UPSC Prelims 2010 · General Studies
Question 25: Economy and Social Development
With reference to the Non-banking Financial Companies (NBFCs) in India, consider the following statements :
- 1.They cannot engage in the acquisition of securities issued by the government.
- 2.They cannot accept demand deposits like Savings Account.
Which of the statements given above is/are correct ?
AnswerThe answer is (b).
NBFCs lend and invest like banks, and their business includes acquiring shares, stocks, bonds, debentures and securities issued by the government, so statement 1 is false. They cannot accept demand deposits (savings or current accounts that can be withdrawn on demand) and cannot issue cheques drawn on themselves, so statement 2 is correct. Remember: NBFC = banking-type business without demand deposits.
- 1. Acquiring government securities is part of what NBFCs may do.
- 2. NBFCs cannot accept demand deposits such as savings accounts.
How you could have got this
- If you were sure statement 1 is not correct, (a) and (c) go: each of them includes 1.
What you needed to know: Acquiring government securities is part of what NBFCs may do.
- Then, if you were sure statement 2 is correct, (d) goes: it leaves 2 out.
What you needed to know: NBFCs cannot accept demand deposits such as savings accounts.
Only (b) is left. This one needs every statement.
This follows an unofficial answer: UPSC has not published its key for this year, and if that answer is wrong, so is this path.
Which options go is worked out from UPSC’s key and the options, not by a model.
Why each option is right or wrong
- (a) Statement 1 is false: NBFCs can hold government securities.
- (b) Right: only statement 2 is correct.
- (c) Statement 1 is wrong, so 'both' fails.
- (d) Statement 2 is correct, so 'neither' fails.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2010, General Studies, Series A. The paper on upsc.gov.in.