IBPS Reading Comprehension 2 — Questions and Answers
Question 1: A passage states: 'The government launched a financial inclusion scheme to bring unbanked populations into the formal banking system. Despite initial enthusiasm, rural adoption remained sluggish due to inadequate infrastructure and low digital literacy.' What is the primary obstacle to the scheme's success according to the passage?
- Lack of government funding
- Poor infrastructure and low digital literacy (Correct answer)
- Disinterest among rural populations
- Excessive banking regulations
Correct answer: Poor infrastructure and low digital literacy
The passage explicitly states that inadequate infrastructure and low digital literacy caused sluggish rural adoption.
Question 2: Read: 'Microfinance institutions bridge the gap between formal banks and underserved communities by offering small loans without requiring collateral. However, critics argue that high interest rates charged by some MFIs negate the benefits for borrowers.' Which of the following best summarizes the author's view?
- Microfinance is entirely beneficial
- Microfinance has merits but faces criticism over interest rates (Correct answer)
- Critics are wrong about microfinance
- Collateral requirements are the main problem
Correct answer: Microfinance has merits but faces criticism over interest rates
The passage presents microfinance's benefit (no collateral) alongside a criticism (high interest rates), reflecting a balanced view.
Question 3: Passage: 'Basel III norms require banks to maintain higher capital buffers to absorb losses during financial stress. While this strengthens bank resilience, it may reduce banks' capacity to extend credit, potentially slowing economic growth.' The word 'resilience' most nearly means:
- Profitability
- Ability to recover from setbacks (Correct answer)
- Regulatory compliance
- Credit expansion
Correct answer: Ability to recover from setbacks
Resilience refers to the ability of banks to withstand and recover from financial stress or losses.
Question 4: A passage reads: 'The RBI periodically conducts open market operations by buying or selling government securities to regulate liquidity in the banking system. When the central bank buys securities, it injects liquidity; when it sells, liquidity is absorbed.' What happens to liquidity when RBI sells government securities?
- Liquidity increases
- Liquidity remains unchanged
- Liquidity is absorbed (Correct answer)
- Interest rates fall
Correct answer: Liquidity is absorbed
The passage explicitly states that when the central bank sells securities, liquidity is absorbed from the system.
Question 5: Passage excerpt: 'Non-performing assets have emerged as a significant challenge for Indian public sector banks, eroding profitability and constraining fresh lending. Prompt corrective action frameworks have been deployed to rehabilitate stressed banks.' What is the effect of NPAs on banks according to the passage?
- They improve bank profitability
- They erode profitability and limit new lending (Correct answer)
- They trigger government bailouts immediately
- They strengthen regulatory frameworks
Correct answer: They erode profitability and limit new lending
The passage directly links NPAs to eroding profitability and constraining fresh lending in public sector banks.
Question 6: Read: 'Digital payment ecosystems have flourished in India, with UPI transactions reaching record volumes. Yet cybersecurity threats, including phishing and identity theft, pose growing risks to consumers who are increasingly transacting online.' The author's tone toward digital payments can best be described as:
- Entirely optimistic
- Harshly critical
- Cautiously balanced (Correct answer)
- Indifferent
Correct answer: Cautiously balanced
The author acknowledges the growth of digital payments while also flagging cybersecurity risks, reflecting a cautiously balanced tone.
Question 7: Passage: 'Credit rating agencies assess the creditworthiness of borrowers and assign ratings that influence the interest rates lenders charge. A higher credit rating typically results in lower borrowing costs, incentivizing borrowers to maintain financial discipline.' Which inference is best supported by the passage?
- Borrowers with poor ratings pay lower interest
- Credit ratings have no effect on borrowing costs
- Maintaining financial discipline can reduce borrowing costs (Correct answer)
- Credit agencies set interest rates directly
Correct answer: Maintaining financial discipline can reduce borrowing costs
The passage implies that good ratings lower borrowing costs, which incentivizes financial discipline—connecting discipline to reduced costs.
IBPS Reading Comprehension 2
A passage states: 'The government launched a financial inclusion scheme to bring unbanked populations into the formal banking system.
Despite initial enthusiasm, rural adoption remained sluggish due to inadequate infrastructure and low digital literacy.' What is the primary obstacle to the scheme's success according to the passage?