INDIAN INSTITUTE OF BANKING & FINANCE JAIIB MODULE (C & D) LEGAL ASPECTS OF BANKING OPERATIONS Saturday 19,Ap

1. INDIAN INSTITUTE OF BANKING & FINANCEJAIIBMODULE (C & D) LEGAL ASPECTS OF BANKING OPERATIONSSaturday19,April, 08T M C VASUDEVAN

2. 01.. Identify which one is correct. A.. A contract of indemnity has two persons B.. A contract of guarantee also has two persons. C.. A minor can take a loan as a borrower D.. A pledge in respect of company advance has to be registered with ROC.

3. 02..The award of a Banking Ombudsman will be reviewed by A.. The Executive Director of RBI B.. The Deputy Governor in charge of Rural Planning and Credit Department of RBI. C.. The Finance Secretary D.. The Banking Ombudsman himself

4. 03..Which is not correct (Banking Ombudsman) A.. The maximum amount the Banking Ombudsman can award as compensation is Rs.10 lacs. B.. Limitation period for filing of the review application is one month. C.. Failure to honor guarantee does not come under its purview . D.. None of the above

5. 04..SARFAESI Act 2002, extends to whole of India including the State of Jammu & Kashmir. Also applicable to housing finance companies. .. The act is effective from 21.06.2002. It also covers the earlier loans which were outstanding.

6. 05..Based on the observation of the Supreme Court in the Mardia Chemicals vs Union of India case, the Government of India issued notification amending the provisions of the SARFAESI Act. The amendment stipulates payment of 50% amount instead of 75% as originally enacted. (When appealed)

7. 06.. . Take over of loans or advances from the Bank or Financial Institution for the purpose of recovery is known as Asset reconstruction. . The word Board is used in the Act refers to the Securities and Exchange Board of India (SEBI)

8. 07..Bank T has lent to S a sum of Rs.2 lacs on the hypothecation of a van.. Who is the Originator as per the provisions of the SARFAESI Act. a.. Borrower S b.. Creditor T c.. Both are not Originators d.. SEBI

9. 08..Default should have been committed by the debtor. . The borrower’s account should have been classified as NPA as per the guidelines of RBI. . The Act is applicable only to a Secured creditor and not to an unsecured creditor

10. 09.. Obligor is a person liable to pay to the lender (originator). As per the contract terms and conditions or otherwise. He has to discharge any obligation in respect of a financial asset whether existing, future, conditional or contingent or and includes a borrower.

11. 10.. Not considered as Qualified Institutional Buyer a.. Bank b.. Insurance company c.. Individual Investor d.. An Asset Management Company

12. 11...Which one is not pertaining to Hypothecation. a.. A charge in or upon any movable property b.. Right in favour of the creditor c.. Possession also with the lender d.. Retaining the ownership with the owner of the property

13. 12.. The securitization company or reconstruction Company to raise funds from qualified institutional buyers by formulating schemes. .Separate scheme wise accounts to be Maintained. .The Scheme invites subscription to security receipts proposed to be issued by such company under the scheme.

14. 13.. Bank X is the secured creditor and U is the borrower and defaulter The branch head is R. U has given his land as security which is under his possession. The outstanding liability is shown under NPA. Identify the Obligor & Originator. a.. X and U respectively b.. X and R respectively c.. U and X respectively d.. R and U respectively

15. 14.. Who will receive the Security receipt from whom.? (SARFAESI Act) a.. Secured Creditor from Principal Debtor b.. Institutional Investor from Securitisation company. c.. Securitization company from Institutional investor d.. Secured Creditor from Securitization company

16. 15.. RGH, the secured creditor. After completing the formalities / procedures (as per SARFAESI ACT) the assets mortgaged by KWY were purchased by a Securitisation and reconstruction company called JFI for Rs.27 lacs. Then a.. JFI will issue a security receipt RGH b.. RGH will receive debentures from JFI c.. KWY will issued security receipts to JFI. d.. RGH will get debentures from KWY

17. 16...In Mardia Chemicals vs Union of India Supreme Court as declared that A.. SARFAESI Act is Constitutionally valid B.. Except a part of Section 17(2) C.. To Deposit 75% for appeal, the Apex court was not in favour D.. All the above

18. 17.. A reconstruction company A.. is engaged as property developer B.. is formed for the purpose of asset reconstruction C.. is registered with SEBI D.. is not registered under the Companies Act

19. 18..The Government of India has A.. issued an order B.. issued a notification amending the Sec17(2) of SARFAESI Act. C.. Instead of 75%, the borrower filing an appeal has to deposit 50% D.. Both B & C are appropriate

20. 19..A Life Insurance company, a Nationalised bank and a foreign institutional investor have formed a Company to invest in Securitisation company as qualified institutional buyer. Then they will have to • a.. Register with SEBI • B.. Register with SEBI is not a must • C.. Register with SEBI is a must • D.. Register with SEBI when directed only

21. 20.. DEF a Securitisation and reconstruction company acquired financial asset from MNO secured creditor. On account of this transaction DEF would become A.. Purchaser B.. Seller C.. Owner D.. None of these

22. 21..The regulatory authority for Securitisation and reconstruction company is a.. Company Law Board b.. Concerned Registrar of Companies c.. SEBI d.. None of these

23. 22.. .The Securitisation Company not only to be registered under the Companies Act but also needs registration from RBI as per A.. RBI Act B.. Companies Act C.. SARFAESI Act D.. SEBI Act

24. 23.. A person who is holding 12% of the paid up equity capital of the reconstruction company is known as A.. Sponsor B.. Obligor C.. Originator D.. Institutional investor

25. 24.. Identify the beneficiaries of the trusts formed by Securitisation compnay. ACE is the Securitisation company. GHY is the Secured creditor. BDF is the Institutional investor. a.. GHY b.. BDF c.. ACE d.. None of them

26. 25.. A security receipt is A.. Similar to Bank’s Fixed Deposit receipt B.. Issued by Securitisation Company C.. Issued to Securitisation Company D.. Issued to a Secured Creditor

27. 26... The Securitisation company can acquire financial asset without execution of any deed of assignment or transfer in its favour by the original creditor. A.. True B.. False C.. Without agreement it cannot be legally valid D.. Deed of Assignment is a must.

28. 27.. Debenture as per the provision of SARFAESI A.. Appears on the left hand side of the balance sheet B.. It is shown as liability representing commitment C.. It is for payment of consideration to be paid to the bank for acquisition of financial asset from it D.. It represents the money borrowed.

29. 28.. Identify the incorrect one (Reconstruction Company) A.. It has to obtain registration certificate from RBI. B.. It has to have minimum capital of Rs.100 crores at the time of registration C.. It can formulate separate schemes for acquisition of financial assets D.. It has to disclose the risk factors to the investors.

30. 29.. The Security receipt (not having any interest or right and so on in immovable property) issued to the holder by the Securitisation company attract registration as per the Registration Act,1908. A.. True B.. False C.. Registration compulsory for such receipts. D.. None of the above

31. 30..If there is a dispute among the bank, securitisation company and the qualified institutional buyer, then the same to be settled by conciliation or arbitration as provided in the A.. Reserve Bank of India Act B.. SARFAESI Act C.. Arbitration and Conciliation Act D.. Both a & c

32. 31..An institutional investor NG wish to transfer the security receipt (Which has an undivided interest in the financial asset) to MV. a.. Registration under the Registration Act required. b.. Registration optional c.. Registration need not be insisted. d.. Registration of Security receipts does not arise.

33. 32.. The power given to the secured creditor, as creditor has overriding effect over the provisions related to mortgage in A.. The Registration Act B.. The Contract Act C.. The SARFAESI Act D.. The Transfer of Property Act

34. 33..The Securitisation company can set up separate trusts scheme wise and act trustees for such schemes as provided in the Securitisation Companies and Reconstruction Companies (Reserve Bank) Guidelines and Directions,2003. The beneficiaries of such trusts are a.. Debenture holders b.. Lending bankers c.. Debtors d.. None of them

35. 34..Acquisition of financial asset from the originator, by Securitisation or reconstruction company is known as a.. Reconstruction b.. Securitisation c.. Transfer of Assets d.. Purchasing

36. 35.. .. Securitisation company is a company registered under the Companies Act,1956 for the purpose of securitisation. It also needs registration from RBI under the provisions of SARFAESI Act. .. Security agreement includes an agreement, instrument or any other document or arrangement under which security interest is created in favor of secured creditor

37. 36.. The minimum capital requirement for securitisation or reconstruction company, at the time of registration is a.. Rs. 35 Crore b.. Rs. 55 Crore c.. Rs.105 Crore d.. None of the above

38. 37..E has created a mortgage by way of deposit of title deeds with the secured creditor bank J. This represents a.. Security Receipt b.. Secured Debenture c.. Security Agreement d.. Secured Debt

39. 38..Secured debt means a debt which is secured by any security interest. ..Secured Asset means the property on which security interest is created. .. The powers given by SARFAESI Act for enforcement of securities are against secured assets only

40. 39..Security Receipt is issued a.. To Borrower by the Bank b.. To Qualified Institutional buyer by the Reconstruction Company c.. To Creditor by the Securitisation Company d...To Reconstruction company by the Securitisation Company

41. 40..Which one is appropriate. (SARFAESI) a..B D F is the institutional investor and will receive Debentures b.. KRT is the Securitisation company will issue Security receipt as well as Debentures c.. GU is the Secured creditor and will receive security receipt d.. MNP, a borrower of the bank will issue Debenture in lieu of payment towards outstanding

42. 41.. ..The security receipt evidences the purchaser’s undivided right, title and interest in the security. ..These receipts are transferable in the market. .. Sponsor is a person holding not less than 10% of the paid up capital of securitisation or reconstruction company.

43. 42.. ..Depending on the nature of security asset RBI has the powers to specify different amounts of owned funds for different companies. ..The company can formulate separate schemes for acquisition of financial asset. ..The securitisation or reconstruction company can act as trustees for such trusts and manage the assets held in trust.

44. 43.. IBF a securitisation and recosnstruction company wish to raise funds by way of deposits. a.. They can approach public for the same. b.. Cannot raise funds by way of deposits c.. If need arises with the permission of RBI d.. They can raise funds by way of Deposits on Private placement basis only.

45. 44.. ..The Securitisation or reconstruction company can acquire financial asset without execution of any deed of assignment or transfer in its favor by the concerned bank or the financial institution. ..Assignment is complete on the acquiring company issuing debenture or bond and incorporating therein the terms and conditions of acquisition.

46. 45.. .. The securitisation involves two stages. In the first stage it is acquisition of financial assets and undivided interest therein. Second stage is issue of security receipts in favor of investors for the purpose of raising money from investors

47. 46..As per the provisions of SARFAESI Act the document to be executed requires (identify which one is not correct) a.. Payment of stamp duty b.. As per the provisions of the Indian Stamp Act c.. State Stamp duty laws d.. Central Stamp duty laws

48. 47.. ..As per RBI guidelines, a...an acquisition of funded assets should not include take over of outstanding commitments, if any, of any bank or financial institution to lend further. b…terms of acquisition of security interest in non-fund based transactions should provide for the relative commitments to continue with bank or financial institute till demand for further funding arises

49. 48..Which one is correct (Securitisation matter) • Security receipt is in favor of investor • Security receipt is issued with permission from Company Law Board • Security receipt can be transferred by the secured creditor • Security receipt is issued to the borrower who has failed to repay

50. 49..Bank D decides that the financial asset now be acquired by the securitisation company RV. Originally the Asset was given as security by QL (a partnership firm) In such an event a notice of such development to be given to a.. QL and such notice is not compulsory. b.. Such notice is not optional c.. The Obligor, which is compulsory as per the Act d.. RV