IIBF MSME Exam – Top 190 Questions for 2026 Exam

Are you appearing for the IIBF MSME Exam 2026? In this guide, we cover the 190 most important questions. This comprehensive mock test is specifically designed for the IIBF Certificate Course on MSME to help you master the concepts quickly.

IIBF MSME Exam – Top 190 Questions for IIBF Certificate Course on MSME (2026)

Revised MSME Classification (Effective 2025-26)

Category	Investment in Plant & Machinery	Annual Turnover
Micro	Up to ₹2.5 Crore	Up to ₹10 Crore
Small	Up to ₹25 Crore	Up to ₹100 Crore
Medium	Up to ₹125 Crore	Up to ₹500 Crore

IIBF MSME Exam MockTest by Bank Promotion Exam Guide

Feature	Details
Topic	IIBF MSME Exam
Total Questions	190 MCQs
Level	Moderate to Hard
Target Exams	IIBF Certificate Course on MSME
Updated	2026

Why This IIBF MSME Exam Test Matters?

Exam Weightage: The latest IIBF syllabus places heavy emphasis on the revised 2025 classification norms and digital platforms like TReDS and Udyam. Success in the exam requires a deep understanding of updated credit guarantee schemes and regulatory frameworks.
Important Topics: The IIBF MSME Exam covers:

Revised MSME Classification (Investment & Turnover)
Priority Sector Lending (PSL) Targets
CGTMSE and PMEGP Guidelines
Insolvency (PPIRP) and Recovery Laws (SARFAESI)

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IIBF MSME Exam – Top 190 Questions for IIBF Certificate Course on MSME (2026)

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Q. 1 of 191

As per the revised classification criteria announced in the Union Budget 2025 (effective April 1, 2025), which of the following correctly defines a “Small Enterprise” in the MSME sector?

A Investment in Plant and Machinery does not exceed Rupees 10 crore; Turnover does not exceed Rupees 50 crore

B Investment in Plant and Machinery does not exceed Rupees 25 crore; Turnover does not exceed Rupees 100 crore

C Investment in Plant and Machinery does not exceed Rupees 50 crore; Turnover does not exceed Rupees 250 crore

D Investment in Plant and Machinery does not exceed Rupees 5 crore; Turnover does not exceed Rupees 10 crore

With reference to the revised MSME Classification Limits effective from April 2025, consider the following statements regarding a Medium Enterprise:
1. Its Investment in Plant and Machinery must not exceed 125 Crore rupees.
2. Its Annual Turnover must not exceed 500 Crore rupees.
3. Exports of goods or services are excluded while calculating the turnover limit.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

Scenario: “GreenPack Solutions,” a packaging firm, has the following financial data for the year ending March 2026:
Investment in Plant & Machinery: Rupees 15 Crore.
Total Annual Turnover: Rupees 80 Crore.
(Export Turnover included in total: Rupees 20 Crore).
Based on the revised April 2025 limits, how is this enterprise classified?

A Micro Enterprise

B Small Enterprise

C Medium Enterprise

D Large Enterprise

Scenario: “TechSol Pvt Ltd” was classified as a ‘Micro’ enterprise in
2024. In the financial year ending March 2025, its turnover increased to Rupees 8 crore, and its investment in equipment remained at Rupees 2 crore.
Question: Based on the revised 2025 classification criteria, what will be the classification of TechSol Pvt Ltd for the year 2026, and why?

A It will upgrade to ‘Small’ because turnover exceeded Rupees 5 crore.

B It will remain ‘Micro’ because revised limits allow turnover up to Rupees 10 crore.

C It will remain ‘Micro’ only because investment is below Rupees 1 crore.

D It will upgrade to ‘Small’ because investment exceeds Rupees 1 crore.

Scenario: “GreenPack Solutions” has an investment in plant and machinery of ₹18 crore and an annual turnover of ₹85 crore.
Question: Based on the MSME classification criteria effective 2025-26, how is this unit categorized?

A Micro Enterprise

B Small Enterprise

C Medium Enterprise

D Large Corporate

Scenario: TechSol Private Limited has an Investment in Plant and Machinery of 18 Crore rupees and an Annual Turnover of 80 Crore rupees. Based on the revised MSME classification criteria effective April 1, 2025, how will this company be classified?

A Micro Enterprise

B Small Enterprise

C Medium Enterprise

D Not an MSME

Regarding the “Composite Criteria” for MSME classification used in 2026, which of the following statements is INCORRECT?

A To maintain a category status (e.g., Small), an enterprise must stay within both the investment and turnover limits.

B If an enterprise exceeds the limit for either investment or turnover, it is placed in the next higher category.

C Exports of goods or services are included when calculating the turnover limit.

D Investment calculation is linked to the Income Tax Return (ITR) of the previous years.

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) facilitates collateral-free loans. As of the current guidelines (2025-26), what is the maximum loan amount per borrower that can be covered under this guarantee scheme?

A ₹1 Crore

B ₹2 Crore

C ₹5 Crore

D ₹10 Crore

Regarding the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, as per the enhanced guidelines effective April 1, 2025, consider the following statements:
1. The ceiling for guarantee coverage has been enhanced to Rupees 10 Crore per borrower.
2. Retail and Wholesale Trade activities are eligible for coverage under the scheme.
3. The scheme offers a “Hybrid Security” product allowing collateral for a part of the facility and guarantee cover for the unsecured balance.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

An MSME borrower has a credit facility covered under the Credit Guarantee Scheme (CGS-I) of CGTMSE. The account turns NPA. Based on the guidelines updated as of April 1, 2025, what is the maximum guarantee cover limit available per borrower?

A ₹2 Crore

B ₹5 Crore

C ₹10 Crore

D ₹50 Crore

Following the Union Budget 2025 announcement, the maximum guarantee coverage ceiling under the Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) was enhanced effective April 1, 2025. What is the new maximum guarantee limit per borrower?

A 2 Crore rupees

B 5 Crore rupees

C 10 Crore rupees

D 20 Crore rupees

Regarding the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme as of February 2026, which of the following statements is INCORRECT?

A The scheme creates a hybrid security model where the borrower provides 25% collateral and CGTMSE guarantees the remaining 75%.

B The guarantee cover for Micro and Small Enterprises was enhanced to Rupees 10 crore in the Union Budget 2025 announcements.

C For credit facilities up to Rupees 10 lakh to Micro Enterprises, the guarantee cover is 85%.

D The scheme is available for both New and Existing Micro and Small Enterprises.

Regarding the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, identify the INCORRECT statement:

A It provides guarantee cover for collateral-free credit facilities extended to eligible MSEs.

B The maximum credit facility covered under the scheme is ₹10 Crore.

C Retail Trade is strictly excluded from coverage under the CGTMSE scheme.

D Hybrid Security is permitted, where the guarantee covers the portion not covered by collateral.

Consider the following statements regarding the Hybrid Security model under the CGTMSE scheme:

Assertion (A):

Member Lending Institutions can obtain collateral security for a part of the credit facility and still avail CGTMSE guarantee cover for the remaining unsecured portion.

Reason (R):

The scheme aims to support loans up to 10 Crore rupees even if the borrower lacks collateral to cover the entire loan amount, provided the guaranteed portion does not exceed the scheme’s ceiling.

A Both A and R are true, and R is the correct explanation of A

B Both A and R are true, but R is NOT the correct explanation of A

C A is true, but R is false

D A is false, but R is true

As per the RBI Priority Sector Lending (PSL) guidelines (updated and applicable in 2026), which of the following statements regarding the targets for Domestic Commercial Banks is INCORRECT?

A The overall Priority Sector target is 40 percent of the Adjusted Net Bank Credit (ANBC).

B The sub-target for advances to Micro Enterprises is 7.5 percent of ANBC.

C Loans to Medium Enterprises are classified as Priority Sector but do not have a separate mandatory sub-target percent within the 40 percent limit.

D Foreign Banks with less than 20 branches are not exempted from the Micro Enterprise sub-target of 7.5 percent.

Under the Priority Sector Lending (PSL) norms prescribed by the RBI, domestic commercial banks are required to lend 40% of their Adjusted Net Bank Credit (ANBC) to priority sectors. Within this, what is the specific sub-target mandated exclusively for Micro Enterprises?

A 5%

B 7.5%

C 10%

D 18%

Under the Reserve Bank of India’s Priority Sector Lending (PSL) guidelines (Master Directions updated 2025), what is the mandatory sub-target for lending to Micro Enterprises for Domestic Commercial Banks?

A 5.0 percent of ANBC or CEOBE

B 7.5 percent of ANBC or CEOBE

C 10.0 percent of ANBC or CEOBE

D 12.0 percent of ANBC or CEOBE

Consider the following statements regarding Priority Sector Lending (PSL) targets for MSMEs:

Assertion (A):

Domestic Commercial Banks are mandated to ensure that
7.5 percent of their Adjusted Net Bank Credit is specifically lent to Micro Enterprises.

Reason (R):

The Reserve Bank of India aims to prevent the crowding out of the smallest entities by larger Small or Medium enterprises within the overall MSME target.

A Both A and R are true, and R is the correct explanation of A

B Both A and R are true, but R is NOT the correct explanation of A

C A is true, but R is false

D A is false, but R is true

Under the “Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012” (as amended), every Central Ministry, Department, or PSU is mandated to procure a minimum of 25% of their total annual purchases from MSEs. Within this 25% limit, what is the specific sub-target reserved exclusively for MSEs owned by Women Entrepreneurs?

A 1%

B 3%

C 4%

D 5%

Regarding the “Prime Minister’s Employment Generation Programme” (PMEGP) guidelines effective in FY 2026, which of the following statements is NOT correct?

A The maximum project cost admissible for a Manufacturing unit is Rupees 50 Lakh.

B The maximum project cost admissible for a Service or Business unit is Rupees 20 Lakh.

C The Khadi and Village Industries Commission (KVIC) is the nodal agency for implementation at the national level.

D General Category beneficiaries are required to contribute 25% of the project cost as their own contribution (margin money).

Consider the following statements regarding the rate of subsidy (Margin Money) provided under the Prime Minister’s Employment Generation Programme (PMEGP) for different categories of beneficiaries:
1. A General Category beneficiary setting up a unit in an Urban area is eligible for a subsidy of 15% of the project cost.
2. A Special Category beneficiary (including SC, ST, Women, and Minorities) setting up a unit in a Rural area is eligible for the maximum subsidy of 35%.
3. A Special Category beneficiary setting up a unit in an Urban area is eligible for a subsidy of 25%.Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Consider the following statements regarding the Khadi and Village Industries Commission (KVIC):

Assertion (A):

KVIC is the nodal agency for implementing the Prime Minister’s Employment Generation Programme (PMEGP) at the national level.

Reason (R):

KVIC is a statutory body established under the KVIC Act, 1956, with the mandate to plan, promote, and organize khadi and village industries.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Regarding the “Framework for Revival and Rehabilitation of MSMEs” (directed by RBI), consider the following statements about the Special Mention Account (SMA) classification for identifying incipient stress:
1. SMA-0 is classified when principal or interest is overdue for 1 to 30 days.
2. SMA-1 is classified when principal or interest is overdue for 31 to 60 days.
3. SMA-2 is classified when principal or interest is overdue for 61 to 90 days.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

Under the “Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises” issued by the RBI, banks must identify incipient stress in MSME accounts. Which of the following correctly defines the SMA-1 (Special Mention Account-1) category?

A Principal or interest payment overdue for 1 to 30 days.

B Principal or interest payment overdue for 31 to 60 days.

C Principal or interest payment overdue for 61 to 90 days.

D Principal or interest payment overdue for more than 90 days (NPA).

Scenario: “Delta Textiles,” a Micro Enterprise, is facing a severe cash crunch. Their loan account with “Bank X” has been overdue for 65 days. The bank wants to classify the account under the stress framework.
Question: Under the RBI’s Prudential Norms on Income Recognition and Asset Classification (IRAC) and the MSME Rehabilitation framework, which category does this account currently fall into?

A Standard Asset

B SMA-1

C SMA-2

D NPA (Non-Performing Asset)

Scenario: An SME borrower’s loan account has its Principal/Interest overdue for 65 days.
Question: As per the RBI’s SMA (Special Mention Account) norms, how should this account be classified?

A SMA-0 (Special Mention Account – 0)

B SMA-1

C SMA-2

D NPA (Sub-Standard)

In the context of the “Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises,” banks are required to identify incipient sickness. Which specific account classification triggers this identification?

A When the account is classified as SMA-0.

B When the account is classified as SMA-1.

C When the account is classified as SMA-2.

D Only when the account is classified as NPA.

When a bank identifies an MSME account as SMA-2, it must form a Committee to decide on a Corrective Action Plan (CAP). For a borrower with loans from a single bank, who constitutes this Committee?

A The Branch Manager and the Zonal Manager.

B The designated senior officer of the bank at the regional/zonal level.

C A forum of lenders including all banks having exposure.

D The external auditors and the borrower.

Scenario: A bank reviews an SME Cash Credit account. The borrower has not submitted stock statements for 7 months. Consequently, the “Drawing Power” (DP) has not been updated or renewed for over 180 days.
Question: As per RBI Income Recognition and Asset Classification (IRAC) norms, how should this account be classified?

A Standard Asset

B SMA-0 (Special Mention Account)

C NPA (Non-Performing Asset)

D SMA-2

According to the Reserve Bank of India’s prudential norms for asset classification, at what point is an MSME loan account classified as a Non-Performing Asset (NPA) based on the “overdue” period?

A When the interest or principal remains overdue for a period of more than 180 days.

B When the interest or principal remains overdue for a period of more than 90 days.

C When the interest or principal remains overdue for a period of more than 60 days.

D When the interest or principal remains overdue for a period of more than 30 days.

Scenario: An MSME borrower’s loan account with a scheduled commercial bank has the following status as of March 31, 2026: The Due Date was January 1, 2026, and Principal and interest remain unpaid for 95 days. The bank classifies it as a Non-Performing Asset (NPA). The borrower claims that under the “Special MSME Relief,” the NPA recognition period is 180 days. Is the borrower correct?

A Yes, for all MSMEs, the NPA norm is 180 days

B Yes, but only if the MSME is registered under GST

C No, the 90-day NPA norm applies universally to MSMEs borrowing from banks; the 180-day dispensation is not the standard rule

D No, unless the loan amount is below 10 Lakh rupees

Under the “Turnover Method” of assessment recommended by the Nayak Committee (and mandated by RBI for MSE units requiring limits up to ₹5 crore), what is the minimum calculated Working Capital Fund Based Limit provided by the bank?

A 25% of the Projected Annual Turnover

B 20% of the Projected Annual Turnover

C 15% of the Projected Annual Turnover

D 10% of the Projected Annual Turnover

Scenario: “Apex Traders” is assessed using the Nayak Committee Turnover Method. Their projected annual turnover is ₹400 Lakh.
Question: What is the specific amount of Promoter’s Contribution (Margin) required to be brought in by the borrower according to the standard formula?

A ₹100 Lakh

B ₹80 Lakh

C ₹20 Lakh

D ₹10 Lakh

Scenario: A bank is assessing a loan for a Micro Enterprise. The branch manager decides to use the “MPBF Method II” (Tandon Norms) instead of the “Turnover Method” for a loan requirement of ₹15 Lakh.
Question: Is this approach consistent with current RBI guidelines for Micro Enterprises?

A Yes, the bank has absolute discretion to use any method.

B Yes, MPBF is the safest method for all loans.

C No, RBI mandates the Turnover Method for limits up to ₹5 Crore to ensure simplicity.

D No, but MPBF is permitted if the borrower requests it.

With reference to the “Nayak Committee” (1991-92) recommendations for the SSI/MSME sector, consider the following statements:
1. It recommended that for SSI units requiring fund-based limits up to ₹5 crore, the working capital should be assessed at 20% of projected turnover.
2. It suggested that banks should open specialized SSI branches to focus on the sector.
3. It recommended the abolition of the “Tandon and Chore Committee” norms for small borrowers.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Scenario: “Alpha Corp,” a public limited company manufacturing auto parts, reported an annual turnover of Rupees 300 Crore in its audited balance sheet for the year ending March 31, 2025.
Question: As per the Ministry of MSME Notification dated November 2024, is Alpha Corp required to register on the TReDS platform?

A No, because mandatory registration applies only to companies with turnover exceeding Rupees 500 Crore.

B Yes, because the mandatory turnover threshold was reduced to Rupees 250 Crore.

C No, because TReDS registration is voluntary for all private sector buyers.

D Yes, but only if they procure goods exclusively from Micro enterprises.

As per the Ministry of MSME notification and the subsequent amendments effective from 2025, the mandatory turnover threshold for companies to onboard the Trade Receivables Discounting System (TReDS) platform was revised. What is the new annual turnover limit above which companies are legally required to register on TReDS?

A Above 500 Crore rupees

B Above 250 Crore rupees

C Above 100 Crore rupees

D Above 50 Crore rupees

The Trade Receivables Discounting System (TReDS) is an electronic platform to facilitate the financing of trade receivables. Which of the following statements regarding TReDS is INCORRECT?

A It involves three participants: MSME Sellers, Corporate Buyers, and Financiers.

B It allows MSMEs to auction their invoices to get immediate cash.

C The liability to pay the financier shifts to the Corporate Buyer once the invoice is accepted.

D It is a government subsidy scheme where the Ministry pays the interest on behalf of the MSME.

Regarding the “TReDS” (Trade Receivables Discounting System) platform, identify the INCORRECT statement:

A It is an electronic platform for facilitating the financing and discounting of trade receivables of MSMEs.

B Only “Reverse Factoring” is permitted on the platform; traditional factoring is banned.

C The transactions on TReDS are “Without Recourse” to the MSME sellers.

D Review of the platform falls under the regulatory purview of the Reserve Bank of India (RBI).

The Trade Receivables Discounting System (TReDS) is a digital platform to solve the liquidity crunch of MSMEs. Which of the following entities are the mandatory participants in the TReDS ecosystem?
1. MSME Sellers (Suppliers).
2. Corporate and Government Buyers.
3. Financiers (Banks and NBFCs).
4. Insurance Companies.Select the correct combination:

A 1, 2, and 3 only

B 1, 2, and 4 only

C 2, 3, and 4 only

D 1, 2, 3, and 4

Under the Factoring Regulation (Amendment) Act, 2021, which significant change was made regarding the participation of Non-Banking Financial Companies (NBFCs) in the factoring business?

A It prohibited NBFCs from participating in TReDS platforms.

B It removed the “Principal Business” criteria, allowing more NBFCs to register as Factors.

C It mandated that only Public Sector Banks can act as Factors.

D It increased the minimum Net Owned Fund (NOF) requirement for Factors to Rupees 500 crore.

Consider the following regarding the “Delayed Payments” protection for MSMEs:

Assertion (A):

Under the MSMED Act, 2006, a buyer is liable to pay compound interest to a Micro or Small Enterprise if payment is not made within 45 days of acceptance.

Reason (R):

The interest rate payable is fixed at three times the Bank Rate notified by the Reserve Bank of India.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Under the MSMED Act, 2006, what is the maximum time period allowed for a buyer to make payment to a Micro or Small supplier if there is a written agreement?

A 30 days

B 45 days

C 60 days

D 90 days

Consider the following statements regarding the “MSME Samadhaan” portal and the “Delayed Payments” provisions under the MSMED Act, 2006:
1. It empowers Micro and Small Enterprises (MSEs) to file applications against buyers who delay payments beyond 45 days.
2. The buyer is liable to pay compound interest with monthly rests at three times the bank rate notified by the RBI.
3. Medium Enterprises are also fully eligible to use the Samadhaan portal for dispute resolution against delayed payments.

A 1 only

B 1 and 2 only

C 1 and 3 only

D 2 and 3 only

Scenario: “SolarTech Solutions,” a Micro Enterprise, has successfully supplied solar lamps worth Rupees 20 Lakh to a Central Public Sector Unit (PSU). The PSU accepted the goods on January 1, 2026. The contract did not specify a payment date. As of February 2026, the payment has not been made.
Question: Under the specific provisions of Section 2(b) and Section 16 of the MSMED Act, 2006, from which exact date does the liability to pay compound interest start?

A From January 15, 2026.

B From January 16, 2026.

C From January 17, 2026.

D From February 15, 2026 (45 days later).

Regarding the MSME Development Act, 2006 provisions on Delayed Payments, consider the following statements:
1. The buyer is liable to pay compound interest with monthly rests if payment is not made within 45 days of acceptance.
2. The interest rate payable is three times the bank rate notified by the RBI.
3. This interest paid by the buyer is allowed as a deductible expense under the Income Tax Act.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

Scenario: “Alpha Corp” purchased raw materials worth 5 Lakh rupees from a registered Micro Enterprise on January 1, 2026. The payment was made on April 15, 2026, which is 105 days later. According to Section 43B(h) of the Income Tax Act, what is the tax implication for Alpha Corp for the Financial Year 2025-26?

A Alpha Corp must pay penal interest, but the entire 5 Lakh rupees is deductible as an expense in 2025-26.

B The expense of 5 Lakh rupees will be disallowed for the Financial Year 2025-26 because payment was not made within the time limit.

C Alpha Corp can claim the deduction in 2025-26 provided they pay the penal interest.

D Section 43B(h) applies only if the supplier is a Medium Enterprise; hence no impact.

Which committee recommended the shift from the “Maximum Permissible Bank Finance” (MPBF) method to the “Cash Budget” system for assessing working capital requirements of large borrowers?

A Tandon Committee

B Chore Committee

C Daheja Committee

D Marathe Committee

Scenario: A company has Total Current Assets (CA) of ₹1000 Lakh and Other Current Liabilities (excluding bank borrowing) of ₹400 Lakh.
Question: Calculate the Maximum Permissible Bank Finance (MPBF) under Tandon Committee Method II.

A ₹350 Lakh

B ₹450 Lakh

C ₹600 Lakh

D ₹750 Lakh

The “Daheja Committee” (1969) is historically significant in Indian banking for introducing which fundamental concept regarding Working Capital finance?

A The concept of “Maximum Permissible Bank Finance” (MPBF)

B The distinction between “Hard Core Working Capital” and “Fluctuating Working Capital”

C The “Turnover Method” for small borrowers

D The compulsory “Loan System” for delivery of bank credit

Which of the following recommendations was NOT made by the “Tandon Committee” (1974) regarding the lending norms for working capital?

A Introduction of three methods of calculating Maximum Permissible Bank Finance (MPBF).

B Fixation of norms for inventory and receivables for 15 major industries.

C Shift from “Security Oriented” lending to “Production Oriented” lending.

D Introduction of the “Loan System” where 80% of the working capital limit must be a Demand Loan.

Under the revised Micro and Small Enterprises Cluster Development Programme (MSE-CDP) guidelines (applicable in 2026), which of the following statements regarding the Government of India (GoI) grant limits is INCORRECT?

A The scheme supports the setting up of Common Facility Centers (CFCs).

B The maximum eligible project cost considered for calculating the grant for a Common Facility Center (CFC) is Rupees 30 Crore.

C The scheme supports Infrastructure Development (ID) projects like new Industrial Estates.

D The GoI grant covers 100 percent of the project cost for all categories of clusters.

Which of the following statements regarding the Micro and Small Enterprises Cluster Development Programme (MSE-CDP) is INCORRECT?

A The scheme supports the setting up of Common Facility Centres (CFCs) like testing labs, design centres, and effluent treatment plants.

B The maximum project cost considered for a Common Facility Centre (CFC) is capped at Rupees 5 crore.

C The scheme also supports “Infrastructure Development” (ID) projects such as developing new industrial estates or upgrading existing ones.

D The Central Government grant is generally restricted to 60% to 80% of the project cost, depending on the location and category.

Consider the following statements regarding the Special Purpose Vehicle (SPV) in the context of MSME clusters:

Statement I:

The SPV must be a legal entity (such as a Section 8 Company or Society) formed by the cluster members.

Statement II:

The SPV is the absolute owner of the land and assets created under the Common Facility Centre (CFC).

A Both Statement I and II are True.

B Only Statement I is True.

C Only Statement II is True.

D Both Statement I and II are False.

In the context of the Cluster Development Programme, interventions are classified as “Soft” and “Hard”. Consider the following activities:
1. Diagnostic Study and Trust Building.
2. Setting up a Common Effluent Treatment Plant (CETP).
3. Market Development and Export Seminars.
4. Construction of a Testing Lab.Which combination correctly represents “Soft Interventions”?

A 1 and 2 only

B 2 and 4 only

C 1 and 3 only

D 1, 3, and 4 only

Regarding the “Implementing Agency” (IA) in the MSE-CDP scheme, identify the INCORRECT statement.

A The IA is responsible for identifying the land for the Common Facility Centre (CFC).

B The IA receives the Government of India grant in a separate bank account.

C The IA is typically a private consultant hired by the SPV to manage accounts.

D The IA monitors the procurement of plant and machinery by the SPV.

Which financial institution, established under an Act of Parliament in 1990, serves as the Principal Financial Institution for the promotion, financing, and development of the MSME sector?

A National Bank for Agriculture and Rural Development (NABARD)

B Export-Import Bank of India (EXIM Bank)

C Small Industries Development Bank of India (SIDBI)

D IDBI Bank

In January 2026, the Union Cabinet approved a significant equity infusion into the Small Industries Development Bank of India (SIDBI). Which of the following statements accurately reflect this decision?
1. The total approved equity infusion is Rupees 5,000 crore.
2. The infusion will be completed in a single tranche in FY
2026.3. The objective is to maintain a healthy Capital to Risk-weighted Assets Ratio (CRAR) as SIDBI expands its direct lending.

A 1 only

B 1 and 3 only

C 2 and 3 only

D 1, 2, and 3

The National Small Industries Corporation (NSIC) was established in
1955. Which of the following specific schemes is managed by NSIC to support the commercial needs of MSMEs?

A Prime Minister’s Employment Generation Programme (PMEGP)

B Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

C Raw Material Assistance (RMA) Scheme and Consortia Marketing

D Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

The “SRI Fund” (Self Reliant India Fund) was launched to provide growth capital to MSMEs. It operates through a “Mother-Fund and Daughter-Fund” structure. Who is the sole anchor investor for the Mother Fund?

A Life Insurance Corporation (LIC)

B Government of India (GoI)

C Reserve Bank of India (RBI)

D State Bank of India (SBI)

With reference to the “SME Growth Fund” and equity support initiatives announced in the Union Budgets (2025-26 and 2026-27), consider the following statements:
1. The government announced a ₹10,000 crore SME Growth Fund in February 2026 to provide equity support.
2. The “Self-Reliant India (SRI) Fund” operates through a “Mother Fund-Daughter Fund” structure.
3. Equity infusion is intended to lower the debt-equity ratio, making SMEs more eligible for bank finance.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Consider the following regarding the Special Purpose Vehicle (SPV) contribution in the MSE-CDP Scheme.

Assertion (A):

The MSE-CDP guidelines mandate that the SPV members must contribute a minimum percentage (typically 10-15%) of the project cost as their equity share.

Reason (R):

This mandatory contribution ensures “Ownership Sense” and commitment, mitigating the risk of the Common Facility Centre (CFC) becoming defunct after government funding stops.

A Both A and R are true, and R explains A.

B Both A and R are true, but R does not explain A.

C A is true, but R is false.

D A is false, but R is true.

Regarding the funding pattern under the MSE-CDP (New Guidelines) effective for the current cycle (2025-26), identify the INCORRECT combination of Project Cost and maximum Government of India (GoI) Grant contribution.
(Note: Assume General Category States unless specified).

A Common Facility Centre costing ₹8 Crore → 70% GoI Grant.

B Common Facility Centre costing ₹20 Crore → 60% GoI Grant.

C Infrastructure Development (New Estate) costing ₹12 Crore → 60% GoI Grant.

D Common Facility Centre costing ₹40 Crore → 60% GoI Grant calculated on the full ₹40 Crore.

The UNIDO (United Nations Industrial Development Organization) methodology for Cluster Development is the standard model adopted by India. Which of the following represents the correct chronological sequence of the main phases?

A Trust Building → Action Plan Implementation → Diagnostic Study → Monitoring.

B Diagnostic Study → Trust Building → Action Plan Implementation → Monitoring & Evaluation.

C Action Plan Implementation → Diagnostic Study → Trust Building → Handover.

D Monitoring → Trust Building → Diagnostic Study → Action Plan Implementation.

Michael Porter’s “Diamond Model” is a framework used to analyze why certain clusters achieve competitive advantage. Which of the following is NOT one of the four main attributes of the Diamond?

A Factor Conditions (Skilled labor, infrastructure).

B Demand Conditions (Sophisticated local customers).

C Related and Supporting Industries (Presence of capable suppliers).

D Government Subsidies (Direct cash transfers to loss-making units).

The Pradhan Mantri MUDRA Yojana (PMMY) classifies loans into three categories based on the stage of growth. Match the category with the correct standard loan limit:
1. Shishu
2. Kishore
3. Tarun

A 1-Up to ₹50,000; 2-₹50,000 to ₹5 Lakh; 3-₹5 Lakh to ₹10 Lakh

B 1-Up to ₹1 Lakh; 2-₹1 Lakh to ₹5 Lakh; 3-₹5 Lakh to ₹10 Lakh

C 1-Up to ₹50,000; 2-₹50,000 to ₹2 Lakh; 3-₹2 Lakh to ₹5 Lakh

D 1-Up to ₹20,000; 2-₹20,000 to ₹1 Lakh; 3-₹1 Lakh to ₹10 Lakh

Under the Pradhan Mantri Mudra Yojana (PMMY), a new loan category titled “Tarun Plus” was operationalized in late
2024. What is the maximum loan limit available under this specific category?

A ₹10 Lakh

B ₹15 Lakh

C ₹20 Lakh

D ₹25 Lakh

Scenario: A bank manager demands a “Third Party Guarantee” for a ₹18 lakh loan applied under the “Tarun Plus” category of the Mudra (PMMY) scheme.
Question: As per RBI and CGFMU guidelines, is this demand valid?

A Yes, guarantees are mandatory for all loans above ₹10 lakh.

B Yes, but only if the borrower has no collateral.

C No, banks are mandated not to accept collateral or third-party guarantees for PMMY loans up to ₹20 lakh.

D No, unless the borrower has a low credit score.

The Office of the Development Commissioner (MSME), formerly known as SIDO, functions as the nodal agency for the sector. Which of the following is NOT a primary function of this office?

A Advising the Government in policy formulation for MSMEs.

B Providing direct long-term project finance and working capital loans to individual MSME units.

C Providing techno-economic and managerial consultancy through its field offices.

D Implementing the Cluster Development Programme (MSE-CDP).

Identify the correct statements regarding the MSME Development Facilitation Offices (MSME-DFOs), formerly known as Small Industries Service Institutes (SISIs):
1. They act as the field offices of the Office of the Development Commissioner (MSME).
2. They are responsible for the manual registration of MSMEs and issuance of certificates.
3. They provide technical consultancy, project profiles, and common facility services to local industries.

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2 and 3

Which authority was established under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 as the apex body to examine factors affecting the promotion of MSMEs and review Central Government policies?

A Small Industries Development Organization (SIDO)

B National Small Industries Corporation (NSIC)

C National Board for Micro, Small and Medium Enterprises (NB-MSME)

D MSME Development Facilitation Office (MSME-DFO)

Scenario: A traditional “Bamboo Craft” cluster in the North East Region (NER) has organized itself. The cluster consists of 600 artisans. They are applying for a “Major Cluster” project under the Revamped SFURTI Scheme.
What is the maximum financial assistance (Hard Intervention limit) they can expect from the Government?

A ₹1.00 Crore

B ₹2.50 Crore

C ₹5.00 Crore

D ₹8.00 Crore

Which of the following statements regarding the SFURTI (Scheme of Fund for Regeneration of Traditional Industries) is INCORRECT?

A It aims to organize traditional industries and artisans into clusters.

B The scheme is implemented by Nodal Agencies like KVIC and Coir Board.

C It focuses exclusively on the IT and Service sectors of MSMEs.

D It provides funding for both “Soft Interventions” (skill training) and “Hard Interventions” (machinery/buildings).

Consider the following statements regarding the ASPIRE (A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship) scheme:
1. It aims to set up Livelihood Business Incubators (LBIs) primarily in rural and underserved areas.
2. It is implemented solely by the Ministry of Skill Development and Entrepreneurship.
3. One of its objectives is to create new jobs and reduce unemployment in the agro-rural sector.Select the correct combination:

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2, and 3

The “Raising and Accelerating MSME Performance” (RAMP) scheme, which is operational until the financial year 2026-27, is primarily supported by which international financial institution?

A Asian Development Bank (ADB)

B World Bank

C International Monetary Fund (IMF)

D New Development Bank (NDB)

The “MSME Sustainable (ZED) Certification” scheme is a key component of the MSME Champions ethos. The scheme certifies MSMEs based on their systems and processes. What are the three certification levels (or gradients) currently offered under this scheme?

A Standard, Advanced, and Premium

B Level 1, Level 2, and Level 3

C Bronze, Silver, and Gold

D Basic, Intermediate, and Expert

Scenario: “Precision Gears Ltd,” a Small Enterprise owned by a Woman Entrepreneur, wants to apply for the “ZED Gold” certification in February
2026. The standard certification fee is applicable.
Question: Under the special dispensation for women entrepreneurs in the ZED scheme, what percentage of the certification cost is subsidized (waiver/reimbursement)?

A 50%

B 80%

C 90%

D 100% (Free of Cost)

Established in 1978 to provide a focal point for the promotion of small, village, and cottage industries at the “grassroots” level, which agency functions under the State Directorate of Industries to provide all services under a “Single Window”?

A Small Industries Development Bank of India (SIDBI)

B District Industries Centre (DIC)

C State Financial Corporation (SFC)

D Micro and Small Enterprises Facilitation Council (MSEFC)

The National Institute for Entrepreneurship and Small Business Development (NIESBUD) functions as an apex body for coordinating and overseeing entrepreneurship development activities in India. Where is its headquarters located?

A Mumbai

B New Delhi (Noida)

C Chennai

D Kolkata

The PM Vishwakarma Scheme provides collateral-free enterprise development loans to traditional artisans. What is the maximum loan amount available in the Second Tranche, and what is the fixed concessional interest rate charged to the beneficiary?

A 1 Lakh rupees at 4 percent interest

B 2 Lakh rupees at 5 percent interest

C 3 Lakh rupees at 7 percent interest

D 2 Lakh rupees at 8 percent interest

Consider the following statements regarding the “PM Vishwakarma Scheme” and its integration with MSME value chains:
1. It is a Central Sector Scheme fully funded by the Government of India.
2. It covers 18 traditional trades including Carpenters, Boat Makers, and Blacksmiths.
3. The scheme provides collateral-free enterprise development loans up to Rupees 3 lakh in two tranches.Select the correct combination:

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Consider the following statements regarding the PM Vishwakarma Scheme toolkit incentives:

Assertion (A):

Beneficiaries under the PM Vishwakarma Scheme are provided a Toolkit Incentive of 15,000 rupees via e-RUPI vouchers.

Reason (R):

The scheme mandates that this incentive be used strictly for procuring modern tools suitable for their trade to enhance productivity.

A Both A and R are true, and R is the correct explanation of A

B Both A and R are true, but R is NOT the correct explanation of A

C A is true, but R is false

D A is false, but R is true

Consider the following statements regarding the “Udyam Assist Platform” (UAP) launched by the Ministry of MSME:
1. It is designed to bring “Informal Micro Enterprises” (IMEs) into the formal ambit by generating a Udyam Registration Number.
2. It allows IMEs to register without a mandatory Goods and Services Tax Identification Number (GSTIN).
3. Enterprises registered via UAP are eligible for Priority Sector Lending (PSL) benefits.Which of the statements given above are correct?

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2, and 3

Under the Udyam Assist Platform (UAP) launched by the Ministry of MSME, which of the following statements is NOT correct?

A It allows Designated Agencies like Banks to register Informal Micro Enterprises on the portal.

B The certificate issued is known as the Udyam Assist Certificate.

C Enterprises registered on UAP are eligible for Priority Sector Lending benefits.

D It is mandatory for Informal Micro Enterprises to upload GST and Income Tax Returns to generate the certificate.

Scenario: “Ramesh operates a small tailoring shop with an annual turnover of ₹15 lakh. He does not have a GSTIN and is therefore unable to register on the main Udyam Portal. He needs to formalize his business to avail a Priority Sector Loan.”
Action: Which platform allows him to register as an Informal Micro Enterprise (IME)?

A GeM Portal

B Udyam Assist Platform (UAP)

C District Industries Centre (Manual Application)

D MSME Databank

Which of the following statements regarding the Udyam Assist Platform (UAP) is INCORRECT?

A It was launched to bring Informal Micro Enterprises (IMEs) into the formal ambit.

B UAP allows IMEs to generate a Udyam Assist Certificate without a GST Number.

C Enterprises registered on UAP are entitled to all benefits under the MSMED Act, 2006, including protection against delayed payments.

D IMEs registered on UAP are eligible for Priority Sector Lending (PSL) classification.

What is the primary objective of the “RAMP” (Raising and Accelerating MSME Performance) scheme, which is a World Bank-assisted program?

A To provide direct cash transfers to loss-making MSME units.

B To strengthen the governance capabilities of the MSME ecosystem and improve access to market and credit.

C To provide 100 percent subsidy for solar power installation in MSME units.

D To replace the PMEGP scheme entirely.

Consider the following statements regarding the RAMP (Raising and Accelerating MSME Performance) scheme:
1. It is a Central Sector Scheme supported by the World Bank.
2. Its primary objective is to exclusively formalize Informal Micro Enterprises.
3. It requires States to prepare Strategic Investment Plans to identify local MSME constraints.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

Scenario: “A rural entrepreneur wants to set up an agro-processing business. She needs a facility that provides ‘incubation’—access to equipment for trial production and hands-on training to refine her product before she invests in her own machinery.”
Action: Which component of the ASPIRE Scheme specifically addresses this need?

A Livelihood Business Incubators (LBIs)

B Trade Related Entrepreneurship Assistance and Development (TREAD)

C Marketing Assistance Scheme

D Credit Linked Capital Subsidy Scheme (CLCSS)

Regarding the “Start-up India” initiative, identify the INCORRECT statement:

A The “Fund of Funds for Startups” is managed by SIDBI.

B Startups can avail a tax holiday for 3 consecutive years out of the first 10 years.

C To qualify as a “Startup,” the entity’s turnover must not exceed ₹500 crore in any previous year.

D The scheme allows self-certification for compliance under 9 labor and environmental laws.

The government has specific schemes to support Women Entrepreneurs. Which of the following statements regarding these initiatives is INCORRECT?

A The “Mahila Coir Yojana” provides subsidized training and machinery specifically to women artisans in the coir industry.

B Under the Stand-Up India Scheme, bank loans between Rupees 10 Lakhs and Rupees 1 Crore are facilitated for at least one woman borrower per bank branch.

C The TREAD scheme creates a government monopoly where women entrepreneurs are legally restricted to sell their products only to the state.

D The Public Procurement Policy mandates that Central Ministries must procure at least 3 percent of their annual purchases from women-owned MSEs.

In the context of the “Interest Equalization Scheme” for Pre and Post Shipment Rupee Export Credit (extended through 2026), what is the annual cap on the subvention benefit available per MSME exporter?

A ₹10 Lakh

B ₹25 Lakh

C ₹50 Lakh

D ₹1 Crore

Regarding the “Lean Manufacturing Competitiveness Scheme” (LMCS) for MSMEs, which of the following is NOT a correct feature or objective?

A It aims to reduce “Muda” (Waste) in manufacturing processes, such as overproduction and excess inventory.

B The scheme is implemented through “Mini Clusters” consisting of 4 to 10 MSME units.

C The Government of India provides 100% funding for the cost of the Lean Consultant for all units.

D The scheme utilizes techniques like 5S, Kaizen, and Kanban.

Under the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021, a specialized “Pre-Packaged Insolvency Resolution Process (PPIRP)” was introduced specifically for MSMEs. What is the minimum default amount required to initiate this process?

A Rupees 1 Crore

B Rupees 1 Lakh

C Rupees 10 Lakh

D Rupees 50 Lakh

Regarding the “Pre-Packaged Insolvency Resolution Process” (PPIRP) for MSMEs for MSMEs introduced under the Insolvency and Bankruptcy Code, which of the following statements is INCORRECT?

A It is available only for corporate debtors classified as Micro, Small, or Medium Enterprises.

B The minimum default amount to trigger PPIRP is Rupees 1 Crore.

C It is a “Debtor-in-Possession” model, meaning the existing management continues to run the company during the process.

D The resolution plan must be approved by the Committee of Creditors (CoC) with at least 66% voting share.

The “Pre-Packaged Insolvency Resolution Process” (PPIRP) for MSMEs is designed to be faster than the standard CIRP. What is the statutory time limit for the completion of the entire process from the commencement date?

A 90 days

B 120 days

C 180 days

D 270 days

Regarding the Pre-packaged Insolvency Resolution Process (PPIRP) for MSMEs introduced under the Insolvency and Bankruptcy Code, consider the following statements:
1. It is available to corporate debtors classified as MSMEs with a minimum default of 10 Lakh rupees.
2. Unlike the standard Corporate Insolvency Resolution Process, the PPIRP allows the existing management to remain in control as a “Debtor-in-Possession” during the process.
3. The maximum time limit for completion of the PPIRP is strictly 270 days.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

Scenario: “Delta Fabrication,” a registered Small Enterprise, has defaulted on a loan repayment of Rupees 40 Lakh to its creditor bank. The default has persisted for 5 months. The promoter wants to resolve this insolvency while retaining management control.
Question: Which resolution route is most appropriate and legally available for Delta Fabrication under the IBC framework?

A Corporate Insolvency Resolution Process (CIRP)

B Pre-Packaged Insolvency Resolution Process (PPIRP)

C SARFAESI Enforcement

D Liquidation Process

What is the primary objective of the “Pre-Packaged Insolvency Resolution Process” (PPIRP) specifically designed for MSMEs?

A To liquidate MSMEs quickly.

B To allow the government to take over MSMEs.

C To provide a faster, cost-effective resolution where the existing management retains control (“Debtor-in-Possession”).

D To waive off all loans of MSMEs.

Under the SARFAESI Act, 2002, what is the minimum outstanding debt threshold required for a secured creditor to enforce security interest?

A The total outstanding debt must be more than ₹50,000.

B The total outstanding debt must be more than ₹10 Lakhs.

C The total outstanding debt must be more than ₹1 Lakh, and the amount due must exceed 20% of the principal amount and interest.

D The total outstanding debt must be more than ₹20 Lakhs, irrespective of the percentage of repayment.

Under the SARFAESI Act, what is the significance of the “60-Day Notice” issued under Section 13(2)?

A It is the notice inviting tenders for the sale of assets.

B It is a demand notice giving the borrower 60 days to discharge their full liability.

C It is a notice informing the borrower that the bank has already sold the property.

D It is a notice from the court summoning the borrower.

A bank wishes to file an application for recovery of debts against an MSME borrower. Under the Recovery of Debts and Bankruptcy Act, 1993 (RDB Act), what is the minimum debt amount required to approach the Debt Recovery Tribunal (DRT)?

A ₹10 Lakh

B ₹20 Lakh

C ₹50 Lakh

D ₹1 Crore

Under the CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) framework, which of the following statements regarding registration charges and purpose is INCORRECT?

A CERSAI registration is mandatory for security interests created on equitable mortgages to prevent dual financing.

B The primary objective is to maintain a central registry of mortgages to prevent fraud where the same property is mortgaged to multiple banks.

C For loan amounts above Rupees 5 lakh, the CERSAI registration fee is typically Rupees 500 plus GST.

D CERSAI was established under the SARFAESI Act, 2002.

Which of the following is NOT a standard document or procedure required for the creation of a valid “Hypothecation” charge on the movable assets (stocks/receivables) of an SME borrower?

A Execution of a Deed of Hypothecation.

B Physical delivery of the possession of goods to the bank.

C Registration of the charge with CERSAI (Central Registry).

D Periodic submission of Stock Statements to calculate Drawing Power.

With reference to the Legal Entity Identifier (LEI) code requirements for borrowers (as per RBI directions effective in 2026), consider the following statements:
1. The LEI is a 20-digit unique alphanumeric code used globally to identify parties to financial transactions.
2. It is mandatory for all non-individual borrowers having a total aggregate exposure of ₹5 Crore and above from banks/FIs to obtain an LEI.
3. Borrowers who fail to obtain an LEI are barred from receiving any renewal or enhancement of their credit facilities.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Scenario: “A bank manager is evaluating a loan application. He specifically looks at the borrower’s personal integrity, reputation in the market, and willingness to repay, rather than just the financials.”
Concept: Which of the “5 Cs of Credit” is the manager assessing in this scenario?

A Capacity

B Capital

C Character

D Collateral

In the context of credit risk management for SMEs, what does the acronym “RAM” stand for in the internal rating models used by banks?

A Risk Assessment Model

B Risk Adjusted Margin

C Risk Asset Management

D Return on Adjusted Money

Which of the following factors is NOT typically considered a “Financial Risk” parameter in a standard SME Credit Scoring Model?

A Debt Service Coverage Ratio (DSCR)

B Current Ratio (Liquidity)

C Management Succession Plan

D Debt-Equity Ratio (Leverage)

Scenario: An SME borrower has a “Current Ratio” of
0.8:
1. The bank’s credit policy mandates a minimum Current Ratio of
1.33:1 (based on Tandon norms).
Question: What does this ratio indicate about the borrower’s financial position?

A The borrower has a healthy surplus of long-term funds.

B The borrower is facing a “Liquidity Crunch” and may struggle to meet short-term obligations.

C The borrower is over-capitalized with idle cash.

D The borrower has zero leverage.

Regarding the Regulatory Capital (Basel III) treatment for MSME exposures as per RBI guidelines updated in 2025, consider the following statements:
1. Regulatory Retail Portfolios generally attract a risk weight of 75 percent.
2. To encourage credit flow, the risk weight for Unrated non-retail MSME exposures was reduced from 100 percent to 85 percent.
3. Bank lending to Medium Enterprises is strictly excluded from Priority Sector Lending.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

With reference to the Internal Rating Based (IRB) approach for calculating capital requirements under Basel III, consider the following statements:
1. In the Foundation IRB (F-IRB) approach, banks estimate their own Probability of Default (PD).
2. In the Advanced IRB (A-IRB) approach, banks estimate PD, Loss Given Default (LGD), and Exposure at Default (EAD).
3. RBI has made it mandatory for all cooperative banks to adopt the Advanced IRB approach immediately.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Consider the following assertion and reason regarding “Credit Pricing” for SMEs.

Assertion (A):

Banks typically charge a higher interest rate spread (Risk Premium) for SME loans compared to large corporate loans.

Reason (R):

SMEs are generally perceived to have higher “Information Asymmetry” and higher historical default rates compared to large, listed corporates.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Based on economic data available as of February 2026, identify the correct combination of statements regarding the MSME sector’s contribution to India:
1. The sector contributes approximately 30 percent to India’s GDP.
2. The sector accounts for roughly 45 percent to 48 percent of India’s total exports.
3. The sector is the largest employer in India, surpassing Agriculture.

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Which of the following is NOT a typical characteristic of the MSME sector in India?

A High Capital-Output Ratio (Requires large capital for small output)

B High Labor Absorption (Labor Intensive)

C Operational Flexibility and Adaptability

D Lower Overhead Costs compared to large industries

In the process of setting up an MSME, what is the specific document called that covers the technical analysis, financial viability, and market potential, and serves as the primary basis for banks to sanction loans?

A Memorandum of Association (MoA)

B Detailed Project Report (DPR)

C Udyam Registration Certificate

D Environmental Impact Assessment (EIA)

Scenario: An MSME is setting up a chemical processing plant. Before commencing construction, they must obtain a “Consent to Establish” (CTE). Later, before starting production, they need a “Consent to Operate” (CTO). Which regulatory body issues these specific clearances?

A The Municipal Corporation of the city

B The State Pollution Control Board (SPCB)

C The Bureau of Indian Standards (BIS)

D The Ministry of Corporate Affairs (MCA)

The “ZED Certification” scheme is a key initiative by the Ministry of MSME to improve quality standards. What does the acronym “ZED” stand for, reflecting the government’s vision for Indian manufacturing?

A Zero Emission Zero Damage

B Zero Error Zero Delay

C Zero Defect Zero Effect

D Zero Debt Zero Equity

When conducting a “Techno-Economic Feasibility” study to select a Location (Site) for a new factory, which of the following is NOT typically considered a primary factor?

A Proximity to sources of raw materials

B Availability of skilled labor and utilities like power and water

C The global stock market trends of the last decade

D Access to transport logistics and target markets

Which statutory Act replaced the term “Industries” with “Enterprises” to explicitly include the Service Sector, and currently serves as the primary legal framework for MSMEs in India?

A The Industries (Development and Regulation) Act, 1951

B The Small Industries Development Bank of India Act, 1989

C The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

D The Companies Act, 2013

The “Small and Medium Enterprises Development Bill, 2005” eventually evolved into which landmark Act that currently governs the legal framework for MSMEs in India?

A The MSME Development Act, 2005

B The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006

C The Small Industries Development Bank of India Act, 2006

D The Industries (Development and Regulation) Act, 2005

The online portal launched on July 1, 2020, which provides a paperless, self-declaration-based registration for MSMEs and automatically integrates with GST and Income Tax systems, is called _.

A MSME Samadhaan

B Udyam Registration

C MSME Sambandh

D CHAMPIONS Portal

Which of the following statements regarding the MSME Registration (Udyam) Procedure is INCORRECT?

A Udyam Registration is a fully online, paperless, and self-declaration based process.

B It is mandatory to link the GSTIN and PAN to the Udyam Registration for all enterprises (subject to specific exemptions).

C An enterprise can file multiple Udyam Registrations for different manufacturing activities under the same PAN.

D No fee is payable for filing Udyam Registration.

Which form of business organization is the simplest to establish and requires no specific central registration, but carries the significant disadvantage of “Unlimited Liability” for the owner (meaning personal assets can be sold to pay business debts)?

A Limited Liability Partnership (LLP)

B Private Limited Company

C Sole Proprietorship

D One Person Company (OPC)

Regarding the Limited Liability Partnership (LLP) Act, 2008 as a strategy for SME organization, consider the following statements:
1. An LLP is a separate legal entity distinct from its partners.
2. The liability of partners is limited to their agreed contribution in the LLP.
3. Every LLP must have at least two “Designated Partners,” of whom both must be resident in India.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

The Limited Liability Partnership (LLP) Act, 2008 created a “hybrid” business structure. Which of the following best defines the unique nature of an LLP compared to a traditional partnership?

A It allows unlimited partners but requires all partners to have unlimited liability.

B It is a separate legal entity where at least one partner has unlimited liability, while others have limited liability.

C It is a corporate body with a separate legal entity, perpetual succession, and limited liability for all its partners.

D It is strictly for professional services (like Chartered Accountants or Lawyers) and cannot be used for manufacturing.

Scenario: Two engineers, Rahul and Amit, want to start a robotics manufacturing unit.
They want to protect their personal assets (Limited Liability).
They do not want the high compliance cost of a Company (no mandatory board meetings or statutory audits in the early stages).
They want to manage the business directly as partners.
Which organizational structure is the most suitable fit for their needs?

A General Partnership (Act 1932)

B Limited Liability Partnership (LLP)

C One Person Company (OPC)

D Public Limited Company

The One Person Company (OPC) was introduced in the Companies Act, 2013. Identify the correct combination of features regarding OPCs:
1. An OPC is a separate legal entity distinct from its single member.
2. The single member must nominate a “Nominee” who will become the member in case of death or incapacity.
3. An OPC is permanently prohibited from converting into a Private Limited Company.

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Regarding the Hindu Undivided Family (HUF) as a form of business organization, which of the following statements is NOT correct?

A Membership in the business is acquired automatically by birth in the family.

B The liability of the ‘Karta’ (head of the family) is unlimited.

C The liability of the ‘Co-parceners’ (other family members) is limited to their share in the family property.

D Registration of the HUF business with the Registrar of Companies is mandatory to start operations.

Consider the following scenario regarding funding for an MSME:

Assertion (A):

Venture Capitalists (VCs) and external equity investors generally prefer investing in a Private Limited Company rather than an LLP or Proprietorship.

Reason (R):

A Private Limited Company allows for the clear allocation of equity shares, separation of ownership from management, and offers higher corporate governance standards.

A Both A and R are true, and R is the correct explanation of A

B Both A and R are true, but R is NOT the correct explanation of A

C A is true, but R is false

D A is false, but R is true

When choosing a structure based on regulatory compliance burden, which of the following statements is INCORRECT?

A A Private Limited Company requires a mandatory annual audit by a Chartered Accountant regardless of its turnover.

B A Sole Proprietorship is not required to file separate financial statements with the Ministry of Corporate Affairs (MCA).

C An LLP is exempt from audit if its turnover is less than Rupees 40 Lakhs and capital contribution is less than Rupees 25 Lakhs.

D A Partnership Firm registered under the Partnership Act, 1932 must file its annual balance sheet with the Registrar of Companies (RoC) every year.

Consider the role of Environmental Scanning in the establishment phase:

Assertion (A):

Before finalizing a product idea, an entrepreneur must conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats).

Reason (R):

Environmental scanning helps identify external opportunities (like a new market gap) and threats (like changing regulations) that are beyond the entrepreneur’s internal control.

A Both A and R are true, and R is the correct explanation of A

B Both A and R are true, but R is NOT the correct explanation of A

C A is true, but R is false

D A is false, but R is true

Which of the following statements regarding the Environmental Impact Assessment (EIA) notifications in the context of MSMEs is INCORRECT?

A MSMEs in the “White Category” are exempted from obtaining the Consent to Operate (CTO).

B Certain categories of MSMEs are exempted from the requirement of a full public hearing if they are located in notified industrial estates.

C All MSMEs, regardless of size, must obtain Environmental Clearance (EC) from the Central Ministry (MoEFCC) only.

D The classification of industries into Red, Orange, Green, and White is based on a Pollution Index score.

Regarding “Entrepreneurship Development Programmes” (EDP) conducted by government agencies, identify the correct combination of objectives:
1. To instill the need for achievement and motivation in potential entrepreneurs.
2. To provide direct cash grants to every participant for personal use.
3. To help participants prepare project reports and understand legal compliance.

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

The Ministry of MSME operates a network of Technology Centres (TCs), formerly known as Tool Rooms. Which of the following statements correctly describe their functions?
1. They provide precision tooling (moulds, dies, jigs) to the industry which small units cannot afford to manufacture themselves.
2. They conduct long-term and short-term technical training courses for skill development.
3. They are purely administrative offices and do not engage in any production activities.

A 1 only

B 1 and 2 only

C 2 and 3 only

D 1, 2 and 3

The Ministry manages specialized Process and Product Development Centres (PPDCs) to support specific clusters. Identify the correct pairing of PPDC Location and its specialized product focus:

A PPDC Agra — Sports Goods

B PPDC Meerut — Foundry and Forging

C PPDC Agra — Foundry and Forging

D PPDC Meerut — Electronics

Consider the following regarding the “International Cooperation (IC) Scheme.”

Assertion (A):

The IC Scheme provides financial assistance to industry associations for participating in international exhibitions, but it does not provide direct travel grants to individual MSME units on a standalone basis without an association.

Reason (R):

The objective is to encourage collective participation and “Cluster Branding” rather than subsidizing individual business travel.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Under the “Building Awareness on Intellectual Property Rights (IPR)” component of the MSME Innovative Scheme, the government reimburses patent registration fees. What is the maximum reimbursement limit for a Foreign Patent grant?

A Rupees 1 Lakh

B Rupees 2 Lakh

C Rupees 5 Lakh

D Rupees 10 Lakh

The “Procurement and Marketing Support (PMS) Scheme” aims to enhance the marketability of services and products of MSEs. Which of the following components are covered under this scheme?
1. Financial assistance for adopting Bar Coding on products.
2. Participation in International Trade Fairs outside India (specifically via the PMS component).
3. Organizing Domestic Trade Fairs and Exhibitions.Select the correct combination:

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2, and 3

Consider the following regarding the “MSME Idea Hackathon.”

Assertion (A):

The “MSME Idea Hackathon” invites ideas from students and MSMEs, and selected ideas receive financial assistance up to Rupees 15 Lakh per idea.

Reason (R):

This initiative is a sub-component of the “MSME Innovative Scheme” aimed at acting as an incubator to convert prototypes into commercial products.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

According to the UNIDO and Ministry of MSME definitions, which of the following best describes an “Industrial Cluster”?

A A group of unrelated industries located in a single Special Economic Zone (SEZ) for tax benefits.

B A geographical concentration of enterprises producing the same or similar products, facing common challenges and opportunities.

C A digital network of geographically dispersed companies sharing a common cloud infrastructure.

D A single large manufacturing unit that outsources its production to multiple international vendors.

Clusters are broadly classified into “Natural” and “Induced” clusters. Which of the following is a defining characteristic of a “Natural Cluster”?

A It is created artificially by the government through land allotment in a new Industrial Park.

B It evolves organically over decades due to factors like raw material availability or traditional skills.

C It is formed solely by a large anchor industry inviting its vendors to a specific location.

D It typically lacks any social homogeneity or common cultural identity among the workforce.

Which of the following is NOT considered a “Critical Success Factor” or a benefit of the Cluster Development approach?

A Reduction in transaction costs for banks due to bulk lending opportunities.

B Elimination of all competition between member units within the cluster.

C Increased “Collective Efficiency” through shared infrastructure.

D Better bargaining power with raw material suppliers and buyers.

Which of the following is widely regarded as the most vital intangible “Critical Success Factor” (CSF) for the sustainability of a cluster development initiative?

A The amount of subsidy released by the State Government.

B The availability of cheap land for expansion.

C The presence of “Social Capital” (Trust) and strong local leadership.

D The immediate construction of a grand entry gate and administrative building.

Consider the following assertion and reason regarding Bank Lending to Clusters.

Assertion (A):

Banks increasingly prefer the “Cluster-based Lending” approach over standalone lending to Micro and Small Enterprises (MSEs).

Reason (R):

Cluster-based lending increases the “Information Asymmetry” between the lender and the borrower, thereby increasing the risk premium.

A Both A and R are true, and R explains A.

B Both A and R are true, but R does not explain A.

C A is true, but R is false.

D A is false, but R is true.

In the context of Cluster Economics, the term “Agglomeration Economies” refers to which of the following phenomena?

A The financial loss incurred when too many banks lend to a single industry.

B The cost savings and benefits that firms derive from being located close to each other.

C The government policy of merging multiple small clusters into one large “Mega Cluster”.

D The accounting practice of aggregating balance sheets of all cluster members for tax purposes.

When preparing the Detailed Project Report (DPR) for a Common Facility Centre (CFC) under the MSE-CDP guidelines, which of the following costs is generally NOT eligible for the Government of India (GoI) Grant calculation?

A Cost of Plant and Machinery for the CFC.

B Cost of Land for the CFC.

C Cost of Laboratory and Testing Equipment.

D Preliminary and Pre-operative expenses (within limits).

From a Banker’s perspective, “Cluster-based Lending” involves specific risks and mitigation strategies. Consider the following statements:
1. Contagion Risk: A downturn in the specific industry sector affects all borrowers in the cluster simultaneously.
2. Peer Pressure: The close social network within a cluster acts as a moral hazard, increasing willful defaults.
3. Appraisal Efficiency: Bankers can develop a single “Master Appraisal” template for the entire cluster, reducing processing time.Which statements are correct?

A 1 and 2 only

B 1 and 3 only

C 2 and 3 only

D 1, 2, and 3

Regarding the stages of Cluster Development intervention:

Statement I:

A “Diagnostic Study Report” (DSR) is typically conducted after the “Detailed Project Report” (DPR) is approved, to diagnose the implementation faults.

Statement II:

The “Soft Interventions” (Trust Building) should ideally precede “Hard Interventions” (Construction) to ensure the members are ready to manage the shared assets.

A Statement I is True; Statement II is False.

B Statement I is False; Statement II is True.

C Both Statements are True.

D Both Statements are False.

Identify the INCORRECT combination regarding the stakeholders in the Cluster Development ecosystem.

A SPV (Special Purpose Vehicle): The group of private members who own and operate the CFC.

B Implementing Agency (IA): The State Govt Agency (like SIDCO/DIC) responsible for fund flow and supervision.

C Cluster Development Executive (CDE): The bank manager responsible for sanctioning loans to the SPV.

D Technical Agency (TA): A specialized institution (like EDII or NPC) that provides technical hand-holding and appraisal.

Scenario: The “Auto-Component Cluster” in Pune has set up a Common Facility Centre (CFC) with a total cost of ₹20 Crore.
GoI Grant: ₹12 Crore
State Govt Grant: ₹4 Crore
SPV Contribution: ₹4 Crore
The CFC starts operations but fails to generate enough revenue to pay for electricity and the salary of the technical staff.
Question: Which critical aspect of the Detailed Project Report (DPR) was likely flawed or overestimated?

A The Structural Stability Certificate.

B The O&M (Operations and Maintenance) Viability / User Charges calculation.

C The land title verification.

D The list of machinery suppliers.

Statement I:

The “Third Italy” model (Industrial Districts in Italy) is globally cited as a successful example where small firms achieved global dominance through flexible specialization and social cohesion.

Statement II:

The “Triple Helix Model” of cluster development refers to the collaboration between three key actors: Government, Industry (Firms), and Academia (Universities).

A Both Statement I and II are True.

B Only Statement I is True.

C Only Statement II is True.

D Both Statement I and II are False.

Which of the following indicators can be used as proxy indicators to measure the successful development of a cluster?
1. Increase in the number of “Joint Initiatives” (e.g., joint raw material purchase).
2. Rise in the turnover or exports of the cluster units compared to the national average.
3. Formation of new horizontal and vertical business linkages.
4. Total amount of loan defaults written off by banks in that area.

A 1 and 2 only

B 1, 2, and 3 only

C 2 and 4 only

D 1, 3, and 4 only

In the context of recent Indian policy (2024-2026), the ODOP (One District One Product) initiative is closely linked to cluster development. Which of the following is NOT a primary objective of ODOP?

A To preserve and promote traditional products like handlooms and handicrafts.

B To allow districts to import foreign goods duty-free to replace local products.

C To provide holistic support including branding, marketing, and credit to the identified product.

D To integrate the district’s product into global value chains.

Consider the following regarding the “Exit Strategy” in Cluster Development.

Assertion (A):

A cluster development project is considered successful only when the Implementing Agency (IA) and Cluster Development Executive (CDE) can withdraw from the cluster without causing its collapse.

Reason (R):

The ultimate goal of the intervention is to make the cluster self-governing and financially self-sustaining through the SPV.

A Both A and R are true, and R explains A.

B Both A and R are true, but R does not explain A.

C A is true, but R is false.

D A is false, but R is true.

Scenario: The “Ceramic Cluster” in Morbi has successfully set up a CFC. However, the units are now facing a new challenge: environmental regulations banning coal gasifiers.
The SPV decides to collectively negotiate with a Natural Gas provider for a dedicated pipeline and bulk rates for all members.
This action is an example of which evolutionary stage of the cluster?

A Passive Clustering (Just location proximity).

B Active Collective Efficiency (Strategic collaboration).

C Declining Phase (Scramble for survival).

D Initial Diagnostic Phase.

Which of the following pairs regarding MSME Global Integration and Standards is INCORRECTLY matched?

A CBAM (Carbon Border Adjustment Mechanism) — EU regulation impacting MSME exporters in steel and aluminum sectors

B ZED ‘Gold’ Certification — Mandatory requirement for all MSMEs to avail any bank loan above 10 Lakh rupees

C RAMP Scheme — Focuses on Greening of MSMEs and sustainable practices

D Green Investment — Cost of Pollution Control devices is excluded from MSME classification limits

Which of the following pairs regarding MSME Technology and Modernization Schemes is INCORRECTLY matched?

A SAMARTH Udyog Bharat 4.0 — Industry 4.0 implementation and Smart Manufacturing demo centres

B SIDBI SPEED Scheme — Loan up to 100 Lakh rupees for purchase of high-end machinery

C ZED Certification — Reimbursement of 100 percent of certification costs for all Medium Enterprises

D ASPIRE Scheme — Livelihood Business Incubators for rural entrepreneurship

Regarding the Open Network for Digital Commerce (ONDC) and its impact on MSMEs, consider the following statements:
1. ONDC acts as a neutral, open-source protocol rather than a single platform or app.
2. It allows a small seller registered on one app to be visible to a buyer registered on a different app.
3. MSMEs are exempt from paying any transaction fees on the ONDC network for the first 5 years.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2 and 3

Which of the following activities is excluded and NOT eligible for registration as an MSME under the Udyam Registration portal?

A Manufacturing of Leather Goods

B Retail and Wholesale Trade

C Gambling and Betting Activities

D Renewable Energy Generation

For an MSME account to be eligible for “Restructuring” without a downgrade in asset classification (retaining Standard status), what is the typical requirement regarding the “Promoter’s Contribution”?

A Promoters must contribute at least 50% of the outstanding debt.

B Promoters are not required to contribute any additional funds.

C Promoters must bring in additional contribution as per the bank’s policy, typically ensuring they have ‘skin in the game’.

D The government provides the entire contribution under CGTMSE.

What is the purpose of a “Techno-Economic Viability” (TEV) study in the context of MSME rehabilitation?

A To determine if the machinery used by the MSME is imported or indigenous.

B To assess whether the business can generate sufficient cash flow to service the debt after restructuring.

C To calculate the scrap value of the company’s assets for immediate sale.

D To verify the KYC documents of the promoters.

If the Committee decides that an MSME unit is unviable and recovery is the only option, which of the following is a valid “Exit Option”?

A Converting the unit into a Public Limited Company.

B Issuing an Initial Public Offering (IPO).

C Sale of the account to an Asset Reconstruction Company (ARC) or One Time Settlement (OTS).

D Granting a fresh term loan for expansion.

Consider the “Standstill Clause” during the review period of an MSME’s Corrective Action Plan (CAP). What does this clause imply for the bank?

A The bank must stop charging interest on the loan.

B The bank is prohibited from initiating legal recovery measures while the proposal is under review.

C The borrower must stop all business operations.

D The bank must freeze all debits and credits in the account.

An MSME account was restructured and retained its “Standard” asset status. After one year, the borrower has serviced the loan satisfactorily without any default. What happens to the “Restructured Standard” tag?

A The tag remains permanently on the account.

B The account is re-classified as a “Standard Asset” without the restructuring tag (Upgradation).

C The interest rate is automatically reduced by 2%.

D The account is sold to a bad bank.

In the context of NPA management, what does the term “Technical Write-off” mean?

A The borrower is forgiven the debt and does not need to pay.

B The bank removes the loan from the asset side of the balance sheet to reduce tax/NPA ratio, but retains the right to recover the money.

C The computer system automatically deletes the account due to a glitch.

D The loan is converted into a grant by the government.

According to the RBI’s “Prudential Framework for Resolution of Stressed Assets,” what is the “Review Period” available to lenders once a default occurs?

A 180 Days.

B 90 Days.

C 30 Days.

D 7 Days.

Which of the following is a “Non-Financial” or “Managerial” warning signal of sickness?

A Constant devolvement of LCs.

B Unexplained delay in the commencement of commercial production.

C Return of cheques.

D Operating losses.

Which of the following categories of borrowers is explicitly EXCLUDED from the benefits of the Framework for Revival and Rehabilitation of MSMEs?

A Micro Enterprises with loans up to ₹5 Crore.

B Small Enterprises with loans up to ₹10 Crore.

C Wilful Defaulters and borrowers classified as Fraud.

D Medium Enterprises with loans up to ₹25 Crore.

Under the Production Linked Incentive (PLI) Scheme for Telecom and Networking Products, a specific financial allocation was ring-fenced exclusively for MSMEs to encourage their participation. What is this allocation amount?

A 1,000 Crore rupees

B 2,500 Crore rupees

C 5,000 Crore rupees

D 500 Crore rupees

Consider the following statements regarding the institutional responsibility for MSMEs in India:

Assertion (A):

The primary responsibility for the promotion and development of MSMEs lies with the State Governments.

Reason (R):

The Central Government’s role is solely to act as a regulator and it does not implement any direct promotional schemes.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Consider the following regarding the “National Schedule Caste and Schedule Tribe Hub” (NSSH).

Assertion (A):

The NSSH scheme provides professional support to SC/ST entrepreneurs to fulfill the obligations under the Public Procurement Policy.

Reason (R):

Despite the mandatory 4% procurement target, the actual procurement from SC/ST MSEs historically remained low due to gaps in supply chain capacity.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

With reference to Commercial Papers (CPs) as a source of short-term financing, consider the following statements as per current RBI Directions (2025-26):
1. The minimum denomination for issuance of a CP is ₹5 Lakh.
2. CPs can be issued for a maturity period between 7 days and 1 year.
3. SMEs cannot issue CPs directly; they must always be guaranteed by a Scheduled Commercial Bank.
Which of the statements given above are correct?

A 1 and 2 only

B 2 and 3 only

C 1 and 3 only

D 1, 2, and 3

Consider the following assertion and reason regarding the “Operating Cycle” concept.

Assertion (A):

A longer operating cycle typically indicates a higher requirement for working capital.

Reason (R):

The operating cycle measures the time gap between the acquisition of raw materials and the realization of cash from sales.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

In the context of “Factoring” services for SMEs, which of the following statements is NOT correct?

A It involves the sale of accounts receivable (invoices) to a third party (Factor) for immediate cash.

B In “Non-Recourse Factoring,” the credit risk of the debtor (buyer) default is borne by the Factor.

C Factoring is strictly defined as a loan against the security of bills, identical to Bill Discounting.

D The Factoring Regulation (Amendment) Act allows NBFCs to undertake factoring business if they meet specific criteria.

Regarding “Supply Chain Finance” (SCF), identify the INCORRECT statement:

A It typically involves an “Anchor” (usually a large corporate) and “Spokes” (SME suppliers/dealers).

B The “Anchor’s” strong credit rating is leveraged to provide lower-cost financing to the “Spokes.”

C In a “Dealer Finance” model, the bank finances the Corporate Anchor to manufacture goods for the SME dealers.

D In a “Vendor Finance” (Reverse Factoring) model, the bank pays the SME supplier early based on the Anchor’s acceptance of the invoice.

Which of the following statements regarding the “PM Vishwakarma Scheme” is correct regarding its funding?

A It is a Centrally Sponsored Scheme with 60:40 Centre-State sharing.

B It is a Central Sector Scheme with 100% funding from the Union Government.

C It is funded entirely by private CSR funds.

D It is a state-level scheme funded by individual State Governments.

Which committee, constituted by the Reserve Bank of India in 2019, comprehensively reviewed the “Expert Committee on Micro, Small and Medium Enterprises” and recommended the creation of a “Distressed Asset Fund” to assist stressed MSMEs?

A U.K. Sinha Committee

B K.V. Kamath Committee

C N.S. Vishwanathan Committee

D Nachiket Mor Committee

Scenario: The “Ganguly Committee” (2004) reviewed the flow of credit to SSIs. One of its key observations related to “SME Clusters.”
Question: What was the core recommendation regarding clusters?

A Clusters should be disbanded to prevent geographical concentration risk.

B Banks should adopt a “Cluster-based Approach” to lending, providing comprehensive financial solutions specific to the industry in that location.

C Clusters should only be financed by Regional Rural Banks (RRBs).

D Interest rates for clusters should be 2% higher than standalone units.

Regarding the “Kapoor Committee” (1998) on credit delivery to SSIs, identify the INCORRECT statement:

A It recommended enhancing the limit of composite loans.

B It suggested that banks should be delegated more powers to branch managers to sanction loans.

C It recommended that the “Credit Guarantee Trust” be scrapped to save costs.

D It emphasized the need for a mechanism to help SSIs in technology upgradation.

Which committee’s recommendations, submitted in 1997, were instrumental in the major policy shift that led to the gradual “de-reservation” of items exclusively reserved for manufacture by the Small Scale Industry (SSI) sector?

A The Nayak Committee

B The Abid Hussain Committee

C The S.L. Kapur Committee

D The Ganguly Committee

Consider the following assertion and reason regarding the “Chore Committee” (1979) norms.

Assertion (A):

The Chore Committee emphasized that large borrowers must finance a part of their current assets from long-term sources (Core Current Assets).

Reason (R):

The committee aimed to reduce the dependence of large industry on bank finance and enforce financial discipline through the Quarterly Information System (QIS).

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Consider the following assertion and reason regarding Venture Capital (VC) financing.

Assertion (A):

Venture Capital is considered “patient capital” but typically requires a defined “Exit Strategy” within 3 to 7 years.

Reason (R):

VC funds are usually structured as closed-end funds with a fixed life cycle, and must return capital with profits to their Limited Partners.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Which of the following is NOT a characteristic of “Quasi-Equity” (or Hybrid Capital) instruments often used in SME financing?

A They may include a moratorium on repayments during the initial years.

B They are strictly secured by a first charge on the fixed assets, superior to senior debt.

C They often combine elements of debt (interest) and equity (upside sharing).

D They are typically subordinate to senior lenders in the event of liquidation.

Consider the following regarding technology upgradation in the textile MSME sector.

Assertion (A):

The government has shifted focus from the “Amended Technology Upgradation Fund Scheme” (ATUFS) to the PLI Scheme for Textiles and the “PM MITRA” parks.

Reason (R):

ATUFS officially sunsetted on March 31, 2022, and the new approach prioritizes creating global champions in Man-Made Fibre (MMF) and Technical Textiles.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

Regarding the “Public Procurement Policy for Micro and Small Enterprises (MSEs),” which of the following is a mandatory provision for Central Public Sector Enterprises (CPSEs)?

A To procure at least 10% of their annual value of goods/services from MSEs.

B To procure at least 25% of their annual value of goods/services from MSEs.

C To procure at least 50% of their annual value of goods/services from MSEs.

D To procure at least 4% of their annual value from Medium Enterprises.

Which of the following best describes the core function of “Business Development Service Providers” (BDSPs) within the MSME ecosystem?

A They are financial intermediaries that exclusively provide working capital loans to sick MSME units.

B They are specialized agencies that facilitate non-financial services such as technology transfer, marketing assistance, and skill training to improve MSME competitiveness.

C They are government-appointed auditors responsible solely for verifying the Udyam Registration details of enterprises.

D They are arbitration councils set up to resolve delayed payment disputes between buyers and MSME suppliers.

In the context of MSME credit appraisal, what does the specific report type “MIRA” primarily refer to when listed alongside CIBIL and D&B reports?

A Monthly Interest Rate Average

B Microfinance Institution Risk Assessment

C Mira Inform (Mercantile Information & Reference Agency) Report

D Manufacturing Industry Regulatory Authority

Scenario: A bank has sanctioned a working capital limit of ₹12 Crore to a Medium Enterprise. The borrower is facing financial stress.
Question: Under the standing “Framework for Revival and Rehabilitation of MSMEs,” is this borrower eligible for the Committee-based Corrective Action Plan (CAP) mechanism?

A No, the framework applies only to loans up to ₹5 Crore.

B No, the framework applies only to Micro and Small Enterprises, not Medium.

C Yes, the framework is applicable to MSMEs having loan limits up to ₹25 Crore.

D Yes, there is no upper ceiling for MSMEs under this framework.

Consider the following statements regarding the evolution of the MSME definition:

Assertion (A):

The 2020 revision (maintained in 2025) abolished the distinction between Manufacturing and Service enterprises for definition purposes.

Reason (R):

The earlier definition based solely on investment created a “fear of growth,” preventing enterprises from modernizing to keep their investment value low.

A Both A and R are true, and R is the correct explanation of A

B Both A and R are true, but R is NOT the correct explanation of A

C A is true, but R is false

D A is false, but R is true

Consider the following regarding the CHAMPIONS
2.0 Portal:

Assertion (A):

The CHAMPIONS portal operates on a “Hub and Spoke” model to resolve MSME grievances.

Reason (R):

The “Hub” is situated in the office of the Secretary, MSME in New Delhi, while the “Spokes” are located in various states and ministry institutions.

A Both A and R are true, and R explains A

B Both A and R are true, but R does not explain A

C A is true, but R is false

D A is false, but R is true

While the Office of the DC-MSME is an “Attached Office” of the Ministry, several other bodies are “Statutory Bodies” created by specific Acts of Parliament. Which of the following is NOT a Statutory Body?

A Khadi and Village Industries Commission (KVIC)

B Coir Board

C National Small Industries Corporation (NSIC)

D National Board for Micro, Small and Medium Enterprises (NB-MSME)

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⚡ Quick Revision: Key Facts for IIBF MSME Exam

1. Micro Enterprise Limit: Investment up to ₹2.5 Crore and Turnover up to ₹10 Crore (Revised 2025).

2. Small Enterprise Limit: Investment up to ₹25 Crore and Turnover up to ₹100 Crore.

3. Medium Enterprise Limit: Investment up to ₹125 Crore and Turnover up to ₹500 Crore.

4. Export Turnover: Export of goods or services is excluded from the turnover calculation for MSME classification.

5. CGTMSE Ceiling: The maximum guarantee cover limit per borrower is enhanced to ₹10 Crore (effective April 1, 2025).

6. Priority Sector Lending (Micro): Domestic Commercial Banks have a mandatory sub-target of 7.5% of ANBC for Micro Enterprises.

7. TReDS Registration: Companies with annual turnover exceeding ₹250 Crore must mandatorily register on TReDS platforms.

8. Delayed Payments: Buyers must pay MSMEs within 45 days; otherwise, they are liable to pay interest at 3 times the Bank Rate.

9. PPIRP Default Threshold: The minimum default amount to trigger Pre-Packaged Insolvency for MSMEs is ₹10 Lakh.

10. PMEGP Subsidy: General Category beneficiaries get 15% (Urban) or 25% (Rural) subsidy; Special Categories get up to 35% (Rural).

11. SARFAESI Minimums: Action can be taken if debt > ₹1 Lakh and outstanding amount > 20% of principal/interest.

12. PM Vishwakarma: Provides collateral-free loans up to ₹3 Lakh (Tranche 1: ₹1L, Tranche 2: ₹2L) at 5% interest.

13. ZED Certification: Women-owned MSMEs are eligible for 100% subsidy (Free of Cost) for ZED Certification.

14. SMA Categories: SMA-0 (1-30 days), SMA-1 (31-60 days), SMA-2 (61-90 days). NPA is > 90 days.

15. Public Procurement: Central Ministries must procure 25% from MSEs, with 3% reserved for Women MSEs and 4% for SC/ST MSEs.

❓ Frequently Asked Questions: IIBF MSME Exam

What is the passing criteria for the IIBF MSME Exam?

Candidates typically need to score at least 50 marks out of 100 to pass the IIBF Certificate Course on MSME.

What is the new definition of a Small Enterprise for the 2026 exams?

A Small Enterprise has Investment up to ₹25 Crore and Turnover up to ₹100 Crore, as per Union Budget 2025 revisions.

Is the IIBF MSME Exam syllabus updated with 2025 guidelines?

Yes, the exam covers the latest updates including the enhanced CGTMSE limit of ₹10 Crore and revised definition limits.

What is the maximum loan under the PMMY (MUDRA) Tarun Plus category?

The Tarun Plus category offers loans between ₹10 Lakh and ₹20 Lakh.

What is the mandatory TReDS registration threshold?

Companies with a turnover exceeding ₹250 Crore must register on the TReDS platform.

What is the interest rate penalty for delayed payments to MSMEs?

The buyer must pay compound interest with monthly rests at three times the Bank Rate notified by the RBI.

Does the IIBF MSME Exam cover the RAMP scheme?

Yes, the Raising and Accelerating MSME Performance (RAMP) scheme is an important topic in the syllabus.

What is the minimum default amount for MSME Pre-Pack Insolvency?

The minimum default amount to initiate PPIRP is ₹10 Lakh.

Can Retail and Wholesale Traders register as MSMEs?

Yes, they can register on Udyam but are eligible primarily for Priority Sector Lending (PSL) benefits.

What is the maximum subsidy under PMEGP?

The maximum subsidy is 35% of the project cost for Special Category beneficiaries in rural areas.

What is the Udyam Assist Platform used for?

It helps Informal Micro Enterprises (IMEs) generate a registration certificate without GSTIN to avail PSL benefits.

What is the risk weight for unrated MSME exposures?

The RBI has reduced the risk weight for unrated non-retail MSME exposures to 85%.

What is the PM Vishwakarma loan interest rate?

Beneficiaries are charged a fixed concessional interest rate of 5% per annum.

What is the maximum project cost for a CFC under MSE-CDP?

The maximum eligible project cost for calculating the grant is ₹30 Crore.

What is the MSME contribution to India’s exports?

The MSME sector contributes approximately 45% to 48% of India’s total exports.

IIBF MSME Exam – Top 190 Questions for IIBF Certificate Course on MSME (2026)

Revised MSME Classification (Effective 2025-26)

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IIBF MSME Exam – Top 190 Questions for IIBF Certificate Course on MSME (2026)

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