Banking Awareness: Expected Interview Questions for IBPS and Other Competitive Exams

1) As per the reports in various newspapers many private companies are trying to obtain the licence to launch a banking company in India. Which of the following organisation/agencies issue the licence for the same ?

1. Securities and Exchange Board of India (SEBI)
2. Indian Institute of Banking and Finance (IIBF)
3. Indian Bank's Association
4. Registrar of Companies
5. None of these

2) What are the cooperative banks at the village level known as ?

1. Central Cooperative Banks
2. Primary agricultural cooperative societies
3. Village cooperative banks
4. State cooperative banks
5. None of these

3) What is CGTMSE  ?

1. Central Government Fund Trust for Medium and Small Enterprises
2. Credit Guarantee Fund for Medium Size Enterprises
3. Central Government Transfer Fund for Multispeciality Micro Enterprises
4. Credit Guarantee Fund Trust for Micro and Small Enterprises
5. None of these

4) Generally, the minimum rate below which the banks do not lend is known as

1. floor rate
2. repo rate
3. highest rate
4. base rate
5. All of the above

5) Which of the following banks has acquired the "Centurion Bank of Punjab" ?

1. ICICI Bank
2. IDBI Bank
3. HDFC Bank
4. AXIS Bank
5. None of these

6) Which Bank became the State Bank of India in 1955 ?

1. General Bank of India
2. Bank of Hindustan
3. Imperial Bank of India
4. Federal Bank of India
5. None of these

7) SBI Act was passed in Parliament in

1. 1935
2. 1949
3. 1955
4. 1969
5. 1980

8) Which of the following is popular "Saving Bank" among the poor children ?

1. Core banking
2. Credit banking
3. Debit banking
4. Merchant banking
5. Piggy banking

9) Traveller's cheques are valid for

1. Three months
2. Six months
3. One year
4. No limit are valid till encashed
5. None of these

10) When was Ombuds Men Scheme first introduced ?

1. November 2006
2. October 1981
3. June 1995
4. January 1998
5. None of these

Banking Awareness: All about Cooperative Banks for Bank Exams and Interviews

Cooperative Banks

The State Cooperative Bank is a central institution at the State level which works as a final link in the chain between the small and widely scattered primary societies, on the one hand, and the money market, on the other. It balances the seasonal excess and deficiency of funds and equate the demand for and supply of capital. It takes-off the idle money in the slack season and supplies affiliated societies and Central Co-operative Banks with fluid resources during the busy season. It is the vertex of the pyramidal structure in a state for the provision of short and medium-term credit to agriculturists on co-operative basis. These are formed by joining together all districts central cooperative banks in a particular state. It collects funds by way of share capital, deposits from public, loan from commercial banks etc.

Objective and functions of State Cooperative Banks

The chief objectives of State Cooperative Bank are to coordinate the work of the Central Banks, and to link Cooperative Credit Societies with the general money market and the Reserve Bank of India. These banks work as real pivots of the Cooperative movement in the state. They act as initial source of credit for seasonal and urgent needs of their members.

Their main functions are:-

(1) They act as banker’s bank to the Central Cooperative Banks in the districts. These banks not only mobilise the financial resources needed by the societies, but they also deploy them properly among the various sectors of the movement.

(2) They coordinate their own policies with those of the cooperative movement and the government.

(3) They form a connecting link between the cooperative credit societies and the commercial money
market and the RBI.

(4) They formulate and execute uniform credit policies for the cooperative movement as a whole.

(5) They promote the wise of cooperation in general by granting subsidiaries to the Central Cooperative Banks for the development of cooperative activities.

(6) They act as a clearing house for capital i.e., money flows from, the Apex Banks to the Central Banks and from the Central Banks to the rural societies and from them to individual borrowers.

(7) They supervise, control and guide the activities of the Central Bank through regular inspections by their inspection staff and rectify the defects in their work. Thus, they act as their friend, philosopher and guide.

(8) They also perform general utility functions such as issuing drafts, cheques and letters of credit on various centres and thereby help remittance of funds.

(9) They collect and discount bills with the permission of the Registrar.

(10) In certain place they also provide safe deposit locker and facilities for safe custody of valuables.

(11) They help the state Governments in drawing up Cooperative development and other development plans and in their implementation.

Problems in the working of State Cooperative Banks

The State Cooperative Banks do suffer from the following problems:-

(i) Poor deposits mobilisation: These banks have not been successful in raising deposits as, even now, individual deposits from less than 25 per cent in many States.

(ii) Undesirable investment of funds: These banks are not followed the guide of RBI about the matter of investment of fund. Despite the advice of the RBI, a cautious policy is not being followed in the matter of investment of the funds which agriculture even now utilised for the purchase of shares in other cooperative institutions; or in making huge advances to the primary cooperative societies; and by way of loans to individuals.

(iii) Failure to assess genuineness of borrowing: The banks have failed in assessing the genuineness of the borrowings of the Central Cooperative Banks. This is evidenced from the fact that the credit limits of such banks had been fixed on the basis of their owned funds without taking into account their past performance; and the bank’s own financial position.

(iv) Ineffective supervision and inspection: Many of the Banks have not taken up this work in right way. Some of the banks have neither adequate nor separate staff for this work. Officers of these banks sometimes pay only ad-hoc and hurried visits.

(v) Book adjustment: Book adjustments are often made regarding repayment of loans. The State Cooperative Banks have failed to check the fictitious transactions of the Central cooperative Banks.

(vi) Increasing overdues: The overdues of the Banks have been showing a rising trend. This is due to the fact that these banks have not followed the prescribed loaning procedure.

(vii) They utilise their reserve funds as working capital.

Expected Bank Interview Questions for IBPS, SBI and Other Bank Interviews

Expected Bank Interview Questions

1. Why do you want joining banking sector?

Banking is one of the fastest growing sectors in India with more stable and high growth and more over providing wide range of career opportunities for graduates. So I want to take an opportunity to join in a bank.

2. What is the difference between Cheque and Demand Draft?

Cheque: Cheque is a negotiable instrument instructing a bank to pay a specific amount from a specific account held in the maker/depositor name with that Bank.

Demand Draft: A demand draft is an instrument used for effecting transfer of money. It is a negotiable instrument.

3. What is a Non-Banking Financial Company (NBFC)?

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares /stocks /bonds /debentures /securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire- urchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

4. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?

NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as given below:

• NBFC cannot accept demand deposits;
• NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself; 

Deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to epositors of NBFCs, unlike in case of banks.

5 . What is Private Banking?

Banking services offered to high net-worth individuals. Private banking institution assists the high net-worth individual in investing his/her money in exchange for commissions and fees. The term "private" refers to the customer service being rendered on a more personal basis.

6. What is BSBDA?

Under the guidelines issued on August 10, 2012 by RBI: Any individual, including poor or those from weaker section of the society, can open zero balance account in any bank. BSBDA guidelines are applicable to "all scheduled commercial banks in India, including foreign banks having branches in India". All the accounts opened earlier as 'no-frills' account should be renamed as BSBDA. Banks are required to convert the existing 'no-frills' accounts’ into 'Basic Savings Bank Deposit Accounts'. The 'Basic Savings Bank Deposit Account' should be considered as a normal banking service available to all customers, through branches . The aim of introducing 'Basic Savings Bank Deposit Account' is very much part of the efforts of RBI for furthering Financial Inclusion objectives.

7. What is BPS (Basis Points)?

BPS (Basis point) : - BPS is an acronym for basic points is used to indicate changes in rate of interest and other financial instrument.

1 BASIC POINT IS EQUAL TO 0.01%

So when we say that repo rate has been increased by 25 bps, it means that the rate has been increased by 0.25%

8. What is KYC?

The Reserve Bank of India (RBI) has advised banks to follow ‘KYC guidelines’, wherein certain personal information of the account-opening prospect or the customer is obtained. The objective of doing so is to enable the Bank to have positive identification of its customers. This is also in the interest of customers to safeguard their hard earned money. The KYC guidelines of RBI mandate banks to collect three proofs from their customers.

They are:

• Photograph
• Proof of identity
• Proof of address

9. What is Sub-prime crisis?

The current Subprime crisis is due to sub-prime lending. These are the loans given to the people having low credit rating.

10. What is Base Rate?

It is the minimum rate of interest that a bank is allowed to charge from its customers. Unless mandated by the government, RBI rule stipulates that no bank can offer loans at a rate lower than BR to any of its customers.

It is effective from, July 1, 2010. However, all existing loans, including home loans and car loans, will continue to be at the current rate. Only the new loans taken on or after July 1 and old loans being renewed after this date will be linked to BR.

Banking Awareness: Cheque and Types of Cheques for Bank Tests and Interviews

Cheque and Types of Cheques

Cheque

It is a bill of exchange dromer on a specified srowee and expressed to see payable on demand.

Dromer: Person who has an account in the bank and who drames a cheque for making payment.
Srowee: A drance is person on whom the cheque is drawen.

EX.:- Cheque is issued of ABC Bank, than 7 ABC bank is the dromee

Payee: A Payee is the person to whom the amount stated in the cheque is payable.


Types of Cheques

• Order Cheque : A cheque which is payable to a particular person or his order is called an order cheque.

• Bearer Cheque : A cheque which is payable to a person whosoever bears, is called bearer cheque.

• Blank Cheque : A cheque on which the drawer puts his signature and leaves all other columns blank is called a blank cheque.

• Stale Cheque : The cheque which is more than three months old is a stale cheque.

• Multilated Cheque : If a cheque is torn into two or more pieces, it is termed as mutilated cheque.

• Post Dated Cheque : If a cheque bears a date later than the date of issue, it is termed as post dated cheque.

• Open Cheque : A cheque which has not been crossed is called an open cheque. Even if a cheque is crossed and subsequently the drawer has cancelled the crossing at the request of the payee and affixes his full signature with the words “crossing cancelled pay cash”, it becomes an open cheque.

• Crossed Cheque : A cheque which carries too parallel transverse lines across the face of the cheque with or without the words “I and co”, is said to be crossed.

• Gift Cheques : Gift cheques are used for offering presentations on occasions like birthday, weddings and such other situations. It is available in various denominations.

• Traveller’s Cheques : It is an instrument issued by a bank for remittance of money from one place to another.

Banking Awareness: All about Reserve Bank of India (RBI) for Coming IBPS Exams and Interviews

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is the nation’s central bank. Since 1935, RBI began operations, and stood at the centre of India’s financial system, with a fundamental commitment to maintaining the nation’s monetary and financial stability.

     From ensuring stability of interest and exchange rates to providing liquidity and an adequate supply of currency and credit for the real sector; from ensuring bank penetration and safety of depositors’ funds to promoting and developing financial institutions and markets, and maintaining the stability of the financial system through continued macro-financial surveillance, the Reserve Bank plays a crucial role in the economy. Decisions adopted by RBI touch the daily life of all Indians and help chart the country’s current and future economic and financial course.

     The origin of the Reserve Bank can be traced to 1926, when the Royal Commission on Indian Currency and Finance—also known as the Hilton-Young Commission— recommended the creation of a central bank to separate the control of currency and credit from the government and to augment banking facilities throughout the country. The Reserve Bank of India Act of 1934 established the Reserve Bank as the banker to the central government and set in motion a series of actions culminating in the start of operations in 1935. Since then, the Reserve Bank’s role and functions have undergone numerous changes—as the nature of the Indian economy has changed.

     Today’s RBI bears some resemblance to the original institution, but the mission has expanded along with the deepened, broadened and increasingly globalised economy. Over the years, RBI’s specific roles and functions have evolved. However, there have been certain constants, such as the integrity and professionalism with which the Reserve Bank discharges its mandate.

RBI at a Glance

• Managed by Central Board of Directors
• India’s monetary authority
• Supervisor of financial system
• Issuer of currency
• Manager of foreign exchange reserves
• Banker and debt manager to government
• Supervisor of payment system
• Banker to banks
• Maintaining financial stability
• Developmental functions
• Research, data and knowledge sharing

Official Directors

•  1 Governor
• 4 Deputy Governors at a maximum

Non-official Directors

• 4 Directors – nominated by the Central Government to represent each local board
• 10 Directors nominated by the Central Government with expertise in various segments of the
• economy
• 1 representative of the Central Government

Holding of Meetings of the Board

• meetings – at a minimum – each year
• 1 meeting – at a minimum – each quarter

Important Banking Awareness Links:

• Functioning of RBI and Rates Determined by RBI 
• Departments in RBI and Hierarchy of Central Board of Memebers
• Organisation and Management of RBI

Banking Awareness: History of Banking in India for Banking and Other Competitive Exams

History of Banking in India

Globally, the story of banking has much in common, as it evolved with the money lenders accepting deposits and issuing receipts in their place. Banking was fairly varied and catered to the credit needs of the trade, commerce, agriculture as well as individuals in the economy.


      The pre-independence period was largely characterised by the existence of private banks organised as joint stock companies. Most banks were small and had private shareholding of the closely held variety. They were largely localised and many of them failed.


     The period from 1967 to 1991 was characterised by major development, viz., social control on banks in 1967 and nationalisation of 14 banks in 1969 and 6 more in 1980. The period beginning from the early 1990's witnessed the transformation of the banking sector as a result of financial sector reforms that were introduced as a part of structural reforms initiated in 1991.

Early Phase of Indian Banks, from 1786 to 1969:

The first bank in India, the General Bank of India, was set-up in 1786. Bank of Hindustan and Bengal Bank followed. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called them Presidency banks. These three banks were amalgamated in 1920 and the Imperial Bank of India, a bank of private shareholders, mostly Europeans was established.

     Alahabad Bank was established, exclusively by Indians, in 1865. Punjab National Bank was set-up in 1894 with headquarters in Lahore.Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. The Reserve Bank of India came in 1935.

     The growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1,100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with the Banking Companies Act, 1949, which was later changed to the Banking Regulation Act, 1949 as per amending Act of 1965 (Act No. 23 of 1965). The Reserve Bank of India (RBI) was vested with extensive powers for the supervision of banking in India as the Central banking authority. During those days, the general public had lesser confidence in banks. As an aftermath, deposit mobilization was slow. Moreover, the savings bank facility provided by the Postal department was comparatively safer, and funds were largely given to traders.

For More Banking Awareness Topics 

Banking Awareness: Banking System of India for Bank Tests

Banking Awareness Banking System of India

Meaning of Banking:

A Bank is a financial institution that provides banking and other financial services to their customers. A bank is generally understood as an institution which provides Fundamental Banking Services such as accepting deposits and providing loans.

The following functions of the banks are as follows:

• To provide the security to the savings of customers
• To control the supply of money and credit
• To encourage public confidence in the working of the financial system, increase savings speedily and efficiently.
• To avoid focus of financial powers in the hands of a few individual and institutions.
• To set equal norms and conditions(i.e., rate interest, period of lending etc) to all types of customers.

Indian Companies (Amendment) Act, 1936:

The Indian Companies Act that was passed in 1913 introduced the institution of private companies in corporate sector in India. But the Act of 1913 did not provide the peculiar environment for Indian commerce, hence to remove these deficiencies, the Indian Companies (Amendment) Act was passed in 1936.

The Amendment Act, 1936 introduced various provisions relating to functioning of directors, guaranteeing payment of provident fund to employees etc. Further in October 1942, Companies Act was amended so that any company which uses world "Bank", "Banking" or "Banker" shall be deemed to be a banking company.

Banking Regulation Act, 1949:

The Banking Regulation Act, enacted in 1949, has been a milestone in the history of banking in India. This act provides a framework for regulation and supervision of commercial banking activity.

Reserve Bank of India:

Bank of India is the Central Bank of our country. On the recommendation Hilton Young Commission, it was established on 1st April, 1935 and in 1949 it was nationalised.

In terms of the preamble to the Reserve Bank of India Act 1934, " The main functions of the bank are to regulate the issuing of bank notes and keeping the reserve with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.

Banking Awareness: Banking Awareness Practice Paper Set 16

Banking Awareness Practice Paper

1) Dirham is the currency of

1. Japan
2. Russia
3. Kuwait
4. Pakistan
5. UAE

2) Which of the following is one of the core functions of the Reserve Bank of India ?

1. To act as Tax collector of the Govt of India
2. Work as Banker to the Banks
3. Help in finalization of the Union Budget
4. Participate in annual meetings of the various financial institutess world wide
5. None of these

3) Which of the following tools is used frequently by the RBI to control credit and monetary situations of the markets in the country ?

1. Cash Reserve Ratio (CRR)
2. Real Time Gross Settlement (RTGS)
3. Balance of Trade
4. Forward Rate Agreements
5. Electronic Clearing Service

4) The National Social Security Fund (NSSF) launched with a corpus of Rs. 1000 crore will help which of the following groups of society ?

1. Bank Employees
2. Central and State Government Employees
3. Workers of the unorganized sector
4. War widows
5. Women employees engaged in textile industry

5) What is the full form of the term "PDS" which is a channel of distribution of food grains and other essentials to poor people on subsidized rates ?

1. Public Distribution System
2. Potential Development System
3. Profitable Distribution Source
4. Public Development Syndication
5. Public Distribution Stores

6) The 12th plan papers are sent to "NDC" for approval, was the news in various newspapers recently. This means the plan was sent to_______

1. New Democratic Council
2. National Development Council
3. New Democratic Committee
4. National Democratic Council
5. New Department Committee

7) Which of the following is the currency of Myanmar ?

1. Dinar
   
2. Kyat
3. Pesso
4. Euro
5. Dollar

8) First share market in India was established in which of the following cities ?

1. Kanpur
2. Chennai
3. Jaipur
4. Mumbai
5. None of these

9) Which of the following is NOT decided by the Finance Minister while presenting Union Budget every year ?

1. Rate of Income Tax
2. Expenditure on Defence Services
3. Relief packages to various sections of the society
4. Repo and Reverse Repo 
5. Revenue expected from various sources

10) Which of the following is NOT an agricultural commodity ?

1. Mango
2. Cumin
3. Sulphur
4. Tomato
5. Garlic

Banking Awareness: Banking Awareness Practice Paper for Coming Competitive Exams

Banking Awareness Practice Paper

1) What is the full form of "NSE" the term we see very frequently in newspapers ?

1. New Service Exchange
2. New Stock Evaluation
3. National Stock Exchange
4. National Service Emporium
5. Net Stock Equity

2) The Head Quarters of the World Trade Organisation (WTO) are located in :

1. Geneva
2. London
3. New York
4. Washington DC
5. Tokyo

3) Which of the following is the name of the currency of a country ?

1. Angola
2. Chad
3. Malta
4. Euro
5. Gabon

4) Currency notes of which  of the following denominations are not in circulation in India ?

1. Rs. 20/-
2. Rs 50/-
3. Rs 500/-
4. Rs 1,000/-
5. Rs 20,000/-

5) All banks in India get major policy decisions/ directives/ guidelines related to their day to day operations from :

1. Ministry of Home Affairs, Govt of India
2. Securities & Exchange Board of India (SEBI)
3. Reserve Bank of India (RBI)
4. All Indian Bank Employees Union
5. Foreign Exchange Dealers' Association of India

6) Banks have installed ATM's at various locations in almost all the cities/ towns in India. What does the letter "T" denote in the name "ATM" as used above ?

1. Total
2. Terminal
3. Terminus
4. Transfer
5. Teller

7) Coins of which of the following denominations are in circulation in India ?

1. Rs 5/-
2. Rs 500/-
3. Rs 50/-
4. Rs 100/-
5. Rs 20/-

8) Which of the following is called yellow metal and we read about it almost every day in the newspaper ?

1. Copper
2. Gold
3. Silver
4. Platinum
5. Zinc

9) Which term is not used in Economics ?

1. Deflation
2. Barter System
3. Pulse Rate
4. Density of Population
5. Monetary Policy

10) Which scheme launched by the Govt of India allows lakhs of poor people to open a Bank Account ?

1. Swabhiman
2. Swavalamban
3. Saral
4. Sahaj
5. Bharat Nirman

Banking Awareness: Banking Awareness Practice Paper for Bank, SSC, UPSC and Other Competitive Exams

1) What is the full form of the term ASBA ?

1. Allotment Supported by Blocked Amount
2. Application Supported by Bank Amount
3. Allotment Supported by Bank Account
4. Application Supported by Blocked Amount
5. Allotment and Social Banking Amount

2) Excise duty is a tax levied on which of the following ?

1. Production of goods
2. Purchase of goods
3. Export of goods
4. Movement of goods beyond municipal limits
5. Sale of goods

3) The erstwhile UTI Bank is presently known as 

1. ING Vasya Bank
2. Yes Bank
3. Indus Ind Bank
4. Axis Bank
5. IDBI

4) The term "Deficit Financing" means the Government borrows money from the 

1. IMF
2. Local bodies
3. RBI
4. Large corporates
5. Public at Large

5) "Carbon credit" is concerned with which one of these internationally sensitive issues ?

1. Deforestation
2. Contrast farming
3. Rural infrastructure
4. Diamond trading
5. Protection of environment

6) Ms Christine Lagarde is holding which of the following positions at present ?

1. Chief of Asian Development Bank
2. Chief of International Monetary Fund
3. Chancellor of Germany
4. Chief of Morgan Stanley
5. Chief of World Banks

7) Regional Rural Banks:

1. have limited area of operation and access to refinance from NABARD
2. are required to lend only to weaker sections
3. are mandated to do only narrow banking
4. can only extend agricultural loans
5. have unrestricted area of operations

8) Which of the following is NOT a Banking or Finance Company ?

1. Barclay
2. Lufthansa
3. BNP Paribas
4. American Express
5. HSBC

9) Review and revision of the monetary and credit policy by which of the following organizations/agencies put an impact on lending and deposit rates of all the banks in India ?

1. National Bank for Agriculture and Rural Development
2. Reserve Bank of India
3. Securities and Exchange Board of India
4. Ministry of Corporation Affairs
5. None of these

10) Which of the following is the part of the name of  a public Sector Bank of India ?

1. Jindal
2. Gokhale
3. Jaipuria
4. TATA
5. Dena

Banking Awareness: Creation of Money by Banking System for Bank Test Preparation

Creation of Money by Banking System

We can now discuss how the banking system of country can "Create" money.

    Banks create money by creating deposits, There are two kinds of deposits, actual deposits and created deposits. When a man puts a certain sum of money into his account, we call it an actual deposit. When a bank gives a loan to a person, an account is opened in his name and he is credited with the amount of the loan. Suppose for example that X obtains a loans of Rs. 5000. The bank will open an account in his name with Rs. 5000 to his credit. X can draw cheques on this account. This is a "Created" deposit. [A loan may of course be given in other ways also, eg., by paying out the cash immediately. Usually, however, loans appear in the form of created deposits as shown above.

    It is sometimes said the every loan creates a deposit. In the example given above, X borrows Rs. 5000. If he takes the entire money out in the form of cash immediately, there is no deposit in the lending bank. But X will use the money for some purpose. Suppose that he pays it to Y from whom he has purchased goods. Y will put the money in some bank or the men to whom Y pays the money will do so. Hence, if in the country concerned, banking habits are well developed the money lent out by a bank will find its way into some deposit account in the banking system. We can therefore say that every loan creates a deposit.

    It is now possible to explain how the banking system of a country can create money. It is a well known fact that depositors do not withdraw the whole of their money at a time. If a bank has total deposit of Rs. 1 crore, only about 10% of it will be withdrawn on a particular day. In the mean time other deposits will come. Hence, the bank can provide for all withdrawals if it keeps about 10% of the total deposits in the form of cash. The remainder of the deposits will not be withdrawn and can be lent out to other [ The percentage of deposits, which ensures safety, differs from country to country and from time to time. In some countries it is 16%. The bankers must be a good judge of the habits of his customers.] The percentage of deposits which a bank keeps in the form of cash is called the cash-reserve.

     Let us suppose that a bank, called the "P" Bank, receive a cash deposit of Rs. 1000. Following the usual banking practice the P Bank will keep 10% of the money (ie., Rs 100) in hand and lend out the remainder (RS. 900). The money lent out will in due course reach some bank or banks. Lets us suppose that the whole of it goes to "Q" bank. This bank will now keep 10% of Rs. 900 (ie., Rs. 90) in hand and lend out the remainder (RS. 810). This money, Rs. 810, will now be deposited in some other bank, which is let us suppose, the "R" bank will thereupon keep 10% of Rs.810 (ie., Rs. 81) in hand and lend out the remainder (RS. 729). The loans and deposits will go on until the final deposit becomes too small. 

Important Links:

• Banking Awareness: Methods of Managing Paper Money
• Banking Awareness: Federal Finance System in India 
• Practice Paper: Expected Banking Awareness Questions for Upcoming Bank Tests

Banking Awareness Practice Paper for Coming SBI Associates, UPSC, SSC

Banking Awareness Practice Paper Based on Last 2 Months Current Affairs 

1) Which country on August 2014 unveiled plans to issue world's first digital currency ?

1. Russia
2. China
3. Ecuador
4. Australia

2) The military group Boko Haram declared Islamic Caliphate in Gwoza town of

1. Angola
2. Congo
3. Nigeria
4. Chile

3) Select the correct statement in the light of the annual report of the Reserve Bank of India released on August 2014.

1. Risks to medium-term inflation target of 6% by January 2016 exist
2. Fiscal deficit target of 3% of GDP by 2016-17 feasible and reasonable
3. CAD to widen from 2013-14 levels but can be sustained
4. All the above

4) Which of the following public sector banks launched personalised saving accounts for those below 18 years of age namely "Pehli Udaan" and "Pehla Kadam" ?

1. State Bank of India
2. Punjab National Bank
3. Bank of India
4. Central Bank of India

5) As per the report of Reserve Bank of India released. India's current account deficit narrowed sharply to _______in the first quarter of 2014-15 ?

1. $7.5 billion
2. $7.8 billion
3. $8.0 billion
4. $8.5 billion

6) Select the correct statement about the annual report released by the Reserve Bank of India on August 2014.

1. The fiscal deficit target if 4.1 percent of GDP for the year 2014-15 is realisable
2. Indicators such as auto-mobile sales, railway freight traffic, cargo handled at ports and foreign tourist arrivals are pointing to wards some recovery
3. Financial Ministry has taken on a tougher target for tax buoyancy of 1.5 percent
4. All the above

7) The Reserve Bank of India on September 2014 extended the currency risk-hedging facility for foreign portfolio investors to the coupon receipts of their investments in debt securities due in the next

1. 10 Months
2. 11 months
3. 12 Months
4. 13 Months

8) The Cabinet Committee on Economic Affairs (CCEA) gave its approval on September 2014 to the sale of stakes in 

1. Coal India Limited
2. National Hydroelectric Power Corporation
3. ONGC
4. All of the Above

9) According to the data released by the Commerce and Industry Ministry core sector growth in July 2014 was 

1. 2.7 %
2. 3%
3. 4.5%
4. 5%

10) Who among the following was appointed as Executive Director in World Bank on September 2014?

1. R. Sinha
2. Subhash Chandra Garg
3. S. Gopalan
4. M.D. Singh

11) National Thermal Power Corporation Limited (NTPC) paid a total divided at the rate of 57.5 % of its paid-up capital for the financial year 2013-14, amount to

1. Rs. 4459.85 crore
2. Rs. 5233.34 crore
3. Rs. 4741.16 crore
4. Rs. 5657.44 crore

12) Which of the following statement is correct about the new rules announced by the Reserve Bank of India to regulate financing by the Non-Banking Finance Companies (NBFCs) against shares held as collateral ?

1. NBFCs cannot give loans exceeding 50% of value of shares pledged
2. For loans more than Rs. 5 lakh, shares with restricted volatility should be colateral
3. NBFCs with asset size more than Rs. 100 crore should inform online to bourses on shares pledged
4. All the above

13) The Union Government of India approved the ?Integrated Coffee Development Project for developing the Coffee sector in the 12th Five Year Plan. The worth of the project is

1. Rs. 950 Crore
2. Rs. 750 Crore
3. Rs. 900 Crore
4. Rs. 1000 Crore

14) According to a report published in august 2014 the cumulative grid-interactive renewable energy installed capacity in India stood on July 2014 at

1. 31,333 MW
2. 31,133 MW
3. 32,424 MW
4. 35,445 MW

15) Which of the following banks announced that it would issue Employees Stock Option Plan (ESOP) linked to performance parameter ?

1. Bank of India
2. Punjab National Bank
3. State Bank of India
4. Bank of Baroda

Important Links:

• Expected Questions from Recent Sports Events
• Computer & Marketing Knowledge Practice Paper
• Current Affairs Practice Paper Based on Recent World Affairs

Expected Banking Awareness MCQ's for Upcoming Competitive Exams

Expected Banking Awareness MCQ's for Upcoming Competitive Exams

1) Goods and Services Tax (GST) Panel recently decided to lower the threshold limit for imposing GST on entities to how much rupees from the proposed 25 lakhs rupees ?

1. 20 lakhs
2. 15 lakhs
3. 10 lakhs
4. 8 lakhs

2) EPFO has recently decided to retain the interest rate on provident fund at which of the following percent ?

1. 8.25%
2. 8.5%
3. 8.75%
4. 9%

3) The Board of Control for Cricket in India (BCCI) August 2014 awarded the title sponsorship for the international series and domestic tournaments to be played in India during the 2014-15 season to which if the following mobile phone companies for an approximate fee of Rs. 18 crore ?

1. Intex
2. Micromax
3. Samsung
4. Nokia

4) Which of the following banks recently declared Vijay Mallya and three other directors of Kingfisher Airlines (KFA) as wilful defaulters ?

1. SBI
2. United Bank of India
3. PNB
4. UCO Bank

5) Which of the following public sector banks recently launched "Family Suarksha Bachat Khata"?

1. SBI
2. PNB
3. UCO Bank
4. Bank of Baroda

6) Which of the following multinational IT consultants obtained the contract to build an IT platform for crowd funding to raise funds for Prime Minister Narendra Modi's dream project Status of Unity ?

1. IBM
2. Accenture
3. Capgemini
4. Mindtree

7) Union Government has recently Approved how much percent hike in Dearness Allowance (DA) to Central Government employees and Dearness Relief (DR) to the pensioners ?

1. 4%
2. 5%
3. 7%
4. 8%

8) Union Finance Minister has recently constituted a panel to assess the amount of unclaimed deposits in the PPF accounts and Post Office savings schemes. Who of the following is the head of the panel ?

1. Bimal Jalan
2. MBN Rao
3. Aditya Puri
4. HR Khan

9) The Reserve Bank of India (RBI) has capped the maximum age at how many years for a Managing Director of CEO's or whole time director in a private bank ?

1. 65
2. 68
3. 69
4. 70

10) Which of the following IT services companies recently launched "Saral Rozgar" cards in West Bengal with the aim to create a common pool of jobseekers and job providers with about 4,000 job openings?

1. TCS
2. Infosys
3. Tech Mahindra
4. Wipro

11) Which of the following public-sector banks recently sought permission of the RBI to launch contact-less debit cards which would enable customers to carry out some transactions without entering the pin number ?

1. PNB
2. SBI
3. ICICI
4. AXIS

12) State Bank of India (SBI) in tie-up with MasterCard recently launched its first multi-currency international debit card to allow consumers to use a single card to pay in multiple currencies. At present, this card will enable customers to load how many international currencies ?

1. 4
2. 6
3. 8
4. 10

13) Which of the following public sector banks recently launched "Pehla Kdam and Pehli Udaan", the two new savings bank products for children ?

1. SBI
2. PNB
3. ICICI
4. Bank of Baroda

14) Which of the following banks has introduced a cardless cash withdrawal facility which allows customers to transfer money from their account to anyone in India with a mobile number ?

1. AXIS
2. ICICI
3. HDFC
4. SBI

15) Computer processor chip maker Intel has tied up with which of the following states' government to launch student innovation programme ?

1. Andhra Pradesh
2. Karnataka
3. Gujarat
4. Maharashtra 

16) Wildlife Trust of India (WTI) and Tata Chemicals Limited (TCL) have signed an MOU to set up the country's first "Coral Garden" in which of the following states ?

1. Gujarat
2. Odisha
3. Maharashtra
4. Goa

17) The WPI-based inflation during August 2014 came down to the lowest levels during last 5 years. What was the inflation level recorded during the month, as disclosed in the data released by the Union Govt ?

1. 3.5%
2. 3.6%
3. 3.74%
4. 4.2%

18) The Reserve Bank of India (RBI) has recently closed down six Urban Cooperative Banks (UCBs), the conduct of whom was found suspicious. What was the main charge against these UCBs ?

1. Being indulged in money laundering activities
2. Tax Evasion
3. Being indulged in Terrorist Financing activities
4. Casino regulations under the Bank Secrecy Act

19) Tata Consultancy Services (TCS) has recently opened the first All Women BPO Unit in which of the following countries ?

1. Vietnam
2. Thailand
3. Singapore
4. Saudi Arabia

20) Which of the Following states in India has recently decided to impose one rupee cess on purchase of every packet of cigarette and bottle of liquor in order to fund public transport in the state ?

1. Karnataka
2. Gujarat
3. Delhi
4. Rajasthan

Important Links:

• Banking Awareness: About Small Industries Development Bank (SIDBI)
• General Studies Practice Paper Based on Indian History
• Computer Terminology Notes (By Alphabet)

Practice Paper Based on Mathematics for Upcoming Competitive Exams

Maths Practice Paper for Upcoming Competitive Exams

1) The Average age of man and his son is 28 years. Six years hence the ratio of their ages becomes 12:5 . What is the present age of his son ?

1. 12 years
2. 14 years
3. 15 years
4. None of these

2) The average of the middle two rational numbers if 4/7, 1/3, 2/5, 5/9 are arranged in ascending order is :

1. 86/90
2. 43/45
3. 43/90
4. None of these

3) If 8 men or 12 women can do a piece of work in 25 days. In how many days can the same work be done by 6 men and 11 women ?

1. 10 days
2. 12 days
3. 15 days
4. None of these

4) Rs. 782 is divided into three parts proportional to the fractions 1/2, 2/3 and 3/4. Then the first part is :

1. Rs. 204
2. Rs. 248
3. Rs. 224
4. Rs. 246

5) Sum of two numbers is equal to sum of square of 11 and cube of 9. Large number is 5² less than square of 25. What is the value of the sum of twice of 24% of the smaller number and half of the larger number ?

1. 360
2. 540
3. 420
4. None of these

6) A well has to be dug that is to be 22.5 m deep and of diameter 7m. Find the cost of plastering the inner curved surface at Rs. 4 per sq metre:

1. Rs. 1690
2. Rs. 1875
3. Rs. 1980
4. None of these

7) A metal cube of edge 12 cm is melted and formed into three smaller cubes. If the edges of two smaller cubes are 6 cm and 8 cm, find the edge of the third smaller cube.

1. 8 cm
2. 10 cm
3. 12 cm
4. None of these

8) A sum of money at simple interest amounts to Rs. 815 in 3 years and to Rs. 854 in 4 years.

The sum is :

1. Rs. 650
2. Rs. 690
3. Rs. 698
4. Rs. 700

9) A policeman sees a chain snatcher at a distance of 50 m. He starts chasing the chain snatcher who is running with a speed of 4 m/s, while the policeman chasing him with a speed of 6 m/s. Find the distance covered by the chain snatcher when he is caught by the policeman.

1. 50 m
2. 100 m
3. 75 m
4. None of these

10) A cistern is normally filled in 8 hours; but takes two hours more to fill because of leak in its bottom. If the cistern is full, the leak will make it empty in :

1. 18 hours
2. 28 hours
3. 40 hours
4. None of these

11) The average of four positive integers is 73.5. The highest integer is 108 and the lowest integer is 29. The difference between the remaining two integers is 15. Which of the following is the smaller of the remaining two integers ?

1. 71
2. 86
3. 73
4. 85

12) If the difference between Simple interest and compound interest on certain sum of money for 3 years at 10% is Rs 15.50. find the sum is :

1. Rs. 100
2. Rs. 500
3. Rs. 1500
4. Rs. 2000

13) A publishers sells copies of books to a retail dealer at Rs 5/ per copy but allows 25 copies to be counted as 24. If the retailer sells each of the 25 copies at RS. 6, his profit % is :

1. 20%
2. 24%
3. 25%
4. 40%

14) If the radii of two concentric circles are 15 cm and 13 cm respectively, the area of the circulating ring in sq cm is

1. 176
2. 178
3. 180
4. 200

15) A farmer travelled a distance of 61 km in 9 hours. He travelled partly on foot @ 4 km/hr and partly on bicycle @ 9 km/hr. The distance travelled on foot is:

1. 14 km
2. 15 km
3. 16 km
4. 17 km

16) A rectangle is having 15 cm as its length and 150 cm as its area. Its area is increased to 1 (1/3) times the original area by increasing only its length. Its new perimeter is

1. 60 cm
2. 70 cm
3. 90 cm
4. 80 cm

17) A radio is sold at a gain of 16%. If it had been sold for rs 20 more, 20% would have been gained. The cost price of ratio is :

1. Rs. 350
2. RS 400
3. Rs. 500
4. Rs. 600

18) Two cyclists start from the same place in opposite direction, one goes towards North at 18 km/hr. and the other goes towards South at 20 km/hr. What time will they take to be 47.5 km a part ?

1. 2 (1/4) hours
2. 1 (1/4) hours
3. 23 (1/4) hours
4. None of these

19) The length and breadth of square are increased by 40% and 30% respectively. The area of resulting rectangle exceeds the area of square is;

1. 42 %
2. 62%
3. 82%
4. 92%

20) A car travels a distance of 840 km at a uniform speed. If the speed of the car is 10 km/hr more, it takes two hours less to cover the same distance. The original speed of the car (in kmph)was:

1. 45
2. 50
3. 60
4. 75

Important Links:

• Baking Awareness Practice Papers for Upcoming Bank Tests
• General Awareness Practice Paper for UPSC, SSC and other Exams
• Computer Knowledge Practice Paper for Competitive Exams

Banking Awareness: Profitability of Banks in India and Banking Reforms for IBPS PO, and SBI PO Exams

Profitability of Banks in India

     The RBI's annual report on trade and progress of Banking in India gives the profitability of the different types of commercial banks in the country. In case of the SBI group and other public sector banks (Nationalised banks) profitability has been quite low. The profitability of Indian private sector banks has been much better than the nationalised banks, whereas in case of foreign banks it has always been excellent.

      The low profitability and poor financial condition of public sector banks can be justified by referring to their deep commitment to social obligations imposed by the government. These obligatory causes for low profitability of public sector banks include 

• Opening branches in rural areas
• Setting up and subsidising regional rural banks
• Financing IRDP and other poverty alleviation programmes at concessional rates of interest
• Priority sector lending to the extent of 40 % of the credit etc.,

     

These causes hold good to a large extent but truth is that private banks are making more profit than the public sector banks.

Causes for Low Profitability of Public Sector Banks:

According to the Narasimhan Committee the causes are:

( I ) Declining Interest Income of Banks:

It is the result of high proportion of the total deposits being impounded in CRR and SLR and earning relatively low rate of interest. Further, a high proportion of bank deposits has to be given to priority sectors under social banking with quite low rates of interest. At least 1% of the total deposits are to be made available to weaker sections of the society at a mere 4% of interest rate. Also large proportion of the loans are disbursed to agricultural and industry and recovery rates of these loans is far from satisfactory.

( II ) Rising Costs of Operations:

Since the revenue has not been rising and the banks face the problem of rising costs of operations, uneconomic branch expansion, heavy recruitment of employees, trade union activity, low productivity, heavy salary bill, etc.

Basic Weaknesses of Public Sector ( Nationalised ) Banks:

• The nationalised banks are over regulated and to some extend are ungoverned.
• They have failed to sustain  desired credit pattern and fill in the credit gaps in the different sectors of the Indian economy.
• They have age old and outmoded procedures and practices which fall to meet the demands of modern fast paced banking system.
• Bureaucratisation has made deep inroads into the banking system.
• There is undue and unwarranted political interference at the highest echelons of the banking structure.
• Large amount of overdue's, a significant portion of which is with agricultural sector.
• Banks did not have any machinery to see that finances from public institutions are in fact going into productive use and not in speculative business as exposed by the securities scams of 1992-93.
• Lower quality of customer service. In a nutshell, there is a yawning gap between promise made and performance given to the customers.

Banking Reforms 

Narasimhan Committee Recommendations:

The main recommendations of Narasimhan Committee (1991)On the Financial (Banking) System are:

( i ) Statutory Liquidity Ratio (SLR) be brought down in a phased manner to 25 percent (the minimum prescribed under the law) over a period of about five year to give banks more funds to carry business and to curtail easy and captive-finance.

( ii ) The RBI should reduce Cash Reserve Ratio (CRR) from its present high level.

( iii ) Directed Credit Programme i.e., credit allocation under government direction, not by commercial judgement of banks under a free market competitive system, should be phased out. The priority sector should be scaled down from present high level of 40 percent of aggregate credit to 10 percent. Also the priority sector should be redefined.

( iv ) Interest rates to be deregulated to reflect emerging market conditions.

( v ) Banks whose operations have been profitable is given permission to raise fresh capital from the public through the capital market.

( vi ) Balance sheets of banks and financial institutions are made more transparent.

( vii ) Set up special tribunals to help banks recover their debt speedily.

(viii) Changes be introduced in the bank structure 3-4 large banks with international character, 8- 10 national banks with branches throughout the country, local banks confined to specific region of the country, rural banks confined to rural areas.

( ix ) Greater emphasis is laid on internal audit and internal inspection in the banks.

( x ) Government should indicate that there would be no further nationalisation of banks, the new banks in the private sector should be welcome subject to normal requirements of the RBI, branch licensing should be abolished and policy towards foreign banks should be more liberal.

( xi ) Quality of control over the banking system by the RBI and the Banking Division or the Ministry of Finance should be ended and the RBI should be made primary agency for regulation of banking system.

( xii ) A new financial institution called the Assets Reconstruction Fund (ARF). Should be established which would take over from banks and financial institutions a portion of their bad and doubtful debts at a discount (based on realisable value of assets), and subsequently follow up on the recovery of the dues owed to them from the primary borrowers.

Important Links:

• General Awareness About Print Media and News Agencies in India
• Reasoning Practice Paper for Coming Bank Tests
• Marketing and Business Knowledge Notes for Upcoming Competitive Exams