lOMoARcPSD|19127201

Banking 1-21 - MCQS

accounts in business (Tabani's School of Accountancy)

Studocu is not sponsored or endorsed by any college or university

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)
 lOMoARcPSD|19127201

Banking
MULTIPLE CHOICE QUESTIONS
Q. Select the right choice from the given options:
1. The name of the first Central Bank in the world is:
a. Bank of Venice b. Bank of England c. Bank of Amsterdam d. State Bank of Pakistan
2. A Pay in Slip is used for:
a. Withdrawal of Cashb. Getting Loan c. Deposit of Cash d. Granting of Loan
3. If an endorser simply signs on the back of the Negotiable Instrument, it is called:
a. Restrictive Endorsement b. Blank Endorsement c. Sans Recourse Endorsement
d. Special Endorsement
4. Overdraft facility is provided on:
a. Bill of Exchange b. Current Account c. Credit Card d. Letter of Credit
5. Notice must be served in case of dishonor of:
a. Cheque b. Bill of Exchange c. Promissory Note d. Letter of Credit
6. Rediscounting of Bills of Exchange is a function of:
a. Statutory Bank b. Scheduled Bank c. Central Bank d. Commercial Bank
7. The usual number of parties to a Cheque are:
a. Two b. Three c. Four d. Five
8. Function of a clearing house is to:
a. Control Credit b. Rediscount Bills c. Monitor loans d. Clear cheques of member banks
9. If the Drawer of a Cheque is the Payee himself, this is written after the word Pay:
a. Name of the Bank b. Self c. Order d. ‘& Co.’
10. The most important function of a Commercial Bank is to:
a. Serve customers b. Create credit money d. Give Loans d. Take Deposits
11. The letter of credit is an:
a. Order b. Request c. Agreement d. Promise
12. The Crossing on a Crossed Cheque can be cancelled by:
a. Drawer b. Payee c. Drawee Bank d. Notary Public
13. In online banking, a cheque of a bank can be presented at
a. any branch of same bank b. any bank c. special branches of any bank d. special banks
14. The reputation of a Bank depends on its:
a. Assets b. Security c. Liquidity d. Publicity
15. This is not a Quantitative Method of Credit Control:
a. Rationing of Credit b. Open Market Operations c. Legislation d. Reserve Ratio
16. This cannot be defined as a Bank by Ownership:
a. Savings Bank b. Statutory Bank c. Private Bank d. Public Bank
17. Balance of Trade includes:
a. Only visible imports and exports b. Only local transactions
c. Only foreign transactions d. Both visible and invisible imports and exports
18. The drawee of a Cheque is the:
a. Payee b. Endorser c. Customer d. Bank
19. Any alteration in a Cheque must be signed by:
a. the Bank b. Gazetted Officer c. Drawer e. Payee
20. The party on which a Cheque is drawn is called:
a. Payee b. Drawer c. Drawee d. Creditor
21. Clearing House reduces the amount of:
a. Plastic money b. Gold and Silver c. Credit Instruments d.Currency

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)

 lOMoARcPSD|19127201

Banking
MULTIPLE CHOICE QUESTIONS

22. A stale cheque is:

a. Older than 6 months b. Not yet due c. Not presented to bank d. Unconfirmed
23. One of the sources for Bank Funds is:
a. Discounting Bills b. Issuing Letter of Credit c. Advancing loans to customers
d. Federal Funds purchase
24. Before lending to a Company, a bank should check its:
a. Authorized Capital b. Paid up Capital c. Subscribed Capital d. Called up Capital
25. In Pakistan, currency notes are issued on the basis of:
a. Fixed Fiduciary System b. Proportional Reserve System c. Minimum Reserve System
d. Simple Deposit System
26. Telegraphic Transfer refers to:
a. Payment through post office b. payment through commercial bank
c. payment through central bank d. payment through mobile banking
27. For deferred payments we use:
a. Foreign exchange b. Debit card c. ATM d. Credit Instruments
28. A rise in Bank Rate will discourage:
a. Debtors b. Creditors c. Fixed account holders d. Savings account holders
29. The instrument payable on demand drawn by a Bank upon itself is:
a. Credit card b. Bill of Exchange c. Cheque d. Payorder
30. Credit is created by:
a. Commercial Banks b. Central Banks d. Exchange Banks d. Whole banking system
31. A depositor’s money in a Commercial Bank has a:
a. Debit balance b. Credit balance c. Nil balance d. PIN code
32. A bank can pay this cheque to anyone:
a. Order cheque b. Blank cheque c. Payorder d. Bearer cheque
33. By type of Ownership, State Bank of Pakistan is:
a. Statutory Bank b. Public Bank c. Private Bank d. Central Bank
34. The endorsement which makes it clear to whom the instrument is to be paid is:
a. Restrictive endorsement b. Conditional endorsement c. Special Endorsement
d. Blank endorsement
35. Bank funds mainly consist of money borrowed from:
a. Moneylenders b. Central Bank c. Merchants d. Account holders
36. Customer needs this to operate ATM:
a. National Tax number b. Credit card number c. CNIC number d. PIN code number
37. The first Commercial Bank established in Pakistan:
a. Habib Bank Ltd. b. Muslim Commercial Bank Ltd. c. State Bank of Pakistan
d. National Bank of Pakistan
38. The signature card is always signed by:
a. Account holder b. Bank Manager c. Governor SBP d. Cashier
39. Central Banking System originated in this century:
a. 16th b. 19th c. 20th d. 21st
40. Banks usually act as custodian of customer’s:
a. Property b. Valuables d. Business d. Cash
41. Commercial Bank can act as Underwriter for:
a. Shares b. Bonds c. Debentures d. All of these

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)

 lOMoARcPSD|19127201

Banking
MULTIPLE CHOICE QUESTIONS

42. A bill of exchange is usually accepted by:

a. Buyer b. Banker c. Central Bank d. Seller
43. A foreign bill of exchange is usually classified as:
a. Bill by place b. Bill by time c. Bill by amount d. None of these
44. A cashier’s cheque is also called:
a. Order cheque b. Bearer cheque c. Payorder d. Crossed cheque
45. The most common form of credit payment for import-export is:
a. Bank draft b. Postal Order c. Bill of Exchange d. Money order
46. The main purpose of signature card of an account holder is:
a. to compare against the cheques presented on the account b. to remind the cashier of lost
cheques
c. to help in dishonor of cheques d. to compare the handwriting
47. A country’s rate of local currency against that of another currency is known as:
a. exchange control b. exchange mechanism c. exchange rate d. balance of payments
48. The purchasing power parity theory was presented by
a. David Ricardo b. Gustav Cassel c. Alfred Marshall d. Lionel Robbins
49. The form of credit given to high net worth exporters is called:
a. Transferable credit b. Revolving credit c. Omnibus credit d. Traveller’s letter of credit
50. Central Banks advance loans to Commercial Banks by
a. Rediscounting bills of exchange b. Clearing House c. Maintaining cash reserves d. Credit
control
51. World Bank is also referred to as
a. IMF b. IFC c. SDR d. IBRD
52. World Bank is an organ of
a. IBRD b. IFC c. IDA d. IMF
53. Special Drawing Rights refer to
a. International money in physical form b. International money in the books of IMF
c. International money used as Foreign Exchange d. American dollars
54. Import quota refers to
a. Allowing partial imports b. Allowing free imports c. Disallowing total imports d. No
restriction on exports
55. Exchange Control means bringing the system under a
a. Centralized authority b. Decentralized authority c. Group of commercial banks
d. Group of financial institutions

56. Exchange control facilitates

a. Depletion of gold reserves b. Depletion of foreign exchange reserves
c. Maintaining optimum level of gold reserves d. None of the above
57. Debt servicing refers to
a. Paying interest on foreign loans b. Paying dividend on loans
c. Paying on any loan d. Paying off principal and interest
58. Exchange pegging refers to
a. Keeping up exchange rate b. keeping up budgetary deficit c. keeping up budgetary surplus
d. none of the above

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)

 lOMoARcPSD|19127201

Banking
MULTIPLE CHOICE QUESTIONS

59. Balance of payment can be improved by

a. Devaluation b. Increase in bank rate c. Attracting foreign investment d. All of the above
60. Continuous negative balance of payment results in
a. Development of economy b. High confidence of foreign investors c. Devaluation d. None of
the above
61. By lowering the bank rate
a. Credit money expands b. Credit money contracts c. Credit expansion remains unchanged
d. Savings are encouraged
62. Following is not a method of selective credit control
a. Legislation b. Rationing of Credit c. Publicity d. Direct action
63. It is responsible for the financial stability of the country
a. Central Bank b. Industrial Bank c. Commercial Bank d. Mortgage Bank
64. Banker for the people is
a. Commercial bank b. Central Bank c. State Bank of Pakistan d. Cooperative bank
65. Bank rate policy is determined by
a. Provincial government b. Central Bank c. Federal Government d. Commercial Bank
66. Buying and selling Treasury Bills is the function of
a. Government of Pakistan b. State Bank of Pakistan c. Commercial Banks d. Scheduled Banks
67. Open market operations refers to
a. Military operation b. Buying and selling Government securities c. Receiving deposits from
markets
d. Selling treasury bills
68. Bank rate of an economy is determined by
a. Bank of England b. State Bank of Pakistan c. Central Bank d. Any type of bank
69. Credit is controlled by
a. Refixing interest rate b. Buying and selling treasury bills c. Changing reserve ratio
d. All of the above
70. Currency notes are issued by
a. Federal Government b. Provincial Government c. Central Bank d. Commercial bank
71. Central Bank is Banker’s Bank because it
a. Rediscounts bills b. Issues L/C c. Draws bills d. Settles trade disputes
72. Cash reserve requirement means maintaining certain level of cash at the
a. Commercial bank b. Central Bank c. Branch of a commercial bank d. All of the above
73. Lender of the last resort is by
a. Commercial bank to commercial bank b. Central bank to central bank c. Commercial bank to
central bank d. Central bank to commercial bank
74. Credits that are automatically renewed are known as
a. Fixed Credits b. Transferable Credits c. Divisible Credits d. Revolving Credits
75. Loan against credit card is secured by
a. Third party guarantee b. Card holders property c. Goodwill of cardholder d. None of the
above
76. An L/C useful only in some specified countries/ areas is called
a. Limited L/C b. Circular L/C c. Revolving L/C d. Revocable Credit

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)

 lOMoARcPSD|19127201

Banking
MULTIPLE CHOICE QUESTIONS

77. A letter of credit accompanied by financial and transport documents is called

a. Full letter of credit b. Complete letter of credit c. Documentary Credit d. Clean credit
78. A sight bill is payable
a. On demand b. At a certain date c. After the expiry of a certain period d. after acceptance
79. This is not a credit instrument
a. Cheque b. Bill of Exchange c. Promissory Note d. Prize Bond
80. This is used as a measure of credit control:
a. Bank Rate b. Wage Rate c. Exchange Rate d. Market Rate
81. Monopoly of Note issue is a characteristic of
a. Federal Government b. Provincial Government c. Central Bank d. Commercial Bank
82. Banks not registered with the Central Bank are
a. Commercial Banks b. Limited Banks c. Scheduled Banks d. Non Scheduled Banks
83. A change in a cheque must be supported by
a. Signature b. Initials c. Name d. Account Number
84. The first bank in the Indian subcontinent was the
a. Bank of Bengal b. Reserve Bank of India c. Imperial Bank d. National Bank
85. Initially banks were established for
a. Multiplying money b. Spending c. Security d. Replacing barter system
86. Credit for banking system goes to
a. Money lenders b. Goldsmiths c. Merchants d. All of the above
87. A bank is the manufacturer of
a. Accounting system b. Industries c. Trade d. Credit
88. State Bank of Pakistan came into being in
a. 1947 b. 1948 c. 1949 d. 1950
89. In 1947, Pakistan’s banking system was run by
a. State Bank of Pakistan b. Reserve Bank of India c. Habib Bank d. Bank of England
90. In Pakistan, banks were nationalized in
a. July 1974 b. March 1974 c. November 1973 d. January 1972
91. Privatization of banks in Pakistan was started in
a. 1980 b. 1985 c. 1995 d. 1991
92. In the USA, the first bank was opened by
a. George Washington b. Alexander Hamilton c. The Whigs d. William Gladstone
93. In the USA, Provincial Banks are known as
a. State Banks b. National Banks c. Cooperative Banks d. Saving and Loan Associations
94. If the drawer of a cheque signs on the back for transferring the rights to another person, it is
called
a. Material change b. Endorsement c. Crossing d. Acceptance
95. If the crossing on a cheque contains the name of a particular Bank or Branch it is called
a. Plain crossing b. Special crossing c. General crossing d. Non negotiable crossing
96. A bill of exchange can be cashed from the bank before maturity by
a. discounting of bill b. renewal of bill c. overdraft d. rediscounting of bill
97. Commercial banks keep their reserves with
a. Stock Exchange b. National Savings Centre c. Central Bank d. Mortgage Bank
98. Clearing House is managed and supervised by
a. Commercial Banks b. Central Bank c. Exchange Banks d. Scheduled Banks

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)

 lOMoARcPSD|19127201

99. Accommodation Bill is drawn to

a. Borrow b. Lend c. Trade d. Sell commodities
100. A clean bill is
a. Well Documented b. Undocumented c. Need not be accepted d. Unwritten

Answer Key:
1. b. Bank of England 2. c. Deposit of Cash 3. b. Blank Endorsement
4. b. Current Account 5. b. Bill of Exchange 6. c. Central Bank
7. b. Three 8. d. Clear cheques of member banks 9. b. Self
10. b. Create Credit money 11. b. Request 12. a. Drawer
13. a. Any branch of same bank 14. c. Liquidity 15. c. Legislation
16. a. Savings Bank 17. a. Only visible imports and exports 18. Bank
19. c. Drawer 20. c. Drawee 21. Currency
22. a. Older than 6 months 23. d. Federal Funds purchase 24. b. Paid up capital
25. b. Proportional Reserve System 26. b. Payment through commercial bank
27. d. Credit instruments 28. a. Debtors 29. d. Payorder
30. d. Whole banking system 31. b. Credit balance 32. d. Bearer Cheque
33. a. Statutory Bank 34. a. Restrictive Endorsement 35. d. Account holders
36. d. PIN code number 37. a. Habib Bank Ltd. 38. a. Account holder
39. a. 16th 40. d. Cash 41. a. Shares 42. a. Buyer 43. a. Bill by place
44. c. Payorder 45. c. Bill of Exchange 46. a. to compare against cheques presented on
account
47. c. Exchange Rate 48. b. Gustav Cassel 49. C. Omnibus Credit 50.a. Rediscounting bills of
exchange 51. d. IBRD 52. d. IMF 53. b. International money in books of IMF
54. a. Allowing partial imports 55. a. Centralized authority 56. c. Maintaining optimum gold
reserves
57. c. Paying on any loan 58. a. Keeping up exchange rate 59.d. All of the above
60. c. Devaluation 61. A. Credit money expands 62. b. Rationing of credit 63.a. Central Bank
64. a.Commercial Bank 65. b. Central Bank 66. b. State Bank of Pakistan
67.b. Buying and selling Govt Securities 68. c. Central Bank 69. d. All of the above
70. c. Central Bank 71. a. Rediscounts bills 72. b. Central Bank 73. d. Central Bank to
Commercial Bank
74. d. Revolving Credits 75. C. Goodwill of cardholder 76. a. Limited L/c 77. Documentary
Credit
78. a. On demand 79. d. Prize Bond 80. a. Bank Rate 81.c.Central Bank 82. d. Non Scheduled
Banks
83. a. Signature 84.a. Bank of Bengal 85. c. Security 86. D. All of the above 87. d. Credit

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)

 lOMoARcPSD|19127201

88. b. 1948 89. b. Reserve Bank of India 90.a. July 1974 91. d. 1991 92.b. Alexander
Hamilton
93. a. State Banks 94.b. Endorsement 95. b.Special Crossing 96.a. discounting of bill
97. c. Central Bank 98. b. Central Bank 99. Borrow 100. b. Undocumented

Downloaded by Lakshmi Narasaiah (lakshminrsh@gmail.com)