1. when a cheque is wrongfully dishonored by the …ibskayamkulam.in/onlineexam/file/2013-09... ·...

1. When a cheque is wrongfully dishonored by the paying bank, it is liable to the :a) Drawer

b) Payee

c) Holder

d) None of these

2. In which of the following cases the paying banker is liable to third parties other than thedrawer?

a) When the bank is wound up before making payment to the holder in which case the holderbecomes the creditor to the bank

b) When the banker pays a cheque disregarding the crossing in which case the bank is liable totrue owner of the cheque

c) Both a and b

d) None of the above

3. Is the bank liable for damages for dishonoring a cheque wrongfully?

a) Yes

b) No

c) None of these

4. The paying banker gets protection under section 85 of NI act, provided the :

a) Payment is a payment in due course

b) Payment is made as per the apparent tenor of the instrument

c) Payment is made in good faith and without negligence

d) All the above

e) None of the above

5. A draws a cheque favoring B for Rs. 1000/- . B alters the amount to Rs. 10,000/- with achemical which is not visible. The cheque is presented for payment. The banker pays thecheque in due course despite the alteration as it is not visible. Whether the banker canclaim protection under NI Act?

a) Yes u/s 85 of NI Act

b) Yes u/s 89 of NI Act

c) Yes u/s 131 of NI Act

6. A cheque was presented for payment and the bank paid the cheque. Later on the drawer ofthe cheque refused to accept the debit as his signature has been forged. What is the legalposition of the bank?

a) The bank will get protection as the signature of the drawer was very cleverly forged

b) The bank will not get protection however cleverly the signature of the drawer is forged sinceforgery is a nullity

c) None of the above

7. Mr. A and Mr .B were maintaining a Savings account at your branch to be operated jointly.A cheque for Rs.10, 000/- purported to be issued by A and B was presented for payment by MrX and the cheque was paid by the bank. A and B refused to accept the debit and sued thebank stating signature of B was forged. What is the legal position of the bank?

a) The bank will not get protection as one of the signature is forged and there was no mandatefrom the account holders

b) The bank will get protection as one of the signature appearing on the cheque is the genuinesignature of Mr. A


8. Mr .A was maintaining Savings account with your branch. He regularly uses to send hisservant Mr. B to the bank along with a cheque for getting payment. One day Mr. B came to thebank and produced a cheque for Rs. 1000/- for payment and the same was paid by the bank.Mr. A called on the bank and demanded refund of the amount paid to Mr. B sating that B hadsurreptitiously removed a duly signed blank cheque from his table drawer and had enchasedthe cheque. What is the position of the banker?

a) The bank will not get protection as the payment was not a payment in due course as per NIActb) The bank will get protection provided they get back the money paid to B

c) The bank will get protection provided they prove that it was a payment in due course as thesignature is the genuine signature of the drawer


9. A cheque was presented for payment through clearing and the same was paid by thepaying bank. Later on the paying bank found that the drawer’s signature was forged oneand demanded refund of money from the collecting bank and the payee of the cheque. Thecollection bank and the payee refused to return the money on the ground that they were notaware of the forgery and it was received in good faith and in the normal course of business.What is the position of the paying banker?

a) The paying banker can recover the amount either from the collecting banker or from thepayee as it was paid in clearing and it is collecting banker’s responsibility

b) The paying banker cannot recover the amount as the drawer’s signature was forged andforgery is a nullity and the collecting banker or the payee is not responsible for the forgery ofthe cheque


10. Can the banker transfer funds from one account to another account of the same customerfor payment of a cheque when the balance in one account is not sufficient to honor the cheque?

a) Yes

b) No

c) None of these

11. Can the paying banker disclose the insufficiency of balance in the account of the customerto the presenter of a cheque?

a) Yes

b) No

c) None of these

12. Can the banker pay a cheque when the balance in the account is just sufficient to pay thatcheque?

a) The cheque has to be returned

b) The cheque can be paid and service charges are recovered for not maintaining sufficientbalance

c) The cheque can be paid after obtaining confirmation from the drawer

d) None of these

13. When a cheque drawn payable to “ Cash or Order” is presented for payment, the bankershould:

a) Pay the cheque to the presenter

b) Pay the cheque to the bearer of the instrument

c) Pay the cheque only to the drawer

d) None of these

14. Is the bank liable to compensate the customer for dishonoring a cheque on account of awrong debit to the drawer’s account which has resulted in insufficient balance?

a) Yes

b) No as the banker had not noticed the wrong debit at the time of payment of cheque

c) Yes only if the customer demands compensation

d) None of these

15. Payment in due course is defined in Section ––––– of NI Act.

a) 10

b) 9

c) 18

d) None of these

16. A cheque was presented for payment without bearing a date. The banker should:

a) Pay the cheque by putting the date

b) Return the cheque unpaid

c) None of these

17. A cheque bearing an impossible date say 31/6/2010 was presented for payment. Whichof the following is correct?

a) If the cheque is presented for payment on or after 30/6/2010, it should be paid.

b) Return the cheque with remarks “Cheque contains impossible date”

c) Pay the cheque after obtaining confirmation from the payee


18. Can the banker pay a cheque bearing a date prior to the date of opening of the account?

a) It cannot be paid as there was no privity of contract on the date of issue of the cheque

b) Pay the cheques as the date of presentation is the decisive factor and not the date of issue


19. Can the banker pay a cheque signed by the Power Attorney holder bearing a date prior tothe date of issue of Power of Attorney?

a) Yes it can be paid

b) No it cannot be paid

c) None of these

20. A cheque becomes stale after six months from the date of issue. It is provided in:

a) NI Act

b) RBI Act

c) Not provided anywhere. It is only an established practice

d) None of these

21. Can the banker pay a post-dated cheque?

a) Yes provided sufficient balance is there in the account

b) No as it will not be payment in due course

c) None of these


22. A cheque was presented by a minor for payment. The banker should:

a) Pay the cheque if it is otherwise in order

b) Return the cheques as the minor cannot receive the payment

c) Pay the cheque only after getting conformation from the drawer


23. A cheque is presented for payment by an insolvent payee. Can the banker pay thecheque?

a) The cheque can be paid as the insolvent is competent to receive payment

b) The cheque cannot be paid as the true owner is the Official Receiver

c) The cheque can be paid after drawer’s confirmation


24. Can the bank make cash payment of a cheque drawn in favor of company/Govt.Department?

a) Yes provided proper discharge is given by the authorized signatory

b) No as it will not be payment in due course

c) None of these

25. A cheque is issued payable to X or Y or order. The cheque is presented for payment byX. Can the banker pay the cheque?

a) It can be paid only when both X and Y come together for payment

b) It cannot be paid as the cheques cannot be issued payable to more than one person

c) It can be paid if the cheque is otherwise in order

d) None of these

Key

1.a 2.c 3.a 4.d 5.b 6.b 7.a 8.c 9.b 10.b 11.b 12.b 13.c

14.a 15.a 16.b 17.a 18.b 19.a 20.c 21.b 22.a 23.b 24.b 25.c

1. When a cheque where the payee’s name is omitted to be written, is presented forpayment. The banker should:

a) Not pay the cheque and return

b) Pay the cheque by asking the payee to write the name and after proper identification of thepayee


2. A cheque payable to X without mentioning the words order or bearer is presented forpayment. What the banker should do?

a) Return the cheque requesting the drawer to specify the words order or bearer

b) Pay the cheque treating it as an order cheque and after proper identification of the payee

c) Pay the cheque treating it as a bearer cheque


3. A cheque (in which the amount in words and figures differs) is presented for payment.What is the legal position of the banker?

a) Pay the cheque with the amount stated in words

b) Pay the cheque with the amount stated in figures

c) Return the cheque with the remarks “amount in words and figures differs”

Note: As per banking practice, such cheques are returned unpaid.

Reason : “ The amount in Words and figured differs”

4. A cheque is presented for payment where the amount is written only in figures and not inwords. The banker should:

a) Pay the cheque after writing the amount in words

b) Return the cheque with the reason “amount should be written in words”


5. A cheque is presented for payment. At the same time the banker comes to know that thedrawer has been arrested and kept under trial. Can the banker pay the cheque?

a) The cheque can be paid as the drawer’s contractual obligation is not taken away

b) The cheque cannot be paid as the drawer’s contractual liberty is taken away


6. Banker has paid a cheque containing the forged signature of the drawer. What is the legalposition of the banker?

a) Banker will not get statutory protection as there is no mandate to pay a forged cheque

b) Banker will get statutory protection if the signature is very cleverly forged


7. Can the paying banker claim statutory protection for payment of chemically alteredcheques where the alteration is not visible to the naked eye?

a) Yes under Section 85 of NI Act

b) Yes under Section 89 NI Act

c) Yes under Section 131 of NI Act

d) None of these

8. A crossed cheque held by a payee was stolen and was received by an account holderin good faith and for value, deposits the same for collection in his bank and his bankercollects it from the paying bank. What is the liability of collecting bank?

a) Collecting bank will not get protection since it is a stolen cheque

b) Collecting bank will not get protection since it is a crossed cheque even if stolen

c) Collecting bank will not get protection only if the drawer confirms payment


9. Can the collecting banker get protection for collection a crossed draft?

a) Yes as per S.131A of NI Act

b) No since S.131 is applicable to cheques

c) Yes provided the purchaser confirms the payment

d) None of these

10. In which of the following circumstances the collecting banker can claim protection underS.131 of NI Act?

a) The collecting banker should have collected the cheque in good faith

b) There is no negligence on the part of the collecting banker in collecting cheque

c) The cheque should be crossed generally or specifically to himself

d) The cheque is collected for a customer

e) All the above

f) None of the above

11. Why introduction is necessary for opening an account for a costumer?a) Because if there is negligence while opening, the bank may not get statutoryprotection

b) Because the customer may commit a fraud at later date

c) Because to protect the customer from being cheated by others


12. Why banks always send a letter of thanks to the introducer after opening an account?a) To ensure that address given on the account opening form is correct

b) To ensure that the introducer had actually introduced the account holder

c) As a preventive measure against frauds and to ensure that the banker is not held negligentat a later date

d) All the above

e) b and c


13. Mr. A was maintaining a Savings account with you. The account was operated by Mr. B ashis Power of Attorney holder. One day MR.B deposited a cheque drawn in favor of Mr. A to hispersonal account and the bank collected the same for credit of Mr B’s account. Mr. A raised anobjection and demanded refund of the amount. What is the position of the banker? a) The bank is not liable as Mr. B was the POA holder of MR.A

b) The bank is liable as it was negligent in collecting a cheque favoring Mr. A to accountof MR.B


14. Mr. X was the manager of Jai Industries Ltd and was signing the cheques as per pro hisemployer i.e., the company. He drew some cheques payable to himself which he collected intohis private account. Later on the company demanded refund of the amount from the bank.What is the position of the bank?

a) The bank is liable as it was negligent in collection such cheques without makingnecessary enquires with the company

b) The bank is not liable as Mr. X was acting as an agent of the company and it is internalaffairs of the company


15. When a cheque is collected by a banker for his customer, the banker acts as ---- ofthe customer.a) Agent

b) PoA holder

c) Holder in due course

d) None of these

16. When a cheque which was purchased by the banker from the customer is sent forrealization, the banker will assume the position of:a) Agent

b) Holder for value

c) PoA holder

d) None of these

17. When a banker collects a cheque for a customer who has no title, he will be held liable for:

a) Fraud

b) Cheating

c) Conversion

d) None of these

18. If a banker wrongly collects for a customer, he will be liable to :

a) His customer on whose behalf the cheque was collected

b) The true owner of the cheque

c) None of these

19. Section 131 of NI Act offers protection to the collection banker only when he is acting as:

a) Agent for the holder

b) Holder for value

c) Power of Attorney holder

d) None of these

20. In which of the following cases the collecting banker will be liable for conversion?

a) Collection of a cheque payable to the principal of a college to his personal a/c

b) Collection of cheque payable to a trust account to the personal account of the trustee

c) Collection of cheque payable to a company and endorsed by the director in his favor , to thepersonal account to the director

d) Collection of cheque payable to a firm , to the personal account of the partner

e) All the above


21. In which of the following cases the collecting banker will be held negligent for collecting acheque?

a) Collecting an account payee cheque to the third party

b) Collecting a cheque specially crossed to another bank

c) Collecting a cheque crossed “Not negotiable” without verifying the title of the customer

d) All the above


22. A banker collects a cheque for a person who has opened an account with that cheque andnot in cash. Later on it was proved that the person had no good title over the cheque. What isthe legal position of the banker?

a) The banker will get protection as there is no rule that the account should be with cash

b) The banker will be held negligent as protection is available only when the cheque iscollected for a properly introduced customer


23. An open cheque was deposited by a customer with his banker for collection and thebanker crossed the cheque himself before collection it. Whether the banker gets statutoryprotection for crossing a cheque?

a) Yes since the cheque can be crossed by anybody

b) No since the crossing of a cheque by the banker is not deemed as a crossing


24. Statutory protection under Section 131of NI Act is available to the banker only when hecollects:

a) Cheques

b) Drafts

c) Bills of Exchange

d) Promissory Notes

e) All dividend and interest warrants

f) All the above

g) a ,b and e

h) None of these

25. A cheque was deposited by Mr. X with his banker for collection. The cheque was presentedin clearing after keeping the cheque pending for 10days. In the mean-time the drawer of thecheque is dead. The cheque was returned by the paying banker. What is the legal position ofthe collecting banker?

a) The collecting banker gets protection as it has been duly presented for payment

b) The collecting banker will not get protection as there has been delay in presenting thecheque for payment


Key

1.b 2.b 3.a 4.b 5.a 6.a 7.b 8.b 9.a 10.e 11.a 12.e 13.b

14.a 15.a 16.b 17.c 18.b 19.a 20.e 21.d 22.b 23.b 24.g 25.b

1. The collecting banker always puts his crossing stamp across the face of the cheque assoon it is received for collection. The reason for this is to:

a) Get statutory protection under Section 131 of NI Act

b) To protect the bank’s interest against fraud by persons who may surreptitiously remove thecheque and realize the proceeds.

c) To protect the interest to the customer against loss


2. A cheque was collected by X bank through Y bank. What is the status of Y bank withregard to collection of cheque:

a) Agent

b) Sub-agent

c) Substituted

d) None of these

3. When a person promise (promisor) to save the other person (promise) from loss onaccount the conduct of the promisor himself or by the conduct of any other person is called:

a) Contract Guarantee

b) Contract of Indemnity

c) None of these

4. In a contract of indemnity, the person who makes the promise and the person to whom thepromise is made is called:

a) Indemnifier and Indemnified

b) Promisor and Promisee

c) Guarantor and Principal debtor

d) None of these

5. A contract of insurance is a contract of:

a) Guarantee

b) Indemnity

c) Either a or b

d) None of these

6. The rights of the indemnity holder are:

a) Claim all damages from the promisor which he may be liable to pay in any suit

b) Claim all costs from the promisor which he might be compelled to pay in any suit

c) All of the above


7. In a contract of guarantee the person who makes a promise to make good the loss toanother person on account of a default by some other person is called:

a) Guarantor

b) Principal debtor

c) Beneficiary

d) None of these

8. How many parties are there in a contract of guarantee?

a) 2

b) 3

c) 4

d) None of these

9. In a contract of guarantee, the liability of the guarantor (surety) is –––– and that of principaldebtor is ––––

a) Secondary , Primary

b) Primary , Secondary

c) None of these

10. When does the guarantor’s liability crystallizes?

a) When there is a failure on the part of the Beneficiary

b) When there is a failure on the part of the Principal debtor

c) Either a or b

d) None of these

11. While issuing a duplicate draft, the bank always obtains:

a) Guarantee letter

b) Indemnity letter

c) None of these

12. Which of the following absolutely necessary under the contract of indemnity?

a) Loss to the promise for making the promisor liable

b) Loss to the promisor for making the promisee liable


13. Contract to indemnity covers only losses caused by:

a) The conduct of the promisor himself

b) Conduct of any other person

c) Both a and b

d) None of these

14. The contract of indemnity can be:

a) In express terms

b) In implied terms

c) Either a or b

d) None of these

15. If the consideration of an indemnity agreement is for unlawful purpose, can it be enforcedin law:

a) Yes

b) No

c) None of these

16. When a guarantee extends to a series of transactions, it is called as:

a) Specific guarantee

b) Continuing guarantee

c) None of these

17. Is it absolutely necessary for any consideration to be given to the guarantor in contract ofguarantee?

a) Not necessary

b) Necessary

c) None of these

18. Mr. A, minor, stood as guarantor for a loan given to Mr. B. The loan goes bad. Can thebank recover the loan either from A or B?

a) The loan can be recovered from B only

b) The loan can be recovered from A only

c) The loan can be recovered either from A or from B

d) The loan cannot be recovered from any of them as it is avoid contract


19. A, B and C are the partners in a firm. The firm is ready to stand as a guarantor for a loan tobe sanctioned to Mr. X. The guarantee agreement has to be signed by:

a) Only A

b) Any one among A,B and C

c) All of them

d) None of these

20. A limited company wants stand as a guarantor for a loan. In this case, it can be acceptedby the bank provided:

a) The Memorandum of Association gives express power to the company to sign theguarantee

b) The Articles of association gives express powers to the directors to execute theguarantee

c) The company passes a Board resolution for signing guarantee by authorized persons

d) All the above permit the company to sign the guarantee

e) None of these

21. When a continuing guarantee is revoked by the guarantor, his liability is :

a) Extinguished for all the existing and future transactions

b) determined and is liable for the balance in the loan account as on that date

c) None of these

22. Which of the following statements are true in respect of a Bank Guarantee?

a) It is given by the bank to a third party called beneficiary

b) It is given by the bank on behalf of its customer called principal debtor

c) It is a promise to pay a certain sum of money to the beneficiary

d) The amount is payable by the bank to the beneficiary in the event of failure on the part of itscustomer to fulfill a contractual obligation

e) All the above


23. What are the types of guarantees normally issued by a bank?

a) Financial guarantee

b) Performance guarantee

c) a or b

d) None of these

24. In which of the following situations a financial guarantee is issued by a bank?

a) It is issued in lieu of the customer being required to deposit cash deposit or earnest money

b) It is issued assuring the performance of a contract by the customer

c) Either a or b

d) None of these

25. What do you understand by a Performance Guarantee?

a) It is issued by the bank to a third party (beneficiary) no behalf of its customer

b) The bank assures the third party (beneficiary) that the customer will perform the contractentered into by him

c) The contract will be performed by the customer as per the condition stipulated in thecontract failing which the bank will compensate the beneficiary up to the amount mentioned inthe guarantee

d) All of the above


Key

1.b 2.c 3.b 4.a 5.b 6.c 7.a 8.b 9.a 10.b 11.b 12.a 13.c

14.c 15.b 16.b 17.a 18.a 19.c 20.d 21.b 22.e 23.c 24.a 25.d

1. When does the bank pays the amount to the beneficiary in the case of a performanceguarantee?

a) When the beneficiary produces a proof of default on the part of our customer

b) A mere demand from the beneficiary that there has been a default by the bank’s customer


2. What do you understand by a Deferred Payment Guarantee?

a) It is a financial guarantee where the banker guarantees the payment of installments by thecustomer to the beneficiary

b) This type of guarantee is issued when the goods or machineries are purchased oncredit and the payment is spread over a period of time as per the contract

c) Both a and b


3. What are statutory Guarantees and when they are issued?

a) These are guarantees as per statutes

b) These are guarantees issued by banks favoring Courts and other statutory authoritiesguaranteeing that the customer will honour his commitments imposed under law

c) If the customer fails to honor such commitments , the bank will compensate to the extent ofthe amount guaranteed

d) All the above


4. What is the maximum period up to which a guarantee can be issued by the bank?

a) It is issued normally up to one year or less

b) In extraordinary cases a guarantee can be issued up to a maximum period of 10 years

c) a or b


5. Which of the following types of guarantees are not issued by banks?

a) Guarantees in favour of financial institutions assuring repayment of their loans

b) Guarantees favouring HUDCO assuring repayment of its loan given to State sponsoredbodies like housing corporation

c) a and b


6. What do you understand by Limitation Clause in a Guarantee?

a) This clause in the guarantee restricts the claim amount

b) This clause in the guarantee restricts the guarantee period

c) This clause in the guarantee restricts the claim period

d) All the above


7. Whether the banks issue a guarantee without the limitation clause?

a) Normally the banks do not issue a guarantee without a limitation clause

b) In exceptional cases the banks may issue such guarantee without a limitation clause like tocustoms authorities but with 100% cash margin

c) a and b


8. Your bank had issued a guarantee for Rs. 50,000/- to State Electricity Board on behalf ofyour customer New India Company Ltd which was being wound up as the earnest moneydeposit. Later on the Electricity Board demanded payment under the guarantee stating that thecompany had not fulfilled the contractual obligation. The bank refused to pay the amount of theguarantee stating the company is under liquidation .What is the position of ht banker?

a) The bank is not liable as the company is under liquidation

b) The bank is liable as there is a default on the part of the company


9. Can the banker who has knowledge of fraud refuse payment of the amount guaranteed?

a) Yes

b) No

c) None of these

10. What is the limitation period of a counter guarantee as per Law of Limitation Act?

a) It is 3 years from the date of execution of the counter guarantee by the customer

b) It is 3 years from the date of issue of the original guarantee

c) It is 3 years from the date of invocation of counter guarantee


11. What do you understand by claim period in a guarantee?

a) It is the validity period of the guarantee within which the beneficiary has to demand paymentfrom the bank

b) It is the period slightly longer than the validity period to enable the beneficiary to make aclaim on the bank in case of default on the part of our customer


12. Are the banks permitted to issue guarantees with unlimited claim period?

a) Such guarantees should not be issued by the banks

b) When the guarantee issued is silent on the claim period, the beneficiary can prefer aclaim within

3 years of the default

c) When the beneficiary is a government department such claim period is 30 years

d) All the above


13. Is a bank guarantee a contingent liability for the bank?

a) Yes

b) No

c) None of these

14. What is a bid bond guarantee?

a) It is issued when an exporter wants to participate in a global tender

b) It is issued in lieu of earnest money to be deposited by the exporter along with the tender forthe bid

c) Both a and b


15. What is Retention money guarantee?

a) It is issued for releasing retention money against the bank guarantee

b) It is issued in lieu of earnest money

c) Both A and B

d) None of these

16. Can the guarantee period be extended?

a) Yes at the specific request of the customer on whose behalf it is issued

b) Yes at the specific request of the beneficiary in whose favour it is issued


17. Can the bank cancel a guarantee issued by it?

a) Yes even without production of the original guarantee

b) Yes only against submission of the original guarantee

c) None of these

18. Which of the following statements are true in respect of a Letter of Credit?

a) It is an undertaking given by the bank to the beneficiary (seller)

b) On behalf of their customer (buyer) to make payment to the beneficiary

c) Provided the beneficiary fulfills the terms and conditions of the credit

d) All the above


19. How many parties are there in a Letter of Credit transaction?

a) Applicant (buyer)

b) Beneficiary (seller)

c) Issuing bank

d) Advising bank

e) Negotiating bank

f) a, b, c, d

g) None of the above

20. What is the role of the Advising bank?

a) Advising bank will advise the L/C to the beneficiary and undertakes a commitment to makepayment subject to fulfillment of terms and conditions

b) Advising bank will advise the L/C to the beneficiary but does not undertake to make paymentto the beneficiary

c) Advising bank will only confirm the authenticity of the L/C document but does notundertake a commitment to pay the beneficiary

d) All of the above

e) b and c


21. Which of the following statements refers to an Irrevocable L/C?

a) An Irrevocable L/C is one where the beneficiary cannot revoke the L/C without the consentof the applicant (buyer)

b) An Irrevocable L/C is one where the applicant (buyer) cannot amend the terms andconditions of the L/C without the consent of the beneficiary


22. What is the role of the confirming bank?

a) Confirming bank undertakes a definite commitment to make payment to the beneficiarysubject to fulfillment of the terms and conditions of the L/C

b) Confirming bank undertakes to confirm the authenticity of the L/C before advising the L/C tothe beneficiary

c) Confirming bank is the bank which confirms the issuance of the L/C on behalf of the L/Cissuing bank


23. Can the advising bank and the confirming bank be one and the same?

a) No they are different

b) Yes both are same

c) None of these

24. What is the role of Reimbursing Bank?

a) It is bank which makes payments to the beneficiary

b) It is the bank which confirms the L/C at the instance of L/C issuing bank

c) It is the bank which is appointed by the issuing bank to make reimbursement to thenegotiating bank or paying bank or confirming bank as the case may be.


25. Which of the following statements refers to an Acceptance Credit?

a) In a acceptance credit, the beneficiary accept the documents

b) In a acceptance credit usance bills will be drawn which will be honoured on their due date

c) In an acceptance credit the seller can either wait till the date of maturity to receive money orcan discount the bills and obtain immediate payment

d) b and c


Key

1.b 2.c 3.d 4.c 5.c 6.d 7.c 8.b 9.a 10.c 11.b 12.d 13.a

14.c 15.a 16.a 17.b 18.d 19.f 20.c 21.b 22.a 23.b 24.d 25.d

1. A Revocable Credit is one:

a) In which the applicant (buyer) can amend or cancel the original terms and conditions ofthe L/C without the consent of the beneficiary

b) In which the applicant can amend the terms and conditions of the L/C only with the consentof the beneficiary


2. Which of the following is a Confirmed L/C?

a) A confirmed L/C is one in which the Advising bank adds its confirmation therebyundertakes a commitment to make payment to the beneficiary

b) A confirmed L/C is one in which the Issuing bank undertakes commitment to makepayment to the beneficiary


3. What is with recourse or Without recourse L/C?

a) In a with recourse L/C the liability of the beneficiary gets extinguished only after the bill is

paid by the drawee (buyer)

b) In a without recourse L/C the beneficiary can exclude his liability by adding to the bill thewords ‘without recourse’ which means the right or recourse to the drawer is not available

c) a and b


4. Identity the Transferable Credit from the following:

a) A Transferable credit is one under which the beneficiary can transfer his rights to theapplicant (buyer)

b) A Transferable credit is one under which the beneficiary can transfer his rights to third parties(second beneficiaries)

c) A Transferable credit can be transferred by the beneficiary to third parties only once

d) b and c


5. What is a Back-to-Back Credit?

a) In a back-to back credit the applicant in whose favour an LC is issued uses the same toobtain another credit from his bank in favour of the supplier

b) In a back – to -back credit the applicant in whose favor an LC is opened will use the same toobtain another credit from advising bank in favor of the supplier


6. Identity the Red Clause Credit among the following:

a) In a Red Clause Credit the important terms and conditions are typed in red ink

b) In a Red Clause Credit there is provision to make an advance payment to thebeneficiary for meeting the cost of production (pre-shipment advance)


7. Identity the Green Clause Credit among the following:

a) It is an extended version of Red Clause Credit

Here the beneficiary is entitled for pre-shipment advance not only to meet the cost of productionbut also warehouse expenses

b) It is an another version of Red Clause LC in which the beneficiary can offer deferredpayment terms to the buyer for the goods to be purchased


8. Which of the following represents a Revolving LC?

a) When an LC is repeatedly opened by the LC issuing bank at the request of the applicant(buyer), it will be a Revolving LC

b) When many numbers of LCs are advised by the Advising bank to the beneficiary, it will be aRevolving LC

c) When the Issuing bank opens a single LC and is rotated (revolved) any number of times atthe request of the applicant (buyer) without his intervention it will be a Revolving LC


9. Can the beneficiary of an LC be allowed to draw sight bills or usance bills?

a) Yes depending on the terms of the LC

b) Yes depending upon the requirement of the applicant

c) Yes depending on the terms of the contract


10. Should the details mentioned in the invoice tally with those mentioned in the Letter ofCredit?

a) Need not tally with the LC

b) Should tally with the LC

c) None of these

11. Which of the following documents represents dispatch of goods by ship?

a) Airway bill

b) Bill of Lading

c) Lorry Receipt

d) None of these

12. When the goods are dispatched by post what is the document issued?

a) Lorry Receipt

b) Courier Receipt

c) Post Parcel Receipt

d) None of these

13. What do you understand by a Multi Modal Transport Document or Combined transportdocument?

a) In a multi modal transport document the goods are transported from one place to anotherinvolving more than one mode of transport like rail, road, sea etc.

b) It is a contract of carriage of goods by at least two different modes of transport from its placeof receipt to the place of destination

c) Both a and b


14. A Bill of Lading is called as a Document of title to goods why?

a) Because anybody who is in possession of this document will get a title over the goods

b) It is defined in the Sale of Goods Act as a document of title to goods

c) Both a and b


15. What is a Claused Bill of Lading?

a) It contains various clauses hence it is called Claused bill of lading

b) It states the defective condition of goods or packing and hence it is called as Clausedbill of lading

c) Either a or b


16. Bill of Lading is always issued in a set of :

a) 2 or 3 copies

b) only one copy

c) 6 copies

d) None of these

17. What do you understand by ‘On board Bill of Lading ‘and ‘Received for Shipment’ Bill ofLading?

a) An On ‘Board’ Bill of Lading is one which states that the goods are already loaded into theship

b) A ‘Received for shipment’ Bill of Lading is one which states that the goods have beenreceived and will be carried on next available vessel or on specified vessel

c) a and b


18. What is a Charter Party Bill of Lading?

a) In this case the shipping company hires the entire ship or a part of total space of the ship

b) The shipping company takes a ship on charter and its rights and obligations to theship-owner are reduced into an agreement which is called Charter Party

c) It is a bill of lading issued by a shipping company for carrying the goods in a charteredship

d) All the above


19. Is an Airway bill a document of title to goods?

a) No since it is considered as a receipt issued by the Airlines company

b) No since the Sale of Goods Act do not recognize it as a document of title to goods

c) Either a or b


20. Is Postal receipt and Courier receipt a document of title to goods?

a) No

b) Yes

c) None of these

21. Can the seller or the buyer take an insurance policy after the shipment of goods?

a) Yes it can be taken after the shipment of goods

b) No, the insurance policy should bear a date on or before the shipment of goods


22. Who issues uniform Customs and Practice for Documentary Credits (UCPDC)?

a) It is issued by Indian Chamber of Commerce

b) It is issued by Confederation of Indian Industries

c) It is issued by International Chamber of Commerce


23. What is the present publication of UCPDC brought out by ICC, PARIS?

a) UCP 400

b) UCP 500

c) UCP 600

d) None of these

24. How many articles are there in revised publication of UCPDC?

a) 49 Articles

b) 39 Articles

c) 80Articles

d) None of these

25. What is the name of the supplementary to UCP 600 brought out by ICC?

a) ISBP 98

b) URC 522

c) eUCP

d) None of these

Key

1.a 2.a 3.c 4.d 5.a 6.b 7.a 8.c 9.a 10.b 11.b 12.c 13.c

14.c 15.b 16.a 17.c 18.d 19.b 20.a 21.b 22.c 23.c 24.b 25.c

1. How many articles are there in eUCP?

a) 12

b) 39

c) 49

d) None of these

2. eUCP relates to:

a) Submission of documents by the exporter in physical form

b) Submission of documents by the exporter in electronic form

c) Submission of documents partly in physical and partly in electronic form

d) Both b and c

e) a,b and c

f) None of these

3. Can the banks open revocable LCs?

a) No as per UCP 600 only irrevocable LCs can be opened

b) Yes if the importer wants it to be opened

c) Yes if the exporter wants it to be opened


4. What is the period within which the exporter has to submit the shipping documents to thenegotiating bank after shipment?

a) 15 days

b) 21 days

c) 5 days

d) None of these

5. When does a bill of lading become stale?

a) If it is submitted to the negotiating bank after 7 days from the date of shipment

b) If it is submitted to the negotiating bank after 5 days from the date of shipment

c) If it is submitted to the negotiating bank after 21 days from the date of shipment


6. Is there any responsibility on the part of the LC issuing bank to scrutinize the documentsreceived from the negotiating bank and if so within what period?

a) There is no responsibility on the part of the issuing bank to verify the documents since theyare already verified by the negotiating bank

b) The issuing bank has to verify the documents within five banking days on receipt of thedocuments from the negotiating bank

c) The issuing bank has to verify the documents within seven banking days on receipt of thedocuments from the negotiating bank


7. Can the negotiating bank purchase discrepant documents drawn under LC?

a) The discrepant documents should not be purchased

b) The discrepant document may be purchased provided the exporter executes and indemnityin favour of the negotiating bank under special circumstances

c) The discrepant documents may be purchased if the exporter is a good customer


8. Which of the following types of guarantees are issued by the bank when the customerimports certain capital goods from aboard and the payment is to be made in installment over aperiod of time as agreed to with the exporter?

a) Financial guarantee .

b) Performance guarantee

c) Deferred payment guarantee

9. What is the objective of Deferred Payment Guarantee?

a) In a deferred payment guarantee the payment of installments is guaranteed by the bank

b) In a deferred payment guarantee the payment is deferred


10. How the payment terms are done in deferred payment contract?

a) Advance payment of 10% to 15% of the price of the goods is made

b) Another 10% to 15% is made on receipt of documents under Letter of Credit

c) The balance amount is paid in installments spread over a period of 1 to 7 years which issecured by a deferred Payment Guarantee

d) All the above


11. Can the Courts interfere in the case of payment of bank guarantees?

a) Courts can prevent the banks from making payment to the beneficiary against a complaintfrom the customer on whose behalf the guarantee is issued

b) Courts will not interfere directly or indirectly to withhold payment unless there is an allegationof fraud


12. Which of the following types of bills are discounted by banks?

a) Clean bill

b) Documentary bill

c) Bills drawn under LC

d) All of these

13. Which of the following are the characteristics of a Bill of Exchange?

a) It is unconditional order signed by a person called the drawer

b) It is a direction to another person to pay a certain sum of money (the drawee)

c) To pay to certain person or his order or bearer (the payee)

d) All of the above


14. How many parties are there in a bill transaction?

a) Three parties drawer, drawee and payee

b) Two parties drawer and payee

c) Two parties drawer and darwee


15. Is the drawer of bill liable to the holder of the bill?

a) Yes when the notice of dishonor is given to him by the holder

b) No since the bills is drawn by him and the liability is only that of the drawee


16. When does the drawee of an usance bill is liable for payment of the bill?

a) The drawee is liable only after the bill is presented to him by the bank

b) The drawee is liable only after the bill is accepted by him


17. What is the rate of interest recoverable as per NI Act when no rate of interest is specifiedin the bill?

a) 12% p.a

b) 10%

c) 18%

d) None of these

18. Identity the pre-conditions required to treat a bill as an inland bill?

a) It must be drawn in India upon a person resident in India

b) It must be drawn in India upon a person resident outside India but payable in India

c) It can be drawn outside India but upon a person resident in India

d) a and b

e) a, b and c


19. Which of the following is a foreign bill?

a) A bill drawn in India upon a person resident in India

b) A bill drawn outside India but upon a person in India

c) A bill drawn In India upon a person outside India and payable outside India

d) a, b, c

e) b and c


20. Is the drawee eligible for any time period for payment in the case of a demand bill?

a) Yes

b) No

c) None of these

21. When the drawer wants to give some time period for payment, he draws:

a) Demand bill

b) Usance bill

c) None of these

22. What are the different types of Usance bills which can be drawn by the drawer?

a) Payable after date

b) Payable after sight

c) a and b

d) None of these

23. What do you understand by a Clean bill?

a) It is a bill drawn without any ambiguity

b) It is bill drawn without a bill of exchange

c) it is a bill drawn without any transport document attached to it

24. What is a documentary bill?

a) It is a bill of exchange accompanied by document of title to goods

b) It is a bill of exchange accompanied by an invoice

c) a or b


25. Which among the following is a DP Bill?

a) Bill drawn with an instruction to deliver against payment

b) Bill drawn with an instruction to deliver against acceptance

c) Both a and b


Key

1.a 2.d 3.a 4.b 5.c 6.b 7.b 8.c 9.a 10.d 11.b 12.d 13.d

14.a 15.a 16.b 17.c 18.d 19.e 20.b 21.b 22.c 23.c 24.a 25.a

1. What are DA bills?

a) Bill drawn with an instruction to deliver against payment

b) Bill drawn with an instruction to deliver against acceptance

c) Bill drawn with an instruction to deliver against receipt


2. What do you understand by Bill Purchase?

a) When an usance bill is purchased by the bank, the facility is called as Bill Purchase facility

b) When demand or usance bill is purchase by the bank, facility is called as bill Purchasefacility

c) When a demand bill is purchased by the bank ,the facility is called as Bill Purchase facility


3. Usance bills are ––––– by the bank.

a) Discounted

b) Purchased

c) None of these

4. When the bank allows drawings against the bill which are in the course of collection, such facility is called as––––––

a) Bill Purchase facility

b) Advance against bills for collection facility

c) Bill Discount facility


5. Book debts are –––––– to the bank:

a) Pledged

b) Assigned

c) Mortgaged

d) None of these

6. Identity the document of title to goods from the following :

a) Lorry Receipt

b) Railway Receipt

c) Bill of Lading

d) Airway Bill

e) b and c

f) All the above

g) None of the above

7. What is the grace period available to the drawee of an usance bill

a) 5 days

b) 7 days

c) 3 days

d) No grace period allowed

8. Is any grace period allowed for payment in the case of a demand bill?

a) Yes, 3 days

b) Not allowed

c) None of these

9. What is bill co-acceptance facility?

a) Under this facility the banker accepts the bill along with the borrower who will be the draweeof the bill

b) Under this facility the bank undertakes a joint liability along with the borrower

c) Both a and b


10. Which of the following bills attract stamp duty?

a) Demand bills

b) Usance bills

c) Both Demand and Usance bills

d) None of these

11. What is the time period within which the goods must be cleared from the Railwayauthorities as per Section 77(2) of Railways Act when the goods are consigned to a notifiedstation?

a) 10 days

b) 7 days

c) 5 days

d) None of these

12. Which of the following types of lorry receipts will be accepted by banks while purchasingthe bills?

a) Lorry receipts issued by any transport operator

b) Lorry receipts issued by IBA approved transport operators

c) Lorry receipts issued by big transport operator

d) None of these


13. What is an accommodation bill?

a) It is a bill drawn by the drawer without any movement of goods from the drawer to thedrawee

b) It is a bill drawn by the drawer to accommodate the drawee of the bill

c) It is a bill drawn by the drawer to accommodate himself while selling the goods to thedrawee

d) None of these

14. Stamp duty on an usance bill:

a) Varies from State to State

b) Uniform throughout India

c) None of these

15. Under what circumstances an usance bill is exempted from stamp duty?

a) When it is drawn for a genuine trade transaction

b) It is drawn on or in favor of Banks

c) Usance period does not exceed 3 months

d) All the above


16. Stamp duty on an usance bill depends on:

a) The bill amount

b) The tenor of the bill

c) Amount and the tenor of the bill

d) None of these

17. The drawee has to accept an usance bill within ––– hours after presentation

a) 24 hours

b) 48 hours

c) 72 hours

d) None of these

18. Noting and protest is compulsory in the case of :

a) Foreign bill

b) Inland bill

c) Both a and b

d) None of these

19. NI Act provisions are not applicable to :

a) Inland bills

b) Foreign bills

c) Supply bills

d) None of these

20. What is the advantage of obtaining immovable property as security?

a) The immovable property cannot be shifted and remains where it is.

b) The value of the immovable property always increases thereby the bank’s advance ismore secured.


21. Is there any disadvantage in taking the immovable property as security?

a) Yes since the valuation of the property poses a problem at times

b) Ascertaining the title of the owner of the property may be difficult

c) It may be difficult to realize the security easily and quickly

d) Creating a charge over the property may be costly

e) All the above


22. What are the advantages of obtaining shares as a security?

a) Value of the security can be ascertained without any difficulty

b) Shares require very little formalities to be observed while taking them as security

c) Realization of value is easier since they are tradable in stock exchanges

d) They yield income by way of dividend which can be appropriated towards the loan account

e) All the above


23. What do you understand by Debentures?

a) It is document issued by a company for having deposited money with the company as fixeddeposit

b) It is a document issued by a company acknowledging indebtedness to the bearer orregistered holder


24. Which among the following are the advantages of financing against goods

a) Goods have a ready market and as such can be easily sold and realize the bank’s advance

b) Valuation of the goods can be done easily

c) Banker acquires a good title over the goods while dealing with customers of repute andstanding

d) All the above


25. Which among the following are the advantages of accepting Life insurance of Policies assecurity?

a) The assignment of Policy in favour of the banker requires very little formalities and thebanker obtains a prefect title

b) Surrender value can be easily ascertained before granting the advance. Longer the period ,greater the surrender value

c) If the premium is not paid regularly, the policy lapses and reviving the policy may be difficult

d) a and b


Key

1.b 2.c 3.a 4.b 5.b 6.e 7.c 8.b 9.c 10.b 11.b 12.b 13.a

14.b 15.d 16.c 17.b 18.a 19.c 20.b 21.e 22.e 23.b 24.d 25.d

1. What do you understand by ‘Actionable Claim’?

a) It is an action against the claim by the bank

b) It is an action against the claim on the bank

c) It is debt not backed by any security either movable or immovable

d) None of above

2. Fixed Deposits (Term Deposits) standing in the name of minor are not accepted as asecurity why?

a) Because the banker cannot exercise right of set off against such deposits

b) Because the minor will not understand the nature of transaction

c) Because the natural guardian may raise an objection at a later date


3. What do you understand by Supply Bills?

a) It is a bill for having sold the goods

b) It is a bill for having supplied sold the goods to the government department or publicsector undertaking and the advance is obtained against submission of copy of the deliverychallan


4. What is the purpose of obtaining a collateral security?

a) As a cushion to fall back upon in case the primary security is inadequate to liquidatethe advance

b) As an additional precaution to protect the banks, interest

c) It is customary among banks to obtain collateral security while granting advances


5. What are the conditions observed while accepting a security for an advance?

a) It should be easily marketable

b) It can be easily valued at any time

c) It is valid and easily enforceable

d) All of these

e) None of these

6. What happens to documents of title to goods which are endorsed in favor of the bankwhen the borrower becomes an insolvent?

a) The bank will lose control over the goods since the Official Receiver will take possession ofthe goods in the case of an insolvent borrower

b) The bank can take possession of the goods and the Official Receiver cannot takecontrol over the goods since such goods cannot be included in the assets of theinsolvent borrower


7. What are the advantages of financing against documents of title to goods such asWarehouse Receipts?

a) By pledging the document of title to goods to the bank, the goods are pledged which servesas a good security

b) The borrower can transfer the document of title to goods by endorsement in favor of thebank and delivery to the bank

c) Bank as a transferee can take possession of the goods at any time

d) Formalities for transfer of title over the goods is very easy as compared to any othersecurity

e) All the above


8. What do you understand by Trust Receipt?

a) It is obtained from the borrower when the goods are released without payment being madeby the borrower

b) It is a receipt issued by the Trust for having accepted donations from public

c) It is a letter issued by the bank for keeping the goods in its custody


9. Why do you consider fixed deposit as the most valuable security from banker’s view point?

a) Because money represented by the receipt is already available with the bank

b) Bankers can immediately exercise right of set off when the advance goes bad

c) There is no valuation problem, storage and costs associated with storage

d) All the above


10. What are the ingredients of Mortgage?

a) There should be transfer of interest in the property by the mortgagor

b) The transfer should be to secure money paid or to be paid by way of loan

c) Both a and b


11. A transaction whereby without delivering possession of the mortgage property, themortgagor binds himself personally to pay the mortgage money is called as:

a) Simple mortgage

b) Equitable mortgage

c) English mortgage

12. Which among the following are the features of Mortgage by conditional sale?

a) The sale is ostensible and not real

b) If the money is not repaid on the agreed date, the ostensible sale will become absolute

c) The mortgagee can use for foreclosure but for sale of the property

d) All the above


13. Which among the following refers to Usufructuary Mortgage?

a) The mortgagee is put in legal possession of the mortgaged property and not the physicalpossession

b) The mortgagee has the right to receive the rents and profits accruing from the property

c) The mortgagee remains in possession of the property until the debt is repaid

d) All the above


14. Which among the following are essential features of English mortgage?

a) It provides for a personal covenant to pay on a specified date notwithstanding the absolutetransfer of the property to the mortgagee

b) There is an absolute transfer of the property in favor of the mortgagee

c) The mortgagee can sue the mortgagor for the recovery of the money and can obtain adecree for sale

d) All the above


15. Which of the following are the features of Equitable mortgage?

a) The mortgagor deposits the title deeds with the creditor with an intention to create amortgage as a security for a loan

b) The place of delivery must be in a Notified place

c) The delivery should be done orally and not in writing

d) All the above


16. Which of the following represent an Anomalous Mortgage?

a) It must be a mortgage as defined in S.58 of Transfer of Property Act

b) It should not be a simple mortgage, a mortgage by conditional sale

c) It should not be a Usufructuary mortgage and English mortgage

d) It should not be an equitable mortgage

e) All the above


17. Why banks prefer equitable mortgage as security for a loan?

a) Because the borrower saves the stamp duty on the mortgage deed

b) There is no registration of the mortgage deed thereby the cost is reduced

c) It involves less time and can be created more conveniently

d) All the above


18. What are the disadvantages of an Equitable mortgage?

a) In case of default, the bank will have to obtain a decree from a court for sale of the propertywhich is time consuming and costly

b) The borrower may create a subsequent legal mortgage in favor of another party thereby thebank may unnecessarily involved in litigation

c) All the above


19. What is the limitation period for filling suit for recovery of mortgaged debt and sale ofmortgaged property in the event of non-payment of the mortgaged debt?

a) The limitation period for filling a suit for sale of mortgaged property is 12 years from the datethe mortgage debt becomes due

b) The limitation period for filling suit for foreclosure is 30 years from the date the moneysecured by mortgage becomes due

c) a or b


20. In which Act pledge is defined and what is pledge?

a) Pledge is defined in S. 172 of Indian Contract Act and is bailment of goods as security forpayment of a debt or performance of a promise

b) Pledge is defined in S.172 of Companies Act and is transfer of goods to the creditor assecurity for a loan


21. Can a pledge be created by actual possession of goods or constructive possession ofgoods?

a) Actual possession only

b) Constructive possession only

c) Either a or b

22. In a pledge whether the ownership and possession both are transferred?

a) Both ownership and possession are transferred to create a pledge

b) Only possession is transferred and not the ownership of goods


23. Pledge is applicable for:

a) Only movable assets like goods can be pledge and not immovable assets

b) All movable and immovable assets can be transferred for creating a pledge


24. Can the banker sell the goods pledged as security for a loan?

a) No as he is baliee and has a right to retain but not to sell the goods

b) Yes the bank can sell the goods in case of default but after giving a reasonable noticeto the pledgor


25. Is giving notice of sale mandatory?

a) Yes it is a statutory obligation as per S.176 of Indian Contract Act

b) No as Indian Contract Act do not specify the notice of sale to be given to the pledgor


Key

1.c 2.a 3.b 4.a 5.d 6.b 7.e 8.a 9.d 10.c 11.a 12.d 13.d

14.d 15.d 16.e 17.d 18.c 19.c 20.a 21.c 22.b 23.a 24.b 25.a

1. Does the bank has a right to sell the goods when the loan has become time barred as perLimitation Act?

a) No

b) Yes

c) None of these

2. Hypothecation is defined in which of the following Acts?

a) Not defined any where

b) Defined in Transfer of Property Act

c) Defined in SARFASI Act


3. What is hypothecation?

a) It is a charge on any immovable property created in favor of the creditor

b) It is a charge on a movable property by transferring the possession to the creditor butretaining the ownership

c) It is a charge on any movable assets without transferring either the assets or thepossession to the creditor


4. Which of the following is true in respect of Hypothecation?

a) The borrower undertakes by signing the hypothecation document to hold the goods as anagent or trustee of the bank

b) The borrower undertakes to transfer the possession of the goods whenever he is required todo so and to covert the charge to pledge

c) Both a and b


5. Can the pledgee retain the goods pledged for payment of all necessary expenses incurredby him with respect to the possession or for the preservation of the goods pledged?

a) Yes

b) No

c) None of these

6. Can the pledgee retain the goods pledged in respect of all debts?

a) Yes the pledgee has the right to retain the goods till all the debts due to him are repaid bythe pledger

b) No it can be retained only in respect of the debt or promise for which they are pledged


7. Is the pledgor responsible for payment of any extraordinary expenses incurred by thepledgee for the preservation of goods?

a) Yes

b) No

c) None of these

8. In which of the following ways goods can be delivered by the pledgor to the pledge?

a) By handing over the keys of the godown in which goods are kept

b) By the warehouse keeper acknowledging to the pledgee that he will hold the goods onbehalf of the pledgee

c) By handing over the document of title to goods

d) By physical delivery of the goods

e) All the above

9. Which of the following persons can create a pledge?

a) Only the owner of the goods

b) A mercantile agent who is in possession of the goods with the consent of the owner

c) Both a and b

d) None of these

10. On which of the following goods the borrower can create an hypothecation charge?

a) Stock - in – trade

b) Machinery used in the manufacturing activity

c) Transport vehicles

d) All of these

11. Which among the following persons can create an hypothecation charge in respect ofmovable assets?

a) Sole proprietorship concerns

b) Partnership firms

c) Companies

d) Individuals

e) All of these

f) None of these

12. Why banks prefer to grant hypothecation advances only to companies?

a) Because it companies have the capacity to repay such advances

b) Because the charge can be registered with Registrar of Companies which constitutes aconstructive notice to the subsequent creditor.

c) Because in the case of companies an hypothecation charge can be converted into pledge ata later stage


13. While advancing against book debts, banks prefer to obtain hypothecation agreementinstead of assignment of book debts why?

a) because it is difficult to create an assignment each time when a book debt is created by theborrower

b) Because hypothecation charge can be registered with ROC in the case of companies

c) Because only hypothecation charge can be created on book debts and not assignmentcharge


14. Can a minor accepted as a borrower?

a) Yes a minor can be accepted as a borrower as he can sign negotiable instruments

b) No since a contract with a minor is void an initio and the bank will not be able to initiate legalproceedings against the minor for recovery of loan


15. What is the minimum number of shareholders required for forming a Private and Publiclimited company?a) Minimum number is 7 for private limited company and 50 for public limited company

b) Minimum number is10 for private limited company and 2 for public limited company

c) Minimum number is 2 for private limited company and 7 for public limited company


16. Who will be appointed by the Court in the case of an insolvent to realize the assets if anybelonging to the insolvent?

a) Administrator

b) Liquidator

c) Official Receiver

d) None of these

17. Is it necessary for a partnership firm to be registered under Partnership Act?

a) Yes it has to be registered with Registrar of Firms

b) It is optional for the firm to get it registered


18. What are the disadvantageous for an unregistered firm?

a) It cannot be sued and sue others

b) It can be sued and sue others

c) It can be sued but it cannot sue others


19. Is a Partnership firm a legal entity?

a) No it is not a legal entity

b) Yes it is a legal entity

c) None of these

20 Does a partner of a firm has the implied authority of transfer the immovable property ofthe firm as security?

a) Yes as it is provided in the Act

b) No unless expressly authorized by the partners


21. What are the important features of the Memorandum of Association of a company?a) It contains the name, place of business, objects of the company

b) It also contains whether the company can borrow and if so whether company can mortgageits properties as security for the loan

c) It contains the borrowing powers of the directors also

d) Both a and b


22. When one of the partners becomes insolvent, what the banker should do with the account?

a) If the accounts is showing credit or debit balance, the operations are stopped

b) If the account is showing a credit balance, the operations on the account can be continuedbut a fresh mandate has to be obtained from the other partners

c) If the account is showing a debit balance, then further operations in the account should bestopped to avoid Clayton’s rule

d) Both b and c


23. Dayabhaga school of law under Hindu Law is prevalent in :

a) all part of the country

b) West Bengal

c) None of these

24. Which of the following members of JHF are called as coparceners?

a) Only male members

b) Male members and daughters of male coparceners

c) All male and female members including mother and daughter – in-law


25. Who will manage the affairs of the JHF?a) Karta being the eldest coparcener of the JHF

b) Any coparcener of the JHF can manage the affairs of JHF


Key

1.b 2.c 3.c 4.c 5.a 6.b 7.a 8.e 9.c 10.d 11.e 12.b 13.a

14.b 15.c 16.c 17.b 18.c 19.a 20.b 21.d 22.d 23.b 24.b 25.a

1. What is Articles of Association?

a) It contains rules and regulations governing the internal management of the company

b) It contains the borrowing powers of the directors

c) Both a and b


2. Which of the following is applicable to a private limited company?

a) Transfer of shares are restricted

b) Limitation on number of members to 50

c) Subscription by general public to the capital of the company is prohibited

d) All the above


3. Which among the following is applicable to Public limited company?a) Shares are freely transferable

b) No restrictions on number of members

c) Public are allowed to subscribe to the capital of the company

d) All the above


4. What do you understand by a Government Company?a) A company in which Central or State Government holds not less than 51% of the sharecapital

b) A company in which Central and State Government is holding 100% of share capital

c) A company in which Central and State Government holding 60% of share capital


5. Which of the following is called a holding company?

a) A company owning100% of share capital in another company

b) A company owning more than 50% of share capital in another company or a company whichcan appoint majority of directors in another company

c) Both a and b


6. What are statutory corporations?

a) Corporations which are established by an Act of Parliament

b) Corporations which are established under the Companies Act

c) Corporations which are established under the Indian Partnership Act


7. Private Trusts are governed by which of the following acts?

a) Public Trust Act

b) Indian Trust Act

c) None of these

8. Trusts formed by Muslims are governed by:

a) Indian Trust Act

b) Public Trust Act

c) Wakf Act

d) None of these

9. Private Trusts are registered with:

a) Registrar of Assurances

b) Charity Commissioner

c) None of these

10. What is the importance document to be obtained while opening an account in the name ofa Trust?

a) Partnership Deed

b) Trust deed

c) None of these

11. The trustee of a Muslim Wakf is called as:

a) Mutawali

b) Trustee

c) Partner

d) None of these

12. Can a HUF be a partner in a Partnership Firm?

a) Yes

b) No

c) None of these

13. A loan was sanctioned to a minor who misrepresented his age. The loan was alsoguaranteed by a person. The loan goes bad. Can the bank recover the loan amount either fromthe minor or from the guarantor?

a) The bank can recover the loan amount only from the guarantor

b) The bank can recover the loan amount only from the minor borrower

c) The bank can recover the loan amount either from the minor or from the guarantor

d) The bank cannot recover the loan amount either from minor or from the guarantor


14. Banks do not sanction loans against the shares of a private limited company. Why?

a) Because the shares of private limited company are not freely transferable

b) Because the shares of private limited company are not listed in stock exchanges and theirmarket value cannot be assessed

c) Both a and b


15. Can a partnership firm stand as a guarantor for a loan to be sanctioned to another firm?

a) Yes provided all the partners agree

b) Yes only if the business of the firm is that of giving guarantees

c) A firm cannot stand as guarantor as per Partnership Act

d) None of these

16. Can the daughter of a coparcener become karta of an HUF?

a) Yes provided all the coparceners agree

b) No since only male coparceners can become karta of an HUF

c) Yes if she is the senior most coparcener in the HUF


17. Is the liability of the directors of a company is limited or unlimited?

a) The liability of the directors is unlimited

b) The liability of the directors is limited to the extent of their share holding

c) The liability of the directors can be decided by the shareholders of the company


18. Can two companies form a Partnership?

a) Yes

b) No

c) None of these

19. Which of the following documents will not be insisted for opening an account in the nameof a Private Limited Company?

a) Memorandum of Association

b) Certificate of Incorporation

c) Certificate of Commencement to Business

d) None of these

20. Do the banks grant any loans/overdrafts to unregistered Societies/Clubs?

a) No since such bodies do not have power to borrow

b) Yes provided the Bye- laws of such bodies permit the borrowings

c) Yes under special circumstances if persons of high standing are in the managingcommittee


21. Societies /Clubs/Associations are registered with:

a) Register of Assurances

b) Register of Societies

c) Register of Firms


22. Under which Act, non- profit making companies are established?

a) Partnership Act

b) Indian Contract Act

c) Section 25 of Companies Act


23. Credit facilities sanctioned by a bank can be broadly classified into:

a) Fund based credit facilities

b) Non-fund based credit facilities

c) a and b


24. Which of the following are fund based facilities?

a) Cash Credit

b) Overdraft

c) Letters of credit limit

d) Guarantees limit

e) a and b


25. Can the bank classify the term Loan and Bill Finance facilities granted by it as fundbased limits?

a) Yes

b) No

c) None of these

Key

1.c 2.d 3.d 4.a 5.c 6.a 7.b 8.c 9.a 10.b 11.a 12.b 13.d

14.d 15.b 16.c 17.b 18.a 19.c 20.a 21.b 22.c 23.c 24.e 25.a

1. Which of the following are classified as non- fund based facilities?

a) Bank Guarantees

b) Letter of Credit

c) a and b

d) None of these

2. Which of the following statements refers to Cash Credit or Overdrafts?

a) A cash credit or overdraft refers to giving to cash the customer

b) A cash credit or overdraft refers to an arrangement by which a banker allows his customer toborrow money up to a certain limit


3. Mr. A is current account holder of your branch. One day he overdrew his account. Therewas no written contract for overdraft. The bank demanded repayment of monies overdrawnwith interest. Mr. A refused to pay interest. A suit for recovery of monies overdrawn withinterest. Will the bank succeed in recovering the money?

a) Yes

b) No

c) None of these

4. The Clayton’s Rule is applicable to:

a) Cash credit

b) Overdraft

c) Term Loan

d) a or b

e) None of these

5. Which of the following statement refers to Clayton’s Rule?

a) The first credit into the account will wipe of last debit in the account

b) The first credit into the account will wipe of first debit in the account


6. Can the bank which has granted an overdraft facility to a customer cancel the facilityunilaterally without serving a notice to the customer?

a) No

b) Yes

c) None of these

7. In which of the following cases a Term Loan is granted by the bank?

a) For Revenue expenditure

b) For Capital expenditure

c) For revenue or Capital expenditure


8. Term Loans can be classified into:

a) Short term loan

b) Medium term loan

c) Long term loan

d) All of these


9. What is the maximum period up to which long term loans are normally sanctioned bycommercial bank?

a) Up to 5 years

b) Up to 10 years

c) Up to7 years

d) None of these

10. Can the bank recover the entire term loan when the borrower fails to pay one of theinstallments?

a) Yes

b) No

c) None of these

11 What is the limitation period for recovery of a term loan?

a) It is 3 years from the date of sanction of the term loan

b) It is 3 years from the date of execution of term loan documents

c) It is 3 years from the date of default in payment of an installment

d) All the above


12. What do you understand by a Bill fiancé facility extended by banks?

a) It is financing against bills drawn by third parties on the borrower

b) It is financing through discounting of bills exchange drawn by the borrower on third parties

c) Either a or b


13. What do you understand by a Bank Guarantee facility extended by banks

a) Under this facility, the banks undertake to discharge the liability of the borrower to thirdparties on account of failure on the part of the borrower to fulfill the contract

b) Under this facility, the banks undertake to discharge the liability of the borrower to thirdparties on account of fulfillment of contract by third parties towards the borrower


14. What was the need for introducing SARFAESI Act?

a) To help banks to recover their non- performing assets

b) To help financial institutions recover their non- performing assets

c) Both a and b


15. Cash credit facility is granted by the bank to borrower in order to:

a) Meet his capital expenditure

b) Meet his working capital expenditure

c) meet his miscellaneous expenditure

d) None of these

16. What are Secured loans and Unsecured loans?

a) Loans granted by banks which are secured by some tangible security of valuable collateralssuch as bonds, shares or immovable assets of the borrower are secured loans

b) Loans granted by banks which are not secured by any tangible assets but on the integrity ofthe borrower are unsecured loans

c) a and b


17. What is Certificate of Incorporation?

a) It is a certificate issued by the Registrar of Firms for incorporating the company

b) It is a certificate issued by the Registrar of Companies for incorporating the company

c) Either a or b


18. In which of the following cases a Certificate of Commencement of Business is issued?

a) Issued in the case of a Public Limited Company

b) Issued in the case of a Private Limited Company


19. Why banks prefer to sanction only secured loans?

a) Because RBI prohibits sanctioning of unsecured loans

b) Because a charge is created over the assets of the borrower

c) Because if the borrower fails to repay the loan, the banker can recover the loan by sale ofthe assets of the borrower

d) Both b and c


20. What are the important aspects to be looked into while granting advances on the basis ofsecurities offered by the borrower?

a) The market ability of the security offered

b) adequacy of margin on the advances

c) Liquidity relating to securities

d) All the above


21. What are the points to be looked into granting an unsecured advance?

a) Personal integrity of the borrower

b) Credit worthiness of the borrower

c) Both a and b


22. The procedure for registration of Partnership firm is laid down in:

a) Section 42 of Partnership Act

b) Section 56 to 68 of Partnership Act

c) Section 34 of Partnership Act

d) None of these

23. The Partnership Act provides for Registration of :

a) Partnership Firm

b) Partnership Deed

c) Either a or b

d) None of these

24. Can a person inspect the Register of Firms maintained by the Registrar?

a) No person is authorized to inspect the Register of Firms maintained by the Registrar

b) Any person can inspect the Register of Firms maintained by the Registrar on payment ofprescribed fee

c) None of these

25. Can a person obtain copies of the entries made in the Register of Firms Maintained by theRegistrar?

a) Yes on payment of prescribed fee

b) No copies will be given


Key

1.c 2.b 3.a 4.d 5.b 6.a 7.b 8.d 9.c 10.a 11.c 12.b 13.a

14.c 15.b 16.c 17.b 18.a 19.d 20.d 21.c 22.b 23.a 24.b 25.a

1. What is the penalty for making false statement under Partnership Act?

a) 3 months imprisonment

b) Fine

c) 3 months imprisonment with fine

d) a or b or c

e) None of these

2. Non-registration of a firm does not affect which of the following?

a) The right of third party to sue the firm or any partner

b) The right of partners to bring an action for the dissolution of the firm

c) The power of an Official Receiver acting for an insolvent partner to bring an action forrealization of the insolvent’s share

d) all the above


3. What do you understand by “Limited Liability “in the case of a company?

a) The liability of the members (shareholders) is limited to the extent of their shares in thecompany

b) The liability of the members is limited to the extent of their net worth


4. What do you understand by “Perpetual Succession” in the case of a company?

a) It means the death, insolvency or retirement of the members affects a company

b) It means the death , insolvency or retirement of the members does not affects a company


5. SARFAESI Act provides legal framework for which of the following activities in thefinancial market?

a) Securitization of financial assets

b) Reconstruction of financial assets

c) Recognition of security interest

d) Power to enforce security by banks and financial institutions

e) All the above


6. What do you understand by a Charge?

a) A charge is any form of security for repayment of a debt

b) A charge is charging a person for non-repayment of a debt


7. How many types of Charges are there?

a) Fixed charge

b) Floating charge

c) Both a and b

d) None of these

8. Which among the following constitutes a Fixed Charge or Specific Charge?

a) When the company gives its fixed deposits as security, it is Fixed Charge

b) When the company gives its particular or specific property as security for the loan,then Fixed charge or Specific Charge is said to be created over the property

c) Either a or b


9. What is a Floating Charge?

a) A charge that floats over the present and future property of the company

b) A charge that does not restrict the company from assigning the property subject to charge tothird persons, whether by way of sale or security

c) A charge that on happening of an event or contingency crystallizes as a fixed charge

d) All the above


10. When a floating charge crystallizes into a fixed charge?

a) When the borrower company ceases to carry on business or goes into liquidation

b) When the happening of an event specified in the charging deed

c) When the creditor intervenes by getting a receiver appointed or doing some other act whichaffects the powers of the company to dispose the assets charged

d) All the above

11. Which among the following statements are true?

a) A charge created by the company over its property should be registered with ROC within 30days of the creation of charge

b) A charge created by the company over its property should be registered with ROC within 60days of the creation of charge


12. Which of the following forms are used for registration of a charge with ROC?

a) Form 10

b) Form 17

c) Form 8

d) None these

13. Which of the following forms are used for registering the satisfaction of a charge?

a) Form 8

b) Form 17

c) Form 10

d) None these

14. What is the effect of non- registration of a charge?

a) Even if it is not registered it will be valid against the liquidator and any creditor of thecompany

b) If not registered the creditor cannot file a case against the company for recovery of theloan

c) If the charge is not registered, it would not be valid against the liquidator and any creditor ofthe company

d) All the above

e) none of the above

15. Can a pledge charge on goods be registered under Section 125 of Companies Act?

a) Yes

b) No

c) None of these

16. Can a floating charge be created over the stock- in – trade of the company?

a) Yes

b) No

c) None of these

17. A floating charge can be created only on:

a) Assets presently held by the company

b) Assets going be held by the company at a future date

c) a or b

d) None of these

18. Hypothecation is a –––––– charge:

a) Floating

b) Fixed

c) Specific

d) None of these

19. Can a charge be created in the electronic form?

a) Yes

b) No

c) None of these

20. Is it required for a company to file the particulars of any commission paid to a person inconsideration of his procuring subscriptions to the equity capital of the company, with the ROC?

a) Yes

b) No

c) None of these

21. What is the document issued by the ROC for registering a charge on the assets of thecompany?

a) Certificate of Incorporation

b) Certificate of Registration of charge

c) Certificate of Commencement to Business

d) None of these

22. What is the period within which the satisfaction of charge has to be filed with the ROC?

a) 15 days from the date of payment of debt

b) 30 days from the date of payment of debt

c) 60days from the payment of debt


23. SARFAESI Act has come into force from:

a) 21st June 2002

b) 1si June 2002

c) 1st April 2002

d) None of these

24. If a company failed to register the charge created on the assets by over sight within thestipulated time, whose permission is required to register it?

a) Company Law Board

b) Registrar of Companies

c) The Lender

d) None of these

25. Who is empowered to impose penalty if the company fails to comply with the provisions oflaw relating to registration of charges?

a) Company Law Board

b) Registrar of Companies

c) Central Government

d) None of these

Key

1.d 2.d 3.a 4.b 5.e 6.a 7.c 8.b 9.d 10.d 11.a 12.c 13.b

14.c 15.b 16.a 17.c 18.a 19.a 20.a 21.b 22.b 23.a 24.a 25.b

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