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Table of contents
1.
Introduction
2.
Beginner Level Banking Interview Questions
2.1.
1. What is the definition of a bank?
2.2.
2. What are the different types of banks?
2.3.
3. What are commercial banks, and what are their types?
2.4.
4. What are the functions of commercial banks?
2.5.
5. What is liquidity in Banking?
2.6.
6. What do you mean by credit score?
2.7.
7. What is a mortgage?
2.8.
8. What are SWIFT codes?
2.9.
9. What is the role of bank tellers?
3.
Intermediate Level Bank Interview Questions
3.1.
10. What is investment banking?
3.2.
11. What do you understand about consumer banking?
3.3.
12. Why do you want a job in the banking sector?
3.4.
13. What are the different types of accounts available in banks?
3.5.
14. What are the different ways in which a bank account is operated?
3.6.
15. What is the overdraft protection service? Do banks charge for overdraft protection services?
3.7.
16. What are the things necessary for opening a bank account?
3.8.
17. What are the different types of card-based payments?
3.9.
18. What is the debt-to-income ratio?
3.10.
19. What is a balloon payment?
3.11.
20. What is the difference between a demand draft and a cheque?
4.
Advanced Level Banking Interview Questions
4.1.
21. What is the adjustment credit?
4.2.
22. What is a foreign draft? 
4.3.
23. What is loan grading in banking?
4.4.
24. What do you mean by co-maker?
4.5.
25. What do you understand by the line of credit?
4.6.
26. What is a convertibility clause?
4.7.
27. What is LIBOR?
4.8.
28. What is the charge-off in banking?
4.9.
29. What is the Annual percentage rate (APR), and what are the different types of APR?
4.10.
30. What are the different types of loans offered by commercial banks?
4.11.
31. What are the different types of fixed deposits?
4.12.
32. What is a home equity loan?
4.13.
33. What is a non-performing asset?
5.
Conclusion
Last Updated: May 20, 2024

Banking Interview Questions and Answers

Author Rishabh
0 upvote
How to Ace Data Analytics Interviews: Do's & Don'ts
Speaker
Alka Pandey
Manager Data Scientist @
10 Jun, 2024 @ 01:30 PM

Introduction

The banking sector is an attractive employer that hires fresh graduates and experienced professionals aspiring to work in this field. We need good academic qualifications, aptitude, sincerity, responsibility, dedication, and experience to secure a job in the bank. To get a career in the banking sector, we must prepare to tackle numerous banking interview questions for the final selection process.   

Banking Interview Questions

Here we will discuss some important questions that can be asked in the interviews.

Beginner Level Banking Interview Questions

1. What is the definition of a bank?

Ans. A bank is a financial body responsible for accepting and providing loans. Banks offer various financial services to individuals, businesses, and governments. Banks are an intermediary between those with surplus funds and those who need funds.

2. What are the different types of banks?

Ans. There are different types of banks. Some of them are retail banks, commercial banks, agricultural banks, cooperative banks, and investment banks. A nation's central bank oversees and regulates all types of banks in most countries. This responsibility falls under the Reserve Bank of India (RBI) in India.

3. What are commercial banks, and what are their types?

Ans. Commercial banks are financial institutions. They accept deposits from the public and give loans to individuals, businesses, and governments. They provide various banking services, including credit facilities, payment processing, etc. Some types of commercial banks are:

  • Public Sector Banks
    The government primarily regulates them as it holds a good part of the shares in these types of banks. In India, the Reserve Bank of India (RBI) acts as a central bank and makes guidelines for public sector banks.
     
  • Private Sector Banks
    Private banks offer personalized banking to individuals. They provide services such as investment management, estate planning, and tax advisory to individuals.
     
  • Foreign Banks
    Foreign banks operate in a country different from their headquarters and provide banking services to local customers. These banks bring global expertise and international banking services to the local market.

4. What are the functions of commercial banks?

Ans. Some of the functions of commercial banks are:

  • Commercial banks accept deposits from individuals and institutions.
     
  • They grant loans to individuals and businesses.
     
  • The banks provide locker facilities to customers.
     
  • The banks trade in bonds and securities.

5. What is liquidity in Banking?

Ans. Liquidity means that a bank has enough money available to pay debts without losing too much money. In simpler terms, liquidity refers to available cash that banks need to meet financial needs. 

6. What do you mean by credit score?

Ans. A credit score is a numerical representation of a person's creditworthiness. It is based on the individual's credit history.

7. What is a mortgage?

Ans. A mortgage is a loan from a bank or lender to purchase a home or real estate. The borrower repays the loan through monthly installments, including interest.

8. What are SWIFT codes?

Ans. SWIFT code stands for Society for Worldwide Interbank Financial Telecommunication. A SWIFT code is a unique code for identification. They are used for identifying a specific bank in international money transfers between banks. It is used to facilitate transfer of funds across borders.

9. What is the role of bank tellers?

Ans. Bank tellers are used to assist customers with transactions. They ensure accurate and efficient handling of cash and provide personalized customer service.

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Intermediate Level Bank Interview Questions

10. What is investment banking?

Ans. Investment banking is a segment of banking that concentrates on helping businesses and organizations to raise capital. They offer mergers and facilitate complex financial transactions.

11. What do you understand about consumer banking?

Ans. Consumer banking provides loans to their customers to buy various products. They offer a simple option of easy payment through small instalments.

12. Why do you want a job in the banking sector?

Ans. Banking is a growing sector in India with stable and high growth. They provide a wide range of career opportunities. I am interested in finance and I have a strong desire to contribute in the financial market. I enjoy working with numbers. These are some of the reasons why I want to join the banking sector.

13. What are the different types of accounts available in banks?

Ans. There are different types of accounts available in banks. These are:

  • Savings accounts 
    Savings accounts allow individuals to deposit and earn interest on their money while they give easy access to funds.
     
  • Checking accounts
    Checking accounts enable individuals to deposit, withdraw, and make payments easily.
     
  • Money market accounts
    These accounts give benefits of both saving and checking accounts. It helps us withdraw the amount and get a higher interest.
     
  • Certificates of deposit 
    Banks offer certificates of deposit (CDs) where customers deposit a specific amount of money for a fixed period at a fixed interest rate with principal and interest guaranteed upon maturity. 
     
  • Retirement accounts
    Retirement accounts are structured to help the individuals save and grow funds for their retirement. They offer tax advantages.

14. What are the different ways in which a bank account is operated?

Ans. There are different ways to operate a bank account. Some of them are:

  • In-branch banking 
     
  • ATM banking
     
  • Mobile or Telephone banking
     
  • Online banking

15. What is the overdraft protection service? Do banks charge for overdraft protection services?

Ans. Banks offer overdraft protection services to protect customers from declining transactions due to insufficient funds. When a customer has overdraft protection, the banks allow them to do transactions even if they have inadequate funds up to a predetermined limit. Yes, banks charge a particular amount for overdraft protection services.

16. What are the things necessary for opening a bank account?

Ans. To open a bank account, you generally need to provide personal information such as government ID and proof of residence.

17. What are the different types of card-based payments?

Ans. There are mainly two types of card-based payments

  • Credit card-based payments 
    Transactions made using a credit card allows individuals to make purchases which is to be paid off later.
     
  • Debit card-based payments
    Transactions made using a debit card linked to an individual's bank account allow them to make purchases from available funds in their bank account without borrowing.

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

Ans. The debt-to-income ratio is calculated as the monthly debt payments divided by your monthly income.  

19. What is a balloon payment?

Ans. A balloon payment is a large sum of money made at the end of a loan term. It is used to lower monthly payments which requires the borrower to make a large payment.

20. What is the difference between a demand draft and a cheque?

Ans. A cheque is a document that orders bank to pay a specific amount of money from one person's account to the person in whose name cheque has been issued. Cheques are issued by an individual who holds a bank account, whereas demand draft is issued by a bank to initiate transactions from one bank to another. Cheques can be cancelled, but demand drafts cannot be cancelled.

Advanced Level Banking Interview Questions

21. What is the adjustment credit?

Ans. Adjustment credit is a short-term loan that central banks provide to commercial banks to help them meet their requirements. Banks use adjustment credit to smooth out temporary funding gaps.

22. What is a foreign draft? 

Ans. A foreign draft is a check drawn for making payments in foreign currencies. It is a safe way to transfer funds internationally. It has higher fees and longer processing times.

23. What is loan grading in banking?

Ans. Loan grading is used by banks to evaluate the level of risk associated with a loan, based on factors such as the borrower's credit history and the likelihood of repayment.

24. What do you mean by co-maker?

Ans. A co-maker is a person who agrees to repay a loan with the primary borrower and is equally responsible for the debt. 

25. What do you understand by the line of credit?

Ans. A line of credit refers to an agreement between the bank(or a lender) and the customer where the bank agrees to lend a specified amount to a borrower when needed, up to a pre-approved credit limit.

26. What is a convertibility clause?

Ans. The convertibility clause is a provision where banks can change the rate of interest(ROI) from fixed to variable for certain types of loans.

27. What is LIBOR?

Ans. LIBOR is London Inter-bank offered rate, which is an average interest rate offered for US dollars or Euros deposited between groups of London Banks. 

28. What is the charge-off in banking?

Ans. Charge-off is a practice where a bank issues an unpaid debt as a loss on their financial statements, usually after a period of several months of non-payment.

29. What is the Annual percentage rate (APR), and what are the different types of APR?

Ans. APR, or Annual percentage rate, is a charge that banks impose on their customers to use their services like loans and credit cards. There are two types of APR. 

  • Fixed APR
    In fixed APR, the imposed interest rate will be the same throughout the life of the loan.
     
  • Variable APR 
    In variable APR, the imposed interest rate can change on the basis of the market.

30. What are the different types of loans offered by commercial banks?

Ans. Commercial banks offer a variety of loans catering to diverse financial needs. Common types include personal loans for individual needs, home loans for property purchases, auto loans for vehicle financing, and business loans to support entrepreneurial ventures. Additionally, banks provide educational loans for academic expenses and offer specialized loans like agricultural loans and gold loans. The terms, interest rates, and eligibility criteria vary for each loan type, allowing banks to address the specific requirements of individuals and businesses across different sectors.

31. What are the different types of fixed deposits?

Ans. Fixed or term deposits come in various types, each offering specific features to cater to different financial needs. Here are some common types of fixed deposits:

  1. Regular Fixed Deposit: The standard fixed deposit where a lump sum amount is invested for a fixed tenure at a predetermined interest rate.
  2. Senior Citizen Fixed Deposit: Tailored for senior citizens, these deposits often offer higher interest rates to benefit elderly investors.
  3. Tax-Saving Fixed Deposit: Designed for tax benefits under Section 80C of the Income Tax Act, these fixed deposits have a lock-in period of 5 years.
  4. Cumulative Fixed Deposit: Interest is compounded quarterly or annually and reinvested with the principal amount, providing a lump sum at maturity.
  5. Non-Cumulative Fixed Deposit: Interest is paid out regularly (monthly, quarterly, half-yearly, or annually) to the investor.
  6. Special Fixed Deposit for Minors: Aimed at securing the financial future of minors, this type may have specific terms and conditions.
  7. Flexi Fixed Deposit: Allows investors to withdraw part of the deposit prematurely without affecting the entire amount, usually with a penalty.
  8. Company Fixed Deposit: Offered by non-banking financial companies (NBFCs) or corporate entities, these deposits may carry higher interest rates and risk.
  9. Tax Implication Fixed Deposit: Considering tax implications, these deposits may have provisions for TDS (Tax Deducted at Source).
  10. Foreign Currency Fixed Deposit: Denominated in foreign currencies, these deposits are suitable for investors dealing with foreign exchange.

32. What is a home equity loan?

Ans. A home equity loan is a type of loan that allows homeowners to borrow against the equity in their property. Equity is the difference between the home's market value and the outstanding mortgage balance. Homeowners can typically access a lump sum amount, and the loan is secured by the property. Interest rates are often lower than unsecured loans, and the borrowed funds can be used for various purposes, such as home improvements, debt consolidation, or other significant expenses. Repayment terms are fixed, and failure to repay can lead to property loss through foreclosure.

33. What is a non-performing asset?

Ans. A non-performing asset (NPA) refers to a loan or advance for which the borrower has not paid the interest or principal for a specific period, usually 90 days or more. In financial terms, it represents an asset that has stopped generating income for the lender. Non-performing assets can include loans, mortgages, or other financial products. Banks and financial institutions closely monitor NPAs as they impact their financial health and can lead to financial instability. Efforts are made to resolve NPAs through restructuring, recovery, or, in severe cases, legal action to reclaim the outstanding amount.

Conclusion

In this article, we discussed banking interview questions. You can also read the article Bank ER diagram.

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