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IBPS PO, BOB & NABARD Development Asst Exam: Reading Comprehension Quiz based on ‘Business Standard'

Sep 9, 2016 14:54 IST

    It is noticed in the recent years that Reading comprehension asked in Banking examination are generally picked from editorial of newspaper like The Hindu, The Economics Times , Business Standard etc. Here the Banking team of jagran josh is providing the Reading Comprehension based on article taken from Business Standard. Candidates are advised to go through the below passage and strengthen their preparation for upcoming banking examination.

    Question (1-10): Read the following passage carefully and answer the questions that follow. Some words / phrases are printed in bold in order to help you locate them while answering some of the questions.

    The non performing assets (NPAs) of Power Finance Corporation (PFC), one of the key state-owned lenders to the sector, grew 198 per cent to Rs 7,519 crore in FY16 compared to the previous year. The company’s profits were muted, too, in the fourth quarter of FY16, due to higher provisions on account of NPAs and an increase in restructured assets, PFC said in its annual report.

    Indicating the rising stressed assets in the power sector, the ratio of PFC’s gross NPAs to total loan assets stood at 3.15 per cent in FY16. The figure was 1.16 per cent in the previous year. Thermal power projects have the largest share in NPAs, at Rs 3,428 crore. It is followed by hydro power projects worth Rs 2,698 crore, gas-based power plants of Rs 1,335 crore and Rs 59 crore worth of biomass-based plants.PFC posted a 19 per cent fall in profit at Rs 1,260 crore for the quarter ended March 31, 2016. On an annual basis, the company posted a net profit of Rs 6,113 crore for FY16 compared to Rs 5,959 crore in FY15. Total income increased 10 per cent during the corresponding year ago to Rs 27564 crore.

    It had been reported earlier that the power sector financing was at cross roads with empty projects in pipeline and bludgeoning NPAs. PFC’s loan sanction has come down by 41 per cent from 2012-13 to Rs 46,600 crore in the last financial year. The loan disbursement has shown a 27 per cent downward trend in PFC in the past four financial years. According to PFC officials, the pipeline of big-ticket generation projects is empty. As for the portfolio of independent power projects based on conventional fuel, 18-20 GW capacity is without any power purchase agreement. In the past five years, no generation project has achieved financial closure, according to market data.  The company said six new NPAs were added during FY16. “I am optimistic that in a couple of years, existing NPAs might get an upgrade upon resolution of policy issues by government initiatives and equity tie-up,” said M K Goel, chairman of PFC.

    At Rs 1.33 lakh crore, PFC, along with Rural Electrification Corporation (REC), is the largest lender to the state electricity boards, which are now cumulatively battling debt exposure of Rs 4 lakh crore. The UDAY Scheme aims to restructure this debt by floating sovereign guaranteed bonds at market rates. It also restricts future borrowings by the states from these lenders and banks till their respective discoms turn around financials and operations. Religare in its report in May 2016 said it expects continued pressure on loan growth and margins of PFC along with further asset quality deterioration over the next 2-3 years.

    “The market has already discounted that both PFC and REC will suffer till the discoms turn around. As for generation projects, the amount of loan to these projects under restructuring tells the tale clearly. There are projects in the market for sale, but there are no takers,” said a senior power sector expert based in Delhi. PFC’s restructured assets stood at Rs 32,260 crore as of March 2016, out of which 56 per cent were already commissioned. “Out of the total restructured assets, Rs 11,550 crore are likely to be upgraded to standard in 2016-17 and the balance will likely be upgraded to standard asset in FY18,” said the company.

    (Source: Business Standard, 5th September)

    1. Which among the following has been attributed to the PFC’s deteriorating condition in the recent years, according to the passage?

    1. The corporation is in the process of restructuring its assets and that is why, it is suffering losses to the tune of thousands of crores
    2. The corporation is in the process of getting shut down by the government
    3. The company has been suffering because of very high number of non-performing assets in the power sector
    4. Both (1) and (3)
    5. Other than those given in options

    Sol: Option (4)

    Explanation: According to the passage, the Power Finance Corporation is suffering because of two reasons and one of them is the rising number of non- performing assets in the power sector and on the other hand, the number of projects going for restructuring is also increasing in the recent years. So, both have contributed to the fall of profits for the corporation.

    2. Which among the following has been ascribed as the objective of the UDAY scheme as announced by the government?

    1. It restricts the states from taking more loans from the lenders in the power sector in the near future
    2. The scheme aims to address the issue of debt by floating sovereign bonds at market rates
    3. The scheme aims at shutting down state discoms which are running in losses for the past one decade
    4. Both (1) and (2)
    5. All the above

    Sol: Option (4)

    Explanation: The UDAY scheme has been launched by the government to address the issue of the power generation sector in the recent years. The scheme will look at the option of floating sovereign bonds at market rates to address the problem of huge NPAs in the power finance corporation. Along with this, the states are also restricted to take new loans from all lenders and banks for the power sector of the state.

    3. Which among the following is true regarding the NPAs in Power Finance Corporation?

    1. Thermal Power Projects contribute the most to the NPAs in the Power Finance Corporation in the recent years
    2. Biomass based power projects are less likely to become NPAs as per the findings of the recent reports regarding NPAs in the power sector
    3. The Power Finance Corporation has decreased giving loans for new projects in the states because of its dwindling financial condition
    4. Both (1) and (2)
    5. All the above

    Sol: Option (5)

    Explanation: According to the portfolio analysis of the power projects financed by the Power Finance Corporation, the thermal power projects are most vulnerable to becoming non-performing assets whereas it is followed by hydro power projects and the least by biomass based power projects. At the same time, PFC has decided to cut down on its borrowings since the profits have decreased in the recent years.

    4. Which among the following is the objective of Rural Electrification Corporation, as mentioned in the passage?

    1. It extends project financing to the power plants which are not financed by the Power Finance Corporation because of lack of viability
    2. It extends credit facility to the power projects which are based in areas less than population of semi urban areas of the country
    3. It lends to the states for development of power projects especially in the areas which are still out of the ambit of electrification
    4. It borrows money from the PFC to extend the same to central power ministry for various development projects
    5. Other than those given in options

    Sol: Option (3)

    Explanation: Power Finance Corporation along with the Rural Electrification Corporation is the biggest lender to the state government power generation companies for development of power plants in various areas of the state.

    5. Which among the following is the problem in restructuring assets for the Power Finance Corporation, according to power experts, as mentioned in the passage?

    1. There are projects in the market for sale but there are hardly any takers for the same since they have very little chance of revival
    2. The projects lack any commercial viability and therefore, nobody wants to invest money in these projects nowadays
    3. The projects which are commercially viable are situated in areas which are not at all places with basic amenities of life
    4. The projects which are up for sale are too costly to be sold to the asset reconstruction companies
    5. None of the above

    Sol: Option (1)

    Explanation: According to the industry experts of power sector, it is seen that for power generation projects, there are no takers virtually though various projects are there on the block for sale. This may be because of lack of any interest from the business community in the power sector or the losses which have crippled the power generation companies these days.

    6. Which among the following is true regarding the loans extended by the Power Finance Corporation, as mentioned in the passage?

    1. The PFC has stopped giving loans for new projects which are on the pipeline for the last few months because of existing NPAs in the sector
    2. The PFC has realized more than double spurt in the percentage of NPAs to total assets as compared to the previous year
    3. In the last quarter of the last financial year, PFC has posted around one fifth decline in the total profit posted by the company in its balance sheet
    4. Both (1) and (2)
    5. All the above

    Sol: Option (5)

    Explanation: PFC has stopped giving new loans for projects in the pipeline since it has posted huge losses in the recent years and at the same time, the share of NPAs to the total assets of the corporation has increased from 1.16 percent in FY 2015 to more than 3.20 percent in the FY 2016. The PFC has posted a 20 percent drop in profit in the last quarter of the last financial year i.e. 2015-16 at Rs 1260 crore.

    7. Which among the following is SIMILAR in meaning to the word muted a used in the passage?

    1. Softened
    2. Reduced
    3. Demoralized
    4. Dissented
    5. Other than given in options

    Sol: Option (2)

    Explanation: The profits of the PFC have decreased in the recent years because of rise in NPAs and the restructuring of old assets by the corporation. This proves that the profits have reduced for the PFC in the recent years.

    8. Which among the following is SIMLAR in meaning to the word bludgeoning as used in the passage?

    1. Rising
    2. Accepting
    3. Coercing
    4. Bullying
    5. Other than given in options

    Sol: Option (1)

    Explanation: The PFC is crippled because of rising number of NPAs in the sector in the recent years and that is why, it has stopped financing new projects so that the old projects can at least be saved by the corporation by way of restructuring or fresh funds.

    9. Which among the following is OPPOSITE in meaning to the word resolution as used in the passage?

    1. Continuation
    2. Cartelization
    3. Centralization
    4. Assertion
    5. Other than those given in options

    Sol: Option (1)

    Explanation: The PFC top brass is of the view that the government will do something regarding the issues faced by the corporation and that is why, it may arrive at a resolution regarding the policy issues. Otherwise, these issues will continue for days to come.

    10. Which among the following is OPPOSITE in meaning to the word deterioration as used in the passage?

    1. Impeccability
    2. Resistance
    3. Assurance
    4. Improvement
    5. Other than those given in options

    Sol: Option (4)

    Explanation: The word ‘deterioration’ refers to a condition that is getting worse day by day whereas improvement is the right opposite word for the given word since it means getting better day by day.

    DISCLAIMER: JPL and its affiliates shall have no liability for any views, thoughts and comments expressed on this article.

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