1. Which of the following is a negotiable instrument commonly used for short-term borrowing by banks?
- A. Mortgage Deed
- B. Promissory Note
- C. Bill of Exchange
- D. Hypothecation Agreement
A Bill of Exchange is a negotiable instrument used for short-term finance, especially in trade and banking transactions.
2. A mortgage deed is primarily executed to:
- A. Record ownership transfer of goods
- B. Pledge immovable property as security for a loan
- C. Create a personal guarantee
- D. Establish a current account relationship
A mortgage deed is a legal document where immovable property is offered as security for a loan.
3. Which document is used when a borrower offers movable goods as security while retaining possession?
- A. Mortgage Deed
- B. Promissory Note
- C. Bill of Exchange
- D. Hypothecation Agreement
Hypothecation allows borrowers to keep movable assets with them while the bank holds a charge on them as security.
4. Which document ensures that a borrower promises in writing to pay a certain sum of money to the bank?
- A. Promissory Note
- B. Mortgage Deed
- C. Hypothecation Agreement
- D. Letter of Credit
A Promissory Note is a written promise by the borrower to pay a definite sum of money to the bank or holder of the note.
5. In banking documentation, which of the following is classified as a primary security document?
- A. Personal Guarantee
- B. Mortgage Deed
- C. Letter of Comfort
- D. Board Resolution
Primary security refers to documents that create a direct charge on assets, such as a Mortgage Deed.
6. Which of the following documents is typically used in trade finance to ensure payment against shipment of goods?
- A. Promissory Note
- B. Mortgage Deed
- C. Letter of Credit
- D. Hypothecation Agreement
A Letter of Credit is a document issued by a bank guaranteeing payment to the seller once the terms of shipment are fulfilled.
7. Which of the following is considered a secondary security in banking?
- A. Mortgage Deed
- B. Personal Guarantee
- C. Promissory Note
- D. Bill of Exchange
Secondary security refers to documents that provide additional security, usually a personal guarantee from an individual or promoter.
8. The pledge of goods involves:
- A. Transferring ownership of goods to the bank
- B. Issuing a promissory note against goods
- C. Creating a lien without transferring possession
- D. Delivering goods to the bank as security while ownership remains with the borrower
In a pledge, the borrower delivers movable goods to the bank as security while ownership remains with the borrower.
9. Which document gives the bank the right to sell the mortgaged property in case of borrower default?
- A. Mortgage Deed
- B. Promissory Note
- C. Letter of Credit
- D. Hypothecation Agreement
A Mortgage Deed legally allows the bank to sell the property if the borrower fails to repay the loan.
10. Hypothecation is mainly used for which type of loans?
- A. Housing loans with immovable property
- B. Vehicle loans and working capital loans against movable assets
- C. Personal unsecured loans
- D. Trade finance against import bills
Hypothecation is a common method for securing loans against movable assets like vehicles or inventory, where possession remains with the borrower.
11. The first step in the documentation procedure of a loan is usually:
- A. Execution of mortgage deed
- B. Verification of KYC and borrower’s identity
- C. Disbursement of loan amount
- D. Registration of hypothecation agreement
Documentation procedure begins with verifying KYC and the borrower’s identity to ensure compliance with RBI and legal guidelines.
12. Which of the following ensures that the terms of the loan are formally agreed between the bank and the borrower?
- A. Loan Agreement
- B. Hypothecation Agreement
- C. Promissory Note
- D. Board Resolution
A Loan Agreement is the key document outlining the terms and conditions of the loan between the bank and the borrower.
13. After preparing the documents, the bank officer must:
- A. Disburse the loan immediately
- B. Obtain only verbal consent from the borrower
- C. Ensure execution and signatures of all parties
- D. Send documents to RBI for approval
Execution of documents with signatures of all parties is essential before any loan disbursement.
14. Registration of documents such as mortgage deeds is required under:
- A. Banking Regulation Act
- B. Negotiable Instruments Act
- C. Companies Act
- D. Registration Act, 1908
Registration of documents like mortgage deeds is mandatory under the Registration Act, 1908 to create a legal charge on immovable property.
15. In documentation procedure, post-execution of documents, the next key step is:
- A. Filing a police verification report
- B. Verification and stamping of documents as per legal requirements
- C. Immediately disbursing the full loan amount
- D. Sending documents to credit bureaus
After execution, documents must be verified and stamped according to legal requirements before disbursing the loan.
16. Before disbursing a loan, the bank must ensure that:
- A. Borrower has submitted only verbal consent
- B. Loan amount matches the bank’s budget
- C. All documents are executed, stamped, and verified
- D. Borrower has insurance coverage only
Loan disbursement is done only after verifying that all required documents are properly executed, stamped, and verified.
17. Which of the following is done to ensure legal validity of a hypothecation agreement?
- A. Verification of PAN only
- B. Proper execution, stamping, and filing with appropriate authorities
- C. Borrower’s oral assurance
- D. Informing RBI
Legal validity of hypothecation requires proper execution, stamping, and filing according to applicable laws.
18. A loan disbursement checklist generally includes:
- A. Only borrower’s KYC documents
- B. Only insurance policy details
- C. Only bank’s internal approval
- D. All executed documents, approvals, and securities
A comprehensive checklist ensures all documents, approvals, and securities are in place before disbursing a loan.
19. In case of missing documents during the documentation procedure, the bank should:
- A. Delay loan disbursement until completion
- B. Disburse loan partially without documents
- C. Rely on borrower’s verbal assurance
- D. Forward documents to RBI for decision
Missing documents delay the disbursement; all required documents must be complete and verified for legal compliance.
20. Which of the following is essential for documents like mortgage deeds to be legally enforceable?
- A. Borrower’s verbal consent
- B. Bank’s internal note only
- C. Proper stamping and registration
- D. Submission to credit bureau
Legal enforceability of mortgage deeds requires correct stamping and registration under applicable laws.
21. Stamping of loan documents is primarily required to:
- A. Verify borrower’s address
- B. Comply with Stamp Act and give legal validity
- C. Approve internal loan limit
- D. Inform RBI
Stamping documents ensures legal validity under the Stamp Act, making them enforceable in a court of law.
22. Post-registration of documents, the bank usually:
- A. Sends documents to borrower’s employer
- B. Immediately closes the account
- C. Waits for RBI instructions
- D. Files the documents safely in the bank’s record room
Post-registration, documents are safely filed for future reference and legal enforcement if needed.
23. Which of the following is an internal control step in the documentation procedure?
- A. Cross-checking all signatures and stamping
- B. Borrower’s verbal confirmation only
- C. RBI approval of each document
- D. Public announcement of loan disbursement
Internal control includes verifying that all documents are properly signed, stamped, and executed before disbursement.
24. A bank officer notices a discrepancy in a borrower’s documents. The correct action is:
- A. Ignore it and proceed
- B. Clarify and rectify the discrepancy before loan disbursement
- C. Disburse part of the loan
- D. Forward to RBI immediately
Any discrepancies must be resolved before disbursement to ensure legal compliance and risk mitigation.
25. The final step in documentation procedure is usually:
- A. Borrower’s oral confirmation of loan receipt
- B. Reporting to RBI
- C. Safe filing and archival of all executed and registered documents
- D. Sending a copy to the borrower’s relatives
The final step involves safe filing and archival of all executed and registered documents for legal and operational purposes.
