2021 CSAT, all questions

UPSC Prelims 2021 · CSAT

Question 43: Reading Comprehension

Passage – 3 · as printed by UPSC
Passage beginning “The resolution of bankruptcy cases of…”

Which one of the following statements best reflects the most logical, rational and practical suggestion implied by the passage given above ?

aLending by the banks should be closely monitored and regulated by the Central Government.
bInterest rates should be kept low so as to induce banks to lend more, promote credit growth and thereby boost economic activity.
cMerger of many banks into a few large banks alone is the long-term solution to make them viable and prevent their bad performance.
dIndian banking system requires structural reforms as a long-term solution for bad loans problem.

AnswerUPSC’s answer is (d).

The passage says that resolving bad loans under the bankruptcy code and recapitalising public sector banks will help, but only partly, because they do little to stop reckless lending itself. Unless the system is reformed to address unsustainable lending, later credit cycles will again strain banks. The suggestion implied is that the banking system needs structural reforms as a long-term fix for bad loans. Close monitoring by the Centre, low interest rates and mergers are not proposed. Remember: a 'suggestion implied' option must be traceable to the passage, not just a sensible general idea.

Why each option is right or wrong
  • (a) Government monitoring of lending is not suggested; the passage calls for systemic reforms.
  • (b) Lower interest rates are not mentioned; the passage is about the quality of lending.
  • (c) Mergers are never discussed, and 'alone' would contradict the passage's call for wider reform.
  • (d) Right: reforms to the system that address unsustainable lending are the lasting remedy.

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

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Source: UPSC, Civil Services (Preliminary) Examination 2021, General Studies Paper II (CSAT), Series A. The paper on upsc.gov.in.