Banking Operations in Mutual Funds
12 questions. Each answer is explained.
Question 1 of 10Practice · Series II-B — Registrars to an Issue and Share Transfer Agents - Mutual Fund
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Learn these topics
More units in NISM Series II-B
- Introduction to Securities5
- Characteristic of Equities7
- Characteristics of Debt Securities7
- Characteristics of Other Securities5
- SEBI- Role and Regulations6
- Basics of Registrars and Transfer Agents12
- Registrars and Transfer Agents Regulations12
- Basics of Mutual Funds14
- Structure and Constituents of Mutual Funds11
- Mutual Fund Products12
- Operational Concepts of Mutual Funds14
- Investors in Mutual Funds10
- Financial Transactions12
- Non-Financial Transactions11
Exam format
| Questions | 100 · 1 mark each |
|---|---|
| Duration | 120 min · 2 hours |
| Pass mark | 50% · 50 of 100 marks |
| Negative marking | None · a wrong answer costs nothing beyond the mark |
| Certificate validity | 3 years · from the date of the examination |
| Marks for this unit | 30 of 100 marks (30%) |
That figure belongs to one published unit covered under these headings — Banking Operations in Mutual Funds and Investors in Mutual Funds and Financial Transactions and Non-Financial Transactions — so the marks belong to the whole group. They are quoted together because no source divides them among its headings.
Source: March 2025 Annexure I, Units 12 to 15 (Investors in Mutual Funds to Non-Financial Transactions): 30%
NISM Series II-B Registrars to an Issue and Share Transfer Agents - Mutual Fund
Exam rules read on NISM's site on 31 October 2026. Check the current rules on NISM's site (opens in a new tab)
What these answers assume, and when it was last checked
Each question uses the rules listed below. We last checked them on 5 September 2026. A Budget or SEBI circular can change a rate, lot size or expiry day. If a rule changes before your exam, treat the linked questions as out of date and check NISM's current workbook.
- NSE uses Tuesday expiry and BSE uses Thursday expiry. This applies from 1 September 2025.
- The January 2026 index lot sizes are NIFTY 65, BANKNIFTY 30, FINNIFTY 60, MIDCPNIFTY 120 and NIFTYNXT50 25.
- The October 2024 SEBI framework sets a minimum index contract value of Rs 15–20 lakh. Each exchange may list one weekly benchmark index.
- Option buyers pay the premium upfront from 1 February 2025. A short index option has an extra 2% Extreme Loss Margin on expiry day from 20 November 2024.
- Equity short-term capital gains are taxed at 20%. Long-term gains are taxed at 12.5% above Rs 1.25 lakh. Both rates apply from 23 July 2024.
- F&O income is non-speculative business income in ITR-3. NSE equity derivatives trade from 9:15 a.m. to 3:40 p.m.
- The final ten-minute session began on 3 August 2026. It aligns with the cash market Closing Auction Session.
- Most Securities Transaction Tax questions test the base and who pays. On an option sale, it is the premium and the seller pays. On a futures sale, it is the traded value and the seller pays.
- On exercise, Securities Transaction Tax uses intrinsic value: settlement price minus strike price. The buyer pays it.
- Two questions test the current rate. From 1 April 2026, option sales carry 0.15% on the premium and futures sales carry 0.05% on traded price. The earlier rates were 0.10% and 0.02% from 1 October 2024.
- This section uses the T+1 rolling settlement cycle. Obligations are fixed on T+1. A short delivery goes to buy-in auction on T+1 and settles on T+2.
- The trade-for-trade surveillance segment uses direct close-out. Funds pay in by 10:30 a.m. and pay out on or after 1:30 p.m. on settlement day.
- Securities pay in to the settlement pool by 10:30 a.m. They pay out directly to the client’s demat account by 3:30 p.m.
- The 3:30 p.m. deadline replaced 1:30 p.m. under SEBI’s 10 October 2024 circular. Direct client credit was required by SEBI’s 5 June 2024 circular.
- The optional T+0 cycle trades until 1:30 p.m. Obligations are fixed by 2:30 p.m. on the trade day. An early pay-in shortage is closed out directly.
- Cash-market Value at Risk margin is six times exponentially weighted moving-average volatility. It has a 9% floor for Group I, a 21.5% floor for Group II, and a fixed 50% or 75% level for Group III.
- Extreme Loss Margin is 3.5% for a share and 2% for a broad-market-index exchange traded fund. Mark-to-market margin is collected before the next day’s trading. The trade-for-trade segment has 100% upfront margin.
- Close-out uses the higher of the highest price from trade day to auction day and 20% above the auction day’s official close.
- A funds shortage costs 0.07% a day. The trading facility is withdrawn at a shortage of Rs 5 lakh or more.
- SCORES allows 21 calendar days, then two 15-day review levels. Online Dispute Resolution moves from conciliation to arbitration after the market participant and SCORES steps.
- At NSE, the Investor Protection Fund limit is Rs 35 lakh per investor for each defaulting or expelled member. This applies to claims arising after 13 August 2024.
- A Basic Services Demat Account has no annual maintenance charge up to Rs 4 lakh of holdings. It costs up to Rs 100 above that, until the Rs 10 lakh eligibility ceiling. These slabs apply from 1 September 2024.
- The rupee pairs are USD-INR, EUR-INR, GBP-INR and JPY-INR. The cross-currency pairs are EUR-USD, GBP-USD and USD-JPY.
- Each contract covers 1,000 units of the foreign currency, except JPY-INR. JPY-INR covers 100,000 yen and is quoted in rupees per 100 yen.
- The tick is 0.25 paise, or Rs 0.0025. It equals Rs 2.50 a contract.
- Rupee pairs trade from 9:00 a.m. to 5:00 p.m. A monthly contract stops trading at 12:30 p.m. two working days before the expiry month’s last business day.
- Final settlement is in cash at the FBIL reference rate on expiry day. FBIL, Financial Benchmarks India, has published this rate in place of the Reserve Bank since 2018. Premium-style European options are quoted in rupees. The buyer pays the premium in cash on T+1.
- Daily settlement is on T+1 and final settlement is on T+2.
- NSE Clearing circular 026/2020 sets SPAN margin plus Extreme Loss Margin. The futures margin is 0.50% for USD-INR, 0.15% for EUR-INR, 0.25% for GBP-INR and 0.35% for JPY-INR. A short option has 0.75%. These figures apply from 1 June 2020.
- A USD-INR client may hold 6% of total open interest or USD 20 million, whichever is higher. A trading member may hold 15% or USD 100 million.
- A resident user has one USD 100 million equivalent limit across all rupee pairs and exchanges. No document is needed below that limit, but a valid underlying contracted exposure must still exist. This clarification applies from 3 May 2024.
- The currency segment has no Securities Transaction Tax.
The exam figures (questions, time, pass mark, negative marking and certificate validity) come from NISM's own pages, read on 31 October 2026. Timed practice uses the same figures. Study with the official workbook as well.
The written-out answers on this page are hidden while your timed set runs.
All 12 questions on Banking Operations in Mutual Funds, with answers
Q1What does NEFT provide for mutual fund investors?
Option A. An electronic bank funds-transfer facility — Correct answer
Option B. A shareholder voting system for the AMC
Why it is wrong: NEFT is banking, not corporate voting.
Option C. A fund portfolio rating issued by agencies
Why it is wrong: Ratings and bank payments are different activities.
Option D. A scheme NAV guarantee for the investor
Why it is wrong: Electronic transfer does not guarantee investment performance.
Answer: A. NEFT is an electronic system for transferring funds between bank accounts.
Hint, shown before you answer in practice mode: Think about moving money between bank accounts.
II-B-116easyconceptual
Q2What is RTGS mainly used for?
Option A. Setting the securities regulator's annual budget and fees
Why it is wrong: Regulatory budgets are unrelated to RTGS.
Option B. Real-time gross settlement of eligible bank transfers — Correct answer
Option C. Daily mutual fund unit valuation by the fund accountant
Why it is wrong: NAV valuation is separate from bank settlement.
Option D. Registering company share capital with the authorities
Why it is wrong: Share registration is not a banking transfer system.
Answer: B. RTGS processes eligible transfers individually on a real-time gross basis.
Hint, shown before you answer in practice mode: Recall the settlement type named in the acronym.
II-B-117easyconceptual
Q3What is the purpose of an investor's approved bank mandate for mutual fund operations?
Option A. Create an exchange trading price for the investor's units
Why it is wrong: A mandate cannot determine market prices.
Option B. Determine which shares the fund manager buys for the scheme
Why it is wrong: Bank details do not set portfolio securities.
Option C. Identify and authorise the bank account used for eligible payments — Correct answer
Option D. Assign a fixed interest coupon to the investor's units every year
Why it is wrong: Mutual fund units do not normally pay a fixed coupon.
Answer: C. A bank mandate identifies authorised account instructions for relevant collections and payouts.
Hint, shown before you answer in practice mode: Think about directing money to the correct account.
II-B-118mediumconceptual
Q4What does NACH typically support in systematic mutual fund investing?
Option A. Converting debt into equity shares of the AMC
Why it is wrong: Conversion rights are different instruments.
Option B. Guaranteeing the scheme's market return every month
Why it is wrong: Bank clearing cannot guarantee a portfolio return.
Option C. Providing a company's annual share vote to the investor
Why it is wrong: Voting is unrelated to NACH.
Option D. Automated recurring bank debits under valid mandates — Correct answer
Answer: D. NACH supports automated bulk electronic payment collections and transfers using valid instructions.
Hint, shown before you answer in practice mode: Think about regular electronic collections.
II-B-119mediumconceptual
Q5What does ASBA mean for an eligible mutual fund application?
Option A. Application money remains blocked in the bank until processed under the mechanism — Correct answer
Option B. The fund buys shares on the investor's personal behalf through the bank
Why it is wrong: ASBA concerns payment blocking, not discretionary trading.
Option C. The RTA lends investors the application money until units are allotted
Why it is wrong: ASBA does not involve an RTA loan.
Option D. Scheme NAV is guaranteed at face value while the application is pending
Why it is wrong: Blocked money does not guarantee NAV.
Answer: A. Under ASBA, the required application amount is blocked in the investor's account according to the facility rules.
Hint, shown before you answer in practice mode: Think about earmarking money instead of transferring it immediately.
II-B-120hardconceptual
Q6An RTA receives a purchase request but the collecting bank has returned the cheque unpaid. What is appropriate?
Option A. Allot units as if the cheque cleared and settle the shortfall later
Why it is wrong: Unpaid funds do not support an ordinary funded subscription.
Option B. Treat the collection as unsuccessful and investigate the application — Correct answer
Option C. Move another investor's cash to cover it until the cheque is re-presented
Why it is wrong: Another investor's money cannot be used to bridge the shortfall.
Option D. Change the recorded cheque to an electronic receipt so allotment can proceed
Why it is wrong: Changing payment type without evidence falsifies records.
Answer: B. A returned cheque means the expected collection has not been realised and must be reconciled.
Hint, shown before you answer in practice mode: Distinguish money promised from money actually collected.
II-B-121mediumapplication
Q7Why is bank reconciliation important in a mutual fund subscription process?
Option A. It eliminates security price risk for the scheme's investors
Why it is wrong: Matching cash records does not eliminate market risk.
Option B. It creates higher coupon income on the scheme's debt holdings
Why it is wrong: Reconciliation does not set debt coupons.
Option C. It matches investor transaction records with actual bank movements — Correct answer
Option D. It chooses the portfolio benchmark used to report performance
Why it is wrong: Benchmark choice is unrelated to cash matching.
Answer: C. Bank reconciliation identifies discrepancies between recorded subscriptions and cash movements.
Hint, shown before you answer in practice mode: Follow the money through processing records.
II-B-122mediumconceptual
Q8What is meant by realised or cleared funds for a mutual fund purchase?
Option A. An unsigned investor promise to pay the amount at a later date
Why it is wrong: A promise is not cleared money.
Option B. A pending transfer instruction without settlement by the bank
Why it is wrong: A pending instruction may not represent available funds.
Option C. The value of a separate portfolio holding of the investor
Why it is wrong: Portfolio value is not the collection for this purchase.
Option D. Money actually available through the applicable banking process — Correct answer
Answer: D. Cleared funds are collected money available according to the relevant banking and scheme rules.
Hint, shown before you answer in practice mode: Think about payment availability rather than intention.
II-B-123mediumconceptual
Q9Why should an RTA check the destination account before processing a redemption payout?
Option A. To reduce misdirected payments and fraud — Correct answer
Option B. To change the fund's investment benchmark
Why it is wrong: Payment verification does not determine benchmarks.
Option C. To estimate the next share index close
Why it is wrong: Account checking cannot forecast the market.
Option D. To waive the fund's operational audit
Why it is wrong: Bank verification cannot replace audit duties.
Answer: A. Payout validation confirms the account is eligible and authorised before money is sent.
Hint, shown before you answer in practice mode: Think about who should actually receive the money.
II-B-124mediumconceptual
Q10A bank reports a debit but the RTA lacks a matching application. Which action is appropriate?
Option A. Erase the bank entry from the audit trail to clear the mismatch
Why it is wrong: Erasure hides a legitimate unmatched receipt.
Option B. Investigate the unmatched receipt before allocating units — Correct answer
Option C. Send the funds to an unrelated investor with a pending request
Why it is wrong: Unmatched money must not be misdirected.
Option D. Credit random units to an investor with a similar name
Why it is wrong: Matching by a similar name risks misallocation.
Answer: B. The RTA should trace unmatched collections to a valid application before allocating units or arranging corrections.
Hint, shown before you answer in practice mode: Consider an unmatched-cash suspense workflow.
II-B-125hardapplication
Q11An investor sets up recurring payments but no valid mandate is recorded. What should happen?
Option A. Use a different folio's existing mandate
Why it is wrong: Mandates are not transferable to unrelated investors.
Option B. Ignore bank authentication requirements
Why it is wrong: Bank collection needs valid approval.
Option C. Complete mandate verification before recurring collection — Correct answer
Option D. Start debits using the investor's phone number only
Why it is wrong: A phone number alone is not payment authorisation.
Answer: C. Recurring bank collections require a valid mandate and appropriate authentication.
Hint, shown before you answer in practice mode: Think about payment consent.
II-B-126mediumapplication
Q12A redemption request has passed checks, but beneficiary bank details changed unexpectedly. What is the best control?
Option A. Send the amount to a staff member's account
Why it is wrong: Staff accounts are unauthorised destinations.
Option B. Ignore change history if the account number is valid
Why it is wrong: A valid format does not establish investor authorisation.
Option C. Pay immediately to avoid any review delay
Why it is wrong: Rushed payment may send money to a fraudulent account.
Option D. Reverify the amended account instruction before payout — Correct answer
Answer: D. Unusual recent bank changes should be verified before releasing investor money.
Hint, shown before you answer in practice mode: Look for a high-risk change close to payout.
II-B-127hardapplication
Banking Operations in Mutual Funds: common questions
How many practice questions are there on Banking Operations in Mutual Funds?
12 questions, all written out on this page with the correct answer and why each other option is wrong. This unit is one of the 15 practice topics for NISM Series II-B, which has 150 questions in total.
Are these real NISM Series II-B questions on Banking Operations in Mutual Funds?
No. LearnNifty wrote every question from NISM's public syllabus. NISM does not publish its question bank, so nobody can offer you the real paper. Use these questions to check that an idea has gone in. Use the official NISM workbook to see what is examined.
How much of the NISM Series II-B exam is Banking Operations in Mutual Funds?
NISM's published syllabus outline gives it 30 of the paper's 100 marks, or 30% of the exam. That figure covers one published unit taught here under more than one heading (Banking Operations in Mutual Funds and Investors in Mutual Funds and Financial Transactions and Non-Financial Transactions). So it is the marks for the group, not for this page alone. No source splits it, so it is not split here. The published unit it comes from: March 2025 Annexure I, Units 12 to 15 (Investors in Mutual Funds to Non-Financial Transactions): 30%
Does negative marking apply to NISM Series II-B?
No. NISM applies no negative marking to Series II-B. A wrong answer costs nothing beyond the mark you did not earn, so a blank is never better than an attempt. Timed practice here uses the same rule.
Are these practice questions kept up to date?
Each question is written against the rules printed on this page, last checked on 5 September 2026. A Budget or a SEBI circular can change a rate, a lot size or an expiry day. If one of those rules changes before your exam, treat the questions that use it as out of date. Then check NISM's current workbook.
Financial Transactions
12 questions on Financial Transactions. Its quiz opens on that unit.
Open Financial TransactionsPaper Trading Try it on the practice trading desk