2014

Answer the following questions in one sentence each:

1. What is full form of NABARD?

National Bank for Agriculture and Rural Development.

2. Who is executive head of the Reserve Bank of India?

Governor

3. What is Goldsmith's note?

During the regime of Queen Elizabeth, the people of England used to deposit their money
with the goldsmiths, and in exchange of it they will be provided a signed receipt, popularly
known as goldsmith note. These notes used to similar to banker’s cheque.

4. What do you mean by Banking Ombudsman?

The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to
redress customer complaints against deficiency in certain banking services covered under the
grounds of complaint specified under Clause 8 of the Banking Ombudsman Scheme 2006.

5. What do you mean by Garnishee Order?

In simple words, a garnishee order is a common form of enforcing a judgment debt against a
creditor to recover money. Put simply, the court directs a third party that owes money to the
judgement debtor to instead pay the judgment creditor. The third party is called a ‘garnishee’.
A garnishee order is a legal notice the court issues that allows the creditor to collect the
amount from either:

1. The debtor’s wages,

2. The debtor’s bank account etc.

6. Explain letter of credit.

In simple terms, letter of credit is a piece of document that serves as instruction of guaranteed
payment from the buyer to the seller. Also known as a documentary credit, a letter of credit is
issued by the bank and acts as a promise of timely payment to the seller.
7. What do you mean by Recurring Deposit?

A recurring deposit is a type of deposit in which there are fixed instalments that have to be
invested in an account at fixed intervals of time for a pre-decided period.

8. Define Hundi.

Hundi, an age old tradition for business transactions in India, is a negotiable instrument
written in various vernacular local languages. The term is derived from the Sanskrit word
hundi which means ‘to collect’.

9. Who are Foreign Donors?

10. What is meant by Negotiable Instrument?

A Negotiable instrument is a specialized type of "contract" for the payment of money that is
unconditional and capable of transfer by negotiation. As payment of money is promised later,
the instrument itself can be used by the holder in due course frequently as money. It is a
transferable, signed document that promises to pay the bearer a sum of money at a future date
or on demand. Examples include checks, bills of exchange, and promissory notes.

PART B 4x4=16

Answer the following questions in 4-5 lines each.

11. Explain the concept of social control of the Banking Companies.

The banks are the custodians of savings and powerful institutions to provide credit. They
mobilise the resources from all the sections of the community by way of deposits and
channelize them to industries and others by way of granting loans. Soon after the
independence, it was realized that banks are not performing their functions in just, fair and
impartial manner. The loans were granted only to the large and medium scale industries and
priority sector i.e. our agriculture sector; new start ups’ were ignored. Since the chairmen of
the banks belongs from industrial background, so they have a general tendency to benefit
their relatives or known persons by the way of any means.

To overcome these deficiencies found in the working of the banks, the Banking Laws
(Amendment) Act was passed in December 1968 and came into force on 1-2-1969. It is
known as the scheme of ‘social control’ over the banks. The following are the main
provisions of this amendment:
Bigger banks had to be managed by whole time chairman possessing special knowledge and
practical experience of the working of a banking company or of finance, economics or
business administration.

The majority of directors had to be persons with special knowledge or practical experience in
any of the areas such as accountancy, agriculture and rural economy, banking, co-operative,
economics, finance, law, small scale industries etc.

The banks were also prohibited from making any loans or advances, secured or unsecured to
their directors or to any companies in which they have substantial interest.

12. Who are considered as special customers of bank?

Every person is legally capable of opening an account with a banker if the banker is satisfied
as to the customer’s bona fides and if he is willing to enter into the necessary business
relations with the banker. The banker is entitled to reject or accept such an application for
opening an account or providing any type of service. The banks have some special
procedures and provisions for their certain customers, hence, they are called as special types
of customers. • They are to be dealt with carefully while operating and opening the accounts.

Mainly this category includes:

• Minors: sec 3 of Indian Majority act, 1873, defines miner as: person below the age of:

18 years, or in case a guardian is appointed by court, it is 21.

Although a miner is prohibited to entering into a contract under the Indian contract act, hence
not eligible to conduct normal business with the bankers, but in the year 2013 RBI has issued
the guidelines to address this issue.

Now:

I. A savings /fixed / recurring bank deposit account can be opened by a minor of any
age through his/her natural or legally appointed guardian.
II. A miner can also open and operate a savings account after attaining a certain age
as fixed by the banks.

• Married women:

• Lunatics

• Illiterate Persons

• Joint Hindu Family

• Co-operative Societies
• Partnership

• Trustees

13. "The relation between banker and customer is primarily that of debtor and creditor."
Explain with suitable examples.

14. Discuss the criminal liability of dishonour of cheque.

To ensure promptitude and remedy against defaulters and to ensure credibility of the holders
of the negotiable instrument, a new Chapter XVII consisting of Sections 138 to 142 has been
inserted in the Negotiable Instrument Act 1981. Prior to insertion of this chapter, an
aggrieved person was not entitled to execute criminal proceedings against the accused person,
but now he can.

Section 138 provides certain criteria, on the fulfilment of those, one can approach to the
courts to ensure the legal action against the party. Section 139 specially provides that no
excuse, like; insufficiency of funds, shall be entertained while deciding the matter.

Section 142 deals with the cognizance of these type of offences. It states that on the
complaint filed by the payee or as the case may be, the holder in due course of the cheque,
courts can take cognizance of the matter. The complaint must be in writing and be made
within one month of the date on which the cause of action i.e. after the person drew the
cheque fails to pay the amount within 15 days of the receipt of notice of its dishonour. No
court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class
has the power to try any offence punishable under section 138. The Cognizance of a
complaint may also be taken by the Court after the prescribed period, if the complainant
satisfies the Court that he had sufficient cause for not making a complaint within such period.

Punishment

Punishment for accused if proved guilty under section 138 N.I. Act:

1. Imprisonment of up to 2 years

2. Penalty of up to twice the amount of the bounced cheque.

Beside the punishments, the court can grant compensation to the complainant under section
357 of the Code of Criminal Procedure, 1973 and no limit has been provided for the amount
of compensation.
PART C 3x8=24 Answer the following question: in 400 words each. Attempt any three of
your choice.

15. Explain functions of NABARD.

National Bank for Agriculture and Rural Development (NABARD) was established on July
12, 1982 with the paid up capital of Rs. 100 cr. by 50: 50 contribution of government of India
and Reserve bank of India. It is an apex institution in rural credit structure for providing
credit for promotion of agriculture, small scale industries, cottage and village industries,
handicrafts etc.

Functions of NABARD:

NABARD was established as a development bank to perform the following functions:

1. To serve as an apex financing agency for the institutions providing investment and
production credit for promoting various developmental activities in rural areas;

2. To take measures towards institution building for improving absorptive capacity of the
credit delivery system, including monitoring, formulation of rehabilitation schemes,
restructuring of credit institutions and training of personnel;

3. To coordinate the rural financing activities of all institutions engaged in developmental

work at the field level and liaison with the Government of India, the State Governments, the
Reserve Bank and other national level institutions concerned with policy formulation; and

4. To undertake monitoring and evaluation of projects refinanced by it.

5. NABARD gives high priority to projects formed under Integrated Rural Development
Programme (IRDP).

6. It arranges refinance for IRDP accounts in order to give highest share for the support for
poverty alleviation programs run by Integrated Rural Development Programme.

7. NABARD also gives guidelines for promotion of group activities under its programs and
provides 100% refinance support for them.

8. It is setting linkages between Self-help Group (SHG) which are organized by voluntary
agencies for poor and needy in rural areas.

9. It refinances to the complete extent for those projects which are operated under the
‘National Watershed Development Programme‘and the ‘National Mission of Wasteland
Development‘.

10. It also has a system of District Oriented Monitoring Studies, under which, study is
conducted for a cross section of schemes that are sanctioned in a district to various banks, to
ascertain their performance and to identify the constraints in their implementation, it also
initiates appropriate action to correct them.
11. It also supports “Vikas Vahini” volunteer programs which offer credit and development
activities to poor farmers.

12. It also inspects and supervises the cooperative banks and RRBs to periodically ensure the
development of the rural financing and farmers’ welfare.

13. NABARAD also recommends about licensing for RRBs and Cooperative banks to RBI.

14. NABARD gives assistance for the training and development of the staff of various other
credit institutions which are engaged in credit distributions.

15. It also runs programs for agriculture and rural development in the whole country.

16. It is engaged in regulations of the cooperative banks and the RRB’s, and manages their
talent acquisition through IBPS CWE conducted across the country.

16. Discuss RBI guidelines for internet banking.

The Reserve Bank of India had set up a Working Group on Internet Banking to examine
different aspects of Internet Banking. The Group had focused on three major areas of I-
banking, i.e., (i) technology and security issues, (ii) legal issues and (iii) regulatory and
supervisory issues. Accordingly, the guidelines were issued by RBI on June 14, 2001 for
implementation by banks. As per original internet banking guidelines, all banks intending to
offer transactional services on the Internet were required to obtain prior approval from RBI.
However later on July 20 2005, this restriction was removed thus no prior approval of the
Reserve Bank of India is required for offering Internet Banking services. The banks intending
to offer the internet banking should have Bank’s Board approved Internet Banking policy to
ensure the compliance of RBI guidelines.

Some of the highlights of internet banking guidelines are:

• The bank should submit a security policy covering recommendations of RBI and a
certificate from an independent auditor that the minimum requirements prescribed have been
met.

• Banks will report to RBI every breach or failure of security systems and procedure

• The guidelines issued by RBI on Risks and Controls in Computers and

Telecommunications’ should be adhered to.

• Only institutions who are members of the cheque clearing system in the country were
permitted to participate in Inter-bank payment gateways for Internet payment. Each gateway
must nominate a bank as the clearing bank to settle all transactions. Payments effected using
credit cards, payments arising out of cross border e-commerce transactions and all intra-bank
payments (i.e., transactions involving only one bank) were excluded for settlement through
an inter-bank payment gateway

• All settlement should be intra-day and as far as possible, in real time. However Inter-bank
payment gateways must have capabilities for both net and gross settlement

• SSL / 128 bit encryption must be used as minimum level of security.

• Banks must make mandatory disclosures of risks, responsibilities and liabilities of the
customers in doing business through Internet

• Banks must ensure that KYC guidelines are followed

• Banks are permitted to offer Internet based foreign exchange services, for permitted
underlying transactions, in addition to the local currency products. Internet based platform for
dealing in foreign exchange, should allow only reporting and initiation of foreign exchange
related transactions, with the actual trade transactions being permitted only after verification
of physical documents. Banks should comply with FEMA regulations in respect of
instructions involving cross-border transactions

• banks are permitted internet based operations on Rupee Vostro Accounts maintained by
exchange houses or banks outside India with them, provided the banks in India ensure that
the software will prevent any unauthorised operation

• Banking Ombudsman Scheme 2006 included deficiencies arising out of internet banking. A
customer may lodge a complaint against the bank for its 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)

• All licensed StCBs, DCCBs, UCBs and RRBs which have implemented Core Banking
Solution (CBS) and migrated to Internet Protocol Version 6 (IPv6) can offer Internet Banking
(View only) facility to their customers, without prior approval of RBI. The cooperative banks
offering Internet Banking (View only) facility to their customers should ensure that the
facility is strictly for non-transactional services such as balance enquiry, balance viewing,
account statement download, request for supply of cheque books, etc. and no online fund-
based transactions are allowed.

• All licensed StCBs, DCCBs and UCBs which have implemented CBS and have also
migrated to Internet Protocol Version 6 (IPv6) and fulfilling the following criteria may offer
Internet Banking with transactional facility to their customers with prior approval of RBI:

◦ CRAR of not less than 10 per cent.

◦ Net worth is Rs.50 crore or more as on March 31 of the immediate preceding financial year.

◦ Gross NPAs less than 7 % and Net NPAs not more than 3%
◦ the bank should have made a net profit in the immediate preceding financial year and
overall, should have made net profit at least in three out of the preceding four financial years.

◦ it should not have defaulted in maintenance of CRR/SLR during the immediate preceding
financial year.

◦ It has sound internal control system with at least two professional directors on the Board.

◦ The bank has a track record of regulatory compliance and no monetary penalty has been
imposed on the bank for violation of RBI directives/guidelines during the two financial years,
preceding the year in which the application is made.

• All RRBs which have implemented CBS and have also migrated to Internet Protocol
Version 6 (IPv6) and fulfilling the following criteria may offer Internet Banking with
transactional facility to their customers with prior approval of RBI:

◦ CRAR of not less than 10 per cent.

◦ Net worth is Rs.100 crore or more as on March 31 of the immediate preceding financial
year.

◦ Gross NPAs less than 7 % and Net NPAs not more than 3%

◦ The bank should have made a net profit in the immediate preceding financial year and
overall, should have made net profit at least in three out of the preceding four financial years.

◦ It should not have defaulted in maintenance of CRR/SLR during the immediate preceding
financial year

◦ The bank has a track record of regulatory compliance and no monetary penalty has been
imposed on the bank for violation of RBI directives/guidelines during the two financial years,
preceding the year in which the application is made.

◦ It has sound internal control system which should be approved by a CISA qualified
independent auditor.

◦ The bank should not have accumulated losses

Now it can be said that banks following these guidelines may offer the facility of E-banking
to its customers without any hindrances.

17. What precautions are the taken by a banker while opening:

(a) Trust's Accounts

(b) Minor's Accounts

(c) Company's Accounts

A. precautions while opening a trust account: “A trust is an obligation annexed to the

ownership of property, and arising out of confidence in and accepted by the owner, or
declared and accepted by him, for the benefit of another, or of another and the owner.” A
trust can be public or private.  All public trusts are required to be registered with the
Charity Commissioner under Public Trust Act of the respective states.

The following precautions must be taken before opening a trust’s account:

It must obtain:

I. copy of constitution of the trust,

II. Trust deed if available,
III. A list of the current trustees and the authority appointing them as trustees,
IV. The necessary resolution passed by the trustees for opening the account with the
bank,
V. Certified copy of the resolution signed by all the trustees in regard to the conduct
of the account,
VI. Any other document, which a bank thing necessary for verification.

B. precaution taken during the opening a miner’s account:

Minors: sec 3 of Indian Majority act, 1873, defines miner as: person below the age of:

18 years, or in case a guardian is appointed by court, it is 21.

Although a miner is prohibited to entering into a contract under the Indian contract act, hence
not eligible to conduct normal business with the bankers, but in the year 2013 RBI has issued
the guidelines to address this issue.

The following precautions should be taken by a banker before opening a miner’s account:

I. In case of miner’s account, Banker may open savings account but not a current
account,
II. Banks should be cautious to issue cheque books to minors age below 15-16,
III. A minor’s account should never be allowed to be overdrawn.
IV. Other precautions which a bank may fit to conduct it’s business, must be taken.

C. Precautions taken before opening a company’s account:

Basically, in most simplest way, a company can be defined as, A company is a legal entity
which is formed by different individuals to generate profits through their commercial
activities.
Before opening a company’s account, certain kind of documentation is required:

I. Account opening form must be filled out,

II. Certified copies of memo of association and articles of association,
III. Copy of certificate of incorporation,
IV. Certificate of commencement of Business,
V. Up-to-date list of directors with their name and address, and
VI. Certificated copy of a resolution of the Board of directors for opening and
conducting the account.

18. Identify two shortcomings of Banking Law in India and suggest legislative reforms for
removing those shortcomings.

I. Increasing numbers of Non-Performing Assets:

The non-performing assets of Indian commercial banks have been growing rapidly.

Non-performing assets consist of:

A. Debts recalled,
B. Suit-filed accounts i.e. where legal action or recovery proceedings have been initiated,
C. Decreed debts i.e. where suits have been filed and decrees obtained; and,
D. Debts classified as bad and doubtful.

The commercial banks at present do not have any machinery to ensure that their loans and
advances are, in fact, going into productive use in the larger public interest. Due to a high
proportion of non-performing assets or outstanding due to banks from borrowers they are
incurring huge losses. Most of them are also unable to maintain capital adequacy ratio.

III. Large Over-Dues:

The small branches of commercial banks are now faced with a new problem: a large amount
of overdue advances to farmers. The decision of the all the political parties, that if they will
come into power, all the loans which were taken buy the farmers, will be waived off. This
political promise creates hurdles for the banks. It should be stop.
2015 paper

What are SChedule banks ?

Scheduled Banks in India refer to those banks which have been included in the Second
Schedule of Reserve Bank of India Act, 1934.

By the permission of which authority RBI establish its branches?

When did negotiable instrument act came into force?

1 march 1882

Distinguish between pledge and mortagage

Pledge is typically utilised where the charge needs to be created over movable assets such as
to avail the debt. On the other hand, Mortgage is used when the securities provided is an
immovable asset/property by the borrowers to obtain the loans.

Pledge is defined under Section 172, of the Indian Contract Act 1872 whereas Mortgage is

defined in Section 58 of Transfer of Property Act 1882.

3) Applicable to which type of Assets:

Pledge is applied on the movable properties such as Gold, shares, NSC (National Saving
Schemes), Fixed Deposits, Insurance Policies etc.

On the other hand, Mortgage is applied over immovable properties that mean anything which
is fixed or attached to the earth, for example, Land & buildings, House, Plant & Machinery
etc.

4) Possession of Property:

When the assets or goods are pledged by any banks or finance company, the property or
goods are under the custody of a bank or finance company or the lender itself.

However, the borrower can still entertain the benefits of his goods. For instance, if a person
pledged his shares to get a debt from a bank, he will still entertain the benefits of his
shares/stocks such as Dividends, capital gain (due to appreciation in share price). 

On the other hand, if the property/assets are mortgage by the banks/lender, the assets/property
retain with the borrower, however, the legal papers of property are kept with the banks.
Moreover, even if the property of borrower is mortgaged with a bank, still he can lease his
house or apartment on rent but he cannot sell his property.

5) Examples of Loan:

Let us consider an example to understand the difference between pledge and mortgage.

When you pledge your Gold, Fixed Deposits, Shares or LIC to obtain a loan from any bank
or finance company. Then banks or finance companies keep your personal assets (Gold or
shares) with themselves as collateral (security) before sanctioning the loan.

On the other hand, when you require a housing loan against your lands and building or house,
then your property is mortgaged with the bank/finance company as security to avail the home
loan.

What is e commerce ?

E-commerce (electronic commerce) is the activity of electronically buying or selling of

products on online services or over the Internet. 

What is microfinance?

Microfinance is the provision of savings accounts, loans, insurance, money transfers and
other banking services to customers that lack access to traditional financial services, usually
because of poverty.

What do you understand by banking companies ?

banking company - a financial institution that accepts deposits and channels the money into
lending activities; "he cashed a check at the bank"; "that bank holds the mortgage on my
home" banking concern, depository financial institution, bank.

What do you mean by hacking of fraud ?

Hacking means using computers to commit fraudulent acts such as fraud, privacy

invasion, stealing corporate/personal data, etc.

Full from of nabard and atm?

National banking for agariculture and rural development and Atomatic teller machine.
Who is executive head of the RBI

Governor

Write a short note on banking ombudsman ?

o The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking

Regulation Act, 1949 by RBI with effect from 1995.
o The Banking Ombudsman Scheme was first introduced in India in 1995 and it
was revised in 2002.
o Current Banking Ombudsman Scheme introduced in 2006.
o From 2002 until 2006, around 36,000 complaints have been dealt by the Banking
Ombudsmen.
o Banking Ombudsman is appointed by Reserve Bank of India.
o Banking  Ombudsman is a senior official appointed by RBI. He handle and redress
customer complaints against deficiency in certain banking services.
o The offices of Banking Ombudsman is mostly situated at State Capitals.
o Around 15  Banking Ombudsmen have been appointed.
o All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary
Co-operative Banks are covered under the Banking Ombudsman Scheme.
o Grounds of Complaints

One can file a complaint on the following grounds of complaints:

1. Any excessive delay or non - payment of collection of cheques, drafts, bills etc.
2. Without any sufficient cause non acceptance of small denomination notes.
3. Charging any commission for acceptance of small denominations notes
4. Any delay in payment of inward remittances or non payment of inward remittances.
5. If any banking organization refuses to accept taxes or any delaying in accepting taxes
(as required by RBI or Government of India).
6. Any delay in issuing government securities
7. Refusal to issue or redemption of government securities.
8. Without any sufficient reason, forced close the deposit accounts by bankers.
9. If any banker refuse to close the accounts
10. If any banker deliberately delaying in closing the accounts.
11. Non compliance of the provisions of Banking Codes and Standard Board of India.
12. If any banker commits non - observance of Reserve Bank of India's guidelines or
instructions or any violation of the directives issued by the Reserve Bank in relation to
banking or other services. 
13. Without any sufficient cause, non acceptance of coins tendered or charging of
commission in respect thereof.
14. Delay or Failure in issue of drafts, pay orders or banker's cheques.
15.  Performance of work is not as per prescribed working hours.
16. Delay or failure in providing any bank facility.
 17. Complaints file by Non - resident Indians having accounts in India in relation to their
remittance from abroad, deposits and other bank related matters.
18. Without any reason, refusal to open deposit accounts.
19. Without adequate prior notice to the customer, charges levied by the banker.
20. Any violation of guidelines or instructions of RBI on ATM/Debit Card/Credit Card
operations.
21. Non - disbursement or delay in disbursement of pension.
Other Grounds 
A customer can also file a complaint on the following grounds of deficiency in service with
respect to loans and advances:
1. The Banking Ombudsman may also deal with such other matter as may be specified by
the Reserve Bank from time to time.
2. Without any valid reason non - acceptance of the application of loans.
3. Any violation of the provisions of the fair practices code for lenders as adopted by the
bank or Code of Bank's Commitment to Customers, as the case may be.
4. Any type of violation of the instruction, guidelines, recommendations of the RBI
5. If any non - observance of Reserve Bank Directives on interest rates;
6. Any delays in sanction of loan applications

Reasons, when you can File a Complaint

1. If the reply is not received from the bank within a period of one month after the
concerned bank has received complaint representation.
2. If bank rejects the complaint.
3. If the complainant is not satisfied with bank's reply.
o Banking Ombudsman does not charge any fee for filing and resolving customer's
complaints.
o If any loss suffered by the complainant then complainant is limited to the amount
arising directly out of the act or omission of the bank or Rs. 20 Lakhs whichever is
lower.

Recent Amendments

o Reserve Bank of India has widen the scope of its Banking Ombudsman scheme, 2006,
to include deficiencies arising out of sale of Insurance/ mutual fund/ other third-party
investment products by Banks. For example, if IDBI bank is selling mutual funds of
Reliance Mutual Funds. If Reliance Mutual funds did not provide the promised services,
then IDBI bank will be made liable for the damages.
o Under the amended scheme a customer would also be able to file a complaint against
the Bank for its non-adherence to RBI instruction with regards to Mobile
Banking/Electronic Banking services in India.
o The procedure for complaints settled by agreement under the scheme has also been
revised. Appeal has now been award for the complaints closed under 13(C) of the
existing scheme related to rejection which was not available earlier.
A bill of exchange can be defined as a legal document which contains the information about
the future payment from the person who is required to pay money and on the name of the
person who is entitled to receive money. A bill of exchange is often used in business
transactions and national and international trades.

1. Failure to Spread Risks:

The unit banking system suffers from its failure to spread risks. As the unit banking
operations are localised in a particular area, the failure of a big party to repay the loan in time
may bring disaster to the bank.

2. Limited Resources:
Unit bank has another disadvantage that it has limited resources at its disposal. So in the
event of a financial or economic crisis, if its depositors start withdrawing their money, the
bank fails. This is what actually happened in the USA during the Great Depression of 1930s
when 5000 banks failed and an additional 1200 were absorbed by larger banks.

3. Non-diversified Services:
The unit bank cannot provide diversified banking services to its customers because of its
inability to establish branches and higher costs. For example, businessmen may prefer a
branch of their city bank in the local business centre to facilitate their business transactions.

4. No Economies of Large Operations:

The unit banking system cannot have the advantages of a large scale banking in that it cannot
recruit more efficient and highly paid staff, and cannot enjoy the economies of large scale and
intensive specialisation and division of labour.

5. Lack of Fund Mobility:

An important argument against the unit banking system is that there is lack of mobility of
funds within the country. The unit banks do not attract funds from outside their areas. On the
other hand, there is every likelihood of local funds flowing out to the large money markets in
pursuit of higher interest rates. This is because the unit banks are unable to pay high interest
rates.

6. Non-Economic Considerations:
A unit bank may not advance loans strictly on economic considerations thereby jeopardizing
the interests of its depositors. It may be pressurised to give loans to a few local businessmen
who may not be creditworthy.

7. Backward Areas:
Since a unit bank has limited resources at its disposal, it cannot be opened in backward
towns. As a result, such areas continue to remain backward.

8. Unhealthy Competition:
As every company starts a unit bank in a large town, it leads to unhealthy competition among
different unit banks with the result that very few survive in the long run.

Difference Between Secured and Unsecured Loan (Secured vs Unsecured loan)

2016

1. Define banking ?
Banking refer as a bench for kepping lendimg and exchanging of money or coins in the
market place by the moneylender or mpney charger.

2. What do you mean by KYC policy?

KYC means know your customer.it’s mandatory frame work for banking
and financial institution used for customer verification process.

3. What do you mean by ATM?

ATM stands for Atomatic teller machine . it is a specialized computer that

makes It comnvienent to manage a bank account’s holder’s fund .

4. define promissory note ?

A promissory note referred to as a note payable is a legal instrument in which one party
promise in writing to pay a determine sum of monwy to the other ,either at the fix or
determinable future time or on demand of the payee under specific terms.

5. Define the term customer ?

Customer means a individual who has or had banking relation with
bank and vails services provided by bank .

6. What do you mean by internet banking ?

Online banking or internet banking allows user to conduct financial
transaction via the internet.

7. on which date banking regulation act came into force ?

16 march 1949
8. what do you mean lien ?

lien is the legal right of person to retain the possession of goods

belonging to another until certain demand or claim of the person in
possession are satisfied. The right is conferred by a contract or by law.
9. Define the term banker
Banker is one who carries banking business that is the word donates
any person individual or firm or company whole which transact
banking business .

10. Define the term banking company?

According to section 5 of banking regulation act 1949 a banking

company means the accepting for the purpose of lending or
 investment from the public repayable on demand or otherwise
withdrawan by cheque draft order or otherwise.

2018
1. What is RTGS?
Real time gross transaction
2. What do you mean by national bank?
A national bank is a bank which is operated by the national government .
3. What is debit card?
A debit card is a plastic card use instead of money when making
purchases directly by the account .
4. Define the bill of exchange ?
Bill of exchange is an order to a person directing him/her to pay the
specified amount to the person whose name is written on the bill.
5. What is the objective of plastic money?
To reduce the expenditure on printing of notes.

6. What is mortagage?
A mortagage is Type of loan that used to finance property .
7. What do you mean by SLR ?
Statutorty liquidated ratio is government term for the reserve with are
required to be maintain by the reserve bank.
8. What is a smart card?
A smart is a physical electronic authorization device used to control
access to resource.
9. What is a nostro account?
A nostro account refer to an account that a bank hold in a foreign
currency in another bank.
What is banking ombudsman ?
Banking ombudsman refer to a person appointed by the reserve bank to
hear complaints against deficiency in certain banking services .
 2020

1. Define the term Banking?

Banking is define in 5 B of Banking regulation act 1949.banking mean the
accepting for the purpose of the lending or investment of deposit of
money from the public repayable on demand or otherwise and
withdrawable by cheque draft order or otherwise.
2. What do you mean by ATM?
Automatic teller machine
3. Define cheque?
Cheque is a document that orders a bank to a pay a specific amount of
money fro ma persons account to the person in whose name the cheque
has been issued .
4. What is e-commerce?
E- commerce stands for electronic commerce .it mean buying and selling
of a product online .
5. Hundi is a type of document use in midevel time to order someone to pay
a specific amount of amount to another person.
6. What do you mean by negotiable instrument ?
According to section 13 of negotiable instruement act negotiable
instruement is a promissory note bill of exchange or cheque payable
either to order or to bearer .
7. What is recurring account?
A recurring commonly knows as RD account is unique term deposit that
is deposited offered by banks to people with regular incomes to deposit a
fixed amount every month .
8. Define customer?
A customer is a person who avails services offered by the bank.
9. What do you understand by banking companies?
Banking companies are defined under section 5 C of the banking
regulation act 1949
10. who is executive head of the RBI.
Governor

2015

Part B

11. Write a short note on Banking ombudsman.

o The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking

Regulation Act, 1949 by RBI with effect from 1995.
o The Banking Ombudsman Scheme was first introduced in India in 1995 and it
was revised in 2002.
o Current Banking Ombudsman Scheme introduced in 2006.
o From 2002 until 2006, around 36,000 complaints have been dealt by the Banking
Ombudsmen.
o Banking Ombudsman is appointed by Reserve Bank of India.
o Banking  Ombudsman is a senior official appointed by RBI. He handle and redress
customer complaints against deficiency in certain banking services.
o The offices of Banking Ombudsman is mostly situated at State Capitals.
o Around 15  Banking Ombudsmen have been appointed.
o All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary
Co-operative Banks are covered under the Banking Ombudsman Scheme.
o Grounds of Complaints

One can file a complaint on the following grounds of complaints:

22. Any excessive delay or non - payment of collection of cheques, drafts, bills etc.
23. Without any sufficient cause non acceptance of small denomination notes.
24. Charging any commission for acceptance of small denominations notes
25. Any delay in payment of inward remittances or non payment of inward remittances.
26. If any banking organization refuses to accept taxes or any delaying in accepting taxes
(as required by RBI or Government of India).
27. Any delay in issuing government securities
 28. Refusal to issue or redemption of government securities.
29. Without any sufficient reason, forced close the deposit accounts by bankers.
30. If any banker refuse to close the accounts
31. If any banker deliberately delaying in closing the accounts.
32. Non compliance of the provisions of Banking Codes and Standard Board of India.
33. If any banker commits non - observance of Reserve Bank of India's guidelines or
instructions or any violation of the directives issued by the Reserve Bank in relation to
banking or other services. 
34. Without any sufficient cause, non acceptance of coins tendered or charging of
commission in respect thereof.
35. Delay or Failure in issue of drafts, pay orders or banker's cheques.
36.  Performance of work is not as per prescribed working hours.
37. Delay or failure in providing any bank facility.
38. Complaints file by Non - resident Indians having accounts in India in relation to their
remittance from abroad, deposits and other bank related matters.
39. Without any reason, refusal to open deposit accounts.
40. Without adequate prior notice to the customer, charges levied by the banker.
41. Any violation of guidelines or instructions of RBI on ATM/Debit Card/Credit Card
operations.
42. Non - disbursement or delay in disbursement of pension.
Other Grounds 
A customer can also file a complaint on the following grounds of deficiency in service with
respect to loans and advances:
7. The Banking Ombudsman may also deal with such other matter as may be specified by
the Reserve Bank from time to time.
8. Without any valid reason non - acceptance of the application of loans.
9. Any violation of the provisions of the fair practices code for lenders as adopted by the
bank or Code of Bank's Commitment to Customers, as the case may be.
10. Any type of violation of the instruction, guidelines, recommendations of the RBI
11. If any non - observance of Reserve Bank Directives on interest rates;
12. Any delays in sanction of loan applications

Reasons, when you can File a Complaint

4. If the reply is not received from the bank within a period of one month after the
concerned bank has received complaint representation.
5. If bank rejects the complaint.
6. If the complainant is not satisfied with bank's reply.
o Banking Ombudsman does not charge any fee for filing and resolving customer's
complaints.
o If any loss suffered by the complainant then complainant is limited to the amount
arising directly out of the act or omission of the bank or Rs. 20 Lakhs whichever is
lower.

Recent Amendments

o Reserve Bank of India has widen the scope of its Banking Ombudsman scheme, 2006,
to include deficiencies arising out of sale of Insurance/ mutual fund/ other third-party
 investment products by Banks. For example, if IDBI bank is selling mutual funds of
Reliance Mutual Funds. If Reliance Mutual funds did not provide the promised services,
then IDBI bank will be made liable for the damages.
o Under the amended scheme a customer would also be able to file a complaint against
the Bank for its non-adherence to RBI instruction with regards to Mobile
Banking/Electronic Banking services in India.
o The procedure for complaints settled by agreement under the scheme has also been
revised. Appeal has now been award for the complaints closed under 13(C) of the
existing scheme related to rejection which was not available earlier.

13. Who is consider as special customer?

Every person is legally capable of opening an account with a banker if the banker is satisfied
as to the customer’s bona fides and if he is willing to enter into the necessary business
relations with the banker. The banker is entitled to reject or accept such an application for
opening an account or providing any type of service. The banks have some special
procedures and provisions for their certain customers, hence, they are called as special types
of customers. • They are to be dealt with carefully while operating and opening the accounts.

Mainly this category includes:

• Minors: sec 3 of Indian Majority act, 1873, defines miner as: person below the age of:

18 years, or in case a guardian is appointed by court, it is 21.

Although a miner is prohibited to entering into a contract under the Indian contract act, hence
not eligible to conduct normal business with the bankers, but in the year 2013 RBI has issued
the guidelines to address this issue.

Now:

I. A savings /fixed / recurring bank deposit account can be opened by a minor of any
age through his/her natural or legally appointed guardian.
II. A miner can also open and operate a savings account after attaining a certain age
as fixed by the banks.

• Married women:

• Lunatics

• Illiterate Persons

• Joint Hindu Family

• Co-operative Societies

• Partnership

• Trustees

14. Explain the essential of bill of exchange ?

#1 A written document

A bill of exchange is a written promise that A contains the information about the business
deal between two parties where one party which seeks the services of other party get written a
bill of exchange which provides a legal promise to the service provider for the decided
payment in future.

#2 The drawer of the Bill of exchange

As you have learned that a party draws a bill of exchange in the name of another party.
Therefore, one party gets the bill drawn from the drawer.

A drawer can be a legal organization or person which draws the bill on the request of the
drawee. It is possible that a drawer of the bill and drawee of the bill of exchange can be the
same person.

#3 Drawee of the Bill of exchange

The drawee of the bill of the exchange who makes a promise to pay the decided payment in
the future. A drawee in which get drawn the bill of exchange when he seeks services from the
other party. A bill of exchange contains a specific amount that a drawee is supposed to pay
after he receives services as decided.

#4 Payee of the Bill of exchange

Another important party involved in the formation of a bill of exchange is the person to
which the amount written in the bill of exchange will be paid in exchange for his services.
The bill of exchange is a legal document which is prepared in favor of payee to protect him
from the fraud customers.

For example, if a person provides services to international customers, then how he would
know that the party which placed the order for his services is genuine or not? Rather than
going with the gut feeling or intuition.

The payee can ask for the bill of exchange and can receive his money using a bill of exchange
from the legal party involved in the transaction.

#5 Bill of exchange is unconditional

The bill of exchange is unconditional that means the drawee of the bill of exchange is bound
to pay the money once he gets the services which are mentioned in the bill. In addition to this,
the drawee is bound to pay when the order is damaged due to some natural activity.

However, the drawee can refuse to pay when his expectations are not met, or the services
provided to him are not as mentioned in the bill of exchange.

#6 Create Trust

In ancient times, people used to do transactions with the people living in the nearby them, and
they used to know each other to take risks with the money.

But when people from different countries started trading with each other, it became difficult
for them to trust people who they never met and with the introduction of internet people
involving in the trading transaction don’t even get a chance to meet each other face to face.

In such scenarios, the role of the bill of exchange became important. As it is a legal
document, it makes it easy for stranger people to trust each other to get involved in business
transactions.

#7 Mentions the currency of the transaction

The Features of Bill of Exchange contains information about the currency of the payment in
the transaction.

For example, if two parties from different countries are getting involved in the transaction,
then the currency of transaction will be decided at the time of writing the bill of exchange,
and the drawee involved in the transaction can’t pay any other currency.

#8 Bill of Exchange contains the date of payment

While writing the bill of exchange the date in future on which the drawer is supposed to pay
the full payment to the payee is mentioned clearly on the bill of exchange.

The payee can take legal actions if the drawer does not pay the full decided amount on the
final date mentioned on the bill of exchange. However, the drawee can pay the full payment
before the decided date.

#9 The mode of payment

The mode of payment is also mentioned on the bill of exchange. Whether the drawee of the
bill of exchange will make the payment in cash or through internet transaction or cheque or
draft.

The payee can only accept the money if only it is paid in the form as it is mentioned on the
bill of exchange.
#10 Details of the order

The bill of exchange also contains the details of the order placed. The bill of exchange
contains the amount of the products to be delivered, the date of the delivery, the quality of the
products, etc. if the payee of the transactions fails to fulfill any of the condition then the
drawee of the transaction can take legal action or can withdraw his participation from the
transaction.

#11 Legally stamped

A bill of exchange is considered valid if only it is properly stamped if it is not stamped

properly then it is of no value and is not considered a legal instrument for the business
transaction.

#12 Revenue Stamp

To make a bill of exchange valid, it is important to paste the revenue stamp on the bill of
exchange. A revenue stamp is an adhesive label pasted on the document to make it legal for
the payment of the taxes or fees on the document.

15. What precation are to be taken by banker while opeaning an account?

Same

2016 Part B
11. write a short note on dishonor of cheque?

A cheque is said to be dishonor when the payment is not made on its

presentation to the bank. Earlier before 1988, there was no liability
provided in case of dishonor of a cheque but after the insertion of Section
138 in the Negotiable Instrument Act, 1881 criminal as well civil liability
were imposed by way of short term imprisonment and fine on the dishonor
of the cheque. It is done to develop and create the faith of the cheque
among the people.1 Section 6 of the Negotiable Act, 1881, defines a
cheque as a bill of exchange drawn on a specified banker and not
expressed that to be payable otherwise on demand.

12. Write a short note on rural Bank RRB?

 The Regional Rural Banks were setup on the basis of Narsimham Committee report
(1975), by the legilations of the Regional Rural Banks Act of 1976. Thereafter,

1
 the first Regional Rural Bank was setup in 1975 itself by the name Prathama
Grameen Bank.

Shares

 Central Government has 50% share.

 State Government has 15% share.
 The Sponsor Bank has 35% share.

Objectives of Regional Rural Banks (RRB):

 To bridge the credit gap in rural regions in India.

 To check rural credit outflow to urban areas.
 To reduce regional imbalances in terms of availability of financial facilities.
 To increase rural employment generation.

Characterstic features of RRBs:

 RRBs have knowledge of rural constraints and problems like a cooperative because it
operates in familiar rural environment.
 RRBs show professionalism in mobilising financial resources like a commercial bank.
 RRBs are supposed to work in its prescribed local limits.
 It provides banking facilities as well as credit to small and marginal farmers, small
entrepreneurs, labourers, artisans in rural areas.
 RRBs have to fullfil the priority sector lending norms as applicable on other
commercial banks.

13. Write a note on types of bank?

Scheduled banks have been included in the second schedule of the Reserve Bank, and fulfils
the following three criteria:

1. It must have a paid up capital of at least Rs. 5 lakhs.

2. It must fulfil the RBI norms about no activity that may be detrimental to the
depositors interests.
3. It must be a Corporation(not a partnership or a single ownership firm).

Non-Scheduled Banks are excluded from the Second schedule of RBI. The Reserve Bank
does not exercise much control over them, but they report monthly to RBI.

Now, We shall first look into Central Bank first. The central bank has the primary function of
regulating commercial banks and other economic activities in the economy. It acts as a
Banker’s Bank. In India, the central Bank is the Reserve Bank of India. It is the apex bank
who controls all other banks by regulating and supervising their activities.

14. Write a note on smart card?

  A smart card is a card that stores information on a microprocessor or memory chip
rather than the magnetic stripe found on ATM and credit cards.Smart cards have
embedded microprocessor chips that provide an extra layer of security for users. They
look like normal credit cards or driver’s licenses, but instead of being a single piece of
plastic, they are actually constructed like tiny boxes that contain the
microprocessor itself.Because they don’t utilize magnetic strips like regular credit
cards and debit cards do, smart cards cannot be read in the same way that normal
cards are.Smart cards are important for security purposes in all of their applications.
In an age of increasing technology hacks and security challenges, smart cards give
users and institutions extra protection for transactions and account information. 
 Transactions made with smart cards are encrypted to protect the transfer of
information from party to party. Each encrypted transaction cannot be hacked and
doesn’t transfer any additional information beyond what’s needed for completing the
single transaction. 

2017. part B

11. Write a short note o commercial bank?

Commercial Banks 
These banks are the oldest and most organized institutions. They have a wide network of
branches initially established as corporate bodies with shareholders by private individuals bot
later on these banks were put under state ownership. The main functions of commercial banks
were financing, organized trade commerce, and industry. But now they provide finance
to agriculture, small scale business and small borrowers also. In the present
banking, functions have tremendously changed.  
Classification of Commercial Banks  
1. Indian Banks - All banks incorporated in India whether having business in India or
abroad are the Indian banks.  
2. Foreign Banks – Banks incorporated and established outside
India (in a foreign country) .but have a place of business in India like Bank of America,
Bank of Tokyo. During globalization, we witnessed so many foreign banks
like ICICI, ABN Amro, Bank Ltd. Etc.  

12. What do you mean by criminal lialilty on

dishonor of cheque ?

Same

13. write a short note on baking ombudsman ?

Same
14. write a short note credit card abuse ?

Credit card fraud is a form of identity theft in which an individual uses

someone else’s credit card information to charge purchases, or to
withdraw funds from the account. Credit card fraud also includes the
fraudulent use of a debit card, and may be accomplished by the theft
of the actual card, or by illegally obtaining the cardholder’s account
and personal information, including the card number, the card’s
security number, and the cardholder’s name and address. Policing
agencies from the local police department, to the U.S. Secret Service
are on the job enforcing fraud laws as they related to credit card fraud.
To explore this concept, consider the following credit card fraud
definition.

2018 part B
State the condition for banking company to get
licence from RBI?

1. Issuance of currency: Monopoly of note issue-Under section 22 RBI Act 1934 RBI has the
sole authority to issue currency notes (called Bank notes) under signature of Governor. This
power of RBI enables it to control and regulate money supply. One rupee note or coins
(which are issued by the Central Government signed by the Finance Secretary.  
2. Banker to the Government – according to section 20 of the RBI Act RBI accept money on
account of the Central Government and make payment on behalf of the Central Government
and undertake various banking functions like exchange remittances, including the
management of the public debt. According to section 21- RBI has right to transact
Government business in India. According to section 21A RBI transact business of State
Government on agreement. Which is later presented before parliament. Under section 45 – It
is an obligation on RBI to appoint SBI as its sole agent at the places where the bank has no
branch or office.  
3. Bankers Bank – The RBI acts as a bankers bank to the Commercial Banks . Commercial
banks keep their account with RBI. Commercial banks keeps deposits and borrows money
from the RBI. In case of difficulty RBI act as a lender of last resort to commercial banks.
Section 17(4) enables the RBI to grant loans and advances to the banks.  
4. Controller of Credit -The RBI control the volume of credit created by the commercial
banks under section 21 RBI can fix interest rates and also uses credit control methods to
control inflation and money supply for ensuring growth of the economy and
price stability. Some of the methods are quantitative or qualitative methods or selective credit
control methods and by determining purpose for which advances may or may not be granted
by a single bank or group of banks  
5. Maintenance of external value -RBI is responsible also for maintaining external value of
Indian currency as well as the internal value. Foreign exchange management reserves are held
by RBI and it has wide powers to regulate foreign exchange management transactions
under Foreign Exchange Management Act. Section 40 of RBI Act regard RBI as custodian
of Exchange Reserves.  
6.Collection of Information’s- After insertion of chapter III-A in RBI Act in the year 1962,
the RBI is empowered to collect credit information under section 45-C and can furnish
information to the banking company on prescribed fees  
7. Promotional and Developmental functions- (i) By encouraging the commercial banks to
extend their branches in the semi urban and rural areas to reduce the dependence of the
people on indigenous bankers and money landers, and to develop the banking habit of the
people. 
(ii) The RBI appoints ad hoc committees / experts groups such as Chakravarthy Committee
from time to time to enquire banking problem and make recommendations to solve them.  
(iii) Banker’s Training College has been set up to extend training facilities to supervisory
staff or commercial banks.  
(viii)The RBI helps to promote the process of industrialization in the country in the country
by setting up specialized institutions for industrial finance. 
8. Controller of Banks- Banking Regulation Act provides power to supervise and control to
RBI of the banks in India some of the relevant sections are as follows:  
(i) Issue of License to banks to conduct banking business. (section 22) 
(ii) Control on issue of new branches or change in location of existing branch (section 23) 
(iii) to inspect books and accounts of commercial banks (section 35)  
(iv) to remove management and other persons from office (section 35-AB)  
(v) to give directions (section 35 A)  
(vi) to appoint additional directors (section 36 AB)  
(vii) as to suspension of business (section 37 & 45)  
 
 
 
 What do you mean by travelers cheque?

The Traveler’s cheque is an exchange medium that can be used as a substitute for

the hard currency. As the name suggests, these cheques are issued to the individuals
who travel on vacations to overseas. Traveler’s Cheque

Definition: The Traveler’s cheque is an exchange medium that can be used as a substitute

for the hard currency. As the name suggests, these cheques are issued to the individuals who
travel on vacations to overseas.

The Traveler’s cheque provides a lot of convenience to those who travel to foreign countries,
as they are not required to carry excess cash along with them and can use these cheques as a
currency to facilitate the purchases. The merchants and other business accept the traveler’s
cheque as a currency, provided the original signatures on the cheque (the cheque signed at the
time of its issue) matches the signature done at the time purchases are initiated.

What do you mean by notice of protest?

Notice of protest is a formal declaration made by a

person interested in some act done or about to be done.
The person making a notice of protest saves with
him/her certain rights, by making such notice. For
example, notice of protest is given by a notary public to
a drawer or indorser of a negotiable instrument, that the
instrument was neither paid nor accepted.

In which condition a minor can be a party of

negotialble instrument ?

According to law, a person, who has not attained adulthood (18

years of age), is a minor. An agreement with a minor is considered
void. If a minor makes an agreement by fraud, i.e., by lying about
his age & presenting himself as an adult, he can not be sued for
damages.
A minor can draw or negotiate instruments (i.e. bill of exchange,
Promissory note, Cheque). But he incurs no personal liability in
such cases. A minor can be a promisee or payee. He can also
become an endorse by transfer of a negotiable instrument.
 2020 part B
11. Write a short note on dishonor of cheque ?
Same

12. Explain the different kinds of account?

1. Savings Account
2. Current Account
3. Recurring Deposit Account
4. Fixed Deposit Account
5. DEMAT Account
6. NRI Account

Savings Account
As the name suggests, the savings accounts can be opened by an individual or jointly by
two people with an aim to save money. 
The main benefit of opening a savings bank account is that the bank pays you interest
for opening this type of account with them. 
Given below are a few features of the Savings account:

 There is no limit to the number of times the account holder can deposit money in
this account but there is a restriction on the number of times money can be
withdrawn from this account. 
 The rate of interest that an account holder get varies from 4% to 6% per annum
 There is no minimum balance that needs to be maintained for this type of an
account
 The savings account holders can get an ATM/Debit/Rupay Card if they want to
 Savings bank account is further divided into two types: Basic Savings Bank
Deposit Account (BSBDA) and the other one is Basic Saving Bank Deposit
Accounts Small Scheme(BSBDS)
 The savings bank account is mostly eligible for students, pensioners and working
professionals

Current Account
The second type of bank account is the current bank account. These accounts are not
used for the purpose of savings.
Some important pointers related to the current bank account have been discussed
below:

 This type of bank account is mostly opened by businessmen. Associations,

Institutions, Companies, Religious Institutions and other business-related works,
the current account can be opened
 There is no fixed number of times that money can either be deposited or
withdrawn from such accounts
 Internet banking is available
 This type of bank account does not have any fixed maturity
 Overdraft facility is available for current bank accounts
 There is no interest that is paid on such accounts

Recurring Deposit Account

Recurring Deposit account or RD account is a form of account wherein the account
holder needs to deposit a fixed amount every month until it reaches the fixed maturity
date. 
The features of the Recurring deposit account have been discussed below:

 Any individual or an Institution can open a recurring deposit account either

separately or jointly
 Periodic or monthly instalments that need to be added can be as low as Rs.50/-
or may vary from bank to bank
 The range of months for which an RD account can be opened varies from 6
months to 120 months
 The interest rate varies depending upon the bank you choose to open an account
with
 Nomination facility is also available for RC accounts
 Passbook is issued for this type of bank account
 Premature withdrawal of the amount is permitted, provided a sum of amount is
deducted as penalty

Fixed Deposit Account

FD or a fixed deposit account is another type of bank account that can be opened in any
Public or Private sector bank.
The list of important things that need to be known with respect to the fixed deposit
account has been mentioned below:

 It is a one time deposit and one time take away account. Under this type of
account, the account holder needs to deposit a fixed amount of sum (as per their
wish) for a fixed time period
 The amount deposited in FD account can only be withdrawn all at once and not in
instalments
 Banks pay interest on the fixed deposit account
  The rate of interest depends upon the amount you deposit and for the time
duration of the FD
 Full repayment of the amount is available before the maturity date of FD

DEMAT Account
Shares and securities which can be held in electronic format constitute the DEMAT
account. The DEMAT account also stands for Dematerialized Account.
Given below the points that need to be known by a candidate regarding the DEMAT
Account:

 There are only two depository organisations which manage this type of bank
account in India. This includes: National Securities Depository Limited and
Central Depository Services Limited
 This helps facilitate easy trade of bonds and shares
 Helps in conducting stress-free transaction of shares
 KYC is required for opening the DEMAT Account
 Transaction cost is reduced
 Traders can work from anywhere
 The transfer of securities can be done with reduced paperwork

NRI Account
To fulfil the bank requirements of a Non-Residential Indian or a Person of India Origin,
the option of NRI account is available.
The NRI Accounts are further divided into three types:

1. NRO ( Non-Resident Ordinary Rupees) Account – This shall allow you to

transfer your foreign earnings easily to India. It can be opened in the form of an
FD/RD/Current/Savings account. These accounts can be opened by an individual
or jointly opened
2. NRE ( Non-Resident External Rupees) Account – When an Indian citizen
moves abroad to work there, his/her account needs to be converted into an NRE
account. This account can be jointly opened with an Indian resident
3. FCNR ( Foreign Currency Non-Resident ) Account – This type of account can
be opened to manage an international currency. It can only be in the form of
Term deposit and can be withdrawn after the maturity period only. 

Savings Account
As the name suggests, the savings accounts can be opened by an individual or jointly by
two people with an aim to save money. 
The main benefit of opening a savings bank account is that the bank pays you interest
for opening this type of account with them. 
Given below are a few features of the Savings account:

 There is no limit to the number of times the account holder can deposit money in
this account but there is a restriction on the number of times money can be
withdrawn from this account. 
 The rate of interest that an account holder get varies from 4% to 6% per annum
 There is no minimum balance that needs to be maintained for this type of an
account
 The savings account holders can get an ATM/Debit/Rupay Card if they want to
 Savings bank account is further divided into two types: Basic Savings Bank
Deposit Account (BSBDA) and the other one is Basic Saving Bank Deposit
Accounts Small Scheme(BSBDS)
 The savings bank account is mostly eligible for students, pensioners and working
professionals

Current Account
The second type of bank account is the current bank account. These accounts are not
used for the purpose of savings.
Some important pointers related to the current bank account have been discussed
below:

 This type of bank account is mostly opened by businessmen. Associations,

Institutions, Companies, Religious Institutions and other business-related works,
the current account can be opened
 There is no fixed number of times that money can either be deposited or
withdrawn from such accounts
 Internet banking is available
 This type of bank account does not have any fixed maturity
 Overdraft facility is available for current bank accounts
 There is no interest that is paid on such accounts

Recurring Deposit Account

Recurring Deposit account or RD account is a form of account wherein the account
holder needs to deposit a fixed amount every month until it reaches the fixed maturity
date. 
The features of the Recurring deposit account have been discussed below:

 Any individual or an Institution can open a recurring deposit account either

separately or jointly
 Periodic or monthly instalments that need to be added can be as low as Rs.50/-
or may vary from bank to bank
 The range of months for which an RD account can be opened varies from 6
months to 120 months
  The interest rate varies depending upon the bank you choose to open an account
with
 Nomination facility is also available for RC accounts
 Passbook is issued for this type of bank account
 Premature withdrawal of the amount is permitted, provided a sum of amount is
deducted as penalty

Fixed Deposit Account

FD or a fixed deposit account is another type of bank account that can be opened in any
Public or Private sector bank.
The list of important things that need to be known with respect to the fixed deposit
account has been mentioned below:

 It is a one time deposit and one time take away account. Under this type of
account, the account holder needs to deposit a fixed amount of sum (as per their
wish) for a fixed time period
 The amount deposited in FD account can only be withdrawn all at once and not in
instalments
 Banks pay interest on the fixed deposit account
 The rate of interest depends upon the amount you deposit and for the time
duration of the FD
 Full repayment of the amount is available before the maturity date of FD

DEMAT Account
Shares and securities which can be held in electronic format constitute the DEMAT
account. The DEMAT account also stands for Dematerialized Account.
Given below the points that need to be known by a candidate regarding the DEMAT
Account:

 There are only two depository organisations which manage this type of bank
account in India. This includes: National Securities Depository Limited and
Central Depository Services Limited
 This helps facilitate easy trade of bonds and shares
 Helps in conducting stress-free transaction of shares
 KYC is required for opening the DEMAT Account
 Transaction cost is reduced
 Traders can work from anywhere
 The transfer of securities can be done with reduced paperwork

NRI Account
To fulfil the bank requirements of a Non-Residential Indian or a Person of India Origin,
the option of NRI account is available.
The NRI Accounts are further divided into three types:

1. NRO ( Non-Resident Ordinary Rupees) Account – This shall allow you to

transfer your foreign earnings easily to India. It can be opened in the form of an
FD/RD/Current/Savings account. These accounts can be opened by an individual
or jointly opened
2. NRE ( Non-Resident External Rupees) Account – When an Indian citizen
moves abroad to work there, his/her account needs to be converted into an NRE
account. This account can be jointly opened with an Indian resident
3. FCNR ( Foreign Currency Non-Resident ) Account – This type of account can
be opened to manage an international currency. It can only be in the form of
Term deposit and can be withdrawn after the maturity period only. 

13. Write a note on smart card?

A smart card is a card that stores information on a microprocessor or memory chip

rather than the magnetic stripe found on ATM and credit cards.Smart cards have
embedded microprocessor chips that provide an extra layer of security for users. They
look like normal credit cards or driver’s licenses, but instead of being a single piece of
plastic, they are actually constructed like tiny boxes that contain the
microprocessor itself.Because they don’t utilize magnetic strips like regular credit
cards and debit cards do, smart cards cannot be read in the same way that normal
cards are.Smart cards are important for security purposes in all of their applications.
In an age of increasing technology hacks and security challenges, smart cards give
users and institutions extra protection for transactions and account information. 

Transactions made with smart cards are encrypted to protect the transfer of
information from party to party. Each encrypted transaction cannot be hacked and
doesn’t transfer any additional information beyond what’s needed for completing the
single transaction. 

14. Explain the function of nabard ?

Functions of NABARD
Credit Functions:

 Framing policy and guidelines for rural financial institutions.

 Providing credit facilities to issuing organizations
 Monitoring the flow of ground level rural credit.
  Preparation of credit plans annually for all districts for identification
of credit potential.

Development Functions:

 Help cooperative banks and Regional Rural Banks to prepare

development actions plans for themselves.
 Help Regional Rural Banks and the sponsor banks to enter into MoUs
with state governments and cooperative banks to improve the affairs
of the Regional Rural Banks.
 Monitor implementation of development action plans of banks.
 Provide financial support for the training institutes of cooperative
banks, commercial banks and Regional Rural Banks.
 Provide financial assistance to cooperative banks for building
improved management information system, computerisation of
operations and development of human resources.

Supervisory Functions:

 Undertakes inspection of Regional Rural Banks (RRBs) and

Cooperative Banks (other than urban/primary cooperative banks)
under the provisions of Banking Regulation Act, 1949.
 Undertakes inspection of State Cooperative Agriculture and Rural
Development Banks (SCARDBs) and apex non- credit cooperative
societies on a voluntary basis.
 Provides recommendations to Reserve Bank of India on issue of
licenses to Cooperative Banks, opening of new branches by State
Cooperative Banks and Regional Rural Banks (RRBs).
 Undertakes portfolio inspections besides off-site surveillance of
Cooperative Banks and Regional Rural Banks (RRBs).
 Part C
2015

15.
Discuss the provisions related to micro - finance
in India and also explain the role of foreign
doners ?

16. Identify two

short coming of Banking system in India

17.
Write a note on modern Aspect of Banking

18.
What is Banking and discuss the differences
between secured and unsecured loan ?
Banking is define in 5 B of Banking regulation act 1949.banking mean the
accepting for the purpose of the lending or investment of deposit of money from
the public repayable on demand or otherwise and withdrawable by cheque draft
order or otherwise.