SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Bank Lending Policies and Procedures
Sample Questions:
Section I: Subjective Questions
1. Write a note on selective or qualitative methods for credit control.
2. Explain the points to be considered while undertaking appraisal of liquidity of the bank.
3. What are the objectives of the Loan Review Mechanism in the bank?
4. What are the main objectives of Banking Regulation Act?
5. Explain the provision related to Reserve Fund, which is applicable to every banking
company in India.
6. When bank is treated as holder for value?
7. What are the objectives of a bank’s lending policy?
8. What do you mean by Working Capital?
Section II: Objective Questions
Multiple Choice Single Response
1. Fertiliser and pesticide are supplied to farmers on credit and
1] often on deferred payment basis
2] often on advance payment basis
3] often on instalment payment basis
4] often on debit payment basis
2. A high Bank/Repo Rate directly increases
1] RBI accommodation to banks
2] imports
3] exports
4] consumption
3. Under CAMELS "L" means
1] Liquidity
2] Liabilities towards depositors
3] Loss making assets
4] Loan to value
4. It speaks well about a bank's risk management practices if the lending policy is
SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Bank Lending Policies and Procedures
1] well-documented
2] deficient
3] inadequate
4] incomplete
5. Fixed assets turn over means
1] The efficiency at which the entity has utilised its resources
2] The amount of new fixed assets acquired during the financial year
3] The disposal of fixed assets during the year
4] Assets revalue during the year
6. Credit rating of a borrower is done to
1] Assess the borrower's capacity to meet his obligations
2] This a report given by a bank to another bank
3] It is only a formality before loan is processed
4] It indicates the amount of loan that should be sanctioned to an entity
7. The fee that bank charges for offering its services and all expenses of the bank are
recovered from the revenue generated from it is termed as
1] Interest Spread
2] Revenue Spread
3] Profit
4] Margin
8. A loan review is not
1] a portfolio review
2] a industry review
3] a business sector review
4] a market review
9. CIBIL Detect provides you with an easy and cost-effective way to access and share
information on
1] high-risk activity
2] moderate-risk activity
3] low-risk activity
4] liabilities
10. As holder for value, the collecting banker
1] becomes the true owner of the cheque
2] does not incur liability on the cheque
3] does not have the right to recover the money in his own name
4] becomes only the holder of the cheque
Multiple Choice Multiple Response
11. Policy may also include methods for assessment , computation of permissible bank
finance such as
1] Cash Budget System
SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Bank Lending Policies and Procedures
2] Turnover Method
3] FIFO
4] LIFO
12. Which of the following is a principle of lending
1] Safety
2] Liquidity
3] Profitability
4] Trust
13. The higher authorities at various levels should desist from the unhealthy practice of
conveying sanction of advances
1] orally
2] on telephone
3] in written form
4] on email
14. Accounts that have some potential weaknesses and which deserve close management
attention are known as
1] Stressed Accounts
2] Special Mention Accounts
3] Sub-Standard Assets
4] Non -Performing Assets
15. The Reserve Bank of India is empowered to
1] appoint a director of banking company
2] reappoint a director of banking company
3] remove a director of banking company
4] nominate a director of banking company
16. When the drawer's signature is forged,
1] the instrument is wholly inoperative
2] the drawer's mandate is missing
3] banker can continue with payment
4] banker is not held responsible
17. Payment in due course means
1] payment in accordance to instructions therein
2] payment in good faith
3] payment in ordinary course of business
4] payment to holder after reasonable query
18. Secure system means computer hardware, software and procedure that
1] reasonably secure from authorized access and use
2] provide a reasonable level of reliability and correct operation
3] adhere to generally accepted security procedures
4] reasonably secure from unauthorized access and misuse
SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Bank Lending Policies and Procedures
Fill in the Blanks
19. The provisioning requirement for unsecured doubtful assets is ____________ per
cent.
1] 100
2] 75
3] 50
4] 25
20. Under IRAC norms the term loss asset means ____________.
1] An asset where loss has been identified by the bank or external/internal auditors
or RBI inspectors and the amount has not been written off
2] A loan granted to an entity which has incurred heavy losses in the last financial
year
3] An asset missing from the bank's balance sheet
4] An asset which has not been written off
21. If the amount of interest charged is fixed every year then it is a case of ____________.
1] Simple Interest
2] Compound interest
3] Floating Interest
4] Fixed Interest
22. A very common example of subsidized loan is ____________.
1] Loan to bank employees at lower rate
2] Credit Card Loan
3] Line of Credit
4] Demand Loan
23. The ___________ enable a bank to identify the borrowal accounts which show signs
of credit deterioration
1] Early Alerts
2] Private detectives
3] Inside Informers
4] Staff of the borrower
24. An uncrossed bearer cheque is a __________ cheque.
1] open
2] safe
3] invalid
4] best
25. The banker is discharged of his liability, if the endorsement made is a _________
one.
1] regular
2] irregular
3] normal
4] complete
SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Bank Lending Policies and Procedures
26. When the banker realizes that the drawer's signature differs from specimen supplied,
he should remark and return the cheque as ___________.
1] signature differs
2] signature forged
3] signature invalid
4] signature doubtful
27. R B I directed that the migration will be effective from ____________ .
1] 31st March 2007
2] 31st March 2006
3] 30th Sept.,2007
4] 30th Sept.,2006
28. Dealing with property as one's own is referred to as ___________ .
1] conversion
2] extortion
3] coercion
4] attachment
State True or False
29. A banker’s lien on negotiable securities has been judicially defined as an implied
pledge.
30. Cash credit advances are repayable on demand and they roll over based on annual
reviews.
31. Functioning of banks is closely regulated in almost every country.
32. Banks have a responsibility to ensure that all the loans and advances given by them
should be safe.
33. The lender has a general right to be repaid.
34. The holder of the negotiable instrument can sue in his own name on the instrument.
35. The risks associated with supply bills is that the payment on the same comes after a
very long time.
36. Banks grant secured and unsecured loans to their clients.
37. Collecting Banker acts as holder for value when he allows the customer to have the
money before it is received from Paying Banker.
38. The banker is not liable to the customer if the delay in presentment is due to
conditions beyond its control.
Match the Following
1] Recalled Advances 1] Health Code -V
SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Bank Lending Policies and Procedures
39. 2] Suit Filed Accounts 2] Health Code-VI
3] Decreed Advances 3] Health Code -VII
4] Bad and Doubtful 4] Health Code-VIII
5] Health Code -IV
6] Health Code -III
40. 1] Branch based application 1] Face to face interaction
2] Agent based application 2] Intermediary between lender and
borrower
3] Telephone based application 3] Loan requirements gathered
telephonically
4] Internet based application 4] Loan requirement filled on bank web
site
5] Personal visit at borrowers place
6] Recurring visits at borrowers place
41. 1] Exposure 1] Norms
2] Asset-Liability 2] Management
3] Statutory 3] Restrictions
4] Collateral 4] Security
5] decision-making
6] credit-needs
42. 1] Proprietary ratio 1] Net profit after Tax/Proprietor's funds
2] Solvency ratio 2] Total Outside liabilities/TNW
3] Quasi Equity 3] Long term Funds introduced by
owner's relatives
4] Sundry debtors 4] Amount due from purchasers of goods
5] Capital brought in by promoters
6] Money received from Govt.
