20+ TOP Banking Interview Questions and Answers
1. Brief me about yourself?
Answer. It is the first fundamental that every interviewer asks a candidate, to start the conversation and know about the person. So, always be positive and introduce yourself starting with your name, qualification and all the other required information that is important for an interviewer to know. Just complete it within 2 minutes so that it should not be extended as a boring conversation.
2. Why do you want to join the banking sector?
Answer. In this be logical and answer it by telling why banking sectors have influenced people with all the facts and figures, ready as to why the banking sector is the fastest growing sector. Do not start by telling that you want to have a stable career or some personal view. Just make it well versed which can form a correct opinion of your answer.
3. What are the types of accounts in a bank?
Answer. Be straight forward and start your answer by telling the information which can match the asked by an Interviewer. The types of accounts in banks are.
Checking Account: You can access the account as saving account but, unlike saving account, you cannot earn interest on this account. The benefit of opening a checking account in a bank is there is no limit for withdrawal.
Money Market Account. This account gives both the benefit of savings account and checking accounts. You can withdraw the amount and yet you can earn higher interest on it. This type of account can be opened with a minimum balance.
Certificate of Deposit Account (CD): By the opening of such account you have to deposit your money for the fixed period like 5 years or 7 years, and you will earn the interest on it. The rate of interest will be decided by the bank, and you cannot withdraw the funds until the fixed period expires.
Saving Account. You can save your money in such account and also earn interest on it. The number of withdrawal is limited and need to maintain the minimum amount balance in the account to remain active.
4. What are the necessary documents a person requires to open an account in a bank?
Answer. As per the RBI advised banks to follow the Know Your Customer (KYC) guidelines where the bank obtains some personal information of the account holder. The primary document that is needed to open an account are photographs, proof of identity proof like adhar card or Pan Card etc., and address proof as well.
5. What are the types of Commercial Banks?
Answer. The types of Commercial Banks are.
Retail or Consuming Bank. – It is a small to midsize branch that directly deals with consumer’s transaction rather than corporate or other banks.
Corporate or business banking. – Corporate banking deals with cash management, underwriting, financing and issuing of stocks and bonds.
Non- traditional Options. – There are many non-banks entities that offer financial services like that of the bank. The entities include credit card companies, credit card report agencies and credit card issuers.
Securities and Investment Banking. – Investment banking manages portfolios of financial assets, commodity and currency, corporate finance, fixed income, debt and equity writing etc.
6. What is the annual percentage rate (APR)?
Answer. APR is known as the Annual percentage rate. It is a charge or interest that the bank imposes on their customers for using their services like loans, credit cards etc. The interest is calculated annually.
7. What is Amortization and negative amortization?
Answer. Amortization refers to the repayment of the loan by instalment to cover principal amount with interest whereas, negative amortization is when the repayment of the loan is less than the loans accumulated interest, then negative amortization takes places.
8. What is the debt to Income ratio?
Answer. Debt to income ratio is calculated by dividing a loan applicant’s total debt payment by his gross income.
9. What is loan grading?
Answer. Loan grading is the classification of the loan based on various risks and parameters like repayment risk, borrowers credit history etc. The system places a loan on one to six categories, based on the stability and risk associated with the loan.
10. What do you mean by Co-Maker?
Answer. A person who signs a note to guarantee the payment of the loan on behalf of the main loan applicant’s is known as Co-maker or signer.
11. What is the line of credit?
Answer. Line of credit is an agreement between the bank and a borrower, to provide a certain amount of loans on borrower’s demand. The borrower can withdraw the amount at any moment and pay the interest only on the amount withdraw.
12. How banks earn a profit?
Answer. The bank earns profit in various ways.
Banking Value chain
Providing funds to borrowers on interest
Additional charges on services like checking account maintenance, online bill payment etc.
13. What is the payroll card?
Answer. Payroll cards are types of smart cards issued by banks to facilitate salary payments between employer and employees. Through payroll card, the employer can load salary payments onto an employee’s smart card and employee can withdraw the salary even though if he or she doesn’t have an account in the bank.
14. What is the card-based payment?
Answer. There are two types of card payments.
Credit Card Payment
Debit Card Payment
15. What is a Payday loan?
Answer. A Payday loan refers to a small amount and a short term loan available at the high-interest rate.
16. What is charge off?
Answer. Charge off is a declaration by a lender to a borrower for non- payment of the remaining amount when borrower badly falls into debt. The unpaid amount is settled as a bad debt.
17. Tell Us Something About Nabard And Its Functions?
NABARD was established by an act of Parliament on 12 July 1976 as National Bank for Agricultural and Rural Development. It is the apex bank to provide rural credit and monitor the RRBs.
The main functions of NABARD are:-
Provide refinance to RRBs and other banks in rural areas for lending.
Acts as a subsidiary for RRBs and co-operative banks.
18. What Is Statutory Liquidity Ratio (slr)?
SLR is the amount of NDTL which a bank needs to maintain in the form of cash, gold or govt. securities before providing credit to its customers. Through SLR, RBI makes sure that bank always have a reserve amount out of their deposits to meet any future contingencies
19. What Is Repo Rate And Reverse Repo Rate?
Repo rate is the rate :at which banks borrow from RBI during shortage of funds. This is a short term loan provided for upto 90 days by selling securities to RBI and receiving money in lieu of it.
Reverse repo rate :is the rate at which banks deposit their excess liquidity with the RBI. In other words, the rate at which RBI borrows from banks by selling securities in order to control excess liquidity in the market is reverse repo rate.
20. What Is The Difference Between Micro Finance And Micro Credit?
Micro credit is giving a small amount of loan to the customers whereas Micro Finance is a wide term. It includes small loan + training on financial matters. In other words, Microfinance= Microcredit + Financial Literacy.