IIBF MSME Exam 2026: 24 Questions & Answers

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Review concise direct answers and the essential concept behind each question. Use the original MCQ practice set for exam-style testing.

What is Incipient Sickness?

Direct Answer
"Incipient Sickness" refers to the early signs of stress before an account turns into a Non-Performing Asset (NPA).
Concept
SMA-0: Overdue for 1–30 days. SMA-1: Overdue for 31–60 days. SMA-2: Overdue for 61–90 days
Practice this as MCQ Question 27 →

What is the Committee for Stressed Micro, Small and Medium Enterprises?

Direct Answer
The "Committee for Stressed Micro, Small and Medium Enterprises" is the authority responsible for approving the resolution plan
Concept
Consortium/Multiple Banking: The Committee includes representatives from all participating banks (JLF – Joint Lenders Forum structure). Sole Banking (Single Lender): Since there are no other banks to consult, the Committee consists of the designated senior officer at the next higher level (e.g., Regional or Zonal Office) to ensure an unbiased review of the Branch’s proposal
Practice this as MCQ Question 28 →

What is a Non-Performing Asset (NPA)?

Direct Answer
A Non-Performing Asset (NPA) is a loan or advance for which the principal or interest payment remained overdue for a period of 90 days
Concept
Term Loans: NPA if interest/installment is overdue for > 90 days. Cash Credit/Overdraft: NPA if the account remains “out of order” (balance > limit or no credit) for more than 90 days. Crop Loans: Overdue for 2 crop seasons (short duration) or 1 crop season (long duration
Practice this as MCQ Question 30 →

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

Direct Answer
The distinction between "Hard Core Working Capital" and "Fluctuating Working Capital"
Practice this as MCQ Question 50 →

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What are Soft Interventions: These?

Direct Answer
Soft Interventions:These are intangible activities aimed at building capacity, trust, and knowledge.
Practice this as MCQ Question 55 →

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

Direct Answer
To strengthen the governance capabilities of the MSME ecosystem and improve access to market and credit.
Practice this as MCQ Question 87 →

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

Direct Answer
To qualify as a "Startup," the entity's turnover must not exceed ₹500 crore in any previous year.
Practice this as MCQ Question 90 →

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

Direct Answer
> ₹1 Lakh and > 20% of principal/interest
Concept
The SARFAESI Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) allows banks to auction properties to recover loans without court intervention. Structural Constraints: Minimum Debt: Section 31(h) exempts cases where the amount due is less than ₹1,00,000. Residual Value: Section 31(j) exempts cases where the remaining debt is less than 20% of the principal amount and interest
Practice this as MCQ Question 100 →

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What is a Cluster?

Direct Answer
A "Cluster" is officially defined as a concentration of enterprises, mostly Micro and Small, located within an identifiable and contiguous geographical area, producing same or similar products.
Practice this as MCQ Question 140 →

What are While finance and infrastructure (Hard Interventions)?

Direct Answer
While finance and infrastructure (Hard Interventions) are visible, the sustainability of a cluster depends on Soft Aspects.
Practice this as MCQ Question 143 →

What are Agglomeration Economies?

Direct Answer
"Agglomeration Economies" are the benefits that come when firms and people locate near one another together in cities or industrial clusters.
Practice this as MCQ Question 145 →

What is promoter's Contribution?

Direct Answer
Promoter's Contribution refers to the personal capital the business owners inject during a restructuring package.
Practice this as MCQ Question 160 →

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?

Direct Answer
Re-classified as Standard without the tag
Concept
Upgradation of Restructured Accounts. Regulatory Rule: If a restructured account performs satisfactorily (payment of principal and interest as per the new terms) for a “Specified Period” (typically 1 year), it is considered “cured.” Outcome: The “Restructured” tag is removed, and it is treated as a normal Standard asset. This reduces the provisioning requirement for the bank and improves the credit rating of the borrower.
Practice this as MCQ Question 164 →

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

Direct Answer
Removed from balance sheet but recovery right retained
Concept
Technical Write-off (or Prudential Write-off). Mechanism: Accounting: The bank uses its profits to fully provide for the bad loan and removes it from the “Gross Advances” list. This cleans up the NPA ratio. Legal: The debt still legally exists. The bank continues its recovery efforts (e.g., in courts or DRT). If money is recovered later, it is recorded as “Recovery in Written-off Accounts” (Profit
Practice this as MCQ Question 165 →

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

Direct Answer
30 Days
Concept
Review Period. Regulatory Rule: As per the June 7, 2019 circular (Prudential Framework), as soon as a default occurs (even for 1 day), lenders must initiate a review. Timeline: They have a 30-day Review Period to decide on the resolution strategy (e.g., whether to restructure, sell, or pursue legal action
Practice this as MCQ Question 166 →

What is the Framework for Revival and Rehabilitation of MSMEs?

Direct Answer
The Framework for Revival and Rehabilitation of MSMEs is designed to help honest borrowers who are facing genuine business stress (incipient sickness).
Practice this as MCQ Question 168 →

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

Direct Answer
In a "Dealer Finance" model, the bank finances the Corporate Anchor to manufacture goods for the SME dealers.
Practice this as MCQ Question 175 →