CAIIB · Bank Financial Management · Module D — Balance Sheet Management
CAIIB BFM Unit 26 — Components of Assets and Liabilities in Bank's Balance Sheet and their Management: 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 26 — Components of Assets and Liabilities in Bank's Balance Sheet and their Management (Module D — Balance Sheet Management). The CAIIB Mock Centre holds 297 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 D297 MCQs in the Mock Centre5 free belowPaper on 12 December
Key facts examiners test from this unit
The bank balance sheet: purpose, law and structure — the balance sheet shows where the money came from (liabilities and net worth) and where it went (assets), in a legal format every bank shares.
The liabilities side — owners' funds absorb losses first; deposits fund most of the bank; the rest is borrowings and amounts payable.
The assets side I: cash, bank balances, call money and investments — cash and RBI balances are the bank's ready money, inter-bank placements the next line of liquidity, and investments the SLR and income buffer.
Changed since the textbook
Financial Stability Report, June 2026 (30 Jun 2026). For SCBs: GNPA ratio 1.8% in March 2026, a multi-decadal low; CRAR 17.7%; NIM 3.3% in March 2026 (from 3.5%); credit growth 14.5% in 2025-26; profit after tax growth 7.2% in 2025-26 (16.8% in 2024-25). Source: OneFin summary
Investment Fluctuation Reserve (IFR) discontinued (18 May 2026). Existing IFR balances as on 17 May 2026 are transferred to statutory reserves, general reserves or the P&L account, and count as Tier 1 capital. Source: KNN India report
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 297 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 which Forms must banks prepare their balance sheet and profit and loss account?
Why (d): Section 29 requires the accounts "in the Forms set out in the Third Schedule of the Banking Regulation Act 1949". Form A is the balance sheet and Form B the P&L. (a) is wrong: The Second Schedule to the RBI Act is the list of scheduled banks, not a set of accounting forms. (b) is wrong: Schedule III is the general company format; banks follow the special Forms under the BR Act. (c) is wrong: Schedule II deals with useful lives of assets for depreciation, not with the format of a bank's accounts.
Question 2 of 5
As on which date does section 29 require the balance sheet to be prepared?
Why (a): Banks prepare the accounts "as on the last working day of the year or the period, as the case may be". (b) is wrong: The textbook says the last working day of the year or period; banks now close on 31 March, which may itself be the last working day. (c) is wrong: The AGM approves accounts already drawn up; it does not set the balance sheet date. (d) is wrong: Reporting Fridays were a CRR reporting convention, now replaced by fortnights, and never set the balance sheet date.
Question 3 of 5
Within SCBs' loans and advances in March 2021, which type was the largest?
Why (d): Term loans were ₹68,07,043 crore of ₹1,08,20,208 crore, about 62.9%. (a) is wrong: These were about 34.1% of advances. (b) is wrong: Bills were about 3.0% of advances. (c) is wrong: The table does not show these separately; they sit with CC and OD.
Question 4 of 5
Which items fall under "interest on balances with RBI and other inter-bank funds"?
Why (a): The head covers interest earned "on balances with RBI and other banks, call loans, money market placements, etc.". (b) is wrong: That is interest expended. (c) is wrong: That is other income. (d) is wrong: That is interest on advances and bills.
Question 5 of 5
Even if the maturities of assets and liabilities are matched, why can profit still change?
Why (a): The textbook: "Depending upon the movement of interest rates the net interest margin may increase or decrease resulting in corresponding increase or decrease in profit.". (b) is wrong: Rates can still change. (c) is wrong: Not the textbook's reason. (d) is wrong: They do not.
0 of 5 answered.
Traps in this unit
Reserves are a source (owners' funds), not cash.
Balances with RBI are an asset.
Overdue deposits are demand deposits.
Practise all 297 questions on Unit 26. 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.