MCQs on RBI ANDFEMA REGULATIONS Part - 1

Q.1:- As per regulation 6 of the FEM (Transfer or Issue of Any Foreign Security) Regulations, 2004, which of the following is included in calculating 100% of the net worth of the Indian party on the date of audited balance sheet:

• Capitalization of the export proceeds and other dues and entitlement as mentioned in regulation 11.
• Investment in agricultural operations through overseas offices or directly.
• Fifty percentage of the value of guarantees issued by the Indian party to or on behalf of the JV or WOS.
• All of the above

Q.2:- Investment policy Guidelines of a Bank should be approved by:

• Board of Directors
• Central Government
• RBI
• None of the above

Q.3:- As per the prudential norms for classification, valuation and operation of investment portfolio by banks, which of the following transfer are not allowed, except under exceptional circumstances?

• HTM to HTF
• HFT to ASF
• ASF to HTF
• ASF to HTM

Q.4:- Loans given by more than one bank to a single borrower is called

• Bridge Loan
• Multiple Loan
• Syndicate Loan
• Term Loan

Q.5:- Sub Standard Assets is an asset which has been a non performing assets for

• Period of less than 12 months
• Period of more than 12 months but less than 36 months
• Period of more than 36 months
• Period of 90 days

Q.6:- Which of the following is not included in calculating 100% of the net worth of the Indian party on the date of last audited balance sheet?

• Capitalization of export proceeds and other dues and entitlements as mentioned in Regulation 11.
• Cash remittance by market purchase and /or equivalent rupee investments.
• Investment in agricultural operations through overseas offices or directly.
• Fifty percent of the value of guarantees issued by the Indian party to or on behalf of the JV or WOS.

Q.7:- As per the prudential norms for classification, valuation and operation of investment portfolio by banks, in which of the following circumstances need arises to determine whether impairment of the investment held to maturity has occurred?

• When a company has defaulted in repayment of its debt obligations.
• When the company has incurred losses for a continuous period of three years and the net worth has consequently been reduced by 25% or more.
• In the case of new company or a new project when the originally projected date of achieving the breakeven point has been extended.
• All of the above

Q.8:- As per the prudential norms for classification, valuation and operation of investment portfolio by banks, when outstanding loan is converted to equity, debenture of other financial instrument, under which investment category should they be classified?

• HTM
• ASF
• HFT
• None of the above

Q.9:- As per the guideline for the sale of stressed assets, when valuation report of the assets proposed to be sold from the two external valuer are recommended?

• When the value of the exposure is beyond Rs. 50 crores.
• When the value of the exposure is beyond Rs. 20 crores.
• When the value of the exposure is beyond Rs. 100 crores.
• When the value of the exposure is beyond Rs. 10 crores.

Q.10:- As per RBI circular dated May 4, 2010, in case of a transfer of shares of an unlisted company by a Resident to a Non-Resident, the transfer price shall not be less than the fair value as determined by:

• Category I Merchant Banker
• Lawyer
• Chartered Accountant
• Company Secretary

Q.11:- When the remittance is made from India, for the purpose of investment under foreign exchange management (Transfer or issue of any foreign security) Regulation. 2004, who shall make the valuation of share of the company outside India, when the amount of investment is more than USD 5 million:

• Cost accountant
• Chartered accountant
• Category I Merchant bankers registered with SEBI
• Any Merchant bankers registered with SEBI.

Q.12:- Which of the following statement is not correct?

• Investment in LLP shall not be less than Fair Price worked out as per any internationally accepted in valuation form
• In case of transfer of profit shares LLP from a person resident outside India, to a person resident in India, the transfer should be for a consideration not less than the fair price of the profit share.
• The issue of shares to a person resident outside India, though subscription to the memorandum of association should be the face of value of the shares.
• The pricing of the partly paid up share should be determined upfront.

Q.13:- A person resident outside India other than an individual who is citizen of Pakistan or Bangladesh or an entity which is registered/ incorporated in Pakistan or Bangladesh, may purchase convertible notes issued by an Indian startup company for an amount of ………in a single tranche:

• Twenty five lakh rupees or more
• Fifty lakh rupees or more
• Twenty lakh rupees or more
• Ten lakh rupees or more

Q.14:- As per Regulation 3 of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017……….,may, on an application made to it and for sufficient reasons, permit a person resident outside India to make any investment in India:

• Central Government
• Reserve Bank of India
• Ministry of external affairs
• All of the above

Q.15:- As per regulation 6 of the FEM (Transfer or Issue of Any Foreign Security) Regulations, 2004, the total financial commitment of the Indian party in Joint Ventures/Wholly Owned Subsidiaries shall not exceed……….of the Indian Party as on the date of the last audited balance sheet:

• 100% of the net worth
• 50% of the total assets
• 100% of the total assets
• 50% of the net worth

Q.16:- As per Regulation 16 of the FEM (Transfer or issue of any foreign security) Regulation, 2004, Sale proceeds of shares/securities shall be repatriated to India immediately on receipt thereof and in any case not later than ……..from the date of sale of the shares/securities and documentary evidence to this effect shall be submitted to the Regional office of the Reserve Bank through the designated authorized dealer:

• 120 days
• 90 days
• 60 days
• 30 days

Q.17:- When the banks should decide the category of investments:

• At any time between acquisition and sale
• At the time of sale
• At the time of acquisition
• All of the above

Q.18:- Which of the following is not a committee to be formed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015?

• Audit committee
• Stakeholders relationship committee
• Finance committee
• Risk management committee

Q.19:- The banks are allowed to include investments included under HTM category upto ………….% of their total investments:

• 25
• 20
• 30
• 15

Q.20:- As per the guidelines for the sale of stressed assets, how should the assets proposed to be sold be valued?

• The valuation of the stressed assets can be internal or external as per the bank policy.
• Only internal valuation is enough to determine the valuation of assets to be sold.
• Compulsory external valuation is necessary.
• None of the above

Q.21:- Bank cannot sale the stress assets to:

• NBFC
• Pvt Limited Co
• Financial Institution
• ARC

Q.22:- Which of the following conditions are required to be fulfilled by a person resident in India, being an individual or a listed Indian company or a mutual fund registered in India to invest in share of an overseas listed company or rated bonds/ fixed income securities of such companies:

• In the case of investment by a listed company, the investment shall not exceed 25 of its net worth as on the date of its audited balance sheet.
• If investment by mutual fund, the investment shall be within the ceiling stipulated by SEBI.
• Every transaction shall be routed through the designated branch of an authorized dealer in India.
• All of the above

Q.23:- What can be the price of the capital instrument of listed Indian company in case of a transfer by a person not resident in India to a person resident in India?

• The price higher than the price at which the price at which the preferential share allotment can be made under the SEBI guidelines.
• The price lower than the price worked out in accordance with the relevant SEBI guidelines.
• The price that has been assured to the person resident outside India at the time of making the investment.
• None of the above

Q.24:- Whether a person who is a citizen of Bangladesh or Pakistan or is an entity incorporated in Bangladesh or Pakistan can purchase capital instruments of an Indian company:

• Yes, with prior Government approval
• No
• Yes, with prior Reserve Bank approval
• None of the above

Q.25:- As per Regulation 4 of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017, ………may, on an application made to it and for sufficient reasons, permit an Indian entity or an investment vehicle, or a venture capital fund or a Firm or an Association of Persons or a proprietary concern to receive any investment in India from a person resident outside India or to record such investment:

• Central Government
• Reserve Bank of India
• Ministry of external affairs
• All of the above

Q.26:- Security acquired by the bank with the intention to hold up to maturity will be classified under:

• Current assets
• Held to maturity
• Available for sale
• Held for trading

Q.27:- As per the guideline for the sale of stressed assets, what is the minimum time to be given for due diligence to the prospective buyer of the assets?

• One week
• Four weeks
• Three weeks
• Two weeks

Q.28:- 100% FDI is allowed in:

• Asset management
• Construction
• Cash & ATM
• Agricultural sector

Q.29:- The aggregate exposure of a bank to the capital markets in all forms (both fund based and non-fund based) should not exceed………… of its net worth as on March 31 of the previous year:

• 10 per cent
• 25 per cent
• 50 per cent
• 40 per cent

Q.30:- Treasury bills should be valued at:

• Carrying cost
• Acquisition price
• Replacement price
• None of the above

Q.31:- Amongst the members of the audit committee, as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015._____members shall be independent directors.

• One-third
• Two-fifth
• Two-third
• All the directors shall be independent directors

Q.32:- Bank investment in unlisted non-SLR securities should not exceed_______ % of its total investment in non-SLR securities as on March 31, of the previous year:

• 10
• 5
• 15
• 20

Q.33:- An Indian party is eligible to make overseas direct investment under the:

• General Permission
• Permission of RBI
• Automatic Route
• Approval Route

Q.34:- Which of the following constitute FDI?

• A speculator trying to profit by buying company share on foreign stock exchange.
• A tourist purchases foreign currency to spend on Holiday abroad.
• AUK Energy Company buys territory abroad where it expects to find oil reserves.
• All of the above

Q.35:- As per Regulation. 6 of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations,2017, a person resident outside India and having investment in an Indian company may make investment in capital instruments (other than share warrants) issued by such company as a rights issue or a bonus Issue subject to:

• The offer made by the Indian company is in compliance with the provisions of the Companies Act, 2013.
• Such issue shall not result in a breach of the Sectoral cap applicable to the company.
• The shareholding on the basis of which the rights issue or the bonus issue has been made must have been acquired and held as per the provisions of these Regulations.
• All of the above

Q.36:- Foreign Exchange Management (Transfer or issue of Security by a Person Resident outside India) Regulations, 2017 came into force on:

• 1st November 2017
• 7th November 2017
• 4th November 2017
• 15th November 2017

Q.37:- What is the limit up to which a person resident in India being a listed company invests in the share of rated bonds or fixed income securities issued by a listed overseas company?

• 25% of its net worth as on the date of its last audited balance sheet.
• There is no upper limit for investments.
• As stipulated by the ceiling decided by SEBI.
• 10% of its net worth as on the date of its last audited balance sheet.

Q.38:- Within what time limit is the Custodian bank of the FPI selling the security or the counterparty entity selling, the security to the FPI will have to report the deal?

• By the end of two business day after the trade day, within the prescribed reporting time.
• By the trade itself within the prescribed reporting time.
• On the trade date its self within the prescribed time.
• None of the above

Q.39:- At what interval Banks should review their investment portfolio?

• Annually
• Half yearly
• Quarterly
• Monthly

Q.40:- Which of the following category of Investments need not be marked to market and will be carried at acquisition cost, unless it is more than the face value, in which case the premium should be amortized over the period remaining to maturity as per the prudential norms for classification, valuation and operation of investment portfolio by banks?

• HFT
• HTM
• ASF
• All of the above

Q.41:- Non-performing assets of a bank is called stressed assets which comprises of

• Non Performing Assets + Restructured Assets
• Non Performing Assets + Restructured Assets + Written Off Accounts
• Non Performing Assets + Written Off Accounts
• Non Performing Assets

Q.42:- When interest rates fall, a Bank that perfectly hedges its portfolio of treasury securities in the futures market:

• Has no change in its income
• Experience gain
• May suffer loss or experience gain
• Suffer loss

Q.43:- Which of the following factors are considered by the RBI in considering the application made to it by an Indian party, as per regulation 9 of the foreign exchange management (transfer or issue of any foreign security) Regulation, 2004?

• Financial position and business track record of the Indian party and the foreign entity
• Prima facie viability of the JV/WOS outside India.
• Contribution to external trade and other benefits which will accrue to India through such investment.
• All of the above

Q.44:- Which of the following is correct in case of investments by a person resident outside India by way of subscription to memorandum of association?

• The shares shall be issued will be in compliance to the provisions of the Companies Act, 2013.
• The shares shall be issued at face value.
• The entry route and sectoral caps have to be considered.
• All of the above.

Q.45:- Direct Investment outside India does not include:

• By way of purchase of existing shares of a foreign entity either by market purchase or private placement or through stock exchange
• Portfolio investment
• Investment by way of contribution to the capital or subscription to the Memorandum of Association of a foreign entity
• None of the above

Q.46:- General permission has not been granted to person resident in India to purchase of security:

• As bonus shares on existing holdings of Foreign Currency Shares.
• Out of funds held in Resident Foreign Currency Accounts.
• Out of foreign currency resources outside India in the case when the party is not permanently residing India.
• Out of fund held in the Resident Indian Currency Account.

Q.47:- Which of the following restriction on any investment made by a person resident outside India specified by the regulation 5 of the FEM (Transfer or Issue of Security by a Person Resident outside India) Regulations, 2017:

• Entry route restriction
• Sectoral caps
• Investment limits
• All of the above

Q.48:- When an investment can be made outside India?

• Investment outside India can be made as per the provisions of the foreign exchange management act and rules and regulations made there under.
• There is no restriction on making any investment outside India.
• Indian entity can make any investment outside India, except in the business of real estate or banking, which need permission.
• Both (b) and (c)

Q.49:- As per regulation 6 of the FEM (Transfer or Issue of Any Foreign Security) Regulations, 2004, for the purpose of calculation of total financial commitment of Indian party to a joint venture or wholly owned subsidiary, 100% net worth calculation does not include which of the following:

• External Commercial Borrowing in conformity with other parameters of the ECM guidelines
• Utilization of the amount raised by ADRs/GDRs by Indian party
• Cash remittance by market purchase.
• Investment in agriculture operations through overseas; offices or directly.

Q.50:- STRIPS Stands for:

• Separate Trading of Registered Interest and Principal Securities.
• Separate trading of Registered Interest and Primary Securities.
• Separate trading of Regulated Interest and Principal Securities.
• Separate Transfer of Registered Interest and Primary Securities.