IBPS Reading Comprehension 3

Question 1

Passage: 'Priority sector lending mandates require commercial banks to allocate a specified portion of their advances to agriculture, micro enterprises, and weaker sections. Failure to meet these targets results in mandatory contributions to government funds.' What is the consequence of not meeting PSL targets?

Accepted Answer

Banks must contribute to government funds

Answer

The passage states that failure to meet PSL targets results in mandatory contributions to government funds.

Question 2

Read: 'The term 'moral hazard' in banking refers to the risk that institutions, knowing they will be bailed out, take on excessive risks. This behavior can destabilize the financial system, making effective regulation essential.' Which of the following best defines 'moral hazard' as used in the passage?

Accepted Answer

Excessive risk-taking due to expectation of bailout

Answer

The passage defines moral hazard as institutions taking excessive risks because they expect to be bailed out.

Question 3

Passage: 'Inflation targeting, adopted by the RBI in 2016, commits the central bank to maintaining CPI inflation within a specified band. This framework enhances monetary policy credibility and anchors inflation expectations.' The word 'anchors' in this context most likely means:

Accepted Answer

Stabilizes or keeps steady

Answer

In monetary policy context, 'anchors' means stabilizes or keeps inflation expectations steady around the target.

Question 4

A passage reads: 'Financial contagion occurs when economic distress in one institution or country spreads rapidly to others through interconnected financial networks. The 2008 global financial crisis exemplified how localized mortgage defaults cascaded into a worldwide recession.' What does the passage identify as the mechanism of financial contagion?

Accepted Answer

Interconnected financial networks

Answer

The passage explicitly states that contagion spreads through interconnected financial networks.

Question 5

Read: 'Corporate bonds offer higher yields than government securities to compensate investors for greater credit risk. Investors seeking safety prefer government bonds, while those chasing returns often gravitate toward corporate debt.' Which group would most likely prefer corporate bonds?

Accepted Answer

Investors chasing higher returns

Answer

The passage states that investors chasing returns gravitate toward corporate debt due to higher yields.

IBPS - Institute of Banking Personnel Selection Practice Test

IBPS - Institute of Banking Personnel Selection Practice Test

IBPS Reading Comprehension 3