In Civil Services IAS Prelim Exam, the CSAT paper is qualifying in nature; however, the IAS aspirants should not take this paper as so easy affair to crack. If an aspirant could not qualify the CSAT paper then his/her General Studies paper will not be evaluated irrespective of attempting the GS Paper extraordinarily. So this is important to make sure that your preparation for the CSAT Paper is up to the mark and you will qualify it comfortably.
For the aspirants of Civil Services IAS Prelim Exam 2016, here, we have provided the practice sets of CSAT Reading Comprehensions:
Directions for Question 1 to 7: Read the following passages carefully and answer the questions that follow:
Passage – 3 (4 questions)
The Goldman Sachs Group, Inc. global investment banking, securities and investment management firm has agreed to pay $5 billion to the US government, one of the largest regulatory penalties in its history, to compensate for the firm’s sale of mortgage bonds which resulted in the 2008 financial crisis. A government inquiry established how the firm sold bonds tied to residential mortgages, and banks deceived investors by misrepresenting the quality of underlying loans. Earlier, Bank of America, Chase and Citigroup agreed to a similar settlement.
There are lessons to learn here for the government, judiciary, market regulator, banks, and asset reconstruction companies (ARCs). The Indian economy was cocooned from the crisis in 2008, because of its strong banking system. The strength of banks emanated from government surety. But as we put in place a reform process in banking, there is a need to strengthen the system further. Parking the problem of non-performing assets (NPA) of banks in ARCs does not mean a solution has been found. ARCs’ traditional role is to turn underperforming assets profitable. It is a challenge fraught with pitfalls. Especially when the human resource managing them in India is not exposed to risks. The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 was to help banks use it to recover NPAs. It also ensures that asset management companies will act as intermediaries between promoters and the trust. The scope of this must be widened to bring in more responsibility for both ARCs and banks. Goldman Sachs, Citigroup, Chase and Bank of America were supposed to do the same. But when they faltered, there was no mechanism of checks and balances in the system. That led to the crisis. What made the crisis worse for the investor was the long process of adjudication. In India, with growing distressed debts and securitization, they could be the future asset instruments for investors.
1. According to the passage, which of the following resulted in 2008 financial crisis?
a) Goldman Sachs securities
b) US government’s securities
c) Goldman Sachs mortgage bonds
d) US government’s mortgage bonds
Explanation: The first line of the passage clearly states that the Goldman Sachs Group, Inc. has agreed to pay $5 billion to the US government to compensate for the firm’s sale of mortgage bonds which resulted in the 2008 financial crisis.
2. Which of the following has not been listed in the passage that made mistakes during the 2008 financial crisis?
a) Asset reconstruction companies (ARCs)
b) Non-Banking Financial Institutions (NBFCs)
d) Market regulator and Banks
Explanation: The second paragraph clearly states that from 2008 financial crisis there are lessons to be learnt by the government, judiciary, market regulator, banks, and asset reconstruction companies (ARCs).
3. The Asset Reconstruction Companies’ (ARC’s) main role to perform was:
a) Convert profitable assets into NPAs
b) Convert unprofitable assets into NPAs
c) Convert performing assets into NPAs
d) Convert NPAs into performing assets
Explanation: The second paragraph clearly states that Asset Reconstruction Companies’ (ARC’s) traditional role is to turn underperforming assets profitable.
4. What does the term ‘Securitization’ mean in the passage?
a) Transforming illiquid asset into a security
b) Transforming liquid asset into a security
c) Transforming security into an illiquid asset
d) Transforming security into an liquid asset
Explanation: Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming them into a security. A typical example of securitization is a mortgage-backed security (MBS), which is a type of asset-backed security that is secured by a collection of mortgages.
Passage – 4 (3 questions)
The International Monetary Fund (IMF) has maintained its position on India’s economic outlook as positive, indicating that the country has neither made major progress nor gone off course. It remains on track to achieve a robust growth rate of 8 per cent and above. In short, India continues to remain a bright spot in the otherwise bleak global economic scenario. As such, the IMF’s World Economic Outlook report must be seen as further encouragement to the Central government as well as a timely reminder for introspection on the future course of action.
Compared to other economies, India is expected to have a better growth rate at 7.5 per cent as against the global average of 3.2. However, it is still far away from the 8.4 per cent reported in July 2014. In fact, the country had even touched 10.26 per cent gross domestic product (GDP) growth in 2010, which arguably is one of the best since the 1990s when the Indian economy was liberalized. A good sports coach would tell his athlete not to compare own performance with others, each and every time at least till he’s well past the rest of the pack. Similarly, the Modi government should endeavor to improve the economy, unmindful of the various factors at play. Finance Minister Arun Jaitley knows that and so does RBI Governor Raghuram Rajan. Officials in the Finance Ministry will cite many reasons for not achieving double-digit growth. True, the circumstances — domestic, global, political and the monsoons — are key to achieving top growth rate and they are not exactly the same as before.
5. India’s position in IMF’s World Economic Outlook report indicates:
a) Failure of the current Central Government efforts.
b) Positive economic outlook
c) Negative economic outlook
d) Weak economic growth rate
Explanation: The first line of the passage clearly states that the International Monetary Fund (IMF) has maintained its position on India’s economic outlook as positive, indicating that the country has neither made major progress nor gone off course.
6. Which of the following initiative was taken in 1990s by the Indian Government?
Explanation: The second paragraph clearly mentions that in 1990s the Indian economy was liberalized.
7. According to the passage, which of the following affects the growth rate of Indian economy?
a) Political scenario
b) Domestic and Global scenario
c) Monsoon condition
d) All of the above
Explanation: The last line of the passage clearly states that the circumstances — domestic, global, political and the monsoons — are key to achieving top growth rate.