IIBF CCP Practice Questions and Answers

Module A: Introduction and Overview of Credit

1. Module A

   1. Bill discounting applies to which type of bill drawn by the borrower on the buyer?

   1. A.Usance bills
   2. B.Demand bills with no credit period
   3. C.Bills drawn on the bank itself
   4. D.Bills held only for collection
   Show answerexpand_more

   Answer: A. Usance bills

   Discounting applies to usance bills, which carry a credit period. Demand bills, payable on presentation, are handled through bills purchase.

2. Module A

   2. Which of these lending activities is a bank barred from under RBI's statutory and regulatory restrictions?

   1. A.Margin trading finance with shares pledged in demat form
   2. B.Loans against the bank's own shares
   3. C.Loans to employees for shares under an ESOP
   4. D.Advances against mutual fund units, linked to NAV
   Show answerexpand_more

   Answer: B. Loans against the bank's own shares

   A bank cannot lend against the security of its own shares. ESOP finance, margin trading finance and advances against mutual fund units are allowed within their prescribed conditions.

3. Module A

   3. Section 20A of the Banking Regulation Act, 1949 bars a bank from doing which of the following without prior RBI approval?

   1. A.Granting clean bill discounting to any borrower
   2. B.Sanctioning credit card limits to its own directors
   3. C.Remitting debts due from its directors or their concerns
   4. D.Lending to another bank's directors on a reciprocal basis
   Show answerexpand_more

   Answer: C. Remitting debts due from its directors or their concerns

   Section 20A prohibits remitting (waiving) debts due from a bank's directors, or from firms and companies in which they are interested, without RBI's prior approval. A remission made in breach of it is void.

Module B: Analysis of Financial Statements and Project Appraisal

1. Module B

   1. Technical feasibility analysis checks how a project's needs for raw material, labour, utilities and technology will be met. When is it done?

   1. A.Only when the account turns irregular
   2. B.At the time of annual review
   3. C.After the first disbursement
   4. D.Before the loan is sanctioned
   Show answerexpand_more

   Answer: D. Before the loan is sanctioned

   Technical feasibility is part of pre-sanction appraisal. The lender must be satisfied that the project can be built and run as projected before committing funds.

2. Module B

   2. Which of the following is another name for the funds flow statement?

   1. A.Statement of sources and applications of funds
   2. B.Schedule of fixed assets
   3. C.Statement of retained earnings
   4. D.Statement of contingent liabilities
   Show answerexpand_more

   Answer: A. Statement of sources and applications of funds

   The funds flow statement is also called the statement of sources and applications of funds, or the statement of changes in financial position.

3. Module B

   3. In discounted cash flow analysis, the net present value break-even point is:

   1. A.The capacity at which revenue equals unit variable cost
   2. B.The sales level at which net present value equals zero
   3. C.The sales volume that covers depreciation but not interest
   4. D.The discount rate that equates outlays with terminal value
   Show answerexpand_more

   Answer: B. The sales level at which net present value equals zero

   NPV break-even is the sales level at which the present value of inflows just equals the initial outlay. At that level the project earns exactly the required discount rate. Accounting break-even ignores the time value of money; this measure does not.

Module C: Working Capital Management and Non-Fund Facilities

1. Module C

   1. In a co-accepted bill, who is the drawer?

   1. A.The buyer of the goods
   2. B.The co-accepting bank
   3. C.The seller or exporter
   4. D.The discounting bank's head office
   Show answerexpand_more

   Answer: C. The seller or exporter

   The seller draws the bill on the buyer, and the bank co-accepts it to assure payment. The buyer is the drawee, not the drawer.

2. Module C

   2. A bank that confirms a letter of credit becomes liable to pay if:

   1. A.The applicant defaults on margin calls
   2. B.The buyer rejects the goods
   3. C.The reimbursing bank revokes its credit line
   4. D.The issuing bank fails to pay
   Show answerexpand_more

   Answer: D. The issuing bank fails to pay

   The confirming bank adds its own undertaking to pay the beneficiary against compliant documents if the issuing bank does not. It does not cover commercial disputes about the goods.

3. Module C

   3. For IT and software borrowers with working capital limits up to ₹2 crore, the limit may be assessed at:

   1. A.20% of projected turnover
   2. B.25% of projected turnover
   3. C.30% of projected turnover
   4. D.10% of projected turnover
   Show answerexpand_more

   Answer: A. 20% of projected turnover

   Up to ₹2 crore, banks may assess the limit at 20% of projected turnover. Above ₹2 crore, MPBF may be assessed on a monthly cash budget.

Module D: Other Credits (Export, Priority Sector, Retail)

1. Module D

   1. Priority sector target achievement is measured against bank credit as on which date?

   1. A.Average of the preceding three financial years
   2. B.Corresponding date of the preceding year
   3. C.Closing date of the preceding quarter
   4. D.Last working day of the financial year
   Show answerexpand_more

   Answer: B. Corresponding date of the preceding year

   Targets are a share of ANBC or CEOBSE, whichever is higher, as on the corresponding date of the preceding year. Achievement is checked every quarter.

2. Module D

   2. What minimum share of total DRI advances must go to SC/ST beneficiaries?

   1. A.25%
   2. B.12%
   3. C.40%
   4. D.50%
   Show answerexpand_more

   Answer: C. 40%

   At least two-fifths (40%) of Differential Rate of Interest advances must reach SC/ST beneficiaries. 12% is the weaker sections priority sector target, a different measure.

3. Module D

   3. Under priority sector norms, what is the sub-target for micro enterprises for domestic commercial banks?

   1. A.40% of CEOBSE
   2. B.8% of ANBC or CEOBSE
   3. C.18% of ANBC
   4. D.7.5% of ANBC or CEOBSE
   Show answerexpand_more

   Answer: D. 7.5% of ANBC or CEOBSE

   Micro enterprises carry a 7.5% sub-target of ANBC or CEOBSE, whichever is higher. 40% is the overall priority sector target and 18% the agriculture target.

Module E: Monitoring and Management of Impaired Assets

1. Module E

   1. A term loan is classified SMA-0 when principal or interest is overdue for:

   1. A.Up to 30 days
   2. B.More than 60 and up to 90 days
   3. C.More than 30 and up to 60 days
   4. D.More than 90 days
   Show answerexpand_more

   Answer: A. Up to 30 days

   SMA-0 is overdue up to 30 days. More than 30 and up to 60 days is SMA-1, more than 60 and up to 90 days is SMA-2, and beyond 90 days the loan is an NPA.

2. Module E

   2. A borrower's bills discounted under an LC, when another facility of the same borrower is NPA, are:

   1. A.Automatically classified as NPA
   2. B.Not necessarily NPA for that reason alone
   3. C.Reclassified as term loans
   4. D.Always treated as loss assets
   Show answerexpand_more

   Answer: B. Not necessarily NPA for that reason alone

   These bills need not be classified NPA just because another facility is NPA. They become NPA if the LC issuing bank does not pay on the due date and the borrower does not make good the amount at once.

3. Module E

   3. A borrower breaches a negative lien by selling the asset to a bona fide purchaser. What can the bank do?

   1. A.Claim the asset back from the purchaser
   2. B.Sell the asset itself under a power of sale
   3. C.Sue the borrower for breach of covenant or recall the loan
   4. D.Claim priority over the purchaser as a chargeholder
   Show answerexpand_more

   Answer: C. Sue the borrower for breach of covenant or recall the loan

   A negative lien is only a promise by the borrower and creates no charge, so the bank cannot follow the asset into a bona fide purchaser's hands. Its remedies are contractual: sue for breach or recall the loan.

How to Use These Questions

• check_circleNote which module your wrong answers come from. That is where to spend the next week.
• check_circleModules B and C carry the calculation questions: ratios, DSCR, MPBF and break-even. Practise those with a calculator, not only by reading.
• check_circleModule E rewards exact day counts and percentages. Learn the SMA buckets, the 90-day rule and the provisioning rates as a table.

FAQs