Commercial Banks Objective Type Questions (1 Mark)

Question 1.
The Head Office of Bank of Baroda is in:
(a) Madras
(b) Kanpur
(c) Mumbai
(d) Delhi
Answer:
(c) Mumbai

Question 2.
Canara Bank was established in the year:
(a) 1906
(b) 1910
(c) 1918
(d) 1924
Answer:
(a) 1906

Question 3.
On 15th April 1980 Government of India nationalised banks. (UP 2016)
(a) 4
(b) 6
(c) 8
(d) 10
Answer:
(b) 6

Question 4.
The bank compares the signature of the customer on the withdrawal form with that in the ……….
(a) Pass Book
(b) Cash Book
(c) Bank Autograph Book
(d) None of these
Answer:
(c) Bank Autograph Book

Question 5.
If the customers want to withdraw the fixed deposit money before …….. days, no interest will be given.
(a) 40
(b) 42
(c) 44
(d) 46
Answer:
(d) 46

Commercial Banks Definite Answer Type Questions (1 Mark)

Question 1.
When fourteen Commercial Banks of India were nationalised?
Answer:
19th July 1969.

Question 2.
On 15th April 1980 how many banks were nationalised?
Answer:
Six.

Question 3.
For which class of people Current Account is beneficial?
Answer:
Businessmen.

Question 4.
In India how many banks were nationalised in the beginning?
Answer:
14.

Commercial Banks Very Short Answer Type Questions (2 Marks)

Question 1.
What is a Commercial Bank?
Answer:
In India, the term ‘Commercial Banks’ refers to these banks which have been established under the provisions of Indian Companies Act, 1913. Sometimes, these banks are referred to as Joint Stock Banks. Commercial Banks as the banks which finance the trade and industry of the country by arranging short term credit facilities.

Question 2.
What is a Pay-in-slip book?
Answer:
Pay-in-slip books used for depositing cash and cheques in the bank. The book consists of 10, 20 or 30 slips. The slip has two parts-original and counterfoil. The details of cash or cheque are entered in the slip as well as in the counterfoil and are sent to the bank. The clerk concerned checks the details and accepts the cash or cheque. Then he stamps the counterfoil and puts his signature on it. The original part of pay in slip remains with the bank. Generally, different pay in slips is used for depositing cheques and cash. They are different in colour.

Question 3.
What is a cheque book?
Answer:
Cheque Book: Bank provides a Cheque Book to every holder of Current Account. The number of forms in a cheque book varies from 10 to 100. The cheque book has two parts— counterfoil, which remains with the account holder and forms, which are issued for payments or for withdrawing money from the bank. All the details are filled in the form is given for withdrawing or in settlement of some dues. Cheque book is an important document and it should be kept properly. In case it is lost, the bank should be intimated immediately.

Question 4.
What is a passbook?
Answer:
Pass Book: Pass Book is a copy of the account maintained by the bank in its books. All the transactions whether debit or credit are likewise written in it. Generally, the passbook should be sent every month to the bank for completion of entries. If there is any mistake in the passbook, it should be immediately rectified.

Commercial Banks Short Answer Type Questions (4 Marks)

Question 1.
Write a short note on the Fixed Deposit Account.
Answer:
The term fixed deposit means deposits repayable after the expiry of a certain period which ordinarily varies from one year to five years. The rate of interest is higher in a fixed deposit account in comparison to other deposits, the rate of interest also depends upon the period of fixed deposits. The longer the period during which the money is to remain with the banker, the higher is the rate of interest. The bankers occasionally allow their customers to withdraw their fixed deposits before their due dates but in such cases, the customers have to forego their accrued interest.

The fixed deposit account is generally opened by those persons who do not have any other source of profitable investment. The persons who have excess money and which is not required by them in the near future open this type of account. The depositor can also borrow money against the security of fixed deposit.

Question 2.
What is Cash Credit?
Answer:
Cash credit is an arrangement by which a banker allows his customer to borrow money up to a certain limit against either a bond of credit by one or more sureties or certain other security. The bank does not give the entire loan at one particular time. What the bank does is that it opens the account in the name of the debtor and allows him to withdraw the money from time to time up to a certain limit determined by the value of the stocks kept in the debtor’s godown.

The godown remains in the possession of the bank. The debtor continues to withdraw small sums of money according to his requirements, but he cannot exceed the credit limit allowed to him. The bank, however, charges interest only on the amount withdrawn from the account. This type of loan is very popular with the Indian Businessmen.

Question 3.
Write in short about the savings bank account.
Answer:
Saving Bank Account is meant for the middle class and low-class income group persons. The motive of this account is to establish the habit of savings amongst these people. The bank also provides a cheque facility to the Savings Bank Account holder, but there should always be a minimum balance of Rs. 300 in the account.

In this account, the depositor can withdraw and deposit money once in a day. Thus, it is suited to those who want to deposit their small savings in a bank, which they need to withdraw only casually, and not every now and then. The interest allowed on Saving Bank Deposit is lower than given of Fixed Deposit but higher than that given on Current Account. It is calculated on the lowest balance kept during the month.

Question 4.
What do you understand by home saving safe account?
Answer:
Home Safe Deposit Account is a very good means of encouraging thrift among persons having small income or among children. A person wishing to open an account has to give an application to the bank. After completion of all the formalities, the bank supplies a safe to the depositor, which he keeps with himself and in which he drops his small savings from time to time.

Periodically the safe is taken to the bank where it is opened and the proceeds are credited to the account of the depositor. Such accounts carry only a very small rate of interest. The bank also provides withdrawal facility on this account but only after a certain amount has been deposited in the account.

Commercial Banks Long Answer Type Questions (8 Marks)

Question 1.
What do you mean by Commercial Bank? Discuss the services being rendered by Commercial Banks to its customers nowadays.
Or
Briefly describe the functions of Commercial Banks. (UP 2011, 12)
Or
Describe the functions of commercial banks. (UP 2019)
Answer:
In simple words, Commercial Banks are those which finance the trade and industry of the country by arranging short-term credit facilities.
According to the Indian Companies Act, 1913, “Commercial Banks are Joint Stock Banks which provide short-term loans for trade and industry of the country.” The main object of these banks is to provide credit to the internal trade of the country, for which they accept deposits from the public. Commercial Banks do not provide fixed or long-term capital for trade or industries.

The functions of Commercial Banks are the following:
1. Acceptance of Deposits: The bank accepts the following types of deposits from the public:

Fixed Deposit Account: The term fixed deposit means deposits repayable after the expiry of a certain period which ordinarily varies from one year to five years. The rate of interest is higher in the fixed deposit account in comparison to other deposits. Money can also be borrowed against the security of fixed deposit.

Current Account: This account is generally opened by businessmen. Under this account, the customer can deposit or withdraw money as and when he likes. No Interest is allowed by first-class banks on such accounts.

Saving Bank Account: Such account is meant for the middle class and low-class income group persons. The main objective of such account is to develop the habit of savings. When these small savings are pooled, it forms a large capital which can be used for the economic growth of the country.

Home Safe Deposit Account: Such account is a very good means of encouraging thrift among persons having small income or among children. These accounts carry only a very small rate of interest.

Recurring Deposit Account: Any person can open this account in his personal name or joint names and in case of minor under the guardianship of someone. The term of account depends upon the wish of the account holder, which varies from 1 year to 7 years. The amount to be deposited every month in the account should be Rs. 10 or in multiples thereof but to a maximum limit of Rs. 500 per month.

2. Lending of money: Lending of money in the form of loans and advances is another important function of the banks. The various types of loans and advances are as follows:

• Ordinary loans
• Overdraft
• Cash Credits
• Acceptance of bills
• Discounting of bills
• Loans at call and short notice.

The advances made by Indian banks are against the following securities:

• Personal credit
• Against valuable marketable securities
• Against precious documents.

3. Agency Functions: The various agency functions rendered by the bank are as follows:

• Collection of payments of cheques, bills of exchange, hundis etc.
• Payment of insurance premium, income tax, hundis, bills of exchange etc.
• Collecting dividends, interests etc. of the customers.
• Sale and purchase of shares and securities for its customers.
• Transfer of funds from place to place.
• The bank acts as the Trustee and Executor.

4. Other Functions. Other functions performed by the bank are as follows:

• Safe custody of valuable goods such as gold and silver ornaments, important papers, shares and debentures.
• Issuing of traveller’s cheques.
• Giving information about its customers.
• Collection of statistics.
• The bank also provides short-term loans to the farmers. The amount given is meant for purchasing of fertilisers, pesticides, electricity expenses etc.
• Transfer of funds from place to place.
• The bank acts as the Trustee and Executor.

5. Other Functions. Other functions performed by the bank are as follows:

• Safe custody of valuable goods such as gold and silver ornaments, important papers, shares and debentures.
• Issuing of travellers’ cheques.
• Giving information about its customers.
• Collection of statistics.
• The bank also provides short-term loans to the farmers. The amount given is meant for purchasing of fertilisers, pesticides, electricity expenses etc.

Question 2.
Write the advantages of Bank Nationalization. (UP 2008, 11)
Answer:
Advantages of Bank Nationalization: The advantages of Bank Nationalization are as follows:
1. The utilisation of Bank Credit in National Interest: If the banks are allowed to be operated by private individuals, then the bank credit shall not be used in the interests of the nation. On the contrary, the bank credit will be utilised in the interests of those individuals who control the banks.

2. Business Fluctuations can be Checked: As is well known, a capitalist economy is all the time afflicted by business fluctuations. The slump and the boom follow each other at regular intervals. These fluctuations cause untold harm to the economy of the country. The government can keep effective control, only if the banks are fully nationalised.

3. Inter-bank Competition can be Ended: There is at present going on wasteful competition among Indian banks which benefit no one. If all the banks are nationalised, this wasteful competition will automatically come to an end.

4. The utilisation of Bank Profits in National Interest: If the banks operate under private management, the profits will surely be utilised in the interests of those individuals who manage and control the banks. If, on the contrary, the banks are nationalised, their profits will be utilised in the national interest.

5. Development of Specialised Banks: There is at present acute shortage of agricultural, industrial and Indian foreign exchange banks in the country. If the entire banking industry is nationalised, the government will surely take steps to develop specialised banking institutions in the. country.

6. Improvement in Efficiency: The government banks in view of their vast resources are able to attract competent, trained and experienced staff more effectively than the private banks. Consequently, the level of operational efficiency is bound to be higher in government banks in comparison to private banks.

7. Balanced Growth of Banks: At present, the private banks operate only in those areas where they get good business, hence, generally all the banks are in towns and big cities. With the nationalisation of banks, the government will open the branches in those areas which do not have banking facilities. In this way, by nationalising the banks, they would have balanced growth.

8. Curb on Corruptions: Many businessmen violate the foreign exchange rules with the consent of the banks. They increase the value of the export invoice and decrease the value of the import invoice. Many banks give loan to their directors on the nominal rate of interest. Sometimes these banks provide indirect benefits to their directors, such as—foreign tours on bank expenses, free accommodation etc. All these malpractices can be abolished by nationalising the banks.

9. Abolition of Foreign Banks: The foreign banks held a dominant position in the Indian banking system. They almost controlled the foreign exchange business of the country as well as they competed with the Indian banks. These foreign banks used our capital for the welfare of their country and not for ours. They also remitted a large portion of their profits to their respective countries. All these problems could be solved by the nationalisation of banks.

10. Economic Growth of the Country: By nationalising the banks, the full banking structure will function for the benefit of the country. The same has been proved by the State Bank and Reserve Bank. They functioned in the national interest after they were nationalised. Both the banks provided credit facilities in rural areas, and now, the deposits received by the nationalised banks are being used for the economic growth of the country.

Question 3.
Point out the differences between the Central Bank and Commercial Bank. (UP 2009)
Answer:
Difference between Central Bank and Commercial Bank

Central Bank	Commercial Banks
1. This is Banker’s Bank, thus controls all the banking functions of the country.	1. Commercial Bank is a part of the banking function and is controlled by Central Bank.
2. Its motive is not to earn profit but to provide banking facilities.	2. Its motive is to earn profits.
3. It works as Government’s Banker, so the government provides many special facilities to the bank.lt has the monopoly of Note Issue.	3. They work as the bankers of the general public and the Government does not provide any special facilities to them.
4. It grants loans to other banks of the country if they are in need of it.	4. They do not have the power of issuing the notes.
5. It manages the government’s reserve and provides security.	5. They get a loan from Central Bank when they are in need of it. They do not have any relation with government reserves.