You are on page 1of 175

1 Which of the following exercises control over banks from the opening to their winding up:

A. Reserve Bank of India and SEBI


B. SEBI and Govt. of India, NABARD
C. Govt. of India and RBI
D. Govt. of India, RBI and SEBI
C RBI and Govt. of India have been given the powers to exercise control under provisions of Banking Regulation Act and
Reserve Bank of India Act 1934

2 The banks in India, fall in which of the following category:


A. statutory corporations and private companies
B. companies and cooperatives
C. statutory corporations, companies and cooperative societies
D. companies, public sector banks, public sector companies
C Banks fall in the category of statutory corporations, companies and cooperative societies.

3 As per definition u/s 5 (b) of Banking Regulation Act 1934, which of the following is not correct in the context banking
business:
A. accepting deposits and giving loans out of such deposits
B. deposits are accepted from public
C. banks cannot refuse to accept deposits whosoever offers
D. accepting deposits and investing such deposits
C Banks can refuse acceptance of deposits from persons who are not found desirable and do not comply the requirement
under KYC.

4 Which of the following cannot accept deposits withdrawable by cheques:


A. banks
B. saving bank schemes run by the govt.
C. private credit societies
D. financial institutions
D U/s 49 A of Banking Regulation, organisation other than banks cannot accept deposits withdrawable by cheque. However,
the saving bank schemes run by Govt. or primary credit societies and any other persons or firms notified by govt. are
exempted from this prohibition.

5 Which of the following cannot accept deposits from the public:


A. banks
B. non-bank finance companies regulated by RBI
C. other companies regulated by Central govt.
D. other firms that are in the business of financial institutions
D Banks, NBFCs registered with RBI and other companies regulated by Govt., can accept deposit from public.

6 Which of the following is not correct statement in the context of Banking Regulation Act:
A. for carrying business of banking, licence from RBI is required
B. each banking company has to use the word bank as part of its name
C. no firm is allowed to use the word bank, banking or banking company as part of their name
D. subsidiaries of banks or in certain cases, the primary credit societies can not use the word bank.
D (a) to (c) are correct but as regards the subsidiaries of banks or in certain cases, the primary credit societies, they are also
allowed to use the word bank.
Page 1 of 175
7 Which of the following forms of business, other than banking business, can not be undertaken by banks:
A. buying and selling of foreign exchange or bullion and specie
B. providing of safe deposit vault
C. undertake and execute trusts
D. buying or selling of goods, directly or indirectly
D There are a no. of other activities, other than banking business, that banks can undertake. All these activities fall in this
category except at (d), which banks cannot do.

8 Which of the following does not match in the context of formation of banks:
A. State Bank of India constituted under SBI Act 1955
B. Nationalised Banks constituted under Nationalisation Act 1970 and 1980
C. RRBs constituted under RRB Act 1976
D. State Bank associate banks constituted under State Bank (Subsidiary Bank) Act 1959
B Nationalized banks were constituted under Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 & 1980.

9 The cooperative Banks fall under the following type of organisation:


A. cooperative society
B. banking company
C. public sector bank
D. any of the above
A Cooperative Banks are cooperative societies registered under any Central Act or State Act.

10 Which of the following is not correct regarding the purpose for which RBI was created under Reserve Bank of India Act
1934:
A. to regulate the issue of bank notes
B. to directly undertake regulation of banking system
C. to keep reserves for securing monetary stability in India
D. to operate the currency and credit system of India
B RBI does not directly deal with regulation of banking system under Reserve Bank of India Act except u/s 42 that deals with
CRR. RBI regulates the banks under provisions of Banking Regulation Act.

11 Banking Regulation Act, in addition to commercial banks, is applicable to which of the following:
A. primary agricultural credit societies
B. cooperative land mortgage banks
C. cooperative banks
D. none of the above
C Banking Regulation Act is not applicable to primary agricultural credit societies and cooperative land mortgage banks.
Cooperative banks are covered by the Act as a result of an amendment in the year 1965.

12 Banking Regulation Act deals with (which one is not correct):


A. regulation of banking business of banking companies
B. control over the management of banking companies
C. suspension or winding up of banking business or levying of penalties for violation of provisions of the Act
D. appointment of board of directors by RBI
D The Board of Directors of banks are not appointed by RBI.

Page 2 of 175
13 Which of the following is not a member of Central Board of directors of RBI?
A. Governor
B. 4 deputy governors appointed by Govt.
C. other directors nominated by RBI
D. Directors nominated by Govt.
C Directors are nominated by govt. and not by RBI.

14 RBI has the authority under Section 22 of Reserve Bank of India Act to issue bank notes with a denomination of:
A. minimum Re 1 and maximum Rs.1000
B. minimum Rs 2 and maximum Rs.1000
C. minimum Re 1 and maximum Rs.10000
D. minimum Rs. 2 and maximum Rs.10000
D RBI has powers to issue bank notes with a minimum Rs 2 and maximum Rs.10000, as the Central Govt. may decide on
recommendations of Central Board of RBI.

15 RBI undertakes govt. business as per Reserve Bank of India Act. Which of the following is not correct regarding this:
A. u/s 20, it has obligation to undertake business of Central Govt.
B. in case of state governments, RBI undertakes banking business based on the agreement with State governments u/s 21 A
C. RBI provides temporary advances to Govt. which are called liquidity adjustment facility
D. none of the above
C RBI provides temporary advances to govt. called ways and means advances to meet the gap between expenditure and flow
of revenue.

16 Which of the following is not power of RBI under Banking Regulation Act as a regulator and a supervisor of banks:
A. to issue licence for opening of a bank
B. to regulate cash reserves and statutory reserves
C. to undertake audit and inspection of banks
D. to give directions in public interest
B RBI has a no. of supervisory and regulatory functions as given in various options. But regulation of cash reserves (CRR) is
through Reserve Bank of India Act and not through Banking Regulation Act.

17 Govt. of India can give directions to RBI (which one is not correct):
A. u/s 7 (1) of Reserve Bank of India Act
B. u/s 22 of Banking Regulation Act
C. after consultation with Governor RBI
D. the direction should be in public interest
B Govt. can issue directions to RBI in public interest, under Reserve Bank of India Act after consulting the Governor.

18 Which of the following powers are not available with Central Govt. as per provisions of Banking Regulation Act 1949:
A. issue of licence for formation of banks u/s 22
B. approval to banks for formation of subsidiary for certain business u/s 19
C. power to acquire undertaking of banks
D. suspension of business and amalgamation of banks u/s 45
A The power to issue licence for formation of banks, is used by RBI not by Central Govt.

Page 3 of 175
19 Who exercises powers on cooperative banks from registration till winding up:
A. RBI
B. Govt. of India
C. Registrar of cooperative societies
D. all the above
C The Registrar of cooperative societies exercise a wide range of powers for cooperative societies from their registration to
winding up.

20 Which of the following statement is not correct:


A. public sector bank is established under a special statute
B. banking companies are registered under Banking Regulation Act
C. cooperative banks are registered under State Coop Societies Act
D. none of the above
B Banking companies are registered under Companies Act.

21 Associate banks of SBI are registered under:


A. Companies Act
B. Banking Companies Acquisition and Transfer of Undertaking Act
C. SBI Act 1955
D. none of the above
D Associate Banks of SBI have been created under provisions of State Bank (Subsidiary Banks) Act 1959.

22 RRBs have been created:


A. as a company under Companies Act
B. as cooperative societies
C. as a body corporate under a special statute
D. none of the above
C RRBs are created under RRB Act 1976.

23 The Banking Regulation Act was passed for:


A. creating various banks in India
B. creating Reserve Bank
C. regulating the banking companies
D. regulating the acceptance of deposit from public
C Banking Regulation Act was enacted to regulate the banking companies.

24 Which of the following statement is not matched correctly:


A. Central Govt. can give direction to RBI - correct
B. Central govt. is primary regulator of banks - false
C. if license of a bank is cancelled, the appeal lies with Central govt. - true
D. State govt. have also control over cooperative banks - false
D RBI is primary regulator of banks and state govt. also have control over cooperative banks.

Page 4 of 175
25 The cooperative banks that operate in more than one State, are registered under which of the following:
A. State coop societies Act
B. Reserve Bank of India Act
C. Multi-state coop societies Act
D. all the above
C The cooperative banks that operate in more than one State are registered under Multi-state cooperative societies act.

26 Central govt. can exempt the banks from provisions of Banking Regulation Act:
A. of its own, if satisfied
B. on request of the bank concerned
C. on recommendation of RBI
D. any of the above, depending upon the circumstances
C Central Govt. has the authority to exempt any bank from provisions of Banking Regulation Act on the recommendations of
RBI.

27 The company related issues of the banking companies are regulated by which of the following:
A. authorities under Companies Act
B. Reserve Bank of India
C. Central Govt.
D. Securities and Exchange Board of India
A The company related matters that are not banking issues, are regulated by the authorities under the Companies Act

28 Banks are undertaking trading in shares and securities and this activity is regulated by:
A. authorities under Companies Act
B. Reserve Bank of India
C. Central Govt.
D. Securities and Exchange Board of India
D Trading in shares and securities are regulated by SEBI irrespective whether it is done by banks or companies or individuals.

29 The term corresponding new banks is used in relation to which of the following:
A. State group banks
B. nationalized banks
C. foreign banks
D. new private banks
B Nationalized banks are the corresponding new banks under the provisions of Banking Companies (Acquisition and Transfer
of Undertaking) Act 1970 and 1980.

30 Central govt. can give direction to RBI only after consulting:


A. Governor RBI
B. Central Board of RBI
C. Finance Commission
D. President of India
A Central govt. can give direction to RBI in consultation with Governor RBI.

Page 5 of 175
31 The Companies Act applies to the banking companies:
A. irrespective whether the provisions of the Banking Regulation Act
B. insofar as the provisions are consistent with the provisions of Banking Regulation Act
C. in relation to their registration and winding up
D. all the above
C The Companies Act is applicable with regard to formation and winding up of a company.

32 The Banking Regulation Act applies to cooperative banks:


A. as provided in the State cooperative Act
B. as provided in the Central cooperative Act
C. as provided in the modification of Section 56
D. as applicable to other commercial banks
C With the introduction of section 56 of Banking Regulation Act in the year 1965, the cooperative banks have come under
regulator purview of RBI.

33 In public sector banks, the shareholding of the Central govt. is :


A. not less than 50%
B. 51% or more
C. more than 50%
D. less than 50%
A To be a public sector bank, the Central Govt. share holding must not be less than 50% in the capital of a bank.

34 A banking company requires ____ from ____ to undertake banking business as per provision of Section ___ of Banking
Regulation Act:
A. registration, RBI, 23
B. licence, RBI, 22
C. registration, Registrar of Companies, 24
D. certificate of commencement of business, Registrar of Companies, 24
B U/s 22 of Banking Regulation Act, banks are required to obtain licence from RBI to carry on banking business.

35 If a bank has to shift its branch in ____ (area), it requires RBI permission u/s 23 of Banking Regulation Act:
A. same district
B. same city
C. same town
D. same village
A Shifting of branch outside the same city, same town or same village does not require RBI permission.

36 Under Section 11 of Banking Regulation Act, the foreign banks have to deposit ___ arising out of their business in India
with, RBI:
A. 10% of their deposits
B. 20% of their deposits
C. 20% of their profit for each year
D. 20% of their net demand and time liabilities
C Foreign banks have to deposit 20% of their profit every year with RBI.

Page 6 of 175
37 Bank companies can promote a subsidiary for the business activities mentioned :
A. in the Resolution passed by their Board of Directors
B. in their Articles of Association
C. Section 6 (1) of Banking Regulation Act
D. Section 22 of Banking Regulation Act when issued licence by RBI.
C Banks can promote a subsidiary for undertaking a business activity mentioned in section 6 (1) of Banking Regulation Act,
provided that activity is part of the Object as per Memorandum of Association, if a banking company.

38 The shareholder of a banking company can exercise maximum ___ % of the total voting rights of all shareholders:
A. 2%
B. 5%
C. 10%
D. no such limit.
C A shareholder of a banking company can exercise maximum 10% of the total voting rights of all shareholders;

39 Banking companies can pay dividend only after they have written off (which one is not correct):
A. all bad debts
B. all capitalized expenses
C. all preliminary expenses
D. all share selling expenses
A Banks can pay dividend only after writing off all the capitalized expenses which include preliminary and share selling
expenses.

40 If the banking licence of a banking company is rejected:


A. it can carry the banking business with special permission of Central Govt.
B. it can carry the business as a money lender
C. it can carry the banking business in one State with permission of State govt.
D. it can carry the banking business for not more than 5 years there after.
B If the banking license is rejected, the bank cannot carry the banking business but it can carry business as money lender or
any other business.

41 If the banking licence of a company is cancelled, the appeal can be made to ___ within ___ from date of order rejecting the
licence:
A. High Court, 30 days
B. Supreme Court, 30 days
C. Central Govt., 30 days
D. Central Govt., 60 days
C A banking company can appeal to Central govt. within 30 days from date of order of rejection.

42 What is the maximum brokerage that the banks can give:


A. 2.5% of the paid up value of the share
B. 1% of the face value of the share
C. 2% of the face value of the share
D. 0.5% of the authorised capital
A The maximum brokerage that can be given by a banking company is restricted to 2.5% of the paid up value of the shares.

Page 7 of 175
43 Which of the following does not match:
A. a person cannot hold the shares of a banking company, as per limit under Reserve Bank of India Act - false
B. a banking company can hold the shares of another banking company - true
C. banking companies can give brokerage as a percentage of paid-up capital - true
D. there is no appeal against RBI decision on cancellation of license - true
D The appeal is possible to Central govt. within 30 days.

44 Majority of the directors i.e. ___ % of the directors should have the qualifications prescribed u/s 10 A (2) of BR Act:
A. 24%
B. 49%
C. 51%
D. 74%
C U/s 10 A (2) of Banking Regulation Act, at least 51% of the directors should have the prescribed qualifications.

45 If board of a bank is to be reconstituted u/s 10A of Banking Regulation Act, for the purpose of reconstitution, the directors
are removed:
A. by lots
B. by majority decision
C. by rotation
D. as per order fixed by RBI
A The directors are removed by lots and such decision is binding on all the directors.

46 If the Chairman of a bank is to be removed from office :


A. RBI has to give compensation to him
B. RBI has to give opportunity to him of being heard
C. RBI has to take the Board of the bank into confidence
D. RBI has to give him opportunity to continue as director
B Before removal of the Chairman, he has to be given an opportunity of being heard.

47 If RBI wants to remove Chairman of a bank and gives opportunity to the bank of being heard, RBI can pass the removal
order if there is no response from the bank for:
A. 15 days
B. 30 days
C. 2 months
D. 3 months
C Bank is given 2 months time by RBI of being heard for removal of Chairman. If there is no response from the bank, RBI can
pass the removal order.

48 U/s 36AB of Banking Regulation Act, RBI can appoint ___ in a bank:
A. workmen director
B. managing director
C. director
D. additional director
D RBI can appoint additional director when RBI is of the opinion that it is necessary to do so in public interest or in interest of
banking policy / depositors of the bank.

Page 8 of 175
49 In relation to removal of managerial personnel, the provisions of Section 36AA of Banking Regulation Act have:
A. overriding effect over other laws
B. persuasive effect over other laws
C. indirect effect over other laws
D. no effect on other laws
A U/s 36AA, Banking Regulation Act, RBI has powers to remove Chairman, Director or Chief Executive of a bank and this
section has overriding effect over other laws.

50 The fit and proper criteria relating to directors of a bank, is fixed by:
A. Central Govt.
B. Reserve Bank of India
C. Security and Exchange Board of India
D. Board of Directors of the concerned bank.
B Under corporate governance guidelines, RBI has the authority to prescribe the fit and proper criteria, in respect of directors
of the bank.

51 Which of the following statement does not match :


A. an ordinary director can hold office maximum for 8 years on a continuous basis - False
B. A company intending to do commence banking business, require licence from SEBI - False
C. the post of Chairman of a bank can be part-time also - True
D. none of the above match
A An ordinary director can hold office maximum for 8 years on a continuous basis.

52 If a chairman of a bank is removed by RBI, he can appeal to ___ within ___:


A. Governor RBI, 30 days
B. SEBI, 30 day
C. Central Govt., 30 days
D. Central govt., 2 months
C The appeal can be made by the chairman of a bank, who is removed by RBI, to Central Govt. within a period of 30 days of
date of order.

53 Under Section 36M, Banking Regulation Act, RBI can remove ___ of a bank:
A. Officer or other staff
B. Top Management Officers
C. Directors
D. Chairman
A RBI can remove an officer or other staff of a banking company u/s 36M of Banking Regulation Act.

54 In which of the following circumstances, RBI cannot cancel the licence of a banking company:
A. the banking company ceases to carry on its business
B. the banking company is unable to pay its depositors in full
C. the banking company has changed its registered office from one State to another State
D. all the above
C RBI can cancel the licence if the banking company ceases to carry on its business or the banking company is failing to pay its
depositors in full.

Page 9 of 175
55 Which of the following statement is correct regarding dividend payment by banks:
A. there are no restrictions on banks to pay dividend
B. the dividend cannot be paid without permission of RBI
C. dividend can be paid only when the capitalized expenses are completely written off
D. dividend can be paid out of past profits or current profits
C There are restrictions on payment of dividend by banks which include that the dividend can be paid out of current year
profits and only when all the capitalized expenses are written off.

56 Corporate governance involves promotion of interest of:


A. shareholders only
B. shareholders and employees only
C. shareholders, employees and customers only
D. shareholders, employees, customers and stakeholders
D Corporate governance is to ensure to promote the interest of shareholders, employees, customers and all stakeholders.

57 Corporate governance is based on the principle of:


A. corporate fairness
B. corporate transparency
C. corporate accountability
D. all the above
D Corporate governance is based on the principles of corporate fairness, transparency and accountability.

58 Corporate governance principals of 2004, are called:


A. CG principles of corporate governance
B. OECD principles of corporate governance
C. Corporate governance principles
D. ABC principles of corporate governance
B These are revised principles that have been approved by various governments all over the world.

59 In India, the corporate governance guidelines have been issued for banks by ___ based on the recommendations of ___
committee:
A. SEBI, Mitra Committee
B. SEBI, Ganguly Committee
C. RBI, Ganguly Committee
D. RBI, Mitra Committee
C RBI issued guidelines on fit and proper criteria for directors of banks on the basis of recommendations of Ganguly
committee.

60 As per RBI guidelines for corporate governance, RBI permission is required for acquisition of shares of a private bank, if it is:
A. 5% or more
B. 10%
C. 10% or more
D. 15% or more
C As per February 2004 guidelines, this is the requirement of RBI in the interest of diversified ownership of banks, so that no
single group entity should have a controlling interest in a bank.

Page 10 of 175
61 Large industrial houses are allowed to acquire by way of strategic investment, in shares of a private bank, not more than:
A. 2% of the capital of the bank
B. 5% of the capital of the bank
C. 10% of the capital of the bank
D. 20% of the capital of the bank
C The restriction is 10% so that the industrial groups should not have controlling interest.

62 U/s 21 of Banking Regulation Act, RBI issues directions to banks in respect of:
A. loans and advances
B. audit and inspection
C. capital structure of banks
D. corporate governance
A U/s 21 of Banking Regulation Act, RBI issues directions to banks in respect of loans and advances relating to margin, rate of
interest and other restrictions including selective credit control directives.

63 RBI can regulate acceptance of deposits including rate of interest on deposits by banks, under section ___ of ____:
A. 35, Banking Regulation Act
B. 35-A, Banking Regulation Act
C. 35, Reserve Bank of India Act
D. 45, Reserve Bank of India Act
B U/s 35A of Banking Regulation Act, RBI issues various directions in public interest, to banks. These guidelines include the
guidelines on deposits, customer service, KYC etc.

64 Banking Ombudsman settles disputes:


A. between two customers
B. between a customer and a bank
C. between two banks and between a customer & the bank
D. between a customer and the govt.
B The institution of Ombudsman has been created to settle the dispute between the banks and their customers. The earlier
provision of arbitration between two banks has been withdrawn in the year 2006.

65 RBI can issue directions to banks on loans and advances :


A. in the interest of Govt.
B. in the interest of borrowers
C. in the interest of public
D. in the interest of borrowers, govt., public and banks
C RBI can issue directions on loans and advances in the interest of public.

66 The purpose of issue of selective credit control by RBI is to regulate the availability of credit according to:
A. priority of borrowers
B. priority of RBI
C. risk involved in the loan transaction
D. national priority
D The selective credit control directives are issued by RBI with a view to make credit available to essential sectors of economy
according to national priorities.

Page 11 of 175
67 Which of the following prohibits, lending at very high (exorbitant) rates of interest and empowers reopening of such
contract:
A. Usurious Loans Act
B. Reserve Bank of India Act
C. Banking Regulation Act
D. Companies Act
A As per provisions of Usurious Loans Act, the loans cannot be given at exorbitant rates of interest. If loans are found to be at
high rates, the courts can intervene.

68 Which of the following provides that a transaction between a banking company and its borrower cannot be reopened by
courts on the ground that the rate of interest is excessive:
A. Section 12, Usurious Loans Act
B. Section 46, Reserve Bank of India Act
C. Section 21A, Banking Regulation Act
D. Section 21, Banking Regulation Act
C Section 21A of Banking Regulation Act provides that a transaction between a banking company and its borrower cannot be
reopened by courts on the ground that the rate of interest is excessive.

69 Which of the following statement does not match to its answer:


A. banks can lend any amount of loans to their directors - false
B. RBI issues directions to banks on loans and advances u/s 35A of Banking Regulation Act - true
C. Banking Ombudsman have been created by RBI u/s 35 A of Banking Regulation Act - true
D. When credit flow is regulated by RBI to particular sectors of the economy it is known as priority sector credit - false
B RBI issues directions to banks on loans and advance u/s 21 of Banking Regulation Act. The regulation of credit flow to
particulars sectors is called selective credit control.

70 Directions u/s 35A of Banking Regulation Act can be issued by RBI to:
A. a particular bank only
B. all banks uniformly
C. a particular bank or uniformly to all banks
D. not to a particular bank but generally to all banks
C Directions can be issued by RBI to a particular bank or generally to banks u/s 35 of Banking Regulation Act.

71 U/s 26 of Banking Regulation Act, the banks are required to file a return with RBI relating to:
A. unclaimed deposits
B. selective credit control advances
C. advances to sensitive sectors of the economy
D. position of high value bad loans
A U/s 26 of Banking Regulation Act, the banks are to send to RBI an annual return as on Dec 31 every year within 30 days
relating to unclaimed deposits.

72 Indian banks are required to transfer ___% of their annual profits to reserve fund under Banking Regulation Act:
A. 25%
B. 20%
C. 15%
D. 10%
B Banks incorporated in India are required to statutorily transfer 20% of their profits every year to a reserve fund.
Page 12 of 175
73 Every banking company has to maintain in India, certain amount of assets u/s 25 of Banking Regulation Act as at:
A. close of each half year
B. as at the close of business on the last Friday of each year
C. as at the close of business on the last Friday of each half year
D. as at the close of business on the last Friday of each quarter
D Such assets are to be maintained on a quarterly basis i.e. last Friday of each quarter.

74 Every banking company has to maintain assets in India, equal to ___% of ___ u/s 25 of Banking Regulation Act as at last
Friday of each quarter :
A. 75% of demand and time liabilities
B. 75% of net demand and time liabilities
C. 50% of net demand and time liabilities
D. 25% of demand and time liabilities
A Such assets equal to 75% of demand and time liabilities are to be maintained on a quarterly basis i.e. last Friday of each year.

75 If a bank fails to maintain cash reserve u/s 42 of Reserve Bank of India Act, it has to pay penal interest to RBI for first day at:
A. bank rate
B. bank rate + 3%
C. BPLR of the bank concerned
D. bank rate + 5%
B The penal interest for the first day is bank rate + 3% and for 2nd and subsequent days it is bank rate + 5%.

76 Which category of banks maintain cash reserve ratio u/s 18 of Banking Regulation Act:
A. nationalized banks
B. banking companies that are not scheduled banks
C. scheduled banks
D. cooperative banks
B Banking companies that are not scheduled banks have to maintain cash reserve ratio prescribe by RBI u/s 18 of Banking
Regulation Act. Other banks maintain CRR as per Section 42 of Reserve Bank of India Act.

77 Liquid assets maintained by banks u/s 24 of Banking Regulation Act are ____ of the cash reserves maintained by banks u/s
42 of Reserve Bank of India Act:
A. inclusive
B. exclusive
C. dependent
D. partly inclusive
B Liquid assets i.e. SLR is exclusive of the CRR.

78 If a bank fails to pay penalty imposed by RBI for non-maintenance of liquid assets u/s 24 of Banking Regulation Act, it can
be recovered:
A. by way of an appeal to Govt.
B. by filing suit in a civil court
C. by filing suit in a court not less than High Court
D. if it is a banking company, by filing appeal with Registrar of Company
B If a bank fails to pay penalty imposed by RBI and RBI has to recover through legal measure. RBI can file suit in a civil court.

Page 13 of 175
79 Which of following type of banks have to maintain cash reserve (CRR) under provisions of Law:
A. scheduled commercial banks only
B. non-scheduled commercial banks only
C. all types of banks including primary cooperative credit societies
D. scheduled and non-scheduled commercial banks.
D Scheduled banks maintain CRR u/s 42 of Reserve Bank of India Act and non-scheduled banks u/s 18 of Banking Regulation
Act.

80 Which of the following provision of Banking Regulation Act is not properly matched:
A. Section 26 - Unclaimed deposits
B. Section 21 - RBI authority to give directions to banks on loans and advances
C. Section 24 - maintenance of cash reserve
D. Section 17 - creation of reserve fund by bank from profits
C Section 24 of Banking Regulation Act deals with maintaining liquid assets i.e. SLR by banks and not cash reserve (CRR).

81 For the purpose of Section 42 of RBI, which of the following is not included in the demand and time liabilities:
A. saving bank and current deposits
B. capital and reserves
C. term deposits up to 1 year
D. borrowing
B Capital and reserves are part of the equity of the bank and are not taken as demand and time liabilities for CRR purposes i.e.
Section 42 of Reserve Bank of India Act.

82 U/s 11 (2) of Banking Regulation Act, foreign banks are required to ______, 20% of their profits for each year in respect of
all their business conducted in India:
A. maintain as reserve fund
B. maintain as special deposit
C. maintain as deposit with RBI
D. maintain as additional cash reserve
C Foreign banks are required to deposit with RBI and maintain the deposit, which should be equal to 20% of the profit for
each year.

83 The directions issued by RBI to banks, u/s 35A of Banking Regulation Act :
A. are binding on the banks only
B. are applicable to banks as well as public
C. are not binding on the bank but are only advisory in nature
D. are binding on the banks if they give acceptance to the same
A The directions of RBI to banks u/s 35A of Banking Regulation Act are binding on the banks. There are penalties for non-
compliance of such directives.

84 If there is a transaction of a bank with a borrower that violates the RBI guidelines:
A. the violation would invalidate the transaction
B. the bank will be liable for prosecution by RBI
C. the transaction will be automatically cancelled
D. all the above
B As per Supreme Court judgement in BoI Finance Ltd vs The Custodian, such transaction will not be invalidated but RBI can
initiate prosecution of the bank concerned.
Page 14 of 175
85 The liquid assets u/s 24 of Banking Regulation Act can be maintained by the bank in the form of:
A. cash in hand and bank balances only
B. cash in hand, bank balance and investment in gold or approved securities
C. cash in hand, bank balance and investment in gold only
D. cash in hand and investment in gold or approved securities only
B U/s 24 of Banking Regulation Act, the liquid assets i.e. SLR can be maintained as cash in hand, bank balance and investment
in gold or approved securities

86 Banking Regulation (Amendment) Act 2007 amended Section 24 (1) (2) of Banking Regulation Act. As a result :
A. the minimum SLR should be 25% of demand and time liabilities
B. the minimum SLR should be 25% of net demand and time liabilities
C. the minimum SLR should be 24% of net demand and time liabilities
D. the minimum SLR earlier fixed at 25% of net demand and time liabilities will be fixed by RBI
D Banking Regulation (Amendment) Act 2007 omitted Section 24 (1) (2) of Banking Regulation Act and thus provided that RBI
can fix up the SLR maximum up to 40% of net demand and time liabilities.

87 If penal interest is imposed by RBI for defaults in maintaining liquid assets (SLR):
A. RBI can waive the penal interest
B. RBI cannot waive the penal interest and has to recover
C. RBI can partly waive the penal interest
D. RBI has no option except to waive if the bank refuses to make the payment
A If RBI is satisfied, it can waive the penal interest imposed on a bank for non-compliance of maintaining SLR.

88 Which of the following does match:


A. there is no restriction on allowing loans and advances against its shares by a bank - false
B. a bank can lend to a firm in which its director is a partner - false
C. banks cannot grant loans to firms in which their directors are guarantors - true
D. none of the above
C Banks cannot grant loans on the security of their own shares. Further they also cannot lend to firms in which their directors
are partners or guarantors.

89 In the context of selective credit control, which of the following is correct:


A. RBI can specify the purpose for which advances may be or may not be granted.
B. RBI can give the direction to banks in general and not to a particular bank
C. RBI can give the direction in the interest of banking policy and for no other matter
D. none of the above
A RBI can specify the purpose of advance, it can give direction in general to all banks and to a particular bank also and
direction can be given in public interest or in the interest of banking policy.

90 In case of nomination for deposit accounts, the nominee can obtain payment of deposit:
A. before maturity in case of term deposit
B. during the life time of depositor,
C. even when there is direction from court to the contrary
D. give discharge on FDR for raising a loan after death of the account holder
A The nominee can obtain payment of FDR before maturity but cannot give discharge for obtaining loan. If there is a court
order, payment to be made as per court order only. Further, during the life time of account holder, he has no rights.

Page 15 of 175
91 When articles lying in safe custody of the bank, are handed over to the nominee after death of the account holders:
A. the bank gets valid discharge
B. the bank gets valid discharge only if it is with consent of the legal heirs
C. the bank gets valid discharge when no dispute is raised by the legal heirs
D. the bank get valid discharge only if there is a court direction to that effect.
A The bank gets valid discharge only when the articles are handed over to nominee after death of the account holder.

92 Which of the following provision does match in the context of nomination :


A. for deposit accounts - Section 45ZA of Banking Regulation Act
B. for safe custody of articles accounts - Section 45ZE of Banking Regulation Act
C. for safe deposit vault (locker) accounts - Section 45ZC of Banking Regulation Act
D. all the above match
A Section 45ZA relates to nomination in case of deposits, 45ZC to safe deposit of articles and 45ZE to safety lockers.

93 Which of the following tools are not used by RBI under selective credit control directives:
A. minimum margin for lending
B. ceiling on the level of credit
C. minimum rate of interest on advances to select commodities
D. none of the above
D All these tools are used by RBI to enforce selective credit control i.e. to effect the quantum and cost of credit.

94 Section 20 A of Banking Regulation Act provides that:


A. banks cannot grant loans on the security of their own shares
B. banks can write off the loans in the name of directors of banks with prior permission of RBI
C. banks cannot lend on the security of partly paid shares
D. banks cannot lend on the security of shares of private companies.
B As per section 20A of Banking Regulation Act, the banks cannot write off the loans given to directors of banks without
permission of RBI.

95 Which of the following rates of interest on advances are fixed by banks themselves:
A. ceiling rate on loans to exporters
B. loans under DRI
C. bench mark prime lending rate
D. ceiling rate on loans up to Rs.2 lac in priority sector
C Ceiling rate on loans to exporter, loans under DRI and Ceiling rate on loans up to Rs.2 lac in priority sector are fixed by RBI.
But BPLR is fixed by the bank concerned.

96 U/s 25 (1) of Banking Regulation Act, banks submit to RBI a return relating to ___ within ___ from end of every quarter:
A. assets maintained in India, one month
B. assets and liabilities in India, two month
C. capital adequacy ratio, 15 days
D. position of NPA, one month
A Banks are required to maintain as assets in India being 75% of their demand and time liabilities and for that they have to
submit a report to RBI every quarter within one month.

Page 16 of 175
97 If the last Friday is a holiday, the return u/s 25 (1) of Banking Regulation Act can be submitted to RBI relating to :
A. next day
B. previous day
C. next working day
D. preceding working day
D If last Friday for which the return is required to be submitted is a holiday, the return is to be submitted as on preceding
working day.

98 RBI can carry inspection of banks by exercising powers u/s ___ of ____:
A. Section 21, Banking Regulation Act
B. Section 35, Banking Regulation Act
C. Section 21, Reserve Bank of India Act
D. Section 35, Reserve Bank of India Act
B RBI can conduct inspection of banks by exercising powers u/s 35 of Banking Regulation Act.

99 If a bank makes appropriation from reserve fund created u/s 17 (1) of Banking Regulation Act, it has to report the matter
to ____ within ____ of such appropriation:
A. RBI, 30 days
B. RBI, 21 days
C. SEBI, 21 days
D. RBI and Central Govt., 21 days
B If a bank makes appropriation from reserve fund created u/s 17 (1) of Banking Regulation Act, it has to report the matter to
RBI within 21 days of such appropriation.

100 While taking a decision on the complaint filed by a customer, the Ombudsman :
A. follows the general guidelines issued by the govt., SEBI, RBI
B. takes into account the circumstances and frames its own rules
C. takes into account RBI directives
D. all the above
C As per Supreme Court judgement in Canara Bank vs PRN Upadhyaya, Ombudsman is to take into account the RBI directions.

101 The banking companies are required to prepare profit and loss account and balance sheet as at:
A. close of the calendar year
B. close of the financial year
C. close of the national year
D. last reporting Friday of March every year
B The banking companies are to prepare P&L account and balance sheet as on the last day of March every year, which is the
last day of the financial year.

102 Who has the powers to change the day for the purpose of preparation of profit and loss account and balance sheet:
A. Reserve Bank of India
B. Security & Exchange Board of India
C. Central Govt.
D. Institute of Chartered Accountants of India
C Central govt. through notification can change the day. It was changed from Dec 31 to Mar 31 in the year 1992.

Page 17 of 175
103 The balance sheet and profit loss account of a banking company is required to be audited by:
A. chartered secretary
B. any person qualified under any law to be an auditor of the company
C. auditors of the banking company
D. certified financial analyst
B Bank balance sheet is required to be audited by any person qualified under any law to be an auditor of the company
appointed as statutory auditor by RBI.

104 A banking company is required to submit ___ copies of the balance sheet and profit and loss account to ___, in addition to
RBI:
A. three, Registrar of Companies
B. two, Registrar of Companies
C. two, SEBI
D. three, Central govt.
A 3 copies are required to be submitted to Registrar of Companies.

105 When RBI conducts inspection of a bank, a copy of the inspection report:
A. should be given to the bank
B. is given to the bank on request of the bank
C. is given to the bank on direction of Central govt.
D. is not required to be given to the bank, being confidential matter
A A copy of the report is required to be given by RBI to the bank, without any request from the bank.

106 The Board for Financial Supervision is constituted by:


A. Security & Exchange Board of India
B. Reserve Bank of India
C. Serious Frauds Office of India
D. Central Govt.
B The Board for Financial Supervision is constituted by RBI.

107 The Central govt. can prohibit a banking company to accept deposit from public u/s 35 (4) of Banking Regulation Act, if
business of the company is conducted:
A. by violation of RBI directives
B. at a loss
C. to the detriment of interest of depositors
D. not in compliance of the Act
C If a banking company conducts its business to the detriment of its depositors, the Central govt. can prohibit such company
from accepting deposit from public.

108 Which of the following statement, does not match:


A. banks have to prepare balance sheet and profit and loss account as on last Friday of March every year - False
B. 2 copies of such profit and loss account and balance sheet is required to be submitted to RBI - True
C. RBI can order special audit of a bank, with consent of the Central govt. - False
D. none of the above
C Balance sheet and profit and loss account is prepared as on last day of March every year and 3 copies are to be submitted to
RBI. RBI can order special audit as per its judgement and discretion without any permission of Central govt.

Page 18 of 175
109 Which of the following statement is not a correct statement?
A. Central govt. can order RBI for inspection of a banking company
B. before publishing the inspection report of a bank, Central govt. has to give notice to the bank
C. Board for Financial Supervision is constituted by RBI
D. Foreign banks have to prepare profit and loss account and balance sheet in India, for the entire business they are transacting
including the business in India.
D Foreign banks are to prepare the balance sheet and profit and loss account for the business they are transacting in India
only.

110 Where a banking company fails to comply with _____, Central Govt. may order to acquire such banking company:
A. directions of RBI u/s 21 and 35A of Banking Regulation Act
B. direction of Central Govt.
C. directions of SEBI
D. provisions of Companies Act
A Central govt. may order acquiring a banking company, if it is satisfied on the report of RBI that the banking company has
failed to comply RBI directions u/s 21 and 35A of Banking Regulation Act.

111 U/s 38 of Banking Regulation Act, who can apply to High Court for winding up of a banking company:
A. Central Govt.
B. Reserve Bank of India
C. Security & Exchange Board of India
D. Registrar of companies.
B RBI can make application to High court for winding up a banking company u/s 38 of Banking Regulation Act.

112 Which of the following can order winding up a banking company if satisfied that the banking company is unable to pay its
debts:
A. High Court
B. RBI
C. Central Govt.
D. Registrar of companies
A High Court, on the basis of an application filed by RBI can order winding up of a banking company it is failing in paying its
debts.

113 If there is winding up proceeding against a banking company, the depositors of the banking company:
A. have to file the claims directly with the liquidator
B. have to file the claims through RBI
C. shall be deemed to have filed their claims
D. shall not be entitled to any claim
C If there is winding up proceeding against a banking company, the depositors of the banking company, shall be deemed to
have filed their claims.

114 Which of the following can order moratorium on a banking company:


A. Central Govt. on recommendations of RBI
B. RBI on recommendations of Central govt.
C. RBI on its own
D. Central govt. on its own
A RBI may apply to Central govt. for an order of moratorium in respect of a banking company.
Page 19 of 175
115 If a banking company is acquired, this undertaking is vested in:
A. Reserve Bank of India or Central Govt.
B. Central Govt. only
C. Central govt., a company created by central govt. only
D. Central govt., a company created by central govt. or a corporation, as directed by central govt.
D The undertaking of an acquired bank is vested in the Central govt. or in any company or corporation as directed by the
Central Govt.

116 In case of liquidation of a banking company, which of the following cannot be appointed a liquidator:
A. Reserve Bank
B. State Bank of India
C. any other person specified by RBI
D. none of the above
D The liquidator can be RBI, SBI or any other person specified by RBI.

117 If a false statement is made in a return or other document submitted by a bank under the provisions of Banking Regulation
Act, it is punishable with:
A. imprisonment only
B. fine only
C. fine and / or imprisonment
D. no punishment only a warning by RBI
C If a false statement is made in a return or other document submitted by a bank under the provisions of Banking Regulation
Act, it is punishable with imprisonment and/or fine.

118 A banking company has to prepare the balance sheet:


A. in the form prescribed by RBI
B. in the form prescribed by Central Govt.
C. in the form set out in the 3rd Schedule to the Banking Regulation Act
D. in the form prescribed by ICAI
C A banking company has to prepare its annual accounts in the form set out in 3rd Schedule to the Banking Regulation Act.

119 If under Section 30 (IB) of Banking Regulation Act, a special audit is conducted on the order of RBI, the expenses of such
audit are borne by:
A. Reserve Bank
B. Central Govt.
C. Bank concerned
D. sharing on a pro-rata basis
C If under Section 30 (IB) of Banking Regulation Act, a special audit is conducted on the order of RBI, the expenses of such
audit are borne by the bank concerned.

120 The annual audit of a banking company, is to be carried by a person qualified to be auditor of a company, as per provisions
of:
A. Section 29, Banking Regulation Act
B. Section 30, Banking Regulation Act
C. Section 29, Reserve Bank of India Act
D. Section 29, Companies Act
B The audit is to be carried u/s 30 of Banking Regulation Act
Page 20 of 175
121 Which of the following is a correct statement:
A. RBI can publish the information collected from a banking company in public interest
B. RBI cannot publish the information collected from a banking company under provisions of Banking Regulation Act
C. RBI cannot publish the information obtained during inspection of a banking company
D. none of the above
A RBI can publish any information, it deems appropriate, in public interest, that it obtained from a banking company.

122 Which of the following statement is correct:


A. Board for Financial Supervision is constituted by SEBI for supervision of mutual funds & companies.
B. Board for Financial Supervision is constituted by RBI for supervision of banks and FIs.
C. Board for Financial Supervision is constituted by Central govt. for supervision of public sector undertakings.
D. none of the above
B The Board for Financial Supervision is constituted by RBI for supervision of banks and FIs.

123 What are the provisions of section 31 of Banking Regulation Act regarding balance sheet and profit and loss account of a
banking company:
A. these are required to audited
B. these are required to be prepared as on March 31 every year
C. these are required to be published in a news paper within 6 months
D. all the above
C As per Sec 31 of Banking Regulation Act, the banking company has to publish its balance sheet and profit and loss account
within 6 months from the date to which it relate, in a newspaper in circulation at the place where the principal office is
located.

124 The banks, whose shares are listed on stock exchange, are required to publish their un-audited results in news papers on a
____ basis, as per ___ requirement:
A. half-yearly, RBI
B. quarterly, SEBI
C. half-yearly, SEBI
D. quarterly, RBI
B As per SEBI listing requirement, the banks having their shares listed on a stock exchange have to publish their un-audited
quarterly results in a news paper.

125 The banking company is required to submit to RBI 3 copies of its audited balance sheet within ___ and this period can be
extended by RBI for ____.
A. 3 months, 2 month
B. 2 months, 1 month
C. 2 months, 2 months
D. 3 months, 3 months
D The period is 3 months and can be extended by RBI for not exceeding 3 months.

Page 21 of 175
126 Foreign Banks are required to display in their principal office, a copy of the last audited balance sheet not later than:
A. the first Monday in August
B. the last day of June
C. the last Friday of June
D. the last Friday of July
A Foreign banks have to display in their principal office, a copy of the last audited balance sheet not later than the first
Monday in August of any year in which it carries on business.

127 The special audit ordered by RBI can be in respect of:


A. a transaction
B. a class of transactions
C. a period of transactions
D. any of the above
D The special audit ordered by RBI can be in respect of a transaction, class of transactions or a period of transactions, as
deemed appropriate by RBI.

128 U/s 27 of Banking Regulation Act, which of the following statement is required to be submitted by a banking company, to
RBI:
A. monthly return on liquid assets i.e. SLR, as on close of the last Friday of previous month
B. monthly return on cash balances i.e. CRR, as on close of the last Friday of previous month
C. monthly return on assets and liabilities in India as on close of the last Friday of previous month
D. quarterly return on assets in India as on close of the last Friday of previous quarter
C U/s 27 of Banking Regulation Act, a banking company is required to be submitted to RBI monthly return on assets and
liabilities in India as on close of the last Friday of previous month.

129 The banking companies are required to preserve records of various transaction for a period prescribed by ___ u/s ___ of
Banking Regulation Act:
A. Central Govt., 45Y
B. Central Govt., 45Z
C. RBI, 45Y
D. RBI, 45Z
A Central govt. is empowered to prescribe the period for preservation of various types of records u/s 45Y.

130 A bank has the authority to _____, u/s 45Z of Banking Regulation Act:
A. return paid instruments after expiry of prescribed period of preservation
B. return paid instruments even before the expiry of prescribed period of preservation
C. allow nomination facilities to the customer for deposit accounts
D. allow nomination facilities to customer for locker and safe custody of articles accounts
B U/s 45Z of Banking Regulation Act, the banks are authorised to return paid instruments to their customers even before the
end of the specified period of preservation of record.

Page 22 of 175
131 U/s 35 of Banking Regulation Act, the inspecting officer, can :
A. obtain statements or information relating to affairs of the banking company
B. examine a director of the banking company on oath
C. examine an officer of the banking company on oath
D. all the above
D The inspecting official for the purpose of inspection can obtain statements or information and may examine a director or an
officer of the banking company, on oath.

132 Which of the following is not correct regarding scrutiny of a bank, by RBI:
A. it can be conducted u/s 35 (1A) of Banking Regulation Act
B. the copy of the report can be given to the bank, if requested by the bank
C. RBI, otherwise, is under obligation to give copy of the report to the bank
D. scrutiny can be carried by one or more officers of RBI
C A copy of the scrutiny report can be given to the banking company, if requested by the banking company. Otherwise, RBI is
not under obligation to give copy of the report.

133 Which of the following is not correct regarding the Board for Financial Supervision:
A. the board is to meet at least once in a month
B. Governor RBI is Chairperson of the Board
C. Quorum for the meeting is three members
D. none of the above
D Board for Financial Supervision of RBI has Governor as the Chairperson. It has to meet at least once in a month. The quorum
for the meeting is 3 members.

134 If a banking company is acquired by the Govt., the compensation to shareholders is determined:
A. as per amount approved by SEBI
B. as per decision of the Registrar of Companies
C. as per Schedule 5 of B R Act
D. as per decision taken by the Govt. being a fair amount of compensation.
C The compensation to shareholders is determined as per Schedule 5 of Banking Regulation Act

135 If ___ wants the amalgamation of two banking companies, it can pass an order to that affect, under___:
A. Govt., Section 39 Banking Regulation Act
B. RBI, Section 66 of Companies Act
C. Govt., Section 396 of Companies Act
D. Govt., Section 44 of Reserve Bank of India Act
C In consultation with RBI, Govt. can order amalgamation of two banking companies u/s 396 of Companies Act.

136 Section 36AE of Banking Regulation Act deals with which of the following aspects:
A. order by Govt. for amalgamation of two banks
B. acquiring of a banking undertaking by the Govt.
C. imposing moratorium on a bank
D. merger of one bank with another bank in the interest of depositors
B U/s 36AE the Central Govt. can acquire the undertaking of banking company in certain cases.

Page 23 of 175
137 If a bank is acquired and a scheme is framed by the Central govt. in consultation with RBI, such scheme is binding on:
A. the Govt.
B. the acquired bank
C. the creditors and depositors
D. all the above
D If a scheme is prepared by the Central govt. u/s 36AF, in consultation with RBI it is binding on the Govt., the acquired bank,
the creditors, the depositors and all other persons having any rights or liabilities in respect of the acquired bank.

138 If on recommendations of RBI, a moratorium is imposed on a bank by the Govt., the total period of such moratorium can
be extended by govt. but not exceeding:
A. 12 months
B. 9 months
C. 6 months
D. 3 months
C If on recommendations of RBI, a moratorium is imposed on a bank by the Govt., the total period of such moratorium can be
extended by govt. but not exceeding 6 months.

139 The scheme of amalgamation or merger of a bank, during the moratorium period is prepared by:
A. the acquired bank
B. the transferee bank
C. RBI
D. Central Govt.
C The scheme of amalgamation or merger of a bank, during the moratorium period is prepared by RBI.

140 RBI can apply to High Court, the winding up of a banking company in which of the following circumstances:
A. if banks has failed to maintain minimum paid up capital and reserves
B. if bank is not entitled to carry on banking business in India u/s 22 of Banking Regulation Act
C. prohibition to accept fresh deposits u/s 35(4) of Banking Regulation Act
D. any of the above
D RBI can apply to High Court, the winding up of a banking company in all the above circumstances.

141 In case of winding up proceedings against a banking company, the liquidator has to make preferential payments u/s 43A of
Banking Regulation Act. The order of such payment shall be (which one is correct):
A. saving bank depositors up to Rs.250 - 2nd preference
B. other depositors up to Rs.250 - 1st preference
C. creditors as per Section 530 of Companies Act - 3rd preference
D. none of the above
A The preference will be to creditors as per Section 530 of Companies Act, then the saving bank depositors up to Rs.250 and
then other depositors up to Rs.250.

142 Voluntary winding up is ordered by High Court only when ____ certifies that the bank will be able to pay in full all its debts
as they accrue:
A. High Court
B. Bank concerned
C. liquidator
D. RBI
D No voluntary winding up is permissible unless RBI certifies that the bank will be able to pay its debts as they accrue.
Page 24 of 175
143 If a bank fails to produce any book or documents which is obligatory during the course of inspection u/s 35 of Banking
Regulation Act, by RBI, the punishment is:
A. fine up to Rs.5000 and imprisonment up to 1 month
B. fine up to Rs.2000 and no imprisonment
C. fine up to Rs.5000 and no imprisonment
D. fine up to Rs.2000 and imprisonment up to 1 month
B There is provision for fine only up to Rs.2000.

144 If a bank is prohibited to accept deposits by RBI u/s 35 (4) of Banking Regulation Act but it accepts deposits, there is
provision for:
A. fine up to Rs.1000 per day
B. fine up to Rs.2000 per day
C. fine up to equal the amount of deposit accepted
D. fine up to twice the amount of deposit accepted
D There is provision for fine up to twice the amount of deposit accepted.

145 If there is a default or contravention by a bank (for example non-reporting of Frauds), RBI can impose penalty ___ of
Banking Regulation Act:
A. Section 47 A,
B. Section 46 A
C. Section 46-B
D. Section 39 AC
A Such penalty can be imposed by exercising powers u/s 47 A of Banking Regulation Act.

146 State Bank of India has been constituted as a :


A. body corporate under SBI Act
B. banking company under SBI Act
C. society under SBI Act
D. public sector bank
A SBI has been incorporated as a body corporate under SBI Act 1955.

147 Which of the following appoints Chairman of State Bank of India:


A. Reserve Bank
B. RBI Governor
C. Central Govt.
D. Central Board of SBI
C SBI Chairman is appointed by Central Govt. He is also Chairman of SBI Associate Banks.

148 SBI conducts business for Central Govt. like collection of taxes, payment of pensions etc. and also other business entrusted
by RBI:
A. as agent of Central Govt.
B. as agent of RBI
C. as a banker to Central govt.
D. in all the above capacities
B Right to conduct govt. business is vested with RBI. SBI and other banks conduct govt. business as agents of RBI.

Page 25 of 175
149 As per section 51 of____ , the provisions of Banking Regulation Act are applicable to SBI:
A. Companies Act
B. Banking Regulation Act
C. Reserve Bank of India Act
D. Negotiable Instrument Act
B The provisions of Banking Regulation Act 1949 are applicable to SBI u/s 51 of Banking Regulation Act.

150 The major portion of shares of associate banks of SBI, is held by:
A. RBI
B. Central Govt.
C. SBI
D. public
C SBI holds the major portion of shares of associate banks.

151 The major portion of shares of Regional Rural Banks is held by:
A. Central Govt.
B. sponsor bank
C. state govt.
D. NABARD
A 50% of shareholding of RRBs is held by Central govt. The balance 35% is held by sponsor banks and 15% by the State govt.

152 The area of operation of RRBs is restricted to:


A. one state
B. one district
C. notified area
D. no restriction
C The area of operations of RRBs is restricted to the notified area.

153 The RRBs are managed by:


A. the Central Govt.
B. their Board of Directors
C. the Board of Directors of the sponsor banks
D. the State govt.
B RRBs have their own Board of Directors. But sponsor banks provide major support in management of affairs of RRBs.

154 Which of the following statement does not match:


A. RRBs are not required to maintain CRR - false
B. State Bank associate banks are not to maintain SLR - false
C. SBI can make regulations for carrying out the purposes of SBI Act in consultation with RBI and with prior approval of Central
Govt. - True
D. Central govt. cannot give directions to SBI in the matter of policy relating to public interest - True
D Central govt. can give directions to SBI in the matter of policy relating to public interest.

Page 26 of 175
155 The management of nationalized banks is governed by:
A. Banking Regulation Act
B. Banking Companies (Acquisition and Transfer of undertakings) Act 1970 & 1980
C. Nationalized Banks (Management and Misc. provisions) Scheme 1970, 1980
D. Companies Act 1956
C The management of nationalized banks is governed by Nationalized Banks (Management and Misc. provisions) Scheme
1970, 1980

156 In the Banking Regulation Act, a reference to a banking company is considered a reference to a ____ also, unless the
context otherwise requires:
A. body corporate
B. banking company
C. cooperative bank
D. none of the above
C In the Banking Regulation Act, a reference to a banking company is considered, a reference to a cooperative bank also,
unless the context otherwise provides.

157 What is the amount of minimum paid up capital and reserves for commencement or carrying on business as a cooperative
bank:
A. Rs.1 lac
B. Rs.5 lac
C. Rs.20 lac
D. Rs.100 lac
A The amount of minimum paid up capital and reserves is Rs.1 lac.

158 Section 19 of Banking Regulation Act provides for restrictions on the cooperative banks in ____ in other cooperative
societies:
A. acquiring interest
B. placing deposit
C. holding of shares
D. all the above
C As per Section 19 of Banking Regulation Act, there are certain restrictions on cooperative banks in holding of shares of other
cooperative societies.

159 U/s 31 of Banking Regulation Act, the state cooperative banks and central cooperative banks are required to submit
returns to:
A. NABARD only
B. RBI only
C. RBI and NABARD
D. RBI, NABARD and Central/State Govt.
C U/s 31 of Banking Regulation Act, the state cooperative banks and central cooperative banks are required to submit returns
to RBI as well as NABARD.

Page 27 of 175
160 The cooperative banks have to prepare their balance sheet and profit and loss account, as per the format prescribed in:
A. 2nd schedule of Reserve Bank of India Act
B. 3rd Schedule of Banking Regulation Act
C. concerned Act, under which the cooperative bank has been incorporated.
D. RBI directions
B The cooperative banks also prepare their balance sheet and profit and loss account, as per the format prescribed in 3rd
Schedule of Banking Regulation Act.

161 Banking Regulation Act was made applicable to cooperative banks by enacting:
A. Banking Laws (Application to Cooperative Societies) Act 1965
B. Banking Regulation (Application to Cooperative Societies) Act 1965
C. Banking Laws (Application to Cooperative Banks) Act 1965
D. Banking Laws (Cooperative Societies) Act 1965
A Banking Regulation Act was made applicable to cooperative banks by enacting Banking Laws (Application to Cooperative
Societies) Act 1965.

162 Which of the following statement is correct:


A. primary cooperative banks do not require licence from RBI.
B. provisions of Banking Regulation Act are not applicable on cooperative banks
C. a cooperative bank can be a primary coop bank, a state coop bank or a central coop bank
D. none of the above
C Primary coop banks also require licence from RBI and provisions of Banking Regulation Act are also applicable to
cooperative banks. Besides, a cooperative bank can be a primary coop bank, a state coop bank or a central coop bank.

163 A scheduled cooperative bank has to maintain cash reserve (CRR):


A. as per Section 24 of Banking Regulation Act
B. as per requirement of Societies Registration Act
C. as per Section 42 of Reserve Bank of India Act
D. as per rules framed by State govt. concerned.
C The scheduled cooperative banks have also to maintain CRR as per Section 42 of Reserve Bank of India Act.

164 State Bank and nationalized banks act as agents of RBI for:
A. carrying out transactions in govt. business only
B. payment of pensions only
C. collection of taxes only
D. transacting govt. business and other business entrusted by RBI
D State Bank and nationalized banks act as agents of RBI for transacting govt. business and other business entrusted by RBI.

165 Which of the following is ex-officio Chairman of associate banks of SBI:


A. Chairman of SBI
B. Governor RBI
C. Managing Director of SBI
D. Chairman appointed by Board of Directors of the concerned associate bank
A Chairman of SBI is also ex-officio Chairman of associate banks of SBI

Page 28 of 175
166 Who can be an auditor of a nationalized bank:
A. any person approved by RBI.
B. any person approved by ICAI
C. a person qualified to be an auditor of a company under Companies Act.
D. any of the above
C A person qualified to be an auditor of a company under Companies Act, can be an auditor of nationalized bank.

167 Public sector banks are represented by which of the following group:
A. SBI, nationalized banks, other domestic banks
B. Nationalized banks, SBI & associate banks, RRBs
C. Nationalized banks, SBI & associate banks, foreign banks
D. All domestic Banks, SBI & associate banks, RRBs
B Public sector banks include SBI and associate banks, nationalized banks and RRBs.

168 SBI was constituted by taking over the undertaking of:


A. Imperial Bank
B. Bengal Bank Limited only
C. Presidency banks
D. all the above
A SBI was constituted by taking over the undertaking of Imperial Bank.

169 Other than Central Govt. no other shareholders can exercise more than __% of the voting rights in SBI:
A. 1%
B. 2%
C. 5%
D. 10%
D Other than Central Govt. no other shareholders can exercise more than 10% of the voting rights in SBI.

170 SBI can carry which of the following types of business:


A. as an agent of RBI
B. business of banking u/s 5 (b) of Banking Regulation Act
C. other business as specified u/s 6 (1) of Banking Regulation Act
D. all the above
D SBI can carry all the above types of business.

171 State Bank of India can sell the shares of associate banks but such sale should not result in reduction of SBI shareholding
below __ % of the issued capital:
A. 74%
B. 51%
C. 50%
D. 33%
C State Bank of India can sell the shares of associate banks but such sale should not result in reduction of SBI shareholding
below 50 % of the issued capital:

Page 29 of 175
172 State Bank of India can remove the managing director of its associate banks after giving an opportunity to show cause with
approval of:
A. SEBI
B. RBI
C. Central govt.
D. all the above
B State Bank of India can remove the managing director of its associate banks after given an opportunity to show cause with
approval of RBI.

173 Audit of SBI associate banks is to be carried by auditors qualified to be appointed as auditors of a company as per
provisions of Companies Act and appointed by:
A. SEBI
B. Registrar of Companies
C. RBI
D. SBI in consultation with RBI
D Audit of SBI associate banks is to be carried by auditors qualified to be appointed as auditors of a company as per provisions
of Companies Act and appointed by SBI in consultation with RBI.

174 The share capital of RRBs is held by : (which one does match)
A. Sponsor Banks - 50%
B. Central Govt. - 35%
C. State Govt. - 15%
D. none of the above
C Share capital is held by Central Govt., sponsor banks and State govt. in the ratio of 50:35:15.

175 RRBs can carry which of the following types of business:


A. as an agent of sponsor bank only
B. business of banking u/s 5 (b) of Banking Regulation Act only
C. other business as specified u/s 6 (1) of Banking Regulation Act only
D. b and c both
D RRBs can conduct business of banking u/s 5(b) and other business specified u/s 6 (1) of Banking Regulation Act.

176 Who can audit the accounts of RRBs.


A. a person approved by ICAI
B. any persons approved by RBI
C. any persons approved by sponsor bank
D. a person qualified to be appointed as auditor of a company as per provisions of Companies Act.
D Audit of RRBs can be conducted by a person qualified to be appointed as auditor of a company as per provisions of
Companies Act

Page 30 of 175
177 Nationalized banks can raise capital in which of the following forms, as per provisions of Banking Companies (Acquisition
and Transfer of Undertaking) and FI Laws (Amendment) Act 2006:
A. by way of a public issue
B. by way of preferential allotment
C. by way of private placement
D. any of the above
D The capital can be raised by these banks by issuing equity or preference shares by way of a public issue or preferential
allotment or private placement.

178 In the capital of nationalized banks, the share of the Central govt. should not be less than:
A. 74%
B. 67%
C. 51%
D. 49%
C Central govt. should hold at least 51% of paid up capital of the nationalized banks.

179 In case of nationalized banks, a preference share holder can exercise, maximum ___ of the total voting rights:
A. 1%
B. 2%
C. 5%
D. 10%
A The maximum extent is 1% of total voting rights.

180 What is not correct regarding the directors of a nationalized bank:


A. whole time directors can be maximum - 4
B. central govt. official as director - 1
C. directors representing staff members including officers - 1
D. total no. of directors - 15
C There can be one director each, representing staff and officers.

181 A nationalized bank is required to hold annual general meeting within ____ of the date of forwarding the balance sheet
etc. to the central govt.
A. 3 weeks
B. 6 weeks
C. 2 months
D. 3 months
B A nationalized bank is required to hold annual general meeting within 6 weeks of the date of forwarding the balance sheet
etc. to the central govt.

182 The authorised share capital of a nationalized bank can be maximum:


A. Rs.2500 cr
B. Rs.2000 cr
C. Rs.1500 cr
D. Rs.500 cr
C As a result of Amendment Acts of 1994 and 1995, the authorised capital can be up to Rs.1500 cr divided into shares of Rs.10
each.

Page 31 of 175
183 Which of the following statement regarding, cooperative banks is not correct:
A. if a cooperative bank operates in one state, State laws are applicable
B. if a cooperative bank operates in more than one state, Central laws are applicable
C. the business of banking of cooperative banks is regulated by Banking Regulation Act
D. a primary agricultural credit society is also regulated by Banking Regulation Act
D A primary agricultural credit society is not regulated by Banking Regulation Act.

184 Which of the following types of cooperative societies are exempted from using the word bank, banker or banking, as part
of their name:
A. a primary credit society
B. a coop society formed for the protection of the mutual interest of coop banks
C. a coop society other than a primary credit society formed by employees of the State Bank, associated banks, nationalized bank.
D. all the above
D All the above types of cooperative societies are not to use the words bank, banker or banking as part of their name.

185 Which of the following restrictions is not applicable to cooperative banks in respect of loans and advances:
A. cannot be granted on the security of their own shares
B. loans cannot be granted to any of its directors
C. loans cannot be granted to firms or private companies in which any of its directors are partners or guarantors or managing
agents.
D. none of the above
D All the above restrictions are u/s 20 of Banking Regulation Act and cooperative banks have to follow these restrictions.

186 A coop society to function as a bank, obtains licence from:


A. NABARD
B. RBI
C. Concerned State Govt. if operation is in one State
D. Central govt. whether operation is in one state or more than one state
B A coop bank requires licence from RBI u/s 22 of B R Act, like other banks.

187 Opening of temporary branches by coop banks for the purpose of exhibitions, conferences, mela etc. up to a period of ___
does not require RBI permission:
A. 15 days
B. one month
C. 3 months
D. 6 months
B Opening of temporary branches by coop banks for the purpose of exhibitions, conferences, mela etc. up to a period of one
month does not require RBI permission:

188 For opening branches by cooperative banks, the application to RBI is required to be routed through:
A. State govt.
B. Central Govt.
C. SLBC of the concerned State
D. NABARD
D For opening branches by cooperative banks, the application to RBI is required to be routed through NABARD.

Page 32 of 175
189 Cooperative banks have to file return regarding cash balances and liquid assets with:
A. RBI only
B. NABARD only
C. RBI, NABARD and concerned State Govt.
D. RBI and NABARD
D Cooperative banks have to file returns relating to CRR and SLR to RBI under copy to NABARD.

190 A state cooperative bank has to submit copy of audited balance sheet to:
A. RBI only
B. NABARD only
C. RBI, NABARD and concerned State Govt.
D. RBI and NABARD
D Given answer is correct. No explanation is required.

191 Which out of the following is not correct regarding submission of copy of audited balance sheet by a cooperative bank :
A. it is submitted to RBI and NABARD
B. it is to be submitted within 3 months
C. three copies are required to be submitted
D. none of the above
B The balance sheet and profit and loss account are required to submitted within 6 months and not 3 months.

192 Winding up of a coop bank may be sought by RBI in which of the following situations:
A. bank has not been fulfilling the requirement of minimum paid up capital and reserves
B. bank is not entitled to carry on banking business in India u/s 22 of Banking Regulation Act
C. bank has been prohibited by RBI u/s 35 (4) of B R Act, to accept further deposits.
D. in any of the above circumstances
D Under any of the given situations, RBI may seek winding up of a coop bank.

193 A coop banks is deemed to be unable to pay its debtors if it refused to meet any lawful demand made at any of its
branches within ___ days, where RBI office is located:
A. same day
B. two working days
C. three working days
D. five working days
B A coop banks is deemed to be unable to pay its debtors if it refused to meet any lawful demand made at any of its branches
within 2 days, where RBI office is located and within 5 days, where RBI office is not located.

194 A coop banks is deemed to be unable to pay its debtors if it refused to meet any lawful demand made at any of its
branches within ___ days, where RBI office is not located:
A. same day
B. two working days
C. three working days
D. five working days
D A coop banks is deemed to be unable to pay its debtors if it refused to meet any lawful demand made at any of its branches
within 2 days, where RBI office is located and within 5 days, where RBI office is not located.

Page 33 of 175
195 If a cooperative bank wants insurance of its deposits with DICGC:
A. it has to get itself registered with DICGC
B. it has not be make any formal request to DICGC. Being a bank, insurance cover is automatically available
C. it has to get registration with DICGC with recommendations from RBI
D. it has to get registration with DICGC with recommendations from NABARD
A If a cooperative bank wants insuring of its deposits with DICGC, it has to get itself registered with DICGC.

196 The bank is under obligation to make payment of cheques issued by the customer under:
A. Section 10 of NI Act
B. Section 11 of Indian Contract Act
C. Section 31 of NI Act
D. Section 31 of Reserve Bank of India Act
C Duty to make payment of cheques issued by customers is as per Section 31 of NI Act. If bank fails to make the payment,
despite fulfillment of conditions by the customer, bank is liable for the loss to the customer.

197 Bankers obligation to make payment of cheques, is on account of the fact that:
A. banker customer relationship is that of debtor and creditor
B. bank gives undertaking in writing to each customer that bank will make the payment of the cheques
C. customer obtains in writing from the bank that bank will make payment of the cheques
D. there is implied contract between the bank and the customer.
A Banker obligation to make payment of cheques, is on account of the fact that banker customer relationship is that of debtor
and creditor.

198 Under which of the following, a protection is not available to the paying bank:
A. Section 10 of NI Act
B. Section 85 of NI Act
C. Section 89 of NI Act
D. Section 131 of NI Act
D U/s 131, the protection is available to the collecting bank against conversion and not to the paying bank. In other sections,
the protection is available to the paying bank.

199 Which of the following, relating to protection, does not match:


A. Section 10 NI Act - payment in due course
B. Section 85 (1) NI Act - payment of an endorsed cheque payable to order
C. Section 85A NI Act - payment of an endorsed demand draft payable to order
D. Section 89 NI Act - payment of bearer cheque
D U/s 89, NI Act, the protection is available to the paying bank in case of materially altered cheque.

200 If a bank makes payment of a crossed cheque it gets protection u/s ___, if the payment is otherwise in order:
A. Section 131 NI Act
B. Section 128 NI Act
C. Section 124 NI Act
D. Section 106 NI Act
B Section 131 deals with protection to collecting bank and section 124 or 106 do not deal with the protections. Section 128
provides protection to the paying bank, if payment of a crossed cheque is made which otherwise in order.

Page 34 of 175
201 Section 31 of NI Act i.e. banker obligation to make payment of cheque applies to:
A. customer only
B. bank only
C. bank and customer both,
D. neither bank nor customer.
B Section 31 of NI Act imposes duty on the bank to make payment of cheques issued by the customer, provided conditions
such as sufficient balance, funds properly available for payment of the cheque etc., are satisfied by the customers.

202 Bank is under obligation to pay cheque u/s 31 NI Act, if the funds are properly available. Which of the following
circumstances are treated as funds available to pay the cheque:
A. the banker has not exercised its right of set off for amount due from customer
B. there is no order from court or any other lawful authority restraining the bank from making payment
C. both the above
D. only (b) above
C The funds are treated to be available if both the conditions at (a) and (b) are satisfied.

203 U/s 31 of NI Act, the banker is under obligation to pay when duly required to do so, which means that:
A. cheque should be properly drawn, only
B. cheque should be signed by the drawer (customer) only
C. cheque can be signed by agent of drawer only
D. all / any of the above
D Both the above conditions should be satisfied i.e. cheque should be properly drawn and also the cheque should be signed
by the customer or his agent.

204 If a bank refuses to make payment of a cheque wrongfully, the bank is liable to compensate the ___, in case he suffers any
loss:
A. holder
B. payee
C. endorsee
D. drawer
D If the cheque is dishonoured wrongfully, the bank is liable to compensate the drawer (and no one else) for loss if any.

205 If bank makes payment of a cheque disregarding crossing by the drawer, the bank is liable to:
A. true owner only
B. payee only
C. endorsee only
D. drawer only
A Where the bank makes payment of a cheque disregarding crossing by the drawer, the bank is liable to the person who has
suffered loss i.e. the true owner (payee or endorsee) of the cheque and not the drawer.

206 If a bank is wound up, what type of right, the payee of a cheque, has?
A. payee has no claim against the bank
B. payee has a claim against the drawer only
C. payee has a claim as a creditor of the bank
D. payee can either recover the amount from the bank or from the drawer.
C The payee of a cheque is deemed to be creditor of the bank in case of failure of a bank before obtaining the payment and he
has a claim on the bank.
Page 35 of 175
207 Section 10 of NI Act deals with which of the following aspects:
A. obligation of the bank to make payment of a cheque
B. payment in due course
C. protection to the paying bank for making payment of a bearer cheque
D. protection to the collecting bank for collecting a cheque for a customer
B Section 10 deals with the payment in due course.

208 To treat a payment as a payment in due course which of the following conditions need not be satisfied:
A. payment as per apparent tenor of the cheque
B. in good faith and without negligence
C. payment must be made to a customer
D. payment to the person in possession of the instrument
C There is no such condition that payment should be made to a customer. Compliance of other conditions is essential.

209 Protection is available to bank u/s ___ of NI Act, for making payment of a cheque, which is materially altered, if the
alteration is not apparent:
A. Section 10
B. Section 85
C. Section 89
D. Section 128
C It is Section 89 of NI Act which provides protection.

210 If a signature of a drawer are forged on a cheque and are similar to the signatures on record:
A. the bank cannot debit the account of the customer and if account is debited, bank is liable
B. the bank cannot debit the account but if the forgery is in the knowledge of the customer, bank is not liable
C. the bank is liable for forgery, even if the payment of the cheque has not been made
D. the bank is not liable if the forgery is done in connivance with the drawer
A A forged cheque is not a mandate of the customer. Hence bank cannot debit the account of the customer. If account is
debited, the debited amount has to be restored by the bank. (Supreme Court judgement in Canara Bank vs Canara Sales
Corpn and others).

211 In a joint account of X and Y, a cheque is presented in clearing and paid. Later on it is found that signatures of X are
genuine but that of Y are forged.
A. the bank cannot debit the account of the customer. Hence the bank is liable
B. the bank cannot debit the account but if the forgery is in the knowledge of the customer, bank is not liable
C. the bank is liable for forgery, even if the payment of the cheque has not been made
D. the bank is not liable if the forgery is done in connivance with the drawer
A A forged cheque is not a mandate of the customer. Hence bank cannot debit the account of the customer. If account is
debited, the debited amount has to be restored by the bank. (Supreme Court judgement in Bihta coop Development and
Cane Marketing Union vs Bank of Bihar).

Page 36 of 175
212 The payment of a materially altered cheque was made by the bank and alteration was not visible despite reasonable care
in passing the cheque. Later on when customer raised a dispute and insisted for examination of the cheque through ultra-
violet lamp, it was found that the cheque was materially altered. Under the circumstances:
A. the bank is liable for the negligence
B. the bank is liable for making payment of a materially altered cheque
C. the bank is liable for not taking adequate precautions and having shown negligence in not using the ultra violet lamp
D. the bank took reasonable care and not liable.
D Using advance technology including ultra-violet lamp is not an obligation when reasonable care is otherwise exercised.
Hence bank is not liable as per Supreme Court judgement in Bank of Maharashtra vs Automotive Engg. Co.

213 A customer lost his cheque book, but he could not inform the bank about loss of cheque book:
A. customer is negligent and cannot claim damages from the bank, if there is loss to the customer due to negligence of the bank
B. If cheque leave is misused, by forgery, the bank shall not be liable
C. customer should inform the bank as it is his duty to do so.
D. none of the above
D The customer has no duty to inform the bank and if there is any loss to the customer due to action of a bank on such cheque
such as due to forgery, the bank shall be liable.

214 A collecting bank gets protection for collecting a cheque, subject to certain conditions, u/s ___ of ____:
A. 131, NI Act
B. 31, NI Act
C. 31, RBI Act
D. 131A, NI Act
A Protection to collecting bank is available against conversion, in the process of collection of a cheque u/s 131 of NI Act and
for collection of DD u/s 131A of NI Act.

215 A collecting bank gets protection for collecting a demand draft subject to certain conditions, u/s ___ of ____:
A. 131, NI Act
B. 31, NI Act
C. 31, RBI Act
D. 131A, NI Act
D Protection to collecting bank is available against conversion, in the process of collection of a cheque u/s 131 of NI Act and
for collection of DD u/s 131A of NI Act.

216 If a bank collects a cheque for a customer, which actually does not belong to him, it is called:
A. material alteration
B. forgery
C. fraud
D. conversion
D Dealing with the property of 3rd parties unauthorisedly, is called conversion. Hence if a bank collects a cheque for a
customer, which actually does not belong to him, it is called conversion. Such offence is punishable.

Page 37 of 175
217 Which of the following conditions is an essential condition for getting protection against conversion by a bank:
A. collection is for a customer
B. collection is of a crossed cheque
C. collection is in good faith and without negligence
D. collection should be of an order cheque only
D To get protection, the conditions at (a), (b) and (c) only, are mandatory.

218 If a bank has collected a cheque in a newly opened account after complying with KYC guidelines, but the first deposit was
not in cash and conversion takes place in the account:
A. the bank shall still get the protection in case of conversion
B. the bank shall not get the protection in case of conversion
C. the bank shall get the protection in case of conversion if the amount of cheque is nominal
D. the bank shall not get the protection in case of conversion if the amount of cheque is large
A If an account has been opened after complying with KYC requirement and first deposit is not in the form of cash, it does not
affect rights of the bank to get protection, in case of conversion.

219 A bank receives a cheque from its customer for collection which he had not crossed. Bank collects the cheques by putting
its own stamp for the purpose of collection. Later on it turned out to be a case of conversion:
A. the bank shall not get the protection
B. the bank shall get the protection as crossing is not an essential condition
C. the bank shall get the protection since at the time of collection, the cheque was specially crossed
D. the bank shall get protection, if the cheque was a bearer cheque.
C One of the condition for protection against conversion, is that the cheque should be crossed, generally or specially. By
putting the stamp, the bank has crossed the cheque specially. Hence, bank gets protection.

220 To show that the bank was not negligent for getting protection against conversion:
A. the customer has to prove that bank has not taken all precautions that are required of a prudent bank in collecting a cheque
B. the customer has to prove that bank was negligent in taking all precautions that are required of a prudent bank in collecting a
cheque
C. the bank will have to prove that bank had taken all precautions that are required of a prudent bank in collecting a cheque
D. it will be assumed that the bank had taken all precautions that are required of a prudent bank in collecting a cheque
C To show that the bank was not negligent for getting protection against conversion, the bank will have to prove that bank
had taken all precautions that are required of a prudent bank in collecting a cheque

221 A bank branch, newly established in a locality, opened a saving bank account in the name of X, on the introduction of a
municipal councilor, who is not having an account. Later on conversion took place in the account:
A. bank is liable for the conversion for not obtaining information from an existing customer
B. bank is liable for conversion for not following appropriate procedure
C. bank is not liable if bank had verified the antecedents of municipal councilor
D. bank is liable if bank even if it verified the antecedents of municipal councilor
C Bank shall be protected against conversion, if bank had verified the antecedents of the introducer.

Page 38 of 175
222 Under the current KYC norms, which of the following documents cannot be obtained for the purpose of identification of
the customer:
A. letter from a recognised public authority
B. telephone bill
C. identity card issued by his employer to bank satisfaction
D. passport or PAN
B The documents to be used for identification include pass port, PAN card, Voter I-card, driving licence, I-Card issued by his
employer to bank satisfaction, letter from recognised public authority. Telephone bill is the document that can be taken for
proof of residence.

223 Under the current KYC norms, which of the following documents cannot be obtained for the purpose of verification of
proof of residence of the customer:
A. bank account statement
B. electricity bill
C. ration card
D. driving licence
D The documents include telephone bill, electricity bill, bank statement, ration card, letter from relative with whom the
account holder resides. The driving licence is used as a document for identification.

224 To get protection against conversion, the cheque or demand draft should be crossed as:
A. generally crossed
B. specially crossed
C. not-negotiable or account payee crossed
D. any of the above
D The condition regarding crossing is that the instrument should be crossed in any manner i.e. general crossing or special
crossing or not-negotiable or account payee crossing.

225 X appointed Y his agent and authorised Y that he can get cheques in X name collected through account of Y. Later on Y
misappropriated the amount of certain cheques:
A. the bank was negligent in accepting such instruction. Hence bank is liable
B. the bank did not take adequate precaution due to which bank is liable
C. bank is not liable, as there was express authority from the customer
D. despite express authority from customer, the bank is liable for conversion.
C Where the customer has given specific authority to the agent to use his own account for the transactions relating to the
principal, the bank gets protection, as account of the agent shall be treated to be account of the principal.

226 In which of the following situations, the collecting bank shall not be held liable for conversion:
A. cheque deposited by X in his personal account while it was drawn in his name in his official capacity
B. cheque of a large amount deposited by Y in his account although bank was aware about the poor financial position of Y
C. cheque in the name of partnership firm, deposited by one partner in his personal account
D. cheque in the name of a proprietorship firm, which were deposited by the proprietor in his individual account
D If a cheque in the name of a proprietorship firm is deposited by the proprietor in his personal account, it is deemed as same
account. Hence bank shall not be held liable for conversion.

Page 39 of 175
227 The law relating to indemnities is laid down as per:
A. Section 131 and 133 of Negotiable Instrument Act
B. Section 121 and 122 of Indian Evidence Act
C. Section 124 and 125 of Indian Contract Act
D. Section 126 and 127 of Indian Contract Act
C The law relating to indemnities is laid down as per Section 124 and 125 of Indian Contract Act.

228 X entered into a contract with Y whereby X undertook to save Y from the loss caused to him by conduct of X or conduct of
any other person. Such contract is a contract of :
A. indemnity
B. guarantee
C. insurance
D. any of the above
A Where in a contract, one party promises to save the other party from loss caused to him by the conduct of promisor himself
or the conduct of any other person, it is called indemnity as per Section 124 of Indian Contract Act.

229 Indemnity is defined u/s ___ of ____:


A. Section 126, Indian Contract Act
B. Section 125, Indian Contract Act
C. Section 124, Indian Contract Act
D. Section 126, Indian Evidence Act
C The definition of indemnity is found in Section 124, Indian Contract Act

230 Where a person promises to another, to save him from the loss caused due to conduct of promisor or the conduct of 3rd
parties, such person is called:
A. promisor
B. guarantor
C. indemnity holder
D. indemnifier
D The person who gives indemnity is called, indemnifier and the person who is indemnified is called indemnity holder.

231 If a person promises to another to save him from the loss caused due to conduct of promisor or the conduct of 3rd parties,
the person to whom promise is made, is called:
A. promisor
B. guarantor
C. indemnity holder
D. indemnifier
C The person who gives indemnity is called, indemnifier and the person who is indemnified is called indemnity holder.

232 A contract of insurance is an example of:


A. contract of guarantee
B. contract of indemnity
C. contract of guarantee or indemnity
D. none of the above
B A contract of insurance is an example of a contract of indemnity, wherein the insurance company promises to save the
person against the loss caused by conduct of insurance company or 3rd parties.

Page 40 of 175
233 In a contract of indemnity, there are ___ parties:
A. one party, the indemnifier
B. two parties, the insurer and the insured
C. two parties, the indemnifier and the indemnity holder
D. two parties, the guarantor and the beneficiary.
C In a contract of indemnity, the two parties are the indemnifier and the indemnity holder.

234 In a contract of indemnity, the liability of:


A. indemnifier is primary
B. indemnifier is secondary
C. indemnity holder is primary
D. indemnity holder is secondary
A In a contract of indemnity, the liability of the indemnifier is primary and indemnity holder is not a liable party.

235 In a contract of indemnity, which of the following parties does not exist:
A. indemnifier
B. indemnity holder
C. the person on whose behalf the indemnity is given
D. none of the above
C In a contract of indemnity there is no person on whose behalf the indemnity is given. There are only two parties i.e.
indemnifier and indemnity holder.

236 Which of the following statements is a correct statement:


A. the liability of the indemnifier occurs due to actions of 3rd parties
B. the liability of the indemnifier occurs due to his own actions
C. the liability of the indemnifier occurs when the indemnity holder suffers loss
D. none of the above
C The liability of the indemnifier occurs when the indemnity holder suffers loss. That loss may be due to conduct of the
indemnifier or the 3rd parties.

237 Which of the following statements are correct:


A. customers can demand issue of duplicate demand draft without indemnity
B. indemnities given by customers are mere formalities and do not have any legal value
C. the indemnities obtained by the bank cover only the principal amount.
D. none of the above
D Customer can demand duplicate draft by giving indemnity only. The indemnities can be enforced and these are not mere
formalities. The indemnities cover the principal as well as the interest and other costs associated with the transaction.

238 If the indemnity holder wants to be compensated he should ensure that (which one is not correct):
A. he acts within the scope of his authority
B. he does not contravene any direction of the indemnifier
C. he does not suffer any loss
D. none of the above
C Indemnity holder has to ensure that he acts within the scope of his authority and does not contravenes the direction given
by the indemnifier.

Page 41 of 175
239 What is the maximum extent up to which the indemnity holder can be indemnified:
A. for the damage suffered.
B. for the costs associated with the transactions
C. for the amount paid for compromise of a suit
D. all the above
D The indemnity holder is entitled to be indemnified for the damages, costs and the amount paid for compromise of a suit.

240 In the situation of a compromise, the indemnity holder need not satisfy which of the following conditions for recovering
the amount from the indemnifier:
A. the compromise is in line with the order of the indemnifier
B. the compromise is otherwise prudent
C. the indemnifier had specifically authorized the indemnity holder to compromise
D. none of the above
D In case of a compromise, the indemnity holder should satisfy all the conditions at (a), (b) and (c) for recovering the amount
from the indemnifier:

241 In case of indemnity, the risk covered is:


A. subsisting
B. continuous
C. contingent
D. all the above
C In case of indemnity, the risk is contingent (i.e. may arise or may not arise) and in case of guarantee, it is subsisting.

242 In a contract of indemnity, the indemnifier is to make good the loss:


A. as soon as it occurs
B. within the prescribed period in the contract of indemnity
C. after the person on whose behalf the indemnity is given has not made good the loss
D. all the above
A In a contract of indemnity, the indemnifier is to make good the loss as soon as it occurs without waiting for whether the
person on whose behalf the indemnity has been given has made good the loss or not.

243 In which of the following situations, the banks do not ask for indemnity:
A. issue of duplicate demand draft or travellers cheque
B. issue of duplicate FDR
C. settlement of deceased account claim case in favour of legal heirs
D. none of the above
D Banks ask for indemnity in all the cases given at (a), (b) or (c) to save themselves from the loss caused to the banks for such
actions.

244 Which of the following statement is not correct in the context of indemnity:
A. indemnities obtained by banks are stamped as agreements
B. if the agreement of indemnity is witnessed, it becomes indemnity bond
C. on an indemnity bond, the stamp duty rate is ad valorem.
D. none of the above
D All the statement given in the question, are correct.

Page 42 of 175
245 In a bank guarantee, the banks undertake to guarantee the:
A. financial commitments of their borrowers only
B. performance of contracts by their borrowers only
C. financial commitments of their borrowers and performance of contracts by their borrowers
D. none of the above
C In a bank guarantee, the banks undertake to guarantee the financial commitments of their borrowers and/or performance
of contracts by their borrowers

246 In case of a guarantee, there are ___ contracts:


A. one contract between the bank and the beneficiary
B. two contracts i.e. between the bank and the beneficiary and between the beneficiary and bank customer
C. three contracts i.e. between the bank and the beneficiary, the beneficiary and bank customer and between the bank customer
and the bank
D. none of the above
C In case of a guarantee, there are three contracts i.e. between the bank and the beneficiary, the beneficiary and bank
customer and between the bank customer and the bank.

247 If a bank guarantee is issued by a bank in lieu of customer requirement to deposit a cash security or earnest money, it is a:
A. financial guarantee
B. performance guarantee
C. deferred payment guarantee
D. any of the above
A It is a financial guarantee where in bank promises the beneficiary to pay, if the applicant fails to pay.

248 Bank B issued a guarantee whereby it assured a 3rd party that the borrower will perform the contract entered into
between the borrower and the 3rd party, failing which the bank shall compensate the 3rd party. It is:
A. an indemnity
B. a financial guarantee
C. a performance guarantee
D. a deferred payment guarantee
C It is a performance guarantee, since bank is guaranteeing the performance of the contract between the borrower and the
3rd party.

249 Banks make payment on invocation of a guarantee by the beneficiary:


A. when the applicant i.e. borrower allows them to do so
B. after obtaining proof of non-performance of contract by the applicant
C. on the basis of mere demand by the beneficiary due to default by the applicant
D. after receipt of court orders
C Generally the banks do not go into the technicalities of the transactions. The guarantees are issued with such provisions,
that the demand made by the beneficiary will be met by the bank, once the beneficiary declares default by the applicant.

Page 43 of 175
250 Which of the following is correct regarding a contract of guarantee:
A. it is dependent on the underlying contract between the beneficiary and the applicant
B. the liability under the contract will be determined by the applicant and the beneficiary together
C. it is independent contract despite the fact that there is an underlying contract between the beneficiary and the applicant
D. the payment shall be made by the bank when the default is proved beyond doubt and the applicant accepts the default.
C The contract of guarantee is independent contract despite the fact that there is an underlying contract between the
beneficiary and the applicant

251 If buyer of machinery wants to purchase machinery from supplier on a long term credit basis and the machinery supplier is
agrees to supply the machinery on the basis of a bank guarantee, which type of guarantee shall be required:
A. financial guarantee
B. performance guarantee
C. deferred payment guarantee
D. performance-cum-deferred payment guarantee
C In such circumstances, the deferred payment guarantee is required. The payment is to be made by the buyer in this case
over a long time period (i.e. on a deferred basis).

252 If bank has to issue a deferred payment guarantee (which one is not true):
A. bank has to carry appraisal similar to in case of sanction of a term loan
B. bank has to assess the ability of the borrower to honour payment of instalment on due date
C. bank has to assess the sources of funds to honour payment of instalment on due date.
D. all the above
D A deferred payment guarantee covers a transaction similar to a term loan where the long term viability has to be
established, to ensure that the borrower shall be able to meet his future liability on a long term basis out of the future
profits.

253 Which of the following statement is correct in the context of a bank guarantee:
A. the liability of the bank is secondary and that of the borrower primary
B. the liability of the bank is primary and that of the borrower secondary
C. the liability of the bank and that of the borrower is primary
D. the liability of the bank as well as that of the borrower secondary
B When the bank issues a bank guarantee, on the contract of guarantee, the liability of the bank is primary and that of the
borrower secondary although the bank is to recover the money from the applicant.

254 Courts normally refuse to grant injunctions against banks from making payment under the guarantee:
A. except in case of special equities in favour of the person on whose behalf the guarantee has been given
B. except in case of frauds
C. because guarantees are based on commercial contracts
D. all the above
D Courts normally refuse to grant injunctions against banks from making payment under the guarantee except in case of
special equities in favour of the person on whose behalf the guarantee has been given or in case of frauds, because
guarantees are based on commercial contracts.

Page 44 of 175
255 Supreme Court has a general direction for courts that injunctions should not be granted against banks from making
payment except in case of fraud or in case of irretrievable injustice, because:
A. the banks are not to see the technicalities
B. the banks are to make payment on mere notice of default and demand for payment
C. trust in internal and international commerce would be irreparably damaged.
D. all the above
C As per Supreme Court direction, the commitments of banks should be free from interference by the courts. Otherwise, trust
in internal and international commerce would be irreparably damaged.

256 Bank-B gave bank guarantee on behalf of XYZ Limited, which later on went into liquidation. The beneficiary demands
payment from the bank:
A. bank is liable to make the payment
B. bank is not liable since the transactions between the applicant and the beneficiary has become void due to operation of law
C. bank is not liable since the bank will not be able to recover the amount from the applicant.
D. bank is not liable since the applicant has recourse against the liquidator.
A Here the applicant has changed his position due to operation of law (winding up) due to which the bank is not discharged
from its liability, as the guarantee is an independent contract from the contract between the applicant and the beneficiary.

257 Which of the following parties in a bank guarantee are properly named:
A. the borrower on whose behalf the guarantee is issued - beneficiary
B. the party in whose favour the guarantee has been issued - applicant
C. the bank that has issued the bank guarantee - surety
D. none of the above
C The party on whose request the bank guarantee is issued is called applicant, in whose favour it is issued is called beneficiary
and the bank is called surety i.e. guarantor.

258 What is the liability of the bank under a bank guarantee where the main contract on the basis of which the guarantee was
issued, has been suspended:
A. bank is not liable since the recovery of amount of guarantee from applicant has become doubtful
B. bank is not liable since the transactions between the applicant and the beneficiary does not exist any more
C. bank is liable to make the payment
D. bank is not liable since the terms of main contract do not exist any more.
C As the guarantee is an independent contract from the contract between the applicant and the beneficiary, the bank
continues to be liable.

259 If there are exceptional circumstances which make it impossible for the bank as a guarantor, to reimburse himself, even if
the bank ultimately otherwise would have succeeded to recover:
A. bank can be stopped by the courts from making payment under the guarantee
B. bank cannot be stopped by the courts to make the payment under the guarantee
C. bank will still has to make the payment
D. none of the above
A As per Supreme Court direction, the courts can grant injunction on payment by the bank in case of fraud and special equity
in favour of the guarantor i.e. irretrievable loss.

Page 45 of 175
260 While issuing a bank guarantee, the banks should ensure that (which one is not correct):
A. the amount of maximum liability must be indicated
B. the period up to which the guarantee should be indicated
C. bank should obtain counter indemnity from the customer on whose behalf the guarantee is issued
D. none of the above
C Bank should obtain counter guarantee from the customer on whose behalf the guarantee is issued.

261 While issuing bank guarantees, the banks make mention of the period during which the guarantee shall subsist. In
addition, the period during which the claim should be made is also indicated. These time periods are called:
A. claim period, guarantee period
B. guarantee period, claim period
C. guarantee period, guarantee period
D. claim period, claim period
B The period during which the guarantee shall subsist is called validity period and the period during which the claim should be
made is called claim period.

262 If a claim is not made by the beneficiary during the claim period mentioned in the guarantee:
A. the bank is absolved of its liability
B. the bank remains liable for unlimited period
C. the claim can be made within the prescribed period of limitation under Limitation Act 1963
D. the claim can be made maximum within 3 years.
C If a claim is not made by the beneficiary during the claim period mentioned in the guarantee, the claim can be made within
the prescribed period of limitation under Limitation Act 1963 as per amendment to Section 28 of the Act wef January 01,
1997.

263 For a bank, the bank guarantee issued is:


A. a current liability
B. a contingent liability
C. a recorded obligation
D. an asset
B The bank guarantee is a contingent liability for the bank, as the liability to pay may arise if the applicant defaults in meeting
his financial commitment. But if there is not default, the bank shall not be called up to pay.

264 Before making payment of a bank guarantee, the bank is to ensure that the invocation is properly made. Which of the
following may not be an important element for treating the invocation as proper:
A. the invocation has been made by the person competent to make the invocation
B. the cause of action arose during the validity period
C. the amount is within the amount limit of the guarantee
D. the invocation is within the claim period given in the guarantee
D While the precautions at (a), (b) and (c) are essential, the invocation can be within the limitation period as per provisions of
Limitation Act instead of as per the claim period mentioned in the guarantee.

Page 46 of 175
265 Which of the following is correct regarding the time limit during which the bank can be sued from date of cause of action,
on a bank guarantee, issued by the bank:
A. 30 years in case of guarantees issued in favour of govt. and 3 years in favour of other persons
B. 30 years in case of guarantees issued in favour of other persons
C. 3 years in all cases
D. 3 years in case of guarantees issued in favour govt.
A From date of cause of action, the bank can be sued in a court within 30 years, if the guarantee is in favour of Govt. and 3
years in other cases, which is the limitation period prescribed under Limitation Act.

266 A party on whose request the opening bank issues the letter of credit is called:
A. beneficiary
B. applicant
C. supplier
D. seller
B The party is called applicant. The beneficiary is the person in whose favour the LC is issued.

267 The party in whose favour the LC is issued by the opening bank is called:
A. buyer
B. importer
C. applicant
D. beneficiary
D The party in whose favour the LC is issued by the opening bank on he request of the buyer of goods i.e. applicant, is called,
the beneficiary i.e. the seller or exporter.

268 The bank that issues the LC undertakes to (which one is more appropriate):
A. make payment to the beneficiary
B. pay to the beneficiary, whether it is able to recover from applicant or not, against the documents
C. pay to the beneficiary, whether it is able to recover from applicant or not
D. pay to the beneficiary, whether it is able to recover from applicant or not, against the documents mentioned in the LC
D The obligation of the issuing bank arises only when the beneficiary delivers the documents stated in the letter of credit.

269 The bank that issues the letter of credit is known as:
A. confirming bank
B. advising bank
C. opening bank
D. negotiating bank
C The bank that issues the LC is called issuing bank. The one that hands over the LC to the beneficiary after verification of its
apparent authenticity is called, advising bank. The bank that makes payment to the beneficiary against receipt of
documents, is called negotiating bank and the bank that gives guarantee of the opening bank, for payment, is called
confirming bank.

Page 47 of 175
270 The bank that makes payment to the beneficiary on receipt of documents as per terms of LC is called:
A. confirming bank
B. advising bank
C. opening bank
D. negotiating bank
D The bank that issues the LC is called issuing bank. The one that hands over the LC to the beneficiary after verification of its
apparent authenticity is called, advising bank. The bank that makes payment to the beneficiary against receipt of
documents, is called negotiating bank and the bank that gives guarantee of the opening bank, for payment, is called
confirming bank.

271 The bank that verifies the apparent authenticity of the LC and then hands over the LC to the beneficiary is called:
A. confirming bank
B. advising bank
C. opening bank
D. negotiating bank
B The bank that issues the LC is called issuing bank. The one that hands over the LC to the beneficiary after verification of its
apparent authenticity is called, advising bank. The bank that makes payment to the beneficiary against receipt of
documents, is called negotiating bank and the bank that gives guarantee of the opening bank, for payment, is called
confirming bank.

272 The bank that gives guarantee of the opening bank to make the payment, if the opening bank fails to pay, is called:
A. confirming bank
B. advising bank
C. opening bank
D. negotiating bank
A The bank that issues the LC is called issuing bank. The one that hands over the LC to the beneficiary after verification of its
apparent authenticity is called, advising bank. The bank that makes payment to the beneficiary against receipt of
documents, is called negotiating bank and the bank that gives guarantee of the opening bank, for payment, is called
confirming bank.

273 The advising bank is also known as:


A. confirming bank
B. notifying bank
C. negotiating bank
D. opening bank
B The advising bank is called notifying bank also.

274 What is the obligation of the advising bank:


A. to make payment of documents when presented
B. to send the documents to opening bank, when received from the beneficiary
C. to confirm the apparent authenticity of the LC
D. to handover the LC to the beneficiary without verifying the genuineness of LC
C The advising bank has no obligation to make payment against documents. It has to verify the apparent authenticity of the
LC and send the LC to the beneficiary, thereafter.

Page 48 of 175
275 Which of the following banks is called the negotiating bank:
A. the bank that verifies the apparent authenticity of LC
B. the bank that makes the payment to the beneficiary on receipt of documents as mentioned in LC
C. the bank that guarantees the payment to the beneficiary in case the opening bank does not pay
D. the bank that purchases the documents at a discount, if these are not drawn as per terms of LC
B The negotiating bank makes payment to the beneficiary and then claims the payment from the opening bank, on the basis
of documents mentioned in the LC.

276 If name of the bank which shall make the payment, is also mentioned by the opening bank, such bank is called:
A. confirming bank
B. nominated bank
C. opening bank
D. Notifying bank
B Where the LC specifies the bank which is to negotiate the document, the bank is called nominated bank.

277 The liability of a confirming bank is:


A. similar to the advising bank
B. similar to the negotiating bank
C. similar to the opening bank
D. to pay even when the documents are not as per terms of LC
C The confirming bank liability is similar to the opening bank, as it has given guarantee for payment by the opening bank.

278 The bank that makes payment to the negotiating bank as per instructions of the opening bank, is called:
A. confirming bank
B. reimbursing bank
C. advising bank
D. negotiating bank
B The bank that makes payment to the negotiating bank as per arrangement with the opening bank, is called the reimbursing
bank.

279 If under an LC, the payment of the bills is to be made by the applicant immediately, these are called:
A. irrevocable LCs
B. acceptance LCs
C. revolving LCs
D. sight LCs
D If under an LC, the payment of the bills is to be made by the applicant immediately, these are called sight LCs. The
documents are delivered to the applicant, against full payment only.

280 The LCs under which the payment of the bills is to be made after a pre-fixed period, are called:
A. irrevocable LCs
B. acceptance LCs
C. revolving LCs
D. sight LCs
B Such LCs are called usance LCs or acceptance LC, where the documents are delivered to the beneficiary against his
acceptance of documents for payment.

Page 49 of 175
281 The LC that can be cancelled or amended by the opening bank is called:
A. revolving LC
B. revocable LC
C. irrevocable LC
D. standby LC
B Such LCs are called revocable LCs. But if it could not be cancelled or amended, it is called irrevocable LC.

282 If nothing is stated whether the LC is revocable or not,


A. it is treated irrevocable
B. it is treated revocable
C. it is treated as invalid
D. it not an LC. It is called a bank guarantee
A As per UCPDC rules, such LCs are treated as irrevocable LC, which cannot be cancelled or amended.

283 Under an LC, the bills of exchange are also called:


A. documents
B. documents
C. document of title to goods
D. promissory notes
B The term draft is used for bill of exchange in a letter of credit.

284 An airway bill is a (which one is correct):


A. receipt of goods issued by the airlines company
B. document of title to goods
C. negotiable instrument
D. none of the above
A An airway bill is a receipt of goods issued by the airlines company, but it is not a document of title to goods nor it is a
negotiable instrument.

285 A bill of lading is (which one is not correct)


A. a receipt of goods issued by the shipping company
B. a document of title to goods
C. a negotiable instrument
D. none of the above
D A bill of lading is a receipt of goods issued by the shipping company. It is a document of title to goods and a negotiable
instrument.

286 Which letter of credit involves three banks i.e. issuing bank, advising bank and a 3rd bank:
A. red clause LC
B. back to back LC
C. standby LC
D. without recourse LC
B In a back to back LC, the 2nd LC is issued by a 3rd bank on the strength of original LC.

Page 50 of 175
287 The LC in which the beneficiary is not liable, if the documents are dishonoured by the opening bank, once these are
negotiated by the negotiating bank:
A. red clause LC
B. back to back LC
C. standby LC
D. without recourse LC
D In a without recourse LC, if the documents are dishonoured by the opening bank, once these are negotiated by the
negotiating bank, the beneficiary is not liable.

288 In a letter of credit, all the parties to a transaction are required to comply with the terms of LC:
A. as far as possible
B. strictly
C. should appear to have made efforts
D. should make effort to comply
B The terms are required to complied with strictly by all the parties to a transaction in LC.

289 If the documents submitted by the beneficiary of an LC are not as per terms of LC:
A. these can be accepted by the negotiating bank
B. these can be accepted by the negotiating bank for confirmation of the applicant
C. these cannot be accepted by the negotiating bank
D. these can be accepted by negotiating bank subject to consent of the opening bank
C If the documents submitted by the beneficiary of an LC are not as per terms of LC, these cannot be accepted by the
negotiating bank.

290 In a letter of credit, the invoice is a document:


A. recording only the quantity of the goods sold
B. evidencing sale of goods by the seller to the buyer
C. recording only the price of the goods sold
D. evidencing the despatch of the goods by the seller to the buyer
B The invoice is a document that evidences the sale of goods by the seller to the buyer.

291 Which of the following types of LCs can be confirmed:


A. revocable LC
B. irrevocable LC
C. without recourse LC
D. acceptance LC
B Only the irrevocable LCs can be confirmed, since in case of revocable LC, the confirming bank shall remain liable, even when
the LC is cancelled.

292 In which of the following types of LCs, the beneficiary can transfer his rights in favour of 3rd parties:
A. without recourse LC
B. revocable LC
C. transferable LC
D. back to back LC
C In case of transferable LCs, the beneficiary can transfer his rights in favour of 3rd parties. But such transfer can take place
only once.

Page 51 of 175
293 The LC in which the beneficiary is given the pre-shipment credit facility on the strength of the LC, is called:
A. transferable LC
B. green clause LC
C. red clause LC
D. back to back LC
C The red clause LC provides for availability of pre-shipment credit to the beneficiary. In the green clause LC, in addition to pre-
shipment, there can be facility of warehouse storage of goods.

294 The LC in which the beneficiary is given the facility of pre-shipment credit and may given the facility the warehouse storage
of goods, on the strength of the LC, is called:
A. transferable LC
B. green clause LC
C. red clause LC
D. revolving LC
B The red clause LC provides for availability of pre-shipment credit to the beneficiary. In the green clause LC, in addition to pre-
shipment, there can be facility of warehouse storage of goods.

295 In a letter of credit there is a provision of repeated negotiation of documents subject to payment of previously negotiated
documents by the applicant. It is called:
A. transferable LC
B. green clause LC
C. red clause LC
D. revolving LC
D In a letter of credit there is a provision of repeated negotiation of documents subject to payment of previously negotiated
documents by the applicant and within the overall total limit.

296 If two parties are doing regular trade and use LC and want to avoid issue of LC repeatedly, which of the following is most
suitable LC:
A. transferable LC
B. green clause LC
C. red clause LC
D. revolving LC
D In a letter of credit there is a provision of repeated negotiation of documents subject to payment of previously negotiated
documents by the applicant and within the overall total limit. Such LC is most suitable for such parties.

297 Which of the following types of bill of lading is normally accepted in a letter of credit:
A. shipped bill of lading
B. received for shipment bill of lading
C. transportation bill of lading
D. charter party bill of lading
A Banks prefer the shipped bill of lading because other types of Bills of lading carry additional risk.

Page 52 of 175
298 As per UCPDC-600, the negotiating bank gets a reasonable period, maximum ___ days after receiving the documents from
the beneficiary to make the payment:
A. 5 working days
B. 5 banking days
C. 7 working days
D. 7 banking day
B The negotiating bank gets maximum 5 banking days to pay or refuse to pay. Similarly, the issuing bank after receiving
documents from negotiating bank also gets maximum 5 banking days.

299 As per UCPDC-600, the opening bank gets a reasonable period, maximum ___ days after receiving the documents from the
negotiating bank to examine whether the documents are as per LC or not:
A. 5 working days
B. 5 banking days
C. 7 working days
D. 7 banking day
B The negotiating bank gets maximum 5 banking days to pay or refuse to pay. Similarly, the issuing bank after receiving
documents from negotiating bank also gets maximum 5 banking days.

300 Which of the following is not correct in connection with UCPDC-600:


A. it has come into operation wef July 01, 2007
B. it has 39 Articles
C. it has 12 additional articles to cover the electronic transactions called eUCP
D. it has totally changed the UCPDC 500 document
D The UCPDC 600 has brought modifications to UCPDC 500 and has not totally changed the UCPDC 500.

301 Deferred payment guarantee is issued by bank in case of following type of business transactions:
A. guarantee for purchase of raw material by the applicant (buyer)
B. guarantee for purchase of capital goods by the applicant on instalment basis
C. guarantee for performance of a contract
D. guarantee for payment of tax liabilities over a no. of year
B Deferred payment guarantee is issued by bank in case purchase of capital goods by the applicant in instalment, on a long
term basis.

302 The period of transaction that is covered by a deferred payment guarantee is generally:
A. between 6 months to 3 years
B. between 6 months to 7 years
C. between 3 years to 7 years
D. between 1 year to 5 years
C Since the buyer of capital asset is to make the payment in instalment to the supplier, the period is on the pattern of a term
loan.

Page 53 of 175
303 Before the deferred payment guarantee is issued, the appraisal of the proposal is carried by banks, similar to :
A. letter of credit limit
B. term loan
C. cash credit limit
D. any of the above
B In DPG, the repayment is involved in instalments over a long period out of future profits, hence the appraisal is on the
pattern of term loan.

304 What is the similarity between a term loan and a deferred payment guarantee (which one is not correct)
A. these are sanctioned for a common purpose i.e. purchase of capital assets
B. these are repaid over a long period of 3 to 7 years or more
C. these are repaid out of the future profits and not by sale of the asset purchased
D. both are recorded in schedule 9 of balance sheet of the bank
D A TL and DPG have the above similarities. The DPG is not recorded in the main balance sheet. Rather it is recorded in the
notes on accounts.

305 How term loan and deferred payment guarantee are different from each other (which one is not correct):
A. term loan is fund based and DPG is non-fund based
B. the outlay of funds in TL is immediate and in DPG it is contingent
C. DPG is recorded in the main part of the balance sheet of the bank while the TL is recorded as a contingent liability in notes on
accounts
D. none of the above
C TL is recorded in the main part of the balance sheet of the bank while the DPG is recorded as a contingent liability in notes
on accounts

306 Normally, what is the amount of advance payment made by the buyer to the seller:
A. 15-20%
B. 10-15%
C. 10-20%
D. 5-10%
B Normally the advance payment is in the range of 10-15%. Further, 10-15% is paid on receipt of capital equipment and the
balance is paid in instalment of 3-7 years.

307 Bank is required to make payment against DPG, if:


A. if one or more instalments have become due and not paid by the applicant (buyer)
B. the major portion has become due for payment and not paid by the applicant (buyer)
C. the entire amount has become due for payment and not paid by the applicant (buyer)
D. the entire amount has become due but partly paid by the borrower
A Bank is required to make the payment, when even a single instalment has become due and bank has not paid.

308 Which of the following terms are mandatorily included in a deferred payment guarantee:
A. the supply of capital goods is on a long term credit basis
B. the schedule for payment of instalment and interest
C. unconditional and irrevocable undertaking of the bank to make payment on invocation of the guarantee by the supplier
D. all the above
D All the above conditions at (a), (b) and (c) are mandatory requirements.

Page 54 of 175
309 From bank point of view, the bills financing has advantages over the cash credit system due to which of the following:
A. the transaction is easily identifiable
B. the date of payment is definite
C. if the bill is on a usance basis, the bank has more than one party liable from which the amount can be recovered.
D. all the above
D There are all the above advantages.

310 The bill of exchange is defined as unconditional order of the drawer to pay a certain sum of money to or to the order of a
particular person. This definition is as per:
A. Section 13 of NI Act
B. Section 5 of NI Act
C. Section 5 of Indian Contract Act
D. Section 22 of B R Act
B Bill is negotiable instrument and it is defined u/s 5 of NI Act.

311 Which of the following parties is properly matched in case of a bill of exchange:
A. the person who is make the order - drawee
B. the person who is to make the payment as per order - drawer
C. the person who is to receive the payment as per order - payee
D. none of the above
C The person that makes the order is drawer and the person to make the payment is called drawee. The person to obtain the
payment is called payee.

312 What is the liability of the drawer of a usance bill of exchange:


A. before acceptance secondary and after acceptance, primary
B. before acceptance primary and after acceptance secondary
C. since the drawee is liable to make payment, the drawer has no liability
D. the liability of the drawer remains even though the payment is made by the drawee
B If the bill is dishonoured by the drawer for non-acceptance, the drawer is liable. If it dishonoured for non-payment, the
drawee is primarily liable and the drawer is also liable.

313 Which of the following provisions regarding rate of interest on a bill of exchange is correct, if the rate of interest is not
stated:
A. rate at 18% p.a. is payable
B. rate at 12% p.a. is payable as per Section 80 NI Act
C. no interest is payable on such bill of exchange
D. bill of exchange is not a valid, if the interest is not mentioned.
A If rate of interest is mentioned, the interest is payable at specified rate as per Section 79. But if it is not mentioned, it is
payable at 18% p.a. as per Section 80 of NI Act.

314 For a bill to be treated as Inland bill of exchange as per Section 11 of NI Act, which of the following condition is mandatory:
A. drawn or made in India and made payable in India only
B. drawn or made in India and made payable in India or drawn upon a person resident in India
C. drawn or made in India and drawn upon a person resident in India only
D. drawn or made in India and made payable in India or outside India
B For a bill to be an Inland bill it should be (a) drawn or made in India and (b) made payable in India or drawn upon a person
resident in India.
Page 55 of 175
315 The classification of which of the following bills does not match:
A. bill drawn in Delhi and payable in Mumbai by a foreigner - Inland bill
B. bill drawn in Delhi and payable in Mumbai by an Indian - Inland bill
C. bill drawn in Delhi and payable in London by a person resident in India - Foreign bill
D. bill drawn in Delhi and payable in London by a foreigner - Foreign bill
C The bill drawn in Delhi and payable in London by a person resident in India is an Inland bill and not a foreign bill.

316 No time period for payment of a bill of exchange is mentioned. Such bill of exchange is treated:
A. a demand bill
B. a usance bill
C. either demand bill or usance bill at discretion of the drawee
D. it is ambiguous bill
A Where no period of payment is mentioned, it is payable on demand as per provisions of Section 11 of NI Act. In such a bill,
the payee is entitled to get the value on demand and on presentation.

317 Which of the following bills is called, a sight bill:


A. an ambiguous bill
B. a demand bill
C. a usance bill
D. all inland bills are sight bills
B A sight bill is a demand bill. In such a bill, the payee is entitled to get the value on demand and on presentation.

318 The bills which are payable after sight have following features (which one is not correct):
A. these are called usance bills
B. the payment is made on the due date
C. for calculating due date, 3 days of grace are to be added in all cases
D. if due date is a holiday, the payment is to be made on the next preceding business day.
C For calculating due date, the 3 days are to be added if no contrary instruction is given by the drawer. If the days of grace are
withdrawn, no days of grace are to be given.

319 Which of the following is not a feature of clean bill of exchange:


A. it is issued for discharge of a debt or claim
B. it is the bill which is not accompanied by any document of title to goods
C. it is a bill where the goods are directly sent to the buyer with mutual consent
D. none of the above
D A clean bill of exchange has all the above features.

320 When the goods are supplied to a govt. department and the payment is covered by a bill of exchange. Such bills are called:
A. clean bills
B. documentary bills
C. supply bills
D. sight bills
C When the goods are supplied to a govt. department and the payment is covered by the supply bills.

Page 56 of 175
321 If a bill of exchange is on a usance basis, what type of credit facility is given by the bank:
A. advance against bills
B. bills discounting
C. bills purchasing
D. no facility can be given as the payment shall be made in future
B Since the value is not payable immediately, the bank makes the payment of the value by discounting it.

322 If a bill of exchange is on a sight basis, what type of credit facility is given by the bank:
A. advance against bills
B. bills discounting
C. bills purchasing
D. no facility can be given as the payment shall be made in future
C Since the value is payable immediately, the bank makes the payment of the value by purchasing the bill.

323 A documentary bill of exchange is one:


A. where documents are attached to the bill
B. where the documents such as invoice and insurance are attached.
C. where the documents of title to goods are attached
D. all the above
C A documentary bill of exchange is one where the document of title to goods are attached. Other documents such as invoice
or insurance may also be accompanying.

324 When a bill of exchange is purchased or discounted by a bank, what type of legal status the bank acquires:
A. bank becomes drawer of the bill
B. bank becomes holder for value (holder in due course)
C. bank becomes drawee of the bill
D. bank becomes the debtors
B The bank acquires the rights of the payee i.e. holder in due course and is called holder for value.

325 If the bill of exchange is purchased or discounted by a bank and it is dishonoured for non-payment, what recourse, does
the bank have:
A. it can recover the value from drawee only
B. it can recover the value from the drawer only
C. it can recover the value both from the drawer and drawee
D. it cannot recover the value from any of these
C The bank has recourse, both against the drawer and the drawee.

326 When a bank allows bill acceptance facility to a borrower (which one is not correct):
A. bank undertakes to pay the bills to the drawer of the bills
B. the facility is just like a cash credit working capital limit
C. the bills accepted by the bank are debited to bills discounted limit of the borrower
D. none of the above
C The bills accepted by the bank are debited to drawee bills discounting account and the borrower makes the payment on
due date.

Page 57 of 175
327 In case of which of the following loan facilities, the bank becomes a guarantor:
A. bills purchase
B. bills co-acceptance
C. bills discounting
D. bills acceptance
B Where the bank is a co-acceptor of a bill of exchange, it is guaranteeing the repayment due to which its capacity is just like a
guarantor.

328 Which of the following is an important requisites of a good and acceptable security (which one is not correct):
A. it may be easily marketable
B. the title of the borrower on the security should be defect free
C. there should not be any encumbrance on the security
D. its value should not fluctuate frequently
A The security should be easily market and not may be easily marketable.

329 Before acceptance the land and building as a collateral security, the banks normally ask for non-encumbrance certificate
for a period of:
A. 1 year
B. 3 years
C. 10 years
D. 12 years of 30 years
D The limitation in case of land and building is 12 years (and 30 years in case of govt. claim) due to which the banks insist on a
non-encumbrance certificate for 12 / 30 years, issued by the revenue department.

330 Which of the following is not a disadvantage for accepting land as a collateral security:
A. its value may decline or appreciate
B. its valuation is difficult
C. the realization of the security is not easy
D. creating charge on land involves lot of cost.
A The value of land normally does not decline. It generally increases with the passage of time.

331 If a bank accept simple mortgage of a land and the value/amount of ____ is ______, the registration of mortgage, is
mandatory:
A. land, Rs.10 lac
B. loan, Rs.100
C. land, Rs.100
D. loan, Rs.1 lac
B If the amount of mortgage money (i.e. loan) is more than Rs.100 and it is secured by simple mortgage, the registration of
mortgage is mandatory.

332 If land and building is accepted as a security, which type of charge is created:
A. assignment
B. pledge
C. mortgage
D. hypothecation
C As per provisions of Transfer of Property Act, mortgage is required to be created if immovable property like land and
building is accepted as a security.
Page 58 of 175
333 Which is not the essential requirement, if mortgage is created through a written agreement:
A. it can be created through a mortgage deed
B. mortgage deed requires payment of stamp duty
C. mortgage deed requires witnessing
D. mortgage deed requires compulsory registration
D Mortgage deed requires compulsory registration only if the amount of loan is Rs.100 or more.

334 When the loan is given by accepting shares as a security, the shares can be:
A. of one type only i.e. equity shares
B. of two types only i.e. equity shares or preference shares
C. of three types i.e. ordinary shares, equity shares or preference shares
D. b or c.
B The shares are either preference shares or the equity shares (which are called ordinary shares also).

335 What is the disadvantage to a bank, if the loan is given by accepting partly paid shares as security (which one is not
correct):
A. bank does not get any charge on such shares
B. bank may be called up on to pay the unpaid amount
C. the value of such shares may violently fluctuate
D. the bank may not be able to maintain proper margin once it has to pay the unpaid amount to avoid forfeiture.
A Bank gets charge over such shares. But other options are correct.

336 The banks retain very high margin on the security of shares. Which of the following is not a reason for that:
A. the value may violently fluctuate due to market sentiment
B. the value may decline due to poor performance of the company whose shares have been accepted as security.
C. the amount of loan may increase due to non-servicing the interest by the borrower
D. bank may not be able to sell the shares.
D The maintenance of higher margin has nothing to do with the sale of shares.

337 The document issued by a company acknowledging its indebtedness to the registered holder is called:
A. equity share
B. debenture
C. preference share
D. ordinary share
B Such document is called debenture. It is also called loan stock. In case of equity share the holder is joint owner of the
company and in case of debenture the holder is creditor of the company.

338 A share is different from a debenture in respect of which of the following (which one is not correct)
A. a debenture earns dividend and a share earns interest
B. a debenture is a loan to a company and the share confers ownership rights
C. a debenture is redeemable and a share is not redeemable
D. none of the above
A A debenture earns interest and the share earns dividend.

Page 59 of 175
339 Which of the following is not a feature of a debenture:
A. it ranks in priority in case of repayment on liquidation of the company
B. it is normally issued on a secured basis
C. it earns interest on a regular basis
D. there is no fluctuation in its market price like in case of share where there are violent fluctuations.
D The debentures that are listed on stock exchanges, face price fluctuations depending up on the financial position of the
company that has issued the debentures.

340 Which of the following securities will be more preferable by a bank from liquidity point of view:
A. land and building
B. shares and debentures
C. goods and merchandise
D. book debts of reputed companies
B The shares and debentures are most preferred due to easy liquidity.

341 Which of the following securities will be more preferable by a bank from point of view of increasing value of the security:
A. land and building
B. shares and debentures
C. goods and merchandise
D. book debts of reputed companies
A The value of land and building normally increases over a given time period.

342 Which of the following securities will be more preferable by a bank from cost of creating charge and maintenance of the
security :
A. land and building
B. shares and debentures
C. goods and merchandise
D. book debts of reputed companies
B Creation of charge on shares and debentures is very easy and cost effective. There is no maintenance cost.

343 To sanction a cash credit limit, which of the following types of security is taken as primary security:
A. land and building
B. shares and debentures
C. goods and merchandise
D. life insurance policy
C Cash credit is the credit facility to finance working capital. Hence current assets like stocks and goods are taken as security
that are of self liquidating nature.

344 Which of the following types of security is not in tangible form:


A. land and building
B. shares and debentures
C. goods and merchandise
D. book debts of companies
D The book debts of companies are not in tangible form. Their realisability depends on the financial position of the company
concerned.

Page 60 of 175
345 Which of the following matches the description of a trust receipt:
A. a receipt of goods issued by a Trust
B. acknowledgement issued by one party in having received the goods in trust from another party
C. acknowledgement for receipt of goods from the creditor by the debtor for a specific purpose and return of the goods.
D. goods kept in trust by the bank when the goods are left by mistake by the customer
C It is acknowledgement of goods by the borrower for having received the goods in trust, from the bank with a promise to
return as per commitment.

346 For the purpose of allowing loan against the security of goods and merchandise, the valuation is done by the bank on
following basis:
A. cost price
B. market price
C. cost price or market price whichever is lower
D. cost price of market price whichever is higher
C The valuation of goods is done on the basis of cost price or market price / realisable values

347 The document of title to goods include a bill of lading, a railway receipt etc. These are defined as per:
A. Section 2 (6) of Indian Contract Act
B. Section 2 (4) of Sale of goods Act
C. Section 2 (5) of NI Act
D. Section 2 (12) of Indian Contract Act
D The definition of document of title to goods is available as per Section 2 (4) of Sale of Goods Act.

348 Which of the following is not a feature of document of title to goods u/s 2(4) of Sale of Goods Act:
A. a proof of possession of goods
B. document of control of goods
C. document that can be transferred by endorsement and delivery
D. the transferee gets defect free title even when the title of the transferor is defective.
D The transferee gets similar title that is possessed by the transferor.

349 Which of the following is not a document of title to goods:


A. bill of lading
B. airway bill
C. railway receipt
D. warehouse receipt
B Airway bill despite being receipt of goods is excluded from the list of title to goods.

350 What is the demerit of document of title to goods as a security:


A. it is in the nature of not-negotiable crossed document which means that the transferee right is similar to the right possessed by
the transferor.
B. the document can be a forged document also that will not convey any title
C. if the buyer has not paid for the goods, the goods may be stopped in transit by the seller
D. all the above
D The document of title to goods carries all the above demerit as a security for bank loan.

Page 61 of 175
351 Under the provisions of Presidency Towns Insolvency Act 1909 or Provincial Insolvency Act 1920, the goods covered under
the document of title to goods:
A. cannot be sold by the receiver or assignee
B. cannot be included by the receiver or assignee in the assets of the insolvent
C. can be sold by the receiver or assignee but payment has to be made to the creditor
D. none of the above
B Under the provisions of Presidency Towns Insolvency Act 1909 or Provincial Insolvency Act 1920, the goods covered under
the document of title to goods cannot be included by the receiver or assignee in the assets of the insolvent. Hence bank
remains secured even in the event of insolvency of the borrower.

352 If a bank has to cover itself while releasing the goods to the borrower but otherwise charged in bank favour, the bank
obtains:
A. letter of hypothecation
B. trust receipt or letter of trust
C. pledge agreement
D. agreement of assignment
B If a bank has to release the goods to the borrower which are charged in bank favour, the bank obtains trust receipt or letter
of trust.

353 Which of the following is an important feature of a Trust Receipt:


A. the borrower has to recognise the right of the bank in the goods as security
B. the borrower undertakes to hold the goods in trust for the bank
C. in case of realization of sale proceeds, the borrower undertakes to deposit the amount in the bank
D. if goods remains unsold, the borrower shall keep the goods until sold and in no case returns the goods to the bank
D If goods remain unsold the borrower shall dispose of the goods as per direction given by the bank.

354 In case of a life insurance policy, the value of security and amount of loan is based on:
A. face value
B. surrender value
C. maturity value
D. any of the above, whichever is higher
B The loans is granted on the basis of surrender value of the insurance policy.

355 If borrower defaults in payment of loan where the loan is secured by a charge on life insurance policy, the loan is
recovered:
A. from insurance company only
B. from borrower only
C. with permission of the borrower from insurance company only
D. directly from the insurance company and if there is shortfall, from the borrower.
D If borrower defaults in payment of loan where the loan is secured by a charge on life insurance policy, the loan is recovered,
directly from the insurance company and if there is shortfall, from the borrower.

Page 62 of 175
356 What type of charge is created on the life policy, when it is accepted as a security for the loan:
A. hypothecation
B. assignment
C. lien
D. pledge
B Life insurance policy is an actionable claim, due to which the charge called assignment secures the loan.

357 Which of the following is not a demerit for accepting the life insurance policy as a security:
A. if the premium is not paid regularly, the policy can lapse
B. the insurance contract is a contract of utmost good faith and any misrepresentation by the borrower while obtaining the policy,
can lead to making the policy void.
C. the policy may be containing restrictive clauses that may restrict the liability of the insurance company.
D. if the policy remains in force for a longer period, the surrender value declines.
D If the policy remains in force for a longer period, the surrender value increases and offers a better security. Hence it is a
merit and not demerit.

358 When the bank gives loan on the security of book debts, which of the following types of charge is created:
A. hypothecation
B. assignment
C. lien
D. pledge
B The book debts of companies are actionable claim, due to which the charge called assignment, secures the loan.

359 Which of the following is an essential condition for creating the assignment:
A. assignment can be oral as well as in writing
B. the notice of assignment must be given to the original debtor
C. the original debtor must acknowledge the assignment in favour of the bank
D. the assignment may be absolute or by way of a charge
A The assignment cannot be oral. It must be in writing only.

360 When the bank serves the notice on assignment, the original debtor must confirm:
A. the amount of debt
B. details of his own right of set-off, if any
C. details of previous notice of assignment, if any.
D. all the above
D The original debtor should provide all the above information.

361 What type of charge is available to the bank, when the loan is granted against the security of fixed deposit receipt:
A. hypothecation
B. assignment
C. lien
D. pledge
B The fixed deposit receipt is an actionable claim, due to which the charge called assignment, secures the loan. In practice, the
banks use the word lien while giving loan on the security of fixed deposit receipt.

Page 63 of 175
362 Against which of the following types of fixed deposit receipt, the loan can be allowed by the bank to a person called X:
A. the FDR issued by another bank in the name of X
B. the FDR issued by the bank in name of minor child of X
C. the FDR issued by the bank in the name of X jointly with his wife which is discharged by both of them
D. the FDR in the name of X kept by him as his clients money.
C The loan cannot be allowed against the FDR of other bank or FDR in the name of the minor or FDR which is not kept in the
same capacity, in which the loan is raised. Hence the loan can be given against FDR, may in the joint name, provided the
discharge is given by all the FDR holders.

363 In case of supply bills, the document evidencing the movement of goods from the seller to the buyer is called:
A. warehouse receipt
B. delivery challan
C. wharfingers certificate
D. supply bill
B The document that evidences the supply of goods by the seller to the govt. department is called delivery challan.

364 When the bank has to allow advance against the supply bills, which of the following document is normally not required to
be submitted compulsorily:
A. hundi or bill of exchange
B. receipted challan or delivery challan
C. inspection note
D. railway receipt or goods receipt
D The goods are directly delivered due to which there is need for receipted challan instead of RR or GR.

365 In case of advance against supply bills, the bank shall receive the payment directly from the govt. department on the basis
of:
A. documents sent by the bank to the govt. department
B. charge assignment acknowledged by the govt. department
C. power of attorney executed by the borrower and registered by the govt. department with them
D. all or any of the above
C In case of advance against supply bills, the bank shall receive the payment directly from the govt. department on the basis
of, power of attorney executed by the borrower and registered by the govt. department with them.

366 If a property is mortgaged in favour of the bank and loan amount or value of the property is Rs.____, the permission of the
Income Tax Deptt. is required to be obtained:
A. Rs.10 lac and above
B. Rs.30 lac or above
C. Rs.50 lac or above
D. none of the above
D There is no such permission required from the Income Tax Deptt. But in case of sale of property of Rs.30 lac or more,
information is required to provided under Annual Information Return (AIR) system, by the registration authority to the
Income Tax Deptt.

Page 64 of 175
367 If a property is mortgaged in favour of bank to secure a loan and later on certain arrears of tax against the property are
noticed:
A. the recovery of bank loan shall have priority
B. the recovery of arrears shall have priority
C. there will be pro-rata sharing of sale proceeds
D. the arrears of tax shall be recovered first and if there is deficit, the bank will have to make up the deficit.
B If a property is mortgaged in favour of bank to secure a loan and later on certain arrears of tax against the property are
noticed, the recovery of arrears shall have priority over the recovery of bank loan.

368 What type of charge is created when the security for the loan is the document of title to goods (such as Railway receipt):
A. hypothecation
B. lien
C. pledge
D. assignment
C The document of title to goods represent the control over the goods. Hence these documents are pledged to the bank to
secure the loan.

369 Which of the following order of securities is preferable, to secure a loan, if options are available to the bank:
A. national saving certificates, bank FDR, life insurance policy, book debts
B. bank FDR, life insurance policy, national saving certificates, book debts
C. life insurance policy, bank FDR, national saving certificates, book debts
D. bank FDR, national saving certificates, book debts, life insurance policy,
B In order of the tangibility and easy realization the order should be bank FDR, life insurance policy, national saving
certificates, book debts.

370 Which of the following is true in the context of a life insurance policy:
A. the policy is issued by the life insurance corporation or general insurance corporation
B. the contract of insurance is a contract of utmost reliability
C. the assignee of life policy cannot sue in his own name
D. the insured should have insurable interest in the policy
D The policy can be issued by life insurance corporation and the contract of insurance is a contract of utmost good faith. The
bank can sue in his own name.

371 The transfer of interest in the immovable property by a person, to secure payment of loan obtained, is called:
A. mortgage
B. assignment
C. pledge
D. hypothecation
A As per section 58 (a) of Transfer of Property Act, the transfer of interest in the immovable property by a person, to secure
payment of loan obtained, is called mortgage.

Page 65 of 175
372 The mortgage can be created:
A. only orally
B. in writing only
C. both in writing as well as orally
D. it cannot be created simultaneously as oral and in writing.
C Mortgage can be created orally as well as in writing. At one point of time two mortgages can be created and one of these
can be oral and other can be in writing.

373 When mortgage is created in writing, what type of document has to be created:
A. mortgage agreement
B. mortgage deed
C. contract of mortgage
D. none of the above
B To create the mortgage, the mortgage deed which is basically the agreement covering the mortgage transaction, has to be
made.

374 In case of a mortgage:


A. only the interest in the property is transferred by the owner
B. only the property is transferred by the owner
C. the interest in the property as well as the property is transferred.
D. none of the above
A As per definition in Section 58 (a) of Transfer of Property Act, only interest in the property is transferred and not the
property itself.

375 Which of the following types of mortgages is not created in writing:


A. simple mortgage
B. mortgage by conditional sale
C. usufructuary mortgage
D. none of the above
D Equitable mortgage is the mortgage which is not created in writing. All the mortgages given in the options, are created in
writing only.

376 Out of the following which mortgage can be created orally:


A. English mortgage
B. simple mortgage
C. equitable mortgage
D. anomalous mortgage
C Equitable mortgage called oral mortgage is not created through a document in writing. It is created orally by deposit of
document of title deed.

377 A mortgage which is not ____ is a anomalous mortgage


A. simple mortgage or mortgage by conditional sale
B. usufructuary mortgage or English mortgage
C. equitable mortgage
D. all the above types of mortgages
D A mortgage that is not simple mortgage OR mortgage by conditional sale OR usufructuary mortgage OR English mortgage OR
equitable mortgage is an anomalous mortgage as per provisions of Section 58 (g) of Transfer of Property Act.
Page 66 of 175
378 Which of the following is not a feature of simple mortgage:
A. it is without delivery of possession of property to the bank
B. borrower is personally liable for the mortgage money
C. property can be sold without court intervention.
D. sale proceeds are to be applied for payment of mortgage money, in case of sale of property
C The property can be sold through court only, except under SARFAESI Act if applicable, where the sale can be without court
intervention.

379 Which of the following is a feature of usufructuary mortgage:


A. borrower is personally liable for the mortgage money
B. the possession of property is delivered to the bank and bank recovers the loan from income of the property
C. property can be sold without court intervention.
D. proceeds of sale proceeds of the property are to applied for payment of mortgage money, in case of sale of property
B In a usufructuary mortgage, the borrower is not personally liable to repay the loan, the property cannot be sold and bank
recover the loan from income of the property as possession of the property remains with the bank, as long as the loan
outstands.

380 In which type of mortgage, the property ownership is transferred in the name of the bank, subject to certain conditions as
per provisions of Transfer of Property Act:
A. simple mortgage
B. English mortgage
C. mortgage by deposit of title deed i.e. equitable mortgage
D. mortgage by conditional sale.
B In case of English mortgage the ownership of the property is transferred in the name of bank subject to the condition that
bank shall retransfer the property if mortgage money is paid.

381 To create equitable mortgage, three ingredients are essential:


A. a debt, deposit of title deed, deposit at a notified place
B. a debt, deposit of title deed, intention that the deposit of title deed is to secure the loan
C. deposit of title deed, intention that the deposit of title deed is to secure the loan, deposit of title deed at a notified place
D. any of the above
B To create equitable mortgage, the ingredients such as (a) a debt, (b) deposit of title deed, (c) intention that the deposit of
title deed is to secure the loan, are essential:

382 The equitable mortgage can be created by deposit of title deeds provided the title deed is deposited at:
A. Mumbai, Kolkata and town notified by the state Govt.
B. Mumbai, Kolkata, Delhi and town notified by the state Govt.
C. Mumbai, Kolkata, Chennai and town notified by the state Govt.
D. Mumbai, Delhi, Bangalore and town notified by the state Govt.
C The deposit of title deed should take place at Bombay, Madras and Calcutta or the town notified in the official gazette by
the State Govt.

Page 67 of 175
383 The territorial restriction in case of deposit of title deed to create equitable mortgage is related to:
A. place of location of the property only
B. place of deposit of title deed only
C. place of location of property as well as place of deposit of title deed both
D. none of the above
B The territorial restriction in case of deposit of title deed to create equitable mortgage is related to place of deposit of title
deed only.

384 A company has its registered office in Mumbai, the head office in Kolkata and a building in Chennai. It obtains a loan in
Delhi and to secure the loan, the Chennai building is to be equitably mortgaged. The mortgage can be created at:
A. Mumbai only being location of registered office
B. Chennai only being location of the property to be mortgaged
C. Delhi only being the place of loan to be taken
D. Mumbai, Chennai and Kolkata only.
D The mortgage can be created in Mumbai, Chennai or Kolkata only and not Delhi unless Delhi is also stated to be a notified
town.

385 In which of the following types of mortgage, no stamp duty is required to be paid, in creation of mortgage:
A. English mortgage
B. equitable mortgage
C. simple mortgage
D. usufructuary mortgage
B Equitable mortgage is created orally and not in writing, due to which no payment of stamp duty is required. Other
mortgages are required to be registered due to which the stamp duty has to be paid at the time registration.

386 In the context of mortgage, the right of foreclosure stands for:


A. right of the mortgager to repay the loan and get the mortgage cancelled
B. right of the mortgager not to pay the loan and ask the mortgagee to sell the property and recover the loan
C. loss of right of mortgager to possess the property after repayment of the mortgage money
D. the right of the mortgagee to stop the mortgager to pay the mortgage money.
C Foreclosure means the loss of right with the mortgager to redeem the mortgage property and take back the possession.

387 In which of the following types of mortgages, the mortgagee can sue for foreclosure:
A. English mortgage
B. mortgage by conditional sale
C. simple mortgage
D. usufructuary mortgage
B The mortgagee can sue for foreclosure in this mortgage where the property has been sold on a provisional basis i.e.
mortgage by conditional sale.

388 To enforce a mortgage, the limitation period available in Limitation Act 1963 is:
A. 3 years
B. 10 years
C. 12 years
D. 30 years
C If the loan is to be recovered by enforcing the mortgage, the limitation period is 12 year from the date the mortgage debt
becomes due.
Page 68 of 175
389 The limitation period for filing suit for foreclosure, as per provisions of Limitation Act 1963 is:
A. 3 years
B. 10 years
C. 12 years
D. 30 years
D The limitation period for filing suit for foreclosure, as per provisions of Limitation Act 1963 is 30 years from the date the
money secured by mortgage becomes due.

390 Equitable mortgage was created in favour of Bank-A by a firm on Jan 29, 2009 on a property to secure a loan. The same
property was mortgaged to Bank-B as simple mortgage on Jan 27, 2009 and was registered with the Registrar of
Assurances on Jan 31, 2009. Which bank is having priority of charge.
A. Bank-A because the mortgage was created before registration in favour of other bank
B. Bank - B because the mortgage was created before Bank-A
C. Bank A and Bank B on a pro-rata basis, since in case of Bank-B the mortgage was created earlier but registered later.
D. Bank A, because equitable mortgage has always priority
B Mortgage was created in favour of Bank-B earlier than Bank-A. Once the mortgage is registered, the effect of mortgage
begins from date of mortgage.

391 The features of which of the following mortgages do not match:


A. English mortgage - ownership is transferred in the name of the bank
B. Usufructuary mortgage - possession is with the bank
C. equitable mortgage - does not require registration
D. simple mortgage - property cannot the sold but borrower is personally liable.
D The property can be sold through court, in case of non-repayment of the loan. Borrower is also personally liable.

392 Enforcement of mortgage is governed by the provisions of:


A. Civil Procedure Code 1908
B. Transfer of Property Act 1882
C. Indian Contract Act 1872
D. Indian Evidence Act
A The enforcement of mortgage is governed by Civil Procedure Code 1908, due to which suit for sale of property is filed in a
civil court, within whose jurisdiction the mortgage property is situated.

393 In a suit for sale of mortgaged property, the court passes:


A. only the final decree
B. preliminary decree and final decree simultaneously
C. first the preliminary decree and then final decree
D. first the preliminary decree and then final decree after 30 days
C In a suit for sale of mortgaged property, the court passes first the preliminary decree (which means the mortgagor is given a
definite period to pay the mortgage money) and then final decree (if the mortgage money is not paid).

Page 69 of 175
394 If suit is to be filed to enforce mortgage, it will be filed with:
A. the DRT within whose jurisdiction the mortgage property is situated.
B. the court within whose jurisdiction the mortgage property is situated.
C. the court within whose jurisdiction the mortgager resides.
D. the court within whose jurisdiction the mortgagee is located.
B The enforcement of mortgage is governed by Civil Procedure Code 1908, due to which suit for sale of property is filed in a
civil court, within whose jurisdiction the mortgage property is situated.

395 Which of the following statement is not a correct statement:


A. in mortgage, the interest in the property is transferred
B. equitable mortgage is created in a place notified by the Central govt.
C. in conditional mortgage, the property is sold with the condition that the sale will become void in case of payment of the
mortgage money
D. the priority of mortgages is with reference to date of creation and not date of registration.
B Equitable mortgage can be created in Mumbai, Kolkata and Chennai and towns notified by the State Govt.

396 The bailment of goods for providing security for payment of debt or performance of promise is called:
A. bailment
B. lien
C. pledge
D. hypothecation
C As per provisions of Section 172 of Indian Contract Act, the bailment of goods for providing security for payment of debt or
performance of promise is called, pledge. Bailment means the delivery of goods.

397 Under provisions of Section 172 of Indian Contract Act, in case of a pledge, the bailor and bailee are called:
A. pawnee and pawnor
B. pawnor and pawnee
C. pledger and pledgee
D. pledgee and pledger
B The bailor i.e. borrower is called pawnor and the bailee i.e. the bank is called pawnee as per Section 172 of Indian Contract
Act.

398 In case of pledge, the position of ownership and possession of goods is as under:
A. possession with the bank and ownership with the borrower
B. possession with the borrower and ownership with the bank
C. possession and ownership with the borrower
D. possession and ownership with the bank
A In case of pledge, the possession is with the bank and ownership is with the borrower

399 In case of hypothecation, the position of ownership and possession of goods is as under:
A. possession with the bank and ownership with the borrower
B. possession with the borrower and ownership with the bank
C. possession and ownership with the borrower
D. possession and ownership with the bank
C In case of hypothecation, the possession and ownership is with the borrower.

Page 70 of 175
400 When the goods are in a godown and the borrower hands over the key of the godown to the bank, it is called:
A. actual pledge
B. constructive pledge
C. symbolic pledge
D. it is not a pledge at all
C When the goods are in a godown and the borrower hands over the key of the godown to the bank, it is called symbolic
pledge.

401 If the goods are lying in a public warehouse and the warehouseman acknowledges to the bank that he holds the goods on
behalf of the bank, it is called:
A. actual pledge
B. constructive pledge
C. symbolic pledge
D. it is not a pledge at all
B If the goods are lying in a public warehouse and the warehouseman acknowledges to the bank that he holds the goods on
behalf of the bank, it is called constructive pledge.

402 In which of the following types of goods, the charge pledge can be created by the borrower:
A. the goods that are in possession of the borrower
B. the future goods also that are to be in his possession
C. also the goods that the borrower is likely to get into his possession subsequently
D. all the above type of goods
A In pledge immediate delivery of goods is involved. Hence pledge can be created on the present goods.

403 Pledge can on the basis of:


A. only an agreement in writing
B. only on the basis of implied agreement from the nature of transaction
C. on the basis of written agreement or implied agreement from the nature of transaction
D. none of the above
C Normally, the pledge should be on the basis of written agreement but it is possible on the basis of implied agreement from
the nature of transaction.

404 Which of the following cannot create pledge:


A. owner of the goods
B. a mercantile agent subject to fulfillment of certain conditions
C. seller of goods in possession of the goods even after sale subject to certain conditions
D. none of the above
D All the above type of persons can create a valid pledge.

405 A pawnee wants to pledge the goods under his pledge:


A. he can do so without consent of the pawner
B. he can do so with consent of the pawner
C. he cannot do so
D. if he does, the pawner cannot recover the goods even after payment of loan
A A pawnee can pledge the goods further but the pledge will be valid to the extent of his interest in the goods. When original
pledger makes the payment, he is entitled for return of the goods immediately.

Page 71 of 175
406 Under Section 173 of Indian Contract Act, the pawnee can retain the goods for:
A. amount of principal only
B. amount of principal and interest only
C. amount of principal, interest other charges only
D. amount of principal, interest, other charges and maintenance expenses
D Under Section 173 of Indian Contract Act, the pawnee can retain the goods for recovery of amount of principal, interest,
other charges and maintenance expenses

407 If the pawnee has to incur extra-ordinary expenses on the goods pledged:
A. he can recover the amount from the goods
B. he can recover the amount from the goods if the amount was incurred with consent of the pawner
C. he cannot recover from the goods but he has to file suit for recovery
D. none of the above
C If the pawnee has to incur extra-ordinary expenses on the goods pledged, he cannot recover from the goods but he has to
file suit for recovery.

408 Where the pawner defaults in making payment of the loan, which of the following right is not available to the pawnee:
A. he may sue the pawner upon the debt or promise
B. he may retain the goods as collateral security for that loan or any other loan
C. he may sell it after giving reasonable notice to the pawner
D. none of the above
B Where the pawner defaults in making payment of the loan, he may retain the goods as collateral security for that loan only
and not for any other loan.

409 If goods are damaged while in the possession of the pawnee:


A. he is liable for the loss
B. he is not liable for the loss
C. he is not liable for the loss if adequate care was exercised
D. he is liable for the loss even when adequate care was exercised
C If goods are damaged while in the possession of the pawnee, he is not liable for the loss if adequate care was exercised.
However, if the loss is due to negligence of the pawnee, he is liable.

410 X despatched certain goods through railway and pledged the railway receipt (by way of endorsement) to Y. Railways failed
to deliver the goods to Y:
A. Y can enforce the rights of owner of goods i.e. X against the railways
B. Y has to involve X for recovery of the goods
C. Y is not entitled to recover since he is only the endorsee and not the owner
D. Y and X both have to file suit.
A The pawnee acquires all the rights of the owner against 3rd parties as per Supreme Court judgement in Morvi Mercantile
Bank Ltd vs Union of India (1965).

Page 72 of 175
411 XYZ pledged certain goods to Bank-A to take the loan. Subsequently, the bank received a notice from the sales tax
department of the govt. to handover the possession to them, for recovery of tax arrears:
A. the bank charge on the goods is subject to recovery of govt. tax
B. the bank charge will prevail over the recovery of govt. dues, due to which, first recovery of bank dues shall take place
C. the recovery of bank loan and the recovery of govt. dues shall be on a pro-rata basis
D. the govt. dues shall be recovered first and if there is any surplus that can be used for recovery of bank loan.
B As per Supreme Court judgement in Bank of Bihar vs State of Bihar (1971), in case of pledge, the bank right prevails over the
recovery of govt. dues. Hence the recovery of bank loan shall be from the goods pledged and if there is any surplus that can
be used for recovery of govt. dues.

412 Certain goods were pledged by XYZ with the Bank-B. Later on, due to increase in the market price of the goods, XYZ
requested the return of a part of the goods and retain the goods of the value that covered the advance of the bank:
A. the pawner can demand the return of goods provided the balance quantity of goods covered the loan of the bank
B. the bank is under obligation to return the excess quantity of goods
C. the pawner cannot demand the return of goods because the value of goods can decline later only
D. the pawner cannot demand the return of goods because the accretion in value to the goods forms part of the pledged property.
D As per Supreme Court judgement in StanChart Bank vs Custodian (2000), if there is accretion to the value of pledged goods,
the pawnee shall retain it.

413 The definition of the term hypothecation is available as per:


A. SARFAESI Act 2002
B. Indian Contract Act 1872
C. General Clauses Act
D. not available
A Till enactment of SARFAESI Act 2002, no definition of Hypothecation was available. But hypothecation is now defined u/s 2
of the Act.

414 As per definition of Hypothecation u/s 2 of SARFAESI Act, which of the following feature of hypothecation is not correct:
A. it is charge on existing moveable property
B. it is charge on future moveable property
C. it is charge without delivery of the moveable property
D. none of the above
D All the feature given in these options are correct.

415 Hypothecation differs from mortgage in the following aspects (which one is not correct):
A. mortgage is of immovable property
B. hypothecation is of movable property
C. in mortgage there is transfer of property in favour of the bank
D. in hypothecation there is no transfer of property but only obligation to repay the money
C In mortgage there is transfer of interest in the property and not the transfer of the property in favour of the bank u/s 58 (a)
of Transfer of Property Act.

Page 73 of 175
416 Hypothecation created by a company carries less risk compared to a partnership firm because:
A. financially the company is much stronger and healthy
B. registration of charge with Registrar of Companies is public notice for the charge created on the movable property
C. recovery of the loan is easier from a company
D. all the above
B Hypothecation charge created by a company carries less risk compared to a partnership firm because the registration of
charge with Registrar of Companies is deemed a public notice for other parties, for the charge created on the movable
property.

417 In which of the following cases, creation of only hypothecation is possible (and not pledge):
A. stock in process
B. a running retail trader shop
C. where the goods have to be constantly handled in bulk such as a rice mill or oil mill
D. all the above
D In all the above cases, the charge pledge will not be possible since the goods will have to be used by the borrower and will
not remain in the possession of the bank.

418 If hypothecation is created by a company, the floating charge (i.e. hypothecation) created within ___ preceding the
commencement of winding up, becomes invalid under certain circumstances u/s 534 of Companies Act:
A. 1 month
B. 3 months
C. 6 months
D. 12 months
D If hypothecation is created by a company, the floating charge (i.e. hypothecation) created within 12 months preceding the
commencement of winding up, becomes invalid under certain circumstances u/s 534 of Companies Act.

419 What type of legal right is available to the bank in case of hypothecation:
A. if loan is being repaid as per terms, there is no right available
B. if loan is not repaid, the borrower is required to handover the possession to the bank
C. if loan is not repaid, the bank can demand possession of the security
D. if loan is not repaid, the bank cannot demand possession the goods but can file suit for sale of security
C If loan is not repaid, the bank demand possession of the goods. If borrower gives the possession, the hypothecation is
converted into pledge and bank can sell the security. If possession is not given, bank has to file suit for sale of security.

420 For a loan given by the bank, which of the following is not liable personally due to which the loan cannot be recovered
from them personally:
A. minor
B. insolvent
C. insane
D. all the above
D All these persons are not competent to contract u/s 11 of Indian Contract Act and any contract with them, cannot be
enforced in a court of law. Hence there is no personal liability.

Page 74 of 175
421 A relationship between persons who have agreed to share the profits of the business is called partnership as per:
A. Section 2 of Indian Partnership Act
B. Section 4 of Indian Partnership Act
C. Section 2 of Companies Act
D. Section 11 of Companies Act
B The above definition of partnership is given in Section 4 of Indian Partnership Act.

422 What is the legal status of a partnership firm:


A. it is a separate legal entity
B. it is a separate legal entity when registered
C. it is not a separate legal entity from its partners. It is only abbreviated name of the partners
D. it is not a separate legal entity but it becomes separate legal entity when registered.
C A firm is abbreviation of names of the partners. It is not a separate legal entity.

423 Which of the following is not correct regarding the registration of the partnership firm:
A. registration is optional
B. a registered firm can sue other parties in its own name
C. banks can insist for registration of the firm as it provides sound legal base for the firm and beneficial both to the firm and the
bank
D. registration is possible with registrar of firms
C The banks can not insist, they can only suggest for registration of the firm as it provides sound legal base to the firm to sue
in its own name and beneficial both to the firm and the bank.

424 To bind other partners, a partner of firm must act:


A. in usual course of business of the firm only
B. in the usual way of doing the business only
C. as a partner on behalf of the firm and not solely on his behalf only
D. all the above together
D If a firm wants to use the implied authority u/s 19 of Indian Partnership Act, he has to ensure compliance of all the above
conditions.

425 By action of one partner, in which of the following cases, the other partners will not be liable:
A. withdrawal of suit filed in a court
B. appointment of agent for the firm
C. mortgage of property of the firm to secure a loan given to a partnership firm
D. to give guarantee on behalf of the firm when the firm is engaged in the business of giving guarantees.
D U/s 19 (2) of Indian Partnership Act, there are restrictions on use of implied authority by a partner and the situation at (a),
(b) and (c) is covered by that restriction. Situation (d) is the action in normal course of business, hence other partners will be
liable for such guarantee.

Page 75 of 175
426 If a firm maintaining bank account is declared insolvent (which one is not correct):
A. bank can not exercise right of set-off
B. the credit balance becomes payable to official receiver.
C. if there is a debit balance in the account bank has to prove the debt before the court.
D. if debt of the bank is proved, the bank is entitled to receive from the official receiver, either in full or as per ratio declared by
the court.
A The bank can exercise the right of set off and if the bank does not want to exercise the right of set off, the credit balance
becomes payable to the official receiver appointed by the court.

427 If a partner of a firm becomes insolvent (which of the following is correct):


A. the partnership continues
B. the operations in the account can be continued
C. the cheques signed by the insolvent partner can be paid
D. none of the above
D If a partner is declared insolvent, the firm is dissolved. Hence operations in the account are not to be allowed and the
cheques signed by the insolvent partner or any other partner cannot be paid.

428 If a partner is declared insolvent or expires, the banks stop operations in the account if it is a loan account. If operations
are continued, the estate of the insolvent / deceased may not remains liable due to:
A. operation of principle of estoppel only
B. operation of rule in Garner and Murray case only
C. operation of rule in Clayton Case only
D. operation of all the above rules/principles
C If operations are continued, the estate of the insolvent / deceased may not remains liable due to operation of rule in
Clayton case.

429 The provisions relating to HUF are available as per:


A. Hindu Succession Act
B. Joint Hindu Family Act
C. Hindu Code 1908
D. customary Law among Hindus
D HUF is not defined in any Act. It is only a practice based on customary law among Hindus.

430 Which of the following is not an important feature of HUF:


A. the family business or property is owned jointly by the coparceners
B. the coparceners have a common ancestor
C. the senior most coparcener is called Karta or manager
D. the females and minors cannot become Karta although they can be coparceners.
D The females and minors can also become Karta if they happen to be the senior most coparceners.

431 Which of the following is not an important feature about Karta:


A. he has the authority to manage the HUF business
B. his liability like other coparceners is limited to the share in joint property / business
C. he can appoint agent for HUF business
D. he can take loan for HUF business and to secure such loan he can create charge on HUF property / business
B Liability of Karta is unlimited while the other coparceners have no personal liability. It is restricted to their share in the HUF
property / business.
Page 76 of 175
432 HUF cannot become a partnership firm as per Supreme Court judgement because:
A. HUF cannot enter into agreement with 3rd parties for any transaction
B. HUF cannot make itself liable for actions of other parties i.e. other partners, because it is not creation of agreement between
parties.
C. HUF cannot make other parties liable for its actions
D. all the above
B HUF cannot make itself liable for actions of other parties i.e. other partners, since it is not creation of agreement between
parties.

433 Which of the following is not an important feature of a company:


A. company is a juristic person created by law
B. company has a perpetual succession which means it continues even when there is no shareholder.
C. company has a common seal distinct from its members
D. none of the above
B The company has a perpetual succession which means it shall continue as long as it fulfills the conditions relating to
minimum no. of shareholders.

434 The no. of partners in a partnership firm is restricted to:


A. 10 in case of banking business and 20 for other business
B. 20 in case of banking business and 10 for other business
C. 20 in case of banking business and for other business
D. 10 in case of banking business and for other business
A The no. of partners in a partnership firm cannot be more than 10 in case of banking business and 20 for other business as
per provisions of Section 11 of Companies Act.

435 The provisions relating to no. of partners in a partnership firm are given as per:
A. Section 11 of Indian Contract Act
B. Section 4 of Indian Partnership Act
C. Section 11 of Companies Act
D. Section 11 of Indian Evidence Act
C The provisions relating to no. of partners in a partnership firm are given as per Section 11 of Companies Act which provides
that if the no. exceeds 10 or 20, it will become an illegal association.

436 An association of more than 10 persons for banking business and 20 for other business can be registered as a:
A. Partnership with Registrar of Firms
B. Partnership with Registrar of Company
C. Company with Registrar of Company
D. Joint venture with Registrar of Assurances
C As per provisions of Section 11 of Companies Act, an association of more than 10 persons for banking business and 20 for
other business can be registered as a company.

437 The minimum no. of members of a company should be:


A. 7 in case of private company and 2 incase of a public company
B. 2 in case of private company and 7 incase of a public company
C. 2 in case of private company and 3 incase of a public company
D. 7 in case of private company as well as incase of a public company
B The minimum no. of members of a company should be 2 in case of private company and 7 incase of a public company.
Page 77 of 175
438 Which of the following document relating to a company does match its purpose:
A. Memorandum of Association states the business / objects and the Certificate of Incorporation states the internal rules
governing the company.
B. Certificate of Commencement of Business states the business / objects and the Articles of Association states the internal rules
governing the company.
C. Memorandum of Association states the business / objects and the Articles of Association states the internal rules governing the
company.
D. Articles of Association states the business / objects and the Memorandum of Association states the internal rules governing the
company.
C The Memorandum of Association states the business / objects and the Articles of Association states the internal rules
governing the company. Both these documents are prepared by the shareholders at the time of formation of a company.

439 Which of the following is called, the Charter of the company:


A. Certificate of Incorporation
B. Certificate of Commencement of Business
C. Articles of Association
D. Memorandum of Association
D The Memorandum of Association is called, the Charter of the company.

440 Which of the following information is not provided by the Memorandum of Association of a company:
A. objects of the company
B. liability of the members of the company
C. no. of directors of the company
D. share capital and its division
C The no. of directors is an internal matter for the company which is mentioned in the Articles of Association.

441 Which of the following information is mentioned in the Memorandum of Association only and not in the Articles of
Association:
A. borrowing powers of the Board of the company
B. State in which the registered office of the company is located
C. procedure for transfer of shares
D. procedure for conducting the meetings of the company
B The information at (a), (c) and (d) is internal to the company and given in the Articles of Association.

442 As per Section 3 (1) (iii) Companies Act, which of the following is not feature of a private company:
A. there are restrictions on the right to transfer of its shares
B. prohibition as to participation by general public in its capital requirement
C. limitation on the no. of members to maximum 50 including the employees and ex-employees.
D. none of the above
C There is ceiling on the no. of members to maximum 50 excluding the employees and the ex-employees of the company.

443 Which of the following is not included in the classification of a public company:
A. limited liability company
B. unlimited liability company
C. limited by guarantee company
D. none of the above
D The companies mentioned at (a), (b) and (c) are included in the classification.
Page 78 of 175
444 A public company is a govt. company, if at least ___ of its shareholding is held by the govt.
A. 26%
B. 49%
C. 51%
D. 74%
C A public company is a govt. company, if at least 51% of its shareholding is held by the Govt.

445 Which of the following can be classified as a foreign company:


A. which has branches in foreign countries
B. which is registered in a foreign country
C. which is doing business in foreign countries
D. all the above
B A company is a foreign company when registered in a foreign company.

446 If a company holds at least __ % capital of another company, is called the ___, of the other company:
A. 33%, subsidiary company
B. 50%, holding company
C. 51%, holding company
D. 51%, subsidiary company
B If a company holds at least 50 % capital of another company, is called the holding company of the other company whose
shares are held.

447 If at least __ % capital of a company, held by another company, the company whose shares are held is called the ___, of
the other company:
A. 33%, holding company
B. 50%, subsidiary company
C. 51%, subsidiary company
D. 51%, holding company
B If a company holds at least 50 % capital of another company, the other company whose shares are held is called the
subsidiary company of the other company.

448 Where an organization is established under an Act of the Parliament it is called:


A. public sector undertaking
B. public sector enterprise
C. statutory corporation
D. any of the above
C Where an organization is established under an Act of the Parliament it is called a statutory corporation such as SBI or
Nationalized Banks created under special Acts passed by the Parliament.

449 A club can be registered under provisions of:


A. Companies Act only
B. Cooperative Societies Act only
C. Societies Registration Act only
D. any of the above
D A club can be registered under Companies Act or Coop Societies Act or Societies Registration Act.

Page 79 of 175
450 Which of the following name of the Act does not match in the context of Trusts:
A. Public Trusts are governed by Public Trust Act
B. Private Trusts are governed by Indian Trust Act
C. Hindu trusts are governed by Religious and Endowment Act
D. Muslim Trust are governed by Muslim Act
D The Muslim Trust are governed by Wakf Act.

451 Which of the following authorities supervise the activities of the public trusts:
A. Court of Trust
B. Trust Boards
C. Charity Commissioners or Commissioners of Endowments
D. any of the above
C The activities of public trusts are supervised by Charity Commissioners or Commissioners of Endowments.

452 The trustee of the Muslim Trust (Muslim Wakf) is called:


A. Trustee
B. Mutawali
C. Wakf
D. none of the above
B The trustee of the Muslim Trust (Muslim Wakf) is called Mutawali.

453 Based on funds outflows, the credit facilities allowed by banks can be grouped as:
A. secured and unsecured
B. fund based and non-fund based
C. working capital & term loans
D. for current assets and for capital expenditure
B Based on funds outflows, the credit facilities allowed by banks can be grouped as fund based and non-fund based.

454 Which of the following credit facilities is not a fund based facility sanctioned a borrower:
A. drawee bills acceptance
B. overdraft
C. deferred payment guarantee
D. bills finance
C DPG is a non-fund based facility while other facilities are fund based.

455 Which of the following credit facility sanctioned by a bank to its borrower is a fund based facility:
A. letter of credit
B. bank guarantee
C. drawee bills acceptance
D. deferred payment guarantee
C Drawee bills acceptance is a fund based limit sanctioned on behalf of the borrower to make payment of usance bills drawn
on the borrower, the payment of which is made immediately by the bank and recovered from the borrower on due date.

Page 80 of 175
456 If a customer overdraws an account although there is no sanctioned overdraft limit and later on refuses to repay it, what
remedy is available with the bank:
A. bank can recover the amount of principal only
B. bank can recover the amount of interest only
C. bank can recover both the principal and interest
D. bank cannot recover the amount, as there is no sanctioned overdraft.
C As per judgement in case of Bank of Maharashtra vs United Construction Co. and Other (1986) if a customer overdraws an
account although there is no sanctioned overdraft limit and later on refuses to repay it, the bank can recover the principal
and interest.

457 Rule in Clayton case is based on which of the following premise:


A. each debit and credit in a running account shall be combined together
B. each debit in a running account is separate loan and any credit to such account is deemed to be repaying first debit in the
account
C. each debit is a common loan but each credit is a separate credit entry
D. none of the above
B Rule in Clayton case is based on the premise that each debit in a running account is separate loan and any credit to this
account is deemed to be repaying first debit in the account

458 Bank-B allowed overdraft to firm ABC on a no. of occasion but later on, on a particular day, returned the cheque and did
not allow the overdraft.
A. the bank is within its rights to do so
B. the bank cannot do so without giving notice to the party regarding its intention not to continue the overdraft
C. the bank cannot do so if there is debit balance in the account, since its recovery can become a problem for the bank.
D. the bank can do so after recovering the entire amount in the previous overdraft balance.
B As per decision in Indian Overseas bank vs Narain Prasad Govindlal Patel (1980), the bank cannot do so without giving notice
to the party regarding its intention not to continue the overdraft.

459 Which of the following features of loan account do match:


A. where credit facility is available on a revolving basis - overdraft
B. where the disbursement is allowed only once and repayment is made in instalments - demand loan
C. where the disbursement is allowed only once and repayment is made on demand - term loan
D. all the above
A Where the disbursement is allowed only once and repayment is made in instalments it is called term loan. In demand loan
the repayment in made on demand preferably in lump sum.

460 The period of term loan classification in which of the following does not match:
A. short term loans - repayable within one year
B. medium term loans - repayable after 1 year but up to 7 years
C. long term loans - repayable in period of more than 7 years
D. none of the above
D The classification given is correct.

Page 81 of 175
461 Bank-B sanctioned a term loan to XYZ limited within the condition that if the borrower failed to pay 2 instalments, the
entire amount of the loan will become payable immediately. If the borrower defaults in making the repayment of 2
instalments, in such case:
A. the bank can treat the entire amount due for payment and can demand payment
B. such agreement is against law of natural justice due to which bank cannot do so
C. such agreements are void i.e. illegal and cannot be enforced.
D. the bank can recover the amount of due instalments only.
A In such circumstances, the bank and the borrower have to follow the terms of the agreement between them as per
judgement in case of PK Achuthan vs State Bank of Travancore (1974).

462 Which of the following is correct regarding, limitation in case of term loan accounts:
A. it begins from date of first disbursement
B. it begins from due date of first instalment for the entire amount
C. if begins from due date of each instalment i.e. separate for each instalment.
D. if part of amount has become due, the limitation begins for the entire amount
C In case of term loans, the limitation begins from due date of each instalment separately. Which means for each instalment
limitation period is different. With one instalment becoming due, the limitation begins for that instalment only and not for
the entire outstanding balance.

463 In case of demand loan, the limitation:


A. begins from date of document
B. begins from the date the loan has become due
C. begins from the date the loan is demanded back by the bank
D. limitation begins from the date whichever is earlier out of the above dates.
A In case of demand loans the limitation is three years from date of document.

464 If a borrower is selling goods on credit, to finance his credit sales, which of the following types of bills facility shall be
allowed:
A. bills purchase
B. bills discounting
C. drawee bill acceptance
D. bills co-acceptance
B If a borrower is selling goods on credit, to finance his credit sales, he will be requiring bills discounting facility.

465 Which of the following facility is not part of non-fund based facility:
A. derivative products
B. underwriting
C. credit guarantee
D. none of the above
D All the above facilities are off-balance sheet exposures i.e. non-fund based facilities.

466 Which of the following is not a correct statement regarding unsecured loans:
A. it is a loan in which the banks rely upon the personal integrity of the borrower
B. there is no tangible security for repayment of such loan due which such loans are called clean loans also
C. bank cannot file suit in a court of law, since there is no security.
D. repayment of such loans depends up to financial strength of the borrower to pay in future
C Banks can file suit against the borrower for his personal liability and get his assets attached for recovery of the loan.
Page 82 of 175
467 The secured loans are those loans (which one is not correct):
A. for which there is some tangible security available to secure the loan
B. viability of the activity in such cases is of secondary importance only
C. primary importance in such loans is that of the security
D. all the above
B Besides, the security, the banks invariably ensure that the activity for which the loan is given is viable. For realization of the
loan, the dependence on security is only if the borrower otherwise fails to pay.

468 Banks prefer secured loans over the unsecured loans because:
A. the economic success itself does not assure the repayment
B. willingness of the borrower to repay is an important factor
C. if borrower is not willing to pay or economic activity turns out to be unviable, loan could be recovered from the security.
D. all the above
D All the above reasons are correct due to which the banks prefer secured loans over the unsecured ones.

469 The procedure to deal with the registration of the firms is contained in:
A. Section 4 of Indian Partnership Act
B. Section 11 of Companies Act
C. Section 56 to 68 of Indian Partnership Act
D. Section 66 to 68 of Indian Partnership Act
C The procedure to deal with the registration of the firms is contained in Section 56 to 68 of Indian Partnership Act.

470 Which of the following statement regarding registration of firm is not correct:
A. registration of firm is optional and not compulsory
B. registration of firm is done by Registrar of Firms
C. Registration of firm and partnership deed takes place simultaneously.
D. none of the above
C Registration is required of the firm and not of the partnership deed.

471 The registrar of firms when satisfied that the provisions of Section ___ of Indian Partnership Act have been duly complied
with, records an entry in the register of firms:
A. Section 59
B. Section 58
C. Section 57
D. Section 56
B The registrar of firms when satisfied that the provisions of Section 58 of Indian Partnership Act have been duly complied
with, records an entry in the register of firms:

472 A firm is deemed to have been registered when:


A. all the formalities connected with registration are completed
B. application for registration is filed by the firm with RoF
C. when entry is made by the Registrar u/s 59 of Indian Partnership Act
D. when certificate of registration is issued by the Registrar
D A firm is deemed to have been registered when certificate of registration is issued by the Registrar of Firms.

Page 83 of 175
473 If a registered firm changes its name or principal place of business, the alternation is required to be registered with a
period of:
A. 30 days from date of making such alternation
B. 2 months from date of making such alteration
C. 3 months from date of making such alteration
D. there is no time limit.
D If a registered firm changes its name or principal place of business, the alternation is required to be registered but without
any time limit.

474 If the Registrar of firms refuses to make amendment in the entry in the Registrar of Firms:
A. he can be directed by the State Govt. to do so
B. Ministry of Corporate Affairs, Govt. of India can direct him to do so
C. a competent court can direct him to do so
D. Company Law Board can direct him
C If the Registrar of firms refuses to make amendment in the entry in the Registrar of Firms, a competent court can direct him
to do so

475 If some person provides wrong information to Registrar of Firms for registration, what is the punishment:
A. imprisonment up to 1 month only
B. imprisonment up to 1 month and fine
C. imprisonment up to 2 months and fine
D. imprisonment up to 3 months and fine
D If some wrong information is provided to Registrar of Firms for registration, the punishment imprisonment up to 3 months
and fine.

476 If a firm is not registered, it cannot file suit against 3rd parties to enforce a right arising from a contract, under provisions
of :
A. Section 69 of Indian Partnership Act
B. Section 58 of Indian Partnership Act
C. Section 58 of Companies Act
D. Section 58 of Indian Contract Act
A Under provisions of Section 69 of Indian Partnership Act, if a firm is not registered, it cannot file suit against 3rd parties to
enforce a right arising from a contract.

477 A partner of an erstwhile un-registered partnership firm wants to bring a suit to enforce a right arising out the contracts:
A. he can do so
B. he can do so by making an application for registration before filing the suit
C. he cannot do so simply by making an application for registration before filing the suit.
D. none of the above
C A partner of an erstwhile un-registered partnership firm wanting bring a suit to enforce a right arising out the contracts,
cannot do so simply by making an application for registration before filing the suit, as per Supreme Court judgement in Loon
Karan Sethia (1977).

Page 84 of 175
478 A partner of an unregistered firm wants to file a suit for dissolution of a firm or to enforce a right to realize the property of
the dissolved firm:
A. he cannot do so as the firm is unregistered firm
B. he can do so under Section 69 (3) of Indian Partnership Act.
C. he can do so after getting the firm registered
D. none of the above
B He can do so under Section 69 (3) of Indian Partnership Act.

479 An unregistered firm u/s 69 of Indian Partnership Act can not file suit to enforce its right but as an exception, the suit can
be filed by unregistered firm also, if the amount does not exceed:
A. Rs.100
B. Rs.1000
C. Rs.10000
D. Rs.1 lac
A Suit can be filed by unregistered firm also, if the amount does not exceed Rs.100.

480 The judgement of House of Lords in the case of Salomon vs Salomon & Co. Ltd relates to:
A. procedure for incorporation of a company
B. procedure for liquidation of a company
C. the principle that the company has corporate personality
D. the principle that the company is a legal entity
C The judgement of House of Lords in the case of Salomon vs Salomon & Co. Ltd relates to the principle that the company has
corporate personality i.e. the company is a separate legal person separate from its shareholders.

481 Which of the following is a correct statement:


A. for all types of actions, the firm is liable for the actions of a partner
B. for actions of a company, the shareholders are liable personally
C. for the actions of a shareholder, the company is liable
D. for actions of a partner in normal course of business, done for a firm, the firm is liable
D Company and shareholders are separate entities due to which for the actions of the company or of the shareholder, they
are not liable to each other. For actions of the partner, a firm is liable only when the actions are for the firm and in normal
course of business and in a normal manner.

482 At the time of incorporation of a company, the promoters are required to submit ___ suitable names in order of
preference, that can be approved for the new company (to check the availability of names):
A. one
B. two
C. three
D. five
C The promoters are to furnish 3 names out of which, if available, the Registrar shall allot the preferred name.

Page 85 of 175
483 It is mandatory that each company should suffix the word limited. But in case of ____ companies, the word limited can be
dispensed :
A. Companies incorporated under a special Act of the Parliament
B. Section 25 Companies
C. Companies promoted by the Govt.
D. Section 23 Companies
B Section 25 companies can be exempted from including the word limited in their name after obtaining licence from Regional
Director.

484 If the word limited are not to be included in the name of the company, this can be done by obtaining ___ from ____:
A. permission, Ministry of Corporate Affairs
B. licence, SEBI
C. licence, Regional Director
D. no such permission or licence is required.
C Section 25 companies can be exempted from including the word limited in their name after obtaining licence from Regional
Director.

485 Which of the following is correct regarding name of a company:


A. name should not be prohibited under the Emblems and Names (Prevention of Improper Use) Act 1950.
B. name should not be identical or too nearly resembling the name of an existing company
C. the name should not be misleading or is not intended to deceive with reference to its objects clause
D. all the above are correct
D All the statements at (a), (b) and (c) are correct.

486 When the Articles of Associations are signed by the promoter:


A. it should be in the presence of at least one witness
B. it should be in the presence of at least two witnesses
C. it should be in the presence of at least two witnesses which should be another signatory to the Articles
D. there is no requirement of witnessing
A When the Articles of Associations are signed by the promoter, it should be in the presence of at least one witness.

487 Which of the following documents is conclusive evidence that the company has come to existence:
A. memorandum of association
B. certificate of incorporation
C. articles of association
D. certificate of commencement of business
B When the certificate of incorporation has been issued, it is conclusive evidence that the company has come to existence.

488 A public company was constituted with 7 shares holders out of which 5 were minors. On behalf of the minors, the
Memorandum of Association was signed by the guardians of the minors.
A. the validity of issue of certificate of incorporation is questionable
B. the validity of issue of certificate of incorporation is partly questionable
C. the validity of issue of certificate of incorporation can not be impeached
D. the validity of issue of certificate of incorporation can be impeached
C The validity of issue of certificate of incorporation cannot be questioned i.e. the certificate of incorporation cannot be
impeached.

Page 86 of 175
489 Which of the following document is required by a public company and not by a private company:
A. memorandum of association
B. certificate of incorporation
C. articles of association
D. certificate of commencement of business
D The certificate of commencement of business is required by a public company only u/s 149 of Companies Act.

490 Under provisions of Section 125 (4) of Companies Act, which of the following types of charge is not required to be
registered:
A. a charge to secure the debentures
B. a charge on any immovable property
C. a charge on book debts of a company
D. none of the above
D All the above type of charges require registration with Registrar of Companies.

491 Which of the following types of charges require registration with Registrar of Companies as per provisions of Section 125
(4) of Companies Act:
A. pledge of stocks
B. loan against document of title to goods
C. loan against deposits
D. hypothecation of goods
D The hypothecation being floating charge and not being pledge requires registration.. In other cases, Section 125 (4) is not
applicable. Hence, these do not require registration.

492 When term loan for purchase of machinery is given, it falls in which of the following category of charges:
A. floating charge
B. fixed charge
C. first charge
D. exclusive charge
B Where the charge extends to a specific property like machinery, it is called fixed charge.

493 When cash credit limit is allowed against hypothecation of stocks, it falls in which of the following category of charges:
A. floating charge
B. fixed charge
C. first charge
D. exclusive charge
A Where the charge extends to the present as well as future property of a company and is not attached to a particular
property, like in case of stocks that keep on rotating, in cash credit hypothecation of stocks.

494 What represents the crystallization of floating charge into a fixed charge:
A. when the company defaults in repayment of term loan instalment and interest
B. when the company defaults in servicing the interest in the cash credit account
C. when the rotation of stocks stops and same stock continues to be held as security, for some reason
D. in all the above situations
C When the rotation of stocks stops, say due to stoppage of production and movement of goods hypothecated to the bank
and same stock continues to be held as security, for any reason, the floating charge gets converted into a fixed charge.

Page 87 of 175
495 To get the charge created in favour of a bank, registered with Registrar of Companies, a company gets a period of:
A. 30 days from date of creation of charge
B. 30 days from date of first disbursement of the loan
C. 30 days from date of last disbursement of the loan
D. any of the above, whichever is earlier.
A The companies get 30 days to file the particulars of charge to get it registered within 30 days from date of creation of charge.

496 If a company fails to file the particulars within the stipulated initial period of 30 days, the particulars can be filed for
registration with permission of Registrar of Companies within :
A. next 270 days
B. next 60 days
C. next 30 days
D. next 10 days
C If a company fails to file the particulars within the stipulated initial period of 30 days, the particulars can be filed for
registration with permission of Registrar of Companies within next 30 days.

497 Which of the following forms do not match for filing the particulars:
A. for a filing particulars for the first time - Form 8
B. for modification of the charge already registered - Form 13
C. for satisfaction of charge on adjustment of the loan - Form 17
D. none of the above
B For modification, Form 10 is required to be used instead of Form 13. Other details are correct.

498 The basic responsibility for filing of particulars of charge lies with:
A. the bank only
B. the company only
C. the bank and company both
D. primarily the bank and secondarily the bank
B U/s 134 of Companies Act, it is the responsibility of the company. But if company is failing in its duty, the bank as a creditor,
can get the charge registered by filing the particulars.

499 If a company fails to get the charge registered, the effect of the non-registration is that:
A. in case of liquidation, the charge will not be valid charge against the liquidator
B. in case of liquidation, the charge will not be valid against the other secured creditors
C. as against the company itself, if it does not go into liquidation, the charge will be valid and can be enforced
D. all the above are correct
D All the statements at (a), (b) and (c) are correct.

500 What are the provisions of Section 141 of Companies Act:


A. the authority of Registrar of Companies to allow the company to file particulars of charge after 30 days
B. the authority of Registrar of Companies to allow the company to file particulars of charge after 60 days
C. the authority of Company Law Board to allow the company to file particulars of charge after 60 days
D. the authority of Registrar of Companies to allow the company to file particulars of charge any time
C Section 141 of Companies Act deals with authority of Company Law Board to allow the company to file particulars of charge
after 60 days (i.e. 30 days discretion of the company + 30 days discretion of the Registrar of Companies)

Page 88 of 175
501 The basic objective of enactment of SARFAESI Act was:
A. to improve the quality of bank lending
B. to enable banks and FIs to recover bad loans by laying hands on the security without court intervention
C. to sell the assets of the borrower without going to a court of law
D. to reduce the NPAs
B The basic objective was to provide a tool to banks and FIs to recover bad loans by laying hands on the security (i.e.
enforcement of security interest) without court intervention.

502 The SARFAESI Act has introduced which of the following (which one is not correct):
A. securitization and reconstruction of financial assets
B. financial assets means the non-performing loans only
C. enforcement of security interest without court intervention
D. setting up of central registry for registration of securitization transactions
B Financial assets for the purpose of SARFAESI Act means non-performing loans as well as investments.

503 Which of the following is not correct regarding SARFAESI Act?


A. it extends to entire India including J & K
B. it came into effect wef June 21, 2002
C. it is applicable to housing finance companies
D. those assets of the borrower can also be sold on which the bank did not create any charge
D Under SARFAESI Act only those securities can be sold on which the borrower has created some charge, say hypothecation,
assignment or mortgage.

504 The constitutional validity of SARFAESI Act was examined by Supreme Court in which of the following cases:
A. Mardia Chemicals vs Union Bank of India
B. Maheshwari Chemicals vs Union Bank of India
C. Mardia Chemicals vs Union of India & others
D. Madari Chemicals vs Union Bank of India
C The case is Mardia Chemicals vs Union of India and others.

505 Which particular provision was suggested by Supreme Court to be removed from the SARFAESI Act, in case of Mardia
Chemicals vs Union of India and others:
A. deposit of 75% of amount of loan if the borrower wants to approach DRT against possession of security.
B. deposit of 50% of amount of loan if the borrower wants to approach DRT against possession of security.
C. deposit of 50% of amount of loan if the borrower wants to appeal to DRAT against DRT.
D. deposit of 75% of amount of loan if the borrower wants to appeal to DRAT against DRT.
A The provision u/s 17 (2) i.e. deposit of 75% of amount of loan if the borrower wants to approach DRT against possession of
security, was found to be unreasonable and oppressive by Supreme Court.

Page 89 of 175
506 After amendment to Section 17 (2) of SARFAESI Act, what new provision has been made:
A. borrower can approach DRT without depositing any amount but to approach DRAT against decision of DRT he has to deposit
75% of the due amount.
B. borrower can approach DRT without depositing any amount but to approach DRAT against decision of DRT he has to deposit
50% of the due amount.
C. borrower can approach DRT without depositing any amount but to approach DRAT against decision of DRT he has to deposit
75% of the due amount which can be reduced to NIL.
D. borrower can approach DRT without depositing any amount but to approach DRAT against decision of DRT he has to deposit
50% of the due amount which can be reduced to NIL.
B The amended provision is that the borrower can approach DRT without depositing any amount but to approach DRAT
against decision of DRT he has to deposit 50% of the due amount.

507 If a security is in possession of the bank, and bank wants to sell the security to recover the due loan:
A. it can do so under SARFAESI Act
B. it can do so under Indian Contract Act
C. it can do so under Recovery of Debt due to Banks and FIs Act 1993
D. it can do so under any of the above
B If a security is in possession of the bank, and bank wants to sell the security to recover the due loan, it can do so under
provisions of Indian Contract Act such as in case of pledge of goods.

508 What is the position of sale of immovable property by a bank where it is charged to the bank:
A. under SARFAESI Act, it can be sold after obtaining possession
B. under Indian Contract Act, it cannot be sold
C. under Transfer of Property Act, it can be sold through court intervention only
D. all the above are correct
D All the options given above are correct.

509 The provisions of SARFAESI Act are applicable in case of:


A. all assets of the borrower
B. only movable assets of the borrower
C. only those securities which have been charged to the bank to secure the loan
D. only those securities which are already in possession of the bank.
C The provisions of SARFAESI Act are applicable in case of only those securities which have been charged to the bank to secure
the loan and are not already in bank possession.

510 SARFAESI Act is not applicable in which of the following category of banks.
A. banking companies
B. SBI & Associates and nationalized banks
C. Regional Rural Banks
D. cooperative banks
C SARFAESI Act is not available for RRBs.

Page 90 of 175
511 Under SARFAESI Act, the term borrower does not include which of the following:
A. the person who has been granted financial assistance from bank or FI
B. the person who has given guarantee for the loan
C. the person who has created mortgage etc. to secure the loan
D. none of the above
D All the above persons are covered under the definition of borrower under SARFAESI Act.

512 All transactions relating to asset securitization or reconstruction or creation of security interest are required to be
registered with ____ under provisions of SARFAESI Act:
A. Security and Exchange Board of India
B. Central Registry
C. Registrar of Companies
D. Registrar of Assurances
B All transactions relating to asset securitization or reconstruction or creation of security interest are required to be registered
with Central Registry to be created by Central Govt. under provisions of SARFAESI Act.

513 The priority of charge under the Central Registry provisions, under SARFAESI Act shall be on the basis of:
A. charge created over the security first, shall have the priority
B. first in time registered to get priority over the person doing registration at a later time
C. priority shall be determined by the authority heading the Central Registry
D. priority shall be with reference to the purpose of loan given against the security
B The priority of charge under the Central Registry provisions under SARFAESI Act shall be on the basis of first in time to
register to get priority over the person doing registration at a later time.

514 Which of the following is not correct as per provision of SARFAESI Act:
A. the Act becomes applicable only when there is a default
B. the bank can classify an account as NPA as per its decision
C. only secured creditors can proceed under SARFAESI Act. The provisions of the Act cannot be used by unsecured creditor
D. the Central Registry will also serve the purpose of maintaining credit information of the lenders.
B The banks cannot classify the account as NPA as per their decision. They are required to follow RBI guidelines as per opinion
expressed by Supreme Court in Mardia Chemicals vs Union of India case.

515 Under SARFAESI Act, which of the following is not covered under Financial Assistance:
A. loan or advance made by the bank
B. subscription to bonds and debentures
C. given guarantee or issued letter of credit
D. none of the above
D Under provisions of SARFAESI Act, all the above are covered under the term Financial Assistance.

516 Before enactment of SARFAESI Act, which of the following types of charge, was not defined in any Act:
A. Pledge
B. Assignment
C. Hypothecation
D. Mortgage
C Before enactment of SARFAESI Act, hypothecation was not defined in any Act:

Page 91 of 175
517 Which of the following is not an important feature of definition of Hypothecation as given in SARFAESI Act:
A. it is charge on immovable assets
B. the assets can be existing or future asset
C. it is a charge without delivery of possession
D. it is created by the borrower in favour of the creditor
A Hypothecation is a charge which is created on moveable assets and not immovable property. On immovable assets
mortgage is created under provision of Transfer of Property Act.

518 Under provisions of SARFAESI Act, the term non-performing asset means the account of a borrower which is classified by
the bank as ____ as per ___:
A. sub-standard only, RBI directives
B. sub-standard or doubtful, bank discretion
C. sub-standard or doubtful or loss, RBI directives
D. sub-standard or doubtful or loss, bank rules
C Under provisions of SARFAESI Act, the term non-performing asset means the account of a borrower which is classified by
the bank as sub-standard or doubtful or loss, RBI directives.

519 Under provisions of SARFAESI Act, the term originator and obligor means:
A. borrower, securitization company
B. bank or FI, borrower
C. securitization company, bank or FI
D. securitization company, borrower
B Originator means the person who had given the loan or made the investment originally and the obligor means the person
liable i.e. the borrower.

520 Under provisions of SARFAESI Act, the term property means (which of the following is not included)
A. intangible assets such as patents, copy rights
B. movable and immovable assets/property
C. debts or receivables
D. none of the above
D All the above type of assets are included in the term property as per provisions of SARFAESI Act.

521 Which of the following is not included in the term Qualified Institutional Buyers (QIB) within the meaning of SARFAESI Act:
A. financial institution or insurance company
B. banks or asset management companies
C. state financial corporation or state industrial development corporation
D. companies registered under Companies Act.
D Companies registered under Companies Act are not QIB unless they get registration from SEBI.

522 Under SARFAESI Act, the reconstruction company means:


A. a financial institution or insurance company
B. a company set up under Companies Act for the purpose of asset reconstruction
C. an asset management company
D. subsidiaries of Banks
B Under SARFAESI Act, the reconstruction company means a company set up under Companies Act for the purpose of asset
reconstruction.

Page 92 of 175
523 When a reconstruction company issues security receipts to the Qualified Institutional Buyers representing undivided
interest in the financial assets, the transaction is known as:
A. reconstruction of financial asset only
B. securitization of financial asset only
C. reconstruction or securitization
D. asset reconstruction
B When a reconstruction company issues security receipts to the Qualified Institutional Buyers representing undivided
interest in the financial assets, the transaction is known as securitization of financial asset.

524 Within the meaning of SARFAESI Act, the term security interest represents any right or title or interest upon a property
created in favour of any secured creditor and does not include:
A. mortgage
B. hypothecation
C. assignment
D. pledge or lien
C Within the meaning of SARFAESI Act, the pledge or lien are not included in the term security interest because under Indian
Contract Act, the sale of security without court intervention is already permitted.

525 Which of the following instrument is issued by a securitization company for securitization of a financial asset, that
represents undivided interest in the security, under provisions of SARFAESI Act:
A. pass through certificate
B. debenture certificate
C. security receipt
D. security sharing certification
C The instrument called security receipt is issued by a securitization company for securitization of a financial asset, that
represents undivided interest in the security.

526 On the request of the secured creditor (bank or FI), who can take possession of the security to handover it to the secured
creditor under provisions of SARFAESI Act:
A. Distt. magistrate or the Chief Metropolitan Magistrate
B. Distt. Police Chief or the Chief Judicial Magistrate
C. Distt. magistrate or the Distt. Police Chief
D. any of the above
A On the request of the secured creditor (bank or FI), Distt. magistrate or the Chief Metropolitan Magistrate can take
possession of the security to handover it to the secured creditor.

527 The provisions of SARFAESI Act can be invoked by a bank to recover the loan if:
A. bank is of the opinion that recovery of the loan should be made
B. there is direction from RBI to recover the loan
C. loan is declared NPA as per RBI guidelines and security is charged to bank
D. loan is declared NPA as per policy of the bank and security is charged to bank
C The provisions of SARFAESI Act can be invoked by a bank to recover the loan if loan is declared NPA as per RBI guidelines
and security is charged to bank.

Page 93 of 175
528 Under provisions of SARFAESI Act, a securitization or reconstruction company can commence the business of securitization
or reconstruction, if the following conditions are satisfied (which one is not correct):
A. it has got it self registered with RBI
B. it has got itself registered with SEBI for this business
C. its owned funds are not less than Rs.100 cr.
D. its owned funds are at least 15% of the total financial assets acquired
B With SEBI, registration is not required. But registration with RBI is mandatory for securitization and reconstruction activities.

529 The certificate of registration issued by RBI to a securitization or reconstruction company under SARFAESI Act, can be
cancelled if:
A. company does not carry the business of securitization or reconstruction
B. company has stopped to receive or hold any investment from QIBs
C. company failed to comply with the conditions of registration certificate issued by RBI
D. all the above
D The certificate of registration issued by RBI to a securitization or reconstruction company under SARFAESI Act, can be
cancelled if any of these conditions is fulfilled.

530 If the registration of a securitization or reconstruction company is cancelled by RBI, under SARFAESI Act:
A. it can request RBI Central Board to reconsider the issue within 15 days
B. it can appeal to Central Govt. within 30 days
C. it can appeal to Central Registry within 30 days
D. it can file suit in a civil court
B If the registration of a securitization or reconstruction company is cancelled by RBI, under SARFAESI Act, it can appeal to
Central Govt. within 30 days from date of communication of such order.

531 If the registration of a securitization or reconstruction company has been cancelled by RBI under SARFAESI Act and it still
has not paid the dues of the investors along with interest, within the period specified by RBI:
A. the registration shall be deemed to have been continuing
B. the registration shall be deemed to have been cancelled
C. the registration shall be treated as available for 2 months
D. the registration shall be treated as cancelled after 3 months
A If registration of a securitization or reconstruction company has been cancelled by RBI under SARFAESI Act and it still has
not paid the dues of the investors along with interest within the period specified by RBI, the registration shall be deemed to
have been continuing

532 A securitization transaction by a securitization company is completed in __ stages i.e.___, under SARFAESI Act:
A. two stages i.e. acquiring the assets from banks and making payment of security receipts
B. two stages i.e. acquiring the assets from banks and then issuing security receipts
C. three stages i.e. acquiring the assets from banks, issuing security receipts and then making payment to QIBs
D. none of the above
B A securitization transaction by a securitization company is completed in two stages i.e. acquiring the assets from banks and
then issuing security receipts.

Page 94 of 175
533 When the security receipt is issued by a securitization company to QIB representing undivided security interest, what are
the provisions regarding registration under SARFAESI Act:
A. registration with Registrar of Companies is mandatory
B. registration is required with registrar of assurances
C. registration is not required
D. registration is required with Central Registry
C When the security receipt is issued by a securitization company to QIB representing undivided security interest, no
registration is required under SARFAESI Act.

534 For realization of the acquired financial assets by an asset reconstruction company (ARC), under SARFAESI Act, which of the
following option is not available:
A. to take over the management of the business of the borrower
B. to sell or lease the business or enforce security interest as per SARFAESI Act
C. rescheduling the payment of debts
D. none of the above
D All the above options are available to ARC for realization of financial asset acquired by it from banks or FIs.

535 Which of the following is not correct in the context of a securitization company:
A. it can not undertake any other business i.e. other than securitization or reconstruction
B. it can raise deposits to finance its activities
C. normally the assets should be realized within 5 years as per RBI guidelines
D. none of the above
B Securitization companies cannot raise deposits.

536 What time period is available as per RBI guidelines to a securitization or reconstruction company to realize an acquired
financial asset under SARFAESI Act:
A. the time to be determined by the company
B. maximum 3 years
C. maximum 5 years
D. depending upon the condition of the financial asset
C As per RBI guidelines, the Securitization or Reconstruction companies are allowed a period of 5 years to realize the financial
asset acquired by them.

537 A securitization or reconstruction company is required to maintain capital adequacy ratio of:
A. minimum 8%
B. minimum 9%
C. minimum 10%
D. minimum 15%
D A securitization or reconstruction company is required to maintain capital adequacy ratio of minimum 15% of total assets
acquired.

Page 95 of 175
538 Which of the following statement does not match:
A. Right of acquisition of financial asset by securitization or reconstruction company subject to prior agreement about the assets -
false
B. offer document, debenture, agreement and security receipt are the documents involved in a securitization transaction - true
C. Acquisition of a financial assets by securitization or reconstruction company is with the liability attached to such asset - true
D. on the basis of security receipt, the holder is entitled to undivided interest in the security - true
C Acquisition of a financial assets by securitization or reconstruction company is not subject to the liability attached to such
asset before acquisition.

539 If an existing company incorporated for securitization wants to undertake securitization activities after application of
SARFAESI Act:
A. it has to incorporate a separate company
B. it is deemed to have acquired the rights to undertake securitization activities under SARFAESI Act
C. it is required to obtain registration with RBI within 6 months from commencement of the Act.
D. the existing companies do not require any registration with RBI
C If an existing company incorporated for securitization wants to undertake securitization activities after application of
SARFAESI Act, it is required to obtain registration with RBI within 6 months from commencement of the Act.

540 Before taking possession of a security under SARFAESI Act, the bank is required to issue notice to the borrower under
provisions of:
A. Section 10 (3) of SARFAESI Act
B. Section 13 (2) of SARFAESI Act
C. Section 14 (1) of SARFAESI Act
D. Section 17 (2) of SARFAESI Act
B The notice giving 60 days time to the borrower is required before taking possession of the security.

541 Under SARFAESI Act, before taking possession, a ___ notice is required to be given to the borrower:
A. one week
B. one month
C. 45 days
D. 60 days
D The notice giving 60 days time to the borrower is required before taking possession of the security.

542 If the borrower has raised objection to the possession of the security by the bank, the bank is required to send reply to the
borrower justifying the possession under SARFAESI Act:
A. one week
B. one month
C. 45 days
D. 60 days
A The period for justifying the possession, to the borrower is one week.

Page 96 of 175
543 Under SARFAESI Act, which of the following courts can take cognizance of the issues relating to dispute between the
borrower and the secured creditor (bank or FI)
A. a distt. court
B. High Court
C. DRT or DRAT
D. any of the above
C Under SARFAESI Act, only DRT or DRAT can take cognizance of the issues relating to dispute between the borrower and the
secured creditor (bank or FI)

544 In case of consortium advances, the action under SARFAESI Act can be initiated if there is consent of ___ banks:
A. 75% banks by value and 60% by number
B. 75% banks by value
C. 60% banks by value
D. 75% banks by number and 60% banks by value
B In case of consortium advances, the action under SARFAESI Act can be initiated if there is consent of 75% banks by value.

545 Under SARFAESI Act, the action on behalf of the bank or FI can be initiated by an authorised officer, who can be:
A. an officer authorised by the competent authority
B. an officer in Scale IV only
C. an officer authorised by the Board of the bank only
D. an officer in Scale IV or above or authorised by the Board of the bank
D Under SARFAESI Act, the action on behalf of the bank or FI can be initiated by an authorised officer, who should be an
officer in Scale IV or above or authorised by the Board of the bank.

546 If the borrower wants to approach DRT against the possession of the security by the bank, he can do so within :
A. one week
B. one month
C. 45 days
D. 60 days
C If the borrower wants to approach DRT against the possession of the security by the bank, he can do so within 45 days.

547 If the borrower wants to approach DRT against the possession of the security by the bank, he can do so by depositing:
A. 75% of the amount due
B. 50% of the amount due
C. 50% of the amount due that can be reduced to 25% by DRT
D. no amount is required to be deposited.
D If the borrower wants to approach DRT against the possession of the security by the bank, he can do so without depositing
any amount as per amendment to original Section 17 (2) of SARFAESI Act on direction of Supreme Court.

548 If the borrower wants to appeal DRAT against the decree of DRT for possession of the security by the bank, he can do so
within :
A. one week
B. 30 days
C. 45 days
D. 60 days
B If the borrower wants to appeal to DRAT against DRT decision for the possession of the security by the bank, he can do so
within 30 days.
Page 97 of 175
549 If the borrower wants to appeal to DRAT against DRT decree for the possession of the security by the bank, he can do so by
depositing:
A. 75% of the amount due which can be reduced to 25% by DRAT
B. 50% of the amount due which can be reduced to NIL by DRAT
C. 50% of the amount due that can be reduced to 25% by DRAT
D. no amount is required to be deposited.
C If the borrower wants to appeal to DRAT against DRT decision for the possession of the security by the bank, he can do so by
depositing 50% of the amount which can be reduced to 25% by DRAT.

550 With regard to sale price of the security, which of the following is not correct:
A. the minimum sale price can be the reserve price
B. the reserve price is fixed by the borrower and the bank together
C. if sale is below reserve price, the consent of the borrower is required
D. none of the above
B The reserve price is fixed by the bank on the basis of valuation of the security before sale.

551 Before sale of a security, a ___ days notice is required to be given to the borrowers as per SARFAESI Act.
A. one week
B. 30 days
C. 45 days
D. 60 days
B Before sale of a security, a 30 days notice is required to be given to the borrowers as per SARFAESI Act.

552 The buyer of the assets sold by the bank under SARFAESI Act is required to pay ___ at the time of sale to confirm the sale:
A. 10%
B. 15%
C. 20%
D. 25%
D The buyer of the assets sold by the bank under SARFAESI Act is required to pay 25% of the purchase price, at the time of sale
to confirm the sale.

553 The buyer of the assets sold by the bank under SARFAESI Act is given ___ time to make payment of the balance amount.
A. one week
B. 10 days
C. 15 days
D. 25 days
C The buyer of the assets sold by the bank under SARFAESI Act is given 15 days time to make payment of the balance amount.

554 The powers to take possession of the security are vested with under SARFAESI Act:
A. with the police authority
B. with the judicial authority
C. with the secured creditors
D. any of the above
B The powers to take possession of the security are vested with under SARFAESI Act with the judicial authority i.e. Chief
Metropolitan Magistrate or Distt. Magistrate and then to handover the possession to the secured creditor.

Page 98 of 175
555 When the management of a business is taken over by the secured creditor under SARFAESI Act, for the loss of office, the
directors of that company:
A. are entitled to subsistence allowance
B. compensation for loss
C. right of employment in the company
D. no right is available
D When the management of a business is taken over by the secured creditor under SARFAESI Act, for the loss of office, the
directors of that company, no right or compensation is available.

556 What is the time period is available to DRT to dispose off the application received from the aggrieved party by the
measures taken by the secured creditor, under SARFAESI Act
A. within 30 days
B. within 45 days
C. within 60 days
D. within 90 days
C The application has to be disposed off by DRT within 60 days and in exceptional cases in 4 months.

557 Which of the following types of loans are eligible for action under SARFAESI Act:
A. where the outstanding balance is Rs.1 lac or more
B. the agriculture loans
C. the loan on the basis of pledge or lien
D. the loan against the bank deposit
B Agriculture land cannot be sold but agriculture loans are eligible. The balance in the account should be above Rs.1 lac for
eligibility.

558 Which of the following types of loans are not eligible for action under SARFAESI Act?
A. if the amount to be recovered does not exceed 20% of the principal and interest
B. if the limitation has expired in the account
C. if the security is not charged to the bank
D. all the above
D All the above types of loans are not eligible for action under SARFAESI Act.

559 If the borrower raises objections to the notice of possession sent by the bank under SARFAESI Act, how should the bank
dispose off the same:
A. it should be ignored
B. it should be replied to within one week without any fresh consideration
C. the bank should give due consideration to the objection and then reply within one week
D. the bank need not give any importance to notice and reply should be sent as a matter of legal formality.
C If the borrower raises objections to the notice of possession sent by the bank under SARFAESI Act, the bank should give due
consideration to the objection and then reply within one week as per direction given by Supreme Court in Mardia Chemicals
vs Union of India & others.

Page 99 of 175
560 What should be priority (1st payment) for appropriation of sale proceeds realized from sale of property under SARFAESI
Act. (1) payment of dues of the secured creditor (2) payment of dues of labour (3) payment of cost, charges and expenses
for preservation and protection of securities, insurance premium etc. (4) payment o legal cost incurred by the creditor for
taking possession and for affecting sale.
A. for (1)
B. for (2)
C. for (3)
D. for (4)
C The priority for appropriation should be for payment of cost, charges and expenses for preservation and protection of
securities, insurance premium etc.

561 Which of the following can set up a Central Registry under SARFAESI Act:
A. Reserve Bank of India
B. Debt Recovery Tribunal
C. Registrar of Companies
D. Central Govt.
D Under SARFAESI Act, the Central Govt. has to authority to set up Central Registry.

562 Which of the following types of transactions are not required to registered under Central Registry under SARFAESI Act:
A. charge created by way of pledge or lien
B. securitization of financial assets
C. reconstruction of financial assets
D. creation of security interest under SARFAESI Act.
A The transactions at (b), (c) and (d) are required to be registered with Central Registry under SARFAESI Act.

563 If a registration with Central Registry takes place under SARFAESI Act, in which of the following laws, the registration shall
not be required:
A. Companies Act
B. Registration Act
C. Motor Vehicles Act
D. none of the above
D A registration with Central Registry does not mean the registration provisions in other Laws shall be waived. So registration
will continue with other Acts also, as required.

564 What is the time period during which the registration with Central Registry under SARFAESI Act should be made:
A. within 15 days of transaction or creation of security interest
B. within 30 days of transaction or creation of security interest
C. within 45 days of transaction or creation of security interest
D. within 60 days of transaction or creation of security interest
B The time period is 30 days of date of such transaction or creation of security interest

Page 100 of 175


565 If there is delay in getting the registration with Central Registry, who can condone such delay and allow the registration,
under SARFAESI Act.
A. Central Registrar can condone the delay up to 10 day after initial period of 30 days
B. Central Registrar can condone the delay up to 15 day after initial period of 30 days
C. Central Registrar can condone the delay up to 30 day after initial period of 30 days
D. Central Registrar can condone the delay up to 60 day after initial period of 30 days
C If there is delay in getting the registration with Central Registry, the Central Registrar can condone the delay up to 30 day
after initial period of 30 days.

566 If there is any modification to the security interest already registered, the modification is required to be registered, under
SARFAESI Act:
A. it is not required to be registered.
B. it is to be registered within 10 days .
C. it is to be registered within 20 days
D. it is to be registered within 30 days
D If there is any modification to the security interest already registered, the modification is required to be registered within 30
days.

567 If particulars are filed for satisfaction of security interest with the Central Registry, it sends a notice to the secured creditor
within __ as to why the satisfaction should not be recorded, under SARFAESI Act:
A. 10 days
B. 14 days
C. 25 days
D. 30 days
B The notice period is 14 days.

568 If there is any satisfaction of the security interest already registered, the satisfaction details are required to be submitted
to Central Registry within, under SARFAESI Act:
A. not required to be registered.
B. to be registered within 10 days .
C. to be registered within 20 days
D. to be registered within 30 days
D If there is any satisfaction of to the security interest already registered, the satisfaction report is to be filed within 30 days.

569 If a charge is satisfied on a security interest it is to be reported within 30 days by ____, under SARFAESI Act:
A. the borrower
B. the owner of the asset
C. the secured creditor
D. any of the above
C The duty to report the satisfaction is that of the secured creditor, if a charge is satisfied on a security interest.

Page 101 of 175


570 Under Section 23 of SARFAESI Act, if the particulars of charge are not filed with the Central Registry, there is provision for:
A. fine up to Rs.1000 per day for default period and imprisonment up to 2 months
B. fine up to Rs.1000 per day for default period
C. fine up to Rs.5000 per day for default period and imprisonment up to 6 months
D. fine up to Rs.5000 per day for default period
D Under Section 23 of SARFAESI Act, if the particulars of charge are not filed with the Central Registry, there is provision for
fine up to Rs.5000 per day for default period.

571 U/s 12 of SARFAESI Act, if a securitization company fails to comply with RBI directions, it can be fined up to ___ by ___:
A. Rs.1 lac, Central Registrar
B. Rs.1 lac, RBI
C. Rs.5 lac, Central Registrar
D. Rs.5 lac, RBI
D U/s 12 of SARFAESI Act, if a securitization company fails to comply with RBI directions, it can be fined up to Rs.5 lac by RBI.

572 U/s 12 of SARFAESI Act, if a securitization company fails to comply with RBI directions and there is further continuation of
the offence, there is provision for additional fine up to ___ by RBI:
A. Rs.10 lac
B. Rs.5000 per day of default
C. Rs.10000 per day of default
D. Rs.25000 per day of default.
C U/s 12 of SARFAESI Act, if a securitization company fails to comply with RBI directions and there is further continuation of
the offence, there is provision for additional fine up to Rs.10000 per day by RBI.

573 If a person contravenes or attempts to contravene or abets the contravention of provisions of SARFAESI Act, there is
provision for:
A. fine up to Rs.5 lac
B. fine up to Rs.3 lac and imprisonment up to 3 year
C. imprisonment up to one year or a fine or both
D. imprisonment up to 3 years or a fine or both
C If a person contravenes or attempts to contravene or abets the contravention of provisions of SARFAESI Act, there is
provision for imprisonment up to one year or a fine or both

574 No court below the rank of ___ can take cognizance of offences under SARFAESI Act:
A. DRT
B. DRAT
C. High Court
D. Metropolitan Magistrate or Judicial Magistrate of First Class
D No court below the rank of Metropolitan Magistrate or Judicial Magistrate of First Class can take cognizance of offences
under SARFAESI Act.

Page 102 of 175


575 There are certain securities/loans, that are excluded from the purview of SARFAESI Act such as lien, pledge etc. u/s ___ of
SARFAESI Act.
A. Section 31
B. Section 32
C. Section 33
D. Section 34
A The exclusions fall u/s 31 of SARFAESI Act.

576 In which of the following cases, the SARFAESI Act is not applicable:
A. creation of security interest in any vessel under Merchant Shipping Act or any aircraft under Aircraft Act
B. properties not liable for attachment or sale u/s 60 of Civil Procedure Code 1908
C. rights of unpaid seller u/s 47 of Sale of Goods Act 1930
D. all the above
D In all the above cases, the provisions of SARFAESI Act are not applicable.

577 On receipt of a notice of possession from the bank under SARFAESI Act, the borrower repaid a major portion of the loan
amounting to about 81% of the principal and interest:
A. bank can continue with possession process to recover the balance under SARFAESI Act
B. bank can seek DRT direction to continue with possession process to recover the balance under SARFAESI Act.
C. bank cannot continue with action under SARFAESI Act.
D. none of the above
C Since the amount due is less than 20% of the principal and interest, the action under SARFAESI Act is not possible.

578 If on a particular point, the provisions of Transfer of Property Act and SARFAESI Act differ:
A. Transfer of Property Act shall prevail
B. SARFAESI Act shall prevail
C. the decision shall be made by a civil court
D. the decision shall be made by DRT
B If on a particular point, the provisions of Transfer of Property Act and SARFAESI Act differ, the provisions of SARFAESI Act
shall prevail.

579 A cause of action arose on a loan recovery about 4 years back. The bank wants to enforce the sale of security charged to
the bank:
A. the bank will have to give notice of possession and then proceed
B. the bank will have to comply with the required procedure to proceed
C. the bank cannot initiate action
D. the bank can initiate action with the permission of a civil court
C The limitation in the account has expired (assuming a period of 3 years) due to which action under SARFAESI Act is not
possible.

580 Rules framed by the Central Govt. under SARFAESI Act become valid when:
A. these are notified by the Gazette
B. the competent authority approves the rules
C. both the Houses of Parliament approve the rules
D. any of the above, whichever is earlier
C Rules framed by the Central Govt. become valid when both the Houses of Parliament approve the rules.

Page 103 of 175


581 Which of the following is not the objective of Ombudsman Scheme formulated by RBI.
A. to resolve customer complaints relating to banking services
B. to facilitate the satisfaction or settlement of customer complaints
C. to resolve the dispute between banks and customers and between banks, through conciliation or arbitration
D. all the above
C Objectives at (a) and (b) are correct but at (c) is not fully correct because, the dispute between banks are not resolved by
Ombudsman after the scheme was revised in 2006.

582 Which of the following is not correct regarding the Ombudsman scheme.
A. scheme extends to whole of India including J&K
B. scheme is applicable to all banks in India
C. scheme is funded by RBI
D. none of the above
D All the above facts are correct

583 The decision or order of the Ombudsman, in the scheme is called:


A. Decree of the Ombudsman
B. Award of the Ombudsman
C. Order of the Ombudsman
D. Judgement of the Ombudsman
B It is called Award of the Ombudsman.

584 The appellate authority under the Ombudsman scheme to whom appeal can be made by the bank or the customer is:
A. Governor RBI
B. any Dy Governor of RBI
C. Dy Governor of RBI, the in charge of the Deptt. implementing the scheme
D. Ministry of Finance
C Dy Governor RBI, the in charge of the Deptt. implementing the scheme, is the Appellate Authority under the scheme.

585 The complaint under Ombudsman scheme can be made in :


A. paper form only
B. electronic form only
C. paper and electronic form
D. paper, electronic or any other mode
C The complaint can be made in paper form or in electronic form, at the option of the customer.

586 Which of the following can be appointed as Ombudsman and for how much time?
A. General Manager of RBI only for 5 years at a time.
B. General Manager or Chief General Manager of RBI for 3 years at a time.
C. Chief General Manager of RBI only for 3 years at a time.
D. Any other suitable person as per criteria fixed by RBI, for 3 years at a time.
B General Manager or Chief General Manager of RBI can be appointed as Ombudsman, for 3 years at a time.

Page 104 of 175


587 Which of the following statement is correct regarding the Ombudsman Scheme:
A. disputes amongst two banks can be taken up by Ombudsman
B. the cooperative banks and RRBs are not covered under the scheme
C. Ombudsman is appointed by the Central govt.
D. the Ombudsman deals with the complaints received from customers subject to fulfillment of procedure to be adopted by the
customer
D Under Ombudsman scheme, all banks are eligible, disputes amongst banks cannot be covered and Ombudsman is appointed
by RBI.

588 A promise has been made by the sales agent of the bank and it is not fulfilled by the bank:
A. no complaint lies with the Ombudsman
B. complaint lies with the Ombudsman if bank had agreed to fulfill that promise
C. complaint can be made with the Ombudsman
D. the complaints relating to outsourcing are not covered.
C The complaints arising out of outsourcing arrangement are also covered due to which the complaint can be entertained by
the Ombudsman.

589 Some amount has been fraudulently withdrawn from account of a customer and bank is not restoring the amount:
A. being a criminal case, complaint on this issue cannot be entertained by Ombudsman
B. this aspect is covered by the Ombudsman scheme. Hence complaint can be entertained
C. as the loss is of civil liability nature, the customer has to file suit in a civil court only
D. Ombudsman can proceed in the matter as suggested by the Police, if the customer has lodged the FIR.
B This aspect is covered by the Scheme due to which the complaint can be entertained.

590 Which of the following can make complaint to the Ombudsman:


A. customer himself
B. Reserve Bank of India on behalf of the customer
C. Central govt. on behalf of the customer
D. all the above
D The complaint can be made by the customer himself or on his behalf by RBI or Central govt.

591 The limitation period for making complaint under the scheme is ___ and it begins from ___:
A. one year, from date of receipt of reply from the bank where customer is not satisfied or from expiry of one month, after making
the complaint to the bank, which bank has not replied.
B. two years, from date of receipt of reply from the bank where customer is not satisfied or from expiry of one month, after
making the complaint to the bank, which bank has not replied.
C. 3 years, from date of receipt of reply from the bank where customer is not satisfied or from expiry of one month, after making
the complaint to the bank, which bank has not replied.
D. one year, from date of receipt of reply from the bank where customer is not satisfied or from expiry of one month, after making
the complaint to the bank, which bank has not replied, whichever is earlier.
D It is one year, from date of receipt of reply from the bank where customer is not satisfied or from expiry of one month, after
making the complaint to the bank, which bank has not replied.

Page 105 of 175


592 A customer is illiterate and finds it difficult to represent himself before the Ombudsman. He engages an advocate to
handle his complaint:
A. a person can engage his representative including an advocate as per the scheme
B. advocate can be engaged with permission of Ombudsman
C. services of advocate are not permitted to be availed under the scheme to represent the complainant.
D. advocate can be engaged provided he does not claim any professional fee.
C Under the scheme, the services of advocate are not permitted to be availed to represent the complainant..

593 A bank refuses acceptance of small denomination notes from a customer:


A. the complaint can be entertained by Ombudsman on this issue
B. the complaint cannot be accepted, as this relates to extra work load
C. the complaint can be entertained, if the customer proves that he was ready to pay extra charges for small denomination notes
D. this is excluded from grounds of complaint. Hence complaint cannot be made.
A The complaint can be made by the Customer on this issue as this one of the grounds of making complaint to the
Ombudsman.

594 The bank has refused to open bank account in the name of a customer on valid reasons.
A. the complaint can be entertained by the Ombudsman
B. the complaint cannot be entertained by the Ombudsman
C. the complaint cannot be entertained, as the person has not become bank customer, as yet.
D. the complaint can be entertained by the Ombudsman if customer could prove that he is correct.
B If the reasons of refusal for not opening the account are valid, the complaint is not maintainable.

595 A person approached the bank for sanction of loan but the bank refused the sanction of the loan:
A. the complaint can be entertained by the Ombudsman
B. the complaint cannot be entertained by the Ombudsman
C. the complaint cannot be entertained, as the person has not become customer of the bank, as yet.
D. the complaint can be entertained by the Ombudsman if customer could prove that he is a creditworthy customer.
B The decision to sanction a loan or not is a commercial judgement of the bank, which cannot be questioned. Hence complaint
is not maintainable.

596 The appeal can be made by the customer against the Award of the Ombudsman to Dy. Governor RBI, within __:
A. 15 days of date of order
B. 30 days of date of order
C. 45 days of date of order
D. none of the above
D The period to make appeal is 30 days from date of receipt of copy of the order by the customer and not from date of order.

597 In order to settle a complaint, the Ombudsman wants some information from the bank:
A. he has to decide the case on the basis of information provided by the customer
B. he has to decide the case on the basis of information provided by the bank of its own
C. to decide the case he can call information from the bank.
D. Ombudsman has to decide the case on the basis already available with his office and cannot call for further information as that
is time consuming process.
C In order to settle a complaint, the Ombudsman can call information from the bank.

Page 106 of 175


598 What are the provisions for compensation to the customer, by the Ombudsman in his award.
A. the compensation of Rs.10 lac can be allowed
B. the amount of compensation can be actual loss suffered by the customer subject to maximum of Rs.10 lac.
C. the compensation can be allowed irrespective of the loss suffered by the customer.
D. there is no provision for compensation in the revised scheme.
B The amount of compensation can be actual loss suffered by the customer subject to maximum of Rs.10 lac.

599 What are the provisions regarding appeal against grounds of rejection of complaint by the Ombudsman :
A. the customer can appeal against the grounds of rejection of complaint to Governor RBI
B. the customer can appeal against the grounds of rejection of complaint within 45 days
C. the customer can appeal against the grounds of rejection of complaint to Dy. Governor RBI within 30 days
D. the customer can appeal against the grounds of rejection of complaint to Dy. Governor RBI within 45 days
C The customer can appeal against the grounds of rejection of complaint to Dy. Governor RBI within 30 days

600 Which of the following types of complaints are not entertained by Ombudsman:
A. if the issue has already been decided by Ombudsman
B. if the matter is pending in court or decided by a court
C. if the matter is frivolous or vexatious in nature
D. all the above
D All the above types of complaints are not entertained by Ombudsman.

601 The bank is required to implement the Award passed by Ombudsman within:
A. 30 days from date of order
B. 30 days from date of receipt of acceptance of the order from the customer
C. 30 days from date of receipt of order by the bank
D. 45 days from date of receipt of order by the bank
B The bank is required to implement the Award passed by Ombudsman within 30 days from date of receipt of acceptance of
the order from the customer. If customer does not give acceptance, the award is not binding on the bank.

602 If the bank wants to appeal against the award under Ombudsman Scheme with the permission of (which one is not
correct):
A. its Chairman
B. its Executive Director
C. its Board of Directors
D. its Chief Executive
C To file the appeal bank need consent of its Chairman or Executive Director or Chief Executive. There is no need for Board
permission.

603 Which of the following decision is not possible for an appeal to be made under Ombudsman Scheme:
A. dismissal of the appeal
B. allow the appeal and set aside the award
C. modify the award
D. pass any order as it may deem appropriate including keep it pending
D The appeal cannot be kept pending. It has to be decided.

Page 107 of 175


604 RDDB Act (DRT Act) 1993 came into operation wef ___ and its applicable:
A. 24.6.1993, through out India except J & K
B. 22.12.1993, through out India including J & K
C. 23.9.1993, through out India except J & K
D. 26.8.1993, through out India including J & K
A The Act came into operation wef 24.6.93, through out India except J & K.

605 RDDB Act (DRT Act) 1993 is not applicable for which of the following:
A. public sector banks and RRBs
B. private banks and foreign banks
C. cooperative banks
D. financial institutions and consortium of banks
C RDDB Act (DRT Act) 1993 is not applicable on cooperative banks as per Supreme Court judgement.

606 The loans covered under RDDB Act (DRT Act) 1993 should have a minimum recoverable amount of:
A. Rs.10 cr
B. Rs.1 cr
C. Rs.10 lac
D. Rs.1 lac
C The loans covered under RDDB Act (DRT Act) 1993 should have a debt due, amounting to Rs.10 lac.

607 Debt recovery tribunal and Debt recovery appellate tribunals are headed by (which one is correct)
A. presiding officers
B. Chairpersons
C. DRT by presiding officer and DRAT by Chairperson
D. DRT by Chairperson and DRAT by presiding officer
C Debt recovery tribunal and Debt recovery appellate tribunals are headed by DRT by presiding officer and DRAT by
Chairperson.

608 Which of the following is covered by the term debt under RDDB Act (DRT Act) 1993:
A. money overdrawn by the customer without any overdraft facility
B. payment made by the bank by mistake
C. any liability including interest
D. all the above
D The term debt has wider meaning and it covers the money overdrawn by the customer without any overdraft facility OR
payment made by the bank by mistake (as per Court Judgement - Madras High Court. Secured or unsecured loans, both are
covered.

609 Which of the following types of amounts do not form part of the term debt under RDDB Act (DRT Act) 1993:
A. fraud committed by an employee
B. any liability payable under a mortgage or money payable under a decree or civil court
C. any liability for which there is no security
D. none of the above
A As per Supreme Court judgement in Bank of India vs Vijay Ramniklal (1997) the amount recoverable from employee under a
fraud, is not a debt).

Page 108 of 175


610 A bank had given loan to a party with outstanding balance of Rs.10.15 lac although the sanctioned limit was Rs.9.50 lac,
which has become difficult of recovery.
A. the suit has to be filed in a civil court as the limit is Rs.9.50 lac
B. the bank can decide regarding in which court, the suit is to be filed
C. bank can file this case in DRT only, which has the jurisdiction.
D. bank can file this case in High Court directly.
C If the amount due for recovery is Rs.10 lac or above, the DRT only has the jurisdiction, where the case has to be filed.

611 The authority to establishment DRT or DRAT lies with:


A. State Govt. concerned
B. Central Govt.
C. Supreme Court
D. High Court of respective States
B DRT or DRAT can be set up by Central Govt. as per provisions of RDDB Act (DRT Act) 1993.

612 Which of the following statement is not correct regarding the Presiding Officer of DRT:
A. he should be qualified to be a Distt. judge
B. he is appointed for 3 years
C. he can hold office until he attains the age of 62 years
D. none of the above
B The presiding officer is appointed for 5 years and he can hold office until he attains the age of 62 years, whichever is earlier.

613 Which of the following statement is not correct regarding the Chairperson of DRAT:
A. he should be qualified to be a High Court judge
B. he is appointed for 5 years
C. he can hold office until he attains the age of 62 years
D. none of the above
C The presiding officer is appointed for 5 years and he can hold office until he attains the age of 65 years, whichever is earlier.

614 The Presiding Officer of DRT or Chairperson of DRAT (which statement is correct)
A. can resign by giving one month notice
B. they can be removed by order of State Govt./Central Govt.
C. they can be removed on ground of proved misbehaviour or incapacity after enquiry
D. all the above
C They can resign by giving 3 months notice. They can be removed by Central Govt. only and not by the State Govt.

615 The execution of decree passed by which of the following court, can be entertained by DRT:
A. DRT
B. Civil Court
C. Foreign Court
D. all the above
D DRT can entertain the execution of decree passed by DRT, a civil court or even a foreign court (Bank of India vs Harshadrai
Odhavji Mody - 2002, Bombay High Court).

Page 109 of 175


616 If there is request for transfer of application from one DRT to another DRT:
A. it can be transferred by the DRT already handing the application
B. it can be got transferred by the DRT which has been asked to entertain the case after transfer
C. it can be transferred by any DRAT
D. it can be transferred by the DRAT having jurisdiction over both the DRTs
D If there is request for transfer of application from one DRT to another DRT, it can be transferred by the DRAT having
jurisdiction over both the DRTs. It can be transferred even on its own motion by giving notice to the parties.

617 If a DRT is set up, which of the following courts cannot exercise the jurisdiction for cases of Rs.10 lac and above:
A. Distt. courts
B. High Courts
C. Supreme Courts
D. all the above
D High Courts and Supreme Court can exercise the jurisdiction under Article 226 and 227 of the Constitution of India. Only DRT
has the jurisdiction for loan recovery issues.

618 An order was passed by a civil court after enactment of RDDB Act (DRT Act) 1993 but before the establishment of DRT
having jurisdiction for that particular area:
A. order passed by civil court was not in its jurisdiction
B. order passed by civil court was in jurisdiction of DRT
C. order passed by civil court was in its jurisdiction
D. none of the above
C Such order passed by civil court was in its jurisdiction as it was passed before establishment of DRT, as per Supreme Court
judgement in Bhanu Construction Company Ltd vs Andhara Bank (2002).

619 Bank-A wants to file a suit in a DRT. The suit can be filed within the local limits of which of the following DRT (which one is
not correct):
A. where the defendant resides or carries on the business
B. where any of the defendants (where there are more than one) resides or carries on the business
C. where the cause of action has arisen
D. it is at the discretion of the bank
D The statement given at (a), (b) and (c) is correct and not (d).

620 Bank-A has filed a suit in DRT on XYZ. Bank-B also has to file the suit:
A. Bank-B can join the Bank-A at any time
B. Bank-B has to file a fresh suit
C. Bank-A will have the priority in recovery if Bank-B files a fresh suit
D. Bank-B can join the Bank-A at any stage of the suit before the final order is passed.
D U/s 19 (20 of RDDB Act (DRT Act) 1993, if a has filed a suit in DRT and other bank also has to file the suit, the other bank can
join the earlier bank at any stage of the suit before the final order is passed.

Page 110 of 175


621 When an application is received by DRT from a bank, it issues summons to the defendant requiring him to show cause
within a period of ____, as to why the relief prayed by the bank should not be granted.
A. 15 days
B. 30 days
C. 45 days
D. 60 days
B The notice period is 30 days of service of the summons, to show cause by the defendant.

622 Which of the following type of order can be passed by DRT as an interim order against the defendant:
A. debar him from transferring of any property
B. debar him from alienating of any property
C. debar him from dealing with or disposing of any property
D. all the above
D DRT can pass an interim order debarring the defendants from transferring, alienating or otherwise dealing with or disposing
of any property.

623 An interim order passed by DRT debarring the defendant from dealing with his property can be in the form of:
A. injunction order
B. stay order
C. attachment order
D. any of the above
D An interim order passed by DRT debarring the defendant from dealing with his property can be in the form of injunction,
stay or attachment order.

624 If a bank wants that the properties of the defendant should be attached (which one is not correct):
A. the bank has to specify the property
B. the bank has to provide proof of ownership of the property by the defendant
C. the bank has to provide the estimated value of the property
D. none of the above
B Bank has to specify the property and advise the estimated value of the property.

625 If an order is passed by a DRT covering the properties relating to other DRTs also, the DRT will send copy of that order to
(which one is not correct):
A. the defendant
B. the bank (i.e. applicant)
C. all the other tribunals
D. the DRAT having jurisdiction over other DRTs to pass on the copy of the order to respective DRT for action.
D If an order is passed by a DRT covering the properties relating to other DRTs also, the DRT will send copy of that order to the
defendant, the applicant and the other DRTs.

626 The appeal against an order of the DRT, can be made by any of the party to ___
A. High Court
B. DRAT
C. Supreme Court
D. any of the above
B The appeal against an order of the DRT, can be made by any party to DRAT only, having the jurisdiction over the DRT
concerned. But no appeal lies, if the order was made with consent of the parties.
Page 111 of 175
627 The period for making appeal against order of DRT to DRAT is:
A. within 30 days from date of order
B. within 30 days from date of receipt of order
C. within 45 days from date of order
D. within 45 days from date of receipt of order
D The appeal can be made within 45 days from date of receipt of order

628 If the borrower wants to appeal against the order of DRT to DRAT, he has to deposit ___% of the amount of the decree of
DRT which can be reduced by DRAT to ___%.
A. 75%, 25%
B. 75%, zero
C. 50%, 25%
D. 50%, Zero
B Where the borrower wants to appeal against the order of DRT to DRAT, he has to deposit 75% of the amount of the decree
of DRT which can be reduced by DRAT to nil.

629 The maximum period during which the DRT is expected to dispose of the application is:
A. 90 days
B. 180 days
C. 1 year
D. to be decided by DRT.
B The maximum period during which the DRT is expected to dispose of the application is 180 days.

630 The maximum period during which the DRAT is expected to dispose of the appeal is:
A. 3 months
B. 6 months
C. 1 year
D. to be decided by DRT.
B The maximum period during which the DRAT is expected to dispose of the appeal is 6 months from date of receipt of appeal.

631 If the borrower or bank is not satisfied with the decision of the Appeal by DRAT, they can file appeal with:
A. High Court
B. Another DRAT
C. Supreme Court
D. there is no provision for appeal.
D If the borrower or bank is not satisfied with the decision of the Appeal by DRAT, there is no provision for appeal. But writ
jurisdiction of High Court under Article 226 of Constitution and supervisory jurisdiction of High Court as well as Special Leave
Petition before Supreme Court are available.

632 Which of the following statement is correct:


A. jurisdiction of DRT is w.r.t. to the location of Head Office of the bank
B. if a case is already filed with a civil court and is transferred to DRT, fresh court fee is required to be paid.
C. a counter-claim before the DRT has the same effect as a plaint in cross suit
D. DRT cannot pass interim orders like attachment or injunction or stay
C Statement at (c) only is correct. DRT can pass interim order and if case is transferred from civil court to DRT, no fresh court
fee is required to be paid.

Page 112 of 175


633 For recovery of the debt, the Recovery officer of DRT can (which not correct):
A. attach the moveable assets
B. sell the moveable assets
C. cannot attach or sell the immovable property
D. can appoint receiver for management of property of the defendant
C Recovery officer can attach or sell the immovable property

634 If a situation warrants that the defendants has to be arrested for recovery of a loan, which one is wrong (under DRT Act):
A. he can be arrested as per order of presiding officer of DRT only
B. he can be arrested as per order of recovery officer
C. there is minimal fair proof of the willful failure of the defendants to pay inspite of sufficient means.
D. none of the above
A The defendant can be arrested on the order of recovery officer provided there is minimal fair proof of the willful failure of
the defendants to pay inspite of sufficient means, as per a Supreme Court judgement.

635 If a party wants to have a review of the recovery certificate issued by the DRT on the ground that error is apparent, he can
make an application to ___ within ___:
A. Presiding Officer, 60 days
B. Presiding Officer, 30 days
C. Recovery officer, 60 days
D. Recovery officer, 45 days
A Such review application can be made by any party within 60 days to the presiding officer of DRT. Recovery officer has no
authority to have any such review.

636 If in an appeal, the amount of recovery is amended by the Chairperson of DRAT, what happens to the recovery certificate
already issued by DRT:
A. it may be withdrawn by recovery officer
B. it may be amended by recovery officer
C. it may be withdrawn or amended by the presiding officer
D. any of the above
C The recovery certificate already issued may be withdrawn or amended by the presiding officer.

637 To recover the due amount from the borrower, the Recovery officer of DRT has powers, similar to __ (which one is not
correct)
A. Tax recovery officer as per Section 226 of Income Tax Act
B. Passing of Garnishee orders under Civil Procedure Cod
C. Seizure of goods under Criminal Procedure Code
D. none of the above
C The recovery officer has similar powers as mentioned at (a) and (b).

638 Bank-A received an attachment order from recovery officer of DRT on the current account of the defendant.
A. the bank has to make the payment similar to the payment of an attachment order
B. the bank shall make the payment after having confirmation from DRT presiding officer
C. the bank shall make payment, with consent of the defendant
D. the bank shall ignore such order.
A The bank has to make the payment similar to the payment of an attachment order.

Page 113 of 175


639 A person aggrieved by the order of the Recovery officer can appeal to ___ within ____:
A. No appeal lies against order of the recovery officer
B. presiding officer, 30 days
C. chairperson, 30 days
D. presiding officer, 15 days
B The appeal can be made to presiding officer within 30 days from date of copy of receipt of such order.

640 If a company is under liquidation proceeding and bank wants to proceed with a suit with DRT:
A. it can be done with the leave of Company Law Board
B. it can be done with the leave of High Court
C. it can be done with the permission of Liquidator
D. it does not require any permission / leave
D If a company is under liquidation proceeding and bank wants to proceed with a suit with DRT, it does not require any
permission since RDDB Act (DRT Act) 1993 has overriding effect on other Acts.

641 When RDDB Act (DRT Act) and Companies Act are in contradiction to each other:
A. the company court will take a decision
B. the High Court will take a decision
C. the RDDB Act (DRT Act) will prevail over the Companies Act
D. the Companies Act will prevail over the RDDB Act (DRT Act)
C When RDDB Act (DRT Act) and Companies Act are in contradiction to each other, the RDDB Act (DRT Act) will prevail over
the Companies Act.

642 If a case is pending in DRT and bank wants to initiate action under SARFAESI Act:
A. it can do so with permission of High Court only
B. it can do so if the DRT specifically decides about that
C. it can do so i.e. simultaneous action under DRT Act and SARFAESI Act is possible
D. it cannot be done, as at one point of time, only one legal remedy can be pursued.
C If a case is pending in DRT and bank wants to initiate action under SARFAESI Act, it can do so i.e. simultaneous action under
DRT Act and SARFAESI Act is possible as per Supreme Court judgement in Transcore vs Union of India and others (2006).

643 A company is under winding up process on the order of High Court. Bank wants to proceed against the company in DRT:
A. it can be done without any permission
B. it can be done only after permission of DRAT
C. it can be done only after permission of High Court that ordered the winding up
D. it cannot be done
A The RDDB Act (DRT Act) provisions prevail over the provisions of Companies Act due to which no permission from High
Court is required.

644 Where 2 more remedies are available for a case but there is inconsistency between these remedies and the party has
choice to opt for one of them, which doctrine comes into play:
A. doctrine of choice of remedy
B. doctrine of election
C. doctrine of election
D. principle of natural justice
B Where 2 more remedies are existing for a case but there is inconsistency between these remedies and the party has choice
to opt for one of them only, the doctrine of election comes into play.
Page 114 of 175
645 Which of the following statement is correct in the context of RDDB Act (DRT Act):
A. the borrower can raise a plea before recovery officer of DRT for correctness of the amount ordered to be paid
B. recovery officer can initiate action for recovery, as available for recovery of Income Tax under Income Tax Act
C. if recovery certificate has come clerical error, it can be corrected by recovery officer
D. none of the above
B If there is clerical error in the recovery certificate, it can be corrected by presiding officer of DRT. Further the borrower can
raise the plea before the presiding officer regarding correctness of the amount of order, to be paid.

646 The provisions of Bankers Book Evidence Act apply on the banks that are maintaining their records:
A. in physical /paper form only
B. in electronic form only
C. both in physical as well as in electronic form
D. records in electronic form though recognised by law are not possible to be produced in physical form
C The provisions of Bankers Book Evidence Act apply on the banks that are maintaining their records whether in physical form
or in electronic form.

647 Under provisions of Bankers Book Evidence Act a certified copy of any entry in bankers books, is considered, in a court, as
____ of existence of such entry on bankers books.
A. substantial evidence
B. good evidence
C. prima facie evidence
D. any of the above
C A certified copy of any entry in bankers books, is considered, in a court, as prima facie evidence of existence of such entry
on bankers books.

648 Under provisions of Bankers Book Evidence Act, the ____ can be compelled to produce ____, by a court order:
A. parties, records
B. bank officers, copies of records
C. bank officers, original books
D. parties, original records.
C Under provisions of Bankers Book Evidence Act, the bank officers can be compelled to produce original books by a court
order.

649 A party has produced a certified copy of books of account and the defendant party wants the bank officer as a witness to
prove the contents of copy:
A. the defendant party has no such right
B. the defendant party has the right to call the bank officer
C. the certified copy being prima facie evidence is admissible as evidence. Hence no requirement of calling the bank officer to
prove.
D. the certified copy being prima facie evidence is admissible as evidence. But still the defendants has the right of calling the bank
officer to prove.
C Under provisions of Bankers Book Evidence Act, the certified copy being prima facie evidence is admissible as evidence.
Hence there is no requirement of calling the bank officer to prove.

Page 115 of 175


650 Which of the following, does not form part of the bankers book under provisions of Bankers Book Evidence Act:
A. ledgers
B. day book and cash book
C. other records used in ordinary course of business
D. none of the above
D Under provisions of Bankers Book Evidence Act, all the above, form part of the bankers books.

651 As per provisions of Bankers Book Evidence Act, if a court is to call a bank officer to appear as witness, the order shall be
served on the bank, giving ___ days before the order is obeyed.
A. 2 working days
B. 3 clear business days
C. 3 clear working days
D. 3 days.
C As per provisions of Bankers Book Evidence Act, if a court is to call a bank officer to appear as witness, the order shall be
served on the bank, giving 3 clear working days before the order is obeyed.

652 To make a person liable mere entries in the books of account are not sufficient (which of the following is wrong under
provisions of Bankers Book Evidence Act):
A. if a person accept the correctness of the book, he becomes liable
B. if there has been further proof of payment of money by the bank which appear in the books of account, the person becomes
liable.
C. if a person disputes the payment but there is entry in the books of the bank, the person is deemed to be liable.
D. none of the above
B Conditions at (a) and (b) have to be complied with as per Supreme Court judgement in Chandrahdar Goswami vs Gauhati
Bank Ltd.

653 Name the Act under which the Lok Adalts are constituted:
A. Civil Procedure Code 1908
B. Legal Services Authority Act 1987
C. SARFAESI Act
D. RDDB Act (DRT Act)
B Lok Adalts are constituted under provisions of Legal Services Authority Act 1987 Act.

654 Which of the following types of cases are handled by Lok Adalts:
A. where the amount is small and disputed by the borrower
B. where the amount is small and bank and borrower have no agreement on the amount
C. where the borrower and bank agree to compromise, irrespective of the amount
D. in all the above cases.
C Lok Adalts entertain the cases where both the parties agree to a compromise. Dispute cases are not taken up by Lok Adalts.

655 If one party agrees to refer a matter to the Lok Adalt and other party disputes:
A. the case can be referred to Lok Adalt
B. on the request of one party, Lok Adalt can be constituted
C. the Lok Adalt cannot entertain such cases being a dispute issue
D. the Lok Adalt of DRT only can entertain such cases
C Lok Adalts entertain the cases where both the parties agree to a compromise. Dispute cases are not taken up by Lok Adalt.

Page 116 of 175


656 The appeal against the award of Lok Adalt can be made to which of the following:
A. in case of normal Lok Adalt, to Distt. Court
B. in case of normal Lok Adalt, to High Court
C. in case of Lok Adalt of DRT, to DRT
D. no appeal is possible.
D Against the award of the Lok Adalt, no appeal is possible.

657 If a dispute is referred to Lok Adalt by a court and the parties do not reach an agreement:
A. the Lok Adalt shall announce its own decision
B. the Lok Adalt shall start the procedure similar to a civil court
C. the Lok Adalt shall refer the case back to the court, which had referred the case to Lok Adalt.
D. none of the above
C If a dispute is referred to Lok Adalt by a court and the parties do not reach an agreement, the Lok Adalt shall refer the case
back to the court, which had referred the case to Lok Adalt.

658 Which of the following cannot organize a Lok Adalt:


A. State Authority or Distt. Authority
B. Supreme Court legal Services Committee
C. High Court Legal Services Committee
D. none of the above
D All the above can organize the Lok Adalt.

659 A normal Lok Adalt can entertain the disputes involving an amount of:
A. Rs.20 lac or more
B. up to Rs.20 lac
C. less than Rs.20 lac
D. up to Rs.10 lac
B A normal Lok Adalt can entertain the disputes involving an amount up to Rs.20 lac.

660 A Lok Adalt organized by DRT can entertain the disputes involving an amount of:
A. Rs.20 lac or more
B. up to Rs.20 lac
C. more than Rs.20 lac
D. up to Rs.10 lac
C A DRT Lok Adalt can entertain the disputes involving an amount above Rs.20 lac.

661 Which of the following is not correct regarding the award of Lok Adalt:
A. it is deemed to be the decree of a civil court
B. the court fee if already paid, shall not be refunded
C. The award is binding on all the parties to the disputes
D. all the above
B The court fee if already paid, shall be refunded in the manner provided under the Court Fees Act 1870

Page 117 of 175


662 The objective of enactment of Consumer Protection Act 1986 is:
A. to help bank customer to file suit in a consumer court
B. better protection of the interests of the consumers
C. quick remedy to the consumer though normal courts
D. all the above
B The objective of enactment of Consumer Protection Act 1986 is better protection of the interests of the consumers.

663 Which of the following is correct regarding the Consumer Protection Act:
A. The Act is applicable on all India basis including J & K State
B. the Act applies generally to all goods and services
C. the goods covered for resale or for commercial purpose and services rendered free of charge.
D. all the above
B The Act is not applicable in J & K. Further the Act does not cover the goods covered for resale or for commercial purpose
and services rendered free of charge.

664 Which of the following can make complaint under Consumer Protection Act (which one is wrong):
A. the consumer himself
B. the voluntary consumer association
C. the Central or State Govt.
D. in case of death of the consumer, the complaint cannot be made
D In case of death of the consumer, the complaint can be made by the legal heirs or representatives.

665 Under provisions of Consumer Protection Act, the complaint can be made for (which is incorrect):
A. unfair or restrictive trade practice
B. the goods suffering from defects
C. deficiency in services which are availed for a cost or free of cost
D. charging of the excessive price.
C For deficiency of services, the complaint can be made only if payment has been made for the services availed. For free
services, no complaint is admissible.

666 Bank-B had sanctioned a loan to XYZ but it found to be inadequate to start the business, by the borrower:
A. complaint under Consumer Protection Act is possible
B. complaint under Consumer Protection Act is possible only if the borrower suffers loss and able to prove that
C. complaint under Consumer Protection Act is not tenable
D. complaint under Consumer Protection Act is tenable if court find the case genuine
C As per judgement in SBI vs Jagannath Meher, the complaint is not tenable under Consumer Protection Act as the decision of
the bank regarding use of discretionary powers cannot be questioned.

667 Which of the following does match with regard to jurisdiction of the consumer courts:
A. Distt. Forum - covering the Distt.
B. State Commission - Covering the State
C. Apex Commission - Covering the entire country
D. none of the above
C The consumer court covering the entire country is called National Commission.

Page 118 of 175


668 If there is contravention of provisions of Consumer Protection Act with any other Act (which one is correct):
A. the provisions relating to other Act will not over-ride the provisions of Consumer Protection Act
B. the provisions of Consumer Protection Act shall over-ride the provisions of other Act.
C. the provisions of Consumer Protection Act are additional means of obtaining remedy by a consumer and if the remedy is barred
in any Act, the consumer forum shall not grant such remedy.
D. none of the above
C The provisions of Consumer Protection Act are additional means of obtaining remedy by a consumer. If the remedy is
barred in any other Act, the consumer forum shall not grant such remedy. This means the provisions of the other Act shall
prevail over the Consumer Protection Act.

669 The agencies appointed under Consumer Protection Act are:


A. completely judicial in nature
B. not judicial in nature
C. quasi judicial in nature
D. none of the above
C The agencies appointed under Consumer Protection Act are quasi judicial in nature.

670 X purchased DD from Bank-B in favour of Y. DD has been misplaced in transit and bank has delayed the issue of duplicate
DD due to completion of formalities:
A. Y can file complaint in consumer court
B. X and Y, together can file complaint in consumer court
C. Y cannot file complaint as he has not purchased any service from the bank
D. Y can file complaint with permission of X
C The person filing complaint in a consumer court should have availed service but not free of charges.

671 The central consumer protection council is headed by:


A. The Secretary of Ministry of Consumer Affairs in the Central Govt.
B. Minister of Consumer Affairs in the Central Govt.
C. Judge of the Supreme Court
D. any person nominated by the President of India
B The central consumer protection council is headed by Minister of Consumer Affairs in the Central Govt.

672 The central consumer protection council holds meetings, the periodicity of which is:
A. once in a year
B. twice in a year
C. once in every quarter
D. once in every month
A The meetings are held at least once in a year.

673 The District consumer protection council holds meetings, the periodicity of which is:
A. once in a year
B. twice in a year
C. once in every quarter
D. once in every month
B The meetings are held at least twice in a year.

Page 119 of 175


674 The State Consumer Protection council is appointed by:
A. Central Govt. Ministry of Consumer Affairs
B. State Govt.
C. Central Govt. in consultation with the State Govt.
D. State govt. in consultation with the Central govt.
B The State Consumer Protection Council is appointed by the State Govt.

675 The Distt. Forum under Consumer Protection Act consists of which of the following:
A. Person qualified to be a Distt. Judge to be president and three other members one of whom to be a women.
B. Person qualified to be a Distt. Judge to be president and 2 other members one of whom to be a women.
C. Person qualified to be a Distt. Judge to be president and one other member
D. Person qualified to be a Distt. Judge to be president and one other member who should be a woman
B The Distt. Forum consists of a person qualified to be a Distt. Judge to be president and 2 other members one of whom to be
a women.

676 The members of Distt. Forum under Consumer Protection Act are appointed by which of the following:
A. High Court of the concerned State
B. Central Govt. Ministry of Consumer Affairs
C. State Govt.
D. Distt. Magistrate
C The members of Distt. Forum are appointed by State Govt.

677 A member of the Distt. Forum under Consumer Protection Act holds office for a period of:
A. 3 years or till he attains the age of 62 years
B. 3 years or till he attains the age of 65 years
C. 5 years or till he attains the age of 62 years
D. 5 years or till he attains the age of 65 years
D A member of the Distt. Forum holds office for a period of 5 years or till he attains the age of 65 years.

678 The Distt. Forum under Consumer Protection Act has to ordinarily decide within ___ from date of receipt of the complaint
about admissibility of a case.
A. 7 days
B. 10 days
C. 21 days
D. 30 days
C The Distt. Forum has to ordinarily decide within 21 days from date of receipt of the complaint about admissibility of a case.

679 If a complaint is admitted by the Distt. Forum under Consumer Protection Act, it can be transferred to ___ on ____:
A. any other court, request of the consumer
B. any tribunal, order of the said tribunal
C. any authority, with the consent of the said authority
D. it cannot be transferred.
D If a complaint is admitted by the Distt. Forum, it cannot be transferred.

Page 120 of 175


680 The time period to take a decision on a complaint, as available to the Distt. Forum under Consumer Protection Act is:
A. one month
B. two months
C. three months
D. five months
C The time period to take a decision on a complaint, as available to the Distt. Forum is three months from date of receipt of
notice by the opposite party. The period is 5 months, if laboratory test are essential.

681 If loss has been suffered by a no. of consumers who are not identifiable conveniently, the Distt. Forum under Consumer
Protection Act may order to pay such sum which shall not be less than __% of the value of such goods:
A. 20%
B. 15%
C. 10%
D. 5%
D If loss has been suffered by a no. of consumers who are not identifiable conveniently, the Distt. Forum may order to pay
such sum which shall not be less than 5% of the value of such goods.

682 Bank-B demanded collateral security valuing 2 times the amount of loan and the borrower approached the Consumer
Court for a direction to the bank against the excessive value of collateral security, as per IBA rules:
A. the complaint is maintainable in the respective consumer court
B. the complaint is not maintainable
C. the complaint is maintainable with special permission of RBI
D. the complaint is maintainable with permission of IBA only
B The complaint is not maintainable. The discretion of the bank cannot be questioned by the consumer courts.

683 If a person is aggrieved by the order of Distt. Forum, under Consumer Protection Act, he can appeal to ___ within ___:
A. Distt. court, 2 months
B. State Commission, 30 days
C. High Court, 30 days
D. no appeal is possible.
B If a person is aggrieved by the order of Distt. Forum, he can appeal to State Commission within 30 days from date of order.

684 If appeal is to be made by a person against decision of Distt. Forum, under Consumer Protection Act, declared liable to
make the payment, he has to deposit:
A. 50% of the amount of the order or Rs.25000 whichever is higher
B. 50% of the amount of the order or Rs.25000 whichever is less
C. 75% of the amount of the order or Rs.25000 whichever is higher
D. 75% of the amount of the order or Rs.25000 whichever is less
A If appeal is to be made by a person against decision of Distt. Forum, declared liable to make the payment, he has to deposit
50% of the amount of the order or Rs.25000 whichever is higher.

685 What is the constitution of State Commission under Consumer Protection Act:
A. Person qualified to be a High Court Judge to be president and 2 other members, one of whom to be women.
B. Person qualified to be a Distt. Court Judge to be president and 2 other members, one of whom to be women.
C. Person qualified to be a High Court Judge to be president and 3 other members, one of whom to be women.
D. A High Court Judge to be president and 2 other members, one of whom to be women.
A A person qualified to be a High Court Judge to be President and 2 other members, one of whom to be women.
Page 121 of 175
686 A member of the State Commission under Consumer Protection Act, holds office for a period of:
A. 3 years or till he attains the age of 62 years
B. 3 years or till he attains the age of 67 years
C. 5 years or till he attains the age of 62 years
D. 5 years or till he attains the age of 67 years
D A member of the Distt. Forum holds office for a period of 5 years or till he attains the age of 67 years.

687 Under Consumer Protection Act, the State Commission can entertain cases involving an amount of:
A. up to Rs.20 lac
B. more than Rs.20 lac
C. above Rs.20 lac up to Rs.100 lac
D. up to Rs.100 lac
C Above Rs.20 lac and up to Rs.100 lac.

688 Under Consumer Protection Act, the Distt. Forum can entertain cases involving an amount of:
A. up to Rs.20 lac
B. more than Rs.20 lac
C. above Rs.20 lac up to Rs.100 lac
D. up to Rs.100 lac
A Up to Rs.20 lac.

689 Under Consumer Protection Act, the National Commission can entertain cases involving an amount of:
A. up to Rs.20 lac
B. more than Rs.20 lac
C. above Rs.20 lac up to Rs.100 lac
D. above Rs.100 lac
D Above Rs.100 lac.

690 If a person is aggrieved by the order of State Commission, under Consumer Protection Act, he can appeal to ___ within ___:
A. High court, 2 months
B. National Commission, 30 days
C. Supreme Court, 30 days
D. no appeal is possible.
B If a person is aggrieved by the order of State Commission, he can appeal to National Commission within 30 days from date
of order.

691 If appeal is to be made by a person against decision of State Commission, declared liable to make the payment, he has to
deposit:
A. 50% of the amount of the order or Rs.35000 whichever is higher
B. 50% of the amount of the order or Rs.35000 whichever is less
C. 75% of the amount of the order or Rs.35000 whichever is higher
D. 75% of the amount of the order or Rs.35000 whichever is less
A If appeal is to be made by a person against decision of State Commission to National Commission, declared liable to make
the payment, he has to deposit 50% of the amount of the order or Rs.35000 whichever is higher.

Page 122 of 175


692 The State Commission is expected to dispose off the appeal against Distt Forum, within ___ from date of admission under
Consumer Protection Act:
A. 30 days
B. 60 days
C. 90 days
D. 120 days
C The State Commission is expected to dispose off the appeal against Distt Forum, within 90 days from date of admission.

693 The National Commission under Consumer Protection Act, is expected to dispose off the appeal against Distt Forum, within
___ from date of admission:
A. 120 days
B. 90 days
C. 60 days
D. 30 days
B The National Commission is expected to dispose off the appeal against State Commission, within 90 days from date of
admission.

694 What is the composition of National Commission under Consumer Protection Act:
A. Person qualified to be a Supreme Court Judge to be president and 4 other members, one of whom to be women.
B. Person qualified to be a High Court Judge to be president and 3 other members, one of whom to be women.
C. Person qualified to be a Supreme Court Judge to be president and 3 other members, one of whom to be women.
D. A Supreme Court Judge to be president and 4 other members, one of whom to be women.
A Person qualified to be a Supreme Court Judge to be president and 4 other members, one of whom to be women.

695 Normally, maximum how many members can be there in a consumer court under Consumer Protection Act, who are
having judicial background:
A. at least 25%
B. at least 50%
C. not more than 25%
D. not more than 50%
B Normally not more than 50% of members should not be there in a consumer court, who are having judicial background.

696 A member of the National Commission under Consumer Protection Act, holds office for a period of:
A. 3 years or till he attains the age of 65 years
B. 3 years or till he attains the age of 70 years
C. 5 years or till he attains the age of 65 years
D. 5 years or till he attains the age of 70 years
D A member of the Distt. Forum holds office for a period of 5 years or till he attains the age of 70 years.

697 If a person is aggrieved by the order of National Commission, under Consumer Protection Act, he can appeal to ___ within
___:
A. High court, 2 months
B. National Tribunal, 30 days
C. Supreme Court, 30 days
D. no appeal is possible.
C If a person is aggrieved by the order of National Commission, he can appeal to Supreme Court within 30 days from date of
order.
Page 123 of 175
698 If appeal is to be made by a person against decision of National Commission to Supreme Court, under Consumer Protection
Act, declared liable to make the payment, he has to deposit:
A. 50% of the amount of the order or Rs.50000 whichever is higher
B. 50% of the amount of the order or Rs.50000 whichever is less
C. 75% of the amount of the order or Rs.50000 whichever is higher
D. 75% of the amount of the order or Rs.50000 whichever is less
A If appeal is to be made by a person against decision of National Commission to Supreme Court, declared liable to make the
payment, he has to deposit 50% of the amount of the order or Rs.50000 whichever is higher.

699 The limitation period to file suit in a consumer court is restricted to:
A. one year from date of cause of action
B. 2 years from date of cause of action
C. 3 years from date of cause of action
D. limitation period concept is not applicable in consumer cases
B The limitation period to file suit in a consumer court is restricted to 2 years from date of cause of action.

700 If order of a consumer court is not complied with, what is the punishment:
A. only fine up to Rs.10000
B. only imprisonment up to 3 years
C. Fine of Rs.2000 to Rs.10000 and/or imprisonment of 1 month to 3 years
D. Fine of up to Rs.10000 and/or imprisonment up to 3 years
C If order of a consumer court is not complied with, the punishment is in the form of fine of Rs.2000 to Rs.10000 and/or
imprisonment of 1 month to 3 years.

701 The service of notice to the party under Consumer Protection Act may be in the form of:
A. registered post AD
B. courier approved by consumer court
C. fax
D. any of the above
D The service of notice to the party under Consumer Protection Act may be in any of the above forms.

702 What is the punishment under Consumer Protection Act for complaints of frivolous nature:
A. only fine up to Rs.10000
B. only imprisonment up to 3 years
C. Fine of Rs.2000 to Rs.10000 and/or imprisonment of 1 month to 3 years
D. Fine of up to Rs.10000 and/or imprisonment up to 3 years
A Fine up to Rs.10000.

703 An order has been passed by Distt. Forum under Consumer Protection Act, for payment of compensation. Its recovery
shall be made by:
A. filing of execution in a civil court
B. referring the order to collector to recover as land revenue
C. recovery officer of DRT
D. recovery officer on the pattern of DRT
B The recovery shall be made by referring the order to collector to recover the amount as land revenue.

Page 124 of 175


704 Banks can file suit for recovery of their loans within a prescribe period called limitation period. The period is stipulated as
per:
A. Indian Contract Act
B. Indian Evidence Act
C. RDDB Act (DRT Act) (DRT Act)
D. none of the above
D The period of limitation is prescribed as per Limitation Act 1963.

705 In respect of the following types of loans, the limitation does not have relevance:
A. if the loan is to be recovered under SARFAESI Act
B. if the loan is against pledge of goods
C. if the loan is to be recovered under Recovery of Debt due to Banks/FIs Act
D. all the above cases.
B In case of pledge, the limitation is not required but in other cases i.e. SARFAESI Act or RDDB Act (DRT Act), the limitation is
required.

706 Period of Limitation, as per provisions of Limitation Act means ___ by the Schedule
A. period prescribed for any suit
B. period prescribed for any appeal
C. period prescribed for any application
D. all the above
D The period of limitation means all as above

707 If a suit is instituted by the bank after the limitation period and the defendants has not raised the period as a defence:
A. the suit will be accepted by the court
B. the suit is acceptable at the discretion of the court
C. the suit shall dismissed by the court
D. the suit has to be accepted by the court
C Even when the limitation is not taken as a defence by the defendant, the suit will be dismissed by the court, if it filed after
the expiry of limitation period.

708 While calculating the limitation period, the calculation is made in the following manner:
A. the date of transaction is excluded
B. the date of transaction is included
C. the date of transaction is excluded only if the date was a holiday
D. the date of transaction is excluded if the date of expiry of limitation is holiday
A Under the provisions of Limitation Act, the date of transaction / documents, is excluded.

709 A loan with a limitation period of 3 years was granted on January 12, 2006. If the limitation is with reference to date of
document, the suit can be filed latest by:
A. January 11, 2009
B. January 12, 2009
C. January 13, 2009
D. at the discretion of the bank
B The period of limitation is to be calculated by excluding the date of transaction i.e. Jan 12, 2006. As a result, the calculation
begins from Jan 13, 2006 due to which the limitation expires on January 12, 2009, when the suit can be filed.

Page 125 of 175


710 A loan with a limitation period of 3 years was granted on July 12, 2006. If the limitation is with reference to date of
document and the court is closed from July 10 to July 12, 2009, the suit can be filed latest by:
A. Jul 11, 2009
B. Jul 12, 2009
C. Jul 13, 2009
D. at the discretion of the bank
C The limitation in this case expires on Jul 12, 2009 but as the court is closed on that day, the suit can be filed on Jul 13, 2009,
the first day of reopening of the court.

711 If the applicant or appellant has sufficient cause not to file the application or appeal within the limitation period, the
courts may admit the same. But it is not possible in case of:
A. application for a fresh suit
B. appeal against the judgement of a court
C. execution petition
D. none of the above
C Execution petition cannot be admitted after expiry of the limitation period by a court even if the applicant or appellant has
sufficient cause for not having filed the application or appeal within the limitation period.

712 If a review or revision application or appeal is to be filed within a given limitation period, the calculation shall be made:
A. from date of receiving the copy of the order
B. from date of issuing the order of judgement
C. from date of judgement of the court
D. from the date at discretion of the court
A If a review or revision application or appeal is to be filed within a given limitation period, the calculation shall be made from
date of receiving the copy of the order.

713 Which of the following period shall be excluded from calculation of limitation period, as per provisions of Limitation Act:
A. the period when defendant was away from India
B. the period required for obtaining consent or sanction of the Govt.
C. period required to obtain copy of the judgement in case of appeal or revision
D. all the above
D All the above type of period is to be excluded for calculation of limitation period.

714 The period of limitation can be extended by the action of parties which include the following:
A. specific acknowledgement of the debt by the borrower
B. part payment of the debt by the borrower
C. specific acknowledgement of the debt or part payment of debt by the agent of the borrower
D. all the above cases
D The period of limitation can be extended by specific acknowledgement of the debt or part payment of debt by the borrower
himself or by the agent of the borrower.

715 If the acknowledgement of debt by the borrower is for part amount only:
A. the limitation is extended for the entire loan
B. the limitation is extended for that portion of the loan
C. the limitation is not extended for the loan
D. such method of extension of limitation is unlawful
A If the acknowledgement of debt by the borrower is for part amount only, the limitation is extended for the entire loan.
Page 126 of 175
716 The acknowledgement or the part payment, for the purpose of extension of limitation:
A. can be any time
B. can be any time before expiry of limitation
C. can be any time after expiry of limitation
D. can be before or after expiry of limitation
B The acknowledgement or the part payment, for the purpose of extension of limitation, can be any time before the expiry of
limitation.

717 The period of limitation for a loan under an agreement that it shall be payable on demand is ___ and begins from ___:
A. 3 years, when there was loan default
B. 3 years, from date of loan/document
C. 2 years, from due date
D. 3 years, from due date of the loan
B The period of limitation for a loan under an agreement that it shall be payable on demand is 3 years and begins from date of
document.

718 The bank discounted a usance bill of exchange. The limitation in this case is ___ and begins from ___:
A. 3 years, when there was dishonour
B. 3 years, from date of discount
C. 2 years, from due date
D. 3 years, from due date of the bill
D In case of a usance bill of exchange, the limitation is 3 years and begins from due date of the bill.

719 The bank granted a term loan payable in half-yearly instalments in 5 years. The limitation in this case is ___ and begins
from ___:
A. 3 years, when there was loan default for the first instalment
B. 3 years, from date of loan
C. 2 years, from due date of the last instalment
D. 3 years, from due date of each instalment of the loan
D In case of a term loan the limitation period is 3 years and begins from due date of each instalment separately.

720 There is an agreement between the parties for specific performance of a contract. The limitation in this case is:
A. 3 years, from date fixed for performance
B. 3 years, from the date of contract
C. 12 years, from date fixed for performance
D. 30 years, from date fixed for performance
C For the agreement for specific performance of contracts, the limitation is 12 years and begins from date fixed for the
performance or if no such date is fixed, it begins from the date of plaintiff notice that the performance is refused.

721 If a loan is secured by mortgage of an immovable property, the limitation period is ___ and begins from ___:
A. 30 years, from date of mortgage
B. 12 years, from date of mortgage
C. 3 years, from date of mortgage
D. 3 years, from date of default
B It is 12 years, from date of mortgage.

Page 127 of 175


722 If a person wants to file suit for a matter for which no period of limitation is provided in the Schedule to the Limitation Act,
the period of limitation is:
A. 3 years and begins from date of contract
B. 12 years, begins when the right to sue, accrues
C. 30 years, begins when the right to sue, accrues
D. no limitation period
C If a person wants to file suit for an issue for which no period of limitation is provided in the Schedule to the Limitation Act,
the period of limitation is 30 years and begins when the right to sue accrues.

723 Which of the following statement is correct:


A. in every suit, the defendant has to set up plea of limitation
B. acknowledgement through a document not directly addressed to the bank, does not extend the limitation period
C. limitation in case of demand promissory note is 3 years from date of promissory note
D. in Limitation Act, the definition of suit includes the appeal or application also.
C The defendant is not required to set up a plea of limitation. The court itself takes care of this aspect. The acknowledgement
through any document extends the limitation period. The definition of suit does not include the appeal and application.

724 For the purpose of limitation, a suit is deemed to have been filed when:
A. the application is prepared by the plaintiff
B. the application is presented before the proper officer
C. the application has been accepted by the property officer
D. the date of first hearing of the case.
B A suit is deemed to have been filed when the application is presented before the proper officer.

725 The Income Tax Act envisages the taxation of income of an assessee on the basis of:
A. only residence of the assessee
B. only place of source of income of the assessee
C. only place of business of the assessee
D. place of residence or place of source of income of the assessee
D The Income Tax Act envisages the taxation of income of an assessee on the basis of place of residence or place of source of
income of the assessee.

726 As per provisions of Income Tax Act, the definition of income is:
A. exhaustive
B. inclusive
C. fully exhaustive
D. all the above
B The definition is not exhaustive and inclusive which means that no precise definition as to what constitutes income is
available.

727 The income tax is calculated on the basis of income of a person on the basis of:
A. assessment year
B. calendar year
C. financial year
D. previous year
A The income tax is calculated on the basis of income of a person on the basis of assessment year.

Page 128 of 175


728 The income is taxed in the assessment year belonging to the income of the ____:
A. same year
B. previous year
C. coming year
D. financial year
B The income arising in the previous year is taxed in the assessment year.

729 Previous year means the ____ year, immediately preceding the ___ year, of an assessee:
A. financial year, calendar year
B. calendar year, assessment year
C. financial year, assessment year
D. assessment year, financial year
C Previous year means the financial year immediately preceding the assessment year of an assessee

730 The residential status of a person is determined in Income Tax Act on the basis of:
A. the no. of days, the assessee was present in India during the previous year
B. the no. of days, the assessee was away from India during the previous year
C. the no. of days, the assessee was present in India during the financial year
D. the no. of days, the assessee was present in India during the previous financial year
A The residential status of a person is determined in Income Tax Act on the basis of the no. of days, the assessee was present
in India during the previous year.

731 The category not ordinarily residents is not relevant for which of the following types of assessee as per Income Tax Act:
A. individuals
B. Hindu Undivided family
C. company
D. none of the above
C The term is not used in case of a company, as an assessee.

732 The income of an assessee in India is taxable under Income Tax Act, if the income is earned:
A. in India only
B. outside India only
C. received in India but earned outside India only
D. in India or outside India
D In case of residents, income earned in India or outside is taxable.

733 If a person is a non-resident, he is required to pay tax on income:


A. earned in India only
B. earned outside India only
C. earned in India or outside India
D. no tax is payable
A A non-resident person is taxed in India for his income in India only.

Page 129 of 175


734 Under Income Tax Act 1961, the income is taxed under different heads of income. Which of the following is not one such
head:
A. capital gains
B. income from house property
C. income from salary
D. none of the above
D There are 5 heads of income which include the above three at (a), (b) and (c) and (1) profit and gains from business or
profession and (2) income from other sources.

735 Which of the following provides details about various types of deductions allowable from gross total income of the
assessee:
A. Section 10 of Income Tax Act
B. Chapter IV of Income Tax Act
C. Chapter VIA of Income Tax Act
D. Chapter VIIA of Income Tax Act
C Chapter VIA of Income Tax Act provides details about deductions from gross total income of the assessee.

736 Which of the following is not required to file a return of income if the income in the previous does not exceed the amount
which is not liable to tax:
A. individual
B. partnership firm
C. company
D. all the above
A The firms and companies are required to file their return of income, even if not taxable.

737 For a corporate assessee, the due date for filing a return is ___ of the assessment year:
A. July 31st
B. Jun 30th
C. Sept 30th
D. Oct 31st
D It is Oct 31st of the assessment year.

738 If a persons finds that he has not properly disclosed the income in his return, he can file revised return:
A. within 6 months from the end of the assessment year or before completion of assessment.
B. within 300 days from the end of the assessment year or before completion of assessment.
C. within one year from the end of the assessment year or before completion of assessment.
D. he cannot file any revised return.
C He can file a revised return within one year from the end of the assessment year or before completion of assessment.

739 If a return of loss is not filed on time:


A. it can be filed any time to carry forward loss to set off in future years
B. it cannot be filed subsequently
C. it can be filed subsequently but the carry forward loss will not be allowed to be set off in future years
D. none of the above
C If a return of loss is not filed on time, it can be filed subsequently but the carry forward loss will not be allowed to be set off
in future years.

Page 130 of 175


740 The summary assessment under Income Tax Act means:
A. when the assessment is completed by Assessing Officer in short manner
B. when the assessment is completed by Assessing Officer without any further enquiry
C. when the assessment is completed by Assessing Officer with further enquiry
D. none of the above
B The summary assessment under Income Tax Act means when the return is accepted by Assessing Officer without any
further enquiry.

741 The scrutiny assessment under Income Tax Act means:


A. when the assessment is completed by Assessing Officer in short manner
B. when the assessment is completed by Assessing Officer without any further enquiry
C. when the assessment is completed by Assessing Officer by issuing notice for the purpose of further enquiry
D. none of the above
C The scrutiny assessment under Income Tax Act means when the assessment is completed by Assessing Officer by issuing
notice for the purpose of further enquiry.

742 U/s 210 of Income Tax Act, there is requirement of payment of advance tax in four instalments. The amount that should be
paid by that period, for which of the following is not matching:
A. by Jun 15 - 15% of the advance tax payable
B. by Sep 15 - 30% of the advance tax payable
C. by Dec 15 - 75% of the advance tax payable
D. by Mar 15 - 100% of the advance tax payable
C By Dec 15, 60% of the advance tax payable should be paid.

743 If a person has the obligation to deduct tax at source, he has to obtain:
A. permanent account number
B. tax deduction account number
C. electronic deposit code number
D. all the above
B The persons deducting tax at source must obtain tax deduction account number (TAN).

744 Which of the following provisions relating to TDS under Income Tax Act do not match:
A. payment of salaries - section 192
B. payments to Non-residents - Section 195
C. other payments such as rent, brokerage etc. - Section 194
D. none of the above
D All the Sections match.

745 The rates at which the deduction of tax at source is to be made by the bank, are given in:
A. Income Tax Act
B. Deduction of Tax at Source Act
C. Finance Act
D. Tax Deduction Schedule attached to Income Tax Act
C The rates are given in Finance Act.

Page 131 of 175


746 The penalty for a bank, for non-compliance of TDS provisions of Income Tax Act include (which one is not correct):
A. fine that can be equal to amount of TDS
B. interest for period of non-payment at 18% p.a.
C. amount of TDS that has not been paid is payable by the bank.
D. none of the above
B The interest is 12% p.a. on the amount of tax payable from the date it is deductible to date when paid.

747 The fringe benefit tax relates to the tax payable:


A. by employees on non-cash benefits given by the employer
B. by employees on the fringe benefits that are provided or deemed to be provided by the employer
C. by employer on the fringe benefits that are provided or deemed to be provided by the employer
D. by employees and employer on pro-rata basis, on the fringe benefits that are provided or deemed to be provided by the
employer
C The fringe benefit tax relates to the tax payable by employer on the fringe benefits that are provided or deemed to be
provided by the employer.

748 Which of the following tax has been withdrawn wef April 01, 2009:
A. fringe benefit tax
B. banking cash transaction tax
C. security transaction tax
D. commodity transaction tax
B Banking cash transaction tax i.e. BCTT has been withdrawn wef 1.4.2009, though the provision for withdrawal was approved
in the Finance Act for 2008..

749 The service tax is payable by ____ whose turnover in a financial year exceeds __:
A. persons availing services, Rs.5 lac
B. persons availing services, Rs.8 lac
C. Service providers, Rs. 8 lac
D. Service providers, Rs.10 lac
D The service tax is payable by service providers whose turnover in a financial year exceeds Rs.10 lac.

750 The rate of service tax is:


A. 5%
B. 8%
C. 10%
D. 12%
C The rate that prevailed on 1.4.2009 is 10%.

751 The service tax is required to be paid to the Govt.:


A. by 5th of the next month following the month in which the income is received
B. by 6th of the next month following the month in which the income is received
C. by 7th of the next month following the month in which the income is received
D. by last day of the same month in which the income is received
A The service tax is required to be paid to the Govt. by last day of the same month in which the income is received.

Page 132 of 175


752 Under Income Tax Act, the tax assessed by the Assessing Officer is required to be paid within:
A. 7 days
B. 10 days
C. 15 days
D. 30 days
D It is required to be paid within 30 days.

753 When tax is deducted at source, it is required to be deposited:


A. by last day of the month, in which deducted
B. within 7 days of date of deduction
C. within 7 days of close of the month, during which deducted
D. within 5 days of close of the month, in which deducted.
C Deducted tax is to be deposited within 7 days from close of the month, in which it was deducted.

754 The persons required to deduct tax at source, are required to submit ___ return of TDS under Income Tax Act:
A. monthly return
B. quarterly return
C. half-yearly return
D. all the above
B The quarterly return is required to be submitted on the prescribed format.

755 For fringe benefits, the banks are required to furnish:


A. a separate return on fringe benefit
B. no additional return
C. return as an annexure to the return on Form 26
D. none of the above
B For fringe benefits, the banks are required not to submit any additional return.

756 Cenvat credit is availed in respect of tax paid on :


A. all types of input services
B. specified input services
C. export input services
D. all goods and services provided as input
B Cenvat credit is availed in respect of tax paid on specified input services.

757 As per provisions of Indian Contract Act, the ___ is free when the parties to the contract agree to the same thing in the
same sense.
A. agreement
B. contract
C. consent
D. all the above
C The consent is free when the parties to the contract agree to the same thing in the same sense, as per provisions of Indian
Contract Act.

Page 133 of 175


758 As per provisions of Indian Contract Act, the contract are treated illegal (void) when there is no __:
A. consent
B. consideration
C. indemnity
D. cash payment
B Consideration is essential for any contract to be treated as a valid contract.

759 As per Indian Contract Act, when a person is making a proposal for the purpose of a contract, he is called:
A. proposer
B. debtor
C. promisor
D. surety
C A person who is proposing is called a promisor.

760 Which of the following persons is competent to contract, as per provisions of Indian Contract Act:
A. a minor
B. a major and of sound mind
C. a major but insolvent
D. a major but not of sound mind
B A person who is major and of sound mind only, is competent to contract.

761 Which of the following contracts are valid, as per provisions of Indian Contract Act:
A. X enters into a contract with Y to deceive Z
B. X makes an agreement with M aged 16 years
C. X makes a proposal to Y who accepts it.
D. X makes a proposal to Y, who is evaluating the proposal.
C In (a) the objective is unlawful. In (b) one of the contracting parties is not competent to contract. In (d) the proposal is yet to
be accepted by one of the contracting parties.

762 Which of the following is a correct statement regarding a contract under provisions of Indian Contract Act.
A. contract means an agreement enforceable by law
B. contract is an agreement between 2 or more persons
C. rights and obligations are enforceable by law must arise out of contracts
D. all the above
D All the above are basic elements of a contract.

763 The person who accepts a proposal, put forth by the other person for the purpose of contract, as per Indian Contract Act,
is called:
A. creditor
B. debtor
C. promisor
D. promisee
D The person who accepts the proposal is called promisee and the one who makes the proposal is promisor.

Page 134 of 175


764 Which of the following statements are not correct regarding a contract:
A. it can be oral
B. it can be in writing
C. certain contracts can be in writing only
D. all contracts in writing require registration with one or the other authority
D All contracts in writing may not require registration with one or the other authority. There are certain contract such as
mortgage created in writing, that require registration.

765 C at the desire of B has done or abstained from doing something or promises to do or abstains from doing something. As
per provisions of Indian Contract Act, this is called:
A. promise
B. contract
C. consideration
D. consent
C This is called consideration, which is basic element of a contract. A contract is not valid in the absence of consideration.

766 A contract by which one party promises to save the other party from loss likely to be caused, it called:
A. a contract of indemnity
B. a contract of guarantee
C. a quasi-contract
D. a contract to compensate
A Such contracts are called, the contract of indemnity.

767 Which of the following matching of parties in a contract of indemnity, is correct:


A. the person who is to be saved from loss is called indemnified and the party which makes the promise is called indemnifier.
B. the person who is to be saved is called indemnifier and the party which makes the promise is called indemnity holder.
C. the person who is to be saved from loss is called indemnity holder and the party which makes the promise is called indemnifier.
D. the person who is to be saved from lass is called indemnity holder and the party which makes the promise is called indemnified.
C In a contract of indemnity, the person who is to be saved from loss is called indemnity holder and the party which makes
the promise is called indemnifier.

768 Which of the following types of loss cannot be recovered under a contract of indemnity:
A. damages paid in a suit
B. cost paid in a suit
C. payment made in compromise that are not contrary to the indemnity
D. none of the above
D All the above types of payments are required to be paid by the indemnifier.

769 Mr. X enters into a contract with Mr. Y that he will not be sued by Mr. Z for the amount of Rs.1 lac which, Y has to pay to Z.
But if Z sues, the loss shall be borne by X.
A. This is a contract of insurance
B. This is a contract of indemnity
C. This is a contract of guarantee
D. this is not a valid contract as there is no consideration.
B It is a contract of indemnity where the indemnifier is promising to compensate for the loss due to action of a 3rd party.

Page 135 of 175


770 Which of the following types of contracts are essentially, the contracts of indemnity:
A. contract to pay compensation
B. contract to buy immovable property
C. contract of insurance
D. contract of providing certain services
C Contract of insurance is essentially a contract of indemnity where the insured person is compensated by the insurance
company for the losses suffered by the insured person due to actions of the insurance company or actions of other parties.

771 The no. of parties, in a contract of indemnity is __ and in a contract of guarantee __:
A. 2, 2
B. 2, 3
C. 3, 2
D. 3, 3
B In a contract of indemnity there are two parties i.e. promisor and promisee. In a contract of guarantee there are 3 parties
i.e. surety, principal debtor and the creditor.

772 The contract to perform the promise or discharge the liabilities of a 3rd party, if the said 3rd party defaults, is :
A. a contract of indemnity
B. a contract of guarantee
C. a quasi-contract
D. a contract to compensate
B Such contracts are called, the contract of guarantee.

773 Which of the following parties do match in a contract of guarantee:


A. the person making the promise - surety
B. the person for whom the promise is made - the creditor
C. the person to whom the promise is made - the principal debtor
D. all the above
B The person for whom the promise is made is called the principal debtor and the person to whom the promise is made is
called the creditor.

774 In a contract of guarantee, the guarantor is not benefited in any manner i.e. no consideration passes on to the guarantor:
A. hence a contract of guarantee is not valid
B. a contract of guarantee like contract of indemnity can be without consideration
C. the benefit obtained by the principal debtor is the consideration for guarantor
D. such contracts without consideration are valid as a matter of exception.
C In a contract of guarantee, the benefit obtained by the principal debtor is the consideration for guarantor also.

775 A guarantee which is extended to a series of transactions, just like for a cash credit account, is called:
A. omnibus guarantee
B. continuing guarantee
C. regular guarantee
D. irrevocable guarantee
B Such guarantees are called continuing guarantee.

Page 136 of 175


776 The liability of the guarantee is co-extensive with that of the principal debtor means:
A. if the borrower is liable the guarantor continues to be liable
B. if borrower defaults, the payment shall be made by the guarantor
C. the guarantor remains liable even when the limitation against the principal debtor expires.
D. all the above
D The meaning of the term liability of the guarantee is co-extensive with that of the principal debtor include all the above
situations.

777 If the guarantor dies, what is the position of his liability:


A. he continues to be liable for the loan
B. for the outstanding balance in the loan, the estate of the guarantor remains liable
C. for the outstanding balance in the loan as well as for any future debit to the account, the estate of the guarantor remains liable
D. neither for the outstanding balance in the loan nor for any future debit, the estate of the guarantor remains liable
B In case of death of the guarantor, for the outstanding balance in the loan, the estate of the guarantor remains liable.

778 If the terms of a contract guaranteed by a guarantor are changed, what is the position of the liability of the guarantor:
A. the guarantor remain liable if his liability does not increase
B. the guarantor is not liable at all
C. the guarantor continues to be liable if the change is with concurrence of the guarantor
D. none of the above
C If the terms of a contract guaranteed by a guarantor are changed, the guarantor continues to be liable if the change is with
concurrence of the guarantor.

779 If the principal debtor (borrower) is discharged from his liability by the creditor (bank):
A. the guarantor shall be discharged from his liability, if it is not done with consent of the guarantor.
B. the guarantor shall not be discharged since the contract of guarantee is independent contract
C. the guarantor shall not be liable since the principal debtor is not liable any more
D. the guarantor shall continue to be liable.
A The guarantor is discharged if the principal debtor is released by the creditor without consent of the surety. The consent of
the surety must be obtained.

780 If the bank does not sue the borrower in a court even after default in repayment:
A. bank cannot demand the repayment of the loan from the guarantor also
B. bank can demand the repayment of the loan only simultaneously
C. bank can demand the repayment of the loan from guarantor alone.
D. bank can demand the repayment of the loan from the guarantor if the borrower is sued first and bank fails to recover from him.
C If there is default by the borrower, it is not essential that the borrower should be sued before suing the guarantor. The
mere forbearance to sue the borrower does not discharge the guarantor from his liability.

781 Where the bank releases one of the joint guarantors, what is the position of liability of the other guarantors or the
borrower:
A. the other guarantors continue to liable
B. the other guarantors as well as the borrower do not remain liable
C. the other guarantors as well as the borrower continue to be liable
D. the other guarantors are not liable but borrower continues to be liable
C Where the bank release one of the joint guarantors, the other guarantors as well as the borrower, continue to remain liable.

Page 137 of 175


782 On payment of a loan by the guarantor, all the securities with the bank have to be transferred to the guarantor by the
bank, due to his right of:
A. lien
B. subrogation
C. appropriation
D. set-off
B The guarantor after payment of the loan to the borrower, gets right of subrogation that means he is entitled to all those
remedies / securities, that were available with the creditor (bank).

783 If there are 2 or more sureties for a loan, what is status of their liability (which one is not correct):
A. to the creditor, they are liable for the full amount individually
B. if one of them makes the payment, the other is not liable
C. their liability amongst themselves, is equal.
D. if one of them makes the payment, the he can recover the amount from the other sureties on pro-rata which have not made
the payment.
B If there are 2 or more sureties for a loan and one of them makes the payment, the other continues to be liable.

784 Which of the following a correct statement:


A. in a contract of guarantee, the liability of the guarantor is primary
B. principal debtor need not make the payment to guarantor, after the guarantor makes the payment
C. anything done for the benefit of the principal debtor is sufficient consideration to the surety by giving the guarantee.
D. in a contract of indemnity, the indemnity holder is primarily liable.
C The guarantor liability is secondary, the principal debtor is liable to guarantor, if guarantor makes the payment of the loan
on default by the principal debtor and in a contract of indemnity, the indemnifier is primarily liable.

785 A guarantee is valid, if it is obtained by:


A. misrepresentation made by the borrower
B. misrepresentation made by the creditor
C. if the creditor remains silent as to the material circumstances
D. none of the above
A Where the guarantee is obtained by misrepresentation made by the creditor or by not disclosing the material circumstances
by the creditor, it not valid.

786 The bailor is the persons, who delivers goods:


A. to the creditor to secure the loan
B. to the surety to give guarantee
C. to another person for some purpose
D. all the above
C The bailor is the persons, who delivers goods to other person for some purpose

787 The bailee can use the goods delivered by the bailor:
A. as per discretion of the bailee
B. as per direction given by the bailor
C. as per the purpose to be decided by the bailee
D. none of the above
B The bailee can use the goods delivered by the bailor, as per the direction of the bailor or according to the purpose, for which
the goods have been delivered.
Page 138 of 175
788 The goods are defective and the bailor does not disclose this fact at the time of bailment. If there is loss to the goods:
A. the bailor is not liable
B. the bailee is not liable
C. the bailor and bailee are liable on pro-rata basis
D. the bailor is liable and bailee is not liable
D If the goods are defective and the bailor does not disclose this fact at the time of bailment and if there is loss to the goods,
the bailor is liable. The bailee is not.

789 If the bailee has rendered certain services in respect of goods bailed to him:
A. he is entitled to get the remuneration for services he rendered
B. he is not entitled to get the remuneration for services he rendered
C. he is entitled to get the remuneration whether he rendered the service of his own or with consent of the be bailor.
D. he is entitled to get the remuneration whether he rendered the service of his own when the bailor had refused to render such
service
A If the bailee has rendered certain services in respect of goods bailed to him, he is entitled to get the remuneration for
services he rendered.

790 The ornaments kept by the bank in safe custody have been damaged, the loss :
A. shall be of the bank
B. shall be not of the bank, if bank had taken adequate care
C. shall be of the bank, even if the bank had taken adequate care
D. the bailor.
B If the bailee takes adequate care and there is damage to bailed goods, the bailee is not liable for such loss.

791 In pledge, the bailor is called __:


A. pledger
B. pledgee
C. pawnor
D. pawnee
C The bailor is called pawner u/s 172 of Indian Contract Act.

792 In pledge, the bailee is called __:


A. pledger
B. pledgee
C. pawnor
D. pawnee
D The bailor is called pawnee u/s 172 of Indian Contract Act.

793 In case of pledge, the possession and ownership of the goods remains with:
A. possession with bank and ownership with borrower
B. possession with the borrower and ownership with the bank
C. possession and ownership with borrower
D. possession and ownership with the bank
A In case of pledge, the possession remains with the bank and ownership with borrower.

Page 139 of 175


794 If loan is not repaid and the bank sells the goods and a part of the loan is still outstanding, what option do the bank have,
to recover the amount:
A. bank can recover the loan from other assets of the borrower
B. bank can recover the loan from the borrower personally
C. bank cannot recover the loan from the borrower personally
D. bank has to write off the loan
B The bank can proceed personally against the borrower, to recover the loan.

795 If the pledged goods are stolen by a person and sold, who will initiate the action for recovery of the amount from the thief:
A. the bank and borrower, both of them shall proceed jointly
B. only the borrower can file the suit
C. the bank can file the suit as the bank steps into the shoes of the owner of goods as a pawnee
D. the issue has to be decided between the borrower and the bank.
C The bank can file the suit as the bank steps into the shoes of the owner of goods as a pawnee.

796 Which of the following statements in the context of pledge is correct:


A. the pawnee can keep the goods even after the pawnor has made the payment
B. the pawnee can sell the goods for recovery of loan without sending any notice before sale to the pawnor
C. the pawnee can sell the goods for recovery of the loan, if the pawnor fails to make the payment
D. none of the above
C Bank cannot retain the goods after payment of the loan. The sale of goods can be made after issue of notice before sale.

797 Which of the following is an essential element of agency.


A. the person should be authorised to do an act by a person
B. the act should be in such manner that the person is bound with the action of other person
C. for the action of the person so authorised, the person authorizing becomes liable
D. all the above
D All the above are important elements of agency.

798 Which of the following is not correct regarding contract of agency:


A. any person who wants to appoint agent should be major and of sound mind
B. a person who is to be appointed as agent can be minor
C. a person who is to be appointed as agent can be insolvent
D. the agency is not valid without consideration
D For agency, no consideration is required. The agent can be minor or insolvent also.

799 When the authority of the agent is inferred from the circumstances, it is called:
A. express authority
B. implied authority
C. indirect authority
D. clear authority
B It is called implied authority (as in case of a partnership firm). If authority is given through words, spoken or written, it is
called express authority.

Page 140 of 175


800 The usual form of contract of agency is by way of:
A. letter of indemnity
B. mandate or power of attorney
C. agency bond
D. bond of guarantee for actions of agent
B The agent is appointed through mandate or power of attorney signed by the principal.

801 Which of the following is correct regarding, the sub-agent?


A. can be appointed by the agent
B. sub-agent is liable to the principal even when appointed without consent of principal
C. if appointed with permission of the principal, the sub-agent is liable to the agent but not to the principal.
D. none of the above
C Agent can appoint sub-agent with the consent of principal or when the custom of trade or nature of agency so requires. The
sub-agent is liable to the agent and not to the principal.

802 If an act is carried by the agent on behalf of the principal without his authority (which one is correct):
A. the principal may ratify it or may not ratify it
B. if there is some gain, it will be of the principal
C. if there is some loss, the agent shall be liable for that
D. none of the above is correct
A If the principal may or may not ratify. If he ratifies it he shall be liable. If he does not ratify, the agent shall be liable.

803 In which of the following circumstances, the agency is not terminated:


A. when the principal invokes the agency
B. when the agent is declared insolvent.
C. when the business of agency is completed
D. when the agent gives up (renounces) the business of agency
B If the agent is declared insolvent, the agency continues. But if the principal is declared insolvent or dies or becomes of
unsound mind, the agency is terminated.

804 The agent is required to conduct the business:


A. as per direction given by the principal
B. if there no direction, as per customs prevailing in the same type of business
C. if agent acts otherwise he is liable and benefits from the gains also.
D. all the above are correct
C If the agent acts otherwise than he is directed, he is liable for loss if any. If there is any gains he has to account for the gains.

805 X directed Y to sell his estate. Y purchases it in the name of Z, which is discovered by X later on:
A. X has to reject the transaction
B. X may repudiate the transaction without assigning any reasons
C. X may repudiate the transaction if he could prove that Y has acted dishonestly
D. X has to accept the transaction.
C X may repudiate the transaction if he could prove that Y has acted dishonestly or has concealed some material fact.

Page 141 of 175


806 Which of the following statements are correct:
A. agent can keep the money received by him on account of sale of goods only if all the goods have been sold
B. if agent is guilty of misconduct he is still entitled to remuneration for that part of business
C. an agent is bound to render proper account to the principal
D. none of the above
C Agent can retain the money received for sale even when all the goods have not been sold as yet. Further if the agent is
guilty of misconduct, he is not entitled to remuneration for that part of the business.

807 Under Sale of Goods Act, the term goods include which of the following:
A. stock and shares
B. growing crops, grass
C. things attached to or forming part of land which are agreed to be severed before sale or under contract of sale.
D. any of the above
D All the options (a), (b) and (c) are correct and part of goods under Sale of Goods Act

808 Under Sale of Goods Act, the definition of which of the following is not correct:
A. price means the consideration for sale of goods
B. delivery means the transfer of possession from one person to another voluntary or otherwise
C. future goods means the goods to be manufactured or acquired.
D. specific goods mean the goods identified.
B In Sale of Goods Act, the delivery means the transfer of possession from one person to another voluntary and not otherwise.

809 A person having authority to sell the goods or buy the goods, under Sale of Goods Act is called:
A. an agent
B. an authorised agent
C. a mercantile agent
D. any of the above
C Such persons are called mercantile agents.

810 As per Sale of Goods Act, when the transaction becomes a sale:
A. only when the goods are delivered to the buyer by the seller
B. only when the property in goods is transferred from seller to buyer with possession
C. when the property in goods is transferred from seller to buyer with or without possession
D. all the above
C A transactions becomes sale when the property in goods is transferred from seller to buyer with or without possession.

811 Which of the following is not an essential element of a contract of sale under Sale of Goods Act?
A. there is a bilateral contract i.e. between seller and buyer
B. the consideration can be money or exchange of goods
C. the property is a movable property and not immovable property
D. the contract of sale can be oral or in writing.
B In a contract of sale, the consideration can be money and not the exchange of goods. Further the immovable property is not
dealt by Sale of Goods Act, it is dealt under provisions of Transfer of Property Act.

Page 142 of 175


812 The delivery of goods or payment for goods, in a contract of sale, as per Sale of Goods Act can be:
A. immediate only
B. in instalments only
C. later on only
D. all the above
D In a contract of sale, the delivery of goods or payment for goods can be immediate or in intalment or later on.

813 When the transfer of property in the goods is to take place at a future time or subject to certain conditions to be fulfilled
there after, the contract is called:
A. absolute sale
B. conditional sale
C. agreement to sell
D. sale agreement
C Under Sale of Goods Act, when the transfer of property in the goods is to take place at a future time or subject to certain
conditions to be fulfilled later on, the contract is called agreement to sell.

814 When parties in a contract agree that the sale of goods shall be regarded as final sale only on the fulfillment of certain
conditions either before or after the conclusion of the contract for sale, it is called:
A. absolute sale
B. conditional sale
C. agreement to sell
D. sale agreement
B It is called conditional sale.

815 Which of the following statement is correct:


A. the risk in goods in a sale is with the seller
B. where parties have performed their part, it is an agreement to sell
C. if the risk is yet to pass on to the buyer, it is an agreement to sell
D. where the parties are yet to perform their part, it is a sale
C The risk in goods in a sale, is of the buyer. Where the parties have performed their part, it is sale and where they are yet to
perform their part, it is agreement to sell.

816 Which of the following is a consideration for sale:


A. delivery of goods
B. lien on goods
C. price for goods
D. all the above
C Payment of price for goods is the consideration in a contract of sale.

817 As per Sale of Goods Act, the goods do not include:


A. shares
B. stocks
C. grass
D. actionable claims
D Actionable claims are not included in the definition of goods but others are included.

Page 143 of 175


818 Under Sale of Goods Act, the goods that are identified and agreed upon at the time when contract of sale is made, are
called:
A. specific goods
B. future goods
C. movable goods
D. immovable goods
B Under Sale of Goods Act, the goods that are identified and agreed upon at the time of contract of sale is made, are called
future goods.

819 Under Sale of Goods Act, if the stipulation agreed to between the parties is essential to the main purpose of the contract,
such stipulation is called:
A. condition
B. warranty
C. guarantee
D. implied condition
A Under Sale of Goods Act, if the stipulation agreed to between the parties is essential to the main purpose of the contract,
such stipulation is called a condition.

820 Under Sale of Goods Act, a ___ is a stipulation, collateral to the main purpose of the contract:
A. condition
B. warranty
C. guarantee
D. implied condition
B Under Sale of Goods Act, a warranty is a stipulation, collateral to the main purpose of the contract.

821 Under Sale of Goods Act, there is an implied condition on the part of the seller that he has a right to __ the goods:
A. use
B. retain
C. sell
D. resell
C Under Sale of Goods Act, there is implied condition on the part of the seller that he has a right to sell the goods.

822 Under Sale of Goods Act, if the sale of goods is by description there is an implied condition that the goods shall correspond
with the ___ :
A. sample
B. written contract
C. description
D. oral agreement
C Under Sale of Goods Act, if the sale of goods is by description there is an implied condition that the goods shall correspond
with the description.

823 The Caveat Emptor means which of the following:


A. seller should recover the price before delivery
B. buyer should cautious while purchasing the goods
C. seller should deliver the goods only after receipt of full price
D. buyer should make the payment only after receipt of delivery as per the quality and quantity contracted.
B According to the doctrine of Caveat Emptor the buyer should beware (be cautious) while purchasing the goods..
Page 144 of 175
824 If the sale of goods is by sample, there is implied condition, under Sale of Goods Act, that the:
A. bulk shall correspond with the sample in quality
B. buyer shall have opportunity to compare the bulk with the sample
C. goods shall be free from defect rendering them unmerchantable, which would not be apparent on reasonable examination of
the sample
D. all the above
D All the above are implied conditions as per Sale of Goods Act for sale by sample.

825 Under Sale of Goods Act, the seller of goods is deemed to be unpaid seller where :
A. he is yet to receive the penalties imposed by him
B. he is yet to receive the price
C. he is yet to receive the damages caused to him
D. all the above
B The seller is deemed to be unpaid seller where he is yet to receive the price.

826 There is no _____ as to the quality or fitness of goods for a particular purpose:
A. implied warranty
B. implied condition
C. express warranty
D. express condition
B There is no implied condition as to the quality or fitness of goods for a particular purpose

827 Under Sale of Goods Act, the lien can be exercised by the unpaid seller, when the goods are :
A. in possession of the seller
B. in transit
C. in possession of the buyer
D. in possession of seller or buyer or in transit.
A The lien can be exercised by the unpaid seller, when the goods are in possession of the seller and not in transit or in
possession of the buyer.

828 Under Sale of Goods Act, the ___ is terminated when the goods reach the possession of the buyer:
A. warranty
B. condition
C. lien
D. all the above
C The lien is terminated when the goods reach the possession of the buyer. The essential condition for lien is possession with
the person who wants to exercise lien.

829 If the seller of goods accepts a negotiable security as an absolute payment, instead of actual payment as per contract:
A. he continues to have the rights of unpaid seller
B. he continues to remain unpaid seller
C. he is no longer an unpaid seller
D. he is not an unpaid seller but can exercise the rights of unpaid seller.
C He is no longer an unpaid seller. He is deemed to have received the payment.

Page 145 of 175


830 Which of the following is the right of unpaid seller under Sale of Goods Act (which one is not correct):
A. he can exercise the right of lien when goods are in his possession
B. he has the right to stop the goods in transit
C. he can resell the goods if the goods are in his possession
D. all the above
B The right to stop the goods in transit arises only when the buyer has become insolvent.

831 If the buyer pledges the goods without making payment to the seller:
A. the seller right of lien is not affected
B. the seller right to stop in transit is not affect
C. the seller rights are affected as a matter of exception.
D. none of the above
C If the buyer pledges the goods without making payment to the seller, the sellers rights are affected as a matter of exception,
as per provisions of Sale of Goods Act..

832 In case of partnership firm, which of the following is not correctly matched:
A. the persons who enter into partnership with one another are individually called partners
B. the persons who enter into partnership with one another are collectively called firm
C. the name under which their business is carried, is called firm name.
D. the firm is a separate legal entity separate from the partners
D The firm is not a separate legal entity separate from the partners. The abbreviated name of partners is called a firm.

833 Three persons have joined together to share the profits and returns arising from property (which one is correct):
A. the persons shall be called partners
B. the group of these persons shall be collectively called firm
C. the name under which they shall carry the transaction shall be called the firm name
D. it is not a partnership firm, since they shall not carry on any business
D For a partnership, to carry on business to share profits, is an essential element.

834 When no provision is made by a contract between the partners about the duration of the partnership, it is knows as a :
A. partnership for a unlimited period
B. partnership for a limited period
C. partnership at will
D. particular partnership
C When no provision is made by a contract between the partners about the duration of the partnership, it is knows as a
partnership at will.

835 If a partnership is for a fixed period and it is continued even after the fixed period:
A. it becomes illegal relationship
B. it is converted into a partnership at will
C. it becomes partnership for unlimited period
D. it becomes a particular partnership
B If a partnership is for a fixed period and it is continued even after the fixed period, it is converted into a partnership at will.

Page 146 of 175


836 Which of the following is correct in the context of partnership firms:
A. if one partners cheat a customer of the firm, other partners are not liable.
B. for a partnership, it is compulsory to prepare a partnership deed
C. the partners can freely decide their mutual rights and liabilities
D. the nature of the business of the firm can be changed only with consent of majority of partners.
C All the partners are liable for the loss to customer is one partner cheats a customer. Partnership firm can be oral also. The
nature of firms business can be changed with consent of all and not with majority of the partners.

837 X, Y and Z have entered into a partnership for carrying on a specific venture. It is called:
A. general partnership
B. partnership at will
C. partnership for a fixed period
D. particular partnership
D It would be called a particular partnership.

838 Which of the following is part of general duty of a partner:


A. partners should not make secret profits
B. partners should be just and faithful to each other
C. partners should render true accounts of the business.
D. partners should disclose full information of all things affecting the firm to all partners but in case of death of any them, not to
their legal heirs.
D The partners should disclose full information of all things affecting the firm to all partners and in case of death of any them
and to their legal heirs also.

839 If one partner of a firm cheats a customer, which of the following is not correct:
A. all the partners are liable for the loss to the customer
B. the partner that has cheated the customer is liable to other partners for loss to them
C. only the partner who has cheated the customer, is liable to the customer
D. none of the above
C As regards liability to the customer, all the partners are liable for the loss to the customer.

840 The difference between partners on the matters relating to the business of the partnership firm can be decided by:
A. majority of the partners if it is an ordinary matter and all the partners if it relates to change in business of the firm
B. all the partners for all matters.
C. majority of the partners for all matters
D. all the above are correct
A The difference between partners on the matters relating to the business of the partnership firm can be decided by majority
of the partners if it is an ordinary matter and all the partners if it relates to change in business of the firm.

841 If a partner has contributed extra capital, he is entitled to ____:


A. no interest
B. interest at prevailing bank rate
C. 6% interest
D. 10% interest
C If a partner has contributed extra capital, he is entitled to 6% interest.

Page 147 of 175


842 Which of the following is correct regarding mutual rights and obligations of the partners:
A. partners are entitled to remuneration for taking part in conducting business of the firm
B. partners have always equal share in the profit and loss of the firm
C. if a partner is entitled to interest on capital, it will be paid only out of profits of the firm
D. a firm is not required to indemnify a partner for the payments made by him on behalf of the firm.
C Partners are not entitled to remuneration. They can have different share in profit and loss according to their mutual
agreement. Further the firm has to indemnify a partner for the payments made by him on behalf of the firm.

843 If it comes to the notice of partners of the firm, that one of the partners is carrying on a business that is a competing
business with the firm:
A. the said partner has to close that business
B. the said partner has to merge this business with the business of the firm
C. if separate business is continued and there are profits from the said business, the profits have to be shared with other partners
D. the said partner has to undertake to close the business in a period fixed by them all
C If partner of a firm is carrying on a business that is competing business with the business of the firm, the profits from the
said business, have to be shared with other partners.

844 In case of a partnership firm all the partners play a dual role of:
A. owner and servant
B. principal and agent
C. shareholder and debtor
D. seller and buyer
B All the partners have joint role in a firm i.e. of a principal and that of an agent.

845 When a partner acts for the business of the firm on behalf of all the partners, it called:
A. express authority of a partner
B. authority of a partner
C. implied authority of a partner
D. any of the above
C It is called implied authority of the partner which is available from definition given in Section 4 of Indian Partnership Act.

846 The partners can use their implied authority in respect of which of the following:
A. to open bank account of the firm in their own name
B. give guarantee on behalf of the firm when the business is to give guarantees.
C. withdrawal of a court case instituted by the firm
D. compromise a claim receivable by a firm
B The implied authority can be used in ordinary course of business and on behalf of the firm to make the firm liable. If
guarantee is signed by one partner and the business of the firm is giving guarantee, it is an action, in normal course of
business.

847 Which of the following actions cannot be taken by a partner by using his implied authority:
A. to appoint another person, as agent for the business of the firm
B. to sell the immovable property belonging to the firm
C. to submit a dispute relating to firm business, for arbitration.
D. none of the above
D All the above actions are not in normal course of business, due to which these can be carried by all of them together.

Page 148 of 175


848 In order to save a firm from loss in an emergency, one of the partners of the firm took an action, which was not in his
implied authority:
A. only he is liable for any loss arising out of the said action since this was without consent of others
B. other partners are liable for that action taken in emergency
C. other partners are not liable for that action as it did not fall in his implied authority
D. none of the above
B If a partner has to take an action under emergency to save the firm from loss, it is binding on other partners even though it
may not fall in implied authority of the partner.

849 What is the implication of doctrine of holding out in the context of a partnership:
A. if a non-partner represents himself as partner and the 3rd party believes and gives credit to the firm, the said non-partner is
personally liable for the debts of the firm.
B. if a non-partner represents himself as partner and the 3rd party believes and gives credit to the firm, the said non-partner is not
personally liable for the debts of the firm.
C. if a non-partner represents himself as partner and the 3rd party believes and gives credit to the firm, the said transaction is
illegal.
D. if a partner represents himself as non-partner and the 3rd party believes and refuses to give credit to the firm, the said partner
is personally liable for the loss to the firm.
A Where a non-partner represents himself as partner and the 3rd party believes and gives credit to the firm, the said non-
partner is personally liable for the debts of the firm. He is known as Partner Holding Out.

850 If a partner transfers his interest in a firm to another person (an outsider), which one is not correct:
A. the transferee is entitled to all rights of the transferor partner
B. the transferee cannot interfere in the business of the firm
C. the transferee has to accept accounts of the firm as agreed to by the partners
D. if the firm is dissolved, the transferee is entitled to have share in the assets of the firm
A The transferee is not entitled to all rights of the transferor partner since he cannot interfere in the business of the firm.

851 A minor cannot become partners because he is _____ as per ____ Act.
A. not competent to be a partners, Indian Partnership Act
B. not competent to contract, Indian Contract Act
C. not competent to ratify, Indian Partnership Act
D. not competent to contract, Section 22, Indian Contact Act
B A minor is not competent to contract u/s 11 of Indian Contract Act due to which he cannot enter into a contract of
Partnership.

852 When a minor is admitted for benefits of a partnership firm:


A. this can be done with the consent of existing partners
B. he is not a partner in that situation and he is not liable personally for the losses of the firm
C. his share is liable
D. all the above are correct
D When a minor is admitted for benefits of the partnership firm, this can be done with consent of all the partners and he has
no personal liability. Only his share is liable.

Page 149 of 175


853 If a minor becomes major while he was admitted for benefits, he is:
A. deemed to be a partner of the firm automatically
B. deemed to be not a partner of the firm
C. to take a decision to be a partner or not within 6 months
D. any of the above
C Where a minor becomes major while he was admitted for benefits, he is to take a decision to be a partner or not within 6
months.

854 If a minor becomes major while he was admitted for benefits and he does not take any decision to be or not to be partner:
A. he is deemed to have become partner if he remains silent for 6 months
B. he is deemed to have no association with the firm
C. he cannot become partner
D. he is not liable for the firm.
A Where a minor becomes major while he was admitted for benefits and he does not take any decision to be or not to be a
partner, he is deemed to have become partner if he remains silent for 6 months.

855 If a minor on becoming major chooses to be a partner, his liability:


A. begins from date when he decides to be partner
B. begins from the date when he became major
C. begins from the date when he was admitted for benefits as minor
D. begins from the expiry of 6 months after becoming major.
C Where a minor on becoming major chooses to be a partner, his liability, begins from the date when he was admitted for
benefits as minor.

856 If a minor after attaining majority, decides not to become partner:


A. he has to give a public notice
B. up to date of such notice, his rights and liabilities shall be similar to when he was minor
C. his share shall not be liable for any acts of the firm done after the date of notice
D. all the above are correct
D All the statements at (a), (b) and (c) are correct.

857 If a partner is declared insolvent, which of the following statement shall be incorrect:
A. he ceases to be a partner of the firm from the date of order of adjudication is made
B. the firm may dissolve or may not dissolve in that situation
C. if the firm is not dissolved pursuant to a contract, the estate of the partner declared insolvent is not liable for any act of the firm
D. the firm shall become liable for any act of the insolvent done by him after date on which the order of adjudication was made.
D The firm shall become not liable for any act of the insolvent done by him after date on which the order of adjudication was
made.

858 A partner of a firm can retire from the partnership firm:


A. with the consent of other partners only
B. as per express agreement between the partners only
C. by giving notice to other partners if the firm is at a will.
D. in any of the above manners
D A partner can retire from the partnership firm any time, with consent of other partners OR as per express agreement
between the partners or by giving notice to other partners, if the firm is at a will.

Page 150 of 175


859 One of the partners has been expelled by other partners (which one is not correct):
A. this cannot be done as partnership is an agreement
B. it can be done by exercising in good faith the powers conferred by a contract between parties.
C. the expelled partner is in similar position as that of a retiring partner
D. a and c are correct
A One of the partners can be expelled by other partners, when done in good faith by using powers conferred by a contract
between parties. In that case, the expelled partner is in a similar position a that of a retiring partner.

860 In which of the following circumstances, a firm can be dissolved by a court (which one is not correct):
A. a partner has become of unsound mind
B. a partner is guilty of conduct that is likely to affect prejudicially the carrying on the business
C. a partner has become permanently incapable of performing his duty as partner
D. in all the above circumstances, the court can automatically order dissolution of the firm.
D The court cannot automatically order the dissolution. It can do so on the suit of a partner of the firm.

861 If a firm has several types of business and one of such business has become unlawful due to certain event:
A. the firm has to close the whole business
B. the firm has to start the whole business afresh
C. the firm can continue with the business if it was not major portion of the total business
D. the firm can continue with other business by closing the unlawful business.
D Where a firm has several types of business and one of such business has become unlawful due to certain event, the firm can
continue with other business and need not close the entire business.

862 When the business of a firm cannot be carried on, except at a loss:
A. the partners can decide to close down the business
B. if some partners do not want to close down, the business cannot be closed down
C. if other partners do not want to close down, one of the partner can approach a court to bring an order for closure of the
business
D. all the above are correct option.
D All the option given in the question are correct.

863 Which of the following is not correct:


A. a firm is dissolved if all except one partners are declared insolvent
B. a firm is dissolved, if the business has become unlawful due to some event
C. a firm is dissolved, if the term has expired for which the firm was constituted
D. a firm is necessarily dissolved, if one of the partners dies.
D If one partner of the firm dies, it is not dissolved necessarily. If there is an agreement providing otherwise, the firm may
continue.

864 Which of the following statement regarding a firm / co. is not correct:
A. a company has to be registered necessarily
B. a firm can be registered at the option of the firm
C. a firm may not get itself registered at its option
D. a firm and a company has to get itself registered with Registrar of Companies
D A company is registered with Registrar of Companies and a firm with Registrar of Firms.

Page 151 of 175


865 As per Section 69 of Indian Partnership Act, if a firm is not registered (which one is not correct):
A. its partner cannot file suit against the partnership firm
B. its partner cannot file suit against the other partners of the firm
C. the firm cannot file suit against other parties to enforce rights arising under a contract
D. a partner cannot file suit for dissolution of the firm
D A partner can file suit for dissolution of the firm. But answers at (a), (b) and (c) are correct.

866 Firm ABC is not a registered firm. It has to recover some amount on account of sale of goods on credit to firm XYZ. The firm
ABC has taken loan from Bank-B.
A. Bank-B cannot file suit on firm ABC because it is not registered
B. Firm ABC cannot file suit on XYZ because ABC is not registered
C. Neither bank can file suit on firm ABC nor ABC can file suit on XYZ due to non-registration.
D. Bank can file suit on firm ABC but ABC cannot file suit on XYZ due to non-registration.
D The other parties can file suit on the unregistered firm but unregistered firm cannot file suit on any other firm.

867 Partner A of ABC firm wants to file suit against partner C and B and the firm ABC, for his share of profit, but the firm is not
registered. He also plans to file suit for dissolution of the firm (which one is not correct):
A. A cannot file suit on ABC
B. A cannot file suit on A and B as a partner
C. A cannot file suit for dissolution of the firm
D. all the above are correct
C A can file suit for dissolution of the firm but he cannot file the suit on ABC or partner A & B.

868 Which of the following is not correct regarding a company:


A. it requires registration under Companies Act 1956
B. this registration is with Company Law Board
C. a company is an artificially legal person created by law
D. the company is dissolved by process of law.
B The registration of a company is with Registrar of Companies and not the Company Law Board.

869 The provisions of which of the following Act do not apply to a company due to various judgements of different courts
(which one is wrong):
A. Indian Partnership Act
B. Citizenship Act
C. Constitution of India
D. all the above
A The provisions of Indian Partnership Act apply on a company, when it becomes a partner. But provisions of other Acts, do
not apply to a company being an artificial person.

870 A company has a perpetual succession which means that (which one is not a correct statement):
A. it does not get dissolved due to death of its members
B. it continues as a separate legal entity
C. the insolvency of its members affects the existence of a company
D. Members can come and go but company continues
C The insolvency or death of its members, does not affect the existence of a company.

Page 152 of 175


871 The company can be held liable only when the documents bear its signatures. To ensure this what is specifically taken care
of by banks as an extra precaution:
A. the banks get signatures of authorised persons
B. the banks obtain resolution from board of directors of the company
C. the banks get the common seal of the company affixed on all important documents
D. all the above
C The banks get the common seal of the company affixed on all important documents. The common seal represents the
company.

872 The common seal is affixed on the documents:


A. in the presence of company representatives
B. in the presence of representatives of the bank and the company
C. by the directors as per procedure given in Memorandum of Association.
D. as per provisions of Articles of Association i.e. in the presence of two directors
D The common seal is affixed as per provisions of Articles of Association i.e. in the presence of two directors who shall sign on
the documents where the seal is affixed.

873 A company is different from a partnership firm in respect of which of the following (choose the incorrect statement)
A. members of a company are not agents of the company but the partners are agents of each other.
B. a company has perpetual succession but firm can be dissolved or gets dissolved.
C. the liability of partners in a firm and shareholders in a company is similar
D. death of a shareholder does not bring the company to an end but death of a partner can bring the firm to an end.
C The liability of a partner is unlimited, joint and several, but the liability of a shareholder of a company is limited.

874 Which of the following statements is false:


A. the directors of the company represent the shareholder of the company
B. the shareholders of a company are the joint owners of a company
C. a company can enter into contracts in its own name
D. if all members of a company die, the company has to be wound up.
D If all members of a company die, the company has not to be wound up as company is separate from its members.

875 If a company is created under some special Act of the Parliament, it is classified as a:
A. govt. company
B. public sector undertaking
C. public limited company
D. statutory company
D Such companies are called statutory companies.

876 Which of the following does not fall under statutory companies:
A. Reserve Bank of India
B. ICICI Limited
C. Food Corporation of India
D. Security & Exchange Board of India
B ICICI Ltd. is a company under Companies Act. Others are created under some special Act of the Parliament.

Page 153 of 175


877 Where the liabilities of the members of a company is limited by the memorandum of association to such an amount the
members undertake to contribute to the assets of the company in case of liquidation, the company is called:
A. company with unlimited liability
B. company with limited liability
C. company limited by guarantee
D. company limited by maximum liability
C Such companies are called companies limited by guarantee. The members of such company pay a fixed sum of money in
case of liquidation.

878 If a company is limited by guarantee:


A. it may or may not have share capital
B. it must have articles of association
C. the members are required to pay only the fixed amount, if there is share capital.
D. all the above statements are correct
C If there is share capital, the members are required to pay the fixed amount of share capital + guarantee with the condition
to pay the amount of guarantee, in case of liquidation.

879 Every member of this company is liable for the debts of company similar to liability of the partners in a partnership firm. It
is:
A. company with unlimited liability
B. company with limited liability
C. company limited by guarantee
D. company limited by maximum liability
A It is a company with unlimited liability. Such company can be public or private company.

880 What is a public company (which is most appropriate definition as per provisions of Companies Act)
A. whose shares are listed on the stock exchange
B. which can invite public to subscribe to its shares
C. which is not a private company
D. all the above
D By definition, a public company is one, which is not a private company.

881 What is the minimum paid up capital of a private company:


A. Rs. 1 lac
B. Rs.5 lac
C. Rs.10 lac
D. there is no such restriction
A It is Rs.1 lac.

882 A private company cannot have deposits from which of the following:
A. public
B. members
C. directors
D. the relatives of directors
A A private company cannot have deposits from public.

Page 154 of 175


883 As regards the public issue, a private company :
A. cannot invite public to subscribe to shares but it can invite to subscribe to debentures
B. cannot invite public to subscribe to debentures but it can invite to subscribe to shares
C. can invite public to subscribe to shares and debentures
D. can not invite public to subscribe to shares or debentures
D A private company can not invite public to subscribe to shares or debentures.

884 What is the minimum paid up capital of a public company:


A. Rs. 1 lac
B. Rs.5 lac
C. Rs.10 lac
D. there is no such restriction
B It is Rs.5 lac.

885 In case of govt. company, minimum 51% shares should be held by:
A. Central Govt. only
B. State govt. only
C. partly by Central Govt. and State govt. only
D. any of the above
D The shares can be held by Central Govt. or State Govt. or partly by both of them.

886 A subsidiary company of a govt. company is a:


A. private company
B. holding company
C. public company
D. govt. company
D Subsidiary company of a govt. company, is also a govt. company.

887 The permitted scope of activities of a company can be verified by a bank by going through:
A. Memorandum of Association only
B. Articles of Association only
C. Memorandum of Association and Articles of Association, both
D. Certificate of Incorporation
A The scope of activities of a company is stated in the object clause of Memorandum of Association.

888 Which of the following is not a correct statement in the context of name of a company:
A. company cannot have a name which is in the opinion of Central govt. is undesirable
B. company cannot have a name which is too identical or similar to the name of an existing company.
C. a public and private companies shall use the last word of their as limited
D. there cannot be a name of a company, without the use of word limited
D Section 25 Companies need not use the words limited along with their name.

Page 155 of 175


889 A company is required to give the notice of location of its registered office within ___ after its incorporation, to the
Registrar of Companies.
A. 10 days
B. 15 days
C. 30 days
D. 60 days
C Such information including for change in registered office address, is to be provided to the registrar within 30 days.

890 Which of the following is an important feature of object clause in the memorandum of association (which one is not
correct):
A. choice of objectives is with the initial subscribers to the memorandum of association.
B. a company has main objectives as well as other objectives
C. carrying on any other business outside the scope of object clause is unauthorised, called, caveat emptor.
D. none of the above
C The unauthorised objectives are called ultra vires.

891 The capital clause of the company should indicate :


A. the amount of authorised capital only
B. the no. of shares only must be given
C. the face value of shares only should also be given
D. all the above should be given
D The capital clause must provide all the above information.

892 The memorandum of association of a company concludes with:


A. the capital clause, stating the no. of shares
B. declaration of subscription, that the persons who have put their signatures intend to form an association.
C. object clause, mentioning the scope of the activities of the company
D. the liability clause, stating that the liability of the shareholders is limited
B The memorandum of association of a company concludes with declaration of subscription that the persons who have put
their signatures intend to form an association.

893 The Articles of Association contain which of the following information:


A. registered office clause of the company
B. set of rules, regulations and bye laws made by the company for internal management
C. guidelines by Registrar of Companies relating to filing of particulars
D. borrowing powers of the shareholders of the company
B Articles of Association contains set of rules, regulations and bye laws made by the company for internal management.

894 If a public company does not frame its own Articles of Association, it can adopt ___ that will be deemed to be its Articles of
Association.
A. Schedule II
B. Table A
C. Table II
D. Schedule A
B Table A of Schedule I of Companies Act can be adopted

Page 156 of 175


895 The Articles of Association of a private company must state (which one is not required):
A. restriction regarding issue of prospectus
B. restriction regarding non-acceptance of deposits from public
C. restriction regarding no. of shareholders
D. none of the above
D All the above information is required to be incorporated by a private company in its Articles of Association.

896 To distinguish the Memorandum of Association from Articles of Association, which statement is correct:
A. Memorandum of Association is subordinate document
B. Articles of Association is a subordinate document
C. Articles of Association is dominating document
D. Memorandum of Association and Articles of Association, both are dominant documents
B Memorandum of Association is a basic document containing objective of the company, hence dominant. Articles of
Association is a subordinate document contains internal rules.

897 If company commits an act of contravention relating to ____, it can be ___:


A. Memorandum of Association, ratified
B. Articles of Association, cannot be ratified
C. Memorandum of Association, cannot be ratified
D. none of the above
C If company commits an act of contravention relating to Memorandum of Association, it can not be ratified. But if there is
any contravention of Articles of Association, it can be ratified by violation of some internal rule only.

898 A person is presumed to have gone through the Articles of Association and Memorandum of Association available with the
office of RoC although he might have actually not laid his hands on these documents. This is called doctrine of:
A. ultra-vires
B. constructive notice
C. indoor management
D. outdoor management
B It is called doctrine of constructive notice.

899 A person dealing with a company cannot take the plea that he had no notice of contents of Articles of Association and
Memorandum of Association due to:
A. doctrine of ultra-vires
B. doctrine of constructive notice
C. doctrine of indoor management
D. doctrine of outdoor management
B Due to doctrine of constructive notice because it is presumed that he must have through the Articles of Association and
Memorandum of Association available with the office of RoC.

Page 157 of 175


900 Which of the following, saves the outsiders, by ensuring that his contract is not inconsistent with the Memorandum of
Association and Articles of Association:
A. doctrine of ultra-vires
B. doctrine of constructive notice
C. doctrine of indoor management
D. doctrine of outdoor management
C The doctrine of indoor management does not bind an outsider person to inquire into the regularity of a company internal
functioning or compliance with internal procedures.

901 If there is some ultra-vires transaction undertaken by the directors of the company, for the company:
A. it can be ratified by the Board of Directors
B. It can be ratified by the shareholders
C. it can be ratified by the Board of Directors or Shareholders
D. It cannot be ratified either by Board or Shareholders.
D An ultra-vires transaction undertaken by the directors of the company, cannot be ratified either by Board or Shareholders as
it is part of object clause of Memorandum of Association which cannot be ratified.

902 The money of a company has been spent by the directors on acquiring a property but ultra-vires:
A. the company cannot be owner of such property
B. the directors are liable for that and they will be owners of that property
C. the company can be lawful owner, although it has been wrongly acquired.
D. the property has to be disposed off immediately and company money restored.
C If the funds of a company are spent on acquiring a property ultra-vires, the company shall be lawful owner, although it has
been wrongly acquired.

903 If the directors of a company undertake some ultra-vires transaction on behalf of the company, which of the following
situation is possible:
A. they are personally liable to the company
B. they can be compelled to refund the money to the company
C. action for fraud can also be taken if there is deliberate misapplication
D. all the above
D All the above type of actions are possible.

904 XYZ Limited borrowed some money from Mr. A by issuing a bond. The Articles of Association of the company provided
that the directors can borrow as much money as they want subject to resolution from the shareholders. The shareholders
claimed that they did not pass any resolution.
A. the borrowing has become ultra-vires
B. A cannot recover because of application of doctrine of constructive notice.
C. Funds lent by A are safe because of application of doctrine of indoor management
D. Funds lent by A are not safe as this cannot be ratified by the Shareholders.
C Funds lent by A are safe. A has right to assume that resolution must have been obtained by the director as that was an
internal procedure of the company. Hence due to application of doctrine of indoor management, A can recover the funds.

Page 158 of 175


905 Which of the following is an exception of doctrine of indoor management, i.e. the person dealing with the company can
suffer loss:
A. where a person dealing with a company has actual knowledge of internal irregularity
B. where the situation is such that a person dealing with a company could have obtained information about internal irregularity
C. where an official of the company is acting unauthorisedly and the person dealing with the company has information about this.
D. all the above
D In all the above circumstances, the person dealing with a company can face a situation of loss and the doctrine of indoor
management will not help.

906 Which of the following is a correct statement:


A. the doctrine of indoor management assumes that the outsiders dealing with the company must have the knowledge about
Memorandum of Association and Articles of Association
B. the doctrine of constructive notice states that the outsiders need not look into the internal procedures of the company
C. the doctrine of ultra vires states that company cannot carry any activity which is not mentioned in the object clause of
Memorandum of Association.
D. all the statements are correct.
C The doctrine of indoor management states that the outsiders need not look into the internal procedures of the company.
The doctrine of constructive notice assumes that the outsiders dealing with the company must have the knowledge about
Memorandum of Association and Articles of Association.

907 What is not correct regarding the words member and shareholders in the context of a company:
A. the companies having no share capital have members only and no shareholders
B. the members of the companies having share capital are called shareholders also
C. the members of the companies and shareholders of the companies are different persons
D. all the statements are incorrect
C The information given in (a) and (b) is correct.

908 According to provisions of Companies Act 1956, every person holding ____ of a company and whose name is entered as
beneficial owner in the records of the depository is deemed as ___ of the concerned company:
A. equity share, member
B. preference share, member
C. equity or preference share, member
D. debenture, member
A Persons holding equity shares and not preference shares and whose name is entered as beneficial owner in records of the
depository, is deemed to be member of the company.

909 If a minor is recorded as member by a company, by mistake (which of the following is wrong):
A. company has a right to rescind the transaction
B. the minor has a right to rescind the transaction
C. if the minor is allotted shares and his name is entered as member, he is liable to the company
D. none of the above
C The minor is not personally liable. (a) and (b) are correct statements.

Page 159 of 175


910 Which of the following can become members of a company:
A. a partnership firm
B. an insolvent person
C. a person of unsound mind
D. a company
D A company is a legal person competent to contract. It can become member of another company. In case of a partnership
firm its partners can individually become members but firm is not a separate legal entity due to which it cannot become
member.

911 If a person makes application in a fictitious name for acquiring or subscribing the shares of a company:
A. he can be allotted shares
B. he can be allotted shares at his risk
C. he can be punished with imprisonment up to 5 years
D. he can be punished with imprisonment up to 5 years and with fine or both.
C A person making application in a fictitious name for acquiring or subscribing the shares of a company, can be punished with
imprisonment up to 5 years.

912 In which of the following circumstances, a person does not cease to be a member of a company:
A. if the company is wound up
B. if the person becomes insolvent
C. if the person dies
D. none of the above
D In all the above cases, a person does not remain the member of a company.

913 The register of members can be closed by a company by giving a prior notice of ___ by advertisement, in some newspaper:
A. 7 days
B. 10 days
C. 15 days
D. 30 days
A By given 7 days notice through advertisement, the register can be closed.

914 What is the maximum time limit, for which the registers of members or debenture holders can be closed:
A. 60 days in year and not more than 45 days at a time
B. 45 days in year and not more than 30 days at a time
C. 60 days in year and not more than 30 days at a time
D. 45 days in year and not more than 15 days at a time
B The register can be closed maximum for 45 days in year and not more than 45 days at a time.

915 A member of a company is entitled to a share in distribution of assets in case of liquidation of a company. It is his ___ right:
A. statutory right
B. proprietary right
C. documentary right
D. basic right
B It is a proprietary right in the capacity of joint owner of a company.

Page 160 of 175


916 If the Board of Directors of a company fails to holder annual general meeting, a member of a company can approach
Company Law Board to call such meeting. This is a ___ right.
A. statutory right
B. proprietary right
C. documentary right
D. basic right
A This is a statutory right of the member, provided by Companies Act.

917 A right has been conferred on a member of a company by virtue of Memorandum of Association or Articles of Association,
this called __ right of the member:
A. statutory right
B. proprietary right
C. documentary right
D. basic right
C Such rights are known as documentary rights.

918 A member of a company can inspect the register of members by virtue of his ___ right:
A. statutory right
B. proprietary right
C. documentary right
D. basic right
A It is his statutory right provided by Companies Act

919 Which of the following is not a statutory right of member of a company:


A. to transfer shares
B. to receive copies of annual accounts of the company
C. to receive dividend if declared
D. priority to have new shares offered if company proposes to increase capital
C To receive dividend is a proprietary right. All others are the statutory rights conferred by the Companies Act.

920 A company wants to invite deposits from the public. For this purpose it has to issue:
A. a public notice
B. a circular
C. a prospectus
D. an instruction
C The company can invite public deposits only by issuing a prospectus.

921 A company has to issue prospectus whenever it wants to invite public for __:
A. public deposits
B. shares
C. debentures
D. all the above
D The prospectus is required to be issued by a company in all these cases i.e. public deposits, shares, debentures.

Page 161 of 175


922 In which of the following circumstances, a company is not required to issue a prospectus:
A. when a person is invited to enter in to underwriting agreement
B. when the shares are offered to existing shareholders
C. when the shares are similar to the shares previously issued and listed on a recognised stock exchange
D. all the above
D In all the above circumstances, the company is not required to issue a prospectus.

923 Which of the following is incorrect statement regarding a prospectus:


A. prospectus can be issued only after incorporation of the company
B. the date written on a prospectus is prima facie evidence of date of its publication
C. every application form should be accompanied by a copy of prospectus
D. there are certain mandatory provisions that are to be stated in a prospectus.
C Every application form should be accompanied by a copy of prospectus but there is an exception i.e. if the application form
is issued to underwriters and existing shareholder or debenture holders, copy need not be sent to them.

924 If there is some misstatement in a prospectus and a person is induced to subscribe shares or debentures, what remedy do
the said person have(which one is not correct):
A. the person can rescind the contract
B. the person cannot claim damages from the company
C. the person can claim damages from the promoters responsible for such misstatement
D. none of the above
B The person has all the above rights and can claim damages from the company.

925 In every public company, at least ___ of total no. of directors are to be persons whose period of office is liable to be
determined for retirement by rotation:
A. 1/3rd
B. 2/3rd
C. 3/4th
D. 3/5th
B 2/3rd directors must retire by rotation in a public company.

926 A public company or a private company being subsidiary of a public company, must have a managing director or whole-
time director or a manager, if its paid up capital is at least:
A. Rs.5 lac
B. Rs.50 lac
C. Rs.100 lac
D. Rs.500 lac
D If a public company or a private company being subsidiary of a public company, has paid up capital of at least Rs.5 cr, it must
have a managing director or whole-time director or a manager.

927 Which of the following can appoint additional directors in a company:


A. the promoters
B. the Board of Directors
C. the shareholders
D. the underwriters or debentures holders
B Additional directors are appointed by Board of Directors of the company.

Page 162 of 175


928 The alternate directors in a company are appointed by:
A. the promoters
B. the Board of Directors
C. the shareholders
D. the underwriters or debentures holder
B Alternate directors are appointed by Board of Directors of the company.

929 If there are casual vacancies in the Board of Directors, these are filled by:
A. the promoters
B. the Board of Directors
C. the shareholders
D. the underwriters or debentures holder
B The casual vacancies are filled by Board of Directors.

930 As per SEBI requirement, how many directors should be independent directors in a company:
A. 20%
B. 25%
C. 33%
D. 50%
D As per SEBI requirement, 50% directors should be independent directors in a company

931 An additional director in a company holds office:


A. for the period he is appointed by the Board
B. at least for 2 years and maximum for 3 years
C. till next annual general meeting
D. till their removal by the Board of Directors
C Additional directors hold office till next annual general meeting.

932 A person appointed as director of a company, has to send his consent to act as a director to __ within ___:
A. the company, 21 days
B. the shareholders, 21 days
C. public through advertisement, 30 days
D. Registrar of Companies, 30 days
D The consent is required to be sent to Registrar of Companies, within 30 days.

933 If a person is appointed as director of a public company, which of the following is correct regarding the qualification shares:
A. he must have qualification shares invariably
B. if Articles of Association specify, he must have qualification shares
C. if Memorandum of Association specifies, he must have qualification shares
D. he must have qualification shares both in case of public company and a private company
B If Articles of Association of a company require, the directors must hold qualification shares. This requirement is not
applicable for private companies.

Page 163 of 175


934 A particular person cannot be a director of more than ___ companies concurrently, excluding private companies or
unlimited companies:
A. 10
B. 12
C. 15
D. no such restriction
C As per requirement of Companies Act, a particular person cannot be a director of more than 15 companies concurrently
excluding private companies or unlimited companies

935 A resolution of Board of Directors can be passed in a duly held meeting only, in respect of which of the following (identify
the incorrect):
A. issue debentures or borrow money other than by debentures
B. invest funds of the company or to make loans
C. authorise buy back of shares u/s 77A of Companies Act
D. none of the above
D In all the above cases, there is need to pass a resolution in a meeting only and not by circulation.

936 If a public company wants to give loan to any director of the company:
A. this can be with permission of SEBI
B. this can be with permission of Central Govt.
C. this can be with permission of Company Law Board
D. this is not permitted
B The public company can give loan to its director with permission of Central Govt. only.

937 If a public company wants to enter into a contract, in which its director is interested, it requires approval of Central Govt. if
its paid up capital is at least:
A. Rs.1 cr
B. Rs.2 cr
C. Rs.5 cr
D. Rs.10 cr
A If paid up capital of a public company is at least Rs.1 cr and it wants to enter into a contract, in which its director is
interested, it requires approval of Central Govt.

938 Which of the following is the objective of enactment of Foreign Exchange Management Act 1999?
A. to facilitate trade and promote orderly development of forex markets in India.
B. to facilitate external trade and payment and promote orderly development of forex markets in India.
C. to facilitate external trade and payment and promote orderly development of forex markets world over
D. to replace Foreign Exchange Regulation Act and to promote orderly development of forex markets world over.
B The objective of enactment of Foreign Exchange Management Act 1999 is to facilitate external trade and payment and
promote orderly development of forex markets in India.

Page 164 of 175


939 The provisions of Foreign Exchange Management Act 1999 apply (which one is not correct):
A. on all India basis including J & K
B. to all branches of banks located in India and not outside India
C. to all persons resident in India or any contravention committed by such persons outside India
D. none of the above
B The provisions of Foreign Exchange Management Act 1999 apply to all branches of banks located in India and outside India,
owned or controlled by persons resident in India.

940 The term authorised person under Foreign Exchange Management Act 1999 means:
A. authorised dealers only
B. authorised money changers only
C. authorised dealers and authorised money changers
D. authorised dealers, authorised money changers and other institutions
C The term authorised person under Foreign Exchange Management Act 1999 means authorised dealers and authorised
money changers.

941 Under Foreign Exchange Management Act 1999, the licence to operate as authorised persons is granted by:
A. RBI only in case of banks
B. SEBI only in case of institutions
C. DGFT in case of money changers
D. RBI for all
D Licence is issued by RBI to all, to act as authorised persons.

942 Which of the following fulfills the requirement of current account transactions as per requirement of Foreign Exchange
Management Act 1999:
A. a transaction which is not a capital account transaction
B. purchase of company shares by a foreign mutual fund in India
C. repayment of loan by the Govt. outside India
D. none of the above
A Current account transaction is a transaction which is not a capital account transaction.

943 Which of the following is not a capital account transaction as per Foreign Exchange Management Act 1999:
A. import of capital goods by an Indian company
B. change in asset or liability position outside India of a person resident in India
C. change in asset or liability position in India of a person resident outside India
D. none of the above
A Import of capital goods by an Indian company is a trade transaction and falls in the category of current account transaction.

944 As per Foreign Exchange Management Act 1999, which of the following cannot be included in foreign exchange:
A. amount payable in foreign currency
B. drafts and travellers cheques drawn in India but payable in foreign currency
C. drafts and travellers cheques drawn in outside India but payable in Indian currency
D. none of the above
D All the items at (a), (b) or (c) are foreign exchange.

Page 165 of 175


945 Under Foreign Exchange Management Act 1999, a person is defined to include which of the following:
A. an individual or an HUF only
B. a firm or a company
C. an association of persons or a body of individual
D. all the above
D Under Foreign Exchange Management Act 1999, all the above are included in the definition of a person.

946 Which of the following is included in the definition of person resident in India as per Foreign Exchange Management Act
1999:
A. a body corporate registered or incorporated in India
B. an office or branch in India owned or controlled by a person resident outside India
C. an office or branch outside India but owned or controlled by a person resident in India
D. all the above
D (a), (b) and (c) all, are included in the definition of persons resident in India.

947 A person is a resident in India if he resides in India for ____ in the _____:
A. at least 182 days, preceding financial year
B. more than 182 days, preceding financial year
C. more than 182 days, current financial year
D. at least 182 days, preceding calendar year
B A person is a resident in India if he resides in India for more than 182 days, in the preceding financial year.

948 If there is any contravention of provisions of Foreign Exchange Management Act 1999, it attract penal provision. Appeal in
such cases can be made to:
A. RBI
B. Directorate of Enforcement
C. Special Director - appeals
D. a civil court
C Appeal at first stage is possible to special director - appeals and thereafter to appellate tribunal and not to High Court or
Supreme Court, except where it is a question involving Law.

949 If amount is quantifiable for a contravention, the penalty under Foreign Exchange Management Act 1999 can be :
A. up to 50% of the amount involved
B. up to equal to the amount involved
C. up to 200% of the amount involved
D. up to 300% of the amount involved
D In such cases the penalty can be up to 300% of the amount involved.

950 If amount is not quantifiable for a contravention, the penalty under Foreign Exchange Management Act 1999 can be :
A. up to 50% of the amount involved
B. up to equal to the amount involved
C. up to Rs.2 lac
D. up to Rs.5 lac
C In such cases the penalty can be up to Rs.2 lac.

Page 166 of 175


951 Where a contravention is a continuing one, further penalty under Foreign Exchange Management Act 1999 can be:
A. Rs.1000 for every day after the first day
B. Rs.2000 for every day after the first day
C. Rs.5000 for every day after the first day
D. Rs.10000 for every day after the first day
C Where a contravention is a continuing one, further penalty under Foreign Exchange Management Act 1999 can be, Rs.5000
for every day after the first day

952 If the sale price of an immovable property exceeds Rs.___, its transfer/sale is possible through a registered instrument only:
A. Rs.100
B. Rs.10000
C. Rs.1 lac
D. Rs.10 lac
A The sale of immovable property priced exceeding Rs.100, is possible through a registered instrument only.

953 If a suit is to be instituted under Transfer of Property Act for sale of mortgaged property (which one not correct):
A. the suit can be instituted in the court of the lower jurisdiction, where it can lie
B. the suit can be instituted in the jurisdiction of court where the property is located
C. in a civil court, the decree is two fold i.e. conditional and unconditional
D. all the above statements are correct.
C The decree is two fold i.e. preliminary and final decree. Other options are correct.

954 In case of suit for sale of mortgage property under Transfer of Property Act the preliminary decree relates to:
A. conditions to be fulfilled by the bank before sale.
B. conditions to be fulfilled by the debtor before sale
C. time limit given to the mortgager to pay the decretal amount
D. time limit given to the mortgager and mortgagee to reach a compromise
C In case of suit for sale of mortgage property under Transfer of Property Act, the preliminary decree relates to time limit
given to the mortgager to pay the decretal amount.

955 In case of lease transaction, the right of ____ of the immovable property is transferred to the lessee:
A. ownership only
B. use only
C. possession only
D. use and possession
D In case of lease transaction, the right of possession and use of the immovable property is transferred to the lessee

956 A lease involving a period of ___ requires to be created through a document in writing which requires to be registered:
A. one month or more
B. more than 6 months
C. more than one year
D. more than 3 years
C If the lease period is more than one year, the lease can be created through a document that will require registration.

Page 167 of 175


957 An actionable claim is secured by:
A. pledge of goods
B. hypothecation of goods and securities
C. mortgage of immovable property
D. no security
D An actionable claim is a claim which does not have any security in the form of mortgage, pledge or hypothecation.

958 Which of the following is not correct regarding assignment:


A. it can be created through an instrument in writing only
B. it can be created through an instrument in writing or orally also
C. if there is default, the assignee can directly sue the debtor in his own name
D. in assignment, there is transfer of actionable claim in favour of the bank
B Assignment can be created through an instrument in writing only.

959 Which of the following is not an actionable claim:


A. book debts of companies
B. fixed deposit receipt issued by a bank
C. shares issued by a company
D. life insurance policy or national saving certificates
C Shares issued by a company represent ownership rights and are not unsecured loans. Hence they are not actionable claims.

960 For the following type of security, the loan is secured by creating assignment only (which one is not correct):
A. bank FDR
B. life insurance policy
C. national saving certificate
D. none of the above
D All these securities are actionable claims on which charge assignment is created.

961 A lease in respect of agriculture or manufacturing purpose, can be terminated by the lessor or lessee by giving a notice of
___, to the other:
A. 1 month
B. 3 months
C. 6 months
D. 11 months
C It can be done by giving a 6 months notice.

962 In case of accession to the mortgaged property, where the ___ is in possession of the mortgaged property, the mortgagee
is entitled of the accession.
A. mortgager, mortgagee
B. mortgagee, mortgagee
C. mortgagee, mortgager
D. none of the above
B In case of accession to the mortgaged property, where the mortgagee is in possession of the mortgaged property, the
mortgagee is entitled of the accession.

Page 168 of 175


963 A mortgager has in his possession, the mortgaged property. He wants to lease the property:
A. he has the legal right to lease
B. he does not have any legal right
C. he cannot give the right of use to the leasee
D. he cannot do so.
A A mortgager in possession of the mortgage property he has the legal right to lease.

964 A lease of an immovable property for agriculture or manufacturing purpose is deemed to be :


A. a long lease
B. a short period lease
C. a lease from year to year
D. a lease for indefinite period
C A lease of an immovable property for agriculture or manufacturing purpose is deemed to be a lease from year to year.

965 Which of the following is correct statement in the context of lease:


A. the price is called rent
B. the money paid for lease is called premium
C. the transferee is called the lessee
D. all the above
C In a lease transaction, the price is called premium and the money paid for lease is called rent.

966 Which of the following is not correct regarding to Right to Information Act 2005:
A. RTI Act came into force wef Oct 12, 2005
B. RTI Act replaced Freedom of Information Act 2002
C. RTI Act extends to whole of India including J & K
D. Objective of RTI Act is to enable Indian citizens to access information under control of public authority
C The Act is not applicable in J & K.

967 Under RTI Act 2005, the information can be accessed under control of a public authority. For this purpose, the public
authority means an authority established:
A. by or under the Constitution
B. by any other law made by the Parliament of India or by the State legislature
C. by any notification issued or order made by the appropriate govt.
D. all the above
D The public authority means the authority established by or under the constitution, by any other law made by Parliament or
State legislature and notification issued or order made by the appropriate authority.

968 Right to information available to Indian citizen under RTI Act 2005 does not include the following right:
A. inspection of documents or records
B. taking notes of documents
C. taking certified samples of the material
D. none of the above
D The right include right of inspection of documents or record, taking notes of documents or taking certified samples of the
material.

Page 169 of 175


969 Under RTI Act 2005, the information can be taken in the form of:
A. diskettes or floppies
B. tapes or video cassettes
C. printouts or in any other electronic form
D. all the above
D The information can be in the form of diskettes or floppies, tapes or video cassettes, printout or in any other electronic form.

970 Under RTI Act 2005 the information can be obtained by:
A. any person in India including artificial persons
B. companies, firms, corporations etc.
C. Indian citizens
D. all the above
C Information can be obtained by Indian citizens (individuals) only and not by companies or firms or corporations.

971 Under RTI Act 2005, the information does not include, which of the following:
A. e-Mails
B. press releases
C. logbooks
D. none of the above
D Information includes eMails, press releases, logbooks etc.

972 Under RTI Act 2005, the period for providing information is:
A. 5 days
B. one week
C. 21 days
D. 30 days
D The period fixed is 30 days for providing information.

973 If information does not relate his organisation, the Central Assistant public information officer has to forward the request
for information to the concerned public authority with in:
A. 5 days
B. one week
C. 21 days
D. 30 days
A The given answer is correct. No explanation is required.

974 If a person seeks information from a public authority:


A. he has to give reasons for seeking the information
B. he has not to give reasons for seeking the information
C. if reasons are given, it can help in quick disposal of the request for information
D. information can not be provided by the public authority without knowing the reasons for seeking information
B To obtain information under RTI Act, the reasons for seeking information are not required to be given.

Page 170 of 175


975 If a person seeking information is not provided information within the prescribed period (normally 30 days), he can make
an appeal :
A. within 30 days
B. within 50 days
C. within 6 months
D. within one year
A The appeal can be made within 30 days.

976 The Prevention of Money Laundering Act 2002 was enacted with the following objective:
A. to prevent money laundering
B. to provide for confiscation of property derived from money laundering
C. to prevent use of banking system for money laundering
D. all the above
D The objectives as given above are correct.

977 The definition of money laundering is given in:


A. Prevention of Money Laundering Act
B. Narcotic Drugs and Psychotropic Substances Act 1985
C. Foreign Exchange Management Act
D. none of the above
D The definition of money laundering is not given in any of these Acts.

978 If a person commits offence under Prevention of Money Laundering Act 2002, shall be liable for imprisonment:
A. of three years
B. of five years
C. five to 10 years
D. three to seven years
D The imprisonment period is 3 to 7 years.

979 If a person commits offence under Prevention of Money Laundering Act 2002, shall be liable for fine :
A. up to Rs.10 lac
B. up to Rs.5 lac
C. up to Rs.2 lac
D. up to Rs.1 lac
B The amount of fine for offences under PML Act 2002 are up to Rs.5 lac.

980 As per Prevention of Money Laundering Act 2002, the banks are required to maintain record of specified transaction for a
period:
A. of 20 years
B. of 10 years
C. of 5-8 years
D. of 5 years
B Under PML Act, the records are to be preserved for a period of 10 years.

Page 171 of 175


981 If a banking company is found to be not complying with requirement of Prevention of Money Laundering Act 2002, the
Director can impose a fine of:
A. Rs.10000
B. Rs.20000
C. Minimum Rs.10000 and maximum Rs.1 lac
D. Minimum Rs.10000 and maximum Rs.5 lac
C The banking company can be fined with a minimum of Rs.10000 and maximum of Rs.1 lac under PML Act 2002.

982 Banks are to maintain records of which of the following transactions as per Prevention of Money Laundering Act 2002:
A. all transactions of the value of more than Rs.10 lac or its equivalent in foreign currency
B. all cash transactions of the value of more than Rs.10 lac or its equivalent in foreign currency
C. all cash transactions of the value of Rs.10 lac above or its equivalent in foreign currency
D. all foreign currency transactions of the value Rs.10 lac above
B Under PML Act, the banks have to maintain record of all cash transactions of the value of more than Rs.10 lac or its
equivalent in foreign currency.

983 Banks are to maintain records of all series of cash transactions integrally connected to each other which have been valued
below Rs.10 lac where such series of transactions have taken place ____, as per Prevention of Money Laundering Act 2002:
A. on a particular day
B. during a particular week
C. within a month
D. within 10 weeks
C For the purpose of total of all cash transaction, the time unit is a month.

984 Banks are required to maintain records under Prevention of Money Laundering Act 2002 which should contain following
information (which is not correct):
A. nature of the transaction
B. amount of the transaction and the currency
C. date on which transacted and the parties to the transaction
D. none of the above
D All the above information is to be provided. Hence no explanation is required.

985 Director under Prevention of Money Laundering Act 2002 is appointed by:
A. Reserve Bank of India
B. Financial Intelligence Unit - India
C. Govt. of India
D. Security and Exchange Board of India
C Under PML Act 2002, the director is appointed by Govt. of India.

986 Which of the following is authorised to prescribe the manner for keeping records to be maintained by banks under PML
Act 2002:
A. RBI only
B. SEBI only
C. RBI and Ministry of Finance
D. RBI and SEBI
D The manner in which the records are to be maintained, is prescribed by RBI.

Page 172 of 175


987 As per Rules under Prevention of Money Laundering Act 2002, the banks are not required to obtain which of the following
documents while opening account of a company:
A. Certificate of Incorporation
B. Memorandum of Association and Articles of Association
C. Board resolution and officially valid document in respect of the person operating the account
D. none of the above
D All the above information is required and it does not require any further explanation.

988 Cyber Laws in India are contained in which of the following:


A. Cyber Technologies Act 2000
B. Information Technology Act 2000
C. Information and Cyber Technology Act 2000
D. Cyber Law of India
B Information Technology Act 2000 covers the Cyber Laws in India.

989 Which of the following objectives of Information Technology Act:


A. to provide for legal infrastructure for e-commerce
B. to facilitate electronic filing of documents of Govt.
C. to facilitate amendment to the relevant Laws
D. all the above
D The objectives are all the above and do not require any further explanation.

990 A system of a secure key pair consisting of a private key for creating a digital signature and a public key to verify the digital
signature, is called:
A. digital signature
B. asymmetric crypto system
C. electronic monitoring
D. e-commerce
B The asymmetric crypto system is a system of a secure key pair consisting of a private key for creating a digital signature and
a public key to verify the digital signature.

991 The person given licence to issue digital signature certificate u/s 24 of Information Technology Act is called:
A. Certifying authority
B. DGC Authority
C. Digital Signature Controller
D. Controller of Certifying Authorities
A The certifying authority is issued licence by the Govt. to issue digital signature certificate u/s 24 of Information Technology
Act.

992 Authentication of an electronic record by a subscriber by means of an electronic method of procedure in accordance with
provisions of Section 3 of Information Technology Act, is called:
A. digital signature
B. asymmetric crypto system
C. electronic monitoring
D. key pair
A It is a factual statement and does not require any explanation.

Page 173 of 175


993 A private key and its mathematically related public key which are so related that the public key can verify a digital
signature created by the private key, is called:
A. digital signature
B. asymmetric crypto system
C. electronic monitoring
D. key pair
D It is called key pair. It does not require any further explanation.

994 Which of the functions of public and private key match:


A. private key verifies the digital signatures and public key creates the digital signature
B. public key verifies the digital signatures and private key creates the digital signature
C. private key and public key are used to verify the digital signatures
D. private key and public key are used to create the digital signatures
B It does not require any further explanation.

995 As per Information Technology Act 2000, the penalty for damage to computers, computer systems etc. has been fixed for
damages up to ____ by way of compensation to affected person:
A. Rs.1 lac
B. Rs.10 lac
C. Rs.100 lac
D. Rs.1000 lac
C The compensation can be up to Rs.100 lac.

996 The Information Technology Act was introduced in India on the initiative of which of the following:
A. Reserve Bank
B. Information Technology Ministry
C. UN Commission on International Trade Law
D. Parliament of India
C IT Act 2000 was enacted on the initiative of UN Commission on International Trade Law.

997 _____ involves promotion of corporate fairness, transparency and accountability in the interest of all stake holders:
A. risk management
B. corporate risk management
C. corporate strategies
D. corporate governance
D Given option is correct

998 As a part of corporate governance, the concept of fit and proper relates to which of the following aspects:
A. directors of banks
B. management of banks
C. to management of banks
D. staff of banks
A Given option is correct. No explanation required

Page 174 of 175


999 Which of the following committee is not associated with corporate governance, directly or indirectly:
A. AS Ganguly Committee
B. M S Varma Committee
C. R H Patil Committee
D. none of the above
D Given option being correct, no explanation is required.

1000 Which of the following Act has statutorily recognised the principles of corporate governance:
A. Banking Companies (Acquisition and Transfer of Undertakings) Financial Institutional Laws (amendment) Act
B. Banking Companies Acquisition and Transfer of Undertakings Act
C. Banking Regulation Act
D. Reserve Bank of India Act
A Given option being correct, no explanation is required.

Page 175 of 175