INFO ON BANKING AWARENESS AND IBPS COMMON INTERVIEW QUESTIONS
Below notes are compiled by Prashant Naik and text is a
collection from internet.
Questions related to Banking Awareness
There will be questions on general and banking awareness and
normally questions are asked about common concepts & burning topics. Likely
questions can be on RBI, Monetary policy, CRR, SLR, Bank Rate, Repo Rate,
Inflation, liquidity control measures, banks nationalization & other
important banking terms and current topics.
Basel III Accord - Basel 3 Norms
What is Basel iii or What is Basel 3 Accord or Meaning
and Definition of Basel III Accord:-
Basel III or Basel 3 released in December, 2010 is the
third in the series of Basel Accords. These accords deal with risk management
aspects for the banking sector. In a nut shell we can say that Basel iii is the
global regulatory standard (agreed upon by the members of the Basel Committee
on Banking Supervision) on bank capital adequacy, stress testing and market
liquidity risk. (Basel I and Basel II are the earlier versions of the same, and
were less stringent)
What does Basel III is all About?
According to Basel Committee on Banking Supervision
"Basel III is a comprehensive set of reform measures, developed by the
Basel Committee on Banking Supervision, to strengthen the regulation,
supervision and risk management of the banking sector".
Thus, we can say that Basel 3 is only a continuation of
effort initiated by the Basel Committee on Banking Supervision to enhance the
banking regulatory framework under Basel I and Basel II. This latest Accord now
seeks to improve the banking sector's ability to deal with financial and
economic stress, improve risk management and strengthen the banks'
transparency.
What are the objectives / aims of the Basel III measures?
Basel 3 measures aim to:
→ improve the banking sector's ability to absorb
shocks arising from financial and economic stress, whatever the source
→ improve risk management and governance
→ strengthen banks' transparency and disclosures.
Thus we can say that Basel III guidelines are aimed at to
improve the ability of banks to withstand periods of economic and financial
stress as the new guidelines are more stringent than the earlier requirements
for capital and liquidity in the banking sector.
How Does Basel III Requirements Will Affect Indian Banks:
The Basel III which is to be implemented by banks in
India as per the guidelines issued by RBI from time to time, will be
challenging task not only for the banks but also for GOI. It is estimated that
Indian banks will be required to raise Rs 6,00,000 crores in external capital
in next nine years or so i.e. by 2020 (The estimates vary from organisation to
organisation). Expansion of capital to this extent will affect the returns on
the equity of these banks specially public sector banks. However, only
consolation for Indian banks is the fact that historically they have maintained
their core and overall capital well in excess of the regulatory minimum.
What is Bank rate?
Bank Rate is the rate at which central bank of the
country (in India it is RBI) allows finance to commercial banks. Bank Rate is a
tool, which central bank uses for short-term purposes. Any upward revision in
Bank Rate by central bank is an indication that banks should also increase
deposit rates as well as Base Rate / Benchmark Prime Lending Rate. Thus any
revision in the Bank rate indicates that it is likely that interest rates on
your deposits are likely to either go up or go down, and it can also indicate an
increase or decrease in your EMI.
What is Bank Rate? (For Non Bankers):
This is the rate at which central bank (RBI) lends money
to other banks or financial institutions. If the bank rate goes up, long-term
interest rates also tend to move up, and vice-versa. Thus, it can said that in
case bank rate is hiked, in all likelihood banks will hikes their own lending
rates to ensure that they continue to make profit.
[Remember Bank Rate is not the same thing as Deposit
Rates offered by banks for fixed deposits and recurring deposits. If you are a
non banker and have landed on this page while looking at Deposit Rates, please
click here to go to correct page i.e. Best Deposit Rates offered by banks for
fixed deposits]
What is CRR?
The Reserve Bank of India (Amendment) Bill, 2006 has been
enacted and has come into force with its gazette notification. Consequent upon
amendment to sub-Section 42(1), the Reserve Bank, having regard to the needs of
securing the monetary stability in the country, RBI can prescribe Cash Reserve
Ratio (CRR) for scheduled banks without any floor rate or ceiling rate. [Before
the enactment of this amendment, in terms of Section 42(1) of the RBI Act, the
Reserve Bank could prescribe CRR for scheduled banks between 3 per cent and 20
per cent of total of their demand and time liabilities].
RBI uses CRR either to drain excess liquidity or to
release funds needed for the growth of the economy from time to time. Increase
in CRR means that banks have less funds available and money is sucked out of
circulation. Thus we can say that this serves duel purposes i.e.(a) ensures
that a portion of bank deposits is kept with RBI and is totally risk-free, (b)
enables RBI to control liquidity in the system, and thereby, inflation by tying
the hands of the banks in lending money.
What is CRR (For Non Bankers):
CRR means Cash Reserve Ratio. Banks in India are required
to hold a certain proportion of their deposits in the form of cash. However,
actually Banks don’t hold these as cash with themselves, but deposit such case
with Reserve Bank of India (RBI) / currency chests, which is considered as equivalent
to holding cash with RBI. This minimum ratio (that is the part of the total
deposits to be held as cash) is stipulated by the RBI and is known as the CRR
or Cash Reserve Ratio. Thus, When a bank’s deposits increase by Rs100, and if
the cash reserve ratio is 6%, the banks will have to hold additional Rs 6 with RBI
and Bank will be able to use only Rs 94 for investments and lending / credit
purpose. Therefore, higher the ratio (i.e. CRR), the lower is the amount that
banks will be able to use for lending and investment. This power of RBI to
reduce the lendable amount by increasing the CRR, makes it an instrument in the
hands of a central bank through which it can control the amount that banks
lend. Thus, it is a tool used by RBI to control liquidity in the banking
system.
What is SLR?
Every bank is required to maintain at the close of
business every day, a minimum proportion of their Net Demand and Time
Liabilities as liquid assets in the form of cash, gold and un-encumbered
approved securities. The ratio of liquid assets to demand and time liabilities
is known as Statutory Liquidity Ratio (SLR). RBI is empowered to increase this
ratio up to 40%. An increase in SLR also restrict the bank’s leverage position
to pump more money into the economy.
What is SLR ? (For Non Bankers):
SLR stands for Statutory Liquidity Ratio. This term is
used by bankers and indicates the minimum percentage of deposits that the bank
has to maintain in form of gold, cash or other approved securities. Thus, we
can say that it is ratio of cash and some other approved securities to
liabilities (deposits) It regulates the credit growth in India.
What are Repo rate and Reverse Repo rate?
Repo (Repurchase) rate is the rate at which the RBI lends
shot-term money to the banks against securities. When the repo rate increases
borrowing from RBI becomes more expensive. Therefore, we can say that in case, RBI
wants to make it more expensive for the banks to borrow money, it increases the
repo rate; similarly, if it wants to make it cheaper for banks to borrow money,
it reduces the repo rate
Reverse Repo rate is the rate at which banks park their
short-term excess liquidity with the RBI. The banks use this tool when they
feel that they are stuck with excess funds and are not able to invest anywhere
for reasonable returns. An increase in the reverse repo rate means that the RBI
is ready to borrow money from the banks at a higher rate of interest. As a
result, banks would prefer to keep more and more surplus funds with RBI.
Thus, we can conclude that Repo Rate signifies the rate
at which liquidity is injected in the banking system by RBI, whereas Reverse
repo rate signifies the rate at which the central bank absorbs liquidity from
the banks
Repo Rate increased by 25 bps (New Rate is 7.75%); MSF
also reduced by 25 bps to 8.75%; Reverse Repo Rate adjusted to 6.75% (updated
on 29/10/2013 at 11.05 AM)
RBI in its credit policy review on Wednesday (18
December 2013) kept the repo rate unchanged at 7.75%.
The policy announcements on 03/05/2011, indicates that
now repo rate has become the only independent variable policy rate, marking a
shift from earlier method of calibrating various policy rates separately.
The reverse repo rate -- the rate at which RBI borrows –
will be kept 100 basis points lower than the repo rate. MSF and Bank Rate too
are marked up (as declared by RBI) above the Repo Rate.
What is Inflation or What is the meaning of Inflation:
In economics inflation means, a rise in general level of
prices of goods and services in an economy over a period of time. When the
general price level rises, each unit of currency buys fewer goods and services.
Thus, inflation results in loss of value of money.
What is Deflation?:
Deflation is the opposite of inflation. Deflation refers
to situation, where there is decline in general price levels.
What is the purpose for introduction of White Label
ATMs in India
In India only Banks are allowed to set up ATMs. Although
between 2008 - 2011, there has been 30% growth in number of ATMs and by the
beginning of 2012, we have about 87,000 ATMs in India, yet the penetration of
ATMs in Tier III and Tier IV cities has been low and downtime of such ATMs has
been high. Thus, RBI is feeling that there is a need to expand ATM network,
which can be done by only with the help of private operators.
Who will benefit from White Label ATMs:
The white label automated teller machines are likely to
benefit customers as well as banks. With the expansion of ATM network,
customers will be able to withdraw funds at more locations which will be
convenient and located near to their home or place of work. Banks too support
introduction of white label ATMs as such machines are likely to reduce
pre-transaction cost for them and will be free from the problems relating to
maintaining and running such a payment channel
Tata enterprises White label brand named as INDICASH is
first white label ATMs in India.
Meaning of Brown Label ATMs:
'Brown label' ATM are those Automated Teller Machines
where hardware and the lease of the ATM machine is owned by a service provider,
but cash management and connectivity to banking networks is provided by a
sponsor bank whose brand is used on the ATM.
The `brown label' has come up as an alternative between
bank-owned ATMs and 'white label' ATMs
The Latest Rates
Q1: What is the latest
Bank Rate?
8.75% w.e.f. 29/10/2013 [Earlier it was 9.00%]
Q2: What is the latest
Repo Rate?
RBI in its credit policy review on Wednesday (18 December
2013) kept the repo rate unchanged at 7.75%.
7.75% w.e.f. 29/10/2013
Q3: What is the latest
Reverse Repo Rate?
6.75% w.e.f. 29/10/2013
Q4: What is the latest
Marginal Standing Facility (MSF) Rate?
8.75% w.e.f. 29/10/2013 [Earlier it was 9.00%]
Q5: What is the latest
Saving Bank Rate in India?
It is deregulated and each bank fixes its own SB Rate
Q6: What is the latest
Cash Reserve Ratio (CRR)?
4.00% w.e.f. 09/02/2013
Q7: What is the latest
Statutory Liquidity Ratio (SLR) ?
23% w.e.f. 11/08/2012
Q8: What is the amount
of income upto which no tax is payable??
Rs.2,00,000 for FY 2013-14
Q9: What is the amount
upto which no tax is payable by woman?
Rs.2,00,000 for FY 2013-14
Q10: What is the amount
upto which no tax is payable by Senior citizen?
Rs.2,50,000 for FY 2013-14 (For very senior citizen there
is no tax upto Rs 5 lakh)
What is the full form of FDI:
The full form of FDI is Foreign Direct Investment.
What is the meaning of FDI ?
The Foreign Direct Investment means “cross border
investment made by a resident in one economy in an enterprise in another
economy, with the objective of establishing a lasting interest in the investee
economy.
FDI is also described as “investment into the business
of a country by a company in another country”. Mostly the investment is into
production by either buying a company in the target country or by expanding
operations of an existing business in that country”. Such investments can take
place for many reasons, including to take advantage of cheaper wages, special
investment privileges (e.g. tax exemptions) offered by the country.
Why Countries Seek FDI ?
(a) Domestic capital is inadequate for purpose of
economic growth;
(b) Foreign capital is usually essential, at least as a
temporary measure, during the period when the capital market is in the process
of development;
(c) Foreign capital usually brings it with other scarce
productive factors like technical knowhow, business expertise and knowledge
What are the major benefits of FDI:
(a) Improves FOREX position of the country;
(b) Employment generation and increase in production ;
(c) Help in capital formation by bringing fresh capital;
(d) Helps in transfer of new technologies, management
skills, intellectual property
(e) Increases competition within the local market and
this brings higher efficiencies
(f) Helps in increasing exports;
(g) Increases tax revenues
Why FDI is Opposed by Local People or Disadvantages of FDI:
(a) Domestic companies fear that they may lose their ownership
to overseas company
(b) Small enterprises fear that they may not be able to
compete with world class large companies and may ultimately be edged out of
business;
(c) Large giants of the world try to monopolise and take
over the highly profitable sectors;
(d) Such foreign companies invest more in machinery and
intellectual property than in wages of the local people;
(e) Government has less control over the functioning of
such companies as they usually work as wholly owned subsidiary of an overseas
company;
Latest Important Banking Sector Data - 2013
Bank Rate
8.75% (w.e.f. 29/10/2013) Decreased from 9.00% which was
continuing since 07/10/2013
[Remember Bank Rate is not the same thing as Deposit
Rates offered by banks for fixed deposits and recurring deposits. If you are a
non banker and have landed on this page while looking at Deposit Rates, please
click here to go to correct page i.e. Best Deposit Rates offered by banks for
fixed deposits]
Cash Reserve Ratio (CRR) 4.00% (w.e.f. 09/02/2013)
announced on 29/01/2013 Decreased from 4.25% which was continuing since
30/10/2012
Statutory Liquidity Ratio (SLR)
23%(w.e.f. 11/08/2012) (announced on 31/07/2012) Decreased
from 24% which was continuing since 18/12/2010
Repo Rate under LAF
7.75% (w.e.f.
29/10/2013)
Increased from 7.50% which was continuing since 20/09/2013
Repo Rate increased by 25 bps (New Rate is 7.75%); MSF
also reduced by 25 bps to 8.75%; Reverse Repo Rate adjusted to 6.75% (updated
on 29/10/2013 at 11.05 AM).
RBI has also increase the liquidity provided through term
repos of 7-day and 14-day tenor from 0.25 per cent of NDTL of the banking
system to 0.5 per cent with immediate effect.
Reverse Repo Rate under LAF
6.75% (w.e.f.
29/10/2013)
Increased from 6.50% which was continuing since 20/09/2013
*Reverse Report rate was an independent rate till
03/05/2011. However, in the monetary policy announced on 03/05/2011, RBI has
decided that now onwards the Reverse Repo Rate will not be announced
separately, but will be linked to Repo rate and it will always be 100 bps below
the Repo rate (till RBI decides to delink the same)
Marginal Standing Facility (MSF)
8.75% (w.e.f. 29/10/2013) Decreased from 9.00% which was
continuing since 07/10/2013
What is Cheque Truncation System or CTS 2010:
The full form of CTS is Cheque Truncation System. RBI has
decided to launch this system and all banks across India are required to follow
RBI guidelines in this regard. As per RBI guidelines, now all banks have to
issue cheques conforming to the CTS 2010 standards with uniform features.
How is CTS 2010 will be different from earlier system of cheque clearance?
Under the CTS system, the physical movement of cheques
between banks will be eliminated. At present , when you issue a cheque to
someone, he has deposit the cheque in his bank to get credit. Then this cheque
moves physically from his bank to your bank which involves a lot of time and
risk. Now under CTS, instead of physical movement of the cheque, an
electronic image of the cheque will be transmitted to the drawee branch / bank.
The presenting bank will retains the physical cheque. Along with the
electronic image, certain key relevant information is also transmitted, such as
date of presentation, presenting bank details, data on the MICR band.
What is the purpose of CTS 2010 or What are the benefits of CTS?
The new process is being adopted to reduce the scope of
frauds as the new standardized cheques will have number of security features. The
system will also help in speed clearance of chequess and thus customers will be
able to get faster credit to their accounts. This will happen as there will be
no physical movement of the cheuqes and hence time is saved and risk of loss of
cheques in transit are totally eliminated.
When will the CTS begin ?:
RBI has originally decided that CTS will be effective
from 1st January 2013, but then it was announced that it will be effective from
1st April, 2013. However, as per RBI guidelines dated 18th March, 2013, now
this deadlines has been revised and it will be effective from 1st August, 2013
(i.e. non CTS cheques will be valid till 31st July, 2013).
What are the features of cheques issued under CTS ?:
(a) Cheque printer details: This is printed on the
extreme left hand side of the cheque. The printer details along with the words
‘CTS-2010’ is mentioned along the area where you tear off the leaf from the
cheque book.
(b) Rupee symbol: The new symbol of the Indian rupee is
printed beside the area where the amount in figures needs to be written.
(c) Details of the bank and its logo: The bank details
and its logo are printed on the face of the cheque. However, it is printed in
invisible ink.
(d) Signature space indicator: The words ‘please sign
above’ are mentioned indicating the space where you will need to sign the
cheque.
(e) VOID pantograph: This is a wavelike design, which is
visible to the naked eye and seen below the area where the account number is
printed.
Financial Inclusion - Role of Indian Banks in Reaching Out to the Unbanked
Even after 60 years of independence, a large section of
Indian population still remain unbanked. This malaise has led generation of
financial instability and pauperism among the lower income group who do not
have access to financial products and services. However, in the recent years
the government and Reserve Bank of India has been pushing the concept and idea
of financial inclusion.
What is Financial Inclusion in banking ? What is meaning
of Financial Inclusion in Indian context ?:
Financial inclusion is the delivery of financial services
at affordable costs to vast sections of disadvantaged and low income groups
(for example "no frill accounts").
Why Financial Inclusion in India is Important ?
The policy makers have been focusing on financial
inclusion of Indian rural and semi-rural areas primarily for three most
important pressing needs:
1. Creating a platform for inculcating the habit to save
money – The lower income category has been living under the constant shadow of
financial duress mainly because of the absence of savings. The absence of
savings makes them a vulnerable lot. Presence of banking services and products
aims to provide a critical tool to inculcate the habit to save. Capital
formation in the country is also expected to be boosted once financial
inclusion measures materialize, as people move away from traditional modes of
parking their savings in land, buildings, bullion, etc.
2. Providing formal credit avenues – So far the unbanked
population has been vulnerably dependent of informal channels of credit like
family, friends and moneylenders. Availability of adequate and transparent
credit from formal banking channels shall allow the entrepreneurial spirit of
the masses to increase outputs and prosperity in the countryside. A classic
example of what easy and affordable availability of credit can do for the poor
is the micro-finance sector.
3. Plug gaps and leaks in public subsidies and welfare
programmes – A considerable sum of money that is meant for the poorest of poor
does not actually reach them. While this money meanders through large system of
government bureaucracy much of it is widely believed to leak and is unable to
reach the intended parties. Government is therefore, pushing for direct cash
transfers to beneficiaries through their bank accounts rather than subsidizing
products and making cash payments. This laudable effort is expected to reduce
government’s subsidy bill (as it shall save that part of the subsidy that is
leaked) and provide relief only to the real beneficiaries. All these efforts
require an efficient and affordable banking system that can reach out to all.
Therefore, there has been a push for financial inclusion.
What are the steps taken by RBI to support financial
inclusion?
RBI set up the Khan Commission in 2004 to look into
financial inclusion and the recommendations of the commission were incorporated
into the mid-term review of the policy (2005–06) and urged banks to review
their existing practices to align them with the objective of financial
inclusion. RBI also exhorted the banks and stressed the need to make available
a basic banking 'no frills' account either with 'NIL' or very minimum balances
as well as charges that would make such accounts accessible to vast sections of
the population
Of the many schemes and programmes pushed forward by
RBI the following need special mention.
A. Initiation of no-frills account – These accounts
provide basic facilities of deposit and withdrawal to accountholders makes
banking affordable by cutting down on extra frills that are no use for the
lower section of the society. These accounts are expected to provide a low-cost
mode to access bank accounts. RBI also eased KYC (Know Your customer) norms for
opening of such accounts.
B. Banking service reaches homes through business
correspondents – The banking systems have started to adopt the business
correspondent mechanism to facilitate banking services in those areas where
banks are unable to open brick and mortar branches for cost considerations.
Business Correspondents provide affordability and easy accessibility to this
unbanked population. Armed with suitable technology, the business
correspondents help in taking the banks to the doorsteps of rural households.
C. EBT – Electronic Benefits Transfer – To plug the
leakages that are present in transfer of payments through the various levels of
bureaucracy, government has begun the procedure of transferring payment
directly to accounts of the beneficiaries. This “human-less” transfer of
payment is expected to provide better benefits and relief to the beneficiaries
while reducing government’s cost of transfer and monitoring. Once the benefits
starts to accrue to the masses, those who remain unbanked shall start looking
to enter the formal financial sector.
What more is to be done for financial inclusion?
Financial inclusion of the unbanked masses is a critical
step that requires political will, bureaucratic support and dogged persuasion
by RBI. It is expected to unleash the hugely untapped potential of the bottom
of pyramid section of Indian economy. Perhaps, financial inclusion can begin
the next revolution of growth and prosperity.
What is RTGS?
The full form of RTGS is "Real Time Gross Settlement".
RTGS can be defined as "as the continuous (real-time) settlement of funds
transfers individually on an order by order basis (without netting")
What do you mean by Real Time? What is the Meaning of
Gross Settlement"?
Here the words 'Real Time' refers to the process of
instructions that are executed at the time they are received, rather than at
some later time. On the other hand "Gross Settlement" means the
settlement of funds transfer instructions occurs individually (on an
instruction by instruction basis). The settlement of funds actually takes place
in the books of RBI and thus the payments are considered as final and
irrevocable.
What is NEFT?
The full form of NEFT is "National Electronic Funds
Transfer (NEFT). The NEFT is a nationwide payment system facilitating
one-to-one funds transfer. Under this system, individuals, firms and corporates
can electronically transfer funds from any bank branch to any individual, firm
or corporate having an account with any other bank branch in the country participating
in the system.
RTGS Vs NEFT:
Thus, we can say that both RTGS and NEFT are schemes
started by RBI for the benefit of the customers which allow accounts holders in
the banks to electronically transfer the funds intra-bank. In the case of RTGS,
settlement in on 'Real Time' basis whereas in case of NEFT the settlement in on
batch basis and net basis. There are some other rules, regulations and
differences, which we will be discussing below:-
What are the minimum and maximum amount of remittance under
RTGS and NEFT:
RTGS
NEFT
Minimum Amount: RS 2 lakhs
No minimum limit
Maximum Amount: No upper ceiling
No upper ceiling
(However, maximum amount per transaction is limited to
Rs.50,000/- for cash-based remittances and remittances to Nepal.)
Questions of Personal Nature
Such types of questions can include questions about
yourself, about your home town, about your family background, about your
schooling, about your culture, about your hobbies, about your extra activities,
why you want to enter in to banking sector etc, likely questions can be tell me
about yourself, give a brief introduction about you, introduce yourself etc.
Questions on Your Qualifications - These types of
questions are almost certain to be asked and such type of questions can include
about your specialization such as engineering, computers, literature (as the
case may be), about your major subjects, important concepts related to your
major subjects, about your university, how your qualifications can contribute
in your job, why banking after having done MBA/MCA/Phd/M.phil/LLB/etc.
Questions on your experience
If you have worked somewhere than questions will be asked
on that and likely questions can be about your earlier job profile,
organization, concepts you have learned there, how your experience is going to
help you in this job etc.
Other Miscellaneous Questions - Friends, we have tried to
cover most of the likely areas but at the same time you should be prepare for
any other unexpected questions because you never know that what is going in the
mind of the interviewer. Hence you should be ready to face any unlikely
question also. However based on the experience we can safely assume that most
of the questions are likely to be from your bio data which we have classified
above. In case you are having any question in mind and want to know how to
answer that you can post the same in the comments section given below.
IBPS Common Interview Questions
Que-1. Introduce Yourself?
Que-2. Have you applied for any other banks?
Que-3.Why you want to enter in Banking Sector?
Que-4. Who is Governor of RBI?
Que-5.What was the name of first bank established in
India?
Que-6. Do you support privatization of banks and why?
Que-7. What is the difference in Current account and
Savings accounts?
Que-8.What is Mutual Fund?
Que-9. What are differences in Private Bank and Public
Bank?
Que-10.What is Bank Rate?
Que-11. Do you have any question for us?
Other Important Topics
Please find and read info on below important topics.
Banking Structure in India
Banking Functions
RBI and its Role in Banking
Know Your Customer (KYC)
Technology and Banking
Banking Ombudsman
Banking and Financial Terms
Mobile and internet based Payment and banking
Direct Benefit Transfer (DBT)
Bank products - types of Deposits, Types of Loans/Advances, value added services, etc.
Monetary Policy
Sensex
Inflation Rate
GDP
National Payments Corporation of India
Unique Identification Authority and AADHAR
Indian Banks' Association (IBA) - an advisory service organisation of banks
