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1) These insurance companies do not offer products to public but to other insurance companies.

LIC
GIC
Reinsurance Companies
Insurance brokers

2) Market Participants who buy & sell securities on their own a/c are known as
Issuers
Dealers
Investment Banks
Brokers

3) Repos are transactions for sale of securities with an agreement to repurchase of these securities at a
later date
 True
 False

4) The financial institution serving only commercial customers such as corporations, merchant banks &
other financial institutions are known as
Retail Banks
Wholesale Bank
Brokerage
Insurance Company

5) A company can give loan but can not accept deposits. What type of financial services firm is this
Investment Bank
Bank
Insurance Company
Finance Company

6) A derivatives contract to exchange future cash flows for a nominal amount is known as
Option
Swap
Forward Contract
Future

7) Liabilities are item on the balance sheet which bank owes to others
True
False

8) Asset – Liability committee (ALCO) can eliminate interest rate risk


 True
 False

9) Balance Sheet reflects the position of a firms finances over a period of time (e.g. Financial Year)
 True
 False

10) Which of the following are underwriting risk


 It is the risk that an investment bank will but will buy securities from an issuer at a price than the
investment bank can resell the securities to other investors resulting in losses for the investiment bank
 It is the risk that an insurance company will issue an insurance contract with a premium that is
too low for the amount of risk assumed
 It is the risk that the bank will approve a loan that will not be repaid in full, resulting in loan
losses for the bank
 All the above

11) Which of the following will you find on the balance sheet of a bank
Cash
Operating Expenses
Provisions for the loan losses
Interest Income

12) Which of the following is on the liabilities side of the balance sheet of a bank
Loans
Short term loans from other bank
Fixed assets
Assets
13) ABC Ltd wants to raise funds by issuing corporate Bonds. Which type of firm will they go to
Bank
Finance Company
Insurance Company
Investment Bank

14) For calculation of Net Interest income, interest paid on deposit is subtracted from interest income on
loans. What is the other component subtracted from interest income on loans for this purpose?
 Depreciation for fixed assets
 Taxes
 Provision for loan losses
 Employee Compensation

15) Money market instruments have original maturity of more than one year
 True
 False

16) Which of the following represent the impact of increased regulation on the retail banks industry
 Basel II regulation on minimum capital requires for banks
 Basel II regulation on setting aside capital for losses associated with operational risk
 AML Requirement for mentoring, identifying proactively preventing money laundering
 Consumer privacy guidelines

17) Government of Venezuela recently nationalized some financial institution. What type of risk is reflected
 Operational Risk
 Political Risk
 Regulatory Risk
 Market Risk

18) Institution which provide deposit, payment, lending & investment management services are known as
 Scheduled Banks
 Investment Banks
 Finance Company
 Commercial Bank

19) OTC market have a central location where buyers and sellers can meet to execute trades
 True
 False

20) Citibank places a deposit of USD 10 million with Barclays Bank in Paris. What type of deposit is this?
 Retail Deposit
 Euro Currency Deposit
 Corporate Deposit
 Certificate of Deposit

21) Which of the following are crucial differentiation between competitors in retail banking
 Price
 Product Differentiation
 Quality Service Delivery
 Financial Stability

22) Which of the following is an example of a rollover loan?


 A home loan that starts with an initial fixed interest rate that is adjusted after a specific
period of time
 A home loan where the loan tenure is not fixed at the stage when the loan is sanction
 A home loan where loan period is extend beyond initial loan period
 All the above

23) Which of the following a business driver for net interest income
 Transaction volumes
 Number of customers
 Account balance
 Credit criteria

24) Which are the following loan product commonly used in retail banking
 Overdraft
 Home Loan
 Consumer Loan
 Syndicate Loan

25) Which of the following needs of the customers is not met by a financial institution?
 Financial advise
 Borrow money
 Arranging inheritance
 Insure financial losses

26) Capital Market in which securities are traded after issue are known as

 Primary Market
 Secondary Market
 Securities Market

27) Long term securities are traded in


 Capital Market
 Primary Market
 Money Market
 All of the above

28) Which of the following are example of operational risk


 System failure due to flooding of the data centre
 Change in rates of interest on loans & deposits
 Error committed in data entry
 Fraud committed by an employer

29) The entities (Corporation, institution, organization or government) who sells securities in the capital
markets to raise funds for their business/financial requirements are known as
 Brokers
 Intermediaries
 Issuers
 Investors

30) Which of the following action is used to manage Market Risk by banks
 Using Computer models
 Setting limits
 Buying derivatives
 All of the above

31) Which of the following statements are TRUE regarding deposits services?
 Only banks, finance companies & other depositors institution are allowed to accept customer deposit
 For most depository institutions, customer deposits are the cheapest source of funds
 Deposit account include Term Deposits, Saving account, & current account
 For a large number of depository institution customer deposits are the largest source of funds
32) What factor (s) led to the popularity of the ATM?
 Relocation of ATMs off-premises to new location
 Sharing of ATM by banks
 ATM prefer a wider variety of transaction
 All of the above

33) Which of the following is true regarding Market Risk


 For retail bank the target component of market risk is interest rate risk
 Variable rate loans represent the largest amount of risk for banks
 Interest rate risk occurs because of a mismatch in the duration of a retail banks assets and
liabilities
 Interest rate risk is managed by bank ALM group

34) What correct formula for calculation net interest income?


 (Revenue for interest and fees for loans) - (Interset paid by bank to depositors and bond holders)
 (Revenue for interest and fees for loans) - (Interset paid by bank to depositors and bond holders) +
(Provisions for loans Losses)
 (Revenue for interest and fees for loans) - (Interset paid by bank to depositors and bond holders) -
(Provisions for loans Losses)
 None of the above

35) Which of the following is true for credit cards


 Credit cards are unsecured term loans
 Credit cards are unsecured of line of credit
 Each transaction done on the cards as to be approved by the card issuer. The issuer will pay the
merchant only for the approved transaction
 The card issuer sent payments to the merchant through the merchant bank( minus a fee known as
interchange fee)

36) A bond with per value of euro 20000 is currently traded at euro 10000. The annual interest on the bond is
euro 2000 what is the current yield of the bank?
 15%
 10%
 20%
 5%

37) Which of the following statements is true for consumer loans?


 Consumer loan can be secured or unsecured loans
 Consumer loan can be term loans or lines-of-credit
 Consumer loan can be secured by a borrowers equity on an existing home

38) Which of the following is a risk usually associated with retail banking?
 Market Risk
 Credit Risk
 Operational Risk

39) You want to sell some securities. A market maker quotes you two rates. Which rate is relevant for you as
a seller?
 Offer
 Best
 Bid
 Mid

40) A retail bank gave away consumer loans worth USD 650m in FY2006-07 out of which loans worth USD 39
m were charged off. The banks management found the situation alarming and decides to put in place a
series of measures to manage the credit risk in the beginning o FY2007-08. A review of FY 2007-08 loans
revealed that the total loans for the year were USD 900 m of which USD 45 was charged off. Do the
numbers suggest that the risk management measures may have worked?
 Yes. The numbers suggest positive results from the risk management measures
 Insufficient data to draw any conclusions
 No. The numbers suggest there was no impact from the risk management measures
 No. The numbers suggest negative results from the risk management measures

41) Which of these is not a function of a central bank?


 Facilitating trade payment
 Setting monetary policy of a country
 Serving as ‘bank to bank’
 Issuing currency notes

42) Which of the following is a step towards improving bank efficiency?


 Centralizing internal business function and process
 Outsourcing
 Business Process re-engineering

43) Credit risk is the risk that counterparties will be unable to complete a financial transaction as promised
 True
 False

44) Which of the following is TRUE regarding the loan organization process?
 It is desirable for a retail bank to have a qualified credit analyst approve as many loan application as
possible
 Generally processing of unsecured loan would require more document to be provided by the borrower
than a secured loan
 Credit score can be used to determine the loan term
 In general, deposits documentation tends to be more complex than loan document
45) Which of the following are true regarding process improvements in retail banking?
 Process improvements in customer-facing processes like sales, services and transactions are critical for
improving customer experience. Process improvements in back-office are not critical from a customer
experience perspective, but are important for efficiency & productivity at the organizational level.
 Consistent enterprise –wide processes lower operational risk & simplify regulatory compliance.
 Process innovation can be a source of competitive advantage while Product innovation cannot
since new products can easily be replicated by competition.
 Business process outsourcing help tide over the difficulties in managing the cyclical nature of
business volumes – without outsourcing the bank may have excess capacity (leading to wastage)
in slack season and shortage in peak season (leading to loss of opportunity)

46) Which of the following is true regarding the Account Opening process?
 The importance of this phase is derived from the fact that the customer experience at this stage
sets the tone for the future relationship with the customer. Also the data generated at this stage
can be used to get a better view of the customer profile.
 A CRM system can be primarily deployed to effectively automate the ‘Application’ phase of the Account
Opening process.
 CRM systems are increasingly being used to support the various phases of the account opening
process including Discovering customer needs & suitable offerings, application, validation,
decision making and documentation.
 Account opening process requires the bank to fulfill the compliance requirements like gathering
AML data, capturing KYC data, etc

47) Which of the following are discovery process of loan processing?


 Cross selling support
 Business Process Outsourcing
 Improved sales tool
 Needs-based decision-support

48) Bank has published the following numbers for its retail banking operation. How would you calculate the
net income for the bank
A. Staff compensation
B. Transaction Fees
C. Interest income from deposits
D. IT cost
E. Commission received
F. Occupancy
G. Asset management fees
H. Interest income from loan
Interest Income(C + H) + Fee Income (B + E + G) – Operating Expenses (A + D + F)

49) Why are banks the most regulated corporate entities


 Bank accept deposits from the public
 Bank provide payment services to the economy
 Bank provide financial services to corporate ,and traders
 Banks are important for meeting govt. budget target

50) Which of the following products and services are associate with Retail Banking
 Deposits including current, savings account and term deposits
 Payment services
 Investment management services
 Loans including mortgage, personal loans, trade finance, credit card

51) The M&A activity in the developed market is expected to witness a change in thrust in the coming year.
Which of the following are some of the factors behind this trend?
 Acquisition in the past have failed to achieve the desired result for operational efficiencies &
cutting cost for merged entities. The benefit drawn have not been commensurate with
expectation
 In the changed scenario the financial institute in developed market are more likely to be targeted of
acquisition by institution from the immerging markets
 Domestic consolidation has already taken place in many markets
 Acquisition will tend to be more strategic - Geographical expansion, new business etc.
52) Which of the following exemplifies the online banking strategy of most bank today
 Reducing the dependency/integration of online banking systems with other delivery channel
 Integrating on-line banking system with core banking system
 Adding additional functionality to their websites
 Using on-line banking services to enter new markets

53) Following are the steps involved in the clearing process of check. Put them in correct order
Payee receive check
Bank collect the check from branches or ATM
Forward them to its check clearing process center
Internal check clearing process
External check clearing process
Debit money from payer’s a/c
Credit to payee’s a/c

54) Which of the following are true regarding Giro transfer


 Giros are used for regular payments like taxes, utility bills
 In a Giro transfer the transferee send payment through its banks to the transferee's bank, which in
turn pay the transferee
 Giro is used to pay for goods at the point of sells.
55) Which of the following are true regarding deployment of delivery channel?
 Bank spending on deliveries channels is on the rise
 Channel dissonance (inconsistent customer experience across multiple channel) is a major
challenge
 Proliferation of channels has brought about increased cost but has facilitated deployment of new product
& service
 Finding the right mix of functionality for all channel is an important endeavor

56) Which of the following are true regarding the retail lending challenges for banks?
 High interest rates in certain markets are impacting volumes.
 There are challenges related to credit quality in retail banking which have been addressed in
developed markets like US & UK by using risk management infrastructure for enabling informed
credit decisions. The infrastructure includes credit bureaus and use of tool like credit scoring.
 High level of consumer debt in some developed markets is a huge concern.
 In emerging markets credit derivatives have emerged as the main method for mitigating credit risk.

57) Which of the following is a benefit that banks envisage from a CRM system?
 Identifying new markets to expand customer base.
 Identifying the most profitable customers, allowing a financial institution to target products and
high levels of customer service at these customers
 Anticipating the financial needs of customers to target marketing and sales efforts based on those
needs (improving the return on marketing investment)
 Delivering consistent, timely customer service across all delivery channels.

58) What are the following are true require Home Loan
 Home loan is secured loan
 Home loan is Term loan
 Each variable rate loan is tied to a specific benchmark rate.
 In a variable rate loan the underlying benchmark is changed by the lending from time to time

59) Which of the following is a step forwards improving a banks efficiency


 Centralizing internal business functions & process
 Out Sourcing
 Business process re-engineering

60) Branch renewal is an important current issue for banks, which of the following are reasons for this
 Most retail banking customers prefer to visit branches for more complicated transaction
 New channels decrease branch activity
 Branches help grow revenue (through cross-selling and product expense)
 Retail customer prefer to visit branches to resolve service problems

61) Which of the following are true regarding Branch Renewal strategy of banks
 Branches are the costliest way of doing transaction. Banks need to target reduction in the number of their
branches to lower cost.
 Branches should equipped with more self service devices for simple transaction
 Branches critical to relationship building, cross-selling and product expansion – should be seem
more as sales outlet

62) Which of the following are activities associated with the underwriting phase of loan processes?
 Increased advanced risk assessment
 Document Imaging
 Extensive KYC capability
 All of the above

63) Which of the following is true about regulators challenges for retail banking
 AML requirement require banks to set aside for operational risk
 In some markets consumer privacy regulations are so stringent that they make it difficult
for banks to share customer data internally for cross- selling
 Basel II regulatory require banks to update account opening procedure
 All of the above

64) Which of the following are TRUE regarding card products?


 On-line debit card transactions are processed through ATM or debit card networks & require
customers to enter a PIN for authentication. Like ATM withdraw funds in an on-line debit card
transaction are transferred immediately
 Off-line debit card use the same authorization & settlement networks (Visa & MasterCard). These
are sometime referred to as “Signature-based cards” since use of these cards, require the card-
holder sign.
 Credit card is a payment product that allow access to funds on credit

65) Which of the following are reasons for strong retail focus among banks today?
 Retail banking is the largest source of revenue & profit for bank today
 Retail banking is the fastest growing business area
 Although retail banking is not the largest source of revenue for the bank nor it the fastest growing
business area, bank adopt the strategy of entering new market or starting fresh operation with retail
banking merging from their experience therein and then diversifying into other branches of banking
 Stable financial performance

66) Which of the following are true regarding recent trends in operational excellence in retail banking
scenario
 Retail banks are looking to take over smaller bank to achieve the economies of scale
 Bank are increasingly laying more emphasis on integration of existing application rather than
addition more functionality into these application
 Central bank holds banks directly responsible for the operation of their outsourcing partners. This
factor in increasingly dissuading banks from outsourcing crucial activities
 With the giant strides in online banking banks started to move away from large investment in branch
infrastructure this trend towards operating with diminishing no of branches as been gaining ground in
recent time

67) Which of the following are true regarding organic growth in retail banking?
 Because of the increasing saturation in acquisition scope in developed markets organic growth is
generally the best option for revenue growth
 The bank would need to remove focus from customers which do not promise return
 Organic growth is the best way forward for developing market where the market for retail banking services
is growing acquisition as a strategy is more appropriate for developed markets than for developing
markets
 Banks would need to move from a transaction mind set to relationship mind set
68) Assign to on developing a solution for the retail banking operation of a large bank which of the following
would definitely be a part of your approach addressing some key executive of banks
 Product Executive
 Operation Executive
 Customer segment manager
 None of the above

69) Which of the following are TRUE for current accounts?


 Current accounts are typically used for making draft, check, debit card and/or giro transfers.
 In some countries current accounts are also referred to as transaction accounts, draft accounts
and/or checking account
 Current accounts allow customers the ability to withdraw cash as and when needed while earning
interest on their account balance
 Customer use current accounts to pay on-going expenses and for safety storing funds.

70) Which of the following is true of the general cross-channel integration challenge / strategy of banks
today?
 Banks typically have multiple applications using different technologies & platforms – this result in
myriad challenges related to customer service and IT management.
 Larger banks are not comfortable with migrating all delivery channels to the same platform because of the
risk involved. They prefer to retain existing platform and integrate these channels making use of
middleware, data warehouse, and centralized data repositories.
 Smaller banks are more amenable to porting all delivery channels to the same platform.

71) Which of the following is true regarding other delivery channels?


 Banks need to move towards independent strategies for each of the channels - Internet banking
branches, and mobile banking etc.
 Internet banking is considered the main retention strategy for banks today
 Mobile banking has had limited success
 Call centers provide centralized product and sales expertise. They also support the emphasis on
cross selling. They also provide support to self service users.

72) A Bank feels the operational efficiency leading to cost reduction is the best way for his retail banking
operation to grow. As a consultant you differ and would recommend a growth led strategy. You are
designated to offer advice on the revenue growth strategy that the bank should adopt which of the
following argument should be used to build your case for
1) Targeting revenue growth over cost reduction
2) Roadmap for achieving a healthy revenue growth
 Scope of efficiency gain is limited – therefore efficiency gain & cost reduction may not be enough
to ensure business growth
 Investor prefers growing bank compare those who increase profit by cost reduction
 Acquisition as well as organic growth are two ways of achieving revenue growth
 Assuming a good fund situation banks are more likely to follow the acquisition root for revenue growth.
This is especially for their strategy for the developed market.

73) Which of the following is one of the recent trends in branch renewal strategy of banks?
 Banks are increasing in branch technology to connect branches to core banking systems &
centralized back-office functions.
 Expand the use of self service devices
 Establishing lesser but bigger branches
 Link branches into larger cross channel integration efforts

74) Which of the following are factors affecting revenue growth in financial services industry including retail
banking?
 Market saturation in developed country
 Growing non-bank presence including insurance firms, retail firms etc
 Increased foreign competition especially in developing market
 High IT cost that are proving to be major bottle necks in business process improvement that are so
necessary for revenue growth as well as cost reduction
 Lack of product /service differentiation

75) In the retail banking IT landscape who typically owns IT infrastructure


 The ownership depends upon the banks business philosophy – no concrete trend is visible in today’s
scenario
 Banks are increasingly laying more emphasis on existing application rather than addition of more
functionality into this application
 The IT infrastructure is owned by business units, this is increasingly being preferred as the way to bring
grater focus on growth of responsible business unit than the ………. of IT
 The IT infrastructure is being increasingly owned by centralized IT department – This being
considered as a good way to bring about high efficiency and cost reduction

76) Which of the following is one of the areas of change for consumer payments
 Check truncation & Imaging
 Expansion of the uses of credit and debit
 Replacement of chip based cards with credit and debit cards to reduce fraud on the point of sale
 Bank’s integration of their internal payment operation

BEGD