Interview Questions on Banking Domain

Interview Questions on Banking Domain, Types of Banks, Types of bank Accounts, Banking Products, banking primary functions, and Banking Terms.

Banking Domain Fundamentals

1. What is Banking?

In general terms, 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.

2. What is the Banking domain and explain briefly?

The banking domain is nothing but a software division in a bank. Most of the banks are computerized now, the required software which is used will be under maintenance and very little enhancements. The members who work on this s/w can say that they are in the banking domain.

3. What is BFSI?

Banking, Financial Services and Insurance (BFSI) is an industry term for companies that provide a range of such services.

4. What are the different types of Banks available in India?

Types of Banks in India:

i) Saving Banks,

ii) Commercial Banks,

iii) Industrial Banks / Development Banks,

iv) Land Mortgage / Land Development Banks,

v) Central / Federal / National Bank,

vi) Co-operative Banks,

vii) Exchange Banks,

viii) Rural Banks

Etc…

5. What are the different types of Accounts available in Banks?

Savings Accounts:

They are for people who want to keep their money in a safe place and earn interest at the same time. We don’t need a lot of money to open a savings account.

Certificates of deposit:

They are savings deposits that require you to keep a certain amount of money in the bank for a fixed period of time. Usually banks charge a penalty if we withdraw our money early.

Individual Retirement Accounts:

They are savings deposits that offer an excellent way to save for our later years.

Checking accounts or Current accounts:

They offer safety and convenience. We keep our money in the account and write a check when we want to pay a bill or transfer some of our money to someone else. Banks sometimes charge a fee for checking accounts, many banks also offer no-fee checking and checking accounts that earn interest if you agree to keep a certain amount of money—a minimum balance—in the account.

Money market deposit accounts:

They are similar to checking accounts that earn interest, except that they usually pay a higher rate of interest and require a higher minimum balance.

6. What are the different types of Loans available in Indian Banks?

Types of Loans:

i) Housing loans,

ii) Industrial Loans,

iii) Personal Loans,

iv) Vehicle Loans,

v) Education Loans,

6) Agriculture Loans,

7) Gold Loans,
Etc…

7. What are the Primary Functions of Banks?

a. Accepting of Deposits.

Saving Deposits:

The account for saving deposits can be opened in a single name or in joint names. The depositors just need to maintain a minimum balance which varies across different banks.

Bank provides ATM cum debit card, checkbook, and Internet banking facility. Candidates can know about the Types of Cheques at the linked page.

Fixed Deposits:

Also known as Term Deposits, money is deposited for a fixed tenure. No withdrawal money during this period allowed. In case depositors withdraw before maturity, banks levy a penalty for premature withdrawal.

Current Deposits:

They are opened by businessmen. The account holders get an overdraft facility on this account. These deposits act as short-term loans to meet urgent needs.

Banks charge a high-interest rate along with the charges for overdraft facility in order to maintain a reserve for unknown demands for the overdraft.

Recurring Deposits:

A certain sum of money is deposited in the bank at a regular interval. Money can be withdrawn only after the expiry of a certain period. This type of account is operated by salaried persons and petty traders.

b. Granting of Loans & Advances

Bank offers the following types of Loans and Advances:

Bank Overdraft:

This facility is for current account holders, it allows account holders to withdraw money anytime more than available in bank balance but up to the provided limit. An overdraft facility is granted against collateral security.

Cash Credits:

A short-term loan facility up to a specific limit fixed in advance. Banks allow the customer to take a loan against a mortgage of certain property (tangible assets and / guarantees).

Cash credit is given to any type of account holder and also to those who do not have an account with a bank. Through cash credit, a larger amount of loan is sanctioned than that of overdraft for a longer period.

Loans:

Banks lend money to the customer for short-term or medium periods of say 1 to 10 years against tangible assets.

Nowadays, banks do lend money for the long term. The borrower repays the money either in a lump-sum amount or in the form of installments spread over a pre-decided time period.

Discounting the Bill of Exchange:

It is a type of short-term loan, where the seller discounts the bill from the bank for some fees.

The bank advances money by discounting or purchasing the bills of exchange.

Interview Questions on Banking Domain

8. What are the Secondary Functions of Banks?

Transfer of Funds:
Transferring of funds from one branch/place to another.

Bill Payments:

Periodic Collections:
Collecting dividends, salaries, pensions, and similar periodic collections on the clients’ behalf.

Periodic Payments:
Making periodic payments of rents, electricity bills, etc on behalf of the client.

Collection of Cheques:
Like collecting money from the bills of exchanges, the bank collects the money of the cheques through the clearing section of its customers.

Portfolio Management:
Banks manage the portfolio of their clients. It undertakes the activity to purchase and sell the shares and debentures of the clients and debits or credits the account.

Utility Functions of Banks:

• Issuing letters of credit, traveler’s cheque, etc.

• Undertaking safe custody of valuables, important documents, and securities by providing safe deposit vaults or lockers.

• Providing customers with facilities of foreign exchange dealings

• Underwriting of shares and debentures

• Dealing in foreign exchanges

• Standing guarantee on behalf of its customers, etc.

9. What or the important operations in Internet Banking?

Important operations in Internet Banking:

i) Balance Inquiry,

ii) Fund Transfers,

iii) Mini statements,

iv) Detailed reports,

v) Bill payments,

vi) Shopping,

vii) Credit card payments,

viii) Loan Payments,

ix) Utility payments etc…

10. What is Corporate Banking?

Corporate Internet Banking (CIB) helps Corporate and Institutional customers to execute complex banking transactions from their desktops.

Key facilities:

• Single window view Bank accounts mapped to a single user ID. This includes loans, deposits, and linked accounts like channel partner, vendor, and dealer accounts.

• Intra and Inter-Bank fund transfer using NEFT and RTGS

• Bulk payments

• Online Tax payment

• Utility Bill payments

• Trade Services

• Cash Management Services which includes Cheque / DD printing, collections MIS, internet-based cheque writing, etc

• Requests for Fixed Deposit( FD) opening, checkbook and cheque stop payment

11. What is Mutual Fund and how it is related to Banking?

A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities. While there is no legal definition of mutual fund, the term is most commonly applied only to those collective investment vehicles that are regulated, available to the general public and open-ended in nature.

Nowadays large-scale Banks are offering Mutual funds to their customers.

12. What should test in the Banking Domain application?

We should test in Banking Domain application:

• Banking Workflows.
• Data Integrity issues.
• Security and access issues.
• Recovery testing.
All the above needs to be tested in the expected banking environment (Hardware, LAN, Op Sys, domain configurations, databases).

13. What are the multiple software testing techniques involved in banking applications?

If we talk about testing banking applications, it requires an end to end testing methodology involving multiple software testing techniques to ensure:

• Total coverage of all banking work-flows and Business Requirements.

• Functional aspect of the application.

• Security aspect of the application.

• Data Integrity.

• Concurrency.

• User Experience.

14. What are the characteristics of Software applications in the banking domain?

The characteristics of a Banking application are as follows:

• Multi-tier functionality to support thousands of concurrent user sessions

• Large scale Integration, typically a banking application integrates with numerous other applications such as Bill Pay utility and trading accounts

• Complex Business workflows

• Real-Time and Batch processing

• High rate of Transactions per seconds

• Secure Transactions

• Robust Reporting section to keep track of day to day transactions

• Strong Auditing to troubleshoot customer issues

• Massive storage system

• Disaster Management.

15. What are the different types of Banking Software Applications available in the Industry?

i) Core Banking System (for Branches and Head office Automation)

ii) ATM Banking (for computerizing Automated Teller Machines)

iii) Internet Banking System (for online Banking Services)

iv) Financial Management System (for internal financial services management)

v) Loan Management System (for handling loan approvals, sanctions, payments and recovery operations)

vi) Credit Card Management system (for handling credit card related operations)

vii) Wealth management system

viii) Investment Management System

ix) Stock market management system

Etc…

16. What is Islamic Banking?

Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shari’ah (Islamic rulings) and its practical application through the development of Islamic economics.

Interview Questions on Banking Domain