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HOW TO PREPARE FOR INTERVIEW?
Perhaps,this is a regular question asked by candidates selected in written tests conducted
by banks & government organizations. Interview sessions are considered tough by
many,as it involves speaking out.Here are somecommonly asked questions in Interview
& methods to answer them.
Question : Tell /Describe about yourself ( you will be asked this 90% )
Answer : Don't recite yourresume.Tell about your education, experience, projects worked
,passion etc.,Make sure you complete this within 2-3mins.
Q: Why should we hire you into our organization
A : This would be perfect time to tell about your strengths,achievements & assets.
Compare your profile with the job role & justify that you will be a best fit for the job.
Answers like This is a best company, I want a job in this fieldwont impress the
interviewer.
Q : What are your strengths & weakness ?
A: Again this is also a commonly asked question to test how much you know of
yourself.Make sure the Strengths you say have some relation to the job you applied.
I am very good in english can be said as I have good communication skills.
WEAKNESS - I don't have any weaknessmeans you are not ready to talk about
it.Similarly don't say something like, Im short tempered & get angry very soon It
gives an impression that you are not fit to work in group.Say something which does not
affect the working & also describe about the steps taken to overcome that.
Q: Where do you see yourself after 5 years ?
A: This question would be asked to check how much you know about the career path.
After 5 years,I want to be in your seatwont work in any case.Think realistically,
understand the growth opportunities of that job & put it across to them.
Thanks for your encouraging replies & emails for our previous post Commonly asked
Interview questionsOur special focus on Interview continues with tips onhow to behave
inside the interview hall,before the panel.Candidates must understand that every single
movement before the interviewer will have an impact on the result.
1. Remember to wish the interviewer/panel good morning or good afternoon once you
enter the room.Once you are offered a seat,sit down calmly.
2. Sit straight with your back against the chair & arms on the armrest. Leaning on the
table or pushing yourself forward are not good signs.
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3. Wait until the interviewer goes through your profile.Don't start talking before you are
asked anything it shows you are nervous.Answer the questions in a clear & bold
manner,once your turn comes.
4. While answering any question,do not look at the ceiling or around the room.Look at
the interviewer ,it shows that you are interested in the conversation.
5. If you don't know the answer,say it to the panel.Do not try to fill the gap by giving
unwanted or wrong answers.Incase of such situations,DON`T scratch your head, bite
your nails, close your eyes or put your fingers on your face.
6. Do not repeat the same answers again.It clearly shows that you are unprepared & have
no proper understanding of the subject.Also,remember to start answering after the
question has been asked.Rushing to answer shows that you want to complete theinterview process as soon as possible.
There has been lot of activity on our Orkut group ,ever since the SBI resultsfor
recruitment of 11000 clerks were released. State bank of India has started the interview
process for those selected candidates & many members of our group were kind enough toshare theirinterview questions with others.
So, we have decided to re-publish their experiences here so that all candidates including
non members of ourOrkut group can benefit.
THE PANEL : For most candidates the interview lasted between 10-25 mins.The topics
were related to India, banking, economy, current affairs & from your resume. Many
candidates informed us that the Interview panel(senior officials) were cool & the session
was full of fun.Now, let us move to the questions -
Bhawana sharma says ,she was asked about -
* Family background.
* Willing to relocate/ work in rural areas or not?
* Reason for doing MBA after B.Tech (candidate is B.Tech,MBA graduate)
* My MBA was in HR & Finance so they asked abt HR and Subjects in Finance
* About Financial Institutions, Share market, Mutual Funds,Nifty, BSE etc.
* My SWOT analysis (Strength,Weakness,Opportunity,Threats)
* About my hobbies (in resume)
* Names of RBI Governor, President, VP & Deputy chairman of Planning commission
* Asked how will i judge a candidate if he/she is suitable for a job?
* Few questions on RBI,SBI, Recession, Subprime crisis etc.,
* What is written on a 100 rupee note and whose signature are there on it?
http://www.bankexamsindia.com/2010/03/sbi-clerk-results-11000-recruitment.htmlhttp://www.orkut.co.in/Main#Community?cmm=60931230http://www.bankexamsindia.com/2009/12/is-mba-degree-necessary-for-bank-jobs.htmlhttp://www.bankexamsindia.com/2010/03/sbi-clerk-results-11000-recruitment.htmlhttp://www.orkut.co.in/Main#Community?cmm=60931230http://www.bankexamsindia.com/2009/12/is-mba-degree-necessary-for-bank-jobs.html -
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barun shares his experience as,
* Tell something about SBI
* Questions related to hobbies
* What are monetary policies
* Repo rate, SLR ,Addhar (The new name of UID Project)
* Why did you apply forclerk job in bank?
* Five years down the line u will be like to be at?
* Will the IPL controversy put a bad image to IPL?
* About Cut motion (recent issue in parliament)
soumya:Xpectin dsays,
* Asked about SBI.
* Importance of March 8 & what happened on that day in Indian parliament.(answer is
Women's day & 33% women`s reservation bill)* Questions fromresume/ biodata.
priya details her turn -
* Asked about SBI & SBI associate banks
* Kinds of loan that SBI provides
* About savings bank account & rate of interest for them
* Difference between Private & Public sector banks
* What are the foreign banks in India
* About my hobby (Reading), I was asked who is the author of Discovery of India
* Headlines of today's newspaper
~Pritha~ says that one of her friend was posed these questions -
* Selection procedure for Rajyasabha members
* IPL results along with best batsman, best bowler etc...
* Family background.
* 5 questions from subject of study in college
We hope the part 1 ofSBI Interview Questions would have helped candidates preparing
for State bank of India recruitment & other jobs to get a feel of what happens inside the
hall.As said earlier, here is the Part 2 ofInterview experiences shared by members on our
Orkut community describing the questions asked.
sree describes her questions -
* Define Indian economy & how it emerges from recession
* What is a bank & who operates it
* What is SLR,PLR,CRR, Bank rate etc.
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* A situation was given & was asked how would i react to it
* Authors of any novels
* They also questions from UG & PG degree & why i chose banking
* News in today's paper
* Chairman of SBI
* Why would u like to join SBI
* What is nationalization act?
* 3-4 questions were asked from degree subjects.
* Why studied B.E and choosingbank jobs
* Some questions about my hobbies.
* Why airlines were stopped in European countries recently?
* Who won the IPL trophy & who is the chairman of IPL
v shares his friend`s experience ,
* What are the financial institution in India* India`s finance minister
* Asked about RBI & their services
* How to reduce inflation
* What new services are provided by RBI
* Why choose banking after engineering
* Some questions about hobbies & personal
i nevr thk futurrecollects that, the panel consisted of 4 members & the questions -
* Some questions from resume (about me, family background, hobbies etc)
* Since I'm an IT graduate ,some questions on computers* What is networking & how many types of topologies
* Asked about conditions of women in our society
SBI CLERK INTERVIEW QUESTIONS | STATE BANK OF INDIA CLERK
INTERVIEW QUESTIONS | SBI CLERK INTERVIEW PREPARATION TIPS
Why do you want to enter banking?
* You need to talk about Banking what the interviewer seeks for is a person who is
flexible to be along with the given timings, someone who can cope up with writing bits
and bobs or a person who can benefit them with more development .Your answer canhave following bulleted points.
Banking is a fast changing environment
Retail banking is now very competitive from telephone banking, retailers and
etc Banking is thus now largely sales driven.
http://www.bankexamsindia.com/2009/12/is-mba-degree-necessary-for-bank-jobs.htmlhttp://www.bankexamsindia.com/2009/12/upcoming-bank-exams-december-2009.htmlhttp://www.bankexamsindia.com/2009/12/upcoming-bank-exams-december-2009.htmlhttp://www.bankexamsindia.com/2010/02/why-computer-knowledge-is-required-for.htmlhttp://www.bankexamsindia.com/2009/12/is-mba-degree-necessary-for-bank-jobs.htmlhttp://www.bankexamsindia.com/2009/12/upcoming-bank-exams-december-2009.htmlhttp://www.bankexamsindia.com/2010/02/why-computer-knowledge-is-required-for.html -
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# You can even talk about IT getting changes and clearing banks offers a wide range of
career opportunities for graduates not just in branch banking but also in financial
services, consultancy and corporate banking.
Have you applied to any other areas apart from banking?
Here off course your answer will hold some other finance or sales and marketing careers insurance or accountancy, altogether these careers should have skills related to banking.
How do you feel about committing yourself to another three years of exams?
The professional examinations that you will almost certainly be required to take as part of
your training are not always difficult in themselves, but do require determination and
focus- especially as much of your study will be done in the evenings after a hard days
work.
You should also be aware of the range of qualifications open to you many of the large
clearing banks offer the opportunity to gain qualifications in marketing, personnel or
accountancy not just banking.
Tell me about an experience in which you had to use tact?Tact and diplomacy are important qualities in retail banking the customer is (almost!)
always right. You may have to tell an account holder diplomatically why they cant have
a loan for example, without provoking them into moving their account elsewhere.
To answer this type of question, think through everything you have done in the last five
years school, university, sports, clubs, societies, travel, vacation jobs etc. and try to
think of situations where you had to demonstrate this and other qualities do this before
your interview.
If you have completed a number of employer application forms, then you should already
have done this as this type of question is now common on application forms.
Who are our major competitors and what differences do you notice in our
products?
The company will be expecting that you have done your research on the industry
generally. You should be familiar with the banks products and services literature on
these can be picked up at any branch. Read the banks brochures and annual reports
these may be in the careers information room.
Be aware of current trends in the market and try to find out what each bank is
doing in these areas.
What is SLR?
Every bank is required to maintain at the close of business every day, a minimum
proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash,
gold and un-encumbered approved securities. The ratio of liquid assets to demand andtime liabilities is known as Statutory Liquidity Ratio (SLR). Present SLR is 24%.
(reduced w.e.f. 8/11/208, from earlier 25%) RBI is empowered to increase this ratio up to
40%. An increase in SLR also restrict the banks leverage position to pump more money
into the economy.
What is SLR ? (For Non Bankers)
SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the
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minimum percentage of deposits that the bank has to maintain in form of gold, cash or
other approved securities. Thus, we can say that it is ratio of cash and some other
approved to liabilities (deposits) It regulates the credit growth in India.
What are Repo rate and Reverse Repo rate?
Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks.
When the repo rate increases borrowing from RBI becomes more expensive. Therefore,we can say that in case, RBI wants to make it more expensive for the banks to borrow
money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to
borrow money, it reduces the repo rate
What are Repo rate and Reverse Repo rate?
Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks.
When the repo rate increases borrowing from RBI becomes more expensive. Therefore,
we can say that in case, RBI wants to make it more expensive for the banks to borrow
money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to
borrow money, it reduces the repo rate
Thus, we can conclude that Repo Rate signifies the rate at which liquidity is injected in
the banking system by RBI, whereas Reverse repo rate signifies the rate at which thecentral bank absorbs liquidity from the banks.
What is the difference between Bank Rate and Repo Rate?
Bank Rate vs Repo Rate
Bank Rate is the rate at which RBI allows finance to commercial banks in India. There
are difference types of refinance that can be availed by banks and these are linked to
Bank Rate. Thus, banks can borrow at this rate only to the extent of their eligibility for
refinance.
On the other hand, Repo is a money market instrument, which enables collateralised short
term borrowing and lending through sale/purchase operations in debt instruments. Under
a repo transaction, a holder of securities sells them to an investor with an agreement to
repurchase at a predetermined date and rate. In the case of a repo, the forward clean price
of the bonds is set in advance at a level which is different from the spot clean price by
adjusting the difference between repo interest and coupon earned on the security. In the
money market, this transaction is nothing but collateralised lending as the terms of the
transaction are structured to compensate for the funds lent and the cost of the transaction
is the repo rate. Thus, a bank can borrow under repo provided he has the extra securities
which it can lend temporarily to RBI for borrowing short term funds.
What is relation between Inflation and Bank interest Rates?
Now a days, you might have heard lot of these terms and usage on inflation and the bank
interest rates. Bank interest rate depends on many other factors, out of that the major one
is inflation. Whenever you see an increase on inflation, there will be an increase ofinterest rate also
What is a bank?
A bank is a financial institution whose primary activity is to act as a payment agent for
customers and to borrow and lend money. It is an institution for receiving, keeping, and
lending money
What is the activity of Banks?
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Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.
Banks borrow money by accepting funds deposited on current account, accepting term
deposits and by issuing debt securities such as banknotes and bonds. Banks lend moneyby making advances to customers on current account, by making installment loans, and
by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks that provide
payment services such as remittance companies are not normally considered an adequate
substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most
funds to households and non-financial businesses, but non-bank lenders provide a
significant and in many cases adequate substitute for bank loans, and money market
funds, cash management trusts and other non-bank financial institutions in many cases
provide an adequate substitute to banks for lending savings to.What is Banking Business?
Banking Business means the business of receiving money on current or deposit
account, paying and collecting cheques drawn by or paid in by customers, the making of
advances to customers, and includes such other business as the Authority may prescribe
for the purposes of this Act.
What is Accounting for Bank Accounts?
Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and
credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets
and Expenses. This means you credit credit accounts to increase their balances and you
debit debit accounts to increase their balances.
This also means you debit your savings account every time you deposit money into it
(and the account is normally in deficit) and you credit your credit card account every time
you spend money from it (and the account is normally in credit).
However, if you read your bank statement, it will say the opposite- that you have credited
your account when you deposit money, and you debit when you withdraw it. If you have
cash in your account you have a positive or credit balance and if you are overdrawn it
will say you have a negative or a deficit balance.
The reason for this is because the bank, and not you, has produced the bank statement.
Your savings might be your assets, but it is the banks liability, so your savings account is
a liability account which is a credit account and should have a positive credit balance.Your loans are your liabilities but the banks assets so they are debit accounts which
should have a negative balance.
Below where bank transactions, balances, credits and debits are discussed, they are done
so from the viewpoint of the account holder which is traditionally what most people are
used to seeing.
What are the commercial roles of the Banks ?
However the commercial role of banks is wider than banking, and includes:
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However the commercial role of banks is wider than banking, and includes:
issue of banknotes (promissory notes issued by a banker and payable to bearer on
demand)
processing of payments by way of telegraphic transfer, EFTPOS, internet banking
or other means
issuing bank drafts and bank cheques
accepting money on term deposit
lending money by way of overdraft, installment loan or otherwise
providing documentary and standby letters of credit (trade finance), guarantees,
performance bonds, securities underwriting commitments and other forms of off
balance sheet exposures
safekeeping of documents and other items in safe deposit boxes
currency exchange
sale, distribution or brokerage, with or without advice, of insurance, unit trusts
and similar financial products as a financial supermarket
WHAT ARE THE ECONOMIC FUNCTIONS OF BANKS?
THE ECONOMIC FUNCTIONS OF BANKS INCLUDE:
1. ISSUE OF MONEY, in the form of banknotes and current accounts subject to
cheque or payment at the customers order. These claims on banks can act as moneybecause they are negotiable and/or repayable on demand, and hence valued at par and
effectively transferable by mere delivery in the case of banknotes, or by drawing a
cheque, delivering it to the payee to bank or cash.
2. NETTING AND SETTLEMENT OF PAYMENTS banks act both as
collection agent and paying agents for customers, and participate in inter-bank clearing
and settlement systems to collect, present, be presented with, and pay paymentinstruments. This enables banks to economise on reserves held for settlement of
payments, since inward and outward payments offset each other. It also enables
payment flows between geographical areas to offset, reducing the cost of settlingpayments between geographical areas.
3. CREDIT INTERMEDIATION banks borrow and lend back-to-back on their
own account as middle men
4. CREDIT QUALITY IMPROVEMENT banks lend money to ordinarycommercial and personal borrowers (ordinary credit quality), but are high quality
borrowers. The improvement comes from diversification of the banks assets and the
banks own capital which provides a buffer to absorb losses without defaulting on itsown obligations. However, since banknotes and deposits are generally unsecured, if the
bank gets into difficulty and pledges assets as security to try to get the funding it needs
to continue to operate, this puts the note holders and depositors in an economicallysubordinated position.
5. MATURITY TRANSFORMATION banks borrow more on demand debt and
short term debt, but provide more long term loans. In other words; banks borrow short
and lend long. Bank can do this because they can aggregate issues (e.g. acceptingdeposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of
banknotes), maintain reserves of cash, invest in marketable securities that can be
readily converted to cash if needed, and raise replacement funding as needed from
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various sources (e.g. wholesale cash markets and securities markets) because they have
a high and more well known credit quality than most other borrowers.
BANKING INTERVIEW QUESTIONS
Why do you want to enter banking?
o You need to talk about Banking what the interviewer seeks for is aperson who is flexible to be along with the given timings, someone who can cope up
with writing bits and bobs or a person who can benefit them with more development
.Your answer can have following bulleted points.
Banking is a fast changing environment
Retail banking is now very competitive from telephone banking,
retailers and etc Banking is thus now largely sales driven.
You can even talk about IT getting changes and clearing banks
offers a wide range of career opportunities for graduates not just in branch
banking but also in financial services, consultancy and corporate banking.
Have you applied to any other areas apart from banking?o Here off course your answer will hold some other finance or sales and
marketing careers insurance or accountancy, altogether these careers should have
skills related to banking.
How do you feel about committing yourself to another three years of exams?
o The professional examinations that you will almost certainly be required
to take as part of your training are not always difficult in themselves, but do require
determination and focus- especially as much of your study will be done in the
evenings after a hard days work.
o You should also be aware of the range of qualifications open to you
many of the large clearing banks offer the opportunity to gain qualifications inmarketing, personnel or accountancy not just banking.
Tell me about an experience in which you had to use tact?
o Tact and diplomacy are important qualities in retail banking the
customer is (almost!) always right. You may have to tell an account holder
diplomatically why they cant have a loan for example, without provoking them into
moving their account elsewhere.
o To answer this type of question, think through everything you have done
in the last five years school, university, sports, clubs, societies, travel, vacation
jobs etc. and try to think of situations where you had to demonstrate this and other
qualities do this before your interview.
o If you have completed a number of employer application forms, then you
should already have done this as this type of question is now common on application
forms.
Who are our major competitors and what differences do you notice in our
products?
o The company will be expecting that you have done your research on the
industry generally. You should be familiar with the banks products and services
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literature on these can be picked up at any branch. Read the banks brochures and
annual reports these may be in the careers information room.
o Be aware of current trends in the market and try to find out what each
bank is doing in these areas.
What significant trends do you see in the future for our industry?
o This is your chance to shine. You will be fully familiar with the economicsituation as it relates to banking or how recent legislation affects it. How will you be
familiar? Because you will have done your research and preparation properly.
o You will have talked to people about the employer, you will have been
reading trade magazines, journals and newspapers, and you will have poured over
company brochures, annual reports or anything else you can get your hands on direct
from the employer.
o You could talk about tele-banking, the limited range of services now being
offered by the supermarket banks, the effects of technology and competition and
much more.
o The Employment Files in the Careers Service library are an obvious firstplace to look. The Internet is also an excellent source of information. Be ready to
have more than one significant trend to discuss!
PREPARE WELL FOR BANK EMPLOYMENT INTERVIEW QUESTIONS AND
You may well be intimidated by the question and answer section of any job employment
interviews that you attend. This need not be so. Just like political leaders like Barak
Obama and Sarah Palin come off well in interviews you can as well. It comes down to
preparation, anticipation and even practice.
It is no secret in the H.R. human resources trade as well with experienced managers and
interviewees that in the end there are only so many questions that can be asked. The same
questions get asked and answered again and again in job interviews so why not prepare
for the eventuality of these probing questions so that you come off looking assured ,
confident and ahead of the rest of the pack. You will become a real find, a real gem for
most employers to hire.
It is true that the core of an interview comes down to a question and answer period.
Generally this includes questions and answers from both the interviewer and you as well.
Not that you want to be in control of the interview. Such tactics early on often indicate
trouble already for the employer with their candidate even before being hired and often
lead to an early ending for the specific interview. Just answer the questions easier if you
are prepared and be prepared to ask a few or several thoughtful and relevant questions.
Generally its expected if the interview is serious about the job in question they will havea few questions to ask.
Generally it can be said that the standard questions that you will be asked in a job
employment interview fall into three general categories. General information questions,
behavioral questions and lastly character or character values questions.
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Firstly in terms of general information and general information questions to test the
waters initially and start initial conversation you may well be asked standard questions to
be expected for example Why do you want the job ? , What type of work do you most
enjoy or excel at? , What are your strongest skills? And the classic You look like a
person who knows what they want and where they want to go. Where do you see yourself
in 2 or 5 years? These questions may well go along hand in hand with questions of yourlong term goals. Lastly in terms of general information the current trend is teams rather
than lone wolves. You invariably may be asked Are you a team player.
Next in line you can expect a slew of behavioral questions. The basic premise of these
questions is that youre past behavior and actions are the best indicator and guess of your
future behavior. Expect questions on how you reacted to past situations you found
difficult and moist difficult. What did you learn from these situations? Have you
improved as a result? In addition you may well be asked your actions and reactions to
hypothetical situations and perhaps even role playing.
Lastly you may well be gauged by character questions. Some firms even employ tests
and exams whose score is judged to be highly accurate in gauging the character andintegrity of candidates. It is a well known , but seldom mentioned fact , that the biggest
source of loss and theft in most commercial businesses and enterprises are not from
outside agencies or customers in say a retail store , but rather the most major source of
loss and pilferage in businesses is internal by employees themselves. Thus companies try
to weed out and reduce the chances of this occurring from the onset by hiring employees
who have great personal honor and integrity. You may well ask hypothetical questions on
paper or directly on your views of customer and staff theft. A customer does not pay for a
chocolate bar, you catch an employee paying back the firm for a loan etc etc.
You may even get hypothetical questions of whether to declare a small item at the border
to the nice customs people when you have only been gone a day and its a small item.
Along with these character questions you expect of how well you work under stress.
All in all it can be said that there are only so many questions in life and in a job
interview. Further these questions can only be asked so many different ways. If you want
to do well and excel in job employment interviews in the end it all comes down to
preparation, anticipation and practice.
BANK PO INTERVIEW QUESTION AND ANSWERS
Posted 1 July, 2010 - 21:23
What are the DIFFERENT CHANNELS OF BANKING you use in your daily life ?
Banks offer many different channels to access their banking and other services:
* A branch, banking centre or financial centre is a retail location where a bank or
financial institution OFFERS A WIDE ARRAY OF FACE-TO-FACE SERVICE TO
ITS CUSTOMERS.
* ATM is a computerized telecommunications device that provides a financial
institution's customers a method of financial transactions in a public space without the
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need for a human clerk or bank teller. Most banks now have more ATMs than branches,
and ATMs are providing a wider range of services to a wider range of users. For example
in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's
account by feeding in the notes and entering the account number to be credited. Also,
most ATMs enable card holders from other banks to get their account balance and
withdraw cash, even if the card is issued by a foreign bank.
* MAIL is part of the postal system which itself is a system wherein written documents
typically enclosed in envelopes, and also small packages containing other matter, are
delivered to destinations around the world.
This can be used to deposit cheques and to send orders to the bank to pay money to third
parties. Banks also normally use mail to deliver periodic account statements to customers.
* TELEPHONE BANKING is a service provided by a financial institution which
allows its customers to perform transactions over the telephone. This normally includes
bill payments for bills from major billers (e.g. for electricity).
* ONLINE BANKING is a term used for performing transactions, payments etc. overthe Internet through a bank, credit union or building society's secure website.
How many type of banks there are ?
Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth
management services to high net worth individuals and families; and investment banking,
relating to activities on the financial markets. Most banks are profit-making, private
enterprises. However, some are owned by government, or are non-profits.
CENTRAL BANKS are normally government owned banks, often charged with quasi-
regulatory responsibilities, e.g. supervising commercial banks, or controlling the cashinterest rate. They generally provide liquidity to the banking system and act as the lender
of last resort in event of a crisis.
TYPE OF RETAIL BANKS* COMMERCIAL BANK: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that banks only
engage in banking activities, whereas investment banks were limited to capital market
activities. Since the two no longer have to be under separate ownership, some use the
term "commercial bank" to refer to a bank or a division of a bank that mostly deals
with deposits and loans from corporations or large businesses.
* COMMUNITY BANKS: locally operated financial institutions that empower
employees to make local decisions to serve their customers and the partners
* COMMUNITY DEVELOPMENT BANKS: regulated banks that provide financial
services and credit to under-served markets or populations.
* POSTAL SAVINGS BANKS: savings banks associated with national postal systems.
* PRIVATE BANKS: manage the assets of high net worth individuals.
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* OFFSHORE BANKS:banks located in jurisdictions with low taxation and regulation.
Many offshore banks are essentially private banks.
* SAVINGS BANK: in Europe, savings banks take their roots in the 19th or sometimes
even 18th century. Their original objective was to provide easily accessible savings
products to all strata of the population. In some countries, savings banks were created on
public initiative, while in others socially committed individuals created foundations to put
in place the necessary infrastructure. Nowadays, European savings banks have kept their
focus on retail banking: payments, savings products, credits and insurances for
individuals or small and medium-sized enterprises. Apart from this retail focus, they also
differ from commercial banks by their broadly decentralised distribution network,
providing local and regional outreach and by their socially responsible approach to
business and society.
* BUILDING SOCIETIES AND LANDESBANKS: conduct retail banking.
* ETHICAL BANKS: banks that prioritize the transparency of all operations and make
only what they consider to be socially-responsible investments.
BANKING TERMINOLOGY
Banking terms beginning with S
SARFESI ACT
The Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest (Sarfesi) Act was introduced to offer an organized platform to the banking
industry so that it can manage its increasing NPA stocks and also match the pace of
foreign financial institutions.
This act enables financial institutions as well as banks to acquire securities and deal in
them. With the help of this act, the financial institutions as well as the banks can actualizethe long-term assets and deal with the issues of liquidity. They can look for the mismatch
in asset-liability and also get hold of their securities to better recovery. This act enables
them to sell securities and bring down the number of Non Performing Assets (NPAs).
SAVINGS BANK ACCOUNT
A savings account holder of a particular bank can carry out his/her banking transactions
on daily basis. Mostly, these accounts are accessed for non-commercial purposes.
Savings account helps is money withdrawal and cash or cheque deposits. A savings
account user gets an easy access to ATM, mobile banking as well as internet banking.
SECURED LOAN
A secured loan is that against which the lender receives some sort of security from the
borrower. Home loan is considered to be the simplest form of this type of loan. The
interest rate on secured loans is less than the ones charged in case of unsecured loans.
STATUTORY LIQUIDITY RATIO
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The Statutory Liquidity Ratio (SLR) is a metric which enables the banks to know the
minimum deposit percentage such as of cash, gold or any other form of security they
need to maintain. It helps in controlling the credit growth in nation.
Banking terms beginning with C
CASH-RESERVER RATIO
The part of the total deposits that is maintained in cash by the banks is referred to as CRR
or Cash-Reserve Ratio. The banks in India do not keep this part of their deposits with
themselves. They need to submit this amount to RBI or currency chests. RBI has the right
to decide on the minimum ratio of the deposits that need to be maintained by the banks.
CASHBACK
The term 'cashback' is used in case of credit cards. Some of the banks that issue credit
cards give back some money to the card holder, if he/she uses the credit card to make
payments at some particular retailers or merchandise stores. In the credit card statement,
the user would get to know about the amount of cash back offered to him/her. The final
amount, that is due on the credit card, is calculated by subtracting the payments that havebeen made during the billing cycle along with the cash back amount.
CO-BRANDED CARD
These credit cards are just like any other credit cards and can be availed from retailers or
airlines apart from banks. These cards have some user benefits. A co-branded card user
can gain travel points or avail attractive discounts related to the product. These cards are
available in the sectors like telecom, travel, petrol pump, entertainment and retail.
Nowadays, banks are offering co-branded debit cards also.
CLEARING HOUSE
When a cheque is deposited in the bank, the receiving bank has to actualize the amount
from the drawee bank before it is transferred to the concerned person's account. Thedrawee bank is presented with the cheque in the clearing house by the receiving bank.
The clearing house is a main collection area for the banks to deal in financial securities
including drafts, cheques and others. This activity is carried out during working days on
daily basis.
COLLATERAL
A loan seeker needs to provide collateral or the security to the lending institution. For
example, in case of education loans, the seeker needs to furnish the lender with the
collateral beyond a fixed amount. A collateral security can be referred to as the security
that falls outside the limit of the loan.
CREDIT APPRAISALIf a person applies for a particular loan, the lending institution runs a complete check on
his/her credit profile to gather information on residence, age, occupation, service
experience and the years of service as applicable to present job. Among these, the
institution will also check if the person has taken any other loan. This entire process is
referred to as credit appraisal.
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CREDIT HISTORY
Credit History is a record of an individual's credit payment including borrowing and
refunding of any kind of loans, credit cards, mortgages and any kind of debt that needs to
be repaid. The credit history contains records on open accounts, status of loans and credit
card accounts. From credit history, a lender can know if the borrower had any late
payment, bankruptcy or loan default issues. The Credit Information Bureau India ltd(Cibil) maintains these records and a lender can gain access to these details from Cibil as
credit information report (CIR). A person needs to pay fee for this.
CREDIT RISK
When a lending institution grants loan to a customer, it assumes this risk. The banks ask
for collaterals from the borrowers because of this risk factor. This risk factor is high in
case of personal loans or any other form of unsecured loans. In addition, in case of
secured loans such as home loans, the lender asks the borrower to share some portion of
the risk, giving margin money. The interest rates are decided depending on credit risk.
Interest rates are kept high, if loan involves high risk factor.
Banking terms beginning with D
DEBIT CARD/ CREDIT CARD
An ATM-cum-debit card allows an individual to purchase anything for the cash available
in his/her account that is joined with the card e.g. if a person has Rs 5000 in his/her bank
account, he/she can use his card to the maximum limit of Rs 5000 only. On the contrary,
credit card helps the user to do shopping till the assigned credit limit on that particular
card.
DEBT-EQUITY RATIO
It helps in calculating the financial leverage of any bank or organization. To measure this,one needs to divide the total liabilities of the banks by stakeholders' equity. This in turn
gives an idea of the ratio of equity and the debt used by the bank in financing the assets.
DEFAULT
If a person wants to continue his/her credit account, he/she either needs to give equated
monthly installments (EMIS) or pay the due amount on credit account each month within
a fixed date. If the person fails to make payment before the specified date, it is considered
as default. It can mar the credit record of that person.
DOWNPAYMENT/MARGIN MONEY
When a bank asks the borrower to share a part of the credit risk and the payment that isreceived from him/her on this account, is referred to as downpayment/ margin money.
DIRECT DEBIT
Also referred to as Electronic Clearing Facility (ECS), direct debit option proves
beneficial in case of servicing of various lines of credit. This is a facility whereby the
person empowers his/her bank to take off a particular amount from his/her account on a
particular date every month. This facility enables a person to make his payments without
visiting the lending institution or bank personally on a frequent basis. However, the
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person has to be aware of the fund availability in his account, as the bank is not
responsible for intimating its customer when the amount is debited from his/her account.
DOCUMENTATION CHARGES
The banks or lending institutions require certain documents from the person, who has
applied for a loan, to look into his/ her creditworthiness. The lending institution leviessome charges for this purpose. These charges are known as documentation charges. The
documentation charges are separate from registration charge, stamp duty and lawyers fee.
DORMANT/INOPERATIVE ACCOUNT
If an individual has not made any transactions from his/her account for more than 2 years,
a savings/current account is declared as inoperative or dormant.
Banking terms beginning with P
PIN NUMBER
A person needs to have pin number in order to gain an access to the ATM. This numberis required, if the person is using credit card, ATM card or ATM-cum-debit card for the
purpose of withdrawing money. Pin number is a set of digits that is sent by the bank to its
customer separately after he/she receives the card. The pin number needs to be kept
secret. According to the experts in banking sector, it is wise to change this number so that
any other person apart from the card holder cannot get access to the holder's account.
Some customer service counters of the institutions ask for pin number. In fact, some
retailers also need this number to enable cash transactions.
PLR/BPLR
PLR stands for Prime Lending Rate and BPLR for Benchmark Prime Lending Rate.
PLR/BPLR is given to the main customers of the lending institution. Mostly, the rates of
interest for all retail loans are connected with PLR/BPLR. However, in some cases,
interest rates are dependent on the floating reference Rate (FRR).
PRE-PAYMENT PENALTY
A person has to bear pre-payment penalty if he/she decides to close the loan amount
ahead of time of its specified expiry date. This penalty is levied on the principal that a
person owes to a lending institution. This penalty saves the lending institution from
facing a loss of income generated through interest rates. Previously, many lending
institutions used to levy a pre-penalty, if the person closed his home loan before the loan
tenure. Nowadays, in case of home loans, if a person has a proof that the money he isusing for foreclosure belongs to his own resources, he can get rid of the pre-payment
penalty. However, any other loan apart from home loan is subject to pre-payment penalty.
PROCESSING FEE
A lending institution levies this fee in order to process the loan application of a person.
This fee can be waived off during festive offers, if the lending institution so decides.
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Banking terms beginning with C
CASH-RESERVER RATIO
The part of the total deposits that is maintained in cash by the banks is referred to as CRR
or Cash-Reserve Ratio. The banks in India do not keep this part of their deposits with
themselves. They need to submit this amount to RBI or currency chests. RBI has the rightto decide on the minimum ratio of the deposits that need to be maintained by the banks.
CASHBACK
The term 'cashback' is used in case of credit cards. Some of the banks that issue credit
cards give back some money to the card holder, if he/she uses the credit card to make
payments at some particular retailers or merchandise stores. In the credit card statement,
the user would get to know about the amount of cash back offered to him/her. The final
amount, that is due on the credit card, is calculated by subtracting the payments that have
been made during the billing cycle along with the cash back amount.
CO-BRANDED CARD
These credit cards are just like any other credit cards and can be availed from retailers orairlines apart from banks. These cards have some user benefits. A co-branded card user
can gain travel points or avail attractive discounts related to the product. These cards are
available in the sectors like telecom, travel, petrol pump, entertainment and retail.
Nowadays, banks are offering co-branded debit cards also.
CLEARING HOUSE
When a cheque is deposited in the bank, the receiving bank has to actualize the amount
from the drawee bank before it is transferred to the concerned person's account. The
drawee bank is presented with the cheque in the clearing house by the receiving bank.
The clearing house is a main collection area for the banks to deal in financial securities
including drafts, cheques and others. This activity is carried out during working days ondaily basis.
COLLATERAL
A loan seeker needs to provide collateral or the security to the lending institution. For
example, in case of education loans, the seeker needs to furnish the lender with the
collateral beyond a fixed amount. A collateral security can be referred to as the security
that falls outside the limit of the loan.
CREDIT APPRAISAL
If a person applies for a particular loan, the lending institution runs a complete check on
his/her credit profile to gather information on residence, age, occupation, service
experience and the years of service as applicable to present job. Among these, the
institution will also check if the person has taken any other loan. This entire process is
referred to as credit appraisal.
CREDIT HISTORY
Credit History is a record of an individual's credit payment including borrowing and
refunding of any kind of loans, credit cards, mortgages and any kind of debt that needs to
be repaid. The credit history contains records on open accounts, status of loans and credit
card accounts. From credit history, a lender can know if the borrower had any late
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payment, bankruptcy or loan default issues. The Credit Information Bureau India ltd
(Cibil) maintains these records and a lender can gain access to these details from Cibil as
credit information report (CIR). A person needs to pay fee for this.
CREDIT RISK
When a lending institution grants loan to a customer, it assumes this risk. The banks ask
for collaterals from the borrowers because of this risk factor. This risk factor is high in
case of personal loans or any other form of unsecured loans. In addition, in case of
secured loans such as home loans, the lender asks the borrower to share some portion of
the risk, giving margin money. The interest rates are decided depending on credit risk.
Interest rates are kept high, if loan involves high risk factor.
Banking terms beginning with B
BAD DEBT If a particular bank or creditor fails to recover money from a borrower or a
debtor, it is termed as bad debt. The bad debt is considered as an expense on the part of
the bank. Nevertheless, the bank, in concern, can always opt for legal proceedings to
recover the amount that has been declared as 'bad debt'.
BALANCE TRANSFER
Balance transfer is an option included in the application form of credit card. This option
can be selected afterwards as well. This facility is very useful for the person, who is
holding more than one card. On availing this facility, the user can transfer the balance
payable amount to the other card, if he/she is not able to make full payment that is due on
a particular card. Nevertheless, the person has to make payment of the transferred amount
on a scheduled time as stated by the bank that gave him/her the other card. One needs to
pay fee for the balance amount that has been transferred. The balance transfer facility is
useful in reducing interest outgo.
BANK STATEMENT
The savings account holders receive passbook mostly. The passbook helps the account
holder to keep a track over his/her transactions. If the user has not been given a passbook,
he/she is sent an account statement by the bank on regular intervals at the mailing
address. The account statement is nothing but like a passbook features all the transaction
details on the person's account for a particular time period. In order to apply for a loan,
one needs to produce a bank statement of the last 6 months to the concerned lending
institution.
BANKING OMBUDSMAN
The banking ombudsman scheme is an efficient and cost-effective forum, which has been
formed to resolve complaints registered by the customers in case of any services provided
by the bank. The central bank of India namely Reserve Bank of India (RBI) has
introduced this scheme under Section 35A of banking regulation Act, 1949. The scheme
came into effect in the year 1995. RBI appoints the banking ombudsman, a senior
official, to look into customer complaints in case of a particular banking service and
resolve them. Presently, we have 15 banking ombudsmen. The offices are mostly found
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in the state capitals. One can find the address of a particular banking ombudsman at the
bank branch.
BOUNCED CHEQUE CHARGES
A cheque can bounce on several accounts including inadequate cash in the account,
signature mismatch and mismatch between the numerals and words. And if a cheque hasbounced or has been dishonored, the person who had drawn it needs to pay bounced
cheque charges in that case. The charges for the bounced cheque can be compensated by
seeking court's assistance. However, this is allowed only when the cheque has been
returned due to insufficient fund in the account.
Banking terms beginning with L
LATE CHARGE: A payment evaluated by the lender for a borrower and obtains it after
a premeditated date is termed as Late Charge. Fine is implied for aberrant payments on a
credit after a Grace Period of ten to fifteen days has passed. Late charge is computed as a
proportion of the unpaid balance and is generally eliminated from the outstanding interest
of the loan.
LEVERAGE:
The utilization of different fiscal tools or loaned capital to elevate the capability of
potential profits from an investment is termed as Leverage.
In other word, Leverage is an amount of debit utilized to fund a company's assets. A
highly leveraged company comprises more obligations than equity. Leverage triggers
investments on part of both investor and company.
LEVERAGE BUY-OUT (LBO):
The acquirement of a business entity by utilizing considerable sum of borrowed capital,
through bonds or loans, to fulfill the expenses met during acquisition. Generally, theproperties of the company being obtained are utilized as loan securities incorporating the
properties of the obtained firm. The intention of leveraged buyouts is to permit firms to
indulge in money-spinning acquisitions without entrusting a huge amount of money.
LIABILITY:
The legal responsibility of the firm that occurs during commercial operations is termed as
liability. These liabilities are met through relocation of fiscal advantages which
incorporates capital, products and services.
LIBOR:
The LIBOR is an extensively used yardstick for interim interest rates. It is the rate at
which privileged borrowers from all over the world are competent enough for borrowing
money. LIBOR are also referred to the interest rates allotted for the less favored world's
borrowers.
LIFE OF LOAN:
A loan borrowed from a bank for a certain capital with a precise reimbursement agenda
and a balanced interest rate. Life of a loan is between 1 to 10 years.
LIFFE:
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London International Financial Futures and Options Exchange (LIFFE) was formed after
the initiation of Chicago Board of Trade and the Chicago Mercantile Exchange. It dealt
with futures, alternatives and products agreements. In the year 2002, it was obtained by
Euronext in order to elevate its existence as a derivatives seller. After the acquisition
LIFFE was rechristened as Euronext.liffe.
LINE OF CREDIT:
An understanding between a bank and a consumer ascertaining an utmost loan
equilibrium that the financial institution can allow the borrower to retain is known as
Line of Credit. The benefit of Line of Credit in case of ordinary loan is that the borrower
is not entitled to forfeit on behalf of the portion of line of credit that he generally doesn't
utilize.
LIQUEDATION:
When the operation of a company come to an end or when the company is considered as
bankrupt, then its properties are sold, advance amount is paid to the creditors and
surpluses are circulated to shareholders. In other words Liquidation is referred to any
kind of business deal that equalizes or terminates a short-term or long-term arrangement.
LIQUIDITY RISK:
The risks arising from the absence of profitability of an investment or deposit that can
neither be purchased nor traded promptly to avert or reduce any kind of loss is termed as
Liquidity risk.
LONDON CLEARING HOUSE:
London Clearing House is an association related with an exchange to deal with the
verification, payment and release of contracts along with satisfying the key responsibility
of ascertaining that the dealings are done in a speedy and well-organized way.
Banking terms beginning with M
MICR CODE
MICR stands for Magnetic Ink Character Recognition. MICR Code comprises nine digits
given on the white strip in the lower part of the cheque on the right side of the cheque
number. This is a unique code and no two bank branches can have the same set of this
code in the nation. It facilitates the process of cheque clearance. The MICR Code is
different from the IFCS code, that is mentioned on every cheque. This code number is
needed in case of RTGS / NEFT transaction.
MINIMUM QUARTERLY BALANCE/QUARTERLY AVERAGE BALANCE
A savings account holder needs to keep a minimum balance in his/her account on
monthly or quarterly basis, as specified by the banks. In case of private banks, the person
may have to maintain higher balance than that of any public sector bank. The public
sector banks can ask a person to maintain a balance of Rs. 500 to Rs. 1000. However, in
private sector banks, the minimum limit for the quarterly balance begins from Rs 5,000.
MORATORIUM PERIOD
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The moratorium period can be called a repayment holiday for loan. If an individual wants
to secure disbursement of loan, but he doesn't have EMI or Pre-EMI provision, he is
provided with an option to dish out some amount, as stated in the bank policy. The
moratorium period is contained in the maximum repayment period. An individual has to
pay interest rates during this period.
Banking terms beginning with U
UMBRELLA FUND: It is an investment phrase which is used to explain a combined
investment policy presented in a form of one legal entity but incorporates many discrete
sub-subsidizes which are sold as personal investment funds.
UNDERWRITER:
A legal entity which governs the unrestricted issuance and allocation of securities from a
conglomerate or other issuing entity is known as an Underwriter. Such kind of entity
works in association with the issuing entity to verify the submission cost of the securities.
It purchases securities from the issuing entity and trades them to depositors through the
underwriter's allocation channel.
UNINSURED DEPOSIT:
Uninsured Deposits are not covered against losses. They generate greater interest rate due
to absence of cover and the buyer undertakes all risks.
UNIT OF TRADING:
It refers to the usual quantity of shares, debentures, goods, equities that incorporates the
lowest unit of buying and selling on an exchange.
UNIT OF TRUSTS:
A non-integrated mutual fund organization that permits accounts to possess assets and
exceed gains via the account holders, other than investing them again into the account.
UNIVERSAL STOCK FUTURES:
An assortment of consistent futures agreements on the shares of respective firms is
known as Universal Stock Futures. The futures agreement is an accord between the
purchaser and the vendor to purchase or trade an allocated number of shares during any
time in the future at a pre-decided cost. The agreement is signed with a cash payment,
which indicates that the stocks are not entitled to be distributed.
Banking terms beginning with O
OBLIGATION: The legal liabilities on a firm or individual to satisfy the conditions of
an agreement. If the liability is not paid, the other party can resort to suitable measures as
per the ones mentioned in the agreement.OFFER PRICE: Offer Price is referred to the price which a purchaser is eager to
acknowledge for a security. Besides the cost, the offer price usually specifies the sum of
the security that the purchaser is willing to sell it for.
OFEX: OFEX or PLUS Markets Group PLC is a London-based stock exchange which
emerged as a Recognized Investment Exchange in the year 2007. OPEX firms have
greater tentative investments than Alternative Investment Market (AIM) firms.
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OPEN-END CREDIT: A loan which was agreed previously and can be utilized
frequently up to a definite limit is called an Open-end credit. Also known as line of
credit, it offers investors and firms an available amount of cash whenever required.
OPEN-END FUND: Open-End Fund is a kind of mutual fund which includes no
constraints on the number of shares the fund will allocate. In case of escalating demands,
the fund will carry on allocating shares regardless of the number of investors. They can
also be procured back and can be sold as per the desire of the investor.
OPEN-END LEASE: A contract that compels the leaseholder, who make intermittent
rent payments, to buy the rented property at the closing contents of the contract. It is also
known as a "finance lease".
OUT-OF THE MONEY: Out of the Money is a term which is used when the strike
value of an option is greater than the market cost of the principal asset.
OUTSTANDING CHECK: Checks or demand drafts that have not been delivered to the
forfeiting bank for compensation or the checks which are still waiting to be collected are
known as Outstanding Checks.OUTSTANDING DEBT: Outstanding Debt refers to the due portion of a liability that
may incorporate interest accumulated on the amount held.
OVER THE COUNTER (OTC): A security dealt in a different perspective other than
the recognized stock exchange like NYSE, AMEX, etc. The term is associated with the
stocks that are sold through a trader, the channel which is different from a federal
exchange. It also indicates to the protection of the obligation and other fiscal tools such as
derivatives, which are sold by merchants.
OVERBOUGHT: It is referred to certain kind of condition in which the requirement of a
specific asset excessively elevates the cost of the price of a principal asset to such anextent that does not assist the essentials.
OVERDRAFT: Overdraft is regarded as an immediate expansion of credit from a loan
providing organization. If the borrower has an overdraft bank account, his checks would
be covered by the banks in case if they bounce.
OVERDUE: Overdue refers to outstanding and more than outstanding amount which is
postponed further ahead the premeditated time of arrival or imbursement.
OVERSOLD: It is a situation in which the cost of the principal property declines rapidly
to an extent of its original value. This situation is generally an outcome of panic selling of
goods in the market.
Banking terms beginning with T
TIME DECAY: The changing ratio in an option's cost from the decline in duration to the
time of its termination. In short, it is the process in which the cost of an option premium
is worn as termination advances. It is also known as theta and time-value decay.
TIME DEPOSIT:
Time Deposit is a saving account or certificate deposit which is possessed for an
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allocated duration with the perceptive that the investor can extract it by providing written
application only.
TIME VALUE OF MONEY:
Also known as present discounted value, it refers to the concept that the capital available
at a specific duration values much more than the similar cost in the future because of its
prospective income ability. This basic theory of investment states similar concept
provided capital can generate interest and any kind of capital values much more the faster
it is attained.
TOTAL EXPENSE RATIO:
A computation of the total value related to controlling and functioning of an investment
organization such as mutual fund is Total Expense Ratio. These values mainly
incorporate organization charges and supplementary expenditures for instance transaction
charges, official charges, assessor fees and other functional expenditures.
TOTAL RETURN:
The profit or loss on an investment that is accrued on two elements: earnings accruedfrom interest on dividends and capital expansion in the share value or bond value. Total
Return is generally expressed as a yearly proportion in context of the sum invested.
TOWNHOUSE:
It refers to a residential unit that encompasses two or more stories and is linked to other
associated units through party hedges. They are generally used in designed unit
improvement which offers grouped or combined lodging.
TRANSACTION: A pact signed between the purchaser and the vendor for the trading of
commodities and services for compensation. The parties taking part in a business deal has
a compulsion to execute their part.
TREASURY BILLS: Treasury Bills are an interim debt responsibility supported by thegovernment with a maturity period of below a year. They are subscribed via an
aggressive bidding method at a concession. It indicates that the bond offers income to the
holder rather than forfeiting of pre-set interest payments by the holder.
TREASURY BOND: It is a profitable bond with a pre-set interest rate and a maturity
period of more than ten years. The holder is entitled to make interest imbursements after
every six months and the earnings accrued by the holders is only charged at the national
level.
TREASURY NOTE: Treasury notes are profitable investments with preset interest rate
with a maturity period between one to ten years. They are widely preferred investments
because they offer great derivative markets that trigger their liquidity. Interest fees on the
notes are transacted after every six months till the investment matures.
TREASURY SECURITY: They are bonds which have a maturity level of more than ten
years. Also known as 'the long bond', they uphold capital on a long term basis and pays
greater yields to the depositors.
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TRENDLINE: A line on the cost diagram of a security illustrating the general course of
the development of a security in its business operations. Trendlines are used to
investigate the cost of individual securities, like goods, mutual fund, etc.
TREYNOR RATIO: Treynor Ratio was formed by Jack Treynor which computes
surplus income accrued in comparison to the income which could have been accrued on
safe investments for each unit of market instability.
Banking terms beginning with R
REPO RATE
If any bank faces fund shortage and seeks to borrow some amount from the central bank
of India i.e. RBI, it is charged the Repo rate. If repo rate is reduced, the banks get to avail
funds at low rates.
REVERSE REPO RATE
When Reserve bank of India takes fund from banks, it is charged the Reverse Repo Rate.
If reverse repo rate is raised, it becomes attractive for the banks to lend more money to
RBI, as it accounts for higher interest rates.
RTGS, NEFT AND IFSC CODE
The National Electronic Fund Transfer (NEFT) system was started to facilitate the
process of fund transfer from one bank to the other. RTGS or Real Time Gross
Settlement, on the other hand, is a process which helps in money transfer from one bank
to the other on gross basis and on a real time. This system makes money transfer fast and
smooth. Settlement in real time implies that there is no waiting period for the fund
transfer. Gross settlement, on the other hand, stands for settlement done on one-to-one
basis. This is considered to be the full and final payment and cannot be revoked, as it isregistered with RBI.
In order to ascertain the unique identity of the different branches of the banks, the Indian
Financial System Code (IFSC) was devised. This code is a combination of letters and
numbers. The first 4 characters of this code represent the banks code and next character
includes the control character. Presently, 0 is used in the 5th position. The last 6
characters stand for the branch identity. In MICR code, one can refer to the nine numbers
to locate a particular branch of the bank.
Banking terms beginning with A
ABSOLUTE ADVANTAGE: The capability of a nation, entity, corporation, or state to
generate a product or service at a lesser price per unit than the price at which any other
unit generates that product or service. For instance: The generation capacity of Japan in
producing television sets is more as compared to other nations and is considered to have
an absolute advantage in this aspect.
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ACCRUED INTEREST: The interest amount collected on purchase of an equity share/
bond or debenture since the preceding coupon imbursement, excluding the completion
date. Accrued interest is included to the indenture price of a bond contract. There are two
ways for computing accrued interest:
(a) On the basis of 360-day a year, employed for commercial and public shares
(b) On the basis of 365-day a year, employed for government shares.
ADVANCE PAYMENT: Compensation made to the indemnified person by the
insurance firm prior to the completion date is called the advance payment. For instance, if
the maturity dates of the claim is premeditated on July 1, 2002 and the insurance firm
forfeits the petitioner before the settlement date, the payment is considered as an advance
payment.
ALLOTMENT: Distribution of shares or bonds in support of new concerns is termed as
Allotment. In other words securities allocated to associates of a countersigning
consortium for the reselling to shareholders/investors.
ALTERNATIVE INVESTMENTS: A phrase indicating to any kind of non-
conventional property with hidden fiscal value that cannot be discovered in an ordinary
investment portfolio. Because of the exceptional features of these investment properties,
assessment may arise as an issue.
AMALGAMATION: Amalgamation or consolidation is the procedure of merging or
joining of two business entities into one new entity. The permutation can be an outcome
of one business entity obtaining the other, uniting of two or more business entities, or
either by suspension of obtainable firms and creation of a new firm to control the merged
entities.
AMORTIZATION: Also known as diminution, liquidation, or approval of anobligation, Amortization refers to the amount utilized for meeting that need. In short, it is
the distribution of an approximate amount during various durations, especially for
mortgages and other type of investment which incorporates associated interest or other
monetary charges. Amortization is generally used in determining the investment cost of
securities.
AUTHORIZED SIGNER: An individual employed by the account holder to sign and
deliver cheques, demand drafts, receipts or any other form of payment in cash or kind is
known as an Authorized Signer.
AUTOMATED CLEARING HOUSE (ACH): An online money-transfer method
established by the National Automated Clearing House Association is known asAutomated Clearing House. This compensation method transacts in context of payroll,
undeviating investment, tariff reimbursements, customer invoices, tax fee and other
payment facilities. The usage of online payment houses is to assist online fund-transfers
and accelerate competence and suitability of government and commercial dealings.
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DD
Demand draft in the Indian context is essentially a written order, where a buyer pre-
deposits an amount of money in a bank and hands over the written order to the seller, so
that the seller can demand the deposited money from the bank where it way deposited
(May not be in the same branch though).
Suppose Mr.A wants to buy a product from a company xyz which costs Rs.600
Instead of giving the money to xyz, Mr.A draws a Demand draft (DD in short) for Rs.600
in favour of xyz by paying Rs.600 (plus an additional commission that goes to the bank
utilized) and then hands over the DD to xyz.
In India, DDs are more frequently used for employment purposes where a company ask
its applicants to draw a DD of required amount in its favour.
Most DDs will have a validity period of 6 months. If the beneficiary didnt produce the
DD with in 6 months from the drawn date, then it may be void.
Many Demand draft, essentially consist of 3 variables:
DD number
MICR number and
Transaction code
Some DDs may also have the extra 6 digit numbers between MICR and transaction
code.
The first variable is the DD number which will of 6 digits, followed by 9 digit MICR
code, then followed by the next 6 digits (may not exists in some banks) and lastly the 2
digit transaction code.
As far as the DD CHARGES go, the countries largest bank SBI charges are as follows:
For DD Amount up to Rs.10000, the charge is Rs.30
Above Rs.10000, the charge is Rs.2.50 multiplied by number of thousands.