Abbreviations and Banking Terminology Questions and Answers

Answer: A

Correct answer: Locational Banking Statistics

Locational banking statistics are the Bank for International Settlements series recording banks' external assets and liabilities by the country in which the reporting office is located, irrespective of the nationality of its parent.

That residence basis is what makes them locational, and it is what distinguishes them from the consolidated banking statistics, which group exposures by the nationality of the parent bank and net out positions within a banking group. The two answer different questions - where the money flows through, against who ultimately bears the risk.

Answer: D

Correct answer: Know Your Customer

Know Your Customer is the set of procedures by which a bank establishes and periodically verifies the identity, address and beneficial ownership of those it deals with.

The RBI mandates it as the first line of defence against money laundering and terrorist financing, so it sits directly under the Prevention of Money Laundering Act framework alongside transaction monitoring and suspicious transaction reporting. "Know Your Client" is used in some markets, but the RBI's own term, and the one in Indian regulation, is Customer.

Answer: C

Correct answer: Current Market Price

Current Market Price is the price at which a security last traded, or at which it can presently be bought or sold.

It appears constantly in Indian market usage - in research notes, in rights and preferential issue pricing, and in the SEBI takeover rules, where the offer price is set against a formula referencing recent market prices. Its significance is that it is determined by transactions rather than by valuation: book value and intrinsic value are estimates, while the market price is what someone actually paid.

Answer: A

Correct answer: Anti Money Laundering

Anti-money laundering covers the legal and procedural framework preventing the proceeds of crime from being disguised as legitimate funds.

In India it rests on the Prevention of Money Laundering Act 2002, and it is why banks operate Know Your Customer procedures, monitor accounts for unusual activity and file suspicious transaction reports with the Financial Intelligence Unit. The obligations fall on the intermediary rather than on the customer, which is what makes AML compliance a standing operational function inside every bank.

Answer: C

Correct answer: Primary Cooperative Agriculture and Rural Development Bank

A PCARDB is the village or block level unit of the long-term co-operative credit structure, lending against the mortgage of land for permanent improvements - wells, levelling, plantations, machinery.

Above it sits the state co-operative agriculture and rural development bank, and NABARD refinances the structure. These are the modern names for what were the primary and central land development banks. What distinguishes them from the short-term structure is the term of the lending: many years, against a season for crop loans.

Answer: B

Correct answer: Indian Financial System Code

The Indian Financial System Code is the eleven-character code identifying a specific bank branch in India's electronic payment systems.

Its structure carries meaning: the first four characters are the bank, the fifth is always zero and reserved, and the last six identify the branch. Every NEFT and RTGS instruction requires it, because a beneficiary account number alone is not unique across banks. It is distinct from the MICR code, which identifies a branch for cheque clearing rather than for electronic transfer.

Answer: D

Correct answer: Average Daily Trading Volume

Average Daily Trading Volume is the mean number of shares of a security traded per day over a stated period, typically twenty or thirty sessions.

It is the standard measure of liquidity. A high figure means a position can be entered or closed without moving the price much; a thin one means the quoted price may not survive contact with a real order. Index inclusion rules, block-trade sizing and margin eligibility all reference it, which is why it is quoted alongside price in most market data feeds.

Answer: B

Correct answer: Urban Cooperative Bank

A UCB is a cooperative bank operating in an urban area, regulated jointly by the RBI and the state registrar.

Answer: D

Correct answer: Special Deposit Scheme

The Special Deposit Scheme was introduced by the Government of India in 1975 for non-government provident, superannuation and gratuity funds, which were required to place a share of their accretions in it.

It carries an administered rate of interest and the deposits are held with the Reserve Bank. The purpose was to channel long-term retirement savings into government funding at a time when the debt market was undeveloped. It is a specific named scheme, not a generic description, which is what distinguishes it from the plausible-sounding alternatives.

Answer: D

Correct answer: Industrial Credit and Investment Corporation of India

ICICI was set up in 1955 to provide long-term finance to Indian industry, and later became a commercial bank.