Dear Readers,
Mahendras has started special quizzes for SBI Clerk examination so that you can practice more and more to crack the examination. This SBI Clerk special quiz series will mold your preparations in the right direction and the regular practice of these quizzes will be really very helpful in scoring good marks in the Examination. Here we are providing you important question of English Language for SBI Clerk 2020 Exam.
Read the following passage carefully and answer the questions given below it. Certain words have been given in bold to help you locate them while answering some questions.
The impressive stock market debut of both Ujjivan Financial services and Equitas Holdings seems to have enthused analysts and investors about the arrival of small finance banks (SFBs), but that could be a premature celebration, considering that these entities are still micro finance institutions (MFIs) and have been riding what have been exceptionally good times for the microfinance sector. The real test will be next year as full-fledged banks. With most of the new licensees being MFIs, the issue of customer acquisition or banking infrastructure may not be problematic, but their real challenges will be in three key areas, viz funding, credit pricing and business models.
On funding, currently MFIs are almost exclusively dependent on bank loans which, in turn, is driven by their classification as priority sector credit; with the SFBs themselves having to meet priority sector targets, bank lending may lose its sheen and SFBs would need to explore alternate avenues. As for deposits, the challenge will be not so much of competing for low-cost deposits, but tapping into a completely different client segment than what they now have.
On the flip side, they are well capitalised and their lower leverage gives them more leeway for additional borrowings, but then the real issues are availability and cost of funds. The limits to future growth in microfinance lending may well be set by their deposit-taking abilities. And then there are the known issues in capital re-structuring that will be required to comply with RBI regulations on promoter and foreign holdings. But as of now, the high capital base should help the cause of capital adequacy well. Another key aspect of the liability side that is bound to change is their asset-liability maturity profile; currently MFIs enjoy a positive mismatch (shorter assets and longer liabilities), which is bound to change with a larger deposit base and changes on the asset portfolio.
Credit pricing has been a key factor behind the high return on assets (ROAs) of MFIs; their large interest spreads together with low cost of risk (that flow from low non-performing assets) are in stark contrast to banks (with low net interest spreads and high credit risk premiums). One wonders whether the transition to banks would impact any of this — for one, they will now be subject to the credit pricing norms under MCLR; with most MFIs currently charging 20 per cent plus rates with the maximum capped by RBI rules for NBFC-MFIs, it remains to be seen how new loans will be priced under MCLR. In all likelihood, net interest spreads would come down.
The saving grace would be low credit risk premiums, given their low bad debt portfolio. While prudential norms for asset quality and income recognition have been made applicable for SFBs, their business model of short term loans (weighted average maturity of loans is less than 12 months) and focused lending have helped them restrict bad loans to insignificant levels.
Finally, their business models could change significantly, not only on account of the changes discussed above on the liabilities side, but also due to the new rules for asset allocation (75 per cent of adjusted net bank credit to priority sector, of which 40 per cent to be dispersed across existing priority sector sub-sectors). This leaves fewer resources for micro financing business itself, their core competence. When we consider that MFI clientele have been largely weaned on repeat loans year on year that keep the cash cycle flowing, it will be a matter of concern if microfinance growth drops as a result of their transition to banks. The rationale for encouraging MFIs to convert to banks apparently derives from giving them a chance to get over the constraints they face, such as inadequate finance, unclear regulatory environment, or low technology and management bandwidth.
Although, as the RBI discussion paper itself acknowledged, earlier experiments with specialised small banks such as LAB were not successful, the driving force now is financial inclusion with the twin initiatives — namely, small finance banks aiming at credit outreach and payments banks at filling gaps in access to formal payments and remittances system. This is a time to pause and watch how the SFBs adapt and how the microfinance sector itself adapts, in the event of any shift in focus of the SFBs on account of their becoming banks.
Q1 According to the passage, which of the following is/are the factors due to which MFIs face a problem?
A. Providing money for a specified purpose
B. The pricing of the credit
C. Providing capital to tertiary sector
D. Business models
01. Only A
02. Only D
03. Both B and D
04. Both A and C
05. All except C
Q2 By taking which of the following actions will the financial inclusion become impetus?
01. Making it a primary aim for small finance banks that the reach of credit should be widened.
02. Trying tirelessly to enhance the pay scales.
03. The betterment in the system of payment for people sending money abroad.
04. Both (2) and (3)
05. Norms to enhance asset quality should be implemented.
Q3 According to the passage, which of the following is NOT TRUE?
(A) Low credit risk premiums would work as a shield, given their low bad debt portfolio.
(B) Forethought rules for the quality of assets and recognition of income have been made applicable for SFBs.
(C) Owing to the presence of focused lending bad loans have been uplifted to being important.
01. Only A
02. Only B
03. Only C
04. Only A and B
05. Only B and C
Q4 Which of the following, according to the passage is TRUE?
01. The business models of SFBs could change significantly due to the changes discussed on the liabilities side.
02. Nearly a hundred percentage of adjusted net bank credit has been provided to the priority sector.
03. It will be a matter of concern if microfinance growth rises as a result of the transition to banks.
04. Around half of the exact sum of money given as credit by banks would be given to existing priority sectors.
05. Only (2) and (3)
Q5 On which of the following are the MFIs primarily relying for funding?
A. Deposits of huge numbers
B. Revenue generated by other sources of income
C. Pricing and banking
D. Credit taken from banks
01. Only A
02. Only B
03. Only D
04. Both A and C
05. Both C and D
6. In the following question, a sentence has been divided into five parts which are not in their correct order. Rearrange the parts to make a meaningful sentence.
there are reports that have suggested that the (A)/ even as various state governments implement (B)/ debt waiver schemes for distressed farmers, (C)/ farmers’ loans with an eye on general elections due in the near future (D)/ central government is looking at the policy dealing with (E)/
(1) BCDEA
(2) ACBDE
(3) ADCBE
(4) BACDE
(5) BCAED
7. In the following question, a sentence has been divided into five parts which are not in their correct order. Rearrange the parts to make a meaningful sentence.
World Cotton Day, an initiative of the so-called Cotton Four, supported by (A)/ the WTO and a few United Nations (UN) organizations (B)/ international textile trade under the aegis of the world’s free (C)/ at the time of writing, more than 150 countries are talking about (D)/ trade cop, the World Trade Organization in Geneva, where a day was observed as (E)/
(1) BCDEA
(2) DCEAB
(3) ADCBE
(4) DABEC
(5) BCAED
8. In the following question, a sentence has been divided into five parts which are not in their correct order. Rearrange the parts to make a meaningful sentence.
yet we are guilty of not applying (A)/ modern and updated insights to education (B)/ than a doctor prescribing an outdated mode of treatment (C)/ although to return to the healthcare analogy is no less alarming (D)/ despite knowing that a better and more modern one exists (E)
(1) BCDEA
(2) ACBDE
(3) DCEAB
(4) BACDE
(5) DABEC
9. In the following question, a sentence has been divided into five parts which are not in their correct order. Rearrange the parts to make a meaningful sentence.
designed in pursuit of sustaining global growth (A)/ of even the prolonged period of extremely (B)/ during her speech, however, was the failure (C)/ loose and fragile monetary policy that has been (D)/ what the IMF chief did not get into (E)
(1) ECBDA
(2) ACBDE
(3) EBCAD
(4) BACDE
(5) BCAED
10. In the following question, a sentence has been divided into five parts which are not in their correct order. Rearrange the parts to make a meaningful sentence.
the state of economy as the first subject to be taken up at its next meeting (A)/ ruling party in majority and is chaired by the (B)/ on Finance, which has the members of the (C)/ ruling party’s former minister, has agreed to deliberate on (D)/ in a unanimous decision the Parliamentary Committee (E)
(1) ECBDA
(2) ACBDE
(3) ADCBE
(4) BACDE
(5) ECDBA
Answers:
1. (5) The answer is given in the first paragraph.
2. (4) The answer is given in the last paragraph.
3. (3) The answer is given in the fifth paragraph.
4. (1) The answer is given in the sixth paragraph.
5. (3) The answer is given in the second paragraph.
6. (5) Even as various state governments implement debt waiver schemes for distressed farmers, there are reports that have suggested that the central government is looking at the policy dealing with farmers’ loans with an eye on general elections due in the near future.
7. (2) At the time of writing, more than 150 countries are talking about international textile trade under the aegis of the world’s free trade cop, the World Trade Organization in Geneva, where a day was observed as World Cotton Day, an initiative of the so-called Cotton Four, supported by the WTO and a few United Nations (UN) organizations
8. (3) Although to return to the healthcare analogy is no less alarming than a doctor prescribing an outdated mode of treatment despite knowing that a better and more modern one exists yet we are guilty of not applying modern and updated insights to education.
9. (1) What the IMF chief did not get into during her speech, however, was the failure of even the prolonged period of extremely loose and fragile monetary policy that has been designed in pursuit of sustaining global growth.
10. (1) In a unanimous decision the Parliamentary Committee on Finance, which has the members of the ruling party in majority and is chaired by the ruling party’s former minister, has agreed to deliberate on the state of economy as the first subject to be taken up at its next meeting.
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