Banking and Financial Institutions MCQ Questions and Solutions with Explanations | Commerce

Tier I capital is the core capital and represents the strongest financial base of a bank

It includes common equity, retained earnings and disclosed reserves which are fully reliable in absorbing losses

Tier II capital is supplementary capital and is less reliable compared to Tier I

It includes revaluation reserves, subordinated debt etc. which are not as readily available during crisis

Regulators therefore restrict how much Tier II can stand against Tier I

Tier II capital should not exceed 100% of Tier I capital because the banking system must primarily depend on strong core capital rather than supplementary capital

Therefore the correct answer is Option B (100%)

Special Economic Zones (SEZs): These are special areas within a country that have different economic regulations compared to the rest of the country. They are created to promote exports and attract investment.

The question is about a tax exemption specifically for banking services provided to businesses in these SEZs.

Service Tax: This is a tax levied by the government on services provided.

The government, to encourage economic activity in SEZs, often provides exemptions from certain taxes.
In this case, banking services offered to units in SEZs are exempt from Service Tax.

Other Taxes:
Capital Gains Tax: This is a tax on the profit earned from selling an asset, like property or shares.
Income Tax: This is a tax on an individual's or a company's income.

Therefore, the exemption applies specifically to Service Tax, making Option C the right answer.