PPTO 2019 CREDIT CONCEPTS PAPER-2

1.What is the hurdle rate for In case of exposures to sensitive sectors, including Real
Estate Sector, NBFC- including NBFC-NDSI and Gems and jewellery industry?
(Cir No 343/2018)

a) Synd 2
b) Synd 4
c) Synd 5
d) Synd 6
e) Synd 7

2. Under the LEF, the sum of all exposure values of the bank to a counterparty or a
group of connected counterparties is defined as a ‘Large Exposure (LE)’, if it is equal
to or above--- percent of the bank’s eligible capital base (i.e., Tier 1 capital)
(Cir No 343/2018)

a) 10
b) 20
c) 30
d) 40
e) 50

3. As a prudential risk mitigation measure, Bank has stipulated that the outstanding
unsecured exposure shall not exceed ---% of Global fund based and non fund based
Credit Exposure (Including Credit Equivalent Derivatives). (Cir No 343/18)

a) 10
b) 20
c) 30
d) 40
e) 50

4. As a tool for credit risk management credit rating serves the following
purposes(343/2018)

a) Measurement of risk/Fixing Risk Premium

b) Monitoring of risk
c) Assessment of Capital to cover the risk
d) Only (a) & (b)
e) (a),(b) and (c)

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5. The following credit decisions are linked to the internal rating assigned to the
Borrowers (Cir No 343/2018)
a) Sanctioning Powers
b) Rate of interest and margin
c) Review/renewal of limits
d) Conduct of Stock and Book Debt Audit
e) (a),(b),(c) and (d) as above
6. 'Specified borrower', means a borrower having an ASCL of more than ( Cir No
343/2018)

a) ₹25,000 Crores at any time during FY 2017-18;

b) ₹15,000 Crores at any time during FY 2018-19;
c) ₹10,000 Crores at any time from April 1, 2019 onwards;
d) only (b)
e) (a),(b) and (c)

7. Among the following select a financial collateral? (Cir No 343/2018)

a) Land and building, Raw materials, stock in trade, produce, and other goods
b) cash (including bank deposits)
c) Book debts/receivables
d) Movable assets such as machineries, automobiles etc.
e) Documents of title to goods etc.

8. What is the OLD name for external rating agency “AQUITE RATINGS AND
RESEARCH PRIVATE LTD”?(343/2018)

a) CARE
b) CRISIL
c) ICRA
d) SMERA
e) INFOMERICS

9. Who is called the “concessionaire”?

a. One who gets concession in ROI for developing Infrastructure project

b. One who gets award of land etc. for developing Infrastructure project
c. One who gets concession in repayment period
d. One who gets concession in repayment period of Infrastructure loan
e. None of the above

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10. In which of the following facilities bank is at disadvantage in verifying the end use of
funds. (Cir No 343/2018)

a) Bills purchase
b) Cash credit
c) Letter of credit
d) All the above
e) None of the above

11. Pricing of loan should be related (Cir No 343/2018)

a) Interbank borrowing rate

b) RBI refinance rate
c) Risk rating and credit quality of the Borrower
d) All the above
e) None of the above

12. A list of planned capital expenditure prepared usually annually known as

a) Capital budget
b) Cash budget
c) Planned expenditure
d) Performance budget
e) None of the above

13. In the parlance of TL assessment and BEP, what is “contribution”?

A. Fixed Cost – Variable Cost
B. Variable Cost – Fixed Cost
C. Purchases - Variable Cost
D. Margin - Equity
E. Sales - Variable Cost

14. All existing exposures of ---------crores and above are to be got rated by any one of
the approved External rating agencies like CRISIL, ICRA, CARE, or 1% additional
interest to be levied. (343/2018)

a) 1
b) 5
c) 10
d) 20
e) 0.50

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15. Ideal average DSCR accepted in case of term loan assessment is (MOI vol 1)

a) 1.50
b) 1.10
c) 2.00
d) 1.00
e) 1.25

16. Under credit policy measures to provide financial support to MSMEs, adhoc limit for
short period not exceeding --------days for procurement of raw materials considered ,
where bulk raw material procurement is required(Cir No 342/2018)

a) 30
b) 45
c) 60
d) 90
e) 120

17. Bench Mark Current Ratio for Medium/Large Industry as per bank policy is
Minimum--------(Cir No 342/2018)

a) 1
b) 1.1
c) 1.25
d) 1.33
e) 1.50

18. Substantial exposure shall not exceed ---------% of the bank’s capital fund(Cir No
343/2018)

a) 25
b) 50
c) 100
d) 500
e) 600

19. Financing entirely new industrial venture being under establishment is known as:
(Cir No 342/2018)
a) Green field project
b) Brown filed project
c) Turnkey project
d) All the above
e) None of the above

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20. Difference between Term Loan & project Finance is: (MOI vol 1)

a) Generally TL is balance sheet based finance & PF is Cash flow based lending
b) Generally TL is Loan to borrower & PF is generally a SPV
c) Generally TL security is physical asset & for PF security is cash flow &
assignment of rights
d) All (a), (b), & (c)
e) None of these

21. As per company’s act of 2013 for creation & modification of charge (Other than
debenture) the following form is to be used:

a) CHG1
b) CGH9
c) CHG8
d) All the above
e) None of the above

22. The debt ranks below other secured loans and securities with regard to claim on
assets/or cash flows of the borrower are known as: (Cir No 342/2018)

a) Secured debt
b) unsecured debt
c) Long term debt
d) Subordinated debt
e) None of the above

23. Branch manager can reject the proposals of: (Cir No 342/2018)
a) Education loan
b) MSE borrower
c) SC/ST loan
d) Branch manager can not reject any of the above loans without obtaining
concurrence of higher authorities
e) No such rule exists in our bank

24. A loan which has a specified maturity which is payable in installments or in bullet
form is known as: (Cir No 342/2018)

a) Loan repayable on demand

b) cash credit
c) Long term loan
d) Term loan
e) Overdraft

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25. National account refers to any credit sanction made at: (Cir No342/2018)

a) RO level
b) FGMO level
c) CO level
d) All the above
e) None of the above
26. Supply bills are classified as: (MOI vol 1)
a) secured advance
b) Partly secured advance
c) Unsecured advance
d) collaterally secured advance
e) None of the above

27. Loan system for delivery of bank credit has been introduced mainly to: (342/18)
a) Rationalize credit administration
b) Instill efficiency in funds management
c) As per Board guidelines
d) Only (a) & (b)
e) All the above

28. X + Depreciation + Int. on TL

DSCR = ---------------------------------------
Instlmts. on TL + Int. on TL
a) PAT
b) PBT
c) Cash Profit
d) Gross profit
e) a and c

29. While appraising large sized project for term loans, the project cost may be
examined by bifurcating into hard cost and soft cost. In this soft cost are: (MOI vol 1)

a) Patent rights & Lease hold rights

b) Good will and royalty
c) Technical know how
d) (a), (b) & (c)
e) None of the above

30. Bank can not lend on the security of their own shares as per restrictions imposed by
a) RBI
b) RBI act 1934 section 20(2-A)
c) Banking Regulation act 1949 section 20
d) SEBI guide lines
e) No such restrictions are there

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31. What is the minimum and maximum threshold limit for mid corporate segment as
per credit policy(Cir No 342/2018)

a) Above Rs. 5 crore up to Rs 10 crore

b) Above Rs. 5 crore up to Rs.50 crore
c) Above Rs. 5 crore up to Rs.100 crore
d) Above Rs. 5 crore up to Rs.200 crore
e) Above Rs. 5 crore up to Rs.500 crore
32. As per the revised guidelines minimum collateral coverage ratio to the extent of
--------% to the proposed credit limit shall be obtained subject to excepted schemes like
schematic lending, govt schemes and CGMSE covered proposals

a) 10
b) 25
c) 50
d) 100
e) 125

33. Under simplified method/holistic approach working capital limit can be assessed up
to Rs. --------- lakhs (Cir No 342/2018)
a) 5
b) 10
c) 15
d) 25
e) 50

34. A company in which at least 51% capital is controlled by another company is known
as: (343/18)

a) Private company
b) Public company
c) Govt. company
d) Holding company
e) Subsidiary company

35. Which one of the following group is classified as current assets:

a) Cash & bank balances, term deposit with banks, sundry debtors,
Inventory and prepaid expenses
b) Furniture & Fixtures and investment in subsidiary companies
c) Provision for payment of taxes and dividend
d) Capital and free reserves
e) None of the above

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36. ----------- is an arrangement where a group of banks which may not have any
business relationship with the borrower, participating for a single loan.(Cir No
342/2018)

a) Participation
b) Syndication
c) consortium
d) Multiple banking
e) None of the above
37. Current assets of company are Rs.800 lac and current liabilities other than bank
borrowing is Rs.80 lac. What shall be the permissible working capital bank finance
as per second method of lending as suggested by Tandon committee(MOI VOL !)

a) Rs.720 lac
b) Rs.640 lac
c) Rs.520 lac
d) Rs.440 lac
e) None of the above

38. The term liquid surplus used in computing working capital denotes MOI VOL !)

a) Gross working capital

b) Surplus from operations
c) Surplus of long term sources over long term uses
d) Cash and bank balances
e) None of the above

39. Which of the following is true in respect of Private Ltd Company?

a) There is no restriction for transfer of shares

b) Certificate of commencement of business is mandatory
c) Minimum number of members is limited to 200 and minimum number of
directors is 3
d) only (b) and (c) are correct
e) (a),(b), and (c) are correct

40. An MSE firm has been sanctioned a cash credit limit of Rs.40 lac. It submits stock
statement for stock value ofRs.45 lac. What is the amount of drawing power in the
account? :(342/2018)

a) Rs.35. lac
b) Rs.38.25 lac
c) Rs.40 lac
d) Rs.40.50 lac
e) Rs.33.75 lac
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41. Which of the following forms is used to file particulars of satisfaction of charge with
ROC, in respect of loan given by the bank

a) Form CHG-4
b) Form CHG-1
c) Form-8
d) Form-10
e) None of the above
42. Treasury share means:
a) Share issued to own employees
b) share issued to govt. employees
c) buyback share by company
d) share issued in discount
e) share issued in premium

43. Accounting standards in India are issued by……

a) Council of the Institute of charted Accountants of India

b) Central Government
c) Reserve Bank of India
d) Account Standard Boards (ASB)
e) None of the above

44. Which of the following risk is computed in RAM rating?(343/2018)

a) Industry Risk
b) Business Risk
c) Financial Risk
d) Management Risk
e) All the above

45. What do you understand by negative lien. It refers to an undertaking given by the
borrower to the bank that he will not create any charge over his…………. without
prior permission of the bank:

a) Immovable properties
b) Immovable and movable properties
c) Movable, immovable and assets including uncalled capital
d) Only (a) and (b)
e) None of the above

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46. A company is having Head office at Baroda, Registered office at Mumbai, takes
a loan of Rs.50/-lac from Delhi while the property to be equitable mortgaged is
situated at Faridabad in Haryana. At which place equitable mortgage can be
created (MOI vol.i)
a) Mumbai
b) Delhi
c) Faridabad
d) Any place provided it is notified
e) None of the above
47. What is sweat equity shares:

a) Shares issued by a company to its employees as bonus

b) Preference shares issued by a company to its employees
c) Equity shares reserved for the employees of the company during IPO
d) Equity shares issued by the company to its employees at a discount
e) None of the above

48. What is a foreign bill of exchange as per sec 12 of NI Act1881? (MOI vol 2)

a) Bills drawn outside India and made payable in or drawn upon any person
resident in India
b) Bills drawn outside India and made payable in or drawn upon any person in
India
c) Bills drawn in India upon persons outside India and made payable outside
India
d) (a) and (b) above
e) (a),(b) and (c) above

49. What are the advantages of Syndication over consortium?

a) Notionally borrower deals with one bank and entire funds requirements
arranged by the syndication leader
b) Unlike consortium, default risk is shared under consortium
c) Borrower gets competitive price through bids
d) Fixed period lending
e) All the above

50. What is the risk weight applicable to CRE-RH borrower

a) 75%
b) 100%
c) 125%
d) 150%
e) 200%

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 PPTO 2019 KEY TO CREDIT CONCEPTS PAPER-2
3

1 b 11 c 21 a 31 c 41 a
2 a 12 a 22 d 32 a 42 c
3 c 13 e 23 d 33 d 43 a
4 e 14 b 24 d 34 e 44 e
5 e 15 a 25 c 35 a 45 c
6 e 16 d 26 c 36 b 46 d
7 b 17 b 27 d 37 c 47 d
8 d 18 e 28 a 38 c 48 e
9 b 19 a 29 d 39 e 49 e
10 b 20 d 30 c 40 b 50 a

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