TYPES OF CHARGES, SECURITIES
& DOCUMENTATION is an important topic from internal Bank promotion exams
point of view. Every year 1 to 5 questions are there in the internal bank
promotion exams question paper depending on the cadre. You may expect same number of questions
this year also. We have prepared some very important questions from the
mentioned topic for your guidance and studies. Questions are also followed by
the answers so that you develop an excellent understanding of the topic before
entering the examination hall.

Multiple Choice Questions with Answers

1. Primary security means.

Option A.  security in the form of equitable mortgage of
land.

Option B.  security which has been created out of bank
finance.

Option C.  security in the form of third party.

Option D.  security in addition to security which bank
has financed.

 

The correct answer is Option B.
security which has been created out of bank finance.

 

 

2. Which of the following is not
a document of title to goods?

Option A.  Bill of Lading.

Option B.  Railway Receipt.

Option C.  Dock Warrants.

Option D.  Airway Bill.

 

The correct answer is Option D.
Airway Bill.

 

 

3. While making an advance
against bill of lading the banker must ask for.

Option A.  original copy of bill of lading.

Option B.  duplicate copy of bill lading.

Option C.  duplicate and triplicate cow of bill of
lading.

Option D.  all the negotiable copies of bill of lading.

 

The correct answer is Option D.
all the negotiable copies of bill of lading.

 

 

4.  Mr A requests XYZ Bank for a loan of Rs.  2 lakh against shares of that bank itself
having market value of Rs.  5 lakh.  The bank can.

Option A.  grant the advance after approval of their
controlling office.

Option B.  grant the advance after approval of RBI as
required under Banking Regulation Act.

Option C.  grant him advance only up to 25% of the
market value.

Option D.  none of the above.

 

The correct answer is Option D.
none of the above.

 

 

5.  As per guidelines of RBI, banks can grant
advance against marketable corporate securities in dematerialised form for
genuine personal needs to individual customers not exceeding.

Option A.  Rs.  10
lakh.

Option B.  RS.  20
lakh.

Option C.  Rs.  5
lakhs.

Option D.  Rs.  50
lakhs.

 

The correct answer is Option B.
Rs.  20 lakh.

 

 

6. The minimum margin to be kept
in the case of advance against shares in dematerialised form is

Option A.  20%.

Option B.  25%.

Option C.  40%.

Option D.  50%.

 

The correct answer is Option D.
50%.

 

 

7. Which life policy would you
prefer while granting advance against it?

Option A.  policy issued under Married Women’s Property
Act.

Option B.  endowment policy.

Option C.  education policy.

Option D.  whole life policy.

 

The correct answer is Option B. endowment
policy.

 

 

8. Amount of advance against life
insurance policy is sanctioned by considering.

Option A.  surrender value of policy.

Option B. the premia paid by the
insured person.

Option C.  the sum assured.

Option D.  repaying capacity of the borrower.

 

The correct answer is Option A.
surrender value of policy.

 

 

9. Advances against ’Supply Bills’
are treated as:

Option A.  partly secured.

Option B.  fully secured.

Option C.  clean.

Option D.  pledge advances.

 

The correct answer is Option C.
clean.

 

 

10.Documentary bills are the bills
which are.

Option A.  accompanied by documents of title to goods.

Option B. accompanied by demand
promissory note

Option C.  payable after a certain specified period.

Option D.  accompanied by invoice and bill of exchange.

 

The correct answer is Option A.
accompanied by documents of title to goods.

 

 

11.  Provisions relating to guarantees are given
in.

Option A.  Transfer of property Act, 1882.

Option B.  Indian Contract Act, 1872.

Option C.  RBI Act, 1934.

Option D.  Banking Regulations Act 1949.

 

The correct answer is Option B.
Indian Contract Act, 1872.

 

 

12.  The number of parties in the case of a
contract of indemnity and guarantee respectively are.

Option A. 2 and 3.

Option B. 3 and 2.

Option C. 3 and 3.

Option D. either Option A. or Option
B..

 

The correct answer is Option A. 2
and 3.

 

 

13.  A contract of insurance is a contract of.

Option A.  Guarantee.

Option B.  Indemnity.

Option C.  both Option A. & Option B..

Option D. none of these.

 

The correct answer is Option B.
Indemnity.

 

 

14.  In case a banker releases the principal
debtor from liability:

Option A. the banker cannot
recover amount from guarantor as he is also discharged of liability.

Option B.  the bank cannot recover amount from guarantor
as guarantor’s liability is co-extensive with Principal Debtor.

Option C.  the bank can recover amount from guarantor as
guarantor’s liability is independent of the liability of the principal debtor.

Option D.  the bank cannot recover amount from guarantor
but guarantor’s property remains liable for repayment of loan.

 

The correct answer is Option A.
the banker cannot recover amount from guarantor as he is also discharged of
liability.

 

 

15.  In case a loan is repaid by the guarantor on default
by the principal debtor, the guarantor.

Option A.  can recover the amount from principal debtor.

Option B. is entitled to all
securities in the possession of the creditor.

Option C.  can recover the amount from principal debtor
but is not entitled to securities in the Possession of the creditor.

Option D.  both Option A. & Option B. above.

 

The correct answer is Option D.
both Option A. & Option B. above.

 

 

16.  In case of default by the principal debtor,
the bank (creditor) can file a suit.

Option A. first against the
principal debtor and then against surety.

Option B.  both principal debtor and surety simultaneously.

Option C.  not necessarily against the principal debtor.

Option D.  either Option B. or Option C. above.

 

The correct answer is Option D.
either Option B. or Option C. above.

 

 

17.  A bank guarantee covering a single
transaction is referred to as.

Option A.  specific guarantee.

Option B.  performance guarantee.

Option C.  deferred payment guarantee.

Option D.  fixed guarantee.

 

The correct answer is Option A.
specific guarantee.

 

 

18.  A continuing bank guarantee is one which.

Option A.  continues till revoked.

Option B.  covers a single transaction.

Option C.  covers a series of transactions.

Option D.  cannot be revoked.

 

The correct answer is Option C.
covers a series of transactions.

 

 

19.  Deferred payment guarantees fall in the
category of.

Option A. performance guarantees.

Option B. counter guarantees.

Option C. bid bond guarantees.

Option D.  financial guarantees.

 

The correct answer is Option D.
financial guarantees.

 

 

20.  In the event of guarantee issued by the bank
being invoked the bank should make payment.

Option A.  after obtaining permission from next higher
authority.

Option B.  after obtaining approval of their advocate.

Option C.  immediately unless restrained by the court of
law.

Option D.  after obtaining consent of principal debtor.

 

The correct answer is Option C.
immediately unless restrained by the court of law.

 

 

21.  The liability of a guarantor under the
guarantee.

Option A.  arises even if the borrower is not asked to
repay the borrowings.

Option B.  arises after bank has exhausted all remedies
against the principal debtor.

Option C. is co-extensive with
that of the principal debtor.

Option D. is crystallised the
moment the advance is disbursed.

 

The correct answer is Option C.
is co-extensive with that of the principal debtor.

 

 

22.  Counter-guarantee means.

Option A.  guarantee obtained from a third party.

Option B.  guarantee executed by the borrower in favour
of the bank at whose instance BG is issued.

Option C.  intimation regarding cancellation of the
guarantee issued by the bank.

Option D.  letter issued by the beneficiary confirming
receipt of guarantee document.

 

The correct answer is Option B.
guarantee executed by the borrower in favour of the bank at whose instance BG
is issued.

 

 

23.  Negative lien means.

Option A.  right of the banker to convert hypothecation
into pledge in the event of borrower’s default.

Option B.  a declaration from the borrower to the effect
that assets offered as security are free from any charge or encumbrance and
that he will not create any charge over them without Permission of the bank.

Option C.  as good as lien.

Option D.  all above.

 

The correct answer is Option B. a
declaration from the borrower to the effect that assets offered as security are
free from any charge or encumbrance and that he will not create any charge over
them without Permission of the bank.

 

 

24.  on which of the following securities charge
can be created by way of mortgage.

Option A.  Stocks.

Option B.  Land& Building.

Option C. Debtors.

Option D.  Vehicles.

 

The correct answer is Option B.
Land& Building.

 

 

25.  The charge on immovable property can be
created by.

Option A.  Pledge.

Option B.  Hypothecation.

Option C.  Lien.

Option D.  mortgage.

 

The correct answer is Option D.
mortgage.

 

 

26.  Pledge is defined in.

Option A.  Indian contract Act, 1872.

Option B.  Transfer of property Act, 1882.

Option C. negotiable instrument act,
1881.

Option D. Limitation Act, 1963.

 

The correct answer is Option A.
Indian contract Act, 1872.

 

 

27.  Hypothecation is defined in.

Option A.  Indian contract Act, 1872.

Option B.  Transfer of property Act, 1882.

Option C.  Negotiable Instruments Act, 1881.

Option D.  SARFAESI Act, 2002.

 

The correct answer is Option D.
SARFAESI Act, 2002.

 

 

28.  Mortgage is defined in.

Option A.  Indian contract Act 1872.

Option B.  Transfer of property Act, 1882.

Option C.  Negotiable Instrument Act, 1881.

Option D.  Limitation Act, 1963.

 

The correct answer is Option B.
Transfer of property Act, 1882.

 

 

29.  Pledge which is defined in section 172 of the
Indian Contract Act, 1872 means

Option A.  bailment of goods.

Option B.  bailment of goods to guarantee a loan.

Option C.  bailment of goods as security for payment of
debt or performance of a promise.

Option D.  both Option B. & Option C. above.

 

The correct answer is Option C.
bailment of goods as security for payment of debt or performance of a promise.

 

 

30.  Which of the following statements is/are
correct?

Option A.  Every bailment is a pledge.

Option B.  Every pledge is a bailment.

Option C.  Pledge can be created in respect of book
debts.

Option D.  both Option A. & Option B.

 

The correct answer is Option B.
Every pledge is a bailment.