Which account allows a non-resident Indian to keep a term deposit in a permitted foreign currency, so that there is no exchange risk for the depositor?
- A.NRE account
- B.NRO account
- C.FCNR (B) account
- D.Escrow account
Correct answer
Explanation
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.
Read the full article: Bank Accounts, Deposits and KYC Rules for Exams
Practice Questions
View allWhich type of bank account pays no interest to the holder but allows an overdraft facility and an unlimited number of transactions?
- A.Savings deposit account
- B.Current account
- C.Recurring deposit account
- D.Fixed deposit account
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A current account is meant for traders, firms and companies that need to receive and pay money many times a day.
Read the full explanation →The KYC norms that banks in India follow are framed mainly under which law?
- A.Banking Regulation Act, 1949
- B.Prevention of Money Laundering Act, 2002
- C.Negotiable Instruments Act, 1881
- D.Foreign Exchange Management Act, 1999
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Know Your Customer rules exist to stop the banking system being used to launder the proceeds of crime or to finance terrorism.
Read the full explanation →Which of the following is NOT an officially valid document for completing KYC at a bank?
- A.Passport
- B.PAN card
- C.Voter identity card issued by the Election Commission
- D.Driving licence
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The list of officially valid documents in the KYC rules is closed and contains the passport, the driving licence, proof of possession of an Aadhaar number, the voter identity card issued by the Election Commission, a job card issued under MGNREGA and signed by an officer of the state government…
Read the full explanation →What is the chief feature of a Basic Savings Bank Deposit Account?
- A.It pays a higher rate of interest than other savings accounts
- B.It requires no minimum balance to be kept
- C.It can be opened only by senior citizens
- D.It allows an unlimited overdraft
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The Basic Savings Bank Deposit Account replaced the earlier no-frills account as the vehicle of financial inclusion.
Read the full explanation →How often must KYC records of a high risk customer be updated under the Reserve Bank's KYC Direction?
- A.Once in two years
- B.Once in five years
- C.Once in eight years
- D.Once in ten years
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Banks classify customers as low, medium or high risk when the account is opened, on the basis of identity, social and financial standing and the nature of the expected business.
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