Reading Comprehension Passages Flashcards

Passage: 'The Unified Payments Interface (UPI) has revolutionised retail payments in India by enabling instant, interoperable fund transfers across banks using a single mobile application. Its adoption has outpaced that of similar systems globally.' What is the BEST conclusion supported by the passage?

Answer: India's UPI adoption has been exceptionally rapid compared to global peers

The passage states UPI adoption has outpaced similar global systems, indicating exceptionally rapid uptake in India.

A passage reads: 'Cybersecurity threats in banking range from phishing attacks targeting customers to sophisticated ransomware assaults on core banking infrastructure. Banks must adopt multi-layered defence strategies to mitigate these risks.' The word 'mitigate' most nearly means:

Answer: Reduce or lessen

'Mitigate' means to reduce the severity or impact of something, in this case, cybersecurity risks.

Passage: 'Credit ratings issued by agencies like CRISIL and ICRA provide investors with an independent assessment of a borrower's ability to repay debt. However, the global financial crisis of 2008 exposed significant conflicts of interest within the rating agency model.' What weakness in the rating agency model does the passage highlight?

Answer: The issuer-pays model creates conflicts of interest that can compromise rating integrity

The passage references the 2008 crisis as evidence of conflicts of interest within the rating model, specifically the issuer-pays structure.

A passage says: 'Central bank digital currencies (CBDCs) are digital forms of sovereign currency issued and regulated by central banks. Unlike cryptocurrencies, CBDCs are backed by the full faith and credit of the issuing government.' How do CBDCs differ from cryptocurrencies?

Answer: CBDCs are government-backed, giving them sovereign guarantee unlike decentralised cryptocurrencies

The passage explicitly states CBDCs are sovereign-backed, distinguishing them from decentralised cryptocurrencies like Bitcoin.

Passage: 'The marginal cost of funds-based lending rate (MCLR) system was introduced to ensure faster transmission of RBI's policy rate changes to bank lending rates, replacing the earlier base rate system which was criticised for its rigidity.' Why was MCLR introduced?

Answer: To ensure policy rate changes are transmitted more quickly to borrowers

The passage states MCLR was introduced to ensure faster transmission of policy rate changes, addressing the base rate system's rigidity.

A passage reads: 'The Jan Dhan Yojana successfully opened millions of bank accounts for the unbanked population. Yet, dormant accounts—those with no transactions for extended periods—remain a persistent challenge undermining the scheme's impact.' What does the author suggest about financial inclusion metrics?

Answer: Account activity, not just account opening, should determine the success of inclusion schemes

The author argues that dormant accounts undermine the scheme, implying active usage is a better measure of true financial inclusion.

Passage: 'Reverse repo rate is the rate at which the RBI borrows money from commercial banks. When the RBI raises the reverse repo rate, it incentivises banks to park more funds with the RBI, reducing liquidity in the banking system.' What effect does raising the reverse repo rate have on the economy?

Answer: It reduces liquidity in the banking system, potentially curbing inflation

Raising the reverse repo rate draws funds from banks to the RBI, reducing liquidity and thereby helping to curb inflationary pressures.