ABM C - Unit 23 - set 1 - Motivational Banker

1. How many Credit Information Companies have been permitted by RBI to function?

One

Two

Three

Four

Question 1 of 25

2. Which of the following is not a credit risk?

Unwillingness of a customer to meet his/her commitment relating to a financial transaction with the bank.

Inability of the customer to reimburse the bank in case of invocation of a guarantee or devolvement of an L.C.

Inability of a customer to meet his/her commitment relating to a financial transaction with the bank.

Loss to the bank due to fraud.

Question 2 of 25

3. Which of the following is an external factor affecting credit risk?

Government policies

Faulty loan and repayment structuring

Overexposure (concentration) of credit to a particular segment

Lack of an efficient recovery machinery.

Question 3 of 25

4. Which of the following is not an internal factor affecting credit risk?

Excessive lending to cyclical industries

Low quality of credit appraisal and monitoring

Deficiencies in the loan policy of the bank

Protectionist policies of other countries

Question 4 of 25

5. Which of the following is not a macro-level action for mitigation of credit risk?

Periodically reviews of the exposure norms for single and group borrowers

Improving appraisal standards of credit proposals

Frequent reviews of norms and fixing internal limits for aggregate commitments to specific sectors of the industry/business

Periodic review of total credit portfolio based on quality parameters

Question 5 of 25

6. Which of the following is not a micro level action for mitigation of credit risk?

Improving sanctioning and delivering process

Obtention of collateral security

Monitoring and review of individual proposals/categories of proposals

Periodical reviews of the exposure limits for business/industry segment

Question 6 of 25

7. Which of the following statements is not true regarding credit derivative products?

These are used to hedge credit risk to the bank

The protection buyer is the lending bank

The protection seller can be another bank or any other organisation

The credit asset is transferred in case of derivatives

Question 7 of 25

8. Credit rating is a system of:

Measuring risk

Mitigating risk

Migrating risk

Credit appraisal

Question 8 of 25

9. Internal rating means:

Rating the project

Rating the promoters

Rating the risk for internal use

Rating borrower and facility

Question 9 of 25

10. For external credit rating, banks depend on

Rating agencies

Experienced staff of the bank

Banking consultants

None of the above

Question 10 of 25

11. Central Repository of Information on Large Credits (CRILC) has been set up by

SBI

as a private company

jointly by SBI and ICICI

RBI

Question 11 of 25

12. Internal factors affecting credit risk include all of the following EXCEPT:

Overexposure to a particular segment

Faulty loan structuring

Economic downturns

Deficiencies in the loan policy

Question 12 of 25

13. Which of the following is NOT considered an external factor affecting credit risk?

Interest rate fluctuations

Government policies

Cyclical industries

Default risk

Question 13 of 25

14. What is the primary objective of credit risk management in banking?

Maximizing profit

Minimizing operational costs

Limiting credit risk within acceptable levels

Expanding market share

Question 14 of 25

15. Which of the following is an external factor affecting credit risk in banking?

Loan appraisal process

Collateral quality

Government policies

Credit scoring models

Question 15 of 25

16. What is the purpose of conducting stress tests in credit risk management?

To assess borrower creditworthiness

To evaluate the effectiveness of collateral

To identify vulnerabilities under adverse scenarios

To determine loan interest rates

Question 16 of 25

17. How do banks mitigate credit risk through risk-based pricing?

By offering discounted interest rates to low-risk borrowers

By charging higher interest rates to high-risk borrowers

By providing additional collateral to mitigate risk

By diversifying loan portfolios across various sectors

Question 17 of 25

18. What is the purpose of collateral and security in credit risk management?

To maximize profitability

To minimize operational costs

To serve as a backup source of repayment

To expand market share

Question 18 of 25

19. Which of the following is NOT a component of credit risk mitigation?

Credit scoring

Risk-based pricing

Stress testing

Market speculation

Question 19 of 25

20. What is the purpose of credit monitoring and review in banking?

To maximize loan disbursement

To identify potential credit defaults

To increase operational efficiency

To minimize regulatory compliance

Question 20 of 25

21. How do banks transfer credit risk to third parties?

Through securitization and credit derivatives

By increasing loan exposure

By reducing collateral requirements

Through diversification of loan portfolios

Question 21 of 25

22. What is the primary benefit of diversifying loan portfolios in credit risk management?

Maximizing profit

Minimizing operational costs

Reducing the impact of credit defaults

Expanding market share

Question 22 of 25

23. What is one of the primary objectives of assigning credit ratings to loan proposals?

Identifying potential defaulters

Assessing the credibility of borrowers

Determining the pricing of loans

Monitoring market trends

Question 23 of 25

24. Which of the following is NOT a purpose of credit ratings in banking?

Assessing provisioning requirements

Facilitating macro evaluation of credit portfolios

Evaluating borrowers' personal assets

Assisting in decision-making by bank management

Question 24 of 25

25. Which approach is mandated by RBI for determining risk weights on assets based on credit ratings until banks adopt an Advanced Internal Rating Based approach?

Historical empirical approach

Probability of Default approach

External rating approach

Internal rating approach

Question 25 of 25

ABM C – Unit 23 – set 1

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