Beyond deposits and loans, banks bundle a wide range of fee-earning support services — remittance instruments, lockers, wealth management, and even acting as the government's own banker. Covers DD/Banker's Cheques, Mail/Telegraphic Transfer, Electronic Benefit Transfer, Safe Deposit Lockers, Portfolio Management Services, Merchant Banking, Government Business, and levying of service charges, with 50 exam-style MCQs with hidden answers.
📅 Updated: September 2026 • 31 min read
📊 At a Glance
Service
Key Feature
Demand Draft
Pre-paid instrument, cannot be dishonoured/stopped by drawer
Safe Deposit Locker
Bank-customer relationship is lessor-lessee, not bailor-bailee
Government Business
Banks act as RBI's agent for tax collection, pension disbursal
1 Remittance Instruments — DD, BC, MT, TT
📜
Demand Draft (DD)
A pre-paid negotiable instrument drawn by one branch/bank on another (or itself), payable on demand; since it's pre-funded, a DD cannot be countermanded/dishonoured by the purchaser (unlike a cheque).
🧾
Banker's Cheque (BC)
Similar to a DD but drawn and payable within the same city/clearing zone (intra-city instrument), commonly used for local high-value payments.
✉️
Mail Transfer (MT)
An older remittance mode where a branch instructs another branch by mail/advice to pay a specified sum to the beneficiary — largely obsolete, replaced by electronic modes.
📡
Telegraphic Transfer (TT)
A faster remittance mode using telegraphic/telex/electronic messaging to instruct the paying branch — the historical precursor to today's NEFT/RTGS-based transfers.
💡
Memory Trick: "DD Can't Die"
A Demand Draft is pre-paid, so the purchaser cannot countermand ("kill") it the way they can stop a cheque — only the payee, or via legal process (indemnity for loss/theft), can affect its payment.
2 Electronic Benefit Transfer (EBT) & Mobile Banking
Electronic Benefit Transfer (EBT) is the mechanism by which government welfare payments (pensions, scholarships, wage payments under employment guarantee schemes) are credited directly into beneficiaries' bank accounts electronically — a precursor concept to today's Direct Benefit Transfer (DBT) architecture built on the JAM (Jan Dhan-Aadhaar-Mobile) trinity. Mobile Banking extends banking services (balance enquiry, fund transfer, bill payment) to a customer's mobile device via an app or USSD, subject to RBI's mobile banking guidelines on transaction limits and security.
3 Safe Deposit Lockers
🔐
Lessor-Lessee, Not Bailor-Bailee
A Safe Deposit Locker facility legally constitutes the bank and customer as lessor and lessee (the bank leases locker space), NOT as bailor-bailee (the bank does not take custody of the locker's contents, since it does not know what is kept inside). RBI's revised locker guidelines (effective 2023) mandate standardised locker agreements, enhanced due diligence, nomination facility, and require banks to compensate customers for loss due to the bank's own negligence, fraud, or fire/theft caused by its lapses (up to 100 times the annual locker rent), while excluding liability for acts of God/natural calamity beyond the bank's control.
4 Portfolio Management Services (PMS)
Banks (through their merchant banking/wealth divisions or SEBI-registered subsidiaries) offer Portfolio Management Services to high-net-worth clients, professionally managing a client's securities portfolio (equity, debt, or a mix) as per an agreed investment mandate, in exchange for a management fee. PMS providers must be registered with SEBI under the SEBI (Portfolio Managers) Regulations.
5 Merchant Banking
As a fee-based ancillary service, banks' merchant banking arms assist corporate clients with issue management (IPOs/FPOs — acting as lead manager/underwriter), loan syndication, corporate advisory (M&A, restructuring), and underwriting of securities issues, requiring SEBI registration as a Category I Merchant Banker for issue-management activities.
6 Government Business
🏛️
Agency Function for RBI
Select banks are appointed as RBI's agents (under Section 45 of the RBI Act) to conduct government business — collection of taxes, payment of pensions, handling government receipts/payments — on RBI's behalf.
💰
Tax Collection
Banks collect direct/indirect taxes (income tax, GST) through authorised branches/e-payment portals and remit the collections to the government account.
🧓
Pension Disbursement
Banks disburse government pensions (central/state government, defence) directly to pensioners' accounts, including life-certificate verification.
📜
Handling Government Securities
Banks facilitate primary issuance and secondary trading of government securities for retail/institutional investors, and act as Primary Dealers in some cases.
7 Levying of Service Charges
Banks are generally free to determine service charges for most ancillary services on a commercial basis, subject to the requirement that charges be fair, transparent and reasonable, and prominently displayed/disclosed to customers (Fair Practices Code, MITC — Most Important Terms and Conditions).
Certain services — e.g. minimum balance non-maintenance penalties, or specific basic banking services (BSBDA) — are subject to RBI's specific caps or exemptions to protect financially vulnerable customers.
Any change in service charges must be communicated to customers in advance (typically 30 days), and charges cannot be levied retrospectively.
JAIIB tip: The Banking Codes and Standards Board of India (BCSBI) Code requires banks to give customers at least 30 days' notice before revising service charges — a favourite numeric detail in exams.
✓ Key Takeaways
DD/Banker's Cheques are pre-paid instruments that cannot be countermanded by the purchaser; MT/TT are historical remittance modes now largely replaced by electronic transfer.
Safe Deposit Lockers create a lessor-lessee (not bailor-bailee) relationship; RBI's 2023 revised guidelines cap the bank's liability for its own negligence at 100 times the annual rent.
Banks offer PMS and Merchant Banking as SEBI-regulated, fee-based wealth/corporate advisory services.
Select banks act as RBI's agents for government business — tax collection, pension disbursement, and government securities handling.
Service charges must be fair, transparent, disclosed in advance, and cannot be applied retrospectively.
📝 Top 50 JAIIB-Style MCQs on Ancillary Banking Services
Test your understanding with these 50 practice MCQs, closely modelled on the JAIIB (PPB) exam pattern. Each question has 5 options — the correct answer is hidden by default; tap "Show Answer" to reveal it along with a short explanation.
📜 Remittance Instruments
1 A Demand Draft is:
A. A pre-paid negotiable instrument, payable on demand
B. A post-dated cheque
C. An unfunded promissory note
D. A type of savings account
E. A currency futures contract
Answer: A. A DD is a pre-paid, on-demand negotiable instrument.
2 Unlike a cheque, a Demand Draft:
A. Cannot be countermanded/stopped by the purchaser since it is pre-funded
B. Can always be freely stopped by the purchaser
C. Has no payee
D. Is never negotiable
E. Cannot be issued by any bank
Answer: A. Being pre-paid, a DD cannot be stopped by the purchaser.
3 A Banker's Cheque (BC) differs from a DD mainly in that it is:
A. Drawn and payable within the same city/clearing zone
B. Never pre-paid
C. Only used for international transfers
D. Identical to a promissory note
E. Issued only by RBI
Answer: A. A BC is an intra-city payable instrument.
4 Mail Transfer (MT) as a remittance mode is:
A. An older mode, largely replaced by electronic transfer
B. The fastest mode available today
C. A cryptocurrency-based transfer
D. Used exclusively for international remittance
E. Mandatory for all transactions above ₹1 lakh
Answer: A. MT is an obsolete mode largely replaced electronically.
5 Telegraphic Transfer (TT) was the historical precursor to:
A. Today's NEFT/RTGS-based transfers
B. Safe deposit lockers
C. Portfolio management services
D. Merchant banking
E. Government pension disbursement
Answer: A. TT preceded modern NEFT/RTGS electronic transfers.
📱 EBT & Mobile Banking
6 Electronic Benefit Transfer (EBT) refers to:
A. Direct electronic crediting of government welfare payments into beneficiaries' accounts
B. A private corporate salary scheme only
C. A cryptocurrency payment system
D. An international trade finance instrument
E. A stock exchange settlement mechanism
Answer: A. EBT electronically credits government benefits to beneficiaries.
7 EBT is considered a precursor concept to today's:
A. Direct Benefit Transfer (DBT) built on the JAM trinity
B. Cryptocurrency exchanges
C. Merchant banking services
D. Safe deposit lockers
E. Credit rating agencies
Answer: A. EBT is a precursor to DBT via the JAM trinity.
8 Mobile banking transaction limits and security are governed by:
A. RBI's mobile banking guidelines
B. No regulation whatsoever
C. Only the customer's personal preference
D. SEBI exclusively
E. Individual telecom operators
Answer: A. RBI's mobile banking guidelines govern limits/security.
🔐 Safe Deposit Lockers
9 The legal relationship between a bank and a safe deposit locker customer is:
A. Lessor-lessee
B. Bailor-bailee
C. Trustee-beneficiary
D. Principal-agent
E. Debtor-creditor
Answer: A. Locker arrangements are lessor-lessee, not bailor-bailee.
10 A bank does NOT take custody of a locker's contents because:
A. It does not know what is kept inside the locker
B. Lockers are always empty by regulation
C. The bank owns the contents automatically
D. Customers are barred from storing anything
E. Lockers do not legally exist
Answer: A. The bank has no knowledge of locker contents, precluding bailment.
11 Under RBI's revised locker guidelines, banks must compensate customers for loss due to the bank's own negligence up to:
A. 100 times the annual locker rent
B. No compensation is ever payable
C. A fixed ₹100 regardless of loss
D. Unlimited amounts with no cap
E. Only the locker's rental deposit
Answer: A. The cap is 100 times the annual locker rent for bank-caused loss.
12 Banks are excluded from locker liability for loss caused by:
A. Acts of God/natural calamity beyond the bank's control
B. The bank's own fraud
C. The bank's own negligence
D. A fire caused by the bank's faulty wiring
E. Theft enabled by the bank's security lapse
Answer: A. Force majeure/natural calamity is excluded from bank liability.
A. Standardised locker agreements and nomination facility
B. Abolition of all locker facilities
C. No due diligence requirements
D. Unlimited free lockers for every customer
E. Lockers accessible without any KYC
Answer: A. Standardised agreements and nomination are mandated.
📈 PMS & Merchant Banking
14 Portfolio Management Services (PMS) involve:
A. Professionally managing a client's securities portfolio per an agreed mandate
B. Only opening fixed deposits
C. Managing lockers
D. Issuing demand drafts only
E. Processing pension payments
Answer: A. PMS manages a client's securities portfolio per a mandate.
15 PMS providers must be registered with:
A. SEBI, under the SEBI (Portfolio Managers) Regulations
B. IRDAI only
C. No regulator; PMS is unregulated
D. Only the local municipal body
E. PFRDA
Answer: A. SEBI registration under Portfolio Managers Regulations is required.
16 A bank's merchant banking arm typically assists with:
A. IPO issue management, loan syndication, and corporate advisory
B. Only savings account opening
C. Only locker rentals
D. Government pension disbursement exclusively
E. Only cheque clearing
Answer: A. Merchant banking covers IPO management, syndication, and advisory.
17 For issue-management activities, a bank's merchant banking arm requires registration as:
A. A SEBI Category I Merchant Banker
B. An IRDAI-registered insurer
C. No registration is needed
D. A PFRDA-registered pension fund
E. An RBI-registered NBFC only
Answer: A. Category I Merchant Banker registration with SEBI is required.
🏛️ Government Business
18 Select banks conduct government business as agents of:
A. RBI, under Section 45 of the RBI Act
B. SEBI
C. IRDAI
D. No authority; it is purely voluntary with no legal basis
E. The World Bank
Answer: A. Banks act as RBI's agents under Section 45 for government business.
19 Government business handled by banks includes:
A. Tax collection and pension disbursement
B. Only private corporate payroll
C. Only forex trading
D. Only mutual fund distribution
E. Only insurance underwriting
Answer: A. Tax collection and pension disbursement are government business functions.
20 Government pension disbursement by banks includes:
A. Life-certificate verification of pensioners
B. No verification of any kind
C. Disbursement only in cash, never to accounts
D. Disbursement only to foreign pensioners
E. Disbursement handled exclusively by post offices
Answer: A. Life-certificate verification is part of pension disbursement.
💳 Service Charges
21 Banks setting service charges must ensure they are:
A. Fair, transparent, reasonable, and prominently disclosed
B. Kept secret from customers
C. Applied retrospectively without notice
D. Identical across every bank in India by law
E. Set only by RBI for every single service
Answer: A. Charges must be fair, transparent and disclosed.
22 Per the BCSBI Code, banks must give customers advance notice before revising service charges of at least:
A. 30 days
B. 1 day
C. No notice is required
D. 5 years
E. 3 days
Answer: A. 30 days' advance notice is required for charge revisions.
23 Which of the following account types receives specific RBI protection from certain minimum-balance-related service charges?
A. Basic Savings Bank Deposit Account (BSBDA)
B. Every current account without exception
C. Only NRE accounts
D. Only FCNR(B) deposits
E. No account type has such protection
Answer: A. BSBDA accounts are protected from certain charge categories.
🧩 Mixed / Comprehensive
24 A customer wants an instrument that a stranger cannot fraudulently have "stopped" once purchased, for a large local payment. They would use:
A. A Demand Draft/Banker's Cheque
B. A personal cheque
C. A locker rental agreement
D. A PMS mandate
E. An EBT credit
Answer: A. DD/BC cannot be stopped by the purchaser, unlike a cheque.
25 If a locker's contents are damaged due to a fire caused by the bank's faulty electrical wiring, the bank is:
A. Liable to compensate, since this stems from the bank's own negligence
B. Never liable under any circumstance
C. Liable only if the customer had insured the contents separately
D. Automatically exempted as an act of God
E. Liable only for locker rent refund, nothing else
Answer: A. Bank negligence (faulty wiring) triggers liability, capped at 100x annual rent.
26 A high-net-worth client wanting a bank to actively manage their equity portfolio for a fee would use:
A. Portfolio Management Services (PMS)
B. A safe deposit locker
C. A Demand Draft
D. EBT
E. Government business services
Answer: A. PMS suits active, fee-based portfolio management for HNIs.
27 A company planning an IPO would engage a bank's:
A. Merchant banking arm, as lead manager/underwriter
B. Locker department
C. EBT unit
D. Government business unit
E. Mail transfer desk
Answer: A. Merchant banking handles IPO lead management/underwriting.
28 Which of the following best explains why a locker relationship is lessor-lessee rather than bailor-bailee?
A. The bank leases physical locker space without ever taking possession/knowledge of the contents placed inside
B. The bank always takes full custody and knowledge of the contents
C. There is no legal distinction between the two relationships
D. Lockers are legally classified as loans
E. The bank owns everything placed in the locker
Answer: A. The bank leases space without possession/knowledge of contents — hence lessor-lessee.
29 Which of the following would most plausibly require 30 days' advance notice to customers under the BCSBI Code?
A. A bank increasing its locker rental fee
B. A one-time interest credit on a savings account
C. A routine cheque clearing cycle
D. An ATM cash withdrawal
E. A KYC document submission
Answer: A. Fee/charge revisions require 30 days' advance notice.
30 Which of the following best distinguishes MT/TT from modern electronic fund transfer systems?
A. MT/TT relied on mail/telegraphic messaging between branches, now largely superseded by real-time electronic systems
B. MT/TT are faster than any modern system
C. MT/TT are still the primary mode used by all Indian banks today
D. MT/TT have no historical connection to modern EFT
E. MT/TT were never used for interbank remittance
Answer: A. MT/TT were manual/telegraphic precursors to real-time EFT.
31 Which of the following best describes why RBI caps a bank's locker-negligence liability at 100 times the annual rent, rather than leaving it unlimited?
A. It balances customer protection against the bank's inability to know/verify the actual value of locker contents
B. The cap has no rational basis
C. Unlimited liability was the original rule and remains unchanged
D. The cap applies only to natural calamities, not negligence
E. 100 times the rent is always a trivial amount with no protective value
Answer: A. The cap balances protection against the bank's inability to verify locker contents' value.
32 A pensioner receiving their monthly government pension directly into their savings account is benefiting from:
A. The bank's government business/agency function
B. A merchant banking service
C. A PMS mandate
D. A safe deposit locker
E. A Demand Draft
Answer: A. Pension disbursement is a government business/agency function.
33 Which of the following best explains why banks are "generally free" to set most ancillary service charges, unlike core deposit interest which faces more prescriptive rules?
A. Ancillary services are commercial, fee-based offerings where competitive market forces (subject to fairness/transparency norms) are considered sufficient regulation
B. There is no regulation of ancillary services at all, even for fairness
C. All service charges are fixed by RBI with zero bank discretion
D. Ancillary services are entirely free of cost by law
E. Deposit interest and service charges are regulated identically
Answer: A. Commercial/competitive forces regulate most service charges, subject to fairness norms.
34 Which of the following would be an example of "government business" beyond tax collection and pension disbursement?
A. Facilitating primary issuance of government securities
B. Underwriting a private corporate IPO
C. Managing a customer's personal equity portfolio
D. Renting out safe deposit lockers
E. Issuing a personal loan
Answer: A. Government securities issuance facilitation is a government business function.
35 Which of the following would most plausibly fall under "corporate advisory" as part of merchant banking?
A. Advising a company on a merger or restructuring
B. Renting a locker to a corporate client
C. Disbursing a government pension
D. Issuing a Demand Draft for a customer
E. Processing an EBT credit
Answer: A. M&A/restructuring advisory is a corporate advisory function.
36 Which of the following best describes the customer-protection rationale behind mandatory locker nomination facility?
A. It ensures a smooth, pre-authorised transfer of locker access to a nominee on the account holder's death, avoiding legal disputes
B. Nomination has no protective purpose
C. Nomination automatically transfers locker ownership to the bank
D. Nomination is required only for lockers rented by companies
E. Nomination eliminates the need for any KYC
Answer: A. Nomination smooths locker-access transfer on the holder's death.
37 Which of the following best captures the JAM trinity's connection to EBT/DBT?
A. Jan Dhan accounts, Aadhaar identity, and mobile numbers together enable direct, targeted electronic benefit transfer to citizens
B. JAM has no connection to benefit transfer
C. JAM refers only to a mobile banking app
D. JAM is a merchant banking product
E. JAM is a type of locker classification
Answer: A. JAM (Jan Dhan-Aadhaar-Mobile) underpins DBT/EBT infrastructure.
38 Which of the following would be a valid reason a bank refuses to open a new locker for a customer despite having a spare locker?
A. The customer fails to complete mandatory KYC/due diligence requirements
B. Banks can never refuse a locker request for any reason
C. Refusal is illegal under all circumstances
D. Lockers cannot legally be refused to KYC-compliant customers under any regulation
E. Only foreign nationals may be refused lockers
Answer: A. Incomplete KYC/due diligence is valid grounds for refusal.
39 Which of the following best explains why banks disclose the MITC (Most Important Terms and Conditions) for their services?
A. To ensure customers clearly understand key charges/terms before availing a service, supporting transparency
B. MITC disclosure is purely optional with no regulatory basis
C. MITC applies only to loan products, never deposit or ancillary services
D. MITC disclosure eliminates the need for any service charges
E. MITC is a marketing brochure with no legal significance
Answer: A. MITC disclosure ensures customer clarity on charges/terms.
40 Which of the following would be an appropriate use of a Banker's Cheque rather than NEFT/RTGS?
A. A local, same-city high-value payment where a physical negotiable instrument is preferred by the payee
B. An instant cross-border payment
C. A recurring monthly SIP investment
D. An ATM cash withdrawal
E. A mobile recharge
Answer: A. A BC suits local payments where a physical instrument is preferred.
41 Which of the following statements about a bank acting as Primary Dealer in government securities is accurate?
A. It facilitates primary issuance and secondary market-making in G-Secs, an extension of the bank's government business role
B. Primary Dealers have no connection to government securities
C. Only foreign banks can act as Primary Dealers
D. Primary Dealer status is unrelated to any RBI function
E. Primary Dealers deal only in corporate bonds, never G-Secs
Answer: A. Primary Dealers support G-Sec issuance/market-making.
42 Which of the following best summarises why "ancillary services" are grouped together as a distinct JAIIB topic, despite covering diverse activities?
A. They represent fee-based, non-core services banks offer alongside their primary deposit/lending business, each with distinct customer-protection and regulatory nuances
B. They are all identical activities with no distinguishing features
C. They form the bank's only source of revenue
D. They are entirely unregulated activities
E. They apply only to foreign banks operating in India
Answer: A. Ancillary services are diverse, fee-based, non-core offerings with their own nuances.
43 Which of the following would be an appropriate step if a customer disputes a service charge levied without the required 30-day notice?
A. The bank should review and potentially reverse the charge, as proper notice was not given per the BCSBI Code
B. The charge stands regardless of notice given
C. The customer has no recourse of any kind
D. Only RBI, never the bank, can address such disputes
E. Notice requirements do not apply to any service charges
Answer: A. A charge without proper notice should be reviewed/reversed.
44 Which of the following best describes a typical fee structure for PMS?
A. A management fee, often linked to assets under management and/or performance
B. PMS is always provided free of charge
C. PMS fees are fixed by RBI for every provider
D. PMS charges only a one-time flat ₹10 fee
E. PMS fees are illegal under SEBI rules
Answer: A. PMS typically charges a management/performance-linked fee.
45 Which of the following would be classified as a capital-market-facing ancillary service, distinct from remittance or government-agency services?
A. Merchant banking and Portfolio Management Services
B. Demand Draft issuance
C. Pension disbursement
D. Tax collection
E. Safe deposit lockers
Answer: A. Merchant banking and PMS are capital-market-facing services.
46 Which of the following best explains why banks must display service charges prominently at branches/websites?
A. Prominent disclosure supports informed customer decision-making and fair-practice compliance
B. Display requirements have no consumer-protection purpose
C. Charges need only be disclosed if a customer specifically requests it in writing
D. Prominent display is optional and rarely followed
E. Display requirements apply only to loan interest, never service charges
Answer: A. Prominent disclosure supports informed decisions and fair practice.
47 Which of the following would be an appropriate remittance instrument for an employer paying a one-time bulk bonus to a vendor in another city, needing a guaranteed, non-stoppable payment?
A. A Demand Draft
B. A locker rental slip
C. A PMS mandate
D. An EBT credit meant for government benefits
E. A merchant banking underwriting agreement
Answer: A. A DD suits a guaranteed, non-stoppable inter-city payment.
48 Which of the following statements about underwriting as a merchant banking activity is accurate?
A. The bank commits to subscribing to unsold portions of a securities issue, for a fee, reducing the issuer's risk
B. Underwriting has no connection to securities issuance
C. Underwriting eliminates all risk for the issuer with no bank commitment
D. Underwriting is a government business function, not merchant banking
E. Underwriting is identical to locker rental
Answer: A. Underwriting has the bank commit to unsold portions, reducing issuer risk.
49 Which of the following best captures why RBI/BCSBI frameworks apply consumer-protection principles across such varied ancillary services?
A. Regardless of the specific service, customers rely on banks' fair dealing, transparent pricing, and accountability for negligence
B. Consumer protection applies only to deposit accounts, never ancillary services
C. Ancillary services are entirely exempt from any customer-protection principle
D. Fair dealing applies only to government business, not commercial services
E. Consumer protection is irrelevant to fee-based banking services
Answer: A. Fair dealing/transparency/accountability apply consistently across ancillary services.
50 Overall, which statement best summarises this topic?
A. Ancillary services span remittance instruments (DD/BC/MT/TT), digital benefit/mobile channels, lessor-lessee locker arrangements, SEBI-regulated PMS/merchant banking, RBI-agency government business, all governed by fair, transparent, and properly-notified service charges
B. All ancillary services are identical in structure and regulation
C. Lockers create a bailor-bailee relationship with unlimited bank liability
D. Government business is unrelated to RBI in any way
E. Service charges can be levied retrospectively without notice
Answer: A. This correctly captures the full ancillary banking services framework.
Disclaimer: This article is prepared for educational and exam-preparation purposes only, summarising ancillary banking services as of September 2026. Candidates should cross-check the latest official IIBF syllabus and RBI guidelines before the exam.