Banking & Financial Awareness Mixed Quiz: Set 34

The correct answer is C, section 128. It lays down that the surety's liability is coextensive with that of the principal debtor unless it is otherwise provided by the contract, which is why a bank that gives an unconditional guarantee can be called upon for the whole amount without the creditor first exhausting its remedies against the customer.

Option A, section 124, defines a contract of indemnity, in which one party promises to save the other from loss caused by the promisor's own conduct or the conduct of any other person; indemnity and guarantee are related but distinct. Option B, section 126, is the definition of the contract of guarantee itself and of the three parties to it, which makes it the closest wrong answer. Option D, section 130, deals with the revocation of a continuing guarantee by the surety for future transactions by notice to the creditor. Remember the run of sections: 124 indemnity, 126 guarantee, 128 coextensive liability, 130 revocation of a continuing guarantee.

The correct answer is B, Society for Worldwide Interbank Financial Telecommunication. The word Society is the key, because SWIFT is a cooperative society owned by its member financial institutions rather than a company or a public authority. It was founded in 1973 to replace the insecure and unstandardised telex traffic between banks and went live in 1977.

Options A, C and D are invented expansions built around the same letters, and each is wrong on the most important word. None of them contains Society, so a candidate who remembers only that one word can eliminate all three at once. Two further points usually accompany this question: the headquarters are at La Hulpe near Brussels in Belgium, and SWIFT is a messaging network only, so it neither holds accounts nor settles payments. The actual movement of value happens through the accounts banks hold with each other or through a central bank's settlement system.

The correct answer is B, the record a bank keeps in its own books, in home currency, of its nostro balance. The nostro account itself lies in the books of the foreign correspondent and is denominated in foreign currency. To track it, the bank at home maintains a parallel account in rupees, converted at the appropriate rate, and the two are reconciled regularly so that unmatched entries, missing credits or stale debits come to light quickly.

Option A describes nothing in this vocabulary; a customer's account belongs to the branch where it is opened. Option C is wrong because a nostro relationship is not a joint account; one bank is the account holder and the other is the account keeper. Option D describes an inoperative account under the rules on unclaimed deposits, an unrelated topic. Learn the four together: nostro ours with you, vostro yours with us, loro theirs, mirror our own record of the nostro.

The correct answer is B, UCP 600. The Uniform Customs and Practice for Documentary Credits is the International Chamber of Commerce code that banks worldwide incorporate into their letters of credit. Its current version is ICC Publication 600, in force from 1 July 2007, with thirty-nine articles covering issuance, examination of documents, discrepancies and the duties of each bank in the chain.

Option A, Incoterms 2020, is also an ICC publication, but it allocates cost, risk and the duty to insure between seller and buyer in a sale contract; it says nothing about how a bank must examine documents. Option C, URDG 758, is the ICC's set of uniform rules for demand guarantees, which applies to bank guarantees rather than to documentary credits. Option D, Basel III, is the Basel Committee's framework on bank capital, leverage and liquidity, a prudential standard with no role in trade documentation. Remember the pairing: credits under UCP 600, guarantees under URDG 758, delivery terms under Incoterms.

The correct answer is B, a back-to-back credit. Here the export credit received by the middleman or manufacturer is used as the security for a second, usually smaller, credit issued in favour of the supplier of the goods or the raw material. The bank that opens the second credit relies on the proceeds of the first, so the two credits are matched in shipment dates and documents, with the second expiring earlier.

Option A, a revolving credit, is reinstated to its original value after every drawing and is used for repeated shipments under a single contract, not for financing a supplier. Option C, a red clause credit, authorises the advising or paying bank to grant the beneficiary a pre-shipment advance at the applicant's risk; the money comes under the same credit, not under a new one. Option D, a standby letter of credit, is a guarantee in the shape of a credit, drawn on only if the applicant fails to perform. Do not confuse back-to-back with a transferable credit, where the first beneficiary passes on the same credit instead of having a new one opened.

The correct answer is C, State Bank of India. In the 2025 list State Bank of India sits in bucket 4 and must hold an extra Common Equity Tier 1 cushion of 0.80 per cent of its risk weighted assets, over and above the normal minimum and the capital conservation buffer. It is the only bank in a bucket higher than bucket 2, which reflects its size relative to the Indian economy.

Option A, HDFC Bank, is a D-SIB but sits in bucket 2 with a surcharge of 0.40 per cent. Option B, ICICI Bank, is in bucket 1 with the lowest surcharge of 0.20 per cent. Option D, Punjab National Bank, is a large public sector bank but has not been identified as a D-SIB, so it carries no surcharge. Buckets 3 and 5 are empty, which is itself a frequently asked detail.

The correct answer is B, eight or eleven. Under the standard ISO 9362 a BIC has four characters identifying the institution, two identifying the country on the ISO 3166 list, and two identifying the location, which makes eight. When a specific branch has to be named, three more characters are added, giving eleven. The eight-character form refers to the institution's primary office.

Option A is wrong on both counts and matches no part of the standard. Option C is wrong; no BIC runs to ten or twelve characters. Option D is wrong because the eleven-character form is optional, used only for a branch. Do not confuse the BIC with two other codes: the Indian Financial System Code, of eleven characters, which identifies a bank branch for domestic RTGS, NEFT and IMPS transfers, and the International Bank Account Number under ISO 13616, which identifies an account and is used in Europe but not in India.

The correct answer is C, 90 days from the complaint. The circular requires every bank to have a board-approved policy fixing its own resolution period, and caps that period at ninety days from the date the complaint is received. If the bank cannot complete the exercise within ninety days, it must still compensate the customer as the circular prescribes, so delay does not work in the bank's favour.

Option A, 30 days, is the period after which a complaint not resolved by the bank can be taken to the Reserve Bank's ombudsman, which is a different deadline and a common source of confusion. Option B, 60 days, does not appear in this framework. Option D, 180 days, is far longer than the rule allows. Pairing helps: ten working days for the provisional credit, ninety days for the final decision, and thirty days of bank inaction before the ombudsman can be approached.

The correct answer is B, packing credit. Packing credit is a pre-shipment advance given against a confirmed export order or a letter of credit, so that the exporter can procure raw material, manufacture, process and pack the consignment. It is liquidated out of the export proceeds or by converting it into post-shipment finance, and it may also be given in foreign currency as packing credit in foreign currency.

Option A, bill discounting, is post-shipment finance: the exporter has already shipped and the bank buys or discounts the export bill. Option C, buyer's credit, is a short-term loan arranged for an importer to pay its overseas supplier, so it finances imports rather than exports. Option D, forfaiting, is the outright purchase of medium-term export receivables without recourse to the exporter, again after shipment. Keep the timeline in mind: before shipment it is packing credit, after shipment it is negotiation, purchase or discounting of bills, factoring or forfaiting.

The correct answer is A, AAA. On the standardised long-term scale, AAA means the highest degree of safety for the timely servicing of interest and principal, followed by AA for high safety, A for adequate safety and BBB for moderate safety, and running down through BB, B and C to D for default. Option B is wrong because A1 plus is the top of the short-term scale, used for instruments maturing within a year, which runs A1 plus, A1, A2, A3, A4 and then D; mixing the two scales is the commonest error here. Option C is wrong because AA plus stands just above AA but still below AAA, since the plus and minus modifiers mark position within a category and are not used with AAA or D at all. Option D is wrong because BBB is only moderate safety, although BBB minus is the lowest investment grade.

The correct answer is A, MT 103. The MT 1 category covers customer payments, and MT 103 is the standard instruction by which a bank asks its correspondent to pay a named beneficiary a stated amount, carrying the remitter's and beneficiary's details and the charges instruction. It is the message behind almost every retail outward remittance.

Option B, MT 202, belongs to the MT 2 category of financial institution transfers and moves funds from one bank to another, often as the cover payment that accompanies an MT 103. Option C, MT 700, belongs to the MT 7 documentary credits and guarantees category and is the message by which a letter of credit is issued, with MT 760 used for a guarantee or standby credit. Option D, MT 940, is a statement message in the MT 9 cash management category. Learn the categories by their first digit; it answers a whole family of questions.

The correct answer is B. e-RUPI is a prepaid electronic voucher, delivered to the beneficiary as an SMS string or a QR code, which can be redeemed only by the named person and only for the named purpose, for example a vaccination or a diagnostic test. It is cashless and contactless and needs no bank account or internet connection at the beneficiary’s end. Option A is wrong because the Reserve Bank has approved no cryptocurrency; e-RUPI is a voucher and uses no blockchain. Option C is wrong because e-RUPI is not currency at all and predates the digital rupee pilots, which began in late 2022. Option D is wrong because e-RUPI is a prepaid voucher and not a credit instrument; NPCI’s card product is RuPay, which is a separate scheme.

The correct answer is C, 1982. The Export-Import Bank of India was established under an Act of Parliament passed in 1981 and commenced operations in 1982, taking over the international financing business of the Industrial Development Bank of India. It finances, facilitates and promotes India's foreign trade, extends buyer's credit and lines of credit to overseas governments and buyers, and supports project exports by Indian companies.

Option A, 1964, is the year associated with the Industrial Development Bank of India and with the Unit Trust of India, not with EXIM Bank. Option B, 1972, is a stray date often used as a distractor in banking papers. Option D, 1992, is the year of the Securities and Exchange Board of India Act and of the start of liberalisation-era reforms, and so looks plausible to a candidate who connects EXIM Bank with the opening of the economy. Pair the two trade institutions in your notes: ECGC from July 1957 for export credit insurance, EXIM Bank from 1982 for export finance.

The correct answer is A, seven working days. The rules require a reporting entity to furnish a suspicious transaction report to the Financial Intelligence Unit not later than seven working days from the date on which it is satisfied that the transaction is suspicious. There is no minimum value, the report covers attempted as well as completed transactions, and the bank must not tip off the customer that a report has been filed. Option B is wrong because thirty days is not the limit for this report; a delay of that length would defeat its purpose, which is to give intelligence while the money can still be traced. Option C is wrong because the fifteenth day of the following month is the due date for the monthly cash transaction report, not for a suspicious transaction report. Option D is wrong because ninety days has no place in these rules; the figure candidates may be recalling is the time limits in attachment and adjudication proceedings.

The correct answer is A, Special Rupee Vostro Accounts. Under the arrangement, an authorised dealer bank in India opens such an account for the correspondent bank of a partner country. Indian importers pay rupees into the account and Indian exporters are paid out of it, and the balance may be invested in Indian government securities. The aims are to cut dependence on hard currency, to save conversion cost and to keep trade flowing with countries facing payment difficulties.

Option B, an Exchange Earners Foreign Currency account, lets an Indian exporter retain part of its earnings in foreign currency instead of converting them. Option C, a Non-Resident External account, is a rupee account for a non-resident Indian, fully repatriable, meant for personal savings and not for trade settlement. Option D, a Resident Foreign Currency account, is for a returning Indian to hold foreign currency brought back. Only the first is a correspondent banking account used for settling trade.

The correct answer is A, 1977. The State Level Bankers' Committee was constituted in 1977 as the apex forum of a state, where all the commercial banks, the regional rural banks, the cooperative banks, the state government and the Reserve Bank meet to review credit flow and agree on the state's annual credit plan. One bank is designated the convenor bank for each state, its head chairs the meetings, and the committee meets quarterly. Option B is wrong because 1969 is the year the Lead Bank Scheme itself began; the state forum came eight years later. Option C is wrong because 1989 is the year the Service Area Approach was introduced at branch level. Option D is wrong because 2004 is the year the restrictive provisions of the Service Area Approach were withdrawn. For a Union Territory the matching body is the Union Territory Level Bankers' Committee.

The correct answer is B, the letter of undertaking. In March 2018 the Reserve Bank discontinued the issuance of letters of undertaking and letters of comfort for trade credit relating to imports into India. These instruments carried a bank's promise to repay an overseas lender, were not routed through the usual documentary discipline, and in the fraud had been issued over the SWIFT network without any entry in the bank's core banking system, so the exposure stayed invisible for years.

Option A, the letter of credit, and option C, the bank guarantee, remained permitted, and the Reserve Bank expressly said trade credit could continue to be raised against them. Option D, the standby letter of credit, is a form of guarantee and likewise continued to be available within the rules. The follow-up lesson examiners like is the supervisory one: banks were directed to integrate the SWIFT messaging system with their core banking systems so that no cross-border message could be sent without a matching entry in the books.

The correct answer is C, two hundred and fifty thousand US dollars. The Liberalised Remittance Scheme allows a resident individual, including a minor, to remit up to that amount in a financial year for any permitted current account purpose such as travel, education, medical treatment, gifts and maintenance of relatives, and for permitted capital account purposes such as buying property or shares abroad. The limit was raised to this figure in 2015.

Option A, twenty-five thousand dollars, was the limit when the scheme was introduced in 2004, so it is correct only historically. Option B, one hundred thousand dollars, was an intermediate limit, and the figure was also reduced to seventy-five thousand for a short period in 2013 before being raised again. Option D, one million dollars, is the limit under a separate facility, the remittance of assets by a non-resident Indian out of a Non-Resident Ordinary account or inherited property, in a financial year. The scheme does not permit remittances for lottery, margin trading or to countries identified as non-cooperative.

The correct answer is B, carriage and marine insurance up to the named port of destination. CIF stands for cost, insurance and freight: the seller pays the cost of the goods, contracts and pays for the freight to the named destination port, and takes out marine insurance for the buyer's benefit. Risk, however, passes when the goods are loaded on board at the port of shipment, which is the trap in the term.

Option A describes ex works, where the seller merely places the goods at the disposal of the buyer at its own premises and the buyer arranges everything thereafter. Option C describes delivered duty paid, the term that puts the maximum obligation on the seller, including clearing the goods for import and paying duty. Option D is not an Incoterm at all. Learn the ladder from least to most seller obligation: ex works, free on board, cost and freight, cost insurance and freight, delivered duty paid; and remember that CFR is CIF without the insurance.

The correct answer is A, the Structured Financial Messaging System. Developed by the Institute for Development and Research in Banking Technology at Hyderabad and built on the INFINET network of the banking sector, it carries the secure, standardised messages behind the Reserve Bank's Real Time Gross Settlement and National Electronic Funds Transfer, and is also used for inland letters of credit between Indian banks. It is in effect the domestic counterpart of SWIFT.

Option B, the National Automated Clearing House, is a bulk payment service of the National Payments Corporation of India for salaries, dividends, subsidies and recurring debits, not a messaging standard. Option C, the Cheque Truncation System, clears cheques by exchanging their electronic images instead of moving paper. Option D is a loose description and not the name of a system. The lesson to carry away is that SWIFT is for cross-border messages, while this system, RTGS, NEFT, IMPS and UPI are domestic.