CRBG EXAM (1) FINAL
1. A private limited company should have minimum two directors.
2. Income tax act 1961 defines association of persons as an integration of persons for a mutual benefit or a common
purpose.
Ans- True.
3. Benchmark interest rates mean interest rate administered by financial benchmark administrator.
Ans- True.
4. Buy back of CDs can be made only 30 days after the date of issue of the CD.
5. Mortgage is used for creating charge against immovable property which includes land, buildings or any other
immovable asset.
6. Banks shall not invest more then 10 % of the unit capital of an REIT/Inv IT.
7. Floating currencies include USD, EURO, STERLING, the Aus DOLLAR, THE CANADIAN DOLLAR and Japanese YEN.
8. Authorised dealers (AD) are the institution that have the license from the RBI to sell and buy of foreign currencies.
Ans- True.
9. Residents are permitted to remit up to US $ 250000 for any current and capital a/c purpose (except those
transaction which are prohibited all together).
10. Which of the following may be classified as consumption loan?
Ans- Term loan for higher education.
11. Under guidelines for stress asset RP stands for
Ans- Resolution plan (RP).
12. Merchant bank offer the following services –
a. Equity under writing.
b. Credit syndication
c. Portfolio management
d. All of the above.
13. The main objectives behind pre shipment finance is to enable exporter to realise its receivable immediately.
Ans- false.
14. Gold or jewellery loan is an example of loan secured by the way of hypothecation.
Ans – false (pledge).
15. Current ratio is a measure of solvency of the firm.
Ans- false.
16. The term working capital in banking parlance refers to capital raised by corporates during incorporation.
Ans – false.
17. Term used to describe pre-shipment finance to exporters-
Ans – Packing credit.
18. An arrangement where more then one bank extends credit facilities to a single corporate in co ordination with
each other under a formal arrangement.
Ans.– Consortium.
19. What does current ratio measure?
Ans. Liquidity ratio.
20. From the lenders Point of View a floating charge leaves it more exposed than a fixed charge because the value of
the assets can and change over time.
– True.
3 marks
1. What is LLP?
Ans.- It represent a mixture of limited liability company and partnership firm.
• The liability of the members are limited.
• It is Separate legal entity.
• No limit on maximum member of partners.
• Managed by Registrar of Companies.
• LLP is capable of entering into contracts and holding property in its own name.
2. Explain Working capital finance.
Ans: Working Capital Finance is an umbrella term for financing the working capital requirements of Corporates
according to their specific needs.
Some of the different types of working capital finance are, Cash credit limit, Export packing credit limit, Post
shipment credit, Bill financing, Letters of credit.
3. Advantage of higher purchase system.
Answer:
• Convenience in Payment: The buyer gets advantage as he has to make the payment in instalments.
This system is greatly beneficial to the people having limited income.
• Increased Volume of Sales: This system fascinates more customers as the payment is to be made in
easy instalments. This leads to increased volume of sales.
• Lesser Risk: From seller’s viewpoint, this system is greatly beneficial as he knows that if the buyer fails
to pay one instalment, he can get the article back.
4. Distinguish between ‘primary’ and ‘co-lateral’ security.
Ans.- Primary security is the asset created out of the credit facility extended to the borrower and / or which
are directly associated with the business / project of the borrower for which the credit facility has been
extended. Collateral security is any other security offered for the said credit facility.
5. Explain capital a/c transaction.
Ans: Capital Account Transaction means a transaction which: Alters foreign assets and foreign liabilities
(including contingent liabilities) of Indian residents. Alters Indian assets and Indian liabilities of non-residents.
Is a specified transaction as mentioned in Section 6.
6. Explain the term mortgage.
Ans: Mortgage is used for creating charge against immovable property which includes land, building or any
other immovable asset. A mortgage is created is when Housing Loan is sanctioned. In this case the property is
mortgaged in favour of the bank / financer but remains in possession of the borrower.
7. Explain Private Equity.
Ans: Private Equity (PE) at the outset is a mode of investment. PE is a form of financing where money, or capital,
is invested into a company. Typically, PE investments are made into mature businesses in traditional industries
in exchange for equity, or ownership stake.
A private equity firm Is a type of investment firm. They invest in businesses with a goal of increasing their value
over time before eventually selling the company at a profit.
5 marks
1. Explain different types of bank charges on securities.
Ans.- Banks secure the loans they disburse by way of various types of security creation depending on the type
of loan, the ease of administering and cost of creation of security.
The most common types of security creation are 'Mortgage', 'Pledge', 'Hypothecation' and 'lien' etc.
Mortgage: It is used for creating charge against immovable property which includes land, buildings or any other
immovable asset. A mortgage is created is when Housing Loan is sanctioned. In this case the property is
mortgaged in favour of the bank / financer but remains in possession of the borrower.
Pledge : A pledge charge is when a borrower hands over physical possession of an asset (like shares, gold, or
documents) to a lender as security for a loan. The lender holds the asset until the loan Is repaid. If the borrower
defaults, the lender can sell the asset to recover the loan.
Hypothecation : A hypothecation charge is when a borrower pledges movable assets, like a vehicle or
inventory, as security for a loan while retaining ownership and usage of the asset. If the borrower defaults, the
lender can take possession of the asset to recover the loan amount.
Lien : A lien charge is a right given to a lender to keep possession of a borrower’s asset (like a bank account,
property, or documents) until a debt is fully repaid. The lender doesn’t take ownership but has the right to sell
or use the asset to recover the debt if the borrower defaults.
2. What are the Different types of companies in India.
Answer - In India, companies are categorized based on various factors like ownership, liability, and public
participation. Below are the main types of companies:
Private Limited Company (Pvt. Ltd.):
A company owned by private shareholders, typically family members or close associates.
Requires a minimum of 2 and a maximum of 200 shareholders.
Public Limited Company (Ltd.):
A company that can offer its shares to the public via stock exchange. Requires at least 7 shareholders and can
have unlimited shareholders.
One Person Company (OPC):
A company with only one owner, introduced to encourage small entrepreneurs. Allows a single individual to
own and manage the business.
Sole Proprietorship:
Business owned and run by a single person, without a distinct legal entity. Simple to set up and manage.
Partnership Firm:
A business owned and run by two or more individuals with shared responsibilities.
Limited Liability Partnership (LLP):
A hybrid structure combining elements of a partnership and a company.
3. Explain the term fixed charge and floating charge.
Ans: If a debt is subject to a fixed charge, the loan is secured against a substantial and identifiable physical
asset such as land, property, vehicles, plant and machinery. This is generally true in the case of Project
Finance/Term Loans.
However, even in respect of working capital loans, an example of a fixed charge in Practice can often be seen
in factoring or invoice discounting facilities.
A floating charge applies to assets where both the quantity and the value can change periodically, such as
stock, debtors and moveable plant and machinery.
It gives the business much more freedom than a fixed charge because the business can sell, transfer or dispose
of those assets without seeking approval from the lender or having to repay the debt first.
4. Explain fixed and floating rate of exchange.
Ans: A floating exchange rate is free of government restrictions. It is a country’s exchange rate system that
“floats” on the global foreign exchange market against other currencies. Floating currencies include U.S. dollar,
euro, sterling, the Australian dollar, the Canadian dollar and the Japanese yen.
A fixed exchange rate Involves government restrictions on the currency in order to protect its value. A fixed
exchange rate system is usually used by countries with more vulnerable economies. An example is the HKD,
which is pegged to the USD.
5. Explain what post shipment finance means and how do banks sanction those?
