MANAGER – CREDIT

Tangible net worth is

1)Share capital plus reserves

2) Total Current assets

3)Fixed assests minus depreciation

4)networth minus tangible assets

5) None of these

The expected topics 

Financial Mng Basic (Time Value, NPV..)

What is Credit Mng (Fund based non fund based credit. WC ,Project Finance.. )

Analysis of Financial Statemnt(incl Ratio Analysis. Current Ratio, Debt Service

coverage ratio.. )

What is Risk Mng(risk identification,measuremnt, pricing, mitigation where risk is

uncertainities n variation..)

Credit Risk(Borrower not paying int or sum..)

Asset Liability Mng(Risk arising out of mismatch of asset and liability of bank inc

interest n liquidity risk.. )

Statistics(Standars Error , Central Limit Theory..)

Note: Do not fall for the temptation to cover what was imp for your MBA exam. Its

credit Mng exam select topics accordingly. Avoid lengthy calculation.Avoid adv

topics like Fin Risk Mng. If you are unaware of above topics then google it. Apply

commonsense don't panic, you have all the ans to your queries just think over it. All

the best!

Sachin

at_t_dude@yahoo.co.in

BANKING RELATED GENERAL AWARENESS - OBJECTIVE TYPE PAPER ONE TO EIGHTPART B

BANKING GENERAL AWARENESS –2011 ONE

1. Paying for facilities like issuance of demand drafts, cheque books, credit or debit cards and ATM interchange may soon become passé as public sector lender ____ waived all service charges on current and savings accounts (CASA), the first by any bank. The move is aimed at increasing the bank’s below-industry average CASA deposits and the bank expects to double its retail account to 1 crore in the next 12 months.a) SBI b) PNB c) Canara Bank d) IDBI Bank e) None of these

2. At present, how many families are categorized as BPL?a) 5.10 cr b) 6.52 cr c) 7.81 cr d) 10.40 cr e) None of these 

3. DTC stands fora) Direct Tax Code b) Disinvestment Tax Code c) Derivative Trade Coded) Distinct Tax Code e) Delhi Tax Code

4. In a surprise move and to the disappointment of taxpayers, the government on Aug 30 deferred the implementation of the Direct Taxes Code (DTC) by a year to ___, 2012 and sough to waive the preferential treatment to woman in tax payment in the name of gender equity.a) Jan 1 b) Mar 31 c) Apr 1 d) Dec 31 e) None of these

5. Which of the following statement is/are true about Direct Taxes Code (DTC)?A) Under the Direct Taxes Code Bill, 2010 – tabled in the Lok Sabha by finance minister Pranab Mukherjee and referred to the Select Committee of Parliament for scrutiny – the government has sought to raise the income tax exemption limit from Rs.1.6 Lakh to Rs.2 Lakh while retaining a host of incentives for individuals.B) While senior citizens (above 65 years) will enjoy a higher exemption of Rs.2.5 Lakh, woman taxpayers will have no additional relief as they have not been categorized separately.C) As for corporate taxes, the levy will be at a flat rate of 30 per cent with no surcharges or cesses. The minimum alternate tax (MAT)will be levied on book profits at 20 per cent.a) Only A b) Only A& B c) Only B&C d) All the abovee) None of these

6. Name the country with India has signed a protocol to the Double Taxation Avoidance Agreement that would the wealth illegally stashed away in banks.a) Britain b) US c) Switzerland d) Francee) None of these

7. In a major step to alleviate delays in wage payments under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), which state govt has launched an “e-Shakti Financial Inclusion” scheme, the first of its kind in the country?a) UP b) MP c) Bihar d) Maharashtra e) None of these

8. Name the bank whose chairman Stephan K Green will be appointed as the minister of state for trade and investment.a) HSBC Holdings b) Standard Chartered Bank c) Barclays Bankd) Royal Bank of Scotland e) None of these

\9. In a big boost to the disinvestment programme of the UPA-II Government, the Petroleum and Natural Gas Ministry gave its green signal to the sale of government’s stake in Oil and Natural

Gas Corporation (ONGC) and Indian Oil Corporation (IOC), a move aimed at raising around __________ this fiscal. a) Rs. 14,000 cr b) Rs.18,000 cr c) Rs.24,000 cr d) Rs. 30,000 cr e) None of these 

10. With a net worth of US$62 billion, Mukesh Ambani would be the richest man of earth in ___________, going past the current claimant, Mexican businessman Carlos Slim, according to a forecast by Forbes. a) 2012 b) 2014 c) 2016 d) 2018 e) None of these 

11. In one of his speeches Pranab Mukherjee said that the Govt had no plans to dilute the roles of market regulators. This means the role of which of the following will not be diluted?a) Life Insurance Corporation of India (LIC)b) Confederation of Indian Industry (CII)c) Federation of Chambers of Commerce & Industry (FICCI)d) Bureau of Indian Standards e) Securities & Exchange Board of India (SEBI)

12. What is the full form of “ULIP’ , the term which was in the news recently?a) Universal Life & Investment Plan b) Unit Loan & Insurance Planc) Universal Loan & Investment Plan d) Uniformly Loaded Investment Plane) Unit Linked Insurance Plan

13. As per the news published in some major financial news papers, the Maharashtra Govt is planning to introduce “Green Tax” on Vehicles. What is the Purpose of Green Tax?a) It has been introduced with the aim of discouraging high consumption of petroleum products.b) It is a tax levied by the Govt in place of VAT as VAT is not very profitable for State Govts.c) It is just like a toll tax which will be charges from all the vehicles whenever they enter green areas of a city like hospitals, schools, and old-age homes.d) This is a tax levied on big commercial vehicles only with the aim of prohibiting them from entering residential areas and non-commercial areas.e) None of these 

14. Very often we read in newspapers about 3 G Third Generation Technology. This is a set of standards used by which of the following?a) To Combat climatic changes b) Production of nuclear energyc) Film production d) Mobile telecommunicationse) All of these

15. Which of the following companies is NOT in the field of insurance business?a) ICICI Prudential b) Bajaj Allianz c) Tata AIGd) Aegon Religare e) Royal Orchild

16. Many times we read that a corporate entity is in the process of raising its capital base. Why is a company required to raise money to strengthen its capital base?A) To finance its diversification Plans B) To finance its diversification plansC) To repay its loans and borrowingsa) Only A b) Only B c) Only C d) Only A & B e) All A, B&C

17. Many times we read in newspapers that a company is planning to bring a public issue. What

does it mean?A) Shares of the company will be issued only through public sector organizations like banks/Central financial institutions etc.B) Shares of the company will be issued to general public only through primary market.C) This means some stakeholders/ promoters are willing to leave the company. Hence they wish to sell their stock to the general public.a) Only A b) Only B c) Only C d) All A,B&C e) None of these

18. Whenever some people wish to enter into the business world, it is a must for them to approach a bank. What services do banks provide them in this regard?A) Banks act as payment agents by operating current accounts, paying cheques and receiving payments for them.B) Maintaining account books for them for their day-to- day activities so that they are not required to appoint account/finance personnel on a regular basis.C) Lending money by way of overdraft, installment loan, credit or advance for business activitiesa) Only A b) Only B c) Only C d) Only A&C e) All of these

19. As we all have noticed, banks these days are giving more emphasis on “Branchless Banking”. What does this really mean?A) Banks will not have many branches as used to be in the good old days. Instead, the number of branches will be restricted and will conduct only a specified core business.B) Banks will launch/operate many delivery channels like ATMs, Mobile Banking/ Internet Banking etc sot that people are not required to visit a branch for their usual banking needs.C) This means banks will issue only debit or credit cards for all types of day-to-day financial transactions. Cheques/cash payments will not be allowed.a) Only A b) Only B c) Only A&B d) Only B&Ce) All A, B&C 

20. Which of the following is NOT a function of a bank?a) Providing project finance b) Selling Mutual Fundsc) Deciding policy rates like CRR, Repo Rate / SLR etcd) Settlement of payments of behalf of the customers e) All of these are functions of a bank

21. Which of the following is a form of “savings Bank” popular among the poor or children?a) Core Banking b) Credit Banking c) Debit Cardd) Merchant Banking e) Piggy Banking

22. Dr. Amartya Sen is a famousa) Physicist b) Chemical Engineer c) Psychologist e) Economiste) None of these 

23. Which of the following nations is considered the originator of the concept of Micro Finance?a) India b) Bangladesh c) South Africa d) USA e) None of these

24. Govt normally does not announce the Minimum Support Price (MSP) of a) Wheat b) Paddy c) Sugarcane d) Jute e) All of these

25. At present Dr.D Subbarao is thea) Governor of Orissa b) Deputy Chairman of the Planning Commissionc) Chairman of the FICCI d) India’s Representative in IMF e) None of these

26. Banks borrow money from the RBI on which of the following rates?a) Bank rate b) CRR c) SLR d) Reverse Repo Rate e) Repo Rate

27. Which of the following is NOT a part of India’s Money Market?a) Bill Market b) Call Money Market c) Banks d) Mutual Fundse) Indian Gold Council

28. Which of the following is/are NOT the feature(s) of India’s Foreign Trade Policy (2004 to 2009)?A) To double India’s percent age share of global trade from present 0.7 per cent to 1.5 per cent by 2009B) Simplifying the procedures and bringing down the cost C) Make SAARC countries India’s most preferred foreign trade partners by 2009a) Only I b) Only II c) Only III d) All I, II and III e) Only I and III

29. Which of the following is /are the measure(s) taken by the Reserve Bank of India (RBI) to ease the liquidity crunch in the country?A) Cut in Cash Reserve Ratio and Statutory Liquidity Ratio.B) Increase the flow of foreign direct investmentC) Supply of additional currency notes in the market.a) Only I b) Only II c) Only III d) All I, II and IIIe) None of these

30. Which of the following services is NOT provided by the post offices of India?a) Savings Bank Scheme b) Retailing of Mutual Fundsc) Sale of Stamp Papers (Judicial) d) Issuance of Demand Draftse) Life Insurance Cover 

31. Which of the following is true of New Lending Rate System in Banks?a) For existing loans, the base rate would be applicable once they matured.b) For new loans, the base rate would be levied immediately.c) Banks can not charge customers any fee for such switch-over.d) All of these e) None of these

32. According to recently released RBI data on the Balance of Payment, net portfolio investments into country during April- December amounted toa) $ 23.6 billion b) $ 30.4 billion c) $ 32.8 billion]d) $ 36.6 billion e) $ 40.4 billion

33. Which of the following is NOT a Government sponsored organization?a) Small Industries Development Bank of Indiab) NABARD c) National Housing Bank d) ICICI Banke) All are government sponsored

34. The Reserve Bank has constituted a working group to review the current operating procedure of monetary policy, as transmission of the policy to the rest of the system remains imperfect. The group, to be headed by RBI executive director ___________, will also review the liquidity adjustment facility (LAF), through which the central bank manages money supply in the system on a day-to-day basis. 

a) Usha Thorat b) Deepak Mohanty c) Rakesh Mohand) Naresh Chandra e) None of these 

35. SEBI was established in a) 1993 b) 1992 c) 1988 d) 1990 e) None of these 

36. The working of SEBI includes: a) To regulate the dealings of share market b) To check the foul dealings in share market c) To control the inside trading of shares d) All of these e) None of these 

37. The ‘Ad hoc Treasury Bill a system’ of meeting budget deficit in India was replaced by a system which came into force on a) March 31,1997 b) April 1,1996 c) April 1,1997 d) March 31, 1996 e) None of these 

38. The recommendations of the 13th Finance Commission has become/will be operational during the perioda) 2009-14 b) 2010 – 15 c) 2011 – 16 d) 2012 – 2017 e) None of these

39. Rural Woman can avail the benefit of Mahila Samriddhi Yojana if they open their account in a) Rural Pot Offices b) Commercial Banks c) Rural Development Bankd) Any of the above e) None of these 

40. The rate at which banks lend to RBI is known as a) Bank Rate b) Repo Rate c) Reverse Repo Rate d) Interest Ratee) None of these 

41. The cause of deflation is a) Lack of goods and services as compared to money supplyb) Lack of imports as compared to exports c) Lack of money supply as compared to supply of goods and services d) Lack of money supply and goods e) None of these 

42. Which bank in India performs the duties of the central bank?a) Central Bank of India b) State Bank of India c) Reserve Bank of Indiad) Bank of India e) None of these 

43. Mixed Economy means a) Co-existence of small and large industriesb) Promoting both Agriculture and Industries in the economyc) Co-existence of public and private sectors d) Co-existence of the rich and the poor e) None of these

44. ‘Pure Banking, Northing Else’ is a slogan raised by a) ICICI Bank b) HDFC Bank c) SBI d) UTI Banke) None of these 

45. Which of the following is true about Swavalamban Scheme?A) Finance minister Pranab Mukherjee will launch the Swavalamban scheme in Murshidabad

district of West Bengal.B) As per the scheme, the Centre will contribute Rs.1,000 a year to each New Pension Scheme (NPS) account opened in the current year.C) The contribution will be made till 2013 – 14.D) To be eligible, a person will have to make a minimum contribution of Rs.1,000 and maximum contribution of Rs.12,000 per annum.a) Only A,B & C b) Only A, C & D c) Only A & D d) All the abovee) None of these 

46. The axe finally fell on Asia’s first cooperative bank, ___________, when the Reserve Bank of India (RBI) cancelled its licence and asked it not to continue any banking – related transactions until further directions. a) Saraswat Co-operative Bank Ltd b) Cosmos Co-operative Bank Ltdc) Nadar Co-operative Bank Ltd d) Anyonya Cooperative Bank Ltde) None of these 

47. 13th Finance Commission was constituted under the Chairmanship of a) YSP Thorat b) Vijai L Kelkar c) TS Vijayan d) Laxmi Narayane) None of these 

48. SEBI is a a) Statutory body b) Advisory body c) Constitutional bodyd) Non-statutory body e) None of these

49. Bank Cash Transaction Tax (BCTT) was withdrawn with effect froma) January 1, 2009 b) March 1, 2009 c) March 31, 2009 d) April 1, 2009 e) None of these 

50. Which committee recommended abolition of tax rebates under Section 88?a) Chelliah Committee b) Kelkar Committee c) Shome Committeed) Naresh Chandra Committee e) None of these 

38. Tarapore Committee submitted its report on “Full Convertibility on Rupee” in a) Current account b) Capital account c) Both on current as well as on capital accountd) Special Drawing Rights (SDRs) e) None of these 

39. CENVAT is related to a) Sales Tax b) Excise Duty c) Custom Duty d) Service Taxe) None of these 

45. NABARD was established on the recommendation of a) Public Accounts Committee b) Shivaraman Committeec) Narasimham Committee d) Khandelwal Committee e) None of these 

46. Sampurna Gramin Rozgar Yojana has been launched from a) 1 Apr 2001 b) 25 Sep 2001 c) 30 Sep 2001 d) No scheme of such title has yet been launched e) None of these 47. VAT is imposed 

a) Directly on the consumer b) On the final stage of production c) On the first stage of production d) On all stages between production and final sale e) None of these 

48. Kutir Jyoti scheme is associate with a) Promoting cottage industry in villages b) Promoting employment among rural unemployed youth c) Providing electricity to rural families living below the poverty lined) All of these e) None of these 

49. CAPART is related with a) Assisting and evaluating rural welfare programmes b) Computer hardwarec) Consultant service of export promotion. d) Controlling pollution in big industries e) None of these 

50. The note issuing dept of RBI should always possess a minimum gold stock worth a) Rs.85 crore b) Rs.115 crore c) Rs.200 crore e) Rs.215 crore e) None of these **********

ANSWERS BANKING GENERAL AWARENESS ONE

1.D 2.B 3.A 4.C 5.D 6.C 7.C 8.A 9.C 10.B

11.E 12.E 13.E 14.D 15.E 16.A 17.B 18.D 19.E 20.C

21.E 22.D 23.B 24.D 25.E 26.E 27.E 28.D 29.A 30.E

31.D 32.C 33.D 34.B 35.C 36.D 37.C 38.B 39.A 40.C

41.C 42.C 43.C 44.C 45.D 46.D 47.B 48.A 49.D 50.B

***********************Sr.No Questions Answer

1)      What is counterpart scheme of Liquid Term Deposit Scheme in rural branches?

A.     MODS

B.     Kisan Mitra Yojana

C.     Kisan Mitra Jama Yojana

D.     Kisan Credit Card

 C

 

 

2)      Cheque Book can be issued on a Kisan Credit Card Account is the loan amount of above

A.     Rs.25,000/-

B.     Rs. 50,000/-

C.     Rs. 1,00,000/-

D.     Rs. 75,000/-

 

 

A

3)      Legal Expenses incurred by the Bank in respect of Protested Bills/Recalled Debt accounts are to be debited to?

A.     Respective PB/RD A/c.

B.     Charges A/c.(Legal Expenses)

C.     Charges A/c.(Sundries)

D.     B.O.D.

 

B

4)      If an NRI makes a deposit under the Multi-Option Deposit Scheme, the deposit will be in the nature of

A.     NRE term deposit a/c.

B.     NRO term deposit a/c.

C.     NRNR account

D.     FCNR account

 

B

5)      Plastic Cards implanted with computer chip to the data is know as

A.     Credit Card

B.     ATM Card

C.     Smart Card

D.     SME Card

C

 

6)      No penalty will be levied for premature withdrawal of single deposit up to Rs????.. In respect of deposits from 15 days to less than 3 years.

A.     Rs.50000

B.     Rs.100000

C.     Rs.200000

D.     Rs.500000

 

B

7)      Under SGSY a SHG  should consist of ---- members

A.     5-10

B.     10-15

C.     10-20

D.     15-20

 

 

C

8)      When the network serves a small area of a building or group of building, it is known as

A.     WAN

B.     LAN

C.     WWW

D.     MAN

 

B

9)      The Blue revolution related to

A.     Crops

B.     Fisheries

C.     Dairy

D.     Water

 

 

B

10)              Minimum number of implements to be purchased along with tractor

A.     Four

B.     Three

C.     Two

D.     One

 

B

11)              The software which our Bank has purchased for implementation of Core banking solutions

A.     e solutions

B.     Bank net

C.     B@ncs24

D.     Novell

 

C

12)              How many times of Net Monthly Income, loan amount can be sanctioned under SCOOM Scheme?

A.     6 times

B.     9 times

C.     12 times

D.     24 times

 

A

13)              Under PMRY scheme, the margin is

A.     5-15%

B.     5-15.25%

C.     10-25%

D.     5-16.25%

 

D

14)              UPCDC 500 refers to A

A.     Documentary Credits

B.     Documentary Collections

C.     Forward Contracts

D.     Bank Master

 

15)              The working capital requirement in respect of SSI units in excess of Rs. 5 Crores will be assessed under:

A.     Nayak Committee

B.     Vaghul Committee

C.     Kapur Committee

D.     Projected Balance Sheet method.

 

D

16)              The relationship between the Banker and hirer of Bank Locker is that of

A.     Debtor-Creditor

B.     Bailor-Bailee

C.     Licensor-Licensee

D.     Principal-Agent

 

C

17)              Restriction on number of partners in a firm is imposed by

A.     Indian Companies Act, 1956

B.     Indian Partnership Act, 1932

C.     Indian Contract Act, 1872

D.     None of these

 

A

18)              Balance in the account of a deceased constituent can be attached by.

A.     A Court Attachment Order

B

B.     A Revenue Attachment Order

C.     A and B

D.     None of the above

 

19)              The certificate to commence business is to be called for, for perusal and return for opening of an account of:

A.     Public Limited Company

B.     Private Limited Company

C.     Club and Trust

D.     All of the above

 

A

20)              What is the basic document to be obtained while opening a Trust Account?

A.     Trust Letter

B.     Trust Deed

C.     Trust Resolution

D.     Memorandum of Association

 

B

21)              Inchoate Negotiable Instrument means:

A.     Post-dated cheque

B.     Pre-dated cheque

C.     Lost Instrument

D.     Incomplete Instrument

 

D

22)              Software industries with individual credit limits upto Rs. 1 Crore are to be included in

A.     Priority Sector

B.     Commercial and Institutional segment

A

C.     Software Exports

D.     Business Enterprise

 

23)              When funds from NRE accounts are repatriated the exchange risk is borne by:

A.     RBI

B.     Authorized Dealer

C.     Depositor

D.     Partly by A.D. and Depositor

 

C

24)              Minimum suit amount for filing a case before Debt Recovery Tribunal is

A.     Rs. 1.00 Lac

B.     Rs. 5 Lacs

C.     Rs. 10 Lacs

D.     Rs.25 Lacs

 

 

C

25)              Physical verification of draft forms is to be done at _____ intervals

A.     Monthly

B.     Quarterly

C.     Half yearly

D.     Annually

 

C

26)              Application under SJSRY are sponsored by

A.     Panchayat Samiti

B.     District Industries Centre

C.     Municipal Council

C

D.     Block Level Bankers Committee

 

27)              Articles of association of a company contains details regarding:

A.     Objectives of the Company

B.     Authorized capital of the Company

C.     Matter related to the conduct of day-to-day business of the Company

D.     Registered Office of the Company

 

C

28)              Which of the following is not a measure of the profitability of the Branch?

A.     Gross Rate of Return

B.     Expenses Ratio

C.     Business per Employee

D.     Net Profit per Employee

 

C

29)              The internet banking facility is known as

A.   OnlineSBI

B.   Net banking

C.   e pay

D.   SBI Connect

 

A

 

 

 

 

30)              Corporate Banking Group has been formed with an aim of

A.     Management of Treasure and Forex products

B.     To take care of needs of large corporate customers

C.     International Banking Business

B

D.     Implementation of Systems and Procedures

 

31)              Which of the following is not member of Circle Human Relations Committee (CHRC)

A.     Chief General Manager

B.     General Manager Commercial Banking

C.     General Manager D & PB

D.     Circle Financial Officer

 

D

32)              In FCBs GENDA reports are to be checked by:

A.     System Administrator

B.     Accountant

C.     Branch Manager

D.     User Control Officer

 

C

33)              The Audit Committee Board of the Bank has ____ members

A.     5

B.     6

C.     8

D.     9

 

B

34)              Which is the Apex body for overall control of Risk Management functions reporting to the Bank?s Board.

A.     Audit Committee

B.     Asset Liability Management Committee

C.     Basle Committee

D.     Integrated Risk Management Committee

D

 

35)              Pre-requisite for a holder to become a holder in due course is that he should obtain a negotiable instrument:

A.     Duly endorsed and delivered

B.     Duly delivered

C.     For valid consideration

D.     None of the above

 

C

36)              Under the National Banking Group the LHO function as

A.     Strategic Business Units

B.     Development and Personal Banking

C.     Commercial Network

D.     Retail Network

 

A

37)              As per Bank?s loan policy Medium Term Loan component should not exceed  ___of aggregate non food advances of the Bank.

A.     15%

B.     30%

C.     50%

D.     60%

 

B

38)              Under SME Credit Plus the units rated _____ and above are eligible

A.     SB3

B.     SB 2

C.     SB 5

D.     SB 4

D

 

39)              Under SSI segment Composite Loan Limit is

A.     Rs.10 Lacs

B.     Rs. 25 Lacs

C.     Rs. 50 Lacs

D.     Rs. 100 Lacs

 

C

40)              The minimum DSCR to be eligible  for availing of finance under SBI Shoppe

A.     2

B.     1.25

C.     1.50

D.     1.75

 

D

41)              Bank Master is multi-currency software, which can support?currencies.

A.     49

B.     99

C.     109

D.     149

 

B

42)              Bank Master software works on:

A.     Windows only

B.     DOS

C    None of the above

D.   A&B

 

B

43)              Expand SMA: D

A.     Special Monitoring Accounts

B.     Special Management Approvals

C.     Special Monetary Accounts

D.     Special Mention Account

 

44)              Take over of advance from which Bank is not permitted:

A.     Co-operative Bank

B.     Nationalized Banks

C.     Our own Branches

D.     Associate Banks

 

D

45)              What is primary security for SME Credit Plus?

A.     Stocks/Book Debts

B.     Land and Building

C.     Third Party Guarantee

D.     Clean

 

D

46)              The balance of Currency Transfer Account is transferred on

A.     30th Sept and 31st March

B.     30th April and 31st Oct

C.     28th Feb. and 31st July

D.     31st Dec and 30th June

 

B

47)              Under SME CREDIT PLUS loan once drawn cannot be outstanding for more than ??. months.

B

A.     1

B.     2

C.     3

D.     6

 

48)              Under Savings Plus the auto sweep is carried on

A.     1st of every month

B.     15th of every month

C.     10th and 20th of every month

D.     30th of every month

 

C

49)              Under Commercial and Institutional Documentation C 5 is

A.     Hypothecation Agreement

B.     Mortgage

C.     Guarantee Agreement

D.     Letter advising grant of Credit facilities

 

 

D

50)              The periodicity of FFR I is

A.     Quarterly

B.     Monthly

C.     Half Yearly

D.     Yearly

 

A

51)              Amongst the following schemes which one is applicable to C&I segment

A.     Rent Plus

B.     Mortgage Loan

A

C.     SME Credit Plus

D.     Rural Godown Scheme

 

52)              Stock Audit is compulsory for credit limit of Rs.____ and above

A.     2 Crores

B.     1 Crores

C.     5 Crores

D.     10 Crores

 

C

53)              What is the maximum period for which bridge loan can be sanctioned

A.     4 Months

B.     3 Months

C.     2 Months

D.     12 Months

 

A

54)              Right of set off cannot be exercised by the Bank in respect of

A.     An ascertained debt

B.     A Time barred Debt

C.     A Contingent Debt

D.     Subordinated Debt

 

C

55)              Audited Balance Sheet will have to be prepared by business entities irrespective of their constitution if the annual turn over is Rs.

A.     10 Lacs

B.     45 Lacs

D

C.     30 Lacs

D.     40 Lacs

 

56)              The PMRY scheme stipulates reservation for the SC/ST to the extent of:

A.     15.50%

B.     20.50%

C.     22.50%

D.     27.50%

 

C

57)              Which among the following is not an actionable claim

A.     TDR

B.     Book Debts

C.     LIC Policy

D.     Shares

 

D

58)              Investment ceiling in plant and machinery for Hosiery SSI unit is:

A.     60.00 lacs

B.     100.00 lacs

C.     300.00 lacs

D.     500.00 lacs

 

D

59)              LIC Policies accepted as cover for advances are entered in

A.     Branch Document Register

B.     Power of Attorney Register

C.     Security Ledger

D

D.     Misc. Securities Register

 

60)              The Bank collects the supply bills on behalf of its borrowers on the basis of the following documents signed by them

A.     Mortgage Deed

B.     Mandate

C.     Hypothecation Agreement

D.     Power of Attorney

 

D

61)              Provision on unsecured portion of doubtful assets should be provided at ------- %.

A.     20

B.     30

C.     50

D.     100

 

D

62)              Assets Hypothecation Register is maintained in respect of

A.     Special Hypothecation Account

B.     Cash Credit (Lock and Key)

C.     Term Loan Account

D.     Machinery

 

A

63)              Hedging means

A.     Protecting against fluctuation, uncertainty, risk in forex markets

B.     Speculative buying/selling of foreign currency

C.     Credit Risk Assessment in respect of advances

A

D.     None of the above

 

64)              MIXED FARMING means:

A.     Multiple Cropping

B.     Availing both ACC and ATL

C.     Availing ACC, ATL, KGC and Agri. Gold Loan

D.     Undertaking cultivation & Allied Activities

 

D

65)              Daily transactions regarding the implementation of Annual Credit Plan is reported to lead bank in:

A.     LBR 1

B.     LBR 2

C.     LBR 3

D.     LBS 1

 

B

66)              Refinance in respect of Composite Term Loans granted to village industries is obtained from

A.     District Industries Centre

B.     RBI

C.     NABARD

D.     SIDBI

 

C

67)              Section 45 Z of Banking Regulation Act, 1949 relates to

A.     Return of unclaimed deposits

B.     Permission to open new branches

C.     Maintenance of Currency Chest

D.     Nomination facility

D

 

68)              What is a contract of Insurance?

A.     It is a contract of indemnity.

B.     It is a contract of pledge.

C.     It is a contract of guarantee.

D.     All of above.

 

A

69)              Contribution in the break even analysis stands for

A.     Sales minus fixed costs

B.     Variable Costs

C.     Sales minus Variables Costs

D.     Margin

 

C

70)              A charge in respect of the assets of a Company has to be registered with the Registrar of Companies within ____ days

A.     90

B.     60

C.     180

D.     30

 

 

D

71)              For booking unrealized interest of previous year the entries are passed at

A.     Branches

B.     Zonal Office

C.     Local Head Office

D.     CAO Kolkatta

 

D

72)              Which one of the following is a not recommendation of Goiporia Committee?

A.     Customer Education

B.     Instant credit of outstation cheques up to Rs.7500

C.     Enhancement in savings bank interest rate

D.     Door to door campaign for deposit mobilization

 

D

73)              Which of the following conditions are required to be fulfilled for booking partial interest in NPA account?

A.     There is reduction in irregularity.

B.     Such reduction is not out of fresh sanction of loan

C.     Such reduction is not out of additional overdrawing

D.     All of the above

 

D

74)              Import License are issued for ____ value

A.     FOB

B.     CIF

C.     FOR

D.     Cost

 

B

75)              Under Agriculture segment opinion reports are required to be compiled when the advance exceeds

A.     25000

B.     50000

C.     100000

D.     15000

 

C

76)              SFMS stand for

A.     Structured Financial Messaging Solutions

B.     Small farm Mechanisation Scheme

C.     Small Farmers Members Society

D.     None of these

 

A

77)              Revival Letter to be signed by Guarantor in respect of Agricultural Advances is

A.     AB2

B.     AB6

C.     AB5

D.     AB1

 

 

 

C

78)              Probate of will issued by the Court is under--------

A.     Hindu Succession Act

B.     Indian Succession Act

C.     Succession Act

D.     Indian Contract Act

 

B

79)              The repayment period of Gold loan for public is

A. 30 months

B. 36months

C. 48 months

D. 60 months

 

 

A

80)              A safe custody account in the name of a minor can be opened only in respect of

A

A.     A Term Deposit Receipt

B.     Government Securities

C.     Company Shares

D.     LIC Policies

 

81)              In which of the following locker accounts nomination is allowed

A.     Either or Survivor

B.     Both or Survivor

C.     Any one or Survivor

D.     Both to operate with no survivorship option

 

D

82)              Under SBI Gold Card scheme free insurance cover for Air accidents is

A.     Rs.10.00 Lacs

B.     Rs. 2 Lacs

C.     Rs. 4 Lacs

D.     Rs. 8 Lacs

 

A

83)              Under which series of drafts, Associate Banks will issue a draft of Rs. 50 Lacs

A.     HC

B.     HL

C.     FL

D.     TL

 

B

84)              What is present rate at which the USROMD is written off?

A.     25% of flat rate

D

B.     20% of flat rate

C.     10% of flat rate

D.     5% of flat rate

 

85)              The Banks position vis-à-vis the customer in respect of collection of bills is

A.     Principal

B.     Agent

C.     Bailee

D.     Trustee

 

B

86)              Bill of Lading is issued by  ???

A.     RBI

B.     Director General of Foreign Trade

C.     Customs Authority

D.     Shipping Company

 

D

87)              Payment of a TT Purchase is made by debit to

A.     Branch Clearing General Account

B.     IBIT Account

C.     Suspense Account

D.     TT?s Purchase Account

 

A

88)              The legend care new account will be marked in the new accounts for a period of

A.     3 months

B.     6 months

D

C.     9 months

D.     12 months

 

89)              While granting housing loan to staff members, non encumbrance certificate for a period of ___ years is to be obtained

A.     30 years

B.     12 years

C.     13 years

D.     20 years

 

C

90)              Under the MODS, for order of breaking deposits in the absence of any selective mandate from depositors, the system of ____ will be observed.

A.     FIFO

B.     LIFO

C.     FILO

D.     LILO

 

B

91)              The cut off score under credit scoring model for Personal loans where tie up is available

A.     40

B.     50

C.     60

D.     75

 

B

92)              The depositor is he makes a deposit under the SBI tax saving Term Deposit scheme gets exemption from one of the under noted tax

A.     Income Tax

D

B.     Gift Tax

C.     TDS

D.     Capital Gains Tax

 

93)              As per Income Tax rules electrical fittings have to be classified under

A.     Other Plant and Machinery

B.     Furniture and fittings

C.     Separate Head

D.     Repairs to Banks property

 

B

94)              Depreciation on the Networked ATM?s and VSAT is calculated and borned by

A.     Designated Branch

B.     Respective Zonal Office

C.     Respective LHO

D.     Corporate Centre

 

C

95)              Under FCNB scheme, who absorbs the exchange risk involved

A.     The Bank

B.     Government of India

C.     RBI

D.     The Depositor

 

A

96)              S.L.Kapur Committee recommendations relates to:

A.     Agri. Financing

B.     SSI Financing

B

C.     SBF Financing

D.     None of the above

 

97)              The amount recovered in the written off accounts is credited to

A.     Protested Bills Account

B.     AUCA

C.     Charges Account

D.     Remitted to LHO

 

C

98)              Committee headed by Mr. Kalia was set up for

A.     Financing feature films.

B.     Investment in Plantations Companies.

C.     Financing Infrastructure/Core Activities.

D.     To study role of NGO/SHG.

 

D

99)              When a customer buys foreign currency travelers cheques from our branches it is a

A.     Sale transaction for the bank

B.     Purchase transaction for the bank

C.     Inter bank transaction

D.     TT Purchase transaction

 

 

A

100)         The balances in the following accounts are fully repatriable

A.     NRE, FCNB and NRO

B.     NRE, FCNB and RFC

C.     NRE, NRO and RFC

B

D.     FCNB and NRO

 

101)         Indian citizens proceeding abroad for medical treatment can avail of foreign exchange without producing documentary proof to the extent of

A.     US$ 1 Lac

B.     US$ 30000

C.     US$ 75000

D.     US$ 50000

 

A

102)         A resident Indian can retain unspent foreign exchange with him to the extent of

A.     US$ 2000

B.     US$ 1000

C.     US$ 3000

D.     US$ 5000

 

A

103)         Which of the following activities are not covered under PMRY?

A. HorticultureB. Poultry

C. Piggery

D. Raising Crops

 

D

104)         When does the limitation of counter guarantee starts?

A. From the date of issue of Bank GuaranteeB. From the date of payment made by the Bank against

guarantee

C. Both of the above.

B

D. None of the above

 

105)         A student, for higher studies abroad, can take foreign exchange from Authorised Dealers without documentary evidence to the extent of

A.     US$ 50000

B.     US$ 100000

C.     US 75000

D.     US$ 25000

 

B

106)          KRISHI PLUS  is introduced for purchase of ????

A. Old Tractor and implementsB. New Tractor and implements

C. New or old tractor with old implements

D.  All of the above

 

B

107)         Our Bank has set a target to bring down Net NPA to ??.

by March,2005.

A. 2%B. 3%

C. 4%

D. 5%

 

A

108)         Single Window refers to

A.     Providing single window at a branch

B.     Providing all services at one counter

C.     Simplified Accounting branch

D.     Simple Work

B

 

109)         As of now how many volumes of Banks Book of Instructions are in vogue?

A.     6

B.     7

C.     8

D.     9

 

D

110)         Usance export bills discounted by the bank is debited to

A.     DD Purchase Account

B.     Bill of Exchange Account

C.     Foreign Currency General Account

D.     Inland Bills Account

 

B

111)         Cash kept under Guarantee Bond System should be examined within ??. days.

A.     10

B.     15

C.     20

D.     30

 

B

112)         Maheswari Committee relates to ??.

A.     Financing to SSI

B.     Agri. Finance

C.     NPA Management

D.      Insurance Sector Reforms

 

C

113)         The following categorized branches report all foreign C

transaction to FD  and submit R returns to RBI

A.     A,B and C1

B.     A, B , C1 and C2

C.     A and B

D.     B, C1 and C2

 

114)         At what rate depreciation is charged on Software?

A.     33.33% as per SLM

B.     60.00% as per SLM

C.     33.33% as per WDV

D.     60.00% as per WDV

 

D

115)         Returning non resident account holders can open RFC accounts in

A.     US Dollars, Euro, JY and Stg.Pound

B.     US Dollars only

C.     US Dollars , Sterling Pound and Euro

D.     Sterling Pound only

 

B

116)         What is maximum period for which deposits under NRNR is accepted.

A.     1 year

B.     2 years

C.     3 years

D.     Scheme has been discontinued.

 

D

117)         An Indian citizen deputed to Indian Embassy in Paris for a fixed term of two years is a

A

A.     Non resident India

B.     Resident

C.     Foreign National

D.     Citizen of Paris

 

118)         Validity period of Equitable mortgage is

A.     3 years

B.     12 years

C.     13 years

D.     30 years

 

B

119)         Government cheques are valid for

A.     One month from the date of issue

B.     During the month of issue

C.     Three months after the month of issue

D.     Twenty one days from the date of issue

 

C

120)         Who is authorized to pass   entries through Sch.No.9 and 10?

A.     Accountant

B.     Field Officer

C.     Branch Manager

D.     Controlling Authority

 

C

121)         Two wheelers  financed to agriculturist under

A.     SCOOM

B.     ATL

B

C.     KGC

D.     Personal Loan

 

122)         Under Krishi Plus the minimum educational qualification of the applicant should be

A.     No minimum prescribed

B.     8th Standard

C.     SSC

D.     Graduation

 

B

123)         Rakshak Plus scheme deals with purchase of

A.     House

B.     Security Alarm

C.     Tractor

D.     Ambulance

 

 

C

124)         Under minor irrigation scheme, repayment for purchase of pumpsets is

A.     5 years

B.     7 years

C.     9 years

D.     12 years

 

C

125)         The following document is obtained for conversion of ACC into ATL

A.     AB4

B.     AB7

C.     AB5

B

D.     AB8

 

126)         To become eligible to avail General Purpose Term Loan under SSI, credit rating should be minimum

A.     SB 1

B.     SB 2

C.     SB 3

D.     SB 4

 

C

127)         Under Core Banking CDC stands for

A.     Core Development Centre

B.     Central Data Centre

C.     Central Distribution Centre

D.     Core Data Centre

 

 

B

 

 

 

128)         Green Channel Programme for Excellence refers to

A.     Award for highest KCC issuing branch

B.     Special Training Workshop for outstanding performer in rural credit

C.     The award for best agriculturist of the branch

D.     Best region award for implementing UCP in record time

 

B

129)         The scheme Justice Plus is not applicable to

A.     Judges

B.     Court Clerks

C.     Advocates

D.     Tribunal Officers

C

 

130)         The staff group insurance scheme is called as

A.     Swarnaganga

B.     Swarnakamal

C.     Swarnasuraksh

D.     Sudarshan

 

 A

131)         BPR stands for

A.     Below Poverty Range

B.     Business Process Reengineering

C.     Bill Payment Register

D.     Business per Region

 

B

132)         Stamp Duty payable on a promissory note payable otherwise than on demand depends on:

A.     Tenor only

B.     Amount & Usance period only

C.     Amount only

D.     None of the above

 

B

133)         Under Pensioner Scheme maximum loan can be granted _____ times of pension

A.     4 months pension

B.     6 months pension

C.     12 months pension

D.     24 months pension

 

C

134)         SSI application received for loans above Rs.25,000 and C

upto Rs. 5 Lacs should be disposed off within

A.     1 Week

B.     2 Weeks

C.     4 Weeks

D.     6 Weeks

 

135)         Banks are required to obtain photographs of depositors as per the provisions of

A.     Banking Regulation Act.

B.     Negotiable Instrument Act

C.     RBI instructions

D.     Contract Act

 

C

136)         In case of Garnishee order, who is called Garnishee

A.     Bank

B.     Judgement Debtor

C.     Judgement Creditor

D.     Court

 

A

137)         Bankers Lien and right to set off derives its power from

A.     Banking Regulation Act

B.     NI Act

C.     SBI Act

D.     Contract Act

 

D

138)         Under Krishi Plus scheme the tractor should run for minimum _____ hour?s p.a.

C

A.     600

B.     1000

C.     1500

D.     2000

 

139)         Pravasi Plus Schme is for

A.     Relative or friends of NRI

B.     Tourists

C.     NRIs

D.     Travel Companies

 

A

140)         Export performance Guarantee covers

A.     Guarantees, bid Bonds issued by bank

B.     Advances made against export incentives receivable

C.     Discount/purchase of bill

D.     None of above

 

A

141)         A foreign draft issued by your branch is required to be cancelled. At what rate will it be cancelled?

A.     TT Selling Rate

B.     TT Buying Rate

C.     Bill Buying Rate

D.     Bill Selling Rate

 

B

142)         Paryatan Plus scheme is for

A.     Tourists

 

C

B.     NRI

C.     For development of infrastructure at tourist centers.

D.     Railway Travellers

 

143)         Under SME Credit Card the stock statement is to be obtained

A.     Once in a year

B.     Every month

C.     At quarterly intervals

D.     At half yearly intervals

 

A

144)         Which of the following aspect has to be considered for treating an account   as NPA:

A.     Means of the borrower

B.     Means of the guarantor

C.     100% deposit in the Branch

D.     Repayment

 

D

145)         Marginal farmers are those holding land up to:

A.     1 hectare(irrigated)

B.     2 hectares

C.     3 hectares

D.     4 hectares

 

A

146)         Maximum number of days allowed for scrutiny of documents presented to Opening/Confirming Bank for payment of L/C are ---------

A.     7 days

C

B.     5 days

C.     7 banking days

D.     11 banking days

 

147)         Under Credit Guarantee Fund Trust for small Industries 1% annual fee is to be borne by_____

A.     Respective Bank

B.     RBI

C.     Borrower

D.     50% by Bank and 50% by borrower.

 

C

148)         Payment of Savings Bank interest is compounded ______

A.     Monthly

B.     Quarterly

C.     Half Yearly

D.     Yearly

 

C

149)         Verified Date wise monthly statement should be sent to

A.     FSLO

B.     Focal Point Branch

C.     Controllers

D.     GAD Mumbai

 

A

150)         The first two digits of draft number denotes:

A.     Circle code number

B.     Bank code number

C.     Branch code number

D.     None of the above

 

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Letter of Credit(L/c) Documentry Collection.

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I ntroduction Parties to Letters of Credit Types of Letter of Credit Standby Letter of Credit   L/c Import Operations Under L/c Export Operations Under L/c Fees And Reimbursements Regulatory Requirements Trade Control Requirements Exchange Control Requirements UCPDC Guidelines ISBP 2002 FEDAI Guidelines Fixing limits for Commercial Stand by Letter of Credit   L/c

Introduction

Letter of Credit  L/c also known as Documentary Credit is a widely used term to make payment secure in domestic and international trade. The document is issued by a financial organization at the buyer request. Buyer also provide the necessary instructions in preparing the document.

The International Chamber of Commerce (ICC) in the Uniform Custom and Practice for Documentary Credit (UCPDC) defines L/C as: 

"An arrangement, however named or described, whereby a bank (the Issuing bank) acting at the request and on the instructions of a customer (the Applicant) or on its own behalf :

1. Is to make a payment to or to the order  third party ( the beneficiary ) or is to accept bills of exchange (drafts) drawn by the beneficiary.

2. Authorised another bank to effect such payments or to accept and pay such bills of exchange (draft).

3. Authorised another bank to negotiate against stipulated documents provided that the terms are complied with.

A key principle underlying letter of credit (L/C) is that banks deal only in documents and not in goods. The decision to pay under a letter of credit will be based entirely on whether the documents presented to the bank appear on their face to be in accordance with the terms and conditions of the letter of credit.

Parties to Letters of   Credit

Applicant (Opener): Applicant which is also referred to as account party is normally a buyer or customer of the goods, who has to make payment to beneficiary. LC is initiated and issued at his request and on the basis of his instructions.

Issuing Bank (Opening Bank) : The issuing bank is the one which create a letter of credit and takes the responsibility to make the payments on receipt of the documents from the beneficiary or through their banker. The payments has to be made to the beneficiary within seven working days from the date of receipt of documents at their end, provided the documents are in accordance with the terms and conditions of the letter of credit. If the documents are discrepant one, the rejection thereof to be communicated within seven working days from the date of of receipt of documents at their end.  

Beneficiary : Beneficiary is normally stands for a seller of the goods, who has to receive payment from the applicant. A credit is issued in his favour to enable him or his agent to obtain payment on surrender of stipulated document and comply with the term and conditions of the L/c.If L/c is a transferable one and he transfers the credit to another party, then he is referred to as the first or original beneficiary.

Advising Bank : An Advising Bank provides advice to the beneficiary and takes the responsibility for sending the documents to the issuing bank and is normally located in the country of the beneficiary.

Confirming Bank : Confirming bank adds its guarantee to the credit opened by another bank, thereby undertaking the responsibility of payment/negotiation acceptance under the credit, in additional to that of the issuing bank. Confirming bank play an important role where the exporter is not satisfied with the undertaking of only the issuing bank. 

Negotiating Bank:  The Negotiating Bank is the bank who negotiates the documents submitted to them by the beneficiary under the credit either advised through them or restricted to them for negotiation. On negotiation of the documents they will claim the reimbursement under the credit and makes the payment to the beneficiary provided the documents submitted are in accordance with the terms and conditions of the letters of credit. 

Reimbursing Bank : Reimbursing Bank is the bank authorized to honor the reimbursement claim in settlement of negotiation/acceptance/payment lodged with it by the negotiating bank. It is normally the bank with which issuing bank has an account from which payment has to be made. 

Second Beneficiary : Second Beneficiary is the person who represent the first or original Beneficiary of credit in his absence. In this case, the credits belonging to the original beneficiary is transferable. The rights of the transferee are subject to terms of transfer.

Types of Letter of Credit

1. Revocable Letter of Credit L/c

A revocable letter of credit may be revoked or modified for any reason, at any time by the issuing bank without notification.  It is rarely used in international trade and not considered satisfactory for the exporters but has an advantage over that of the importers and the issuing bank.

There is no provision for confirming revocable credits as per terms of UCPDC, Hence they cannot be confirmed. It should be indicated in LC that the credit is revocable. if there is no such indication the credit will be deemed as irrevocable.

2. Irrevocable Letter of CreditL/c

In this case it is not possible to revoked or amended a credit without the agreement of the issuing bank, the confirming bank, and the beneficiary.  Form an exporters point of view it is believed to be more beneficial. An irrevocable letter of credit from the issuing bank insures the beneficiary that if the required documents are presented and the terms and conditions are complied with, payment will be made. 

3. Confirmed Letter of Credit  L/c

Confirmed Letter of Credit is a special type of L/c in which another bank apart from the issuing bank has added its guarantee. Although,  the cost of confirming by two banks makes it costlier, this type of  L/c is more beneficial for the beneficiary as it doubles the guarantee.

4. Sight Credit and Usance Credit  L/c

Sight credit states that the payments would be made by the issuing bank at sight, on demand or on presentation. In case of usance credit, draft are drawn on the

issuing bank or the correspondent bank at specified usance period. The credit will indicate whether the usance draft are to be drawn on the issuing bank or in the case of confirmed credit on the confirming bank.

5. Back to Back Letter of Credit  L/c

Back to Back Letter of Credit is also termed as Countervailing Credit. A credit is known as backtoback credit when a L/c is opened with security of another L/c.

A backtoback credit which can also be referred as credit and countercredit is actually a method of financing both sides of a transaction in which a middleman buys goods from one customer and sells them to another.

The parties to a BacktoBack Letter of Credit are:     1.  The buyer and his bank as the issuer of the original Letter of Credit.     2.  The seller/manufacturer and his bank,     3.  The manufacturer's subcontractor and his bank.

The practical use of this Credit is seen when L/c is opened by the ultimate buyer in favour of a particular beneficiary, who may not be the actual supplier/ manufacturer offering the main credit with near identical terms in favour as security and will be able to obtain reimbursement by presenting the documents received under back to back credit under the main L/c.

The need for such credits arise mainly when :

1. The ultimate buyer not ready for a transferable credit2. The Beneficiary do not want to disclose the source of supply to the openers.

3. The manufacturer demands on payment against documents for goods but the beneficiary of credit is short of the funds

6. Transferable Letter of Credit  L/c

A transferable documentary credit is a type of credit under which the first beneficiary which is usually a middleman may request the nominated bank to transfer credit in whole or in part to the second beneficiary. 

The L/c does state clearly mentions the margins of the first beneficiary and unless it is specified the L/c cannot be treated as transferable. It can only be used when the company is selling the product of a third party and the proper care has to be taken about the exit policy for the money transactions that take place. 

This type of L/c is used in the companies that act as a middle man during the transaction but don’t have large limit. In the transferable L/c there is a right to substitute the invoice and the whole value can be transferred to a second beneficiary.

The first beneficiary or middleman has rights to change the following terms and conditions of the letter of credit:

1. Reduce the amount of the credit.2. Reduce unit price if it is stated

3. Make shorter the expiry date of the letter of credit.

4. Make shorter the last date for presentation of documents.

5. Make shorter the period for shipment of goods.

6. Increase the amount of the cover or percentage for which insurance cover must be effected.

7. Substitute the name of the applicant (the middleman) for that of the first beneficiary (the buyer). 

Standby Letter of Credit   L/c

Initially used by the banks in the United States, the standby letter of credit is very much similar in nature to a bank guarantee. The main objective of issuing such a credit is to secure bank loans. Standby credits are usually issued by the applicant’s bank in the applicant’s country and advised to the beneficiary by a bank in the beneficiary’s country.

 Unlike a traditional letter of credit where the beneficiary obtains payment against documents evidencing performance, the standby letter of credit allow a beneficiary to obtains payment from a bank even when the applicant for the credit has failed to perform as per bond.  

A standby letter of credit is subject to "Uniform Customs and Practice for Documentary Credit" (UCP), International Chamber of Commerce Publication No 500, 1993 Revision, or "International Standby Practices" (ISP), International Chamber of Commerce Publication No 590, 1998.

Import Operations Under   L/c

The Import Letter of Credit guarantees an exporter payment for goods or services, provided the terms of the letter of credit have been met.

A bank issue an import letter of credit on the behalf of an importer or buyer under the following Circumstances

When a importer is importing goods within its own country. When a trader is buying good from his own country and sell it to the another country for the

purpose of merchandizing trade.

When an Indian exporter who is executing a contract outside his own country requires importing goods from a third country to the country where he is executing the contract.

The first category of the most common in the day to day banking

Fees And Reimbursements

The different charges/fees payable under import L/c is briefly as follows

1. The issuing bank charges the applicant fees for opening the letter of credit. The fee charged depends on the credit of the applicant, and primarily comprises of :

(a) Opening Charges  This would comprise commitment charges and usance charged to be charged upfront for the period of the L/c.

 The fee charged by the L/c opening bank during the commitment period is referred to as commitment fees. Commitment period is the period from the opening of the letter of credit until the last date of negotiation of documents under the L/c or the expiry of the L/c, whichever is later.

Usance is the credit period agreed between the buyer and the seller under the letter of credit. This may vary from 7 days usance (sight) to 90/180 days. The fee charged by bank for the usance period is referred to as usance charges

(b)Retirement Charges

1. This would be payable at the time of retirement of LCs. LC opening bank scrutinizes the bills under the LCs according to UCPDC guidelines , and levies charges based on value of goods.

2. The advising bank charges an advising fee to the beneficiary unless stated otherwise The fees could vary depending on the country of the beneficiary. The advising bank charges may be eventually borne by the issuing bank or reimbursed from the applicant.

3. The applicant is bounded and liable to indemnify banks against all obligations and responsibilities imposed by foreign laws and usage.

4. The confirming bank's fee depends on the credit of the issuing bank and would be borne by the beneficiary or the issuing bank (applicant eventually) depending on the terms of contract.

5. The reimbursing bank charges are to the account of the issuing bank.

Risk   Associated   with Opening Imports L/cs

The basic risk associated with an issuing bank while opening an import L/c are :

1. The financial standing of the importerAs the bank is responsible to pay the money on the behalf of the importer, thereby the bank should make sure that it has the proper funds to pay.

2. The goodsBankers need to do a detail analysis against the risks associated with perishability of the goods, possible obsolescence, import regulations packing and storage, etc. Price risk is the another crucial factor associated with all modes of international trade.

3. Exporter RiskThere is always the risk of exporting inferior quality goods. Banks need to be protective by finding out as much possible about the exporter using status report and other confidential information.

4. Country RiskThese types of risks are mainly associated with the political and economic scenario of a country. To solve this issue, most banks have specialized unit which control the level of exposure that that the bank will assumes for each country.

5. Foreign exchange riskForeign exchange risk is another most sensitive risk associated with the banks. As the transaction is done in foreign currency, the traders depend a lot on exchange rate fluctuations.

Export   Operations Under L/c

Export Letter of Credit is issued in for a trader for his native country for the purchase of goods and services. Such letters of credit may be received for following purpose:

1. For physical export of goods and services from India to a Foreign Country.2. For execution of projects outside India by Indian exporters by supply of goods

and services from Indian or partly from India and partly from outside India.

3. Towards deemed exports where there is no physical movements of goods from outside India But the supplies are being made to a project financed in foreign exchange by multilateral agencies, organization or project being executed in India with the aid of external agencies.

4. For sale of goods by Indian exporters with total procurement and supply from outside India. In all the above cases there would be earning of Foreign Exchange or conservation of  Foreign Exchange.

Banks in India associated themselves with the export letters of credit in various capacities such as advising bank, confirming bank, transferring bank and reimbursing bank.

In every cases the bank will be rendering services not only to the Issuing Bank as its agent correspondent bank but also to the exporter in advising and financing his export activity.

1. Advising an Export L/cThe basic responsibility of an advising bank is to advise the credit received from its overseas branch after checking the apparent genuineness of the credit recognized by the issuing bank. 

It is also necessary for the advising bank to go through the letter of credit, try to understand the underlying transaction, terms and conditions of the credit and advice the beneficiary in the matter.

The main features of advising export LCs are:

1. There are no credit risks as the bank receives a onetime commission for the advising service. 2. There are no capital adequacy needs for the advising function.

2. Advising of Amendments to L/CsAmendment of LCs is done for various reasons and it is necessary to fallow all the necessary the procedures outlined for advising. In the process of advising the amendments the Issuing bank serializes the amendment number and also ensures that no previous amendment is missing from the list. Only on receipt of satisfactory information/ clarification the amendment may be advised.

3. Confirmation of Export Letters of CreditIt constitutes a definite undertaking of the confirming bank, in addition to that of the issuing bank, which undertakes the sight payment, deferred payment, acceptance or negotiation.

Banks in India have the facility of covering the credit confirmation risks with ECGC under their “Transfer Guarantee” scheme and include both the commercial and political risk involved.

4. Discounting/Negotiation of Export LCsWhen the exporter requires funds before due date then he can discount or negotiate the LCs with the negotiating bank. Once the issuing bank nominates the negotiating bank, it can take the credit risk on the issuing bank or confirming bank.

However, in such a situation, the negotiating bank bears the risk associated with the document that sometimes arises when the issuing bank discover discrepancies in the documents and refuses to honor its commitment on the due date. 

5. Reimbursement of Export LCs Sometimes reimbursing bank, on the recommendation of issuing bank allows the negotiating bank to collect the money from the reimbursing bank once the goods have been shipped. It is quite similar to a cheque facility provided by a bank.

In return, the reimbursement bank earns a commission per transaction and enjoys float income without getting involve in the checking the transaction documents. 

reimbursement bank play an important role in payment on the due date ( for usance LCs) or the days on which the negotiating bank demands the same (for sight LCs)

Regulatory Requirements

Opening of imports LCs in India involve compliance of the following main regulation:

Trade Control Requirements

The movement of good in India is guided by a predefined se of rules and regulation. So, the banker needs to assure that make certain is whether the goods concerned can be physically brought in to India or not as per the current EXIM policy.

Exchange Control Requirements

The main objective of a bank to open an Import LC is to effect settlement of payment due by the Indian importer to the overseas supplier, so opening of LC automatically comes under the policies of exchange control regulations.

UCPDC Guidelines

Uniform Customs and Practice for Documentary Credit (UCPDC) is a set of predefined rules established by the International Chamber of Commerce (ICC) on Letters of Credit. The UCPDC is used by bankers and commercial parties in more than 200 countries including India to facilitate trade and payment through LC.

UCPDC was first published in 1933 and subsequently updating it throughout the years. In 1994, UCPDC 500 was released with only 7 chapters containing in all 49 articles . 

The latest revision was approved by the Banking Commission of the ICC at its meeting in Paris on 25 October 2006. This latest version, called the UCPDC600, formally commenced on 1 July 2007. It contain a total of about 39 articles covering the following areas, which can be classified as 8 sections according to their functions and operational procedures.

Serial No. Article Area Consisting

1. 1 to 3 GeneralApplication, Definition andInterpretations

2. 4 to 12 ObligationsCredit vs. Contracts, Documentsvs. Goods

3. 13 to 16 Liabilities and responsibilities.

Reimbursement, Examination of Documents, Complying,

Presentation, HandlingDiscrepant Documents

4. 17 to 28 Documents

Bill of Lading, Chapter Party Bill of Lading, Air Documents, Road Railetc. Documents, Courier , Postal etc.Receipt. On board, Shippers' count,Clean Documents, Insurance documents

5. 29 to 33MiscellaneousProvisions

Extension of dates, Tolerance inCredits, Partial Shipment and Drawings. House of Presentation

6 34 to 37 Disclaimer

Effectiveness of DocumentTransmission and TranslationForce Majeure Acts of an Instructed Party

7 38 & 39 OthersTransferable Credits Assignment of Proceeds

ISBP 2002

The widely acclaimed International Standard Banking Practice(ISBP)  for the Examination of Documents under Documentary Credits was selected in 2007 by the ICCs Banking Commission. 

First introduced in 2002, the ISBP contains a list of guidelines that an examiner needs to check the documents presented under the Letter of Credit. Its main objective is to reduce the number of documentary credits rejected by banks.

FEDAI Guidelines

Foreign Exchange Dealer's Association of India (FEDAI) was established in 1958 under the Section 25 of the Companies Act (1956). It is an association of banks that deals in Indian foreign exchange and work in coordination with the Reserve Bank of India, other organizations like FIMMDA, the Forex Association of India and various market participants.FEDAI has issued rules for import LCs which is one of the important area of foreign currency exchanges. It has an advantage over that of the authorized dealers who are now allowed by the RBI to issue stand by letter of credits towards import of goods.

As the issuance of stand by of letter of Credit including imports of goods is susceptible to some risk in the absence of evidence of shipment, therefore the importer should be advised that documentary credit under UCP 500/600 should be

the preferred route for importers of goods.

Below mention are some of the necessary precaution that should be taken by authorised dealers While issuing a stands by letter of credits: 

1. The facility of issuing Commercial Standby shall be extended on a selective basis and to the following category of importers

i. Where such standby are required by applicant who are independent power producers/importers of crude oil and petroleum products

ii. Special category of importers namely export houses, trading houses, star trading houses, super star trading houses or 100% Export Oriented Units.

2. Satisfactory credit report on the overseas supplier should be obtained by the issuing banks before issuing Stands by Letter of Credit.

3. Invocation of the Commercial standby by the beneficiary is to be supported by proper evidence. The beneficiary of the Credit should furnish a declaration to the effect that the claim is made on account of failure of the importers to abide by his contractual obligation along with the following documents.

i. A copy of invoice.

ii. Nonnegotiable set of documents including a copy of non negotiable bill of lading/transport document.

iii. A copy of Lloyds /SGS inspection certificate wherever provided for as per the underlying contract.

4. Incorporation of a suitable clauses to the effect that in the event of such invoice /shipping documents has been paid by the authorised dealers earlier, Provisions to dishonor the claim quoting the date / manner of earlier payments of such documents may be considered.

5. The applicant of a commercial stand by letter of credit shall undertake to provide evidence of imports in respect of all payments made under standby. (Bill of Entry)

Fixing limits for Commercial Stand by Letter of Credit   L/c 1. Banks must assess the credit risk in relation to stand by letter of credit and

explain to the importer about the inherent risk in stand by covering import of goods.

2. Discretionary powers for sanctioning standby letter of credit for import of goods should be delegated to controlling office or zonal office only.

3. A separate limit for establishing stand by letter of credit is desirable rather than permitting it under the regular documentary limit.

4. Due diligence of the importer as well as on the beneficiary is essential .

5. Unlike documentary credit, banks do not hold original negotiable documents of titles to gods. Hence while assessing and fixing credit limits for standby letter of credits banks shall treat such limits as clean for the purpose of discretionary lending powers and compliance with various Reserve Bank of India's regulations.

6. Application cum guarantee for stand by letter of credit should be obtained from the applicant.

7. Banks can consider obtaining a suitable indemnity/undertaking from the importer that all remittances towards their import of goods as per the underlying contracts for which stand by letter of credit is issued will be made only through the same branch which has issued the credit.

8. The importer should give an undertaking that he shall not raise any dispute regarding the payments made by the bank in standby letter of credit at any point of time howsoever, and will be liable to the bank for all the amount paid therein. He importer should also indemnify the bank from any loss, claim, counter claims, damages, etc. which the bank may incur on account of making payment under the stand by letter of credit.

9. Presently, when the documentary letter of credit is established through swift, it is assumed that the documentary letter of credit is subject to the provisions of UCPDC 500/600 Accordingly whenever standby letter of credit under ISP 98 is established through SWIFT, a specific clause must appear that standby letter of credit is subject to the provision of ISP 98.

10.It should be ensured that the issuing bank, advising bank, nominated bank. etc, have all subscribed to SP 98 in case stand by letter of credit is issued under ISP 98.

11.When payment under a stand by letter of credit is effected, the issuing bank to report such invocation / payment to Reserve Bank of India.

Table of Contents

Chapter 1 - Payment Methods In Export Import Chapter 2 - Payment Collection Against Bills

Chapter 3 - Letter Of Credit (L/c)

Chapter 4 - Trade Documents

Chapter 5 - Pre Shipment Trade Finance

Chapter 6 - Post Shipment Finance

Chapter 7 - Forfeiting Factoring

Chapter 8 - Bank Guarantees

Chapter 9 - Transport Risk

Chapter 10 - Contract Credit Risk

Chapter 11 - Country Political Risk

Chapter 12 - Currency Risk

Chapter 13 - Export Import (Exim) Policy

Chapter 14 - Foreign Exchange Management Act (FEMA)

Chapter 15 - Fedai Guidlines