MA0037 & BANKING RELATED LAWS AND PRACTICES

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DRIVE - SUMMER 2015

PROGRAM - MBADS (SEM 3/SEM 5) MBAFLEX/ MBA (SEM 3)

SUBJECT CODE & NAME - MA0037 & BANKING RELATED LAWS AND PRACTICES

BK ID - B1618

CREDITS - 4

MARKS – 60

Q1. “Section 42 of the Banking Regulation Act prescribes maintenance of Cash Reserve Ratio in all scheduled banks.” Illustrate. (Maintenance of Cash Reserve Ratio in commercial banks as per Section 42 of banking Regulation Act) 10

Ans: Maintenance of Cash Reserve: Every banking company which is a scheduled bank is duty-bound to maintain with RBI a certain cash reserve as per section 42 of the RBI Act. In the case of non-scheduled banks, section 18 of the

Q2. Explain the essential features of a contract of guarantee. 10

Ans: Essential features of a contract of guarantee:

1. Concurrence – Concurrence of all the three parties to it namely, i) surety, ii) the principal creditor, and iii) the principal creditor.

Primary liability in some person – There must be a primary liability in some person other than the surety. There must be an enforceable liability as defined under Sec 126 of Indian Contract Act. The primary liability in a

Q3. Explain the rules of endorsement in the light of Negotiable Instruments Act. 10

Ans: Endorsement: Endorsement means ‘the writing of a person’s name on the face or back of a negotiable instrument or on a slip of paper (called alonge) annexed thereto, for the purpose of negotiation’ (Sec 15). The person who signs the instrument is called the ‘Endorser’. The person to whom the instrument is endorsed to is called the ‘Endorsee’. Sec 15 states that endorsement maybe made by the holder or the maker

Q4. A banker has to be acquainted with transfer of immovable properties. What are the salient features of such transactions as per the Transfer of Property Act 1882 ?( Salient features of transfer of immovable properties as per Transfer of Property Act, 1882) 10

Ans: Transfer of Property: Immovable Chapter II of the Transfer of Property Act of Parties deals with the transfer of immovable properties by competent persons and the ways to execute the same. Immovable property normally consists of:

a) Land, buildings, and anything attached to or embedded in the earth

b) Abstract right

Q5. Explain the rules of Set-off and Appropriation applied by commercial banks. 10

Ans: Set-off and Appropriation:

Set off: For exercising the right of set-off, the banker should ensure that the accounts are in the same name and in the same right. The capacity of the account holder in both or all the accounts must be the same i.e., the funds available in one account are held by him/her in the same right or capacity in which a debit balance stands in another account.

Rules governing

Q6. Explain the jurisdiction, power and authority of DRT (debt Recovery Tribunal) and DART (Debt Appellate Recovery Tribunal). 10

Ans: Jurisdiction, powers and authority of DRT: Whenever the Tribunal or the Appellate Tribunal is established, its appointed day i.e., date from which they function is declared in the notification, they exercise jurisdiction, powers and authority to entertain and decide applications or appeals, as the case may be, from the banks and financial institutions for and about recovery of debts due to them. In order to restrict the jurisdiction of the Tribunal, the claim for recovery of the debt must be above Rupees ten lakh, including

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