Free JAIIB Online Mock Test


Legal and regulatory aspects of banking

1. Which of the following is not part of the public sector banks?
1
State Bank of India
2
Regional Rural Banks
3
Nationalized Banks
4
None of the above

Explanation: Public Sector Banks (PSBs) are banks where a majority stake (i.e. more than 50%) is held by a government. The shares of these banks are listed on stock exchanges. There are a total of 21 PSBs in India. Since SBI, Nationalized Banks, Regional Rural Banks are parts of the public sector banks.

2. Under section 22 of BR Act, 1949 commencing or carrying on of banking business without a valid banking license from RBI:
1
Is permitted
2
Can be got regulated from RBI
3
Is prohibited
4
Can be continued where it has been cancelled and the liabilities towards the depositors have not been discharged

Explanation: No company shall commence or carry on the banking business without obtaining a certificate of registration from the Bank.

3. If an Indian bank has place of business in more than one state and no office in Mumbai or Kolkata, what is the amount of minimum capital:
1
Rs.1 lac
2
Rs.2 lac
3
Rs.5 lac
4
Rs.10 lac

Explanation: Section 11 in BR ACT,1949: Requirement as to minimum paid-up capital and reserves, if it has places of business in more than one State and no office in Mumbai or Kolkata, five lakhs of rupees.

4. Under Section 36 AA, who among the following cannot be removed from a bank by RBI?
1
Chairman
2
Director
3
Chief Executive Officer
4
None of the above

Explanation: RBI is empowered under section 36AA of BR Act to remove any chairman, director, chief executive officers or other officer or employee of a banking company. For this purpose, the bank has to be satisfied that it is necessary to do so.

5. What is the purpose to maintain cash reserve for CRR purpose?
1
Balance in currency chest
2
Cash in hand
3
Balance with other banks
4
Cash deposit with RBI for this purpose

Explanation: Cash reserve Ratio (CRR) is the amount of Cash that the banks have to keep with RBI. They have to maintain a certain percentage of their deposits in the form of cash and can use only the remaining amount for lending/investment.

6. The undertaking of an acquired bank may vest in the central government or in any company or corporation as directed by the central government:
1
TRUE
2
FALSE
3
Partly true
4
Cannot say

Explanation: The undertaking of an acquired bank may vest in the central government or in any company or corporation as directed by the Reserve Bank:

7. The share capital of RRBs is held by : (which one does match)
1
Sponsor Banks
2
Central Govt.
3
State Govt.
4
None of the above

Explanation: Regional Rural Banks are local level banking organizations operating in different States of India. They have been created with a view to serve primarily the rural areas of India with basic banking and financial services. However, RRBs may have branches set up for urban operations and their area of operation may include urban areas too. The share capital of RRBs is held by State Govt.

8. On which of the following a collecting bank will get protection u/s 131 of NI Act:
1
Crossed draft
2
Crossed promissory note
3
Crossed bill of exchange
4
Crossed cheque

Explanation: Section 131 of the Negotiable Instruments Act provides protection to a collecting banker who receives payment of a crossed cheque on behalf of his customers.

9. A collecting bank gets protection u/s 131 of NI Act only if:
1
The collection is in good faith and without negligence
2
The bank collects only on behalf of the customer
3
The bank collects only crossed cheques
4
a to c

Explanation: Section 131 of the Negotiable Instruments Act affords statutory protection in such a case where the customer's title to the cheque which the banker has collected has been questioned.

10. Which of the following actions can be done by a partner singly (i.e. falls within implied authority of a partner) to bind the partnership firm:
1
Sale of immovable property
2
Give guarantee to secure loan of other firm
3
Acknowledge debt already raised by the firm
4
Appoint an agent for the business of the firm

Explanation: Every partner is an agent of the firm and his other partners for the purpose of the business of the partnership, and the acts of every partner who does any act for carrying on in the usual way business of the kind carried on by the firm of which he is a member bind the firm and his partners, unless the partner so acting has in fact no authority to act for the firm in the particular matter, and the person with whom he is dealing either knows that he has no authority or does not know or believe him to be a partner.

11. Indemnified cannot recover which of the following from the indemnifier:
1
Damages paid by the indemnifier
2
All costs
3
All sums the indemnified had to pay under the contract
4
a to c

Explanation: A contract where one party promises to save the other from any loss caused to him by the conduct of promisor himself or any other person is called contract of indemnity. In case of indemnity contract the indemnifier, after compensating indemnity holders loss, cannot recover that amount from any person. But in contract of guarantee, if surety makes payment to creditor, he (surety) can recover that amount from principal debtor.

12. Under UCPDC provisions, where a letter of credit does not specify whether revocable or irrevocable this is treated as:
1
Irrevocable
2
Revocable
3
With recourse
4
a and c

Explanation: Irrevocable credits may not be modified or canceled by the buyer. The buyer's issuing bank must follow through with payment to the seller so long as the seller complies with the conditions listed in the letter of credit. Changes in the credit must be approved by both the buyer and the seller. If the documentary letter of credit does not mention whether it is revocable or irrevocable, it automatically defaults to irrevocable.

13. In a bill of landing the specified goods have been consigned to the named person. Such kind of Bill of landing is called:
1
Short bill of landing
2
Consigned bills of landing
3
Straight bill of landing
4
Clauses bill of landing

Explanation: A straight bill of landing is generally accepted to be one that makes the goods deliverable to a named consignee and either contains no words importing transferability or contains words negating transferability (such as "non-transferable").

14. A deferred payment guarantee is mostly based on a primary contract between the buyer and the seller.
1
True
2
False

Explanation: In a contract of deferred payment guarantee, the bank executes a guarantee on behalf of the buyer to the sellers bank. On the strength of such guarantee, the sellers banker discounts the sellers bills that may be drawn on buyer and pays the seller.

15. _______ is a document issued by a company acknowledging its indebtedness to the bearer or a registered holder:
1
Preference share
2
Debenture
3
Equity share
4
Sweat equity shares

Explanation: A debenture is debt instrument issued by company under its seal acknowledging is debt and containing provision with the regard to repayment of principal and interest.

16. Under the Registration Act, Mortgage by deposit of title deeds is ___________:
1
Must be registered
2
Not to be registered
3
Either 1 or 2
4
None of the above

Explanation: Mortgage by deposit of title deed, is not required to be created by way of a deed and does not require registeration.

17. In which kind of mortgage, there is substantial saving of payment of stamp duty:
1
English mortgage
2
Mortgage by conditional sale
3
Equitable mortgage
4
Simple mortgage

Explanation: An equitable mortgage in which the lender is secured by taking possession of all the original title documents of the property that serves as security for the mortgage. It gives the mortgagee the right to foreclose on the property, sell it, or appoint a receiver in case of non-payment. In this type of mortgage, there is substantial saving of payment of stamp duty.

18. The charge on movable assets to be created is known as:
1
Set-off
2
Assignment
3
Mortgage
4
Hypothecation

Explanation: Hypothecation is a way of creating a charge against the security of movable assets, which is much similar to pledge.

19. An unsecured debenture does not require any registration because it is not secured by _________:
1
Fixed charge
2
Floating charge
3
Both (a) & (b)
4
None of the above

Explanation: Unsecured debentures are debentures that are not supported by a collateral security. No specific assets will be set aside against unsecured debentures. It does not require any registration because it is not secured by fixed and floating charge.

20. Under the provisions of SARFAESI Act 2002, an institution making investment by way of buying the security receipts is known as_______:
1
Securitization Company
2
Reconstruction Company
3
Qualified Institutional Buyer
4
FII

Explanation: Qualified Institutional Buyers are those institutional investors who are generally perceived to possess expertise and the financial muscle to evaluate and invest in the capital markets.