92 important Banking terms for any Banking interviews

Hello Friends
We are sharing Some banking terms which can asked in IBPS/SBI and other banking interviews and written examination.Hope you like it
1. Why do you want to join banking sector?
Banking is one of the fastest growing sectors in India with more stable and high growth and more over providing wide range of career opportunities for graduates. So I want to take an opportunity to join in a bank.

2. What is the difference between Cheque and Demand Draft?
Cheque: Cheuqe is a negotiable instrument instructing a bank to pay a specific amount from a specific account held in the maker/depositor name with that Bank.
Demand Draft: A demand draft is an instrument used for effecting transfer of money. It is a negotiable instrument.
3. What is a Non-Banking Financial Company (NBFC)? 
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of 
loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other 
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any 
institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than 
securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is 
a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in
installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary nonbanking
company)

4. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as 
given below:
NBFC cannot accept demand deposits; NBFCs do not form part of the payment and settlement system and cannot issue 
cheques drawn on itself;deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to 
depositors of NBFCs, unlike in case of banks.

5 . What is Private Banking?
Banking services offered to high net-worth individuals. Private banking institution assists the high net-worth individual in 
investing his/her money in exchange for commissions and fees. The term “private” refers to the customer service being
rendered on a more personal basis. 

6. What is BSBDA?
Under the guidelines issued on August 10, 2012 by RBI: Any individual, including poor or those from weaker section of the 
society, can open zero balance account in any bank. BSBDA guidelines are applicable to “all scheduled commercial banks in 
India, including foreign banks having branches in India”. All the accounts opened earlier as ‘no-frills’ account should be renamed 
as BSBDA. Banks are required to convert the existing ‘no-frills’ accounts‟ into ‘Basic Savings Bank Deposit Accounts’. The ‘Basic 
Savings Bank Deposit Account’ should be considered as a normal banking service available to all customers, through branches .
The aim of introducing ‘Basic Savings Bank Deposit Account’ is very much part of the efforts of RBI for furthering Financial 
Inclusion objectives.

7. What is BPS (Basis Points)?
BPS (Basis point) : – BPS is an acronym for basic points is used to indicate changes in rate of interest and other financial 
instrument. BASIC POINT IS EQUAL TO 0.01% So when we say that repo rate has been increased by 25 bps, it means that the 
rate has been increased by 0.25% 

8. What is KYC?
The Reserve Bank of India (RBI) has advised banks to follow „KYC guidelines‟, wherein certain personal information of the 
account-opening prospect or the customer is obtained. The objective of doing so is to enable the Bank to have positive 
identification of its customers. This is also in the  interest of customers to safeguard their hard earned money. The KYC 
guidelines of RBI mandate banks to collect three proofs from their customers. They arePhotograph
Proof of identity
Proof of address

9. What is Sub-prime crisis?
The current Subprime crisis is due to sub-prime lending. These are the loans given to the people having low credit rating.

10. What is Base Rate? 
It is the minimum rate of interest that a bank is allowed to charge from its customers. Unless mandated by the government, RBI 
rule stipulates that no bank can offer loans at a rate lower than BR to any of its customers. It is effective from, July 1, 2010. 
However, all existing loans, including home loans and car loans, will continue to be at the current rate. Only the new loans
taken on or after July 1 and old loans being renewed after this date will be linked to BR.

11. What is SWIFT?
SWIFT :- Society for worldwide Interbank financial tele- communication.  India was 74th Nation to join SWIFT Network.  SWIFT 
Code is a standard format of bank Identifier code. This code is used particularly in International transfer of money between 
banks.  A majority of FOREX related message are sent to correspondent banks abroad through SWIFT.  SWIFT Code consist 8 or 
11 character when code is 8 digit, It is referred to primary office 4 – bank code 2 – country code 2 – location code 3 – branch 
code (optional).  

13. What is NOSTRO and VOSTRO account?
NOSTRO Account: A NOSTRO account is maintained by an Indian bank in the foreign countries.
VOSTRO Account: a vostro a/c is maintained by a foreign bank in India with their corresponding bank.

14. What is a DeMat Account?
DeMat is nothing but a dematerialized account. If one has to save money or make  cheque payments, then he/she needs to
open a bank account. Similarly, one needs to open a DeMat account if he/she wants to buy or sell stocks. Thus, DeMat account 
is similar to a bank account wherein the actual money is being replaced by shares. In order to open a DeMat account, one 
needs to approach the Depository Participants [DPs]. In India, a DeMat account is a type of banking account that dematerializes 
paperbased physical stock shares. The DeMat account is used to avoid holding of physical shares: the shares are bought as well 
as sold through a stock broker. In this case, the advantage is that one does not need any physical evidence for possessing these 
shares. All the things are taken care of by the DPs. This account is very popular in India. Physically only 500 shares can be traded 
as per the provision given by SEBI. From April 2006, it has become mandatory for any person holding a DeMat account to 
possess a Permanent Account Number (PAN).

15. What is RuPay Card?
RuPay is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of 
banks in India. The RuPay project had been conceived by Indian Banks Association (IBA) and had the approval of Reserve Bank 
of India (RBI). RuPay LogoNational Payments Corporation of India (NPCI) has a plan to provide a full range of card payment 
services including the RuPay ATM, RuPay MicroATM, Debit, Prepaid and Credit Cards which will be accepted in India and
abroad, across various channels like POS, Internet, IVR and mobile etc. The initial focus of NPCI would be to approach those 
banks who have not been issuing any payment card at all more specifically  – Regional Rural Banks (RRBs) and urban cooperative banks. All Public Sector Undertakings (PSU) banks set to join RuPay system by the end of year 2012. RuPay-based 
debit cards can be used by the consumers on the Internet from September, 2012. The government of India had launched 
India‟s first domestic payment card network, RuPay, to compete with Visa Inc and Mastercard Inc.

16. What is foreign exchange reservers?
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by 
central banks and monetary authorities.However, the term in popular usage commonly includes foreign exchange and
gold,SDRs and IMF reserve positions.

17. What is Bancassurance ?
Bancassurance stands for distribution of financial products particularly the insurance policies (both the life and non-life), also 
called referral business, by banks as corporate agents, through their branches located in different parts of the country.

18. What is Money Laundering ?
Money laundering is the processes of concealing the source of obtain money.Money or funds obtained through illegal activities 
are presented as legitimate.

19. What is the difference between Nationalized bank and Private Bank ? 
A Nationalized bank is one that is owned by the government of the country. Since the people decide who the government is, 
they are also referred to as public sector banks. The government is responsible for the money deposited into the accounts of
these banks. Where as a private sector bank is one that is owned by an independent individual or a company that is controlled 
by a few individuals. In short, the bank is owned by someone else and they run the bank. The person owning/running the  bank 
is responsible for the money deposited into the accounts of these banks. 

20. What are non-perfoming assets?
A classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to 
make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Also known as “nonperforming loan”.

21. What is the Functions of RBI?
The Reserve Bank of India is the central bank of India, was established on April 1, 1935 in accordance with the provisions of the 
Reserve Bank of India Act, 1934.The Reserve Bank of India was set up on the recommendations of the Hilton Young 
Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.To regulate 
the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the 
currency and credit system of the country to its advantage.” Banker to the Government: performs merchant banking function 
for the central and the state governments; also acts as their banker.Banker to banks: maintains banking accounts of all 
scheduled banks.

29 What is monetary policy?
A Monetary policy is the process by which the government, central bank, of a country controls 
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the 
economy.

22. What is SEZ?
SEZ means Special Economic Zone is the one of the part of government‟s policies in India. A special Economic zone is a 
geographical region that economic laws which are more liberal than the usual economic laws in the country. The basic motto 
behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of 
the people.

23. What is SIDBI?
The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro, small 
and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly 
owned subsidiary of Industrial Development Bank of India. 

24. What is TREASURY BILLS (TB)? 
Treasury bills (T-Bills) are the short term liabilities of the central government .theoretically government of India issued three 
types of T-bills through auctions, namely 91 days, 182days,and 364 days. There are no treasury bills issued by state
government. Minimum amount of T –Bills is Rs. 2500and in multiple of RS. 2500.T-bills are issued at a discount and are 
redeemed at par from 1st April 1997 treasury bills have been replaced by WAYS AND MEANS ADVANCES .

25. What is COMMERCIAL PAPER (CP)?
commercial paper was introduced by RBI in 1991. It is a short term money market instrument issued in the form of promissory 
note .Corporate; primary dealers and the all India financial institution are eligible to issue CP. The maturity period of each 
commercial paper is 7days to 1year from the date of issue .CP can be issued denominations of Rs. 5lakh or multiples thereof. 
Only a schedule bank can act as an issuing and paying agent (IPA) for issuance of CP. 

26. What is CRM?
Customer Relationship Management (CRM) refers to the ability to understand, anticipate and manage the needs of the 
customer, interaction and relationship resulting in increased profitability through revenue and margin growth and operational 
efficiencies.

27. What is Right to information Act?
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central 
Government and State overnments.The Act applies to all States and Union Territories of India, except the State of Jammu and 
Kashmir – which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into 
force on 13 October 2005.

28. What is Recession?
A true economic recession can only be confirmed if GDP (Gross Domestic Product)growth is negative for a period of two or 
more consecutive quarters.

29. What is dematerialisation ?
Dematerialisation is a process by which the paper certificates of an investor are taken back by the company/registrar and 
actually destroyed and an equivalent number of securities are credited in electronic holdings of that investor. 

30. What is Defivative ?
A derivative is a financial contract that derives its value from another financial product/commodity (say spot rate) called 
underlying (that may be a stock, stock index, a foreign currency, a commodity). Forward contract in foreign exchange
transaction, is a simple form of a derivative. 

31. What is LAF ?
Liquidity Adjustment Facility (LAF) was introduced by RBI during June, 2000 in phases, to ensure smooth transition and keeping 
pace with technological upgradation.

32. What is a Repo Rate?
Repo rate is the rate at which our banks borrow rupees from RBI. Whenever the banks have any shortage of funds they can 
borrow it from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases, 
borrowing from RBI becomes more expensive 

33. What is Reverse Repo Rate?
This is exact opposite of Repo rate. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from 
banks. RBI uses this tool when it feels there is too much money floating in the banking system. Banks are always happy to lend 
money to RBI since their money is in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to 
transfer more funds to RBI due to this attractive interest rates.

34. What is CRR Rate?
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of 
this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the 
excessive money from the banks.

35. What is Bank Rate?
Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances 
that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central 
banks to control the money supply.  

36. What is PLR?
The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent 
and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime rate are 
made by banks at the same time; although, the prime rate
does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments 
of the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of each respective
month. Some banks use the name “Reference Rate” or “Base Lending Rate” to refer to their Prime Lending Rate.

37. what is Bitcoin?
Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized 
peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, 
Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping 
system in existence. 

38. What is SLR Rate?
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt.
approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the
RBI (Reserve Bank of India) in order to control the expansion of bank credit. SLR is determined as the percentage of total
demand and percentage of time liabilities. Time Liabilities are the liabilities a commercial bank liable to pay to the customers
on their anytime demand. SLR is used to control inflation and propel growth. Through SLR rate tuning the money supply in the 
system can be controlled efficiently.

39. What is Deposit Rate?
Interest Rates paid by a depository institution on the cash on deposit.  

40. What is Fiscal Policy?
Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, 
interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine 
public revenue and public expenditure.

41. What is the Banking Ombudsman Scheme?
The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of 
complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35 A 
of the Banking Regulation Act, 1949 by RBI with effect from 1995. 

42. Which are the banks covered under the Banking Ombudsman Scheme,2006?
All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the 
Scheme.

43. What is Inflation?
Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation 
figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are 
fewer Goods and more buyers; this will result in increase in the price of Goods, since there is more demand and less supply of 
the goods.

44. What is Deflation? 
Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative 
(below zero) and stays there for a longer period.

45. What is FII?
FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established 
outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII’s generally buy in large
volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance 
Companies, Banks, etc. 

46. What is FDI?
FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of 
a company in another country in order to gain a measure of management control” (Or) A foreign company having a
stake in a Indian Company.

47. What is IPO?
IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock 
exchanges. 

48. What is GDP?
The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period; 
classically a year.

49. What is GNP?
Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by 
foreigners in domestic market. 

50. What is Revenue deficit?
It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received 
by the government.

51. What is Disinvestment?
The Selling of the government stake in public sector undertakings. 

52. What is Fiscal Deficit?
It is the difference between the government‟s total receipts (excluding borrowings)  and total expenditure.

53. What is National Income?
National Income is the money value of all goods and services produced in a Country during the year.

54. What is bank and its features and types?
A bank is a financial organization where people deposit their money to keep it safe.Banks play an important role in the financial 
system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an 
efficient manner.

55. What are Mutual funds?
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a 
continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund 
manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the 

investors annually. A company that invests its clients’ pooled fund into securities that match its declared financial objectives. 
Asset management companies provide investors with more diversification and investing options than they would have by 
themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies.
These companies earn income by charging service fees to their clients.

56. What is Cheque?
Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the
maker/depositor’s name with that Bank.A bill of exchange drawn on a specified banker and payable on demand.“Written order
directing a bank to pay money”. 

57. What is demand Draft?
A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft 
both are used for Transfer of money. You can 100% trust a DD. It is a banker’s check. A check may be dishonored for lack of 
funds a DD can not. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than 
individuals.

58. What is NABARD?
NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural 
Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of 
Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to 
provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for 
promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural 
crafts.

59. What is SENSEX and NIFTY?
SENSEX is the short term for the words “Sensitive Index” and is associated with the Bombay (Mumbai) Stock Exchange (BSE). 
The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE.
Where as NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL 
SHOW DAILY TRADING MARKS. Sensex and Nifty both are an “index”. An index is basically an indicator it indicates whether most 
of the stocks have gone up or most of the stocks have gone down.

60. What is SEBI?
SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired 
statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament  Chaired by C B Bhave.

61.What are the Open Market Operations (OMOs)?
Ans: OMOs are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government
securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.  For Ex: 
When the RBI feels there is excess liquidity in the market, it resorts to sale of securities thereby sucking out  the rupee liquidity. 
Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the 
market.

62.  What is RRB’S (regional rural banks)?
Ans. Regional Rural Banks are the banking organizations being operated in different states of India. They have been created to 
serve the rural areas with banking and financial services. Share capital in RRB’s: Central government: 50%, Sponsored bank: 
35%, State government: 15%Prathama Bank is the first Regional Rural Bank of India, sponsored by Syndicate Bank established 
on 2nd October, 1975, with its Head Office at Moradabad.RRBs works under supervision of NABARD (National Bank for 
Agriculture and Rural Development).NABARD head office is at MUMBAI.Note: Example of RRB’S: Prathma Gramin Bank,Pragathi
Gramin bank etc. Every Gramin bank is sponsored by its nationalized bank.Example: Pragathi grameena bank is sponsored by
“Canara bank”. 

63. What are Co-operative banks?
Ans. The main purpose of co-operative banks is to co-operate small scale industries, and to provide small loans.Example: Bellary 
dist co-op bank etc.

64. What are Industrial banks?
Ans. The main purpose of industrial banks is to provide big loans to large scale industries. Examples: IDBI bank, Industrial bank 
of India etc.

65. Types of accounts in banks?
Ans. Savings bank account [SB a/c]: The main purpose of SB a/c is to encourage small savings from the public. Interest paid on 
SB a/c is 4 percent. Any individual can open SB a/c. An Indian residing at abroad can open a NRI a/c. NRI represents non resident Indians.
Current account: It’s a running and active account. No interest is paid on current a/c.Current accounts can be opened on firm 
names. Even individuals can also open current a/cs. But on firm names you cannot open SB a/c.Fixed Deposit account: Amount 
is kept for a fixed period. Higher rate of interest will be paid on this a/c.Recurring deposit [RD a/c]: A fixed amount can be 
deposited in monthly installments. Interest rate is same as fixed deposits.

66. What is Unclaimed Deposit Account?
Ans: Those saving or current accounts which have not been operated upon for 10 years or more, as at the end of each calendar 
year.

67. What is Inoperative /Dormant Account?
Ans: A savings as well as current account should be treated as inoperative / dormant if there are no transactions in the account 
for over a period of two years.The following services are not available for inactive / inoperative accounts: 
(a) Request for address change
(b) ATM/Debit card renewal or issue
(c) Request for cheque book
(d) Transactions through ATM/Debit card, Internet Banking and Phone banking
(e) Transactions through issue of Clearing Cheque (applicable only for accounts in “Inoperative” status

68.What is Cheque Truncation?
i. Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting
bank en-route to the drawee bank branch.
ii. In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant 
information like data on the MICR band, date of presentation, presenting bank, etc.
iii. Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the 
scope for clearing-related frauds or loss of instruments in transit, lowers the cost of collection of cheques, and removes 
reconciliation-related and logistics-related problems, thus benefitting the system as a whole.

69.What is Marginal Standing Facility (MSF): 
MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government 
securities.
ii. This came into effect in may 2011. Under the Marginal Standing Facility (MSF), currently banks avail funds from   the RBI on 
overnight basis against their excess statutory liquidity ratio (SLR) holdings.  

iii. Additionally, they can also avail funds on overnight basi s below the stipulated SLR up to 1 per cent of their respective Net 
Demand and Time Liabilities (NDTL) outstanding at the end of second preceding fortnight.Why (MSF) is it required: Banks 
borrow money from RBI at MSF rate when there is an acute cash shortage or acute asset-liability mismatch. This does not carry 
any stigma. Size of MSF: Minimum amount of Rs. One crore and in multiples of Rs. One crore thereafter.

70.What is CBS (Core Banking Solutions):
Core Banking Solutions is the process, where branches of the bank are connected to a central host and the customers of 
connected branches can do banking at any breach with core banking facility.
Advantages for both to the customers & the banks:
Customer: i. Transactions of business from any branch. 
ii. Lower incidence of errors.
iii. Better funds management due to immediate availability of funds.
Banks: i. Better customer service.
ii. Availability of accurate data.
iii. Increased business volume with better asset liability management and risk management.

71.What is Credit card?
Ans. Credit card is a plastic instrument that can be used for the purchase of goods and services. You can buy the services and 
then pay the cash to the bank. Limits will be fixed based on the net worth of the customer.Leading credi t cards: VISA, MASTER.

72. What is NEFT & RTGS?
NEFT (National Electronic Fund Transfer): NEFT enables funds transfer from one bank to another but works a bit differently than 
RTGS. NEFT is slower than RTGS. The transfer is not direct and RBI acts as the service provider to transfer the money from one 
account to another. You can transfer any amount through NEFT, even a rupee.There is no Minimum & Maximum Limit in NEFT. 
Need of NEFT: We can use this facility if we want to transfer funds online in a day or two. NEFT can make life easier for those 
who need to send money to their parents or children living in another city. It cuts the trouble of issuing a cheque or draft and 
posting it. It can also be done through internet banking.
RTGS (Real time gross settlement ): RTGS system is funds transfer systems where transfer of money or securities takes place 
from one bank to another on a “real time” and on “gross” basis. Settlement in “real time” means payment transaction is not 
subjected to any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the 
transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments 
are final and irrevocable.Minimum & Maximum Limit of RTGS: 2 lakh and no upper limit.
In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is
immediate, final and irrevocable (which cannot be changed or reversed).

73.What is a currency chest?
i. To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled
banks to establish Currency Chests. 
ii. These are actually storehouses where banknotes and rupee coins are stocked on  behalf of the Reserve Bank. As on June 30, 
2006, there were 4428 Currency Chests and 4102 Small Coin Depots. 
iii. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of
operation. 

74. What is Online or Internet Banking?
Ans: The accessing of bank information, accounts and transactions with the help of a computer through the financial 
institution’s website on the Internet is called online banking. It is also called Internet banking or e -banking 

75. What are soiled, mutilated and imperfect banknotes? 
(i) “soiled note:” means a note which, has become dirty due to usage and also includes a two piece note pasted together 
wherein both the pieces presented belong to the same note, and form the entire note.
(ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces.
(iii) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or 
indecipherable but does not include a mutilated banknote.

76. What are the various types of financial markets?
The financial markets can broadly be divided into money and capital market.A. Money Market: The money market provides 
investment avenues of short term tenor. Money market transactions  are generally used for funding the transactions in other 
markets including Government securities market and meeting short term liquidity mismatches.By definition, money market is 
for a maximum tenor of up to one year. Within the one year, depending upon the tenors, money market is classified into:
i. Overnight market or Call money – The tenor of transactions is one working day.
ii. Notice money market – The tenor of the transactions is from 2 days to 14 days.
Iii. Term money market – The tenor of the transactions is from 15 days to one year.
B. Capital Market: Capital market is a market for longterm debt and equity shares. In this market, the capital funds comprising 
of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as 
organized markets like stock exchanges.

77. Commercial Paper (CP)?
Ans: Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory 
note.Corporate, primary dealers (PDs) and the all-India  financial institutions (FIs) that have been permitted to 
raise short-term resources under the umbrella limit fixed by the Reserve Bank of India are eligible to issue CP.
Period: CP can be issued for maturities between a minimum of 7 days and a maximum up to one year from the date of issue.
33. Certificate of Deposit (CD)
Ans: Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialized form or as a Usance 
Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period.
Period: Banks can issue CDs for maturities from 7 days to one a year whereas eligible FIs can issue for maturities 1 year to  3 
years.

78. What is EMV based card payments?
Ans: EMV stands for Europay, MasterCard and Visa, a global standard for inter-operation of integrated circuit cards (IC cards or 
“chip cards”) and IC card capable point of sale (POS) terminals and automated teller machines (ATMs), for authenticating cred it 
and debit card transactions.It is a joint effort initially conceived between Europay, MasterCard and Visa to ensure the security 
and lobal interoperability of chip-based payment cards

79. What is Bhartiya Mahila Bank  
(BMB) is an Indian financial services banking company based in New Delhi, India.India’s Prime Minister Manmohan Singh 
inaugurated the system on 19 November 2013 on the occasion of the 94th birth anniversary of former Indian Prime Minister 
Indira Gandhi.Headquarter – New Delhi. Bank will get an initial capital of Rs 1,000 crore.
Usha Ananthasubramanian – The First CEO/Chairperson of Bhartiya Mahila Bank

80. Financial inclusion: 
Financial inclusion means providing sound and affordable financial services to the “unbanked”, those who do not have access to 
the formal financial system.Financial inclusion is more than an economic issue  – it is a legal and regulatory reform process.

81. What is Bancassurance:
The sale of insurance and other similar products through a bank. This can help the consumer in some situations; for example, 
when a bank requires life insurance for those receiving a mortgage loan the consumer could purchase the insurance directly 
from the bank.

82. What is IFSC (Indian Financial System Code)?
i. Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT 
system.
ii. This is an 11 digit code with the first 4 alpha characters representing the bank, The 5th character is 0 (zero).and 
the last 6 characters representing the bank branch.
iii. IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the 
messages appropriately to the concerned banks / branches.

83. What is MICR : 
stands for Magnetic Ink Character Recognition. MICR Code is a numeric code which uniquely identifies a bank branch 
participating in the ECS Credit scheme. MICR code consists of 9 digits e.g 400229128
i. First 3 digits represent the city (400)
ii. Next 3 digits represent the bank (229)
iii. Last 3 digits represent the branch (128)
The MICR Code allotted to a bank branch is printed on the MICR band of cheque leaves issued by bank branches.

84. What is Balance of Trade:
The value of a country’s exports minus the value of its imports. Unless specified as the balance of merchandise trade, it 
normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.
Balanced Trade: When a balance of trade equal to zero. (exports – imports = 0)

85. What is Balance of Payments:
A list of all of a country’s international transactions for a given time period, usually one year. Payments into the country 
(receipts) are entered as positive numbers, called credits; Payments out of the country (payments) are entered as negati ve 
numbers called debits. A single numbers summarize all of a country’s international transactions: the balance of payments 
surplus.

86. What is Balance Sheet: 
A financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These 
three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by 
the shareholders.The balance sheet must allow the following formula: 
Assets = Liabilities + Shareholders’ Equity

87.What is Direct & Indirect Tax:
A direct tax is that which is paid directly by someone to taxing authority. Income tax and property tax are an examples of direct 
tax. They are not shifted to somebody else.Indirect Tax: This type of tax is not paid by someone to the authorities and it is 
actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. 
Excise Tax, Sales Tax, Vat, Entertainment tax are indirect taxes.

88.SDR (Special Drawing Rights):
SDR are new form of International reserve assets, created by the International Monetary Fund in 1967. The value of SDR is 
based on the portfolio of widely used countries and they are maintained as accounting entries and not as hard currency or 
physical assets like Gold. 

89. What is CRAR(Capital to Risk Weighted Assets Ratio):
Capital to risk weighted assets ratio is arrived at by dividing the capital of the bank with aggregated risk weighted assets  for 
credit risk, market risk and operational risk. 

90. What is Government Bonds?
Ans: A government bond, which is also known as a government security, is basically any security that is held with the 
government and has the highest possible rate of interest. 

91. What is FDI & FII?
FDI: Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or comp any 
of another country, either by buying a company in the target country or by expanding operations of an existing business in that 
country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of 
another country such as stocks and bonds.
FII: Foreign institutional investors (FIIs) are those institutional investors which invest in the assets belonging to a different 
country other than that where these organizations are based.Note: Foreign institutional investors play a very important role in 
any economy. These are the big companies such as investment banks, mutual funds etc, who invest considerable amount of 
money in the Indian markets. With the buying of securities by these big players, markets trend to move upward and vice-versa. 
They exert strong influence on the total inflows coming into the economy.
Difference b/w FDI & FII: 1. FDI or Foreign Direct Investment is an investment that a parent company makes in a foreign 
country. On the  contrary, FII or Foreign Institutional Investor is an investment made by an investor in the markets of a foreign 
nation.
2. In FII, the companies only need to get registered in the stock exchange to make investments. But FDI is quite different from it 
as they invest in a foreign nation.
3. FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the whole 
economy.
4. The Foreign Institutional Investor is also known as hot money as the investors have the liberty to sell it and take it  back. But 
in Foreign Direct Investment, this is not possible. In simple words, FII can ente r the stock market easily and also withdraw from 
it easily. But FDI cannot enter and exit that easily. This difference is what makes nations to choose FDI’s more than then FI Is.
5. While the FDI flows into the primary market, the FII flows into secondary market. While FIIs are short-term investments, the 
FDI’s are long term.

92. What is Basel Norms ? 
Bureau of International Settlement (BIS) headquarters at Basel, Switzerland has appointed a committee to supervise and 
to set some standards  for International Banks. This committee is known as Basel Committee on Bank Supervision BCBS). 
The rules and regulations for Banks issued by this committee were called Basel Norms / Accords. There are three Basel 
Norms, namely Basel I, II and III.Basel I Accord : This was issued in 1988. This accord focused on the capital adequacy of
financial institutions. Banks that operate internationally are required to have a risk weight of 8% or less. Indi a adopted 
Basel I Norms in the year 1999.
Basel II Acord : This is the second of the Basel Accords, published in the year 2004. This consists of the
recommendations on Banking Laws and Regulations issued by BCBS.
Basel III Accord : Basel III guidelines were released in the year 2010. This is to enhance the banking regulatory
framework. It builds on the Basel I and Basel II documents and seeks to improve the banking sector’s ability to deal with 
financial and economic stress, improve risk management and  strengthen the banks’ transparency
Some additional Banking Questions1. Why do you want to join banking sector?
Banking is one of the fastest growing sectors in India with more stable and high growth and more over providing wide range of 
career opportunities for graduates. So I want to take an opportunity to join in a bank.
2. What is the difference between Cheque and Demand Draft?
Cheque: Cheuqe is a negotiable instrument instructing a bank to pay a specific amount from a specific account held in the
maker/depositor name with that Bank.
Demand Draft: A demand draft is an instrument used for effecting transfer of money. It is a negotiable instrument.
3. What is a Non-Banking Financial Company (NBFC)? 

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of 
loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other 
marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any 
institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than 
securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is 
a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in
installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary nonbanking
company)
4. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?
NBFCs lend and make investments and hence their activities are akin to that of banks; however there are a few differences as 
given below:
NBFC cannot accept demand deposits; NBFCs do not form part of the payment and settlement system and cannot issue 
cheques drawn on itself;deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to 
depositors of NBFCs, unlike in case of banks.
5 . What is Private Banking?
Banking services offered to high net-worth individuals. Private banking institution assists the high net-worth individual in 
investing his/her money in exchange for commissions and fees. The term “private” refers to the customer service being
rendered on a more personal basis. 
6. What is BSBDA?
Under the guidelines issued on August 10, 2012 by RBI: Any individual, including poor or those from weaker section of the 
society, can open zero balance account in any bank. BSBDA guidelines are applicable to “all scheduled commercial banks in 
India, including foreign banks having branches in India”. All the accounts opened earlier as ‘no-frills’ account should be renamed 
as BSBDA. Banks are required to convert the existing ‘no-frills’ accounts‟ into ‘Basic Savings Bank Deposit Accounts’. The ‘Basic 
Savings Bank Deposit Account’ should be considered as a normal banking service available to all customers, through branches .
The aim of introducing ‘Basic Savings Bank Deposit Account’ is very much part of the efforts of RBI for furthering Financial 
Inclusion objectives.
7. What is BPS (Basis Points)?
BPS (Basis point) : – BPS is an acronym for basic points is used to indicate changes in rate of interest and other financial 
instrument. BASIC POINT IS EQUAL TO 0.01% So when we say that repo rate has been increased by 25 bps, it means that the 
rate has been increased by 0.25% 
8. What is KYC?
The Reserve Bank of India (RBI) has advised banks to follow „KYC guidelines‟, wherein certain personal information of the 
account-opening prospect or the customer is obtained. The objective of doing so is to enable the Bank to have positive 
identification of its customers. This is also in the  interest of customers to safeguard their hard earned money. The KYC 
guidelines of RBI mandate banks to collect three proofs from their customers. They arePhotograph
Proof of identity
Proof of address
9. What is Sub-prime crisis?
The current Subprime crisis is due to sub-prime lending. These are the loans given to the people having low credit rating.
10. What is Base Rate? 

It is the minimum rate of interest that a bank is allowed to charge from its customers. Unless mandated by the government, RBI 
rule stipulates that no bank can offer loans at a rate lower than BR to any of its customers. It is effective from, July 1, 2010. 
However, all existing loans, including home loans and car loans, will continue to be at the current rate. Only the new loans
taken on or after July 1 and old loans being renewed after this date will be linked to BR.
11. What is SWIFT?
SWIFT :- Society for worldwide Interbank financial tele- communication.  India was 74th Nation to join SWIFT Network.  SWIFT 
Code is a standard format of bank Identifier code. This code is used particularly in International transfer of money between 
banks.  A majority of FOREX related message are sent to correspondent banks abroad through SWIFT.  SWIFT Code consist 8 or 
11 character when code is 8 digit, It is referred to primary office 4 – bank code 2 – country code 2 – location code 3 – branch 
code (optional).  
13. What is NOSTRO and VOSTRO account?
NOSTRO Account: A NOSTRO account is maintained by an Indian bank in the foreign countries.
VOSTRO Account: a vostro a/c is maintained by a foreign bank in India with their corresponding bank.
14. What is a DeMat Account?
DeMat is nothing but a dematerialized account. If one has to save money or make  cheque payments, then he/she needs to
open a bank account. Similarly, one needs to open a DeMat account if he/she wants to buy or sell stocks. Thus, DeMat account 
is similar to a bank account wherein the actual money is being replaced by shares. In order to open a DeMat account, one 
needs to approach the Depository Participants [DPs]. In India, a DeMat account is a type of banking account that dematerializes 
paperbased physical stock shares. The DeMat account is used to avoid holding of physical shares: the shares are bought as well 
as sold through a stock broker. In this case, the advantage is that one does not need any physical evidence for possessing these 
shares. All the things are taken care of by the DPs. This account is very popular in India. Physically only 500 shares can be traded 
as per the provision given by SEBI. From April 2006, it has become mandatory for any person holding a DeMat account to 
possess a Permanent Account Number (PAN).
15. What is RuPay Card?
RuPay is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of 
banks in India. The RuPay project had been conceived by Indian Banks Association (IBA) and had the approval of Reserve Bank 
of India (RBI). RuPay LogoNational Payments Corporation of India (NPCI) has a plan to provide a full range of card payment 
services including the RuPay ATM, RuPay MicroATM, Debit, Prepaid and Credit Cards which will be accepted in India and
abroad, across various channels like POS, Internet, IVR and mobile etc. The initial focus of NPCI would be to approach those 
banks who have not been issuing any payment card at all more specifically  – Regional Rural Banks (RRBs) and urban cooperative banks. All Public Sector Undertakings (PSU) banks set to join RuPay system by the end of year 2012. RuPay-based 
debit cards can be used by the consumers on the Internet from September, 2012. The government of India had launched 
India‟s first domestic payment card network, RuPay, to compete with Visa Inc and Mastercard Inc.
16. What is foreign exchange reservers?
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by 
central banks and monetary authorities.However, the term in popular usage commonly includes foreign exchange and
gold,SDRs and IMF reserve positions.
17. What is Bancassurance ?
Bancassurance stands for distribution of financial products particularly the insurance policies (both the life and non-life), also 
called referral business, by banks as corporate agents, through their branches located in different parts of the country.
18. What is Money Laundering ?
Money laundering is the processes of concealing the source of obtain money.Money or funds obtained through illegal activities 
are presented as legitimate.
19. What is the difference between Nationalized bank and Private Bank ? 

A Nationalized bank is one that is owned by the government of the country. Since the people decide who the government is, 
they are also referred to as public sector banks. The government is responsible for the money deposited into the accounts of
these banks. Where as a private sector bank is one that is owned by an independent individual or a company that is controlled 
by a few individuals. In short, the bank is owned by someone else and they run the bank. The person owning/running the  bank 
is responsible for the money deposited into the accounts of these banks. 
20. What are non-perfoming assets?
A classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to 
make interest or principal payments for 90 days the loan is considered to be a non-performing asset. Also known as “nonperforming loan”.
21. What is the Functions of RBI?
The Reserve Bank of India is the central bank of India, was established on April 1, 1935 in accordance with the provisions of the 
Reserve Bank of India Act, 1934.The Reserve Bank of India was set up on the recommendations of the Hilton Young 
Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.To regulate 
the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the 
currency and credit system of the country to its advantage.” Banker to the Government: performs merchant banking function 
for the central and the state governments; also acts as their banker.Banker to banks: maintains banking accounts of all 
scheduled banks.
29 What is monetary policy?
A Monetary policy is the process by which the government, central bank, of a country controls 
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the 
economy.
22. What is SEZ?
SEZ means Special Economic Zone is the one of the part of government‟s policies in India. A special Economic zone is a 
geographical region that economic laws which are more liberal than the usual economic laws in the country. The basic motto 
behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of 
the people.
23. What is SIDBI?
The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro, small 
and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly 
owned subsidiary of Industrial Development Bank of India. 
24. What is TREASURY BILLS (TB)? 
Treasury bills (T-Bills) are the short term liabilities of the central government .theoretically government of India issued three 
types of T-bills through auctions, namely 91 days, 182days,and 364 days. There are no treasury bills issued by state
government. Minimum amount of T –Bills is Rs. 2500and in multiple of RS. 2500.T-bills are issued at a discount and are 
redeemed at par from 1st April 1997 treasury bills have been replaced by WAYS AND MEANS ADVANCES .
25. What is COMMERCIAL PAPER (CP)?
commercial paper was introduced by RBI in 1991. It is a short term money market instrument issued in the form of promissory 
note .Corporate; primary dealers and the all India financial institution are eligible to issue CP. The maturity period of each 
commercial paper is 7days to 1year from the date of issue .CP can be issued denominations of Rs. 5lakh or multiples thereof. 
Only a schedule bank can act as an issuing and paying agent (IPA) for issuance of CP. 

26. What is CRM?
Customer Relationship Management (CRM) refers to the ability to understand, anticipate and manage the needs of the 
customer, interaction and relationship resulting in increased profitability through revenue and margin growth and operational 
efficiencies.
27. What is Right to information Act?
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central 
Government and State overnments.The Act applies to all States and Union Territories of India, except the State of Jammu and 
Kashmir – which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into 
force on 13 October 2005.
28. What is Recession?
A true economic recession can only be confirmed if GDP (Gross Domestic Product)growth is negative for a period of two or 
more consecutive quarters.
29. What is dematerialisation ?
Dematerialisation is a process by which the paper certificates of an investor are taken back by the company/registrar and 
actually destroyed and an equivalent number of securities are credited in electronic holdings of that investor. 
30. What is Defivative ?
A derivative is a financial contract that derives its value from another financial product/commodity (say spot rate) called 
underlying (that may be a stock, stock index, a foreign currency, a commodity). Forward contract in foreign exchange
transaction, is a simple form of a derivative. 
31. What is LAF ?
Liquidity Adjustment Facility (LAF) was introduced by RBI during June, 2000 in phases, to ensure smooth transition and keeping 
pace with technological upgradation.
32. What is a Repo Rate?
Repo rate is the rate at which our banks borrow rupees from RBI. Whenever the banks have any shortage of funds they can 
borrow it from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases, 
borrowing from RBI becomes more expensive 
33. What is Reverse Repo Rate?
This is exact opposite of Repo rate. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from 
banks. RBI uses this tool when it feels there is too much money floating in the banking system. Banks are always happy to lend 
money to RBI since their money is in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to 
transfer more funds to RBI due to this attractive interest rates.
34. What is CRR Rate?
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of 
this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the 
excessive money from the banks.
35. What is Bank Rate?
Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances 
that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central 
banks to control the money supply.  

36. What is PLR?
The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent 
and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime rate are 
made by banks at the same time; although, the prime rate
does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments 
of the Fed Funds Rate. The rates reported below are based upon the prime rates on the first day of each respective
month. Some banks use the name “Reference Rate” or “Base Lending Rate” to refer to their Prime Lending Rate.
37. what is Bitcoin?
Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized 
peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, 
Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping 
system in existence. 
38. What is SLR Rate?
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt.
approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the
RBI (Reserve Bank of India) in order to control the expansion of bank credit. SLR is determined as the percentage of total
demand and percentage of time liabilities. Time Liabilities are the liabilities a commercial bank liable to pay to the customers
on their anytime demand. SLR is used to control inflation and propel growth. Through SLR rate tuning the money supply in the 
system can be controlled efficiently.
39. What is Deposit Rate?
Interest Rates paid by a depository institution on the cash on deposit.  
40. What is Fiscal Policy?
Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, 
interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine 
public revenue and public expenditure.
41. What is the Banking Ombudsman Scheme?
The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of 
complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35 A 
of the Banking Regulation Act, 1949 by RBI with effect from 1995. 
42. Which are the banks covered under the Banking Ombudsman Scheme,2006?
All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the 
Scheme.
43. What is Inflation?
Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation 
figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are 
fewer Goods and more buyers; this will result in increase in the price of Goods, since there is more demand and less supply of 
the goods.
44. What is Deflation? 

Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative 
(below zero) and stays there for a longer period.
45. What is FII?
FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established 
outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII’s generally buy in large
volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance 
Companies, Banks, etc. 
46. What is FDI?
FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of 
a company in another country in order to gain a measure of management control” (Or) A foreign company having a
stake in a Indian Company.
47. What is IPO?
IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock 
exchanges. 
48. What is GDP?
The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period; 
classically a year.
49. What is GNP?
Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by 
foreigners in domestic market. 
50. What is Revenue deficit?
It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received 
by the government.
51. What is Disinvestment?
The Selling of the government stake in public sector undertakings. 
52. What is Fiscal Deficit?
It is the difference between the government‟s total receipts (excluding borrowings)  and total expenditure.
53. What is National Income?
National Income is the money value of all goods and services produced in a Country during the year.
54. What is bank and its features and types?
A bank is a financial organization where people deposit their money to keep it safe.Banks play an important role in the financial 
system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an 
efficient manner.
55. What are Mutual funds?
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a 
continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund 
manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the 

investors annually. A company that invests its clients’ pooled fund into securities that match its declared financial objectives. 
Asset management companies provide investors with more diversification and investing options than they would have by 
themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies.
These companies earn income by charging service fees to their clients.
56. What is Cheque?
Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the
maker/depositor’s name with that Bank.A bill of exchange drawn on a specified banker and payable on demand.“Written order
directing a bank to pay money”. 
57. What is demand Draft?
A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft 
both are used for Transfer of money. You can 100% trust a DD. It is a banker’s check. A check may be dishonored for lack of 
funds a DD can not. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than 
individuals.
58. What is NABARD?
NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural 
Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of 
Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to 
provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for 
promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural 
crafts.
59. What is SENSEX and NIFTY?
SENSEX is the short term for the words “Sensitive Index” and is associated with the Bombay (Mumbai) Stock Exchange (BSE). 
The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE.
Where as NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL 
SHOW DAILY TRADING MARKS. Sensex and Nifty both are an “index”. An index is basically an indicator it indicates whether most 
of the stocks have gone up or most of the stocks have gone down.
60. What is SEBI?
SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired 
statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament  Chaired by C B Bhave.
61.What are the Open Market Operations (OMOs)?
Ans: OMOs are the market operations conducted by the Reserve Bank of India by way of sale/ purchase of Government
securities to/ from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.  For Ex: 
When the RBI feels there is excess liquidity in the market, it resorts to sale of securities thereby sucking out  the rupee liquidity. 
Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the 
market.
62.  What is RRB’S (regional rural banks)?
Ans. Regional Rural Banks are the banking organizations being operated in different states of India. They have been created to 
serve the rural areas with banking and financial services. Share capital in RRB’s: Central government: 50%, Sponsored bank: 
35%, State government: 15%Prathama Bank is the first Regional Rural Bank of India, sponsored by Syndicate Bank established 
on 2nd October, 1975, with its Head Office at Moradabad.RRBs works under supervision of NABARD (National Bank for 
Agriculture and Rural Development).NABARD head office is at MUMBAI.Note: Example of RRB’S: Prathma Gramin Bank,Pragathi
Gramin bank etc. Every Gramin bank is sponsored by its nationalized bank.Example: Pragathi grameena bank is sponsored by
“Canara bank”. 

63. What are Co-operative banks?
Ans. The main purpose of co-operative banks is to co-operate small scale industries, and to provide small loans.Example: Bellary 
dist co-op bank etc.
64. What are Industrial banks?
Ans. The main purpose of industrial banks is to provide big loans to large scale industries. Examples: IDBI bank, Industrial bank 
of India etc.
65. Types of accounts in banks?
Ans. Savings bank account [SB a/c]: The main purpose of SB a/c is to encourage small savings from the public. Interest paid on 
SB a/c is 4 percent. Any individual can open SB a/c. An Indian residing at abroad can open a NRI a/c. NRI represents non resident Indians.
Current account: It’s a running and active account. No interest is paid on current a/c.Current accounts can be opened on firm 
names. Even individuals can also open current a/cs. But on firm names you cannot open SB a/c.Fixed Deposit account: Amount 
is kept for a fixed period. Higher rate of interest will be paid on this a/c.Recurring deposit [RD a/c]: A fixed amount can be 
deposited in monthly installments. Interest rate is same as fixed deposits.
66. What is Unclaimed Deposit Account?
Ans: Those saving or current accounts which have not been operated upon for 10 years or more, as at the end of each calendar 
year.
67. What is Inoperative /Dormant Account?
Ans: A savings as well as current account should be treated as inoperative / dormant if there are no transactions in the account 
for over a period of two years.The following services are not available for inactive / inoperative accounts: 
(a) Request for address change
(b) ATM/Debit card renewal or issue
(c) Request for cheque book
(d) Transactions through ATM/Debit card, Internet Banking and Phone banking
(e) Transactions through issue of Clearing Cheque (applicable only for accounts in “Inoperative” status
68.What is Cheque Truncation?
i. Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting
bank en-route to the drawee bank branch.
ii. In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant 
information like data on the MICR band, date of presentation, presenting bank, etc.
iii. Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the 
scope for clearing-related frauds or loss of instruments in transit, lowers the cost of collection of cheques, and removes 
reconciliation-related and logistics-related problems, thus benefitting the system as a whole.
69.What is Marginal Standing Facility (MSF): 
MSF rate is the rate at which banks borrow funds overnight from the Reserve Bank of India (RBI) against approved government 
securities.
ii. This came into effect in may 2011. Under the Marginal Standing Facility (MSF), currently banks avail funds from   the RBI on 
overnight basis against their excess statutory liquidity ratio (SLR) holdings.  

iii. Additionally, they can also avail funds on overnight basi s below the stipulated SLR up to 1 per cent of their respective Net 
Demand and Time Liabilities (NDTL) outstanding at the end of second preceding fortnight.Why (MSF) is it required: Banks 
borrow money from RBI at MSF rate when there is an acute cash shortage or acute asset-liability mismatch. This does not carry 
any stigma. Size of MSF: Minimum amount of Rs. One crore and in multiples of Rs. One crore thereafter.
70.What is CBS (Core Banking Solutions):
Core Banking Solutions is the process, where branches of the bank are connected to a central host and the customers of 
connected branches can do banking at any breach with core banking facility.
Advantages for both to the customers & the banks:
Customer: i. Transactions of business from any branch. 
ii. Lower incidence of errors.
iii. Better funds management due to immediate availability of funds.
Banks: i. Better customer service.
ii. Availability of accurate data.
iii. Increased business volume with better asset liability management and risk management.
71.What is Credit card?
Ans. Credit card is a plastic instrument that can be used for the purchase of goods and services. You can buy the services and 
then pay the cash to the bank. Limits will be fixed based on the net worth of the customer.Leading credi t cards: VISA, MASTER.
72. What is NEFT & RTGS?
NEFT (National Electronic Fund Transfer): NEFT enables funds transfer from one bank to another but works a bit differently than 
RTGS. NEFT is slower than RTGS. The transfer is not direct and RBI acts as the service provider to transfer the money from one 
account to another. You can transfer any amount through NEFT, even a rupee.There is no Minimum & Maximum Limit in NEFT. 
Need of NEFT: We can use this facility if we want to transfer funds online in a day or two. NEFT can make life easier for those 
who need to send money to their parents or children living in another city. It cuts the trouble of issuing a cheque or draft and 
posting it. It can also be done through internet banking.
RTGS (Real time gross settlement ): RTGS system is funds transfer systems where transfer of money or securities takes place 
from one bank to another on a “real time” and on “gross” basis. Settlement in “real time” means payment transaction is not 
subjected to any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the 
transaction is settled on one to one basis without bunching or netting with any other transaction. Once processed, payments 
are final and irrevocable.Minimum & Maximum Limit of RTGS: 2 lakh and no upper limit.
In an RTGS system, transactions are settled across accounts held at a Central Bank on a continuous gross basis. Settlement is
immediate, final and irrevocable (which cannot be changed or reversed).
73.What is a currency chest?
i. To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled
banks to establish Currency Chests. 
ii. These are actually storehouses where banknotes and rupee coins are stocked on  behalf of the Reserve Bank. As on June 30, 
2006, there were 4428 Currency Chests and 4102 Small Coin Depots. 
iii. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of
operation. 

74. What is Online or Internet Banking?
Ans: The accessing of bank information, accounts and transactions with the help of a computer through the financial 
institution’s website on the Internet is called online banking. It is also called Internet banking or e -banking 
75. What are soiled, mutilated and imperfect banknotes? 
(i) “soiled note:” means a note which, has become dirty due to usage and also includes a two piece note pasted together 
wherein both the pieces presented belong to the same note, and form the entire note.
(ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces.
(iii) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or 
indecipherable but does not include a mutilated banknote.
76. What are the various types of financial markets?
The financial markets can broadly be divided into money and capital market.A. Money Market: The money market provides 
investment avenues of short term tenor. Money market transactions  are generally used for funding the transactions in other 
markets including Government securities market and meeting short term liquidity mismatches.By definition, money market is 
for a maximum tenor of up to one year. Within the one year, depending upon the tenors, money market is classified into:
i. Overnight market or Call money – The tenor of transactions is one working day.
ii. Notice money market – The tenor of the transactions is from 2 days to 14 days.
Iii. Term money market – The tenor of the transactions is from 15 days to one year.
B. Capital Market: Capital market is a market for longterm debt and equity shares. In this market, the capital funds comprising 
of both equity and debt are issued and traded. This also includes private placement sources of debt and equity as well as 
organized markets like stock exchanges.
77. Commercial Paper (CP)?
Ans: Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory 
note.Corporate, primary dealers (PDs) and the all-India  financial institutions (FIs) that have been permitted to 
raise short-term resources under the umbrella limit fixed by the Reserve Bank of India are eligible to issue CP.
Period: CP can be issued for maturities between a minimum of 7 days and a maximum up to one year from the date of issue.
33. Certificate of Deposit (CD)
Ans: Certificate of Deposit (CD) is a negotiable money market instrument and issued in dematerialized form or as a Usance 
Promissory Note, for funds deposited at a bank or other eligible financial institution for a specified time period.
Period: Banks can issue CDs for maturities from 7 days to one a year whereas eligible FIs can issue for maturities 1 year to  3 
years.
78. What is EMV based card payments?
Ans: EMV stands for Europay, MasterCard and Visa, a global standard for inter-operation of integrated circuit cards (IC cards or 
“chip cards”) and IC card capable point of sale (POS) terminals and automated teller machines (ATMs), for authenticating cred it 
and debit card transactions.It is a joint effort initially conceived between Europay, MasterCard and Visa to ensure the security 
and lobal interoperability of chip-based payment cards
79. What is Bhartiya Mahila Bank  

(BMB) is an Indian financial services banking company based in New Delhi, India.India’s Prime Minister Manmohan Singh 
inaugurated the system on 19 November 2013 on the occasion of the 94th birth anniversary of former Indian Prime Minister 
Indira Gandhi.Headquarter – New Delhi. Bank will get an initial capital of Rs 1,000 crore.
Usha Ananthasubramanian – The First CEO/Chairperson of Bhartiya Mahila Bank
80. Financial inclusion: 
Financial inclusion means providing sound and affordable financial services to the “unbanked”, those who do not have access to 
the formal financial system.Financial inclusion is more than an economic issue  – it is a legal and regulatory reform process.
81. What is Bancassurance:
The sale of insurance and other similar products through a bank. This can help the consumer in some situations; for example, 
when a bank requires life insurance for those receiving a mortgage loan the consumer could purchase the insurance directly 
from the bank.
82. What is IFSC (Indian Financial System Code)?
i. Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT 
system.
ii. This is an 11 digit code with the first 4 alpha characters representing the bank, The 5th character is 0 (zero).and 
the last 6 characters representing the bank branch.
iii. IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the 
messages appropriately to the concerned banks / branches.
83. What is MICR : 
stands for Magnetic Ink Character Recognition. MICR Code is a numeric code which uniquely identifies a bank branch 
participating in the ECS Credit scheme. MICR code consists of 9 digits e.g 400229128
i. First 3 digits represent the city (400)
ii. Next 3 digits represent the bank (229)
iii. Last 3 digits represent the branch (128)
The MICR Code allotted to a bank branch is printed on the MICR band of cheque leaves issued by bank branches.
84. What is Balance of Trade:
The value of a country’s exports minus the value of its imports. Unless specified as the balance of merchandise trade, it 
normally incorporates trade in services, including earnings (interest, dividends, etc.) on financial assets.
Balanced Trade: When a balance of trade equal to zero. (exports – imports = 0)
85. What is Balance of Payments:
A list of all of a country’s international transactions for a given time period, usually one year. Payments into the country 
(receipts) are entered as positive numbers, called credits; Payments out of the country (payments) are entered as negati ve 
numbers called debits. A single numbers summarize all of a country’s international transactions: the balance of payments 
surplus.
86. What is Balance Sheet: 

A financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These 
three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by 
the shareholders.The balance sheet must allow the following formula: 
Assets = Liabilities + Shareholders’ Equity
87.What is Direct & Indirect Tax:
A direct tax is that which is paid directly by someone to taxing authority. Income tax and property tax are an examples of direct 
tax. They are not shifted to somebody else.Indirect Tax: This type of tax is not paid by someone to the authorities and it is 
actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. 
Excise Tax, Sales Tax, Vat, Entertainment tax are indirect taxes.
88.SDR (Special Drawing Rights):
SDR are new form of International reserve assets, created by the International Monetary Fund in 1967. The value of SDR is 
based on the portfolio of widely used countries and they are maintained as accounting entries and not as hard currency or 
physical assets like Gold. 
89. What is CRAR(Capital to Risk Weighted Assets Ratio):
Capital to risk weighted assets ratio is arrived at by dividing the capital of the bank with aggregated risk weighted assets  for 
credit risk, market risk and operational risk. 
90. What is Government Bonds?
Ans: A government bond, which is also known as a government security, is basically any security that is held with the 
government and has the highest possible rate of interest. 
91. What is FDI & FII?
FDI: Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or comp any 
of another country, either by buying a company in the target country or by expanding operations of an existing business in that 
country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of 
another country such as stocks and bonds.
FII: Foreign institutional investors (FIIs) are those institutional investors which invest in the assets belonging to a different 
country other than that where these organizations are based.Note: Foreign institutional investors play a very important role in 
any economy. These are the big companies such as investment banks, mutual funds etc, who invest considerable amount of 
money in the Indian markets. With the buying of securities by these big players, markets trend to move upward and vice-versa. 
They exert strong influence on the total inflows coming into the economy.
Difference b/w FDI & FII: 1. FDI or Foreign Direct Investment is an investment that a parent company makes in a foreign 
country. On the  contrary, FII or Foreign Institutional Investor is an investment made by an investor in the markets of a foreign 
nation.
2. In FII, the companies only need to get registered in the stock exchange to make investments. But FDI is quite different from it 
as they invest in a foreign nation.
3. FDI is more preferred to the FII as they are considered to be the most beneficial kind of foreign investment for the whole 
economy.
4. The Foreign Institutional Investor is also known as hot money as the investors have the liberty to sell it and take it  back. But 
in Foreign Direct Investment, this is not possible. In simple words, FII can ente r the stock market easily and also withdraw from 
it easily. But FDI cannot enter and exit that easily. This difference is what makes nations to choose FDI’s more than then FI Is.
5. While the FDI flows into the primary market, the FII flows into secondary market. While FIIs are short-term investments, the 
FDI’s are long term.
92. What is Basel Norms ? 

Bureau of International Settlement (BIS) headquarters at Basel, Switzerland has appointed a committee to supervise and 
to set some standards  for International Banks. This committee is known as Basel Committee on Bank Supervision BCBS). 
The rules and regulations for Banks issued by this committee were called Basel Norms / Accords. There are three Basel 
Norms, namely Basel I, II and III.Basel I Accord : This was issued in 1988. This accord focused on the capital adequacy of
financial institutions. Banks that operate internationally are required to have a risk weight of 8% or less. Indi a adopted 
Basel I Norms in the year 1999.
Basel II Acord : This is the second of the Basel Accords, published in the year 2004. This consists of the
recommendations on Banking Laws and Regulations issued by BCBS.
Basel III Accord : Basel III guidelines were released in the year 2010. This is to enhance the banking regulatory
framework. It builds on the Basel I and Basel II documents and seeks to improve the banking sector’s ability to deal with 
financial and economic stress, improve risk management and  strengthen the banks’ transparency

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