25 Most Frequently Asked Banking Interview Questions and Answers

The banking industry has its history in India, just as it did in our colonial history. The bank’s financial health will determine the fate of the country’s economy. The banking Industry’s history has three phases: the pre-independence stage (Before 1947), the second phase (1947–1991), and the third phase (1991–present). The banking sector has evolved into its current form.

 

We do have digital banking, banks that don’t have physical branches, and banking services offered by startups. To get back to the point, India’s banking history has shown tremendous changes in the third phase compared to other phases. Technological innovation, such as the Internet, played a major role here. So, Let’s learn about commonly asked Banking Interview Questions and Answers.

 

The banks have gradually evolved into their present form. Because of this, it has the power to save or destroy the country’s economy. The banking industry contributes 16% of the country’s GDP (Gross Domestic Product). The banking career is known as a reputed and stable career as its impact is directly felt on the economy, so government intervention will be earlier compared to other sectors.

 

Which has fueled the demand for banking jobs. To get into banking, one must be academically qualified, well aware of current affairs, and have a good personality assessment. So, keeping these things in mind, it becomes essential to know about Banking Interview Questions and Answers. Especially the one who is passionate about making a career in banking.

25 Most Frequently Asked Banking Interview Questions and Answers

These are the most commonly asked Banking Interview Questions and Answers

1. What is a bank, in simple words?

Ans. A bank is a Financial institution that functions with a license from a central bank or Government. Its major responsibilities are to receive and safeguard customer deposits. It does provide other services, for example, Insurance, stock trading, transaction platform, etc.

2. Introduce yourself in a precise and effective way.

Ans. Here you have to start with your name, qualifications, previous work experience, and where you are from. The introduction should be three minutes long, not longer than that.

3. What types of accounts do banks provide? 

Ans. Out of all the other Banking Interview Questions and Answers, this is the one that you must be generally aware of.

Checking Account:  It is equal to a savings account, but the difference is that there is no minimum balance or drawdown limit. Further, unlike savings accounts, you cannot earn interest on the amount deposited.

Money Market Account: There is no withdrawal, and you can earn a higher interest rate. However, you need a minimum balance to open an account.

Certificate of Deposit Account: Here you have to deposit a certain amount for a fixed period, and banks provide interest as per their guidelines. You cannot withdraw the amount until the period Expires.

Savings Account: You need to maintain a minimum balance for your account to function. The withdrawal limit is applicable, and you can earn interest.

4. What are the types of banks?

Ans. The types of banks are commercial banks, Agricultural banks, cooperative banks, Investment banks, and retail banks. The Reserve Bank of India (RBI) regulates all these banks. Among all the other Banking Interview Questions and Answers, the answer to this question is quite simple.

5. Why do you want to enter the banking sector?

Ans.  Here you have to tell about the growth of the banking industry, its vastness, and its impact on the country’s economy. Numbers such as money utilized for development, welfare schemes, and how it can be utilized can also be added.

6. What are the documents required to open an account at a bank?

Ans. The documents required are

• Government-issued documents such as an Aadhaar card, PAN card, or Driving license.
• Passport-size photo

7. What is the Annual Percentage Rate (APR)?

Ans. Banks Charge an annual interest rate (APR) from customers for services such as transactions, Insurance, wealth management, etc.

8. What are the services of a commercial bank?

Ans. It receives deposits from customers as fixed deposits, current deposits, and savings deposits.

• It provides locker services, so customers can keep their valuables safe without any worries.
• Commercial banks provide home loans, Personal loans, and business loans.
• Just a glimpse of this is enough to face an interview, compared to other Banking Interview Questions and Answers.

9. What are the types of commercial banks?

Ans. There are three types

• Public-sector banks: The Government owns these banks. The Government holds the majority of shares. The guidelines for their Functioning are framed by the Central Bank of India. 
• Private-sector banks: These are registered as companies with limited liabilities; the shares are held by Individuals or by the company itself.
• Foreign banks: The bank’s head offices are in other countries as part of the expansion they have entered into India. Indeed The presence of foreign banks contributes to economic progress.

10. What is Investment banking?

Ans. It is a division of the banking Industry. This is responsible for managing credit, finances, assets, etc. Companies, Governments, and NGOs also maintain a portfolio of financial assets, including fixed income, credit provided, interest rates on deposits, etc.

11. What is a Crossed check?

Ans. It gives out specific instructions. In this case, the check amount should be deposited into the account of the specified person and not handed over as cash to the customer at the counter.

12. What is an overdraft protection service?

Ans. Let’s say you have two accounts in the same bank: one is a savings account, and the other is a business account. The savings account lacks a sufficient balance, so the bank transfers money from a business account; this service is an overdraft protection service.

13. What are the charges the bank charges for overdraft protection service?

Ans. Yes, different banks charge different rates. This is the only question that cannot be answered clearly out of the other Banking Interview Questions and answers, as rates charged vary in each bank.

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

Ans. We arrive at this number by dividing the monthly income of the loan holder by the amount he pays to clear the debt every month.

15. What do you mean by the term cost to debt?

Ans. When a loan is taken from a bank, either personal or business. The interest paid throughout the loan period is the cost of the debt.

16. What is loan Grading?

Ans. A quality score is given for the loan based on various parameters, such as credit rating and repayment risk.

17. How do banks earn a profit?

Ans. The bank earns money in these three ways:

• Interest on loans
• Taking Deposits
• It charges on Transactions, account maintenance, bill payments, etc.

Out of all the other Banking Interview Questions and answers, this one is important. The recruiter expects you to know the answer if you want to be part of their family.

18. What is a payroll card, in simple words?

Ans. Banks issue these smart cards to help employers make payments to employees even if they don’t have an account with the bank.

19. Are there types of fixed deposits?

Ans. Yes, there are various types of fixed deposits

• Standard fixed deposits
• Corporate fixed deposits
• Tax-saving fixed deposits
• Senior citizen fixed deposits
• NRI fixed deposits

20. What do you mean by interbank deposit?

Ans. Two banks tie up one bank and hold its money on behalf of another bank. To make sure the transactions run smoothly, the bank opens an account in the due bank.

21. What is a non-performing asset?

Ans. A nonperforming asset is a loan that has not paid interest or principal for more than 90 days.

22. Types of loans provided by corporate banks

Ans. Personal loans

• Home loans
• Car loans
• Agriculture loans
• Gold loans
• Education loan
• Small Business Loans

23. What do you mean by a line of credit?

Ans. Mutual agreement between the bank and borrower to provide a loan as per the borrower’s terms. The terms are taking money whenever the borrower needs it and paying interest on the borrowed amount only.

24. What is a payday loan?

Ans. In short, It is a loan that offers a small amount for a shorter duration of time at a higher interest rate.

25. What is the full form of ACH?

Ans. ACH, in full terms, is an automated clearing house. This is an Electronic transfer between banks and financial Institutions.

Moving Further

After knowing the benefits of a banking career, the most commonly asked question is interview.

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Conclusion

The most commonly asked Banking Interview questions and answers have been discussed in this blog. Now you know about the benefits of a career in banking and the questions you have to face during the interview. But what about the missing link between the two? I am talking about learning. Join the Banking Executive Course and learn.