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DIGIBANK Previous Year Questions & Exam-Pattern Practice (2026)

IIBF doesn't release official question papers. Practice these exam-pattern recall questions instead — modeled on the current DIGIBANK syllabus and difficulty, with answers and explanations.

15 hard practice questions Answers + explanations included

Why "previous year questions" don't officially exist for DIGIBANK

IIBF does not publish past question papers, and no verified bank of actual previous-year questions exists anywhere. Every question on this page is an exam-pattern practice question written to match the current Digital Banking syllabus and difficulty — it is not an actual exam question. That's the honest way to prepare for the recall-based pattern.

DIGIBANK subject

Digital Banking

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1

In a four-party POS scheme, which party is obliged to actually pay the merchant for the transactions it acquires from that merchant?

  1. A. The card scheme operator (e.g., Visa/MasterCard)
  2. B. The card issuer
  3. C. The merchant acquirer
  4. D. The cardholder's account-provider bank
Show answer & explanation

Correct answer: C. The merchant acquirer

The source states that because there is no direct contractual relationship between the card scheme operator and the cardholder or merchant, the merchant acquirer (not the card issuer or the card scheme operator) is obliged to pay the merchant for the transactions it acquires. Hence the best answer is the merchant acquirer.

Study this chapter: POS (Point of Sale)
2

A customer in a Tier I centre uses a debit card to withdraw cash at a POS terminal. As per RBI norms cited in the chapter, what is the maximum per-day cash withdrawal limit, and what is the cap on customer charges for such a withdrawal?

  1. A. Rs 1,000 per day; charges not more than 1% of the transaction amount
  2. B. Rs 2,000 per day; charges not more than 1% of the transaction amount
  3. C. Rs 1,000 per day; charges not more than 2% of the transaction amount
  4. D. Rs 2,000 per day; charges not more than 0.5% of the transaction amount
Show answer & explanation

Correct answer: A. Rs 1,000 per day; charges not more than 1% of the transaction amount

The source states cash withdrawal at POS is Rs 1,000 per day in Tier I and II centres (and Rs 2,000 in Tier III to VI), and that customer charges on such withdrawals shall not be more than 1% of the transaction amount. For Tier I the correct pairing is Rs 1,000 with a 1% cap (A); B uses the Tier III–VI figure, and C/D use incorrect charge caps.

Study this chapter: POS (Point of Sale)
3

A merchant adds a 2% surcharge on card payments and refuses a validly presented credit card from a rival scheme. Judging by the "Dos and Don'ts" for merchants, which assessment is correct?

  1. A. Both actions are permitted at the merchant's discretion
  2. B. The surcharge is permitted but refusing the card is not
  3. C. Both actions violate the rules: surcharges are barred unless expressly allowed by local law, and all properly presented cards must be accepted
  4. D. Refusing the card is permitted but the surcharge is not
Show answer & explanation

Correct answer: C. Both actions violate the rules: surcharges are barred unless expressly allowed by local law, and all properly presented cards must be accepted

The "Dos" require merchants to accept all cards when properly presented, and the "Don'ts" bar imposing any extra charge or surcharge unless expressly allowed by local law. Both of the merchant's actions therefore violate the rules, so C is correct; the other options wrongly permit one or both behaviours.

Study this chapter: POS (Point of Sale)
4

Assertion (A): A merchant must verify the cardholder's signature against the one on the card for all signature-based cards. Reason (R): Signature verification is also mandatory for chip-and-PIN cards before completing the transaction.

  1. A. Both A and R are true, and R is the correct explanation of A
  2. B. Both A and R are true, but R is not the correct explanation of A
  3. C. A is true, but R is false
  4. D. A is false, but R is true
Show answer & explanation

Correct answer: C. A is true, but R is false

The "Dos" list requires verifying the cardholder's signature for all signature-based cards, so A is true. However, the source explicitly states this signature verification is NOT required for chip-and-PIN cards, making R false. Hence C.

Study this chapter: POS (Point of Sale)
5

A bank wants to deploy POS terminals to field agents conducting Financial Inclusion enrolment in remote villages that lack any live telecom link during the day, requiring transactions to be stored and uploaded later in a batch. Which POS type is designed for this?

  1. A. Integrated point-of-sale terminal (IPOS)
  2. B. Portable terminal
  3. C. Polled terminal (POT)
  4. D. Acquirer-owned terminal
Show answer & explanation

Correct answer: C. Polled terminal (POT)

A polled terminal stores accepted card transactions and transmits their details to the acquirer in a batch; it is referred to as a Predominantly 'Off-line Terminal' (POT) and has been used for off-line Financial Inclusion field operations with subsequent batch upload where telecom is available. IPOS (A) is a merchant-shop billing machine; a portable terminal (B) works only within a radius of a base station wired to a phone line; acquirer-owned (D) refers to ownership, not offline capability.

Study this chapter: POS (Point of Sale)
6

Assertion (A): "Memory scraping" is the technique behind most major POS malware attacks. Reason (R): When a card is swiped, its details are briefly stored in the terminal's memory while being transmitted to the processor, giving malware a window to copy the data.

  1. A. Both A and R are true, and R is the correct explanation of A
  2. B. Both A and R are true, but R is not the correct explanation of A
  3. C. A is true, but R is false
  4. D. A is false, but R is true
Show answer & explanation

Correct answer: A. Both A and R are true, and R is the correct explanation of A

The source confirms both: memory scraping is the reason behind most major POS malware attacks (A true), and it works precisely because card details are briefly held in the terminal's memory during transmission, providing a window for malware to copy them (R true). R directly explains why memory scraping is effective, so R correctly explains A.

Study this chapter: POS (Point of Sale)
7

A restaurant wants a card terminal that the waiter can carry to any table inside the premises, but it only works within a limited range of a base unit wired to the outlet's telephone line. Which terminal does this describe?

  1. A. Mobile POS (m-POS)
  2. B. Portable terminal
  3. C. Polled terminal
  4. D. Acquirer-owned terminal
Show answer & explanation

Correct answer: B. Portable terminal

A portable terminal can be used only within a specified radius of its base station, which is itself connected to the merchant's telephone line and situated in the retail outlet; the source notes these are mostly used in the hospitality industry. An m-POS (A) uses a mobile telephone connection and can be taken away from the shop entirely; a polled terminal (C) is an offline batch device; acquirer-owned (D) denotes ownership.

Study this chapter: POS (Point of Sale)
8

Consider the following statements about the merchant on-boarding pre-requisites for POS: 1. A POS terminal may be installed before the Merchant Establishment (ME) Agreement is executed, provided KYC is complete. 2. KYC compliance and acceptance of the bank's MSF/MDR scales are pre-requisites for on-boarding. Which is/are correct?

  1. A. 1 only
  2. B. 2 only
  3. C. Both 1 and 2
  4. D. Neither 1 nor 2
Show answer & explanation

Correct answer: B. 2 only

The source lists KYC compliance and acceptance of the Bank's MSF/MDR scales among the on-boarding pre-requisites, so statement 2 is correct. Statement 1 is wrong because the source explicitly says the POS terminal shall be installed only AFTER the execution of the ME agreement. Hence only 2 is correct.

Study this chapter: POS (Point of Sale)
9

A merchant acquirer pays its large merchants on Day 1, certain banked merchants on Day 2, and the remaining merchants on Day 3, even before the card scheme operator has fully settled funds to it. Which set of source facts together best explains this practice?

  1. A. The acquirer is legally barred from paying merchants before receiving scheme funds, so this is non-compliant
  2. B. Card scheme operators settle the net amount due to the acquirer in parts across Days 1, 2 and 3 by geography/currency/time zone, yet acquirers usually initiate merchant payment even before receiving those funds, varying timing by merchant type and disbursement arrangements
  3. C. The card issuer directly pays each merchant, bypassing the acquirer
  4. D. Settlement always occurs entirely on Day 0 for all parties simultaneously
Show answer & explanation

Correct answer: B. Card scheme operators settle the net amount due to the acquirer in parts across Days 1, 2 and 3 by geography/currency/time zone, yet acquirers usually initiate merchant payment even before receiving those funds, varying timing by merchant type and disbursement arrangements

The settlement section states card scheme operators settle the acquirer's net amount in parts across Days 1, 2 and 3 based on geography, currency and time zone, and that acquirers usually initiate payment to merchants even before receiving funds — paying large merchants on Day 1, certain banked merchants on Day 2, and the rest on Day 3. This integrates both the part-settlement timing and the acquirer's advance-payment practice, so B is correct; the others contradict the source.

Study this chapter: POS (Point of Sale)
10

Match the POS transaction type (Column I) with its description (Column II): Column I: (i) Void (ii) Refund (iii) Pre-authorization (iv) Cash advance Column II: (P) Amount blocked from customer's account for a specific period, typically in hotels (Q) Merchant gives cash instead of a product, like an ATM (R) Sale cancelled and amount returned before end-of-day settlement (S) Sale cancelled and amount refunded after end-of-day settlement

  1. A. (i)-R, (ii)-S, (iii)-P, (iv)-Q
  2. B. (i)-S, (ii)-R, (iii)-Q, (iv)-P
  3. C. (i)-R, (ii)-S, (iii)-Q, (iv)-P
  4. D. (i)-Q, (ii)-P, (iii)-R, (iv)-S
Show answer & explanation

Correct answer: A. (i)-R, (ii)-S, (iii)-P, (iv)-Q

Per the source: Void = cancel sale and return amount before settlement (R); Refund = cancel and refund after settlement (S); Pre-authorization = block some amount for a specific period, used in hotels (P); Cash advance = POS used like an ATM, merchant gives cash (Q). Only option A maps all four correctly.

Study this chapter: POS (Point of Sale)
11

Consider the following statements about PSTN and GPRS POS terminals: 1. A PSTN POS terminal needs telephone lines to interact with the Data Centre. 2. A GPRS POS terminal uses a SIM card and can be moved anywhere as it has a built-in battery. Which of the statements is/are correct?

  1. A. 1 only
  2. B. 2 only
  3. C. Both 1 and 2
  4. D. Neither 1 nor 2
Show answer & explanation

Correct answer: C. Both 1 and 2

The text states a PSTN POS terminal needs telephone lines and is stationed/wired to the line, while a GPRS POS terminal uses SIM cards and can be moved anywhere because it has a SIM and built-in battery. Both statements faithfully reproduce the source, so both are correct; A, B and D each omit a true statement.

Study this chapter: POS (Point of Sale)
12

A card scheme charges a flat per-transaction fee to recover the cost of authorizing a transaction over its network, and this fee applies even when an authorization is declined for business reasons. Which scheme price point is this?

  1. A. Assessment Fees
  2. B. Administrative Fees
  3. C. Authorization Charges
  4. D. Member Audit Charges
Show answer & explanation

Correct answer: C. Authorization Charges

Authorization Charges recover the expense of authorizing a transaction over the network as a flat fee per transaction, vary by the scheme's tiered structure, and the source notes the charge applies even for business declines. Assessment Fees (A) are a percentage of POS/non-ATM volumes for using the brand; Administrative Fees (B) are a monthly member fee; Member Audit Charges (D) are for auditing member systems.

Study this chapter: POS (Point of Sale)
13

A merchant who has not settled the day's POS transactions complains that the day's card sales have not reached the merchant's account. Which statement correctly explains the situation?

  1. A. Settlement is automatic at the card network end, so the merchant need not act
  2. B. If settlement is not performed on the POS terminal, the unsettled sales amount will not be credited to the merchant's settlement account
  3. C. Settlement can be performed only once per day, so unsettled sales roll over automatically
  4. D. Unsettled sales are credited directly by the issuer regardless of settlement
Show answer & explanation

Correct answer: B. If settlement is not performed on the POS terminal, the unsettled sales amount will not be credited to the merchant's settlement account

The "Dos" instruct merchants to perform settlement on the POS terminal at least once a day; if not done, the amount of unsettled sales will not be credited to the merchant's settlement account. The trap options imply automatic crediting (A, D) or a once-only limit (C); the source actually allows settlement more than once a day and makes crediting dependent on settlement being done.

Study this chapter: POS (Point of Sale)
14

An m-POS solution is being marketed to small retailers. Which statement MOST accurately captures its defining advantage over a traditional merchant POS terminal as described in the chapter?

  1. A. It guarantees offline batch processing for Financial Inclusion
  2. B. It requires minimal investment on initial infrastructure, since payments can be accepted using an existing smartphone or tablet
  3. C. It can never accept contactless or NFC payments
  4. D. It removes the need for any card scheme network operator
Show answer & explanation

Correct answer: B. It requires minimal investment on initial infrastructure, since payments can be accepted using an existing smartphone or tablet

Under "Advantages over Traditional POS," the first listed benefit is minimal investment on initial infrastructure — accepting payments with an existing smartphone or tablet, configurable across iOS, Android and Windows Mobile. Offline batch processing (A) describes a polled terminal; the source says m-POS supports contactless and NFC (so C is false); and the card scheme operator remains part of the flow (D is false).

Study this chapter: POS (Point of Sale)
15

Why does the source note that many banks actively pursue POS (acquiring) business even when direct fee income is modest?

  1. A. Because POS terminals are exempt from all maintenance costs
  2. B. Because on-boarded merchants invariably keep their current accounts with the acquiring bank, giving float income and growing CASA deposits
  3. C. Because the RBI pays banks a subsidy for each POS terminal deployed
  4. D. Because POS terminals eliminate the need for any settlement infrastructure
Show answer & explanation

Correct answer: B. Because on-boarded merchants invariably keep their current accounts with the acquiring bank, giving float income and growing CASA deposits

Under "Relationship Value – Current Account Float," the source says merchants on-boarded for PoS business invariably have current accounts with the acquiring bank, generating float income, and that many banks use PoS business to garner current accounts and increase CASA deposits. The other options describe benefits the source never claims.

Study this chapter: POS (Point of Sale)

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