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100 Basics of Legal and Regulatory Aspects of Banking - JAIIB

Legal & Regulatory aspects of Banking

JAIIB Exam Study Material: 100 Basics of Legal and Regulatory Aspects of Banking - JAIIB

01. In the case of a bearer cheque, the identity is not necessary


02. When an order cheque is endorsed in blank, it becomes payable to bearer and transferable by mere delivery


03. A cheque crossed “Not Negotiable”, is still transferable


04. As per section 138 of Negotiable Instruments Act, there is a provision of penalty when the cheque issued in discharge of a liability is dishonoured due to insufficient funds in the account, subject to the condition that the cheque has been presented to the bank within a period of three months and is not honoured due to insufficient funds


05. A fixed deposit receipt cannot be endorsed


06. A cheque is presented in an account but there is no sufficient balance to meet the same. The cheque will be returned with the remarks – insufficient funds


07. The cheque on behalf of a partnership firm can be stopped for payment by any partner whether authorized to operate the account or not


08. The marginal farmer is one who possesses agriculture land upto 1.25 acres of irrigated land or 2.5 acres of non-irrigated land


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09. Registration of charge is not required in the case of pledge, lien, set-off and appropriation


10. Loans for construction of godown for own use of farmers is not part of indirect finance to agriculture


11. Olericulture is cultivation of vegetables


12. Agriculture labourer is a labourer whose income from agriculture is more than 50%


13. Nostro account is an account of a bank established in India with a Foreign Bank in another country and the account is maintained in foreign currency


14. Resident Foreign Currency (RFC) account scheme is available for home returned Non resident Indians


15. Under packing credit limit, the extent of finance is computed on the basis of Freight on Board basis



16. Forfeiting refers to discounting of export bill without recourse to the seller


17. In an overdraft account, when the death notice of partner is received the bank should stop the operations to avoid application of Clayton’s case


18. A company is not dissolved by lunacy of a director or bankruptcy of a director or death of a director


19. In the case of insolvency, the banker’s obligation to honour customer cheques comes to an end when the customer is adjudged insolvent


20. A lien is the right to retain goods or securities belonging to a debtor until he has discharged a debt due to the retainer thereof


21. The shareholders of a Private Limited Company cannot transfer the shares to any other individual other than the shareholders of the company


22. The rule in Clayton’s case applies in the case of running accounts having debit balances in respect of partnership accounts


23. The term banking has been defined in Banking Regulation act – 1949


24. Bills drawn in respect of goods delivered by parties to various Government/Semi Government departments are known as supply bills


25. Goiporia committee has made the recommendations – Commencement of employee working hours should be 15 minutes before commencement of business hours


26. Banking companies are registered under – Banking Regulation act - 1949


27. Bipartite settlements are registered under Industrial Disputes Act


28. Financial products, whose prices are derived from the price of the underlying currency, interest rate, stocks etc. are called as– securitization


29. Revaluation reserves is a part of subsidiary capital/tier II capital


30. The committee headed by Y V Reddy –revised the concept of liquidity and monetary aggregates


31. Verma Committee was appointed to examine the restructuring of weak banks


32. The process through which any member-owned organization becomes a shareholder-owned company is called demutualization


33. Official Language deals with the following articles of constitution – 343 to 351


34. Hindi was declared as the official language of the union on 14-09-1949


35. The system of electronic funds transfer was suggested by the committee headed by – B D Shah


36. INFINET is – RBI’s VSAT based communication system


37. The negotiable instruments act is applicable for the entire part of the country


38. If the cheque is drawn in favour of “Mother God” or order, the cheque is to be returned with the reasons – “since drawn on fictitious name”


39. A cheque payable to Rohit is endorsed as follows – Pay to “Kabil on his marriage”. This endorsement is conditional endorsement


40. The cheque crossed – “account payee” drawn in favour of Mr Brij Nand is presented by Raman in his account and in this case the bank should not make the payment



41. The following are not negotiable instruments – airway bill, a currency note, a letter of credit and lorry receipt


42. Under section 25 of Negotiable Instruments Act, public holidays are declared by – the respective state governments by notifications in the official gazettes


43. Conversion means – not crediting the amount in the account of true owner


44. By “General Crossing”, we mean two transverse parallel lines on top left hand corner of a cheque


45. Forward exchange contract is an agreement where the foreign exchange is delivered at predetermined future date at a contracted date


46. Unless otherwise specified in the letter of credit, the insurance amount should be expressed in the currency of the letter of credit


47. On the death of the partner, bank opens a new account to rule-of the existing account to avoid application of Clayton’s case


48. Executor in banking means a person named by the deceased in his will for which probate is obtained


49. The partnership firm doing the banking business cannot have more than 10 partners and for other business not more than 20 partners; otherwise it will become illegal association. This is the condition as per Indian Companies act 1956.


50. Prospectus is an invitation to the public to subscribe shares or debentures or deposits


51. According to the rule in Clayton’s case, the money paid in by a customer has to be applied towards adjustment in overdraft account in order of time in which the debits were incurred


52. Banking company is prohibited from undertaking business like trading of goods etc under – Banking Regulation act 1949


53. For availing remedy under section 138 of Negotiable Instruments act, the holder will have to give notice to the drawer within 30 days of return of the cheque


54. When a firm has branches at different places and wishes to avail the loan at all stations, the documents will be executed at its Head Office and sub limits will be allocated to branches at different places


55. In the case of any doubt about stamp duty, clarification can be sought from State Stamp Authority and Controller of stamp duty


56. Banks were nationalized under – Banking Companies (Acquisition and transfer of undertaking) act-1970


57. When an account shows debit balance, the banker is a creditor and when the account shows credit balance, the banker is the debtor


58. Partnership firms cannot do the business of banking and it is provided under the banking regulation act 1949


59. The concept of authorized deduction and illegal deduction is mentioned in the act – Payment of wages act


60. The process of replacing paper securities into electronic holding of shares is known as – dematerialization


61. Official Language policy came into force from 16.01.1950


62. The Central Processing Unit – CPU- consists of control unit and arithmetic logic unit


63. When the price of dollar is raised from Rs. 48 to Rs. 55 the exporter will be benefited in terms of rupee


64. A cheque is the mandate of the accountholder


65. When a cheque without a date is presented for payment, the banker should return the cheque


66. In a cheque the name of the banker had been written with or without the words – “Not negotiable” – In this case, it is called as a special crossing


67. For negotiating a negotiable instrument there are no limits


68. A bearer cheque is transferable only by delivery


69. A bill drawn in Paris and drawn in favour of a trader in Mumbai and payable in Chennai is called a foreign bill


70. The Negotiable Instruments Act provides protection to the collecting banker in respect of Conversion


71. Crossing of a cheque denotes that it should be paid to a banker only


72. By noting, it is meant that the fact of dishonour has been recorded by the notary public on a dishonoured bill or/and on a plain paper attached to the bill


73. Sericulture is classified under – direct agriculture advance


74. Mahima relates to refinance by NABARD to banks for onlending to agencies for marketing of non farm products of rural women


75. Foreign exchange transactions are viewed always from the angle of the bank


76. The responsibility of managing the foreign exchange resources lies with – Reserve Bank of India


77. Exim policy is announced by the Ministry of Commerce


78. In a Free on Board contract, freight and insurance will be borne by the importer


79. If a letter of credit is slient about the revocability, then the letter of credit is irrevocable


80. Crystalisation of sight export bills purchased/negotiated will be done on the expiry of transit period plus 30 days 81. A transferable letter of credit can be transferred only once


82. Natural guardian under Hindu Minority and guardianship act, 1956 will be – his father and after him the mother


83. For banking transactions, an administrator is one who is appointed by the court if the deceased has died intestate


84. Banker’s lien is an implied pledge


85. A contract of insurance is a contract of indemnity


86. Acceptance of a usance bill will be made on the face of the bill


87. The right of set-off can be exercised by the banker only when the relationship between the customer and the banker is that of debtor and creditor


88. Bank must create reserve fund and 25% of the profits should be transferred to this fund before any dividend is declared and this is as per Banking Regulation act 1949


89. Limitation period for availing the remedy under Section 138 of Negotiable Instruments Act is one month from the date of cause of action


90. In case the amount of loan to a company is decreased or increased, the memorandum of modification or charge should be submitted to the Registrar of companies


91. The rate of revenue stamp is the same throughout India except in Jammu and Kashmir


92. When articles are kept in safe custody, the relationship between banker and customer is that of bailee and bailor


93. In the case of minor’s joint account with the guardian and when the minor attains majority, the guardian should not be allowed to operate the account


94. Wages of employees are settled under Minimum wages act


95. CB Bhave committee has looked into ways to reduce cost of demat operations and the said companies should bear a substantial part of dematerialization costs


96. Basle committee relates to Capital Adequacy


97. In Camel’s rating – E stands for earnings


98. The revised definition of a sick SSI unit has been given by Kohli committee


99. Greenshoe option is retaining the full/part of equity subscribed by investing public over and above that issued


100.Hindi is accepted as an official language of the union under Devanagiri script


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