Finance Interview Questions: MBA Finance, B.

Com, Bank,BPO Interview questions

How to prepare for MBA finance interviews? What topics are key in
cracking finance roles?
This book is a collection of 400 plus interview questions asked during
finance interviews in 10 plus core finance industries.

Finance Interview Questions- TANUJA P T Copyright © 2020 TANUJA P T

All rights reserved. ISBN: DEDICATION- To all my students and readers of
this book, may you succeed in life!
CONTENTS
1 Accounting Interview Questions 1
2 Commercial Banks Interview Questions 27
3 Small Finance Banks Interview Questions 109
4 Non-Banking Finance Company Interview Questions 115
5 Home Finance Companies Interview Questions 117
6 Consumer Finance Companies Interview Questions 130
7 Financial Services Interview Questions 131
8 Capital Markets Companies Interview Questions 133
9 Financial Data Providers Interview Questions 158
10 Specialized Finance Companies Interview Questions 167
11 Insurance Companies Interview Questions 168

Accounting Interview Questions

1. What do you mean by Balance Sheet? What are the items that comes under it?

Ans. The balance sheet shows the total assets of the company, and how these assets are funded, either by debt or
equity. It is sometimes referred to as a net worth statement, or a financial status statement.

The balance sheet is divided into two parts i.e. the left side of the balance sheet details the assets of the company
and the right side of the balance sheet details the liabilities of the firms and the equity of the shareholders. The
assets and liabilities are divided into two categories: current assets / liabilities (short term) and assets / liabilities that
are non-current (long term).  Items included in the balance sheet are:

Assets: Cash, marketable securities, prepaid expenses, accounts receivable, inventory, and fixed assets.

Liabilities: Accounts payable, accrued liabilities, taxes payable, short-term debt, and long-term debt.

Assets = Equity + Liabilities.

2. What is the difference between income statement and balance sheet?

Ans. Main differences between income statement and balance sheet are

Timing: The balance sheet reveals the status of the financial situation of an organization at a specific point in time,
while an income statement reveals the firm's results for a period of time. For example, the financial statement issued
for the month of December will include a balance sheet as of December 31, and a statement of income for the
month of December.

Reported items: The balance sheet reported assets, liabilities, and equity, while the income statement reported
revenues and expenses netted to a profit or loss.

Metrics: The various line items in the balance sheet are compared to each other to subtract a business' liquidity,
while the subtotals in the income statement are contrasted with revenue to calculate the gross profit percentage,
operating income percentage and net income percentage.

Uses – accounting: Management uses the balance sheet to assess if a company has adequate resources to meet its
commitments, while the statement of profit is used to analyze performance, and to recognize any operational or
financial problems that require correction.
Uses-creditors and lenders: Creditors and lenders use the balance sheet to see whether a company is over-
leveraging, which informs them whether additional credit will be provided to the organization. They use the income
statement to decide if a business generates enough profit to pay off its liabilities.

Relative importance: The importance of the two reports varies according to the reader, but the general view is that
the balance sheet is second in importance to the statement of income, because the statement of income reports the
results of the business.

3. What is GST? Is it direct or indirect?

Ans. GST is a comprehensive indirect tax levied on manufacture, sale and consumption of goods as well as services at
the national level. It has replaced all previous indirect taxes levied on goods and services by States Governments and
Central Government. GST is a single tax on the supply of goods and services. It is a destination based tax. GST will
subsume Central Excise Law, Service Tax Law, VAT, Entry Tax etc. There are:

SGST – State GST, collected by the State Govt.

CGST – Central GST, collected by the Central Govt.

IGST – Integrated GST, collected by the Central Govt.

4. What is the difference between direct and indirect tax?

Ans.

Direct Tax Indirect Tax

Direct tax is paid directly to the government
Direct taxes are based on the ability-to - pay
concept, meaning that if you make more, the tax
rate will be higher too.
Direct Tax aims at redistributing a nation's wealth
(taking it from the rich, giving it to the poor)
Direct taxes are not transferable to another
individual or entity;
The individual or organization to whom the tax is
levied is responsible for the full payment of the tax.
It is considered to be progressive tax since you tax
depending upon the ability of the taxpayer to pay
An indirect tax is a tax that is collected by one person but
actually paid for by another person
Indirect tax on goods or services is levied based on a slab
rate which increases the price of a good or service
Indirect tax is ultimately charged to the end consumer, with
a higher retail price.
Indirect taxes are levied on all taxpayers in equal measure,
regardless of income level.
Indirect taxes are transferred because the price of the tax is
offset by simply increasing the overall price of the good or
service.
It is considered regressive tax, as you tax without
considering the taxpayer's ability to pay

5. What is demonetization?

Ans. Demonetization is the act of stripping away a currency unit of its legal tender status. It happens when national
currency changes: the current form or money forms are pulled out of circulation and retired, often to be replaced by
new notes or coins. Often, a nation replaces the old currency with new currency entirely.

6. What do you know about depreciation?

Ans. Depreciation, in accounting, refers to two facets of the same concept:

 Decrease of asset value (fair value depreciation)

 Asset expenses are assigned to the times for which the assets are used.

In other words, depreciation is a method of reallocating the cost of a tangible asset in motion over its useful life span.
The most common methods of depreciation comprise:

 Straight-line
 Double declining balance
 Units of production
  Sum of years digits
7. Is an employee depreciated or appreciated?

Ans. Employee when contributes to the success of the organization, appreciates. A trust worthy, motivated workforce
is the backbone of any organization. Employees should be appreciated by giving rewards like opportunity for career
progression, financial incentives, and recognition.

8. What is TDS? Where is it shown in a balance sheet?

Ans. TDS means Tax deducted from source. Under the Income Tax Act, individuals responsible for making payments
are required to deduct tax at a prescribed rate at source. Rather than receiving income tax at a later date, the
government wants the payers to deduct tax in advance and deposit it with the government. TDS is deducted from the
payee's account at the time of payment in cash or cheque or credit, whichever occurs earlier. TDS is deducted from
salaries, interest payments by banks, commission payments while rent is being paid, and payments made to
consultants, payments to lawyers or freelancers.

In Balance Sheet, TDS is deducted by the organization being a liability (payable) shown on the liability side, and TDS
deducted by the vendor or customer of the organization is an asset (receivable) shown on the asset side.

9. What is the difference between provisions and reserves?

Ans. Provision implies money set aside to cover any liability or loss anticipated.

Reserves apply to withholding any amount in future for some specific purpose.

10. What is fair value accounting?

Ans. Fair value accounting uses the actual market value as the basis for which such assets and liabilities are
considered. Fair value is the estimated price at which, under current market conditions, an asset can be sold or a
liability settled during an orderly transaction to a third party. The ideal fair value determination is based on the prices
being offered in an active market. An active market is one in which the volume of transactions is sufficiently high to
provide ongoing information on pricing. The market from which a fair value is derived should also be the principal
asset or liability market.

11. What is the difference between balance sheet and trading account?

Ans. • Balance Sheet is a statement of all the company's assets and liabilities as at a given date. Trading a / c is
prepared to calculate the gross profit due to the difference between sales (revenue) and sales costs. It is an account
which records direct costs.

• Trading account gives a straightforward picture of financial transactions directly linked to sales, direct expenditure
and direct profits with a Gross Profit & Loss outcome. Balance sheet refers to the accounts which at the end of the
year have balances and continue with the company until it ends, i.e. assets and liabilities.

12. What is Profit and loss account?

Ans. The profit and loss account is a financial statement summarizing the revenues, costs and expenses incurred
during a given period, usually a fiscal quarter or year. The P&L statement is a synonym for the statement of income.
These records provide information about the ability or incapacity of a company to generate profit by increasing
revenue, cutting costs or both. Profit and loss account, provides statement of profits, statement of activities,
statement of financial performance or employment, statement of earnings and statement of expenses.

13. What is gross profit and what is Net profit?

Ans.

Gross Profit Net Profit

It is the excess of net sales over cost of buying or Net profit is the amount in excess of gross profit after
producing goods (direct expenses). covering all the indirect expenses.
It shows credit balance of the trading account Net profit is the credit balance in profit and loss
 account.
Comparison of gross profit with net sales is used to The enterprise's profitability can be measured by
determine the success of the company. comparing net profit with net sales.

14. What are the various Accrued & deferred revenue items?

Ans. Accrued revenue is used for transactions where goods and services were delivered, but cash has not yet been
received. Example: Rent outstanding, royalties outstanding, etc. Deferred revenue reflects situations where money
was received, but the goods and services were not provided. Example: A cleaning company allows a full year's
prepayment of its monthly fee for its services. For that year, the company accepts to provide cleaning services.

15. What is deferred tax? How does deferred tax asset or deferred tax liability occur?

Ans. Deferred tax relates to the tax impact of temporary discrepancies between the accounting revenue and the
company's taxable revenue. If book profit is more than taxable profit, then tax liability is deferred. This is a deferred
tax asset if book profit is less than taxable profit. Deferred tax liability is a future tax payment that a company is
expected to make to appropriate tax authorities in the future, and is calculated as the anticipated tax rate of the
company times the difference between its taxable income and before tax accounting earnings.

16. What are the demerits of double entry book keeping?

Ans. Demerits of double entry book keeping are

• By this method each transaction is recorded in two-stage (journal and ledger) and two-sides (debit and credit) in
the account books. This increases the number and size of account books and creates complications.
 Time, labour, and money are involved in double entry book keeping. So maintaining of accounts under this
system is not possible for small concerns.
• Know-how is required to maintain accounts under this system. Understanding this accounting method isn't easy.
• Since the system is complex, there is greater chance of errors.

17. What is Realization concept?

Ans. The theory of realization is the idea that profit can only be accepted after the underlying goods or services
associated with the revenue have been provided or made. Revenue can therefore only be accounted or recognized
after it has been earned.

In the case of selling of goods, revenue must be realized as the seller passes to the customer the costs and rewards
associated with owning the products. It is commonly recognized when the goods are finally passed to the purchaser.
Where goods are sold on credit terms, revenue is recognized along with a corresponding receivable value which is
then settled upon the receipt of the due amount from customer. In the case of service delivery, revenues are
recognized on the basis of the completion stage of the services stated in the contract. Any refunds from the
consumer above or short of the income accepted in compliance with the completion stage shall be accounted as
deferred income or accumulated income, as appropriate.

18. What is Amortization?

Ans. Amortization is the process of distributing cost of an intangible asset over the useful life of that asset.
Amortization is the payment of debt in regular installments with a fixed repayment schedule over time, like with a
mortgage or a car loan. We can only amortize intangible assets. Examples of intangible assets that are expensed
through amortization might include:

• Patents and trademarks

• Franchise agreements
• Proprietary processes like copyrights
• Cost of issuing bonds to raise capital
• Organizational costs
Unlike depreciation, amortization is typically expensive on a straight-line basis, meaning that the same amount will
be spent over the useful life of the asset in each period. Unlike depreciation, it also has no reuse or resale value.

19. How are prepaid expense accounted?

Ans. Prepaid expenses are expenses that a company has not yet recorded as an expense, but have been paid out in
advance. In other words, prepaid expenses are expenses paid in one accounting period, but recognized in a later
accounting period. Initially, prepaid expenses are recorded as assets, because they have future economic benefits
and are charged at the time the benefits are realized. A prepaid cost is kept as a current asset on an organization's
balance sheet before it is spent. 

20. What are the different accounting standards?

Ans. Accounting standards are authoritative benchmarks which are approved by the accounting board of a country.
Worldwide, there are many different accounting standards in use, ranging from full-accrual accounting standards to
accounting standards for cash and tax bases. Each is known as the Generally Accepted Principles of Accountancy, or
GAAP. Accounting standards specify how to recognize, measure, present and disclose transactions and other events
in the Financial Statements. Such standards aim at providing financial information to investors, lenders, creditors,
contributors and others that is useful in making decisions about providing the entity with resources. There are 27
effective Accounting Standards for professional accounting, they are:

AS 1 Disclosure of Accounting Policies

AS 2 Valuation of Inventories
AS 3 Cash Flow Statements
AS 4 Contingencies and Events Occurring after the Balance Sheet Date
AS 5 Net Profit or Loss for the period, Prior Period Items and Changes in Accounting Policies
AS 7 Construction Contracts - revised 2002
AS 9 Revenue Recognition
AS 10 Property, Plant and Equipment
AS 11 The Effects of Changes in Foreign Exchange Rates – revised 2003
AS 12 Accounting for Government Grants
AS 13 Accounting for Investments
AS 14 Accounting for Amalgamations
AS 15 Employee Benefits – revised 2005
AS 16 Borrowing Costs
AS 17 Segment Reporting
AS 18 Related Party Disclosures
AS 19 Leases
AS 20 Earnings per Share
AS 21 Consolidated Financial Statements
AS 22 Accounting for Taxes on Income
AS 23 Accounting for Investments in Associates in Consolidated Financial Statements
AS 24 Discontinuing Operations
AS 25 Interim Financial Reporting
AS 26 Intangible Assets
AS 27 Financial Reporting of Interests in Joint Ventures
AS 28 Impairment of Assets
AS 29 Provisions, Contingent Liabilities and Contingent Assets

21. What are the golden rules of accounting?

Ans. Golden Principles of accounting:

Personal Account: Debit the receiver, Credit the giver.

Real Account: Debit what comes in, Credit what goes out.
Nominal Account: Debit all expenses and losses, Credit all incomes and gains.

22. Why do we debit expenses?

Ans. Since expenses trigger a decrease in the credit balance of the business, a debit entry is necessary. A debit entry
increases the amount recorded for the expense account.

23. What is a bank reconciliation statement?

Ans. A bank reconciliation statement is a reconciliation of difference between the cash book which is maintained by
the organization and bank book which is maintained by the bank. A bank reconciliation should be completed at
regular intervals for all bank accounts, to ensure that a company's cash records are correct. A settlement with banks
can also prevent certain kinds of fraud.

24. What is Law of diminishing marginal utility?

Ans. The law of Diminishing Marginal Utility states that the marginal usefulness derived from each additional unit
decreases as consumption increases. Marginal utility is derived as the change in utility as an additional unit is
consumed. Utility is an economic term used to represent satisfaction or happiness. Marginal utility is the incremental
increase in utility which results from one additional unit of consumption.

25. Give an example of real account, nominal account, and personal account?

Ans. Personal Account: Rao’s account, Seema’s account etc.

Real Account: Cash, Accounts Receivables, Accounts Payable, Fixed Assets.
Nominal Account: service revenue, sales revenue, wages expense, utilities expense, supplies expense, and interest
expense.

26. What is capital expenditure? What is operating expenditure? Which of it is controllable?

Ans. Capital expenditure is an expenditure a business incurs to acquire or add value to fixed assets with a view to
generating future benefits. The capital-expenditure benefits extend beyond the actual spending accounting period.
The acquired assets can be either tangible or intangible. Operating expenditure is an ongoing cost that an enterprise
has to spend on running its daily operations. The benefits derived from such expenses are exhausted and don't carry
forward within the same accounting period. It's the reverse of capital outlays. Operating expenditure is controllable
as it’s more understandable.

27. What is cash flow statement? Examples of each type of cash flow.

Ans. The Cash Flow Statement shows the amount of money a business, institution, or individual has to increase or
decrease. In other words, it is used to define the amount of cash (currency) produced or consumed during a given
period of time. Different types of cash flow are:

•Cash flow from investing activities: Increase or decrease in current assets and current liabilities.
•Cash flow from operating activities: Purchase of land, building, furniture etc.
•Cash flow from financing activities: Issue of shares, debentures etc.

28. Give an example of Liquidity, Coverage, Profitability, and efficiency ratios?

Ans. •Liquidity Ratio: Cash ratio, Current ratio, Quick ratio etc.
•Coverage Ratio: Fixed-Charge Coverage Ratio, Debt Service Ratio
•Profitability Ratio: Gross Profit Margin, Operating Margin.
•Efficiency Ratio: Asset Turnover Ratio, Working Capital Ratio.

29. What is accrued income and accrued expenses

Ans. Accrued Income is income earned in one accounting period, but cash is not received until a different accounting
period. Example: Return on interest. Accrued expenses are costs incurred in one accounting period that will not be
charged until another accounting period has expired. Example: Payable wages, Rent payable.

30. What is Goodwill? How is it calculated?

Ans. Goodwill is a long term (or non-current) asset which is classified as an intangible asset. The amount of goodwill
is the cost of buying the business minus the tangible assets' fair market value, the intangible assets that can be
identified, and the liabilities obtained in the purchase.

To compute goodwill, the fair market value of the acquired company's identifiable assets and liabilities is deducted
from the purchase price.

31. What is Realization concept and Accrual concept?

Ans. The realization principle is the concept that revenue can only be recognized once the underlying goods or
services associated with the revenue have been delivered or rendered, respectively.

Accrual concept is the most fundamental principle of accounting which requires recording revenues when they are
earned and not when they are received in cash, and recording expenses when they are incurred and not when they
are paid.

32. What are the items in trading account in the Debit side and Credit Side?

Ans. Dr. Trading Account Cr.

Particulars Amount Particulars Amount

Opening Stock Xxxx Xxxx
Purchases Xxxx Xxxx
Wages Xxxx Xxxx
Carriage Inwards Xxxx Xxxx Sales Xxxx Xxxx
Freight Inwards Xxxx Xxxx
Gross Profit c/d Xxxx Xxxx

33. What are the items in Profit and loss account in the Debit side and Credit Side?

Ans. Dr.             Profit and Loss Account   Cr.

Particulars Amount Particulars Amount

Rent Xxxx Xxxx Gross Profit b/d Xxxx Xxxx
Rates and Taxes Xxxx Xxxx Interest Received Xxxx Xxxx
Salaries Xxxx Xxxx
Insurance Xxxx Xxxx
Auditor’s fee Xxxx Xxxx
Legal Expenses Xxxx Xxxx
Repairs Xxxx Xxxx
Bad Debts Xxxx Xxxx
Net Profit Xxxx Xxxx

34. What are the items on the liability side of a Balance sheet?

Ans.

Liabilities Amount
Capital xxx Xxx
(+) Profit xxx Xxx
Long Term Loans Xxx
Short Term Loans Xxx
Sundry Creditors Xxx
Bills Payable Xxx
Bank Overdraft xxx

35. What is the Ideal working capital? Is negative working capital bad for a company?
Ans. Working Capital Ratio of 2 or greater than 2 is considered as good short-term liquidity of the firm while less than
1 indicates that there will be issues regarding short term liquidity.

Negative working capital means that there are more short-term debts. Businesses with only cash dealings can earn
higher turnover with negative working capital. So, if the business has consistent negative working capital which is
fueling its sales growth, then it’s good. However, if negative working capital which is not fueling sales growth is bad. 
A good working capital ratio is considered anything between 1.2 and 2.0.

36. How analytics can be applied in Finance?

Ans. Analytics can be applied in finance for

1) Fraud Detection
2) Marketing optimization
3) Customer Lifetime Value
4) Feedback management
5) Knowing customer buying habits
6) Collections

37. How profit margin can be increased?

Ans. Profit margin can be increased by

1) Up-selling and cross-selling to increase your average unit sold / customer.

2) Customer Retention.
3) Tracking scrap, spoilage, and wastage.
4) Expanding your business focus to new areas.

38. What are the reasons for a product to have lower revenue than last year?

Ans. Reasons for a product to have lower revenue than previous years are

1) Poor Marketing and Sales Alignment

2) Lack of Staff Motivation
3) Poor Training given to staff
4) Changes in Senior Management
5) Economic Changes (inflation/deflation)
6) Poor quality of raw materials
7) High competition

39. If you are CFO, how will you manage Working Capital?

Ans. I would manage the working capital by

1) Not over investing in inventory.

2) Managing procurement
3) Improving the receivables process
4) Managing debtors effectively
5) Paying vendors on time and negotiating prices

40. How do you measure the health of a company?

Ans. There are 7 ratios that indicate the health of the company. They are as follows:

Current Ratio Operating Cash – Flow Ratio

Quick Ratio Pre - Tax Net Profit Margin
Return on Assets Inventory Turnover
Accounts Receivable Turnover Ratio
As well as the Balance Sheet can help us to find the financial position of the company and this can show the financial
strength of company.
 41. What is the difference between direct cost and indirect cost?

Ans. Key differences between direct cost and indirect cost are

Direct Cost Indirect Cost

A cost that is easily attributable to a cost object is
known as Direct Cost.
Specific projects
All direct cost together forms Prime Cost
Direct cost is Traceable
E.g., Direct Materials, Direct Labour, Direct Expenses
Indirect Cost is defined as the cost that cannot be allocated
to a particular cost object.
Multiple projects
All indirect cost together forms on cost or Overheads
Indirect Cost is not Traceable
E.g., Indirect Materials, Indirect Labour, Indirect Expenses

42. What are the different financial modelling types?

Ans. Please find below different financial models.

A) Three Statement Model. D) Sum of the Parts Model.

B) Discounted Cash Flow (DCF) Model. E) Consolidation Model.
C) Initial Public Offering (IPO) Model. F) Budget Model.
43. What is contra entry?

Ans. Contra Entry is an entry that is recorded to reverse or offset an entry across an account. If a debit entry is
recorded in an account, the credit side of the contra entry will be recorded and vice-versa.

44. What is suspense account?

Ans. A suspense account is an account that is temporarily or permanently used to carry doubtful entries and
discrepancies pending their analysis and ongoing classification. It can be a repository for monetary transactions
entered with invalid account numbers (payment receipts, cash disbursements, and journal entries).

45. What is depreciation? Can you explain the methods of accounting for depreciation?

Ans. Over time, an asset's monetary value decreases due to usage, wear and tear or obsolescence. This decrease is
measured as depreciation. The methods for accounting of depreciation is as follows:

1) Straight-Line Depreciation Method:  Straight-line depreciation is a very common and simple method of calculating
the expense. In straight-line depreciation, the expense amount is the same every year over the useful life of the
asset.

2) Double Declining Balance Depreciation Method: Compared to other depreciation methods, double-declining-
balance results in larger expense in the earlier years as opposed to the later years of an asset’s useful life. The
method reflects the fact that assets are more productive in its early years than in its later years.

3) Units of Production Depreciation Method: Units-of-production depreciation method depreciates assets based on
the total number of hours used or the total number of units to be produced over its useful life.

4) Sum-of-the-Years-Digits Depreciation Method: Sum-of-the-years-digits method is one of the accelerated

depreciation methods. A higher expense is incurred in the early years while lower expense is incurred in the latter
years of the asset.

46. What is bad debt? What will be the journal entry for provision of bad debt?

Ans. A bad debt is a monetary sum owed to a borrower who is unlikely to be compensated, or that the borrower is
unable to take steps to recover for different reasons, mostly because the debtor does not have the money to pay.
Bad Debts a/c Dr. To Sundry Debtors a/c

47. Why capital is a liability?

Ans. Capital is a liability, as the owner and business entity are considered separate from each other. So the amount of
capital invested by the owner has to be repaid at the time of winding up the legal business entity.
 48. What is demand and supply curve?

Ans. The demand curve is the graph depicting the relationship between a certain commodity's price and the amount
consumers are willing and able to buy at any given price. The supply curve is a graphical representation of the
correlation between the cost of a good or service for a given period and the quantity supplied.

49. Is current ratio an enough indicator about company’s performance?

Ans. No, it’s not enough indicator to measure performance, we should look at profitability ratios to get a complete
picture of company’s performance. The current ratio is a liquidity ratio that measures a company's ability to pay
short-term obligations. Current assets include cash, accounts receivable, inventory and other assets that are
expected to be turned into cash in less than a year. Current liabilities include accounts, wages, taxes payable, and the
current portion of long-term debt.

A current ratio that is in line with the industry average or slightly higher is generally considered acceptable. A current
ratio that is lower than the industry average may indicate a higher risk of default. Similarly, if a company has a very
high current ratio compared to their peer group, it indicates that management may not be using their assets
efficiently.

50. What is GDP, GNP and PPP – what is its relation with foreign exchange?

Ans. GDP is the final value of the goods and services produced within a country's geographical boundaries over a
specified period of time, normally one year. The rate of GDP growth is a significant indicator of a country's economic
performance.

GDP rises when the value of foreign exports in a country exceeds the value of its foreign imports. Essentially, if a
country sells more to foreign nations than its daily customers purchase goods originating from abroad, the GDP of a
country would increase.

The Gross National Product (GNP) is a measure of the economic activity of a nation by measuring the value of all
finished goods and services produced by a nation's economy by its nationals within one year.

The theoretical equation attempts to assess the changes required to be made to the exchange rates of two currencies
to suit each other's buying power.

The exchange rate between two countries depends on the relative buying power of the currencies in question. Such
will be the rate equating the two buying powers.

51. What is Inflation? How is it different from Stagflation?

Ans. Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and
services in an economy increases over a period of time.

Stagflation was the term given to inflation which does not fit that mould, inflation which coincides with higher or
rising unemployment. Stagflation describes a combination of two different economic indicators: inflation rate and
unemployment rate.

52. What is the difference between Guarantee and Indemnity?

Ans. A contract in which one party promises to compensate another for any loss suffered by the Promisor’s or the
third party’s act. A contract in which a party guarantees to another party that he will execute the contract or
compensate for the loss, is the assurance contract in case of their person's default.

 Guarantee is defined in Section 124 of Indian Contract Act, 1872.Indemnity is defined in Section 126 of Indian
Contract Act, 1872.
 Guarantee has two parties, i.e. indemnifier and indemnified. Indemnity has three parties, i.e. creditor,
principal debtor and surety.
 Number of Contracts required in a guarantee is 1. Number of Contracts required in indemnity is 3.
 Degree of liability of the promisor is primary. Degree of liability of the promisor is secondary.
  Purpose of Guarantee is to compensate for the loss. Purpose of Indemnity is to give assurance to the
fulfillment of promise.
53. What is Consumer Price Index?

Ans. Consumer price index is a comprehensive measure used for estimation of price changes in a basket of goods and
services representative of consumption expenditure in an economy.

54. What do you mean by assessment year?

Ans. Assessment Year is the year in which one file income tax returns of the year prior (i.e. Financial Year). It is the
year in which the income that one has earned in the financial year that is just ended is evaluated. E.g. for Financial
Year 2020-21 the Assessment Year will be 2021-22.    (Consist of 12 months starting from 1st April of every year to
31st March of the next year.)

55. What do you understand by total income? How many heads are there under total income?

Ans. Total Income is the income on which tax liability is calculated. It is necessary to compute total income to
ascertain tax liability. Section 80C to 80U provides certain deductions which can be claimed from Gross Total Income
(GTI). Five heads of total income:

A) Income from salary D) Capital Gain

B) Income from house property E) Income from other source
C) Income from Business/Profession

56. How will you decide the residential status of an individual? Who are resident but not ordinary resident?

Ans. To determine the residential status of an individual, the first step is to ascertain whether he is resident or non-
resident. If he is a resident, then the next step is to ascertain whether he is resident and ordinarily resident or is a
resident but not ordinarily resident.

Step 1: Determining whether resident or non-resident

A) He is in India for a period of 182 days or more in that year; or
B) He is in India for a period of 60 days or more in the year and for a period of 365 days or more in 4 years
immediately preceding the relevant year.
Step 2: Determining whether resident and ordinarily resident or resident but not ordinarily resident.
A) He is resident in India for at least 2 years out of 10 years immediately preceding the relevant year.
B) His stay in India is for 730 days or more during 7 years immediately preceding the relevant year

57. What is tax refund?

Ans. A tax refund or tax rebate is a refund on taxes when the tax liability is less than the taxes paid. Taxpayers can
often get a tax refund on their income tax if the tax they owe is less than the sum of the total amount of the
withholding taxes and estimated taxes that they paid, plus the refundable tax credits that they claim.

58. What is capital gain? Explain long term capital gains and how is it different from short term capital gains?

Ans. A capital gain refers to profit resulting from a sale of a capital asset, such as stock, bond or immovable property,
where the sale price exceeds the buying price. The gain is the difference between a higher price of sale and a lower
price of buy.

The short-term capital gain refers to an individual’s profit on account of the short-term capital asset transfer. At the
other extreme, when an individual transfers a long-term capital asset, the profit earned is called long-term capital
gain. The primary difference between short-term and long-term capital gain is the period for which an individual
holds the capital asset or investment. Financial Asset Holding is less than 12 months for short-term capital gain and
more than 12 months for long-term capital gain.

59. What is alternative minimum tax (AMT)?

Ans. Alternative Minimum Tax (AMT) is an extra income tax that is levied by the government in addition to the basic
income tax for those persons, companies, properties, and trusts that have exemptions or special circumstances that
allow lower standard income tax payments.

60. What do you mean by amortization and how is it different from impairment?

Ans. Amortization is an accounting term that refers to the process of allocating the cost over a period of time for an
intangible asset. It also refers to the loan principal being repaid over time.

The amortization is used to describe a reduction in an intangible asset's value over its lifetime. Impairment occurs
when an intangible asset is deemed to be less valuable than is stated after amortization on the balance sheet.

61. What is intercompany reconciliation?

Ans. Inter-company reconciliation is reconciling among the two branches of the same company located in multiple
locations. Whereas one branch acts as seller to other branch when some product is moved from branch A to branch
B.  Example: when branch A sends some products to branch B then in this case, branch A becomes the seller and
branch B becomes the purchaser.

62. What is the securities transaction tax?

Ans. Securities Transaction Tax (STT) is a tax payable in India on the value of securities (excluding commodities and
currency) transacted through a recognized stock exchange. As of 2020, it is 0.1% for delivery based equity trading.

63. What are the objectives of internal audit?

Ans. The objectives of an internal audit are:

A) Establish the areas of risk in the area being audited;

B) Establish the controls in place to address those risks and review their adequacy;
C) Check whether the organization’s financial regulations are being followed;
D) Carry out detailed testing of the controls being relied on; and
E) Make recommendations where weaknesses or inefficiencies are observed.

64. Explain about cross functional audits?

Ans. Cross functional audit is when other professional groups within an organization are involved in internal auditing
in an organization for the improving the functioning of that organization.

65. What are audit control procedures?

Ans. Internal control procedures can be broken into seven categories,

1) Separation of Duties. 5) Trial Balances.

2) Access Controls. 6) Periodic Reconciliations.
3) Physical Audits. 7) Approval Authority
4) Standardized Documentation.

66. What is CARO 2003? What do you mean by management audit?

Ans. CARO 2003 means company audit report order 2003. This was introduced by the central government which
wanted reporting requirements mandated by ministry of corporate affairs also to be present in the auditor’s report.
Management Audit is an assessment of the processes and practices of management of an organization in
administration and resource use, operational and strategic planning, and employee and organizational development.

67. Explain block chain.

Ans. Block chain is a technology that allows a reliable record of who owns what transactions, which is difficult to
hack. Block chain is based on distributed ledger technology that records information securely over a peer-to - peer
network. Though originally created for Bitcoin trading, the potential of the block chain reaches far beyond crypto
currency. Block chain ledgers may include land titles, loans, identities, manifestations of logistics-almost anything of
value. The technology is still new, but the potential business impact it can have is exciting, and immense.

68. How will you convince your parents to switch from Indian taxation to US taxation?

Ans. US Taxation allows two types of deductions i.e.; Filing status based (for example: Single, Married, head of family,
widow/widower) and Income based. US citizen can also claim two types of deductions namely; standard deduction
(based on filing status) and personal exemption. Indian taxation is based on age and income. Hence US taxation is
better system than Indian Taxation.

69. What is the difference between NRI and NRE?

Ans. An NRE account is a bank account opened in India on behalf of an NRI to park his/her foreign earnings; whereas
an NRO account is a bank account opened in India on behalf of an NRI to manage the revenue he/she earns in India.
These revenues include rent, dividend, pension, interest and so on. NRE accounts are exempt from tax. None of the
balance is taxable, nor the interest earned on these accounts. However, the interest received on an NRO account is
taxable at a higher rate according to the Income Tax Act 1961. The principal amount of an NRE account is available for
repatriation, and the interest accrued thereon. In other words, in the case of an NRE account, you can transfer those
amounts to a foreign account. The interest amount can be repatriated in the case of an NRO account; however, in a
financial year, in the case of the principal amount, you can remit only up to USD 1 million.

70. What are preliminary expenses? Where do they appear in the balance sheet?

Ans. Preliminary expenses are expenses incurred when a company is formed and before the start of any business
operations. They are listed on the asset side of the balance sheet and are ideally amortized within the same year, also
known as pre-operative expenses.

71. If you are a car manufacturer, how will unsold stock reflect in the balance sheet?

Ans. They will appear as closing stock for the period in the asset side of the balance sheet

72. If you are given certain amount of money to deposit in bank how will that amount be noted in books of
accounts both bank and customer?

Ans. In the books of the bank, it will be credited to the customer’s bank account and in the books of the customer it
will be debited to the bank.

73. If you buy a share at Rs.1000 then you lose Rs.200 from that, how will it reflect in the books of accounts

Ans. It will appear as capital loss in the books of accounts

Commercial Banks Interview Questions

74. What is the difference between drawer, drawee and payee?

Ans. In the case of cheque payment, the person who has a bank account and draws / writes a cheque is the drawer
and his bank is the drawee and the payee is the one to whom the amount is payable. In case of self-check the drawer
himself is the Payee.

75. Describe PESTEL Analysis

Ans. A PESTEL analysis is a framework or tool used by marketers to assess and track the macro-environmental factors
affecting an organization. PESTEL is an acronym for analysis of aspects of political, economic, social, technological,
environmental and legal nature. This analysis helps us identify the threats and weaknesses used in a SWOT analysis.

76. What is the difference between high interest regime and low interest regime?

Ans. High Interest regime is one in which the central bank (RBI) uses monetary policy to combat inflation through a
decrease in money supply and thus overall economic demand. This is done by levying higher interest to the banking
sector. A low interest regime occurs when interest rates, set by a central bank (RBI), are for an extended period below
the historical average.
 77. What is Jidoka?

Ans. Jidoka is defined as an automatic stop of a process when there are irregularities in the process. It is used in
quality control processes which apply four principles

1. Determine anomaly 4. Investigate the root cause, and ensure that all actions
2. Stop. are taken to counter it.
3. Fix the immediate situation, or remedy the anomaly.

78. Which bank do you have account? What are the facilities available in that bank?

Ans. I have account in State bank of India. Facilities available with SBI are Savings account, Current account, home
loans, and auto loans.

79. What is probability? What is the probability if I toss a coin?

Ans. To what extent an event is likely to occur, measured by the ratio of the favorable cases to the total number of
possible cases. The odds of one coin flipping are 1⁄2.

80. What is Industrial dispute act? What is strike? What is lockout? What is suspension? What is retirement?
What is voluntary retirement? What is compulsory retirement?

Ans. The Industrial Disputes Act of 1947 refers to India as a whole and regulates Indian labor law to the degree that it
affects trade unions as well as individual workers working within the Indian mainland territory. This became effective
April 1, 1947.

Strike action, also known as industrial strike, general strike, or just strike, is a job stoppage, triggered by the workers'
collective refusal to work. A strike usually happens in response to employee grievances. Lockout is a temporary work
stoppage or employment denial imposed by a company's management during a labor dispute. It is different from a
strike in which workers refuse to work. Suspension is the act of suspending someone or something, or suspending
the work / task conditions. Retreat is the retreat from one's job or position or from one’s productive working life. An
individual may also be semi-retired if he or she reduces working hours.

Voluntary retirement scheme is a tool used by companies to eliminate excess staff. It is also called as ‘Golden
Handshake’. This style has come about in India as labor laws do not require unionized workers to be directly
retrenched. VRS refers to workers that have completed 10 years of service or are older than 40 years.

Mandatory retirement, also known as compulsory retirement, is the age at which persons holding such positions or
offices are required by industry tradition or regulation to quit or retire.

81. What is SWOT and Porters Five force analysis?

Ans. Porters 5 forces outlines 5 key competitive components that may impact an organization.

1. The potential for new entrants into the industry.

2. Existing competition in the industry.
3. The arrival onto the market of new goods or services that can replace existing products or services.
4. Supplier power-When suppliers start bargaining; this could lead to scarcity.
5. Consumer Power-If Consumers have more bargaining power; it will result in a decline in profitability.

SWOT analysis is the analysis of Strength Weakness Opportunities and Threats to a company. Strength and
Weaknesses are internal factors that can be controlled or changed. External factors include opportunities and
threats. For example, tax cuts and economic reforms.

82. What are products offered by bank? How do banks give out loans?

Ans. Products that banks sell are

Retail deposit products • Current deposit account

• Savings bank account • Term deposit account
• Recurring deposit account • Zero balance account for salaried people
• No frill account for common man •Trade related advances
• Senior citizen deposit account, etc.  •Crop loan
Retail loan products Retail services
•Home loans • Safe deposit lockers
•Auto loans • Depository services
•Consumer loans • Banc assurance products etc.
•Education loans

Banks give loans that are based on customer creditworthiness. To calculate a borrower's creditworthiness, it is
necessary to perform a credit analysis. A lender will also evaluate his or her credit score, in addition to checking a
borrower's credit history. A credit score refers to a given score given to a borrower based on its credit history. The
score is given by credit bureaus which can assess and rate one's repayment behaviour. It is based on credit reports
that are created by credit bureaus.

A lender’s credit appraisal process will typically check and evaluate the following important factors:

•Income
•Age
•Repayment ability
•Work experience
•Present and former loans
•Nature of employment
•Other monthly expenses
•Future liabilities
•Previous loan records
•Tax history
•Financing pattern
•Assets owned

83. What is job design?

Ans. Job design (also referred to as work design or task design) is a core function of human resource management. It
is related to the specification of content, methods and job relationships in order to satisfy the technological and
organizational requirements, as well as the social and personal requirements of the job holder or employee.

84. Why do you want to join banking sector? What do you know about banking?

Ans. 1) The Banking sector offers tremendous opportunities for growth. Through the level of Trainee Officer,
applicants can grow up to the rank of General Manager.
2) Bank Employees have respect in society, since there is direct interaction with the customers.
3) One of the major reasons is Job security, especially with Public Sector Banks.
4) Banks provide a challenging working environment, anyone who loves to achieve work goals will definitely like a
banking job.
5) Overall banks provide opportunities for higher learning which is the demand for career development.
Banking is a service industry. Banking firms are highly regulated and supervised financial operations, making them
safe, pleasant and rewarding places to work. Banking careers offer integrity, stability and growth.

85. What is the procedure to open a bank account?

Ans. 1. Decide which type of bank account you want to open: there are many types of bank accounts including Saving
Account, Recurring Deposit Account, Fixed Deposit Account and Current Account. Thus, a decision must be taken
about the form of account to be opened.

2. Approach any Bank of preference & meet its Bank Officer: When the account form is determined, a suitable bank
should be approached. The next move is to speak with the bank official about account opening. To open a bank
account, one must ask the bank officer for an Account Opening Form.

3. Fill in the Bank Account Opening Form: In all respects, the Account opening form must be properly completed.
Required name, address, occupation and other information should be filled in where appropriate. The Specimen
Signature Card includes two or three specimen signatures. Unless the account is opened in joint names, then joint
signing of the form is required. Banks would also ask the applicant to request copies of his new photo for
identification purposes. Following are the documents needed to open a bank account;

• Proof of identity - Passport, driving license, Voter's ID card, etc.

• Proof of address - Passport, Driving license, Voter's ID card, etc.
• PAN card. • Form 16 (only if PAN card is not available)
• 2 latest passport size photographs.

4. Give References for Opening your Bank Account: The bank usually requires that each of the current account
holders have references (someone who is an existing client of the bank). The introducer mentions the reference in
the column intended in the account opening form. For safeguarding the bank's interest, the reference signs his/her
specimen signature in the column intended for the purpose.

5. Submit Bank Account Opening Form and Documents: The account opening form duly filled out must be submitted
to the bank along with the necessary documents. For example, in the case of a joint stock company, the application
form must be followed by a vote from the Board to open the account. It is also essential to submit certified copies of
articles and association memorandums.

6. Verification of the Bank Account Opening Form: Bank officer checks whether the form is complete or not.
Supporting documents are also checked. If the officer is satisfied with the form, then he clears the account opening
form.

7. Depositing initial amount in newly opened Bank Account: Appropriate amount has to be deposited in the bank
after getting the proposal form approved. After depositing the initial money, in the case of a savings account, the
bank offers a pass book, a cheque book and pay in slip book. A fixed deposit receipt is issued for fixed deposits. A
cheque book and a pay in slip book are given in the case of the current account. The pass book and a pay in slip book
are given for recurring deposit account.

86. Who determines the interest rate for loans?

Ans. RBI (Reserve Bank of India) determines the interest rate for loans in India.

87. What is credit risk and describe other types of risk involved in banks?

Ans. A credit risk is primarily the possibility of a loan default that may result from a borrower failing to make the
required payments. Other types of risk are

●Credit risk
●Market risk
●Operational risk
●Liquidity risk
●Reputational risk
●Business risk
●Systemic risk
●Moral hazard

88. What is Basel iii norms?

Ans. Basel III is an international regulatory agreement which implemented a set of reforms designed to strengthen
banking sector regulation, supervision and risk management.

89. What is EOQ?

Ans. Economic order quantity is the exact order quantity that minimizes the total holding costs and ordering costs for
a company. EOQ is the optimal order quantity that a company can buy for its inventory given a fixed production cost,
a certain demand rate and other variables.

90. What is ABC analysis?

Ans. ABC analysis is a method of inventory categorization consisting of the division of inventory items into three
categories, A, B and C: A being the most valuable items, C being the least valuable. This approach seeks to attract the
attention of managers to the essential few (A-items) and not to the other trivial low value items (C-items).

91. What are the different types of lead time?

Ans. Different types of lead time are

 Pre-processing lead time - the amount of time needed to produce a work order from the moment you hear
about the requirement.
 Processing lead time - the time required to make/manufacture the item.
 Fixed lead time - it is the part of processing lead time which is not dependent on order quantity.
 Variable lead time - lead time which is dependent and varies based on order quantity.

92. What is a Cooperative bank? How is it different from private banks?

Ans. Cooperative Banks are licensed in compliance with the 1912 Cooperative Societies Act. They are regulated under
the Banking Regulation Act of 1949 and the Banking Laws (Application to Cooperative Societies) Act of 1965, by the
Reserve Bank of India. All Co-operatives work with "one member, one vote" and "no profit, no loss" principles.
Cooperative banks are formed by a group of volunteers whose purpose is to satisfy their economic, social and
cultural needs through a jointly owned enterprise. But the Cooperatives Societies have limits on lending money for
agriculture and other purposes only to their members in rural areas. District cooperative banks in urban as well as
rural areas can accept deposits and offer loans to non-members and small businesses.

In India, both commercial and cooperative banks are established banks and perform related functions such as deposit
banking and advance payments. However, their structure and supervision do have certain differences.

1. Their ownership differs as the shareholders and cooperative banks are owned by members of cooperative
societies.
2. Commercial banks and Cooperative banks are both covered by the 1949 Banking Regulation Act. Cooperative
banks, however, are also covered under the 1912 Cooperative Act, and 1965 Banking Laws Act.
3. RBI regulates commercial banks while NABARD regulates cooperative banks.
4. Commercial banks are regulated by the Banking Companies Act.
5. Their scope of operation also varies as commercial banks have rural, urban, metropolitan, and international
presence, while cooperative banks only function in rural and urban areas.
6. Commercial banks make advances of all kinds such as agriculture, industry, exports and services, while
cooperative banks mainly lend to the segment of agriculture and retail.
7. Commercial banks operate through their branch networks, while cooperative banks are three-tiered-State
Cooperative Bank, District Central Cooperative Bank, and Cooperative Service Societies. Cooperative Service
Societies serve in rural areas.
8. The Central Government appoints the chief executive officer in Government-owned commercial banks and their
board of directors selects them in Private Banks. The Government and RBI are represented in their Governing Board.
Shareholders and staff elect their directors too. In Cooperative Banks, the President is elected by members of
cooperative societies and their activities are controlled by the State Govt.

93. What is credit appraisal? What does a bank look before giving a loan?

Ans. Credit appraisal is an assessment of a prospective borrower’s creditworthiness or repayment potential (the
lender assesses the technical feasibility, economic viability and bankability) with a significant emphasis on his / her
ability and purpose to repay his / her loan. A customer's credit evaluation mechanism lies in deciding whether or not
the customer is liable to repay the balance of the loan within the specified period.

This assessment basically checks the criterion mentioned below

1. Past Credit history—- determining whether his past or current loans have a clear trail of repayment and wanting
to know the reasons for any repayment wrongdoing.
2. Customer profile — Understanding which section of the market customer belongs, i.e., if he is a wage-earner or a
business class, and then assessing the nature of the company.
3. Trying to know the customer through a physical (age & health) interaction and understanding his/her needs.
4. Assessing the customer's financial position at present and in the past — this can be done by assessing his/her
finances, their banking pattern and any other source of revenue (if any).
5. This may sound strange, observing customer's facial expressions when questioned can also get us a lot of hints.
6. One should never try to give a loan out of pity and personal comfort to a customer because if customer does not
have the ability to repay, loan could turn in to bad debt in the future.
7. Loan purpose
8. Business strategy (Project viability)
9. Financial statements of the borrower.

94. What is the full form of CIBIL? How does CIBIL calculate scores?

Ans. CIBIL stands for Credit Information Bureau (India) Limited. Established in August 2000, it is India's first credit
information company. The company gathers and retains credit records of both individuals and business organizations.
This involves data on debt repayment and debt and credit card fees paid.

CIBIL score is calculated using its own proprietary algorithm, but the main elements of score composition revolve
around an individual's loan and credit card repayment behaviour. CIBIL score has range between 300 and 900 points,
respectively. Higher the ranking, better the borrower's credit-track record. The closer you’re to 900, the more likely a
bank will approve a loan. Experience says that at the time of making a credit appraisal of your loan application, banks
can consider a credit score of 750 and above as good enough score.

95. What is at the money? What is call option? What is put option?

Ans. At the money (ATM) is a situation where the strike price of an option is equal to the price of the security
underlying it. Both call and put options can be ATM at the same time. An ATM option does not have an intrinsic
value, but can have a time value before expiry. Trading activities with options tend to be high when options are ATM.

Call options are a contract that gives the option holder the right, but not the obligation, to purchase a stock, bond,
product or other instrument at a predetermined price within a defined period of time. The stock, bond, or
commodity is called the underlying asset. A call option buyer profits when price increases for the underlying asset.

A put option is an option contract that gives the owner the right to sell a defined amount of an underlying security at
a defined price within a specified time period, but this contract does not lead to an obligation to sell. This is the
opposite of a call option, which gives the holder the right to purchase an underlying security at a specified price
before expiring.

96. What’s Rural Marketing? What’s Social Media Marketing?

Ans. Rural marketing is a process of developing, pricing, promoting and distributing specific rural goods and services
that leads to the desired value exchange with rural customers to meet their needs and wishes, as well as to achieve
organizational goals.

Social media marketing is the use of websites and social media platforms to advertise a product or service. It is the
mechanism by which social media sites receive traffic or exposure.

97. What is product life cycle? Which stage of the cycle do you think Indian banking sector is in?

Ans. A new product moves from introduction to growth, maturity and decline through a sequence of stages. This
series is known as the product life cycle and is correlated with changes in the marketing situation thereby influencing
the marketing plan and the marketing mix. Indian banking sector is in growth stage.

98. What are the types of conflicts in a team? How will you solve them?

Ans. Types of conflicts in a team are listed below Conflict over positions, strategies or opinions - If two or three
strong but different positions are being argued in the group and it gets nowhere, a leader could stop the group and
ask each member to turn to talk without interruption or discussion. The rest are just listening to and trying to
understand where they come from, and why they pose the solution they are. It may go something like this.
Leader: "Let's pause a minute. I would like every one of you to state what's under your argument. What are your
interests, worries, ambitions, fears or needs that bring you to that conclusion? The leader's role in this instance is to
make sure that everybody gets noticed.

When the exercise is complete the leader should look for common concerns or goals. When everything is revealed,
the leader can build on any shared interests. This becomes the new focus in most situations, and transforms the
situation from confrontation to problem-solving.

Mistrust or uneven communication - If some people on the team dominate the discussion while others sit in silence
or seem to have fallen out, a leader can stop the process and ask each person what they need from others to feel
successful in the community, and how others can help.

Another simple practice is to appoint an observer of the process whose job is to focus on how the team interacts.
The process observer is allowed to call time to point out their findings if the teams get out of kilter — it may be
tempers are growing or communication is not flowing. For example, "We interrupted the speaker 10 times in the last
five minutes," or, "We keep talking about each other." Simply knowing this fact can alter the interaction of the team.
The team will quickly catch up on itself. Once you know what the impact of your behaviour is, it is harder to
misbehave.

Personality clashes -If personal styles are very different and create friction among team members, the DISC, MBTI, or
other behavioural evaluation tool may be implemented by a team leader to help people understand each other
better and learn to work together. Such resources allow people to consider what someone else wants. They can also
provide a common frame of reference for handling differences between individuals.

Power issues and personal agendas -Conflict involving power issues, or clear personal agendas also must be dealt
with. The truth is that some people just don't fit into a team and a leader needs to be willing to take them out or give
them another role. This does not happen frequently, but it is required occasionally. The good news is the squad
usually takes a leap forward once it's dealt with. This should only be an option if other attempts to cooperate with
the person have failed. Conflict can be healthy to a team when properly channeled. Leaders face the challenge of
knowing how and when to intervene.

99. What is Cash flow statement?

Ans. Cash flow Statement helps analyse the enterprise's cash inflow and outflow by considering various cash
statements. The different cash flow statements are:
 Cash flow from operating activities
 Cash flow from investing activities
 Cash flow from financing activities

100. What are intangible assets?

Ans. An intangible asset is an asset where physical substance is lacking. It is the opposite of physical assets such as
machinery and buildings. An intangible asset is usually very difficult to evaluate. Patents, copyrights, patents,
trademarks, goodwill, and trade names are examples of intangible assets.

101. What is market segmentation? If age is taken as a basis of market segmentation, what is it called?

Ans. Market segmentation is the practice of dividing a large consumer or business sector, consisting normally of
current and potential consumers, into consumer subgroups based on some form of common characteristics. Market
segmentation based on age is called demographic segmentation.

102. Develop a marketing strategy for a banking product. Choose your segment etc.

Ans. 1) Optimization of local search engines (SEO) mean you can find opportunities online and your customer will be
able to find you. As per CA Web Stress Index, 88 per cent of consumers will first shop online before opening a
checking account, according to the CA Web Stress Index. You may be the nearest financial institution, and you may
have the best offers on your bank accounts, but if your rivals dominate the top organic search results in Google and
Bing, then potential customers would be losing out. Do your prospective customers even know their bank?
Local SEO (search engine optimization) is the secret to optimizing the visibility of each of your branches on-line. Many
elements play a role in designing a comprehensive local SEO plan, but here are some main tactics you can use to
bring your future customers in front of:

Local map listings: Create and verify map listings in both Google and Bing for each of your branches. This information
usually appears above organic results when a local search is conducted and offers a rundown of the vital details your
customers need most: branch location, operating hours, telephone number, a connection to your website, and
directions to take them right to your doorway. Getting some 5-star reviews for those listings will increase your
credibility and give potential customers a greater sense of confidence that you can help them.

City-Specific Content: Build pages for each of your bank branches on your website. Flesh them out with branch
contact information, a high-quality building picture and address. Don't forget to add a few unique content paragraphs
which explain the services you provide, your staff, etc. To help drive curious visitors into confident customers, insert a
link to your deposits page. Both elements work together to help each page in the search engine results rank higher
on each branch site. Here is more list of best practices branch location.

Business Review Sites: Many people browse the Yelp and Yellow Pages websites to identify local businesses. Make
sure every location in your branch is listed on those sites. Review and listing to make sure your address, phone
number and working hours are all up-to - date. Having some 5-star ratings on these platforms should boost your
reputation, again.

Content Marketing: creating valuable content for your audience is an effective way to reach new prospects while at
the same time providing useful resources to improve engagement with existing customers. It is an important
marketing tactic that banks use to support almost every product or service. One approach is to develop content that
can address the customers 'and prospects' questions. For example, take deposits – do your customers ever ask you
about the discrepancies between the accounts you give, or do they intend to keep some amount of money in their
account? These topics may inspire new pieces of content that will educate your audience and open your bank's line
of communication.

Using these local SEO strategies will also increase the likelihood of potential clients finding you through Google
searches and business review sites. This is the time to present an attractive offer for a new deposit account once your
visitor has landed on your site or visited one of your branches.

Generally speaking, these approaches are useful for increasing the online exposure to a local audience and should
produce long-term results. If you're trying to reach a particular audience, keep reading for more detail.

2. To meet the target audience, using rising marketing platforms

You can't assume, in today's competitive climate, that any single channel will take your prospects through the entire
buyer journey. Part of your marketing plan for banks should be to identify the consumers and business people who
can help you grow your deposits significantly, then develop a multi-channel strategy to reach them.

Build a profile of what sort of customer you want to meet. For example, what is their ZIP code and the financial
products will they be using? Are they residents in the area for a lifetime, or have they just moved out of state here?
Was this their first step towards organizing their finances or, after several years, are they planning to change financial
institutions? Each of these categories has specific requirements and provides unique opportunities to open new
account deposit. Once that information is mapped out, you can design your marketing and outreach plan for bank
deposits accordingly.

As you create your desired customer profiles, an important consideration is researching what you think may be
attractive to your audience. It is critical for millennial customers and their effect on various industries to keep this
significant market in full view. With growing deposits, however, Baby Boomers is nearly 50 times better to market,
with significantly more assets under management at RIA (registered investment advisory) firms. When you know who
you want to target, integrated marketing campaigns that involve several touch-points from direct mail marketing,
statement stuffers and inserts, informative website material, email, and digital advertising will help you increase
deposits from existing customers and attract new customers to raise bank deposits.

3. Make the most of paid search marketing

It is becoming the standard in 2019 for potential customers to turn to a search engine to study a product or service
before making a decision. Even the majority of individuals who decide to open a physical branch account first gather
information online. As a result, putting your community bank in front of those searchers is becoming important. That
much is clear, even despite an aggressive search marketing strategy, many financial companies are not exploiting the
full potential of their online presence.

In using tactics such as pay-per - click (PPC) ads using platforms such as Google Ads, community banks have the
ability to drive past their rivals and achieve visibility at the top of the results pages of search engines. Paid search ads
are as successful as they can be aimed to a particular audience according to the exact words that Google searches for.
It is achieved using groupings of the target keywords, unique ad content, geo-targeting and a host of other choices.

Paid search ads provide a straightforward path for a highly qualified market to deliver your services to. Here are some
items to remember when developing a paid search campaign if your goal is to increase the deposits:

• Create advertisements for each deposit service: create advertisements focusing on individual deposit services and
select target keywords to provide those advertisements for relevant searches. Often match your ads with the
keywords that you're targeting. For example, if someone is searching for "open checking account near me," then you
would want to show ads related to your checking options, rates etc. If ads are displaying from a CD-related search for
your premier checking accounts, then there is little chance that users will actually click on them. It is a common
mistake of many search advertisers; in fact, on misaligned search terms and ad content, the average Google Ads
account wastes 76 per cent of its budget.

• Specific targeting is essential to driving eligible traffic and conversions. If your targeting area is too wide, then you
may end up with a fast-decreasing budget being wasted by users who are not part of your target audience. If you
have several branches it's smart to target prospects across each of your locations within a small radius.

• Consider your competition: The common practice of search marketing is to keep a watchful eye on your rivals. If
you see ads in the search engines for your local competitors, take a look at the services that they promote and how
they distinguish them. This can help you get an idea of what interests their customers, and how they address those
interests. Additionally, when someone searches for one of your rivals, you can tailor your advertisements to appear,
allowing you the ability to position your bank as a better alternative to their needs.

You will never outspend a megabank, but you can absolutely target prospects for megabanks or existing customers to
help them understand the benefits of local banking.

The pay-per - click landscape is huge, and there are several elements we haven't focused on like-budget, ad
extensions, display ads, remarketing / retargeting, consumer match, and more. If you plan to add paid ads to your
online presence, your best bet is to partner with a digital marketing agency that is experienced in helping banks grow.

4. Build effective mobile presence

A few issues are assured by 2020. One is that your clients spend a great deal of their lives online and on their mobile
phones. When your bank doesn't have a digital presence that allows you to make easy transactions anywhere, at any
time, you won't increase the number of deposits and, in addition, you can lose current clients. Convenience is of the
utmost importance for making banking an enticing proposition for your institution.

If you don't already have a mobile app available to give your customers, build a quick option that allows customers to
perform basic functions such as check deposit, account summary, and move funds from their handheld device.
People's lives are busier than ever, so providing time-saving solutions with a mobile-first mindset will make your bank
more appealing and turn your bottom line into greater growth.

5. Delivering friendly and educational customer service

There was a time when it was enough to serve up a smile and a small gift to gain new accounts. Now your bank is
vying for highly sought-after customers against bigger banks as well as online-only financial institutions. That means
you have to do your research, and then roll the red carpet out. Identify your bank's customers, and try to understand
their banking lives.
For example, busy people might not want to go through the trouble of switching their savings account, so you don't
want to lead with marketing strategies for savings accounting. However, the same personal or business customer may
entice a competitive loan offer. Once you have established a good relationship with this one product, cross-selling
other products like that no-fee check is easier.

Make teller outreach a key part of your internal marketing strategy. In the age of direct deposit and mobile banking,
clients need not visit a physical branch. Make it count with friendly, personalized service when they do. That is often
what sets a bank apart from larger, more impersonal institutions. As the teller handles the transaction of the
customer, they will recommend items that would be a good choice, like higher yield savings or investment services.

When it comes to customers with high net worth, pick up the phone and get yourself personal. Relationships are
important and the personal touch and commitment to their needs and happiness will be valued by individuals and
businesses.

Don't take any customer for granted overall. Remember that you're not the only bank that attempts to woo potential
customers or sell additional products to existing clients. Win them because they are real, available, comprehensive
and proactive.

103. Which software is mostly used in banks?

Ans. Finacle by Infosys, BaNCS by TCS, and Flexcube by Oracle are softwares used in banks.

104. How to prepare trading account?

Ans. Trading account is prepared using Trial Balance. Trading Account is like a statement which is divided in two parts
i.e. Income part and Expenditure Part. Dr. Trading Account Cr.

105. What is market capitalization?

Ans. Market capitalization refers to the total market value of the outstanding shares of a company in the dollar.
Commonly known as "market cap," this is calculated by multiplying the outstanding shares of a company by one
share's current market price. This figure is used by the investment community to determine the size of a company, as
opposed to using sales or total asset numbers.

106. What is Capital market? How is it different from Money market?

Ans. Capital market refers to activities collecting funds from certain entities and making them available to other
entities in need of funds. The core purpose of such a market is to improve transaction efficiency such that each
individual person does not need to check and evaluate, establish legal agreements and complete transfers of funds.
The money market is where high liquidity financial instruments are traded, with very short maturities. Participants
use it as a means for short-term borrowing and lending, with maturities typically ranging from overnight to just under
a year.

107. What is Sensex? How is it different from Nifty?

Ans. Sensex is a free-float market-weighted stock market index of 30 well-established and financially sound
companies listed on Bombay Stock Exchange. The main difference between SENSEX and Nifty is that SENSEX is the
stock market index for BSE Limited, while Nifty is the stock market index for National Stock Exchange (NSE). Another
is that SENSEX is comprised of 30 stocks, while Nifty is comprised of 50 stocks.

108. What is financial management?

Ans. Financial Management is the process of planning, organizing, controlling and monitoring financial resources with
a view to achieve organizational goals and objectives.

109. What is Initial public offering?

Ans. Initial Public Offerings (IPO) are those securities that are sold for the first time by the company to collect funds
to the public. One or more investment banks underwrite an IPO, which also arrange that the shares be listed on one
or more stock exchanges.

110. What is Repo rate? What is Reverse Repo Rate?

Ans. The rate at which the commercial banks borrow from the RBI when there is a shortage of cash is known as Repo
Rate. Reverse Repo Rate is the rate at which the RBI borrows from the commercial banks. The current rate is repo
rate and reverse repo rate can checked in below link (click on current rate) https://www.rbi.org.in/

111. What do you understand by Commercial banking management?

Ans. A commercial bank is a financial institution that provides services such as accepting deposits, business loans,
and basic investment products. The term commercial bank may also refer to a bank, or a division of a large bank,
which deals precisely with the deposits and loan services provided to corporations or large or medium-sized
enterprises as opposed to individual members of the public or small business. Commercial banking management is
the term used for the activities undertaken to run commercial banks profitably.

112. What do you understand by Credit Risk management?

Ans. Credit risk management is the method of reducing risks by recognizing at any given time the adequacy of a
bank's reserves of capital and loan risks – a mechanism that has long been a problem for financial institutions.

113. Difference between logistics and transport

Ans. Logistics implies a broader spectrum of operations related to the production and delivery goods and services.
Transportation is a function of logistics operations, which is focused purely on the identification, definition and
deployment of transportation modes (i.e. sea/road/air). Logistics operations also include warehousing and
sourcing/procurement activities.

114. What is the difference between Kaizen and TQM?

Ans. TQM concentrates mainly on customer loyalty through quality enhancement. It is both a top-down approach
and a bottom-up approach, while kaizen is based on procedures, and a bottom-up approach to initiate small gradual
changes. TQM implementation is more complex than Kaizen.

115. Difference between Current Account and Savings Account. What are the advantages of using one
over other?
 Ans. Savings account is used for parking personal savings, paying energy bills, meeting liquidity requirements and
investing. Current account is used for frequent business and/or occupation transactions.
 Savings account earns interest of 3% to 6% per annum. Current account earns no interest.
 For savings accounts, interest income earned above Rs.10, 000 /- is taxed as per section 80 TTA of income tax act,
1961.For current account there are no taxes, as there are no interests earned
 Savings account allows low or zero balance for some accounts. Current account holders are mandated to
maintain moderate to high balance for accounts.
 Everyone can open savings account. Current account can be opened by Business houses, Professionals, and
proprietors of business.

116. What is banking? Describe key developments in the Banking sector?

Ans. Banking can be defined as the business activity of accepting and safeguarding money owned by other
individuals and entities, and then loaning it out to earn a profit. However, the activities covered by the banking
industry have expanded with the passage of time, and banks are now also providing numerous other services. These
days, the banking services include debit and credit card issuance, providing safe custody of valuable items, lockers,
ATM services and online transfer of funds across the country / world. Main developments within the banking sector
are
a) Robust Demand: Increasing the workforce and increasing disposable income has led to a multiple increase in
demand for banking services. With diverse Govt. Rural banking interventions are also seeing increase in demand.
b) Technology innovation: mobile banking, online banking, ATMs and Door Step Banking are primary developments
in banking services.
c) Solid business fundamentals: The banking sector is seeing higher margins and expansions of interest and service
fees.
d) Policy support: Reserve Bank of India provides excellent financial and monetary support for the banking sector
and the economy.

117. What is the difference between Derivatives and Options?

Ans. A derivative is a financial contract from which an underlying asset derives its value, risk and basic term structure.
Options include one derivatives category while other types include futures contracts, swaps, and forward contracts.
Derivatives have been used to hedge risk and increase yields for generations, particularly in the agricultural industry,
where one party agrees to sell crops or livestock to a counterparty that agrees to purchase those crops or livestock at
a specific price on a specific date. When first introduced, those bilateral contracts were revolutionary, replacing oral
agreements and the simple handshake.

Equity Options- An equity option is a derivative that gets its value from a stock underlying it. The equity option
reflects the right, but not the obligation, to purchase or sell a stock on or before the expiration date at a certain price
known as the strike price. If the holder exercises the option, the option vendor must deliver 100 shares of the
underlying stock per contract to the purchaser. Equity options are traded on exchanges and settled through
centralized clearing houses, giving transparency and liquidity, two critical factors when traders or investors take
exposure to derivatives.

American style options can be exercised at any point before the expiry date, while options in the European style can
only be exercised on the day it expires. Most exchange options on equity and exchange traded funds (ETFs) are
American options while only a few are broad-based options. Indices have American-style options, including the SP-
100 Large Cap Index. Major benchmarks have actively traded European-style options including the SP-500.

118. Difference between Derivatives and Options

Ans. A derivative is a financial contract which derives its value, risk, and basic term structure from an underlying
asset. Options are one type of derivatives, which grant the investor the option to buy or sell the underlying asset, but
not the obligation. Options are available for equities, currencies, and commodities.

119. What is Foreign Exchange?

Ans. Foreign exchange, or forex, is the conversion of one country's currency into another. In a free economy the
currency of a country is valued in accordance with supply and demand laws. In other words, the value of a currency
may be added to the currency of another nation, such as the U.S. dollar, or even to a currency basket. The currency
value of a nation can also be determined by the Government of the nation. Many countries nevertheless freely float
their currencies against those of other countries, which keeps them in constant fluctuation.

120. What is marketing? What is marketing mix?

Ans. Marketing can be defined as "the management process responsible for identifying, anticipating and satisfying
customer requirements profitably. The 'marketing concept' implies that a company should anticipate the needs and
expectations of potential customers and fulfill them more efficiently than its rivals in order to achieve its
organizational objectives. The marketing mix is described as the "collection of marketing tools used by the company
to achieve its target marketing goals." The marketing mix therefore refers to four broad levels of marketing decision:
product, price, promotion and place. The marketing mix used in the marketing of services is extended by processes,
people and physical evidence.

121. What is the difference between selling & marketing?

 Ans. Selling principle is a notion of industry, which states that if customers and companies remain unattended,
then the commodity of a company will not be amply sold. Marketing concept is a business orientation that talks
about achieving organizational goals by getting better at providing customer satisfaction than others.
 Selling is about compelling consumer's mind towards goods and services. Marketing is about positioning the
goods and services towards the minds of the consumer.
 Selling starts at Factory. Marketing starts with identifying the Target Market.
 Selling focuses on the feature or benefit of the Product. Marketing focuses on Customer needs.
 Selling has an Inside-out outlook. Marketing has an Outside-in outlook.
 The essence of selling is transfer of title and possession. The essence of marketing is satisfaction of consumers.
 Selling requires short term planning. Marketing requires Long term planning.
 Selling is volume oriented. Marketing is profit oriented.
 Selling is narrow in scope. Marketing is broader in scope.

122. What is letter of credit?

Ans. A letter of credit is a letter from a bank that guarantees that a buyer's payment to a seller is received on time
and for the correct amount. Should the purchaser be unable to make payment on the purchase, the bank would be
expected to cover the complete or residual purchase cost.

123. What are the main sources of income for a bank?

Ans. Banks get their income from the following;

 Interest on loans - Banks provide various loans and advances to industries, corporates and individuals. The
interest received on these loans is their main source of income.
 Interest on investments - Banks invest in various government and rated securities, and earn interest and
dividends from these investments
 Fees income - Banks charge fees for performing banking services like syndication of loans, accepting bills of
exchange etc.
 Foreign exchange operations - Banks also deal in foreign exchange and act as brokers for the same, earning an
income from these operations. 
• Commission from third party products

124. What are all the key ratios of banking sector?

Ans. Key ratios that are tracked in banking sector are

•Loan/deposit ratio •Efficiency Ratio •Capital ratios •Return on Equity / Return on Assets •Credit Quality Ratio

125. What is the difference between savings and fixed deposits?

• Ans. The main purpose of depositing in savings account is to save a portion of income for immediate
expenses. Main purpose of having fixed deposits is to get a lump sum amount at the end of the maturity
period.
• It earns a nominal interest rate. Its interest rate is quite high. The longer the duration, higher the interest
rate.
• In nature it is constant. It can function for any number of years. Amount is held for a fixed time with the
bank, after which it is reimbursed to the depositor along with the interest accrued.
• Lesser amount is sufficient to open a savings account. More money is needed to open a Fixed Account.
• Intermittent Withdrawals from the savings account are permitted. Withdrawals are not permitted until the
fixed period expires.
• There is no credit facility normally available to the savings account holders. The account holders can get a
loan facility of 75% of the fixed deposit.
• Amount can be deposited any number of times. The deposit is made once, however it can be renewed after
the fixed deposit tenure.

126. Different ratios in financial accounting?

Ans. The five major Financial Ratio categories are listed below:

Liquidity Ratios 1. Current ratio: -This ratio is a comparison between current assets and current obligations. Its main
shortcoming is that it includes inventory as an existing asset. Inventory may not be that easy to convert into cash, so
may not be a good liquidity indicator.

2. Quick ratio: -The current ratio is the same but excludes inventory. The majority of remaining assets should
therefore be readily convertible into cash within a short period of time.

3. Cash ratio: -This ratio compares to current liabilities only cash and readily convertible investments. As such, it is the
most conservative of all liquidity ratios, and thus is useful in situations where current liabilities are due in the very
short term for payment.

Business Ratios 1. Stock Turnover Ratio-This ratio focuses on the relation between the cost of the sold products and
the average stock. And it is also known as the Ratio of Inventory Turnover or Stock Velocity.

2. Debtors Turnover Ratio-This ratio measures the effectiveness with which Accounts Receivable is managed and is
therefore also known as the 'Accounts Receivable Turnover Ratio.' The ratio shows the equation between a
company's credit sales (cash sales are not taken into account) and its average debtors.

3. Creditors Turnover Ratio- This ratio (also known as creditors’ turnover ratio or creditors' velocity) is calculated by
dividing the net credit purchases by average accounts payable. It measures the number of times, on average, the
accounts payable are paid during a period.

4. Working Capital Turnover Ratio-This activity ratio will measure the efficiency with which the company uses its
working capital to support the sales volume. Any surplus of existing assets over a company's contractual
commitments is its working capital.

Debt Ratios 1. Ratio Debt to Equity - Calculated by dividing the amount of the total debt by the value of the equity.
The goal is to see if financing originates from a fair proportion of the debt. Lenders like to see a large shareholding in
a firm.

2. Ratio Debt - Calculated by dividing total debt by total assets. A high ratio implies that assets are primarily financed
through debt rather than equity, and are considered a risky financing approach.

3. Debt servicing level coverage - Calculated by dividing the total net annual operating income by the total annual
loan payments. It checks the ability of an organization to pay back both the principal and interest portions of its debt.

4. Ratio of interest to cover - Calculated by dividing the profits before interest and taxes by interest cost. The goal is
to see if a corporation can pay its interest payments when due, even if it can't repay a loan balance. In situations
where a loan is supposed to be rolled over into a new loan at maturity, this mechanism works well.

Profitability Ratios 1. Gross profit ratio - This ratio excludes from revenue all costs associated with the prices of the
products sold in the statement of profit, and then divides the result by revenue. This is used to calculate the amount
of sales which are still available after selling products and services to pay for marketing and administrative costs and
to produce income. This ratio involves allocating fixed costs to the expense of the sold goods; thus, the outcome
tends to yield a lower percentage than the contribution margin ratio.

2. Net Profit ratio. Subtracts all expenses from sales in the income statement, and then divides the outcome by sales.
This is used in a reporting period for calculating the net earnings generated, net of income taxes. When the accrual
accounting approach is used, this can result in a figure that vary from what cash flows would imply, due to the accrual
of expenses that have not yet occurred.

3. Return on Assets - Divide net earnings on the balance sheet by the total sum of assets. The measurement can be
improved by using a tight credit policy to reduce the amount of receivable accounts, a system of just-in-time
production to reduce inventories, and by selling off rarely used fixed assets. The outcome varies by industry, as some
industries need considerably more assets than others.
4. Return on Equity – This ratio is derived by dividing net profits on balance sheet by the total amount of equity.
Measurement can be strengthened by financing a greater share of debt-based operations and using leverage to buy
back properties, thus reducing equity usage. If a firm does not generate enough strong cash flows to pay off debt, it
may be risky to do so.

Ratios to market value 1. Book value per share – This ratio is calculated by the net shareholders owned equity,
divided by the number of outstanding shares. This measure is used as a benchmark to determine whether the market
value per share is higher or lower which can be used as the basis for decisions to buy or sell shares.

2. Dividend yield ratio - Calculated as the total dividends paid per annum, divided by stock market price. This is
investors' return on investment in buying the shares at the current market price.

3. Earnings per share. Calculated as the company's reported earnings, divided by the total number of outstanding
shares (there are several variations on that calculation). This calculation in no way represents the market price of a
company’s stock, but investors may use it to determine the price they think the shares are worth.

4. Market value per share - Calculated as the Company's total market value, divided by the total outstanding shares.
This reveals the value currently assigned by the market to every share in a company's stock.

5. Price / Earnings ratio - Calculated as the current market price of a share, divided by the earnings reported per
share. The resulting multiple is used to determine whether the shares are overpriced or under-priced in accordance
with the effects of the same calculation for competing firms.

127. Difference between financial accounting and management accounting?

Ans. The following points explain the significant differences between financial accounting and accounts management:

i. Financial Accounting is the accounting branch which keeps track of all the entity's financial information.
Management accounting is the branch of accounting that records and reports an entity's financial as well as non-
financial information.

ii. Financial accounting users are both the company's internal management and the outside parties, while
management accounting users are only internal management.

iii. Financial accounting is to be reported publicly while the management accounting is for the organization's use and
is therefore very confidential.

iv. Financial accounting includes only the monetary details. In comparison, management accounting includes both
monetary and non-monetary information such as the number of workers, the amount of raw material used and sold,
and so on.

v. financial accounting is carried out in the prescribed format, whereas the Management Accounting format does not
exist.

vi. Financial Accounting focuses on providing its users with information about the functioning of the entity’s business,
while Management Accounting focuses on providing information to assist them in evaluating the performance and
developing future plans.

vii. Financial Accounting is done primarily for a specified period, usually one year. On the other hand, management
accounting is conducted as the company needs for example; quarterly, half-yearly basis, etc.

viii. Financial accounting is a must for audit purposes for every company. On the opposite, Management accounting is
voluntary, because no auditing is carried out.

ix. The reporting and auditing of financial accounting information is required by statutory auditors. Management
accounting information is for internal use only.

128. What is Six Sigma? What is Kaizen? What is JIT?

Ans. Six Sigma is a set of Process Improvement techniques and tools. It was introduced by engineer Bill Smith while
working at Motorola in 1980.A six sigma process is one in which there is statistically expected to be free of defects
99.99966 percent of all opportunities to produce some feature of a part. Six Sigma approaches aim to enhance the
efficiency of a process output by finding and eliminating the causes of defects and reducing variability in production
processes and business processes.

Kaizen is an approach to continuous improvement based on the idea that minor, ongoing positive changes can reap
significant improvements. It is typically based on co-operation and commitment, and contrasts with approaches that
use radical changes or top-down edicts to transform.

Just in time (JIT) is a method of inventory management through which materials, goods, and labour are scheduled to
arrive or be replenished in the production process exactly when necessary.

129. What is Supply Chain? What is Quality Management?

Ans. Supply chain management (SCM) is the broad range of activities needed to schedule, control and conduct the
flow of a product, from raw material procurement and manufacturing to delivery to the end customer, in the most
streamlined and cost-effective manner possible.

Quality management is the act of supervising all activities and tasks necessary to ensure the degree of quality
desired. It involves developing a quality strategy, establishing and enforcing quality preparation and monitoring, as
well as quality management and enhancing quality. It is called Total Quality Management (TQM), as well.

130. What is a Mutual fund? How do mutual funds make money?

Ans. A mutual fund is an investment security that allows investors to pool their money into one investment which is
managed professionally. Mutual funds may invest in such assets as stocks, bonds, cash or a combination. Investors
usually receive three forms of a return from a mutual fund:

1. Income is earned from stock dividends, and interest on bonds held in the portfolio of the fund. A fund pays out
almost all of the income it receives over the year in the form of a distribution to fund owners. Funds often give
investors the choice of either receiving a distribution check or reinvesting the earnings and getting more shares

2. If the fund sells priced securities the fund would have a capital gain. Most funds also pass on those gains in a
distribution to investors.

3. If fund holdings increase in price but are not sold by the fund manager, the price increases for the fund's shares.
You can then sell your shares in the mutual fund to the market for a profit.

131. What do you know about banking Structure? What are the different classifications of banks? What
is Scheduled Banks?

Ans. The Banking structure in India can be broadly segmented into 3 parts viz., Central Bank, Scheduled Banks & Non-
Scheduled Banks.

Reserve Bank of India - The RBI is India's central bank; this is the main body that governs the operations of all other
banks in the world. It was established on April 1, 1935 pursuant to the Reserve Bank of India Act, 1934. It regulates
the Indian Rupee's monetary policy, and value. Its main purpose is to issue the 'Bank Notes' currency. The Central
Bank’s aim is not to earn profit, but to maintain price stability and strive for economic development with the
country's entire round growth. Scheduled Banks - All the banks listed under the second schedule of the 1934 Reserve
Bank of India Act are scheduled banks. These banks include Scheduled Commercial Banks and Scheduled Cooperative
Banks. The following obligations should be met by these banks:
1) Paid up capital and collected funds should not be less than Rs.5 lakhs.
2) Any activity of the Bank should not be detrimental or adversely affect the interests of the customers.
There are two main benefits that these banks enjoy: -
a) Eligibility for a loan from RBI at Bank Rate
b) Automatic membership into a clearing house
Composition of Scheduled banks - Scheduled banks comprise of i) Commercial Banks, ii) Co-operative Banks

Commercial Banks are any banking organization that deals with the deposits and loans of business organizations.
Commercial banks issue bank cheques and drafts, as well as accept money on term deposits. These institutions are
run to make a profit and owned by a group of individuals.
Co-operative Banks are small sized banks operating in rural and urban areas. They also perform fundamental banking
activities but they are different from commercial banks. They do not operate with a profit motive. Four types of
commercial banks are Public Sector Banks, Private Sector Banks, Foreign Banks, and Regional Rural Banks.

Public Sector Banks - Banks in which the government has the majority stakes (51% or more) are called Public Sector
Banks. These include SBI and its Associate Banks (19 Nationalized Banks – Banks that were earlier private but were
later brought under the control of Government). SBI and its associates -State Bank of Bikaner and Jaipur (SBBJ) State
Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore
(SBT), besides Bharatiya Mahila Bank (BMB), merged with SBI with effect from April 1, 2017.

Private Sector Banks - Private Banks are owned by private individuals/institutions. These are registered under the
Companies Act 1956 as Limited Companies. They are further classified into:     New private sector banks – (example:
HDFC Bank, ICICI Bank, AXIS Bank, Yes Bank) and Old private sector banks – (example: Karur Vysya Bank, IndusInd
Bank)

Foreign banks - They are nothing but banks which are incorporated outside India but have operations in India.
Example HSBC, Standard Chartered, JP Morgan, etc.

Regional Rural Banks - Banks that are specially designed to cater to the credit needs of the rural and weaker sections
of the society are called Regional Rural Banks.

Cooperative banking in India - They are broadly divided in to Urban and Rural Cooperative Banks. But their
classification can be done on 5 levels:
Primary Coop. Credit Society – Association of borrowers and non-borrowers. Funds of society are derived from
members.
District Central Coop. Bank – Functions at District level only
State Coop. Bank – Apex Body the State Govt.
Land Development Bank – Long term loans to farmers. No deposits from public.
Urban Coop. Bank – general banking activities at State level.
Non-Scheduled Banks - Banks not under 2nd Schedule of the Reserve Bank of India Act, 1934 are called non-
scheduled banks. Non-scheduled banks are also subject to the statutory cash reserve requirement. But they are not
required to keep them with the RBI; they may keep these balances with themselves. They are not entitled to borrow
from the RBI for normal banking purposes, though they may approach the RBI for accommodation under abnormal
circumstances.

There are 5 Non-Scheduled Urban Cooperative Banks in Apart from the co-op banks there are 4 other Local Area
India Banks, which complete the ambit of Non Scheduled
1 Akhand Anand Co-Operative Bank Ltd Banks in India. They are:
2 Alavi Co-Op Bank Ltd 1. Coastal Local Area Bank Ltd
3 Amarnath Co-operative Bank Ltd 2. Capital Local Area Bank Ltd
4 Amod Nagrik Sahakari Bank Ltd 3. Krishna Bhima Samruddhi Local Area Bank Ltd
5 Amreli Nagrik Sahakari Bank Ltd 4. Subhadra Local Area Bank Ltd

132. What is the difference between Bonds and Equities?

Ans. The companies issue equity shares in order to collect money from the market by giving the shareholders the
right of ownership. Bond is a fixed income instrument representing a loan to a borrower made by an investor.

133. What is SEBI? What is its function?

Ans. India's Securities and Exchange Board (SEBI) is Indian securities market regulator. It was created in 1988 and
granted statutory powers on 30 January 1992 through the 1992 SEBI Act.

1. Protective Functions: SEBI performs these functions to protect investor interest and provide investment security.
(i) SEBI checks Price Rigging (ii) SEBI prohibits Insider trading (iii) SEBI prohibits fraudulent and Unfair Trade Practices
(iv) SEBI undertakes steps to educate investors so they can assess the securities of different companies and select
the most profitable securities. (v) SEBI supports fair practices and codes of conduct in the security sector by taking
steps:
(a) SEBI has issued guidelines to protect debenture holders' interests where companies are unable to change mid-
term terms.
(b) SEBI is empowered to investigate insider trading cases and has stiff fines and prison provisions.
(c) SEBI has stopped the practice of making preferential allotment of shares unrelated to market prices.
2. Developmental Functions: (i) SEBI promotes the training of securities market intermediaries.
(ii) SEBI strives to promote stock exchange activities by following a flexible and adaptive approach:
(a) SEBI has permitted internet trading through registered stock brokers.
(b) SEBI has made underwriting optional to reduce the cost of issue.
(c) Even initial public offer of primary market is permitted through stock exchange.
3. Regulatory Functions: (i) SEBI has regulations and rules and a code of conduct to regulate intermediaries such as
merchant bankers, brokers, underwriters, etc. (ii) These intermediaries have been brought under the regulatory
sphere and private placement has been made more restrictive. (iii) SEBI registers and regulates the working of stock
brokers, sub-brokers, share transfer agents, trustees, merchant bankers and all those who are associated with stock
exchange in any manner. (iv) SEBI registers and regulates the working of mutual funds. (v) SEBI regulates takeover of
the companies. (vi) SEBI conducts inquiries and audit of stock exchanges

134. What do you mean by Financial Services Marketing?

Ans. Marketing of financial services refers to the marketing of economic services provided by the finance industry,
which includes a wide range of businesses managing money, including credit unions , banks, credit card companies ,
insurance companies, accounting firms, consumer finance firms, stock brokerages, investment funds, individual
managers and some government-sponsored businesses.

135. What is Inventory management?

Ans. Inventory management involves keeping track of stocked goods in a company. It tracks their weight, dimensions,
quantities and location. This allows business owners to know when it is time to replenish goods, or to buy more
supplies for their production. If inventory management is not handled properly, a business can either lose money on
potential unfilled sales or waste money by stocking too much inventory.

136. What are the various steps in Marketing?

Ans. Steps in marketing process: -

1. Analysis of the Opportunities in the Market - The first step of the Marketing Process is to evaluate the market and
identify the gaps that need to be exploited. Such opportunities are linked to consumer expectations and desires that
the rivals in the industry are not focusing. A business that is starting the marketing cycle targets the incentives that
will be useful in the long-term success to efficiently boost its results.

2. Selection of the Target Market- It is the most important step in the marketing process which selects the target
customers. The company performs a thorough study of the target markets for this purpose, in order to choose the
final clients.

• Market Segmentation: The process in which the entire market is divided into different consumer units, each unit
having specific desires, customer preferences and actions that require different marketing mixes and strategies.
• Market Targeting: In this process the targeted segments of the total market are evaluated to ascertain the
attractiveness of each segment so that the one or two most suitable and potential segments should be selected
and entered.
• Market Positioning: It is the placement of a company's goods in consumers ' minds as opposed to rivals' products.

3. Development of Marketing Mix - After setting out a company's complete marketing strategy, it is then ready to
start planning its marketing mix.

• Marketing Mix: Marketing Mix is composed of certain variables of markets that are mixed by the company in
order to generate certain desired response in the targeted segments. Indeed the product's demand is influenced
by the use of certain marketing mix activities. The marketing combination consists of the four following Ps.
01- Product: means any offer (goods or services) that the company offers to the market.
02- Price: means the money the customers have paid to get the product.
03- Place: means the actions that ensure that the commodity is available to consumers on the market.
04- Promotion: involves all attempts by the organization to ensure that goods are marketed to consumers by further
presenting details on the benefits of the product.
4. Management of Marketing Efforts This is actually the action phase of the development marketing program in
which a suitable marketing mix is set for a target market. For the management of marketing efforts four functions
are adopted which are as follow.
01- Competitive research in which the organization recognizes internal strengths and weaknesses, as well as
potential opportunities and risks.
02- Strategic Strategy in which such marketing plans or tactics are drawn up to achieve the overall marketing goal.
03- Marketing Execution in which the plans and strategies developed are actually implemented to attain marketing
objectives.
04- Marketing Control in which the performance of the marketing plans and strategies is evaluated and necessary
steps are taken to ensure the achievement of the company's overall marketing objectives.

137. Describe the different types of pricing.

Ans. Different types of pricing: -

a) Penetration pricing-The price charged for products and services is set artificially low in order to gain market share.
b) Economy pricing- The marketing and promotion costs of a product are kept to a minimum
c) Price skimming- Price skimming sees a company being charging a higher price while launching a product or service
since it has a significant competitive advantage. The high price attracts new competitors into the market, and due to
increased supply, the price inevitably falls.
d) psychological pricing- Psychological pricing is the practice of setting prices slightly lower than rounded numbers, in
the belief that customers do not round up these prices, and so will treat them as lower prices than they really are.
e) Product line pricing- The process used by retailers to divide goods into cost categories to create different levels of
quality in consumers ' minds. Effective product line pricing by a company will usually involve putting in enough price
gaps between categories to inform prospective buyers of quality differentials. Also known as price lining.
f) Optional product pricing- Companies will attempt to increase the amount customers spend once they start to buy.
Optional 'extras' raise overall product or service price. For example, airlines will charge for optional extras such as
ensuring a window seat or booking a seat row next to each other.
g) Captive product pricing-Captive products are strategically used to maximize revenue. Sellers generally follow a
product-mix pricing strategy when pricing captive products. Low price are offered for the core product, but high
prices are placed on captive products.
h) Product bundle pricing-n a bundle pricing, companies sell a package or set of goods or services at a lower price
than they would charge if all of them were purchased separately by the client.
i) Promotional pricing-promotional pricing is the sales promotion technique which involves reducing the price of a
product or services in short term to attract more customers & increase the sales volume.

138. What are the various products of banks?

Ans. Banks offer large number of different products. Some of the basic products are: Current accounts, Savings
accounts, Credit accounts, Fixed accounts, Digital products (UPI apps), Debit cards, Credit cards, Cheque books,
Overdraft, Bill of exchange, Personal and business loans -Mortgages, Purpose loans, non-purpose loans, Investment
loans. Each of these products has number of sub-category of products. Banks also offer different services such as
investment advices, Money transfers, and payment processing.

139. Describe some basic theories in HR.

Ans. Some basic theories in HR are: Maslow’s Need Hierarchy – We have five categories of needs according to
Maslow: physiology, safety, love, esteem and self-actualization. In this theory, higher needs begin to emerge in the
hierarchy when people feel they have satisfied the previous needs sufficiently

Existence Relatedness Growth (ERG) Theory – ERG theory is a theory proposed by Clayton Alderfer in psychology. By
categorizing the hierarchy into its ERG theory (Existence, Relation and Growth),

Alderfer further developed Maslow's hierarchy of necessities. The existence category is concerned with having the
material requirements of human life.
McGregor’s Theory-X and Theory-Y - Social psychologist Douglas McGregor had developed the concept of theory X
and theory Y. It explains two opposing sets of assumptions managers make about their people: Theory X – employees
hate work, have no motivation and are unable to take responsibility.

Expectancy Theory - Expectancy theory suggests an individual will behave or act in some way because they are
motivated to choose a specific behaviour over others because of what they expect to be the result of that selected
behaviour.

Reinforcement Theory - BF Skinner and his associates proposed the reinforcement theory of motivation. It states
that the behaviour of individuals is a function of their consequences. Thus, according to Skinner, the organization's
external environment needs to be effectively and positively designed to motivate the employee.

Herzberg two factor theory - The two-factor theory (also known as Herzberg's theory of motivation-hygiene and
dual-factor theory) notes that there are some factors in the workplace that trigger job satisfaction while there is a
different collection of factors that cause dissatisfaction, all of which function independently.

McClelland (Needs for Affiliation, Power, and Achievement) Theory of Motivation - Need theory, also known as
Three Needs Theory, proposed by psychologist David McClelland, is a motivational model that seeks to explain how
the needs for achievement, power and affiliation

Adam’s Equity Theory - In 1963, the American psychologist John Stacey Adams developed The Adams Equity Theory.
It's about the balance between the effort that an employee puts into their work (input), and the output that they get
in return. Input includes hard work, skills, and enthusiasm.

140. Why banking industry? How banking is different from other industries?

Ans. Ten reasons why one should join banking sector are
1) Scope for individual growth
2) Variety of roles
3) Challenges
4) Opportunity to contribute to the growth of economy
5) Opportunity to travel, meet new people
6) Opportunity to apply one's creativity
7) Handsome salaries
8) Opportunity to build one's network
9) Job Security
10) Job satisfaction
Banking vs. other industry- Key differences Low Margin: The low margin in banking compared to non-financial
industries leaves little room for recovery from management mistakes, makes banking a high volume, low profit
business and this pressures banks to use high leverage.
Highly regulated business: You cannot start a bank with the ease of starting any other business
Risk management: Risk of Non-performing assets is managed through a structured process

141. What is sinking fund? What is depreciation?

Ans. A sinking fund is a fund that an organization establishes by setting aside revenue over a period of time to fund a
future capital expense or repay a long-term debt.

Depreciation refers, in accounting, to two aspects of the same concept;

• Decrease in asset value (fair value depreciation)

• The allocation of the cost of assets to periods in which the assets are used (depreciation with the matching
principle)
142. What are Assets and Liabilities?

Ans.

Assets Liabilities
Assets offer companies potential benefits Liabilities are obligations to business
 Assets are depreciable Liabilities are non-depreciable
Assets are classified as Tangible vs. Non tangible Liabilities are classified as current vs. long term
Assets = Liabilities + Shareholders Equity Liabilities = Assets- Shareholders Equity

143. In your perspective, what should bank do in future?

Ans. Digital transformation: - Banks operating on a digital core can see cost reductions and streamlined processes.
The end-to - end integration also aims to offer a more streamlined and engaging customer experience. And with
emerging digital technologies such as block chain and artificial intelligence it gives space for more market
transformation.

Block chain technology: - The block chain implementation transforms the paper-intensive international trade finance
mechanism to an electronic shared ledger that allows all the participating organizations, including banks, the
opportunity to access a common source of information. It also helps them to monitor all documents and verify
ownership of properties digitally, as an un-alterable ledger in real time. By dramatically reducing processing costs, the
block chain could potentially save banks trillions in cash.

Artificial Intelligence: - Artificial intelligence is a synthesis of three advanced technologies-machine learning, natural
language processing, and cognitive computing. The concept of Artificial Intelligence is to simulate human intelligence
into artificial machines, using sophisticated machine learning and natural algorithms for language processing. AI in
banking is in the form of Chat bot, Customer Preferences Identification and Fraud Detection.

Crypto currencies / Cashless society: - Banks need to be able to relinquish their conventional methods of operation
and take on a more flexible role. It is important to become forward thinking and support the use of block chain
technology even while carrying out their current business. If banks wish to survive in a controlled world of crypto
currencies, their functions must be close to those of coin exchanges.

Collaborate with New Fintech Entrants: - The new-age data native companies from Fintech are more customer-
oriented assets and have lean operating models that are free from legacy system problems and have better
regulatory arbitration. FinTech's organizational structures are flatter, with fewer barriers to change. This system not
only promotes creativity but also the opportunity to break down and restore the unsustainable structures. Banks will
cooperate with New Fintech Incomers

144. What is Liquidity ratio? What is Debt equity ratio?

Ans. Liquidity ratios measure the ability of a company to pay debt obligations and its safety margin by calculating
metrics including current ratio, rapid ratio and cash flow ratio in operation.

Debt equity ratio is used to assess financial leverage for a company. The debt-to - equity ratio is also called a risk or
gearing ratio. It can be determined by dividing total shareholdings of the liabilities.

145. What is Current asset, current liabilities?

Ans. Current assets are those assets which can be turned into cash within a short period, say a year. So, e.g., Cash,
cash equivalents, accounts receivables, etc.

Current liabilities are those liabilities that need to be settled within short period, say one year e.g., Short-term debts,
accounts payables, accrued liabilities etc.

146. What is Product life cycle?

Ans. The product life cycle defines the time during which an item is produced, introduced onto the market and
ultimately removed from the market. The cycle is divided into four phases: initiation, growth, maturity, and decline.
The idea of the product life cycle is used in marketing to decide when it is appropriate to advertise, reduce prices,
explore new markets or create new packaging.

147. Describe the different types of Ratios. What is EPS Ratio? What is PES Ratio?

Ans. Different types of ratios are

• Current Ratio - The current ratio (CR) is equal to the current total assets divided by current total liabilities. This
indicates to what extent current liabilities can be remitted through current assets.
• Quick asset Ratio -The quick asset ratio (QAR) removes from current assets less liquid current assets, such as
inventory and pre-paid expenses, which cannot be converted into cash quickly. The quick ratio, also called the acid
test ratio, is equal to liquid current assets, divided by current liabilities. It indicates the extent to which current
liabilities can be paid off through liquid current assets such as cash, marketable securities, and accounts receivables.
• Inventory / Stock Turnover-The inventory turnover indicates whether inventory levels are reasonable in relation to
cost of goods sold. It is calculated by dividing the cost of goods sold with average inventory.
• Fixed asset Turnover-The fixed asset turnover ratio measures the efficiency of the use of fixed assets in generating
sales. It is computed as sales divided by average net fixed assets.
• Debt Ratio -The debt ratio indicates the proportion of assets financed through both short-term and long-term debt.
This ratio is computed as total debt, which is the sum of short-term and long-term debt, as a percentage of total
assets.
• Gross Profit Margin Ratio-The gross profit margin (GPM) shows the firm's profit margin after deducting costs of
goods sold but before deducting operating expenses, interest expenses, and taxes. This ratio is also known as gross
profit ratio.
• Earnings per share (EPS) is the portion of a company's profit allocated to each share of common stock. Earnings per
share serve as an indicator of a company's profitability. It is calculated by net income less preferred dividend divided
by weighted average number of shares.
• Price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to
its per-share earnings (EPS). The price-to-earnings ratio is also sometimes known as the price multiple or the
earnings multiple. It is calculated by dividing market value of share by earnings per share.

148. What is Capital Appreciation?

Ans. The appreciation of capital is an increase in the price or value of the properties. It may refer to appreciation of
company stocks or bonds held by an investor, an increase in land valuation or other upward revaluation of fixed
assets. Capital appreciation may occur passively and gradually, without the investor taking any action. It is
distinguished from a capital gain which is the profit achieved by selling an asset. Capital appreciation may or may not
be reflected in financial statements; if indicated, the increase is said to be "recognized" by revaluation of the asset.

149. What are the various Goodwill Calculation Methods?

Ans. The following are the various methods of calculating goodwill;

• Average profit method - Under this method Goodwill's value is calculated by multiplying the Average Future profit
by a certain number of years of purchase. Goodwill = Future maintainable profit after tax x No. of years purchase
• Super profit method - Super profit is the surplus of projected sustainable future profits over ordinary income. An
enterprise may have certain advantages that allow it to earn extra profits over and above the normal profit that
would be earned if the enterprise's capital were invested in some other business with similar risks. Under this
method the goodwill is determined by multiplying the super profits by purchasing a certain number of years.
• Capitalization method -Under this method goodwill can be calculated by capitalizing average normal profit or
capitalizing super profits.
1. Capitalization of average profit method - Goodwill = Capitalized Value – Net Assets of Business
2. Capitalization using super profit method - Under this method, Goodwill is calculated by capitalizing the super
profits directly. Goodwill = Super Profits x (100/ Normal Rate of Return)
•Annuity method- In this process goodwill is measured by taking for a certain number of years the average super
profit as the value of an annuity. This annuity’s present value is calculated by discounting at the interest rate (normal
rate of return) given. That discounted annuity present value is a goodwill value.

150. Why RBI is needed? Where is HQ of RBI?

Ans. RBI is required to regulate the issue of Bank Notes, regulating the functioning of commercial banks and holding
of reserves with a view to ensuring monetary stability in India and generally to operate the currency and credit
system of the country to its advantage. RBI headquarters is in Mumbai.

151. What will you do if you are a bank manager and you want to sanction a loan?
Ans. • Identifying the intent of the loan and reviewing the relevant documents which confirm that (Example: the
borrower must send the documents from the educational institution concerned to receive the education loan.
• Discuss with the applicant about the EMI
• Analysing the applicant's financial background by analysing the credit score
• Evaluating the address and identity proofs

152. What is the difference between fiscal and monetary policies?

Ans. Current Fiscal and Monetary policies are available in below notification from Govt.
https://www.indiabudget.gov.in/ub2018-19/frbm/frbm3.pdf
Below are few key differences between Monetary and Fiscal policy. -
• Monetary policy involves influencing the supply and demand for money through interest rates and other
monetary tools. Fiscal policy relates to the impact of government spending and tax on aggregate demand and
the economy.
• Monetary policy is usually initiated by the Central Bank. Expansionary fiscal policy is an effort to raise aggregate
demand, with higher government spending and lower taxes involved.
• The target of monetary policy is to achieve low inflation and through that promote economic growth.
Expansionary fiscal policy will lead to a larger budget deficit. Deflationary fiscal policy will help reduce a budget
deficit.
• Monetary policy's main tool is change of interest rates. For example, if the Central Bank feels that the economy
is growing too fast and inflation is rising, then interest rates will be raised to reduce demand in the economy.
Deflationary fiscal policy is an attempt to reduce aggregate demand and will involve lower spending and higher
taxes.

153. What is BCG Matrix? Where do you use ANSOFF matrix?

Ans. BCG matrix is a framework created by Boston Consulting Group to assess the business brand portfolio's strategic
position and it’s potential. This classifies the portfolio of companies into four groups based on industry attractiveness
(that industry's growth rate) and competitive position (relative market share). Such two dimensions show the
company portfolio’s possible productivity in terms of the cash required to sustain the unit and the cash it produces.
BCG Matrix's four categories are Question Marks, Bad Dogs, Cash Cows, and Stars. The general purpose of this
analysis is to assist in understanding which brands the company should invest in and which should be divested.
Ansoff Matrix is used to assess the risks associated with the numerous available strategic growth options. It depicts 4
growth options by matching existing and new products with existing and new markets, plotted on a matrix. It helps
highlight the risk that you might be exposed to by a particular growth strategy as you move from one section of the
matrix to another. Ansoff matrix as a strategic marketing tool that ties a company's marketing strategy to its strategic
path in general. The approach provides four growth strategies, including market penetration, market development,
product development, and diversification;

154. What are the different types of bank accounts? What are the different types of loan accounts? 

Ans. Types of bank accounts: Savings Account, Current Account, Recurring Deposit Account, Fixed Deposit Account,
DEMAT Account, NRI Account.

Types of loan accounts: Personal Loans, Credit Card Loans, Home Loans, Car Loans, Two-Wheeler Loans, Education
Loans, Loan against the Insurance Schemes, Loan against Fixed Deposits, Loan against Mutual Funds and Shares

155. How can you incorporate post sales in banking? How can we implement marketing in a bank?

Ans. Post sales in banking maybe implemented with the after services like
a) Automated Payment of bills directly from the bank
b) Reminder for payment of bills through apps, and push notifications
Marketing can be implemented by using the strategies below:
• Market cooperatively with partners
• Tap into new markets, new customer categories
• Being different from competitors
• Researching the market and competitors
• Get on the right social media platforms
• Educate and teach customers on investing and various financial instruments.

156. What is customer attrition? What is customer retention? Which among acquiring a customer and
customer retention is easier?

Ans. Customer attrition - also known as customer churn, turnover, or defection - is when clients or customers end
their relationship with a company. Customer retention refers to the ability of a company or product to retain its
customers over some specified period. Customer retention is easier.

157. What is analytics? How will business analysis be useful in banking sector?

Ans. Analytics is the scientific process of discovering and communicating the meaningful patterns which can be found
in data. It is concerned with turning raw data into insight for making better decisions. Risk Management, regulatory
compliance and Automation are three key areas where Business Analysis will be useful in banking sector.

158. What is MBO?

Ans. Management by objectives (MBO) is a strategic management model which aims to improve an organization's
performance by clearly defining goals agreed upon by both management and staff. The method lets leaders of the
company see their successes as they accomplish each goal, which promotes a productive work climate and a sense of
accomplishment. Significant part of MBO is assessing and evaluating the actual output of an employee against the
defined expectations.

159. What is ROA? What is ROE?

Ans. ROA: Return on assets (ROA) is an indicator of how profitable a corporation is relative to its total assets. ROA
provides an indication to a manager, investor or analyst as to how effectively an organization tries to use its assets to
produce income. Return on assets is displayed as a percentage.

ROE: Return on equity (ROE) is a financial performance measure calculated by dividing the net income by the
shareholders' equity. Since the equity of the shareholders is equivalent to the assets of a corporation minus its debt,
ROE may be known as the return on net assets.

160. What is Balance sheet? What is Trading account? What is trail balance? What is Profit and loss?

Ans. a. A statement of the assets, liabilities, and capital of a business or other organization at a particular point in
time, detailing the balance of income and expenditure over the preceding period is balance sheet. Balance sheet
provides a snapshot of what a company owns and owes as well as the amount invested by the shareholders.

b. Any investment account which contains securities, cash or other holdings can be a trading account. Trading
account most commonly refers to a primary account of a day trader. These investors tend to buy and sell assets
frequently, often within the same trading session, and their accounts are subject to special regulation as a result. The
assets held in a trading account are separated from others which may form part of a long-term strategy of buying and
holding.

c. A trial balance is a bookkeeping worksheet on which all ledgers' balances are grouped into equivalent columns of
debit and credit account amounts. An organization annually prepares a trial balance, usually after each reporting
period ends. The general purpose of producing a trial balance is to ensure the mathematically correct entries in a
company's bookkeeping system.

d. The profit and loss (P&L) statement is a financial statement that summarizes the revenues, costs and expenses
incurred during a specified period, usually a fiscal quarter or year. P&L records provide information about a
company's ability or inability to generate profit by increasing revenue, reducing costs or both.

161. Difference between Trial Balance and Balance sheet

Ans. Trial Balance: They are prepared to check the arithmetic accuracy of account books. In an accounting period it
may be prepared number of times. It prepared all of the ledger accounts with balances. Auditor need not sign the
trial balance. Balance Sheet: It is prepared to disclose the true financial status of the business. It is usually prepared
once at the end of accounting period. It prepared with the balances of assets and liabilities. Auditor must sign the
balance sheet.

162. What is EOQ? What is the ABC process in Inventory?

Ans. a. The economic order quantity (EOQ) is a model that is used to calculate the optimal quantity that can be
purchased or produced to minimize the cost of both the carrying inventory and the processing of purchase orders or
production set-ups. Inventory optimization in supply chain

b. ABC analysis is an inventory categorization method which consists in dividing items into three categories, A, B and
C: A being the most valuable items which include 20% of items accounts for 80% of these annual consumption value
of items, B items include  medium consumption of about 30% of the inventory  which accounts for 15 to 20% of
annual consumption, C being the least valuable ones which accounts for less than 5% of annual consumption value
that comes from about 50% of total inventory items.

163. What’s customer retention? How does a bank do Customer acquisition? What is the Marketing
segmentation you would recommend for private sector banks?

Ans. a. Customer retention refers to the activities and actions that companies and organizations take in order to
reduce the number of client defections. Customer retention plans seek to help businesses maintain as many
customers as possible, often through customer loyalty campaigns and brand loyalty.

b. Bank New Customer Acquisition Strategies – Switch over from a competitor bank to your bank should be a smooth
process, easier the process, faster the growth. Private sector banks could use segmentation of behaviour and
demographics.

164. What are the key differences between Private vs. Public Banks?

Ans. Key differences between Private vs. Public Banks Public sector banks

Public sector banks Private sector banks

Public sector banks are those banks
where the government holds majority
stake of more than 50%
They have large number of customers
Interest rate on deposits is high
Promotion is based on seniority
Job security is always present
These are those banks whose majority of stake is
held by the private individuals where they hold
50% of shares are known as private sector banks.
They have relatively small customer base
Interest rate on deposits is marginally lower
Promotion is based on merit/ results
Job security is purely based on performance

165. What can you do in banking sector? Is banking needed in India?

Ans. I can contribute to banking sector with my marketing skills, customer handling skills, knowledge of compliance
process, Banking Operations Administration/Accounting. Banking in India is required as

1: - Promote Saving Habits of The People: Bank attracts depositors by introducing attractive deposit schemes and
providing rewards or return in the form of interest. Banks provide its clients with various types of deposit schemes. It
enables to create banking habits or saving habits among people.

2: - Capital Formation and Promote Industry: Capital is one of the most important part of any business or industry. It
is the life blood of business. Banks increase the formation of capital by collecting deposits from depositors and
converting these deposits into loans that advance to industry.

3:- Smoothing Of Trade and Commerce Functions: Trade and commerce play a vital role for any nation in this modern
age. And the money exchange is expected to be user friendly. A bank helps its clients send funds to anywhere in the
world and receive funds from anywhere in the world. A well-developed banking infrastructure offers various
attractive services such as mobile banking , internet banking, debit cards , credit cards, etc. to fast and smooth
transactions of these kinds. So, banking helps develop trade and trade
4. Generate Employment Opportunity: Since a bank promotes industry and investment, they automatically create
opportunities for employment. So, a bank can generate employment opportunities for an economy.

5 Support Agricultural Development: Agricultural sector is one of the integral part of any economy. Food self-
sufficiency is the major challenge and goal of any country. Bank promote agricultural sector by providing loans and
advances with low rate of interest compared to other loans and advances schemes. Many small finance banks
support these kind of agriculture related activities.

6. Applying of Monitory Policy: Monitory policy is an important policy of any government. Monitoring policy's main
objective is to stabilize the country's financial system from the dangers of inflation, deflation, crisis etc. The recent
repo rate increase to 6.5 per cent is just one example.

7. Balanced Development: Modern banks have spread their operations all over the globe. We can see a number of
big banks such as Citi Bank, SBI and Baroda Bank etc. It helps spread banking activities through rural and semi-urban
areas to a region. By promoting rural areas, bank is helping to achieve balanced development with the spread of
banking operations across the country. It plays an essential part in the country's socio-economic development. A
developed banking system allows the country to achieve balanced development without taking into account the rich
and the poor, the cities and rural areas, etc. And in a developing country such as India, the banking sector has a big
obligation to stabilize the country's socio-economic conditions.

166. Does closing stock appear in trail balance? What is it you attain from trading account, profit and
loss account?

Ans. a. The trial balance does not show closing stock. It is the amount left over from products purchased during an
accounting period. Total purchases are already included in the trial balance and therefore closing stock should not be
reinserted in the trial balance.

b. Trading account is an account which indicates the result of trading activities, such as purchase and sale of
products. Profit & loss account is an account, representing the actual profit earned or loss sustained by the business
during the accounting period. It is prepared to ascertain gross profit or loss for the period.

167. Why do we need Double entry system for accounting?

Ans. We need the double entry system for:

a) To see the financial position of the business much more clearly
b) Helps catch errors, and prevents frauds and misappropriations
c) Helps prepare accurate accounting records
d) The matching principles in the double entry system allows companies to accurately assess the profit earned or loss
suffered during a period.
e) Helps in comparative analysis of each year and helps in decision making.

168. What is Credit appraisal? What do you know about credit appraisal process?

Ans. a. Credit Appraisal is the process by which a lender assesses the technical feasibility, economic viability and
bankability of the prospective borrower, including the creditworthiness of the prospective borrower.

b. Credit appraisal process of a customer lies in assessing if that customer is liable to repay the loan amount in the
stipulated time. In order to compute the creditworthiness of a borrower, a credit analysis needs to be performed. A
lender may also determine his or her credit score, in addition to reviewing a borrower's credit history. A credit score
refers to a particular score that is given to a borrower depending on his or her credit history. The score is given by
credit bureaus which can assess and rate one's maximum repayment behavior. It is based on credit reports that are
created by credit bureaus. Ideally a loan applicant's credit score should be above 750. In India CIBIL is the leading
credit bureau in preparing credit report.

A lender’s credit appraisal process will typically check and evaluate the following important factors:
•Income •Age •Repayment ability •Work experience •Present and former loans •Nature of employment
•Other monthly expenses •Future liabilities •Previous loan records •Tax history •Financing pattern
•Assets owned
These are some of the ratios that are useful in the credit appraisal process:

Fixed obligation to income ratio (FOIR): This ratio refers to how one handles one’s debts, and how often one repay
one’ debts. It refers to the ratio of loan obligations to income that they earn on a monthly basis, and other expenses.
The bank will assess whether a certain portion of your income is sufficient to manage your EMIs with respect to the
loan you have applied for and your other liabilities. If the ratio is higher than the lender's benchmark set then the
lender cannot approve the order.

Installment to income ratio (IIR): This ratio considers your loan's equated monthly instalments (EMIs) to the revenue
you earn. It will indicate the amount that you are required to take from your income to pay for your personal EMI
loan.

Loan to cost ratio: This ratio indicates the maximum amount eligible for a given borrower. This will depend on the
cost of the car if you take a car loan and if you take home loan, on the cost of the house. That will depend on your
personal requirement for a personal loan. The ratio will usually range from 70 to 90 per cent of the car or house’s
cost.

Documents for proving credit worthiness are: Proof of income, Proof of address, Proof of identity, Proof of
employment, Proof of creditworthiness, and Proof of investment

169. How does bank calculate the repaying capabilities of loan account holder?

Ans. These are some of the ratios that are useful in the credit appraisal process:

Fixed obligation to income ratio (FOIR): This ratio refers to how one deals with his or her debts and how often they
repay their debts. It refers to the ratio of the loan obligations and other expenses to the income that they earn on a
monthly basis. The bank will assess if a certain portion of your income is sufficient to manage your EMIs for the loan
that you have applied for and for your other liabilities. If the ratio is higher than the benchmark fixed by the lender,
then the lender may not accept the application.

Installment to income ratio (IIR): This ratio considers the equated monthly installments (EMIs) of your loan to the
income that you earn. It will indicate the amount you will be required to take from your income to pay your personal
loan EMI.

Loan to cost ratio: This ratio indicates the maximum amount that a particular borrower is eligible to take. This will
depend on the cost of the car if you are taking a car loan and on the cost of the house if you are taking a home loan.
For a personal loan, it will depend on your personal requirement. Usually, the ratio will range from 70 to 90% of the
cost of the car or house.

170. What are the documents needed for opening a bank account?

Ans. Proof of identity - Passport, Driving license, Voter's ID card, etc.

Proof of address - Passport, Driving license, Voter's ID card, etc. PAN card.
Form 16 (only if PAN card is not available) 2 latest passport size photographs.

171. What are the different stock exchanges in India?

Ans. 1. Bombay Stock Exchange (BSE) in Mumbai, one of
the two principal large stock exchanges of India.
2. National Stock Exchange of India (NSE) in Mumbai, one
of the two principal large stock exchanges of India.
3. Multi Commodity Exchange of India (MCX)-Mumbai.
4. National Commodity and Derivatives Exchange
(NCDEX)-Mumbai.
5. Calcutta Stock Exchange (CSE)-Kolkata.
6. Madras Stock exchange- Chennai.
7. Inter Connected Stock Exchange Ltd.-Mumbai.
8. United Stock Exchange of India- Mumbai.
9. OTC Exchange of India-Mumbai.
10. Bangalore Stock Exchange (BgSE)-Bangalore
11. Ahmedabad Stock Exchange-Ahmedabad
12. Cochin Stock Exchange-Kochi.
13. Madhya Pradesh Stock Exchange-Indore.
14. Saurashtra Kutch Stock Exchange-Rajkot
15. Mangalore Stock Exchange-Mangalore.
16. Vadodara Stock Exchange-Vadodara.
17. Bhubaneswar Stock Exchange-Bhubaneshwar.
18. Coimbatore Stock Exchange-Coimbatore.
19. Delhi Stock Exchange Association – New Delhi.
20. Guwahati Stock Exchange-Guwahati.
21. Jaipur Stock Exchange- Jaipur.
22. Lucknow Stock Exchange-Lucknow.
23. Ludhiana Stock Exchange Association-Ludhiana
24. Meerut Stock Exchange-Meerut. 25. Pune Stock Exchange-Pune.

172. What is the difference between Shares, bonds, and equity?

Ans. Shares and equity are almost similar and both reflect the company's capital, equity means the possession of
assets after the debt has been paid off. Shares is generally the traded equity. Difference between Equity Shares and
bonds.
• Equity share holder is part owner of the company. Bond is just a lender to the company
• Equity does have voting rights. Bond owners do not enjoy voting rights.
• Equity share owner get dividend from the company. Bond owners get interest.
• Equity share are riskiest form of investment. Bonds are safer than equity shares.

173. What are the key differences between service marketing and product marketing?

Ans. Product marketing is the marketing of tangible goods which includes things that can be touched. It is the
continuous process of maximizing profit by promoting a product and selling the same to the audiences who need the
product. Service marketing is the marketing of intangible assets which include services like B2B, B2C etc.

174. What are the 4P’s? What are the 7P’s?

Ans. The 4 p’s and 7p’s are same. Product, price, promotion, place, packaging, positioning and people.

175. Difference between primary and secondary market?

Ans. The term capital market refers to any part of the financial system that leverages capital from bonds, shares, and
other investments. In the primary capital market, new stocks and bonds are issued and sold to investors, while shares
are exchanged on the secondary capital market.

The market place for new shares is called primary market. The place where formerly issued securities are traded is
known as Secondary Market.
• Primary market is also called New Issue Market (NIM). Secondary market is also called ‘After Market’.
• Securities are purchased direct from the issuer. Securities are purchased indirectly.
• Primary market supplies funds to budding enterprises and also to existing companies for expansion and
diversification. Secondary is primarily for trading; it does not provide funding to companies.
• In primary market security is sold only once. In secondary market security is sold multiple times.
• Buying and selling happens between Company and Investors. Buying and selling happens between Investors.
Amount from the security sales goes to Company.
• Amount from the security sales goes to Investors. Underwriters are the intermediaries in the primary market.
Brokers are the intermediaries in the primary market.
• Security price is fixed in the primary market. In the secondary market, security price fluctuates, depends on the
demand and supply.
• Primary market not based to any specific spot or geographical location. Secondary market has physical existence.

176. What are the different types of stock exchange?

Ans. Currently there are 9 exchanges approved by SEBI in India. Major ones are Bombay Stock Exchange and National
Stock Exchange.

177. What are the Differences between money market and capital market?
• Ans. The money market is part of the capital system, where lending and borrowing take place for up to one year
in the short term. Capital markets are part of the financial market, where lending and borrowing take place over
the medium and long term.
• Money markets usually deal in promissory notes, bills of exchange, commercial paper, T bills, call money etc.
Capital market deals in equity shares, debentures, bonds, preference shares etc.
• Money market contains financial banks, the central bank, commercial banks, financial Companies, chit funds etc.
Capital market involves stockbrokers, mutual funds, underwriters, individual investors, commercial banks, stock
exchanges, Insurance Companies.
• Money markets are informal. Capital markets are more formal.
• Money markets are liquid. Capital Markets are comparatively less liquid.
• The maturity of financial instruments is generally up to 1 year. The maturity of capital market instruments is
longer, and they have no timeframe specified.
• Since the market is liquid and the maturity is less than one year, Risk involved is low. Due to less liquid nature and
long maturity, the risk is comparatively high.
• The market fulfils short-term credit needs of the business. The capital market fulfils long-term credit needs of the
business.
• The money markets increase the liquidity of funds in the economy. The capital market stabilizes the economy due
to long-term savings.

178. What is marginal cost? What are Direct and indirect costs?

Ans. Marginal costs are variable labour and material costs, plus an estimated portion of the fixed costs (such as
overhead administration and selling expenses). A direct cost is a price wholly attributable to the production of
specific goods or services. Some costs, such as depreciation or administrative costs, are more difficult to assign to a
particular product and are therefore regarded as indirect costs.

179. Scheduled bank is meant for?

Ans. A scheduled bank, in India, refers to a bank listed in the Reserve Bank of India Act, 1934, 2nd Schedule. Banks
that are not covered by this Schedule are called non-scheduled banks. Scheduled banks are usually private, foreign
and nationalized banks operating in India.

180. What is beta? What is Mean, median, mode?

Ans. In probability theory and statistics, the beta distribution is a family of continuous probability distributions
defined at interval [0, 1] parameterized by two positive shape parameters, denoted by α and β, which appear as
random variable exponents and regulate the shape of the distribution.

Mean, median, and mode are three types of "average." The "mean" is the "average" you’re used to, where you add
up all the numbers and then divide by the number of numbers. The "median" is the "middle" value in the number
list. The mode is a statistical term that refers to the most commonly found number in a number set.

181. What is the Equation for standard deviation?

Ans.

182. What is corporate banking?

Ans. Corporate banking, also known as corporate banking, refers to the Banking aspect that deals with corporate
clients. The term was originally used in the United States to distinguish it from investment banking, after the two
activities were separated by the 1933 Glass-Stengel Act.

183. How do you transfer money online in banks?

Ans. In India you can use the options below to transfer money into banks online

NEFT is known for numerous reasons as being the most cost-effective and convenient online money transfer method.
NEFT is available on internet banking and mobile banking services provided by most banks in India, regulated by the
Reserve Bank of India (RBI). NEFT enables individuals to transfer even the smallest amount, without worrying about
the bank’s fee. NEFT transactions are handled in batches, and the funds are deposited on the basis of RBI's cut-off
date.

RTGS is used when an individual is required to transfer Rs.2 lakh and above, they can consider RTGS as the real-time
factor of settlement. Under RTGS the funds are deposited without delay in real time. Unlike NEFT, RTGS does not
follow the batch processing method, every transaction is processed by instruction, making it quicker and more
efficient

IMPS as the name implies, when a person has to pass and settle funds to another account immediately, IMPS will
prove useful because it instantly settles the funds. IMPS is comparatively a new concept in India as compared to RTGS
NEFT. Most banks make IMPS through their mobile banking platform and internet banking.

Digital Wallets – Several digital wallets were introduced to the Indian market in order to encourage digital
transactions following the demonetization of high-value currency at the end of 2016. Digital wallets are not only
popular and useful to be an optional method for online transactions but also to transfer money easily and
conveniently to another user or bank account. Many banks have, after demonetization, introduced their own digital
wallets to cater for the increasing demand.

Unified Payments Interface-The National Payments Corporation of India's Unified Payments Interface (UPI) is a new
digital transaction concept introduced by the Government of India. UPI, based on the mobile platform, allows users
to transfer money from one bank account to another without bank details being required. In order to send and
receive funds, UPI uses a Virtual Payment Address (VPA) which is created during the registration process with bank
account details as the pre-requisites. Once the registration is completed, any UPI user can use the VPA to transfer
funds.

184. What is trial balance? What is the purpose of trial balance? What are the Different types of
accounting errors?

Ans. A Trial Balance is a statement indicating the total accounts debit and credit balance. The cumulative debit sums
for the trial balance to count are equal to the credit sums. It therefore verifies the arithmetic accuracy of the posts in
the accounts of the ledger. Accordingly, trial balance accounts are an integral part of financial accounting. The
purpose of the trial balance is to ensure that the ledgers are entered correctly in accordance with the accounting
principles, so that the financial statements numbers are correct

We can classify the above errors in the following categories:

1. Mistakes of the Commission: mistakes caused by the incorrect reporting of transactions to the ledger, the incorrect
counting of accounts, the incorrect balance of accounts, the incorrect casting of day books or the incorrect recording
of the number in the journal or the day books are commission mistakes. These are clerical in nature, and mostly
affect the balance of the trial.

2. Errors of Omission: The error of omission typically occurs at the time of reporting a transaction in the journal or
subsidiary books or at the time of uploading to the ledger. These are of two types, error of complete omission and
error of partial omission. The error of complete omission is when the accountant omits to record a transaction
altogether. On the other hand, suppose he records the transaction in the subsidiary book but forgets to post it in the
ledger, this is the error of partial omission.

3. Compensating Errors: These are Compensating Errors when the net effect of two or more errors is nil. These don't
affect the balance of the trial.

4. Principal Errors: We record the transactions journal entry according to the accounting conventions and principles.
The errors that occur from the breach of these are in fact errors. An error of principle is a misclassification of
expenditure or income between the capital and income.

185. What is the role of banking?

Ans. Banks accept deposits, make loans and derive a profit from the difference in the interest rates paid and charged
respectively to depositors and borrowers. The bank’s job is to provide a secure place to hold your money and
sometimes the chance to earn interest on your deposits. In the modern economic world the banking system plays an
important role. Banks are gathering individuals' savings and lending them to business owners and businesses. Thus
the banks play an important role in a country's creation of new capital (or capital formation) and thus help the
process of growth.
 186. What are the different types of loans?

Ans. Home loans, car loans, industrial loans, school loans, trade-related advances, and crop loans are various types of
loans.

187. Where does gross profit appear in profit and loss account?

Ans. Gross profit in profit and loss account will appear in credit side as an income and as a balance carried forward
from trading account.

188. What is DuPont analysis?

Ans. DuPont analysis is an analysis technique used to dissect the different drivers of return on equity (ROE). There are
three major financial metrics that drive return on equity (ROE): operating efficiency, asset use efficiency and financial
leverage. Operating efficiency is represented by net profit margin or net income divided by total sales or revenue.
Asset use efficiency is measured by the asset turnover ratio. Leverage is measured by the equity multiplier, which is
equal to average assets divided by average equity.

DuPont Analysis=Net Profit Margin × Asset Turnover × Equity Multiplier

Where: Net Profit Margin = Revenue /Net Income

Asset Turnover = Sales / Average Total assets

Equity Multiplier = Average Total assets / Average shareholders’ Equity

189. What are the important ratios you know?

Ans. The five major categories in the financial ratios list include the following:

Liquidity Ratios Current ratio. This ratio is a comparison between current assets and current liabilities. Its main flaw
is that it includes inventory as a current asset. Inventory may not be that easy to convert into cash, and so may not be
a good indicator of liquidity.

Quick ratio. This is identical to the current ratio, but excludes inventory. The majority of the remaining assets should
therefore be readily convertible into cash within a short period of time.

Cash ratio. This ratio compared to current liabilities only cash and readily convertible investments. It is therefore the
most conservative of all liquidity ratios and is therefore useful in situations where current liabilities are due in the
very short term for payment.

Activity Ratios Stock Turnover Ratio - The focus of this ratio is the relationship between the cost of the goods sold
and the average stock. So it is also known as the Ratio of Inventory Turnover or Stock Velocity.

Debtors Turnover Ratio - This ratio tests the efficiency with which Accounts Receivable is handled and is thus also
known as the Accounts Receivable Turnover ratio' .The ratio shows the equation between a company's credit sales
(cash sales are not taken into account) and its average debtors.

Creditors Turnover Ratio -This one of the activity ratios will measure the efficiency with which the firm is using their
Working Capital to support their sale volumes. So any excess of current assets over the current liabilities of a firm is
their working capital.

Working Capital Turnover Ratio - This one of the activity ratios will measure the efficiency with which the company
uses its working capital to support the volumes it sells. So any excess of current assets over a company's current
obligations is its working capital.

Debt Ratios Debt to equity ratio - Calculated by dividing the total debt volume by the total value of the equity. The
goal is to see that financing comes from a fair proportion of the debt. Lenders like to see a major shareholding in a
company.

Debt ratio - Calculated through division of total debt by total assets. A high ratio implies that assets are primarily
financed by debt rather than equity, and are considered a risky approach to financing.
Debt service coverage ratio - Calculated by dividing the total net annual operating revenues by the total annual loan
payments. It tests an enterprise's ability to repay both the principal and interest parts of its debt.

Interest coverage ratio - Calculated by dividing earnings before interest and taxes by interest expense. The goal is to
see if a corporation can at least pay its interest payments when due, even though it cannot repay the balance of a
loan. This measure works well in cases where, at maturity, a loan is expected to be rolled over into a new loan.

Profitability Ratios Gross profit ratio - Subtracts from sales all costs associated with the cost of the goods sold in the
income statement, and then divides the result by sales. This is used to determine the percentage of sales still
available after selling goods and services to pay for selling and administrative costs and to generate a profit. This ratio
includes allocating fixed costs to the cost of the goods sold, so the result tends to yield a smaller percentage than the
margin ratio of the contribution.

Net profit ratio - Subtracts all expenses from sales in the income statement, and then divides the outcome by sales.
This is used to calculate the net earnings generated, net of income taxes, in a reporting period. When the accrual
accounting method is used, this may lead to a statistic that is different from what cash flows would suggest, due to
the accrual of costs that have not yet occurred.

Return on assets – This is calculated by dividing net profits by the total amount of assets on the balance sheet. The
measurement can be improved by using a tight credit policy to reduce the amount of receivable accounts, a system
of just-in-time production to reduce inventories, and by selling off rarely used fixed assets. The effect varies by
industry, as some industries need considerably more assets than others.

Return on equity – This is calculated by dividing net profits by the total amount of equity on the balance sheet.
Measurement can be improved by funding a larger share of debt-based operations, and by using debt to buy back
shares, thereby minimizing equity utilization. If a business doesn't experience sufficiently consistent cash flows to pay
off the debt, doing so can be risky.

Market Value Ratios Book value per share - Calculated as the aggregate amount of stockholders' equity, divided by
the number of shares outstanding. This calculation is used as a proxy for assessing if the market value per share is
higher or lower, and can be used as the basis for shares purchasing or selling decisions.

Dividend yield - Calculated as the cumulative dividends paid per annum, divided by stock market price. This is
investors' return on investment should they buy the shares at the current market price.

Earnings per share - Calculated as the company's reported earnings, divided by the total number of outstanding
shares (there are several variations on that calculation). This measurement in no way reflects the market price of a
company’s shares, but investors can use it to derive the price they think the shares are worth.

Market value per share - Calculated as the Company's total market value, divided by the total outstanding shares.
This reveals the value currently assigned by the market to every share in a company's stock.

Price/earnings ratio - Calculated as a company's current market price, divided by the reported earnings per share.
The resulting multiple is used to determine whether the shares are overpriced or underpriced relative to comparable
firms with the same ratio results.

190. What is NBFC? How is it different from a Bank?

Ans. A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 of India,
engaged in the business of loans and advances, the acquisition of securities, shares , bonds, hire-purchase insurance
or chit-fund business, but does not include any institution whose main business is that of agriculture , industrial
operation, the purchase or selling of any products (other than security A non-bank institution which is a company
and has the main business of receiving deposits under any scheme or arrangement in one lump sum or in instalments
by way of contributions or in any other way, is also NBFCs lending and making investments and its activities are
therefore similar to that of banks; however, there are a few differences as shown below:

i. NBFC cannot accept demand deposits;

ii. NBFCs are not part of the payment and settlement system and cannot issue drawn cheques on themselves;
And
iii. Deposit Insurance and Credit Guarantee Corporation's deposit insurance scheme is not open to NBFC
depositors, unlike in the case of banks.

191. What is SLR & CRR?

Ans. Cash Reserve Ratio (CRR) is the portion of deposits that it must deposit with the commercial banks (minimum
cash reserves) to the RBI.
Statutory Liquidity Ratio (SLR) refers to the minimum percentage of deposits that the bank is required to maintain to
the RBI in the form of gold, cash or other approved securities.
The RBI must change the said percentages to monitor the bank's available money supply.

192. How much money can lend by bank if they get rupees 1Lakh as deposit?

Ans. The bank could lend Rs.96000. (100000-4000, where 4000 is the amount to be kept with RBI.) Latest cash
reserve ratio can be viewed using below link https://www.rbi.org.in/

193. Do a SWOT analysis for private banks?

Ans. Strength: Great Financials, Good Management, Rewarding Future, Strong record, Reasonable valuations
Weakness: Geographical Concentration Risk,
Threats: Increased Competition from new entrants, more schemes and similar products in competitors.
Opportunities: Financial industry disruptors, Mobile Banking, Internet banking, Expansion into rural areas and retail
banking, doing aggressive marketing in order to improve brand value, digitalization in banking industry.

194. What are different kinds of loans? Documents required? What is CIBIL certification?

Ans. Different Types of Bank Loans in India are Personal Loans ,Credit Card Loans ,Home Loans ,Car Loans ,Two-
Wheeler Loans ,Education Loans ,Loan Against the Insurance Schemes ,Loan Against Fixed Deposits ,Loan Against
Mutual Funds and Shares. Documents Required for Loan against Property

For Salaried Individuals

Proof of Residence - Any one of Ration Card / Telephone Bill / Electricity Bill / Voters Card. Proof of Identity - Any one
of Voters Card / Aadhaar Card/ Driving License / Employers Card. Latest Bank Statement / Passbook (where salary /
income is credited for past 6 months). Latest 6 Months Salary Slip with all deductions and last 2 years Form 16.
Copies of all Property Documents.
For Self-Employed Individuals
Documents Required for a Business Loan
The following documents are required along with your Business Loan application:
PAN Card - For Company/Firm/Individual
A copy of any of the following documents as identity proof:
1. Aadhaar Card 2. Passport 3. Voter's ID card 4. PAN Card 5. Driving License,
A copy of any of the following documents as address proof:
1. Aadhaar Card 2. Passport 3. Voter's ID card 4. Driving License
Bank statement of the previous 6 months
Latest ITR along with computation of income, Balance Sheet and Profit & Loss account for the previous 2 years, after
being CA Certified/Audited
Proof of continuation (ITR/Trade license/Establishment/Sales Tax Certificate),
Other Mandatory Documents [Sole Prop. Declaration Or Certified Copy of Partnership Deed, Certified true copy of
Memorandum & Articles of Association (certified by Director) & Board resolution (Original)]
Documents Required for Commercial Vehicle Loan
When you run a small company, you may need a loan to buy a vehicle to do your job. The documents required to
apply for a commercial vehicle loan are as follows:
Age proof, ID proof, Application form, Photograph, Residence proof, Income proof, Current repayment track,
Work in hand/Contract copies, Signature verification proof, Existing vehicle ownership proof, Pro forma invoice,
Post-sanction/Pre-disbursement documentation: Loan Agreement duly signed along with RTO set, Post Dated
Cheques (PDCs)/ECS Form/Standing Instruction (SI) request, Margin money receipt, Insurance cover note
The CIBIL score helps banks and non-bank financial institutions to determine the credit worthiness for applicants for
loans and credit cards. The full form of CIBIL is Credit Information Bureau (India) Limited.

195. What is cross selling? How would a sales rep help a bank? What kind of sales and marketing roles
are there in banks?

Ans. Cross-selling involves offering the customer a related product or service. A Sales representative can introduce
new services or products to the customer through cross selling. Products might include either CASA, Credit Cards,
Mortgage, Loans, Banc assurance or all of these. A sales rep can help a bank by:
• Sourcing applications for products and services
• Maintaining contact with important customers / providers / builders / companies / government departments,
etc.
• Target Approach: Achieves the allocated targets.
• Has the appropriate product knowledge to grow.
• In short, the marketing to current and prospective consumers of the goods and services.

Examples of Sales and Marketing roles with in a bank are:  Customer Relations officer, Sales Officer, Wealth
management officers and branch manager.

196. Will retail model or online model prevail?

Ans. Online retail is rising at a remarkable pace, given the fact that most people still prefer shopping offline. Selling
online comes with significantly lower costs than running a traditional physical store, because you don't have to pay
for a physical space and ongoing costs. Online model will grow faster than retail model.

197. Difference between Credit card and Debit card?

Ans. A debit card is nothing like a credit card. When using a debit card, you deduct the money from your savings
account. You borrow money with a credit card to be repaid at some interest later, just like a loan. ATMs and debit
cards are also a convenient way to make transactions without cash, allowing you to keep a better track of the money
you spend.

Credit Cards Debit Cards

Bill is generated every month
It is linked to the issuing bank or financial organization
Credit limit is assigned on a monthly basis.
Interest is charge only if you haven’t cleared you bill
on time
If you are consistently failing to clear your bill within
the due date, it affects your credit score negatively.
Please use the card responsibly to avoid the same.
No bill generated. Account statement generated instead
It is linked to the cardholder’s bank account.
Cash withdrawal and POS limit assigned on a daily basis.
Some debit cards do not have that limit.
Since no amount is borrowed hence interest is not
charged
Since no credit is taken, hence no question of credit
score.

198. How do banks get their investment and capital?

Ans. Banks basically make money by lending money at rates higher than the cost of the money they lend. Banks raise
money via Deposits, Wholesale Deposits, Debt and Share Equity and lend money through Loans, Consumer Loans.
Bank-issued loans are charged higher interest rates than the interest offered on customers' deposits. Banks also
charge a fee for their services, take commission for the sale of financial products from third parties.

199. What is Financial Modelling?

Ans. It is the method of producing a representation in the form of a spreadsheet of the expenditures and profits of a
business that can be used to measure the effects of a potential event or decision. It is used by a company's financial
analyst to analyse and anticipate how future events could affect the performance of a company’s stock.
 200. What is 360-degree feedback? What is Maslow theory?

Ans. A 360-degree feedback (also known as multi-ratter feedback, multi-source feedback, or multi-source
assessment) is a mechanism in which input from the superiors, peers, and managers of an employee is received, as
well as a self-assessment by the employee itself. 360-degree feedback allows you to use multiple ratters such as
supervisors, peers, direct reports, subordinates and external ratters (clients or vendors) to leave feedback on an
employee. In the development plan of the employee, the feedback is often used as a benchmark.

Maslow stated that people are motivated to achieve certain needs and that some needs take precedence over
others. Our most important need is to live physically, and this will be the first thing that motivates our behaviour.
Once that level is met, the next level up is what motivates us, and so forth.

1. Physiological needs-these are biological human survival requirements, e.g., climate, food, drink, shelter, clothing
2. Safety needs-elements protection, security, order, law, stability, freedom from fear.
3. Love and belonging needs-the third level of human needs is social and involves feelings of belonging after the
physiological and safety needs have been fulfilled.
4. Esteem needs - which Maslow classified into two categories: (i) esteem for oneself (dignity, achievement, mastery,
and independence) and (ii) the desire for reputation or respect from others (e.g., status, prestige).
5. Self-actualization needs - realizing personal potential, self-fulfilment, seeking personal growth and peak
experiences.

201. If given an insurance policy whom and how will you sell?

Ans. 1. Learn everything you can about your product. Learn the laws, the tax implications, the way policy’s function,
the endorsements and riders your policies have or can have, how to analyse your client’s needs, how to finance the
payments... Learn everything about your industry. You can do this with mentors, by working with a company with a
training program, in class, online etc. The best teacher is experience and a good mentor if you ask me.

2. Find out about your client. Whether you're doing casualty insurance for a business or doing life insurance for a
single parent you want to get as much information as possible about your client. Their budget, financial position,
operations (employment), savings, hazardous activities. Anything you can know about them will help you advise
them better. Obviously as you sell different products those questions will tailor and narrow but in general information
is gold to you.

3. Scour the market, your resources for everything your client should know based on the information you now have
and devise a proposal to fit their needs based on the budget they proposed to you and another one (if necessary)
based on what you think they need.

4. Present with honesty, integrity and authority. If you have two equally adequate options but one is less expensive
show it. If you have a carrier that pays you a bonus or a higher commission for a product but there is another that is
better and/or cheaper do not go for a few extra points in commission do what's best for your client. Whatever it is
present prepared with information that is relevant and important to your client and give your recommendation with
conviction.

5. Close them. Ask for referrals. With regards to closing the explanation is too large. Think of it this way. If you're a
ladies’ man, or if you've seen one on TV do what he does. Don't talk more than you need to, be sweet but aggressive.
This is a personal business; people want to like you and they will buy from you if they do. Once they agree to buy just
shut up and close. In a glance some tips include

a) Set up our office thoughtfully by knowing the customer. Have every tool in our fingertips.
b) Be organized. We should have easy access to any information during the sales call.
c) Prepare for objections-listen to it, show compassion and use knowledge to help the client get past their
reservations.
d) Ask questions-do not make any assumptions.
e) Listen-listen to learn, not to respond. Understand the prospects concerns.
f) Evaluate our success and failure frequently.
 g) Be sincere. Standout among the competitors by expressing genuine interest in helping the client’s access
quality, affordable healthcare coverage.
h) Customize our conversation with the customers.
i) Exude confidence. Allow our genuine desire to serve the client.
j) Create a good opening and closing
k) Do regular follow up.

202. What are the 3 things important in any person to succeed in marketing?

Ans. Ability to sell, Ability to network.

Adapt to changing strategy, scenario, Ability to adopt to the new trends and technology
Ability to nurture and maintain relationships Regular research

203. What is the difference between Scheduled and unscheduled banks?

• Ans. Scheduled banks is a bank whose minimum paid up capital is Rs. 5 lakhs. Non-scheduled banks are the
banks which do not comply with the rules specified by the Reserve Bank of India, or say the banks which do not
come under the category of scheduled banks.
• Scheduled banks are listed in the second schedule. Unscheduled banks are not listed in the second schedule.
• Scheduled banks are required to maintain Cash reserve ratio with RBI. Unscheduled bank Cash reserve ratio is
maintained with themselves.
• Scheduled banks are allowed to borrow money from RBI for regular banking purposes. Non-Scheduled banks are
not allowed to borrow money from RBI for regular banking purposes.
• Scheduled bank has to submit returns periodically. Unscheduled bank has no such provision of submitting
periodic returns.
• Scheduled bank can become a member of clearing house. Unscheduled bank cannot become member of clearing
house.

204. How to motivate theory X employees?

Ans. The basic assumption in that theory is that people don't want to work. This theory suggests that people don't
like their employment, rather than having a positive attitude to their employment, and they just work them because
they need money.

Theory X managers are task centered, so it will be good to stick to the facts and figures and give very clear deadline.

205. What do you know about product mix? What are the products bank sells?

Ans. The Product Mix refers to the full range of products the company is offering for sale. In other words, the number
of product lines a company has is called a product mix for its customers. Four dimensions of the product mix: width,
length, depth, and consistency. Products that banks sell are deposit products

• Savings bank account • Recurring deposit account • Current deposit account • Term deposit account
• Zero balance account for salaried people • No frill account for common man • Senior citizen deposit account, etc. 
Loan products •Home loans •Auto loans •Consumer loans •Education loans •Trade related advances
•Crop loan Services • Safe deposit lockers • Depository services • Banc assurance products etc.

206. What are the laws you know?

Ans. The Insolvency and Bankruptcy Code, 2016 (IBC) is the bankruptcy law of India which seeks to consolidate the
existing framework by creating a single law for insolvency and bankruptcy. Indian contract act, Income tax act,
SARFAESI Act 2002.

207. What is Core banking Solution?

Ans. Core (centralized online real-time exchange) banking is a banking service provided by a group of networked bank
branches where customers can access their bank account and do basic transactions from any of the branches of the
member branches. It is a branch networking that enables clients to run their accounts and access banking services
from any branch of the CBS (core banking solution) network.

208. How is economic slowdown going to affect banking sector?

Ans. Economic slowdown affected the banking sector by causing banks to lose money on mortgage defaults,
interbank lending to freeze, and credit to consumers and business to dry up. Banks will stop lending to each other,
and it has become more difficult for consumers and businesses to obtain credit.

209. What is a corporate?

Ans. A company is a separate legal body and is independent from its members. Corporations enjoy most of the rights
and responsibilities that individuals possess: they can enter contracts, loan and borrow money, sue and be sued, hire
employees, own assets, and pay taxes. Some refer to it as a legal person

210. Explain non-performing assets?

Ans. A non-performing asset (NPA) refers to a term in default or in arrears for loans or advances. Non-performing
assets are recorded on a bank's balance sheet after the borrower fails to pay for an extended period of time

211. How would you sell credit cards when there isn't a leads list given?

Ans. By determining which key features, benefits and messages matter to each potential market and conveying the
customers about how our business can help them solve their problems. In order to have a customer buy our credit
cards, we have to find a reason why these customers want to come to us. Value proposition needs to be explicitly
spelled out.

212. What is debt service ratio?

Ans. Within economics and government finance, the debt service ratio of a country is the ratio of its debt service
payments (main + interest) to its export earnings. International finances of a country are healthier when that ratio is
low. The ratio is between 0 and 20 per cent for most nations.

213. How many laws are there as per banking act?

Ans. There are various banking laws and regulations which are mainly or partly related as to how the banks function
in the country, they are as follows : The Reserve Bank of India Act, 1934 ,Banking Regulation Act, 1949 ,Prevention of
Money Laundering Act, 2002 (“PMLA”) , Limitation Act, 1963 , Recovery of Debts Due to Banks and Financial
Institutions Act, 1993 (“DRT Act”) , Lok Adalats under Legal Services Authority Act , SARFAESI Act, 2002 , Lenders
Liability Act , Banking Ombudsman, The Consumer Protection Act,1986. So currently there are 36 laws available as
per banking act.

214. What is capital appreciation?

Ans. Capital appreciation is an increase in the price or value of assets. It can refer to an investor’s appreciation of
company stocks or bonds, an increase in land valuation, or any other upward revaluation of fixed assets.

215. Difference between DD and cheque?

Ans. A cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on
demand. Demand Draft is a pre-paid Negotiable Instrument, wherein the drawee bank acts as guarantor to make
payment in full when the instrument is presented. Because of inadequate balance, a cheque will bounce. DD cannot
be dishonoured as the amount is paid beforehand. In cheque drawer and payee are different persons. In DD, both
parties are banks.

216. How would removal of minimum wages act impact businesses?

Ans. The effect of a minimum wage depends, in part, on the competitiveness of the labour market — or not, in which
case employers exert significant power over wage decisions. Under two severe assumptions, we study the job effects
of minimum wage: in the first case, there are many employers struggling to hire workers; in the second, there is one
single employer. An ideally competitive labor market is a combination of several businesses that are at job
competition. Companies do not have the power to set salaries; the market dictates fair wages. If a firm deviates from
this wage, it either pays less and loses workers or pays more, sustains losses, and exits the market. At the other
extreme there is a labor market, which is a collection of local small markets. Some firms are in a dominant hiring
position in each local market (think of a large retailer near, for example, a small town). Within such an employer-
dominated market (referred to by economists as a monopolistic economy) a large employer has the ability to
arbitrarily set a wage without fear of competition.

217. How u will convince someone to buy a loan?

Ans. Make clear the terms and conditions of the loan to the borrower, and show the advantages of taking the loan.

218. What is the difference between a Term Loan and a Demand Loan?

Ans. A demand loan is a loan which may require a lender to be repaid in full at any time. The lender and the
borrower (or should be) have understood this condition from the outset. At the other hand, a term loan is a loan
which has a fixed term length. It has a fixed timeline for the repayment.

Small Finance Banks Interview Questions

219. What is brain drain?

Ans. Brain Drain is defined as the departure of educated or skilled people from one region, economic sector, or field
to another usually for better pay or living conditions.

220. Microfinance is different than other financial activities. How comfortable are you?

Ans. Microfinance is an Individual focused, community-based approach to providing capital and/or financial services
to people with low economic backgrounds who do not currently benefit from major financial institutions or small
businesses who do not have access to traditional or conventional resources. Micro-finance is intended to create
financial inclusion within society. Main stream finance, on the other hand, deals with the provision of services to the
overall economy, with mainly profit as motive.

221. What is MCLR?

Ans. The marginal cost of funds-based lending rate (MCLR) is the minimum interest rate that a bank can lend at.
MCLR is a tenor-linked internal benchmark, meaning the bank determines the rate internally, depending on the time
left to repay a loan.

222. How digital marketing can help in rural areas or retail?

Ans. Through infrastructure development, villages have moved closer to cities. Mobile and, to some degree, the
internet took urban villages closer and rural India became acquainted with urban lifestyle. This motivated rural
people to increase prosperity and improve their lifestyle. This motivation, together with the availability of easy
capital through microfinance and the schemes of governments, helped rural India to set up agricultural side
businesses. Such companies are notable sources of Poultry, Dairy, Honey, etc. Those initiatives have begun to bridge
the gap between urban and rural India's per capita income. Accordingly, disposable income in rural Indians increased
the demand for specific goods sold in urban India alone.

223. You are the team leader; two people in your team are not contributing. How will you tackle this
situation?

Ans. I would like to gauge which of the below categories these team members are and then adapt my leadership style
accordingly

a) Low Competence - High Commitment: - If the team members are of low competence-high commitment, I would
be giving specific guidance and close supervision.
b) Some Competence - Low Commitment: - If the team members are of some competence-low commitment, I
would be explaining and persuading them as to why they should contribute to the team.
c) High Competence- Variable Commitment: - If the team members are of high competence-variable commitment, I
would be sharing and facilitating their discussions.
d) High Competence- High Commitment: - If the team members are of high competence-high commitment, I would
be providing minimum guidance or help to solve problems

224. What is the difference between equality and equity?

Ans. Equality and equity are two approaches which we should use to achieve justice. Equity gives everyone what it
takes to be successful. Equality is fair justice for all. Equality is aimed at promoting fairness, but can only work if
everyone starts from the same place and needs the same assistance.

225. What will you do when employees quit your company and join your competitors?

Ans. 1.  Discontinue remote electronic access — The conventional office is no longer limited to the walls surrounding
a desk for an employee. Employees have easy access to their machines and voice mails. It is critical that electronic
access for a leaving employee is discontinued immediately. Doing so can strengthen the ability of an employer to
seek trade secret protection for its information, and may limit a former employee's ability to misappropriate key
information electronically.

2. Ensure return of records and property — Over a period of years, departing employees, particularly long-time
employees, may have accumulated firm records in hard or electronic form. Employers are well advised to seek
written confirmation from departing employees that all such records and information obtained as a result of their
employment with the company has been returned, including company information which may reside on the
employee's owned electronic devices. This would also include the return of all the office keys, building access cards
and tangible properties.

3. Freeze usage of employee’s computer — If an employee resigns it is not always necessarily possible to know if the
employee presents an unfair competitive danger. It may be a couple of weeks before an employer learns that the
former employee was engaged in wrongdoing. Computers previously used by the former employee may be a
valuable tool in carrying out a post-fact investigation, but key evidence may be lost (e.g., overwritten or deleted) if
the employer has continued to use the former employee’s computer. For this reason, the computer of a former
employee should be removed from active use should there be any suspicion that a former employee poses a
competitive threat. If that is not feasible, making a computer forensic image presents another alternative.

4.Exit interview — If the leaving employee is willing, the employer will perform an exit interview during which the
employee will be asked about potential employment plans, reminded of contractual obligations (such as non-
competence or confidentiality agreements), and asked to return all the employer 's property.

5. Check computers — Employees often plan departures months in advance. You can email key files and information
to a private email address or download it to a flash drive with the stroke of a few buttons. Unusual emails or bulk
transfers can give an indication to an employer that departing employees may not have the best of intentions.

6. Transition clients — Clients should be assigned new company contacts as soon as possible. This will improve the
employer's chances of solidifying and sustaining the customer relationship, and can expose evidence of the
wrongdoing of the former employee such as a violation of a non-request agreement.

7. Interview co-workers — Departing employees often converse with their colleagues. They can foreshadow their
post-employment intentions in these conversations, expose past wrongdoing or maybe seek to hire co-workers for
the benefit of their new employers. Coworkers can be a valuable source of information for the former employer
under investigation.

8. Online social media — If misconduct or candor of a former employee is in question, former employers may
consider reviewing statements made on online social media by former employees. These outlets are sometimes used
to contact former clients or to post confidential information by departing employees.

9.Notify former employee of contractual obligations — Departing employees should be immediately reminded in
writing of any contractual obligations they may have (e.g. non-competitive and non-disclosure agreements), advised
that these obligations are taken seriously by the employer, and provided a written copy of their agreements.

10. Scan files — Files of a former employee should be reviewed to determine if anything seems missing or destroyed.
 226. What is small finance?

Ans. Small finance banks in India are a kind of niche banks with Small Finance.
Bank license may provide basic banking services for the acceptance and lending of deposits. The aim behind these is
to provide financial inclusion for sections of the economy that are not served by other banks, such as small business
units, small and marginal farmers, micro and small industries and unorganized sector entities

227. How is LAP Calculated? Is home loan part of Micro finance?

Ans. Loan against property is a choice available to anyone who owns a self-occupied home, a commercial property or
even a plot of land. The main condition to use loan against property on the lender's side is that there is no other
pressure on the property i.e., the owners have complete ownership of the property without any restrictions. One of
the primary advantages of using LAP is that because it is a secured interest, the loan rate for an LAP is much lower
than any other loan options such as personal loan. However, they can be marginally higher than most mortgage
loans, due to the lending structure. The most important advantages of using LAP are that it is one of the most stable
loans and that the lending cost for an LAP is very small in comparison with other loans. But they can be marginally
higher than most mortgage loans, due to the lending structure. Yeah, home loan is an important part of micro
finance. Micro-finance firms also lend home loans to low-income urban communities.

228. The Population of a remote area in Jharkhand is around 10000 and have only very basic amenities.
Most of the people are agriculturists having large amount of land. Most of them are illiterates. Common
practice exist in the area is to take money from few local lenders and pay a hefty interest for the loan which
becomes a bane for most of the farmers. A microfinance bank is planning to start its unbanked centre. You
are posted there as Branch manager who is responsible for profitability of the bank by providing banking
services which includes Accounts, Deposits and loans. Loans are a critical service there as prior experiences
of others financial institutions are bad when it comes to loan repayment

As a responsible banker what would be your steps to make the centre profitable and at the same time being
compliant to regulatory bodies.

Ans. Every village will be having a Sarpanch (who is the head of the village), by contacting Sarpanch it will be easy for
a microfinance bank to get a chance for discussing with the local people. Then we should identify and convert people
from 5 to 10 or up to 20 members to small groups who do or can-do similar businesses. Microfinance bank can
provide loans for these communities, and these loans can be paid later in small instalments with low interest rates.
When they pay their loan without any delay, a higher amount of loan will be given which will be beneficial for will
their business. We should also concentrate on disbursing loans to women who are weak in socio economic and
educational background so that they can earn for their children. Microfinance banks follow group liability scheme,
which means that if 1 of the 10 groups fails to pay the loan sum, 9 will have to pay for that member, thus ensuring
the repayment.

229. Tell us more about scope of micro finance in India

Ans. India's microfinance sector has played a key role in the growth of the poor population segment deprived of
finance from formal lending institutions. Bank Linkage Program and Microfinance Institutes (MFIs), two major
channels of microfinance distribution, have helped the Self-Help Groups (SHGs) to rise from below poverty level.
Increased numbers of SHGs and MFIs, and reduced rural and urban poverty rates illustrate the success story of India's
microfinance sector.

There are currently around 8 million SHGs operating to serve over 103 million household members. The number of
SHGs has risen from 500 in 1992 to 8.0 million in March 2012 according to the National Bank for Agriculture and
Rural Development (NABARD).

Non-Banking Finance Company Interview Questions

230. Which of banking product would you prefer to sell? Why?

Ans. I’d rather sell Home Loan, as it has

a) Easy and trouble-free lending with minimum processing time
b) Loans up to 90 per cent of property costs on the basis of qualifications
c) pre-approved loans with no hidden charges, available as required
d) Term Loan secured against residential properties

231. What is the difference between NBFC and normal banks?

• Ans. An NBFC is a company that provides banking services to people without holding a bank license. Bank is a
government authorized financial intermediary that aims at providing banking services to the general public.
• These companies are incorporated under Companies Act 1956.Banks are incorporated under Banking Regulation
Act, 1949.
• NBFC’s does not accept demand deposits. Banks accept demand deposits.
• Foreign investment in NBFC is allowed up to 100%.Foreign investment in Banks is allowed up to 74% for private
sector banks.
• NBFC’s is not a part of Payment and Settlement system. Banks are Integral part of the Payment and Settlement
system.
• NBFC’s are not required to maintain reserve ratios. Bank are required to maintain reserve ratios compulsorily.
• Deposit insurance facility is not available for NBFC’s. Deposit insurance facility is available for Banks. NBFC do not
create credit. Banks create credit.
• Transaction services is not provided by NBFC. Transaction services is provided by banks.

232. What is the correlation between current repo rate and current inflation?

Ans. Repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks. Repo rate is
also an instrument of monetary policy. Repo rate is the pace at which India's Reserve Bank (RBI) is lending money to
commercial banks. Repo-rate is also a monetary policy instrument. When commercial banks are running out of funds
they turn to RBI for assistance. So, when the repo rate is small, banks receive RBI funds at a cheaper rate.

The effect of repo rate on inflation and on the rest of the economy is known as the process of transmission. The
public expects RBI to do what it takes to cut inflation rates. Therefore, the market interest rates will also grow with an
increase in the repo rate. It would lead to a decline in consumption and expenditure, and eventually to a decrease in
demand. This would inevitably lead to a decline in inflation levels. Repo rate affects the exchange rate, too. Increasing
the repo rate also increases market interest rates and leads to a stronger exchange rate. This leads to higher imports
and lowering of exports. With lower import rates, the rate of inflation once.

Home Finance Companies Interview Questions

233. What is NABARD? How does it help in priority sector lending?

Ans. NABARD stands for National Bank for Agriculture and Rural Development.

It is an apex development financial institution in India, headquartered at Mumbai. NABARD was established in 1982
by carving out Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of RBI and merging
these with Agricultural Refinance and Development Corporation (ARDC).

234. Does Saving A/c. have tax? How much?

Ans. Yes, as per section 80TTA of the Income tax act, interest up to Rs.10, 000/- earned from all savings bank account
is exempt from income tax. If the interest more than Rs.10000 then tax would applicable as per the income slab. TDS
(Tax deducted at source) on saving interest is not deducted like in fixed deposit and term deposit.

235. What is liability and asset to a Bank?

Ans. A bank’s reserves are their clients' unpaid loans. Additionally, the bank would likely have its own investments
that would be assets to the bank, as well as normal property, fixtures, and equipment assets. In a time of bank loan
default, the borrower assumes possession of the secured property (for example, real estate or cars), and tries to sell
the collateral to repay the amount borrowed. Therefore there are probably assets of this type on the books at any
given time. A bank’s liabilities are the deposits of the client's checking, saving, or investment account. In addition,
usual liabilities, such as own loans owed by the bank or other related commitments, will be liabilities just like they
are in any other business.
 236. What is profit for a bank?

Ans. Profit for a bank tie back to the basic way banks make money: banks use money from the depositors to make
loans. The amount of interest the banks collect on the loans is greater than the amount of interest that they pay with
savings accounts to customers — and the difference is the profit of the banks.

237. What are resources to a Bank?

Ans. Money is a major resource for banks and they earn money by charging interest on money they lend, charging
fees for the services they provide, and trading financial instruments in the financial markets. Banks receive fees by
offering advice to major companies looking forward to issuing and selling stocks and bonds, as well as from trading
securities on capital markets.

238. What are expenses for a Bank?

Ans. Bank Expenses includes all: fair costs or expenses (including appropriate attorneys' fees and expenses) incurred
in planning, negotiating, implementing and enforcing the Loan Documents; fair collateral audit fees; and appropriate
attorneys' fees and expenses incurred by the Bank in amending, executing or defending the Loan Documents
(including fees and expenses of the Loan Documents)

239. Why does banks discourage its customers to make repayment before due date?

Ans. This will result in loss of future customer revenue.

240. What is CASA Ratio?

Ans. CASA ratio stands for current account ratio and savings ratio. A bank's CASA ratio is the ratio of current and
saving account deposits to total deposits.

241. Can you describe the Interest rate scenario in the country?

Ans. State Bank of India (SBI) has announced a reduction in fixed deposit interest rates across all maturities in view of
the falling interest rate scenario and surplus liquidity. The bank stated in a press release that the new rates will take
effect as from 1 August 2019.

SBI has high the retail term deposit rates below Rs. 2 and the bulk term deposits above Rs. 2 Crore. There is a
decrease of up to 20 basis points (bps) in the retail sector for time deposits with longer tenors, and 35 bps in the bulk
sector. Interest rates for time deposits with shorter tenors, that is, up to 179 days, were cut by 50-75 bps.

This comes as bad news for fixed income investors as the government has cut interest rates on small-scale savings
schemes such as the National Savings Scheme, Kisan Vikas Patra and the Public Provident Fund by 10 basis points.
This was revealed late in June. In addition to these banks, interest rates on fixed deposits were also high after the last
repo rate cut by RBI in June.

242. What is Base rate? What is the current base rate?

Ans. Base rate is the minimum rate fixed by the Indian Reserve Bank, which does not allow banks to lend to their
customers under. Description: The base rate is agreed to improve liquidity in the credit market and ensure that banks
pass on the lower fund costs to their clients The current rate of repos as fixed by the RBI, can be viewed from the link
below. https://www.rbi.org.in/

243. What is NPA? What are the new laws to reduce NPA?

Ans. A non-performing loan is a default loan, or close to default. By being in default for 90 days, many loans become
non-performing but that will depend on the terms of the contract.

The immediate solution to that NPA is to divest non-performing assets. Banks will sell the assets in this way before
the loans become NPA. In this way, NPAs on papers will be cleared for banks.

Actions to Reduce NPA

 Through the 'Insolvency and Bankruptcy Code (IBC)' 2016 banks either revive the firms or liquidate them to solve
the issue of NPAs.
 Selling non-performing assets is the immediate remedy. The banks are selling more NPAs starting in April 2017.
 Among all of the defaulters, almost Rs. 1.54 lakh crore NPAs were created by the top 20 companies. If banks
focus on these major defaulters, government may not need to bail out banks.
 Banks will audit the company they are offering loans to thoroughly. Loans to poor companies can lead to a lack of
resources to make good investments.
 It is better to show the list of names of the defaulters publicly. That's going to cause fear and act as a deterrent.
 Once a loan has been issued, banks can constantly track the company's repayment potential and should be able
to determine if it is about to bankrupt. Banks will sell the assets in this way before the loans become NPA.
 Creating and moving NPAs to 'Asset Reconstruction / Restructuring Business.' In this way, NPAs on papers will be
cleared for banks. This approach is effective in addressing the tension in the banking system.

244. How will RBI ensure to increase rural banking? What are the new Bills/laws in regards to that?

Ans. To promote agriculture and rural development, NABARD was founded essentially as a development bank. Its key
purpose is to provide refinancing, as authorized by the RBI, for rural credit disbursed by State Co-operative Banks,
Regional Rural Banks and other financial institutions.

245. What is the main purpose of Capital Adequacy Ratio?

Ans. Also known as Capital to Risk (Weighted) Assets Ratio (CRAR), the Capital Adequacy Ratio (CAR) is the ratio of a
bank's capital to its risk. National regulators control the CAR of a bank to ensure it can withstand a sufficient amount
of loss and comply with the requirements of statutory capital.

246. What RBI is doing for making more people involved in banking system?

Ans. Together with the government (e.g. Jan Dhan Yojana) RBI launches schemes to draw people below poverty line
to the banking sector. RBI provides a bank's customer with complete control over its valuables held with the bank.
RBI supports the Government by providing regulatory guidance to push 'digital India.' RBI also provides Micro
Finance companies with regulatory guidelines which provide banking services to marginal sections of society. RBI
helps implement financial inclusion by supporting policies for Jan Dhan, Aadhaar and Mudra Loans.

RBI also acts as the Government's banking regulator and banker. This sets laws and regulations for various banking
operations such as a loan, credit card or debit card. In times of financial crisis RBI also serves as a "lender of last
resort" to the banking sector. RBI runs the Foreign Exchange, too. RBI has introduced a great many financial inclusion
measures. RBI will allocate the specific rates which both banks and citizens will benefit.

247. What is our GDP and its growth?

Ans. Gross domestic products is a numerical measure of the market value of all finished goods and services
produced, often annually, in a particular time span.

The GDP figure in the second quarter of 2019 was $5,334,475 million, US is the world's leading economy in terms of
GDP, as can be seen in the quarterly GDP ranking of the 50 countries we publish.

Real gross domestic product (GDP) rose 2.1 per cent in the second quarter of 2019, according to the Bureau of
Economic Analysis' "advance" estimate. Real GDP rose 3.1 per cent in the first quarter.

248. What is Credit – GDP ratio?

Ans. Credit to GDP is a relatively straightforward indicator of the ratio of the economy's total credit to the economy's
annual output. When the amount of debt in the economy goes up, the credit worthiness of the nation's producers
will decline.

249. Why private banks are more profitable than PSB’s?

Ans. The main reason private sector banks are more competitive is their urban client base, high-tech and less
exposure to priority sector lending such as agriculture, crafts and other government initiatives.
Public sector banks must make 40% of their advances in the priority sector, while private banks have the option to
invest their resources in NABARD bonds where 100% recovery is guaranteed. Public sector banks are incurring large
NPA to finance the lending of priority sectors.

The network of rural branches and banks in unbanked areas is dragging down PSB’s profitability.

250. What are the Challenges faced by Micro finance in India and steps taken by RBI?

Ans. Some of the other problems are: rising interest rates, over-reliance on the banking system, analphabetic and a
lack of product knowledge. Measures RBI takes

Under the revised guidelines on the large exposure framework that came into effect on April 1, 2019, the exposure of
a bank to a single NBFC is limited to 15% of its Tier-I capital, while the limit for entities in other sectors is 20%, which
can be extended to 25% by the board of the bank under exceptional circumstances.

The central bank has also agreed to allow bank loans to registered NBFCs, other than microfinance institutions, for
on-lending to agriculture (investment credit) up to Rs 10 lakh, micro and small businesses up to Rs 20 lakh and
housing up to Rs 20 lakh per borrower to be listed as priority sector loans, subject to certain conditions.

251. How would you do Securities - Risk Analysis?

Ans. a) First Identify the risk category, some examples of the risks are

i. Market risk (systematic): The risk of a decline in security due to negative market conditions. Both
securities are risky for the market.
ii. Business risk (non-systematic): a corporation's risk of failing to meet expectations. And
iii. Credit possibility: The possibility of not paying the principal and the interest on time. The key bond-rating
firms are Moody's, Standard & Poor's and Fitch.
iv. Danger of liquidity (marketability): The danger of not easily selling the safe. Long-term bonds and limited
partnerships carry a greater risk of liquidity.
v. Interest danger (money rate): the danger of dropping bond prices as interest rates increase. All bonds
(even zero-coupon bonds) are at risk of interest.
vi. Reinvestment possibility: The risk of having to reinvest the interest and dividends earned at a lower rate
of return. Zero coupon bonds, T-bills, T-STRIPS and so on, since they don't collect interest payments, they
have no reinvestment chance.
vii. Purchasing power (inflation) risk: The risk of the return on investment being lower than the rate of
inflation. Long-term bonds and fixed annuities carry a high risk of inflation. Investors will be buying stocks
and variable annuities to reduce inflation risk.
viii. Come on. Capital possibility: The possibility of losing all invested capital. Since options and warrants have
expiry dates, investors can lose all the money they have invested at expiry. Inverters will buy investment-
grade bonds to reduce capital risk.
ix. Regulatory (legislative) danger: The danger that the market may be impacted by law changes.
x. Currency risk: The risk that a change in currency exchange rates will affect the value of an investment.
Investors with foreign investments are the ones most impacted by the danger of currency.
xi. Non-systematic risk: A risk specific to a particular business or industry. Investors should have a diversified
portfolio to avoid the non-systematic risk.
xii. Political (legislative) risk: the risk that a security’s value might be affected by instability or political change
in a country (such as corporate nationalization).
xiii. Prepayment risk: The type of risk mostly associated with real-estate investments such as securities
backed up by mortgages. Mortgage-backed securities have an average life expectancy, but if mortgage
interest rates decrease, more investors will refinance, and earlier than expected the bonds will be called
up.

Timing risk: The risk that an investor will buy or sell a security at the wrong time and thus fail to maximize profits.
Second, evaluate the probability of the defined risk occurring. Put a percentage for probability of occurrence.
And lastly, once you've plotted the likelihood, search for any of the strategies below
A) Avoid: Reduce chance of occurrence
B) Transfer: Push others to risk. For instance: taking an insurance policy.
C) Limit: Cap your loss by creating mechanisms to manage losses.
D) Accept: accept and take the risk.

252. What is VAR?

Ans. Risk Value (RV) is a metric that calculates and quantifies the level of financial risk within a company, portfolio or
position over a specified period of time. Investment and commercial banks use this measure primarily to assess the
magnitude and frequency ratio of possible losses in their investment portfolios.

253. How to calculate risk?

Ans. Risk equals impact multiplied by cost-weighted probability: Risk = Effect X Probability / Cost. Impact is the effect
that should a risk event occur on the organization. Probability is the probability the event might occur within a given
timeframe.

254. What is GDP? How do you calculate GDP? Explain in layman terms.

Ans. The Gross Domestic Product measures the value of one country's economic activity. Strictly defined, GDP is the
sum of the market values, or prices, of all final goods and services produced over a period of time in an economy.
GDP estimation is: GDP = private consumption + corporate investment + government spending + government
expenditure + (exports-imports). "Gross" means, for the gross domestic product, that GDP measures production
regardless of the different uses to which the product may be put.

255. What is Debt restructuring?

Ans. Debt restructuring is a mechanism that allows a private or public corporation or a sovereign body facing issues
with cash flow and financial distress to reduce and renegotiate its outstanding debts in order to boost or restore
liquidity so that it can continue operations.

256. Why company is having the names Limited?

Ans. The term appears as a suffix after the name of the company, meaning it's a private limited company. For a
limited company, the responsibility of the shareholders is limited to the amount they originally spent. When such an
organization is insolvent, personal assets of the shareholders would remain covered.

257. What is Demat Account?

Ans. Demat Account is an account used for holding electronically established shares and securities. Demat account
full form is a dematerialized account. The aim of opening a Demat account is to keep purchased or dematerialized
shares (converted from physical to electronic shares), thus making it easy for users to transact online.

258. What is net interest margin?

Ans. Net interest margin (NIM) is a measure of the difference between the interest income generated by banks or
other financial institutions and the amount of interest paid to their lenders (e.g., deposits), relative to the amount of
their (interest-earning) assets.

259. What is underwriting?

Ans. Underwriting involves promising payment in the event of injury or financial loss, and recognizing the financial
liability risk arising from such guarantee.

260. How to you measure creditworthiness of a client?

Ans. Your overall credit report, credit score and payment history are several factors which measure creditworthiness.
Credit rating companies use Experian, TransUnion and Equifax to assess creditworthiness.

261. What is the most attractive item on the balance sheet?

Ans. Cash/ Assets are the most attractive item on the balance sheet.
 262. Name few ratios?

Ans. A) Liquidity ratio B) Current ratio C) Debt ratio D) Profitability ratio

263. What is a liquidity ratio?

Ans. Liquidity ratio is the ratio of the liquid assets to the company's current liability.

264. Explain current ratio?

Ans. The current ratio is the ratio of the current asset to the company's current liability.

265. What are current assets?

Ans. Current assets mean the cash and other assets which can be converted in the cash within a year.

266. What is a leverage ratio?

Ans. Leverage ratio is the proportion of loans a bank or company has in relation to their equity or capital. Consumer
Finance Companies Interview Questions
267. How would you handle the employees if they don’t achieve their target?

Ans. Instead of monthly goals, we should encourage employees to achieve daily goals, we should take commitments
directly from the employee each morning and ask them to reach the daily goal before the end of the day. We can also
take employee reports directly to verify the status at various time intervals. We ought to motivate them. And
different gift cards, team lunches, should be presented to the best player.

268. How would you work and face problems in an unknown place?

Ans. One should be flexible with working anywhere and at any time provided the work fulfills ones career ambitions.
Financial Services Interview Questions
269. What is an RTA? What is the business model of RTA?

Ans. On behalf of a fund house a Registrar & Transfer (R&T) agent serves as a third party. The R&T agent has a broad
network of branches nationwide to help investors execute their transactions. Investors may also receive documents,
send them and even get their transaction statements through their branch network. The agent serves to investors as
a one-window device. An R&T agent also offers information and data to investors about new fund offerings.

Mutual fund investors do a number of transactions on any working day. They can buy, sell or transfer units or even
ask their bank to change their residential address or email address. Each such request is a on its own transaction.

Mutual fund houses will keep track of those transactions. Since this is not their core business, they may not want to
invest in this role or they may not have the requisite technical skills to manage these enormous transactions.

Hence, most prefer to outsource this work to an agency that can regularly handle these investor requests. This is
done by an R&T agent through its offices around the country, on behalf of the fund house. The three key transfer
agencies are the Computer Age Management Services (CAMS), Karvy, and Deutsche Investor Services, which manage
these documents.

From the viewpoint of mutual funds, R&T agents help to save money and help reach out to a larger number of
investors. Investors typically have a diversified portfolio, and want to invest in various fund houses schemes.

The mutual fund pays charges for the services the R&T agent provides.

The fees would depend on the number of transactions conducted for the mutual fund. In exchange, the mutual fund
charges those expenses to the fund's expense ratio. However, as an investor you do not have to pay any fees at the
office of the R&T agents for your transactions.

Capital Markets Companies Interview Questions

270. What is beta of a stock? If beta of stock is .05 what does that mean?
Ans. Beta is a function of the volatility of stocks relative to the economy. This is one way of measuring risks. If beta is
0.5 it means that the change in stock value will be comparatively less for any shift in the economy or market and, in
this case, half the impact.

271. What is a candle stick pattern?

Ans. A candlestick is a type of price chart used that displays a security's high, low, open and closing prices for a given
period of time.

272. What is support and resistance?

Ans. In the technical analysis of the stock market, support and resistance are some fixed rates of a security price at
which it is assumed that the price will continue to stop and reverse. Support is a price point where a downtrend can
be expected to pause due to a concentration of demand. As the asset or securities price falls, demand for the shares
rises, thereby forming the line of support. Meanwhile, resistance zones occur as prices increase as a result of a sell-
off.

273. How interest rates and bond prices are related?

Ans. Bonds have an inverse relationship to interest rates; bond prices decline as interest rates increase and vice-
versa. Most bonds pay a fixed rate of interest, if interest rates in general decline, the interest rates of the bond are
more appealing, and people bid the bond price. Similarly, consumers would no longer appreciate the lower fixed
interest rate paid by a bond, if interest rates increase, and their price will fall.

274. How coupon rate is determined?

Ans. The coupon rate of a bond can be determined by calculating the amount of the cumulative coupon payments of
the protection and calculating them by the par value of the bond.

275. Is there an impact of dividend in the equity market??

Ans. Generous and stable dividends contribute to higher stock price and thus upward progress in share market
indices. Stocks which pay dividends consistently are common among investors. While dividends are not guaranteed
on common stock, many companies take pride in generously rewarding shareholders each year with regular – and
often through – dividends. Companies doing this are perceived as financially stable, and financially stable firms make
good investments, particularly among buy-and - hold investors who are most likely to benefit from dividend
payments.

276. Why price and YTM have an inverse relation?

Ans. Yield to maturity is the total rate of return that a bond will earn when it makes all interest payments and the
original principal is repaid. When the bond reaches maturity the market price is heading towards face value. Price
and YTM therefore have an inverse relationship.

277. What is white box and black box testing?

Ans. Black Box Testing is a software test method in which the tester is not aware of the internal structure / design /
implementation of the item being tested. White Box Testing is a research method for applications in which the tester
is aware of the internal structure / design / implementation of the element being evaluated.

278. What is HP ALM and how does it function?

Ans. HP ALM (Application Life Cycle Management) is a web-based platform that helps companies control the lifecycle
of the application right from project preparation, gathering requirements, before Testing & Deployment, which is
otherwise a time-consuming process. This requires all stakeholders to collaborate and communicate, in order to
achieve the project objectives. It offers rigorous monitoring and reporting, and smooth integration of activities
related to different projects.

This allows for thorough review of the project and efficient management. ALM will connect to our email systems and
send emails to all required team members about any changes (such as changing specifications, raising defects, etc.).
 279. What is the difference between Waterfall model vs. Agile model?

Ans. Top 10 differences between Agile and Waterfall Methodology are:

• In the Waterfall model, the software development process is divided into different phases while the Agile
methodology separates the project development lifecycle into sprints

• Waterfall is a structured software development methodology and can often be quite rigid, whilst Agile is known for
its flexibility

• According to the Waterfall model, software development will be performed as a single project which is then split
into separate stages, with each step only occurring once during the SDLC. However, the Agile methodology can be
considered as a collection of many different projects, which are nothing more than iterations of the various phases
aimed at improving the overall software quality with feedback from users or the QA team

• If you want to use the Waterfall model for software development, then you need to be transparent in advance
about all the implementation specifications because there is no room to adjust specifications until the project
development starts. On the other hand, the Agile methodology is quite flexible and allows for changes to the project
development requirements even after the initial planning has been completed

• All stages of project creation, such as planning, growth, testing, etc., are completed once in the Waterfall model,
although they adopt an iterative development process as part of the Agile methodology. As a result, planning,
growth, prototyping and other phases of software development may appear over the entire SDLC more than once

• Their individual approach to quality and testing is one of the major differences between the Agile and Waterfall
development methods. In the Waterfall model, the "Test" phase resembles the "Construct" process, but in the Agile
approach, testing is usually performed at the same time as programming or at least in the same iteration as
programming

• While the waterfall methodology is an internal process and does not require customer participation, the Agile
Software Development Approach focuses on customer satisfaction and therefore involves customer participation
throughout the development phase

• The Waterfall model can be considered a strictly sequential process, but the Agile methodology is a highly
collaborative software development process, which leads to better team input and quicker problem solving

• The Waterfall model is ideally suited for projects that have well specified specifications and are not expected to
change at all, whereas the Agile model embraces a process in which specifications are expected to alter and evolve.
Therefore, if you are planning to develop a software that would require frequent revision and must comply with the
technology landscape and customer needs, Agile is the best approach to follow.

• The Waterfall model exhibits a project mindset and lays its focus strictly on the completion of project development,
while Agile introduces a product mindset that focuses on ensuring that the developed product satisfies its end
customers, and changes itself as the requisites of customers change

280. How does Stock Split affects market capitalization?

Ans. A share split is a corporate action in which a company splits its existing shares into multiple shares to boost the
share liquidity. Although the number of outstanding shares increases by a specific multiple, the total dollar value of
the shares remains the same compared to pre-split amounts, because no real value is added by the split. In this way,
the overall value of the company would remain the same, measured by the market capitalization.

281. What will be the duration for a Zero-Coupon Bond?

Ans. The duration of a Zero-Coupon Bond is equal to its time of maturity.

282. What is the difference between Initial Margin and Maintenance Margin?

Ans. An initial margin requirement refers to a margin requirement at the time of purchase which reflects the margin.
The initial margin requirement is the amount that a trader is expected to deposit in order to start a trading position.
Once a trading position is established, a trader must maintain a certain balance, typically 50-75 percent of the initial
margin, in order to continue holding the position, whereas a maintenance margin requirement is a margin
requirement that represents the minimum amount of equity in the margin account total. If the account falls below
the specified maintenance margin level then the broker sends a margin call to the trader, informing the trader that
they must deposit sufficient funds immediately to return the account to the initial margin level. When the trader
refuses to do so immediately, the broker close off the trading position of the trader.

283. What are Swaps? What are different types of swaps?

Ans. A swap is a derivative arrangement whereby two parties share the cash flow or liabilities from two separate
financial instruments. Most swaps contain cash flows that are based on a notional principal sum like a loan or a bond,
although the contract may be almost anything. The principal usually doesn't change sides. Each cash flow requires
one leg of the swap. For general, one cash flow is set, while the other is variable and dependent on a benchmark
interest rate, floating currency exchange rate or index price.

Types of swaps are: Interest rate swaps, Currency swaps, Commodity swaps, Credit default swaps, Zero coupon
swaps, Total return swaps

284. What is the payoff diagram of long call?

Ans. Pay off diagram is a way of using a plan to consider the gains and losses. It's the graphical representation of a
long call strategy's possible outcomes. Call options however have a short lifespan. If the underlying stock price does
not rise above the strike price until the expiry date of the contract, then the call option expires worthlessly.

285. Why there is an inverse relation between bond price and interest rate?

Ans. The main reason for sharing an inverse relationship with the bond prices and interest rates is the concept of
opportunity cost. Investors are continually comparing the returns on their existing investments to what they might
earn on the market elsewhere. As market interest rates change, the coupon rate of a bond — which is fixed,
remember, —becomes more or less attractive to investors, who are thus willing to pay more or less for the bond
itself.

286. What is convertible bond?

Ans. A convertible bond is a fixed-income securities that pays interest payments, which can be exchanged into a
specified number of common stock or equity shares. The transfer from bond to stock can be achieved over the
lifetime of the bond at several occasions, which is generally at the bondholder’s discretion.

287. What is dividend?

Ans. Dividend refers to the share of profit the company earns, which is paid to the company's shareholders.

288. What are the models used for valuation?

Ans. Key models used for valuation are Dividend discount model, Discounted Cash Flow Model, and Comparables
Method.

Dividend discount model - The DDM is one of the "absolute" systems which is simplest. It is best utilized to value a
company's investment opportunity, which pays stable and predictable stock dividends. This method calculates the
value of an investment based on the dividends its shareholders are paying. The reasoning is that the estimation of
the present value of the dividend cash flows is a reasonable approximation of what would be worth of the stock
shares.

Discounted Cash Flow Model – Discounted cash flow models are best used when a company fails to pay dividends on
stocks or when their payments are irregular. The model calculates the discounted future cash flows of the company
in this case, and compares them to alternative investments. In this model to be successful the company needs to
have stable, optimistic and consistent cash flows. These types of firms are usually mature companies that have gone
through a business' usual growth stages.

Comparable Method – Comparable method is taken as an example of a "relative" method of valuation. It is used
when there is no discounted cash flow method because the cash flows are negative or indeterminable. It can also be
used as a contrast with the investment instrument's Dividend Discount Model and Discounted Cash Flow models to
measure a range or average value.

The Comparables Method compares several stock prices to a market benchmark to determine if the stock is
comparatively below or overvalued compared to other stocks in the same field. The rationale is that they will sell
similar properties for similar prices. We know that under all cases, a specific form of valuation cannot be used, since
each case is different. The best we can do by knowing the characteristics of the investment instrument is selecting
the most accurate valuation model given its strengths and weaknesses. Investors are not limited strictly to using one
process. It is best to use a variety of models and compare them to each other to ensure that you choose the most
reliable and effective model given the goals of each investment decision.

289. What are corporate actions?

Ans. A corporate action is any activity that brings material change to an organization and impacts its stakeholders,
including shareholders, both common and preferred, as well as bondholders. These events are generally approved by
the board of directors of the company; shareholders may also be allowed to vote on certain events. Many corporate
acts demand that shareholders file a response.

290. What is reverse split?

Ans. A reverse stock split is a type of corporate action which consolidates the number of existing shares of stock into
fewer, proportionally more valuable, shares. The process involves a firm reducing the total number of its outstanding
shares in the stock market, and sometimes signalling a distressed company.

291. What is spinoff?

Ans. A spinoff is the formation of an independent company through the sale or distribution of new shares of an
existing business or division of the parent company.

292. What is Vega?

Ans. Vega is calculation of price sensitivity of an option to fluctuations in the value of the underlying asset. Vega
represents the amount that the price of an option contract changes in response to a 1 per cent change in the
underlying asset's implied volatility.

293. What is delta?

Ans. Delta also known as the hedge ratio is the ratio of an option's price change to the price change for the
underlying asset.

294. What are Greek letters?

Ans. "Greeks" is a phrase used in the market options to describe the different aspects of the risk involved in taking an
options position. Increasing risk variable is a product of the option being imperfectly inferred or linked to another
underlying variable. Traders use various Greek principles, such as delta, theta and others, to determine risk options
and to control portfolios of options.

295. How will you pitch an investor who has net worth of Rs.3 Crores?
Ans. First we need to understand the customer's needs and requirements. A proper financial planning has to be
carried out for this reason in which the customer's inflows and outflows should be taken into account and there
suggested how the customer should start saving for his / her future goals and needs. The next crucial argument is
that the investments should be diversified, depending on the customer’s requirements. The product will be
determined where to invest, and how much to invest will also have to be negotiated with the customer depending on
the risk involved.

296. How can you market mutual funds using social media?

Ans. One may follow below four steps to market mutual funds using social media.

Step 1 → We should use social media like Facebook, twitter and Instagram to connect with the investors building
awareness of the mutual fund offering.
Step 2 → Search Engine Optimization to ensure that mutual funding offering is seen by clients, run Sign up for Emails,
run Display Campaigns and Retargeting
Step 3 →Write blogs and conduct Webinars to ensure that all information is available
Step 4 → Online Reputation Management to build credibility to close sales.

297. What is the band of NIFTY and SENSEX?

Ans. Nifty band is around 11990 to 12500. Sensex band is around 40500 to 41500

298. How to calculate NIFTY?

Ans. Nifty calculation is based on the concept of “free float market capitalization”. As this concept, Nifty index level
at any point of time show us the free-float market. The base year (period) for this calculation is 1995 and the base
value was 1000 index points. Mathematical calculation:
Nifty 50 = (total of free flow market capital of 50 most liquid stocks) * index factor
Index factor = 1000/market capital value in 1995

299. Why is NIFTY lesser than SENSEX even though NIFTY consists of 50 shares while SENSEX consists of
30 shares?

Ans. Both stock exchanges use free float market capitalization approach for calculation of index. But base year and
base index value is different for both indices. For nifty base year is 1995 and base index value is 1000 while Sensex
base year is 1979 and base index value is 100.

Economic Scenario of the base year of both indexes is different. One is before 1991 economic reform and another
one is after it. So that is having the impact on the index values.

300. What is correlation?

Ans. It is the degree of relationship between two variables. It will tell us that change in one variable how other
variable is expected to react.

301. If two shares are positively correlated in a portfolio, is it risky or not? Why?

Ans. Yes, it is risky, because if one share price goes down other will also fall.

302. What is Black Scholes model?

Ans. Black Scholes Model is a mathematical model for pricing a contract of options which estimates the variation of
financial instruments over time. It is used to calculate the theoretical value of options using current stock prices,
expected dividends, the strike price of the option, expected interest rates, expiry time and anticipated volatility.

303. Explain financial valuation

Ans. Financial valuation is the method of calculating the current or future value of an asset or business. Financial
valuation helps one to arrive at the fair value of an asset or company.

304. Explain industry analysis, company analysis

Ans. Company Analysis is the study of data related to the company's profile, products or services and financial
performance. Purpose of company analysis is usually to identify the fair value of an asset or business, either to
purchase or to invest.

Industry Analysis is the analysis of economic and financial situation in the target industry. It aims to identify the
factors impacting the industry, gauge the economic cycle of the target industry, and build situational awareness of
the competitors in the industry to carve out competitive advantage.

305. Explain calculation of DCF

Ans. Discounted cash flow (DCF) is a mechanism for measuring the present value of projected future cash flows to
calculate the worth of an investment. The formula for Discounted Cash Flow is:
DCF = CF1/ (1+r) 1 + CF2/ (1+r) 2 + CFn/ (1+r) n
Where: CF = the cash flow for the given year. CF1 is for year one, CF2 is for year two, CFn is for additional years
r = the discount rate

306. Explain calculation of relative valuation

Ans. Relative valuation model is a tool that provides a comparative view of the market value of a company vis-à - vis
its rivals and industry peers. Many of the relative valuation factors are free cash flow, enterprise value (EV), operating
margin, real estate price-to-cash flow and retail price-to - sales (P / S).

307. How to calculate VAR using R?

Ans. Steps to calculate VAR using R are

a. Call API of the stock,
b. Get Data,
c. Use RMetrics (*source file),
d. VaR is generated at different confidence intervals

308. If you are given some money and you know that the market is bullish, where would you invest?
Why?

Ans. In a bullish market, investment in Real Estate Investment Fund, long positions in blue chip stocks, and options
for calls in blue chip stocks, and long index ETFs is cheaper. This is because, we expect the price to rise in a bullish
market.

309. What is gamma?

Ans. Gamma is delta differential of second order.

310. What are the factors to be considered before investing in shares?

Ans. Factors to be considered before investing in shares are.

a. Check the volatility
b. Read the current news
c. Check the 52-week low
d. Make a pool of different stocks
e. Economic, Industry and Company analysis
f. Shortlist some stocks based on the analysis
g. Invest

311. What all things should you keep in mind while going for a startup?

Ans. Things one should keep in mind while going for a startup are:

● Character ● Capital ● Conditions ● Collateral ● Capacity

312. What is mutual fund? Name two types of mutual funds, Difference between two types of mutual
fund?
Ans. A mutual fund is the company which pools money from many investors and invests the money in securities like
stocks, bonds and short-term debt. Two types of mutual fund are:

● Money market fund (liquid fund) ● Fixed income (debt mutual fund)

Money market fund invest in government T-bill and certificate of deposit whereas, fixed income fund buys bonds
from corporation and government agencies.

313. What is the difference between Fixed Deposit and Mutual fund?

Ans. Fixed deposit offers pre-decided returns that do not alter over the investment period while mutual funds offer
long-term investment returns because they are connected to the market.

314. What is the difference between equity and bond?

Ans. Equity is the investment instruments which, in return for a monetary value, provide ownership of a public
limited company.

Bond is the investment instruments for which the institution or organization issuing them acts as borrowed capital.

315. Explain Volatility Index

Ans. Volatility index or VIX, is a real time market index that represents the markets expectation of 30-day forward-
looking volatility. It provides a measure of market risk and investors sentiments.

316. When will you use long straddle?

Ans. Long straddle is a combination of buying a call and buying a put, both with the same strike of price and
expiration. Investor buy the straddle because they predict a big price move or a great deal of volatility in the near
future.

317. Explain CAPM model

Ans. CAPM (Capital Asset Pricing Model) defines the relationship between systematic risk and expected return for
assets. It is commonly used throughout finance for pricing risky securities and generating expected return for assets
given the risk of those assets and cost of capital.

318. Explain Modigliani miller approach

Ans. The Modigliani Miller theory notes that, apart from the risk involved in the venture, a firm's market value is
determined by its operating profit. The theory has claimed that the firm’s value is not contingent on the firm's choice
of capital structure or funding decision.

319. When do you choose IRR and NPV? 

Ans. We select IRR and NPV for evaluation of projects which are mutually exclusive. The two strategies would say that
NPV assumes the cash income that is reinvested in the existing capital expense of the project while IRR assumes that
a business will reinvest cash flow at the project.

320. What is the difference between zero coupon bond and index?

Ans. A zero coupon bond is a debt insurance that does not pay interest but instead sells at a deep discount, making a
profit at maturity when the bond is repaid for the full face value of it. An index fund is a type of mutual fund that has
a portfolio built to match or track financial market index components.

321. What are swifts?

Ans. Swifts is a large messaging network used by banks and other financial institutions to send and receive
information such as money market instructions in a fast, accurate and secure manner.

322. Explain the concept of Fund accounting?

Ans. Fund accounting is an accounting method for tracking resources that have been limited by the donor, regulatory
agencies, grant authority or other sector or entity or by statute.

323. Explain the life cycle of a corporate action?

Ans. A corporate action is any operation that brings substantial change to an entity and affects its stakeholders,
including common and preferred shareholders, as well as bondholders. Life cycle of corporate action are
a)     Pre-announcement: - In this phase, proposed Corporate Action event becomes a voting point, and wider
discussion happens.
b)     Event Announcement: - In this phase lead agent creates and shares official document (prospectus) about the
event which will be sent to all first ring market participants
c)     Event Creation: - All market participants notify their underlying clients about the upcoming event. This is done
by creating an event in their respective systems.
d)     Claims Processing: - In this phase all eligible positions need to be established and claims or transformations of
pending trades need to be processed
e)     Instruction management: - In this phase shareholders are required to send an instruction about what decision
they wish to make in regards to the event.
f)       Entitlement calculation: - In this phase all market participants establish what their or their clients’ entitlements
are.
g)     Payment: - In this phase confirmation of payment messages are cascaded down to underlying clients
h)     Reconciliation: - In this phase every event is reconciled before and after the event has finished to make sure
that everything has been processed properly
i) Reporting: - In this phase communicate about the event during and after the event
j)       Invoicing: - In this phase payments are collected at each level in the chain of intermediaries.

324. What is the difference between Mexico market and Dutch market?

Ans. Mexican stock exchange Bolsa Mexicana de Valores (BMV) in Spanish, is headquartered in Mexico City. It has 148
companies listed in it, with an aggregate market capitalization of around $416 billion.

The Amsterdam Stock Exchange is one of the oldest stock exchanges in the world, founded in 1602. It has more than
20 of the most frequently traded Dutch companies’ trade on the exchange.

325. Explain how the primary market affects the futures or spot market?

Ans. Primary market offers the basis for Futures or Spot market trades. Price is fixed on the primary market, prices in
futures or spot markets vary depending on demand and supply; stocks issued on the primary market are traded on
the secondary.

326. Explain ULIPs?

Ans. ULIPs stand for Unit Linked Insurance Plans offered by the insurance companies.

327. Debt mutual funds or equity mutual funds? Which is cheaper?

Ans. Mutual equity funds are cheaper than Mutual Equity funds. Since mutual equity funds held for 12 months or
less are taxed at a rate of 15 per cent relative to mutual bond funds.

328. What is effect of base currency and local currency on investments?

Ans. If the local currency increases in value as compared to the base currency, then the return on investments will
decrease. On the other hand, if the base currency rises in value relative to the local currency, then the return on
investment would increase.

329. What is Investment Attribution?

Ans. Investment attribution is a series of methods used by performance analysts to describe why portfolios
performance differed from the benchmark.

330. What is Cash Flow? How is depreciation treated in Cash Flow statement?
 Ans. Cash flow is the difference between the amount of cash available at the start of a period and the amount
available at the end of that period. When depreciation is a permissible cost for measuring taxable income, then its
existence would decrease the amount of tax a corporation is expected to pay. Accordingly, cash flow must every
currency.

331. What will be the journal entry for Accrual Expenses?

Ans. Accrued expense account will be debited while expense account will be credited.

332. How is coupon calculated for a bond?

Ans. Coupon rate is determined by adding a bond's gross annual payment volume, then dividing that by the bond's
face value.

333. Explain different types of hedges

Ans. The different types of hedges are:

a) Forward exchange contract for currencies.
b) Currency future contracts.
c) Short straddles on equities or indexes.
d) Money market operations for interest.
e) Money market operations for currencies.
f) Forward exchange contract for interest.
g) Covered calls on equities.
h) Future contract for interest.

334. What is the difference between hedge fund and mutual fund?

Ans. Hedge funds are not registered with SEC and can only be sold to sophisticated investors who have been carefully
defined. The SEC licenses mutual funds that can be sold to an infinite number of investors.

335. Why do people invest in junk bonds?

Ans. Junk bonds are bonds which carry a higher default risk than most corporate and government issued bonds. It
represents bonds issued by financially struggling companies with a high risk of defaulting or failing to pay their
interest payments or repaying the principal to investors.

Junk bonds return higher yields than most other debt securities with a fixed income. It has the potential for
substantial price increases should the financial situation of the company improve.

336. What are the functions of a custodian bank? Explain the role and scope of Custodian Banking in
India

Ans. The functions of a custodian bank are:

a)     Prevent the investors from losing their money if the mutual fund goes bankrupt.
b)     If the fund is dissolved the custodian bank is responsible for returning funds to investors.
The role and scope of custodian bank in India are:
I. Arrange settlement of any purchases and sales and deliveries in/out of such securities and currency.
II. Maintain currency/cash bank accounts, effect deposits and withdrawals and manage other cash transactions.
III. Perform foreign exchange transaction.

337. What is total return swap?

Ans. Total return swap is a two-party contract that exchanges the return on a financial asset between them. One
party makes payment under this arrangement based on a fixed rate while the other party makes payment based on
the overall return of an underlying asset.

338. Explain position multiplier

Ans. Position multiplier allows a trader to control a position that is greater than the amount of funds at disposal. For
example: when opening a Rs100 deal and using an 10X multiplier your potential profit (and loss) will be calculated as
if you were investing Rs1000.

339. How to value bond?

Ans. Bond valuation includes calculating the present value of future interest payments of a bond, also referred to as
its cash flow, and the value of the bond at maturity, also referred to as its face value or par value.

340. What is OTC trading?

Ans. Over-The-Counter (OTC) market is a competitive market in which market participants trade directly between two
parties stocks, goods, currencies or other instruments and without a central exchange or broker.

341. What is the Journal Entry for recording outstanding expenses?

Ans. The journal entry for recording outstanding expenses is: Expense A/C Dr. To outstanding expense A/C

342. What is the Macroeconomic factors affecting stock price?

Ans. Interest rates, inflation, unemployment and economic growth are the macroeconomic factors that influence
stock prices.

343. Explain Greek economic crisis?

Ans. The Greek economic crisis was the sovereign debt crisis that Greece faced in the aftermath of the 2007-08
financial crisis. As a series of abrupt changes and austerity steps that led to impoverishment and loss of income and
wealth, as well as a minor humanitarian crisis hit the population.

344. What is the Journal entry for recording doubtful debt?

Ans. The journal entry for recording doubtful debt is: Bad debt A/C Dr. To provision for bad debt A/C

345. Which hedge fund strategies have performed the best in last year?

Ans. Quantitative trading fund strategies have performed the best in the last year.

346. What is accounting standard 7?

Ans. Accounting standard 7 is to prescribe the accounting treatment of revenue and cost associated with the
construction contracts.

347. What is Quant investing? How is different from ordinary investing strategies?

Ans. Quant investing also known as systematic investing, is an investment strategy that uses sophisticated statistical
modelling, computer system and data analysis to determine the maximum probability of a successful transaction
being carried out.

Investment strategies are flexible. If you select one, and it doesn't fit your risk tolerance or schedule, you can make
changes. It would however be expensive to do so, as each purchase carries a fee.

348. What is interest coverage ratio?

Ans. Interest coverage ratio is the ratio that measures how many times a firm can make interest payments on its debt
with earnings before interest and taxes (EBIT).

349. Explain US GAAP, IFRS

Ans. The U.S. Generally Accepted Accounting Principle (U.S. GAAP) refers to the accounting rules used in the U.S. to
organize, present and report financial statements for a variety of entities including private holdings and publicly
traded companies, non-profit organizations and governments.
International Financial Reporting System (IFRS) is a set of accounting standards developed by the International
Accounting Standard Board (IASB), an independent, not-for-profit organization.

350. What are Secured loans? How is it different from Unsecured Loans?

Ans. A secured loan is a loan in which the borrower promises some asset as collateral for the loan, which then
becomes a secured debt owed to the loaning creditor. Unsecured loan doesn’t require you to provide an asset as
collateral in order to attain a loan. It is not protected by any collateral.

Financial Data Providers Interview Questions

351. How would you treat minority shareholding in the holding company financial statements? 

Ans. Minority interest is shown under the equity section of consolidated balance sheet.

352. What is FCFF? FCFE? FIFO, LIFO? Terminal value calculation?

Ans. Free Cash Flow to the Firm (FCFF) is the cash available to investors after a company pays its business costs,
invests in short-term assets such as inventories and invests in long-term assets such as real estate and plants &
equipment.

Free Cash Flow to Equity (FCFE) is the amount of cash a business generates that is available to be potentially
distributed to the shareholders. It also represents the residual value of assets minus liabilities.

First-In, First-Out (FIFO) is a method in which oldest inventory items are recorded as sold first but do not necessarily
mean that the exact oldest physical object has been tracked and sold.

Last In, First-Out (LIFO) is a method used to account for inventory that records the most recently produced items as
sold first.

The terminal value is a typically calculated by applying an appropriate multiple to the relevant statistic projected for
the last projected year.

353. What is DCF? Explain Depreciation and its adjustments? 

Ans. Discounted cash flow (DCF) is a method of valuation used to measure an investment's worth based on its
potential cash flow. DCF analytics are trying to find out a company's worth now, based on expectation of how much
money it will make in the future.

Depreciation does not directly impact the amount of cash flow produced by a company, but is tax-deductible,
minimizing the cash outflows associated with income taxes. Depreciation thus influences the cash flow by raising the
amount of cash that company will pay in income tax.

354. What is connection between balance sheet and cash flow statement?

Ans. A balance sheet is a summary of a company's financial balance while a cash flow statement shows how a
company's cash position is affected by changes in the balance sheet accounts and revenue on the income statement.

Both the balance sheet and the cash flow statement are related to net income. As regards the balance sheet, net
income flows through retained earnings into stockholder’s equity.

355. How would you treat profit/ loss on conversion of financial statements from foreign to Indian
currency?

Ans. Profit or loss on conversion from foreign currency to Indian currency is shown under the header “accumulated
other comprehensive income /loss” in the Profit and Loss account and Balance Sheet.

356. What will be the effect on inflation if interest rates are cut?

Ans. If the interest rates are reduced, more people would be able to borrow more money. The result is that
consumers have more money to spend, causing the economy to grow and inflation to increase.
 357. How do you price a bond? Risks related to bonds? 

Ans. Bonds are loans that can either trade on fair terms, at premium, or at a discount depending on the issuer's
supply and demand, age-to-maturity, and credit ratings. The price of a bond is determined by using a discount rate to
deduct the expected cash flow to the present. Default risk, inflation risk, interest rate risk, reinvestment risk, buy-
back risk for callable bonds are main risks linked to bonds.

358. What is an exchange?

Ans. Exchange is a place where the both the buyer and the seller come together so buy and sell the shares, stocks,
etc. It is a common platform for both of them. It enables them to do a standard trading.

359. Who regulates exchanges?

Ans. In India, SEBI regulates stock exchanges.

360. Who actually buys and sells the securities?

Ans. The brokers do the buying and selling of the securities on behalf of their clients. Also big asset management
companies or institutional traders do the trading of securities in the stock exchange.

361. What is the chain of a transaction between the buyer and the seller, with an exchange in between?

Ans. Exchange acts as a guardian and is in charge of standardizing trade between buyer and seller. Seller places the
price he wants to sell and buyer places the price he wants to buy and then the exchange gets together.

362. What is equity?

Ans. It is the unit share which is traded in the market. When the company needs money it goes to the market to raise
it but means of issuing of shares also called as equity.

363. What do you mean by TSO?

Ans. TSO – It stands for total shares outstanding (authorised shares + restricted shares)

364. Explain Free Float

Ans. Free Float is the number of publicly owned shares that are available for trade.

365. What is the difference between authorised shares vs. restricted shares?

Ans. Restricted shares – There are those stocks that are not tradable, Authorised Shares– the maximum number of
shares that can be issued legally are called as authorised shares.

366. What is an IPO?

Ans. The IPO (the initial public offering) is when the company wants to raise money from the market for the first
time, the IPO is launched and the funds raised.

367. Explain Preference shares:

Ans. When the company is going public it can raise the money by three means (launch of IPO, preference shares and
issue of rights). Preference shares are when the issuers pick and give priority to a group of individuals or businesses,
when raising funds.

368. Explain the concept of Zero Dividend

Ans. Zero Dividend is when a preference share that need not to pay dividend to the shareholder they will get the
profits from the capital appreciation.  

369. What are Warrants?

Ans. Options which have a tenure more than a year are called as warrants.
 370. Explain Income Shares 

Ans. Shares which pay dividend are called as income shares.

371. What is Capital Share?

Ans. Zero dividend preference shares are called as capital shares as they make profit out of capital appreciation.

372. What are Nil Paid shares?

Ans. These shares are being issued by the corporations to the shareholders at the market price or at discount, usually
at discount. It gives the shareholder the opportunity to buy more number of shares at a lesser price.

373. What is Convertible preference share?

Ans. The debentures that can be converted into equity after a fixed time into fixed no. of shares of a pre-determined
value.

374. What is Bearer Share?

Ans. It is issued by the business entities. It differs from the other shares in that no record of the owner and the
transaction is kept as it is not registered, whoever has this is its owner.

375. What is ADR?

Ans. American depository receipts are receipts you can purchase non-us business shares on the stock exchange in the
United States. It is traded in US dollars. It helps individuals diversify their investments and reduce risk.

376. What is a debt?

Ans. The fixed income securities can be called as debt. Debts bear fixed rate of return till the passage of designated
time.

377. Explain Issuer, Principal, Coupon and Maturity with respect Debt:

 Ans. Issuer – The Company which issues the debt is called the issuer.
 Principal – The amount which is taken in the initial can be called as principle.
 Coupon – The rate of interest which a debt instrument carries is called coupon.
 Maturity – The date of maturity of the bond is when the amount will be paid by the issuer.

378. Explain Bonds

Ans. Bonds are the bond that carries a fixed return rate with a specified maturity period.

379. What are Strips?

Ans. The process of removing the coupon from the bonds and selling them as zero coupon bonds and interest paying
coupons. The interest paying coupon is called as stripped coupons.

380. Explain FRN’s

Ans. Floating rate note is a note with a variable rate of interest which is adjusted every after six months and is tied
with some benchmark instruments.

381. Explain Government Gilt –

Ans. These are government securities which are issued by the government bearing rate, amount and maturity date.

382. What is the difference between Government Treasury bill and Sovereign Eurobond?

Ans. The main distinction between the State Treasury bill and the sovereign Eurobond is the state issuing the
Treasury bills and the fixed bear rate and fixed interest. In India there are 91 day, 182 day, and 364 day maturity T-
bills. Whereas sovereign Eurobond is a debt insurance issued by the foreign-denominated government in the country
called sovereign bond, and where the currency is Euro, it is called sovereign Eurobonds.
 383. What is an Index? Give the different types of Indices

Ans. Index is a basket of stocks that shows the general movement of the stocks either up or down. Some type of
indexes would be equity index, derivative index, etc.

384. What is a Future?

Ans. Futures are the standardised contracts which are done with the help of the exchange. These are basically
derivative contracts with a set lot size, value and the date of maturity.

385. Explain Expiry Date, Lot Size, delivery date and contract specifications with respect to a Futures
contract:
 Ans. An Expiry Date (last trading day) – The expiry date is the last date or the maturity date of the contract...
 A Lot Size – The fixed size of contracts that can be bought or the multiple of that is called as lot size. If the lot size
is 50 then you can buy minimum number of 50 contracts or a multiple of 50 (for example: 50,100, 150, 200…..).
 A delivery date – The date on which the delivery is to be made. This is also called as the settlement date this is
usually done on the last Thursday of the month.
 A contract specification – It contains the specifications regarding the contract like the lot size, maturity date,
value and other specifications. In Indian market the minimum value of the contract is 2 lac.
 A schedule of delivery months – It is settled at every last Thursday of the month and it can run for a maximum of
3 months.
 Trading hours – The duration for the trading is between 10 am – 4 pm in India. You can buy or sell the securities
only between these times.

386. What is an Option?

Ans. It gives the right but not the obligation to the buyer or the seller to buy or sell the underlying asset. It is a
derivative instrument.

387. Explain Exercise/ Strike price, Premium, Expiry Date, Call, put, long, short, at the money, in the
money and out of the money with respect to an Option Contract:

Ans. Exercise/ Strike price – The price at which the contracts going to be executed are called as the strike price.
Premium – when the difference between the strike price and the spot price is positive it can be called as the
premium.
Expiry Date – The maturity date of the contract is called as the expiry date. On this date you have to renew the
contract or it will be executed.
Call – It gives the buyer the right but not the obligation to buy the underlying asset at a fixed rate, size and duration.
Put – It gives the seller the right but not the obligation to sell the underlying asset at a fixed rate, size and duration.
Long – long position can be stated when you are buying.
Short – short position is when you sell.
At the money – when the spot price is less than the strike price and you make profit it is called at the money.
In the money – when the spot price and the strike price are the same, a position of no profit no loss.
Out of the money – when the spot price is more than the strike price and you incur loss.

Specialized Finance Companies Interview Questions

388. How will you bring more investments?

Ans. a) Use social media campaign to publicize prospectus, highlighting the safety of investment and probable
returns.
b) Post a blog article on LinkedIn with an offer to 15-min consultation
c) Get referral from current investors/ customers
d) Work using personal networks
e) Revisit on closed clients for referrals
f) Reach out to lost opportunities
g) Implement an email marketing campaign to generate leads

389. How will you raise money from lenders?

Ans. If we are a corporate house we can Issue debentures, medium term notes, commercial paper, promissory notes.
If the lender is an institutional lender, then avail overdraft, Term loan, revolving loan facility.

390. How will you create more investors / leads for our products?

Ans. a. Use social media to find prospects you can help.

b. Post a blog article on LinkedIn with an offer for a 15-minute consultation.
c. Offer a free 1 hour course on financial planning
d. Get referrals from current customers.
e. Work with your personal network.
f. Attend a networking event.
g. Revisit closed/lost opportunities.
h. Implement an email sequence.

Insurance Companies Interview Questions

391. How to sell insurance?

Ans. If it’s Business to Customer - Create good customer relationships and we should understand what their
requirements are and which product will fit their needs? Once the right product fit has been established, we will sell
the product with the advantages it will provide. If it's Business to Business - It would be channel sales and the priority
is to build good channel partnerships and provide good service

392. How will you sell insurance through the agents without giving incentives and benefits?

Ans. Motivating agents without commission will be extremely difficult, since the insurance market is competitive. In
order to inspire the agent, the sales person must be in regular communication with the agent, we must be
acquainted with the market, we must create confidence, and eventually, based on the relationship we have with the
agents, we will be able to spring up business.

393. How will you select agents to sell insurance?

Ans. Few criteria for selecting agents would be

a)     Agent should meet the Minimum sales volume that the agent can source
b) Agent should be IRDAI licensed person,
c) Agent should align with company’s norms and conditions
d)     Agent should a productive person with need to work for the commissions.

394. What is insurance?

Ans. An agreement under which a corporation or state undertakes to provide a compensation guarantee for the
specified loss, injury, sickness, or death in exchange for payment of a specified premium.

395. How to sell insurance to HNI customers?

Ans. To sell insurance to HNI customers you must first understand how they think and how different their needs are
from other customers. Some clients, for example, may buy life insurance as a tool for estate planning. This can be
done by discussing with them about their requirements and the benefits and disadvantages of changing any existing
coverage amounts.

396. How to sell health insurance?

Ans. Be organized - Keeping an organized office space will help you stay calm, collected, and focused

Prepare for objections. – Be willing to listen, show compassion and use the experience to help a customer get
through their reservations.

Ask questions - Understanding what's relevant to your customer will help you narrow down the types of insurance
products and services that they'd want.

Listen - Listening effectively can help you close the sale

Evaluate your success – and failure – frequently

Automate follow up- CRM tools which include auto-response technology are an insurance seller’s game-changers.
These tools helps to optimize time and streamline sales efforts. Insurance software systems offer insurance agents
the ability to customize communications, develop their company and provide the level of customer service that will
attract customers and facilitate referrals.

397. How would you achieve a target of 1 lakh customers in one month?

Ans. a) Implement Content Marketing

b) Embrace social media

c) Ensure Brand Consistency

d) Automate Your Marketing

e) Delivering value in new ways- The other major element in the value-for - money calculation is customer
experience. Through this sense, improving relationships with customers through improved communication is a way of
generating more value for money, through demonstrating the ability to recognize and respond appropriately to
changing customer needs. The insurers will then have the opportunity to expand their basic value proposition.

398. What is an advisory agent?

Ans. Advisory agent is a professional who gives expert guidance and investment advice in various insurance schemes.
An advisory agent performs a number of functions such as intermediation, sales and other services for various
transactions, compliance management, consulting or advisory role, etc.

399. How would you tap a market and convince the target audience?

Ans. a) Speak straight to the target client. Developing and maintain a voice for your brand
b) Create unique, valuable insights that can only come from you, not your competitors.
c) Use humor, compassion, and empathy.
d) Differentiate your content - your audience is looking to you as the expert when it comes to your content. To be
considered an expert, you must not only have useful feedback but also take a strong stance.
e) Ask the right questions to make them think -The easiest way to connect emotionally and drive more engagement
amongst your audience is to question them. Ask them about their experiences with your company, your products, or
your service.
f) Deepen Your Buyer Personas - You want to target buyers with meaningful content, which means you must
understand their triggers and goals – you have to move beyond their role.
g) Stay Agile -Your buyer personas and content programs should be dynamic, not static. Always keep evaluating and
adapting, and stay nimble so you can modify as needed.

400. When does prepaid expenses becomes negative in the balance sheet?

Ans. All Prepaid expenses that are incurred within 12 months appear on the balance sheet as a current asset. When
the balance available for the prepaid expenses account exceeds the outstanding amount of the proposed expense,
then the prepaid expenses is depicted as negative.

401. What is IBNR?

Ans. Incurred but not reported (IBNR) claims is the amount owed by an insurer to all eligible claimants who have
incurred a covered loss but have not registered it yet. Since the insurer does not know how many of these losses
have happened, nor the magnitude of each loss, IBNR is an estimation obviously.

402. What is OCI?

Ans. OCI stands for other comprehensive income.

ABOUT THE AUTHOR Mrs. Tanuja P.T is a Training and Development professional with 10 plus years of work
experience at HSBC, First American, Inter title and Vibgyor High Schools. She lives in Bangalore, with her husband and
2 children. She can reached at onehourtraining@gmail.com