BANKING AND INSURANCE LAWS

SAMPLE MCQ FOR PRACTICE

UNIT- 1: BANKING SYSTEM IN INDIA
1. Which of the following function is performed by Banks?
a. Accepting deposits
b. Lending money
c. Currency exchange
d. All of the above
Ans. D.
2. Which Section of Banking Regulation Act, 1949 defines Banking?
a. Section 2(a)
b. Section 2(b)
c. Section 2(c)
d. Section 2(d)
Ans. B
3. Which is of the following is not a function of RBI?
a. Monopoly over issuance of currency notes
b. Acting as government’s bank
c. Acting as custodian of foreign currency reserves
d. Dealing with general public directly
Ans. D
4. In which of the following years, the RBI was nationalized?
a. 1947
b. 1949
c. 1950
d. 1952
Ans. B
5. Which of the following is not a nationalized bank?
a. Punjab National Bank
b. Union Bank of India
c. UCO Bank
d. HDFC Bank
Ans. D
6. Which of the following is the apex institution for financing development of agriculture and
other economic activities in rural India?
a. NABARD
b. IDBI
c. NHB
d. None of the above
Ans. A
7. Which of the following is correct?- nationalization years
a. First phase of nationalization: before independence
b. Second phase of nationalization: 1947-1991
c. Third phase of nationalization: 1991 and beyond
d. All of the above
Ans. D
8. Merchant banks helps in which of the following?
a. Assisting clients in fund raising
b. Acting as the stock exchange broker
c. Helps in management of projects
d. All of the above
Ans. D
9. Which of the following banks deal in foreign exchange?
a. Exchange bank
b. Investment bank
c. Merchant bank
d. EXIM bank
Ans. A
10. Which of the following is popular in rural areas?
a. Cooperative banks
b. Indigenous banks
c. Saving banks
d. Commercial banks
Ans. B
11. Where are the Scheduled banks listed?
a. RBI Act, 1934- First schedule
b. RBI Act, 1934- Second schedule
c. Banking Regulation Act, 1949- First Schedule
d. Banking Regulation Act, 1949- Second Schedule
Ans. B
12. Which of the following is an initiative in e-banking sector?
a. ATMs
b. RTGS
c. NEFT
d. All of the above
Ans. D
13. Which of the following was the first bank to have established in India?
a. Bank of Hindustan
 b. General Bank of India
c. Oudh Commercial Banks
d. Bank of Bombay
Ans. A
14. State Bank of India was formed as a merger of which of the following banks?
a. Bank of Bengal, Bank of Madras and Bank of Bombay
b. Bank of Bengal, Bank of Madras and General Bank of India
c. Bank of Madras, Oudh Commercial Bank and General Bank of India
d. Bank of Madras, Bank of Bombay and General Bank of India
Ans. A
15. Which of the following is not an apex level banking institution in its respective field?
a. NABARD
b. EXIM
c. NHB
d. SBI
Ans. D
16. First wave of nationalization was in which year?
a. 1960
b. 1965
c. 1969
d. 1980
Ans. C
17. What is the capital of RBI?
a. 5 crores
b. 10 crores
c. 15 crores
d. 1 crore
Ans. A
18. Where is the business which RBI may transact given in RBI Act?
a. Section 15
b. Section 16
c. Section 17
d. Section 18
Ans. C
19. What is the highest denomination of currency that can be issued?
a. ₹ 2000
b. ₹ 5000
c. ₹ 10000
d. None of the above
Ans. C
20. Banking Regulation Act, 1949 was earlier called?
a. Banking and Moneylending Regulation Act, 1949
b. Banking Companies Act, 1949
c. Moneylending Companies, Act, 1949
d. None of the above
Ans. B
21. Which section of Banking Regulation Act, 1949 defines banking business?
a. Section 5
b. Section 6
c. Section 7
d. Section 8
Ans. B
22. The RBI by virtue of its power under section 22 cannot grant a license to any Co-operative
Bank unless it is a State Co-operative Bank or a Central Cooperative Bank or a Primary
Co-operative Bank. It would be necessary that a declaration under the National Bank for
Agriculture and Rural Development Act, 1991 (NABARD Act) be first obtained.
It was held in which of the following case?
a. Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd. v.
Maharashtra State Co-operative Bank Ltd., AIR 2004 SC 141
b. Bank of India, Vijayawada v. Katamanen, Suryanarayana, AIR 1992 AP 345
c. Y. Jameela Beevi v. State Bank of Travancore, 1990
d. Bank of India, Vijayawada v. Katamanen, Suryanarayana, AIR 1992 AP 345
Ans. A
23. Nationalization came after social control policy?
a. Yes
b. No
c. They came simultaneously
d. There was no social control policy
Ans. A
24. What were the steps taken in Social control policy in 1967?
a. Setting up of NCC
b. Amendment of Banking Regulation Act, 1949
c. Both a and b
d. None of a and b
Ans. C
25. Which of the following is an advantage of Bank nationalization?
a. Planned process of economic development
b. Focus on agriculture, small industry and other priority sectors
c. Removal of control by few
d. All of the above
Ans. D
26. Nationalization was first introduced through which of the following mode?
a. The Banking Companies (Acquisitions and Transfer of Undertaking)
Ordinance, 1969
b. The Banking Companies (Acquisitions and Transfer of Undertaking)
Ordinance, 1970
c. The Banking Companies (Acquisitions and Transfer of Undertaking) Act, 1969
d. The Banking Companies (Acquisitions and Transfer of Undertaking) Act, 1969
Ans. A
27. How many banks were nationalized in 1969?
a. 14
b. 10
c. 15
d. 21
Ans. A
28. Which of the following case is called Bank nationalization case?
a. E.P. Royappa v. Union of India
b. R.C. Cooper v. Union of India
c. Minerva Mills v. Union of India
d. None of the above
Ans. B
29. Who can supersede the functions of any bank if it is not working properly?
a. RBI
b. Central Government
c. State Government
d. There cannot be any supersession
Ans. A
30. Bank nationalization was how many judges’ bench case?
a. 10
b. 11
c. 12
d. 13
Ans. B
31. Bank nationalization was challenged on grounds of which of the following?
a. Article 19(1)(f) and (g)
b. Article 31(2)
c. Article 301
d. All of the above
Ans. D
32. What are the relationships shared between banker and customer?
a. Debtor and creditor
b. Pledger and pledgee
c. Trustee and beneficiary
d. All of the above
Ans. D
33. What is true regarding bailment?
a. It is defined in Indian Contract Act, 1872
b. It refers to delivery of good by one person to another for some purpose
c. Banks can act as bailee
d. All of the above
Ans. D
34. Banks can act as which of the following?
a. Trustee
b. Executor
c. Agent
d. All of the above
Ans. D
35. What are the duties of the banker?
a. To help clients in financial needs
b. To keep track of financial status of the client
c. To keep accurate financial record
d. All of the above
Ans. D
36. What are the duties of the customer?
a. Exercise reasonable care in drawing cheque
b. Disclose forgery
c. Act in good faith
d. All of the above
Ans. D
37. Are banking service covered under Consumer Protection Act, 2019?
a. Yes
b. No
c. Sometimes
d. May be
Ans. A
38. Which of the following is a deficiency on banking services?
a. Refusing or holding back the amount that was due on fixed deposit after
maturity
b. Delay in the payment of amount on term deposits after maturity
 c. Dishonor of cheques because of mistake or negligence by bank.
d. All of the above
Ans. D
39. Which of the following is a deficiency on banking services?
a. Dishonoring of demand drafts because of omission by bank officials.
b. Refusing grant of loans without any bonafide reason
c. Causing undue delay in discharging installments of loan
d. All of the above
Ans. D
40. Which of the following is a deficiency on banking services?
a. Charging interest at higher rate than what has been specified in loan
agreement.
b. Failure in returning securities even after the loan is repaid.
c. Bank’s failure to honour guarantee, if demand was as per guarantee.
d. All of the above
Ans. D
41. Which of the following is a deficiency on banking services?
a. Articles in locker are lost
b. Loss to customers due to unavailability of securities in bank premises
c. Closing bank account without any instructions in that regard from the account
holder
d. All of the above
And. D
42. Which of the following is a deficiency on banking services?
a. Refusing cheque book facility to customer just because of the fact that the
minimum balance has not been maintained
b. Failure of bank cashier to account for money deposited at the counter with him
(vicarious liability)
c. Rude behavior of bank officials resulting in discomfort or mental agony to
customers
d. All of the above
Ans. D
43. Which of the following is a deficiency on banking services?
a. Without even demanding repayment giving notice to “face the auction or
make payment”
b. Failure at returning the dishonored cheque
c. Rude behavior of bank officials resulting in discomfort or mental agony to
customers
d. All of the above
Ans. D
44. What are options available with customer in case they want to file a case against any
banker?
a. Banking Codes and Standards Board of India
b. In-house complaint mechanism of banks
c. Ombudsman office
d. COPRA 2019
e. All of the above
Ans. E
45. Which of the following are the principles regarding consumer protection given by RBI?
a. Right to honest, transparent and fair dealing
b. Right to fair treatment
c. Right of suitability
d. All of the above
Ans. D
46. Which of the following are the principles regarding consumer protection given by RBI?
a. Right to privacy
b. Right to grievance redressal
c. Right of suitability
d. All of the above
Ans. D
47. What is the adjudicatory mechanism under COPRA 2019?
a. Central Consumer Protection Authority
b. Consumer Protection Council
c. Consumer Redressal Commission
d. Consumer Mediation Cell
Ans. C
48. Which of the following is correct with respect to the jurisdiction of consumer commission?
a. District commission: below 1 crore
b. State commission: above 1 crore and less than 10 crores
c. National commission: more than 10 crores
d. All of the above
Ans. D
49. Where can the appeal be filed from the decision of National Consumer Redressal
Commission?
a. Supreme Court
b. High Court of the State from which the case arose
c. President of India
d. No appeal is allowed
Ans. A
50. Which of the following is an obligation of banker towards customer?
 a. Honour the cheque
b. Maintain secrecy of the accounts
c. Safeguard trust property of the customer
d. All of the above
Ans. D
UNIT- 2: LENDING, SECURITIES AND RECOVERY OF LOANS
51. What is the importance of lending?
a. Ensures availability of funds
b. Ensures flow of credit in the market
c. Helps in economic development
d. All of the above
Ans. D
52. What is the requirement of principles of lending?
a. They ensure that there is surety with the bank that money would come back.
b. To fulfil profit earning motive
c. To assure itself of the repaying capacity of the borrower
d. All of the above
Ans. D
53. Which of the following is not the principle of lending?
a. Safety
b. Liquidity
c. Profitability
d. None of the above
Ans. D
54. Which of the following principles of lending ensures the repayment of money?
a. Principle of safety
b. Principle of liquidity
c. Principle of security
d. All of the above
Ans. D
55. Which of the principles ensure that banks make profits during the process of lending?
a. Principle of security
b. Principle of diversification of funds
c. Principle of profitability
d. Principle of liquidity
Ans. C
56. Which of the following principles is based on the approach ‘Do not put all eggs in one
basket’?
a. Principle of liquidity
 b. Principle of safety
c. Principle of national interest
d. Principle of diversification of advances (principle of diversity)
Ans. D
57. Which of the following factors are kept in mind by the bankers while granting loans?
a. Experience of the applicant
b. Purpose for loan
c. Ability to repay
d. All of the above
Ans. D
58. Which of the following principle focusses on short-term loans to ensure repayment?
a. Principle of safety
b. Principle of liquidity
c. Principle of security
d. Principle of profitability
Ans. B
59. For which of the following, banker shall not be interested in giving loans?
a. For hoarding stock
b. For buying house
c. For education
d. For investing in legal business
Ans. A (also for speculative activities banks discourage advancing money)
60. Can banks grant loans without taking any security in return?
a. Money can be lent without any security
b. No, principle of security mandates banker to avoid lending money without any
security
c. A banker generally avoids lending to a borrower without any security. But there
may be exceptions due to promotion of financial inclusion and other factors like
project for which money is required and the capacity of the borrower.
d. None of the above
Ans. D
61. Financial inclusion promoted under which of the following principle of lending?
a. Principle of safety
b. Principle of security
c. Principle of national interest
d. Principle of safety
Ans. C
62. What is the need of financial inclusion in India?
a. Neglect of agriculture and small businesses
b. Neglect of weaker sections
 c. More focus on industry and commerce
d. All of the above
Ans. D
63. Which of the following principles of lending proved to be a hindrance in financial
inclusion?
a. Safety
b. Security
c. Purpose
d. All of the above
Ans. D
64. Which of the following sectors is categorised by RBI as priority lending sector?
a. Agriculture
b. MSMEs
c. Export credit
d. All of the above
Ans. D
65. Which of the following sectors is not a priority lending sector?
a. Social infrastructure
b. Renewable energy
c. Distressed persons
d. None of the above
Ans. D
66. Which of the following constitutes weaker sections?
a. Small and marginal farmers
b. Artisans, village and cottage industries
c. Persons with disabilities
d. All of the above
Ans. D
67. Which of the following schemes is for the priority lending sector?
a. IRDP (Integrated Rural Development Programme)
b. DRI Scheme (Differential Rate of Interest)
c. 20-point programmes
d. All of the above
Ans. D
68. Village adoption scheme is a part of which of the following programmes?
a. IRDP
b. DRI
c. 20-point programme
d. None of the above
Ans. A
69. Which of the following is an objective of financial inclusion?
a. Build a stronger and sustainable economic growth and development
b. Help people secure financial services
c. Establish proper financial institutions
d. All of the above
Ans. D
70. Which of the following is an initiative for financial inclusion in India?
a. Establishment of Regional Rural Banks
b. No frills account
c. Business correspondent model
d. All of the above
Ans. D
71. Which of the following facilitate digitalization of monetary transactions?
a. Unified Payment Interface (UPI) and BHIM
b. Immediate Payment Service (IMPS) and National Electronic Funds Transfer
(NEFT)
c. Aadhaar Pay
d. All of the above
Ans. D
72. Which of the following are the schemes under Financial Inclusion?
a. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
b. Stand Up India Scheme
c. Pradhan Mantri Mudra Yojana (PMMY)
d. All of the above
Ans. D [Other schemes: Sukanya Samriddhi Yojana, Jeevan Suraksha Bandhan Yojana,
Credit Enhancement Guarantee Scheme (CEGS) for Scheduled Castes (SCs), Venture Capital
Fund for Scheduled Castes under the Social Sector Initiatives and Varishtha Pension Bima
Yojana (VPBY)]
73. Which of the following are included in the securities?
a. Shares, bonds, debentures, etc.
b. Investments
c. Goods and stock
d. All of the above
Ans. D
74. Which of the following are included in the securities?
a. Land and building
b. Life insurance
c. Book debts
d. All of the above
Ans. D
75. What are the factors undertaken by the banker while granting loans?
a. Skills and expertise
b. Financial resources
c. Risk tolerance
d. All of the above
Ans. D
76. What are the precautions that must be taken while giving loan against any security?
a. Title of the borrower
b. Valuation of the property
c. Verification of documents
d. All of the above
Ans. D
77. What are the benefits of keeping goods and stock as security with the banker?
a. They have a ready market
b. Valuation can be done easily
c. Tangible form of security
d. All of the above
Ans. D
78. What are the advantages of life insurance as security?
a. Life insurance is statutorily regulated
b. Assignment in favour of bank requires less formalities
c. Good surrender value
d. All of the above
Ans. D
79. Which of the following is a mode of keeping security with the bank?
a. Pledge and hypothecation
b. Mortgage and assignment
c. Lien
d. All of the above
Ans. D
80. In which of the following mode of security, the possession is transferred to the bank?
a. Pledge
b. Hypothecation
c. Mortgage
d. Lien
Ans. A
81. Pledge is also called:
a. Bailment of goods as security for payment of debt
 b. Bailment of goods for performance of promise
c. Both A and B
d. Neither A nor B
Ans. A (Read Section 172 of the Indian Contract Act, 1872)
82. Mortgage is applicable to which of the following:
a. Moveable assets
b. Immoveable assets
c. Both a and b
d. Neither a nor b
Ans. B
83. Where is mortgage defined?
a. Transfer of Property Act
b. Indian Contract Act
c. Sale of Goods Act
d. All of the above
Ans. A
84. What was the reason behind enactment of Recovery of Debts due to Banks and Financial
Institutions Act, 1993 (old name)?
a. Banks facing difficulties in recovering loans and enforcement of securities
b. Blocking of funds due to procedural difficulties
c. No special legal mechanism for the banks to recover loans
d. All of the above
Ans. D
85. Under which section of the 1993 Act the jurisdiction of DRT is given?
a. Section 17
b. Section 21
c. Section 19
d. Section 18
Ans. C
86. Within how many days can the application be withdrawn from the Tribunal?
a. 15 days
b. 30 days
c. 45 days
d. 10 days
Ans. B
87. What are the particulars that have to be stated in the application?
a. Particulars of the security interest
b. Estimated value of the securities
c. Estimated values of other securities in case debt is security is insufficient to
cover the amount of debt
 d. All of the above
Ans. D
88. Within how many days under 1993 Act defendant has to show cause as to why relief prayed
by the plaintiff should not granted?
a. 15 days
b. 30 days
c. 45 days
d. 10 days
Ans. B
89. What is the time period for extension that can be given for filing written statement?
a. 30 days
b. 15 days
c. 10 days
d. No extension
Ans. B
90. What are the orders that can be passed by the Tribunal under 1993 Act?
a. point a receiver of any property, whether before or after grant of certificate for
recovery of debt;
b. remove any person from the possession or custody of the property;
c. commit the same to the possession, custody or management of the receiver;
d. All of the above
Ans. D
91. Can recovery officer hear any objection to the Recovery Certificate?
a. Yes
b. No
c. Sometimes
d. No objection can be raised
Ans. B
92. Can an appeal be raised from the order passed by DRT by the consent of the parties?
a. No
b. Yes
c. Sometimes
d. None
Ans. B
93. Where can the application be filed for recovery of secured loan?
a. SARFAESI Act
b. RDDBFI Act (new name- Recovery of Debts and Bankruptcy Act, 1993)
c. Both a and b
d. None of the above
Ans. C
94. Where can the application be filed for recovery of unsecured loan?
a. SARFAESI Act
b. RDDBFI Act (new name- Recovery of Debts and Bankruptcy Act, 1993)
c. Both a and b
d. None of the above
Ans. B
95. Enforcement of securities in favour of secured creditor under SARFAESI Act can be done
by:
a. Bank itself
b. DRT
c. Bank with the help of DRT
d. Any of the above
Ans. A
96. What is the time period for discharge of liabilities after notice has been served by secured
creditor under the SARFAESI Act?
a. 30 days
b. 45 days
c. 60 days
d. 90 days
Ans. C
97. Within how many days can the objection be filed by the borrower on the receipt of notice?
a. 10 days
b. 15 days
c. 30 days
d. One week
Ans. D
98. What recourses can be taken by the secured creditor to recover secured debt?
a. Possession of secured asset
b. Taking over management of the business of the borrower
c. Appoint manager to manage the secured asset
d. Any of the above
Ans. D
99. Which of the following authorities can assist the secured creditor in taking possession of
the secured asset?
a. Chief Metropolitan Magistrate
b. District Magistrate
c. Both of the above
d. None of the above
Ans. C
100. Where can the appeal be filed by the aggrieved party against any action taken by the
secured creditor?
a. DRT
b. DRAT
c. Civil Court having jurisdiction
d. Any of the above
Ans. A
101. What is the time period within which appeal can be filed under Section 17 of the
SARFAESI Act?
a. 40 days
b. 45 days
c. 60 days
d. 90 days
Ans. B
102. Where can the appeal under Section 17 be filed if the borrower resides in the State of
Jammu and Kashmir?
a. Court of District Judge
b. CMM
c. DM
d. None of the above
Ans. A (See Section 17A of the SARFAESI Act)
UNIT- 3: BANKING FRAUDS
103. Are banking frauds defined anywhere?
a. No
b. Yes
Ans. A
104. Where is the definition of fraud given?
a. Indian Contract Act, 1872
b. IPC 1860
c. Both a and b
d. Neither a nor b
Ans. A
105. What are the reasons for commission of banking frauds?
a. Lack of transparency in system
b. Delay and red tape
c. Cushion of safety in the Indian criminal system
d. All of the above
Ans. D
106. Why is it difficult to detect the banking frauds?
 a. Technicalities in the banking system
b. Sophisticated crime
c. Hi-tech crime
d. All of the above
Ans. D
107. Why is it difficult to detect the banking frauds?
a. International crime
b. Faceless crime
c. No crime scene
d. All of the above
Ans. D
108. What is the stage in which banking fraud can be committed?
a. Making deposit
b. Making advances
c. Services
d. All of the above
Ans. D
109. What are the provisions in IPC in which banking fraud can be covered?
a. Section 403 and 405
b. Section 415
c. Section 463
d. All of the above
Ans. D
110. In which of the following ways can the fraud related to deposits be made?
a. Value of cheque deposited is inflated by inserting numbers.
b. Nature of cheque is altered by deleting words
c. A dormant account is fraudulently operated by forging signature.
d. Any of the above
Ans. D
111. In which of the following ways advance-related frauds can be committed?
a. Collaterals lodged with the bank are inadequate or valueless.
b. Value of Hypothecated /pledged stocks is inflated.
c. Goods pledged with the bank are removed with the connivance of the bank staff.
d. Any of the above
Ans. D
112. Which of the following is present in banking fraud?
a. Deceit
b. Concealment
c. Violation of trust
d. All of the above
Ans. D
113. Which of the following is a service-related fraud?
a. Deficiency in the services
b. Non returning of collateral
c. Non-Repayment of deposits made
d. All of the above
Ans. D
114. Which of the following is a service-related fraud?
a. Dishonouring of cheque
b. Deduction of amount without authorization
c. Lost goods from safety lockers
d. All of the above
Ans. D
115. Which of the following is a fraud related to service bills?
a. Fraudster discounts the bogus or stolen railway receipts.
b. False bills are drawn on sister concerns for the purpose of discounting.
c. Bills are inflated in collusion with the supplier.
d. All of the above
Ans. D
116. Which of the following is an e-fraud?
a. Introduction of Spyware, malware, virus etc.
b. Wire tapping
c. Hacking
d. All of the above
Ans. D
117. Which of the following is an advantage of e-banking?
a. Faster Transactions
b. Convenience
c. Easy access
d. All of the above
Ans. D
118. Which of the following is an advantage of e-banking?
a. Speed and efficiency
b. Lesser limitations
c. Better customer service
d. All of the above
Ans. D
119. Which of the following is a disadvantage of e-banking?
a. Difficult for Beginners
 b. Trust and Responsibility
c. Inconvenience
d. All of the above
Ans. D
120. Which of the following is a disadvantage of e-banking?
a. Inability to Handle Complex Transactions
b. Financial Jargon
c. Security Issues
d. All of the above
Ans. D
121. Which of the following is a disadvantage of e-banking?
a. Technology issues
b. Virtual assistance
c. Complicated websites
d. All of the above
Ans. D
122. Where are e- frauds relating to banking generally included?
a. IT Act, 2000
b. Indian Contract Act, 1872
c. Indian Penal Code, 1860
d. None of the above
Ans. A
123. In which of the following the scam operates by obtaining information about a victim?
a. Cheating be personation
b. Theft of identity
c. Both a and b
d. Neither a nor b
Ans. C
124. Which of the following ways can be used to decrease e-frauds in banking sector?
a. Increasing security
b. Improving authentication process
c. Trust
d. All of the above
Ans. D
125. Which authority in the banks performs the function of Fraud Prevention and
Management?
a. CEO of the bank
b. Chairman of the bank
c. Both a and b
d. Neither a nor b
Ans. C
126. Which is the first authority responsible for prevention of bank frauds?
a. Bank
b. RBI
c. Government
d. None of the above
Ans. A
127. Which of the following can be used for detecting frauds in the banking system?
a. Early warning signals
b. Red flag accounts
c. Both a and b
d. Neither a nor b
Ans. C
128. Which of the following agency can be involved in cases of banking frauds?
a. Central Vigilance Officer
b. CBI
c. Police
d. Any of the above
Ans. D
129. What are the powers with Central Vigilance Commission?
a. Summon any person to record evidence on oath
b. Ask for production of documents
c. Call any public record
d. All of the above
Ans. D
130. Who has the responsibility to maintain efficiency of banking system in India?
a. Bank itself
b. RBI
c. Government
d. All of the above
Ans. D
UNIT- 4: INSURANCE LAWS
131. Why is insurance needed?
a. Life is full of risks
b. It provides support in the events of loss
c. It tries to reduce the financial risk
d. All of the above
Ans. D
132. What is true for insurance?
 a. It is a social device
b. It permits statistical prediction of losses and provides for payment of losses from
funds contributed (premium) by all members who transferred risk
c. It is a cooperative device that spreads the risk
d. All of the above
Ans. D
133. What is true for the insurance?
a. It spreads the risk over a number of persons
b. It leads to sharing the loss of each member of society on the basis of probability
of loss to their risk
c. It is method to provide security against losses to the insured
d. All of the above
Ans. D
134. What is true for the contract of insurance?
a. The client agrees to pay a premium to the Insurance Company
b. Such premium may be a fixed amount payable as a single payment or it may
be paid as periodical payments
c. In lieu of the payment of such premium the Insurance Company agrees to make
some payment to the client or bear the costs of the client due to financial loss
incurred on the occurrence of certain events
d. All of the above
Ans. D
135. What is the important component of the contract of insurance?
a. Insured
b. Insurer
c. Premium
d. All of the above
Ans. D
136. Which of the following is true for insurable interest?
a. It must be present in the life or property insured
b. It must be pecuniary in nature
c. It defines the relationship of the insured with the subject matter of insurance
d. All of the above
Ans. D
137. Which of the following is the test of insurable interest?
a. It is in monetary terms
b. It defines relationship of insured with the subject matter
c. It is present where insured must be benefitted by the safety of the subject matter
and suffers loss if the subject matter is lost
d. None of the above
Ans. C
138. Which of the following is an essential of a valid contract of insurance?
a. Two parties- insurer and insured and capacity to enter into contract
b. Offer and acceptance
c. Consideration
d. All of the above
Ans. D
139. What is true for contract of insurance?
I. Risk elimination
II. Risk reduction
III. Risk sharing
a. I and III
b. I and II
c. II and III
d. I, II and III
Ans. C
140. Which of the following are the benefits offered by the contract of insurance?
a. Peace of mind
b. Eliminates dependency
c. Social security
d. All of the above
Ans. D
141. What is the need of insurance from business point of view?
a. Uncertainty of losses of reduced
b. Business efficiency is increased
c. Loans can be obtained against the policy
d. All of the above
Ans. D
142. What are the requirements of free consent in the contract of insurance? It should be free
from:
a. Undue influence
b. Fraud
c. Misrepresentation
d. All of the above
Ans. D
143. What is the theory on which contract of insurance is based?
a. Theory of cooperation
b. Theory of probability
c. Both a and b
d. Neither a nor b
Ans. C
144. The premium is calculated on the basis of which theory?
a. Theory of cooperation
b. Theory of probability
c. Both a and b
d. Neither a nor b
Ans. B
145. What is the nature of contract of insurance?
a. Wagering contract
b. Contract of indemnity
c. Contingent contract
d. All of the above
Ans. B
146. What is the importance of insurance from society point of view?
a. Protection of wealth of society
b. Economic growth of the country
c. Generation of financial resources
d. All of the above
Ans. D
147. What can be the categorisation of contract of insurance from business point of view?
a. Life, general, social
b. Marine, cattle, life
c. Fiduciary, motor, health
Ans. A
148. What is the term used for exercise for one’s own benefit, of rights or remedies possessed
by another against third parties?
a. Subrogation
b. Contribution
c. Reinsurance
d. Double insurance
Ans. A
149. What is the term used for right of the insurers to claim from others some payment
towards the loss and it resembles the remedies between co-sureties whereby the liability
of each may be made proportionate?
a. Subrogation
b. Contribution
c. Reinsurance
d. Double insurance
Ans. B
150. What is the term used for insuring again by the insurer?
a. Subrogation
 b. Contribution
c. Reinsurance
d. Double insurance
Ans. C
151. What term used same subject matter insured twice either with same company or
different companies?
a. Subrogation
b. Contribution
c. Reinsurance
d. Double insurance
Ans. D
152. Which of the following is the principle of insurance?
a. Insurable interest
b. Utmost good faith
c. Indemnity
d. All of the above
Ans. D
153. Which of the following is the principle of insurance?
a. Subrogation
b. Contribution
c. Causa proxima
d. All of the above
Ans. D
154. Which of the following is the principle of insurance?
a. Insurable interest
b. Proximate cause
c. Mitigation of loss
d. All of the above
Ans. D
155. What is true regarding insurable interest?
a. A person is said to have an insurable interest in the property, if he is financially
benefitted by its existence and is suffering a loss by non existence.
b. Insurable interest is the legal right of the insured
c. Absence of insurable interest makes the contract void since it is the interest of
the insured in the subject matter which is insured and not the subject matter
itself.
d. All of the above
Ans. D
156. In which of the following cases insurable interest can exist?
a. In relationships of marriage, blood and adoption
 b. In contractual relationships
c. In statutory relationships
d. All of the above
Ans. D
157. What is the meaning of uberrimae fidei?
a. Utmost good faith
b. Mitigation of loss
c. Indemnity
d. None of the above
Ans. D
158. What is true regarding the principle of indemnity?
a. It provides security against the damage or loss
b. Compensation of loss
c. An exact financial compensation
d. All of the above
Ans. D
159. What is true regarding the principle of indemnity?
a. To bring back the insured at the financial position he enjoyed immediately
before the loss.
b. Indemnity means to make good the loss and nothing more than actual loss.
c. Contribution and Subrogation are corollary to this principle.
d. All of the above
Ans. D
160. Where is indemnity defined?
a. Indian Contract Act
b. Sale of Goods Act
c. Transfer of Property Act
d. None of the above
Ans. A
161. What is the meaning of subrogation?
a. Doctrine of Rights Substitution
b. Right of the insurer who has paid the loss to be put in the place of the assured.
c. It means that the insurer steps into the shoes of the insured after settling the
claim or after compensating the loss.
d. All of the above
Ans. D
162. What is true regarding the proximate cause?
a. In case loss occurs due to more than one causes, then according to this principle,
the nearest or the direct cause to loss is to be considered as the actual cause of
the loss not the remote cause.
 b. Does not necessarily mean ‘nearest in time’
c. What is truly proximate is the one which is proximate in efficiency
d. All of the above
Ans. D
163. Which principle of insurance says that it is the duty of the insured to decrease or
minimize the severity of loss?
a. Principle of contribution
b. Principle of subrogation
c. Principle of mitigation of loss
d. Principle of proximate causa
Ans. C
164. What is true regarding material fact?
a. A fact that affects the judgment capacity of a person
b. Different consequence would have occurred had the fact not been disclosed
c. if knowledge of it would have influenced a prudent insurer, either to refuse the
risk altogether, or to accept it only at a higher premium
d. all of the above
Ans. D
165. Which of the following is the duty under the principle to disclose material facts?
a. To all the material facts which he knows or ought to know
b. Specific duty when insurer asks an question
c. Only to negotiations preceding the formation of contract
d. All of the above
Ans. D
166. Which of the following facts are required to be disclosed by the insured?
a. Facts which were immaterial earlier but later became material
b. Facts which increase the risk
c. Previous losses incurred and claims under previous policies (mainly in case of
double insurance)
d. All of the above
Ans. D
167. Which of the following facts are required to be disclosed by the insured?
a. Special terms and conditions of the previous policies, if any
b. Facts of existence of non-indemnity, any charge or encumbrance on the policy
in the form of a loan security or otherwise
c. Description of subject matter
d. All of the above
Ans. D
168. Which of the following facts are required to be disclosed by the insured?
a. Facts which suggest special motive behind taking insurance
 b. Facts which suggest existence of any moral hazards which relate to the moral
integrity of the proposer, etc.
c. Construction of building or packing of the goods
d. All of the above
Ans. D
169. Which of the following facts are not required to be disclosed by the insured?
a. Facts not in knowledge of insured
b. Facts of common knowledge
c. Facts of law
d. All of the above
Ans. D
170. Which of the following facts are not required to be disclosed by the insured?
a. Facts which a survey would have revealed
b. Facts which could reasonably be discovered
c. Facts lessening the risk
d. All of the above
Ans. D
171. Which section of Marine Insurance Act talks about the principle of utmost good faith
is given?
a. Section 19
b. Section 20
c. Section 21
d. Section 22
Ans. A
172. Which of the following has to be taken care of by the insurer while observing utmost
good faith?
a. Intention of parties must prevail
b. Language used in the policy
c. Contra Proferentum
d. All of the above
Ans. D
173. What is true regarding the rule of Contra proferentum?
a. It ensures that one party is not put to disadvantage due to use of ambiguous
terms used by other party
b. It encourages the drafters of the policy to make it clear and explicit as much as
possible and to take into account as many foreseeable situations as possible
c. To discharge the party against the interests of whom the ambiguous contract
shall be enforced
d. All of the above
Ans. D
174. Which of the following is a type of general insurance?
a. Health
b. Motor
c. Travel
d. All of above
Ans. D
175. What is the objective of life insurance?
a. To give a stated sum of money on the happening of a particular event contingent
on the duration of human life
b. To pay a certain sum of money to the nominee of the policy in case of death of
the insured or to pay a certain sum to the insured in case he survives after a
certain fix period, whichever is earlier
c. To bridge this gap by creating an immediate estate to protect the family in the
event of the breadwinner’s death
d. All of above
Ans. D
176. Which of the following is included in life insurance business?
a. the granting of disability and double or triple indemnity accident benefit, if so
provided the contract of insurance.
b. The granting of annuities upon human life and
c. The granting of superannuation allowance and annuities payable out of any fund
applicable solely to the relief and maintenance of persons engaged or who have
been engaged in any particular profession, trade or employment or of the
dependents of such persons
d. All of above
Ans.
177. Which of the following insurance can be used as an investment?
a. Life insurance
b. Motor insurance
c. Health insurance
d. Marine insurance
Ans. A
178. Which of the following are requirements of life insurance?
a. Principle of good faith
b. Proposal and offer
c. Insurable interest
d. All of the above
Ans. D
179. Who are the persons entitled to receive payment under the policy?
a. Payee
b. Assured
 c. Executors and administrators
d. All of the above
Ans. D
180. Which of the following are the features of Mediclaim?
a. Cost effective
b. Cashless treatment
c. Eases financial stress
d. All of the above
Ans. D (other: day care, pre-hospitalization, post hospitalization, life-long renewability)
181. Which of the following facts are true for fire insurance?
a. Principal object is insurance against loss or damage occasioned by fire
b. The extent of insurer’s liability being limited by the sum insured and not
necessarily by the extent of loss or damage sustained by the insured
c. The insurer having no interest in the safety or destruction of the insured
property apart from the liability undertaken under the contract.
d. All of the above
Ans. D
182. Which of the following facts are essential for a contract of fire insurance?
a. Insurable interest
b. Proximate cause
c. Utmost good faith
d. All of above
Ans. D (others: indemnity, subrogation, warranties)
183. What is true regarding the presence of insurable interest in the contract of fire
insurance?
a. Essential to be present throughout the policy
b. It can be transferred with the permission of the insurer
c. Without presence of insurable interest, the contract shall be void and be wager
d. All of the above
Ans. D
184. What are the rights of insurer in the case of contract of fire insurance?
a. Right of disclosure
b. Right of control over property
c. Right of entering the property
d. All of the above
Ans. D
185. What are the losses that are covered under the fire insurance policy?
a. Lighting
b. Explosion
c. Damage by earthquake fire and shock
 d. All of the above
Ans. D
186. Which of the following incidental losses are covered under fire insurance policy?
a. Damage from smoke or heat
b. Property blown up to prevent a fire from spreading
c. Loss resulting from efforts of fire brigade to put out the fire
d. All of the above
Ans. D
187. Which of the following losses are not covered under the fire insurance policy?
a. Anticipated profits
b. Continuing expenditure
c. Depreciation
d. All of the above
Ans. D
188. Which of the following are the types of property insurance?
a. Fire
b. Flood
c. Earthquake
d. All of the above
Ans. D
189. What is true regarding the nature and scope of contract of marine insurance?
a. It is a contract of indemnity
b. It covers risk concerned with both land and sea
c. It only covers lawful marine adventure
d. All of the above
Ans. D
190. Which of the following are included in the perils of sea?
a. Ship wrecks and Collisions
b. Wear and tear of ordinary nature
c. Both a and b
d. Neither a nor b
Ans. D
191. What is true regarding the nature of insurable interest in marine insurance?
a. Insured must have insurable interest in the subject matter where he stands in any
legal or equitable relation to the subject matter
b. Must be present at the time of loss and not at the time of loss (Section 8(1) of
the Marine Insurance Act, 1963)
c. Since the ownership and other interests of the subject matter often change from
hands to hands, the requirement of the insurable interest to be present only at
the time of loss makes the policy freely assignable
 d. All of the above
Ans. D
192. Which of the following is a third party insurance?
a. Fire
b. Motor
c. Life
d. Health
Ans. B
193. What is true regarding the composition of IRDA?
a. It has a Chairperson, not more than 5 whole time members and not more than 4
part-time members
b. Members are appointed by Central Government
c. They must have knowledge in life insurance, general insurance, actuarial
science, finance, economics, law, accountancy, administration or any other
discipline which would, in the opinion of the Central Government, be useful to
the Authority
d. All of the above
Ans. D
194. Which of the following is the duty of IRDA?
a. To regulate, promote and ensure orderly growth of the insurance business and
re-insurance business
b. issue to the applicant a certificate of registration, renew, modify, withdraw,
suspend or cancel such registration;
c. protection of the interests of the policy holders in matters concerning assigning
of policy, nomination by policy holders, insurable interest, settlement of
insurance claim, surrender value of policy and other terms and conditions of
contracts of insurance
d. All of the above
Ans. D
195. Which of the following is the duty of IRDA?
a. specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents;
b. specifying the code of conduct for surveyors and loss assessors;
c. promoting efficiency in the conduct of insurance business;
d. All of the above
Ans. D (Please see Section 14 of IRDA for other duties)
196. Where can complaints regarding insurance policies be filed?
a. Consumer Fora
b. With IRDA
c. With Insurance Ombudsman
d. Any of the above
Ans. D
197. Which of the following is an initiative by IRDA?
a. Complaint mechanism
b. Integrated Grievance Management System (IGMS)
c. Protection of Policyholders’ Interests (PPHI) Regulations 2017
d. All of the above
Ans. D
198. When can one approach insurance ombudsman?
a. One has first approached your insurance company with the complaint and hey
have rejected it or not resolved it to satisfaction or not responded to it at all for
30 days
b. complaint pertains to any policy one taken in your capacity as an individual
c. The value of the claim including expenses claimed is not above Rs 30 lakhs
d. All of the above
Ans. D
199. Which of the following is a deficiency in the insurance services?
a. Delay in settlement of claims, beyond the time specified in the regulations,
framed under the IRDAI Act, 1999.
b. Any partial or total repudiation of claims by the Life insurer, General insurer or
the Health insurer.
c. Any dispute about premium paid or payable in terms of insurance policy
d. All of the above
Ans. D
200. Which of the following is a deficiency in the insurance services?
a. Legal construction of insurance policies in so far as the dispute relates to claim.
b. Policy servicing related grievances against insurers and their agents and
intermediaries.
c. Issuance of life insurance policy, general insurance policy including health
insurance policy which is not in conformity with the proposal form submitted
by the proposer.
d. All of the above
Ans. D