CAIIB · Bank Financial Management · Module C — Treasury Management
CAIIB BFM Unit 21 — International Equity and Debt 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 21 — International Equity and Debt 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
Foreign investment — any foreign stake in an unlisted company, or 10% or more of a listed one on a fully diluted basis, is FDI, and stays FDI; below 10% is portfolio investment.
Depository receipts — GDRs and ADRs carry Indian shares abroad in foreign currency; IDRs carry a foreign company's shares in India in rupees.
ECB instruments, lenders and maturity — ECB is commercial borrowing from recognised non-residents, in foreign currency or rupees, with a minimum average maturity set by purpose.
Changed since the textbook
Individual non-residents may buy listed shares (12 Jun 2026). The FEM (Non-debt Instruments) (Third Amendment) Rules, 2026 let any individual non-resident, not only NRIs and OCIs, buy listed shares on a stock exchange, below 10% of a company each and 24% in all; holdings through the FPI and individual routes together must stay below 10%. Source: TaxGuru
Land-border rule eased (Press Note 2, 2026 Series) (1 May 2026). Press Note 2 (2026 Series), given effect by the NDI Amendment Rules from 1 May 2026, tests beneficial ownership against the PML Rules threshold: an investor from another country whose land-border beneficial owners hold up to 10% without control now uses the automatic route. Entities and citizens of the seven land-border countries still need Government approval; the Pakistan rule is unchanged. Source: Legal500
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
Which of these is a prohibited sector for investment by a person resident outside India?
Why (a): Lottery business heads the textbook's list of prohibited sectors. (b) is wrong: Insurance is open to foreign investment, within a cap. (c) is wrong: Private banks are open to foreign investment, within a cap. (d) is wrong: Food manufacturing is not on the prohibited list.
Question 2 of 5
In which currency are GDRs denominated?
Why (c): 21.2: GDRs are denominated in foreign currency. (a) is wrong: Rupee-only denomination is a feature of IDRs. (b) is wrong: GDRs are not rupee instruments, although the dividend on the underlying shares is paid in rupees to the depository. (d) is wrong: SDRs are an IMF reserve asset, not the currency of a GDR.
Question 3 of 5
What overall cap applies to capital raised by issuing IDRs in India, and who monitors it?
Why (a): 21.3 sets an overall cap of USD 5 billion, monitored by SEBI. (b) is wrong: USD 750 million a year is the textbook's automatic-route ECB limit. (c) is wrong: USD 50 million is the trade credit limit per import transaction for most importers. (d) is wrong: The textbook sets a cap.
Question 4 of 5
According to the textbook (the 2019 ECB rules), at what exchange rate is an INR ECB lender's foreign currency converted into rupees?
Why (a): Row 9, INR column: conversion to rupees is at the rate on the date of settlement. The ECB rules in force since 16 February 2026 (Schedule I of the FEM (Borrowing and Lending) Regulations) do not repeat this rule; they keep only the agreement-date rule for a change of currency. (b) is wrong: The agreement-date rule applies when FCY ECB is changed into INR. (c) is wrong: RBI sets no such rate. (d) is wrong: The textbook uses the settlement-date rate.
Question 5 of 5
What is the all-in-cost ceiling for a trade credit in Indian rupees?
Why (b): Row vi sets + 250 bps for INR trade credit. (a) is wrong: + 300 bps is for new FCY trade credit. (c) is wrong: + 450 bps was the textbook's ceiling for INR ECB, removed in February 2026. (d) is wrong: + 350 bps is for converted LIBOR-linked FCY trade credit.
0 of 5 answered.
Traps in this unit
Only tobacco manufacturing is barred, not trading.
A non-repatriable NRI investment is not "foreign investment".
A GDR issue raises equity, so the debt–equity ratio improves.
Practise all 184 questions on Unit 21. 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.