Banking Financial Awareness · General Awareness

Banking Services and Operations

1,239 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.

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Banking Services and Operations Questions

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Narrow money refers to ________.

  1. $M _1$
  2. $M _2$
  3. $M _3$
  4. $M _4$
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per the revised definition of M1 as a measure of money stock in India, it can be defined as currency plus demand deposits with commercial banks plus other deposits with RBI.
Since, this definition of money supply is narrow, it is termed as narrow money.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

The chief function of money is that of __________.

  1. a medium of exchange

  2. a reserve base for credit creation

  3. providing liquidity

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

The most fundamental and primary function of money is to serve as a medium of exchange, which solves the double coincidence of wants problem inherent in barter systems.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which of the following is not a function of money?

  1. Medium of exchange

  2. Unit of account

  3. Standard of deferred payment

  4. Store of metal
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Store of METAL is not a function of money. 'Store of VALUE' is a function - money preserves purchasing power. 'Store of metal' suggests hoarding physical metal, which is not a monetary function. The actual functions are medium of exchange, unit of account, standard of deferred payment, and store of VALUE.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which of the following are the functions of money?
(i) Medium of exchange
(ii) Unit of account
(iii) Store of value
(iv) Standard of deferred payments.

  1. (i) and (ii) only

  2. (i), (ii) and (iii) only

  3. (ii) and (iv) only

  4. (i), (ii), (iii) and (iv)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Medium of exchange, unit of account, store of value, and standard of deferred payments are all widely recognized primary and secondary functions of money.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

The transaction motive relates to the desire of the people to hold cash for the future transactions.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

False. 

Transaction motive basically relates to the desire of the public to let the cash move freely in the economy through depositing it into the banks and initiating the process of credit creation in the economy. Transaction motive even relates to the motive of not influencing the price changes in the capital market. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Many a time we read in newspaper about the benefits of National Electronic Funds Transfer (NEFT), a delivery service launched by the bank. Why do banks advocate for such delivery channels?
A. It is a system in which no physical transfer takes place, hence risk is very low.
B. In this system banks are not required to transfer any money actually to the account of the customer. Only book adjustment is done. Hence actual fund is not needed.
C. This facility is available to anybody at any place. Even having a bank account is not at all necessary.

  1. Only (A) is correct

  2. Only (B) is correct

  3. Only (C) is correct

  4. Both (A) and (B) are correct
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer.

Under this Scheme, individuals can electronically transfer funds from any bank branch to any individual having an account with any other bank branch in the country participating in the Scheme.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Various banks in the country have installed machines which disburse money to general public. These machines are called _______.

  1. coin dispensing machines

  2. ATMs

  3. debit card machines

  4. ledger machines
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

An ATM, which stands for automated teller machine, is a specialized computer that makes it convenient to manage a bank account holder's funds.
It allows a person to check account balances, withdraw or deposit money, print a statement of account activities or transactions, and even purchase stamps

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Many times we see banks advertise - "Anywhere Banking: Anytime Banking". Which of the following products/facilities launched by banks make it possible for the customers to avail banking services 24 hours all seven days?
A. ATM
B. Internet Banking
C. Universal cheque book facility

  1. Only (A)

  2. Only (B)

  3. Both (A) and (B)

  4. All (A), (B) and (C)
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

  • An automated teller machine (ATM) is an electronic telecommunications device that enables customers of financial institutions to perform financial transactions, such as cash withdrawals, deposits, transfer funds, or obtaining account information, at any time and without the need for direct interaction with bank staff.
  • Internet banking is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website.
  • A cheque is a document that orders a bank to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued.
All these facilities are available to a customer all the time.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

In which of the following fund transfer mechanisms, can funds be moved from one bank to another and where the transaction is settled instantly without being bunched with any other transaction?

  1. RTGS

  2. NEFT

  3. TT

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

RTGS (Real Time Gross Settlement) is a system where funds are transferred on a gross basis in real-time, meaning each transaction is settled individually and immediately.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which of these is not a function of money?

  1. Medium of exchange

  2. Store value

  3. Power indicator

  4. Measurement of value
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The functions of money can be classified into two categories: 

1. Primary function: The primary function of money includes money as a medium of exchange and money as a measure of value.


2. Secondary function: The secondary function of money includes money as a store of value and money as a standard of deferred payment. 


Therefore, power indicator is not a function of money. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

If someone keeps some money for bad days, this demand for money is known by_________ motive of money.

  1. speculative

  2. transaction

  3. precautionary

  4. store
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Precautionary motive of money refers to the demand for money to store it for future uncertainties. In other words, if money is demanded so that it can be kept for bad days then the demand of such money is known by the precautionary motive of money. In such cases, money functions as the store of value. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Demand deposits are included in ________.

  1. M1

  2. M2

  3. Both

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

Money supply refers to the total stock of money of all types ( currency as well as demand deposits) held by the people of a country at a given point of time. 

Money supply is measured in several ways which includes M1, M2, M3 and M4  measurement of money supply. Every measurement has it own definition with different components varying from most liquid to most rigid form. 

Demand deposits refers to the deposits of the people which is held by the commercial banks which can be withdrawn on demand. These are included in M1 and M2 measurement of money supply as they are considered the liquid money supply in the economy. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which of the following function does money serve when used to purchase or sell different goods and services?

  1. Store of value

  2. Medium of exchange

  3. Standard of value

  4. Display of power
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. As a medium of exchange, money functions as a mode of exchanging goods and services. In this function of money, money is used to purchase or sell different goods and services in the market. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

What functions are performed by money?

  1. Served as a medium of exchange

  2. Common measure of value

  3. Store of value

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

Money refers to a common medium of exchange that is issued under the law of government and acts as a legal tender for the whole country. The functions performed by money are as follows: 

1. Medium of exchange: As a medium of exchange, it refers to a function of money in which money is considered as a mode of exchanging goods. This function of money solved the main problem of barter system which was double coincidence of wants.

2. Common measure of value: As a measure of value, it refers to a function of money that helps in determining the value of goods and services. Money is taken as the common denominator while measuring the value of goods and services in monetary terms.

3. Store of value: As a store of value, it refers to the function of money  that helps individuals in storing their wealth in the form of money. Therefore, money acts as an asset that sustains value over a period of time.