(D

A K GUPTA'S

BANKERS TRAINING INSTITUTE

(75, Block BG-1, Paschim Vihar, New Delhi- 110063)
Tele: Oil 65476949. 09350476949 Q11 2fi27di57

BANKING LAW & PRAGTIGF

TOPIC PAGE No.

❖ Nl ACT
1 To 16

❖ BANKING REG. ACT & RBI ACT 17 TO 19

❖ TYPES OF CUSTOMERS / BANKER

CUSTOMER RELATIONSHIP &
TYPES OF DEPOSIT ACCOUNTS 20 TO 55

❖ ANCILLARY BUSINESS & MISC. 56 TO 65

♦> CHARGING OF SECURITIES,

DOCUMENTATION 66 TO 81

❖ ANSWERS

Websites: vvwriii^barikeretraininglnstitute.com

email: akg.bti@gmall.com
, code:71022104
 A K GUPTA'S

BANKERS TRAINING INSTITUTE

(75, Block BG-1, Paschim Vihar, New Delhi - 110063)
Tele: 011 65476949, Oil 25274157, 09953587375

KNOW YOUR FACULTY

A. K. GUPTA
1. Shrl A.K. Gupta is a post graduate in commerce, LLB, CAIIB, PG Dip in Personnel Management
and IR, PG Dip in Marketing and Management, PG Diploma in Training and Development,
Certificate in Industrial Finance;

2. Ex- Chief Manager. Punjab National Bank with an experience of more than 28 years as a banker
3. Experience of more than 12 years In training in the bank's training college (Principal for 5 years):
has helped thousands of bankers up to scale V in their banking career.
4. Guiding bankers for career advancement in banks for last 15 years.
5. Has been examiner with Indian Institute of Banking & Finance (IIBF, Mumbai) for about 5 years.
Has been teaching Financial Management and Management Accounting and Commercial Law in
the classes conducted by the Indian Institute of Banking & Finance.

6 After having left bank as chief manager, at the age of 48 years, remained associated with number
of leading management institutions at MBA level including Masters of Finance. University of
Delhi, International Management Institute etc teaching subjects like Management of Banks,
Financial Services, Financial Management. Merchant Banking, Banking Law & Practice.
7. Conducted programmes in the area of Asset Liability Management and Credit risk management
for top management executives in the rank of Chief General Manager/General Manager/DGM/
AGMs of SIDBI, Central Bank of India, Dena Bank, Punjab & Bind Bank
8 Has been visiting faculty to training colleges of several banks like PNB, NIBSCCM Qoint college
of Oriental Bank of Commerce, PSB and J&K Bank). Canara Bank, UCO Bank. Bank of India etc
9. He was incharge of Economic Intelligence Cell in PNB for 5 years and the job involved analysis
of monetary & credit policies of RBI, analysis of Govt. policies and Budget; tracking Banking and
Economy related developrrients; He was Senior Manager incharge of. AssetLiability Management
Ceil for 2 years. - ^ ;
' ,
10. Besides attending several programmes at NIBM and BTC(RBI), he was a student of University of
Manchester for 3 months for an advanced programme in Development Banking.
11. Number of articles and case studies authored by him have appeared in Economic Times,
Financial Express, PNB Monthly Review, Vikaipa (Journal of MM Ahmedabad). The Banker,
Indian Banking Today and Tomorrow, Indian Management (Journal of AIMA). He presented
papers at Bank Economists Conferences.

He can be contacted at: 093 50 476949, email: akg.bti@gmail.com

•. I f ' "i-'j
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949}

NEGOTIABLE INSTRUMENTS ACT

Definitions
1. Provisions relating to Negotiable Instruments are given in the Negotiable Instruments Act, 1881. The
Negotiable Instruments Act is applicable in whole of India including Jammu & Kashmir. The Act came into
force w.e.f. Mar 01, 1882. Latest amendment was in Dec 2002. Total sections in N I Act are 147.
2. What is a Negotiable Instrument?: As per Section 13 of the N I Act, Nl means and include promissory note
(PN), bill of exchange (BoE)and cheque.
3. Negotiable Instruments as per N I Act: Promissory Note, Bill of Exchange, Cheque, DO
4. Negotiable Instruments as per Section 137 of Transfer of Propertv Act: Documents of title to goods such as
Railway Receipt, Bill of Lading, Warehouse Receipt etc.
5. Negotiable Instruments as per practice and usage: Treasury Bills, Certificate of Deposit, Commercial Paper,
Govt. Promissory Note.
6. Features of Negotiable Instrument: (i) it is freely transferable and (ii) the title of the transferee will be better
than the transferor if the transferee took the instrument for value and in good faith under circumstances
when he did not have suspicion about any defect in the title of the transferor. Such a transferee is called
holder in due course and is defined in Section 9 of the Act.
7. Promissory Note: defined in Section 4 of N 1 Act. It is an instrument in writing {not being a bank note or a
currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money
only to, or to the order of, a certain person, or the bearer of the instrument. There are two parties in a PN i.e.
promisor and promisee or maker and payee. Currency notes and bank notes are not promissory notes as
per sec 4.
8. Bill of Exchange: defined in Section 5 of N I Act. Bill of exchange is an instrument in writing containing an
unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to,
or to the order of, a certain person or to the bearer of the instrument. In a Bill of Exchange, the person
ordering for payment is called Drawer and the person directed to pay is called Drawee. The beneficiary is
called payee.
9- Cheque: defined in Sec 6 of Nl Act. It is a bill of exchange but always payable on demand and drawee is
always a banker. Thus, a cheque is similar to a Bill of Exchange. Further, any bill which is payable on
demand and in which drawee is a banker will be called cheque. The definition includes cheques in electronic
form and truncated cheques.
10.Demand & Usance PN or BOE: The promissory note or bill of exchange can be payable on demand or after
some time. If no time is mentioned then the same will be treated as Demand promissory note or Demand Bill
of Exchange. If these are payable after sometime called as Usance PN or BOE.
11.Bearer or Order: A negotiable instrument can be payable to bearer or order. If neither bearer nor order is
written it is treated as payable to order. If both bearer or order are written it is treated as payable to bearer.
12.0n demand bearer instruments: As per Section 31 of RBI Act, 1934, no person other than Central
Government or Reserve Bank of India or any other person authorized in this behalf can issue bearer
promissory notes and a demand bills of exchange payable to bearer.
13.Presumptlon of N I: As per Section 118 of N I Act, N I is presumed to be (i) made for consideration {ii)
executed on the date appearing on the instrument and (iii) every holder is a holder in due course.
14.Inchoate instrument: defined in section 20 of the Nl Act. It is an instrument on which date, payee or amount
is not mentioned. It can be completed by the Holder and the completion will not be treated as material
alteration. An instrument without signatures is not treated as an instrument at all.
15.Ambiguous instrument: defined in Section 17 of N I Act. An instrument which can be treated as Bill of
Exchange or Promissory Note is called as Ambiguous instrument. Holder can treat it PN or BOE as per his
discretion.
IS.Holder: defined in section 8 of the Nl Act. Holder of a promissory note, bill of exchange or cheque means
any person entitled in his own name to the possession thereof and to receive the amount due thereon from
parties thereto.
17.Holder in Due Course: defined in Section 9 pf the Nl Act. Holder in due course is a person who became
possessor of a Nl for valuable consideration, in good faith, before becoming due, and without having any
reason to believe that the person transferring the instrument was not entitled thereto.
Transfer of a Negotiable Instrument and Endorsement
1 ■ Transfer of a Negotiable instrument: by assignment (under Transfer of Property Act) or by Negotiation.
2. Negotiation: means transferring an instrument from one person to another to constitute the transferee the
holder thereof.
3. Negotiation of a Bearer instruments: A bearer instrument is negotiated by mere delivery and no
endorsement is required.
4. Negotiation of an order instrument: An order instrument can be negotiated by endorsement followed by
delivery. It may be noted that legal heirs can not complete the negotiation of a negotiable instrument with
endorsement by the deceased merely by delivery.
5. Title of Transferee: The transferee gets better title, if instrument is taken for consideration. In good faith.
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75. Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 6S476949, Oil 25274157,09350476949)

6. Endorsement: Signing of an instrument on the back or face thereof or on a slip of paper annexed thereto for
the purpose of negotiation is called endorsement (Section 15). The person who transfers the instrument is
called endorser and the person to whom it is transferred is called endorsee.
7. Who can endorse: Drawer, holder, payee can endorse.
8. Liability of endorser: Under Section 35 of N I Act, liability of an endorser is similar to principal debtor.
9. Blank Endorsement: In a blank endorsement the endorser just signs his name without indicating endorsee. It
can be converted into full by writing name of a person above signatures. The effect of an endorsement in
blank is that it makes an instrument dawn originally payable to order to bearer instrument for the purpose of
negotiation which can be further negotiated by mere delivery.
10.Endorsement in Full: When, the endorser indicates the name of the endorsee it is called full endorsement.
11.Sans Recourse Endorsement: An endorsement in which endorser excludes his liability is termed 'sans
recourse' or without recourse endorsement. In case of dishonour of instrument, the amount can not be
recovered from such endorser.
12.Facultative: An endorsement in which endorser waives the notice of dishonour is called Facultative
endorsement. But this is not applicable to other parties to the instrument.
13.Restrictive endorsement: An endorsement which restricts further right of negotiation is called as restrictive
endorsement. For example if it is written in the endorsement as "Pay to Hari for my use" it is restrictive
endorsement.
14.Conditional Endorsement: When alongwith endorsement, condition is imposed by endorser. For example,
pay to C on completion of studies. Paying bank not to ensure compliance of condition. Condition binds
endorser and endorsee only.
15.Back to Back Endorsement. An endorsement in which the endorser himself becomes endorsee is called as
back to back endorsement and in such a case, the endorsee can recover the amount only from parties prior
to his own endorsement.
16.Negotiation Back: When the drawer of a cheque himself becomes endorsee, it is called "Negotiation Back"
and this cheque is treated as satisfied.
1 /.Partial Endorsement: The endorsement can be made only for full amount but in case part payment has been
received and a note to that effect is made on the instrument, then the same can be endorsed for the balance
amount.
18.Forged Endorsement: When endorsement is made by a person other than Holder by forging signatures of
Holder. Title does not pass to any person on the basis of such endorsement. A person getting instru-ment
after such endorsement does not become holder.
PAYMENT OF CHEQUES
Protection to paying banker: A paying banker gets protection under Section 85 of the Nl Act.
1. In the case of order cheques, protection is available under section 85(1) and for bearer cheques it is
available under section 85(2) of Nl Act. In the case of drafts it is available under section 85A.
2. As per section 85(1) of the Act a paying banker is discharged by payment in due course of a cheque
payable to order and which purports to be endorsed by or on behalf of payee. It means paying banker is
concerned about regularity of endorsement and not its genuineness or forgery.
3. As per section 85(2) of the Nl Act, a bank will be discharged of its liability by making payment in due course
of a cheque payable to bearer if the payment is made in due course notwithstanding any endorsement. If
the cheque is endorsed, the bank is not required to take note of any such endorsement. Thus as per section
85(2),'Once a bearer always a bearer'
Payment in due course Is defined in Sec 10 of the Act and means (i) payment is accordance with the apparent
tenor of the instrument(ii) in good faith and without negligence (iii)to any person in possession thereof (iv)
under circumstances which don't afford a reasonable ground for believing that the is not entitled to receive
payment of the amount therein mentioned.
Payment of a cheque: While making payment of a cheque, bank is required to take certain precautions.
(a) Form of the cheque has not been given in the Act. It is simply as per practice. However, RBI has
prescribed format as per new cheque standards "CTS-2010". All banks providing cheque facility to their
customers, will issue only 'CTS-2010' standard cheques across the country by December 31, 2012.
(b) Different ink: A cheque can be drawn in different inks, handwritings or different scripts. Thus, a cheque
presented with different ink, handwriting or script can be paid.
(c) Language: The cheque should be written in Hindi, English or Regional language. Bank is within its powers
to return a cheque written in a language other than the language of that region.
(d) Signatures on Back: When a cheque is presented for payment signatures of the presenter are taken on
the back as a witness of payment. If the presenter refuses to sign, the bank can take receipt on a separate
paper.
(e) Date: Ante dated: A cheque dated prior to its date of presentation is called ante dated cheque and can be
paid within 3 months from the date of issue. Post dated cheque means a cheque which is dated
subsequently to the date of presentation. Both ante-dated and post-dated cheques are valid in taw. A post
dated cheque can be passed only on the date written on it or within 3 months thereafter. Stale cheque: RBI
has reduced the period within which cheques/drafts/pay orders/banker's cheques are presented for
payment from six months to three months from the date of such instrument for instruments issued on or
2
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 6S476949, Oil 2S274157,09350476949)

after April 1, 2012. It has been done because these instruments are being circulated In the market like cash
for six months. The drawer may further reduce validity and can revalidate the cheque any number of times
impossible Date: A cheque with impossible date like 31.11.10 should be paid on the last day of the month
or within 3 months of the last day of the month. Cheque dated prior to openina the account: A cheque
dated prior to the date of opening the account or issue of cheque book can be paid if otherwise in order.
(f) Amount : (i) The amount should be written both in words and figures. (It) Amount in words is called legal
amount and amount written in figures is called courtesy amount, (iii) As per Sec 18 of the Nl Act, if the
amount written in words and figures differ, the amount written in words will be the amount intended to be
payable, (iv) If the balance in the account is just equal to the amount of the cheque, the cheque will be paid
(v) If the balance in the account is insufficient to pay the cheque, it should not be paid relying on the
balance in some other account or transferring the amount from other account unless there is an
arrangement to that effect. If bank makes payment without sufficient balance in the account on which
cheque has been drawn by relying on balance in some other account and customer contests the payment
of cheque, bank may not be able to exercise the right of set off. (vi) If number of cheques are presented at
the same time and the balance is not sufficient to pay alt the cheques, then normally priority is given to
cheques favouring revenue authorities, then to cheques favouring public authorities. If balance is left,
maximum number of cheques should be passed taking care that cheque of very small amount is not
dishonoured.
(g) Banking Hours; As per section 65 of the Act, presentment for payment of a cheque must be made within
banking hours. If a cheque presented after banking hours is paid, it will not be a payment in due course.
However, the payment of a reasonable amount can be made to drawer even after banking hours. Further,
the presentment should be within banking hours. Actual payment may be even after banking hours.
(h) Mutilation: if there is any mutilation of cheque, it should be confirmed by drawer.
(i) Material alteration: (i) Any change in date, amount or name of payee is called material alteration, (ii) The
change from order to bearer, or cancellation of crossing or converting special crossing to general crossing
is also material alteration, (iii) However, bearer to order or crossing a cheque or converting general crossing
to special crossing or completing an incomplete cheque is not material alteration, (iv) If there is any material
alteration on a cheque It can be paid only after confirmation from drawer. In the case of joint accounts with
"either or sun/ivor" clause any of the account holders can confirm material alteration, (v) The confirmation
should be under full signatures as per specimen signatures (vi) With effect from 1®' Dec 2010, In case of
clearing houses where image based cheque truncation has started, cheques with material alteration will not
be acceptable even if the same has been authenticated. This rule does not apply to change in date, (vii)
Under Section 89 of the Nl Act, 1881 paying banker gets protection in case of payment of materially altered
cheques if the alteration is not apparent at the time of payment and payment has been made in due course.
G) Payee: if the payee is fictitious person then the cheque can be paid to bearer if it is payable to bearer but if
the cheque is payable to order, it can be paid only to the drawer.
(k) Bearer or Order: if a cheque is payable to bearer or order, it can be paid to bearer. However, if neither
bearer nor order is written it is payable to order.
(I) Forged signatures: (i) If there is a forgery in the signatures, such an instrument is null and void. Paying
banker will not get protection if it pays such a cheque even though the drawer might have been careless in
custody of the cheque book or bank might have sent statement of accounts and the customer did not point
out the mistake, (ii) However, if the cheque has been signed by the drawer himself but in a different fashion,
the banker will not be liable.
Crossing:
(a) General Crossing: If a cheque or a draft bears across its face addition of iwo parallel transverse lines with
or without addition of words "and company' or any abbreviation thereof, it is called General Crossina
(Section 123).
(b) General Crossing is a direction to the paying banker to pay the cheque/draft through some bank.
(c) Even if the name of a city is written between two parallel lines like "Indore", it will continue to be a general
crossing and the cheque can be paid to any bank. Such cheque can be paid at any station to a bank and
not necessarily at Indore.
f^) Special Crossing: When a cheque/draft bears the name of a bank across its face with or without two
parallel transverse lines either with or without the words 'not negotiable", it is said to be specially crossed
(section 124).
(e) A cheque with special crossing can be paid only to the named bank or his authorized agent for collection.
(f) A cheque crossed to two banks has to be returned unpaid unless crossed by one bank to another as his
agent for collection (Section127).
(g) The special crossing is in favour of a bank and not in favour of a particular branch. Hence a cheque
favouring PNB Bhopal, can be paid to a branch of PNB at any other place also.
(h) For special crossing it is noi necessary that the cheque should bear two parallel lines.
(i) The Act does not restrict the payment of a crossed cheque to the banker in cash. Therefore, a cheque with
general or special crossing can be paid to a bank in cash.
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

0) ApDlicabilitv of provisions relating to Crossing: Provisions relating to crossing are applicable to cheques and drafts only
and not to Promissory Notes or Bill of Exchange. Therefore, if any Bill or Promissory note is having addition of two
parallel lines or name of a banker, it does not have any effect.
(k) Who can cross a cheque: The Crossing can be done by drawer, payee or holder or a banker.
(!) 'Account Payee' crossing (i) Account payee crossing is not recognised by law but is a long standing practice
amongst bankers, (ii) It is a direction to the collecting banker, (iii) Such a cheque can be collected for credit of the
named payee and can not be endorsed.
(m) RBI guidelines on Account oavee crossing: In consonance with the legal requirements and in particular the intent of the
Negotiable Instruments Act, and with a view to protect the banks being burdened with liabilities arising out of
unauthorized collections, and in the interest of the integrity and soundness of the payment and banking systems, RBI
in 2006, prohibited the banks from crediting "account payee' cheque to the account of any person other than the payee
named therein. RBI has clarified that the practice of collecting third party account payee cheques on behalf of co
operative credit societies who are their constituents is generally not permissible but banks may consider collecting
account payee cheques drawn for an amount not exceeding Rs.50,000/- to the account of their customers who are co
operative credit societies, if the payees of such cheques are the constituents of such co-operative credit societies,
(n) 'Not negotiable' crossing takes away an important characteristic of negotiability. A cheque with Not negotiable
crossing remains freely transferable and can be endorsed. But a person taking a cheque crossed generally or specially
bearing in either case the words 'not negotiable' shall not have and shall not be capable of giving a better title to the
cheque than that which the person from whom he took it had (Section 130). Nobody will be a holder in due course of
a cheque bearing Not Negotiable Crossing
(o) Cancellation of crossing can be done by drawer only under his full signatures by writing the words crossing
cancelled. In such cases, the payment is made in cash to a person known to the bank.
(p) Under Section 128 of the NI Act. The paying banker is will get protection in respect of crossed cheques or drafts
provided the instrument has been paid in accordance with the requirement of the crossing and payment has been
made in due course.
(q) As per Section 129 of the N I Act, if a banker pays a cheque in vio'ation of the crossing direction, it will not be a
payment in due course and bank shall be liable to the true owner of the cheque for any loss he may sustain uwing
to payment of the cheque.
Migrating to CTS 2010 standards: All cheques issued by banks (including DDs / POs issued by banks) shall conform to
CTS-2010 standard. Drawee banks will return the non-CTS-2010 instruments, if any, presented In the regular CTS clearing,
under the reason code '3'/-Present in proper zone'. Banks can continue to present such non-CTS-2010 instruments in
Express Cheque Clearing System (ECCS) centres and MICR CPCs till such time the CPCs are In operation.
Others
a) Instruments returned unpaid should have a signed / initialed objection slip on which a definite and valid reason for
refusing payment must be stated.
b) When cheque valuing rupees one crore and above drawn on a particular account of the drawer is dishonoured on four
occasions during the financial year for want of sufficient funds in the account, no fresh cheque book should be issued.
Also, the bank may consider closing current account at its discretion. Further, banks should have a Board approved
policy for dealing with frequent dishonour of cheques of value of less than Rs. 1 aore. The policy should also deal with
matters relating to frequent dishonour of ECS mandates.
c) RBI has suggested following for prevention of frauds - (i) Examination under UV lamp for alt cheques beyond a
threshold of say, Rs.2 lakh; (ii) Checking at multiple levels, of cheques above a threshold of say, Rs. 5 lakh; (iii)
Sending an SMS alert to pa/er/drawer when cheques are received in clearing; (iv) Alerting the customer by a phone
call and getting the confirmation from the payer/drawer and/or contacting base branch in case of non-home cheques
for dealing with suspicious or large value cheques (in relation to an account's normal level of operations)
Cheque Truncation System (CTS): RBI has introduced CTS for clearance of cheques facilitating the presentation and
payment of cheques including Government Cheques without their physical movement.(For details refer IT section in KIT II)
DISHONOUR OF CHEQUES DUE TO INSUFFICIENT BALANCE
1. Law on making bouncing of cheques for insufficiency of funds a penal offence was recommended by Rajamanar
Committee. The said Act has been made effective from 01.04.1989.
2. As per Section 138 of the Act, if any cheque drawn by a person on an account maintained by him with a banker for
payment of any amount of money to another person for the discharge, in whole or in part, of any debt or other liability,
is returned by the bank unpaid, either with the reason funds insufficient or exceeds arrangement or similar reason, such
person shall be deemed to have committed an offence.
3. As per judgements of the Supreme Court, the cheques which are dishonoured on account of the payment being stopped
by the drawer or Account being closed will attract penalty prescribed under Sec 138 of the Act.
4. Penaltv as per section 138: In case of dishonour of cheque due to reasons stated above, punishment can be
imprisonment up to two year, or maximum fine up to twice the amount of the cheque, or both.
5. Conditions for invoking section 138: The provisions of this section shall apply when the following conditions are
satisfied: (a) the cheque has been presented to the bank within a period of six months from the date on which it is
drawn or within the period of its validity, whichever is earlier, (b) the cheque had been received for consideration (c)
the payee or the holder in due course of the cheque, makes a demand for the payment of the said amount of money by
giving a notice, in writing, to the drawer, of the cheque, within thirty days of the receipt of information by him from the
bank regarding the return of the cheques as unpaid, and (d) the drawer of such cheque fails to make the payment of
the said amount, to the holder in due course of the cheque, within fifteen days of the receipt of the said notice. As per
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block 86 - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

Sec 139 of the Act, unless the contrary is proved, it shall be presumed, that the holder of a cheque received the cheque
for the discharge, in whole of in part, of any debt or other liability.
Liability of Directors: As per Sect HI of the Act, If the person committing an offence under section 138 is a company,
every person who, at the time the offence was committed, was in charge of, and was responsible to the company for
the conduct of the business of the company as well as the company shall be deemed to be guilty of the offence.
However, the nominee directors employed in Central or State Govt or a financial corporation controlled by the Central or
State Govt shall not be liable. Further, if it is proved that the offence was committed without the knowledge of the
concerned official of the company he will not be liable.
7- Limitation oeriod for making complaint: The complaint in such cases should be made in the court of a metropolitan
magistrate or a judicial magistrate of the first class or above within one month of the date of the cause-of-action (i.e. if
payment is not made within 15 days). Unless otherwise disproved, Bank's cheque returning slip or memo having official
mark of the bank shall be presumed to be proof of dishonour of the cheque.
COLLECTION OF CHEQUES
Protection to Collecting Banker:
1. Under Section 131 of the Act a collecting banker gets protection for collection of cheques and under section 131A for
collection of drafts.
2. The protection is against risk of conversion i.e. illegal interference with rights of true owner of the instrument
inconsistent with his right of ownership.
3. Such protection is available to the banker when: (I) the cheque/draft is crossed (ii) the bank receives the payment for its
customer (iii) the bank acts as agent for collection and not holder for value (iv) it receives the payment in good faith
and without negligence.
4. To get protection as a collecting banker the bank must ensure that there is no negligence involved. Examples of
negligence could be opening of accounts without proper proof of identity, Ignoring 'not negotiable or 'account payee'
crossing, collecting cheques payable to firm. Ltd Co, Trust, Institutions in the personal accounts of partner, director,
trustee or the office bearer.
5. Cheque return charges shall be levied only in rases where the customer is at fault and is responsible for such returns.
Further, Cheques that need to be re-presented without any recourse to the payee, shall be made In the immediate next
presentation clearing not later than 24 hours (excluding holidays) with due notification to the customers of such re
presentation through SMS alert, email etc.
BILL OF EXCHANGE
1. Demand Bill: A bill of exchange payable on demand or at sight or on presentment is called Demand Bill.
2. Usance Bilk A bill of exchange payable after some time is railed Usance Bill.
3. Documentary bill is one which is accompanied by document of title to goods like railway receipt, bill of lading, etc.
4. Clean bill: is one which is not accompanied by any document of title to goods.
5. Inland bill: is one which is drawn or made in India and is either payable in India or on a person resident in India.
6. Foreion bill: is one which is not an Inland Bill i.e. it is drawn outside India or if drawn in India is payable outside India
on a person resident outside India. Foreign Bills are issued in more than one part.
7. Accomodation Bill: means a bill issued without consideration and dealing in such bills is called kite flying.
8. Interest Rate: If in a bill of exchange or promissory note, interest rate is not mentioned, it will be 18% p a
CALCULAHON OF DUE DATE
1. Usance bills should be presented for aixeptance within a reasonable time.
2. he reasonable time is given under section 105 of NI Act. As per section 105, reasonable time means as per usage and
practice of the area.
3. The drawee is allowed 48 hours excluding public holiday to accept the bill.
4. If a Usance bill Is payable after date, its due date Is calculated from date of the bill and if it is payable after sight, its due
date is calculated from the date of acceptance.
5. As per sertion 22 of the N I Act, three days of grace are allowed In the case of Usance bills and Usance promissory
notes. But if the due date is fixed on a particular day or days of grace are specifically prohibited, the same need not be
given.
6. As per Section 25 of the Act, If a bill or promissory note matures for payment on public holiday under NI Act, 1881
(Sunday or any day declared to be public holiday by the Central Government) it falls due on immediate next preceding
business day. It may be noted that 26^'' Jan, 15"^ August and 2"^ October are national holidays and if the bill falls due on
any of these dates, then preceding business day will be the due date.
7. If the period of usance is given in days, then the day from which due date is to be calculated is excluded. Due
consideration should be given to leap year in which February has 29 days.
8. If the period of usance Is given in months and there is no corresponding day in the month in which bill matures, last day
of the month is taken into account. For example, a bill dated 3P' Dec payable two months after date will fall due on 31^'
Feb without grace period. But since February has only 28 days, 28"^ February will be considered and after 3 days of
grace, 3"^ March will be due date.
DISHONOUR OF A BILL
1. If the drawee does not accept the bill within stipulated period it is treated as dishonoured by non acceptance. In such
case, drawee will not be liable on the bill. In certain cases, such bill is required to be presented to a person named in the
bill called as Drawee in case of need.
2. If a bill after being accepted is not paid on due date, it is said to have been dishonoured due to non payment.
3. Noting and Protesting: Under section 99 of the Act, when a promissory note or bill of exchange has been dishonoured
by non-acceptance or non-payment, the holder may get the dishonour noted by a notary public upon the instrument
within a reasonable time after dishonour.
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG - I, PascNim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

4. If the dishonour is got certified from the Notary public, such certificate is called a pretest.(Sec 100).
5. While noting and protest is optional in case of Inland bills, foreign bills of exchange must be protested for dishonour when
such protest is required by the law of the place where they are drawn (Section 104).
6. Noting and Protesting is done only in the case of dishonour of demand or usance bills or promissory notes and not in the
case of dishnour of a cheque.
7. A person accepting the bill to save the honour of a party to the bill is called "Acceptor for Honour".
8. Liabilities of the parties: If a bill is dishonoured by non acceptance, then holder can recover the amount from all prior
parties except drawee. In this case, the drawer will be the principal debtor.
9. If a bill is dishonoured due to non payment (it means it was accepted), then the holder can recover the amount from all
prior parties including the acceptor of the bill (previously called the drawee). In this case, acceptor (drawee) will be the
principal debtor.
10. Stamoina of a Bill: A demand bill need not be stamped but a usance bill is stamped as per provisions of the Indian Stamp
Act.
11. The value of stamps on a usance bill or promissory note depends on tenor and amount of the bill.
12. However, if the usance period of a bill is up to 3 months, no stamp duty is levied if the bill is for genuine trade transaction
and bank is a party to the bill.
SUMMARY OF IMPORTANT SECTIONS OF NI ACT
Section No. Section Contents

4 Promissory note
5 Bill of exchange
6 Cheque
7 Drawer, drawee, drawee in case of need, acceptor
8 Holder
9 Holder in due course
10 Payment in due course
11 Inland instruments
12 Foreign Instruments
13 Negotiable instruments
14 Negotiation defined
15 Endorsement defined
16 Endorsements in blank and full
17 Ambiguous instruments
18 Amount in words and figures, if differs
19 Instruments payable on demand defined
20 Inchoate instruments
21 Instruments payable after sight
22 Maturity date of Promissory notes/bills of exchange; Days of Grace
25 Bill maturing on a holiday
26 Capacity of the minor
31 Obligation of the Paving Banker
51 Who can negotiate
65 Hours of presentment
80 Interest rate when no rate specified in the instrument
85(1) Protection to Paying Banker for order cheques
85(2) Protection to Paying Banker for Bearer cheques
87 Effect of Material Alteration
89 Payment of instrument on which alternation is not apparent : protection
to banker
99 Noting of Bill of Exchange & Promissory Note
100 Protesting of BOE & PN
105 Reasonable Time for Presentment etc.
123 General Crossing
124 Special Crossing
125 Who can cross
126 Effect of crossing
128 Payment in due course of crossed cheque
129 Payment of crossed cheque out of due course; liability to true owner
130 Not Negotiable Crossing
131 Protection to collecting banker
138 Dishonour of a cheque for insufficiency of funds
139 Presumption in favour of holder
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block PG -1, Paschim Vihar, New Delhi - II0063; Ph Oil 65476949,Oil 25274157,09350476949)

NEGOTIABLE INSTRUMENTS: INTRODUCTION

1. The law relating to negotiable instruments in India is contained in:
(a) Banking Regulation Act. 1949 (b) Negotiable Instruments Act, 1881
(c) Bills of Exchange Act, 1882
(d) Companies Act, 1956 (e) none of the above
2. Negotiable Instruments Act is applicable in the state of:
(a) All states except union territories (b)the whole of India (c) the whole of India except J&K (d) none
3. How many sections are there in the Nl Act?
(q) 131 (b)137 (c) 142 (d) 147 e) none of the above
4. A Cheque is defined under section of Act :
(a)24 of Banking Regulation Act (b) 42 of the RBI Act (c)6 of Nl Act
(d) 10 of Indian Contract Act (e) none of the above
5. Payment in due course has been defined under section of Nl Act:
(a)85 (b)13 (c)8 (d)9 (e) 10
6. For payment of cheque protection is available to the paying banker under section of Nl Act:
(a) 85 (b)131 (c) 85 A (d) 10 (e) none of the above
7. Protection to a collecting banker against conversion is available under section of Nl Act
a)85 (b)131 (c) 85 A (d) 10 (e) none of the above
8. The maker of a bill of exchange is called drawer and the person who is directed to carry out the
unconditional order of the drawer is called :
(a) drawee (b) payee (c) endorsee (d) all of the above (e) none of the above
9. Under section 31 of the RBI Act, 1934, no person other than RBI/Centra! Govt. can draw, make or issue
(a) demand bill of exchange payable to bearer (b) hundi payable to bearer
(c) any promissory note payable to bearer (d) alt above (e) none of the above
10. Which of the following is not a negotiable instrument as per Nl Act, 1881 ?
(a) bill of exchange (b) bank's term deposit receipt <c) cheque (d) promissory note (e) none
11. Which of the following is a negotiable instrument under Nl Act, 1881 ?
(a) Bill of lading (b) Life Insurance Policy (c) Share Certificate (d)Cheque (e) all above
12. Which among the following will be treated as a sans recourse endorsement:
(a) The endorser writes on the back side of the cheque 'pay without my liability'
(b) The drawer writes on the back side of the cheque 'pay without my responsibility'
(c) The endorser writes on the back side of the cheque 'Notice of dishonour waived'
(d) The drawer writes on the back side of the cheque that he will not be liable if the cheque is endorsed.
(e) None of these
13. An order cheque was payable to Miss Lata Khanna as a gift on her marriage. She is married to Shri Ravi
Malhotra. The regular endorsement in this case will be :
(a) Lata Malhotra {b) Lata Khanna(now Lata Malhotra)
(c) Lata Malhotra nee Lata Khanna (d)either(b) or(c) (e) none of these
14. A cheque is presented at drawee branch in which name of payee and amount in words are in different hand
writings. In this case:
(a)The cheque will not be paid as it amounts to material alteration.
(b) The cheque can be paid if otherwise in order.
(c) The cheque can be paid only after confirmation of the drawer
(d) The cheque can be paid after obtaining indemnity from the presenter (e) None of tnese
15. Which of the following is not a negotiable instrument:
(a) Letter of credit (b)Airway Bill (c)A currency note (d) Postal Order (e) all of the above
16. A promissory note or bill of exchange in which no time for payment is specified is always payable :
(a) on demand (b) at the discretion of the promisor/drawee
(c) 30 days after sight (d) one week after date of instrument (e) none of these
17. According to Section 8 of the Nl Act 1881, a holder means :
(a) a person in possession of the instrument in his own name
(b) a person entitled to receive or recover the amount thereon
(c) a person entitled to possession of instrument in his own name and to receive or recover the amount due
thereon from the parties thereto
(d) a person who holds the instrument in trust for another (e) none of the above
18. To be holder in due course in the case of an order instrument:
(a) the person should be its payee or endorsee
(b) the instrument must be regular and complete in all respects
(c) the instrument must have been received for valuable consideration before the amount mentioned
therein became due without having sufficient cause to believe that any defect existed In the title of
the transferor (d) all above (e) none of the above
19. A cheque is given to a Charitable Trust in donation. The Trust in this case will become :
(a) drawee (b) holder-in-due course (c) holder (d) either (a) or(c) {e)none
20. Inchoate instrument is one which is :
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG • I, Paschlm Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,093S0476949)

(a) not drawn in proper form (b) acquired without valuable consideration
(c) acquired under circumstances which showed that transferor had no title or defective title thereto
(d) incomplete instrument (e) either (b) or (c)
21. An Inchoate instrument is one in which following is not mentioned :
(a) Name of the payee (b) Amount (c) The date (d) Any of the above (e) None of the above
22. When neither bearer nor order is written on a cheque, it will be treated as :
(a) payable to bearer (b) payable to order (c) either (a) or (b) as per choice of the customer (d) none
23. An endorsement can be on ;
(a) the face or back of the negotiable instrument (b) piece of paper annexed to the instrument
(c) a stamped paper intended to be completed as a negotiable instrument
(d) any of the above (e) none of the above
24. Which of the following documents can not be endorsed :
(a) Bill of Lading (b) Bank Draft (c) Fixed Deposit Receipt (d) Demand Bill of Exchange (e) None
25. A cheque was payable to A or order. He endorsed it in favour of B but died before it could be delivered
to B. The legal heirs of A can ;
(a) complete the negotiation by delivery only(b) not complete the negotiation by delivery
(c) cancel the earlier endorsement and complete the negotiation by fresh endorsement and delivery
(d) either (a) or (c) (e) none of the above
26. The effect of an endorsement in blank is that it makes :
(a) an order instrument payable to bearer (b) a bearer instrument payable to order
(c) a crossed cheque payable across the counter (d) a negotiable instrument a 'not negotiable' one
27. Endorsement in full means :
(a) signature of the endorser with his full address (b) signature of the endorser alongwith his PAN no.
(c) signature of the endorser with direction to pay the amount to a certain specified person or his order
(d) both (a) and (b) above (e) none of the above
28. Where a negotiable instrument is dishonoured, the endorsee is required to give a notice to the
endorser. When the endorser waives such a notice in his endorsement it is called :
(a) conditional endorsement (b) restrictive endorsement
(c) facultative endorsement (d) endorsement 'sans recourse' (e) none of the above
29. A negotiable instrument in which endorser excludes his liability is called :
(a) conditional endorsement (b) restrictive endorsement
(c) facultative endorsement (d) endorsement 'sans recourse' (e) none of the above
30. A cheque is payable to Rashmi Bhardwaj or order. She endorses it to Shri G S Sain;. Which of the
following endorsements in this case will be 'restrictive endorsement'?
(a) pay to G S Saini for my use (b) pay to G S Saini or order at his own risk
(c) pay to G S Saini after he marries my cousin {d)pay to G S Saini, notice of dishonour waived

PAYMENT & COLLECTION OF CHEQUES

31. To get protection for payment of order cheques with forged endorsements a bank should ensure that:
(a) payment is made in due course (b) endorsement is regular
(c) drawer has attested signatures of the payee(d) both (a) and (b) above (e) all above
32. A cheque is issued payable to Shri Ashish Bareja or bearer. It bears endorsement on its back as under
Pay to Radhakrishnan
Ashish Bareja
The drawee branch pays the cheque to bearer who signed as Ashok Kumar. Under the circumstances :
(a) the bank can't debit the customer's account as endorsement of payee is irregular
(b) the bank can't debit the customer's account as an endorsement in full at the back of the cheque
has taken away the bearer character of the instrument
(c) the bank can rightfully debit the customer's account as in case of cheque originally expressed to be
payable to bearer, the drawee is discharged by payment in due course to bearer thereof
notwithstanding any endorsement
(d) the bank can't debit the customer's account as it is not payment in due course. {e)none
33. Protection is not available to the paying blinker in case of ;
(a) forged signatures of drawer (b)forged but regular endorsements on order cheques
(c) material alteration though it was not apparent (d) all above (e) none of the above
34. A cheque is issued in favour of R K Srivastava or order. It is endorsed by one Mr. S G Srivastava under
forged endorsement of R K Srivastava to Shri Sunil Kumar. The cheque is received through clearing
and paid by the paying branch. Under the circumstances ;
(a) bank can't debit the customer's account as endorsement of the payee has been forged
(b) bank will get protection under Section 85 (1) of Nl Act, 1881 if the endorsement is regular
(c) bank may not get protection under Section 85(1) if Nl Act, 1881 as the endorsement is forged
(d) either (a) or (b) (e) none of the above
35. For any payment to be treated as payment in due course, it should be ;
(a) in good faith and without negligence(b) as per the apparent tenor of the instrument
8
 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 2S274157,093S0476949)

(c) to a person in possession of instrument under circumstances which do not afford reasonable
ground to believe that he is not entitled to receive payment of amount mentioned in the instrument
(d) all above (e) only (a) and (c) above
36. Which of the following can't be payment in due course ?
(a) payment of a cheque dated 11.07.2007 on 04.07.2007
(b) payment of a crossed cheque across the counter
(c) payment of a cheque favouring school to the bearer (d) all above (e) none of the above
37. Which of the following can be treated as payment in due course ?
(a) payment of cheque in respect of which there is a 'stop order'
(b) payment of a cheque after banking hours
(c) payment of a bearer cheque to the presenter even though he Is not the endorsee of the cheque
(d) payment of cheque showing alterations in amount in words confirmed under initials of the drawer
(e) none of these
38. A cheque dated June 31, 2007 is presented for payment on June 30, 2007. The cheque will be :
(a) paid, if otherwise in order (b) returned witn the reason 'Refer to drawer'
(c) returned with the reason 'Impossible date' {d) paid on or after 1st July 2007(e) none of these
39. Your branch receives a cheque drawn by one of your valued client for Rs.5 lac in favour ot a reputed
company. The cheque is dated July 2007. The cheque :
(a) should be returned with the remarks 'Refer to Drawer
(b)should be paid on or after 31®' July 2007
(c) can be paid on or after 1 st August 2007 (d)can be paid on or after 1 st July 2007(e) None
40. An account was opened with the bank on 30.06.2007. A cheque dated 18th June, 2007 is presented for
payment on 04.07.2007. It will
(a) not be passed and returned with the remark 'Impossible Date'
(b) be returned with the remarks 'cheque dated prior to opening of the account'
(c) be passed, if otherwise in order as ante dated cheque is valid in law.
(d) be returned with the reason \drawer's confirmation required' (e)either(b)or(d)
41. We have received the following four cheques in clearing on 03.07.2007. Which of these cheques can be
passed
(a) cheque dated July, 2007 (b) cheque dated 11.06.2006
(c) cheque dated 11.07.2007 (d) cheque dated 31.06.2007 (e)all above other than (c)
42. A cheque is treated as stale when it is not presented for payment within 3 months from trie date of
issue. The cheque is treated as stale as per the provisions of the:
(a) Limitation Act (b) Indian Contract Act {c) Banking Regulation Act
(d) Reserve Bank of India Act (e) None of these
43. Which of the following can be a valid instrument ?
(a) an ante-dated cheque {b) a post-dated cheque
(c) a stale cheque revalidated by the drawer under his full signatures
(d) all above (e) none of the above
44. A current account holder has a balance of Rs. 36,732 on a particular day when three cheques for Rs.
27,115, Rs. 95)6, Rs 4509 and Rs. 101 favouring income tax officer, Delhi Vidyut Board, f*^agan Bhai
Desai and Rafiq Ahmed are presented through clearing. Under the circumstances we may:
(a) return all the cheques treating them as one demand
(b) pay the cheque for Rs. 101, Rs 4509 and Rs 9516 as smaller the amount the greater the loss of
reputation
(c) pass the cheque for Rs. 27,115 and Rs 9516 as these are favouring Revenue Deptt and public
utility service
(d) pass the cheque which was issued first amongst the three
(e) pass the cheque for Rs. 27,115 and Rs 9516 and lOlas first two cheques are favouring Revenue
Department and public utility service and still balance of Rs 101 is left to meet one more cheque
45. In your bank to avail of cheque book facility in savings account, a customer in Delhi is required to
maintain a minimum balance of Rs. 1000/- in his account. You receive a cheque drawn by a savings
account holder for Rs. 1000 when the balance in the account is Rs. 1000. Under these circumstances :
(a) we must pay the cheque, if otherwise in order as the balance in the account is sufficient.
(b) we should return the cheque with the reason 'funds insufficient'
(c) we should pass the cheque as the balance in the account is sufficient.
(d) we may pass the cheque as a special case and inform the customer to strictly observe minimum
balance norms failing which his account may be closed (e) none of the above
46. A cheque is presented to the banker with the amount in words as One Thousand Thirty only while
amount in figures is mentioned as Rs 1013/-. The banker will :
(a) Pay the amount written in words (b) Pay the amount written in figures
(c) Pay the amount written in figures as the same is less than the amount written in words
(d) Return the cheque with the remarks'Amount in words & Figures Differ* (e)None of the above
 A K CiUflAi* BAnKtKb iKAlNinij iNb111U11(/b, biocK IK> -1, Paschim Vihar, New Delhi - 110063; Ph oil 6S476949, Oil 25274157,09350476949)

47. Shri Ashwini Verma has a savings account with us showing credit balance of Rs. 4,745 and a time
deposit for Rs. 10,000/-. We receive a cheque across the counter issued in favour of third party for Rs.
5400
(a) we should pay the cheque relying on our right of set off against term deposit
(b) we should return the cheque with reason 'funds insufficient'
(c) we should return the cheque with reason 'exceeds arrangement'
(d) we should pay cheque to the debit of time deposit account (e) none of the above
48. Which of the following is not a material alteration ?
(a) alteration of date of cheque (b) conversion of general crossing into special crossing
(c) conversion of 'order' into 'bearer' (d) alteration of amount of cheque (e) all above
49. A cheque with material alteration should be confirmed by ;
(a) drawer of the cheque b) drawee bank (c) last holder of the cheque
(d) holder of the cheque at the time when the alteration took place (e)none of the above
50. Protection to the paying banker in the case of material alteration of a cheque which is not apparent is
available under section of the N I Act
(a)85 (b) 87 (c)89 (d) 131 (e) 138
51. Sh Ranbir Singh maintains a current account with our branch. He issues a cheque to Shri S.K. Sharma
for Rs. 100/- {one hundred only). Shri S.K. Sharma alters the amount as Rs. 5,100/- both in words and
figures. The alteration is done in such a way that it Is not apparent. The bank pays the cheque. Shri
Ranbir Singh challenges the payment. In this case the bank :
(a) should recover the amount from Sh SKSharnidand reimburse the amount to the customer
(b) can avail of statutory protection under Section 89 of Nl Act, 1881
(c) can't debit the customer's account as cheque with a material alteration is null and void
(d) is liable to the customer and can't debit his account (e)none of the above
52. One of your customers did not keep cheque book issued to him under lock and key with the result that
a cheque was stolen by his servant and signatures so cleverly forged that it was not easy to detect the
forged signatures. The bank paid this cheque. In this case, the bank :
(a) is liable to the customer as a cheque having forged signatures is null and void
(b) can rightfully debit the customer's account as it was not easy to detect forged signatures and
protection is available under section 89 of the N I Act
(c) can rightfully debit the customer's account as the forgery took place due to negligence of the
customer
(d) both (b) and (c) above (e) none of the above
53. A mutilated cheque can be paid only after:
(a) obtaining indemnity from the payee (b)seeking confirmation of drawer on the cheque Itself
(c) seeking verbal confirmation of the drawer (d) it is six months old (e)none of the above
54. Which of the following is not a payment in due course if payment made to a third party, In the context of
the fact that banking hours of the branch are between 10.00 a.m. to 2.00 p.m.
(a) a cheque received at 1.50 p.m. and finally paid at 2.45 p.m.
(b) a cheque received at 1.50 p.m. and finally paid at 3.40 p.m.
(c) a cheque received at 2.30 p.m. and finally paid at 2.35 p.m. (d)atl above(e) none of the above
55. A cheque Is presented for payment at 1.35 p.m. and a token is issued to the presenter. It is posted in
the ledger and passed for payment by the officer. The drawer issues 'stop payment' order which is
received by the branch at 2.15 p.m. .when the payment is yet to be effected by the cash department.
Under the circumstances:
(a) stop order can't be accepted as it is received after banking hours
(b) stop order can't apply as the presenter has been issued a token and the cheque has already been
passed for payment whereby money is held in trust for the token holder
(c) stop order must be accepted as payment has finally not been made to the presenter
(d) stop order can be accepted only after the presenter agrees to return the token
(e) either (b) or (d)
56. Payment of a cheque beyond banking hours may be effected by the bank in its discretion to ;
(a) any holder of the cheque, if otherwise in order (b) respectable payees (c) drawer only
(d) all above (e) none of the above
57. An account holder of the bank sent a telegram to the drawee branch to stop payment of cheque issued
by him. The cheque is received in clearing the same day. The cheque should be :
(a) paid, if otherwise in order as there is no clear mandate from the drawer
(b) returned with the reason 'Refer to drawer'
(c) returned with the reason 'payment countermanded by telegram. Drawer's confirmation awaited'
(d) paid as 'stop payment orders' through telegram can't be accepted (e) either (a) or (d)
58. A cheque was issued by A favouring B. 8 reports loss of the cheque to the drawee branch. In this case :
(a) Bank should not pay the cheque as Payee has right to stop payment of the cheque because the
amount was payable to him.

10
 A K GUPTA'S BANKERS TRAINING INSTTTUTE(75, Block BG -1, Paschiin Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(b) Bank should pay the cheque as payee has no right to stop the payment because the bank has no
privity of contract with the payee.
( c) Bank should return with the reason " Payment stopped"
(d) Bank should advise payee to contact the drawer for stop order and in the meantime return the
cheque with the reason "Cheque reported lost; drawer's confirmation awaited' (e) None
59. In which of the following situations, the reason 'cheque has been countermanded' is used when
returning a cheque
(a) when funds in the account are insufficient to pay the cheque
{ b )when cheque is reported lost by the payee and he advises the bank not to pay
( c) when garnishee order is received
(d) When the drawer instructs the bank not to pay the cheque (e) Any of the above
60. You have today received a stop payment instruction from the co parcener who is not authorised to
operate the account for stopping payment of the cheque issued by the Karla. In this case:
a) Bank is not bound by the instruction given by the co parcener as he does not have any such authority
b) Bank should act on the instruction as co parcener is also liable for the acts done by the Karta
c) Bank should follow the instruction if Karta is not working in the interest of the business
d) Bank should return the cheque with the remarks " Drawer's authority in question (e) None of these
61. We receive a cheque for payment across the counter which is signed by one joint account holder
whereas change of date is confirmed by the other joint account holder. The account is in names of these
two persons with instructions 'either or survivor'. Under the circumstances we should ;
(a) return the cheque with reason 'alteration requires confirmation of drawer who signed the cheque'
(b) pass the cheque, if otherwise in order
(c) not pass the cheque unless both confirm the alteration of date
(d) return the cheque with reason 'cheque Irregularly drawn' (e)none of the above
62. General Crossing of cheque means :
(a) putting a cross(x) on the face of the cheque (b) writing the name of a bank as payee
(c) putting two parallel transverse lines across the face of a cheque
(d) cancelling the signature of the drawer
63. A cheque is said to be specially crossed when it:
(a) bears the name of bank across its face with two parallel transverse lines
(b) bears the name of the bank In a round stamp without two parallel transverse lines.
(c) bears the name of a bank as payee
(d) two parallel transverse lines with the word 'account payee only' between them.
(e) Any one of (a), (b) or (c) above
64. The basic purpose of crossing a cheque is :
(a) to ensure that payment is made to the right payee
(b) that cheques are not popularised as a means of payment
(c) that customer must open an account so that Income Tax officials are helped in their job
(d) to cancel it and niake payment in cash (e) none of the above
65. A cheque to have a general crossing must have :
(a) the words 'and company'or any abbreviation thereof (b) the words 'Account Payee' only
(c) the words 'not negotiable' (d)two parallel transverse lines
(e) any one or more of the (a),(b) and (c) above
66. When a cheque is crossed generally, it is an instruction to the paying banker to :
{a)pay the cheque only through a particular banker (b) ensure that the endorsements are not forged
(c) pay the cheque only through a banker (d)pay the cheque after identification of payee
(e) ensure that title of the recipient of money is not defective
67. A cheque bears across its face the name of a bank between two parallel transverse lines. The cheque
will be treated as having
(a) Special crossing (b) General Crossing (c) Extraordinary crossing
(d) Restrictive Crossing (d) Without recourse crossing
68. Which of the following is a special crossing :
(a) Words Not negotiable written between two parallel lines (b)Account Payee only
(c) Words Not negotiable written without two parallel lines
(d) Words Not transferable written on the face of the cheque (e) None of the above
69. Special crossing is an instruction to the paying banker to :
(a) pay the cheque across the counter (b) pay the cheque through some bank
(c) pay the cheque through the bank whose name appears on the face of the cheque or its agent for
collection, being a banker
(d) pay the cheque only after ascertaining the identity of the payee or holder{e)none of the above
70. A cheque bears across its face stamps of two banks when presented to the drawee branch. The cheque
(a) must be returned with the remarks 'crossed to two banks'
(b) should be paid to the bank whose stamp appears to have been put earlier
(c) should be paid to the bank which has presented it through clearing
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 A K GUPTA'S BANKERS TRAINING INblllUTE (75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157, 09350476949)

(d) can be paid if one of the bank{s) has appointed the other as its agent for collection
(e) may be paid without bothering whether one bank Is acting as an agent for collection for the other or
not as it is not the duty of the paying banker.
71. An open cheque can be crossed by :
(a) the drawer (b)the payee (c) the holder (d) any of the above{e)none of the above
72. If a banker pays a cheque in violation of the crossing it is liable to :
(a) drawer of the cheque {b)true owner of the cheque {c)to the collecting bank (d) all above
(e) none of the above as it can claim protection under sec 85 of the Negotiable Instruments Act.
73. A cheque is crossed to 'Bank of Baroda' who presents it at the counter of paying bank. In this case :
(a) payment can be made across the counter
(b) payment can be collected only through clearing house
(c) payment can be made only to Service Branch of Bank of Baroda
(d) payment can be made through some other bank (e) none of the above
74. A cheque with a 'Not Negotiable' crossing :
(a) is not transferable
(b) is freely transferable but the transferee can't have better title to it than what the transferor had
(c) is freely transferable but nobody will be a holder in due course of this cheque.
(d) cannot be collected by the banker (e) Both (b) & (c)
75. A crossing can be cancelled by;
(a) collecting banker (b) drawer of the cheque under his initials
(c) collecting banker or paying banker
(d) drawer of the cheque under his full signatures by writing the words 'Pay Cash' (e) none uf these
76. With regard to collection of cheques conversion means :
(a) changing the date of cheque (b) converting general crossing to special crossing
(c) wrongful interference with other person's property not consistent with owner's right of possession.
(d) all above (e)none of these
77. Protection against conversion is available to the collecting banker under Section
(a) 85 of the Negotiable Instruments Act, 1881 (b) 21 of the Banking Regulation Act, 1949
(c) 45 ZE of the Banking Regulation Act, 1949 (d)131 of the Negotiable Instruments Act, 1881
(e) Section 89 of the Nl Act, 1881
78. Protection to a collecting banker under the Negotiable instruments Act, 1881 is available when :
(a) the cheque is crossed (b) the payment is received for a customer
(c) the payment is received in good faith and without negligence
(d) all above (e) only (a) and (b) above
79. Protection to a collecting banker is not available when :
(a) cheque is crossed generally (b)cheque is crossed 'Account Payee'
(c) cheque is crossed with the word 'not negotiable'(d) the cheque is not crossed (e) both (c) and
(d)
80. A cheque favouring R S Bhandari and sons, a partnership firm is endorsed by one of the partners in his
name and after collection, the same Is credited by the banker in the personal account of the partner.
The amount is withdrawn by the partner. In this case :
(a) Collecting banker is liable to the firm (b) Paying banker is liable to the firm
{c)Neither collecting banker nor paying banker is liable as partner has implied authority to endorse,
(d) Both banks are liable for the entire amount (e)Both banks will share tfie liability on equal basis
81. Law on making drawing of cheques without sufficient funds a penal offence was recommended by :
(a) Shetty committee (b) Narsimham Committee
(c) Rangarajan Committee (d) Rajamanar Committee (e) Ghosh Committee
82. Bouncing of cheques for insufficiency of funds can be punishable with :
(a) imprisonment for a term extending to 3 months (b)fine upto Rs. 500/-
(c) imprisonment for a term extending to one year or with fine upto amount of the cheque or both
(d) imprisonment up to two year or with fine upto twice the amount of the cheque or both
(e) none of the above
83. If a-nheque is dishonoured, due to insufficiency of funds, the maximum amount of fine under Section
138 of N.I. Act will be :
(a) Twice the amount of cheque (b) Two year imprisonment
(c )Amount of cheque and two year imprisonment, (d) Both (a) & (b) (e) None of these
84. The drawer of a dishonoured cheque is punishable for his offence provided :
(a) cheque was presented within 6 months or its validity period whichever is earlier
(b) cheque was returned only for the reason of insufficiency of funds or reasons of similar meaning
(c) the cheque had been issued for consideration (d) all above (e) none of the above
85. The complaint in respect of bouncing of cheques can be made in the court of metropolitan magistrate or
judicial magistrate of first class within :
(a) 3 months of dishonour of cheque (b) 1 month of cause of action arising
(c) 6 months of cause of action arising (d) one year of dishonour of cheque {e)none of the above
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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75. Block BG -1, Paschtm Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

86. A truncated cheque means:

(a) physical cheque whose electronic image has been created (b) electronic form of the cheque
(c) Photostat copy of the original cheque (d) a cheque which has been destroyed (e) none of these
BILL OF EXCHANGE
87. A clean bill of exchange is one:
(a) with which document of title to goods are attached
(b) with which document of title to goods is not attached (c)with which clean bill of lading is attached
(d) which is not an accomodation bill but a genuine trade bill
(e) which does not involve any money laundering
88. Ashok Sharma draws a BOE in Delhi on Ramesh who is a resident of Mumbai but the bill is payable at
London. This bill will be classified as :
(a) inland bill as it is drawn in India and drawn on a person resident in India
(b) foreign bill as it is payable outside India
(c) inland bill only if payment is sent from India to make the payment of the bill
(d) either (a) or (b) on per choice of drawee (e) none of the above
89. Which of the following bills are drawn In more than one part ?
(a) inland clean bills (b) foreign bills (c) inland usance bills
{d)accommodafion bills (e)both (b) and (c)
90. Demand bill is one which is expressed to be payable :
(a) at sight (b) on presentment (c) on demand (d) any of the above {9)none of the above
91. As per provisions of section 22 of the N I Act, 1881, days of grace are allowed in case of:
(a) cheques (b) usance bills (c) usance promissory notes (d) demand bills e) both (b) &(c)
92. A bill dated 20 12.2007 payable one month after sight is presented for acceptance on 21 12 2007 and
is accepted on 23.12.2007. The bill will be due on :
{8) 23. 1.2008 (b)24.1.2008 (c)25.1.2008 (d)26.1.2008 (e)27.1.2008
93. A bill dated 31.01.2008 payable one month after date is presented for acceptance on 01.02 2008 and is
accepted on 02.02.2008. It will fall due on :
(a) 05.03.2008 (b)29.02.2008 (c)03.03.2008 (d) 04.03.2008 (e)01.03.2008
94. A bill dated 18.12.2007 is payable 120 days after sight and it is sighted on 19.12.2007 It will fall due on
(a) 16.4.2008 (b) 17.04.2008 (c) 19.04.2008 (d) 20.04.2008 (e)18.04.2008
95. A bill which is at maturity on a public holiday, it will be deemed to be due on:
(a) Next preceding business day (b) Next preceding working day
(c) Next succeeding business day (d) Next succeeding working day (e) None of the above
96. A biil of exchange dated 02.01.2008 payable one month after date is presented for acceptance on
03.01.2008 and is accepted on 04.01.2008. The Government declares public holiday from 02.02.2008
to 05.02.2008. The bill will be deemed to be due on :
(a) 06.02.2008 (b)01.02.2008 (c)08.02.2008 (d) 09.02.2008 (e)08.02.2008
97. A bill dated 31 December 2007 payable two months after date, accepted on 2.1.2008 will be due on
(a)5 March 2008 (b)8 March 20048 (c)28 February 2008 (d) 4 March 20048 (e)3 March 2008
98. A drawee of a usance bill, can be allowed hours to decide whether to accept or not to accept it
(a) 24 hours inclusive of public holiday (b) 48 hours inclusive of public holiday
(c) 48 hours (exclusive of public holidays) (d) 72 hours (exclusive of public holidays) (e) none
99. Noting of a bill of exchange means :
(a) the fact of dishonour recorded by Notary Public (b) the fact of dishonour recorded by the
holder
(c) entering its due date in 'due date diary' (d) getting the acceptance on the bill itself
(e) getting particulars of a bill noted in a court of law
100. Noting of a bill or promissory note is done by ;
(a) Oath Commissioner (b) First Class Magistrate (c) holder (d) Notary Public (e) Bank
101. Protest in the context of bill or promissory note means :
(a) acceptance with some condition (b) refusal to accept as a mark of strong disapproval
(c) certificate issued by the Notary Public attesting that the bill or note has been dishonoured
(d) disapproving the terms of the bill though not specifically refusing to accept the same
(e) none of the above
102. In case rate of interest is not mentioned in a bill of exchange or promissory note:
(a) no interest can be charged (b) it will be 18% p.a.
(c) it will be charged at the bank rate (d) it will be 15% p.a. (e) it will be 6% p.a.
103. Acceptor for honour of a bill of exchange Is ;
(a) drawee in case of need
(b) any person who is already not liable on the instrument but accepts the dishonoured bill, which has
been noted and protested, for honour of a party liable on the instrument
(c) the person who is already liable for only a part of the amount
(d) either (b) or (c) (e) none of the above
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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG - I, Paschim Vihar, New Delht - 110063; Ph Oil 65476949, Oil 25274157, 09350476949)

104. Party liable as a principal debtor on a promissory note is :

(a) promisee (b) promisor (c) acceptor for honour {d)all above (e)none of these
105. Party liable as a principal debtor on a bill of exchange which has not yet been accepted is :
(a) drawer (b) payee (c) drawee
(d) drawee-in-case of need (e) negotiating bank
106. Party liable as a principal debtor on a bill of exchange which has been duly accepted is :
(a) drawer (b) acceptor (c) payee
(d) drawee-in-case of need (e) negotiating bank
107. A draws a bill on B payable to C or order who endorses it to D. It is dishonoured by non-payment on due
date. D can recover the amount from :
(a) Bonly (b) A and B only (c) A,B & C
(d) A only (e) none of the above
108. A draws a bill on B payable to C or order. C endorses it in blank and transfers it to D and D writes 'Pay
to E or order' over blank endorsement of C converting it into an endorsement in full and hands over the
bill to E. The bill is dishonoured by non-acceptance. E can recover the amount from:
(a) A and C only (b) A,B,C and D (c) A, B and C
(d) D only (e) A and D only
109. Holidays under the Negotiable Instruments Act, 1881 are declared by:
(a) Concerned State Govt. (b)Central Govt.(c) RBI (d) IBA (e) District Magistrate

MISCELLANEOUS IMPORTANT QUESTIONS

110. Format of a cheque is described in which of the following Acts?
(a) N I Act (b) Banking Regulation Act (c) RBI Act (d) As per practice & usage (e) None
111. The Bank account of a limited company is operated by two directors jointly. There is a material alteration
on the cheque which is duly confirmed by one of the directors. What should the bank do?
(a) The bank shall pay the cheque as either can confirm material alteration.
(b) The bank shall not pay the cheque as it should be confirmed by alt directors of the company.
(c) The bank shall not pay the cheque as it should be confirmed by both the directors.
(d) The bank shall not pay the cheque as in case of limited companies, material alteration is not
allowed and fresh cheque has to be issued.
(e) None of these
112. A cheque payable to Income Tax Officer, signed by two directors is presented for payment. Signatures
of one of the directors do not tally with the signatures on the record. What should the bank do?
(a) The cheque should be paid as it is in favour of revenue authority.
(b) The cheque should be returned as it lacks authority.
(c) The cheque should be paid after telephonic confirmation from the directors.
(d) None of these
113. You have received a cheque for payment in Delhi on which words "Indore" is written between two
parallel lines. The cheque has been presented by Punjab National Bank for payment. What should the
bank do?
(a) The cheque will not be paid as it can be paid to a bank only at Indore.
(b) The cheque will not be paid as it can be paid only to State Bank of Indore.
(c) The cheque will be paid as it has been presented through a bank.
(d) The cheque will not be paid as it is crossed to two banks.
(e) None of these
114. A Bill of exchange which is payable on demand and in which drawee is a bank is called .
(a) Demand Bill (b) Inland Bill (c) Documentary Bill (d) Cheque
115. Which of the following is not a material alteration?
(a) Converting an order cheque to bearer cheque (b) Cancelling crossing on a cheque
(c) Converting a bearer cheque to order cheque (d) Change in date on cheque
116. If on a promissory note or bill of exchange no time for payment is mentioned it is treated as .
(a) payable on demand (b) incomplete bill or PN (c) inchoate bill (d) time bill
117. A banker which purchases a cheque and credit the proceeds to the account before collection of the
cheque is called .
(a) Holder for value (b) Agent for collection (c) Payee (d) None of these
118. You are presented with a cheque for payment which is written in red ink and blue ink and in different
handwritings. What will you do?
(a) The cheque will not be paid as it amounts to material alteration.
(b) The cheque will be paid after confirmation from drawer.
(c) The cheque will be paid if otherwise in order.
(d) The cheque will be returned with the remarks "mandate of drawer not clear"
119. In case of truncation of cheques, which of the following is sent to the paying bank?
(a) physical cheque only {b) only image of the cheque
(c) Both physical cheque and image of cheque (d) None of these
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 A K GUPTA S BANKERS TRAINING INSTITUTE(75, Bfock 8G -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 252741S7,09350476949)

120. A cheque on which there is a change in date or amount or payee, the change is called .
(a) Conversion (b) Material alteration (c) Material conversion (d) None of these
121. A cheque of Rs 50,000 payment of which had been stopped was paid inadvertantly. As a result
another cheque was dishonoured due to insufficient funds. The lawyer of payee has sent you the notice
for compensation for wrongful dishonour of cheque. What is the bank's liability?
(a) The bank is liable to payee for wrongful dishonour of cheque.
(b) The bank is liable to drawer for wrongful dishonour of cheque.
(c) The bank is not liable either to payee or drawer as bank has not returned the cheque deliberately
(d) The bank is liable both to drawer and payee for wrongful dishonour.
122. A cheque has been presented for payment in which amount in words is mentioned as Ten Lac only
whereas amount in figures is mentioned as Rs 10,000. As per Section 18 of N I Act which of the
following amounts is payable by bank?
(a) Rs Ten thousand will be paid (b) Rs Ten Lac should be paid
(c) Cheque should be returned with the remarks "Drawer's mandate not clear"
(d) The amount mentioned in clearing schedule should be paid (e) None of these
123. Dealing in accomodation bills is called .
(a) Kiteflying (b) Bartering (c) Kerb dealings (d) Forward contract
124. A Bill of Exchange has been presented for collection on which two parallel lines are drawn Which of the
following statements is true in this regard?
(a) Bill of exchange can be paid only if presenled through bank.
\b) Bill of exchange can be paid only to bank to whom Bill of exchange is specially crossed
(c) Provisions relating to crossing are not applicable to Bill of Exchange. So there is no impact of two
parallel lines on the Bill.
(d) None of these
125. A bill dated 12.6.2009 payable two months after date is presented for sight on 13.6.09 and is acceoted
on 15.6.09. What is the due date of the bill?
(a) 15.8.2009 (b) 13.8.2009 (c) 14.8.2009 (d) None of these
126. Which of the following crossing is not defined under Negotiable Instruments Act?
(a) Not negotiable Crossing (b) Account Payee Crossing (c) General Crossing
(d) Both Not Negotiable Crossing and Account Payee Crossing (e) None of these
127. If a cheque is dishonored due to insufficient funds, as per Sec 138 of N I Act, maximum imprisonment
can be .
(a) 6 months (b) 1 year (c) 2 years (d) 3 years {e) None of these
128. Banks have the practice of obtaining signature of presenter of cheque on the back of cheque Why
banks obtain signatures of presenter on back of cheque?
(a) It Is mandatory as per Negotiable Instruments Act.
(b) It is treated as discharge of cheque.
(c) It is taken as witness of receipt of payment by presenter.
(d) Both (a) and (c) (e) None of these
129. What is the effect of writing not negotiable between two parallel lines on the face of the cheque*?
(a) The cheque does not remain transferable and can not be endorsed.
(b) The cheque does not remain a negotiable instrument at all.
(c) Not Negotiable crossing does not restrict transferability but title of transferee will not be better than
the title of transferor.
(d) The cheque can not be endorsed and title of transferee will not be better than the title of transferor.
130. An account was opened on 15th January 2011 and cheque book was issued on 17th January 2011.
Today two cheques have been received for payment. Date on first cheque is 14th Januarw 2011 and on
second cheque, the date is 16th January 2011. Which of the following cheques will be paid?
(a) Cheque dated 16th January 2011 will be paid and other cheque will be returned.
(b) Both cheques will be returned as ante dated cheques are not valid.
(c) Both cheques will be paid as ante dated cheques are valid.
(d) Both cheques will be returned as cheques are dated before opening the account and issue of
cheque book.
(e) None of these
131. What constitutes special crossing on a cheque?
(a) Two parallel lines on face of cheque
(b) Name of a bank on the face of a cheque with or without two parallel lines on face of cheque.
(c) Name of a bank on the face of a cheque only within two parallel lines.
(d) Account Payee written within two parallel lines on the face of cheque
132. RBI has advised banks that they will not credit a cheque crossed account payee in the account of a
third party and are required to credit only to the account of payee. Why this mandate has been given by
RBI?
(a) in consonance with the legal requirements and in particular the intent of the N I Act

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG • I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(b) with a view to protect the banks being burdened with liabilities arising out of unauthorized
collections
(c) in the interest of the integrity and soundness of the payment and banking systems.
(d) Both (b) and (c) only (e) All of these
133. A cheque is handed over to bank for collection in clearing. But before presenting the same in clearing,
payment is made to the customer. What is the status of the bank?
(a) drawer (b) Drawee (c) Holder for value (d) Agent for collection.
134. Who can open a crossed cheque by cancellation of crossing?
(a) Drawer (b) Payee (c) Holder (d) Any one of these (e) None of these
135. A cheque has been dishonoured due to insufficient funds. As per section 138 of Negotiable Instruments
Act, the holder of cheque can file a suit against the drawer within how much period?:
(a) 1 month from the date of cause of action (b) 1 month from the date of return of cheque
(c) 3 years from the date of cause of action (d) 1 month from sending notice to drawer.
136. A cheque drawn on your branch has been presented for payment. The cheque is partly written in
English, partly in Hindi and partly in the local language of the area in which the branch is located. If the
cheque is otherwise in order, what would you do?:
(a) The cheque can be paid as a cheque can be written in English, Hindi or vernacular language of the
area where the branch is located.
(b) Cheque can not be paid as it amounts to material alteration.
(c) Cheque can be written only in English or Hindi and therefore, it will not be paid.
(d) Cheque can be paid after confirmation from drawer.
137. The provisions relating to crossing are applicable to Cheques and Drafts only. In this regard, as oer
Negotiable Instruments Act, who can cross a cheque?
a) Drawer of cheque b) Holder of Cheque c) Payee of Cheque
d) Collecting Bank e) All of these
138. Which type of crossing restricts transferability of a cheque?
(a) Not Negotiable Crossing (b) Special Crossing (c) Account payee crossing
(d) General Crossing (e) None of these
139. What is the essential of a general crossing?
(a) two parallel lines on face of the cheque with or without the words and company or any
abbreviation thereof.
(b) two parallel lines with words and company or a abbreviation thereof between the lines
(c) name of the bank betv»/een two parallel lines.
(d) All of these (e) None of these
140. What is the impact of special crossing a cheque?
(a) it does not continue to be transferable (b) it does not remain negotiable
(c) it is payable only to a bank
(d) it is payable only to the bank to whom specially crossed or his agent for collection.
141. What is an ante dated cheque?
(a) A cheque on which date is subsequent to date of presentation.
(b) A cheque on which date is prior to date of presentation of cheque.
(c) A cheque on which date is six months old. (d) A cheque bearing impossible date
142. What is an inchoate cheque?
(a) A cheque on which date is six months before presentation of the cheque.
(b) A cheque on which drawer has not put his signatures.
(c) A cheque on which date or amount or name of payee is not mentioned.
(d) Any of these (e) None of these
143. Which of the following is not a payment in due course?
(a) Paying a cheque after banking hours
(b) paying a crossed cheuqe in cash to a person other than to a banker
(c) Paying a post dated cheque before the date on cheque
(d) All of these (e) None of these
144. A bearer cheque on which endorsement was forged has been paid by the paying bank. The paying
bank is liable to which of the following?
(a) true owner of cheque (b) Drawer (c) Payee (d) Holder (e) None of these
145. What has been defined in Section 31 of N I Act?:
(a) It entails duty of a bank to honour cheques drawn by customer if the cheque is othenwise in order,
balance in the account sufficient and funds in the account are properly applicable i.e. no garnishee
order or attachment order.
(b) Definition of a Negotiable Instrument.
(c) Protection to Paying Banker (d) Protection to Collecting Banker (e) None of these

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG • I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 2S2741S7,09350476949)

Banking Regulation Act, 1949 & RBI Act, 1934

Banking Regulation Act, 1949
1. The law relating to banking came into force on 16.03.1949 under the name of the Banking Companies Act
1949.
2. W.e.f. 01.03.1966 its name was changed to Banking Regulation Act, 1949.
3. Originally the Act was not applicable to the State of J&K. In 1956 it was made applicable to J&K also.
4. The Banking Regulation Act, 1949 does not apply to primary agricultural credit societies, co-operative land
mortgage banks and non-agricultural primary credit societies with paid up capital and reserves of less than
Rs.Hakh.
5. As per Section 5, Approved Securities means (i) Securities in which a trustee may invest money under
clause (a), clause (b), Clause (bb). clause (c) or Clause (d) of Section 20 of the Indian Trust Act, 1882. and
(ii) Such of the securities authorised by the Central Govt. under clause (b) of Section 20 of the Indian Trust
Act, 1882, as may be prescribed.
6. As per Section 5, Banking' means the accepting, for the purpose of lending or investment of deposits of
money from the public, repayable on demand or otherwise, and withdraw-able by cheque, draft order or
otherwise.'Demand Liabilities' means liabilities which must be met on demand and 'time liabilities' means
liabilities which are not demand liabilities.
7. Section 6 lays down the forms of business in addition to the business of banking in which a bank may
engage.
8. Section 7 prohibits use of words 'bank' 'banker' or banking company by a company oiher than a banking
company.
9. Section 8 prohibits trading activities for a bank except iti connection with realisation of security given to or
held by it.
10.As per Section 9 a banking company cannot hold any immovable property, howsoever acquired except
such as is required for its own use, for a period exceeding 7 years from the acquisition thereof. The
aforesaid period of 7 years can be extended by RBI by a period not exceeding 5 years where it is satisfied
that such extension would be in the interest of depositors of the banking company.
11.As per Section 13, payment of commission, brokerage, discount or remuneration in respect of any shares
by a banking company shall not be more tfian 2.5% of the paid up value of said shares.
12.As per Section 17 a banking company is required to transfer to Reserve Fund 20% of the profits before
declaring dividend. As per current guidelines of RBI a scheduled bank is required to transfer 25% of the
profit before providing for bonus and declaring dividend.
13.As per Section 19(2) no banking company can hold shares in another company whether as pledgee,
mortgagee or absolute owner of an amount exceeding 30% of the paid up share capital of that company or
30% of its own paid up share capital and reserves, whichever is less.(RBI has reduced it to 10%).
14.As per Section 21 A, Rate of Interest charged by banks are not subject to scrutiny of courts.
15.As per Section 24, banks are required to maintain Statutory Liquidity Ratio as prescribed by RBI. Maximum
SLR will be 40% of NDTL. As per amendment to Banking Regulation Act, the condition of minimum SLR of
25% of NDTL has been removed. Thus, RBI has liberty to fix minimum SLR.
16.As per Section 26, banking companies are required to submit a return of all deposit accounts which have
not been operated for the last 10 years. The return is submitted as on 31®' December and within one month
17.Section 45 Y relates to power granted to Central Govt. to make rules for preservation of records.
18.Section 45Z relates to return of paid instruments to customers after keeping a true copy of all relevant
parts of such instruments.
19.Section 45ZA to 45 ZF relate to nomination in deposits, safe custody and locker accounts.

Reserve Bank of India Act, 1934

1. Reserve Bank of India Act, 1934 came into force on 01.04.1935.
2. RBI was established on the recommendations of the Hilton Young Commission.
3. Section 4 : The capital of RBI shall be 5 crores of rupees.
4. Section 22 confers sole right on RBI to Issue bank notes of denominational values of
Rs. 2, Rs. 5, Rs. 10, Rs. 20, Rs. 50, Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs. 10,000, or any other
denomination which the Central Govt. may direct.
5. Section 27 lays down that RBI shall not reissue bank notes which are torn, defaced or excessively spoiled.
6. Section 29 exempts RBI from stamp duty on Bank notes.
7. Section 31 prohibits drawing, accepting, making or issue of any bill of exchange, hundi, promissory notes
payable to bearer on demand except by Central Govt or RBI. Promissory Note can not be issued payable to
bearer even if it is payable after some time.
8. Section 33 lays down that assets of the issue department of RBI shall consist of gold coin, gold bullion,
foreign securities, rupee coins and rupee securities. The aggregate value of gold coin, gold bullion and
foreign securities held shall not at anytime be less than Rs.200 crore of which gold coin and gold bullion not
less than Rs.115 crore
9. Section 42(1) deals with cash reserves ratio to be maintained by scheduled commercial banks.
lO.Sectlon 49 requires RBI to publish bank rate from time to time.
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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, BfocV BG -1, Paschim Vihar, New Delhi — 110063; Ph Oil 65476949,Oil 2S274157,09350476949)

CASH RESERVE RATIO

1. Scheduled Commercial Banks are required to maintain GRR as per section 42(1) of RBI Act.
2. Banks are required to maintain certain percentage of Net Demand & Time Liabilities as cash with RBI.
3. With effect from 1^' April 2007, the RBI can prescribe the Cash Reserve Ratio (CRR) for Scheduled
Commercial Banks without any floor rate or ceiling rate. Accordingly, there is no minimum or maximum
CRR as per RBI Act and RBI will fix CRR.
4. Banks are required to maintain the prescribed CRR based on their NDTL as on the last Friday of the
second preceding fortnight.
5. CRR balance is kept as cash with RBI.
6. The actual balance on any day of the fortnight (14 days) may be more or less than the required balance.
However, cash balance with RBI on any day of the fortnight, should not fall below 90 per cent of the
required average daily cash balance.
7. RBI will not pay any interest on the CRR balances with effect from 31®'f^arch 2007.
8. In cases of default in maintenance of CRR requirement on a daily basis, which is presently 90% of the total
Cash Reserve Ratio requirement, penal interest will be recovered for that day at the rate of three per cent
per annum above the bank rate on the amount of shortfall and if the shortfall continues on the next
succeeding day/s, penal interest will be recovered at a rate of five per cent per annum above the bank rate.
9. In cases of default in maintenance of CRR on average basis during a fortnight, penal interest will be
recovered at the rate of 25%.
10. Reserve Bank of India has prescribed statutory return i.e. Form A return (for CRR)to be sent fortnightly.

STATUTORY LIQUIDITY RATIO

1. Statutory Liquidity Ratio is maintained as per section 24 of Banking Regulation Act.
2. As per amendment to section 24 of the Banking Regulation Act, the provision relating to maintenance of
minimum BLR of 25% of NDTL has been withdrawn. Thus, RBI is free to fix minimum BLR. However, it can
be increased to maximum of 40% of NDTL. RBI has decided to reduce the Statutory Liquidity Ratio'(BLR)
from 21.5 per cent of their Net Demand and Time Liabilities (NDTL) to: (i) 21.25% from April 2, 2016; (ii)
21% from July 9, 2016; (iii) 20.75% from October 1, 2016; and (iv) 20.50% from January 7, 2017.
3. BLR can be kept in the form of (a) cash with bank (b) gold valued at a price not exceeding the current
market price; (c) cash balance with other banks (d) excess cash balance with RBI;(e) Investments in BLR
securities which includes UnEncumbered Dated securities issued up to May 6, 2011; Treasury Bills of the
Government of India; Unencumbered Dated securities of the Government of India issued from time to time under the
market borrowing programme and the Market Stabilization Scheme; State Development Loans (SDLs) of the State
Governments issued from time to time under the market borrowing programme;
4. For calculation of BLR, banks should send monthly statement on Form VIII under Section 24 of the B R Act.
5. If a bank fails to maintain BLR on any day of the fortnight, RBI will charge penal interest for that day at the
rate of 3% per annum above the bank rate on the amount of shortfall. If the shortfall continues on the next
succeeding day/s, penal interest will be recovered at a rate of five per cenfper annum above the bank rate.
NET DEMAND & TIME LIABILITIES
For calculation of NDTL for calculation of BLR & CRR, the following are excluded from Liabilities: (a) Paid up
capital, reserves, any credit balance in the Profit & Loss Account of the bank, amount availed of as refinance
from the RBI, and apex financial institutions like Exim Bank, NABARD, NHB, SIDBI etc.(b) Amount of provision
for income tax in excess of the actual/estimated liabilities, (c) Amount received fromi DICGC towards claims and
held by banks pending adjustments thereof, (d) Amount received from ECGC by invoking the guarantee, (e)
Amount received from insurance company on ad-hoc settlement of claims pending Judgment of the Court, (f)
Amount received from the Court Receiver, (g) Inter Bank Liabilities up to 14 days. For calculation of CRR.
inter-bank term deposits / term borrowing liabilities of original maturities of 15 days and above and upto one
year are also not to be included in NDTL. Further, banks are exempted from maintaining CRR on the following
liabilities: (a) Credit balances in ACU (US$) Accounts, (b) Demand and Time Liabilities in respect of their
Offshore Banking Units (OBU's). However, liabilities on account of CBLO (Collateralised Borrowing and Lending
Obligations) is included in NDTL.

Objective Type Questions

1. Banking Regulation Act,1949 does not apply to :
(a) primary agricultural credit societies (b) Go-operative land mortgage banks (c) Btate of J&K
(d) all above (e) only (a) and (b) above
2. A banking company can't hold any immovable property, howsoever acquired except such as is required for
its own use, for a period longer than 7 years as per Bection of the Banking Regulation Act, 1949 .
(a) 9 (b) 17 (c) 18 (d) 24 (e) 56
3. No banking company can hold shares in another company whether as pledgee, mortgagee or absolute
owner of an amount exceeding 30% of paid-up capital of that company or 30% of its own paid-up capital and
reserves , whichever is lower. The said provisions are contained in :

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG • I, Paschim Vihar, New Delhi - 110063; Ph Oil 6S476949,Oil 25274157,09350476949)

(a) Section 19{2) of Banking Regulation Act.1949 (b) Section 293.1(d) of Companies Act,1956
(c) Section 20(A) of Banking Regulation Act, 1949 (d) Section 21A of Banking Regulation Act,1949
4. Under Section 20(1) of Banking Regulation Act ,1949 no banking company can grant loan against:
(a) its own certificate of deposit (b) shares of a private limited company
(c) its own shares (d) either (a) or (c) (e) all above
5. Requirements relating to CRR to be maintained by a banking company are given in :
(a) Section 24 of RBI Act, 1934 (b) Section 42 of Banking Regulation Act 1949
(c) Section 24 of Banking Regulation Act,1949 (d) Section 42(1) of RBI Act (e) None of these
6. The Banks are required to maintain CRR on the NDTL of last Friday of the:
(a) preceding fortnight (b) third preceding fortnight (c)second preceding fortnight
(d) preceding month (e) second fortnight of last month
7. Under provisions of RBI Act, 1934, a scheduled commercial bank has to maintain cash reserve ratio
(CRR) at prescribed percentage of its net demand and time liabilities. Such liabilities do no include-
(a) overdue time deposits with banks (b) deposits at call
(c) refinance availed by a bank from RBI/NABARD/SIDBI (d) all above (e) only(a) & (c) above
8. Which of the following is/are exempted from provisions relating to CRR?
(a) NRE balances (b) NRNR balances (c) FCNR (B) balances
(d) deposit liabilities of off-shore banking units (e) all above
9. Banks are required to maintain a minimum of percent of required CRR amount on a daily basis
during a foitnight which is applicable to all days of the reporting fortnight.
(a) 80% (b) 50% (c) 70% (d) 90% (e) none of these
10. At present, interest rate allowed by RBI, on eligible cash balances maintained by the banks with RBI on
account of Cash Reserve Ratio is at:
(a) Bank Rate (b) Repo Rate (c) Reverse Repo Rate (d) Base Rate (e) No interest allowed
11. Statutory Return prescribed by RBI for BLR under Section 24 of the Banking Regulation Act 1949 is-
(a) Form A return (b) Form VIII return (c) Form SDF return(d) Form X (e) None of these
12. Section 45 Zof the Banking Regulation Act,1949 relates to:
(a) nomination in locker accouiits (b) nomination in safe custody
(c) preservation of bank records (d) nomination in deposit accounts te)return of paid instruments
13. The paid-up capital of RRB is contributed by Central Govt. State Government and Sponsoring Bank in
the ratio dT:
(a) 50:35:15 (b) 15:50:35 {c)15:35;50 (d)35: 15:50 (e)50:15:35
14. Public sector banks in India include :
(a) nationalised banks and development financial institutions
(b) nationalised banks , SBI and its associate banks, IDBI Ltd (c) nationalised banks, RRBs and SBI
(d) RBI, nationalised banks, SBI and its associate banks (e) None of these
15. Net demand and time liabilities in respect of offshore banking units are exempt from :
(a) minimum CRR requirement (b) maintaining average CRR balances
(c) minimum BLR requirement (d) maintaining prescribed current SLR (e) both (b)& (c) above
16. Under Section 24 of the Banking Regulation Act,1949 all SCBs are required to maintain maximum 40% of
their demand and time liabilities as SLR in the form of:
(a) cash (b) gold valued at a price not exceeding the current market price
(c) unencumbered approved securities valued at a price as specified by the RBI
(d) one or more of the above (e) only(b) or (c) above
17. Which of the following is/are excluded from computation of NDTL for CRR but not for SLR purposes
(a) Amount receved from SIDBI under CGFTSI by invoking the guarantee
(b) Amount received from the Court Receiver
(c) Inter bank term deposits of original maturity of 15 days and above and upto one year
(d) Deposits held as securities for advances (e) none of those
18. Bank rate means :
(a) minfmum rate charged by commercial banks on advances (b) maximum interest rate on deposits
(c) rate charged by a commercial bank on advances to its prime borrowers
(d) rate of interest at which RBI rediscounts bills of commercial banks
19. The rural branch of a commercial bank is a branch at a place having population of less than-
(a) 50,000 (b) 10,000 (c) 1,00,000 (d) 20,000 (e) none of these
20. Statutory Liquidity Ratio is maintained as per which of the following?
(a) Sec 42 of Banking Regulation Act (b) Section 42 of RBI Act (c) Sec 24 of RBI Act
(d) Sec 24 of Banking Regulation Act (e) None of these
21. Statutory Return prescribed by RBI for CRR under Section 42 of the Reserve Bank of India Act,1934 is:
(a) Form A return (b) Foi-m VIII return (c) Form SDF return (d) Form X (e) None of these

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 A K GUPTA'S BANKERS TRAINING INSTTTLTTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157, 09350476949)

Banker Customer Relationship and Accounts of Customers

1. Banker Customer Relationship
Bank is one which conducts business of banking. Banking has been defined in Section 5 of Banking Regulation
Act. Customer is not defined in any Act. However, it is defined in KYC norms. As per various court decisions,
any person for whom bank agrees to open an account is called as customer of the bank.

Various types of relationships

Type of Transaction Bank Customer
Deposit in the bank (CR balance in account) Debtor Creditor
Loan from Bank (Debit balance in account) Creditor Debtor
Safe Deposit Vault Lessor (Licensor) Lessee (Licensee)
Safe custody Bailee Bailor
Issue of draft (after issue of draft) Debtor Creditor
Payee of draft Trustee Beneficiary
Collection of cheque & Standing Instruction Agent Principal
Goods left neqliqently by customer Trustee Beneficiary
Purchase of cheque from customer Holder for value Endorser
Purchase/sale of securities on behalf of customer Agent Principal
Currency Chest on behalf of RB' Agent RBI is principal
Money deposited. No instructions for its disposal Trustee Beneficiary
Pledge Pawnee (Pledgee) Pawner (Pledger)
Mortgage Mortgagee Mortgagor
Hypothecation Hypothecatee Hypothecator
Assignment Assignee Assignor

2. Banker's Obligations
There are two main duties of a bank i.e (i) Duty to maintain secrecy of customer's account (ii) Duty to honour
cheques.
Duty to maintain secrecv:
1. A bank has duty to maintain secrecy of customer's account as per Implied Contract.
2. Moreover, as per Section 13 of Banking Companies {Acquisition and Transfer of Undertaking) Act also, the
bank is required not to disclose any information relating to affairs of its customers.
3. The duty to maintain secrecy continues even after closure of account.
4. Balance in the account of an employee should not be disclosed to employer. Similarly balance in the
account of wife not to be disclosed to husband and vice versa.
5. If bank discloses customer's affair (e.g. in case of insufficient balance in the account advising the presenter
of cheque to deposit deficit amount), bank will be liable to customer for resultant loss.
Exceptions to rule of secrecv:
1. Courts: As per Banker's Book Evidence Act, bank may be required to produce certified copies of record in
the court.
2. Police: Officer incharge of a police station may issue a written order for production of documents in
connection with trial or investigation. Police can even seize records against proper receipt.
3. The information may also be required to be parted to inspector appointed to investigate affairs of a limited
company under section 235/237 or under FEMA.
4. Revenue Authorities: Bank may be required to produce to Income Tax Authority, record pertaining to
transaction of a customer. However, roving enquiries should not be made except in case of cash
transactions of Rs 1 lac and above.
RBI: As per Banking Regulation Act or RBI Act, Reserve Bank may seek information frcm bank.
Banking Practice: Banks have the practice of sharing information in genera! among themselves. The
information should be given in confidence and without any responsibility on the part of supplying bank.
Consent of customer: For example, information is given to a Credit Information Company as per express
consent of customer.
8. To protect bank's interest.
Duty to honour cheaues
As per section 31of N I Act, a bank is under obligation to pay cheques issued by customer provided (i) there is a
sufficient balance in the account (ii) the cheque is otherwise in order (iii) the funds are properly applicable i.e.
not attached by Garnishee order or attachment order. If a bank dishonour a cheque drawn by a customer
despite satisfaction of aforesaid conditions, bank will be liable to Drawer (and not to payee or true owner) for
damages suffered by him.

3. Banker's Rights: Bank has three rights namely (i) Right of Lien (ii) Right of Set Off (iii) Right of
Appropriation.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -1, Paschim Vihar, New Delhi - il0063; Ph Oil 6S476949, Oil 25274157,09350476949}

4. Right of Lien:
1. Lien is the right of creditor to retain possession of goods and securities belonging to the debtor till the debts
due to him (creditor) are paid.
2. This right is available only on goods and securities and not on balances in the accounts.
3. It is a statutory right but parties may exclude this right by mutual consent.
4. Lien entitles retention of possession of goods but the creditor cannot sell the goods.
5. Lien can be Particular lien (Sec 170 of the Indian Contract Act) or General Lien. In particular lien, the
creditor has right to retain goods on which some labour has been done and till the charges pertaining to that
have been paid. In the case of General Lien, creditor has right to retain the goods and securities belonging
to the debtor for all dues payable by him. This right is available only to bankers, factors, wharfingers,
attorneys (Section 171 of the Indian Contract Act).
6. Banker's Lien is also a general lien but it is an implied pledge because the banker has right to retain as well
as sell goods of the borrower after giving him reasonable notice.
7. Fur exercising right of lien, (a) the goods or securities and debt should be in the same right and same
capacity (b) Loan should be due or overdue and lawful (iii) Reasonable notice is given. Further, Right of
Lien is available on the goods and securities received in the ordinary course of business.
8. It is not available when the goods or securities have been deposited for a specific purpose; goods received
for safe custody or lying in safe deposit vault or goods left by the debtor negligently. However, in the case of
loans against pledge of jewellery, bank can exercise right of general lien on the ornaments left in the
possession of the bank after adjustment of the jewellery loan in case some other advance is outstanding.
9. Negative lien is a declaration from the borrower to the effect that securities/goods offered as security are
not encumbered and that the borrower will not create any charge over them without bank's permission. This
undertaking does not create any charge in favour of the bank and therefore advance against negative lien
are treated as clean advance.

5. Right of Set Off

1. Set off is the right to combine two or more accounts having debit and credit balance.
2. It is not defined in any Act.
3. This right arises when two parties are debtor as welt as creditor to each other i.e. one account should be in
debit and another account should be in credit.
4. In the cas6 of banks, this right arises when wants to combine its loan due from a borrower with his deposit
accounts.
5. For exercising right of set off following conditions should be satisfied (i) Both accounts should be in same
right and same capacity (ii) The debt should be due and not accruing due (iii) Reasonable notice should be
sent to the depositor before exercising set off.
6. Right of set off can be exercised even in case of loans which are time barred.
7. It can not be applied on fixed deposit which is not due as yet. Similarly it can not be applied for adjusting
term loan or CC or overdraft which are regular and not overdue.
8. If a loan is in the name of an individual, set off can be exercised on credit balance in his individual account
and sole proprietorship account. Set off can not be exercised on deposit accounts which are held jointly with
other individuals, or partnership in which the borrower is partner, or client account maintained by a solicitor
or account of minor under guardianship where borrower is the guardian or on the credit balance of a trust in
which borrower is trustee.
9. If loan is in joint names, set off can be exercised on credit balance in joint account as well as credit balance
in individual accounts of joint borrowers.
10.If loan is in the name of a partnership firm then set off can be exercised on credit balance in the name of
firm, partners and any other partnership firm which has just same partners as are in the borrowing firm.
11.For exercising right of set off. all branches of a bank are considered as one.

6. Right of Appropriation
1. Section 59,60,61 of Indian Contract Act, deal with appropriation of payments.
2. If a customer maintains more than one account with a bank and he deposits some amount then he has the
first right to indicate to which account the amount should be credited. If he does not exercise this right, then
bank can credit the amount to any of his accounts including an account which is time barred by limitation.
3. In certain cases Clayton's Rule apply. This rule is applicable in case of death, insolvency, insanity of a joint
borrower or partner or guarantor or retirement of a partner or revocation of guarantee by guarantor.
4. Clayton's rule is related to appropriation of payments and is applicable in case of running borrowal accounts
like cash credit or overdraft. As per Clayton's rule, credit entry will set off debits in the chronological order of
time. This means that first item on the debit side will be discharged first by a credit and so on. For example
in a firm s cash credit account, there was a debit balance of Rs 5 lac when one of the partners died. The
bank continued operations in the account. Rs 4 lac were deposited and Rs 3 lac were withdrawn. The estate
of deceased partner is liable only for one lac i.e 5 lac minus Rs 4 lac.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

07. Garnishee Order

■ A Garnishee Order is an order issued under provisions of Order 21, Rule 46 of the Code of Civil Procedure,
1908. Through this order the court attaches the deposit of a particular depositor with the bank. The bank
upon whom the order is served is called Garnishee. The depositor who owes money to another person is
called judgement debtor while the person to whom money is due is called judgement creditor.
■ The court first issues order Nisi requiring the bank to explain as to why the funds in the account not be
utilised to meet the judgement creditor's claim. After this order, the order Absolute is issued directing the
bank to freeze the entire balance or a portion of credit balance in the account of the judgement debtor.
■ Upon receipt of Garnishee Order Nisi, the operation in the account are suspended, the bank has to earmark
desired balance in the account of the judgement debtor.
■ Garnishee Order applies to existing debts as also debts accruing due i.e. SB/CD/RD/FD.
■ Garnishee Order applies only to those accounts of Judgement Debtor which have credit balance.
• The relationship between bank and judgement debtor is of debtor and creditor. Bank is the debtor of
Judgement Debtor who is a creditor of the bank.
■ Garnishee order does not apply to money deposited subsequent to receipt of Garnishee order. It also does
not apply to cheques sent for collection but yet to be realized. But if credit was allowed in the account
before realization with power to withdraw to customer, GO will be applicable on this amount.
■ Garnishee order does not apply to unutilized portion of overdraft or cash credit account of the borrower as
no debt is due to judgement debtor. For example, if limit is Rs 4 crore and outstanding is Debit Rs 3 crore,
Garnishee order is not applicable on the balance Rs 1 crore.
■ Bank can exercise right of set off before applying Garnishee Order.
■ Garnishee order is applicable only if both debts are in same right and same capacity. Garnishee order
issued in a single name does not apply to accounts in the joint names of judgement debtor with other
person(s). But if Garnishee order is issued in joint names, it will apply to individual accounts also of the
same debtors. When Garnishee Order is in the name of a partner it will not apply to partnership account but
when Garnishee order is in the name of firm, accounts of individual partners are covered.
■ Garnishee Order can be served on Head Office of the bank and it can take reasonable time to
communicate the same to its branches.
■ If amount is not specified in the order, then it will be applicable on the entire balance in the account.
However, if it is for specific amount, the cheques can be paid from the balance available after setting aside
the amount as mentioned in the Garnishee order.

08. Income Tax Attachment Orders

■ income Tax Authorities issue Attachment Orders in terms of Section 226(3) of Income Tax Act, 1961. On
receipt of this order, banker is required to remit the desired amount to income tax authorities. A order
without mentioning the amount is not a valid order. Attachment Order is different from Garnishee order in
following respects (a) Attachment order applies to money deposited in the account after receipt of order
also till it is fully satisfied whereas Garnishee order does not apply to subsequent deposits, (ii) Attachment
Order in single name applies to joint accounts also proportionately unless the contrary is proved whereas
Garnishee order in single name does not apply to joint accounts.
• In case banker fails to comply with Attachment Order, it will be liable for the amount of order and deemed
as an assessee in default. However, right of set off is available to bank before applying the order.
• When both Garnishee order and Attachment Order are received simultaneously, priority should be given to
attachment order.
Garnishee Order Attachment Order
Issued by Court of law. 1. Issued by Revenue Authorities.
Applies to balance in the account at the time of 2. Besides balance in the account at the time of
receipt of order. Future credits are not covered. receipt of the order, it covers future credits.
Applicable only when relationship is that of debtor 3. Applicable when relationship between the bank
ancf creditor between the bank and the customer. and the customer is of debtor and creditor at the
time of receipt of order or at a future date.
4. When issued in single name, does not apply to a 4. When issued in single name, applies pro-rata to
joint account of the judgement debtor with others joint account of the assesses with other person.
5. When issued in joint names, applies to individual 5. When issued in joint names, applies to their
accounts of judgement debtors. individual accounts like a garnishee order.
6. When issued in the name of a partner in his 6. Same as in case of garnishee order.
individual capacity, does not apply to partnership
account. 7. Same as in case of garnishee order.
7. When issued in the name of the firm, applies to
individual account of partners. 8. Applies to deceased accounts
8. Applies to deceased accounts also 9. Bankers' right of set off enjoys priority
9. Bankers' right of set off enjoys priority

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 A K GUPTA'S BANKERS TRAINING INSnTUTE(75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 2S2741S7,09350476949)

ACCOUNTS OF CUSTOMERS
9. Accounts of Minors
1. As per section 3 of the Indian Majority Act, 1875, a minor is a person who has not attained the age of 18
years. A person will become major at the age of 18 whether guardian is natural or appointed by a court
of law.
2. As per section 11 of the Indian Contract Act, 1872 a minor is not competent to enter into a contract and
the contract entered into by him is void ab-initio. A minor cannot ratify an agreement after attaining
majority. However, a contract for the supply of necessities of life to a minor is a valid contract if it is
done by a person who is legally bound to supply the necessities to the minor and these necessities must
be suitable to the conditions of his life.
3. As per Section 183 of Indian Contract Act, a minor cannot appoint an agent. However, as per Section
184 of the Indian Contract Act, a minor can be appointed as an agent and he can make principal liable
by his actions. A minor can not delegate authority in his self operated account.
4. Banks do not grant overdraft / loan to a minor, even if security is provided because a contract with minor
being void, the bank will not be able to recover the loan. Even when loan has been raised on a term
deposit in the name of a major person, his request for addition of the name of the minor can not be
entertained.
5. If a minor misrepresents age for laising a loan bank cannot recover loan from him
6. If a loan given to a minor is guaranteed then bank cannot recover loan from guarantor also because
basic contract is void.
7. According to Section 26 of Nl Act, a minor can draw or endorse or negotiate a cheque or a bill but he
cannot be held liable on such cheque or bill. However, such bill will be valid and other parties will be
liable in their respective capacities.
8. A minor can not appoint nominee. However, minor can be appointed nominee.
9. As minor does not incur any personal liability, he can not be declared insolvent.
10.Minor as a partner: A minor cannot be partner in a partnership concern as he can not enter into a valid
contract and partnership is created by agreement. As per section 30 of Indian Partnership Act 1932 a
rninor may be admitted to benefits of partnership with the consent of all partners. However the liabilitv
of the minor partner will be limited to his share in the business of the firm and he will not liable personally
for me acts of the firrn. On attaining majority, a minor has to give public notice within six months of
attaining majority or when it comes to his knowledge after becoming major which ever is later whether
he wants to continue as a partner. If he remains silent, it amounts to his implied consent If he'chooses
to become a partner, he will be held liable as a partner from the date he has been admitted to the benefit
of the partnership firm and his profit sharing ratio will continue as it was existing before becoming maior.
As minor is not partner, he is not counted in the number of partners and he cannot give stop payment
instructions on a cheque issued by partnership.
11.As per section 6 of the Hindu Minority and Guardianship Act. 1956. father is the natural guardian of a
Hindu rninor boy or an unmarried girl and after him, the mother. In case of a married Hindu minor qirl
her husband is the natural guardian. If the husband is minor or minor girl becomes widow her father iri
law and after him the mother in law will be the guardians. When guardian of a Hindu minor ceases to be
a Hindu or he becomes a hermit or sanyasi he ceases to be natural guardian
12.Under section 9 of the Hindu Minority & Guardianship Act. 1956, a Hindu father entitled to act as the
natural guardian of his minor legitimate child may appoint a guardian by will in respect of minor's person
or property. Such a guardian is called a Testamentary guardian. But such guardian will come into picture
only on the death of father as well as mother. Similarly, mother can also appoint a testamentary
guardian for her minor child. Where no testamentary guardian is appointed by a Hindu father/mother the
court can appoint a guardian for person or property of the Hindu minor.
13.As per personal law applicable to Muslims, father is the natural guardian. A Muslim father can appoint a
testamentary guardian and even mother of a Muslim child can be testamentary guardian. If the father
d.es without leaving behind a will, father's father i.e. paternal grandfather is the guardian. However the
testa^mentary guardian appointed by the will of the father will have priority over paternal g.'-andfather.' On
the death of paternal grandfather, the person appointed by the will of the paternal grandfather will be
guardian. If the father s father dies intestate, court can appoint a guardian.
14.Accounts of a minor: A minor can have account under guardianship as well as self operated account.
15. n the case of accounts under guardianship, the bank records the date of birth of the minor as given by
the rninor or the guardian. Birth certificate is not necessary and the declaration about the date of birth
given by the guardian is sufficient and conclusive proof regarding his date of birth. The account will be
operated by the guardian during minority of fhe child and once the minor becomes major the debit in the
account will be allowed only with the consent of minor who has become major even though the cheques
might have been issued prior to his attaining majority. If guardian dies during minority, next guardian will
operate the account. In case the minor dies, the balance in the account will be paid to the legal heirs of
ill© minor.

16.Minoi^s j^Qther as Guardian: Though as per section 6 of the Hindu Minority and
Guardianship Act, 1956, father is the natural guardian, RBI on the basis of Supreme Court Judgement

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -!, Paschtm Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157, 09350476949)

has allowed mother to open and operate all types of deposit accounts even though the father is alive. As
per this judgement, both mother and father will act in the capacity of natural guardian simultaneously.
17.As per RBI, minors above the age of 10 years may be allowed to open and operate savings bank
accounts independently. Banks may, however, fix limits in terms of age and amount up to which minors
may be allowed to operate the deposit accounts independently. On attaining majority, the erstwhile
minor should confirm the balance in his/her account and if the account is operated by the natural
guardian / legal guardian, fresh operating instructions and specimen signature of erstwhile minor should
be obtained and kept on record for all operational purposes. Banks are free to offer additional banking
facilities like internet banking, ATM/ debit card, cheque book facility etc., subject to the safeguards that
minor accounts are not allowed to be overdrawn and that these always remain in credit.
18.A minor cannot appoint nominee in minor's independently operated account. On his behalf nomination
will be done by a person legally competent to act on his behalf. Joint account is also allowed in the
name of two minors provided both are of 10 years of age, are literate, belong to the same family and
operation is jointly.
19.Minor's account can be a joint account with the guardian also. In that case the account is operated by
the natural guardian in two capacities - one as joint account holder and the other as a natural guardian
of minor joint account holder. In such accounts special instructions like 'either or survivor' or 'jointly or
survivor' should be obtained which remain dormant during minority of the minor and become operative
after the minor becomes major. In jointly operated accounts with minor, till attainment of majority by
minor, guardian will sign for himself as well as on behalf of minor. When minor becomes major, account
will be operated jointly by guardian and minor who has become major.
20.A bearer cheque presented for cash payment by a minor may be paid as a minor can give a valid
discharge in the capacity of the payee.
21.Minor can obtain premature payment of FDR as he can give valid discharge but can not raise loan
against security of FDR.

9 A. Guardians of mentally challenged persons: The National Trust for the Welfare of Persons with Autism.
Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 provides for appointment of legal
guardians for persons with disability that is covered under the said Act. For this purpose, local level committees
have been set up. The above Act provides for appointment of legal guardians for persons with disability by the
Local Level Committees set up under the Act, The Trust has opined that a legal guardian so appointed can
open and operate the bank account as long as he remains the legal guardian. It may also be noted that the
provisions of Mental Health Act, 1987 also allows appointment of Guardian by District Courts. Therefore, banks
should rely upon the Guardianship Certificate issued either by the District Court under Mental Health Act or by
the Local Level Committees under the above Act for the purposes of opening / operating bank accounts.

9 B. Accounts of Visually Challenged (Blind) Persons

A visually challenged person is competent to the contract like any other person. However, on account of his
physical disability, he may contest subsequently that the facts were misrepresented to him and thereby avoid
the contract. Therefore, signature or thumb impression of the blind person should be attested by an
independent witness to the effect that all terms and conditions were properly explained to the blind person in his
presence. Moreover, cash deposit and withdrawal by blind person should be handled by the officer of the bank.
RBI has advised banks to ensure that all the banking facilities such as cheque book facility including third party
cheques, ATM facility, Net banking facility, locker facility, retail loans, credit cards etc. are invariably offered to
the visually challenged without any discrimination.

10. Accounts of Illiterate Persons

An illiterate person is competent to contract like any other person. He can, however, contest subsequently that
his consent was obtained by misrepresentation and thereby avoid the contract. Therefore, banks should get
the same witnessed to the effect that the terms and conditions of the bank were explained to the illiterate
person in his own language and he signed the form after understanding in their presence. Normally cheque
book is not issued to illiterate depositor. However, cheque book can be issued for making statutory payments,
post dated cheques for repayment of instalments of loan. In such cases, the cheques will be crossed account
payee and thumb Impression of the illiterate depositor will be verified on such cheques at the time of issue of
cheque book by competent authority of the bank.

11. Accounts of Married Women & Pardanashin ladies

A married woman, being an independent person, is legally competent to enter into a contract. Banks can safety
open account in her name after observing -usual safeguards. Bank should obtain employment/occupation
particulars of her husband. Any cheque issued in favour of the company/firm where her husband is employed
and endoresed in her favour should not be collected without sufficient enquiry to avoid being liable for
conversion. A pardanashin lady is one who remains in complete seclusion and does not transact with people
other than members of her family. Though pardanashin lady is legally competent to enter into a contract, she
may be able to avoid it on the pretext of undue influence and the onus of proving absence of undue influence is

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block 8G -1, Paschim Vihar, New Delhi- 110063;?h Oil 65476949, Oil 25274157,09350476949)

on the bank. Therefore, bank should take extra care in this regard. Signature of pardanashin lady should be
attested by her guardian if she is unmarried and by her husband if she is married. The signature may be
attested by any other member of the family also. If she is illiterate she will not be issued cheque book and for
every payment she will have to give the discharge in the presence of an independent witness. However, in case
of literate woman, cheque book will be issued and payment will be made on the basis of recorded signatures.

12. Joint accounts

1. Joint accounts can be opened with various types of operating instructions like Either or Survivor, Joint
Operation or Former or Survivor or Either or Joint or Survivor. The position in such cases as under:
2. Either or Survivor (E or S): It means anyone can operate the account till both are alive. After the death of
either of them, the bank can pay the balance to the survivor without any formality.
3. To be operated iointiv: Account will be operated by both jointly till both are alive and, if one of the two
expires, the bank would pay the final balance to the survivor, along with all the legal heirs of the deceased.
4. Jointly or by Survivors: Account can be operated by both / all the person jointly during their lifetime and, in
the event of death of any one, the balance is payable to the surviving persons jointly.
5- Former or Survivor: In such accounts, till the first named person is alive, the second named person has no
right to withdraw/operate the account. After the death of the first named person, the payment will be made
to second named person.
6. Any one or any one of the survivors: In such accounts, anyone can operate the account during the lifetime
of all. In case of death of any one of them, anyone of the survivors can operate the account.
7. In case of "either" or "either or survivor" or "joint" operation any one of the account holders can stop
payment of the cheque. The revocation in case of either or either or survivor can be done by either but in
case of joint operation, revocation has to be done by all jointly. In case of Former or Sun/ivor accounts,
stop payment of cheque can be done by Former and revocation of stop payment can also be done by
Former.
8. In case of "either of survivor" alteration on the cheque can be confirmed by any of the account holders.
9. Any authority to a third party has to be with the consent of all joint account holders.
10.Joint accounts are joint property. Therefore, unless there is clear mandate in the account opening form
that any one can undertake the following functions, these should be done by ail joint account holders
jointly under signatures of all (a) opening the account (b) closure of account (c) making or altering
nominatibn (d) raising loan against term deposit (e) premature payment of term deposit (f) addition or
deletion of names.
11 .In case of joint accounts with either or survivor instruction, if any of the account holders becomes insane,
the balance will be paid jointly to the account holders other than who has become insane and guardian of
the insane minor appointed by court.
12.In all types of joint accounts, Gamishee order issued in joint names will be applicable on joint accounts but
Garnishee order issued in the name of one of the account holders will not be applicable on joint account.
13.Repayment of Term/Fixed Deposits in joint accounts:(a) Either or Survivor FDRs: Payment on due date or
thereafter can be made to either of them. In case of premature payment, the signatures of both the
depositors may have to be obtained. If one of the depositors expires before the maturity, no pre-payment
of the fixed/term deposit may be allowed without the concurrence of the legal heirs of the deceased joint
holder. However, payment can be made to survivor atone on maturity. fb)Former or Survivor accounts:
The 'Former' alone can operate/withdraw the matured amount of the fixed/term deposit, when both the
depositors are alive. However, in case the deposit is to be paid before maturity, the signature of both the
depositors may have to be obtained. Further, if the former expires before the maturity of the fixed/term
deposit, the 'Survivor' can withdraw the deposit on maturity. For premature withdrawal the consent of the
surviving depositor and the legal heirs of the deceased is required.

13. Accounts of Proprietorship and Partnership Firms

1. For opening account of a sole proprietorship concern, sole proprietorship letter is obtained signed by the
sole proprietor in his individual capacity. Basically there is hardly any difference between the sole proprietor
as an individual and sole proprietorship which is nothing but a business name of the concern owned by him.
That is why RBI allowed extension of nomination facility in accounts of sole proprietorsnip concerns.
2. As per section 4 of the Indian Partnership Act, 1932 partnership is the relation between persons who have
agreed to share the profits of a business carried on by all or any of them acting for all.
3. f^inimum partners: A partnership firm should have minimum 2 partners.
4. Maximum partners: As per Companies Act 2013, an association of more than 100 persons which is not
registered as Company or Society will be an illegal association. Therefore, maximum number of partners can
be 100.(As per Companies Act 1956, maximum number of partners could be 20 for any business other than
banking and 10 for banking business).
5. In case of Limited Liability Partnerships, there is no limit on maximum number of partners.
6- Who can become a partner?: Only a person competent to contract can become partner. Minor, insolvent,
insane cannot become partner. A company and a firm can become partner in another firm.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG • I, Paschim Vihar, New Delhi - 110063; Pfi Oil 65476949, Oil 25274157,09350476949)

7. Who can not become a partner?: HUF can not become partner as per judgement of the Supreme Court
because HUF is neither a legal person nor a natural person and can not be liable for action of others.
Charitable Trust can not become partner because partnership is formed for business. As per RBI, Non
Banking Finance Co. cannot become a partner.
8. Partnership Deed: Partnership can be oral or in writing. Therefore, banks do not insist on partnership deed
while opening accounts of a partnership concern and rely on contents of partnership letter executed by the
partners in their individual capacities.
9. Registration of Partnership: A partnership firm is registered with registrar of firms. Though. It is not
necessary that the firm oe registered yet registration is preferred because an unregistered firm can not sue
others in its own name for recovery of its dues while others can sue it In its name. Therefore, while granting
loans banks prefer that the firm should be registered one.(Section 69 of Indian Partnership Act, 1932)
10.Minor as partner: As per section 30 of the Partnership Act, 1932, a minor cannot be a full fledged partner but
he can be admitted to the benefits of partnership. His liability is maximum to the extent of his share in the
firm and he wilt not be personally liable. On attaining majority, a minor has to decide within 6 months from
date of majority or date of his knowledge about his admission for benefits, whichever is later whether he
wants to continue as a partner. If chooses to be a partner, his liability begins from date he was admitted in
the firm for benefits and his profit sharing ratio continues in earlier ratio.
11.Implied authoritv of partner: As per section 19 of the Partnership Act, 1932, a partner of a firm has implied
authority to act on behalf of the firm for the normal business of the firm and bind the firm. All actions of the
partner in the ordinary course of business are actions of all partners. However, in the absence of any usage
or custom of the trade to the contrary, a partner's implied authority does not cover (a) admission of any
liability in a suit against the firm (b) withdrawal of any suit filed on behalf of the firm (c) acquire/transfer any
immovable property on behalf of the firm (d) submitting a dispute relating to the business of the firm to
arbitration (e) opening a bank account on behalf of the firm in his own name (f) compromising on behalf of a
firm (g) entering into partnership on behalf of the firm. But if all partners agree for these issues and
authorize any one in this regard, these jobs can be undertaken by the said partner.
12.Liability of partner: As per section 25 of the Indian Partnership Act, 1932 every partner is liable, jointly with
all other partners and also severally, for all acts of the firm while he Is a partner. Thus, liability of a partner is
unlimited. However, as per section 49 of the same Act, where there are joint debts due from the firm, and
also separate debts due from any partner, the separate property of any partner shall be applied first in the
payment of his separate debts, and the surplus (if any) in the payment of the debts of the firm. To be able to
recover its debts from assets of the firm as also the individual assets of the partner (s), the banks get the
documents executed not only as partners but also as individuals. In case of Limited Liability Partnership, the
liability of partner is limited up to the amount agreed to be contributed by him.
13.In order to bind the firm, a partner of a firm must sign for and on behalf of the firm and not in his individual
capacity.
14.Account of Partnership firm: For opening account of a partnership firm, all partners are required to sign
Account opening form except minor who is admitted for benefits of firm.
15.Operational Authoritv: In Partnership accounts operation authority is given by all partners. Any change in the
operational authority is also with the consent of all partners including those who were earlier not authorized
to operate. Every partner including a sleeping partner has authority to stop payment of a cheque issued by
another partner of the firm. However, the revocation of stop payment of cheque will be as per operational
authority.
16.As per section 18 of Partnership Act 1932, a partner is the agent of the firm for the purpose of business of
the firm. Being an agent, he can't delegate his authority to an outsider without the written consent of all
other partners.
17.Death, insolvency, insanity of partner: On the death, insolvency or insanity of a partner, the partnership is
dissolved and operations are stopped. The cheques signed by the deceased, insane or insolvent partner will
not be paid. If the account is in credit, operations are allowed for winding up of the firm. In such case
operations are allowed on the basis of a fresh mandate. It the account is in debit, operations in the account
should be stopped to retain liability of the deceased /insolvent partner or his/her estate and to avoid
operations of the Clayton's rule.
18.Banks must ensure that cheques drawn in favour of or endorsed in the name of the firm are not allowed to
be collected in the personal account of a partner without sufficient inquiry. Other wise bank nay not be able
to get any protection available to a collecting banker under Section 131 of Nl Act, 1881.
19.Two firms having all common partners, are one firm as firm is not a legal entity. It is only consolidated name
of all partners.

13A. Limited Liability Partnership

1. Limited Liability Partnership is governed by Limited Liability Partnership Act 2008.
2. It is registered with Registrar of Companies.
3. Minimum number of partners is 2 but there is no limit on number of partners. An individual or a body
coporate can be a member of an LLP.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157, 09350476949]

4. Liability of partner is limited to the extent of his contribution in the firm. A partner shall not be personally
liable.

14. Accounts of Limited Companies

1. A limited company is an artificial person with perpetual succession incorporated under the Companies Act.
2. Types of Companies: A limited company may be private limited or public limited. Private company means a
company which restricts the right to transfer its shares. A small company means a private limited company
paid up share capital of which does not exceed Rs 50 lakhs and turnover of which as per its last profit and
loss account does not exceed Rs two crores. One person Company means a company which has only one
person as a member.
3. Number of members:. As per Companies Act 2013, in the case of a private limited company, minimum
number of members should be 2 and maximum number of members excluding employees can be 200. For
public limited company minimum number of shareholders should be 7 and there is no ceiling on maximum
number.
4. Number of Directors: ivlinimum Directors in a public limited company should be three, in a private limited
company 2 and in One Person Company one. Maximum directors in all types of companies can be 15.
However, company may appoint more than 15 directors by passing a special resolution. Govt may prescribe
class of companies in which minimum one director would be woman. Every company shall have minimum
one director who stayed in India for minimum 182 days in the previous financial year. Every listed company
shall have at least one third of the total directors as independent directors.
5- Number of Directorships: An individual cannot be director of more than 20 companies at one time and within
this, he can become director of maximum 10 public companies.
Transferability of shares: Shares of a public limited company are transferable and are quoted on the stock
exchange while in case of a private limited company the same are held by friends and relatives and are
transferable only among the members and are not quoted on stock exchange.
7. Shareholders are owners of the company, directors are agents of the company and debenture holders are
creditors of the company.
8- Documents for opening account: For opening account of a limited company bank should obtain the
following;
(a) Memorandum of Association: It contains name of the Company, its authorised capital, registered office
and Ihability of shareholders, objects of the company etc. An^rthing done by the directors beyond the
objects stated in the memorandum of association is called ultra-vires the company and can't be ratified
even in a general body meeting. Therefore, directors can borrow only for the objects mentioned in the
memorandum of association. If any loan is given for objects other than those mentioned in
Memorandum of Association, company will not be liable for such loans.
(b) Articles of Association: lays down the internal working of the company like rights and powers of the
directors, rules of conducting meetings, borrowing power of directors etc.
(c) Certificate of incorporation : It is equivalent to birtft registration certificate of the company. It is issued by
Registrar of Companies after the promoters file memorandum and articles of association with it. This is
the most important document. A company does net exist without it. If an account is opened without this
certificate, the bank will hold the amount as trustee. This is an evidence of formation of company as a
body corporate capable of exercising functions.
(d) Certificate of commencement of business: used to be issued by Registrar of companies. Earlier it was
required by public limited companies only. Now it is not required by either public limited company or
private limited company. However, both public limited and private limited companies cannot commence
business or exercise borrowing powers without filing a declaration with ROC that every subscriber to
Memorandum has paid the value of shares and paid up capital of the company is minimum five lac in
case of public company and minimum Rs 1 lac in case of private company. The declaration is required
to be filed within 180 days of the date of incorporation of the company.
(e) Resolution of Board of Directors which is pas.sed by the Board of Directors authorising opening and
operation of the account by named officials of the company. A copy of the resolution sho"!d be attested
by its Company Secretary and / or Chairman of the meeting at which resolution was passed.
(f) KYC norms are required to be applied on the company and all persons authorized to operate the
account of company.
9. As per doctrine of 'Constructive Notice' anybody dealing with company is assumed to have knowledge of
Memorandum and Articles of Association.
10.Operational Authority: The operational authority is decided by Board Resolution. Any change in operational
authority is also as per Board Resolution. Stop payment of a cheque and revocation of stop payment will be
as per operational authority.
11.The directors can not delegate their authority to any other person.
12.In case a director dies, the cheques signed by him presented for payment can be paid if these are otherwise
in order and are dated prior to his death.
13.Common Seal of the Company is to be affixed on documents as per Articles of Association or Board
Resolution.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG • I. Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

14.Cheque favouring company should not be credited to the personal account of the director. Such cheques
should not be paid In cash. These should be credited to the account of company only.
15.Borrowing powers of Directors: The borrowing powers of company arise from Memorandum of Association.
The Borrowing powers of directors are given in the Articles of Association. Under Section 180 of companies
Act 2013, (Section 293 (1)(d) of the Companies Act, 1956), if the Board of Directors of a public limited
company or a private limited company want to borrow more than the paid up capital and free reserves of the
company, consent of the shareholders is required in the General Body meeting by passing a special
resolution. However, short term borrowings like cash credit, overdraft, BP limit are not covered under this
provision.
16.Winding up of company: Winding up can be (a) voluntary (b) Compulsory by court (c) through court
supervision.
Registration of Charge
1. When to be registered: Under section 77 of the Companies Act 2013,(Section 125 of the Companies Act,
1956), a charge created by a company on its property is required to be registered with Registrar of
Companies (ROC). The new Act requires registration of all charges and does not give list of charges.
However, charge is not to be registered in case of pledge or lien.
2. Modification: Whenever, there is a change in terms and conditions of ihe loan, then as per section 79 of te
Companies Act 2013 (section 135 of Companies Act), the particulars of Modification of charge should be
filed with the ROC within 30 days of the modification.
3. Satisfaction: When loan is repaid, particulars of satisfaction of charge should be filed with ROC as per
section 82 of the Companies Act 2013 (section 138 of the Companies Act, 1956) within 30 days of the
satisfaction of charge.
4. ROC with whom particulars to be filed: The particulars of the charge should be filed with the Registrar of
companies in whose jurisdiction the Registered Office of the Company is locaied. For example, a company
having its registered office at Jaipur shall have to file particulars of charge with ROC Jaipur though loan
might have been availed from a bank in Delhi and security may be located in any other state.
5. Forms: For filing particulars of fresh charge. Form No. CHG 1 is required. Form used for modification of the
charge is same as that for fresh registration. For satisfaction of charge. Form No. CHG 4 is to be submitted
duly signed by both the company and the charge holder. Currently, the particulars of charge are filed
electronically.
6. Period for filing particulars: Particulars of charge are required to be filed within 30 days of creation of charge.
7. Extension of Period of Registration: ROC may allow registration to be made within 300 days of creation of
charge (extension of 270 days) in filing particulars of charge or filing particulars of modification of charge.
The company will be required to pay additional fees. If registration is not made within 300 days of creation of
charge, then permission is required from Central Government. Similar to registration of charge, satisfaction
of charge can also be intimated within an additional period of 270 days on payment of additional fees to the
Registrar.
8. Duty to file particulars of charge: It is the primary duty of the company to get the charge / modification of
charge / satisfaction of the charge registered with ROC. However, if the company does not get the charge
registered, bank in its own interest can file particulars of charge.
9. Consequence of non filing the particulars: In case the particulars of charge are not filed, the bank becomes
the unsecured creditor against the official liquidator.
10.Priority of charge: The priority of the charge is reckoned from the date of creation of charge (i.e. date of
documents) and not from the date of registration if the charge is registered within the stipulated period.

15. Accounts of Hindu Undivided Family(HUF)

1. Under Mitakshara School of Hindu Law, HUF can be formed by the Hindus, the Sikhs, the Jains and the
Buddhists
2. Till August 05, the eldest male member of the family used to be the 'Karta' while ail other male members
were called coparceners. The Hindu Succession Act was amended w.e.f. 09.09.05. The salient features of
the Amendment are as under: (a) Daughters have been given equal rights in the Mitakshara Coparcernary
property. The daughter of a Coparcener by birth is /becomes a coparcener in her own right and has the
rights/liabilitrs in the coparcener property. The female coparcener can also act as Karta. (b) The disability
on female heirs to ask for partition in respect of dwelling houses has been removed .
3. HUF is neither a legal person nor a natural person. It is not created by agreement. It is not incorporated
under any Act. It is from a common ancestor and membership is by birth or adoption.
4. The eldest coparcener including female is the Karta. The Karta gets this nght because of being the senior
most member of the family and is not selected by other coparceners. He/She continues to be Karta even
when he/she lives outside India.
5. Operational authority to operate the account is with Karta. Karta can appoint any other coparcener or third
party to conduct business of HUF and/or operate the account. Co parcener can not stop payment of the
cheque unless he is authorized to operate the account.

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE(75, Block BG - I, Paschim Vthar, New Delhi - 110063; Ph Oil 65476949, Oil 252741S7,09350476949]

6. Position of a Karta of HUF is different from a partner of a partnership firm. Kara has the authority to act on
behalf of HUF in the matter of compromise or subjecting a dispute to arbitration which a partner does not
enjoy.
7. Though Karta is competent to raise loan on behalf of HUF for family business and bind it by doing so, it is
always advisable to get the documents executed by all major co-parceners (including female co parceners)
so that they are personally also liable.
8. In case of death, insanity or insolvency of Karta, next seniormost member of family becomes Karta.
9. The liability of Karta is unlimited while that of co parceners is limited up to their share in the firm.

16. Account of Trusts

1. According to Section 3 of the Indian Trust Act, 1882, a trust is an obligation annexed to the ownership of
property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted
by him for the benefit of another and the owner.
2. Parties to a Trust: The person reposing the confidence is called the author of the trust, the person in whom
confidence is reposed is called trustee and the person for whose benefit trust is reposed is called
beneficiary.
3- Types of Trusts: Trusts can be of two types - private trusts where beneficiaries are certain specified
individuals or groups and public trusts where beneficiary is public at large. While private trusts are governed
by Indian Trust Act, 1882, public trusts are governed by Public Trusts Act of the concerned state. The
document creating a trust is called 'trust deed'. Public Trusts are registered with the Charity Commissioner.
Operational Authority: The operation and other acpects of the bank account are to be conducted as per the
Trust Deed. Unless otherwise provided for in the trust deed, all trustees have to operate the account jointly.
I rustees can't delegate their powers to an outsider even by mutual consent.
5. Loan to a trust: Unless specifically provided for in the trust deed, no trustee or trustees can raise loan
against the security of the assets of the trust. Further, the loan should be for the objects as mentioned in the
Trust Deed.
6. On the death of a trustee, the trust property is passed on to the next trustee while in the event of death of
sole trustee or last surviving trustee, the court can appoint a trustee.
7. Death or insolvency of a trustee does not affect the trust property and the bank can pay cheques issued by
the deceased trustee prior to his death.
8. Stop payrrfent of a cheque and revocation of stop payment as per operational authority.
9. Cheques favouring Trust should not be credited to personal account of Trustee without proper enquiry.
10.The funds lying in Trust account should not be allowed to be used for adjusting debt ot the Trustee.
17. Account of Executors and Administrators
1. An executor is a person named by the deceased in his will to mange his estate whereas an administrator is
appointed by the court of law for the same purpose where the deceased dies without leaving behind a will
(intestate).
2. In the eyes of law, executors and administrators, unlike trustees are treated as one person. On opening a
bank account, therefore, executors/administrators can authorise any one or more of them to operate the
account.
3. On the death of an executor or administrator, the surviving executor(s) or administrator(s) can continue to
operate the account unless otherwise provided for in the will or letter of administration.
4. While opening the account or an executor, bank should obtain letter of probate, which is an official
confirmation of the will of the deceased by a court of law. For opening account in the name of
administrator(s), letter of administration is required which is issued by the court of law.
18. Societies and Clubs
1. Societies and Clubs are non-profit making organizations created for promoting art, culture, literature sports
etc.
2. These can be registered under Societies Registration Act 1860 with Registrar of Societies.
3. Societies can also be registered with Registrar of Companies under section 25 of Companies Act which
pertains to non profit making companies.
Documents to be obtained while opening the account: (i) Copy of Registration Certificate (ii) Copy of Bye
laws which contain rules and regulations (iii) Copy of resolution passed by the Managing Committee which
should include authority to open the account and operational authority.
5. Loan to Societv: It should be ensured that loan is for the objects of the society, raising of loan is permitted as
per Bye laws and resolution should be passed by the Management Committee.
6. Cheques presented after death of Secretary or Office Bearer: Any cheque signed by the Secretary of Club
or Society or any other office bearer who is authorized to operate the account and presented after his death
can be paid provided if is otherwise in order and dated prior to his death.

19. Mandate and Power of Attorney

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Black BG - I, Paschim Vthar, New Delhi - 110063; Ph Oil 65476949, Oil 2S274157, 093S0476949)

1. When an account holder authorises another person through a simple letter of authority, it is called mandate.
On the other hand, power of attorney is executed on stamped paper and may cover any other transactions
besides opening/operation of an account. Bank generally accept mandates. However, Power of Attorney is
also acceptable. A mandate does not require witnessing or stamping. On the other hand, power of attorney
is stamped as per the State Stamp Rules of the state where it is executed. It must either be registered with
a Registrar of Documents or attested by Notary Public.
2. The account holder can revoke mandate or power of attorney any time even if it is stated to be irrevocable.
3. Any cheque signed by the agent and presented after cancellation of authority shall not be paid irrespective
of date on the cheque. However, principal continues to be liable for the acts of the agent done prior to
revocation of authority.
4. Any cheque signed by agent and dated prior to delegation of authority will not be paid.
5. Power of attorney or mandate is revoked by death, insanity, insolvency of the Principal. Any cheque signed
by the principal or agent presented after the death, insanity or insolvency of the principal will not be paid.
6. In case Cheque issued by the agent is presented for payment after his death, insanity or insolvency, the
same can be paid so long as the principal is alive provided the same is dated prior to the date of death or
insanity of the agent.
7. Agent can not delegate authority to a third party.

20. Death of a Customer and Settlement of Claims

1. In the case of death of individual customer, operation in the account should be stopped. Any cheque
presented after the death of individual account holder should not be paid as bank's authority to pay the
cheque is terminated in case of death, insanity or insolvency of individual customer.
2. The payment should be made to nominee if there is nomination. If there is no nominee but will has been
written by the account holder, then the person named in the will be required to bring Probate from competent
court. The person named in the will or probate is called Executor. In this case payment should be made to
executor.
3. When a person dies without writing, will, he is said as having dies intestate. In this case, payment will be
made to legal heirs.
4. RBI has advised that for making payment of balance in the account of deceased customer to legal heirs of
the deceased. Succession certificate is not mandatory for any amount. Bank has to satisfy about legal heirs.
For delivering contents of locker or safe custody. Letter of Administration is required.
5. While delivering contents of locker or safe custody, inventory should be prepared. If some sealed packet is
found in the locker of safe custody, it should be delivered as it is without opening the same.
6. The claim should be settled and payment should be made within 15 days from the date of receipt of
completed papers.
7. If any credit is received in the account after death of customer, it should be credited to a separate account in
the name of customer with the permission of legal heir or nominee. Otherwise it should be returned to
remitter under intimation to the legal heir or nominee.
8. Pre-mature payment of term deposit can be allowed but no loan can be allowed.
9. Interest in case of current account should be paid at Saving rate from date of death till date of payment.
10.In case of term deposits, up to due date interest should be paid at contracted rate. For overdue period,
interest should be paid at applicable rate on date of maturity if the death was before maturity and at saving
rate if the depositor died after maturity.

21. Know Your Customer(KYC)Guidelines

• These guidelines have been issued by RBI under Section 35A of the Banking Regulation Act, 1949.
• Obiective of KYC guidelines: To ensure Anti Money Laundering (AML) and Combating of Financing of
Terrorism (OFT) and prevent banks from being used by criminal elements for money laundering activities.
KYC procedures also enable banks to know/understand their customers and their financial dealings which in
turn help them manage their risks prudently.
• Guidelines issued by Financial Action Task Force (FATF) on Prevention of Money Laundering also need to
be followed.
• For the purpose of KYC policy, a 'Customer' is defined as a person or entity that maintains an account and/or
has a business relationship with the bank.
• Banks have been advised to frame their KYC policies incorporating the following four key elements:
Customer Acceptance Policy: Customer Identification Procedures; Monitoring of Transactions; and Risk
management.
Customer Acceptance Policy
Banks' Board should clearly lay down policy relating to KYC taking into account the following;
1. No account is opened in anonymous or fictitious/benami name(s);
2. KYC norms should be applicable on all accounts except Small accounts and on all persons authorized to
operate the account.

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

3. Customers should be categorised into low, medium and high risk (banks may choose any suitable
nomenclature viz. level I, level II and level III ); customers requiring very high level of monitoring, e.g.
Politically Exposed Persons may, if considered necessary, be categorised even higher.
4. Examples of low risk customers could be salaried employees whose salary structures are well defined,
people belonging to lower economic strata of the society whose accounts show small balances and low
turnover, Government Departments and Government owned companies, regulators and statutory bodies etc.
5. Examples of High risk customers include (a) nonresident customers;(b) high net worth individuals;(c)trusts,
charities. NGOs and organizations receiving donations; (d) companies having close family shareholding or
beneficial ownership: (e) firms with 'sleeping partners'; (f) politically exposed persons (PEPs) of foreign
origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial
owner; (g) non-face to face customers and (h) those with dubious reputation as per public information
available etc; (i) bullion dealers (including sub-dealers) & jewelers. However, only NPOs/NGOs promoted by
United Nations or its agencies may be classified as low risk customer.
6. Bank should review the risk profile of the customer at least once in six months.
7. Not to open an account or close an existing account where the bank is unable to verify the identity and /or
obtain documents required as per the risk categorisation due to non cooperation of the customer or non
reliability of the data/information furnished to the bank.
8. Bank should obtain proof of identity, proof of address, and photograph of the prospective customer.
9. Banks obtain photograph while opening account for the purpose of identification.
10.If the address on the document submitted for identity proof by the prospective customer is same as that
declared by him/her in ttie account opening form, the document may be accepted as a valid proof of both
identity and address. Customers may submit only one documentary proof of address (either current or
permanent) while opening a bank account or while undergoing periodic updation. In case the proof of
address furnished by the customer is not the local address or address where the customer is currently
residing, the bank may take a declaration of the local address on which all correspondence will be made by
the bank with the customer. No proof is required to be submitted for such address for correspondence/local
address. Verification of address by the bank through 'positive confirmation' has been dispensed with. In the
event of change in this address due to relocation or any other reason, customers may intimate the new
address for correspondence to the bank within two weeks of such a change.
11.Documents for proof of identity and address of the customer: fi^ Passport (11) PAN card (iii) Voter Identity
card (iv) Driving Licence (v) MANREGA Job Card (vi) Aadhar card issued by the Unique Identification
Authority of India. Banks would not have ihe discretion to accept any other document for this purpose.
Banks may maintain records of the identity of clients, and records in respect of transactions with its client in
hard or soft format.
12.Documents for oroof of address of the customer: Same as above except PAN card.
13.In case of marriage, a document shall be deemed to an "officially valid document" even if there is a change
in the name subsequent to its issuance, provided it is supported by a marriage certificate issued by the State
Government or a Gazette notification, indicating such a change of name.
14.Time for completing KYC Norms: Where a customer categorised as low risk expresses inability to complete
the documentation requirements on account of any reason that the bank considers to be genuine, and
where it is essential not to interrupt the normal conduct of business, the bank may complete the verification
of identity within a period of six months from the date of establishment of the relationship.
15.Simplified Measures for KYC: In case of 'Low risk' customers it would be sufficient to obtain eitfier (i) identity
card with applicant's Photograph issued by Central/State Government Departments, Statutory/Regulatory
Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions; or
(ii) letter issued by a gazetted officer, with a duly attested photograph of the person above for the purpose of
proof of identity and proof of address.
16.Updation of Customer Identification Data: Full KYC exercise will be required to be done at least every two
years for high risk individuals and entities, at least every eight years for medium risk individuals and entities
and at least every ten years for low risk individuals. Fresh photographs will be required to be obtained from
minor customer on becoming major. Fresh proofs of identity and address will not be required from those
customers who are categorised as 'low risk'. In case of change of address of such 'low risk' customers, they
could merely forward a certified copy of the document (proof of address) by mail/post, etc. Banks may not
insist on physical presence of such low risk customer at the time of periodic updation.
1/.Opening another account in the same bank: If an existing KYC compliant customer of a bank desires to
open another account in the same bank, there should be no need for submission of fresh proof of identity
and/or proof of address.
18. Non-compliance of KYC requirements: Banks should Impose 'partial freezing' on such KYC non-compliant in
a phased manner. The option of 'partial freezing' to be exercised after giving due notice of three months
initially to the customers followed by a reminder for further period of throe months. Thereafter, banks may
impose 'partial freezing' by allowing all credits and disallowing all debits with the freedom to close the
accounts. If the accounts are still KYC non-compliant after six months of imposing initial 'partial freezing'
banks may disallow all debits and credits from/to the accounts, rendering them inoperative. Further, it would
always be open to the bank to close the account of such customers.

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG • I, Paschtm Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

19. Small account: "Small account" means a savings account in a banking company where- (i) the aggregate of all credits
in a financial year does not exceed rupees one lakh, (ii) the aggregate of all withdrawals and transfers in a month does
not exceed rupees ten thousand, and; (ill) the balance at any point of time does not exceed rupees fifty thousand. An
individual who desires to open a small account in a banking company may be allowed to open such an account on
production of a self-attested photograph and affixation of signature or thumb print, on the Account opening form.
Foreign remittance shall not be allowed to be credited into a small account unless the identity of the client is fully
established through the production of officially valid documents. A small account shall be opened only at Core Banking
Solution linked branch or in a branch where it is possible to manually monitor and ensure that foreign remittances are
not credited to a small account and the stipulated limits on monthly and annual aggregate of transactions and balance in
such accounts are not breached. A small account shall remain operational initially for a period of twelve months, and
thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking
company of having applied for any of the officially valid documents within twelve months of the opening of the said
account, with the entire relaxation provisions to be reviewed in respect of the said account after twenty four months.
20. Foreign students studying in India: Non Resident Ordinary (NRG) bank account to t>e opened on the basis of his
passport along with a photograph and a letter offering admission from the educational institution. Foreign student
should submit a valid address proof giving local address, in the form of a rent agreement or a letter from the
educational Institution as a proof of living in a facility provided by the educational institution within 30 days of opening
the account. During the 30 days period, maximum credit of foreign remittances up to USD 1,000 and maximum monthly
withdrawal to Rs. 50,000/-, pending verification of address.
21. Basic saving bank deposit account: No mtn or maximum balance or restriction on credits in a year but max number of
withdrawal in a month 4 times without any limit on amount of withdrawals. Other saving bank accounts in that bank to
be closed within 30 days of opening Basic Saving Bank Deposit account.
22. PAN No: Quoting of PAN number is not as per KYC norms. But as per Income Tax Rules, Quoting of PAN number is
mandatory while opening an account or making a time deposit exceeding Rs. 50,000 and any person who has not been
allotted a PAN number shall make a declaration in Form No. 60/61.
23. Accounts of Self Help Grouos: KYC verification of all the members of SHG need not be done while opening the savings
bank account of the SHG and KYC verification of all the office bearers would suffice. At the time of credit linking of
SHGs, no separate KYC verification of the members or office bearers is necessary.
Monitoring of Transactions
Maintenance of records of transactions
Banks should introduce a system of maintaining proper record of following transactions:
1. all cash transactions of the value of more than Rupees Ten Lakh or its equivalent in foreign currency;
2. Banks should maintain proper record of all series of cash transactions integrally connected to each other which have
been valued below rupees ten lakhs cr its equivalent in foreign currency where such series of transactions have taken
place within a month and the.
3. all series of cash transactions integrally connected to each other which have been individually valued below Rupees Ten
Lakh or its equivalent in foreign currency where such series of transactions have taken place within a month and
monthly aggregate exceeds rupees ten lakhs or its equivalent in foreign currency.
4. all transactions involving receipts by non-profit organisations of value more than rupees ten lakh or its equivalent in
foreign currency
5. all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where
any forgery of a valuable security or a document has taken place facilitating the transaction and
6. All suspicious transactions whether or not made in cash and by way of as mentioned in the Rules.
Inteorallv connected cash transactions
Debit transactions are treated as integrally connected cash transactions if total cash debits during the calendar month
exceeds Rs. 10 lakhs. Similarly Credit transactions are treated as integrally connected cash transactions if total cash credits
during the calendar month exceeds Rs. 10 lakhs. However, the bank should not report a transaction which is less than
Rs.50,000/-.

Maintenance and Preservation of record

Banks should maintain for at least five years from the date of transaction between the bank and the client, all necessary
records of transactions, both domestic or international, which will permit reconstruction of individual transactions (including
the amounts and types of currency Involved if any) so as to provide, if necessary, evidence for prosecution of persons
involved in criminal activity. Banks should ensure that records pertaining tc the identification of the customer and his
address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, etc.) obtained while opening the
account and during the course of business relationship, are properly preserved for at least five years after the business
relationship is ended.

Reoortino to Financial Intelligence Unit - India

In terms of the PMLA Rules, banks are required to report information relating to cash and suspicious transactions and all
transactions involving receipts by non-profit organisations of value more than rupees ten lakh or its equivalent in foreign
currency to the Director, Financial Intelligence Unit-India (FIU-IND).
Cash Transaction Report( CTR )
1. The Cash Transaction Report (CTR) for each month should be submitted to FIU-IND by 15th of the succeeding month.
It should include transactions where cash receipt or payment is more than Rs 10 lakh and integrally connected cash
transactions where cash debit or cash credit during the month exceeds Rs 10 lakh.
2. All Cash transactions where forged or counterfeit currency notes or bank notes has been used as genuine should be
reported by the 15th day of the succeeding month.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -1, Paschim Vihar, New Delhi - 110063; PhOll 65476949, Oil 25274157,09350476949)

3. While filing CTR, details of individual transactions below Rupees Fifty thousand need not be furnished.
4. CTR should contain only the transactions carried out by the bank on behalf of their clients/customers excluding
transactions between the internal accounts of the bank.
SusDicious Transaction Reoorts(SIR)
1. While determining suspicious transactions, banks should be guided by definition of suspicious transaction contained in
PMLA Rules.
2. Banks should make STRs if they have reasonable ground to believe that the transaction involve proceeds of crime
generally irrespective of the amount of transaction and/or the threshold limit.
3. The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at a conclusion that any
transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature.
4. Banks should not put any restrictions on operations in the accounts where an STR has been made. Banks and their
employees should keep the fact of furnishing of STR strictly confidential, as required under PML Rules. It should be
ensured that there Is no tipping off to the customer at any level.
Cross border wire transfers: All cross border wire transfers of the value of more than rupees five lakhs or its equivalent
in foreign currency where either the origin or destination of fund is in India to be reported to FIU-IND.
Non-profit Organisation: The report of all transactions involving receipts by non- profit organizations of value more than
rupees ten lakh or its equivalent in foreign currency should be submitted every month to the Director, FIU-IND by 15th of
the succeeding month in the prescribed format.
Other Guidelines ofRBIon KYC
1- Introduction not Mandatory for ooenina accounts: Since introduction is not necessary for opening of accounts under
PML Act and Rules or Reserve Bank's extant KYC instructions, banks should not insist on introduction fo. opening bank
accounts of customers.
2. Principal Officer: Banks should appoint a senior management officer to be designated as Principal Officer who should
have timely access to customer identification data, CDD information, transaction records and other relevant
information. The Principal Officer should be able to act independently and report directly to the senior management
or Board of Directors.(September 11, 2009)
3. KYC/AML guidelines issued by RBI shall also apply to their branches and majority owned subsidiaries located outside
India, especially, in countries which do not or insufficiently apply the FATF Recommendations, to the extent local laws
permit. In case there is a variance in KYC/AML standards prescribed by the Reserve Bank and the host country
regulators, branches/overseas subsidiaries of banks are requir^ to adopt the more stringent regulation of the two.
4. KYC once done by one branch of the bank should be valid for transfer of the account within the bank. Banks may
transfer exjsting accounts at the transferor branch to the transferee branch without insisting on fresh proof of address
and on the'basis of a self-declaration from the account holder about his/her current address.
5. Reliance on third oartv due dilioence: For the purpose of identifying and verifying the identity of customers at the time
of opening account, banks may rely on a third party subject to the conditions that- (a) the bank immediately obtains
necessary information of such client due diligence carried out by the third party; (b) the third party Is not based in a
country or jurisdiction assessed as high risk; and (e) the bank is ultimately responsible for client due diligence and
undertaking enhanced due diligence measures, as applicable.
6- Central KYC Records Registry fCKYCRl: Government has amended the Prevention of Money Laundering (Maintenance
of Records) Rules, 2005, (Rules), for setting up of the Central KYC Records Registry (CKYCR). The KYC records
received and stored by the CKYCR could be retrieved online by any reporting entity across the financial sector for the
purpose of establishing an account based relationship. In case of opening of ^mall Accounts', only personal details
together with the photograph, signature/thumb impression and self-certification document should be obtained. Every
reporting entity shall within three days after the commencement of an account-based relationship with a client, file the
electronic copy of the client's KYC records with the Central KYC Records Registry. The Central KYC Records Registry
shall issue a KYC Identifier for each client to the reporting entity, which shall communi3te the KYC Identifier in writing
to their client. 5. Where a client, submits a KYC Identifier to a reporting entity, then such reporting entity shall retrieve
the KYC records online from the Central KYC Records Registry by using the KYC Identifier and shall not require a client
to submit the same KYC records or information or any other additional identification documents or details, unless -(i)
there is a change in the information of the client as existing in the records of Centra! KYC Records Registry; (ii) the
current address of the client is required to be verified; The reporting entity which performed the last KYC verification or
sent updated information in respect of a client shall be responsible for verifying the authenticity of the identity or
address of the client. A reporting entity may rely on a third party subject to the conditions that the reporting entity,
within two days, obtains from the third party or from the Central KYC Records Registry records or the information of
the client due diligence carried out by the third party.

22. Nomination Facilities in Customers' Accounts

1. Nomination facility was introduced on the recommendation of Talwar Committee.
2. In 1983, Section 45ZA to 45ZF were added to the Banking Regulation Act, 1949 providing for extension of
nomination facilities in banks. However, the facility of nomination was started in banks w.e.f. 29.03.1985.
3. Nomination facilities are available in deposit accounts (Sec 45 ZA & 45ZB), in respect of articles deposited
for safe custody with the bank (Sec 45ZC & 45ZD)and in locker accounts (45ZE & 45ZF)
4. Sections 45ZA, 45 ZC, 45ZE relate to nomination, change in nomination and cancellation of nomination.
Sections 45ZB, 45 ZD, 45ZF state that bank will be discharged of liability by making payment/delivery to
nominee.
5. Where facility is available: Nomination facility is available in all types of deposit accounts like SB, CA, FD,
RD,foreign currency accounts of individuals and accounts of NRI like NRE, FCNR(B)and NRO.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block B6 -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

6. Who can nominate: Account should be in individual capacity or joint account of individuals or a sole
proprietorship firm.
7. Who can not nominate: The facility of nomination is not available in partnership accounts, HUF, deposit
accounts of clubs/societies/limited companies/trusts. A minor can not appoint a nominee. On his behalf,
nomination facility can be exercised by the person legally competent to act on behalf of the minor.
8. Who can be nominee: Only an individual can be appointed nominee. He or She can be minor, very old
person or even an insolvent person, if nominee is a minor, the depositor has to appoint a major person to
receive deposit amount / articles in the safe custody / locker etc. on behalf of the minor nominee in the event
of death of the depositor.
9. Number of nominees:ln the case of deposit accounts there can be only one nominee irrespective of the fact
whether deposit account is in single name or joint names and also irrespective of operating instructions in
the joint accounts.
10.In the case of articles deposited for safe custody only one nominee is permitted if account is in the name of
a single person. In case articles are deposited by more than one person, nomination facility is not available.
11.In the case of locker accounts in single names or in joint names where under contract of hire, operation is
allowed to any one or more of locker holder(s)/survivor(s), nominee can be only one. However, in locker
accounts in joint names where operations are 'jointly', by 2 or more of such hirers, more than one nominee
can be appointed. {Though nomination rules allow more than one nominee in jointly operated locker
accounts, as per IBA maximum number of nominees in such cases should be two).
12.Nomination once exercised can be changed, cancelled or modified by the depositor(s) at any time and any
number of times. In case of more than one depositors, all such acts require their joint consent. Survivor of a
joint account has the right to cancel an existing nomination, exercise fresh nomination where nomination
was earlier not exercised or change nomination.
13.When does the right of nominee start?:RiQht of a nominee starts only after death of all depositors/locker
holders/safe custody article lodger. The only exception is the nominee{s) in case of jointly operated lockers.
In that case, right of nominee(s) starts immediately after the death of any of the hirers.
14.In the case of illiterate account holder nomination is required to be witnessed by two persons.
IS.Status of nomineeiThe status of nominee is just like trustee of legal heirs. He does not become absolute
owner of the amount or items lying in safe custody or in safe deposit vault. Nominee can not get his name
added or get his name substituted or renew FDR. He can not raise any loan against FDR. However,
Nominee is entitled to premature payment of deposit and no penalty Is levied in effecting premature payment
to norninee.
le.Leaal Heir versus nominee: When both nominee and legal heirs approach the bank for getting payment after
the death of depositor or locker holder, bank will make payment to the nominee unless there is a court order
to make payment to legal heirs. Bank gets a valid discharge by payment to nominee.
17.Formalities for making payment to nominee: In case of death of depositor, nominee has to submit following
documents (a) Copy of death certificate (b) claim form (c) Identification which can be done by 1^' class
fvlagistrate or Gazetted officer or by a bank officer or any two persons known to bank. While delivering
contents of locker or safe custody, if anv sealed packet is found, the same should be delivered without
opening the same.
18.In case of term deposits, there is no need of fresh nomination in the case of renewal of FDR.
19.While making nomination, the thumb impression of the accountholder should be attested by two witnesses.
However, signatures of the accountholders in forms DAI, DA2 and DA3 need not be attested by witnesses.
20.In the case of accounts in the name of single persons, nomination must be obtained. If the depositor does
not want to nominate any body, a written letter should be obtained from him in this regard. In case the
person opening the account declines to give such a letter, the bank should record the fact on the account
opening form open the account.
21.Banks should acknowledge the receipt of the duly completed form of nomination, cancellation and / or
variation of the nomination. Such acknowledgement should be given to all the customers irrespective of
whether the same is demanded by the customers.
22.Banks should incorporate the legend "Nomination Registered' on every pass book or deposit receipt so as to
enable the relatives to know that the nomination facility was availed of by the deceased depositor.
23.In addition to the legend "Nomination Registered", banks should also indicate the name of the Nominee in
the Pass Books / Statement of Accounts / FDRs, in case the customer is agreeable to the same.
23. SETTLEMENT OF CLAIMS IN RESPECT OF MISSING PERSONS
The settlement of claims in respect of missing persons would be governed by the provisions of Section 107 /
108 of the Indian Evidence Act, 1872. As per the provisions of Section 108 of the Indian Evidence Act,
presumption of death can be raised only after a lapse of seven years from the date of his/her being reported
missing. As such, the nominee / legal heirs have to raise an express presumption of death of the subscriber
under Section 107/108 of the Indian Evidence Act before a competent court. If the court presumes that he/she
is dead, then the claim in respect of a missing person can be settled on the basis of the same. Keeping in view
the risk management systems, banks may fix a threshold limit, up to which claims in respect of missing persons
could be settled without insisting on production of any documentation other than (i) FIR and the non-traceable
report issued by police authorities and (ii) letter of indemnity.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Bloch 6G -1, Paschim Vihar, New Delhi - 110063; Ph Oil 6S476949, Oil 25274157,09350476949)

24. Bank Ombudsman Scheme 2006

1. The Scheme was introduced in 1995 under Section 35A of Banking Regulation Act. The Scheme was
revised in 2002 and revised again with effect from 1st January. 2006.
2. The objective is to provide an independent, expeditious and inexpensive forum to redress the public
complaints against banks for deficiency in services.
3. Scheme is applicable to all Scheduled Commercial Banks (including private sector, public sector, foreign
banks, RRBs, Scheduled Co operative Banks throughout India including J&K.
4. Ombudsman is appointed by RBI. The appointment will be for 3 years at a time.
5. The Chief General Manager / General Manager of RBI can be Banking Ombudsman.
6. The expenses of the Ombudsman will be borne by RBI.
7. Complaints relating to deficiency in service in deposit, ancillary services, non adherence of RBI guidelines
on advances, delay in sanction or disbursement, time schedules, credit card and direct selling agents,
internet banking, non-observance of the Reserve Bank's guidelines on engagement of recovery agents by
banks, non-adherence to the provisions of the fair practices code for lenders or the Code of Bank's
Commitment to Customers issued by the Banking Codes and Standards Board of India (BCSBI).
8. The complainant can file the complaint with the Ombudsman if no reply is received from the bank within one
month of lodging the complaint with bank or reply received is not satisfactory. Maximum period within which
complaint can be filed is 1 year from the date of receiving the reply from the bank. In case reply is not
received from the bank, complaint can be lodged within 13 months from the date of making the complaint to
the bank. Complaint can be made on paper or through electronic means. But complaint can not be made
through Advocate.
9. Ombudsman will not entertain a complaint where (a) case is pending in the court (ii) case has already been
decided by the court (iii) similar case has already been decided Ombudsman.
lO.On receipt of complaint. Ombudsman would try to promote settlement by agreement through conciliation or
mediation. If there is no settlement, then award is given by the Ombudsman. Thus role of the Ombudsman is
that of Arbitrator with mutual consent.
11.The amount of award shall not be more than the actual loss suffered by the complainant subject to a
maximum of Rs 20 lakh. Besides, award up to Rs 1 lac for mental agony of customer. In case of credit
cards, the compensation can be up to Rs 1 lakh considering loss of the complainant's time, expenses
incurred by the complainant, harassment and mental anguish suffered by tfie complainant.
12.0n receiving the copy of the award, the customs'- may accept the same within 30 days of receipt of the copy
of the award. The award shall not be binding on a bank unless the complainant gives acceptance within 30
days from the date of receipt of copy of award.
13.if complainant accepts the award, the bank should implement the award within 1 month of receipt of
acceptance from the complainant and intimate compliance to the Banking Ombudsman.
14.If Ombudsman rejects the complaint or award is not acceptable to the complainant, he can file an appeal to
the Appellate authority (Deputy Governor, RBI) within 30 days of the date of receipt of communication
regarding award or rejection of the complaint. Similarly, bank may also file appeal with Deputy Governor,
RBI within thirty days from the date on which the bank receives letter of acceptance of Award by
complainant. In the case of bank, appeal may be filed by a bank only with the previous sanction of the CMD
or ED or CEO of the bank.
15.If the bank does not implement the award it should inform Customer Service Committee of the Board and
also give a note to this effect in the Annual Report of the Bank.
16.If a bank has centralised certain transactions, like housing loans, credit cards, complaints regarding such
transactions would have to be made to the BO in the State in which the bank customer receives the bill.
17.The Scheme does not include certain banking transactions, such as, failure to honour bank guarantee or
letter of credit and misbehavior of staff.
IS.Displav of names of Nodal Officers appointed under Ombudsman Scheme: Banks should display the
contact details of the Banking Ombudsman on Comprehensive information Board. Banks should also
include the name and other details of the concerned Nodal Officer appointed under the Banking
Ombudsman Scheme.
19. All public sector banks and select private & foreign banks should appoint an internal ombudsman designated Chief
Customer Service Officer(CCSO) who should not have worked in the bank in which he is appointed as CCSO.

25. Other issues relating to Customer service

1. Banks should ensure that the complaint registers are kept at prominent place in their branches which would
make it possible for the customers to enter their complaints. Banks should fix a time frame for resolving the
complaints received at different levels. Banks should prominently display at the branches, the names of the
officials who can be contacted for redressal of complaints, together with their direct telephone number, fax
number, complete address (not Post Box No.) and e-mail address etc.
2. Banks should disclose the brief details regarding the number of complaints alongwith their financial results.
This statement should include all the complaints received at the Head Office / Controlling Office level as
also the complaints received at the branch level. However, where the complaints are redressed within the
next working day, banks need not Include the same In the statement of complaints.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG • I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157, 09350476949)

3. Where the complaints are not redressed within one month, the concerned branch / controlling office should
(onward a copy of the same to the concerned Nodal Officer under the Banking Ombudsman Scheme and
keep him updated regarding the status of the complaint. This would enable the Nodal Officer to deal with
any reference received from the Banking Ombudsman regarding the complaint more effectively.
4. In the final letter sent to the customer regarding redressal of the complaint, banks should indicate that the
complainant can also approach the concerned Banking Ombudsman.
5. Delays In Cheque Clearing; (i) Banks shall reframe their Cheque Collection Policies (CCP)covering local
and outstation cheque collection as per the timeframe prescribed by the Commission, (li) For local cheques
credit and debit shall be given on the same day or at the most the next day of their presentation in clearing.
Ideally, in respect of local clearing, banks shall permit usage of the shadow credit afforded to the customer
accounts immediately after closure of relative return clearing and in any case withdrawal shall be allowed
on the same day or maximum within an hour of commencement of business on the next working day,
subject to usual safeguards, (iii) Timeframe for collection of cheques drawn on state capitals / major cities /
other locations to be 7/10/14 days respectively. If there is any delay in collection beyond this period, interest
at the rate specified in the CCP of the bank, shall be paid. In case the rate is not specified in the CCP, the
applicable rate shall be the interest rate on Fixed Deposits for the corresponding maturity. Banks shall not
decline to accept outstation cheques deposited by its customers for collection.
6. Customer Committees: Branch level committees include their customers too. Further as senior citizens
usually form an important constituency in banks, a senior citizen may preferably be included therein. The
branch level committees may also submit quarterly reports giving inputs / suggestions to the Standing
Committee on Customer Service. The Branch Level Customer Service Committee may meet at least once a
month.
7. Both the drop box facility and the facility for acknowledgement of the cheques at the regular collection
counters should be available to customers and no branch should refuse to give an acknowledgement if the
customer tenders the cheque at the counters. Banks should invariably display on the cheque drop-box itself
that "Customers can also tender the cheques at the counter and obtain acknowledgment on the pay-in-
slips". The above message should be displayed in English, Hindi and the concerned regional language of
the State.
8. Banks should invariably offer pass book facility to all its savings bank account holders (individuals) and in
case the bank offers the facility of sending statement of account and the customer chooses to get statement
of account, the banks must issue monthly statement of accounts. The cost of providing such Pass Book or
Statements should not be charged to the customer.
9. Banks should mention the address / telephone number of the branch on the Pass Books / Statement of
accounts issued to account holders.
10. tJnique Customer Identification Code fUCIC) for banks' customers in India: Banks should initiate steps for
allotting UCIC to all their customers while entering into any new relationships for individual customers and
to existing individual customers by end- Dec 2014.
11. Intersol charges: Banks should follow a uniform, fair and transparent pricing policy and not discriminate
between their customers at home branch and non-home branches. If a particular service is provided free at
home branch the same should be available free at non home branches also. There should be no
discrimination as regards intersol charges between similar transactions done by customers at home branch
and those done at non-home branches
26. CODE OF BANK'S COMMITMENT TO CUSTOMERS
The Banking Codes and Standards Board of India (BCSBI) is a society registered under the Societies
Registration Act, 1860. It functions as an independent and autonomous body. BCSBI has in collaboration with
the Indian Banks' Association (IBA), evolved two codes - Code of Bank's Commitment to Customers and the
Code of Bank's Commitment to Micro and Small Enterprises - which set minimum standards of banking
practices for member banks to follow when they are dealing with individual customers and micro and small
enterprises. BCSBI is not a forum for redressal of individual grievances.
1. Changes in Fees & Charges: If bank increases any of charges or introduce a new charge, it will be notified
one month prior to the revised charges being levieiJ / becoming effective.
2. Changes to Terms and Conditions: (i) Normally, changes will be made with prospective effect giving notice
of one month, (ii) If any change is made without notice, bank will notify the change within 3C days. If such
change is to customer's disadvantage, customer may within 60 days and without notice, close account or
switch it without having to pay any extra charges or interest. Bank will immediately update on its website,
any changes in the terms and conditions.
3. Credit Reference Agencies: If customer's loan account has been in default, and thereafter regularised, bank
will take steps to update this information with the CRA in the next monthly report. When customer apply for
credit facility from the bank, bank will on request, and on payment of prescribed fee (at present Rs 50)
furnish customer a copy of the credit information obtained by the bank from the CRA.
4. Collection of Dues: Customer would be contacted ordinarily at the place of customer's choice and in the
absence of any specified place at the place of customer's residence and if unavailable at customer's
residence, at the place of business/occupation. Normally Bank's representatives will contact customer
between 0700 hrs and 1900 hrs.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949}

5. Complaints. Grievances and Feedback: (t) Acknowledgement of customer's complaint within a week.{ii)
Final response or reason why Bank needs more time to respond within 30 days of receiving customer's
complaint.
6. Changing customer's account:(a) If customer is not happy about choice of current / savings account, within
14 days of making first payment into the account, he can switch to another account or Bank will give
customer's money back with any interest it may have earned. Bank will ignore any notice period and any
extra charges. If customer decides to close his current/savings account, Bank will close account within
three working days of receiving customer's instructions. If customer wants to transfer his account to another
branch of the bank, bank will transfer the account to the transferee branch within 3 (three) working days
without insisting on fresh proof of address and on the basis of a self declaration from customer giving
current address. Bank will intimate customer as soon as the account is operationalised.
7. Savings/Current Accounts: Bank will inform of any change in minimum balance to be maintained 30 days in
advance.
Dormant/ Inoperative Accounts: Customer will also be Informed three months before customer's account is
classified as dormant /inoperative. Bank will not charge customer for activation of the inoperative account.
9. Closing Customer's Account: Under normal circumstances, Bank will not close customer's account without
giving customer at least 30 days' notice.
10. Failed ATM Transaction: Bank will reimburse amounts wrongly debited in failed ATM transactions within a
maximum period of 7 working days from the date of receipt of customer's complaint.
11. Branch Closure/ Shifting: If Bank plan to close branch or if Bank moves its branch, Bank will give (i) notice
of two months if there is no other branch of any bank functioning at customer's centre (ii) notice of one
month, if there is a branch of any other bank functioning at customer's centre.
12. Settlement Of Claims in respect of Deceased Account Holders: Bank will settle the claims in respect of
deceased depositors and release payments to survlvor(s)/ nominee(s) within a maximum period of 15 days
from the date of receipt of claim subject to the production of proof of death of the depositor and suitable
identification of the claim(s).
13. Loans: Bank will supply authenticated copies of all the loan documents executed by customer at Bank's
cost. Bank will return to customer all the securities / documents/title deeds to mortgaged property within 15
days of the repayment of all dues agreed to or contracted. Bank will compensate customer for any delay in
return of securities / documents / title deeds to mortgaged property beyond 15 days of the repayment of all
dues agrded to or contracted.
14. Credit Card: (i) Bank will provide 'Online .Alerts' for all card transactions, irrespective of the amount. In case
Bank activates the card without customer's consent / bill customer for the card for which customer has not
given consent. Bank will not only reverse the charges forthwith but will also pay a penalty amounting to
twice the value of the charges reversed.

Service Time taken

Changes in interest rates Within a fortnight of the decision
Change in fees or charges 1 month prior notice
Change in terms & conditions 1 month prior notice; otherwise within 30 days;
customer can close account within 60 days.
Acknowledge of customers complaint Within one week
Final response to customer's complaint Within 30 days
Closure of customer's account at request of customer Within three working days of receiving instructions
Closure of customer's account at bank initiative 30 days prior notice
Transfer of account to other branch Within 3 working days
Change in min balance charges 30 days prior notice
Return of unpaid cheques Within 24 hours
Decision on loan application up to Rs 20 lakh Within 30 working days
Max liability of customer in Internet banking transaction Rs 10000
Max liability of customer in case of loss of card Rs 10000
Closure of Credit card Within 7 working days
Change in fees or charges on credit card One month prior notice
Wrong debit to a/c due to failed ATM transaction Within 7 working days
Penalty for activation of card & billing without request Reversal of charge and penalty twice the value of
charges reversed.
Closure/shifting of branch 2 or 1 months notice
Settlement of claim & payment to nominee Within 15 days
Return of securities on repayment of loan Within 15 days of repayment
Transfer of borrowal account Decision within two weeks

27. Consumer Protection Act

1. Consumer Protection Act was Implemented with effect from April 15, 1987. The Act is not applicable in J&K.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vibar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

2. A complaint can be filed by the consumer, voluntary consumer association, Central or State Government.
3. The objective is to address consumer's grievances against deficiency in the quality of goods or services for
consideration.
4. Limitation period for lodging the complaint is 2 years from the date of cause of action.
5. The Forum operates at three levels i.e. District, State or National. The forum in which the complaint will be
filed depends on the value of goods/services and the compensation if any. For claims up to Rs 20 lac,
complaint will be lodged with Distt. Forum, for claims over Rs 20 lac up to Rs 100 lac with State Commission
and for claims more than Rs 100 lac with the National Commission.
6. Admissibility of complaint to be decided within 21 days of the receipt of complaint: decision within 3 months
without analysis and within 5 months with analysis.
7. Appeal from one forum to another can be made within 30 days of the order. For making appeal against
decision of District Forum to State Forum, amount to be deposited is 50% or Rs 25,000 whichever is less, to
National Forum it is 50% or Rs 35,000 whichever is less and for making appeal against decision of National
Commission to Supreme Court the amount to be deposited is 50% or Rs 50,000 whichever is less.
Types of Accounts
28. Saving Account:
1. Saving account can be opened in the name of individuals. These accounts can not be used for business
purpose.
2. Organisations for which Saving Bank accounts can not be opened: Saving Bank accounts are opened for
savings and not for any business. Therefore, such accounts can not be opened in the name of business
concern. Further, as per RBI directives, Government Departments or Bodies who for performance of their
functions depend on Budgetary Allocations cannot open Savings Bank Accounts. Thus, RBI has
specifically asked banks not to open SB accounts in the name of (a) Govt. Departments (b) Municipal
Corporations or Committees, (c) Panchayat Samitees, (d) State Housing Boards, (e) State Electricity
Boards (f) Water and Sewerage Boards, (g) State Text Book Publishing Corporations or Societies, (h)
Metropolitan Development Authorities, (i) State/District Level Cooperative Housing Societies (j) any bank
including Land Development Bank .
3. Organisations for which Saving Bank accounts can be opened: The above prohibition is not applicable for
the following organizations/agencies and therefore banks can open SB account in their names - (i)
Companies licensed under section 25 of Companies Act, 1956 which are permitted not to add to their
names thb word 'limited' (i.e. Non profit making companies). For example. Chamber of Commerce, Indian
Bank Association, Lions Gius etc. (ii) Societies registered under Societies Registration Act, 1860 or any
other corresponding law in force in any State/UT. (iii) Primary Cooperative Credit Society being financed by
the bank (PACS) (iv) Institutions other than those mentioned above and whose entire income is exempt
from payment of income tax under Income Tax Act, 1961. (v) Government departments (Central as well as
State Government) /bodies/agencies in respect of grants/ subsidies released for implementation of various
programmes/schemes sponsored by the Central Government as well as State Government on production of
an authorization to the bank from the respective Government departments certifying that the concerned
Government department or body has been permitted to open savings bank account. Banks should keep on
their record a copy of the authorization issued by the respective State Government departments. For
example (a) Khadi and Village Industries Boards,(b) Agriculture Produce Market Committees (c) Distt Rural
Development Agency (DRDA)(d) Integrated Tribal Development Agency (ITDA)(e) Draught Prone Area
Development Programme (DPAP)(f) Member of Parliament Local Area Development Authority (MPLADS)
(g) Small Farmers Development Agency (h) Marginal Farmers and Agricultural Laborer's Agencies (i) Nagar
panchayats and palikas.. Muncipal Bodies for credit of subsidy amount, (j) District Development Agency
(DDA); (vi) Development of Women and Children in Rural Areas(DWCRA); (vii) Self-help Groups (SHGs),
registered or unregistered, which are engaged in promoting savings habit among their members; (viii)
Farmers' Clubs-Vikas Volunteer Vahini(VVV); (ix) Clubs, Associations, Society, Educational Institutions (x)
Any other institution permitted by RBI provided it is a non trading institution.
4. Interest rate on Saving accounts was deregulated by RBI with effect from 25'^ October 2011. Banks are free
to determine their savings bank deposit interest rate, subject to lha following two conditions: (a) Each bank
will have to offer a uniform interest rate on savings bank deposits up to Rs.1 lakh, irrespective of the
amount in the account within this limit, (b) For savings bank deposits ove.'- Rs.1 lakh, a bank may provide
differential rates of interest, if it so chooses, subject to the condition that banks will not discriminate in the
matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on
the same date, at any of its offices. With effect from 1.4.2010, interest rate on saving bank is payable on
daily product basis. It should be credited quarterly or earlier interval.
5. Banks should invariably offer pass book facility to all its savings banks account holders (individuals) and in
case banks offer the facility of sending statement of account and the customer chooses to get statement of
account, banks must issue monthly statement of account. The cost of providing pass book or statement
should not be charged to customer.
6. Basic Saving Bank Deposit account: 'Basic Savings Bank Deposit Account' with following minimum
common facilities should be offered to all their customers: (i) The 'Basic Savings Bank Deposit Account'
should be considered a normal banking service available to all; (ii) This account shall not have the

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG • I, Paschin? Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

requirement of any minimum balance; (iii) The services available in the account will include deposit and
withdrawal of cash at bank branch as well as ATfyis; receipt/credit of money through electronic payment
channels or by means of deposit/collection of cheques drawn by Central/State Government agencies and
departments; (iv). There will be no limit on the number of deposits that can be made in a month, account
holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals; and (v).
Facility of ATM card or ATM-cum-Debit Card will be provided without any charges. Further, no charge will
be levied for non-operation/activation of in-operative 'Basic Savings Bank Deposit Account'. The 'Basic
Savings Bank Deposit Account' would be subject to Know Your Customer(KYC) guidelines. If such account
is opened on the basis of simplified KYC norms, the account would additionally be treated as a 'Small
Account'. Holders of 'Basic Savings Bank Deposit Account' will not be eligible for opening any other savings
bank deposit account in that bank. If a customer has any other existing savings bank deposit account in that
bank, he/she will be required to close it within 30 days from the date of opening a 'Basic Savings Bank
Deposit Account'. The existing basic banking 'no-frills' accounts should be converted to 'Basic Savings
Bank Deposit Account'.
7. Levy of penal charges on non-maintenance of minimum balances in savings bank accounts: Banks should
inform customers regarding the requirement of minimum balance in savings bank account and levy of penal
charges for non-maintenance of the same at the time of opening the account in a transparent manner.
Banks are not permitted to levy penal charges for non-maintenance of minimum balances in any inoperative
account. Further, no charge should be levied for non-operation/activation of Basic Savings Bank Deposit
Accounts (BSBDAs). While levying charges for non-maintenance of minimum balance in savings bank
account, banks shall adhere to the following guidelines from April 1, 2015; (i) In the event of a default in
maintenance of minimum balance/average minimum balance as agreed to between the bank and customer,
the bank should notify the customer clearly by SMS/ email/ letter etc. that in the event of the minimum
balance not being restored in the account within a month from the date of notice, penal charges will be
applicable; (ii) In case the minimum balance is not restored within a reasonable period, which shall not be
less than one month from the date of notice of shortfall, penal charges may be recovered under intimation
to the account holder; (iii) The penal charges should be directly proportionate to the extent of shortfall
observed. In other words, the charges should be a fixed percentage levied on the amount of difference
between the actual balance maintained and the minimum balance as agreed upon at the time of opening of
account; (iv) Penal charges should be reasonable and not out of line with the average cost of providing the
services;(v) The balance in the savings account should not turn into negative balance solely on account of
levy of Charges for non-maintenance of minimum balance. Further, as per direction from Bombay High
Court, accounts of all student beneficiaries under the various Central/State Government Scholarship
Schemes should be free from restrictions of 'minimum balance' and 'total credit limit'. Thus, there would be
no limit on total credits in such accounts.
8- PRADHAN MANTRI JAN DHAN YOJANA: Prime Minister Narendra Modi on August 28 launched his
government's mega scheme 'Pradhan Mantri Jan Dhan Yojana', an ambitious scheme for comprehensive
financial inclusion. Under the scheme, account holders will be provided zero-balance bank account with
RuPay debit card, in addition to inbuilt accidental insurance cover of Rs 1 lakh. Additional Rs.30,000 life
assurance cover for those opening bank accounts before Jan 26, 2015. Holders can avail overdraft of Rs
5,000 from the bank subject to satisfactory operations of the account for at least six months.
29. Inoperative Accounts:
1. Banks should make an annual review of accounts in which there are no operations (i.e. no credit or debit other than
crediting of periodic interest or debiting of service charges) for more than one year. The banks may approach the
customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for
the same.
2. A savings as well as current account should be treated as inoperative / dormant if there are no transactions in the
account for over a period of two years.
3. In case any reply is given by the account holder giving the reasons for not operating the account, banks should continue
classifying the same as an operative account for one more year within which period the account holder may be
requested to operate the account.
4. For the purpose of classifying an account as 'inoperative' both the type of transactions i.e. debit as well as credit
transactions induced at the instance of customers as well as third party should be considered. However, the service
charges levied by the bank or interest credited by the bank should not be considered.
5. Where the customer has given a mandate for crediting the interest on Fixed Deposit account or dividend on shares to
the Savings Bank account, crediting the interest to the Savings Bank accounts as per the mandate of the customer,
should be treated as a customer induced transaction. Such accounts should be treated as operative account as long as
the interest on Fixed Deposit account or dividend on shares is credited to the Savings Bank account.
6. Operation in inoperative accounts may be allowed after due diligence as per risk category of the customer. Due
diligence would mean ensuring genuineness of the transaction, verification of the signature and identity etc. There
should not be any charge for activation of inoperative account.
7. Banks should allot a different "product code" in their CBS to accounts opened by banks for beneficiaries under the
various Central / State Government Schemes including scholarship schemes for students so that the stipulation of
inoperative /dormant account due to non-operation does not apply.

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30. Term Deposits

1. Minimum period as per RBI is 7 days. Maximum period as per IBA is 10 years. However, term deposits in
the name of minors or as per court orders can be opened for more than 10 years
2. Interest rate on term deposits is deregulated and is decided by Asset Liability Management Committee of
the bank. Bank can not discriminate among customers regarding payment of interest except for single
deposits of Rs 1 crore and above. Banks can also offer differential interest rates based on whether the term
deposits are with or without-premature-withdrawal-facility
3. If due date of term deposit is on a holiday, banks will make payment on next working day or thereafter and
will pay the interest for the holiday to depositor at contracted rate irrespective of when the payment is taken.
4. In case of renewal of overdue term deposits, bank may decide the rate of interest payable for the overdue
period. However, if the payment of a overdue term deposit is sought, interest for overdue period will be paid
at saving rate.
5. Depositor can request for addition or deletion of names in the deposit but at least one of the original
depositors must remain. If loan raised against term deposit, name of a minor can be added only when loan
has been adjusted.
6. As per Section 269 T of Income Tax Act, if the principal plus interest of term deposit is Rs 20,000 or above,
the payment should be made through credit to account or issuing account payee cheque or DD. It should
not be paid in cash. In case, bank pays such term deposit in cash, penalty will be equal to amount paid.
Similarly, payment of interest of Rs 10,000 and above should not be made in cash.
7. Bulk Deposits mean deposits of Rs 1 crore and above. Bank can refuse premature payment of Bulk
deposits. In case of premature payment of FDR, penalty will be decided by the bank. However, penalty can
not be charged in case of premature payment in case of death of depositor. Previously, banks were not
allowed to charge penalty in case of premature renewal of term deposits. RBI has advised in April 2010,
that banks can frame their own guidelines in this regard.
8. In case of death of depositor, inteiest for overdue period will be paid at saving rate if depositor died after
maturity date. If depositor dies before maturity of FDR, interest for overdue period will be paid at FD rate as
on date of maturity for the period overdue amount remained with the bank.
9. Payment of interest on accounts frozen by banks: (i) A request letter may be obtained from the
customer for renewal for a term indicated by the customer. In case the depositor does not exercise his
option of choosing the term for renewal, banks may renew the same for a term equal to the original term.
No new receipt is required to be issued. However, suitable note may be made regarding renewal in the
deposit ledger, (iii) Renewal of deposit may be advised by registered letter / speed post / couner service to
the concerned Government department under advice to the depositor. In tiie advice to the depositor, the
rate of interest at which the deposit is renewed should also be mentioned, (iv) If overdue period does not
exceed 14 days on the date of receipt of the request letter, renewal may be done from the date of maturity.
If it exceeds 14 days, banks may pay interest for the overdue period as per the policy adopted by them, and
keep it In a separate interest free sub-account which should be released when the original fixed deposit is
released,(v) As regards savings bank accounts frozen by the enforcement authorities, banks may continue
to credit the interest to the account on a regular basis.
Depositor Education and Awareness Fund Scheme, 2014
1. As per section 26A of B R Act, RBI is empowered to establish The Depositor Education and Awareness Fund. The
amount to the credit of any account in India with any bank which has not been operated upon for a period of ten years
or any deposit or any amount remaining unclaimed for more than ten years shall be credited to the Fund. The Fund
shall be utilized for promotion of depositors' interest.
2. RBI has prepared Depositor Education and Awareness Fund Scheme, 2014 (Scheme). As per the scheme, banks shall
transfer to the Fund the amounts becoming due in each calendar month, (i.e., proceeds of the inoperative accounts
and balances remaining unclaimed for ten years or more), and the interest accrued on interest bearing accounts till the
date of transfer, on the last working day of the subsequent month.
3. The rate of interest payable by banks to the depositors/ claimants on the unclaimed interest bearing deposit amount
transferred to the Fund shall be 4% simple interest per annum.
4. All such unclaimed liabilities (where amount due has been transferred to DEAF) may be reflected as "Contingent
Liability - Others, items for which the bank is contingently liable" under Schedule 12 of the annual financial statements.
5. The depositor would, however, be entitled to claim from the bank her deposit or any other unclaimed amount or
operate her account after the expiry of ten years, even after ijjch amount has been transferred to the Fund. The bank
would be liable to pay the amount to the depositor/claimant and claim refund of such amount from the Fund.
6. Where refund has been claimed from the Fund, banks shall preserve records/documents in respect of such accounts
and transactions, for a period of at least five years from the date of refund from the Fund.
7. In case a foreign currency denominated deposit with a fixed maturity date remains inoperative for a period of three
years from the date of maturity of the deposit, at the end of the third year, the authorised bank shall convert the
balances lying in the foreign currency denominated deposit into Indian Rupee at the exchange rate prevailing as on
that date.
8. In case of foreign currency denominated deposit with no fixed maturity period, if the deposit remains inoperative for a
period of three years, the authorised bank shall, after giving a three month notice to the depxasitor at his last known
address as available with it, convert the deposit from the foreign currency in which it is denominated to Indian Rupee
at the end of the notice period at the prevailing exchange rate.

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 A K GUPTA'S BANKERS TRAINING INSTTU'TE (7S, Block BG -1, Paschim Vihar, New Delhi — 110063; Ph Oil 65476949, Oil 25274157,09350476949)

TYPES OF CUSTOMERS
1. An introducer of a bank account is liable for:
(a) loss to the banker that the account holder may cause to it
(b) establishing proper identity of the account holder
(c) tracing the account holder as and when bank desires
(d) all above (e) only (b) and (c) above
2. As per Sec 3 of Indian l\^ajority Act, a person domiciled in India will be treated as major when he/she has
attained age of:
(a) 18 years (b) 21 years (c) 25 years
(d) Normally 18 years but if the person was borne abroad then 21 years
(e) None of these
3. As per Section 26 of N I Act, which of the following can be done by a minor?
(a) A minor can draw a cheque, Bill of Exchange or Promissory Note but cannot endorse the same
(b) A minor can draw a cheque. Bill of Exchange or Promissory Note and can endorse the same but
neither he will be liable nor any person will be liable on the instrument
(c) A minor can draw a cheque, Bill of Exchange or Promissory Note and can endorse the same and he
will be liable alongwith other persons who arc party to the Instrument.
(d) A minor can draw a cheque. Bill of Exchange or Promissory Note and can endorse the same and
make other parties liable except himself.
(e) None of these
4. As per PBI, banks can open savings account of a minor independently when he is at least years old
(a) 10 (b) 14 (c) 12 (d) 7 (a) 16
5. While opening deposit account of a minor under guardianship of his/her guaraian we record minor's date
of birth. For this purpose we have to :
(a) insist on school certificate (b) insist on certificate issued by the Registrar of Births and Deaths
(c) get declaration from the natural guardian (d) both(a) and (c) (e)both (b)and (c)
6. The guardian of a minor has been appointed by court. In this case, minor will attain majority at the age of:
(a) 21 years (b) 18 years (c) 18 years if he is a Christian otherwise 21 years
(d) 18 years in the case of Hindus & Muslims and 21 years in other cases (e) None of these
7 In case of Hindu minor boy or an unmarried girl his/her father Is the natural guardian. After the death
of the father the guardian as per law is;
(a) grand-father (b) mother (c) guardian appointed by the court
(d) guardian named in the will of father i.e. testamentary guardian
(e) either (b)or(d) as per choice of minor if he is old enough to comprehend the transactions
8. In case of a minor Muslim boy whose father has expired without leaving behind a will, the guardian will be:
(a) mother {b) maternal grand-father (c) paternal grand-father
(d) paternal uncle (e) maternal uncle
9. The father of a minor Hindu boy got converted to Christianity but mother did not. Choose the best
option out of the following which reflects the true legal position in this case .
(a) He wilt continue to be natural guardian of his son (b) He can appoint a guardian through a will
(c) He will continue to be natural guardian of his son with the consent of the mother of the child.
(d) He wilt cease to be natural guardian which status will go to mother (e) either (a) or(b)
10. A testamentary guardian appointed by a Hindu father can act after the death of :
(a) father (b) both father and mother (c) father, mother and grand-father
(d) father, mother, grand-father and grand-mother (e) None of these
11. As per provisions of Indian Partnership Act, 1932, a minor can't be:
(a) a full fledged partner in a partnership firm (b) admitted to benefits of a partnership firm
(c) manager of a partnership firm (d) both (a)& (c) (e) both (b) and (c)
12. A loan was given to a minor against guarantee of a valued client of the Bank. In case of default by the
minor the bank can proceed legally against:
(a) the borrower (b) the guarantor (c) both the borrower and the guarantor
(d) neither as contract entered into by a minor is void abinitio and the liability of guarantor being co
extensive with that of the borrower, the guarantor is also not liable
(e) both the borrower and the guarantor but only after the minor attains majority
13. A savings account holder Master Nikhil aged 14 years wants to give power of attorney to his brother Sahil
aged 20 years. In this case we :
(a) may accede to his request as the attorney is a major
(b) cannot accede to his request as a minor cannot appoint an agent
{c) may accede to his request after obtaining indemnity bond from his natural guardian
(d) should seek legal advice and act accordingly (e) either (c) or (d)
14. A minor who has attained majority and has elected to be a partner in a partnership concern will be :
(a) liable only for fresh debts of the firm after his electing to be a partner
(b) liable for past debts of the firm from the date he was admitted to the benefits of partnership
(c) entitled to the same share in the profits of the firm as he was earlier unless otherwise agreed

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 A K GUPTA'S BANKERS TRAINING INSTITUTE {75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476^49, Oil 25274157,09350476949}

(d) both (b) and (c) above (e) both (a) and (c) above
15. A savings account was opened in the name of a Hindu minor under guardianship of his father. After the
death of the father the minor who is by nowlS years of age approaches the bank for repayment of the
balance. Bank should :
(a) not pay him until he attains majority
(b) pay him through his mother who is now the natural guardian
(c) not pay him unless directed by the court (d) either (b) or (c) (e) either (a) or (c)
16. Bank is approached by two minor brothers aged 16 years and 12 years to open their joint account who
can read and write. The statement reflecting the best legal position in the case is :
(a) open the account (b) open the account if the natural guardian consents to sign as introducer
(c) not open the account as joint holders are agent of each other and a minor can't appoint agent
(d) open the account and allow them to operate the account after obtaining indemnity from a major
(e) None of these
17. Law leiating to partnership firms is given in :
(a) Indian Partnership Act, 1932 (b) Companies Act, 1956 (c) Banking Regulation Act. 1949
{d) partnership deed (e) none of these
18. The provisions relating to maximum number of partners in partnership firm are contained in :
(a) Partnership Act. 1932 (b) Companies Act, 1956/Companies Act 2013
(c) Banking Regulation Act, 1949 (d) N I Act (e) none of these
19. Two persons aged 21 years and 16 years approach your branch for opening current account under
the title of Ravi Bros of which they declare themselves to be partners. There are no other partners
in the firm. In this case, the branch :
(a) should open the account as minor can be admitted to the benefits of partnership
(b) should not open the account as minimum number of partners, excluding minor admitted to benefits
of partnership, should be two.
(c) can open the account if the minor undertakes to be a full fledged partner on attaining majority
(d) should seek legal advice and act accordingly (e) either (a) or (d)
20. A partnership firm, having a current account with us, had 3 partners and a minor admitted to the benefits
of the partnership. The minor after attaining majority has consented to be a full fledged partner. Bank :
(a) must close the old account and open a new one after obtaining a new set of documents
(b) dan obtain a new partnership letter signed by all the four including the minor {now major)
(c) may ask the partners to get the firm registered again as it amounts to reconstitution of the firm
(d) either (b) or (c) (e) none of these
21. A sleeping partner of a firm issues stop payment instructions. In this case bank ;
(a) cannot comply with his request as he is not competent to issue or stop payment of cheque
(b) must comply with his order
(c) can act upon his instructions provided one of the operating partners joins him
{d) should not allow any further operations till the matter is sorted out (e) either (b) or(d)
22. A firm has Ram, Shyam and Harnam as its partners. Ram wants that on his behalf his son Anshul should
be allowed to operate the account. In this case bank can:
(a) allow Anshul to operate the account
(b) allow Anshul to operate the account if either Shyam or Harnam agrees to the proposition.
(c) not allow as a partner can't delegate his authority to a third party.
(d) do so if both Shyam and Harnam also agree to the proposition
(e) seek legal advice and act accordingly
23. A firm has three partners and a minor admitted to the benefits of partnership. The minor intends to stop
payment of a cheque issued by one of the partners. In this case bank:
(a) should not act upon the order of minor who is not competent to interfere in the routine work of
partnership (b) is bound to act upon the order
(c) may act upon the order if the natural guardian of the minor joins him in signing the stop order
(d) may act upon the order of the minor if he is able to prove that the firm is carrying on business
which is detrimental to his interest (e) both (c) & (d) above
24. A partnership firm dealing in hosie^'y goods has a current account with you. One of its partners applied for
and was sanctioned loan for purchase of fertilizers. Under the circumstances the firm :
(a) will be liable as a partner has implied authority to borrow on behalf of the partnership firm
(b) will never be liable as the borrowing is for a purpose outside the scope of business of the firm
(c) can be liable if all other partners had authorized the said partner to undertake this transaction
(d) can be liable if bank proves that other partners were not available at the time of sanction of
facilities and it acted in good faith (e) either (c) or (d) above
25. Our branch has sanctioned credit facilities to a party on the guarantee of a partnership concern which
manufactures exhaust fans. The guarantee letter can be signed by :
(a) all the partners jointly as giving guarantees is not the normal business of the firm
(b) any partner if he is authorized by all other partners for this (c) any partner
(d) either (a) or (b) (e) none of these as guarantee can be given by individuals only

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 6S476949, Oil 25274157,09350476949)

26. Prem and Bhushan are two partners of a firm having assets amounting to Rs. 75,000. The total liabilities
of the firm are Rs. 1,20,000. Personal assets of Prem are worth Rs. 60,000 and he is indebted
personally to the extent of Rs. 45,000 while personal assets of Bhushan are Rs. 30,000 and he is
indebted personally to the extent of Rs. 50,000. Both of them are declared insolvents. The creditors of
the firm will get of dues.
(a) 62.5% (b) 46% (c) 75% (d) 33.33% (e) 50%
27. Banks get the loan documents signed by all the partners of a partnership firm in their individual capacity
and also as partners to ensure that:
(a) no body denies liability subsequently
(b) banks can recover their outstanding from all assets of the firm
(c) banks can recover their outstanding from personal assets of partners ratably besides assets of the
firm (d) either (a) or (c) (e) none of these
28 can't be a full fledged panner in a partnership firm .
(a) a minor (b) a partner of another partnership firm (c) a public limited company
(d) Karta of a HUF in his individual capacity (e) all of these
29. M/s Shyamala Enterprises has a current account with us. One of its partners died and a notice to this
effect has been received by the bank. On that day the credit balance in the account is Rs. 2,25,000.
Bank should :
(a) close the account and pay the money to surviving partners and legal heirs of the deceased jointly
as per provisions relating to devolution of joint rights in the Indian Contract Act,1872
(b) refer the matter to Registrar of Firms and act accordingly
(c) let the account continue for the purpose of winding up the business of the firm
(d) stop operations in the account and open fresh account to avoid operation of rule in Clayton's case
(e) seek legal advice looking to the large amount involved and act accordingly
30. Your branch Is in receipt of notice of death of a partner of M/S Sethi Bros which is maintaining current
account with us. There is a provision that the firm will continue even after the death of the partner
However, the account of the firm is showing a debit balance. Branch should :
(a) continue allowing operations by surviving partners for the purpose of winding up the business of
the firm
(b) stop operations in the account till all the surviving partners acknowledge the existing liability and
their net worth is up to the satisfaction of the bank
(c) stop operations on the account to avoid operation of Rule in Clayton's case
(d) refer the matter to Registrar of Firms and in the meantime continue operations in the account.
(e) either (b) or(c) above
31. A private limited company wants to open a current account with our branch. Bank should :
(a) obtain introduction of an existing current account holder
(b) waive introduction after permission from its Controlling Office
(c) not insist on introduction as certificate of incorporation serves the purpose.
(d) not insist on introduction as certificate of Incorporation serves the purpose. However, it should
independently ascertain identity of operators of the account.
(e) ourselves introduce the account after verifying memorandum and articles of association of the Co.
32. The minimum number of members in a public limited company is:
(a) 2 (b) 5 (c) 7 (d) 10 (e) 20
33 A public limited company must have at least directors.
(a) 2 (b) 3 (c) 5 (d) 7 (e) 10
34. is not issued by the Registrar of Companies .
(a) Certificate of Registration (b) Certificate of Registration of charge
(c) Memorandum and Articles of Association (d)Certificate of Incorporation (e) Both (a) & (c)
35. A Certificate of Incorporation is issued by ;
(a) Registrar of Companies (b) Registrar of Firms (c) Company Law Board
(d) Industries Department of the concerned State (e) either (a) or (d) depending on locatiun
36. As per provisions of Companies Act, 2013, while opening current account of a private limited company or
public limited company, the Banks are not required to obtain:
(a) Certificate of Incorporation (b) Memorandum of Association
(c) Certificate of Commencement of Business (d) Board's Resolution (e) None of these
37. A public limited company has been incorporated only a few days back. It wants to open a current account
with us as it is going for a public issue. We may open the account and:
(a) not insist on Certificate of Incorporation
(b) not insist on Certificate of Commencement of Business
(c) not insist on certificate of Registration of charge (d) both (a) and (c) (e) both (b) and (c)
38. A company was constituted with the objective to promote computer software in India, if has been
granted credit facilities by the bank for manufacture of rayon textiles. The contract between the bank
and the company:
(a) can be enforceable if all directors endorse it (b) can't be enforceable at all as it is ultra-vires

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 A K GUrn'A'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157, 09350476949)

(c) can be enforceable if ratified by all the members in a general body meeting .
(d) can be enforceable if ratified by the members in general body meeting by two thirds majority.
(e) either (a) or (c) above
39. The phrase 'Constructive Notice' in the context of a limited company means :
(a) that the company has been duly registered
(b) that the company intends to go in for a public issue
(c) that anybody dealing with the company has knowledge of its Memorandum and Articles of
Association
(d) that every shareholder is informed about the date of next general body meeting (e) none of
these
40. The account of a limited company is operated by the any of the two directors jointly. Branch comes to
know about the death of one of these directors. The very next day a cheque bearing his signature and
that of the other director is presented through clearing. In this case, the branch :
(a) may pass the cheque after seeking confirmation of the other signatory to the cheque
(b) may pass the cheque after confirmation of other signatory and another director of the company
(c) can pass the cheque , if otherwise in order
(d) should return the cheque with reason 'one signatory reported dead'
(e) should return the cheque and stop further operations on the account
41. The provisions governing a particular trust are given in :
(a) Trust Deed (b) Articles of Association (c) Indian Trusts Act, 1882
(d) Memorandum of Association (e) none of these
42. A trust has three trustees. They want to open a curient account and insist that any one of them will
operate the account. Under the circumstances, the bank should :
(a) open the account as the trustees can delegate powers to one of them
(b) open the account as requested if the trustees are persons of good means
(c) not open the account if trust deed does not allow for operation by one trustee
(d) not open the account as trustees have always to act jointly
(e) open the account provided the trust deed provides for nomination by any one of them
43. A trust has two trustees. The deed allows for operation by either of them. One of the trustees has
expired. Subsequently a cheque signed by the deceased trustee is presented through clearing. Branch
should:
(a) pass the cheque, if otherwise in order preferably after confirmation of the sun/iving trustee
(b) return the cheque with the remark 'trustee reported deceased'
(c) pass the cheque only after getting confirmation of the surviving trustee
(d) return the cheque and close the account as trust comes to an end after death of a trustee
(e) pass the cheque in the normal course, if otherwise in order
44. The sole trustee of a hospital managed by a public trust maintaining account for more than 7 years with
your branch has approached the branch to allow loan for purchase of some urgent equipments for the
hospital. Branch should :
(a) allow the loan only if approved by the Charity Commissioner being the case of a public trust
(b) allow loan in the name of the trust if he is prepared to execute personal guarantee for the amount
of the loan.
(c) allow the loan only if the trust deed provides for granting of loan to the trust.
(d) allow the loan as it is going to be utilized for the benefit of the community
(e) allow the loan after getting clearance of a Court of competent jurisdiction
45. Karta of an HUF maintaining account with you has settled in Toronto. Choose the best option .
(a) Next senior most coparcener can become Karta if all other coparceners agree to the proposition
(b) The eldest son of the Karta can operate the account
(c) He will continue to be Karta and can appoint attorney for operation of the account
(d) He alone can continue to operate the account being the Karta
(e)! le will continue to be Karta and can appoint the next senior most coparcener only as attorney for
operation of the account
46. Karta of an H.U.F. is going for a pilgrimage and wants delegate authority to operate the account to a
younger coparcener. Other coparceners object to this proposal. In this case:
(a) Karta can delegate authority only to the next senior most member of the family.
(b) Karta can delegate authority to junior member with the consent of all other major coparceners.
(c) Karta can not delegate authority to any one including coparcerners.
(d) Karta can delegate authority to junior member with the consent of the next senior most coparcener.
(e) Karta can delegate authority to any one and therefore his action of appointing junior member as
authority is valid
47. In relation to banking transactions, an executor is a person who is :
(a) appointed by the court to look after the affairs of the deceased
(b) named in the will of the deceased to took after his estate after his death
(c) appointed by the legal heirs of the deceased to distribute his wealth amongst them

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, block BG - I, Paschim Vihar, New 0€lhi - 110063; Ph Oil 65476949, Oil 25274157,093S0476949)

(d) required to execute construction work of the deceased

(e) appointed to execute the work left unfinished by the deceased particularly relating to contracts
48. While opening account in the name of an executor, we must obtain:
(a) original will (b) probate (c) succession certificate
(d) letter of administration (e) either (a )or(b)
49. While opening account in the name of an administrator, we must obtain :
(a) original will (b) probate (c) succession certificate
(d) letter of administration (e) either (c) or (d)
50. The main difference between mandate and power of attorney is that:
(a) mandate is stamped with adhesive stamps and power of attorney with non-judicial stamps
(b) mandate is given to joint account holder and power of attorney is given only to an outsider
(c) a mandate is a stamped document whereas power of attorney is not
(d) mandate is not stamped whereas power of attorney is stamped (e) both (b) and (d)
51. A power of attorney should be :
(a) registered with Registrar of Documents (b) attested by a Notary Public
(c) attested by Gazetted Officer (d) either (b) or (c) (e) either (a) or(b)
52. Shashanl; has granted power of attorney to Ratnesh to operate his current account on his behalf. Ratnesh
can :

(a) close the account (b) transfer the account (c) overdraw the account
(d) only (b) or (c) above (e) none of these
53. Mr. SX. Singh has appointed ivlr. Amar Nath as his attorney to operate his savings account. Mr. Nath
has since expired and a cheque signed by him is presented for payment after receipt of notice of his
death by the bank. It should :
(a) not pass the cheque as power of attorney is extinguished after his death
(b) pass the cheque, if otherwise in order only after confirmation of principal
(c) pass the cheque, if otherwise in order preferably after confirmation of principal
(d) pass the cheque, if otherwise in order in the normal course (e) either(c) or(d) above
KYC NORMS
54. KYC guidelines have been issued by RBI under provisions of :
(a) Section 42 of RB! Act ,1934 (b) Section 35A of RBI Act ,1934
(c) Section 35A of Banking Regulation Act ,1949 (d) Section 24 of Banking Regulation Act 1949
(e) both (a) & (c) above
55. The main objective of KYC guidelines is to :
(a) prevent banks from being used by criminal elements for money laundering activities.
(b) enable banks to know/understand their customers and their financial dealings better and thereby
broaden their customer base
(c) combating financing of terrorism (d) all above (e) only(a) and (c) above
56. As per KYC guidelines of RBI, Banks should ensure that any remittance of funds by way of demand
draft, mail / telegraphic transfer or any other mode and issue of travelers' cheques for value of
is effected by debit to the customer's account or against cheques and not against cash payment.
(a) Rs .25,000 and above (b) Rs. 50,000 and above (c) Rs. 1,00,000 and above
(d) above Rs. 50,000 (e) above Rs. 1 lac
57. Under KYC guidelines which of the following is not included in the definition of customer ?
(a) a person or entity that maintains an account and/or has a business relationship with the bank
(b) one on whose behalf the account is maintained (i.e. the beneficial owner)
(c) beneficiary of transactions conducted by Chartered Accountants/ Solicitors etc. as permitted
under the law (d) only (b) & (c) above (e) none of these
58. As per current KYC guidelines, banks are required to maintain proper record of cash transactions of :
(a) deposit of Rs.10 lacs and above (b) withdrawal of Rs.10 lacs and above
(c) deposit and withdrawal of Rs. 10 lacs and above (d) deposit and withdrawal of over Rs.10 lac
(e) deposit and withdrawal of Rs. 5 lacs and above
59. As per relaxation in KYC guidelines, a person can open small account by furnishing only self attested
photograph and address provided he undertakes that
a. The balance in his account will not be more than Rs 50,000 at any time
b. The total credits in a financial year will not be more than Rs 100,000
c. The total transactions in a financial year should not exceed Rs 2,00,000
d. Both (a)& (c) (e) Both (a)& (b)
60. KYC guidelines of RBI are not applicable to :
(a) accounts of individuals held singly or jointly (b) accounts of corporates
(c) correspondent banks' accounts (d) only(a) & (b) above (e) none of these
61. Which of the following document(s) cannot be accepted as documentary evidence of proof of identity
of an individual willing to open an account with the bank as per the latest KYC guidelines of RBI 7
(a) Driving licence (b)PAN card (c) Voter's Identity Card (d) Ration card (e) both (a) &{d}

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block EG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

62. Which of the following document(s) can be accepted as documentary evidence of correctness of
permanent address of an individual willing to open an account with the bank as per the latest KYC
guidelines of RBI?
(a) Passport (b) Driving License (c) Aadharcard
(d) Voter's identity card (e) any of the above
63. Besides usual documents for opening account of a limited company, which other documents is/are
in the list of documents prescribed by RBI in its KYC guidelines?
(a) An officially valid document in respect of managers, officers or employees holding an attorney to
transact on its behalf.
(b) Power of Attorney granted to its managers, officers or employees to transact business on its behalf
(c) Copy of PAN allotment letter/telephone bill (d) Only (a)&(b) above (e) only (b) & (c) above
NOMINATION FACILITY
64. Nomination facilities were extended to banks on the recommendations of ;
(a) Vyas Committee (b) Rangarajan Committee (c) Goiporia Committee
(d) Ghosh Committee (e) none of these
65. Provisions relating to nomination facilities are given in :
(a) RBI Act,1934 (b) Banking Regulation Act,1949 (c) Nl Act,1881
(d) Indian Contract Act,1872 (e) both (b) & (d) above
66. Section 45.Z(A) of the Banking Regulation Act,1949 relates to :
(a) preservation of bank records (b) nomination in deposit accounts
(c) nomination in locker accounts (d) payment of interest on eligible cash balances by RBI
(e) both (b) and (c) above
67. Nomination facilities relating to deposit accounts are available in :
(a) individual accounts in single name (b) individual accounts in joint names
(c) sole proprietorship accounts (d) all of these (e) only (a) and (b)
68. Nomination facility is not available in:
(a) locker account in joint names with instructions for joint operations by all locker holders
(b) articles accepted for safe custody from more than one person
(c) deposit account in joint names with operating instructions 'either or survivor'
(d)all above (e) only (a) & (b)
69. In case of deposit account in joint names of two persons with joint operations, choose the best option
out of the following in the event of death of either of the account holders.
(a) Payment will be made to the survivor and nominee of the deceased in equal proportion
(b) Payment will be made to the survivor, nominee and legal heirs of the deceased jointly
(c) Payment will be made to legal heirs of the deceased and the survivor jointly
(d) Payment can't be made as it is a disputed case (e) none of these
70. A depositor has exercised nomination in favour of his minor son. He will be required to:
(a) appoint some major person as his nominee in place of minor
(b) appoint some major person as his second nominee
(c) appoint a major person as guardian to receive payment on behalf of minor in the event of death of
depositor
(d) appoint a major person to receive payment on behalf of minor in case of death of depositor
(e) furnish indemnity discharging the bank from all liability by effecting payment to minor nominea.
71. A time deposit was accepted on 12.07.2004 for 3 years. Nomination was exercised by the depositor.
The deposit was renewed on 12.07.2007 but fresh nomination was not exercised. Out of the following
choose the option most relevant to this case .
(a) Nomination exercised earlier will remain in force.
(b) Nomination exercised earlier stands revoked automatically.
(c) Nomination exercised earlier can remain in force if the depositor dies without leaving a will
(d) In the event of depositor's death only legal heirs will be entitled to payment as per provisions of
Indian contract Act ,1872
(e) None of the above
72. A deposit was accepted with instructions 'either or survivor' from two depositors A and B. A died before
due date. B approaches the bank to cancel nomination earlier exercised by them. In this case
(a) nomination once exercised is irrevocable
(b) bank should seek legal advice and act accordingly
(c) nomination can't be cancelled as it requires consent of both the depositors
{d) nomination can't be cancelled as it requires consent of both the survivor and the legal heirs of the
deceased depositor
(e) nomination can be cancelled as survivor can do so
73. In case of death of depositor who has exercised nomination, bank gets valid discharge by payment to:
(a) the nominee (b) nominee and legal heirs jointly (c) legal heirs only
(d) competent court of law (e) none of these
74. A locker is let out to one person. He can appoint:

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -1, Paschim Vihar, New Delhi- 110063;Ph Oil 6S476949,Oil 25274157,09350476949)

(a) one nominee only (b) no nominee as nomination is allowed only in deposit accounts
(c) any number of nominees (d) maximum two or three nominees (e) none of these
75. A locker is let out to two persons with instructions 'either or sun/Ivor'. In this case :
(a) there can be no nomination as nomination is allowed in deposit accounts only
(b) there can be two or three nominees (c) there can be only one nominee
(d) nomination can't be allowed as instructions are'either or survivor", (e) none of these
76. A locker is let out to two persons with instructions'to be operated jointly'. In this case:
(a) nomination is not allowed as it is not a deposit account
(b) there can be maximum two nominees (c) there can be more than one nominee
(d) there can be only one nominee (e) nomination is not allowed as locker is operated jointly
77. In a time deposit account , the nominee requests the bank for premature payment of the deposit after
depositor's death. In this case the bank:
(a) cannot do so as the legal heirs of the depositor may challenge the payment subsequently
(b) may allow payment as after death of the depositor, the nominee is entitled to seek premature
payment
(c) should not accede to his request as he can claim payment only at maturity
(d) may allow him payment jointly with legal heirs of the depositor (e) none of the above
78. When an illiterate depositor exercises nomination, it is required to be :
(a) verified by the Notary Public
(b) attested by a Gazetted Officer of Central or State Government
(c) brought to the notice of his legal heirs (d) attested by two witnesses (e) either (a) or (d)
79. One of the literate depositors of your branch who exercised nomination in his account has desired
that name of nominee be indicated in the deposit receipt. In this case the branch:
(a) should get the fact witnessed by two independent persons
(b) should not accede to his request as the same tantamounts to bank defiling the sanctity of
nomination by disclosing it
(c) should ensure that the fact is brought to the notice of his legal heirs
(d) should get the fact verified by the Notary Public
(e) none of these
80. Banks normally don't obtain signatures of nominee and at the time of claim by the nominee get his
identification through :
(a) a Bank Officer (b) first class Magistrate (d) Gazetted Officer of Central / State Gov1
(d) any two persons acceptable to the Bank (e) any one of these
81. As per current guidelines of RBI. where nomination has not been exercised, if bank is satisfied it can
make payment to legal heirs of the deceased depositor without Insisting on production of succession
certificate up to:
(a) Rs. 50,000 (b) Rs. 5 lacs <c) Rs. 1 lac (d) Rs. 25.000 (e) any amount
82. Your branch paid a sum of Rs.94,100/- along with up-to-date interest to the nominee of a depositor after
proper identification and after observing usual formalities on 09.07.2005 and on 25.07.2005 you receive
a notice from the legal heirs of the deceased depositor that the payment has been wrongly made and
that the nominee being a distant relation of the deceased was not entitled to the amount and claimed
damages from the bank. In this case, the bank :
(a) should write to the nominee for refund and payment to the legal heirs
(b) is discharged in full after making payment to the nominee and claim of legal heirs against the bank
as well as the nominee is not admissible
(c) is discharged in full in respect of its liability for the deposit though the claim of legal heirs against
the nominee may be admissible in the court.
(d) has acted negligently by not getting 'NOC from the legal heirs before payment to the nominee
(e) none of the above
83. Your branch had received certain debenture certificates of a company from Mohan for safe custody. You
receive a legal notice from Nagesh , an advocate stating that the debenture certificates were
fraudulently got transferred by Mohan and that Paras who is his client is true owner of the same.
Nagesh has desired that me certificates be not delivered without his consent to Mohan Under the
circumstances bank should :
(a) not take any cognizance of the notice as it is not bound by it
(b) write back to Nagesh that no notice of claim of any person other than the person in whose name
articles are held in safe custody is receivable and bank is not bound by such notice
(c) advise Nagesh that he may approach the court and give him 30 days time to do so
(d) inform Nagesh that no notice of claim of any person other than lodger of the articles is receivable
and show our inability to help him unless be obtains an order from a court of competent jurisdiction
subject to bank being not liable if called upon to return the articles in the meantime
(e) either (b) or (d)
84. Who of the following can not be appointed nominee?
(a) an old lady of 90 years who is not maintaining good health, (b) a minor of 5 years of age

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 A K GUPTA-S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhf - 110063; Pti Oil 6S476949, Oil 25274157,09350476949)

(c) a trust in which the son of the account hoWer is the sole trustee
(d) non resident Indian (e) all of these
85. While allowing access to a nominee of locker holder and preparing inventory, the branch finds among
other things a sealed packet. Branch should :
(a) tear it open and specifically mention the particulars of the article it contained in the inventory
(b) mention it as sealed packet in the inventory and deliver it after observing usual formalities
(c) allow delivery of sealed packet in the presence of two independent witnesses
(d) not deliver it to nominee as only legal heirs are entitled to it (e) none of these
86. Legal heirs of Ganga Ram, a locker holder of your branch, who had nominated Harish as his nominee,
threaten to file a suit for damages against the bank for allowing liberty to remove articles to Harish!
Choose the best option out o f the following relevant to this case.
(a) Bank need not bother about the notice since as per provisions of the Banking Regulation Act,1949
no suit, prosecution or other legal proceeding shall lie against the bank .
(b) Bank can be liable for damages and should try for a compromise.
(c) Bank should request the legal heirs to allow it a period of one or two weeks to enable to it approach
the nominee and retrieve articles as per inventory prepared at the time of delivery in terms of our
clarifications to the nominee that he holds the articles in trust for the legal heirs
(d) either (a) or (c) above (e) none of the above
CUSTOMER SERVICE
87. A draft is uniformly valid for a period .
(a) till encashed (b) for one year (c) for si.x months
{d) for three months (e) for two years
88. As per current guidelines of RBI banks should issue duplicate draft, in lieu of lost draft without insisting on
seeking non-payment advice from the drawee office for an amount up to:
(a) Rs. 1,000 (b) Rs. 2,500 (c) Rs. 25,000 (d) Rs. 5,000 (e) Rs. 50,000
89. As per current instructions of RBI, a duplicate demand draft should be issued to the customer within :
(a) 48 hours of completion of formalities (b) 7 days of request
(c) 14 days of request provided formalities have been complied with
(d) 7 days of completion of formalities (e) 14 days of completion of formalities
90. In case of non-issue of duplicate demand draft within the stipulated period, the banks should :
(a) pay interest at rate applicable to fixed deposit of corresponding maturity to the customer
(b) pay interest at savings bank rate to the customer for the period of delay
(c) refund exchange/commission charged for issue of DD and also waive charges for issue of
duplicate DD
(d) both (b) and (c) above (e) both (a) and (c) above
91. As per current instructions of RBI, banks are required to afford immediate credit of outstation / local
cheque (s) up to a maximum amount of:
(a) Rs. 5,000 (b) Rs. 7,500 (c) Rs. 25,000 (d) Rs.15,000 (e) as per bank's discretion
92. The facility of immediate credit of outstation cheque is available in :
(a) all cash credit accounts (b) all current accounts (c) all overdraft accounts
(d) individual savings / current / cash credit / overdraft accounts (e) as per bank's discretion
93. As per the latest directives of RBI, maximum period for collection of outstation cheques in respect of State
capitals is:
(a) 15 days
(b) 14 days
(c) 10 days
(d) 3 days
(e) 7 days
94. As per the instructions of RBI, interest for the period of delay beyond stipulated period for crediting
proceeds of cheques to current/savings bank account should be allowed at the rate:
(a) as applicable to term deposit of appropriate tenor (b) equal to BPLR of the bank
(c) 2% above BPLR of the bank (d) as applicable to savings account
(e) as per Cheque Collection Policy of the bank.
95. As per the instructions of RBI, where proceeds of outstation cheques are to be credited to cash credit,
overdraft or loan accounts of the customer, bank should pay interest for the period of delay at the rate :
(a) equal to BPLR of the bank (b) as applicable to savings account
(c) 2% over savings bank rate (d) as applicable to term deposit of appropriate tenor
(e) as per Cheque Collection Policy of the bank
96. For any abnormal delay in collection of outstation cheques, banks have been advised by RBI to pay penal
interest over and above the stipulated rate for any delay which is over and above the stipulated rate by :
(a)2% (b) 3% (c) 1% (d) 2.5% (e) as per Cheque Collection Policy of the bank
97. Timeframe for collection of cheques drawn on state capitals/major cities/other locations should be :
(a) 7/10/14 days respectively (b) 3/7/10 days respectively (c) 7/10/15 days respectively
(d) 5/7/10 days respectively (e) None of these

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE(75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 6S476S49, Oil 2S274157,09350476949)

98. As per recommendations of Talwar Committee, loan documents should be obtained in duplicate and the
duplicate set should be :
(a) sent to controlling office of the Bank (b) handed over to the customer, if he so desires
(c) sent to 'Documents Centre' of IBA (d) handed over to bank's lawyer for safe custody
(e) none of the above
99. As per RBI instructions, each branch must set up a customer service committee comprising :
(a) Branch Manger, Accountant and two representatives of customers
(b) Branch Manager and Officers of the branch
(c) B.M. and representatives of all categories of staff, customers one of whom should be Sr. Citizen
(d) Branch Manager, Union representative and at least 3 customers of the bank(e) none of these
100. Customer's day is held on:
(a) 1 day of each month (b) 15'" day of each month and if 15'" Is holiday then next day
(c) 10' day of each month (d) 15'^ day of each month and if 1 s"" is holiday then preceding day
101. Which of the following is incorrect about suggestions of The Tarapore Committee on Procedures and
Performance Audit on Public Senyices:
(a) even if cheque drop boxes have been provided, the customer should be given receipt for cheques
delivered for collection during banking hours of the bank
(b) for hiring a locker, no fixed deposit should be taken from the customer except equal to rent for 3
years and locker breaking charges
(c) an independent Banking Codes and Standards Board should be set up.
(d) Both (a) & (b) (e) None of these
102. Employees' working hours should commence 15 minutes before tho business hours was recommended
by:
(a) Talwar committee (b) Y.V.Reddy committee (c) Goiporia committee
(d) Jilani committee (e) none of these
103. Which of the following does not figure in the recommendations of Goiporia committee ?
(a) Business hours for all transactions except cash should be extended upto one hour before close of
working hours
(b) Nomination should be provided unless customer does not want it.
(c) Clearing houses should be started at centres with more than 10 branches
(d) Bdfore launching any scheme GOI should consult RBI/NABARD/IBA (e) none of the above
104. Under the Consumer Protection Act, 1986 State Consumer Disputes Redressal Commission also called
State Commission has jurisdiction for entertaining complaints where the value of goods or services and the
compensation, if any, claimed is :
(a) above Rs.5 lacs and upto Rs.20 lacs (b) above Rs. 20 lacs and upto Rs.1 crore
{c) above Rs.1 crore (d) above Rs. 50 lacs
(e) above Rs.25 lacs and upto Rs.1 crore
105. A complaint under the Consumer Protection Act,1986 can be lodged by :
(a) consumer of goods/services (b) registered consumer association
(c) Central/State Govt. (d) any of the above (e)only(a)or {b) above
106. The President of State Consumer Commission is one who is or has been a judge of:
(a) District Court (b) Supreme Court (c) High Court
(d) any one of the above (e) none of these
107. District Consumer Disputes Redressal Forum also called District Forum consists of a President and
other members one of whom shall be a woman.
{a) 3 (b) 4 (c) 2 (d) 5 (e) none of these
108. An appeal against the order of the lower consumer court can be preferred with a higher
consumer court within days of the order.
(a) 15 (b) 30 (c) 60 (d) 45 (e) 180
109 A customer got a DD for Rs. 1,60,000 issued favouring Executive Engineer, CPWD and submitted it with
the tender. The drawee branch returned the DD as it was signed by only one officer. The customer
suffered a loss of Rs.3 lacs as the contract was not awarded to him. He lodged a claim for the amount.
Under me circumstances :
(a) the customer's claim is not admissible as it was for him to see that DD was signed by two officers
(b) bank may be called upon to meet reasonable claim of the customer
(c) bank can be asked to pass compensation not more than double the amount of DD
(d) bank can only be asked to pay interest from the date of purchase of DD till the date of claim
(e) none of these

BANKING OMBUDSMAN SCHEME

110. The Banking Ombudsman is appointed by RBI for a period not exceeding years.
(a) 3 years (b) 2 years (c) 1 year (d) 5 year (e) None of these
111 Complaint to the Banking Ombudsman may not be entertained if :

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vlhar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(a) it is in respect of the same subject matter which was settled by the office of the Banking
Ombudsman whether received from the same complainant or some other complainant.
(b) it is pending before any court, tribunal or arbitrator
(c) it has been dismissed or a decree or award has been passed by any court, tribunal, or forum,
(d) all above (e) both (b) and (c )above
112. No complaint to the Banking Ombudsman shall lie unless:
(a) the complainant's representation had been rejected by the bank against whom the complaint is
lodged
(b) the complainant had not received any reply to his representation even after one month of receipt of
representation
(c) the complainant is not satisfied with the reply given to him by the bank
(d) any one of the above (e) none of these
113. The maximum period within which a complaint can be lodged with the Banking Ombudsman is:
(a) one year after the complainant has received the reply of the bank
(b) one year if no reply is received from the date of the representation to the bank.
(c) one year and one month from the date of the representation to the bank if no reply is received.
(d) Either (a) or (b) (e) Either (a) or (c)
114. As regards compensation awarded by the Banking Ombudsman, it shall not exceed:
(a) double the loss suffered by the complainant
(b) the loss suffered by the complainant as a direct consequence of the omission or commission of
the bank
(c) Rs.20 lacs (d) lower of (a) or (c) (e) lower of (b) or (c)
115. The Bank has to accept and implement the award within one montti of date of its receipt of the
acceptance in writing of the Award by the complainant or within extended time allowed by the
Ombudsman. It can prefer an appeal before the Appellate Authority within days of receipt of
acceptance of the award by the complainant but the appeal may be filed by the bank only with the
previous sanction of the Chairman or the fyianaging Director or the Executive Director or the CEO of
the bank.
(a) 15 (b)45 (c) 30 (d)60 (e) None of these
116. Which of the following is incorrect about Banking Ombudsman Scheme?
(a) Complaint can be made through a lawyer.
(b) Complaint can be lodged against misbehavior of staff also in addition to other cases.
(c) Maximum award for mental agony in case of Credit Card complaints is limited to Rs 10 lac.
(d) The scope of the authority of the Banking Ombudsman does not cover grievances against
deficiency in banking services relating to credit card.
(e) all of these
BANKER CUSTOMER RELATIONSHIP: GARNISHEE & ATTACHMENT ORDER
117 The relationship between a person who has deposited his life insurance policy with the bank for safe
custody and the bank is that of:
(a) debtor and creditor (b) principal and his agent (c) lessor and lessee
(d) bailor and bailee (e) agent and his principal
118. The relationship between locker holder and the bank is:
(a) trustee and beneficiary (b) lessee and lessor (c) lessor and lessee
(d) bailee and bailor (e) bailor and bailee
119 The relationship between a lodger of a cheque for collection and the bank will be that of:
(a) principal and his agent (b) bailor and bailee (c) debtor and creditor
(d) agent and his principal (e) creditor and debtor
120. A 'Garnishee' in the context of a Garnishee Order served on the bank stands for:
(a) the person who caused the Court to issue the order on the bank
(b) Court issuing the Older (c) the depositor on whose account the order is served
(d) the bank on whom the order is served (e) none of these
121. A Garnishee order is issued on the banker of:
(a) judgment creditor (b) judgment debtor (c) both (a) & (b)
(d) either (a) or (b) as per court's choice (e) none of these
122. As soon as the bank is served with Garnishee Order it is supposed to ;
(a) advise the customer to immediately withdraw the entire amount
(b) contact its advocate and get the order vacated
(c) earmark garnished amount in the judgment debtor's account and inform him accordingly
(d) close the judgment debtor's account (e) either (a) or (d)
123. Your branch has received Garnishee Order for Rs.lG.OOO/- on Nirmal Soni who is maintaining current
account with us. The balance in the account on the date of receipt of Garnishee Order is Rs. 45,000. On
the same day we receive a cheque for Rs. 25.000/- drawn on the account. Under the circumstances the
branch
(a) may pass the cheque as the balance left will be sufficient to meet the Garnishee Order

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 2S274157,09350476949}

(b) should not pass nay cheque after receipt of Garnishee Order
(c) should request the party to deposit cash to meet the cheque
(d) should inform the facts to the court and act as per their advice (e) none of these
124. Shri S.N.Sinha enjoys an overdraft limit of Rs.2 lacs against shares of market value of Rs.4 iacs. Bank
receives Garmishee Order for Rs.63.000 when the debit balance in the account is Rs.1,25,000. In such
a case the bank ;
(a) must comply with the order as even after paying the garnished amount the balance v»(ill be within
sanctioned limit
(b) must comply with the Garnishee Order as there is an arrangement to overdraw and market value of
shares is sufficient for the purpose
(c) is under no obligation to comply with the order as the banker owes no money to the customer
(d) is under obligation to meet the order even if the outstanding exceeds the sanctioned limit
(e) none of the above
125. Before the amount to which Garnishee Order can apply is determined, the bank can:
(a) pass a cheque received in clearing representing payment of school fees of customer's children
(b) comply with the standing instructions of the customer (c) exercise its right of set off
(d) pass cheque representing insurance premium for life cover (e) none of these
126. Garnishee Order does not apply to :
(a) sale proceeds of shares lodged with the bank which have not been received till the receipt of order
(b) cheques sent for collection but not realised till the time of receipt of order
(c) amount deposited by the customer after the time of receipt of order
(d) all of these (e) none of those
127. Mr. Ravi Anand maintains a savings bank account with our branch. On 03.11.2007 when his account
showed a credit balance of Rs. 75,000,a cheque for Rs. 65,000/- was presented through clearing and
passed for payment. A Garnishee Order is received by the bank at 4.00 p.m. while the time for
returning cheques received through clearing house is 3 p.m. In this case the bank ;
(a) should ask the account holder to deposit amount equal to amount of cheque in a suspense account
and pass the cheque to the debit of that account
(b) is not bound by the order as time for returning dishonoured cheques was over when the order was
received
(c) rfiust comply with the order intimating the collecting bank that the cheque may be treated as
dishonoured
(d) either (a) or (b) (e) none of these
128. The court served Garnishee Order on Central Office of Bank of India prohibiting it to make payment of
balance in the current account of M/s Five Star Traders with Nehru Place, New Delhi branch of the
bank. In this case :
(a) the order served on the Central Office is a sufficient notice and the Central Office should intimate
its branch within reasonable time
(b) the order served on the Central Office is treated as notice to all its branches and Central Office is
given one month's time to intimate all its branches
(c) the order will not be operative as it is not served on the concerned branch
(d) the order should be served on Nehru Place branch of the bank only (e) none of these
129. Your branch received a Garnishee Order in respect of all accounts of Shyam Sunder Sharma. The
blanch has one savings account in the name of Shri Shyam Sunder Sharma and Smt. Reena Sharma
In this case the Garnishee Order:
(a) is not applicable (b) will apply as one of the joint account holders is judgment debtor
(c) will apply to the extent of 50% of balance in the account
(d) either (a) or (c) (e) none of these
130. Your branch received a Garnishee Order in the names of Sansar Chand and Ashok Kumar. There is no
account in their joint names but they have separate accounts in their individual names with the branch.
In this case :
(a) the order will not be applicable and we should inform the facts to the court
(b) individual accounts will be covered as they are jointly and severally liable for their debts
(c) we should apply the order after consent of the account holders
(d) the order can be applicable only after referring the matter to our controlling office(e) None
131. Your branch received a Garnishee Order for Rs. 70,000 on 08.07.2007 in the name of partnership firm
ABC & Co. having A,B and C as partners. On scrutiny you find following accounts in your books
(i) fixed deposit account in the name of C for Rs.1 lac falling due on 15.07.2007.
(ii) demand loan in the name of M/s ABC & Co. against deposit receipt of C with debit balance of Rs.
65,000
(iii) a savings bank account in the name of B showing a balance of Rs. 5,000
(iv) overdraft account In the name of M/s ABC & Co. overdrawn to the extent of Rs.14.000 (limit
sanctioned Rs.40,.000 against NSCs for Rs. 55,000 ).
In this case the Garnishee Order will cover:

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE {75, Block BG -1, Paschim Vthar, New Delhi - 110063; Ph Oil 65476949, Oil 35274157,09350476949)

(a) undrawn balance in the overdraft account of the firm and balance in savings account of B
(b) none of the above accounts as the account in the name of the firm shows a debit balance and
hence no debt is owed by the bank to judgment debtors
(c) undrawn balance in the overdraft account of the firm and balance from fixed deposit account of C
(d) fixed deposit account of C to extent of difference between deposit account and loan availed against
the same and balance in Savings account of B (e) none of these
132. When a bank receives an Attachment Order, it should immediately :
(a) close the customer's account
(b) pay the amount demanded in the order to the Income Tax Authorities
(c) approach the advocate to get it vacated
(d) approach the customer and advise him to withdraw the amount immediately
(e) none of these
133 Your branch received an Attachment Order from the Income Tax Officer in the name of V.S.Aggarwal for
Rs. 35,000. You find that there is a joint account in the name of V.S.Aggarwal and l^rs. Shashikala
Aggarwal which shows a credit balance of Rs. 75,000. In this case :
(a) the joint account can be attached pro-rata and as attached amount is less than half of the balance in
account the bank must comply with the order
(b) the order wilt not be applicable as the account is in joint names
(c) the order will apply only after it is received through court of law of competent jurisdiction
(d) the order will apply only after botn the account holders consent to it (e) none of these
134. A Garnishee Order does not apply to :
(a) balance in savings account of the customer
(b) fixed deposit falling due for payment subsequently
(c) money deposited with the bank after receipt of the Order
(d) all above (e) only (b) & (c)
135. Your branch received an Income Tax Attachment Order in the name of D.L. Sharma for Rs. 41,000. You
have a term deposit account of D.L. Sharma and his wife for Rs. 70,000 and a demand loan account in
the name of D.L Sharma against term deposit showing debit balance of Rs.50,400. In this case :
(a) bank must comply with the order even before exercising its right of set off
(b) bank should comply with the order after exercising its right of set off
(c) bank should not comply with the order as deposit account is in joint names
(d) bank should inform the I.T.O. that time deposit is not yet due (e) either (c) or(d)
136. Income Tax Officer of your area has directed your branch to send him a list of all accounts with names
and addresses of depositors maintaining balance of Rs. 25,000/- or more. In this case :
(a) the bank is bound to comply with the order under Section SOL of the Income Tax Act, 1961
(b) the bank is bound to comply with the order under Section 285 of the Income Tax Act, 1961
(c) the bank is not bound by the order as ITO can't issue such an order in general terms
(d) both (a) and (b) (e) none of these
137. Bank is not justified in disclosing the affairs in his customer's account when required to do so
(a) as per practice and usage amongst banks (b) with the written consent of the customer
(c) by the Income Tax Department (d) by the customer's employer (e) none of these
138 The duty of maintaining secrecy of customer's account comes to an end when :
(a) the account is closed (b) the account is transferred to some other branch
(c) the account is designated inoperative account
(d) the account is designated as 'Non-Resident' account (e) none of these
139. A banker has a general lien over:
(a) articles deposited for safe custody (b) goods left negligently with the bank
(c) bill lodged for collection to meet a bill drawn on the customer
(d) ail of these (e) none of these
140. Banker's general lien tantamounts to pledge because :
(a) bank has a right to sue the borrower in case of default
(b) bank puts its own lock over the security under the lien of the bank
(c) it confers upon him the right to sell securities in case of default by the borrower as in pledne
(d) either (b) or (c) (e) none of these
141. Banker's right of lien can be exercised on :
(a) securities remaining with the bank after loan for which they were lodged has been adjusted
(b) securities left negligently with the bank
(c) goods or securities standing in the name of our borrower and a third party
(d) all of these (e) none of these
142. The bank has allowed an overdraft of Rs. 5,500 in current account of Mr. Kamta Prasad. It wants to
exercise its right of set off. This right will be available in :
(a) saving bank account in the joint name of Mr. and Mrs Kamta Prasad
(b) current account in the name of Kamta Prasad & Co. .sole proprietor Kamta Prasad
(c) fixed deposit account in the name of M/s Supreme Co.( Kamta Prasad one of the partners)

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 A K GUPTA'S 6ANKERS TRAINING INSTITUTE(75, Sloch BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(d) Recurring deposit account of Mrs. Kamta Prasad (e) any one of more of tfiese
143. Mr. Ravindra Pratap is a current account holder of your branch . He is allowed a temporary over-draft of
Rs. 20,000 which is not adjusted despite several reminders. There is a Recurring deposit account with
the branch in the name of Master Saurabh (minor) under guardianship of his father Ravindra Pratap.
The bank wants to adjust proceeds of this account showing credit balance of Rs.16,841/- against
overdraft . fn this case the bank can :
(a) exercise right of set off as RD account is in fact account of natural guardian
(b) not exercise right of set off as the two accounts are in different names and different rights
(c) exercise right of set off with express consent of both Mr. Pratap and his minor son
(d) exercise right of set off as minor can't have any objection to the act of the natural guardian
(e) none of these
144. Mr. Sunil Gaur is a guarantor for a loan granted to Mr. R.L.Sandhu. The bank can exercise right of set
off against deposit account of Mr. Gaur:
(a) any time it likes as liability of guarantor is certain
(b) only when Mr.Sandhu fails in meeting his liability
(c) only when bank files a suit against Mr. Gaur for recovery of debt
(d) all above (e) none of the above
145. Mr. Raja Ram Verma has three borrowal accounts - cash credit account showing debit balance of Rs.
45,400: an overdraft account with balance of Rs.17,000 against sanctioned limit of Rs 25.000 and a
current account showing a debit balance of Rs. 2,500 being temporary overdraft in current account. Mr
Verma deposits Rs. 2,500 but does not give any directions as to which account the amount should be
credited. In this case :
(a) the amount may be credited to any of the three accounts as per bank's discretion
(b) the amount should be credited to current account to adjust the temporary overdraft as the amount
of deposit and the circumstances imply that payment is for discharge of temporary overdraft in
current account
(c) the amount should be credited to the account in which credit facility was allowed first
(d) the amount should be kept in a suspense account and Mr.Verma must give direction regarding
appropriation of the amount (e) none of these
146. Rule in Clayton's case relates to.
(a) liability of a guarantor (b) banker's right of set off (c) appropriation of payments
(d) rights of banker while discounting documentary usance bills (e) banker's right of lien
147. Rule in Clayton's case applies to:
(a) term loans (b) recurring deposit accounts (c) running accounts having debit balances
(d) all above (e) none of these
148. Your branch has received a status enquiry from Citibank in respect of one of your customers whom they
intend granting vehicle loan. In this case we can :
(a) disclose full facts as we are supposed to give a true picture to our fellow banker
(b) reply in general terms without any liability on our part
(c) reply only after obtaining consent of account holder in writing
(d) just put the communication aside
(e) reply only after Citibank undertakes to indemnify us in case of legal action by the account holder
TYPE OF DEPOSIT ACCOUNTS
149. In Bank's balance sheet savings deposits are shown under:
(a) contingent liabilities (b) demand liabilities (c) current liabilities
(d) term liabilities (e) subordinated debt
150. A Savings Bank account should not normally be opened for:
(a) sole proprietorship concern (b) partnership firm (c) limited company
(d) all of these (e) none of these
151. A Savings Bank account can he opened and interest allowed in the accounts in the name of:
(a) District Rural Development Agency (b) Agriculture Produce Market Committee
(c) Farmers' Club
(d) Gram Panchayats for implementation of government, sponsored schemes (e) all of these
152. Number of withdrawals in Basic Savings Bank Deposit account should not exceed:
(a) 50 in a year (b) 4 in a month (c) 12 in a quarter
(d) 25 in a half year (e) None of the stated options
153. A saving bank account can be allowed in the name of:
(a) Municipal Corporations (b) State Electricity Boards
(c) Khadi & Village Industries Board (d) State Housing Boards (e) None of these
154. A Savings Bank account is introduced by a respectable person of the locality well known to the bank.
The introducer did not come personally to the branch. Under the circumstances bank should :
(a) accept introduction and allow only cash transactions in the account i.e. cheque book not be issued
(b) not accept the introduction as presence of introducer at the branch is mandatory

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE(75, B(e>ck BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(c) accepl the introduction and send a letter of thanks by Registered A.D. post to the last recorded
address of the introducer (d) both (a) & (c) (e) ether (a) or (c)
155. Shri Banke Bihari, an illiterate savings bank account holder of your branch approaches the branch for
issue of cheque book so that he can withdraw cash as per his requirement without visiting the branch.
Under the circumstances branch :
(a) may issue cheque book and depositor be advised to come personally for withdrawing money
(b) may issue cheque book in the normal course ( c) should not accede to customer's request
(d) may issue cheque book and get the fact witnessed by another account holder
(e) should issue cheque book for making statutory payments and post dated cheques for repayment of
loans.
156. A saving bank account becomes inoperative when there is no debit or credit in the account for:
(a) 6 months (b) 12 months (c)2 years (d)3 years (e) None of these
157. For the purpose of classifying a savings bank account as inoperative which of the following is not
considered as operation?
(a) Depositing cash or cheque in the account
(b) Withdrawing cash or transfers from the account
(c) Credit of interest on FD to saving bank by following standing instruction
(d) Credit of dividend on Shares to saving bank by following standing instruction
(e) None of these
158. A Savings account holder has requested your for issuance of a fresn cheque book through a third party.
He has sent a letter for the purpose instead of requisition slip from the old cheque book. The branch
should:
(a) issue the cheque book to the third [Darty over the counter (b) not icsue the cheque book
(c) issue the cheque book and send it by regdpost to the last recorded address of the account holder
(d) close the account for violating bank's rule by not sending requisition slip (e) none of these
159. A Savings account holder has time deposits of Rs.5 lacs with your branch. He issues a cheque
favouring Mahanagar Telephone Nigam Ltd. for Rs. 2,520/- when his account shows a credit balance of
Rs.755 only. Under the circumstances the branch :
(a) can return the cheque with the reason 'funds insufficient'
(b) should transfer sufficient funds from term deposit account and cheque be passed
(c) may rely on its right of set off and pay the cheque
(d) may return the cheque with the reason 'please present again' and in the meantime seek
instructions from the account holder
(e) either (c) or (d) above
160. When a party wants to open a current account, besides completion of other formalities, the branch must
obtain an undertaking that:
(a) he does not have current account in another bank / branch
(b) he does not enjoy credit facilities with some other bank / branch
(c) he will not open current account with other bank / branch (d) all above (e) only (a) & (c)
161. During the course of inquiry, we find that our prospective current account holder is enjoying credit
facilities with Canara Bank. Under the circumstances we should:
(a) open the account and advise the fact to Canara Bank (b) refuse to open the account
(c) ask the customer to bring no objection letter from Canara Bank
(d) open the account without any formality.
(e) write to Canara Bank ,wait for a fortnight and in case there is no response open the account
162. As per RBI, minimum period for which term deposits can normally be accepted by banks is :
(a) 15 days (b) 30 days (c) 90 days (d) 46 days (e) 7 days
163. Maximum period for which time deposit(s) can normally be accepted by a bank as prescribed by IBA is :
(a) 6 months (b) 10 years (c) 5 years (d) 3 years (e) 7 years
164. Deposits for period longer than the maximum prescribed by IBA can be accepted :
(a) under orders of the competent courts
(b) for protection of minor's interest whose parents are not alive
(c) if the customer insists on it (d) all above (e) . either (a) or (b) or both
165. In time deposit accounts the instructions are normally applicable at the time of maturity. To mitigate
difficulties to the depositor(s) in case of joint deposit accounts, RBI advised banks :
(a) not to insist on joint discharge for payment of deposit before maturity
(b) obtain mandate for premature payment / loan to anyone at the time of opening the account
(c) obtain indemnity from the joint depositor insisting on premature payment / loan and do the needful
(d) either (a) or (b) (e) either (a) or (c)
166. A deposit was accepted for a period of 5 years on 1.11.2010. The depositor expired on 11.6.2014. The
payment was made to legal heirs on 1.2.2015. Bank should allow interest for 1.11.2014 to 31.1.2015 at
(a) the contracted rate (b) the rate which is 1% less than the contracted rate
(c) the rate applicable to deposit of 4 years 3 months as ruling on 1.11.2010
(d) the rate 1% less than the rate applicable to a deposit of 4 years 3 months as ruling on 1.2.2015

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(e) as per its discretion

167. A time deposit accepted for a period of 36 months under re-investment plan is withdrawn prematurely
after 17 months. The amount payable will be worked out by :
(a) applying simple interest rate as applicable to 17 months
(b) calculating maturity value for 15 months at applicable rate plus 2 months interest thereon
(c) calculating maturity value for 15 months at applicable rate plus 2 months interest on principal
(d) applying simple Interest at contracted rate for 17 months
(e) either (b)or (c) as per bank's discretion
168. As per current instructions / guidelines of RBI, to be eligible for time deposit receipt being renewed as of
date of maturity the depositor has to :
(a) get it renewed for at least 46 days as of date of maturity
(b) get it renewed as of date of maturity in such a way that it remains with the bank for at least 15
days from date of presentation
(c) get it renewed for a period at least equal to the overdue period
(d) get it renewed as of date of maturity for at least 15 days (e) none of the above
169. Banks are permitted to allow 1% additional interest on deposit of :
(a) an employee of the bank
(b) the spouse of deceased staff member / deceased retired staff member in his/her single name
(c) an association or a fund, members of which af'e exclusively the bank's staff
(d) all above (e) only (a) and (b) above
170. A deposit was accepted on 1.1.2013 for one year. It is repaid to legal heirs of the deceased on 1.2.2015
after the death of the depositor in October, 2014. Interest for the overdue period will be allowed :
(a) at the rate applicable to saving accounts (b) at the contracted rate
(c) at the rate applicable to a deposit of 13 months as ruling on 1.1.2013
(d) lower of the rate applicable to a deposit of 13 months as on 1.2.2015 or the contracted rate
(e) None of these
171. A time deposit receipt was made out in name of MTNL A/c Ram Lai and Sons. Ram Lai and Sons
approach the bank for premature withdrawal of deposit. In this case the bank :
(a) can't accede to the request as payment can be made only to MTNL
(b) may accede to the request if the receipt has been released by MTNL
{c) may accede to the request without any further inquiry / formality
(d) can not effect premature payment of such type of receipts (e) none of the above
1 72. A term deposit of Rs. 90,000/- was accepted in the name of Naresh & Nisha. After sometime both of
them visit and request for changing the name in the FD in the name of their two sons What should the
bank do?
<a) the bank should accept the request as it is made by both of them
(b) the bank can not accept the request
(c) the bank should accept the request after ascertaining that It is being done as per free will and not
under pressure from the sons.
(d) the bank should accept the request after obtaining indemnity from the depositors
(e) none of the above
173. A deposit was accepted from Prem and Suresh with instructions repayable to'former or survivor' Prem
approaches the bank for loan against the deposit singly. In this case the bank :
(a) can't grant loan to former as the instructions apply only at the time of maturity
(b) can grant loan to him as survivor's right arises only after death of former
(c) can allow loan only after Suresh also signs the application for grant of loan to Prem
(d) can allow loan only after sanction of its controlling office (e) none of these
174. For premature payment of a term deposit penal interest is levied at Bank's discretion As per RBI
instructions this penalty is waived In the case of:
(a) premature payment to legal heirs/nominee
(b) premature renewal for a period longer than the remaining period of original contract
(c) premature payment of term deposit representing subsidy under PMRY /SJSRY/SGSY etc
(d) all of the above (e) only (a) and (b) above
175. A term deposit receipt is in the joint names of Ajay and Vijay with instructions repayable to 'either or
survivor'. The depositors request the bank to grant a loan to a firm in which Ajay is one of the partners
The said firm is already enjoying cash credit limit with the bank. The rate of interest chargeable in this
case will be ;
(a) as applicable to advance to the depositors themselves (b)as applicable to cash credit account
(c) 2% higher than the rate applicable to cash credit account of the firm
(d) maximum lending rate (e) lower of (c) and (d) above
176. As per Section 269 T of Income Tax Act, if principal and interest on a fixed deposit is payment
to depositor cannot be made in cash and is to be paid only by crediting account or account oavee
cheque. '
(a) exceeding Rs. 10,000 (b) exceeding Rs. 20,000 (c) exceeding Rs. 50,000

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block 8G ■ I, Paschim Vihar, New Delhi —110063; Ph Oil 65476949, Oil 252741S7,09350476949}

(d) of Rs 20,000 or more (e) of Rs 50,000 or more

177. Provisions of Section 269 T of Income Tax Act, are applicable to
(a) savings bank accounts (b) current accounts (c) term deposit accounts
(d) all above (e) only (b) and (c) above
178. A time deposit falls due on 15.08.2007. The deposit will be repaid on :
(a) the succeeding day i.e. 16.08.2007 (b) the preceding day i.e. 14.08.2007
(c) the succeeding day i.e. 16.08.2007 with interest for 15.08.2007 at saving bank rate
(d) the succeeding day i.e. 16.08.2007 with interest for 15.08.2007 at contracted rale (e) None
179. A time deposit standing in the name of Sanoj is endorsed in favour of Shashi who approaches the bank
for payment to the credit of her savings bank account .Under the circumstances :
(a) the request can't be acceded to as bank's time deposit receipt is not transferable
(b) the request may be acceded to after obtaining suitable indemnity from Shashi
(c) the request may be acceded to if Saroj executes indemnity in bank's favour
(d) the bank must accede to Shashi's request (e) none of these
180. A term deposit receipt is in the name of Gopal who has raised a loan against the same. The depositor
approaches the Bank with the request to add name of his minor son to the deposit reciept. Under the
circumstances the bank :
(a) should noi accede to such a request during currency of the loan
(b) can accede to the customer's request in the normal course
(c) may accede to the customer's request if his son also signs all loan documents
(d) either (b) or (c) above (e) none of the above
181. A duplicate deposit receipt is presented for payment befoie maturity. The party insists on payment.
Under the circumstances the bank ;
(a) must refuse premature payment as per the terms of the indemnity executed by the depositor
(b) may accede to the request of the depositor.
(c) may effect payment as repayment before maturity is the right of the depositor
(d) may prefer allowing loan against the receipt after satisfying about customer's need
(e) either (b) or(d) above
182. A Recurring account was opened for 36 months. Only 9 monthly installments were deposited. Just after
36 months of deposit, the depositor approaches the Bank for repayment. In this case payment will be:
(a) treated as payment on due date and depositor will get interest for 36 months without penalty for
premature withdrawal
(b) treated as premature payment
(c) made only after the depositor deposit installments in default with penalty for late deposit
(d) either (b) or (c) (e) none of these
183. Choose statement which is true' with regard to latest Instructions of RBI relating to deceased accounts
(a) In the case of deposit accounts where the depositor had made a valid nomination, the payment of
the balance in the deposit account to the nominee represents a valid discharge of the bank's liability
(b) In case an account has been opened with survivorship clause like either or survivor or former or
survivor, the bank Is discharged of liabilities by making payment to the survivor(s)
(c) Banks should settle the claims in respect of deceased depositors and release payments to
survivor(s) / nominee{s) within a period not exceeding 15 days from the date of receipt of the claim
subject to the production of proof of death of the depositor and suitable identification of the claimant(s).
(d) all above (e) only (a) &(b) above
184. When the sole depositor or one of the depositors expires, and bank receives an instrument for credit to the
account, the bank should:
(a) return the instrument to the remitter as bank can not credit sucH instruments In the account.
(b) open an account styled as 'Estate of Shri , the Deceased' on the request of
survivor(s) / nominee where all the pipeline flows in the name of the deceased account holder could be
allowed to be credited , provided no withdrawals are made.
(c) return the pipeline flows to the remitter with the remark "Account holder deceased" and intimate the
sun/ivor(p) / nominee accordingly who could then approach the remitter to effect payment in the name of
the appropriate beneficiary.
(d)any one of the above e) either (b)or (c) above
185. As per the provisions of the Income Tax Act,1961 presently income earned by way of interest is exempt
from income lax up to an amount of p.a.
(a) Rs.15000 {b)Rs.5,000 (c) Rs. 9,000 (d) Rs. 12,000. (e) none of these
186. Which of the following is/are outside the purview of the TDS under Section 194A of the Income Tax Act?
(a) recurring deposit (b) savings bank (c)fixed deposit (d) Both (a) & (b) {e)none
187. TDS is applicable when interest on term deposit credited or paid or likely to be paid / credited exceeds:
(a) Rs.10,000 during a financial year (b) Rs.5,000 during a financial year
(c) Rs.10,000 during a calendar year (d) Rs. 5,000 during a calendar year (e) none of these

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

Ancillary Business/Service Conditions & Other Related matters

1. Counterfeit Notes
Authority to Impound Counterfeit Notes: The Counterfeit Notes can be impounded by- (i) All branches of
Public Sector Banks; (ii) All branches of Private Sector Banks and Foreign Banks; (iii) All branches of Co
operative Banks & Regional Rural Banks; (iv) All Treasuries and Sub-Treasuries; (v) Issue Offices of
Reserve Bank of India.
2. Detection & Impounding: Banknotes tendered over the counter should be examined for authenticity through
machines and such of these determined as a counterfeit one, shall be stamped as "COUNTERFEIT NOTE"
and impounded. Each such impounded note shall be recorded under authentication, in a separate register.
The size of the stamp should be uniformly 5 cm x 5 cm with the following inscription - "COUNTERFEIT
BANKNOTE IMPOUNDED" with bank and branch name, signature and date. The same procedure as used
for detection over the counter is to be followed where notes are received directly at the back office /
currency chest through bulk tenders;
Acknowledgement to tenderer: When a banknote tendered at the counter of a bank branch or treasury is
found to be counterfeit, an acknowledgement receipt must be issued to the tenderer, after stamping the
note. The receipt, in running serial numbers, should be authenticated by the cashier and tenderer. The
receipt is to be issued even in cases where the tenderer is unwilling to countersign it;
Credit to customer's account: No credit to customer's account is to be given for counterfeit notes if any in
the tender received over the counter or at the back-office / currency chest;
Reporting to Police and other bodies: (i) For cases of detection of counterfeit notes upto 4 pieces in a
single transaction, a consolidated report should be sent by the Nodal Bank Officer to the police or the Nodal
Police Station, along with the suspect counterfeit notes, at the end of the month; (ii) For cases of detection
of counterfeit notes of 5 or more pieces, in a single transaction, the counterfeit notes should be forwarded
by the Nodal Bank Officer to the local police or the Nodal Police Station for investigation by filing FIR.
Acknowledgement of the police authorities concerned has to be obtained for note/s forwarded to them both
as consolidated monthly statement and FIR.
Examination of the Banknotes before Issuinc over Counters. Feeding ATMs and Remitting to Issue Offices
of the Reserve Bank: The banks should re-align their cash management in such a manner so as to ensure
that cash receipts in the denominations of Rs 100 and alx)ve are not put into re-circulation without the notes
being machine processed for authenticity. The said instructions shall be applicable to all bank branches
irrespective of the volume of daily cash receipt. Banks should put in place adeguate safeguards/checks
betore loading ATMs with notes. Dispensation of counterfeit notes through the ATMs would be construed as
an attempt to circulate the counterfeit notes by the bank concerned. Detection of counterfeits in chest
remittances is also liable to be construed as wilful involvement of the chest branches concerned in
circulating Counterfeit Notes and may attract special investigation by police authorities, and other action like
suspending the operation of the chest concerned. Reserve Bank may consider the option of levying higher
penal interest/penalties for the amount of forged notes detected in the chest remittances bv RBI or durino
inspection. ^
7. Preservation of Counterfeit Notes Received from Police Authorities: All Counterfeit Notes received back
from the police authorities/cou.is may be preserved in the safe custody of the bank. These Counterfeit
Notes at branches should be subiected to verification on a half-yearly basis (on 31st March and 30th
September) by the Officer-in- Charge of the bank office concerned. They should be preserved for a period
of three years from the date of receipt from the police authorities. They may thereafter be sent to the
concerned Issue Office of Reserve Bank of India.
The banks should ensure that all bank personnel handling cash are trained on features of genuine Indian
bank notes within a period of 2 years.
Cassette swapping system': The High Level Group on Systems and Procedures lor Currency Distribution,
headed by Smt. Usha Thorat, has recommended, switching over to 'cassette swapping system' so that
replenishment of currency notes in ATMs is done in a highly secured manner.
1 A Other types of notes/ currency chest
Soiled Notes: Notes which have become unusable due to constant use. The notes which are complete and
only torn in two pieces are also treated as Soiled notes.
Mutilated Notes: Notes which are torn in more than two pieces or where part of the note is missing is called
mutilated notes. Up to two pieces it will be soiled note.
Star series notes: These notes are just like other bank notes and are issued by RBI for replacing wrongly
printed notes. Presently, these notes are issued in the denomination of Rs 10, Rs 20, Rs 50 and Rs 100.
Clean Note Policy: The practice of stapling of note packets, apart from damaging notes, reduces the life
span of notes and renders it difficult for customers to open note packets easily. Therefore, banks should do
away with stapling of any note packets and instead secure them with paper bands, and banks should sort
notes into re-issuables and non-issuables, and issue only clean notes to public. Further, banks should
forthwith stop writing of any kind on watermark window of bank notes.

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG •I, Paschifn Vihar, New Delhi — 110063; Ph Oil 6S476949, Oil 25274157,09350476949]

5. Currency Management: The responsibility of currency management in a bank should be entrusted to a

nodal official, who shall be a senior functionary at a level not less than that of a General Manager and who
will be accountable for the obligations cast upon currency chests by RBI.
6. Facility for Exchange of Notes and Coins: The facility of exchange of cut/mutilated banknotes, should be
made available at all bank branches (including those of co-operative banks and RRBs). This facility should
be provided to all members of public without discrimination on all working days.
7. The cash kept in the current chest is the property of RBI and bank is an agent of RBI for the same.
Minimum withdrawal or deposit in currency chest can be for Rs 1,00,000 and in multiples of Rs 50,000.
8. With effect from 1.4.07, the cunency chest holding banks, enhanced the 'service charges' from the existing
rate of Re.1/- per note packet of 100 pieces to Rs.2/- per packet on cash deposited by the non-chest bank
branches.
9. CCTV Coverage of all cash handling operations in Currency Chests: Coverage of CCTVs surveillance
should cover all cash operations in the vaults / strong rooms and other cash handling areas to identify any
mischief / irregularity. Further, Potdar from the Chest Remitting bank should accompany soiled note
remittance.
10. Issue of banknotes with numerals in ascending size in number panels: RBI has issued Rs 50, Rs 100, Rs
500 and Rs 2000 denomination Banknotes with the numerals in both the number panels in the ascending
size from left to right while the first three alpha-numeric characters (prefix) will remain constant in size.
11. Banknotes with new numbering pattern and special features for the visually impaired: RBI is putting into
circulation banknotes in the denominations of Rs 100, Rs 500 and Rs 2000 Incorporating three new/revised
features - (i) ascending size of numerals in the number panels, (ii) bleed lines, and (iii) enlarged
identification mark. The current banknotes will be without inset letter in the number panels. The banknotes
of Rs 100 denomination will have four bleed lines, Rs 500 denomination will have five angular bleed lines in
three sets of 2-1-2 lines on the obverse in both, the upper left and the right hand edge of the banknote.
Similarly, Rs 2000 banknotes will have six angular bleed lines in four sets of 1-2-1-2-1 lines on the obverse
in both, the upper left and right hand edge of the banknotes. These will facilitate identification of these notes
by visually impaired persons.
2. Remittances/Cheque collection
1. DD is uniformly valid for 3 months w.e.f. 1.4.12. Earlier it used to be valid for 6 months.
2. Duplicate DD has to be issued to the purchaser within 14 days (fortnight) of the request subject to
completion of formalities. The period of fortnight prescribed by RBI for issue of duplicate Demand Draft
would be applicable only in cases where the request for duplicate demand draft is made by the purchaser
or the beneficiary and would not be applicable in the case of third party endorsements.
3. Banks should issue duplicate DD up to Rs 5000 without awaiting non-payment advice from drawee branch.
4. In case duplicate DDs are not issued within the stipulated period, banks are required to pay interest for the
period of delay at rates applicable to term deposits of corresponding maturities.
5. Normally duplicate DD is issued at the request of purchaser. However, where the purchaser is a Govt,
Deptt /PSU it may not be ready to execute indemnity in favour of the bank. Under such circumstances, the
issuing bank, can issue duplicate at the request of payee also. Even otherwise, as per Ml Act, payee is
entitled to receive duplicate of a negotiable instrument after submission of indemnity bond.
6. When a duplicate DD has been issued at the request of purchaser/beneficiary, the original should not be
paid but returned with the remarks. "Duplicate since issued".
7. In case both original as well as duplicate DDs are presented for payment it should pay duplicate DD and
return the original with the reason 'DD reported lost and duplicate since issued and paid'.
8. The payment of a demand draft can not be stopped
9. Demand draft or Pay order or Traveller cheque or any other remittance of Rs 50,000 & above should be
issued to the debit of account and not against cash. The applicants (whether customers or not) for the
above transactions for amount exceeding Rs. 50,000 should affix PAN number on the applications
10. Demand drafts of Rs. 20,000/- and above should be issued invariably with account payee crossing.
11. RBI has prescribed for following charges for Collection of Outstation cheques in saving bank accounts; (i)
Up to Rs. 5,000; not exceeding Rs. 25 per instrument (ii) More than Rs 5000 up to Rs. 10,000; not
exceeding Rs. 50 per instrument (iii) More than Rs. 10,000 to Rs. 1,00,000 : not exceeding Rs. 100 per
instrument; (iii) Rs.1,00,001 and above: Bank discretion (iv) The above charges will be all inclusive. No
additional charges such as courier charges, out of pocket expenses, etc., should be charged from the
customers. For current account deposits, the bank has discretion for cheques of all amounts.
12. Timeframe for collection of cheques drawn on State Capitals / major cities / other locations to be 7/10/14
days respectively. If there is any delay in collection beyond this period, interest at the rate specified in the
COP of the bank, shall be paid. In case the rate is not specified in the COP, the applicable rate shall be the
interest rate on Fixed Deposits for the corresponding maturity.

3. Safe Deposit Vault/ Lockers

1. The relationship between bank and customer in case of Safe Deposit Vault is Lessor and Lessee.
2. The relationship between bank and customer in case of safe custody of articles, is Bailee and Bailor.

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG -1, Pascllim Vihar, New Delhi ~ 110063; Ph Oil 65476949, Oil 25274157,09350476949)

3. Safe Deposit Vault is governed by provisions of Transfer of Property Act wfiereas Safe Custody is governed
by provisions of Indian Contract Act.
4. Locker facility is normally extended to account holders. Timings of locker department are normally upto half
an hour before close of working hours (not business hours.)
5. Linking the lockers facility with placement of fixed or any other deposit beyond what is specifically permitted
is a restrictive practice and should be prohibited. Banks may at the time of allotment, obtain a Fixed Deposit
which would cover 3 years rent and the charges for breaking open the locker in case of an eventuality.
6. Identification Code of the bank / branch should be embossed on all the locker keys with a view to facilitate
Authorities In identifying the ownership of the locker keys.(Latest instruction)
7. If a locker is in joint names with operating instructions as either or sun/ivor, and one of them reports loss of
key, the operation of the locker should be allowed to both on joint basis.
8. Where the lockers have remained unoperated for more than three years for medium risk category or one
year for a high risk category, banks should immediately contact the locker-hirer and advise him to either
operate the locker or surrender it. This exercise should be carried out even if the locker hirer is paying the
rent regularly. In case the locker-hirer does not respond nor operate the locker, banks should consider
opening the lockers after due notice to him.
9. Branches should maintain a wait list for the purpose of allotment of lockers and ensure transparency in
allotn-,ent of lockers. All applications received for allotment of locker should be acknowledged and given a
wait list number.
10. Access to the safe deposit lockers / return of safe custody articles to Survivor(s) / Nominee(s) / Legal
heir(s): White giving access to the survivor(3) / nominee(s) of the deceased locker hirer / depositor of the
safe custody articles, the banks should desist from insisting on production of succession certificate, letter of
administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee(s)
Banks should prepare an inventory before returning articles left in safe custody / before permitting removal
of the contents of a safe deposit locker. In case the nominee(s) / survivor(s) / fegal heir(s) wishes to
continue with the locker, banks may enter into a fresh contract with nominee(s) / survivor(s) / legal heir(s)
and also adhere to KYC norms in respect of the nominee(s)/ legal heir(s).
11. Banks are not required to open sealed/closed packets left with them for safe custody or found in locker
while releasing them to the nominee(s) and surviving locker hirers / depositor of safe custody article.
12. When a locker is surrendered, banks normally interchange locks/keys etc.
13. In the event of death of locker-holder(s), contents of locker are delivered to legal heirs on the basis of letter
of administration. As succession certificate applies to debts and securities, contents of locker are not
delivered against the same except in the states of U.P.. Uttranchal. M.P. and Chhatisgarh.
4. Pension Payments
1. Pension Payment Order is the basic document sanctioning pension to a retired employee.
2. Life certificate is obtained in November every year. Now,(December 9, 2014) the Government of India has
since launched "Jeevan Pramaan", a digital life certificate based on Aadhaar Biometric Authentication.
Accordingly, in case of Central Government Civil Pensioners a Life Certificate Issued online by a
Governmer^t Agency as a result of Aadhar Biometric Authentication will also be accepted as a valid
certificate. ■ his document may be accessed through a Website by the Pension Disbursing Agency without
insisting either on personal appearance of the pensioner or Life Certificate by the Competent Authority.
Banks should issue a duly signed acknowledgement to pensioners on receipt of the life certificate submitted in ohvsical
form.
3. Pension for the month of March is credited in the month of April. Thus, in the month of April, pension is
credited twice in the account of the pensioner.
4. Pension account is opened in the name of pensioner. It can be opened jointly with the spouse either as
"either or survivor" or "former or survivor" provided the pensioner gives an undertaking that the pension
disbursing authority will be discharged by credit pension to the joint account.
5. Nomination exercised by the pensioner and indicated in ihe PPO is under provisions of Pension
Regulations and does not cover balance in the pension account of the pensioner.
5. PubMc Provident Fund Scheme,1968/Govt Business
1. PPF scheme is operated through SBI, selected bank branches of public and private sector banks, and post
offices. FlUF are not allowed to open this account. An account opened on behalf of a Flindu Undivided
Family prior to the 13th day of May, 2005, shall be closed after expiry of fifteen years from the end of the
year in which the initial subscription was made
2. The amount of initial sut)scription shall be minimum of Rs.lOO/-. Minimum contribution per financial year is Rs
500 and maximum has been increased to Rs.150,000/-.
3. Payment of Commission to agents on PPF has been discontinued.
4. PPF is opened for 15 years. The period can be extended for 5 years at a time at the request of the
depositor. The extension is allowed for any number of times.
5. The Interest income on PPF is not taxable.
6. Depositors can avail loan against the deposit after certain 3 years and some withdrawals after 5 years.

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7. The Govt has advised that the PPF accounts of subscribers who go missing will be settled as per the
provisions contained in Section 107/108 of the Indian Evidence Act. 1872.
8. Commission rates for government Business including PPF and Senior Citizen Saving Scheme with effect from July
1,2012 will be as under: Receipts: Physical - Rs 50 per transaction; Electronic - Rs 12 per transaction; Pension
payments: Rs 65 per transaction; Other payments: 5.5 paise per Rs 100 turnover.
9. Remittance transactions of Government by accredited banks by whatever mode including through ECS, EFT, NEFT,
RIGS form part of agency transactions and has to be effected free of charge.
10. The remittance period of all Government transactions including EASIEST and OLTAS received through e-payments by
Public Secto'- Banks will be T+2 working days (excluding put through date) w.e.f. August 1, 2008 and T+1 working
day (excluding put through date) w.e.f. January 1, 2009.
11. Interest Rate on delayed remittances and double/excess reimbursement is Bank Rate + 2%.
6. Senior Citizen Savings Scheme,2004
1. Senior Citizen Saving Scheme was introduced by GOI w.e.f. 02.08.2004. It is operated by post offices and select
branches of select public and private sector banks which are operating PPF Scheme,1968. The scheme was introduced
in place of Varishth Nagrik Bima Yojna. Minimum eligible age is 60 years and 55 years for retired persons whether in
normal course or after seeking VRS. No minimum age limit for ex servicemen from military. Account can be held singly
or jointly with spouses only.
2. More than one account can also be opened in the same deposit office.
3. Investments can be in multiples of Rs 1,000 with maximum of Rs 15 lacs.
4. The amount can be deposited in cash, if the amount of deposit is up to rupees one lakh. The amount can be deposited
by any electronic mode if the account is opened in a deposit office working on Core Banking Solution platform
5. The account is opened for 5 years and extendable by 3 years.
6. Luan against deposit is not allowed. Premature payment can be had after minimum holding of one year. If premature
payment is sought after one year, penalty will be charged at the rate of one and a half per cent of the principal
amount and if premature payment is after 2 years, then the penalty will be at the rate of 1% of the principal amount.
7. Rate of interest is 9.3% p.a. for 2015-16. Compounding of interest is not allowed. Where deposit office Is working on
Core Banking platform, interest payable on due dates as specified above, shall be credited by the deposit office in the
savings account of the depositor standing at any such deposit office or any branch of a bank
8. The interest income is taxable and tax is deducted at source. Investors under the scheme are eligible to file Form 15-G
and 15-H to claim exemption from TDS on the interest payable on the deposits under the said scheme. Nominee of the
investors of SCSS can also produce 15-G form at the time of payment after the death of the depositor
9. Nomination is allowed as per post office rules.
10. Where the'depositor has expired before the maturity of the deposits, the nominee / legal heir is entitled to the benefit
of Saving Bank rate of interest for the period commencing the date of death of the depositor to the date of closure of
the account. In the case of a joint account, or where the spouse is the sole nominee, the spouse may continue the
account on the same terms and conditions as specified under these rules. However, in case the spouse does not
continue the joint account, the account shall be dosed on an application in Form-F and the deposit refunded alongwith
interest.
11. The depositor may seek transfer of account from one deposit office to another subject to payment of a transfer fee of
rupees five per lakh of deposit for the first transfer and rupees ten per lakfi of deposit for the second and subsequent
transfer (no transfer fee Is payable if the deposit is less than rupees one lakh).
SUKANYA SAMRIDDHI ACCOUNT
The rules relating to scheme were notified by Central Government on 2"^ Dec 2014. These accounts can be opened with
Post Office or select branches of banks authorized for this purpose.
1. Who can open the account: The account may be opened by the natural or legal guardian in the name of a
girl child from the birth of the girl child till she attains the age of ten years and any girl child, who had
attained the age of ten years, one year prior to the commencement of these rules, shall also be eligible for
opening of the account. A depositor may open and operate only one account in the name of a girl child
under these rules. Birth certificate of a girl child in whose name the account is opened shall be submitted by
the guardian at the time of opening of the account along with other documents relating to identity and
residence proof of the depositor. Natural or legal guardian of a girl child shall be allowed to open the
account for two girl children only.
2. Amount of Deposit: Initial deposit - Rs 1000 and then in multiple of one hundred rupees. Minimum deposit
in a financial year - Rs 1000. Maximum deposit in a financial year - Rs 150,000. Deposits may be made till
completion of fourteen years, from the date of opening of the account. An irregular account where minimum
amount if Rs 1000 has not been deposited may be regularised on payment of a penalty of fifty rupees per
year along with the said minimum specified subscription for the year (s) of default any time till the account
completes fourteen years.
3. Interest on deposit: As notified by the Government, compounded yearly. For FY 2015-16, it is 9.2% p.a.
Interest shall be credited to the account till the account completes fourteen years.
4. Operation of account: The account shall be opened and operated by the natural or legal guardian of a girl
child till the girl child attains the age of ten years. On attaining age of ten years, the account holder that is
the girl child may herself operate the account. However, deposit in the account may be made by the
guardian or any other person or authority.
5. Premature closure of account: In the event of death of the account holder, the account shall be closed
immediately on production of death certificate issued and the balance shall be paid along with interest till

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75/ Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 252741S7,09350476949)

the month preceding the month of premature closure of the account, to the guardian of the account holder.
The Central Government may allow pre-mature closure of the account only in cases of extreme
compassionate grounds such as medical support in life threatening diseases, death, etc.
6. Transfer of account: The account may be transferred anywhere in India if the girl child in whose name the
account stands shifts to a place other than the city or locality where the account stands.
7. Withdrawal: .- withdrawal up to fifty per cent, of the balance at the credit, at the end of preceding financial
year shall be allowed to meet the financial requirements of the account holder for the purpose of higher
education and marriage. The withdrawal shall be allowed only when the account holder girl child attains the
age of eighteen years.
8. Closure on maturity: The account shall mature on completion of twenty-one years from the date of opening
of the account. However, in case of marriage of the account holder, the operation of the account shall not
be permitted beyond the date of her marriage provided the account holder is not less than eighteen years of
age as on the date of closing of account.
9. Tax Benefits: Contributions made under the scheme will qualify for deduction under section 30C of Income
Tax Act subject to a maximum of Rs 150,000. The interest income in case of these deposits is not taxable.
7. TAX DEDUCTED AT SOURCE
1. Interest on deposits with banks:
a) No tax is deducted at source on interest payable on saving bank deposits.
b) From 1.6.2015, TDS on Interest on fixed deposits and RD will be deducted oiily if the interest paid or
payable in a financial year exceeds Rs 10,000. Further, the computation of interest income for the
purposes of deduction of tax would be made with reference to the income credited or paid by the bank
(instead of branch) which has adopted core banking solutions.
c) Rate of TDS : 10%; If PAN No not submitted then rate of TDS is 20%.
d) Interest paid on NRE, FCNR accounts is exempt from income tax and therefore no deduction of tax at
source but TDS will be applicable on NRO irrespective of amount of interest or type of account.
e) Submission of Form No.15G/15H : No deduction shall be made in the case of individual or any other
person other than limited company who is resident in India and who furnishes a declaration in writing in
duplicate in the prescribed form 15G (in the case of other than senior citizens) or on 15H in the case of
senior citizens provided tax on the estimated income of the depositor for the financial year will be NIL
and amount of interest credited or paid during the previous year does not exceed the maximum amount,
which is not chargeable to income-tax. In cases where the deductee who furnishes Form No. 15G or 15H
but does not provide PAN, TDS will be deductible @ 20% w.e.f 01.04.2010.
f) The declaration can be given in paper form or electronically. The bank shall allot a unique identification
number to each declaration received in Form No.15G and Form No.lSH respectively during every quarter
of the financial year and furnish the particulars of declaration received during any quarter along with the
unique identification number in the statement of TDS of the said quarter. TDS statement containing the
particulars of declaration will be sent by the bank during each quarter irrespective of the fact that no tax
has been deducted in the said quarter. Bank shall preserve such declaration up to seven years from the
end of the financial year in which the declaration has been received for verification by Income Tax
Authority or any proceeding under the Income Tax Act. The declaration will remain valid only for one
Assessment year. Banks should give an acknowledgment to customer at the time of receipt of Form 15-
G/15-H. 15G & 15H can be submitted electronically also.
2. Payment to Resident Contractors: TDS if amount paid or likely to be paid to the contractor or sub
contractor exceeds Rs.30,000/- or more in a single payment or Rs.100,000/- in the aggregate during the
financial year. Rate of TDS: 1% if the payment is to an individual or a HUF and 2% for payment to others.
3. Brokerage/Commission other than Insurance Commission: Tax will be deducted at source if the
amount paid or likely to be paid exceeds Rs.5,000/- in a financial year, (b) Rate of TDS: 10%
4. Rent: TDS if the amount of rent credited/paid during the financial year exceeds Rs.180000. Rate of
TDS:(i)Rent of Plant or machinery or equipment: 2%;(ii) Rent of land, building furniture or fittings: 10%.
5. Fees for professional or technical services or Royalty: Tax will be deducted at source if the payment in a
Financial year is more than Rs 30,000. Rate of TDS: 10%.
6. Interest Payments in NRO accounts: Tax will be deducted at source on interest on deposits irrespective of
type of account and amount of interest. Rates of TDS: (i) if the recipient is a non resident non corporate person:
30% plus education cess 2% and secondary and higher education cess 1% i.e. total TDS at the rate of 30 90%
7. TImeLimitforDepositingofTDS, Issuing TDS Cert, and Filing of Quarterly Return:
a) TDS to be deposited within one week from the last day of the month in which tax is deducted. However,
TDS during March then TDS can be deposited upto 30"" April.
b) The statement of TDS should be sent on form 24 Q in the case of salaries, on form 26 Q in all other
payments to residents and on form 27Q for all payments to non residents.
c) The statement of TDS should be sent within 1 month from the end of quarter.
d) The TDS certificate except in the case of salary should be issued in form No. 16A within 15 days from the
due date of the quarterly statement. In the case of TDS on salary, the same should be issued on Form
No. 16 and 12BA by 31 May immediately following the financial year in which the income was paid.
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e) Quarterly TDS return should be submitted in electronic form. Form No.27A is to be furnished in paper
form by deductor along with the e-TDS Return. It is a summary of e-TDS Returns which contains control
totals of amount paid and income tax deducted at source. A separate form No. 27A is to be furnished for
each e-TDS Return i.e. one each for Form Nos.24Q, 260 and 270.
8. Consequence of failure to deduct and pay Sec. 201: As per section 201 of the Income Tax Act, if a
person who is required to deduct tax at source does not deduct the same or after deducting fails to pay the
tax, then, such person shall be deemed to be an assessee in default in respect of such tax and shall be liable to
pay simple interest at the rate of 18% per annum w.e.f. financial year 2010-11 on the amount of such tax from
the date on which such tax was deductible to the date on which such tax is actually paid. Further, such person
shall be liable to pay, by way of penalty, a sum equal to the amount of tax which such person failed to deduct or
pay as aforesaid. There can be imprisonment of 3 months to 7 years.
9. Failure to comply with provisions regarding TAN: If the person required to deduct tax at source, fails to
apply for TAN or after allotment of such number fails to quote such number wherever required then he shall be
liable for penalty of a sum which may extend to Rs.10,000/-.
10. Failure to issue certificate, or submit return, statement, etc. : If any person fails to furnish in due time
annual return for tax deducted; or furnish certificate of tax deducted at source; or furnish in due time quarterly
statement of TDS deposited, then, he shall be liable for penalty which shall be Rs.200 for every day during
which the failure continues subject to a maximum of the amount of tax deductible. If there is wrong reporting in
statement, penalty can be between Rs 10,000 to Rs 100,000.
11. Penalty for delay in TDS statement: Rs 200 per day. Further, if there is a discrepancy in TDS statement,
minimum penalty will be Rs 10,000 and maximum penalty will be Rs 100,000.
12. Electronic filling of Returns: If the taxable income of the assessee is more than Rs 5 'ac in a financial
year it is mandatory to file return electronically.
8. DEPOSIT INSURANCE
1. Deposit Insurance is provided by Deposit Insurance and Credit Guarantee Corporation.
2. Deposit Insurance is compulsory for all banks in India including private, foreign and co-operative banks
except Primary Agricultural societies.
3. Insurance is available for a maximum of Rs 1 lakh per depositor per bank. If a customer has more than one
account in a bank, all his accounts will be clubbed and maximum claim will be Rs 1 lakh in case of
liquidation or amalgamation of a bank. However, account of A, A and B, B and A are considered separately.
4. Premium is Rs 10 paise per Rs ICQ per annum payable on half yearly basis as on 31®' March (For Apr to
Sept) and 30"^ Sept( Get to Mar). Thus, effectively insurance premium is 5 paise per half year. Insurance
premium is payable in advance within 2 months of beginning of the half year. The premium will be borne by
bank.
5. Deposits in the name of Central or State Govt. Banks and Foreign Govt not covered. However, deposits in
the name of quasi Govt bodies, local authorities like Municipal Corporation, Statutory bodiOv*:, Govt owned
corporations are covered.
6. Banks should submit return on 01-01 while paying premium.
9. REPORTING OF FRAUDS
Reporting of Frauds to Reserve Bank of India:
1. Fraud cases involving an amount more than Rs. 1 lakh: should be reported on FMR-1 within three weeks
from the date of detection to (i) R.O under whose jurisdiction the branch where the fraud has taken place is
located and to the R.O under whose jurisdiction the Head Office where the fraud has taken place is located.
In case the bank fa'ls under the supervisory purview of Financial Conglomerate Monitoring Division (FCMD),
the reporting is to be done to FCMD, RBI in place of R.O under whose jurisdiction the Head Office where the
fraud has taken place is located.
2. Fraud cases involving an amount of Rs. 1 crore and above: In addition to reporting to Regional Office, banks
may report the fraud by means of a D.O. letter to the Chief General Manager-ln-charge, Department of
Banking Supervision, RBI, Central Office, within a week of such frauds coming to the notice of the bank's
Head Office.
Reports to the Board:
1. All frauds of Rs. 1.00 lakh and above should be reported to Board of Directors promptly.
2. Frauds involving an amount of Rs 1.00 crore and above should be monitored and reviewed exclusively by
the Special Committee of the Board.
Reporting frauds to Police/CBI
1. Frauds of Rs 3 crore and above should be reported to CBI and frauds below Rs 3 crore should be reported
to Local Police
Reporting to CBI
1. Cases of Rs. 3.00 crore and above upto Rs. 25 crore (a) Where staff involvement is prima facie evident -
CBI (Anti Corruption Branch) (b) Where staff involvement is prima facie not evident - CBI (Economic
Offences Wing).
2. Rs.25 crore to Rs 50 or - Banking Security and Fraud Cell of the CBI whether there is staff involvement or
not.
3. More than Rs 50 cr - Joint Director (Policy) CBI, HQ New Delhi

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Cases to be referred to Local Police : Cases below Rs.3 crore - Local Police.
1. Cases of financial frauds of the value of Rs.1.00 lakh and above, which involve outsiders (private parties)
and bank staff, should be reported by the Regional Head of the bank concerned to a senior officer of the
State CID/Economic Offences Wing of the State concerned.
2. For cases of financial frauds below the value of Rs.1.00 lakh but above Rs.10,000/- the cases should be
reported to the local police station by the bank branch concerned.
Reporting to RBI/Police in case of fraudulent encashment of DDs/TTs/Pav Orders/Cheoues
1. To ensure uniformity and to avoid duplication, frauds involving forged instruments may be reported only by
the paying banker and not by the collecting banker.
2. In the case of collection of an instrument which is genuine but the amount is collected fraudulently by a
person who is not the true owner, the collecting bank, which is defrauded, will have to file fraud report with
the RBI/Police/CBI.
3. In case of collection of instrument where the amount has been credited before realisation and subsequently
the instrument is found to be fake/forged and returned by the paying bank, collecting bank will report.
Cases of 'negligence and cash shortages' and 'irregularities in foreign exchange transactions: Only following
types of cases to be reported:
1. cases of cash shortage more than Rs. 10,000/-, and
2. cases of cash shortage more than Rs.5,000/- if detected by management / auditor/ inspecting officer and not
reported on the day of occurrence by the persons handling cash.
10. USE OF HINDI IN PUBLIC SECTOR BANKS
1. Use of Hindi in Public Sector Banks is governed by the Official Languages Act (OLA), 1963 (as amended
in 1967) and the Official Language Rules(OLR), 1976 •
2. Monitoring the progress in use of Hindi in Public Sector Banks is done by the Department of Banking
Operations and Development(DBOD), Central Office. Reserve Bank of India.
3. The Official Language Policy is not applicable to banks other than Public Sector Banks though some
instructions had been issued to private sector banks also to do the customer service in Hindi.
4. Classification of Regions: For the purpose of Official Language Policy, the various States/Union
Territories have been classified into three Regions as under:
(i) Region 'A': Himachal Pradesh, Haryana, Rajasthan, Madhya Pradesh, Bihar and Uttar Pradesh,
Uttaranchal, Jharkhand, Chattisgarh and the Union Territories of Delhi and Andaman and Nicobar
Islands.
(ii) Region 'B' Maharashtra, Gujarat and Punjab and the Union Territory of Chandigarh.
(iii) Region 'C: All other remaining States and Union Territories.
5. Display of name-boards, designation boards, counter boards, sign boards etc.
a) All sign boards, counter boards, name boards of the bank and other boards, placards etc. should be
displayed in Hindi, besides English in Hindi speaking areas.
b) Banks may prominently display notice boards at branches in Hindi speaking areas to the effect that
forms etc. filled in Hindi are entertained by them.
c) The name/designation boards of the offices/officials of the banks, as also the name-boards of the
Departments/ Divisions, etc. may be displayed bilingually for the present in offices in Regions A & B
6. Official Languages Implementation Committees
The Official Languages implementation Committees should be set up at the Headquarters of each bank
and at Its all offices/branches. ii)The Officer-in-charge of the office/branch may be ex-officio Chairman of
the Committee. The Hindi Officer or, in his absence, any officer nominated by the bank, should be the
Member Secretary of the Committee. Other members of the Committee should be drawn from different
departments. The total number of the members should not be too large, ili) The Committee should meet
at least once in a quarter to review: the compliance with the provisions of the Official Languages Act,
1963 as amended ; progressive use of Hindi for official purposes; periodical reports; progress of in-
service training in Hindi Language/ typewriting and stenography; and progress of Hindi translation of
statutory/non-statutory documents, procedural literature etc.The banks may ensure that OI iC meetings
convened by the Reserve Bank are attended by officers at sufficiently high level/ Chairman of OLIO in
respective banks, along with the officer-in-charge of Official Language Department/Section / Cell. Further,
the banks should arrange to piovide the working knowledge of Hindi to all the staff-members by the end
of 2005 in Regions A, B and C. Therefore, those banks who could not achieve the targets, should
expedite the process of such training.
7. As per Official Language Act, all circulars, resolutions, orders should be Issued bilingually in Hindi & English
and it is the duty of the signing official to ensure this.
8. All letters received in Hindi should be replied in Hindi and it is the duty of the signing official to ensure this.
9. Hindi Divas is celebrated on 14'^ September. On 14*^ September 1949, it was accepted that Hindi will be
the Official language of India.

Region A B C
A 100% 100% 65%
B 90% 90% 55%

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 A K GUPTA'S BANKERS TRAINTNG INSTTTUTE (75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

. 55% 55% I 55% I

11. On the recommendations made by the Parliamentary Committee on Official Language, the Honourable
President of India has passed the following orders ; (1) The work of data processing should be done by the
public sector banks either in Hindi or in bilingual form and only standard encoding (Unicode font/software)
should be used for Hindi.(2) Credit card, ATM etc. services should be provided in Hindi or in bilingual form
QUESTIONS
1. Printing and/or circulation of forged Indian currency notes is an offence under provisions of:
(a) RBI Act. 1934 (b) Banking Regulation Act, 1949
(c) Indian Penal Code (d)Foreign Exchange Management Act , 1999 (e) none of these
2. Forged notes can be impounded by:
(a) all branches of the public sector banks
(b) all branches of private sector banks and foreign banks
(c) ail branches of co-operative banks and RRBs
(d) all treasuries and sub-treasuries/ RBI Issue Offices (e) all above
3. Which of the following is,'are 'not true' with regard to detection and impounding of forged notes:
(a) Note suspected/found forged should be branded with stamp 'Counterfeit Note' and impounded
(b) Acknowledgement receipt should be issued signed by cashier & countersigned by tenderer
(c) Acknowledgement receipt should be issued even when the tenderer refuses to countersign it
(d) The counterfeit note should be sent to the police for further investigation
(e) none of the above
4. Banks may not report cases of detection of forged notes to Police provided:
(a) only one or two notes are detected to be forged (b) the tendeier's bonafides are beyond doubt
(c) the matter is reported to issue office of RBI (d) all above (e) none of these
5. Which of the following notes(s) is/are not eligible for payment under the Note Refund Rules
(a) A note which is less than half the full size of the note (b) A note which is found to be forged
(c) A note which is deliberately cut or tampered
(d) A note devoid of major portion of the number i.e. prefix and three digits or four digits of the
number in single / double number notes wfiere the inadequacy is ttiere at both the numbering pane
(e) all above
6. One rupee notes bear the signatures of:
(a) Finance Minister (b) RBI Governor
(c) Secretary, Ministry of Finance (d) Deputy Governor of RBI (e) either (c) or (d)
7. The highest denomination of Bank note that can be issued by RBI is:
(a) Rs.50 (b) Rs.lOO (c) Rs.500 (d) Rs.lOOO (e) Rs.10,000
8. Mutilated notes are notes which:
(a) are torn (b) are disfigured / washed (c) are burnt/eaten by white ants
(d) all above (e) none of these
9. A double numbered note cut into 2 pieces but on which both the numbers are intact Is called::
(a) mutilated note (b) soiled note (c) both (a) &(b)
(d) normal note (e) either (a) or(b) as per choice of the bank
10. Against mutilated notes the tenderer gets:
(a) full value (b) half value (c) full / half value or no value for Rs.10 or above
(d) full value or no value for Rs.5 or less (e) either (c) or (d)
11 The payee of a draft approaches us and tells that he received the draft issued by our branch which he
has misplaced somewhere and requests to issue duplicate draft. What should be done?
(a) The branch should issue duplicate draft as requested after obtaining formal request in writing
(b) The branch should request him to approach purchaser and in the meantime mark caution.
However, if the payee is able to establish ihat he is the holder of draft, duplicate can be issued to
him after obtaining indemnity.
(c) tell him to report the loss to the police and furnish a copy of the same for necessary action
(d) tell him point blank that he has no right to approach for a duplicate draft (e) none of these
12. Issuing branch issued duplicate draft to its purchaser after completing usual formalities. The paying
branch received both original as well as duplicate DO in clearing. Under the circumstances it should
(a) pay the original DD and return duplicate with reason 'Original already paid'
(b) pay the duplicate DD and return the original with the reason 'Duplicate already paid'
(c) pay both the drafts and invoke indemnity against the purchaser
(d) pay either and return the other (e) consult its legal advisor and act accordingly
13. A duplicate draft was issued after observing usual formalities. The next day original draft is presented
through clearing when duplicate is yet to be paid. Under the circumstances the paying branch should :
(a) pay the draft (b) return the draft with reason 'Draft reported lost'
(c) return the draft wiih reason 'Draft reported lost and duplicate since issued.
(d) not pay the draft at all (e) none of these
14 When a locker holder reports loss of key :
(a) bank issues him a duplicate key (b) he should be asked to approach the court of law
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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG • I, Paschim Vihar, New Delhi- 110063; Ph Oil 65476949, Oil 25274157,09350476949)

(c) the locker will be drilled open at his cost / expenses

(d) he should be given a new locker immediately till such time as key is traced (e) none of these
15. Normally access to a locker of deceased customer is allowed to his successors/legal heirs on
production of
(a) indemnity bond (b) letter of administration / probate
(c) identity card / passport (d) a letter of guarantee from a reputed party (e) all of these
16. The timings of Safe Deposit Vault at our branch are 10.15 a.m. to 4.45 p.m. A locker holder approaches
the branch at 9.45 a.m. with a request to allow him operation of locker as he has to catch train as 10.30
a.m. Under the circumstances the branch :
(a) may allow him operation looking to his urgent requirements
(b) should not accede to his request (c) must allow him operation If the bank is then open
(d) 'may accede to his request after obtaining indemnity on plain paper (e) none of these
17. Pension account can be opened in :
(a) single name of pensioner or jointly with the spouse
(b) joint names of the pensioner and his / her spouse only
(c) joint names of the pensioner and any member of his family
(d) single name of the pensioner only (e) none of these
18. A letter of undertaking on unstamped paper authorising the bank to recover excess amount of pension
paid, if any, is obtained from the pensioner:
(a) once a year in November (b) twice a year in April and October (c) every month
(d) in the beginning before starting payment of pension (e) every time arrears are paid
19. Life certificate is obtained from a pensioner:
(a) in the beginning and after every 5 years (b) in November every year
(c) in May and November every year (d) once in two years in the month of November
(e) every 3 months in case of ex-servicemen and 6 months in other cases
20. Certificate of non-remarriage from widows of pensioner for family pension is taken :
(a) in May ever^' year (b) in November every year <c) in May and November every year
(d) one time in the beginning and a declaration that she will inform the bank if she gets remarried
(e) none of these
21. Pension Is required to be credited normally during the last 3-4 working (Jays of the month but for the
montfrof;
(a) October it is credited on 1st November (b) March it is credited on 1st working day of April
(c) December it is credited on 1 st January (d) June it is credited on 1 st July
(e) November it is credited on 1st December
22. Choose the incorrect statement(s) with regard to pension accounts :
(a) We can now issue cheque books in pension accounts and personal presence of pensioner for
withdrawal is not to be insisted upon
(b) We can accept standing instructions like LIC premium, transfer to recurring deposit account
payment of electricity, telephone bills etc. from pensioner
(c) A pensioner cannot exercise nomination in pension account opened in tfte bank as name of the
nominee is already available in P.P.O.
(d) all of these (e) none of these
23. When a pensioner commutes part of his basic pension, the commuted portion is resorted after:
(a) 15 years of date of retirement (b) 15 years from date of commutation
(c) 20 years from date of retirement (d) either (b) or (c), whichever is later
(e) after 20 years form date of commutation
24. Senior Citizens Savings Scheme ,2004 account can be opened by a Senior Citizen with :
(a) a Post Office (b) any branch of SBI or its Associate Banks
(c) any branch of a public sector or private sector bank
(d) any branch of a private sector bank operating PPF Scheme
(e) any branch of a public sector bank and private sector bank operating PPF Scheme and Post Office
25. Minimum age to be eligible for opening Senior Citizens Savings Scheme ,2004 account is;
(a)60 yea.3 (b)65 years(c)55 years fd) 50 years (e) either (a) or (c)
26. Senior Citizens Savings Scheme ,2004 account can be opened in the name of Senior Citizen:
(a) singly (b)jointly with a member of his family (c) jointly with spouse
(d) either (a) or (c) (e) either (a) or (b)
27. Maximum amount that a senior citizen can invest under Senior Citizens Savings Scheme ,2004 is :
(a) Rs 5 lakh (b) Rs 15 lakh (c) Rs 10 lakh (d) rs 20 lakh (e) no ceiling
28. There is a locker in the joint names of A and B and operated by either. A reports loss of key and stops
operation in locker and next day B comes with the key to operate the locker. What should the bank do?
(a) allow operation as it can be operated by either.
(b) allow operation only to A who has reported loss of key
(c) allow operation to both jointly (d) Don't allow operation to either or jointly
29. At the time of allotment of a locker, a bank may accept maximum fixed deposit equal to;
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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG - I, Paschim Vihar, New Delhi- 110063; Ph Oil 65476949, Oil 25274157,09350476949}

(a)3 years rent and charges for breaking open the locker
(b) 1 year rent and charges for breaking open the locker
(c)the amount interest on which will be equal to rent for one year (d) None of these
30. Gratuity Act ,1972 is applicable up to salary of;
(a) Rs. 2,500 p.m. (b) Rs. 3,500 p.m. (c) Rs. 7,500 p.m. (d) Rs. 6,500 p.m.(e) none of these
31. Under Gratuity Act, 1972, gratuity payable to an employee is at the rate of:
(a) >2 of the last dawn monthly salary for each completed year of service
(b) 5/26 of the last drawn monthly pay for each year of service or part thereof exceeding six months
(c) Vs of the last drawn monthly salary for each year of service or part thereof exceeding six months
(d) 15/26 of the last drawn monthly salary for each year of service or part thereof exceeding six months
(e) one month salary for each completed year subject to a maximum of 20 months
32. Gratuity payable to an employee under provisions of Gratuity Act which was subject to a maximum of
Rs,3.5 lac has been raised to:
(a) Rs.l.Slac (b) Rs.2 lac (c) Rs.lOlac (d) Rs.2.5 lac (e) Rs.Slac
33. Pension at full rate is payable after years of completed service.
(a) 28 (b)33 (c) 40 (d) 30 (e)25
34. Who of the following can stop payment of a DD?
(a) Purchaser (b) Issuing Bank (c) Payee (d) Drawee branch (e) None of these
35. Choose the correct statement(s) with regard to commutation of a part of pension :
(a) Only 1/3 of basic pension can be commuted
(b) Commuted portion of the basic pension is restored after IS years of commutation
(c) If a request for commutation is received after one year from date of retirement, It will be allowed
only after medical examination
(d) all of these (e) none of these
36. PPF account can be opened in the name of:
(a)an individual (b) an HUF (c)a Trust (d) a society (e) all of these
37. Official Languages Act, 1963(as amend^ in 1967) and the Official Language Rules(OLR), 1976
are applicable to:
(a)foreign banks (b) Indian private sector banks (c) Public sector banks
(d) all of the above (e) only(b)& (c )above
38. For the purpose of Official Language Policy, the various States/Union Territories have been classified
into three Regions - A,8 & C. The state of Maharashtra falls in Region.
(a) 8 (b) C (c) A (d) both (c) &(a) (e) none
39. Meeting of the Official Languages Implementation Committee should be held at least once In a:
(a)fortnight (b) month (c) quarter (d) half year (e) week
40. The banks have been advised to provide working knowledge of Hindi to all the staff-members in :
(a) Regions 'A' (b) Regions '8' (c) Regions'C
(d) Regions 'A' and '8' (e) all three Regions 'A','B' and 'C
41. Tax on interest on term deposits in banks is deducted at source if interest payable in a financial year is:
(a) Rs 10,000 & above (b) More than Rs 10,000 (c) More than Rs 5000 (d) None of these
42. In cash deposited by a valued customer, you find that one of the bank note is counterfeit. What will be
done?
(a) Note wiW be returned as customer is valuable
(b) Note will be returned but only after marking 'Counterfeit Note'stamp.
(c) Note will be Impounded and not returned at all (d) None of these
43. Duplicate DD has to be issued to the purchaser within;
(a) 14 days of the request (b) 14 days of completion of formalities
(c) 14 days of request provided formalities are completed (d) None of these

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block B6 • I, Paschtm Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

CHARGING OF SECURITIES AND DOCUMENTATION

INTRODUCTION
1. Charging a security means creating right of the creditor (bank) over the security so that in case of
default by the borrower, creditor (bank) can realize the security to recover its advance.
2. Fixed & Floating Charge: A charge could be fixed charge or floating charge. Fixed charge is created on
specific property like land, building etc whereas floating charge is an equitable charge over the assets of
the company. A floating charge crystallizes when the company ceases to be a going concern or the
charge holder (bank)initiates action to enforce security for recovery of the amount of loan.
3. IS*, and pari passu charge: When charge is created in favour of more than one creditor, then the
creditor in whose favour the charge was created earlier will have the first charge and any subsequent
charge will be called as 2^1^ charge and so on. If a charge is created in favour of several creditors with
the condition that all creditors will have equal priority in proportion to the amount of their advance it is
called as Pari passu charge. When consortium advance is granted this type of charge is created by the
borrower. In case of pan passu charge sale proceeds of the property are shared among creditors in the
proportion of their outstanding within sanctioned limits.

TYPES OF CHARGES
Charge on securities can be created by various methods depending on the type of security charged.
I
Nature of Charge T- -«^.
Type of Security
Defined in
Pledge Moveable Goods like stocks Sec 172 of Indian Contract Act
Hypothecation Moveable Goods like stocks, vehicles, Sec 2 of SARFAESI Act
Lien Moveable goods & security Sec 171 of Indian Contract Act
Mortgage Immovable Property Sec 58 of Transfer of Property Act
AQcinnmont

Type of Security Nature of charge

Stocks, vehicle, movable plant and machinery Pledge, Hypothecation, Lien
Land and Building Mortgage
Book Debt Assignment. Hypothecation
LIP, FDR, NSC. KVP, Supply Bill Assignment
Shares and Debentures Lien
Railv^ay Receipt Pledge

PLEDGE
1. Pledge is defined in section 172 of Indian Contract Act.
2. Pledge is the bailment of goods as a security for payment of a debt or performance of a promise.
3. Bailment is defined in Indian Contract Act.
4. Bailment means delivery of goods with some purpose and with the condition that when the purpose is
accomplished the goods will be delivered back to the bailor.
5. The essential ingredient of pledge is delivery or transfer of possession. The person who delivers the goods
is called as the pledger and the person to whom the possession is delivered (bank) is called as the pledgee.
6. In the case of pledge, the ownership remains with the borrower and possession is transferred to bank.
7. The pledge advances are also called as Lock & Key limits.
8. In case of pledge, the transfer of possession can be actual as in the case of physical delivery of goods
constructive as in the case of transfer of document of title of goods. The pledge can be created by owner of
goods, or the agent of the owner.
9. Obligations of bank as a pledgee: The bank as a pledgee must take care of the goods pledged as a
person of ordinary prudence would take of his own goods of the same value, bulk and quality. Bank is also
expected to return the goods when the loan is repaid, not to make unauthorized use of the goods pledged.
10.Rights of the bank as a pledgee: (i) Bank can sell the goods without intervention of the court in case the
pledger fails to repay the bank loan. But the sale can be done only after giving reasonable notice to the
pledgor. The obligation to give notice is a statutory obligation and bank cannot deny this obligation by
agreement with the borrower. While bank has a right to sell the goods, he is under no obligation to sell the
goods even if the goods may become out of date as in the case of medicines. If after sale of goods, some
debt is still outstanding, bank can file a suit for recovery of the same, (ii) Bank as a pledgee has priority in
right over the goods and Bank's right of sale under pledge cannot be extinguished even by lawful seizure of
goods pledged to it. The only exception to this rule is in case of wages and salaries of workers and in this
case the charge of the workers and the bank will be pari passu.

HYPOTHECATION
1. Hypothecation is defined in Section 2 of Sarfaesi Act.
2. Under hypothecation ownership as well as possession remains with the borrower i.e. neither
ownership nor possession is transferred to the bank.
3. Therefore, the major difference between pledge and hypothecation is on account of possession.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

4. In the case of Hypothecation nature of charge Is equitable charge. {Also referred as floating charge)
5. If goods in a show room which keep on changing are hypothecated to bank, the nature of charge is floating
charge.
6. Bank can take over possession of hypothecated goods either with the consent of borrower or by enforcing
rights under Sarfaesi Act.
7. When bank has definite information that the borrower is selling the goods with malafide intention, the bank
can bring criminal proceedings for breach of trust.
8. Hypothecation is preferred to pledge where it is not practicable or it is difficult to create pledgee. It is also
allowed where pledge can impede borrower's business.

ASSIGNMENT
1. Assignment is transfer of right or interest over actionable claims. The transferor of claim is called as the
assignor and the transferee is called the assignee.
2. As per Section 3 of Transfer of Property Act Actionable Claim means a claim to any debt other than debts
secured by mortgage, hypothecation, pledge, or to any beneficial interest in immovable property, which is
not in one's possession. The debt or beneficial interest could be present or future, conditional or contingent.
3. Assignment is done on unsecured debts like Book Debts, Supply Bills, LIC policy, fixed deposit etc.
4. Assignment can be done only through an instrument in writing, signed by transferor or his agent, clearly
indicating his intention to transfer. A notice of assignment should be sent to the debtor so that debtor
becomes liable to the assignee. As per sec. 131 of Transfer of Property Act, the notice of assignment must
be in writing and should be signed by the assignor/his agent. However, if the assignor refuses to send such
notice, assignee may send the notice of assignment indicating the refusal of the assignor to sign the same.
5. Charge on book debts can be created by way of assignment or hypothecation.

MORTGAGE
1. Mortgage is defined in Section 58 of the Transfer of Property Act.
2. Mortgage is the transfer of interest in a specific immovable property, for the purpose of securing an existing
or future debt or for the performance of an engagement which may give rise to a pecuniary liability. The
person creating the mortgage is called as the mortgagor and the person in whose favour mortgage is
created (bank) is called as the mortgagee.
3. Immovable property, means land and things attached or permanently fastened to the earth.
4. Types of Mortgage: There are six types of mortgages namely (i) Simple Mortgage (ii) Mortgage by
Conditional Sale (iii) Usufructuary Mortgage (iv) English Mortgage (v) Mortgage by Deposit of title Deeds
(Equitable Mortgage) and (vl) Anamalous Mortgage. Of these, all mortgages except Equitable Mortgage
require registration with the Registrar of Assurances.
5. Registered Mortgage: In the case of registered mortgage (also called legal mortgage)first a mortgage deed
is written which is stamped as per Stamp Act of the concerned state. The deed Is then executed in the
presence of two witnesses. Thereafter, in terms of the Indian Registration Act 1908, it is to be registered with
the Registrar of Assurances(Sub Registrar) within 4 months of the execution.
6. Simple Mortgage: In simple mortgage the mortgagor makes himself personally liable to pay the debt and
agrees that in the event of failing to pay according to his contract, mortgagee can get the property sold
through the intervention of the court. If after sale of property some debt is still outstanding, the borrower shall
be personally liable for the outstanding amount. Neither the possession nor ownership of the properly is
transferred to the mortgagee. The mortgagee cannot exercise the right of foreclosure.
7. Mortgage by Conditional Sale: The mortgagor ostensibly sells the property to the mortgagee upon the
condition that if the debt is paid in time the property wilt be transferred back to him and in case of non
payment within the specified time the transaction would become a real sale. There is no personal liability of
the mortgagor. In case of default, the mortgagee can exercise his right of foreclosure through court.
8. Usufructuary Mortgage: In this mortgage, possession of the property is transferred to the mortgagee. The
mortgage money is recovered through income of the mortgaged property. Mortgagee is entitled to retain
possession over the property and io recover his dues from the income accruing there from and has no right
to sue the mortgagor in his personal capacity or file suit for sale of mortgaged property. He also does not
have right to sue for foreclosure.
9. English Mortgage: As in the case of simple mortgage, the mortgagor undertakes personal liability to pay
the debt. He transfers the ownership of mortgaged property to the mortgagee upon a condition that property
must be transferred back to him on payment of debt. Mortgagee can sell the mortgaged property even
without the intervention of court provided the mortgagor or mortgagee is not a Hindu, Mohammedan or
Buddhist or member of a notified race, sect, tribe, or class and the mortgaged property is situated in any
presidency town (Calcutta, Bombay, Madras) or any town duly notified by State/Central Government (Sec.
69 of the Transfer of Property Act). In English Mortgage there is no right to sue for foreclosure.
Equitable Mortgage
1. Equitable Mortgage is called as Mortgage by Deposit of Title Deeds.
2. It can be created by mere deposit of title deeds of property with intention to borrow.

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 A K GUPTA S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vlhar, New Delhi - 110063; Ph Gil 6S476949,Oil 25274157,09350476949)

3. Title deeds should be deposited at Mumbal, Kolkatta, Chennai or any other town notified by the State
Government in this regard. It is not necessary that the title deeds should be deposited with the branch or at
the place where the loan is being raised. These can be deposited anywhere in India at a notified place. In
exceptional circumstances, mortgagor can deliver the title deeds to an authorized representative of the bank
at mortgagor's residence or other place provided it is in a Notified Centre. In such cases, the narration in the
title deed register and confirmation memorandum may be suitably modified.
4. The property may be located anywhere in India which can be mortgaged.
5. The title deeds may be deposited by the mortgagor himself or his agent.
6. Equitable Mortgage does not require registration with Registrar of Assurances. But in case of a limited
company, charge in respect of equitable mortgage must be registered with Registrar of Companies
7. All equitable mortgages in favour of banks should be registered with CERSAI within 30 days of the deoosit
of title deeds.
8. In certain states like Maharashtra, Gujrat the stamp duty is levied even in case of Equitable Mortgage
9. A title deed can be a sale deed, lease deed, partition deed, gift deed, deed of assignment deed of
relinquishment, or such other documents. Agreement to sale is not a title deed.
10.Normally a bank should insist for original title deeds but in exceptional cases equitable mortgage can be
created even by certified copy of the title deeds provided there is conclusive proof that original are destroved
or irretrievably lost.
11.While accepting the title deeds from the mortgagor, no agreement is put in writing. However, to ensure that
the title deeds were deposited with an intention to secure a debt, a recital is made in the Title' Deed Register
recording fact of deposit of title deed which is signed by bank officials. Further, a letter of confirmation
should be obtained from the mortgagor after the deposit of title deeds.
12.Property located in cantonment areas should not be accepted for equitable mortgage, without clearance
from cantonment authorities.
la.The bank should not part with the title deeds even for a short duration at the request of the mortgagor
because if some other creditor is induced to finance on the basis of title deeds, the bank may lose orioritv
over the mortgaged property. ^ y
Legal Audit of title documents in respect of large value loan accounts: The concurrent auditors should
look into and report, inter alia, on the genuineness of the title documents especially for large value loans. Banks
should also subject the title deeds and other documents in respect of all credit exposures of Rs 5 crore and
above to periodic legal audit and re-verification of title deeds with relevant authorities as part of reaular audit
exercise till the loan stands fully repaid.
Legal Opinion and Search Report; Before accepting mortgage of immovable property, legal opinion should be
obtained that the property is fit for mortgage and search should be conducted in the records of Registrar /Sub
Registrar for at least 12 years to ensure that the property Is free from prior encumbrance.
Priority of Mortgage: The priority of the mortgage is considered from the date of execution of the mortgage
deed (in the case of registered mortgage) or from the date of creation of mortgage by deposit of title deeds.
Ihus, the priority is reckoned from the date of creation of mortgage and not with reference to the type of
mortgage or date of registration. For example, a mortgage deed was executed on 7th April 2010 in favour of
Modern Bank and was registered on 11th April 2010. In the meantime, on 10th April 2010, the owner deposited
the title deeds with Lakshmi Bank to secure a debt thus creating equitable mortgage over the property In this
case, the mortgage in favour of the Modern Bank will have priority.
Right of Redemption: Right of the mortgagor to get back his mortgaged property on repayment of the loan is
called as the right of redemption. '
Right of foreclosure; The right of the mortgagee to deny the mortgagor of the property to exercise his right of
redemption i.e. debarring the mortgagor for ever to get back the mortgaged property is called as the right of
foreclosure. This right is available to the mortgagee in case of mortgage by conditional sale.
III. TYPE OF SECURITIES
1 Trust receipt means a document containing promise from the borrower to hold goods or their sale proceeds
as trustee for the banker. Advances against trust receipts are treated as clean advances.
Document of title to goods includes railway receipt, bill of lading and MTR (by practice),
Warehousekeeper's receipt, wharfinger's certificate. Advances against these are actually pledge advances
as bank has constructive possession of goods. Airway Bill or Air consignment note is not a document of title
to goods.

Advance against Shares: Following points should be considered white granting advance against shares:
(a) As per section 19(2) of the Banking Regulation Act, no banking company is permitted to hold shares of
a particular company whether as pledgee, mortgagee or absolute owner for an amount beyond 30% of
the paid-up capital of the company or 30% of its own paid-up capital and reserves whichever is lower.
RBI has now reduced the same to 10% of paid up capital of the company or 10% of the paid up capital
and reserves of the bank whichever is lower in case of ownership of shares by a bank in a company.
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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 2S2741S7, 09350476949)

(b) As per Sec.20 {1){a) of the Banking Regulation Act, a bank cannot grant loans against its own shares.
(c) Bank should not grant advance against security of partly paid shares because these represent
contingent liability. Moreover, it is prohibited by RBI.
(d) Amount of advance: Loans against the security of shares from the banking system, should not be more
than Rs 10 lakh per borrower if the shares etc are held in physical form and not more than Rs 20 lakh
per borrower if these are in dematerialised form.
(e) Margin: Minimum margin of 50 percent of the market value of equity shares/convertible debentures held
in physical form. For demat shares margin is 25%. RBI has given freedom to banks to stipulate margins
on loans to individuals against preference shares/bonds/debentures of corporate bodies.
(f) Valuation: Shares/debentures/bonds should be valued at prevailing market prices when they are lodged
as security for advances.
(g) In case advance is granted to an employee for purchase of shares of his own company, then the
amount of advance can be up to 90% of the value.
(h) Advances to Brokers: Share and stockbrokers may be provided need based overdraft facilities/line of
credit against shares and debentures held by them as stock-in-trade. The ceiling of Rs.10 lakhs/Rs.20
lakh for advances against shares/debentures to individuals will not be applicable in the case of share
and stockbrokers and the advances would be need based. Minimum 50% margin be maintained for
guarantee issued on behalf of Brokers of which at least 25% should be cash margin.

4. Advance against supply bills: Supply Bills or Receipted Challan are not document of title goods. These
are in the form of invoice regarding goods supplied for which payment is yet to be received. A limit against
the security of supply bills is granted to contractors or suppliers of goods to Government/Semi-Government
department or Corporation. Banks get irrevocable power of attorney for receiving proceeds of supply bills
direct from Government department and get it registered with department or Corporation.

5. Advance against Life Insurance Policy: Bank prefer advances against LIP as these can be easily
assigned in favour of the bank, the value does not fluctuate wildly, it is easy to ascertain the value of the
security. Generally advances are granted against life insurance policies issued by LIC. However, advance
can also be granted against life policies issued by private sector companies. While granting advance,
following points should be considered:
(a) Advarice should be allowed against endowment policy i.e. a policy which matures for payment atter the
specified period or on the death of the insureci whichever is earlier. Banks generally do not prefer
Whole life policies (because the money will be paid by the company on the death of the insured).
Policies issued under Section 6 of Married Women Properties Act 1874 (because it is issued for the
benefit of wife/children and can not be assigned in favour of the bank.
(b) The amount of loan is linked to the surrender value of the policy and not to its face value or paid up
value. Surrender value means amount payable by the insurance company, upon surrendering the
policy. A policy normally has no surrender value before completing three years. Therefore, banks do not
grant advance against LIP before it has run for at least three years.
(c) It should be ensured that the policy against which loan is to be sanctioned Is in force, premium has
been paid regularly, that the age of the assured has been admitted by the Insurance company and is
not already assigned in favour of some other creditor. Last premium paid receipt should be obtained to
ensure that the premium has been paid regularly.
(d) Life insurance Policy is charged to bank by way of assignment. The policy should be assigned in
favour of the bank on the policy itself and be witnessed by a person. Besides assignment on the policy,
a notice of assignment signed by the policyholder addressed to the company should be obtained. The
policy carrying assignment along with the notice of assignment should be sent to the insurance
company for registration of the assignment.
(e) There is no role of nominee while granting advance against LIP. The assignment is to be done by the
assured only. In fact, on assignment in favour of the bank, the nomination made under Sec. 39 of
Insurance Act 1938 gets automatically cancelled. When the loan Is adjusted, reassignment is done in
favour of the assured and he is required to make fresh nomination.

Margin: Margin is the cushion against decline in value of securities as also borrower's stake in the business.
Drawing Power is calculated after deducting margin from value of goods. For this purpose, market value or
cost price whichever is lower is considered. Drawing power may workout to be more than limit then it is
called as notional drawing power but it is limited to the sanctioned limits.

Insurance: Goods are insured for their full value otherwise average clause will be applicable. Average clause
means that if goods are under insured then in the case of damage to goods, claim will be proportionately.

GUARANTEE
1. Guarantee is defined in section 126 of Indian Contract Act.
2. There are three parties to a contract of guarantee namely principal debtor, creditor and surety.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (7S, Block BG -1, Paschim Vihar, New Delhi - 110063;Ph Oil 6S476949,Oil 2S274157,09350476949)

3. The contract of guarantee is not a contract of utmost good faith. Therefore, bank is not supposed to disclose
all information regarding loan account being guaranteed. However, if the surety makes specific enquiry bank
must disclose facts to surety otherwise he can avoid liability.
4. A Guarantee which is for a single transaction like term loan is called specific guarantee. A Guarantee for
series of transactions like in cash credit or overdraft is called continuing guarantee.
5. The liability under guarantee is a contingent liability and surety is liable on default by the principal debtor.
Once there is a default, the liability of the surety is co extensive with the principal debtor.
6. When on default by principal debtor, a guarantor makes payment on being called by the creditor, he
becomes entitled to all rights and remedies which creditor had against the principal debtor. This right of the
surety is called Right of Subrogation.
7. If a surety revokes guarantee then he will be liable for the amount outstanding in the account at the time of
revocation and interest thereon. However, if guarantee is continuing like in case of cash credit, surety is
required to issue notice and he will be liable for the amount outstanding in the account on the expiry of
notice period and interest thereon.
BANK GUARANTEE
Bank Guarantees are of three types namely (a) Financial Guarantee (b) Performance Guarantee (c) Deferred
Payment Guarantee.
Financial Guarantee: When a customer of the bank is required to deposit some amount with court or revenue
authority or earnest money and guarantee is issued in lieu of such money, it is called Financial guarantee.
2- Performance Guarantee: This type of guarantees are meant for performance of contracts entered into by the
customers.
3- Deferred Payment Guarantee: This type of guarantee is issued when the bank's customer purchases some
machine etc on deferred payment basis and that payment is guaranteed by the bank. Following points are to be
noted in this regard.
1. Deferred payment guarantee is a type of financial guarantee.
2. Both bank and the purchaser of machinery prefer this type of guarantee as neither is required to part with
funds immediately.
3. Basic difference between Term Loan and Deferred Payment Guarantee is on account of outlay of funds In
term loans funds are disbursed immediately whereas in case of DPG, bank is required to make payment
when the purchaser of machinery defaults
4. Appraisal df the DPG proposal is done just like that of a term loan
4. Maximum period for guarantee: Generally maximum period can be up to 10 years. However, banks have
been allowed to issue guarantee for more than 10 year also.
Liability, of Bank: In the case of guarantee, the liability of bank is contingent liability and it is shown as a
footnote to the Balance Sheet.
Limitation period in a guarantee: As per amendment to Section 28 of Indian Contract Act, limitation period for
enforcing claims under Bank guarantee is 3 years (30 years in case of Govt) from the date of invocation or
stipulated expiry date whichever Is earlier.

DOCUMENTATION FOR ADVANCES

Bank obtain documents from the prospective borrowers to establish rights for recovery of loan, as an evidence
of debt, for stating terms and conditions of loan and for charging of securities of the borrower/guarantor In
favour of the bank. The following points are relevant regarding execution of documents:
1. The type of document that should be obtained from the borrower depends on the type of limit i.e. CO Term
Loan etc, type of security i.e. stocks, vehicles etc.. type of charge i.e. pledge, hypothecation etc and the
type of borrower i.e. individual, partnership etc.
2. The execution of documents means signing, attesting, witnessing wherever required of a document to
establish a contractual relationship. Therefore, the parlies executing the document should be competent to
contract, and it should be executed with free consent.
3. Date and Place: The date and place on the document should be the one on which the documents have
been executed and place where documents have been executed. In case, there are more than cne
executants, then they should be requested to sign the document at one place and on same date. In case it
is not possible, then each executant should put place and date under his signatures.
4. Any cutting, overwriting, alteration, addition in the document should be authenticated under full signatures
of all the executants.
5. In case the executant is an illiterate person or a blind person or he signs in a vernacular language, a
declaration should be obtained from an independent person to the effect that the documents have been
read out to the illiterate/blind persona and that he has put his thumb impression or signatures after
understanding the same.
6. In tne case of partnership firm documents should be signed by all major partners in their capacity as partner
and in their individual capacity to make them jointly and severally liable. In the case of HUF, documents
should be signed by the Karta in his capacity as Karta. Signatures of major co parceners should also be
obtained to make them personally liable. In the case of joint stock companies i.e. limited companies, the
documents will be executed by the persons authorized by the resolution passed by the Board of Directors. If
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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -1, PascMm Vihar, New t5elt>i - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

there is requirement of common seal that also will be affixed in the presence of official authorized by Board
Resolution.
7. Document requiring witnessing/attestation must be witnessed because if is not witnessed then it will not be
treated as executed. As per Sec 3 of the Transfer of Properly Act, attestation means attestation by two or
more witnesses each of who has seen the person executing or signing the instrument. The documents
which require attestation are mortgage deed, gift deed, a will, power of attorney, assignment. The
document which does not require attestation should not be attested as it may be treated as bond and may
attract ad valorem stamp duty.
8. A letter of continuity is required in the case of running CC or OD accounts to stop operation of Rule in
Clayton's case.
Stamping of Loan Documents
1. Indian Stamp Act extends to whole of India except Jammu & Kashmir.
2. There are certain documents on which stamp duty is prescribed by Central Government. These documents
are Promissory Note, Bill of Exchange, Cheque, Bill of Lading, Letter of Credit, Share Transfer Form,
Debenture, Proxy, Insurance Policy and Money receipts. Therefore, duty on these documents will be same
throughout India except J&K. On all other documents, the stamp duty rates are prescribed by the State
Govt. Such documents are Power of Attorney. Agreements, Guarantee Bond, Indemnity Bond etc.
3. Stamp Duty on Different Instruments;
a) Demand Promissory Notes:
DPN Amount Stamp value
Not exceeding Rs. 250 Five paise
Exceeding Rs. 250 but not exceeding Rs. 1000 Ten paise
Exceeding Rs. 1000/- Fifteen paise
b) Demand Bill of Exchange: No stamp duty is payable
c) Usance Promissory Notes/Usance Bills: The amount of stamp duty depends on period of usance and
the amount of the bill. However, Bills of exchange with usance not exceeding three months drawn
on/drawn by/made in favour of a commercial bank/cooperative bank and representing a genuine
transaction are completely exempted from stamp duty.
d) Receipts: For money or property with value above Rs. 5000- Rs One.
4. Documents which require stamping should be stamped before or at the time of execution.
5. If adhesivfe stamps are used on any document, these must be effectively cancelled by signing across the
stamp or In some other effectual manner. If these are not cancelled effectively, the document will bs treated
as unstamped.
6. If a document is unstamped or under stamped, It will not be admissible in a court of law. Such documents
can be validated by payment of deficit stamp duty and penalty. The amount of penalty can be up to 10
times the deficiency subject to a minimum of Rs 5.
7. Document executed in different states: Where a document is to be executed oy persons in different States,
it must bear the stamp duty as applicable in the State where the first person signs the document. In case
the stamp duty is more in the second State then the difference is to be paid before it is signed by the person
in the second State. Where one of the States is Jammu & Kashmir, full stamp duty applicable to both the
States are payable.
8. Documents executed outside India: If a document other than a promissory note or bill of exchange is
executed outside India, it should be stamped as per Indian Law within three months after their first receipt
in India. Therefore, documents like a power of attorney or an Agreement executed outside India must be
stamped within three months of their first receipt in India. In the case of A promissory note or a usance bill
of exchange is executed outside India, it should be stamped by its first holder in India before presenting
the same for acceptance, payment, or negotiation.

Limitation of Loan Documents

1. Law relating to limitation is contained in the Limitation Act, 1963 which is applicable to whole of India except
Jammu & Kashmir.
2. Period of Limitation : It is the time limit within which legal remedy can be sought in a court of law to enforce
the right. The limitation period bars the remedy of filing a suit but does not take away the right or recovering
the debt. Therefore, there is no limitation period in case of pledge or lien or set off.
3. Date of execution of a document is excluded tor the purpose of ascertaining limitation period of a document.
Thus, a suit based on a DPN dated 5.4.2007 can be filed latest by 5.4.2010.
4. If the courts are closed on the day the limitation period expires, case can be filed on the day the court
reopens
5. While calculating limitation period, the period for which the executant was out of India should be excluded.
6. Prescribed period of limitation cannot be extended / waived by mutual agreement.
7. The banker's right of general lien / set-off / sale of pledged goods is not barred by the law of limitation.
There is no limitation period for resorting to these methods / remedies. The legal remedy i.e. the right of
suing the borrower in his personal capacity can be sought only within the prescribed limitation period .

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

Extension of Period o< Limitation: Period of limitation can be extended by Acknowledgement of debt or
part payment. In both cases, limitation period will start from the date of acknowledgement or part payment;
The acknowledgment or part payment should be by the borrower himself or his agent specifically authorized
for this purpose; Acknowledgement or part payment should be before the expiry of limitation period. Once
the limitation expires it can not be extended by part payment or acknowledgement of debt; The stamped
acknowledgement of debt by the borrower before the expiry of documents does not automatically extend
the period of limitation against the guarantor. Similarly, the acknowledgement of debt signed by the
principal debtor and a surety does not bind another surety who has not joined in signing the
acknowledgement / revival letter of debt; An admission of debt in the balance sheet filed by a firm before
the I.T. Authority also extends the period of limitation from the date of (signing) the balance sheet. Such an
acknowledgement does not require to be stamped. The balance sheet, constitutes sufficient
acknowledgement of debt in writing; In case limitation expires in a particular case, the liability can be
revived by obtaining fresh promise to pay the outstanding debt. As per section 25 (3) of Indian Contract Ac,
a time barred debt is a valid consideration. Limitation period of various documents is given below:
Description Period of Limitation
Temporary Overdraft without DPN 3 years from date of loan
Demand Loan 3 years from the date of loan
Demand Promissory Note 3 years from date of DPN
Bill of exchange payable on demand 3 years from date of Biil.
Usance bill of exchange or promissory note 3 years from the due date of the bill or promissory note
Term Loans payable by instalments where creditor has no 3 years from due date of each instalment
right to recall the advance for the reason of default
Mortgage 12 years from the due date of the loan
Right of foreclosure by the mortgagee 30 years from the date when money became due
Right of redemption 30 years from the date when the right to recover accrues
For the balance due on a mutual, open and current account 3 years from close of the financial year in which last item
entered in the account is admitted or proved
Any suit by State/Central Government 30 years from the date when limitation would start
Money deposited payable on demand like SB ,Current A/c 3 years from date of demand
Appeal to be filed to High Court against the judgement of 90 days from the date of decree
Lower Court.
Appeal to be filed to other courts on the decree at Lower 30 days from the date of decree
Court
Execution of Decree 12 years from the date of decree
Recovery of loss caused by fraud 3 years from the date of detection of fraud

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

TYPES OF SECURITY: PLEDGE: HYP; MORTGAGE: ASSIGNMENT

1. Primary security means :
(a) security In the form of equitable mortgage of land (b) security against which the borrower was
financed
(c) security in the form of third party (d) in addition to security which bank has financed (e)any of the
above
2. Which of the following is not a document of title to goods ?
(a) Bill of Lading (b) Railway Receipt (c) Dock Warrants (d) Airway Bill (e) none of the above
3. While making an advance against bill of lading the banker must ask for:
(a) original copy of bill of lading (b) duplicate copy of bill lading
(c) duplicate and triplicate copy of bill of lading (d) all the negotiable copies of bill of lading
(e) copy of bill of lading which is stamped as per Stamp Act.
4. Mr A requests OBC for a loan of Rs. 2 lakhs against shares of that bank itself having market value of Rs.
5 lakhs. The bank can ;
(a) grant the advance after approval of their controlling office
(b) grant the advance after approval of RBI as required under Banking Regulation Act.
(c) grant him advance only upto 25% of the market value (d) either (a) or (c) above (e) none
5. As per guidelines of RBI, banks can grant advance against marketable corporate securities in physical
form for genuine personal needs to individual customers not exceeding:
(a) Rs.10 lakh (b) Rs.20 lakh (c) Rs. 5 lakhs (d) Rs. 50 lakhs (e) none of the above
6. The minimum margin to be kept in the case of advance against shares in dematerialised form is :
(a) 20% (b) 25% (c)40% (d)50% (e) none of the above
7. Which life policy would you prefer while granting advance against it ?
(a) policy issued under Married Women's Property Act (b) endowment policy
(c) education policy (d) whole life policy (e) none of the above
8. Amount of advance against life insurance policy is sanctioned by considering :
(a) surrender value of policy (b)the premia paid by the insured person
(c) the sum assured (d) repaying capacity of the borrower (e) all above
9. Advances against 'Supply Bills' are treated as :
(a) partly secured (b) fully secured (c) clean (d) pledge advances (e) both (b)and (d)
10. Docume'ntary bills are the bills which are :
(a) accompanied by documents of title to goods (b)accompanied by demand promissory note
(c) payable after a certain specified period (d) accompanied by invoice and bill of exchange
11. Provisions relating to guarantees are given in:
(a) Tran.sfer of Property Act, 1882 (b) Indian Contract Act, 1872
(c) RBI Act, 1934 (d) Banking Regulations Act 1949 (e) None of the above
12. The number of parties in the case of a contract of indemnity and guarantee respectively are:
(a)2 &3 (b)3 &2 (c)3 & 3 (d) either (a) or (b) (e) none
13. A contract of insurance is a contract of
a) Guarantee b) Indemnity (c) both (a)& (b)
d)can be treated as (a)or(b) at the option of the insured (e) None
14. In case a banker releases the principal debtor(PD)from liatiility :
(a) the bank can't recover amount from guarantor as he is also discharged of liability
(b) the bank can recover amount from guarantor as guarantor's liability is co-extensive with P.D.
(c) the bank can recover amount from guarantor as guarantor's liability is independent of the liability of the
Principal Debtor
(d) the bank can't recover amount from guarantor but guarantor's property remains liable for repayment of
loan (e) none of the above
15. In case a loan is repaid by the guarantor on default by the principal debtor, the guarantor :
(a) can recover the amount from principal debtor
(b) is entitled to all securities in the possession of the creditor
(c) can recover the amount from principal debtor but is not entitled to securities in the possession of the
creditor (d) both (a) & (b) above- (e) None of these
16. In case of default by the Principal Debtor, the bank (creditor) can file a suit against
(a) First against the principal debtor and then against surety
(b) First against the surety and then against principal debtor
(c) Both principal debtor and surety simultaneously
(d) Not necessarily against the principal debtor (e) Both (c) & (d)
17. A bank guarantee covering a single transaction is referred to as :
(a) specific guarantee (b) performance guarantee (c) deferred payment guarantee
(d) fixed guarantee (e) none of the above
18. A continuing bank guarantee is one which :
(a) continues till revoked (b) covers a single transaction (c) covers a series of transactions
(d) cannot be revoked (e) none of the above

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

19. Deferred payment guarantees fall in the category of;

(a) performance guarantees (b)counter guarantees (c) bid bond guarantees
(d) financial guarantees (e) either (b) or (d)
20. In the event of guarantee issued by the bank being Invoked the bank should make payment:
(a) after obtaining permission from next higher authority
{b)after obtaining approval of their advocate
(c) immediately unless restrained by the court of law
(d) after obtaining consent of principal debtor (e) none of the above
21. The liability of a guarantor under the guarantee :
(a) arises even if the borrower is not asked to repay the borrowings
(b) arises after bank has exhausted all remedies against the principal debtor
(c) is co-extensive with that of the principal debtor
(d) is crystallised the moment the advance is disbursed (e) none of the above
22. Counter-guarantee means :
(a) guarantee obtained from a third party
(b) guarantee executed by the applicant in favour of the bank who has issued guarantee on his account
(c) intimation regarding cancellation of the guarantee issued by the bank
(d) letter issued by the beneficiary confirming receipt of guarantee documents
(e) revocation of guarantee by the concerned bank
23. Negative lion means :
(a) right of the banker to convert hypothecation into pledge in the event of default by the borrower.
(b) a declaration from the borrower to the effect that assets offered as security are free from any charge
or encumbrance and that he will not create any charge over them without permission of the bank
(c) as good as lien (d) all above (e) none of the above
24. On which of the following securities charge can be created by way of Mortgage
a) Stocks b) Land & Building c) Debtors d) Vehicles e) NSC
25. The charge on movable assets can be created by
a) Pledge b) Hypothecation c) Lien d) Both (a) & (b)e) All of these
26. The charge on immovable property can be created by
a) Pledge b) Hypothecation c) Lien d) Mortgagee) Assignment
27. Pledge is defined in
a) Indian contract Act b) Transfer of Property Act c) Negotiable Instruments Act
d) Limitation Act e) SARFAESI Act 2002
28. Hypothecation is defined in
a) Indian contract Act b) Transfer of Property Act c) Negotiable Instruments Act
d) Limitation Act e) SARFAESI Act 2002
29. Mortgage is defined in
a) Indian contract Act b) Transfer of Property Act c) Negotiable instruments Act
d) Limitation Act e) SARFAESI Act 2002
30. Pledge which is defined in section 172 of the Indian Contract Act means
a) Bailment of goods b) Bailment of goods to guarantee a loan
c) Bailment of goods as security for payment of debt or performance of a promise
d) Both (b) & (c) e) none of these
31. Which of the following is correct?
a) Every bailment is a pledge b) Every pledge is a bailment
c) Pledge can be created in respect of book debts d) both (a) & (b)e) none of these
32. Which of the following is correct in case of pledge
a) Ownership remains with borrower but possession is with bank
b) Both ownership and possession remains with borrower
c) Both ownership and possession are transferred to banker
d) Possession is with borrower but ownership is transferred to the bank e) none of these
33. In case of advance against pledge of stocks, the delivery of goods can be
a) actual b) constructive c) symbolic d) any one of these e) none of these
34. Which of the following is correct about hypothecation?
a) Ownership remains with borrower but possession is with bank
b) Both ownership and possession remains with borrower
c) Both ownership and possession are transferred to banker
d) Possession is with borrower but ownership is transferred to the bank e) none of these
35. The difference between pledge and hypothecation is on account of
a) valuation b) ownership c) possession d) both (b) &(c) e) all of these
36. Who of the following can create a valid pledge?
a) actual owner of goods b) pledgee of goods for subsequent pledge
c) Seller in possession of goods after sale without notice of the banker
d) One of the joint owners with the consent of other owner e) All of these
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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75. Block BG • 1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

37. In case of advance against goods, drawing power is calculated by

a) deducting margin from market value of stockb) deducting margin from cost price
c) deducting margin from market value or cost price which ever is higher
d) deducting margin from market value or cost price which ever is lower e) none of these
38. In case of advance against shares, the drawing power is calculated by minus margin
a) face value b) market value c)face value or market value which ever is lower
d) face value or market value which ever is high e) none of these
39. A borrower was sanctioned a limit of Rs.1.5 lac against pledge of stocks with margin of 25%. How much
stocks should be pledged with the bank to avail maximum limit?
a) Rs.200, 000b) Rs.18, 7500 c)Rs.112, 500 d)Rs.175. 000 e) none
40. Which of the following is not the duty of the banker as a pledgee?
a) To take care of goods pledged as a person of ordinary prudence would take of his goods of the same
value, quantity, and bulk
b) Not to make unauthorized use of goods
c) To return the goods when purpose is accomplished but he can retain any accretion to goods pledged
d) Not to mix his own goods with that of the borrower e) none of these
41. Advance was given to a borrower against pledge of stocks. The loan has gone bad and bank wants to sell
the stock. On a scrutiny of documents, it is observed that borrower has given authority to bank to sell
stocks without notice to borrower. How shall bank deal with the situation?
a) Bank can sell the goods only with the permission of the court
b) Bank can sell the goods without intervention of the court but after notice to borrower
c) Bank can sell the goods without intervention of court and without any notice to the borrower
d) Bank can sell the goods without notice to borrower but only after obtaining permission of the court
e) None of these
42. Lakshmi Bank sold the goods pledged to it after notice to borrower when the outstanding amount was Rs
4 lac. The amount realised was Rs 5 lac. What action should be taken by the bank?
a) Bank can retain balance of Rs.1 lac and treat it as income
b) Bank should keep the amount in sundries and await instructions from controlling authority
c) Bank should adjust the outstanding and return the balance to the borrower
d) Either (b) or (c) e) none of these
43. Bank haS sanctioned a limit of Rs. 4.50lakhs to a party who is normally maintaining stock of Rs. 6 lakhs at
25% margin. The stocks should be insured upto:
(a) balance outstanding in the account as on the date of getting insurance cover (b) full value
(c) limit sanctioned (d) 25% more than the value of stock (e) either (a) or (c)
44. Mortgage is defined in section of the Transfer of Property Act
a) 170 b) 130 c) 58 d)131 e) none of these
45. In case of mortgage, the person creating the mortgage is called as and the person in whose favour
mortgage is created is called as
a) Mortgagee, mortgagor b) Assignor, Assignee c) Mortgagor, Mortgagee
d) Assignee, Assignor e) Pledgor, Pledgee
46. Which of the following is incorrect about Mortgage?
a) Mortgage can be of land, Building, Machinery Embedded to earth
b) Mortgage can be done for an existing or future debt
c) Mortgage involves transfer of interest in specific immovable property
d) The intention for mortgage is to secure payment of a loan e) none of these
47. In which of the following mortgages possession is transferred to mortgagee
a) Simple mortgage b) Equitable Mortgage c) Mortgage by conditional sale
d) Usufructuary mortgage e) none of these
48. Which of the following mortgage is created by deposit of title deeds?
a) Simple mortgage b) Equitable Mortgage c) Mortgage by conditional sale
d) Usufruuiuary mortgage e) none of these
49. Which of the following mortgage does not require registration with Registrar of Assurances?
a) Simple mortgage b) Equitable Mortgage c) Mortgage by conditional sale
d) Usufructuary mortgage e) none of these
50. In which of the following mortgages, mortgager is personally not liable?
a) simple mortgage b) equitable mortgage c) English mortgage
d) mortgage by conditional sale e) none of these
51. In which of the following types of mortgage, right of foreclosure is available to mortgagee?
a) Simple Mortgage b) Equitable Mortgage c) Mortgage by conditional sale
d) Usufructuary mortgage e) none of these
52. In which of the following mortgages, repayment of the loan is made out of the proceeds of rents and
profits accruing from the mortgaged property?
a) Simple Mortgage b) Equitable Mortgage c) Mortgage by conditional sale
d) Usufructuary mortgage e) none of these
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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG -1, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949,Oil 25274157,09350476949)

53. Equitable Mortgage can be created by deposit of title deeds at

a) Calcutta, Madras and Bombay b) any town notified by state Govt. in official gazette for this purpose
c) any town notified by RBI for this purposed) either (a)or (b) e)either (a) or (c)
54. For creating equitable Mortgage, title deeds can be deposited by
a) Mortgagor himself b) Authorised agent of the Mortgagor
c) Mortgagee d) either (a) or (b) e) All of these
55. Which of the following is not true about Hypothecation of stocks?
a) Borrower can sell the goods hypothecated and substitute the same by new stocks
b) Borrower undertakes to hand over the possession of security when asked by the bank
c) Borrower holds the hypothecated goods as a trustee for the bank
d) The bank can take the possession of stocks and convert hypothecation into pledge if the borrower does
not co-operate and hand over the possession e) None of these
56. The charge by way of Hypothecation is
a) an equitable charge b)fixed charge c) innocuous charge d) running charge e) none
57. In the context of bank lending, floating charge stands for:
(a) charge created on any goods that can float on water (b)charge created on sailing ships or vessels
(c) a charge not on any particular item but general items of the borrower (d) either (a) or(b)
58. In case of a loan granted by more than one bank by creating Pari passu charge on the same security it
means "
a) Bank, which had given loan earlier, will have priority over the security
b) All banks will share the sale proceeds of security equally on default by borrower
c) Ail banks will have charge on the security in proportion to their outstanding advance
d) A charge which is not required to be registered with Registrar of companies e) none of these
59. When a hypothecation is converted to pledge, the creditor(banks) gets the rights of a
a) pledgee b) owner c) hypothecatee d) both (a) &(b) e) all of(a)(b)& (c)
60. In case, the borrower who had pledged the goods as security does not repay the loan the bank as a
pledgee may take which of the following actions?
a) bring a suit against the pledger b) retain the pledged goods as a security
c) sell the goods pledged after giving the pledger reasonable notice of sale
d) both (a)& (b) e) all of these
61. A charge on the book debts of the borrower is created by
a) Assignment b) Pledge c) Mortgage d) Hypothecation e) Either(a) or(d)
62. In case of advance against which of the following securities, charge is not created by assignmenf?
a) fixed deposit b) Life Insurance Policy c) Supply Bills d)Shares e) none of these
63. A loan was sanctioned to a partnership. The firm wants to create equitable mortgage of its property in
favour of the bank. The title deeds of the property can be deposited with the bank by
a) All the partners acting together
b) Any one of the partners because every partner has implied authority
c) Any one partner having authority from other partners to act on their behalf for mortgage
d) either (a) or (c) e) none of these as property of a partnership firm cannot be mortgaged
64. A borrower did not repay the loan In time. He had mortgaged his land & building to the bank. The bank
wants to exercise a right in such a way that borrower is absolutely debarred of his right to acquire the
property back. This right is called as
a) Right of redemption b) Right of subrogation c) Right of foreclosure
d) Right of set off e) Right of lien
65. A mortgage in which mortgagor transfers the mortgaged property absolutely to the mortgagee subject to
the condition that the same will be retransferred to the mortgager on payment of the mortgage money is
called as
a) Mortgage by conditional sale b) English mortgage c) Simple mortgage
d) Usufructuary mortgage ej none of these
66. Which of the following is not true about equitable mortgage?
a) The property whose title deeds are being deposited should be located in a place notified by state Govt
b) The property should be specific immovable property
c) EM is created by deposit of title deeds with the mortgagee (bank) at a place notified by the state govt
d) Deposit of title deeds should be with an intention to secure a loan
e) The borrower remains personally liable
67. A property was mortgaged to the bank by deposit of title deeds to secure a loan. After some time, when
the loan is still outstanding, the borrower requests the bank to deliver the title deeds temporarily as he has
to show it to his advocate in connection with same tax liability. What will you do?
a) The bank can accept the request of the borrower as records in title deed register are sufficient proof of
mortgage
b) The bank should not accept the request as with the delivery of title deeds back to mortgagor equitable
mortgage comes to an end.

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 A K GUPTA'S BANKERS TRAINING INSTITUTE (75, Block BG - I, f-aschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949]

c) The bank should not accept the request of the borrower as he may create mortgage in favour of other
creditor
d) The bank can deliver the document only to the legal counsel of the borrower e) Both (b) & (c)
68. A company wants to create equitable mortgage of its property by deposit of title deeds for security the
loan. In this case, title deeds can be deposited by
a) Chief Finance Officer b) Managing Director
c) Officials of the company who are authorized by managing director to sign loan documents
d) An official authorized as per the resolution passed by Board of Directors of the Company e) none
69. A borrower mortgaged his immovable property for securing a loan. On repayment of the loan, the
mortgagee refuses to release the mortgage. Which of the following rights can be exercised by the
borrower to get the property released?
a) Right of foreclosure b) Right of Redemption c) Right set off
d) Right of Appropriation e) Right of subrogation
70. Which of the following is true about equitable mortgage?
a) It does not require any registration b) It does not attract any stamp duty
c) It does not require registration but level of stamp duty varies from state tot state
d) Mortgage deed is prepared but its registration is not necessary e) none of these
71. The mortgagee is entitled only to retain possession over the property and to recover his dues from the
income accruing therefrom but no right to sue the mortgagor in his personal capacity or file suit for sale
of mortgaged property in case of:
(a) Mortgage by deposit of title deeds (b) English Mortgage (c) Simple Mortgage
(d) Usufructuary Mortgage (e) either (c) or (d)
72. Equitable Mortgage can be created :
(a) only at the station where the concerned bank has a branch (b) only at notified towns in India
(c) in Delhi and all cities having population of 12 lacs or more as per 1991 census
(d) any city in India (e) all cities with population of 5 lacs or more as per 1991 census
73. The essence of equitable mortgage lies in :
(a) existence of debt in the present (b) deposit of title deeds
(c) intention that title deed will be security for the debt (d) all above (e) none of the above
74. Mode of charging securities by Assignment is prescribed in :
(a) lndian"Contract Act, 1872 (b) RBI Act, 1934 (c)Transfer of Property Act, 1882 (d)B R Act, 1949
75. The provisions relating to charging of actionable claims by way of assignment are contained in
a) Negotiable Instruments Act b) Indian contract Act c) Transfer of Property Act
d) Both (a) & (d) e) none of these
DOCUMENTATION: STAMPING: LIMITATION: REGISTRATION
76. Which of the following is not true regarding loans raised by a minor?
a) A bank can not proceed against a minor for recovery of a loan given to him as an agreement with minor is
void abinitio
b) A loan taken by a minor during his minority cannot be recovered even if It is ratified by him after attaining
majority.
c) If a loan raised by a minor is guaranteed by a major person, the guarantor is also not liable
d) The guardian of a Hindu minor can not sell, mortgage or transfer any immovable property of minor without
previous permission of the court. e) None of these
77. Who of the following is not eligible to raise a loan from the bank
a) Illiterate person b) Blind person c) Married women d) All of these e) None of these
78. In case of loan to a HUF, the documents should be got signed from:
a) Only karts as he is authorized to borrow and charge HUF property b) Karta and all co parceners
c) Karta and major coparceners
d) Karta and major coparceners & guardians of minor coparceners e) None of these
79. In case of loan to a partnership firm, the documents should be signed by:
a) all partners of the firm b) all partners of the firm excluding minor partners
c) all partners excluding sleeping partners
d' all major partners in their capacity as partner of firm and in their individual capacity e) None
80. Which of the following is true regarding loan to a partnership firm?
a) It should be seen that the firm is registered one b) the firm may be registered or unregistered
c) While it is preferable to finance registered firms, finance can be legally given to unregd firms
d) if the firm is not registered bank will not be able to recover the loan e)none of these
81. Which of the following should be ensured while granting term loan to a limited company?
a) The object for which loan is being given is as per the objects stated in Memorandum of Association
b) There is a board resolution authorizing certain officials or directors to execute loan documents
c) The loan being raised is within the borrowing powers mentioned in Articles of Association
d) There is a resolution passed in the general body meeting of shareholders for raising the loan if the
same exceeds aggregate of the paid up capital and free reserves of the company
e) All of these
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 A K GUPTA'S BANKERSTR^iNING INSTITUTE(75, Block BG -1, Paschiin Vihar, New Delhi - 110063; Ph Oil 65476949,Oil 25274157,09350476949)

82. The borrowing powers of directors are contained in

a) Certificate of Incorporation b) Articles of Association c) Memorandum of Association
d) Board Resolution e) None of these
83. In case of loan to company
a) it is essential that all loan documents must bear common seal.
b) the common seal must be affixed on loan documents where the Articles of Association or Board
Resolution so requires.
c) if Articles of Association or Board Resolution is silent regarding common seal, it need not be fixed
d) Both (b) & (c) e) None of these
84. The common seal of the company should be affixed on the loan documents in the presence of
a) Company Secretary of the Company b) Managing Director of the Company
c) Official(s) who have been authorized by Board of Directors in this regard
d) Officials(s) who have been authorized by shareholders in the general body meeting
e) None of these
85. A loan was sanctioned to M/s Rajiv Ranjan & Co. at Delhi. While two partners are in Delhi, one of the
partners is in Lucknow and one is abroad. In this case, what sfiould the bank do?
a) Loan will be disbursed only if partners came to Delhi on a single day and execute documents.
b) Loan documents can be signed by partners on different dates and different places but in the
documents, the date & place will be one on which the documents were executed by any partner first
c) Every partner should put date and place below his signatures if the same are executed at different
places on different dates
d) The piace of execution on the documents will be the place where loan has been disbursed irrespective
of place of execution but every partner will put date of execution below his signatures
e) None of these
86. Which of the following is inconect about execution of loan documents?
a)ln case of loans documents executed by illiterates and blind persons, a declaration should be obtained
from an independent person to the effect that the documents were read out to him and he has put his
thumb impression after understanding the same.
b) Loan documents can be executed by a person with left hand but a small note to this effect may be
made besides the signatures as generally loan documents are signed by right hand.
c) In casfe of loan documents executed by illiterate person, the thumb impression should be attested by an
independent witness on the document itself.
d) Loan documents executed by a person with left hand should be either attested by one independent
witness or a declaration obtained from the borrower that he has signed the documents with left hand
e) Both (c) &(d)
87. Mr. A has been sanctioned a loan of Rs. 10 lakh but before execution of documents, Mr. A had to go
abroad due to certain reasons. He executes a power of attorney in favour of his minor son and requests
you to get the documents executed by the minor. What will you do?
a) Request cannot be acceded to as minor is incompetent to enter into an agreement.
b) Request cannot be acceded to as documents cannot be executed by a Power of Attorney.
c) Bank may consider accepting request of borrower as minor is acting as an agent and his acts are
binding upon the Principal borrower.
d) The request may be considered provided minor is more than 16 years old. e) None of these
88. Indian Stamp Act 1899 is applicable in
a) Whole of India b) Whole of India excluding Jammu & Kashmir
c) Whole of India excluding Union Territories
d) Whole of India excluding certain areas of J & K , Himachal Pradesh & Uttranchal e)None of these
89. Which of the following documents are required to stamped with the same stamp duty throughout India
except J&K.
a) Promissory Note b) Bill of exchange c) Receipts d) Both (a) & (b) only e) All of these
90. A promissory note or bill of exchange executed out of India should be stamped by its first holder in India
a) within 3 months of its receipt in India b) within 3 months of its acceptance, payment or negotiation
c) before presenting the same for acceptance, payment or negotiation
d) Any of these whichever is later e) None of these
91. Which of the following is not true regarding cancellation of adhesive stamps?
a)Adhesive stamps must be cancelled at the time of or before execution of documents or immediately
after execution of documents
b) Cancellation should be done in such a manner that stamps cannot be used again
c) If the adhesive stamps affixed to a document are not properly cancelled, the document is deemed to be
stamped
e) The best way of cancelling the stamp is to get the signatures over the stamps and such signature
should extend partly to the document.
92. Summary suit can be filed for money decree on the strength of those documents where there is a prima
facie evidence of a defendant's liability. Such documents include :

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE(75, Block BG - I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949}

(a) promissory note (b) bill of exchange (c) cheque (d) all above (e) none of the above
93. Documents which require stamping should be stamped :
(a) before filing a suit (b) before execution (c) any time after execution
(d) all above (e) none of the above
94. A promissory note which is payable otherwise than on demand attracts :
(a) stamp duty of 25 paise (b) stamp duty of Re. 1/-
(c) same stamp duty as a bill of exchange of like amount and tenor payable otherwise than on demand
(d) stamping of Rs.5 only (e) none of the above
95. Which of the following documents, in the event of their being unstamped or under stamped cannot be
admitted in evidence in a court of law even after paying penalty as per laid down procedure :
(a) Letter of credit (b) Letter of hypothecation/pledge (c) Promissory note/bill or exchange
(d) all above (e) none of the above
96. If a document other than Promissory Note or Bill of Exchange is unstamped or understamped, then what
will be the consequences?
a) The document will not be admissible as evidence in the court of law.
b) The document can be admitted in evidence on payment of deficit amount alongwith a penalty of ten
times the deficit
c) The document can be admitted by on payment of deficit amount alongwith a penalty which is minimum
Rs. 5 and maximum ten times the deficit.
d) (a)or (c) as per discretion of Collector of Stamps
e) (a) or (b) as per discretion of Collector of Stamps.
97. A power of Attorney executed outside India is required to be stamped as per Indian stamp law within
months of its receipt in India.
a) 1 b)2 c)3 d) 4 e) none of these
98. On which of the following documents stamp duty is levied as per rates prescribed by State Govt.?
a) Promissory note b) Bill of exchange c) Insurance policy d) Power of Attorney e) All
99. On which of the following documents stamp duty is levied as per rates prescribed by Central Govt.?
a) Hypothecation agreement b) Mortgage deed c) Indemnity Bond
d) Guarantee Deed e) None of these
100. Which of the following is not true regarding stamp duty on a demand promissory note
a) Amount of loan upto Rs. 250: Stamp duty 5 paise
b) Amount of loan more than Rs. 250 but upto to Rs. 1000 : Stamp duty 10 paise
c) Amount of loan more than Rs. 1000 : Stamp duty 15 paise d) All of these e) None of these
101. Which of the following documents donot require to be stamped?
a) Demand Promissory Note b) Demand Bill of Exchange
c) Usance Promissory Note d) Usance Bill of exchange e) Both (a) & (b)
102. Assuming that Stamp duty rate on an agreement executed in Delhi is Rs. 10/-, in Lucknow Rs. 100, in
Patna Rs. 50, and in Jammu Rs. 20/- what will be stamp duty payable on a document executed first in
Delhi by partner A, then in Lucknow by partner B, then in Patna by partner C & then in Jammu by partner
D.
a) Stamp duty of Rs. 100 will be paid in Delhi itself.
b) Stamp duty of Rs. 10 will be paid in Delhi, Rs. 100 in Lucknow, Rs.50 in Patna & Rs. 20 in Jammu
c) Stamp duty of Rs. 10 will be paid in Delhi, Rs. 90 in Lucknow and Rs.20 in Jammu
d) Stamp duty of Rs. 10 will be paid in Delhi, Rs. 90 in Lucknow, Rs.40 in Patna
e) Stamp duty of Rs. 10 will be paid in Delhi and Rs. 90 in Lucknow.
103. Limitation period for exercising right of Redemption and Right of Foreclosure is
a) 3 years b) 12 years c) 30 years
d) 30 years in case beneficiary is Government and 12 years in other cases e) none of these
104. Which of the following is true about law of limitation ?
a) If limitation period expires, bank cannot recover the amount from the borrower
b) If limitation period expires, bank cannot sell the goods pledged to it
c) if limitation expires bank can take action under SARFAESi Act.
d) If limitation period expires, bank loses the remedy of filing a suit but it does not take away the right of
recovering the debt
e) None of these
105. Limitation Act is applicable in
a) Whole of India b) Whole of India except Jammu & Kashmir
c) Whole of India excluding union territories d) Respect of loans granted by banks only
e) None of these
106. A loan was sanctioned to a partnership but since the partners were at different places, the documents
were executed by one padner on 15.6.2007, 2nd partner on 18.6.2007 & 3rd on 21.6.2007. The limitation
period against the firm will run from:
a) 15.6.2007 b) 18.6.2007 c) 21.6.2007
d) any one of these dates as per discretion of court e) none of these

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG • I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949}

107. The limitation period for recovery of amount of a dishonoured Usance bill is 3 years from
a) date of bill b) date of acceptance c) due date of payment
d) date of presentation of bill for acceptance e) none of these
108. The period of limitation for execution of a decree, in respect of decreed debt is years from the
date of decree
a) 3 b) 12 c)30 d) Any of these depending upon beneficiary e) none of these
109. A demand promissory note was executed on 5.3.04. The suit for recovery of amount can be filed upto
a) 4.3.07 b) 5.3.07 c) 8.3.07 d)3 years from the date of demand of loan
110. A demand promissory note was executed on 31.7.2004. Assuming that 31.7.2007 is Sunday, the suit for
recovery of amount can be filed upto
a)30.7.2007 as limitation will expire on 30.7.2007
b)30.7.2007 because through the limitation will expire on 31.7.07, but It being Sunday, suit can be filed up
to next preceding business day.
c)31.7.07 and Judge will be requested to entertain application as a special case
d) 1st August 2007 when the court opens e) none of these
111. Which of following is not true regarding limitation period?
a) On an agreement payable by instalments where creditor does not have right to recall the advance for
default of instalments, the limitation period is 3 years from due date of each instalment,
b) Limitation period in respect of fixed deposits with a bank is 3 years from date of demand by the
depositor and not from due date of FDR
c) Limitation period for filing appeal to High Court is 90 days from date of decree and for filing appeal In
other courts on the decree of lower court is 30 days from date of decree
d) Limitation period for recovery of loss caused by a fraud is 3 years from date of committing the fraud
e) Limitation period against the guarantor starts from the date of demand of the guarantor.
112. Acknowledgement of debt in a case was obtained after expiry of limitation period. In this case what will be
the position of bank?
a) Limitation period will extend for 3 years from date of expiry.
b) Limitation period will extend for 3 years from date of executioi i of acknowledgement of debt
c) Limitation period will extend for 3 years from date of demand
d) Limitation period will not extend e) None of these
113. In case Of a bill payable on demand, limitation period starts from
a) date of default b) date o! demand c) date of bill d) date of protest with Notary Public e) none
114. A loan was granted to A & B with a clause that they will be liable jointly and severally. As the documents
were about to expire, bank obtained Balance confirmation from A only as B was out of town. On return of
'B', Bank requested him to sign B.C. which he refused. In this case:
a) Limitation period will extend only against A
b) Limitation period will extend against both A and 8.
c) Limitation period will not extend against any of them as B.C. signed by one of them is not valid
d) Limitation period will extend against both A & B provided 8 was abroad, e) None of these
115. Limitation period available to a holder of cheque for taking action u/s 138 of Nl Act for dishonoured
cheque due to insufficient funds is
a) one month from date of cause of action b) 15 days from date of cause of action
c) 3 years from date of dishonour d) one month from date of demand e) none of these
116. In case of clean overdraft, the limitation period is
a) 3 years from date of document
b) 3 years from date of sanction c)3 years from date of demand by bank
d) 3 years from date of refusal by borrower to pay e) none of these
117. D.P. Note executed by a borrower has become time barred. It means :
(a) that the bank has lost all rights against the borrower
(b) that the bank can't proceed against the borrower in a court of law on the basis of D.P. Note
(c) bank can't sell goods pledged with it (d) all above (e) none of the above
118. The period of limitation for sale of mortgage property through court when it is payable on demand is
^ years from date of creation of mortgage
(a) 3 years (b) 12 years (c) 30 years (d) none of the above
119. Period of limitation can be extended by :
(a) obtaining letter of acknowledgement of debt (b) part payment of debt
(c) obtaining a fresh set of documents (d) all above (e) either (b) or (a) above
120. A loan was granted to a borrower against pledge of stocks and outstanding in the account is Rs. 5 lakh.
Despite repeated reminders he has neither repaid the loan nor signed B.C. As a result limitation has
expired. The value of stocks pledged is about Rs. 4 lac and borrower is also maintaining a saving bank
account with a balance of Rs. 1 lac. What are the options available to the bank?
a) The bank cannot recover the loan as limitation has expired.
b) The bank cannot file a suit against borrower as limitation has expired.
c) The bank can sell the goods pledged and exercise right of lien over SB balance.

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 A K GUPTA'S BANKERS TRAINING INSTTTUTE (75, Block BG • I, Paschim Vihar, New Delhi - 110063; Ph Oil 65476949, Oil 25274157,09350476949)

d) The bank can recover the loan by sale of pledged goods and exercising right of set off on saving bank
deposits. e) None of these
121. A charge created by a company on Its assets is required to be registered with the Registrar of Companies
as per Section of the Companies Act 2013.
a) 77 b)125 c)138 d)293(1)(d) e) None of these
122. As per Section 77 of the Companies Act 2013, charge created by a company on its assets is required to
be registered with the Registrar of Companies within days of the creation of charge.
a)30 b) 45 c)60 d) 90 e) None of these
123. If a company is not able to file particulars of charge with the ROC within 30 days of creation of charge,
ROC may allow such registration to made within days of such creation on payment of late fees.
a)300 b)270 c)60 d) 90 e) None of these
124. Which of the following charge is not required to be registered with Registrar of Companies,
a) Hypothecation of stocks b) Assignment of Book Debts
c) Mortgage of Immovable property d) Pledge of stocks e) None
125. In which of the following cases, charge is not required to be registered with Registrar of Companies,
a) Advance against Trust Receipt b) Advance against negative lien
c) Advance against Bank's own deposit d) All of these e) Only (b) & (c)
126. In which of the following cases, charge is not required to be registered with the Registrar of Companies
a) Advance against Documentary bills b) Purchase of cheques
c) Pledge of stocks d) All of these e) none of these
127. A company failed to file particulars of charge with the ROC within the prescribed time period of 30 days
and even extended time period allowed for late fees. Now it can file particulars of charge with ROC after
obtaining permission from
a) Registrar of companies b) Creditor (lending bank) c) Central Government d) RBI e) None
128. The primary responsibility of filing the particulars of charge with the ROC is of
a) Borrowing company b) lending banker c) Manager of the bank
d) Both (a) or (b) e) None of these
129. For registering the charge with the ROC, the borrowing company is required to submit to ROC from no. _
a)8 b) 13 c) 17 d) both form no. 8 & 13 e) CHG I
130. In which of the following cases, the modification of charge is not required to be filed by the borrowing
companV with the ROC.
a) Change in the amount of limit b) Variation in the rate of interest
c) Obtaining additional securities d) all of these e) none of these
131. Particulars regarding modification of charge are required to be filed with ROC within 30 days of such
modification on form no.
a)8 b)13 0)14 d) Both 8 & 13 e) CHG I
132. When an advance is fully repaid by the company, the particulars regarding satisfaction of charge are
required to be filed within days of the adjustment of loan.
a) 15 b) 30 c) 45 d)60 e) none of these
133. Particulars regarding satisfaction of charge are required to be filed on form no.
a)8 b)13 c)17 d)both17&13 e) CHG 4
134. If particulars of charge are not filed with ROC within prescribed period what will be the consequences?
a) Bank becomes an unsecured creditor
b) In case of liquidation of the company, the secured creditors will have prior charge over the sale
proceeds of the security.
c) The bank's advance will become void abinitio and bank will not be able to recover the same.
d) Both (a) & (b) e) All of these
135. In which of the given cases, primary responsibility of filing the particulars of charge with ROC is of the
lending banker?
a) Registration of charge b) Modification of charge c) Satisfaction of charged) All of these e) None
136. A company has its registered office at Jaipur in Rajasthan. Its administrative office is in Delhi while factory
is located at Tirupur, Tamilnadu. The company raises loan from a bank having Head office at Bangalore
against hypothecation of machinery. The charge will be registered with the ROC at
a) Delhi b) Jaipur c) Chennai d) Bangalore e) Any of these
137. Bank requested the borrower to sign balance confirmation for an outstanding balance of Rs. 10 lakh.
However the borrower contested that interest had been wrongly charged to the extent of Rs. 50,000 and
therefore, acknowledged the debt only for Rs. 9.5 lakh. In this case:
a) Limitation period will extend for whole of the debt.
b) Limitation period will not extend as borrower has disputed the liability.
c) Limitation period will extend for Rs. 9.5 lac as borrower has acknowledged the same for Rs. 9.5 lac.
d) Limitation period will not extend as it is not a valid acknowledgment. e) None of these

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 A K GUPTA'S BANKERS TRAINING INSTITUTE(75, Block BG - I. Pijschim Vihar, New Delhi- 110063; PhOll 65476949, Oil 25274157,09350476949)

ANSWER SHEET

1 8 11 D 21 0 31 D 41 D 51 B 61 8 71 D 81 D 91 E ini 0
2 B 12 A 22 8 32 C 42 E 52 A 62 C 72 B 82 D 92 C 102 B
3 U 13 D 23 D 33 A 43 D 53 B 63 E 73 A 83 A 93 c 103 R
4 C 14 B 24 C 34 8 44 E 54 C 64 A 74 E 84 D 94 D 104 R
b b 15 E 25 C 35 D 45 A 55 C 65 D 75 D 85 8 95 A 105 A
6 A 16 A 26 A 36 D 46 A 56 C 66 C 76 C 86 A 96 B 106 R
/ B 17 C 27 C 37 C 47 8 57 c 67 A 77 D 87 8 97 E 107 C
8 A 18 D 28 C 38 A 48 B 58 D 68 E 78 D 88 A 98 C 108 A
9 U 19 C 29 D 39 E 49 A 59 D 69 C 79 D 89 8 99 A 109 R
10 B 20 U 30 A 40 C 50 C 60 A 70 D 80 A 90 D 100 D
B 123A
124 C 125 C 126 8 127 C 128 C 129C 130C 131 B 132E 133C 134A 135A 136A 137E
138C 139A 140D 1418 142C 143D 144E 145A

1 E 4 E 7 C 10 E 13 E 16 D 19 B
2 A 5 D 8 D 11 8 14 8 17 C 20 D
3 A 6 C 9 D 12 E 15 8 18 0 21
1fype oi customers & deposit accounts(Page 20 TO 55
1 B 21 B 41 A 61 D 81 E 101 E 121 8 141 A 161 E 181 R
2 A 22 0 42 C 62 E 82 C 102 C 122 C 142 B 162 F 182 A
3 U 23 A 43 E 63 D 83 A 103 E 123 A 143 B 163 8 183 n
4 A 24 C 44 C 64 E 84 C 104 B 124 C 144 B 164 E 184 F
b C 25 D 45 c 65 8 85 8 105 D 125 C B
145 165 B 185 F
6 B 26 C 46 E 66 B 86 A 106 C 126 D 146 C 166 C 186 R
/ B 27 C 47 8 67 D 87 D 107 C 127 B 147 C 167 B 187 A
8 C 28 A 48 8 68 B 88 D 108 8 128 A 148 8 168 E
9 U 29 C 49 D 69 C 89 C 109 B 129 A 149 3 169 D
10 B 30 E 50 D 70 D 90 A 110 A 130 B D
150 170 A
11 A 31 0 51 E 71 A 91 E 111 D 131 0 151 E 171 B
12 U 32 C 52 E 72 C 92 D 112 0 132 B 152 8 172 B
13 B 33 8 53 D 73 A 93 E 113 E 133 A 153 C 173 C
14 D 34 E 54 C 74 A 94 E 114 E 134 C 154 C 174 E
lb B 35 A 55 E 75 D 95 E 115 C 135 8 155 E 175 A
IB C 36 C 56 B 76 C 96 E 116 E 136 C 156 C 176 D
1/ A 37 E 57 E 77 8 97 A 117 D 137 D 157 E 177 C
18 B 38 8 58 D 78 D 98 B 118 8 138 E 158 C 178 D
19 B 39 C 59 E 79 E 99 C 119 A 139 E 159 A 179 A
20 B 40 C 60 E 80 E 100 8 120 D 140 C 160 8 180 A

1 C 6 C 11 8 16 8 21 8 26 D 31 D 36 A 41 B
2 E 7 E 12 8 17 A 22 C 27 B 32 C 37 C 42 C
3 b 8 0 13 C 18 D 23 B 28 C 33 8 38 A 43 C
4 b 9 B 14 C 19 B 24 E 29 A 34 E 39 C
b E 10 E 15 8 20 D 25 A 30 E 35 D 40 E
Documentation i Page 66 to 81)
1 B 14 A 27 A 40 C 53 D 66 A 79 D 92 D 105 8 118 B 131 E
2 U lb D 28 E 41 8 54 D 67 C 80 C 93 8 106 C 119 E 132 8
3 U 16 E 29 B 42 C 55 D 68 D 81 E 94 C 107 C 120 0 133 E
4 b 1/ A 30 C 43 B 56 A 69 8 82 8 95 E 108 8 121 A 134 D
b A IB C 31 B 44 C 57 C 70 C D
83 96 C 109 B 122 A 135 E
B 19 D 32 A 45 C 58 C 71 D 84 C 97 C 110 D 123 A 136 B
•/ B 20 C 33 D 46 E 59 A 72 8 85 C 98 D 111 D 124 D 137 A
8 A 21 C 34 B 47 D 60 E 73 D 86 E 99 E 112 D 125 E
9 C 22 B 35 C 48 8 61 E 74 C 87 C 100 E 113 C 126 C
10 A 23 B 36 E 49 8 62 D 75 C 88 8 101 8 114 B 127 C
11 B 24 B 37 D 50 D 63 D 76 E 89 E 102 C 115 A 128 A
12 A 25 E 38 8 51 C 64 C 77 E 90 C 103 C 116 A 129 E
13 B 26 D 39 A 52 D 1 65 i 8 78 C 91 C 104 D 117 B 130 E

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