Banking & Financial Awareness Mixed Quiz: Set 7

The correct answer is B, National Bank for Agriculture and Rural Development. NABARD was set up in 1982 on the recommendation of the committee headed by B Sivaraman, and its head office is at Mumbai. It is the apex institution for rural credit: it refinances the loans given by cooperative banks and regional rural banks, supervises them, and funds rural infrastructure through the Rural Infrastructure Development Fund. It also promoted the self help group and bank linkage programme that took small credit to rural women.

Option A replaces bank with board, option C replaces it with bureau and changes agriculture to agrarian, and option D adds the word reform. All three are close enough to sound right to a candidate who has not read the full form. The word to hold on to is bank, because NABARD lends and refinances rather than merely advising.

The correct answer is D, 30 th December, 2016. Prime Minister Narendra Modi launched the BHIM app on 30 December 2016, a few weeks after the note ban of November 2016, to push people towards digital payment. BHIM stands for Bharat Interface for Money and is named after Dr B R Ambedkar, whose full name was Bhimrao Ramji Ambedkar. The app is built by the National Payments Corporation of India on the Unified Payments Interface, so money moves straight from one bank account to another using a UPI identifier or a mobile number, and it works in several Indian languages. A is wrong because 15 August 2016 saw no such launch. B is wrong because 31 October 2016 is before the note ban announcement. C is wrong because 26 January 2016 is Republic Day of that year and unconnected. Exam tip: BHIM, Bharat Interface for Money, NPCI, UPI, 30 December 2016.

The correct answer is B, Depositor Education and Awareness Fund. Under the Banking Regulation Act as amended, a bank must transfer to this fund, maintained by the Reserve Bank of India, any deposit that has not been operated or claimed for ten years. The money is used for education and awareness of depositors, but the right of the depositor is not lost: the depositor or the legal heir may claim the amount from the bank at any time afterwards, with interest, and the bank then recovers it from the fund.

Option A, the Consolidated Fund of India, is the government's main account into which its revenues flow and has no connection with unclaimed deposits. Option C, the National Investment Fund, holds the proceeds of disinvestment of public sector undertakings. Option D, the Financial Inclusion Fund, is maintained with NABARD for developmental work in unbanked areas, which makes it a plausible but wrong option.

The correct answer is D, Financial service to disadvantaged people. A microfinance institution exists to lend small sums to poor and low-income people who cannot offer the security an ordinary bank asks for. It gives tiny loans, takes small savings and sells simple insurance, usually working through self-help groups or joint liability groups in which the members stand guarantee for one another, so no collateral is needed. The loans are small, are repaid weekly or monthly, and are often used for a small shop, a sewing machine, cattle or seed. In India these bodies are registered with the Reserve Bank of India as NBFC-MFIs, and NABARD's SHG-Bank Linkage programme works on the same idea. A and B are wrong because government employees and Union ministers draw regular salaries and can borrow from ordinary banks. C is wrong because corporate borrowers are served by commercial banks and the capital market. Exam tip: microfinance means small collateral-free loans to the poor, through SHGs and NBFC-MFIs under the RBI.

The correct answer is B, Kisan Credit Card. The Kisan Credit Card scheme was introduced in 1998 on the recommendation of the R V Gupta Committee and is worked by commercial banks, regional rural banks and cooperative banks. It gives a farmer a single revolving limit for seeds, fertiliser, labour and other crop expenses, valid for several years with a yearly review, so that he need not apply afresh every season. The limit has since been extended to animal husbandry and fisheries, and short-term crop loans under it carry an interest subvention with a further rebate for prompt repayment.

Option A, Krishi Credit Card, uses the Hindi word for agriculture and is the closest trap, but the scheme is named after the farmer, the kisan. Options C and D both end in Corporation, which would make the name that of an institution rather than of a credit instrument, so neither can be right.

The correct answer is B, 16. A debit card carries a 16-digit card number printed on its front, and this is the number a shop or a website reads to route the payment. The digits are not random. The first six form the Bank Identification Number, which names the card network and the bank that issued the card; the next nine identify the customer's account with that bank; and the last one is a check digit worked out by the Luhn formula, so a mistyped number is caught at once. RuPay, Visa and Mastercard debit cards issued in India all follow this pattern, usually printed in four groups of four. A is wrong because 15 digits belong to American Express cards, which are charge and credit cards. C and D are wrong because 14 and 17 digits do not match the pattern used for debit cards. Exam tip: 16 digits, the first six the BIN, the last one a Luhn check digit, and the three-digit CVV on the back.

The correct answer is B, cheque. Section 6 of the Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand. In plain words it is a written order by an account holder, the drawer, telling the bank, the drawee, to pay a stated sum to the payee named on it, which is exactly what the question describes.

Option A, cash, is money itself and needs no instruction to anyone. Option C, a passbook, is only a record of the entries in an account, so it proves what has happened but orders nothing. Option D, currency, is the legal tender issued by the Reserve Bank and the Government of India, again not an instruction to pay. Only a cheque is an instrument carrying an order to a banker, and that is why it is a negotiable instrument under Section 13 of the Act.

The correct answer is B, Banking. The Basel Norms are international standards for banking supervision.

They are issued by the Basel Committee on Banking Supervision, which works under the Bank for International Settlements at Basel in Switzerland. Their purpose is to make sure a bank holds enough capital against the risks it takes, so that losses fall on its shareholders and not on depositors. Basel I of 1988 dealt with credit risk, Basel II of 2004 added market and operational risk along with supervision and disclosure, and Basel III, framed after the crisis of 2008, raised the quality of capital and brought in liquidity and leverage rules. In India the Reserve Bank applies them and asks for a capital to risk weighted assets ratio of nine per cent.

Options A, C and D are wrong because insurance is governed by IRDAI, and the share and commodity markets by SEBI.

Exam tip: Basel Committee, Basel, Switzerland; India's CRAR requirement is nine per cent.

The correct answer is C, SBI. YONO, short for You Only Need One, is the State Bank of India's digital banking app, launched in November 2017. Its YONO Cash feature lets a customer start a withdrawal on the phone, get a six-digit reference number, and then collect the cash from an ATM, a branch counter or a shop point by entering that number with a PIN, so no debit card is needed. YONO Cash Point extended the same cardless service to retail outlets, which helps in small towns where ATMs are few. Option A is wrong because Citi Bank's Indian retail business was later sold to Axis Bank and it ran no YONO service. Option B is wrong because UBS is a Swiss investment bank with no retail ATM network in India. Option D is wrong because HDFC Bank's own apps are PayZapp and MobileBanking, not YONO. Exam tip: YONO belongs to SBI; iMobile is ICICI, PayZapp is HDFC and BHIM is the NPCI app.

The correct answer is A. The Banking Ombudsman is a senior officer appointed by the Reserve Bank of India to hear and settle customer complaints about deficiency in banking service. The scheme was first brought in under Section 35A of the Banking Regulation Act, 1949, and the ombudsman decides complaints on matters such as delayed payment, wrongly levied charges, card and digital transaction disputes and refusal to accept small coins. A customer must first take the complaint to the bank and may approach the ombudsman when the bank does not reply in thirty days or the reply is unsatisfactory. Option B is wrong because private banks, foreign banks, regional rural banks and scheduled cooperative banks are covered too, not only public sector banks. Option C is wrong because the complainant is free to reject the award and go elsewhere; it binds the bank once accepted. Option D is wrong because the whole process is free of cost to the customer. Exam tip: the ombudsman is appointed by the RBI, complain to the bank first, and the service costs nothing.

The correct answer is D, Large amounts of loan. Microfinance means small loans to poor households that banks treat as too risky, so a large loan is the opposite of the idea. The Reserve Bank defines a microfinance loan as a collateral-free loan given to a household below a set annual income, and the whole model rests on small, frequent repayments rather than big sums. Option A is a real principle, because the borrower has no land or gold to pledge and the group's promise takes the place of security. Option B is a real principle: members of a joint liability group watch each other's repayment, and this peer pressure is why recovery rates stay high. Option C is a real principle, since self-help groups are built mainly around women, who save and repay more regularly and spend more on the family. NABARD's SHG-Bank Linkage Programme of 1992 carried this model across India. Exam tip: microfinance — small, collateral-free, group-guaranteed loans, mostly to women.

The correct answer is C, Promissory Note. Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as an instrument in writing, signed by the maker, containing an unconditional undertaking to pay a certain sum of money to or to the order of a certain person. The word that decides the question is undertaking, that is a promise: only two parties are involved, the maker who promises and the payee who receives. A currency note is left out of the definition even though the Reserve Bank promises to pay on it. Option B is wrong because a bill of exchange, under Section 5, carries an unconditional order to pay, not a promise, and has three parties: drawer, drawee and payee. Option A is wrong because a cheque, under Section 6, is only a bill of exchange drawn on a specified banker and payable on demand, so it too is an order. Option D is wrong because a hundi is a traditional instrument in a regional language, not defined by the Act. Exam tip: promise means promissory note, order means bill or cheque.

The correct answer is C, Rupees 5 lakh. The Deposit Insurance and Credit Guarantee Corporation is a wholly owned subsidiary of the Reserve Bank of India, and it insures the deposits held in banks. The cover was raised from one lakh rupees to five lakh rupees in 2020, and it applies for each depositor in each bank, taking the principal and the interest together. All commercial banks, including branches of foreign banks in India, local area banks, regional rural banks and cooperative banks, are covered, and the premium is paid by the bank, not by the depositor.

Option A, one lakh rupees, was the earlier limit and is the answer a candidate gives from an old book. Options B and D, two lakh and ten lakh rupees, are not limits under this scheme at all; two lakh rupees is instead the minimum amount for an RTGS transfer, which is why it appears here as a distractor.

The correct answer is B, Immediate Payment Service. IMPS is an interbank money transfer service run by the National Payments Corporation of India, launched in November 2010. Its great advantage is that it works round the clock, on holidays and at night, and the money reaches the beneficiary within seconds. A transfer can be made using the account number with the IFSC code, or using the mobile number with the MMID, and it can be started from mobile banking, internet banking, an ATM or a branch. NPCI, set up in 2008 as an umbrella body for retail payments, also runs UPI, RuPay, NACH, AePS and FASTag. Option A is wrong because the letter S stands for service, not sector. Option C is wrong for the same reason. Option D is wrong because the first word is immediate, not instant. Exam tip: NEFT and RTGS are run by the RBI, while IMPS and UPI are run by NPCI; RTGS is meant for amounts of two lakh rupees and above.

The correct answer is C, FCNR (B) account, the Foreign Currency Non-Resident Bank account. It is a term deposit held in a permitted foreign currency such as the US dollar, pound sterling, euro or yen, for a period of one to five years, and both principal and interest are repaid in that currency, so a change in the rupee rate does not affect the depositor. The exchange risk is carried by the bank.

Option A, the Non-Resident External account, is held in rupees; it is freely repatriable and the interest is exempt from income tax in India, but the depositor bears the exchange risk. Option B, the Non-Resident Ordinary account, is also in rupees and is meant for income earned in India such as rent, pension or dividend, with taxable interest and restricted repatriation. Option D, an escrow account, is a neutral account used to hold money until the conditions of a contract are met.

The correct answer is A, Punjab National Bank. The slogan The Name you can Bank Upon belongs to Punjab National Bank. PNB was set up in 1894 at Lahore and was the first Indian bank started wholly with Indian capital, with Lala Lajpat Rai among those behind it; its head office is now in New Delhi. Taglines like this are asked often because each large bank keeps one for years, and PNB has used this line through its branding. B is wrong because the State Bank of India uses The Banker to Every Indian, and earlier With you all the way. C is wrong because HDFC Bank uses We understand your world. D is wrong because Canara Bank uses Together We Can. Exam tip: pair the bank with its line and its founding year, PNB 1894 Lahore and The Name you can Bank Upon, SBI 1955 and The Banker to Every Indian.

The correct answer is C, the SAPAP model. The South Asia Poverty Alleviation Programme model is called the international model of self help group formation because it was taken up with the support of the United Nations Development Programme and followed the same design across South Asian countries, beginning in India in the districts of Andhra Pradesh. It builds a three-tier structure, the group of poor women at the bottom, a village organisation above it and a federation at the mandal level, with savings first and credit afterwards.

Option A, the CDF model, refers to the Cooperative Development Foundation work in Andhra Pradesh, which is a cooperative thrift model. Option B, the SEWA model, grew out of the Self Employed Women's Association of Ahmedabad and its own bank. Option D, DWCRA, the Development of Women and Children in Rural Areas, was a government programme of 1982 and is the domestic, not the international, model.

The correct answer is B, there are not sufficient funds in your account. NSF stands for not sufficient funds, and a bank writes it on the return memo when the balance in the drawer's account is less than the amount of the cheque. This is the ground that attracts Section 138 of the Negotiable Instruments Act, 1881, under which issuing such a cheque is an offence punishable with imprisonment up to two years, or a fine up to twice the amount, or both.

Option A describes a know your customer problem, which is dealt with separately and is not what NSF means. Option C, forgery, is returned with a remark about the signature differing or the instrument appearing altered, and material alteration is covered by Section 87. Option D is not a banking return reason at all. Only the shortage of balance is described by the letters NSF.

The correct answer is C, 2002. The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act was passed in 2002. It allows a secured creditor, after giving the borrower a notice of sixty days, to take possession of the mortgaged asset and sell it to recover the dues, without filing a suit in a civil court. It also created the legal ground for asset reconstruction companies, which buy bad loans from banks. Agricultural land is kept outside the reach of the Act.

Option A, 1993, is the year of the Recovery of Debts Due to Banks and Financial Institutions Act, which set up the Debt Recovery Tribunals. Option B, 1999, is not linked with any such recovery law. Option D, 2016, is the year of the Insolvency and Bankruptcy Code, which handles the resolution of a whole company rather than the sale of one secured asset. Papers often place 1993 and 2016 beside 2002 exactly to test this order.

The correct answer is A, CERSAI, the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. It keeps the Central KYC Records Registry, in which banks and other reporting entities file the KYC records of their customers with a unique KYC identifier. A customer whose record is already in the registry need not repeat the whole process when dealing with another bank, insurer or mutual fund, which saves both time and paper.

Option B, the National Payments Corporation of India, runs retail payment systems such as UPI, RuPay, NACH and the IMPS service. Option C, SEBI, regulates the securities market. Option D, IRDAI, regulates insurance. All three are regulators or system operators in the financial sector, which makes them plausible, but the KYC registry belongs to CERSAI, a company set up under the SARFAESI framework.