75 MCQ on Bank Related Laws and Practices with Answers

75 MCQ on Bank Related Laws and Practices with Answers

Are you looking for a comprehensive guide to 75 MCQ on Bank Related Laws and Practices? Then this article is perfect for you.

Here, you will find 75 multiple-choice questions (MCQs) covering topics ranging from banking regulations to financial instruments, with answers provided.

These MCQs are designed to help you test your knowledge on the various aspects of bank related laws and practices.

With these thought-provoking questions, this article can serve as a valuable reference for any banking professional or aspiring student.

About Bank Related Laws and Practices

Bank related laws and practices play a crucial role in ensuring the stability and integrity of the financial system. These laws and practices are put in place to regulate banks, protect depositors, prevent fraud, and promote fair competition.

Understanding these laws is essential for anyone who wants to manage their finances or do business with a bank.

One of the most important bank related laws is the Banking Act. This law regulates how banks operate, including what services they can offer, who can own them, how much capital they must hold, and how they should be supervised.

The Banking Act also sets out rules for deposit insurance schemes which protect depositors if a bank fails.

Another key law is Anti-Money Laundering (AML) legislation which aims to prevent criminals from using banks to launder money obtained through illegal activities such as drug trafficking or terrorism financing.

75 MCQ on Bank Related Laws and Practices with Answers

75 MCQ on Bank Related Laws and Practices with Answers

1. Lending and investment activity of a bank are the same. (True/False)
Ans. True

2. Under no circumstances can a bank refuse to open an account if no sufficient proof is furnished. (True/False)
Ans. True

3. ‘Know Your Customer’ requirements are not a part of opening bank accounts and accepting deposit. (True/False)
Ans. False

4. Withdrawal of deposit cannot be by way of drawing a cheque only. (True/False)
Ans. True

5. Permitted business activities of a bank are not a part of central government guidelines from time to time. (True/False)
Ans. True

6. The term banking is defined under ___.
(a) RBI Act,
(b) BR Act,
(c) Companies Act
Ans. BR Act

7. Loans can be granted ___.
(a) with security only,
(b) without security,
(c) with or without security)
Ans. With or without security

8. A bank can undertake a certain activity ___.
(a) as per section 6(1) of BR Act,
(b) as per central government directives,
(c) Both of these)
Ans. As per section 6(1) of BR Act

9. A bank can accept for safe custody ___.
(a) Deposit receipts,
(b) Bonds,
(c) Either of these two
Ans. Either of these two

10. Maximum period for which a bank can possess an immovable property is ___
(a) 5 years, (b) 7 years, (c) even beyond 7 years under certain circumstances with permission of RBI
Ans. 7 years

11. A bank can sell certain goods and securities ___.
(a) as a part of recovering its dues,
(b) as a part of banking business,
(c) None of these two)
Ans. As a part recovering its dues

12. a) Total number of nationalised banks till now are 20.
a) Regional Rural Banks are in the private sector because of their small size.
b) Provisions of BR Act and RBI Act do not apply to Cooperative banks as they are constituted under a different Statute.
Ans. True

13. Public sector banks include ___.
(a) Nationalised Banks,
(b) Regional Rural Banks,
(c) Both of these
(d) Both of these

14. Cooperative banks are constituted under ___.
(a) Central/State legislation, (b) BR Act, (c) Society Registration Act
Ans. (c) Society Registration Act

15. Private sector banks come under the purview of ___
(a) Companies Act, BR Act, both of these
Ans. Both of these

16. One rupee note is issued by RBI. (True/False)
Ans. False

17. Commercial banks can seek credit information from RBI. (True/False)
Ans. True

18. RBI is popularly called ‘banker’s bank’. (True/False)
Ans. True

19. One of this is not the function of RBI ___.
(a) Issue of currency notes, (b) Issuing bank guarantees, (c) Credit control in the banking system
Ans. Issuing bank guarantee

20. Capital of RBI is owned by ___.
(a) Government of India, (b) Jointly by Government of India and State Governments,
(c) GOI and World Bank jointly
Ans. Government of India

21. RBI Governor is appointed by ___.
(a) Banks and FIs
(b) Chief Justice of India
(c) Central Government
Ans. Central Government

22. There is no ceiling on the number of shares of a bank a person may own. (True/False)
Ans. True

23. Voting rights of an individual shareholder is not subject to any upper ceiling. (True/False)
Ans. False

24. A bank can engage in any lawful activity through a subsidiary. (True/False)
Ans. False

25. At least ___ of the Directors should have the qualifications prescribed under section 10A (2) of the BR Act (a) 50%, (b) 75%, (c) 51%
Ans. 51%

26. A foreign bank is expected to deposit ___ % of its profit from Indian operations with RBI every year
(a) 10 %,
(b) 20 %,
(c) 25%
Ans. 20%

27. Commission, brokerage paid on the sale of shares of a banking company should not exceed ____% of the paid up value of the shares.
(a) 1%,
(b) 2.5%,
(c) 5%)
Ans. 2.5%

28. There is no appeal to the orders issued by RBI against banks. (True/False)
Ans. False

29. Government has the power to suspend the operation of BR Act. (True/False) Ans. True

30. The capital of RBI is subscribed by public sector banks. (True/False)
Ans. False

31. Government’s powers to issue directions to RBI are found in ___.
(a) BR Act,
(b) RBI Act,
(c) Companies Act)
Ans. RBI Act

32. RBI’s powers to issue directions to banks are not found in one of these sections:
( a) Section 21,
(b) Section 35A,
(c) Section 22.
Ans. Section 22

33. RBI can prohibit a particular transaction of a bank under ___ BR Act
(a) Section 11,
(b) Section 36,
(c) Section 45ZA.
Ans. Section 36

34. RBI is the sole authority to exercise powers against cooperative societies. (True/False)
Ans. False

35. In the case of cooperative societies operating in more than one state, Multi State Cooperative Societies Act, 2002 applies. (True/False)
Ans. True

36. RBI empowered to direct cooperative banks to wind up the business, in case the cooperative banks registered under Deposit Insurance and Credit Guarantee Corporation Act. (True/False)
Ans. True

37. Introduction of ___ in BR Act has brought the cooperative banks under the purview of RBI
(a) Section 56,
(b) Section 21,
(c) Section 24
Ans. Section 56

38. Company matters of a banking company are regulated by ___
(a) Reserve Bank,
(b) SEBI,
(c) Authority under the Companies Act
Ans. Companies Act

39. Trading in shares by banks is subject to regulation by ___
(a) SEBI,
(b) Company Law Board,
(c) Companies Act.
Ans. SEBI

40. Section ___ of the Transfer of Property Act recognizes instruments may be negotiable by custom or usage.
Ans. Section 137

41. The directions issued by RBI are basically persuasive in nature. (True/False)
Ans. False

42. RBI’s order prohibiting a banking company to a certain transaction is subject to central government’s approval. (True/False)
Ans. False

43. Power to regulate advances is governed by sections 21 and section 35A jointly. (True/False)
Ans. True

44. If RBI issues circulars without referring to statutory provisions, it has only persuasive value for banks. (True/False)
Ans. False

45. Issuing directions to banks is one of the ways of controlling credit in the banking system. (True/False)
Ans. True

46. Fixed deposit is an example of demand deposit. (True/False)
Ans. False

47. Rate of interest allowed in savings deposit is 5%. (True/False)
Ans. False

48. More than one person can be appointed as nominee in case of deposit account. (True/False)
Ans. False

49. Between the legal heirs and nominee, it is the former who gets the right to receive the money in case of death of the depositor. (True/False)
Ans. False

50. Nomination facility is extended to safe deposit vault account. (True/False)
Ans. True

51. The facility of nomination is not available in co-operative banks. (True/False)
Ans. False

52. Banks are required to file a return covering the unclaimed deposits in terms of RBI Act. (True/False)
Ans. True

53. Under orders of courts, banks can accept deposits for a period exceeding 10 years. (True/False)
Ans. True

54. The term ‘banking’ under section 5(b) of Banking Regulation Act does not include lending by banks. (True/False)
Ans. False

55. The question of maintaining margin arises only in the case of secured advances. (True/False)
Ans. True

56. Selective credit control is one of the measures of credit control in banks. (True/False)
Ans. True

57. RBI Act provides for imposing restrictions on bank loans and advances. (True/False)
Ans. True

58. In case of dispute as to whether a particular transaction is in the nature of loan/advance, the decision of central government is final. (True/False)
Ans. False

59. The interest rate structure applicable to commercial banks is totally regulated by RBI. (True/False)
Ans. False

60. Provisions of Usurious Act, 1918 can override the commercial rate of interest structure of banks. (True/False)
Ans. False

61. Reserve Bank India can regulate the interest rates in the banking system under RBI Act, 1934. (True/False)
Ans. True

62. Commercial banks can have different interest rate structure depending upon the sectors and nature of activities financed. (True/False)
Ans. True

63. Process of deregulation of interest rates has come in the wake of financial and banking sector reforms in our country. (True/False)
Ans. True

64. Reserve funds of banks form part of their CRR balance. (True/False)
Ans. False

65. Banks can use the funds lying in reserve funds for the purpose of lending. (True/False)
Ans. False

66. In the matter of transfer of profits to reserve funds, foreign banks are in the same footing as banks incorporated in India. (True/False)
Ans. False

67. Banks can approach Central Government for seeking exemption from the requirement of transfer of profits to reserve funds account under some circumstances. (True/False)
Ans. False

68. Any appropriation of money from reserve funds has to be reported to RBI unless otherwise exempted from doing so. (True/False)
Ans. True

69. Every bank in the country is necessarily a scheduled bank. (True/False)
Ans. False

70. The entire CRR balance is eligible for payment of interest in the hands of Reserve bank of India. (True/False)
Ans. False

71. The maximum percentage of CRR that the RBI can fix is 15 per cent. (True/False)
Ans. False

72. It is mandatory for banks to submit a return on demand and time liabilities and borrowings from other banks to RBI every Friday. (True/False)
Ans. False

73. In exceptional cases, RBI can prohibit a bank from accepting deposits in case of prolonged non-maintenance of CRR with RBI. (True/False)
Ans. True

74. Banks have to maintain 25 per cent of demand and time liabilities as liquid assets on a daily basis. (True/False)
Ans. False

75. The present SLR is 20 per cent. (True/False)
Ans. False

FAQs related to banking laws and regulations

Q1. What are the various laws related to banking?

Ans: Various laws related to banking include the Banking Regulation Act, 1949 (in India), the Federal Reserve Act (in the United States), and the Basel Accords (international banking standards).

Additionally, there are laws related to consumer protection, anti-money laundering (AML), and bankruptcy that impact the banking sector.

Q2. Which policy banks are legally required to follow?

Ans: Banks are legally required to follow monetary policy set by the central bank of their respective countries. For example, in India, banks must adhere to the monetary policy set by the Reserve Bank of India (RBI), while in the United States, banks follow the policies set by the Federal Reserve.

Q3. Which type of bank is governed under various regulations and acts?

Ans: All types of banks, including commercial banks, cooperative banks, and central banks, are governed under various banking regulations and acts. These laws are designed to ensure the stability and integrity of the banking sector.

Q4. Why is law important in the banking sector?

Ans: Law is crucial in the banking sector to maintain financial stability, protect the rights of depositors, ensure fair and transparent lending practices, prevent fraud and money laundering, and provide a legal framework for banking operations.

Q5. Who sets banking regulations?

Ans: Banking regulations are typically set by government authorities and regulatory bodies. In many countries, the central bank plays a significant role in formulating and implementing banking regulations.

Additionally, legislative bodies may pass laws related to banking, and financial regulatory agencies oversee compliance.

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Conclusion

It is clear that there is a great deal of importance for individuals to understand the key bank related laws and practices.

With the help of this MCQ article, we have been able to gain an insight into some of the most important points on this topic.

This knowledge can be used not only to better our own financial situation but also to assist others who may need guidance in this area.

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