UPSC Prelims 2020 · CSAT

Question 61: Reading Comprehension

Passage beginning “Bank credit to the industrial sector has…” — Passage—1 · as printed by UPSC

Which one of the following is the most logical and rational inference that can be made from the above passage?

aIndian banking system is not able to help the country in its economic growth.

bEconomic reforms that started in 1991 have not helped in improving the economy to expected levels.

cIndia lacks the institutional mechanism to deal with the failure of banks.

dEncouraging the foreign investments in our industrial sector is a good alternative to this sector's dependence on banks for credit.

AnswerUPSC’s answer is (c).

The passage says bank credit to industry is shrinking and traces the cause to reforms left unfinished, in particular a missing resolution body for banks. It adds that banks should be allowed to fail, but weak banks cannot be closed because no system exists to do it. The inference is that India lacks the institutional mechanism to deal with bank failure. Remember: the passage blames absent institutions, not banking or reform as a whole.

Why each option is right or wrong

(a) Too broad: the passage speaks of shrinking credit to industry, not of banks being unable to help growth.
(b) Reforms are called incomplete, which is different from saying they failed to improve the economy.
(c) Right: no resolution system exists to shut down weak banks.
(d) Foreign investment is not mentioned.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2020, General Studies Paper II (CSAT), Series A. The paper on upsc.gov.in.