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IBPS PO, BOB & NABARD Development Asst exam: Reading Comprehension Quiz based on The Economic Times

Sep 13, 2016 15:40 IST

    It has been observed in the recent times that bank examinations focus solely on passages based on economic and social issues, business and finance, banking etc taken from leading newspapers such as The Hindu, The Economic Times, The Business Standard, The Business Line, The Times of India, The Indian Express etc. Here the banking team of Jagranjosh is presenting to you a passage for reading comprehension taken from The Economic Times (dated 19th August 2016). Candidates are advised to attempt the quiz to prepare for upcoming banking examinations.

    Question (1-10): Read the following passage 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.

    Startups are one step closer to being able to borrow money, with the Department of Industrial Policy & Promotion (DIPP) given charge of framing guidelines for a credit guarantee fund for them.  "Earlier, the matter was being dealt with by the department of finance. We have started the work and it should be finalized by September," a senior government official said. The DIPP is part of the ministry of commerce & industry. After suggestions from stakeholders including startups, venture capital funds and angel investors, the government is looking at ways of increasing the availability of finance to startups.

    The credit guarantee fund would help in the flow of "venture debt from the formal banking system," the official said. The Startup Action Plan announced by Prime Minister Narendra Modi in January said that a credit guarantee mechanism through the National Credit Guarantee Trust Company or the Small Industries Development Bank of India (SIDBI) would get funding of Rs 500 crore annually for the next four years.

    "Access to capital is the biggest challenge for startups. We have not been able to get easy and collateral-free loans from banks yet. We hope to see this scheme operationalised soon," said Gaurav Kachru, founder of 5ideas, which supports startups. Once the guidelines are finalized, they are likely to be submitted to the cabinet for approval. DIPP is also monitoring the disbursal of money from the fund of funds by SIDBI. Of the Rs 10,000 crore provisioned for startups, SIDBI has sanctioned Rs 168 crores for six alternative investment funds. "We are looking at ways to ensure that the funds reach the startups faster. There are many delays right now," the official said.

    In January, the government had approved the creation of a credit guarantee fund to back the Mudra Yojana under the Stand up India scheme. The objective was to leverage the institutional credit structure to reach out to underserved sectors of the population, including Scheduled Castes and Scheduled Tribes and women entrepreneurs.

    The Mudra credit guarantee fund is expected to guarantee over Rs 1 lakh crore worth of loans to micro and small units initially. Among other incentives for startups, the government has started providing tax exemption to eligible companies for three years from incorporation. Only companies registered after April 2016 can apply for the tax benefits. DIPP has proposed that the time limit for tax exemption be extended to seven years

    1. The credit guarantee fund for startups is going to be managed by the Department of Industrial Policy and Promotion now. It comes under the administrative jurisdiction of –

    1. Ministry of Finance
    2. Ministry of Commerce and Industry
    3. Ministry of Skill Development and Entrepreneurship
    4. Ministry of Home Affairs
    5. Other than those given in options

    Sol: Option (2)

    Explanation: According to the first paragraph of the passage, the credit guarantee fund to be established for supporting the startup ecosystem in the country is going to be given to Department of Industrial Policy and Promotion which is under the Ministry of Commerce and Industry whereas previously, it was with the Ministry of Finance.

    2. Which among the following is / are incentive (s) provided by the government to the startup companies as of now?

    1. The startup companies do not need to register with the Ministry of Corporate Affairs under the provisions of the Companies Act 2013
    2. Tax exemption is provided to the startup companies if they have been incorporated after December 2015
    3. Credit guarantee is provided to the startup companies through the credit guarantee trust and IDBI bank
    4. Both (1) and (2)
    5. None of the above

    Sol: Option (5)

    Explanation: According to the passage, the government has decided to start with a credit guarantee trust in order to provide guarantee to the loans given to the micro and small industries. It is expected that Rs 1 lakh crore of loans will be provided to the micro, small and startup companies whereas tax exemption is also provided by the government for the companies incorporated after April 2016.

    3. The passage talks about “undeserved” sections of the society in the context of getting loans from banks. What does it imply?

    1. These sections of the society do not repay the loans at all and the loans become NPA mandatorily
    2. These sections of the society do not offer a viable option for the banks to provide them loans
    3. These sections of the society do not go to banks to approach for loans because they are too scared of the formal banking system
    4. These sections of the society mainly rely on unorganized banking system in the country for capital infusion in their business
    5. Other than those given in options

    Sol: Option (2)

    Explanation: Scheduled castes, scheduled tribes and women entrepreneurs are considered to be the undeserved sections of the society for getting credit from the banks since they are often not able to provide any collateral for the loans and in some cases, there is no credit history for the companies to make the banks trust their ability to run a business. So, banks do not find lending to these companies viable.

    4. Which among the following best explains the problem of the startup ecosystem in the country, according to the passage?

    1. The startup companies are starved of funds from the formal banking system since the banks are not interested in supporting their business idea
    2. The startup entrepreneurs cannot handle once they are successful and they go off the radar completely
    3. The ideas of the startup companies are hardly sustainable in the long run and that is why most of the startup companies fail to remain afloat in the long run
    4. The startup ecosystem in the country lacks any kind of proper and healthy competition and that is why, the hunger to excel is no longer there in the companies
    5. Other than those given in options

    Sol: Option (1)

    Explanation: According to the passage, the startup companies in India do not lack expertise or new and unique ideas but what they lack is funding from the formal banking system. The funds do not reach the startup ecosystem easily because of the gap of trust between the companies and the formal finance market of the country.

    5. The objective of the credit guarantee fund launched by the government under Mudra Yojana is which among the following?

    1. The objective is to give credit to loans provided to the underprivileged sections of the society
    2. The objective is to cover up for all the losses incurred by selling off shares in the public sector companies by the government
    3. The objective is to help the startup ecosystem come up with new ideas by training them with new skills
    4. Both (1) and (3)
    5. Other than those given in options

    Sol: Option (1)

    Explanation: The Government has launched a credit guarantee fund under the Mudra Yojana to support the Stand Up India scheme. The objective is to leverage the institutional credit from formal banking system to reach the undeserved section of the society namely scheduled castes, scheduled tribes and women entrepreneurs of the country.

    6. Which among the following is true regarding the scheme announced by PM Modi regarding boosting up the startup ecosystem in the country?

    1. The government will provide Rs 500 crore in the next four years in order to provide credit guarantee to the loans provided to the startup companies
    2. The credit guarantee mechanism is going to be implemented through the Small Development Bank of India
    3. The credit guarantee fund is only for unicorn companies with high valuations and no guarantee is going to be there for loss making startup companies
    4. Both (1) and (3)
    5. None of the above

    Sol: Option (5)

    Explanation: The government has announced that a credit guarantee fund is going to be set up under the control of SIDBI or National Credit Guarantee Trust and an annual outlay of Rs 500 crore annually for the next four years will be made to the fund. However, there is no mention of extending the credit only to startup companies with good valuations and no guarantee to companies with little chance of success.

    7. Which among the following is SIMILAR in meaning to the word charge as used in the passage?

    1. Acquisition
    2. Responsibility
    3. Rebuttal
    4. Refusal
    5. Other than those given in options

    Sol: Option (2)

    Explanation: According to the passage, the DIPP has been given the responsibility to frame guidelines for the credit guarantee fund to be set up to support the startup ecosystem of the country. So, that means responsibility.

    8. Which among the following is SIMILAR in meaning to the word Access as used in the passage?

    1. Availability
    2. Attainability
    3. Rectification
    4. Retrieval
    5. Other than those given in options

    Sol: option (1)

    Explanation: According to the passage, it is not possible for the startup companies to get funds from the formal banking system easily since banks are reluctant to offer loans to the companies. The availability of funds is not very optimistic for these companies.

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

    1. Attributed
    2. Junked
    3. Asserted
    4. Tricked
    5. Other than those given in options

    Sol: Option (2)

    Explanation: The word has been used in the sense that the credit guarantee fund would come into existence very soon in order to support the startup ecosystem in the country. Hence, the opposite in meaning will be a word that means that plan has been cancelled. ‘Junked’ means ‘cancelled’ or ‘deserted’.

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

    1. Detach
    2. Destabilize
    3. Destiny
    4. Design
    5. ther than those given in options

    Sol: Option (1)

    Explanation: In the passage, ‘leverage’ has been used to indicate that the credit structure is going to reach the startup companies easily once the new guarantee fund is operationalised. Hence, ‘detach’ means the opposite to the same.

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