AHSEC - Class 12 Solved Question Papers: Banking' 2020 | Class 12 Banking Solved Question Papers

Ans: 1840

Ans: 4(Four). Four local boards located at Kolkata, Mumbai, New Delhi and Chennai.

Ans: Industrial Finance Corporation of India

Ans: NBFIs: Development bank is a specialised financial institution which provides medium and long term finance to business units in the forms of loans, underwriting, investments and guarantees operations, promote entrepreneurship and upgrade knowhow and do-how. It is a multi-purpose financial institution and not just a term-lending institution. It does not accept deposits from the public, unlike commercial banks.

Ans: False, Unconditional

Ans: Scheduled banks refer to those banking institutions whose names are included in the Second Schedule of the Reserve Bank of India Act, 1934.

Non-Scheduled banks refer to those banking institutions, whose names do not appear in the Second Schedule of the RBI Act, 1934.

Ans: Commercial bank help in execution of monetary policy by maintaining CRR and SLR. They also follow the RBI guidelines for granting loans and advances.

Ans: The term “Endorsement” of a negotiable instrument means writing of a person’s name of the back of the instrument for the purpose of negotiation. According to Section 15 of the Negotiable Instrument Act, 1881, “When the maker or holder of a negotiable instrument sings his name, otherwise than such maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto he is said to have endorsed the instrument.” The person who puts his signature is called the “endorser” and the person in whose favour it is being endorsed in called the “endorsee”.

Ans: Cash Credit is a type of advance wherein a banker permits his customer to borrow money upto a particular limit by a bond of credit with one or more securities. The advantage associated with this system is that a customer can withdrawn money as and when required. The bank will charge interest only on the actual amount withdrawn by the customer. Many industrial concerns and business houses borrow money in this form. Cash credit limits are fixed once a year. Hence it gives rise to the tendency of fixing a higher limit than the amount of funds required by the customer throughout the year. In times of credit shortage the customer may misutilise the normally unutilized credit gap.

Ans: Inspection of Bank is done by Officers of Reserve Bank of India as per Banking Regulation Act 1949 and some other laws of Government of India. The main job of the Inspecting Officers of RBI is to check the Authenticity of the Audit Report. They also carry some extra work other than carried out by CAs.

Ans: Sensex: It is a Market Capitalisation Weighted index of 30 stocks representing a sample of large, well-established and financially sound companies. It is the oldest index in India.

Ans: All the banks operating in a country, beside, cash in hand must maintain statutory cash reserve in the Reserve Bank of India against their time and Demand liabilities which is called cash reserve ratio. The Cash Reserve Ratio (CRR) refers to the portion of total deposits of a commercial bank which it has to keep with the RBI in the form of cash reserves. Present CRR is 4%.

Statutory Liquidity ratio of the total deposits of a bank which it has to maintain with itself in the form of liquid funds like government securities and cash in hand at any given conditions and point of time. Present SLR is 19.25%.

Ans: Broadly NBFI’s in India are classified into two groups:

(i) Organised NBFI’s which is further divided into Industrial development banks and agricultural development banks.

(ii) Unorganised NBFI’s

(i) Organised NBFI’s: The organised NBFI’s include development banks and other specialised institutions. Development banks are further divided into Industrial Development banks and Agricultural Development banks:

Industrial Development banks are the following: (i) Industrial Development banks of India (IDBI). (ii) Industrial Credit and Investment Co-operations of India (ICICI). (iii) Industrial Development banks of India (IDBI). (iv) Life Insurance corporation (LIC). (v) Unit Trust of India (UTI). (vi) General Insurance Corporations (GIC).

Agricultural Development banks are the following: (i) National bank for agricultural and rural development (NABARD). (ii) Land Development Bank (LDB) (ii) Unorganised NBFI’s: A number of unorganised NBF does also operate in the country. They are known as loan companies; higher purchase finance companies, chit funds etc.

(ii) Unorganised NBFIs: The unorganised non-banking financial institutions include merchant banking companies, credit rating agencies, factoring companies, leasing companies etc.

Ans: A Holder in Due Course enjoys the following rights and privileges:

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Ans: Features of Money Market: The salient features of money market are as follows:  2020

Or

Ans: The word, “Hundi” has been derived from the Sanskrit word “hund” or “huna” (2017) which means to “collect”. A Hundi is a traditional bill of exchange which is written in oriental Indian languages.  A Hundi may be defined as “a written unconditional order signed by the creditor, directing the debtor to pay a certain sum of money on demand or after a specified period to a person named therein”. It may be payable at sight or demand or at the expiry of a certain period. (2012)

1) Darshani Hundi: It is a type of Hundi which is payable at sight or on demand.

2) Muddati Hundi: It is similar to a time of bill of exchange. It is payable after a specified period of time. It is also known as “Miadi Hundi.”

3) Shah-Jog Hundi: It is drawn by a merchant upon another asking the later to pay the amount of the Hundi to a shah – respectable person in the market.

4) Jokhmi Hundi: It is drawn by the consignor of goods on the consignee against the goods shipped.

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Ans: The first function or the primary function of money is to issue paper currency. The Central Bank has the sole power to issue paper currency. The notes are legal tender money. In India, the RBI issue currency notes of all types except One Rupee note which are issued by the Ministry of Finance, Govt. of India. But the notes are issued following some methods. The Central Banks follows different methods or system according to the currency or banking regulations to issue notes. These systems are:

The simple deposit system is also knows as full reserve system. Under this system, the Central Bank is required to keep 100% of metal, either gold or silver or both as reserve for every note issued. The notes so issue becomes representative paper money. The advantage of this system is that it enjoys a public confidence and there is no danger of over issue of currency notes. But it is very costly and money supply cannot be increase as and when required.

The system of fixed fiduciary was first introduced in England in 1844. Under this system, the Central Bank issue currency notes up to a certain limit against reserves of Govt. securities. The notes issued beyond the limit set by the law have to be fully banked by metallic reserves. Though the system inspires public confidence and ensures convertibility of currency notes without any danger of over issue, yet the system is uneconomical and un-elastic as it requires sufficient gold reserves and the supply of money cannot be increased easily at time of emergency.

The proportional system of issuing currency is very simple and elastic. According to this system, the notes issued by Central Bank are banked by both metallic reserves and securities. A certain percentage (25 to 40%) of the total notes issued has to be backed by gold or silver reserves and the remaining by Govt. securities. The system guarantees the convertibility of paper money and is economical to use.

The minimum reserve system is followed in India since 1956. This is a system in which the Central Bank is authorized to issue notes up to any limit by keeping a certain minimum reserve of gold and foreign securities. In India, the RBI is required to keep the minimum reserve of Rs. 200/- crore out of which Rs. 115/- crore should be kept in gold. The system is very elastic and economical for developing countries as it requires only a small and fixed amount of gold reserve. However, it lacks in public confidence due to non-convertibility of notes. 

The system in which the Central Bank is authorized to issue notes up to a certain limit without any gold reserves is known as Maximum Reserve System. Under this system, the Central Bank is given power to determine the maximum limit and also the power to reserve the limit from time to time according to the needs of the economy. This system is elastic and economical to use. But it involves the danger of over issue of notes and lacks public confidence.

Ans: A Letter of Credit is an assurance document issued by the bank of the importer in favour of the exporter specifying that the bills of exchange drawn by the exporter on the importer will be met upto a specified amount in case the importer fails to honour his commitment. Letter of credit is mainly used as a means to make payment in international trade. In actual practice, a letter of credit means, “a document issued by a banker authorizing the banker to whom it is addressed to honour the bills of the person named therein to the extent of certain amount.”

(A) Traveler’s Letter Credit.

Ans: a) Core banking is normally defined as the business conducted by a banking institution with its retail and small business customers. Many banks treat the retail customers as their core banking customers and have a separate line of business to manage small business. Larger business is handled by the corporate banking division of the institution. Core banking basically is depositing and lending of money.

b) Factoring: Factoring is a service of financial nature involving the conversion of credit bills into cash. Accounts receivables, bills recoverable and other credit dues resulting from credit sales appear, in the books of accounts as book credits. Here the risk of credit, risk of credit worthiness of the debtor and as number of incidental and consequential risks are involved. These risks are taken by the factor which purchase these credit receivables without recourse and collects them when due. These balance-sheet items are replaced by cash received from the factoring agent. Factoring is also called “Invoice Agent” or purchase and discount of all “receivables”.

C) Internet /E-Banking: Online banking also known as internet banking, e-banking, or virtual banking, is an electronic payment system that enables customers of a bank or other financial institution to conduct a range of financial transactions through the financial institution's website. Internet banking is a term used to describe the process whereby a client executes banking transactions via electronic means. This type of banking uses the internet as the chief medium of delivery by which banking activities are executed. The activities clients are able to carry out are can be classified to as transactional and non transactional.

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Ans: The National Bank For Agriculture and Rural Development (NABARD), a developing bank, came into existence on July 12, 1982, under an Act of Parliament with an initial capital of Rs. 100 crores. It is an apex institution set up for providing and regulating credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas. The NABARD has taken over the functions of ARDC (Agricultural Refinance and Development Corporation) and refinancing functions of RBI in respect of co-operative banks and the RRBs.

Ans: Bills of Exchange: According to Section 5 of the Negotiable Instrument Act 1881, “A 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.”

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Ans: The International Development Association is an affiliate of IBRD. It was establishment in 1960 to provide soft loans to less developed member countries for the purpose of slum clearance, construction of roads and bridges etc.

Financing Procedure of IDA: The IDA loans are different from the conventional loans. The following are the distinctive features of the financing policy of the IDA:

Branch Banking: Branch Bank is a type of banking system under which the banking operations are carried with the help of branch network and the branches are controlled by the Head Office of the bank through their zonal or regional offices. Each branch of a bank will be managed by a responsible person called branch manager who will be assisted by the officers, clerks and sub-staff. In England and India, this type of branch banking system is in practice. In India, State Bank of India (SBI) is the biggest public sector bank with a very wide network of 16000 branches.

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Ans: Negotiable instrument: Negotiable Instrument means a written document which guarantees the specific amount of money to the person named therein and is transferable by delivery or by endorsement. According to Section 13 of the Negotiable Instrument Act 1881, “A Negotiable Instrument means a Promissory Note, Bill of Exchange and Cheque, payable either to order or to bearer.

Ans: The RBI, as a Central Bank of the Country has assumed greater responsibility as developmental and promotional agency. Its promotional functions and activities have been mainly directed towards building up and strengthening financial infrastructure and filling the institutional gap by setting up new financial institutions and by ensuring the allocation of credit in the socially desired directions. The Development and Promotional functions of the Central Banks are listed below:

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Ans: Before independence, the general insurance business in India was done by foreign companies. After independence, the general insurance business was completely owned by the government. In 1972, the government nationalized the general insurance business and 107 insurer were amalgamated and grouped into four companies, namely The National Insurance Company Limited, The New India Assurance Company, The Oriental Insurance Company Limited and the United India Assurance Company Limited. The General Insurance Corporation of India was setup in 1972 as a holding company of these four general insurance companies.

General Insurance Corporation of India (GICI) sell insurance against specific risks, such as loss from fire and accident, to property of various kinds, such as motor vehicles good, machinery, building etc. and also against risk of personal Accidents and sickness. The policies of these companies do not involve savings features. GICI provides loans and investment in the capital market of the country. GICI invests in shares and debentures, underwriters and invests in new issues of the corporate sector, grants loans and advances to companies.