PAPER NO.

5
Q.1 Answer the following in one or two sentences:
a) Define Bank ?
Ans:- “A Bank is what a bank does”. This is a simple definition.
[Link] Johnson defined, “ A bank is a place where money is laid up
to be called for occasionally”.
b) Mention any two presumptions under the Negotiable Instruments
Act?
Ans:- Presumptions under the Negotiable Instruments Act are as
follows:-
[Link] Consideration : Every Negotiable Instrument was made or drawn
for consideration, and that every such instrument,when it has been
accepted,indorsed, negotiated or transferred was accepted ,indorsed
negotiated or transferred for consideration.
[Link] to date : Every negotiable instrument bearing a date was made or
drawn on such date.
c) State the Objective of Banking Law?
Ans:- Objectives of Banking Law :-
 Protect consumers: Ensure consumers have access to
information about their rights and options
 Ensure financial stability: Maintain the stability of the financial
system
 Prevent financial crime: Prevent banks from engaging in unfair or
deceptive practices
 Promote competition: Promote competition to keep prices low for
consumers
 Promote fair and competitive banking practices: Promote
efficiency and competitiveness among banks
 Protect depositors: Provide security and guarantee to depositors
  Regulate banking: Regulate the opening of branches and
changing of locations of existing branches

d) What are Current Accounts?

Ans:- A current account is a bank account for managing daily financial
transactions. It's also known as a demand deposit account.
e) Mention any two relationships between the banker & Customer?
Ans:- Relationship between the banker & customer are as follows:-
Debtor and creditor Relationship
Principal and Agent Relationship
Bailer & Bailee Relationship
Pawnee & Pawnor Relationship.
f) What are Stale Cheques?
Ans:- Stale Cheques: The date on a cheque may be a current one,or an
ante one or a post one.A cheque which bears date before the date of
issue is said to be ante-dated.
g) Define Holder?
Ans:-“Holder” define under Section 8 of Negotiable Instrustment Act
1881 .A holder is a person who has legally obtained a negotiable
instrument, with name entitled on it, for receiving the payment from the
parties liable.
h) Who is a Banking ombudsman?
Ans:- A banking ombudsman, appointed by the RBI, addresses customer
complaints about bank services, such as issues with ATMs, cards, and
unfair practices. With 22 regional offices, customers can file complaints
through the RBI portal. The ombudsman can investigate and award
compensation up to ₹20 lakhs.
i)State the Full form of DRT?
Ans:- DRT stands for Debts Recovery Tribunal.
j)What is NBFC?
Ans:- NBFC stands for Non-Banking Financial Company. It is a financial
institution that offers financial services like loans, credit, and
investments, but doesn't have a banking license. NBFCs are registered
under the Companies Act of India.
[Link] the purpose of SEBI?

Ans:-The main objective is to create such an environment which

facilitates efficient mobilization and allocation of resources through the
securities market. This environment consists of rules and regulations,
policy framework, practices and infrastructures to meet the needs of
three groups which mainly constitute the market i.e. issuers of securities
(companies), the investors and the market intermediaries.

2. What is order absolute?

Ans:-an "order absolute" is a final, unconditional court order or

judgment, typically following a garnishee proceeding, that compels a
third party (like a bank) to pay a debt owed to a judgment debtor to the
judgment creditor.

[Link] do you mean by crossing of cheques?

Ans:- Crossing a cheque means drawing two parallel lines across its face,
typically on the top left corner, to instruct the bank to deposit the funds
only into the payee's account, not to be cashed over the counter.

[Link] is lien?

Ans:-A lien is a legal claim or right a creditor (like a bank) holds against
a borrower's asset (like a property or fixed deposit) to secure repayment
of a debt, allowing them to seize and sell the asset if the borrower
defaults.
[Link] does amalgamation mean?

Ans:-"Amalgamation" refers to the combination of two or more banks

into a single, new legal entity, where the original banks cease to exist,
and their assets, liabilities, and operations are transferred to the newly
formed entity.

[Link] is Noting?

Ans:-Section 99 “Noting “When a promissory note or bill of exchange has

been dishonoured by non-acceptance or non-payment, the holder may cause
such dishonour to be noted by a notary public upon the instrument, or upon a
paper attached thereto, or partly upon each.

[Link] any two grounds for winding up of NBFC?

Ans:- Two grounds for the winding up of an NBFC (Non-Banking Financial

Company) are: if the NBFC becomes unable to pay its debts or if the Reserve
Bank of India (RBI) determines that the continuance of the NBFC would be
against public interest.

[Link] is Recurring Deposit?

Ans:-A Recurring Deposit (RD) is a savings scheme where you deposit a fixed
amount of money regularly (e.g., monthly) for a set period, earning interest on
the accumulated sum. For example, investing ₹1000 each month for 5 years
earns interest, resulting in a larger maturity amount.

[Link] any two kinds of Endorsements?

 Ans:-Blank Endorsement:
 The endorser signs their name on the back of the instrument
without specifying who the instrument is payable to.
 This makes the instrument payable to "bearer" or whoever holds
it.
 Special Endorsement:
 The endorser signs their name and specifies the name of the
person to whom the instrument is payable.
 This is also known as a "full endorsement".
 The person named becomes the "endorsee" of the instrument.
10. What do you mean by Audit?

Ans:- Audit Section 30:

According to section 30 of the Act, every bank should get audited its
accounts periodically and shall submit the report to the [Link]
banking company shall before appointing,reappointing or removing any
auditor or auditors obtain the perious approval of the RBI.

[Link] are Credit Card?

Ans:- A Credit Card is a financial tools that allows you to make

purchases and pay for them later.

[Link] which year did SEBI came into effects?

Ans:- The Securities and Exchange Board of India came into effect on
January 30,1992.

[Link] the charaterstics of Reserve Bank of India?

Ans:-1. Note issuing authority.

[Link] Bank.

[Link] Authority.

[Link] Control Authority.

[Link] Ombudsman Scheme.

[Link] Negotiable Instrument?

Ans:-The Term Negotiable Instrument literly means A written document

which create a right in favour of some person & which is freely
transferable.

15. Define SEBI?

Ans:- Securities and Exchange Board of India (SEBI) is a statutory

regulatory body entrusted with the responsibility to regulate the Indian
capital markets. It monitors and regulates the securities market and
protects the interests of the investors by enforcing certain rules and
regulations.

[Link] any two duties of a Bank Auditor?

Ans:- Bank auditors, whether internal or external, review financial

records, assess internal controls, and ensure compliance with regulations
and policies to safeguard bank assets and ensure accurate financial
reporting.

[Link] is Debit Card?

Ans:-A debit card is a payment card issued by a bank or financial

institution that allows you to make electronic transactions, both online
and in-person, by accessing the funds available in your linked bank
account.

[Link] do you mean by Endorsement?

Ans:- an endorsement refers to the act of signing the back of a negotiable

instrument (like a check) to transfer ownership or rights to another
party, thus authorizing payment or transfer of funds

19. State any two types of relationship between a banker and

customer?

Ans:- The relationship between banker and customer is described

as debtor-creditor, principal-agent, and other specialized relationships
like bailee-bailor and mortgagor-mortgagee.

[Link] do you understand by Co-operative Bank?

Ans:- A cooperative bank is a financial institution owned and controlled

by its members, who are also its customers, operating on principles of
cooperation, mutual aid, and democratic decision-making.
[Link] are banking fraud?

Ans:- Bank fraud encompasses various illegal activities aimed at

obtaining money or assets from financial institutions, including identity
theft, check fraud, credit card fraud, and phishing, among others.

[Link] Between a Promissory Note and Cheque?

Basis Cheque Promissory Notes

A promissory note is a tool
By cheque, a person orders made in writing way with an
the bank to send the fund open contract to pay a
Meaning to the bank account of specific fund of the amount
another person by whose to a specific person or the
name the cheque is made. agency's bearer and marked
by its creator.
A promissory note is stated
A cheque is stated in
Legal in section 4 of the NI Act
section 6 of the NI act 1881
1881.
Parties Three parties are involved Two parties are involved in
Involved in the case of a cheque. the case of a promissory note.
The drawer of the The drawer of the instrument
Drawer instrument of the cheque is of the promissory notes is
Creditor Debtor
The Promissory note is paid
The cheque is paid as on
Payability on the specific time period to
the demand.
the one listed there.
Grace There is no grace period in Three days of grace period is
Period the case of a Cheque. given for promissory notes
For a cheque, it is not
In the case of a Promissory
necessary to have a notice
Notice of note, no notice of dishonor is
of dishonor.
Dishonour there.

.
In the case of a cheque, the
For promissory notes, the
parties stay liable to pay
Liability liability of the drawer is prior
even if no notice of
and final.
dishonor is provided.
 A cheque is normally valid
for the time of six months;
Validity of A promissory note is valid
certain cheques made by
these for three months, counting
the nation can be valid for
instruments from the date it is issued.
three months, counting
After that, it will become
from its issued dates.
invalid.
Acceptance A cheque doesn't need For a Promissory note, no
of the acceptance, and its entity is acceptance is needed from
instrument for a quick transaction. the drawee.
Except in some specific It is compulsory to have a
Stamp cases, no stamp is needed stamp on the promissory
in case of a cheque notes.
A cheque bounce notice is
given when the cheque is
returned due to insufficient
funds, mismatched
signature, overwriting, etc.,
and the holder can ask for
the payment of the amount
of the cheque. Yet, if the
cheque is bounced due to Promissory notes are tied by
inadequate funds in the a part of a property or other
account, then notice is real acquisition that can be
given as on Section 138 of retrieved if the payer does
Security and the NI Act within a time of not make the payment on
Dishonour 30 days of a notice given by their terms. A person must
the Financial Institution, also check the proof of the
that is, a bank. limitations time and file a
case at a specific time under
After fifteen days of the the Act 1963.
issue, the holder can start
legal moves under Section
138 of the NI Act 1881, and
the bouncing of a cheque is
said to be a criminal
offense that can be
punished by jail for not
more than two years or a
 fine that can be double
than that of the cheque
amount.
Listed below are some
Listed below are some types
types of cheques:
of Promissory notes:
 Order cheque
 Investment promissory
 Bearer cheque
note
Types of  Open cheque
 Real estate promissory
instruments  Traveler’s cheque
note
 Self-cheque
 Commercial promissory
 Crossed cheque
note
 Banker’s cheque
 Person promissory note
 Post-dated cheque

[Link] do you mean by Banking law?

Ans:-Banking law encompasses the body of rules and regulations

governing the operations of banks and other financial institutions,
including their relationships with customers and other entities. It covers
areas like banking regulation, transactions, and the rights and
responsibilities of banks and their clients.

[Link] Any two Types of Bank?

 [Link] is Garnishee Order?

Ans:-A garnishee order is a court directive that compels a third party,

known as the garnishee, to pay money directly to the judgment creditor
instead of the judgment debtor. Typically, this situation arises when the
debtor has funds held by a bank or another financial institution.

[Link] between promissory Note and Bill of Exchange?

Ans:-

FEATURE PROMISSORY NOTE BILL OF EXCHANGE

Parties Involved Two Parties: Maker & Payee Three Parties: Drawer,
Drawee, Payee

Nature Unilateral Promise to pay Unilateral Order to pay

Acceptance No acceptance required Acceptance by drawee

required.

Transferability Negotiable , can be transferred Can be endorsed or

transferred.

Usage Common for personal loans & Common in trade and

debts international transaction .

[Link] Debt?

Ans:-Debt refers to sum of money owed by one person and due to

another person. Most popular kinds of debt are loans with or without
mortgages and credit card debt. One person can lend debt to another at
a fixed or a floating interest income. So, the borrower will return the
principal amount together with the interest amount along the period of
loan repayment. The word 'debt' is derived from an old french word
'dette' that means an obligation.
[Link] did the Reserve Bank of India Act came into force?

Ans:-The Reserve Bank of India Act, 1934, came into force on April 1,
1935.

[Link] is DRAT?

Ans:-DRAT stands for Debt Recovery Appellate Tribunal, a quasi-

judicial body established under the Recovery of Debts and Bankruptcy
Act, 1993, to hear appeals against orders of Debt Recovery Tribunals
(DRTs).

[Link] do you mean by Bill drawn in sets?

Ans:- A "bill drawn in sets" means a bill of exchange (a written order to

pay a sum of money) is divided into multiple parts, each numbered and
containing a provision that it remains payable only if the other parts
remain unpaid, with all parts together constituting a single bill.

[Link] was the Negotiable Instrument Act incorporated?

Ans:- The Negotiable Instrument Act was incorporated on 9 th December

1881.

32. who has a better title in case of the holder and holder in due course
? Give reasons?

Ans:-

22252Comparison: Promissory Notes vs Bills of

Exchange

Feature Promissory Note Bill of Exchange

Parties Involved Two parties: Maker & Payee Three parties: Drawer,
Drawee,
Payee

Nature Unilateral promise to pay Unilateral order to pay

Acceptance No acceptance required Acceptance by drawee required

Transferability Negotiable, can be transferred Can be endorsed or

transferred

Usage Common for personal loans & debts Common in trade and
international

transactions