Banking Interview Questions for Freshers

1. What is the definition of a bank?

Ans. A bank is a financial body responsible for accepting and providing

loans. Banks offer various financial services to individuals, businesses, and
governments. Banks are an intermediary between those with surplus
funds and those who need funds.

2. What are the different types of banks?

Ans. There are different types of banks. Some of them are retail banks,
commercial banks, agricultural banks, cooperative banks, and investment
banks. A nation's central bank oversees and regulates all types of banks in
most countries. This responsibility falls under the Reserve Bank of India
(RBI) in India.

3. What are commercial banks, and what are their types?

Ans. Commercial banks are financial institutions. They accept deposits

from the public and give loans to individuals, businesses, and
governments. They provide various banking services, including credit
facilities, payment processing, etc. Some types of commercial banks are:

 Public Sector Banks

The government primarily regulates them as it holds a good part of
the shares in these types of banks. In India, the Reserve Bank of
India (RBI) acts as a central bank and makes guidelines for public
sector banks.

 Private Sector Banks

Private banks offer personalized banking to individuals. They
provide services such as investment management, estate planning,
and tax advisory to individuals.

 Foreign Banks
Foreign banks operate in a country different from their headquarters
and provide banking services to local customers. These banks bring
global expertise and international banking services to the local
market.

4. What are the functions of commercial banks?

Ans. Some of the functions of commercial banks are:

 Commercial banks accept deposits from individuals and institutions.

 They grant loans to individuals and businesses.

 The banks provide locker facilities to customers.

 The banks trade in bonds and securities.

5. What is liquidity in Banking?

Ans. Liquidity means that a bank has enough money available to

pay debts without losing too much money. In simpler terms, liquidity
refers to available cash that banks need to meet financial needs.

6. What do you mean by credit score?

Ans. A credit score is a numerical representation of a person's

creditworthiness. It is based on the individual's credit history.

7. What is a mortgage?

Ans. A mortgage is a loan from a bank or lender to purchase a home or

real estate. The borrower repays the loan through monthly installments,
including interest.

8. What are SWIFT codes?

Ans. SWIFT code stands for Society for Worldwide Interbank Financial
Telecommunication. A SWIFT code is a unique code for identification. They
are used for identifying a specific bank in international money transfers
between banks. It is used to facilitate transfer of funds across borders.

9. What is the role of bank tellers?

Ans. Bank tellers are used to assist customers with transactions. They
ensure accurate and efficient handling of cash and provide personalized
customer service.

Banking Interview Questions for Intermediate

10. What is investment banking?

Ans. Investment banking is a segment of banking that concentrates on

helping businesses and organizations to raise capital. They offer mergers
and facilitate complex financial transactions.

11. What do you understand about consumer banking?

Ans. Consumer banking provides loans to their customers to buy various

products. They offer a simple option of easy payment through small
instalments.
12. Why do you want a job in the banking sector?

Ans. Banking is a growing sector in India with stable and high growth.
They provide a wide range of career opportunities. I am interested in
finance and I have a strong desire to contribute in the financial market. I
enjoy working with numbers. These are some of the reasons why I want to
join the banking sector.

13. What are the different types of accounts available in banks?

Ans. There are different types of accounts available in banks. These are:

 Savings accounts
Savings accounts allow individuals to deposit and earn interest on
their money while they give easy access to funds.

 Checking accounts
Checking accounts enable individuals to deposit, withdraw, and
make payments easily.

 Money market accounts

These accounts give benefits of both saving and checking
accounts. It helps us withdraw the amount and get a higher interest.

 Certificates of deposit
Banks offer certificates of deposit (CDs) where customers deposit a
specific amount of money for a fixed period at a fixed interest rate
with principal and interest guaranteed upon maturity.

 Retirement accounts
Retirement accounts are structured to help the individuals save and
grow funds for their retirement. They offer tax advantages.

14. What are the different ways in which a bank account is

operated?

Ans. There are different ways to operate a bank account. Some of them
are:

 In-branch banking

 ATM banking
 Mobile or Telephone banking

 Online banking

15. What is the overdraft protection service? Do banks charge for

overdraft protection services?

Ans. Banks offer overdraft protection services to protect customers from

declining transactions due to insufficient funds. When a customer has
overdraft protection, the banks allow them to do transactions even if they
have inadequate funds up to a predetermined limit. Yes, banks charge a
particular amount for overdraft protection services.

16. What are the things necessary for opening a bank account?

Ans. To open a bank account, you generally need to provide personal

information such as government ID and proof of residence.

17. What are the different types of card-based payments?

Ans. There are mainly two types of card-based payments

 Credit card-based payments

Transactions made using a credit card allows individuals to make
purchases which is to be paid off later.

 Debit card-based payments

Transactions made using a debit card linked to an individual's bank
account allow them to make purchases from available funds in their
bank account without borrowing.

18. What is the debt-to-income ratio?

Ans. The debt-to-income ratio is calculated as the monthly debt

payments divided by your monthly income.

19. What is a balloon payment?

Ans. A balloon payment is a large sum of money made at the end of a

loan term. It is used to lower monthly payments which requires the
borrower to make a large payment.

20. What is the difference between a demand draft and a cheque?

Ans. A cheque is a document that orders bank to pay a specific amount of

money from one person's account to the person in whose name cheque
has been issued. Cheques are issued by an individual who holds a bank
account, whereas demand draft is issued by a bank to initiate transactions
from one bank to another. Cheques can be cancelled, but demand drafts
cannot be cancelled.

Banking Interview Questions for Experienced

21. What is the adjustment credit?

Ans. Adjustment credit is a short-term loan that central banks provide to

commercial banks to help them meet their requirements. Banks use
adjustment credit to smooth out temporary funding gaps.

22. What is a foreign draft?

Ans. A foreign draft is a check drawn for making payments in foreign

currencies. It is a safe way to transfer funds internationally. It has higher
fees and longer processing times.

23. What is loan grading in banking?

Ans. Loan grading is used by banks to evaluate the level of risk

associated with a loan, based on factors such as the borrower's credit
history and the likelihood of repayment.

24. What do you mean by co-maker?

Ans. A co-maker is a person who agrees to repay a loan with the primary
borrower and is equally responsible for the debt.

25. What do you understand by the line of credit?

Ans. A line of credit refers to an agreement between the bank(or a

lender) and the customer where the bank agrees to lend a specified
amount to a borrower when needed, up to a pre-approved credit limit.

26. What is a convertibility clause?

Ans. The convertibility clause is a provision where banks can change the
rate of interest(ROI) from fixed to variable for certain types of loans.

27. What is LIBOR?

Ans. LIBOR is London Inter-bank offered rate, which is an average interest

rate offered for US dollars or Euros deposited between groups of London
Banks.

28. What is the charge-off in banking?

Ans. Charge-off is a practice where a bank issues an unpaid debt as a loss

on their financial statements, usually after a period of several months of
non-payment.
29. What is the Annual percentage rate (APR), and what are the
different types of APR?

Ans. APR, or Annual percentage rate, is a charge that banks impose on

their customers to use their services like loans and credit cards. There are
two types of APR.

 Fixed APR
In fixed APR, the imposed interest rate will be the same throughout
the life of the loan.

 Variable APR
In variable APR, the imposed interest rate can change on the basis
of the market.

30. What are the different types of loans offered by commercial

banks?

Ans. Commercial banks offer a variety of loans catering to diverse

financial needs. Common types include personal loans for individual
needs, home loans for property purchases, auto loans for vehicle
financing, and business loans to support entrepreneurial ventures.
Additionally, banks provide educational loans for academic expenses and
offer specialized loans like agricultural loans and gold loans. The terms,
interest rates, and eligibility criteria vary for each loan type, allowing
banks to address the specific requirements of individuals and businesses
across different sectors.

31. What are the different types of fixed deposits?

Ans. Fixed or term deposits come in various types, each offering specific
features to cater to different financial needs. Here are some common
types of fixed deposits:

1. Regular Fixed Deposit: The standard fixed deposit where a lump

sum amount is invested for a fixed tenure at a predetermined
interest rate.

2. Senior Citizen Fixed Deposit: Tailored for senior citizens, these

deposits often offer higher interest rates to benefit elderly investors.

3. Tax-Saving Fixed Deposit: Designed for tax benefits under

Section 80C of the Income Tax Act, these fixed deposits have a lock-
in period of 5 years.

4. Cumulative Fixed Deposit: Interest is compounded quarterly or

annually and reinvested with the principal amount, providing a lump
sum at maturity.
5. Non-Cumulative Fixed Deposit: Interest is paid out regularly
(monthly, quarterly, half-yearly, or annually) to the investor.

6. Special Fixed Deposit for Minors: Aimed at securing the financial

future of minors, this type may have specific terms and conditions.

7. Flexi Fixed Deposit: Allows investors to withdraw part of the

deposit prematurely without affecting the entire amount, usually
with a penalty.

8. Company Fixed Deposit: Offered by non-banking financial

companies (NBFCs) or corporate entities, these deposits may carry
higher interest rates and risk.

9. Tax Implication Fixed Deposit: Considering tax implications,

these deposits may have provisions for TDS (Tax Deducted at
Source).

10. Foreign Currency Fixed Deposit: Denominated in foreign

currencies, these deposits are suitable for investors dealing with
foreign exchange.

32. What is a home equity loan?

Ans. A home equity loan is a type of loan that allows homeowners to

borrow against the equity in their property. Equity is the difference
between the home's market value and the outstanding mortgage balance.
Homeowners can typically access a lump sum amount, and the loan is
secured by the property. Interest rates are often lower than unsecured
loans, and the borrowed funds can be used for various purposes, such as
home improvements, debt consolidation, or other significant expenses.
Repayment terms are fixed, and failure to repay can lead to property loss
through foreclosure.

33. What is a non-performing asset?

Ans. A non-performing asset (NPA) refers to a loan or advance for which

the borrower has not paid the interest or principal for a specific period,
usually 90 days or more. In financial terms, it represents an asset that has
stopped generating income for the lender. Non-performing assets can
include loans, mortgages, or other financial products. Banks and financial
institutions closely monitor NPAs as they impact their financial health and
can lead to financial instability. Efforts are made to resolve NPAs through
restructuring, recovery, or, in severe cases, legal action to reclaim the
outstanding amount.