CAIIB · Banking Regulations & Business Laws · Module B — Important Acts/Laws & Legal Aspects of Banking Operations, Part A
CAIIB BRBL Unit 11 — Payment and Settlement Systems Act, 2007: 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 11 — Payment and Settlement Systems Act, 2007 (Module B — Important Acts/Laws & Legal Aspects of Banking Operations, Part A). 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 B179 MCQs in the Mock Centre5 free belowPaper on 20 December
Key facts examiners test from this unit
The PSS Act and its key definitions — since 12 August 2008 the PSS Act has made the RBI the regulator and supervisor of payment systems in India, which it now runs through the Payments Regulatory Board; stock exchanges are outside it.
Settlement terms, derivatives and LEIs — gross systems settle each instruction separately, netting leaves only net claims, and the Act's newer definitions (derivative, issuer, LEI, trade repository) support identifying parties in financial transactions.
The Payments Regulatory Board and authorisation — the RBI acts through a six-member Payments Regulatory Board, and no one but the RBI may run a payment system without its authorisation, granted on the Section 7 factors.
Changed since the textbook
Master Directions on authorisation (15 Jun 2026). The RBI consolidated seven instructions on authorisation, including net worth, perpetual validity, cooling periods and on-tap applications. Source: RBI
Authentication Directions (25 Sept 2025). From 1 April 2026, digital payments need two authentication factors, one of them dynamic (card-present excepted); issuers compensate customers' losses. Source: KPMG
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
A non-bank company wants to set up and run ATMs in its own brand. What does it need?
Why (b): White-label ATM operators are non-bank entities authorised by the RBI under the PSS Act to set up and run ATMs in their own brand, with a sponsor bank for settlement. (a) is wrong: A banking licence is not needed for running ATMs. (c) is wrong: SEBI has no role. (d) is wrong: ATM networks are payment systems needing authorisation.
Question 2 of 5
Under the PSS Act's definition of a derivative, which of these is NOT a derivative?
Why (b): The PSS Act treats as a derivative an instrument whose value is derived from an underlying such as interest rates, exchange rates, credit ratings or credit indices, or security prices, so swaps, currency forwards and credit default swaps qualify. A fixed-rate term deposit derives its value from no underlying. (a) is wrong: An interest rate swap derives its value from interest rates. (c) is wrong: A forward derives its value from exchange rates. (d) is wrong: A CDS derives its value from credit risk.
Question 3 of 5
On which of these grounds may the RBI revoke a payment system operator's authorisation under Section 8?
Why (d): Failure to comply with the RBI's orders or directions is one of the grounds for revocation listed in Section 8(1). A fall in volumes, a minority stake sale or a change of chief executive is not, in itself, a ground. (a) is wrong: A fall in volumes is not a ground in Section 8(1). (b) is wrong: A minority stake sale is not a ground. (c) is wrong: A change of chief executive is not a ground.
Question 4 of 5
During an inspection under Section 14, whom may the RBI's officer call upon to furnish information or documents?
Why (d): Section 14 lets the officer inspect at the premises and call upon any employee of the system provider or of a participant, or any other person working there, to furnish the information or documents he requires. (a) is wrong: The power is not limited to directors. (b) is wrong: It is not limited to a compliance officer the provider names. (c) is wrong: The persons called upon need not consent.
Question 5 of 5
What is UPI Lite designed for?
Why (d): UPI Lite, introduced by NPCI in 2022 under the RBI's framework for small-value digital payments, is an on-device wallet that the user loads from his bank account, with his UPI PIN, and then uses for small payments without entering the PIN each time. (a) is wrong: UPI Lite is for small payments, not large ones. (b) is wrong: It is not a cross-border remittance channel. (c) is wrong: Voice-based payments from feature phones use UPI 123PAY.
0 of 5 answered.
Traps in this unit
Net positions must sum to zero.
Individuals are outside the LEI rule.
51% is a floor, not a cap.
Practise all 179 questions on Unit 11. The free CAIIB demo opens Units 1–2 of every paper with full explanations; the BRBL Online Mock Centre unlocks all 5,800+ BRBL 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.