Banking Interview Questions for Preparation
1- What is the definition of a Bank ?
A bank is a financial body responsible for accepting and providing loans. Banks offer various
financial services to individuals, businesses, and governments. Banks are an intermediary
between those with surplus funds and those who need funds.
2- What are the different types of Banks ?
There are different types of banks. Some of them are retail banks, commercial banks,
agricultural banks, cooperative banks, and investment banks. A nation's central bank oversees
and regulates all types of banks in most countries. This responsibility falls under the Reserve
Bank of India (RBI) in India.
3- What are commercial Banks, and what are their types ?
Commercial banks are financial institutions. They accept deposits from the public and give
loans to individuals, businesses, and governments. They provide various banking services,
including credit facilities, payment processing, etc. Some types of commercial banks are:
Public Sector Banks
The government primarily regulates them as it holds a good part of the shares in these
types of banks. In India, the Reserve Bank of India (RBI) acts as a central bank and makes
guidelines for public sector banks.
Private Sector Banks
Private banks offer personalised banking to individuals. They provide services such as
investment management, estate planning, and tax advisory to individuals.
Foreign Banks
Foreign banks operate in a country different from their headquarters and provide banking
services to local customers. These banks bring global expertise and international banking
services to the local market.
4- What are the functions of commercial Banks ?
Some of the functions of commercial banks are:
Commercial banks accept deposits from individuals and institutions.
They grant loans to individuals and businesses.
The banks provide locker facilities to customers.
The banks trade in bonds and securities.
5- What is liquidity in Banking ?
Liquidity means that a bank has enough money available to pay debts without losing too
much money. In simpler terms, liquidity refers to available cash that banks need to meet
financial needs.
6- What do you mean by credit score ?
A credit score is a numerical representation of a person's creditworthiness. It is based on the
individual's credit history.
7- What is a mortgage ?
A mortgage is a loan from a bank or lender to purchase a home or real estate. The borrower
repays the loan through monthly instalments, including interest.
8- What are SWIFT codes ?
SWIFT code stands for Society for Worldwide Inter bank Financial Telecommunication.A
SWIFT code is a unique code for identification. They are used for identifying a specific bank in
international money transfers between banks. It is used to facilitate transfer of funds across
borders.
9- What is the role of bank tellers ?
Bank tellers are used to assist customers with transactions. They ensure accurate and
efficient handling of cash and provide personalised customer service.
10- What is investment banking ?
Investment banking is a segment of banking that concentrates on helping businesses and
organizations to raise capital. They offer mergers and facilitate complex financial
transactions.
11- What do you understand about consumer banking ?
Consumer banking provides loans to their customers to buy various products. They offer a
simple option of easy payment through small instalments.
12- Why do you want a job in the banking sector ?
Banking is a growing sector in India with stable and high growth. They provide a wide range of
career opportunities. I am interested in finance and I have a strong desire to contribute in the
financial market. I enjoy working with numbers. These are some of the reasons why I want to
join the banking sector.
13- What are the different types of account available in banks ?
There are different types of accounts available in banks. These are:
Savings Accounts
Savings accounts allow individuals to deposit and earn interest on their money while they
give easy access to funds.
Checking Accounts
Checking accounts enable individuals to deposit, withdraw, and make payments easily.
Money Market Accounts
These accounts give benefits of both saving and checking accounts. It helps us withdraw the
amount and get a higher interest.
Certificates of deposite
Banks offer certificates of deposit (CDs) where customers deposit a specific amount of
money for a fixed period at a fixed interest rate with principal and interest guaranteed upon
maturity.
Retirement Accounts
Retirement accounts are structured to help the individuals save and grow funds for their
retirement. They offer tax advantages.
14- What are the different ways in which a bank account is operated ?
There are different ways to operate a bank account. Some of them are:
In-branch banking
ATM banking
Mobile or Telephone banking
Online banking
15- What is the difference between a demand draft and a cheque ?
A cheque is a document that orders bank to pay a specific amount of money from one
person's account to the person in whose name cheque has been issued. Cheques are issued
by an individual who holds a bank account, whereas demand draft is issued by a bank to
initiate transactions from one bank to another. Cheques can be cancelled, but demand drafts
cannot be cancelled.
16- What do you know about RBI ?
The Reserve Bank of India (RBI) is India’s apex central banking institution. Established on April
1, 1935, under the Reserve Bank of India Act, 1934, it is headquartered in Mumbai and is fully
owned by the Government of India.
As the backbone of the Indian financial system, the RBI's core responsibilities include:
Monetary Policy: It regulates the money supply and formulates policies (via a Monetary
Policy Committee) to manage inflation, currently targeting a flexible headline CPI of 4%.
Currency Issuance: The RBI holds the exclusive right to issue and manage banknotes,
while coins are minted by the government and distributed by the central bank.
Banker to the Government: It manages the government's banking needs, handles receipts
and payments, and acts as an aggregator for all tax collections, including GST.
Banker to Banks: It acts as a supervisor for the entire banking industry and serves as the
"lender of last resort" to provide emergency liquidity to other financial institutions.
Forex Management: It holds and manages India's foreign exchange reserves and
maintains the external value of the Indian Rupee.
17- What is a non-performing asset ?
A non-performing asset (NPA) refers to a loan or advance for which the borrower has not paid
the interest or principal for a specific period, usually 90 days or more. In financial terms, it
represents an asset that has stopped generating income for the lender. Non-performing
assets can include loans, mortgages, or other financial products. Banks and financial
institutions closely monitor NPAs as they impact their financial health and can lead to
financial instability. Efforts are made to resolve NPAs through restructuring, recovery, or, in
severe cases, legal action to reclaim the outstanding amount.
18- What are the different types of fixed deposits ?
Fixed or term deposits come in various types, each offering specific features to cater to
different financial needs. Here are some common types of fixed deposits:
Regular Fixed Deposit: The standard fixed deposit where a lump sum amount is invested
for a fixed tenure at a predetermined interest rate.
Senior Citizen Fixed Deposit: Tailored for senior citizens, these deposits often offer
higher interest rates to benefit elderly investors.
Tax - Saving Fixed Deposit: Designed for tax benefits under Section 80C of the Income
Tax Act, these fixed deposits have a lock-in period of 5 years.
Cumulative Fixed Deposit : Interest is compounded quarterly or annually and reinvested
with the principal amount, providing a lump sum at maturity.
Non-Cumulative Fixed Deposit:: Interest is paid out regularly (monthly, quarterly, half-
yearly, or annually) to the investor.
Special Fixed Deposit for Minors: Aimed at securing the financial future of minors, this
type may have specific terms and conditions.
Flexi Fixed Deposit: Allows investors to withdraw part of the deposit prematurely
without affecting the entire amount, usually with a penalty.
Company Fixed Deposit: Offered by non-banking financial companies (NBFCs) or
corporate entities, these deposits may carry higher interest rates and risk.
Tax Implication Fixed Deposit: Considering tax implications, these deposits may have
provisions for TDS (Tax Deducted at Source).
Foreign Currency Fixed Deposit: Denominated in foreign currencies, these deposits are
suitable for investors dealing with foreign exchange.
19- What is difference between REPO rate and Reverse REPO rate ?
The primary difference is that the Repo rate is the interest rate at which the central bank (like
the RBI) lends money to commercial banks, while the Reverse Repo rate is the rate the central
bank pays commercial banks for parking their surplus funds with it.
These rates are key tools used to manage money flow in the economy. [1]
Feature Repo Rate Reverse Repo Rate
Basic Definition Rate at which the central Rate at which the central
bank lends money to banks. bank borrows from banks.
Primary Objective Controls inflation by Absorbs excess liquidity
making borrowing more from the banking system.
expensive.
Direction of Money Central Bank \(\rightarrow Commercial Banks \
\) Commercial Banks. (\rightarrow \) Central
Bank.
Interest Rate Always higher than the Always lower than the Repo
Reverse Repo rate. rate.
20- What is the Annual percentage rate (APR), and what are the different types of APR?
APR, or Annual percentage rate, is a charge that banks impose on their customers to use their
services like loans and credit cards. There are two types of APR.
Fixed APR- In fixed APR, the imposed interest rate will be the same throughout the life of
the loan.
Variable APR -In variable APR, the imposed interest rate can change on the basis of the
market.