IBPS Reading Comprehension Passages 3 — Questions and Answers
Question 1: Passage: 'The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 marked a paradigm shift in India's credit culture, establishing time-bound resolution of stressed assets and improving creditor rights.' What does 'paradigm shift' mean in this context?
- A minor policy adjustment
- A complete change in the prevailing approach or framework (Correct answer)
- A temporary regulatory measure
- A rollback of earlier banking reforms
Correct answer: A complete change in the prevailing approach or framework
A 'paradigm shift' signifies a fundamental and comprehensive change in the existing framework, here referring to credit resolution norms.
Question 2: A passage states: 'Basel III norms require banks to maintain higher capital buffers to absorb unexpected losses, reducing the likelihood of systemic failures during financial crises.' What is the primary goal of Basel III as described?
- Expanding bank branch networks in rural areas
- Increasing banks' profitability through higher interest rates
- Strengthening bank resilience against financial shocks (Correct answer)
- Promoting foreign direct investment into the banking sector
Correct answer: Strengthening bank resilience against financial shocks
The passage states Basel III norms require higher capital buffers to absorb losses and reduce systemic failures, indicating resilience is the primary goal.
Question 3: Passage: 'Corporate governance in banks is pivotal to maintaining depositor confidence. Weak governance structures have historically precipitated banking scandals that eroded public trust.' The word 'precipitated' most nearly means:
- Prevented
- Investigated
- Triggered or hastened (Correct answer)
- Resolved
Correct answer: Triggered or hastened
'Precipitated' means caused or hastened, indicating that weak governance triggered banking scandals.
Question 4: Passage: 'Unlike developed economies where capital markets dominate, Indian businesses are heavily reliant on bank credit for their financing needs. This bank-centric model creates concentration risk within the financial system.' What concern does the author raise?
- That Indian capital markets are too large
- That over-reliance on banks creates vulnerability in the financial system (Correct answer)
- That Indian businesses prefer foreign loans over domestic ones
- That banks avoid lending to large corporations
Correct answer: That over-reliance on banks creates vulnerability in the financial system
The author warns that heavy dependence on bank credit creates concentration risk, making the financial system vulnerable.
Question 5: A passage reads: 'Green financing refers to loans and investments directed toward environmentally sustainable projects. Banks are increasingly integrating environmental, social, and governance (ESG) criteria into their credit appraisal processes.' What does this passage suggest about modern banking?
- Banks are replacing traditional credit assessment with ESG metrics alone
- Environmental considerations are becoming part of mainstream banking decisions (Correct answer)
- Green financing is exclusive to international banks
- ESG criteria make loans more expensive for all borrowers
Correct answer: Environmental considerations are becoming part of mainstream banking decisions
The passage indicates that ESG criteria are being integrated into credit appraisal, suggesting sustainability is entering mainstream banking.
Question 6: Passage: 'Tokenisation of card data replaces sensitive card information with a unique identifier called a token, significantly reducing the risk of data theft during online transactions.' What is the MAIN benefit of tokenisation?
- Speeding up loan processing in banks
- Enabling banks to offer higher credit limits
- Protecting sensitive card data from theft in digital transactions (Correct answer)
- Reducing bank charges for international transfers
Correct answer: Protecting sensitive card data from theft in digital transactions
The passage states tokenisation reduces the risk of data theft by replacing sensitive card details with tokens.
Question 7: A passage says: 'The proliferation of fintech startups has intensified competition in the financial services sector, compelling traditional banks to innovate their product offerings and improve customer experience.' What effect have fintechs had on traditional banks?
- Traditional banks have reduced their product range to cut costs
- Fintechs have caused traditional banks to merge with each other
- Competition from fintechs has pushed traditional banks to innovate (Correct answer)
- Traditional banks have acquired all major fintech companies
Correct answer: Competition from fintechs has pushed traditional banks to innovate
The passage states that fintech competition has compelled traditional banks to innovate their offerings and enhance customer experience.
IBPS Reading Comprehension Passages 3
Passage: 'The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 marked a paradigm shift in India's credit culture, establishing time-bound resolution of stressed assets and improving creditor rights.' What does 'paradigm shift' mean in this context?