Attempt CAIIB ABM PYP Quiz & Download Repetitive MCQs PDF

1. What is the primary purpose of risk management in banking?

To increase profits
To improve customer satisfaction
To minimize losses
To expand market share

2. Which of the following is NOT a type of financial risk?

Market risk
Systematic risk
Operational risk
Credit risk

3. Which approach is used to measure market risk?

VaR (Value at Risk)
NPV (Net Present Value)
IRR (Internal Rate of Return)
CAPM (Capital Asset Pricing Model)

4. Operational risk includes risks due to:

Credit default
Market fluctuations
Foreign exchange movements
Human errors and frauds

5. The Basel framework primarily addresses which type of risk?

Operational risk
Credit risk
All of the above
Market risk

6. The Weighted Average Cost of Capital (WACC) is calculated by:

Adding equity and debt capital costs
Taking a weighted average of equity and debt capital costs
Using only equity capital costs
Using only debt capital costs

7. What is the primary objective of capital budgeting?

Managing operational cash flow
Managing day-to-day financial operations
Selecting long-term investment projects
Reducing tax liabilities

8. Which formula is used to calculate NPV (Net Present Value)?

Sum of discounted cash flows – Initial investment
Future value – Present value
IRR × Investment cost
WACC × Capital expenditure

9. The Payback Period measures:

The profitability of a project
The rate of return of a project
The cost of capital
The time required to recover the initial investment

10. IRR is the discount rate at which:

Payback period equals zero
NPV equals zero
Cash inflows are maximized
Profitability index equals one

11. Which of the following is NOT part of credit risk assessment?

Market fluctuations
Borrower’s repayment capacity
Borrower’s income sources
Borrower’s credit history

12. Which financial ratio is important for evaluating a borrower’s liquidity?

Debt-to-equity ratio
Return on equity
Current ratio
Gross profit margin

13. What is a primary security in loan agreements?

A collateral asset
The main asset being financed
A legal document
A co-guarantor’s asset

14. The concept of 5Cs of credit includes all EXCEPT:

Capacity
Character
Collateral
Currency

15. The Debt Service Coverage Ratio (DSCR) measures:

Profitability of a project
Operational efficiency of a business
Cash reserves of a bank
Debt repayment ability of a company

16. What is the main function of monetary policy?

To increase tax revenues
To promote exports
To control inflation and manage liquidity
To regulate foreign investments

17. What does CRR stand for in banking?

Credit Risk Ratio
Cash Reserve Ratio
Current Revenue Ratio
Collateral Risk Ratio

18. Repo rate is:

The rate at which banks borrow from RBI
The rate at which banks lend to RBI
The interest rate on fixed deposits
The rate charged on home loans

19. GDP measures the:

Total imports and exports
Average income of citizens
Inflation rate
Total value of goods and services produced in a country

20. What is fiscal deficit?

The shortfall in tax collection
The difference between GDP and GNP
The excess of government expenditure over revenue
The difference between exports and imports

21. If a project has cash inflows of ₹500,000, ₹600,000, and ₹700,000 for three years and the initial investment is ₹1,200,000, what is the payback period?

2 years
2.5 years
3 years
1.5 years

22. A loan of ₹10,00,000 is given at an interest rate of 12% per annum for 3 years. What will be the total interest paid?

₹2,40,000
₹1,20,000
₹3,60,000
₹6,00,000

23. Calculate the DSCR if Net Operating Income = ₹5,00,000 and Total Debt Servicing = ₹4,00,000.

0.8
1.25
1.5
2.0

24. Which of the following is considered a non-fund-based credit facility?

Cash credit
Term loan
Overdraft
Letter of credit

25. What is the main function of an investment bank?

To manage savings accounts
To provide retail banking services
To underwrite securities and assist in raising capital
To provide short-term loans to businesses

26. In which of the following, a bank’s own funds are used?

Term loans
Advances
Non-fund-based facilities
Securities

27. What is the role of a bank’s treasury?

To monitor the performance of loans
To invest in long-term securities
To manage the bank’s cash reserves
To maintain customer accounts

28. The duration of a letter of credit is determined by:

The bank issuing the credit
The exporter
The importer
Both exporter and importer

29. The main purpose of KYC (Know Your Customer) is to:

Prevent fraud
Ensure customer loyalty
Increase the bank’s profitability
Verify customer identity and assess risk

30. What is the main objective of asset-liability management (ALM) in banks?

Maximizing profits
Managing liquidity and mitigating interest rate risks
Increasing market share
Reducing operational costs

31. Which of the following regulations ensures that banks maintain a minimum level of capital?

Basel III
The Negotiable Instruments Act
The Banking Regulation Act
The Companies Act

32. The Banking Regulation Act governs:

Financial institutions and insurance companies
The operation of cooperative banks only
Commercial banking activities in India
Non-banking financial companies (NBFCs)

33. Under which law can the Reserve Bank of India (RBI) issue directives to commercial banks regarding their operations?

The Reserve Bank of India Act, 1934
The Banking Regulation Act, 1949
The Companies Act, 1956
The Foreign Exchange Management Act (FEMA)

34. What is the maximum period for which a customer can request a “stop payment” order for a cheque under banking regulations?

6 months
1 year
5 years
3 months

35. Which of the following acts governs the issue and transfer of negotiable instruments in India?

The Banking Regulation Act
The Reserve Bank of India Act, 1934
The Companies Act, 2013
The Negotiable Instruments Act, 1881

36. What is the primary function of a mutual fund?

To provide loans to small businesses
To issue debt instruments to the public
To pool money from investors and invest in securities
To offer credit cards to consumers

37. Which of the following is NOT a type of insurance provided by banks?

Life insurance
Land ownership insurance
Health insurance
Asset insurance

38. Which type of loan is used to finance long-term fixed assets, such as machinery or equipment?

Term loan
Working capital loan
Home loan
Cash credit

39. Which of the following is an example of an investment banking service?

Providing personal loans
Managing retirement funds
Offering home loans
Underwriting new issues of shares and bonds

40. Which type of account is typically used by a business to deposit and withdraw money on a daily basis?

Fixed deposit account
Current account
Savings account
Recurring deposit account

41. Which of the following is used to evaluate a company’s profitability?

Gross profit margin
Quick ratio
Debt-to-equity ratio
Current ratio

42. What does a low Current Ratio indicate?

The company has good liquidity
The company may face liquidity problems
The company is highly profitable
The company has high debt

43. The Price to Earnings (P/E) ratio is primarily used to evaluate:

A company’s liquidity
The market value of a company’s shares
A company’s debt levels
A company’s dividend policy

44. A positive Net Present Value (NPV) suggests that:

The project is unprofitable
The project should be rejected
The project has no risk
The project will create value for the company

45. Which of the following ratios is used to determine the efficiency of a company in managing its working capital?

Return on Assets
Return on Equity
Working Capital Turnover Ratio
Earnings Before Interest and Taxes (EBIT)

46. Which technology is used for enabling real-time gross settlement (RTGS) in India?

Blockchain
RTGS
SWIFT
NEFT

47. The process of encryption ensures that:

Customer transactions are processed quickly
Transaction data is secure and protected
Banks can verify the identity of customers
Banks can grant loans faster

48. Which of the following is an example of an e-banking service?

All of the above
ATMs
Internet banking
Mobile banking

49. What is the main advantage of using cloud computing in banking?

Faster loan processing
Higher interest rates
Direct control over customer data
Reduced operational costs and scalable infrastructure

50. Which of the following is a feature of a core banking system?

Allows banks to create financial products
Manages the bank’s investment portfolio
Allows customers to access their accounts from anywhere
Only used for international transactions