SBI PO Prelims Full Mock Test 14

1. Read the following passage carefully and answer the questions given after it. India's micro, small and medium enterprises employ a very large share of the non-farm workforce, yet many of them remain trapped in a cycle of small size and low productivity. A tailoring unit with six machines may survive for decades without ever adding a seventh. Owners often explain this caution in simple terms: growing bigger means more paperwork, more inspections and more taxes, while the benefits of size are uncertain. Credit is a large part of the story. Banks find it costly to assess small borrowers who lack audited accounts, and they compensate by demanding collateral that most entrepreneurs do not have. The result is that many firms rely on informal lenders who charge far higher rates. Digital records of sales and tax payments are beginning to change this picture, because lenders can now judge a firm by the money flowing through its accounts rather than by the property it owns. Markets matter as much as money. A small firm that sells only in its own town is limited by local demand. Online marketplaces and government procurement portals have opened wider markets, but using them well requires skills in pricing, packaging and logistics that many owners have never needed before. Policymakers sometimes treat small firms as a single category that needs protection. A better approach may be to separate the firm that wants to stay small from the one that wants to grow, and to remove the obstacles that punish the second for its ambition.

   Q1.According to the passage, why do many small firm owners avoid expanding?

   • A.They cannot find workers in their towns
   • B.They fear more paperwork, inspections and taxes while gains are uncertain
   • C.Banks forbid them to grow
   • D.Their machines cannot be repaired
   • E.Online marketplaces do not accept them

2. Q2.Why do banks demand collateral from small borrowers?

   • A.Informal lenders insist on it
   • B.Collateral is required by all foreign banks
   • C.Digital records are illegal
   • D.Small borrowers ask for it
   • E.Assessing borrowers without audited accounts is costly

3. Q3.How are digital records changing lending to small firms?

   • A.They replace banks with marketplaces
   • B.They allow firms to avoid taxes
   • C.They increase interest rates of informal lenders
   • D.Lenders can judge firms by their cash flows instead of their property
   • E.They make loans unnecessary

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