Commercial Banking

Are you looking for a job in Banking Sector, if yes. Then checkout the popular interview questions in commercial banking that are likely to be asked in the job interview.

Q.1 Can you describe what are different types Of banks?
All the Central banks are normally government owned and assigned with regulatory responsibilities, such as: controlling the cash interest rates or supervising commercial banks,etc. Islamic Banks are established in accordance of the concepts of Islamic Law. Based on Islamic canons this form of banking revolves around several well established principles.
Q.2 How will you determine the creditworthiness of a company?
There are two ways to determine the creditworthiness of a company namely - Assets and cash Flows. This requires a thorough approach involves a full financial analysis of the business based on its financial statements, market conditions, and the management team. On the asset approach, it’s important to understand how much the assets are truly worth, how liquid they are, and how much you think you could get for them. On the cash flow approach, the historical ability to generate cash flow (or net income, EBIT, EBITDA, etc.) will be relied on, in conjunction with a realistic forecast to assess how much debt they can service.
Q.3 When you are asked to analyse a set of financial statements, what would you do?
The first thing I would do is put them in a clean Excel workbook, or company template, in an organized format. Next, I would calculate a variety of ratios: profitability, growth, margins, leverage, and liquidity (see question below for specific examples). Finally, I would analyse these ratios and identify trends (based on at least 3 years of historical information), which I would try to extrapolate into the future.
Q.4 What are the most important credit metrics?
Some of the most important credit metrics include - 1. Leverage - debt to equity, debt to capital, debt to EBITDA, interest coverage ratio (or fixed charge coverage ratio), and other variations of these ratios. 2. Liquidity - working capital, current ratio, quick ratio, cash ratio.
Q.5 Let us suppose you have been given an income statement where revenue was going up and net income was going down, what could be the problem in this case?
Given the situation, there could be many reasons for such an issue - One of the most likely reason could be that the company is fueling its revenue growth by, 1. Increasing its marketing expenses (see: return on ad spend), 2. Decreasing prices, 3. Experiencing an increase in cost of goods sold, 4. Changing accounting policies, like no longer capitalizing an expense that used to be capitalized. The key concern is, that more investigation into the income statement is required, but it’s often an indication that growth is being pursued in an uneconomic way.
Q.6 In personal life, how do you manage risk?
This questions gives you the opportunity to showcase your potential and skills by applying the principles of risk management in a different way. Remember this is a behavioural question and there is no right or wrong answer. The point here to understand is that there are various ways to think about a risk situation like risk of loss, the risk of missing out, risk vs reward, etc. It is suggested that you should speak about your finances, and you could even highlight about personal activities done to manage such risks.
Q.7 According to you what is the key to become a great commercial banker?
Now this is a open-ended interview question and indeed there are a lots of ways to answer it. You are expected to highlight the skillset required in commercial banking and then link your response to that. Primarily the key skills required are - Analytics, and Sales/relationship management.
Q.8 Regional rural banks deposites are covered by which body?
DICGC
Q.9 What are the key characteristic of financial derivative?
1. value is derived from an underlying instrument. 2. they are vehicles for transferring risk 3. they are leveraged instruments
Q.10 What are the core objective of a monetary policy?
Money supply
Q.11 Which is the instrument that is issued for automatic monetization of debt
Adhoc Treasury Bill
Q.12 In case of FCNR(B) Scheme, the period for fixed deposits is _____________________.
for terms not less than 1 year and not more than 5 years
Q.13 What are Investment Banks?
It is a financial intermediary Performing a variety of services. Investment banks basically specialize in large and complex financial transactions such as:
Acting as an intermediary between a securities issuer and the investing public, underwriting, facilitating mergers and other corporate reorganizations, and acting as a broker and/or financial adviser for institutional clients.
Q.14 Can you tell us about the sources and application of funds Of commercial banks?
Yes, Share Capital
>Sources of Funds:
Deposits
Reserves and Surplus
Borrowings
Application of Funds:
Cash and cash Balance with RBI
Cash balance with other banks
Investments
Advances Source
Q.15 What is the role of commercial banks?
Like any other bank the Commercial banks too hold many roles like:
Mobilizing Saving for Capital Formation
Financing Industry
Financing Trade
Financing Agriculture
Financing Consumer Activities
Help in Monetary Policy
Financing Employment Generating Activities
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