CAIIB · Bank Financial Management · Module C — Treasury Management
CAIIB BFM Unit 20 — Treasury Products: 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 20 — Treasury Products (Module C — Treasury Management). The CAIIB Mock Centre holds 184 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 C184 MCQs in the Mock Centre5 free belowPaper on 12 December
Key facts examiners test from this unit
The forex market and its products — spot settles on the second working day; TOD < TOM < spot < forward for USD/INR; forwards are spot ± the interest differential, not forecasts.
Swaps, forex surpluses and interbank money — a swap pairs spot and forward; nostro balances earn nothing without a sweep; call is overnight, notice 2–14 days, term up to a year.
Money market instruments and RBI's facilities — T-bills, CMBs, CP and CDs are discounted short paper; repo is secured borrowing with a haircut; the SDF and MSF bound the corridor.
Changed since the textbook
100% FDI in insurance (2 May 2026). The Finance Ministry notified 100% FDI in insurance under the automatic route on 2 May 2026, amending the FEMA rules (LIC capped at 20%). Private banks remain at 74% (49% automatic) and public sector banks at 20%. Source: Business Standard
Non-deliverable rupee derivatives barred, then mostly restored (1 Apr 2026). Amid pressure on the rupee, and after capping banks' net open rupee positions on 27 March 2026, RBI barred banks from offering non-deliverable rupee derivatives from 1 April 2026; on 20 April 2026 it withdrew most of the bar, keeping a ban on such deals with related parties. Source: Finnovate
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 184 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 USD/INR deal is struck on a Thursday in a week with no holidays. What are the value dates for cash, tom and spot?
Why (a): Cash (TOD) settles on the deal date, TOM on the next working day and spot on the second working day after the deal. From a Thursday that gives Thursday, Friday and, skipping the weekend, Monday. Quotes are for spot unless stated otherwise. (b) is wrong: TOM is the next working day, Friday. (c) is wrong: Saturday is not a settlement day. (d) is wrong: Cash settles on the deal date itself.
Question 2 of 5
What is a forward-to-forward swap?
Why (c): 20.1.3: a simultaneous purchase and sale of currency on two forward dates (forward to forward) is also a swap. (a) is wrong: That is a spot-forward swap, such as the textbook's USD/INR swap. (b) is wrong: The textbook describes no rollover at old rates. (d) is wrong: That is an interest rate swap, not a forex swap.
Question 3 of 5
What is the 'sweep facility' on a bank's nostro account?
Why (c): Nostro balances earn little or nothing, so correspondents offer a sweep: balances above an agreed minimum are invested overnight in the money market and earn interest, usually linked to the overnight rate, before returning next morning. The funds stay with the correspondent. (a) is wrong: Pooling currencies is not what the sweep does. (b) is wrong: The funds stay with the correspondent abroad. (d) is wrong: RBI plays no part in nostro sweeps.
Question 4 of 5
A bank lends ₹200 crore in the interbank market for 10 days and another ₹100 crore for 15 days. How are the two placements classified?
Why (b): Call money is overnight, notice money runs beyond overnight up to 14 days, and term money from 15 days up to one year. So the 10-day placement is notice money and the 15-day placement is term money. (a) is wrong: Call money is overnight. (c) is wrong: 15 days is beyond the 14-day limit for notice money. (d) is wrong: 10 days falls within notice money.
Question 5 of 5
What is the borrowing limit for primary dealers in call and notice money?
Why (c): 20.2's table gives primary dealers 225% of NOF for call and notice money, and 225% of NOF for term money. (a) is wrong: 100% of capital funds applies to scheduled commercial banks. (b) is wrong: 2% of aggregate deposits applies to co-operative banks. (d) is wrong: Primary dealers do have a prudential limit.
0 of 5 answered.
Traps in this unit
Spot is not "today".
Notice money is not overnight.
The treasury clears the cost of FC funds; it does not appraise credit.
Practise all 184 questions on Unit 20. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the BFM Online Mock Centre unlocks all 7,600+ BFM 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.