CAIIB · Advanced Bank Management · Module C — Credit Management
CAIIB ABM Unit 20 — Term Loans: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper I of the December 2026 cycle (Sunday 6 December 2026)
This is the free practice page for CAIIB ABM Unit 20 — Term Loans (Module C — Credit Management). The CAIIB Mock Centre holds 150 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.
ABM · Module C150 MCQs in the Mock Centre5 free belowPaper on 6 December
Key facts examiners test from this unit
Term loans, WCTL and deferred payment guarantees — term loans buy fixed assets and are repaid from future cash flows, so DSCR, not the current ratio, decides them; a DPG is a term loan in guarantee form.
Project appraisal: the eight areas — check that the proposal is acceptable, the people sound, the environment cleared, the economy and market receptive, the technology right and the numbers complete.
Commercial appraisal: break-even, DSCR, IRR and sensitivity — can the project cover its costs early (BEP), service its debt comfortably (DSCR), reward its owners (IRR) and survive bad news (sensitivity)?
Changed since the textbook
Banks allowed to finance acquisitions of companies (from 1 July 2026) (13 February 2026). RBI amended its directions on 13 February 2026 to let banks finance the acquisition of shares by eligible non-financial companies; revised directions of 30 March 2026 moved the start from 1 April to 1 July 2026, with earlier adoption permitted. Source: Acquisition financing by banks in India
RBI's instructions consolidated into 238 Master Directions (28 November 2025). RBI streamlined more than 9,000 circulars and directions issued up to 9 October 2025 into 238 Master Directions for its regulated entities, effective 28 November 2025 (drafts were published on 10 October 2025). Instructions that the textbook quotes from master circulars, such as those on financing infrastructure projects, now sit in these consolidated directions. Source: New commercial bank regulations
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 150 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
Which repayment schedule suits a salaried borrower with steady income?
Why (b): A constant income level suits EMIs. (a) is wrong: Crop-linked schedules suit farmers. (c) is wrong: A bullet does not match a monthly salary. (d) is wrong: Salaries, not asset sales, service the loan.
Question 2 of 5
What does economic appraisal mainly examine?
Why (b): It studies the macro-economy and the product's standing to see if incremental production will be accepted. (a) is wrong: That is management or financial appraisal. (c) is wrong: That is technical appraisal. (d) is wrong: That is commercial appraisal.
Question 3 of 5
How is the break-even point in units computed?
Why (d): BEP (units) = fixed cost ÷ contribution per unit. (a) is wrong: Variable cost is not what must be recovered. (b) is wrong: Price includes variable cost. (c) is wrong: Variable cost is already netted in contribution.
Question 4 of 5
What is the average gross DSCR over a repayment period?
Why (c): It is the horizontal sum of cash accrual plus interest divided by the sum of instalments plus interest; not the arithmetic mean. (a) is wrong: The minimum is a separate test. (b) is wrong: The textbook says it is not the arithmetic mean. (d) is wrong: One year does not represent the period.
Question 5 of 5
What minimum pre-enhanced rating must a bond have to receive PCE?
Why (a): PCE may be offered only for bonds whose pre-enhanced rating is BBB minus or better. (b) is wrong: It is stricter than the rule. (c) is wrong: AA minus is the kind of rating PCE aims to reach. (d) is wrong: BB plus is below investment grade.
0 of 5 answered.
Traps in this unit
A DPG is for the client's purchases, not sales.
WCTL funds current assets, not machinery.
Leaving IDC or working capital margin out of project cost.
Practise all 150 questions on Unit 20. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the ABM Online Mock Centre unlocks all 4,600+ ABM 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.