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Test: Principles and Practices of Banking - 5 - Bank Exams MCQ


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100 Questions MCQ Test Mock Test Series for JAIIB Exam 2025 - Test: Principles and Practices of Banking - 5

Test: Principles and Practices of Banking - 5 for Bank Exams 2024 is part of Mock Test Series for JAIIB Exam 2025 preparation. The Test: Principles and Practices of Banking - 5 questions and answers have been prepared according to the Bank Exams exam syllabus.The Test: Principles and Practices of Banking - 5 MCQs are made for Bank Exams 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Principles and Practices of Banking - 5 below.
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Test: Principles and Practices of Banking - 5 - Question 1

What is the difference between balance sheet lending (BSL) and marketplace lending (MPL)?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 1

Balance sheet lenders (BSL) carry the credit risk in their balance sheet and provide capital for such assets and associated credit risk, generated organically or non-organically. Market Place Lenders (MPLs) or Market Place Aggregators (MPAs) essentially perform the role of matching the needs of a lender and borrower without any intention to carry the loans in their balance sheet.

Test: Principles and Practices of Banking - 5 - Question 2

What can senior managers do to become ethical leaders of the employees at banks?
(i) Convey the importance of ethics
(ii) Walk their talk about ethics
(iii) Effectively lead the ethics

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 2

The senior managers at banks can follow the above-mentioned steps to become role models for the employees and become their ethical leaders.

Test: Principles and Practices of Banking - 5 - Question 3

What is Financial Literacy?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 3

Financial literacy is the process of improving one's knowledge and understanding of the use of financial products and services.

Test: Principles and Practices of Banking - 5 - Question 4

Who is eligible for coverage under PMFBY?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 4

All farmers including sharecroppers and tenant farmers growing the notified crops in the notified areas are eligible for coverage.

Test: Principles and Practices of Banking - 5 - Question 5

What is a custodian bank?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 5

A custodian bank is a bank that is mainly concerned with the safekeeping of customer's financial assets.
Custodian banks hold and safeguard financial assets on behalf of their clients, which can include securities such as stocks, bonds, and mutual funds, among others. The custodian bank is responsible for ensuring the safekeeping of these assets and for processing any transactions related to them, such as buying and selling securities, collecting dividends, and paying out interest.
While banks may provide loans, extend credit, and offer other financial services, a custodian bank specifically focuses on the safekeeping and management of financial assets for its clients.

Test: Principles and Practices of Banking - 5 - Question 6

What are some security tips to avoid phishing, vishing, and smishing attacks?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 6

To avoid phishing, vishing, and smishing attacks, it is important to be vigilant and not respond to suspicious emails or phone calls asking for personal information. Instead, call the legitimate organization's customer service number to verify any requests for personal information. Additionally, reviewing account activity regularly can help identify any unauthorized activity.

Test: Principles and Practices of Banking - 5 - Question 7

What is the maximum amount that can be repatriated abroad from a resident account held by a foreign national leaving India?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 7

When foreign nationals leave India, the amounts repatriated abroad should not exceed USD one million per financial year.

Test: Principles and Practices of Banking - 5 - Question 8

Why is ethical conduct important in information security?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 8

Any failure of professionals handling the IT desk and data can result in major leakages of sensitive information, with huge losses to the banks, reputation risk, and expensive legal battles. Hence, ethical conduct is important in information security.

Test: Principles and Practices of Banking - 5 - Question 9

Direction: Bank computerization during the initial stages involved the transition of traditional manual banking processes to computer-based systems. This transition aimed to improve the efficiency and accuracy of banking operations and to provide better customer service. During the initial stages of bank computerization, banks typically adopted standalone computer systems that were not connected to any network. One of the key challenges during the initial stages of bank computerization was the lack of standardization and interoperability between different systems. Overall, the initial stages of bank computerization laid the foundation for the modern digital banking systems that we have today. The use of technology has transformed banking operations and has made it possible to offer a wide range of services to customers through online and mobile platforms.

Q. What advantage(s) do/does Centralized data processing give to the banks?
(i) Each branch shares the same set of software, hardware, and other infrastructure.
(ii) The corporate-level information is made available to all the branches.
(iii) If the central server goes down, it will not affect the productivity of the systems connected.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 9

Statement iii is incorrect as it is a disadvantage of centralized processing, rather than an advantage. If the central server/computer goes down, all the connected users/systems will lose access to the data and services provided.

Test: Principles and Practices of Banking - 5 - Question 10

Direction: Bank computerization during the initial stages involved the transition of traditional manual banking processes to computer-based systems. This transition aimed to improve the efficiency and accuracy of banking operations and to provide better customer service. During the initial stages of bank computerization, banks typically adopted standalone computer systems that were not connected to any network. One of the key challenges during the initial stages of bank computerization was the lack of standardization and interoperability between different systems. Overall, the initial stages of bank computerization laid the foundation for the modern digital banking systems that we have today. The use of technology has transformed banking operations and has made it possible to offer a wide range of services to customers through online and mobile platforms.

Q. When did the concept of Bank Computerization practically start?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 10

The concept of Bank Computerization practically started during 1980-81.

Test: Principles and Practices of Banking - 5 - Question 11

Which philosophy of ethics is described by the following statement:
Each of us with a wealth surplus to his or her essential needs should be giving most of it to the people suffering from poverty so dire as to be life-threatening

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 11

The above statement is given by Peter Singer about trusteeship and says that the trustees have to create, preserve and increase wealth without expecting its enjoyment.

Test: Principles and Practices of Banking - 5 - Question 12

Which ethical code of conduct says that the banks must offer suitable products or services to customers as per their requirements and profile?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 12

Being transparent means keeping the customers updated about their rights and obligations and offering them products and/or services suitable to their requirements and profile.

Test: Principles and Practices of Banking - 5 - Question 13

What is the holistic approach to ethical production?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 13

The holistic approach to ethical production involves focusing on the well-being of society as a whole, including the well-being of consumers and the impact of production on the environment.

Test: Principles and Practices of Banking - 5 - Question 14

Read the following statements about Values at the workplace.
(i) The extent to which personal values match with the values in an organization is considered an indicator of the "fit" between the organization and the individual.
(ii) Improving corporate performance on a single value does not affect the way a company functions.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 14

Statement ii is incorrect. The correct statement is - Improving corporate performance on a single value can virtually transform the way a company functions.

Test: Principles and Practices of Banking - 5 - Question 15

What is the main purpose of NICNET?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 15

Though NICNET has been allowed connectivity to banks in India for e-mail services, its main purpose is to support the communication needs of the Central/State Governments in India and facilitate e-Governance applications in Government Ministries/ Departments at the Centre, States, Districts, and Block level, resulting in better efficiency and accountability to the people of India.

Test: Principles and Practices of Banking - 5 - Question 16

Which of the following machines helps to withdraw cash?
(i) Cash Recycler Machine
(ii) Cash Dispenser Machine
(iii) Automated teller Machine

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 16

Cash dispensers are ones intended to serve customers for making cash withdrawals only. A Cash Recycler machine is a self-service terminal that lets one deposit and withdraw cash. ATMs are an extended version of Cash recyclers and dispensers that are used to withdraw cash, along with a wide variety of functions.

Test: Principles and Practices of Banking - 5 - Question 17

What is/are the requirement for due diligence in the case of opening a Savings account for a Self-Help Group?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 17

In the case of opening a Savings account for a Self-Help group, the due diligence of only the office bearers shall suffice. However, for credit linking of SHGs, the due diligence of all the members of the group is mandatory.

Test: Principles and Practices of Banking - 5 - Question 18

Can a Regulated Entity appeal against an Award issued for the non-furnishing of documents/ information by it?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 18

A Regulated Entity can appeal against an Award or order of rejection, but only with the prior sanction of the Chairman or the MD/ CEO or, in their absence, the ED/Official of equal rank. However, a Regulated Entity will not have a right to appeal for an Award issued for the non-furnishing of documents/ information by it.

Test: Principles and Practices of Banking - 5 - Question 19

What is the purpose of the loan provided by MUDRA?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 19

The loan provided by MUDRA is for income-generating activities and not for the consumption/personal needs.

Test: Principles and Practices of Banking - 5 - Question 20

Which of the following statements is correct about Non-Resident (External) Rupee Account Scheme - NRE Account?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 20

An NRE Account can be maintained by NRIs and POIs. Two or more NRIs and/or POIs can open an NRE account jointly. Further, the minimum tenure of NRE Term Deposits is one year. Also, there is no monetary limit to avail loans against the NRE Deposits, subject to the condition that the amount cannot be used for re-lending, agricultural/plantation activities, or investments in the real estate business.

Test: Principles and Practices of Banking - 5 - Question 21

Direction: Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services without holding a banking license. They operate in various segments such as consumer finance, vehicle finance, housing finance, and microfinance, among others. Banks provide finance to NBFCs in the form of term loans, working capital loans, and credit lines. The finance is typically used by NBFCs to fund their lending activities, purchase assets, and other operational expenses. Banks also provide credit enhancement facilities such as guarantees and letters of credit to support NBFCs in raising funds from the market. The Reserve Bank of India (RBI) regulates the lending activities of banks to NBFCs. The RBI has mandated that banks should classify their lending to NBFCs as per their risk assessment and ensure that the exposure to individual NBFCs does not exceed the prescribed limits.

Q. Which of the following institutions is not included in the definition of NBFC?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 21

The definition of NBFC excludes any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities), or providing any services and sale/purchase/construction of an immovable property.

Test: Principles and Practices of Banking - 5 - Question 22

Direction: Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services without holding a banking license. They operate in various segments such as consumer finance, vehicle finance, housing finance, and microfinance, among others. Banks provide finance to NBFCs in the form of term loans, working capital loans, and credit lines. The finance is typically used by NBFCs to fund their lending activities, purchase assets, and other operational expenses. Banks also provide credit enhancement facilities such as guarantees and letters of credit to support NBFCs in raising funds from the market. The Reserve Bank of India (RBI) regulates the lending activities of banks to NBFCs. The RBI has mandated that banks should classify their lending to NBFCs as per their risk assessment and ensure that the exposure to individual NBFCs does not exceed the prescribed limits.

Q. Which of the following activities are NBFCs engaged in, that banks may extend working capital and term loans to?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 22

Banks may extend need-based working capital facilities as well as term loans to all NBFCs registered with RBI and engaged in infrastructure financing, equipment leasing, hire-purchase, loan, factoring, and investment activities subject to the guidelines.

Test: Principles and Practices of Banking - 5 - Question 23

Direction: Non-Banking Financial Companies (NBFCs) are financial institutions that provide banking services without holding a banking license. They operate in various segments such as consumer finance, vehicle finance, housing finance, and microfinance, among others. Banks provide finance to NBFCs in the form of term loans, working capital loans, and credit lines. The finance is typically used by NBFCs to fund their lending activities, purchase assets, and other operational expenses. Banks also provide credit enhancement facilities such as guarantees and letters of credit to support NBFCs in raising funds from the market. The Reserve Bank of India (RBI) regulates the lending activities of banks to NBFCs. The RBI has mandated that banks should classify their lending to NBFCs as per their risk assessment and ensure that the exposure to individual NBFCs does not exceed the prescribed limits.

Q. Under what conditions can banks rediscount bills discounted by NBFCs arising from the sale of commercial vehicles?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 23

All conditions must be satisfied for banks to rediscount bills discounted by NBFCs arising from the sale of commercial vehicles.

Test: Principles and Practices of Banking - 5 - Question 24

How are retail loans mainly processed and monitored?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 24

Retail loans are mainly processed and monitored through computerized systems and scorecards.

Test: Principles and Practices of Banking - 5 - Question 25

What is the Credit Information Companies (Regulation) Act, of 2005?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 25

The Act requires all credit institutions to become members of at least one Credit Information Company within three months of its commencement and provide credit data in the format required by the CIC. All Credit Institutions are required to become members of all CICs.

Test: Principles and Practices of Banking - 5 - Question 26

What are the two fundamental criteria that determine the liability of a bank under a guarantee?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 26

The liability of a bank under a guarantee depends on two fundamental criteria, which are the amount guaranteed and the period of the guarantee. These two factors must be specifically stated in the guarantee agreement because, in the absence of any one or both of these factors, the bank’s liability could be unlimited either in the amount guaranteed or the period during the guarantee.

Test: Principles and Practices of Banking - 5 - Question 27

Direction: A bank has a large number of customers who are not individuals but are entities like partnerships, companies, trusts, and associations. These entities hold different types of accounts with the bank, such as current accounts, savings accounts, term deposits, and foreign currency accounts. The bank has to ensure that the accounts of these entities comply with the relevant laws and regulations and that the transactions are consistent with the purpose of the account. The bank has a dedicated team of professionals who handle these accounts and ensure that they comply with the law. Banks should also inform the authorized signatories of any issues with the account and advise them to take appropriate measures to safeguard the funds.

Q. Which of the following rules is incorrect regarding the obtaining of Photographs of account holders?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 27

Photocopies of an OVD with photographs would not suffice in place of photographs, and the customer has to submit the recent photograph only.

Test: Principles and Practices of Banking - 5 - Question 28

Direction: A bank has a large number of customers who are not individuals but are entities like partnerships, companies, trusts, and associations. These entities hold different types of accounts with the bank, such as current accounts, savings accounts, term deposits, and foreign currency accounts. The bank has to ensure that the accounts of these entities comply with the relevant laws and regulations and that the transactions are consistent with the purpose of the account. The bank has a dedicated team of professionals who handle these accounts and ensure that they comply with the law. Banks should also inform the authorized signatories of any issues with the account and advise them to take appropriate measures to safeguard the funds.

Q. According to the rules for opening and operations of a partnership firm's account, when should the operations in the account be stopped if a partner gives notice of stoppage of operation?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 28

When a partner gives notice of stoppage of operation, all operations must be stopped immediately under intimation addressed as a joint letter sent to all the partners as well as the firm. Then the account would be operative only by all partners jointly.

Test: Principles and Practices of Banking - 5 - Question 29

What is smishing?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 29

Smishing is a type of cyber-attack where fraudulent text messages are sent to steal personal information, such as account numbers and passwords. The text message typically contains a link to a fake website or an automated voice response system.

Test: Principles and Practices of Banking - 5 - Question 30

What is the maximum number of State Information Commissioners that can be appointed?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 30

As per Section 15(2) of the Right to Information Act, 2005, the State Information Commission can have State Information Commissioners not exceeding ten in number.

Test: Principles and Practices of Banking - 5 - Question 31

Kanika is a partner in a firm PQR that wants to open a bank account in the firm name opening of account requires the signature of?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 31

If a partner wants to open an account in the name of the firm only then the signature of all the partners are required.

Test: Principles and Practices of Banking - 5 - Question 32

What are the potential risks of open banking?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 32

The potential risks of open banking include data breaches caused by inadequate security, hacking, or insider threats. These risks are more widespread and have become relatively common in the modern era, including at financial institutions. The possibility of a malicious third-party app emptying a customer's bank account without their knowledge is a severe (and unlikely) threat to the system.

Test: Principles and Practices of Banking - 5 - Question 33

What happens to banks that do not achieve their priority sector lending targets?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 33

Banks that do not achieve their priority sector lending targets are allocated amounts for contribution to the Rural Infrastructure Development Fund (RIDF) and other funds with NABARD/NHB/SIDBI/MUDRA Ltd., as decided by RBI from time to time. UCBs are also required to contribute to these funds. The interest rates and tenure of deposits are fixed by RBI.

Test: Principles and Practices of Banking - 5 - Question 34

What is the importance of ensuring that loan documents are valid and not time-barred for a banker?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 34

Ensuring that loan documents are valid and not time-barred is important for a banker because it enables the bank to take legal action to recover dues. If the documents are expired or time-barred, the bank cannot take any legal course of action to recover the dues.

Test: Principles and Practices of Banking - 5 - Question 35

Who is a holder in due course of a bill of exchange?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 35

Section 9 of the NI Act, 1881 defines a holder in due course as any person who for consideration became the possessor of the bill (that is to whom the bill is transferred).

Test: Principles and Practices of Banking - 5 - Question 36

Which of the following is a method of assurance used in international trade when the seller is in doubt about the buyer's ability to pay?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 36

The seller may ask for assurance from a banker that the terms of trade would be complied with and his interest would be protected. One method of this assurance is the use of a Letter of Credit (LC).

Test: Principles and Practices of Banking - 5 - Question 37

Direction: Credit is a crucial input for the promotion and development of micro, small, and medium enterprises (MSMEs). The Government of India has taken various measures to ensure that MSMEs have access to timely and adequate credit. loan facilities to MSMEs are classified in a distinct category as per Reserve Bank of India (RBI) guidelines. The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) is a collateral-free credit facility for Micro and Small Enterprises (MSEs) in India. The scheme covers various loans which can be taken for various purposes, including business expansion, modernization, and technology up-gradation. The interest rates charged by the lending institutions are reasonable. It has also contributed to the growth of the MSME sector in India by providing them with timely credit without the need for collateral.

Q. Which Act was enacted to facilitate MSMEs in corporatization?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 37

To facilitate MSMEs in corporatization, the Limited Liability Partnership Act, of 2008 was enacted.

Test: Principles and Practices of Banking - 5 - Question 38

Direction: Credit is a crucial input for the promotion and development of micro, small, and medium enterprises (MSMEs). The Government of India has taken various measures to ensure that MSMEs have access to timely and adequate credit. loan facilities to MSMEs are classified in a distinct category as per Reserve Bank of India (RBI) guidelines. The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) is a collateral-free credit facility for Micro and Small Enterprises (MSEs) in India. The scheme covers various loans which can be taken for various purposes, including business expansion, modernization, and technology up-gradation. The interest rates charged by the lending institutions are reasonable. It has also contributed to the growth of the MSME sector in India by providing them with timely credit without the need for collateral.

Q. Who can participate as sellers on the Trade Receivables Discounting System (TReDS) platform?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 38

TReDS is an electronic platform for facilitating the financing/ discounting of trade receivables of MSMEs through multiple financiers. Only MSMEs can participate as sellers on the TReDS platform.

Test: Principles and Practices of Banking - 5 - Question 39

When were the priority sectors formally described and based on whose report?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 39

The priority sectors were formally described in 1972 based on the report submitted by the informal study group on statistics relating to advances to the priority sectors constituted by the Reserve Bank in May 1971.

Test: Principles and Practices of Banking - 5 - Question 40

Direction: The payment and collection of cheques and other negotiable instruments are crucial aspects of modern business transactions. Cheques, promissory notes, bills of exchange, and other negotiable instruments are used to facilitate payments between parties. When a cheque is issued, it is a promise by the issuer to pay a specified amount to the payee on demand or at a future date. The payee can deposit the cheque in their bank account for collection, and the bank will process it by verifying the signature and ensuring that there are sufficient funds in the issuer's account. If the cheque is valid and funds are available, the bank will credit the payee's account. In cases where the cheque bounces, the bank will not honor it and return it to the payee's bank. To prevent fraudulent activities, banks have implemented various security measures and procedures for the payment and collection of negotiable instruments.

Q. What is the purpose of adding "A/c Payee" or "Payee's A/c only" to the crossing of a cheque?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 40

Adding the words "A/c Payee" or "Payee's A/c only" to the crossing is a direction to the collecting bank to collect the proceeds for the payee's account only and is a practice widely followed for more protection.

Test: Principles and Practices of Banking - 5 - Question 41

Direction: The payment and collection of cheques and other negotiable instruments are crucial aspects of modern business transactions. Cheques, promissory notes, bills of exchange, and other negotiable instruments are used to facilitate payments between parties. When a cheque is issued, it is a promise by the issuer to pay a specified amount to the payee on demand or at a future date. The payee can deposit the cheque in their bank account for collection, and the bank will process it by verifying the signature and ensuring that there are sufficient funds in the issuer's account. If the cheque is valid and funds are available, the bank will credit the payee's account. In cases where the cheque bounces, the bank will not honor it and return it to the payee's bank. To prevent fraudulent activities, banks have implemented various security measures and procedures for the payment and collection of negotiable instruments.

Q. What should a banker do if a cheque contains material alterations?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 41

Any material alteration of a negotiable instrument renders it void against anyone who is a party thereto at the time of making such an alteration and does not consent thereto unless it was made to carry out the common intention of the original parties. Any material alteration should be authenticated under the full signature of the drawer.

Test: Principles and Practices of Banking - 5 - Question 42

Direction: The payment and collection of cheques and other negotiable instruments are crucial aspects of modern business transactions. Cheques, promissory notes, bills of exchange, and other negotiable instruments are used to facilitate payments between parties. When a cheque is issued, it is a promise by the issuer to pay a specified amount to the payee on demand or at a future date. The payee can deposit the cheque in their bank account for collection, and the bank will process it by verifying the signature and ensuring that there are sufficient funds in the issuer's account. If the cheque is valid and funds are available, the bank will credit the payee's account. In cases where the cheque bounces, the bank will not honor it and return it to the payee's bank. To prevent fraudulent activities, banks have implemented various security measures and procedures for the payment and collection of negotiable instruments.

Q. What is a facultative endorsement?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 42

A facultative endorsement is when the endorser waives their right to notice of dishonor but remains liable for non-payment of the instrument.

Test: Principles and Practices of Banking - 5 - Question 43

What is the purpose of using EMV Chip and PIN-based cards?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 43

The purpose of using EMV chips and PIN-based cards is to enhance the security of transactions.

Test: Principles and Practices of Banking - 5 - Question 44

Which section of the Negotiable Instruments Act grants protection to a paying banker?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 44

Section 85 of the Negotiable Instruments Act grants protection to a paying banker on his making payment of a cheque.

Test: Principles and Practices of Banking - 5 - Question 45

Which agency acts as the Nodal Agency of GOI for the MSP Scheme?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 45

The Food Corporation of India (FCI) acts as the Nodal Agency of GOI for the MSP Scheme.

Test: Principles and Practices of Banking - 5 - Question 46

Direction: Mr. Sharma, a retired government employee, had recently suffered a stroke and was unable to carry out his banking activities on his own. His son, who lived in another city, wanted to help his father in managing his finances. For this purpose, Mr. Sharma decided to grant his son the power to operate his bank account. Mr. Sharma approached his bank and requested them to help him. The bank agreed to do so and asked Mr. Sharma and his son to provide the necessary documents for the purpose. They were advised to provide clear and specific instructions to the bank regarding the operation of the account and the use of the funds.

Q. Which of the following statements resembles the case given?
(i) It is a right allowing a bank to retain any money, or property belonging to a customer until their debt belonging to the bank has been satisfied.
(ii) It is a legal authority given to another person to act on their behalf
(iii) It is of two types- General, and Specific. The General power is given for acting in more than one transaction whereas the Specific power is issued for a specific purpose.
(iv) The signature of the third-person is verified by the customer in the required letter.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 46

The Power of Mandate is an authority given by the account holder to a third person to do certain acts on his behalf, and the signature of the third person (mandate) is verified by the customer in the mandate letter.

Test: Principles and Practices of Banking - 5 - Question 47

Direction: Mr. Sharma, a retired government employee, had recently suffered a stroke and was unable to carry out his banking activities on his own. His son, who lived in another city, wanted to help his father in managing his finances. For this purpose, Mr. Sharma decided to grant his son the power to operate his bank account. Mr. Sharma approached his bank and requested them to help him. The bank agreed to do so and asked Mr. Sharma and his son to provide the necessary documents for the purpose. They were advised to provide clear and specific instructions to the bank regarding the operation of the account and the use of the funds.

Q. What is the title given to the son in the above case?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 47

The son (third-person) to whom the authority is known as mandatee.

Test: Principles and Practices of Banking - 5 - Question 48

Direction: Mr. Sharma, a retired government employee, had recently suffered a stroke and was unable to carry out his banking activities on his own. His son, who lived in another city, wanted to help his father in managing his finances. For this purpose, Mr. Sharma decided to grant his son the power to operate his bank account. Mr. Sharma approached his bank and requested them to help him. The bank agreed to do so and asked Mr. Sharma and his son to provide the necessary documents for the purpose. They were advised to provide clear and specific instructions to the bank regarding the operation of the account and the use of the funds.

Q. Which right is given by Mr. Sharma to his son in the above case?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 48

A mandate is an authority given by the account holder (Mr. Sharma) in favor of a third person (here, the son) to do certain acts on his behalf. However, power of attorney is exercised when the authority is given to act as an agent of the account holder.

Test: Principles and Practices of Banking - 5 - Question 49

What is the procedure for complaining about the Protected Disclosures Scheme for Private Sector and Foreign Banks in India?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 49

The complaint must be made in a sealed envelope superscribed as "Complaint under Protected Disclosures Scheme for Banks" and addressed to the Department of Supervision. The complainant must provide their name, designation, and address in the covering note. Complaints can also be made in email form.

Test: Principles and Practices of Banking - 5 - Question 50

What happens when a transaction hits the Central Database in CBS?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 50

Once the transaction hits the Central Data Base, the system will validate the transaction and debit or credit the particular account.

Test: Principles and Practices of Banking - 5 - Question 51

Which of the following statements is true in relation to SWIFT?
I. SWIFT stands for Society for Worldwide Inter-bank Financial Telecommunications.
II. It operates as a financial messaging platform.
III. SWIFT is wholly owned by its member banks/financial institutions.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 51
  • Society for Worldwide Inter-bank Financial Telecommunications (SWIFTs) was founded in 1973 by 239 banks spread over fifteen countries with the objective of creating a unified international transaction processing and transmission system to meet the ever-growing telecommunication requirement of the banking industry. It is a cooperative non-profit organization established under Belgian law with its headquarters in Brussels. SWIFT operates a financial messaging platform that brings together more than 11,000 financial institutions and corporations across 215 countries.
  • SWIFT is wholly owned by its member banks/financial institutions. Swift is basically a message transmission system. All the transactions are processed without the exchange of paper, banknotes, cheque, draft, etc., and as such is a true epitome of paperless banking. In India, all nationalized banks are members of SWIFT.
  • Thus, Option (d) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 52

Government of India has launched a rationalised poverty alleviation scheme called the 'Swarna Jayanti Shahari Rozgar Yojana' replacing which of the following existing schemes?
I. Nehru Rozgar Yojana (NRY)
II. Urban Basic Services for the Poor (UBSP)
III. Prime Ministers integrated Urban poverty eradication programme (PMIUPEP)
IV. Development of women and children in Rural areas (DWCRA)

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 52

Government of India has launched a rationalised poverty alleviation schemes called the 'Swarna Jayanti Shahari Rozgar Yojana' replacing which of the following existing schemes:

  • Nehru Rozgar Yojana (NRY)
  • Urban Basic Services for the Poor (UBSP)
  • Prime Ministers integrated Urban poverty eradication programme (PMIUPEP)

Thus, Statements I, II & III are correct.
Hence, the correct answer is Option(b) .

Test: Principles and Practices of Banking - 5 - Question 53

Among the given, which of the given statements is/are correct?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 53

RBI initiatives:

  • To spread knowledge of banking principles to a variety of target groups, including school-age and college-bound children, women, the impoverished in rural and urban areas, members of the armed forces, and senior people, the RBI has launched a scheme called "Project Financial Literacy."
  • On November 14, 2007, RBI unveiled a website for financial education.
  • To facilitate the organisation of Financial Literacy Camps and Financial Literacy, RBI distributed a thorough Financial Literacy Guide. Materials include a series of 16 posters as well as a financial diary.
  • All Financial Literacy Centers and rural branches are obliged to create an annual schedule of venues for the holding of outdoor Financial Literacy Camps, per an RBI circular dated June 6, 2012.
  • The programme should be implemented at each site in three stages, each lasting a minimum of two hours, with a visit to guarantee that cards are delivered on time. Two weeks after the first session, there will be a second session. Branch representatives should visit the village after 15 days of the second session to make sure that the residents received their cards. Additionally, they will make sure that the BC is operating and that the people may conduct business. Two months following the second session, a third session will be held.

Hence, option (a) is the correct choice.

Test: Principles and Practices of Banking - 5 - Question 54

Which of the following are the benefits of the Cheque Truncation System?
I. MICR amount encoding not required
II. Reconciliation difference eliminated - MICR and Image data travel together
III. No cheques being lost/tampered/pilfered
IV. No risk of any manipulation of data and image during transit

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 54

Cheque Truncation System (CTS) is a cheque clearing system undertaken by the Reserve Bank of India (RBI) for quicker cheque clearance. As the term proposes, truncation is the course of discontinuing the flow of the physical cheque in its way of clearing. Instead of this an electronic image of the cheque is transferred with vital essential data. Benefits of CTS

Customer Service

  • Extended cut off time for acceptance of Customer Cheques by banks
  • Easy retrieval of information
  • Reduced timelines for clearing

Operational Benefit

  • • MICR amount encoding not required
  • • Reconciliation difference eliminated - MICR and Image data travel together
  • • No cheques being lost/tampered/pilfered
  • • No risk of any manipulation of data and image during transit
  • • CTS 2010 standards leading to enhanced security and automation

Commercial Benefit

  • • Cost involved in paper movement eliminated
  • • Grid implementation allowing better liquidity management for banks
Test: Principles and Practices of Banking - 5 - Question 55

A payment of a cheque will only be made if it is presented within a period of ______ from the date of the instrument.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 55

In India, it was the practice to make payment of a cheque/ draft/ pay order only if presented within a period of six months from the date of the instrument. It was noticed that undue advantage of this facility was being taken by circulating these instruments in the market like cash for six months. Hence, the RBI has reduced the validity of these instruments to three months, effective from April 1, 2012, in exercise of powers conferred by Sec. 35A of the Banking Regulation Act, 1949. Thus, Option (b) is the correct answer.

Test: Principles and Practices of Banking - 5 - Question 56

Among the below given Observations and reason which of the following is correctly describing the condition.

Observation:An increase in the ratio of current assets to total assets will result in a decline in the profitability of the firm.
Reason: The investment in current assets is less profitable than those in fixed assets.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 56
  • On account of the above principle, an increase in the ratio of current assets to total assets will result in a decline in the profitability of the firm. This is because investment in current assets is less profitable than those in fixed assets.
  • Hence, option (c) is the correct choice.
Test: Principles and Practices of Banking - 5 - Question 57

Among the below given, which of the following is correctly matched?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 57
  • The terminals or the PCs are connected with a single powerful PC acting as a server. Various productivity tools are utilised to analyse the branch-level data to make branch-level policy decisions. Security measures play an important role in branch-level computerisation because of online banking applications. Most of the security features are in-built in the operating system and hardware themselves, such as use of password provision at different levels, various access rights to system and data, locking facilities, etc. The provision of features like disk mirroring, disk duplexing, transaction tracking systems, regular backups, use of uninterrupted power supply, prevent failures and help in recovering from failures. The generation of audit trails and exceptional transaction reports ensure proper functioning of the computerised systems.
  • Hence, option (c) is correct choice.
Test: Principles and Practices of Banking - 5 - Question 58

Which one of the following statements is true about Business values?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 58
  • 'Business values' is an informal term and explains the core principles or standards that guide the way business is done. They sum up what your business stands for. They are the core values or standards that influence the organizational culture and drive how and why of the organization's actions. Business plans and strategies may change, the core values of a business will usually remain the same. Business values induce thinking.
  • Business ethics indicates magnitude of rightness or wrongness of one's options whereas Business values indicate level of significance.
  • Thus, option (b) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 59

Generally, a bank wire transfer takes:

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 59
  • Bank wire transfers and sending money through agents like Western Union and Money gram are the most popular methods for remitting money to India.
  • Bank Wire Transfer: Money is transferred from one bank to another using the electronic medium. It generally takes two working days.
  • Thus, Option (b) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 60

Which one of the following statements is true about Norms?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 60
  • Norms are expectations of proper behavior and not the requirements of that behavior. Norms are the ways an individual expects all the people to act in a given situation. They are inconsistent but universal. Norms are not published, may not be obeyed and cannot be made obligatory except by sanctions (penalties, condemnation or exclusion) of a group.
  • Thus, Option (b) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 61

Which of the following statements is true about the Kiosk Banking?
I. The purpose of introducing Kiosk banking was to facilitate primary banking services at strategic locations depending on the services offered.
II. These kiosks are essentially unmanned.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 61
  • An electronic kiosk in a Bank is a small electronic/computerized Box/structure that helps users inquire, print, transact. These kiosks are deployed in places with high foot traffic like airports, malls, etc. These kiosks are essentially unmanned.
  • The purpose of introducing Kiosk banking was to facilitate primary banking services at strategic locations depending on the services offered. Apart from helping the customers to transact without visiting the branch, Kiosks also help those living in remote villages/locations who are deprived of banking services due to the non-availability of a bank branch in the vicinity.
  • Thus, Option (c) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 62

Which of the following statements is true about Mandate?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 62

A mandate is an authority given by the account holder in favor of a third person to do certain acts on his behalf. The following are the salient points of a mandate:

  • The customer informs the bank about the authority given to the third person (mandatee).
  • The signature of the mandatee is verified by the customer in the mandate letter.
  • The mandate is normally temporary for a short period.
  • Institutions need to issue a power of attorney and not a mandate.
  • A mandate ceases to be valid on death, insanity, and insolvency/ bankruptcy of the account holder.
  • A mandate can be withdrawn anytime by the account holder/s.

Thus, Option (d) is the correct answer.

Test: Principles and Practices of Banking - 5 - Question 63

Which one of the following statements is not true about Fintech?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 63
  • Peer-to-peer (P2P) lending platforms, crowdfunding, blockchain technology, distributed ledgers technology, Big Data, smart contracts, Robo advisors, E-aggregators, and other major Fintech products and services are currently in use. These Fintech products are currently used to connect lenders and borrowers, information seekers and providers, with or without a nodal intermediation agency.
  • Fintech or Financial technology can be described as the use of technology to deliver financial solutions. Fintech refers to technologically enabled financial innovations. It aims to improve and automate the delivery and utilization of financial services.
  • Some benefits of fintech products that are helping Banks are: Reduced Costs, Reduced time to market, Customer Services and Revenue, World-class compliance and security, Greater speed and convenience, Innovative products, and Transparency of products.
  • Thus, Option (c) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 64

Which of the following functions are performed by banks?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 64

Following are the few services which the bank provides:

  • Advancement of loans
  • Cheque payments
  • Discounting on bills of exchange
  • Debit card
  • Credit card
  • Guarantee by banks
  • Fund remittance, locker facility

Hence option d is correct.

Test: Principles and Practices of Banking - 5 - Question 65

Among the given statements, choose which one is the correct statement in context to Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 65
  • The following are the correct statement in context to Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act:
  • ∙ In 2002, India passed the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act. The Act gave banks the ability to seize assets from non compliant businesses without having to go through the lengthy court procedure. Banks are required by law in many nations to uphold the rights and interests of borrowers, depositors, and other clients.
  • ∙ According to the rules, each bank in India created its own set of fair practices regulations, which were put into effect on November 1, 2003.
  • ∙ Dr. Y.V. Reddy, the then-Governor of the Reserve Bank of India, announced the "Code of Bank's Commitment to Customers" during an official event held at the RBI on July 1, 2006.
  • Hence, option (b) is the correct choice.
Test: Principles and Practices of Banking - 5 - Question 66

Consider the following statements and choose the correct answer
I. Business ethics is the prescribed code of conduct for businesses.
II. Business Ethics refers to the principles and ideals, which help in making judgment of what is more important. The statement is:

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 66
  • Business ethics is the prescribed code of conduct for businesses. It is a set of guidelines for dealing with various procedures ethically.
  • Business ethics refers to the guidelines for conduct, that address questions about morality whereas Business values refers to the principles and ideals, which help in making judgment of what is more important. Thus, Option (b) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 67

Statement I: It is an obligation of the Banker to give Notice before Closing the Account of the customer.

Statement II: If the bank believes that an account is not being operated properly, then it is an obligation of the bank to close the account by sending a written intimation to the customer.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 67
  • It is an obligation of the Banker to give Notice before Closing the Account of the customer.
  • If the bank believes that an account is not being operated properly, then it is a right of the bank, not an obligation to close the account by sending a written intimation to the customer.
  • Therefore, Statement I is correct & Statement II is incorrect.
  • Hence, Option (a) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 68

Under the Pradhan Mantri Suraksha Bima Yojana, a premium of Rs. _____ per annum is to be deducted from the account holder's bank account through 'auto-debit' facility in one installment.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 68
  • Pradhan Mantri Suraksha Bima Yojana is available to people in the age group 18 to 70 years with a bank account who give their consent to join/ enable auto-debit on or before 31st May for the coverage period 1st June to 31st May, on an annual renewal basis. Aadhaar would be the primary KYC for the bank account. The risk coverage under the scheme is Rs. 2 lakhs for accidental death and full disability and Rs. 1 lakh for partial disability. The premium of Rs. 20 per annum is to be deducted from the account holder's bank account through 'auto-debit' facility in one installment.
  • Thus, Option (a) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 69

Which of the following is/are services of banks?
I. Credit card
II. Funds remittance
III. Debit cards
IV. Discounting on the bill of exchange

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 69

In modern times there are many services that are offered by the banks. This is done so that more and more customers are attracted. Although there are some basic services as well which are offered by the banks. Thus, these basic services are common for all banks.
Following are the few services which the bank provides:

  • Advancement of loans
  • Cheque payments
  • Discounting on bills of exchange
  • Debit card
  • Credit card
  • Guarantee by banks
  • Fund remittance

Hence, the correct answer is Option(d) 

Test: Principles and Practices of Banking - 5 - Question 70

To be registered as NBFC-MFI, qualifying assets share should not be less than _______ of net assets.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 70
  • An NBFC-MFI is defined as a non-deposit taking NBFC other than a company licensed under Section 25 of the Companies Act, 1956 - Section 8 of the Companies Act, 2013. Qualifying Assets Share should not less than 85% of net assets to be "qualifying assets."
  • Thus, Option (d) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 71

Kanika is a partner in a firm PQR wants to open a bank account in the firm name. opening of account requires the signature of?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 71
  • If a partner wants to open an account in the name of the firm only then the signature of all the partners are required.
  • Hence option b is correct.
Test: Principles and Practices of Banking - 5 - Question 72

Which one of the following statements is correct in relation to Phishing?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 72
  • Phishing: Phishing is the fraudulent attempt to obtain sensitive information such as usernames, passwords and credit card details, often for malicious reasons, by disguising as a trustworthy entity in an electronic communication.
  • Ransomware: Ransomware is a type of malicious software from crypto virology that threatens to publish the victim's data or perpetually block access to it unless a ransom is paid.
  • Malware: Malware is the term for maliciously crafted software code. Special computer programmes now exist that enable intruders to fool an individual into believing that traditional security is protecting him during online banking transactions. Attacks involving malware are a factor in online financial crime.
  • Distributed denial of service (DDoS): A denial-of-service attack (DoS attack) generally consists of the concerted efforts of a person/persons to prevent an internet site or service from functioning efficiently. It floods the incoming of messages to the target system essentially forces it to shut down, thereby denying the service of the system to legitimate users.
  • Thus, Option (c) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 73

Where the lockers have remained non-functional for more than _____ for high and medium risk categories respectively, banks should immediately contact the lockers- hirers and advise them to operate the lockers or surrender the lockers even if the rent is being paid regularly.

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 73
  • Where the lockers have remained non -functional for more than1 and 3 years for high and medium risk categories respectively, banks should immediately contact the lockers- hirers and advise them to operate the lockers or surrender the lockers even if the rent is being paid regularly.
  • Hence option b is correct.
Test: Principles and Practices of Banking - 5 - Question 74

Which of the following statements is true in relation to the term Credit Appraisal?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 74
  • Credit appraisal is a process of critical evaluation of a loan request by a prospective borrower. The primary objective of evaluation is safety and liquidity of funds lent and profitability from the credit extended. The lender uses certain standard tools like analysis of the borrower's financial statements, weighing the prospects of the applicant's product in the market juxtaposed to the industry, viability of customers business and if the credit will remain as a performing asset. In this connection appraisal means something more than the verification and validation of the data and information that the applicant submits to the bank. An appraisal is undertaken for ensuring that a credit is good.
  • Thus, Option (c) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 75

Which of the following is not a direct example of ethical behaviour in the workplace?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 75

Ethical Behavior in the Workplace Examples

  • Trustworthiness. Companies rely on trust within their organization as well as between their clients to foster dependable relationships.
  • Accountability. Mistakes are inevitable, but how you deal with them is important. Taking ownership of your mistakes and learning from them is an important part of creating an ethical workplace.
  • Respect. Regardless of what level an employee is at in a company, whether it be an intern, manager, or CEO, everyone deserves to be treated with respect.
  • Transparency. Communicating openly and honestly with coworkers and clients paves the way for strong, successful relationships.
  • Integrity. Workers who display integrity have a strong moral code that they use to guide them throughout their everyday decision-making process, regardless of who is watching.

Hence, the correct answer is Option (c) .

Test: Principles and Practices of Banking - 5 - Question 76

In India, with the formation of SEBI, and addition of clause 49 (listing agreements), business ethics gained the center stage of business operations. In which of the following years SEBI was formed?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 76
  • In India, with the formation of SEBI in 1992, and addition of clause 49 (listing agreements) in 2005, business ethics gained the center stage of business operations. Several Committees have been set up, the latest was the Uday Kotak Committee set up by SEBI.
  • Thus, Option (d) is the correct answer.
Test: Principles and Practices of Banking - 5 - Question 77

Which of the following refers to a banking security in which a unique vein structure of the human body is used to identify individuals?

Detailed Solution for Test: Principles and Practices of Banking - 5 - Question 77

Vein recognition method, like retinal pattern identification, uses the unique vein structure of the human body to identify individuals. The 'vein check' system uses a simple infrared scanning and encoding technique to locate the number, position and size of subcutaneous vessels.

Test: Principles and Practices of Banking - 5 - Question 78

X took a loan from Y in lieu of a post dated cheque. Y presented the cheque with the bank but the Cheque was returned by the bank with an endorsement that the account is closed.

Which among the following is the most suitable remedy for Y?