Reading Comprehension for SBI PO Prelims: 14th June 2018

Reading Comprehension for SBI PO Prelims (Week-05)

Directions (1-10): Read the following passage carefully and answer the questions given below them. Certain words/phrases have been printed in bold to help you locate them while answering some of the questions.

Union Minister Piyush Goyal, currently in charge of the Finance Ministry, has announced the formation of a committee to assess the idea of special asset reconstruction companies or asset management companies to take over bad loans from banks. The bankers’ panel has been given two weeks to revert. The idea of a ‘bad bank’ is not new. Chief Economic Adviser Arvind Subramanian had suggested the creation of a Public-Sector Asset Rehabilitation Agency (PARA) to deal with what he described as India’s “festering twin balance sheet problem”. By this he meant over-leveraged corporates unable to service debt or invest afresh, and banks hit by non-performing assets (NPAs) cagey about fresh lending. This overhang hurts new investments and continues to dent India’s medium-term growth and job creation prospects.
A professionally-run PARA, or the so-called ‘bad bank’, could assume custody of the largest and most difficult-to-resolve NPAs from lenders’ balance sheets. This would allow banks to focus on extending fresh credit and supporting the pick-up in growth. More importantly, a bad bank taking tough decisions on borrowers-gone-bad, it was argued, could free bankers from the risks entailed in large loan write-downs. But there are good reasons why the Finance Ministry left the bad bank idea in the cold over the past year and a half – among them the fact that the new entity would need a lot of capital support, just as banks do. Some of this was envisaged as coming from the Reserve Bank of India through a complicated transaction. After a long debate within government, under Finance Minister Arun Jaitley, it was noted that setting up a new institution would be very time-consuming and there would be challenges on its ownership structure as well as the pricing of bad loans taken over from banks.
In any case, going by the experience of private asset reconstruction companies, a PARA by itself would not be able to deploy dramatically different tools to extract better value from underlying assets and would, at best, amount to window-dressing bank books to attract investors. As former RBI Governor Raghuram Rajan had pointed out, a government-owned bad bank could still face scrutiny from the Comptroller and Auditor General and the Central Vigilance Commissioner. For now, the government is clearly under pressure to demonstrate fresh intent to investors as India Inc believes bank loans are likely to remain sluggish for the next two-three years. Whether or not the knots in the bad bank idea are sorted out, the government should focus on other reforms as well. One, amend the Prevention of Corruption Act to shield bankers and officers from investigative witch-hunts. Two, back bankers to take demonstrable action against wilful defaulters. And three, take a hard look at what ails the Insolvency and Bankruptcy Code.

Q1. Of all the following, which is NOT addressed by the author in the passage?
(a) Idea of bad bank had earlier been introduced by CEA Arvind Subramanian.
(b) The bad bank could assume the custody to resolve the problem of NPAs.
(c) The concept of a bad bank has been experimented in several countries especially after the financial crisis of 2008-09.
(d) A bad bank could free bankers from the risks entailed in large loan write downs.
(e) Union Minister Piyush Goyal announced the formation a committee to assess an asset management company to take over bad loans from banks.

Q2. As per the passage, what were the challenges discussed in setting up of a new institution for bad loans?
(a) It would be time consuming to set up the institutions.
(b) Ownership structure will have to face certain challenges.
(c) Challenges of pricing of bad loans taken over from banks.
(d) Both (a) and (b)
(e) All are correct.

Q3. Apart from the idea of setting up a bad bank, what are the other reforms that the government should focus on regarding NPAs?
(a) Amendment in the prevention of corruption act to shield bankers and officers from expedition based on suspects.
(b) Support bankers to take demonstrable action against wilful defaulters.
(c) Search upon what weakens the Insolvency and Bankruptcy code.
(d) Both (a) and (b)
(e) All are correct.

Q4. Which of the following can be inferred from the passage above?
(a) Along with idea of ‘Bad Banks’, tackling NPAs requires other structural reforms as well.
(b) For a bad bank to find success, lenders will require to assign a realistic value to banks’ soured loans and also cooperation from the promoters of those assets.
(c) Bad loans or gross non-performing assets (NPAs) with these government-owned banks touched a staggering Rs 10.25 lakh crore as of March 2018.
(d) The idea of bad bank gained currency when the Economic Survey 2017 suggested creation of a ‘Public Asset Rehabilitation Agency’ (PARA) to help tide over the enormous problem of stressed assets.
(e) All are correct.

Q5. Choose the word which best expresses the meaning of the following word given in bold in the passage
CAGEY
(a) Frank
(b) Reticent
(c) Innocent
(d) Guileless
(e) Naive

Q6. Choose the word which best expresses the meaning of the following word given in bold in the passage
ENVISAGED
(a) Disregard
(b) Launch
(c) Menace
(d) Envisioned
(e) Commination

Q7. Choose the word which best expresses the meaning of the following word given in bold in the passage
DEPLOY
(a) Conclude
(b) Employ
(c) Conceal
(d) Disorder
(e) Imbrue

Q8. Choose the word which is most opposite to the following word given in bold in the passage
SCRUTINY
(a) Audit
(b) Inspection
(c) Glimpse
(d) Interrogate
(e) Surveillance

Q9. Choose the word which is most opposite to the following word given in bold in the passage
SLUGGISH
(a) Dallying
(b) Leisurely
(c) Tardy
(d) Hasty
(e) Crawling

Q10. Choose the word which is most opposite to the following word given in bold in the passage
AILS
(a) Agitate
(b) Tranquilizes
(c) Distress
(d) Frazzle
(e) Unhinge

Direction (11-15): In each of the questions given below a sentence is given which is then divided into five parts out of which last part is given bold and correct. There is no error in three out of four remaining parts and therefore only one of the parts is incorrect. You must choose the grammatically incorrect part as your answer. If no part is incorrect, choose option (e) as your answer .i.e. “No error”.

Q11. Many of those in the top(A)/ percentiles have attending long-term(B)/ coaching classes as well as(C)/ crash courses, paying(D)/ exorbitant fees(E)/.
 (a) A
(b) B
(c) C
(d) D
(e) No Error

Q12. Lavish advertisements, as well as(A)/ interviews with toppers, make it quite(B)/ obviously that those who can afford(C)/ expensive coaching classes have a(D)/ distinct advantage in this system(E)/.
(a) A
(b) B
(c) C
(d) D
(e) No Error

Q13. Like many other competitive examinations(A)/, NEET has spawned a coaching industry(B)/, with some parts of(C)/ the country proving to with ideal locale(D)/ for academic sweatshops(E)/.
(a) A
(b) B
(c) C
(d) D
(e) No Error

Q14. Not so long ago, bi-monthly policy meetings of the(A)/ Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI)(B)/ entailing nail-biting suspense for market(C)/ participants, who watched it for cues(D)/ to the future direction of interest rates(E)/.
 (a) A
(b) B
(c) C
(d) D
(e) No Error

Q15. Still, the rich hardwood floor(A)/ reflected the weak morning(B)/ sun in a cheerful manner(C)/ that spawned reluctance(D)/ to continue the tour(E)/.
(a) A
(b) B
(c) C
(d) D
(e) No Error

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