The CBI Foreign Exchange Officer exam demands a deep understanding of FEMA and recent RBI circulars. In this guide, we cover the 100 most important questions. This Vital mock test is specifically designed for the Central Bank of India Foreign Exchange Officer recruitment to help you master the concepts quickly.
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✅ General Practice
Q1Which of the following best describes the primary objective of the Foreign Exchange Management Act (FEMA), 1999, as stated in its preamble, and how does it fundamentally differ from its predecessor, FERA?Q2As per Section 1 of FEMA, 1999, the Act extends to the whole of India. Which of the following statements correctly defines its extra-territorial jurisdiction?Q3With reference to the Foreign Exchange Management (Export of Goods and Services) (Second Amendment) Regulations, 2025 (notified November 2025), consider the following statements regarding export realization:Q4Under Section 2(v) of FEMA, 1999, a "Person Resident in India" is generally defined as a person residing in India for more than 182 days during the course of the preceding financial year. Who among the following is EXCLUDED from this definition (i.e., treated as a Person Resident Outside India) despite satisfying the 182-day condition?Q5According to the November 2025 Amendment to the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, what is the specific privilege granted to exporters maintaining foreign currency accounts in International Financial Services Centres (IFSCs) regarding the retention of export proceeds?Q6FEMA, 1999 operates through a decentralized framework of "Authorized Persons." Which of the following categories of Authorized Persons (APs) is permitted to undertake all current and capital account transactions according to RBI directions?Q7Consider the following statements regarding the legal nature of contraventions under FEMA:Q8Scenario: Mr. Arjun, an Indian citizen who has lived in Mumbai all his life, accepts a job offer in London. He leaves India on September 25, 2025, to join his new employment. He does not visit India for the rest of the financial year.Q9Section 2(e) of FEMA, 1999 defines a "Capital Account Transaction." Which of the following accurately captures the core essence of this definition?Q10Under the Foreign Exchange Management (Current Account Transactions) Rules, 2000, transactions are categorized into three Schedules based on the nature of restrictions. Which Schedule lists transactions that are completely PROHIBITED?Q11With reference to the Liberalized Remittance Scheme (LRS) for resident individuals, consider the following statements regarding the permissible limits and tax implications (Tax Collected at Source - TCS) as of the Financial Year 2025-26:Q12Under Schedule I of the Current Account Transactions Rules, certain remittances are prohibited. For which of the following purposes is the remittance of foreign exchange NOT prohibited?Q13Consider the following statements regarding the convertibility of the Indian Rupee:Q14Scenario: Ms. Riya, a resident Indian, wants to gift USD 50,000 to her friend residing in New York. She has already spent USD 210,000 in the current financial year on foreign travel and investing in US stocks. Can she proceed with this gift under LRS?Q15Which of the following pairs regarding Schedule II (Transactions requiring Central Government Approval) is INCORRECTLY matched?Q16Scenario: A Resident Individual wants to use the LRS route to purchase a life insurance policy from a foreign insurer. The policy is issued by an insurer in the UK. Is this permitted?Q17Under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023 (and subsequent 2025 amendments), which of the following is the standard permissible mode for receipt of export proceeds?Q18With reference to the October 2025 Amendment regarding Merchanting Trade Transactions (MTT), the Reserve Bank of India extended the permissible time period for the "Foreign Exchange Outlay" (the gap between import payment and export receipt). What is the new limit?Q19Regarding the Exchange Earners’ Foreign Currency (EEFC) Account, which of the following statements is INCORRECT?Q20As per the June 2025 relaxation concerning Advance Remittance for imports, Authorised Dealer Banks can now allow advance remittance for the import of shipping vessels up to what limit without a Bank Guarantee or Standby Letter of Credit (SBLC)?Q21Consider the following statements regarding Advance Payments received against Exports under the amended FEMA regulations (Nov 2025):Q22What is the role of EDPMS (Export Data Processing and Monitoring System) in the FEMA compliance architecture?Q23Consider the following regarding "Third Party Payments" for Export/Import:Q24Scenario: An Indian Status Holder Exporter exported goods worth USD 1 Million on January 1, 2026. Under the new regulatory framework (post-Nov 2025), what is the latest date by which he must realize and repatriate the full value of the export to avoid contravention, assuming no specific extension is sought?Q25Under the FEMA adjudication hierarchy, if a person is aggrieved by an order passed by the Adjudicating Authority (e.g., a Special Director of Enforcement), to whom does the first appeal lie?Q26Section 13 of FEMA, 1999 prescribes the quantum of penalty for contraventions. If the amount involved in the contravention is quantifiable, what is the maximum penalty that can be imposed?Q27As per the Foreign Exchange (Compounding Proceedings) Rules, 2024 (which superseded the 2000 Rules), the monetary limit for an Assistant General Manager (AGM) of the RBI to compound a contravention has been significantly enhanced. What is the new limit?Q28Under Section 37A (introduced later to target illicit assets), if the Authorized Officer has reason to believe that foreign exchange or immovable property is held outside India in contravention of Section 4, what specific action can they take regarding assets within India?Q29The Foreign Exchange (Compounding Proceedings) Rules, 2024 also revised the application fee structure. What is the new fee required to be paid along with the application for compounding?Q30Consider the following statements regarding Civil Imprisonment under FEMA:Q31With reference to appeals to the Appellate Tribunal under FEMA, consider the following statements:Q32Scenario: Mr. X has been issued a Show Cause Notice by the Directorate of Enforcement (ED) for a contravention involving ₹3 Crores. The adjudication proceedings are currently in progress. Mr. X now wants to apply for Compounding of this contravention to the RBI to settle the matter. Is he eligible?Q33According to the conceptual framework of the Balance of Payments (BoP), which of the following constitutes the "Acid Test" for classifying a transaction under the Capital Account?Q34In the structure of India’s Balance of Payments, "Invisibles" are a critical component of the Current Account. Which of the following is NOT a sub-component of Invisibles?Q35Identify the transaction that will be recorded in the Current Account, despite being related to a foreign investment or loan.Q36Consider the following international transactions regarding a hypothetical Indian manufacturing firm, "Bharat Motors Ltd." Choose the correct option.Q37Which of the following pairs is INCORRECTLY matched with its classification in India's Balance of Payments?Q38"A deficit in the Current Account (CAD) must necessarily be financed by a net surplus in the Capital/Financial Account or a drawdown of Foreign Exchange Reserves."Q39Scenario: An Indian 'Unicorn' startup, TechVeda, raises $100 Million by selling 15% of its shares to a Japanese Venture Capital fund. Simultaneously, it pays $2 Million as a "facilitation fee" to a Singapore-based investment bank for arranging the deal.Q40In the context of the International Monetary Fund (IMF), India has accepted the obligations under Article VIII of the IMF Articles of Agreement since August 1994. What does this status signify?Q41Which expert committee appointed by the Reserve Bank of India laid down the roadmap and preconditions (fiscal deficit, inflation, NPA levels) for moving towards Full Capital Account Convertibility (FCAC)?Q42Regarding the Liberalised Remittance Scheme (LRS) for resident individuals, identify the correct statements:Q43Scenario: Mr. Sharma, a resident Indian, wishes to remit INR 15 Lakhs in FY 2025-26 for two different purposes:Q44Under the Foreign Exchange Management (Current Account Transactions) Rules, 2000, certain transactions are Prohibited (Schedule I). Remittance is NOT allowed for which of the following?Q45Which of the following routes for Foreign Investment in India is INCORRECTLY described?Q46"A person resident in India is strictly prohibited from maintaining a Foreign Currency Account (FCA) inside India."Q47Under which Section of the Foreign Exchange Management Act (FEMA), 1999, does the Reserve Bank of India grant authorization to any person to deal in foreign exchange or foreign securities as an authorized person?Q48Which of the following correctly lists the four categories of "Authorized Persons" currently under the purview of the RBI's Master Direction on Money Changing Activities?Q49Consider the following statements regarding the permitted activities of an Authorized Dealer (AD) Category-II:Q50Full Fledged Money Changers (FFMCs) are authorized to undertake all of the following activities EXCEPT:
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Frequently Asked Questions
Why is the distinction between Capital and Current Account critical for the Central Bank of India Foreign Exchange Officer exam?
It is the foundation of FEMA compliance. Current Account transactions (Trade/Interest) are generally free unless prohibited (Schedule I). Capital Account transactions (Loans/Investments) are prohibited unless explicitly permitted by RBI/Govt. Confusing the two leads to compliance failures.
Can a Resident Individual open a Foreign Currency Account in India?
Generally, no. However, specific exceptions exist: EEFC accounts for exporters and RFC (Resident Foreign Currency) accounts for returning NRIs. IFSC units are legally treated as ‘non-resident’ zones.
What is the role of EDPMS in export monitoring?
EDPMS (Export Data Processing and Monitoring System) is the IT backbone that links Customs (Shipping Bills), Banks (Inward Remittance), and RBI. It tracks un-realized exports and generates the ‘Caution List’ for defaulters.
How has the Compounding process changed in 2024?
The 2024 Rules doubled the application fee to ₹10,000 (+GST), allowed digital payments (NEFT), and removed the restriction that barred compounding if an appeal was pending. It also increased delegation powers to regional officers (e.g., AGM limit raised to ₹60 Lakhs).
What is the ‘75% Rule’ for FFMCs?
To prevent hoarding, FFMCs must sell at least 75% of the foreign currency notes they purchase from other banks/FFMCs to the public (travelers) every quarter. They cannot just trade inter-bank.
Can an Authorized Dealer Category-II handle export payments?
No. AD Category-II entities are restricted to “Specified Non-Trade Current Account Transactions” like private remittances, medical, and education fees. Trade transactions (Export/Import) require an AD Category-I license.
What happens if an exporter fails to realize proceeds within 15 months?
They must apply for an extension (ETX) through their AD Bank. If the delay is unjustified, they risk being flagged on the EDPMS Caution List, which blocks future exports.
Is PAN mandatory for LRS transactions?
Yes, PAN is mandatory for all LRS remittances, regardless of the amount (even below $25,000), to track the aggregate $250,000 limit and apply TCS correctly.
What is the difference between FDI and FPI?
FDI (Foreign Direct Investment) is long-term investment in unlisted equity or >10% of listed equity. FPI (Foreign Portfolio Investment) is generally <10% in listed equity and is considered more volatile (‘Hot Money’).
Does the Central Bank of India Foreign Exchange Officer exam cover the latest 2025 amendments?
Yes, recent exams focus heavily on updates like the extended export realization period (15 months), new TCS rates, and the split of powers between Govt (NDI) and RBI (Debt).