Module: | KYC, NPAs, Advances & Investment Valuations
Q214: Consider the following statements regarding Basic Banking Services classification limits and general operational rounding rules:
1. An account qualifies for Basic Banking Services if the maximum ceiling for remittances is up to ₹10,000 and for collections is strictly below ₹10,000.
2. The classification for Basic Banking Services permits foreign exchange transactions up to a maximum limit of $1,000.
3. All transactions, including the charging of interest on advances, must be rounded off to the nearest rupee, ignoring fractions less than 50 paise.
4. Banks are officially permitted to use strict margin and security stipulations as a direct substitute for conducting due diligence on the creditworthiness of a borrower.
Which of the statements given above is/are correct?
2. The classification for Basic Banking Services permits foreign exchange transactions up to a maximum limit of $1,000.
3. All transactions, including the charging of interest on advances, must be rounded off to the nearest rupee, ignoring fractions less than 50 paise.
4. Banks are officially permitted to use strict margin and security stipulations as a direct substitute for conducting due diligence on the creditworthiness of a borrower.
Which of the statements given above is/are correct?
✅ Correct Answer: A
The correct answer is A. Statement 1 is correct: The regulatory guidelines define Basic Banking Services by enforcing strict low-value transaction ceilings, specifically capping remittances at up to ₹10,000 and collections at strictly below ₹10,000.
Statement 2 is incorrect: The framework explicitly limits foreign exchange transactions for Basic Banking Services to a maximum of $500, not $1,000.
Statement 3 is correct: Standard mathematical rounding is mandated for all transactions and interest calculations, where fractions of 50 paise and above are rounded up to the next higher rupee, and those strictly below 50 paise are completely ignored.
Statement 4 is incorrect: The directives categorically prohibit banks from using margin and security stipulations as a lazy substitute for conducting proper, thorough due diligence on the actual creditworthiness of the borrower.
Statement 2 is incorrect: The framework explicitly limits foreign exchange transactions for Basic Banking Services to a maximum of $500, not $1,000.
Statement 3 is correct: Standard mathematical rounding is mandated for all transactions and interest calculations, where fractions of 50 paise and above are rounded up to the next higher rupee, and those strictly below 50 paise are completely ignored.
Statement 4 is incorrect: The directives categorically prohibit banks from using margin and security stipulations as a lazy substitute for conducting proper, thorough due diligence on the actual creditworthiness of the borrower.