Banking and Economic Awareness-Set 01

Q1. CRISIL, the largest credit rating agency in India was established in
A. 1985
B. 1987
C. 1992
D. 1994

Answer: B. 1987

CRISIL short for Credit Rating Information Services of India Limited was the first credit rating agency set up in India on January 29, 1987.

The agency started operations in 1988.  At the time of incorporation, the agency was promoted by ICICI Limited, UTI and many such financial institutions. 

Learn more:

https://crisil.com/about-crisil/our-history.html

Q2. Incorporated in 1993, CARE is a credit rating, research and advisory committee promoted by IDBI, Canara Bank, UTI and other financial and lending institutions. What is the full form of CARE?
A. Credit Advisory and Research Limited
B. Credit Analysis and Research Limited
C. Credit Advisory and Research Executive
D. Credit Analysis and Research Executive

Answer: B. Credit Analysis and Research Limited

CARE stands for Credit Analysis and Research Limited.

Credit Analysis and Research Limited (CARE) is a credit rating, research and advisory committee promoted by Industrial Development Bank of India (IDBI), Canara Bank, Unit Trust of India (UTI) and other financial and lending institutions. 

CARE Ratings commenced operations in April 1993 and over nearly two decades, it has established itself as the second-largest credit rating agency in India. With the rating volume of debt of around Rs. 92 lakh crores (as on March 31, 2017)

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Q3. Small and Medium Enterprises Rating Agency of India (SMERA) was founded by:
A. Indian financial and banking service organizations
B. Industrial Development Bank of India
C. Small Industries Development Bank of India
D. Reserve Bank of India

Answer: C. Small Industries Development Bank of India

Small and Medium Enterprises Rating Agency of India (SMERA) a joint initiative by Small Industries Development Bank of India (SIDBI), Dun & Bradstreet Information Services India Private Limited (D&B) and several leading banks in the country.

SMERA was exclusively set up for micro, small and medium enterprises (MSME) in India and has grown to rate SME, mid & large corporate.

SMERA Ratings Limited is a full-service Credit Rating Agency, registered with the Securities and Exchange Board of India (SEBI), and accredited by Reserve Bank of India (RBI) as an External Credit Assessment Institution (ECAI), for Bank Loan Ratings under BASEL-II norms. SMERA is empanelled with National Small Industries Corporation (NSIC), the nodal agency of the Ministry of MSME, Government of India to provide SMERA-D&B-NSIC Micro & Small Enterprises Rating for SMEs in India.

SMERA has assigned more than 47,000 ratings since inception as on September 2017.

SMERA has its Registered and Head Office in Mumbai

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Q4. Which of the following has the greater share in the central government’s earnings?
A. Corporate tax
B. Income tax
C. Excise duties
D. Non-tax revenue

Answer: A. Corporate tax

Corporation Tax is levied on the income of Companies under the Income-tax Act, 1961. In the union budget 2016-2017, the share of corporate tax was 19.09%. Budget Estimate for 2017-2018 is Rs. 538744.73 crore.

Income Tax is a tax on the income of individuals, firms etc. other than Companies, under the Income-tax Act,1961. The share of income tax was 14.08% in the union budget 2016-2017. Budget Estimate for 2017-18 is Rs. 441255.27 crore.

The excise duties amounted to 12% in the union budget 2016-2017. Budget Estimate for 2017-2018 is Rs. 406900 crore.

Non-Tax Revenue receipts are from various sources such as return on assets in form of dividend and profits, interest, fees, fines and miscellaneous receipts collected in the exercise of sovereign functions, regulatory charges and license fees and user charges for publicly provided goods and services. In the union budget 2016-2017, the share of Non-tax revenue was 13%. Budget Estimate for 2017-2018 is Rs. 288757.07 crore.

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Q5. The bulk of the Central Government’s subsidies arise on the provision of economic services, which account for :
A. 45% of the total subsidies
B. 52% of the total subsidies
C. 70% of the total subsidies
D. 88% of the total subsidies

Answer: D. 88% of the total subsidies

Central government subsidies trends in the subsidies given by Central Government (Year 1994-95) the bulk of the Central Government’s subsidies arise on the provision of economic services, which account for 88% of the total subsidies (10% on merit services and 78% on non-merit).

In social services, the Centre’s participation is limited. Most of the social sector expenditure pertains either to the Union Territories that figure in the Central Budget or are in the nature of departmental transfers to State governments. Except for information and broadcasting.

Social services include Elementary education, Family welfare, General education, Information and broadcasting, Labour and employment, Medical and public health, Other social services, Secondary education, Social welfare and nutrition, Technical education, University and higher education and Water supply & sanitation.

Economic services include Agriculture, rural development and allied activities, Energy, General economic services, Industry and minerals, Irrigation and flood control, Postal and Science technology & environment.

In 2003-2004, the share of economic services was  81.44% while Social services accounted for 18.56%. 

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Q6. In the union budget 2017, what is the government’s allocation of funds for Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS)?
A. Rs. 45,000 crore
B. Rs. 47,499 crore
C. Rs. 48,000 crore
D. Rs. 38,500 crore

Answer: C. Rs. 48,000 crore

Learn more:  Arun Jaitley gives highest ever allocation for MGNREGS in Budget 2017

Q7. Consider the following options and answer the question given below.

  1. Interest credited to your account
  2. Dividend received on shares
  3. Withdrawal of cash at an ATM
  4. FD proceeds credited to your bank account

Which of the following is/are classified as customer induced transactions?

A. Only 3
B. Only 1, 2 and 3
C. Only 2, 3 and 4
D. All of the above

Answer: C. Only 2, 3 and 4

Customer induced transactions include:

  1. Withdrawal and deposit of money by the account holder through ATM, net banking, mobile banking, cheques etc.
  2. Payment by cheque
  3. Transfer of funds through Internet banking, phone banking or ATMs
  4. A standing instruction to the bank by the account holder such as payment of utility bills of the account holder is also considered as a valid transaction
  5. Fixed Deposit (FD) proceeds credited to your bank account
  6. When a customer has given a mandate for crediting dividend on shares to his or her Bank account and the dividend is credited to his or her account, it is treated as a customer induced transaction.

System generated transactions, such as interest credited to your bank account or service charges levied by the bank, are not considered as “customer induced transaction”.

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Q8. A savings bank account becomes inactive when there are no transactions for the last _______.
A. 12 months
B. 15 months
C. 18 months
D. 24 months

Answer: A. 12 months

If you have a current or a savings bank account and have not done any transactions through it for more than 12 months, then it will be classified as an inactive account.

Learn more: Difference between inactive and dormant savings bank accounts

Q9. A current account becomes dormant when there are no transactions for the last _______.
A. 12 months
B. 15 months
C. 18 months
D. 24 months

Answer: D. 24 months

A current account becomes dormant when there are no transactions for the last 24 months or 2 years.

For the purpose of classifying an account as ‘inoperative’ or dormant both the type of transactions i.e. debit, as well as credit transactions induced at the instance of customers as well as a third party, should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered.

However, interest on savings bank accounts is credited on a regular basis even the account is dormant.

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Q10. The Reserve Bank of India in a statement in May 2017 said that it will soon put into circulation currency notes in one rupee denomination. The new one rupee note will bear the signature of:
A. the Governor of RBI
B. the Secretary (Economic Affairs), Ministry of Finance
C. the Chairman of NITI Aayog
D. the President of India

Answer: B. the Secretary (Economic Affairs), Ministry of Finance

According to a statement released by the Reserve Bank of India, the one rupee notes bearing the rupee symbol have been printed by the government and will be soon put into circulation.

The note will bear the signature of the Secretary (Economic Affairs), Ministry of Finance.

The color of one rupee currency note shall be predominantly pink-green on the obverse and reverse in combination with others.

The numbering will be in the black at the right-hand bottom portion of the note. On the reverse side, the year 2017 is mentioned. There is also a representation of the one rupee coin with the rupee symbol having a floral design and the surrounding design consists of a picture of the “Sagar Samrat” oil exploration platform.

Source: RBI to issue new pink-green one rupee notes

Q11. Rajiv Gandhi Equity Savings Scheme (RGESS), a tax saving scheme designed exclusively for the first time individual investors in securities market was introduced in which union budget?
A. Union Budget 2013-14
B. Union Budget 2012-13
C. Union Budget 2010-11
D. Union Budget 2009-10

Answer: B. Union Budget 2012-13

Rajiv Gandhi Equity Savings Scheme (RGESS), is a tax saving scheme announced in the Union Budget 2012-13 (para 35) and further expanded vide Union Budget 2013-14 (para 61 & 144).

The scheme is designed exclusively for the first time individual investors in the securities market, whose gross total income for the year is below a certain limit.

The income ceiling of the beneficiaries should be Rs. 12 lakh.

The investor would get under Section 80CCG of the Income Tax Act, a 50% deduction of the amount invested during the year, up to a maximum investment of Rs. 50,000 per financial year, from his/her taxable income for that year, for three consecutive assessment years.

‘Rajiv Gandhi Equity Savings Scheme 2013’ (RGESS guidelines) can be used for claiming the deduction in the computation of total income of the assessment year related to a previous year, in consideration of investment in eligible securities, under sub-section (1) of section 80CCG of the Income Tax Act, 1961.

Source:

Q12. Section 80CCG of Income Tax Act offers:
A. tax deductions on investment by first-time investors in equity savings schemes
B. tax deductions on amounts spent by an individual towards the premium of a health insurance policy
C. tax deductions on subscription of long-term infrastructure bonds which have been notified by the government
D. tax deductions on investment in pension funds

Answer: A. tax deductions on investment by first-time investors in equity savings schemes

The section 80CCG in the Income tax Act, 1961 on ‘Deduction in respect of investment under an equity savings scheme’ was introduced vide Finance Act, 2012 and amended vide Finance Act, 2013, to give tax benefits to ‘New Retail Investors’ whose gross annual income is less than or equal to Rs.12 Lakhs, for investments in ‘Eligible Securities’ up to Rs.50,000 in a single financial year, for three consecutive assessment years.

The section 80CCG is also referred as Rajiv Gandhi Equity Savings Scheme (RGESS).

Source:

Q13. What is the full form of ELSS?
A. Equity Liked Savings Scheme
B. Equity Linked Sourcing Scheme
C. Equity Linked Savings Scheme
D. Equity Liked Sourcing Scheme

Answer: C. Equity Linked Savings Scheme

ELSS stands for Equity Linked Savings Scheme. These are tax­-saving mutual funds that you can use to save income tax of up to Rs 1.5 lakh under Section 80C. ELSS funds have a lock­-in period of 3 years and invest a majority of their portfolio in the stock market.

Source:

Q14. A PPF account holder can deposit a maximum of Rs. ________ in one financial year.
A. 50 thousand
B. 1 lakh
C. 1.5 Lakh
D. 2 Lakh

Answer: C. 1.5 Lakh

Public Provident Fund (PPF) scheme is a long term investment option supported by Government of India which offers safety with interest rate of 7.8% and returns that are fully exempted from Tax. Investors can invest minimum Rs. 500 to maximum Rs. 1,50,000 in one financial year and can get the facilities such as loan, withdrawal, and extension of account.

Source: Public Provident Fund FAQs

Q15. What do you mean by “ECB” in financial terms?
A. External Credit Business
B. External Commercial Borrowings
C. External Credit Borrowings
D. Essential Commercial Business

Answer: B. External Commercial Borrowings

External commercial borrowing (ECBs) are loans in India made by non-resident lenders in foreign currency to Indian borrowers. They are used widely in India to facilitate access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs include commercial bank loans, buyers’ credit, suppliers’ credit, securitised instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc. ECBs cannot be used for investment in the stock market or speculation in real estate. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies.

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The options of cashless payment in India

 

Photo Courtesy: NITI Aayog

 

To ease the digital payments and paving the way for a cashless economy, Government of India has taken multiple steps. It has delegated NITI Aayog to implement digital payments systems and create awareness campaigns to popularize the different modes of digital payment which are currently available.

As part of promoting cashless transactions and converting India into less-cash society, various modes of digital payments are available.

Some digital payment systems you should know are:

Continue reading The options of cashless payment in India

Which committee was constituted in November 2016 to convert 100% Government – Citizen Transactions to the digital platform?

Answer: Amitabh Kant committee

In a transformative attempt to weed out black money and corruption from public life, the Government of India has constituted a Committee of Officers to enable 100 per cent conversion of Government to Citizen (G2C)Transactions to the digital platform.

The Committee is formed under the leadership of NITI Aayog CEO Mr. Amitabh Kant. The main objective of this committee is to identify and implement in the earliest possible time frame user-friendly digital payment options in all sectors of the economy.

This is an integral part of the Governments strategy to transform India into a cashless economy.
Source:
1. http://niti.gov.in/content/digital-payments
2. http://www.thehindu.com/business/Economy/Centre-forms-committee-to-push-cashless-transactions/article16702164.ece

Banking Awareness – Set-01

There are 15 questions in this practice set. With each question, there are 4 options. You have to choose which one of them is correct.

The answer is given with each question. You will find external links with each answer. You can learn further about the topic by visiting those links.

Questions in this set were asked on our Facebook Page. If you’ve come here from our page, in this post you will find the answer to the questions I asked.

If you have any query or feedback, please write it below in the comment box.


1.  What is NOSTRO account?

A. an account which is generally held with a domestic bank on behalf of a foreign bank
B. an account which is generally held by a bank on behalf of a 3rd party bank
C. an account which is generally held with a foreign bank on behalf of a domestic bank
D. None of the above

Answer: C. accounts which are generally held with a foreign bank on behalf of a domestic bank

 

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2. Which of the following bank has signed up as a national supporter for the under 17 FIFA world cup, scheduled to kick start on October 2017?

A. State Bank of India
B. Bank of Baroda
C. Punjab National Bank
D. ICICI Bank

Answer: B. Bank of Baroda

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3. The alphabet ‘B’ in  the acronym CBLO stands for:

A. Banking
B. Borrowing
C. Business
D. Base

Answer: B. Borrowing

 

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4. ___________ is a satellite-based wide area network using VSAT (Very Small Aperture Terminal) technology set up by the RBI in June 1999.

A. RBINET
B. BANKINNET
C. INFINET
D.INDINET

Answer: C. INFINET

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5. What does ‘F’ in the FIMMDA stand for?

A. Financial
B. Future
C. Fixed
D. Federal

Answer: C. Fixed

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6. Which of the following statement is TRUE for the Fixed Income Securities

A. Holders of fixed-income securities are not owners, but the creditors
B. Fixed Income Securities are similar to equity
C. Commercial paper is not an example of Fixed Income Securities
D. None of the above

Answer: A. Holders of fixed-income securities are not owners, but the creditors

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7. Basel III introduced two required liquidity ratios. Choose from the options given below:
I. Liquidity Coverage Ratio
II. Capital Adequacy Ratio
III. Net Stable Funding Ratio
IV. McDonough Ratio

A. I and II
B. II and III
C. I and III
D. II and IV

Answer: C. I and III

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8. What is/are the RBI Guideline(s) for the development of Internet Rate Swaps?

A. Banks can use IRS for hedging and trading both
B.  MIFOR is a benchmark for IRS
C. Under ISDA agreement Banks can opt for dual Jurisdiction i.e., Indian as well as common law
D.  All of the above

Answer: D.  All of the above

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9. Which of the following agencies is associated with the business of mutual fund sector as a regulator?

A. PFRDA
B. FMC
C. SEBI
D. AMFI

Answer: C. SEBI

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10. The first and the foremost mutual fund of India, UTI, was established in:

A. 1960
B. 1963
C. 1966
D. 1969

Answer: B. 1963

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11. Which of the following terms is not used in banking and Finance?

A. Capital gain
B. Blue Chip
C. Market risk
D. Stare decisis

Answer: D. Stare decisis

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12. ECML technology is used in which of the following banking products/services?

A. Home Loans
B. Foreign Exchange Services
C. Digital Wallet
D. Internet Banking

Answer: C. Digital Wallet

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13.Which of the following terms is not used in Economics?

A. Exogenous                          
B. Depreciation
C. Deep Market                    
D. All are Economics term

Answer: D. All are Economics term

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14. Which of the following statements is true?

A. Banks cannot accept demand and time deposits from public
B. Banks can accept only demand deposits from public
C. Banks can accept demand and time deposits only from government
D. Banks can accept both demand and time deposits from public

Answer: D. Banks can accept both demand and time deposits from public

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15. Which of the following bank had the key role in concluding the biggest asset resolution in India with the consummation of the Rs. 16,189 crore takeover of Jaypee Cements by Ultratech?

A. State Bank of India
B. ICICI Bank
C. Axis Bank
D. Punjab National Bank

Answer: B. ICICI Bank

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Q. Which of the following statement is TRUE for the Fixed Income Securities?

Q1- 14 July 2017.png

Answer: A. Holders of fixed-income securities are not owners, but the creditors

Fixed Income Securities are debt instrument where the issuer; a corporation or government; agreed to pay a predetermined amount of interest on a fixed schedule.

Unlike equity where the investor is the owner, the holder or investor has the creditor relationship with the issuer of fixed income securities.

The different types of fixed income securities include government securities (G-Sec), corporate bonds, commercial paper, treasury bills, strips etc.

Learn more:

  1. About Fixed Income Securities-General
  2. INTRODUCTION TO FIXED INCOME SECURITIES

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Which of the following bank has signed up as a national supporter for the under 17 FIFA world cup, scheduled to kick start on October 2017?

Q2- 12 July 2017.png

Answer: B. Bank of Baroda

The Bank of Baroda has signed up as a national supporter for the under 17 FIFA world cup, scheduled to kick start in October 2017. It is the first Indian company to do so.

Learn more: FIFA ropes in Bank of Baroda as first ‘National Supporter’ for the FIFA U-17 World Cup


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Q. What is NOSTRO account?

Q1- 12 July 2017 (1).png

Answer: C. accounts which are generally held with a foreign bank on behalf of a domestic bank

Nostro in Latin literally means ‘ours’. Hence, Nostro account points at – “Our account with you”.

Take for example a bank in India, say Bank of Maharashtra (BoM),  gets a lot many remittances and trade related money sent home from UAE. However, BoM does not have a banking license in the UAE.

So BoM reaches out to a local bank of UAE, say United Emirates Bank, and asks them to open a bank account in BoM’s name, in UAE’s local currency dirham. On this, Bank of Maharashtra can do all sorts of transactions as if they were themselves present in the UAE and operating this account.

Nostro accounts are generally held in a foreign country (with a foreign bank), by a domestic bank (from our perspective, our bank). It obviates that account is maintained in that foreign currency.

In our example, Bank of Maharashtra’s account with United Emirates Bank in UAE.

Learn more:

  1. What are Nostro and Vostro accounts in banking? How are they used in payments and settlements?
  2. NOSTRO, VOSTRO, LORO Accounts

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