Frequently asked Banking Interview questions 13 (Letter of Credit)


Frequently asked Banking Interview questions (Foreign Exchange)

Interview-Questions_largeDear Readers Now as the interview dates of RRB All Grades and IBPS PO are scheduled we bring to you very common banking interview questions with out set No 13 based on foreign Exchange. We will be updating material and Videos on a regular basis to help maximum number of candidates to cherish their dreams.

try Usually the time interval for interview for RRb exams and IBPS PO lies between 7-9 minutes and more depending on the interest you are generating.

QuestionsSehpaathi Test Application

  1. What is the difference between fiscal deficit and Current account deficit?
    Answer :: Sir, Fiscal deficit can be understood as when government’s total expenditure is more than the revenue earned (excluding money borrowed).
    A current account deficit means the value of imports of goods / services / investment incomes is greater than the value of exports. It is sometimes referred to as a trade deficit.

  2. What do you understand by balance of trade?
    Answer:: Sir balance of trade can be understood by the difference of total value of exports and total value of imports. If imports are more than exports there is a trade deficit, and in vice versa situation it is known as trade surplus.

  3. Name a few items which India import the most.
    Answer:: Sir India imports many items, major of which are petroleum products and coal.
  4. Banks issue Letter of Credit to customers. What is letter of credit?
    Answer:: Letter of credit is a non fund based banking advance in which branch acts as a advisor or confirming position. Importers and Exporters are usually unknown to each other. In such cases they bring banking channel in between. A letter of credit is a commitment from the bank that they will pay the dues of the importer/exporter in case the payment fails or goods received are not of the same quality as agreed upon. All Transactions are done between . 
    Exporter >> Exporter Bank >>>> Importer Bank >>> Importer
  5. Why are Letter of credit known as Non Fund Based Advance 
    Answer:: Sir , In Letter of credit, no money payment is done by the bank directly. Bank issues a letter of credit which is a confirmation to the Exporter/Importer about payment from the Importer/Exporter respectively. Bank issues Letter of credit on basis of security which is forfeited if Letter of credit issued by the bank on behalf of the customer is invoked.
  6. Why letter of credit is a contingent liability?
    Answer:: Sir Contingent liabilities are those liabilities which are not a liability today but can become a liability tomorrow. Letter of credit are non fund based advances, which if invoked becomes a liability because it becomes a fund based advance.
  7. What is direct benefit transfer?
    Answer:: Sir When a LC is issued in continuation of an existing Letter of Credit. Arrangement in which one irrevocable letter of credit serves as the collateral for another; the advising bank of the first letter of credit becomes the issuing bank of the second letter of credit.

sehpaathi Test App

[do_widget id=text-43]