Banking Interview Question and Answers 2010

What is Retail Banking?

Banking services for individual customers. Retail banking refers to banking in which banking institutions execute transactions directly with consumers. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth.

What is Private Banking?

Banking services offered to high net-worth individuals. Private banking institution assists the high net-worth individual in investing his/her money in exchange for commissions and fees. The term "private" refers to the customer service being rendered on a more personal basis.

What is an Investment Bank and Commercial Bank and what is the difference between them?

Investment Bank: A financial institution that deals primarily with raising capital, corporate mergers and acquisitions, and securities trades. It aids companies in acquiring funds.

Commercial Bank: An institution which accepts deposits, makes business loans, and offers related services. Commercial banks also allow for a variety of deposit accounts, such as checking, savings, and time deposit. These institutions are run to make a profit and owned by a group of individuals.

A Commercial bank is commonly referred to as simply a bank. The term ‘Commercial’ is used to distinguish it from an investment bank. The term ‘Commercial’ is used to refer to any banking organization or division that deals with the deposits and loans of business organizations.

Traditionally, banks either engaged in commercial banking or investment banking. In commercial banking, the institution collects deposits from clients and gives direct loans to businesses and individuals.

Through investment banking, an institution generates funds in two different ways. They may draw on public funds through the capital market by selling stock in their company, and they may also seek out venture capital or private equity in exchange for a stake in their company.

Examples of Investment Banks: Bank of America, J P Morgan Chase, Citigroup.

What is Private Equity?

Private equity is money invested in companies that are not publicly traded on a stock exchange. Instead, they normally seek equity stakes (that is partial ownership) in private companies. Venture capital is a specialized subcategory of private equity. Both are high risk, high reward investment approaches.

What is Globalization?

Globalization is a process of interaction and integration among the people, companies, and governments of different nations.

Advantages of Globalization:

i)It can reduce Poverty,

ii) It promotes world peace.

iii)It is allowing access to technology in developing countries and etc.

What is Privatization?

Privatization can also be called denationalization or disinvestment. Privatization refers to of ownership from the government(public sector) to the private business sector either partially or totally.

What is Liberalization?

The process of reducing or removing restrictions on international trade. This may include the reduction or removal of tariffs, abolition or enlargement of import quotas, abolition of multiple exchange rates, and removal of requirements for administrative permits for imports or allocations.

What is Marketization?

It is an economic system based on the principles of the market, including supply, demand, choice and competition.

What is Micro Finance?

Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services and micro insurance. People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and manage risks.

What is Free Market economy?

A market economy based on supply and demand with little or no government control is said to be free market economy.

What is Stock Market/ Share market?

A market where securities are bought and sold. Its basic function is to enable public companies, governments and local authorities to raise capital by selling securities to investors.

What is Equity?

Ownership interest in a corporation in the form of stock.

What is Stock?

The capital raised by a corporation through the issue of shares entitling holders to an ownership interest (equity).

What is National Electronic Fund Transfer system (NEFT)? What is the difference between RTGS and NEFT?

National Electronic Fund Transfer (NEFT) is an online system for transferring funds of Indian financial institution (especially banks). This facility is used mainly to transfer funds below Rs. 1,00,000. The Reserve Bank of India has instructed banks that they should not use RTGS for amounts below Rs 1 lakh.

The key difference between RTGS and NEFT is that while RTGS is on gross settlement basis, NEFT is on net settlement basis. The minimum transaction value for RTGS is Rs. 1,00,000, whereas there is no minimum value for NEFT.

What is DICGC?

Deposit Insurance is nothing but the protection of deposit amount invested in banks under the Act of Deposit Insurance and Credit Guarantee Corporation (DICGC). If a bank fails then a limited amount of protection is provided by the government to depositors. All commercial banks, cooperative banks are covered under the Deposit Insurance in India.

What is IRDA?

To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Headquartered in Hyderabad. Hari Narayan is the chairman of IRDA.

What is Balance of Payments?

A balance of payments is a strategy used to analyze the relationship between money that is flowing into a country and money that is going out of that same country. The BOP is divided into three main categories: the current account, the capital account and the financial account.

What is Balance of Trade?

The difference between a country's imports and its exports.

What is Global Warming?

Global warming refers to an average increase in the Earth's temperature, which in turn causes changes in climate. It happens when greenhouse gases (carbon dioxide, water vapor, nitrous oxide, sulphur hexafluoride and methane) trap heat and light from the sun in the earth’s atmosphere, which increases the temperature. 

What is Kyoto Protocol?

It is an international agreement aimed at controlling the greenhouse emissions, mainly Carbon Dioxide.

What is Savings Account?

A savings account typically refers to an account in which one places money to earn a small amount of interest.

What is Debit Card?

A debit card is a plastic card issued by banks to customers. The card allows instant purchase, removing the correct balance from the user’s attached bank account.

What is Credit Card?

A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale.(for more go on to Banking terms page).