CAIIB · Advanced Bank Management · Module D — Compliance in Banks and Corporate Governance
CAIIB ABM Unit 26 — Compliance Function in Banks: 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 26 — Compliance Function in Banks (Module D — Compliance in Banks and Corporate Governance). The CAIIB Mock Centre holds 90 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 D90 MCQs in the Mock Centre5 free belowPaper on 6 December
Key facts examiners test from this unit
Compliance and compliance risk — compliance means observing laws, regulations, codes and the bank's own rules, beyond what is legally binding; compliance risk is sanctions, financial loss and reputational loss.
Compliance policy, principles and procedures — a Board-approved compliance policy, reviewed yearly, and fourteen working principles keep the function enabled, independent and close to the business.
Compliance programme and scope of the function — a risk-based programme with an annual assessment and a fixed reporting calendar covers six areas of compliance across the bank, its subsidiaries and RRBs.
Changed since the textbook
RBI imposed 353 penalties of ₹54.78 crore in 2024-25 (1 June 2025). RBI's Annual Report for 2024-25 shows 353 penalties aggregating ₹54.78 crore: co-operative banks 264 (₹15.63 crore), private banks 15 (₹14.8 crore), public sector banks 8 (₹11.11 crore), NBFCs and ARCs 37 (₹7.29 crore) and housing finance companies 13 (₹0.83 crore). The breaches included the cyber security framework, exposure and IRAC norms, KYC, fraud classification and reporting, CRILC reporting and submissions to credit information companies. Source: Business Standard
RBI Master Direction on IT governance, risk, controls and assurance (7 November 2023). RBI issued the Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices, applicable from 1 April 2024 to banks and other large regulated entities. It requires a Board-level IT strategy committee and an IT governance framework, and sets expectations on information security, IT and cyber risk management, business continuity and disaster recovery, and information systems audit. Source: RBI Master Direction
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 90 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
Under RBI's September 2020 framework for the compliance function in banks, which of these is true of the Chief Compliance Officer (CCO)?
Why (c): RBI's 2020 framework protects the CCO's independence: a minimum fixed tenure of three years and no business targets or other roles that create a conflict of interest, so no 'dual hatting', such as also being CRO. Reporting to a business head would compromise that independence. (a) is wrong: Reporting to a business head compromises independence. (b) is wrong: Dual hatting is not allowed. (d) is wrong: The minimum tenure is three years.
Question 2 of 5
According to the textbook, which group of departments should the compliance department interact with at frequent intervals?
Why (a): The compliance department works with the bank's other control and support functions (legal, operational risk management, taxation and audit or inspection) at frequent intervals to take stock of developments and compliance gaps. Business lines such as dealing, sanction and sales are what compliance oversees. (b) is wrong: These are business and support units, not the control functions named. (c) is wrong: These are business lines that compliance oversees. (d) is wrong: These are corporate functions, not the control functions named.
Question 3 of 5
Through which channel may the compliance function report directly, bypassing normal reporting lines?
Why (b): The compliance function has a right of direct access to the Board of Directors or the Audit Committee of the Board, bypassing normal reporting lines. (a) is wrong: Public statements are not a reporting line. (c) is wrong: Shareholders are not the channel. (d) is wrong: Business heads are the normal line being bypassed.
Question 4 of 5
Whose accounting standards fall within the scope of a bank's compliance function?
Why (c): Accounting standards framed by the ICAI, as applicable to the bank, are within the scope. (a) is wrong: FEDAI deals with foreign exchange rules. (b) is wrong: IBA issues codes, not accounting standards. (d) is wrong: Branches do not frame standards.
Question 5 of 5
Where must a bank send prior intimation before appointing, transferring or removing its CCO?
Why (b): Prior intimation goes to the Department of Supervision, RBI, Central Office, Mumbai, with the candidate's profile and the MD & CEO's fit and proper certification. (a) is wrong: The Ministry is not the addressee. (c) is wrong: Exchanges are not the addressee. (d) is wrong: IBA has no such role.
0 of 5 answered.
Traps in this unit
Compliance includes voluntary codes and internal rules.
The Board, not the MD, approves the policy.
Launch only after the compliance review.
Practise all 90 questions on Unit 26. 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.