Banking & General Financial Awareness Multiple Choice Questions (MCQs) and Answers with explanation for All Banking Exams of 2020-2021 such as IBPS Bank PO, IBPS Bank Clerical, RRB PO and Clerical, SBI PO and SBI Clerical, IBPS Recruitments, RBI Grade B and RBI Banking Examinations.
31. What is the primary role of the Independent Advisory Committee (IAC) under the SARFAESI Act, 2002?
[A] Approving loan applications
[B] Evaluating borrower’s financial position
[C] Auditing bank accounts
[D] Regulating interest rates
Show Answer
Correct Answer: B [Evaluating borrower’s financial position]
Notes:
The IAC assesses the financial status of borrowers and recommends whether a change or takeover of management is needed to ensure effective recovery of dues under the SARFAESI Act, 2002.
32. How does the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) impact the banking sector in India?
[A] It allows creditors to initiate legal proceedings
[B] It prohibits legal actions against a corporate debtor
[C] It mandates immediate liquidation of assets
[D] It increases the number of insolvency cases
Show Answer
Correct Answer: B [It prohibits legal actions against a corporate debtor]
Notes:
The moratorium under Section 14 of the IBC prevents creditors from initiating or continuing legal proceedings against a corporate debtor during the insolvency resolution process. This ensures a stand-still period, allowing the debtor to operate and organize its affairs, thereby facilitating a smoother resolution process in the banking sector.
33. What is a Back-to-Back Letter of Credit primarily used for?
[A] Direct transactions between buyer and seller
[B] Where the original beneficiary needs to issue a secondary LC to a supplier
[C] As a substitute for financial guarantees
[D] For multiple shipments under the same LC
Show Answer
Correct Answer: B [Where the original beneficiary needs to issue a secondary LC to a supplier]
Notes:
In a Back-to-Back LC arrangement, the beneficiary of the original LC becomes the applicant for a new LC to be issued in favor of the supplier. This is commonly used when a middleman is involved in the transaction.
34. A nominated bank is:
[A] The bank that advises the LC to the applicant
[B] The bank that negotiates or accepts documents under the LC
[C] The bank that confirms the LC
[D] The applicant’s bank
Show Answer
Correct Answer: B [The bank that negotiates or accepts documents under the LC]
Notes:
A nominated bank is authorized by the Issuing Bank to handle documents and make payment to the beneficiary, provided the terms of the LC are met.
35. Which clause in a Letter of Credit specifies that partial shipments are allowed?
[A] Confirmed Clause
[B] Discrepancy Clause
[C] Shipment Clause
[D] Partial Shipment Clause
Show Answer
Correct Answer: D [Partial Shipment Clause]
Notes:
A Partial Shipment Clause in a Letter of Credit explicitly states whether multiple shipments are allowed. If not mentioned, partial shipments are generally allowed as per UCP 600.
36. Which ESG initiative is aimed at improving transparency in financial services?
[A] Business Correspondent Model
[B] Equator Principles
[C] Corporate Social Responsibility (CSR)
[D] BRSR (Business Responsibility and Sustainability Report)
Show Answer
Correct Answer: D [BRSR (Business Responsibility and Sustainability Report)]
Notes:
The BRSR framework improves transparency by requiring companies, including banks, to disclose their ESG initiatives and sustainability performance to stakeholders.
37. Basel III norms were introduced in response to:
[A] A. The Asian financial crisis
[B] B. The subprime mortgage crisis of 2008
[C] C. The dot-com bubble burst
[D] D. The eurozone crisis
Show Answer
Correct Answer: B [B. The subprime mortgage crisis of 2008]
Notes:
Basel III was introduced in response to the 2008 global financial crisis, aiming to strengthen bank capital requirements and improve risk management.
38. What is the maximum maturity term for Treasury Bills in India?
[A] 91 days
[B] 182 days
[C] 364 days
[D] 730 days
Show Answer
Correct Answer: C [364 days]
Notes:
Treasury Bills in India are issued with maximum maturities of 91 days, 182 days, and 364 days.
39. What does a high Money Multiplier indicate?
[A] Low liquidity in the economy
[B] High level of credit creation by banks
[C] High cash reserves with RBI
[D] Low demand for loans
Show Answer
Correct Answer: B [High level of credit creation by banks]
Notes:
A high Money Multiplier indicates that banks are able to create a large amount of credit from their reserves, leading to increased liquidity in the economy.
40. Which of the following describes “arbitrage” in stock markets?
[A] Investing in stocks for long-term capital appreciation
[B] Simultaneously buying and selling an asset in different markets to profit from price differences
[C] Holding stocks during volatile market periods
[D] Short-selling stocks to profit from declining prices
Show Answer
Correct Answer: B [Simultaneously buying and selling an asset in different markets to profit from price differences]
Notes:
Arbitrage involves taking advantage of price differences for the same asset in different markets by simultaneously buying in one market and selling in another.
