Question 1

In a Hindu Undivided Family (HUF) account, what happens upon the death of the Karta?

The eldest female member automatically becomes the Karta in all cases.The account operations are stopped until a new Karta is appointed or the eldest coparcener takes over.The bank allows the remaining coparceners to operate the account as usual.The HUF account is compulsorily closed and funds distributed.

View Explanation

Upon the death of the Karta, the bank must stop operations to determine the new Karta (usually the next eldest coparcener). While recent laws allow daughters to be coparceners and potentially Karta, the succession must be formally established before operations resume to avoid legal disputes.

Question 2

A cheque drawn on a Partnership Firm's account is presented for payment after the death of one partner. The cheque is dated before the partner's death. The bank should:

Pay only 50% of the amount.Return the cheque marked "Partner Deceased".Return the cheque marked "Refer to Drawer".Pay the cheque if there is sufficient balance.

View Explanation

Normally, the death of a partner dissolves the firm. However, regarding old transactions (cheques issued before death), the bank can pay them to avoid dishonor, provided the account has funds and the surviving partners don't object. The estate of the deceased partner remains liable for acts done before death.

Question 3

Which document is the "Charter" of a company and defines its constitution and scope of powers?

Board ResolutionArticles of Association (AoA)Certificate of IncorporationMemorandum of Association (MoA)

View Explanation

The Memorandum of Association (MoA) defines the company's relationship with the outside world and sets the limits (scope) of its operations. Any act outside the MoA is "Ultra Vires" (void). AoA defines internal rules.

Question 4

When opening an account for an Illiterate Person, which of the following is NOT a standard safeguard?

A photo must be affixed to the account opening form.Thumb impression must be witnessed.Cheque book should ideally not be issued.Account can only be operated jointly with a literate person.

View Explanation

An illiterate person CAN open a single account. While joint operation is allowed, it is not mandatory that they must open a joint account. The other safeguards (witness, photo, no cheque book) are standard.

Question 5

Unregistered Clubs and Societies are not legal entities. Therefore, banks should typically avoid opening accounts for them to avoid issues related to:

Deposit insurance.Unlimited liability of members.KYC compliance.Suing and being sued (Legal capacity).

View Explanation

Since an unregistered body has no separate legal existence, it cannot be sued in its own name. If the account goes into debit/overdraft, recovering money becomes legally complex as the bank has to sue individual members.

Question 6

In a Joint Account with "Jointly" operation instruction, if a cheque is issued signed by all, but one account holder sends a "Stop Payment" instruction:

The bank pays 50% of the amount.The bank requires all holders to sign the stop payment request.The bank must stop payment based on the mandate of a single holder.The bank should ignore it as the cheque is validly signed by all.

View Explanation

The authority to *draw* funds is joint, but the authority to *revoke* the mandate (stop payment) is individual. Any single joint holder can stop payment to protect the funds.

Question 7

When opening an account for an Executor/Administrator, the bank must inspect the:

Power of Attorney.Probate or Letter of Administration.Partnership Deed.Memorandum of Understanding.

View Explanation

An Executor derives authority from the Will (confirmed by Probate). An Administrator is appointed by the court (Letter of Administration) if there is no will. These documents validate their legal standing.

Question 8

Why do banks generally not pay interest on Current Accounts?

RBI has strictly banned it for all banks.Because of the high cost of servicing these accounts due to unlimited transactions.It is prohibited by the Constitution.Current accounts are only for poor people.

View Explanation

Current accounts offer fluidity and unlimited transactions (cheques, transfers) which incurs high operational costs for banks. Hence, no interest is paid (though RBI deregulated this, most banks still don't pay to maintain margins).

Question 9

When a minor attains majority, what action must the bank take regarding his account operated by a guardian?

Obtain a fresh signature and confirmation of balance from the minor-turned-major to operate the account himself.Close the account and open a new one.Ask the guardian to continue for 1 more year.Continue the account as is.

View Explanation

The guardianship terminates automatically when the minor attains majority. The bank must stop the guardian's operations and take fresh instructions and specimen signatures from the erstwhile minor.

Question 10

A "Certificate of Commencement of Business" is required to open a bank account for:

Proprietorship Firms.Private Limited Companies.Partnership Firms.Public Limited Companies.

View Explanation

Under the Companies Act, a Public Limited Company needs a Certificate of Commencement of Business in addition to the Certificate of Incorporation to start operations and borrow money. Private companies only need Incorporation cert.

JAIIB Quiz

Quiz Finished!