What is Para Banking?
Activities undertaken by banks other than core banking like insurance, mutual funds, and
asset management.
What is Arm Chair Banking?
Banking services offered at the customer’s convenience, typically through online or mobile
platforms.
What are the documents required for an Education Loan?
Admission letter, fee structure, ID proof, address proof, income proof of parents, academic
records, and collateral documents (if required).
Documents for opening a Current Account for a new company?
Company PAN, Certificate of Incorporation, Memorandum & Articles of Association, Board
resolution, GST registration, ID/address proof of directors.
What is Bancassurance?
It’s a partnership between a bank and an insurance company to sell insurance products
through the bank’s channels.
Difference between Bank & NBFC?
Banks accept demand deposits and issue cheques; NBFCs can't. Banks are regulated by RBI
under the Banking Regulation Act; NBFCs under the RBI Act.
7. What is KYC?
Know Your Customer – a process to verify the identity of customers using documents like ID,
address proof, and photo.
8. What is RTGS?
Real-Time Gross Settlement – a system for large-value, real-time fund transfers (₹2 lakh and
above).
9. What is NEFT?
National Electronic Funds Transfer – electronic fund transfer system that settles in half-
hourly batches.
10. What is IFSC Code?
Indian Financial System Code – a unique 11-digit code to identify a bank branch for
electronic payments.
11. What is CASA?
Current Account Savings Account – low-cost deposits for banks used for lending and
investments.
12. What is a Demand Draft (DD)?
A prepaid instrument issued by a bank to transfer money, safer than cheques as it's
guaranteed by the bank.
13. What is a Non-Performing Asset (NPA)?
A loan or advance where interest or principal is overdue for more than 90 days.
14. What is the CRR (Cash Reserve Ratio)?
Percentage of a bank’s total deposits to be kept with RBI in cash form, without earning
interest.
15. What is the SLR (Statutory Liquidity Ratio)?
Minimum percentage of deposits banks must maintain in the form of liquid assets like cash,
gold, or govt securities.
16. What is a Cheque Bounce?
It occurs when a cheque cannot be processed due to insufficient funds or signature mismatch.
17. What is the Base Rate and MCLR?
Base Rate is the minimum interest rate set by RBI below which banks can’t lend. MCLR
(Marginal Cost of Funds Based Lending Rate) is the current benchmark rate linked to a
bank’s cost of funds.
18. What is Priority Sector Lending (PSL)?
Loans that banks are mandated by RBI to give to certain sectors like agriculture, MSMEs,
education, housing, etc.
19. What is the difference between FDI and FII in banking context?
FDI (Foreign Direct Investment) involves long-term investment in businesses; FII (Foreign
Institutional Investors) refers to short-term investment in financial markets.
20. What is the role of the RBI in banking?
RBI regulates and supervises banks, formulates monetary policy, manages currency, and
ensures financial stability.
21. What is a Letter of Credit (LC)?
A guarantee from a bank that a buyer’s payment to a seller will be received on time and for
the correct amount.
22. What is a Bank Guarantee?
A promise by a bank to cover a loss if a borrower defaults on a contract.
23. What is the difference between repo rate and reverse repo rate?
Repo rate is the rate at which RBI lends to banks; reverse repo is the rate at which RBI
borrows from banks.
24. What is the CAMELS rating system?
Used by regulators to assess a bank’s health: Capital adequacy, Asset quality, Management,
Earnings, Liquidity, and Sensitivity to market risk.
25. What is Treasury Management in banks?
Managing the bank's holdings, investments, liquidity, and risks to ensure optimal returns and
regulatory compliance.
26. What is the SARFAESI Act?
A law allowing banks to seize and sell assets of defaulters without court intervention to
recover dues.
27. What is the difference between CRAR and CAR?
CRAR (Capital to Risk-weighted Assets Ratio) and CAR (Capital Adequacy Ratio) both
measure a bank's capital adequacy. CRAR is the term used under Basel III norms in India,
ensuring banks have enough capital to absorb potential losses.
28. What is the significance of the Basel III norms?
Basel III is a global regulatory framework that strengthens bank capital requirements and
introduces new regulatory requirements on bank liquidity and leverage, enhancing the
banking sector's ability to deal with financial stress.
29. Explain the concept of financial inclusion.
Financial inclusion refers to providing affordable financial services—like savings, credit,
insurance—to all individuals and businesses, especially the underprivileged, ensuring
equitable economic growth.
30. What is the difference between repo rate and bank rate?
The repo rate is the rate at which the RBI lends short-term funds to banks against securities.
The bank rate is the rate at which the RBI lends long-term funds to banks without any
collateral.
31. What are Non-Banking Financial Companies (NBFCs)?
NBFCs are financial institutions that offer banking services without meeting the legal
definition of a bank. They cannot accept demand deposits but provide loans, credit facilities,
retirement planning, and investment services.
32. What is the role of NABARD in the Indian banking system?
NABARD (National Bank for Agriculture and Rural Development) focuses on the
development of agriculture and rural sectors by providing credit and other facilities to
promote sustainable rural development.
33. How do banks manage credit risk?
Banks manage credit risk by assessing the creditworthiness of borrowers, setting credit
limits, requiring collateral, and diversifying their loan portfolios to minimize potential losses.
34. What is the importance of KYC in banking?
KYC (Know Your Customer) is crucial for preventing identity theft, financial fraud, money
laundering, and terrorist financing by verifying the identity of clients.
35. Describe the process of loan underwriting.
Loan underwriting involves evaluating a borrower's creditworthiness, including income,
credit history, and repayment capacity, to determine the risk of lending.
36. What is the significance of the SLR (Statutory Liquidity Ratio)?
SLR is the minimum percentage of a bank's net demand and time liabilities that must be
maintained in the form of liquid assets. It ensures the bank's solvency and controls credit
expansion.
37. What is the Liquidity Coverage Ratio (LCR)?
LCR ensures banks have enough high-quality liquid assets to survive a 30-day stress
scenario.
38. What is the difference between a Term Loan and a Working Capital Loan?
Term Loan: Long-term loan for fixed assets; Working Capital Loan: Short-term loan for
daily operations.
39. Explain the concept of 'Basel III' in banking.
Basel III is a global regulatory framework to strengthen bank capital requirements and risk
management practices.
40. What is the role of a Credit Rating Agency?
They assess the creditworthiness of borrowers, influencing interest rates and investment
decisions.
41. How does a bank manage interest rate risk?
Through asset-liability management, interest rate swaps, and duration gap analysis.
42. What are the different types of bank accounts?
Savings Account, Current Account, Fixed Deposit, Recurring Deposit, NRI Accounts.
43. What is the significance of the CRAR (Capital to Risk-Weighted Assets Ratio)?
It measures a bank's capital adequacy, ensuring it can absorb potential losses.
44. Explain the difference between Retail Banking and Corporate Banking.
Retail Banking serves individual customers; Corporate Banking deals with businesses and
large entities.
45. What is a Non-Performing Asset (NPA)?
An asset where the borrower has stopped making interest or principal repayments for over 90
days.
46. How do banks detect and prevent fraud?
Through KYC norms, transaction monitoring, internal audits, and fraud detection systems.