IBPS PO Mains English Sectional Mock Test 04

1. Read the following passage carefully and answer the questions given after it. Co-operative banks occupy a peculiar place in Indian banking. They are at once the oldest form of organised rural credit and the most fragile. Born in the early twentieth century as village societies that lent to their own members, they grew into a network of over ninety thousand primary societies, district banks and state apex banks. Their strength was intimacy: the manager knew the borrower, the borrower's field and the borrower's reputation, and lending decisions were made on knowledge no credit score could capture. Their weakness was the same intimacy. When the local strongman wanted a loan, the manager found it hard to refuse; when the board wanted to lend to its own members, no rulebook stood in the way. The result, repeated across decades, was a cycle of political lending, mounting bad loans and periodic rescue by the state. The Reserve Bank's recent decision to bring urban co-operative banks under a tighter supervisory framework — with fit-and-proper tests for directors, caps on unsecured lending and a clear path to amalgamation for the weakest — is therefore welcome. But supervision alone cannot cure a governance problem. Until the boards of these banks are chosen for competence rather than connection, the cycle will repeat, and the depositor, who trusted the word 'co-operative', will pay the price.

   Q1.According to the passage, what was the strength of co-operative banks?

   • A.Their large capital base and modern technology.
   • B.The manager's personal knowledge of the borrower, the field and the reputation.
   • C.Their freedom from Reserve Bank supervision.
   • D.Their ability to lend without any documentation.
   • E.Their branches in every metropolitan city.

2. Q2.What does the author identify as the weakness of the same intimacy?

   • A.Managers did not understand modern banking products.
   • B.It made lending decisions slow and bureaucratic.
   • C.Local influence made it hard to refuse loans to powerful people.
   • D.Borrowers refused to share information with managers.
   • E.The banks could not attract deposits from cities.

3. Q3.What recent step by the Reserve Bank does the passage welcome?

   • A.The closure of all weak urban co-operative banks.
   • B.A tighter supervisory framework with fit-and-proper tests, caps on unsecured lending and amalgamation for the weakest.
   • C.A ban on all lending by primary societies.
   • D.The merger of co-operative banks with public sector banks.
   • E.A complete waiver of bad loans of co-operative banks.

Start the test to answer these. Correct answers and explanations are shown after you submit.