Chapter 1

MSME Finance and MSME Lending Policy of the Bank

1. Lending activities of Commercial Banks in India currently can be broadly classified sector – wise as follows:

A. Agriculture Credit & Retail Credit B. Retail Credit & Commercial / Business Credit

C .Agriculture Credit , Retail Credit and Commercial / Business Credit

D. None of the above.

2. Which among the following is not a non – individual borrower.

A. Proprietary Concerns B. Limited Liability Partnerships C. Association of Persons

D. Trusts E. All of them are non – individual borrowers.

3. State whether the following statement is true or false

“ A loan for the personal consumption needs of an individual , availed in his personal capacity can be called a
retail

loan”

A. True B False

4. State whether the following statement is true or false

“ The difference in the credit appraisal process in business / commercial credit vis-à-vis retail credit mainly lies
in the means of credit “

A. True B. False

(The difference is in the purpose of credit )

5. . State whether the following statement is true or false

“ A loan for manufacturing ( production ) or trade related activity , which enhances scale of production or
volume of trade is a commercial or business loan ”

A. True B. False

6. The term -------------- in commercial lending refers to whether deployment of commercial assets ( fixed and
current assets ) generate sufficient cash surplus in the business to repay the loans .

A. Viability B. Feasibility C. Profitability D. None of the above

7. State whether the following statement is true or false

“ Commercial lending and retail lending differ in that the working life of the assets created ( primary security )
is more important in the latter whereas the working life of the borrower is more important in the former “.

A. True B. False

( In commercial lending , primary security is more important whereas the working life of the borrower is more
important in retail lending )

8. State whether the following statement is true or false

“ Commercial credit appraisal is largely based on the analysis of financial statements ( besides other factors ) ,
compared to retail credit appraisal based on scorecards and standardized criteria. “

A. True B. False.

9. Which of the following is not a non fundedfacility.

A. Bills purchased / Bills discounted B. Guarantees C. Letter of credit

D. Co-acceptance of Bills.

10.Which of the following is a funded facility.

A. Export Finance B. Bill Finance C. Overdraft & Cash Credits

D. All of them are funded facility.

11. The MSMED Act , -------------- streamlines the framework for SMEs in India, addressing some of the key
governance and operational issues faced by such enterprises.

A. 2005 B.2006 C. 2007 D. 2008

12. State whether the following statement is true or false

“ Manufacturing sector Enterprise is one , which is engaged in the manufacturing or production of goods
wherein investment in Plant & Machinery ( Original Cost including Land & Building ) is the criterion for its
classification.

True B. False

( Original cost excluding Land & Building and the items specified by the ministry of Small Scale industries )

13. State whether the following statement is true or false

“ A Service Sector Enterprise is one , which is engaged in providing or rendering of services where in
investment in equipment ( Original Cost excluding Land & Building and furniture , fittings and other items not
directly related to the service rendered or as may be notified under the MSMED Act 2006 ) is the criterion for
its classification .

A. True B. False
14. A Micro Enterprise ( Manufacturing sector ) is one where investment in plant and machinery ( original cost
) does not exceed Rs. -----------------.

A. 10 L B. 20 L C. 25 L D. 50 L

15. A Small Enterprise(Manufacturing sector ) is one where investment in plant and machinery ( original cost
) is more than Rs.25 L but does not exceed Rs. --------

A. 50 L B. 100 L C. 200 L D. 250 L

16. A Medium Enterprise ( Manufacturing sector ) is one where investment in plant and machinery ( original
cost ) is more than Rs.200 L but does not exceed ------------------

A. Rs. 5 Cr B. 10 Cr C. 15 Cr D. 20 Cr

17. A Micro Enterprise ( Service Sector ) is one where investment in equipment ( original cost ) does not
exceed Rs. -------

A. 3 L B. 5 L C. 7.5 L D. 10 L

18. A Small Enterprise ( Service Sector ) is one where investment in Equipment ( original cost ) is more than
Rs. 10 L but does not exceed Rs. -------------

A. 50 L B. 100 L C. 150 L D. 200 L

19.A Medium Enterprise ( Service Sector ) is one where investment in equipment ( original cost ) is more than
Rs. 2 Cr but does not exceed Rs. ------------.

A . 3 Cr B. 5 Cr C. 7.5 Cr D.10 Cr

Enterprises Manufacturing Sector Service Sector

Investment in Plant & Machinery ( Investment in Equipment ( Original
Original Cost ) Cost )
Micro < = 25 L < = 10 L
Small > 25 L and < = 500 L > 10 L and < = 200 L
Medium > 500 L and < = 1000 L > 200 L and < = 500 L

* < = means does not exceed

20. State whether the following statement is true or false.

“ While calculating the value of plant and machinery for manufacturing enterprises , the cost of land and
building should not be included “

A. False B. True

21. State whether the following statement is true or false.

“ While calculating the investment in plant and machinery the original price thereof , irrespective of whether
the plant and machinery is new or second hand , shall be taken into account. "
A. False B. True

22. While computing the investment in Plant & Machinery in case of manufacturing enterprises , which of the
items below to be excluded:

A. Installation of Plant & Machinery B. Research and development equipment and Pollution
Control Equipment

C. Charges paid for technical know – how for erection of plant and machinery .

D.Bank Charges and service charges paid to the National Small Industries Corporation or State Small
Industries corporation

E .All the above to be excluded

23.While computing the investment in Plant & Machinery in case of manufacturing enterprises , which of the
items below to be excluded:

A. Equipment such as tools , jigs , dyes , moulds and spare parts for maintenance and the cost of consumable
stores

B . Power generation set and extra transformer installed by enterprises as per the regulations of the State
Electricity Board.

C. Firefighting Equipment D. Gas producer plants

E. All the above to be excluded

24. While computing the investment in Plant & Machinery in case of manufacturing enterprises , which of the
items below to be excluded:

A. Procurement or installation of cables , wiring , bus bars , electrical control panels , oil circuit breakers or
miniature circuit breakers which are necessarily used for providing electrical power to the plant and
machinery for safety measures.

B. Transportation charges ( excluding sales tax or value added tax and excise duty ) for indigenous machinery
from the place of their manufacture to the site of the enterprise.

C. Storage tanks which store raw materials and finished products only and are not linked with the
manufacturing process.

D. All the above to be excluded .

25. Loan Policy of a bank usually contains guidelines on which of the following aspects :

A. Exposure limits for single borrowers and groups

B. Exposure limits for individual sectors like real estate , capital market etc

C . Thrust areas of the bank and low priority areas

D. Discretionary powers at various levels for sanctioning credit proposals.

E. All the above.

26. Which of the following is not true with regard to MSME Lending Policy of the Bank :

A. It is part of Loan Policy document which is currently being published annually

B. It lays down guidelines for assessment of credit to MSME units

C. It aims to achieve various growth parameters prescribed for MSME units

D. It adopts cluster based financing for MSMEs.

E. All the above are correct.

27. Which of the following is not true with regard to MSME Lending Policy of the Bank :

A. It describes the MSME sector and its functional coverage

B. It intends to make available adequate and hassle –free credit facilities to MSME enterprises

C. It intends to give more thrust to Micro and Small Enterprises

D. It adheres to the BCSBI’s Code of Commitment to MSMEs.

E. All the above are correct.

28. State whether the following statement is true or false.

“ All bank loans to Micro / Medium Enterprises in the manufacturing sector will come under Priority sector. “

A. False B. True

29. In respect of service enterprises , Bank loans up to Rs.------- per unit to Micro & Small Enterprises and Rs.-
--- to Medium Enterprises will be treated as priority sector advance.

A. 2.5 Cr & 5 Cr B. 5 Cr & 10 Cr C. 7.5 Cr & 15 Cr D. 10 Cr & 20 Cr

30. State whether the following statement is true or false.

“ Bank loans to food and agro processing units will form part of agriculture “

A. True B. False

31. A bank has given Rs.1500Crores loans to units in the KVI sector. What is the amount eligible for
classification under the sub- target of 7.5 per cent prescribed for Micro enterprises under priority sector.

A .750 Cr B. 900 Cr C. 1125 Cr D. 1500 Cr

32. State whether the following statement is true or false.

“ Outstanding deposits with SIDBI on account of priority sector shortfall is classified as direct finance under
priority sector “

A. False B. True

( is classified as Indirect Finance under priority sector )

33. State whether the following statement is true or false.

“The Bank is required to ensure that priority sector advances ( which include the MSEs sector ) constitute 40
% of Adjusted Net bank Credit ( ANBC ) or credit equivalent amount of Off – Balance Sheet Exposure ,
whichever is lower.

A. False B. True

( whichever is higher )

34. Bank is required to achieve a sub – target of -----------% of ANBC or Credit Equivalent Amount of off –
balance Sheet exposure , whichever is higher , for lending to micro enterprises.

A. 6.5 B. 7 C. 7.5 D. 8

35. Bank loans above Rs. ------------ per borrower / unit to Micro and Small Enterprises and Rs. ------------- crore
to Medium Enterprises engaged in providing or rendering of services and defined in terms of investment in
equipment under MSMED Act , 2006 , shall not be reckoned in computing achievement under the overall
Priority Sector targets.

A.1&2 B. 2 & 4 C. 3 & 7.5 D. 5 & 10

36. Applications complete in all respects from units under MSME sector for a credit limit or enhancement in
existing credit limit uptoRs. 5 lakhs will be disposed offwithin ------------ week /s from the date of receipt .

A. 1 B. 2 C.3 D. 4

37. Applications complete in all respects from units under MSME sector for a credit limit or enhancement in
existing credit limit above Rs. 5 lakhs and uptoRs. 25 Lakhs will be disposed off within ------------ week /s from
the date of receipt .

A. 2 B. 3 C. 4 D. 6

38. Applications complete in all respects from units under MSME sector for a credit limit or enhancement in
existing credit limit above Rs. 25lakhs will be disposed off within ------------ week /s from the date of receipt .

A. 2 B. 3 C. 4 D. 6

39. Application for additional / ad- hoc credit facilities and restructuring of accounts , if considered viable
from units under MSME sector for a credit limit or enhancement in existing credit limit uptoRs. 5 lakh will be
disposed off within ------ days.

A. 7 B. 10 C. 15 D. 20
40. Application for additional / ad- hoc credit facilities and restructuring of accounts , if considered viable
from units under MSME sector for a credit limit or enhancement in existing credit limit above Rs. 5 lakh and
upto Rs.25 lakh will be disposed off within ------ days.

A. 7 B. 10 C. 15 D. 20

41.Application for additional / ad- hoc credit facilities and restructuring of accounts , if considered viable from
units under MSME sector for a credit limit or enhancement in existing credit limit above Rs. 25 lakh will be
disposed off within ------ days .

A. 7 B. 10 C. 15 D. 20

42.The Bank will disburse loans to MSEs within ------------------ working days after complying with all sanction
terms.

A. 2 B. 3 C. 4 D. 5

43. No processing fee will be charged for loans to Micro and Small Enterprises uptoRs. ---------------

A. 10000 B. 15000 C. 20000 D. 25000

44. State whether the following statement is true or false.

“ Rejection of MSME loan applications for fresh limits / enhancement of existing limits should be done with
the concurrence of the next higher authority “.

A. False B. True

( Sanction of reduced limits should be reported to the next higher authority immediately with full details for
review and confirmation )

45. Which of the following is not true with regard to MSME Loan Policy of the Bank :

A. Customers are selected on the basis of initial screening

B. MSME loan appraisal consists of evaluating customer profile , business activity and past credit history of
the borrower

C . It checks the acceptability of the product manufactured or service rendered , its popularity / market
demand , market competitors and end use of the fund

D. It takes into account the Project Cost , the Proponent’ s own financial contribution , projections for three
years , detailed ratio / balance sheet analysis including parameters like BEP , liquidity , solvency and
profitability ratios etc will be carried out to grade the financial health of the borrower entity .

E. All the above is correct.

( in addition to the above , we have to check out for Willful Defaulter’s List of RBI , Specific Approval List ( SAL
) of ECGC etc. )

46. Which of the following is not true with regard to MSME Loan Policy of the Bank :
A . Facility will be sanctioned to each customer on the basis of eligibility and specific requirement of their
business.

B. Borrower will be rated as per our internal credit rating on the basis of strength of past and projected
financials of the borrower, availability of collateral coverage and prospects of the business.

C. Evaluation of Environmental stipulations , availability of necessary infrastructure – roads , labour , raw

material and markets , will be undertaken.

D. The borrower is visited by the officers of the bank at residence / office / factory premise. The officer
understands the management , business requirement , future potential of the business and exact credit
requirement of the borrower.

E. all the above is correct.

47. State whether the following statement is true or false.

“ Traditionally , SME lending takes an asset – backed approach , where the amount lent is not fully secured
through tangible securities “.

A. True B. False

( is fully secured through tangible securities . Asset- backed approach just implies that proceeds of the
securities should be available for liquidation of the Bank loans , in case of failure of the business or if the
borrower does not repay the dues. )

48. Assets created out of bank finance is called ----------------------

A. Primary security B. Collateral Security C. Additional security D. None of the

above.

49.Which of the following is a tangible security.

A. Primary Security B. Collateral Security C. Additional Security D. All the above .

( Collateral Security - Charge on borrower’s property to secure the finance normally with a margin .

Additional Security – Personal guarantee of borrower / Co-obligant / guarantor , guarantee cover , liquid
securities etc )

50. State whether the following statement is true or false.

“ All assets given as security should be insured to the extent of loan sanctioned “.

A. False B. True

( should be insured to the fullest )

51. As per Loan Policy , no collateral security is insisted for loans uptoRs.----------------- to MSE units.
A. 5 L B. 10 L C. 20 L D. 25 L

( In such cases , Bank may obtain the guarantee of CGTMSE as per eligibility . Delegatees who sanction the
loan shall ensure that the loan proposal under the CGTMSE cover is subjected to rigorous appraisal. )

52. State whether the following statement is true or false.

“ Loan can be on fixed / floating rate and interest rate will be linked to the MCLR of the Bank “.

A. True B. False.

( The interest on fixed rate loan will remain fixed while the interest rate on floating rate loan will be linked to
the MCLR of the bank )

53. Increase in the Fees / Charges would be notified through ----------------- 30 days prior to the revised charges
becoming effective.

I. Website II. Account statements III . E mails / SMS IV . Notice at the branches

A. Only I is correct B. Only I and II correct C. Only I, II and III correct D. I , II , III and IV
correct

54.The bank would intimate the customer regarding interest rate ( MCLR ) change through ----------------.

I . Written Letter II . Notice at the branch III. Notification on Website.

A. Only III is correct B. Only I and III are correct C. Only II and III re correct D. I , II and III are
correct.

( Intimation can be through any or all of the above modes ).

55.Before a loan account of a Micro , Small and Medium Enterprise turns into a Non Performing Asset ( NPA )
, Bank shall identify incipient stress in the account by creating three sub –categories under the Special
Mention Account ( SMA ) viz SMA – 0 , SMA – 1 and SMA – 2 . The basis for classification as SMA – 0 is “
Principal or interest payment not overdue for more than ---------------- days but account showing signs of
incipient stress.

A. 15 B. 30 C. 45 D. 60

( SMA – 1 – Principal or interest payment overdue berween 31 – 60 days ; SMA – 2 – Principal or interest
payment overdue between 61 – 90 days. )

56. On the basis of early warning signals , the branch maintaining the MSME account shall consider
forwarding the stressed accounts with aggregate loan limits above Rs .------- lakh to the concerned committee
within five working days for a suitable Corrective Action Plan ( CAP ) .

A . 10 B. 15 C. 25 D .50

57. State whether the following statement is true or false.

“ Forwarding the stressed MSME account to the Committee for CAP will be mandatory in cases of accounts
reported as SMA -1 & SMA – 2. “.

A . False B. True

( mandatory in cases of accounts reported as SMA – 2 )

58. State whether the following statement is true or false.

“ As regards MSME accounts with aggregate loan limits up to Rs. ---------- identified as SMA – 2 , the account
should be mandatorily examined for CAP by the branch itself under the authority of the branch manager. “.

A . False B. True

Chapter 2 - Borrower Selection , Due Diligence and Policy on securities

59. Performance of a loan depends on factors like

I. Performance of Business II. Creditworthiness and Integrity of the borrower III . Strength of the
management

IV. The past history of the borrower

A. Only I is correct B . Only I & II are correct C. Only I , II and III are correctD . All the above

60. State whether the following statement is true or false.

“ The credit worthiness of a borrower can be ascertained only by the market report that the bank can gather
about the borrower “.

A . False B . True

61. Some of the important sources of information where banker can have information about project and the
borrower are ----------------------------------

A .Deafaulters list published by RBI B. Caution listed parties by IBA 0r other agencies like ECGC ( SAL )

C . CIBIL Report D . All the above

62. Credit Information Bureau India Limited ( CIBIL ) now known as TRANSUNION CIBIL Limited came into
existence in the year ------------

A .1999 B .2000 C .2002 D .2003

63. Only ------ Credit information Companies ( CICs ) has been given the license to operate in India.

A.1 B .2 C. 3 D .4

( CIBIL , Experian , Equifax and Crif High Mark )

64.Which of the following is the oldest and largest CIC in India.

A. CIBIL B. Experian C . Equifax D .Crif High Mark

( Dun and Bradstreet is one of the world’s largest and oldest CIC )

65. Which of the following is a rating agency :

A. CRISIL and CARE B. ICRA C . SMERA D . BRICKWORKS E. All the above

66.In the case of lending under Consortium / Multiple Banking Arrangements , Bank should exchange
information about the conduct of the borrower’s accounts among banks in the format as prescribed by RBI at
---------------------intervals.

A. monthly B. quarterly C. half yearly D.

annually

67. ROC search report gives an idea about --------------------------

I . Borrowing levels II. Capital III . Shareholding pattern IV. Extent of charges on assets
etc

A. I and IV B. I , II and IV C. II , III and IV D. I , II , III and IV.

68. Payment of wages, labour issues etc are often a critical indicator about the health of a unit having an
aggregate fund based and non fund based exposure of Rs.----- cr and above. All term lending and refinancing
institutions will submit data on quarterly basis.

A.1 B .2 C .5 D .10

69. After the necessary checks and enquiries , a credit analyst should be able to answer the famous --------- C
s , ----------Ms and ------------ Ps

A .4 , 3 and 5 B .4 , 4 and 4 C . 5 , 4 and 4 D . 5 , 5 and 6

( 5 C s – Character , Capital , Capacity , Collateral and conditions ;

5 M s - Men , Money , Materials , Market and Machine

6 P s - People , Project , Purpose , Product , Place and Policies )

70. Through a client interview , banker should be able to assess and cross check :

A . KSA B. BSR C. KSA & BSR D. None of the above

( KSA – Knowledge , Skill and Attitude ; BSR - Business Acumen , Sincerity and Reliability )

71. State whether the following statement is true or false.

“ Through proper Due Diligence and Client Interviewing and Cross checking , a banker can reasonably
complete the task of KYB and KYBB “ .

A. True B. False
( KYB – Know Your borrower ; KYBB – Know Your Borrower’s Business )

72. ------------------- should be obtained and scrutinized wherever the finance sought is for a business concern.

A. Balance Sheet (audited , wherever required as per rules ) for the previous year.

B. Balance Sheets (audited , wherever required as per rules ) for the previous two years

C . Balance Sheet (audited , wherever required as per rules ) for the previous year and provisional balance
sheet as on a latest date .

D. Balance Sheets ( audited , wherever required as per rules ) for the previous two years and provisional
balance sheet as on a latest date.

73. Which of the following is to be reduced fromNetworth to arrive at Tangible Net worth in the case of
partnerships , Companies etc.

A . Drawings by partners

B . Drawings by partners and accumulated losses

C . Drawings by partners , accumulated losses and investment in subsidiaries , sister concerns .

D. All the above

74. At the time of sanctioning a loan and renewal of limits , banker has to calculate the means of the
borrower and record it in the appraisal notes. Normally ---------------- is taken for the purpose.

A . Net Worth B. Tangible Net Worth

75. State whether the following statement is true or false.

“ While calculating the networth in the case of individuals and proprietors , property to be inherited from
alive parents can also be considered “.

A. True B. False.

( usually not considered )

76. Which among the following is not a classical factor of production.

A. Land B. Labour C. Capital D. Fixed Asset E. Organisation

77. State whether the following statement is true or false.

‘ Technical Appraisal is an attempt by a banker to ensure that the unit which is being financed has the
minimum required physical facilities for smooth functioning “.

A. True B. False

78. A Banker has to evaluate a credit proposal in a comprehensive manner covering ---------------- factors.
A . Legal and Economical B. Legal , Financial and Managerial

C. Legal , Financial , Technical and Managerial D. Legal , Economical , Financial , Technical and Managerial

79. Which of the following is not correct.

A. Assets created out of the finance are charged to the lending Bank and forms the primary security for the
credit facilities and at a stipulated rate of margin , covers the credit facility partly or fully as per the lending
norms of the Bank.

B. In the case of credit facilities granted for acquisition of land and construction of building thereon , the
related Land &Building are to form the primary security ( as in the case of finance for construction of shopping
complex )

C . Any additional security other than primary forms collateral security

D. Bank has an approved list of securities , which can be accepted as collateral security and the margin to be
maintained on each item of security is also stipulated.

E. all the above statements are true.

80. Which of the following statement is not correct :

A. Disbursement of limits is prohibited before creation of mortgage if not otherwise permitted by the
sanctioning authority.

B. While accepting landed property with building as security for loans and advances , approved plans obtained
from statutory authority shall be insisted to ensure that the building is constructed as per the approved plan.

C . Banks shall cross check and confirm the genuineness and bonafides of documents , title deeds , financial
statements , IT returns , salary certificate etc accepted in connection with the credit proposals.

D. Third party collaterals shall be taken only in very exceptional situations and only when the sanctioning
authority is fully convinced of the genuineness , enforceability and marketability of the securities.

E. None of the above

( all the statements are correct )

81. Which of the following is not correct with regard to third party collaterals.

A. While accepting third party collaterals , owner of the property should be apprised of the inherent risk
involved in his action ie the probability of default by the principal borrower , chances of the Bank attaching
the security property for sale etc.

B. While accepting the third party collaterals , officials of the Bank should personally visit / inspect the
immovable property , ascertain the value of the property and convince themselves that the third party is in
actual possession of the property , there are no disputes of ownership of the property , no litigation is
pending against the property etc , by local enquiries or by other means of enquiry.
C. In cases where third party collaterals are proposed to be taken as security , integrity , trustworthiness ,
creditworthiness , reliability etc of the applicant and the third party should be checked and confirmed.

D. while accepting third party collaterals , it should be brought to the notice of the third party that as owner
of the property , he would be required to join as co-obligant to the loan and that in terms of such
requirement , he would be jointly and severally responsible to pay off the entire amount of debt , along with
interest and other charges due there on.

E. None of the above

82. which of the following is not correct with regard to acceptance of Lease Hold Interest in Property as
security.

A . The lessor shall either be the Government or Govt / Semi – Govt / Quasi Govt Corporations providing
infrastructural facilities like MIDC , SIDCO , SIPCOT , Co-operative Industrial Estates etc or development
agencies like DDA , BDA

B. The consent / NOC from the lessor to create mortgage in favour of the Bank should be obtained in writing.

C. The period of lease shall be at least 12 years more than the loan period.

D. The lease agreement should provide for mortgage of the leasehold interest by the lessee.

( The period of lease shall be at least 15 years more than the loan period ).

83. State whether the following statement is true or false.

“ Sub leased properties can be taken as security “.

A. False B. True

( can not be taken as security )

84. Wherever collateral security is indicated as necessary , the fixed assets ( other than immovable property )
taken as collateral security shall not exceed --------- % of the total collateral security.

A. 25 B. 35 C. 40 D. 50

85. Fixed assets which are not in good working condition and which are more than ------ years old should not
be accepted as security.

A. 5 B. 7 C. 10 D. 12

( if age is more than 10 years respective sanctioning committee can take an appropriate decision on a case to
case basis )

86. Waiver of margin / collateral security requirements is permitted for agricultural loans up to Rs.------------

A. 50000 B .100000 C. 200000 D. 250000

87. State whether the following statement is true or false.

“ In the case of financing of second hand machinery , it should be ensured that the residual life of the
machinery should be at least equal to that of the loan period “

A . False B. True

( at least equal to double the loan period )

88. State whether the following statement is true or false.

“ In cases where good condition second hand machinery is imported , the invoice value of the second hand
machinery or the valuation certified by the valuer , whichever is lower , minus customs duty may be treated as
its book value for assessing the eligible finance. “

A .False B . True

( plus customs duty )

89. While financing second hand machinery other than imported , the book value shall be computed as
original invoice value less depreciation ( straight – line method with ---------------depreciation for the first year
and ----------- for subsequent years.

A. 20 % & 15 % B . 15 % & 12.5 % C .15 % & 10 % D. 10 % & 5 %

90. A minimum margin of -------- % shall be stipulated while financing second hand machinery.

A. 15 % B . 25 % C. 40 % D . 50 %

91. State whether the following statement is true or false.

“ The restriction of 10 years on the age of second hand machinery can be relaxed in deserving cases by the
sanctioning authority , if the finance is for importing second hand machinery.”

A . True B. False

92. State whether the following statement is true or false.

“ Even if the action initiated under SARFAESI Act is overturned by the Court / Tribunal , the option for filing
recovery suit / application before the Civil court / debts Recovery tribunal is always available to the Bank ,
provided the documents are not time barred “.

A. False B . True.

93. Which of the following statement is not correct :

A . Bank shall obtain personal guarantee of all promoters / guarantors / trustees for all credit facilities
sanctioned to religious institutions , hospitals and educational institutions.

B . In the case of credit facilities for acquisition of land and construction of building thereon , the Land &
building will be part of the primary security. Even though Bank has financed primary security and the value is
adequate , Bank shall explore the possibility of obtaining additional collateral security not forming part of
primary security , which is free from all other charges and on which action under SARFAESI can be initiated.
C . As a general policy , bank discourages financing second hand machinery , pertaining to certain types of
industries such as acid manufacturing plants , ammonia based plants , coke plants etc where there are
chances of high degree of corrosion.

D.Present day commercial banking relies on highly objective risk assessment requiring quantification of
various aspects of risks contained in the credit proposal and objective decision making based on the same.

E. While arriving at Networth in the case of individuals and proprietors , circumstantial evidence need not be looked
into in the case of jewellery owned.

( Circumstantial evidence also may be looked in rather than taking declaration at Face Value )

94. For any credit facility , a Banker has to make a comprehensive assessment of the profile of the borrower
covering the following minimum points ( other than appraisal based on financial statements )

i) Purpose / need for credit vis – a – vis the business activity pursued
ii) Types of facilities required and quantum
iii) Due diligence report on the Borrower(s) / Guarantor(s) / Group(s)
iv) Borrower’s business expertise and prospects
v) Financial Strength and weakness and Means
vi) Risk profile ( Business , Management , Financial ) and its sensitivity to changes and possible mitigants
vii) Adequacy and enforceability of the tangible securities / guarantees under various scenarios
viii) Internal Credit rating & external Credit rating , if available
ix) Track record of repayment and cash flow establishing capacity to repay
x) Legal capacity to assume the liability
xi) Verification of Documentary proof and identify like PAN Card , Verification of DIN / Father’s name ,
Verification of CIBIL Reports / SMA reports , CERSAI mortgage check , ROC etc.

Chapter 3 – Financial Statements of MSMEs

95. Which of the following details should be essentially captured by financial appraisal done :

A. Networth of the application ( position of excess assets over liabilities )

B. Repayment capacity – adequacy of profits
C. Viability – Increase or sustainability of operations
D. All the above

96. The process of moulding of ‘Financial Accounting ‘ into statements specifically customized for the user 9
using the different decision making parameters ) is --------------------
A. Advanced Financial Accounting B. Management Accounting C.Cost Accounting
D. Creative Accounting

97.Window dressing in accounting is also known as -----------

A. Innovative accounting B. Creative Accounting C . Refinement Accounting
D. Manipulation Accounting

98. The accounting standards notified by Central Government regulations and all the statutory provisions ,
taken together , constitute the Indian GAAP. GAAP means -----------------------------
A. Generally Adopted Accounting Principles B. Generally Accepted Accounting Practices
C. Generally Adopted Accounting Practices D. Generally Accepted Accounting Principles

99. As per Section ------ of Companies Act , 2013 Financial statements of a company includes the following :
i) Balance Sheet at the end of financial year ii ) Statement of Profit & Loss for the financial year
iii ) Cash Flow statement for the financial year ( not mandatory for small companies , OPCs ( one person
company ) & Dormant companies )
iv) Statement of Changes in equity , if applicable
v) Explanatory Notes on Accounts annexed to & forming part of Financial statements
A. 2 ( 13) B. 2 (17 ) C.2 ( 28 ) D. 2 ( 40)

100. ---------------------of Companies Act , 2013 provides general instructions for preparation of balance Sheet
and statement of profit and loss account of a company.
A. Schedule I B. Schedule II C. Schedule III D. Schedule IV