of A, the balance in the account shall be paid to
a) B and C
b) B , C and the Legal representatives of A
c) B , C and the nominee of A
d) B or C
12. Bank deposits are made available to the business in the form of
a. Capital
b. Credit and investment
c. Loans and Advances
d. Deposits
13. When a customer is dead or has become insolvent or insane,

a. the banker should close the account
b. the banker should stop operation in the account
c. the banker need not do anything
d. the banker should inform Reserve Bank of India
14. Which of the following statements is/are true ?

Statement A : When a partner becomes insolvent or insane the firm gets dissolved
Statement B : The bank shall allow operation in the account by the other partners
a. Statement A and B
b. Statement A only
c. Statement B only
d. Both Statements are false
15. Certified copy of Board Resolution is required in case of the following customer
a. Partnership Firm
b. Joint Stock Company
c. Proprietory Concern
d. Joint Account
16. Memorandum of Association, Articles of Association and Certificate of Incorporation are

required in case of opening account in the name of
a. Partnership Firm
b. Joint Stock Company
c. Proprietory Concern
d. Joint Account
17. When a company is being wound up, the banker should act as per the instruction of
a. Board Directors
b. Registrar of Companies
c. Official Liquidator
d. Reserve Bank of India
18. Following are Demand Deposits
a) Savings Bank and Current Account
b) Fixed Deposit
c) Recurring Deposits
d) Reinvestment Deposits
19. The best suited account for the trading community is
a) Current Account
b) Savings Bank Account
c) Fixed Deposit
d) Recurring Deposit
20. Current account cannot be opened for
a. Business people
b. Joint stock companies
c. Minors
d. Illiterates
21. Fixed deposit is not a demand deposit. It is payable

a. Only At the date of maturity
b. Either at the date of maturity or on demand by the customer
c. When the bank wants to pay
d. Not before the maturity date
22. TDS means

a. Term Deposit Savings
b. Term Deposit Scheme
c. Tax Deducted at Source
d. Tax Deduction Scheme
23. At present banks are required to deduct tax at source from interest on term deposits, if
such interest per annum exceeds ______________ for an individual aged below 60 years.
a. Rs.40000/-
b. Rs.50000/
c. Rs.10000/-
d. Rs.25000/-
24. Interest rates on Fixed Deposits are determined by

a. Reserve Bank of India
b. Respective Commercial Banks
c. Ministry of Finance
d. Income Tax Department
25. According to IBA the maximum period for which a fixed deposit can be made is
a. 10 years
b. 7 Years
c. 15 Years
d. 20 Years
26. If the maturity proceeds of a term deposit is Rs.20000/- or above, the amount shall be
paid to the customer in the following form/s
a. account payee crossed pay order
b. credit to the customer’s account
c. Account payee banker’s cheque
d. All of the above
27. What is CFT under KYC / AML regulations
a) Combating the Financing of Terrorism
b) Calculating Financial Terrorism
c) Commission on Financial Terrorism
d) Committee on Financial Terrorism
28. A banking company cannot directly or indirectly engage in
a) Buying or selling or bartering of goods
b) Buying and selling of foreign exchange
c) Realization of securities given to it and held by it
d) Collection or negotiation of bills of exchange received
29. A banking company can acquire immovable properties
a) For their own use only
b) For letting out as shopping complex
c) For investment purposes
d) For the purpose of maintaining reserve ratios
30. Money Laundering Means
a) Conversion of illegal money into legitimate money through bank accounts
b) Conversion of cash and gold into deposits
c) Exchange of soiled currencies for new currencies
d) Conversion of assets to invest in Laundromat

31. Money laundering is done by
a. Government agencies
b. Reserve bank of India to get back soiled money from the public
c. Criminals dealing in illegal drugs, human trafficking , terrorism and other illegal
activities
d. Reputed Business houses to exchange soiled money
32. Money laundering does not refer to profit generated from

(a) Drug Trafficking
(b) Financial Frauds
(c) Commission from Land Brokerage
(d) Arms,Antique, Gold smuggling
33. FATF means
a) Financial Action Task Force

b) Financial Accounting Trade Federation
c) Financial Association of Traders in Finance
d) Foreign Authority Traders Federation
34. ______________is the global money laundering and terrorist financing watchdog
a. The Financial Action Task Force (FATF)
b. International Monetary Fund
c. International Anti-Money Laundering Agency
d. Combating the Financing of Terrorism
35. ____________________ is the central national agency responsible for receiving,

processing, analyzing and disseminating information relating to suspect financial
transactions
a. Research and Analysis Wing
b. Central Bureau of Investigation
c. CBCID
d. Financial Intelligence Unit - India
36. For opening of accounts in the name of Individuals , the important documents to be
verified is
a) Appointment order copy

b) PAN Card and Aadhar Card
c) Birth Certificate
d) Employment Certificate
37. Sometimes banks may take possession of certain assets which were given as securities,
while undertaking recovery proceedings. Such assets shall be
a) Sold off within 7 years
b) Held by the bank for its own use
c) (a) or (b)
d) Let out for rent to the public
38. Any property derived or obtained, directly or indirectly, by any person as a result of
criminal activity or value of any such property is
a. proceeds of crime
b. criminal property
c. money laundering
d. Laundered money
39. Money laundering typically involves following three steps

a. Placement , layering and integration
b. Account opening , Depositing the dirty money and closing the account
c. Layering, Integration and Placement
d. Depositing the money, transferring the money and closing the account
40. Which one of the following is not a stage in money laundering activity
(a) Placement
(b) Amalgamation
(c) Layering
(d) Integration
41. Suspicious transaction in any bank account should be reported by the bank to
a. Reserve Bank of India
b. Financial Action Task Force
c. Financial Intelligence Unit - India
d. Ministry of Corporate Affairs
42. As per KYC guidelines, demand draft/ pay order /mail transfer for Rs. _____ and above
is issued only by debit to customer’s account or against cheques and not against cash
(a) 500000
(b) 100000
(c) 50000
(d) 10000
43. Full form of CIP______?

(a) Customer Identification Procedure
(b) Credit Inspection Process
(c) Circular in Progress
(d) Central Inventory Preparation
44. Which of the following document is not officially valid KYC document
(a) Aadhar card
(b) National Population Register
(c) PAN Card
(d) Job Card issued by NREGA
45. In case of Low Risk Customer Category, the fresh KYC should be obtained in:
(a) 1 year
(b) 3 years
(c) 5 years
(d) 10 years
46. In case of Medium Risk Customer Category, the full KYC should be obtained in:
(a) 3 year
(b) 5 years
(c) 8 years
(d) 10 years
47. In case of High-Risk Customer Category, the full KYC should be obtained in:
(a) 1 year
(b) 2 years
(c) 3 years
(d) 5 years
48. In the Basic Savings Bank Deposit (BSBD) account the total credit in a year should not
exceed ___________ and total debits by way of withdrawals and transfers in a month
should not exceed __________
a. Rs.2,50,000/ and Rs.50,000/-

b. Rs.1,00,000/- and Rs.10,000/-
c. Rs.50,000/ and Rs.5,000/
d. Rs.5,00,000/ and Rs,50,000/-
49. In the Basic Savings Bank Deposit (BSBD) account the balance in the account should
not exceed_______________AT ANY TIME.
a. Rs.50,000/
b. Rs.1,00,000/-
c. Rs.10,000/-
d. Rs.25,000/-
50. A Savings Bank account or a Current Account, if not continuously operated for
___________, it shall be classified as Inoperative/Dormant account
a. 12 months
b. 24 months
c. 48 months
d. 60 months
Q.No Key Q.No Key Q.No Key Q.No Key Q.No Key
1 a 11 a 21 b 31 c 41 c
2 a 12 c 22 c 32 c 42 c
3 a 13 b 23 a 33 a 43 a
4 c 14 b 24 b 34 a 44 b
5 d 15 b 25 a 35 d 45 d
6 c 16 b 26 d 36 b 46 c
7 b 17 c 27 a 37 c 47 b
8 d 18 a 28 a 38 a 48 b
9 b 19 a 29 a 39 a 49 a
10 a 20 d 30 a 40 b 50 b
Note : Every care has been taken to suggest the correct answer. Students are requested to check
with the study materials/class notes, etc.

Banking Law and Practice - Mcqs

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BANKING LAW AND PRACTICE - MCQs

1. The relationship between a banker and customer is............

a) That of a debtor and creditor

b) That of a creditor and debtor

c) Primarily that of a debtor and a creditor

d) That of an agent and principal

a) That of a debtor and creditor

b) That of a creditor and debtor

c) Primarily that of a debtor and a creditor

d) That of a principal and agent

3. The banker has a lien on........

a) Bonds given for collection

b) Bonds given for safe custody

c) Bonds left by mistake

d) (a) and (b) together

4. In executing the standing instructions, there exists a relationship of........

a) debtor and creditor

b) Trustee and Beneficiary

c) Bailee and Bailor

d) Agent and Principal

5. To constitute a person as a customer.......

a) There must be frequency of transactions

b) There must be a dealing of a banking nature

c) There must be some sort of an account

d) There must be a single transactions of any nature

6. The banker has a statutory obligation to.........

a) Honour customers' cheque

c) Maintain secrecy of his customers' accounts

d) Honour customers' bill

7. The following one is a negotiable instrument, negotiable by usage or custom............

9. The most important feature of a negotiable instrument is......

a) Freely transferable without defect

b) Transferable always with defect

d) Depending upon banking custom

11. Not negotiable crossing is a warning to the...........

12. A Not negotiable crossing restricts............ of the cheque

c) Neither transferability nor Negotiability

d) Both transferability and Negotiability

13. The following one is absolutely essential for a special crossing.

a) Two parallel transverse lines

b) Words 'And Company'

c) Words 'Not Negotiable'

14. The safest from of crossing is

d) A/c Payee crossing

15. A cheque which is not crossed is called:

16. An order cheque can be converted in to a bearer cheque by means of........

a) Sans recourse endorsement

d) Sans fairs endorsement

17. Negotiability gives to the transferee......... title of the transferor.

a) The same title

b. San recourse endorsement

2. Secured advance is a loan or advance

3. Which of the following is not true of Unsecured advances

4. ___________ is a contract to perform the promise or discharge the liability of third

5. Type of charge(s) used for securing raw materials

6. Type of charge used for registering security interest on a vehicle

10. Who among the following is not a party to a contract of guarantee?

C. Who is the guarantor ?

5. No banker will and should ordinarily think of an advance without a satisfactory

7. Bank deposits are made available to the business in the form of

b. Credit and investment

c. Loans and Advances

2. If cheque is crossed an account payee, this is direction of ____ to _.