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BANKING AWARENESS

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Banking Awareness Questions - Set 8

Directions (1-10): Read the questions carefully and answer the correct one from the options.

 

Q1) Which of the following bank/ banks have granted $380 million of loan to Andhra Pradesh for Power Project?

a) International Monetary Fund

b) Asian Development Bank

c) Asian Infrastructure Investment Bank

d) World Bank

e) Both c and d

 

Q2) Recently RBI reconstituted the Oversight Committee mechanism and increased the number of members to five from the earlier two, who is the chairman of Oversight Committee?

a) Pardeep Kumar

b) S Raman

c) Janki Ballabh

d) B N Rao

e) None of these

 

Q3) The government has permitted banks and post offices to deposit junk Rs500 and Rs1000 notes with Reserve Bank by_____________

a) July 30, 2017

b) July 20, 2017

c) June 20, 2017

d) June 30, 2017

e) August1, 2017

 

Q4) Which of the following foreign organisation has sanctioned a loan assistant of 44 million dollars for the Assam State Public Finance Institutional Reforms Project?

a) International Monetary Fund

b) Asian Development Bank

c) New Development Bank

d) World Bank

e) None of these

 

Q5) In which of the following year RBI took initiative for electronic clearing service in order to enhance better payment and settlement system in India?

a) 1988

b) 1990

c) 1992

d) 1994

e) 1996

 

Q6) Under which of the following section of the Banking Regulation Act 1949 RBI (Reserve Bank of India) grants license for the commencement of the banking business?

a) 20

b) 21

c) 22

d) 22(1)

e) 24

 

Q7) Recently World Bank and Asian Infrastructure Investment Bank have granted a loan of $380 million to Andhra Pradesh Power Project, in what ratio World Bank and Asian Infrastructure Investment Bank provide loan?

a) 50:50

b) 40:60

c) 30:70

d) 60:40

e) 40:60

 

Q8) In the following acronym CDSL, D stand for___________

a) Deposit

b) Depository

c) Demat

d) Debit

e) None of these

 

Q9) Banking Ombudsman Act was enforced in which of the following year?

a) 2002

b) 2004

c) 2006

d) 2008

e) None of these

 

Q10) Which of the following is Asia’s first stock exchange?

a) Singapore Exchange Limited

b) National Stock Exchange

c) Bombay Stock Exchange

d) NASDAQ Stock Exchange

e) None of these

 

Answer key with explanations:

1. Answer (e) Both c and d Explanation: World Bank and Asian Infrastructure Investment Bank have granted $380 million of loan for helping the southern state and will build a reliable, quality and affordable power supply to citizens.

2. Answer: (a) Pardeep Kumar,

Explanation: Oversight Committee It is a five member committee.

Chairman- Pardeep Kumar

Other Members- Janki Ballabh, M B N Rao, Y M Deosthalee and S Raman

3. Answer: (b) July 20, 2017

4. Answer: (d) World Bank

Explanation: World Bank

Headquarter: Washington D.C.

Founded: 1945

5. Answer: (b) 1990

Explanation: In 1990 RBI took initiative for electronic clearing service in order to enhance better payment and settlement system in India.

6. Answer: d) 22(1)

Explanation: Under section 22 (1) of the Banking Regulation Act 1949 RBI( Reserve Bank of India) grants license for the commencement of the banking business.

7. Answer: (d) 60:40

8. Answer: (b) Depository

Explanation: CDSL- Central Depository Services Ltd.

9. Answer: (c) 2006

10 Answer: (c) Bombay Stock Exchange

Explanation: Bombay Stock Exchange

Headquarter: Mumbai

Founded: 1875

CEO: Ashish Chauhan

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Commercial Banks - Banking Awareness

Commercial Bank is an institution which collects surplus funds from the public, safeguards them, and make available to the true owner of the fund when required. Commercial banks are of two types:

1) Scheduled banks - The banks which are included in Second Schedule of Reserve Bank of India Act 1934 are schedule banks.RBI includes only those banks under this schedule which fulfill the criteria laid down under section 42(6)(a) of RBI Act 1934. Every schedule bank enjoys two principle facilities:

  • It becomes eligible for debts/loans at the bank rate from RBI.
  • It automatically acquires the membership of clearing houses.

At present there are 22 Public Sector banks, private and foreign banks and 19 nationalized banks.

  • In 1969, nationalization of 14 banks was done.
  • In 1980, nationalization of 6 banks was done.

Later on in 1993 New Bank of India merged with Punjab National Bank. Thus at present there are 19 Nationalized banks in India.

In year 2014 Bandan Bank and IDFC get licensed by RBI in this category.

2) Non-Scheduled banks - The banks which are not included in Second Schedule of Reserve Bank of India Act 1934 are non-scheduled banks.

Functions of Commercial Banks

The functions of the Commercial Banks can be broadly classified into three parts:

I) Primary Functions

1) Accepting Deposits - Deposits constitute the major source of funds for the banks. Hence, the main function of a commercial bank is acceptance of deposits from the public. The deposit must be of money and not of other assets. Commercial Banks pay interest on the deposits to mobilize the savings and to hold deposits.

People can deposit their cash balances in the following accounts as per their requirement:

  • Fixed Deposit Account
  • Current Deposit Account
  • Saving Deposit Account
  • Recurring Deposit Account

2) Advancing Loans - Another main function of the bank is to advance loans. A certain part of the cash received by the banks as deposits is kept in the reserve and remaining is giving as loan.

Banks advance following types of the loan:

  • Money at call - It is the money lent for a very short period generally from 1 to 14 days.
  • - Overdraft means allowing the borrower to over draw his current balance. This facility is available for short term to reliable customers.
  • Discounting of Bills - It means advancing a loan against a promise of repayment in the future.

3) Creation of Credit - When a bank advances a loan or credit; it does not lend cash but opens an account in favour of the customer and credits the amount to the account. It creates a claim against itself which is acceptable by the public for settlement of debts. In this process the bank creates money.

4) Cheque System of Payments of Funds - A cheque as a negotiable instrument is the most popular credit instrument used by the customer to make payments. Now days it become main credit instrument in the banking world.

II Secondary Functions - Secondary Functions can be classified into two types:

1) Agency Functions- Banks renders a number of useful services to the customers apart from performing the primary functions. Commercial banks act as agents of their customers in following ways:

a) Collection and payment of credit-The commercial banks collect and pay the various negotiable instruments like cheques, bill of exchange, promissory notes etc.

b) Purchase and Sale of Securities- Purchase and sale of securities are also undertaken by the modern commercial banks.

c) Trustee and Executor- Banks undertake administration of will or settlements and trusteeship functions through its expert staff and specialized departments.

d) Remittance of Money- The commercial banks remit funds on the behalf of customer from one place to another through cheques, drafts, mail transfers etc.

e) Bullion Trading- The commercial banks trade in bullions like gold and silver in many countries.

2) General Utility Facilities- Banks provides following utility functions in addition to the agency services.

a) Locker Facilities- Bank provides locker facilities to their customers. People can keep their jewellery and other important documents in these lockers at a nominal annual rent.

b) Acting as underwriters- Banks also underwrites the new issues of the Government and Corporate bodies for a commission.

c) Acting as Information Banks - Commercial Banks also act as Information bureau as they collect the financial, economic and statistical data relating to the industry, trade and commerce.

d) Merchant Banking Services - Commercial Banking also renders merchant banking services to the customers. They help in availing loans from non-banking financial institutions.

e) Dealing in Foreign Exchange - Major commercial banks also transact business of foreign exchange through their main branches. Commercial banks are the main authorized dealers of foreign exchange in India.

III) Modern Functions

1) Automatic Teller Machine (ATM) cum Debit Cards-Many bankers has introduced ATMs to assist their customers to withdraw and deposit cash without any waiting time. The debit and credit cardholders of a bank can also withdraw cash in emergency from the ATMs at any time.

2) Credit Cards - Credit Card is plastic money which acts an instrument of credit. The credit cardholders need not carry cash in their pockets. The card holder may purchase goods from many authorized dealers by using the credit card at nominal rate of interest.

3) Tele Banking- A customer can do entire non-cash related banking over the phone anywhere and anytime. Automatic Voice Recorders or ID numbers are used for rendering tele-banking services which have added convenience to customers.

4) Internet Banking- Internet Banking is a platform for electronic delivery of banking services to the customers.

5) Round the Clock Banking - The modern banking system facilitates performing of basic banking transactions by customers round the clock globally. World –wide 24 hours and 7 days a week banking services are made possible.

 
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RRBs and their expansion in India

Since ages past the average Indian farmer has been living under heavy debts. He is born under debts, lives in debts, dies in debts and leaves debts for his heirs. The basic reason of his endless debts is the ancestral obligations; which are regarded sacred and paid till his last breath. The heavy expenditure at social functions, deaths and marriages force him to be down under the feet of traditional moneylender who had been exploiting him by charging high rates of interest. The farmers who fall once into the hands of the moneylender are never debt free.

In the whole country a network of co-operative societies was spread but the entire needs of rural people could not be satisfied. They also adversely affected them because of corruption, favouritism and inefficiency.

Hence the establishment of Rural Banks was defined as “To fulfill the aims of institutionalising the credit structure and enhancing its area and coverage.” Establishment of co-operative societies was no doubt a relief to the poor. But they could not meet the entire needs of the rural people. They could provide little service to the community because of corruption, nepotism and inefficien­cy which infected them. They were, however, able to make a dent and money­lenders share in the total lending came down to 40% in 1960-62 from 70% in 1951-52.

14 leading banks of the country were nationalised in 1969. The object was to give banking facilities to the neglected sections of the society specially the poor farmers, landless labourers and artisans. The nationalised banks expanded their branches in rural areas. Despite this a large number of people were still left uncovered and unfacilitated.

On August 18, 1975 a conference of Chief Minister and State Finance Ministers was held in Delhi to study the credit needs of rural people. The conference decided to give these banks a different shape other than the commercialised and co-operative banks and the staff be given facilities in regard to the local conditions in various states and regions.

The President accepted the Chief Minister’s Conference recommendations and made an ordinance on Sept. 26, 1975 to setup the regional rural banks in the country. In reply to it fifty banks were opened on Oct. 2, 1975 covering 9 districts of various states. The share capital of banks was made up by central government, state government and commercialised bank in ratio of 50%, 15% and 35% respectively. Before April 1, 1977 a target of 5&regional banks was set up.

The aim’s and objects of Rural Banks are as follows :

1. These banks will provide credits to rural population to make it more productive and raise the level of life.

2. They will identify the credit needs of each region to regulate produc­tivity and avoid wastefulness.

3. The banks will help eradication of poverty and eliminate the financial constraints that mar the progress of poor farmers and artisans.

4. These banks will combine the better features of both the systems of commercial banks and the co-operative societies avoiding inabilities that are present in them.

5. They will also enhance the membership of primary societies and expand it substantially.

6. They will develop the tendency to repay regularly the government loans. The proper climate for recovery of loans will be created and non­payments will be discouraged.

7. The rural banks will also help rural industries, animal husbandries, poultries and fishery.

These banks will evolve an economic structure of rural India to make the use of the fruits of science and technology as their motto is “Banks exist for the people and not people for the banks.”

The government has contributed 15% of the initial capital and 15% is proposed to be raised from the local people. But this idea was dropped. The transactions of these banks will be made in the regional languages so as to make them truly people’s banks.

Rural banks have been established to meet the needs of the weaker sections of society. It will eliminate rural indebtedness. It will save the rural population from the clutches of the clever moneylenders. It will also promote economic development by providing the much needed funds to marginal and poor farmers. The possibilities of lack of funds to start small-scale industries will be eliminated. Easy loans will be provided to them on low rates of interests without having substantial securities. The bank staff will specially be made rural minded so that the villagers may not feel reluctant to partonise these banks. The efforts will be made to form banking habits in villagers.

 
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Banking Awareness - 15 March, 2017

1). SBI to impose penalty for not maintaining minimum account balance from April 1
State Bank of India
, India’s largest bank, has decided to resume the charge on savings account holders for failing to maintain the monthly average balance in their accounts. The bank had done away with the minimum balance criteria for savings bank accounts a few years back in a bid to lure new customers. Sources said the service charges for non-maintenance of monthly average balance (MAB) will be revised with effect from April 1, 2017. Monthly average balance that customers will have to maintain in their savings bank accounts in SBI branches in metropolitan areas is Rs 5,000. In case the shortfall in the monthly average balance is below 50 per cent, then a charge of Rs 50 plus service tax will be levied.
Similarly, in urban areas SBI customers will be required to maintain a monthly average balance of Rs 3000. If the shortfall in MAB is less than 50 per cent, then a charge of Rs 40 plus service tax will be levied. In semi-urban areas, customers will have to maintain a monthly average balance of Rs 2000, while in rural areas, maintaining an MAB of Rs 1000 will be a must.
 
2). HDFC Life brings country's first life insurance Chatbot with Haptik
HDFC Life
, one of India's leading private life insurance companies, announced the launch of India's first life insurance chatbot in collaboration with Haptik, India's largest chatbot platform. The chatbot will act as a financial guide to help users choose the most suitable life insurance plans and solutions. This chatbot aims to assist the customers with insurance advice - ranging from Health to Tax Planning & Retirement, based on a simple 60-second quiz which enables it to compute their Insurance Quotient. Calculated using different parameters under each insurance category, the Insurance Quotient is an indicative score for each individual, based on which, HDFC Life can recommend the best-suited insurance plans for the user. The chatbot not only works as a personal financial advisor but also brings to the forefront the universal need for life insurance. The chatbot will be live for only two weeks from the date of its launch on the Haptik app, which is available on both iOS and Android.
 
3). Karur Vysya Bank launches 3 technology services
To keep pace with technology across the globe, Karur Vysya Bank (KVB) launched three technology services for the benefit of customers.
FASTag: was launched in association with Indian Highways Management Company, a subsidiary of National Highway Authority of India, wherein pre loaded tags affixed to vehicles help them move on without having to join queues at toll plazas and handing cash for payment. It can be pre-loaded with amounts and the toll amount will automatically be debited by the toll plazas through sensors, he said. The tags can be reloaded as and when required and tags are valid at all toll lazas throughout the country
United Payments Interface (UPI): is a mobile app that helps customers to transfer funds inter-bank, 24 X 7 through their smartphones, he said. A single mobile application can access different bank accounts without the customer having to share his bank details or having to remember user IDs and passwords, he said. The transfer is effected through the Immediate Payment Service platform of NPCI (National Payment Corporation of India). Supported by the security of two factor authentication, payment requests can be initiated by the beneficiary or scheduled by the remitter, he said adding that the KVB UPI can be downloaded from Android Play Store.
Bharat Bill Payment System (BBPS), a facility offered through NPCI where in customers can make utility bill payments like electricity, water, gas, DTH and telecom servioces through a single utility, instead of accessing multiple sites.
 
4). SBI launches 'Work from Home' facility for employees
Country's largest lender State Bank of India launched a new facility to enable its employees to work from home. The Board of the bank has recently approved the 'Work from Home' policy to enable its employees to work while at home using mobile devices to address any urgent requirement they may have, that prevents their travelling to work. The lender will be using mobile computing technologies and shall have continuous control over all the enabled devices centrally to manage and secure the data and applications on the mobile devices. The use of technology and services shall be monitored through carefully designed MIS and dashboard to enable improvements and refinements.
 
 
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Banking Awareness - 07 February, 2017

1). Dena Bank rolls out RFID-enabled cards to serve valued clients better
Dena Bank
has introduced RFID-enabled banking cards whereby a branch/relationship manager can identify a valued client entering a branch with the card. Once the client enters the branch, complete information about him/her will pop up on the manager’s desktop. This will help the branch staff to take care of the customer’s needs and offer services quickly without any delay. When the customer holding the Radio Frequency Identification (RFID) card completes the transaction and leaves the bank branch, the system will capture his/her exit, indicating that transactions have been completed.

 

2). HDFC Life ties-up with ET Money to launch data-led policy
HDFC Life
announced the launch of an exclusive data-led group term insurance plan in partnership with ET Money, the Times Internet backed financial services app. This is the country's first term insurance plan based on the spend pattern of the users. This financial planning management app brings insurance at the finger-tips of the discerning new-age generation. Offered as an ET Money benefit, the group term life insurance plan can be availed exclusively by 1 million users of the ET MONEY app. One can get a group term life insurance coverage that ranges anywhere from Rs 25-50 lakh and it will be based on spend pattern of the user.

 

3). CBEC launched a mobile application for Goods and Services Tax
The Central Board of Excise and Customs (CBEC) launched a mobile application for Goods and Services Tax (GST). The app will inform the taxpayers of the latest updates on GST among others. The mobile application for GST was launched in-line to the Union Government’s Digital India Initiative. The application will provide latest updates on GST to the taxpayers.

Goods and Services Tax rollout deferred to 1 July 2017
The application will help taxpayers to access certain information related to the GST like
• Migration to GST-Approach and guidelines for migration
• Draft Law-Model GST Law, GST Compensation and Law IGST Law
• Draft Rules-Rules related to Registration, Payment, Returns, Refund and Invoice
• Frequently Asked Questions (FAQs) on GST
• Various resources on GST like videos and articles among others
• Links related to website as well as email and helpdesk contacts

 

4). CBDT signs 10 unilateral APAs with taxpayers
The Central Board of Direct Taxes (CBDT) signed ten Advance Pricing Agreements (APAs) with taxpayers. The APAs were signed in various sectors of the economy like Telecom, Pharmaceutical, Banking & Finance, Steel, Retail and Information Technology, etc. In the current financial year, a total of 76 APAs (7 Bilateral APAs and 61 Unilateral APAs) have already been signed by CBDT. With this, the total number of APAs entered into by the CBDT reached 140 in number. This includes 10 Bilateral APAs and 130 Unilateral APAs. The CBDT expects more APAs to be signed before the end of the current fiscal.

 

5). RBI sets up inter-disciplinary standing committee to review cyber threats
The Reserve Bank of India (RBI) has set up of an inter-disciplinary standing committee on cyber security to review the threats inherent in the existing and emerging technology. The 11-member committee will be headed by Meena Hemchandra, RBI Executive Director. It can co-opt more experts and also operate through a framework of sub-committees to examine specific issues.

Key Facts

  • The committee will study adoption of various security standards and protocols, interface with stakeholders.

  • Based on study, it will suggest appropriate policy interventions to strengthen cyber security and resilience.

 

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