Chapter 35: Credit Cards, Home Loans, Personal Loans, Consumer Loans (JAIIB – Paper 2)
1. Which of the following is a revolving line of credit provided by banks?
A. Home Loan
B. Personal Loan
C. Credit Card
D. Car Loan
A credit card is a revolving credit facility, where the borrower can use funds up to a limit and repay later, often with interest if not paid within the due date.
2. What is the minimum amount a customer must pay on a credit card bill to avoid default?
A. Billing Amount
B. Full Outstanding Balance
C. Interest Amount Only
D. Minimum Amount Due
Banks specify a "Minimum Amount Due" (usually 5–10% of outstanding) that must be paid to avoid being treated as a defaulter.
3. If a customer pays only the minimum amount due on a credit card, what will happen to the remaining balance?
A. It is waived off
B. It attracts interest charges until fully paid
C. It is carried forward without charges
D. It is converted into a loan automatically
Any unpaid balance after the minimum amount is paid continues to attract high interest (usually 30–40% p.a.) until cleared.
4. Which regulatory guideline makes it mandatory for banks to send SMS/email alerts for every credit card transaction?
A. RBI Mandate
B. SEBI Regulations
C. NPCI Guidelines
D. IBA Circular
RBI has made it mandatory for banks to provide real-time alerts (SMS/email) for all credit card transactions to prevent fraud and ensure transparency.
5. A customer disputes a fraudulent credit card transaction. What is the first step the bank must take?
A. File police complaint on behalf of customer
B. Block customer's card permanently
C. Block the card immediately and investigate
D. Ask customer to repay first, then resolve
In case of suspected fraud, the bank must block the card immediately to prevent further misuse and then investigate the complaint.
6. Under which type of interest rate is the EMI of a home loan likely to change during the loan tenure?
A. Fixed Rate
B. Floating Rate
C. Hybrid Fixed
D. Step-up EMI
In floating rate home loans, EMIs vary as per changes in the benchmark rate (like Repo Linked Lending Rate or MCLR).
7. As per RBI guidelines, what is the maximum Loan-to-Value (LTV) ratio allowed for home loans up to ₹30 lakh?
A. 75%
B. 80%
C. 85%
D. 90%
RBI permits banks to lend up to 90% of property value as LTV for home loans up to ₹30 lakh.
8. A borrower takes a home loan of ₹20 lakh at 9% annual interest for 20 years. Approximate EMI will be?
9. If a borrower prepays part of a floating-rate home loan, RBI guidelines allow banks to charge:
A. No prepayment penalty
B. 2% penalty
C. 1% penalty
D. Discretionary penalty by bank
RBI has directed banks not to levy prepayment penalties on floating-rate home loans, to promote customer-friendly practices.
10. A customer has defaulted on EMI payments for 95 days. As per RBI norms, the home loan account will be classified as:
A. Special Mention Account (SMA)
B. Non-Performing Asset (NPA)
C. Standard Asset
D. Restructured Asset
A loan account becomes NPA if interest or principal remains overdue for more than 90 days. Hence, at 95 days it is classified as NPA.
11. Which of the following is the main characteristic of a personal loan?
A. Secured loan backed by property
B. Loan only for salaried persons
C. Unsecured loan without collateral
D. Loan repayable only in lump sum
Personal loans are generally unsecured loans, provided without collateral, based on the borrower’s income, credit score, and repayment capacity.
12. What is the usual repayment tenure for personal loans in most banks?
A. 1 to 5 years
B. 6 to 10 years
C. 10 to 15 years
D. 15 to 20 years
Personal loans are short-term retail credit products, with repayment periods usually ranging from 1 year to 5 years.
13. A borrower with a low credit score applies for a personal loan. Which action is the most likely response from the bank?
A. Sanction loan at lower interest
B. Ignore the credit score
C. Provide loan without documentation
D. Reject or sanction loan at higher interest
Credit score is a key factor for unsecured loans. Low scores often result in rejection or approval at higher interest rates to cover risk.
14. What is the common method used by banks to recover overdue personal loans?
A. Sell borrower’s pledged house
B. Engage recovery agents or legal action
C. Adjust against FD lien
D. Mortgage borrower’s gold
Since personal loans are unsecured, banks usually rely on recovery agents, legal notices, and civil action for recovery in case of default.
15. Which RBI guideline is applicable for fair practices in recovery of personal loans?
A. Fair Practices Code for Lenders
B. Basel III Accord
C. FEMA Regulations
D. SEBI Code of Conduct
RBI has issued a Fair Practices Code which guides banks and NBFCs to adopt ethical practices in lending and recovery, especially in retail loans like personal loans.
16. Which of the following best defines a consumer loan?
A. Loan given only for housing
B. Loan for corporate working capital
C. Loan to individuals for purchasing consumer durables
D. Loan given to government projects
Consumer loans are retail credit facilities provided to individuals for buying goods like refrigerators, TVs, vehicles, and other consumer durables.
17. Which type of consumer loan allows a borrower to buy goods and pay in fixed installments?
A. Hire Purchase Loan
B. Overdraft Facility
C. Credit Card
D. Gold Loan
In hire purchase loans, goods are financed, and the borrower pays in fixed installments. Ownership transfers after the final payment.
18. Which security do banks normally ask for while sanctioning consumer durable loans?
A. House property mortgage
B. Fixed Deposit lien
C. No security required
D. Hypothecation of the asset purchased
In consumer loans, the asset financed (TV, fridge, vehicle, etc.) is hypothecated to the bank until full repayment.
19. A borrower buys a refrigerator worth ₹40,000 under a consumer loan scheme. Bank finances 80% of cost. How much margin does the borrower pay?
A. ₹10,000
B. ₹8,000
C. ₹12,000
D. ₹20,000
Bank finances 80% of ₹40,000 = ₹32,000. Remaining 20% (₹8,000) is margin money to be paid by borrower.
20. Which of the following risks is highest for banks in consumer loans?
A. Credit Risk due to borrower default
B. Market Risk
C. Interest Rate Risk
D. Sovereign Risk
Since consumer loans are small-ticket and retail-focused, the biggest challenge is credit risk — risk of default by individual borrowers.
