FEMA Act 1999, Types of customers, Partnership Act, Limited Company
FATCA, COPRA, IT Act, Citizens Charter
FEMA ACT 1999
1. When did the Foreign Exchange Management Act (FEMA) come into effect?
A. 1st June 1999
B. 1st June 2000
C. 1st June 2001
D. 1st June 1998
The Foreign Exchange Management Act (FEMA) came into effect on 1st June 2000.
2. What does "foreign exchange" include under section 2(n) of FEMA?
A. Only foreign currency
B. Foreign currency and drafts payable in foreign currency
C. Foreign currency, deposits, credits, and balances payable in any foreign currency
D. Only foreign currency and drafts
Under section 2(n) of FEMA, "foreign exchange" includes foreign currency, deposits, credits, and balances payable in any foreign currency.
3. What is the primary objective of the Foreign Exchange Management Act (FEMA)?
A. To regulate domestic trade
B. To consolidate and amend the law relating to foreign exchange for facilitating external trade and payments
C. To promote the domestic currency
D. To regulate foreign investments in domestic markets
The primary objective of FEMA is to facilitate external trade and payments and to promote the orderly development and maintenance of the foreign exchange market in India.
4. Under section 2(o) of FEMA, what does "foreign security" include?
A. Only foreign currency bonds
B. Only foreign shares
C. Securities in the form of shares, stocks, bonds, debentures, or any other instrument denominated in foreign currency
D. Only foreign stocks and bonds
Under section 2(o) of FEMA, "foreign security" includes any security in the form of shares, stocks, bonds, debentures, or any other instrument denominated or expressed in foreign currency.
5. What was FEMA enacted to improve upon?
A. Indian Companies Act
B. Foreign Exchange Regulation Act (FERA) 1974
C. Foreign Trade Act
D. Indian Contract Act
FEMA was enacted to improve upon the Foreign Exchange Regulation Act (FERA) 1974.
6. Which section of FEMA defines "capital account transaction"?
A. Section 2(f)
B. Section 5
C. Section 2(e) read with Section 6(1) and 6(3)
D. Section 2(n)
"Capital account transaction" is defined under Section 2(e) read with Section 6(1) and 6(3) of FEMA.
7. Which of the following is true about capital account transactions under FEMA?
A. They are always permitted without any restrictions
B. They are not covered under FEMA
C. They are subject to certain restrictions imposed by the Reserve Bank of India
D. They are only restricted to transactions involving foreign securities
Capital account transactions are subject to certain restrictions imposed by the Reserve Bank of India, unlike current account transactions which are freer.
8. What does "capital account transaction" include under FEMA?
A. Transactions related to foreign trade only
B. Transactions involving payment for services
C. Transactions that alter assets or liabilities outside India or in India
D. Transactions involving day-to-day operational expenses
"Capital account transaction" includes transactions that alter assets or liabilities outside India or in India, including contingent liabilities.
9. Which account transactions are subject to fewer restrictions under FEMA?
A. Capital account transactions
B. Current account transactions
C. Both capital and current account transactions
D. Neither capital nor current account transactions
Current account transactions are subject to fewer restrictions compared to capital account transactions under FEMA.
10. What is the primary focus of FEMA as opposed to its predecessor, FERA?
A. Restricting foreign exchange transactions
B. Facilitating external trade and payments
C. Increasing penalties for foreign exchange violations
D. Completely banning foreign exchange transactions
FEMA focuses on facilitating external trade and payments, and promoting the orderly development and maintenance of the foreign exchange market in India, unlike FERA which was more restrictive.
11. Under FEMA, which section specifies the restrictions on capital account transactions?
A. Section 2(e)
B. Section 5
C. Section 7
D. Section 6
Restrictions on capital account transactions are specified under Section 6 of FEMA.
12. Which of the following is NOT considered a capital account transaction under FEMA?
A. Foreign direct investment
B. Investment in foreign securities
C. Payment for import of goods
D. Borrowing in foreign currency
Payment for import of goods is considered a current account transaction, not a capital account transaction under FEMA.
13. Under FEMA, what is the primary purpose of allowing convertibility of the rupee for current account transactions?
A. To restrict foreign trade
B. To promote external trade and payments
C. To regulate capital flows
D. To prevent currency speculation
The primary purpose of allowing convertibility of the rupee for current account transactions is to promote external trade and payments.
14. Which regulatory body has the power to place restrictions on specified capital account transactions under FEMA?
A. Ministry of Finance
B. Securities and Exchange Board of India (SEBI)
C. Reserve Bank of India (RBI)
D. Financial Intelligence Unit (FIU)
The Reserve Bank of India (RBI) has the power to place restrictions on specified capital account transactions under FEMA.
Types of customers
15. According to banking guidelines, what operational instruction should be used for a joint account of two illiterate persons?
A. Either or Survivor
B. Jointly
C. Jointly or Survivor
D. Former or Survivor
For a joint account of two illiterate persons, the operational instruction should be Jointly or Survivor.
16. According to section 131 of the Negotiable Instruments Act, which of the following is the primary reason for opening an account with cash only?
A. To facilitate faster processing of transactions
B. To protect the bank’s interest
C. To avoid overdrafts
D. To comply with regulatory requirements
Opening an account with cash only is to protect the bank’s interest under Section 131 of the Negotiable Instruments Act.
17. What is the maximum age at which a minor is considered to attain majority according to the Indian Majority Act, when a guardian is appointed by a court?
A. 18 years
B. 21 years
C. 16 years
D. 20 years
A minor is considered to attain majority at 21 years if a guardian is appointed by a court, according to the Indian Majority Act.
18. Which type of account should not be opened for an illiterate person according to banking guidelines?
A. Savings Account
B. Fixed Deposit Account
C. Current Account
D. Recurring Deposit Account
Current accounts should not be opened for illiterate persons.
19. For a blind person, which of the following precautions should be taken while opening and maintaining their bank account?
A. Issue a cheque book for convenience
B. Allow overdrafts on the account
C. Explain various risks in account operations
D. Open a joint account with another blind person
For a blind person, it is crucial to explain various risks in account operations.
20. What is a requirement for opening an account for a minor according to banking regulations?
A. The minor must have a legal guardian
B. The minor must be 21 years old
C. The account can be a joint account with another minor
D. No overdrafts are allowed in the account
For a minor’s account, no overdrafts are allowed.
21. Which of the following types of accounts can a minor of 14 years open according to banking guidelines?
A. Savings Account
B. Fixed Deposit Account
C. Current Account
D. Recurring Deposit Account
A minor of 14 years can open a Current Account.
22. Which precaution should be taken while opening and maintaining an account for an illiterate person?
A. Issue a cheque book
B. Open a Current Account
C. Do not issue a cheque book
D. Allow overdrafts
No cheque book should be issued to illiterate persons.
23. Which type of account operation is permitted for a blind person?
A. Cheque transactions without witness
B. Overdrafts on the account
C. Cash transactions in the presence of a witness
D. No operational restrictions
For blind persons, cash transactions should be made in the presence of a witness.
Indian Partnership Act 1932
24. According to Section 4 of the Indian Partnership Act 1932, what defines the relationship in a partnership?
A. Sharing of liabilities in business
B. Sharing the losses of a business
C. Sharing the profits of a business carried on by all or any of them acting for all
D. Management of business by one person
Section 4 of the Indian Partnership Act 1932 defines the partnership relationship as the sharing of profits of a business carried on by all or any of them acting for all.
25. What is the maximum number of partners allowed in a partnership firm under the Companies Act 2013?
A. 50
B. 75
C. 100
D. 150
Under the Companies Act 2013, the maximum number of partners in a partnership firm is 100.
26. In India, what is the legal requirement for the registration of a partnership firm?
A. It is mandatory and carries a penalty for non-registration
B. It is optional and no penalty is imposed for non-registration
C. It is mandatory but no penalty is imposed for non-registration
D. It is optional but carries a penalty for non-registration
In India, it is not compulsory to register a partnership firm, and no penalty is imposed for non-registration.
27. What should be done if a partner of a firm becomes insolvent according to the guidelines for partnership accounts?
A. Continue the operations of the account
B. Stop the operations in the account
C. Transfer the account to another branch
D. Allow overdrafts to the account
In the event of insolvency of any partner, the operations in the account should be stopped.
28. What document should be obtained when opening an account for a partnership firm?
A. Partnership deed signed by all partners
B. Certificate of incorporation
C. Memorandum of Association
D. Partnership letter signed by all partners
A letter of partnership duly signed by all the partners should be obtained when opening an account for a partnership firm.
Limited Company
29. Under which act are Joint Stock Companies governed in India?
A. Indian Partnership Act, 1932
B. Companies Act, 1956
C. Companies Act, 2013
D. Indian Contract Act, 1872
Joint stock companies in India are governed by the Companies Act, 2013.
30. Which of the following is NOT a type of company under the Companies Act, 2013?
A. Public Limited Company
B. Private Limited Company
C. Government Company
D. Limited Liability Partnership
The types of companies under the Companies Act, 2013 include Public Limited Company, Private Limited Company, and Government Company. A Limited Liability Partnership (LLP) is governed by a different act.
31. Which document serves as proof of a company’s incorporation?
A. Memorandum of Association
B. Articles of Association
C. Certificate of Incorporation
D. Board Resolution
The Certificate of Incorporation is issued by the registrar of companies and serves as proof of a company’s incorporation.
32. What should never be done with a cheque payable to the company?
A. Deposited in the company account
B. Endorsed to a third party
C. Deposited in the personal account of a director
D. Deposited in a subsidiary company's account
A cheque payable to the company should never be deposited in the personal account of a director, as this could lead to misappropriation of company funds.
33. When opening a bank account for a limited company, which of the following is NOT required?
A. Certificate of Incorporation
B. Memorandum of Association
C. Introduction by a current account holder
D. Board Resolution
An introduction by a current account holder is not required when opening a bank account for a limited company; the Certificate of Incorporation serves the purpose.
34. Which section of the Companies Act, 2013, is concerned with borrowing in excess of net worth?
A. Section 180 (1)(d)
B. Section 180 (1)(b)
C. Section 180 (1)(a)
D. Section 180 (1)(c)
Section 180 (1)(d) of the Companies Act, 2013, pertains to borrowing in excess of a company's net worth.
35. When opening an account for a limited company, which document is essential to prove the company’s incorporation?
A. Articles of Association
B. Memorandum of Association
C. Certificate of Incorporation
D. Board Resolution
The Certificate of Incorporation is the official document issued by the Registrar of Companies that proves the company’s legal existence.
36. Which of the following documents is NOT required when opening an account for a limited company?
A. Certificate of Incorporation
B. Memorandum of Association
C. Introduction by an existing customer
D. Board Resolution
An introduction by an existing customer is not required when opening an account for a limited company; the Certificate of Incorporation and other official documents suffice.
37. What could happen if a bank opens an account for a limited company without obtaining certified true copies of the required documents?
A. The bank could face legal penalties
B. The account may not be protected by insurance
C. The bank might unknowingly support illegal activities
D. All of the above
If a bank opens an account without certified true copies, it could face legal penalties, lack account protection, or unknowingly support illegal activities, making it crucial to verify documents thoroughly.
38. Which document specifies the purpose clause that must be verified when granting credit facilities to a company?
A. Articles of Association
B. Certificate of Incorporation
C. Memorandum of Association
D. Board Resolution
The Memorandum of Association contains the purpose clause, which defines the scope of activities the company is authorized to undertake. This must be verified when granting credit facilities.
39. What should be checked if there is a death of a director in a limited company with a bank account?
A. Suspend all transactions immediately
B. The account operations continue as usual
C. Check if the board resolution needs updating
D. Close the account and open a new one
In the event of the death of a director, the board resolution might need updating, but account operations can typically continue without interruption as per the existing resolution.
40. Why is a certified true copy of the Memorandum of Association required when opening a bank account for a limited company?
A. To verify the identity of the directors
B. To confirm the scope of the company's activities and powers
C. To check the company’s registered office
D. To ensure compliance with the company’s financial policies
A certified true copy of the Memorandum of Association is required to confirm the scope of the company's activities and powers, which is essential for the bank to ensure the company's operations align with its stated objectives.
41. What is a certified true copy?
A. A handwritten note confirming a document is genuine
B. A photocopy of a document without any verification
C. An original document issued by the government
D. A photocopy of a document that has been verified as true and accurate by a competent authority
A certified true copy is a photocopy of an original document that has been verified as a true and accurate representation of the original by a competent authority, such as a notary public or company secretary.
42. Which of the following documents does NOT typically require a certified true copy when opening a bank account for a limited company?
A. Director's personal bank statement
B. Memorandum of Association
C. Certificate of Incorporation
D. Articles of Association
A director's personal bank statement is not required when opening a bank account for a limited company. The required documents are typically the Certificate of Incorporation, Memorandum of Association, Articles of Association, and a Board Resolution.
43. Who is typically authorized to certify a true copy of a company's documents?
A. Any employee of the company
B. The company's auditors only
C. A notary public or company secretary
D. Any director of the company
A certified true copy is usually verified by a notary public or company secretary, who is authorized to confirm the document's authenticity and ensure it is a true representation of the original.
