Nomination is a process whereby a depositor appoints one or more persons to receive the proceeds of the deposit in the event of his/her death. This is done to ensure that the proceeds of the deposit are not lost and that they are distributed to the rightful heirs.
The Banking Regulation Act, 1949 (BRA) mandates banks to allow depositors to make a nomination. The nomination can be made in writing at any time and can be revoked at any time.
The nominee is entitled to receive the proceeds of the deposit only if the depositor dies before the maturity of the deposit. If the depositor survives the maturity of the deposit, the nominee is not entitled to receive any amount.
Loans and Advances
Loans and advances are funds that are lent by a bank to a customer. Banks lend money to customers for a variety of purposes, such as buying a house, starting a business, or financing a car purchase.
The RBI regulates the lending activities of banks under the Banking Regulation Act, 1949 (BRA). The RBI has set out certain requirements that banks must comply with when lending money to customers. These requirements include:
- Banks must assess the creditworthiness of the borrower before lending money.
- Banks must charge a reasonable rate of interest on loans.
- Banks must ensure that the loan is secured by collateral.
- Banks must monitor the borrower’s repayments and take action if the borrower defaults on the loan.
Multiple Choice Questions
- Which of the following is not a requirement that banks must comply with when lending money to customers?
- Banks must assess the creditworthiness of the borrower before lending money.
- Banks must charge a reasonable rate of interest on loans.
- Banks must ensure that the loan is secured by collateral.
- Banks must provide loans to all customers who apply for them.
- Banks must monitor the borrower’s repayments and take action if the borrower defaults on the loan.
- The answer is Banks must provide loans to all customers who apply for them. Banks are not obligated to provide loans to all customers who apply for them. Banks have the right to assess the creditworthiness of the borrower and to decide whether or not to lend money.
- Which of the following is the most important requirement that banks must comply with when lending money to customers?
- Banks must assess the creditworthiness of the borrower before lending money.
- Banks must charge a reasonable rate of interest on loans.
- Banks must ensure that the loan is secured by collateral.
- Banks must monitor the borrower’s repayments and take action if the borrower defaults on the loan.
- All of the above
- The answer is All of the above. All of the requirements mentioned above are important for ensuring the safety and soundness of the banking system and for protecting the interests of depositors.
- What is the purpose of nomination?
- To ensure that the proceeds of the deposit are not lost in the event of the depositor’s death.
- To ensure that the proceeds of the deposit are distributed to the rightful heirs of the depositor.
- To enable the depositor to change the nominee at any time.
- All of the above
- The answer is All of the above. The purpose of nomination is to ensure that the proceeds of the deposit are not lost in the event of the depositor’s death and that they are distributed to the rightful heirs of the depositor. The depositor can also change the nominee at any time.
Conclusion
Nomination and loans and advances are important aspects of banking. By understanding these concepts, you can make informed decisions about your banking relationship.