MCQs on RBI ANDFEMA REGULATIONS Part - 2

Q.1:- Profit on sale of investment in held to maturity category:

• Will be kept in Profit & loss account.
• Will be kept in Profit & loss account and later adjusted to Capital Reserve.
• Will be kept in Profit & loss account and later adjusted to General Reserve.
• Will be transferred to Capital Reserve directly.

Q.2:- Which of the following is Adjusted Net Bank Credit

• Net Bank Credit plus Investments in non-SLR Bonds (HTM) plus credit equivalent of off balance sheet exposures.
• Net Bank Credit plus Investments in non-SLR Bonds (HTM) or credit equivalent of off balance sheet exposures, whichever is lower.
• Net Bank Credit plus Investments in non-SLR Bonds (HTM) or credit equivalent of off balance sheet exposures, whichever is higher.
• Net Bank Credit minus Investments in non-SLR Bonds (HTM) or credit equivalent of off balance sheet exposures, whichever is higher.

Q.3:- Which of the following statement is not correct?

• Automatic Route means the entry route through which investment by a person resident outside India does not require the prior Reserve Bank approval or Government approval.
• Government Route means the entry route through which investment by a person resident outside India requires prior Government approval.
• Aggregate Foreign Portfolio Investment up to 49 percent of the paid-up capital on a fully diluted basis or the Sectoral/statutory cap, whichever is lower, will not require Government approval.
• None of the above

Q.4:- Which of the following is not a condition to be complied with, by an Indian party to make investment in an entity outside India, engaged in financial services activity

• Earned net profit in the preceding five financial years from the financial service activities.
• Has obtained approval from the concerned regulatory authorities both in India and abroad.
• The provisions of part 1 of the FEMA (transfer of issue of any foreign Security) regulation 2000.
• All of the above

Q.5:- In the ease or swap of capital instrument, who can undertake valuation of the securities in the question?

• A merchant bankers registered with the SEBI.
• An Investment Banker outside India registered with the appropriate regulatory authority in the host country.
• None of the above
• Both (a) and (b)

Q.6:- As per FEM (Transfer or issue of any foreign security) Regulation, 2004, when a proprietary concern in India may apply to the Reserve Bank in Form ODB for permission to accept shares of a company outside India in lieu of fees due to it for professional services rendered to the said company:

• The value of the shares accepted from each company outside India shall not exceed fifty per cent of the fees receivable by the Indian concern from that company.
• The Indian concern's shareholding in any one company outside India by virtue of shares accepted as aforesaid shall not exceed ten per cent of the paid-up capital of the company outside India, whose shares are accepted.
• None of the above
• Both (a) and (b)

Q.7:- What is the validity period of Bank Receipt?

• Fifteen days
• Thirty days
• Forty five days
• Seven days

Q.8:- The investments classified by the banks under HFT have to be sold within…….. days, as per the prudential norms for classification, valuation and operation of investment portfolio by banks:

• 45
• 90
• 75
• 30

Q.9:- As per the prudential norms for classification, valuation and operation of investment portfolio by banks, which of the following securities can be held under HTM category:

• SLR securities up to the extent permitted.
• Re-capitalization bond receive from government of India towards their re-capitalization requirement and held in investments portfolio.
• Investments in long term bond issued by companies engaged in infrastructure activities.
• All of the above

Q.10:- As per the guideline for the sale of stressed assets, with effect from April 1,2018, what is the threshold for the investment by banks in security receipt banks by assets sold by them, to be eligible for progressive provisioning?

• 50 percent
• 30 percent
• 10 percent
• 20 percent

Q.11:- In case the investment of the bank in unlisted non-SLR securities exceeds 10%, what should be the banks course of action?

• The bank can invest in non-SLR securities even after the breach of the limits
• The bank will not be allowed to make investments in unlisted non-SLR securities till the 'time bank's investment in unlisted non-SLR securities comes within the limit of 10%
• None of a and b
• Both (a) and (b)

Q.12:- The profit from the sale of which of the following categories of investments will be taken to the profit and loss accounts as per the prudential norms for classification, valuation and operation of investment portfolio by banks:

• Investments held for trading
• Investment available for sale
• Investment held till maturity
• Both (a) and (c)

Q.13:- Which of the following statement is correct?

• The individual scrips in the Available for Sale category will be marked to market at quarterly or at more frequent intervals.
• The individual scrips in the Held for Trading category will he marked to market at monthly or at more frequent intervals.
• None of the above
• Both (a) and (b)

Q.14:- As per the guidelines for the sale of stressed assets, who shall bear the cost of external valuation of assets proposes to be sold?

• The borrower whose assets is to be sold foe recovery.
• He bank selling the assets.
• The prospective buyer of the assets.
• Either the bank or the prospective buyer, as decided on case to case basis.

Q.15:- Exchange price for shares transfer by Person resident outside India shall;

• Less than market value
• Less than fair value
• Not less than fair value
• Not more than market value

Q.16:- Bank typically sale the stressed assts to ARC and then hold them in the form of:

• Revenue Receipt
• Capital Receipt
• Shares receipt
• Security Receipt

Q.17:- As per the prudential norms for classification, valuation and operation of investment portfolio by banks, which of the following is not one of the circumstances when need arises to determine whether impairment of the investment held to maturity has occurred?

• When the company has incurred has losses for a continues period of two years and the net worth has consequently been reduced by 20%.
• The loan amount of the company with any bank has been restructured.
• The credit rating of the company has been downgraded to below investment grade.
• When a company has defaulted in repayment of its debt obligations.

Q.18:- Reserve Bank of India provides short term loans to commercial banks at

• Bank Rate
• Reverse Repo Rate
• Repo Rate
• Base Rate

Q.19:- Individual Script in the available for sale category will be………..at the quarterly or at more frequent intervals:

• Marked to market
• At cost
• At fair value
• At sale value

Q.20:- Ready Forward contracts may be undertaken only in:

• Dated Securities and Treasury Bills issued by Government of India.
• Dated Securities issued by State Governments.
• None of the above
• Both (a) and (b)

Q.21:- Which of the following factor shall be the considered by the Reserve Bank of India while considering application made to obtain its permission for investment to be made outside India:

• Prima facie viability of the JV/WOS outside India.
• Financial position and business track record of the Indian party and the foreign entity.
• Contribution to external trade and other benefits which will accrue to India through such investment.
• All of the above

Q.22:- The requirement of exchange of physical confirmation of trade matched on F-TRAC is waived subject to which of the following condition?

• Participant entering into one-time bilateral agreement for eliminating the exchange of confirmation.
• Participant ensuring adherence to a sound risk management framework and complying with all the regulatory and legal requirement and practice.
• Participants adhering to the extant laws such as stamp duty as may be applicable.
• All of the above

Q.23:- The profit from the sale of which of the following categories of investments will be appropriated to capital reserve account after passing it through the profit and loss accounts as per the prudential norms for classification, valuation and operation of investment portfolio by banks:

• Investment available for sale
• Investments held for trading
• Investment held till maturity
• All of the above

Q.24:- As per the notification on guidelines for the sale of stressed assets, the board of a Bank shall lay down detailed policies and guidelines on sale of their stressed assets to Securitization Companies (SCs)/Reconstruction Companies (RCs). Which of the following aspect need to consider?

• Procedure for sale of such financial assets.
• Valuation procedure to be followed to ensure that the realizable value of financial assets is reasonably estimated.
• Delegation of powers of various functionaries for taking decision on the sale of the financial assets.
• All of the above

Q.25:- The security acquired by bank with the intention to trade by taking advantage of short term price/ interest rate movement will be classified:

• Held for trading
• Held to maturity
• Current assets
• Available for sale

Q.26:- In which of the following circumstances can a bank receipt not be issued?

• The security is physically held at a different centre and the bank is in a position to physically transfer the security and given delivery thereof within a short period.
• The script is yet to be issued by the issuer and the bank is holding the allotment advice.
• The security has been lodged for transfer/interest payment and the bank is holding necessary records of such lodgment and will be in position to give physical delivery of the security within a short period.
• In respect of transaction in government securities for which SGL facilities is available.

Q.27:- Which of the following guidelines should followed by the bank desirous of making investment in equity shares/ debentures?

• Build up adequate expertise in equity research by establishing a dedicated equity research department, as warranted by their scale of operations.
• Formulate a transparent policy and procedure for investment in shares, etc., with the approval of the Board.
• The decision in regard to direct investment in shares, convertible bonds and debentures should be taken by the Investment Committee set up by the bank's Board.
• All of the above

Q.28:- When the remittance is made from India, for the purpose of investment under Foreign exchange management (Transfer or issue of any foreign security Regulation, 2004, who shall make the valuation of share of the company outside India, when the amount of investment is up to USD 5 million:

• Chartered Accountant or Certified Public Accountant
• Any Merchant hankers registered with SEBI
• Cost accountant
• Category I Merchant bankers registered with SERI

Q.29:- Which of the following conditions are required to be fulfilled by an Indian party to make investment in an entity outside India, which is engaged in financial services?

• He has earned net profit during the preceding three financial years from the financial services activities.
• He is registered with the regulatory authority in India for conducting the financial services activities.
• He has fulfilled the prudential norms relating to capital adequacy, prescribed by the concerned regulatory authority in India.
• All of the above

Q.30:- The entire investment portfolio of the banks (including SLR securities and non-SLR securities) should be classified under which of the following categories:

• Held to Maturity (HTM)
• Available for Sale (AFS)
• Held for Trading (HFT)
• All of the above .

Q.31:- For the purpose of foreign exchange from an Authorized Dealer in India, which of the following is not considered in reckoning 100% net worth of the Indian party?

• Investment in agriculture operations through overseas officers or directly.
• External Commercial Borrowing in conformity with other parameters of the ECB guidelines.
• 50% of the value of guarantees issued by Indian party to or on behalf of JV OR WOS.
• Cash remittance by market purchase.

Q.32:- Which one is not a permissible source of funding overseas direct investment?

• Capitalization of Exports
• Proceeds of Indian Currency Fund raised through ADR/GDR issue.
• Proceeds of External Commercial Borrowings/ Foreign Currency Convertible Funds.
• Drawl of foreign exchange from an Authorized Dealer Bank in India.

Q.33:- Which of the following statement is correct?

• Pricing guidelines as per regulation l1 shall be applicable for investment in capital instruments by a person resident outside India on non-repatriation basis
• In case of share warrants, their pricing and the price/ conversion formula shall be determined upfront
• None of the above
• Both (a) and (b)

Q.34:- What is the time limit for an Indian company which has received amount of consideration for issue of capital instruments and where such issue is reckoned as Foreign Direct Investment for the purpose of these regulations, shall report such receipt in Advance Remittance Form to the Regional Office concerned of the Reserve Bank:

• Not later than 30 days from the date of receipt
• Not later than 60 days from the date of receipt
• Not later than 15 days from the date of receipt
• Not later than 10 days from the date of receipt

Q.35:- A person resident outside India may purchase capital' instrument of listed Indian company on a stock exchange in India provided that:

• The person resident outside India has taken permission of Central government.
• The person resident outside India has taken permission of RBI
• The Person resident outside India making the investment has already acquired control of that company in accordance with SEBI (SAST) Regulation 2011 and continue to hold such control
• The person resident outside India has taken permission of Government of his country

Q.36:- The guideline relating to listing and rating pertaining to non-SLR securities is applicable to bank’ investment in:

• Certificates of deposit
• Equity/debt instruments/Units issued by Venture capital funds
• Unrated bond of companies
• Commercial paper

Q.37:- As per Regulation 15 of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017, a person resident outside India can make investment in:

• Lottery Business including Government/ private lottery, online lotteries
• Gambling and betting including casinos
• Nidhi Company
• None of the above