Banking Jobs Preparation

Correct Answer ( C )

Interest rate risk is a significant concern for banks as changes in interest rates can affect the profitability of their assets and liabilities . Banks use various strategies to mitigate this risk , including using interest rate derivatives like swaps and futures to hedge against unfavourable rate movements , and ensuring a balance between short-term and long-term instruments . Furthermore, banks use sophisticated models to forecast future interest rate scenarios and adjust their portfolios accordingly , regularly monitoring market conditions and economic indicators to anticipate potential shifts in interest rates .

Correct Answer ( C )

The compliance officer plays a crucial role in ensuring that the bank adheres to all applicable laws, regulations and internal policies . Their responsibilities include developing and implementing compliance programs, conducting periodic audits and risk assessments to identify potential violations , training employees on compliance procedures , and reporting suspicious activity to the relevant authorities . The compliance officer’s work is vital for maintaining the bank’s integrity and stability in the financial system . It extends to staying informed on emerging regulations and adapting compliance strategies accordingly , ensuring the bank remains

Correct Answer ( C )

Commercial banks and investment banks serve distinct roles in the financial system. Commercial banks primarily focus on providing financial services to individuals and businesses such as taking deposits, offering loans and providing basic banking services like checking accounts and debit cards , which play a critical role in facilitating everyday financial transactions . In contrast, investment banks focus on assisting corporations and governments with raising capital through activities such as underwriting securities (stocks and bonds), mergers and acquisitions advisory and trading in financial markets . While some large financial institutions offer both commercial and investment banking services

Correct Answer ( D )

KYC stands for Know Your Customer and is a crucial process by banks and other financial institutions to verify the identity of their clients and understand their business dealings . The goal is to prevent money laundering, terrorist financing and other financial crimes . KYC procedures typically involve collecting and verifying information such as identification documents (passport, driver’s license), proof of address and details about the source of funds . Compliance with KYC regulations is essential for banks to avoid hefty penalties and maintain a clean reputation . Failure to adequately conduct KY

Correct Answer ( A )

The repo rate is the rate at which the central bank lends money to commercial banks against the security of government securities . It is a crucial tool in monetary policy, used to influence the overall cost of borrowing in the economy . When the repo rate is increased , borrowing becomes more expensive for commercial banks , which in turn leads to higher interest rates for businesses and consumers , which can help reduce inflation by stimulating economic growth , but potentially leading to increased inflation .

Correct Answer ( C )

Non-performing assets (NPAs) are loans or advances that have not been repaid by borrowers within a specific period and represent a significant risk to the financial health of banks . High levels of NPAs indicate poor asset quality and can lead to decreased profitability, increased capital requirements and even potential bank failures . NPAs tie up bank funds that could be used for lending to productive sectors of the economy . Banks employ various strategies to recover NPAs, including restructure loans, initiating legal proceedings and

Correct Answer ( D )

The Reserve Bank of India (RBI) acts as the central bank of India and plays a crucial role in regulating the Indian banking system . Its primary functions include maintaining monetary stability, managing the country’s foreign exchange reserves and acting as lender of last resort to commercial banks . The RBI also oversees the licensing and supervision of banks to ensure financial soundness and stability . This includes setting reserve requirements, capital adequacy ratios and implementing prudential regulations to prevent banking crises . Furthermore, RBI actively