Banking System in India, Awareness Questions

01. In which year "Regional Rural Banks" were started in India?
(a) 1965
(b) 1675
(c) 1975
(d) 1889

02. The Oldest Bank in India was?
(a) SBI
(b) SHB
(c) IOB
(d) DENA BANK

03. When was the Indian Rupee devaluation?
(a) 1965
(b) 1966
(c) 1967
(d) 1985

04. In which year First Bank of India "Bank of Hindustan" was started/established?
(a) 1959
(b) 1945
(c) 1956
(d) 1770

05. In which year RESERVE BANK OF INDIA was established?
(a) April 1st, 1935
(b) June 1st, 1945
(c) August 8th, 1992
(d) April 2nd, 1930

06. In which year "Pherwani Committee" recommended to establish National Stock Exchange (NSE) in India?
(a) 1990
(b) 1989
(c) 1991
(d) 1975

07. AER stands for _________
(a) American Equity Rates
(b) Annual Earning Status
(c) Annual Earning Report
(d) Annual Earning Rate

08.  Which public sector bank has the large number of branches in foreign countries?
(a) Bank of Baroda
(b) Bank of India
(c) Union Bank of India
(d) Indian Overseas Bank

09. In which year, "Union Bank of India" was started/inaugurated by Mahatma Gandhi?
(a) 1920
(b) 1909
(c) 1919
(d) 1918

10. Banking in India controlled by ____________.
(a) Reserve Bank of India
(b) Union Ministry of India
(c) Union Finance Commission
(d) Union Ministry of Commerce

11. National Income Ignores ________.
(a) Sale of land
(b) Sales of a company
(c) Export of a company
(d) company Income

12. The present Indian Monetary System is based on _____________.
(a) Gold Reserve System
(b) Proportional Reserve System
(c) Minimum Reserve System
(d) Convertible Currency System

13. Which is the first Indian bank to be wholly owned by Indians?
(a) Bank of Maharashtra
(b) Central Bank of India
(c) Punjab National Bank
(d) Bank of Baroda

14. Which is the First bank to introduce "Debit Card" in India?
(a) SBI (july 1st, 1955)
(b) SBH (august 8th, 1941)
(c) Andhra Bank (nov 20, 1923)
(d) City Bank (june 16th, 1912)

15. Which is the first foreign bank has been opened the branch in India?
(a) HSBC  (Pune)
(b) DOHA BANK (Recently started first branch in Mumbai)
(c) BANK OF AMERICA (Started in India in 1964)
(d) BARCLAYS (Head Quarter in Mumbai)

16. First Bank Introduce ATM in India?
(a) HSBC
(b) SBH
(c) CITY BANK
(d) DOHA BANK

17. Which bank introduced internet banking facility in India?
(a) HDFC
(b) ICICI (First to Introduce Mobile ATM)
(c) Dena
(d) Baroda

18. Which bank has the maximum number of overseas branches?
(a) ICICI
(b) Baroda Bank
(c) SBI
(d) Dena Bank

19. In which year "Saving Account System" was started by Presidency Bank in India?
(a) 1833
(b) 1888
(c) 1820
(d) 1842

20. In which year, Bank of Hindustan and General Bank of India were started, which is the First bank to establish in India?
(a) 1705
(b) 1770
(c) 1707
(d) 1700

Answers

01. (c)   02. (a)   03. (b)   04. (d)   05. (a)   06. (c)   07. (d)   08. (a)   09. (c)   10. (a)

11. (a)   12. (c)   13. (b)   14. (d)   15. (a)   16. (a)   17. (b)   18. (b)   19. (a)   20. (b)

Capital Market Instruments

The capital market generally consists of the following long term period i.e., more than one year period, financial instruments. 

In the equity segment Equity shares, preference shares, convertible preference shares non-convertible preference shares etc and in the debt segment debentures, zero coupon bonds, deep discount bonds etc.

Equity Shares: 

• In accounting and finance Equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists.

Shareholder' Equity:

• When the owners are shareholders the interest can be called shareholders equity. 
• The accounting remains the same and it is ownership equity spread out among shareholders. In case all the shareholders are in one, the share equally in ownership equity from all perspectives.

Equity in Real Estate:

• The conception of equity with respect to real estate makes the equity of redemption.
• And, this type of equity is a property right valued at the difference between the market price of the property and the amount of any mortgage (loan) or other encumbrance.

Debentures:

• A debenture is a document, it is either creates a debt or acknowledgement it.
• It is a debt without collateral.(Property or asset).
• Coming to corporate finance, this term is used for a medium to long term debt instrument used by large companies to borrow money. (But in some countries this term is used  as interchangeably with bond, loan stock.)
• It is like a certificate of loan/bond evidencing that the company is liable to pay a specified amount with interest. And the money raised by the debentures becomes part of the company's capital structure and it does not become share capital.
• Debentures holders have no rights to vote in the company's general meetings of shareholders, but they may have separate meeting/votes. For example, on changes to the rights attached to the debentures. The interest paid to them is a charge against profit in the company's financial statements.

Zero Coupon Bonds:

• This type of bonds also called as a Discount Bond or Deep Discount bond, this bond bought at price lower than the its face value.
• This face value is repaid at the time of maturity and it does not make interest payments (periodically)
• Face value or Par value is the amount paid to bondholder at the time of maturity date)

Financial Markets

Financial market means it allows people to buy and sell financial securities such as stocks, bonds and also commodities like precious metals or agriculture goods.

The financial market is divided into two different categories:

• Money Market
• Capital Market

Money Market, wherein short-term monetary assets are bought and sold and this money market operates by the Financial institutions and financial instruments only.

Financial Institutions include RBI, Commercial Banks, Cooperative Banks in the organised sector and Indigenous Banks, Money lenders, Chit funds, etc in the unorganised sector.

Financial Instruments are the bills, treasary bills, promissory notes, hundies, certificate of deposits, etc.

Money Market it refers to the market for short-term requirement and deployment of funds.

Call money Money lent for one day.

Notice Money money lent for a period exceeding one day.

Term Money money lend for 15 days or more in inter bank market.

Held till Maturity Securities which are not meant for sale and shall be kept till maturity.

Yield to Maturity Expected rate of return on an existing security purchased from the market.

Coupon Rate Specified interest rate on a fixed Maturity security fixed at the time of issue.

Treasary Operations Trading in Government securities in the market. An investor bank can purchase these securities in the primary market. Trading takes place in the secondary market.

Gilt Edged Securities Government security that is a claim on the government and is a secure financial instrument which guarantees certainly of both capital and interest. These securities are free of default risk or credit risk, which leads to low market risk and high liquidity.

Indian financial system

Financial System is a set of inner related activities or services that work together to achieve some pre-determined goals and it includes different markets, the institutions, instruments services and mechanisms which influence the generation of savings, investment, capital formation and growth.

Financial Assets currency, bank deposits, life insurance policies, unit shares and other kinds of deposits, etc.

Financial Market such as money market and capital markets and financial Intermediates or Financial Institutions such as banks and non-banking financial institutions.

• The first bank in India was set up - 1770 by an agency house.
• Central bank- 1773
• The Bombay stock exchange - 1870
• The first life insurance company - "Oriental Life Insurance Company"
• The first General (non-life) Insurance Company - 1850
• In 1951, there were 566 private commercial banks in India.
• RBI established in which year - 1 April 1935
• After independence, the RBI became a state-owned institution from January 1st, 1949.
• Indian Financial system was characterised by a lack of organised credit institutions in rural India at the time of Independence. 
• Unit Trust of India came into existence in 1964 to provide a channel for retail investors to participate in the capital market.

Nationalisation of Banks (1969)

1. Central Bank of India

2. Bank of Maharashtra

3. Dena bank

4. Punjab National Bank

5. Syndicate Bank

6. Canara Bank

7. Indian Bank

8. Indian Overseas Bank

9. Bank of Baroda

10. Union Bank

11. Allahabad Bank

12. United Bank of India

13. UCO Bank

14. Bank of India

• In 1980, six more private sector banks were nationalised.
• Regional Rural Banks were set up in 1975 to provide agriculture credit.
• National Bank for Agriculture and Rural Development  (NABARD) established in which year - 1982

According to Reserve Bank Act 1934, amended in 1994, main functions of the Intermediaries in India are:

• To accept deposits and advance loans  to financial institutions, to invest in securities, hire purchase finance or equipment leasing.
• Development Banks (Industrial Finance Corporation of India Limited, Industrial development Bank of India, Small Industries Development Bank of India, Industrial Investment Bank of India, Industrial Credit and Investment Corporation of India, State Finance Corporation and State Industrial Development Banks)
• Specialised Banks (National Agriculture and Rural Development Bank, Export-Import Bank, etc)
• Others (Life Insurance Corporation of India, General Insurance Corporation, United Trust of India, Investment Companies, Hire purchase Finance Companies, Equipment leasing Company, Loans Company, Housing Finance Company, Residuary Non-Banking Company, Mutual Benefit Company, Nidhi Company, Chit Fund Company, Venture Capital Funds/Companies, etc).

Indigenous Bankers are included in the unorganised sector of Indian Banking System. It is called unorganised sector because Reserve Bank has no control over it.