Part 1 ‐Abbreviations related to Digital Banking and Pay tech

1. RTGS: Real time Gross Settlement System

 Operated by ‐‐‐‐‐‐? [RBI]
 Minimum amount in case of C2C (Customer to Customer) transfers is Rs ‐‐‐‐[2 00 000].
 Maximum limit in case of C2C (Customer to Customer) transfers is Rs ‐‐‐ [No limit].
 Minimum or maximum limit for bank‐to‐bank remittances through RTGS is ‐‐ .[No limit]
 RTGS operates from 8 AM to ‐‐‐‐‐‐ [8 PM]
2. NEFT: National Electronic Fund Transfer
 Operated by ‐‐? [RBI]
 Minimum amount that can be sent is ‐‐‐‐‐ [Re 1]
 Maximum amount that can be sent is Rs ‐‐‐‐ [No maximum limit.]
 ***From July10, 2017, settlement in case of NEFT is done at ‐‐‐‐ [half hourly intervals].
3. IFSC: Indian Financial System Code
 IFSC is the electronic address of a ‐‐‐‐‐‐ [bank branch].
 An alpha‐numeric number consisting of ‐‐‐‐‐‐ digits [11 digits.]
 [For example the IFSC code of Union Bank of India, Chandrasekharpur Branch is UBIN0545056. The
first four alpha codes indicates bank, followed by 0 and then branch code.]
 IFSC is required in case of NEFT, RTGS, Mobile banking, Internet banking. Where this is not
required.
[IMPS, AEPS, UPI app transfers, BHIM app]
4. CTS: Cheque Truncation System
 Clearing system where banks send the images of the cheques is called ‐‐‐‐ [CTS]
 CTS is Operated by ‐‐‐‐‐ through ‐‐‐‐ Grids/Clearing houses. [RBI, 3 / Mumbai, Chennai and Delhi]
 Collecting bank retains the physical cheques whose images have been sent. Such cheques are
called
‐‐‐‐ and it must preserve the same for a minimum period of ‐‐‐‐ years. [Truncated cheques, 10.]
 Banks need not return the paid cheques to the Govt. departments. This system was called ‐‐‐‐ [P2F
system (i.e. Paper to Follow)].
5. NPCI: National Payments Corporation of India
 NPCI is non‐profit company/Sec. 25 company owned by ‐‐‐‐‐‐‐‐ [commercial banks].
 It is formed at the behest of RBI to manage ‐‐‐‐‐ payment systems of the country. [retail]
 It operates retail payment systems like NFS, NACH, APB, IMPS, UPI, IMPS, Rupay, Rupay Card etc.,
6. NFS: National Financial Switch
 This switch / gate way connects ATMs of all banks so that any bank customer can operate the ATM
of other banks is called ‐‐‐‐‐ and it is maintained by ‐‐‐‐‐‐‐‐‐[NFS and NPCI]
7. NACH: National Automated Clearing House
The Electronic Clearing Service, provided by RBI, is now replaced by ‐‐‐‐‐ and this new system is
managed by ‐‐‐‐‐? [NACH, NPCI]
 TCS wants to pay salary to the accounts of its employees spread over banks all over India suing
NACH
Here it is called ‐‐‐‐‐‐ facility. [NACH Credits (i.e. remittances from one account to huge number of
accounts throughout India,) [Note: NACH Debit facility is used for transfer from huge number of
accounts throughout India to one account.)
 The minimum or maximum amount for remittance of funds by NACH is Re ‐‐‐‐ and Rs ‐‐‐ [No limit].
8. APB: Aadhaar Payment Bridge
 The system/platform provided by NPCI for direct credit to Aadhaar linked accounts is ‐‐‐‐ [APB]
 Direct Benefit Transfer [DBT] by Govts is made by using the ‐‐‐‐ provided by ‐‐‐‐‐ [APBS, NPCI]
 The system which relates each bank account to respective Aadhaar is ‐‐‐‐ [Aadhaar Mapper]
9. DBT: Direct Benefit Transfer scheme
 The GoI/state Govts transfer social benefits like pension, subsidy, scholarships, LPG subsidy, etc.
directly to the Aadhaar linked accounts by APB which is called ‐‐‐‐‐‐‐ [DBT]
10. IMPS: Immediate Payment Service.
 The online remittance facility which can be done by mobile banking without using IFSC, bank
account number of the payee but his MMID is ‐‐‐‐‐ [IMPS]
11. MMID: Mobile Money Identifier.
 For IMPS the payee has to provide his ‐‐‐‐‐ to the sender? [MMID which is the code for bank,
branch]
12. MPIN:
 In ATM banking we need ATM PIN where PIN stands for ‐‐‐‐[Personal Identity Number]
 In mobile banking also in IMPS we need ‐‐‐‐ [MPIN]
13. ***UPI‐ Unified Payments Interface.
 The platform/system provided by NPCI which enables banks to provide their mobile apps/UPO app
(i.e. applications) to their customers to transfer funds to any bank account by using a virtual
payment address or otherwise is called ‐‐‐‐ [UPI] [Note: UPI App can be used for many other things.]
14. UPI–App: UPI enabled Application.
 Mobile apps provided by banks to operate through UPI platform of NPCI is called ‐‐‐‐ [UPI app]
 UPI app helps one to know the bank balance, get mini statement, transfer funds, etc.
 The upper limit per transaction using UPI app is Rs. ‐‐‐‐‐ [1 Lakh.]
 Through UPI app, money can be sent by mentioning ‐‐‐‐‐ address of the beneficiary. [VPA]
 UPI app enables to request money from friends. Such a transaction is called ‐‐‐‐ [Pull Transaction,
Note: Sending money is called push transaction.]
 UPI app enables making payment at merchant establishments by scanning a code which is called
‐‐‐‐
[QR/Quick Response Code]
15. ***BHIM: Bharat Interface for Money.
 BHIM app is a UPI App introduced by the ‐‐‐‐‐‐ [GoI].
 What are the three facilities offered by this app? [i). Transfer of money to any virtual payment
address/VPA, ii). Pull Transaction i.e. request to a friend to send money and iii). Payment at
merchant establishment by scanning QR Code.
16. UPI‐PIN: UPI Personal Identification Number.
 The mobile PIN used in UPI app /BHIM is called ‐‐‐‐ and what is this? [UPI PIN. It is a 4‐6 digit pass
code to authorize payments from the account.]
17. ***VPA: Virtual Payment Address.
 Through UPI app one can remit money by mentioning the Virtual ID of the payee. Examples of
virtual
id: skd@upi, pigeon@upi etc. Such a Virtual Id is called ‐‐‐‐‐ [VPA]
18. P2P Pull functionality ‐ Person to Person Pull functionality.
 UPI App of any bank/ BHIM provides a function to request money from friends. The person
requested to pay if agrees to pay has to just confirm the request upon which his account will stand
debited. Such a function is called ‐‐‐‐ [P2P pull function]
19. AEPS: Aadhaar Enabled Payment System.
 Making payment from one’s Aadhaar linked bank account at merchant establishment by entering
the Aadhaar in the app available in the smart phone of the merchant and authenticating/validating
the same by biometric is called ‐‐‐ [AEPS][Note: Merchant to have a finger print reader/ biometric
reader for verification of the Aadhaar by the payer.][Note: AEPS is called Digital POS.]
 The business correspondent of a bank can enable banking transactions like balance enquiry,
Aadhaar
to Aadhaar Fund Transfer, cash deposit, cash withdrawal by the ‐‐‐‐‐ without using the micro ATM
[AEPS] .[AEPS is replacing the micro ATMs.]
20. UIDAI: Unique Identification Authority of India
 The autonomous Govt body which provides Aadhaar, stores Aadhaar details in its centralized
server
and provides the same to Authentication User Agencies is ‐‐‐‐‐‐ [UIDAI]
 Aadhaar is a ‐‐‐‐ digit Unique Identification Number [UIN] that stores demographic and biometric
information and the photograph of a person resident in India. [12/Twelve]. Note: This number never
starts with “0” or“1” and its last digit is a check sum digit.]
 ***[Note: MICR code 9 digits, IFSC 11 digits, PAN 10 digits [6+4 alphabets], Aadhar‐12 digits.]
21. AUA: Authentication User Agency
 Banks/ FIs/others authorised by UIDAI to have access to Aadhaar details of a person after having
his
express consent are called ‐‐‐‐‐‐‐ [AUAs]
22. KUA: KYC User Agency.
 Banks/ FIs/others authorised by UIDAI to have access that has signed an agreement with UIDAI to
use e‐KYC service provided by UIDAI are called ‐‐‐‐ [KUA]
23. eKYC ‐ Electronic Know Your Customer.
 e‐KYC is an ‐‐‐‐‐‐‐‐ valid document for identity proof required for KYC. [officially]
 For e‐kyc the customer has to provide his Aadhaar number, give his express consent to collect his
Aadhaar details from UIDAI, authorise by way of biometrics in the biometric reader in the bank.
 Then the bank has to log on to UIDAI, and take a print out of the customer’s Aadhaar details and
retains the same as an ‐‐‐‐‐‐‐‐ [OVD/identity proof].
 E‐KYC is now called ‐‐‐‐‐ based e‐KYC to differentiate it from OTP based e‐KYC. [biometric]
24. OTP based e‐KYC: One Time Pin based e‐KYC.
 Here the Customer will send an SMS to UIDAI mentioning his Aadhaar number and in return get an
‐‐
‐‐‐. [OTP. He will give this OTP to bank.
 The Bank will send an ‐‐‐‐‐ to UIDAI mentioning the Aadhaar number and the OTP provided by
Customer. [SMS]
 The UIDAI will match the same and send a Yes/No report which will act as ‐‐‐ [OVD] .
25. BFD: Best Finger Detection.
 Capturing fingerprints of both the hands of a person and comparing the same with the biometric
data stored with UIDAI CIDR and finding out the best‐matched one is called the ‐‐‐‐ [BFD]
26. BC: Business Correspondent.
 BC is an individual or an entity, which is an agent of a bank to provide banking service in remote
places. He uses Micro ATM (terminal) or Digital POS for this purpose.
27. GSM : Global System for Mobile Communications
 General mobile phones (i.e. other than smart phones) use GSM (or CDMA) technology.
28. ***USSD ‐ Unstructured Supplementary Service Data.
 USSD helps in transmitting information over the signals of the GSM network and helps send
messages. USSD can be used to avail online banking service by using general phones for which the
NPCI has provided the ‐‐‐‐‐ service . [*99*99# Service.]
29. *99*99# Service.
 What is the number to which SMS can be sent from a general phone/feature phone (i.e. not a
smart
phone) to UPI platform of NPCI to transfer money from bank a/c ‐‐‐‐‐ [*99*99#]
30. TRAI: Telecom Regulatory Authority of India.
 The regulatory authority for telephone operators in India is ‐‐‐ [TRAI]
 As per TRAI guideline the maximum charge for SMS to *99*99# by any TSP/Telephone Service
Provider can be Rs. ‐‐‐‐‐ per transaction. [1.50]
31. QSAM: Query Service on Aadhaar Mapper.
 Sending SMS to *99*99# Service to find out one’s Aadhaar linking status is called ‐‐‐[QSAM]
32. PSP: Payment Service Providers.
 Organizations which provide facility for remittance of funds or issue credit cards/debit cards,
payments, online payments/digital payments are mobile banking payments i.e. banks, Paytm, free
charge, oxigen, etc.
33. TSPs: Telecom Service Providers.Airtel, BSNL, Idea, Reliance Jio, etc.
34. POS: Point of Sale
 Machines supplied by banks to merchant establishments to enable the buyers of goods to make
payment towards purchase of goods by swiping their debit/credit cards is called ‐‐‐‐ [POS] .
 The maximum amount of cash that can be withdrawn at POS to the extent of in Tier 1 and Tier 2
centers is Rs ‐‐‐‐ and in Tier 3 to Tier 6 centers is Rs ‐‐‐‐ [1000 and 2000]
35. NFC technology: Near Field Communication technology.
 The technology used in case of payment vide contact less cards is called ‐‐‐ [NFC]
 It allows two electronic devices to establish radio data communication with each other like blue
tooth. There is no need to swipe the card on a machine. Once the card contacts the machine the
cardholders account is debited. Examples: Metro fare payment in Delhi.
 Contact Cards are also called ‐‐‐‐‐‐ Cards.[Touch and Pay]
36. ***QR Code‐ Quick Response Code.
 A two dimensional bar code, consisting of black square dots, arranged in a square grid on a white
background which can be scanned by using the camera in the mobile phone is a ‐‐‐ [QRC]
 [Note: The QRC contains the data unique to the merchant concerned. QR is also called digital POS
as
it helps to make payment at merchant’s establishment.]
37. BQRC: Bharat Quick Response Code.
 The common QR Code where a merchant can be uniquely indemnified by all major payment
gateways like Visa, MasterCard, RuPay cards, and American Express Cards is called the ‐‐‐‐‐ [BQRC].
[Note: The BHIM app can be used to scan BQRC.]
38. PBs: Payment Banks.
 The first payment bank to be formed in India is ‐‐‐‐ [Airtel Payment Bank.]
 The second payment bank to be formed is ‐‐‐‐‐ [India Post Payments Bank]
 Note: A payment bank cannot provide loans. It can accept only SB deposits not exceeding Rs 1
lakh.
It cannot accept term deposits. Payment banks are Banks. called Differential
39. BBPS: Bharat Bill Payment System.
 The system which enables consumers to pay various utility bills at one place is called ‐‐‐‐‐‐ BB.
40. IT Act: Information Technology Act 2000
 Sec. 5: Which Act provides legal backing to Electronic Signature/Digital Signature? [IT Act].
 Electronic signatures which are supplied in form of a Digital Signature Certificate [DSC] which can
be
purchased from the ‐‐‐‐‐‐ [Certifying Authority for DSC].
 Digital Signature is a random number generated by Asymmetric Crypto System [ACS], which is also
called ‐‐‐‐‐‐‐ [Cryptography].
 DSCs are issued under a system called PKA. PKA stands for ‐‐‐‐‐‐ [Public Key Infrastructure].
 Each DSC has a pair of keys called Private Key and ‐‐‐‐‐‐‐‐‐‐ [Public Key].
 Computer related crimes/ Cyber Crimes are punishable under which Act? [IT Act]
41. Payment and Settlement System Act (PASSA) 2007
 Cheques, ATMs, RTGS, NEFT, NACH, e‐wallets, online payments, internet banking, mobile banking,
mobile apps and any digital payment, debit cards, credit cards, prepaid instruments like gift cards
and other instruments by which one can make pay to another come under ‐‐‐‐ system [Payment]
 CTS Clearing, Settlement through Clearing Corporation of India etc. by which banks settle the
amount to be paid or received from each other is called ‐‐‐‐‐‐‐‐ system. [Settlement system]
 The Act which regulates all such instruments and the issuer of such instrument is ‐‐‐‐[PASSA]
 PASSA is administered by which authority? RBI’s Board for Regulation and Supervision of Payment
and Settlement System.
 National Payment Corporation of India is formed as required by which Act? [PASSA].
42. PBs: Payment Banks
 SBI and commercial banks are called universal banks. PBs are called ‐‐‐‐‐‐[differential banks]
 Which committee recommended for the formation of the PBs? [Nachiket Mor Committee]
 Which is the first payment bank to be formed in India? [The Airtel Payment Bank Ltd]
 Which payment bank is wholly owned by the GoI? [Postal Payment Bank]
 The minimum paid up capital required to form a PB is Rs ‐‐‐‐‐‐ [100 crore.]
 What is the maximum amount of loan a PB can provide to a customer? [NIL]
 Can they accept deposits? [Yes only SB deposits up to Rs 1 lakh but no term deposit.]
 What is the SLR requirement for PBs? [Minimum 75% of their deposits].
 Jio Payment Bank is a joint venture of Reliance Industries with ‐‐‐ bank. [State Bank of India.]
43. Frequently asked questions from this segment [Recollected Questions from Canara Bank clerk
to
officer May 17, UCO Bank May 17, IDBI Bank 2016 etc.]
a. What is the full form of UPI? [Ans. Unified Payment Interface]
b. What is the full form of VPA? [Ans. Virtual Payment Address]
c. How many digits are there in Aadhaar? [Ans. 12 digits]
d. Minimum amount that can be remitted by using NEFT is Rs ‐‐‐‐‐‐‐. [Ans. Re 1/‐]
e. Minimum amount that can be remitted by using RTGS is Rs ‐‐‐‐‐‐? [Rs. 200,000]
f. Maximum amount of cash that can be drawn in POS in Tier 1 center? [Ans. Rs 1000 in tier I and II
centers and Rs 2000 in tier III to VI centers.]
g. Which Act provides legal recognition to digital signature? ‐ Information Technology Act 2000
h. What is the full form of NACH? [Ans. National Automated Clearing House]
i. In USSD the letter D stands for ‐‐‐ [Ans. Data]
j. What is B is APBS? [Ans. Bridge] [Aadhaar Payment Bridge System]
k. Payment Bank cannot accept the following type of deposit? [Ans. cannot accept SB deposits
exceeding Rs 1 lakh, term deposits. It cannot give loans.]
l. Universal Bank cannot do the following function. [Can all functions a bank is permitted to do.]
m. Jio Payment Bank is joint venture with which bank? [Ans. SBI]
n. Cheque Truncation System is regulated as per which Act? [Ans. PASSA]
o. In IFSC which is 11 digit number, the letter S stands for ‐‐‐‐ [Ans. System][Indian Financial System
Code]
p. What is Phishing? To steal the customers personal / confidential data like Bank a/c number, Credit
Card Number, PIN or Password over internet & access their accounts.
q. Which of these cannot be done by swiping debit card in ATM? a. Bal enquiry, b. Card hotlist, c. Min
stat, d. Chq requisition [Ans. All of these]
Part 2 ‐ Know Your Customer
Abbreviations and Important Terms asked in Examinations
1. ML: Money Laundering:
 It means putting criminally/ illegally obtained money into the banking system, with the objective
to
make it appear to have come from legitimate sources. Money laundering is a worldwide problem as
it can be used for financing terrorist activities. All member countries of the United Nations
Organization (UNO) have decided to fight against financing of terrorist activities.
 Accordingly, the United Nations Security Council [UNSC], of the UNO, has taken the
responsibility to
pass resolutions banning individuals and organizations involved in terrorist activities. The Financial
Task Force [FATF], a standing committee formed by the UNSC sends these lists to all countries
and
advises measures to curb terrorism. It issues FATF statements with the names of the countries,
which have failed to implement measure for AML.
 Shell Bank: It means a bank, which is incorporated in a country where it has no physical presence
and is unaffiliated to any regulated financial group. The banks are used for money laundering.
 ***Money mules: Money mules are persons who agree to route criminally obtained money
through
their account. The money deposited in their accounts are transferred through many accounts before
it reaches the account of the criminal so that it looks as if money has come through a proper source.
The money mules do this for some commission or other allurements. They may be or may not be
aware of such money laundering. When the crime is detected such persons through whose accounts
money is transferred are considered as parties to the crime, and are punished as such.
 Audit trails: Money launderers transfer criminally obtained money through shell banks, money
mules, fictitious accounts and series of remittances takes place before the money reaches the
targeted account. By examining such series of transfers, the investigators can find out the real
source of money. Such evidences involving transfer of money is called Audit Trail.
2. AML: Anti Money Laundering.[Note: Money Laundering means putting criminally obtained
money
into the banking system so as to make appear to have come from legitimate sources.]
3. ***CFT: Combating Financial Terrorism. [Note: AML is also called Combating Financial
Terrorism. or
KYC /Know Your Customer guidelines.]
4. UNSC: United Nations Security Council [Note: UNSC of the UNO passes resolutions to
implement
CFT measures.
5. FATF: Financial Action Task Force.[Note: This is a standing forum of the UNSC which advises
the
member countries of UNO about the list of the terrorist organizations and individuals in whose
names banks must not open accounts.]
6. PMLR: Prevention of Money‐Laundering Act, 2002
 This is the Act, which came into effect from July 1, 2005, aims to prevent money laundering.
 It provides powers to Enforcement Directorate, Ministry of Finance to investigate cases involving
money laundering to enforce the Act. PMLR Rules require banks, FIs and intermediaries to verify
identity of clients, maintain records and furnish information in prescribed form to FIU‐IND.
 As per the Act, money laundering is punishable with rigorous imprisonment from 3 years to 7
years.
 If money laundering involves offence under Narcotic Drugs and Psychotropic Substance Act, 1985
the punishment may extend to 10 years instead of 7 years.
7. PMLR Rules: Prevention of Money‐Laundering (Maintenance of Records) Rules, 2005,
 Rule 3: Provides for the records to be maintained by the banks in respect of cash transactions of
above Rs 10 lakh. It provides for preservation of these records for a minimum period of 5 years from
the date of transaction and preservation of identity proof and address proof documents for a
minimum period of 5 years. Rule 7: Provides for Officially Valid Documents for identity proof.
8. KYC Directives: Know your Customer [Note: RBI issues KYC directives to banks, NBFCs and
other RBI
regulated entities. These are directives and banks must obey the same.]
9. REs: Regulated Entities[Note: Regulated Entities are organizations regulated by RBI like banks,
NBFCs, Payment Service Providers, Prepaid Instrument Issuers etc.]
10. KYC policy: Know Your Customer policy:
 As per RBI guideline, each bank must formulate its KYC policy duly approved by its Board of
Directors
or any committee of the Board to which power has been delegated. The policy to deal with four key
elements: Customer Acceptance Policy; Risk Management; Customer Identification
Procedures;
and Monitoring of Transactions. The Concurrent auditors / internal auditors to verify the
compliance with KYC policies and procedures. Based on this, quarterly audit notes be placed before
Audit Committee.
11. ***CAP: Customer Acceptance Policy
 Banks to accept a person as customer only after proper Customer Due Diligence.
 Banks not to open accounts in anonymous or fictitious /benami name.
 Banks must not open accounts in the name of a person or entity in the name of individuals and
entities whose names appear in the sanctions lists circulated by RBI.
 Banks to obtain the mandatory information for KYC purpose while opening an account
12. RM: Risk Management
 Note: Banks to classify customers into 3 risk categories namely Low Risk, Medium Risk and
High
Risk.
 High Risk Category: PEPs, NRIs, Bullion Dealers, NPOs
 Medium Risk: In‐operative Accounts, HNIs
 Low Risk: Salaried persons, pension accounts, defence personnel
 The degree of risk management, to increase with increase in the level of risk.
13. ***PEPs: Politically Exposed Persons[Note: These are individuals who are or were Heads of
States/Governments, senior politicians, senior government/judicial/military officers, senior
executives of state‐owned corporations, important political party officials, etc. Accounts in their
name or their relatives are to be classified under High Risk category.]
14. NPO‐Non‐Profit Organisations[Note: A trust or a society registered under the Societies
Registration
Act, 1860 or any similar State Act or a company registered under Section 25 of the Companies Act,
1956 / Sec. 8 of the Companies Act 2013 is classified as NPO. Many NPOs receive foreign assistance
and thus the possibility of using these accounts for money laundering is quite high. Accounts in
name of NPOs to be classified under High Risk category].
15. ***CIP: Customer identification Procedure
 Customer identification is necessary for (i) opening accounts, (ii) remittances, (iii) Selling third
party
products, or own products, (iv) payment of dues of credit cards, (v) loading of prepaid instrument of
Rs 50 000 and above,(vi)Transactions with a walk‐in customer for Rs. 50,000 and above, (vii) sending
wire transfer.
 CIP involves obtaining photograph, identity proof and address proof, business/ activity
information
/Customer Profile and related documents for CDD.
 Introduction: Introduction is not necessary while opening accounts.
 Wire Transfer: It means sending money by electronic means through a bank (i.e. originator bank)
to
make that money available to a beneficiary at a bank (i.e. beneficiary bank). When the originator
bank and the beneficiary bank are located in the same country, the wire transfer is called a domestic
wire transfer. If the ‘originator bank’ or ‘beneficiary bank’ is located in different countries it is a
cross‐border wire transfer.
16. ***CDD‐ Customer Due Diligence
 It means identifying and verifying the customer and the beneficial owner using ‘Officially Valid
Documents’ for identity’ and address’ and knowing other details about the customers.
 Outsourcing of CCD: Banks cannot outsource CDD function/ compliance function for KYC norms
i.e.
engage a third party to do KYC or CDD.
17. ODD: On‐going Due Diligence: [Note: This means regular monitoring of transactions in
accounts to
ensure that they are consistent with the customers profile and source of funds.]
18. EDD: Enhanced Due Diligence
 Note: In case of high‐risk customer banks must adopt high standards of due diligence.
 For example for Non‐Face‐To‐Face customers (i.e. customer who do not come to branch for
opening account/ doing transactions), banks should ask for certification of all the documents
presented, or for calling for additional documents. The first payment to be effected through the
customer's KYC‐complied account with another bank.
 Similarly for Politically Exposed Persons (PEPs) banks to get sufficient information about the
sources of funds, accounts of family members and close relatives. The decision to open an account
for PEP should be taken at a senior level.
 Similarly, in case of Client accounts opened by professional intermediaries’ banks must ask
the
names of the clients and shall not open accounts where name of the client is not disclosed.
19. SDD: Simplified Due Diligence
 In case of low risk customers, banks can go for simplified KYC and in case of small accounts the
KYC
procedure is still simpler. [Both discussed later]
 For opening savings bank account in the name of Self Help Group/ SHG, KYC verification is
required
only for the office bearers. It is not required for of all the members of SHG.
 NRO savings bank account in the name of foreign students can be opened pending submission
of
the address proof. They have to submit their passport and a letter offering admission from the
educational institution in India. The student has to submit a declaration to provide the local address
within a period of 30 days. Foreign remittances not exceeding USD 1,000 or equivalent into the
account and a cap of rupees fifty thousand on aggregate in the same, during the 30‐day period can
be allowed. [Note: Students with Pakistani nationality shall require prior approval of the RBI for
opening the account.]
20. CDD done by a third party
 ***Banks as a rule must not outsource KYC compliance activities i.e. must not engage any third
party
for doing KYC compliance activities. However, they can use the third party KYC data subject to the
following conditions. The 3rd party should be a regulated entity as per the requirement of the PML
Act.
 It must agree to provide copies of identification data. It must not be based in a country or
jurisdiction assessed as high risk. [Note: Bank is ultimately undertaking enhanced due diligence
measures lies with the bank concerned.]
21. ***OVDs: Officially Valid Documents
 Note: Documents, which are notified by the GoI to be accepted as identity proof, are called OVDs.
These are six in number. They include (i) Passport, (ii) Driving License, (iii) Permanent Account
Number (PAN) Card, (iv) the Voter's Identity Card issued by the Election Commission of India, (v) Job
card issued Under MNREGA scheme duly signed by an officer of the State Government, (vi) Letter
issued by the Unique Identification Authority of India containing details of name, address and
Aadhaar number.
 In addition the e‐KYC and OTP‐KYC by way of Aadhaar are considered as OVDs.
 Change in name after marriage: In cases of change in name due to marriage, a copy of the
marriage
certificate issued by the State Govt. or the Gazette notification indicating change in name is required
along with a certified copy of the ‘officially valid document’ in the existing name to change the name
in the existing account.
22. Deemed OVD for Simplified KYC procedure:[Note: Under the simplified KYC procedure,
which is
applicable for low risk customers not having OVD, banks can open accounts on production of one the
following deemed OVD document. (i) identity card with applicant’s photograph issued by Central/
State Govt. Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled
Commercial Banks, and Public Financial Institutions; or (ii) Letter issued by a Gazetted officer, with a
duly attested photograph of the person.]
23. ***Small Account and KYC Procedure
 ***A small account as per GoI notification is a savings account in which (a) the aggregate of all
credits in a financial year does not exceed rupees one lakh; (b) the aggregate of all withdrawals and
transfers in a month does not exceed rupees ten thousand; and (c) the balance at any point of time
does not exceed rupees fifty thousand.
 Prime Minister’s Jan Dhan Yojana /PMJDY Account satisfying these conditions to be classified
as
small accounts. The KYC required for such accounts is as follows. A self‐attested photograph from
the customer duly certified by a designated officer of the bank that the person signed in his
presence.
24. Opening account without OVD: In case of low risk customers banks at their option can open
accounts without OVD but complete the verification of identity of the customer within a period of
six months from the date of opening account.
25. OVDs for Address Proof
 ***The following documents are notified as OVDs for Address Proof. (i) Utility bill, which is not
more
than two months old, of any service provider (electricity, telephone, post‐paid mobile phone, piped
gas, water bill); (ii) Property or Municipal Tax receipt; (iii) Bank account or Post Office savings bank
account statement; (iv) Pension or family Pension Payment Orders (PPOs) issued to retired
employees by Government Departments or Public Sector Undertakings, if they contain the address;
(v) Letter of allotment of accommodation from employer issued by State or Central Government
departments, statutory or regulatory bodies, PSBs, scheduled commercial banks, financial
institutions and listed companies; (vi) Leave and license agreements with such employers allotting
official accommodation; and (vii) Documents issued by Government departments of foreign
countries or letter issued by Foreign Embassy or by a Mission in India; (vii) Import and Exporter Code
Number/IECN.
 When separate address proof is not necessary: If the OVD contains both proof of identity and
proof
of address, there is no need to ask for address proof.
 When current address proof not necessary: When a person transfers his account, there is no
need
to furnish separate proof of address for permanent and current addresses. A declaration by the
customer about local address on which all correspondence will be made is sufficient.
 ***Change in address: Where a person changes his address, banks shall ensure that fresh proof
of
address is obtained within a period of six months.
 Address proof of relative: A person can provide OVD of his close relative, with whom the person
is
staying, as the ‘proof of address. [Note: A declaration from the relative that the person is a relative
and is staying with him/her shall be obtained.]
26. Periodic Updation of KYC time interval
 ***High risk customers: at least once in every two years, Medium risk customers ‐ once in every
eight years, Low risk customers‐ once in every ten years.
 The time limits starts from the date of opening / last verification of KYC.
 In case of low risk customers: (i) Fresh proofs of identity and address shall not be sought and a
selfcertification
to that effect is obtained.(ii) A certified copy of the proof of address forwarded by ‘low
risk’ customers through mail/post will be accepted. (iii) Physical presence not required
 In case of minor, photograph to be obtained on his becoming a major.
27. Partial freezing and closure of accounts
 ***In case the account holder fails to submit KYC information for up‐nation banks can go for
partial
freezing. Partial freezing means allowing all credits and disallowing all debits in the account. Partial
freezing’ shall be exercised after giving due notice of three months followed by a reminder giving a
further period of three months to comply with KYC requirements.
 In case the account is not made KYC compliant, the bank can close the account six months after
the
date of partial freezing.
28. DD: Designated Director[Note: The Board of each bank must designate a director who will
ensure
the overall compliance by the banks with the obligations imposed under chapter IV of the PML Act
and the Rules there under.]
29. PO: Principal Officer [Note: He is an officer nominated by the bank being the designated
director to
be responsible for furnishing information as per rule 8 of the Rules if the Act.]
30. ***ST: Suspicious Transaction and STR i.e. Suspicious Transaction Report
 It is a “transaction” that
a. Gives rise to a reasonable ground of suspicion that it may involve money laundering/financing of
the
activities relating to terrorism like: False identification documents, Accounts opened with names
very close to other established business entities, delay in verification of Identification documents,
Suspicious background or links with known criminals, value inconsistent with the client’s apparent
financial standing Doubt over the real beneficiary of the account, etc.
b. Appears to be made in circumstances of unusual or unjustified complexity; like multiple accounts,
activity compared with past transactions, sudden activity in dormant accounts.
a. Appears to not have economic rationale or bona‐fide purpose like ‐ Unexplained transfers
between
multiple accounts with no rationale, frequent purchases of drafts or other negotiable instruments
with cash
31. FIU‐IND: Financial Intelligence Unit of India
 ***FIU‐IND formed as per the PMLR Act, headed by its Director functions from the Ministry of
Finance. It is required to receive, process, analyse, the suspected transaction reports from banks,
NBFCs, HFIs, FIs insurance companies, capital market intermediaries and share the same with the
Enforcement Directorate as per powers given in Sec. 12 of the Act and PMLR Rule 3, 7, 8, and 9.
32. Rule 3 of the PML Rule 2005 on Preservation of Records
 *** Under Rule 3, banks have to maintain records for the following types of transactions.
 ***(i) All cash transactions of more than Rs 10 lakh, or its equivalent in foreign currency and
 (ii) Series of cash transactions integrally connected which exceed Rs 10 lakh during a month
 (iii) All cash transactions, where forged or counterfeit currency notes have been used as genuine
or
involving any forgery of a valuable security or a document
 (iv) Suspicious transactions whether or not made in cash;
 ***(v) All cross border wire transfers of the value exceeding Rs.5 lakh or its equivalent in foreign
currency where either the origin or destination of funds is India
 Such information should contain the nature, the amount, the denominated, the date, and the
parties
to the transaction. This will help to have an audit trail to reach the original source of money.
 ***Banks to maintain records of transactions with the customer both domestic and international,
for at least five years from the date of transaction.
 ***Banks to preserve identity proof and address proof documents, for at least five years after the
business relationship is ended. Banks to make available the identification records and transaction
data to the competent authorities upon request.
 In case of failure to maintain such information FIU‐IND can levy fine from Rs 10,000 to Rs 1 lakh.
33. Rule 7 of the PML Rule 2005 on procedure and manner of submission of information
 FIU‐IND asks for CTR, CCR, CBWTR and STR
a. CTR: Monthly Cash Transaction Report: Banks have to generate electronic Cash Transaction
Reports
(CTR) at the end of each month from their live transaction data and submit the same latest by 15 th of
the succeeding month. The data file for this purpose is called CBA.
b. CCR: Monthly Counterfeit Currency Report: All cash transactions which involved counterfeit
currency note to be reported to FIU‐IND within 15 days of the succeeding month.
c. CBWTR: Monthly Cross Boarder Wire Transfer Report: This report is to be submitted to FIU‐
IND
every month giving all cross border transactions of more than Rs 5 lakh to reach by 15th of
succeeding month.
d. STR: Suspicious Transaction Reports (STR): Banks have to generate Suspicious Transaction
Reports
[STR] from their live transaction data. It is to be submitted within 7 days of its detection. The data
file for this purpose is called SBA.
34. Other procedures to prevent money laundering
 Issue and Payment of Demand Drafts, etc.: Issue and Payment of any remittance of funds for
value
of Rs 50000 and above shall be effected by debit to the customer’s account or against cheque and
not against cash. [Remittance includes demand draft, mail / telegraphic transfer / NEFT / IMPS or
any other mode and issue of travellers’ cheques.]
 Quoting of PAN: Permanent account number [PAN] of customers shall be obtained and verified
while undertaking transactions as per the provisions of Income Tax Rule 114B as applicable to banks.
Form 60 shall be obtained from persons who do not have PAN.
 UCIC: Unique Customer Identification Code [UCIC] [Note: Each customer to be allotted a
UCIC and
all accounts in his name in all branches will be linked to this number.]
 Collection of Account Payee Cheques: Account payee cheques to be collected to the payee’s
account only. However A/c payee cheques up to Rs 50000 can be collected to the account of
cooperative
credit societies provided the payee of such cheques is the constituent of the latter.
 Aadhaar Number: All SB accounts must be linked to Aadhaar. All new SB accounts opened from
January 1, 2017 will be opened only if the person submits Aadhaar.
35. ***CKYCR: Central KYC Records Registry
 ****GoI has appointed CERSAI as the CKYCR. [CERSAI stands for Central Registry of Securitisation
Asset Reconstruction and Security Interest of India]
 ***Banks and other REs to prepare the KYC templates as prescribed for individual customers
and
legal entities as per the rules made by the CKYCR and have to upload the same to the site of the
CKYCR. Banks have to send such data pertaining to all new individual accounts opened on or after
January 1, 2017. The CKYCR has to receive, store, safeguard and retrieve the KYC records in digital
form.
36. KYC Templates: [It means templates as prescribed by the CKYCR for reporting the KYC data.]
37. FATCA: Foreign Account Tax Compliance Act of the United States of America (USA) [Note:
As per
this Act of USA, banks in India having accounts in the name of persons/entities liable to pay income
tax in USA have report the details as required under the Act.]
38. IGA: Inter Governmental Agreement [Note: This is an agreement between the GoI and the
USA to
improve international tax compliance and to implement FATCA of the USA.]
39. CRS‐Common Reporting Standards [Note: It means reporting standards set for
implementation of
multilateral agreement signed to automatically exchange information based on Article 6 of the
Convention on Mutual Administrative Assistance in Tax Matters.]
40. UAPA: The Unlawful Activities (Prevention) Act, 1967
 To cope up with terrorist activities, this Act was amended in 2008, and Section 51A was
introduced.
 As per this the GoI has power to freeze, seize or attach funds and other financial assets held by, on
behalf of or at the direction of the individuals or entities Listed in the Schedule to the Order, or any
other person engaged in or suspected to be engaged in terrorism.
41. UNSC sanction lists:
 The UNSC sends to the Ministry of External Affairs [MEA], the lists of names of individuals and
entities suspected of having terrorist links. The MEA in turn sends the same to all regulators
including RBI. RBI sends the list to banks. There are two lists (i) ISIL (Da’esh) & Al‐Qaida Sanctions
List, and (ii) 1988 Sanctions List, i.e. Taliban sanction lists.
 Sanction Lists: Banks to maintain updated designated lists in electronic form and run a check at
regular intervals to verify whether such individuals or entities are holding bank accounts. In case of
finding out any account, information to be given within 24 hours to Ministry of Home Affairs.
42. ED: Enforcement Directorate
 ED functions under the Ministry of Finance, GoI and is in charge of the enforcing economic offence
laws like the Foreign Exchange Management Act 1999 [FEMA] and the Prevention of Money
Laundering Act 2002 .
 It collects economic intelligence/ crimes, investigates the same for investigation purpose it can
conduct search, seizure, arrest, and ask for evidence like police. It prepares charge sheets and file
criminal suits.
43. Frequently asked questions on KYC
a. What is the risk classification of inoperative account? [Medium risk]
b. What is the risk classification of accounts in the name of Defence personnel? [Low Risk]
c. Bullion Dealers are classified in which Risk Category as per KYC guidelines: High.
d. KYC day is observed on ___: 1st August
e. After the closure of the account the bank has to preserve the KYC /identity proof document for a
minimum period of __. [Ans. Five years from the date of closure of account]
f. Updation of KYC for low risk customer at what intervals? [Ans. 10 years]
g. E‐KYC is developed and provided by which organization? [Ans. UIDAI]
h. In case of small accounts, balance in the account should not exceed Rs __? [Ans. Rs 50,000]
i. In case of small account maximum credit during a year can be Rs __? [Ans. Rs 1 lakh
j. Extension of AML/CFT: Anti Money Laundering; Combating Financing of Terrorism
k. As per KYC guideline, in case of change in address the customer has to inform the banks within __
period [Six months]
l. Which authority enforces PMLR and FEMA? [Enforcement Directorate]
Part 3 ‐ Frequently Asked Questions on Laws Related to Banking
1. Banking Regulation Act
a. Which section defines Statutory Liquidity Ratio [SLR]? [Sec. 24 (2) of BR Act.]
b. Which act empowers RBI to regulate interest rate on bank credits? [BR Act 1949.]
c. Which section defines Validity period of Cheque? [Ans. Validity period is not defined in any act. It is
3 months as per RBI directions u/s 35A of BR Act.]
d. Banks issuing Demand Drafts of Rs. 20,000 and above should be crossed with ‘Account Payee’
crossing is under which Act: As per special directives of RBI, u/s 35A of Banking Regulation Act.
e. Which section stipulates that Banks are not allowed to advance against their own shares? [Sec. 20
of
BR Act]
f. Sec. 26A of RBI Act provides for the formation of DEAF? What is full form of DEAF? [Depositor
Education and Awareness Fund]
g. DEAF is maintained with ‐‐‐‐‐‐ [RBI].
h. Banks to transfer the unclaimed balances/accounts to ‐‐‐‐‐ [DEAF]
i. Unclaimed balance/account is one, which is not operated for the last ‐‐‐‐ years. [10]
2. Banking Regulation Act: Nomination
a. When Nominee can claim payment and at what capacity? [Only after the death of depositor as a
trustee of legal heirs.]
b. In case of nomination, who will attest signatures of depositor on nomination form? Witness is
required only in case of thumb impression given by the person giving nomination. No witness
required in case of signatures of the depositor on the nomination form.
c. Who can nominate in respect of deposit accounts? [Only Individuals and Sole Proprietary Firms].
d. What is the Legal position of nominee receiving the deposit amount after the death of the
depositor? (a) Owner of the fund, (b) Agent of the legal heirs, (c) Trustee of legal heirs, (d) PA
holder
e. Whether a trust can be a nominee? [No. Only individuals can be appointed as nominee]
f. Safe deposited locker holder has died. Nominee to be handed over the locker contents. There is a
sealed box among other things. As per the procedure of inventory handling what bank will do?
[Banks are not required to open sealed/closed packets left with them for safe custody or found in
locker while releasing the same]
3. Banking Regulation Act‐ Banking Ombudsman Scheme
a. ***Maximum compensation that can be granted by the Ombudsman? [Rs 20 lakh.]
b. Before lodging complaint before Ombudsman, customer has to give the complaint to bank and
the
latter to dispose of the complaint within ‐‐‐‐ [30 days from the date of its receipt.] [Note: Complaint
can be given to Ombudsman only after expiry of 30 days.]
c. ***Period within which complaint can be lodged with the BO? [Within 1 year from the receipt of
reply or no reply from the bank]
d. Customer /Bank can make appeal within ‐‐‐‐ days to Appellate Authority? [30 days]
e. Who is the appellate Authority? [Deputy Governor of RBI in charge of Customer Service and
Awareness Department.]
4. Book of Evidence Act
a. Bank is not required to produce original book of records to a Court but true copy of the same. This
is as per which Act? [Ans: Bankers Book Evidence Act.]
b. Note: Sec. 6, of the Bankers Book Evidence Act provides that a banker, or officer of a bank, shall
not in any legal proceeding, to which the bank is not a party, be compelled to produce any
banker's book, the contents of which can be proved under the provisions of this Act, or to appear
as a witness to prove the matters, transactions and accounts therein recorded, unless by order of
the court made for special cause.
c. Legal proceeding here means any civil or criminal proceeding or inquiry in which evidence is or
may be given, and includes arbitration.
5. Code of Civil Procedure 1908 [Garnishee Order]
a. Garnishee order is applicable to amounts where the banker and customer relationship is that of __
and __. [Debtor and creditor] [Note: If A has lent money to B, A is called the creditor, B the debtor
and money lent is called debt. In case the debtor fails to repay the debt, the creditor files a suit and
sends an order from the Court sent to the bank holding deposit of B. The bank is ordered to pay the
amount to Court towards the payment of the debt. Such an order issued by the court to the bank is
called garnishee order. Here the bank is called garnishee which means debtor to debtor. Funds held
by the bank in the capacity of a debtor are attachable. Funds held in other capacity like trustee,
agent etc., are not attachable.]
b. Garnishee order is not applicable to which of the following: a) Savings, b) Current, c) FD, d) CC /
OD
with debit balance. [Ans. CC/OD with debit balance.]
c. If in Garnishee Order no amount is mentioned, what should the bank do? [Attach full amount]
6. Consumer Protection Act 1986
a. ***The District forum, will take up cases where the value of compensation claimed does not
exceed
Rs. __? [Ans. Rs 20 lakh], [Note: State commission ‐‐> Exceeding Rs 20 lakh but not exceeding Rs 1
crore. National Commission ‐‐> exceeding Rs 1 crore.]
b. ***A complaint can be filed within __ years of the cause of action. [2 years]
c. ***The time limit for appeal in each case is __ days from the date of the order of the respective
lower authority. [30 days]
d. ***While preferring an appeal to the States Commission, __% of the decreed amount or Rs __,
whichever is higher. [Ans. 50% Rs 25,000] [Note: For appeal to National Commission it is 50% or Rs
35,000, For appeal before Supreme Court it is 50% or Rs 50,000 whichever is higher]
e. ***What is the amount of court fee or stamp duty payable while filing a complaint? [nil]
7. Companies Act 2013
a. ***What is the full form of CIN? [Corporate Identity Number]
b. ***What is the full form of DIN? [Director Identity Number]
c. *** What is the full form of OPC? [One Person Company]
d. *** What is the full form of NCLT? [National Company Law Tribunal]
e. ***What is the full form of CSR? [Corporate Social Responsibility]
Note: Any company having a turnover of Rs.1,000 crore and above, Or Net worth of Rs.500 crore
and above Or Net profit of Rs.5 crore and above is required to spend 2% of its average net profits
for
the last 3 years towards Corporate Social Responsibility.
f. ***The minimum paid‐up capital of a public limited company is Rs.__ and that of a private
company
is Rs.__. [No such limit]
g. The minimum number of members / shareholders a public company can have is __? [7]
h. ***The maximum number of members / shareholders a private company can have is __? [200]
i. The maximum number of members/ shareholders a public company can have is __? [no limit]
j. The minimum number of directors a private company can have is __? [2 except in case of one
person
company where it is 1]
k. The minimum number of directors a public company can have is __?[3]
l. The maximum number of directors a public company can have is __? [15]
m. ***The maximum number of companies in which a person can become director is __? [20]
n. The maximum age limit for a whole‐time director/, MD / or CEO of any company is __? [70]
o. The minimum age limit for a whole‐time director/, Managing Director/ or CEO is __? [21]
p. Certificate of Incorporation refers to __? [Birth certificate of a company issued by ROC.]
q. Which document stipulates the objects or the activities a company can do? Memorandum of
Association]
r. ***Any activity or contract executed by a company, which is beyond the object clause is called __
of
the memorandum of association. [Ultravire] [Note: If the object clause stipulates that company will
do only cement production activity, if a bank finances to it for production of steel it is ultravire and
the bank cannot recover the amount from the company.]
s. *** Which document stipulates the maximum capital / Authorised Capital the company may have?
[Memorandum of Association]
t. Which document provides the name of the company and the name of the state in which its
registered office will be located? [Memorandum of Association]
u. Two documents called Public documents are to be submitted for the formation of a company. One
of these is Memorandum of Association while the other is __? [Article of Association]
v. Which of the following documents is not required by company? (a) Article of association, (b)
Certificate of commencement of business, (c) Memorandum of Association, (d) none of these [Ans.
(b)]
w. ***Articles of Association of a limited company contain __? [Ans: Rules and regulations relating to
internal working of a company]
x. ***The borrowing power of a company is given in the following document (a) Memorandum of
Association, (b) Articles of Association, (c) Resolution of the Board, (d) a+b (e) NOA [Ans: (b)]
y. The borrowing power of the following type of company must be expressly given in the
memorandum as it has no implied power to borrow‐‐‐‐‐‐ [Non‐profit making company] [Examples of
such companies are Indian Banks Association, National Payment Corporation of India, Indian
Chambers of Commerce etc. These are also called Sec. 8 companies.]
z. ***A company borrows money from a bank for a purpose, which is beyond the scope of the
memorandum. What is its implication? [The contract is absolutely void as it is ultra‐vire the
memorandum and even all shareholders can not ratify the same. Bank cannot recover the amount.]
aa. The borrowing power of a company is exercised by ‐‐‐‐‐‐‐‐‐‐‐[Board of Directors by passing
resolution
in a meeting]
bb. Sec. 77***A company if it creates any charge on its assets has to register the details of the
charge
with Registrar of companies within ‐‐‐‐ days of the creation of charge [30 days]
cc. Sec. 77***A company if it modifies any charge already created on its assets has to register the
details of modification with Registrar of companies within ‐‐‐‐ days modification. [30 days]
dd. The form to be filed for registering the charge is ‐‐‐‐‐‐ [Form CHG‐1]
ee. CHG‐1 to be digitally signed by ‐‐‐‐‐‐ and the charge holder (bank) and it will be filed together
with
the document / instrument creating the charge. [Company]
ff. ***Where the charge is not filed within 30 days the Registrar can allow the registration of the
charges after thirty days but within a period of ‐‐‐‐‐‐‐ days of the date of such creation of charge or
modification of charge. [300 days]
gg. The document issued by a company to invite application from public for issuing share capital is
called
‐‐‐‐‐ [Prospectus]
hh. ***RHP stands for ‐‐‐‐‐? [Red Herring Prospectus] [Note: This is type of prospectus which does
not
mention the fixed price at which the company will issue the shares.]
ii. ***ADR stands for ‐‐‐‐‐‐? [American Deposit Receipt] [Note: Companies in India issue ADRs in USA
against their shares. These are traded in stock exchanges of USA]
jj. ***GDR stands for ‐‐‐‐‐? [Global Depository Receipt] [Note: Companies in India issue GDRs in any
foreign country other than USA against their shares. These are traded in stock exchanges of
countries other than USA]
kk. ***IDR stands for ‐‐‐‐‐? [Indian Depository Receipt] [Note: Foreign Companies issue IDRs in India
against their shares. These are traded in stock exchanges of India]
ll. A current account in the name of a company can be opened based on the following type of
resolution a) Specific Resolution by Board of Directors in a meeting, (b) Omnibus Resolution by
Board in a meeting, (c) Circular Resolution by Board, (d) a or b or c, (e) a or b
mm. The Board resolution submitted for opening a current account should be certified by (a)
Chairman of
the company, (b) Chairman of the meeting, (c) Secretary of the company. (d) Chairman of the
meeting and counter signed by Secretary
nn. Omnibus Resolution of a company is passed. What purpose it will serve (a) For availing loan from
bank, (b) For opening cash credit account, (c) For opening account at any place, (d) For getting
central govt assistance, (e) NOA
oo. ***The maximum amount up to which a company can raise capital is called........ capital (a)
Authorised, (b) Issue, (c) Subscribed, (d) NOA
pp. ***The maximum amount of capital can raise is stipulated in (a) Article of association (b)
memorandum of association (c) Companies Act (d) Rules for raising capital of Companies Act
qq. **The person who can sign on behalf of the company is (a) Director, (b) Managing Director, (c)
Any
officer of the rank of General Manager and above, (d) Any person authorised by Board Resolution,
(e) NOA
rr. ***Directors derive their power from ‐‐‐‐‐‐ [Article of Association]
ss. The minimum number of members/ shareholders a private company can have is ‐‐‐‐ except in
case of
one person company [OPC]. [Ans. 2, OPC has one member.]
tt. ***The Managing Director of a company, the only person authorised to operate the account dies.
A
cheque signed by him prior to his death is presented for payment. What you do? [Pay] [Note: He is
an agent to represent the company. Company is alive.]
uu. ***The current account of a company is operated by its three directors. A, B, C under their single
signature. You are informed that Mr A is adjudged insolvent. A cheque signed by him presented for
payment. What you do? [Pay the cheque]
vv. [Note: Where a director becomes insolvent, the operation of the account need not be stopped.
Cheques already signed by him can be paid. After insolvency he cannot continue as a director.]
ww. No cheque in the company’s current account should be honoured from the date of (a) filing of a
petition for winding up. (b) Order for winding up. (c) Appointment of liquidators, (d) receipt of Court
order/Resolution for winding up, (e) NOA [Ans. order for winding up]
8. Deposit and Insurance and Credit Guarantee Corporation Act
Which organisation provides insurance cover to customers against the non‐payment of their
deposits due to the failure/ closure of the bank? [DICGC] [Note: DICGC is wholly owned by RBI]
***The maximum amount of insurance coverage provided by DICGC to an individual against all his
deposit accounts in all branches in the bank is Rs ‐‐‐‐‐‐‐‐ [1 00,000]
Who pays the premium and what rate? [Bank, 10 paise p.a. per Rs 100 of deposit.]
9. Hindu Minority and Guardianship Act 1956 ; Guardian and Wards Act 1890,
a. As per Sec. 6 of the Hindu Minority and Guardianship Act 1956, the natural guardian of a Hindu
minor is his father, then mother, then‐‐‐‐ and then ‐‐‐‐‐‐ [Testamentary guardian, Legal guardian].
b. Guardian appointed by the will of the minor’s father is called ‐‐‐‐. [Testamentary Guardian]
c. The guardian appointed by the Court who is called the legal guardian. The legal guardian is
appointed as per the provisions of the ‐‐‐‐‐‐[Guardian and Wards Act 1890]
d. Whether a “WILL” has to be registered? [Not required] [Note: It must be witnessed].
e. Letter of administration is issued by court when there is no ‐‐‐‐‐ : [Will]
10. Indian Succession Act 1925 ; Hindu Succession Act 1956
 Which Act provides that after the death of a person, his property will devolve as per his Will
executed by him, which is called testamentary succession, and in case there is no will the relevant
laws of succession will apply. [Indian Succession Act 1925]
 As per Indian Succession Act, what is a will? [A Will is a legal declaration of the intention of the
testator (i.e. Person making the will), with respect to his property both movable and immovable
which he desires to pass on to different persons (called legatee) after his death.
 Who cannot make a will? [A minor or a person of unsound mind]
 A will to be valid must be executed / signed and attested by minimum ‐‐‐ witnesses,[Two]
 A testator can change his Will, at any time, in any manner he deems fit. However, only the ‐‐‐‐ will
is
enforceable. [last]
 Whether registration of a Will is compulsory? [No. But it can be registered with the sub‐registrar].
 The person named in the will to admister the same is called ‐‐‐‐ [executor]
 A copy of the last will certified by the ‘court that the will is genuine and is the last will and the
executor can act upon it is called ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐[Probate]
 What is a testamentary guardian? By means of his will the father of a minor can appoint a
guardian.
Such a guardian is called testamentary guardian. He can function only after father and mother die.
11. Hindu Succession Act 1956
 The Hindu Succession Act, 1956 deals with intestate (i.e. where there is no a will) succession. It is
applicable only to Hindus and ‐‐‐‐‐‐ [Buddhists, Jains, and Sikhs.].
 Who is legal heir to the property of a Hindu male dying intestate/ without a will? [The property
devolves first to heirs within Class I. Class I heirs are sons, daughters, widows, mothers, sons of a
pre‐deceased son, widows of a pre‐deceased son, son of a, pre‐deceased sons of a predeceased son,
and widows of a pre‐deceased son of a predeceased son. Each shall be granted one share of the
deceased’s property. If the widow of a pre‐deceased son, the widow of a pre‐deceased son of a
predeceased
son or the widow of a brother has remarried, she is not entitled to receive the inheritance.
 If there are no heirs categorized as Class I, the property will be given to heirs within Class II. Who
are
the Class II heirs in descending order? : Father, Son's / daughter's son, Brother, Sister, Daughter's /
son's son, Daughter's / son's daughter, Daughter's / daughter's son, Daughter's /daughter's
daughter, Brother's son, Sister's son, Brother's daughter
 Who is legal heir to the property of a Hindu male dying intestate/ without a will? The property of a
Hindu female dying intestate/ without a will, shall devolve in the following descending order. (a)
husband, Sons and daughters (including the children of any pre‐deceased son or daughter) (b) heirs
of the husband. (c) Father and mother, heirs of the father, and heirs of the mother.
12. Indian contract Act: Void Contracts [Minors, Lunatics]
a. Whether minor can ratify the loan amount after attains majority? No because there is no contract
as
it was void from the very time it was made i.e. void abinitio.
13. Voidable Contracts: Blind, Illiterates ,Purdanashin Lady
a. As per RBI guideline in case of visually impaired persons the deposit of third party cheques in
current
account is limited to Rs __. [No limit] [Note: As per Court direction and also RBI guidelines banks
have to offer to blind persons all types of banking products that they offer to other customer.]
14. Indian Contract Act –Clayton Rule/ Rule of Appropriation, right of set off
a. Outstanding in a CC account is Rs.2.00 lakhs. One of the partners died and the operations were
continued in the account by the bank in spite of notice of the death given to the bank. Later 2.50
lakh deposited and 1 lakh was withdrawn? What is liability of legal heirs of the deceased partner:
[Ans. NIL as per Claytons rule? [Clayton’s Rule also means rule of appropriation as per
Contract
Act.]
 [Note: Clayton’s Rule is applicable to running accounts like cash credit and overdraft accounts.
Suppose in case of a CC account, the customer withdrew Rs 30,000 is on 1/1/18, Rs 20,000 on
6/1/18, Rs 10,000 on 7/1/18. Accordingly, the total amount borrower is liable to pay to the bank is
Rs 60,000. Now suppose he dies on 8/1/18, his liability to the bank remains at Rs 60,000.
 However if bank allows withdrawal of amount after his death, his liability comes down to the
extent
of the amount deposited. And after such deposit, if the bank allows fresh withdrawal he is not liable
for the amount withdrawn after his death. His guarantor is also not liable for any fresh amount
withdrawn. In case of a partnership firm, after the death of a partner, his personal liability comes
down to the extent of the amount so deposited. For this reason (As per Clayton rule, operation in an
account is stopped on the death of the account holder or, guarantor or partner.]
b. Right of Set off refers to ___.[Netting /Clubbing of a deposit due to a person from a bank with the
credit/loan which is due to bank from the same person to arrive at the net due.][Example: Suppose A
has Rs 50,000 in his SB account with the bank. If has borrowed Rs 60,000 from the bank which is due,
bank has the right to combine the mutual debts (adjust the deposit with the loan) after giving notice,
and ask the net amount.
c. A sum of Rs.20,000 is due from X. The loan is secured by the guarantee of Y. Y’s account with the
bank has a credit balance of Rs. 30,000. Can the bank exercise right of setoff against the balance in
Y’s account? [The bank can exercise set‐ off after notice to Y as the liability of a guarantor is
same/co‐extensive, with that of the borrower.]
15. Indian Contract Act ‐‐ Contract of Bailment
a. Safe custody of Articles comes under which Act: Indian Contract Act. [Note: Banks accept duplicate
keys of other banks, fixed deposits from NRI Customers, Wills of the customers, Small packets for
safe custody (i.e. Keep it safe). Such contracts are called contract of bailment.)
b. Identify the relationship between customer and bank which is not that of Bailer and Bailee
relationship: (a) Deposit of small packet with the bank (b) Deposit of articles in safe deposit lockers
(c) Deposit of money in account (d) Small packet left by mistake in bank (e) Jewel deposited for loan
(f) b, c, d,e.
c. Bailment of goods for securing a repayment of loan is called‐‐‐‐‐‐‐? [Pledge]
16. Indian Contract Act‐ Contract of Agency
a. In case of standing instructions, the relation between bank and customers is‐‐‐‐. [Agent and
Principal]Note: When a person wants another person to work as per his mandate/power of
attorney the person so appointed is called agent. The person appointing the agent is called the
principal. The agent has powers to sign a contract on behalf of the principal only to the extent
delegated to him. For example, all officers of your bank are agents of the bank. They are issued
Power of Attorney/PA by the bank. They can sign contracts on behalf of the bank to the extent
provided in the PA.
b. Agent dies ‐ Cheque signed by him presented for payment. Whether bank can pay the same? [Yes
as
the principal is alive.]
c. Financial Director dies ‐ Cheque signed by him presented for payment. Can bank pay the same?
[Yes
because he is an agent of the company who is alive].
d. Flying club Secretary has died. A cheque signed by him presented for payment. Will you pay the
same? [Yes because he is signing as an agent to represent the club.
e. What is the Banker‐ Customer relationship in case of cheque sent for collection: Agent and
Principal.
f. A&B maintain a joint account with joint operation and they have given Power of Attorney to C for
operating in account. B died and after his death a cheque signed by C is presented for payment.
What should the bank do? [Cheque will not be paid because principal /one of the principals died.]
g. A appointed B as agent. B died . A cheque signed by B is presented for payment. What should the
Bank do? [Cheque will be paid as the principal is alive.]
17. Indian Contract Act‐ Contract of Guarantee
a. What does the Right to Subrogation mean? [Note: In case a loan/debt given by bank C, [called the
creditor] to the borrower B [called the principal debtor] and the same is guaranteed by G [called the
guarantor/ surety], the principal debtor and the surety are equally liable to pay the debt. The bank
can recover the amount from the guarantor only. In such a case the law is the guarantor paying the
debt amount is entitled to get all securities/rights the creditor had against the debtor and can sue
him to get the amount. This is called stepping into the shoes of the creditor. Such a right of the
surety is called the Right of Subrogation.]
b. When guarantor on payment of all dues of principal debtor, gets the following right? [Right of
Subrogation.]
18. Indian Partnership Act 1932
a. Sec.19. Implied authority of a partner does not allow a single partner to do the following. (a)
Submit dispute of the firm for arbitration , (b) compromise any claim by firm (c) withdraw any suit
filed by the firm (d) transfer or mortgage immovable property in the name of the firm (e) all of
these
b. Sec. 25. What is the extent of liability of a partner? [Unlimited, Joint and Several]
c. Sec.30. A minor has been admitted for benefits of Partnership. On becoming major, within how
much period he has to decide whether he wants to continue as partner or not?: Within 6 months of
attaining majority or within 6 months of knowing that he is partner whichever is later.
d. Sec.69. Partnership firm not registered. What is the implication? (a) Partnership firm cannot file
the
suit against anybody, but others can file suit on unregistered partnership firm. (b) partners cannot
file suit against the firm and other partners (c) both
e. ***An association for carrying business for profit or partnership of more than ‐‐‐‐‐‐members if not
incorporated is considered as illegal association. So a partnership can have maximum this number
of members. (a) 20 (b) 10 (c) 100 (d) 200
f. ***Why HUF cannot become a partner in a partnership firm? Partnership is a contract /
agreement. HUF is not a legal entity and cannot enter into contract, it can be a partner of the firm.
g. *** Whether an NBFC can become a partner? [No as per RBI guideline it cannot.]
h. A minor whose date of birth is 1. 1. 1996 came to know on 1.1.2016 that he was admitted to the
benefit of a partnership on 1.1.2000. He wants to opt out of the partnership. He can do so by ‐‐‐‐‐
[1.7.2016]
i. Bank received the notice of death of a partner on 14.7.16 who died on 13.7.16. On 15.7.16 it
received a cheque dated 3.7.16 under the signature of this partner drawn in favour of Income Tax
Department. How the cheque should be disposed off? ‐‐‐‐‐‐‐‐[pay the cheque if surviving partners
authorise you do so]
19. Indian Trust Act 1882
a. Money kept with specific purpose ‐relationship between bank and customer: [Trustee and
beneficiary[Note: In case of trust, the trustee become the owner of the property, but can deal with
the property only for the benefit of the person(s) for whose benefit the trust is created i.e.
beneficiary.]
b. In which of the following cases the banker‐ customer relationship is that of a Trustee and
Beneficiary? (a) Bank Vs. Payee of a DD , (b) Bank Vs Customer whose money is held pending
instruction for disposal, (c) Bank Vs Customer who left goods by mistake, (d) Bank Vs Customer who
gave bank money for specific purpose like advance deposit of money for purchase of cars, for
purchase of shares etc. (e) nominee vs. legal heirs [Ans: All of these]
c. **A public trust can avail loan or create mortgage over immovable property, without the prior
permission from ‐‐‐‐‐‐‐? [Charity Commissioner]
d. Can a trustee issue a power of attorney in favour any person to sign on his behalf? [[Ans. A
trustee
cannot delegate his function/power].
20. Income Tax Act ‐ ITO Attachment Order, Term Deposits, PAN, Returns, TDS
a. Sec 194A: Tax to be deducted at Source [TDS is applicable] on interest on fixed deposit is if
interest
paid/ payable on a fixed deposit in a financial year is above Rs. 10,000. This is as per which section
of the Income Tax Act? [Section 194 A of Income Tax Act.]
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b. Where PAN is not submitted the rate of TDS is ‐‐‐‐‐ [20% even if 15H/ 15G, submitted].
c. TDS is to be deducted on interest in Savings bank account if such interest p.a exceeds Rs ‐‐‐‐‐ [No
TDS by bank. Note: SB interest above 10 000 attract tax but no TDS]
d. In case of payment of rent on building and furniture TDS is required where the payment during a
financial year exceeds Rs ‐‐‐‐‐ [1, 80 000 and rate of TDS is 10%.]
e. Sec 269T: Which Act provides that if the principal plus interest of a term deposit is 20000 or
above it
should not be paid in cash? [Section 269 T of Income Tax Act.]
f. TDS.As per revised procedure, banks will not send copy of Form 15G/15 H to Income Tax Dept.
and
retain the same with them for‐‐‐‐ years: 6 years.
21. Insolvency and Bankruptcy Code 2016
The regulating authority as per this code is ‐‐‐‐ [Insolvency and Bankruptcy Board of India]
22. Legal Services Authorities Act 1987 ‐ [Lok Adalat]
a. Recovery of cases involving amount not exceeding Rs ‐‐can be referred to Lok Adalat. [Ans. 20
lakh.]
b. Appeal against the award given by Lok Adalat can be made to which Authority? [No appeal is
permitted to any court against decision of Lok Adalat.]
c. Maximum amount of claim that can be filed Lok Adalat is Rs ‐‐‐‐ [Ans. Rs. 20.00 lakh. It case of Lok
Adalat formed by DRT the amount will be more than Rs.20 lakh.]
d. The maximum amount of court fee payable on cases filed with Lok Adalat is Rs __ [Nil]
23. Limitation Act 1963
a. A document is executed by A on 1/1/18, by B on 15/2/18, by C on 14/3/18. What is the effective
date for ascertaining limitation period? [1/1/18 i.e. date executed by first person.]
b. What is the limitation period when Govt. wants to take legal action for recovery of its dues __? [30
years.]
c. What is limitation period in case of a suit to be filed by a person against GoI/ State Govt? [3 years]
d. The period of limitation for mortgage is ‐‐‐‐‐ [Ans. 12 years from due date of loan].
24. Negotiable Instrument Act 1881
a. Sec.5: Bill of exchange is ‐‐‐‐‐ (a) unconditional order to pay money to or to the order a person (b)
is
negotiable (c) can be endorsed (d) drawn be the creditor/person to get money (c) all of these
b. Sec.5: The following is applicable to Bill of exchange but not in case of a cheque (a) noting (b)
crossing (c) payable after certain period (d) stamp duty (c) all of these
c. Sec. 6: Cheque is ‐‐‐‐‐‐‐ (a) a bill of exchange (b) always drawn on a bank (c) always payable on
demand (d) does not attract stamp duty (e) all of these
d. Sec. 6: Cheque is valid for three months. Which Act provides this? (a) Negotiable Instrument Act
(Validity of Cheque defined under which act: Validity period not defined in any act. It is 3 months
as per RBI special directions u/s 35 A of BR Act.
e. Sec. 10: Payment in due course provisions is provided in which section of the NI Act? [Sec 10 of NI
Act]
 [Note: Banks while paying the cheque must ensure that it is a payment is due course which must
involve the following. (a) Pay as per apparent tenor.
 For example; Post‐dated cheque ‐> do not pay, Crossed cheque ‐> do not pay cash, Order cheque ‐
>
to the payee or to the endorsee etc. (b) pay with good faith and without negligence
 (c) payment under circumstances which do not afford a reasonable ground to believe that the
person in possession of the cheque is not entitled for the payment.
f. Sec 10A: Cheque dated 31.06.2017 has been presented for payment on 30.06.2017. What should
the
bank do? [Cheque will be paid as it is payment in due course.]
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g. While paying bearer cheque signature is obtained on the back side of cheque. What for is meant?
(a)
endorsement, (b) receipt of money (c) witnessing (d) verification of signature by cashier
h. Sec20: Inchoate instrument means __: Incomplete instrument i.e. date or payee or amount is
missing
i. Sec 21: When no time or date is mentioned on bill of exchange, when it will be payable? [On
demand]
j. Sec 31: Bank has received a letter from public prosecutor mentioning the arrest of customer and to
stop the operations in the customer’s account. A cheque is received for payment. What should be
the line of action: [Honor the cheque] Note: Arrest does not take away the right to draw a
cheque.][Note: Bank to stop payment of a cheque, when asked by drawer to do so.
k. Sec 85:Which section of the NI Act provides protection to paying bank on payment of cheque with
forged endorsement provided the endorsement is regular: Sec 85 (1) of NI Act
l. Sec 85: A bearer cheque bearing forged endorsement is paid. What is the liability of paying bank?
[No liability as once a bearer is always bearer. Note: In case of a bearer cheque bank need not look
at endorsement.
m. Sec 85: A bearer cheque bearing forged endorsement is paid. What is the liability of paying
bank?:
[No liability. Note: In case of a bearer cheque bank need not look at endorsement. For this reason it
is called “Once a bearer is always bearer”. Sec 85 (1) of NI Act
n. Sec 89: Protection to the Paying Bank in case of material alteration which is not apparent in a
cheque is available under which Act: [Sec89 of N.I. Act.]
o. Sec 89: Which of the following is not a material alteration in case of a Cheque? (a) Striking out
bearer and making it order, (b) alteration of the date; (c) Changing the cheque from payable to order
to bearer.
p. Sec 89: Material alteration visible, cheque is paid, protection to paying banker is available under
which provision of the Sec. ‐‐‐ of the NI Act [Not available].
q. Sec 89: The signature of the drawer is so skill fully forged that it is almost impossible to find out
that
it is not his signature? Bank pays the same. Which section of the NI Act protects bank in case of such
wrong payment? [Ans. Bank does not get any protection in case of payment when the signature of
the drawer is forged.]
r. Sec 99: Noting: When a promissory note or bill of exchange has been dishonoured by
nonacceptance
or non‐payment, the holder may cause such dishonour to be noted by a ‐‐‐‐ : [A notary
public]
s. Sec 99: Why Noting? To create evidence that the dishonour has actually been done.
t. Sec 99: What is Protest? The certificate issued by the Notary Public starting the fact of dishonour is
called Protest. The purpose is to create better evidence of dishonour.
u. Sec 124:Under Special Crossing, protection to the bank is available under Section: 124 of NI Act.
v. Sec 124: Special Crossing ‐ what is essential: Bank's name must appear with or without two
parallel
lines
w. If crossing is not made by drawer, who can put the crossing? [any holder]
x. In cheque, if crossing is not made by drawer , which type of crossing can be put by the by the
holder
– (a) general (b) special (c) not‐negotiable (d) a/c payee (e) all of these
y. Sec 129: Protection to a paying banker in case of a crossed cheque is available under sec. ‐‐‐ of NI
Act?
z. Sec 131:Protection to collecting banker is available under: section 131 of N I Act in case of cheques
and section 131 A for demand draft
aa. Sec 131: What is conversion? Which section provides banks protection against conversion? [Sec.
128]
bb. [Collecting cheque for a customer, who is not the owner of that cheque is called conversion. A
bank
can get protection in case of conversion only if it is a crossed cheque,).
cc. Sec 138: Under Sec 138 of NI act if a cheque is returned due to insufficient funds what is the
maximum punishment? 2 years imprisonment or twice the cheque amount or both.].
dd. Sec 138: Time limit to file suit under Sec 138 of N.I. Act in case of cheque returns unpaid due to
insufficient funds is ‐‐‐‐‐‐? [One month from the date cause of action i.e. expiry of demand notice
period/cause of action.
ee. ***Sec 138:What is maximum penalty if a cheque is issued without account having sufficient
balance in the account? (No penalty. Penalty is applicable only on dishonour and then demand]
ff. ***Sec 138: As per the recent judgement of the Supreme Court any case under sec. 138 of the NI
Act
is to be filed with the court where the following is located? (a) bank branch of the drawer (b) bank
branch of the payee (c) residence/office of the drawer (d) residence of the payee
25. Reserve Bank of India Act 1934 ‐ LAF, Repo, CRR, Currency Notes
a. MPC: What does LAF stands for? [Monetary Policy Committee.
b. MPC: Which Act provides for the formation of the MPC? [Section 45ZB of RBI Act.]
c. MPC: MPC consists of ‐‐‐‐‐ members. [ 6, 3 from RBI and 3 nominated by GoI.]
d. LAF. What does LAF stands for? Liquidity Adjustment Facility.
e. LAF. RBI grant the very short term loans to Banks against Govt Securities at ‐‐‐‐ rate? Repo Rate.
f. LAF. When banks purchase Govt. Security from RBI for short term, it is called? Reverse Repo.
g. LAF. Liquidity provided under 7 day and 14 day term repos is?0.75% of NDTL.
h. OMO. Open Market Operation refers to ‐‐‐‐‐‐ Sale & purchase of Govt. securities by RBI.
i. Sec. 31. No bank can issue bearer demand draft/pay order as per which act: Sec 31 of Reserve
Bank
of India Act.
j. Sec. 42. CRR is defined in which section of RBI Act? Sec 42(1).
k. Sec. 42. At what rate RBI gives interest on CRR balance maintained by banks is ‐‐‐ : Nil.
l. Sec. 42. Cash Reserve Ratio is maintained as a percentage of ‐‐‐‐ : Net Demand & Time liabilities.
(NDTL)
m. What is PDO / Public Debt Office? It is a part of RBI which is in charge of issuing and servicing Govt
bonds/public debts.
26. Recovery of Debts due to Banks and Financial Institutions Act/[DRT and DRAT]
a. What is the minimum amount of the debt recoverable for which suit can be filed with DRT? [Rs 10
lakh and above including un‐debited interest]
27. SARFAESI Act 2002
a. What is the time Limit within which the bank has to register the details of the security interest by
way of mortgage is ‐‐‐‐ days from date of deposit of title deeds.[30 days]
a. Hypothecation is defined in: Sec 2(n) of SARFAESI Act.
b. Which organizations purchase NPAs of banks and FIs? [Ans. Asset Reconstruction Companies]
c. CERSAI has been set up under which Act: Sarfaesi Act.
28. Transfer of Properties Act 1882
a. Mortgage means: Transfer of interest in a specific immovable property.
b. In case of equitable mortgage, the deposit of title deeds has to be at ‐‐‐‐‐. [Any town notified by
the
State Govt.]
c. Simple Mortgage is also known as ‐‐‐‐‐‐ : [Registered Mortgage.]