Dear Students, kindly prepare for your Commercial Banking Mid-Term Test from these below given MCQs.

The test would be for 20 marks carrying 1 mark for each question and duration would be 20 minutes.

1. “Money is what money does” – who said?

(i) Crowther
(ii) Robertson
(iii) Walker
(iv) Marshall

2. Direct exchange of goods against goods is called:

(i) Charter
(ii) Money
(iii) Barter
(iv) None of these

3. What possess general acceptability?

(i) Bank draft
(ii) Money
(iii) Bill of exchange
(iv) None of these

4. Which type of deposits gives highest rate of interest?

(i) Current deposit
(ii) Fixed deposit
(iii) Recurring deposit
(iv) None of these

5. Which bank deals with short-term credit?

(i) Agricultural bank
(ii) Commercial bank
(iii) Industrial bank
(iv) None of these

6. Which of the following is not the function of the commercial bank?

(i) Issue of paper notes.
(ii) Acceptance of deposits
(iii) Advancing loans
(iv) Credit control

7. Which of the following is not near money?

(i) Paper notes
(ii) Treasury bill
(iii) Bond
(iv) Bill of exchange

8. Which bank is called lender of last resort?

(i) Commercial bank
(ii) Agricultural bank
(iii) Industrial bank
(iv) Central bank
9. In which year the Reserve Bank of the India was established?
(i) 1945
(ii) 1947
(iii) 1935
(iv) 1953

10. Which bank enjoys monopoly power of Note issue?

(i) NABARD
(ii) Commercial Bank
(iii) Central Bank
(iv) None of these

11. For which function, money is accepted as unit of account?

(i) Measure of value,
(ii) Medium of exchange
(iii) Standard of deferred payment
(iv) Store of value

12. Which is considered as the mother of all Central Banks?

(i) Bank of England
(ii) Risks Bank of Sweden
(iii) Federal Reserve Bank
(iv) Reserve Bank of India

13. Which of the following is an example of direct tax?

(i) Sales tax
(ii) Commodity tax
(iii) Income tax
(iv) None of these

14. Who deals with income and expenditure of public authorities?

(i) Public finance
(ii) Private finance
(iii) Local Govt.
(iv) None of these

15. State Bank of India is a

(i) Public Sector Bank
(ii) Private Sector Bank
(iii) Joint Sector Bank
(iv) Non-Nationalised bank

16. For foreign Bank, priority sector lending targets is __ % of net banking credit
(i) 32%
(ii) 36%
(iii) 40%
(iv) 44%
17. 1st August of every year is observed as
(i) KYC Compliance Day
(ii) KYC Compliance of AML Days
(iii) Computer Security Day
(iv) KYC Compliance and Fraud Prevention Day

18. Real Time Gross Settlement (RTGS) is management by

(i) State Bank of India
(ii) Reserve Bank of India
(iii) Indian Bank Association
(iv) Government of India

19. The portion of total deposits of a commercial bank which it has to keep with RBI in the form of cash
reserves in termed as
(i) CRR
(ii) SLR
(iii) Bank Rate
(iv) Repo Rate

20. Bank deposit refers to

(i) The amount of money standing to the credit of a customer of a bank
(ii) A term used by the Federal Reserve to refer to the total deposits of member banks
(iii) The amount of money standing to the debit as a customer of a bank
(iv) All of the above

21. In order to control credit -

(i) CRR should be increased and Bank Rate should be decreased
(ii) CRR should be decreased and Bank Rate should be decreased
(iii) CRR and Bank Rate should be increased
(iv) CRR should be decreased and Bank Rate should be increased

22. Total number of RRBs now functioning is

(i) 84
(ii) 98
(iii) 112
(iv) 102

23. Suspicious Transactions Reports (STRs) is submitted to

(i) RBI
(ii) Banking Department, Ministry of Finance
(iii) FIU-IND
(iv) Central Bureau of Investigation (CBI)

24. Which section of Banking Regulation Act 1949 provides nomination for payment of depositor's money?
(i) Section 42
(ii) Section 24
(iii) Section 110A
(iv) Section 452A
 25. SEBI is
(i) Regulatory Authority
(ii) Statutory Authority
(iii) Both (a) and (b)
(iv) None of these

26. M Narasimham headed

(i) The working group constituted by the Government of India in July 1975 for the establishment of Regional
Rural Banks
(ii) The committee on the financial system 1991
(iii) The committee on Banking Sector Reforms 1997

27. Who is the custodian of monetary reserves in India?

(i) SBI
(ii) SIDBI
(iii) NABARD
(iv) RBI

28. Which one of the following is the apex institution in finance sector of India?
(i) IDBI
(ii) NABARD
(iii) NHB
(iv) RBI

29. The short term money market comprise

(i) The call money market
(ii) The inter bank deposit market
(iii) The bills re-discounting market
(iv) All of the above

30. Who is the fiscal agent and advisor to government in monetary and financial matters in India?
(i) SBI
(ii) IDBI
(iii) ICICI
(iv) RBI

31. RBI notifies CRR under ----------- Act.

A. Section 24 of the Banking Regulation Act
B. Section 42 bf the Banking Regulation Act
C. Section 24 of the RBI Act
D.Section 42 of the RBI Act

32. Overdraft granted against 'no frills' accounts in rural and semi-urban areas is classified as
A. 5% Direct Advance of Agriculture Sector
B. 100% Direct Advance of Agriculture Sector
C. 100% Indirect Advance of Agriculture Sector
D. 100% Direct Advance of Personal Sector
 33. The rate at which RBI lends to banks under the Liquidity Adjustment Facility (LAF) is called
A. Repo Rate
B. Reverse Repo Rate
C. Bank Rate
D.Cash Reserve Ratio

34. When a bank borrower, or counter party, fails to meet its payment obligations regarding the terms agreed
with the bank, it is called
A Market Risk
B Operational risk
C Liquidity risk
D Credit Risk

35. When a bank chooses the wrong strategy or follow a long-term business strategy which might lead to its
failure, it is called
A Credit risk
B Operational risk
C Market risk
D Business risk

36. The Yield to Maturity of a bond is the same as:

(i) The present value of the bond
(ii) The future value of the bond
(iii) The bonds internal rate of return
(iv) None of these

37. Choose from the following a symptom which is not relating to “Over Trading”.
A Cash shortage
B High inventory turnover ratio
C Low current ratio
D Low inventory turnover ratio

38. Choose a sentence which speaks inappropriately about earning per share (EPS).
A It indicates the net profit earned per share
B It influences dividend policy of the firm
C It does not influence the share holding pattern of the company
D It does not influence the market price of the share

39. Sources of financing project cost excludes:

A Trade Credit
B Leasing
C Subsidy
D Deferred Credit

40. Cash can be conserved by resorting to:

A Best credit terms with suppliers
B Maximum quantity of stock
C Minimum level of creditors
D All of these
41. When there is a financial loss to bank arising from legal suits filed against the bank or by a bank for applying
a law wrongly, it is called
A Systematic risk
B Equity risk
C Market risk
D Legal Risk

42. When the actions can lead to the entire financial system coming to a standstill, it is called
A Market risk
B Equity risk
C Business risk
D Systematic risk

43. What is the risk called when one bank makes the decision about how much risk to take, while someone else
(like government) bears the costs if things go badly?
A Systematic risk
B Equity risk
C Moral Hazard
D Market risk

44. The effect of purchasing power or inflation on present value is important because :
A It increases the real value of cash flows received in the future
B It reduces the real value of cash flows received in the future
C It has no effect on real value of cash flow received in the future
D None of these

45. If a company revaluates its fixed assets, the current ratio of the company will:
A Remain unaffected
B Improve if assets are revalued upward
C Improve if assets are revalued downwards
D Undergo change only if liabilities are remaining constant

46. Tangible net worth is calculated as:

A Capital + Reserves – Fictitious Assets and intangible assets
B Capital + Reserves
C Capital + Reserves – Intangible Assets
D Capital + Fictitious Assets + Reserves – Intangible assets

47. A uniform discount rate cannot be applied for comparing different type of investments e.q. building
property v/s PPF because of:
A Liquidity
B Risk
C Return difference
D None of these
48. When the risk of losses in on- or off-balance sheet positions arise from movement in market prices, it is
called
A Liquidity risk
B Systemic risk
C Liquidity risk
D Market Risk

49. When the bank is not able to have enough cash to carry out its day-to-day operations, it is called
A Liquidity risk
B Operational risk
C Systemic risk
D Liquidity risk

50. An Asset is :
A Sources of funds
B Use of funds
C Inflow of funds
D None of these

51. When bank’s image and public standing is in doubt and leads to public’s loss of confidence in a bank, it is
called
A Reputational risk
B Market risk
C Operational risk
D Moral Hazard

52. What is a Lease?

a) A rental agreement between owner of a flat/house and the Tenant, whereby the Tenant pays specified
amount on specified dates to the owner
b) A legal contract between the owner of an asset and its user, containing many conditions including payment
of a specified amount by the user to the Owner for use of the asset
c) Both (a) and (b)
d) None of the above

53. What is Factoring ?

a) An easy way of raising capital from a factoring company by small business
b) Selling of account receivables on a contract basis for cash payment to a factor before it is due
c) An arrangement for raising short term money against prepaid expenses
d) A method of discounting of long term bills

54. Which one of the following is called as initial repayment holiday given to a borrower for repayment of
loan?
a) Amortization
b) Moratorium
c) Subvention
d) None of the above
55. Who sets up 'Base Rate' for Banks?
a) Individual Banks Board
b) Interest Rate Commission of India
c) RBI
d) None of the above

56. Which of the following are Bank advances of a Bank?

a) Bad debts
b) Non-performing Assets
c) Out of order accounts
d) Overdrawn accounts

57. Which of the following are benefited through the Reserve mortgage scheme?
a) Government employees
b) Minors
c) Senior citizens
d) All the above

58. Which of the following are the amounts owed to a company that are not going to be paid?
a) Bad debts
b) Non-performing Assets
c) Out of order accounts
d) Overdrawn accounts

59. Whom with Primary Dealers deal in both primary and secondary markets?
a) Corporate Bonds
b) Debentures
c) Equities
d) Government Securities

60. What will be the impact if Reserve Bank of India reduces the Bank Rate by 1%?
a) Less liquidity in the market
b) More liquidity in the market
c) No change in the market liquidity
d) Mobilisation of more deposits by commercial banks

61. What is the full form of IRR?

a) Internal Rate of Return
b) Internal Reserve Ratio
c) Internal Rate of Ratio
d) Internal Recession Rate

62. Which among the following made the initial contribution for setting up Financial Inclusion Fund and
Financial Inclusion Technology Fund?
a) Government of India, NABARD and RBI
b) NABARD, UTI and RBI
c) SIDBI, Government of India and IDBI Bank
d) SIDBI, NABARD and UTI
63. Which one of the following is known as the real return to the investor getting reduced due to sudden rise
in the prices of the commodities?
a) Cost risk
b) Demand risk
c) Market risk
d) Systemic risk

64. Which among the following refers to misselling?

(i) When mutual funds are sold without telling the likely returns
(ii) When agents sell the products without telling investors what are the risks involved in investing in
mutual funds
(iii) When agents invest somebody's money in mutual funds without their knowledge

a) Only (ii)
b) Both (i) and (iii)
c) All (i), (ii) and (iii)
d) None of the above

65. What will bank customers pay for using safe deposit locker facilities?
a) Commission on locker
b) Exchange on locker
c) Rent on locker
d) Safe custody charges

66. Which one of the following is known as a Savings Bank Account opened with a commercial bank with zero
balance or very minimal balance?
a) Current Account
b) No frill account
c) Savings Bank-ordinary Account
d) Students Savings Bank Account

67. What does the letter 'R' denote in the abbreviation 'BR Act' which controls banking activities in the
country?
a) Reclamation
b) Reformation
c) Regulation
d) Rule

68. What is Mortgage?

a) A security created on immovable property for a deposit received by a bank
b) A security created on immovable property for a loan given by a bank
c) A facility created on movable property for a deposit received by a bank
d) A security created on movable property for a loan given by a bank

69. Which one of the following depicts the financial position of a bank or business enterprise at a given point
of time?
a) Balance sheet
b) Cash flow statement
 c) Income statement
d) Model audit

70. What does RTGS enable?

a) Immediate transfer of money from customer of one bank to customer of another bank
b) Immediate transfer of money from customer of one bank to customer of another branch within the same
bank
c) Immediate transfer of money from customer of one bank to customer of another country
d) Immediate transfer of money from customer of one bank to customer of RBI

71. Which of the following permit cheque operation?

a) Savings bank accounts and fixed deposit accounts
b) Current accounts and fixed deposit accounts
c) Savings bank accounts and cash accounts
d) Savings bank accounts and current accounts

72. What happens if a crossed cheque is presented for payment?

a) It can be paid only through a banker
b) It cannot be paid at all
c) It can be paid across the counter in another bank
d) None of the above

73. Under which sector will banking sector fall?

a) Agricultural sector
b) Industrial sector
c) Service sector
d) None of the above

74. Which is known as the arrangement when more than one banks allow credit facilities to one party in
cordination with each other?
a) Amortization
b) Consortium
c) Moratorium
d) Subvention

75. What is an Indian Depository Receipt?

a) An instrument in the form of deposit receipt issued by Indian depositories
b) An instrument in the form of depository receipt created by an Indian depository against underlying equity
shares of the issuing company
c) A deposit account with a Public Sector Bank
d) A depository account with any of Depositories in India

76. What is Call Money?

a) Money borrowed or lent for a day or over night
b) Money borrowed for more than one day but up to 3 days
c) Money borrowed for more than one day but up to 7 days
d) Money borrowed for more than one day but up to 14 days
77. What is the most powerful tool used by the Reserve Bank of India to control inflation?
a) Raise interest rates
b) Raise current supply
c) Reduce current supply
d) Reduce interest rates

78. What does crossing of cheques make them?

a) Invalid document
b) Ineligible to endorse to a person other than the payee
c) Remain the same
d) Ineligible to get cash across the bank counter

79. What happens when a bank dishonours a cheque?

a) It is called settlement of the cheque
b) It is called withdrawing of the cheque
c) It is called nullifying of the cheque
d) It is called return of the cheque unpaid

80. Which ratio provides for each bank a rating for the overall performance and six individual scores for each
ratio category separately ?
a) The CAMELS
b) The BASEL
c) The Capital Adequacy
d) The NIM
.

All The Best !!!