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ALL THE VERY BEST FOR YOUR EXAMS

SAMPLE QUESTIONS FOR

CAIIB

ADVANCED BANK MANAGEMENT

(ABM)

Despite having taken reasonable care to review the sample Question , we disclaim all liability for
any loss or harm arising from actions done based solely on the contents. These brief comments are
the result of numerous people's work. We want to appreciate each and every one of them for their
invaluable work. We ask that everyone read the Macmillan book and stay up to speed with the most
recent information available from the RBI website and other reliable sources. Please notify us as
well if you come across any inaccurate or dubious information, along with a link to the relevant
source or reference for the accurate information.

Ashok Pandey (Senior Manager)

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INDEX

SI No. Topic Page No

1 General Information 3

2 Syllabus 6

3 Important Question 8
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CAIIB GENERAL INFORMATION

SI NO. Mandatory Paper Elective Papers: Candidates may select any

option they like.
1 Advanced Bank Management Human Resources Management

2 Advanced Business & Risk Management

Financial Management

3 Banking Regulations and Information Technology & Digital Banking

Business Laws

4 Bank Financial Management Central Banking

5 Rural Banking

 Only current bank employees who have passed the JAIIB exam are eligible to take
the CAIIB exam.
 Exams for the CAIIB are only offered online.
 Normally, the exam is held twice a year on Sundays in May/June and
November/December.
 The exam will take two hours to complete.

Examination Pattern:

 There will be 100 objective-type multiple-choice Questions on the Question paper,

worth 100 marks. Some of the Questions will be based on case studies or case lets.
The quantity of Questions required for a subject, however, may be changed by the
Institute.
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 In certain CAIIB subjects, there might be numerical Questions for which there are no
available .The candidate must key in the Answer to these Questions, which will not
follow the MCQ format.

 Negative points won't be awarded for incorrect responses.

 Exam Questions will include the following:

a. Knowledge evaluation

b. Knowledge of concepts

c. Logical and analytical explanation

d. Solving problems

e. Examining case

Passing Requirements:

 50 out of 100 is the minimum score required to pass the subject.

 Candidates will also be considered to have finished if they receive at least 45 marks in
each subject and an overall score of 50% in all exam subjects in a single attempt. The
Test.

 Until the allotted time for passing the test expires, candidates may keep their credits for
the subjects they have successfully attempted.

 Note: A candidate may take the CAIIB exam five times, but only if they register for the
exam and complete it within three years of the date of registration, whichever comes
first. It is not necessary for these five attempts to occur one after the other.
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 The "Class of Pass" requirements:

 First Class: Pass all subjects in the FIRST PHYSICAL ATTEMPT with an aggregate score of
60% or higher.
 First Class with Distinction: 60% or higher in each category overall and 70% or higher in
every participant in the FIRST ACTUAL ATTEMPT.
 Only "Pass Class" will be awarded to candidates who have been granted exemption in
one or more subjects.

 Deadline for Guidelines and Significant Developments Ahead of Exams:

 The Institute will only take into consideration instructions/guidelines issued by the
regulator(s) and significant developments in banking and finance up to December 31 for
the purpose of including them in the Question papers for the exams that will be
administered from February to July of each calendar year.

 Important developments in banking and finance up to June 30th, as well as

instructions/guidelines issued by the regulator(s), will only be taken into consideration
for inclusion in the Question papers for the exams that the Institute will administer from
August to January of each year.

➤ Exam Fees

An overview Fee
First attempt fee 5000
Second attempt fee 1300
Third attempt fee 1300
Fourth attempt fee 1300
Fifth attempt fee 1300
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SYLLABUS

The booklet contains information on the suggested syllabus, which is indicative. Though
Questions can address any pertinent topic under the subject, candidates must study all topics
falling within the purview of the subject in Question due to the professional nature of
examinations.

Even though those topics may not have been explicitly covered in the syllabus, candidates taking
the exam should especially get ready to respond to Questions about current events that may
arise under the various subjects covered in the exam.

MODULE C: CREDIT MANAGEMENT

 Overview of Credit Management

 Importance of Credit; Historical Background of Credit in India; Principles of Credit;

Types of Borrowers; Types of Credit; Components of Credit Management; Role of
RBI Guidelines in Bank’s Credit Management

 Analysis of Financial Statements

 Which are the Financial Statements; Users of Financial Statements; Basic

Concepts Used in Preparation of Financial Statements; Accounting Standards
(AS); Legal Position Regarding Financial Statements; Balance Sheet; Profit and
Loss Account; Cash Flow Statement; Funds Flow Statement; Projected Financial
Statements; Purpose of Analysis of Financial Statements by Bankers; Rearranging
the Financial Statements for Analysis; Techniques used in Analysis of Financial
Statements; Creative Accounting; Related Party Transactions

 Working Capital Finance

 Concept of Working Capital; Working Capital Cycle; Importance of Liquidity

Ratios; Methods of Assessment of Bank Finance; Working Capital Finance to
Information Technology and Software Industry; Bills/Receivables Finance by the
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Banks; Guidelines of RBI for Discounting/Rediscounting of Bills by Banks; Trade

Receivables Discounting System (TReDS); Non-Fund Based Working Capital Limits;
Other Issues Related to Working Capital Finance

 Term Loans

 Important Points about Term Loans; Deferred Payment Guarantees (DPGs);

Difference between Term Loan Appraisal and Project Appraisal; Project Appraisal;
Appraisal and Financing of Infrastructure Projects

 Credit Delivery and Straight Through Processing

o Documentation; Third-Party Guarantees; Charge over Securities; Possession of Security;

Disbursal of Loans; Lending under Consortium/Multiple Banking Arrangements;
Syndication of Loans; StraightThrough Loan Processing or Credit Underwriting Engines

 Credit Control and Monitoring

o Importance and Purpose; Available Tools for Credit Monitoring/Loan Review Mechanism
(LRM)

 Risk Management and Credit Rating

o Meaning of Credit Risk; Factors Affecting Credit Risk; Steps taken to Mitigate Credit Risks;
Credit Ratings; Internal and External Ratings; Methodology of Credit Rating; Use of Credit
Derivatives for Risk Management; RBI guidelines on Credit Risk Management; Credit
Information System

 Restructuring/Rehabilitation and Recovery

 Credit Default/Stressed Assets/NPAs; Wilful Defaulters; Non-cooperative

borrowers; Options Available to Banks for Stressed Assets; RBI Guidelines on
Restructuring of Advances by Banks; Available Frameworks for Restructuring of
Assets; Sale of Financial Assets.
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 Resolution of Stressed Assets under Insolvency and Bankruptcy Code 2016

 Definition of Insolvency and Bankruptcy; To Whom the Code is Applicable; Legal

Elements of the Code; Paradigm Shift; Corporate Insolvency Resolution Process;
Liquidation process; Pre-packed Insolvency Resolution Process for stressed
MSMEs
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CHAPTER 17-: Overview of Credit Management

1) What role does credit play in the national 5) What impact does increased consumer
economy? spending due to credit have on the economy?
a. Minimal a. Decreases demand
b. Negligible b. No impact on demand
c. Important c. Drives up demand
d. Irrelevant d. Stabilizes demand

Answer: c. Important Answer: c. Drives up demand

2) How does credit benefit entrepreneurs? 6) How does the availability of credit affect
a. Limits project size economic growth?
b. Reduces project scope a. Stalls growth
c. Provides leverage for larger projects b. Has no impact on growth
d. Increases project risk c. Propels the economy to higher growth
d. Slows down growth
Answer: c. Provides leverage for larger projects
Answer: c. Propels the economy to higher growth
3) What is the result of access to credit on
industrial production and services? 7) 7. What is a potential downside of excessive
a. Decreased production credit availability for nonproductive purposes?
b. No impact on production a. Decreases inflationary pressure
c. Accelerated production b. Stimulates economic growth
d. Stagnant production c. Puts deflationary pressure
d. Puts inflationary pressure
Answer: c. Accelerated production
Answer: d. Puts inflationary pressure
4) How does credit enable individuals in terms of
asset creation? 8) 8. Why does excessive credit for nonproductive
a. Restricts asset creation purposes create inflationary pressure?
b. Limits asset size a. Increases demand without affecting supply
c. Allows purchase/creation of assets b. Decreases demand without affecting supply
d. Discourages asset ownership c. Reduces both demand and supply
d. Has no impact on inflation
Answer: c. Allows purchase/creation of assets
Answer: a. Increases demand without affecting
supply
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9) What challenge is associated with the time lag 13) What socio-economic problems have been
between increased demand and supply creation? associated with the role of private money lenders
a. Excessive inflation in India?
b. Economic stagnation a. Urbanization issues
c. Difficulty in meeting demand b. Rural indebtedness and creation of rural
d. Reduced consumer spending landless population
c. Technological challenges
Answer: c. Difficulty in meeting demand d. Environmental concerns

10) 10. In summary, what is the dual role of credit Answer: b. Rural indebtedness and creation of
in the economy? rural landless population
a. Only positive impact
b. Only negative impact 14) What aggravated the problem of rural
c. Both positive and negative impacts indebtedness and the creation of a landless
d. No impact at all population in India?
a. Low levels of technology
Answer: c. Both positive and negative impacts. b. High level of financial literacy
c. High levels of literacy
11) Which monetary tools does the Reserve Bank d. Illiteracy/financial illiteracy
of India utilize to control credits and maintain a
Answer: d. Illiteracy/financial illiteracy
balance between economic growth and inflation?
a. Fiscal policy 15) How has the growth of the banking sector
b. Social policy addressed the issue of rural indebtedness to some
c. Monetary tools like Bank Rate, CRR, SLR, etc. extent?
d. Industrial policy a. Worsened the issue
b. No impact on the issue
Answer: c. Monetary tools like Bank Rate, CRR, c. Addressed the issue to a great extent
SLR, etc. d. Created new problems

12) What traditional role have private money Answer: c. Addressed the issue to a great extent
lenders played in meeting credit requirements in
16) What problem has sometimes emerged with
India?
the use of credit in the banking sector?
a. Minimal role
a. Efficient credit allocation
b. Limited role
b. Misuse for achieving political ends
c. Dominant role
c. Excessive financial literacy
d. No role
d. Low levels of interest rates
Answer: c. Dominant role
Answer: b. Misuse for achieving political ends
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17) 7. In what year did the nationalization of banks b. Agricultural sector

occur in India? c. Big business houses
a. 1950 d. Government projects
b. 1969
c. 1975 Answer: c. Big business houses
d. 1980
22) What was a common characteristic of big
Answer: b. 1969 business houses before nationalization?
a. Lack of ownership/management interest in
18) 8. How is the nationalization of banks? banks
a. A crisis event b. High financial literacy
b. A turning point c. Excessive credit availability
c. A routine occurrence d. Government control
d. An insignificant event
Answer: a. Lack of ownership/management
Answer: b. A turning point interest in banks

19) 9. What did the nationalization of banks signify 23) After nationalization, what entity exercised
in the history of credit flow in India? greater control over banks in India?
a. Decreased government control a. Big business houses
b. Increased private sector dominance b. Reserve Bank of India (RBI)
c. Weakening of the banking sector c. Private money lenders
d. A watershed event d. Agricultural sector

Answer: d. A watershed event Answer: b. Reserve Bank of India (RBI)

20) 10. What impact did the nationalization of 24) What change did nationalization bring to the
banks have on credit flow in India? credit flow in the economy?
a. No impact a. Decreased credit flow
b. Decreased credit flow b. Increased credit flow to neglected sectors
c. Increased credit flow c. No impact on credit flow
d. Stagnant credit flow d. Shifted focus to big business houses

Answer: c. Increased credit flow Answer: b. Increased credit flow to neglected

sectors
21) Before nationalization, where was the flow of
credit primarily directed in India?
a. Small businesses
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25) What term became integral to the banking 29) 9. How did the concept of Priority Sector
system after nationalization, ensuring credit flow contribute to economic development?
to neglected sectors? a. Hindered economic growth
a. Elite Sector b. Limited credit availability
b. Priority Sector c. Directed credit to neglected sectors
c. High-Profile Sector d. Favored big business houses
d. Exclusive Sector
Answer: c. Directed credit to neglected sectors
Answer: b. Priority Sector
30) 10. What impact did nationalization have on
26) Who ensured that a substantial portion of the direction of credit flow in India?
bank credit flows to the Priority Sector after a. Shifted focus to big business houses
nationalization? b. Increased credit flow to neglected sectors
a. Private money lenders c. Decreased overall credit flow
b. Big business houses d. No impact on credit flow
c. Reserve Bank of India (RBI)
d. Agricultural sector Answer: b. Increased credit flow to neglected
sectors
Answer: c. Reserve Bank of India (RBI)
31) What are the fundamental principles that
27) 7. What concept became an integral part of influence bankers' lending operations?
the banking system to address the neglect of a. Economic trends
certain sectors? b. Market demand
a. Exclusive Banking c. Unwritten principles
b. Priority Sector d. Government regulations
c. Elite Banking
d. Specialized Banking Answer: c. Unwritten principles

Answer: b. Priority Sector 32) Which of the following is NOT one of the
principles of credit?
28) 8. What did the Reserve Bank of India ensure a. Safety of funds
regarding the credit flow to the Priority Sector? b. Purpose
a. Decreased control c. Market share
b. Greater control d. Profitability
c. Unrestricted flow
d. Substantial portion Answer: c. Market share

Answer: d. Substantial portion

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33) What does the principle of "safety of funds" 37) 7. Which principle ensures that borrowed
emphasize in lending operations? funds can be converted into cash quickly if
a. Ensuring maximum risk needed?
b. Minimizing the risk of funds a. Safety of funds
c. Ignoring risk factors b. Purpose
d. Focusing solely on profitability c. Liquidity
d. Security
Answer: b. Minimizing the risk of funds
Answer: c. Liquidity
34) Which principle focuses on the intended use of
the borrowed funds? 38) 8. What does the principle of "security" in
a. Safety of funds lending operations focus on?
b. Purpose a. Maximizing risk
c. Profitability b. Minimizing risk
d. Liquidity c. Providing collateral
d. Ignoring risk factors
Answer: b. Purpose
Answer: c. Providing collateral
35) What is one of the aspects of credit
management influenced by these principles? 39) 9. What is the purpose of the "risk spread"
a. Marketing strategies principle in credit management?
b. Employee satisfaction a. Concentrating risk in one area
c. Loan policies b. Diversifying risk across various areas
d. Product development c. Ignoring risk factors
d. Avoiding risk altogether
Answer: c. Loan policies
Answer: b. Diversifying risk across various areas
36) What is the emphasis of the "profitability"
principle in lending operations? 40) 10. What is the role of these principles in
a. Ignoring profits shaping bankers' lending operations?
b. Maximizing profits for the bank a. Limited influence
c. Minimizing profits for the borrower b. No influence
d. Focusing solely on liquidity c. Significant influence
d. Negative influence
Answer: b. Maximizing profits for the bank
Answer: c. Significant influence
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41) According to the Indian Contract Act, which 45) Under which legal framework do Companies
category does an individual fall under as a operate as borrowers?
borrower? a. Companies Act
a. Partnership firm b. Public Trusts Act
b. Sole proprietary firm c. Hindu Undivided Family Act
c. Companies d. Indian Trusts Act
d. Hindu undivided family
Answer: a. Companies Act
Answer: b. Sole proprietary firm
46) What legal entity is associated with Acts that
42) Which legal entity is associated with the created them in the context of borrowing?
customary laws pertaining to Hindus as a. Sole proprietary firm
borrowers? b. Statutory corporations
a. Limited Liability Partnerships c. Clubs and Associations
b. Hindu undivided family d. Local Authorities
c. Trusts and co-operative societies
d. Statutory corporations Answer: b. Statutory corporations

Answer: b. Hindu undivided family 47) 7. According to the Indian Trusts Act, which
entities fall under the category of borrowers?
43) In borrowing, which type of entity is governed a. Companies
by the Indian Partnership Act? b. Trusts and co-operative societies
a. Local Authorities c. Limited Liability Partnerships
b. Limited Liability Partnerships d. Local Authorities
c. Companies
d. Partnership firm and joint ventures Answer: b. Trusts and co-operative societies

Answer: d. Partnership firm and joint ventures 48) 8. Which entities are governed by the
customary laws pertaining to Hindus as
44) Which Act is applicable to Trusts and Co- borrowers?
operative Societies as borrowers? a. Companies
a. Indian Contract Act b. Hindu undivided family
b. Companies Act c. Sole proprietary firm
c. Societies Registration Act d. Local Authorities
d. Indian Partnership Act
Answer: b. Hindu undivided family
Answer: c. Societies Registration Act
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49) 9. In borrowing, what category do Clubs and a. Immediate transfer of money

Associations fall under? b. Commitment by the bank without a transfer of
a. Local Authorities money
b. Limited Liability Partnerships c. Future commitment to transfer money
c. Companies d. No involvement of the bank
d. Clubs and Associations
Answer: b. Commitment by the bank without a
Answer: d. Clubs and Associations transfer of money

50) 10. What is the overarching legal principle 54) In the context of non-fund based credit, what
regarding the laws applicable to different kinds of may result from the commitment made by the
borrowers? bank?
a. Uniform laws for all borrowers a. Immediate transfer of money
b. Laws tailored to each borrower category b. Future transfer of money
c. No legal requirements for borrowing c. No financial obligation
d. Inconsistent legal framework d. Bank's withdrawal from the commitment

Answer: b. Laws tailored to each borrower Answer: b. Future transfer of money

category
55) What is an example of non-fund based credit?
51) What are the two main types of credit? a. Mortgage loan
a. Personal and Business credit b. Bank guarantee issued in favor of a contractor
b. Secured and Unsecured credit c. Personal line of credit
c. Fund-based and Non-fund based credit d. Auto loan
d. Short-term and Long-term credit
Answer: b. Bank guarantee issued in favor of a
Answer: c. Fund-based and Non-fund based credit contractor

52) In fund-based credit, what occurs between the 56) If the beneficiary invokes a bank guarantee,
bank and the borrower? what is the bank's obligation?
a. Commitment a. Withdraw the guarantee
b. Future transfer of money b. Refuse payment
c. Actual transfer of money c. Remit the amount to the beneficiary
d. No financial transactions d. Escalate the matter to legal authorities

Answer: c. Actual transfer of money Answer: c. Remit the amount to the beneficiary

53) What characterizes non-fund based credit?

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57) 7. Who becomes liable to pay the amount to a. No such possibility

the bank if a bank guarantee is invoked? b. Rare possibility
a. Bank c. High probability
b. Beneficiary d. Immediate conversion
c. Contractor
d. Government Answer: c. High probability

Answer: c. Contractor 62) Besides guarantees, what are the other forms
of non-fund-based credit?
58) 8. What is the fundamental difference a. Mortgage loans
between fund-based and non-fund based credit? b. Personal lines of credit
a. The involvement of a bank c. Letters of credit, co-acceptance of bills, forward
b. The type of financial institution contracts, and derivatives
c. The transfer of money d. Auto loans
d. The purpose of credit
Answer: c. Letters of credit, co-acceptance of
Answer: c. The transfer of money bills, forward contracts, and derivatives

59) 9. What financial transaction characterizes 63) What type of credit is based on a commitment
fund-based credit? without an immediate transfer of money?
a. Immediate payment a. Fund-based credit
b. Commitment b. Non-fund-based credit
c. Future transfer of money c. Short-term credit
d. No financial transactions d. Long-term credit

Answer: a. Immediate payment Answer: b. Non-fund-based credit

60) 10. What is the distinction between fund- 64) Besides guarantees, what are some other
based and non-fund based credit? examples of non-fund-based credit?
a. Nature of commitment a. Personal loans
b. Type of beneficiary b. Mortgage loans
c. Transfer of money c. Auto loans
d. Legal obligations d. Crop loans

Answer: c. Transfer of money Answer: a. Letters of credit, co-acceptance of

bills, forward contracts, and derivatives
61) What possibility exists for a non-fund-based
credit to be converted into a fund-based credit?
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65) How can fund-based credit be further 69) 9. In credit classification, what does
classified based on the period? "institutional credit" refer to?
a. Short-term credit a. Loans to individuals
b. Long-term credit b. Loans to corporations
c. Both short-term and long-term credit c. Loans to government entities
d. No further classification d. Loans to retail customers

Answer: c. Both short-term and long-term credit Answer: c. Loans to government entities

66) In the classification of credit based on 70) 10. In summary, what is a key distinction
purpose, what is an example of a specific type of between fund-based and non-fund-based credit?
credit? a. Type of customers
a. Personal loans b. Period of credit
b. Export finance c. Immediate transfer of money
c. Auto loans d. Purpose of credit
d. Mortgage loans
Answer: c. Immediate transfer of money
Answer: b. Export finance
71) What is the primary document that guides
67) 7. How do banks often classify their credit credit management in a bank?
portfolio? a. Financial statements
a. Based on the interest rate b. Loan proposals
b. Based on the type of customers c. Loan policy of the bank
c. Based on the loan amount d. SWOT analysis
d. Based on the duration of credit
Answer: c. Loan policy of the bank
Answer: b. Based on the type of customers
72) What influences the formulation of a bank's
68) 8. What is an example of a classification based loan policy?
on the type of customers? a. Customer preferences
a. Working capital finance b. Market conditions, competitors' policies, SWOT
b. Project finance analysis, and RBI guidelines
c. Corporate credit c. Economic forecasts
d. Crop loan d. Government regulations

Answer: c. Corporate credit Answer: b. Market conditions, competitors'

policies, SWOT analysis, and RBI guidelines
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73) What is SWOT analysis in the context of Answer: c. Concentration of credit risk in specific
formulating a loan policy? sectors
a. Software analysis
77) 7. What discretionary powers are mentioned in
b. Strengths, Weaknesses, Opportunities, Threats
the loan policy?
analysis
a. Powers to deny all credit proposals
c. Stock market analysis
b. Powers to set interest rates
d. Sector-wise analysis
c. Powers at various levels for sanctioning credit
Answer: b. Strengths, Weaknesses, Opportunities, proposals
Threats analysis d. Powers to override RBI guidelines
Answer: c. Powers at various levels for sanctioning
74) What are some aspects covered in a typical
credit proposals
loan policy?
a. Customer preferences 78) 8. How does the loan policy address exposure
b. Market conditions limits for single borrowers and groups?
c. Exposure limits, sectors, and discretionary a. By setting a maximum number of loans
powers b. By setting limits on the total exposure
d. Economic forecasts c. By imposing minimum loan amounts
d. By prohibiting loans to specific sectors
Answer: c. Exposure limits, sectors, and
discretionary powers Answer: b. By setting limits on the total exposure

75) What does "Exposure limits for single 79) 9. What is one of the factors influencing the
borrowers and groups" refer to in a loan policy? formulation of a loan policy?
a. Limits on the number of loans a bank can offer a. Political climate
b. Limits on the total exposure a bank can have to b. Economic forecasts
a single borrower or a group of borrowers c. Cultural trends
c. Limits on the interest rates for loans d. Technological advancements
d. Limits on the loan durations
Answer: b. Economic forecasts
Answer: b. Limits on the total exposure a bank
80) 10. What is a key aspect of a bank's loan policy?
can have to a single borrower or a group of
a. Market conditions
borrowers
b. Customer preferences
76) In the loan policy, what are "Exposure limits c. SWOT analysis
for individual sectors" designed to control? d. Exposure limits, sectors, and discretionary
a. Customer preferences powers
b. Market conditions Answer: d. Exposure limits, sectors, and
c. Concentration of credit risk in specific sectors discretionary powers
d. Interest rates
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81) What are the primary questions that arise in a 84) What crucial information is the lender seeking
lender's mind before agreeing to lend money? when asking, "What should be the terms of
a. What are the economic conditions? repayment, interest rate, etc.?"
b. Is the borrower trustworthy? What is he going a. Borrower's hobbies
to do with the money? What are the risks b. Details about the borrower's family
involved? c. Repayment plans, interest rates, and other
c. How much profit will be generated? terms
d. What is the interest rate? d. Borrower's travel history

Answer: b. Is the borrower trustworthy? What is Answer: c. Repayment plans, interest rates, and
he going to do with the money? What are the risks other terms
involved?
85) In credit appraisal, what question pertains to
82) What is a key consideration in the credit the evaluation of the borrower's integrity and
appraisal process? reliability?
a. Borrower's clothing style a. Should I take any collateral security or personal
b. Lender's preferences guarantee?
c. Amount involved, duration, purpose of the loan, b. How much profit will be generated?
category of borrower, risks involved, and security c. Is the borrower trustworthy?
available d. What is the interest rate?
d. Government regulations
Answer: c. Is the borrower trustworthy?
Answer: c. Amount involved, duration, purpose of
the loan, category of borrower, risks involved, and 86) What does the lender consider when asking,
security available "Should I take any collateral security or personal
guarantee?"
83) In credit appraisal, what is the lender a. Borrower's educational qualifications
evaluating when questioning, "Should I give him b. Availability of government grants
the amount he has asked for or a different c. Security and assurance for loan recovery
amount?" d. Borrower's social media activity
a. Borrower's personal life
b. Economic conditions Answer: c. Security and assurance for loan
c. Risks involved recovery
d. Loan amount viability

Answer: d. Loan amount viability

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87) What determines the complexity of the credit c. Government regulations

appraisal process? d. Weather conditions
a. Weather conditions
b. Borrower's profession Answer: b. Risks involved
c. Amount involved, duration, purpose of the loan,
category of borrower, risks involved, security 91) What does the term "Delivery" in the context
available, RBI guidelines, etc. of credit refer to?
d. Political climate a. Physical transportation of money
b. Legal aspects of documentation and creation of
Answer: c. Amount involved, duration, purpose of charge over security
the loan, category of borrower, risks involved, c. Marketing strategies
security available, RBI guidelines, etc. d. Borrower's personal preferences

88) What does the lender assess when Answer: b. Legal aspects of documentation and
considering, "How should charge be created over creation of charge over security
primary/collateral security?"
a. Borrower's personal preferences 92) What does the delivery process cover in the
b. The color of collateral context of working capital limits, such as a loan or
c. The lender's business model cash credit?
d. Legal claim and documentation for enforcing a. Transportation of goods
the claim in case of default b. Legal documentation
c. Creation of charge over security
Answer: d. Legal claim and documentation for d. Disbursement procedures
enforcing the claim in case of default
Answer: d. Disbursement procedures
89) What is the primary focus of credit appraisal?
a. Borrower's hobbies 93) Why is efficient monitoring essential for the
b. Lender's preferences borrower and the bank?
c. Loan recovery and risk assessment a. To increase interest rates
d. Borrower's clothing style b. To ensure end-use of the bank's funds and
ensure safety
Answer: c. Loan recovery and risk assessment c. To provide unlimited credit
d. To discourage borrowing
90) Why would the appraisal for a small crop loan
or a vehicle loan differ from that for an industrial Answer: b. To ensure end-use of the bank's funds
project? and ensure safety
a. Borrower's personal preferences
b. Risks involved
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94) What does Credit Risk Management primarily Answer: c. To ensure the safety of the bank's
aim to achieve for a bank? funds
a. Maximum profit
b. Unlimited lending 98) 8. In the context of credit delivery, what does
c. Identify, measure, and control credit risk within "creation of charge over security" involve?
acceptable limits a. Setting interest rates
d. Reduce interest rates b. Providing legal documentation for loan recovery
c. Transportation of goods
Answer: c. Identify, measure, and control credit d. Physical delivery of money
risk within acceptable limits
Answer: b. Providing legal documentation for
95) In the context of credit risk management, what loan recovery
is considered a major risk faced by a bank?
a. Economic conditions 99) 9. What aspect does efficient monitoring focus
b. Market competition on in the interest of the borrower?
c. Credit risk a. Encouraging unlimited borrowing
d. Government regulations b. Discouraging borrowing
c. Timely help in unforeseen difficulties
Answer: c. Credit risk d. High-interest rates

96) What is the importance of suitable policies in Answer: c. Timely help in unforeseen difficulties
credit risk management?
a. To encourage borrowing 100) 10. What is the primary objective of Credit
b. To discourage borrowing Risk Management for a bank?
c. To identify, measure, and control credit risk a. Unlimited lending
within acceptable limits b. Maximum profit
d. To minimize profits c. Identify, measure, and control credit risk within
acceptable limits
Answer: c. To identify, measure, and control d. Discourage borrowing
credit risk within acceptable limits
Answer: c. Identify, measure, and control credit
97) 7. Why is credit risk management important risk within acceptable limits
for a bank?
a. To maximize losses
b. To minimize profits
c. To ensure the safety of the bank's funds
d. To encourage unlimited lending
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101) What is the primary objective of restructuring a. Credit default

in the context of credit management? b. Credit Risk Management
a. Encourage unlimited borrowing c. Recovery process
b. Discourage borrowing d. Unlimited lending
c. Make the operations of the enterprise viable
again Answer: c. Recovery process
d. Maximize losses
105) In the context of credit management, what is
Answer: c. Make the operations of the enterprise the focus of rehabilitation in the first case
viable again mentioned?
a. Encouraging unlimited borrowing
102) In cases of genuine business problems, what b. Making the operations of the enterprise viable
might banks examine before considering again
recovery? c. Discouraging borrowing
a. Feasibility of providing additional assistance, d. Creating more credit defaults
concessions, or rephasing
b. Increasing interest rates Answer: b. Making the operations of the
c. Encouraging unlimited borrowing enterprise viable again
d. Creating more credit defaults
106) What does the term "wilful default" refer to
Answer: a. Feasibility of providing additional in the context of credit default?
assistance, concessions, or rephasing a. Genuine business problems
b. Intentional default
103) What widely known terms are mentioned as c. Recovery process
part of the restructuring and rehabilitation d. Rehabilitation process
process?
a. Credit Risk Management Answer: b. Intentional default
b. Corporate Debt Restructuring (CDR) and
Rehabilitation of sick SSI units 107) What might banks examine in cases of
c. Unlimited lending genuine business problems to assist the
d. Government regulations enterprise?
a. Feasibility of providing additional assistance,
Answer: b. Corporate Debt Restructuring (CDR) concessions, or rephasing
and Rehabilitation of sick SSI units b. Encouraging unlimited borrowing
c. Maximizing losses
104) When rehabilitation is not considered d. Recovery process
feasible or does not yield desired results, what
Answer: a. Feasibility of providing additional
does the bank initiate?
assistance, concessions, or rephasing
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108) 8. What does the bank initiate in the case of Answer: b. In times of tight liquidity position
wilful defaults and unsuccessful rehabilitation?
a. Credit default 112) What does refinance from NABARD/SIDBI/RBI
b. Credit Risk Management typically involve in the context of credit
c. Unlimited lending management?
d. Recovery process a. Providing additional assistance to borrowers
b. Creating charge over security
Answer: d. Recovery process c. Borrowing from other financial institutions
d. Availing funds from NABARD/SIDBI/RBI for
109) 9. In the context of restructuring and certain priority sector advances
rehabilitation, what is the purpose of Corporate
Debt Restructuring (CDR)? Answer: d. Availing funds from
a. Encourage unlimited borrowing NABARD/SIDBI/RBI for certain priority sector
b. Discourage borrowing advances
c. Make the operations of the enterprise viable
again 113) What is the primary role of RBI's guidelines in
d. Increase interest rates the credit management of any bank in India?
a. Maximize losses
Answer: c. Make the operations of the enterprise b. Encourage unlimited borrowing
viable again c. Ensure compliance and influence credit
management
110) 10. In summary, what is the course of action d. Discourage borrowing
when rehabilitation is not feasible or
unsuccessful? Answer: c. Ensure compliance and influence
a. Encourage unlimited borrowing credit management
b. Credit default
c. Credit Risk Management 114) What is an important task of the credit
d. Initiate the recovery process department of any bank?
a. Maximizing losses
Answer: d. Initiate the recovery process b. Discouraging borrowing
c. Ensuring compliance with RBI guidelines
111) When does the aspect of refinance become d. Encouraging unlimited borrowing
significant in credit management?
a. During times of unlimited liquidity Answer: c. Ensuring compliance with RBI
b. In times of tight liquidity position guidelines
c. When interest rates are low
d. During economic recession
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115) What is the direct influence of RBI on the d. Maximizing losses

credit management of any bank in India?
a. Increasing interest rates Answer: c. Ensuring compliance and avoiding
b. Encouraging unlimited borrowing penalties
c. Keeping abreast with RBI guidelines and
ensuring compliance 119) 9. What do NABARD/SIDBI/RBI norms
d. Providing unlimited funds elaborate on in the context of refinance?
a. Discouraging borrowing
Answer: c. Keeping abreast with RBI guidelines b. Encouraging unlimited borrowing
and ensuring compliance c. Availing funds for certain priority sector
advances
116) In times of tight liquidity, what can banks d. Creating charge over security
avail from NABARD/SIDBI/RBI in the context of
credit management? Answer: c. Availing funds for certain priority
a. Additional funds for any purpose sector advances
b. Refinance for certain priority sector advances
c. Unlimited borrowing facilities 120) 10. What is the primary purpose of refinance
d. Personal loans for bank employees in times of tight liquidity for banks?
a. Encourage unlimited borrowing
Answer: b. Refinance for certain priority sector b. Ensure compliance with RBI guidelines
advances c. Avail funds for certain priority sector advances
d. Discourage borrowing
117) 7. What is the significance of keeping abreast
with RBI guidelines in credit management? Answer: c. Avail funds for certain priority sector
a. Discouraging borrowing advances
b. Maximizing losses
c. Ensuring compliance and avoiding penalties 121) What is the primary responsibility of banks in
d. Providing unlimited funds relation to the funds they provide?
a. Maximizing losses
Answer: c. Ensuring compliance and avoiding b. Discouraging borrowing
penalties c. Ensuring proper end use of bank funds and
monitoring the funds flow
118) 8. What does the credit department of any d. Encouraging unlimited borrowing
bank aim to achieve by keeping abreast with RBI
guidelines? Answer: c. Ensuring proper end use of bank funds
a. Encouraging unlimited borrowing and monitoring the funds flow
b. Discouraging borrowing
c. Ensuring compliance and avoiding penalties
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122) Why is it necessary for banks to evolve 126) In relation to working capital finance, what
arrangements to monitor the use of funds? should banks ensure regarding acquisitions of
a. To encourage unlimited borrowing shares and debentures?
b. To maximize losses a. Encourage unlimited acquisitions
c. To ensure compliance with RBI guidelines b. Discourage acquisitions
d. To ensure withdrawals are strictly for the c. Strictly avoid acquisitions
sanctioned purpose d. Maximize acquisitions

Answer: d. To ensure withdrawals are strictly for Answer: c. Strictly avoid acquisitions
the sanctioned purpose
127) 7. What type of investments should not be
123) What should not happen concerning working funded using working capital finance?
capital finance? a. Investments in fixed assets
a. Diversion for acquiring fixed assets b. Discouraging borrowing
b. Unlimited borrowing c. Investments in associate companies
c. Encouraging investments in capital markets d. Encouraging unlimited borrowing
d. Discouraging borrowing
Answer: c. Investments in associate companies
Answer: a. Diversion for acquiring fixed assets 128) 8. What is the focus of banks concerning the
purpose of withdrawals from cash credit/overdraft
124) What should be strictly avoided in the use of accounts?
working capital finance? a. Discouraging withdrawals
a. Maximizing losses b. Encouraging unlimited withdrawals
b. Diversion for acquiring fixed assets c. Strictly ensuring withdrawals are for the
c. Discouraging borrowing sanctioned purpose
d. Encouraging unlimited borrowing d. Maximizing withdrawals

Answer: b. Diversion for acquiring fixed assets Answer: c. Strictly ensuring withdrawals are for
the sanctioned purpose
125) What is one of the activities that working
capital finance should not be diverted towards? 129) 9. In the context of end use of funds, what
a. Acquiring associate companies should banks monitor to ensure proper utilization?
b. Discouraging borrowing a. Borrower's personal life
c. Encouraging unlimited borrowing b. Interest rates
d. Investing in the capital market c. Funds flow and proper end use
d. Market conditions
Answer: d. Investing in the capital market
Answer: c. Funds flow and proper end use
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130) In summary, what is the key responsibility of Answer: b. Upto 1 Cr investment and Upto 5 Cr
banks in relation to the end use of funds? turnover
a. Encourage unlimited borrowing
b. Maximize losses 133) According to the common guidelines, what is
c. Ensure proper end use of bank funds and the maximum loan amount for units in the MSE
monitor the funds flow sector where banks are mandated not to accept
d. Discourage borrowing collateral security?
a. Rs. 1 Lakh
Answer: c. Ensure proper end use of bank funds b. Rs. 10 Lakh
and monitor the funds flow c. Rs. 25 Lakh
d. Rs. 50 Lakh
131) How did the MSMED Act, 2006 modify the
definition of micro, small, and medium Answer: b. Rs. 10 Lakh
enterprises?
a. It increased the limits for manufacturing 134) What is the maximum loan amount for units
enterprises only in the MSE sector where banks can extend
b. It decreased the limits for service enterprises collateral-free loans if the track record is good?
only a. Rs. 1 Lakh
c. It modified the definition for both b. Rs. 10 Lakh
manufacturing or production and rendering of c. Rs. 25 Lakh
services d. Rs. 50 Lakh
d. It eliminated the classification of enterprises
Answer: c. Rs. 25 Lakh
Answer: c. It modified the definition for both
manufacturing or production and rendering of 135) What is the turnover limit for small
services enterprises in the MSME sector, as per the new
limits announced on 13-05-2020?
132) What are the new limits for micro enterprises a. Upto 10 Cr
in terms of investment and turnover, as per the b. Upto 50 Cr
MSME New limits announced on 13-05-2020? c. Upto 5 Cr
a. Upto 25 Lakh investment and Upto 10 Lakh d. Upto 20 Cr
turnover
b. Upto 1 Cr investment and Upto 5 Cr turnover Answer: a. Upto 10 Cr
c. Upto 10 Cr investment and Upto 50 Cr turnover
d. Upto 20 Cr investment and Upto 100 Cr
turnover
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136) What is the turnover limit for medium b. 2 Cr

enterprises in the MSME sector, as per the new c. 5 Cr
limits announced on 13-05-2020? d. 50 Cr
a. Upto 10 Cr
b. Upto 50 Cr Answer: b. 2 Cr
c. Upto 5 Cr
d. Upto 100 Cr 140) 10. What is the maximum turnover limit for
small manufacturing enterprises under the new
Answer: b. Upto 50 Cr limits announced on 13-05-2020?
a. Upto 1 Cr
137) 7. As per the MSMED Act, 2006, what are the b. Upto 5 Cr
old limits for small service enterprises in terms of c. Upto 10 Cr
turnover and investment? d. Upto 20 Cr
a. Upto 5 Cr turnover and Upto 2 Cr investment
b. Upto 10 Lakh turnover and Upto 5 Cr Answer: a. Upto 1 Cr
investment
c. Upto 50 Cr turnover and Upto 10 Cr investment 141) What is the purpose of a Composite Loan
d. Upto 100 Cr turnover and Upto 20 Cr with a limit of Rs. 1 crore?
investment a. To encourage unlimited borrowing
b. To maximize losses
Answer: a. Upto 5 Cr turnover and Upto 2 Cr c. To enable MSE entrepreneurs to avail working
investment capital and term loan through a Single Window
d. To discourage borrowing
138) 8. In the context of lending to the MSME
sector, what is the maximum investment limit for Answer: c. To enable MSE entrepreneurs to avail
medium manufacturing enterprises under the old working capital and term loan through a Single
limits? Window
a. 2 Cr
b. 5 Cr 142) Under the Credit Linked Capital Subsidy
c. 10 Cr Scheme (CLSS) for Technology Upgradation, what
d. 50 Cr is the maximum loan amount for which the
subsidy is available?
Answer: c. 10 Cr a. Rs. 5 crore
b. Rs. 1 crore
139) 9. According to the common guidelines, what c. Rs. 10 lakh
is the maximum investment limit for small service d. Rs. 50 lakh
enterprises under the old limits?
a. 10 Lakh Answer: b. Rs. 1 crore
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143) What is the rate of subsidy under the Credit Answer: b. Rs. 1 crore
Linked Capital Subsidy Scheme (CLSS) for
Technology Upgradation? 147) 7. In the Priority Sector, which sector is NOT
a. 5% mentioned?
b. 10% a. Agriculture
c. 15% b. MSME
d. 20% c. Education
d. Information Technology
Answer: c. 15%

144) In the context of Composite Loan, what is the Answer: d. Information Technology
primary benefit for MSE entrepreneurs?
a. Encourage unlimited borrowing 148) What is one of the sectors included in the
b. Single Window access for working capital and Priority Sector?
term loan a. Health
c. Maximize losses b. Real Estate
d. Discourage borrowing c. Social Infrastructure
d. Luxury Goods
Answer: b. Single Window access for working
Answer: c. Social Infrastructure
capital and term loan
149) Under the Priority Sector, what does CLSS
145) Which government ministry has launched the
stand for?
Credit Linked Capital Subsidy Scheme (CLSS)?
a. Credit Linked Capital Subsidy Scheme
a. Ministry of Finance
b. Capital Loan Subsidy Scheme
b. Ministry of Agriculture
c. Composite Loan Subsidy Scheme
c. Ministry of Micro, Small and Medium
d. Credit Linked Composite Scheme
Enterprises
d. Ministry of Commerce and Industry Answer: a. Credit Linked Capital Subsidy Scheme

Answer: c. Ministry of Micro, Small and Medium 150) What is the main purpose of a Composite
Enterprises Loan with a limit of Rs. 1 crore?
a. Maximize losses
146) What is the maximum loan amount eligible b. Encourage unlimited borrowing
for the Credit Linked Capital Subsidy Scheme c. Enable MSE entrepreneurs to avail working
(CLSS) for Technology Upgradation? capital and term loan through a Single Window
a. Rs. 10 lakh d. Discourage borrowing
b. Rs. 1 crore
c. Rs. 5 crore Answer: c. Enable MSE entrepreneurs to avail
d. Rs. 50 lakh working capital and term loan through a Single
Window
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151) What percentage of the overall Priority Answer: d. One

Sector target is allocated to the Agriculture
sector? 155) 7. What is the overall Priority Sector target
a. 15% for Scheduled Commercial Banks and foreign
b. 20% banks with 20 or more branches, as a percentage
c. 25% of ANBC or CEOBE, whichever is higher?
d. 18% a. 30%
b. 40%
Answer: d. 18% c. 50%
d. 60%
152) In the context of Priority Sector, what is the
specific target for Weaker Section as a percentage Answer: b. 40%
of ANBC or CEOBE, whichever is higher?
a. 5% 156) 8. What is the specific target for Micro
b. 7.5% Enterprises under the Priority Sector?
c. 10% a. 5%
d. 15% b. 7.5%
c. 10%
Answer: b. 7.5% d. 15%

153) For foreign banks with less than 20 branches, Answer: b. 7.5%
what is their overall Priority Sector target
percentage? 157) 9. For which category of banks is the overall
a. 30% Priority Sector target 40%?
b. 40% a. Foreign banks with less than 20 branches
c. 50% b. Scheduled Commercial Banks
d. 60% c. Cooperative Banks
d. Development Banks
Answer: b. 40%
Answer: b. Scheduled Commercial Banks
154) How many targets do foreign banks with less
than 20 branches have in relation to the Priority
Sector?
a. Two
b. Three
c. Four
d. One
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158) 10. How are the figures for Priority Sector 161) Overdrafts extended by banks, up to Rs.
targets expressed? 10,000 under Pradhan Mantri Jan Dhan Yojana
a. As a percentage of Gross Domestic Product (PMJDY) accounts are related to which sector?
(GDP) a. Education
b. As a percentage of Total Assets b. Agriculture
c. As a percentage of Adjusted Net Bank Credit c. Khadi and Village Industries Sector (KVI)
(ANBC) or credit equivalent amount of Off-Balance d. Finance to Micro, Small and Medium
Sheet Exposure (CEOBE), whichever is higher Enterprises (MSMEs)
d. As a fixed monetary amount
Answer: d. Finance to Micro, Small and Medium
Answer: c. As a percentage of Adjusted Net Bank Enterprises (MSMEs)
Credit (ANBC) or credit equivalent amount of Off-
Balance Sheet Exposure (CEOBE), whichever is 162) What type of advances granted to units in the
higher Khadi and Village Industries Sector (KVI) are
covered under Priority Sector Advances?
159) Which sector is covered under Priority Sector a. Only term loans
Advances and eligible for consideration under the b. Only working capital finance
sub-target of 7.5% prescribed for the c. Both term loans and working capital finance
Microenterprises segment within the priority d. Only overdrafts
sector?
a. Education Answer: c. Both term loans and working capital
b. Real Estate finance
c. Khadi and Village Industries Sector (KVI)
d. Information Technology 163) What is the maximum limit for overdrafts
extended by banks under Pradhan Mantri Jan
Answer: c. Khadi and Village Industries Sector Dhan Yojana (PMJDY) accounts?
(KVI) a. Rs. 5,000
b. Rs. 7,500
160) What is the prescribed sub-target percentage c. Rs. 10,000
for the Microenterprises segment within the d. Rs. 15,000
Priority Sector?
a. 5% Answer: c. Rs. 10,000
b. 7.5%
c. 10%
d. 15%

Answer: b. 7.5%
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164) In the context of Priority Sector Lending, d. Annual turnover of the unit
which segment has a sub-target of 7.5%?
a. Agriculture Answer: c. Type of the unit
b. Large Corporates
c. Microenterprises 168) 10. What is the prescribed sub-target for the
d. Real Estate Microenterprises segment within the Priority
Sector?
Answer: c. Microenterprises a. 5%
b. 7.5%
165) 7. What is the purpose of extending c. 10%
overdrafts up to Rs. 10,000 under Pradhan Mantri d. 15%
Jan Dhan Yojana (PMJDY) accounts?
a. Encourage unlimited borrowing Answer: b. 7.5%
b. Discourage borrowing
c. Financial inclusion for the unbanked 169) What is the maximum loan amount for
d. Maximize losses housing finance in a Metro Area, where the
maximum cost of the house is Rs. 45 Lac?
Answer: c. Financial inclusion for the unbanked a. Rs. 20 Lac
b. Rs. 25 Lac
166) 8. Which sector is related to advances c. Rs. 30 Lac
covered under Priority Sector Advances and is d. Rs. 35 Lac
eligible for the sub-target of 7.5% for the
Microenterprises segment? Answer: d. Rs. 35 Lac
a. Information Technology
b. Real Estate 170) In a Metro Area with a population of 10 Lac
c. Khadi and Village Industries Sector (KVI) and above, what is the maximum loan amount for
d. Education housing finance if the cost of the house is Rs. 45
Lac?
Answer: c. Khadi and Village Industries Sector a. Rs. 25 Lac
(KVI) b. Rs. 30 Lac
c. Rs. 35 Lac
167) 9. What is the primary eligibility criterion for d. Rs. 40 Lac
advances in the Khadi and Village Industries Sector
(KVI) to be covered under Priority Sector Answer: c. Rs. 35 Lac
Advances?
a. Size of the unit
b. Location of the unit
c. Type of the unit
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171) What is the maximum loan amount for 175) In an Other Area, what is the maximum loan
housing finance in an Other Area, where the amount for repairs?
maximum cost of the house is Rs. 30 Lac? a. Rs. 4 Lac
a. Rs. 15 Lac b. Rs. 6 Lac
b. Rs. 20 Lac c. Rs. 8 Lac
c. Rs. 25 Lac d. Rs. 10 Lac
d. Rs. 30 Lac
Answer: b. Rs. 6 Lac
Answer: c. Rs. 25 Lac
176) What is the eligibility criterion for
172) In an Other Area with a maximum house cost educational loans to be considered as eligible for
of Rs. 30 Lac, what is the maximum loan amount priority sector, irrespective of the sanctioned
for housing finance? amount?
a. Rs. 15 Lac a. Course duration
b. Rs. 20 Lac b. Type of institution
c. Rs. 25 Lac c. Loan purpose
d. Rs. 30 Lac d. Loan amount for vocational courses

Answer: c. Loan purpose

Answer: c. Rs. 25 Lac
177) 9. What is the maximum loan amount for
173) Which category of employees will be educational loans for individuals, irrespective of
excluded from housing loans in the context of the sanctioned amount, as eligible for priority
Metro Areas? sector?
a. Government employees a. Rs. 10 Lac
b. Bank employees b. Rs. 15 Lac
c. Private sector employees c. Rs. 20 Lac
d. Bank's own employees d. Rs. 25 Lac

Answer: d. Bank's own employees Answer: c. Rs. 20 Lac

174) What is the maximum loan amount for 178) What category of lending is covered under
repairs in a Metro Area? the heading "Export Credit"?
a. Rs. 4 Lac a. Loans for education
b. Rs. 6 Lac b. Loans for housing
c. Rs. 8 Lac c. Loans for international trade
d. Rs. 10 Lac d. Loans for social infrastructure

Answer: d. Rs. 10 Lac Answer: c. Loans for international trade

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179) What is the maximum loan limit per Answer: c. Rs. 10 lakh
borrower for building social infrastructure under
the Social Infrastructure category? 183) What is the maximum loan limit per
a. Rs. 5 crore borrower for loans not exceeding Rs. 1,00,000
b. Rs. 10 crore provided directly by banks to individuals, given the
c. Rs. 15 crore individual borrower's household annual income in
d. Rs. 20 crore rural areas does not exceed Rs. 1,00,000?
a. Rs. 50,000
Answer: b. Rs. 10 crore b. Rs. 75,000
c. Rs. 1,00,000
180) Which of the following is NOT an activity d. Rs. 1,50,000
mentioned under the Social Infrastructure
category? Answer: c. Rs. 1,00,000
a. Schools
b. Healthcare facilities 184) 7. What is the maximum loan limit per
c. Manufacturing units distressed person under the "Loans to distressed
d. Drinking water facilities persons" category to repay their debt to non-
institutional lenders?
Answer: c. Manufacturing units a. Rs. 1,50,000
b. Rs. 1,75,000
181) What is the maximum loan limit per c. Rs. 2,00,000
borrower for purposes like solar-based power d. Rs. 2,50,000
generators and biomass-based power generators
under the Renewable Energy category? Answer: c. Rs. 2,00,000
a. Rs. 20 crore
b. Rs. 25 crore 185) 8. What is the maximum loan limit per
c. Rs. 30 crore borrower for building social infrastructure under
d. Rs. 35 crore the Social Infrastructure category?
a. Rs. 5 crore
Answer: c. Rs. 30 crore b. Rs. 10 crore
c. Rs. 15 crore
182) For individual households, what is the d. Rs. 20 crore
maximum loan limit per borrower under the
Renewable Energy category? Answer: b. Rs. 10 crore
a. Rs. 5 lakh
b. Rs. 7.5 lakh
c. Rs. 10 lakh
d. Rs. 15 lakh
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186) Who are considered as the weaker sections c. Weaker Sections

under the Priority Sector, with a target of 10%? d. Scheduled Castes and Scheduled Tribes
a. Large-scale farmers
b. Middle-income households Answer: c. Weaker Sections
c. Small and Marginal Farmers
d. Urban professionals 190) Which groups of people are specifically
mentioned as part of the Weaker Sections under
Answer: c. Small and Marginal Farmers Priority Sector lending?
a. Professionals in urban areas
187) For Small and Marginal Farmers to be b. Rural artisans
considered under the Weaker Sections, what is c. Distressed farmers indebted to non-institutional
the maximum landholding allowed? lenders
a. Up to 1 hectare d. Large-scale industrialists
b. Up to 2 hectares
c. Up to 5 hectares Answer: c. Distressed farmers indebted to non-
d. Up to 10 hectares institutional lenders

Answer: b. Up to 2 hectares 191) Under the Weaker Sections, which

beneficiaries are eligible for the Differential Rate
188) Which category falls under the Weaker of Interest (DRI) scheme?
Sections when individual credit limits do not a. Cottage industries
exceed Rs. 1 lakh? b. Scheduled Castes and Scheduled Tribes
a. Large-scale industries c. Small and Marginal Farmers
b. Cottage industries d. Urban professionals
c. Medium-scale farmers
d. Commercial enterprises Answer: c. Small and Marginal Farmers

Answer: b. Cottage industries 192) 7. What is the target percentage for lending
to the Weaker Sections under Priority Sector?
189) Beneficiaries under Government-sponsored a. 5%
schemes like National Rural Livelihood Mission b. 8%
(NRLM), National Urban Livelihood Mission c. 10%
(NULM), and Self-Employment Scheme for d. 15%
Rehabilitation of Manual Scavengers (SRMS) are
considered part of which target group under the Answer: c. 10%
Priority Sector?
a. Middle-income households
b. Upper-income professionals
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193) 8. What is the maximum individual credit d. Rs. 1,50,000

limit for artisans, village, and cottage industries to
be considered under the Weaker Sections? Answer: c. Rs. 1,00,000
a. Rs. 50,000
b. Rs. 75,000 197) What category of individuals is covered under
c. Rs. 1,00,000 the Priority Sector with specific consideration for
d. Rs. 1,50,000 loans to persons with disabilities?
a. Large-scale farmers
Answer: c. Rs. 1,00,000 b. Professionals
c. Urban entrepreneurs
194) What is the maximum loan amount per d. Distressed persons
distressed person, other than farmers, under the
Priority Sector, for repaying their debt to non- Answer: d. Persons with Disabilities
institutional lenders?
a. Rs. 50,000 198) What is the maximum loan amount for
b. Rs. 75,000 individuals with disabilities under the Priority
c. Rs. 1,00,000 Sector?
d. Rs. 1,50,000 a. Rs. 50,000
b. Rs. 75,000
Answer: c. Rs. 1,00,000 c. Rs. 1,00,000
d. Rs. 1,50,000
195) Which category of individuals falls under the
Priority Sector with a loan amount not exceeding Answer: c. Rs. 1,00,000
Rs. 1 lakh per borrower to repay their debt to non-
institutional lenders? 199) What is the maximum limit for overdrafts
a. Professionals extended by banks under Pradhan Mantri Jan-
b. Distressed farmers Dhan Yojana (PMJDY) accounts?
c. Distressed persons other than farmers a. Rs. 5,000
d. Urban entrepreneurs b. Rs. 7,500
c. Rs. 10,000
Answer: c. Distressed persons other than farmers d. Rs. 15,000

196) What is the maximum loan amount for Answer: c. Rs. 10,000
individual women beneficiaries under the Priority
Sector?
a. Rs. 50,000
b. Rs. 75,000
c. Rs. 1,00,000
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200) Under the Priority Sector, which Answer: c. To avoid concentration risk
communities are specifically mentioned for
eligibility, as may be notified by the Government 204) What is the primary purpose of prescribing
of India from time to time? regulatory limits on banks' exposure to single and
a. Majority communities group borrowers in India by RBI?
b. Urban communities a. To encourage high exposure
c. Rural communities b. To discourage risk management
d. Minority communities c. To avoid concentration risk
d. To promote risk concentration
Answer: d. Minority communities
Answer: c. To avoid concentration risk
201) What is the maximum loan amount for
priority sector loans up to which no loan-related 205) What risk is RBI primarily concerned about
and ad-hoc service charges/inspection charges when advising banks on fixing exposure limits to
should be levied? specific industries or sectors?
a. Rs. 15,000 a. Market risk
b. Rs. 20,000 b. Credit risk
c. Rs. 25,000 c. Concentration risk
d. Rs. 30,000 d. Operational risk

Answer: c. Rs. 25,000 Answer: c. Concentration risk

202) What is the maximum loan amount for 206) What is the consequence of excessive
overdrafts under Pradhan Mantri Jan-Dhan Yojana exposure to a specific industry or sector without
(PMJDY) accounts? fixed limits, as per RBI's guidance?
a. Rs. 5,000 a. Encourages risk diversification
b. Rs. 7,500 b. Discourages risk management
c. Rs. 10,000 c. Increases concentration risk
d. Rs. 15,000 d. Promotes regulatory compliance

Answer: c. Rs. 10,000 Answer: c. Increases concentration risk

203) Why has RBI advised banks to fix limits on

their exposure to specific industries or sectors?
a. To encourage concentration risk
b. To discourage risk management
c. To avoid concentration risk
d. To promote high-risk lending
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207) How does fixing exposure limits contribute to 211) What is the maximum exposure ceiling limit
prudent risk management in banking? for a borrower group as a percentage of a bank's
a. By promoting high-risk lending capital funds?
b. By encouraging concentration risk a. 30%
c. By avoiding concentration risk b. 40%
d. By minimizing regulatory compliance c. 50%
d. 60%
Answer: c. By avoiding concentration risk
Answer: b. 40%
208) In summary, what is the primary reason for
RBI prescribing regulatory limits on banks' 212) What is the maximum exposure ceiling limit
exposure to single and group borrowers in India? for a borrower group as a percentage of a bank's
a. To encourage concentration risk capital funds, with the maximum limit allowed?
b. To discourage risk management a. 40%
c. To avoid concentration risk b. 50%
d. To promote high-risk lending c. 60%
d. 70%
Answer: c. To avoid concentration risk
Answer: b. 50%
209) What is the maximum exposure ceiling limit
213) For exposure to NBFCs, what is the maximum
for individual borrowers as a percentage of a
limit as a percentage of a bank's capital funds?
bank's capital funds?
a. 5%
a. 10%
b. 10%
b. 15%
c. 15%
c. 20%
d. 20%
d. 25%
Answer: b. 10%
Answer: b. 15%
214) For NBFC-AFC (Asset Financing Companies),
210) In the case of a single borrower, what is the what is the maximum exposure limit as a
maximum exposure ceiling limit as a percentage of percentage of a bank's capital fund?
a bank's capital funds? a. 10%
a. 15% b. 15%
b. 20% c. 20%
c. 25% d. 25%
d. 30%
Answer: b. 15%
Answer: b. 20%
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215) 7. Under what condition can banks assume 218) What is the basis for pricing rupee loans
exposures on a single NBFC/NBFC-AFC beyond the sanctioned and credit limits renewed from April 1,
specified limits? 2016, onwards?
a. On account of high-risk lending a. Prime Lending Rate (PLR)
b. On account of fund on-lent to the infrastructure b. Base Rate
sector c. Marginal Cost of Funds based Lending Rate
c. On account of speculative investments (MCLR)
d. On account of international borrowings d. Fixed Interest Rate

Answer: b. On account of fund on-lent to the Answer: c. Marginal Cost of Funds based Lending
infrastructure sector Rate (MCLR)

216) 8. What is the maximum exposure limit for a 219) Who is responsible for approving the
single NBFC/NBFC-AFC as a percentage of a bank's comprehensive policy on interest rates on
capital funds, assuming exposures beyond the advances?
specified limits? a. Reserve Bank of India (RBI)
a. 10%/15% b. Individual loan officers
b. 15%/20% c. Board of Directors or a delegated committee
c. 20%/25% d. Chief Executive Officer (CEO)
d. 25%/30%
Answer: c. Board of Directors or a delegated
Answer: b. 15%/20% committee

217) What is the requirement for banks regarding 220) What is the significance of the Marginal Cost
the formulation of a policy on interest rates on of Funds based Lending Rate (MCLR) in the pricing
advances? of advances?
a. It is optional for banks a. It is used for international borrowings
b. The policy must be approved by the Reserve b. It is the benchmark for pricing rupee loans
Bank of India c. It is applicable only for fixed-rate loans
c. The policy must be approved by the Board of d. It is used for short-term loans only
Directors or a delegated committee
d. The policy is formulated by individual loan Answer: b. It is the benchmark for pricing rupee
officers loans

Answer: c. The policy must be approved by the

Board of Directors or a delegated committee
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221) What components will comprise the Marginal d. Annual MCLR

Cost of Funds for calculating MCLR?
a. Only marginal cost of funds Answer: d. Annual MCLR
b. Marginal cost of funds and negative carry on
account of CRR 225) In addition to the published benchmarks,
c. Marginal cost of funds and operating costs what option do banks have regarding the
d. Marginal cost of funds, negative carry on publication of MCLR?
account of CRR, operating costs, and tenor a. They must publish MCLR for all maturities
premium b. They have the option to publish MCLR for any
other longer maturity
Answer: d. Marginal cost of funds, negative carry c. They can choose to publish MCLR for shorter
on account of CRR, operating costs, and tenor maturities only
premium d. They are not allowed to publish MCLR for any
other maturity
222) What is the negative carry on account of CRR
used for in the calculation of MCLR? Answer: b. They have the option to publish MCLR
a. To increase the interest rates for any other longer maturity
b. To decrease the interest rates
c. To cover the cost of maintaining CRR 226) In summary, what are the published internal
d. To discourage lending benchmarks for MCLR?
a. Overnight MCLR, One-month MCLR, Three-
Answer: c. To cover the cost of maintaining CRR month MCLR, Six-month MCLR, One-year MCLR
b. Overnight MCLR, Three-month MCLR, Six-month
223) What is the purpose of including tenor MCLR, Two-year MCLR
premium in the calculation of MCLR? c. One-month MCLR, Three-month MCLR, Six-
a. To discourage long-term loans month MCLR, Two-year MCLR
b. To encourage short-term loans d. One-month MCLR, Three-month MCLR, Nine-
c. To cover the cost of funds over different tenors month MCLR, One-year MCLR
d. To simplify the calculation
Answer: a. Overnight MCLR, One-month MCLR,
Answer: c. To cover the cost of funds over Three-month MCLR, Six-month MCLR, One-year
different tenors MCLR

224) Which of the following is not a published

internal benchmark for MCLR?
a. Overnight MCLR
b. One-month MCLR
c. Three-month MCLR
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227) According to RBI guidelines, what is the 230) What is the primary purpose of offering an
recommended distribution of loan components for incentive, such as a lower rate of interest, to
borrowers enjoying working capital credit limits of borrowers for opting for the 'Loan System'?
Rs. 10 crore and above from the banking system? a. To discourage borrowers from choosing the
a. Term loan: 60%, Cash credit: 40% 'Loan System'
b. Term loan: 70%, Cash credit: 30% b. To equalize the interest rates on both
c. Term loan: 80%, Cash credit: 20% components
d. Term loan: 90%, Cash credit: 10% c. To encourage borrowers to choose the 'Loan
System'
Answer: c. Term loan: 80%, Cash credit: 20% d. To increase the rate of interest on the cash
credit component
228) For borrowers with working capital credit
limits of less than Rs. 10 crore, what incentive can Answer: c. To encourage borrowers to choose the
banks offer to encourage them to opt for the 'Loan 'Loan System'
System'?
a. Higher rate of interest on the loan component 231) In summary, what is the recommended loan
b. Lower rate of interest on the cash credit component distribution for borrowers with
component working capital credit limits of Rs. 10 crore and
c. Lower rate of interest on the loan component above, as per RBI guidelines?
d. No incentive is allowed a. Term loan: 60%, Cash credit: 40%
b. Term loan: 70%, Cash credit: 30%
Answer: c. Lower rate of interest on the loan c. Term loan: 80%, Cash credit: 20%
component d. Term loan: 90%, Cash credit: 10%

229) What is the recommended distribution of Answer: c. Term loan: 80%, Cash credit: 20%
loan components for borrowers with working
capital credit limits of less than Rs. 10 crore, as per 232) What is the primary objective of the
RBI guidelines? framework for dealing with loan frauds?
a. Term loan: 70%, Cash credit: 30% a. To maximize profits for banks
b. Term loan: 80%, Cash credit: 20% b. To minimize loan disbursals
c. Term loan: 90%, Cash credit: 10% c. To focus on prevention, early detection, and
d. Term loan: 100%, Cash credit: 0% prompt reporting of loan frauds
d. To encourage fraudulent activities
Answer: Not explicitly mentioned in the provided
information Answer: c. To focus on prevention, early
detection, and prompt reporting of loan frauds
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233) What is the purpose of introducing the 236) In the context of loan fraud prevention, what
concept of a Red Flagged Account (RFA) in the is the significance of staff accountability
framework? proceedings?
a. To identify profitable accounts a. To reward staff for negligence
b. To track loan repayments b. To punish staff for any reason
c. To control fraud risk by detecting suspicious c. To determine negligence and take timely action
activities d. To encourage fraudulent behavior among staff
d. To promote fraudulent transactions
Answer: c. To determine negligence and take
Answer: c. To control fraud risk by detecting timely action
suspicious activities
237) In summary, what is the concept of a Red
234) What does the term Early Warning Signals Flagged Account (RFA) based on within the
(EWS) refer to in the context of the framework for framework for dealing with loan frauds?
dealing with loan frauds? a. An account with high profits
a. Signals indicating the smooth functioning of b. An account with potential fraudulent activity
loans indicated by Early Warning Signals (EWS)
b. Indications of potential fraudulent activity c. An account with a low credit score
c. Warning signs for late payments d. An account with no outstanding loans
d. Signals for loan recovery
Answer: b. An account with potential fraudulent
Answer: b. Indications of potential fraudulent activity indicated by Early Warning Signals (EWS)
activity
238) What should the bank do immediately when
235) When is an account considered a Red Flagged Early Warning Signals (EWS) indicate weakness or
Account (RFA) within the framework? potential wrongdoing in a loan account?
a. When the account has a high credit score a. Increase the loan amount
b. When there are signs of potential fraudulent b. Ignore the signals as they may be false alarms
activity based on Early Warning Signals (EWS) c. Put the bank on alert and investigate the matter
c. When the account has a low credit score d. Report the signals to the borrower
d. When the account has no outstanding loans
Answer: c. Put the bank on alert and investigate
Answer: b. When there are signs of potential the matter
fraudulent activity based on Early Warning Signals
(EWS)
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239) According to RBI guidelines, which of the Answer: b. Monitoring the end use of funds and
following is covered under the Fair Practices Code the conduct of the borrower after loan
for Lending? disbursement
a. Only loan appraisal
b. Only loan disbursements 242) Under the Fair Practices Code, what is one of
c. Application for loans and their processing, loan the general guidelines relating to discrimination?
appraisal and terms/conditions, disbursements of a. Discrimination based on financial status
loans, post-disbursement supervision b. Discrimination based on political affiliation
d. Discrimination based on age, gender, and c. Discrimination based on age, gender, and
nationality nationality
d. Discrimination based on educational
Answer: c. Application for loans and their background
processing, loan appraisal and terms/conditions,
disbursements of loans, post-disbursement Answer: c. Discrimination based on age, gender,
supervision and nationality

240) What is the purpose of the Fair Practices 243) In summary, what are the areas covered by
Code for Lending in the banking sector? the Fair Practices Code for Lending according to
a. To complicate loan procedures RBI guidelines?
b. To discourage customers from applying for a. Only loan appraisal
loans b. Only loan disbursements
c. To ensure fair and transparent practices in c. Application for loans and their processing, loan
lending appraisal and terms/conditions, disbursements of
d. To favor certain categories of borrowers loans, post-disbursement supervision
d. Discrimination based on age, gender, and
Answer: c. To ensure fair and transparent nationality
practices in lending
Answer: c. Application for loans and their
241) According to the Fair Practices Code, what processing, loan appraisal and terms/conditions,
does the term "post-disbursement supervision" disbursements of loans, post-disbursement
encompass? supervision
a. Ensuring borrowers make early repayments
b. Monitoring the end use of funds and the
conduct of the borrower after loan disbursement
c. Imposing additional charges on borrowers
d. Recovering loans aggressively
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244) What is the primary purpose of the Banking Answer: b. Minimum standards of banking
Codes and Standard Board of India (BCSBI)? practices when dealing with MSEs
a. To enforce strict regulations on banks
b. To establish a code of conduct for banks 248) Which organization has formulated the Code
c. To promote competition among banks of Bank's Commitment to MSEs?
d. To discourage lending to Micro and Small a. Reserve Bank of India (RBI)
Enterprises (MSEs) b. Banking Codes and Standard Board of India
(BCSBI)
Answer: b. To establish a code of conduct for c. Indian Banks' Association (IBA)
banks d. Securities and Exchange Board of India (SEBI)

245) Which sector is covered by the Code of Answer: b. Banking Codes and Standard Board of
Bank's Commitment formulated by BCSBI? India (BCSBI)
a. Large Corporations
b. Micro and Small Enterprises (MSEs) 249) What is the nature of the Code of Bank's
c. Agricultural sector Commitment to Micro and Small Enterprises
d. Information Technology sector (MSEs) formulated by BCSBI?
a. Mandatory
Answer: b. Micro and Small Enterprises (MSEs) b. Voluntary
c. Regulatory
246) Is the Code of Bank's Commitment to Micro d. Advisory
and Small Enterprises (MSEs) mandatory or
voluntary for banks? Answer: b. Voluntary
a. Mandatory
b. Voluntary

c. Answer: b. Voluntary

247) What does the Code of Bank's Commitment

to MSEs set for banks?
a. Maximum interest rates on loans to MSEs
b. Minimum standards of banking practices when
dealing with MSEs
c. Regulations on the size of loans to MSEs
d. Guidelines for mergers and acquisitions
involving MSEs
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CHAPTER 18-: Analysis of Financial Statements

1) What is a key consideration for a bank when a) Borrower's favorite movie
evaluating a loan proposal? b) Financial details of the prospective borrower
a) Cultural background c) Borrower's hobbies and interests
b) Political affiliations d) Borrower's astrological sign
c) Financial details of the borrower
d) Social media presence Answer: b) Financial details of the prospective
borrower
Answer: c) Financial details of the borrower
5) What is the primary purpose of collecting
2) What determines the extent of financial details financial details in the loan assessment process?
required by a bank when assessing a loan a) To assess the applicant's taste in luxury items
proposal? b) To determine the applicant's favorite color
a) Borrower's physical fitness c) To evaluate the Net Worth of the applicant
b) Type of borrower's car d) To analyze the applicant's social media activity
c) Type of loan, type of borrower, purpose of the
loan, etc. Answer: c) To evaluate the Net Worth of the
d) Borrower's favorite color applicant

Answer: c) Type of loan, type of borrower, 6) How is Net Worth calculated for an individual in
purpose of the loan, etc. the context of loan assessment?
a) By counting the number of personal possessions
3) In the case of security-based lending, such as b) By deducting liabilities from assets
loans against fixed deposits or shares, what may c) By assessing the borrower's educational
be the requirement for financial details? qualifications
a) Extensive financial details are always required d) By considering the borrower's social
b) Financial details are never required connections
c) Financial details may be few or may not be
required at all Answer: b) By deducting liabilities from assets
d) Only personal details are required

Answer: c) Financial details may be few or may

not be required at all
4) Apart from integrity and KYC aspects, what
plays a crucial role in a bank's decision-making
process for a loan proposal?
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7) Why is the Net Worth of a business entity a) By analyzing the borrower's taste in luxury
considered to be added to liabilities during loan items
assessment? b) By deducting liabilities from assets
a) To confuse the loan assessment process c) By assessing income and deducting expenditure,
b) Because it reflects the business's separateness including existing loan repayments
as a legal entity d) By counting the number of social media
c) To make the business appear more valuable followers
d) Because it is a common accounting error
Answer: c) By assessing income and deducting
Answer: b) Because it reflects the business's expenditure, including existing loan repayments
separateness as a legal entity
11) In the context of Viability, what factor
8) How does the Net Worth of an applicant assist distinguishes a loan for consumer durables from a
the bank in the loan decision-making process? home loan?
a) It helps the bank assess the applicant's taste in a) Color of the items being purchased
fashion b) Potential increase in income
b) It guides the bank in deciding the level of c) Social media presence of the borrower
activity desirable for the applicant d) Size of the borrowed amount
c) It determines the applicant's favorite food
d) It has no impact on the loan decision Answer: b) Potential increase in income

Answer: b) It guides the bank in deciding the level 12) How does scrutiny of financial records assist
of activity desirable for the applicant the bank in assessing Viability for a business
enterprise seeking a loan?
9) What information does the bank collect to a) By analyzing the business owner's personal
assess Repayment Capacity in the case of an interests
individual seeking a loan? b) By counting the number of employees
a) Favorite color of the borrower c) By determining whether the proposed bank
b) Income, expenditure, and repayment of existing loan will result in a viable increase in operations
borrowings d) By evaluating the business owner's favorite
c) Social media activity movie
d) Educational qualifications
Answer: c) By determining whether the proposed
Answer: b) Income, expenditure, and repayment bank loan will result in a viable increase in
of existing borrowings operations
10) How is the Repayment Capacity of an
individual determined in the loan assessment
process?
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13) What does the bank inquire about in the b) Preparation and audit of financial statements
absence of formal statements of financial position for corporate entities
for individuals seeking a loan? c) Social media presence of the applicants
a) Social media activity d) The color of items being purchased
b) Favorite color of the borrower
c) Assets, liabilities, sources of income, Answer: b) Preparation and audit of financial
expenditure, and terms of repayment of existing statements for corporate entities
loans 17) Which financial statement provides
d) Educational qualifications information about the financial position of a
Answer: c) Assets, liabilities, sources of income, business at a specific point in time?
expenditure, and terms of repayment of existing a) Profit & Loss account
loans b) Income & Expenditure statement
c) Balance sheet
14) Why does the bank require certain d) Funds flow statement
information from individuals regarding their
financial position? Answer: c) Balance sheet
a) To analyze their taste in luxury items
18) What is the alternative term for the Profit &
b) To assess the need for the loan
Loss account in the case of non-profit
c) To determine the borrower's favorite food
organizations?
d) To count the number of personal possessions

Answer: b) To assess the need for the loan a) Explanatory schedules

b) Income & Expenditure statement
15) Where is information about assets, liabilities, c) Auditors' report
and financial position typically available for d) Notes on accounts
applicants other than individuals?
Answer: b) Income & Expenditure statement
a) Social media profiles
b) Financial statements, as required by law 19) In addition to the balance sheet and profit &
c) Personal preferences of the applicants loss account, what other documents provide
d) The number of social media followers useful information to bankers during the
assessment process?
Answer: b) Financial statements, as required by
a) Social media profiles of the business
law
b) Explanatory schedules and notes on accounts
16) What do statutory provisions primarily c) Personal preferences of the business owner
regulate concerning financial statements? d) Number of followers on social media
a) Personal interests of the applicants
Answer: b) Explanatory schedules and notes on
accounts
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20) Which financial statement involves a Answer: b) Money Measurement Concept

mathematical analysis of changes in the structure
of two consecutive balance sheets? 24) Which concept assumes that a business will
a) Profit & Loss account continue its operations for the foreseeable future
b) Income & Expenditure statement and is not planning to liquidate or scale down its
c) Funds flow statement operations?
d) Auditors' report a) Cost Concept
b) Going Concern Concept
Answer: c) Funds flow statement c) Conservatism Concept
d) Realisation Concept
21) Who are among the users of financial
statements, aside from bankers? Answer: b) Going Concern Concept
a) Fashion designers
b) Other creditors and lenders 25) What has the Companies Act 2013 prescribed
c) Movie producers regarding the format of financial statements?
d) Food critics a) Only the format of the balance sheet
b) Only the format of the Profit & Loss account
Answer: b) Other creditors and lenders c) Formats for both the balance sheet and Profit &
Loss account
22) Which group of individuals or entities is d) No specific format is prescribed
interested in financial statements for investment
purposes? Answer: c) Formats for both the balance sheet
a) Social media influencers and Profit & Loss account
b) Investors
c) Travel bloggers 26) What does the Companies Act 2013 emphasize
d) Event planners regarding the content of financial statements?
a) The financial statements should be entertaining
Answer: b) Investors b) The financial statements should give a true and
fair view of the state of affairs
23) Which concept in the preparation of financial c) The financial statements should focus on social
statements ensures that financial information is media metrics
presented in a stable and consistent unit of d) The financial statements should follow the
measure? latest fashion trends
a) Entity Concept
b) Money Measurement Concept Answer: b) The financial statements should give a
c) Cost Concept true and fair view of the state of affairs
d) Dual Aspect Concept
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27) According to the Companies Act 2013, what

standards should financial statements comply a) They are exempt from preparing financial
with? statements
a) Social media standards b) They must prepare consolidated financial
b) International accounting standards statements in addition to standalone financial
c) Fashion industry standards statements
d) Accounting standards notified under section c) They can choose to prepare either standalone
133 or consolidated financial statements
d) They only need to prepare standalone financial
Answer: d) Accounting standards notified under statements
section 133
Answer: b) They must prepare consolidated
28) In what form or forms should financial financial statements in addition to standalone
statements be presented according to the financial statements
Companies Act 2013?
a) As per the company's preferences 31) What does a balance sheet represent for an
b) In any form the company desires entity?
c) In the form or forms provided for different a) A summary of daily transactions
classes of companies in Schedule III b) A snapshot of assets and liabilities at a
d) Only in electronic form particular moment
c) A record of social media activity
Answer: c) In the form or forms provided for d) A list of employee preferences
different classes of companies in Schedule III
Answer: b) A snapshot of assets and liabilities at a
29) Why is it necessary for every company to particular moment
prepare financial statements, even if there is no
activity during the accounting period or the 32) How can assets be defined in the context of a
project is incomplete? balance sheet?
a) To showcase the company's social media a) What the firm owes to others
presence b) The date at which the balance sheet is prepared
b) To comply with Income Tax rules c) What the firm owns
c) To determine the company's favorite color d) The end of the accounting period
d) To evaluate the company's taste in luxury items
Answer: c) What the firm owns
Answer: b) To comply with Income Tax rules
30) What does the Companies Act 2013 mandate
for companies with subsidiaries, associates, or
joint ventures regarding financial statements?
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33) In the analogy of a balance sheet being like a a) Fixed Assets

snapshot, why might two balance sheets taken at b) Current Assets
different moments be different? c) Contingent Liability
a) Due to social media trends d) Non-Current Assets
b) Because the date of preparation is different
c) Because of employee preferences Answer: c) Contingent Liability
d) Due to changes in the weather
38) How are assets categorized in the balance
Answer: b) Because the date of preparation is sheet format?
different a) By the firm's preference
b) By their color
34) When is a balance sheet typically prepared? c) Based on their use of funds
a) At the beginning of the accounting period d) According to their source of funds
b) At the end of the accounting period
c) On a random date chosen by the firm Answer: c) Based on their use of funds
d) Whenever the firm prefers
39) Which assets in the Current Assets category
Answer: b) At the end of the accounting period are likely to be either consumed or converted into
cash within one year from the date of the balance
35) In the format of a balance sheet, where are sheet?
long-term liabilities typically categorized? a) Non-current assets
a) Current Assets b) Long-term investments
b) Fixed Assets c) Fixed assets
c) Current Liabilities d) Inventory/stock
d) Net Worth
Answer: d) Inventory/stock
Answer: c) Current Liabilities
40) What is an example of an asset classified
36) Which section of the balance sheet represents under Current Assets that represents money held
the sources of funds for the entity? in a bank account?
a) Current Assets a) Goodwill
b) Liabilities (Source of funds) b) Brands/trademarks
c) Fixed Assets c) Bank Balance
d) Net Worth d) Debtors
Answer: b) Liabilities (Source of funds)
Answer: c) Bank Balance
37) What category in the balance sheet includes
items like bank guarantees and letter of credit?
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41) Which type of assets do not have a physical 45) What term is used to describe the total value
existence and fall under the category of Intangible of Fixed Assets after deducting depreciation?
Assets? a) Net Income
a) Current Assets b) Net Assets
b) Fixed Assets c) Netblock
c) Long-term investments d) Net Liabilities
d) Goodwill
Answer: c) Netblock
Answer: d) Goodwill
46) Assets that cannot be classified as either fixed
42) What is an example of an Intangible Asset that assets, current assets, or intangible assets fall into
represents the exclusive right to use a brand or which category?
trademark? a) Current Liabilities
a) Computers b) Contingent Liability
b) Brands/trademarks c) Non-Current Assets
c) Copyrights d) Accrued Income
d) Debtors
Answer: c) Non-Current Assets
Answer: b) Brands/trademarks
47) What is the characteristic time frame for
43) What is the characteristic of Fixed Assets, also liabilities classified as Current Liabilities?
known as tangible assets? a) More than 2 years
a) Meant to be sold b) Within 1 year from the date of the balance
b) Can be touched sheet
c) Consumed within a year c) Exactly 6 months
d) Current in nature d) More than 5 years

Answer: b) Can be touched Answer: b) Within 1 year from the date of the
balance sheet
44) Which of the following is an example of a Fixed
Asset that is not meant to be sold? 48) Which of the following is an example of a
a) Inventory Current Liability?
b) Land a) Debentures
c) Bank Balance b) Term loan
d) Debtors c) Bills payable
d) Unsecured loan
Answer: b) Land
Answer: c) Bills payable
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49) What is the term used for the total amount

payable to outsiders after 1 year from the date of Answer: a) Capital or share capital
the balance sheet?
a) Networth 53) Where does the profit retained in the business
b) Current Liability contribute to in the balance sheet?
c) Long-term Liability
d) Installment a) Current assets
b) Long-term liabilities
Answer: c) Long-term Liability c) Networth or Owner's Equity
d) Current liabilities
50) Which of the following is considered a Long-
term Liability? Answer: c) Networth or Owner's Equity
a) Provision for tax
b) Bank borrowing in the form of CC and OD 54) What component of Networth represents
c) Bills payable additional funds received by the company for
d) Unsecured loan issuing shares at a premium?

Answer: d) Unsecured loan a) Reserves and surplus

b) Capital or share capital
51) What does Networth or Owner's Equity c) Share premium
represent in a business? d) Sundry creditors
a) Total liabilities
b) Total assets Answer: c) Share premium
c) Amount contributed by the owner plus retained
profit 55) What are the three primary methods used by
d) Current liabilities bankers for the analysis of financial statements?

Answer: c) Amount contributed by the owner plus a) Comparative Analysis, Budget Analysis, and
retained profit Social Media Analysis
b) Funds Flow Analysis, Trend Analysis, and Ratio
52) What is an example of a component of Analysis
Networth that represents the capital contributed c) Cultural Analysis, Environmental Analysis, and
by the owner? Technological Analysis
d) Personality Analysis, Preference Analysis, and
a) Long-term liability Lifestyle Analysis
b) Reserves and surplus
c) Share premium Answer: b) Funds Flow Analysis, Trend Analysis,
d) Sundry creditors and Ratio Analysis
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56) Which method involves the examination of the d) Funds Flow Analysis
flow of funds within an organization over a specific
period? Answer: b) Ratio Analysis

a) Trend Analysis 60) How can a ratio be expressed?

b) Ratio Analysis
c) Social Media Analysis a) Only as a percentage
d) Funds Flow Analysis b) Only as a number
c) Only as a proportion
Answer: d) Funds Flow Analysis d) As a percentage, number, or proportion

57) What does Trend Analysis primarily focus on in Answer: d) As a percentage, number, or
financial statement analysis? proportion

a) Social media trends 61) What can both figures used in the calculation
b) Changes in financial figures over time of a ratio be derived from?
c) Environmental factors
d) Personal preferences a) Social media metrics
b) Only from the Profit & Loss account
Answer: b) Changes in financial figures over time c) Either from the Profit & Loss account or the
Balance Sheet
58) Which method involves the calculation and d) Only from the Balance Sheet
interpretation of various financial ratios to assess
a company's performance and financial health? Answer: c) Either from the Profit & Loss account
or the Balance Sheet
a) Cultural Analysis
b) Lifestyle Analysis 62) How do ratios contribute to financial analysis?
c) Ratio Analysis
d) Technological Analysis a) By providing social media trends
b) By offering a comparison of financial
Answer: c) Ratio Analysis performance and position
c) By analyzing environmental factors
59) What is the primary method favored by d) By determining personal preferences
bankers for the analysis of financial statements?
Answer: b) By offering a comparison of financial
a) Trend Analysis performance and position
b) Ratio Analysis
c) Social Media Analysis
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63) What ratios fall under the category of 66) Which ratio falls under Turnover Ratios and is
Profitability Ratios, which are of significant of interest to bankers for assessing the efficiency
interest to bankers? of receivables management?

a) Current Ratio and Debt Equity Ratio a) Debt Service Coverage Ratio
b) Operating Profit Margin and Net Profit Margin b) Debtor Turnover Ratio
c) Debtor Turnover Ratio and Debt Service c) Quick Ratio or Acid Test Ratio
Coverage Ratio d) Current Ratio
d) Quick Ratio and Acid Test Ratio
Answer: b) Debtor Turnover Ratio
Answer: b) Operating Profit Margin and Net Profit
Margin 67) How is the Current Ratio (CR) calculated?

64) Which ratios provide insights into a company's a) Current assets - Current liabilities
ability to meet its short-term obligations and are b) Current liabilities / Current assets
categorized as Liquidity Ratios? c) Current assets / Current liabilities
d) Quick assets - Current liabilities
a) Debt Service Coverage Ratio and Debtor
Turnover Ratio Answer: c) Current assets / Current liabilities
b) Quick Ratio or Acid Test Ratio and Current Ratio
c) Operating Profit Margin and Net Profit Margin 68) What does the Current Ratio indicate about a
d) Debt Equity Ratio and Current Ratio firm's financial stability?

Answer: b) Quick Ratio or Acid Test Ratio and a) Efficiency of receivables management
Current Ratio b) Ability to pay current liabilities
c) Profitability
65) What does the Debt Service Coverage Ratio d) Long-term liabilities
indicate among Capital Structure Ratios? Answer: b) Ability to pay current liabilities

a) Ability to service interest and instalments 69) How is the Quick Ratio (CR) calculated, also
b) Profitability known as the Acid Test Ratio?
c) Debtor turnover
d) Liquidity a) Quick assets - Current liabilities
b) Current liabilities / Quick assets
Answer: a) Ability to service interest and c) Current liabilities / Current assets
instalments d) Quick assets / Current liabilities

Answer: d) Quick assets / Current liabilities

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70) What is considered as Quick Assets in the c) Ability to service interest and instalments on
Quick Ratio calculation? term loans
d) Profitability
a) Inventory and prepaid expenses
b) Current assets Answer: c) Ability to service interest and
c) Tangible net worth instalments on term loans
d) Long-term liabilities
74) Which ratio is used to assess the firm's ability
Answer: a) Inventory and prepaid expenses to pay term loan instalments on time?

71) Question 5: How is the Debt Equity Ratio a) Debt Equity Ratio
calculated? b) Debtor Turnover Ratio
c) Operating Profit Margin
a) Long-term liabilities / Current liabilities d) Debt Service Coverage Ratio
b) Current liabilities / Long-term liabilities
c) Tangible Net Worth / Long-term liabilities Answer: d) Debt Service Coverage Ratio
d) Long-term liabilities / Tangible Net Worth
75) Which category do Inventory Turnover Ratio
Answer: d) Long-term liabilities / Tangible Net and Debtor Turnover Ratio fall under?
Worth
a) Profitability Ratios
72) Under which category do Operating Profit b) Turnover Ratios
Margin and Net Profit Margin fall among the ratios c) Liquidity Ratios
commonly analyzed for financial statements? d) Capital Structure Ratios

a) Capital Structure Ratios Answer: b) Turnover Ratios

b) Profitability Ratios
c) Turnover Ratios 76) How is the Inventory Turnover Ratio (ITOR)
d) Liquidity Ratios calculated?

Answer: b) Profitability Ratios a) Cost of goods sold / Average Inventory

b) Average Inventory / Cost of goods sold
73) What does the Debt Service Coverage Ratio c) Inventory in beginning / Inventory at the end
(DSCR) indicate about a firm's ability to meet its d) Average Inventory * Cost of goods sold
financial obligations?
Answer: a) Cost of goods sold / Average Inventory
a) Ability to pay current liabilities
b) Efficiency of receivables management
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77) What does the Debtor Turnover Ratio (DTOR)

assess?

a) The efficiency of receivables management

b) The liquidity position of the firm
c) The profitability of the firm
d) The ability to pay current liabilities

Answer: a) The efficiency of receivables

management

78) What is included in the calculation of Average

Inventory in the Inventory Turnover Ratio
formula?

a) Inventory at the end

b) Inventory in the beginning
c) Goods purchased
d) Wages

Answer: b) Inventory in the beginning and

Inventory at the end

79) What is included in the calculation of Account

Receivables in the Debtor Turnover Ratio formula?

a) Cash sales
b) Total Sale
c) Bill Receivables
d) Credit Sales

Answer: c) Bill Receivables

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CHAPTER 19-: Working Capital Finance

1) What are fixed assets in a business C) Cash and bank balances
enterprise? D) Broking and commission agent activities
A) Raw materials, finished goods, and
receivables Answer: B) Raw materials and finished goods
B) Office furniture, machines/computers, etc.
C) Current assets like cash and bank balances 5) In the example of an entrepreneur setting
D) Broking and commission agent activities up a small enterprise for manufacturing
polythene bags, what would be considered a
Answer: B) Office furniture, fixed asset?
machines/computers, etc. A) Raw materials
B) Finished goods
2) What is the purpose of fixed assets in a C) Factory shed and plant machinery
business? D) Cash and bank balances
A) To generate immediate cash flows
B) To carry out broking and commission Answer: C) Factory shed and plant
activities machinery
C) To provide long-term operational support
D) To facilitate quick turnover of inventory 6) What is the total capital of ABCLtd as of
9/9/2017?
Answer: C) To provide long-term operational A) Rs. 25 lakh
support B) Rs. 75 lakh
C) Rs. 100 lakh
3) What is the term used for the money D) Rs. 200 lakh
blocked in current assets in a business?
A) Fixed capital Answer: C) Rs. 100 lakh
B) Operational capital
C) Liquid capital 7) What is the total of long-term liabilities for
D) Working capital ABCLtd as of 9/9/2017?
A) Rs. 25 lakh
Answer: D) Working capital B) Rs. 75 lakh
C) Rs. 100 lakh
4) In the context of working capital, what are D) Rs. 200 lakh
examples of current assets?
A) Office furniture and machinery Answer: B) Rs. 75 lakh
B) Raw materials and finished goods
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8) What is the total value of fixed assets for 12) How many tons of bags did the
ABCLtd as of 9/9/2017? entrepreneur supply on 21/09/2017?
A) Rs. 25 lakh A) 5 tons
B) Rs. 75 lakh B) 10 tons
C) Rs. 100 lakh C) 15 tons
D) Rs. 200 lakh D) 20 tons

Answer: C) Rs. 100 lakh Answer: B) 10 tons

9) What is the rate of polythene granules per 13) What is the total invoice amount raised by
kg that the entrepreneur discovers from the the entrepreneur on 21/09/2017 for the 10
dealer? tons of bags supplied?
A) Rs. 10 per kg A) Rs. 10 lakh
B) Rs. 50 per kg B) Rs. 11 lakh
C) Rs. 75 per kg C) Rs. 20 lakh
D) Rs. 100 per kg D) Rs. 21 lakh

Answer: D) Rs. 100 per kg Answer: B) Rs. 11 lakh

10) What is the minimum quantity of 14) What is the total labor charges (expense)
polythene granules the entrepreneur incurred for converting 10 tons of polythene
purchases from the dealer? granules into bags?
A) 5 tons A) Rs. 1 lakh
B) 10 tons B) Rs. 2 lakh
C) 15 tons C) Rs. 5 lakh
D) 20 tons D) Rs. 10 lakh

Answer: B) 10 tons Answer: B) Rs. 2 lakh

11) What is the rate of polythene granules per 15) What is the total capital of ABCLtd as of
kg? the evening of 30/9/2017?
A) Rs. 50 per kg A) Rs. 25 lakh
B) Rs. 75 per kg B) Rs. 75 lakh
C) Rs. 100 per kg C) Rs. 100 lakh
D) Rs. 110 per kg D) Rs. 132 lakh

Answer: C) Rs. 100 per kg Answer: C) Rs. 100 lakh

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16) What is the total value of long-term progress, finished goods, and receivables, in
liabilities for ABCLtd as of 30/9/2017? this example?
A) Rs. 25 lakh A) Rs. 20 lakh
B) Rs. 75 lakh B) Rs. 30 lakh
C) Rs. 100 lakh C) Rs. 32 lakh
D) Rs. 132 lakh D) Rs. 40 lakh

Answer: B) Rs. 75 lakh Answer: C) Rs. 32 lakh

17) What is the total amount payable to the 21) What is the term used for the total
supplier for raw materials as of 30/9/2017? current assets required to run the enterprise
A) Rs. 5 lakh smoothly?
B) Rs. 10 lakh A) Fixed capital
C) Rs. 30 lakh B) Operational capital
D) Rs. 75 lakh C) Working capital
D) Long-term capital
Answer: B) Rs. 10 lakh
Answer: C) Working capital
18) What is the total value of finished goods
22) In this example, how does the
as of 30/9/2017?
entrepreneur meet the entire requirement of
A) Rs. 10 lakh
working capital?
B) Rs. 11 lakh
A) Bank loan
C) Rs. 20 lakh
B) Personal savings
D) Rs. 30 lakh
C) Credit provided by the supplier
Answer: B) Rs. 11 lakh D) Government grant

19) What is the total amount receivable as of Answer: C) Credit provided by the supplier
30/9/2017?
23) Why does the amount of working capital
A) Rs. 10 lakh
needed vary among enterprises?
B) Rs. 11 lakh
A) It depends on the nature of activity and
C) Rs. 20 lakh
market conditions
D) Rs. 30 lakh
B) It is determined by government regulations
Answer: D) Rs. 30 lakh C) It is fixed for all enterprises
D) It is influenced by the entrepreneur's
20) What is the total amount of current personal preference
assets, including raw materials, work in
Answer: A) It depends on the nature of
activity and market conditions
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24) How is working capital finance by banks Answer: B) To meet the credit provided by
assessed? the supplier
A) Based on fixed assets
B) Based on long-term liabilities 28) What does the bank ask the entrepreneur
C) Based on total current assets needed to bring from his own sources to contribute to
D) Based on the entrepreneur's credit score the working capital?
A) Current assets
Answer: C) Based on total current assets B) Fixed assets
needed C) Net Working Capital
D) Own money, such as capital or long-term
25) What is the term used for the amount the borrowings
entrepreneur needs to bring from his own
sources to meet part of the working capital? Answer: D) Own money, such as capital or
A) Gross Working Capital long-term borrowings
B) Net Working Capital
C) Fixed Capital 29) What are the sources of the two parts of
D) Operational Capital the working capital?
A) Personal savings and government grant
Answer: B) Net Working Capital B) Credit provided by the supplier and bank
finance
26) In the scenario where credit is not C) Fixed deposits and loans from friends and
available from the supplier or is only available relatives
for a limited time, what alternative does the D) Operational capital and long-term
entrepreneur seek for working capital? borrowings
A) Personal savings
B) Bank loan Answer: B) Credit provided by the supplier
C) Government grant and bank finance
D) Selling fixed assets
30) What is the term used for the total
Answer: B) Bank loan requirement of current assets of an
enterprise, including short-term credit and
27) What is the purpose of the entrepreneur some amount arranged through long-term
approaching the bank for a working capital funds?
loan in this example? A) Net Working Capital
A) To purchase fixed assets B) Operational Capital
B) To cover expenses C) Gross Working Capital
C) To repay long-term liabilities D) Fixed Capital
D) To meet the credit provided by the supplier
Answer: C) Gross Working Capital
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31) What is the amount arranged by the C) Purchase of raw materials, processing,
enterprise through long-term funds to meet selling, and receiving cash
part of the working capital called? D) Investing in long-term assets
A) Operational Capital
B) Gross Working Capital Answer: C) Purchase of raw materials,
C) Net Working Capital processing, selling, and receiving cash
D) Fixed Capital
35) What factor influences the length of the
Answer: C) Net Working Capital working capital cycle?
A) The size of the enterprise
32) What does the working capital cycle of a B) The location of the business
business enterprise involve? C) The stocks of raw materials required to be
A) Only selling finished goods held
B) Purchase of raw materials, processing, D) The amount of credit provided to
selling, and receiving cash purchasers
C) Long-term investments
D) Capital expenditure Answer: C) The stocks of raw materials
required to be held
Answer: B) Purchase of raw materials,
processing, selling, and receiving cash 36) What does the length of the working
capital cycle indicate about the working
33) What factor influences the length of the capital requirement?
working capital cycle? A) The longer the cycle, the lower the working
A) The size of the enterprise capital requirement
B) The location of the business B) The longer the cycle, the higher the
C) The stocks of raw materials required to be working capital requirement
held C) The cycle does not impact the working
D) The amount of credit provided by suppliers capital requirement
D) The cycle only affects net working capital
Answer: C) The stocks of raw materials
required to be held Answer: B) The longer the cycle, the higher
the working capital requirement
34) In the context of the working capital cycle,
what actions does a business enterprise
typically undertake?
A) Only purchasing raw materials
B) Only selling finished goods
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37) What is the primary factor that influences Answer: D) It ensures accurate assessment
the work in process in the working capital of current assets and working capital
cycle? requirements
A) The size of the enterprise
B) The location of the business 40) What does Working Capital (W.C) refer to
C) The process involved in in a firm?
manufacturing/processing A) Investment in fixed assets
D) The credit provided to purchasers B) Investment in long-term assets
C) Investment in current assets
Answer: C) The process involved in D) Investment in intangible assets
manufacturing/processing
Answer: C) Investment in current assets
38) What is one of the components that the
length of the working capital cycle depends 41) What is the primary meaning of Working
on? Capital for a firm?
A) The size of the enterprise A) Investment in fixed assets
B) The location of the business B) Investment in long-term assets
C) The amount of credit provided to C) Investment in current liabilities
purchasers D) Investment in current assets
D) The cost of raw materials
Answer: D) Investment in current assets
Answer: C) The amount of credit provided to
purchasers 42) What does NWC stand for in the context
of meeting Working Capital requirements
39) Why is the correct assessment of the from own sources?
working capital cycle important in a bank's A) Net Wealth Contribution
assessment of gross working capital, net B) Non-Working Capital
working capital, and bank finance? C) Net Working Capital
A) It helps in determining the size of the D) National Working Capital
enterprise
B) It aids in evaluating the location of the Answer: C) Net Working Capital
business
C) It assists in understanding the process
involved in manufacturing/processing
D) It ensures accurate assessment of current
assets and working capital requirements
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43) How is the position of available Net Answer: B) Market practice

Working Capital depicted?
A) In the projected balance sheet 47) What are examples of Other Current
B) In the current liabilities Liabilities?
C) In the last accounting year's balance sheet A) Bank finance and internal accruals
D) In the internal accruals B) Salaries and other expenses payable,
advances from customers, etc.
Answer: C) In the last accounting year's C) Desired current ratio and market practice
balance sheet D) Total working capital and availability of
funds
44) What is considered in estimating the limits
for Working Capital based on the projected Answer: B) Salaries and other expenses
balance sheet at the end of the current payable, advances from customers, etc.
accounting year?
A) External loans only 48) How is the need for working capital
B) Internal accruals only finance from the bank calculated?
C) Both internal accruals and external loans A) It is equal to the desired current ratio
D) Non-operating income B) It is equal to the total working capital
C) It is equal to the gap between total working
Answer: C) Both internal accruals and capital and the availability of funds
external loans D) It is equal to the bank finance

45) What factor may lead a bank to stipulate Answer: C) It is equal to the gap between
additional Net Working Capital (NWC) to be total working capital and the availability of
brought in by a firm? funds
A) Desired current assets
B) Desired current ratio 49) What is excluded when calculating the
C) Anticipated internal accruals need for working capital finance from the
D) Market practice bank?
A) Internal accruals
Answer: B) Desired current ratio B) Market practice
C) Bank finance
46) What is the estimation of Suppliers' Credit D) Desired current ratio
dependent on?
A) Desired current ratio Answer: C) Bank finance
B) Market practice
C) Internal accruals
D) Bank finance
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50) What factors drive the determination of C) Permissible Bank Finance Method (P.B.F.M)
'Suppliers' Credit' and 'Other Current D) Desired Current Ratio Formula
Liabilities'?
A) Market conditions or business needs Answer: C) Permissible Bank Finance
B) Desired current ratio and internal accruals Method (P.B.F.M)
C) Bank finance and total working capital
D) Internal control measures 54) What does the Permissible Bank Finance
Method focus?
Answer: A) Market conditions or business A) Market conditions and business needs
needs B) Desired current ratio and internal accruals
C) The amount through its own long-term
51) What can banks prescribe regarding the sources (Net Working Capital)
amount to be brought in by the enterprise? D) The recommendations of the Tandon
A) The amount of internal accruals Committee
B) The amount of Suppliers' Credit
C) The amount through its own long-term Answer: C) The amount through its own
sources (Net Working Capital) long-term sources (Net Working Capital)
D) The amount of other current liabilities
55) What is the focus of the First Method of
Answer: C) The amount through its own Lending?
long-term sources (Net Working Capital) A) Calculating long-term liabilities
B) Determining the desired current ratio
52) What dominated the psyche of bankers C) Bringing in Net Working Capital (NWC) of at
for a long time? least 25% of the working capital gap
A) Internal control measures D) Evaluating internal accruals
B) The Permissible Bank Finance Method
C) The Total Working Capital Method Answer: C) Bringing in Net Working Capital
D) The recommendations of the Tandon (NWC) of at least 25% of the working capital
Committee gap

Answer: D) The recommendations of the

Tandon Committee

53) What term is used for the method

suggested by the Tandon Committee, which is
still followed by banks in their calculations?
A) Market-driven Calculation
B) Total Working Capital Method
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56) What does Working Capital Gap represent Answer: B) 1.17:1

in the context of the First Method of Lending?
A) Total current assets 60) What does the Third Method of Lending
B) Total current liabilities require the enterprise to bring in as Net
C) Other Current Liability (OCL) Working Capital (NWC)?
D) The difference between total current A) 50% of total current assets
assets and total current liabilities (excluding B) 100% of core assets and 25% of remaining
bank finance) current assets
C) 75% of total current assets
Answer: D) The difference between total D) 100% of total current assets
current assets and total current liabilities
(excluding bank finance) Answer: B) 100% of core assets and 25% of
remaining current assets
57) What is the Margin required in the First
Method of Lending? 61) In the given exercise, if Stock is 500,
A) 10% of Working Capital Gap Debtor is 100, bank Borrowing is 300, and
B) 25% of Working Capital Gap Creditors are 400, what is the Working Capital
C) 50% of Working Capital Gap Gap as per the Third Method of Lending?
D) 75% of Working Capital Gap A) 500
B) 400
Answer: B) 25% of Working Capital Gap C) 300
D) 200
58) What is MPBF in the First Method of
Lending? Answer: D) 200
A) Maximum Permissible Bank Finance
B) Marginal Profit and Business Finance 62) According to the Third Method of Lending,
C) Minimum Permissible Business Fund what is considered 'core assets' for the
D) Maximum Profitable Borrowing Fund calculation of Net Working Capital (NWC)?
A) Stock only
Answer: A) Maximum Permissible Bank B) Debtor only
Finance C) Both Stock and Debtor
D) Bank Borrowing
59) What is the Expected current ratio in the
First Method of Lending? Answer: C) Both Stock and Debtor
A) 1:1
B) 1.17:1
C) 2:1
D) 3:1
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63) In the given exercise, if the enterprise C) 25%

brings in 100% of core assets and 25% of D) 30%
remaining current assets, what is the bank
limit or Working Capital limit as per the Third Answer: C) 25%
Method of Lending?
A) 200 67) What portion of the gross working capital
B) 300 is assumed to be provided by the bank under
C) 400 the Turnover Method?
D) 500 A) 5%
B) 10%
Answer: C) 400 C) 20%
D) 25%
64) In the given exercise, if the enterprise
brings in 100% of core assets and 25% of Answer: C) 20%
remaining current assets, what is the Working
Capital limit as per the Third Method of 68) How much of the gross working capital is
Lending? expected to be brought in as margin by the
A) 100 enterprise according to the Turnover
B) 200 Method?
C) 300 A) 2.5%
D) 400 B) 5%
C) 10%
Answer: D) 400 D) 15%

65) Who suggested the Turnover Method for Answer: B) 5%

working capital assessment?
A) Tandon Committee 69) What is the main assumption underlying
B) Nayak Committee the Turnover Method for working capital
C) RBI Committee assessment?
D) Finance Ministry A) The need for working capital is unrelated to
the annual turnover
Answer: B) Nayak Committee B) The bank provides the entire working
capital needed
66) According to the Turnover Method, what C) 25% of the annual turnover is the gross
percentage of the annual turnover is assumed working capital requirement
to be the gross working capital needed by the D) The enterprise does not need to contribute
enterprise? any margin
A) 10%
Answer: C) 25% of the annual turnover is the
B) 15%
gross working capital requirement
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70) What is the recommended basis for requirement based on for Micro and Small
calculating the working capital credit limit for Enterprises (MSEs)?
Micro and Small Enterprises (MSEs) according A) Profit margin
to RBI guidelines? B) Holding norms
A) 10% of estimated annual turnover C) Employee strength
B) 15% of estimated annual turnover D) Market share
C) 20% of estimated annual turnover
D) 25% of estimated annual turnover Answer: B) Holding norms

Answer: C) 20% of estimated annual 74) How many working capital cycles per year
turnover does the method suggested by the Nayak
Committee assume?
71) According to RBI guidelines, what is the A) 2
maximum credit limit for Micro and Small B) 3
Enterprises (MSEs) in individual cases? C) 4
A) Rs. 1 crore D) 5
B) Rs. 3 crore
Answer: C) 4
C) Rs. 5 crore
D) Rs. 10 crore
75) What is the primary factor influencing an
Answer: C) Rs. 5 crore enterprise's requirement for working capital
funds?
72) Why might RBI guidelines result in under- A) Market conditions
financing for units with a working capital cycle B) Level of operations
of more than 3 months? C) Nature of activity
A) RBI guidelines assume a working capital D) All of the above
cycle of 3 months
Answer: D) All of the above
B) RBI guidelines require a longer working
capital cycle
76) Why does an enterprise seek short-term
C) RBI guidelines are flexible and
bank finance, particularly working capital
accommodate all working capital cycles
finance?
D) RBI guidelines do not consider the working
A) To invest in long-term assets
capital cycle
B) To fulfill the requirement of excess cash
Answer: A) RBI guidelines assume a working outflows
capital cycle of 3 months C) To purchase fixed assets
D) To pay off long-term liabilities
73) In addition to the RBI guidelines, what do Answer: B) To fulfill the requirement of
banks normally assess the working capital excess cash outflows
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77) What is the ideal way to assess the need C) Based on monthly cash budgets
for bank finance? D) Based on seasonal cash budgets
A) Precisely project daily cash inflows
B) Increase the periodicity of estimating cash Answer: C) Based on monthly cash budgets
flows
C) Rely on long-term projections only 81) When is finance provided to the borrower
D) Use market conditions as the sole under this method?
determinant A) Whenever there is a surplus in the cash
budget
Answer: A) Precisely project daily cash B) Whenever there is a shortfall in the cash
inflows budget
C) At the beginning of the financial year
78) Why is the projection of daily cash flows D) At the end of the financial year
not considered a feasible option?
A) Because market conditions are perfect Answer: B) Whenever there is a shortfall in
B) Because enterprises do not have access to the cash budget
financial projections
C) Because market conditions are not perfect 82) On what basis is the limit calculated under
D) Because enterprises do not require this method?
working capital A) Peak surplus
B) Peak deficit
Answer: C) Because market conditions are C) Average cash balance
not perfect D) End-of-year cash balance

79) In practical terms, what is the increased Answer: B) Peak deficit

periodicity of estimating cash flows for an
enterprise's working capital need? 83) In which industries is this method
A) Daily commonly used for financing working capital
B) Weekly requirements?
C) Monthly or quarterly A) Manufacturing and service industries
D) Yearly B) Construction and filmmaking industries
C) IT & software industries
Answer: C) Monthly or quarterly D) Seasonal industries like Jute/sugar
mills/Tea/Coffee Industry
80) How are borrower's working capital
requirements calculated? Answer: D) Seasonal industries like
A) Based on yearly cash budgets Jute/sugar mills/Tea/Coffee Industry
B) Based on daily cash budgets
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84) What is a characteristic feature of the D) 5.6 Lac

industries mentioned in the context of
working capital financing? Answer: D) 5.6 Lac
A) They have consistent cash flows
throughout the year 87) What is the firm's Net Working Capital
B) They experience seasonal fluctuations in (NWC)?
cash flows A) 2 Lac
C) They are not eligible for bank financing B) 3 Lac
D) They do not require working capital C) 1 Lac
D) 4 Lac
Answer: B) They experience seasonal
fluctuations in cash flows Answer: B) 3 Lac

85) What is the total value of the firm's Raw 88) How much cash is available with the firm?
Material, Finished Goods, and Stock in A) 18 Lac
Progress? B) 19 Lac
A) 10 Lac C) 20 Lac
B) 9 Lac D) 1.9 Lac
C) 8 Lac
D) 5 Lac Answer: B) 19 Lac

Answer: A) 10 Lac 89) If the firm's Bank Borrowing is 1 Lac, what

is the firm's total Working Capital?
86) What is the firm's total Current Liability, A) 2 Lac
including Other Current Liability, Sundry B) 3 Lac
Creditor, and Outstanding Debtor? C) 4 Lac
A) 4 Lac D) 1 Lac
B) 5 Lac
C) 4.6 Lac Answer: C) 4 Lac
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CHAPTER 20-: Term Loans

1) What is the primary purpose for which Answer: B) Plant and machinery
banks provide term loans?
A) Personal expenses 5) Which loans are considered exceptions to
B) Consumption term loans provided by banks?
C) Acquisition of fixed assets A) Working capital loans
D) Working capital B) Consumption loans
C) Personal loans
Answer: C) Acquisition of fixed assets D) Educational loans

2) What types of loans are exceptions to Answer: C) Personal loans

banks providing term loans for acquiring fixed
assets? 6) In what situations do banks provide term
A) Personal loans loans for current assets, and what is this type
B) Consumption loans of loan called?
C) Educational loans A) Always; Current Asset Loan (CAL)
D) Both A and B B) In exceptional cases; Working Capital Term
Loan (WCTL)
Answer: D) Both A and B C) Regularly; Current Working Capital Loan
(CWCL)
3) What is the main focus of working capital D) Never; Term Asset Loan (TAL)
loans provided by banks?
A) Acquiring fixed assets Answer: B) In exceptional cases; Working
B) Personal expenses Capital Term Loan (WCTL)
C) Sustaining current assets level
D) Education 7) What is the purpose of bringing funds from
long-term sources to maintain the desired
Answer: C) Sustaining current assets level level of current assets?
A) To increase current liabilities
4) What are some examples of fixed assets for B) To decrease current assets
which term loans are provided? C) To maintain the stipulated current ratio
A) Raw materials (CA/CL)
B) Plant and machinery D) To eliminate working capital
C) Outstanding debts
D) Both A and B Answer: C) To maintain the stipulated current
ratio (CA/CL)
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8) What is the formula for calculating A) Short-term assets

Networking Capital (NWC)? B) Long-term assets
A) NWC = CA x CL C) Both short-term and long-term assets
B) NWC = CA - CL D) Neither short-term nor long-term assets
C) NWC = CA / CL
D) NWC = CL / CA Answer: B) Long-term assets

Answer: B) NWC = CA - CL 12) How are working capital loans typically

categorized in terms of assets and liabilities
9) What may happen if a business enterprise for banks?
is unable to bring in the required amount of A) Short-term assets
Networking Capital (NWC)? B) Long-term assets
A) Decreased liquidity C) Both short-term and long-term assets
B) Increased business operations D) Neither short-term nor long-term assets
C) Improved cash flow
D) Reduced profitability Answer: A) Short-term assets

Answer: A) Decreased liquidity 13) In practical terms, how long does an

enterprise usually continue to enjoy a working
10) How do the repayment terms differ capital loan?
between working capital loans and term A) Until it becomes profitable
loans? B) Until it faces liquidity issues
A) Both are payable on demand C) Until its working is satisfactory
B) Working capital loans are payable as per D) Until the term loan is repaid
the agreed repayment schedule, while term
loans are payable on demand Answer: C) Until its working is satisfactory
C) Term loans are payable on demand, while
working capital loans are payable as per the 14) What ratio assumes great importance
agreed repayment schedule while considering term loans, particularly
D) Both are payable as per the agreed when assessing the borrower's ability to repay
repayment schedule using future cash flows?
A) Debt-to-Equity Ratio
Answer: C) Term loans are payable on B) Debt Service Coverage Ratio (DSCR)
demand, while working capital loans are C) Current Ratio
payable as per the agreed repayment D) Quick Ratio
schedule
11) How are term loans generally categorized Answer: B) Debt Service Coverage Ratio
in terms of assets and liabilities for banks? (DSCR)
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15) Which ratios assume greater importance 19) What is the usual stipulation for the
for working capital loans, especially when repayment of principal and interest for
evaluating the borrower's ability to meet industrial enterprises?
short-term obligations? A) Monthly
A) Debt Service Coverage Ratio (DSCR) B) Quarterly
B) Liquidity Ratios (Quick Ratio, Current Ratio) C) Bullet repayment
C) Debt-to-Equity Ratio D) Annual
D) Profitability Ratios
Answer: A) Monthly
Answer: B) Liquidity Ratios (Quick Ratio,
Current Ratio) 20) What is the term used for the repayment
structure where the entire repayment is
16) Why is there no uniform repayment stipulated in one installment only?
schedule for all term loans? A) Monthly/quarterly repayment
A) To create complexity for borrowers B) Crop-specific repayment
B) To match the borrower's cash surplus C) Bullet repayment
C) To increase interest payments D) EMI repayment
D) To discourage borrowers
Answer: C) Bullet repayment
Answer: B) To match the borrower's cash
surplus 21) How is the repayment typically structured
for industrial enterprises?
17) How is the repayment typically structured A) Monthly/quarterly repayment
for a salaried person with a constant income B) Bullet repayment
level? C) Crop-specific repayment
A) Monthly/quarterly repayment D) Through the EMI system
B) Bullet repayment
Answer: A) Monthly/quarterly repayment
C) Crop-specific repayment
D) Through the EMI system 22) In what situation is a Deferred Payment
Guarantee (DPG) typically utilized?
Answer: D) Through the EMI system
A) When the purchaser pays immediately
18) For a farmer, when might the repayment B) When the supplier offers deferred
of principal and interest coincide? payments
A) Monthly C) When there is no repayment schedule
B) Quarterly D) When the bank guarantees repayment
C) Annually according to an agreed schedule
D) With the cropping pattern Answer: D) When the bank guarantees
Answer: D) With the cropping pattern repayment according to an agreed schedule
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23) What type of method is Deferred Payment D) The appraisal is more stringent for a DPG
Guarantee (DPG) for financing the purchase of
fixed assets? Answer: B) The appraisal is the same for both
A) Fund-based method DPG and term loan
B) Non-fund-based method
C) Debt-based method 27) In project finance, what is appraised in
D) Equity-based method terms of the financial needs of the enterprise?
A) Only long-term funds
Answer: B) Non-fund-based method
B) Only working capital requirements
C) Both long-term funds and working capital
24) What happens if the purchaser defaults in
requirements
payment of any amount in a Deferred
D) Only short-term funds
Payment Guarantee (DPG)?
A) The bank absorbs the loss
Answer: C) Both long-term funds and working
B) The supplier absorbs the loss
capital requirements
C) The exposure becomes fund-based until
recovery from the client
28) What is the reason for appraising the total
D) The bank terminates the guarantee
requirement of long-term funds in project
Answer: C) The exposure becomes fund- finance?
based until recovery from the client A) To determine the interest rate
B) To assess the managerial competence
25) What risks are involved in a Deferred C) To decide the amount of term loan to be
Payment Guarantee (DPG)? sanctioned
A) Operational risks D) To evaluate the market conditions
B) Market risks
C) Risks similar to those in a term loan Answer: C) To decide the amount of term
D) Credit risks loan to be sanctioned

Answer: C) Risks similar to those in a term 29) In the case of an existing enterprise
loan purchasing machinery with a minor impact on
business, what detailed examination may be
26) How does the appraisal process for a unnecessary for the bank?
Deferred Payment Guarantee (DPG) compare A) Financial projections for the next 2-3 years
to that of a term loan? B) Techno-economic feasibility
A) The appraisal is more relaxed for a DPG C) Managerial competence
B) The appraisal is the same for both DPG and D) IRR (Internal Rate of Return)
term loan
C) The appraisal is not required for a DPG Answer: B) Techno-economic feasibility
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30) For an existing enterprise making a minor D) Projected Debt Service Coverage Ratio
machinery purchase, what may be enough for (DSCR)
the bank to examine?
A) Detailed business plans for the next 5 years Answer: D) Projected Debt Service Coverage
B) Detailed market analysis Ratio (DSCR)
C) Projections for the next 2-3 years to ensure
a satisfactory Debt Service Coverage Ratio 33) What is mentioned as the key factor that
(DSCR) simplifies the appraisal of a standalone term
D) Detailed competitor analysis loan proposal if one is clear about project
appraisal?
Answer: C) Projections for the next 2-3 years A) Projections for the next 2-3 years
to ensure a satisfactory Debt Service Coverage B) Techno-economic feasibility
Ratio (DSCR) C) Economic appraisal
D) Managerial aspects
31) What does DSCR stand for, and why is it
mentioned in the context of an existing Answer: C) Economic appraisal
enterprise's machinery purchase?
A) Debt Service Coverage Ratio; To assess 34) What are the broad steps involved in
market conditions project appraisal?
B) Demand and Supply of Credit Ratio; To A) Managerial Appraisal, Legal Appraisal, and
evaluate managerial competence Financial Appraisal
C) Debt Service Coverage Ratio; To ensure a B) Technical Appraisal, Legal Appraisal, and
satisfactory level in projections Financial Appraisal
D) Demand and Supply of Capital Ratio; To C) Appraisal of Managerial Aspects, Technical
determine the interest rate Appraisal, and Economic Appraisal
D) Managerial Appraisal, Economic Appraisal,
Answer: C) Debt Service Coverage Ratio; To and Legal Appraisal
ensure a satisfactory level in projections
Answer: C) Appraisal of Managerial Aspects,
32) For loans to individuals like housing loans Technical Appraisal, and Economic Appraisal
or educational loans, what may be sufficient
to examine to judge viability? 35) What is the first step in project appraisal?
A) Detailed market analysis A) Economic Appraisal
B) Techno-economic feasibility B) Legal Appraisal
C) Projections for the next 2-3 years to ensure C) Appraisal of Managerial Aspects
a satisfactory Debt Service Coverage Ratio D) Technical Appraisal
(DSCR)
Answer: C) Appraisal of Managerial Aspects
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A) What is the form of business organization?

36) What is mentioned as a key factor in B) Can promoters bring additional funds in
making the appraisal of a standalone term case of contingencies?
loan proposal simpler? C) What is the financial stake of promoters in
A) Projections for the next 5 years the project?
B) Understanding project appraisal D) Who are the key persons to be appointed
C) Techno-economic feasibility to run the business?
D) Legal appraisal
Answer: C) What is the financial stake of
Answer: B) Understanding project appraisal promoters in the project?

37) In the appraisal of managerial aspects, 40) In the appraisal of managerial aspects,
what is the first question seeking what is the third question focused on?
Answers about the promoters? A) The form of business organization
A) What is the financial stake of the B) The credentials of the promoters
promoters in the project? C) Key persons to be appointed
B) What are the credentials of the promoters? D) The ability to bring additional funds in
C) Can promoters bring additional funds in contingencies
case of contingencies?
D) What is the form of business organization? Answer: D) Can promoters bring additional
funds in case of contingencies?
Answer: B) What are the credentials of the
promoters? 41) What is the overall aim of the appraisal of
managerial aspects?
38) What does the appraisal of managerial A) To assess the key persons to be appointed
aspects aim to determine about the B) To evaluate the form of business
promoters? organization
A) Their financial stake in the project C) To determine the financial stake of
B) Their educational qualifications promoters
C) Their credentials D) To assess the capability and credibility of
D) Their willingness to invest in contingencies the promoters

Answer: C) Their credentials Answer: D) To assess the capability and

credibility of the promoters
39) What is the second question in the
appraisal of managerial aspects, seeking
information about the promoters' financial
involvement in the project?
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42) What aspects are involved in the technical Answer: D) Return on investment, payback
appraisal of a project? period, and cost-benefit ratio
A) Financial feasibility and location
B) Products to be manufactured and 46) Which methods are mentioned for
marketing arrangements assessing Return on Investment in economic
C) Return on investment and pollution control appraisal?
D) Location and availability of raw materials A) IRR (Internal Rate of Return) only
B) NPV (Net Present Value) only
Answer: D) Location and availability of raw C) Payback period only
materials D) NPV, IRR, payback period, cost-benefit
ratio, accounting rate of return, etc.
43) In the technical appraisal of a project,
what aspect involves details of the proposed Answer: D) NPV, IRR, payback period, cost-
construction? benefit ratio, accounting rate of return, etc.
A) Marketing arrangements
B) Return on investment 47) What does a high break-even point
C) Provider of technology indicate about a project?
D) Contractor for project execution A) Higher profitability
B) Lower risk
Answer: D) Contractor for project execution C) More risk
D) Lower viability
44) What is NOT mentioned as a part of the
technical feasibility of a project? Answer: C) More risk
A) Pollution control
B) Location 48) What does sensitivity analysis examine in
C) Availability of infrastructure the context of a project's viability?
D) Marketing arrangements A) Production process
B) Break-even point
Answer: D) Marketing arrangements C) Impact of market conditions on raw
material prices
45) What aspects are involved in the D) Availability of infrastructure
economic/financial feasibility of a project?
A) Return on investment only Answer: C) Impact of market conditions on
B) Location and marketing arrangements raw material prices
C) Products to be manufactured only
D) Return on investment, payback period, and
cost-benefit ratio
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49) How is a project with a high break-even C) Ministry of Finance, Government of India
point compared to one with a lower break- D) Ministry of Planning
even point?
A) More viable Answer: C) Ministry of Finance, Government
B) Less risky of India
C) More risky
D) Equally risky 53) What authority issues Gazette
Notifications to specify the sectors qualifying
Answer: C) More risky under 'infrastructure lending'?
A) Ministry of Industry
50) What is the purpose of break-even B) Ministry of Infrastructure
analysis in project appraisal? C) Ministry of Finance, Government of India
A) To determine profitability D) Ministry of Planning
B) To assess the impact of market conditions
C) To identify the point of no profit and no Answer: C) Ministry of Finance, Government
loss of India
D) To examine sensitivity analysis
54) In the context of infrastructure projects,
Answer: C) To identify the point of no profit what determines the sectors that qualify for
and no loss infrastructure lending?
A) International regulations
51) In uncertainty about market conditions, B) Government policy
what does sensitivity analysis examine? C) Local municipalities
A) Break-even point D) Industry associations
B) Viability of the project
C) Impact of small changes in raw material Answer: B) Government policy
prices or finished goods
D) Return on investment 55) What sectors currently qualify under
'infrastructure lending'?
Answer: C) Impact of small changes in raw A) As per industry associations'
material prices or finished goods recommendations
B) As per international regulations
C) As per Gazette Notifications issued by the
52) What determines the sectors included in Ministry of Finance
the definition of "Infrastructure" for lending D) As per local municipalities' guidelines
purposes?
A) Ministry of Industry Answer: C) As per Gazette Notifications
B) Ministry of Infrastructure issued by the Ministry of Finance
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56) Who issues Gazette Notifications to define Answer: B) Solid waste management
the sectors included in the definition of
"Infrastructure" for lending purposes? 60) What is covered under the
A) Industry associations "Communication" sector for infrastructure
B) Local municipalities lending?
C) Ministry of Finance, Government of India A) Real estate development
D) International organizations B) Telecommunication, telecommunication
towers, and telecom services
Answer: C) Ministry of Finance, Government C) Agriculture markets
of India D) Education institutions

57) Which sector is included under Answer: B) Telecommunication,

"Transport" in the definition of infrastructure telecommunication towers, and telecom
lending? services
A) Agriculture
B) Telecommunication 61) Which of the following is considered part
C) Road and bridges of "Social and Commercial Infrastructure" for
D) Information technology infrastructure lending?
A) Information technology
Answer: C) Road and bridges B) Electricity generation
C) SEZ (Special Economic Zones)
58) What falls under the "Energy" sector for D) Solid waste management
infrastructure lending purposes?
A) Internet services Answer: C) SEZ (Special Economic Zones)
B) Electricity generation, transmission, and
distribution 62) According to RBI guidelines, what are the
C) Social media platforms types of financing options banks can provide
D) Real estate development for infrastructure projects?
A) Only working capital finance
Answer: B) Electricity generation, B) Only term loans
transmission, and distribution C) Working capital finance, term loans, project
loans, and more
59) In the context of infrastructure lending, D) Subscription to bonds and debentures only
what does "Water & Sanitation" include?
A) Internet services Answer: C) Working capital finance, term
B) Solid waste management loans, project loans, subscription to bonds
C) Tourism facilities and debentures/preference shares/equity
D) Real estate development shares
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63) What is the purpose of "Take-out B) To issue guarantees favoring other lending
Financing" according to the RBI guidelines? institutions
A) To withdraw from financing projects C) To provide liquidity support to the project
B) To collaborate with IDFC for project D) To issue guarantees without any credit
financing appraisal
C) To enter into financing arrangements with
multiple banks Answer: B) To issue guarantees favoring
D) To avail liquidity support from financial other lending institutions
institutions
66) According to RBI guidelines, what
Answer: B) To enter into take-out financing condition must be fulfilled for banks to issue
arrangement with IDFC/other financial inter-institutional guarantees for
institutions or avail of liquidity support from infrastructure projects?
IDFC/other FIs A) Banks must issue guarantees for all projects
B) Banks must take a funded share in the
64) Under RBI guidelines, what is the project at least to the extent of 10% of the
condition for banks issuing guarantees project cost
favoring other lending institutions for C) Banks must issue guarantees without
infrastructure projects? taking any share in the project
A) The bank issuing the guarantee must take a D) Banks must take a funded share in the
funded share in the project project at least to the extent of 5% of the
B) The bank issuing the guarantee must have project cost
no share in the project
C) The bank issuing the guarantee must take Answer: D) Banks must take a funded share
an equity share in the project in the project at least to the extent of 5% of
D) The bank issuing the guarantee must have the project cost
a share in the project at least to the extent of
2% of the project cost 67) According to RBI guidelines, where should
the promoter's contribution toward the
Answer: A) The bank issuing the guarantee equity capital of a company ideally come
must take a funded share in the project at from?
least to the extent of 5% of the project cost A) Bank loans
B) Government grants
65) What is the role of banks in "Inter- C) Promoter's own resources
institutional Guarantees" for infrastructure D) Foreign investments
projects as per RBI guidelines?
A) To provide guarantees without any share in Answer: C) Promoter's own resources
the project
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68) What was the RBI's initial advice regarding D) Exception for foreign companies
the financing of the promoter's equity in a
company? Answer: C) Exception only for companies
A) Encouraged banks to provide loans for engaged in implementing or operating an
acquiring promoter's shares infrastructure project in India
B) Discouraged banks from providing
advances to take up shares of other 71) Why did RBI permit an exception to the
companies policy regarding the financing of the
C) Advised banks to grant advances for promoter's shares in the infrastructure
acquiring promoter's shares sector?
D) Promoted joint ventures for acquiring A) Due to pressure from the government
promoter's equity B) Due to the importance attached to the
infrastructure sector
Answer: B) Discouraged banks from providing C) To promote foreign investments
advances to take up shares of other D) To discourage infrastructure projects in
companies India

69) Under what circumstances did RBI permit Answer: B) Due to the importance attached
an exception to the policy of not granting to the infrastructure sector
advances for acquiring the promoter's shares?
A) For any company 72) What is the focus of due diligence for
B) Only for companies engaged in financing infrastructure projects undertaken
manufacturing by Government-owned entities?
C) Only for companies engaged in A) Profitability of the project
infrastructure projects in India B) Viability of the projects
D) Only for companies listed on the stock C) Social impact of the project
exchange D) Market share of the project

Answer: C) Only for companies engaged in Answer: B) Viability of the project

implementing or operating an infrastructure
project in India

70) What is the exception made by RBI in its

policy regarding the financing of the
promoter's shares?
A) No exception is made
B) Exception for all companies
C) Exception only for infrastructure projects
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73) How should banks/financial institutions Answer: D) Because of the unique nature of
undertake due diligence in the case of such projects
financing infrastructure projects by
Government-owned entities? 76) What is the significance of special
A) Ignore individual components of financing appraisal skills in the financing of
and returns infrastructure projects through Special
B) Ensure that individual components of Purpose Vehicles?
financing and returns are well defined and A) They are not significant
assessed B) They ensure government support for the
C) Rely solely on the government's project
assessment of the project C) They help assess the unique aspects of such
D) Skip due diligence as it is a government- projects
owned project D) They focus on profitability only

Answer: B) Ensure that individual Answer: C) They help assess the unique
components of financing and returns are well aspects of such projects
defined and assessed
77) What is the prudential credit exposure
74) What type of projects are often financed limit for borrowers belonging to a group,
through Special Purpose Vehicles in the according to RBI guidelines?
context of infrastructure financing? A) 30% of the bank's capital funds
A) Agricultural projects B) 40% of the bank's capital funds
B) Manufacturing projects C) 50% of the bank's capital funds
C) Infrastructure projects D) No specific limit for group borrowers
D) Information technology projects
Answer: C) 50% of the bank's capital funds,
Answer: C) Infrastructure projects provided the additional credit exposure is on
account of extension of credit to
75) Why does financing infrastructure projects infrastructure projects
through Special Purpose Vehicles call for
special appraisal skills?
A) Because the projects are small
B) Because the projects are not viable
C) Because the projects are government-
owned
D) Because of the unique nature of such
projects
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78) What is the additional credit exposure 81) What is the significance of the prudential
limit for single borrowers in the context of credit exposure limits in the context of
prudential requirements for infrastructure infrastructure financing?
projects? A) To restrict credit exposure to all borrowers
A) 10% of the bank's capital funds B) To encourage lending to personal loan
B) 15% of the bank's capital funds borrowers
C) 20% of the bank's capital funds C) To manage risks associated with
D) 5% of the bank's capital funds infrastructure projects
D) To limit lending to infrastructure projects
Answer: C) 20% of the bank's capital funds,
provided the additional credit exposure is on Answer: C) To manage risks associated with
account of infrastructure projects infrastructure projects

79) Under what conditions can the credit 82) What guidelines do banks need to follow
exposure limit for group borrowers be for capital adequacy purposes in the context
extended to 50% of the bank's capital funds? of infrastructure financing?
A) Without any conditions A) Basel III guidelines
B) If borrowers belong to different industries B) Prudential Guidelines on Asset Quality
C) If the exposure is on account of C) International Accounting Standards
infrastructure projects D) Prudential Guidelines on Capital Adequacy
D) If the exposure is on account of personal and Market Discipline
loans
Answer: D) Prudential Guidelines on Capital
Answer: C) If the exposure is on account of Adequacy and Market Discipline
extension of credit to infrastructure projects
83) What may long-term financing of
80) What is the additional credit exposure infrastructure projects lead to, according to
limit for single borrowers if it is on account of RBI guidelines?
infrastructure projects? A) Increased profitability
A) 10% of the bank's capital funds B) Asset–liability mismatches
B) 5% of the bank's capital funds C) Decreased liquidity
C) 15% of the bank's capital funds D) Lower risk exposure
D) No additional limit for single borrowers
Answer: B) Asset–liability mismatches,
Answer: B) 5% of the bank's capital funds, particularly when such financing is not in
provided the additional credit exposure is on conformity with the maturity profile of a
account of infrastructure projects bank's liabilities
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84) What is the significance of exercising due 87) Why is the timely availability of credit
vigil on the asset-liability position in the crucial for infrastructure projects, according
context of infrastructure financing? to RBI guidelines?
A) To increase liquidity mismatches A) To increase project costs
B) To encourage long-term financing B) To ensure successful project
C) To ensure compliance with Basel III implementation
guidelines C) To discourage infrastructure investments
D) To prevent liquidity mismatches due to D) To reduce the demand for credit
lending to infrastructure projects
Answer: B) To ensure successful project
Answer: D) To prevent liquidity mismatches implementation
due to lending to infrastructure projects
88) What is essential for banks/FIs to clearly
85) What do banks need to consider regarding delineate in the context of infrastructure
asset-liability management in the context of project financing?
infrastructure financing? A) Project costs
A) Encourage mismatches for higher returns B) Loan interest rates
B) Exercise due diligence on project feasibility C) Procedure for approval of loan proposals
C) Ensure conformity with Basel III guidelines D) Monitoring of daily expenses
D) Exercise due vigil to avoid liquidity
mismatches Answer: C) Procedure for approval of loan
proposals
Answer: D) Exercise due vigil to avoid
liquidity mismatches 89) Why should banks/FIs institute a suitable
monitoring mechanism for infrastructure
86) What framework do banks need to projects?
implement for capital adequacy and market A) To delay project implementation
discipline in infrastructure financing? B) To discourage project financing
A) Basel II guidelines C) To review applications within the specified
B) Dodd-Frank Act period
C) New Capital Adequacy Framework D) To increase project costs
D) Sarbanes-Oxley Act
Answer: C) To review applications within the
Answer: C) New Capital Adequacy specified period
Framework
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90) What is the purpose of delineating A) To discourage infrastructure projects

administrative arrangements for B) To increase liquidity support
infrastructure project financing? C) To avoid asset-liability mismatches
A) To discourage infrastructure investments D) To decrease the demand for long-term
B) To reduce the demand for credit loans
C) To ensure successful project
implementation Answer: C) To avoid asset-liability
D) To increase project costs mismatches

Answer: C) To ensure successful project 94) What is the main purpose of take-out
implementation financing in the context of infrastructure
projects?
91) According to RBI guidelines, what is a A) Encouraging asset-liability mismatches
prerequisite for the successful B) Discouraging long-term loans
implementation of infrastructure projects? C) Avoiding liquidity support
A) Administrative delays D) Avoiding asset-liability maturity
B) Timely and adequate availability of credit mismatches
C) Discouragement of project financing
D) Reduction in project costs Answer: D) Avoiding asset-liability maturity
mismatches
Answer: B) Timely and adequate availability
of credit 95) How does take-out financing benefit
banks in infrastructure financing?
92) What is the primary purpose of the take- A) Increases liquidity support
out financing structure in infrastructure B) Decreases demand for long-term loans
financing? C) Avoids asset-liability mismatches
A) To increase asset-liability mismatches D) Encourages asset-liability maturity
B) To discourage long-term loans mismatches
C) To avoid liquidity support
D) To avoid asset-liability maturity Answer: C) Avoids asset-liability mismatches
mismatches
96) What issue does take-out financing help
Answer: D) To avoid asset-liability maturity banks avoid in the context of long-term loans
mismatches to infrastructure projects?
A) Asset-liability mismatches
93) Why is the take-out financing B) Liquidity support
arrangement designed in infrastructure C) Decreased demand for loans
financing? D) Increased long-term financing
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100) How does the Liquidity Support from

Answer: A) Asset-liability mismatches IDFC work as an alternative to take-out
financing?
97) What is the purpose of the take-out A) IDFC refinances the entire outstanding loan
financing arrangement with IDFC or other after an agreed period
financial institutions in infrastructure B) IDFC encourages asset-liability mismatches
projects? C) IDFC discourages liquidity support
A) To discourage liquidity support D) IDFC transfers outstanding loans on a pre-
B) To increase asset-liability mismatches determined basis
C) To transfer outstanding loans on a pre-
determined basis Answer: A) IDFC refinances the entire
D) To limit the availability of project appraisals outstanding loan after an agreed period

Answer: C) To transfer outstanding loans on a 101) What is the commitment made by IDFC
pre-determined basis under the Liquidity Support scheme at the
point of sanction?
98) What issues do take-out financing A) To limit the availability of project appraisals
structures address in the context of B) To discourage liquidity support
infrastructure projects? C) To provide liquidity support to banks
A) Increased liquidity support D) To refinance the entire outstanding loan
B) Asset-liability mismatches, limited after an agreed period
availability of project appraisals, etc.
C) Discouragement of long-term loans Answer: D) To refinance the entire
D) Decreased demand for loans outstanding loan after an agreed period
102) What is the purpose of Partial Credit
Answer: B) Asset-liability mismatches, limited Enhancement (PCE) to Corporate Bonds in the
availability of project appraisals, etc. context of infrastructure projects?
A) To increase liquidity risk for banks
99) What is the alternative to take-out B) To encourage corporates to avail bond
financing provided by IDFC and SBI? financing
A) Increased demand for long-term loans C) To discourage project development
B) Decreased liquidity support D) To limit the credit needs of the
C) Providing liquidity support to banks infrastructure sector
D) Encouraging asset-liability mismatches
Answer: B) To encourage corporates to avail
Answer: C) Providing liquidity support to bond financing
banks
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103) Why is there excessive pressure on the 106) What is the purpose of allowing banks to
banking system to fund the credit needs for provide Partial Credit Enhancement (PCE) to
project development in the infrastructure bonds?
sector? A) To discourage corporates from issuing
A) Due to a surplus of funds in the banking bonds
system B) To limit project funding options
B) Because of a lack of demand for credit C) To enhance the credit rating of bonds for
C) Greater asset-liability mismatch in project funding
infrastructure and project financing D) To increase liquidity risk for insurance
D) Insufficient credit needs in the funds
infrastructure sector
Answer: C) To enhance the credit rating of
Answer: C) Greater asset-liability mismatch in bonds for project funding
infrastructure and project financing
107) What is the primary objective of allowing
104) Who may be better suited to finance banks to offer Partial Credit Enhancement
infrastructure projects due to their long-term (PCE) to bonds?
liabilities? A) To discourage the use of bonds for project
A) Banks funding
B) Insurance and provident/pension funds B) To limit project funding options
C) Corporates C) To enhance the credit rating of bonds for
D) Special Purpose Vehicles (SPVs) better market terms
D) To increase liquidity risk for corporates
Answer: B) Insurance and provident/pension
funds Answer: C) To enhance the credit rating of
bonds for better market terms
105) What does RBI allow banks to provide
under Partial Credit Enhancement (PCE)? 108) How are banks allowed to offer Partial
A) Liquidity support to corporates Credit Enhancement (PCE)?
B) Equity financing for projects A) As a direct equity investment
C) Credit enhancement to bonds issued by B) As a funded irrevocable contingent line of
corporates/SPVs credit
D) Short-term loans to infrastructure projects C) As a long-term loan
D) As a subscription to bonds
Answer: C) Credit enhancement to bonds
issued by corporates/SPVs Answer: B) As a funded irrevocable
contingent line of credit
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109) What is the purpose of offering a

'standby credit facility' for projects under
implementation?
A) To discourage project cost overruns
B) To fund cost overruns if needed
C) To limit the financing options for projects
D) To increase the Debt-Equity Ratio

Answer: B) To fund cost overruns if needed

110) How are 'standby credit facilities'

typically sanctioned and disbursed
internationally?
A) Disbursed at the time of initial financial
closure
B) Disbursed only if there is no cost overrun
C) Sanctioned and disbursed simultaneously
D) Sanctioned at the time of initial financial
closure but disbursed only when there is a
cost overrun

Answer: D) Sanctioned at the time of initial

financial closure but disbursed only when
there is a cost overrun
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CHAPTER 21-: Credit Delivery and Straight Through Processing

1) What is the primary purpose of credit A. It ensures the borrower receives the lowest
appraisal in the context of advancing funds? interest rate
A. Maximizing profits for the bank B. It helps customize terms based on the
B. Ensuring the safety of the advance borrower's needs
C. Speeding up the loan approval process C. It standardizes terms for all borrowers
D. Minimizing customer inquiries D. It is not related to setting terms and
conditions
Answer: B. Ensuring the safety of the advance
Answer: B. It helps customize terms based on
2) Why is credit appraisal considered critical the borrower's needs
before a bank lends money?
A. To increase the bank's liquidity 5) What precautionary measure does the bank
B. To assess the borrower's credit history take before lending money?
C. To identify suitable investment opportunities A. Conducting a credit appraisal
D. To mitigate the risk of default B. Accepting any collateral offered
C. Lowering interest rates
Answer: D. To mitigate the risk of default D. Expediting the loan approval process

3) What aspect of the borrower's operations Answer: A. Conducting a credit appraisal

does credit appraisal focus on?
A. Marketing strategies 6) What documents should be obtained from the
B. Viability of operations borrower and the guarantors to enable legal
C. Employee satisfaction recourse in the event of default?
D. Environmental sustainability A. Personal identification cards
B. Bank statements
Answer: B. Viability of operations C. Relevant legal documents and agreements
D. Educational certificates
4) What role does credit appraisal play in
prescribing terms and conditions for the credit? Answer: C. Relevant legal documents and
agreements
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7) Is any charge to be created on the primary and C. Shared possession between the borrower and
collateral security? If yes, how should it be done? the bank
A. No, charges are not necessary D. Possession is not relevant
B. Yes, charges are required, and they should be
verbal Answer: B. In possession of the bank only
C. Yes, charges are required, and they should be
documented and registered 10) How should the loan be disbursed according
D. Charges should only be created on the to best practices?
collateral A. Issuing a cheque to the borrower directly
B. Crediting the borrower's account with the loan
Answer: C. Yes, charges are required, and they amount
should be documented and registered C. Using a wire transfer to the borrower's
account
8) Is the charge of the bank on the securities D. Providing the loan in cash
required to be registered with any authority
prescribed by the law? Answer: B. Crediting the borrower's account
A. No, registration is not necessary with the loan amount
B. Yes, registration is required with any legal
authority 11) What are the RBI guidelines regarding loan
C. Registration is needed only for primary disbursement?
security A. RBI does not provide guidelines for loan
D. Registration is required only for collateral disbursement
security B. Follow the bank's internal policies
C. Adhere to RBI guidelines, if any, on loan
Answer: B. Yes, registration is required with any disbursement
legal authority D. Loan disbursement is solely at the discretion
of the bank
9) Should the securities be in possession of the
borrower or the bank? Answer: C. Adhere to RBI guidelines, if any, on
loan disbursement
A. In possession of the borrower only
B. In possession of the bank only
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12) According to the passage, what can unbiased Answer: C. Linkage to Unique Identification
and uninfluenced independent credit decisions Authority of India (UIDAI) for Aadhaar
be taken with? verification
A. Manual intervention only
15) How does the electronic linkage to UIDAI
B. Well-coded software programming and due
benefit the customer?
linkage to third-party-owned data
A. By increasing the time needed to establish
C. Unverified data
identity
D. Limited software programming
B. By reducing the verification time for Aadhaar
C. By complicating the verification process
Answer: B. Well-coded software programming
D. By delaying the turn-around time
and due linkage to third-party-owned data
Answer: B. By reducing the verification time for
13) What is one of the benefits mentioned for Aadhaar
the workforce and customers due to STP?
A. Increased workload for the workforce 16) What is mentioned as a result of
B. A decrease in customer energy implementing STP in terms of the turn-around
C. Saving time and energy for both the workforce time of proposals?
and customers A. It is considerably increased
D. Higher manual intervention B. It is not affected
C. It is considerably reduced
Answer: C. Saving time and energy for both the D. It remains the same
workforce and customers
Answer: C. It is considerably reduced
14) What example is cited in the passage
regarding the electronic linkage of STP software? 17) Why is it essential for borrowers and
A. Linkage to commercial banks guarantors to sign documents in the lending
B. Linkage to government agencies process?
C. Linkage to Unique Identification Authority of A. To prove their eligibility for a loan
India (UIDAI) for Aadhaar verification B. To establish their liability in a court of law
D. Linkage to international databases C. To expedite the loan approval process
D. To create a formal record of the transaction

Answer: B. To establish their liability in a court

of law
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18) What does the borrower need to sign for 21) What is the importance of proper stamping
documents creating a charge over the primary on the documents?
security? A. It adds decorative value to the documents
A. Only the loan application form B. It helps reduce the size of the documents
B. Only the collateral agreement C. It ensures the legality and validity of the
C. Documents related to the primary security documents
D. Personal identification card D. It is optional and does not affect the
documents' validity
Answer: C. Documents related to the primary
security Answer: C. It ensures the legality and validity of
the documents
19) Who should sign the relevant documents for
a charge over collateral security? 22) Why is it important for the date of execution
not to be earlier than the date of stamping on
A. Only the borrower documents?
B. Only the collateral owner A. It ensures the documents are not outdated
C. The guarantor and the borrower B. It complies with legal requirements
D. The owner of the collateral C. It reduces the risk of fraud
D. It is a formality without legal significance
Answer: D. The owner of the collateral
Answer: B. It complies with legal requirements
20) What precaution should be taken if the
owner of collateral security is different from the 23) What information should be properly
borrower? mentioned in the documents regarding
A. No precaution is necessary execution?
B. The owner should become a guarantor first A. Only the names of the parties involved
C. The borrower should sign on behalf of the B. Only the date of execution
owner C. Both the date and place of execution
D. Collateral security is not relevant to the D. The purpose of the document
borrower
Answer: C. Both the date and place of
Answer: B. The owner should become a execution
guarantor first
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24) Why is it necessary to ensure that parties A. 15 days

executing the documents have the necessary B. 30 days
authority and capacity? C. 45 days
A. To expedite the documentation process D. 60 days
B. To prevent unauthorized signatures
C. To reduce the number of signatories Answer: B. 30 days
D. To avoid stamp duty charges
28) What should be done within the prescribed
Answer: B. To prevent unauthorized time limit if any document is required to be
signatures** registered with the Sub-registrar?
A. It is not necessary to register with the Sub-
25) What must be ensured about the person registrar
signing the documents? B. It should be done within 15 days
A. They should be a legal expert C. It should be done within the prescribed time
B. They should be a notary public limit
C. They should be doing so with their free will D. It should be done within 60 days
D. They should have a financial background
Answer: C. It should be done within the
Answer: C. They should be doing so with their prescribed time limit
free will
29) Who can be third-party guarantors in the
26) When should documents be filled in context of bank loans?
according to best practices? A. Only individuals
A. After they are signed B. Only legal entities
B. It doesn't matter when they are filled in C. Individuals or any other legal entity
C. Before they are signed D. Only government entities
D. During the stamping process
Answer: C. Individuals or any other legal entity
Answer: C. Before they are signed

27) What is the time limit for registering charges

with the ROC in case of companies?
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30) Why is the personal guarantee of 33) According to the passage, what should the
proprietor/partners not stipulated in finance to programming in machine lending allow for?
firms? A. Dependence on the programmer at every
A. Proprietors and partners have limited liability moment
B. Proprietors and partners have unlimited B. Flexibility at the user-end with due
liability authorization
C. To simplify the documentation process C. Constant changes without authorization
D. It is a legal requirement D. No flexibility at the user-end

Answer: B. Proprietors and partners have Answer: B. Flexibility at the user-end with due
unlimited liability authorization

31) Why do banks stipulate personal guarantees 34) What are errors of omission in lending
in the case of companies and other legal decisions?
entities? A. Errors that occur due to incorrect recording of
A. To discourage companies from taking loans transactions
B. Promoters/directors/trustees do not have B. Errors that result from a partial or complete
unlimited liability omission of a transaction from the account
C. It is a regulatory requirement books
D. To increase the burden on the borrower C. Unintentional errors only
D. Errors that occur due to intentional fraud
Answer: B. Promoters/directors/trustees do not
have unlimited liability Answer: B. Errors that result from a partial or
complete omission of a transaction from the
32) What can be attached for the recovery of account books
bank loans in the case of firms with unlimited
liability? 35) What is the biggest problem faced in lending
A. Personal assets of the partners decisions according to the passage?
B. Business assets of the firm A. High interest rates
C. Intellectual property B. Errors of omission and commissions
D. Government grants C. Lack of big data analysis
Answer: A. Personal assets of the partners D. Intentional fraud

Answer: B. Errors of omission and commissions

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36) What does the passage suggest about the Answer: B. When shares are closely held by a
chances of omission in rule-based automation person or connected group
like STP?
A. Chances of omission are increased 39) Who is preferable as a guarantor when a
B. Chances of omission are almost obviated personal guarantee is considered necessary?
C. Chances of omission are intentional A. Director or managerial personnel
D. Chances of omission are unintentional B. Principals holding shares in the borrowing
company
Answer: B. Chances of omission are almost C. Professionals or government officials
obviated D. Any member of the board

37) How does STP address the challenge of value Answer: B. Principals holding shares in the
statements on the previous track record of the borrowing company
borrower?
A. Relies on human tendency 40) Why might there be justification for
B. Relies on subjective Answers obtaining personal guarantees of directors even
C. Goes through Credit Information Company in non-closely held companies?
reports, bank statements, transaction analysis, A. To discourage directors from taking undue
and comes back with a definite Answer risks
Ignores the borrower's track record B. To ensure government involvement in the
company
B. Answer: C. Goes through Credit Information C. To ensure continuity of management
Company reports, bank statements, transaction D. To simplify the lending process
analysis, and comes back with a definite Answer
Answer: C. To ensure continuity of
38) In what circumstances may personal management
guarantees of directors be helpful, according to
RBI suggestions?
A. Only in the case of private companies
B. When shares are closely held by a person or
connected group
C. Only when the government is involved
D. When the company is publicly traded
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41) How can lending institutions protect 44) Why might personal guarantees be
themselves in situations where continuity of considered useful for public limited companies
management is crucial? with unsatisfactory financial positions or cash
A. By obtaining guarantees from any member of generation capacity?
the board A. To discourage risky financial behavior
B. By obtaining guarantees from professionals B. To simplify the documentation process
C. By obtaining guarantees from connected C. To provide additional safety against default
groups D. To meet regulatory requirements
D. By obtaining guarantees from directors
Answer: C. To provide additional safety against
Answer: D. By obtaining guarantees from default
directors 45) In cases where there is likely to be
considerable delay in creating a charge on assets,
42) What is the suggested way for banks to what may be taken as an alternative?
ensure continuity of management or knowledge A. Relying on government regulations
of changes? B. Personal guarantees to cover the interim
A. Relying on government regulations period
B. Obtaining guarantees of the directors C. Issuing additional shares
C. Depending on professionals' advice D. Seeking professional advice
D. Monitoring the stock market
Answer: B. Personal guarantees to cover the
Answer: B. Obtaining guarantees of the interim period
directors
46) When might personal guarantees of parent
43) In what context may personal guarantees of companies be obtained for subsidiaries with
directors be helpful for public limited companies unsatisfactory financial conditions?
other than those rated as first class? A. When the subsidiary is financially stable
A. When the advance is secured by assets B. When the government intervenes
B. When the advance is unsecured C. When the subsidiary is considered satisfactory
C. Only in the case of closely held companies D. When the subsidiary's financial condition is
D. When the government is involved not satisfactory
Answer: B. When the advance is unsecured
Answer: D. When the subsidiary's financial
condition is not satisfactory
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47) Which type of charge is typically created over Answer: D. Lien

a house as security?
A. Hypothecation 51) In the context of creating a charge over an
B. Pledge LIC (Life Insurance Corporation) policy, what is
C. Lien the applicable type?
D. Mortgage A. Mortgage
B. Assignment
Answer: D. Mortgage C. Hypothecation
D. Pledge
48) What type of charge is commonly associated
with a car as collateral? Answer: B. Assignment
A. Mortgage
B. Hypothecation 52) What is a favored method of finance
C. Pledge mentioned in the passage, involving keeping
D. Assignment goods in a godown with the bank holding the
keys?
Answer: B. Hypothecation A. Hypothecation
B. Lock and Key advances
49) When gold is offered as security, what type C. Trust receipt
of charge is created? D. Inventory financing
A. Lien Answer: B. Lock and Key advances
B. Pledge
C. Mortgage 53) How was the "Lock and Key" method
D. Assignment inconvenient for both the borrower and the
bank?
Answer: B. Pledge A. It was time-consuming
B. It involved too much paperwork
50) What type of charge is established when a C. It required constant monitoring by the bank
Fixed Deposit (FD) is used as security? D. It was inconvenient for the borrower and the
A. Hypothecation bank
B. Mortgage
C. Pledge Answer: D. It was inconvenient for the
D. Lien borrower and the bank
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54) What replaced the "Lock and Key" method, C. When possession is termed as "Constructive
where possession of goods remained with the Possession"
borrower? D. When the goods are fully paid for
A. Inventory financing
B. Hypothecation Answer: C. When possession is termed as
C. Trust receipt "Constructive Possession"
D. Pledge
58) What is the term used when the borrower
Answer: B. Hypothecation holds the goods as an agent of the bank in the
context of "Pledge"?
55) What did the borrower have to do if goods A. Legal Possession
were to be delivered to them under the B. Actual Possession
"Hypothecation" method? C. Constructive Possession
A. Provide a trust receipt D. Exclusive Possession
B. Deposit money in the cash credit account
C. Sign a pledge agreement Answer: C. Constructive Possession
D. Give a personal guarantee
59) How does "Constructive Possession" in the
Answer: B. Deposit money in the cash credit case of Pledge differ from actual possession?
account A. The borrower has no control over the goods
B. The borrower is the legal owner of the goods
56) What aspect has a bearing on the overall risk C. The borrower holds the goods as an agent of
rating of the proposal, especially in the case of the bank
inventory? D. The bank retains all rights over the goods
A. Interest rates
B. Possession of security Answer: C. The borrower holds the goods as an
C. Credit history of the borrower agent of the bank
D. The term of the loan

Answer: B. Possession of security

57) In what scenario can the borrower have
possession in the case of "Pledge"?
A. Only when explicitly allowed by the bank
B. Only when the goods are kept in a godown
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60) What type of account is opened by the bank Answer: C. No account can be opened with any
providing working capital limits for the other bank without the bank's permission
borrower?
A. Savings account 63) How are the drawings in the cash credit
B. Fixed deposit account account regulated?
C. Cash credit account A. Through overdrafts
D. Current account B. Through fixed installments
C. Through the system of "Drawing Power" (DP)
Answer: C. Cash credit account D. By the borrower's discretion

Answer: C. Through the system of "Drawing

61) What is the requirement regarding financial Power" (DP)**
transactions for a borrower with working capital
limits in the case of sole banking? 64) What is the purpose of obtaining periodic
A. Transactions can be routed through any statements of the cash credit account?
account A. To provide proof of transactions to the
B. All transactions should be routed through the borrower
cash credit account B. To keep the bank informed about the
C. The borrower can have multiple accounts borrower's activities
D. The borrower must open a fixed deposit C. To monitor and keep a tab on the transactions
account D. To facilitate the closing of the account

Answer: B. All transactions should be routed Answer: C. To monitor and keep a tab on the
through the cash credit account transactions

65) Ideally, how should the Drawing Power (DP)

62) What is the restriction on opening accounts be calculated?
with other banks in the case of sole banking for A. By obtaining a statement of all current assets
working capital? B. By obtaining a statement of all current
A. No restriction liabilities
B. Only fixed deposit accounts can be opened C. By deducting Net Worth from total assets
C. No account can be opened with any other D. By deducting Net Working Capital stipulated
bank without the bank's permission at the time of assessment
D. The borrower can freely open accounts with
other banks Answer: D. By deducting Net Working Capital
stipulated at the time of assessment
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66) Why is obtaining a statement of all current Answer: C. Monthly

assets and liabilities not always feasible for
calculating DP? 69) What does the bank do to calculate DP in
A. It is time-consuming exceptional cases where obtaining statements
B. Such statements are available only after monthly is not practical?
accounts are finalized A. Increase the margin on stocks and book debts
C. Banks do not require detailed statements B. Reduce the margin on stocks and book debts
D. Borrowers are not willing to provide such C. Extend the credit period to sundry creditors
statements D. Increase the credit period to sundry creditors

Answer: B. Such statements are available only Answer: B. Reduce the margin on stocks and
after accounts are finalized book debts

67) What are the three major items used for 70) What is the potential risk associated with
calculating? providing only a cash credit limit to a borrower?
A. Cash, fixed assets, and investments A. Overutilization of the limit
B. Stocks, book-debts/receivables, and sundry B. Low interest rates on the borrowed funds
creditors C. Deterioration of the borrower's
C. Long-term loans, short-term loans, and creditworthiness
overdrafts D. Difficulty in obtaining short-term funds
D. Equity, bonds, and debentures
Answer: A. Overutilization of the limit
Answer: B. Stocks, book-debts/receivables, and
sundry creditors 71) In a situation of abundant liquidity, what may
happen to the utilization of the cash credit limit?
68) How often is the statement of stocks, book- A. It tends to decrease
debts/receivables, and sundry creditors typically B. It remains constant
obtained? C. It tends to increase
A. Quarterly D. It becomes unpredictable
B. Annually
C. Monthly Answer: A. It tends to decrease
D. Biannually
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72) What does the bank lose in situations where 75) According to RBI guidelines, what is the
the borrower fully utilizes the cash credit limit in recommended loan component for borrowers
a tight liquidity market? with working capital credit limits of Rs. 10 crore
A. Potential for earning high interest and above?
B. Creditworthiness of the borrower A. 50 percent
C. Access to short-term funds at low interest B. 60 percent
rates C. 70 percent
D. Control over the borrower's spending D. 80 percent

Answer: A. Potential for earning high interest Answer: D. 80 percent

73) What method is suggested in the passage to 76) What flexibility do banks have regarding the
ensure more stable utilization of the limit? composition of working capital for borrowers
A. Increasing the interest rates on the cash credit with limits of Rs. 10 crore and above?
B. Disbursing a portion of the sanctioned limit as
a fixed "Loan" A. Banks must adhere strictly to the 80 percent
C. Reducing the overall sanctioned limit loan component
D. Imposing stricter conditions on the borrower B. Banks have the freedom to increase the cash
credit component beyond 20 percent
Answer: B. Disbursing a portion of the C. Banks cannot change the composition as per
sanctioned limit as a fixed "Loan" their desire
D. Banks can only decrease the loan component
74) How does disbursing a portion of the
sanctioned limit as a fixed "Loan" help the bank? Answer: B. Banks have the freedom to increase
A. It increases the liquidity of the bank the cash credit component beyond 20 percent or
B. It provides more flexibility to the borrower to increase the loan component beyond 80
C. It ensures a fixed income for the bank percent, as the case may be, if they so desire.
D. It reduces the credit risk for the bank

Answer: C. It ensures a fixed income for the

bank
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77) In the case of borrowers with working capital D. By increasing the loan component without any
credit limits less than Rs. 10 crore, what incentive
incentive may banks offer to encourage the
"Loan System"? Answer: C. By offering a lower rate of interest
A. Lower rate of interest on the cash credit on the loan component
component
B. Lower rate of interest on the loan component 80) In what situations may the strict application
C. Higher cash credit limits of the loan system create difficulties for
D. Longer repayment periods borrowers?
A. In business activities with low volatility
Answer: B. Lower rate of interest on the loan B. In business activities that are not seasonal
component C. In business activities that are cyclical and
seasonal in nature or have inherent volatility
78) What is the recommended percentage of the D. In business activities with fixed income
loan component for borrowers with working
capital credit limits less than Rs. 10 crore Answer: C. In business activities that are cyclical
according to RBI guidelines? and seasonal in nature or have inherent volatilit
A. 50 percent
B. 60 percent 81) What authority is required for banks to
C. 70 percent identify and exempt certain business activities
D. It is to be settled by the bank with its from the loan system?
borrower clients A. Approval from the borrowers
B. Approval from the government
Answer: D. It is to be settled by the bank with C. Approval from the Reserve Bank of India (RBI)
its borrower clients. D. Approval from their respective Boards

79) How can banks incentivize borrowers to opt Answer: D. Approval from their respective
for the "Loan System"? Boards
A. By providing a higher cash credit limit
B. By offering longer repayment periods
C. By offering a lower rate of interest on the loan
component
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82) In the case of term loans disbursed in one go, what does the bank do with the entire amount to
what is the borrower asked to do? be paid to the seller?
A. Open a savings account A. Keeps it in a fixed deposit
B. Deposit his margin with the bank B. Credits it to the borrower's savings account
C. Apply for additional loans C. Remits it to the seller
D. Keep the loan amount in a fixed deposit D. Invests it in the stock market

Answer: B. Deposit his margin with the bank** Answer: C. Remits it to the seller

83) What happens to the borrower's loan 86) In the case of personal loans or consumption
account in the case of term loans disbursed in loans, where may the amount be credited in
one go? exceptional cases?
A. It is credited with the loan amount A. To the borrower's fixed deposit account
B. It is debited by the amount of the loan B. To the borrower's savings account with the
C. It remains unchanged bank
D. It is frozen C. To the borrower's current account with the
bank
Answer: B. It is debited by the amount of the D. To the borrower's loan account
loan
Answer: B. To the borrower's savings account
84) What is the purpose of the borrower with the bank
depositing his margin with the bank in the case
of term loans? 87) What is considered a part of the borrower's
A. To increase the loan amount contribution (margin) in the case where an
B. To earn interest on the margin amount has already been paid to the buyer?
C. To secure the loan against default A. Details of the borrower's monthly income
D. To reduce the interest rate on the loan B. Satisfactory proof, like details of the bank
account, etc.
Answer: C. To secure the loan against default C. The borrower's credit score
D. The borrower's employment history
85) When the term loan is disbursed in one go
for the purchase of a machine or ready house, Answer: B. Satisfactory proof, like details of the
bank account, etc.
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88) In project loans, how is the disbursement 90) In the third methodology, when do
related to the progress of the project? promoters agree to bring in equity funds?
A. Disbursement is made in one go regardless of A. Only after the project is completed
the project progress B. Proportionately as the banks finance the debt
B. Disbursement is related to the progress of the portion
project C. Before the banks start disbursing funds
C. Disbursement is made only after the project is D. Only if the banks request additional funds
completed
D. Disbursement is unrelated to the project Answer: B. Proportionately as the banks finance
progress the debt portion

Answer: B. Disbursement is related to the 91) What risk is associated with the last
progress of the project methodology of promoters bringing in equity
funds?
89) According to RBI guidelines, what is one of A. Market risk
the methodologies banks adopt for determining B. Credit risk
the level of promoters' equity in financing C. Equity funding risk
projects? D. Operational risk
A. Promoters bring their entire contribution
upfront before the bank starts disbursing its Answer: C. Equity funding risk
commitment
B. Promoters are not required to contribute to 92) What advice is given to banks to contain the
the project equity funding risk?
C. Banks provide the entire funding without any A. To adopt the first methodology
contribution from promoters B. To avoid financing projects with high equity
D. Promoters contribute only after the project is requirements
completed C. To have a clear policy regarding the Debt
Equity Ratio (DER)
Answer: A. Promoters bring their entire D. To increase the equity contribution from
contribution upfront before the bank starts promoters
disbursing its commitment
Answer: C. To have a clear policy regarding the
Debt Equity Ratio (DER)
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93) Under what circumstances is sole banking 96) Why might borrowers prefer not to depend
suitable for financing the working capital needs on one bank and avail facilities from various
of an enterprise? banks?
A. When the enterprise prefers multiple banking A. To increase competition among banks
arrangements B. To lower interest rates
B. If the requirement is within the policy C. To diversify their sources of financing
framework of the financing bank D. To simplify the borrowing process
C. When prudential norms are not a concern
D. If the enterprise has a high-risk perception Answer: C. To diversify their sources of
financing
Answer: B. If the requirement is within the
policy framework of the financing bank 97) In a consortium arrangement, what role does
the Lead bank play?
94) What may lead a bank to prefer another A. Provides funding to the borrower
bank for financing a part of the enterprise's B. Arranges periodic meetings of member banks
requirements? and takes the lead in various activities
A. Low-risk perception C. Acts as a silent observer
B. High comfort level D. Handles only the documentation process
C. Prudential norms
D. Lack of competition Answer: B. Arranges periodic meetings of
member banks and takes the lead in various
Answer: C. Prudential norms** activities

95) What is the term used when two or more 98) What formal arrangement exists between
banks enter into a formal arrangement to banks in the case of multiple banking?
finance the working capital needs of a borrower? A. Consortium agreement
A. Consortium arrangement B. Lead bank agreement
B. Sole banking C. No formal arrangement
C. Multiple banking arrangements D. Mutual interest agreement
D. Borrower's preference
Answer: A. Consortium arrangement Answer: C. No formal arrangement**
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99) In syndication of loans, what does the term 102) How do participating banks in a syndication
"Syndication" refer to? arrangement appraise the borrower's proposal?
A. The process of creating a consortium A. Independently, without any coordination
B. The sharing of a long-term loan by two or B. In collaboration with the lead bank
more banks C. Only after the lead bank approves the
C. Multiple banks competing for the same proposal
borrower D. Based on their own lending policies and risk
D. The lead bank's role in documentation appetite

Answer: D. Based on their own lending policies

Answer: B. The sharing of a long-term loan by
and risk appetite
two or more banks

103) What is the purpose of the meeting of

100) What is the primary purpose of syndicating
participating banks arranged by the lead bank?
loans among two or more banks?
A. To finalize the loan amount
A. To increase competition among banks
B. To agree on common terms and conditions of
B. To simplify the lending process
sanction
C. To share the risk associated with lending to a
C. To decide on the interest rate for the loan
borrower
D. To determine the syndication fee
D. To minimize documentation requirements
Answer: B. To agree on common terms and
Answer: C. To share the risk associated with conditions of sanction
lending to a borrower
104) What is the function of the lead bank in a
101) In a syndication arrangement, what role syndication arrangement?
does the Lead bank play? A. To charge a syndication fee from the borrower
A. Provides the loan directly to the borrower B. To independently appraise the borrower's
B. Approaches various banks with the borrower's proposal
proposal C. To liaise with the borrower and other
C. Acts as a silent observer participating banks
D. Handles only the documentation process D. To minimize the risk associated with lending

Answer: B. Approaches various banks with the Answer: C. To liaise with the borrower and
borrower's proposal other participating banks
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105) What fee does the lead bank typically 108) What significant events in the early 1990s
charge from the borrower in a syndication paved the way for the establishment of new
arrangement? generation private sector banks?
A. Documentation fee A. Technological advancements
B. Processing fee B. Banking reforms
C. Syndication fee C. The shift to a mechanized environment
D. Appraisal fee D. Liberalisation, Privatisation, and Globalisation

Answer: C. Syndication fee Answer: D. Liberalisation, Privatisation, and

Globalisation
106) What does "straight-through loan
processing" refer to? 109) What advantage did new generation private
A. Manual handling of the loan sanction process sector banks have over traditional banks in the
B. Automation of the entire loan sanction 1990s?
process from application to disbursement A. Higher interest rates
C. Limited use of technology in loan processing B. Lower reliance on technology
D. Partial automation with significant manual C. Increased manual processing
interference D. Utilization of the information technology
revolution
Answer: B. Automation of the entire loan
sanction process from application to Answer: D. Utilization of the information
disbursement technology revolution

107) When did the banking process begin to shift 110) What market did new generation private
from manual methods to a mechanized sector banks sense as their niche in the 1990s?
environment? A. Commercial loans
A. 1960s B. Agricultural loans
B. 1970s C. Personal loan segment
C. 1980s D. Corporate loans
D. 1990s
Answer: C. Personal loan segment
Answer: C. 1980s
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111) What contributed to the outburst of A. Compliance

personal segment loans like home loans, car B. Location
loans, and personal loans? C. Uniformity
A. Decline in interest rates D. Proximity
B. Technological advancements
C. Shift to a mechanized environment Answer: B. Location
D. Changes in government policies
115) What does "Straight-through loan
Answer: B. Technological advancements processing" enable in the loan sanction process?
A. Increased manual interference
112) Why did new generation banks adopt B. Full automation from application to
centralised processing of loan proposals? disbursement
A. To increase biases in the loan sanction process C. Limited technology use
B. To ensure compliance with regulatory and D. Lengthy processing time
internal guidelines
C. To facilitate manual processing Answer: B. Full automation from application to
D. To decentralize decision-making disbursement

Answer: B. To ensure compliance with 116) How does Straight-through loan processing
regulatory and internal guidelines benefit banks and financial institutions?
A. It hinders customer service
113) What did centralised processing ensure in B. It limits the use of human resources
the approach, sanction process, documentation, C. It allows for more manual interference
and post-santion processes? D. It frees up human resources to work on more
A. Diversity complex cases
B. Uniformity
C. Biases Answer: D. It frees up human resources to work
D. Flexibility on more complex cases

Answer: B. Uniformity

114) What became a redundant factor with the

advent of the internet?
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117) What is one of the key outcomes of using A. Staying fixed and unchangeable
Straight-through loan processing? B. Switching between different types of loans
A. Decreased customer delight C. Avoiding customization for future changes
B. Limited business growth D. Ignoring regulatory and administrative
C. Increased processing time changes
D. Enhanced customer delight
Answer: B. Switching between different types
Answer: D. Enhanced customer delight of loans

118) Why do most banks use STP? 121) Why is the capability to customize
A. To decrease the customer base important for STP software?
B. To slow down business levels A. To limit its functionality
C. To scale up their customer base and business B. To avoid regulatory changes
levels C. For future regulatory or administrative
D. To limit technological advancements changes
D. To increase errors and commissions
Answer: C. To scale up their customer base and
business levels Answer: C. For future regulatory or
administrative changes
119) Besides personal loans, where is STP
actively used now? 122) What is one of the risks that customization
A. Only for agricultural loans of STP software helps mitigate?
B. For MSME and other commercial lending as A. Customer satisfaction
well B. Errors, omissions, and commissions
C. Only for corporate loans C. Slow processing time
D. Only for educational loans D. Inflexibility

Answer: B. For MSME and other commercial Answer: B. Errors, omissions, and commissions
lending as well

120) What is a crucial aspect of the functionality

of STP software?
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123) What is the ultimate goal of STP in terms of 126) What is highlighted as a potential difference
customer experience? between lenders?
A. To complicate the customer experience A. Identical outlook in the loan origination
B. To ignore customer feedback process
C. To simplify and enhance the overall customer B. Micro details being universally applicable
experience C. Differences in both broader outlook and micro
D. To focus only on administrative changes details
D. No differences between lenders in loan
Answer: C. To simplify and enhance the overall origination
customer experience
Answer: C. Differences in both broader outlook
124) Why does the STP solution need to be and micro details
capable of customization?
A. To avoid any changes 127) What is mentioned about the use of
B. To comply with regulatory changes software in the loan origination process?
C. To increase errors A. Only large lenders use software
D. To reduce flexibility B. Small lenders do not use any software
C. Every lender, including small ones, uses one or
Answer: B. To comply with regulatory changes the other software
D. Software is irrelevant in the loan origination
125) What is emphasized regarding the loan process
origination process?
A. Uniformity in the origination process among Answer: C. Every lender, including small ones,
all lenders uses one or the other software
B. Guarantee of identical loan origination
methods 128) What does the passage suggest about the
C. Variability in loan origination approaches loan origination methods of different lenders?
among lenders A. They are universally identical
D. Micro details are not relevant in loan B. There is a guarantee of uniformity
origination C. Micro details are irrelevant
D. They can vary
Answer: C. Variability in loan origination
approaches among lenders Answer: D. They can vary
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129) What is the overall message regarding the Answer: C. In-depth idea of what the lender-
relevance of STP in the loan origination process? user needs the software to do
A. STP is irrelevant in loan origination
B. Loan origination methods are uniform 132) What must be duly captured in the
C. Variability exists in loan origination, and STP is software?
relevant A. General industry trends
D. Micro details do not matter in loan origination B. Specific parameters of the lender's loan policy
C. Random data points
Answer: C. Variability exists in loan origination, D. Historical data
and STP is relevant
Answer: B. Specific parameters of the lender's
130) What is the first stepping stone for the loan policy
automation of credit processing?
A. Ratio analysis 133) What does the passage mention about
B. Thorough synchronization between the maker different loans in terms of software
and the user development?
C. Detailed financial modeling A. They require separate software
D. Human intervention B. They need to share the same software
C. They do not have specific rules
Answer: B. Thorough synchronization between D. They should be excluded from the software
the maker and the user
Answer: A. They require separate software
131) What is highlighted as a crucial aspect for
the software developer in the automation 134) What is described as a critical appraisal
process? tool?
A. Ignoring the lender-user's needs A. Human intervention
B. Limited understanding of the lender's loan B. Synchronization between the maker and the
policy user
C. In-depth idea of what the lender-user needs C. Software development
the software to do D. Ratio analysis
D. Lack of coding skills
Answer: D. Ratio analysis
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135) What can be programmed with thorough Answer: C. Verification of Know Your Customer
homework? documents, Ownership documents, and prior-
A. Only exposure norms charge history
B. Only sensitivities of commercial viability
indicators 138) What is specifically mentioned as a role in
C. Almost all numerical parameters, from the credit decision of personal segment lending?
exposure norms to sensitivities of commercial A. Exposure norms
viability indicators B. Ratio analysis
D. Only commercial viability indicators C. Verification of Know Your Customer
documents, Ownership documents, prior-charge
Answer: C. Almost all numerical parameters, history, and credit record
from exposure norms to sensitivities of D. Commercial viability indicators
commercial viability indicators
Answer: C. Verification of Know Your Customer
136) Why does the passage mention that it is documents, Ownership documents, prior-charge
much easier to develop STP in structured lending history, and credit record
like personal segment loans?
A. Due to the involvement of more complexities 139) What is NOT mentioned as part of the credit
B. Due to the absence of numerical parameters decision in personal segment lending?
C. Due to fewer complexities being involved A. EMI Ratio
D. Due to the lack of exposure norms B. Loan-to-Value Ratio
C. Exposure norms
Answer: C. Due to fewer complexities being D. Sensitivities of commercial viability indicators
involved
Answer: C. Exposure norms
137) What plays a vital role in the credit decision
of personal segment lending? 140) Where are credit decisions placed in the
A. Structured lending context of risk mitigation?
B. Sensitivities of commercial viability indicators A. At the beginning of the tunnel
C. Verification of Know Your Customer B. At the middle of the tunnel
documents, Ownership documents, and prior- C. At the end of the tunnel
charge history D. Nowhere in the tunnel
D. Numerical parameters
Answer: C. At the end of the tunnel
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141) When does the passage suggest that loan default risks, country risks, exchange risks, and
sanction should happen? more
A. Only when risks are not perceived
B. Only when some risks are perceived 144) What is the prime key for a contemporary
C. Only when all perceived risks are mitigated STP software?
D. Only when risks are ignored A. Limited Third-Party-Big data
B. Integration with third-party services
Answer: C. Only when all perceived risks are C. Ignoring Artificial Intelligence
mitigated D. Avoiding real-time transactional data

142) What does the passage recommend Answer: B. Integration with third-party services
regarding the identification of risk elements?
A. Limited identification of risk elements is 145) What does the STP software of some banks
sufficient in India do in joint lending situations?
B. Exhaustive identification of all possible risk A. Ignores account statements of other lenders
elements involved B. Scans and uploads account statements of
C. Identification of risks after loan sanction other lenders
D. Ignoring the identification of risk elements C. Only focuses on round-about transactions
D. Performs credit rating without considering
Answer: B. Exhaustive identification of all trade transactions
possible risk elements involved
Answer: B. Scans and uploads account
143) What are examples of risks? statements of other lenders
A. Only industry and business risks
B. Only financial risks 146) What does the STP software discard during
C. Industry and business risks, management risks, the processing of account statements?
financial risks, legal risks, default risks, country A. All entries
risks, exchange risks, and more B. Round-about transactions and round-amount
D. Only country risks transactions
C. Genuine trade transactions
Answer: C. Industry and business risks, D. Profit and loss accounts
management risks, financial risks, legal risks,
Answer: B. Round-about transactions and
round-amount transactions
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147) What does the STP software of these banks C. Lenders share data with Credit Information
base its credit rating, credit assessment, and Companies in the course of acceptance and
credit decisions on? appraisal of new credit proposals
A. Round-about transactions D. Lenders never share data with Credit
B. Profit and loss accounts Information Companies
C. True transaction data from recast profit and
loss account and balance sheet Answer: C. Lenders share data with Credit
D. Only joint lending data Information Companies in the course of
acceptance and appraisal of new credit proposals
Answer: C. True transaction data from recast
profit and loss account and balance sheet 150) What is one of the conditions mentioned
for effective risk mitigation through STP?
148) What role do Credit Information Companies A. Avoidance of trustworthy data
play in the credit decision process? B. Access to an abundance of trustworthy data
A. They ignore borrower transactions C. Dependence on human interference
B. They facilitate, aggregate, analyze, estimate, D. Reliance on qualitative aspects
and share data about borrower transactions and
economic behavior patterns Answer: B. Access to an abundance of
C. They only share data with lenders trustworthy data**
D. They focus on profit and loss accounts
151) What is the reliance in machine lending
Answer: B. They facilitate, aggregate, analyze, when human interference is avoided?
estimate, and share data about borrower A. Reliance on manual processes
transactions and economic behavior patterns B. Full reliance on algorithms coded into the
program
149) How does lender-based data build-up C. Reliance on dynamic parameters
occur? D. No reliance on parameters
A. Lenders create data without sharing with
Credit Information Companies Answer: B. Full reliance on algorithms coded
B. Credit Information Companies only share data into the program
with lenders
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152) What are some examples of quantitative A. Dependence on the programmer at every
parameters? moment
A. Trustworthy data B. Flexibility at the user-end with due
B. Credit score, macro-economic conditions, authorization
industry and business environment C. Constant changes without authorization
C. Dynamic parameters D. No flexibility at the user-end
D. Defined set of rules
Answer: B. Flexibility at the user-end with due
Answer: B. Credit score, macro-economic authorization
conditions, industry and business environment
156) What are errors of omission in lending
153) What makes the dynamic nature of the decisions?
environments challenging in the context of STP? A. Errors that occur due to incorrect recording of
A. Trustworthy data transactions
B. Reliance on human interference B. Errors that result from a partial or complete
C. Static rules omission of a transaction from the account
D. Constant changes in the environments books
C. Unintentional errors only
Answer: D. Constant changes in the D. Errors that occur due to intentional fraud
environments
Answer: B. Errors that result from a partial or
154) What is the nature of the rules in machine complete omission of a transaction from the
lending? account books
A. Static and unchanging
B. Dynamic and constantly evolving 157) What is the biggest problem faced in
C. Dependent on human interference lending decision?
D. Unreliable and inconsistent A. High interest rates
B. Errors of omission and commissions
Answer: B. Dynamic and constantly evolving C. Lack of big data analysis
D. Intentional fraud
155) What should the programming in machine
lending allow for? Answer: B. Errors of omission and
commissions**
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158) What does the passage suggest about the

chances of omission in rule-based automation
like STP?
A. Chances of omission are increased
B. Chances of omission are almost obviated
C. Chances of omission are intentional
D. Chances of omission are unintentional

Answer: B. Chances of omission are almost

obviated**

159) How does STP address the challenge of

value statements on the previous track record of
the borrower?

A. Relies on human tendency

B. Relies on subjective Answers
C. Goes through Credit Information Company
reports, bank statements, transaction analysis,
and comes back with a definite Answer
D. Ignores the borrower's track record

Answer: C. Goes through Credit Information

Company reports, bank statements, transaction
analysis, and comes back with a definite Answer
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CHAPTER 22-: Credit Control and Monitoring

1) What is the primary concern highlighted in factor despite the presence of excellent credit
the given scenario regarding credit control appraisal and security?
and monitoring?
a) Lack of security a) Static business environment
b) Dynamic nature of the business b) Consistency in market conditions
environment c) Dynamic nature of the business
c) Inadequate credit appraisal environment
d) Documentation errors d) Overemphasis on documentation

Answer: b) Dynamic nature of the business Answer: c) Dynamic nature of the business
environment environment

2) Why might the risk of default increase over 5) Why may the assumptions made during
time, despite an excellent credit appraisal the credit appraisal lose their sanctity over
and obtaining security? time?
a) Fluctuations in interest rates a) Due to the unpredictability of interest rates
b) Changes in government policies b) Dynamic nature of the business
c) Dynamic nature of the business environment
environment c) Overreliance on documentation
d) Inadequate documentation d) Lack of security measures

Answer: c) Dynamic nature of the business Answer: b) Dynamic nature of the business
environment environment

3) What potential factor could undermine the 6) What is the primary purpose of Credit
assumptions made during the credit appraisal Control and Monitoring, also known as Loan
process? Review Mechanism (LRM)?
a) Rapid changes in technology a) Maximizing profits for the bank
b) Stability in market conditions b) Ensuring proper use of funds and
c) Strict adherence to documentation preventing unauthorized diversion
d) Lack of security c) Facilitating easy loan approvals
d) Streamlining documentation processes
Answer: a) Rapid changes in technology
4) In the context of credit control and Answer: b) Ensuring proper use of funds and
monitoring, what is highlighted as a risk preventing unauthorized diversion
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7) What role does Credit Control and 10) What is the key role of Credit Control and
Monitoring play in relation to the business's Monitoring concerning the business's viability
performance projection? in the given context?
a) Strictly adhering to the projected lines a) Ignoring any deterioration in business
b) Ignoring any deviations from the projected conditions
lines b) Seizing the security immediately
c) Taking appropriate action if there is a c) Initiating appropriate action to ensure the
deterioration from the projection business runs on viable lines
d) Leaving the business to operate d) Maximizing the loan amount
independently
Answer: c) Initiating appropriate action to
Answer: c) Taking appropriate action if there ensure the business runs on viable lines
is a deterioration from the projection
11) What advice has the RBI given to banks
8) In the context of Credit Control and regarding credit monitoring tools?
Monitoring, what action should the bank take a) Rely solely on certificates issued by
if there is a continuous deterioration in the Chartered Accountants
business despite appropriate measures? b) Depend entirely on information obtained
a) Increase the loan amount from borrowers
b) Initiate legal action against the borrower c) Use a combination of records, information,
c) Recall the advance or seize the security and methods for monitoring
d) Ignore the deterioration and continue d) Avoid monitoring credit altogether
monitoring
Answer: c) Use a combination of records,
Answer: c) Recall the advance or seize the information, and methods for monitoring
security
12) What action does the RBI recommend in
9) What should be detected and stopped to case of incorrect certification regarding the
ensure proper use of the bank's funds? utilization of funds and credit monitoring?
a) Strict adherence to business projections a) Ignore the incorrect certification
b) Deterioration in business conditions b) Withdraw the facilities sanctioned
c) Unauthorized diversion of funds c) Depend more on certificates from
d) Regular loan reviews Chartered Accountants
d) Increase the credit limit
Answer: c) Unauthorized diversion of funds
Answer: b) Withdraw the facilities
sanctioned
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13) What does the conduct of accounts with Answer: c) Gives useful insights into the
the bank reveal about the enterprise? financial health and fund utilization of the
a) Details of personal transactions of the enterprise
business owner
b) Information about the enterprise's 16) How can banks strengthen their
financial health and fund utilization monitoring system?
c) Chartered Accountant's certification a) Reduce inspections of borrowers' go
d) Legal recourse options downs
b) Rely solely on borrower's accounts for sale
Answer: b) Information about the proceeds
enterprise's financial health and fund c) Increase the frequency of inspections of
utilization borrowers' go downs
d) Remove the pledge of stock in favor of
14) What are some unsatisfactory features hypothecation
that may be revealed through the conduct of
accounts with the bank? Answer: c) Increase the frequency of
a) High turnover and timely submission of inspections of borrowers' go downs
stock statements
b) Frequent overdrawing and delays in 17) What measure is suggested in the
submission of stock statements information to ensure the proper routing of
c) Low turnover and correct certification sale proceeds through the borrower's
d) Dependence on Chartered Accountant accounts with the bank?
certificates a) Increase the frequency of inspections
b) Rely on borrower's go downs for
Answer: b) Frequent overdrawing and information
delays in submission of stock statements c) Insist on the pledge of stock
d) Reduce the frequency of periodic
15) What is the significance of using records information submissions
and information from the conduct of
accounts for credit monitoring? Answer: c) Insist on the pledge of stock
a) Provides irrelevant information
b) Offers details about personal transactions
c) Gives useful insights into the financial
health and fund utilization of the enterprise
d) Requires additional certification from
Chartered Accountants
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18) How does the bank calculate Drawing 21) In what situations does the bank typically
Power (DP) for the borrower? resort to stock audit?
a) Based on borrower's certification a) Small-size accounts
b) By relying solely on periodic inspections b) Accounts with frequent inspections
c) Using statements of stock and receivables c) Medium and large-size accounts
submitted by the borrower d) Accounts with easily accessible stocks
d) Ignoring the periodic information
submitted by the borrower Answer: c) Medium and large-size accounts

Answer: c) Using statements of stock and 22) Why might a bank conduct a stock audit?
receivables submitted by the borrower a) To increase the Drawing Power (DP)
b) To verify stocks during normal inspections
19) What is the purpose of a thorough c) To cross-check the reliability of statements
scrutiny of the statements of stock and submitted by the borrower
receivables submitted by the borrower? d) To reduce the frequency of periodic
a) To increase the Drawing Power (DP) inspections
b) To verify correctness, inventory Answer: c) To cross-check the reliability of
accumulation, and old receivables statements submitted by the borrower
c) To rely solely on borrower's certification
d) To reduce the frequency of inspections 23) In addition to stock audit, what other
audit may the bank conduct in certain cases?
Answer: b) To verify correctness, inventory a) Overhead audit
accumulation, and old receivables b) Receivables audit
c) Financial audit
20) How are stocks verified during periodic d) External audit
inspections of the enterprise by bank
officials? Answer: b) Receivables audit
a) Stocks are never physically verified
b) Stocks are verified based on borrower's 24) What information can be obtained by
certification analyzing the financial statements and
c) Stocks are physically verified either fully or auditors' report?
on a random selection basis a) The number of inspections conducted by
d) Stocks are verified solely through go down the bank
inspections b) The profitability of the borrower's business
c) The frequency of stock audits
Answer: c) Stocks are physically verified d) The location of stocks in various accounts
either fully or on a random selection basis
Answer: b) The profitability of the
borrower's business
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25) When are financial statements and 29) Why is it important for the bank's charge
auditors' reports typically available? over the assets to be prominently displayed
a) Once a month during field visits?
b) Once a quarter a) To reduce the need for periodic inspections
c) Once a year b) To maintain transparency and compliance
d) Once a week c) To increase the credit limit
d) To avoid interactions with creditors and
Answer: c) Once a year debtors

26) What is the primary purpose of periodic Answer: b) To maintain transparency and
visits and inspections? compliance
a) To increase the borrower's credit limit
b) To assess the level of operations and 30) In the context of credit monitoring, what
activity is the purpose of periodic scrutiny of
c) To reduce the frequency of inspections borrowers' books of accounts and accounts
d) To rely solely on borrowers' certifications maintained with other banks?
a) To increase credit limits
Answer: b) To assess the level of operations b) To reduce field visits
and activity c) To interact with selected creditors and
debtors
27) How does periodic visits assist in the d) To ensure financial transparency and
assessment of credit limits? detect any irregularities
a) By relying on borrowers' certifications
b) By finding the position of stocks and assets Answer: d) To ensure financial transparency
c) By ascertaining the anticipated level of and detect any irregularities
operations
d) By conducting stock audits 31) How can banks obtain market reports
about the borrower and the business
Answer: c) By ascertaining the anticipated segment for credit monitoring?
level of operations a) Through borrower's certifications
b) From periodic inspections
28) What does a field visit help in finding out c) From industry associations and rating
about the assets charged to the bank? agencies
a) Their location d) Through financial statements
b) Their quantity
c) Their market value Answer: c) From industry associations and
d) Their position rating agencies

Answer: d) Their position

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32) In what situations might a bank appoint a a) Monthly intervals

nominee director on the board of the b) Quarterly intervals
borrowing company? c) Yearly intervals
a) For small limits d) Once in five years
b) In exceptional cases or for large limits
c) For routine credit audits Answer: b) Quarterly intervals
d) To reduce the need for legal audits
36) What is the primary purpose of Credit
Answer: b) In exceptional cases or for large Audit?
limits a) To increase the credit limit
b) Examination of various credit functions of
33) What is the purpose of the legal audit of the bank
title documents for large value loan c) Quarterly financial statement analysis
accounts? d) Interaction with creditors and debtors
a) To increase credit limits Answer: b) Examination of various credit
b) To review quarterly financial statements functions of the bank
c) To ensure the genuineness of title
documents 37) Who typically conducts Credit Audit
d) To avoid interactions with creditors and within a bank?
debtors a) External auditors
b) Borrowers
Answer: c) To ensure the genuineness of c) Internal staff with adequate credit
title documents experience
d) Chartered Accountants
34) What amount threshold triggers the
requirement for periodic legal audit and re- Answer: c) Internal staff with adequate
verification of title deeds, according to the credit experience
RBI circular mentioned?
a) Rs. 1 crore and above 38) What does Credit Audit examine in terms
b) Rs. 5 crore and above of processes and procedures?
c) Rs. 10 crore and above a) Compliance with borrowers' certifications
d) Rs. 50 crore and above b) Compliance with extant sanction and post-
sanction processes/procedures
Answer: b) Rs. 5 crore and above c) Compliance with periodic inspections
d) Compliance with industry associations
35) How often are banks required to furnish a
review note to its Board/Audit Committee of Answer: b) Compliance with extant sanction
the Board regarding legal audits? and post-sanction processes/procedures
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39) According to RBI suggestions, what are b) Processing Credit Audit Reports
the objectives of Credit Audit? c) Conducting periodic inspections
a) Increasing credit limits and reducing d) Analyzing quarterly financial statements
inspections
b) Reviewing quarterly financial statements Answer: b) Processing Credit Audit Reports
c) Picking up early warning signals and
suggesting remedial measures 43) What is one of the functions of the Credit
d) Relying solely on borrower's certifications Audit Department concerning findings?
a) Ignoring Credit Audit findings
Answer: c) Picking up early warning signals b) Analyzing and advising the
and suggesting remedial measures departments/functionaries concerned
c) Conducting field visits
40) How does Credit Audit contribute to d) Increasing credit limits
credit risk management?
a) By increasing credit limits Answer: b) Analyzing and advising the
b) By improving the quality of the credit departments/functionaries concerned
portfolio
c) By reducing the need for periodic 44) What is the role of the Credit Audit
inspections Department in processing responses received
d) By avoiding interactions with creditors and regarding Credit Audit Reports?
debtors a) Ignoring responses
b) Conducting periodic inspections
Answer: b) By improving the quality of the c) Analyzing responses and arranging for
credit portfolio closure of reports
d) Increasing credit limits based on responses
41) Where can the credit audit/loan review
mechanism be assigned? Answer: c) Analyzing responses and
a) Borrower's Department arranging for closure of reports
b) Inspection and Audit Department
c) Credit Limit Department 45) What is an additional responsibility of the
d) Legal Department Credit Audit Department?
a) Conducting borrower interviews
Answer: b) Inspection and Audit b) Issuing certificates of compliance
Department c) Maintaining a database of advances
subjected to Credit Audit
42) What are the functions of the Credit Audit d) Reducing the frequency of inspections
Department?
a) Issuing credit limits
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Answer: c) Maintaining a database of Answer: b) Reducing concentrations in

advances subjected to Credit Audit certain sectors as per Loan Policy and
Prudential Limits suggested by RBI
46) What is the recommended focus of credit
audit according to the information provided? 49) What does the "Loan Review" aspect of
a) Strictly at the account level credit audit involve?
b) Broadened from the account level to the a) Reviewing only large accounts
overall portfolio and credit process b) Reviewing the sanction process and post-
c) Solely on large accounts sanction processes/procedures for all
d) Only on post-sanction processes accounts
c) Focusing only on fresh proposals
Answer: b) Broadened from the account d) Ignoring the renewal of limits
level to the overall portfolio and credit
process Answer: b) Reviewing the sanction process
and post-sanction processes/procedures for
47) What does the term "Portfolio Review" in all accounts
credit audit involve?
a) Reviewing only large accounts 50) When should proposals for renewal of
b) Examining the quality of Credit & limits be included in the credit audit?
Investment Portfolio a) Within 1-3 months from the date of
c) Ignoring concentrations in certain sectors sanction
d) Focusing solely on account-level details b) Within 6-9 months from the date of
sanction
Answer: b) Examining the quality of Credit & c) Within 3-6 months from the date of
Investment Portfolio sanction
d) After a year from the date of sanction
48) What is one of the suggestions provided
in the information regarding the portfolio Answer: c) Within 3-6 months from the date
review in credit audit? of sanction
a) Increasing concentrations in certain sectors
b) Reducing concentrations in certain sectors 51) What is the criterion for selecting existing
as per Loan Policy and Prudential Limits accounts for credit audit?
suggested by RBI a) Random selection
c) Ignoring RBI's suggestions b) Proposals from the rest of the portfolio
d) Restricting the review to large accounts c) Accounts with sanction limits above a
specified cut-off
d) Only accounts with serious irregularities
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Answer: c) Accounts with sanction limits b) To ignore regulatory compliance

above a specified cut-off c) To suggest remedial measures for serious
irregularities
52) How are proposals selected for credit d) To streamline documentation processes
audit from the rest of the portfolio?
a) Randomly (5-10%) Answer: c) To suggest remedial measures
b) Only those with serious irregularities for serious irregularities
c) Proposals with the highest credit limits
d) Based on borrower's certifications 56) How does the frequency of credit audit
vary based on the magnitude of risk?
Answer: a) Randomly (5-10%) a) High risk accounts - 6 months, average risk
accounts - 3 months, low risk accounts - 1
53) What is one of the action points for credit year
audit concerning compliance? b) High risk accounts - 1 year, average risk
a) Increasing credit limits accounts - 6 months, low risk accounts - 3
b) Ignoring regulatory compliance months
c) Verifying compliance with bank's policies c) High risk accounts - 3 months, average risk
and regulatory requirements accounts - 6 months, low risk accounts - 1
d) Reducing the frequency of inspections year
d) High risk accounts - 1 year, average risk
Answer: c) Verifying compliance with bank's accounts - 3 months, low risk accounts - 6
policies and regulatory requirements months

54) What does the credit audit process Answer: c) High risk accounts - 3 months,
examine regarding the conduct of accounts average risk accounts - 6 months, low risk
and follow-up by line functionaries? accounts - 1 year
a) Only serious irregularities
b) Adequacy of documentation 57) Where is Credit Audit conducted?
c) Only regulatory compliance a) At the central office
d) The conduct of account and follow-up by b) At the branch that appraised the advance
line functionaries c) At the borrower's location
d) At the borrower's accountant's office
Answer: d) The conduct of account and
follow-up looked at by line functionaries Answer: b) At the branch that appraised the
advance
55) What is the purpose of detecting early
warning signals in the credit audit process?
a) To increase credit limits
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58) How are reports on the conduct of

accounts of allocated limits obtained for
Credit Audit?
a) From the central office
b) From the main operative credit limits
branch
c) From the corresponding branches
d) From the borrower's office

Answer: c) From the corresponding

branches

59) What is the recommended frequency for

credit audit in low-risk accounts?
a) Quarterly
b) Semi-annually (6 months)
c) Annually (1 year)
d) Monthly

Answer: c) Annually (1 year)

60) How often is credit audit suggested for

high-risk accounts?
a) Semi-annually (6 months)
b) Annually (1 year)
c) Quarterly
d) Monthly

Answer: c) Quarterly
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CHAPTER 23-: Risk Management and Credit Rating

1) What is the meaning of credit risk in the 4) How is credit risk defined in the banking
context of banking business risks? context?
a) Risks related to operational disruptions a) Risks related to operational disruptions
b) Risks associated with losses due to frauds b) Risks resulting from adverse market
c) Risks caused by natural calamities like movements
floods c) The unwillingness or inability of a customer
d) Risks related to the business of banking or counterparty to meet financial
commitments
Answer: b) Risks associated with losses due d) Risks associated with losses due to frauds
to frauds
Answer: c) The unwillingness or inability of a
2) Among the three broad categories of risks customer or counterparty to meet his
faced by the business of banking, which commitment relating to a financial transaction
category does credit risk fall under? with the bank.
a) Operational Risks
b) Market Risks 5) In a fund-based limit, what constitutes
c) Credit Risks credit risk?
d) Business Risks a) Non-payment of principal and interest by
the borrower
Answer: c) Credit Risks b) Adverse market movements of interest
rates
3) What are market risks in the context of c) Operational disruptions
banking business risks? d) Losses due to frauds
a) Risks related to operational disruptions
b) Risks resulting from adverse market Answer: a) Non-payment of principal and
movements of interest rates, exchange rate, interest by the borrower, as per the agreed
etc. terms of repayment.
c) Risks caused by natural calamities like
floods
d) Risks associated with losses due to frauds

Answer: b) Risks resulting from adverse

market movements of interest rates,
exchange rate, etc.
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6) : When does credit risk arise in the case of a Answer: b) By reducing a customer's
non-fund based limit? capability to honor financial transactions with
a) Adverse market movements of interest the bank
rates
b) Non-payment of principal and interest by 9) Which of the following is NOT mentioned
the borrower as an external factor affecting credit risk?
c) Operational disruptions a) Exchange rate fluctuations
d) Customer not reimbursing the bank fully in b) Government policies
case of invocation of a guarantee or c) Protectionist policies of other countries
devolvement of an LC d) Market risks

Answer: d) Customer not reimbursing the Answer: d) Market risks

bank fully in case of invocation of a guarantee
or devolvement of an LC. 10) : How do the external factors mentioned
differ from market risks?
7) What are external factors in the context of a) External factors directly affect a bank, while
credit risk? market risks affect customers
a) Factors directly affecting a bank's market b) Market risks directly affect customers,
risks while external factors affect a bank indirectly
b) Factors influencing a customer's business c) Both external factors and market risks
and ability to honor financial transactions affect customers in the same way
c) Factors related to operational disruptions d) External factors and market risks are
d) Factors leading to losses due to frauds synonymous

Answer: b) Factors influencing a customer's Answer: b) Market risks directly affect

business and ability to honor financial customers, while external factors affect a
transactions bank indirectly.

8) How do external factors impact the overall

quality of a bank's credit portfolio?
a) By directly affecting market risks
b) By reducing a customer's capability to
honor financial transactions with the bank
c) By causing operational disruptions
d) By leading to losses due to frauds
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11) What is the primary concern associated a) Low quality of credit appraisal and
with internal factors affecting credit risk? monitoring
a) Adverse market movements b) Lack of an efficient recovery machinery
b) Overexposure or concentration of credit to c) Political risks
a particular segment/geographical region d) Deficiencies in the loan policy of the bank
c) Government policies
d) Political risks Answer: c) Political risks

Answer: b) Overexposure or concentration 15) What is the primary objective of credit risk
of credit to a particular segment/geographical management in a bank?
region a) To maximize operational efficiency
b) To minimize market risks
12) What is a key internal factor contributing c) To limit credit risk within acceptable levels
to credit risk in the banking context? d) To eliminate all types of risks
a) Exchange rate fluctuations
b) Excessive lending to cyclical industries Answer: c) To limit credit risk within
c) Protectionist policies of other countries acceptable levels
d) Losses due to frauds
16) How does a bank mitigate risks to the
Answer: b) Excessive lending to cyclical overall credit portfolio at the macro level?
industries a) By minimizing operational disruptions
b) Through frequent reviews of norms and
13) What is the significance of ignoring the fixing internal limits for aggregate
purpose of a loan as an internal factor commitments
affecting credit risk? c) By avoiding lending to specific sectors
a) It leads to operational disruptions d) By eliminating all exposures to various
b) It increases market risks sectors
c) It contributes to faulty loan and repayment
structuring Answer: b) Through frequent reviews of
d) It has no impact on credit risk norms and fixing internal limits for aggregate
commitments
Answer: c) It contributes to faulty loan and
repayment structuring

14) : Which of the following is NOT mentioned

as an internal factor affecting credit risk?
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17) What is the purpose of fixing internal 20) What was previously mandatory, but is no
limits for aggregate commitments at the longer required?
macro level? a) Periodic reviews of loan policies
a) To maximize risk-adjusted rate of return b) Classification of the portfolio by assigning
b) To eliminate all risks health codes
c) To avoid all exposures to specific sectors c) Formulation of policies for rehabilitation
d) To evenly spread exposures over various d) Credit ratings and credit scoring
sectors and retain likely losses within
tolerable limits Answer: b) Classification of the portfolio by
assigning health codes
Answer: d) To evenly spread exposures over
various sectors and retain likely losses within 21) What plays an important role at the micro
tolerable limits level in credit risk management?
a) Elimination of all risks
18) : What is the major focus of the steps b) Periodic reviews of loan policies
taken at the macro level in credit risk c) Credit ratings and credit scoring
management? d) Formulation of policies for recovery
a) Maximizing market risks
b) Minimizing credit risk Answer: c) Credit ratings and credit scoring
c) Eliminating operational risks
d) Avoiding exposure to specific sectors 22) How can a bank disperse/transfer risk in
large value accounts at the micro level?
Answer: b) Minimizing credit risk a) By avoiding large value accounts
b) Through periodic reviews of loan policies
19) What is the purpose of periodically c) By resorting to consortium/multiple
reviewing loan policies at the macro level in banking and using derivatives like credit
credit risk management? default swaps
a) To eliminate all risks d) By maximizing operational efficiency
b) To classify the portfolio by assigning health
codes to each account Answer: c) By resorting to
c) To formulate policies for rehabilitation, consortium/multiple banking and using
compromise, recovery, and write-off derivatives like credit default swaps
d) To maximize operational efficiency

Answer: c) To formulate policies for

rehabilitation, compromise, recovery, and
write-off
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23) What determines the level of credit risk in a) To determine the size of the loan
each loan proposal? b) To help in macro evaluation of the total
a) The unique features of the proposal credit portfolio
b) The size of the loan c) To eliminate all risks
c) The overall market conditions d) To decide about accepting, rejecting, or
d) The financial history of the borrower accepting with modifications/special
covenants
Answer: a) The unique features of the
proposal Answer: d) To decide about accepting,
rejecting, or accepting with
24) Why may two similar projects with modifications/special covenants
different promoters have different credit
risks? 27) What is the primary purpose of using
a) Due to differences in the size of the credit ratings in the banking context?
projects a) To eliminate all risks
b) Because of variations in the level of credit b) To assess the financial history of the
risk involved borrower
c) Based on the overall market conditions c) For assessing provisioning requirements
d) Regardless of the unique features of the and as a decision-making tool for reviewing
projects the loan policy
d) To determine the size of the loan
Answer: b) Because of variations in the level
of credit risk involved Answer: c) For assessing provisioning
requirements and as a decision-making tool
25) What is one of the objectives of for reviewing the loan policy
measuring and quantifying risk through credit
ratings? 28) Why did most banks in India set up their
a) To eliminate all risks own credit rating models in the past?
b) To determine the size of the loan a) Because rating agencies were well-
c) To help in macro evaluation of the total equipped
credit portfolio b) Due to government regulations
d) To assess the financial history of the c) Lack of confidence in external rating
borrower agencies
d) To eliminate all risks
Answer: c) To help in macro evaluation of
the total credit portfolio Answer: c) Lack of confidence in external
26) How does credit rating assist in the rating agencies
decision-making process for a credit proposal?
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29) How have rating agencies gained the b) Financial statements analysis and
confidence of banks in recent years? business/project risks
a) By providing ratings for all types of loans c) Promoters/Management aspects and the
b) By eliminating all risks in the credit securities available
portfolio d) All of the above
c) Through experience gained over the years
d) By setting up their own credit rating models Answer: d) All of the above
(Promoters/Management aspects and the
Answer: c) Through experience gained over securities available; Financial aspects based
the years on analysis of financial statements;
Business/project risks)
30) : Which of the following is NOT mentioned
as one of the rating agencies in the context of 33) How is the risk rating of a proposal
credit ratings for banks? determined in a bank's rating model?
a) CARE a) By eliminating all risks
b) ICRA b) By reviewing the ratings at irregular
c) CRISIL intervals
d) RBI c) By summing up scores given for different
perceived risks
Answer: d) RBI d) By maintaining a constant rating

31) What forms the basis for deciding the risk Answer: c) By summing up scores given for
rating of a credit proposal in a bank's rating different perceived risks
model?
a) Financial statements analysis 34) : Why is there a need to review the ratings
b) Scores given for different perceived risks of a borrower at regular intervals?
with allotted weightages a) To eliminate all risks
c) Elimination of all risks b) To maintain a constant rating
d) Promoters/Management aspects c) To upgrade, downgrade, or maintain the
rating based on the dynamic market scenario
Answer: b) Scores given for different d) To eliminate the need for credit ratings
perceived risks with allotted weightages
Answer: c) To upgrade, downgrade, or
32) What are the broad categories of risk maintain the rating based on the dynamic
areas that are usually scored in a bank's rating market scenario
model?
a) Elimination of all risks
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35) What advice has RBI provided to banks a) Ignore project delays and cost overruns
regarding credit appraisal reports? b) Include project delays and cost overruns in
a) Banks should eliminate the need for credit sensitivity tests/scenario analysis
appraisal reports c) Eliminate all infrastructure projects
b) Banks should rely solely on in-house d) Rely solely on credit appraisal reports
consultants of the borrowing entity prepared by outside consultants
c) Lenders should carry out independent and
objective credit appraisal and avoid Answer: b) Include project delays and cost
dependence on outside consultants overruns in sensitivity tests/scenario analysis
d) Banks should use credit appraisal reports
without any scrutiny 39) In the context of Willful Defaulters and
monitoring the end use of funds, what does
Answer: c) Lenders should carry out RBI recommend regarding certification from
independent and objective credit appraisal the borrower's auditors?
and avoid dependence on outside consultants a) Lenders should rely on the certification
given by borrower's auditors.
36) What specific type of analysis does RBI
recommend for infrastructure projects, b) Lenders may consider engaging their own
especially regarding potential risks? auditors for certification without a separate
a) Credit appraisal analysis mandate.
b) Sensitivity tests/scenario analysis c) Lenders should award a separate mandate
c) Elimination of risks to the auditors for certification regarding
d) Financial statements analysis diversion/siphoning of funds.
d) Lenders are not required to seek any
Answer: b) Sensitivity tests/scenario analysis certification from the borrower's auditors.

37) Why does RBI advise banks to carry out Answer: c) Lenders should award a separate
sensitivity tests/scenario analysis for mandate to the auditors for certification
infrastructure projects? regarding diversion/siphoning of funds.
a) To avoid infrastructure projects altogether
b) To minimize credit risk
c) To eliminate cost overruns
d) To eliminate project delays

Answer: b) To minimize credit risk

38) According to RBI guidelines, what is the
recommendation for infrastructure projects
regarding project delays and cost overruns?
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40) In addition to the RBI guidelines, what b) CERSAI is not involved in the registration of
does the advice to banks suggest in order to mortgages.
ensure proper end-use of funds and prevent c) CERSAI is used for the registration of
diversion/siphoning of funds by the mortgages at the state level.
borrowers? d) CERSAI is used for the registration of
a) Banks should rely solely on borrower's equitable mortgages.
auditors for certification.
b) Banks are not advised to engage their own Answer: b) CERSAI is generally used to
auditors for certification purposes. register equitable mortgages.
c) Banks may consider engaging their own
auditors for specific certification without a 43) What is the government mandate
separate mandate. regarding the registration of all types of
d) Banks should avoid any certification related mortgages with CERSAI?
to fund diversion. a) It is optional for banks to register
mortgages with CERSAI.
Answer: c) Banks may consider engaging b) Banks should register only certain types of
their own auditors for specific certification mortgages with CERSAI.
purpose without relying on certification given c) The government mandate requires banks to
by borrower's auditors. strictly follow the registration of all types of
mortgages with CERSAI.
41) What is the current practice for the d) Registration with CERSAI is only required
registration of mortgages, especially equitable for public sector banks.
mortgages?
a) Registration is not mandatory for Answer: c) The government mandate
mortgages. requires banks to strictly follow the
b) Registration is done at the state level. registration of all types of mortgages with
c) Registration is done at the district level. CERSAI.
d) Registration is done with the Reserve Bank
of India.

Answer: c) Registration of mortgages,

especially equitable mortgages, is done at the
district level.

42) What is the role of CERSAI in the

registration of mortgages?
a) CERSAI is used for the registration of
mortgages at the district level.
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44) According to RBI guidelines on Willful Answer: c) Banks may consider engaging
Defaulters, what action should lenders take if their own auditors for specific certification
they wish to obtain a specific certification purpose without relying on certification given
from the borrowers' auditors regarding by borrower's auditors.
diversion/siphoning of funds?
46) What is the current practice for the
a) Rely on the certification provided by the registration of mortgages, particularly
borrower's auditors without any additional equitable mortgages?
steps.
a) Mortgages are not required to be
b) Request the certification directly from the registered.
borrowers without involving auditors. b) Mortgages are registered at the state level.
c) Mortgages are registered at the district
c) Award a separate mandate to the auditors level.
for the certification purpose.
d) Mortgages are registered with the Reserve
d) Engage the lenders' own auditors for Bank of India.
certification without any separate mandate.
Answer: c) Mortgages are registered at the
Answer: c) Award a separate mandate to the district level.
auditors for the certification purpose.
47) How is the Central Registry of
45) In the context of ensuring proper end-use Securitization Asset Reconstruction and
of funds and preventing diversion/siphoning, Security Interest of India (CERSAI) commonly
what advice is given to banks in addition to utilized in the registration process?
the RBI guidelines?
a) CERSAI is used for the registration of
a) Banks should solely rely on borrower's mortgages at the state level.
auditors for certification. b) CERSAI is not involved in the registration of
b) Banks should avoid engaging their own mortgages.
auditors for certification. c) CERSAI is used for the registration of
c) Banks may consider engaging their own mortgages at the district level.
auditors for specific certification purpose d) CERSAI is used exclusively for the
without relying on certification given by registration of commercial mortgages.
borrower's auditors.
d) Banks are nt required to obtain any Answer: c) CERSAI is generally used to
certification related to fund diversion. register equitable mortgages.
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48) What does the government mandate a) Facilitating borrowers in obtaining multiple
instruct regarding the registration of all types loans.
of mortgages with CERSAI?
b) Reducing the paperwork involved in the
a) Banks have the option to register loan application process.
mortgages with CERSAI.
c) Arresting the accumulation of fresh Non-
b) Only specific types of mortgages need to be Performing Assets (NPAs) in the banking
registered with CERSAI. system.

c) The government mandate requires strict d) Enhancing the profitability of lending

adherence to registering all types of institutions.
mortgages with CERSAI.
Answer: c) Arresting the accumulation of
d) Registration with CERSAI is mandatory only fresh Non-Performing Assets (NPAs) in the
for private banks. banking system.

Answer: c) The government mandate 51) Why is an efficient database system

requires banks to strictly follow the considered imperative in the context of a
registration of all types of mortgages with credit information system?
CERSAI.
a) To provide borrowers with more
49) Why was the need for a credit information convenient access to their credit information.
system felt?
b) To enhance the marketing strategies of
a) To facilitate faster loan approvals. credit institutions.
b) To alert banks and financial institutions
against borrowers with a history of default. c) To streamline the loan application process
c) To streamline internal communication for borrowers.
within lending institutions.
d) To reduce interest rates on loans. d) To ensure an adequate, comprehensive,
and reliable information system on
Answer: b) To alert banks and financial borrowers.
institutions against borrowers with a history
of default. Answer: d) To ensure an adequate,
50) What is the primary goal of implementing comprehensive, and reliable information
a credit information system? system on borrowers.
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52) Who felt the keen need for an efficient a) Punjab National Bank
credit information system?
b) HDFC
a) Borrowers seeking loans.
c) ICICI Bank
b) Reserve Bank/Government and credit
institutions. d) Axis Bank

c) Financial analysts. Answer: b) HDFC

d) Non-banking financial institutions. 55) How many Credit Information Companies

(CICs) are presently operational in India?
Answer: b) Reserve Bank/Government and
credit institutions. a) 2

53) Who recommended the establishment of b) 3

a Credit Information Bureau (CIB) with equity
participation from commercial banks, c) 4
Financial Institutions (FIs), and NBFCs
registered with the Reserve Bank? d) 5

a) State Bank of India Answer: c) 4

b) Working Group chaired by Shri N.H. 56) When was the Credit Information
Siddiqui Companies (Regulation) Act, 2005 passed by
Parliament?
c) Reserve Bank of India
a) January 2001
d) Parliament of India
b) May 2005
Answer: b) Working Group chaired by Shri
N.H. Siddiqui c) December 2001

54) In collaboration with which financial d) September 2005

institution was Credit Information Bureau
(India) Ltd., later changed to Trans Union CIBIL Answer: b) May 2005
Limited, set up in January 2001?
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57) How frequently are Credit Information c) Rs. 7,500 each

Companies (CICs) and Credit Institutions (CIs)
required to update the credit information d) Rs. 10,000 each
collected/maintained by them?
Answer: b) Rs. 5,000 each
a) Quarterly
60) Prior to the regulatory changes, what
b) Annually information related to Suit filed accounts of
Willful Defaulters (Rs. 25 lac and above) were
c) Monthly or at shorter intervals credit institutions required to submit to Credit
Information Companies (CICs)?
d) Biannually
a) Only confidential information
Answer: c) Monthly or at shorter intervals
b) List of non-suit filed accounts
58) What is the maximum one-time
membership fee that CICs can charge Credit c) List of suit filed accounts
Institutions (CIs) for becoming their
members? d) Both suit filed and non-suit filed accounts

a) Rs. 5,000 Answer: c) List of suit filed accounts

b) Rs. 7,500 61) How was the information on non-suit filed

accounts of Willful Defaulters (Rs. 25 lac and
c) Rs. 10,000 above) disseminated before the regulatory
changes?
d) Rs. 15,000
a) Displayed on CICs' websites
Answer: c) Rs. 10,000
b) Shared confidentially among banks and FIs
59) According to the regulations, what is the by RBI
cap on annual fees charged by CICs to Credit
Institutions (CIs)? c) Published in newspapers

a) Rs. 2,500 each d) Shared with the general public

b) Rs. 5,000 each Answer: b) Shared confidentially among

banks and FIs by RBI
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62) What is the primary purpose of the b) Crop loans

Central Repository of Information on Large
Credits (CRILC) established by the RBI? c) Personal loans

a) To manage currency circulation d) Business loans

b) To collect, store, and disseminate credit Answer: b) Crop loans

data to lenders
65) Despite the exemption for crop loans,
c) To regulate interest rates on loans what does the guideline suggest banks should
continue to report to CRILC?
d) To facilitate international financial
transactions a) Outstanding credit card balances

Answer: b) To collect, store, and disseminate b) Outstanding home loan balances

credit data to lenders.
c) Other agriculture loans
63) At what threshold of aggregate fund-
based and non-fund based exposure are d) Outstanding personal loan balances
banks required to report credit information to
CRILC for all their borrowers? Answer: c) Other agriculture loans

a) Rs. 1 crore and above 66) In addition to credit information, what

does RBI guidelines require banks to report to
b) Rs. 3 crore and above CRILC regarding their customers?

c) Rs. 5 crore and above a) Monthly income

d) Rs. 10 crore and above b) Outstanding loan interest rates

Answer: c) Rs. 5 crore and above c) Outstanding current account balance of Rs.
1 crore and above
64) Which category of loans is exempted from
reporting to CRILC, according to the d) Number of credit cards held
guidelines?
Answer: c) Outstanding current account
a) Home loans balance of Rs. 1 crore and above.
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CHAPTER 24-: Restructuring/Rehabilitation and Recovery

1) What does credit default refer to? b) Funds
a) The successful repayment of principal and c) Collateral
interest d) Insurance
b) The inability or unwillingness of a customer to
meet financial commitments Answer: b) Funds
c) The timely repayment of loans
d) The achievement of trading goals 5) What characterizes stressed assets?
a) Successful repayment
Answer: b) The inability or unwillingness of a b) Default has already occurred
customer to meet financial commitments c) Lack of financial commitments
d) Undefined prospects of default
2) In the context of direct lending, what may not
be repaid as per the terms of repayment in the Answer: b) Default has already occurred or
case of credit default? facing a reasonably certain prospect of default
a) Principal amount only
b) Interest amount only 6) Provide an example of a stressed asset
c) Both principal and interest amounts a) Successfully implemented industrial projects
d) Neither principal nor interest amounts b) Ongoing industrial projects
c) Abandoned industrial projects
Answer: c) Both principal and interest amounts d) Industrial projects with undefined prospects

3) Credit default is related to which types of Answer: c) Abandoned industrial projects

transactions?
a) Only lending transactions 7) Despite the repayment terms not yet falling
b) Only trading transactions due, why is a term loan for an abandoned
c) Only financial transactions industrial project considered a stressed asset?
d) Lending, trading, and any financial a) Due to successful repayment
transactions b) Due to the abandonment of the industrial
project
Answer: d) Lending, trading, and any financial c) Due to ongoing implementation
transactions d) Due to undefined prospects

4) In the case of guarantees or letters of credit, Answer: b) Due to the abandonment of the
what may not be forthcoming upon industrial project
crystallization of the liability? 8) How does the Reserve Bank of India (RBI)
a) Additional guarantees classify assets for banks in India?
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a) Performing and Non-performing assets b) After 9 months of being an NPA

b) Standard and Non-standard assets c) After 12 months of being an NPA
c) Current and Non-current assets d) After 15 months of being an NPA
d) Profitable and Non-profitable assets
Answer: c) After 12 months of being an NPA
Answer: a) Performing and Non-performing
assets 13) What does wilful default refer to in the
context of payment obligations?
9) What are the categories of Non-performing a) Unintentional default
assets (NPAs) based on their level of irregularity? b) Intentional default
a) Sub-standard, doubtful, and loss c) Default beyond the borrower's control
b) SMA0, SMA1, and SMA2 d) Default with lender's consent
c) Standard, substandard, and doubtful
d) Performing, sub-performing, and non- Answer: b) Intentional default
performing
14) According to RBI guidelines, when is a default
Answer: b) SMA0, SMA1, and SMA2 considered as wilful?
a) When the borrower defaults due to
10) When does an account become an NPA uncontrollable circumstances
according to RBI directives? b) When the borrower defaults intentionally,
a) After 30 days of irregularity despite having the capacity to honor obligations
b) After 60 days of irregularity c) When the lender approves the default
c) After 90 days of irregularity d) When the borrower defaults and diverts funds
d) After 120 days of irregularity with lender's consent

Answer: c) After 90 days of irregularity Answer: b) When the borrower defaults

intentionally, despite having the capacity to
11) What is the classification of an account that honor obligations
becomes an NPA after 90 days?
a) Standard asset
b) Sub-standard asset
c) Doubtful asset
d) Loss asset

Answer: b) Sub-standard asset

12) Question 5: When is an account classified as
a Doubtful asset?
a) After 6 months of being an NPA
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15) What is one criterion for deeming a wilful Answer: d) When the borrower disposes of
default, as per RBI guidelines? assets without the knowledge of the lender
a) Borrower defaults but has no capacity to
honor obligations 18) What does "diversion of funds" encompass?
b) Borrower defaults and utilizes finance for a) Proper utilization of short-term working
specific purposes capital funds
c) Borrower defaults but diverts funds for other b) Utilization of borrowed funds for sanctioned
purposes purposes
d) Borrower defaults but informs the lender c) Transferring funds to subsidiaries with the
promptly lender's consent
d) Illegitimate routing of funds without lender's
Answer: c) Borrower defaults but diverts funds permission
for other purposes
Answer: d) Illegitimate routing of funds without
16) In the context of wilful default, what does lender's permission
"siphoning off the funds" refer to?
a) Prompt repayment of obligations 19) Which of the following is considered a form
b) Proper utilization of funds of diversion of funds?
c) Diverting funds for specific purposes a) Proper utilization of short-term working
d) Illegitimate diversion of funds for other capital for long-term purposes
purposes b) Borrowed funds deployed for the sanctioned
purposes
Answer: d) Illegitimate diversion of funds for c) Transfer of funds to subsidiaries with prior
other purposes approval of lenders
d) Investment in other companies without
17) In the context of wilful default, when is a approval of lenders
default considered to have occurred related to
movable and immovable assets? Answer: a) Proper utilization of short-term
a) When the borrower promptly informs the working capital for long-term purposes
lender of asset disposal
b) When the borrower disposes of assets with
the lender's knowledge
c) When the borrower disposes of assets for
securing a term loan
d) When the borrower disposes of assets without
the knowledge of the lender
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20) What is the consequence of routing funds 23) Who can lending institutions consider
through any bank other than the lender bank publishing photographs of, according to RBI
without prior permission? instructions?
a) Enhanced credit rating a) All borrowers, irrespective of their default
b) Improved financial health status
c) Violation of lending agreements b) Only non-whole-time directors
d) Increased transparency c) Only those declared as wilful defaulters
following RBI instructions
Answer: c) Violation of lending agreements d) All directors and guarantors of borrower firms

21) How is the term "siphoning off funds" Answer: c) Only those declared as wilful
defined? defaulters following RBI instructions
a) Proper utilization of borrowed funds for
unrelated purposes 24) What condition exempts non-whole-time
b) Utilization of funds for the operations of the directors from being considered as wilful
borrower defaulters?
c) Borrowing funds from banks for financial a) The approval of their Board of Directors
health improvement b) Meeting the special conditions in accordance
d) Diverting funds without impacting the with RBI instructions
financial health of the entity c) Being part of a borrower firm
d) Indiscriminate publishing of their photographs
Answer: a) Proper utilization of borrowed funds
for unrelated purposes Answer: b) Meeting the special conditions in
accordance with RBI instructions
22) Why did the RBI decide on guidelines for
publishing photographs of wilful defaulters? 25) Within what time frame are banks/FIs
a) To encourage lenders to publish photographs required to report information on non-
indiscriminately cooperative borrowers to CRILC?
b) To protect the financial health of the entity a) 7 days
c) To prevent the indiscriminate publishing of b) 14 days
defaulters' photographs c) 21 days
d) To promote transparency in lending d) 30 days
institutions
Answer: c) 21 days
Answer: c) To prevent the indiscriminate
publishing of defaulters' photographs
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26) How is a non-cooperative borrower defined Answer: c) Report information on non-

in the given context? cooperative borrowers to Central Repository of
a) A borrower who engages constructively with Information on Large Credits (CRILC)
the lender
b) A borrower who defaults but provides 29) What is the cutoff limit for classifying
necessary information to the lender borrowers as non-cooperative?
c) A borrower who defaults and cooperates with a) Aggregate fund-based and non-fund-based
lenders in recovery efforts facilities of Rs. 5 crores
d) A borrower who defaults and obstructs b) Aggregate fund-based facilities only
lenders' efforts for recovery c) Non-fund-based facilities only
d) Aggregate facilities of any amount
Answer: d) A borrower who defaults and
obstructs lenders' efforts for recovery Answer: a) Aggregate fund-based and non-fund-
based facilities of Rs. 5 crores
27) What actions can characterize a non-
cooperative borrower? 30) According to RBI instructions, what is the
a) Timely repayment and providing necessary stance on publishing photographs of defaulting
information borrowers, other than wilful defaulters?
b) Denying access to financed assets/collateral
securities a) Lending institutions can publish photographs
c) Engaging constructively with the lender of all defaulting borrowers
d) Facilitating the sale of securities b) Lending institutions can publish photographs
of non-cooperative borrowers
Answer: b) Denying access to financed c) Lending institutions cannot publish
assets/collateral securities photographs of any defaulting borrowers
d) Lending institutions can publish photographs
28) What measures should banks/FIs take of borrowers with special conditions
regarding non-cooperative borrowers?
a) Publish photographs of non-cooperative Answer: c) Lending institutions cannot publish
borrowers photographs of any other defaulting borrowers
b) Engage constructively with non-cooperative
borrowers
c) Report information on non-cooperative
borrowers to CRILC
d) Provide necessary information to non-
cooperative borrowers
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31) How often should the boards of banks/FIs b) A limited role

review the status of non-cooperative borrowers? c) A crucial role
a) Monthly d) An insignificant role
b) Quarterly
c) Half-yearly Answer: c) A crucial role
d) Annually
35) Which step involves the bank exiting from
Answer: c) Half-yearly the stressed asset?
a) Rescheduling/Restructuring
32) What is emphasized regarding credit b) Rehabilitation
defaults? c) Compromise
a) All credit defaults result in loss to the bank d) Exit from the account
b) Credit defaults always lead to full recovery for
the bank Answer: d) Exit from the account
c) Not every credit default necessarily results in
loss to the bank 36) What does the bank consider while
d) Recoveries from credit defaults are formulating a strategy for stressed assets?
guaranteed a) Only legal aspects
b) Only social aspects
Answer: c) Not every credit default necessarily c) Both legal and social aspects
results in loss to the bank d) Neither legal nor social aspects

33) How does the recovery outcome vary for Answer: c) Both legal and social aspects
banks in cases of credit defaults?
a) Recovery is always with no loss 37) What is the last step typically taken by a bank
b) Recovery is always with some loss in the case of a stressed asset?
c) Recovery may be with some loss or in the a) Rehabilitation
worst scenario, there may be no recovery at all b) Legal action
d) Recovery is always with full compensation c) Compromise
d) Exit from the account
Answer: c) Recovery may be with some loss or
in the worst scenario, there may be no recovery Answer: f) Writeoff
at all

34) What role do timely action and an

appropriate strategy play in stressed asset
recovery?
a) No significant role
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38) Question 5: In which step does the bank d) Only when the borrower has repaid the entire
consider legal action for stressed asset recovery? loan
a) Compromise
b) Rescheduling/Restructuring Answer: c) Only in the case of
c) Legal action consortium/multiple banking
d) Rehabilitation
42) Why might a bank find it difficult to exit a
Answer: e) Legal action problematic account in the case of sole banking?
a) Other banks are not interested in taking up
39) What is the bank's first effort in dealing with the account
a stressed asset? b) The borrower refuses to allow the exit
a) Exit from the account c) Legal constraints prevent the exit
b) Rescheduling/Restructuring d) Limited options available for dealing with the
c) Rehabilitation account
d) Compromise
Answer: d) Limited options available for dealing
Answer: a) Exit from the account with the account

40) When is it possible for a bank to exit from an 43) What is the primary action taken by banks if
account showing signs of stress? the default is not wilful?
a) Only in the advanced stages of stress a) Legal action
b) Only when symptoms are detected at an early b) Rescheduling/Restructuring
stage c) Exit from the account
c) Only in the case of consortium/multiple d) Compromise
banking
d) Only when the borrower has repaid the entire Answer: b) Rescheduling/Restructuring
loan
44) According to the RBI definition, when is an
Answer: b) Only when symptoms are detected account considered restructured?
at an early stage a) When the borrower repays the loan in full
b) When the bank grants concessions for
41) In what scenario may other banks take up economic or legal reasons
the share of a bank wanting to exit a stressed c) When the borrower defaults wilfully
account? d) When the borrower demands a loan extension
a) Only in the case of sole banking
b) Only in the advanced stages of stress Answer: b) When the bank grants concessions
c) Only in the case of consortium/multiple for economic or legal reasons
banking
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45) In which situation is rehabilitation a relevant b) To recover dues by offering concessions to the
option for dealing with stressed assets? borrower
a) When the borrower is unwilling to cooperate c) To exit from the account
b) When the default is wilful d) To initiate legal action
c) When business enterprises face adverse
conditions and incur long-term losses Answer: b) To recover dues by offering
d) When other banks are willing to take up the concessions to the borrower
account
49) What influences the decision to offer
Answer: c) When business enterprises face concessions to the borrower in the
adverse conditions and incur long-term losses "Compromise" option?
a) Viability of restructuring
46) When is a manufacturing enterprise b) Availability/realisability of securities,
considered "sick"? enforceability of documents, etc.
a) When there is no erosion in net worth c) Detailed viability study
b) When there is a 25% erosion in net worth d) Exit from the account
c) When there is a 50% erosion in net worth due
to accumulated cash losses Answer: b) Availability/realisability of securities,
d) When the unit has been in commercial enforceability of documents, etc.
production for less than two years
50) When do banks initiate "Legal Action" in the
Answer: c) When there is a 50% erosion in net recovery process for stressed assets?
worth due to accumulated cash losses a) After restructuring
b) After compromise
47) When may banks consider the option of c) When rehabilitation is not viable
"Rehabilitation" for stressed assets? d) When even compromise does not materialize
a) Only when restructuring is not viable
b) After undertaking a detailed viability study Answer: d) When even compromise does not
c) Without considering the results of materialize
restructuring
d) When the borrower refuses to cooperate 51) In the recovery process for government-
sponsored schemes, who assists in the recovery
Answer: b) After undertaking a detailed viability of bank's dues?
study a) Civil Courts
b) Government Machinery
48) What is the purpose of the "Compromise" c) Recovery Officers
option in dealing with stressed assets? d) CFSA
a) To restructure the loan
Answer: c) Recovery Officers
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55) What statutory basis has been conferred on

52) What option do banks have for the recovery Lok Adalats by the Legal Services Authority Act,
of their dues through legal means in the civil 1987?
system? a) Reserve Bank Guidelines
a) Government Machinery b) Commercial Banks' Participation
b) Recovery Officers c) People's Courts
c) Civil Courts d) Debt Recovery Tribunals
d) CFSA
Answer: c) People's Courts
Answer: c) Civil Courts
56) What is the maximum amount for which
53) What observation has the CFSA made about banks can settle disputes through Lok Adalats?
the proceedings in Civil Courts in India? a) Rs. 5 lakh
a) The proceedings are rapid and efficient b) Rs. 10 lakh
b) The proceedings are among the slowest in the c) Rs. 20 lakh
world d) Rs. 50 lakh
c) The proceedings are on par with global
standards Answer: c) Rs. 20 lakh
d) The proceedings are not applicable to the
recovery of dues 57) What is the purpose of Debt Recovery
Tribunals (DRTs)?
Answer: b) The proceedings are among the a) Resolving cases involving amounts up to Rs. 20
slowest in the world lakh
b) Resolving cases involving amounts over Rs.
54) According to the information, what is critical 500 crore
for strengthening market efficiency and c) Settling disputes in Lok Adalats
enhancing commercial confidence in contract d) Expediting the recovery of cases involving
enforcement? amounts over Rs. 20 lakh
a) Slow proceedings in Civil Courts
b) Effective enforcement of creditor rights and Answer: d) Expediting the recovery of cases
insolvency systems involving amounts over Rs. 20 lakh
c) Government-sponsored schemes
d) CFSA recommendations

Answer: b) Effective enforcement of creditor

rights and insolvency systems
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58) According to recent changes, which financial d) They intervene in court proceedings
entities can now file recovery cases in Debt
Recovery Tribunals (DRTs)? Answer: b) They purchase financial assets from
a) Only commercial banks banks/FIs
b) Only non-banking financial institutions
(NBFCs) 62) What guidelines have been issued to ensure
c) Only financial institutions that the process of asset reconstruction
d) NBFCs with assets over Rs. 500 crore proceeds on sound lines?
a) SARFAESI Guidelines
Answer: d) NBFCs with assets over Rs. 500 crore b) Lok Adalat Guidelines
c) Security Interest (Enforcement) Rules, 2002
59) What does the SARFAESI Act, 2002, provide d) Guidelines for Securitization Companies and
for banks and FIs? Reconstruction Companies
a) Legal intervention in recovery processes
b) Secured creditors' authorization to enforce Answer: d) Guidelines for Securitization
securities and recover dues Companies and Reconstruction Companies
c) The establishment of Lok Adalats
d) Restriction on the sale of financial assets 63) What is the initial authorized capital of Asset
Care Enterprise Ltd. (ACE), the asset
Answer: b) Secured creditors' authorization to reconstruction company incorporated by IFCI
enforce securities and recover dues and other banking and FIs in June 2002?
a) Rs. 5 crore
60) According to the SARFAESI Act, how can b) Rs. 10 crore
banks and FIs realize their dues without the c) Rs. 15 crore
intervention of courts or tribunals? d) Rs. 20 crore
a) By participating in Lok Adalats
b) By filing cases in Civil Courts Answer: d) Rs. 20 crore
c) By seeking government intervention
d) By enforcing security interest 64) Which banks have jointly promoted the Asset
Reconstruction Company (India) Ltd. (ARCIL)?
Answer: d) By enforcing security interest a) IFCI and ICICI Bank
b) SBI and ICICI Bank
61) What role do securitization companies (SCs) c) IDBI, ICICI Bank, SBI, and few other banks
and reconstruction companies (RCs) play in the d) IFCI, ICICI Bank, and SBI
SARFAESI Act?
a) They authorize the enforcement of securities Answer: c) IDBI, ICICI Bank, SBI, and few other
b) They purchase financial assets from banks/FIs banks
c) They conduct Lok Adalats
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65) How was the SARFAESI Act amended in Answer: c) File an appeal before the debt
2004? recovery appellate tribunal after depositing 50%
a) To restrict the powers of the Debt Recovery of the amount of debt due
Tribunal
b) To provide borrower's right to make an 68) According to the conditions for SARFAESI
application before the debt recovery tribunal applicability, what is the minimum outstanding
without depositing money amount required for an account to be eligible
c) To increase the authorized capital of asset under SARFAESI?
reconstruction companies a) Rs. 10,000
d) To limit the powers of secured creditors b) Rs. 50,000
c) Rs. 1,00,000
Answer: b) To provide the borrower's right to d) Rs. 5,00,000
make an application before the debt recovery
tribunal without depositing any portion of the Answer: c) Rs. 1,00,000
money due within 45 days of takeover
69) What is one of the conditions for SARFAESI
66) According to the amendment in the not to be applicable?
SARFAESI Act in 2004, how long does the debt a) Not applicable on agriculture land
recovery tribunal have to dispose of the b) Minimum outstanding should be less than Rs.
borrower's application? 1,00,000
a) 30 days c) Security should be charged to the bank
b) 45 days d) Borrower has repaid 80% of the principal
c) 60 days amount
d) 90 days
Answer: a) Not applicable on agriculture land
Answer: c) 60 days
70) According to the SARFAESI Act, when is an
67) What does the SARFAESI Act amendment in account considered applicable under SARFAESI?
2004 enable for any person aggrieved by the a) When the borrower is cooperative
order of the debt recovery tribunal? b) When the outstanding is less than Rs. 1,00,000
a) File an appeal without depositing any amount c) When the account is not an NPA
b) File an appeal before the debt recovery d) When the borrower has repaid 80% of the
tribunal principal amount
c) File an appeal before the debt recovery
appellate tribunal after depositing 50% of the Answer: c) When the account is not an NPA
amount of debt due
d) File an appeal only if the debt recovery
tribunal approves
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71) What does the Insolvency and Bankruptcy 75) Which tribunal is designated for handling
Code, 2016 (IBC) create a single law for? cases related to individuals and partnerships
a) Corporate governance under the Debt Recovery Tribunal (DRT)?
b) Insolvency and bankruptcy a) National Company Law Tribunal
c) Securities and exchange b) Debt Recovery Tribunal
d) Taxation c) District Court
d) High Court
Answer: b) Insolvency and bankruptcy
Answer: b) Debt Recovery Tribunal
72) Who can initiate the insolvency resolution
process according to the IBC? 76) What is the purpose of the National
a) Only the debtor Company Law Tribunal (NCLT)?
b) Only the creditor a) Handling cases related to individuals and
c) Both the debtor and the creditor partnerships
d) The regulator b) Handling cases related to companies and
Limited Liability Partnership firms
Answer: c) Both the debtor and the creditor c) Handling cases related to criminal offenses
d) Handling cases related to taxation
73) For corporates, how long is the initial period
for completing the insolvency resolution process Answer: b) Handling cases related to companies
according to the IBC? and Limited Liability Partnership firms
a) 90 days
b) 120 days 77) When does a bank consider the option of
c) 180 days "Writeoff"?
d) 360 days a) At the beginning of the recovery process
b) When the borrower repays the full amount
Answer: c) 180 days c) When further pursuit of the case is not
expected to yield worthwhile results
74) What is the role of the Insolvency and d) When the borrower declares bankruptcy
Bankruptcy Board of India in the IBC process?
a) Manage the insolvency process Answer: c) When further pursuit of the case is
b) Regulate and oversee the process not expected to yield worthwhile results
c) Control the assets of the debtor
d) Adjudicate insolvency cases

Answer: b) Regulate and oversee the process

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CHAPTER 25-: Resolution of Stressed Assets under Insolvency and

Bankruptcy Code 2016
1) What significant change did the Insolvency a) Judge
and Bankruptcy Code bring to the laws related b) Trustee
to insolvency in the country? c) Resolution Professional
a) Increased complexity in multiple laws d) Debtor
b) Simplification of existing laws
c) Introduction of liquidation for viable Answer: c) Resolution Professional
businesses
d) Prolonging the legal action for recovery 5) To whom is Part II of the Insolvency and
Bankruptcy Code applicable?
Answer: b) Simplification of existing laws a) Only companies
b) Companies, LLPs, and Personal Guarantors
2) Why is the Insolvency and Bankruptcy Code to Corporate Debtors
referred to as a 'Code' rather than an 'Act'? c) Individuals and Partnership Concerns
a) It is a secret set of laws d) Any body incorporated under any law
b) It is a consolidation of amendments to
existing laws Answer: b) Companies, LLPs, and Personal
c) It is a temporary measure Guarantors to Corporate Debtors
d) It is a complex legal document
6) What entities does Part III of the Insolvency
Answer: b) It is a consolidation of and Bankruptcy Code cover?
amendments to existing laws a) Only Individuals
b) Companies and LLPs
3) How is insolvency defined in the context of c) Partnership and Proprietorship Concerns,
the Insolvency and Bankruptcy Code? and Individuals
a) Situation where assets exceed liabilities d) Only Partnership Concerns
b) Situation where liabilities exceed assets
c) Inability to pay debt obligations Answer: c) Partnership and Proprietorship
d) Legal recognition of the insolvency Concerns, and Individuals

Answer: b) Situation where liabilities exceed

assets

4) Who is responsible for selling the property

and discharging obligations to creditors under
the Insolvency and Bankruptcy Code (IBC)?
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7) Which body serves as the regulator under 10) Which entity serves as the Appellate
the Insolvency and Bankruptcy Code? Authority for Corporate Debtors in the
a) Insolvency Professional Agencies insolvency resolution process?
b) Insolvency Professionals a) National Company Law Tribunal (NCLT)
c) Insolvency & Bankruptcy Board of India b) Debt Recovery Tribunals (DRT)
(IBBI) c) National Company Law Appellate Tribunal
d) Information Utilities (NCLAT)
d) Supreme Court
Answer: c) Insolvency & Bankruptcy Board of
India (IBBI) Answer: c) National Company Law Appellate
Tribunal (NCLAT)
8) Who are the primary entities involved in
the insolvency resolution process under the 11) What is the role of Debt Recovery
Insolvency and Bankruptcy Code? Tribunals (DRT) in the insolvency resolution
a) Only Financial Creditors process?
b) The Judiciary and Corporate Debtors a) Adjudicating Authority for Corporate
c) The Creditors, Corporate Debtor, and Debtors
Judiciary b) Adjudicating Authority for individuals and
d) Only the Committee of Creditors partnerships
c) Appellate Authority for Corporate Debtors
Answer: c) The Creditors, Corporate Debtor, d) Supreme Authority
and Judiciary
Answer: b) Adjudicating Authority for
9) What is the role of the National Company individuals and partnerships
Law Tribunal (NCLT) in the insolvency
resolution process? 12) What is the main responsibility of the
a) Adjudicating Authority for individuals and Insolvency and Bankruptcy Board of India
partnerships (IBBI)?
b) Adjudicating Authority for Corporate a) Handling insolvency cases
Debtors b) Regulating both the profession and process
c) Appellate Authority for individuals and of the Insolvency and Bankruptcy Code
partnerships c) Adjudicating insolvency matters
d) Supreme Authority d) Approving bankruptcy orders

Answer: b) Adjudicating Authority for Answer: b) Regulating both the profession

Corporate Debtors and process of the Insolvency and Bankruptcy
Code
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13) Which entities are under the regulatory Answer: b) Adjudicating Authority for
supervision of IBBI? valuation disputes

a) Only Insolvency Professionals 16) What role can an Insolvency Professional

b) Insolvency Professionals, Insolvency (IP) undertake in the resolution process under
Professional Agencies, Insolvency Professional the Insolvency and Bankruptcy Code?
Entities, and Information Utilities a) Only Interim Resolution Professional (IRP)
c) Only Insolvency Professional Entities b) Only Resolution Professional (RP)
d) Only Information Utilities c) Liquidator and/or Bankruptcy Trustee
d) All of the above
Answer: b) Insolvency Professionals,
Insolvency Professional Agencies, Insolvency Answer: d) All of the above
Professional Entities, and Information Utilities
17) How are Insolvency Professionals (IPs)
14) In addition to its role in insolvency licensed or registered to undertake their roles
matters, what other regulatory authority does under the Insolvency and Bankruptcy Code?
IBBI have? a) By the Supreme Court
a) Securities and Exchange Board of India b) By the Ministry of Corporate Affairs
(SEBI) c) By the Securities and Exchange Board of
b) Reserve Bank of India (RBI) India (SEBI)
c) Ministry of Corporate Affairs d) By the Insolvency and Bankruptcy Board of
d) Companies (Registered Valuers and India (IBBI)
Valuation) Rules, 2017
Answer: d) By the Insolvency and Bankruptcy
Answer: d) Companies (Registered Valuers Board of India (IBBI)
and Valuation) Rules, 2017
18) What is the responsibility of an Insolvency
15) What does IBBI act as under the Professional Agency (IPA)?
Companies (Registered Valuers and Valuation) a) Adjudicating insolvency cases
Rules, 2017? b) Promoting the best professional standards
a) Regulatory Authority for Companies Act among Insolvency Professionals (IP)
b) Adjudicating Authority for valuation c) Liquidating assets in insolvency cases
disputes d) Representing debtors in court
c) Valuation Authority for property
transactions Answer: b) Promoting the best professional
d) Authority for development of the legal standards among Insolvency Professionals (IP)
profession
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19) In the context of the Insolvency and Answer: a) Authenticating financial

Bankruptcy Code, what is the role of an IP in information
the end-to-end job?
a) Representing creditors in court 23) Who forms the Committee of Creditors
b) Initiating legal action against debtors (CoC) in the insolvency resolution process?
c) Implementing the IBC from start to finish, a) Interim Resolution Professional
depending on the role b) Insolvency Professional Entities (IPEs)
d) Advising companies on financial matters c) Information Utilities (IUs)
d) Corporate Debtors (CD)
Answer: c) Implementing the IBC from start
to finish, depending on the role Answer: a) Interim Resolution Professional

20) How many Insolvency Professional 24) How is the voting power determined for
Agencies (IPAs)? each financial creditor in the Committee of
a) One Creditors (CoC)?
b) Two a) Equally distributed among all financial
c) Three creditors
d) Four b) Proportional to the exposure to the
corporate debtor
Answer: c) Three c) Proportional to the number of financial
creditors
21) Which of the following is not a mandatory d) Randomly assigned
setup but provides infrastructural support
services to Insolvency Professionals (IPs)? Answer: b) Proportional to the exposure to
a) Insolvency Professional Entities (IPEs) the corporate debtor
b) Information Utilities (IUs)
c) Committee of Creditors (CoC) 25) What is the role of operational creditors in
d) Insolvency Professional Agencies (IPAs) the Committee of Creditors (CoC)?
a) They have a voting power similar to
Answer: a) Insolvency Professional Entities financial creditors
(IPEs) b) They have an observatory role, except in
the absence of financial creditors
22) What is the role of Information Utilities c) They make critical decisions in the CoC
(IUs) in the insolvency process? d) They form a separate committee
a) Authenticating financial information
b) Adjudicating insolvency cases Answer: b) They have an observatory role,
c) Representing creditors in court except in the absence of financial creditors
d) Initiating legal action against debtors
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26) What is the quorum requirement for the

Committee of Creditors (CoC)? Answer: b) CEO of the corporate debtor
a) 25% by value
b) 33% by value 30) What happens to the Board of Directors of
c) 50% by value the corporate debtor upon the appointment
d) 75% by value of the Interim Resolution Professional (IRP)
and the formation of the Committee of
Answer: b) 33% by value Creditors (CoC)?
a) They continue to have control over the
27) What majority is required for critical corporate entity
matters to be passed by the Committee of b) They are replaced by the IRP and CoC
Creditors (CoC)? c) They become advisors to the IRP
a) 51% d) They assume the role of the CoC
b) 60%
c) 66% Answer: b) They are replaced by the IRP and
d) 75% CoC

Answer: c) 66% 31) What is the impact of the Insolvency and

Bankruptcy Code (IBC) on the original
28) What majority is required for the promoters or their related parties during the
withdrawal of an application for resolution resolution process?
under section 12A by the Committee of a) They are given priority in the bidding
Creditors (CoC)? process
a) 51% b) They are allowed to bid for the resolution of
b) 66% the corporate entity
c) 75% c) They are barred from bidding, effectively
d) 90% taking away ownership, control, and
management
Answer: d) 90% d) They automatically become members of the
Committee of Creditors (CoC)
29) What role does the Interim Resolution
Professional (IRP) play in the corporate entity Answer: c) They are barred from bidding,
undergoing resolution under the Insolvency effectively taking away ownership, control,
and Bankruptcy Code (IBC)? and management
a) Legal advisor
b) CEO of the corporate debtor
c) Representative of the original promoters
d) Financial auditor
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32) What phrase is used to describe the c) Non-payment of dues either in full or in part
change brought about by the Insolvency and to any of the creditors
Bankruptcy Code (IBC) in terms of control over d) Violation of environmental regulations
the corporate entity?
a) "Promoters in Power" Answer: c) Non-payment of dues either in full
b) "Creditors in Charge" or in part to any of the creditors
c) "Debtors in Control"
d) "Board of Directors Supremacy" 36) Can the Corporate Insolvency Resolution
Process (CIRP) be initiated only by the
Answer: b) "Creditors in Charge" creditors, or can it also be initiated by the
Corporate Debtor itself?
33) What is the minimum default amount a) Only by the creditors
required for the initiation of the Corporate b) Only by the Corporate Debtor
Insolvency Resolution Process (CIRP)? c) Both by the creditors and the Corporate
a) Rs. 10 lakhs Debtor
b) Rs. 50 lakhs d) Neither by the creditors nor the Corporate
c) Rs. 1 crore Debtor
d) Rs. 5 crores
Answer: c) Both by the creditors and the
Answer: c) Rs. 1 crore Corporate Debtor

34) Who can initiate the Corporate Insolvency 37) Who is responsible for proposing the
Resolution Process (CIRP)? name of an Insolvency Professional (IP) to act
a) Only Financial Creditors as Interim Resolution Professional (IRP) in the
b) Only Operational Creditors Corporate Insolvency Resolution Process
c) Only the Corporate Debtor (CIRP)?
d) Financial Creditors, Operational Creditor, or a) Committee of Creditors (CoC)
the Corporate Debtor b) Operational Creditor (OC)
c) Corporate Debtor (CD)
Answer: d) Financial Creditors, Operational d) National Company Law Tribunal (NCLT)
Creditor, or the Corporate Debtor
Answer: c) Corporate Debtor (CD)
35) How is 'default' defined in the context of
the Corporate Insolvency Resolution Process
(CIRP)?
a) Non-compliance with corporate governance
norms
b) Non-fulfillment of contractual obligations
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38) Is the proposition of an Interim Resolution d) Powers only over operational matters
Professional (IRP) mandatory in the case of an
application by an Operational Creditor (OC)? Answer: c) All powers of the CEO and Board
a) Yes, it is mandatory of Directors of the Corporate Debtor (CD)
b) No, it is optional
c) It depends on the financial condition of the 41) What does the term "Moratorium" signify
Operational Creditor in the context of the Corporate Insolvency
d) Only the National Company Law Tribunal Resolution Process (CIRP)?
(NCLT) can propose an IRP a) A period of intense financial scrutiny
b) A stay on certain legal and recovery actions
Answer: b) No, it is optional against the Corporate Debtor (CD)
c) The final stage of the insolvency process
39) Why is the term 'interim' used for the d) A time limit for the Committee of Creditors
Resolution Professional during the initial (CoC) to make decisions
stages of the Corporate Insolvency Resolution
Process (CIRP)? Answer: b) A stay on certain legal and
a) Because the Resolution Professional is recovery actions against the Corporate Debtor
temporary (CD)
b) Because the decision is subject to approval
by the Committee of Creditors (CoC) 42) What is the significance of the moratorium
c) Because only the CoC can decide who will period declared by the National Company Law
be the regular Resolution Professional Tribunal (NCLT) in the Corporate Insolvency
d) Because the Resolution Professional's Resolution Process (CIRP)?
authority is limited during this stage a) It accelerates the recovery process
b) It allows the CD to continue its regular
Answer: c) Because only the CoC can decide operations without any restrictions
who will be the regular Resolution c) It provides a stay on legal actions, asset
Professional transfers, and other recovery measures
against the CD
40) What powers does the Interim Resolution d) It limits the powers of the Interim
Professional (IRP) have once appointed in the Resolution Professional (IRP)
Corporate Insolvency Resolution Process
(CIRP)? Answer: c) It provides a stay on legal actions,
a) Limited powers over financial matters only asset transfers, and other recovery measures
b) No powers until approved by the against the CD
Committee of Creditors (CoC)
c) All powers of the CEO and Board of
Directors of the Corporate Debtor (CD)
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43) According to the time norms in the of CIRP must be made by the Interim
Corporate Insolvency Resolution Process Resolution Professional (IRP)?
(CIRP), what is the total duration available for a) Within 7 days of appointment
the entire process? b) Within 10 days of admission of CIRP
a) 60 days c) Within 14 days of admission of CIRP
b) 90 days d) Within 21 days of admission of CIRP
c) 120 days
d) 180 days Answer: c) Within 14 days of admission of
CIRP
Answer: d) 180 days
47) Who constitutes the Committee of
44) Who is responsible for making the Public Creditors (CoC) in the Corporate Insolvency
Announcement of the commencement of the Resolution Process (CIRP)?
Corporate Insolvency Resolution Process a) Interim Resolution Professional (IRP)
(CIRP)? b) Operational Creditors
a) Committee of Creditors (CoC) c) Financial Creditors who are not related
b) Corporate Debtor (CD) parties
c) Interim Resolution Professional (IRP) d) National Company Law Tribunal (NCLT)
d) National Company Law Tribunal (NCLT)
Answer: c) Financial Creditors who are not
Answer: c) Interim Resolution Professional related parties
(IRP)
48) Within how many days of its constitution
45) When does the IRP take control of the must the Committee of Creditors (CoC) hold
entire assets and affairs of the corporate its first meeting in the Corporate Insolvency
debtor in the Corporate Insolvency Resolution Resolution Process (CIRP)?
Process (CIRP)? a) 3 days
a) After the completion of the CIRP b) 5 days
b) Three days after the Public Announcement c) 7 days
c) Upon admission of the CIRP by NCLT d) 10 days
d) When the Committee of Creditors (CoC) is
formed Answer: c) 7 days

Answer: c) Upon admission of the CIRP by

NCLT

46) What is the timeframe within which the

Public Announcement of the commencement
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49) If there are no financial creditors (other determined in the Corporate Insolvency
than related parties), how is the Committee of Resolution Process (CIRP)?
Creditors (CoC) constituted? a) Equally distributed among all members
a) Only operational creditors b) Proportional to the operational debt
b) Operational creditors and employees c) Proportional to the financial debt, whether
c) Operational creditors, workmen, and secured or unsecured
employees d) Decided by the National Company Law
d) No CoC is constituted Tribunal (NCLT)

Answer: c) Operational creditors, workmen, Answer: c) Proportional to the financial debt,

and employees whether secured or unsecured
50) What is the minimum majority required
for the CoC to decide on the continuation of 53) Under what conditions can the Corporate
the Interim Resolution Professional (IRP) as Insolvency Resolution Process (CIRP) be
the Resolution Professional (RP) in the first withdrawn?
meeting? a) Anytime during the process
a) 51% b) After the publication of the expression of
b) 60% interest (EoI)
c) 66% c) Before the appointment of the Interim
d) 75% Resolution Professional (IRP)
d) Before the publication of the EoI for
Answer: c) 66% submitting the resolution plan

51) Within how many days of her Answer: d) Before the publication of the EoI
appointment must the Resolution Professional for submitting the resolution plan
(RP) appoint two valuers to determine the fair
value and liquidation value of the Corporate 54) What does EoI stand for in the context of
Debtor (CD)? Corporate Insolvency Resolution Process
a) 3 days (CIRP)?
b) 5 days a) Endorsement of Interest
c) 7 days b) Expression of Interest
d) 10 days c) Execution of Intent
d) Examination of Insolvency
Answer: c) 7 days
Answer: b) Expression of Interest
52) : How is the voting power of each
Committee of Creditors (CoC) member
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55) What does IM stand for in the context of b) To provide comprehensive information to
the Corporate Insolvency Resolution Process the Committee of Creditors (CoC) and
(CIRP)? potential investors
a) Investment Memo c) To outline the legal procedures of the
b) Information Memorandum insolvency process
c) Insolvency Manifesto d) To communicate the decision to liquidate
d) Investigation Manual the Corporate Debtor

Answer: b) Information Memorandum Answer: b) To provide comprehensive

information to the Committee of Creditors
56) Who is responsible for preparing the (CoC) and potential investors
Information Memorandum (IM) in the
Corporate Insolvency Resolution Process 59) What is the purpose of the Evaluation
(CIRP)? Matrix in the Corporate Insolvency Resolution
a) Financial Creditors Process (CIRP)?
b) Operational Creditors a) To calculate the liquidation value of the
c) Corporate Debtor Corporate Debtor
d) Resolution Professional (RP) b) To evaluate the performance of the
Resolution Professional
Answer: d) Resolution Professional (RP) c) To provide a set of criteria for evaluating
57) Which of the following is NOT typically Resolution Plans
included in the Information Memorandum d) To determine the fair value of the assets
(IM) during the Corporate Insolvency
Resolution Process (CIRP)? Answer: c) To provide a set of criteria for
a) List of creditors and their claims evaluating Resolution Plans
b) Audited financial statements for the last
two financial years 60) What does EOI stand for in the context of
c) Marketing strategy of the Corporate Debtor the Corporate Insolvency Resolution Process
d) Guarantees given in relation to debt (CIRP)?

Answer: c) Marketing strategy of the a) Expression of Ineligibility

Corporate Debtor b) Essential Operational Information
c) Expression of Interest
58) What is the purpose of the Information d) Eligibility for Operational Involvement
Memorandum (IM) in the Corporate
Insolvency Resolution Process (CIRP)? Answer: c) Expression of Interest
a) To promote the products/services of the
Corporate Debtor
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61) When is the Expression of Interest (EOI)

typically published in the Corporate Insolvency 64) Who is disqualified as a resolution
Resolution Process (CIRP)? applicant under Section 29A of the Corporate
a) Within 30 days of insolvency Insolvency Resolution Process (CIRP)?
commencement date a) Any individual or entity with an outstanding
b) Not later than the seventy-fifth day from debt
the insolvency commencement date b) A person or a corporate in which the person
c) After the formation of the Committee of is a promoter or has control over management
Creditors (CoC) with an NPA account for at least one year
d) Before the appointment of the Resolution c) Any person who has ever been a director of
Professional a company
d) A person who is disqualified to act as a
Answer: b) Not later than the seventy-fifth director under any law
day from the insolvency commencement date
Answer: b) A person or a corporate in which
62) Who is responsible for publishing the the person is a promoter or has control over
Expression of Interest (EOI) in the Corporate management with an NPA account for at least
Insolvency Resolution Process (CIRP)? one year
a) Committee of Creditors (CoC)
b) Resolution Applicant 65) Under Section 29A, who cannot be a
c) Corporate Debtor resolution applicant in case of a Corporate
d) Resolution Professional (RP) Debtor with preferential, undervalued,
extortionate, or fraudulent transactions?
Answer: d) Resolution Professional (RP) a) Any person with a criminal record
b) A person who has executed a guarantee for
63) What is the role of a Resolution Applicant the Corporate Debtor
in the context of the Corporate Insolvency c) An undischarged insolvent
Resolution Process (CIRP)? d) Any person disqualified to act as a director
a) To conduct the liquidation process under company's Act 2013
b) To submit a resolution plan to the
Resolution Professional Answer: d) Any person disqualified to act as a
c) To assess the eligibility of the Committee of director under company's Act 2013
Creditors (CoC)
d) To prepare the Information Memorandum
(IM)

Answer: b) To submit a resolution plan to the

Resolution Professional
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66) What is the consequence of being a wilful c) Securities Enforcement and Business
defaulter for a resolution applicant under Investments
Section 29A of the Corporate Insolvency d) Society for Economic and Business
Resolution Process (CIRP)? Innovation
a) The applicant is barred from submitting a
resolution plan Answer: a) Securities and Exchange Board of
b) The applicant's resolution plan is given India
priority
c) The applicant is required to pay an 69) What documents are issued to prospective
additional fee resolution applicants by the Resolution
d) The applicant is granted preferential Professional (RP) within five days of receiving
treatment by the Committee of Creditors Expression of Interest (EOI)?
(CoC) a) Copies of Information Memorandum,
evaluation matrix, and a request for resolution
Answer: a) The applicant is barred from plans
submitting a resolution plan b) Evaluation matrix and a request for
resolution plans only
c) Information Memorandum and evaluation
matrix only
67) In which situations does Section 29A of the d) A request for resolution plans only
CIRP disqualify a person from being a
resolution applicant? Answer: a) Copies of Information
a) Only in cases of undischarged insolvency Memorandum, evaluation matrix, and a
b) Only in cases of criminal convictions request for resolution plans
c) In various specified situations, including
criminal convictions, NPA status, and wilful 70) What is the minimum time limit allowable
default to Resolution Applicants (RA) for the
d) Only in cases of guarantee invocation submission of a resolution plan?
a) 14 days
Answer: c) In various specified situations, b) 30 days
including criminal convictions, NPA status, and c) 60 days
wilful default d) 90 days

68) What does SEBI stand for in the context of Answer: b) 30 days
Section 29A of the CIRP?
a) Securities and Exchange Board of India
b) Social and Environmental Business
Initiatives
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71) What does a resolution plan contain in the d) How the plan has prioritized the interests of
context of the Corporate Insolvency shareholders
Resolution Process (CIRP)?
a) Only the amount payable under the plan to Answer: c) How the plan has dealt with the
operational creditors interests of all stakeholders, including financial
b) Only the amount payable under the plan to and operational creditors
financial creditors
c) An action plan for insolvency resolution and 74) What details are required in a resolution
maximization of asset value plan concerning the implementation of any
d) A statement on the corporate debtor's other resolution plan in the past?
annual financial statements a) Details of the financial position of the
resolution applicant
Answer: c) An action plan for insolvency b) Details of the corporate debtor's annual
resolution and maximization of asset value financial statements
c) Details of the resolution applicant's past
72) In a resolution plan, what statements are experience and capabilities
required regarding the amounts payable to d) Details of any failure to implement or
creditors? contribution to the failure of implementation
a) Only the amount payable under the plan to of another resolution plan
operational creditors
b) Only the amount payable under the plan to Answer: d) Details of any failure to
financial creditors implement or contribution to the failure of
c) Statements on amounts payable to implementation of another resolution plan
operational creditors and financial creditors
d) Statements on amounts payable to 75) What does a resolution plan need to
employees and shareholders demonstrate regarding feasibility and
viability?
Answer: c) Statements on amounts payable a) Only financial feasibility
to operational creditors and financial creditors b) Only technical feasibility
c) Both technical and financial feasibility and
73) What aspect must be addressed in a viability
resolution plan concerning the interests of d) Only managerial feasibility
stakeholders?
a) Only the interests of financial creditors Answer: c) Both technical and financial
b) Only the interests of operational creditors feasibility and viability
c) How the plan has dealt with the interests of
all stakeholders, including financial and
operational creditors
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76) What is a required statement in a c) The duration of the plan

resolution plan regarding necessary d) Details of the management and control
approvals? during the plan's term
a) A statement on the resolution applicant's
experience Answer: d) Details of the management and
b) A statement on the financial position of the control during the plan's term
corporate debtor
c) A statement on how the resolution plan 79) Who evaluates each resolution plan to
proposes to obtain necessary approvals and identify the best resolution plan?
the timeline for the same a) Resolution Professional (RP)
d) A statement on the resolution plan's b) Committee of Creditors (CoC)
implementation schedule c) Resolution Applicant
d) Adjudicating Authority
Answer: c) A statement on how the
resolution plan proposes to obtain necessary Answer: b) Committee of Creditors (CoC)
approvals and the timeline for the same
80) What role does the Resolution Applicant
77) In the context of a resolution plan, what play during the evaluation of resolution plans
does the term 'implementation schedule' refer by the CoC?
to? a) Active participant in the evaluation process
a) The financial feasibility of the plan b) Observer, attending meetings where
b) The technical feasibility of the plan resolution plans are considered
c) The timeline for obtaining necessary c) Decision-maker in the selection of the best
approvals and implementing the plan plan
d) The duration of the plan d) Facilitator of the evaluation matrix

Answer: c) The timeline for obtaining Answer: b) Observer, attending meetings

necessary approvals and implementing the where resolution plans are considered
plan

78) What must a resolution plan include

regarding the management and control of the
business of the corporate debtor during its
term?
a) A statement on the resolution applicant's
experience
b) A demonstration of technical and financial
feasibility
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81) What does the Adjudicating Authority 84) When is a liquidation process
order if no resolution plan is received or the automatically initiated under the Insolvency
received plans do not get the required 66% and Bankruptcy Code?
votes from CoC? a) When the Resolution Professional
a) Appointment of a new Resolution recommends it
Professional b) When the Committee of Creditors votes for
b) Extension of the Corporate Insolvency it
Resolution Process c) When the Corporate Insolvency Resolution
c) Approval of the existing resolution plan Process fails
d) Liquidation of the Corporate Debtor with d) When the Adjudicating Authority orders it
appointment of a liquidator
Answer: c) When the Corporate Insolvency
Answer: d) Liquidation of the Corporate Resolution Process fails
Debtor with appointment of a liquidator
85) What can trigger the initiation of the
82) Who issues the order of liquidation of the liquidation process in case of a failed
company? Corporate Insolvency Resolution Process
a) Resolution Professional (RP) (CIRP)?
b) Committee of Creditors (CoC) a) Approval of the Resolution Professional (RP)
c) Resolution Applicant b) Non-compliance with the terms of an
d) Adjudicating Authority approved Resolution Plan
c) Unanimous decision of the stakeholders
Answer: d) Adjudicating Authority d) Extension of the CIRP

83) In the absence of a resolution plan or if Answer: b) Non-compliance with the terms of
the received plans do not meet the required an approved Resolution Plan
criteria, what does the Adjudicating Authority
order? 86) Who can be appointed as the liquidator if
a) Extension of the Corporate Insolvency otherwise not ineligible?
Resolution Process a) Resolution Professional (RP)
b) Appointment of a new Resolution b) Committee of Creditors (CoC)
Professional c) Resolution Applicant
c) Approval of the existing resolution plan d) Adjudicating Authority
d) Liquidation of the Corporate Debtor
Answer: d) Liquidation of the Corporate Answer: a) Resolution Professional (RP)
Debtor
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87) Under what circumstance can creditors Answer: a) One

representing 66% of the outstanding financial
debt resolve to liquidate the corporate 90) What does the Liquidator invite through
debtor? the public announcement within 5 days of her
a) Before the commencement of the appointment?
Corporate Insolvency Resolution Process a) Stakeholder opinions
(CIRP) b) Proposals for revival
b) After the completion of the CIRP c) Proof of claims from CD's stakeholders
c) During the preparation of the Information d) Bids for liquidation
Memorandum (IM)
d) At any time before the preparation of the Answer: c) Proof of claims from CD's
IM stakeholders

Answer: d) At any time before the 91) How should financial creditors submit
preparation of the Information Memorandum their claims during the liquidation process?
(IM) a) In person
b) By post
c) Electronically only
88) What must happen for the RP to be d) In person or by post
appointed as the liquidator?
a) Unanimous decision of the stakeholders Answer: c) Electronically only
b) Approval of the CoC
c) Non-compliance with the terms of an 92) Within what timeframe should
approved Resolution Plan stakeholders submit their claims during the
d) Successful completion of the CIRP liquidation process?
a) 10 days from the liquidator's appointment
Answer: b) Approval of the CoC b) 15 days from the liquidator's appointment
c) 5 days from the liquidator's appointment
89) What is the minimum requirement for the d) 30 days from the liquidator's appointment
number of language newspapers in which the
Liquidator must make a public announcement Answer: The exact timeframe is not provided
of the CD's liquidation? in the text.
a) One
b) Two (English and Hindi)
c) Three (English, Hindi, and regional
language)
d) Four (English and three regional languages)
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93) What must claimants update if they had b) Within 45 days from the liquidation
submitted a claim during the corporate commencement date
insolvency resolution process? c) Within 60 days from the liquidation
a) Amount of the claim commencement date
b) Interest or admissible costs, if any d) Within 90 days from the liquidation
c) Proof of their identity commencement date
d) Claim status
Answer: c) Within 60 days from the
Answer: b) Interest or admissible costs, if any liquidation commencement date
94) What is the purpose of preparing a list of
stakeholders by the liquidator? 97) What matters does the stakeholders'
a) To determine the liquidation value consultation committee advise the liquidator
b) To classify stakeholders based on their on?
importance a. Matters related to the appointment of
c) To assess the financial health of the professionals and their remuneration.
corporate debtor b. Matters related to the sale, including the
d) To provide information on admitted claims, manner of sale, pre-bid qualifications, reserve
secured or unsecured debts, details of price, amount of earnest money deposit, and
stakeholders, and proofs rejected marketing strategy.
c. Reviewing the decision(s) taken by the
Answer: d) To provide information on liquidator prior to the constitution of the
admitted claims, secured or unsecured debts, consultation committee.
details of stakeholders, and proofs rejected d. All of the above.

95) Within how many days should the Answer: d) All of the above
liquidator file the list of stakeholders with the
Adjudicating Authority? 98) What does Section 52 of the liquidation
a) 30 days process allow the secured creditor to do?
b) 45 days a) Give up its security interest and recover the
c) 60 days amount from the sale of assets by the
d) 90 days liquidator.
b) Recover its dues by making its own efforts
Answer: b) 45 days using the secured asset.
c) Both (a) and (b).
96) When does the liquidator constitute a d) None of the above.
stakeholders' consultation committee?
a) Within 30 days from the liquidation Answer: c) Both (a) and (b).
commencement date
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99) How many representatives are allowed for a) 50%

secured financial creditors who have b) 60%
relinquished their security interests when c) 66%
their claims admitted during the liquidation d) 75%
process are less than 50% of the liquidation
value? Answer: c) 66%
a) Maximum 2
b) Maximum 4 103) Is it mandatory for the liquidator to
c) Maximum 1 follow the advice of the consultation
d) None committee?
a) Yes
Answer: a) Maximum 2 b) No
c) Only if the advice is legally binding
100) In the consultation committee, how d) Only if the liquidator agrees
many representatives are allowed for
unsecured financial creditors when their Answer: b) No
claims admitted during the liquidation process
are less than 25% of the liquidation value? 104) If the liquidator decides differently from
a) Maximum 1 the advice of the consultation committee,
b) Maximum 2 what must she do?
c) Maximum 4 a) Ignore the advice
d) None b) Document the reasons in writing and
mention it in the next progress report
Answer: a) Maximum 1 c) Seek legal action against the committee
d) Both (a) and (b)
101) How many representatives are allowed
for shareholders or partners in the Answer: b) Document the reasons in writing
consultation committee? and mention it in the next progress report
a) 1
b) 2 105) What is the liquidator required to form
c) 3 for the purposes of liquidation?
d) None a) Consultation Committee
b) Resolution Plan
Answer: a) 1 c) Liquidation Estate
d) Stakeholder List
102) What is the minimum percentage of
representatives of the consultation committee Answer: c) Liquidation Estate
required to advise the liquidator?
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106) What does the liquidation estate c) 30 days

comprise? d) 21 days
a) Only tangible assets
b) Only intangible assets Answer: b) 7 days
c) Both tangible and intangible assets
d) Only assets in possession of the liquidator 110) What is the purpose of the Preliminary
Report submitted by the liquidator?
Answer: c) Both tangible and intangible assets a) To evaluate the assets of the CD
b) To detail the capital structure of the CD
107) What is one of the powers and duties of c) To distribute proceeds to creditors
the liquidator in relation to the assets and d) To facilitate the liquidation process
properties of the Corporate Debtor (CD)?
a) To sell the assets without evaluation Answer: b) To detail the capital structure of
b) To hide the assets from creditors the CD
c) To keep the assets in possession of the CD
d) To acquire custody and control over the 111) When is the Preliminary Report
assets submitted by the liquidator to the
Adjudicating Authority?
Answer: d) To acquire custody and control a) Within 30 days from the liquidation
over the assets commencement date
b) Within 45 days from the liquidation
108) What is one of the responsibilities of the commencement date
liquidator in conducting the business of the CD c) Within 60 days from the liquidation
for its beneficial liquidation? commencement date
a) To expand the business operations d) Within 75 days from the liquidation
b) To maximize profits for the shareholders commencement date
c) To minimize creditor claims
d) To conduct the business in a way that Answer: d) Within 75 days from the
facilitates liquidation liquidation commencement date

Answer: d) To conduct the business in a way 112) What type of information does the
that facilitates liquidation Preliminary Report include?
a) Progress reports
109) What timeframe does the liquidator have b) Asset memorandum
to provide information about the CD when c) Capital structure of the CD
required by creditors? d) Final distribution plan
a) 14 days
b) 7 days Answer: c) Capital structure of the CD
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113) What is one of the reports that the b) Value of assets on a standalone basis
liquidator is required to submit to the NCLT? c) Final distribution plan
a) Business expansion plan d) Business expansion plan
b) Minutes of consultation with stakeholders
c) Marketing strategy for asset sale Answer: b) Value of assets on a standalone
d) Inventory of office furniture basis

Answer: b) Minutes of consultation with 117) In addition to the value of the asset, what
stakeholders does the Asset Memorandum include?
a) Manner of sale and reasons
114) What is the purpose of the Asset b) Expected amount of realization from sale
Memorandum prepared by the liquidator? c) Estimates of assets and liabilities
a) To evaluate the capital structure of the CD d) Proposed plan of action
b) To detail the estimated liquidation costs
c) To provide details of assets intended for Answer: a) Manner of sale and reasons
sale
d) To distribute proceeds to creditors 118) When is the first Progress Report
required to be submitted by the liquidator
Answer: c) To provide details of assets after her appointment?
intended for sale a) Within 30 days after the end of the quarter
b) Within 15 days after the end of the quarter
115) When is the liquidator required to c) Within 60 days after the end of the quarter
prepare the Asset Memorandum? d) Within 90 days after the end of the quarter
a) Within 30 days from the liquidation
commencement date Answer: b) Within 15 days after the end of
b) Within 45 days from the liquidation the quarter
commencement date
c) Within 60 days from the liquidation 119) How often should subsequent Progress
commencement date Reports be submitted by the liquidator?
d) Within 75 days from the liquidation a) Monthly
commencement date b) Quarterly
c) Annually
Answer: d) Within 75 days from the d) Biannually
liquidation commencement date
Answer: b) Quarterly
116) What information does the Asset
Memorandum provide about the assets?
a) Progress reports
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120) What is the timeline for submitting a Answer: b) Audited accounts of the
Progress Report if a liquidator ceases to act liquidator's receipts and payments for the
during the liquidation process? financial year
a) Within 30 days of cessation 123) What category of transactions involves
b) Within 45 days of cessation the borrower deliberately entering into a
c) Within 60 days of cessation transaction to defraud a person benefited
d) Within 15 days of cessation from a creditor?
a) Preferential transactions
Answer: d) Within 15 days of cessation b) Undervalued transactions
c) Fraudulent transactions
121) What information is required to be d) Extortionate transactions
included in the Progress Reports related to
liquidation for each quarter? Answer: c) Fraudulent transactions
a) Only appointment and cessation details of
professionals 124) If a transaction is determined to be an
b) Progress in liquidation, settlement of list of avoidance transaction, what power does the
stakeholders, and details of distribution NCLT have?
c) Only details of fee or remuneration a) Only to reverse the transfer of assets
d) Detailed account of receipts, but not b) Only to release or discharge the security
payments interest
c) To restore the status quo ante, among other
Answer: b) Progress in liquidation, settlement powers
of list of stakeholders, and details of d) To modify the terms of such transactions
distribution
Answer: c) To restore the status quo ante,
122) What does the Progress Report for the among other powers
fourth quarter of the financial year need to 125) How is the Liquidation Value of a
enclose? corporate debtor determined?
a) Detailed account of receipts and payments a) The resolution professional's estimate alone
b) Audited accounts of the liquidator's b) The average of estimates provided by two
receipts and payments for the financial year registered valuers
c) Only information on material changes in c) The highest estimate provided by registered
expected realization valuers
d) Statement indicating any ongoing property d) The lowest estimate provided by registered
sales valuers

Answer: b) The average of estimates provided

by two registered valuers
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126) What happens if the estimates provided 129) When it comes to the distribution of
by the two registered valuers are significantly liquidation value, what is the priority for debts
different according to the resolution owed to unsecured creditors?
professional? a) Fourth priority
a) The resolution professional makes the final b) Fifth priority
decision. c) Sixth priority
b) Another registered valuer is appointed, and d) Seventh priority
their estimate is considered.
c) The Liquidation Value is determined solely Answer: a) Fourth priority
based on the estimates of the two valuers.
d) The Liquidation Value is left undetermined. 130) What options does a secured creditor
have during liquidation proceedings?
Answer: b) Another registered valuer is a) Only opt to stand outside the liquidation
appointed, and their estimate is considered. process
b) Only opt to relinquish her security interest
127) What is the first priority for distribution c) Either opt to stand outside the liquidation
of the liquidation value realized in the event of process or join the liquidation process
liquidation? d) Can neither opt to stand outside nor join
a) Financial debts owed to unsecured creditors the liquidation process
b) Debts owed to the Governments
c) The insolvency resolution process costs and Answer: c) Either opt to stand outside the
the liquidation costs liquidation process or join the liquidation
d) Wages and unpaid dues owed to employees process

Answer: c) The insolvency resolution process

costs and the liquidation costs in full 131) What does a secured creditor need to
consider when deciding whether to relinquish
128) In the distribution of liquidation value, security to the liquidator or to stand out of the
what is the priority given to debts owed to liquidation process?
secured creditors? a) Only pros
a) Second priority b) Only cons
b) Third priority c) Only the priority of recovery
c) Fourth priority d) Consider all pros and cons
d) Fifth priority
Answer: d) Consider all pros and cons
Answer: b) Third priority
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132) In the liquidation process, if a secured Answer: b) Liquidator's actions are

creditor opts to enforce her security interests, transparent and less prone to legal challenges
what can she do additionally under section
53? 135) What challenge may a secured creditor
a) Join the liquidation process at a higher face if she opts out of the liquidation process
priority and chooses SARFAESI or DRT route?
b) Recover any balance amounts at a much a) Liquidator's resistance to the decision
higher priority b) Faster resolution
c) Join the liquidation process at a much lower c) Lower costs
priority d) Borrower's efforts to protect ownership
d) Opt out of the liquidation process and possession

Answer: c) Join the liquidation process at a Answer: d) Borrower's efforts to protect

much lower priority ownership and possession

136) What obligation does a bank have even if

133) What is one of the advantages of the it opts out of the liquidation process?
liquidation process over SARFAESI or DRT a) No obligation
proceedings for a secured creditor? b) Pro-rata liquidation costs and workmen's
a) Liquidator has limited flexibility and judicial dues
powers c) Full liquidation costs
b) Liquidator's actions are not time-bound d) No obligation for workmen's dues
c) Liquidator's actions are prone to legal
challenges Answer: b) Pro-rata liquidation costs and
d) Liquidator has a wider span of flexibility and workmen's dues
judicial powers
137) If a secured creditor relinquishes her
Answer: d) Liquidator has a wider span of security, how does she rank in priority during
flexibility and judicial powers liquidation?
a) First priority
134) Why is the liquidation process considered b) Second priority after liquidation costs
faster than DRT proceedings or SARFAESI? c) Pari-passu with liquidation costs and
a) Liquidator's actions are not time-bound workmen
b) Liquidator's actions are transparent and less d) Last priority
prone to legal challenges
c) DRT proceedings are quicker Answer: c) Pari-passu with liquidation costs
d) SARFAESI is more efficient and workmen
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138) If a secured creditor stands outside the 141) In what type of bank account should the
liquidation process and the proceeds from the liquidator deposit all moneys due to the
realization of secured assets are not enough corporate debtor during the liquidation
to repay its debt, how does the unpaid debt process?
rank in priority? a) Personal account of the liquidator
a) First priority b) Any bank account in a scheduled bank
b) Second priority after liquidation costs c) Account in the name of the liquidator
c) Pari-passu with debts owed to the d) Bank account in the name of the corporate
Government debtor followed by 'in liquidation'
d) Last priority
Answer: d) Bank account in the name of the
Answer: c) Pari-passu with debts owed to the corporate debtor followed by 'in liquidation'
Government
142) When should the liquidator deposit the
139) If a secured creditor stands outside the realizations from the assets into the bank
liquidation process and realizes more than the account during the liquidation process?
debt owed from the security, what should be a) Within 7 days
done with the surplus amount? b) Within 10 days
a) Keep it for future use c) Within 15 days
b) Use it to cover liquidation costs d) Without any specific timeframe
c) Tender it to the liquidator
d) Distribute it among shareholders Answer: c) Within 15 days

Answer: c) Tender it to the liquidator 143) What is the maximum amount of cash
that the liquidator is allowed to maintain for
140) In the case of perishable assets or assets meeting liquidation costs without specific
with deteriorating value, how can the permission from the Adjudicating Authority?
liquidator realize the value of the assets? a) ₹50,000
a) Private sale to any interested party b) ₹75,000
b) Private sale without any restrictions c) ₹1,00,000
c) Auction route only d) ₹1,50,000
d) Private sale, but not to related parties or
professionals without NCLT approval Answer: c) ₹1,00,000

Answer: d) Private sale, but not to related

parties or professionals without NCLT
approval
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144) How should payments above ₹5000 be 147) What details are included in the asset
made by the liquidator during the liquidation sale report prepared by the liquidator after
process? the sale of an asset?
a) Cash a) Only the realised value
b) Online banking transactions or cheques b) Only the cost of realisation
drawn against the bank account c) Realised value, cost of realisation, manner
c) Demand drafts and mode of sale, reasons for any shortfall,
d) Money orders person to whom the sale is made, and other
sale details
Answer: b) Online banking transactions or d) Only the reasons for any shortfall in value
cheques drawn against the bank account
Answer: c) Realised value, cost of realisation,
145) When is the liquidator allowed to manner and mode of sale, reasons for any
commence distribution of proceeds from shortfall, person to whom the sale is made,
realization to stakeholders? and other sale details
a) Before filing the list of stakeholders
b) After filing the asset memorandum 148) What is the prescribed timeline for the
c) After filing the list of stakeholders and the completion of the liquidation process by the
asset memorandum liquidator?
d) As soon as the liquidation process begins a) 6 months
b) 1 year
Answer: c) After filing the list of stakeholders c) 2 years
and the asset memorandum d) 3 years

146) Within what timeframe should the Answer: b) 1 year

liquidator distribute the proceeds from
realization to stakeholders? 149) In case the sale process extends beyond
a) 30 days the initial one-year period, how much
b) 60 days additional time may be granted for the
c) 90 days liquidation process?
d) 120 days a) Up to 30 days
b) Up to 60 days
Answer: c) 90 days c) Up to 90 days
d) Up to 120 days

Answer: c) Up to 90 days
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150) If the liquidator fails to complete the c) Seven days after the order for dissolution
liquidation within one year, what must she d) After the RoC deletes the name of the
do? Corporate Debtor from the register

a) Continue with the liquidation without Answer: b) From the date of complete
seeking approval liquidation
b) Apply to the Adjudicating Authority to
continue the liquidation, providing an
explanation and specifying the additional time
required
c) Discontinue the liquidation process
d) Seek approval from the creditors to extend
the timeline

Answer: b) Apply to the Adjudicating

Authority to continue the liquidation,
providing an explanation and specifying the
additional time required

151) What does the liquidator include in the

final report submitted prior to dissolution?
a) Liquidation costs only
b) Explanation of liquidation cost exceeding
the estimated cost, if applicable
c) Assets of the corporate debtor
d) Only the compliance certificate

Answer: b) Explanation of liquidation cost

exceeding the estimated cost, if applicable

153) When does the Corporate Debtor cease

to exist after the order for dissolution is issued
by the Adjudicating Authority?
a) Immediately upon the liquidator's
application
b) From the date of complete liquidation