Chapter 8: Important Retail Liability Products (JAIIB – Paper 4)
1. What is the primary purpose of a demand deposit account?
A. Long-term investment
B. To earn high interest on fixed deposits
C. To provide easy access to funds for withdrawals and payments
D. To purchase government bonds
Demand deposits are designed to give account holders quick access to their money, allowing withdrawals or payments on demand.
2. Which of the following is a key feature of a current deposit account?
A. Fixed tenure and fixed interest rate
B. No limit on the number of withdrawals and deposits
C. Only available for salaried individuals
D. Mandatory minimum balance of ₹1 crore
Current deposit accounts are designed for businesses and allow unlimited deposits and withdrawals without restrictions.
3. Who are the typical customers of a current deposit account?
A. Businesses and firms requiring frequent transactions
B. Only senior citizens
C. Children under 18 years of age
D. Freelancers with no regular income
Current accounts are primarily meant for businesses, partnerships, and professionals who need frequent deposits and withdrawals.
4. Which of the following is an advantage of a current deposit account?
A. High fixed interest rate on deposits
B. Limited withdrawals per month
C. Only for long-term investment
D. Flexibility in transactions and easy access to funds
Current accounts provide flexibility in transactions, making them ideal for customers who need frequent access to funds.
5. Which of the following is true about the interest paid on current deposit accounts?
A. Interest is higher than savings accounts
B. Typically, no interest is paid on current accounts
C. Interest is fixed for 10 years
D. Interest is paid quarterly at 12%
Current accounts are primarily transactional accounts and usually do not earn interest for the account holder.
6. Which type of deposit allows withdrawals and deposits at any time without prior notice?
A. Fixed Deposit
B. Recurring Deposit
C. Demand Deposit
D. Term Deposit
Demand deposits, including savings and current accounts, allow the account holder to withdraw and deposit money anytime.
7. A business chooses a current account primarily because:
A. It requires frequent transactions and overdraft facilities
B. It provides high fixed returns
C. It has a long-term lock-in period
D. It is only for savings purposes
Businesses prefer current accounts for unlimited transactions and additional facilities like overdraft to manage liquidity.
8. Which feature distinguishes current deposit accounts from savings accounts?
A. Interest rate is higher than fixed deposits
B. Only senior citizens can open them
C. They have a lock-in period of 1 year
D. They are designed for frequent transactions with no limit on withdrawals
Current deposit accounts are intended for high-frequency transactions and are mainly used by businesses, unlike savings accounts.
9. Which of the following is commonly required for opening a current account for a partnership firm?
A. Share certificate
B. Partnership deed and PAN of the firm
C. Property documents
D. Life insurance policy
Banks require a partnership deed and PAN of the firm to verify legal existence and tax compliance before opening a current account.
10. Which document is mandatory for opening a current account for a company?
A. Passport of all directors
B. Property tax receipt
C. Certificate of incorporation and Memorandum & Articles of Association
D. GST registration of directors
For companies, banks verify legal registration using the Certificate of Incorporation and Memorandum & Articles of Association before account opening.
11. What is the first step in opening a current account?
A. Submission of account opening form with KYC documents
B. Requesting cheque books
C. Depositing a fixed amount
D. Opening a savings account simultaneously
The account opening process starts with submitting the account opening form along with necessary KYC and business documents for verification.
12. Which operational instruction is generally issued for current accounts?
A. Interest calculation on quarterly basis
B. Lock-in period of 1 year
C. Pre-closure charges applicable
D. Maintaining minimum balance as per bank norms
Banks issue operational instructions such as maintaining a minimum balance, withdrawal limits, and cheque book issuance for current accounts.
13. Which KYC documents are mandatory for opening a current account?
A. Driving license and PAN card only
B. Proof of identity and proof of address of the entity and authorized signatories
C. GST registration only
D. Bank statement of last 3 months only
KYC norms require banks to verify identity and address of the business/entity as well as authorized signatories before opening the account.
14. What is the main purpose of operational instructions in current accounts?
A. To fix interest rates
B. To restrict account opening
C. To guide the customer and staff on account usage and compliance
D. To convert current accounts into savings accounts
Operational instructions ensure proper usage of current accounts, including compliance, minimum balance, transaction limits, and documentation.
15. Which of the following is correct regarding minimum balance in current accounts?
A. There is no concept of minimum balance in current accounts
B. Minimum balance is fixed at ₹10,000 for all accounts
C. Minimum balance is only applicable to savings accounts
D. Banks may specify minimum balance requirements which vary depending on type of customer
Current accounts usually require a minimum balance, which may differ for businesses, companies, or professionals as per bank policy.
16. What is the primary reason for transferring a current account from one branch to another?
A. To increase interest earned
B. Convenience for customer due to relocation or business needs
C. To avoid KYC norms
D. Mandatory RBI requirement
Current accounts may be transferred to another branch at the customer's request for operational convenience or due to business relocation.
17. An account is termed 'inoperative' when:
A. The balance exceeds ₹10 lakh
B. Customer deposits cash regularly
C. There have been no transactions for a specified period
D. Account is opened for fixed deposits only
Banks classify accounts as inoperative or dormant if there are no customer-initiated transactions over a prescribed period, usually 2 years.
18. Which of the following is NOT a reason for closing a current account?
A. Customer request
B. Bank merger or restructuring
C. Violation of bank’s terms and conditions
D. Customer deposits funds regularly
Accounts are closed due to customer request, policy violations, or bank restructuring; regular deposits are not a reason for closure.
19. Which of the following is a primary purpose of a savings bank account?
A. High-frequency business transactions
B. To encourage savings among individuals with safe and convenient access
C. To provide loans against deposits only
D. To earn high fixed returns like term deposits
Savings bank accounts are designed to encourage regular savings by individuals while providing safe and convenient access to funds.
20. Which of the following is an advantage of a savings bank deposit to the customer?
A. Unlimited overdraft facility without collateral
B. Guaranteed high returns like fixed deposits
C. Safety of funds with interest earnings and ease of withdrawals
D. Exemption from income tax
Savings accounts provide safety of deposits, modest interest income, and easy access for withdrawals, making them ideal for individuals.
21. Which statement best explains the importance of savings bank deposits for customers?
A. Encourages disciplined savings and builds a financial cushion for emergencies
B. Required for opening current accounts
C. Only for senior citizens to earn interest
D. Provides tax-free income
Savings bank deposits promote financial discipline and provide a ready source of funds for emergencies, benefiting individuals.
22. When a current account is transferred, which of the following is true?
A. All pending cheques are automatically cancelled
B. The old account continues along with the new account
C. Customer must close all other accounts
D. Account number remains the same; branch-specific operations are updated
When a current account is transferred to another branch, the account number is retained, but operational control shifts to the new branch.
23. Which of the following individuals or entities can open a savings bank account?
A. Resident individuals, minors through guardians, and certain non-profit organizations
B. Only salaried individuals
C. Only senior citizens above 60 years
D. Only corporate entities
Savings bank accounts can be opened by resident individuals, minors via guardians, and some non-profit organizations, ensuring access to banking facilities for all.
24. What does deregulation of interest on savings deposits mean?
A. Interest is fixed by RBI for all banks
B. Banks are free to decide the interest rate on savings deposits within limits set by RBI
C. No interest is allowed on savings deposits
D. Interest is tax-free for all deposits
Deregulation allows banks to set their own interest rates on savings deposits, subject to RBI guidelines, rather than following a uniform rate.
25. Which of the following statements is correct regarding maintenance of balance in a savings bank account?
A. There is no concept of minimum balance in any savings account
B. Banks are not allowed to impose minimum balance charges
C. Banks may prescribe minimum balance depending on account type and levy charges if not maintained
D. Minimum balance rules apply only to current accounts
Banks specify minimum balance norms for savings accounts depending on account type and can levy charges if the balance is not maintained.
26. How is interest on savings bank accounts typically calculated?
A. Flat monthly rate irrespective of balance
B. On daily or monthly minimum balance basis and credited quarterly
C. Only at the end of the financial year
D. Only if account balance exceeds ₹1 lakh
Interest is generally calculated on daily or monthly minimum balance and credited to the account quarterly, as per bank norms.
27. Which of the following restrictions typically apply to savings bank accounts?
A. No deposits allowed
B. No ATM withdrawals allowed
C. Cannot transfer funds via NEFT/RTGS
D. Limit on number of withdrawals per month as per RBI guidelines
RBI restricts the number of free withdrawals from savings accounts per month to encourage saving and regulate bank operations.
28. Which of the following services are commonly offered in savings bank accounts?
A. Only cheque encashment
B. Fixed deposit booking only
C. ATM/debit card, internet banking, mobile banking, and cheque facility
D. Only locker facilities
Savings accounts offer multiple services like ATM/debit cards, internet and mobile banking, cheque facilities, and fund transfers for customer convenience.
29. Which of the following statements about interest deregulation on savings accounts is true?
A. Interest is set uniformly by all banks at 4%
B. Banks can set their own rates within the ceiling prescribed by RBI
C. Only government banks can decide the interest rate
D. No interest is allowed after deregulation
RBI allows banks to determine their savings account interest rates within specified limits, promoting competition and better returns for customers.
30. Who is eligible to maintain a minor’s savings account?
A. Only the minor themselves
B. Only the guardian
C. Only a parent
D. Minor through a parent or legal guardian
Minors can open and operate savings accounts through a parent or legal guardian who acts on their behalf until they reach majority age.
31. What is the primary feature of a time deposit (fixed deposit) account?
A. Withdrawals allowed any time without notice
B. No interest is paid
C. Funds are deposited for a fixed period at a predetermined interest rate
D. Only minors can open these accounts
Fixed deposits involve depositing a sum for a fixed tenure at a predetermined interest rate, offering higher returns than savings accounts.
32. What does 'periodicity of time deposit' refer to?
A. Frequency of ATM withdrawals
B. The tenure or duration for which the deposit is made
C. Minimum balance requirement
D. Number of deposit accounts held by the customer
The periodicity of a time deposit refers to the fixed tenure for which the money is deposited, e.g., 6 months, 1 year, or more.
33. Which operational instruction is commonly applicable to fixed deposits?
A. Premature withdrawal may attract penalty
B. Unlimited deposits and withdrawals like current accounts
C. Interest is credited only at the end of 10 years
D. Fixed deposits cannot be renewed
Fixed deposits have operational instructions like fixed tenure, penalty on premature withdrawals, and renewal options on maturity.
34. How is interest on fixed deposits generally calculated?
A. Only on the first month’s deposit
B. On withdrawals made during the tenure
C. Interest is fixed irrespective of deposit amount
D. On the principal amount for the specified period at the agreed rate, compounded quarterly, monthly, or annually
Interest on FDs is calculated on the principal for the deposit tenure at the agreed rate, with compounding frequency specified by the bank.
35. Who can open a term deposit account in the name of a minor?
A. Only the minor themselves
B. Parent or legal guardian on behalf of the minor
C. Only grandparents of the minor
D. Only bank staff members
Term deposits for minors can be opened by parents or legal guardians until the minor attains majority age, after which they can operate the account.
36. What happens if a fixed deposit is withdrawn before maturity?
A. Full interest is paid with no penalty
B. FD cannot be withdrawn under any circumstances
C. Interest is paid at a reduced rate and penalty may be charged
D. Deposit is converted into savings account automatically
Premature withdrawal of FDs attracts reduced interest and/or penalty as per bank’s operational instructions.
37. Which of the following is NOT a typical operational instruction for time deposits?
A. Interest payout frequency can be chosen by customer
B. Tenure of deposit is fixed at the time of opening
C. Renewal on maturity is allowed
D. Unlimited withdrawals without affecting interest
Time deposits do not allow unlimited withdrawals without affecting interest; early withdrawal usually leads to penalties.
38. Which of the following is an operational issue commonly associated with fixed deposits?
A. Unlimited withdrawals without affecting interest
B. No interest is earned on FDs
C. Premature withdrawal penalties and interest recalculation
D. Cannot be used as collateral for loans
Operational issues include premature withdrawals, recalculation of interest, and ensuring correct maturity instructions are followed.
39. Which of the following is true about advances against bank’s own time deposit receipts?
A. Bank does not provide any loan against its own FDs
B. Bank may advance loans to customers using their own TDRs as collateral
C. Only current account holders can avail this facility
D. Interest is waived on FDs used as collateral
Banks allow advances against their own time deposit receipts as security, enabling customers to borrow without breaking the FD.
40. What happens when a fixed deposit matures and the customer does not provide renewal instructions?
A. FD is closed and funds are transferred to current account automatically
B. Bank forfeits the interest earned
C. FD continues without interest accrual
D. FD is renewed automatically for the same tenure at the prevailing interest rate
FDs are typically renewed automatically for the same tenure at the bank’s prevailing rate unless the customer gives alternate instructions.
41. According to recent RBI rules, what happens to overdue fixed deposits?
A. Bank closes the FD and transfers principal to savings account without interest
B. Interest continues to accrue at the contracted rate until the FD is claimed
C. FD is converted into a current account automatically
D. Bank forfeits the principal amount
RBI mandates that interest continues to accrue on overdue FDs at the contracted rate until claimed by the customer.
42. Which of the following is an operational precaution for fixed deposits?
A. Allowing premature withdrawals without any penalty
B. Avoiding renewal on maturity automatically
C. Recording instructions for withdrawal, renewal, and nominee details correctly
D. Providing FDs only to senior citizens
Proper operational management includes maintaining accurate records of maturity, renewal, premature withdrawal instructions, and nominees.
43. Advances against FDs are typically sanctioned up to:
A. 50% of the FD value
B. 90% to 95% of the FD value depending on bank policy
C. 100% of FD without interest adjustment
D. Only the principal amount minus accrued interest
Banks typically sanction advances against FDs up to 90%-95% of the deposit value, keeping it as security for the loan.
44. Who is eligible to submit Form 15G to the bank?
A. Only senior citizens
B. Individuals below 60 years whose total income is below taxable limit
C. Any corporate account holder
D. Non-resident Indians only
Form 15G is submitted by individuals below 60 years to request non-deduction of TDS on interest income if their total income is below the taxable limit.
45. What is Form 15H used for?
A. To claim refund of income tax
B. For corporate accounts to avoid TDS
C. For senior citizens to request non-deduction of TDS on interest income
D. For minors to submit KYC
Form 15H is submitted by senior citizens (age 60 and above) to prevent deduction of TDS on interest if their total income is below the taxable limit.
46. When do banks deposit TDS deducted from interest to the Income Tax Department?
A. Only at the end of the financial year
B. Only when requested by the customer
C. TDS is not deposited by banks
D. Monthly or quarterly as per Income Tax provisions and due dates
Banks deposit TDS deducted on interest to the Income Tax Department as per the prescribed schedule (monthly or quarterly) under Income Tax rules.
47. What is a 2-in-1 account in banking?
A. Two individuals sharing a current account
B. An account linked to both a savings account and a term deposit
C. Account allowing both deposits and foreign exchange transactions
D. Account for joint minors only
A 2-in-1 account combines a savings account with a linked term deposit, enabling automatic sweep-in or sweep-out facilities for better interest management.
48. Which of the following is true about Recurring Deposit (RD) accounts?
A. Only a lump sum deposit is allowed at account opening
B. No interest is paid on RDs
C. Customers deposit a fixed amount regularly for a specified tenure and earn interest
D. Only minors can open RDs
RDs allow customers to deposit a fixed sum monthly for a specific period and earn interest at rates similar to term deposits, promoting disciplined savings.
49. What is a key operational feature of a Recurring Deposit?
A. Only quarterly deposits are allowed
B. Interest is not compounded
C. Premature withdrawals are not allowed under any circumstances
D. Customers must deposit a fixed amount regularly; premature withdrawal may attract penalty
RD accounts require fixed monthly deposits. Premature withdrawals are possible but may attract penalties, similar to fixed deposits.
50. Which of the following is an advantage of submitting Form 15G or 15H to the bank?
A. Higher interest rates on deposits
B. Exemption from service charges
C. Prevents deduction of TDS on interest if income is below taxable limit
D. Automatic increase in deposit tenure
Form 15G/15H allows eligible individuals to request non-deduction of TDS on interest income when their total income is below the taxable limit.
