Export Import Finance MCQ Questions and Answers Part – 3

Export Import Finance MCQ Questions and Answers Part – 1

Export Import Finance MCQ Questions and Answers Part – 2

Export Import Finance MCQ Questions and Answers Part – 3

101. Under an acceptance letter of credit, the responsibility of the issuing bank is
A. only to accept the bill
B. to pay against the bill
C. to accept the immediately and also to pay the amount of the bill on its due date.
D. to get the acceptance of the importer on the bill.
ANSWER: C
102. A confirmed letter of credit is one
A. confirmed to be authention
B. confirmed by the importer to be correct.
C. confirmed by the exporter that he agrees to the conditions.
D. confirmed by a bank (other than the opening bank) in the exporter’s country.
ANSWER: D
103. Under the confirmed letter of credit the undertaking the confirming bank is
A. in addition to that of the opening bank.
B. in substitution of the undertaking of the opening bank.
C. subject to government policies to the exporter country.
D. none of the above.
ANSWER: A
104. A credit which provides for reinstatement of the amount as and when bills are drawn under it is called
A. reinstatement credit
B. reimbursement credit
C. revolving credit.
D. back-to-back credit.
ANSWER: C
105. Working Group for approval of project exports does not include
A. Reserve Bank of India.
B. Financing bank.
C. Exim bank.
D. DGFT.
ANSWER: D
106. For project exports fulfilling norms for period of credit, in principle sanction can be given by
A. the financing bank.
B. Exim bank.
C. The financing bank for contracts worth up to Rs 25 crores and Exim bank for contracts worth up to
RS 100 crores.
D. the financing bank for contracts worth up to Rs 100 crores and Exin bank for contracts worth up to
Rs 25 crores.
ANSWER: C
107. The following statement with respect to moratorium on repayment of principal on project export is
not correct
A. For capital goods exports the maximum period of moratorium is 1 year.
B. For turnkey project exports the maximum period moratorium is 2 years.
C. For consumer goods export the maximum period moratorium is 3 years.
D. None of the above.
ANSWER: C
108. Export of services on deffered payment terms requires clearance of the Working Group for
A. contracts beyond Rs 5 crores.
B. contracts beyond 10 crores
C. contracts beyond 20 crores
D. all contracts.
ANSWER: D
109. In case of failure of the exporter, the liability of the bank which has issued the performance guarantee
is to
A. compel the exporter to fulfill his obligation.
B. find alternative contractor who can execute the contract
C. financially compensate the beneficiary up to the value of the contract
D. financially compensate the beneficiary up to the guaranteed amount.
ANSWER: D
110. Advance payment guarantee assures
A. the beneficiary that the exporter will make advance payments.
B. the exporter that the importer will make advance payments.
C. the importer to refund the money he has advanced to the exporter, if the latter fails.
D. the exporter that the bank will extend credit for the contract.
ANSWER: C
111. Indian parties are prohibited from making investment in foreign entity engaged in the business of
A. real estate.
B. real estate or banking.
C. real estate or banking or agriculture.
D. none of the above.
ANSWER: B
112. Direct investment in a joint venture abroad can be made by an Indian party with ceiling on limit under automatic route if the investment is made from
A. balances in EEFC account
B. funds raised through ADR/GDR.
C. balances in EEFC account or funds raised through ADR/GDR.
D. no such provision.
ANSWER: C
113. Which of the following is not an approved method of funding direct investment in a foreigh joint
venture?
A. Capitalisation of reserves
B. Issusing shares in foreign market.
C. Swap of shares.
D. Utilisation of ECB proceeds.
ANSWER: B
114. An Indian entity which has made direct investment abroad is not required to
A. repatriate to India the dues receivable from foreign entity.
B. submit annual performance report to Reserve Bank.
C. ensure return on investment is not less than the prime rate in the country of investment.
D. none of the above.
ANSWER: C
115. Export Credit Guarantee Corporation(ECGC) policies do not cover risk against
A. buyer’s protracted default to pay for the goods.
B. war in buyer’s country.
C. buyer’s failure to obtain necessary import licence or exchange authorization from authorities in his
country.
D. cancellation of export licence.
ANSWER: C
116. The standard policy of ECGC covers risk of
A. buyer’s failure to obtain import licence.
B. insolvency of the collecting bank.
C. cancellation of import licence in the buyer’s country.
D. all the above.
ANSWER: C
117. The standard policy of ECGC protects loss to the extent of
A. 90% for political risk and 60% for commercial risk.
B. 90% for both political and commercial risks.
C. 60% for political risk and 90% for commercial risk.
D. 60% for both political and commercial risks.
ANSWER: B
118. The maximum amount of claim against an individual buyer that ECGC will accept under its standard
policy issued to an exporter is known as
A. maximum liability.
B. credit limit.
C. individual limit.
D. there is no such ceiling.
ANSWER: B
119. The standard policy of ECGC is issued
A. on whole turnover basis for 24 months.
B. on whole turnover for 12 months.
C. against each consignment separately.
D. on monthly basis.
ANSWER: A
120. Funds allocated under ASIDE should be used for
A. developing infrastructure such as roads.
B. creation of free trade zones
C. advertisements abroad
D. conducting trade tours.
ANSWER: A
121. Unless prohibited by letter of credit, a bank can accept
A. claused bill of lading.
B. received for shipment bill of lading.
C. bill of lading indicating that the carrying vessel is propelled by sail only
D. none of the above.
ANSWER: D
122. Market access initiative is not available for
A. conducting market studies
B. participation in international trade fairs
C. Testing charges for engineering products
D. None of the above
ANSWER: D
123. Guarantee credit is other name for
A. back to back credit
B. anticipatory credit
C. standby credit
D. Automatic credit
ANSWER: C
124. Amendment to a letter of credit should be advised through the
A. negotiating bank
B. advising bank.
C. issuing bank
D. none of the above.
ANSWER: B
125. 19 A guarantee issued by a bank in lieu of bid money to be deposited by the exporter to participate in
the tender is a
A. bid bond guarantee
B. performance guarantee.
C. advance payment guarantee
D. retention money guarantee.
ANSWER: A
126. A guarantee issued in favour of an importer so that he releases entire contract amount instead of
retaining a portion is
A. performance guarantee
B. retention money guarantee.
C. bid bond guarantee.
D. advance payment guarantee.
ANSWER: B
127. For export guarantees issued a bank may obtain cover from ECGC under its
A. export performance guarantee.
B. retention money guarantee.
C. bid bond guarantee.
D. advance payment guarantee.
ANSWER: A
128. The statutory basis for regulation of foreign trade in India is
A. Foreign Trade( Development and Regulation) Act.
B. Foreign Exchange Management Act.
C. Customs Act.
D. Director General of Foreign Trade.
ANSWER: A
129. Two parties agreeing to buy and sell from each other without involving payment is known as
A. Domestic trade.
B. foreign trade.
C. Countertrade.
D. non paying trade.
ANSWER: C
130. Banks can permit reduction in value of export bills up to
A. 1%.
B. 2%.
C. 5%.
D. 10%.
ANSWER: D
131. Undrawn balance on export bills are permitted up to
A. 10%
B. 15%
C. 5%
D. 2%
ANSWER: A
132. For imports from Pakistan, payment should be made in
A. US dollars.
B. Indian Rupee.
C. Pakistan currency.
D. any currency.
ANSWER: A
133. The time limit for export realization
A. is 2 months from the date of shipment.
B. is 3 months from the date of shipment
C. is 4 months from the date of shipment.
D. is 6 months from the date of shipment.
ANSWER: D
134. Comprehensive risk policy covers
A. only commercial risk.
B. only political risk.
C. both commercial and political risk
D. none of the above.
ANSWER: C
135. 21 Export turnover policy is for
A. large exporters who pay not less than Rs 10 lakhs per annum towards premium
B. large exporters who pay not less than 25 lakhs per annum towards premium.
C. small exports who pay less than 10 lakhs per annum.
D. small exporters who pay more than 10 lakhs premium per annum.
ANSWER: A
136. Which one of the following statements relating to Consultancy and Technology Services Finance Programme of Exim Bank is Wrong?
A. The exporter is expected to get an advance payment of 25%.
B. The export should be covered by ECGC policy.
C. Minimum period of loan is seven years.
D. They should be secured by a government guarantee or letter of credit.
ANSWER: C
137. For Export Oriented Units, Exim Bank finances
A. . term loans only.
B. both working capital and term loans.
C. term loans, working capital as long term working capital.
D. only investment overseas.
ANSWER: C
138. Which one of the following is not a common features of direct lending by Exim Bank?
A. They are for medium or long-term.
B. The size of the loan is high.
C. Security is not insisted upon.
D. Interest rates are relatively low.
ANSWER: C
139. The facility that is available to commercial banks in India from Exim Bank is
A. refinance of export credit.
B. export bills rediscounting.
C. syndication of export credit risks
D. all the above.
ANSWER: D
140. Exim bank issues guarantees on behalf of
A. all exporters from India.
B. exporters of construction and turnkey projects
C. banks in India.
D. Government of India.
ANSWER: B
141. Export factoring encourages the following method of payment
A. open account system
B. letter of credit method
C. documentary bills.
D. advance payment.
ANSWER: A
142. For availing discounting of bills with forfeiter, the exporter should produce
A. avalised bills of exchange or promissory notes accepted by importer’s bank
B. avalised bills of exchange or promissory notes accepted by exporter’s bank.
C. Reserve Bank permit.
D. no objection certificate from Exim bank.
ANSWER: A
143. Which of the following is not a basic objective of documentation in foreign trade?
A. to assure that the exporter will receive the payment.
B. to assure that the importer will receive the goods.
C. to reduce foreign exchange risk.
D. none of the above.
ANSWER: D
144. Which of the following is not an important document in foreign trade?
A. a check for the value of goods.
B. a draft.
C. bill of lading.
D. a letter of credit.
ANSWER: A
145. .______ risk is the potential exchange loss from outstanding obligations as a result of exchange-rate fluctuations.
A. Trade.
B. Exchange.
C. Finance.
D. Transaction.
ANSWER: D
146. Foreign exchange risk can be reduced by using _____.
A. forward contracts
B. futures contracts.
C. currency options.
D. all of the above.
ANSWER: D
147. Which of the following is not a condition for drafts to be negotiable?
A. must be in writing, signed by the drawer.
B. must contain a promise to pay a certain sum if goods are receive
C. must contain an order to pay.
D. must be payable on sight or at a specified date.
ANSWER: B
148. . If a draft is made to bearer, payment should be made to _____.
A. a bank.
B. drawer.
C. acceptor.
D. anyone who presents the draft.
ANSWER: D
149. If a draft is accepted by a bank, it becomes a _____.
A. valid draft.
B. demand draft
C. usance draft.
D. bankers acceptance.
ANSWER: D
150. Forms of countertrade include the following except ___.
A. simple barter.
B. clearing arrangement.
C. counter purchase.
D. mutual agreement.
ANSWER: D

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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