Chapter 10: Back Office Functions/Handling Unreconciled Entries in Banks (JAIIB – Paper 3)
1. Which of the following is a primary function of the back office in banks?
A. Marketing new banking products
B. Directly interacting with customers
C. Processing, settlement, and reconciliation of transactions
D. Preparing credit appraisal reports
The back office is responsible for processing, settlement, reconciliation, and record-keeping of banking transactions, not customer-facing activities.
2. Unreconciled entries in bank accounts are usually handled by:
A. Back office staff
B. Relationship managers
C. Branch managers
D. Marketing officers
Back office staff reconcile accounts, investigate discrepancies, and ensure entries are corrected in the system.
3. Which of the following tasks is NOT typically performed by the bank’s back office?
A. Reconciliation of nostro and vostro accounts
B. Verification of inter-branch transactions
C. Settling clearing house entries
D. Sanctioning of credit limits
Sanctioning of credit limits is a front-office/credit department responsibility, not a back-office function.
4. A mismatch between clearing entries in branch books and RBI settlement account would be resolved by:
A. Customer service desk
B. Back office reconciliation team
C. Marketing department
D. Loan recovery cell
The reconciliation team in the back office ensures clearing entries match with RBI/other banks’ settlement figures.
5. Why is back office reconciliation of entries critical for banks?
A. To increase customer acquisition
B. To enhance marketing campaigns
C. To reduce the cost of banking operations
D. To ensure accuracy, detect fraud, and comply with regulatory requirements
Reconciliation helps maintain accuracy, prevents financial misstatements, detects fraud, and ensures compliance with regulations.
6. Which of the following best describes reconciliation in banks?
A. Increasing loan limits based on customer demand
B. Approving overdraft facilities
C. Matching internal bank records with external statements to ensure accuracy
D. Promoting new banking products
Reconciliation involves comparing internal bank records with external sources (like RBI, clearing house, or customer statements) to confirm accuracy and completeness.
7. Which accounts are most commonly subject to reconciliation in banks?
A. Loan accounts only
B. Nostro, Vostro, and inter-branch accounts
C. Marketing expense accounts
D. Fixed deposit accounts
Banks regularly reconcile nostro, vostro, and inter-branch accounts to ensure transactions with other banks and branches are accurate and updated.
8. A bank finds a ₹2 crore mismatch between its branch records and the RBI’s clearing account. Who is responsible for resolving this issue?
A. Reconciliation/Back Office Department
B. Loan appraisal team
C. Customer relationship team
D. Audit department
The back office reconciliation team investigates mismatches between branch records and RBI clearing data to correct errors and update accounts.
9. What is the main risk of not reconciling bank accounts regularly?
A. Increase in customer base
B. Improved staff productivity
C. Faster processing of loan applications
D. Misstatements in accounts and undetected frauds
Without regular reconciliation, errors and frauds may remain hidden, leading to inaccurate financial reporting and regulatory penalties.
10. In reconciliation, “unreconciled entry” refers to:
A. A loan account pending sanction
B. A transaction recorded in bank books but not matching with counterparty records
C. A customer complaint not resolved on time
D. An unclaimed fixed deposit
An unreconciled entry means a mismatch where a transaction in the bank’s books does not agree with corresponding records, requiring investigation.
11. Inter-branch reconciliation is necessary because:
A. It increases bank profits directly
B. It helps in staff performance appraisals
C. Transactions between different branches must be balanced and matched
D. It reduces the number of customers visiting branches
Inter-branch transactions (like fund transfers, clearing, remittances) must reconcile to ensure accounts are balanced across branches.
12. An inter-branch entry is passed when:
A. A customer withdraws cash at the same branch
B. A loan is sanctioned by the branch manager
C. Marketing expenses are incurred by head office
D. A customer deposits a cheque of Branch X in Branch Y
When a customer of one branch transacts at another branch, inter-branch entries are generated for reconciliation between the two branches.
13. Unreconciled inter-branch entries may lead to:
A. Higher credit rating for the bank
B. Misstatement of accounts and regulatory penalties
C. Increase in staff incentives
D. Faster loan processing
If inter-branch entries are not reconciled, the bank’s books may show incorrect balances and attract regulatory penalties.
14. Which office is usually responsible for monitoring and reconciling inter-branch entries in banks?
A. Head office / Centralized reconciliation cell
B. Marketing department
C. Customer relationship team
D. Treasury department
A centralized reconciliation cell or head office department usually monitors and clears inter-branch entries on a periodic basis.
15. A customer of Branch A deposits ₹50,000 cash at Branch B. This transaction will result in:
A. An entry in RBI’s clearing account
B. A suspense account adjustment
C. A direct credit to Branch B’s income account
D. An inter-branch entry between Branch A and Branch B
Since the customer belongs to Branch A but deposits at Branch B, the transaction will be settled through inter-branch entries.
