INDIAN BANKING RADAR (IBR) - IBPS PO MAINS — BANKING INTELLIGENCE MOCK

🔥 PLATINUM SERIES 2.0 | VOL. 214

📅 THURSDAY, 29 OCTOBER 2026

🎯 TARGET EXAMINATIONS

IBPS PO Mains • SBI PO • Other Banking Examinations

📝 Questions: 20 | Marks: 20

⏳ Suggested Time: 15 Minutes

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Q1. A bank discovers that a borrower has submitted forged invoices to obtain working capital finance. Which approach best reflects sound credit-risk management:

A. Investigate the suspected fraud, assess exposure and initiate appropriate action

B. Renew the credit limit immediately

C. Ignore the discrepancy if interest is serviced regularly

D. Transfer the exposure without disclosure

E. Continue disbursements until the next annual review

Q2. A bank issues a financial guarantee on behalf of its customer. When may the bank become liable to pay the beneficiary:

A. Immediately upon issuing the guarantee

B. When a valid demand is made in accordance with the guarantee's terms

C. Only after the guarantee becomes a fixed deposit

D. Only when the applicant closes the account

E. Whenever the beneficiary requests payment, regardless of the guarantee's terms

Q3. A bank's net interest income increases, but its average interest-earning assets increase at a faster rate. What may happen to its Net Interest Margin (NIM):

A. It must increase

B. It must remain unchanged

C. It may decline

D. It becomes equal to return on equity

E. It cannot be calculated

Q4. Which regulatory framework primarily governs the transfer of loan exposures by regulated lenders in India:

A. Deposit Insurance and Credit Guarantee Corporation Act

B. Payment and Settlement Systems Act

C. Securities Contracts (Regulation) Act

D. RBI's applicable Transfer of Loan Exposures framework

E. Foreign Exchange Management Act exclusively

Q5. A bank detects transactions inconsistent with a customer's established account activity. What is the appropriate compliance response:

A. Close the account automatically

B. Inform the customer that a suspicious transaction report will necessarily be filed

C. Ignore the transactions if sufficient funds are available

D. Treat every unusual transaction as conclusive proof of money laundering

E. Investigate under AML procedures and make required regulatory reports where applicable

Q6. A bank engages a Lending Service Provider (LSP) to facilitate digital loans. Which statement is correct:

A. The regulated lender remains responsible for compliance with applicable regulatory requirements

B. The LSP assumes all regulatory responsibility

C. The LSP may collect unrestricted personal data

D. The lender need not disclose borrowing costs

E. The LSP may independently change sanctioned loan amounts

Q7. A bank funds long-term fixed-rate loans substantially through short-term deposits. Which risk deserves particular attention:

A. Counterfeit currency risk alone

B. Asset-liability mismatch and associated liquidity and interest-rate risks

C. Foreign exchange risk alone

D. Cash-counting risk alone

E. Elimination of interest-rate risk

Q8. A customer discovers incorrect repayment information in a credit report. What should the customer do:

A. Apply for another PAN

B. Stop repaying all existing loans

C. Dispute the inaccurate information through the relevant lender and credit information company's prescribed processes

D. Demand removal of all historical repayment information

E. Open another bank account to erase the entry

Q9. Which statement correctly distinguishes a bank's lien from its right of set-off:

A. Both permit unrestricted appropriation of every customer asset

B. A lien always requires immediate sale of property

C. Set-off applies only to immovable property

D. A lien generally involves retaining property or securities, while set-off involves adjusting mutual monetary claims subject to applicable conditions

E. Neither concept is relevant to recovery of bank dues

Q10. A bank's Early Warning Signal (EWS) system identifies unusual fund movements and suspected diversion of funds. What should the bank do:

A. Immediately declare the borrower a wilful defaulter

B. Waive the outstanding interest

C. Continue disbursements without further monitoring

D. Ignore the signals unless a court issues an order

E. Investigate promptly, assess risk and initiate appropriate corrective action

Q11. What is the principal purpose of classifying a bank account as inoperative under applicable RBI instructions:

A. To identify accounts without customer-induced transactions for the prescribed period and apply relevant safeguards

B. To confiscate the account balance

C. To convert every savings account into a fixed deposit

D. To cancel the depositor's legal claim

E. To permanently prohibit digital transactions

Q12. A customer's KYC record is available through the Central KYC Records Registry (CKYCR). What should a bank do when updating the customer's KYC:

A. Ignore CKYCR under all circumstances

B. Treat the CKYCR identifier as a credit score

C. Use the record in accordance with applicable retrieval, verification, consent and updating requirements

D. Disclose the customer's information without restrictions

E. Assume that all future KYC obligations are eliminated

Q13. What is the primary purpose of the RBI's Prompt Corrective Action (PCA) framework for banks:

A. Guaranteeing minimum annual profits

B. Automatically liquidating every loss-making bank

C. Replacing statutory audits

D. Identifying financial weaknesses and triggering appropriate supervisory corrective measures

E. Exempting weak banks from capital requirements

Q14. A project loan appears viable under normal conditions but becomes unviable when sales decline and input costs rise. What should the bank do:

A. Treat the project as risk-free

B. Assess sensitivity, repayment resilience and risk-mitigation measures before deciding on the loan

C. Ignore the adverse scenario

D. Rely exclusively on collateral value

E. Automatically reduce the interest rate

Q15. Under the applicable RBI digital-lending framework, which disclosure helps a borrower understand the cost of a digital loan:

A. The lending officer's personal investment details

B. The bank's internal staff appraisal report

C. The complete list of other borrowers

D. The lender's confidential risk model

E. The applicable Key Facts Statement (KFS) and Annual Percentage Rate (APR) disclosures

Q16. A bank's exposure to a single borrower is approaching the applicable regulatory concentration limit. What should it do:

A. Assess aggregate exposure under the applicable regulatory limits before extending further credit

B. Ignore the limit for long-standing customers

C. Automatically exclude unsecured exposures

D. Divide the exposure among branches to avoid aggregation

E. Assume the limit applies only to public sector banks

Q17. Which statement correctly distinguishes operating profit from net profit:

A. Operating profit equals cash held in branches

B. Net profit excludes operating expenses

C. Net profit reflects applicable provisions, taxes and other relevant items beyond operating profit

D. Operating profit includes only interest on government securities

E. Both measures must always be identical

Q18. A bank proposes outsourcing an IT function to an external service provider. Which principle should guide the decision:

A. Outsourcing transfers all regulatory responsibility

B. The service provider is exempt from security requirements

C. The bank need not assess operational resilience

D. The bank remains accountable for applicable compliance and must manage outsourcing risks through appropriate controls and oversight

E. Customer information may be shared without safeguards

Q19. A borrower defaults on a loan. Which approach best reflects prudent banking practice regarding provisioning:

A. Avoid provisioning until the borrower closes the business

B. Apply the relevant income-recognition, asset-classification and provisioning requirements

C. Write off every overdue loan immediately in full

D. Assume collateral eliminates credit deterioration

E. Postpone provisioning indefinitely if recovery proceedings begin

Q20. Which measure best strengthens a bank's fraud-risk governance:

A. Allowing each branch to decide independently whether to report fraud

B. Removing escalation procedures

C. Treating every early warning signal as proof of employee misconduct

D. Restricting fraud monitoring to annual statutory audits

E. Establishing appropriate governance, early-warning systems, investigation, accountability and reporting procedures

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✅ ANSWER KEY

Q1.A

Q2.B

Q3.C

Q4.D

Q5.E

Q6.A

Q7.B

Q8.C

Q9.D

Q10.E

Q11.A

Q12.C

Q13.D

Q14.B

Q15.E

Q16.A

Q17.C

Q18.D

Q19.B

Q20.E

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📖 EXPLANATIONS & LEARNING POINTS

Q1. Fraud Risk Management

Suspected forged invoices require investigation, assessment of the bank's exposure, preservation of evidence and appropriate action under applicable procedures.

Learning point: Regular interest servicing does not eliminate fraud risk.

Q2. Bank Guarantee

A bank guarantee creates a contingent obligation. Payment liability depends on the guarantee's terms and a valid demand presented in accordance with those terms.

Learning point: A bank guarantee is distinct from a cash deposit.

Q3. Net Interest Margin

NIM is generally calculated as net interest income divided by average interest-earning assets, expressed as a percentage.

If net interest income grows more slowly than average interest-earning assets, NIM may decline.

Learning point: Higher net interest income does not necessarily mean higher NIM.

Q4. Transfer of Loan Exposures

Loan transfers by regulated lenders must comply with the applicable RBI framework and its requirements concerning eligibility, documentation and other prescribed conditions.

Learning point: Loan transfers are subject to regulatory requirements.

Q5. AML Compliance

Unusual transactions require risk-based examination. Banks must investigate relevant circumstances and submit prescribed reports where required.

Learning point: An unusual transaction is a warning indicator, not automatic proof of money laundering.

Q6. Digital Lending

A Lending Service Provider performs specified activities for a regulated lender. Outsourcing does not remove the lender's regulatory responsibilities.

Learning point: The regulated lender remains accountable for applicable compliance.

Q7. Asset-Liability Management

Long-term fixed-rate loans funded by short-term deposits can create refinancing pressure, liquidity risk and interest-rate risk.

Learning point: ALM addresses maturity mismatches, repricing differences and cash-flow requirements.

Q8. Credit Information Disputes

Incorrect credit information should be disputed through the relevant lender and credit information company's prescribed procedures.

Learning point: Accurate credit reporting supports fair lending decisions.

Q9. Lien vs Set-off

A lien generally involves retaining property or securities under an enforceable right. Set-off involves adjusting mutual monetary claims where legally permissible.

Learning point: Neither right gives a bank unrestricted authority over every customer asset.

Q10. Early Warning Signals

EWS indicators identify possible credit stress or irregularities. Banks should investigate promptly and take appropriate corrective measures.

Learning point: An early warning signal does not automatically establish fraud or wilful default.

Q11. Inoperative Accounts

The applicable RBI framework identifies accounts without customer-induced transactions for the prescribed period and provides for safeguards and reactivation procedures.

Learning point: Inoperative status does not automatically extinguish the customer's claim to the balance.

Q12. CKYCR

The Central KYC Records Registry facilitates centralised KYC record retrieval. Banks must follow applicable requirements concerning verification, access, updating and customer information.

Learning point: Centralised KYC does not eliminate every ongoing KYC obligation.

Q13. Prompt Corrective Action

PCA enables supervisory intervention when a bank meets specified regulatory trigger conditions relating to financial indicators.

Learning point: PCA is a supervisory corrective framework, not automatic liquidation.

Q14. Project Appraisal

Sensitivity analysis assesses how changes in sales, costs and other assumptions affect project viability and repayment capacity.

Learning point: Credit appraisal should consider plausible adverse scenarios, not merely optimistic projections.

Q15. KFS and APR

The Key Facts Statement and applicable Annual Percentage Rate disclosures help borrowers understand the cost and material terms of a loan.

Learning point: Transparent pricing supports informed borrowing decisions.

Q16. Concentration Risk

Banks must assess aggregate borrower and connected-group exposures against applicable regulatory limits before extending additional credit.

Learning point: Dividing exposure across branches does not eliminate aggregate concentration risk.

Q17. Operating Profit vs Net Profit

Operating profit reflects operating performance. Net profit incorporates applicable provisions, taxes and other relevant income and expenses.

Learning point: Higher operating profit does not necessarily produce higher net profit.

Q18. IT Outsourcing

Banks must undertake appropriate due diligence, establish contractual safeguards and monitor outsourced IT activities.

Learning point: Outsourcing a function does not automatically transfer regulatory accountability.

Q19. Provisioning

Banks must apply the relevant income-recognition, asset-classification and provisioning requirements based on the account's circumstances.

Learning point: Collateral and recovery proceedings do not automatically eliminate the need to recognise credit deterioration.

Q20. Fraud-Risk Governance

Effective fraud-risk management requires appropriate governance, early-warning mechanisms, investigation procedures, accountability and timely reporting.

Learning point: Fraud prevention is an organisation-wide responsibility.

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