General Awareness · Banking Financial Awareness

Regulatory Thresholds and Caps in India

778 Questions

Regulatory Thresholds and Caps in India refer to the statutory limits imposed on finance, taxation, and corporate governance. It covers sectoral caps, expenditure limits, and penalty thresholds defined by law. These questions are crucial for banking, accounting, and civil services exams.

Financial limitsTax deductionsCorporate regulationsElectoral thresholdsPenalties and fines

Regulatory Thresholds and Caps in India Questions

Multiple choice

A bank has revaluation reserves of Rs. 300 cr. What amount can be included in the Tier 2 capital?

  1. Rs. 300 cr

  2. Rs. 165 cr

  3. Rs. 135 cr

  4. Rs. 30 cr
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Correct Answer: Rs. 135 cr A revaluation reserve is a reserve created when a company has an asset revalued and an increase in value is brought to account. A simple example may be where a bank owns the land and building of its head-offices and bought them for $100 a century ago. A current revaluation is very likely to show a large increase in value. The increase would be added to a revaluation reserve. The reserve may arise out of a formal revaluation carried through to the bank's balance sheet, or a notional addition due to holding securities in the balance sheet valued at historic cost. Basel II also requires that the difference between the historic cost and the actual value be discounted by 55% when using these reserves to calculate Tier 2 capital. Hence, 45% of 300 cr = 135 cr. 

Multiple choice

Which of the following is not correct in the context of term deposits?

  1. Term deposit receipts are non-transferable.

  2. Term deposit can be issued normally for a maximum period of 120 months.

  3. On term deposit the interest is normally compounded on a quarterly basis.

  4. Cash payment of a term deposit is allowed if the amount is Rs. 20000 or less.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

For term deposits, the minimum amount accepted for fixed/short deposit is Rs. 1000 for a period of 15 days and above and minimum of Rs. 100 lac and above for a minimum period of 7 days.

Multiple choice

If a banking company fails to ensure compliance of obligations under Prevention of Money Laundering Act 2002, the director can impose a fine of

  1. min Rs. 1000 and max Rs. 1 lac

  2. min Rs. 5000 and max Rs. 2 lac

  3. min Rs. 50000 and max Rs. 5 lac

  4. min Rs. 10000 and max Rs. 1 lac
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If the Director, in the course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may - by an order, levy a fine on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.

Multiple choice

Under Prevention of Money Laundering Act, 2002, banks are required to maintain record of cash transactions of the value of

  1. Rs. 50000 and above

  2. Rs. 1 lac and above

  3. Rs. 10 lac and above

  4. above Rs. 10 lac
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

As per Rule 3 of the Rules notified by Notification No. 9/2005, every banking company, financial institution and intermediary shall maintain a record of all cash transactions of the value of more than Rs. 10 lac or its equivalent in foreign currency. Thus, option 4 is the correct answer.

Multiple choice

For an Indian bank, as per Section-11 of Banking Regulation Act, the minimum paid-up capital and reserves should be

(a) Rs. 5 lac, if the bank is having business in more than one state (b) Rs. 10 lac, if business is in more than one state and includes Mumbai or Kolkata or both (c) Rs. 2 lac, if place of business is in the state and does not included Mumbai or Kolkata

  1. Only (a), (b) and (c)

  2. Only (a) and (b)

  3. Only (b) and (c)

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

For an Indian bank, as per Section-11 of Banking Regulation Act, the aggregate value of its paid-up capital and reserves shall not be less than: (i) if it has places of business in more than one state, Rs. 5 lac, and if any such place or places of business is or are situated in the city of Bombay or Kolkata or both, Rs. 10 lac. If it has all its places of business in one state, none of which is situated in the city of Bombay or Kolkata, Rs. 1 lac in respect of its principal place of business, plus Rs. 10 thousand in respect of each of its other places of busi­ness situated in the same district in which it has its principal place of business, plus Rs. 25 thousand in respect of each place of business situated elsewhere in the state, other­wise in the same district.

Multiple choice

Section 12 of Banking Regulation Act stipulates that the subscribed capital of a bank cannot be less than ___ % of its authorized capital and paid-up capital cannot be less than _____ % of the subscribed capital.

  1. 10%, 50%

  2. 25%, 25%

  3. 50%, 50%

  4. 50%, 10%
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Under section 12 of Banking Regulation Act, no banking company shall carry on business in India, unless it satisfies the condition that the subscribed capital of the company is not less than one-half of the authorised capital and the paid-up capital is not less than one-half of the subscribed capital. Thus, option 3 is the correct answer.

Multiple choice

If a banking company is found to be not complying with the requirement of Prevention of Money Laundering Act, 2002, the Director can impose a fine of

  1. Rs. 10000

  2. Rs. 20000

  3. minimum Rs. 10000 and maximum Rs. 1 lac

  4. minimum Rs. 10000 and maximum Rs. 5 lac
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If a banking company is found to be not complying with the requirement of PMLA Act 2002, the Director can impose a fine of minimum Rs. 10000 and maximum Rs. 5 lac.

Multiple choice

If any relative of the auditor holding interest on security whose face value exceeds ________, then the auditor is disqualified from being appointed as auditor.

  1. Rs. 10

  2. Rs. 100

  3. Rs. 1,000

  4. Rs. 10,000

  5. Rs. 1,00,000
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

If any relative of the auditor holding interest on security whose face value exceeds Rs. 1,000, then the auditor is disqualified from being appointed as auditor as per section 141 of Companies Act, 2013.