Banking Financial Awareness · General Awareness

Banking Services and Operations

1,373 Questions

Banking Services and Operations cover the fundamental principles of financial institutions, including credit markets, money supply, and risk management. It also addresses various transaction methods and account types used by businesses. This topic is crucial for candidates preparing for banking and insurance recruitment examinations.

Banking AbbreviationsCredit Market OperationsMoney Supply MetricsRisk Management MeasuresForeign Exchange RulesDigital Banking Technology

Banking Services and Operations Questions

Multiple choice

Which of the following is/are motive(s) of holding cash?

  1. Transaction motive only

  2. Precautionary motive only

  3. Speculative motive only

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As explained earlier cash is needed for transaction, precautionary and speculative motive. Hence, cash is needed for all of these motives.

Multiple choice

Which of the following could be termed as a transactional product?

  1. Insurance

  2. Shares

  3. Real estate

  4. Bank deposits
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Correct Answer: Bank deposits

Transactional marketing is a business strategy that focuses on single "point of sale" transactions. The emphasis is on maximizing the efficiency and volume of individual sales rather than developing a relationship with the buyer. 

Multiple choice

In which of the following forms of businesses may banking companies emerge?

  1. Acting as an agent for any government or local authority or any other person

  2. Undertaking and executing trusts

  3. Contracting for public and private loans.

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Under part 2 of Banking Regulations Act, banks may carry out businesses lending or advancing money act as an agent contracting for private or public loans. Banks can also undertake the administration of estates acquisition, maintenance, construction of any building convenient for the purposes of company.

Multiple choice

Which of the following is/are true with regard to the functions of central bank?

(i) Custodian of cash reserves of commercial banks (ii) Custody and management of foreign exchange reserves (iii) Clearing house for transfer and settlement. (iv) Lender of the last resorts.

  1. (i) and (ii)

  2. (ii) and (iii)

  3. (iii) and (iv)

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Functions of a central bank:

Regulator of Currency

Banker, fiscal agent and adviser to the government

Custodian of cash reserves of commercial banks

Custody and management of foreign exchange reserves

Lender of the last resort

Clearing house for transfer and settlement

Controller of credit

Multiple choice

A co-operative bank is

  1. created by persons belonging to the same local

  2. created by professional community

  3. created by people sharing a common interest

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

A co-operative bank is a financial entity which belongs to its members who are, at the same time, the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services. (loans, deposits, banking accounts...)

Multiple choice

In the absence of proper reference, the banker can be held liable on the grounds of

  1. negligence

  2. connivance

  3. crime

  4. arrogance
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

In the absence of proper reference the banker, can be held liable on the grounds of negligence. Following are the duties of the bank, which when bank fails to carry out, can make it liable due to negligence

  • To ensure crossing and special crossing
  • To take into account the state of customer's account
  • To open the account with proper references and documentary proof etc. 
Multiple choice

Cash Credit facility is a

  1. fund-based facility

  2. non-fund based facility

  3. both fund and non-fund based

  4. All of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Fund-based working capital products include cash credit, packing credit and short termed loans etc.

Multiple choice

For delayed credit in customer's bank account, bank is not liable, if the delay is due to

  1. war

  2. damage of the bank

  3. acts of God

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The bank shall not be liable to compensate customers for delayed credit, if some unforeseen event (including but not limited to civil commotion, sabotage, accident, fires, natural disasters or other “Acts of God”, war, resulting in damage to the bank’s facilities or of its correspondent bank(s), etc.) beyond the control of the bank prevents it from performing its obligations within the specified service delivery parameters.

Multiple choice

Bills co-acceptance facility is a

  1. fund-based facility

  2. nbon-fund based facility

  3. Both fund and non-fund based

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The credit facilities given by the banks where actual bank funds are not involved are termed as 'non‑fund based facilities'. These facilities are divided in three broad categories as under

Letters of credit

Guarantees

Co‑acceptance of bills/deferred payment guarantees. 

Multiple choice

The bank who opens letter of credit is called

  1. issuing bank

  2. advising bank or the confirming bank

  3. negotiation bank or the nominated bank

  4. reimbursement bank
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Issuing bank is the bank who opens letter of credit. Letter of credit is created by issuing bank who takes responsibility to pay amount on receipt of documents from supplier of goods. (beneficiary under LC).

Multiple choice

The advising bank’s responsibility is to

  1. inform the issuing bank as to whom to issue the letter of credit

  2. advise the buyer the dispatch of documents by the seller

  3. inform the beneficiary/seller about the letter of credit

  4. None of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Advising bank is another party involved under Letter of Credit. Advising bank, as a part of letter of credit, takes responsibility to communicate with necessary parties under letter of credit and other required authorities. The advising bank is the party who sends documents under Letter of Credit to opening bank.

Multiple choice

The confirming bank

  1. guarantees to undertake the responsibility of payment

  2. conforms the negotiation of the bills

  3. advises bank and conforms the Letter of Credit

  4. None of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Confirming bank is one of the other parties involved in Letter of Credit. Confirming bank confirms and guarantees to undertake the responsibility of payment or negotiation acceptance under the credit.

Multiple choice

Negotiating bank is the bank which

  1. negotiates the preliminary contract of sale between the buyer and the seller

  2. negotiates documents delivered to bank and verifies the documents

  3. guarantees the payment by the issuing bank

  4. All of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Negotiating bank is one of the main parties involved under Letter of Credit. Negotiating Bbnk, who negotiates documents delivered to bank by beneficiary of Letter of Credit. Negotiating bank is the bank who verifies documents and confirms the terms and conditions under Letter of Credit on behalf of beneficiary to avoid discrepancies