CAIIB 2020 Bank Financial Management Mock Tests Set 12

Two companies, C and D, have the borrowing rates shown in the following table.

According to the comparative advantage argument, what is the total potential savings for C and D if they enter into an interest rate swap?



Options are :

  • 0.5%.
  • 1.0%
  • 1.0%
  • 2.0%.

Answer :1.0%

CAIIB 2020 Bank Financial Management Mock Tests Set 13

An investor has an A-rated bond, a BB-rated bond, and a CCC-rated bond where the probabilities of default over the next three years are 4 percent, 12 percent, and 30 percent, respectively. What is the probability that all of these bonds will default in the next three years if the individual default probabilities are independent?


Options are :

  • 1.44%
  • 0.14%.
  • 0.14%.
  • 23.00%

Answer :0.14%.

Following is the data of ICICI Bank for the FY ending 2018,

What is the percentage change in NII( Net interest income) from fiscal 2017 to fiscal 2018?


Options are :

  • 5.9%
  • 5.1%
  • 4.8%
  • 6.3%

Answer :5.9%

Given below is the balance sheet of Roger Bank as on 31 03 2016

Demand Liabilities in the above case works out to


Options are :

  • 632000
  • 638000
  • 1238000
  • None of the above

Answer :632000

CAIIB 2020 Bank Financial Management Mock Tests Set 14

Given below is the information of Bank of Baroda

What income would be recognized for term loan portfolio of the bank


Options are :

  • 280
  • 320
  • 460
  • 310

Answer :310

Banks, across the world, use different ways to estimate the aggregate risk exposures. The most commonly used approach is :


Options are :

  • RAROC
  • GAP Analysis
  • Monte Carlo Analysis
  • IRRBB

Answer :RAROC

CAIIB 2020 Bank Financial Management Mock Tests Set 2

Which of the following is/are correct w.r.t capital conservation buffer (CCB)? I) The capital conservation buffer (CCB) is designed to ensure that banks build up capital buffers during normal times (i.e. outside period of stress) which can be drawn down, as losses are incurred during a stressed period. II) The requirement is based on sample capital conservation rules designed to avoid breaches of minimum capital requirements. III) Banks are required to maintain a capital conservation buffer of 2.5%, comprised of Common Equity Tier-I capital, above the regulatory minimum capital requirement of 9%.


Options are :

  • Only I
  • Only II
  • Only III
  • All of the above viz. I,II,III

Answer :All of the above viz. I,II,III

Consider two traders such that each returned a profit of $10 million over the last year. The first is a Foreign Currency Trader and second is a Bond Trader. Assume the FX and bond traders have notional amount and volatility as describe below. The bond trader deals in larger amounts, $200 million, but in a market with lower volatility, at 4% per annum, against $100 million and 12% for the FX trader. The risk capitals can be computed as a VAR measure, say at the 99% level over a year, as Banker Trust did. Assuming normal distributions, Which of the two traders (Bond or FX traders) performed well?


Options are :

  • Bond Trader
  • FX Trader
  • Both performed equally
  • Both performed poorly.

Answer :Bond Trader

Which of the following statements is NOT correct w.r.t. NPAs (I)Interest and/or installment of principal remain overdue for a period of more than 90 days in respect of a term loan. (II)The account remains out of order in respect of an Overdraft /Cash Credit (OD/CC). (III)The bill remains overdue for a period of more than 120 days in the case of bills purchased and discount. (IV)The installment of principal or interest thereon remains overdraft for four crop seasons for short duration crops. (V)The installment of principal or interest thereon remains overdraft for two crop seasons for short duration crops.


Options are :

  • Only I,II
  • Only III,IV,V
  • Only I
  • Only I,III,IV

Answer :Only III,IV,V

CAIIB 2020 Bank Financial Management Mock Tests Set 3

With respect to export project finance, sometimes there are instances where the actual importer has paid the dues to the bank abroad but the bank in turn is unable to remit the amount due to political developments such as war, strife, UN embargo, etc. In such cases, where the lending bank is able to establish through documentary evidence that the importer has cleared the dues in full by depositing the amount in the bank abroad before it turned into NPA in the books of the bank, but the importers country is not allowing the funds to be remitted due to political or other reasons, the assets classification may be made after a period of _______  from the date the amount was deposited by the importer in the bank abroad.


Options are :

  • 3 months
  • 6 months
  • 9 months
  • 12 months

Answer :12 months

Which of the following statements are correct w.r.t rates of provisioning for standard assets? (I)Farm Credit to agricultural activities and Small and Micro Enterprises (SMEs) sectors at Per cent. (II)Advance to Commercial Real Estate (CRE) Sector at 1.00 per cent. (III)Advance to Commercial Real Estate Residential Housing Sector (CRE RH) at 0.75 per cent (IV)Housing loans extended at teaser rates at 2 per cent in view of the higher risk associated with them. The provisioning rate shall be reduced to 0.40 per cent after 1 year from the dare on which the rates are reset at higher rates if the accounts remain standard.


Options are :

  • Only I,II
  • Only III,IV,V
  • Only I
  • All of the above viz. I,II,III,IV

Answer :All of the above viz. I,II,III,IV

Under Cash Budget System method employed for construction activities the working capital is determined by:


Options are :

  • Ascertaining level of current assets
  • Ascertaining level of current liabilities
  • Finding cash gap after taking into account projected periodical cash inflows and outflows
  • All of the above

Answer :Finding cash gap after taking into account projected periodical cash inflows and outflows

CAIIB 2020 Bank Financial Management Mock Tests Set 4

Which of the following are reasons for growing significance of Asset Liability Management in Banks- I)Volatility II)Product innovation III)Regulatory Environment IV)Management Recognition


Options are :

  • Only I,IV
  • Only II,III
  • Only I,II,III
  • All of the above viz. I,II,III,IV

Answer :All of the above viz. I,II,III,IV

Factoring means


Options are :

  • Another entity buys your debts
  • Another entity buys your credits
  • Another entity loans an amount to you
  • None of the above

Answer :Another entity buys your debts

Under cash budget system method, working capital is determined by ----


Options are :

  • Ascertaining level of current assets
  • Ascertaining level of current liabilities
  • Finding cash gap after taking in to account projected cash inflows and outflows
  • all of the above

Answer :Finding cash gap after taking in to account projected cash inflows and outflows

CAIIB 2020 Bank Financial Management Mock Tests Set 5

Which of the following statements is true?


Options are :

  • A Cash Credit is a running account
  • Cash Credits may become long term in nature due to repeated rollovers
  • Overdrafts are allowed only against the security of inventories
  • Both a and b above

Answer :Both a and b above

Short-term interest rates are


Options are :

  • Usually lower than long-term rates.
  • Usually higher than long-term rates.
  • Lower than long-term rates during periods of high inflation only.
  • Not significantly related to long-term rates.

Answer :Usually lower than long-term rates.

Which of the following would normally be a current liability?


Options are :

  • Note Payable Due In Two Years
  • Unearned Revenue
  • Both a and b
  • None of the above

Answer :Unearned Revenue

CAIIB 2020 Bank Financial Management Mock Tests Set 6

Working Capital Gap means:


Options are :

  • Excess of Current Assets over Current Liabilities
  • Excess of Current Assets over Current Liabilities other than bank borrowings
  • Excess of Current Assets over Current Liabilities including working Capital term loan
  • None of these

Answer :Excess of Current Assets over Current Liabilities other than bank borrowings

The purpose of Assets Liability Management is to enhance the asset quality; quantify the risk associated with the assets and liabilities and further manage them. Such a process will involve which of the following steps: I)Reviewing the interest rate structure and comparing the same to the interest/product pricing of both assets and liabilities. II)Examining the loan and investment portfolios in the light of the foreign exchange risk and liquidity risk that might arise. III)Examining the credit risk and contingency risk that may originate either due to rate fluctuations or otherwise and assess the quality of assets. IV)Reviewing the actual performance against the projections made analyzing the reasons for any effect on the spreads.


Options are :

  • Only I
  • Only II,III,IV
  • Only I,II,III
  • All of the above viz. I,II,III,IV

Answer :All of the above viz. I,II,III,IV

Net Interest income is


Options are :

  • Interest earned on advances
  • Interest earned on investments
  • Total interest earned on advances and investment
  • Difference between interest earned and interest paid

Answer :Difference between interest earned and interest paid

CAIIB 2020 Bank Financial Management Mock Tests Set 7

Which of the following three steps are necessary for managing liquidity risk in banks: I) Developing a structure for managing liquidity risk. II)Setting tolerance level and limit for liquidity risk III) Measuring and managing liquidity risk IV) Mitigating liquidity risk.


Options are :

  • Only I
  • Only III,IV
  • Only I,II,III
  • all of the above viz I,II,III,IV

Answer :Only I,II,III

A bank manager is quite certain that interest rates are going to decrease within the next six months. How should the bank manager adjust the banks leverage-adjusted duration gap to take advantage of this anticipated fall?


Options are :

  • The bank should set its leverage adjusted duration gap to a negative position by lengthening duration of the liability relative to the asset or shortening duration of asset relative to the liability
  • The bank should set its leverage adjusted duration gap to a positive position by lengthening duration of the asset relative to the liability or shortening duration of liability relative to the asset
  • The bank should set its leverage adjusted duration gap to a positive position by lengthening duration of the liability relative to the asset or shortening duration of asset relative to the liability
  • The bank should set its leverage adjusted duration gap to a neutral position.
  • None of the above answers.

Answer :The bank should set its leverage adjusted duration gap to a positive position by lengthening duration of the asset relative to the liability or shortening duration of liability relative to the asset

Which of the following statements is correct w.r.t. Income recognition of Projects under implementation? (I)Banks may recognize income on accrual basis in respect of the projects under implementation which are classified as standard. (II)Banks should not recognize income on accrual basis in respect of the projects under implementation which are classified as a substandard asset. (III)Banks which have wrongly recognised income in the past should reserve the interest if it was recognised as income in the previous year(s).


Options are :

  • Only I,II
  • Only III
  • Only I
  • All of the above viz. I,II,III

Answer :All of the above viz. I,II,III

CAIIB 2020 Bank Financial Management Mock Tests Set 8

During periods of high and volatile inflation, a financial institutions:


Options are :

  • Interest rate risk exposure and Credit risk exposure tends to decrease.
  • Interest rate risk exposure and Credit risk exposure tends to be unaffected.
  • Interest rate risk exposure tends to increase but Credit risk exposure tends to be unaffected.
  • Interest rate risk exposure and Credit risk exposure tends to increase.
  • None of the given answers.

Answer :Interest rate risk exposure and Credit risk exposure tends to increase.

Net funding requirements are measured and managed through: I) The maturity ladder II) Alternative scenarios III) Measuring liquidity over the chosen time-frame IV) Assumptions used in determining cash flows


Options are :

  • Only I
  • Only III,IV
  • Only I,II,III
  • all of the above viz I,II,III,IV

Answer :all of the above viz I,II,III,IV

Which of the following is not one of the seven types of operational risk identified by the Basel Committee?


Options are :

  • Failed business strategies.
  • Clients, products, and business practices.
  • Employment practices and workplace safety.
  • Execution, delivery, and process management.

Answer :Failed business strategies.

CAIIB 2020 Bank Financial Management Mock Tests Set 1

____________  is the product emerging in the context of the funding of long-term infrastructure projects. Under this arrangement, the institution/the bank financing infrastructure projects will have an arrangement with any financial institution for transferring to the latter the outstanding in respect of such financing in their books on a predetermined basis.


Options are :

  • Takeout Finance
  • Export Project Finance
  • Post- Shipment Suppliers Credit
  • Pre- Shipment Suppliers Credit

Answer :Takeout Finance

Interest is recognized in case of NPA accounts on


Options are :

  • Accrual basis
  • Actual basis
  • Actual basis but after outstanding NPA is realized
  • a or b or c but as per bank's policy

Answer :Actual basis

___________ means spelling out procedures to ensure that information flows remain timely and uninterrupted, and provide senior management with the precise information it needs on asset and liability behaviours, in order to make quick decisions.


Options are :

  • Contingency Planning
  • Liquidity Management
  • Risk Management
  • Disaster Management

Answer :Contingency Planning

CAIIB 2020 Bank Financial Management Mock Tests Set 10

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