Sbi Po Preliminary Exam Exam Template With Answers Page 12
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24SBI PO Preliminary Exam Model Paper - 3
a) None
b) Only (A)
c) Only (B) and (C)
d) Only (C)
e) All (A), (B) and (C)
English Language
Directions (Q. 71-80) Read the following passage carefully and answer the questions given below it.
Certain words have been printed in bold to help you to locate them while answering some of the
questions.
Banking sector reforms in India were introduced in order to improve efficiency in the process
of financial intermediation. It was expected that banks would take advantage of the changing
operational environment and improve their performance. Towards this end, the Reserve Bank of India
initiated a host of measures for the creation of a competitive environment. Deregulation of interest
rates on both deposit and lending sides imparted freedom to banks to appropriate price their products
and services. To compete effectively with non-banking entities, banks were permitted to undertake
newer activities like investment banking, securities trading and insurance business. This was
facilitated t hrough amendments in the relevant acts which permitted PSBs to raise equity from the
market up to threshold limit and also enabling the entry of new private and foreign banks. This
changing face of banking led to an erosion of margins on traditional banking business, promoting
banks to search for newer activities to augment their free incomes. At the same time, banks also
needed to devote focused attention to operational efficiency in order to contain their transaction costs.
Simultaneously with the deregulation measures prudential norms were instituted to strengthen the
safety and soundness of the banking system. Recent internal empirical research found that over the
period 1992-2003, there has been a discernible improvement in the efficiency of Indian banks. The
increasing trend in efficiency has been fairly uniform, irrespective of the ownership pattern. The rate
of such improvement has, however, not been sufficiently high. The analysis also reveals that PSBs
and private sector banks in India did not differe significantly in terms of their efficiency measures.
Foreign banks, on the other hand, recorded higher efficiency as compared with their Indian
counterparts.
71. Prudential norms were initiated in the banking sector with a view to
a) Increase operational efficiency
b) Contain the non-performing assets
c) Strengthen the soundness of banking system
d) Improve the customer service
e) None of these
72. Banking sector reforms in India were introduced for the purpose of
a) Giving more and more employment opportunities to the educated unemployed
b) Taking care of the downtrodden masses
c) Increasing efficiency in the banking activities
d) Giving bettern return to the Central Government
e) None of these
73. Banks can control their transaction costs by
a) Restricting their lending activities
b) Undertaking more and more non-banking activities
c) Encouraging the customers to bank with other banks
d) Devoting more attention to operational efficiency
e) None of these
74. The recent internal empirical research conducted by the RBI found that
a) There is cut-throat competition in banking industry
Page 12
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