Jaiib

LEGAL ASPECTS OF BANKING
OPERATIONS
INDIAN INSTITUTE OF
BANKING & FINANCE
MODULE A & B
10.10.07

**.. Banking is defined in the Banking Regulation
Act.
• Primary function to accept deposit, lend and
invest.
• Secondary functions include opening of Letters of
credit , Issuing Bank guarantees, Demand Drafts
• Mail Transfers, Telegraphic Transfers, Collection
of instruments
• Executor Trustee services, Dealing in Forex
related transactions

• Offering Safe Deposit Locker facilities,
accepting Safe custody articles and so on
• Oflate bankers offer other services like
• ATM, Debit, Credit and other plastic cards
• Accepting Electricity, Telephone bills , and
extending services on behalf of the Service
providers

• Bancassurance, cross selling of various financial
products and so on
• While the bank is making a person as their
customer due care has to be shown taking into
consideration the latest provisions of KYC norms
• A banker should be able to justify beyond doubt
that his customer has become his customer after
following all the procedures, norms and he has
acted as a prudent banker.

• 01.Bank license is issued by Reserve Bank
of India based on the provisions of
• A.. Banking Regulation Act
• B.. Reserve Bank of India Act
• C.. Both a & b
• D.. Neither Banking Regulation Act nor
Reserve Bank of India Act

02.. Reserve Bank of India Act,1934 was
enacted to constitute the Reserve Bank of
India
a.. To regularize issue of Bank notes
b.. To Regulate the issue of Bank notes
c.. For directing the banks when they err
d.. To consolidate and amend the law relating
to banking

**. Reserve Bank of India act was introduced
in 1934 and since then amended from time
to time to include the latest requirements.
• A provision was inserted by the Information
Technology Act,2000 to enable RBI to
make regulations for regulating payment
systems of banks and financial institutions

• 03..Identify the Act which puts restrictions
on the shareholding, directorship, voting
rights and other aspects of banking
companies.
• a.. Companies Act
• b.. Banking Regulation Act
• C.. Reserve Bank of India Act
• D.. All the above mentioned Acts

• 04..Identify which one is not part of the Banking
Regulation act
• a. To regulate business of banking companies
• b. To control over the management of banking
business
• c. To wind up a banking business
• d. To keep reserves for securing monetary stability
in India

• 05..Private banks are governed by the Companies
Act. In respect of their business of banking and by
the RBI Act for their constitution.
• a. The above is not incorrect
• b. The above is incorrect
• c. For Constitution, Companies Act and banking
business provisions of both Banking Regulation
Act and Reserve Bank of India Act
• d. There is no role for Companies Act

**. RBI’s whole capital is held by the Central
Government.
.. The board has one Governor and not more
than 4 Deputy Governors appointed by the
Central Govt
.. RBI alone can issue and mange currency in
India as per the provisions of RBI act.

• RBI as regulator of banking sector is mainly by
virtue of the provisions of the Banking Regulation
Act
• RBI inspects banks and exercise supervisory
powers and may issue directions in public interest
• RBI also collects credit information and make
available the same
• RBI also imposes penalties wherever applicable

06..Other than the Governor, Deputy
Governors of RBI, the other directors are
a.. Appointed
b.. Nominated
c.. Selected
d.. Elected

07..Reserve Bank of India has the powers to
issue currency notes in denominations of
a.. Rs.2/-
b.. Rs.50/-
c.. Rs.10,000/-
d.. All the above

08..The co-operative banks are under the
regulatory purview of the Reserve Bank of
India. This is due to the amendment to
• a . Reserve Bank of India Act
• b . Cooperative Act
• C . Banking Regulation Act
• d . Both a & b

**The refusal of licence to a company would make it
ineligible to undertake banking business, but still
the company can carry on other business like
money lending
. . RBI can stipulate a higher requirements of capital
for the purpose of licensing a banking company,
the RBI has to be satisfied that the company has
adequate capital structure and earning prospects

• In addition to the conditions applicable to domestic banks,
for foreign banks RBI will look into
• a. Whether the carrying on of banking business by the
company in India will be in public interest.
• b. Whether the government of the law of the country in
which the company is incorporated discriminates in any
way against banking companies
• C.. Whether the company complies with the provisions of
the BR Act as applicable to foreign companies

**The Banking Regulation Act authorizes the RBI to cancel
the license granted to any banking company. The
cancellation may be
on account of
a.. The company ceases to carry on banking business in
India
b.. The company at any time fails to comply with any of the
conditions imposed or the company does not fulfill at
anytime any of the conditions referred in the act.

**As per the BR act, a foreign bank (banking
company incorporated outside India)
operating in India has to deposit and keep
deposited with RBI an amount of Rs.15 lacs
(for such banks having places of business in
Mumbai or Kolkata or both Rs.20 lacs)
.. In addition to above, 20% of profit to be
remitted with RBI

09..The amount of deposit with RBI by
foreign banks to be kept in
a.. Cash
b.. Unencumbered approved securities
c.. Partly in both
d.. None of the above

**As per the provisions of the BR act, the subscribed
capital of a banking company shall not be less
than half of its authorised capital and the paid up
capital shall not be less than half of its subscribed
capital.
.. No shareholder can exercise voting rights in
respect of the shares held by him in excess of 10%
of the total voting rights of all the shareholders of
the banking company.

10..Which one is in correct
a.. Banking companies are permitted to have only
ordinary shares
b. Preference shares issued before 01.07.1944 can
be allowed to continue
c. Banking companies are not permitted to have
equity shares
d. Banking companies are not permitted to have
special preference shares

11..As per the provisions of the BR act,
a.. No dividend is payable until all capitalized
expenses are completely written off.
b.. This also includes preliminary expenses
and share selling commission
c.. Both a & b are correct
d.. Both a & b are incorrect

**At least 51% of the total number of directors shall
be persons who have special knowledge or
practical experience in respect of accountancy,
agriculture and rural economy, banking, co-
operation and so on
..The directors of a banking company not to hold
office for more than 8 years continuously
..The whole –time Chairman and a Managing
Director shall hold office for a period not
exceeding 5 years

..The Whole-time Chairman or the Managing
Director of a banking company should have
special knowledge or practical experience
of the working of a banking company or
State Bank of India or a subsidiary bank or
a financial institution or financial,
economical or business administration.

12..A banking company can not have
this
person as the head of their institution
a.. Managing Director
b.. Chairman
c.. Managing Agent
d.. Whole Time Chairman

13..As per the provisions of the Reserve Bank of
India Act, the Whole time Chairman or the
Managing Director of a banking company to
hold qualification shares of minimum 50.
a. It is not 50 but 100
b. They need not hold any qualification shares
c. They need to have minimum qualification
shares of 10 as per the provisions of Banking
Regulation act and not RBI act
d. None of these

**Banks have to file a return on their
unclaimed deposit within 30 days of the end
of each calendar year.
.. All deposits not operated in 10 years
.. For term deposits, the period of 10 years
starts from the expiry of the period of the
deposit

14.. Rajkumar has nominated his brother
Radhakrishn as the nominee for his Savings Bank
account. Nominee will not be entitled to get the
money on this account from the bank
a.. As long as Rajkumar is alive
b.. If Rajkumar is closing the said account.
c.. If Rajkumar has changed the nomination in some
one’s favour
d.. In all the above cases

**RBI issues directions from time to time regulating
the lending operations of banking companies
..The tools employed for exercising Selective Credit
Control are
a. Minimum margins for lending against selected
commodities
b. ceilings on the levels of credit and
c. charging of minimum rate of interest on
advances against specified commodities

• RBI is authorized to regulate interest rates on
loans and advances as well as deposits.
• The Usurious Loans Act. 1918 prohibits lending at
exorbitant rates. The law has been made to protect
the weaker borrowers from the powerful
moneylenders
• ..RBI has issued guidelines in respect of internet
banking. These cover a.. Technology and
Security issues b.. Legal issue and c . Regulatory
and supervisory issues

**Banking Ombudsman is an authority
established under the Banking Ombudsman
Scheme, 1995 by the RBI. The purpose is to
resolve and settle the complaints of banking
public against the commercial banks and the
scheduled primary cooperative banks
without resorting to courts.

** Banking Ombudsman scheme applicable
to all commercial banks, RRBs and
schedules primary co-operative banks.
.. Disputes between two banks can also be
taken up with the Banking Ombudsman
..A banking ombudsman may act as an
arbitrator

15..identify the odd one (Banking ombudsman)
a.. Observance of Reserve Bank directives on
interest rates
b. Non-acceptance of application for loans without
assigning valid reasons to the applicant
c. Non-issuance of Demand Drafts to non-
customers
d. Non-adherence to prescribed working hours by
branches

16..Every year a sum equivalent to not less
than 15% of profits to be transferred to the
reserve fund by a bank. Such transfer to be
made not before any dividend is declared.
a.. Yes b.. No
c.. Partly true d.. Fully in correct

**Appropriation of any amount from the
reserve fund or the share premium account
has to be reported to RBI within 21 days of
such appropriation.
.. Every scheduled bank has to submit a return
to RBI showing the demand and time
liabilities and borrowings from banks in
India

**In the case of banking companies which are
not scheduled banks, as per the provisions
of BR act, the cash reserve need not be
maintained with RBI. It may be with the
bank itself, or in a current account with RBI
or byway of net balance in current accounts
or in one or more of these ways

17..For a non scheduled bank cash reserve
balance should not be less than 20% of the
demand and time liabilities as on the last
Friday of the second preceding fortnight.
a.. True b.. False
c.. It is not 20% but 30%
d.. These banks need not have any cash
reserve

18.. A bank has to submit a Friday statement
to RBI . The said Friday(18th
of a particular
month) has not been declared as holiday
under the Negotiable Instruments Act, but
the previous working day was declared .
Then the statement to be prepared as on
a.. 16th
of that month b.. 17th
of that month
c.. 18th
of that month d.. 20th
of that month

**Every banking company has to maintain in
India certain amount of assets as per the
provisions of BR act.
.. At the close of business on the last Friday of
every quarter, such assets shall not be less
than 75% of the demand and time liabilities
of the banking company in India.

19..As per the provisions of the BR Act, a
return regarding the assets maintained in
India to be submitted to RBI, within 14
days from the end of every quarter.
a.. Not 14 days b.. It is 20 days
c.. It is 15 days not 20 days
d.. One month

**Every banking company has to submit 3
copies of its balance sheet and profit and
loss account to RBI within 3 months from
the end of the period to which it relate. The
period may be extended by the RBI by a
further period not exceeding 3 months.

• 20..A banking company need not submit copies of
balance sheet and auditor’s report to the Registrar
of Companies.
• a. Yes. b. No
• C. The banking company has to submit to
Registrar of Companies also
• D.. Since they are submitting to RBI there is no
need to submit to Registrar Companies separately

21..Foreign banks (banking companies incorporated
outside India) operating in India have to display in
a conspicuous place in their principal office a copy
of the last audited balance sheet and profit and
loss account. This has to be done not later than
a.. The First of July of the year in which it carries on
business
b.. The First Monday in August
c.. The First Friday in October
d.. The Last Friday in November

**RBI is empowered to order special audit of the
accounts of any banking company.
The expenses relating to the special audit to be
borne by the concerned banking company.
.. Every month, a banking company has to submit to
the RBI a return showing its assets and liabilities
in India as at the close of business on the last
Friday of the previous month

..A bank is authorized to return paid
instruments to their customers even before
the end of the preservation period without
any charges.
.. The inspecting officer is authorized to
examine any director or officer of a banking
company on oath.

22..It is not mandatory to give a copy of the
report to the banking company.
a.. Inspection report b.. Scrutiny report
c.. Search report d.. All these reports

23.. To order amalgamation of two banking
companies under the provisions of
Companies Act rests with
a.. Central Government
b.. Reserve Bank of India
c.. Central Government with the consultation
of Reserve Bank of India
d.. Company Law Board

24..Authroisation under the law for a debtor
to postpone payment of dues for a specified
time
a.. Holiday period b. Gestation period
c.. Moratorium d.. None of these

**State Bank of India was established under sec 3 of
the State Bank of India Act,1955 to take over the
undertaking of the then Imperial Bank and to carry
on the business of banking and other business in
accordance with that act.
.. The Central Government can give directions to
SBI on matters of policy involving public interest
in consultation with the Governor of RBI and the
Chairman of the State Bank.

• 25..State Bank of India Chairman and Managing
Director are appointed for a period of 7 years.
• A.. For Chairman it is 7 years, but for MD it is 5
years
• B.. For both it is not to exceed 5 years
• C. For both it is not to exceed 6 years
• D.. For Managing Director it is 7 years but for
Chairman it is only 5 years

**The State Bank will act as an agent of RBI
at the places where it has a branch and
where RBI has no branch.
.. To handle government and other business
as required by RBI.
.. The terms and conditions shall be as agreed
between them.

**The Central Government may after
consultation with the SBI and RBI by order
in writing authorize a subsidiary bank to
undertake other form of business.
..The State Bank is empowered to inspect the
subsidiary banks
..The auditors are appointed by State Bank of
India in consultation with RBI

• Regional Rural Banks have the holding
pattern such as Central Government 50% ,
Sponsor Bank 35% and State Government
15%
• Two or more RRBs may be amalgamated
by the Central Government by notification
in the Official Gazette.

26..Regional Rural Bank cannot
a.. Open deposit accounts
b.. Lend to Agriculturalists
c.. Extend Credit to an Artisan

**In respect of Nationalised Banks, the shares
other than those held by the Central
Government are freely transferable. No
shareholder other than the Central
Government can exercise voting rights in
excess of 1 % of the total voting rights of
all the shareholders.

**The directors of Nationalised banks are
nominated by the Central Government or
elected from shareholders.
.. Among others one Chartered Accountant
with not less than 15 years of experience
nominated in consultation with RBI.
.. Not more than 6 directors to be nominated
by Central Government

• State Bank of India act was amended to divide
capital into shares of Rs.10 each instead of
Rs.100/-
• The Banking Companies (Acquisition and
Transfer of Undertakings )Act amended to
facilitate public holdings of shares.
• Authorized capital could be up to Rs.1500/- crore
divided into shares of Rs.10/-each and also to
increase or reduce the authorized capital between
Rs.1500 crore and Rs.3000 crore

**The minimum paid up capital and reserves
to start banking business by a cooperative
bank is not less than Rs.1.00 lac
.. A co-operative bank not to lend on its own
shares/ unsecured loans or advances to its
directors/ any company or associates
wherein the director has interest

**Restrictions not applicable for unsecured
loans/ advances made by a co-operative
bank against bills for supplies or services
made to government or bills of exchange
arising out of bona fide, commercial or
trade transactions.
.. A co-operative bank to get permission of
RBI to open a branch in a new place.

27..Three copies of balance sheet and other
connected documents along with the
auditor’s report to be submitted to Reserve
Bank of India by a Co-operative bank
within
a.. 6 weeks b.. 3 months
c.. 6 months d.. 9 months

**When the customer’s signature on the cheque is
forged there is no mandate to the bank to pay. As
such a banker is not entitled to debit the
customer’s account on such forged cheque.
.. The drawee of a cheque having sufficient funds of
the drawer in his hands properly applicable to the
payment of such cheque must pay the cheque
when duly required to do so, and, in default of
such payment, must compensate the drawer for
any loss or damage caused by such default.

** “Payment in due course” means payment
in accordance with the apparent tenor of the
instrument in good faith and without
negligence to any person in possession
thereof under circumstances which does not
afford a reasonable ground for believing
that he is not entitled to receive payment of
the amount therein mentioned.

28..A cheque has been received by the drawee bank in local
clearing. At that time the account has clear balance to meet
the cheque amount. However, it has been observed that the
Words and Figures differ. The cheque contained Rs
Twenty two thousand two hundred and twenty two in
words but in figures read as Rs.2222/- Bank has to
a. Make the payment
b. Return the instrument
c.. Make payment for only Rs22222/- as per words
d.. Act as a prudent banker

29.. A cheque has been received in clearing
on 29th
of this month bearing the date as 27th
of two months ago. The cheque to be
returned on the grounds
a. Stale Cheque
b.. Ante Dated Cheque
c.. Should not be returned
d.. Post Dated

• 30.. A cheque has been received for collection. The
Collecting banker has given his necessary certificates on
the reverse of the cheque, which had more than two
endorsements.
a. It is the responsibility of the collecting banker to verify
the regularity of endorsements
b. It is not the responsibility of the paying bank to verify
the regularity of endorsements
c.. The Collecting bank as well as the paying bank are
responsible to verify the regularity of endorsements

31.. A cheque has been received by the drawer’s banker. On
scrutiny it has been observed that the word bearer was
altered into order again re-altered into bearer. The drawer
has signed only the cheque.
a.. The drawee bank to make payment.
b.. The paying banker will be in order to return the same
with a reason Material alteration requires drawer’s
authentication
c.. The above is not a material alteration.
d.. The responsibility lies with the collecting banker and not
the paying banker.

** A paying banker should not act in a casual
manner. To get appropriate protection under
the provisions of NI Act,1881, he should act
in good faith. He should not have any doubt
that the payment is being made to the
incorrect person. He should act without
negligence.

**A Collecting banker should act in good
faith.
He should collect cheques only for his
customer
Cheques should have been crossed
(Generally or specially)
Without negligence he should act.

**The banker to understand his customer properly
and the collecting banker should not act in a haste
or in a causal manner.
The proper identification and opening of account
with due care assumes lot of importance.
A collecting banker cannot avoid his
responsibility, even at a later date, when it is
proved that the account opened was not properly
opened.

** There is no bar as such to collect a third
party cheque. However, an account payee
crossed cheque, the collecting banker not to
collect for a third party.
He has to make necessary enquiries before
any third party cheques are collected on
behalf of its customer.

• 32.. A collecting banker has collected an
uncrossed cheque for his customer. However,
before collecting he has affixed his bank’s
crossing seal (using the rubber stamp) .The banker
• a.. Will get protection
• b.. Will not get protection
• c.. Will get protection since the act allows a
special crossing also
• d.. Will not get protection since the original
cheque was uncrossed

33..A cheque has been collected by Bank A. But the
cheque bore the crossing in favour of Bank B.
a.. The paying bank can make the payment since it
has been collected by a bank.
b.. The drawee bank not to honour
c.. The Collecting bank is not in order in collecting
such a crossed cheque
d.. Both b & c

34.. Customer G of a bank has lost the
Demand Draft purchased. The bank issued a
duplicate draft on G executing an indemnity
and completing the other formalities. G is
known as
a.. Surety b.. Guarantor
c.. Indemnified d.. None of these

** A contract of indemnity has two parties.
.. The indemnifier has to make good the loss
as soon as it occurs.
.. There are only two parties to a contract of
indemnity and hence only one contract.
.. An indemnity is for the reimbursement of
loss

35.. IN an indemnity the risk is subsisting whereas in
a guarantee the liability is contingent.
a.. The above is correct
b.. The above is incorrect
c.. For indemnity the risk is contingent and for
guarantee the liability is subsisting
d.. For both risk contingent and liability subsisting

**Issuing of Bank guarantees is one of the
functions of a banker.
It is a Non fund based finance extended
The bank to secure the bank guarantee in
addition to necessary securities will have to
obtain a Counter guarantee or Counter
indemnity to safe guard their interest

**Bank guarantee is the commitment given
by the issuing bank (Guarantor) to the
beneficiary.
If the claim is made by the beneficiary
within the guarantee period and as per the
terms and conditions of the bank guarantee,
then the bank should make the payment
without fail and also without any delay.

**Courts will not interfere in the functions of a
banker with regard to bank guarantees issued by
them.
The Courts will not prevent the bank from making
the claim amount on the bank guarantee.
The Courts will interfere only when there is a mala
fide intention or fraud or forgery takes place.

36.. A bank guarantee has been issued by Bank K on behalf of its
customer L in favor of R. The guarantee amount being Rs.2.75 lacs.
When the claim received by Bank K from R, the bank has a balance
of Rs.3.28 in the current account of L. Then the bank K
a.. Can debit L’s current account with the claim amount and make a
demand draft in favour of R and send.
b. Before doing so Bank K to consult L and take his permission.
c. Bank K to discuss with R
d. Can not debit the current account of L but extend an advance in
favour of L and then make the payment

37.. A bank guarantee has to be paid on invocation by the
beneficiary. At that time the bank has a balance of Rs.3
lacs (Fixed deposit) as collateral security and not
substantial balance in the current account of the party. The
claim amount is Rs.5 lacs.
a.. The bank will close Fixed deposit and make payment
b.. For the balance amount the bank can request the
beneficiary for some more time
c.. The bank need not honour, since the balance of the
collateral security will not be sufficient to meet the claim
amount
d.. None of these

**Banks generally issue Performance guarantees.
Advance payment , Deferred payment and
Statutory guarantees are also being issued by
banks
Before issuing a bank guarantee, the bank will go
through the draft copy and after satisfying with
the contents they agree to issue.
Besides the documents for various types of
securities, appropriate counter guarantee also to be
taken.

**Amount of guarantee, period, protective
clause, claim period , beneficiary are some
of the important aspects which are to be
clearly understood and put in place to
avoid complications at a later date.
.. If claim has come from the beneficiary
utmost importance to be given and due
action to be taken.

** A Letter of Credit is a commitment by the
LC opening bank to the beneficiary
(Exporter or Seller) to make payment.
.. Banks under a LC deal in documents
.. LC terms and conditions should not be
vague .

**A Negotiating banker (the bank in the beneficiary
/ Exporter’s country) negotiates the bills (makes
payment on the bills drawn by the seller and
accepts the documents). He is also known as
Nominated or Paying banker.
.. A confirming banker has to undertake on its part
the liabilities of the credit vis-à-vis the beneficiary
or the Negotiating bank.
.. Reimbursing bank is appointed by the issuing
bank to make reimbursement to the Negotiating,
Paying or Confirming bank

38.. The bank in the Beneficiary / Exporters
country through which the LC is advised to
the beneficiary is called Advising bank. The
other name for advising bank is
a.. Notifying bank b.. Nominated bank
c.. Paying bank d.. Notified bank

**LCs could be Revocable / Irrevocable
/Confirmed / With recourse or without
recourse/ Transferable and Back – to Back
Credits
.. The other types include Red clause and
Green Clause LCs.

39..Anticipatory Letter of Credit means
a.. Red Clause LC
b.. Blue Clause LC
c.. Green Clause LC
d.. Both a or c

** LC documents include Bill of exchange,
Invoice, Transport documents (like Airway
bill, Bill of Lading, LR,RR,) Post parcel
receipts, Insurance documents, Packing list,
Certificate of Origin, Quality certificate and
so on

**As in the case of Bank guarantee, the
payment under the LC – Banks obligation is
primary.
.. Exceptional cases the Court would interfere
with the machinery of irrevocable
obligations assumed by the banks, such as,
clear cases of fraud of which the banks have
notice.

**Bills are classified into inland, foreign,
demand, Usance, Clean, Documentary.
.. Demand bills are always purchased whereas
time bills are discounted.
.. Bills can also be accepted by banks on
collection basis

40.. A bill dated 12th
of last month accepted
27th
of last month for 75 days is known as
a.. At sight bill b.. On demand bill
c.. After sight bill d.. None of these

41.. A customer has tendered an outstation cheque to
his banker who accepted on collection basis. After
sending the cheque for collection, at the request of
the customer the bank has purchased the same.
Then the relationship between the banker and
customer would be
a.. Agent – Principal b.. Creditor – Debtor
c.. Debtor – Creditor d.. Principal - Agent

42.. A cheque purchased has been returned
with the reason “Funds insufficient”. Then
the bank which advanced finance has to
a.. Recover the finance from the drawer
b.. Recover the finance from the drawee
c.. Recover the finance from the payee
d.. Forego the advance lent

**Various types of Bank securities include
Land/ Real Estate, Stocks and Shares,
Debentures, Goods, Documents of Title to
goods, Trust receipts, Life Policies, Post
office NScs,, Term deposits, Book debts
and so on. Banks also consider Supply Bills
finance as well.

**Depending upon the nature, value of
securities accepted by the banks, necessary/
appropriate Loan documents are to be
taken to secure the securities/ money lent
and also to protect the interest of the bank.
.. If proper / adequate precautions are not
taken bank not only loose the security but
also the chances of recovery.

43..Life policy as security will involve
a.. Pledge
b.. Hypothecation
c.. Assignment
d.. Both a & c

44.. A bank has considered a loan on their
Fixed deposit. The deposit holder is M and
the loan has been given to N. Then N would
give
a.. Letter of Pledge
b.. Third Part Letter of Pledge
c.. Demand Promissory Note
d.. Duly discharged Fixed deposit receipt

45..XYA (P) Ltd company has been sanctioned a Supply
Bills limit of Rs.7 lacs.
a.. The Charge need not be registered with the
Registrar of Companies since Supply Bills is
treated as an unsecured finance
b.. The Charge has to be registered
c.. The Charge has to be registered since Book debts
are considered as Collateral security
d.. No connection with the Registrar of Companies
since the bank only gives the finance

46.. A depositor wish to transfer his fixed deposit to
his uncle’s name.
a.. Not possible since it is already printed on the
deposit receipt as Not transferable
b.. Possible by way of proper endorsement
c.. Possible by closing the deposit before maturity
and with that open a new account in the name of
the depositor’s uncle

47..As part of documentation the Irrevocable
Power of Attorney is also insisted in respect
of
a.. Life Policy Loan b.. Fixed Deposit Loan
c.. Clean OD d.. Supply Bills Finance

** There are 6 types of Mortgages.
The Transfer of Property Act discusses
about the Mortgages.
The basic requirements include
An intention to create mortgage by the
owner of the property (mortgagor) in favour
of the Mortgagee (Creditor) to secure a debt

48..(1) The sale is ostensible and not real. (2) The mortgagee has the right
to receive rent on the property mortgaged (3) Mortgage is put through
in a Notified area (4) Private Sale possible- Identify the mortgages
a.. Simple Mortgage/ English Mortgage/ Equitable Mortgage/ Anomalous
Mortgage
b.. Mortgage by way of Conditional Sale/ Usufructuary Mortgage /
Mortgage by way of Deposit of Title deeds / English Mortgage
c.. Registered Mortgage / English Mortgage / Equitable Mortgage /
Simple Mortgage
d.. Mortgage by way of Conditional Sale / Equitable Mortgage /
Usufructuary Mortgage / English Mortgage

49..Identify the correct mode of charge in respect
of(1) Vehicle loan,(2) Cash Credit, (3)Gold
ornaments loan & (4) Flat purchase.
a.. Pledge / Hypothecation / Hypothecation/
Mortgage
b.. Hypothecation / Assignment / Pledge / Mortgage
c.. Pledge / Mortgage / Hypothecation /
Hypothecation

**As per the provisions of the Registration
Act,1908, a registered document operates,
not from the date of its registration , but
from the time of its execution. Thus a
Mortgage document executed earlier,
though registered later than another, has
priority over the documents executed later

**The limitation period for filing a suit for sale of mortgaged
property is 12 years from the date the mortgage debt
becomes due.
.. The limitation period for filing suit for foreclosure is 30
years form the date the money secured by mortgage
becomes due..
.. Foreclosure means the loss of the right possessed by the
mortgagor to redeem the mortgaged property.
.. Under the Mortgage by way of conditional sale, the
mortgagee can sue for foreclosure, but not sale of the
property.

50.. A Ltd company has availed finance by way of
Simple Mortgage. Then there
a.. Will be two types of Registrations
b.. One with the Registrar of Companies
c.. Another with the Sub Registrar of
Assurances in whose jurisdiction the
mortgaged property is situated
d.. All of these

51..A property mortgaged (Equitable mortgage) is in
a village which is not a notified area. The bank
branch which gave the loan is in a Notified area. If
the bank wish to file a suit, then
a.. Suit has to be filed in the district headquarters of
the bank branch
b.. Suit to be filed with the Mortgage court
c.. Such loan not possible (Property in a different
area and the lending bank in another area)
d.. None of these

52.. Which one is possible
a.. A hypothecation can become pledge
b.. Pledge and third party pledge there is no
difference
c.. A mortgage is applicable to Vehicle as
security
d.. For transfer of goods assignment is used

**Hindu Undivided family is governed by personal
laws. In Bengal and other parts of erstwhile
Bengal province, a Hindu undivided family is
governed by Dayabhag Law in other parts of
India, it is governed by Mitakshara Law.
While lending to the HUF business banker has to
be very careful in protecting the interest of the
bank

**Trusts, Clubs, Co-operative societies ,
Schools, Colleges etc., lending has to be
properly understood then to be given.
.. The appropriate documents, such as deed,
agreements, bye laws, resolutions to be
carefully gone through and then proceed.

53.. Which one does not attract registration as per
the provisions of the Companies Act, with the
Registrar of Companies.
a.. A charge on any book debts of the company
b.. A charge on called capital of the company
c.. A floating charge on the undertaking or any
property of the company including stock-in-trade
d.. A charge on a copy right

54..Who should maintain the Index of
Register of Charges as per the Companies
Act.
a.. Registrar of Companies
b.. Lending Bank
c.. Creditor
d.. Debtor Company

**As per the provision of the Companies Act,
any creditor or member of company can
inspect the books relating to charges created
by the company and it is the duty of the
company to keep the Register of Charges
open to inspection

55.. A Limited Company applied for Working finance on 23rd
of July. Received the sanction letter on 12th
of August and
executed the loan documents on 18th
of August. Availed the
finance on 3rd
of September only. The charge has been
registered with the Registrar of Companies on 15th
of
September.
a.. The Registration is in order
b.. The Registration is not in order
c.. The Charge should have been filed within 1 month from
the date of sanction
d.. Since the finance has been taken only on 3rd
of September,
time to be calculated from that date to file the charge

THANKS & ALL THE BEST
T.M.C.VASUDEVAN
09819500380
02227606208
vasu1611@rediffmail.com
vasu1611@yahoo.co.in

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