Legal-3-part-B

Legal-3-part-B

Letter of Credit

1. Letter of Credit is not a /an?

a) Negotiable Instrument

b) Type of Guarantee

c) Instrument of payment of money to exporter

d) A contract among importer, exporter and issuing Bank

Answer: A

Explanation: Letter of Credit is not a Negotiable Instrument.

1. But Letter of Credit is a type of Guarantee.

2. It assures payment of money without failure to exporter.

3. It is a contract between Exporter / Seller/ Beneficiary and Bank. It is Independent of any other contract among any other parties or performance.

2. Payment of Letter of Credit depends only on?

a) Performance of Export

b) Correctness of documents submitted

c) Terms and conditions in purchase agreement

d) All of these

Answer: B

Explanation: Letter of Credit is Independent of all other contracts or performance of exports. Banks verify all documents submitted with Letter of Credit. Details in documents like bill of exchange, Invoice, Bill of lading, marine Insurance and Quality/Inspection certificate are thoroughly compared with LC. If it’s found correct, payment is made.

3. Ram & Co had a purchase contract with Chi Young in Hong Kong. M/S Chi Young asked for a Letter of Credit from a Bank-Z. It also stipulated it should be informed through ABC Bank of Hong Kong. It further advised Ram & Co to get the Letter of Credit confirmed by another Bank- DEF Bank in Hong Kong.

Match the following:

a)	Ram & Co	-	Issuing Bank
b)	Chi Young	-	Advising Bank
c)	ABC bank	-	Importer / Buyer / Applicant
d)	DEF & Co	-	Beneficiary / Seller/exporter
e)	Applicants Bank-bank-Z	-	Confirming Bank

Answer:

a. a-d; b-b; c-a; d-e; e-c

b. a-a; b-c; c-b; d-d; e-e

c. a-d; b-c; c-a; d-b; e-e

d. a-c; b-d; c-b; d-e; e-a

Explanation:

Applicant:  Importer/purchaser

Issuing bank: Importer asks his bank to issue LC in favor of exporter on behalf of him. His bank is called issuing bank.

Advising bank:  Issuing bank asks another bank to advise/inform the LC to the exporter. This bank is called advising bank.

Confirming bank:  Sometimes advising is not enough for exporter. He may ask for further assurance/confirmation for the authenticity of LC. **Confirming bank becomes a party and has to pay LC in case of any failure from issuing bank.

4. Chi Young prepared all the documents and submitted to his Bank– KLM. KLM advanced the money after verification. As pointed out in the Letter of Credit , it sent the document to PQR Bank. PQR was entrusted with the payment of money by issuing Bank and PQR paid the money.

Fill in the following with words below.

A.KLM is ___________ Bank

B.PQR is ___________ Bank

a) Lending Bank                                          b) Negotiating Bank

c) Reimbursing Bank                                 d) Confirming Bank

e)  b & c                                                         f) b & d

Answer: b

Explanation:

Exporter has the option to go for negotiation to any bank. Negotiating bank always discounts LC/Bill of exchange and other documents.

Issuing bank can also ask any bank to reimburse/pay the Bill as per LC immediately on presentation from negotiating bank. Then, issuing bank reimburses the money to reimbursing bank.

5. Which one is called nominated or paying Bank in a Letter of Credit?

a) Exporter’s Bank                                     b) Confirming Bank

c) Negotiating Bank                                   d) Reimbursing Bank

Answer: C

Explanation: Negotiating Bank is called paying Bank or Nominated Bank.

6. Confirming Bank has responsibility?

a) To advise Letter of Credit

b) To negotiable Letter of Credit

c) To accept Letter of Credit

d) To undertake payment of Letter of Credit

Answer: D

Explanation: When a Bank confirms Letter of Credit on the instructions of issuing Bank; it automatically gets the responsibility of paying the Bills under Letter of Credit directly to beneficiary. When it pays so, it is ‘without Recourse’ to drawer of the bill/the exporter.

Without recourse: When a bank purchases a bill from the seller/exporter without recourse condition, the seller/drawer is not-liable if payment is dishonored by drawee/importer/buyer.

7. E, an exporter, presented bills to his Bank-N. Bank negotiated the bills and sent it for realization. Meanwhile the importer became Insolvent. Bank could not claim the value of bill from the drawer. Exporter – E because.

a) Irrevocability condition

b) Without recourse condition

c) Counter Guarantee not obtained from E.

d) None of these

Answer: B

Explanation: When Letter of Credit is issued with ‘without recourse to drawer’ condition, Bank cannot claim the money from the Drawer.

8. International practice in business does not accept?

a) Revocable Letter of Credit                  b) Confirmed Letter of Credit

c) Irrevocable Letter of Credit                d) Acceptance Letter of Credit

Answer: A

Explanation: International practices never allow revocable Letter of Credits whereas they accept only Irrevocable Letter of Credits.

                        Revocability always allows amendments without the consent of all parties. Hence ICC stopped this practice.

9. Acceptance Credit means?

a) Separate Acknowledgement required from drawee.

b) Loan should be accepted by borrower.

c) Negotiation of Letter of Credit by accepting Bank

d) Bills on receipt immediately paid by drawee.

Answer: D

Explanation: When Bills under Letter of Credit are received, it is to be paid and retired by buyer-drawee. It is called acceptance credit or sight credit.

 If acceptance credit carries a period of credit say 30 days. It is called usance credit. It means drawee can pay after 30 days of his acceptance.

10. Red clause credit ?

a) means LC printed in red letters

b) Allows advance before shipment

c) Allows post shipment

d) None of these

Answer: B

Explanation:

This LC allows packing credit on completion of production for the purpose of shipping.

11. Green clause Letter of Credit?

a) Allows storage and pre-shipment advance to exporter

b) Covers only Green entrepreneurship

c) Enables importer to get advance post shipment

d) None of these

Answer: A

12. E-an exporter received Letter of Credit in favour of him. A, B and C are suppliers to E. So, he gave up the rights of receipt of payment to his suppliers: A, B, C. It is called ________?

a) Bank to Bank Letter of Credit

b) Transferable Letter of Credit

c) Negotiable Letter of Credit

d) Supportive Letter of Credit

Answer: B

Explanation: Letter of Credit *must have a mention about the right to transfer. Then only, transfer of LC can be made to others.

13. E on receipt of Letter of Credit favoring him, asked his banker to issue new Letters of Credit to A, B & C on behalf of him. They are called __________?

a) Subsidiary Letter of Credit

b) Agents Letter of Credit

c) Back to Back Letter of Credit

d) Branched out Letter of Credits

Answer: C.

When LC is received by E , he asks his bank to issue new letters of credit to his suppliers on the security of LC originally received in favor of him; this is called Back to Back LC.

Then what is Transferable LC?

 Here, the LC itself is transferred directly to suppliers; but LC should have this condition as a clause incorporated in it.

14. Acceptance or refusal of document under Letters of Credit is to be done within _________ working days?

a) 3                             b) 5

c) 10                           d) 15

Answer: B

15. Letter of Credits are called _________ and governed by _______ prepared by _________. It contains _______ articles?

a) ECC                        b) 39              c) ICC             d) Documentary Credits

e) Bank Guarantee             f) 49               g) UCP 600

select correct answer:

A.    d g c f

B.     g d f c

C.     d f g c

Explanation:

UCP 600 – Uniform customs and practice 600.

ICC – International chamber of Commerce.

Letter of Credits are called documentary credits and governed by UCP600 prepared by ICC. It contains 39 articles

16. In one of the Letter of Credits, Letter of Credit becomes a security for other Letter of Credits issued?

a) Transferable Credit                               b) Confirmed Credit

c) Back to Back Credit                               d) Revocable Credit

Answer: C

Bill Finance

1. One of the following is correct about bill finance?

a) Long term                                                            b) Liquidity

c) Off balance sheet item                                     d) Cheque Payment

Answer: B-Liquidity

Explanation: Bill Finance is characterized by Liquidity because it gets realized in short term and so, Bankers get immediate money and income.

All Bills can be rediscounted by banks under Bill rediscounting scheme in RBI or with other banks whenever it is needed.

2. B – drew a bill of exchange for Rs.5,00,000–on ‘C’ for  purchase of generators from ‘B’. So ‘C’ accepted the bill of exchange and sent it to ‘B’. ‘A’ was a supplier to ‘B’. B had a due of Rs.10,59,688 to A. So, ‘B’ endorsed the bill in favor of A by signing and delivering it to ‘A’. Who are A, B & C ? Match these names with a, b, c, d and e below.

a) Drawee                                                   

b) Endorsee                                                

c) Endorser

d) Drawer

e) a-b, b-d, c-a, d-c

 f) a-c; b-a; c-b; d-b.

Answer: f                 

Explanation:  It is natural whenever we come across these words. One gets confused. Let me explain:

Drawer: A person who draws / demands payment. It can be a cheque or bill of exchange. He makes the bills / prepares the Bill or Cheque & orders the other person to pay the money immediately to himself or somebody. So, A drawer is a person who makes / draws a bill of exchange / cheque.

Drawee:  is one who has been ordered to make payment. In case of a cheque  Drawer – (customer) orders ‘the Bank’ to pay a certain amount money to himself or bearer or order of payee. In a cheque / DD- ‘BANK’ is the Drawee.

Payee: Is the beneficiary who receives payment; If it is not an ‘account payee’/‘Crossed’ bill he has the right to transfer the bill for a CONSIDERATION like ‘B’ has transferred the payment to ‘A’.

In a Bill of Exchange which is purely a mercantile claim of money for a business done.

i. Drawer is the maker and payee.

ii. He asks the Counter person to pay the money to him or to an endorsee as per his orders

3. Match the following in relationship to Bill of Exchange?

a)	Seller	-	Who accepts Bill of Exchange
b)	Buyer	-	Who pays Bill of Exchange
c)		-	Who receives the payment
d)		-	Who makes the Bill of Exchange

A.    a-c, a-b, b-d, b-c.

B.     a-d, a-c; b-b;            b-a.

Answer: b    

4. Holder in due course is?

a) Drawer for consideration                               b) Endorser for consideration

c) Endorsee for consideration                            d) Drawee for consideration

Answer: C

Explanation: ‘A’ draws a Bill of Exchange on ‘B’ asking him to pay the bill. Now ‘A’ transfers the Bill by endorsing it to ‘C’ who is a Creditor to A. In *consideration of this credit ‘A’ transferred the bill of Exchange. Now ‘C’ is the possessor of Bill of Exchange and *holder in due course by endorsement and delivery. B – The drawee has to pay ‘C’ only.

Holder in due course: **needs endorsement, delivery for a consideration.

Holder: ***needs endorsement and delivery only.

5. One of these is not true about Endorsement .

a) A signature on the back of the bill

b) Gives possession Rights to the endorsee

c) Consideration and delivery must be there

d) Gives a right to maker to receive the amount due as per bill of exchange.

Answer: D

Explanation: Drawer means one who makes/demands payment. But when he endorses the bill, he gives his right to endorsee.

6. ‘B’ drew a Bill of Exchange for the goods sent by him to ‘D’. ‘D’ paid the bill after a delay of 15 days. Interest for delay was missed to be mentioned in the Bill. What is the interest in the absence interest?

 a) 6%                        b) 12%           c) 18%           d) 24%

Answer:  c.

[In the absence of interest rate, Law prescribes 18%]

7. ‘A’ draws a Bill on ‘D’ for sale of goods to D. Then ‘A’ transferred the Bill to ‘B’ for consideration. B on his part endorsed it to ‘C’. Unfortunately when ‘C’ demanded payment, ‘D’ dishonored the bill. Who is liable?

a) ‘B’ is Liable to ‘C’                        b) ‘A’ is Liable to ‘B’

c) ‘A’ is Liable to ‘C’                        d) ‘B’ is Liable to ‘D’

Answer:  a.

Explanation: It is the Law that every endorser is liable to next endorsee.

ex: ‘A’ endorsed to B. ‘B’ to ‘C’. C claimed payment from drawee-D. But, it was dishonored.

Rule is every endorser is liable to endorsee. So, B( who endorsed it to C) is liable to C because D refused payment.

8. There are three types of classification.

Match:

a)	Inland Bills & Foreign Bills	-	Each has separate classification
b)	Foreign Bills & Clean Bills	-	Term
c)	Demand and Usance	-	Nature
d)	Clean and Documentary Bills	-	Place

A. A – B; B – D; C – A; D – C

B. A – D; B – A; C – B; D – C

Answer: B

Explanation: Bills are classified on place, period (term) and nature.

i.                    What is Term?

Term refers to maturity period. There are two types 1.Demand and 2. usance. Demand is like our cheque, on demand payment should be made by drawee.(immediately)

If like 15 days or 30 days or 45 days etc is given for payment, it is called USANCE bills.

ii.   What is place?

Depends on place of like foreign or domestic (origin and payment within inland-domestic bills; if it is another country it is foreign).

ii.                    What is nature?

It says whether secured by other documents or unsecured without any other documents (clean).

Clean bills mean no other documents except bill of exchange. No other security is there.

Documentary bills have various documents attached to them like bill of exchange, LR/RR/bill of lading/insurance/inspection etc..So, they are secured.

So, Nature means whether it is secured or clean (unsecured).

9. ABC & co received the following Bills. Classify them into the correct types.

1. A Bill drawn from Indore payable in Tirupur.

2. A Bill Drawn from Newyork for $100,000 on a Jaipur merchant

3. ABC & Co Accepted a Bill for Rs.50,00,000 drawn by PQR payable immediately.

4. ABC & Co had a 30 days time to pay even after acceptance.

a) Inland Bill __________                                   b) Usance Bill _____

c) Foreign Bill _________                                   d) Demand Bill ______.

Choose one below:

a.     A-1;B-4;C-2;D-3

b.     A-4;B-1;C-3;D-4

Answer: a.

10. D.P Bill – delivery Against Payment or sight bill has not one of the features below?

a) Drawer to send the bill

b) Drawee to accept it

c) Drawee to pay immediately & take delivery of goods

d) Drawee to take delivery of bills  & pay later.

Answer:- D

Explanation: Delivery on Acceptance means Delivery of RR / LR to drawee/buyer on sight or acceptance by him and then, they can pay later. With RR/LR they take delivery of goods and start selling/business and collect money and pay..

But delivery on payment – D.P means Drawee has to pay immediately on sight / after acceptance of the bill drawn on him, then only Lorry Receipt/Railway Receipt is to released to him by banker.

11. Banks have different types of Bill Finance. Which one of these is separate from bill finance?

a) Bills Purchased

b) Bills discounted

c) Advance against bills for collection

d) Supply Bills

Answer: D

Explanation: Bills purchased or discounted and Advance against bills for collection usually consist of a Bill of Exchange which is negotiable and other documents like RR/LR/ Bill of lading  which are quazi-negotiable;

But, supply bills are not negotiable. It is only a demand on government for performance of contracts/finished works (so no LR/RR) by bank’s customer-contractor. It is almost a clean bill. Eg: A contractor constructs a fly-over and makes a bill of change for the contracted amount.

12. Our Bank advanced against bills of Exchange drawn by A on B. Bill was endorsed in favor of our Bank and accompanied by RR. When bank sent the bill, it was dishonored by drawee-B. Who is liable?

a) Drawee is Liable

b) Drawer Liable

c) Drawer and Drawee Liable

d) None of these

Answer: B

Explanation: On dishonor by drawee, Drawer is liable to bank. ***( Please note  if it is ‘Without recourse’ bill, drawer is not liable)

13. Bank advanced ‘A’ (drawer of the Bill) and sent it to drawee for acceptance. After 15 days, Drawee returned the bill saying that goods did not arrive. Bank on verification at Railway confirmed the non-arrival of goods. Who is liable?

a) Drawer Liable to Bank .

b) Bank to go against drawee

c) Bank to sue Railway

d) None of these

Answer: C.

Explanation:  Bank has become a holder of the Bill & RR. As a ‘proper holder in due course’ (because of advance), bank becomes the owner of goods. So it has got all the rights to file a suit against Railways. Railways are liable.

Holder in due course:  A bill has to be endorsed and delivered to the endorsee for a consideration. Then the holder is called holder in due course.

What is the difference between a holder and holder in due course?

 Example:

1.If a bill is endorsed and delivered to Bank, Bank is just a holder.

2. A bill is endorsed and delivered to Bank *after an advance is disbursed under ‘bills purchased’/ bills discounted. Now, bank has passed on a consideration to drawer. In this case, Bank is not just a holder, BUT A HOLDER IN DUE COURSE.

The difference is ‘consideration’.

14. Our bank ___________a bill for Rs.5,00,000 drawn by ‘A’ on ‘B’. This is called_________. Bank also becomes ______ for the bill along with drawee   _________.

a) Bill co-acceptance facility

b) Liable

c) Co-accepted

d) ‘B’

e) ‘A’

Choose from A and B.

A.    C,A,B, D

B.     B,C,A,D

Answer:A

Explanation: Drawer/sellers sometimes ask for a banker to co-accept the bill. Co-acceptance gives co-borrower’s status as in education loans. Co-accepting bank is liable to pay in case of failure on the part of drawee/buyer.

Co-acceptance facility is a non-fund based one till failure by buyer/ drawee.

15. Drawee Bill acceptance facility enables a banker to pay the bill on behalf of _______ and banker can recover it later from _______. It also has an advantage to file suit against   ______ and _____ in the event of dishonor of the bill by the buyer/drawee. Same answer can be repeated if found correct.

a) Drawee

b) Drawer

Fill in the blanks with a & b above and select the correct combination:

a. A, B, A, B.

b. B, B, A, A.

c. B, A, A, A.

d. A, A, A, B

Answer: d

Various types of Securities

1. A Security should have one of these qualities?

a) Not transferable

b) Perishable

c) Ascertainable value

d) Partly paid

Answer: C

Explanation: When a bank looks for security/collateral, they prefer transferable property, fully paid and non-perishable property/goods..

2. Four loan applications are in front of you.

1. A loans for Rs.10 lakhs without any security.

2. A loan for Rs.10 lakhs with security of goods.

3. A loan for purchase of house.

4. A loan for purchase of machinery and on hypothecation of machinery and mortgage of house property.

Match the following  with the  above details as per security type

a)  Machinery is primary security and mortgage of house property is secondary.

b) Unsecured loan

c) Primary security only

d) Secured by hypothecation

Select your Answer:

A.    a-2; b-3; c-4; d-1

B.     a-1; b-2; c-4; d-3

C.     a-4; b-2; c-3; d-1

D.    a-4; b-1; c-3; d-2

 answer: D.

Explanation:

Primary security means the property/machinery/goods purchased out of bank/any loan and given as security.

Collateral/secondary is additional security to primary.

3. Land and building are acceptable to creditors as security because of?

a) Appreciation

b) Tangibility

c) Ascertainability of value.

d) All above

Answer: D

4.Fill in the blanks:

        Unsecured loan is sanctioned on the basis of 1.______, 2._______ and 3._______ of the borrower.

a) Personal Integrity

b) Credit worthiness

c) Earning capability

d) Collateral security

Select correct combination: 

A. a b c

B. b c d

C. a c d

            Answer:  A.

5. Fill in the blanks:

         In a secured loan bank gets 1._____ for the loan in form of 2. ______ or 

3  ________. These securities act as 4.______ to absorb the loan in case of failure of 5.______ by borrower.

a) Cushion

b) Primary Security

c) Security

d) Repayment

e) Collateral Security

f)  c b e a d.

g)  b d c a e

Answer: f.

Explanation: 

 Unsecured loan is sanctioned on the basis of PERSONAL INTEGRITY, credit worthiness and EARNING CAPABILITY of the borrower.

In a secured loan, bank gets SECURITY for the loan in the form of PRIMARY SECURITY or COLLATERAL SECURITY. These securities act as CUSHION to absorb the loss in case of failure on REPAYMENT by borrower.

6. Encumbrance certificate is obtained_________________.

a) To find out whether any charge is existing on the property

b) To assess the correctness of ownership

c) From SRO/RO

d) For 30 years

e) All the above

Answer: e

Explanation: charge means a right. In case of E.C it shows all claims/encumbrance on the property.

Eg: ‘A’ got a loan from a bank and MOD was also done. After a month ‘A’ tries  to convince ‘C’ to give a loan on the same property. C applies for E.C. E.C shows bank’s charge/right as first mortgagee. B can refuse loan or register his loan as second mortgagee.

7. Fill in the blanks:

Legal opinion on title deeds is obtained from a _____ and ______ is done by _________ before sanction loan for Collateral Securities like home / land / buildings.

a) Approved Engineer

b) Valuation of asset

c) Lawyer

d) b c a

e) c b a

Answer: e.

8. Registration of mortgage deed is recommended if the  ______ for?

a) Value of Security is > Rs.100

b) Value of loan & interest is = Rs100 or more

c) Value of Security is = Rs.100

d) Value of loan is => Rs. 100

Answer: D

9. However, even if the value of principal is more than Rs.100, one of the mortgages below does not require registration.

a) English mortgage

b) Anomalous mortgage

c) Equitable mortgage

d) None of these

Answer: C

Explanation: It is done by mere deposit of title deeds by the mortgagor in a notified town.

Then, he informs sub-registrar in the prescribed form called MOD all the details like the date of deposit, purpose and amount etc. for entry in sub – Registrar’s office. The registration of this information of deposit is called memorandum of Deposit of title deeds. Note here only information of deposit with bank and other details are registered (not the loan agreement).

 In contrast in registration of mortgage deed, agreement/contract for loan is registered; there is no need for deposit/hand over of title deeds.

Here, there is no handing over of title deeds because loan Agreement is registered.

10. Which are eligible for mortgage?

a) Freehold Property

b) Leasehold Property

c) Monthly rented Property

d) A & B

e) A, B, and C

Answer: D

Explanation: However, Bankers look for a long unexpired period of lease. Lessor should become a party to agreement of loan; in addition *he should give an undertaking not to cancel the lease during the loan period and *NOC for mortgaging the property by lessee.

11. Banks give loan only to____________?

a) Preference shares

b) Partly paid shares

c) Equity shares

d) Quoted shares in market.

Answer: D

Explanation: Banks avoid partly paid shares as security because banks may have to pay the calls in case of winding up/closing of company.

12. ABC & Co contracted with ‘XYZ’ company for construction of a small port. XYZ asked Bank -B for a loan of 500 lakhs. Bank sanctioned the loan on registering the charge with the ROC. Later on it is found that XYZ has no powers to borrow as per M.O.A. XYZ refused repayment because of MOA which is completely legal. Who is liable to Bank?

a) XYZ because charge is registered with ROC

b) XYZ not liable because debenture is ultra-wires

c ) a or b

d) b

d) None

Answer: b.

Explanation: MOA specifies the objectives of the company. Banks have to go thru the objectives before lending. If a company does anything which is forbidden in MOA, it is called ultra-wires. Company is not liable for anything which it is ultra-wires.

Goods

1. Stocks hypothecated have to be inspected by Bank.

a) Every month on specific date

b) All stocks to be verified physically

c) Valued at market rate

d) by Surprise visits every month

Answer: D

2. True or False. T/F

a) Inspection of goods every month on specific dates.

b) Goods to be valued at market or cost whichever is lower

c) Surprise inspection

d) Stocks to be compared with invoice

e) Random checks of stocks to be made when large in number

f) Stock statements if not submitted for 3 consecutive months, Account becomes NPA.

Select correct answer:

A.    a-F; b-T; c-T; d-T; e-T; f-T

B.     a-T; b-F; c-T; d-F; e-f; f-T

Answer: A.

3. Stock audit for Large Accounts to be conducted at least once in…………?

a) 3 months

b) 1 year

c) 6 months

d) 9 months

Answer: B

4. Goods \ Stocks can be taken under.

a) Hypothecation

b) Pledge

c) A or B

d) Assignment

Answer: C

5. Possession of goods is not possible by negotiation (endorsing) of …………..?

a) Bill of Lading

b) Airway bill

c) LR

d) RR

Answer: B

Explanation: Airway bill, courier & parcels are not negotiable. Bill of lading, LR, RR, Warehouse receipt, wharfingers certificate, Dock warrant, delivery order are

Quazi-negotiable documents. Transfer of these documents gives the transferee a right to possession.

6. Trust receipt gives a legal power to borrower to _______ with goods on behalf of _______ .  _____________ cannot exercise power over goods under trust.

Fill in with.

a) Official Receiver

b) Deal

c) Creditor / Bank

d) c b a

e) a b c

f) b c a

Answer: f.

Fill in the blanks.

7. Life insurance policy is _____ in favor of Bank.

The loan value is decided on ________ and Assignment is _______ with life insurance companies.

a) Assigned

b) Surrender value / paid up value of premiums paid till date

c) Registered

d) b c a

e) a b c

Answer: a b c.

8. Assignment is dealt in ___________ .

a) Sale of Goods & act

b) Transfer of property Act

c) Contract Act

d) Mortgage Act

Answer: B

Explanation:

Sec130 of Transfer of Property Act deals with assignment.

9. Bankers desist from giving loan for a policy under_______ .

a) Money back policy

b) Endowments policy

c) Whole life policy

d) Policy under married women property Act

Answer: D

10. Loan against LIC Policy requires ___________ .

a) Assignment in favour of Bank

b) Notice of Assignment to Life Insurance Company ensuring bank’s right

c) Registration of Assignment in Life Insurance Company in favor of Bank

d) All of these

Answer: d.

11. ‘Loan against Deposit’ cannot be given for_________ .

a) Deposit of other branches

b) Deposit of other Banks

c) Deposit in other branches in USDs/GBPs

d) All of these
Answer: B

Explanation: Because other banks always have first right on their deposits as lien / right to set off.

12. Loan Against deposit does not need one of these.

a) Discharge on the back of deposit receipt on a Revenue Stamp.

b) Letter authorizing the Bank to appropriate the deposit for loan in case of failure of repayment.

c) Discharge on the back of the Deposit Receipt sans/without revenue stamp.

d) Noting of Lien

Answer: C

Explanation: Revenue stamp is necessary for discharge.

13. Loan against gold for one of these is not allowed.

a) Overdraft

b) Agriculture Purpose

c) Non – Agriculture Purpose

d) Speculation

Answer: D

Speculation is like betting / fixing. No bank gives loan for speculative purposes.