CAIIB · Banking Regulations & Business Laws · Module A — Regulations and Compliance
CAIIB BRBL Unit 7 — Financial Sector Legislative Reforms & Financial Stability and Development Council: 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 7 — Financial Sector Legislative Reforms & Financial Stability and Development Council (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 belowPaper on 20 December
Key facts examiners test from this unit
Why reform: Narasimham Committee I — many regulators and fragmented laws, plus financial repression, made reform necessary; Narasimham I (1991) found high reserves, directed credit and subsidies draining banks.
Narasimham Committee II and the FSLRC — Narasimham II (1998) tightened capital and asset quality; the FSLRC (2011–2013) set out to rewrite financial laws, and banking laws are still being amended.
Banking reforms: competition and prudence — reforms brought competition (private, foreign and differentiated banks), market pricing and lower reserves, and Basel-style prudential norms.
Changed since the textbook
Financial Stability Report, June 2026 (30 June 2026). The RBI's Financial Stability Report, reflecting the FSDC Sub-committee's view, put banks' gross NPA ratio at 1.8% (March 2026), projected at 1.9% by March 2028. Source: Business Today
EASE 8.0 for public sector banks (10 March 2026). The Government told Parliament that EASE 8.0 ('EASERise') for FY 2025-26 covers risk and resilience, innovation (including AI), socio-economic impact and excellence. Source: Taxheal (PIB)
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
Which of these was a recommendation of the first Narasimham Committee (1991)?
Why (a): The first Narasimham Committee recommended phasing down the SLR and CRR, deregulating interest rates, prudential norms on income recognition, asset classification and provisioning, and a four-tier structure with a few large banks at the top. It wanted banks freed from directed investment, not more of it, and it advised against further nationalisation. (b) is wrong: It proposed a four-tier structure, not a single bank. (c) is wrong: It advised against further nationalisation. (d) is wrong: It wanted the SLR cut, not raised.
Question 2 of 5
Which of these was a recommendation of the FSLRC (report, 2013)?
Why (b): The FSLRC, chaired by Justice B.N. Srikrishna, proposed a non-sectoral Indian Financial Code to replace much of the existing financial law, with the RBI continuing to regulate banking and payments and a unified agency for the other financial regulators. It did not propose merging the RBI with SEBI, and its proposed Resolution Corporation would have strengthened deposit protection, not abolished it. (a) is wrong: It kept the RBI separate, with a unified agency for the other regulators. (c) is wrong: It did not propose nationalising insurers. (d) is wrong: Its proposed Resolution Corporation would have strengthened deposit protection.
Question 3 of 5
Which body was set up to decide banks' and financial institutions' money claims quickly, outside the civil courts?
Why (d): Debt recovery tribunals, set up under the RDB Act, 1993, decide claims of banks and financial institutions of ₹20 lakh and more quickly, outside the civil courts. (a) is wrong: The SAT hears appeals against SEBI's orders. (b) is wrong: The NCLT handles insolvency and company law cases, not banks' money claims as such. (c) is wrong: The Ombudsman hears customers' complaints against banks, not banks' claims.
Question 4 of 5
Which of these is an indirect instrument of monetary policy?
Why (d): Indirect instruments include open market operations and the purchase and repurchase of government securities. (a) is wrong: Reserve requirements are a direct instrument. (b) is wrong: Administered rates are direct. (c) is wrong: Selective credit controls are direct.
Question 5 of 5
Which of these is a function of the FSDC?
Why (a): The FSDC monitors macro-prudential supervision of the economy, including the functioning of large financial conglomerates. (b) is wrong: NBFC licences come from the RBI. (c) is wrong: The RBI fixes the SLR and CRR. (d) is wrong: The Government decides PSB mergers, in consultation with the RBI.
0 of 5 answered.
Traps in this unit
Narasimham I is the Committee on the Financial System; II is on Banking Sector Reforms.
The FSDC (2010) came before the FSLRC (2011).
Narasimham II is 1998, not 1991.
Practise all 179 questions on Unit 7. 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.