CAIIB ABM Previous Year Paper, Check Most Repetitive MCQs

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CAIIB ABM Previous Year Paper

CAIIB ABM Previous Year Paper is an essential resource for candidates preparing for the CAIIB exam. Understanding the most commonly asked questions and the structure of the exam can significantly improve your performance. In this article, we will dive into the topics covered in the CAIIB ABM Previous Year Paper and highlight the most repetitive MCQs to help you prepare effectively.

CAIIB ABM Exam – Overview

The CAIIB exam is designed for professionals in the banking industry who want to enhance their skills and knowledge. Paper 1 of the CAIIB exam, Advanced Bank Management (ABM), consists of four modules:

Module A: Statistics
Module B: Human Resource Management (HRM)
Module C: Credit Management
Module D: Compliance in Banks and Corporate Governance

CAIIB ABM Previous Year Paper

CAIIB ABM Previous Year Paper is a valuable resource for understanding exam patterns and frequently asked questions. It helps in improving time management and reinforcing key concepts for better exam performance.

What is the primary purpose of risk management in banking?
a) To increase profits
b) To minimize losses
c) To improve customer satisfaction
d) To expand market share
Answer: b) To minimize losses
Which of the following is NOT a type of financial risk?
a) Market risk
b) Operational risk
c) Credit risk
d) Systematic risk
Answer: d) Systematic risk
Which approach is used to measure market risk?
a) VaR (Value at Risk)
b) NPV (Net Present Value)
c) IRR (Internal Rate of Return)
d) CAPM (Capital Asset Pricing Model)
Answer: a) VaR (Value at Risk)
Operational risk includes risks due to:
a) Credit default
b) Market fluctuations
c) Human errors and frauds
d) Foreign exchange movements
Answer: c) Human errors and frauds
The Basel framework primarily addresses which type of risk?
a) Operational risk
b) Credit risk
c) Market risk
d) All of the above
Answer: d) All of the above

The Weighted Average Cost of Capital (WACC) is calculated by:
a) Adding equity and debt capital costs
b) Taking a weighted average of equity and debt capital costs
c) Using only equity capital costs
d) Using only debt capital costs
Answer: b) Taking a weighted average of equity and debt capital costs
What is the primary objective of capital budgeting?
a) Managing operational cash flow
b) Selecting long-term investment projects
c) Managing day-to-day financial operations
d) Reducing tax liabilities
Answer: b) Selecting long-term investment projects
Which formula is used to calculate NPV (Net Present Value)?
a) Future value – Present value
b) Sum of discounted cash flows – Initial investment
c) IRR × Investment cost
d) WACC × Capital expenditure
Answer: b) Sum of discounted cash flows – Initial investment
The Payback Period measures:
a) The time required to recover the initial investment
b) The profitability of a project
c) The rate of return of a project
d) The cost of capital
Answer: a) The time required to recover the initial investment
IRR is the discount rate at which:
a) NPV equals zero
b) Payback period equals zero
c) Cash inflows are maximized
d) Profitability index equals one
Answer: a) NPV equals zero

Which of the following is NOT part of credit risk assessment?
a) Borrower’s repayment capacity
b) Borrower’s income sources
c) Market fluctuations
d) Borrower’s credit history
Answer: c) Market fluctuations
Which financial ratio is important for evaluating a borrower’s liquidity?
a) Debt-to-equity ratio
b) Current ratio
c) Return on equity
d) Gross profit margin
Answer: b) Current ratio
What is a primary security in loan agreements?
a) A collateral asset
b) A legal document
c) The main asset being financed
d) A co-guarantor’s asset
Answer: c) The main asset being financed
The concept of 5Cs of credit includes all EXCEPT:
a) Capacity
b) Character
c) Collateral
d) Currency
Answer: d) Currency
The Debt Service Coverage Ratio (DSCR) measures:
a) Debt repayment ability of a company
b) Profitability of a project
c) Operational efficiency of a business
d) Cash reserves of a bank
Answer: a) Debt repayment ability of a company

What is the main function of monetary policy?
a) To increase tax revenues
b) To control inflation and manage liquidity
c) To promote exports
d) To regulate foreign investments
Answer: b) To control inflation and manage liquidity
What does CRR stand for in banking?
a) Credit Risk Ratio
b) Cash Reserve Ratio
c) Current Revenue Ratio
d) Collateral Risk Ratio
Answer: b) Cash Reserve Ratio
Repo rate is:
a) The rate at which banks borrow from RBI
b) The rate at which banks lend to RBI
c) The interest rate on fixed deposits
d) The rate charged on home loans
Answer: a) The rate at which banks borrow from RBI
GDP measures the:
a) Total imports and exports
b) Total value of goods and services produced in a country
c) Average income of citizens
d) Inflation rate
Answer: b) Total value of goods and services produced in a country
What is fiscal deficit?
a) The shortfall in tax collection
b) The excess of government expenditure over revenue
c) The difference between GDP and GNP
d) The difference between exports and imports
Answer: b) The excess of government expenditure over revenue

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?
a) 2 years
b) 2.5 years
c) 3 years
d) 1.5 years
Answer: b) 2.5 years
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?
a) ₹3,60,000
b) ₹2,40,000
c) ₹1,20,000
d) ₹6,00,000
Answer: a) ₹3,60,000
Calculate the DSCR if Net Operating Income = ₹5,00,000 and Total Debt Servicing = ₹4,00,000.
a) 0.8
b) 1.25
c) 1.5
d) 2.0
Answer: b) 1.25

Which of the following is considered a non-fund-based credit facility?
a) Cash credit
b) Term loan
c) Letter of credit
d) Overdraft
Answer: c) Letter of credit
What is the main function of an investment bank?
a) To manage savings accounts
b) To provide retail banking services
c) To underwrite securities and assist in raising capital
d) To provide short-term loans to businesses
Answer: c) To underwrite securities and assist in raising capital
In which of the following, a bank’s own funds are used?
a) Term loans
b) Advances
c) Non-fund-based facilities
d) Securities
Answer: b) Advances
What is the role of a bank’s treasury?
a) To manage the bank’s cash reserves
b) To monitor the performance of loans
c) To invest in long-term securities
d) To maintain customer accounts
Answer: a) To manage the bank’s cash reserves
The duration of a letter of credit is determined by:
a) The exporter
b) The bank issuing the credit
c) The importer
d) Both exporter and importer
Answer: b) The bank issuing the credit
The main purpose of KYC (Know Your Customer) is to:
a) Prevent fraud
b) Ensure customer loyalty
c) Verify customer identity and assess risk
d) Increase the bank’s profitability
Answer: c) Verify customer identity and assess risk
What is the main objective of asset-liability management (ALM) in banks?
a) Maximizing profits
b) Managing liquidity and mitigating interest rate risks
c) Increasing market share
d) Reducing operational costs
Answer: b) Managing liquidity and mitigating interest rate risks

Which of the following regulations ensures that banks maintain a minimum level of capital?
a) Basel III
b) The Negotiable Instruments Act
c) The Banking Regulation Act
d) The Companies Act
Answer: a) Basel III
The Banking Regulation Act governs:
a) Financial institutions and insurance companies
b) The operation of cooperative banks only
c) Commercial banking activities in India
d) Non-banking financial companies (NBFCs)
Answer: c) Commercial banking activities in India
Under which law can the Reserve Bank of India (RBI) issue directives to commercial banks regarding their operations?
a) The Reserve Bank of India Act, 1934
b) The Banking Regulation Act, 1949
c) The Companies Act, 1956
d) The Foreign Exchange Management Act (FEMA)
Answer: b) The Banking Regulation Act, 1949
What is the maximum period for which a customer can request a “stop payment” order for a cheque under banking regulations?
a) 6 months
b) 1 year
c) 3 months
d) 5 years
Answer: c) 3 months
Which of the following acts governs the issue and transfer of negotiable instruments in India?
a) The Banking Regulation Act
b) The Negotiable Instruments Act, 1881
c) The Reserve Bank of India Act, 1934
d) The Companies Act, 2013
Answer: b) The Negotiable Instruments Act, 1881

What is the primary function of a mutual fund?
a) To provide loans to small businesses
b) To pool money from investors and invest in securities
c) To issue debt instruments to the public
d) To offer credit cards to consumers
Answer: b) To pool money from investors and invest in securities
Which of the following is NOT a type of insurance provided by banks?
a) Life insurance
b) Health insurance
c) Asset insurance
d) Land ownership insurance
Answer: d) Land ownership insurance
Which type of loan is used to finance long-term fixed assets, such as machinery or equipment?
a) Working capital loan
b) Home loan
c) Term loan
d) Cash credit
Answer: c) Term loan
Which of the following is an example of an investment banking service?
a) Providing personal loans
b) Managing retirement funds
c) Underwriting new issues of shares and bonds
d) Offering home loans
Answer: c) Underwriting new issues of shares and bonds
Which type of account is typically used by a business to deposit and withdraw money on a daily basis?
a) Fixed deposit account
b) Current account
c) Savings account
d) Recurring deposit account
Answer: b) Current account

Which of the following is used to evaluate a company’s profitability?
a) Quick ratio
b) Gross profit margin
c) Debt-to-equity ratio
d) Current ratio
Answer: b) Gross profit margin
What does a low Current Ratio indicate?
a) The company has good liquidity
b) The company may face liquidity problems
c) The company is highly profitable
d) The company has high debt
Answer: b) The company may face liquidity problems
The Price to Earnings (P/E) ratio is primarily used to evaluate:
a) A company’s liquidity
b) The market value of a company’s shares
c) A company’s debt levels
d) A company’s dividend policy
Answer: b) The market value of a company’s shares
A positive Net Present Value (NPV) suggests that:
a) The project is unprofitable
b) The project should be rejected
c) The project will create value for the company
d) The project has no risk
Answer: c) The project will create value for the company
Which of the following ratios is used to determine the efficiency of a company in managing its working capital?
a) Return on Assets
b) Return on Equity
c) Working Capital Turnover Ratio
d) Earnings Before Interest and Taxes (EBIT)
Answer: c) Working Capital Turnover Ratio

Which technology is used for enabling real-time gross settlement (RTGS) in India?
a) Blockchain
b) SWIFT
c) NEFT
d) RTGS
Answer: d) RTGS
The process of encryption ensures that:
a) Customer transactions are processed quickly
b) Transaction data is secure and protected
c) Banks can verify the identity of customers
d) Banks can grant loans faster
Answer: b) Transaction data is secure and protected
Which of the following is an example of an e-banking service?
a) ATMs
b) Internet banking
c) Mobile banking
d) All of the above
Answer: d) All of the above
What is the main advantage of using cloud computing in banking?
a) Faster loan processing
b) Reduced operational costs and scalable infrastructure
c) Higher interest rates
d) Direct control over customer data
Answer: b) Reduced operational costs and scalable infrastructure
Which of the following is a feature of a core banking system?
a) Allows customers to access their accounts from anywhere
b) Allows banks to create financial products
c) Manages the bank’s investment portfolio
d) Only used for international transactions
Answer: a) Allows customers to access their accounts from anywhere

How to Use CAIIB ABM Previous Year Papers Effectively

Step	Action
Understand the Exam Pattern	Familiarize yourself with the structure and syllabus of CAIIB ABM.
Analyze Past Papers	Focus on the most frequently asked topics and concepts.
Practice Time Management	Solve papers under timed conditions to improve speed and accuracy.
Improve Conceptual Understanding	Review and understand concepts where mistakes were made.
Focus on Case Studies	Regularly practice case study-based questions to build application skills.
Take Mock Tests	Use previous year papers as mock exams to assess your preparation.
Track Your Progress	Evaluate your scores and adjust your study plan accordingly.
Revise Regularly	Use the papers as part of your revision strategy to reinforce concepts.

Conclusion

The CAIIB ABM Previous Year Paper provides invaluable insights into the exam pattern and commonly asked questions. By focusing on the most repetitive MCQs and understanding the topics in detail, candidates can significantly improve their chances of success. Prepare systematically, and use this article as a guide to enhance your knowledge and boost your exam readiness.

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CAIIB ABM Previous Year Paper, Check Most Repetitive MCQs

CAIIB ABM Previous Year Paper

CAIIB ABM Exam – Overview

CAIIB ABM Previous Year Paper

Top Topics to Focus On from CAIIB ABM Previous Year Paper

1. Statistics (Module A)

2. Human Resource Management (Module B)

3. Credit Management (Module C)

4. Compliance in Banks and Corporate Governance (Module D)

How to Use CAIIB ABM Previous Year Papers Effectively

Conclusion