JAIIB and CAIIB Banking Practice: Legal, Technology, Credit, and Ethics Exam Review

Comprehensive review flashcards covering regulatory banking laws, credit appraisal methodologies, payment systems, cyber security concepts, and professional business ethics from the JAIIB and CAIIB curriculum.

What is the legal definition and statutory basis of a Banker's Lien in India?

A Banker's Lien is the right of a bank to retain possession of goods and securities owned by a debtor until the debt due is paid. It is recognized as a general lien under Section $171$ of the Indian Contract Act, $1872$, and acts as an automatic, statutory right that functions as an implied pledge.

In a Hindu Undivided Family (HUF), what are the legal rights of female members and daughters regarding coparcenary and Karta roles?

Following the $2005$ amendment to the Hindu Succession Act, daughters (married or unmarried) are coparceners with equal rights as sons, and women are legally eligible to act as Karta.

Why are minors ineligible to rent bank locker facilities?

Minors are legally incompetent to enter into valid contracts under the Indian Contract Act, preventing banks from renting lockers to them due to associated legal liability.

After how many years of being inoperative does a Foreign Currency Deposit Account become eligible for crystallisation?

$3\text{ years}$ from the date of maturity, at which point the bank converts it into INR at the exchange rate prevailing at the end of the third year.

What is the prescribed bank procedure when detecting up to $4$ counterfeit currency notes versus $5$ or more counterfeit notes in a single transaction?

For up to $4$ counterfeit notes, the notes are impounded and a consolidated monthly report is sent to the police by the Nodal Bank Officer. For $5$ or more counterfeit notes, an FIR is filed immediately with the police along with the notes.

When a Demand Draft is issued by a bank at the request of person 'A' in favour of payee 'B', what legal relationships are established?

Between purchaser 'A' and the issuing bank, the relationship is Creditor and Debtor. Between payee 'B' and the issuing bank, the relationship is Beneficiary and Trustee.

In what registered capacity do banks act when offering Demat account services to their customers?

Depository Participant (DP), registered with depositories such as NSDL or CDSL.

What are the three sequential stages of the money laundering cycle?

1. Placement (introducing illicit cash into the financial system)
2. Layering (moving funds across multiple accounts/transactions to conceal origin)
3. Integration (reintroducing 'cleaned' funds into the legitimate economy).

What are the financial thresholds to qualify as a 'small limited liability partnership (LLP)' under the LLP (Amendment) Act?

A contribution not exceeding $\text{₹}25\text{ lakhs}$ and a turnover not exceeding $\text{₹}40\text{ lakhs}$ in the previous financial year.

Which authority has the jurisdiction to issue a Garnishee Order against a customer's bank account?

A Civil Court, acting under Order $21$, Rule $46$ of the Civil Procedure Code.

Under Schedule II of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, which ministry's prior approval is mandatory for outward remittances for cultural tours?

Ministry of Education / Human Resource Development (HRD).

How are lease payments accounted for in the lessee's books of accounts under lease financing?

Lease payments are recorded as revenue expenses in the lessee's income statement, because the lessor retains ownership and claims depreciation.

How does Section 5(b) of the Banking Regulation Act, 1949 define 'Banking'?

Accepting deposits of money from the public for the purpose of lending or investment, which are repayable on demand or otherwise and withdrawable by cheque, draft, order, or otherwise.

Under the Prevention of Money Laundering Act (PMLA), who holds the legal responsibility for reporting transactions and sharing information with FIU-IND?

The Principal Officer (PO).

What was the deadline set by the RBI for non-individual borrowers with aggregate exposures of $\text{₹}25\text{ crore}$ or more to obtain a Legal Entity Identifier (LEI)?

April $30$, $2023$.

What is the primary legal objective of an 'Order Nisi' issued by a court in garnishee proceedings?

To ask the bank to show cause and explain why the debtor's funds should not be attached, placing a temporary hold on outgoing transactions.

Within how many days of establishing an account-based relationship must a reporting entity file a client's electronic KYC records with CKYCR?

Within $10\text{ days}$, as mandated by the Prevention of Money-laundering (Maintenance of Records) Amendment Rules, $2015$.

When both a bank's right of set-off and a court's garnishee order apply to a debtor's account balance, which takes precedence?

The bank must execute its right of set-off first to satisfy its own dues; only the remaining balance, if any, is subject to the garnishee order.

Under the Companies Act, 2013, what is the minimum number of members required to incorporate a private company versus a public company?

A minimum of $2$ members for a private company, and a minimum of $7$ members for a public company.

For a sub-standard secured NPA held between 6 months and 1 year where directors' names appear repeatedly on wilful defaulter lists, what is the accelerated provisioning requirement?

$25\%$.

Using the Operating Cycle method, calculate the working capital requirement for an enterprise with annual operating expenses of $\text{₹}50\text{ lakhs}$, an operating cycle of $75\text{ days}$, and $365\text{ days}$ in a year.

Number of operating cycles is $\frac{365}{75} \approx 4.8666$. The working capital requirement is $\frac{\text{₹}50,00,000}{4.8666} \approx \text{₹}10,41,666.67$ (or approx. $\text{₹}10.42\text{ lakhs}$).

Under the Nayak Committee Turnover Method, what is the required borrower contribution for an enterprise with a projected turnover of $\text{₹}138\text{ lakh}$?

$\text{₹}6.9\text{ lakh}$ ($5\%$ of projected turnover, calculated as $0.05 \times 138 = \text{₹}6.9\text{ lakh}$).

Under the Tandon Committee's Second Method of Lending, what percentage of current assets must be funded from long-term sources, and what minimum current ratio is targeted?

The borrower must arrange at least $25\%$ of total current assets from long-term funds, targeting a minimum current ratio of $1.33:1$.

Under Section 20 of which Act was the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) established?

SARFAESI Act, $2002$.

What is the minimum denomination and issuance multiple for Certificates of Deposit (CDs) in India?

$\text{₹}5\text{ lakhs}$ (and in multiples of $\text{₹}5\text{ lakhs}$ thereafter).

What is a Brown Label ATM?

An ATM where the physical machine, installation, and site maintenance are owned by a third-party sponsor/service provider, but cash management, network connectivity, and banking operations are provided by a sponsor bank under its own brand.

What is the cash loading limit and structural feature of Small PPIs (Minimum KYC PPIs)?

Small PPIs are reloadable electronic instruments with a maximum cash loading limit of $\text{₹}10,000$ per month and $\text{₹}1,20,000$ per year, usable solely for purchasing goods and services at merchant locations contracted with the issuer.

What are the core differences between Business Ethics and Business Values?

Business Ethics refers to guidelines for conduct that determine what is morally correct or incorrect in a given situation. Business Values refer to internal principles and ideals that induce thinking, determine what an organization or individual wants to achieve, and indicate levels of significance.

What are the three recognized decision-making approaches used to resolve ethical dilemmas?

1. End-result thinking (Utilitarian; maximizing good for the greatest number)
2. Rule-based thinking (Deontological; adhering to established rules and duties regardless of outcome)
3. Care-based thinking (The Golden Rule; empathy-based decision making).

Under the Insolvency and Bankruptcy Code (IBC), what are the separate Adjudicating Authorities for corporate persons versus individuals?

The Adjudicating Authority for corporate persons (companies and personal corporate guarantors) is the National Company Law Tribunal (NCLT); for individuals and partnership firms, it is the Debt Recovery Tribunal (DRT).