SME Basic Quiz 1

Abbreviation
DSCR is ________. C
A) Debt Solvency Contingent Return
B) Debt Service Coningeny Ratio
C) Debt Service Coverage Ratio
D) Debt Solvency Coverage Ratio
Expand PFSBU B
A) Proposal Finance Strategic Business Unit
B) Project Finance Strategic Business Unit
C) Priority Finance Strategic Business Unit
D) Project Facility Finance Strategic Business Unit
In Term Loan Appraisal what does 'IRR' stand for ? B
A) Incremental Rate of Return'
B) Internal Rate of Return'
C) Internal Rate of Revaluation'
D) Incremental Rate of Revaluation
What is RoR ? B
A) Return on Revenue
B) Right of recompense
C) Right of restructuring
D) Return on Restructuring
TPE Stands For A
A) Third Party Entities
B) Trusted Party Entities
C) Trusted Partner Entities
D) Third Partner Entities
In Term Loan appraisal, 'FACR' is ____________ C
A) Foreign Accounts Compliance Report
B) Fixed Assets Control Report
C) Fixed Asset Coverage Ratio
D) Fixed Assets / Current Assets Ratio
Which of the following does not come in full form of EBIDTA? D
A) Interest
B) Amortization
C) Earnings
D) Deferred Taxes
(Earnings before Depreciation, Interest, Tax and Amortization)
'SMCR' is _________. B
A) Service Manufacturing Core Requirements
B) Security Margin Coverage Ratio
C) Security Margin Current Ratio
D) Security Margin Capital Requirement
Expand LIE A
A) Lender’s Independent Engineer
B) Lender’s Identification Engineer
C) Legal Identification Engineer
Expand CAPSA C

Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022

 SME Basic Quiz 2

A) Correction Action Plan for Stressed Assets

B) Correct Action Plan for Stressed Assets
C) Corrective Action Plan for Stressed Assets
Full form of SCC A
A) Selective Credit control
B) Selected credit control
C) Special control Credit
D) Special credit control
Acronym for ODS related to sensitive commodities? B
A) Oman Department of Space
B) Ozone Depleting Substance
C) Onion department of store
D) Onion division store
In term loan appraisal what does IRR stand for B
A) Incremental rate of return
B) Internal rate of return
C) Internal rate of revolution
Full form of NPLL? B
A) Normally permitted low lending
B) Normally permitted lending limit
C) Not permitted lending limit
Full form of LEF? C
A) Large extant framework
B) Large enhanced framework
C) Large exposure framework
D) None of the above

Loan Policy
Exposure Ceiling Limits in case of a Group of Connected Counterparties B
A) 25% of Bank's Tier II Capital
B) 25% of Bank's Tier I Capital
C) 15% of Bank's Tier I Capital
D) 15% of Bank's Tier II Capital
Large borrower is defined as the sum of all exposure values of the bank to a counterparty or a group D
ofconnected counterparties is equal to or above
A) 20% of the Bank's Tier- II Capital
B) 10% of the Bank's Tier- II Capital
C) 20% of the Bank's Tier- I Capital
D) 10% of the Bank's Tier- I Capital
Exposure to a Group of Connected NBFCs B
A) 25% of Bank's Tier II Capital
B) 25% of Bank's Tier I Capital
C) 15% of Bank's Tier I Capital
D) 15% of Bank's Tier II Capital
The Bank's aggregate exposure to the capital markets shall not exceed C
A) 25% of its net-worth as on March 31 of the previous year
B) 50% of its net-worth as on March 31 of the previous year

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 SME Basic Quiz 3

C) 40% of its net-worth as on March 31 of the previous year

D) 30% of its net-worth as on March 31 of the previous year
Non Fund Based facility (ies) not to exceed B
A) 200 % Bank's total fund based exposure
B) 100 % Bank's total fund based exposure
C) 75 % Bank's total fund based exposure
D) 50 % Bank's total fund based exposure
List of the CAG, CCG, R&DB and SARG relationships will be reviewed annually independently by B
A) DMD & CFO
B) DMD & CCO
C) MD (CCG & IT)
D) Chairman
As per latest Loan Policy, which among the following shall be considered as takeover of advances C
from another Bank?
A) When we join a consortium as an additional member.
B) When we join a consortium and exposure of an existing member is taken over partly/wholly
C) When we join or increase our share in Multiple Banking Arrangement in order to replace an
existing member either in whole or in part.
D) All of the above
In which of the following industry, cash budget method of assessment of working capital limits is A
not used?
A) Oil industry
B) Tea industry
C) Sugar industry
D) Construction industry
As per loan policy methods of Assessment of working capital is done through * D
A) Turnover Method
B) Projected Balance Sheet Method (PBS)
C) Cash Budget Method
D) All of the above
Which of the following statements is INCORRECT regarding the implementation of DIPAK Pricing C
Tool in our Bank?
A) Tool is applicable to loan products such as Lease Rental Discounting (LRD) and Project Finance
(PF) loans etc
B) All new DIPAK Pricing proposals shall henceforth be created directly from LLMS login only
C) Tool is applicable for loans to PSUs and other Government Guaranteed Corporations where
competitive pricing is offered
D) Users are advised to complete all the pending proposals in DIPAK standalone tool by29.12.2020
and take backup for future reference

{e-circular No. 1174/2020 - 21 dated 24.12.2020 (Tool is not applicable for loans to PSUs and other
Government Guaranteed Corporations where competitive pricing is offered and to fixed pricing
products, such as EPC)}
Which among the following is not a component of External Benchmark based Lending Rate (EBLR) C
decided by the Bank?
A) Repo Rate
B) Spread
C) Tenor Premium
D) Credit Risk Premium
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 4

{Tenor Premium is a component in MCLR}

The exposure to large borrower shall be reported by CRMD to? C
A) SEBIC
B) GOI
C) RBI
D) Company
The date on which the borrower becomes a specified borrower is termed as: A
A) Reference Date
B) Deal Date
C) Specified Date
D) Green Date
Under RBI guidelines on enhancing Credit Supply for Large Borrowers through Market Mechanism, A
the Bank has to keep future incremental exposure to large “specified borrowers”………. a “Normally
Permitted Lending Limit (NPLL).
A) Within
B) Above
C) Below
D) Equal to
Authenticity of the documents/ reports/ certificates etc. issued by Chartered Accountants is to be B
verified from the link
A) https://udin.icai.gov.in
B) https://udin.icai.org
C) https://udin.icai.nic.in
D) https://udin.icai.com
System of Unique Document Identification Number (UDIN) has been implemented by? B
A) SBI
B) ICAI
C) SEBI
D) RBI
Turnover method is applicable for sanction of limit A
A) Fund based working capital limit upto 5 crore
B) Fund based working capital limit upto 10 crore
C) Fund based and Non fund based working capital limit up to 5 crore
D) Fund based and non fund based working capital limit upto 10 crore
PBS method is applicable for sanction of limit B
A) Fund based working capital upto 5 crore
B) Fund based working capital above 5 crore
C) Fund and non fund based working capital up to 5 crore
D) Fund and non fund based working capital above 5 crore
Which method is used for assessing working capital finance for seasonal industries? C
A) Turnover method
B) PBS
C) Cash budget method
D) Cash balancing method
Credit review department (CRD) has been set up at d
A) Regional level
B) Circle level
C) Corporate centre level
D) Circle & Corporate centre level
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 SME Basic Quiz 5

Which of the following is not a working capital assessment method C

A) Turnover method
B) Projected balance sheet method (PBS)
C) Cash balancing method
D) Cash budget method
In which Act & Section the Bank cannot grant any loans and advances on the security of Its own D
share?
A) BR Act 1937 & 20(1)
B) RBI Act 1949 & 20(2)
C) RBI ACT 1934 & 20(2)
D) BR ACT 1949 & 20(1)
What % of Loan provided by Bank to Companies for Buy-back of their Securities/Shares? C
A) 70 %
B) 50 %
C) 0%
D) 100%
What % of share bank can holds in any company, whether as pledgee, mortgagee or absolute D
owner?
A) 30 % paid up share capital of that company.
B) 30 % of its own paid up share capital.
C) Both own and company up to 30% paid up whichever less.
D) Own or company up to 30% paid up whichever is Less.
The frequency of taking Audited financials along with Tax Audit Report to analysed as part of due- D
diligence and monitoring.
A) Each quarter
B) Twice in a year
C) Once in two year
D) Each year
Can ANY BANK/FO grant a advanced facility to SHELL COMPANY? d
A) Yes with Permission from RBI only.
B) Yes with Permission from both RBI and SEBI.
C) Yes with permission of Chairman/MD of the Bank or board of Director.
D) No, bank can’t provide any advance to Shell Company
IAS not applicable on D
A) Companies net worth < 500cr
B) Companies net worth < 250 cr
C) Listed company < 250 cr
D) Unlisted company < 250 cr
{Applicable on all listed companies. Applicable on Unlisted companies networth> =250 cr}
EBLR has been linked with which rate? A
A) Repo rate
B) Reverse repo rate
C) Bank rate
D) None of the above
"Operating cost"; one of the component of spread can be altered: B
A) Once in a month
B) Once in 3 months
C) Once in 6 months
D) Once in 12 months
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 SME Basic Quiz 6

Who is responsible for computation of the MCLR/ Base Rate/SBAR in Bank? B

A) L & D department
B) ALM Department
C) Credit Department
D) BOPM Department
Who approve delegation of financial powers applicable to the bank? D
A) Chairman
B) CGM-STU
C) MD-IB & Risk
D) Board of Director
Time limit to obtain POST Facto approval if sanction in done beyond the Delegation of power? D
A) 9 month
B) 6 month
C) 1 month
D) 3 month
Who has full powers for sanctioning credit facilities? A
A) ECCB
B) CCSC
C) CLCC
D) CCCC
FULL FORM OF ECCB:- B
A) Emergency Committee of Central Board
B) Executive Committee of the Central Board
C) Executive committee of corporate Board
D) Exlusive committee of Corporate Board
Insurance policy of stock / fixed assets should be in the name of borrower only? C
A) True
B) In joint name of bank & borrower
C) In joint name of bank and borrower or in sole name of the borrower if the policy contains the
agreed bank clause
It is the primary responsibility of...... to ensure the assets and keep the policy alive. B
A) Bank
B) Borrower
C) Insurance company
Unit handling hazardous substances should take out insurance in quantity equal to or exceeding a C
stipulated quantity under the provision of...
A) Limited liability act
B) Hazardous substances protection act
C) Public liability insurance act
Building factory land etc. must be fully covered by insurance against the risk of fire as well as... B
A) Burglary
B) Lighting
C) Theft
Operating units should ensure validity and enforceability of these documents in the court of law B
till.................
A) incorporation
B) liquidation
C) amalgamation
D) merger
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 7

Classified categories of covenants viz. C

A Mandatory Covenants
B Non mandatory covenants
C Mandatory Negative covenants
D Compulsory covenants
A) Option 1 A only
B) Option 2 A or C only
C) Option 3 B or D only
D) Option 4 all of the above
The covenants are classified into................. categories B
A) one
B) two
C) three
D) four
Documentation is a ...................... process covering the entire duration of an advance comprising the B
following stages:
A) continuous and compulsory process
B) continuous and ongoing process
C) complete and compulsory
D) inclusive and ongoing process
Agencies for Specialised Monitoring (ASM) is applicable for large borrowers with total exposure B
above ……. exposures from Banking system.
A) Rs. 100 Cr
B) Rs. 250 Cr
C) Rs. 550 Cr
Term Loan: Interest and/or instalment of principal remain overdue for a period of more than ….. C
A) 30 days
B) 60 days
C) 90 days
D) 180 days
The instalment of principal or interest thereon remains overdue for ……. seasons for short duration B
crops (Agriculture segment).
A) one crop
B) two crop
The instalment of principal or interest thereon remains overdue for …. season for long duration A
crops (Agriculture segment).
A) one crop
B) two crop
NPA are to be classified into....categories? B
A) 4
B) 3
C) 5
An asset which has remained NPA for...... is called substandard assets. A
A) Less than or equal to 12 months
B) More than 12 months
C) More than 90 days
Asset classification shall be.. A
A) Borrower wise
B) Facility wise
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 8

C) Loan amount wise

Working capital account will become NPA in case of irregular drawings for a continuous period of... C
A) 30 days
B) 60 days
C) 90 days
Regular limits need to be reviewed/regularised not more than.....from the due date? C
A) 1 month
B) 2 months
C) 3 months
An account with the regular/ adhoc credit limit have not been reviewed/ renewed within......from the C
due date/ date of ad hoc sanction will be treated as NPA.
A) 30 days
B) 90 days
C) 180 days
Specified period mean a period of .......from the commencement of first payment of interest or C
principle, whichever is later.
A) 90 days
B) 180 days
C) 1 year
D) 3 years
In serious credit impairment such as erosion in the value of security/frauds committed by borrowers C
classified as?
A) Loss assets
B) Doubtful asset
C) Both
D) None of the above
If realisable value of security is less than 50% of the value assessed by the bank or accepted by RBI B
at the time of last inspection it is classified under?
A) Loss
B) Doubtful
C) Standard
D) None of the above
If realisable value less than 10% of the outstanding in the borrowal account classified as? C
A) Doubtfull
B) Standard
C) Loss
D) None of the above
Advance against gold ornaments, gov sec and all other sec not classified as NPA? B
A) True
B) False
In case loss assets are permitted to remain in the Bank’s books for any reason, a provision ……..% in D
the account shall be made.
A) 25% of outstanding
B) 40% of outstanding
C) 50% of outstanding
D) 100% of outstanding
Any fresh exposure to Non-Cooperative borrower will by implication entail greater risk necessitating C
…… provisioning.
A) Lower
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 9

B) Same
C) Higher
The threshold limits for appraisal of proposals of Non – Infrastructure projects and criteria D
for reference of projects to PF&S, SBU are set as under?
A) 250 Cr
B) 350 Cr
C) 550 Cr.
D) 750 Cr
The threshold limits for appraisal of proposals of Infrastructure projects and criteria for reference of B
projects to PF&S, SBU are set as under?
A) 750 Cr.
B) 250 Cr.
C) 350 C.
D) 500 Cr.
Eligible account for EXIT POLICY are:- B
A) Sub standard account
B) All standard account
C) All Doutful accounts
D) All NPA account
EXIT POLICY are applicable with minimum threshold limit? C
A) 2 Cr and above
B) 4 Cr. and above
C) 5 Cr. and above
D) 10 Cr. and above
Review of accounts identified for exit account need approval from? C
A) Controllers not below rank CGM
B) MD
C) GM
D) None of the above
Review of account identified for exit on? B
A) Daily basis
B) Monthly basis
C) Quarterly basis
D) Half yearly basis
Dropping accounts from exit list need approval from? C
A) GM
B) Chairman
C) CGM
D) MD
Which type of account have the higher possibility turning into NPA? D
A) A rated
B) C rated
C) B rated
D) D rated
IBC framework regulated by? A
A) IBBI
B) NCLT
C) DRT
D) None of the above
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 10

NCLT dealt with? B

A) Individuals
B) Corporate persons
C) Partnership firms
DRT deals with? A
A) Individuals and partnership firms
B) Proprietorship
C) Corporate
What is limit fixed by CVC for reporting of cases of wilful default by bank/FI? C
A) 20 L
B) 35 L
C) 25 L
D) 10 L
Wilful defaulter debarred from bank finance for new venture for a period of? B
A) 10 Y
B) 5 Y
C) 8 Y
D) 1 Y
Guarantor con under sec __ of which act? B
A) Sec 32 of br act1949
B) Sec 128 of Indian contract act1872
C) Sec 35 of RBI act
D) Sec 126 of Indian contract act 1872
The recourse under loc shall be taken in all cases of fraud where the amount involved__ & above? D
A) 100 Cr
B) 30 Cr
C) 55 Cr
D) 50 Cr
Restructuring of advances could take place in the following stages: D
A) before commencement of commercial production / operation;
B) after commencement of commercial production / operation but before the asset has been
classified as ‘sub-standard’;
C) after commencement of commercial production / operation and the asset has been classified as
‘sub-standard’ or ‘doubtful’.
D) All of the above
The accounts classified as ‘Standard assets’ should be immediately re-classified as …… upon B
restructuring.
A) Standard assets
b) Substandard assets
C) Doubtful assets
A timeline of ….. days after the review period is provided for implementation of resolution plan. D
A) 30 days
B) 60 days
C) 90 days
D) 180 days
The minimum default amount to initiate the IBC-2016 procedure is… A
A) 1 lakh
B) 10 lakh
C) 20 lakh
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 SME Basic Quiz 11

D) 1 crore
The application under the IBC-2016 provision can be filed by: D
A) Financial creditors,
B) Operational creditors, (including Government & employees/workmen), and
C) Corporate debtor
D) Anyone
Which of the following is not true about Deferred payment guarantees ? C
A) is offered to the exporter for a deferred period or for a certain time period.
B) Normally issued for capital goods or machinery
C) Payments are made in one time lumpsum amount
Which one of the following is incorrect regarding invocation of Inland BG ? C
A) Authority for payment of invoked BG is vested with the Branch Head or COO of the Branch
B) BG invoked but the invocation is not as per the terms and conditions of guarantee- Decision of
non-honoring is to be approved by branch Head/ controller not below the rank of AGM
C) BG invoked but the invocation is not as per the terms and conditions of guarantee- Decision of
non-honoring is to be approved by branch Head or COO of the branch
D) If account is transferred to SARG/ Other Branch: such account is to be dealt with by the Transferee
(SARG)/ Controlling Branch only
A BG has been invoked which of the following authority is vested with the power to stop the D
payment?" *
A) An Officer not below the rank of DGM
B) An Officer not below the rank of GM
C) An Officer not below the rank of CGM
D) None of the above is correct
What is the threshold limit for referring the credit proposals to Project Finance and Structuring C
Strategic BU (PF&S SBU) for vetting?
A) Infrastructure >500 cr and Non-Infrastructure>750 cr
B) Infrastructure >250 cr and Non-Infrastructure>1000 cr
C) Infrastructure >250 cr and Non-Infrastructure>750 cr
D) Infrastructure >200 cr and Non-Infrastructure>500 cr
Branches under Commercial Clients Group (CCG) normally handles the credit proposals with an C
exposure of _____________.
A) Rs. 200 crores and above
B) Rs. 100 crores and above
C) Above Rs.50 crores
D) Above 25 crores
As per RBI’s Large Exposure Framework (LEF), what are the caps on exposure (prudential norms) for B
Single Counterparty and Group of Connected Counterparty borrowers?
A) 15% & 25% of Bank’s Tier-I Capital
B) 20% & 25% of Bank’s Tier-I Capital
C) 10% & 20% of Bank’s Tier-I Capital
D) 20% & 30% of Bank’s Tier-I Capital
The aggregate exposure to all Large Borrowers should not exceed ____________ Bank’s Tier-I Capital? C
A) 500%
B) 600%
C) 800%
D) 50%
Who will be classified as Large Borrower as per the guidelines of Large Exposure Framework of RBI? B
A) Having exposure of 5% of Bank’s Tier-I Capital and above
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 SME Basic Quiz 12

B) Having exposure of 10% of Bank’s Tier-I Capital and above

C) Having exposure of 15% of Bank’s Tier-I Capital and above
D) Having exposure of 20% of Bank’s Tier-I Capital and above
What is the maximum ceiling on exposures prescribed by Bank on Individual and non-corporate B
borrowers?
A) Rs.50 crores and Rs. 250 crores respectively
B) Rs.100 crores and Rs. 250 crores respectively
C) Rs.100 crores and Rs. 500 crores respectively
D) Rs.100 crores and Rs. 1000 crores respectively
What is the accepted level of Unsecured Exposure on Bank’s outstanding Total Exposure (domestic D
+ IBG) as per policy guidelines?
A) 10%
B) 15%
C) 20%
D) 25%
What is the average maturity period of any term loan except loans under rehabilitation/ C
infrastructure / renewable energy etc?
A) 5 years
B) 10 years excluding moratorium
C) 10 years including moratorium
D) 12 years
What is incorrect about Legal Entity Identifier (LEI)? A
A) It is a 21 digit unique code.
B) It identifies every legal entity/structure who is a party to a financial transaction across the globe.
C) Obtention of LEI is mandatory by RBI for borrowers having exposure of Rs.5 Crores and above.
D) Validity period of LEI is 1 year from date of issuance/last renewal
Obtention of Legal Entity Identifier (LEI) has been made mandatory by RBI for the Borrowers having D
A) Fund based exposure of Rs 5 Cr and above
B) Fund Based exposure of Rs 10 Cr and Above
C) Total fund based and non fund based exposure of Rs. 10 Cr and above
D) Total fund based and non fund based exposure of Rs. 5 Cr and above
What are the Bank guidelines for considering credit facilities to companies whose loans were C
compromised/settled with our Bank or with other Banks?
A) Considered after a cooling period of 1 year from date of settlement of amount in full
B) Considered after a cooling period of 2 years from date of settlement of amount in full
C) Considered after a cooling period of 3 years from date of settlement of amount in full
D) There is no provision for considering credit facilities
As per Section 19(2) of BR Act, the bank shall not hold shares in any company whether as pledgee C
or mortgagor or absolute owner for an amount not exceeding ________________.
A) 30% of Paid-up Share capital of that company
B) 30% of its own Paid-up Share capital and reserves
C) Lower out of the two above
D) higher out of the two above
Who is the competent authority for sanction of credit facilities to spouse and minor/dependent A
children of Directors of our Bank?
A) Up to Rs.25 lacs – as per delegation of financial powers, above Rs.25 lakhs – by Board of
Directors/ECCB
B) Up to Rs.50 lacs – as per delegation of financial powers, above Rs.50 lakhs – by Board of
Directors/ECCB
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 SME Basic Quiz 13

C) Up to Rs.100 lacs – as per delegation of financial powers, above Rs.100 lakhs – by Board of
Directors/ECCB
D) Irrespective of amount – Board of Directors/ECCB
What is the maximum loan amount that can be sanctioned to an individual against security of shares, C
convertible bonds/debentures in demat form?
A) Rs. 5 lakhs
B) Rs. 10 lakhs
C) Rs. 20 lakhs
D) Rs. 50 lakhs
For considering credit proposal to new connection, what should be the stipulation for audited D
financials?
A) Not more than 3 months old from the closure of relative FY
B) Not more than 6 months old from the closure of relative FY
C) Not more than 9 months old from the closure of relative FY
D) Not more than 12 months old from the closure of relative FY
As per the loan policy, what is the desired level of Tangible Net Worth (TNW) for manufacturing and B
Trade & Services Sector?
A) 3 & 4 respectively
B) 4 & 5 respectively
C) 3 & 5 respectively
D) 3 & 6 respectively
Internal Credit Rating in the form of Credit Risk Assessment (CRA) is applicable for all fund & non- B
fund based exposures of _______________ under C&I/AGR/MSME segments?
A) Rs.25 lacs and above/US$ 50 K
B) Rs.50 lacs and above/US$ 100 K
C) Rs.100lacs and above/US$ 100 k
D) Rs.200 lacs and above/US$ 100 k
Dynamic review of internal rating is applicable for all borrowers who are enjoying aggregate credit A
limits of ______________ and above at _____________ intervals without trigger.
A) 500 crores / USD 80 Mio; Half Yearly
B) 600 crores / USD 100 Mio; Half Yearly
C) 500 crores / USD 80 Mio; Quarterly Yearly
D) 500 crores / USD 100 Mio; Half Yearly
Which of the following methods is best suited for assessing the working capital requirement for C
seasonal industries?
A) Turn Over Method
B) Projected Balance Sheet Method
C) Cash Budget Method
D) Fund Based Working Capital Method
At what periodicity, term Loans (TL) have to be reviewed? D
A) For irregular term loans, at half yearly intervals
B) TL Review is a part of review/renewal exercise of the working capital facility
C) At yearly intervals for regular term loans
D) All the above are correct
What is the maximum period up to which working capital facilities can be continued without renewal B
and based on reviews?
A) 270 days from the date of sanction
B) 270 days from the due date of renewal
C) 180 days from the date of sanction
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 SME Basic Quiz 14

D) 180 days from the due date of renewal

Which of the undernoted situation/(s) is/are not considered as take over? D
A) Increasing our share either in Consortium or MBA of which we are already a part.
B) Where we join a consortium either as an additional member or when another bank exits
C) Only A
D) Both A & B
Large borrower is defined as the sum of all exposure values of the bank to a counterparty or a group C
of connected counterparties is equal to or above _____ of the Bank’s Tier- I Capital. The aggregate
exposure to all “large borrowers” should not exceed _____ of Bank’s Tier I Capital.
A) 20%, 200%
B) 10%, 200%
C) 10%, 800%
D) 20%, 800%
Maximum aggregate exposure ceiling prescribed by the Bank for Individuals as borrowers is D
A) Rs.25.00 Cr
B) Rs.50.00 Cr.
C) Rs.75.00 Cr
D) Rs.100.00 Cr
As per substantial exposure norms: Aggregate of substantial Exposures to Single Borrowers not to B
exceed
A) 200% of tier I capital
B) 300% of tier I capital
C) 400% of tier I capital
D) 500% of tier I capital
Review of NFB facility to be carried out by CPMD at C
A) Half-Yearly Intervals
B) Yearly Intervals
C) Quarterly Intervals
D) Monthly Intervals
If the exposure on account of enhancement /additional loan requested by the borrower is beyond A
120% of their maximum threshold, the proposal will be processed by
A) the higher team prescribed to handle the account
B) RM RBO
C) DGM (B&O)
D) GM (Network)
Which of the following is correct? D
A) If Audited financials are more than 9 months old and upto 12 months, provisional financials not
older than 6 months are to be obtained.
B) If Audited financials are more than 12 months old and upto 18 months, provisional financials as
on 31st March of the previous year duly signed by the promoter are to be obtained.
C) Above Stipulations are waived for Central/State PSUs.
D) All the above are correct.
A unit has approached for sanction of credit limit of Rs. 25 Crores and the internal rating of the unit C
is SB-4/CUE-4. The unit is, however, not in a position to furnish 25% collateral security as per the
extant norms. The proposal is otherwise fully viable and a good business proposition for the bank.
Who has the discretion to permit relaxation in collateral security norms?
A) None
B) GM (Network)
C) CGM (Circle/BU)
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 15

D) DMD & CCO

The CIR process shall be completed within a period of -------------- days from the date of admission B
of th application to initiate such process
A) 365 days
B) 180 days
C) 90 days
D) 30 days
Provision of loan policy applicable to D
A) Domestic operation
B) International operation
C) A only
D) Both A and B
Exposure shall include D
A) credit exposure
B) Investment exposure
C) Market exposure
D) A and B
E ) All of the above
Exposures to a group of counterparties with specific relationships or dependencies such that, were A
one of the counterparties to fail, all of the counterparties would very likely fail treated as
A) Single counterparty
B) Group of connected counterparties
As per Loan policy Guidelines of the Bank, Non-Corporate borrowers includes:- B
A) Partnership Firm, HUF, Trust, Association
B) Proprietorship, Partnership Firm, HUF, Trust
C) Partnership Firm, HUF, Trust, Society
D) Partnership Firm, HUF, Trust, LLP

SME Delivery Model

SME Loans upto Rs. 50 Lakh at Non BPR Centre will be sanctioned by C
A) Retail Asset Credit Centre
B) Branches (if not mapped to RACC)
C) Both a & b
D) RBO
RM (SME) AMT will handle SME loans in BPR Centre B
A) Upto Rs. 50 Lakh
B) Above Rs. 50 Lakh
C) Upto Rs. 5 Crore
D) Above Rs. 5 Crore
CCG Branches shall normally handle proposals for exposures of A
A) Above Rs. 50 crores
B) Upto Rs 50 Crores
C) Above Rs 100 Crores
D) Upto Rs 100 Crores
SME Loan Proposal above Rs. 50 lakh at Non BPR Centre are to be sanctioned by _____ A
A) RM (RBO)
B) Retail Asset Credit Centre
C) DGM (B&O)
D) Branch
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 SME Basic Quiz 16

Government Sponsored Schemes Asset Management Team (GSSAMT) will handle all Govt. A
Sponsored Scheme loan proposals including MUDRA loans
A) End to End Relationship
B) Only Sourcing
C) Only Sanctioning
D) Both B&C
When the revised SME Delivery Model was rolled out pan India? C
A) 2016
B) 2017
C) 2015
D) 2014
RASME Centre having more than......? SME accounts will have separate Manager/CM-Team Leader D
for SME business.
A) 300
B) 200
C) 500
D) 400
MUDRA loans are processed by ___ at SMEC ? B
A) SLAMT
B) GSSAMT
C) Chief Manager (Sanction)
D) Chief Manager (L&A)
Who is responsible for sourcing of proposal upto Rs. 50 lacs at BPR Centre? C
A) Collection Cell
B) Maintenance Cell
C) AMT at SME Centre/MPST/ Branch
D) RBO
At RASME Centre, who will process the SME Advances proposal for Rs. 10 lacs? D
A) GSSAMT
B) Chief Manager (Sanction)
C) Branch
D) AMT at RASMEC
………….. will be responsible for completion of documents, creation of mortgage, registration of A
charges with ROC, Disbursement, creation and registration of Pari-passu charges, custody of
documents, obtention of revival letter.
A) RM (SME)
B) CM Sanction
C) Branch Manager
The documentation/collateral creation and its archival of RMSME account is done by ___. D
A) SMEC
B) RASMEC
C) RBO
D) RM (SME)
RMSME to handle advances accounts with limit above Rs.__ crore at BPR Centre. D
A) Rs. 5 Crore
B) Rs. 1 Crore
C) Rs. 3 Crore
D) Rs. 50 lac
A Govt. sponsored Scheme proposal of Rs. 20 lacs will be processed by _________ team at SMEC. A
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 17

A) GSSAMT
B) SLAMT
C) Will not be processed at SMEC
D) None of the above
SLAMT at SMEC is responsible for ________ proposals B
A) Govt. Sponsored Scheme Proposals
B) Bank's regular scheme proposals
C) Both Govt. and Regular Scheme
D) None of the above
A borrower having cash credit limit of Rs.50 lacs is being handled by SLAMT at SME Centre. Now, C
the borrower has requested for enhancement in limit to Rs.54 lacs. Who will process the proposal?
A) RMSE Team Linked to the SME Centre
B) Branch where account is maintained
C) SLAMT at SME Centre
D) None of the above
A customer approaches the Branch at BPR Centre with a proposal for sanction of Cash Credit Limit D
of Rs.40 lacs. At that centre, all SME accounts with limit upto Rs.50 lacs are being handled by SME
Centre. What the Branch will do with the request of the borrower?
A) Branch will decline the proposal
B) Branch will return the proposal to the customer and direct him to SME Centre
C) Branch will not take any action on the proposal as it is outside their purview
D) Branch will collect proposal / KYC documents / other available information from the customer
and forward it to SME Centre for processing
As per SME Delivery Model, who is responsible to handle SME advances above Rs.5 crore at Non D
BPR Centre?
A) RMRE TEAM
B) SME Centre
C) RMSME TEAM
D) RACC
Each RM (SME) team will handle maximum …. CIFs. C
A) 10
B) 20
C) 25
D) 50
Assets Quality Team will handle max. ….. CIFs. D
A) 10
B) 20
C) 25
D) 50
………… will handle SME loans upto Rs. 50 lacs including Govt. Sponsored Schemes. B
A) Branch
B) Retail Asset Credit Centre (RACC)
……… will be treated like any of Spoke branch for RACC. A
A) Hub Branch
B) RACC
C) Spoke Branch
…… are non-BPR branches upto Scale IV linked with RACCs for sanctioning/ maintenance of their C
loans.
A) Hub Branch
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 18

B) RACC
C) Spoke Branch
CRA slippage can be checked from which site? C
A) CPPC
B) RACC
C) CPPD
RACC will handle SME loans........ C
A) Up to 1 crore
B) Upto 20 lacs
C) Upto 50 lacs
D) Above 20 lacs
What is the Financial Powers of Chief Manager (Branch) in Non-BPR CENTRE? A
A) 50 Lacs
B) 40 Lacs
C) 25 Lacs
D) 20 Lacs
Loan proposal above Rs. 50 lacs at NON-BPR are to be sanctioned by A
A) AGM (SME) at AO.
B) DGM (B&O).
C) RM (SME)
D) AGM (RASMEC)
When the SME Delivery Model was rolled out pan India and whom recommendation? B
A) In 2016 With Recommendation ECCB
B) In 2015 with recommendation BCG
C) In 2014 with recommendation CMC
D) In 2013 with recommendation CCCC
Credit facilities extended to Micro, Small & Medium Enterprises on floating rate basis are linked to B
_____
A) MCLR
B) EBLR
C) RLLR
D) Base Rate
Post of RMSE & RMME has been merged and renamed as ------- C
A) RM MSME
B) RMME
C) RMSME
D) RMRE
A borrower approaches for sanction of Rs. 4 Cr under Schematic lending and Rs. 1 Cr. under Non- D
Schematic, this proposal will be sanctioned by _____
A) Regional Manager
B) AGM SME Center
C) CLCC
D) DGM (B&O)
A borrower approaches for sanction of Rs. 1 Cr under Schematic lending and Rs. 4 Cr. under Non- C
Schematic, this proposal will be sanctioned by _____
A) Regional Manager
B) AGM SME Center
C) CLCC
D) DGM (B&O)
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 19

The loans sanctioned and disbursed under e-Mudra platform are mandatorily covered under B
guarantee cover of _______
A) CGTMSE
B) CGFMU
C) CGSSI
D) No need to cover under guarantee cover
2nd additional assessment of RM-SME proposal falling within the power of CLCC & Below is the D
responsibility of ______.
A) Branch Head
B) SMEC Head
C) Regional Manager
D) 2nd assessment is not required
ROCC and RAROC is to be calculated for C
A) All exposures above Rs 50.00 lakhs
B) All exposures above Rs 1.00 crore
C) All exposures above Rs 5.00 crores
D) All exposures above Rs 50.00 crores
Which of the firm was engaged by bank for carrying out a review and remedial meassure to arrest A
this falling trend of SME
A) Boston Consulting Group
B) Hitachi Consulting Group
C) PA Consulting Group
D) Moor house consulting
The existing team will handle the enhancement/ additional loan request upto ___% of their D
respective maximum threshold for exposure
A) 105
B) 110
C) 115
D) 120
An SME Centre is headed by Chief Manager with one Manager (Sanction) posted for sanction of D
SME advances. Who will sanction the proposal falling above the financial power of Manager
(Sanction)?
A) Manager (Sanction)
B) Branch
C) RBO
D) Head of SME Centre
A SME proposal of Rs.40 lacs has been sanctioned by CM (Sanction) at RASMEC. To whom it will B
be submitted for control?
A) RBO
B) Head of RASMEC
C) Branch Manager
D) None of these
Who is responsible for follow-up of irregular SME advances of Rs.20 lacs other than Govt. D
Sponsored Scheme at SME Centre?
A) Chief Manager (Sanction)
B) GSSAMT
C) Chief Manager (Loan Administration)
D) SLAMT

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 SME Basic Quiz 20

Pre-Sanction Credit Process

A borrower can engage the services of intermediaries for preparation of financial statements, CMA D
data etc. for submission to the Bank for availing loan facilities. The intermediaries can be a __?
A) Chartered Accountants
B) Cost Accountants
C) Financial Consultants
D) Any of the above
A shell company is an entity that has ___ C
A) No active business
B) usually exists only as a vehicle for another company
C) Both 1 & 2 above
D) None of the above
Pre-sanction process comprises of D
A) Appraisal & Recommendation
B) Assessment
C) Sanction
D) All the above
For loans above Rs. 1.00 Crores, how many valuation reports are to be obtained? B
A) 1
B) 2
C) 3
D) As per the discretion of the appraising officer
At the time of sanction of credit facilities, Valuation report should not be older than ___ months. A
A) 3
B) 6
C) 9
D) 12
In case of Minor, less than 10 years, whose ID is required for KYC. D
A) Father
B) Mother
C) Minor
D) The person who will operate the account (Natural Guardian or Legal Guardian)
A company has approached us for sanction of credit facilities. What declaration we should obtain D
from them before considering the request?
A) Declaration regarding whether any credit facilities in any bank / FI / NBFC and their status.
B) Declaration regarding overdue statutory payment obligations
C) Declaration regarding credit facilities availed by its associates and subsidiaries from banking
system
D) All the Above
A company has export sales turnover of Rs.50 crore. From which return it can be verified? A
A) GR Form / Softex Declaration Form
B) GST / VAT Return
C) SEBI
D) None of the above
What precaution we should take at the time of sharing of Credit information on our constituents D
with other banks?
A) It should be shared only on a specific request received in writing from other banks.
B) It should be shared only on the format prescribed by IBA.
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 21

C) The estimated means should not be stated in absolute terms. It should be shared by way of
prescribed rating.
D) All the Above
I-probe search is mandatory for all loans of _______? D
A) Rs.1 crore and above
B) Rs.25 Lacs and above
C) Rs.1 Lac and above
D) Rs.10 Lac and above
For a loan proposal of Rs.11 lacs, What are Bank's instructions in respect of i-Probe search? B
A) Optional
B) Mandatory
C) Not Mandatory
D) None of the above
How many Credit Information reports is/are required for processing secured loans limit of Rs. 26 C
lacs?
A) Not required
B) 1
C) 2
D) 3
How many Credit Information reports is/are required for processing unsecured secured loans limit C
of Rs.26 lacs?
A) Not required
B) 1
C) 2
D) 3
CMR report is in addition to two Credit Information Companies (CICs) reports for processing secured B
loans limit > Rs. 10 lacs ?
A) FALSE
B) TRUE
C) Can't say
D) As per discretion of Sanctioning Authority
R&DBG will normally handle SME proposals for exposures upto Rs. -------- C
A) 10 crores
B) 30 crores
C) 50 crores
D) 100 crores
Opinion Reports on Borowers and Guarantors should be updated at ________ interval B
A) Once in 6 month
B) Annually
C) Once in two years
D) Once in three years
NOC issued for opening the current account should be reviewed _________. B
A) Once in 6 month
B) Once in a year
C) Once in two years
D) No need to review the NOC
NOC for opening of current with non-lender Banks and penal provisions are applicable on borrowal A
account having exposure of Rs. ______ and above from the Bank.
A) Rs. 10 lacs
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 22

B) Rs 25 lacs
C) Rs. 1 crore
D) Rs. 5 crore
What is the time norms for disposal of applications for loans above Rs.50 lakhs and up to Rs. 5 crores C
under MSME Segment _________?
A) 15 days
B) 21 days
C) 22 days
D) 30 days
Information on SMA accounts with balance outstanding of Rs. 5 crores and above have to be D
furnished to RBI through ____________.
A) Central Registry of Information on Large Credits
B) Central Repository of Intimation on Large Credits
C) Central Depository of Information on Large Credits
D) Central Repository of Information on Large Credits
In respect of new connections where proposed exposure (both fund and non fund) are _____________, C
pre-screening of the applicants to be obtained from ____________.
A) 2 crores; M/s. Cubictree Technology Solutions Pvt Ltd.,
B) 2 crores; M/s. TransUnion Cibil Ltd.,
C) 5 crores; M/s. Cubictree Technology Solutions Pvt Ltd.,
D) 5 crores; M/s. CRISIL
Within how many days, bank has to upload the KYC details of the customer after establishing the B
account-based relation?
A) T + 1 day
B) T + 2 days
C) T + 3 days
D) T + 5 days
What is the form number and timeline in filing with Registrar of Companies, whenever a company A
alters/increased its share capital?
A) eForm SH-7; within 30 days
B) eForm SH-5; within 30 days
C) eForm PAS-3; within 90 days
D) eForm SH-7; within 90 days
To verify the income of a service provider engaged in service industry, which of the following return C
filed with GST authorities has to be verified?
A) ST-4
B) ST-5
C) ST-3
D) GST-3
What is the time norms for disposal of applications for loans up to Rs. 25,000/- under priority sector B
______?
A) 7 days
B) 14 days
C) 21 days
D) 30 days
At what periodicity, the Provident Fund contribution deducted by an establishment/firm from its B
employees has to be remitted with EPFO?
A) Monthly; by 15th of succeeding month
B) Monthly; by 20th of succeeding month
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 23

C) Quarterly, by 15th from the end of the quarter

D) Quarterly, by 20th from the end of the quarter
In respect of non-corporates enjoying credit facilities of Rs._______ from the Bank have to submit B
audited balance sheet.
A) Rs.10 lakhs and above
B) Rs.25 lakhs and above
C) Rs.50 lakhs and above
D) Rs.100 lakhs and above
Which of the following format is used for sanction/approval of credit proposals with total exposure C
of Rs.50 crores and above from banking system?
A) Form – S
B) Form – DDS
C) Form – DD
D) Form – M
As per Companies Act 2013, companies in India can follow which of the following methods while D
arriving depreciation on fixed assets?
A) Straight line method
B) Written down value method
C) Cumulative average method
D) Either A or B Above
A unit can amortize its preliminary/pre-operative expenses up to a stipulated percentage of its B
project cost in ______ years.
A) Equal annual instalments over a period of 15 years
B) Equal annual instalments over a period of 10 years
C) Equal annual instalments over a period of 8 years
D) Equal annual instalments over a period of 5 years
Bank’s Empanelled advocate has to conduct search for ______ years to verify the title of immovable B
property offered as security for loan up to Rs.1 crore.
A) 12 years
B) 13 years
C) 15 years
D) 30 years
What are the guidelines in obtention of second Title Investigation Report (TIR) for sanction of home C
loan proposals in a RERA approved project?
A) For loans above Rs. 1 crore
B) For loans Rs. 1 crore & above
C) For loans above Rs. 5 crores
D) For loans above Rs. 10 crores
Whenever any property is taken as security based on Gift Deed as the principal title deed, whose C
clearance must be obtained before creation of mortgage?
A) From Bank’s panel advocate
B) Two different panel advocates of the Bank
C) Bank’s Law Department
D) No need to obtain any prior clearance
The panel valuer has to justify if the valuation proposed by them on immovable property is more D
than ___________ % over the guideline value provided in the State Government/IT Gazette.
A) 5%
B) 10%
C) 15%
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 24

D) 20%
For limit amount _________ , second Credit Information Company’s report has to be obtained for A
processing unsecured loan proposals under MSME Segment.
A) Above 2 lakhs
B) Above 5 lakhs
C) Above 10 lakhs
D) Above 200 lakhs
Which of the following is not a collateral security? D
A) Third Party Guarantee
B) Personal Guarantee of Promoters
C) Mortgage of Immovable Property
D) Hypothecation of assets financed by the Bank
Which method of Working Capital assessment is to be carried out while sanctioning Construction D
Cos / Software Indus etc.
A) Traditional Method
B) Projected Balance Sheet Method
C) Projected Annual Turnover Method
D) Cash Budget Method
The stages in pre-sanction credit process in the order in which they are done, are C
A) Appraisal, Assessment, Recommendation and Sanction
B) Assessment, Appraisal, Recommendation and Sanction
C) Appraisal and Recommendation, Assessment, Sanction
D) Appraisal, Assessment and Sanction
Under prima facie acceptability in term loan appraisal, we need to peruse AOA of the Co to know A
A) The authorized signatories of the Co and that no prejudicial clauses are contained therein
B) Borrowing powers of the Company
C) Scope of the Company
D) Objectives of the Company
Under prima facie acceptability in term loan appraisal, we need to peruse MOA of the Co to know C
A) The authorized signatories of the Co
B) No prejudicial clauses are contained therein
C) Scope & Objectives of the Company
D) Common seal formalities of the Company
For new connections, profiling reports from Cubic Tree Technology Solutions P Ltd has been made B
mandatory for all aggregate exposures of
A) Rs.10 crores and above
B) Rs. 5 crores and above
C) Rs. 25 lakhs and above
D) Rs. 1 crore and above
Sources for Due diligence in Pre- sanction credit process D
A) CIC defaulters list / Wilful defaulters list
B) ROC Search
C) i-probe
D) All the above
What type of opinion does an auditor provide when it disagrees with the information and / or D
conclusions to a financial reports?
A) Adverse
B) Strong
C) Unqualified
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 25

D) Qualified
Which type of security can be used in a pledge charge? B
A) Building
B) Finished goods
C) Heavy
D) Life Insurance Policy
Which of the following are required for a corporate guarantee to be valid? D
A) A Board resolution and approval from the Registrar of Companies
B) A board resolution nd the guarantee document signed by the Chairman of the Board
C) A guarantee document signed by the Chairman of the Board and approval from the ROC
D) A Board resolution and approval to issue a guarantee to be contained in the MOA/AOA
For MSE Sector (both Manufacturing and Services enterprises) no collateral security is to be obtained D
for loans?
A) Up to 50 Lacs
B) Up to 20 Lacs
C) Up to 30 Lacs
D) Up to 10 Lacs
All Bank SME advances for both manufacturing and service are cover under CGTMSE? A
A) Up to 2 Cr.
B) Up to 1 Cr.
C) Up to 50 Lacs
D) Up to 20 Lacs
All Retail trade are cover under CGTMSE? B
A) Up to 2 Cr.
B) Up to 1 Cr.
C) Up to 50 Lacs
D) Up to 20 Lacs
In SME which security assets which will be created out of bank finance? C
A) Collateral Security
B) Hybrid Security
C) Primary Security
D) Secondary Security
In SME which security assets which will not be created out of bank finance? A
A) Collateral Security
B) Hybrid Security
C) Primary Security
D) Secondary Security
If mortgage of property is involved in the loan the before proceeding further search should be made C
on ___ to ascertain that there is no mortgage outstanding against the property in other bank
A) RFIA
B) RACC
C) CERSAI
D) None of the above
Pre disburesement Compliance Certificate is compiled to ensure --------- D
A) End-use of fund
B) Timely submission of stock statements
C) Timely completion of project
D) Compliance with terms of sanction

Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022

 SME Basic Quiz 26

Legal Aspects of Advances

Bank's dealing with different types of customers (different constitution of business entities) are C
governed by different Laws. For e.g., Companies Act, Limited Liability Act, Partnership Act govern
Companies, Limited Liability Partnerships, Partnership etc. What are the implications of these laws
for Bankers dealing with such customers?
A) There are no implications of the various Acts in the normal banking arrangements. Hence these
Acts are of no significance to the Bankers
B) The Acts assume significance in case of a dispute with the Customer and the dispute resolution
mechanism shall be governed by the relevant Acts
C) The relevant act for a particular type of customer defines the overall legal framework for the
dealings between the Bank and the customer, the procedures and compliances to be observed in
entering into contractual obligations and defines the liabilities, rights and obligations of each party.
D) The different Acts are significant for formation of the business entity and hence of no significance
to the Bankers
What are the instances which warrant a second TIR in respect of proposed mortgages? A
A) Properties acquired through Gift Deeds, Properties acquired by our Borrower / Guarantor
transacted by POA holder of seller, and Properties belonging to Third Party Guarantors
B) Properties belonging to Directors of Companies to which Bank is lending, Properties belonging
to Corporate Entities, Properties acquired through Power of Attorney Holder
C) Properties which have been acquired within a period of one year, Third Party Properties &
Properties acquired through Gift Deed
D) Properties which cannot be certified as having clear title on examination / search of chain of title
for a period of 30 years, Properties acquired through Gift Deeds, and properties transacted by Power
of Attorney Holders
A company namely ‘A' is an associate of another company namely ‘B' if ‘B' holds control of A
A) At least 20% of total share capital or of business decisions under an agreement of ‘A'.
B) At least more than 20% of total share capital or of business decisions under an agreement of ‘A'.
C) At least more than 50% of total share capital or of business decisions under an agreement of ‘A'.
D) None of the above
On enhancement of limit supplemental document is executed, instead of initial documents for the B
enhanced amount; Why is this done?
A) To avoid stamp duty on the whole amount of the loan, when stamp duty has already been paid
for the original amount of loan
B) If the earlier charges are satisfied on registration of new charge for the whole amount (instead of
modification of earlier / original charge), the priority of charge may be lost
C) Supplemental documents are taken to establish the continuity of the loan from the original date,
instead of treating the enhanced loan as a new loan from the enhanced date
D) Contract Act prohibits altering the original terms of sanction and therefore supplemental
document is taken instead of initial documents for the whole amount
What are the key characteristics of an Equitable Mortgage? A
A) Delivery of title deeds clarifying intention to create a valid mortgage at a centre notified by
Government of India
B) Delivery of title deeds at the Bank’s Branch, Taking acknowledgement for the documents
delivered and sending a copy of the acknowledgment (countersigned by the borrower and
guarantor) to the Branch as evidence of having created the mortgage
C) Sending the documents listed in TIR to the branch by Registered Post by the mortgagor, visiting
the branch to declare the intension of creating mortgage and obtaining an acknowledgment for the
documents delivered by Post

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 SME Basic Quiz 27

D) The mortgagor (owner) personally visiting the branch, delivering the documents and taking a
receipt for the documents delivered, from the branch.
What does section 281 of Income Tax Act, 1961 deal with? A
A) Section 281 of the Income Tax Act, 1961 requires an assessee to obtain the permission of the
assessing officer before creating a charge on or transfer of certain assets, including land, building,
machinery, manufacturing facilities and others.
B) Section 281 of the Income Tax Act, 1961 requires a Bank or Financial Institution creating a charge
to obtain the permission of the assessing officer before creating a charge on or transfer of certain
assets, including land, building, machinery, manufacturing facilities and others.
C) Section 281 of the Income Tax Act, 1961 requires an assessee to deposit an equivalent amount
of tax payable for the assessment year in which a charge on the property is created and obtain the
permission of the assessing officer before creating a charge on or transfer of certain assets, including
land, building, machinery, manufacturing facilities and others.
D) Section 281 of the Income Tax Act, 1961 requires an assessee to declare that there are no tax
arrears or disputed tax liabilities up to the assessment year in which the charge is created and obtain
the permission of the assessing officer before creating a charge on or transfer of certain assets,
including land, building, machinery, manufacturing facilities and others.
According to Sec.77 of Companies Act all types of charges are to be registered with ROC; If not, it A
would be;
A) Void against the liquidator and void against the creditor
B) Void against the company creating charge and the Registrar of Companies
C) Void ab initio against the lending bank or financial institution
D) With the CERSAI registration of charge being made mandatory, the registration of charge with
ROC is now incidental and not mandatory.
What are the types of charges that needs to be registered with the Registrar of Companies? D
A) A charge on book Debts of Company
B) A floating charge on the undertaking or any property of the Company
C) A charge on Goodwill, Patent, Trademark, copy right, License etc
D) All of the above
The Book Debts has also to be analyzed from the angle of D
A) age profile
B) trend in the average collection period,
C) build up of bad Debts.
D) All of the above are important
If the original title deeds are not available, equitable mortgage can be created by depositing certified C
copies of title deeds. The statement is;
A) True, equitable mortgage can be created by certified copies as the original copies are to be in
the safe custody of the owner of the property
B) No, equitable mortgage cannot be created by certified copies of title deeds
C) Yes, equitable mortgage can be created by deposit of certified copies of title deeds in rare and
exceptional situations, like lost title deeds, with sufficient precautions
D) If there are no original documents to title to property mortgage cannot be done
A security interest created by a Bank has to be registered with CERSAI within what period in order D
to retain priority of charge
A) Within 30 days of charge creation
B) Within 12 days of charge creation
C) Within 21 days of charge creation
D) There is no such time limit for registration

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 SME Basic Quiz 28

Security Interest created on a vehicle has to be registered for perfecting the charge. On which portal A
is the charge registered?
A) Vahan.nic.in
B) CERDAI
C) Both Vahan.nic.in and CERSAI
D) With Regional Transport Authority
What is the maximum number of members permitted for a Private Limited Company? D
A) 10
B) 50
C) 75
D) 200
An Associate Company A, of another Company B, is defined by the extent of control exercised by B A
over A; What is the extent of Control to be exercised by B over A for A to be an associate of B?
A) 20% of the total share capital of A or the business decisions
B) 25% of the total share capital of A or the business decisions
C) 33% of the total share capital of A or the business decisions
D) 51% of the total share capital of A or the business decisions
A government company is one in which not less than ____________ of paid up share capital is held by A
the Government (State / Central)
A) 51%
B) 45%
C) 75%
D) 66%
When a reconstitution takes place in case of a partnership firm which has created equitable A
mortgage of immovable property in favour of the Bank, what is the action to be taken?
A) An agreement on prescribed proforma to be obtained without disturbing the existing mortgage
B) An agreement on the prescribed proforma to be obtained with creation of fresh equitable
mortgage
C) Only fresh equitable mortgage to be obtained
D) No action is needed to be taken
Which among the following are distinct legal entities? A
A) Individuals C
B) Partnerships D
C) Limited Companies
D) Limited Liability Partnerships
Can a minor be a partner in a partnership? B
A) No, a minor cannot be a partner in a partnership
B) Yes, a minor can be a partner in a partnership
Limited Liability Partnerships, a new corporate form, was created out of which of the following A
legislation?
A) The Limited Liability Act, 2008
B) The Limited Liability Partnership Act, 2008
C) Constitution of Limited Liability Partnerships Act, 2008
D) Limited Liability Corporate Act, 2008
The constitutional document in the case of a Limited Liability Partnership is? A
A) LLP Agreement
B) LLP Contract
C) LLP Undertaking
D) LLP Agreement cum indemnity
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 SME Basic Quiz 29

In respect of loans less than Rs.100 lacs, the search of the title of the property may be made for A
___________, if it establishes clear and marketable title
A) 13 Years
B) 30 Years
C) 21 Years
D) 12 Years
Creation of security interest has to be noted / registered on the CERSAI portal within what time D
period of creation of the security interest?
A) 30 days
B) 45 days
C) 60 days
D) Immediately on creation of security interest
Balance sheet required _ years in case of working capital limit? A
A) 3 Years
B) 4 Years
C) 5 Years
D) 1 Year
If loan availed from other bank which letter we should collect from that bank in case of takeover? B
A) Approval letter
B) Sanction letter
C) First loan doc
Generally, takeover of loans below Rs. _____ to be discouraged. B
A) 10.00 lacs
B) 25.00 lacs
C) 50.00 lacs
D) 15.00 lacs
The Credit Information Report (CIR) from the transferor Bank at the time of takeover of credit A
facilities.
A) should be obtained in the prescribed format before disbursement
B) Not to be taken
C) Need not be insisted upon
D) Facility cannot be put up for sanction unless CIR has been obtained
Perfection of securities must be completed within _____ days of disbursement in case of Takeover D
of Accounts.
A) 60
B) 30
C) 45
D) 90
A declaration should be obtained from the applicant unit at the time of receiving application for A
loan that:
A) It does not have any other credit facility in any bank/ FI/ NBFC which is irregular
B) There are no overdue statutory dues
C) Only A
D) Both A & B
Maximum ceiling prescribed by the Bank for Non-corporates is B
A) Rs. 25.00 crores
B) Rs. 100.00 crores
C) Rs. 50.00 crores
D) Rs. 10 crores
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 SME Basic Quiz 30

Estimated/projected balance sheet of next___ Years in case of working capital limit and for the period A
of loan in case of term loan?
A) 2 Years
B) 3 Years
C) 4 Years
D) 5 Years
Can a laminated title deed accepted for mortgage? B
A) No
B) Yes
Equitable mortgage registered with CERSAI under which act? A
A) SARFAESI act
B) DRT act
C) DRAT act
CERSAI comes under sec 8 of which act? B
A) Company act 1956
B) Companies act 2013
C) Br act 1949
Verification site under CERSAI? C
A) www.cersai.in
B) www.cersai.sbi.co.in
C) www.cersai.org.in
Which type of charge is been exempted for registration with registrar of companies? D
A) Book debts of company
B) Charge on any immovable property
C) Charge on Goodwill trademark copyright etc
D) Pledge advances and corporate guarantee
Charges created within 30 days are having priority from the date of... C
A) Loan sanction
B) Filing
C) Creation
D) None
Charges created after 30 days may loose priority and maybe reckoned from date of.... B
A) Loan sanction
B) Filing
C) Creation
D) None
How many clauses exist in the Companies (Auditor's Report) Order, 2020 (CARO-2020)? D
A) 15
B) 16
C) 18
D) 21
Valuation report in case of Consortium/Multiple Banking arrangement ________ valuation/s are to be D
obtained from ________ valuer/s in case of properties valued Rs. 50 Crores and above.
A) 3, Lead Bank empanelled
B) 3, One from Lead bank and other 2 from Banks having next highest exposures
C) 2, Lead bank empanelled
D) 2, One from Lead bank and other from Bank having second highest exposure
Which of the following value is not a part of valuation report submitted by the empanelled valuer? C
A) Fair Market Value
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 SME Basic Quiz 31

B) Book Value
C) Depreciated Value
D) Distress sale value
Mr. Chris received a proposal of Rs. 105 Lakhs, for which the prospective Borrower has offered a B
collateral security, valued at Rs. 49 Lakhs. Mr Chris approaches you for guidance regarding the
number of valuation report/s to be obtained. What will you suggest?
A) One or Two as per discretion of the sanctioning Authority
B) Two
C) One, as the valuation of the property is below Rs. 50.00 Lakhs
D) Two, as the loan is above Rs. 100 Lakhs
In case of compromise proposal, while assessing the realisabl value of the security proper weightage B
would have to be given to its location, condition and marketability. For this purpose services of
approved valuers may be engaged and it should be ensured that the valuation reports are not more
than:
A) 24 months old
B) 12 months old
C) 6 months old
D) 3 months old
Report from two CICs are to be obtained? C
A) For secured loan above Rs. 2 Lacs
B) For secured loan above Rs. 5 Lacs
C) For unsecured loan above Rs. 2 Lacs
D) None of the above is correct
As per CKYCR guidelines all account based relationships data are required to be uploaded within. B
A) same day of establishment of relationship.
B) within T+2 days of establishment of relationship.
C) within T+5 days of establishment of relationship.
D) within T+7 days of establishment of relationship
Find the Odd one out? D
A) CARE Limited
B) CRISIL
C) ICRA Limited
D) FITCH
Which of the following is not correct as regards the basic attributes of a Limited Liability Partnership. C
A) It is a body corporate formed under the LLP Act, 2008.
B) It is a separate legal entity distinct from its designated partners.
C) It can not sue others but it can be sued.
D) It can have a common seal if it desires to have one.
Which statement is true with respect to registration of an LLP (Limited Liability Partnership)? C
A) No registration is required for an LLP.
B) Registration for an LLP is optional.
C) Every LLP must register itself with the Registrar of Companies.
D) LLP to be registered under the Indian Partnership Act.
While granting loans and advances against shares, statutory provisions contained in Sections 19(2) D
of Banking Regulation Act, 1949 is
A) The Bank shall not hold shares in any company, whether as pledgee, mortgagee or absolute
owner, of an amount exceeding thirty five per cent of the paid-up share capital of that company or
thirty per cent of its own paid-up share capital and reserves, whichever is less

Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022

 SME Basic Quiz 32

B) The Bank shall not hold shares in any company, whether as pledgee, mortgagee or absolute
owner, of an amount exceeding thirty per cent of the paidup share capital of that company or thirty
five per cent of its own paid-up share capital and reserves, whichever is less
C) The Bank shall not hold shares in any company, whether as pledgee, mortgagee or absolute
owner, of an amount exceeding thirty five per cent of the paid-up share capital of that company or
thirty five per cent of its own paid-up share capital and reserves, whichever is less
D) The Bank shall not hold shares in any company, whether as pledgee, mortgagee or absolute
owner, of an amount exceeding thirty per cent of the paidup share capital of that company or thirty
per cent of its own paid-up share capital and reserves, whichever is less
As per extant norms for take over of borrowal units from other bank, Credit Information Report (CIR) C
is to be obtained from the transferor banks. However, despite all efforts put in by the operating
functionaries, CIR is not coming. How should the Credit Analyst deal with such situation?
A) Waiver for non-obtention of CIR dealing the reasons for the same should be obtained from
Sanctioning authority.
B) In such a scenario we need to approach IBA & RBI requesting them to direct the transferor bank
to do the needful.
C) Credit Analyst may compile the opinion report on his own based on the information sourced
from CRILC/MCA/CIBIL/Other public forums after obtaining approval from controlling.
D) Statement of account of the borrower for past 12 months should suffice for the purpose
Original application prepared by the Bank empaneled Advocate is to be vetted by? C
A) AGM
B) DGM
C) Bank’s Law officer
D) Not required to be vetted as it is prepared by Bank’s empaneled Advocate
A new lead worth Rs. 1 Crore has come and prima facie the proposal seems to be a bankable B
proposition. The unit is presently having no borrowing arrangement and having a Current Account
with Canara Bank. The promoters are, however, not ready to immediately close the Current Account
therein and have sought time of 6 months for closure of the same citing genuine reasons. What
should a Credit Ananyst do in order to not loose the business?
A) Compliance of extant norms is non-negotiable and such business can not be booked unless the
Current Account is closed.
B) Approval from GM (Network) may be obtained considering the merit of the case.
C) Prior approval from the Controller must be obtained citing the request of the case and the merit
thereof.
D) The promoters need to be suitably conseiled and prevailed upon to close the account before
onboarding them to our Bank
Mr. Akhilesh has joined Bholpur branch as field officer after his confirmation. He was instructed by D
his branch manager to conduct pending inspections as RFIA is due in next month. Mr. Akhilesh has
no idea how to conduct an inspection of a unit and he requested guidance from his Branch Manager.
What guidance his branch manager should provide to him?
A) Inspecting official must assess the level of activity from various sources, such as the order book,
Electricity Bill, the work on the shop floor, number of shifts of working, accumulation of
B) When there is decline in sales, production and profitability, the reason therefore should be
ascertained and issue should be discussed with the borrower.
C) Inspecting official mustcheck if the books of accounts e.g. cash book, sales, purchase and stock
registers are being maintained properly and kept up to date.
D) All of the above
Which among the following is an objective of periodic inspection and follow up? D
A) Assess the quantity, quality and value of stocks
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 SME Basic Quiz 33

B) The security coverage is not diluted at any time for any reason.
C) The servicing of the loan does not suffer under any circumstances
D) All of the above
Which among the following is not the feature of SIDBI’s interactive portal? D
A) Hand holding support
B) Loan from Banks
C) Guarantee support for Collateral free loans
D) Set up and run the unit with due diligence
Capital mentioned in the Balance Sheet of a company can be verified from _______. C
A) Chartered Accountant
B) Company
C) Balance Sheet available with Registrar of companies
D) None of these
Net profit declared by a unit can be verified from _______. A
A) Income tax return and other related documents submitted to IT Authorities.
B) Company
C) Chartered Accountant
D) None of these
A company has declared net profit of Rs.2 crore in the audited balance sheet. From which return it C
can be verified?
A) Credit Claim in the GST / VAT Return
B) PF / ESI / Professional Tax Registers / Returns
C) Income tax return and other related documents submitted to IT Authorities.
D) GR Form / Softex Declaration Form
Income received by a service provider needs to be verified with ________. B
A) PF / ESI / Professional Tax Registers / Returns
B) ST-3 / GST return filed with tax authorities
C) SEBI
D) GR Form / Softex Declaration Form
Report from only one Credit Information Company is required to be obtained for _____________ for B
secured advances under SME Segment.
A) Limit above Rs.10 lacs
B) Limit upto Rs.10 lacs
C) Rs.5 lacs and above
D) Limit of Rs.5 lacs
Report from only one Credit Information Company is required to be obtained for _____________ for A
unsecured advances under SME Segment.
A) Limit upto Rs.2 lacs
B) Limit above Rs.5 lacs
C) Rs.5 lacs and above
D) Limit of Rs.5 lacs
Report from two Credit Information Companies is required to be obtained for _____________ for B
unsecured advances under SME Segment.
A) Limit upto Rs.3 lacs
B) Limit above Rs.2 lacs
C) Rs.5 lacs and above
D) Limit of Rs.5 lacs
Report from two Credit Information Companies is required to be obtained for _____________ for A
secured advances under SME Segment.
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 SME Basic Quiz 34

A) Limit above Rs.10 lacs

B) Limit of Rs.10 lacs
C) Limit of Rs.5 lacs and above
D) Limit of Rs.10 Lac and above
In case of variation of ______________ or more in the valuation proposed by the valuer and the B
guideline value provided in the State Government notification, justification on variation must be
given by the Valuer.
A) 10%
B) 20%
C) 0.05
D) 0.15
A title deed is deposited by the mortgagor on 15.02.2018. What may be the date of letter of D
confirmation taken as part of EM?
A) 15.02.2018
B) 17.02.2018
C) 16.02.2018
D) Either 2 or 3
What is the purpose of obtaining SME 12 under SME Documentation? A
A) SME 12 is a link letter and is obtained at the time of shifting from non-SME documents to SME
documentation.
B) SME 12 is not prescribed under SME Documentation.
C) SME 12 is the format for
D) SME 12 is the TIR format.
Is registration of instruments relating to mortgage by deposit of title deeds compulsory in the B
respective sub-registrar office?
A) Yes, it is compulsory in all states and Union Territories throughout the country.
B) No, it is not compulsory in all states. One needs to refer to the State Specific regulations in this
regard.
C) Can be registered as per the will of the lender.
D) Not required in any of the states/ union territories throughout the country.
While inspecting a property, is selfie of the inspecting official required? D
A) Selfie of the Inspecting official at the site, with the borrower, should be taken as an integral part
of inspection and the same should be kept with the security documents.
B) There is no requirement of taking a selfie during property inspection.
C) Selfie must be taken by the Inspecting official with all the co-owners of the property.
D) Selfie of the Inspecting official at the site, with or without the borrower, should be taken as an
integral part of inspection and the same should be kept with the security documents.
What is the risk in accepting a laminated original title deed as security? A
A) The laminated original title document may be a coloured xerox copy, and original may be kept
with some other bank.
B) There is no risk.
C) Laminated original title deeds not to be accepted under any circumstances.
D) None of the statements is correct.
The renewal of M/s. Consum Trading Pvt. Ltd. has fallen due. The company has submitted it C
Audited Balance Sheet as on 31.03.2018. However, the audited Balance Sheet is not yet uploaded
at the website of Ministry of Corporate Affairs. In such case, what process will be followed for
independent verification of audited Balance Sheet?
A) Confirmation should be obtained from the Chartered Accountant firms who has audited the
Balance Sheet on phone
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 SME Basic Quiz 35

B) Only signed copy of Audited Balance Sheet is required to be obtained.

C) Independent confirmation should be obtained from the Chartered Accountant firms who has
audited the Balance Sheet by email / Fax / Letter. Moreover, along with the audited balance sheet,
the borrowing Units need to submit usual KYC documents in respect of the auditor firm viz. copy
of address proof and identity proof like PAN card, Driving license, Aadhar
D) None of these

Analysis of financial statement

Ind. Accounting Standards (AS) are formulated by C
A) Accounting Standards Organisation
B) Indian Standards Organisation
C) Accounting Standards Board
D) Accounting Standards Bureau
Form-V of CMA format in our Bank is named as? B
A) Cash Flow Statement
B) Fund Flow Statement
C) Analysis of Balance Sheet
D) Operating Statement
Reena has joined the branch as field officer recently. She has not worked in loan and advances D
section. One day, while going through the loan files, she has some doubts. Considering you a good
resource person, she called you asking what is Cost of sales ? Which statement is correct?
A) Cost of Sales (Cost of Goods Sold during an accounting year ) = Cost of production + interest on
working capital
B) Cost of Sales (Cost of Goods Sold during an accounting year ) = Cost of production + opening
stock of raw material - closing stock of raw material
C) Cost of Sales (Cost of Goods Sold during an accounting year ) = Cost of production + Opening
Stock of Semi Finished Goods- Closing Stock of semi Finished Goods.
D) Cost of Sales (Cost of Goods Sold during an accounting year ) = Cost of production + Opening
Stock of Finished Goods- Closing Stock of Finished Goods.
Semi-finished goods to be valued in Stock Statement at ------- A
A) Cost of production or selling price or market price or Govt. controlled rates, whichever is the
lowest
B) Cost of production or market price, whichever is the lowest
C) Cost of production or selling price, whichever is the lowest
D) Market price or Govt. controlled rates, whichever is the lowest
You are Branch Manager of a scale III branch in one of the urban area. Recently, one scale I officer, D
Smt. Reena, is posted in your branch as field officer in SME segment. Reena has no exposure of loan
and advances. A customer approches her for making a cash credit limit of Rs. 15 lakhs. During
discussion with you on that particular file, she asks what is working capital? Which of the following
statement is not correct?
A) Working capital is the amount of funds necessary to cover the cost of operating the business
cycle of the entrepreneur.
B) Working capital is the funds required for acquisition of build up Current Assets generally for a
period of one operating cycle.
C) It is the level of fund which a company must possess to finance its day to day operation.
D) This refers to the investment of the business unit in long term assets, cash, long term securities,
account receivables and inventories.
Reena has joined the branch as field officer recently. She has not worked in loan and advances D
section. One day, while going through the loan files, she has some doubts. Considering you a good
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 SME Basic Quiz 36

resource person, she called you asking how to calculate under Projected Annual Turnover Method
for Business Enterprises in Trade & Services Sector ? What would be your reply ?
A) For Trade & Services (T & S) sector also, the assessment of credit limit be based upon annual
turnover
B) Generally, credit limit equal to 15% of projected annual turnover should be offered to Business
Enterprises in the T&S sector.
C) It would be available for utilization generally as a cash credit limit. However, where needed an LC
limit (as a sub-limit of total), may also be allowed.
D) All are correct.
Reena has joined the branch as field officer recently. She has not worked in loan and advances D
section. One day, while going through the loan files, she has some doubts. Considering you a good
resource person, she called you asking what is Nayak Committee Method ? Which statement is
correct?
A) Nayak Committee Method is applicable for Assessment of Working Capital Requirement for the
Limit amount up to Rs 5 Crores for SSI units.
B) Under Nayak Committee method, working capital requirement is computed at a minimum 25%
of output value of which at least four-fifths should be provided by the Bank and the balance one
fifth representing the borrower's contribution towards margin for the working capital
C) Under Nayak Committee method, the working capital requirement will be assessed at 25% of
Projected Annual Turnover (PAT), of which 5% should be borne by entrepreneur as margin and 20%
would be allowed as Bank Drawings.
D) All are correct.
Smt Reena has joined the branch as field officer recently. She has not worked in loan and advances A
section. One day, while going through the loan files, she has some doubts. Considering you a good
resource person, she called you asking what is Cost of production ? Which statement is correct?
A) Cost of production = Consumption of Raw Material (Imported & Indigenous) + Consumables
Spares & Stores+ Power& Fuel+ Direct Labor+ Repairs & Maintenance+ Other manufacturing
Expenses + Depreciation+ Opening stock of Stock In Process- Closing Stock of Stock In Process.
B) Cost of production = Consumption of Raw Material (Imported & Indigenous) + Consumables
Spares & Stores+ Power& Fuel+ + Depreciation+ Opening stock of Stock In Process- Closing Stock
of Stock In Process.
C) Cost of production = Consumption of Raw Material (Imported & Indigenous) + Consumables
Spares & Stores+ Power& Fuel+ Direct Labor+ Repairs & Maintenance+ Other manufacturing
Expenses + Depreciation+ Interest on working capital + salary of office staff
D) Cost of production = Consumption of Raw Material (Imported & Indigenous) + Repairs &
Maintenance+ Other manufacturing Expenses + Depreciation+ Opening stock of Stock In Process-
Closing Stock of Stock In Process + Interest on working capital
Smt Reena is recently posted as field officer of SME segment in your branch. She has no exposure D
of loan and advances. One day she asks you what is Net Working Capital? Which of the following
statement is not correct?
A) Net Working Capital (NWC) is the difference between Current Assets and Current Liabilities.
B) The Net Working capital is a qualitative concept which indicates the liquidity position of a firm
and the extent to which working capital needs are financed by long term sources of funds.
C) Net Working Capital represents the portion of Current assets that has been funded from the
Long-Term Sources (such as Capital, reserves and Long Term Borrowings)
D) All are correct.
Which comes under denominator while calculating no. Of days / months of Stock in Process? A
A) Cost of Production
B) Cost of Goods Sold
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 37

C) Raw Material Consumption

D) Net Sales
Which of the following statement is not correct with regards to working capital? D
A) Working capital is the amount of funds necessary to cover the cost of operating the business
cycle of the entrepreneur.
B) Working capital is the funds required for acquisition of build up Current Assets generally for a
period of one operating cycle.
C) It is the level of fund which a company must possess to finance its day to day operation.
D) This refers to the investment of the business unit in long term assets, cash, long term securities,
account receivables and inventories.
Working Capital is defined as? D
A) Funds required for acquisition of current assets generally for a period of one operating cycle
B) Funds required for meeting day-to-day operations like purchase of raw materials, spares &
stores, meeting manufacturing expenses.
C) Funds required for running the operating cycle of a business unit
D) All of these
Gross Working Capital is better known as C
A) Funds required for setting up of plant
B) Total of Balance Sheet
C) Total funds required to complete an operating cycle ( i.e. total period required to convert cash
into cash)
D) Any of these
Gross Working Capital is also known as D
A) Working capital Requirement
B) Total Current Assets
C) Total funds required to complete an operating cycle ( i.e. total period required to convert cash
into cash)
D) All of these
Which of the following statement is not correct with regards to Net Working Capital? D
A) Net Working Capital (NWC) is the difference between Current Assets and Current Liabilities.
B) The Net Working capital is a qualitative concept which indicates the liquidity position of a firm
and the extent to which working capital needs are financed by long term sources of funds.
C) Net Working Capital represents the portion of Current assets that has been funded from the
Long-Term Sources (such as Capital, reserves and Long Term Borrowings)
D) All are correct.
Working capital Gap means: C
A) CL – CA
B) CA – TL
C) CA – CL other than Bank Borrowings
D) TL-CA
Assets which are not part of the operating cycle are : C
A) Raw Material, Stock-in-Trade, Work in Progress (SIP), Stores & Spares, Finished goods
B) Trade receivables (Book Debts, Sundry Debtors)
C) Advances to supplier of machinery
D) Advance to suppliers of RM/Stock in Trade
The financial statements of a business enterprise include: _________________ D
A) Balance sheet
B) Statement of Profit and loss
C) Cash flow statement
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 SME Basic Quiz 38

D All the above

Financial statements are prepared for the use of? D
A) Lenders
B) Government Authorities
C) Shareholders
D) All of the above
The format for preparation of financial statements for the Companies is standard as per…. C
A) Companies Act 2011.
B) Companies Act 2012.
C) Companies Act 2013.
D) Companies Act 2014.
CMA format contains.... forms B
A) 3
B) 5
C) 7
D) 11
CMA is being prepared for.... years data. C
A) 2
B) 3
C) 4
D) 5
If trade receivables are more than.... months old from the date of invoice it is treated as deferred B
trade receivable.
A) 3
B) 6
C) 9
D) 18
Assets with long term nature and can be used more than 1 year classified as? B
A) Current assets
B) Fixed assets
C) Short term assets
Intangible assets must be non monetary assets without physical presence? A
A) True
B) False
For classifying anything under Intangible Assets, it should satisfy which criteria C
A) It must be a non-monetary asset without physical substance
B) Future economic benefits are expected to flow from such asset
C) Both of the above
D) Non of the above
Assets which are not supporting operating cycle directly but require for operations? C
A) Intangible assets
B) Current assets
C) Non current assets
Operating Cycle begins with acquisition of raw materials and ends with collection of receivables. B
The stages/sequences in terms of time period in the operating cycle are as follows :
A) Raw Material, Finished goods, receivables, Work in progress, and advanced paid to suppliers
B) advanced paid to suppliers, Raw Material, Work in progress, Finished goods, and receivables
C) Raw Material, Work in progress, Finished goods, advanced paid to suppliers and receivables
D) Raw Material, Work in progress, , receivables, advanced paid to suppliers and Finished goods
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 39

Goodwill, patent, licenses are example of ? B

A) Non current assets
B) Intangible assets
C) Current assets
Assets which are not part of the operating cycle are : C
A) Raw Material, Stock-in-Trade, Work in Progress (SIP), Stores & Spares, Finished goods
B) Trade receivables (Book Debts, Sundry Debtors)
C) Advances to supplier of machinery
D) Advance to suppliers of RM/Stock in Trade
Another name of creative accounting is? A
A) Window dressing
B) Window accounting
C) Window creative
Building, plant, machinery, vehicles, furniture and fixtures are example of? C
A) Current assets
B) Non current assets
C) Fixed assets
Which of the following is NOT a component of the working capital cycle? B
A) Semi Finished and Finished Goods
B) Trade Payable
C) Raw Material
D) Trade Receivables
Normal operating cycle is assumed to have a duration of how many months? C
A) 6
B) 9
C) 12
D) 24
Contingent Liabilities on account of disputed tax liabilities will be shown in the Balance Sheet under? C
A) Asset Side
B) Liabilities Side
C) As a footnote
D) Both asset and liabilities side
For accounting purposes, why a proprietorship firm is required to prepare a Balance Sheet? B
A) There is no need for a proprietorship firm to prepare a balance sheet.
B) A proprietorship firm should prepare the balance sheet and profit and loss account of the firm
separately to know the strength and viability of the business run by the firm.
C) Only Profit & Loss account is required to be prepared by a Proprietorship firm.
D) Proprietor's detailed statement on assets and liabilities is sufficient to access the status of the
firm for the lender.
Which of these actions would cause the working capital gap of a company to increase? A
A) Changing the payment terms offered to customers from 60 to 90 days.
B) Improvements in the manufacturing process.
C) Renegotiation of a credit facility on more favorable terms
D) Purchase of new machinery to reduce production time
Reasons for reduction in Net Working Capital could be? D
A) Losses in business
B) Conversion of current assets into non-current assets
C) Use of short term funds for long term purposes
D) All of the above
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 SME Basic Quiz 40

The Net Working capital is a ------------- concept which indicates the ---------------position of a B
firm and the extent to which working capital needs may be financed by permanent sources of funds.
A) Proactive, exact
B) qualitative, liquidity
C) need based, calculative
D) conservative, minimum
Net Working Capital (NWC) represents the portion of Current assets that has been funded from the C
---- Sources (such as ----------, reserves and Long Term Borrowings)
A) short term, margin
B) short term, capital
C) Long-Term , Capital
D) long term, margin
The long term surplus / deficit in a funds flow statement depicts? C
A) Profitability of the unit
B) Excess Money available at Management disposal
C) Change in Net Working Capital
D) None of the above
While preparing fund flow statement, depreciation is considered as? C
A) Short Term Source
B) Long Term Surplus
C) Long Term Sources
D) Any of the above
Which one of the following is not a Current Liability? B
A) Statutory Dues Payable
B) Long Term Deposits received from dealer
C) Term Loan Installment payable within next one year
Which is an example of tangible fixed Assets? C
A) Copyrights
B) Pre-paid expenses
C) land & Building
D) Pre-operating expenses
Which can't be used to calculate the return of shareholders? C
A) Earnings per share
B) Dividends per share
C) Net asset value
D) Return on shareholders equity
Which of the following does not indicate about the solvency of a firm? C
A) TOL/TNW
B) Debt Equity Ratio
C) NWC
D) TOL / Adjusted TNW
Which is not a profitability analysis ratio? C
A) EPS
B) ROE
C) DEBT EQUITY RATIO
D) EBIDTA
Cash Flow Statement consists the cash flows from … activities? D
A) Operating
B) investing
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 SME Basic Quiz 41

C) Financial
D) All of the above
Which of the following is/are examples of intangible assets? D
A) Preliminary Expenses
B) Patents
C) Goodwill
D) all of the above
Reasons for reduction in Net Working Capital could be? D
A) Losses in business
B) Conversion of current assets into non-current assets
C) Use of short term funds for long term purposes
D) Any of the above
The Raw Materials holding level is compared in terms of? D
A) Months' Purchase
B) Months' Cost of Production
C) Months' Cost of Sales
D) Months' Consumption
Advance Paid to Suppliers of Raw Materials holding level is compared in terms of : C
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Gross Sales
The long term surplus / deficit in a funds flow statement depicts? C
A) Profitability of the unit
B) Excess Money available at Management disposal
C) Change in Net Working Capital
D) None of the above
A Company has forgot to record the depreciation in the its books. What could be the effects on the B
earnings of the Company?
A) Earnings will not be changes as the Depreciation is a non cash charge
B) Earnings are inflated
C) Earnings will be decreased
D) Depreciation is only an book entry, therefore will not impact at all on earnings
Which of the following is not a Solvency Ratio A
A) Current Ratio
B) TOL / TNW
C) TOL / Adjusted TNW
D) Debt Equity Ratio
Which is not excluded to arrive at adjusted TNW? D
A) Revaluation reserves
B) Investment in associates
C) Preoperative expenses
D) Investment in traded instruments
The net tax liabilities for a particular FY as calculated by the unit is Rs. 115.00 lakh, whereas the tax D
payment is required to be made as per Income Tax Rules is Rs. 123.60 lakh for that particular year.
The difference of Rs. 8.60 lakh is on account of wrong depreciation charged. How will the difference
be treated?
A) Will not be accounted for at all as the difference was due to permanent difference
B) Deferred Tax Liability
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 SME Basic Quiz 42

C) Deferred Tax Assets

D) Correct depreciation entry will be passed impacting value of asset and future depreciation
A Company has changed the method of applying Depreciation from SLM to WDV. What will the B
total impact on the profit for all the remaining years taken together(Assuming company is able to
declare PAT in both the scenarios in all the years)?
A) Total profit for all the years taken together will show net increase
B) Total profit for all the years taken together will show net decrease
C) Total profit for all the years taken together will remain the same
D) Data insufficient
Return on Capital Employed (ROCE) is calculated as D
A) EBIDTA / TNW
B) EBIDTA / Total Assets
C) EBIDTA / Total Liabilities
D) Any of 2 and 3
The cash break-even (i.e. without considering ‘Depreciation' as fixed cost) at installed capacity C
should normally be below ________ .
A) 0.65
B) 0.6
C) 0.5
D) 0.33
Cash inflow will comprise the following ________. D
A) profit before tax with interest added back
B) depreciation
C) pre-operative expenses written off
D) All comprise cash inflow
What will be the EBIDTA, if Profit Before Tax is Rs. 15.20 lakh, Interest cost is Rs. 5.10 lakh, Tax C
expense is Rs. 4.55 lakh, deferred Taxes is Rs 4.50 lakhs and Depreciation is Rs.4.15 lakh?
A) Rs. 33.50 lakh
B) Rs. 28.95 lakh
C) Rs. 24.45 Lakh
D) in Balance sheet and shown as unrealized gains in left hand side as part of net worth
What will be the cash accrual of the a unit if, Sale is Rs. 345 lakh, PBT is Rs. 16.00 lakh and C
Depreciation is Rs. 12.35 lakh. The unit has paid an interest of Rs. 13.20 lakh on term loan and unit
has to pay tax @ 30%. ?
A) Rs. 8.45 lakh
B) Rs. 14.31 lakh
C) Rs. 23.55 lakh
D) Rs. 28.35 lakh
M/S Finetech has acquired a machine at a cost of Rs. 80 lakh on 01.12.2017. Depreciation is chargesd B
@ 20% under WDV method. What will the amount of depreciation to be debited to P&L account
for 2019-20?
A) Rs 10.24 Lakhs
B) Rs 11.52 lakhs
C) Rs. 12.80 lakhs
D) Rs. 16.00 lakhs
If Cost of Production of a unit is Rs. 560.00 lakhs, Opening stock in Process was Rs. 24.00 lakh, B
Closing stock in Process is Rs. 28.00 lakh, Opening stock of Finished Goods was Rs. 40.00 lakh and
Closing stock of Finished Goods is Rs. 50.00 lakh. What is the Cost of Sale of the unit?
A) Rs. 546.00 lakh
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 SME Basic Quiz 43

B) Rs. 550.00 lakh

C) Rs. 570.00 lakh
D) Rs. 574.00 lakh
A manufacturing company, invested Rs. 20 lakh during FY 2016-17 in shares. During FY 2019-20, the A
value of investment grew to Rs 25.00 lakhs. How will Rs 5.00 lakhs be accounted for in the Balance
Sheet?
A) This income will not be considered
B) The income will be considered as part of operating income and taken in P&L account accordingly
C) The income will be considered as part of non-operating income and taken in P&L account
accordingly
D) The income will not be taken in P&L account but value of investment will be increased by Rs 5.00
lakhs a
Country Risk Ratings are circulated by IBG. We say that Country Risk is assumed to exist when cash D
Flow from countries categorized as Medium Risk or below by IBG is ___ or more of the borrower's
cash flow.
A) 0.5
B) 0.4
C) 0.3
D) 0.25
The Audit Report where the Auditors qualify their opinion / furnish adverse comments in case of B
any non compliance with any of the law / rules / Acts / Accounting Standards or material departure
from the accounting principles etc. and these non compliances are having material impact on the
financial statements, is known as
A) Clean Report
B) Qualified Report
C) Adverse Report
D) Critical Report
Which is not used to denote quality, reliability and accuracy of financial statements of a unit? B
A) Excellent
B) Very Good
C) Good
D) Poor
As on 31.03.2021, Adjusted TNW was Rs. 257 lakh, Deferred Tax Assets outstanding was Rs. 7 lakh, Investment B
in associates was Rs. 50 lakh. Work out the Net Worth of the unit?
A) Rs. 264 lakh
B) Rs. 314 lakh
C) Rs. 307 lakh
D) Rs. 200 lakh
Reasons for reduction in Net Working Capital could be? D
A) Losses in business
B) Conversion of current assets into non-current assets
C) Use of short term funds for long term purposes
D) Any of the above
The Raw Materials holding level is compared in terms of D
A) Months' Purchase
B) Months' Cost of Production
C) Months' Cost of Sales
D) Months' Consumption
The long term surplus / deficit in a funds flow statement depicts? C
A) Profitability of the unit
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 SME Basic Quiz 44

B) Excess Money available at Management disposal

C) Change in Net Working Capital
D) None of the above
A Company has forgot to record the depreciation in the its books. What could be the effects on the earnings B
of the Company?
A) Earnings will not be changes as the Depreciation is a non cash charge
B) Earnings are inflated
C) Earnings will be decreased
D) Depreciation is only an book entry, therefore will not impact at all on earnings
The desired level of financial ratio ‘TOL/Adjusted TNW' in case of manufacturing segment is A
prescribed as
A) LESS THAN EQUAL TO 4.00
B) LESS THAN EQUAL TO 5.00
C) LESS THAN EQUAL TO 7.00
D) LESS THAN EQUAL TO 3.00
The minimum acceptable level of financial ratio ‘TOL/Adjusted TNW' in case of Trade and Services C
segment is prescribed as
A) LESS THAN EQUAL TO 4.00
B) LESS THAN EQUAL TO 5.00
C) LESS THAN EQUAL TO 7.00
D) LESS THAN EQUAL TO 3.00

Working capital assessment

Benchmark current ratio is: A
A) 1.33
B) 2
C) 1.5
D) 2.33
Projected balance sheet method is applicable for borrowers who require fund based working capital D
finance of above Rs.....
A) 1 Cr
B) 2 Cr
C) 4 Cr
D) 5 Cr
Why RBI has issued guidelines on Loan System for Delivery of Bank Credit to be implemented w.e.f. A
01st April 2019 in respect of Borrowers having aggregate Fund Based Working Capital limits of
Rs.150 crore and above from the banking system?
A) to promote greater Credit discipline
B) to know the exact assessment of banking needs of the customer
C) to have better idea about the total assets and liabilities of the borrower
D) to know more about the balance sheet of the customer
To encourage the MSME units to shift to digital mode WC limits of such MSME be assessed at .....% B
of the projected annual turnover.
A) 25
B) 37.50
C) 52.50
D) 7.50

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 SME Basic Quiz 45

While appraising WC limit under PBS method certain items viz: a) TCA, b) OCL, c) WCG, d) NWC, e) D
ABF, f) Fixed asset & g) level of intangible assets for last 3 years and projected for the next year are
computed, compared, considered and commented. Find out odd items.
A) a & e
B) c & g
C) b & f
D) f & g
The cash budgeting technique helps a decision maker in situation where borrower need... B
A) LONG TERM CREDIT
B) SHORT TERM CREDIT
C) Multiple credit
D) Risk free credit
For FBWC limits upto rupees 5 crore the.... committee guidelines must be adhered to. A
A) Nayak
B) Goipora
C) Vivek
D) Talwar
For limits above rupees 5 crore upto rupees 50 crore, assessed Bank finance as per......to be taken C
into consideration.
A) Nayak committee
B) Talwar committee
C) Project Vivek
D) Tarapore committee
Project Vivek is applicable for all eligible SME proposals up to Rs. …… in R&DBG. C
A) 50 Lakh
B) 5 Cr
C) 50 Cr
Which of the following factor does not affect the amount of working capital in a business? C
A) Increase in Sales Turnover
B) Seasonality in business
C) The composition of sources to finance working capital
D) Uneven pattern of sales
E) Consumption of Raw Material
Gross Working Capital is better known as D
A) Funds required for setting up of plant
B) Total of Balance Sheet
C) Current Asset – Net Working Capital
D) Total funds required to complete an operating cycle
An asset is classified as current asset when it satisfies some crieteria. Which of the following is not C
one of the criteria
A) It is expected to be realized in or is intended for sale or consumption in, the company's normal
operating cycle
B) It is held primarily for the purpose of being traded
C) It is expected to be realized within 12 months subject to happening of an independent event
D) It is cash or cash equivalents unless it is restricted from being exchanged or used to
Net Working Capital represents A
A) Long Term Funds, available to support the short term requirement of the unit
B) Promoters’ Margin
C) Short Term Funds arranged by the unit from market
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 SME Basic Quiz 46

D) Total Working Capital less Bank Finance

Under Projected Annual Turnover (PAT) method as per Nayak Committee recommendations, A
minimum contribution from the promoters or Net Working Capital must be equal to?
A) 5% of the Projected Annual Turnover
B) 5% of the total requirement
C) 5% of the Total Current Assets
D) 20% of the Projected Annual Turnover
For Trade & Services (T &S) Sector in C&I segment the assessment of credit limit for FBWC Limit B
upto Rs. 5.00 crores is linked with Annual Turnover. Which one of the following statement is incorrect
in context of financing to such units.
A) Across the board Credit limit equal to 15% of projected annual turnover should be offered to
business enterprises in the T&S
B) The business enterprises should be established one and should be at least 2 years old.
C) The business enterprises should be a profit making
D) CRA of the unit must be SB-9 and better
For a manufacturing unit, the major source for financing the current assets are: C
A) Trade Creditors only
B) Trade Creditors and working capital limits from Bank only
C) Trade Creditors, working capital limits from Bank and Net Working capital
D) Trade Creditors, working capital limits from Bank, Net Working capital and cash.
What is the net working capital (margin) requirement under second method of lending prescribed A
by Tandon Committee ?
A) 25% of total current assets
B) 25% of total assets
C) 25% of working capital gap
D) 20% of Projected Annual Turnover
For Trade & Services (T&S) Sector in C&I segment the assessment of credit limit be based upon A
Annual Turnover, rather than on build up of Inventory and receivables . Which one of the following
statement is correct in context of financing working capital to Trade & Services Sector in C & I
Segment
A) Across the board Credit limit equal to 15% of projected annual turnover should be offered to
business enterprises in the T&S
B) The business enterprises should be established one and should be at least 2 years old.
C) CRA of the unit must be SB-7
D) The upper cap of Working Capital Limit should be Rs 1.00 crore
Given the acceptable level of Current Assets at Rs 1000.00 and Projected level of Current Liabilities B
other than Bank Finance at Rs 200.00. In this situation what would be Working Capital Bank Finance
and Current Ratio, as per Second Method of lending (Tandon Committee)
A) Rs 500.00 and 1.50
B) Rs 550.00 and 1.33
C) Rs 600.00 and 1.25
D) Rs 750.00 and 1.20
The relationship between Working capital Gap(WCG), Bank Borrowing and NWC is as under A
A) WCG = NWC+ Bank Borrowing
B) WCG= Bank Borrowing - NWC
C) Bank Borrowing = WCG + NWC
D) NWC = Bank Borrowing – WCG
In respect to the calculation of NWC , which one of the following is incorrect D
A) NWC = CA-CL
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 SME Basic Quiz 47

B) NWC= Long Term Sources –Long term Uses

C) NWC= (Capital + Reserves + Long Term Borrowings) - (Fixed assets+ Non Current assets )
D) NWC= WCG + ASSESSED BANK FINANCE
Stock in process holding level is compared in terms of : A
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Consumption.
Finished Goods holding level is compared in terms of : B
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Consumption.
Trade Receivables holding level is compared in terms of : D
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Gross Sales
Trade Payable (Sundry Creditor) holding level is compared in terms of : C
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Gross Sales
Advance Received from customers holding level is compared in terms of : D
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Gross Sales
Advance Paid to Suppliers of Raw Materials holding level is compared in terms of : C
A) Months' cost of Production
B) Months' Cost of Sales
C) Months' Purchase
D) Months' Gross Sales
While assessing the working capital limit, it was observed that level of receivables is estimated to D
go up from existing Rs 6 Lacs to Rs 9 Lacs, whereas gross turnover of the unit is also estimated to
go up from existing level of Rs 36 Lacs to Rs. 48 Lacs. What is the likely impact on approximate
holding periods of receivables?
A) It is estimated to decline from current 90 days to 75 days
B) It is estimated to decline from current 80 days to 65 days
C) It is estimated to increase from current 61 days to 75 days
D) It is estimated to increase from current 61 days to 68 days
Which of the following is NOT a component of the working capital cycle? C
A) Finished goods
B) Trade Receivables
C) Trade Payables
D) Raw Materials
Which of the following factor does not affect the amount of working capital in a business? C
A) Increase in Sales Turnover
B) Seasonality in business
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 SME Basic Quiz 48

C) The composition of sources to finance working capital

D) Uneven pattern of sales
How is working capital financed? C
A) Short term sources only
B) Long term Sources only
C) Both Short Term and Long Term Sources
D) It is not material as long as working capital is available.
Company A has annual Gross sales of Rs 200 Crores and Account receivables of Rs 50 Crores at the C
year end. These amounts for Company – B for the same year are Rs 120 Crores and Rs 40 Crores
respectively. All other things being equal, which company has lower accounts receivables build up
?
A) Company –B
B) The build up is same in both the Company.
C) Company -A
D) The information is inadequate to draw a conclusion.
Which does not denote Net Working Capital? D
A) Excess of Current assets over current liabilities
B) Portion of working capital financed from Long Term Sources
C) Excess of Long Term Sources over Long term Uses
D) None of the above
For working capital assessment, the required financial data is to be obtained from the borrowers are D
:
A) Particulars of existing / proposed limits from the banking system, Operating statement
B) Particulars of existing / proposed limits from the banking system, Operating statement, Analysis
of balance sheet,
C) Particulars of existing / proposed limits from the banking system, Operating statement, Analysis
of balance sheet, Comparative Statement of Current Assets (CA) and Current Liabilities (CL)
D) Particulars of existing / proposed limits from the banking system, Operating statement, Analysis
of balance sheet, Comparative Statement of Current Assets (CA) and Current Liabilities (CL), Funds
flow statement
In an entity, the long term funds available to support short term uses, is known as B
A) Working Capital Gap
B) Net working Capital
C) Working Capital
D) Gross Working Capital
Working Capital Gap (WCG) is the difference between Current Assets and Other current Liabilities A
(Current Liabilities ------------ Bank Borrowings) of a business unit.
A) excluding
B) including
C) either one or two
D) neither one or two
While appraising a term loan, which of the following factors is not to be considered in Economic C
Viability ?
A) Future trends in volume and patterns of Supply & Demand
B) Thorough market analysis
C) Availability of Labor (Skilled / Unskilled)
D) Ancillary industry
Which of the following is not a Component to be considered for arriving at drawing power in CC C
limit?
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 SME Basic Quiz 49

A) Raw Materials and Stores & Spares

B) Stock in Process
C) Advance payment received from customers
D) Finished Goods
Which Statement is prepared to know the movement of NWC, liquidity, sources and uses of long D
term funds, diversion, siphoning-off?
A) Operating Statement
B) Balance Sheet
C) Assets/Liability Statement
D) Fund Flow Statement
Which of the statement is not correct regarding Bill Financing Limits? A
A) There is no relation to sales / business of the borrower
B) The drawer is of good standing and creditworthy
C) The drawees are creditworthy and are not associates
D) The documents are genuine and represent underlying trade transactions in goods
The working capital requirements of a business unit depends upon a large number of factors. Which D
one of them is not one of them:
A) Size of Bussiness
B) Production Cycle
C) Production Policy
D) Loan Policy
Personal guarantee of the individual partners needs to be obtained. C
A) for making them individually liable.
B) for making them jointly liable.
C) for making them jointly and severally liable, more particularly in case of unregistered firms.
D) It depends on the contents of the partnership deed/partnership letter
Share premium amount represents the amount, paid by the investors over and above the facevalue A
of the share. The share premium amount is treated as part of
A) Net Worth of the entity.
B) Revaluation Reserves
C) Term Liability
D) Current Liabilities
While assessing the Fund requirement of a unit, Revaluation Reserve, if any, should be considered B
as part of ….
A) Either as Net worth or as Fixed Assets
B) Must be knocked off from both Net worth and Fixed Assets as it is only a book entry
C) Net worth only
D) Fixed assets only
Under CASH BUDGET CALCULATION, which of the statement is not correct? D
A) In Cash Budget method, only cash transactions occurred (both inflows and outflows) during the
period are not expences/ revenues for the period (as done in P & L)
B) All cash items regardless of their classification (expense, asset, fixed cost, variable cost) are
accounted for in a cash budget. Non-cash items do not appear in a cash budget
C) In Cash Budget method, the quantum of finance required is determined from the projected cash
flows
D) Projected values of Current Assets & Current Liabilities are used
Cash Budget is usually the ---------------- of cash receipts and cash payments of an enterprise, B
drawn at small intervals of time, say monthly, weekly etc.
A) Calculation
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 SME Basic Quiz 50

B) forecast
C) netting
D) surplus
Nayak Committee Method is applicable for Assessment of Working Capital Requirement for the B
Limit amount up to Rs. --------- Crores for SSI /C& I (Mfg) units.
A) 1
B) 5
C) 10
D) 15
Mr. Manoj Kumar working in SME advances has a doubt regarding exposure norms of the Bank as C
per policy matters. He is aware that the exposure consists of credit exposure and investment
exposure. He wants to know which among the following will not make part of investment exposure
of the Bank.
A) Investments in shares and debentures of companies
B) Investments in PSU bonds
C) Investments in T-bills
D) Investments in Commercial Papers.
Dead Inventory i.e. slow moving or obsolete items should not be classified as Current. Assets. It C
should be classified as
A) Current Liabilities
B) Fixed Asset
C) Non Current Assets
D) None of these
ABC company approaches Bank for sanction of enhancement of limits. The company is enjoying A
credit limit of Rs 90.00 lakhs and has now requested for sanction of additional Term Loan of Rs 25.00
lakhs besides increase in working capital limit of Rs 10.00 lakhs. Field Officer Ms Bina wants to check
Exected Loss Figure. What formula would you advise her?
A) Expected Loss = Exposure at default X Probability of Default X Loss Given Default
B) Expected Loss = Total Credit Limit X Probability of default X Loss Given Default
C) Expected Loss = Total Outstanding X Probability of default X Loss Given default
D) Expected Loss = Total Exposure X Probability of Default X Loss Given Default
Which is the ‘core test' ratio in project financing? C
A) Current Ratio
B) Debt Equity Ratio
C) Debt Service Coverage Ratio
D) TOL/TNW
While preparing fund flow statement, increase in capital will be considered as? B
A) Short Term Source
B) Long Term Source
C) Short Term Surplus
D) Long Term Surplus
An officer has recently joined as a desk officer in GSSAMT has come to you for clarification regarding B
his Key areas he has to attend. Which among the following in incorrect with regard to SOP of
GSSAMT.
A) The Renewal/ review of accounts will be responsibility of AMT.
B) AMT will consist of one Scale-II officer, one Scale-I officer and one customer assistant and will
handle 200-250 CIFs.
C) It will handle all Govt. Sponsored Scheme loan proposals including MUDRA loans.

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 SME Basic Quiz 51

D) The accounts will be parked in the branches as hitherto, for providing day to day services to the
customers
TOL / TNW is calculated as B
A) Total Liabilities / Net Worth
B) (Total Liabilities - Net Worth)/(Net Worth - Intangibles)
C) (Total Liabilities - Net Worth)/ Net Worth
D) (Total Liabilities - Current Liabilities) / (Net Worth - Intangibles)
Mr. Sitaraman is working in SME Branch Bijapur as RMME. M/s XYX & Co. has submitted documents D
to the Branch for negotiation. MrSitaraman wants to verify genuineness of shipping Bill. Can you
help Mr. Sitaraman from where he can verify the genuineness of documents?
A) https://www.icegate.gov.in
B) EDPMS (Export Data Processing & Management System)
C) Customs Office
D) Any of the above
SARG has been set up with a view to bringing about better focus on management and resolution of D
Non-Performing Assets and assets under stress including----
A) SMA-3
B) SMA-1
C) SMA-0
D) SMA-2
Ms Shruti Nautiyal is working as a desk officer in documentation wing at SMECCC Panchkula. A D
sanctioned proposal of M/s Polytex Pvt Ltd has been received for which documentation is to be
completed. The work has been entrusted to MsNautiyal, what are the points she has to comply while
arranging for execution of documents
A) Ensures compliance with requirements, if any, of corporate borrowers contained in the
Memorandum and Articles of Association, relevant resolution of the Board, etc.
B) A copy of the loan Documents/agreements along with all its enclosures will be delivered to the
borrower (s)
C) Acknowledgement of receipt of handing over the loan Documents/agreements thereof to be
obtained.
D) All of the above
What is maximum CRA rating cap for new non-trading unit with credit facilities of Rs 1.00 crore. D
A) SB-3
B) SB-4
C) SB-5
D) SB-6
What is maximum CRA rating cap for new trading unit with credit facilities of Rs 1.00 crore. D
A) SB-3
B) SB-4
C) SB-5
D) SB-6
Under Tandon Committee method based on the MPBF concept, the amount of WC finance is arrived A
at as a residual source after netting off from the working capital gap, the available NWC or the
required minimum of NWC whichever is
A) Higher
B) Lower
C) as per demand of the borrower
D) neither is correct

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 SME Basic Quiz 52

Mr Abhigyan Bose handling 27 SME customers in the capacity of RMME is posted at Hisar RBO. D
Regional Manger is asking him to complete the CRA exercise in respect of all his customers. He has
3 accounts which are internally rated SB-11 and below. What are the guidelines for carrying out the
CRA exercise in respect of borrowers who are rated SB-11 and below.
A) Reviewed annually
B) Reviewed annually, except the accounts those are covered under Dynamic Rating
C) Reviewed half yearly
D) Reviewed half-yearly intervals, except the accounts those are covered under Dynamic Rating
Advance received from Dealers should be classified as? B
A) Current Assets
B) Current Liabilities
C) Non-Current Assets
D) Term Liability
What will come under investing activity in Cash Flow Statement among the following? D
A) Investment by promoters in shares of company
B) raising of unsecured loans from friends and relatives
C) Sale of finished goods
D) Sale of depreciated machinery at a loss
What is the finished goods holding period in days for a unit with sales of Rs. 374.00 lakh, finished
goods of Rs. 36.00 lakh, cost of goods sold Rs. 328.50 lakh and trade receivables of Rs. 64.00 lakh?
A) 30 days
B) 33 days
C) 35 days
D) 40 days
As on 31.03.2019, Adjusted TNW was Rs. 257 lakh, Deferred Tax Assets outstanding was Rs. 7 lakh, B
Investment in associates was Rs. 50 lakh. Work out the Net Worth of the unit?
A) Rs. 264 lakh
B) Rs. 314 lakh
C) Rs. 307 lakh
D) Rs. 200 lakh
Net Worth of the unit is 168.00 lakhs, Deferred Tax Assets outstanding is Rs. 6.00 lakh, investment B
in Associates is 12.00 lakh and the unit has received advance payment from Dealers is Rs. 8.00 lakh.
What is the Adjusted TNW of the unit?
A) Rs. 142.00 lakh
B) Rs. 150.00 lakh
C) Rs. 156.00 lakh
D) Rs. 162.00 lakh
If the Total of Current Assets are Rs. 117 lakh, Non-Current Assets are Rs. 8.50 lakh and Total Current B
Liabilities is Rs. 102.20 lakh, then what will the amount of long term funds, which are supporting the
financing of current assets?
A) Rs. 6.30 lakh
B) Rs. 14.80 lakh
C) Rs. 23.30 lakh
D) Rs. 21.10 lakh
Bank branches process loans within the time frame as stipulated in Code of Bank’s Commitment to D
SME borrower from the date of receipt of complete application in all respects and is accompanied
by required documents. Which among the following time frame in this regard is incorrect:
A) Application for loan upto Rs. 5 lakh within 2 weeks
B) Application for loan between Rs. 5 lakh to Rs. 25 lakh in 3 weeks
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 53

C) Application for loan above Rs. 25 lakh in 6 weeks

D) All are correct
M/s Raj & Co., a trading firm in FMCG has been availing a cash credit limit of Rs. 60.00 lacs against C
Book Debts (Up to 60 days) with 40% margin. The firm has submitted stock statement showing level
of book debts Rs. 50 lacs (Up to 30 days), Rs. 40 lacs (31 days to 60 days). How much DP will you
allow to the firm.
A) Rs. 64 lacs
B) Rs. 60 lacs
C) Rs. 54 lacs
D) Rs. 50 lacs
M/s X has been sanctioned a cash credit limit of Rs. 80.00 lacs against the stock in your branch. The B
stipulated margin is 30% as per terms of sanction. The firm has submitted a stock statement with
stock having value of Rs. 120.00 lacs. During inspection, you observe that the firm has included
old/obsolete stock worth Rs. 20.00 lacs in their stock statement. What Drawing Power will you allow
for the firm.
A) Rs. 80 lacs
B) Rs. 70 lacs
C) Rs. 60 lacs
D) Rs. 50 lacs
Ms. Chanda has taken over charge of a semi urban branch as a Branch Manager. She observed that D
most of the firms enjoying Cash Credit facility from the branch submit their stock statements on
their letter head. The field oficer calculate DP over stock statement and update DP in CBS. What
action is required to be taken by Ms. Chanda to correct the situation.
A) Stock Statement (Format FSM-3) to be submitted by the borrower (and signed by an authorised
signatory) as per frequency prescribed in relevant scheme
B) Stock Statements received from the Borrower need to be analysed and scrutinized properly.
C) To ensure that there are no slow moving or obsolete stocks and DP is not calculated over it
D) All of the above
Which among the following statement is correct while calculating DP if the actual level of Sundry A
Creditors is within the level considered for assessment of FBWC limit.
A) Sundry Creditors need not be deducted from the value of stocks provided there is no dilution in
NWC or CR, Drawing are within limit and conduct of the account is satisfactory.
B) Sundry Creditors need not be deducted from the value of stocks without considering any other
factors.
C) Sundry Creditors need to be deducted from the value of stocks.
D) All statements are incorrect
As on 31.03.2019, Adjusted TNW was Rs. 257 lakh, Deferred Tax Assets outstanding was Rs. 7 lakh, B
Investment in associates was Rs. 50 lakh. Work out the Net Worth of the unit?
A) Rs. 264 lakh
B) Rs. 314 lakh
C) Rs. 307 lakh
D) Rs. 200 lakh
Disbursement of term loan on reimbursement basis C
A) is prohibited by RBI
B) can be done for 50% of the loan amount
C) Can be done after seeking approval from sanctioning authority
D) Can be done for the entire amount

Term Loan Appraisal

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 SME Basic Quiz 54

Which of the following is not a source of financing the cost of the project? D
A) Share capital
B) Internal cash accruals
C) A development loan from government
D) All are sources of finance
A term loan is an advance for a longer period intended mainly for financing D
A) Acquisition of fixed assets
B) Acquisition of balancing equipment’s
C) Strengthening of NWC etc
D) All of the above
Which of the following information is required to calculate Break Even analysis D
A) Fixed expenses
B) Semi Fixed expenses
C) Variable expenses
D) All of the above
Contingency provision could be in range of? B
A) 1 to10%
B) 5 to 15%
C) 5 to 10%
When total fixed cost equals the contribution called? C
A) BEA (Break even analysis)
B) BEA (Break even assets)
C) BEP (Break even point)
If Fixed cost is Rs 40, Variable cost is Rs 6 per unit , Selling Price is Rs 10 per unit , what is the break A
even point?
A) 10 units
B) 4 units
C) 2 units
D) 8 units
Lower the BEP the higher will be the profitability? A
A) True
B) False
As per the Loan Policy, the average maturity of any term loan including moratorium should not A
normally exceed
A) 10 years
B) 9 years
C) 8 years
D) 7 years
Term Loans can be disbursed in C
A) Lumpsum
B) Instalments
C) Both of the above
D) None of the above
The purpose of term loan is mainly for D
A) Acquisition of fixed assets
B) Acquisition of balancing equipment
C) Strengthening of NWC etc
D) All the above
To calculate Gross DSCR, interest is added to both the numerator and denominator D
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 SME Basic Quiz 55

A) False
B) Maybe
C) Cannot say
D) True
In the calculation of break even point, contribution means D
A) Fixed expenses
B) Sales - Fixed cost
C) Sales - All cost
D) Sales – Variable cost
The formula to calculate the Cash Break Even Point is ________ . B
A) (Fixed Costs + Depreciation) / Contribution * 100
B) (Fixed Costs + Depreciation) / Contribution * 100
C) (Variable Costs + Depreciation) / Contribution * 100
D) (Fixed Costs +Variable Costs+ Depreciation) / Contribution * 100
A company's sale is increasing. Other parameters as proportion of sale in Profit & Loss Account D
remain the same. What will be impact on Break even Point?
A) Break even Point will increase
B) Break even Point will come down
C) Break even Point may go up or come down depending on other aspects
D) Break even Point will remain same
Sh. Kalu Ram Narula was credit officer. During Term Loan appraisals of different units ‘BEP’ was B
calculated. He was in confusion in which risk range the unit will fall depending upon the percentage
of ‘BEP’. He assigned the low risk range to the unit having BEP 64%. The proposal was returned by
the Branch Manager to rectify the risk range. As a broad guideline the break-even at installed
capacity, the level between _________ will be in the medium risk range.
A) 50% and 60%
B) 66% and 70%
C) Above 60% and 70%
D) Above 60% but below 75%
Sh. Naresh Kumar Ausla was credit officer. During Term Loan appraisals of different units 'BEP' was A
calculated . He was in confusion in which risk range the unit will fall depending upon the percentage
of 'BEP'. He assigned the low risk range to the unit having BEP 69%. The proposal was returned by
the Branch Manger to rectify the risk range. As a broad guideline the break-even at installed
capacity, the level between_______ will be in the ‘low risk' range.
A) 51% and 65%
B) 50% and 60%
C) 51% and 60%
D) 45% and 55%
DSCR indicates the degree of viability of project and is a determining factor in fixing C
A) Repayment period
B) Quantum of annual instalment
C) Both the above
D) None of the above
In 'DSCR' ___________ D
A) Debt means 'maturing term obligation viz., installment repayable during a year under all the term
loans/deferred payment guarantees'
B) Service means 'cash accruals comprising net profit plus depreciation and non-cash write-off'
C) DSCR' is a determining factor in fixing the repayment period in Term Loan
D) All are correct
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 56

The following Formula calculates which Ratio (Cash Accruals + Interest on Term Loans) / C
(Installments of Term Loans + Interest on Term Loans + Interest on Term Loans)
A) Debt Service Coverage Ratio (DSCR)
B) Net Debt Service Coverage Ratio (NDSCR)
C) Gross Debt Service Coverage Ratio (GDSCR)
D) All of the above
The maximum tenure for 'Term Loans other than scheme specific' will be ______. C
A) 30 years or project life whichever is lower (with a minimum tail period of 10%)
B) 20 years or project life whichever is lower (with a minimum tail period of 10%)
C) 20 years or project life whichever is lower (with a minimum tail period of 15%)
D) 30 years or project life whichever is lower (with a minimum tail period of 15%)
Tail period refers to A
A) Time between last scheduled repayment date and last date of the useful life of the project.
B) Last Repayment year
C) The difference between DCCO and new DCCO.
D) All the above
Financial feasibility study includes D
A) determining the accuracy of cost estimates
B) examining suitability of the envisaged pattern of financing
C) examining general soundness of the capital structure
D) All of the above
Technical feasibility study is done to_____________________ A
A) to determine the suitability of the technology
B) to ensure that machinery is in good condition
C) To ensure quality of imported machinery
D) All the above
While appraising a term loan, which of the following factors is not to be considered in Technical D
Feasibility ?
A) Location of plant & accessibility to critical inputs
B) Production factors (power, water, utilities, transport etc.) and Availability of Labor (Skilled /
Unskilled)
C) Type of technology and its suitability
D) All are considered
While vetting the Technical Feasibility Report, if required, from whom, second opinion may be C
sought?
A) The officer one scale higher and other than the credit officer handling the proposal
B) From the Bank's Technical Consultancy Cell only
C) From the Bank's Technical Consultancy Cell / Bank's empanelled Consultant/ SBI Caps
D) From outside agencies
In case of a project involving only expansion or modernization, a technical feasibility report by an B
outside agency may not be insisted upon. Is it true?
A) Yes, true
B) Yes, provided that the technical expertise available within the company is considered adequate
for the purpose
C) No, it is required even the technical expertise available within the company is considered
adequate for the purpose
D) None of these is correct
While calculating FACR , one should consider D
A) Collateral security
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 57

B) Third Party guarantees

C) All of the above
D) None of the above
While calculating gross DSCR D
A) Interest on term loan to be added to cash accruals
B) Interest on term loan to be deducted from cash accruals
C) Interest on term loan to be added to repayment obligations
D) Both (i) & (iii)
What is the primary purpose of calculation of DSCR? C
A) ascertain the liquidity levels
B) find out the solvency levels
C) ascertain the viability of the project
D) ascertain leverage levels
Internal Rate of return is A
A) The rate of discount at which the net present value of all future cash flows from the project is
zero.
B) Opportunity cost of funds
C) The difference between revenues and weighted average cost of funds.
D) None of the above
Commercial Viability includes finalization of Debt/Equity ratio. D
A) Maybe true
B) Sometimes
C) False
D) True.
The cushion built into the cost of the project by way of contingency provision could be in range of B
_____ of the cost of non-firm items in the project cost.
A) 5% to 10%
B) 5% to 15%
C) 10% to 15%
D) 10% to 20%
Branch Manger called Mr. Sudhakar , the newly joined officer. He was asked to review all the Term D
Loans. Mr. Sudhakar wanted guidance from BM ,In cases of Stand alone TLs and in cases where term
loans as well as working capital credit facilities sanctioned to a borrower. BM told Mr. Sudhakr some
points regarding review of Term Loans. Which of the following is not correct?
A) Review of TL should form part of the review /renewal of working capital facilities
B) Term Loans which are irregular are required to be reviewed once in six months
C) Stand alone TLs also need to be reviewed annually
D) If review of working capital facilities is being carried out before 1 year, it is not necessary to review
Term Loan alongwith such review / renewal.
Term Loans sanctioned in SME and not availed within____ months from the date of sanction need B
revalidation
A) 3 months
B) 6 months
C) 1 month
D) Not required
The average maturity of any term loan, normally should not exceed ________ . C
A) 10 years excluding moratorium
B) 15 years excluding moratorium
C) 10 years including moratorium
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 SME Basic Quiz 58

D) 20 years including moratorium

The tenor of Term Loan is to be considered from the date _______. D
A) the date of last drawdown.
B) the date of completion of documents.
C) as acceptable to the borrower
D) the date of first drawdown
While appraising a term loan, which of the following are determined under Financial Feasibility? D
A) reasonableness and accuracy of cost estimates,
B) Financial arrangement is complete, without any gaps, and ensures cash is available as and when
needed
C) Estimates of earnings and operating costs are as realistic as possible
D) All are correct
Estimates of cost needs to be vetted thoroughly primarily because A
A) Over estimation may lead to diversion of funds and under estimation would result on cost
overrun
B) Cost estimation will also affect viability of the project
C) Vetting of cost will lead to accurate estimation of working capital requirements subsequently
D) None of the above
Average maturity should invariably be calculated for all the term loans individually. For which type A
of Term Loans, it is not applicable?
A) for term loans having EMI based repayment programmes
B) for term loans having sufficient collateral security
C) for term loans having deferred repayment programmes
D) for term loans which have been rescheduled
The tenor for scheme specific Term Loans should be as per the approved schemes subject to a D
maximum period of ……
A) 10 years
B) 20 years
C) 25 years
D) 30 years.
The maximum tenure for 'Term Loans other than scheme specific' will be ______. C
A) 30 years or project life whichever is lower (with a minimum tail period of 10%)
B) 20 years or project life whichever is lower (with a minimum tail period of 10%)
C) 20 years or project life whichever is lower (with a minimum tail period of 15%)
D) 30 years or project life whichever is lower (with a minimum tail period of 15%)
In Bhaghinaur branch some of the Term Loans were irregular. Branch Manger asked Sh. Mehta, Field D
Officer to file civil suits in cases Limitation period is about to expire. The Credit officer was not sure
about the limitation period applicable in case of Term Loans. He called his friend Mr. Gaurav for
guidance. In your opinion, what Mr. Gaurav would have told Mr. Mehta regarding the limitation
period in case of Term Loan?
A) There is no limitation period applicable in case of Term Loans
B) 3 years from the Default in the payment of any of the instalments
C) 3 years from the date of acknowledgement of debt/ liability
D) 3 years from the Default in the payment of any of the instalments or acknowledgement of
debt/liability
The types of term assistance extended by the Bank can be broadly classified into D
A) Term Loans (including foreign currency loans),
B) Deferred Payment Guarantees (DPGs),
C) Underwriting of Shares/ Debentures
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 59

D) All of the above

Mr. Mohan Chand Gupta, posted at Novakula branch, was appraising three proposal for Term Loan. A
Three units A, B, and C have submitted financial statements to the officer. The Breakeven point (BEP)
shown by unit A, B, and C are 24%, 32% and 38% respectively. Mr. Gupta discussed it with BM and
asked him which unit is more safer? What will be the reply of BM, considering BEP?
A) A
B) B
C) C
D) None of these
While appraising a term loan, its prima facie acceptability otherwise should be examined extensively B
on the same lines as applicable for any other appraisal. It should inter-alia; focus on _______.
A) Quality Production and Profit generation
B) Promoter /Management Appraisal and Industry/Activity Outlook.
C) Projected Turover.
D) Capacity Utilisation
Various factors such as bank's lending policy, exposure norms , industry related risk factors, list of B
defaulters etc are examined to determine the …. of a project
A) scale of operation
B) prima facie acceptability
C) technical feasibility
D) Environmental suitability
The term loan is granted for the purpose of___________ D
A) Acquisition of fixed assets required for new project or expansion/diversification
B) Replacement of high cost debt (for the residual period only)
C) Merger and acquisition
D) All are correct
Which of the following are debt components? D
A) Debentures
B) Term Loans
C) Unsecured loans/deposits
D) All are debt components
When Short Term Funds are used for Long Term purposes but the funds remains within the business, B
is known as
A) Conversion of Funds
B) Diversion of Funds
C) Siphoning of Funds
D) Any of the above
While appraising a term loan, under financial feasibility, we should examine and comment on the C
basically two parameters. What are those two parameters?
A) BEP and Capacity Utilisation
B) Availability of Finance-Source and Amount
C) Cost of Project and Means of Finance
D) Promoter's Contribution and Bank Finance
You are heading a scale III, SME intensive branch. Mr. Anand, a young probationary officer has joined D
your branch for his 2nd branch training. Mr. Anand read in local newspaper about a high value fraud
through diversion of fund. He sought your guidance in understanding the process to prevant
Diversion of fund in working capital limits. How will you explain process for drevention of ‘Diversion
of Fund’ to Mr. Anand.

Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022

 SME Basic Quiz 60

A) By ensuring drawals for cash credit accounts are strictly for the purpose for which the credit
facilities have been granted.
B) By ascertaining the details of investments made in associate companies/subsidiaries/real estate
etc.
C) By ensuring that there is no diversion of working capital finance for acquisition of fixed assets.
D) All of the above
When we assess the term loan proposal, 'IRR' has to be ascertained. 'IRR' is that rate at which ______ D
.
A) present value of the benefits equal to the present value of costs
B) net present value to zero
C) Both are not correct
D) Both are correct
In a term loan proposal , working capital margin represents the provision required to be built into D
the cost of a project, at the peak level during the…..of operations
A) First five years
B) First three years
C) First two years
D) First full year of operations
While appraising a term loan, examine arrangements made for treatment and disposal of effluents D
involved especially in respect of chemical units in compliance with __________ .
A) Manufacturing Process
B) Bye Products
C) Chemicals used during production
D) environment and pollution control stipulations
FSMTL-1 is ………….. B
A) Progress report during implementation of the project by the Inspecting Officials
B) Progress report of implementation of the project submitted by the borrower
C) Progress report after commencement of commercial operation
D) Indicative List of Activities involved in Follow up supervision and monitiring
FSMTL-3 is ………….. C
A) Progress report during implementation of the project by the Inspecting Officials
B) Progress report of implementation of the project submitted by the borrower
C) Progress report after commencement of commercial operation (T/L financed unit)
D) Monthly Statement of Select Operational data (MSOD)

Credit Risk Management

In case an existing units enjoying credit facilities from us, fails to pass entry barrier, what course of C
action is required
A) Exit from the exposure
B) Neither renewal nor enhancement is possible
C) Rating should be downgraded to worse of actual CRA rating or SB- 11
D) Penal interest of 2% is to be applied
E) No action required, it will continue as usual
Which of the following parameters are entry barriers to be cleared by borrowers under CRA exercise C
A) Integrity
B) Compliance of environment Regulation and Local laws
C) Both 1 & 2
D) None of the above
Which of these IS NOT entry barriers? D
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 SME Basic Quiz 61

A) Compliance with Local laws

B) Compliance with environment Regulations
C) Integrity
D) Compliance with Loan Policy
Under Credit Risk assessment exercise (CRA), Units are not assessed under which of the following B
Risk
A) Financial Risk
B) Operational Risk
C) Business & Industry Risk
D) Management Risk
E) They are assessed for all the above mentioned Risk under CRA
A proposal for sanction of various limits of ABC Pvt Ltd is being undertaken by appraising Officer in C
December 2017.The unit will be involved in manufacturing of moulds. The project is likely to start
commercial operation by 31/05/2018.The CRA of the unit will be based on which of the following
Financial Statements
A) Projected 31.03.2018
B) Projected 31.03.2019
C) Projected 31.03.2020
D) Audited 31.03.2017
E) For new units no CRA is required
A unit is having ECR of BBB-, given by rating agency ICRA. The unit has got total score 67 under B
three parameters namely Financial Risk, Management Risk & Business & Industry Risk based on
audited financials as on 31/03/2017. What is the final score of the unit for CRA rating purpose
A) 67
B) 68
C) 69
D) 70
E) 72
A new unit involved in manufacturing of cables and having total exposure of Rs 15 Crs is rated as C
SB-4 based on balance sheet dated 31.03.2017. What will be final rating of the unit considering New
Unit risk factor
A) SB-3
B) SB-4
C) SB-5
D) SB-6
E) SB-10
What is the hurdle rating for New Trading/Non Trading units under CRA C
A) SB-6
B) SB-8
C) SB-10
D) SB-11
E) There is no hurdle rating for new Units
Credit Risk Assessment Models are applicable to all the following segments except E
A) C & I
B) Agriculture(AGL)
C) SSI
D) SBF
E) Personal
Dynamic review of CRA rating with trigger is required in which of the following cases B
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 SME Basic Quiz 62

A) Total exposure of Rs 5 crores & above

B) Total exposure of Rs.10 crores & above
C) Total exposure of Rs.50 crores & above
D) Total exposure of Rs.100 crores & above
E) Dynamic review is required only when CRA rating is below SB-10
Dynamic review without trigger is required to be carried out at what interval C
A) Monthly
B) Quarterly
C) Half –yearly
D) Yearly
E) without trigger Dynamic review is not required to be carried out for any exposure
Dynamic review without trigger is required to be carried out for all exposures of D
A) Rs. 50 Crores &above
B) Rs 100 Crores & above
C) Rs 200 Crores & above
D) Rs 500 Crores & above
E) Rs 1000 Crores & above
Which of the following models is used only in case of CRA Regular and not in case of CRA Simplified C
A) Trade Model
B) Non-Trade Model
C) Construction Model
D) Services Model
E) All the above models are used in both CRA Regular & CRA simplified
Risk weight assigned for exposure rated BB and below under BASEL II guidelines E
A) 50%
B) 75%
C) 100%
D) 125%
E) 150%
Risk weight assigned for exposure rated A- under BASEL II guidelines C
A) 20%
B) 30%
C) 50%
D) 100%
E) 150%
The CRA of a unit under simplified model was calculated based on audited Financials of 31.03.2019 E
and rating was computed as SB-8. The collateral security available is 40% What will be the impact
on final CRA rating
A) It will be upgraded by one notch to SB-7
B) It will be downgraded by one notch to SB-9
C) It will be downgraded by two notch to SB-10
D) It will be downgraded below hurdle rate to SB-11
E) There will not be any downgrade as CRA is not linked to collateral value.

How many rating grades are there under CRA? D

A) 8
B) 12
C) 10
D) 16
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 SME Basic Quiz 63

For awarding facility rating, how many rating grades have been created E
A) 4
B) 8
C) 10
D) 12
E) 16
An ECR agency has given a rating of BBB- to a company, this is considered as measurement of D
A) Market Risk
B) Systemic Risk
C) Operational Risk
D) Credit Risk
E) None of the above
A customer is enjoying One cash credit limit, two term loan, one BG limit & one LC limit, which of D
the following option is correct regarding facility rating
A) One borrower rating & one facility rating
B) One borrower rating &two facility rating
C) One borrower rating & three facility rating
D) One borrower rating &five facility rating
E) Two borrower rating &five facility rating
At what periodicity CRA rating of the borrower accounts need to be reviewed? C
A) Up to SB-8 Annually; SB-9 & worse Half yearly intervals
B) Up to SB-9 Annually; SB-10 & worse Half yearly intervals
C) Up to SB-10 Annually; SB-11 & worse Half yearly intervals
D) Up to SB-10 Annually; SB-11 & worse quarterly intervals
Credit Risk Assessment (CRA) to be reviewed at half yearly intervals for units having CRA D
A) SB-5 & below
B) SB-7 & below
C) SB-10 & below
D) SB-11 & below
E) SB-15 & below
Units below SB-10 review to be carried out at? B
A) Quarterly
B) Half yearly
C) Yearly
Prudential norms have been prescribed to avoid C
A) Diversion of risk
B) Mitigation of Risk
C) Concentration of Risk
D) Transfer of Risk
E) All of the above
How many modules are there in the CUE rating D
A) 3
B) 4
C) 5
D) 7
E) 9
For green field Projects, which of the following modules is not applicable in CUE rating exercise D
A) Customer information
B) Consumer CIBIL
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 SME Basic Quiz 64

C) Commercial CIBIL
D) Financial Information
E) All of the above are applicable
The pricing of the working capital limit of Rs 50 lacs is normally linked with B
A) CRA
B) CUE
C) ECR
D) Financial Soundness
E) None of the above
For renewal cases, which of the following module in CUE will have highest weightage C
A) Financial Module
B) Current Account Module
C) Cash Credit module
D) QCA
E) All of them have equal weightage
Based on Credit Risk Assessment (CRA) score, what is the risk rating assigned to NPA accounts by D
default?
A) SB-11
B) SB-12
C) SB-15
D) SB-16
What is the 'Hurdle Rate' prescribed under internal risk rating model for considering new connection D
or enhancement in credit limits?
A) SB-5
B) SB-6
C) SB-7
D) SB-10
As per the Loan Policy, no enhancements in credit limits or new connections are to be considered B
in respect of accounts rated below
A) SB 8
B) SB 10
C) SB 9
D) SB 12
Expand CUE? B
A) Credit Undertaking Engine
B) Credit Underwriting Engine
C) Credit Undergoing Engine
The CUE rating once validated should not be reviewed /revised within ….. months from validation. B
A) 3 months
B) 6 months
C) 12 months
PACE tool is Applicable in Greenfield Units. B
A) True
B) False
For proposals with exposures exceeding Rs. …. for which the financial analysis (PACE) is mandatory. A
A) 50 Lacs
B) 5 Cr
C) 50 Cr
SB-1 is considered as? C
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A) Medium risk
B) Lowest risk
C) High risk
ECR is mandatory for exposure? B
A) 100 Cr and above
B) 50 Cr and above
C) 150 Cr and above
CRA model is mandatory for all accounts with aggregate exposure of? B
A) 100 lacs and above
B) 500 lacs and above
C) 50 lacs and above
CRA model to be used in case of consortium advance, where our Bank is leader, is based on A
A) Credit Limits to be sanctioned by our Bank
B) Total Credit Limits from consortium
C) Total credit limits enjoyed by unit from consortium and other Banks outside consortium
D) Total Credit Limits from consortium and investment of consortium member Banks
Scoring model for all products with exposure of less than? D
A) 100 lacs
B) 200 lacs
C) 500 lacs
D) 50 lacs
Score for leverage ratio of a unit is awarded A
A) Financial Risk
B) Business & Industry Risk
C) Management Risk
D) Qualitative Parameters
The CUE rating can be revised after how many months from validation? C
A) 12 Months
B) 9 Months
C) 6 Months
D) 3 Months
Borrower’s related parties, like partners, proprietor, directors and guarantors are analyzed under B
which of the following modules of CUE
A) Commercial credit bureau (CIBIL )
B) Consumer credit bureau (CIBIL)
C) Qualitative Credit Assessment (QCA) module
D) Financial information
The CRA rating of PQR Pvt. Ltd. based on the audited balance sheet of 31.03.2020 was SB-9. The D
account became NPA on 31/12/2020, what will be impact on CRA rating
A) Rating will be retained as SB-9 till 31.03.2021
B) Rating will be retained as SB-9 till next CRA exercise
C) Rating will be downgraded to SB-15
D) Rating will be downgraded to SB-16
Which of these risks is not main classification of risk under CRA? B
A) Financial Risk
B) Compliance Risk
C) Business & Industry Risk
D) Management Risk

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 SME Basic Quiz 66

Different types of ratios, as per the latest redrawn financials from the PACE tool, are used under C
which module
A) Customer information
B) On-us Cash-credit module
C) Financial module
D) Qualitative Credit Assessment (QCA) module
Customer information module quantifies key profile factors pertaining to D
borrower's_________________
A) constitution
B) region
C) length of relationship
D) All the above
Objective of the credit monitoring is A
A). Ensuring maintenance of high quality of credit portfolio.
B) Ensuring that the present borrower brings in more business to the Bank.
C) To appraise the performance of credit department.
D) To ensure good quality of service to the borrowers and guarantors at all times.

Bank Guarantee
Bank Guarantee was issued on 05-04-2018 for a period of 12 months against 100 percent cash B
margins. After its expiry the customer has requested to extend this BG for a further period of 12
months. Does the branch has to take prior administrative clearance in this case?
A) Extension will be treated as fresh guarantee issued. Hence, PAC is not required
B) As the BG has been issued against 100 percent cash margins no PAC required
C) BG issued for period less than 18 months but that has been subsequently extended, exceeding
in aggregate of 18 months from its original issue date will require PAC
D) None of the above
Can a Bank Guarantee be issued for a maturity period beyond 10 years? D
A) Yes, against 100% cash margin
B) Yes, with prior approval of the competent authority
C) No, cannot issue BG beyond 10 years
D) Both A and B above
What is the minimum claim period in a Bank Guarantee? A
A) 1 year from the date of expiry of the validity period
B) 1 year from the date of issue
C) 6 months from the date of expiry of the validity period
D) 18 months from the date of issue
Bank Guarantee issued on behalf of exporters favoring the customs department under EPCG B
Scheme is categorised under -------?
A) Performance Guarantee
B) Financial Guarantee
C) Deffered Payment Guarantee
D) Any of the above
Mr. Joseph has approached your branch for issue a Bank Guarantee for Rs. 20.00 lakhs against the B
security of a fixed deposit for a period of 24 months. Does the branch requires to take administrative
approval before issuing Bank Guarantee.
A) BG issued upto 36 months against 100 percent cash margins does not requires any administrative
approval from any authority.
B) No administrative clearance in case of 100% margin
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C) BG issued upto Rs. 50.00 lakhs against 100 percent cash margins does not requires any
administrative approval irrespective of the period
D) Now bank has changed the instructions, BG issued upto 24 months does requires prior
administrative clearance
Bank Guarantee for periods beyond 120 months should be considered only against 100 percent C
cash margins. However, BGs are issued against underlying long term project finance where business
units may need to issue long term BGs at lower margins. In case BGs are issued beyond 120 months
at lower cash margins who is the competent authority for approving such cases?
A) CGM Circle
B) CGM Vertical
C) DMD of the respective vertical
D) MD of the respective vertical
Bank Guarantee issued by branch for Rs. ----- and above should invariably be signed by two officials A
jointly with their SS numbers.
A) Rs. 50,000/-
B) Rs. 1.00 lakh
C) Rs. 5.00 lakh
D) Rs. 10.00 lakh
As per extant instructions branches will ensure that all Bank Guarantees issued through SFMS mode C
only. All BGs are to be advised through SFMS immediately and BG is to delivered to the beneficiary
along with 'BG beneficiary issuance advice'. This advice can be generated through which software?
A) SFMS
B) SWIFT
C) Exim bill software
D) LLMS
Bank guarantees should normally be issued on the standard format issued by ….. B
A) Reserve Bank of India (RBI)
B) Indian Banks Association (IBA)
C) State Bank of India (SBI)
D) Government of India
Bank Guarantee should be issued for a definite period and specific amount. A
A) True
B) False
The claim period of Bank Guarantees (fresh or extension) shall invariably be specified, minimum of C
…… from the date of expiry of validity period.
A) One month
B) Six month
C) One year
After ….. days of expiry, BG should be marked off(removed) in the system. C
A) 3 days
B) 5 days
C) 7 days
D) 10 days
The beneficiary of the bank guarantee can invoke in writing, the guarantee any time before the B
expiry of the claim period.
A) False
B) True
Capital requirement for a financial guarantee will be ___times that required for performance B
guarantee?
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A) 5
B) 2
C) 10
In SBI MF the face value of units accepted as the equivalent of cash margin for NFB exposure should D
be equal to __% of cash margin stipulated?
A) 100%
B) 75%
C) 50%
D) 125%
BG is issued on 16.03.2018 and the validity period is 31.12.2018, the commission to be recovered is B
for a period of
A) 9 months & 15 days
B) 10 months
C) 12 months as commission is required to be recovered on quarterly basis
D) 12 months as commission for minimum period of 12 months is required to be recovered
Can a BG be amended after issuance ? B
A) No
B) Yes, with the consent of all the parties concerned
C) Yes
D) At the discretion of Bank
BG issued for a period of 6 years against 100% cash margin. Period Angle Clearnace (PAC) is required C
to be taken from
A) DGM
B) GM
C) No PAC required. In this case
D) CGM
BG issued in lieu of advance payment for Raw Material falls under C
A) Performance Guarantee
B) Either Performance or Financial Guarantee depending upon deal
C) Financial Guarantee
D) None of the above
Assessment of Deferred Payment Guarantee should be done on the lines of D
A) Working Capital Assessment
B) LC Assessment
C) Normal Bank Guarantee Assessment
D) Term Loan Assessment
Can BGs with automatic renewal clause be issued by the Bank? C
A) Yes
B) No
C) Yes, only to select beneficiaries such as customs authority, courts and overseas project owners in
respect of project exports
D) Can't say
The Bank Guarantee is a collateral contract, consequential to a main contract between the … B
A) Banker and Borrower
B) Applicant and the beneficiary
C) Banker and beneficiary
D) Borrower and Guarantor
Person to whom the BG is given and who has the right to enforce it, is called C
A) Applicant
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B) Guarantor
C) Beneficiary
D) Buyer
Bank Guarantee can be classified in ……. Categories A
A) Two
B) One
C) Three
D) More than three
Why proper classification of BGs is required? D
A) To increase BG business
B) To increase commission
C) Both a & b
D) For correct calculation of Capital Charge
Maximum period for which a BG can be issued without prior administrative clearance B
A) 24 months
B) 18 months
C) 36 months
D) Any period
Normally, BG should not have a maturity of more than ……. Years. A
A) 10
B) 5
C) 3
D) 7
What is the % of margin required for issuing BG related to disputed payments D
A) 50%
B) 110%
C) 25%
D) 100%
Deferred Payment Guarantee (DPG) is …… B
A) a contract to pay the dues to the Government authorities
B) a contract to pay to the supplier the price of machinery as per the terms of contract on the due
dates if defaulted by the buyer.
C) Not at all a contract
D) a contract to pay the price of raw material to the suppliers as and when asked by them
A BG of Rs 100000 was issued on 01/04/2018 for 12 months, however customer has again B
approached the branch on 01/09/2018 itself to extend the validity up to 31/03/2020. Is
administrative clearance required
A) No fresh extension is only for 12 months,
B) Yes, 18 months period should be taken from date of issue
C) Yes, remaining validity of the BG as on date of extension is more than 18 Months
D) Either b or c
EPCG bank guarantee is issued on behalf of those customers considering their capacity to meet C
A) Import target
B) Domestic sales
C) Export sales
D) Intra Group sales
NFB (LC/BG) to Related Parties can be sanctioned D
A) As part of sub -limit within overall NFB limit
B) LC/BG issued to Related party over and above sub-limit, at 100% margins
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C) Guidelines are applicable irrespective of ECR and category of borrower

D) Only a &b

Letter of Credit
All CAG and CCG branches are authorised to purchase/discount bills under Letter of Credit. Other B
than these branches who has the authority to grant permission to purchase/discount bills?
A) DMD (Vertical)
B) CGM (Circle)
C) CGM (Vertical at Corporate Center)
D) GM (Network)
A ------- allows the beneficiary to receive partial payment before shipping the products or C
performing the services. Originally these terms were written in red ink. In practical use, issuing bank
will rarely offer these terms unless the beneficiary is very crediworthy or any advising bank agrees
to refund the money if shipment is not made
A) Revolving LC
B) Green Clause LC
C) Red Clause LC
D) Confirmed LC
If beneficiary doesn’t trust issuing Bank it can get LC ------- by another bank of its choice. A
A) Confirmed
B) Irrevocable
C) Red Clause
D) Green Clause
Letter of Credit is a letter issued by a Bank/Financial Institution to another Bank/Financial Institution A
to serve as a guarantee for payments made to a specified person under specified conditions. Who
gives this guarantee to the beneficiary for payment?
A) Issuing Bank under LC
B) Nominated Bank under LC
C) Negotiating Bank under LC
D) Advising Bank under LC
What is time available with LC opening Branch for examination of documents received under LC and D
advising discrepancies after which documents will be considered accepted automatically.
A) 3 days
B) 5 days
C) 3 working days
D) 5 working days
Margins deposited for LCs and Guarantees relating to working capital will be included in the Current D
Assets. However, LC Margin for Project LC/LC for Import of fixed assets must be classified As
A) current Liabilities
B) Current Assets
C) fixed assets
D) Non Current Assets
Margins deposited for LCs and Guarantees relating to working capital will be included in the B
A) Current Liabilities
B) Current Assets
C) Cash Margin in the form of liabilities
D) None of these
Letters of Credit are usually issued by Bank/Financial Institutions. Besides these two, LC can be issued C
by ----
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A) Insurance Companies
B) Mutual Funds
C) Both of the above
D) None of the above
Letter of Credit is a letter issued by a Bank/Financial Institution to another Bank/Financial Institution A
to serve as a guarantee for payments made to a specified person under specified conditions. Who
gives this guarantee to the beneficiary for payment?
A) Issuing Bank under LC
B) Nominated Bank under LC
C) Negotiating Bank under LC
D) Advising Bank under LC
In context to Letter of Credit which among the following definitions are wrong D
A) Beneficiary - The company or individual who will receive the payment from buyer
B) Issuing Bank - The Bank which issues the LC to the seller
C) Advising Bank - The Bank which advises the Lc to beneficiary
D) Confirming Bank - Must be the issuing Bank
Letter of Credit has ____ parties. C
A) Two
B) Three
C) Four
D) Five
Which of the following statements is incorrect about Irrevocable letter of credit? C
A) This cannot be amended or cancelled without the agreement of all parties thereto
B) This type of letter of credit is mainly in use and offers complete protection to the seller
C) This type of letter of credit is mainly in use and offers complete protection to the buyer
Which of the following statement is correct about a letter of credit? C
A) The function of advising bank and negotiating bank may be undertaken by a single bank.
B) The function of advising bank and confirming bank may be undertaken by a single bank.
C) The function of advising bank, confirming bank and negotiating bank may be undertaken by a
single bank
D) Each function should be undertaken by different banks
LCs for purchase of machinery / capital goods should be C
A) backed by borrower’s own funds
B) firm sanction of term loan
C) anyone of the above
What is complying documents under LC? D
A) Documents as per LC terms
B) Documents as per UCP600 terms
C) Documents as per international standard banking practices terms
D) All
Which of the following is not a feature of letter of credit? D
A) Helps in reducing FBWC requirement for buyer
B) Helps seller to get immediate payment though credit is extended by him.
C) Bank intermediate lends its creditworthiness for which it charges the applicant.
D) An issuing bank issues LC at the request of the beneficiary
An LC provides for allowing pre-shipment credit the beneficiary. It is called D
A) Confirmed LC
B) Irrevocable LC
C) Back to back LC
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D) Red clause LC
Name of LC when Bank provides finance for Pre-Shipping at the port for shipment? A
A) Green Clause LC
B) Red Clause LC
C) Back to back LC
D) Confirmed LC
A letter of credit which is backed by other letter of credit is termed as '___________' credit and is also A
used when middleman is involved in a sale transaction.
A) Back to back
B) Red clause LC
C) Irrevocable LC
D) Green clause LC
Under, UCPDC-600, the term “ Middle” of a month shall be construed as C
A) Second week of the month
B) Third week of the month
C) 11th to 20th day of the month
D) 5th to 15th day of the month
UCPDC means B
A) Uniform code and practices for Documentary Credit
B) Uniform Customs and Practices for Documentary credits
C) Uniform practices for documentary credit
D) Uniform Code and Procedures for Documentary Credits
UCPDC-600 have been revised by: C
A) Bank of International Settlement
B) World Bank and IMF
C) International chamber of Commerce, Paris
D) United Nations Organisation
Letter of credits are transmitted internationally through SWIFT messages in SWIFT standard formats. C
What is the message type used by the LC issuing Bank?
A) MT 500
B) MT 600
C) MT 700
D) MT 800
Complying presentation is a presentation that is in accordance with D
A) the terms and conditions of the credit
B) the applicable provisions of (UCP 600)
C) international standard banking practice
D) All of the above
While opening LC, we should take care that D
A) We should normally open letters of credit for their own customers who enjoy credit facilities
B) The application should be properly scrutinised to establish the genuine need of the customer
C) Means, creditworthiness and standing of the importer/applicant
D) All of the above
UCPDC guideline issued by? C
A) ICC Australia
B) IBA Paris
C) ICC Paris
What is complying documents under LC? D
A) Documents as per LC terms
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B) Documents as per UCP600 terms

C) Documents as per international standard banking practices terms
D) all of the foregoing
LC expires on 21.06.2019. Beneficiary submits the documents with usance bill with maturity date B
21.08.2019. Is it advisable to extend the expiry date of LC?
A) Yes LC should be amended with expiry date extended up to 21.08.2019
B) Not necessary to extend expiry date provided documents are presented within presentation
period.
C) Maturity date of draft can not occur beyond the stated expiry date hence expiry extension is must
D) Take the consent of the importer
Bills discounted/negotiation limit under LC can be sanctioned outside ABF against D
A) LCs opened by our Bank branches
B) LCs opened by Domestic First Class banks
C) LCs opened by Overseas Correspondent Banks
D) Any of the above
Importer receives goods of inferior quality under LC transaction. However, there is no discrepancy C
in the documents submitted. Which among the following is applicable
A) Importer can refuse payment on grounds of inferior quality of goods
B) LC issuing bank can refuse payment
C) Payment cannot refused as documents are complying with terms of LC
D) Negotiating bank should seek recourse from exporter
Importer is called ________ while seller is called _____ under LC? B
A) Beneficiary, applicant
B) Applicant, beneficiary
C) Importer, seller
If importer buyer not able to pay bill under LC then it is called? A
A) Development of LC
B) Promotion of LC
C) Bad LC
LC for purchase of machinery should be backed by? B
A) Bank or demand loan
B) Customer own fund or term loan sanctioned for that purpose
If payment of bills under LC is allowed by permitting irregularity in CC then irregularity should be B
regularised within?
A) 7 days
B) 15 days
C) 10 days
D) 11 days
Who gives undertaking to the beneficiary for payment under LC? A
A) Issuing bank of LC
B) Advising bank
C) Nominated bank
A/An ____________ advises a beneficiary (exporter) that a letter of credit (L/C) opened by an issuing B
bank for an applicant (importer) is available.
A) Issuing bank
B) Advising bank
C) Nominated bank
When the Confirming Bank adds confirmation to the LC, it takes over the responsibilities of the A
___________ in case the LC is devolved.
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A) Issuing bank
B) Advising bank
C) Nominated bank
How many articles in UCP 600? D
A) 30
B) 36
C) 37
D) 39
In what type of letter of credit is payment delayed until a specified future date? B
A) Sight
B) Usance
All inland LC has to be opened through ____ and Foreign LC to be opened through ____ only. A
A) SFMS; SWIFT
B) SWIFT; SFMS
The validity of Revolving LCs should not be for more than ___ C
A) 1 month
B) 6 months
C) 1 year
D) 5 year
Letter of Credit(LC) is also called as... C
A) Documentary Credit
B) Banker’s Commercial Credit
C) Both A and B
An Exporter is enjoying Foreign Bill purchase limit with your Branch which is fully drawn. He has C
approached you with a request to help him raise funds against some additional export bills as some
of his export bills drawn under LC have discrepancies. How can you help him?
A) Politely decline his request as Bank has no such product
B) Rediscount his export Bills
C) Give him Advance against Bills sent on collection basis
D) Give him advance against goods sent on consignment basis
M/s Arihant is an importer corporate of AA rating. He got a Letter of Credit issued for import of raw C
material and has also routed the import documentary bill through your Branch. Before the due date
of the bill he has requested you to arrange for credit facility against the said LC through your Foreign
office.
Which of the following action is to be done on maturity?
A) DB recovers amount from importer and credits to NOSTRO A/c of FO
B) DB recovers amount from importer and credits to EPC of Exporter
C) Only 1
D) Only 2

Preparation of proposals
Name the loan proposal sanction format which will be put up to the sanctioning authority, for total A
exposure of Rs 25 lac to Rs 1 cr.
A) Form S2
B) Form DDS
C) Form S
D) Form M
Details of credit limits comes under which broad parameter A
A) Section B- Present proposal
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B) Section C- Performance & financial indicators.

C) Section F- Assessment of Fund based limits.
D) Section E- summary of critical risk factors
Brief background of the unit to cover: D
A) Key milestones achieved since incorporation
B) Technical collaboration
C) Group companies
D) All of the above
The purpose for enhancement of limits may be: D
A) Change in operating cycle
B) Change in product mix.
C) Increase in capacity addition
D) All of the above
The following should not be treated as non-interest income while calculating RAROC: C
i) Income from NCD/CP/CD.
ii) Fixed deposits kept as margin.
iii) Fixed deposits (not kept as margin)
A) (i) is correct statement.
B) Both (i) &( iii) are correct statements.
C) All the (i), (ii), (iii) are correct statements.
D) None of the above statements are correct

Post Sanction Process

What is the maximum Post Shipment Finance that can be extended in relation to the invoice value B
of goods?
A) 50%
B) 100%
C) 110%
What is the period prescribed for realization of export proceeds from the date of Shipment? C
A) 3 months
B) 6 months
C) 9 months
D) 12 months
FFR-I to be submitted ……………… A
A) Monthly
B) Quarterly
C) Half yearly
D) Yearly
FSM-6 deals with--------- B
A) Monthly Stock Statement
B) Inspection Report
C) Monthly Select Operational Data
D) Follow up Register for monitoring timely of FFRs /statements
Which among the following is not a tool to ensure End use of funds? D
A) Stock Statements
B) FFRs
C) Stock audit
D) Pre disbursement Compliance Certificate

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 SME Basic Quiz 76

Mr. Sohan has recently taken over charge of a Field Officer in a branch. While going through Audit D
Report, he observed that auditor has commented adversely regarding maintenance of inspection
record in many accounts. What Mr. Sohan is required to do to avoid occurrence of such audit
irregularities.
A) After inspection branch official to ensure entry of inspection in CBS (& generate inspection
reports in LLMS/LOS as applicable)
B) Submitting Inspection Report (FSM-6) to higher Authority
C) Noting their observations for meticulous compliance
D) All of the above
During implementation of the project, which of the following statement is required from borrower and at C
what intervals
A) FSMTL 2, Quarterly
B) FSMTL 2, Half yearly
C) FSMTL 1, Quarterly
D) FSMTL 3, Quarterly
FFR-I and FFR-II is to be submitted by which of the unit C
A) Unit enjoying Working Limit of Rs 5 Crores and above
B) Unit enjoying Working Limit above Rs 5 Crores
C) Unit enjoying Working Limit of Rs 10 Crores and above
D) Unit enjoying Working Limit above Rs 10 Crores
Future Moulds Pvt. Ltd. is engaged in manufacturing of Plastic Bottles. The Company has invested Rs. 85 lac C
from working capital limit for acquiring plot of land for future expansion. The investment made by the
Company is to be considered as …………
A) Withdrawal of funds
B) Siphoning of Funds
C) Diversion of Funds
D) None of the above
What are two types of Standard Covenants prescribed by the Bank? A
A) 1. Mandatory 2. Mandatory Negative
B) 1. Mandatory 2. Non-Mandatory
C) 1. Mandatory Positive 2. Mandatory Negative
D) None of These
NOC for opening of current accounts by our borrowers with a non-lender bank shall have to be authorised D
by an official not below the rank of a ………………………… for units whose proposals are sanctioned by CLCC &
below.
A) DGM
B) General Manager (Net Work)
C) Chief General Manager
D) Current account with non lender bank is not allowed
As per Stock Statement as on 31.10.2019, total Current Assets level was Rs. 250 lac. Out of which, the B
chargeable current assets was 90% of total current assets. As per terms of sanction, 20% margin on
chargeable current Assets has been stipulated for FBWC limit of Rs. 170 lac. What would be the drawing
power for the month of November 2019?
A) Rs. 180 lakh
B) Rs. 170 lakh
C) Rs. 225 lakh
D) Cannot be calculated from the given information
In case the borrower wants to undertake any activity, listed in the Mandatory Negative Covenants, how C
much days’ notice is required to be given by the borrower?
A) 15 Days
B) 30 Days
C) 60 Days

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 SME Basic Quiz 77

D) 90 Days
ABC Ltd. is engaged in manufacturing of Plastic Bottles. The Company has invested Rs. 85 lakh from working D
capital limit for acquiring plot of land for future expansion. The investment made by the Company is to be
considered as ………?
A) Investment of funds
B) Withdrawal of funds
C) Siphoning of funds
D) Diversion of Funds
FFR-II is to be submitted within how many days? B
A) 67 days from the end of quarter
B) 67 days from the end of half year
C) 52 days from the end of quarter
D) 52 days from the end of half year
Semi-finished goods should be valued at? C
A) Cost of purchase
B) Cost of production
C) Cost of production or selling price or market price or Govt. controlled rates, whichever is the lowest
D) Cost of goods sold
Which of the following is one of the effective monitoring tools available to Credit Officer in credit monitoring C
of a Unit enjoying working capital limit?
A) Collateral Security of 220% of loan value
B) Scrutiny of exceptional System Reports at half yearly intervals
C) Periodic stock inspection of the Unit
D) Pre-sanction market survey
The nature of charge to be registered with ROC is D
A) Hypothecation & Lien
B) Pledge & Mortgage
C) Lien & Assignment
D) Hypothecation & Mortgage
What is the primary purpose of calculating drawing power in a fund-based working capital facility? D
A) To ensure that bank funds are not tied up in obsolete stocks
B) To check that the value of eligible assets is at least equal to the approved credit limit
C) To ensure that drawings are being used to fund assets
D) To determine the amount the customer can draw on
What type of transactions would require further investigation in a Working Capital finance? C
A) Debits for frequent suppliers
B) Debits for salaries
C) Debits of round figure sums
D) Credits for sales turnover
Which statement is correct with respect to the Law of Limitation? A
A) It limits the period within which the debt can be recovered from the borrower
B) It limits the type of advances which can be recovered from the borrower
C) It limits the amount t which can be recovered from the borrower
D) It limits the jurisdictions in which debts can be recovered from the borrower
What information can be obtained from CRILC? C
A) Details of willful default by the borrower
B) Details of other companies with common directors
C) Borrower’s loan account being reported as SMA by another bank
D) Details of criminal case against the promoters
Which of the following statements best describes the purpose of stock audit? D
A) Stock audit is a monitoring tool employed when the relationship team is not able to carry out unit
inspections due to time constraint
B) Stock audit conveys to the borrower that the bank is seriously keeping a watch on his business
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C) Stock audit is one more monitoring tool

D) It is an independent third party insight on the borrower’s affairs and a detailed examination of specific
issue in relation to the borrower’s business, if required
Of the following, which is a purpose of monitoring? (i) Ascertain the level of current assets (ii) Ascertain if D
the unit’s operations are as per the projections (iii) Be aware of events that can impact the borrower’s
business
A) Option (i)
B) Option (i) and (iii)
C) Option (ii) and (iii)
D) All the options
Why should you check for any inventory pile-up during unit inspection? C
A) Inventory pile-up officers additional business opportunity in terms of the borrower’s need for more
financing
B) Higher inventory may pose a logistical challenge for the unit in terms of handling / storage
C) Inventory pile-up may be indicative of adverse developments such as obsolescence, reduced market
acceptability, order cancellation, speculative intentions etc.
D) Excess inventory, when disposed off in bulk, would lead to sudden cash inflow which would cause cash
Imbalance
Why should the stock statement include age-wise break-up of receivables? D
A) It facilitates enforcement of the bank’s security in recovery proceedings in the vent of default
B) It is mandatory as per RBI guidelines
C) It is always helpful to get as much information as possible so as to be ready to meet any future
requirement of such information
D) It enables the bank to identify the receivables within and outside the sanctioned cover period. Further, it
gives a sense about the pace of realization of receivables and impending bad debts
What is timeline for Assigning / offering of SRA to Bank’s empaneled Auditors? a
A) 30 days before the due date of prescribed periodicity (yearly / half yearly / quarterly) as the case may be.
B) 45 days before the due date of prescribed periodicity (yearly / half yearly / quarterly) as the case may be.
C) 15 days before the due date of prescribed periodicity (yearly / half yearly / quarterly) as the case may be.
D) No such timeline
In case the borrower wants to undertake any activity, listed in the Mandatory Negative Covenants, how c
much day’s notice is required to be given by the borrower?
A) 15 Days
B) 30 Days
C) 60 Days
D) 90 Days
The units enjoying working capital exposure of Rs. 300 crore has to submit, which of the following returns D
along with the Stock and Receivables Statement?
A) GST Returns
B) Statement of Accounts, maintained with other Banks
C) Details of all invoices above Rs.10 lakh along with GST No. of debtors
D) All the above
QRR-II is to be submitted within how many days? B
A) 67 days from the end of quarter
B) 67 days from the end of half year
C) 52 days from the end of quarter
D) 52 days from the end of half year
Semi-finished goods should be valued at? C
A) Cost of purchase
B) Cost of production
C) Cost of production or selling price or market price or Govt. controlled rates, whichever is the lowest
D) Cost of goods sold
Stressed Asset Management
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 79

Reporting of Irregularity in NPA Accounts C

A) Immediate reporting (i.e. on loan account being classified as NPA)
B) Subsequent reporting on annual basis including variation in irregularity / outstanding on account
of accrued but unapplied interest or other
C) Both 1 & 2
D) Quarterly with or without any change of outstanding/ irregularity
Effect of erosion in security value/frauds on classification of NPAs. C
A) When the realizable value of the security is less than 50 per cent- Doubtful
B) If the realizable value of the security, as assessed by the bank/ approved valuers/ RBI is less than
10 per cent of the outstanding- Loss
C) Either of the above
D) None of the above
If a bank fails to fetch a return in the form of interest realized from the borrower in case of Loans, A
the bank has no right to book that interest chargeable as income in its balance sheet as per income
recognition norm of RBI. Based on the above premise which statement is incorrect?
A) This will not apply to Government guaranteed accounts
B) interest on advances against term deposits, NSCs, IVPs, KVPs and surrender value of life insurance
policies may be taken to income account on the due date, provided adequate margin is available in
the accounts
C) If any advance, including bills purchased and discounted, becomes NPA, the entire interest
accrued and credited to income account in the past periods, should be reversed if the same is not
realized
D) The accrued interest calculated for NPA accounts will not be part of Bank's gross advances
Asset classification of accounts under consortium is as A
A) it should be based on the record of recovery of the individual member banks
B) if Account of one bank is NPA it will render all other participating Bank to classify NPA in their
books
C) Pooling of remittances by the borrower under consortium lending arrangement is with one Bank
and sharing of pooled amount with other bank is not taking place it will not have any effect on asset
classification
D) None of the above
What is the timeline for Branches to invariably report default in Borrowal accounts to the appropriate B
Authority?
A) With in 7 days of irregularity occurs
B) before 10th day of succeeding month
C) before 15th day of succeeding month
D) By the end of the succeeding month
As per the Insolvency & Bankruptcy Code 2016, appeal against the order of NCLT can be filed C
at___________
A) Supreme Court
B) DRAT
C) NCLAT
D) HIGH COURT
Borrower can file application Against the SARFAESI action taken by the Bank under Section 13(4) in A
which court and the timeline prescribed for the same is
A) DRT under section 17 with in 45 days
B) DRAT under section 18 within 45 days
C) DRT under sec 18 within 30 days
D) DRAT under sec 19 within 30 days
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 80

Action under SARFAESI Act, 2002 can be initiated in the following cases:(find the incorrect option) D
A) The account should be an NPA as per RBI guidelines
B) The claim amount (including accrued interest) should be for an amount not less than Rs.1.00 lac.
C) The amount due (including interest) should be more than 20% of the principal amount and
interest thereon
D) The account should be classified as SMA or NPA as per RBI guidelines
What is incorrect regarding SARFESI action u/s 13(2) of the Act D
A) DRT/Civil Court to be informed suitably in consultation with the Advocate handling the matter
regarding initiation of action u/s 13(2) of the Act, where, suit is pending at DRT/Civil Court.
B) For Objections Raised by the Borrower, the Authorized Officer shall communicate the reasons for
non- acceptance within 15 days of receipt of such representation or objection
C) the Authorised Officer shall modify the notice and issue a fresh notice within 15 days from the
date of receipt of the representation or objection if accepted
D) If the Borrower(s)/Guarantor(s) makes fresh objection/representation after issuance of modified
notice further objections will be rejected Suo motu
A suit for recovery of bank's dues can be filed before the Civil Court in case where dues amount B
from the borrower is less than
A) Rs. 10 Lakh
B) Rs. 20 Lakh
C) Rs. 30 Lakh
D) Rs. 25 Lakh
For the sale of immovable property as per SARFAESI Act 2002 _____ days notice is required to be A
served and after failure of the first sale of the immovable property, only __________ days' notice is
required to be served to the borrower/ guarantor for any subsequent sale
A) 30,15
B) 30,30
C) 15,15
D) 15,30
If the notice of SARFAESI action returns then what is not to be done D
A) the service should be effected by affixing a copy of the demand notice on the outer door/other
conspicuous place where the Borrower(s) /Guarantor(s) reside
B) Returned cover should be preserved carefully on record to be used as evidence, when required.
C) Contents of the notice to be published in two leading news papers, one in English and one
vernacular, having sufficient circulation in that locality
D) Copy of the newspapers where the notice have been published may be kept on record
Action Required Before Issuing SarfaesiNotice : (find the incorrect option) C
A) In NPA accounts identified for SARFAESI action, the loan documents including EM documents
pertaining to securities held should be legally enforceable and within the period of limitation
B) Assets charged to the bank should be inspected and identified.
C) Approval for issuing notice under section 13(2) of SARFAESI Act, 2002 to be obtained from the
Controller in case of Branch with incumbency of Scale IV and above
D) Before initiating action under Section 13(4) of SARFAESI Act, the Branch should invariably obtain
approval of the appropriate authority as per the authority structure for transfer to Recalled Assets
An asset, including a leased asset, is considered as non-performing when it ceases to generate D
income for the bank which includes (find the odd man out)
A) interest and/ or installment of principal remain overdue for a period of more than 90 days in
respect of a term loan
B) The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted,
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 81

C) in respect of derivative transactions, the overdue receivables representing positive mark-to-

market value of a derivative contract, if these remain unpaid for a period of 90 days from the
specified due date for payment
D) The account remains ?out of order' in respect of an Overdraft/Cash Credit (OD/CC) over 90 days
Effect of erosion in security value/frauds on classification of NPAs. C
A) When the realizable value of the security is less than 50 per cent- Doubtful
B) If the realizable value of the security, as assessed by the bank/ approved valuers/ RBI is less than
10 per cent of the outstanding- Loss
C) Either of the above
D) None of the above
A suit for recovery of bank's dues can be filed before the Civil Court in case where dues amount B
from the borrower is less than
A) Rs. 10 Lakh
B) Rs. 20 Lakh
C) Rs. 30 Lakh
D) Rs. 25 Lakh
Reporting of particulars of account in CRILC is mandatory. C
A) For Loan above Rs.5 Crores.
B) For loan above Rs.5 Crores including SMAs.
C) For loan above Rs.5 Crores including SMAs and Non-coperative borrowers.
D) None of the above.
What is the penal interest charged on the irregular Loans D
A) 2% od penal intt on CC and 2% on TL for irregular portion respectively
B) 3% od penal intt on CC and 3% on TL for irregular portion respectively
C) 4% od penal intt on CC and 4% on TL for irregular portion respectively
D) 5% od penal intt on CC and 5% on TL for irregular portion respectively
What is time limit for civil suit to be filed on approval by competent authority C
A) 7 Days
B) 30 Days
C) 3 Months
D) 6 Months
For the sale of immovable property as per SARFAESI Act 2002 _____ days notice is required to be A
served and after failure of the first sale of the immovable property, only __________ days' notice is
required to be served to the borrower/ guarantor for any subsequent sale
A) 30,15
B) 30,30
C) 15,15
D) 15,30
Principal or interest payment or any other amount wholly or partially overdue between1-30 days B
classifies for SMA 0 account which classifies for
A) Cash Credit and revolving credit account
B) Term loan only
C) Both CC and TL
D) None of the above
Which of the statement/(s) is/ are true in respect of compromise proposals from guarantors? D
A) Compromise proposal cannot be taken from guarantor.
B) Compromise Settlement proposals from guarantors should be treated on par with proposals from
borrowers
C) Compromise proposal may be taken from guarantor
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 82

D) Both B & C are correct

What is the action under SARFAESI Act 13(4) stated below is incorrect? B
A) the Authorised Officer may take possession of the secured assets of the borrower
B) Part payment, if any, made by the Borrower(s)/ Guarantor(s) will affect the right of the Bank to
continue with further proceedings
C) can be taken if exercise of rights under the Act is agreed upon by the Secured Creditors in case
of multiple/consortium finance, representing not less than 60 % of o/s
D) Action can be taken after 60 days of 13(2) notice
As per the Security Interest (Enforcement) Rules, 2002 (the Rules), ‘Authorised officer' means an B
officer not less than a __________ of a public sector bank or equivalent.
A) Asstt. General Manager
B) Chief Manager
C) Manager
D) Branch Manager
As per provisioning norms for sub-standard and doubtful assets (identify incorrect statement) D
A) for sub standard asset if Secured Advances: 15%
B) for sub standard asset if Unsecured Advances: 25%
C) Doubtful Assets upto 1 year 25% on secured portion and 100% on unsecured portion
D) Doubtful Assets more than 1 year to 3 years 50% on secured portion and 100% on unsecured
portion
Regarding upgradation of loan accounts classified as NPAs which statement is correct? C
A) If arrears of interest and principal are paid by the borrower in the case of loan accounts classified
as NPAs, the accounts should no longer be treated as non-performing and may be classified as
standard.
B) Standard accounts that are classified as NPA, and NPA accounts that are retained in the same
category on restructuring, will be upgraded only when all the outstanding loan / facilities in the
account perform satisfactorily during the specified period (@) i.e. principal and interest on all
facilities in the account are serviced as per terms of payment during that period
C) Both are correct
D) none of the above
An asset, including a leased asset, is considered as non-performing when it ceases to generate D
income for the bank which includes (find the odd man out)
A) interest and/ or installment of principal remain overdue for a period of more than 90 days in
respect of a term loan
B) The bill remains overdue for a period of more than 90 days in the case of bills purchased and
discounted,
C) in respect of derivative transactions, the overdue receivables representing positive mark-to-
market value of a derivative contract, if these remain unpaid for a period of 90 days from the
specified due date for payment
D) The account remains out of order' in respect of an Overdraft/Cash Credit (OD/CC) over 90 days
As per provisioning norms for standard assets (identify incorrect statement) B
A) Farm credit for Agriculture Activities and Advances to Small and Micro Enterprises: 0.25%
B) Advances to Commercial Real Estate (CRE) Sector: 1.5%
C) Advances to Commercial Real Estate-Residential Housing Sector (CRE-RH): 0.75
D) All other loans and advances not included above including advances to Medium Enterprises:
0.40%
The cut off limit for classifying a borrower as non-cooperative is A
A) Fund- based and Non Fund based facilities Rs.5 crore or its equivalent
B) Fund- based and non fund based facilities Rs.50 crore or its equivalent
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 83

C) Fund- based and non fund based facilities Rs.15 crore or its equivalent
D) Fund- based and non fund based facilities Rs.25 crore or its equivalent
Branch has provided facts/figures/docuemnts to bank’s empanelled Advocate on 25th April. By what D
time Advocated has to draw application for filing with DRT.
A) 25th July
B) 25th May
C) 5th May
D) 2nd May
Which among the undernoted action on borrower is not considered default? D
A) Delay in payment of instalment
B) Payment of less than required dues
C) Non payment of dues
D) Payment by guarantor before due date
Generally Assets classified as SMA-0, SMA-1 and SMA-2, if they are restructured the asset shall be B
classified as _________ after restructuring?
A) Standard Assets
B) Sub Standard Asset
C) Doubtful Asser
D) Assets under review
Regarding upgradation of loan accounts classified as NPAs which statement is correct? C
A) If arrears of interest and principal are paid by the borrower in the case of loan accounts classified
as NPAs, the accounts should no longer be treated as non-performing and may be classified as
standard.
B) Standard accounts that are classified as NPA, and NPA accounts that are retained in the same
category on restructuring, will be upgraded only when all the outstanding loan / facilities in the
account perform satisfactorily during the specified period (@) i.e. principal and interest on all
facilities in the account are serviced as per terms of payment during that period
C) Both are correct
D) none of the above
A borrower has defrauded Bank and obtained loan of Rs. 1,00,000 and the account has been D
declared as fraud account by the bank. The bank has filed suit against the borrower. The borrower
wants to repay the amount. What should be conditions of compromise.
A) Criminal complaint will continue even after settlement of compromise case
B) The term and condition will be those applicable for Wilful Defaulters
C) Proposal should be put up after obtaining in-principle approval of GM
D) All of the above
Which of the following should be kept in mind while filing suit? D
A) Documents should not be time barred
B) Enforceability of documents should be ascertained
C) Property held as security should be physically verified by the Branch Officials
D) All of the above
Obtaining administrative approval is must if repayment period under compromise settlement is B
extended beyond a period of
A) 12 Months
B) 18 Months
C) 24 Months
D) 30 Months
Can an interim resolution professional act as the resolution professional? B
A) No, as it involves conflict of interest.
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 84

B) Yes, if appointed by the committee of creditors with not less than 66% of the voting share of the creditors.
C) Yes, if appointed by the committee of creditors with votes of not less than 66% of the creditors.
D) Yes, if appointed at a meeting of the committee of creditors with a majority of the Creditors
Debts owed to a secured creditor in the event such secured creditor has relinquished security ranks equally B
with –
A) Insolvency resolution process costs.
B) Workmen’s dues for a period of 24 months prior to liquidation commencement date
C) Wages and any unpaid dues owed to employees other than workmen for the period of twelve months
preceding the liquidation commencement date.
D) Dues to Central Government.
Who makes regulations to be adopted by Insolvency Professional? A
A) Insolvency and Bankruptcy Board of India
B) National Company Law Tribunal
C) Ministry of Corporate Affairs
D) Governing Board of the Insolvency Professional Agency
For calculation of NPV, the maximum estimated time to realize the securities may be taken as ------years B
from the date of filing suits in case of DRT / Court cases
A) 5
B) 7
C) 10
D) None of these
If the entire compromise amount is not paid within four months, interest on the balance amount paid after B
four months shall be charged from --------- day from the date of letter conveying approval of the compromise
to the borrower.
A) 15
B) 30
C) 21
D) 60
The bank initiated action against a borrower under SARFAESI Act and sent him 60 days notice for making A
payment. The borrower being aggrieved with the action of the bank makes a representation to the bank.
The bank is required to send reply to the representation within how many days?
A) within 15 days of receiving the representation
B) within 30 days of receiving the representation
C) within 60 days of receiving the representation
D) within 7 days of receiving the representation
Minimum number of attempts prescribed for sale by public auction by the Bank, before resorting to sale by A
private treaty with threshold limits up to Rs. 1.00 cr is -----.
A) One
B) Two
C) No stipulation for minimum number
D) Three
After the sale of the secured asset, which document issued by the Authorized Officer evidences the title of D
the purchaser?
A) Possession Notice
B) Sale Notice
C) Deposit Challans
D) Certificate of Sale
What is the time period under SARFAESI Act 2002, borrower has to file application against the bank act of B
taking the possession of the asset (Under Section 17):
A) 60
B) 45
C) 30
D) 60
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 85

Our bank is having exposure in the account of M/s ABC Pvt. Limited, the credit facilities of which were C
classified as NPA on 31.01.2020. Notices under the provisions of SARFAESI Act were issued on 17.02.2020.
However, notices sent to one of the guarantors was returned undelivered. What step needs to be initiated
by the handling branch ?
A) No further steps to be undertaken.
B) Pasting of notice at a place wherein the said guarantor will come to know that such notice has been issued
on him.
C) Pasting of notice at a place wherein the said guarantor will see that such notice has been issued on him
and publishing the contents of 13(2) in two newspapers, out of which one newspaper must be vernacular.
D) Receipt of notice by the borrowing entity is only mandatory.
An appeal is preferred by the borrower in DRAT against the final order given by DRT. Which of the D
undernoted statement is correct in this regard?
A) Where an Appeal is preferred, the Borrower / Guarantors are not required to deposit any amount with
the Appellate Tribunal.
B) Where an Appeal is preferred, the Borrower / Guarantors are required to deposit with the Appellate
Tribunal, 60% of the amount of debt due as determined by the DRT so that the Appeal is entertained by the
Appellate Tribunal (DRAT). But the Appellate Tribunal (DRAT) may reduce the amount to 25% with the
reasons recorded in writing for such waiver or reduction.
C) Where an Appeal is preferred, the Borrower / Guarantors are required to deposit with the Appellate
Tribunal, 75% of the amount of debt due as determined by the DRT so that the Appeal is entertained by the
Appellate Tribunal (DRAT).
D) Where an Appeal is preferred, the Borrower / Guarantors are required to deposit with the Appellate
Tribunal, 50% of the amount of debt due as determined by the DRT so that the Appeal is entertained by the
Appellate Tribunal (DRAT). But the Appellate Tribunal (DRAT) may waive or reduce the amount to be
deposited with the reasons recorded in writing for such waiver or reduction.
Normally along with the compromise offer letter, an initial deposit of at least of the offer amount may be A
taken from the borrower under no lien account as an evidence of the borrower's bonafide intention to
pursue the compromise settlement with the Bank.
A) 5%
B) 2.5%
C) 10%
D) 12.5%
Credit facilities sanctioned to M/s XYC and Company Limited were classified as NPA on 15.02.2018. The B
promoter Directors as well the Company have been declared as Wilful Defaulters strictly following the
guidelines prescribed by RBI. Now the promoter has offered to settle the bank dues under compromise.
Which of the undernoted statement is correct in this regard?
A) Compromise settlement with a Wilful Defaulter is not permitted as the same is not in line with the Bank
s compromise settlement policy.
B) In case of Wilful Defaulters, a tough stand must be taken and the proposal should be put up after obtaining
in-principle approval of the GM (NW/CCG/CAG/SARG) based on a review of such cases.
C) The sanctioning authority for settlements may take a considered view in the matter considering the facts
of the case.
D) Such settlement proposal may be considered by the bank but the sanctioning authority for approval of
such settlements is CCCC irrespective of exposure.
The CIR process under the Insolvency and Bankruptcy Code can be triggered in the event a corporate has B
committed a default of Rs. or more in respect of a debt.
A) 10 lacs
B) 1 lakh
C) There is no minimum default amount stipulated under IBC in the given situation.
D) 5 lacs
It is not in the ordinary course of banking to …….. irregular drawings C
A) occur
B) report
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 86

C) permit
D( decline
Standby Line of Credit is normally sanctioned along with regular limits to ensure that the borrower B
A) resorts to over drawings in case of need
B) is restricted to draw within the sanctioned limits
C) anticipates contingency requirements in advance
D) uses the assessed bank finance limit exhaustively
The objectives of the system of reporting irregularity are: B
A. Comply with the guidelines contained in Bank’s Manual of Loans and Advances Part-3, Chapter 21A and
instructions contained in Bank’s various circulars on CAPSA.
B. Reporting for control, obtaining confirmation and evolve action plan
C. Evolve a Corrective Action Plan, implement the same and seek confirmation of the plan
D. In simple words, reporting of irregularities and confirmation thereof superimpose the occurred
irregularity by a ‘Corrected’ stamp from the delegated authority.
Default day-1 for a revolving credit facility is: C
A. the day on which the account is identified as SMA-0
B. when whole or any part or of debt has become due and payable and is not repaid by the debtor or the
corporate debtor, as the case may be.
C. 31st day of outstanding remaining in excess of limit or drawing power, whichever is less
D. day on which outstanding exceeded limit or drawing power, whichever is less and remains unpaid.
Resolution Plan for SMA can be: C
A. Stress Analysis, TEV Study and Stress Test
B. Tracing triggers of EWS, Red Flagging and Reporting
C. Rectification, Restructuring and Recovery
D. Reporting, Confirmation and CAP
Total Exposure for the purpose of Exit Policy means: C
A. Fund Based Limits Sanctioned
B. Fund Based Outstanding
C. Fund Based plus Non Fund Based Expoure across all verticals
D. Aggregate Exposure from all lenders.
” If the account has turned into Special Mention Account (SMA-0/ SMA-1 /SMA-2), it is not taken up for B
exit”. Is this statement true?
A. True
B. False
Identification of accounts for exit is done by: C
A. Circle Credit Officer
B. Deputy General Manager [Business] or Deputy General Manager [SME].
C. Relationship Manager /Officer maintaining the accounts.
D. External Screening Committee
Time available to the borrower for complying with the remedial measures suggested by the Bank as per exit D
policy is:
A. 30 days
B. 45 days
C. 60 days
D. 90 days
Exit Budget will be finalised based on ………. approach A
A. Bottoms Up
B. Pyramid
C. Horizontal
D. Distributive
In accounts handled by SME Centre / RASMECCs, is permitted to allow overdrawing on business B
considerations.
A) CPC head alone
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 87

B) the concerned Branch Head / SME Centre / RASMECC Head

C) Sanctioning authority
D) No over drawing should be permitted
If holding on operations continued ……………….. the same has to be approved by the sanctioning authority. C
A) even for one day
B) beyond the initial 30 days
C) beyond the initial period of 3 months,
D) beyond the initial 10 days
The following categories of borrowers are normally not eligible for restructuring D
A) Wilful defaulters
B) Fraudsters
C) Cases of malfeasance
D) All the above
When can the right of recompense be exercised? A
A) Once the unit has been revived and surplus cash accruals are available after meeting the repayment
obligations under rehabilitation package, from the second anniversary date of the rehabilitation package.
B) After the unit becomes cash break-even subject to a minimum of 2 years from the date of upgradation to
Standard Assets
C) From the date of achieving margin of safety
D) On mutual consultation between borrower and lender
SSA Advances sanctioned ab initio unsecured with backing of Escrow account shall attract a provision at the D
rate of
A) 25%
B) 40%
C) 100%
D) 20%
A notice under Section 13(2) of SARFAESI Act may be given in which of the following cases? D
A) After account is classified as NPA.
B) The remaining dues exceed 15% of principal plus interest accrued thereon.
C) If the dues exceed Rs. 1 lac.
D) Both 1 & 3 are correct.
What are the rights of a secured creditor during liquidation? D
A) A secured creditor in the liquidation proceedings may stand within the liquidation process
B) A secured creditor in the liquidation proceedings may stand outside liquidation process
C) A secured creditor in the liquidation proceedings may stand as unsecured creditor for unrealised amounts
if proceeds of secured assets are not adequate to realise the debt.
D) All of the above are correct.
What are the timelines prescribed by the Bank for filing of Original Application before the DRT? A
A) Original Application (OA) is to be filed in DRT immediately on approval but in any case within a maximum
period of 3 months from the date of approval. Where documents are getting time barred, Original
Application (OA) in DRT is to be filed 2 months before expiry of documents.
B) No timeline is prescribed by the Bank.
C) Original Application (OA) is to be filed in DRT immediately on approval but in any case within a maximum
period of 2 months from the date of approval. Where documents are getting time barred, Original
Application (OA) in DRT is to be filed 3 months before expiry of documents.
D) Original Application (OA) is to be filed in DRT immediately on approval but in any case within a maximum
period of 6 months from the date of approval.
What is the timeline prescribed for filing of suit before Civil Court for recovery of Bank's dues? B
A) No timeline is prescribed by the Bank.
B) Civil suit is to be filed immediately on approval but in any case within a maximum period of 3
months from the date of approval.
C) Civil suit is to be filed immediately on approval but in any case within a maximum period of 45
days from the date of approval.
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 SME Basic Quiz 88

D) Civil suit is to be filed immediately on approval but in any case within a maximum period of 6
months from the date of approval.
Monetary ceiling of cases to be referred to the Lok Adalat organized by Civil Courts is Rs. __________. C
A) 10 lacs
B) 15 lacs
C) 20 lacs
D) 25 lacs
What is the maximum cap for court fee when filing recovery suit before DRT? C
A) Rs. 2.00 lacs
B) Rs. 2.50 lacs
C) Rs. 1.50 lacs.
D) There is no upper cap towards court fee for filing of recovery case in DRT.
The currency in which payment for import is made depends upon A
A) The country from which the goods are shipped
B) The country of origin of goods.
C) The arrangement between the buyer and seller.
D) The bank which the importer's bank has correspondent relationship.
Normally, the time permitted for repayment of entire compromise settlement should not exceed C
_______ months.
A) 6 months
B) 24 months
C) 12 months
D) 18 months
The following is not a post-shipment advance D
A) negotiation of bill under letter of credit
B) purchase of foreign bill.
C) advance against foreign bill for collection
D) packing credit

Export & Import Finance

PCFC is an export finance extended for------------ in---------------------- A
A) Pre shipment, Foreign Currency
B) Post shipment, Foreign Currency
C) Any of the above
D) None of the above
PCFC can be availed in which of the following currencies? B
A) Canadian Dollar
B) Japanese Yen
C) Dirham
D) None of the above
Running Account facility is permitted to C
A) Exporters with satisfactory track record
B) Overdue Bills should be within 5% of average of last three calendar year realizations
C) Both of the above
D) None of the above
Which of the following is not true with respect to Running Account Facility? D
A) It is granted to exporters of EOU’s/EPZ’s
B) Outstanding in EPC is marked basis FIFO
C) It cannot be granted to sub-suppliers as in EPC
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 89

D) It can be granted only against firm export orders/LCs

Interest equalization is applicable on A
A) Pre and post shipment Rupee credit only
B) Pre and post shipment credit in any currency
C) Pre shipment Rupee credit only
D) Post shipment Rupee credit only
Interest equalization applicable on manufacturer exporters in MSME sector C
A) 3%
B) 2%
C) 5%
D) 7%
ECGC functions under the administrative control of A
A) Ministry of commerce and industry, Govt of India
B) Ministry of Finance
C) DGFT
D) None of the above
What kind of risks does ECGC cover C
A) Political Risk
B) Commercial Risk
C) Both
D) None
The all-in cost ceiling that can be charged by the overseas bank offering buyers credit is capped by A
RBI at
A) L+250
B) L+350
C) L+200
Tenor of SBLC for obtaining buyers credit is to be equal to total permissible credit period i.e. the D
buyers credit tenor plus ------ days
A) 30
B) 7
C) 60
D) 15
After issuance of NLRF and transmission of MT 799 to the FO, clearance to be obtained from B
A) RACC
B) RCC
C) RAAC
D) RAC
Who regulates the foreign trade in India B
A) RBI
B) DGFT
C) FEDAI
D) SEBI
EPC and PCFC are sources for____ B
A) Import financing
B) Export financing
What do you mean by 'Substantial interest' A
A) in relation to a company, means the holding of a beneficial interest by an individual or his spouse
or minor child, whether singly or taken together, in the shares thereof, the amount paid upon which
exceeds Rs. 5 lacs or ten per cent of the paid-up capital of the company, whichever is less
Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022
 SME Basic Quiz 90

B) in relation to a company, means the holding of a beneficial interest by an individual or his spouse
or minor child, whether singly or taken together, in the shares thereof, the amount paid upon which
exceeds Rs. 25 lacs or ten per cent of the paid-up capital of the company, whichever is less
C) in relation to a company, means the holding of a beneficial interest by an individual or his spouse
or minor child, whether singly or taken together, in the shares thereof, the amount paid upon which
exceeds Rs. 10 lacs or ten per cent of the paid-up capital of the company, whichever is less
D) in relation to a company, means the holding of a beneficial interest by an individual or his spouse
or minor child, whether singly or taken together, in the shares thereof, the amount paid upon which
exceeds Rs. 1 lacs or ten per cent of the paid-up capital of the company, whichever is less
At the end of FY, the Inventory Holding level of a unit has increased from 45 days to 65 days. What D
could be the possible reasons for substantial increase in the inventory holding level?
A) The unit was holding the substantial amount of finished goods, waiting for clearance from the
buyers to dispatch the material
B) The unit had procured raw material in bulk to complete the orders
C) The unit has bought substantial amount of raw material in the month of march as the prices are
going upside
D) Any of the above
An Exporter has not complied with the T&C of the advance. Which of the following options are to B
be compiled by you as a banker?
1. Charge commercial lending rate ab-initio to the exporter.
2. Send Information to Monetary Policy Department, RBI.
3. Bank to pay higher ROI to RBI on portion of Refinance availed by them
4. Authority to apply concessional ROI lies with RBI
A) All options from 1 to 4
B) Option Nos 1,2&3
C) Option Nos 2,3&4
D) Only 1&2
60% of sales of a unit come from exports to Zimata, a high risk country under caution. Of these, 40% A
are against confirmed LC of First Class Banks. What will be impact on final CRA?
A) No impact
B) Downgrade by 1 stage
C) Downgrade by 2 stages
D) Downgrade by 3 stages

Sunil Kumar Achara, Trainee Officer 2021 / 01/01/2022