Banking Solved Question Paper 2021 PDF [Gauahti University B.Com 5th Sem]

 

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Banking Solved Question Paper

2021(Held in 2022)

Gauhati University B.Com 5th Sem CBCS Pattern

Gauhati University Banking Solved Question paper 2021 (Held in 2022)

GU Banking Solved  Question  Paper 2021

(Held in 2022)

COMMERCE

(Honours Elective)

Paper: COM-HE-5046

(Banking)

Full Marks: 80

Time: Three hours

The figures in the margin indicate full marks for the questions.

1.(A) Choose the correct answer of the following: 1×10=10

(a) In which year was the Imperial Bank of India established ?

(i) 1920

(ii) 1921

(iii) 1930

(iv) 1935

(b) Which one of the following is the first universal bank in India ?

(i) SBI

(ii) HDFC Bank

(iii) AXIS Bank

(iv) ICICI Bank

(c) Garnishee order is issued by

(i) customer of the bank

(ii) the banker

(iii) the court

(iv) None of the above

(d) Overdraft is granted

(i) for short duration

(ii) for medium duration

(iii) for long duration

(iv) All of the above

(e) In case of negotiable instruments, which person generally gets a good title ?

(i) Holder of stolen instrument

(ii) Finder of the lost instrument

(iii) Holder in due course

(iv) None of the above

(f) In which year was the Banking Regulation Act passed ?

(i)1921

(ii) 1934

(iii) 1935

(iv) 1949

(g) "A banker's lien is particular lien." The statement is

(i) Correct

(ii) Incorrect

(h) "Advances of a bank represents its assets." The statement is

(i) Correct

(ii) Incorrect

(i) "A bill of exchange can be crossed." The statement is

(i) Correct

(ii) Incorrect

(j) "Banks can carry on trading activities." The statement is

(i) Correct

(ii) Incorrect

2. Answer the following questions:2x5=10

(a) Write the full form of RTGS and NEFT.

Ans:-  The full forms of RTGS and NEFT are as follows:

   - RTGS: Real Time Gross Settlement

   - NEFT: National Electronic Funds Transfer

(b) What are 'banking' and 'banking company' as per the Banking Regulation Act?

Ans:- As per the Banking Regulation Act, 1949, the terms are defined as follows:

   - Banking: Banking refers to accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order, or otherwise.

   - Banking Company: A banking company is a company that transacts the business of banking, which includes accepting deposits from the public and providing loans and advances. It is also involved in various financial activities defined under the Banking Regulation Act.

(c) What is currect account?

Ans:- A current account is a type of financial account held at a financial institution, typically a bank, that is designed for frequent and regular transactions. It allows account holders to deposit and withdraw funds as often as needed and does not usually offer interest on the balance. Current accounts are primarily used for business and personal transactions, including payments, withdrawals, and transfers.

(d) What is cash credit ?

Ans:- Cash credit is a type of short-term loan provided by banks to individuals or businesses. It is typically extended to borrowers against a specific credit limit, and the borrower can withdraw funds as needed up to that limit. Interest is charged only on the amount withdrawn, and the borrower must repay the borrowed amount within a specified period. Cash credit is often used for working capital needs and is a common form of financing for businesses.

(e) What is endorsement ?

Ans:- Endorsement is a signature or a statement written on the back of a negotiable instrument, such as a check or a promissory note, to transfer ownership or indicate instructions regarding the instrument's payment. It is a legal and financial endorsement that signifies the payee's consent to receive payment, transfer the instrument to someone else, or otherwise act upon it as specified in the endorsement. Endorsements can vary in nature and can include blank endorsements, restrictive endorsements, or special endorsements, depending on the intended use of the instrument.

3.Answer any four questions of the following in about 200 words each: 5×4=20

(a) Distinguish between public sector and private sector banks.

Ans:- 

Basis	Public Sector Banks	Private Sector Banks
Ownership	Majority owned by the government	Owned by private entities
Management	Governed by government policies	Privately managed and controlled
Access to Capital	Easier access to government funds	Relies on private capital
Profit Orientation	Balance profit and social welfare	Primary focus on profitability
Decision-Making	Bureaucratic and government-driven	More flexible and independent
Accountability & Transparency	Subject to government scrutiny	Typically more transparent

(b) Briefly discuss the general relationship between banker and customer.

Ans:- General Relationship Between Banker and Customer:

The relationship between a banker and a customer is built on trust and governed by contractual agreements. It involves several key aspects:

1. Account Opening: The relationship begins when a customer opens an account with the bank. The customer agrees to follow the bank's terms and conditions.

2. Deposits: Customers deposit money into their accounts, and the bank holds these funds safely. The bank owes a debt to the customer for the deposited amount.

3. Withdrawals: Customers can withdraw money as needed, and the bank is obligated to honor these withdrawal requests as long as there are sufficient funds in the account.

4. Loans and Credit: Banks can extend credit to customers in the form of loans, credit cards, or overdraft facilities. Customers agree to repay these loans with interest.

5. Duty of Confidentiality: Banks must maintain the confidentiality of customer information, ensuring that personal and financial details remain secure.

6. Fiduciary Duty: Banks have a fiduciary responsibility to act in the best interests of their customers and provide fair and transparent services.

7. Legal Framework: The relationship is governed by banking laws, regulations, and the terms and conditions outlined in account agreements.

Overall, the banker-customer relationship is based on mutual trust, financial transactions, and the bank's duty to provide financial services while safeguarding customer interests.

(c) What is pledge ? State the essentials of a pledge.

Ans:- Pledge and Its Essentials: Pledge is a legal arrangement in which a borrower (pledgor) offers a tangible asset as collateral to a lender (pledgee) to secure a loan or debt. The essentials of a pledge include:

1. Intention: Both parties must intend for the asset to be used as security for the loan, and this intention should be clearly stated in the agreement.

2. Transfer of Possession: The pledgor must transfer possession of the pledged asset to the pledgee or a designated custodian. This ensures that the asset is under the control of the lender.

3. Specific Identification: The asset being pledged must be clearly identified and described in the pledge agreement. This prevents confusion or disputes over the collateral.

4. Legal Ownership: The pledgor must have legal ownership of the asset being pledged. Only assets owned by the pledgor can be used as collateral.

5. Purpose: The pledge agreement should specify the purpose for which the loan is being taken and the conditions under which the pledged asset will be released back to the pledgor.

6. Default Clause: The agreement should outline the consequences of default, including the pledgee's right to sell or dispose of the pledged asset to recover the debt.

7. Registration: In some jurisdictions, pledges may need to be registered with relevant authorities to be legally enforceable.

Pledges are commonly used in various financial transactions, such as securing business loans, mortgages, and personal loans, to provide lenders with a means of recovering their funds in case of default by the borrower.

(d) State the characteristics of negotiable instruments.

Ans:- Characteristics of Negotiable Instruments:

 Negotiable instruments are financial documents that are easily transferable and represent a promise to pay a specific sum of money to the bearer or a designated payee. They possess several characteristics, including:

1. Transferability: They can be transferred from one party to another, either by endorsement or delivery, and the transferee becomes the holder in due course.

2. Written Format: Negotiable instruments must be in writing, either handwritten or printed, and contain an unconditional promise to pay.

3. Certain Sum: They specify a fixed and definite amount of money to be paid.

4. Payable on Demand or at a Specified Time: The payment can be either on-demand (e.g., a cheque) or at a future date (e.g., a promissory note or bill of exchange).

5. Signed by the Maker or Drawer: They require the signature of the person creating the instrument (the maker for a promissory note or the drawer for a bill of exchange) to be legally valid.

6. Payee: They designate a payee, the person to whom the payment is to be made.

7. Unconditional: The promise to pay must be unconditional. Any condition or contingency may render the instrument non-negotiable.

8. Free Transferability: The transfer of negotiable instruments should not be subject to any restrictions or conditions.

9. Presumption of Good Faith: Holders in due course acquire the instrument in good faith and for value, without notice of any defects.

(e) Distinguish between cheque and bill of exchange.

Aspect	Cheque	Bill of Exchange
Drawer	Drawer and drawee are usually the same person or entity, typically a bank.	Drawer and drawee are often different entities, with the drawer issuing the bill to the drawee for payment.
Payable to	Payable only to the specified payee or the bearer, depending on the type of cheque.	Payable to a specific party (payee) or to their order, depending on the terms.
Usage	Primarily used for transferring money from a bank account to the payee.	Used in trade transactions, credit arrangements, and lending, often involving commercial transactions.
Acceptance	No formal acceptance is required by the drawee bank; payment is expected upon presentation.	The drawee of the bill must formally accept it, signifying their commitment to pay on maturity.
Parties Involved	Typically involves the drawer, drawee (bank), and payee.	Involves the drawer (seller or creditor), the drawee (buyer or debtor), and the payee (creditor or third party).
Payment	Payment is usually made immediately upon presentation to the bank.	Payment is made on a specified future date, as per the terms of the bill.

(f) State the requirements as to minimum paid-up capital and reserves for banking companies incorporated in India.

4. Answer the following questions in about 600 words each: 10×4=40

(a) Describe the functions of a bank.

Ans:- A bank is a financial institution that plays a crucial role in the economy by providing a wide range of financial services to individuals, businesses, and governments. The functions of a bank can be broadly categorized into several key areas:

1. Accepting Deposits:

   - Banks offer various types of deposit accounts, such as savings accounts, checking accounts, fixed deposits, and recurring deposits. Customers deposit their money into these accounts, which can be withdrawn as needed.

2. Providing Loans and Credit:

   - Banks lend money to individuals, businesses, and governments to meet their financial needs. These loans can be for various purposes, including personal loans, home loans, business loans, and more.

3. Payment Services:

   - Banks facilitate payments and fund transfers through various means, including checks, electronic funds transfers (EFTs), wire transfers, and online banking services. They also issue debit and credit cards for making purchases and ATM withdrawals.

4. Safekeeping of Valuables:

   - Many banks offer safe deposit boxes or vaults where customers can store valuable items like documents, jewelry, and important records in a secure environment.

5. Currency Exchange:

   - Banks provide currency exchange services, allowing customers to buy and sell foreign currencies for travel, trade, or investment purposes.

6. Investment and Wealth Management:

   - Banks offer investment products and services, including mutual funds, stocks, bonds, and retirement accounts. They may also provide wealth management and financial advisory services to help clients grow and manage their wealth.

7. Trade Finance:

   - Commercial banks facilitate international trade by offering trade finance services, such as letters of credit, export financing, and import financing, to facilitate smooth transactions between buyers and sellers in different countries.

8. Corporate Banking Services:

   - Banks serve corporate clients by providing services like treasury management, cash management, and corporate lending to help businesses manage their finances and operations effectively.

9. Electronic Banking Services:

   - With advancements in technology, banks offer electronic banking services like online banking, mobile banking, and electronic bill payment to make banking more convenient for customers.

Or

Discuss the structure of commercial banks in India.

Ans:- Commercial banks in India are typically structured into the following categories:

1. Scheduled Commercial Banks:

   - These banks are licensed and regulated by the Reserve Bank of India (RBI) and are included in the Second Schedule of the RBI Act, 1934. They can be further categorized into public sector banks, private sector banks, and foreign banks operating in India.

2. Public Sector Banks:

   - Public sector banks in India are owned and operated by the government. Some well-known examples include the State Bank of India (SBI), Punjab National Bank (PNB), and Bank of Baroda (BOB).

3. Private Sector Banks:

   - Private sector banks are owned and operated by private individuals or corporations. Examples include HDFC Bank, ICICI Bank, and Axis Bank.

4. Foreign Banks:

   - Foreign banks are banks with their headquarters located outside India but with a presence in the country. They operate under the regulations of both their home country and the RBI.

5. Regional Rural Banks (RRBs):

   - RRBs are banks that primarily serve rural and semi-urban areas. They are established with the cooperation of the central government, the state government, and the sponsor banks (typically public sector banks).

6. Cooperative Banks:

   - Cooperative banks are financial institutions that are owned and operated by their members, who often belong to a specific community or region. These banks are further categorized into urban cooperative banks and rural cooperative banks.

The banking sector in India is highly regulated by the RBI, which sets guidelines and policies to ensure the stability and integrity of the financial system. Commercial banks play a pivotal role in the Indian economy by mobilizing savings, channeling funds to productive sectors, and providing essential financial services to the public.

(b) State the procedure of opening a bank account in the name of a minor and a partnership firm.

Ans:- Opening a Bank Account for a Minor:

1. Choose the Bank: Select a bank that offers savings or minor accounts. Not all banks may provide this service, so it's important to check with different banks.

2. Gather Required Documents:

   - Birth certificate of the minor.

   - Identity proof of the minor, such as an Aadhar card or school ID.

   - Passport-sized photographs of the minor and the guardian (usually a parent).

   - PAN card of the guardian (if applicable).

   - Address proof of the guardian, such as a utility bill or passport.

3. Select the Type of Account: You can usually choose between a joint account with the minor as the first account holder and the guardian as the second account holder or a custodial account where the guardian manages the account on behalf of the minor.

4. Visit the Bank Branch: Go to the selected bank branch with all the necessary documents and the minor. Both the minor and the guardian need to be present.

5. Fill Out the Application: Complete the account opening application form provided by the bank. Make sure to provide accurate information.

6. Deposit Initial Amount: Deposit the required minimum amount into the account as specified by the bank. This initial deposit amount may vary from bank to bank.

7. Signature and Photograph: The guardian may be required to provide their signature and photographs for verification.

8. KYC (Know Your Customer) Process: The bank will verify the documents and perform the KYC process to confirm the identity of the minor and the guardian.

9. Account Activation: Once all the documents are verified, the bank will activate the account and provide an account number and passbook or statement.

Opening a Bank Account for a Partnership Firm:

1. Select the Bank: Choose a bank that offers business banking services and suits the needs of the partnership firm.

2. Gather Required Documents:

   - Partnership Deed: This legal document outlines the terms and conditions of the partnership, including the names of partners, their contributions, and profit-sharing ratios.

   - PAN card of the partnership firm.

   - Address proof of the partnership firm, such as a utility bill or rental agreement.

   - Identity and address proof of all partners (KYC documents).

   - Passport-sized photographs of all partners.

3. Visit the Bank: Schedule an appointment or visit the bank branch with all the necessary documents and partners.

4. Fill Out the Application: Complete the business account opening application form provided by the bank.

5. Deposit Initial Funds: Deposit the initial capital into the business account as required by the bank.

6. Verification: The bank will verify the partnership deed and other documents submitted. They may also conduct a background check on the partners.

7. Account Activation: Once all documents are verified, the bank will activate the partnership firm's account and provide an account number, checkbook, and other banking services as per the agreement.

Or

Discuss the special features of banker customer relationship.

Ans:- Special Features of Banker-Customer Relationship:

1. Confidentiality: Banks are required to maintain the confidentiality of customer information and transactions unless required by law to disclose it.

2. Duty of Care: Banks have a duty to exercise care and diligence in handling customer accounts and transactions.

3. Fiduciary Relationship: The banker-customer relationship is often considered a fiduciary one, where the bank must act in the best interests of the customer.

4. Right to Set-off: Banks have the right to set off a customer's debts against their deposits in the same bank, subject to certain conditions.

5. Right to Lien: Banks may exercise the right of lien, which means they can retain a customer's funds or assets until the customer fulfills their obligations to the bank.

6. Right to Information: Customers have the right to request information about their accounts and transactions, and banks must provide accurate and timely information.

7. Bank Secrecy: Banks are required to maintain customer privacy, but they may disclose information in certain cases, such as to prevent money laundering or fraud.

8. Right to Stop Payment: Customers have the right to request a stop payment on a check, but banks may charge a fee for this service.

9. Termination of Relationship: Both the customer and the bank have the right to terminate the banking relationship, subject to any contractual obligations.

10. Regulatory Compliance: Banks must comply with legal and regulatory requirements in their interactions with customers, including KYC and anti-money laundering measures.

The banker-customer relationship is governed by various laws and regulations to ensure the fair and ethical treatment of customers by financial institutions.

(c) Explain with examples, various types of crossing of cheques.

Ans:- A crossed cheque is a cheque that has two parallel lines drawn across its face. These lines effectively limit the payment of the cheque to the account of the payee mentioned on the cheque. Crossing of cheques is a security measure to prevent the fraudulent encashment of cheques and to ensure that the payment goes to the intended recipient. There are different types of crossing of cheques, each serving a specific purpose. Here are some common types of crossed cheques:

1. General Crossing:

   - When two parallel lines are drawn across the face of the cheque without any additional instructions, it is considered a general crossing.

   - Example: If you write a cheque to John Smith and cross it generally, it can only be deposited into John Smith's bank account.

2. Special Crossing:

   - In this case, the name of a specific bank is written between the two parallel lines. This means that the cheque can only be deposited into an account at that particular bank.

   - Example: If you write a cheque to John Smith and specially cross it with "ABC Bank," John can only deposit it into his ABC Bank account.

3. Not Negotiable Crossing:

   - When the words "Not Negotiable" are added between the parallel lines, it indicates that the cheque is not transferable to another person. It can only be deposited into the account of the payee.

   - Example: A cheque made out to John Smith with "Not Negotiable" crossing cannot be transferred to someone else, and John must deposit it into his own account.

4. Account Payee Crossing:

   - This type of crossing is similar to "Not Negotiable," but it includes the words "Account Payee Only" or "A/C Payee Only."

   - It ensures that the funds are credited only to the account of the payee and cannot be encashed over the counter.

   - Example: A cheque made out to John Smith with "Account Payee Only" crossing can only be deposited into John's bank account.

5. Restrictive Crossing:

   - In a restrictive crossing, specific instructions are added between the parallel lines, limiting the use of the cheque for a particular purpose.

   - Example: A cheque made out to John Smith with a restrictive crossing like "For Rent Payment Only" can only be used for paying rent.

6. Multiple Crossing:

   - Sometimes, cheques may have more than one type of crossing. For instance, a cheque can be both "Account Payee Only" and "Special Crossing."

   - Example: A cheque made out to John Smith with both "Account Payee Only" and "ABC Bank" crossing can only be deposited into John's ABC Bank account.

The choice of crossing depends on the payer's intention and the level of security required for the transaction.

Or

Discuss the principles of sound lending.

Ans:- Following are the some principles of sound lending:

1. Creditworthiness Assessment:

   - Lenders should thoroughly evaluate the creditworthiness of borrowers by assessing their financial history, income, debt levels, and repayment capacity.

2. Risk Management:

   - Lenders must have robust risk management practices in place to identify, measure, and mitigate risks associated with lending activities.

3. Loan Purpose:

   - Loans should be issued for legitimate and productive purposes, such as starting or expanding a business, buying a home, or investing in education.

4. Adequate Collateral:

   - For secured loans, there should be sufficient collateral to cover the loan amount in case of default. The value of collateral should be accurately assessed.

5. Loan Terms:

   - Loan terms, including interest rates, repayment schedules, and maturity dates, should be reasonable and tailored to the borrower's ability to repay.

6. Regulatory Compliance:

   - Lenders must adhere to all applicable laws and regulations governing lending practices in their jurisdiction.

7. Diversification:

   - Lenders should diversify their loan portfolios to reduce concentration risk. Overexposure to a single sector or type of loan can lead to significant losses.

8. Loan Monitoring:

   - Continuous monitoring of loan accounts helps identify early warning signs of financial distress in borrowers, allowing for timely intervention.

9. Adequate Capitalization:

   - Lending institutions should maintain adequate capital reserves to absorb potential losses and maintain their financial stability.

10. Ethical Lending Practices:

    - Lenders should adhere to ethical and fair lending practices, avoiding discriminatory or predatory lending.

11. Documentation and Record Keeping:

    - Proper documentation of loan agreements and maintaining accurate records is crucial for legal compliance and risk management.

12. Prudent Decision Making:

    - Lenders should make lending decisions based on objective analysis rather than subjective factors.

Sound lending practices are crucial for the sustainability of financial institutions and the overall stability of the financial system. By following these principles, lenders can minimize credit risk and promote responsible lending.

(d) Discuss the powers of the Reserve Bank of India under the Banking Regulation Act, 1949.

Ans:- Powers of the Reserve Bank of India under the Banking Regulation Act, 1949:

The Banking Regulation Act, 1949, provides the Reserve Bank of India (RBI) with a wide range of powers and authority to regulate and supervise banks and financial institutions in India. Here are some of the key powers conferred upon the RBI under this act:

a. Licensing of Banks: The RBI has the authority to issue licenses for the establishment of new banks in India. It can also grant licenses for the opening of new branches or the closure of existing ones. This power is instrumental in ensuring the stability and growth of the banking sector.

b. Regulation of Banking Operations: The RBI can prescribe regulations and guidelines related to various aspects of banking operations, including capital adequacy, liquidity, and risk management. It sets the norms and standards that banks must adhere to for their safe and sound functioning.

c. Control Over Management: The Banking Regulation Act empowers the RBI to regulate the appointment and removal of directors, CEOs, and other key personnel in banks. This control helps ensure the competence and integrity of bank management.

d. Inspection and Supervision: The RBI can conduct regular inspections of banks to assess their financial health, compliance with regulations, and overall performance. It can call for special audits if necessary. This power is crucial for maintaining the stability of the banking system.

e. Imposing Penalties: In case of violations of the Banking Regulation Act or RBI regulations, the central bank has the authority to impose penalties on banks and their officials. These penalties may be financial or regulatory in nature.

f. Winding Up of Banks: If a bank is deemed to be insolvent or its operations pose a threat to the financial system, the RBI can recommend its winding up or amalgamation with another bank. This power is exercised in the interest of protecting depositors and maintaining the stability of the financial system.

g. Control Over Banking Business: The RBI can issue directives to banks regarding the types of business they can undertake, such as lending, investments, and asset quality standards. It can also control the interest rates that banks offer on deposits and charge on loans.

h. Special Measures: During exceptional circumstances, such as a financial crisis or economic instability, the RBI can take special measures to safeguard the banking system's integrity and stability. These measures may include imposing temporary restrictions on withdrawals or suspending banking operations.

Or

Describe the provisions of the Banking Regulation Act, 1949 in regard to

(i) licensing of banks, and

(ii) inspection of banking companies.

Ans:-  Provisions of the Banking Regulation Act, 1949:

(i) Licensing of Banks: The Banking Regulation Act, 1949, lays down the regulatory framework for the establishment and operation of banks in India. Some key provisions regarding the licensing of banks include:

   - Section 22: This section empowers the RBI to grant licenses for the establishment of new banks and the opening of new branches. It outlines the conditions and criteria that must be met for obtaining a banking license.

   - Section 23A: This section allows the RBI to impose conditions on the grant of banking licenses, including specifying the area of operation, capital requirements, and other necessary terms.

   - Section 11(1): It states that no banking company can commence business in India without obtaining a license from the RBI.

(ii) Inspection of Banking Companies: The Banking Regulation Act, 1949, provides for the inspection and supervision of banking companies to ensure their financial stability and compliance with regulations. Key provisions related to the inspection of banking companies include:

   - Section 35: This section grants the RBI the power to inspect and examine the accounts, books, and affairs of any banking company. It can also call for special audits if it deems necessary.

   - Section 36: The RBI can appoint its officers or other persons as inspectors to conduct inspections of banks. These inspectors have access to all relevant documents and information.

   - Section 37: It specifies the rights and responsibilities of the inspectors and provides for penalties in case of non-cooperation with the inspection process.

Overall, the Banking Regulation Act, 1949, serves as a crucial piece of legislation that empowers the RBI to regulate and supervise the banking sector in India, ensuring its stability and the protection of the interests of depositors and the broader financial system.

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