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JAIIB Crash Course May 2025 IE and IFS Quiz-3
JAIIB CAIIB Course Quiz – May 2025: The JAIIB exam for May 2025, conducted by IIBF, is fast approaching. To support your preparation, we are providing regular MCQ-based quizzes specifically designed for the JAIIB CAIIB syllabus. These quizzes are structured module-wise and unit-wise to help you cover the entire syllabus systematically. Practicing these quizzes consistently will strengthen your concepts, improve accuracy, and increase your chances of clearing the exam on your first attempt.
Q.1 Which of the following is NOT a characteristic of the Informal Financial System?
(a) Lack of regulations
(b) High transaction costs
(c) Unstructured procedures
(d) Low default rates
Q.2 Which of the following is not a mandatory requirement for setting up a Universal Bank in the private sector in India?
(a) Initial minimum paid-up capital of Rs 500 crores.
(b) Maintaining a minimum net worth of Rs 500 crores at all times.
(c) Achieving priority sector lending targets applicable to scheduled commercial banks.
(d) Opening at least 50% of its branches in unbanked rural areas.
Q.3 What was one of the main reasons for the nationalization of 14 banks in 1969?
(a) Excessive foreign investments in Indian banks leading to loss of financial sovereignty.
(b) High dependence of the economy on private capital markets for credit.
(c) Limited access to banking services for farmers, small-scale industries, and weaker sections.
(d) Surplus liquidity in banks leading to inflationary pressures in the economy.
Q.4 Which of the following was the first Development Financial Institution (DFI) established in India, and in which year?
(a) Industrial Credit and Investment Corporation of India (ICICI), 1955
(b) State Financial Corporation (SFC), 1951
(c) Industrial Finance Corporation of India (IFCI), 1948
(d) Small Industries Development Bank of India (SIDBI), 1990
Q.5 Which of the following statements about early banking in India is correct?
(a) The Bank of Hindustan, established in 1770, was the first formal bank in India but ceased operations in 1832.
(b) General Bank of India, established in 1786, is the oldest surviving bank in India.
(c) The European-controlled banks in India during the 18th century operated without any liability limitations.
(d) Oudh Commercial Bank, established in 1881, remains operational today as part of the Indian banking system.
Q.6 What is the primary objective behind the establishment of Local Area Banks (LABs)?
(a) To promote large-scale corporate investments in rural areas.
(b) To mobilize rural savings and provide local credit to bridge gaps in financial access.
(c) To increase urban banking penetration and international trade financing.
(d) To facilitate large industrial houses in setting up regional banks.
Q.7 Which of the following is NOT one of the four categories of Development Financial Institutions (DFIs) in India?
(a) Development Banks
(b) Specialised Financial Institutions
(c) Commercial Banks
(d) Investment Institutions
Q.8 Which of the following is not a requirement for a bank to be classified as a Scheduled Bank under the Reserve Bank of India Act, 1934?
(a) The bank must have a paid-up capital and raised funds of at least Rs 5 lakhs.
(b) The bank must be included in the Second Schedule of the RBI Act, 1934.
(c) The bank must maintain the Cash Reserve Ratio (CRR) with the RBI as per its regulations.
(d) The bank must be entirely government-owned to qualify as a Scheduled Bank.
Q.9 What was the primary reason for the establishment of ICICI in 1955?
(a) To provide short-term working capital finance to Indian businesses.
(b) To offer underwriting and investment facilities to emerging enterprises, addressing gaps in capital markets.
(c) To regulate and supervise banking activities in India.
(d) To act as India’s central bank and manage monetary policy.
Q.10 Which of the following reforms was NOT a direct recommendation of the Narasimham Committee – I (1991)?
(a) Phased reduction of the Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).
(b) Abolition of the branch licensing policy to give banks operational freedom.
(c) Introduction of Local Area Banks (LABs) to mobilize rural savings.
(d) Implementation of demonetization to curb black money and counterfeit currency
Q.11 What was the key outcome of the 2002 merger of ICICI with ICICI Bank?
(a) ICICI Ltd ceased to exist as a Development Financial Institution, transforming into a universal bank.
(b) ICICI Bank was restructured as a pure-play development financial institution (DFI).
(c) ICICI continued as an independent financial institution alongside ICICI Bank.
(d) ICICI’s merger led to the closure of its international operations and delisting from the New York Stock Exchange.
Q.12 According to the Regional Rural Banks (Amendment) Act, 2015, which of the following statements is incorrect regarding the shareholding structure of a Regional Rural Bank (RRB)?
(a) The authorized share capital of an RRB is Rs. 2000 crore.
(b) The Central Government holds 50% of the issued capital, the State Government 15%, and the Sponsor Bank 35%.
(c) The Central and State Governments must always hold at least 75% of the total paid-up capital.
(d) RRBs can raise share capital from sources other than the Central Government, State Governments, and Sponsor Banks, subject to conditions.
Q.13 Which of the following is not a permissible activity for Payments Banks in India?
(a) Accepting demand deposits in the form of savings and current accounts.
(b) Investing up to 75% of their demand deposit balance in government securities eligible for SLR.
(c) Issuing credit cards to their customers.
(d) Handling third-party products like insurance and mutual fund distribution
Q.14 What was the primary objective behind the establishment of the Industrial Development Bank of India (IDBI) in 1964?
(a) To provide direct financial assistance to small-scale industries only
(b) To act as an apex institution coordinating financial institutions and funding large industrial projects
(c) To function as a commercial bank offering short-term loans to businesses
(d) To replace the Industrial Finance Corporation of India (IFCI) as the primary lender for infrastructure projects
Q.15 What is the minimum paid-up capital requirement for setting up a Payments Bank in India?
(a) ₹500 crore
(b) ₹200 crore
(c) ₹100 crore
(d) ₹50 crore
Q.16 What is the primary role of the Small Industries Development Bank of India (SIDBI)?
(a) Providing long-term loans to large-scale industries for infrastructure development
(b) Promoting, financing, and developing the MSME sector in India
(c) Regulating the banking sector and overseeing financial institutions
(d) Managing foreign investments in Indian industrial projects
Q.17 What is the minimum paid-up equity capital requirement for setting up a Small Finance Bank (SFB) in India, as per the latest guidelines?
(a) ₹100 crore
(b) ₹200 crore
(c) ₹500 crore
(d) ₹50 crore
Q.18 Which of the following is a business activity permitted to be conducted by the Reserve Bank of India (RBI) under Section 17 of the RBI Act?
(a) Acceptance of interest-bearing deposits from the general public.
(b) Granting loans directly to private companies and individuals.
(c) Acceptance of deposits without interest from the Central/State Governments, banks, and local authorities.
(d) Trading in equity shares of private corporations for investment purposes.
Q.19 Under the SIDBI Make in India Soft Loan Fund for MSMEs (SMILE) scheme, what is the minimum loan size for purposes other than equipment finance?
(a) ₹5 lakh
(b) ₹10 lakh
(c) ₹25 lakh
(d) ₹50 lakh
Q.20 Which of the following statements regarding the establishment and evolution of the Reserve Bank of India (RBI) is correct?
(a) The RBI was established in 1933 after the passage of the Reserve Bank Bill in the Legislative Assembly.
(b) The RBI was nationalized immediately after India’s independence in 1947.
(c) The RBI initially functioned as the central bank for both India and Burma but ceased to do so for Burma in 1942.
(d) The RBI was established as a public institution with full government ownership from the outset.
Q.21 According to Section 11 of the Banking Regulation Act, what is the minimum aggregate value of a banking company’s paid-up capital and reserves?
(a) ₹1 lakh
(b) ₹5 lakhs
(c) ₹10 lakhs
(d) ₹50 lakhs
Q.22 What is the primary role of the Export-Import Bank of India (EXIM Bank)?
(a) Financing and promoting foreign trade in India
(b) Providing microfinance to small businesses
(c) Regulating commercial banks in India
(d) Managing India’s foreign exchange reserves
Q.23 Which of the following activities is the Reserve Bank of India (RBI) prohibited from undertaking as per Section 19 of the RBI Act?
(a) Purchasing foreign exchange for managing currency reserves.
(b) Granting loans to commercial banks for liquidity purposes.
(c) Engaging in trade or having a direct interest in any commercial or industrial undertaking.
(d) Accepting deposits from the government without paying interest.
Q.24 Which of the following activities is NOT permitted under Section 6 of the Banking Regulation Act as a business of banking?
(a) Buying, selling, and dealing in bullion and specie
(b) Issuing letters of credit and traveler’s cheques
(c) Granting loans secured by immovable property for real estate development
(d) Collecting and transmitting money and securities
Q.28 What was the primary objective of the Lead Bank Scheme introduced by the RBI in 1969?
(a) To assign specific banks to districts for coordinated credit planning
(b) To privatize commercial banks and increase competition
(c) To increase foreign direct investment in the banking sector
(d) To promote digital banking and cashless transactions
Q.29 What was the significance of MYRADA’s initiative in linking Self Help Groups (SHGs) with banks in 1984–85?
(a) It introduced government-controlled lending schemes for SHGs.
(b) It marked the beginning of the microfinance movement by facilitating banking with micro-institutions controlled by the poor.
(c) It led to the nationalization of microfinance institutions in India.
(d) It replaced traditional cooperative banks with SHG-led financial institutions
Q.30 According to Section ____ of the Banking Regulation Act, a bank has to maintain certain percentage of demand and time liabilities (DTL) as Statutory Liquidity Ratio (SLR)?
(a) 25
(b) 24
(c) 40
(d) 42
Q.21 What was the significance of the SHG–Bank Linkage Programme launched by NABARD in 1992?
(a) It aimed to provide direct government subsidies to Self Help Groups (SHGs).
(b) It introduced SHGs as an alternative to the formal banking system.
(c) It integrated SHG financing into the banking system, leading to its inclusion in priority sector lending by RBI in 1996.
(d) It mandated commercial banks to replace traditional lending with SHG-based financing.
Q.23 As per RBI guidelines, what percentage of their Adjusted Net Bank Credit (ANBC) or Credit Equivalent of Off-Balance Sheet Exposures (CEOBE) must Small Finance Banks lend to priority sectors?
(a) 40%
(b) 50%
(c) 60%
(d) 75%
Q.24 According to NABARD guidelines, what is the typical savings-to-loan ratio for SHGs, and how does it change for matured SHGs?
(a) A fixed 1:1 ratio, irrespective of SHG maturity
(b) A savings-to-loan ratio varying from 1:1 to 1:4, with higher loans possible for matured SHGs at the bank’s discretion
(c) A maximum 1:2 ratio for all SHGs, with no flexibility for matured SHGs
(d) SHGs can borrow unlimited amounts without any savings-linked restrictions
Q.25 Under which SHG–Bank Linkage Model do banks provide direct financing to SHGs without NGO intervention?
(a) Model I: NABARD–Bank–SHG
(b) Model II: NABARD–Bank–SHG (with NGO as a facilitating agency)
(c) Model III: NABARD–Bank–NGO–SHG (with NGO as a financial intermediary)
(d) None of the above, as NGO involvement is mandatory in all models
Q.26 According to the RBI’s “Framework for Microfinance Loans” (2022), what is the maximum annual household income limit for eligibility to receive a microfinance loan?
(a) ₹1.00 lakh
(b) ₹2.00 lakh
(c) ₹3.00 lakh
(d) ₹5.00 lakh
Q.27 According to Section 26A of the Banking Regulation Act, the Depositor Education and Awareness Fund (DEAF) receives funds from which of the following sources?
(a) Deposits that have not been operated for 5 years
(b) Deposits that have not been operated for 10 years
(c) Deposits that have not been operated for 15 years
(d) Deposits that have been inactive for a period decided by the bank
Q.28 As per Section 45-IA of the RBI Act, a Non-Banking Financial Company (NBFC) can commence or carry on the business of a non-banking financial institution only if it:
(a) Has a Certificate of Registration (CoR) from the RBI and net owned funds of at least Rs 2 crores
(b) Is registered under the Companies Act, 1956, and operates under the direct supervision of the Finance Ministry
(c) Has a license from SEBI and maintains a minimum capital adequacy ratio of 15%
(d) Is listed on a recognized stock exchange and has a paid-up capital exceeding Rs 5 crores
Q.29 According to Section 24 of the RBI Act, which of the following statements is correct regarding the denomination of currency notes in India?
(a) The Reserve Bank of India can independently decide the denominations of currency notes to be issued.
(b) The maximum denomination of currency notes that can be issued, as per the Act, is ₹10,000.
(c) The Central Government cannot discontinue the issuance of any denomination once introduced.
(d) Currency notes of all denominations mentioned in the Act must always remain in circulation.
Q.30 Which study group recommended that hire purchase and leasing companies could accept deposits up to the extent of their Net Owned Funds, leading to early regulatory measures for NBFCs in India?
(a) A. C. Shah Committee (1992)
(b) James S. Raj Study Group (1975)
(c) Narasimham Committee (1991)
(d) Malegam Committee (2011)
Q.31 Which of the following correctly describes the ownership structure of NARCL and IDRCL?
(a) Public sector banks hold 51% of equity in both NARCL and IDRCL.
(b) Public sector banks hold 51% of equity in NARCL, while holding 49% in IDRCL with the remaining held by private sector lenders.
(c) Private sector lenders hold 100% equity in both NARCL and IDRCL.
(d) NARCL is fully owned by the Reserve Bank of India, and IDRCL is fully government-owned.
Q.32 How will the payment structure for the sale of bad loans to NARCL typically be arranged?
(a) 15% cash upfront and 85% in the form of Security Receipts (SRs)
(b) 50% cash upfront and 50% in equity shares of NARCL
(c) 100% cash upfront with no Security Receipts issued
(d) 85% cash upfront and 15% in government bonds
Q.33 Which of the following is NOT a regulatory requirement for Deposit-Taking NBFCs (NBFC-Ds) in India?
(a) Only those NBFCs to which the RBI had given a specific authorisation and have an investment grade rating are allowed to accept/hold public deposits to a limit of 1.5 times of its Net Owned Funds.
(b) They can accept and renew public deposits for a period ranging from 12 months to 60 months.
(c) The deposits they accept are insured, ensuring protection for depositors.
(d) They cannot offer gifts, incentives, or any additional benefits to depositors.
Q.34 Regarding the ownership structure of NaBFID, which of the following statements is correct?
(a) NaBFID will initially be privately owned, with the government holding no stake.
(b) The central government will initially own 100% of NaBFID, which can later be reduced to as low as 26%.
(c) Only domestic banks and financial institutions are allowed to hold shares in NaBFID.
(d) NaBFID’s authorised share capital is capped at Rs 10,000 crore, as per the act.
Q.35 Which of the following statements is TRUE as per Section 17 of the Banking Regulation Act?
(a) A banking company must transfer at least 10% of its annual profit to the Reserve Fund before declaring any dividend.
(b) A banking company can use the Reserve Fund at any time for business expansion.
(c) The Central Government, on RBI’s recommendation, may allow a bank to stop transferring 20% of its profit to the Reserve Fund only after the Reserve Fund equals the paid-up capital.
(d) Banks are required to maintain the Reserve Fund only if they incur losses in a financial year.
Q.36 Why did the Narasimham Committee – II (1998) propose the concept of Narrow Banking for weak banks?
(a) To allow weak banks to focus exclusively on retail lending.
(b) To enable struggling banks to invest only in short-term, risk-free assets to limit losses.
(c) To promote financial inclusion in rural areas.
(d) To restrict these banks from further lending activities and gradually close them down.
Q.37 Which of the following is NOT typically considered a major risk associated with infrastructure investment?
(a) Demand uncertainty that may affect the usage of the infrastructure asset.
(b) Environmental and regulatory surprises that can delay or halt projects.
(c) Technological obsolescence in sectors like telecommunications.
(d) Guaranteed high returns due to government subsidies and monopoly power.
Q.38 Which of the following statements is NOT TRUE regarding a Core Investment Company – Non-Deposit Taking – Systemically Important (CIC-ND-SI) NBFC?
(a) It must hold at least 90% of its total assets as investments in equity shares, preference shares, debt, or loans in group companies.
(b) It actively trades in shares, debt, and loans in group companies to maximize returns.
(c) Its asset size must be less than ₹100 crore to qualify as a CIC-ND-SI.
(d) It can invest in any company without restrictions, including unrelated businesses.
Q.39 Which of the following was a key recommendation of the P J Nayak Committee (2014) on improving governance in Indian banks?
(a) Increasing government ownership in public sector banks (PSBs).
(b) Reducing government interference and improving board autonomy in banks.
(c) Mandating that all bank directors must be government officials.
(d) Limiting private sector participation in bank governance.
Q.40 According to Section 22 of the RBI Act, which of the following statements is correct regarding the issuance of banknotes in India?
(a) The Reserve Bank of India has the exclusive right to issue banknotes in India.
(b) Both the Reserve Bank of India and the Central Government have the authority to issue currency notes.
(c) The Central Government continues to issue currency notes along with the Reserve Bank of India.
(d) Commercial banks in India are allowed to issue their own currency notes under RBI supervision.
Q.41 What was the primary objective of the Malhotra Committee, formed in 1993?
(a) To regulate the stock market and ensure investor protection
(b) To reform and restructure the insurance sector in India
(c) To introduce new monetary policy measures for financial stability
(d) To privatize all public sector financial institutions in India
Q.42 Which of the following is NOT a requirement for a Non-Banking Financial Company – Microfinance Institution (NBFC-MFI) as per the RBI’s regulatory framework?
(a) Maintaining at least 75% of total assets as microfinance loans
(b) Having a minimum Net Owned Funds (NOF) of ₹5 crore (₹2 crore for NBFC-MFIs in the North Eastern Region)
(c) Being a deposit-taking NBFC with authorization to accept public deposits
(d) Registering with the Reserve Bank of India under the provisions of the RBI Act, 1934
Q.43 What is the primary purpose of the Market Stabilisation Scheme (MSS) introduced by the Reserve Bank of India in 2004?
(a) To raise funds for the Central Government’s fiscal expenditure
(b) To absorb excess liquidity in the economy through the issuance of treasury bills and dated securities
(c) To provide long-term financing to commercial banks at concessional rates
(d) To regulate foreign exchange reserves and stabilize the Indian Rupee
Q.44 Which of the following legislative measures was the first to regulate life insurance business in India?
(a) The Indian Life Assurance Companies Act, 1912
(b) The Insurance Act, 1938
(c) The Indian Insurance Companies Act, 1928
(d) The British Insurance Act, 1870
Q.45 What was the primary purpose of establishing the Insurance Regulatory and Development Authority (IRDA) in India?
(a) To nationalize the insurance sector and eliminate private competition
(b) To regulate and develop the insurance industry, promote competition, and enhance customer satisfaction
(c) To merge life and general insurance sectors into a single regulatory framework
(d) To replace the Life Insurance Corporation (LIC) as the sole provider of insurance in India
Q.46 Which of the following statements correctly describes the early development of the life insurance business in India?
(a) The first life insurance company in India was the Bombay Mutual, established in 1871
(b) Life insurance in India started only after the enactment of the British Insurance Act in 1870
(c) Indian insurance companies dominated the market in the 19th century, facing little competition from foreign companies
(d) The Oriental Life Insurance Company, established in 1818 in Calcutta, was the first life insurance company in India but failed in 1834
Q.47 What is the primary objective of the Reserve Bank of India’s Open Market Operations (OMO)?
(a) To regulate the demand and supply of foreign exchange in the economy
(b) To manage liquidity in the banking system through outright purchase or sale of government securities
(c) To provide long-term loans to commercial banks at concessional rates
(d) To directly control inflation by fixing the interest rates for all loans in the economy
Q.48 What significant change did the IRDAI introduce on 2nd September 2019 regarding foreign direct investment (FDI) in the insurance sector?
(a) It restricted FDI in insurance intermediaries to 49%
(b) It allowed 100% FDI in insurance intermediaries
(c) It reduced FDI in insurance intermediaries from 74% to 26%
(d) It mandated that all insurance intermediaries must be fully owned by Indian entities
Q.49 Which of the following statements best describes the concept of insurance penetration?
(a) It measures the percentage of the population covered under insurance
(b) It is the ratio of total insurance premium to the Gross Domestic Product (GDP)
(c) It calculates the number of insurance policies sold in a given year
(d) It represents the total revenue generated by insurance companies
Q.50 Which of the following is NOT a function of an Insurance Repository in India?
(a) Maintaining insurance policies in electronic form on behalf of insurers
(b) Selling and underwriting insurance policies to customers
(c) Acting as a single point of service for all e-policies held by a policyholder
(d) Enhancing efficiency and transparency in the issuance and maintenance of insurance policies
Q.51 Which commission’s recommendations played a crucial role in the establishment of the Reserve Bank of India?
(a) Montagu-Chelmsford Reforms
(b) Hilton-Young Commission
(c) Simon Commission
(d) Macaulay Commission
Q.52 Which of the following assets is NOT eligible for maintaining the Statutory Liquidity Ratio (SLR)?
(a) Government securities
(b) Gold valued at a price not exceeding the current market price
(c) Corporate bonds rated AAA by credit agencies
(d) Cash reserves
Answer:
Q1: B
Q2: D
Q3: C
Q4: C
Q5: A
Q6: B
Q7: C
Q8: D
Q9: B
Q10: D
Q11: A
Q12: C
Q13: C
Q14: B
Q15: C
Q16: B
Q17: B
Q18: C
Q19: C
Q20: C
Q21: B
Q22: A
Q23: C
Q24: C
Q28: A
Q29: B
Q30: B
Q21: C
Q23: D
Q24: B
Q25: A
Q26: C
Q27: B
Q28: A
Q29: B
Q30: B
Q31: B
Q32: A
Q33: C
Q34: B
Q35: C
Q36: B
Q37: D
Q38: C
Q39: B
Q40: A
Q41: B
Q42: C
Q43: B
Q44: A
Q45: B
Q46: D
Q47: B
Q48: B
Q49: B
Q50: A
Q51: B
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