CAIIB · Bank Financial Management · Module A — International Banking
CAIIB BFM Unit 6 — External Commercial Borrowings and Foreign Investments in India: 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 6 — External Commercial Borrowings and Foreign Investments in India (Module A — International Banking). The CAIIB Mock Centre holds 284 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 A284 MCQs in the Mock Centre5 free belowPaper on 12 December
Key facts examiners test from this unit
Other operational rules for ECBs — how ECB money may change currency, be hedged, be limited, wait until used, be refinanced and be secured.
Foreign investment: framework and key concepts — the NDI Rules govern foreign equity; the 10% line on a fully diluted basis separates FDI from FPI.
Who can invest, where and in what — eligible investors put eligible instruments into eligible entities, outside the prohibited sectors.
Changed since the textbook
Individual non-residents may buy listed shares: below 10% each, 24% together (12 Jun 2026). FEM (Non-debt Instruments) (Third Amendment) Rules, 2026 (S.O. 3030(E)), in force on 12 June 2026: any individual person resident outside India, not only NRIs and OCIs, may buy listed Indian equity on the stock exchange on a repatriable basis; each individual below 10%, all such individuals together up to 24%. Source: TaxGuru
SEBI SWAGAT-FI framework in force (1 Jun 2026). SEBI circular of 16 January 2026 took effect on 1 June 2026: trusted foreign investors (SWAGAT-FI) that qualify as FVCIs may apply for FVCI and FPI registration with one set of documents (same custodian and depository participant); registration blocks and the KYC review cycle are 10 years. Source: TeamLease RegTech
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 284 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 NOT a "real estate activity" for ECB purposes?
Why (d): The definition excludes construction or development of industrial parks, integrated townships and SEZs. (a) is wrong: Buying and selling property is a real estate activity. (b) is wrong: Renting property is a real estate activity. (c) is wrong: Agency work is included in the definition.
Question 2 of 5
Alternative Investment Funds are governed by the SEBI (AIFs) Regulations of:
Why (a): The textbook cites the SEBI (AIFs) Regulations, 2012. (b) is wrong: 2014 is the year of the REIT and InvIT regulations. (c) is wrong: 2019 is the year of the FPI regulations. (d) is wrong: 2000 is the year FEMA came into force.
Question 3 of 5
NRIs resident in Nepal and Bhutan may invest in India subject to:
Why (d): NRIs resident in Nepal and Bhutan may invest in India provided the amount comes in free foreign exchange through banking channels; rupees from those countries do not qualify. No separate RBI approval is needed for this. (a) is wrong: The textbook states a payment condition, not an approval. (b) is wrong: The money must come in free foreign exchange. (c) is wrong: The free foreign exchange condition applies.
Question 4 of 5
When a PROI sells shares on a stock exchange, the FC-TRS is the responsibility of:
Why (a): The textbook marks sales on a stock exchange as the non-resident's responsibility. (b) is wrong: The exchange does not file FC-TRS. (c) is wrong: The investee company files FC-GPR, not this FC-TRS. (d) is wrong: RBI receives the form.
Question 5 of 5
The Depository Receipt Return (DRR) is filed by:
Why (b): The textbook puts the DRR on the domestic custodian, within 30 days of the close of the issue or programme. (a) is wrong: The custodian files it. (c) is wrong: FPIs do not file it. (d) is wrong: SEBI does not file it.
0 of 5 answered.
Traps in this unit
Unweighted averaging of repayment dates.
The 2022 relaxations ended on 31 December 2022.
Using today's shares, not fully diluted.
Practise all 284 questions on Unit 6. 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.