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JAIIB · Principles & Practices of Banking · Module B — Functions of Banks

JAIIB PPB Unit 22 — Principles of Lending, Types of Borrowers and Credit Facilities: Free MCQs with Explanations

By Swarnakshi Jha (ex-banker) · Updated 20 September 2026 · Paper 2 of the November 2026 cycle (22 November 2026)

This page is a free slice of our JAIIB PPB question bank for Unit 22 — Principles of Lending, Types of Borrowers and Credit Facilities (Module B — Functions of Banks). The Mock Centre holds 64 questions on this unit alone, every one with a why-right / why-wrong explanation; below are the facts examiners keep returning to, five of those questions to try, and the traps that cost marks.

PPB · Module B64 MCQs in the Mock Centre5 free belowPaper on 22 November 2026

Key facts examiners test from this unit

  1. Six principles: Safety (first), Liquidity, Profitability (3–4% spread), Purpose (end-use), Diversification, Security (cushion only); 7 Cs of credit.
  2. Individuals: Sec. 11/12 ICA capacity; minors' contracts VOID (necessities: Sec. 68, estate only); lucid intervals; pardanashin women — explanation burden on the bank; illiterate — thumb impression valid; joint borrowers — all sign, joint & several.
  3. Partnerships: Sec. 4 definition; registration optional (Sec. 69 disability); max 50 partners; implied authority (Sec. 19); death dissolves; HUF — Karta (unlimited) vs coparceners (family share), daughters coparceners (2005), necessity burden on the LENDER.

5 free practice questions — tap an option

Five basic questions from this unit. Answers lock on the first tap, exactly as in the exam, and a short explanation opens underneath. The Mock Centre adds the moderate and tough questions, why every other option is wrong, the concept capsule and the exam tip — with your score and revision dates tracked.

Question 1 of 5
Not concentrating exposure on one borrower/group/sector reflects the principle of:
Why (c): Not concentrating exposure on one borrower, group or sector is DIVERSIFICATION OF RISKS — spread the book across geography, industry and borrowers.
Question 2 of 5
A contract with a minor is:
Why (c): A contract with a minor is VOID AB INITIO — Mohori Bibee vs Dharmodas Ghose settled that a minor's contract is a nullity from the start.
Question 3 of 5
The senior-most member managing the HUF is the:
Why (b): The senior-most member managing the HUF is the KARTA — the manager; members with birth-rights in the property are the coparceners.
Question 4 of 5
An LLP is incorporated under the:
Why (b): An LLP is incorporated under the LLP ACT, 2008 — the hybrid statute that gives a partnership's flexibility inside a body corporate.
Question 5 of 5
Working capital means:
Why (a): Working capital means FUNDS FOR DAY-TO-DAY OPERATIONS — the money that keeps stocks moving and receivables funded until cash returns.
0 of 5 answered.

Traps in this unit

Confusable AConfusable BThe difference
SafetySecurityThe FIRST principle vs the cushion (last resort)
Sec. 11 ICASec. 12 ICACompetence categories vs soundness-of-mind test
Practise all 64 questions on Unit 22. The free demo opens a slice of every subject with the same explanations; the PPB Online-only pass unlocks all 3,280 PPB questions, the full and module mocks, Smart Revision and the Readiness Score for one year (₹1,299). Not sure where you stand? Take the free 10-question test first.
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← Unit 21: The Right to Information Act 2005 · Unit 23: Appraisal and Assessment of Credit Facilities → · All PPB units · JAIIB 2026 guide

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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. Regulatory figures verified as of September 2026; verify from official sources before relying on them in practice.