INDIAN INSTITUTE OF

BANKING & FINANCE

JAIIB
MODULE (A & B)
LEGAL ASPECTS OF BANKING
OPERATIONS

Thursday, 06 April, 06
T M C VASUDEVAN

vasu1611@yahoo.co.in
01. Identify the Act which regulates
entry into banking business by
licensing.
A .. Banking Regulation Act, 1949.
B.. Reserve Bank of India Act,1934
C.. Indian Constitution
D.. All the above.
02.. Raj has appointed Kumar as the nominee
for his Fixed deposit, whereas Kunwar was
appointed as the nominee for the Safe deposit
Locker contents. Incase Kumar dies .

A. Raj can have Kunwar to be the nominee for

Locker
B. Raj is also permitted to continue his locker
C. The death of Kumar, the nominee will not alter the
position
D. All the above are correct.
03.. Suraj has approached the drawee
bank to handover the original cheque
issued by him and since paid to the
debit of his account.
A.. Bank need not oblige
B.. Bank to refuse
C.. At the most they can provide a Xerox
Copy only
D.. None of these
04.. The Scheduled banks have to submit
their returns to the Reserve Bank of India
about their demand and time liabilities as
per the provisions of the

A.. Banking Regulation Act,1949

B.. Reserve Bank of India Act.1934
C.. Banking Regulation Act,1970
D.. State Bank of India Act,1955
05.. As per the provisions of the Reserve Bank
of India Act,1934, a banking company to file
within 30days of the close of each financial
year a return of unclaimed deposits.

A.. The above statement is True

B.. The above statement is incorrect.
C.. The correct position is Banking
Regulation Act,1949.
D.. Even the answer C is only partially
correct
06.. In case of winding up of the banking
company, each depositor will have to make
the claim within 15days of the winding up
order.
A.. True
B.. False
C.. The claims of every depositor deemed to
have been filed for the amount as shown in
the books of the banking company standing
to his credit..
D.. Ans ( C ) is partially correct.
07.. Making any false statement in any return,
balance sheet or other documents or
information given under the BR act (sec46)
punishable.

A.. The above is incorrect

B.. The above is not incorrect.
C.. Punishment is not for any as stated
above.
D.. Punishment is applicable only when there
is willfully any false statement and so on.
08..The State Bank of Hyderabad has been
established as per the provisions of

A.. Hyderabad State Bank Act

B.. State Bank of Hyderabad Act
C.. State Bank Of India Act
D.. Reserve Bank of India Act
09.. For State Bank Of India
Audit who can be eligible to
conduct Audit.
A.. Director of the Bank
B.. Not a member of Local Board
C.. Member of a Local Committee
D.. An Office of the State Bank of India
10..State Bank of Mysore was
established as per the provisions of
A.. State Bank of Mysore Act
B.. State Bank of India Act
C.. Reserve Bank of India Act
D.. None of the above
11.. The Commercial Banks
were Nationalised as per
A.. The Bank Nationalistion Act (Banking Companies
(Acquisition and Transfer of Undertakings)Act,1970
B.. The Banking Companies (Acquisition and
Transfer of Undertakings) Act,1980.
C.. Both A& B are incorrect
D.. Both A & B are not incorrect.
12.. The State Bank of India is empowered
under Section 47 to inspect the subsidiary
banks.

A.. The above statement is true.

B.. The above statement is not true
C.. Only RBI can inspect and not State Bank
D.. None of these
13..The issued capital of the
Regional Rural Bank is held as
15 %:50%:35% by
A.. Regional Rural Bank : State Government :
Sponsor Bank
B.. State Government : Central Bank (RBI):
Sponsor Bank
C.. State Government : Reserve Bank of India
: State Bank of India
D.. None of these
14..The Licensing part of the Co-
operative Banks is looked after
by the
A.. Reserve Bank of India
B.. The Registrar of Co-operatives
C.. Both A & B
D.. The State Government where the
headquarters of the Co-operative Bank is.
15..Displaying of an audited balance sheet to
be done not later than the first Monday in
October of any where the banking business
held.

A.. Applicable to all banks

B.. Only applicable to Foreign Banks
C.. Applicable to New Private Banks
D.. None of the above
16.. As per BR Act the return on
Liquid Assets to be filed within

A.. 7 days from the end of the month to which it

relates.
B..15 days from the end of the month to which it
relates
C.. 20 days from the end of the month to which it
relates
D.. 30 days from the end of the month to which it
relates
17.. Banking Ombudsman is

A.. Discontinued and a new company has

been set up.
B.. Not applicable to delays in receipt of
export proceeds
C.. Applicable to adherence to prescribed
working hours by branches.
D.. All the above are not True.
18.. * A Co-operative Bank
functioning in more than one
State is known as
A.. Primary Co-operative Bank
B.. Urban Co-operative Bank
C.. Multi – Force Co-operative Bank
D.. None of these
19.. Garvita has issued a cheque favouring
Deva for Rs.27750/= The cheque has been
otherwise in order and the account has
enough balance.

A.. The Collecting Bank will refuse payment

B.. The Collecting Bank will receive payment
C.. The Drawer’s Bank will not make the payment
D.. The Drawee Bank will not make the payment.
20.. V & S are holding a joint Savings Bank account
with bank U. A cheque has been paid by the said bank in
clearing, bearing two signatures of both S& V. After
some days it was identified that S’s signature has been
forged. The Paying Bank’s protection

A.. Will be there under Sec 85 of NI Act,1881

B.. Will not be there under Sec 10 of NI Act1881
C.. Will not be there under Sec 06 of NI Act 1881
D.. Will not be there under Sec 10 & 85 of NI Act
1881.
21.. After paying a cheque it has come
to t he notice of the bank that one of
the endorsements has been forged.
A.. The paying bank is protected
B.. It is a payment in due course
C.. If endorsements are regular he gets protection
D.. In addition to a,b & c it is the duty of the
collecting banker to verify and not the paying
banker.
22.. Which cannot be transferred
by way of an assignment
A.. The right on receivables
B.. The right over a Term deposit of the Bank
C.. The right over an Life Policy
D.. None
23.. A cheque has been paid
bearing a visible alteration on the
date and words. The bank
A.. Will get protection under Sec10 of NI Act 1881
B.. Will get protection under Sec89 of NI Act 1881
C..Will get protection under both these sections
D..Will not get protection under both these sections
24.. As per Section 89 of NI Act,1881 a
bank can seek protection only if there is a
material alteration in the cheque and does not
appear to have been altered.
A.. The above is correct
B.. The above is in correct
C.. The material alteration will not alter the
position.
D.. The material alteration will to some
extent alter the postion.
25.. Bank K opened an account 13 months ago. The
bank had obtained the signature of an existing account
holder of another branch in the application form. They
did not make proper enquiries . When the banker
collected a demand draft on which the payment was
released. After few days the bank came to know that the
said demand draft was so altered as to place of
payment as well as amount.

A.. The Collecting bank will get protection.

B.. The Paying bank will get protection
C.. The Collecting bank will be held responsible
D.. Both banks are responsible
26.. An arbitrator under Banking
Ombudsman
• * 1.. CMD of one of the Nationalised
Banks
• * 2.. One of the Deputy Governors of RBI
• * 3.. Finance Ministry Representative
• * 4.. Banking Ombudsman himself
27.. A performance guarantee has been issued
on behalf of its client. The guarantee has been
invoked by the beneficiary. There is no
sufficient balance in the account of the client.

A.. The Bank can postpone paying the

guarantee amount.
B.. The Bank has to honour the claim
C.. Later on they can rely on Counter
guarantee to recover
D.. Both B & C
28..On a Bank Guarantee, the court
will not interfere, since it is a
commitment by an individual banker
to the beneficiary.
A.. True
B.. False
C.. Unless a fraud or forgery the court will
not interfere
D.. None of the above
29..Reimbursing bank is
appointed by
A.. Negotiating Bank
B.. Confirming Bank
C.. Paying Bank
D.. None of the above
30.. The Red Clause LC and
Green Clause LC are one and
the same.
• A.. True
• B.. False
• C.. Green Clause LC is the
refinement of Red Clause
• D.. Both are ordinary LCs.
31..The Combined Transport Bill
is known as

A.. Multiple Bill of exchange

B.. Multiple Bill of Lading
C.. Multiple Bill of Entry
D.. None of these
32.. The issuing bank should advise the
credit and any amendments there to
through
A.. any bank
B.. the same advising bank
C.. any bank as per convenience of the opener
D.. None of these
33.. All Letter of Credits need not
contain a clause of last date of shipment
and expiry.
A.. The statement is not incorrect
B.. The statement is not True
C.. It is the discretion of the bank
D.. It is the understanding between importer
and exporter
34..Both Bank guarantee and Letter
of Credit are

A.. One and the same

B.. Different
C.. One has contingent liability
D.. One is more important than the
other
35..The Guarantees could be

A.. Performance Guarantee

B.. Advanced Payment Guarantee
C.. Deferred Payment Guarantee
D.. All of these
36.. As per the provisions of the NI
Act,1881, if no rate of interest is
specified in the instrument , interest due
thereon shall be calculated at the rate of

A.. 18% p.a

B.. 02% p.m
C.. 06% p.a
D.. 12% p.a
37..Which instrument need not be
stamped?

A.. Promissory Note

B.. Bill of Exchange
C.. Power of Attorney
D.. Cheque
38.. The Sec 130 of the Transfer
of Property Act, permits
assignment of

A.. Negotiable Instrument

B.. Irrevocable Power of Attorney
C.. Actionable Claim
D.. All the above
39..A Private Ltd Company has availed
Certain credit facilities including a
supply bill limit of Rs.5.00 lacs. Then

A .. Charge need not be registered with ROC

B.. Since it is a clean advance no charge
registration required
C.. Charge has to be registered with ROC
D.. None of the above
40.. One of the following need not be
accepted . Identify

A.. After sight Bill

B.. Time Bill
C.. Usance Bill
D.. At Sight Bill
41..Which is correct?

A.. Hypothecated goods could be pledged to

another banker
B.. Under pledge the property pledged will be
with the owner
C.. English Mortgage Private Sale not allowed
D.. For Simple Mortgage no stamp duty
42..Generally the banker as a
Creditor will have the right and
not the possession in respect of
A.. Mortgage and Pledge
B.. Hypothecation and Mortgage
C.. Pledge and Third Party Pledge
D.. Hypothecation and Pledge
43..In which type of mortgage possession
is with the mortgagor.

A.. Simple Mortgage

B.. English Mortgage
C.. Equitable Mortgage
D.. All the above
44..A bank relying on the contents of
their Pledge agreement, have sold the
gold ornaments without intimating the
owner.
A.. The Bank is not in order
B.. The Bank should have given a reasonable
Norice
C.. The Bank is perfectly in order otherwise
the agreement becomes meaningless
D.. In case of Hypothecation Notice required
and not for Pledge
45..Which one is not correct

A.. Valid Pledge can be created by

endorsement of RR
B.. Actual Delivery not necessary.
C.. Constructive Delivery acceptable
D.. None of these
46..Which statement is correct?
A.. Hypothecation can be converted into
Pledge
B.. Mortgage can be converted into
Hypothecation
C.. Pledge can become Mortgage if needed
D.. Assignment represents Negotiation
47.. On Minor’s deposit a loan
can be considered
A.. Not allowed
B.. False
C.. Natural Guarantor has to sign the
documents
D. None
48..One of the partners of UMTV
& Co died in UK. Then the
operation in the account
A.. to be discontinued
B.. to be allowed
C.. to be allowed if the partnership deed is
silent
D.. to follow the contents of partnership deed
49.. Banker has to be more
careful in handling

A.. A Trust Account

B.. A Recurring Deposit Account
C.. A Fixed deposit of Rs.5555/-
D.. A Government Department Account
50..Bank GT has terminated the
overdraft account of the borrower since
his operation in the account has not
been satisfactory.
A.. Bank relied on the contents of Overdraft
agreement
B.. Bank should have given an opportunity to him in
writing
C.. Bank has the right to terminate
D.. There is no need for the bank to intimate as the
borrower has to know the conditions of the bank.
51.. Which type of finance to a
Limited Company charge need
not be registered with ROC.
A.. Assignment of Book Debts
B.. Vehicle Loan for the Managing Director’s
son
C.. Term Loan for Building
D.. Cash credit (Hypothecation)
52.. A person has been appointed as the
Manager of the property charged. He
has to give notice to the Registrar of
Companies within

A.. 30 days
B.. 30 days of his appointment
C.. 30 days of his taking charge of the post
D..30 days from the date of liquidation
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