Below is a completely different set of 100 multiple-choice questions, covering Modules 3

(Banking Regulations), 4 (Negotiable Instruments), and 6 (SARFAESI), ensuring no question

repeats from the previous sets.

Correct answers are marked in bold.

MODULE 3: LAW OF BANKING REGULATIONS

A. Social Control, Nationalization, and Banking Regulation

1. Which among these was NOT a key reason for nationalizing banks in India?
a) Providing banking access to rural and priority sectors
b) Curbing private monopoly over bank credit
c) Eliminating all government control in banking
d) Expanding branch networks across regions
2. Nationalization of banks in India first occurred in:
a) 1955 with the creation of SBI
b) 1975 with the formation of RRBs
c) 1980 with six banks
d) 1969 with fourteen banks
3. Social control on banks generally aimed at:
a) Boosting big industrialists’ hold on bank funds
b) Ensuring banking served larger economic goals, especially rural needs
c) Converting banks into NBFCs
d) Preventing government input on credit policies
4. The Banking Regulation Act, 1949 was primarily enacted to:
a) Oversee foreign direct investment
b) Restrict branch expansion
c) Provide a framework for regulating and supervising banking companies
d) Abolish private banking entirely
5. Which among these is a consequence of social control measures prior to
nationalization?
a) Privatizing 10 large banks
b) Tightening oversight on large borrowers and controlling bank boards
c) Declaring all co-operative banks illegal
d) Reducing the presence of the Reserve Bank of India
6. The idea behind ‘social control’ legislation in 1968 was to:
a) Prevent misuse of bank credit by big industrial houses
b) Enhance free-market autonomy for banks
c) Promote only foreign bank branches
d) Introduce unlimited private capital in banks
7. One hallmark of nationalized banks after 1969 was:
a) Rapid expansion of rural branches
b) Closing all rural branches
c) Reducing staff benefits
d) Converting them into post offices
 8. Which is a correct statement about the shift to regulation from control post-
1980?
a) RBI ceased to oversee public sector banks
b) Government mandated no further expansions
c) RBI adopted prudential norms allowing operational flexibility but with strong
oversight
d) All banks were fully privatized
9. Under the Banking Regulation Act, RBI can regulate:
a) The paid-up capital, reserves, and management of banking companies
b) Only private sector banks
c) Cooperatives alone
d) Stock exchange transactions
10. A direct result of imposing social control on banks was:
a) Halting priority sector lending
b) Ensuring boards have certain professional directors
c) Permitting only single-family ownership
d) Eliminating SLR requirements

B. Licensing of Banking Activities (Section 22)

11. Section 22 states that no banking business can commence unless:

a) The finance ministry issues a special gazette
b) RBI grants a license
c) A 3-year waiting period is observed
d) It is recommended by the local MLA
12. Before approving a new bank license, RBI checks if:
a) The management is fit and proper, and the bank is not against public interest
b) Only foreign shareholders are in majority
c) No rural expansion is planned
d) The board has only family members
13. A banking license can be canceled if:
a) The bank invests in government securities
b) The bank pays regular dividends
c) The bank conducts its affairs in a manner detrimental to depositors
d) The bank merges with another NBFC
14. Which among these is a typical condition RBI might impose on a newly licensed
bank?
a) Prohibiting priority sector lending
b) Minimum capital infusion and promoter lock-in
c) Mandating the bank to operate only in one district
d) No checks on branch expansion
15. Fit-and-proper criteria usually means:
a) The promoter has political influence
b) The promoter has integrity, adequate financial capacity, and good track
record
c) The promoter is under 25 years of age
d) The promoter is nominated by SEBI
 16. Which statement about NOFHC (Non-Operative Financial Holding Co.) is
TRUE?
a) It merges the bank’s assets with promoter’s personal business
b) It is not recognized under RBI’s guidelines
c) It segregates banking from other group businesses for regulatory clarity
d) It is mandatory for foreign banks operating in India
17. If a bank is found violating the licensing terms repeatedly, RBI can:
a) Cancel or suspend its license after due notice
b) Seek recourse to civil courts for raising capital
c) Only impose a meager fine
d) Force the bank to become an NBFC automatically
18. Licensing ensures banks are not run by:
a) Corporate boards
b) Government-appointed staff
c) Unscrupulous persons lacking financial stability
d) Private professionals
19. If the RBI refuses a license application, the company can:
a) Immediately start a local area bank
b) Commence banking outside India
c) Seek a review or appeal, but cannot launch banking domestically
d) Demand the Supreme Court to overturn it
20. Key rationale behind Section 22 licensing is:
a) Protecting depositors by ensuring only suitable entities enter banking
b) Expanding foreign banks without restrictions
c) Minimizing RBI’s involvement in banking
d) Promoting only digital payment systems

C. Capital, Reserve & Liquid Asset Requirements

21. The main purpose behind capital adequacy norms is to:

a) Lower deposit interest rates
b) Maintain solvency and protect depositor funds
c) Encourage high-risk loans
d) Provide unlimited liquidity
22. Basel Accords are known for:
a) Regulating only NBFCs
b) Setting global standards on capital adequacy and risk management
c) Issuing PSL guidelines
d) Deciding CRR for each nation
23. Tier 1 capital is also referred to as:
a) Leverage capital
b) Core capital
c) Government-subsidized capital
d) Revaluation buffer
24. SLR (Statutory Liquidity Ratio) mandates banks to keep:
a) Entire net worth in intangible assets
b) A certain percentage of NDTL in liquid assets
 c) 50% of liabilities in property bonds
d) Zero gold reserves if profitable
25. CRR (Cash Reserve Ratio) implies banks must:
a) Keep a fixed percentage of deposits with the RBI
b) Maintain that ratio overseas
c) Convert deposits into equity shares
d) Refrain from priority sector loans
26. Tier 2 capital typically includes:
a) Equity share capital
b) Statutory Reserves
c) Subordinated debts, revaluation reserves, undisclosed reserves
d) Non-performing assets
27. Section 19 of the Banking Regulation Act prevents:
a) Excessive investment in other companies’ equity
b) Branch expansions in multiple states
c) Accepting deposits from foreigners
d) Maintaining capital reserves
28. Basel III introduced:
a) A capital conservation buffer and a leverage ratio
b) Eliminating Tier I capital concept
c) The rolling back of SLR
d) Only guidelines for microfinance
29. A high Capital to Risk Weighted Assets Ratio (CRAR) indicates:
a) The bank is better positioned to absorb loan losses
b) The bank is risking depositors’ money
c) The bank must reduce Tier I capital
d) The bank cannot operate internationally
30. Regulatory capital norms primarily seek to:
a) Let banks decide their own capital definitions
b) Eliminate RBI oversight
c) Encourage only short-term loans
d) Ensure the bank can withstand unforeseen financial stresses

D. Managerial Organs & Board Composition (Section 10A)

31. Section 10A ensures a bank’s board has:

a) Only family members of the promoter
b) Persons with professional expertise and a balanced representation
c) No accountability to RBI
d) Permanent directorship for 20 years
32. RBI can remove or disqualify a director if:
a) The director is deemed unfit or was involved in misconduct
b) The director had a personal disagreement with the chairman
c) The board requests better stock performance
d) The central government demands it without cause
33. A ‘Whole-Time Director’ or ‘Whole-Time Chairman’ is an individual who:
a) Devotes entire time and attention to managing the bank’s affairs
b) Sits on multiple other boards as well
 c) Is a marketing consultant
d) Must be a government official
34. The concept of ‘fit and proper’ for directors usually covers:
a) The bank’s brand name
b) Character, integrity, competence, and financial soundness
c) Only shareholding above 10%
d) Political party affiliation
35. Section 10A was crucial for:
a) Permitting any number of relatives on the board
b) Abolishing the need for a chairman
c) Mandating professional directorship to reduce undue influence
d) Keeping the entire board anonymous
36. If the board composition contravenes Section 10A norms:
a) RBI may intervene, seeking reconstitution or removal of non-compliant
directors
b) The bank can ignore it for 2 financial years
c) The central government alone can rectify it
d) Only depositors can approach the Supreme Court
37. A board mandated under 10A must ensure:
a) Minimal experience among directors
b) Adequate representation of experts in finance, law, etc.
c) All directors from the same educational background
d) That it invests solely in corporate bonds
38. If RBI appoints an additional director to a bank’s board:
a) Such director has no voting rights
b) He/she enjoys full rights as other directors
c) The bank can refuse to seat them
d) Their term is indefinite and not subject to renewal
39. Managerial autonomy under the Act is balanced with:
a) Zero direct accountability to depositors
b) Full government interference in daily operations
c) RBI’s supervisory power ensuring compliance
d) Only the board’s self-regulation
40. A prime goal of board regulation is:
a) To bar professional guidance
b) To safeguard depositor interests and ensure sound governance
c) To reduce accountability for top management
d) To centralize all decisions with the government

E. Amalgamation and Reconstruction (Section 44A)

41. Under Section 44A, an amalgamation scheme must typically:

a) Be approved by shareholders and sanctioned by RBI
b) Only need approval from the finance ministry
c) Bypass depositors’ interests
d) Exclude any role for boards of merging banks
42. Amalgamation differs from liquidation because:
a) Both result in winding up of the bank’s operations
 b) Liquidation is less final
c) Amalgamation merges banks; liquidation dissolves them
d) Neither requires RBI permission
43. Which statement about bank amalgamation is TRUE?
a) The RBI ensures the scheme is not detrimental to depositors
b) The Supreme Court automatically sanctions every scheme
c) It is purely a board-level decision with no external oversight
d) Private banks cannot be amalgamated
44. Key purpose of amalgamating banks is to:
a) Avoid statutory liquidity ratio
b) Enhance capital, reduce inefficiencies, and expand network
c) Stop credit facilities to priority sectors
d) Achieve forced retirement of employees
45. In recent years, an example of public sector bank amalgamation is:
a) Syndicate Bank merging with Canara Bank
b) HDFC merging with IndusInd Bank
c) ICICI merging with IDBI Bank
d) No public bank merges have occurred
46. An amalgamation scheme, once cleared by RBI:
a) Is binding on the banks, shareholders, and creditors
b) Needs a separate court decree
c) Exempts the new entity from CRR
d) Must be renewed every year
47. Depositors’ interests under 44A are protected by:
a) Zero direct representation
b) Automatic liquidation if they object
c) Having 75% depositors sign an EGM notice
d) RBI ensuring the scheme doesn’t prejudice depositors
48. Which of the following is a possible effect of amalgamation?
a) Enhanced competitiveness and operational synergies
b) Complete elimination of all liabilities
c) Guarantee that no NPAs remain
d) Staff automatically gets demoted
49. If a bank’s board proposes amalgamation with another bank:
a) It can do so without informing RBI
b) Only depositors must approve
c) A majority shareholder resolution plus RBI approval is required
d) The Supreme Court decides the final outcome
50. Post-amalgamation, employees typically:
a) All lose their jobs by default
b) Remain absorbed per the terms of the sanctioned scheme
c) Are required to invest in the bank’s equity
d) Sue for re-employment

Accounts & Audit (Pages 135-138)

51. A statutory audit in a bank ensures:

a) The board can hide financial irregularities
 b) Accuracy of financial statements and compliance with laws
c) The depositors have no oversight
d) Zero accountability to RBI
52. Under Section 30, the auditor’s report must reflect:
a) A true and fair view of the bank’s affairs
b) Only the profit portion
c) Directors’ personal opinions
d) Borrower details in indefinite detail
53. If an auditor finds serious inconsistencies, they:
a) Must qualify or disclaim in the audit report
b) Are free to manipulate accounts
c) Postpone the finalization indefinitely
d) Only inform the board privately
54. Banks must submit audited balance sheets to RBI:
a) Once every 5 years
b) Annually, within the time specified by RBI guidelines
c) Never, as it’s confidential
d) Only upon depositors’ demand
55. The final authority for appointing auditors in some public sector banks may rest
with:
a) Reserve Bank of India
b) Board of Directors only
c) SEBI
d) CBI
56. The concept of a ‘true and fair view’ means:
a) The bank can adjust figures to appear stable
b) Financial statements accurately reflect the bank’s actual position
c) Omitting NPAs is allowed
d) Only partial disclosure of liabilities
57. If a bank repeatedly fails to comply with audit requirements, RBI could:
a) Send just an advisory note
b) Impose penalties or revoke its license in extreme cases
c) Transfer the bank’s accounts to government
d) Avoid any action due to legal immunity
58. One key outcome of statutory audit is:
a) Enhanced credibility and trust among stakeholders
b) Automatic extension of deposit insurance
c) Halting any staff promotions
d) Government guarantee of solvency
59. Under the Act, if an auditor uncovers fraud in a bank:
a) They must keep it confidential due to client privilege
b) They are obliged to report it to appropriate authorities (RBI/board)
c) They are free to resign and remain silent
d) They only wait till the next year’s audit
60. Which statement is FALSE about auditing banks?
a) Auditors verify compliance with RBI guidelines
b) Audit fosters transparency in bank operations
c) Audit results can be hidden from RBI
d) An auditor can qualify the report if irregularities are found
MODULE 4: NEGOTIABLE INSTRUMENTS – LAW &
PROCEDURE
A. Fundamental Concepts

61. A negotiable instrument is typically:

a) A real estate title deed
b) A written, signed unconditional promise or order to pay a specific sum
c) A personal contract
d) An intangible goodwill certificate
62. Which one is recognized as a negotiable instrument under the NI Act?
a) Bill of Exchange
b) Fixed Deposit Advice
c) Warehouse receipt
d) Credit note
63. Negotiation of a bearer instrument occurs by:
a) Mere delivery of the instrument
b) Court notarization
c) Partial assignment
d) Registration with sub-registrar
64. An endorsement ‘in blank’ means:
a) The endorser’s signature only, with no specified endorsee
b) Writing the payee’s name and address
c) Making it non-transferable
d) Cancelling the instrument entirely
65. Holder in due course is protected against:
a) All future endorsements
b) Defects in title of prior parties
c) Payee’s disclaimers
d) Potential civil suits from the drawer

B. Promissory Notes

66. A promissory note is invalid if it:

a) Lacks a date
b) Lacks an unconditional promise to pay
c) Names only the payee
d) Is written on a piece of paper with no stamp
67. Parties to a promissory note are typically:
a) Maker (promisor) and payee (promisee)
b) Drawer, drawee, payee
c) Maker, endorser, bank
d) Endorser, notary, acceptor
68. Which statement about a promissory note is correct?
a) It requires acceptance by the drawee
 b) It is always payable on demand
c) It involves a primary liability on the maker
d) It must have three parties mandatorily
69. A note reading “I promise to pay X Rs. 10,000 on delivery of goods next month”
is not valid because:
a) It states a certain amount
b) The promise is conditional on an event
c) It includes an interest clause
d) The sum is too large
70. If the maker defaults on the maturity date of a promissory note:
a) The payee can file suit for enforcement
b) The note becomes an endorser’s liability
c) There is no recourse if the note is not accepted
d) Only the drawer in a bill of exchange is liable

C. Bill of Exchange

71. A bill of exchange is distinguished by the fact that it:

a) Is an order from one party to another to pay a third party
b) Is a promise by the payee to pay the drawer
c) Must be accepted by the payee
d) Requires no signature from the drawer
72. Acceptance of a bill occurs when:
a) The drawer signs it
b) The drawee writes ‘accepted’ and signs
c) The payee endorses it further
d) The notary public stamps it
73. Which statement is FALSE about a time bill?
a) It is payable after a certain period
b) It might require acceptance
c) It is always payable on demand
d) Dishonour can occur by non-acceptance
74. Dishonour by non-payment occurs if:
a) The drawer revokes acceptance
b) The acceptor refuses to pay on maturity
c) The payee changes the date
d) The bill is lost
75. When a bill is retired before maturity:
a) It is dishonoured
b) The acceptor extends it
c) The holder and acceptor agree to settle early
d) It becomes an inchoate instrument

D. Cheques
 76. A cheque differs from a bill of exchange mainly because it:
a) Is drawn on a banker and payable on demand
b) Must be accepted by the drawee
c) Always includes days of grace
d) Has indefinite validity
77. Crossing a cheque effectively ensures:
a) Payment can be demanded in cash over the counter
b) Payment only through an account at the specified bank
c) Endorsement is invalidated
d) The payee cannot deposit it
78. Dishonour of a cheque under Section 138 occurs if:
a) The payee forgets to sign
b) The cheque is returned unpaid due to insufficient funds
c) The drawer’s bank merges with another
d) The payee decides not to deposit it
79. Stop payment instructions by the drawer to the bank can:
a) Still attract liability under S.138 if a legal debt existed
b) Immediately absolve the drawer
c) Indefinitely suspend the payee’s rights
d) Convert the cheque into a demand draft
80. Days of grace do not apply to a cheque because:
a) A cheque is always payable on demand
b) The holder has 3 more days beyond the date
c) NI Act excludes it from priority sector norms
d) The drawer must accept it first

E. Negotiable Instruments – Additional Points

81. A holder in due course obtains:

a) The liabilities of the prior holder
b) A questionable title if the instrument had a defect earlier
c) Good title free from prior defects if acquired in good faith
d) The right to alter the sum
82. Ambiguous instruments under the NI Act can be treated as:
a) Either a note or a bill
b) A cheque or a note interchangeably
c) A money order
d) A security under the Companies Act
83. Inchoate instruments are those which are:
a) Fully completed and accepted
b) Only for foreign transactions
c) Non-transferable by law
d) Signed but lacking certain essential details
84. If there is a discrepancy between the amount in figures and words:
a) The lesser amount prevails automatically
b) The amount in words shall govern
c) The instrument is void ab initio
d) The bank picks whichever is beneficial
 85. Section 138 of the NI Act imposes criminal liability if:
a) A cheque issued for a legally enforceable debt is dishonoured
b) The drawer is a minor
c) The payee forgot to deposit on time
d) The cheque is forcibly collected by payee
86. Interim Compensation introduced in 2018 means:
a) Court can order up to 20% of cheque amount to be paid during trial
b) The entire cheque amount must be paid upfront
c) Only 5% of the amount can be claimed
d) It’s a settlement out of court
87. Material alteration includes changes to:
a) The color of the paper
b) The date, payee name, or amount without consent
c) The location of signature if authorized
d) Endorsee’s minor corrections
88. Countermanding a cheque is essentially:
a) Endorsing it to a third party
b) Instructing the bank not to honor the cheque
c) Transferring partial value
d) Doubling the face value
89. Which statement is TRUE regarding the presumption under Sec.139?
a) The drawer must prove innocence beyond doubt
b) The payee has to prove the debt from scratch
c) The court presumes the cheque was issued for a lawful liability
d) No presumption arises unless the cheque is for over Rs. 1 lakh
90. Noting and Protest are relevant primarily for:
a) Cheques used abroad
b) Dishonoured bills of exchange
c) Demand drafts
d) Debit card transactions

MODULE 6: SARFAESI ACT, 2002

91. The SARFAESI Act facilitates:
a) Enforcement of security interests without court intervention
b) Mergers of co-operative banks
c) Overriding the NI Act
d) Guaranteeing deposit insurance
92. Under SARFAESI, an Asset Reconstruction Company (ARC):
a) Must be a government department
b) Acquires NPAs from banks/FIs to recover them
c) Handles only post-dated cheques
d) Issues mandatory directions to RBI
93. Securitization typically involves:
a) Pooling NPAs and issuing security receipts to qualified buyers
b) The drawer guaranteeing a cheque
c) RBI rewriting the bank’s regulations
d) Using immovable property as an intangible asset
94. Before enforcing the security interest, the secured creditor must serve a demand
notice giving the borrower:
a) 15 days to respond
b) 45 days to pay
c) 90 days grace
d) 60 days
95. If the borrower fails to clear dues within 60 days of notice, the secured creditor
can:
a) File an FIR with the police
b) Take possession of the secured assets or appoint a manager
c) Approach the consumer forum
d) Only wait for the borrower to respond further
96. The Borrower’s representation to the secured creditor:
a) Is automatically accepted
b) Must be ignored by the lender
c) Can be appealed directly to Supreme Court
d) Must be replied to within 15 days by the secured creditor
97. Appeals against SARFAESI actions are heard by:
a) Competition Commission
b) Labour Court
c) Debt Recovery Tribunal (DRT)
d) SEBI Appellate Tribunal
98. Which of the following is outside the purview of SARFAESI enforcement?
a) Agricultural lands as primary security
b) Securitizing a home loan NPA
c) Taking possession of commercial property
d) Selling an NPA account to ARC
99. Mardia Chemicals v. Union of India is known for:
a) Upholding the constitutionality of SARFAESI
b) Declaring the Act inoperative
c) Restricting the sale of NPAs
d) Mandating civil court involvement in every case
100. Once IBC proceedings commence, SARFAESI enforcement typically:
a) Continues as usual
b) Is stayed by the insolvency moratorium
c) Overrules the IBC’s entire process
d) Remains unaffected in practice