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Journalism of Courage
UPSC Essentials brings to you its initiative of subject-wise quizzes. These quizzes are designed to help you revise some of the most important topics from the static part of the syllabus. Each day, we will cover one new subject. Attempt today’s subject quiz on Economy to check your progress. Come back tomorrow to solve the MCQs on International Relations. Don’t miss checking the answers and explanations at the end of the quiz.
With reference to the evergreening of loans, consider the following statements:
1. Banks adopt the evergreening of loans to avoid classifying a loan as a non-performing asset (NPA).
2. It is a process whereby a lender tries to revive a loan that is on the verge of default or in default by extending more loans to the same borrower.
3. The process of evergreening of loans is a temporary fix for a bank.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
With reference to the crude oil, consider the following statements:
1. India is the world’s largest consumer of crude oil.
2. At present, Saudi Arabia is India’s top source of crude oil.
Which of the statement(s) given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2
Consider the following:
1. Venture capital funds
2. Infrastructure funds
3. Private equity funds
4. Hedge funds
How many of the above are Alternative Investment Funds (AIFs)?
(a) Only one
(b) Only two
(c) Only three
(d) All four
With reference to the remittance inflows, consider the following statements:
1. India witnessed the highest amount of remittance inflows in the world in 2023.
2. It is not included in Gross National Product (GNP).
3. India’s largest source of remittance is UAE.
How many of the statements given above are correct?
(a) Only one
(b) Only two
(c) All three
(d) None
Consider the following:
1. Special Drawing Rights (SDRs)
2. Gold reserves
3. Foreign currency assets held by RBI
4. India’s Reserve Position in the International Monetary Fund
How many of the above are included in India’s foreign exchange reserves?
(a) Only one
(b) Only two
(c) Only three
(d) All four
FYI:
— Shaktikanta Das, Governor of the Reserve Bank of India (RBI), has raised concerns about banks using innovative methods for evergreening loans – concealing the true status of stressed corporate loans – to project an artificially clean image in collusion with corporates.
— The process of evergreening of loans, a form of zombie lending, is typically a temporary fix for a bank. Hence, statement 3 is correct.
— Evergreening of loans is a process whereby a lender tries to revive a loan that is on the verge of default or in default by extending more loans to the same borrower. Hence, statement 2 is correct.
— If an account turns into a non-performing asset (NPA), banks are required to make higher provisions which will impact their profitability.
What is NPA?
— A loan turns into a nonperforming asset, or NPA, if the interest or instalment remains unpaid even after the due date — and remains unpaid for a period of more than 90 days.
— As a result, banks use loan evergreening to avoid classifying a loan as an NPA. In the past, many banks dressed up bad loans and provided additional funds to companies that couldn’t afford to repay. Hence, statement 1 is correct.
— Banks delay the recognition of losses due to loan defaults and engage in evergreening, which is essentially the rolling over of debts of unviable borrowers that would have otherwise defaulted.
Therefore, option (c) is the correct answer.
FYI:
— According to ship tracking data, global oil and petroleum product flows through the maritime channel have decreased by over 50% in December from their regular levels due to some major shipping companies and oil companies refraining from transiting through the Red Sea and the Suez Canal as a result of recent attacks on commercial vessels by Yemen’s Houthi rebels.
— On the other hand, so far there has been no effect on oil shipments to India. This is because tankers carrying Russian oil do not appear to be in danger from the rebels, and the majority of the nation’s imports of crude oil from West Asia do not go via that route.
— India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. Hence, statement 1 is not correct.
— Russia is currently India’s top source of oil, followed by Iraq, Saudi Arabia, and the UAE. Hence, statement 2 is not correct.
— The Red Sea-Suez Canal route accounts for the majority of India’s imports of Russian oil, and things are currently running smoothly there. According to ship tracking data, four oil tankers carrying Russian Urals crude are currently sailing towards the Bab-al-Mandeb strait to make deliveries to Indian ports.
Therefore, option (d) is the correct answer.
FYI:
— The Reserve Bank of India (RBI) has directed banks, non-banking financial companies (NBFCs), and other lenders not to invest in any scheme of alternative investment funds (AIFs) that has downstream investments in a debtor company.
— An AIF means any fund established or incorporated in India which is a privately pooled investment vehicle, and which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors.
— Banks and NBFCs, which are Regulated Entities (RE) under the Reserve Bank of India (RBI), make investments in units of AIFs as part of their regular investment operations.
— Venture capital funds, angel funds, infrastructure funds, private equity funds and hedge funds, among others, are AIFs.
Therefore, option (d) is the correct answer.
FYI:
— India saw the highest remittance inflows worldwide in 2023 at USD 125 billion. Hence, statement 1 is correct.
— The World Bank said in a report that from a historical high of 24.4% in 2022, growth in remittances from India is predicted to cut in half to 12.4% in 2023.
— According to the most recent Migration and Development Brief from the World Bank, “remittances are expected to increase by USD 14 billion and rise to USD 125 billion in 2023, increasing India’s share in South Asian remittances to 66% in 2023 from 63 per cent in 2022.”
— India was followed by Mexico (USD 67 billion), China (USD 50 billion), the Philippines (USD 40 billion), and Egypt (USD 24 billion).
— The remittance inflows represent substantial shares of Gross National Product (GNP). Hence, statement 2 is not correct.
— Regarding India, the World Bank stated that the primary drivers are low inflation and robust labour markets in high-income source nations, which have increased remittances from highly skilled Indians living in the US, UK, and Singapore, making up 36% of all remittance flows to India.
— Remittance flows to India were also boosted by higher flows from the GCC, especially the UAE, which accounts for 18 per cent of India’s total remittances and is the second-largest source of them after the US. Hence, statement 3 is not correct.
Therefore, option (a) is the correct answer.
FYI:
— The Reserve Bank of India (RBI) reported that India’s forex reserves increased by $2.816 billion to $606.859 billion in the week ending December 8.
— India’s gross foreign exchange reserves comprise foreign currency assets of the Reserve Bank, gold held by RBI and Special Drawing Rights (SDRs) of the Government of India.
— India’s Reserve Position in the International Monetary Fund is not included as part of foreign exchange reserves as they may not be available on immediate demand.
— The RBI has the primary responsibility of collection, compilation and dissemination of data relating to foreign exchange reserves.
Therefore, option (c) is the correct answer.
Daily subject-wise quiz — Polity and Governance (Week 37)
Daily Subject-wise quiz — History, Culture, and Social Issues (Week 37)
Daily subject-wise quiz — Environment, Geography, Science and Technology (Week 37)
Daily subject-wise quiz — Economy (Week 36)
Daily subject-wise quiz – International Relations (Week 36)
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