CAIIB · Banking Regulations & Business Laws · Module A — Regulations and Compliance
CAIIB BRBL Unit 1 — Legal Framework of Regulation of Banks: Free MCQs with Explanations
By Swarnakshi Jha (ex-banker) · Updated 29 October 2026 · Paper IV of the December 2026 cycle (Sunday 20 December 2026)
This is the free practice page for CAIIB BRBL Unit 1 — Legal Framework of Regulation of Banks (Module A — Regulations and Compliance). The CAIIB Mock Centre holds 179 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.
BRBL · Module A179 MCQs in the Mock Centre5 free belowIn the free demoPaper on 20 December
Key facts examiners test from this unit
The business of banking — banking is accepting public deposits to lend or invest them (Section 5(b)); it needs an RBI licence (Section 22) and 'bank' in the name (Section 7); banks may do Section 6 business but must not trade (Section 8) or keep non-banking property beyond 7 years (Section 9).
The constitution of banks — banks are statutory bodies (nationalised banks, SBI, RRBs), companies (private and foreign banks) or co-operative societies, and their constitution decides how far the BR and RBI Acts apply.
The Reserve Bank of India Act, 1934 — the RBI Act sets up the RBI and touches banks mainly through Section 42 (CRR) and Section 18 (direct discount); the 2019 amendments gave the RBI strong powers over NBFCs.
Changed since the textbook
Calendar 'fortnight' for CRR and returns (15 December 2025). In line with the Banking Laws (Amendment) Act, 2025, the RBI amended its CRR and SLR directions: the fortnight is now the 1st to the 15th and the 16th to the last day of each month, instead of Saturday to the second following Friday. Form A (Section 42 return) becomes a single fortnightly return and Form VIII monthly, from 15 December 2025. Source: RBI circular RBI/2025-26/148
RBI consolidates its rules into function-wise Master Directions (28 November 2025). The RBI issued 238 consolidated, function-wise Master Directions (some reports cite 244) for 11 types of regulated entities, including commercial banks, small finance banks, payments banks, RRBs, co-operative banks, AIFIs, NBFCs and ARCs, and repealed about 9,445 circulars. Drafts had been released on 10 October 2025. 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 179 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
How can the range of business permitted to banks under Section 6(1) be widened?
Why (a): Under Section 6(1)(o) the Central Government notifies other business that a banking company may engage in. (b) is wrong: The power to notify other business lies with the Central Government. (c) is wrong: A board cannot go beyond Section 6. (d) is wrong: Shareholders cannot widen the statutory list.
Question 2 of 5
Which bank's failure led the Government to amend the BR Act in 2020 to strengthen the RBI's control over co-operative banks?
Why (c): Problems in the co-operative sector, including the failure of PMC Bank in Mumbai in 2019-20, led to the Banking Regulation (Amendment) Act, 2020. (a) is wrong: Lakshmi Vilas Bank was a banking company. (b) is wrong: Yes Bank is a private sector banking company. (d) is wrong: Global Trust Bank failed in 2004 and was a banking company.
Question 3 of 5
The BR Act was given its present name with effect from 1 March 1966. What prompted the change?
Why (d): From 1 March 1966 the Act was extended to co-operative banks, which are not companies, so its original name, which referred to banking companies, no longer fitted. (a) is wrong: Fourteen banks were nationalised in 1969, after the renaming. (b) is wrong: RRBs came from 1975, after the renaming. (c) is wrong: NABARD was created in 1982, long after the renaming.
Question 4 of 5
Which of these powers under the BR Act is exercised by the Central Government rather than by the RBI?
Why (d): Under Section 45 the Central Government orders a moratorium on a bank on the RBI's application, and it sanctions any scheme of reconstruction or amalgamation that the RBI prepares. Licensing, inspection and directions are the RBI's own powers. (a) is wrong: The RBI grants banking licences itself. (b) is wrong: The RBI carries out inspections itself. (c) is wrong: The RBI issues such directions itself.
Question 5 of 5
Under Section 56, how is a reference to a 'banking company' read for a co-operative society?
Why (d): Section 56 says references to a 'banking company', 'the company' or 'such company' are construed as references to a co-operative bank. (a) is wrong: The State Government is not the bank. (b) is wrong: PACS are generally outside the Act under Section 3. (c) is wrong: The Registrar is a separate reading for 'Registrar'.
0 of 5 answered.
Traps in this unit
A bank may sell a pledged security to recover a loan; that is not trading.
Premises for the bank's own use are not caught by Section 9.
A nationalised bank is a statutory body, not a company.
Practise all 179 questions on Unit 1. 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.