Chapter 27: Lender’s Appraisal Procedure (JAIIB – Paper 4)
1. What is the primary purpose of a lender’s appraisal procedure?
A. To decide the interest rate only
B. To register the loan application
C. To assess the creditworthiness and repayment capacity of the borrower
D. To collect documents for record-keeping
Lender’s appraisal is conducted to evaluate the borrower's financial strength, creditworthiness, and repayment capacity before sanctioning the loan.
2. Which of the following documents is typically required when applying for a home loan?
A. Share certificate of a private company
B. Proof of income such as salary slips or IT returns
C. Passport of a third party
D. Vehicle registration papers
Income proof, such as salary slips, bank statements, or IT returns, is essential for assessing repayment capacity for a home loan.
3. Which section of the home loan application form contains details about the property to be financed?
A. Property Details Section
B. Personal Identification Section
C. Income Declaration Section
D. Bank Details Section
The Property Details section includes information such as location, cost, ownership status, and legal documents related to the property.
4. During appraisal, which factor is most important in determining a borrower’s repayment capacity?
A. Borrower’s nationality
B. Location of the property
C. Age of the property
D. Income and existing liabilities of the borrower
The borrower’s income, monthly obligations, and existing liabilities are key determinants of repayment capacity.
5. Which document is NOT usually required for availing a home loan?
A. Vehicle insurance policy
B. Proof of identity
C. Income proof
D. Address proof
Vehicle insurance is unrelated to a home loan and is not typically required in the appraisal process.
6. Which step in the appraisal procedure involves verifying the authenticity of submitted documents?
A. Credit scoring
B. Loan disbursement
C. Document verification
D. Account opening
Document verification ensures that all submitted documents such as identity, income, and property papers are genuine and valid.
7. In a home loan appraisal, which of the following is a key component assessed under the borrower’s financial position?
A. Property layout
B. Income, savings, and existing debts
C. Nearby amenities
D. Builder’s reputation
Assessing income, savings, and outstanding liabilities helps determine the borrower's ability to repay the loan.
8. When a home loan application is received through an agent, the lender’s first step should be:
A. Disburse the loan immediately
B. Verify the authenticity of the application and the agent
C. Conduct property inspection only
D. Collect post-sanction fees
Applications received through agents require verification to ensure the agent is authorized and the application details are genuine before proceeding.
9. Which of the following is a critical aspect of the loan appraisal process?
A. Customer’s choice of agent
B. Location of the bank branch
C. Assessment of creditworthiness and repayment capacity
D. Type of stamp paper used in application
Loan appraisal focuses on evaluating the borrower’s ability to repay and overall financial stability, which is central to risk management.
10. At the pre-sanction stage, which of the following is considered an “other relevant issue”?
A. Existing legal disputes on the property
B. Borrower’s preferred branch timings
C. Loan officer’s personal preference
D. Type of stationary used in application
Pre-sanction stage appraisal includes checking for legal disputes, title verification, and other factors that may affect the loan’s safety.
11. Why is property inspection conducted before loan sanction?
A. To register the agent
B. To verify borrower’s identity only
C. To finalize interest rate
D. To confirm the existence, condition, and valuation of the property
Property inspection ensures that the asset being financed exists, is in good condition, and its value aligns with the loan requested.
12. In case of applications received through agents, which risk must the bank carefully evaluate?
A. Risk of agent’s delayed documentation
B. Risk of fraudulent submissions or misrepresentation
C. Risk of property depreciation
D. Risk of high interest rate fluctuations
When agents are involved, banks must check for potential fraud or misrepresentation in documents submitted by the agent on behalf of the applicant.
13. What is the main objective of analyzing other relevant issues at the pre-sanction stage?
A. To finalize the disbursement date
B. To collect post-sanction fees
C. To ensure the loan is safe and compliant with internal and regulatory guidelines
D. To assign the agent for collection
Pre-sanction evaluation of other relevant issues ensures that all risks are addressed and that lending complies with internal and RBI guidelines.
14. Which of the following is the primary purpose of proper documentation in home loans?
A. To provide legal evidence and ensure enforceability of the loan
B. To increase processing fees
C. To satisfy the borrower only
D. To avoid interest payment
Proper documentation ensures that the loan agreement, mortgage deed, and other records are legally enforceable and protect the bank’s interests.
15. What is a mortgage in the context of home loans?
A. An insurance policy for the property
B. A loan granted without any collateral
C. A legal charge on the property offered as security for the loan
D. A government subsidy for homebuyers
In a mortgage, the borrower pledges the property as collateral, giving the lender legal rights over the asset in case of default.
16. Registration of loan-related documents is important because:
A. It helps the borrower get a lower interest rate
B. It allows faster disbursement
C. It is only a formality with no legal effect
D. It gives legal validity and public notice of the transaction
Registration ensures that the mortgage deed and related documents are legally valid and recorded in public records, protecting lender and borrower rights.
17. Which of the following measures helps in detecting forged or fabricated title deeds?
A. Only taking borrower’s verbal confirmation
B. Verification with the land registry and legal title search
C. Checking the color of the property papers
D. Approving based on agent’s recommendation
Banks verify title deeds with the land registry and conduct legal searches to ensure the property is free of encumbrances and documents are genuine.
18. Which document is commonly registered during the home loan process to secure the bank’s interest?
A. Borrower’s passport copy
B. Latest utility bills
C. Mortgage deed / Charge document
D. Agent appointment letter
The mortgage deed is registered to legally record the lender’s charge on the property as security for the loan.
19. What is the risk of not detecting a forged or fabricated title deed?
A. Delay in processing fees
B. Borrower may pay higher interest
C. Property may lose market value
D. Lender may lose security and face legal complications
If forged or fabricated documents are not detected, the bank’s security is compromised, potentially leading to financial loss and legal disputes.
20. When should document registration and verification ideally be completed in the home loan process?
A. After full loan repayment
B. At the pre-sanction or sanction stage before disbursement
C. Only at the borrower’s request
D. After the loan is disbursed
Registration and verification of all critical documents should be done before disbursing the loan to ensure legal compliance and secure the bank’s interest.
21. Apart from mortgage of property, which of the following can be considered as other securities for loans?
A. Only cash deposits
B. Only government bonds
C. Movable assets, pledge of shares, and hypothecation of stock
D. Only gold ornaments
Other securities include movable assets, pledge of shares, hypothecation of stock or receivables, and other acceptable forms of collateral apart from immovable property.
22. What is the primary purpose of registering charges with CERSAI?
A. To calculate interest rate
B. To provide public notice of secured transactions and prevent multiple charges on the same asset
C. To record borrower’s income details
D. To register property valuation
Registration with CERSAI ensures that all charges on assets are publicly recorded, helping prevent fraud and multiple loans on the same collateral.
23. Which type of loan security must be registered with CERSAI under the SARFAESI Act?
A. Only unsecured personal loans
B. Only government guaranteed loans
C. Only loans below ₹5 lakh
D. All loans secured by movable or immovable property
All loans secured by assets, whether movable or immovable, must be registered with CERSAI to protect the lender’s interest and comply with the SARFAESI Act.
24. Registration of charges on security interest with CERSAI must be completed:
A. Only when the borrower defaults
B. At the time of loan closure
C. At the time of sanctioning the secured loan
D. Only for loans above ₹50 lakh
Registration should be done at the time of sanction to establish the lender’s charge and make it legally valid and public.
25. Which of the following details are recorded when registering a charge with CERSAI?
A. Borrower’s details, lender’s details, asset description, and loan amount
B. Only borrower’s income
C. Only property valuation
D. Only the interest rate of the loan
CERSAI registration records key details like borrower, lender, asset, and loan amount to prevent disputes and protect lender’s interests.
26. Failure to register a charge with CERSAI may result in:
A. Automatic loan waiver
B. Borrower paying less interest
C. Faster approval of subsequent loans
D. Risk of multiple charges on the same asset and legal complications
If a charge is not registered, other lenders could claim security on the same asset, exposing the bank to legal and financial risk.
27. CERSAI registration of charges is applicable to which type of lenders?
A. Only cooperative banks
B. All banks and financial institutions providing secured loans
C. Only housing finance companies
D. Only private lenders
All banks and financial institutions providing secured loans must register charges with CERSAI as per regulatory guidelines.
28. Which of the following assets cannot be registered with CERSAI?
A. Movable assets pledged
B. Immovable property mortgaged
C. Intangible personal agreements without security interest
D. Hypothecated stock
Only assets with a registered security interest can be recorded; personal agreements without security cannot be registered with CERSAI.
29. What is the main objective of monitoring a home loan account after disbursement?
A. To collect additional documentation
B. To advertise new loan products
C. To verify the borrower’s property ownership again
D. To ensure timely repayment and detect early signs of stress
Monitoring helps banks track repayment performance, identify delays, and take corrective action before the account turns non-performing.
30. Which action is generally taken at the closure of a home loan account?
A. Charge additional interest
B. Release the mortgage/security and issue a No Objection Certificate (NOC)
C. Keep the account open for monitoring
D. Register the property again with CERSAI
Upon full repayment, banks release the charge/mortgage on the property and provide an NOC, indicating the loan has been cleared.
31. Which of the following is a common type of home loan fraud?
A. Delayed loan disbursement
B. Paying extra processing fees
C. Submission of forged or fabricated property documents
D. Requesting EMI holidays
Home loan frauds often involve forged documents, inflated property valuations, or misrepresentation of borrower’s income and assets.
32. What is a key step banks take to prevent home loan frauds during account monitoring?
A. Periodic verification of borrower’s documents and property status
B. Increasing the loan tenure automatically
C. Charging higher prepayment penalties
D. Closing the account immediately
Regular monitoring and verification of documents and property status help banks detect discrepancies and potential frauds early.
33. Which of the following is a red flag indicating possible home loan fraud?
A. Timely EMI payments
B. Borrower providing inconsistent income or identity details
C. Early repayment of loan
D. Submission of all required documents
Discrepancies in borrower information or forged documents are strong indicators of potential fraud.
34. After detecting a home loan fraud, the first action a bank should take is:
A. Close the branch
B. Ignore minor discrepancies
C. Increase the borrower’s loan limit
D. Conduct an internal investigation and involve legal authorities if necessary
Banks must investigate internally and, if required, report to legal authorities to prevent financial loss and take corrective action.
35. Closure of a home loan account involves which of the following steps?
A. Filing a new loan application
B. Agent verification only
C. Receiving final payment, releasing security, and issuing NOC
D. Re-registering the property with CERSAI
Final repayment clears the loan, the mortgage/charge is released, and a No Objection Certificate (NOC) is issued to the borrower.
