Examination Paper: Banking and
Financial Services Management
1
IIBM Institute of Business
Management
IIBM Institute
of Business Management
Examination
Paper MM.100
Principles and
Practices of Banking
Section A:
Objective Type (30 marks)
· This section
consists of Multiple Choice questions & Short Answer type questions.
· Answer all the
questions.
· Part One
questions carries 1 mark each & Part Two questions carries 4 marks each.
Part One:
Multiple
Choices:
1. Frequency of First Tranche
Returns is:
a. Weekly
b. Monthly
c. Monthly/quarterly
d. Monthly/quarterly/half-yearly
2. An order for winding up a
banking company can be issued by:
a. The High Court
b. The RBI
c. The Central Government
d. The Supreme court
3. Who shall be natural guardian
in case of married minor girl?
a. Father
b. Brother in law
c. Father-in-law
d. Husband
4. X a partner in the firm XYZ
Co. wants to open a Bank account in the firm’s name. It will require
signatures of:
a. All partners
b. Any one of the partner
c. Managing partner only
d. Sleeping partner not required
5. Public limited companies
should have minimum shareholders, before Opening Bank account.
a. 11
b. 7
c. 5
d. 15
Examination Paper: Banking and
Financial Services Management
2
IIBM Institute of Business
Management
6. If the beneficiary is
government then the Expiry of guarantee is governed by the ‘law of
limitation’ ranging from 3 years
to:
a. 15 years
b. 30 years
c. 20 years
d. 10 years
7. Charge created on LIC Policy
is:
a. Lien
b. Hypothecation
c. Pledge
d. Assignment
8. The device that combines the
parallel input data into single serial output data is known as:
a. Switcher
b. Multiplexer
c. Encoder
d. Front end processor
9. In market skimming pricing
strategy:
a. Initially price is lower and
then it is increased
b. Initial price is high and is
maintained high
c. Initial price is low and is
maintained low
d. Initially price is higher and
then it is reduced
10. The marketing personnel need
information ………… intervals.
a. At yearly
b. At quarterly
c. At monthly
d. On a continuous basis and
regular
Part Two:
1. Explain ‘Cryptography’ and the
need of keys. Convince.
2. Define the term ‘obscenity’
used in E-commerce.
3. What do you understand by Real
time accessement?
4. What ‘Marketing mix’ conveys
in modern marketing theory? Explain in short.
5. Write a note on ‘Labeling’ in
product development.
END OF SECTION A
Examination Paper: Banking and
Financial Services Management
3
IIBM Institute of Business
Management
Section B:
Caselets (40 marks)
· This section
consists of Caselets.
· Answer all the
questions.
· Each Caselet
carries 20 marks.
· Detailed
information should form the part of your answer (Word limit 150 to 200 words).
Caselet 1
There is a lacuna in the present
T-Bill auction system of RBI. The dealers (investors) are subject to
what is called the ‘Winners
Curse’. The value of a T-Bill to a dealer is the price it can fetch in the
secondary market. This is an
unobserved random value, which is likely to be common to all dealers.
It is quite unlike the works of
art which the Sotheby’s would place at an auction. The price of Mona
Lisa, say, to an avid collector
of Da Vinci’s paintings, would be more than what a Picasso collector
would value it. In sharp
contrast, market participants are likely to agree on the price of a T-Bill in
the
secondary market. Now winning an
auction in a discriminatory price method may not be profitable.
For, it would mean that the
winner has overestimated the T-Bill value.
Questions:
1. How does the winner in such an
auction become the loser due to the ‘winner curse’?
2. Explain the role of primary
dealers in the money market.
Caselet 2
In a bid to familiarize banks,
exporters and other financial bodies with ‘Forfeiting’, the State Bank of
India (SBI) will soon be setting
up a three-man cell at its international division in Mumbai for
advisory purposes. According to
Mr. D. Ian Guild, Senior Advisor, Forfeiting & Syndications
Group, Standard Bank, the cell
was being set up after a series of meetings with the bank, and is
essentially aimed at spreading
the message of Forfeiting as an effective trade financing mechanism
to increase exports. Suggesting
that forfeiting was the ideal springboard for effecting a quantum
jump in exports in the
medium-term, Mr. Guild said he was confident of aggregating forfeiting
business of $100 millions in 1998
and $250 millions in 1999 in the country. Since its introduction in
1992, Exim Bank had facilitated
69 forfeiting transactions valued at around $75 millions, with credit
periods ranging between 90 days
and seven years, and covering the export of goods ranging from
textiles to plant and machinery.
The RBI has now permitted all commercial banks to act as
facilitators for forfeiting
transactions. Mr. Guild pointed out that forfeiting has not really taken off in
India because exporters and
commercial banks lacked the knowledge of the mechanics of the
scheme. In India, the real
challenge would be to motivate small and medium exporters to use the
forfeiting route for exports to
countries which may not be able to buy on cash terms. Mr. S.
Bhattacharya, deputy general
manager, Exim Bank, Calcutta, said: “Payment defaults by overseas
buyers were an integral part of
cross-border business and export credit insurance has not been a
comprehensive answer to this
problem”. Forfeiting offered an alternative solution, especially to
exporters wishing to penetrate
difficult markets for the first time, he pointed out. Some of the top
international forfeiters in the
world have stopped accepting forfeiting documents involving Pakistan
and Russia, according to Mr.
Amitabh Mehta, Trader and Originator, Forfeiting and Syndications
Examination Paper: Banking and
Financial Services Management
4
IIBM Institute of Business
Management
group, Standard Bank London Ltd.
(SBLL). According to Mr. Mehta, forfeiting transactions
involving Pakistan could not be
carried out due to poor performance of the banks there. In addition,
the financial status of Pakistan
following the nuclear blasts has made it impossible to carry out the
transactions. Similarly,
transactions with Russia are being totally rejected by forfeiting due to the
current economic turmoil. Joining
the list with Pakistan and Russia are Iraq, Sudan and Nigeria, he
added. Commenting on the Indian
situation, Mr. Mehta said, “With its sound banking system, the
country is well placed in the
international scene. In fact, there is tremendous potential for forfeiting
in the years to come,” he said.
According to him, even after the nuclear tests conducted by India, the
top forfeiters were not worried
and continued to accept forfeiting papers to be transacted with India.
Questions:
1. Discuss the mechanism of
forfeiting and the role played by banks in forfeiting transactions.
2. How does forfeiting differ
from factoring?
END OF SECTION B
Section C:
Applied Theory (30 marks)
· This section
consists of Applied Theory Questions.
· Answer all the
questions.
· Each question
carries 15 marks.
· Detailed
information should form the part of your answer (Word limit 200 to 250 words).
1. Government securities are
referred to as ‘gift-edged securities’, as they are absolutely secured.
RBI, being the banker to the
Government, issues different types of paper on behalf of the latter, to
cater various requirements.
Discuss the various types of Government securities that are issued by
the RBI.
2. A sound regularly framework in
regulating capital markets is expected to provide transparency,
maintain market integrity,
fairness and ensure investor protection. However, lack of adequate
regulations can lead to
manipulations which endanger the integrity of the market and damage the
confidence of investors and
market participants in India?
END OF SECTION C