CAIIB BRBL Module A UNIT 4 MCQ – Returns, Inspection, Winding up, Mergers & Acquisitions

Question 1: Under banking regulations, how often are banking companies generally required to prepare their balance sheet and profit and loss account?

A. Every quarter
B. Every six months
C. Annually
D. Only when requested by the Reserve Bank

Show Explanation

Correct Answer: C. Annually. Banking regulations mandate the preparation of the primary financial statements, namely the balance sheet and profit and loss account, on an annual basis.

Question 2: Who is deemed qualified to conduct the statutory audit of a banking company’s accounts?

A. An internal auditor appointed by the bank’s management.
B. Any certified public accountant from any country.
C. A person duly qualified under the prevailing law to be an auditor of companies.
D. An officer deputed by the Reserve Bank of India.

Show Explanation

Correct Answer: C. A person duly qualified under the prevailing law to be an auditor of companies. The law requires that the auditor of a banking company must possess the same qualifications necessary to audit any registered company.

Question 3: After the annual accounts of a banking company are audited, where must copies of these audited accounts and the auditor’s report be submitted?

A. Only to the shareholders during the annual general meeting.
B. To the Reserve Bank and the Registrar of Companies.
C. Exclusively to the Ministry of Finance.
D. Only to the head office of the banking company.

Show Explanation

Correct Answer: B. To the Reserve Bank and the Registrar of Companies. Regulations require banking companies to file copies of their audited financial statements with both the central bank (Reserve Bank) and the authority responsible for company registration (Registrar of Companies).

Question 4: For a banking company incorporated outside India but operating branches within India, what scope must its annual balance sheet and profit and loss account cover?

A. All global operations of the banking company.
B. Only the operations of its main branch in India.
C. All business transacted through all of its branches situated in India.
D. Only its deposit-taking activities in India.

Show Explanation

Correct Answer: C. All business transacted through all of its branches situated in India. Foreign banks operating in India are required to prepare financial statements that reflect the business conducted by all their Indian branches.

Question 5: According to regulations, who must sign the annual balance sheet and profit and loss account of a banking company incorporated in India which has only three directors?

A. The manager or principal officer only.
B. The manager or principal officer and any one director.
C. All three directors only.
D. The manager or principal officer and all three directors.

Show Explanation

Correct Answer: D. The manager or principal officer and all three directors. If a banking company incorporated in India has three or fewer directors, the financial statements must be signed by the manager or principal officer and all the directors.

Question 6: In what format must a banking company prepare its balance sheet and profit and loss account as per the Banking Regulation Act?

A. In accordance with International Financial Reporting Standards (IFRS).
B. Following the format prescribed by the Institute of Chartered Accountants of India.
C. In the forms set out in the Third Schedule to the Act, or as closely as circumstances allow.
D. According to the format used by the State Bank of India.

Show Explanation

Correct Answer: C. In the forms set out in the Third Schedule to the Act, or as closely as circumstances allow. The Banking Regulation Act specifies that banking companies must use the formats provided in its Third Schedule for their main financial statements.

Question 7: Which Act’s provisions regarding the form of financial statements have an overriding effect specifically for banking companies?

A. The Securities and Exchange Board of India Act.
B. The Companies Act, 2013.
C. The Banking Regulation Act, 1949.
D. The Reserve Bank of India Act, 1934.

Show Explanation

Correct Answer: C. The Banking Regulation Act, 1949. For banking companies, the specific requirements regarding the format of financial statements laid down in the Banking Regulation Act prevail over the general provisions of the Companies Act.

Question 8: Who possesses the authority to amend the forms set out in the Third Schedule of the Banking Regulation Act for banking company accounts?

A. The Reserve Bank of India Governor.
B. The Central Government, after providing specified notice.
C. The Parliament of India through a special resolution.
D. A committee representing all scheduled banks.

Show Explanation

Correct Answer: B. The Central Government, after providing specified notice. The power to modify the prescribed formats for banking company accounts rests with the Central Government, which must announce its intention with at least three months’ notice.

Question 9: Within what period from the end of the financial period must a banking company publish its audited accounts and balance sheet, along with the auditor’s report, in a newspaper?

A. Within 3 months
B. Within 6 months
C. Within 12 months
D. Within 30 days of the Annual General Meeting

Show Explanation

Correct Answer: B. Within 6 months. Banking regulations stipulate that the publication of audited annual accounts in a newspaper must occur within six months after the closing of the accounting period.

Question 10: What is the standard time limit for a banking company to submit three copies of its annual balance sheet and profit and loss account to the Reserve Bank?

A. Within 30 days from the end of the period.
B. Within 60 days from the end of the period.
C. Within 3 months from the end of the perioD.
D. Within 6 months from the end of the period.

Show Explanation

Correct Answer: C. Within 3 months from the end of the period. The stipulated deadline for submitting the annual audited accounts to the Reserve Bank is three months after the financial period concludes.

Question 11: Can the Reserve Bank grant an extension to a banking company for submitting its annual accounts, and if so, what is the maximum extension period allowed?

A. No extension is permitted under any circumstances.
B. Yes, an extension of up to one additional month.
C. Yes, an extension of up to three additional months.
D. Yes, an extension of up to six additional months.

Show Explanation

Correct Answer: C. Yes, an extension of up to three additional months. The Reserve Bank is empowered to grant an extension for the submission of accounts, but this extension cannot exceed a further three months.

Question 12: How does a banking company fulfil its obligation to submit accounts to the Registrar of Companies?

A. By sending a separate set of documents directly to the Registrar.
B. The submission made to the Reserve Bank is deemed to fulfil this requirement.
C. By publishing the accounts prominently on its website.
D. Banking companies are exempted from submitting accounts to the Registrar.

Show Explanation

Correct Answer: B. The submission made to the Reserve Bank is deemed to fulfil this requirement. Under Section 32 of the Banking Regulation Act, furnishing the required copies to the RBI satisfies the obligation to file with the Registrar of Companies.

Question 13: What specific requirement applies to banking companies incorporated outside India regarding the display of their accounts at their principal office in India?

A. They must display their global consolidated accounts.
B. They must display the last audited balance sheet and profit and loss account pertaining to their Indian business.
C. They must display the accounts within one month of the financial year-enD.
D. There is no such display requirement mentioned in the regulations.

Show Explanation

Correct Answer: B. They must display the last audited balance sheet and profit and loss account pertaining to their Indian business. Foreign banks must display a copy of their latest audited India-specific financial statements conspicuously at their main office in India by the first Monday of August each year.

Question 14: What is required before a banking company can appoint, re-appoint, or remove its statutory auditor(s)?

A. Approval from the company’s shareholders only.
B. Prior approval from the Reserve Bank of India.
C. Consent from the Institute of Chartered Accountants of India.
D. Notification to the Central Government.

Show Explanation

Correct Answer: B. Prior approval from the Reserve Bank of India. Section 30(1A) of the Banking Regulation Act mandates that banks must obtain the RBI’s approval before making any changes related to their statutory auditors.

Question 15: Which of the following represents an additional reporting requirement for the auditor of a banking company incorporated in India, beyond those typically required for other companies?

A. Reporting on the bank’s customer service ratings.
B. Stating whether the returns received from the bank’s branches were adequate for the audit.
C. Commenting on the bank’s contribution to national economic growth.
D. Providing an assessment of the bank’s future profitability.

Show Explanation

Correct Answer: B. Stating whether the returns received from the bank’s branches were adequate for the audit. Auditors of Indian banks have specific duties, including reporting on the adequacy of information received from branches for audit purposes.

Question 16: The responsibility of an auditor of a banking company extends significantly beyond safeguarding the interests of shareholders primarily because:

A. Banking regulations are more complex than other corporate laws.
B. The auditor is directly appointed by the Reserve Bank.
C. The bank deals with public money, creating a responsibility towards depositors and the public.
D. Bank auditors face higher penalties for errors.

Show Explanation

Correct Answer: C. The bank deals with public money, creating a responsibility towards depositors and the public. As banks operate with funds from the public (deposits), their auditors have a wider duty encompassing the interests of depositors and the broader public.

Question 17: What is the primary purpose behind the Reserve Bank implementing an “Enforcement Action Framework” concerning statutory auditors?

A. To fix the maximum audit fees chargeable to banks.
B. To encourage auditors to complete bank audits more quickly.
C. To ensure quality bank audits are delivered, thereby fostering market confidence.
D. To prescribe the specific audit software that must be used.

Show Explanation

Correct Answer: C. To ensure quality bank audits are delivered, thereby fostering market confidence. This framework aims to hold auditors accountable for lapses and promote high-quality audits, which strengthens trust in the financial reporting of banks.

Question 18: Under which condition(s) is the Reserve Bank empowered to order a special audit of a banking company’s accounts?

A. Only if the bank has declared losses for two consecutive years.
B. Only upon receiving a request from the Central Government.
C. If the RBI believes it is necessary in the public interest, or in the interest of the bank or its depositors.
D. As a mandatory annual procedure for all banks.

Show Explanation

Correct Answer: C. If the RBI believes it is necessary in the public interest, or in the interest of the bank or its depositors. The RBI can initiate a special audit based on its own judgement regarding the necessity for such an audit for protective or public interest reasons.

Question 19: When the Reserve Bank orders a special audit, who can it direct to conduct this audit?

A. Only an audit firm selected by the banking company.
B. Any international audit firm of repute.
C. A newly appointed qualified auditor or the existing auditor of the banking company.
D. Only auditors from the Reserve Bank’s internal audit department.

Show Explanation

Correct Answer: C. A newly appointed qualified auditor or the existing auditor of the banking company. The RBI has the discretion to either appoint a specific qualified auditor for the special audit or direct the bank’s current statutory auditor to conduct it.

Question 20: Who is liable to bear the expenses incurred in relation to a special audit ordered by the Reserve Bank under the Banking Regulation Act?

A. The Reserve Bank of India.
B. The Central Government.
C. The banking company whose accounts are subjected to the special audit.
D. The depositors of the banking company.

Show Explanation

Correct Answer: C. The banking company whose accounts are subjected to the special audit. The costs associated with carrying out a special audit mandated by the RBI must be paid by the concerned banking company.

Question 21: How frequently must a banking company typically submit its return concerning liquid assets as per Section 24(3) of the Banking Regulation Act, and what is the submission deadline?

A. Quarterly, within 15 days from the quarter end.
B. Monthly, within 20 days from the end of the month.
C. Half-yearly, within 30 days from the half-year enD.
D. Annually, within 3 months from the year end.

Show Explanation

Correct Answer: B. Monthly, within 20 days from the end of the month. This specific return detailing liquid assets is required to be filed on a monthly basis, with a deadline of twenty days after the conclusion of the relevant month.

Question 22: What key data points must be included in the return on liquid assets filed by banking companies?

A. Only details of cash held in vaults.
B. A list of high-value loan accounts.
C. Particulars of specified assets and the demand and time liabilities as of specified dates.
D. Projections of future asset growth.

Show Explanation

Correct Answer: C. Particulars of specified assets and the demand and time liabilities as of specified dates. This return focuses on reporting the bank’s holdings of eligible liquid assets against its demand and time liabilities, measured at the close of business on alternate Fridays.

Question 23: When is the deadline for a banking company to submit its monthly return under Section 27 of the Banking Regulation Act, detailing assets and liabilities in India?

A. By the 15th day of the same month.
B. Within seven working days of the month end.
C. Before the close of the month succeeding the month to which the return relates.
D. Concurrently with the annual accounts submission.

Show Explanation

Correct Answer: C. Before the close of the month succeeding the month to which the return relates. This monthly return must be submitted to the Reserve Bank before the end of the month that follows the reporting month.

Question 24: Besides routine monthly or quarterly returns, what specific information can the Reserve Bank require a banking company to furnish every half-year?

A. Details of staff training programmes conducted.
B. Information regarding investments or the classification of its advances across different sectors.
C. Customer satisfaction survey results.
D. Branch-wise profit and loss statements.

Show Explanation

Correct Answer: B. Information regarding investments or the classification of its advances across different sectors. The Reserve Bank has the authority to call for half-yearly submissions detailing the bank’s investment portfolio or the sectoral distribution (e.g., industry, commerce, agriculture) of its loans.

Question 25: What is the time limit for a banking company to submit its quarterly return detailing its assets held within India, as required by Section 25(1) of the Banking Regulation Act?

A. Within 7 days of the end of the quarter.
B. Within 15 days of the end of the quarter.
C. Within one month of the end of the quarter.
D. Within 45 days of the end of the quarter.

Show Explanation

Correct Answer: C. Within one month of the end of the quarter. The quarterly return focusing on assets located in India must be filed within one month following the end of the respective quarter.

Question 26: How often must a banking company file a return concerning deposits that have remained unclaimed or not operated upon for ten years, and what is the deadline?

A. Monthly, within 10 days of month-end.
B. Quarterly, within 15 days of quarter-end.
C. Annually, within 30 days of the close of each calendar year.
D. Only upon specific direction from the Reserve Bank.

Show Explanation

Correct Answer: C. Annually, within 30 days of the close of each calendar year. This return related to long-dormant deposits is an annual requirement, due within thirty days following the end of the calendar year.

Question 27: What is the primary objective of the “Depositor Education and Awareness Fund” established under Section 26A of the Banking Regulation Act?

A. To provide loans to depositors at concessional rates.
B. To manage the pension funds of bank employees.
C. To utilise funds from long-unclaimed deposits for promoting depositor interests and awareness activities as specified by the RBI.
D. To serve as a contingency fund for banks facing liquidity issues.

Show Explanation

Correct Answer: C. To utilise funds from long-unclaimed deposits for promoting depositor interests and awareness activities as specified by the RBI. This fund uses amounts from accounts dormant for 10 years or more to finance activities aimed at depositor education and welfare.

Question 28: If a depositor claims their money after it has been transferred to the Depositor Education and Awareness Fund, what is the bank’s responsibility?

A. The bank must direct the depositor to the Fund for payment.
B. The bank must pay the depositor the principal amount only.
C. The bank must pay the depositor the principal along with applicable interest, and then seek a refund from the Fund via RBI.
D. The claim is forfeited once the amount is transferred to the Fund.

Show Explanation

Correct Answer: C. The bank must pay the depositor the principal along with applicable interest, and then seek a refund from the Fund via RBI. The bank’s liability to the depositor remains, including interest; after payment, the bank can claim reimbursement from the Fund.

Question 29: By which day of every month must a banking company that is not a scheduled bank submit its return related to cash reserve maintenance?

A. Before the 10th day.
B. Before the 15th day.
C. Before the 20th day.
D. Before the last working day.

Show Explanation

Correct Answer: C. Before the 20th day. Non-scheduled banks are required to file their cash reserve return before the twentieth day of each month.

Question 30: What is the initial penalty rate levied on a banking company if it fails to maintain the required Cash Reserve Ratio (CRR) on any given day?

A. 1% above the Bank Rate on the shortfall.
B. 2% above the Bank Rate on the shortfall.
C. 3% above the Bank Rate on the shortfall.
D. 5% above the Bank Rate on the shortfall.

Show Explanation

Correct Answer: C. 3% above the Bank Rate on the shortfall. The regulations specify an initial penalty equivalent to the Bank Rate plus three per cent per annum on the amount by which the bank falls short of the prescribed CRR.

Question 31: If a banking company’s failure to maintain the prescribed Cash Reserve Ratio (CRR) continues on subsequent days after the initial default, what penalty rate applies?

A. The penalty remains at 3% above the Bank Rate.
B. The penalty is waived for subsequent days.
C. The penalty increases to 5% above the Bank Rate on the shortfall for each subsequent day.
D. The penalty reverts to the Bank Rate only.

Show Explanation

Correct Answer: C. The penalty increases to 5% above the Bank Rate on the shortfall for each subsequent day. For persistent defaults in maintaining CRR, the penalty rate escalates to the Bank Rate plus five per cent per annum for subsequent days.

Question 32: Under which specific legislative provision must Scheduled Banks submit returns detailing their demand and time liabilities to the Reserve Bank?

A. Section 24 of the Banking Regulation Act, 1949.
B. Section 42 of the Reserve Bank of India Act, 1934.
C. Section 18 of the Banking Regulation Act, 1949.
D. Section 26A of the Banking Regulation Act, 1949.

Show Explanation

Correct Answer: B. Section 42 of the Reserve Bank of India Act, 1934. This section of the RBI Act specifically governs the requirement for scheduled banks to maintain reserves and submit related returns to the RBI.

Question 33: Which body is empowered by the Banking Regulation Act to make rules specifying the periods for which banking companies must preserve their books, accounts, and other documents?

A. The Indian Banks’ Association (IBA).
B. The Reserve Bank of India (RBI).
C. The Central Government, after consultation with the RBI.
D. The Securities and Exchange Board of India (SEBI).

Show Explanation

Correct Answer: C. The Central Government, after consultation with the RBI. Section 45Y grants this rule-making power to the Central Government, contingent upon prior consultation with the Reserve Bank.

Question 34: Based on regulatory clarifications and the Banking Companies (Period of Preservation of Records) Rules, 1985, what is the commonly accepted preservation period for many types of bank records like ledgers and registers?

A. 1 to 2 years.
B. 3 to 4 years.
C. 5 to 8 years.
D. 10 to 12 years.

Show Explanation

Correct Answer: C. 5 to 8 years. Guidance suggests that banks generally continue to follow the 5 to 8 year preservation periods specified in these rules for various standard records.

Question 35: Does the Reserve Bank have the authority to compel a bank to preserve specific records for a period longer than stipulated in the general preservation rules?

A. No, the general rules are the absolute upper limit.
B. Yes, the RBI can issue a written order for longer preservation based on factors in Section 35A(1).
C. Only if the bank voluntarily agrees to a longer perioD.
D. Only for records pertaining to foreign transactions.

Show Explanation

Correct Answer: B. Yes, the RBI can issue a written order for longer preservation based on factors in Section 35A(1). The RBI possesses the power to mandate extended preservation periods for specific records if it deems necessary under the provisions of the Act.

Question 36: Under the Prevention of Money Laundering (PML) Rules, banks must maintain records of individual cash transactions that exceed which monetary threshold?

A. ₹ 50,000
B. ₹ 1,00,000
C. ₹ 10,00,000 (Ten Lakh Rupees) or its foreign currency equivalent.
D. ₹ 1,00,00,000 (One Crore Rupees) or its foreign currency equivalent.

Show Explanation

Correct Answer: C. ₹ 10,00,000 (Ten Lakh Rupees) or its foreign currency equivalent. The PML rules require record-keeping for all single cash transactions above the ten lakh rupee mark (or its equivalent value in foreign currency).

Question 37: When must a bank maintain records for a series of interconnected cash transactions, where each transaction is individually below ₹ 10 Lakhs?

A. Always, regardless of the total amount.
B. Only if the customer requests it.
C. If the transactions occur within a month and the monthly aggregate exceeds ₹ 10 Lakhs.
D. If any single transaction in the series exceeds ₹ 5 Lakhs.

Show Explanation

Correct Answer: C. If the transactions occur within a month and the monthly aggregate exceeds ₹ 10 Lakhs. Multiple smaller cash transactions within a month need to be recorded if their total value crosses the ten lakh rupee threshold, considering all accounts of the same customer.

Question 38: What types of transactions involving Non-Profit Organisations (NPOs) require mandatory record maintenance by banks under PML Rules?

A. All transactions, irrespective of amount.
B. Only cash donations received by NPOs.
C. Transactions involving receipts by NPOs exceeding ₹ 10 Lakhs or its foreign currency equivalent.
D. Only international fund transfers to NPOs.

Show Explanation

Correct Answer: C. Transactions involving receipts by NPOs exceeding ₹ 10 Lakhs or its foreign currency equivalent. Specific rules mandate record-keeping when NPOs receive funds (receipts) above the ten lakh rupee threshold (or equivalent).

Question 39: Does the requirement under PML Rules to maintain records of suspicious transactions apply only if the transaction involves cash?

A. Yes, only suspicious cash transactions must be recorded.
B. Yes, and only if the amount exceeds ₹ 10 Lakhs.
C. No, all suspicious transactions must be recorded, whether involving cash or not.
D. No, but only if forgery is suspected.

Show Explanation

Correct Answer: C. No, all suspicious transactions must be recorded, whether involving cash or not. The obligation to record suspicious transactions is comprehensive and covers all such transactions, regardless of whether they are cash-based.

Question 40: For the purpose of transaction reconstruction under PMLA, which set of information must be preserved by banks?

A. Nature, amount, currency, date, and parties of the transaction.
B. Only the amount and date of the transaction.
C. Customer’s reason for the transaction and the branch location.
D. Transaction ID and the teller who processed it.

Show Explanation

Correct Answer: A. Nature, amount, currency, date, and parties of the transaction. Record maintenance should capture these key details to enable the reconstruction of individual transactions if required.

Question 41: What is the minimum period for which banks must maintain records of transactions between the bank and its client, as per the PML Amendment Act 2012?

A. One year from the transaction date.
B. Three years from the transaction date.
C. Five years from the transaction date.
D. Ten years from the transaction date.

Show Explanation

Correct Answer: C. Five years from the transaction date. The law stipulates a minimum retention period of five years for general transaction records to facilitate potential future inquiries or investigations.

Question 42: For how long after the cessation of a business relationship must a bank preserve customer identification documents (like passport copies, PAN card, utility bills)?

A. For one year.
B. For three years.
C. For at least five years.
D. For ten years.

Show Explanation

Correct Answer: C. For at least five years. KYC and customer identification documents must be retained for a minimum period of five years after the customer’s relationship with the bank ends.

Question 43: What is the specific preservation period mandated under PMLA for records pertaining to complex or unusual transactions that lack an apparent economic or lawful purpose, after appropriate action is completed?

A. 3 years.
B. 5 years.
C. 7 years.
D. 10 years.

Show Explanation

Correct Answer: D. 10 years. Due to their higher risk profile, records of such specific transactions require a longer preservation period of ten years after the necessary follow-up actions have been taken.

Question 44: Under Section 45Z of the Banking Regulation Act, what must a bank do before it can return paid instruments to a customer earlier than the end of the official preservation period?

A. Obtain written consent from the customer.
B. Get specific approval from the Reserve Bank.
C. Make and keep in its possession a true and accurate copy of all relevant parts of the instrument.
D. Ensure the instrument value is below ₹ 10,000.

Show Explanation

Correct Answer: C. Make and keep in its possession a true and accurate copy of all relevant parts of the instrument. Early return of paid instruments is permissible only if the bank first creates and retains an accurate copy.

Question 45: Is a banking company permitted to charge its customer for the cost of making copies of paid instruments before returning them early?

A. No, the bank must absorb this cost.
B. Yes, the bank is entitled to recover the cost of making such copies from the customer.
C. Only if the customer is a business entity, not an individual.
D. Only if explicitly allowed by the Reserve Bank on a case-by-case basis.

Show Explanation

Correct Answer: B. Yes, the bank is entitled to recover the cost of making such copies from the customer. The Act specifically allows banks to recover the expenses incurred in making the necessary copies from the customer.

Question 46: What is the primary methodology currently employed by the Reserve Bank for conducting its Annual Financial Inspections (AFI) of banks?

A. Detailed audit of 100% transactions.
B. Focusing solely on profitability ratios.
C. Risk Based Supervision (RBS) approach, often utilising frameworks like SPARC.
D. Reviewing only the statutory audit reports.

Show Explanation

Correct Answer: C. Risk Based Supervision (RBS) approach, often utilising frameworks like SPARC. Modern supervisory practices involve assessing banks based on their risk profiles using structured methodologies like RBS and associated tools such as SPARC.

Question 47: What is the Reserve Bank’s obligation if it receives a direction from the Central Government to conduct an inspection of a specific banking company?

A. The RBI must seek approval from its Board before complying.
B. The RBI can suggest an alternative bank for inspection.
C. The RBI is bound to comply with such a direction and conduct the inspection.
D. The RBI must first consult the concerned banking company.

Show Explanation

Correct Answer: C. The RBI is bound to comply with such a direction and conduct the inspection. The Banking Regulation Act makes it mandatory for the RBI to carry out an inspection when directed to do so by the Central Government.

Question 48: During an inspection conducted by the Reserve Bank, what are the key obligations of the banking company’s officials, including directors?

A. To provide access only to summarised financial data.
B. To limit responses to written queries only.
C. To produce all necessary books, accounts, documents and furnish required statements/information.
D. To facilitate inspection only during non-banking hours.

Show Explanation

Correct Answer: C. To produce all necessary books, accounts, documents and furnish required statements/information. The law requires full cooperation from the bank’s personnel, including providing access to all relevant records and information demanded by the inspection team.

Question 49: Following an inspection conducted at the Central Government’s behest, what action can the Government take based on the report, after giving the bank a chance to represent itself?

A. Order the bank to change its auditors immediately.
B. Publish the salaries of the bank’s top management.
C. Prohibit the bank from accepting further deposits or impose other conditions.
D. Mandate a reduction in the bank’s lending rates.

Show Explanation

Correct Answer: C. Prohibit the bank from accepting further deposits or impose other conditions. If the inspection reveals affairs detrimental to depositors’ interests, the Government, after due process, can impose significant restrictions, including barring the acceptance of new deposits.

Question 50: How does the provision of a scrutiny report to a banking company differ from the provision of an inspection report by the RBI?

A. Scrutiny reports are always provided, while inspection reports are optional.
B. Inspection reports are always provided, while scrutiny reports are provided only if requested or if adverse action is contemplated.
C. Both reports are provided only upon specific request from the bank.
D. Neither report is ever provided to the banking company.

Show Explanation

Correct Answer: B. Inspection reports are always provided, while scrutiny reports are provided only if requested or if adverse action is contemplated. Unlike inspection reports (copy given to bank), scrutiny reports are shared with the bank under more limited circumstances as specified in Section 35(1A)(b).

Question 51: Which department was initially tasked with the inspection and surveillance functions relating to commercial banks from 1993, before the establishment of the Board for Financial Supervision?

A. Department of Non-Banking Supervision (DNBS)
B. Department of Banking Supervision (DBS)
C. Department of Cooperative Banks Supervision (DCBS)
D. Department of Supervision

Show Explanation

Correct Answer: B. Department of Banking Supervision (DBS). The Department of Banking Supervision was responsible for the inspection and surveillance of commercial banks starting in 1993, prior to the formation of broader supervisory bodies.

Question 52: What was the primary objective for setting up the Board for Financial Supervision (BFS) in November 1994?

A. To manage the foreign exchange reserves of the country
B. To ensure dedicated and integrated supervision over various credit institutions
C. To oversee the operations of primary dealers only
D. To regulate the capital market activities of banks

Show Explanation

Correct Answer: B. To ensure dedicated and integrated supervision over various credit institutions. The BFS was established to provide focused and unified supervision across different types of financial institutions involved in credit activities.

Question 53: Following its establishment, which types of institutions fall under the supervisory jurisdiction of the Board for Financial Supervision (BFS)?

A. Only Scheduled Commercial Banks and All India Financial Institutions
B. Only Non-Banking Finance Companies and Primary Dealers
C. Scheduled Commercial Banks, Co-operative Banks, Financial Institutions, Local Area Banks, Small Finance Banks, Payments Banks, Credit Information Companies, NBFCs, and Primary Dealers
D. Only Co-operative Banks and Local Area Banks

Show Explanation

Correct Answer: C. Scheduled Commercial Banks, Co-operative Banks, Financial Institutions, Local Area Banks, Small Finance Banks, Payments Banks, Credit Information Companies, NBFCs, and Primary Dealers. The BFS oversees a wide range of financial entities to ensure comprehensive financial supervision.

Question 54: For what purpose was the Department of Supervision established effective from 1st November 2019?

A. To handle only the supervision of Non-Banking Finance Companies
B. To manage the overseas operations of Indian banks exclusively
C. To integrate the entire supervision and inspection function for all regulated entities into a unified department
D. To focus solely on the technical assistance programme for cooperative banks

Show Explanation

Correct Answer: C. To integrate the entire supervision and inspection function for all regulated entities into a unified department. The Department of Supervision was created to unify the supervision functions previously handled by separate departments like DBS, DNBS, and DCBS, aiming to reduce supervisory arbitrage and information asymmetry.

Question 55: Which legislation was amended to insert Section 45NAA, granting the Reserve Bank of India additional powers over Non-Banking Financial Companies (NBFCs)?

A. The Banking Regulation Act, 1949
B. The Companies Act, 2013
C. The Reserve Bank of India Act, 1934
D. The Securities and Exchange Board of India Act, 1992

Show Explanation

Correct Answer: C. The Reserve Bank of India Act, 1934. Section 45NAA was added to the RBI Act, 1934, enhancing the RBI’s supervisory authority over NBFCs and their group companies.

Question 56: What power does Section 45NAA of the RBI Act grant the Reserve Bank concerning NBFCs?

A. Power to set interest rates charged by NBFCs
B. Power to mandate NBFCs to merge with banks
C. Power to direct NBFCs to furnish information about group companies and conduct inspections or audits of them
D. Power to restrict NBFCs from accepting public deposits

Show Explanation

Correct Answer: C. Power to direct NBFCs to furnish information about group companies and conduct inspections or audits of them. This section allows the RBI to gather necessary information and scrutinise the affairs of companies related to an NBFC for supervisory purposes.

Question 57: According to the Reserve Bank of India (Board for Financial Supervision) Regulations, 1994, who serves as the chairman of the Board for Financial Supervision (BFS)?

A. A Deputy Governor nominated by the Central Government
B. The Finance Minister of India
C. The Governor of the Reserve Bank of India
D. An external expert appointed by the Central Board

Show Explanation

Correct Answer: C. The Governor of the Reserve Bank of India. The regulations specify that the Governor of the RBI holds the position of chairman of the BFS.

Question 58: How is the Vice Chairman of the Board for Financial Supervision (BFS) appointed?

A. Elected by the members of the Central Board
B. Appointed directly by the Central Government
C. Nominated by the Governor from amongst the Deputy Governors of the RBI
D. Chosen from the four nominated directors of the Central Board

Show Explanation

Correct Answer: C. Nominated by the Governor from amongst the Deputy Governors of the RBI. The Governor selects one of the RBI Deputy Governors, typically the one overseeing supervision, to act as the full-time vice chairman.

Question 59: How many directors from the Central Board of the Reserve Bank are nominated to be members of the Board for Financial Supervision (BFS)?

A. Two directors
B. Three directors
C. Four directors
D. Five directors

Show Explanation

Correct Answer: C. Four directors. The composition of the BFS includes four directors nominated from the RBI’s Central Board by the Governor.

Question 60: What is the primary function of the sub-committee of the Board for Financial Supervision (BFS) constituted in April 2018?

A. To handle monetary policy decisions
B. To exercise supervision and inspection powers over specific types of financial entities like Payments Banks and Small Finance Banks
C. To manage the RBI’s currency operations
D. To oversee the regulation of foreign exchange markets

Show Explanation

Correct Answer: B. To exercise supervision and inspection powers over specific types of financial entities like Payments Banks and Small Finance Banks. The sub-committee focuses on the supervision of certain categories of banks, NBFCs, and credit information companies.

Question 61: Who chairs the sub-committee of the Board for Financial Supervision (BFS)?

A. The Governor of the RBI
B. The Deputy Governor in charge of supervision
C. One of the nominated Central Board Directors
D. An external member appointed by the BFS

Show Explanation

Correct Answer: B. The Deputy Governor in charge of supervision. The sub-committee is chaired by the RBI Deputy Governor responsible for the supervision portfolio.

Question 62: Besides the chairman, who are the members of the sub-committee of the Board for Financial Supervision (BFS)?

A. Only the other Deputy Governors
B. Only the two Directors of the Central Board
C. The other three Deputy Governors and two Directors of the Central Board
D. All four nominated Directors from the Central Board

Show Explanation

Correct Answer: C. The other three Deputy Governors and two Directors of the Central Board. The sub-committee includes all Deputy Governors and two Central Board Directors as members, alongside the chairing Deputy Governor.

Question 63: What is the core function of the Board for Financial Supervision (BFS)?

A. To formulate the monetary policy of India
B. To manage the public debt of the Central Government
C. To exercise powers of supervision and inspection over specified financial sectors under RBI and Banking Regulation Acts
D. To issue currency notes and coins

Show Explanation

Correct Answer: C. To exercise powers of supervision and inspection over specified financial sectors under RBI and Banking Regulation Acts. The BFS is primarily responsible for overseeing the supervision and inspection activities related to banks, financial institutions, and NBFCs.

Question 64: Which of the following is an initiative undertaken by the Board for Financial Supervision (BFS) to improve oversight?

A. Setting the repo rate for the banking system
B. Introducing an off-site surveillance system to complement on-site supervision
C. Managing the government securities market
D. Printing currency notes for circulation

Show Explanation

Correct Answer: B. Introducing an off-site surveillance system to complement on-site supervision. The BFS implemented off-site monitoring as a measure to enhance the effectiveness of its supervisory framework alongside traditional on-site inspections.

Question 65: What measure did the Board for Financial Supervision (BFS) introduce concerning weak banks?

A. A scheme for mandatory merger with stronger banks
B. A technical assistance program focused only on management training
C. A scheme of Prompt Corrective Action Framework
D. A guarantee scheme for all deposits held in weak banks

Show Explanation

Correct Answer: C. A scheme of Prompt Corrective Action Framework. The BFS introduced the Prompt Corrective Action (PCA) framework as a structured approach to address issues in banks showing signs of financial weakness.

Question 66: What system did the Board for Financial Supervision (BFS) introduce to enhance monitoring based on potential risks?

A. A system based solely on quarterly financial results
B. A system of annual public disclosures by banks
C. A system of risk-based supervision of banks
D. A system focusing only on credit risk management

Show Explanation

Correct Answer: C. A system of risk-based supervision of banks. The BFS moved towards risk-based supervision (RBS) to focus supervisory attention on banks based on their individual risk profiles.

Question 67: What is the typical frequency of meetings for the Board for Financial Supervision (BFS)?

A. Once every quarter
B. Once every six months
C. Normally once every month
D. Only when required for urgent matters

Show Explanation

Correct Answer: C. Normally once every month. The BFS generally convenes monthly meetings to discuss supervisory reports and policy matters.

Question 68: What constitutes the quorum for a meeting of the Board for Financial Supervision (BFS)?

A. Two members including the chairman or vice chairman
B. Three members, of whom one must be the chairman or the vice chairman
C. Four members including one Deputy Governor
D. The Governor and all four nominated Directors

Show Explanation

Correct Answer: B. Three members, of whom one must be the chairman or the vice chairman. A minimum of three members, including either the chairman (Governor) or the vice chairman (Deputy Governor), are required for a valid BFS meeting.

Question 69: What is the name of the Reserve Bank’s web-based application launched to monitor compliance requirements in supervised entities?

A. SPARC
B. E-Kuber
C. DAKSH
D. NEFT

Show Explanation

Correct Answer: C. DAKSH. DAKSH is the RBI’s advanced supervisory monitoring system, designed as a web-based workflow application to enhance compliance monitoring and communication with supervised entities.

Question 70: Under what circumstances can the Central Government acquire the undertaking of a banking company as per Section 36AE of the Banking Regulation Act?

A. If the bank fails to meet profit targets for one year
B. If the bank repeatedly fails to comply with RBI directions on banking policy or is managed detrimentally to depositors’ interests
C. If the bank wishes to voluntarily transfer its undertaking to the government
D. If the bank’s share price falls below a certain level

Show Explanation

Correct Answer: B. If the bank repeatedly fails to comply with RBI directions on banking policy or is managed detrimentally to depositors’ interests. Acquisition is considered if the bank shows persistent non-compliance with policy directions or mismanagement harmful to depositors, and if acquisition is deemed necessary for specified reasons like protecting depositors or banking policy.

Question 71: What procedural step must the Central Government take before acquiring the undertaking of a banking company under Section 36AE?

A. Obtain approval from the Parliament
B. Consult the Indian Banks’ Association
C. Receive a report from the Reserve Bank and give the banking company a reasonable opportunity to show cause
D. Announce the acquisition in major newspapers one month in advance

Show Explanation

Correct Answer: C. Receive a report from the Reserve Bank and give the banking company a reasonable opportunity to show cause. The government acts upon an RBI report and must allow the bank to present its case against the proposed acquisition.

Question 72: Upon acquisition of a banking company’s undertaking by the Central Government, where do the assets and liabilities of the acquired bank vest?

A. Only in the Reserve Bank of India
B. They are immediately liquidated and distributed to creditors
C. They stand transferred to and vest in the Central Government or a transferee company/corporation designated by the Government
D. They remain with the original shareholders of the acquired bank

Show Explanation

Correct Answer: C. They stand transferred to and vest in the Central Government or a transferee company/corporation designated by the Government. The ownership and obligations of the acquired bank are transferred either to the government itself or to another entity specified by the government.

Question 73: Who is responsible for framing a scheme for an acquired bank under Section 36AF of the Banking Regulation Act?

A. The acquired bank’s management
B. The Reserve Bank of India independently
C. The Central Government, in consultation with the Reserve Bank
D. A tribunal appointed for this purpose

Show Explanation

Correct Answer: C. The Central Government, in consultation with the Reserve Bank. The Central Government has the power to create a scheme for the acquired bank, but this must be done after consulting with the RBI.

Question 74: According to Section 36AG of the Banking Regulation Act, who is entitled to receive compensation when a banking company’s undertaking is acquired?

A. Only the depositors of the acquired bank
B. Only the employees of the acquired bank
C. Persons registered as shareholders immediately before the acquisition (or the acquired foreign bank itself)
D. Only the secured creditors of the acquired bank

Show Explanation

Correct Answer: C. Persons registered as shareholders immediately before the acquisition (or the acquired foreign bank itself). Compensation is payable to the owners (shareholders) of the bank whose undertaking has been transferred.

Question 75: What is the process outlined in Section 44A of the Banking Regulation Act for the voluntary amalgamation of two banking companies?

A. Direct approval from the Central Government
B. Approval by the Reserve Bank followed by shareholder approval
C. Preparation of a scheme, approval by shareholders of both companies by specified majority, and sanction by the Reserve Bank
D. Approval by a High Court order

Show Explanation

Correct Answer: C. Preparation of a scheme, approval by shareholders of both companies by specified majority, and sanction by the Reserve Bank. Voluntary amalgamation requires a shareholder-approved scheme (by a majority representing two-thirds value) which is then submitted to the RBI for final sanction.

Question 76: Who has the authority to apply to the Central Government for an order of moratorium in respect of a banking company under Section 45 of the Banking Regulation Act?

A. The banking company itself
B. The depositors of the banking company
C. The Reserve Bank of India
D. The Registrar of Companies

Show Explanation

Correct Answer: C. The Reserve Bank of India. The RBI is authorized to request the Central Government to impose a moratorium on a bank if it deems necessary.

Question 77: What is the maximum total period for which a moratorium can be imposed on a banking company under Section 45?

A. Three months
B. Six months
C. One year
D. Two years

Show Explanation

Correct Answer: B. Six months. While the initial period may be shorter, the total duration of the moratorium, including extensions, cannot exceed six months.

Question 78: During a period of moratorium imposed under Section 45, what restriction is generally placed on the banking company?

A. It cannot accept new deposits
B. It cannot grant new loans
C. It cannot make payments to depositors or discharge liabilities to creditors, unless directed otherwise by the Central Government
D. It cannot open new branches

Show Explanation

Correct Answer: C. It cannot make payments to depositors or discharge liabilities to creditors, unless directed otherwise by the Central Government. A key effect of a moratorium is the temporary suspension of the bank’s payment obligations, subject to any specific allowances made by the government.

Question 79: Under what conditions can the Reserve Bank prepare a scheme for the reconstruction or amalgamation of a banking company, potentially during a moratorium?

A. Only if the bank requests it
B. If the RBI is satisfied it is necessary in the public interest, depositors’ interest, for proper management, or for the banking system’s interest
C. Only if the bank’s net worth turns negative
D. If directed by the High Court

Show Explanation

Correct Answer: B. If the RBI is satisfied it is necessary in the public interest, depositors’ interest, for proper management, or for the banking system’s interest. The RBI can initiate a scheme if it believes such action serves key objectives related to stability, depositor protection, or proper management.

Question 80: What specific provision must a scheme of amalgamation under Section 45 include regarding the employees of the transferor bank?

A. Mandatory termination of all employees
B. Continuation of all workmen and staff (unless specifically excluded) on existing terms, with pay parity to transferee bank employees within three years
C. Transfer of employees only with a reduction in salary
D. Option for employees to transfer to any other bank of their choice

Show Explanation

Correct Answer: B. Continuation of all workmen and staff (unless specifically excluded) on existing terms, with pay parity to transferee bank employees within three years. The law mandates protection for employees’ service continuity and eventual pay alignment in amalgamation schemes.

Question 81: What is the primary purpose of winding up a banking company when it is unable to meet its liabilities?

A. To merge it with a healthier bank
B. To sell off its assets, pay off creditors, and distribute any remaining funds to shareholders
C. To temporarily suspend its operations until it recovers financially
D. To transfer its management to the Reserve Bank of India

Show Explanation

Correct Answer: B. To sell off its assets, pay off creditors, and distribute any remaining funds to shareholders. Winding up, or liquidation, is the process of dissolving a bank by realising its assets to settle debts and returning any surplus to owners.

Question 82: Under Section 37 of the Banking Regulation Act, what action can a banking company take if it is temporarily unable to meet its obligations?

A. Apply directly to the Central Government for financial aid
B. Apply to the High Court for a temporary stay of proceedings against it
C. Issue new shares to raise capital immediately
D. Voluntarily close down its operations without court intervention

Show Explanation

Correct Answer: B. Apply to the High Court for a temporary stay of proceedings against it. A bank facing temporary difficulty in meeting obligations can seek a moratorium or stay from the High Court.

Question 83: What is the maximum total period for which the High Court can grant a moratorium or stay of proceedings to a banking company under Section 37 of the Banking Regulation Act?

A. Three months
B. Six months
C. One year
D. Indefinitely, as decided by the Court

Show Explanation

Correct Answer: B. Six months. The initial stay granted by the High Court under this section, including any extensions, cannot exceed a total duration of six months.

Question 84: What supporting document is generally required when a banking company applies to the High Court for a moratorium under Section 37?

A. A resolution from the bank’s shareholders
B. A certificate of solvency from an independent auditor
C. A report from the Reserve Bank indicating the bank’s ability to pay debts if the moratorium is granted
D. A detailed plan for restructuring approved by the board

Show Explanation

Correct Answer: C. A report from the Reserve Bank indicating the bank’s ability to pay debts if the moratorium is granted. The application for stay should typically be supported by an RBI assessment of the bank’s potential viability.

Question 85: What action may the High Court take upon passing a moratorium order under Section 37 in the interests of the depositors?

A. Appoint a new CEO for the bank
B. Order the bank to merge with another institution
C. Direct the Central Government to take over the bank
D. Appoint a special officer to take custody and control of the bank’s assets and books

Show Explanation

Correct Answer: D. Appoint a special officer to take custody and control of the bank’s assets and books. To protect depositors’ interests during the moratorium, the court can appoint a special officer to oversee the bank’s affairs.

Question 86: If the Reserve Bank determines that a banking company under moratorium (granted under Section 37) is being managed detrimentally to depositors’ interests, what action can it take?

A. Extend the moratorium period indefinitely
B. Apply to the High Court for the winding up of the company
C. Take over the management of the bank directly
D. Cancel the banking license immediately

Show Explanation

Correct Answer: B. Apply to the High Court for the winding up of the company. If the RBI finds mismanagement harmful to depositors during a Section 37 moratorium, it can seek compulsory liquidation through the High Court.

Question 87: Under which circumstance MUST the High Court order the winding up of a banking company as per Section 38 of the Banking Regulation Act?

A. If the bank fails to declare dividends for three consecutive years
B. If the bank’s share price falls significantly
C. If the banking company is unable to pay its debts, or if the RBI applies for winding up
D. If the bank closes more than 10% of its branches

Show Explanation

Correct Answer: C. If the banking company is unable to pay its debts, or if the RBI applies for winding up. Section 38 mandates winding up by the High Court if the bank cannot pay its debts or upon an application by the RBI under specified conditions.

Question 88: In which situation is the Reserve Bank obligated to apply to the High Court for the winding up of a banking company?

A. When requested by the bank’s shareholders
B. When directed by the Central Government following an adverse inspection report
C. When the bank makes a loss for two consecutive years
D. When the bank wishes to voluntarily wind up

Show Explanation

Correct Answer: B. When directed by the Central Government following an adverse inspection report. The RBI must apply for winding up if instructed by the Central Government, usually based on findings that the bank’s affairs harm depositors’ interests.

Question 89: Which failure by a banking company allows the Reserve Bank to discretionarily apply for its winding up?

A. Failure to open a new branch as planned
B. Failure to comply with minimum paid-up capital and reserve requirements (Section 11)
C. Failure to meet lending targets for a specific sector
D. Failure to conduct an annual general meeting on time

Show Explanation

Correct Answer: B. Failure to comply with minimum paid-up capital and reserve requirements (Section 11). Non-compliance with the core requirement of maintaining minimum capital and reserves is a ground for the RBI to seek winding up.

Question 90: If a banking company is prohibited from accepting fresh deposits by the RBI or the Central Government, what action may the RBI take?

A. Provide financial assistance to the bank
B. Order the bank to change its management
C. Apply for the winding up of the banking company
D. Appoint an observer to the bank’s board

Show Explanation

Correct Answer: C. Apply for the winding up of the banking company. If a bank is barred from accepting new deposits due to regulatory actions, the RBI can petition for its liquidation.

Question 91: A banking company is deemed unable to pay its debts if it refuses to meet a lawful demand within a specified time, and which condition is met?

A. The High Court issues an order confirming inability to pay
B. The bank’s auditors report the inability to pay
C. The Reserve Bank certifies in writing that the bank is unable to pay its debts
D. The bank fails to meet the demand within 30 days

Show Explanation

Correct Answer: C. The Reserve Bank certifies in writing that the bank is unable to pay its debts. The RBI’s certification following the bank’s failure to meet a lawful demand within the stipulated short period (two or five days depending on location) confirms its inability to pay for winding up purposes.

Question 92: Who appoints the Court Liquidator attached to a High Court for conducting winding up proceedings of banking companies?

A. The Chief Justice of the High Court
B. The Reserve Bank of India
C. The Central Government
D. The Bar Council of India

Show Explanation

Correct Answer: C. The Central Government. The official Court Liquidator responsible for bank liquidations is appointed by the Central Government.

Question 93: Under Section 39 of the Banking Regulation Act, who can be appointed as the official liquidator if the Reserve Bank applies to the court?

A. Only the official Court Liquidator
B. The Reserve Bank itself, the State Bank of India, another notified bank, or a specified individual
C. Any retired High Court judge
D. An officer nominated by the Institute of Chartered Accountants of India

Show Explanation

Correct Answer: B. The Reserve Bank itself, the State Bank of India, another notified bank, or a specified individual. The RBI can request the appointment of itself, SBI, another designated bank, or an individual as the liquidator instead of the standard Court Liquidator.

Question 94: Within what timeframe must the liquidator of a banking company submit a preliminary report to the High Court regarding assets available for preferential payments?

A. Within fifteen days of the winding up order
B. Within one month of the winding up order
C. Within two months of the winding up order
D. Within six months of the winding up order

Show Explanation

Correct Answer: C. Within two months of the winding up order. The liquidator is required to assess the asset situation quickly and report on funds available for priority payments within two months.

Question 95: What action must the liquidator take within fifteen days of the winding up order regarding creditor claims?

A. Pay all secured creditors immediately
B. Give notice calling for claims for preferential payment and other claims
C. Submit a final list of creditors to the High Court
D. Sell all perishable assets of the bank

Show Explanation

Correct Answer: B. Give notice calling for claims for preferential payment and other claims. The liquidator must promptly issue a public notice inviting creditors to submit their claims, especially those seeking preferential treatment.

Question 96: How are the claims of depositors treated in the winding up proceedings of a banking company?

A. Depositors must file individual claims with supporting documents
B. Only depositors with balances above a certain limit need to file claims
C. The claim of every depositor is deemed to have been filed for the amount shown in the bank’s books
D. Depositors’ claims are processed only after all other creditors are paid

Show Explanation

Correct Answer: C. The claim of every depositor is deemed to have been filed for the amount shown in the bank’s books. Depositors generally do not need to file separate claims; their dues as per the bank’s records are automatically considered.

Question 97: In the winding up of a banking company, what is the order of priority for payments after settling dues mentioned in Section 327 of the Companies Act?

A. General creditors, followed by depositors
B. Savings bank depositors up to ₹250, then other depositors up to ₹250, then general creditors
C. All depositors equally, followed by general creditors
D. Shareholders, followed by depositors

Show Explanation

Correct Answer: B. Savings bank depositors up to ₹250, then other depositors up to ₹250, then general creditors. After statutory preferential payments (like employee dues), small savings depositors and then other small depositors receive priority up to a specified limit, before general creditors.

Question 98: Does the provision for preferential payment to small depositors by the liquidator apply if their deposits are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC)?

A. Yes, they receive preferential payment in addition to DICGC insurance
B. No, the preferential payment provision does not apply to depositors covered by the DICGC Act
C. Yes, but only for the amount exceeding the DICGC cover
D. Partially, depending on the liquidator’s discretion

Show Explanation

Correct Answer: B. No, the preferential payment provision does not apply to depositors covered by the DICGC Act. If a depositor’s claim is settled under the deposit insurance scheme, the specific preferential payment rules under liquidation for small depositors do not apply to that insured amount.

Question 99: What certification is required from the Reserve Bank before a banking company can proceed with voluntary winding up under Section 44?

A. Certification that the bank has sufficient assets to merge with another bank
B. Certification that the bank has followed all regulatory guidelines perfectly
C. Certification that the bank will be able to pay in full all its debts as they accrue
D. Certification that the bank’s management is competent to handle the winding up

Show Explanation

Correct Answer: C. Certification that the bank will be able to pay in full all its debts as they accrue. Voluntary winding up is generally permitted only if the RBI certifies the bank’s inability to pay its debts fully, ensuring it’s not a means to escape liabilities unfairly.

Question 100: What power does the High Court have if it finds that a voluntary winding up or winding up under supervision is detrimental to the interests of depositors?

A. It can only advise the bank to seek amalgamation
B. It can halt the winding up process indefinitely
C. It can order the winding up to be conducted by the Court itself
D. It must allow the voluntary winding up to continue as initiated

Show Explanation

Correct Answer: C. It can order the winding up to be conducted by the Court itself. If voluntary liquidation proceedings appear harmful to depositors, the High Court can convert it into a compulsory, court-supervised winding up.

Question 101: Under the Reserve Bank of India Act, what is the penalty for knowingly making a false statement or willfully omitting a material statement in any return or document submitted to the RBI?

A. A fine only, up to ₹1 lakh
B. Imprisonment up to one year only
C. Imprisonment up to three years and also a fine
D. Confiscation of personal assets of the responsible officers

Show Explanation

Correct Answer: C. Imprisonment up to three years and also a fine. Providing false or incomplete material information to the RBI is a serious offence punishable by both imprisonment and a monetary fine.

Question 102: What penalty can be imposed under the Reserve Bank of India Act for failing to produce required books, accounts, documents, or information?

A. A fine up to ₹10,000 for each offence
B. A fine up to ₹100,000 for each offence, plus a daily fine for continuing offences
C. Imprisonment up to six months
D. Temporary suspension of the banking license

Show Explanation

Correct Answer: B. A fine up to ₹100,000 for each offence, plus a daily fine for continuing offences. Failure to provide information mandated under the RBI Act attracts a substantial fine, with additional daily penalties if the non-compliance persists.

Question 103: According to Section 46 of the Banking Regulation Act, what is the maximum punishment for willfully making a false statement or omitting a material statement in any return or document required under the Act?

A. Fine up to ₹10 lakh
B. Imprisonment up to one year or fine
C. Imprisonment up to three years and fine up to ₹1 crore or both
D. Public censure of the bank’s directors

Show Explanation

Correct Answer: C. Imprisonment up to three years and fine up to ₹1 crore or both. Similar to the RBI Act, the BR Act imposes severe penalties, including imprisonment and a significant fine, for deliberately providing false or incomplete information.

Question 104: If a person fails to produce documents or furnish information required during an inspection or scrutiny by an RBI officer under the Banking Regulation Act, what is the potential penalty?

A. A warning letter from the RBI Governor
B. A fine up to ₹20 lakh per offence, plus a daily fine up to ₹50 thousand for persistence
C. Compulsory retirement for the officer responsible
D. Suspension of the bank’s clearing house privileges

Show Explanation

Correct Answer: B. A fine up to ₹20 lakh per offence, plus a daily fine up to ₹50 thousand for persistence. Non-cooperation with RBI inspection or scrutiny by failing to provide required information attracts substantial fines under the BR Act.

Question 105: If a banking company receives deposits in contravention of a prohibitory order under Section 35(4)(a) of the Banking Regulation Act, who can be held guilty and punished?

A. Only the CEO of the bank
B. Only the branch manager who accepted the deposit
C. Every Director or other officer, unless they prove lack of knowledge or due diligence
D. Only the depositor who made the deposit

Show Explanation

Correct Answer: C. Every Director or other officer, unless they prove lack of knowledge or due diligence. Senior management and directors are presumed responsible for such contraventions unless they can demonstrate they were unaware or tried to prevent it.

Question 106: What is the general penalty prescribed under Section 46 of the Banking Regulation Act for contravening any provision of the Act or failing to comply with orders or scheme requirements, where no specific penalty is provided?

A. A fixed penalty of ₹5 lakh
B. Imprisonment for six months
C. Fine up to ₹1 crore or twice the amount involved (if quantifiable), whichever is more, plus a daily fine for continuing contravention
D. Revocation of the banking license

Show Explanation

Correct Answer: C. Fine up to ₹1 crore or twice the amount involved (if quantifiable), whichever is more, plus a daily fine for continuing contravention. A significant residual penalty clause exists for breaches not specifically penalised elsewhere in the Act.

Question 107: Who is authorized to take cognizance of offences punishable under the Banking Regulation Act (Section 47)?

A. Any police officer above the rank of Inspector
B. Any citizen by filing a Public Interest Litigation
C. A Metropolitan Magistrate or Judicial Magistrate First Class (or higher court) only upon a complaint by an authorized RBI officer
D. The Central Bureau of Investigation (CBI) directly

Show Explanation

Correct Answer: C. A Metropolitan Magistrate or Judicial Magistrate First Class (or higher court) only upon a complaint by an authorized RBI officer. Prosecution under the BR Act generally requires initiation by the RBI through a formal complaint to the specified courts.

Question 108: What is the implication if the Reserve Bank chooses to impose a penalty under Section 47A of the Banking Regulation Act for a specific default or contravention?

A. The bank can appeal the penalty to the High Court
B. The penalty amount is doubled if not paid within 30 days
C. No complaint can be filed in a court for the same default or contravention
D. The responsible officers automatically face imprisonment

Show Explanation

Correct Answer: C. No complaint can be filed in a court for the same default or contravention. RBI’s power to impose penalties under Section 47A acts as an alternative to court prosecution for that particular instance; both cannot be pursued for the same offence.

Question 109: What legal standing does a scheme for the amalgamation of a banking company, prepared by the Reserve Bank and sanctioned by the Central Government under relevant provisions, possess in relation to other laws or agreements?

A. It is subordinate to existing employment contracts
B. It has an overriding effect on other laws, agreements, awards, or instruments
C. It requires ratification by the shareholders of the transferee bank
D. It can be challenged in any civil court

Show Explanation

Correct Answer: B. It has an overriding effect on other laws, agreements, awards, or instruments. A government-sanctioned scheme for bank amalgamation under specific legal provisions takes precedence over other potentially conflicting laws or prior agreements.

Question 110: What term refers to a legally authorized temporary suspension of payments or legal actions against a banking company, often ordered by the government or a court when the bank faces financial difficulties?

A. Amalgamation
B. Scrutiny
C. Moratorium
D. Winding up

Show Explanation

Correct Answer: C. Moratorium. A moratorium provides a temporary halt to a bank’s payment obligations and shields it from legal proceedings, allowing time for resolution.