CAIIB · Bank Financial Management · Module A — International Banking
CAIIB BFM Unit 2 — Liberalised Remittance Scheme (LRS) and Other Remittance Facilities for Residents: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper II of the December 2026 cycle (Saturday 12 December 2026)
This is the free practice page for CAIIB BFM Unit 2 — Liberalised Remittance Scheme (LRS) and Other Remittance Facilities for Residents (Module A — International Banking). The CAIIB Mock Centre holds 266 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.
BFM · Module A266 MCQs in the Mock Centre5 free belowIn the free demoPaper on 12 December
Key facts examiners test from this unit
LRS, FEMA and the capital–current divide — resident individuals, minors included, may remit up to USD 250,000 a financial year for permitted current or capital account purposes, under FEMA's "no unless allowed" structure.
Permissible and non-permissible remittances — Schedule I is closed to everyone, Schedule II needs the named ministry's approval, Schedule III is the bank's own call within LRS.
Operational guidelines and documents — check who (PAN, KYC), why (purpose, Form A2) and where the money came from (source of funds) before every LRS remittance.
Changed since the textbook
FATF call-for-action list after the June 2026 plenary (19 Jun 2026). FATF plenary of 17–19 June 2026: DPRK and Iran remain subject to countermeasures; Myanmar to enhanced due diligence. Source: FATF
LRS outflows in FY 2025-26 (22 May 2026). Total USD 28.98 billion (−2%): travel USD 16.87 bn, maintenance of relatives USD 3.53 bn, equity and debt investment USD 2.65 bn (+56%), studies USD 2.31 bn (−21%), deposits USD 705 mn, property USD 529 mn. Source: Business Standard
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 266 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
In a nutshell, Section 10(6) of FEMA is about:
Why (b): The textbook: Section 10(6) is about using foreign exchange availed from an authorised dealer for the purpose for which it was availed. (a) is wrong: RBI's power over authorised persons is Section 11. (c) is wrong: The definition of foreign exchange is Section 2(n). (d) is wrong: Compounding is a settlement process, not what Section 10(6) says.
Question 2 of 5
The overall LRS limit for a resident individual is:
Why (c): The limit is USD 250,000 per financial year for all permissible current and capital account transactions together, and it has stayed there since 2015. (a) is wrong: The limit runs by financial year, not calendar year. (b) is wrong: USD 200,000 is an old limit, not today's. (d) is wrong: The limit resets on 1 April; it is not a rolling window.
Question 3 of 5
Which documents must accompany each remittance under the Liberalised Remittance Scheme?
Why (c): Every LRS remittance needs Form A2, the application-cum-declaration, which may be submitted online, and the remitter's PAN, which is mandatory for all LRS transactions. No RBI approval is needed within the limit, and Form A2 goes with each remittance, not once a year. (a) is wrong: PAN is needed for all LRS remittances, not just capital account ones. (b) is wrong: Form A2 goes with each remittance, not once a year. (d) is wrong: No RBI approval is needed within the limit.
Question 4 of 5
Besides the prescribed relations, the 2013 definition of "relative" includes:
Why (d): Section 2(77) covers members of an HUF, husband and wife, and the prescribed relations. (a) is wrong: Cousins are not in the definition. (b) is wrong: Business partners are not relatives. (c) is wrong: Grandchildren were dropped in 2013.
Question 5 of 5
A customer who opened an account two months ago asks the bank to remit USD 50,000 under LRS to buy shares abroad. What should the bank do?
Why (d): LRS expects the remitter to have banked with the AD for at least a year; for a new customer the AD instead carries out due diligence on the account and obtains the previous year's bank statement or, failing that, the latest income-tax assessment order or return, to satisfy itself about the source of funds. No RBI approval is needed within the limit. (a) is wrong: A new customer is not refused; the bank does extra due diligence. (b) is wrong: PAN and Form A2 are needed, but a new customer also needs source-of-funds evidence. (c) is wrong: No RBI approval is needed within the limit.
0 of 5 answered.
Traps in this unit
HUFs and trusts cannot use LRS; minors can.
Interest on loans is current account.
Nepal and Bhutan: no forex released.
Practise all 266 questions on Unit 2. This unit is part of the free CAIIB demo: register with your e-mail and the whole unit opens, with full why-right / why-wrong explanations, a 60-question test in each paper and Smart Revision of your mistakes.
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.