Read
the passage carefully and answer the questions given below it. Certain words/phrases
are given in bold to help you locate them while answering some of the
questions.
The
RBI orders a moratorium when a bank’s financial stability is threatened. Depositors
face some restrictions on withdrawing money from their accounts during this
period. Currently the restriction is confined to premature withdrawl of FDs in
case of Kapol Bank. Customers can still withdraw money from their savings and
current accounts. However, the Bhanking Regulation Act has provisions for
relief to customers facing a financial emergency. “Banks’ administrative board
can approach the RBI with a plea for relaxing the withdrawal limits in case of
account holders such as those who have saved or deposited money for their
medical treatment or educational purpose and pensioners,” says VN Kulkarni,
chief credit counsellor with the Bank of India backed Abhay Credit Counselling
Centre.
Since
one cannot do much after the bank gets into trouble or the RBI comes into the picture,
it would be wise to take some precautions. “Depositors need to be selective
not only in choosing the bank, but also in depositing the amount using different
combinations,” says Kulkarni. For instance, you can maintain the first deposit
in your name, held jointly with your spouse or children. Similarly, the second
joint FD could be created with your wife as the first holder. This will help you
benefit from the deposit insurance cover extended to retail depositors. Currently,
deposits are insured upto Rs.1 Lakh per bank, and not per branch of the same
bank. You can also look at maintaining FDs in more than one bank to spread out
the risk.
However,
this may not be feasible for some individuals. For instance, a retiree who
wishes to invest her huge retirement corpus in FDs. “It is not feasible to split
a huge amount of, say, Rs.50 Lakh into 50 deposits with different banks. Senior
citizens have to strike a balance between convenience, risks and higher returns
that some of the smaller banks offer,” says Suresh Sadagopan, certified financial
planner and founder, Ladder. Financial Advisories. He recommends diversification
by investing in fixed income options like company FDs, nonconvertible debentures
as also more secure alternatives such as tax free bonds and senior citizens
savings scheme, which offers an interest rate of 9.2%. You must also evaluate
the bank’s credentials carefully before parking your money in it. “While
selecting the bank, you need to ascertain its gross NPAs. It should be not
higher than 5%. Similarly, ensure that your bank has adequate capital as
prescribed by the regulators,” says Kulkarni. “That is, minimum 9% of
risk-weighted assets, and at least 12%, in case of cooperative banks.” You will
find this information in the balance sheets of banks.
1.
Which of the following is not definitely true with respect to Kapol Bank?
a)
It is a private sector bank
b)
At present, premature withdrawal of FD cannot be allowed.
c)
Customers of this bank have been allowed withdrawal of money from their CASA.
d)
There are no restrictions on withdrawal except of premature fixed deposits.
2.
Find the statement which is not based on the facts mentioned in the passage.
a)
Under certain circumstances, account holders facing financial emergency can be
allowed withdrawal of moiney beyond withdrawal limit as per the provisions laid
down in the Banking Regulation Act.
b)
When the bank gets into trouble it is better for a depositor to be selective in
both choosing the bank and depositing the amount using different combinations.
c)
When the financial stability of a bank is at stake the central bank ordres a moratorium
d)
The central bank has ordered a moratorium on Kapol Bank.
3.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Parking
a)
Removing b) Depositing c) Stopping
d)
Walking
4.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Picture
a)
Scene b) Mainstream c) Portrait
d)
Role
5.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Diversification
a)
Variegation b) Homogenous c) Allocation
d)
Division
6.
Choose the word/group of words which is most opposite in meaning of the word/group
of words printed in bold as used in the passage.
Threatened
a)
Warned b) Jeopardised c) Ensured
d)
Exposed
7.
Choose the word/group of words which is most opposite in meaning of the word/group
of words printed in bold as used in the passage.
Strike
a)
Maintain b) Hit c) Knock
d)
Smack
Read
the passage carefully and answer the questions given below it. Certain words/phrases
are given in bold to help you locate them while answering some of the
questions.
India’s
banking sector may be getting ready for a wave of consolidation as the country
tries to build institutions of world class proportions. Four big state run banks
– State Bank of India, Punjab National Bank, Bank of Baroda and Bank of India –
have already begun on exercise to identify takeover targets to gain access to franchises
that would augment their capabilities, said three top bankers familiar with
the move. The top managements of the four banks are in the process of preparing
a blueprint that would explain the rationale for absorbing one or two entities,
said the people cited above, none of whom wanted to be named. Employees at
these state run banks are engaged in the exercise after Finance Minister Arun Jaitley
gave the lenders the go-ahead to decide how they would strategiese to remain
relevant in the emerging economic scenario.
“We are hearing from the corridors of finance
ministry that there is seriousness on consolidation of banks,” said an
executive from one of the top four banks. “The sense we are getting is that
first there could be merger of at least one SBI associate bank with SBI to kick
off the consolidation process.” Although no names of likely acquisition targets
are being discussed at these four banks, the key conditions for a smaller bank
will be regional, technological and cultural advantages. For instance, a bank
such as Bank of Baroda, which does not have a presence in the East, may prefer
one from that part of the country. State run banks have weakened over the years
as governments have treated them as an organ of the administration and used
them to push their social agenda. Meanwhile, lenders in neighbouring China have
acquired scale while those in India are puny by comparison, giving them
little clout in global markets.
The
economic downturn, with growth having almost halved from the peak, has exposed
the fault lines in the system. The parlous financial position of the government
has left banks capital starved - the allocation for this year is tiny compared
with the amount needed to meet Basel III standards. And, to access capital from
the market, the state run banks need a strategy to turn more profitable. Currently,
they are labouring under bad debt on account of companies finding it difficult
to repay loans because of the slump.
“Government
has made it clear that they will not give any capital,” said one of the
bankers. “Banks that have the capital and the capability to raise capital could
look at acquisitions,” he said, while adding “Nothing has reached the drawing board.
Banks are only doing all kinds of permutations and combinations.”
To
be sure, state run bank consolidation has been discussed for nearly a decade,
but little progress has been made, except for shotgun weddings that were aimed
at rescuing ventures in poor shape. Inertia among banks, cultural issues
and fears of trade union unrest held up any such move. That may now change with
the new government.
“There
have been some suggestions for consolidation of public sector banks,” Jaitley
said in his July 10 Budget speech. “Government, in principle, agress to
consider these suggestions.”
A
committee set up by the Reserve Bank of India under former Axis Bank Chairman
P.J. Nayak had suggested that the health of state run banks was poor. To strengthen
them, the report said it would be better “either to privatise these banks and
allow their future solvency to be subject to market competition,
including through mergers; or to design a radically new governance structure
for these banks
which
would better ensure their ability to compete successfully, in order that repeated
claims for capital support from the government, unconnected with market returns,
are avoided.”
The
market share of the public sector banks is forecast to decline from 80% in 2000
to just over 60% in 2025, Nayak had said. They stack up poorly in many respects
against non-state institutions. For instance, net profit per employee at the new
private sector banks was about four tiems that of the SBI Group in the year ended
March 2013.
8.
Which of the following is not true in the context of the passage?
a)
Four big state run banks have begun to identify takeover targets.
b)
The finance minister has given free hand to state run banks to make their own
strategy for banking business.
c)
The four big state run banks have already decided the names of some small banks
likely to be taken over
d)
According to PJ Nayak Committee report, the state run banks were not performing
well.
9.
Why have banks turned capital starved? Answer in the context of the passage?
a)
Because of excessive loans santioned to malafide customers
b)
Because of bad monetary policy of the RBI
c)
Because of the excessive payments towards government sponsored schemes without
appropriate provision for them
d)
Because of the dangerous financial position of the government
10.
Which of the following is possibly the most appropriate title for the passage?
a)
Policy Paralysis of the Central Government
b)
The Economic Downturn
c)
Union Budget 2014: A Review
d)
Consolidation of Banks
11.
Which of the following statements regarding the consolidation of state run
banks is/are true? Answer in the context of the passage.
a)
Efforts for consolidation of state run banks are on for past one decade but nothing
remarkable has come out as yet.
b)
The consolidation of state run banks is a complex task and it will take some
more years for its completion.
c)
Banks are doing all kinds of permutations and combinations but the result is
cipher.
d)
Only a) and b)
12.
What does the phrase ‘kick off’ mean as used in the passage?
a)
Discontinue b) Breakdown c) Smash
d)
Begin
13.
Under the current scenarioi what do state run banks need to do to access
capital from the market?
a)
They need to float public shares
b)
They need a strategy to earn more profit
c)
They should increase lending rate to attract depositors.
d)
They should announce handsome returns to depositors.
14.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Acquisition
a)
Redemption b) Forfeit c) Possession
d)
Dearth
15.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Parlous
a)
Harmful b) Strong c) Critical
d)
Powerful
16.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Inertia
a)
Inactivity b) Liveliness c) Awakening
d)
Interest
17.
Choose the word which is most similar in meaning to the word printed in bold as
used in the passage.
Solvency
a)
Destitution b) Depriviation c) Impotency
d)
Financial competence
18.
Choose the word/group of words which is most opposite in meaning of the
word/group of words printed in bold as used in the passage.
Puny
a)
Trivial b) Strong c) Inferior
d)
Tiny
19.
Choose the word/group of words which is most opposite in meaning of the
word/group of words printed in bold as used in the passage.
Augment
a)
Reinforce b) Strengthen c) Magnify
d)
Multiply
ANSWERS:
1.
Option A
2.
Option B
3.
Option B
4.
Option A
5.
Option A
6.
Option C
7.
Option D
8.
Option C
9.
Option D
10.
Option D
11.
Option A
12.
Option D
13.
Option B
14.
Option C
15.
Option A
16.
Option C
17.
Option D
18.
Option B
19.
Option D
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