JAIIB Principle And Practices Of Banking Set-12

November 6, 2014

1. Which of the followings forms the part of lending principles ?
A.Safety money lent.
B.Liquidity
C.Profitability
D.Purpose
E.All of these 
The Correct Answer is :  All of these
 
2. In appraisal of Term loan proposal, the following aspects are to be looked in :
A.Managerial Competence
B.Technical Feasibility
C.Economic Viability
D.Financial Viability
E.All of the above 
The Correct Answer is :  All of the above
 
3. What are the cardinal principles of lending ?
A.Safety
B.Security
C.Liquidity
D.Profitability
E.All of these 
The Correct Answer is :  All of these
 
4. In Banking practice, credit risk refers to : 
A.Banker's default in releasing credit to a borrower
B.default of a banker in maintaining SLR
C.default of a borrower in repayment of loan
D.All of the above
E.None of the above 
The Correct Answer is :  default of a borrower in repayment of loan
 
5. While sanctioning loans the bank :
A.follows laid down principles of lending
B.is not supposed to observe any principles of lending
C.has to consider loan application on the basis of deposit given by the prospective borrower
D.All of the above
E.(b) and (c) 
The Correct Answer is :  follows laid down principles of lending
 
6. Most fundamental aspects, which the bank has to consider while sanctioning the loans in terms of principles of founding lending are : 
A.person and his moral integrity
B.purpose, amount, period of loan and repayment
C.experience
D.security
E.All of the above 
The Correct Answer is :  All of the above
 
7. A bank should pay attention to which of the following parts, while sanctioning loans ?
A.The advance should earn reasonable yield.
B.The advance should raise standard of living of the borrower
C.Money advanced should earn reasonable yield to the bank and is repaid in time besides raising living standard of the borrower.
D.Bank not to consider any thing.
E.None of the above 
The Correct Answer is :  Money advanced should earn reasonable yield to the bank and is repaid in time besides raising living standard of the borrower.
 
8. Bank can reduce risk in lending to a borrower :
A.by obtaining adequate security
B.by ensuring that there will be no problem of liquidity with the borrower
C.by ensuring that there will be no default on account of lack of liquidity and lack of willingness to pay on the part of borrower
D.All of the above
E.None of the above 
The Correct Answer is :  by ensuring that there will be no default on account of lack of liquidity and lack of willingness to pay on the part of borrower
 
9. Financial risk analysis involves :
A.Analysis of financial standing of a borrower
B.Analysis of performance of a borrower under certain select financial parameters
C.Analysis of past track record of commitments of a borrower
D.A study of financial position of guarantor
E.None of the above 
The Correct Answer is :  Analysis of performance of a borrower under certain select financial parameters
 
10. Liquidity with a banker means : 
A.Cash on hand available with him
B.Cash and bank balance
C.The level of convertible (to cash) short term assets available with a bank
D.All of the above
E.None of the above 
The Correct Answer is :  The level of convertible (to cash) short term assets available with a bank

11. The cardinal principles of bank lending are :
A.Safety
B.Security
C.Liquidity
D.Profitability
E.All of these 
The Correct Answer is :  All of these
  
12. Credit operations of banking system are generally guided by : 
A.Directives of RBI
B.Instruction of Govt.
C.Bank's own policy
D.All of these
E.None of these 
The Correct Answer is :  All of these
 
13. RBI translates its views on economy into affirmative actions through changes in the 
A.Credit policy
B.Monetary Policy
C.Credit and Monetary policy
D.All of these
E.None of the above 
The Correct Answer is :  Credit and Monetary policy
 
14. Reserve Bank reviews credit policy…in a year.
A.once
B.thrice__in Jan., May, September every yer
C.four times, every quarter
D.twice April and October
E.None of the above 
The Correct Answer is :  twice April and October
 
15. In the case of hypothecation advances, statements of stocks are taken periodically from the borrowers with a declaration regarding their clear title to the goods and the correctness of the quantity, quality and valuation thereof. These declarations :
A.are required to be signed by the persons authorized to operate on the account.
B.bind the borrowers and form the basis of the hypothecation advance
C.are used to control that the drawings in the account are covered by sufficient stocks and that adequate margin is maintained
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 
16. As the goods under Hypothecation remain in the possession of the borrower, care has to be exercised to see that the bank's security is complete, adequate, safe and available at all times. For this purpose : 
A.an effective supervision over the goods and the position of the borrowers is absolutely necessary
B.periodical inspection of goods is one of the ways of supervising the advance
C.the borrower's books of accounts should be scrutinized and reconciled with the statements submitted
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 
17. It is advisable to have the bank's name boards prominently displayed on the go downs containing the hypothecated goods to :
A.obviate the possibility of the same goods being hypothecated to another bank
B.avoid a possible attempt being made by the Receiver in the event of the borrower's insolvency to treat the borrower as the 'reputed owner' of the hypothecated goods
C.Both of the above
D.None of the above
E.Any of the above 
The Correct Answer is :  Both of the above
 
18. Periodical inspection of the goods is one of the ways of supervising the advance. During a visit the inspecting officer should ascertain that : 
A.there is satisfactory turnover of stocks
B.the goods forming the bank's security are paid for by the borrowers
C.the hypothecated stock is not over-valued
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 
19. Hypothecation is known as : 
A.a legal transaction by which goods may be made available as security for a loan or advance or debt
B.transfer or ownership of goods to the lender
 conditional sale
C.All of the above
D.None of the above 
The Correct Answer is :  a legal transaction by which goods may be made available as security for a loan or advance or debt
  
20. Which of the following securities are not the subject matter of hypothecation ?
A.Raw material
B.Finished products
C.Plant and Machinery
D.Share and Debentures
E.None of the above 
The Correct Answer is :  Share and Debentures

21. Hypothecation is created when :
A.loans are required for purchase of machinery for production
B.advances are required for acquisition of raw materials for processing and conversion into finished goods
C.advances given for purchase of tools, equipment, vehicle etc.
D.advances for raising to crops
E.All of the above 
The Correct Answer is :  All of the above
 
22. In case of default in a hypothecated advance, what are the alternatives available to the banker to protect its interest ?

A.Bank can take possession of goods with the consent of the borrower. It is advisable to get a document of pledge signed by the borrower after the goods are taken in bank's possession. The goods can then be sold after giving a legal notice.
B.An application has to be made to the court for appointment of a Receiver to take charge of stocks.
C.A suit is to be filed and application has to made to the court for attachment of the goods before judgment.
D.Any one of the above
E.None of the above 
The Correct Answer is :   Any one of the above
 
23. A floating charge is described as an equitable charge on the assets for the time being of a going concern. It crystallizes as a specific charge in the following case : 
A.Upon commencement of winding up proceedings of a company.
B.When a Receiver is appointed by the court or by the lender under the powers contained in the debentures.
C.When the terms of debentures are not fulfilled by the borrower and the lender takes some steps to realized the debts.
D.Any one of the above
E.None of the above 
The Correct Answer is :  When the terms of debentures are not fulfilled by the borrower and the lender takes some steps to realized the debts.
 
24. When a company is under liquidation, a floating charge on its assets created within 12 months preceding the commencement of liquidation proceedings is void except :

A.to the extent of the amount of cash actually paid to the company at the time or after the creation of charge in consideration thereof with interest
B.When it is proved that the company was solvent immediately after the creation of floating charge
C.Any one of the above
D.None of the above
E.All of the above 
The Correct Answer is :  Any one of the above
 
25. A mortgage is the transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced :
A.by way of loan
B.an existing or future debt
C.or performance of an engagement which may give rise to a pecuniary liability
D.All of the above
E.None of the above 
The Correct Answer is :  or performance of an engagement which may give rise to a pecuniary liability
 
26. Immovable property includes land benefits that arise out of land and things attached to the earth. 'Attached to the earth' means : 

A.rooted in the earth, as in the case of trees and shrubs
B.embedded in the earth, as in the case of walls or buildings
C.attached to what is so embedded for the permanent beneficial enjoyments of that to which it is attached
D.All of the above
E.None of the above 
The Correct Answer is :   All of the above
 
27. The property in which the interest is sought to be transferred must be capable of identification by description with regard to : -
A.location
B.area
C.boundaries
D.All of the above
E.(a) and (b) 
The Correct Answer is :  boundaries
 
28. Where without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money and agrees, expressly or implicitly, that in the event of his failing to pay according to his contract, the mortgage shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied so far as may be necessary in payment of the mortgage money, the transaction is called :
A.Simple mortgage
B.English mortgage
C.Equitable mortgage
D.Anomalous mortgage
E.All of the above 
The Correct Answer is :  Simple mortgage
 
29. The words 'cause the mortgaged property to be sold ' imply that : 
A.the mortgaged has to power to sell the property without the intervention of the court
B.the mortgagee can appoint a representative who has the power to sell the property
C.The mortgagee has no power to sell the property without the intervention of the court
D.None of the above
E.All of the above 
The Correct Answer is :  he mortgagee has no power to sell the property without the intervention of the court
 
30. Where the mortgagor binds himself to repay the mortgage money on a certain date and transfers the mortgaged property absolutely to the mortgagee, subject to the proviso that the mortgagee will re transfer it to the mortgagor upon repayment of the mortgage money as agreed, the transaction called :
A.Simple mortgage
B.English mortgage
C.Equitable mortgage
D.Mortgage by conditional sale
E.None of the above 
The Correct Answer is :  English mortgage
 
31. The review carried during April is called :
A.Initial review
B.Slack season monetary and credit policy
C.April review
D.All of the above
E.None of the above 
The Correct Answer is :  Slack season monetary and credit policy
 
32. The review carried during October is called : 
A.Mid term review
B.Slack season policy
C.Basy season monetary and credit policy
D.Any of theses
E.None of the above 
The Correct Answer is :  Basy season monetary and credit policy
 
33. While sanctioning loans and advances to the borrowers, the bank : 
A.need not to follow any principle
B.should follow laid down principles of lending
C.should advances on the basis of deposits
D.should lend as per the wish of the branch manager
E.None of the above 
The Correct Answer is :  should follow laid down principles of lending
 
34. The essentials of good lending are that :
A.it is need based
B.it is production and employment oriented
C.It generates income to the borrower and ensures timely repayment of ban dues
D.(a) and (c)
E.All of the above 
The Correct Answer is :  All of the above
 
35. Ideal borrower should posses the following :
A.Character
B.Capacity
C.Capital
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 
36. While considering a loan proposal, the lending banker should, among st others, also take into consideration :
A.Marketability
B.Managerial ability
C.Spread
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 
37. A banker can reduce risk in lending : 
A.by obtaining 200% collateral security.
B.by obtaining 100% collateral security in addition to prime security.
C.by ensuring that borrower will not have liquidity problem during the course of business.
D.by ensuring that the borrower will not default in repayment of loan on account of non-availability of adequate liquidity and lack of willingness to pay.
E.All of the above 
The Correct Answer is :  by ensuring that the borrower will not default in repayment of loan on account of non-availability of adequate liquidity and lack of willingness to pay.
 
38. In banking reference, credit risk refers to :
A.default of a banker in sanctioning credit limits to the borrower
B.default of a banker in keeping sufficient cost at branch level
C.default by a borrower in repayment of banks dues
D.All of the above
E.None of the above 
The Correct Answer is :  default by a borrower in repayment of banks dues
 
39. Financial risk analysis involves : 
A.Analysis of financial net worth of a prospective borrower
B.Analysis of past track record of borrowers commitment
C.Analysis of performance of a borrower under financial parameters
D.All of the above
E.None of the above 
The Correct Answer is :  Analysis of performance of a borrower under financial parameters
 
40. What are the five 'C's which a borrower should possess ?
A.Capital and Collateral
B.Conditions
C.All of these
D.None of the above
The Correct Answer is :  All of these
 
41. At the outright, credit facilities extended by the bank are : 
A.Fund based credit facilities
B.Non-fund based credit facilities
C.Both (a) and (b)
D.None of the above
E.Any one of the above 
The Correct Answer is :  Both (a) and (b)
 
42. Fund based credit facilities are those facilities, where :
A.the cash outflow is immediate
B.no cash outflow
C.cash outflow may or may not take place
D.All of the above
E.None of the above 
The Correct Answer is :  the cash outflow is immediate
 
43. In non-fund based credit facilities :
A.the cash outflow is immediate
B.cash outflow may or may not take place. If it takes place that it is not immediate. It would be at future date
C.Both (a) and (b) above
D.Any one of the above
E.None of the above 
The Correct Answer is :  cash outflow may or may not take place. If it takes place that it is not immediate. It would be at future date
 
44. The credit facilities (both fund based and non-fund based) are provided to finance :
A.fixed assets
B.current assets
C.non-business assets
D.Both (a) and (b)
E.None of the above 
The Correct Answer is :  Both (a) and (b)
 
45. Fund based credit facilities include :
A.Term loan for acquisition of fixed assets.
B.Cash credit facility
C.Bill purchase facility
D.Overdraft facility
E.All of the above 
The Correct Answer is :  All of the above
 
46. Non-fund based credit facilities include : 
A.Letter of credit
B.Letter of guarantee
C.Acceptance of bills on behalf of customer
D.Deferred payment guarantees
E.All of the above 
The Correct Answer is :  All of the above
 
47. Cash credit facility against merchandise (i.e., goods) are allowed by way of : 
A.Hypothecation
B.Pledge
C.Lien
D.(a) and (b)
E.None of these 
The Correct Answer is :  (a) and (b)
 
48. When two or more banks jointly extend credit facilities to a borrower, such type of advances are known as :
A.Collective advances
B.Consortium advances
C.Venture financing
D.All of these
E.None of the above 
The Correct Answer is :  Consortium advances
 
49. Reserve Bank of India has given freedom to the participating banks in consortium to frame ground rules for the consortium arrangements, such as : 
A.minimum and maximum share of each bank
B.number of participating banks
C.rules for entry/exist from the consortium
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 
50. The banks in the consortium may frame their own rules relating to : 
A.sanction of adhoc/additional credit facilities in exigencies by leader bank/other banks
B.the fees or charges to be paid to the leader bank towards services provided by the leader bank
C.grant of facility by a non-member bank to the borrower
D.All of the above
E.None of the above 
The Correct Answer is :  All of the above
 







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