Reading Comprehension Flashcards

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?

Answer: Poor infrastructure and low digital literacy

The passage explicitly states that inadequate infrastructure and low digital literacy caused sluggish rural adoption.

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?

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.

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:

Answer: Ability to recover from setbacks

Resilience refers to the ability of banks to withstand and recover from financial stress or losses.

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?

Answer: Liquidity is absorbed

The passage explicitly states that when the central bank sells securities, liquidity is absorbed from the system.

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?

Answer: They erode profitability and limit new lending

The passage directly links NPAs to eroding profitability and constraining fresh lending in public sector banks.

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:

Answer: Cautiously balanced

The author acknowledges the growth of digital payments while also flagging cybersecurity risks, reflecting a cautiously balanced tone.

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?

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.