Important Questions

Balbharti Maharashtra State Board 12th OCM Important Questions Chapter 4 Business Services Important Questions and Answers.

Maharashtra State Board 12th Commerce OCM Important Questions Chapter 4 Business Services

Select the correct option and rewrite the sentences

Question 1.
Principle of utmost good faith is applicable to ………………
(a) Life insurance
(b) Marine insurance
(c) All types of insurance
Answer:
All types of insurance

Question 2.
Insurable interest must exist in ……………..
(a) Life insurance contract only
(b) Marine insurance contract only
(c) Every insurance contract
Answer:
Every insurance contract

Question 3.
Indemnity means ………………….
(a) compensation equal to loss
(b) compensation more than loss
(c) compensation less than loss
Answer:
compensation equal to loss.

Question 4.
In India railways are owned and managed by ………………….
(a) Private companies
(b) Government
(c) Individuals
Answer:
Government

Question 5.
The costliest means of transport is ………………
(a) Rail transport
(b) Water transport
(c) Air transport
Answer:
Airtransport

Question 6.
Road transport is suitable for ……………… distance.
(a) Short
(b) Long
(c) Medium
Answer:
Short

Question 7.
Railway transport is convenient mode of transport for travelling ………………. distance.
(a) Short
(b) Long
(c) Medium
Answer:
Long.

Question 8.
Food Corporation of India is Em exEimple of ……………….
(a) Government warehouse
(b) Duty-paid warehouse
(c) Cold storage warehouse
Answer:
Government warehouse

Question 9.
Duty paid warehouses are located near ………………….
(a) Railway stations
(b) villages
(c) port and dock
Answer:
port and dock.

Question 10.
Postal services are administered by …………………
(a) Private companies
(b) Government of India
(c) Panchayat system
Answer:
Government of India

Question 11.
In case of urgency and to avoid delays ……………… is sent.
(a) Registered post
(b) Speed post
(c) Insured post
Answer:
Speed post

Question 12.
Inland letter card is used for transmission of messages ……………… only.
(a) outside India
(b) within India
(c) within state
Answer:
within India

Question 13.
Communication in the nature of financial statements may be posted by a service provider to the customers at least once in ……………….. days under Bill Mail Service.
(a) 90
(b) 60
(c) 30
Answer:
90

Question 14.
A ………….. is the person named in money order to whom the money is to be paid.
(a) drawee
(b) drawer
(c) payee
Answer:
payee

Question 15.
Under iMO one can transfer money from Rs ………………….. to Rs 50,000 from designated iMO post offices.
(a) 5,000
(b) 1,000
(c) 500
Answer:
1,000.

Question 16.
The types of account under which the amount is kept fixed for specific period is called ……………….
(a) Fixed Deposit Account
(b) Current Account
(c) Recurring Deposit Account
Answer:
Fixed Deposit Account

Question 17.
The account In which a monthly deposit of certain amount Is to be made for a fixed period Is known as ……………….
(a) Savings Account
(b) Current Account
(c) Recurring Deposit Account
Answer:
Recurring Deposit Account

Question 18.
The account suitable for business purpose is ………………….
(a) Savings Account
(b) Current Account
(c) Recurring Account
Answer:
Current Account

Question 19.
The account suitable for creating a saving habit is ………………..
(a) Current Account
(b) Recurring Account
(c) Savings Account
Answer:
Savings Account

Question 20.
There Is no limit on the frequency of withdrawals from a …………………
(a) Savings Account
(b) Fixed Deposit Account
(c) Current Account
Answer:
Current Account.

Match the pairs

Question 1.

Group A	Group B
(A) Life Insurance	(1) Written request by insured
(B) Mitigation of loss	(2) Document contains terms and conditions of insurance contract
(C) Premium	(3) Insurable interest
(D) Policy	(4) Maximise loss
(E) Claim	(5) Transfer of loss from one person to another
(F) Subject-matter of insurance	(6) To minimise the loss
	(7) Owned by Private Companies
	(8) Life, property or cargo of insured
	(9) Demand to compensate the loss occurred
	(10) Payment made by policyholder

Answer:

Group A	Group B
(A) Life Insurance	(3) Insurable interest
(B) Mitigation of loss	(6) To minimise the loss
(C) Premium	(10) Payment made by policyholder
(D) Policy	(2) Document contains terms and conditions of insurance contract
(E) Claim	(9) Demand to compensate the loss occurred
(F) Subject-matter of insurance	(8) Life, property or cargo of insured

Question 2.

Group A	Group B
(A) Air Transport	(1) Suitable for carrying bulky and heavy goods
(B) Pipeline Transport	(2) Connects two places on the hills
(C) Railway Transport	(3) Raigad Ropeway
(D) Road transport	(4) Fastest mode of Transport
(E) Water Transport	(5) Feeder to other Transport
	(6) Petroleum and gas
	(7) Monorail transport
	(8) Door to door service
	(9) Owned by private companies
	(10) Fully owned by foreign companies.

Answer:

Group A	Group B
(A) Air Transport	(4) Fastest mode of Transport
(B) PipelineTransport	(6) Petroleum and gas
(C) Railway Transport	(5) Feeder to other Transport
(D) Road transport	(8) Door to door service
(E) Claim	(1) Suitable for carrying bulky and heavy goods

Question 3.

Group A	Group B
(A) Warehousing	(1) Located at railway station
(B) Cold storage	(2) Stocks the goods on which duty is paid
(C) Warehouse keeper	(3) Owned and managed by Government
(D) Duty paid warehouses	(4) Time utility
(E) Government warehouses	(5) Bond
	(6) Possession utility
	(7) Perishable goods
	(8) Stocks the goods on which duty is not yet paid
	(9) Owned and managed by NGOs
	(10) Operated by manufacturers to profit storage needs

Answer:

Group A	Group B
(A) Warehousing	(4) Time utility
(B) Cold storage	(7) Perishable goods
(C) Warehouse keeper	(5) Bond
(D) Duty paid warehouses	(2) Stocks the goods on which duty is paid
(E) Government warehouses	(3) Owned and managed by Government

Question 4.

Group A	Group B
(A) Reserve Bank of India (RBI)	(1) Recurring deposit account
(B) Overdraft facilities	(2) 12 hours service
(C) ATM	(3) Withdrawals after fixed period of time
(D) Fixed deposit account	(4) Central Bank
(E) Business Service	(5) Current account
	(6) 24 hours service
	(7) Commercial bank
	(8) Withdrawal before fixed period of time
	(9) Intangible in nature
	(10) Tangible in nature

Answer:

Group A	Group B
(A) Reserve Bank of India (RBI)	(4) Central Bank
(B) Overdraft facilities	(5) Current account
(C) ATM	(6) 24 hours service
(D) Fixed deposit account	(3) Withdrawals after fixed period of time
(E) Business Service	(9) Intangible in nature

Give one word/phrase/term for the following sentences

Question 1.
The policy under which cargo is insured for a specific period and voyage.
Answer:
Mixed Policy

Question 2.
The principle of insurance under which the insurer and insured must show complete faith towards each other.
Answer:
Principle of utmost good faith

Question 3.
The type of insurance where the principle of indemnity is not applicable.
Answer:
Life insurance

Question 4.
The person who is protected against certain losses.
Answer:
Insured or Policy Holder

Question 5.
The policy for which the premium is lowest, among all insurance policies.
Answer:
Term insurance policy

Question 6.
The consideration for which the insurer agrees to insure the insured.
Answer:
Premium

Question 7.
This policy is applicable till the departure of the vessel from the port.
Answer:
Part Risk Policy

Question 8.
A policy in which subject matter is insured for a specific voyage irrespective of time involved in it.
Answer:
Voyage policy

Question 9.
Type of marine insurance policy purchased from more than one insurer.
Answer:
Composite marine insurance policy

Question 10.
Policy under which several ships belonging to one owner are insured under the same policy.
Answer:
Fleet Policy or Block Policy.

Question 11.
Mode of transport which helps to get goods and passengers at their doors.
Answer:
Road transport

Question 12.
The mode of transport which connects two places on the hills or across a valley or river.
Answer:
Rope way.

Question 13.
A warehouse where the goods can be stored after the payment of import duty.
Answer:
Duty Paid Warehouse

Question 14.
These warehouses are owned and operated by big manufacturers to fulfil their own storage needs.
Answer:
Private Warehouses

Question 15.
The warehouses which provide storage facilities to general public for certain charges.
Answer:
Public Warehouses

Question 16.
The warehouses which store imported goods until the payment of custom duty.
Answer:
Bonded Warehouses

Question 17.
These warehouses are owned, managed and controlled by co-operative societies.
Answer:
Cooperative Warehouses.

Question 18.
A quick and easy way of transferring personal remittances from abroad to beneficiaries in India.
Answer:
International Money Transfer

Question 19.
A method of exchanging mail between people using electronic devices.
Answer:
e-mail

Question 20.
The process of passing any information from one person to another with the help of some medium.
Answer:
Communication

Question 21.
The postal service which provide complete solutions right from mail preparation to mail delivery useful for small business and large companies.
Answer:
Business Post.

Question 22.
A bank which Is known as banker’s bank.
Answer:
Central bank

Question 23.
The type of bank which issues currency notes In India.
Answer:
Reserve Bank of India

Question 24.
They operate at village level.
Answer:
Primary Credit Societies

Question 25.
It is not allowed to Issue loans and credit cards.
Answer:
Payment Bank

Question 26.
It is an apex institution for financing agricultural and rural sector.
Answer:
National Bank for Agricultural and Rural Development (NABARD)

Question 27.
The type of bank engaged in financing import and export trade and in foreign exchange transactions.
Answer:
Exchange bank.

State whether following statements are True or False

Question 1.
The principle of subrogation is applicable to life insurance contract.
Answer:
False

Question 2.
The principle of utmost good faith is only applicable to life insurance contract.
Answer:
False

Question 3.
Insured must have insurable interest in the subject-matter at the time of taking the policy.
Answer:
True

Question 4.
An individual must always try to minimize the loss by fire as far as possible.
Answer:
True

Question 5.
The Principle of indemnity is applicable to fire insurance.
Answer:
True

Question 6.
Railway transport provides door to door services.
Answer:
False

Question 7.
Water transport is the costliest means of transport.
Answer:
False

Question 8.
Transport is useful in raising standard of living.
Answer:
True

Question 9.
Air transport is suitable for short distances.
Answer:
False

Question 10.
Air transport plays vital role during war or emergency situation.
Answer:
True.

Question 11.
International trade for perishable goods has become possible due to cold storage warehouses.
Answer:
True

Question 12.
In bonded warehouses imported goods on which customs duty is already paid are stocked.
Answer:
False

Question 13.
In duty paid warehouses imported goods on which customs duty is not yet paid are stocked.
Answer:
False

Question 14.
Co-operative warehouses are owned, managed and controlled by individuals and private enterprises to earn rent.
Answer:
False

Question 15.
Warehouses can provide transportation facilities to bulk depositors.
Answer:
True.

Question 16.
Parcel cannot be insured.
Answer:
False

Question 17.
Envelope ensures safety of documents and confidentiality of messages.
Answer:
True

Question 18.
If insured parcel lost in transit, the post office is not responsible to pay the insured amount.
Answer:
False

Question 19.
As a premium, courier service is usually less” expensive than usual mail services.
Answer:
False.

Question 20.
Central bank of the nation cannot accept deposits from the public.
Answer:
True

Question 21.
Overdraft facility Is given to savings account holders.
Answer:
False

Question 22.
Current account Is suitable for business community.
Answer:
True

Question 23.
Debit cards are issued by the bank to non account holders also.
Answer:
False

Question 24.
Real-Time Gross Settlement means payment transaction is not subject to any waiting period.
Answer:
True

Question 25.
The minimum amount to be remitted through RTGS Rs 1.00,000
Answer:
False

Question 26.
Banks never charge any commission for issuing a bank draft.
Answer:
False

Question 27.
Bank issue gift cheques and gold coins to account holders only.
Answer:
False

Find the odd one

Question 1.
Voyage policy, Time policy, Average policy, Mixed policy.
Answer:
Average policy

Question 2.
Specific policy, Composite policy, Comprehensive policy, Excess policy.
Answer:
Composite policy.

Question 3.
Big ships, boats, helicopters, launches
Answer:
helicopters

Question 4.
Aircrafts, tankers, jets, helicopters
Answer:
tankers

Question 5.
Animal carts, motor-cycles, tracks, boats
Answer:
boats

Question 6.
Launches, buses, boats, tankers
Answer:
buses

Question 7.
Fruits, machinery, fish, vegetables
Answer:
machinery

Question 8.
Machinery, cotton, coal, vegetables
Answer:
vegetables.

Question 9.
Storage, advertising, price stabilisation, risk-bearing
Answer:
advertising

Question 10.
Financing, grading and packing, salesmanship, processing.
Answer:
salesmanship.

Question 11.
Inland Letter, Envelope, Business Post, Book Post.
Answer:
Business Post

Question 12.
Electronic Money Transfer, Instant Money order, Bill Mail Service, International Money Transfer.
Answer:
Bill Mail Service

Question 13.
e-post, courier service, internet, email.
Answer:
e-post.

Question 14.
Issue of cheques. locker facility. issue of currency flotes, preparing project report.
Answer:
issue of currency notes

Question 15.
Portfolio management. framing monetary policy, Dematerlalisatlon, Forex transactions.
Answer:
framing monetary policy

Complete the sentences

Question 1.
……………… policy is suitable for small ship owner having only one ship.
Answer:
Single vessel

Question 2.
……………… policy is purchased from more than one insurer.
Answer:
Composite

Question 3.
Insurance is a means of protection from …………………
Answer:
financial loss

Question 4.
………………. is the consideration for which the insurer agrees to insured a person.
Answer:
Premium

Question 5.
……………….. policy is like pension payment scheme.
Answer:
Annuity

Question 6.
ULIP stands for ………………..
Answer:
Unit Linked Insurance Plan.

Question 7.
Road transport is suitable for …………….. distance.
Answer:
short

Question 8.
Road transport is suitable to carry …………….. goods over a short distance.
Answer:
Perishable

Question 9.
Transport system contributes to the rapid development of ………………..
Answer:
industry and commerce

Question 10.
Long distance networks of Pipeline transport are used for ………………
Answer:
petroleum and gas

Question 11.
When the goods and passenger move inside the country, it is known as ……………….. water transport.
Answer:
inland.

Question 12.
Warehouses provide space for ………………
Answer:
storage of goods

Question 13.
Bonded warehouses are under the close supervision of ………………
Answer:
customs authority

Question 14.
The ……………… warehouses are owned and managed by big manufacturers and merchants.
Answer:
private

Question 15.
All duty paid warehouses are ………………
Answer:
public warehouses

Question 16.
……………… warehouses are owned, managed and controlled by the Government.
Answer:
Government

Question 17.
……………… warehouses are owned, managed and controlled by co-operative societies.
Answer:
Co-operative.

Question 18.
The process of passing information from one person to another with the help of some ……………….. is called Communication.
Answer:
Medium

Question 19.
The Department of Post and Telegraph is part of ………………..
Answer:
Ministry of Communication and Information and Technology

Question 20.
Printed books, magazines, etc. can be sent through ………………
Answer:
Book Post

Question 21.
………………. is the service through which customers can send their messages to any address in India.
Answer:
e-post

Question 22.
Courier services are usually employed by ………………..
Answer:
a company

Question 23.
The minimum quantity of articles to be posted ……………….. by Bill Mail Service at a time is
Answer:
5000.

Question 24.
Cash credit is granted under a separate …………………
Answer:
Loan account

Question 25.
ICICI Bank is an example of ……………..
Answer:
PrIvate Sector Bank

Question 26.
The account under which a fixed sum is to be deposited regularly every month is known as ………………
Answer:
Recurring deposit account

Question 27.
The RBI was established in the ……………… year
Answer:
1945

Question 28.
In public sector banks, the majority of capital Is held by …………………
Answer:
Government.

Select the correct option and complete the following table

Question 1.
(Warehousing provides storage facilities on rental basis, Big manufacturers and merchants to fulfil their storage needs, Duty paid warehouses, Bonded warehouses)

Group A	Group B
(1) Private warehouses	—————
(2) ————–	Work under the control of customs authorities
(3) ————–	Useful for importer as proper care of goods is taken after paying customs duty
(4) Public warehouses	————–
(5) Time utility and place utility	——————–

Answer:

Group A	Group B
(1) Private warehouses	Big manufacturers and merchants to fulfil their storage needs
(2) Bonded warehouses	Work under the control of customs authorities
(3) Duty paid warehouses	Useful for importer as proper care of goods is taken after paying customs duty
(4) Public warehouses	Provide storage facilities on rental basis
(5) Time utility and place utility	Warehousing.

Question 2.
(Courier service, ensures safety of documents and confidentiality of messages, Book Post, International Money Transfer, Communication in the nature of financial statements, bills, etc.)

Group A	Group B
(1) Envelope	—————-
(2) —————	Printed books, magazines can be sent at distance places through post.
(3) Bill mail service	—————
(4) —————-	Transferring personal remittances from abroad to beneficiaries in India.
(5) —————-	Exchange of items between two or more persons.

Answer:

Group A	Group B
(1) Envelope	ensures safety of documents and confidentiality of messages
(2) Book Post	Printed books, magazines can be sent at distance places through post.
(3) Bill mail service	Communication in the nature of financial statements, bills, etc.
(4) International Money Transfer	Transferring personal remittances from abroad to beneficiaries in India.
(5) Courier service	Exchange of items between two or more persons.

Question 3.
(Ministry of Shipping, Air transport, movement of people and goods from place to another, Duroto Express and Shatabdi Express, Ministry of Railways, looks after development of surface transport in the country)

Group A	Group B
(1) Transportation	—————
(2) Ministry of Road Transport	————–
(3) ————–	Looks after development of rail transport
(4) Some popular trains	————–
(5) ————–	Mountainous areas where other modes of transport cannot reach
(6) —————-	Looks after development of ocean transport

Answer:

Group A	Group B
(1) Transportation	Movement of people and goods from one place to another
(2) Ministry of Road Transport	Looks after development of surface transport in the country
(3) Ministry of Railways	Looks after development of rail transport
(4) Some popular trains	Duranto express and Shatabdi Express
(5) Air transport	Mountainous areas where other modes of transport cannot reach
(6) Ministry of Shipping	Looks after development of ocean transport

Answer in one sentence

Question 1.
What is Indemnity ?
Answer:
Indemnity means a guarantee or assurance to put the insured in same financial position in which he was immediately before the happening of the uncertain event.

Question 2.
What is Insurance ?
Answer:
insurance is contract between the insured and insurer whereby the insurer agrees to compensate the insured against loss.

Question 3.
What is Child Insurance ?
Answer:
A child insurance policy is a saving cum investment plan that is designed to meet child’s future financial requirements which helps him to pursue his dreams.

Question 4.
What is ULIP policy ?
Answer:
Unit Linked Insurance Policy (ULIP) is the policy which combines the benefits of life insurance policy with mutual funds.

Question 5.
Define warehouse.
Answer:
A warehouse is defined as, an establishment for the storage or accumulation of goods.

Question 6.
What is public warehouses ?
Answer:
A public warehouse is a specialised business establishment that provides storage facilities to the general public on certain charges.

Question 7.
What is Retail Post ?
Answer:
The service under which department of S post offers convenience to the common people by making third party’s products and services available in their areas through selected post offices, e.g. collection of electricity bill, collection of taxes, etc. is called Retail post.

Question 8.
What is e-Post ?
Answer:
e-Post is the service through which customers can send their messages to any address in India with a combination of electronic transmission and physical delivery.

Question 9.
What is Transportation ?
Answer:
Transportation refers to the movement of people, animals and goods from one location to another location.

Question 10.
What is Road Transport ?
Answer:
Road transport are the means that connect people and places on the surface of the land.

Question 11.
What is Rail Transport ?
Answer:
Transportation of passengers and goods on rail lines through trains is called as rail transport.

Question 12.
What is Water Transport ?
Answer:
The movement of passengers and goods on waterways by using various means such as boats, steamers, launches, ships, etc. is called water transport.

Question 13.
What are services ?
Answer:
Services are an act of performance that one party offers to another for certain consideration or without consideration essentially intangible and does not result in the ownership of anything, e.g. services of doctors.

Question 14.
What are business services ?
Answer:
Business services are those services which help business to grow and run It successfully.

Question 15.
What is NABARD ?
Answer:
National Bank for Agriculture and Rural Development (NABARD) Is an apex Institution which provides short term as well as long term credit through regional rural banks to agricultural and rural sector of the Indian economy.

Question 16.
What is overdraft ?
Answer:
Overdraft is a temporary arrangement by which a current accountholder Is allowed to withdraw more money than his own balance up to a certain limit sanctioned by the bank.

Correct the underlined word and rewrite the sentences

Question 1.
Under whole life policy, the insured can receive money from the insurance company.
Answer:
cannot receive

Question 2.
The person who is protected against certain losses is called insurer.
Answer:
insured

Question 3.
Whole life policy is taken for a specific period.
Answer:
Endowment

Question 4.
Fire insurance gives protection against the losses caused due to the dangers of the sea.
Answer:
Marine.

Question 5.
Ministry of Railways looks after the development of water transport throughout the country.
Answer:
Railways

Question 6.
In hilly areas where other modes of transport are not accessible, water transport is important and convenient.
Answer:
Air

Question 7.
Ministry of Road transport looks after development of ocean transport throughout the country.
Answer:
Shipping

Question 8.
Palace on wheels and Maharaja are the examples of popular trains.
Answer:
Luxury

Question 9.
Warehouses are constructed in such a way to maximise risks.
Answer:
Minimise

Question 10.
Warehouses create place utility by preserving the goods till they are demanded.
Answer:
time

Question 11.
A private warehouse is a specialised establishment that provides storage facilities to the general public for certain charges.
Answer:
public

Question 12.
Duty paid warehouses work under the control of customs authorities.
Answer:
Bonded

Question 13.
Bonded warehouses are more useful for re-export of the goods.
Answer:
Duty paid.

Question 14.
Inland letter is used to send message outside India only.
Answer:
within

Question 15.
Printed books, magazines, journals, etc. can be sent through Business Post.
Answer:
Book Post

Question 16.
The minimum quantity of articles to be posted at a time is 1000 in Bill Mail Service.
Answer:
5000

Question 17.
A Drawee is the person named in money order as the person to whom the money is to be paid.
Answer:
A Payee

Question 18.
On can transfer money from INR 1000 to INR 5000 from designated imp post offices.
Answer:
50,000

Question 19.
Services are homogeneous.
Answer:
heterogeneous

Question 20.
All services are transferable in nature.
Answer:
non-transferable

Question 21.
Commercial bank issues currency notes in India.
Answer:
Reserve Bank of India

Question 22.
Export and Import Bank provides financial assistance to common people.
Answer:
Exporters and Importers

Distinguish between.

Question 1.
Private Warehouse and Public Warehouses
Answer:

	Private Warehouse	Public Warehouses
1. Ownership and management	These warehouses are owned and managed by big manufacturers, merchants, a firm or a company.	These warehouses are owned and managed by individuals, firms, co-operative organisations, etc.
2. Purpose	These warehouses are meant for their owners. They Eire not given on rental basis to outsiders.	These warehouses are meant for commercial use. Storage and other facilities are provided to small manufacturers and traders on payment of rent.
3. Location	Private warehouses are located at the places near factory or residence or place which is convenient to their owners.	Public warehouses are generally located near the junctions of railways, highways and waterways.
4. Rules and Regulations	These warehouses Eire not required to work under any rules and regulations. They have to observe general laws of the nation.	These warehouses work under a licence from the government in accordance with the rules and regulations prescribed by the government.
5. Suitability	These warehouses are suitable for large scale manufacturers, wholesalers and retailers who can afford to have their own warehouses.	These warehouses are more suitable for small scale manufacturers, traders or distributors who cannot afford to have their own warehouses.

Question 2.
Government Warehouses and Private Warehouses

	Government Warehouses	Private Warehouses
1. Ownership and management	These warehouses Eire owned, managed and controlled by Central and State governments or public authorities.	These warehouses are owned, managed and controlled by big manufacturers, merchants, a firm or a company.
2. Storage facilities	These warehouses offer storage facilities to the governments, small farmers, businessmen, traders at nominal charges.	These warehouses offer storage facilities to the owners for their own purposes. They are not rented to others.
3. Other services	These warehouses provide all the services for marketing such as classification, standardisation, grading, packing, etc.	These warehouses provide only those services which Eire required by their owners.
4. Rate	The rates charged by these warehouses for storing the goods are usually cheap and low.	Since these warehouses do not give their space on hire to outsiders, the question of charging rent does not arise.
5. Location	These warehouses Eire located at the important transport centres across different states and country.	These warehouses Eire located in the premises of the owners which may be near to their factories or market places.

Question 3.
Road Transport and Water Transport
Answer:

	Road Transport	Water Transport
1. Nature	Road transport represents transport facilities on the ground. It consists of motor transport, carts, etc.	Water transport represents transport facilities in the water. It consists of river, canal and ocean transport.
2. Carrying capacity	It has limited carrying capacity.	It has huge or large carrying capacity.
3. Cost of construction and maintenance	It requires relatively less capital investment in terms of construction of vehicles and roads and their maintenance.	Although no cost is involved in construction of waterways, high cost is involved for construction of ships and ports and also for maintenance of ships and ports
4. Transport charges	Transport charges are not fixed but they Eire usually high due to increase in fuel charges.	Transport charges Eire fixed according to the distance and they Eire relatively the lowest.
5. Door to door service	Road transport provides door to door services to the passengers.	Water transport does not provide door-to-door services to the passengers.
6. Suitability	It is suitable for short distances and for carrying light and perishable goods such as fruits, fish, vegetables, food grains and other consumer goods.	It is suitable for long distance and for carrying heavy and bulky goods such as machinery, cotton, COEQ, etc. in large quantity to any part of the world.
7. Means of transport	It uses animals, animal carts, motor-cycles, trucks, tempos, three-wheelers, buses, motor CEO’S, etc.	It uses launches, boats, tankers, liners, big ships etc.

Question 4.
Water Transport and Air Transport
Answer:

	Water Transport	Air Transport
1. Speed	Water transport is the slowest mode of transport.	Air transport is the fastest mode of transport
2. Carrying capacity	Water transport has huge carrying capacity.	Air transport has limited carrying capacity.
3. Means of transport	Water transport uses big ships, boats, liners, tankers, etc. as means of transport.	Air transport uses aircraft, jets, helicopter, etc. as means of transport.
4. Suitability	Water transport is suitable for carrying heavy Eind bulky goods such as machinery, cotton, coal, etc. in large quantities to any part of the world.	Air transport is suitable to carry light, perishable and valuable goods to any part of the world.
5. Transport charges	Transport charges are fixed according to the distance and they are relatively lowest.	Transport charges are fixed according to the distance and they Eire relatively highest.
6. Origin	Water transport dates back to early historical period.	Air transport commenced at the beginning of the 20th century.
7. Means of transport	It uses animals, animal carts, motor-cycles, trucks, tempos, three-wheelers, buses, motor CEO’S, etc.	It uses launches, boats, tankers, liners, big ships etc.

Question 5.
Savings Account and Fixed Deposit Account
Answer:

	Savings Account	Fixed Deposit Account
1. meaning	A savings account is a type of bank account meant for any regular salaried and wage earners and for making savings	A Fixed Deposit Account is a type of bank account under which a certain fixed amount is deposited for a definite period of time.
2. Mode of withdrawals	Withdrawals are allowed by cheques or withdrawal slips.	No withdrawal is permitted before the date of maturity.
3. Facilities	Passbook balance on SMS, cheque books, etc. are issued to the account holders.	Only Fixed Deposit Receipt (FDR) is issued.
4. Restrictions on withdrawals	There are certain restrictions on the number of withdrawals and the amount to be withdrawn at a time.	Withdrawal or payment can be obtained only on the expiry of the fixed period.
5. Rate of interest	Interest at low rate is paid periodically in this account.	Interest at high rate is paid periodically or at the expiry of period along with principal sum depending upon the time period of deposit.
6. Loan	No loan facility is available on the balance of savings account.	A certain amount by way of loan can be granted against the security of the Fixed Deposit Receipt (FDR).

Question 6.
Loan and Overdraft
Answer:

	Loan	Overdraft
1. Meaning	Loan is an arrangement under which the bank advances an amount against securities for a certain fixed period of time.	Overdraft is a temporary arrangement where a current account holder is allowed to overdraw from the account up to a specified limit.
2. Eligibility	Any account holder (i.e. current, savings or fixed deposit) can get a loan facility.	Only current account holders are eligible for an overdraft facility.
3. Purpose	The purpose of loan is to provide a long-term finance for some project or expansion of business.	The purpose of overdraft is to meet short term working capital requirements.
4.Duration	Loan may be sanctioned for a period such as 1 year, 3 years, 5 years or even more.	Overdraft is generally sanctioned for a short duration from 15 to 60 days.
5. Interest	Interest is calculated on the sanctioned loan amount whether it is withdrawn or not and the rate of interest is a little higher than that of overdraft.	Interest is calculated on the amount actually withdrawn and the rate of interest is lower than that of loan.
6. Repayment	Loan is repaid either in instalments or in lump sum on its due date.	Overdraft amount is adjusted against the amount or cheques deposited in the Current Account.

Arrange in proper order

Question 1.
email, Inland letter, Courier
Answer:
Inland letter, Courier, email.

Explain the following terms/concepts

Question 1.
Insurable interest.
Answer:
(1) A person is said to have insurable interest in the object insured if he is in such a relationship with the object of insurance, that he would stand to benefit monetarily by the continuance of the object insured or would suffer a financial loss by the loss or destruction or absence of the object. Therefore, it is necessary that he should be the owner or the lawful user of the object concerned.

(2) In simple term, insurable interest means – some financial interest in the subject-matter. The insured must have insurable (financial) interest in the subject-matter of insurance. No person can enter into a valid insurance contract unless he has insurable interest in the object insured. A person has insurable interest in his own life and his property. A wife has insurable interest in the life of her husband. Similarly, a businessman has insurable interest in the business property.

Question 2.
E-banking service
Answer:
(1) E-banklng stands for electronic banking. It is also called Virtual banking or Online Banking It is a systern under which all the working of the banks Is done through Internet and computers. With the help of this system. an account holder can deposit the money into the bank or withdraw the money. These funds tram one account to another. He can also get information of his account on the computer itself.

(2) The following-banking services are available to account holders:

• Automated Thller Machine (ATM)
• Credit Cards
• Debit Cards
• Mobile Banking
• National Electronic Fund Transfer (NEFT)
• Real Time Gross Settlement (RTGS). E-banking has made life much easier and banking much faster for both customers and banks.

Justify the following statements

Question 1.
The principle of indemnity does not apply to life insurance contract.
Answer:
(1) The principle of indemnity is the controlling principle of insurance according to which the insured shall be compensated for only the actual loss suffered by him.

(2) All insurance contracts except life insurance contracts are the contracts of indemnity. Life insurance contract is, strictly speaking, a contract of assurance and not a contract of indemnity.

(3) In the case of life insurance contract, insurer cannot fully compensate the insured or his legal heir. This is because loss due to death of individual cannot be exactly determined or expressed in terms of money.

(4) Life insurance contract is a contract of assurance by which the insurer agrees to pay a fixed amount on the happening of the contingency.

Question 2.
Transport is useful in raising standard of living.
Answer:
(1) An efficient transportation system helps to develop agriculture by making available better seeds, fertilisers and agricultural equipment.

(2) Transport system also contributes to the rapid development of industry and commerce. The development in agriculture, industry and commerce leads to expansion in employment opportunities. Transport, as an industry by itself, also provides jobs to millions of people all over the country.

(3) By generating employment, transport leads to increase the purchasing power with people. As a result consumption pattern improves and consumption of variety of goods and services increases.

(4) Transport makes products from different regions available in local markets. The people also get variety of new and novel goods and services from any corner of the world at their places. This raises their standard of living.

Question 3.
Railway transport does not provide door to door service.
Answer:
(1) Transportation of passengers and goods from one place to another on the land surface on railway tracks through trains is called Railway Transport. It is the most dependable, cheaper and faster mode of transport to carry goods and passengers over long distances. It occupies an important place in land transport system.

(2) Railway transport requires specially ; prepared rail tracks with signalling systems. Therefore, throughout the country only certain places are fixed between which such tracks Eire laid. So, it runs between two railway stations.

(3) Special platforms are constructed to facilitate the loading and unloading of goods and for the movement of passengers.

(4) Goods and passengers are transported from one station to another by railway and there onward journey in the interior locations is facilitated by road transport. Thus, railways cannot provide door-to-door service in the interior as road transport does.

Question 4.
Current account is suitable for businessman.
Answer:
(1) A current account is a type of bank account in which there are no restrictions on the number of deposits and withdrawals. Therefore, it is suitable for businessmen (traders, hospitals, educational institutions, companies, etc.) as they have numerous day-to-day transactions of depositing amounts or cheques into a bank and issuing cheques for making payments to various parties.

(2) A current account is meant for facilitating, banking transactions of a businessman, such as collection of cheques, remittances to parties, bank overdraft facility, etc. A salaried person has no such transactions and does not require such facilities.

(3) A salaried person is interested in the rate of interest on his savings in the bank account. Banks generally do not pay any interest on the current account balances because they cannot use the current deposits for advancing loans to businessmen. Therefore, a salaried person finds savings account suitable for his limited banking transactions.

(4) The minimum balance to be kept for running the current account is much higher as compared to that for the savings account. A salaried person has a limited income and therefore, cannot afford to keep relatively large sum blocked in his account without earning any interest thereon. Therefore, a current account is suitable for businessman.

Attempt the following

Question 1.
What is fire insurance? Explain the different types of fire insurance policies.
Answer:
[A] Meaning : Fire insurance contract is contract of indemnity against loss or damage to goods or property arising from fire. Any property which is likely to damage due to fire may be insured against fire. Fire insurance also cover the loss caused due to fire, lightning and explosion.

[B] Types : The different types of fire insurance policies are shown in the following:

1. Valued Policy
2. Average Policy
3. Specific Policy
4. Floating Policy
5. Excess Policy
6. Reinstatement Policy
7. Comprehensive Policy
8. Consequential Loss Policy
9. Sprinkler Leakage Policy

1. Valued Policy : It is a policy under which the value of the property (i.e. subject mater) is ascertained and agreed upon by the insurer and the insured at the time of issue of the policy. The insurer undertakes to pay the agreed value irrespective of amount of loss caused due to fire. This type of policy is taken for those goods whose value is too difficult to calculate at the time of loss by fire, e.g. artwork, paintings, etc.

2. Average Policy : This policy contains an average clause. Under this policy the insurer is liable to pay only that proportion of the actual loss as the insured sum will bear to the full value of the property at the time of the loss, e.g. the machinery of Rs 5,00,000 is insured under fire insurance for Rs 2,00,000, The loss occurred due to fire arrived at Rs 2,50,000. This is because insurance is 40% of actual value of machinery. Hence the claim for loss is also 40% of 2,50,000 i.e. Rs 1,00,000.
Formula to calculate claim:
\(\frac {Value of Policy}{Value of Property}\) × Actual loss
\(\frac {200000}{500000}\) × 250000 = Rs 100000

3. Specific Policy: This type of policy mentions a specific maximum amount payable as compensation in case the insured property is destroyed by fire, irrespective of the market value of the property insured, e.g. a property of the value of Rs 5,00,000 is insured for Rs 3,00,000. The loss occurred due to fire is Rs 1,50,000. Here insurance company will pay Rs 1,50,000 in full as compensation.

4. Floating Policy : This type of policy covers, under one sum and for a single premium, one or several kinds of goods lying in different localities. As the quantity of goods lying at different places fluctuate from time to time, it is convenient to the businessmen to take a policy for one sum and one premium for goods lying at different places.

5. Excess Policy : This type of policy is taken when the market value of stock constantly fluctuates. In such case one policy is taken for a minimum amount below which value of stock never falls and another policy for excess amount by which price fluctuates, e.g. If the value of stock ranges between Rs 5,00,000 and Rs 5,40,000, then one policy will be taken for Rs 5,00,000 and another policy will be taken for Rs 40,000 i.e. for excess amount.

6. Reinstatement Policy : Under this policy, insurer undertakes to replace the property or goods lost by fire or to pay the amount that would be needed to reinstate or replace the damaged or destroyed property. While replacing the property for paying compensation depreciation amount of the property destroyed is not taken into consideration. The rate of premium is usually very high.

7. Comprehensive Policy : This fire insurance policy covers all kinds of risks such as fire explosion, lightning, earthquake, floods, riot, strikes, burglary, etc. under single policy.

8. Consequential Loss Policy : Initially a fire insurance policy was meant for indemnification of loss due to damage of tangible property. The intangible property was not covered by fire insurance. The consequential loss policy now taken for the loss of tangible as well as intangible properties. This policy covers the risk of loss of net profits, payment of standing charges, expenditure in respect of the increased cost of working, etc.

9. Sprinkler Leakage Policy: This policy covers the damage of property caused by an automatic sprinkler system that has leakage or discharged water accidently and not due to fire and smoke. This policy does not cover the discharge or leakage of water due to heat caused by fire, repair, earthquake, war, explosion, etc.

Question 2.
Explain the advantages of air transport.
Answer:
The advantages of air transport are explained as follows:
(1) Fastest means of transport : Among all the means of transport available at present, air transport is the fastest and quickest means of transport.

(2) Vital services : Air transport plays key role during war and emergency situations because it is useful to provide valuable services quickly in affected areas by floods, earthquakes, etc.

(3) Free routes : In case of air transport, it is not necessary to incur any expenditure on the construction of aerial routes. It uses natural and shortest aerial routes.

(4) Less pollution : In comparison to other means of transport like road transport, air transport is less polluting.

(5) Useful in certain areas : Air transport is very useful in carrying passengers, goods and medicines to the areas specially hilly and mountainous areas which are not accessible by any other means.

(6) Market for perishable and costly goods : For speedy transport of perishable good medicines, human organs, diamonds, ornaments, etc. air transport is most suitable and the fastest.

Answer the following.

Question 1.
Explain types of warehouses.
Answer:
The different types of warehouses are:
(1) Private warehouses : The warehouses owned and operated by the big manufacturers and wholesalers for storing their own goods are called private warehouses. Big companies which need large storage capacity on a regular basis, can afford to construct and maintain their own warehouses. Many public sector organisations also have their own private warehouses, e.g. the Food Corporation of India (FCI) has constructed warehouses in different parts of the country for its own use. Usually these warehouses are constructed near to ones business factory or industry for convenience. They have network of warehouses in different parts of the country.

(2) Public warehouses : Warehouses which are established to provide storage facilities to the general public, small manufacturers and traders on rental basis are called public warehouses. These warehouses are owned and managed by an individual or co-operative societies. These warehouses are located near railway junctions, highways, waterways, airport, seaport, etc. They are well guarded and specially designed to protect goods from several types of risks. These warehouses have to obtain licence from the government. They provide warehousing facilities at low cost. Many marketing facilities such as standardisation, grading, labelling, packing, branding, etc. are provided in these warehouses.

(3) Bonded warehouses : Warehouses which are licensed by the government to accept and store imported goods till the customs duties are not paid on such goods are called bonded warehouses. These warehouses are managed and controlled by customs authorities. These warehouses are located near the ports. The importers cannot take possession of goods from such warehouses unless and until the duty on the goods is paid.

The warehouse-keeper is required to give undertaking or ‘Bond’ that without the consent of the customs authorities goods will not be removed from the warehouse. Hence, such warehouses are called ‘Bonded Warehouses’. If an importer is unwilling or unable to pay customs duty immediately, he can withdraw them in instalments and pay customs duty proportionately.

(4) Duty-paid warehouses : The duty-paid warehouses provide the facility of storing the imported goods but not yet sold or transported to importers’ place or godown. These warehouses are owned and managed by the dock authorities only and hence they are also known as public warehouses. These warehouses are located near port and dock areas. They are more useful to importers who re-export the imported goods. The concerned authorities take all the due and reasonable care to ensure their safety. Processing of imported goods such as sorting, re-packing is done in these warehouses.

(5) Government warehouses : Warehouses which are owned, managed and controlled by the Central and State Governments or public authorities are called Government warehouses. These warehouses offer storage facilities to small traders, farmers, businessmen, etc. who are in need of the same on payment of reasonable rent. Central Warehousing Corporation of India (CWC), State Warehousing Corporation (SWC) and Food

(6) Co-operative warehouses : These are warehouses owned, run, managed and controlled by co-operative societies to provide warehousing facilities to the members who are farmers in rural areas. These warehouses are similar to private warehouses but they run on the principle of co-operation. They are used for storing agricultural commodities, consumer goods, raw materials, etc. Farmers, small producers and traders are benefited by such warehouses as they charge at economical rates.

(7) Cold storage warehouses : Cold storage warehouses are largely used to store and preserve perishable goods such as flowers, fish, eggs, meat, vegetables, fruits, medicines, dairy products, etc. These products are kept in cold storage warehouses at very low temperature so that their quality and freshness would remain intact. These warehouses ensure continuous supply of seasonal and perishable products throughout the year. International trade for seasonal and perishable goods such as green peas, mangoes, etc., becomes possible only because of cold storage facilities.

Question 2.
What is rail transport. Explain its advantages and disadvantages.
Answer:
[A] Meaning : Railways are the principal means of transport on land. The mode of transport which carries goods, passengers and materials from one place to another on rail lines through trains is called Railway transport. It runs passenger trains, mail express, goods trains, popular trains and luxury trains. The ministry of railways looks after the development of rail transport in India.

[B] Advantages : The advantages of rail transport are explained as follows:

1. Suitable for long distances : Railway transport is suitable and convenient mode of transport for travelling over long distances.
2. Carriage of heavy and bulky goods : Railway transport is more suitable for the carriage of bulky and heavy goods like engineering goods, coal, cotton, livestock, oil, etc. over long distances.
3. Speedy : Railway transport is more speedy in comparison to road transport.
4. Less affected by adverse weather conditions : Usually railway service is more certain, uniform and regular. It is not much affected by adverse weather conditions such as rains, fogs, floods, etc.
5. Protection to goods : Railway transport protects goods against rains, sun, wind, snow, etc. and ensures safety and security to goods.

[C] Disadvantages : The disadvantages of railway transport are explained as follows:

1. Expensive for short distances : Railway transport is more expensive for carrying goods and passengers over short distances.
2. Non-availability of services in remote part : The services of railway transport are not reachable or available in the remote part of the country.
3. Heavy loss in case of accident : In case of accident, it involves heavy losses of life, goods and materials.
4. Inflexibility : Fixed time schedule of trains, permanent track, definite station and halts, etc. bring certain degree of inflexibility in railway transport.
5. Incomplete service : The railway service is available between the nearest stations only. Railways can not provide door-to-door services. Therefore, railway stations are required to be connected by roads.

Question 3.
What is water transport? Explain the advantages and disadvantages of water transport.
Answer:
[A] Meaning : This is the oldest and cheapest means of transport. The mode of transport which carries goods and passengers on the surface of the water from one port to another by using boats, steamers, launches, ships, etc. is called water transport. When the passengers and goods move within the country, it is known as inland water transport and when the goods and passengers are carried through sea and oceans, it is known as ocean or sea transport. The ministry of shipping takes cares of ocean transport in India.

[B] Advantages : The advantages of water transport are explained as follows:

1. Economical mode of transport : Water transport is suitable and economical mode of transport for carrying heavy and bulky goods over longer distances.
2. Safe mode of transport : It is safe and secured mode of transport in regard to occurrence of accidents.
3. Promotes international trade : Water transport facilitates and promotes international trade and thus helps to widen the market.
4. Free routes : Water transport use waterways which are natural and free of cost route and involve no construction and maintenance costs.
5. More flexibility : Water transport is more flexible in comparison to rail transport.

[C] Disadvantages : The disadvantages of water transport are explained as follows:

1. Absence of door-to-door services : Water transport cannot provide door-to-door service. It carries goods and passengers from one port to another.
2. Affected by adverse weather conditions : It is much affected by adverse weather conditions like heavy rains, cyclone, storms, etc.
3. Low speed : In comparison to other modes of transport, speed of water transport is very slow. Therefore, perishable goods cannot be transported by this mode of transport.
4. Heavy capital expenditure : Heavy investment (capital expenditure) cost is involved in the construction and maintenance of ships, ports, docks, wharves, etc.
5. Hazardous : Water transport is hazardous. There are dangers of storms, cyclone and other perils of sea.

Question 4.
Define Bank. Explain different type of banks.
Answer:
[A] Definition : Bank is a dealer in money and credit. It is a financial institution whose basic activities are to accept deposits and advance, lend money and provide other related services, According to The Indian Banking Regulation Act, 1949, “any company which transacts the business of banking in India.” The term banking is further defined as, “accepting for the purpose of lending or investment of deposits from the public, repayable on demand or otherwise and withdrawable by cheque, draft and order or otherwise.”

[B] Types of Banks:
The different types of banks are shown In the following:

1. Central Bank
2. Commercial Bank
3. Co-operatIve Bank
4. Industrial Development Bank
5. Exchange Bank
6. RegIonal Rural Bank
7. SavIngs Bank
8. Investment Bank
9. Speclalised Bank

The different types of banks are explained below:
1. Central Bank : The central bank in a country is the financial institution at the top (apex) of all the banking institutions operating in the country. In India, The Reserve Bank of India was established in 1945 under a special statute called the Reserve Bank of India Act, 1944. It performs the functions like framing monetary policy, issuing currency notes, acting as a banker to the Government and acting as the banker’s bank to commercial and other banks in India.

2. Commercial Bank : The Commercial bank plays key role in the economic, industrial and social development of a country. It performs broadly two functions such as (i) Primary functions which include accepting deposits and lending money in different forms and (ii) Secondary function which include agency functions and utility functions. The different types of commercial banks in India are as follows:
(i) Public Sector Banks : The banks in which majority of the share capital or stake (interest) is held by the Government of India are called Public Sector Bank, e.g. State Bank of India, Bank of India, etc.

(ii) Private Sector Banks : The banks in which majority of the share capital or stake is held by private individuals are called Private Sector Banks, e.g. Axis Bank, HDFC Bank, etc.

(iii) Foreign Banks : The banks which are registered and have their headquarters in foreign country but operate in different countries including India through their branches established there, are called Foreign banks e.g. Standard Chartered Bank, American Express Bank, HSBC, etc.

3. Co-operative Banks : Co-operative banks are formed, registered and organised under the Indian Co-operative Societies Act and regulated under Banking Regulation Act. These banks are more popular in rural and semi-urban areas. These banks are primarily meant for catering to the financial needs of economically backward people, farmers and small scale units. They operate at three different levels:
(a) Primary Credit Societies : The primary credit societies work at village level. These credit societies collect the savings and surplus money in the form of deposits from members and common people. They are also financed by the State Co¬operative Banks and District Co-operative Banks for the purpose of lending to needy people for productive purpose.

(b) District Central Co-operative Banks : The District Central Co-operative Banks operating at district level and financed by the State Co-operative Bank for the purpose of providing finance to primary credit societies.

(c) State Co-operative Banks : The State Co-operative Banks Eire working at state level. These banks provide funds to District Central Cooperative Banks and Primary Credit Societies to enable them to provide finance to rural and semi urban areas. Apart from this, they also supervise the working of district banks and credit co¬operative societies.

4. Industrial Development Banks : The banks which provide medium and long term equipment, latest technology, expansion and modernisation of business, etc. are called Industrial Development Banks. Industrial Finance ; Corporation of India (IFCI), State Financial Corporations (SFCs), Maharashtra State Finance Corporation (MSFC), etc. are the examples of Industrial Development Banks. These banks perform the following functions:

• Provide medium and long term finance to business organisations for expansion and modernisation.
• Underwriting i.e. giving guarantee to buy shares issued by public limited companies.
• Purchase debentures and bonds.

5. Exchange Banks : An exchange bank specialises in financing import and export trade and in foreign exchange transactions. The American Express Bank, Bank of Tokyo, Barclays Bank, etc. are the examples of Exchange Banks functioning in India. The Exchange Banks perform the following functions:

• Finance foreign trade transactions,
• Issue letter of credit on behalf of importer,
• Discount foreign bills of exchange,
• Remit dividend, interests and profits.

6. Regional Rural Banks : These banks were constituted (established) in 1975 and are sponsored by large public sector banks. 50%, 35% and 15% of the capital of these banks are provided by the Central Government, sponsored banks and State Government respectively. These banks collect (mobilise) funds in the form of deposits from rural and semi-urban areas. They provide loans and advances to small and marginal farmers, agricultural workers, rural artisans for productive purpose.

7. Savings Bank : A savings bank is one which has the main object of inculcating the habit of saving among the community. It collects scattered savings of the community especially from rural areas and invests the same in good securities. In India, Postal Savings Bank is an example of such a bank. Commercial Banks and Co-operative Banks act as savings banks as they have separate savings accounts departments.

8. Investment Bank : Investment banks offer financial and advisory assistance to their customers which usually include business firms and government organisations. These banks provide advice on investment decisions and facilitate mergers and acquisitions by undertaking research. These Banks do not directly deal with the common people.

9. Specialised Banks: The banks which make available to the requirements of the business and provide possible support to set up business activities in specific area are called Specialised Banks. The different types of specialised banks are:
(a) Export Import Bank of India (EXIM Bank) : These banks provide the needed financial assistance and support to the exporters and importers in setting up business for exporting and importing products respectively. They work to expand and promote country’s international trade.

(b) Small Industries Development Bank of India (SIDBI) : SIDBI was established on 2nd April, 1990 under the Act of Parliament of India. Its main function is to act as the main institution for financing, promoting and developing the Micro, Small and Medium Enterprises (MSMEs) as well as co-ordinator of the institutions engaged in similar activities.

(c) National Bank for Agricultural and Rural Development (NABARD) : NABARD has been established to work as an apex institution to finance agricultural and rural sector. It provides long term and short term loans through regional rural banks. It provides loans to financial institutions and not individuals. It is also concerned with the function of policy planning and operations relating to agricultural credit and credit for other activities in rural areas.

Balbharti Maharashtra State Board 12th OCM Important Questions Chapter 3 Entrepreneurship Development Important Questions and Answers.

Maharashtra State Board 12th Commerce OCM Important Questions Chapter 3 Entrepreneurship Development

Select the correct options and rewrite the sentences

Question 1.
The term entrepreneur was first used by ………………
(a) J. Schumpeter
(b) R. Cantilon
(c) A.H. Cole
Answer:
(b) R. Cantillon

Question 2.
13 functions of an entrepreneur were enumerated by ………………
(a) J. Schumpeter
(b) R. Cantillon
(c) Kilby Peter
Answer:
(c) Kilby Peter

Question 3.
The inner urge of a person to do something is ………………
(a) initiative
(b) hard work
(c) creativity
Answer:
(a) initiative

Question 4.
Entrepreneurial ……………… is measured in terms of the individual’s attitude towards opportunity recognition.
(a) value
(b) attitude
(c) motivation
(b) attitude

Question 5.
The basic elements of the process of ……………… are motive, behaviour, and goal.
(a) value
(b) motivation
(c) attitude
Answer:
(b) motivation

Question 6.
EDP was first introduced in ……………… in 1970.
(a) Maharashtra
(b) Andhra Pradesh
(c) Gujarat
Answer:
(c) Gujarat

Give one word/phrase/term which can substitute each one of the following

Question 1.
A process of setting up a new business organization.
Answer:
Entrepreneurship

Question 2.
A combination of knowledge, skills, motive, attitude, and habits.
Answer:
Competence

Question 3.
A scheme of instructions which is planned, systematic, consistent, pervasive, and monitored to measure its effectiveness.
Answer:
Training

Question 4.
The fourth factor of production.
Answer:
Entrepreneurs.

Answer in one sentence

Question 1.
What is Entrepreneurship Development Programme (EDP)?
Answer:
An Entrepreneurship Development Programme is a device to help a person In strengthening his entrepreneurial motive and In acquiring skills and capabilities necessary for playing his entrepreneurial role efficiently.

Question 2.
Who is Intrapreneur?
Answer:
An intrapreneur is an employee who has the authority and support of his company/employer to implement his own innovative and creative ideas.

Question 3.
What is Training?
Answer:
Training is a scheme of instructions that is planned systematically, consistently, pervasive, and monitored to measure its effectiveness.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 12 Stock Exchange Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 12 Stock Exchange

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
The Securities Contracts (Regulation) Act was passed in the year _____________
(a) 1956
(b) 1947
(c) 1971
Answer:
(a) 1956

Question 2.
SEBI was established in the year _____________
(a) 1988
(b) 1987
(c) 1986
Answer:
(a) 1988

Question 3.
The Oldest Stock Exchange in Asia is _____________
(a) BSE
(b) NSE
(c) LSE
Answer:
(a) BSE

Question 4.
The BSE switched to electronic trading system in _____________
(a) 1988
(b) 1995
(c) 1956
Answer:
(b) 1995

Question 5.
Stock Exchange is also formed/termed as _____________
(a) Local Market
(b) Super Market
(c) Stock Market
Answer:
(c) Stock Market

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) SEBI	(a) Sensex
(2) Stock Exchange	(b) Primary market
(3) Nifty	(c) Auction
(4) Bear	(d) Made up of 50 listed companies
(5) SENSEX	(e) Optimistic about rising in prices of securities
	(f) Pessimistic about fall in prices of securities
	(g) Purchase and sale of shares
	(h) Machinery regulating Stock Exchanges
	(i) BSE
	(j) NSE

Answer:

Group ‘A’	Group ‘B’
(1) SEBI	(h) Machinery regulating Stock Exchanges
(2) Stock Exchange	(g) Purchase and sale of shares
(3) Nifty	(d) Made up of 50 listed companies
(4) Bear	(f) Pessimistic about fall in prices of securities
(5) SENSEX	(i) BSE

Question 2.

Group ‘A’	Group ‘B’
(1) Bull	(a) A Secondary Market for Securities
(2) Stag	(b) Auction
(3) Broker	(c) Invests in Primary Market
(4) Stock Exchange	(d) Mandiwala
(5) NSE	(e) Deals on behalf of his client
	(f) A broker optimistic about rising in prices of securities
	(g) A broker pessimistic about fall in prices of securities
	(h) 1992
	(i) 1988
	(j) 1996

Answer:

Group ‘A’	Group ‘B’
(1) Bull	(f) A broker optimistic about rising in prices of securities
(2) Stag	(c) Invests in Primary Market
(3) Broker	(e) Deals on behalf of his client
(4) Stock Exchange	(a) A Secondary Market for Securities
(5) NSE	(h) 1992

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
He/She acts as a link between Jobber and the investor.
Answer:
broker

Question 2.
The securities contract (Regulation) Act 1956, provides the functioning, licensing of this institution.
Answer:
Stock Exchange

Question 3.
The first listed Stock Exchange in India.
Answer:
BSE

Question 4.
The professional speculator in the Stock Exchange.
Answer:
Jobber

Question 5.
An intermediary between investor and broker.
Answer:
Jobber

Question 6.
The single and most important institution in the secondary market for securities.
Answer:
Stock Exchange

1D. State whether the following statements are True or False.

Question 1.
Stock Exchange in India is regulated by SEBI.
Answer:
True

Question 2.
Stock Exchange is also called a Primary Market.
Answer:
False

Question 3.
The NSE is the first listed Stock Exchange in India.
Answer:
False

Question 4.
The objective of SEBI is to protect the interests of companies.
Answer:
False

Question 5.
The securities market is an organised market in India.
Answer:
True

Question 6.
Stock Exchanges reflect the financial progress of a country.
Answer:
True

Question 7.
There is no control on Stock Exchange.
Answer:
False

Question 8.
Stock Exchange is a place for buying and selling securities.
Answer:
True

Question 9.
Insider trading is legally permitted.
Answer:
False

1E. Find the odd one.

Question 1.
BSE, NSE, LSE
Answer:
LSE

Question 2.
Crash, Bull, Bear
Answer:
Crash

Question 3.
Sensex, Rally, Nifty
Answer:
Rally

1F. Complete the sentences.

Question 1.
A bear broker whose expectations have gone wrong and makes a loss in dealings is called _____________
Answer:
Lame duck

Question 2.
SEBI has its headquarters in _____________
Answer:
Mumbai

Question 3.
The NSE (National Stock Exchange of India) was incorporated in the year _____________
Answer:
1992

Question 4.
SEBI regulates capital markets in _____________
Answer:
India

Question 5.
A smart speculator, who quickly judges market trends thereby makes profits is _____________
Answer:
a wolf

Question 6.
The instructions are given by an investor to the broker to buy or sell a security when it reaches a certain price is called _____________
Answer:
stop-loss

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(a) Oldest Stock Exchange in India	(1) ……………………….
(b) ………………..	(2) Stock Exchange

(BSE, Secondary Market)
Answer:

Group ‘A’	Group ‘B’
(a) Oldest Stock Exchange in India	(1) BSE
(b) Secondary Market	(2) Stock Exchange

1H. Answer in one sentence.

Question 1.
What is SEBI?
Answer:
SEBI is a statutory body under the SEBI Act, 1992, which regulates and controls the activities of the stock exchanges and protects the interest of investors.

1I. Correct the underlined word/s and rewrite the following sentences.

Question 1.
NSE is the oldest Stock Exchange in Asia.
Answer:
BSE is the oldest Stock Exchange in Asia.

Question 2.
Insider Trading is the practice of buying and selling securities within the same trading day before the closing of markets on that day.
Answer:
Day Trading is the practice of buying and selling securities within the same trading day before the closing of markets on that day.

Question 3.
The sensitive index called Sensex is made up of the 50 largest and actively traded stocks of listed companies.
Answer:
The sensitive index called Sensex is made up of the 30 largest and actively traded stocks of listed companies.

Question 4.
Investors can deal in their securities through a Jobber.
Answer:
Investors can deal in their securities through a broker.

Question 5.
In India, Bear is known as Tejiwala.
Answer:
In India, Bear is known as Mandiwala.

2. Explain the following terms/concepts.

Question 1.
Insider Trading
Answer:
Insider trading is the trading of a public listed company’s securities by an individual with access to non-public information about the company. It is illegal as it is unfair to other investors who do not have access to the information.

Question 2.
Sensex
Answer:
It is the Index of the BSE that was created in 1986, which represents the increase or decrease in prices of stocks of a selected group of companies. The sensitive Index called Sensex is made up of the 30 largest and actively traded stocks of listed companies.

Question 3.
Nifty
Answer:
It is the index of the NSE created in 1996 made up of 50 listed companies. It includes all the 30 Sensex stocks.

Question 4.
Crash
Answer:
If the Sensex or Nifty moves in a downward direction, it is called a crash. Bears are active during this period.

Question 5.
Stop-loss
Answer:
It is instruction or order given by an investor to the broker to buy or sell a security when it reaches a certain price. This instruction is given by the investor when he wants to avoid losses when the prices fall below the stop price.

3. Study the following case/situation and express your opinion.

1. Ajay is a licensed member of the Stock Exchange Arnav his client wants to purchase securities. Answer the questions from the above situation.

Question (a).
By what term/name will Ajay be known?
Answer:
Ajay will be known as ‘Broker’.

Question (b).
How did Ajay become/acquire the term?
Answer:
Ajay acquired the term as ‘Broker’ by registering himself with the Stock Exchange as it is required for the purpose of trading in the Stock Exchange.

Question (c).
How did the transaction between them take place?
Answer:
The transaction between Ajay and Arnav was validated by a note given by Ajay to his client Arnav. This note is called contract note which both Ajay and Arnav had a copy of each immediately after their transaction within 24 hours.

2. Anurag is an employee of the Stock Exchange who passes sensitive information relating to likely high growth in profits of ‘sun’ company to his relative Jyoti. Jyoti thus buys shares at low prices. But due to the Corona Virus spread and lockdown and worldwide panic, the Sensex is moving swiftly in a downward direction. Answer the following queries.

Question (a).
Describe the nature of the term that describes Jyoti’s actions?
Answer:
The term that describes Jyoti’s actions is known as ‘Insider trading’ means trading due to non-public sensitive information about ‘SUN’ Company.

Question (b).
Is Jyoti’s action normal? Why?
Answer:
Jyoti’s action which is based on insider information is illegal. It is unfair to other investors who do not have access to the information.

Question (c).
What is this downward direction called?
Answer:
If the Sensex/ Nifty moves in a downward direction it is called a ‘CRASH’.

3. Moon Co-Ltd. listed its shares in Bombay Stock Exchange (BSE). Due to the COVID-19 pandemic, the Stock Exchanges in India came crashing down. Answer the queries.

Question (a).
What do you mean by the term Stock Exchange Crash?
Answer:
If the Sensex or Nifty moves in the downward direction, it is called a crash.

Question (b).
What is the Index of BSE called?
Answer:
The index of BSE is called Sensex which represents the increase or decrease in prices of stocks of a selected group of companies.

Question (c).
The Index of BSE comprises of how many companies.
Answer:
The index of BSE or Sensitive index called Sensex is made up of the 30 largest and actively traded stocks of listed companies. It was created in 1986.

4. Keith Bionics Ltd. a newly formed company makes a public issue of shares for the first time to raise capital funds. It also gets itself listed for the first time with BSE. Answer the queries.

Question (a).
What is Keith Bionics’ first time issue termed as/called?
Answer:
The public issue of shares or other securities by the new company ‘Keith Bionics Ltd/is termed as/called ‘Initial Public Offer (IPO)’.

Question (b).
What do you mean by listing with BSE?
Answer:
Listing means an agreement signed by Keith Bionics Ltd. with BSE so that its share and securities get a platform to be bought and sold in BSE multiple times.

Question (c).
What is the advantage of listing to Keith Bionics Ltd.?
Answer:
Because of listing with BSE the shares and securities of Keith Bionics Ltd. can be bought and sold (traded) in BSE repeatedly thus providing marketability along with liquidity for this company’s share.

4. Distinguish between the following.

Question 1.
Bull and Bear
Answer:

Points	Bull	Bear
1. Meaning	A speculator who purchases the securities with the intention to sell them at a higher price later is called the Bull.	A speculator who sells the securities when the prices of securities start falling is called the Bear.
2. Functions	A bull buys securities at a lesser price and sells them at a maximum higher price to make the maximum possible profit.	A bear buys securities at a lesser price and sells them at a little higher price to make a desirable profit and to avoid selling at a still lower prices in the future.
3. Expectation	A bull always anticipates that the prices of securities will rise further in the future.	A bear always anticipates that the prices of securities will fall further in the future.
4. Other names	A bull is also called ‘Tejiwala’. This is because he always anticipates the price to rise.	A bear is also called ‘Mandiwala’. This is because he always expects the price to fall.
5. Nature/View of future	A bull takes an optimistic view of the future.	A bear takes a pessimistic view of the future.

5. Answer in brief.

Question 1.
Explain the management and organizational structure of the Stock Exchange in India.
Answer:
(i) Management of Stock Exchange:

• The Executive committee of the stock exchange looks after the overall activities and management of the stock exchange.
• The composition, powers, and the name of the executive committee differ from exchange to exchange.
• There are other supporting committees to assist the executive committee like an advisory committee, listing committee, etc.

(ii) Organization Structure of Stock Exchanges in India:
In India, the stock exchange may be organized in one of the following three forms:

• Voluntary non-profit making organization.
• Companies with liability limited by shares.
• Companies with liability limited by guarantee.

The Securities Contract (Regulations) Act 1956, provides rules for their functioning, licensing, recognition, and controlling speculations.

(iii) Membership of Stock Exchange:
The eligibility criteria for membership may differ from stock exchange to stock exchange.

6. Justify the following statements.

Question 1.
Stock Exchange is a Secondary Market.
Answer:

• The stock exchange is a specific place where the trading of securities is arranged in an organized method.
• In the primary market, new securities are floated by the issuing companies and direct contact with the public at large is established for selling of the securities.
• A stock exchange is the single most important institution in the secondary market for securities.
• It is the place where already issued and outstanding shares are bought and sold, repeatedly.
• Thus, it is rightly said that Stock Exchange is a secondary market which is an organized market in India.

Question 2.
The objective of SEBI is to protect the interest of investors.
Answer:

• The Securities and Exchange Board of India was set up on 12th April 1988, the main purpose of setting up SEBI was to develop and regulate stock exchange in India.
• The objectives of SEBI are to protect the interest of the investors.
• To bring professionalism in the working of intermediaries in the capital markets, i.e., brokers, mutual funds, stock exchanges, Demat depositories, etc. is also an objective of SEBI.
• Objectives of SEBI also include creating a good financial climate, so that companies can raise long-term funds through the issue of securities – shares and debentures.
• Thus, it is rightly said that the objective of SEBI is to protect the interest of investors.

Question 3.
Insider trading is considered illegal.
Answer:

• Insider trading refers to the trading of shares on the stock exchanges with sensitive information, which is not yet published.
• The insiders include managers, directors, other employees, auditors, etc., who have a hold over sensitive information and accordingly buy or sell on the Stock Exchanges.
• For instance, if the sensitive information relates to likely high growth in profits of the company, then the insiders may buy the shares at a low price and when the information is published, the share price may shoot up considerably resulting in the insiders selling and making huge profits.
• Insider trading is restricted by SEBI.
• Thus, insider trading is considered illegal.

7. Answer the following questions.

Question 1.
What is Stock Exchange? Explain the organizational structure and features of the Stock Exchange.
Answer:
Stock Exchange is a place where securities are purchased and sold in an organized manner. It is also known as Stock Market, Share Market, Share Bazaar, or Secondary Market. The Securities Exchange Board of India regulates the stock exchange.

Organization Structure of Stock Exchanges in India:
In India, the stock exchange may be organized in one of the following three forms:

• Voluntary Non-Profit making organization
• Companies with liability limited by shares
• Companies with liability limited by guarantee

The Securities Regulation Act 1956 provides rules for functioning, licensing, recognition, and controlling the stock exchanges.

Features of Stock Exchange:
(i) Market for Securities:
Stock exchange deals with securities. Securities include equity shares, preference shares, debentures, government securities, and bonds, etc. It is a trading place where corporate securities and government securities are traded.

(ii) Second Hand Securities:
Stock exchange includes trading of securities that are already issued by the companies. In other words, second-hand securities are bought and sold among investors in the stock exchange.

(iii) Listed Securities:
Only listed securities can be traded on a stock exchange. Listing of securities provides protection of the investor’s interests. The company also has to strictly follow the rules laid down by the stock exchange.

(iv) Organised and Regulated Market:
The stock exchange is an organized market of securities. All the listed companies have to follow the rules and regulations laid down by the stock exchange.

(v) Specific Location:
The stock exchange is a place where securities are traded. It is a marketplace where brokers and intermediaries meet to conduct dealings in securities. Now, the stock exchange has also been digitalized.

(vi) Only Members can trade:
The stock exchange is only open to its members who are known as brokers. Brokers act as agents between members or their authorized agents on behalf of the investors.

Question 2.
Explain the importance of the Stock Exchange.
OR
State/Explain the role of the Stock Exchange.
Answer:
The stock exchange’s role is vital for the economic development of a nation. It is briefly stated as follows:
(i) Assist in raising funds:
Stock Exchanges’ enables companies to raise long-term funds which can be utilized for expansion and modernization and also for the purpose of setting up new projects.

(ii) Facilitates listing of shares:
The companies that issue shares to the public can get their shares listed in one or more stock exchanges thus, enabling them to raise long-term funds through the issue of shares.

(iii) Facilitates trading of shares:
The stock exchanges facilitate the trading of shares between sellers and buyers thus, brings liquidity to the shares. Sellers can sell shares and realize cash when in need of funds or whenever they want to book profits.

(iv) Generate Employment:
Stock Exchanges generate employment facilities in the country as a number of brokers, sub-brokers, agents, and others employment. Stock Exchanges also facilitate indirect employment in the various sectors.

(v) Facilitates Capital Formation:
Stock Exchanges encourage investors to invest in the primary and secondary stock markets. By investments, money is saved. These savings leads to investment in shares and other securities thus, leading to capital formation.

(vi) Stimulates Industrial Development:
The stock exchanges facilitate mobilization of long-term funds through the issue of shares and debentures which are utilized by companies for Expansion and Modernization, Setting up of new projects.
Thus enhancing and improving industrial development in the country.

(vii) Facilitates Regional Development:
The stock exchanges facilitate regional development through companies that generate long-term funds due to them. Thus, utilizing the funds generated for the development of backward regions by setting up new units.

(viii) Provides Investment Opportunity:
The stock exchanges provide additional opportunities for investors to invest in shares. Usually, returns from stock markets are much higher as compares to traditional forms of investment, provided investment is done in good companies that provide good returns to investors.

(ix) Provides revenue to the government.
The stock exchanges provide revenue to the government either directly or indirectly. The stock exchanges pay tax on the revenue earned by them, an investor who invests in stock markets are subject to capital gains tax. The companies also pay their taxes thus, providing revenue to the government.

(x) Promotes efficient management of listed companies:
Stock Exchanges indirectly promote the efficiency of the management of listed companies. Listed companies have to perform well for their own interest and that of their shareholders. The efficiency of the listed company is reflected in the share prices on stock markets. Higher the efficiency, higher is the performance and as such higher the prices of the shares on the stock markets.

8. Attempt the following.

Question 1.
Write about the major Stock Exchanges in India.
Answer:
Following are the two most important Stock Exchanges in India.
(i) Bombay Stock Exchange BSE:

• Bombay Stock Exchanges commonly referred to as the BSE is a stock exchange located on Dalai Street, Mumbai.
• It is the 11th largest Stock Exchange in the world by market capitalization. Established in 1875, BSE is Asia’s first Stock Exchange and is the first listed Stock Exchange in India.
• At that time it was called ‘The Native Share and Stock Broker’s Association. (NSSBA). Approximately over 5000 companies are listed in the BSE.
• It is now a demutualized and corporatized entity registered under the Companies Act 1956.
• (e) The BSE switched to an electronic trading system in 1995. This automated, screen-based trading platform is called BSE-On-Line Trading (BOLT).
• BSE is the first exchange in India and second in the world to obtain ISO 9001:2000 certifications.
• The BSE has also introduced a centralized
  exchange-based internet system, bsewebx.co.in to enable investors anywhere in the world to trade on the BSE platform.
• It operates one of the most respected capital market educational institutes in the country (The BSE Institute Ltd). BSE also provides depository services through its Central Depository Services Ltd. CDSL arm.

(ii) National Stock Exchange (NSE):

• NSE was set up by a group of leading Indian Financial Institutions in 1992 as a company and was recognized as a Stock Exchange in 1993 under the Securities Contracts (Regulation) Act, 1956.
• It started trading activities in 1994.
• It is the largest and most modem stock exchange in India.
• The NSE is located in Mumbai. It was the first demutualized electronic exchange in India.
• NSE was the first exchange in the country to provide a modern, fully automated screen-based electronic trading system that offered easy trading facilities to investors.
• The main index of NSE is the NIFTY which was launched in 1996.

Features:

• It has nationwide coverage.
• There is transparency in dealings.
• Investors can check the exact price at which the transaction took place.
• The index of NSE is called The broader 50 share – NIFTY.

Objectives:

• Establishing nationwide trading facilities for all types of securities.
• Ensuring equal access to investors all over the country through an appropriate communication network.
• Meeting informational benchmarks and standards.
• Enabling shorter settlement cycles.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 11 Financial Market Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 11 Financial Market

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
A ___________ is an institution that facilitates exchange of financial instruments.
(a) Capital Market
(b) Financial Market
(c) Money Market
Answer:
(b) Financial Market

Question 2.
The ___________ market contributes to the national growth by ensuring a continuous flow of surplus funds to deficit units.
(a) Financial
(b) Money
(c) Secondary
Answer:
(a) Financial

Question 3.
The market which provides short term funds is ___________
(a) Capital Market
(b) Sold Market
(c) Money Market
Answer:
(c) Money Market

Question 4.
The maturity period of commercial bills is ___________ days.
(a) 90
(b) 92
(c) 96
Answer:
(a) 90

Question 5.
___________ are debt instruments that are issued by corporate houses for raising short term financial resources.
(a) Commercial papers
(b) Treasury bills
(c) Government securities
Answer:
(a) Commercial papers

Question 6.
The maturity period of Treasury bill is ___________ days.
(a) 192
(b) 182
(c) 172
Answer:
(b) 182

Question 7.
The debt instruments which are issued by the corporate houses to raise funds from the money market is ___________
(a) Certificate of deposit
(b) Preference shares
(c) Commercial papers
Answer:
(c) Commercial papers

Question 8.
___________ deals in medium and long term funds.
(a) Capital Market
(b) Gold Market
(c) Money Market
Answer:
(a) Capital Market

Question 9.
The repurchase rate which is also known as the official bank rate is ___________ rate.
(a) Repo
(b) Credit
(c) Interest
Answer:
(a) Repo

Question 10.
___________ bills enjoy a high degree of liquidity.
(a) Treasury
(b) Commercial
(c) Publicity
Answer:
(a) Treasury

Question 11.
___________ is also known as new issue market.
(a) Primary Market
(b) Secondary Market
(c) Financial Market
Answer:
(a) Primary Market

Question 12.
The Market which is also known as the government securities market is ___________ market.
(a) Primary
(b) Secondary
(c) Gilt-edged
Answer:
(c) Gilt-edged

Question 13.
A market where existing securities are resold or traded is called ___________ market.
(a) Commodity
(b) Secondary
(c) Primary
Answer:
(b) Secondary

Question 14.
A financial market is a link between investor and ___________
(a) borrowers
(b) creditors
(c) capitalists
Answer:
(a) borrowers

Question 15.
___________ plays an important role in the financial system of a country.
(a) Capital Market
(b) Money Market
(c) Financial Market
Answer:
(a) Capital Market

Question 16.
The market which provides short term fund is ___________
(a) Capital Market
(b) Gold Market
(c) Money Market
Answer:
(c) Money Market

Question 17.
The market which deals in medium-term and long-term credit or fund is called ___________
(a) Money Market
(b) Capital Market
(c) Gold Market
Answer:
(b) Capital Market

Question 18.
A security market in which new issues of securities (i.e. shares and debentures) are arranged or organized is called ___________ market.
(a) Primary
(b) Secondary
(c) Bullion
Answer:
(a) Primary

Question 19.
In Money Market, funds can be traded for a maximum period of ___________ year/s.
(a) one
(b) five
(c) two
Answer:
(a) one

Question 20.
The debt instruments which are issued by the corporate houses to raise funds from the money market is ___________
(a) Certificate of deposit
(b) Preference shares
(c) Commercial Papers
Answer:
(c) Commercial Papers

Question 21.
___________ is the most common method to meet the credit needs of trade and industry.
(a) Commercial papers
(b) Treasury bills
(c) Commercial bills
Answer:
(c) Commercial bills

Question 22.
The liquidity is ___________ in case of commercial bills.
(a) high
(b) low
(c) constant
Answer:
(a) high

Question 23.
The repurchase rate which is also known as the official bank rate is ___________ rate.
(a) Repo
(b) Credit
(c) Interest
Answer:
(a) Repo

Question 24.
The market which is also known as the government securities market is ___________ market.
(a) Primary
(b) Secondary
(c) Gilt-edged
Answer:
(c) Gilt-edged

Question 25.
Under ___________ the shares of a company are sold among the selected group of persons.
(a) Right issue
(b) Private placement
(c) Public issue
Answer:
(b) Private placement

Question 26.
A market where existing securities are resold or traded is called ___________ market.
(a) commodity
(b) secondary
(c) primary
Answer:
(b) secondary

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Treasury bill	(a) Primary market
(2) Commercial bill	(b) Long term credit
(3) New Issue	(c) Mobilization of funds
(4) Stock Exchange	(d) Promissory note
(5) Financial Market	(e) Short term credit
	(f) Secondary market
	(g) Central Government
	(h) Deals only with brokers
	(i) New banking institution
	(j) Mutual Fund

Answer:

Group ‘A’	Group ‘B’
(1) Treasury bill	(d) Promissory note
(2) Commercial bill	(e) Short term credit
(3) New Issue	(a) Primary market
(4) Stock Exchange	(f) Secondary market
(5) Financial Market	(c) Mobilization of funds

Question 2.

Group ‘A’	Group ‘B’
(1) Money Market	(a) Most common method to meet credit needs
(2) Commercial bills	(b) Primary Market
(3) Repo rate	(c) Interest
(4) Gilt-edged market	(d) Government securities market
(5) Secondary market	(e) Official bank rate
	(f) Treasury bills
	(g) Financial market
	(h) Short term funds are borrowed and lent
	(i) Stock exchange
	(j) Fewer applications than expected

Answer:

Group ‘A’	Group ‘B’
(1) Money Market	(h) Short term funds are borrowed and lent
(2) Commercial bills	(a) Most common method to meet credit needs
(3) Repo rate	(e) Official bank rate
(4) Gilt-edged market	(d) Government securities market
(5) Secondary market	(i) Stock exchange

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A market that provides long-term funds.
Answer:
Capital Market

Question 2.
An intermediary between the lender and borrower.
Answer:
Financial Market

Question 3.
A market where short-term funds are borrowed and lent.
Answer:
Money Market

Question 4.
A debt instrument issued by the corporate house for raising the short-term funds from the money market.
Answer:
Commercial Paper

Question 5.
Short-term instrument issued by a commercial bank and special financial institution.
Answer:
Certificate of deposit

Question 6.
A type of bill in the nature of promissory note issued by the government.
Answer:
Treasury bill

Question 7.
A market for borrowing and lending long-term capital is required by the business enterprises.
Answer:
Capital Market

Question 8.
The market deals in the issue of new securities.
Answer:
Primary Market

Question 9.
The government securities market is for government and semi-government securities.
Answer:
Gilt-edged Security Market

Question 10.
The equity shares of the companies are issued to the existing equity shareholders.
Answer:
Right Issue

Question 11.
A marketplace where the existing securities are bought and sold.
Answer:
Secondary Market

Question 12.
The place where buying and selling of securities take place.
Answer:
Stock Exchange

Question 13.
The institution which regulates business in the stock exchange.
Answer:
SEBI

Question 14.
A market for financial assets which are close substitutes for money.
Answer:
Money Market

Question 15.
A market where short-term funds are borrowed and lent.
Answer:
Money Market

Question 16.
A market for borrowing and lending long-term capital is required by the business enterprises.
Answer:
Capital Market

Question 17.
A debt instrument issued by the corporate house for raising the short-term funds from the money market.
Answer:
Commercial Paper

Question 18.
The negotiable term deposit certificates are issued by the financial institutions at discount, at market rate, or at par.
Answer:
Certificate of deposit

Question 19.
A type of bill in the nature of promissory note issued by the government.
Answer:
Treasury Bill

Question 20.
The bill is issued by the government for raising short-term funds to bridge the gap between receipts and expenditure.
Answer:
Treasury Bill

Question 21.
A market where productive capital is raised and made available for industrial purposes.
Answer:
Capital Market

Question 22.
A market for government and semi-government securities.
Answer:
Gilt-edged Market

Question 23.
The market is utilized for raising fresh capital in the form of shares and debentures.
Answer:
Primary Market

Question 24.
The equity shares of the companies are issued to the existing equity shareholders.
Answer:
Right Issue

Question 25.
The most popular method of raising long-term securities by offering them to the public by using a prospectus.
Answer:
Public Issue

Question 26.
A marketplace where the existing securities are bought and sold.
Answer:
Secondary/Stock Market

1D. State whether the following statements are true or false.

Question 1.
Money market Facilitates mobilization of funds.
Answer:
False

Question 2.
Repo Rate is known as an official bank Rate.
Answer:
True

Question 3.
The financial market does not contribute towards nations’ growth and development.
Answer:
False

Question 4.
Commercial bill is a common method to meet long term needs of industry.
Answer:
False

Question 5.
Reverse Repo Rate is similar to Repo Rate.
Answer:
False

Question 6.
MMMF is a part of the capital market.
Answer:
False

Question 7.
The financial market brings together borrowers and lenders.
Answer:
True

Question 8.
Certificate of deposit is a part of the money market.
Answer:
True

1E. Find the odd one.

Question 1.
91 days, 182 days, 365 days
Answer:
365 days

Question 2.
Share, debentures, MMMF’s
Answer:
MMMF’s

Question 3.
Treasury Bill, certificate of deposit, bond
Answer:
Bond

Question 4.
Share, debenture, commercial paper
Answer:
Commercial paper

Question 5.
SEBI, RBI, SIDBI
Answer:
SIDBI

Question 6.
Commercial paper, certificate of deposit, bond
Answer:
Bond

Question 7.
Preference share, Equity shares, commercial bill
Answer:
Commercial Bill

1F. Complete the sentences.

Question 1.
Financial Assets are exchanged in a ___________
Answer:
Financial Market

Question 2.
___________ is dealing with second hand issue.
Answer:
Secondary Market

Question 3.
Money Market is Regulated by ___________
Answer:
RBI

Question 4.
The instruments of ___________ can easily converted into cash.
Answer:
Money Market

Question 5.
___________ is an unsecured promissory note issued by companies.
Answer:
Commercial Paper

Question 6.
Secondary market is commonly called as ___________
Answer:
Stock Exchange

Question 7.
___________ Market increases liquidity of fund in the economy.
Answer:
Money

Question 8.
___________ is dealing with mobilisation of fund.
Answer:
Capital Market

Question 9.
Derivative market is specially designed to ___________
Answer:
derivatives

Question 10.
___________ are the intermediary of primary market.
Answer:
Underwriters

Question 11.
___________ is also known as new issue market.
Answer:
Primary Market

Question 12.
___________ are the intermediary of Secondary Market.
Answer:
Security brokers

Question 13.
In ___________ risk factor is very less.
Answer:
Money Market

Question 14.
Government security market is also called as ___________
Answer:
Gilt Edged Market

Question 15.
Private companies deal their securities in ___________
Answer:
Industrial Security Market

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) ………………….	(a) Promissory note
(2) …………………	(b) short term credit
(3) New Issue	(c) ……………….
(4) Stock Exchange	(d) ………………

(Commercial bill, Treasury bill, Secondary market, Primary market)
Answer:

Group ‘A’	Group ‘B’
(1) Treasury Bill	(a) Promissory note
(2) Commercial Bill	(b) short term credit
(3) New Issue	(c) Primary Market
(4) Stock Exchange	(d) Secondary Market

Question 2.

Group ‘A’	Group ‘B’
(1) Financial Market	(a) ………………….
(2) Money Market	(b) …………………
(3) ………………….	(c) Primary Market
(4) ………………….	(d) Commercial Paper
(5) Capital Market	(e) …………………

(Financial Securities, Short Term, Neiv issue, unsecured promissory note, long term)
Answer:

Group ‘A’	Group ‘B’
(1) Financial Market	(a) Financial Securities
(2) Money Market	(b) Short term
(3) New Issue	(c) Primary Market
(4) Unsecured promissory Note	(d) Commercial Paper
(5) Capital Market	(e) Long Term

Question 3.

Group ‘A’	Group ‘B’
(1) ………………….	(a) Gilt-edged Market
(2) …………………	(b) Repo Rate
(3) Commercial bills	(c) ……………………
(4) Money market	(d) …………………..

(Short term, most common method to meet credit needs, official bank rate, Government securities)
Answer:

Group ‘A’	Group ‘B’
(1) Government securities	(a) Gilt-edged Market
(2) Official Bank Rate	(b) Repo Rate
(3) Commercial bills	(c) Most common method to meet credit needs
(4) Money market	(d) short term

1H. Answer in one sentence.

Question 1.
What is Repo Rate?
Answer:
This is a rate at which commercial banks borrow money from the central bank (RBI).

Question 2.
What is a Secondary Market?
Answer:
It is the market where existing securities are resold. It is also called as the stock market.

Question 3.
What is a Treasury bill?
Answer:
It is a short-term security issued by RBI on behalf of the Central Government of India to meet government short-term fund requirements.

Question 4.
What is commercial paper?
Answer:
Commercial paper is an unsecured debt instrument issued by companies to build short-term finance.

Question 5.
What is the Gilt-edged market?
Answer:
The gilt-edged market is the market where government securities are traded. This market deals in government and semi-government securities.

1I. Correct the underlined word/s and rewrite the following sentences.

Question 1.
Treasury bills are issued by companies.
Answer:
Commercial papers are issued by companies.

Question 2.
Capital Market builds finance for the short term.
Answer:
Money Market builds finance for the short term.

Question 3.
Gilt edge market deals with corporate securities.
Answer:
Industrial Securities Market deals with corporate securities.

Question 4.
The government uses commercial bills to build short-term finance.
Answer:
Treasury Bills uses commercial bills to build short-term finance.

Question 5.
Mutual Fund deals in Money Market.
Answer:
Money Market Mutual Fund deals in Money Market.

Question 6.
The minimum value of the commercial paper is 6 lakhs.
Answer:
The minimum value of the commercial paper is 5 lakhs.

Question 7.
Trade Bills are unsecured negotiable promissory notes issued by Banks.
Answer:
Certificate of deposits is an unsecured negotiable promissory note issued by Banks.

Question 8.
Underwriters are the intermediary of the secondary market.
Answer:
Security Brokers are the intermediary of the secondary market.

Question 9.
Direct Investment took place in the secondary market.
Answer:
Indirect Investment took place in the secondary market.

Question 10.
In the primary market security price is fixed by Demand and supply.
Answer:
In the Secondary market security price is fixed by Demand and supply.

Question 11.
Primary Market the parties dealing in this market are the only investors.
Answer:
Secondary Market the parties dealing in this market are the only investors.

1J. Arrange in proper order.

Question 1.
Arrange the given instruments by using minimum amount Criteria:
(a) Certificate of deposit
(b) Commercial paper
(c) Treasury Bill
Answer:
(a) Treasury Bill
(b) Certificate of deposit
(c) Commercial paper

Question 2.
Arrange the following instruments on the basis of ‘Year of the beginning’:
(a) Commercial papers
(b) Certificate of deposits
(c) Treasury bills
Answer:
(a) Treasury bills [1990]
(b) Certificate of deposits [1989]
(c) Commercial papers [1917]

Question 3.
Arrange the following securities on the basis of redemption:
(a) Preference shares
(b) Equity shares
(c) Debentures
Answer:
(a) Debentures
(b) Preference shares
(c) Equity shares

2. Explain the following terms/concepts.

Question 1.
Private Placement
Answer:
Private placement means when a company offers its securities to a selected group of persons identified by the board excluding qualified institutional buyers and employees not exceeding 200. This helps the company to raise funds quickly and economically

Question 2.
Government Securities
Answer:

• The marketable debt issued by the government, semi-government which represents claims on the government is known as ‘Government Securities’.
• These securities are safe as payment of interest & repayment of principal amount are guaranteed.

Question 3.
Repo Rate
Answer:

• Repo is an agreement where the seller of a security agrees to buy it back from the lender at a higher price on a future date.
• This agreement is made between RBI and commercial banks. Here, commercial banks borrow from RBI.

Question 4.
Reverse Repo Rate
Answer:

• Reverse Repo rate is the rate at which RBI borrows from commercial banks.
• Reverse Repo rate is always less than Repo Rate.

Question 5.
Gilt-edged market
Answer:
The gilt-edged market is the market where government securities are traded. This market deals in government and semi-government securities.

Question 6.
Money Market Mutual Fund
Answer:
Money Market Mutual Funds (MMMFs):
A Mutual Fund which invests in Money market instruments like Call Money, Repos, T-bills, CDs, etc. is called as MMMFs. This type of Mutual Fund invests in debt instruments that mature in less than 1 year and have low risk. Individuals and corporates are allowed to invest in MMMFs.

3. Study the following case/situation and express your opinion.

1. M/s. Radheshyam company wants short-term loans (Borrowing) to meet its working capital needs. Hence as an expert advice M/s. Radheshyam on the following matters.

Question (a).
Can a company select a capital market to complete its working capital needs?
Answer:
No, Company cannot select a capital market to meet working capital requirements. A company should go for the money market.

Question (b).
If a company selects the money market, the names of the instruments through which short-term finance can be build up?
Answer:
If company select money market option, it can build up finance through Trade bill, commercial papers and MMMF’s.

Question (c).
Is completion of working capital needs important to Radhaeshyam Company?
Answer:
Yes, completion of working capital needs important to Radheshyam company. Because working capital needs are daily needs of the business. Once it is completed production cycle can work better.

2. Government of India wants short-term finance to deal with the short-term deficit condition. Advice the government on the following.

Question (a).
Name of the instrument through which government can build up short-term finance?
Answer:
Treasury bill is the best option to build short-term finance for the Government. It can be issued for 91 days, 182 days, and 364 days.

Question (b).
What will be the minimum amount of investment in the Treasury bill?
Answer:
The minimum amount of investment in treasury bills is ₹ 25,000.

Question (c).
Method of issue of Treasury bill.
Answer:
Treasury bills are issued at discount and repaid at par. Hence it is also caused as a ‘zero’ coupon bond.

4. Distinguish between the following.

Question 1.
Commercial Bills and Treasury Bills
Answer:

Points	Commercial Bills	Treasury Bills
1. Meaning	Commercial Bills are the money market instruments that are created to fulfill the credit needs of Trade and Industry.	Treasury bills are the money market instruments that are created to fulfill the credit needs of the government.
2. Nature of instrument	They are in the form of a bill of Exchange.	They are in the form of promissory notes.
3. Maturity Period	The maturity period is 3 months/90 days.	The maturity period of treasury bills is 91 days, 182 days, 364 days.
4. Borrower	Blue Chip companies or big business organizations are the borrowers.	Government is the borrower.
5. Development of market	The commercial bill market has not much developed in the money market.	Treasury bills have developed in the money market due to government support.

Question 2.
Repo Rate and Reverse Repo Rate
Answer:

Points	Repo Rate	Reverse Repo Rate
1. Meaning	It is the interest rate at which the central bank repurchases the Government Securities.	It is the interest rate at which commercial banks repurchase the Government Securities.
2. Level	Repo Rate is always higher than Reverse Repo Rate.	Reverse Repo rate is always lower than Repo Rate.
3. Initiative	It is carried out by the central bank.	It is carried out by a commercial bank.
4. Current Rate	The current Repo Rate as of February 2020 is 5.15%.	The current Reverse Repo Rate as of February 2020 is 4.90%.
5. Lender and Borrower	Here, the lender is RBI and Borrower is a commercial Bank.	Here, the lender is a commercial Bank and Borrower is RBI.
6. Borrower’s objective	Its main objective is to manage short-term deficiency of funds.	Its main objective is to reduce the overall supply of money in the economy.

5. Answer in brief.

Question 1.
Write a note on the importance of the financial market.
Answer:
Role: A financial market is of great use for a country as it helps the economy in the following ways:
(i) Saving Mobilization:
Obtaining funds from surplus units such a households individuals, public sector units, central government, etc and channelizing their funds or productive purposes.

(ii) Investments:
The financial market plays an important role in arranging to invest funds thus, collected in those units which are in need of the funds.

(iii) National Growth:
The financial market contributes to the national growth by ensuring a continuous flow of surplus funds to deficit units.

(iv) Entrepreneurship Growth:
Financial markets contribute to the development of the entrepreneurial class by making available the necessary financial resources.

(v) Industrial Development:
The components of financial markets help towards accelerated growth of industrial and economic development of a country thus, contributing to raising the standard of living and the society’s wellbeing.

(vi) Capital formation:
The capital market brings together borrowers and lenders. It attracts saving from people and directs it towards the institutions where it is needed. It generates capital for the business.

Question 2.
Explain constituents of Capital Market.
Answer:
The capital market is divided into two segments:

• Gilt Edged Market
• Industrial Securities Market

(i) Gilt Edged Market:
It is also known as the government securities market, which is a market for government and semi-government securities.
Features of this market are:

• Guaranteed return on investment
• No speculation on securities
• Major institutions are LIC, PF, and commercial banks.
• The heavy volume of transactions
• Institutional-based investors.

(ii) Industrial Securities Market:
It is a market for industrial securities such as bonds, equities, etc. It comprises two segments.

• Primary Market
• Secondary Market

Primary Market:
It is also known as New Issue Market. The market is utilized for raising fresh capital in the form of shares and debentures. It helps to accelerate economic and industrial development.

Modes of raising capital in the Primary Market:
(i) Public Issue/Prospectus:
Securities are issued to the general public. This is the most popular method of raising long-term funds. In this method, securities are offered to the public by issuing a prospectus.

(ii) Rights Issue:
The equity shares of a company are issued to the existing equity shareholders in the form of rights issues. In this issue, additional securities are offered to the existing shareholders.

(iii) Private Placement:
Under the private placement, the shares of a company are sold among the selected group of persons. There are three categories of participants in the primary market i.e. issuers of securities, investors, and intermediaries.

Secondary Market:
It is a market where existing securities are sold or traded. This market is also known as the stock market. The secondary market consists of recognized stock exchanges operating under rules, bye-laws, and regulations duly approved by the government.

Question 3.
Write a note on Participants in the Money Market.
Answer:
Some important participants in the money market:
(i) Reserve Bank of India:
It is the most important participant in the money market. Through the money market, RBI regulates the money supply and implements its monetary policy. It issues government securities on behalf of the government and also underwrites them. It acts as an intermediary and regulator of the market.

(ii) Central and State Government:
Central Government is a borrower in the Money Market, through the issue of Treasury Bills (T-Bills). The T-Bills are issued through the Reserve Bank of India (RBI). The T-Bills represent zero risk instruments. Due to its risk-free nature banks, corporate, etc. buy the T-Bills and lend to the government as a part of its short-term borrowing program. The state government issues bonds called State Development Loans.

(iii) Public Sector Undertakings (PSU):
Many listed government companies can issue commercial paper in order to obtain its working capital.

(iv) Scheduled Commercial Banks:
Scheduled commercial banks are very big borrowers and lenders in the money market. They borrow and lend in call money market, short notice market, Repo and Reverse Repo market.

(v) Insurance Companies:
Both, the general and life insurance companies are usual lenders in the money market. They invest more in capital market instruments. Their role in the money market is limited.

(vi) Mutual Funds:
Mutual Funds offer varieties of schemes for the different investment objectives of the public. Mutual funds schemes are liquid schemes. These schemes have the investment objective of investing in money market instruments.

6. Justify the following statements.

Question 1.
Primary Market is known as the New issue market.
Answer:

• The primary market is that security market where fresh securities are raised in the form of shares and debentures.
• This market is mainly utilized for raising long-term funds.
• Funds are raised in this market through various modes such as public issue/prospectus, right issue, and private placement.
• Moreover, the primary market is also beneficial for capital formation in the country which in turn accelerates its economic and industrial development.
• Thus, the Primary market is known as New Issue Market.

Question 2.
The gilt-edged market is known as the government securities market.
Answer:

• A gilt-edged market is a market where government and semi-government securities are traded. Therefore, it is also known as the government securities market.
• In such a market, mostly gilt-edged securities are traded. These are the stocks and bonds issued by the Central or State Government.
• These securities are considered safe investments as payment of interest and repayment of principal amount on them are guaranteed by the government. Also, there is no speculation on such securities.
• In the Gilt-edged market, the major participants are public corporations such as Life Insurance Corporation (LIC), Provident Fund (PF), and commercial banks.
• The government securities are mostly in the form of stock certificates, promissory notes, and government bonds.
• Thus, the gilt-edged market is known as the government securities market.

Question 3.
Repo rate is known as the official bank Rate.
Answer:

• Repo rate refers to the discounted interest rate at which the Central Bank repurchases the government securities.
• Such transaction is mainly carried out to reduce short-term liquidity in the system.
• Here, the Central Bank has the sole power to adjust (increase or decrease) the repo rate so as to control the money supply in an economy.
• Additionally, the transactions are mainly carried out between the Central Bank and Commercial Banks at a repo rate.
• Due to all the above reasons, the repo rate is known as the official bank rate.

Question 4.
Capital Market facilitates the mobilization of funds.
Answer:

• The money market is a place where short-term funds are borrowed and lent.
• It is a market for financial assets that are close substitutes for money.
• The instruments dealt in the money market are liquid and can be easily converted into cash at a low transaction cost.
• Due to this, the money market fails to facilitate the mobilization of funds.
• On the other hand, the Capital market, a market for long-term instruments, facilitates the mobilization of funds.
• In this market, the instruments such as bonds, debentures, equity shares, and stocks having long or indefinite maturity periods are traded.
• Thus, mobilization of funds is facilitated by the capital market rather than the money market.

7. Answer the following questions.

Question 1.
Explain the role and importance of the financial market in the development of an economy.
Answer:
Role: A financial market is of great use for a country as it helps the economy in the following ways:
(i) Saving Mobilization:
Obtaining funds from surplus units such as households, individuals, public sector units, Central Government, etc and channelizing their funds or productive purposes.

(ii) Investments:
The financial market plays an important role in arranging to invest funds thus, collected in those units which are in need of the funds.

(iii) National Growth:
The financial market contributes to national growth by ensuring a continuous flow of surplus funds to deficit units.

(iv) Entrepreneurship Growth:
Financial markets contribute to the development of the entrepreneurial class by making available the necessary financial resources.

(v) Industrial Development:
The components of financial markets help towards accelerated growth of industrial and economic development of a country thus, contributing to raising the standard of living and the society’s wellbeing.

(vi) Capital formation:
The capital market brings together borrowers and lenders. It attracts saving from people and directs it towards the institutions where it is needed. It generates capital for the business.

(vii) Employment Generation:
The capital market is contributed towards the generation of capital. It supports the development of small and large businesses. It creates employment opportunities for the public.

(viii) Productive use of funds:
The financial market allows productive use of the fund. An excess fund of investors is used by the borrowers for productive purposes.

Question 2.
Explain constituents of the Indian capital market.
Answer:

(i) The Gilt Edged Market: It is also known as the government securities market, which is a market for government and semi-government securities. Features of this market are:

• Guaranteed return on investment
• No speculation on securities
• Major institutions are LIC, PF, and commercial banks.
• The heavy volume of transactions
• Institutional-based investors.

(ii) Industrial Securities Market: It is a market for industrial securities such as bonds, equities, etc. It comprises two segments.

• Primary Market
• Secondary Market

(A) Primary Market: It is also known as New Issue Market. The market is utilized for raising fresh capital in the form of shares and debentures. The industrial sectors usually approach this market for raising fresh capital. This is usually a long-term fund. The primary market is useful for capital formation in the country and accelerates economic and industrial development.

Modes of raising capital in the Primary Market:
(i) Public Issue/Prospectus:
Securities are issued to the general public. This is the most popular method of raising long-term funds. In this method, securities are offered to the public by issuing a prospectus.

(ii) Rights Issue:
The equity shares of a company are issued to the existing equity shareholders in the form of rights issues. In this issue, additional securities are offered to the existing shareholders.

(iii) Private Placement:
Under the private placement, the shares of a company are sold among the selected group of persons. There are three categories of participants in the primary market. They are the issuers of securities, investors, and intermediaries.

(B) Secondary Market: It is a market where existing securities are sold or traded. This market is also known as the stock market. The secondary market consists of recognized stock exchanges operating under rules, bye-laws, and regulations duly approved by the government.

A stock exchange is defined under section 2(3) of the Securities Contracts (Regulations)
Act 1956 as “An association, organization or body of individuals, whether incorporated or not established for the purpose of assisting, regulating or controlling of business in buying, selling or dealing in securities.”

Functions of Secondary Market:

• To facilitate liquidity and marketability of securities.
• To contribute to the economic growth through mobilization of funds to the most efficient channels.
• To provide an instant valuation of securities dealt at the stock exchange.
• To ensure a measure of safety and fair dealing to protect investor’s interests.

8. Attempt the following.

Question 1.
Explain features of the Indian Money Market?
Answer:
A money market is a place where short-term funds are borrowed and lent. The Instruments dealt with within this market are liquid financial assets.
The features of the money market are as follows:
(i) No Fixed Place for Trading of Securities/Shares:
In the money market, there is no definite place to carry out lending and borrowing operations of securities or shares.

(ii) Involvement of Brokers:
Dealings in such a market can be conducted with or without the participation of brokers.
Companies, banks, etc. may directly deal in the money market.

(iii) Financial Assets:
The financial assets that are dealt in the money market are close substitutes for money as these assets can be easily converted into cash without any loss in value.

(iv) Organisations Involved:
The main organizations dealing in the money market in India are the Reserve Bank of India (RB), State governments, banks, corporate investors, etc.

(v) Nature of the Market:
It is not a single market but a collection of markets for different instruments such as commercial bills, commercial papers, certificates of deposits, government securities, etc.

(vi) Term of Finance:
The funds can be borrowed or lent for a maximum period of one year.

(vii) Source of Short Term Funds:
The money market provides a place or a system whereby short-term (for a period of less than one year) funds can be easily borrowed or lent.

Question 2.
Explain important participants of the Indian Money Market.
Answer:
Some important participants in the Indian Money Market are:
(i) Reserve Bank of India:
It is the most important participant in the money market. Through the money market, RBI regulates the money supply and implements its monetary policy. It issues government securities on behalf of The Government and also underwrites them. It acts as an intermediary and regulator of the market.

(ii) Central and State Government:
Central Government is a borrower in the Money Market, through the issue of Treasury Bills (T-Bills). The T-Bills are issued through the Reserve Bank of India (RBI). The T-Bills represent zero risk instruments. Due to its risk-free nature banks, corporate, etc. buy the T-Bills and lend to the government as a part of its short-term borrowing program. The state government issues bonds called State Development Loans.

(iii) Public Sector Undertakings (PSU):
Many listed government companies can issue commercial paper in order to obtain their working capital.

(iv) Scheduled Commercial Banks:
Scheduled commercial banks are very big borrowers and lenders in the money market. They borrow and lend in the call money market, short notice market, Repo and Reverse Repo market.

(v) Insurance Companies:
Both, the general and life insurance companies are usual lenders in the money market. They invest more in capital market instruments. Their role in the money market is limited.

(vi) Mutual Funds:
Mutual Funds offer varieties of schemes for the different investment objectives of the public. Mutual funds schemes are liquid schemes. These schemes have the investment objective of investing in money market instruments.

(vii) Non-Banking Finance Companies (NBFCs): NBFCs use their surplus funds to invest in government securities, bonds, etc. (Example of NBFC – Unit Trust of India)

(viii) Corporates:
Corporates borrow by issuing commercial papers which are nothing but short-term promissory notes. They are the lender to the banks when they buy the certificate of deposit issued by the banks.

(ix) Primary Dealers:
Their main role is to promote transactions in government securities. They buy as well as underwrite the government securities.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 10 Dividend and Interest Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 10 Dividend and Interest

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
Dividend is a part of ______________ distributed to the shareholders.
(a) Profit
(b) Reserve
(c) Unpaid Capital
Answer:
(a) Profit

Question 2.
Dividend is an income on investment in ______________
(a) Debentures
(b) Loan
(c) Shares
Answer:
(c) shares

Question 3.
Unpaid or Unclaimed dividend shall be transferred to ‘Investors Education and Protection Fund’ on expiry of ______________ years.
(a) Three
(b) Seven
(c) Five
Answer:
(b) Seven

Question 4.
The dividend declared between two Annual General Meetings is known as ______________ dividend.
(a) Interim
(b) Final
(c) Annual
Answer:
(a) Interim

Question 5.
The ______________ recommends the final dividend.
(a) Shareholders
(b) Board of Directors
(c) Promoters
Answer:
(b) Board of Directors

Question 6.
______________ is the dividend declared at the Annual General Meeting.
(a) Interim dividend
(b) Final dividend
(c) Unpaid dividend
Answer:
(b) Final Dividend

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Dividend coupon	(a) Return of investment of shareholders
(2) Dividend warrant	(b) Declared at Annual General Meeting
(3) Dividend	(c) Share certificate holder
(4) Final Dividend	(d) Share warrant holder
(5) Interim Dividend	(e) Return on debentures
	(f) Declared between two Annual General Meetings
	(g) Bonus Shares
	(h) Declared at an extraordinary general meeting
	(i) Special resolution
	(j) Debenture certificate holder

Answer:

Group ‘A’	Group ‘B’
(1) Dividend coupon	(d) Share warrant holder
(2) Dividend warrant	(c) Share certificate holder
(3) Dividend	(a) Return of investment of shareholders
(4) Final Dividend	(b) Declared at Annual General Meeting
(5) Interim Dividend	(f) Declared between two Annual General Meetings

Question 2.

Group ‘A’	Group ‘B’
(1) Interim dividend	(a) Cannot be paid in kind
(2) Dividend account	(b) Cannot be paid out of reserves
(3) Declaration of dividend	(c) Owners of the company
(4) Interest	(d) Board of Directors
(5) Listed Company	(e) Schedule Bank
	(f) Dividend as a per-share basis only
	(g) IEPF
	(h) Debenture holders
	(i) Rate of dividend is high
	(j) Shareholder’ approval

Answer:

Group ‘A’	Group ‘B’
(1) Interim dividend	(b) Cannot be paid out of reserves
(2) Dividend account	(e) Schedule Bank
(3) Declaration of dividend	(j) Shareholder’ approval
(4) Interest	(h) Debenture holders
(5) Listed Company	(f) Dividend as a per-share basis only

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A dividend remaining unpaid to shareholders even after the expiry of 30 days of its declaration.
Answer:
Unpaid dividend

Question 2.
People who recommend the rate of dividend.
Answer:
Board of directors

1D. State whether the following statements are true or false.

Question 1.
The final dividend is paid on the actual profits that arrived after the closure of books of accounts.
Answer:
True

Question 2.
The interim dividend is declared before the preparation of the final accounts of the company.
Answer:
True

Question 3.
The higher the risk, the lower is the interest.
Answer:
False

Question 4.
Auditors’ opinions should be taken before declaring an Interim dividend.
Answer:
True

Question 5.
‘Unpaid Dividend Account’ is opened in a private Bank by the company.
Answer:
False

1E. Find the odd one.

Question 1.
Equity Shares, Preference Shares, Deposit Holders
Answer:
Deposit Holders

Question 2.
Interest, Dividend warrant, Dividend Mandate
Answer:
Interest

Question 3.
Unpaid/Unclaimed Account, IEPF, Deposits
Answer:
Deposits

Question 4.
ECS, NEFT, Cash
Answer:
Cash

1F. Complete the sentences.

Question 1.
Dividend can be paid out of ______________
Answer:
capital profits

Question 2.
Dividend which is approved by shareholders should pass ______________
Answer:
ordinary resolution

Question 3.
The dividend declared by company but not been paid or claimed by 9 shareholders is called ______________
Answer:
unpaid/ unclaimed dividend

Question 4.
Rate of interest is expressed as annual percentage of ______________
Answer:
principal

Question 5.
______________ is paid to the creditor of the company.
Answer:
Interest

Question 6.
Any amount in ‘Unpaid Dividend A/c’ for 7 years should be transferred to ______________
Answer:
IEPF

1G. Answer in one sentence.

Question 1.
Who declares the final dividend?
Answer:
The final dividend is declared by shareholders.

Question 2.
Which are the two types of dividend?
Answer:
The two types of dividends are (a) Interim and (b) Final.

Question 3.
Name the electronic mode of payment of dividends.
Answer:
The electronic mode of payment of dividends is ECS (Electronic Clearing Services), NEFT (National Electronic Fund Transfer).

Question 4.
What is the full form of IEPF?
Answer:
IEPF means Investors Education and Protection Fund.

1H. Correct the underlined word/s and rewrite the following sentences.

Question 1.
The dividend is payable in kind.
Answer:
The dividend is payable in cash.

Question 2.
Unclaimed/Unpaid dividends should be transferred to Dividend Account.
Answer:
Unclaimed/ Unpaid dividends should be transferred to Unpaid Dividend Account.

Question 3.
The interim dividend rate is higher than the Final Dividend.
Answer:
The interim dividend rate is lower than the Final Dividend.

Question 4.
The rate of dividend is expressed as an annual percentage of the principal.
Answer:
The rate of interest is expressed as the annual percentage of the principal.

Question 5.
Dividends cannot be declared out of reserves.
Answer:
A dividend cannot be declared out of capital.

Question 6.
The dividend is declared at the Board Meeting.
Answer:
The dividend is declared at the Annual General Meeting.

Question 7.
The dividend Mandate should be sent to the registered address of the shareholder.
Answer:
A dividend Warrant should be sent to the registered address of the shareholder

Question 8.
Interest is a charge on capital profits.
Answer:
Interest is a charge on profits.

Question 9.
Interest is paid to the owners of the company.
Answer:
The dividend is paid to the owners of the company.

1I. Arrange in Proper Order.

Question 1.
(a) Declaration of Dividend
(b) Sources of Dividend
(c) Payment of Dividend
Answer:
(a) Sources of dividend
(b) Declaration of Dividend
(c) Payment of Dividend

Question 2.
(a) Payment of dividend to shareholder’s banker
(b) Dividend Mandate
(c) Company authorizes
Answer:
(a) Dividend Mandate
(b) Company authorizes
(c) Payment of dividend to shareholder’s banker

2. Explain the following terms/concepts.

Question 1.
Dividend Warrant.
Answer:
It is an instrument sent by the company to the shareholder. It is a document that reflects shareholder is entitled to receive a dividend or not. It contains the name and address of the registered shareholder. In other words, it is the order of payment in which dividend is paid.

3. Study the following case/situation and express your opinion.

1. VMCL Co. Ltd. decides to pay the final dividend.

Question (a).
Is the rate of final dividend lower than interim dividend which is already paid by them?
Answer:
No, as the interim dividend is a part of the first half of the profit, its rate is lower than the final dividend.

Question (b).
Who has the authority to declare the final dividend?
Answer:
The Board of Directors has the authority to declare the final dividend.

Question (c).
Can it be paid out of capital profit?
Answer:
Yes, the final dividend can be paid out of capital profits, if it fulfills certain statutory conditions. For eg. Capital profits should be released in cash.

2. Mr. Dutch has given a loan to the VMCL Co.

Question (a).
What is Mr. Dutch to VMCL Co.?
Answer:
Mr. Dutch is the creditor for the VMCL Co.

Question (b).
What will Mr. Dutch receive in return?
Answer:
Mr. Dutch will receive interest in return.

Question (c).
Will Mr. Dutch receive interest even if the company is in loss?
Answer:
Yes, Mr. Dutch will receive interest even if the company incurs loss because it is not linked with profits or loss of the company.

3. Mr. B is the shareholder who wants to get dividend credited directly in his bank account.

Question (a).
What form is Mr. B required to fill to get the dividend credited directly into this account?
Answer:
“Dividend Mandate” is the prescribed form required to fill to get dividends credited directly into this account.

Question (b).
If Mr. B has sold his partial shares, will he receive the dividend?
Answer:
No, If Mr. B has sold his partial shares, he will be receiving dividend on the remaining shares.

Question (c).
What is the benefit of Dividend Mandate?
Answer:
The benefit of dividend mandate is it saves time, cost and efforts.

4. Answer in brief.

Question 1.
Explain different modes of payment of dividend.
Answer:
Dividend is either paid in cash or by cheque or warrant or by electronic mode. Dividend is paid to the shareholders. Following are the modes of payment of dividend:
(i) Dividend Warrant:
It is a cheque sent by a company to a shareholder for payment of dividend to the registered address of the shareholder.

(ii) Dividend Mandate:
A shareholder can also receive dividend directly in the bank account for which the shareholder has to send a request to the company in the prescribed form called ‘Dividend Mandate’. Dividend mandate authorizes the company to pay dividend directly to shareholder’s bank account.

(iii) Electronic Mode:
Company can also use electronic mode to pay dividends.
It is mandatory for the listed company to use electronic mode of payment approved by RBI such as ECS (Electronic Clearing Services), NEFT (National Electronic Fund Transfer).
Banks should also make necessary arrangements with other banks in collaboration for paying dividend through Dividend Warrants at par.

5. Justify the following statements.

Question 1.
Dividend cannot be paid on calls i.e. in advance.
Answer:

• Dividend is an unconditional payment made out of company’s profit.
• It is paid out of current profits or profits of the previous financial year.
• Dividend once approved and declare by shareholders cannot be cancelled.
• Once the Annual Accounts of previous year has been approved in AGM the dividend of the previous year cannot be declared.
• Thus, it is rightly said that dividend cannot be paid on calls i.e. in advance.

Question 2.
Dividend can be declared even if a company suffers loss in that particular period.
Answer:

• Dividend is paid out of company’s profit i.e. out of current profits, profit of any previous year, out of capital profits and money provided by central or state government.
• Every year the company transfer part of its profit to different reserves.
• Dividend may be declared from capital profit i.e. selling company’s assets.
• Company may utilise accumulated profit and reserves in absence of profit.
• Government also provides funds to company under certain schemes.
• Thus, it is rightly said that dividend can be declared, even if a company suffers loss in that particular period.

Question 3.
The rate of interim dividend is lesser than final dividend.
Answer:

• Final dividend is declared at the end of the financial year whereas Interim dividend is declared between two annual general meetings.
• Interim dividend is declared when the company makes good profit in the first half of the financial year.
• Interim dividend is declared twice in a year.
• Hence the rate of dividend is lower than final dividend.
• Thus, it is rightly said that the rate of interim dividend is lesser than final dividend. OR Interest is paid to the creditor of the company.

Question 4.
Payment of interest does not require the passing of a resolution at any meeting.
OR
Resolution need not be passed for payment of interest.
Answer:

• Interest is the liability of the company.
• It is to be paid to the creditors: of the company.
• It is paid every year irrespective of the profits earned by the company every year. It is a charge on profit.
• The rate of interest is fixed and pre-determined. Thus, it is rightly said that payment of interest does not require the passing of a resolution at any meeting. OR Resolution need not be passed for payment of interest.

6. Answer the following questions.

Question 1.
Explain legal provisions for the payment of dividends.
Answer:
The term dividend is derived from the Latin word ‘Dividendum’ which means that which is to be divided. A dividend is the portion of the company’s earnings distributed to the shareholders decided and managed by the company’s board of directors. Dividend is a share in distributable profits of the company. A shareholder is entitled to receive the dividend when it is formally declared by the company.

Legal provisions for payment of Dividend are as follows:

• According to the provisions of Companies Act 2013, no dividend shall be payable except by way of cash.
• Dividend can also be paid through cheque, warrant or by any electronic mode, to the shareholder.
• In case of Joint holding of shares dividend, warrant should be sent to the registered address of the first-named joint shareholder as per the Register of Members or to the other joint shareholder whose name has been given to the company.
• Company must pay dividend within 30 days from the date of its declaration.
• Dividend is payable only to the registered shareholders of the company. Preference shareholders are entitled to receive the dividend before the equity shareholders as per the terms of issue of the preference share.
• Dividend will be paid as per the statements furnished by the depository in case of shares held in electronic form. Whereas the shares held in the physical form, will receive dividend as per the names appearing in the Company’s Register of Members.
• Default:
  • Default is paying a dividend in the given time result in-
  • Punishment to every Director of the company.
  • Company will be liable to pay the interest at the rate of 12% p.a. till the default continues.

Question 2.
Explain the rules pertaining to the Unpaid/Unclaimed Account.
Answer:
Dividend declared by the company but neither paid to nor claimed by a shareholder within 30 days of its declaration is termed as Unpaid and Unclaimed Dividend. Following rules govern the Unpaid/Unclaimed Dividend:

• Unpaid/’Unclaimed should be transferred to ‘Unpaid Dividend Account’ opened in a scheduled Bank by the company.
• This transfer should be within 7 (seven) days of the end of 30 days within which payment was to be made. In other words, this transfer should happen within 37 (Thirty-seven) days from the declaration of dividend.
• Within 90 (Ninety) days of the transfer of amount in the ‘Unpaid Dividend Account’, the company is required to publish a statement mentioning the name, address and unpaid amount payable to the shareholder. This statement is to be published on the company’s website or any other website approved by the Central Government.
• If any person claims the dividend to the company after a long time, then the company is liable to pay the unpaid or unclaimed dividend to the person.
• Any amount in the Unpaid Dividend Account of a company that remains unpaid/ unclaimed for a period of 7 (seven) years from the date of such a transfer shall be, transferred by the company to ‘Investors Education and Protection Fund (IEPF).
• The claimant of money will have to follow the procedures and submit necessary documents to get a claim from IEPF.

7. Attempt the following.

Question 1.
Explain the legal provisions for the sources of dividends.
Answer:
The term dividend is derived from Latin word ‘Dividendum’ which means that which is to be divided. A dividend is the portion of the company’s earnings distributed to the shareholders decided and managed by the company’s board of directors.
Dividend is a share in distributable profits of the company. Shareholder is entitled to receive the dividend when it is formally declared by the company.

Legal provisions for the sources of dividend
(i) Company can pay dividend for the financial year out of the following:

• Current Profits i.e. profits earned by the company for the current year, after providing for depreciation and transfer to Reserves.
• Out of profits of the company of any previous financial year, after providing for depreciation.
• The money provided by the Central or State Government to pay dividends.

(ii) Dividend can be paid out of Capital Profits:

• Capital profits are realized in cash
• It mentioned in Articles of Association of the company
• It remains as profits after revaluation of all Assets and Liabilities.

(iii) Dividend cannot be paid out of Capital.

(iv) Dividend can be paid out of free reserves of the company.

Question 2.
Explain the legal provisions of the listed company regarding the declaration of dividends.
Answer:
When a company lists its shares on Stock Exchange, additional listing agreements are to be followed which are as follows:

• Stock exchange should be informed. If the securities are listed 2 days prior to the Board meeting in which recommendation of final dividend is to be considered.
• Stock Exchange should be informed immediately regarding the declaration of dividend as soon as the Board meeting gets over.
• Notice of closing book should be informed at least 7 (seven) working days before the closure to the stock exchange.
• Transfer Register and Register of Members should be closed.
• Electronic Clearing Services (FCS) or National Electronic Fund Transfer (NEFT) mode should be used for the payment of dividends.
• The listed company has to pay the dividend on a per-share basis only.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 9 Depository System Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 9 Depository System

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
Dematerialization removes the problem of _____________ handling of securities.
(a) Physical
(b) Public
(c) Social
Answer:
(a) Physical

Question 2.
The National Securities Depository Limited (NSDL) was established in the year _____________
(a) 1995
(b) 1996
(c) 1997
Answer:
(b) 1996

Question 3.
The process of converting shares from the electronic form into physical form is called _____________
(a) Rematerialization
(b) Dematerialization
(c) Depository
Answer:
(a) Rematerialisation

Question 4.
An agent of the depository is _____________
(a) Depository Participant (DP)
(b) Depository Officer (DO)
(c) Beneficial Owner (BO)
Answer:
(a) Depository Participant (DP)

Question 5.
An intermediary between the investors and depository is _____________
(a) Depository Participant
(b) SEBI
(c) Chief Executive Officer (CEO)
Answer:
(a) Depository Participant (DP)

Question 6.
An investor has to open _____________ with the Depository Participant for handling shares in electronic form.
(a) Demat A/c
(b) Securities
(c) Depository A/c
Answer:
(a) Demat A/c

Question 7.
Depository Participant is an agent of _____________
(a) Investor
(b) Securities and Exchange Board of India
(c) Depository
Answer:
(a) Investor

Question 8.
_____________ is a process by which share certificates of investors are converted into an electronic form.
(a) Dematerialization
(b) Rematerialization
(c) Depository
Answer:
(a) Dematerialization

Question 9.
Dematerialization is a process in which share in physical form is converted into _____________
(a) Electronic form
(b) Paper form
(c) Computer form
Answer:
(a) Electronic form

Question 10.
The provisions regarding dematerialization of securities are made in _____________
(a) Law
(b) Memorandum of Articles
(c) Articles of Association
Answer:
(c) Articles of Association

Question 11.
Demat account holder can _____________ any person of his choice.
(a) Elect
(b) Nominate
(c) Choose
Answer:
(b) Nominate

Question 12.
All depository participants are to be registered with _____________
(a) Registrar of companies
(b) Securities and Exchange Board of India (SEBI)
(c) Depository
Answer:
(b) Securities and Exchange Board of India (SEBI)

Question 13.
An institution which records share certificate in the electronic form is known as _____________
(a) Stock exchange
(b) Depository
(c) Depository Participant
Answer:
(b) Depository

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Dematerialization	(a) State of being interchangeable
(2) Rematerialisation	(b) Register with Depository
(3) Fungibility	(c) Demat Request Form
(4) Issuer	(d) Transferor informs DP
(5) Sale of Shares	(e) Transferee intimates the DP
(6) Purchase of Shares	(f) Remat Request Form
	(g) Broker

Answer:

Group ‘A’	Group ‘B’
(1) Dematerialization	(c) Demat Request Form
(2) Rematerialisation	(f) Remat Request Form
(3) Fungibility	(a) State of being interchangeable
(4) Issuer	(b) Register with Depository
(5) Sale of Shares	(d) Transferor informs DP
(6) Purchase of Shares	(e) Transferee intimates the DP

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
The year in which the Depository act was passed.
Answer:
1996

Question 2.
The largest institution in India which gives Depository services.
Answer:
NSDL (National Security Depository limited)

Question 3.
The year in which National Security Depository Limited (NSDL) Started functioning.
Answer:
1996

Question 4.
Investor in whose name Demat account is opened.
Answer:
Beneficial owner (ISIN)

Question 5.
An account to be opened by an investor for handling shares in electronic form.
Answer:
Demat A/c

1D. State whether the following statements are true or false.

Question 1.
CDSL is the oldest Depository in India.
Answer:
False

Question 2.
An investor can keep his Securities with his savings bank account.
Answer:
False

Question 3.
ISIN number is given to the Depository Participant.
Answer:
False

Question 4.
Dealing in Demated Securities is a time-consuming process.
Answer:
True

Question 5.
Settlement of cash is easy in case of rematerialized Securities.
Answer:
False

Question 6.
For Dematerialized Securities Company has to be registered with the Depository.
Answer:
True

1E. Find the odd one.

Question 1.
Physical, Electronic, Capital
Answer:
Capital

Question 2.
Off Market Trade, Market Trade, Clearing blouse.
Answer:
Clearing House

1F. Complete the sentences.

Question 1.
An agent of Depository is called as _____________
Answer:
Depository Participant

Question 2.
An investor who opens an account with the Depository participant is known as _____________
Answer:
Beneficial Owner

Question 3.
An account through which the Securities are held in electronic form is called as _____________
Answer:
Demat A/c

Question 4.
For converting physical Securities into electronic Securities an investor has to submit _____________
Answer:
Demat Request Form (DRF)

Question 5.
For converting electronic Securities into physical certificates an investor has to submit _____________
Answer:
Remat Request Form (RRF)

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(a) Depository Participant	(1) ……………………….
(b) ……………………	(2) Holds securities electronically
(c) Issuer	(3) ………………………
(d) …………………….	(4) Investor

(Beneficial owner, Depository, Links investor and depository, Company issuing securities)
Answer:

Group ‘A’	Group ‘B’
(a) Depository Participant	(1) Links investor and depository
(b) Depository	(2) Holds securities electronically
(c) Issuer	(3) Company issuing securities
(d) Beneficial owner	(4) Investor

1H. Answer in one sentence.

Question 1.
Who is the Beneficial Owner?
Answer:
The investor in whose name Securities are credited to his Demat A/c is the ‘Beneficial Owner’.

Question 2.
What are the two modes of holding securities?
Answer:
The two modes of holding securities are:

• Physical
• Electronic

Question 3.
When and where was the world’s first depository system set up?
Answer:
The world’s first depository system was set up in Germany in 1947.

Question 4.
What is Corporate Action?
Answer:
When the investor accounts get automatically credited/debited for securities in case of change initiated by the company is called Corporate Action.

Question 5.
Who is the Issuer?
Answer:
The issuer is the company that issues securities in the dematerialized form.

Question 6.
What is the full form of IPO?
Answer:
IPO means Initial Public Offer.

2. Explain the following terms/concepts.

Question 1.
Depository
Answer:

• It is an organization like the Central Bank where securities are held in electronic form at the investor’s request.
• It also provides different services related to different transactions in such securities.
• It is responsible for the safe-keeping of the investor’s securities.
• There is no direct access of investors with the Depository.
• It works as a link between the company and investors.

Question 2.
Depository Participant (DP)
Answer:

• Depository Participant is an agent of Depository who is registered under the SEBI Act.
• He acts as a link between the Depository and the investor.

Question 3.
Beneficial Owner (BO)
Answer:

• The BO is the investor of securities who have accepted the services of a Depository Participant.
• The BO can also be called Client of Depository and DP. BO is given a unique account number in which securities are held.

Question 4.
Off Market Trade
Answer:

• Trade settled between two parties i.e. transferor or transferee on certain agreed terms without the involvement of the third party i.e. clearing corporation, share broker, or stock exchange is called, ‘Off Market Trade’.
• For e.g. Legacy transfers, gifts, shifting of securities between a client and a sub-broker, etc.

Question 5.
Market Trade
Answer:
Trade settled between two parties i.e. transferor or transferee with the help of the third party i.e. clearing corporation, share broker, or stock exchange is called, ‘Market Trade’.

3. Study the following case/situation and express your opinion.

1. KPCL Bank is a well-established banking institution. Now, it got registered as a Depository Participant.

Question (a).
Under which act did KPCL Bank got registered as a DP?
Answer:
Under SEBI Act, KPCL Bank got registered as a DP.

Question (b).
KPCL Bank as an intermediary will be a link between whom?
Answer:
KPCL Bank as an intermediary will be a link between the Depository and the investor.

Question (c).
Name the two depositories in India, of whom KPCL Bank can be a DP (Agent).
Answer:
NSDL and CDSL.

2. Mr.K wants to rematerialize his 50 shares of PQR Ltd.

Question (a).
Which form he is required to fill as a written request to the DP?
Answer:
He is required to fill Remat Request Form (RRF).

Question (b).
Does he have to fill instrument of transfer if he wishes to transfer the same after remit?
Answer:
Yes. He needs to fill instrument of transfer if he wishes to transfer the same after remit.

Question (c).
Does he have to quote certificate no. and distinctive no. if he wishes to transfer his shares after it is in remat form?
Answer:
Yes, he has to quote certificate no. and distinctive no. if he wishes to transfer his shares after it is in Remat form.

3. Mariam is a broker working with Abacus Co.

Question (a).
Who is the depositor?
Answer:
Abacus Co is the depositor.

Question (b).
Who is the depository participant?
Answer:
Mariam is a depositor participant.

Question (c).
Mariam should be registered with whom?
Answer:
Mariam being the broker must be registered with SEBI and comply with SEBI norms.

4. Distinguish between the following.

Question 1.
Depository and Depository Participant.
Answer:

Points	Depository	Depository Participant
1. Meaning	A depository is an entity that helps the investor to buy or sell securities online.	A depository participant is a link between companies and investors.
2. Types	There are two depositories functional in India. They are NSDL and CDSL.	Various depository participants are linked to NSDL and CDSL.
3. Who can be?	A Depository may be organizations, banks, or institutions.	A Depository Participant can be a bank, financial institution, a broker.
4. Registered	Depositories must be registered as a company under the Companies Act and obtain a Certificate of Commencement of business from SEBI.	Depository Participants should be registered under the SEBI Act.

Question 2.
NSDL and CDSL
Answer:

Points	NSDL	CDSL
1. Full Form	NSDL means National Securities Depository Ltd.	CDSL means Central Depository Services India Ltd.
2. Formed	NSDL was formed in 1996	CDSL was formed in 1999
3. Works for	NSDL mainly works for National Stock Exchange (NSE)	CDSL mainly works for the Bombay Stock Exchange(BSE)
4. Registered	Depositories must be registered as a company under the Companies Act and obtain a Certificate of Commencement of business from SEBI.	Depository Participants should be registered under the SEBI Act.

5. Answer the brief.

Question 1.
What are the two ways of holding securities?
Answer:
There are two ways of holding the securities:
(i) Physical mode:
Securities are held in physical form i.e. paper form. Holding securities in physical form is riskier as it can be torn, misplaced, stolen, damaged, etc. It also consumes a lot of time in storing and handling certificates and documents. Transfer and Transmission of shares is a time-consuming process.

(ii) Electronic/Dematerialized:
In this system, securities are held in electronic or dematerialized form. Holding securities in electronic form is a safe and secure way. It saves a lot of time in storing and handling certificates and documents. Transfer and Transmission of shares is a time-saving process. The electronic system is a much faster and easier system of holding securities.

Question 2.
Explain Depository System. State its importance.
Answer:
A depository system is a system, where securities are held in electronic form. The transfer and settlement of securities are done electronically. On behalf of shareholders, the Depository System maintains accounts of the shareholder, enables transfer, collects dividends, bonus shares, etc.

It is also known as, ‘Scripless trading system’. The Depository Act was passed in the year 1996 under which the depository system was introduced. NSDL and CDSL are the two depositories operating in India.

Importance of Depository System:

• Depository plays a very important role in the smooth functioning of the capital market.
• Reduced paperwork: The aim of the depository system is to reduce the paperwork. It is scriptless system.
• Use of Technology: Paperless trading is possible as it uses the technology. It facilitates electronic transfer.
• Elimination of Storage and handing: As it is a scriptless system storing and handing of certificates work gets eliminated.
• Reduces cost and efforts: Depository system the cost and efforts involved in storage and handling of physical certificates.

Question 3.
Explain the various concepts/terms related to Depository System:
Answer:
(i) Dematerialization:
It is the process in which share certificates are converted into electronic form. The client has to open a DEMAT account with the help of DP.

(ii) Fungibility:
Fungibility means interchangeable. Financial assets may or may not be fungible. The shares in depositories are fungible. They don’t have distinctive numbers for identification.

(iii) Rematerialization:
Rematerialization is the process in which shares are reconverted into physical form.

(iv) International Securities Identification Number:
ISIN is an identification number given to a security of an issuer company at the time of issuing such security for the first time in the depository system. ISIN consists of a 12 (Twelve) digit alpha-numeric code which is divided into 3 (Three) parts. For Govt, securities allotment of ISIN is done by the RBI & for others by NSDL. It is accepted globally.

Question 4.
How many depositories are established in India, under the Depository Act of 1996?
Answer:
There are two depositories established in India under the Depository Act of 1996:
(i) NSDL (National Security Depository Limited):

• NSDL is the first and the largest depository in India established in November 1996.
• It is established by IDBI (Industrial Development Bank of India), Unit Trust of India (UTI), and National Stock Exchange (NSE).
• NSDL has its headquarters in Mumbai.
• It is registered under the Companies Act as a Public Limited Company.
• Investors, Stock Exchanges, Banks, Clearing Members, etc. receive a variety of services from NSDL.
• Services provided by NSDL include account maintenance, dematerialization, rematerialization, settlement of trades through market transfers and off-market transfer, nomination, transmission, distribution of noncash corporate actions, dividend distributions, facility of freezing, or locking of investors’ accounts, Investor grievances, etc.

(ii) CDSL (Central Depository Services Limited:

• CDSL began its operations in February 1999.
• It was promoted by the Bombay Stock Exchange jointly with several banks.
• The headquarters of CDSL is in Mumbai.
• CDSL also offers Demat services like NSDL across the country and has a wide DP network.
• NSDL and CDSL have played a great role in the success of the Depository System in India.

6. Justify the following statements.

Question 1.
The depository system has some advantages to the Investor.
Answer:

• The depository system holds certificates of the Investor in an electronic form.
• Safety is ensured as the entire system functions under the Depository Act and is monitored by SEBI.
• The investor even can freeze his account to avoid fraud.
• Investors can easily transfer the securities in electronic form.
• The investor receives a statement of account periodically which keeps him updated.
• Investors can raise easy loans against the Dematerialized securities.
• A nomination facility is also available for investors.
• Dividend, Bonus Shares, Right Issue, Redemption amount gets automatically credited to Investors account.
• Thus, it is rightly justified that Depository systems have some advantages to the investor.

Question 2.
An investor can raise loan against dematerialized securities.
Answer:

• Investors can take a loan against securities (shares, debentures, bonds, mutual fund units) that are held in their Demat accounts.
• The time required for the documentation process to take loans is less.
• In order to raise a loan against dematerialized securities, both the borrower and lender should have Demat accounts with the same depository
• The Demat accounts can be held with the same or different depository participant (DP).
• Thus, it is rightly said that investors can raise loans against dematerialized securities.

Question 3.
Better and quicker services of the Depository system attract investment from abroad.
Answer:

• Paperless trading is a boon for company management.
• Automatic and transparent screen-based trading in securities, shorter settlement periods have improved liquidity in investment in securities.
• The transfer process under the depository system is prompt and free from defects.
• The company is able to know the particulars of beneficial owners and their holdings periodically.
• Thus, it is rightly said that Better and quicker services of the Depository system attract investment from abroad.

Question 4.
It is necessary for the Beneficial Owner to open a DEMAT account with the DP.
Answer:

• The beneficial Owner is the investor of the company.
• For holding the securities in electronic form, it is necessary to open a DEMAT account.
• DEMAT account can be opened with the help of DP.
• The BO can also be called a client of Depository and DP.
• BO has to pay charges to the DP for availing the services of DP.
• BO is entitled to all rights, benefits and is subject to all liabilities with respect to securities.
• BO is given a unique account number in which securities are held.
• Thus, it is rightly said that it is necessary for the Beneficial Owner to open a DEMAT account with the DP.

7. Answer the following questions.

Question 1.
What is the procedure for the Transfer of Securities under the Depository System in case of the sale of shares?
Answer:
When shares are sold the Transferor (Investor) has to inform his DP by issuing Delivery Instruction Slip (DIS) duly filled and signed with the details of the security sold. At the end of the transaction, the said securities are debited from his Demat Account.

Transfer of shares can be done in two ways:
(i) Off Market Trade:
Trade settled between two parties i.e. transferor or transferee on certain agreed terms without the involvement of the third party i.e. clearing corporation, share broker, or stock exchange is called, ‘Off Market Trade’. For e.g. Legacy transfers, gifts, shifting of securities between a client and a sub-broker, etc.

Procedure:

• Seller i.e. the transferor gives instructions to the DP to transfer securities from the seller’s account to the buyer’s account.
• The buyer i.e. transferee will get securities credited to his account through his DP. DP will transfer the securities only after receiving confirmation from the depository.
• The transferee will directly pay the money to the transferor.

Diagrammatic presentation:

(ii) Market Trade:
Trade settled between two parties i.e. transferor or transferee with the help of the third party i.e. clearing corporation, share broker, or stock exchange is called, ‘Market Trade’.

Procedure:

• The Seller i.e. the transferor gives instruction to his DP. The securities are then transferred from Transferor’s account to the Transferor’s Broker account.
• From the Transferor’s Brokers account securities are transferred to the clearinghouse of the Stock Exchange.
• On the pay-out day, securities move from the clearinghouse to the account of the broker of the transferee.
• After instructions and confirmation from Depository, securities are transferred to the buyer’s account.

8. Attempt the following.

Question 1.
Explain the process of Dematerialisation?
Answer:
Dematerialization is the process of converting physical certificates into electronic form/mode. When an investor opts for a depository system, he has to approach a Depository participant, who is the authorized agent of the depository. The investor needs to surrender his share certificate to the company through a depository participants. On confirmation from the company and Depository DP arranges to credit investors account with an equivalent number of shares.

Following steps are involved in the process of Dematerialisation:

• Submission of DRF by Investor: The investor has to submit the DRF (Demat Request Form) in triplicate and original certificates to DP.
• Entry in the system and forwarding request to Depository: DP enters the details of Demat request in the system and sends it to the Depository.
• Forwarding Copy to the Issuer: DP sends the physical certificates and copy of DRF to the Issuer i.e. Company
• Verification by the Issuer: The Issuer (Company) verifies and confirms to Depository about dematerializing of the securities.
• Updating records by the Depository: Depository records the request in the system and forwards it to the Issuer Company.
• Intimation to the DP: Depositor credits the dematerialized securities to the beneficiary/investors Demat A/c and informs the DP.
• Intimation to the investor: A statement of account is issued to the Investor periodically. It contains all the details of the investor.

Question 2.
Explain the functioning of the depository under the IPO scheme.
Answer:
IPO is the first sale of shares by a privately owned company to the general public. A public company can raise capital by making an appeal to the general public to purchase shares of the company by issuing a prospectus.

The process of IPO is as follows:

• Submission of Application: The investor (applicant/BO) has to submit an application for securities to the issuer company.
• Verification with Depository: The details of the investor are verified by the company with Depository.
• Report by Depository: After verification depository submits the investors report to the issuer company
• Details of Allotment: The issuer company submits the details of allotment to the depository for updating their records.
• Crediting the account: The depository credits the account of the beneficial owner with a specific number of securities.
• Intimation to the DP: Depository then informs the Depository Participant (DP) about the details of the beneficial owner account.
• Intimation to the BO: Depository Participant informs the beneficial owner (investor) about his investment through Statement of Accounts.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 8 Correspondence with Depositors Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 8 Correspondence with Depositors

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
_____________ capital is raised by accepting deposits.
(a) owned
(b) fixed
(c) borrowed
Answer:
(c) borrowed

Question 2.
Deposits are accepted to fulfil _____________ capital need of the company.
(a) working
(b) fixed
(c) owned
Answer:
(a) working

Question 3.
A company can accept deposit for minimum _____________ months.
(a) 12
(b) 36
(c) 6
Answer:
(c) 6

Question 4.
Person investing in company’s deposit is called _____________
(a) depositor
(b) debenture holder
(c) shareholder
Answer:
(a) depositor

Question 5.
Company makes payment of interest on deposits after deducting _____________
(a) ACS
(b) CGS
(c) TDS
Answer:
(c) TDS

Question 6.
Company can also make electronic payment of interest through _____________
(a) DGFT
(b) NEFT
(c) IEPF
Answer:
(b) NEFT

Question 7.
A government Company can accept maximum _____________ percent deposit.
(a) 25
(b) 35
(c) 30
Answer:
(b) 35

Question 8.
A private company can accept deposits from _____________
(a) directors
(b) government
(c) public
Answer:
(c) public

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
1. Deposit maturity	(a) Letter of renewal
2. Accuracy	(b) Investment up to ₹ 25000
3. Deposit receipt	(c) 21 days
4. Small depositors	(d) Precaution
5. Renewal of deposit	(e) 36 months
	(f) Creditors

Answer:

Group ‘A’	Group ‘B’
1. Deposit maturity	(e) 36 months
2. Accuracy	(d) Precaution
3. Deposit receipt	(c) 21 days
4. Small depositors	(b) Investment up to ₹ 25000
5. Renewal of deposit	(a) Letter of renewal

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
A person who invests in a company’s deposits.
Answer:
Depositor

Question 2.
The status of the deposit holder in the company.
Answer:
Creditor

Question 3.
Amount deducted from gross interest exceeding ₹ 10,000.
Answer:
TDS

Question 4.
Avoiding rude and harsh words while writing letters to the depositor’s means.
Answer:
Courtesy

Question 5.
The way of writing letters from depositors’ point of view.
Answer:
You attitude

1D. State whether the following statements are true or false.

Question 1.
The deposit represents owned capital of the company.
Answer:
False

Question 2.
Fixed deposit is a long-term source of finance.
Answer:
False

Question 3.
Company Secretary has to follow legal provisions while corresponding with depositors.
Answer:
True

Question 4.
Correspondence with depositors helps to maintain the goodwill of the company.
Answer:
True

Question 5.
The deposit receipt should be issued within 21 days from the date of acceptance of the deposit.
Answer:
True

Question 6.
Government companies can raise deposits up to 35 percent.
Answer:
True

1E. Find the odd one.

Question 1.
Repayment of Deposit, Convertible Debentures, Renewal of Deposit
Answer:
Convertible Debentures

Question 2.
Depositor, Creditor, Evidence of Ownership
Answer:
Evidence of Ownership

Question 3.
6 months, 25 months, 36 months
Answer:
25 months

1F. Complete the sentences.

Question 1.
Company cannot accept deposits for a period more than _____________ months.
Answer:
36 months

Question 2.
The company is liable to pay regular _____________ on the deposits at a fixed rate.
Answer:
Interest

Question 3.
Company cannot accept deposits for period less than _____________ months.
Answer:
6 months

Question 4.
Unnecessary and irrelevant information in the letter should be _____________
Answer:
Avoided

Question 5.
Secretary conducts correspondence with the depositors as per the instructions of the _____________
Answer:
Board of Directors

1G. Answer in one sentence.

Question 1.
Who gives instructions to the company secretary for corresponding with the depositors?
Answer:
The Board of Directors gives instructions to the company secretary for corresponding with the depositors.

Question 2.
Who’s consent is necessary for the renewal of the deposit?
Answer:
Depositors’ consent is necessary for the renewal of the deposit.

Question 3.
What is the time limit for sending deposit receipts to the depositor from the date of acceptance?
Answer:
A deposit receipt is sent to the depositor within 21 days from the date of acceptance of a deposit.

1H. Correct the underlined words and rewrite the following sentences.

Question 1.
Deposits can be accepted for a minimum period of 12 months.
Answer:
Deposits can be accepted for a minimum period of 6 months.

Question 2.
Deposit receipt can be issued within a period of 15 days of acceptance.
Answer:
Deposit receipt can be issued within a period of 21 days of acceptance.

1I. Arrange in proper order.

Question 1.
Legal provision, Board Resolution, Acceptance of deposits
Answer:
Legal provision, Board Resolution, Acceptance of deposits

Question 2.
Appoint banker, Credit rating, Deposit insurance
Answer:
Appoint banker, Credit rating, Deposit insurance

Question 3.
Return with depositors, Entries in register of deposit, Issue of the deposit receipt
Answer:
Issue of deposit receipt, Entries in the register of deposit, Return with depositors

2. Justify the following statements.

Question 1.
Public deposits can be renewed after the maturity period.
Answer:

• Deposits are unsecured loans offered to the company.
• Deposits can be accepted for a minimum period of 6 months and a maximum period of 36 months.
• If the Depositor agrees, deposits can be renewed for a further period.
• Renewal may take place with the same terms and conditions or maybe with different terms and conditions.
• For renewal, the depositor has to submit the old deposit receipt with the renewal request.
• The company will cancel the old deposit receipt and issue the new deposit receipt.
• The depositor enjoys a fixed rate of interest till further maturity.
• Thus, it is rightly said that Public deposits can be renewed after the maturity period.

Question 2.
Deposits are repaid on maturity.
Answer:

• Deposit is a short-term source of finance of the company and it is used in order to satisfy the short-term working capital needs of the company.
• The company cannot accept deposits for a period less than 6 months or more than 36 months,
• The company is liable to pay regular interest on the deposits at a fixed rate along with the principal amount on maturity.
• On maturity of tenure of deposits, it is binding on the company to repay the deposit.
• Default in repayment of deposit results in levy of penalty.
• The letter for repayment of the deposit is to be sent to the depositor when the deposit is to be redeemed.
• Thus, it is rightly justified that deposits are repaid on maturity.

Question 3.
Correspondence with the depositors enhances the goodwill of the company.
Answer:

• The depositors of the company are the creditors of the company.
• They provide borrowed capital to the company to meet its working capital needs.
• proper correspondence with the depositors is helpful to convey proper information about their investments.
• It generates a bridge of good relations between company and depositors which ultimately helps to generate goodwill in the Corporate market.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 7 Correspondence with Debentureholders Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 7 Correspondence with Debentureholders

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
Debenture holders receive ______________ as a proof of their investment in the company.
(a) Share Certificate
(b) Debenture Certificate
(c) Share Warrant
Answer:
(b) Debenture Certificate

Question 2.
______________ have no right to attend company’s meetings.
(a) Shareholders
(b) Directors
(c) Debenture holders
Answer:
(c) Debentureholders

Question 3.
______________ have priority in the repayment of the capital at the time of winding up of the company.
(a) Debenture holders
(b) Shareholders
(c) Secretary
Answer:
(a) Debenture holders

Question 4.
Debentures are secured through charge on the ______________ of the company.
(a) Liability
(b) Profits
(c) Assets
Answer:
(c) Assets

Question 5.
The fund created for the redemption of debentures is known as ______________
(a) DRRF
(b) DHFL
(c) IEPF
Answer:
(a) DRRF

Question 6.
Debentures are repaid on maturity by using debenture ______________ reserve.
(a) Redemption
(b) Depreciation
(c) General
Answer:
(a) Redemption

Question 7.
Debenture holder has the right to inspect ______________
(a) Partnership Deed
(b) Memorandum of Association
(c) Trust Deed
Answer:
(c) Trust Deed

Question 8.
From the date of request, trust deed should be provided by the company with in ______________
(a) 14 days
(b) 7 days
(c) 21 days
Answer:
(b) 7 days

Question 9.
Communication in writing means ______________
(a) Correspondence
(b) Motion
(c) Voting
Answer:
(a) Correspondence

Question 10.
Debentures are issued after passing resolution at ______________
(a) Board Meeting
(b) General Meeting
(c) Committee Meeting
Answer:
(a) Board Meeting

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Courtesy	(a) Wrong Publicity
(2) Prompt Response	(b) True and Real Facts
(3) Transparency	(c) Politeness
(4) Conciseness	(d) Up to date information
(5) Precise Information	(e) Reply without delay
(6) Secretary	(f) Irrelevant Information
(7) Goodwill	(g) Hide Information
	(h) Confidential Officer
	(i) False and incorrect Information
	(j) Rude and harsh wording
	(k) Brief and to the point
	(l) Delay in replying
	(m) Good image of the company
	(n) Disclose Secrets

Answer:

Group ‘A’	Group ‘B’
(1) Courtesy	(c) Politeness
(2) Prompt Response	(e) Reply without delay
(3) Transparency	(b) True and Real Facts
(4) Conciseness	(k) Brief and to the point
(5) Precise Information	(d) Up to date information
(6) Secretary	(h) Confidential Officer
(7) Goodwill	(m) Good image of the company

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
Capital raised by the company by issuing debentures.
Answer:
Debenture Capital

Question 2.
Rate of interest on debentures.
Answer:
Fixed

Question 3.
Debentures are secured by a charge of the assets of the company.
Answer:
Secured Debentures

Question 4.
Debentures are redeemable after a certain period of time.
Answer:
Redeemable Debentures

Question 5.
The Debenture holder has a right to inspect and obtain copies of this deed.
Answer:
Trust Deed

Question 6.
Debenture holder who gets interested through interest coupons.
Answer:
Bearer Debenture holder

Question 7.
The Debentures are issued to the public by issuing this document.
Answer:
Prospectus

Question 8.
The type of Debentures which can be converted into equity shares.
Answer:
Convertible Debentures

1D. State whether the following statements are true or false.

Question 1.
Debenture holders are the creditors of the company.
Answer:
True

Question 2.
Debenture holders enjoy normal voting rights.
Answer:
False

Question 3.
Debentures can be issued to more than 500 people without appointing Debenture Trustee.
Answer:
False

Question 4.
Debenture Certificate is issued within 6 months from the date of allotment of debentures.
Answer:
True

Question 5.
Secretary is the confidential officer of the company.
Answer:
True

1E. Find the odd one.

Question 1.
Courtesy, Transparency, Enclosure
Answer:
Enclosure

Question 2.
Conciseness, Accuracy, Inside address
Answer:
Inside address

Question 3.
Convertible Debentures, Secured Debentures, Cumulative Preference Shares.
Answer:
Cumulative Preference Share

1F. Complete the sentences.

Question 1.
Convertible Debentures are converted into ______________ on the maturity.
Answer:
Equity shares

Question 2.
Redeemable Debentures are ______________ on the date of maturity.
Answer:
Repaid

Question 3.
Registered Debenture holders get interest through ______________
Answer:
Interest Warrant

Question 4.
Bearer Debenture holders get interest through ______________
Answer:
Interest Coupons

Question 5.
Secured Debentures are secured by ______________ on the assets of the company.
Answer:
Charge

Question 6.
Being the creditors, due ______________ should be given to the Debenture holders while corresponding.
Answer:
Respect

Question 7.
The secretary should follow the ______________ of the Companies Act, 2013 .
Answer:
Statutory Provisions

Question 8.
As a Confidential Officer of the company, the secretary should not disclose any important and ______________ information related to the company while corresponding.
Answer:
Secret

Question 9.
The information provided by the secretary must be factual and ______________
Answer:
True

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(a) Interest Warrant	(1) …………………..
(b) ………………………..	(2) Interest Coupons
(c) …………………………	(3) Secured Debenture

(Bearer Debentures, Registered Debentures, Charge on the assets)
Answer:

Group ‘A’	Group ‘B’
(a) Interest Warrant	(1) Registered Debentures
(b) Bearer Debentures	(2) Interest Coupons
(c) Charge on the assets	(3) Secured Debenture

1H. Answer in one sentence.

Question 1.
Who is appointed when the issue of debentures exceeds more than 500 people?
Answer:
Debenture trustees are appointed when the issue of debentures exceeds more than 500 people.

Question 2.
Debenture Certificate should be issued within how many months from the date of allotment of Debentures?
Answer:
Debenture Certificate should be issued within 6 months from the date of allotment of Debentures.

Question 3.
Which debentures are converted into equity shares?
Answer:
Convertible Debentures are converted into equity shares.

Question 4.
Who has to communicate the decisions of the management and other information to the Debenture holders?
Answer:
The secretary has to communicate the decisions of the management and other information to the debenture holders.

Question 5.
Which fund is created for Redemption of Debentures?
Answer:
A Debenture Redemption Reserve Fund is created for Redemption of Debentures.

1I. Correct the underlined word/s and rewrite the following sentences.

Question 1.
Debentures carry a fluctuating rate of interest as a return on investment in debentures.
Answer:
Debentures carry a fixed rate of interest as a return on investment in debentures.

Question 2.
Debenture Capital is the owned capital of a company.
Answer:
Debenture Capital is the borrowed capital of a company.

1J. Arrange in proper order.

Question 1.
Redemption of Debentures, Debenture Redemption Reserve Fund, Debenture Redemption Form.
Answer:
Debenture Redemption Reserve Fund, Debenture Redemption Form, Redemption of Debentures

2. Study the case/situation and express your opinion.

1. As a secretary of Velon Industries Limited.

Question (a).
Give any three circumstances where the company will have to correspond with the debenture holders.
Answer:
Secretary will correspond with the debenture holder under the following circumstances:

• Allotment Letter to debenture holders.
• Payment of Interest.
• Redemption of debentures.

Question (b).
What precautions should be taken while drafting the letters?
Answer:
As a secretary, one should be polite, transparency should be maintained and the image of the company should be kept in mind while drafting the letters.

Question (c).
Board Resolution is necessary for the payment of interest?
Answer:
Yes, Board Resolution is necessary for the payment of interest.

2. Disha Industries Ltd. Allots debentures to Mr. Vijay Mittal.

Question (A).
Which letter will be sent to Mr. Vijay Mittal?
Answer:
Letter of Allotment of Debentures will be sent to Mr. Vijay Mittal.

Question (b).
Why does Vijay Mittal preserve the Allotment Letter?
Answer:
Mr. Vijay Mittal preserves the allotment letter because he will receive a Debenture Certificate in exchange for the allotment letter.

Question (c).
What details does the letter contain?
Answer:
The letter contains the details of the issue of debentures i.e number of debentures applied, numbers of debentures allotted, distinctive numbers of debentures, amount received, types of debentures, rate of interest, maturity date, etc.

3. Rolta India Limited wants to pay interest to the debenture holders.

Question (a).
Which resolution is required for the payment of interest to debenture holders?
Answer:
Board Resolution is required for the payment of interest to the debenture holders.

Question (b).
Can the company pay interest in the next year as in the current year company has incurred a loss?
Answer:
No, the company has to pay the interest as it does not depend upon the profits of the company.

Question (c).
How can the company pay interest to the debenture holders?
Answer:
The company can pay interest to debenture holders by the way of interest warrant and electronic mode i.e. ECS and NEFT.

3. Answer in brief.

Question 1.
What is a debenture? Explain Debenture Capital.
Answer:
Debentures is an instrument in writing, acknowledging a debt under a common seal of a company.

• Debenture represents the borrowed capital of a company.
• The debenture is an acknowledgment of debt.
• The debenture holder is a creditor of the company.
• Compared to equity shares, debenture capital is considered safe and secured capital.
• Debentures are repaid on the expiry of a fixed period at the winding up of the company before equity shares are repaid.
• A debenture may be secured, unsecured, redeemable, convertible, non-convertible, etc
• Secured debentures have a charge on the assets of the company.
• Redeemable debentures are repaid on the expiry of a fixed period.
• Convertible debentures are converted into equity shares on the expiry of a fixed period.
• Non-convertible debentures cannot be converted into equity shares but are repaid on the expiry of the fixed period.

Question 2.
State any four precautions to be taken while drafting letters to the debenture holders.
Answer:
The following precautions are to be kept in mind by the secretary while corresponding with the debentures.
(i) Transparency:

• Transparency with debenture holders has to be maintained.
• It is necessary to disclose correct and accurate information of the company, favourable as well as the adverse credit rating of the company, etc. in correspondence.

(ii) Politeness (Courtesy):

• As debenture holders are the creditors of the company, proper respect should be given to them in correspondence.
• The use of words in the letter should be proper which depicts respect to the debenture holders.
• Rude and harsh words should be strictly avoided.

(iii) Conciseness:

• Letters to the debenture holders should be brief and to the point.
• Unnecessary information should be avoided.

(iv) Accuracy/Precise information:

• The secretary should provide precise and up-to-date information to debenture holders.
• The information must be true and correct.

Question 3.
When does a secretary enter into correspondence with debenture holders?
Answer:

1. Debenture holders are creditors of the company.
2. Therefore, they do not participate in the management of the company.
3. They do not enjoy voting rights.
4. Whatever decisions are taken by the management, are communicated to them by the secretary.
5. A secretary has to enter into correspondence with the debenture holders under the following circumstances:
   • Informing the applicant about allotment of debentures.
   • Informing about payment of interest through
     • Interest warrant
     • Electronic payment of Interest
   • Letter of conversion of debentures into equity shares.
   • Letter for the redemption of debentures.

4. Justify the following statements.

Question 1.
Debenture holders are the creditors of the company.
Answer:

• Debenture represents borrowed capital of the company.
• It is an acknowledgment of debt issued by the company under its common seal.
• The person buying the debenture is known as the ‘Debenture holder’.
• Debenture holders are the creditors of the company.
• They provide loans to the company and hence, enjoy fixed-rate interest as a return on their investment.
• Debentures are secured and redeemable. They are repaid after a certain period of time, i.e. on the maturity date.
• Thus, it is rightly justified that, debenture holders are the creditors of the company.

Question 2.
The company secretary should follow legal provisions while corresponding with Debenture holders.
Answer:

• Debenture holders are the creditors of the company and hence, the secretary has to correspond with Debenture holders on different occasions.
• The secretary should follow the statutory provisions of the Companies Act, 2013 and other relevant laws while corresponding with Debenture holders.
• Secretary should be cautious and careful while corresponding with debenture holders on legal matters. He should be aware of legal consequences.
• Non-compliance with legal provisions can result in legal consequences, creating problems for the company.
• Thus, it is rightly justified that, the company secretary should follow legal provisions while corresponding with debenture holders.

Question 3.
Interest is a debt.
Answer:

• Debenture capital is the borrowed capital of the company.
• Debenture holders are the creditors of the company receiving the fixed rate of interest.
• The company pays the interest through interest warrant and electronic mode i.e. Electronic Clearing System (ECS) or National Electronic Fund Transfer (NEFT).
• Interest is to be paid compulsorily even if the company makes a loss. It does not depend upon the profits of the company.
• Thus, it is rightly justified that, interest is debt.

5. Attempt the following.

Question 1.
Explain the different types of letters written to the debenture holders.
Answer:
Secretary has to communicate with the management and the debenture holders for various reasons. This communication is done by drafting letters to the debenture holders. A secretary should be very cautious and careful while corresponding with debenture holders of the company. Following are the circumstances when the secretary corresponds with the debenture holders.

(i) Debenture Allotment Letter.

• An allotment Letter is sent to the debenture holders when the company allows debentures to the applicant.
• Allotment Letter is preserved by the debenture holder till he receives Debenture Certificate in exchange for this letter.
• Allotment Letter contains details of the issue of debentures, i.e. name of debenture holder, debentures issued, face value, types of debentures, rate of interest, etc.

(ii) Payment of Interest Letter.

• Interest is paid to the debenture holders through:
  • Interest Warrant
  • Electronically
• Payment of Interest Letter contains details such as a number of debentures, distinctive numbers, the gross amount of interest payable, TDS deducted, the net amount of interest payable, etc.
• Board Resolution is required for the payment of interest on debentures.

(iii) Conversion of Debentures Letter.

• Debentures are converted into equity shares.
• Conversion of Debenture Letter is issued only when the company receives Letter of Option.
• After conversion, a share certificate is issued.
• Approval of shareholders is necessary by passing a special resolution at Extra-Ordinary General Meeting.
• Only after receiving the shareholders’ approval, letter of conversion of debentures is sent to debenture holders.

(iv) Redemption of Debentures Letter.

• Debentures are redeemed after a specific period.
• Debenture Redemption Reserve Fund (DRRF) is created for the redemption of debentures.
• Debenture Redemption Form (DRF) is sent along with the letter.
• This letter informs that their debentures have become due for redemption.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 6 Correspondence with Members Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 6 Correspondence with Members

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
Shareholders are ____________ of the company.
(a) Owners
(b) creditors
(c) loan givers
Answer:
Owners

Question 2.
Important decisions need approval of ____________ at the meeting.
(a) auditors
(b) shareholders
(c) directors
Answer:
shareholders

Question 3.
Secretary writes letter to members as ____________
(a) auditor
(b) Public Relations Officer
(c) Director
Answer:
Public Relations Officer

Question 4.
____________ shares are issued to existing equity shareholders.
(a) deferred
(b) preference
(c) bonus
Answer:
bonus

Question 5.
Polite and prompt correspondence by secretary creates ____________ of the company.
(a) goodwill
(b) prestige
(c) image
Answer:
goodwill

Question 6.
Secretary is a ____________ of confidential matter.
(a) caretaker
(b) custodian
(c) auditor
Answer:
custodian

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Secretary	(a) Registered Document
(2) Electronic Mode	(b) Fluctuating rate of dividend
(3) Share Certificate	(c) Correspondence with members
(4) Reply Letter	(d) Dividend Warrant
(5) Bon as Share	(e) Payment of Dividend
	(f) Existing Equity Shareholder
	(g) Bearer Document
	(h) Low rate of dividend
	(i) Fluctuations in the market
	(j) Correspondence with Bank

Answer:

Group ‘A’	Group ‘B’
(1) Secretary	(c) Correspondence with members
(2) Electronic Mode	(e) Payment of Dividend
(3) Share Certificate	(a) Registered Document
(4) Reply Letter	(h) Low rate of dividend
(5) Bon as Share	(f) Existing Equity Shareholder

1C. Write a word or term or a phrase that can substitute each of the following statements.

Question 1.
Return of investment in shares.
Answer:
Dividend

Question 2.
Warrant attached with notice of dividend.
Answer:
Dividend warrant

Question 3.
Title to the shares issued by the company.
Answer:
Share Certificate

Question 4.
A portion of profits is distributed to the shareholders of the company.
Answer:
Dividend

Question 5.
The letter containing reasons for the low rate of dividends.
Answer:
Reply Letter

1D. State whether the following statements are True or False.

Question 1.
Secretary should always provide correct, updated, and tactful information to the members.
Answer:
True

Question 2.
Secretary should disclose confidential information to the members.
Answer:
False

Question 3.
Share certificates must be duly stamped and signed under the common seal of the company.
Answer:
True

Question 4.
The dividend is declared and approved in General Meeting.
Answer:
False

Question 5.
A dividend warrant is a written order given by the company to its banker to pay the amount mentioned in it to the shareholder whose name is specified therein.
Answer:
True

Question 6.
The dividend is to be paid to shareholders within 30 days from the date of declaration.
Answer:
False

1E. Find the odd one.

Question 1.
Allotment letter, Allotment slip, Refund order
Answer:
Refund order

Question 2.
Dividend Coupon, Dividend warrant, Transfer receipt
Answer:
Transfer receipt

1F. Complete the sentences.

Question 1.
Shareholders are the ____________ of the company.
Answer:
owners

Question 2.
The role of secretary while writing to members is of ____________
Answer:
Public Relations Officer

Question 3.
Share Certificate must be signed by at least ____________ directors.
Answer:
2

Question 4.
Dividend is the portion of ____________
Answer:
Profits

Question 10.
Bonus Shares issued are credited to Shareholders ____________ Account.
Answer:
Demat

1G. Select the correct option from the bracket.

Question 1.

Group ‘A’	Group ‘B’
(1) …………………..	(a) Directors and Members
(2) ………………….	(b) Registered Post
(3) Correspondence	(c) …………………….
(4) ………………….	(d) Payment of Dividend Electronically

(Written communication, Share Certificate, Secretary, ECS)
Answer:

Group ‘A’	Group ‘B’
(1) Secretary	(a) Directors and Members
(2) Share Certificate	(b) Registered Post
(3) Correspondence	(c) Written communication
(4) ECS	(d) Payment of Dividend Electronically

1H. Answer in one sentence.

Question 1.
What is politeness?
Answer:
Politeness means the use of courteous language. A courteous letter shows sympathy, respect, and mutual understanding.

Question 2.
What is the time period to dispatch the share certificate by the company?
Answer:
The company must dispatch a share certificate to the allottee within two months after the allotment of shares.

Question 3.
What is the time limit to pay the dividend?
Answer:
The dividend is to be paid to the shareholders within 30 days from the date of declaration.

1I. Correct the underlined word and rewrite the following sentences.

Question 1.
Secretary should follow relevant provisions of the Companies Act, 1986.
Answer:
Secretary should follow relevant provisions of the Board of Directors.

Question 2.
Share Certificate must be countersigned by the shareholder.
Answer:
Share Certificate must be countersigned by the Board of Directors.

Question 3.
The interim dividend is declared by shareholders.
Answer:
The interim dividend is declared by Equity.

Question 4.
Interim Dividend is paid through cash.
Answer:
Interim Dividend is paid through electronic mode.

Question 5.
Rights shares are the shares given to existing shareholders free of cost.
Answer:
Bonus shares are the shares given to existing shareholders free of cost.

1J. Arrange in proper order.

Question 1.
(a) Reply Letter
(b) Issue of Share Certificate
(c) Payment of Dividend
Answer:
(a) Issue of Share Certificate
(b) Payment of Dividend
(c) Reply Letter

2. Explain the following terms/concepts.

Question 1.
Correspondence with Members
Answer:
Correspondence with members means communicating the decisions and information of the management to the members through letters. The letter not only includes casual informing but also sending replies to the letters.

Question 2.
Share Certificate
Answer:
Share Certificate is a registered document. It is a title of shares issued by the company under the common seal of the company. It should be duly stamped and signed by two directors and countersigned by the secretary of the company.

3. Answer in brief.

Question 1.
Explain Secretary acts as a link between the Directors and the Members.
Answer:

• A secretary is an employee in the organization. The secretary is responsible for all the compliances with statutory and regulatory requirements.
• The Secretary communicates the decisions and information taken by the management to the members through correspondence.
• The secretary also deals with government agencies and private institutions.
• The secretary replies to the queries raised by the members. Complaint letters should be promptly attended without any delay by the secretary.
• The secretary should provide correct and updated information to the members as and when demanded.

Question 2.
Write a note on Payment of dividend.
Answer:

• The dividend is the portion of the company’s profits that is distributed among the shareholders of the company.
• The dividend is paid through the Dividend Warrants or through Electronic Mode i.e. ECS, NEFT, etc. to the registered shareholders.
• The rate of dividend is recommended by the Board of Directors.
• It is declared and approved by shareholders in the Annual General Meeting.
• The dividend is to be paid to the shareholders within 30 days from the date of declaration.
• The letter related to the payment of the dividend is sent to the concerned shareholders. The letter contains detailed information regarding the payment of dividends.

4. Justify the following statements.

Question 1.
Share Certificate is a registered document.
Answer:

• Share Certificate is the title to the shares issued by the company.
• It is duly stamped and signed by two directors and countersigned by the directors under the common seal of the company.
• It contains all the details regarding the issue of shares, shareholders’ names, number of shares issued, share certificate number, etc.
• It is issued or dispatched to the allottee within two months after allotment of shares.
• Thus, it is rightly said that a share certificate is a registered document.

Question 2.
Registered shareholders get dividends through dividend warrants or electronically.
Answer:

• The dividend is the portion of profits of the company which is distributed to the shareholders of the company.
• Dividend can be paid through dividend warrant or by means of electronic mode i.e. ECS or NEFT, etc only to the registered shareholders.
• The dividend is paid through dividend coupons to share warrant holders. Share warrant is a bearer document of title to shares.
• The letter contains a number of equity shares held, dividend warrant number, gross dividend, TDS if any, the net amount of dividend, etc.
• Thus, it is rightly said that the registered shareholders get dividends through dividend warrants or electronically.

Question 3.
Reply letter contains or specifies the reasons for the low rate of dividend.
Answer:

• Reply letter is the answer given to the query raised by the member.
• The letter is sent to the concerned member who is not satisfied with the payment of dividend made by the company.
• The letter contains reasons for the lowering down of the rate of dividend.
• The secretary has to convince the shareholders that the dividend is lowered due to void reasons and assure that company will overcome the situation.
• Thus, it is rightly said that a reply letter contains or specifies the reasons for the low rate of dividend.

5. Study the case/situation and express your opinion.

1. As a Secretary of Networks limited.

Question (a).
Give any 3 occasions where he will have to correspond with members.
Answer:
Secretary will correspond with members on the following occasions:

• Issue of Share Certificate;
• Payment of Dividend;
• Reply to query letter

Question (b).
3 points of precautions he will take while drafting a letter.
Answer:
Correct Information, Lucid language, and the image of the company have to be borne in mind.

Question (c).
Whether he should take Director’s approval before drafting any letter.
Answer:
Yes, Director’s approval is a must for major matters.

2. Comfort Motors Ltd. has allotted shares to Mr. Jayant Modi.

Question (a).
Will Comfort Motors Ltd. send a letter to Mr. Jayant Modi when demanded?
Answer:
Yes, when Mr. Jayant Modi demands, the company will send the letter for the issue of the share certificate.

Question (b).
How will the company send the share certificate?
Answer:
The company will send the share certificate through registered post.

Question (c).
What information should the letter of issue of share certificate contain?
Answer:
The letter will contain information such as folio no., share certificate no., no. of shares, etc.

3. Mr. Ashish Rai has applied for 100 shares of ₹ 10 each payable as ₹ 2 per share on application, ₹ 4 on the allotment, and ₹ 4 on 1st and final call.

Question (a).
Is there any compulsion that he get the number of shares he has applied for?
Answer:
No, there is no such compulsion to get the shares. he has applied for. In case of oversubscription he may or may not be allotted shares.

Question (b).
What is the amount he will have to pay at the time of application?
Answer:
Mr. Ashish will have to pay ₹ 200/- (₹ 2/- x 100 shares applied for) at the time of application.

Question (c).
What is the maximum amount he will have to pay for the above shares?
Answer:
₹ 1000/- (₹ 10 * 100 shares) is the maximum amount that Mr. Ashish will have to pay as a total amount for the shares.

4. Anmol Steel Industries Ltd. wants to pay dividends to the registered shareholders.

Question (a).
Who recommends and approves the rate of dividend?
Answer:
The Directors recommends and shareholders approve the rate of dividend.

Question (b).
How will the dividend be paid to the shareholders?
Answer:
The dividend can be paid through a dividend warrant or through electronic mode i.e. ECS, NEFT.

Question (c).
Is the letter sent to the registered shareholders before the payment of the dividend?
Answer:
Yes, the companies send the letter of payment of dividend.

5. Mr. Raj She seeks information about interim dividends as heard from one of his fellow shareholders.

Question (a).
What does the Secretary refer to?
Answer:
The Secretary will refer to the date of dividend notice sent to the members

Question (b).
Does he need to give the details of the interim dividend?
Answer:
Yes, he can give the date and details sent.

Question (c).
After getting the details does Mr. Raj have any document that he can refer to as proof?
Answer:
Mr. Rajat can verify with the Passbook/ statement as regards the amount credited.

6. Yash Industries Ltd. is issuing bonus shares.

Question (a).
Can the company issues bonus shares to all the shareholders?
Answer:
No, the company can issue bonus shares to only existing shareholders of the company.

Question (b).
Is it necessary for the shareholders to pay a certain amount for bonus shares?
Answer:
No, bonus shares are fully paid up shares given by the company as a gift.

Question (c).
How are the shareholders informed regarding the issue of bonus shares?
Answer:
Bonus Shares are credited to shareholders Demat Account or share certificate is issued if shares are held in physical form.

7. Mr.Anand Khot has complained of a low rate of dividends. As a Secretary,

Question (a).
Is it necessary to reply to the complaint letter?
Answer:
Yes, it is a must for the Secretary to send a reply letter.

Question (b).
Is it necessary to give reasons for the low rate of dividends?
Answer:
Yes, reasons, as discussed in the AGM, can be written in the letter in order to convince about the low rate of dividend.

Question (c).
Which points he has to keep in mind while drafting the above letter?
Answer:
Prompt response, correct information, politeness, and image of the company are some of the major points to be considered while drafting the letter.

Balbharti Maharashtra State Board Class 12 Secretarial Practice Important Questions Chapter 5 Deposits Important Questions and Answers.

Maharashtra State Board 12th Secretarial Practice Important Questions Chapter 5 Deposits

1A. Select the correct answer from the options given below and rewrite the statements.

Question 1.
No Deposits can be repaid before ___________ months.
(a) One
(b) Six
(c) Nine
Answer:
(b) Six

Question 2.
Premature deposits can be repaid after ___________ months.
(a) Two
(b) Three
(c) Four
Answer:
(b) Three

Question 3.
___________ company cannot collect deposits from the public.
(a) Private
(b) Public
(c) Government
Answer:
(a) Private

Question 4.
A copy of return of deposits must be sent to ___________
(a) Registrar of companies
(b) Govt of India
(c) State bank of India
Answer:
(a) Registrar of companies

Question 5.
On acceptance of deposits, companies required to keep register of deposits at ___________
(a) Office of the registrar
(b) Sebi office
(c) Registered office of the company
Answer:
(c) Registered office of the company

1B. Match the pairs.

Question 1.

Group ‘A’	Group ‘B’
(1) Return of deposits	(a) Cognisable criminal offense
(2) Deposits in contravention of the law	(b) 25% of paid-up capital
(3) Deposit Repayment Reserve Account	(c) Delivered to the registrar of companies
(4) Registrar of Companies	(d) Approved by the SEBI
(5) Eligible public company	(e) Filing of circular or advertisement
	(f) On or before 30th June every year
	(g) Not less than 15%
	(h) Net worth 100 crores
	(i) Net worth 10 crores
	(j) No punishment

Answer:

Group ‘A’	Group ‘B’
(1) Return of deposits	(f) On or before 30th June every year
(2) Deposits in contravention of the law	(a) Cognisable criminal offense
(3) Deposit Repayment Reserve Account	(g) Not less than 15%
(4) Registrar of Companies	(e) Filing of circular or advertisement
(5) Eligible public company	(h) Net worth 100 crores

Question 2.

Group ‘A’	Group ‘B’
(1) Private company	(a) Approval of secretary
(2) Period of deposit	(b) Can accept deposits from the public
(3) Validity of advertisement	(c) Can accept deposits from its members or relatives of directors or directors
(4) Board of directors	(d) Six months to three years
(5) Public company	(e) Approval of depositors
	(f) Right to accept deposits
	(g) Six months to forty-two months
	(h) Refund of deposit before maturity
	(i) Ten months after the expiry of the financial year
	(j) Six months after the expiry of the financial year

Answer:

Group ‘A’	Group ‘B’
(1) Private company	(c) Can accept deposits from its members or relatives of directors or directors
(2) Period of deposit	(d) Six months to three years
(3) Validity of advertisement	(j) Six months after the expiry of the financial year
(4) Board of directors	(f) Right to accept deposits
(5) Public company	(b) Can accept deposits from the public

1C. Write a word or a term or a phrase that can substitute each of the following statements.

Question 1.
An acknowledgment of deposit accepted by the company.
Answer:
Deposit Receipt

Question 2.
Type of company that can accept deposits from members as well as the public.
Answer:
Eligible Public Company

Question 3.
A record of details of public deposits maintained by the company.
Answer:
Deposit register

Question 4.
The authority which has the power to accept deposits.
Answer:
Board of Directors

Question 5.
Return on investments as deposits in the company.
Answer:
Interest

Question 6.
Time within which company has to issue deposit receipt.
Answer:
30 Days

1D. State whether the following statements are true or false.

Question 1.
A company can accept deposits payable on demand.
Answer:
False

Question 2.
A company can accept deposits to any extent.
Answer:
False

Question 3.
Acceptance of deposits is the same as a renewal.
Answer:
False

Question 4.
Deposits may be secured or unsecured.
Answer:
True

1E. Find the odd one.

Question 1.
Record of deposits registered office of the companies, Registrar of companies.
Answer:
Registrar of companies

Question 2.
Six months, thirty-six months, forty-two months.
Answer:
Forty-two months

Question 3.
Advertisements, Circular, Board meeting.
Answer:
Board meetings

Question 4.
English newspaper, application for, a regional newspaper.
Answer:
Application forms

Question 5.
Return of deposits, stock exchange, registrar of companies.
Answer:
Stock Exchange

1F. Answer in one sentence.

Question 1.
Are loans and deposits the same?
Answer:
Loans mean any sum borrowed by a company. It has to be repaid instantly or when demanded by the lender whereas deposits are sums borrowed by the company but repaid only on a fixed maturity date.

2. Explain the following terms/concepts.

Question 1.
Register of Deposit
Answer:

• Register for Deposits records all the deposits accepted or renewed by the company at its registered office.
• The details of the deposit along with the details of the depositors should be entered in the Register of Deposits within seven days from the date of issue of the Deposit Receipt.

Question 2.
Interest on Deposit
Answer:

• The return received on the deposit amount is called Interest on Deposit.
• The rate of interest on deposits is decided by the Reserve Bank of India from time to time.
• In case of premature repayment of deposits, the company can deduct 1% interest from the rate of interest stated at the time of acceptance of the deposit.

3. Answer in brief.

Question 1.
Explain the provisions related to the period/tenure of deposits.
Answer:
The provisions related to the period/tenure of deposits are as follows:

• No deposit can be accepted or renewed which is to be repaid within a period of six months or more than thirty-six months.
• In certain circumstances, a company may accept deposits repayable earlier than six months to meet its short-term needs.
• Such deposits must have a tenure of a minimum of three months and the number of such deposits cannot be more than 10% of the aggregate of the paid-up share capital and free reserves of the company.
• Under certain circumstances, at the request of the depositor, the company makes premature repayment of deposits.
• The company may also renew its deposits with the same terms of issue and it will be considered as fresh deposits.

4. Answer the following questions.

Question 1.
Explain terms and conditions for acceptance of deposits.
Answer:
The company raises funds by accepting deposits from the public and its own members. In other words, it is a short-term loan taken by the company. The company can collect deposits on certain terms and conditions laid down by the Companies Act 2013. They are as follows:
(i) Amount of Deposit:
Different types of companies have different terms and conditions for accepting deposits.
The following table shows the percentage of acceptance of deposits.

Companies	Acceptance of Deposits (%)
(i) Private Company	Up to 100% of the aggregate of paid-up share capital and free reserves
(ii) Public Company	Should not exceed 25% of the aggregate of paid-up capital and free resources
(iii) Eligible Public Company	Should not exceed 25% of the aggregate paid-up capital and free reserves in case of the public. Should not exceed 10% of the aggregate paid-up capital and free reserves in case of members.
(iv) Government Company	Should not exceed 35% of the paid-up share capital and free reserves.

(ii) Period/Tenure of Deposit:

• The tenure of deposit should be more than six months but less than thirty-six months.
• Under certain circumstances only, the company can accept deposits for 3 months.
• The company can make premature repayment of deposits after a minimum of 3 months.

(iii) No demand deposit:
The company cannot accept or renew deposits repayable on demand.

(iv) Secured or Unsecured Deposit:

• A company can accept secured or unsecured deposit if it is mentioned in the circular or advertisement.
• A company offering secured deposits has the right to create a charge on its tangible assets within 30 days of acceptance of deposits.

(v) Application Form:

• A prescribed application form is to be filled by the applicant.
• This application form is given by the company.
• It includes a declaration made by the applicant that the deposit he is making is not borrowed from any person.

(vi) Joint names:
The company can accept deposits in joint names of depositors. But there should not be more than three names.

(vii) Nomination:

• Every depositor has to nominate at least one person.
• Nominee enjoys all the benefits in the event of death of the depositor.

(viii) Circular or Advertisement:

• If a company invites deposits from its members, it issues a circular. But if it invites deposits from the public, the company has to issue an advertisement.
• A copy of the circular or advertisement signed by all directors must be filed with the Registrar of Companies.
• Issue of Circular or Advertisement:
• The company has to publish the advertisement in one English newspaper and one vernacular/regional newspaper.

(ix) Appointment of Deposit Trustee:

• Deposit Trustee is appointed by the public companies and eligible public companies.
• One of the more deposit trustees is appointed if secured deposits are issued.
• A contract ‘Trust Deed’ is signed between the company and deposit trustee.

(x) Create charge on assets:
The company secured deposits create a charge on its tangible assets within 30 days of acceptance.

(xi) Deposit Insurance:

• A company needs to take Deposit Insurance at least 30 days before the issue of circular or advertisement.
• Deposit insurance is necessary only when the deposit amount plus interest is up to ₹ 20,000.

(xii) To obtain a credit rating:

• The company obtains credit ratings for deposits on the basis of the net worth of the company, liquidating position, ability to repay deposits on time, etc.
• Credit rating for deposits is given by credit rating agencies.
• The rating is done every year during the tenure of deposits.

(xiii) Open Deposit Repayment Reserve Account:

• A Deposit Repayment Reserve Account is opened in a scheduled bank for accepting deposits.
• The company has to deposit an amount up to 15% of the number of deposits maturing during the current year and following the financial year on or before 30th April.
• This account is used only for repaying deposits only.

(xiv) Deposit Receipt:

• Deposit Receipt is to be issued to the depositors within 21 days from the date of receipt of money or realization of cheque.
• The receipt has to be signed by the officer duly authorized by the Board of Directors.
• The Receipt contains the name and address of the depositor, amount of deposit, rate of interest payable, and date on which it is repayable.

(xv) Register of Deposit:

• Register of Deposit is to be maintained by the company at its registered office.
• The details of the deposit accepted and renewal of the deposits are recorded and depositors are recorded in the Register of Deposits.
• Deposit Receipt should be issued within 7 days from the date of issue.

(xvi) Return of Deposit:

• A Return of Deposit should be recorded with the company on or before 30th June every year.
• The return includes details of deposit with the company as of 31st March of that year.

(xvii) Interest:

• Reserve Bank of India decides the rate of interest on deposits.
• The rate of interest changes from time to time.
• In case of premature repayment of deposits, the company can deduct 1% interest from the rate of interest.
• If the deposits matured and are claimed but remain unpaid by the company, the company will be liable to pay a penal rate of interest at the rate of 18%.

(xviii) Right to alter the Terms and Conditions:
A company cannot directly or indirectly alter the terms and conditions of the Deposit, Deposit Trust Deed, and Deposit Insurance, once the circular or advertisement is issued and deposits are accepted.

(xix) Disclosure in financial statements:
Deposit money received by the company from the Directors or the relatives of the Directors (in the case of a private company) should be disclosed in the company financial statement.

(xx) Punishment:

• As per the Companies Act, an officer of the company will be liable for punishment if found guilty / not fulfilling the provisions of the Act.
• The Maharashtra Protection of Interest of Depositors (in Financial establishments) Act, 1999 has the right to take action against companies and also punish if found guilty.
• Companies in Maharashtra will be punished for contravening the provisions of this Act also.

Question 2.
Explain the procedure for accepting deposits from the public.
Answer:
Only Eligible Public Companies can accept deposits from the public.
Following is the procedure to be followed for accepting deposits from the public:
(i) Hold Board Meeting:

• A resolution is passed in the Board Meeting for accepting the deposits from the public.
• The details of the amount of deposit, terms and conditions of issue, etc. are decided in this meeting.

(ii) Hold a General Meeting:

• A General Meeting is held by the company for seeking shareholders’ approval for accepting deposits.
• A Special resolution is passed and filed with the Registrar of Companies and if needed with RBI also.

(iii) Hold Board Meeting:

• The board meeting is held to verify and approve the draft of the advertisement.
• The draft should be signed by the majority of the Directors of the company.

(iv) Appoint Banker:
The company has to appoint a banker so that the applicants can submit their application form along with the deposit money.

(v) Obtain Credit Rating:

• The company has to obtain a Credit rating from a recognized Credit Rating Agency.
• This helps in the goodwill of the company.
• This credit rating should be mentioned in the advertisement.

(vi) Appoint Deposit Trustee:

• The company appoints Deposit Trustees when secured deposits are issued.
• It is a contract between the company and Trustee i.e. Deposit Trustee Deed.
• The Deposit Trust deed contains the terms and conditions.
• The deed has to be signed at least 7 days before issuing the advertisement.

(vii) Take Deposit Insurance:

• The company enters into an agreement with the Insurance Company 30 days before issuing the advertisement.
• Deposit Insurance is necessary only when the deposit amount plus interest exceeds ₹ 20,000.

(viii) File a copy of the advertisement with the Registrar of Companies:

• A copy of the advertisement has to be filed with the Registrar of Companies.
• The company can publish the advertisement after 30 days of filing.

(ix) Advertisement to the Public:

• Advertisement is published for the public after 30 days of filing with the Registrar of Companies.
• The advertisement has to be published in one English newspaper and one regional newspaper having wide circulation in the state where the company’s registered office is located.

(x) Upload the advertisement on the company’s website:
After releasing the advertisement to the public, it is also necessary to upload it on the company’s website.

(xi) Collect application form and money:
The banker collects the application forms along with the deposit money on behalf of the company.

(xii) Issue Deposit Receipt:
The company has to issue a Deposit Receipt within 21 days from the date of receipt of money or realization of cheque.

(xiii) Create charge on assets:

• The company issuing secured deposits can create charges on its assets.
• This charge of assets should be created within 30 days of acceptance of the deposit.

(xiv) Make entries in Register of Deposits:
Secretary has to record the details of deposits in the Register of Deposits within the 7 days after issuing the Deposit Receipt.
The entries have to be verified by an authorized officer.

(xv) File Return of Deposits with Registrar of Companies:

• The company has to file a Return of Deposit before 30th June every year.
• The return has details of Deposits with the company as of 31st March

Question 3.
Explain the procedure for accepting deposits from members.
Answer:
The following is the procedure to accept deposits from members:
(i) Hold Board Meeting:

• Secretary arranges for a Board Meeting.
• In the Board Meeting, decisions regarding the amount of deposit, terms of issue of deposit, etc. are decided.

(ii) Hold a General Meeting:

• To seek approval from shareholders for accepting deposits, the company holds a general meeting.
• A special resolution is passed in a general meeting and filed with the Registrar of Companies.

(iii) Hold Board Meeting:

• After getting shareholder’s approval, a Board meeting is held to approve the draft of the circular for inviting applications for deposits from members.
• The draft should be signed by a majority of the Directors of the company.

(iv) Appoint Banker:
A Banker is appointed for collecting the application forms and the Deposit money on behalf of the company.

(v) Obtain Credit Rating:

• Credit rating agencies rate the company’s deposit.
• The rating given by the Credit Rating Agency must be mentioned in the circular.

(vi) Appoint Deposit Trustee:

• Company appoints Deposit Trustees.
• The Trust deed is signed at least 7 days before issuing the circular.

(vii) Take Deposit Insurance:
The company takes Deposit Insurance at least 30 days before issuing the circular.

(viii) File a copy with Registrar of Companies:
A copy of the circular is filed with the Registrar of Companies and can be issued to the members-only after 30 days of filing.

(ix) Issue circular to members:

• The company sends the circulars to members after 30 days of filing them with the Registrar.
• It is sent by registered post, speed post, or email. The company may even publish the circular in newspapers.

(x) Upload circular on company’s website:

• An eligible public company has to upload the circular on the company’s website.
• Whereas, it is optional for a private company and other public companies.

(xi) Collect application form and money:
The company informs the bank to collect the application form along with the deposit money.

(xii) Issue of Deposit Receipt:

• A deposit Receipt is issued by the company.
• It should be issued within 21 days from the date of receipt of the money or realization of the cheque.

(xiii) Create charge on assets:
If a company accepts secured deposits, it has to create a charge on its assets within 30 days of acceptance of deposits.

(xiv) Make entries in Register of Deposits:

• Secretary has to enter the details of deposits in the Register of Depositors within 7 days from the date of issue of Deposit Receipt.
• It has to be signed by an authorized officer.

(xv) File Return of Deposits:

• The company has to file a return of deposit before 30th June every year.
• The return has details of deposits with the company as of 31st March.