CAIIB · Advanced Business & Financial Management · Module D — Emerging Business Solutions
CAIIB ABFM Unit 19 — Hybrid Finance: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper III of the December 2026 cycle (Sunday 13 December 2026)
This is the free practice page for CAIIB ABFM Unit 19 — Hybrid Finance (Module D — Emerging Business Solutions). The CAIIB Mock Centre holds 190 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five practice questions with explanations, and the traps that cost marks.
ABFM · Module D190 MCQs in the Mock Centre5 free belowPaper on 13 December
Key facts examiners test from this unit
Hybrid securities: nature, merits and types — hybrids sit between debt and equity; higher yield and steadier price, but hard to assess.
Preference share capital — prior claim over equity, no legal claim to dividend; redeemable within 20 years.
Redemption of preference shares and bank PNCPS — redeem from a fresh issue or from profits with a capital redemption reserve; bank PNCPS are perpetual, non-cumulative AT1.
Changed since the textbook
Dividends stay taxable in shareholders' hands under the Income-tax Act, 2025 (1 April 2026). Since 1 April 2020, when dividend distribution tax was abolished, dividends, including preference dividends, have been taxed in the hands of shareholders, and the company gets no deduction for them. The Income-tax Act, 2025, in force from 1 April 2026, replaced the Income-tax Act, 1961, with its provisions renumbered; the treatment of dividends continues. Source: EY Global Tax News
Revised ECB framework: FCCBs within a simpler borrowing regime (16 February 2026). The RBI's amended borrowing and lending regulations (in force 16 February 2026) define ECB as any commercial borrowing that involves agreed interest and repayment of principal, expressly including FCCBs and FCEBs. The limit is the higher of USD 1 billion of outstanding ECB or total borrowing of up to 300% of net worth; the cost is to be in line with market conditions, with no all-in-cost ceiling; the minimum average maturity is generally 3 years (1 to 3 years for manufacturers borrowing up to USD 150 million). Source: Mondaq
5 free practice questions — tap an option
Five practice questions from this unit. Answers lock on the first tap, exactly as in the exam, and an explanation opens underneath. The Mock Centre has all 190 questions on this unit, from easy to tough, with caselets and key-in numericals, why every other option is wrong and the exam tip — and tracks your score and revision dates.
Question 1 of 5
A company has not paid the dividend on its preference shares for 2021-22 and 2022-23. At its next general meeting, on what may the preference holders vote?
Why (a): Under section 47, preference holders normally vote on resolutions directly affecting their rights; once their dividend has been unpaid for two years or more, they may vote on every resolution. (b) is wrong: The two-year default widens their votes to all resolutions. (c) is wrong: Their votes extend to all resolutions, not dividends alone. (d) is wrong: Their votes extend to all resolutions, not directors alone.
Question 2 of 5
What decides the dividend on an adjustable-rate preference share?
Why (a): Adjustable-rate preference shares have no fixed rate; their dividend depends on prevailing market interest rates. (b) is wrong: The board cannot reset the rate at will. (c) is wrong: The rate is not tied to the equity dividend. (d) is wrong: A rate fixed for life describes ordinary preference shares.
Question 3 of 5
What right does a warrant give its holder?
Why (b): A warrant gives the holder the right but not the responsibility to buy a predetermined number of equity shares at a predetermined price during a predetermined period. (a) is wrong: A warrant carries no obligation, and the price is preset. (c) is wrong: A warrant pays no interest and converts into shares. (d) is wrong: A right to sell back is a put.
Question 4 of 5
In a preferential allotment of warrants in India, how much of the price must the buyer pay upfront?
Why (c): In preferential allotments the buyer of warrants pays 25% of the price upfront; the balance is paid on exercise. (a) is wrong: Half is not the rule. (b) is wrong: The statutory minimum is 25%. (d) is wrong: The full price is not payable upfront.
Question 5 of 5
In an FCCB, which party holds the right of early redemption under a put option?
Why (b): Under a put option the right of early redemption lies with the bondholder; under a call it lies with the issuer. (a) is wrong: The issuer's right is a call. (c) is wrong: A trustee does not hold redemption options. (d) is wrong: An exchange is not party to the bond.
0 of 5 answered.
Traps in this unit
Hybrids do not normally carry control.
The dividend is not 'guaranteed'.
Preference holders do not vote ahead of equity holders.
Practise all 190 questions on Unit 19. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABFM Online Mock Centre unlocks all 4,000+ ABFM questions, the full-length papers with caselets and key-ins, module mocks and Smart Revision for 18 months (₹1,499).
Independent study aid — not affiliated with, endorsed by, or sponsored by the Indian Institute of Banking & Finance (IIBF). Exam pattern, dates, fees and passing criteria are set by IIBF — always confirm the current rules at iibf.org.in. CAIIB content follows rules and developments up to IIBF's cut-off of 30 June 2026 (where a rule changed later, the update box says so); verify from official sources before relying on them in practice.