Q 1. Why you want join banking sector?
Ans. Banking sector is growing sector, providing a wide range of opportunities to graduates like me. The competitive environment of banking sector provides ample scope for individuals, vertical growth. And, banking requires maintaining excellent rapport with the customers. Being a people’s person, I can very relate to these aspects of banking. I am also versed with computer knowledge that is now most in banking.
Q 2. What is a bank?
Ans. Bank is a financial institution that accepts deposits (money) from the public (customers) and creates credits.
Q 3. What is a Cheque?
Ans. A Cheque is a negotiable instrument instructing a bank to pay a specific amount from a specific account held in the maker/ depositor name with the bank. In other words, a cheque is a bill of exchange drawn on a specified banker and payable on demand.
Q 4. What is a Demand Draft?
Ans. Demand Draft is a negotiable instrument that is used for effecting transfer of money.
Q 5. What is the difference between Cheque and Demand Draft?
Ans. Cheque can be dishonored for variety of reasons such as insufficient funds signature mismatch, overwriting cheque is 3 months+ old (stale) etc. But, Demand Draft is a negotiable instrument that is used for effecting transfer of money. Since it’s a banker’s check, it can’t be dishonored.
Q 6. What is KYC?
Ans. KYC stands for ‘Know Your Customer’. As per KYC guidelines prescribed by information of the customer is required while opening an account (or renewal of old accounts!). The objective is to enable positive identification of customers by their respective Banks. The documents as mandated under KYC guidelines are
- Proof of identity
- Proof of address
Q 7. What is Base Points (BPS)?
Ans. Base Points (BPS) is used to indicate changes in the rate of interest and other financial instrument
1 BPS = 0.01%
So when we say that repo rate has been decreased by 25 bps, it means that repo rate has been decreased by 0.25%.
Q 8. What is Repo Rate?
Ans. Repo Rate is the rate at which RBI lends money to commercial banks. Whenever any bank faces shortage of funds, it can borrow from RBI. A reduction in Repo Rate helps banks avail more money at a cheaper rate. Vice versa, hike in Repo rate will make borrowing money from RBI more expensive.
Q 9. What is Reverse Repo Rate?
Ans. This is vice-versa of Repo Rate. Reverse Repo rate is the rate at which RBI borrows money from banks. RBI uses this tool to drain excess money circulating in the banking system. Banks are always happy to lend money at good interest in safe hands.
Q 10. What is CRR Rate?
Ans. Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI as cash. If RBI decides to increase the CRR percentage, the credit available to banks for lending comes down. Thus, RBI can increase CRR rate to drain out the excess money from the banks.
Q 11. What is Bank Rate?
Ans. Bank rate is the interest rate at which the central bank (RBI) charges loans and advances to commercial banks and other financial intermediaries. Bank rate is yet another tool at the disposal of the central bank (RBI) to effectively control excess of the money supply.
Q 12. What is SLR Rate?
Ans. SLR (Statutory Liquidity Ratio) is the percentage of its NDTL (Net Demand and Time Liabilities), a commercial bank has to maintain as liquid assets such as cash, gold or govt. approved securities (i.e. govt Bonds) before providing credit to its customers. SLR Policy is a tool that RBI can use to effectively regulate the expansion of credit by the banks. SLR generally used to control inflation and propel growth.
SLR is determined as the percentage of total demand and percentage of time liability.
Time Liability: – The liability of a bank to pay to the customer on their anytime demand.
Q 13. What is PLR?
Ans. The Prime Interest Rate is the interest rate that a bank charges to interest rate that a bank charges to its most financially sound (or high credit worthy) customers. This rate remains basically the same for major banks. Adjustments to the prime rate are made by banks at the same time, although the prime rate does not adjust on regular basis.
Q 14. What is Base Rate?
Ans. It is the minimum rate of interest that a bank is allowed to charge from its customers. No bank can offer loans at a rate lower than Base rate to any of its customers unless mandated by the govt.
Q15. What is Deposit Rate?
Ans. Interest rates paid by banks on the cash deposited with them by the customer.