BANK INTERVIEW QUESTIONS AND ANSWERS

BANK INTERVIEW QUESTIONS AND ANSWERS

Aspirants preparing for bank exams, often seek frequently asked question to crack bank interview. This blog contains some best bank interview questions and answers that will help you to clear the banking interview easily. Since in interview, irrespective of the exams type there are some common questions which are asked to judge the personality of the candidates. So, these are also added with some tips. We hope that this blog will provide you quick view and will be very useful for your interview.

Common Questions with Tips

Brief me about yourself?

It is the first fundamental question that every interviewer asks a candidate to start the conversation. So, always be positive and introduce yourself in precise and systematic manner. It should be as following steps:

• Greet– Good morning/Afternoon/Evening (based on interview time)
• Name– My Name is…. /I am…. /This is…… (Never say, Myself….)
• Place– I belong to……. /I am from…….
• Family- In my family, apart from my parents I have………….
• Qualification
• Additional qualification/skills– For example, I have done 3-months computer course from NIIT.
• Experience, if any
• Hobby– like, my hobby is listening to music etc.
• That’s all about me, thank you.

Just complete it within 2 minutes so that it should not be extended as a boring conversation.

Meaning of your Name

Interviewer may ask the meaning of your name. So, you should know the meaning of your name if any.

Where have you come from and what is famous in your city?

The candidate must know about the local MLA/MP/Ministers and any renowned personality from his area. Besides, you should also know about famous places/ monuments/temples/palace in your area.

Please tell us about your strength and weaknesses?

Simply, try to put forward a strength which will be useful in the banking sector such as, good communication skills, adaptability etc. The strength should bring about a positive aspect of your personality in front of the panel.

They may ask how your quality/strength will be helpful to bank. So, be prepared with an answer.
Weakness must not be very negative, here you have to choose those habits or action which may turn in useful towards your job. For example, you can say that whenever I am given a task, I get lost in it. I forget the time until the work is done.

After doing B.Sc/B.Tech/MBA/MA, why do you want to choose banking? Why not something related with your field of education?

Here you have to relate your education with banking prospect that how your education can benefit the banking jobs. Tell the things you have gained that will be useful in banking.

You can also be asked some questions from academics.

Prominent personalities of banking industry

You should have a quick read about great personality of banking industry. Also, try to keep yourself updated about the recent happenings of at least the month prior to interview.

Why do you want to make a career in the banking sector? Or why do you want to join the banking sector?

This question is common in bank interviews as the answer helps the interviewer understand your reasons behind the choice of career.

Here, you have to explain your views on why you think the banking sector is most suitable for you.

You can say that the banking sector is one of the fastest-growing sectors and has influenced many people’s lives, plays an important role in our economy. It offers challenging roles and opportunities to develop skills and knowledge. The dynamic nature of the industry and its relevance in the economic scenario is why I want to pursue a career in the banking sector.

What motivated you to become a personal banker?

Interviewers ask this question to understand more about your background and why you are pursuing a career in personal banking. Here, you have to express how passionate you are about this career and emphasize your unique background. Make your response personal, and tell your story about how you got started in banking.

Example: “I have always been fascinated by finance, and I have been continuously learning more about the topic. When I started college, a career in personal banking seemed like an obvious choice to me based on my personal interests and skills. I have excellent communication skills, and I am good at solving problems and making decisions under pressure. So, I believed that I could use these skills to give people good financial advice and help them reach financial security, so a career as a personal banker sounded rewarding.”

Question Related to Banking

What do you mean by a bank? Or what is bank?

A bank is a financial institution that undertakes the banking activity such as, accepts deposits and lend the same to earn certain profits.

What is Banking?

It may be defined as the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.

See also… BANKING SYSTEM IN INDIA- AN OVERVIEW

What do you understand by a commercial bank?

The commercial bank is the most common bank where most people do their banking. They gain capital from the customers’ deposits and then earn interest by providing loans. These are public sector, private sector and foreign banks.

Following are some functions of a commercial bank:

• Accept Deposits: Accept deposits from their customers as saving deposits, fixed deposits (FD), and current deposits.
• Provide Loans:These are the most important functionThey provide loans to their customers, individuals, organizations etc., like personal, car, home loan, business loan, etc. and earn profit as interest in their credit.
• Provide locker facilities:Commercial banks provide locker facilities to customers who want to keep their valuable items safely.
• Dealing in foreign exchange:Commercial banks provide foreign exchange to individuals or companies that export or import goods from foreign countries. The banks which have the license to deal in foreign exchange can do such transactions.
• Exchange of Securities:Commercial banks also trade in bonds and securities.

What are the types of bank account?

There are many different types of accounts, but most common bank accounts are of four types.

• Savings Account- It is a commonly used deposit account that allows the account holders to save and withdraw money. It can be opened individual, single or jointly. Banks pay some interest individually.
• Current Account– Meant for daily transactions as no limit of transaction in a day, mainly used for business by persons, firms, companies, public enterprise etc. No interest is paid by banks but banks take certain service charges.
• Fixed Deposits-Fixed deposits are generally used for long term savings and to earn more interest. Certain sum of money is deposited for specific period of time and cannot be withdrawn before maturity. However, one can close the account before maturity with penalty.
• Recurring Deposit Account– This account is opened for regular monthly/bimonthly/quarterly/yearly savings for certain period to obtain high interest. Here, fixed amount is deposited for a fixed period. Withdrawal and closure process is same as fixed deposit accounts.
• Demat Account– Demat Account is used to buy and store shares in an electronic format.

What are the necessary documents a person requires to open an account in a bank?

As per the RBI to follow “Know Your Customer (KYC)” the bank obtains some personal information of the account holder. The primary documents needed to open an account are photographs, proof of identity proof like Aadhar card or Pan Card etc., including address proof as well.

What are the main functions of the RBI (Reserve Bank of India)?

The RBI is the central bank of India. The main functions of RBI are:

• It issues currency.
• RBI is banker to government, as it manage banking needs of government.
• Banker to other banks- RBI has power to control, help and direct other commercial banks.
• Lender of last resort to commercial banks.
• Custodian of country’s foreign currency reserves.
• Controls credit supply based on economic priority of the government.
• It has regulatory & supervisory functions as its issue license to open new banks/branches, has power of removal and appointment of banking board/personnel.
• It inspects, conduct and furnish credit information & impose penalty.
• It has also promotional functions.

What is financial inclusion?

Financial inclusion is the availability of banking services at an affordable cost in order to include the weaker section of the society in the banking system. It aims to provide banking services to everyone. In 2004, Kofi Annan (UNO Head) was addressing UNESCO conference and the word “Financial Inclusion” was for the first time used by him at that time. In 2006, a committee was made under the chairmanship of Mr. HR Khan for financial inclusion and the report said that 57% of Indian population was deprived of banking facilities.

What are some of the challenges that the Indian banking sector faces currently?

As a developing economy, the Indian banking sector has to deal with various challenges that can affect their profitability as well as their financial stability. By understanding the issues that they are up against, banking professionals will be in a better position to make informed decisions to avoid financial crises and help their banks stay financially healthy.

For example, Non-performing assets, together with restructured assets, pose the greatest risk to the Indian banking sector in the current economic climate. These bad loans greatly affect bank’s profitability. Their capital is also decreasing and again if the bank has too many bad loans and not have adequate capital, it could face major financial losses. This is increasingly becoming a problem for public sector banks in India.

What are the various risks that banks face?

• Credit Risk: – loan or NPA.
• Market Risk: – Money invested in the market.
• Operational risk: – Day-to-Day working risks.

What is a balloon payment?

The balloon payment is the final due payment. When the entire loan payment is not amortized within the loan’s specified time, the remaining balance is due as the final repayment to the lender. A balloon payment can occur within an adjustable-rate or fixed-rate mortgage.

What is Annual percentage Rate (APR)?

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. annually. APR is of 2 types:

Fixed APR- The rate of interest is the same through-out the mortgage term.

Variable APR- Rate of interest changes based on bank’s prime rate.

Can you differentiate between FDI and FII? Or what is the difference between FDI and FII?

FDI (Foreign Direct Investment) is the investment made by a parent company in a foreign company, making them stakeholders. Here, long term investments made by a parent company in a foreign business that flows in primary market.

FII (Foreign Institutional Investors) refers to the investment made by foreign companies in the stock market of a country. Here, short term investments flow in the secondary market. FII can enter the stock market easily and also withdraw from it easily. But FDI cannot enter and exit that easily as FDI only targets a specific sector.

What is amortization?

Amortization refers to the repayment of the loan by instalment which cover principal and interest both. Simply, Amortization is an accounting technique that divides the sum amount of a loan into small fixed payments (instalment) to be paid to the lender.

When the loan payment for a period is lesser than the amount to be paid, it is called negative amortization.

What is Core Banking System/Core Banking Solution?

CBS is networking of branches that enables customers to operate their accounts and avail banking services from any branch of the bank anywhere in the country. (CORE- Centralized online real time exchange).

What do to you mean by debt-to-income ratio?

Debt to income ratio is calculated by dividing total debt of an applicant by his gross income.

What do you understand by inter-bank deposit?

When you deposit an amount in one bank meant for another bank is called an inter-bank deposit. The bank for which you deposited the money is called as correspondent bank.

What is the difference between a bank guarantee and a letter of credit?

Generally, both take the liability of payment and having not much difference between them. However, the main difference between them is that, letters of credit ensure that a transaction goes ahead. Whereas, a bank guarantee reduces any loss incurred if the transaction doesn’t complete or any other issue. So, the bank guarantee contains more risk for a bank than a letter of credit as it is protecting both parties, the purchaser and seller.

What do you understand by a charge-off?

 A charge off is a type of write-off. It is the amount that is considered a bad-debt when the borrower fails to pay remaining amount to the lender. The unpaid amount is settled as a bad debt.

Now a days banking scenario changing constantly, according to you, what are the needs of the banking sector?

Interviewers ask this question to assess your understanding and knowledge of the changing trends and needs of the banking sector. So, you must know the current trends and technology banks witnessed till.

Here, you can say, I think banks need to work towards the adequate distribution of savings to all sectors for conclusive growth. Today banks need professional and modern management techniques to make the banking processes efficient. Banks need to fulfill the credit needs of all sections of society and at the same time to ensure better credit management and reduce the NPA and bad loans through making efficient strategies.

What are the common ways to operate your bank accounts?

Now a days, Bank accounts can be operated not only through branches of bank but also, through Mobile Banking, Internet Banking, ATM.

What is loan grading?

Loan grading is the classification of the loan based on various risks and parameters like repayment risk, borrowers credit history etc. So, it is a classification of credit risk system used by banks for assigning a quality score to a loan based on borrower’s credit history, repayment risks associated with the loan and also quality of the collateral, and likelihood of repayment of the loan. It involves assigning a quality score from 1 to 6 to assess the nature and risks associated with the loan.

What is the line of credit?

It 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. These are readily available funds available for the borrower to withdraw when required.

What are the software banking applications available in the industry?

The 8 commonly used software banking applications are:

• Core banking system (CBS)
• Internet banking system
• ATM banking
• Loan management system
• Credit management system
• Investment management system
• Stock-market management system
• Financial management system

What is a financial management system?

A financial management system is software used by banks and other financial institutions to record and control the income, assets, and expenses.

This is done in order to maximize profits and manage finances to ensure sustainability.

Why do we need a credit management system?

Credit management system helps to control the monetary transactions credited to the account holders. It helps the banks and other financial institution to control credit, makes the funds sustainable and prevents bankruptcy and ultimately optimize profits.

What is the source of income for banks? Or how banks earn a profit?

Banks make most of their profit by accepting deposits and then lending various loans on certain interest. Bank also makes profit by providing various banking services like, cheque, internet banking, operational services, guarantee etc. to its customers.

Banks also earn from the additional charges levied on online bill payments, maintaining accounts, safeguarding assets and other such services.

What are the different types of loans that banks provide?

Banks provide different types of loans to meet various needs of the customers. The most common loans provided by banks are:

• Consumer durable loans
• Retail loans, like housing loans, car loans, 2-wheeler loans etc.
• Mortgage loans
• Secured/Unsecured personal loan
• MSME (Micro, small and medium enterprise) loans.
• Education loans
• Agriculture loans like, KCC.
• Gold loans
• Loan against fixed deposit/NSC/KVP and other insurance/government security bonds
• Credit card

What is the difference between a cheque and DD (Demand Draft)?

Cheque and DD both are used to transfer an amount between two accounts of the same or different bank.

Cheque is a document that orders a bank to pay specific amount of money from a person’s account to the person in whose name the cheque has been issued. While, DD is issued by a bank to a client (Drawer) directing another bank (Drawee) or one of its own branches to pay a certain amount to the specified party. So, DD is order of payments by bank to another bank/branches. Bank take some service charge while issuing DD.

Key differences are as under:

What are CRR and SLR?

CRR stands for Cash Reserve Ratio and SLR stands for Statutory Liquidity Ratio. Both CRR and SLR are used by the RBI (Reserve Bank of India) to regulates inflation, money supply, and liquidity.

Under CRR, commercial banks are required to keep a certain percentage of total deposits with the RBI. On the other hand, SLR is the percentage of NDTL kept by the bank in the form of liquid assets. It is used to maintain the stability of banks by limiting the credit facility offered to its customers.

What do you mean by ACH?

ACH (Automated Clearing House) refers to the electronic transfer of funds.

It allows the user to collect payments electronically by debiting the customer’s savings account. It is a faster payment method and is an alternative to cash, cheques and credit cards.

What is Repo Rate and Reverse Repo Rate?

Repo rate and reverse repo rate are a part of the liquidity adjustment facility.

Repo rate is the rate of interest at which the RBI lends money to commercial banks when they are short of funds. It plays a very important role in controlling inflation as an increase in repo rate reduces the money supply.

Reverse repo rate is the rate of interest at which the commercial banks deposit excess money with the RBI. In other words, it is the rate at which the RBI absorbs liquidity on an overnight basis from banks. During high level of inflation RBI increase the reverse repo rate and then banks prefer to lend their money to RBI in order to get substantial rate of interest.

What is a foreign draft?

A foreign draft is safer and cheaper method of transferring funds internationally or send money in foreign countries. It allows the receiver to use funds quicker than cheque or cash and is effective alternative to foreign currency and can be easily purchased from commercial banks.

What do you understand by the GDP of the country?

The final value of all the goods and services produced under the geographical area of a country is the Gross Domestic Product of that country. GDP is calculated at consumption, investment and exports and imports are subtracted from the sum of these three.

What is a Non -banking Financial Company (NBFC)?

Difference between NBFC and banks?

Non-banking financial companies are financial institutions registered under the companies act, 1956 that provide banking services, but do not hold a banking license. However, these institutions are not allowed to take deposits from the public, but do offer all sorts of banking services, such as loans and credit facilities, retirement planning, money markets, underwriting, and merger activities. The basic difference between bank and NBFC is: –

• NBFC can’t accept demand deposits.
• NBFC are not a part of the payment and settlement system and can’t issue cheques drawn on themselves.
• They are not registered in the banking act and don’t have a banking license.
• They don’t have to maintain CRR, SLR or CASA like banks.

What is the difference between nationalized banks and private banks?

A nationalized bank is owned by the govt. of that country and is also known as public sector bank whereas a private sector bank is owned by an independent individual or company.

What do you mean by term “CASA” related to bank?

CASA stands for Current Account Savings Account. The CASA ratio shows how much deposit a bank has in the form of current and saving account out of the total deposit. A higher CASA ratio means better operating efficiency of the bank because on current account there is no interest payable whereas on savings account a tiny 3.5% interest is payable by the bank.

Tell us something about BSBDA.

BSBDA stands for Basic Savings Bank deposit account. BSBDA is the new name for “no-frill accounts” under which anyone can open “zero balance account”. This BSBDA is aimed at providing banking facilities to weaker section of the society and improve financial inclusion.

What is the meaning of “base rate”?

Base Rate is the minimum rate of interest which a bank has to charge from its customers and a bank can’t sanction loan on a rate below the base rate. This rate came into effect from July 1 2010.

What are the components of the monetary policy of RBI?

The components of monetary policy include CRR, Repo rate, reverse repo rate, SLR, MSF and Bank Rate.

See… MONETARY POLICY BY RBI

Tell us something about NABARD and its functions.

NABARD was established on 12 July 1976 on the recommendation of B. Sivaramman committee as National Bank for Agricultural and Rural Development. It is the apex bank for agriculture and rural development in India. It also monitors the RRBs.

Read… FULL FORM OF NABARD-ROLE & FUNCTION

What is banking ombudsman scheme?

The scheme is for customer’s grievances and complaints regarding certain services provided by the bank. It was introduced under the Section 35 A of banking regulation Act, 1949 by RBI with effect from 1995 which was later amended and became the banking ombudsman scheme, 2006. Customer can appeal against the decision of ombudsman to deputy governor of RBI. He is the highest authority of appeal. All banks in India are covered under the scheme.

What is inflation and deflation?

Inflation is the increase in the price of goods and services due to more demand and less supply. In inflation, there is more liquidity in market which has to be controlled to reduce the purchasing power of customers. Deflation is the decrease in prices of goods and services due to more supply and very less demand. In deflation, there is lack of liquidity in market which results in very weak purchasing power of people.

Read more… INFLATION-EFFECTS, MEASURES & CAUSES

Can you differentiate the old tax regime and the new tax regime?

As per the union budget 2020-21, the old income tax regime is with existing income tax deductions and exemptions, while the new income tax regime with lower tax rates but no or fewer exemptions.

See also…
100 IMPORTANT QUESTIONS FOR BANK EXAMS
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