CAIIB · Banking Regulations & Business Laws · Module B — Important Acts/Laws & Legal Aspects of Banking Operations, Part A
CAIIB BRBL Unit 9 — Negotiable Instruments Act, 1881: 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 9 — Negotiable Instruments Act, 1881 (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
Negotiable instruments: meaning and presumptions — the NI Act (in force 1 March 1882) treats promissory notes, bills and cheques payable to order or bearer as negotiable, and Section 118 presumes key facts about them until the contrary is proved.
Notes, bills, cheques and the parties — a note is an unconditional promise, a bill an unconditional order, and a cheque a bill on a banker payable on demand (including truncated and electronic cheques); Section 7 names the parties.
The paying banker — a bank must pay a duly drawn cheque covered by funds properly applicable (Section 31), and is protected only when it pays in due course (Section 10), which Section 85 extends to forged endorsements.
Changed since the textbook
Directors' liability needs specific averments (April 2026). In Saroj Pandey the Supreme Court held that a complaint must aver a director's specific role; signing board resolutions is not enough. Source: Verdictum
Collecting bank must present in time (April 2026). In Canara Bank v. Kavita Chowdhary the Supreme Court held a collecting bank is its customer's agent; letting cheques go stale was deficiency in service (6% compensation). Source: LiveLaw Business
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
Under Section 118(b), an instrument bearing a date is presumed to have been made on which date?
Why (d): Section 118(b) presumes that every negotiable instrument bearing a date was made or drawn on that date. (a) is wrong: The presumption is the date shown, not the next day. (b) is wrong: The due date is when payment falls due. (c) is wrong: The presumption is tied to the date shown.
Question 2 of 5
Who is an 'acceptor for honour' under Section 7?
Why (a): When a bill has been noted or protested for non-acceptance or better security and a person accepts it supra protest for the honour of the drawer or an endorser, he is an acceptor for honour. (b) is wrong: The drawee who accepts is simply the acceptor. (c) is wrong: The payee receives payment. (d) is wrong: A drawee in case of need is named in advance.
Question 3 of 5
A bank pays an order cheque in good faith and without negligence, on an endorsement that looks regular but later turns out to be forged. Does Section 85 protect the bank?
Why (b): Under Section 85(1), when an order cheque purports to be endorsed by or on behalf of the payee, the paying bank is discharged by payment in due course. A forged endorsement passes no title, but that does not make the paying bank liable when it pays in due course. (a) is wrong: Section 85 discharges the bank despite the forged endorsement. (c) is wrong: No prior report of loss is required. (d) is wrong: Section 85 protects payment in due course without such a check.
Question 4 of 5
Under Section 8, who is the 'holder' of a negotiable instrument?
Why (c): Section 8 defines the holder as a person entitled in his own name to possession of the instrument and to receive or recover the amount from the parties, so mere possession is not enough. Taking it for value, before maturity and in good faith describes a holder in due course. (a) is wrong: That describes the payee, who may or may not still be the holder. (b) is wrong: Possession without entitlement is not enough. (d) is wrong: That describes a holder in due course.
Question 5 of 5
For how long have cheques been valid under the RBI's directive effective 1 April 2012?
Why (a): The RBI's notification of 4 November 2011 directed banks to treat cheques, drafts, pay orders and banker's cheques as valid for three months from 1 April 2012. (b) is wrong: Six months was the earlier validity. (c) is wrong: The validity is three months. (d) is wrong: The validity is three months.
0 of 5 answered.
Traps in this unit
Presumptions are rebuttable.
Cheques have no days of grace.
The drawer of a bill is secondarily liable; the acceptor primarily.
Practise all 179 questions on Unit 9. 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.