[Solved] Banking Risks MCQ [Free PDF] - Objective Question Answer for Banking Risks Quiz - Download Now! (2024)

1. award
2. arbitration
3. constellation
4. Mediation

The correct answer isarbitration.

Key Points

• Place of arbitrationis important for the determination of the rules applicable to the substance of the dispute. This is because the rules of arbitration, including those governing the procedure and the law applicable to the merits of the dispute, are typically determined by the seat of arbitration.
• Awardis the final and binding decision of the arbitral tribunal. It is theresultof arbitration, not theresourceagainst the bank.
• Arbitrationis a form of alternative dispute resolution in which the parties to a dispute agree to submit their dispute to a neutral third party (the arbitrator) for a binding decision. It is theprocessby which disputes are resolved, not theresourceagainst the bank.
• Constellationis a group of stars that form a recognizable pattern.
• Mediationis a form of alternative dispute resolution in which a neutral third party (the mediator) helps the parties to a dispute reach a mutually acceptable agreement.

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1. Raja Challaiah Committee
2. Kelkar Committee
3. Nariman Committee
4. Malhotra Committee

The correct answer is Nariman Committee.

Key Points

• The Nariman Committee was appointed by the Reserve Bank of India (RBI) in 1969 to recommend measures to improve the flow of credit to the rural sector. The committee recommended the Lead Bank System, which was introduced in 1970.
• The Nariman Committee was led by Mr. F. K. F. Nariman, who was then the custodian of Union Bank of India. The committee consisted of representatives from the RBI, commercial banks, cooperative banks, and the government.
• The committee recommended the Lead Bank System as a way to ensure that all districts in the country have a lead bank that would coordinate the activities of all commercial banks in the district and ensure that adequate credit is available to all sectors of the economy, including agriculture, small-scale industries, and trade.
• The Lead Bank System has played a significant role in improving the flow of credit to the rural sector. The system has helped to increase the number of bank branches in rural areas and to make credit more accessible to rural borrowers. The system has also helped to reduce the cost of credit for rural borrowers.

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1. Bank rate
2. Call rate
3. Reporate
4. Reverse-repo rate

The correct answer isReverse Repo Rate.Key Points

• Reverse Repo Rate is defined as the rate at which the Reserve Bank of India (RBI) borrows money from banks for the short term. It is an important monetary policy tool employed by the RBIto maintain liquidity and check inflation in the economy. The Reverse Repo Rate helps the RBI get money from the banks when it needs it.
• The reverse repo rate is the interest rate paid to commercial banks when they deposit their excess funds in the central bank or when the central bank borrows money from them.The currentrepo rate is 6.50%.

Additional Information

• The repo rate isthe interest rate at which the Reserve Bank of India (RBI) loans money to commercial banks. Repo is an abbreviation for Repurchase Agreement or Repurchasing Option. Banks obtain loans from the Reserve Bank of India (RBI) by selling qualifying securities.
• A bank rate isthe interest rate at which a nation's central bank lends money to domestic banks, often in the form of very short-term loans.
• The call money rate isthe benchmark interest rate that banks charge brokers who are borrowing the money to fund margin loans. The call money rate, also known as the broker loan rate, typically isn't available to individuals, instead, investors pay the call money rate plus a service fee on a margin account.

Thus,The short-term borrowing rate at which the Reserve Bank of India borrows money from other banks is known as ReverseRepo Rate.

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1. 18.00%
2. 13.00%
3. 19.00%
4. 15.00%

The correct answer is

Key Points

• Statutory Liquidity Ratio (SLR)is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities.
  • The SLR was prescribed by Section 24(2A) of the Banking Regulation Act, 1949.
  • These are reserved within the banks themselves (before lending to customers) known as Net Demand and Time Liabilities which are decided by the Reserve Bank of India (RBI).
  • RBI reserves the right to increase the ratio up to 40%.
  • It is the traditional instrument of monetary policy of the central bank.
  • To control credit growth.
  • The flow of liquidity and inflation in the economy.
  • The current Statutory Liquidity Ratio (SLR) as of October 2021 is 18%.

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1. Securities and Exchange Board of India (SEBI)
2. Competition Commission of India (CCI)
3. Ministry of Finance
4. Reserve Bank of India (RBI)
5. SIDBI

The correct answer isReserve Bank of India (RBI).

Key Points

• RBI has announced a slew of regulatory changes for non-banking lenders by amending the Oct 2021 circulars on scale-based regulations.
• It issued four circulars in April 2022 includinglarge exposures framework for NBFCs.
• The sum of all the exposure value of an NBFC (Non-Banking Financial Company) to a single counterpartycannot exceed 20%of its available eligible capital base at all times.

Additional Information

• In April 2022, The Reserve Bank of India (RBI)has reverted back to normal trading timings in markets regulated by it.
• The trading in RBI-regulated markets, which includes the money market, will start from the pre-pandemictiming of 9 am and end at 3:30 pm.
• The Competition Commission of India (CCI) has approved HSBC’s acquisition of L&T Investment Management Ltd., the investment manager for L&T Mutual Fund.
• The $425 million dealinvolves HSBC buying the entity from its parent L&T Finance Holdings Ltd. (LTFH).
• The acquisition is being executed throughHSBC Asset Management (India) Pvt. Ltd.
  • RBI 25th Governor:Shaktikanta Das (As of Feb2022).
  • RBI Headquarters:Mumbai;
  • RBI Founded:1 April 1935, Kolkata.

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Banking Risks Question 6

1. RBI
2. SBI
3. HDFC Bank
4. ICICI Bank

Banking Risks Question 6 Detailed Solution

The correct answer is SBI.

• The ‘Ecowrap report’ was published in May 2020 by the State Bank of India.​

Key Points

• Ecowrap is the report released by The Economic Research Department, State Bank of India.
  • The report includes details of GDP, Agricultural reforms, Formal and informal economies.

Additional Information

• Reserve Bank of India is the central bank and regulatory body of India.
  • It is responsible for the issue and supply of Indian Rupee.
  • It was established on 1 April 1935 in Kolkata.
  • The headquarter of RBI is located in Mumbai.
• HDFC Bank Limited is an Indian banking and financial services company.
  • It was established in August 1994.
  • The headquarter of HDFC is in Mumbai.
• ICICI Bank Limited is a multinational bank and financial services company.
  • It was established in 1994 in Vadodara.
  • The headquarter of ICICI is in Mumbai.

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Banking Risks Question 7

1. Reserve Bank of India
2. Union Finance Ministry
3. Securities and Exchange Board of India
4. Indian Bank Association

Banking Risks Question 7 Detailed Solution

The correct answer is theReserve Bank of India.

Key Points

• Reserve Bank of Indiamanages liquidity in India

Additional Information

• Reserve Bank of India
  • Under the jurisdiction ofthe Ministry of Finance.
• Functions of RBI include:
  • Issue of Bank Notes
  • Banker to Government i.e. manages the banking needs of the government
  • Represents the Government of India as a member of the IMF and the World Bank.
  • Custodian of Cash Reserves of Commercial Banks
  • Custodian of Country’s Foreign Currency Reserves
  • Lender of Last Resort.
  • Controller of Credit i.e. Managing money supply (Liquidity)
• General information about RBI
  • Headquarters- Mumbai
  • Governor-Shaktikanta Das(as of July 2022)
  • Established on1 April 1935 in Kolkata.
  • Moved to Mumbai in 1937.
• Securities and Exchange Board
  • Regulator of the securities and commodity market
  • Under the jurisdiction ofthe Ministry of Finance.
  • Established-12 April 1992
  • Chairperson- Madhabi Puri Buch(as of July 2022)
• Ministry of Finance
  • Finance Minister- Smt Nirmala Sitharaman(as of July 2022)
  • Minister of State- Dr. Bhagwat Kishanrao KaradandShri Pankaj Chaudhary(as ofJuly 2022)
  • Finance Secretary- Dr.T. V. Somanathan(as of July 2022)
• Indian Bank Association
  • Formed-26 September 1946
  • It's the representative body of theIndian Banking Industry.
  • Chairman-A K Goel(as of July 2022)

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Banking Risks Question 8

1. Tax Saving Fund
2. Index fund
3. Belant fund
4. Gilt fund

Banking Risks Question 8 Detailed Solution

The correct answer isGuilt fund.

• Gilt funds are the funds that invest exclusively in government securities.
• Gilt funds are debt funds that invest primarily in government securities.
• These funds have no risk of non-payment of interest or principal amount but get affected by interest rate movements as the Government borrowing typically happens to be for a longer duration.
• Tax saving funds are those fundsthat qualify for tax deductions under Section 80C of the Income Tax Act.
• An index fund is a portfolio of stocks or bonds designed to mimic the composition and performance of a financial market index.

Additional Information

• All types of funds are regulated by the SEBI (Securities Exchange Board of India).
• In 1996, SEBI formulated the Mutual fund regulation.
• The headquarters of SEBI is in Mumbai.
• The Chairman of SEBI is Mr Ajay Tyagi.

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Banking Risks Question 9

1. D
2. A
3. C
4. B

Banking Risks Question 9 Detailed Solution

The correct answer is Don't change your PIN at regular intervals

Customers should observe the following Do's to keep their transactions at ATM safe and secure

• Do change your PIN at regular intervals.
• The consumer should conduct the ATM transaction in complete privacy
• Only one cardholder should enter and access the ATM kiosk at a time.

Customers should observe the following Dont's to keep their transactions at ATM safe and secure

• The cardholder should not lend his/her ATM card to anyone.
• The cardholder should not write the PIN on the card
• The cardholder should not share PIN with anyone.
• The cardholder should not let anyone see the PIN while it is being entered at the ATM
• The cardholder should not share your login ID and password.

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Banking Risks Question 10

1. Bank rate
2. Call rate
3. Reporate
4. Reverse-repo rate

Banking Risks Question 10 Detailed Solution

The correct answer isReverse Repo Rate.Key Points

• Reverse Repo Rate is defined as the rate at which the Reserve Bank of India (RBI) borrows money from banks for the short term. It is an important monetary policy tool employed by the RBIto maintain liquidity and check inflation in the economy. The Reverse Repo Rate helps the RBI get money from the banks when it needs it.
• The reverse repo rate is the interest rate paid to commercial banks when they deposit their excess funds in the central bank or when the central bank borrows money from them.The currentrepo rate is 6.50%.

Additional Information

• The repo rate isthe interest rate at which the Reserve Bank of India (RBI) loans money to commercial banks. Repo is an abbreviation for Repurchase Agreement or Repurchasing Option. Banks obtain loans from the Reserve Bank of India (RBI) by selling qualifying securities.
• A bank rate isthe interest rate at which a nation's central bank lends money to domestic banks, often in the form of very short-term loans.
• The call money rate isthe benchmark interest rate that banks charge brokers who are borrowing the money to fund margin loans. The call money rate, also known as the broker loan rate, typically isn't available to individuals, instead, investors pay the call money rate plus a service fee on a margin account.

Thus,The short-term borrowing rate at which the Reserve Bank of India borrows money from other banks is known as ReverseRepo Rate.

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Banking Risks Question 11

1. Market Risk
2. Credit Risk
3. Liquidity Risk
4. Business Risk
5. Operational Risk

Banking Risks Question 11 Detailed Solution

The correct answer isLiquidity Risk.

• The term "liquidity risk" speaks for itself; it is the risk that may disable a bank from carrying out day-to-day cash transactions.
• Liquidity by definition means a bank has the ability to meet payment obligations primarily from its depositors and has enough money to give loans.
• For example, anyone going to the bank to withdraw money. Imagine the bank saying that it doesn’t have cash temporarily. That is the liquidity risk a bank has to save itself from.
• In Bank, mostly Liquidity risk due to rising non-performing assets (NPA) can arise when the bank gives credit to borrowers who default at maturity.

Note:

• Operational risk is related to the disability of a bank for carrying out day to day activities.

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Banking Risks Question 12

1. 21
2. 22
3. 23
4. 19.25

Banking Risks Question 12 Detailed Solution

The correct answer is 21.

• The Statutory Liquidity Ratio (SLR) according to the recent RBI review (2019) is 21.

Important Points

• Statutory Liquidity Ratio (SLR) is the minimum percentage of deposits that a commercial bank has to maintain in the form of liquid cash, gold or other securities.
  • The SLR was prescribed by Section 24(2A) of the Banking Regulation Act, 1949.
  • These are reserved within the banks themselves (before lending to customers) known as Net Demand and Time Liabilities which are decided by the Reserve Bank of India (RBI).
  • RBI reserves the right to increase the ratio up to 40%.
  • It is the traditional instrument of monetary policy of the central bank.
  • To control credit growth.
  • The flow of liquidity and inflation in the economy.
  • The current Statutory Liquidity Ratio (SLR) as of October 2021 is 18%.

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Banking Risks Question 13

1. Personality
2. Attitude
3. Intelligence
4. Aptitude

Banking Risks Question 13 Detailed Solution

The correct answer is Intelligence.

Key Points

• Basel Age is the mental age level at which all the items on an intelligence test can be creditably passed.
• Basal age represents the highest level, on a test standardized in units corresponding to mental age or age-equivalents, below which it can be assumed that all items would be answered correctly.
• If a basal is not obtained, testing moves back to successively lower blocks until a basal is established.
• Ceiling Age: The lowest year level at which the examinee fails all the subtests of the scale.
• Mental Age: Mental age is computed by adding to his basal age, the number of months credit received for passing each subtest up to his ceiling age.
  • Mental Age= basal age + credit (until ceiling age)

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1. Business Risk
2. Reputational Risk
3. Credit Risk
4. Systematic Risk
5. Operational Risk

• The correct answer isBusiness Risk.

Key Points

• Business risk arises from the bank’s inability to generate profits at its target levels.
• For Bank, Business Risk is the risk associated with the failure of a bank's long-term strategy, estimated forecasts of revenue, and a number of other things related to profitability.
• Business risk is the risk arising from a bank's long-term business strategy. It deals with a bank not being able to keep up with the changing competition dynamics, losing market share over time, and being closedor acquired.

Additional Information

• Credit Risk:The uncertainty involved in the repayment of banks' dues.
• Operational Risk:It comes from the losses a bank might make from inadequate or failed internal processes or people and systems.
• Reputational Risk:This risk of possible damage to the bank'sbrand and reputation.
• Systematic Risk: The risk which can bring down the entire financial system.

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1. 1 to 8
2. 1 to 5
3. 1 to 6
4. 1 to 10
5. None of the above

The correct answer is1 to 5.

Key Points

• The CAMELS Rating Framework is a system of rating for on-site examinations of banking Institutions through six critical dimensions relating to its operations and performance, which are referred to as the component factors.
• These are Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity.
• CAMELS is an acronym for Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity.
• The rating system is on a scale of one to five, with one being the best and five being the worst.

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