Interview Questions.

Q1. What is financial institution? What are the sorts of banks?

Ans: A financial institution is a financial organization licensed as a receiver of coins deposits. There are two types of banks, commercial banks and funding banks. In maximum of the countries, banks are regulated by way of the country wide government or important financial institution.

Q2. What is funding banking?

Ans: Investment banking manages portfolios of financial belongings, commodity and foreign money, constant profits, company finance, company advisory offerings for mergers and acquisitions, debt and equity writing etc.

Q3. What is commercial bank?

Ans: Commercial financial institution is owned with the aid of the institution of people or by using a member of Federal Reserve System. The industrial bank offer offerings to people, they're primarily involved with receiving deposits and lending to commercial enterprise. Such bank earns cash via imposing interest at the mortgage borrowed by means of the borrower. The money that is deposited via the client can be utilized by the financial institution to provide business loan, automobile mortgage, mortgages and home repair loans.

Q4. What are the types of Commercial Banks?

Ans:

a) Retail or client banking

It is a small to mid-sized branch that immediately deals with consumer’s transaction in place of corporate or different banks

b) Corporate or enterprise banking

Corporate banking offers with cash management, underwriting, financing and issuing of shares and bonds

c) Securities and Investment banking

Investment banking manages portfolios of monetary belongings, commodity and forex, constant earnings, company finance, corporate advisory offerings for mergers and acquisitions, debt and fairness writing and so on.

D) Non-conventional options

There are many non-bank entities that provide economic services like that of the financial institution. The entities include credit score card organizations, credit card report corporations and credit card issuers

Q5. What is patron bank?

Ans: Consumer financial institution is a new addition within the banking region, such bank exist handiest in international locations like U.S.A and Germany. This bank provides loans to their purchaser to shop for T.V, Car, furnishings and so on. And supply the option of smooth price via instalment.

Q6. What are the styles of accounts in banks?

Ans: 

a) Checking Account: You can get admission to the account because the saving account but, not like saving account, you can not earn interest in this account. The benefit of this account is that there may be no limit for withdrawal.

B) Saving Account: You can save your cash in such account and also earn interest on it. The range of withdrawal is limited and need to hold the minimal quantity of stability within the account to stay lively.

C) Money Market Account: This account offers advantages of both saving and checking money owed. You can withdraw the quantity and but you may earn better interest on it. This account can be opened with a minimal balance.

D) CD (Certificate of Deposits) Account: In such account you have to deposit your cash for the fixed period of time (five-7 years), and you'll earn the hobby on it. The fee of interest is determined by way of the financial institution, and you cannot withdraw the price range until the constant duration expires.

Q7. What are the exceptional methods you could operate your money owed?

Ans: You can perform your bank money owed in extraordinary approaches like

Internet banking

Telephone or Mobile banking

Branch or Over the counter carrier

ATM ( Automated Teller Machine)

Q8. What are the matters that you have to maintain in issue earlier than establishing the financial institution debts?

Ans: Before beginning a bank account, if it's miles a saving account, you have got to check the interest charge at the deposit and whether the interest price stays regular for the length. If you have the checking account, then look for how many cheques are unfastened to use. Some banks can also rate you for the usage of paper cheques or ordering new cheque books. Also, test for exclusive debit card choice this is supplied on opening an account and online banking functions.

Q9. What is ‘Crossed Cheque’ ?

Ans: A crossed cheque suggests the amount ought to be deposited into the payees account and can't be cashed by means of the financial institution over the counter. Here inside the picture, variety#2, you could see two pass-traces on the left facet nook of the cheque that suggests crossed cheque.

Q10. What is overdraft safety?

Ans: Overdraft safety is a provider this is provided by using a financial institution to their patron. For instance, in case you are holding two bills, saving and credit account, within the equal bank. Now if one in every of your debts does now not have sufficient coins to system the cheques, or to cowl the purchases. The financial institution will switch cash from one account to some other account, which does now not have coins so that you can save you take a look at return or to clean your shopping or strength payments.

Q11. Do bank charge for ‘overdraft safety’ service?

Ans: Yes, financial institution will charge on ‘overdraft safety’ offerings but the costs could be applicable handiest while you start the use of the service.

Q12. What is (APR) Annual Percentage Rate?

Ans: APR stands for Annual Percentage Rate, and it's far a charge or hobby that the bank imposes on their customers for the use of their offerings like loans, credit playing cards, mortgage loan and so on. The hobby fee or prices imposed is calculated yearly.

Q13. What is ‘top price’?

Ans: Basically, ‘top charge’ is the charge of interest that is determined by way of international locations (U.S.A) biggest banks for his or her preferred clients, having a great credit score score. Much ‘variable’ hobby relies upon on the ‘high fees’. For instance, the ‘APR’ (Annual Percentage Rate) on a credit score card is 10% plus high price, and if the prime price is three%, the present day ‘APR’ on that credit score card could be thirteen%.

Q14. What is ‘Fixed’ APR and ‘Variable’ APR?

Ans: ‘APR’ (Annual Percentage Rate) may be ‘Fixed’ or ‘Variable’ kind. In ‘Fixed APR’, the hobby rate stays identical in the course of the term of the mortgage or loan, at the same time as in ‘Variable APR’ the hobby price will change with out notice, based totally on the opposite elements like ‘prime rate’.

Q15. What are the exclusive styles of banking software programs are to be had inside the Industry?

Ans: There are many styles of banking software programs and few are listed underneath

a) Internet banking gadget: Internet banking lets in the customers and economic organization to behavior final transaction using banks or economic institute website.

B) ATM banking (Automated Teller Machine): It is an electronic banking outlet, which allows customers to finish simple transaction.

C) Core banking system: Core banking is a provider supplied with the aid of a networked financial institution branches. With this, customer can withdraw cash from any department.

D) Loan control device: The database collects all of the data and continues the music about the clients who borrows the money.

E) Credit control system: Credit control system is a machine for coping with credit debts, assessing risks and figuring out how much credit to provide to the customer.

F) Investment management machine: It is a process of handling money, consisting of investments, banking, budgeting and taxes.

G) Stock market control machine: The inventory marketplace management is a gadget that manages economic portfolio like securities and bonds.

H) Financial management gadget: Financial control gadget is used to control and keep a document of its profits, expense and belongings and to maintain the accountability of its income.

Q16. What is the ‘cost of debt’?

Ans: When any enterprise borrows price range, from a economic organization (financial institution) or different sources the hobby paid on that amount is referred to as ‘fee of debt’.

Q17. What is ‘balloon charge’?

Ans: The ‘balloon price’ is the very last lump sum charge this is due. When the whole loan charge is not amortized over the life of the mortgage, the closing balance is due as the final repayment to the lender. Balloon price can arise inside an adjustable fee or constant charge loan.

Q18. What is ‘Amortization’?

Ans: The repayment of the loan by instalment to cover principal amount with interest is referred to as ‘Amortization’.

Q19. What is bad Amortization?

Ans: When reimbursement of the loan is less than the loans accrued hobby, then bad Amortization occurs. It will growth the mortgage quantity as opposed to lowering it. It is also known as ‘deferred interest’.

Q20. What is the distinction among ‘Cheque’ and ‘Demand draft’?

 

Ans: Both are used for the transfer of the amount among  money owed of same banks or distinct financial institution. ‘Cheque’ is issued by an man or woman who holds the account in a financial institution, at the same time as ‘Demand draft’ is issued by using the financial institution on request, and will charge you for the carrier. Also, call for draft can't be cancelled, while cheques can be cancelled as soon as issued.

Q21. What is debt-to-Income ratio?

Ans: The debt-to-income ratio is calculated by way of dividing a mortgage applicant’s overall debt payment through his gross income.

Q22. What is adjustment credit score?

Ans: Adjustment credit score is a brief-term loan made by way of the Federal Reserve Bank (U.S) to the industrial financial institution to maintain reserve necessities and aid short term lending, while they are short of coins.

Q23. What do you mean by using ‘foreign draft’?

Ans: Foreign draft is an opportunity to overseas forex; it's far generally used to ship cash to a overseas usa. It can be bought from the industrial banks, and they will rate in step with their banks policies and norms. People opt for ‘foreign draft’ for sending cash as this approach of sending money is cheaper and safer. It also allows receiver to get admission to the price range quicker than a cheque or cash switch.

Q24. What is ‘Loan grading’?

Ans: The type of loan based on numerous dangers and parameters like repayment hazard, borrower’s credit history and so forth. Is called ‘loan grading’. This machine places loan on one to six categories, primarily based on the steadiness and threat related to the loan.

Q25. What is ‘Credit-Netting’?

Ans: A system to reduce the range of credit score tests on financial transaction is referred to as credit-netting. Such settlement happens usually among large banks and other monetary institutions. It places all the future and modern transaction into one settlement, casting off the need for credit score cheques on every transaction.

Q26. What is ‘Credit Check’?

Ans: A credit test or a credit score document is completed by using the financial institution on a basis of an man or woman’s financial credit. It is achieved in an effort to make sure that an individual is capable sufficient of assembly the economic obligation for its commercial enterprise or any other monetary transaction. The credit score test is carried out maintaining few elements in concern like your liabilities, property, income etc.

Q27. What is inter-bank deposit?

Ans: Any deposit this is held by means of one financial institution for any other bank is known as inter-bank deposit. The bank for which the deposit is being held is referred as the correspondent financial institution.

Q28. What is ILOC (Irrevocable Letter Of Credit)?

Ans: It is a letter of credit or a contractual agreement between monetary institute (Bank) and the party to which the letter is handed. The ILOC letter can not be cancelled below any condition and, guarantees the charge to the celebration. It requires the bank to pay against the drafts assembly all of the terms of ILOC. It is legitimate upto the stated time period. For example, if a small enterprise wanted to agreement with an overseas supplier for a targeted item they might come to an settlement on the phrases of the sale like first-rate standards and pricing, and ask their respective banks to open a letter of credit for the transaction. The customer’s bank would ahead the letter of credit to the vendor’s bank, wherein the charge terms would be finalized and the cargo might be made.

Q29. What is the distinction among bank assure and letter of credit?

Ans: There is not a good deal distinction among bank guarantee and letter of credit as they both take the legal responsibility of charge. A bank assure incorporates extra risk for a financial institution than a letter of credit as it's far shielding each parties the patron and vendor.

Q30. What is cashier’s cheque?

Ans: A cashier cheque issued by using the financial institution on behalf of the consumer and takes the guarantee for the fee. The price is accomplished from the financial institution’s personal price range and signed with the aid of the cashier. The cashier cheque is issued when speedy agreement is essential.

Q31. What do you mean with the aid of co-maker?

Ans: A individual who symptoms a be aware to guarantee the payment of the mortgage on behalf of the main mortgage applicant’s is called co-maker or co-signer.

Q32. What is domestic fairness mortgage?

Ans: Home fairness mortgage, also referred to as the second loan, permits you to borrow money towards the cost of fairness in your own home. For example, if the cost of the house is $1, 50,000 and you've got paid $50,000. The stability owed on your loan is $1, 00,000. The amount $50,000 is an fairness, that's the distinction of the real cost of the house and what you owe to the bank. Based on fairness the lender will come up with a mortgage. Usually, the applicant gets eighty five% of the loan on its equity, thinking about your earnings and credit rating. In this situation, you'll get eighty five% of $50,000, that's $forty two,500.

Q33. What is Line of credit score?

Ans: Line of credit is an agreement or association among the bank and a borrower, to offer a sure quantity of loans on borrower’s call for. The borrower can withdraw the amount at any moment of time and pay the interest simplest on the amount withdrawn. For example, if you have $5000 line of credit, you may withdraw the overall amount or any amount less than $5000 (say $2000) and only pay the hobby for the quantity withdrawn (in this case $2000).

Q34. How bank earns income?

Ans: The financial institution earns earnings in diverse methods

a) Banking fee chain

b) Accepting deposit

c) Providing price range to borrowers on hobby

d) Interest spread

e) Additional expenses on services like checking account maintenance, on line invoice charge, ATM transaction

Q35. What are payroll cards?

Ans: Payroll playing cards are sorts of clever playing cards issued by way of banks to facilitate salary payments between agency and personnel. Through payroll card, company can load revenue bills onto an employee’s smart card, and employee can withdraw the income despite the fact that he/she doesn’t have an account within the financial institution.

Q36. What is the cardboard primarily based payments?

Ans: There are two kinds of card payments

Credit Card

Debit Card

Q37. What ACH stands for?

Ans: ACH stands for Automated Clearing House, that's an digital transfer of finances among banks or financial institutions.

Q38. What is ‘Availability Float’?

Ans: Availability Float is a time difference among deposits made, and the budget are truly to be had inside the account. It is time to procedure a physical cheque into your account.

For example, you have $20,000 already on your account and a cheque of some other $10,000 greenback is deposited in your account but your account will show balance of $20,000 rather than $30,000 until your $10,000 greenback cheque is cleared this processing time is called availability go with the flow.

Q39. What do you mean by means of time period ‘Loan Maturity’ and ‘Yield’?

Ans: The date on which the most important amount of a mortgage turns into due and payable is referred to as ‘Loan Maturity’. Yield is generally referred as the dividend, hobby or return the investor gets from a security like stock or bond, interest on restore deposit and so on. For example, any funding for $10,000 at hobby charge of four.25%, will give you a yield of $425.

Q40. What is Cost Of Funds Index (COFI)?

Ans: COFI is an index that is used to decide interest prices or adjustments within the hobby rates for sure forms of Loans.

Q41. What is Convertibility Clause?

Ans: For positive loan, there is a provision for the borrower to change the hobby rate from fixed to variable and vice versa is referred as Convertibility Clause.

Q42. What is Charge-off?

Ans: Charge off is a assertion by means of a lender to a borrower for non-price of the ultimate quantity, whilst borrower badly falls into debt. The unpaid amount is settled as a horrific debt.

Q43. What ‘LIBOR’ stands for?

Ans: ‘LIBOR’ stands for London Inter-Bank Offered Rate. As the call endorse, it's far a median hobby charge presented for U.S dollar or Euro greenback deposited between groups of London banks. It is an global hobby fee that follows world financial situation and used as a base price with the aid of banks to set hobby fee. LIBOR comes in 8 maturities from overnight to three hundred and sixty five days and in five special currencies. Once in an afternoon LIBOR pronounces its hobby rate.

Q44. What do you imply by term ‘Usury’?

Ans: When a loan is charged with high hobby price illegally then it's far referred as ‘Usury’. Usury fees are usually set with the aid of State Law.

Q45. What is Payday loan?

Ans: A pay-day mortgage is typically, a small quantity and a brief-time period mortgage to be had at high hobby charge. A borrower generally writes put up-dated cheques to the lender in respect to the amount they wish to borrow.

Q46. What do you mean by using ‘cheque endorsing’?

Ans: ‘Endorsing cheque’ guarantees that the cheque get deposited into your account most effective. It minimizes the danger of theft. Normally, in endorsing cheque, the cashier will ask you to sign behind the cheque. The signature must fit the payee. The image over here suggests the endorsed cheque.

Q47. What are the unique kinds of Loans supplied by way of banks?

Ans: The exclusive styles of loans offered with the aid of banks are:

 Unsecured Personal Loan

Secured Personal Loan

Auto Loans

 Mortgage Loans

Small business Loans

Q48. What are the one of a kind kinds of ‘Fixed Deposits’?

Ans: There are two distinct forms of ‘Fixed Deposits’

Special Term Deposits: In this form of ‘Fixed Deposits’, the earned interest at the deposit is introduced to the foremost quantity and compounded quarterly. This quantity is collected and repaid with the fundamental quantity on adulthood of the deposit.

Ordinary Term Deposits: In this form of ‘Fixed Deposits’, the earned credit is credited to the investor’s account, as soon as in a quarter. In a few cases, hobby may be credited on a monthly basis.

The earned hobby on fixed deposits is non-taxable. You also can take a mortgage towards your fixed deposit.

Q49. What are the one of a kind styles of Loans supplied through Commercial Banks?

Ans: Start-Up Loans

This kind of Loan is offered to borrower to begin their enterprise and can be used to build a storefront, to acquire stock or pay franchise costs to get a commercial enterprise rolling.

Line of Credit

Lines of credit are some other sort of enterprise loan provided by means of industrial banks. It is greater like a safety on your business; the financial institution permits the client to withdraw the quantity from effectively available finances in an detrimental time. Customer or Company can pay returned over time and withdraw money again with out going into the mortgage manner.

Small Business Administration Loans

It is a Federal Agency (U.S) that offers investment to small agencies and marketers. SBA (Small Business Administration) loans are made through banks, credit score unions and different lenders who partners with SBA.

Q50 What is ‘Bill Discount’?

Ans: ‘Bill Discount’ is a agreement of the invoice, in which your energy invoice or gas invoice is offered to a bank for early charge at less than the face price and the bank will recover the overall quantity of the bill from you before invoice due date. For instance, power invoice for XYZ is $one thousand; the energy invoice employer will promote the bill to the bank for 10% to 20% cut price to the face cost. Here, the bank will buy the power bill for $900 whose face fee is $1000, now the bank will recover, complete amount of bill from the customer i.E $one thousand. If the customer fails to pay the bill, the financial institution will placed hobby on the exceptional bill and ask the patron for the charge.

Q51. What is ‘Bill Purchase’?

Ans: In ‘Bill Purchase’ the mortgage may be created for the full fee of the draft and the hobby will be recovered when the real price comes. For example, a ‘Sight draft’ is provided for which the mortgage is created for one hundred% of the draft cost. The money is received after 7 days, and then the interest may be recovered for 7 days in conjunction with the fundamental amount.

Q52. What is ‘Cheque Discount’?

Ans: Cheque discounting carrier is obtainable most effective by means of few banks. For example, when you have a cheque of $3000 outstation and the cheque will take 7 seven days for clearance, then financial institution will provide you a service for early charge. The financial institution could make an early fee, however they'll pay only for certain percent of the actual quantity, here they may pay you $2000 however they will price hobby on it and the closing $a thousand may be paid, as soon as the outstation cheques get clean.