[AHSEC Class 11 Finance 2023 Solved Question Paper, HS First Year Finance Solved Question Paper 2023 ]
2023
FINANCE
Full Marks: 80
Pass Marks: 24
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. (a) What is meant by finance?
Answer:- Finance refers to the management of money and financial resources. It involves raising, allocating, and utilizing funds effectively to achieve specific goals.
1. (b) Write a short-term source of finance.
Answer:- One short-term source of finance is Trade Credit.
1. (c) The Reserve Bank of India was established on April 1, ______. (Fill in the blank)
Answer:- The Reserve Bank of India was established on April 1, 1935.
1. (d) What is a Public Sector Bank?
Answer:- A Public Sector Bank is a bank where the majority stake is held by the government.
1. (e) What is Fixed Deposit Account?
Answer:- A Fixed Deposit Account is a type of bank account where a specific sum of money is deposited for a fixed period at a predetermined interest rate.
1. (f) Define Bill of Exchange.
Answer:- A Bill of Exchange is a written order from one party to another, directing them to pay a specific sum of money to a third party at a fixed future date.
2. Give the meaning of holder in due course.
Answer:- A holder in due course is a person who acquires a negotiable instrument for value, in good faith, and without notice of any defect in the title of the person transferring it.
3. Write two uses of ATM.
Answer:-
Withdrawal of cash anytime
Balance inquiry and mini statement generation.
4. Write two objectives of nationalization of banks.
Answer:-
Expansion of banking facilities in rural areas
Reduction of regional economic disparities.
5. Write two functions of Cooperative Bank.
Answer:-
Providing financial assistance to farmers and small-scale industries
Mobilizing savings from small income groups.
6. State any two differences between Commercial Bank and Development Bank.
Answer:-
Commercial Bank: Profit-oriented; provides short-term and medium-term loans.
Development Bank: Development-oriented; provides long-term loans for development projects.
AHSEC Class 11 Finance Question Paper 2023 – Section 2 (Solved)
7. Write three long-term sources of finance.
Answer:-
Equity Shares – Funds raised by issuing shares to the public.
Debentures/Bonds – Debt instruments issued by companies to borrow funds.
Term Loans from Financial Institutions – Long-term loans provided by financial institutions for capital expenditure.
8. Write three features of Foreign Bank.
Answer:-
Operates in multiple countries: Foreign banks have branches in different countries.
Follows international banking norms: They comply with global financial standards.
Specializes in foreign exchange transactions: They deal extensively in foreign currency.
9. What is meant by chain banking? Write two features of chain banking.
Answer:- Chain Banking: It refers to a system where an individual or group controls two or more banks without forming a holding company.
Features:
Direct control by individuals or family members
No formal agreement is required between banks.
Or:
Briefly write a note on Lead Bank Scheme.
Answer:- The Lead Bank Scheme was introduced to enhance banking services in underdeveloped regions by assigning one bank as the lead bank for a district.
Key Objectives:
Identify and address regional banking needs.
Provide financial assistance to priority sectors like agriculture and small industries.
10. Write three advantages of Recurring Deposit Account.
Encourages regular savings: Allows individuals to save a fixed amount every month.
Fixed interest on deposits: Provides consistent interest earnings.
Safe investment option: Low-risk savings instrument.
Or:
State the meaning and importance of cheque book.
Answer:- A cheque book is a document issued by a bank that allows account holders to make payments through cheques instead of cash.
Importance:
Safe and convenient for large payments
Acts as proof of payment.
11. Define endorsement. Briefly write any two types of endorsement.
Answer:- Endorsement: It refers to signing on the back of a negotiable instrument to transfer ownership or rights to another party.
Types:
Blank Endorsement: Signature only, no specific payee mentioned.
Special Endorsement: Specifies the person to whom the payment is to be made.
12. State five differences between Bill of Exchange and Promissory Note.
Answer:-
Parties Involved:
Bill of Exchange: Drawer, Drawee, Payee
Promissory Note: Maker, Payee
Acceptance:
Bill of Exchange: Needs acceptance
Promissory Note: No acceptance required
Order/Promise:
Bill of Exchange: Order to pay
Promissory Note: Promise to pay
Liability:
Bill of Exchange: Drawee is primarily liable
Promissory Note: Maker is primarily liable
Copies:
Bill of Exchange: Can be drawn in sets
Promissory Note: Cannot be drawn in sets.
Or:
Write about the five essential elements of valid endorsement.
Answer:-
Signature of the endorser: Must be signed by the endorser.
Instrument must be delivered: The instrument must be handed over to the endorsee.
Intent to transfer rights: Clear intent to transfer ownership.
Unconditional transfer: No conditions attached to the transfer.
Endorsement on the instrument itself: Must be done on the instrument or a slip attached to it.
13. Write the differences between Indian Money Market and Indian Capital Market.
Answer:-
Duration:
Money Market: Deals with short-term funds (less than one year).
Capital Market: Deals with long-term funds (more than one year).
Instruments:
Money Market: Treasury bills, Commercial papers, Certificates of deposit.
Capital Market: Shares, Debentures, Bonds.
Risk:
Money Market: Low risk.
Capital Market: Higher risk due to market fluctuations.
Regulation:
Money Market: Regulated by the Reserve Bank of India (RBI).
Capital Market: Regulated by the Securities and Exchange Board of India (SEBI).
Participants:
Money Market: Banks, Financial institutions, Government.
Capital Market: Investors, Companies, Government.
14. What is Regional Rural Bank? Write three objectives of Regional Rural Bank.
Answer:-Regional Rural Bank (RRB): A bank specifically set up to provide banking services in rural and semi-urban areas.
Objectives:
Providing banking services to rural areas.
Offering loans to farmers and small industries.
Mobilizing rural savings and promoting economic activities in rural regions.
Or:
What is Investment Bank? Write four functions of Investment Bank.
Answer:-Investment Bank: A financial institution that assists companies in raising capital and provides advisory services for financial transactions.
Functions:
Underwriting of securities: Assisting companies in issuing new securities.
Mergers and Acquisitions Advisory: Guiding firms through mergers and acquisitions.
Wealth Management: Managing large portfolios for clients.
Facilitating large financial transactions: Helping clients with significant financial deals.
15. Write three advantages and two disadvantages of group banking.
Answer:-Advantages:
Efficient fund management: Group banking facilitates better resource allocation.
Risk diversification: Risk is spread across multiple banks in the group.
Cost efficiency: Common administrative costs reduce operational expenses.
Disadvantages:
Dependency on central authority: Excessive reliance on the parent organization may cause delays in decision-making.
Limited local autonomy: Branches may have limited independence.
16. Write a note on the power and duties of Banking Ombudsman.
Answer:-Banking Ombudsman: An official appointed by the Reserve Bank of India (RBI) to address customer grievances related to banking services.
Powers and Duties:
Resolve complaints against banking services.
Pass awards or compensation to customers.
Inspect bank records if necessary.
Enforce corrective measures against banks violating guidelines.
Report annually to the RBI about grievances and resolutions
17. Discuss the internal structure of the Indian Financial System.
Answer:-The Indian Financial System (IFS) serves as a framework that facilitates the mobilization of financial resources and their allocation into productive activities, ensuring economic growth and stability. It operates through a network of institutions, markets, instruments, and services.
Components of the Indian Financial System
Financial Institutions:
Financial institutions act as intermediaries between savers and investors. They are categorized into:Banking Institutions: Includes Commercial Banks (like SBI, HDFC), Cooperative Banks, Regional Rural Banks, and Development Banks.
Non-Banking Financial Companies (NBFCs): These include institutions providing services such as hire purchase, leasing, and housing finance.
Financial Markets:
Financial markets are platforms where financial assets are traded.Money Market: Deals with short-term instruments like Treasury Bills, Commercial Papers, and Certificates of Deposit.
Capital Market: Deals with long-term investments through shares, bonds, and debentures.
Forex Market: Facilitates the exchange of currencies.
Financial Instruments:
Debt Instruments: Bonds and debentures used to raise capital.
Equity Instruments: Ownership rights through shares.
Hybrid Instruments: A combination of debt and equity (e.g., convertible debentures).
Financial Services:
Services provided by financial institutions, including:Credit facilities (loans and advances).
Investment advisory.
Portfolio management.
Insurance and risk management.
Regulatory Bodies:
Reserve Bank of India (RBI): Governs monetary policy and banking operations.
Securities and Exchange Board of India (SEBI): Regulates the stock market.
Insurance Regulatory and Development Authority (IRDA): Manages insurance sectors.
Pension Fund Regulatory and Development Authority (PFRDA): Oversees pension funds.
The Indian Financial System ensures economic development by efficiently allocating resources, maintaining financial stability, and fostering industrial growth.
18. Discuss the functions of the Central Bank of India.
Answer:-The Central Bank, also known as the Reserve Bank of India (RBI), plays a pivotal role in India’s financial system by managing monetary policy, issuing currency, and ensuring financial stability.
Functions of the Central Bank:
Issuance of Currency:
The RBI has the exclusive authority to issue currency notes in India (except coins, which are issued by the government). This ensures uniformity and control over the supply of money.Monetary Policy Implementation:
The RBI regulates money supply and credit in the economy to control inflation, deflation, and ensure economic stability. It uses tools like:Repo Rate and Reverse Repo Rate.
Cash Reserve Ratio (CRR).
Statutory Liquidity Ratio (SLR).
Regulation of Banking Institutions:
The RBI supervises and regulates commercial banks, cooperative banks, and NBFCs by:Granting licenses.
Conducting inspections.
Imposing penalties for non-compliance.
Custodian of Foreign Exchange Reserves:
The RBI manages India’s foreign exchange reserves and ensures a stable exchange rate for the Indian Rupee.Government’s Banker:
The RBI acts as a banker, agent, and debt manager for both the central and state governments. It handles their accounts and helps in borrowing through government securities.Lender of Last Resort:
During a financial crisis, the RBI provides financial support to banks or institutions that are unable to meet their obligations.Promoting Financial Inclusion:
The RBI plays a developmental role by ensuring banking facilities reach rural and underprivileged areas. It supports schemes like the Pradhan Mantri Jan Dhan Yojana (PMJDY).Payment and Settlement Systems:
The RBI oversees and improves payment systems like NEFT, RTGS, and UPI to facilitate secure and efficient transactions.
What is meant by unit banking system? Discuss the features of unit banking system.
Answer:-Unit Banking System refers to a banking model where a single bank operates without any branches, focusing on localized services.
Features of Unit Banking System:
Localized Operations:
The bank serves only a specific geographical area, making it community-focused.Personalized Services:
Since operations are limited, the bank can build strong customer relationships and provide tailored services.Limited Resources:
The bank relies on local deposits and investments, which may restrict its financial capacity.Quick Decision-Making:
As there is no hierarchy or multiple branches, decisions can be made swiftly.Low Risk Exposure:
The bank is less affected by external or macroeconomic risks as its operations are localized.Independent Management:
The management has complete control over the bank’s operations.
While unit banking systems provide personalized services, they lack the scalability and resource-sharing advantages of branch banking systems.
19. Discuss the procedure of opening a Bank Account in the name of a company and a partnership firm.
Answer:-Opening a bank account for an organization involves legal and regulatory formalities to ensure compliance with banking rules.
(A) For a Company:
Board Resolution:
A formal resolution passed by the company’s Board of Directors, authorizing the opening of a bank account and specifying authorized signatories.
Documents Required:
Certificate of Incorporation.
Memorandum of Association (MOA) and Articles of Association (AOA).
Permanent Account Number (PAN) of the company.
Proof of registered office address (e.g., utility bill).
Authorized Signatory Details:
KYC documents (Aadhaar, PAN) of individuals authorized to operate the account.
Account Opening Form:
A duly filled and signed form provided by the bank.
Other Requirements:
Declaration of compliance with regulatory guidelines.
Shareholding pattern or list of directors.
(B) For a Partnership Firm:
Partnership Deed:
A copy of the registered partnership deed specifying the terms of the partnership.
Documents Required:
PAN card of the partnership firm.
Address proof of the firm (e.g., utility bill).
KYC Documents of Partners:
Identity proof and address proof of all partners.
Authorization Letter:
A letter signed by all partners, authorizing specific individuals to operate the account.
Account Opening Form:
A completed form provided by the bank.
Both types of accounts require adherence to Know Your Customer (KYC) norms and compliance with anti-money laundering regulations.
Or
What is meant by holder? Write the differences between Holder and Holder in Due Course.
Answer:- Holder: A holder is a person who is legally entitled to possess a negotiable instrument (e.g., cheque, bill of exchange) and can claim payment from the concerned party.
Differences Between Holder and Holder in Due Course:
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