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Reading Comprehension Quiz for IBPS PO 2017
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Q.Read the following passage carefully and answer the questions given below it. Certain words are given in bold to help you locate them while answering some of the questions.
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Foreign investor presence in India’s debt markets has increased considerably after the global financial crisis. Annual inflows over the years ending August peaked at $3.4 billion in 2008, fell to less than $600 million in the immediate post-crisis year 2009, and rose sharply to $10.2 billion in the year ended August 2010, $6 billion in the year ended August 2011 and $9 billion in year ended August 2012. The year to August 2013 was unusual in as much as there were net outflows of $2.8 billion, to be followed by a surge to $12.9 billion in the year to August 2014.
The collapse in flows and the exit of FPIs from the debt market in 2013 were clearly related to the fears of a liquidity squeeze generated by talk of the “taper” in the US.
The exit of portfolio capital weakened India’s rupee considerably, worsened sentiment and accelerated the outflow. A corollary of this relationship between expectations of the state of international liquidity (influenced by the policy stance of the US Federal Reserve), the direction of movement of the rupee and the volume of inflows into debt markets, is that the post-crisis expansion of foreign presence in India’s debt markets must be seen as the result of the sharp increase in liquidity in the international financial system as a result of the monetary and fiscal policies adopted in response to the crisis
Interest rates in India are much higher than in international markets, and if the assessment of exchange risk is that it is low (or that the rupee will not depreciate by ‘abnormal’ margins), investment interest in the Indian debt market would be high.
The result has been that despite the reversal in flows in 2013, cumulative net investment by FPIs in India’s debt market has risen from less than a billion dollars in 2006 to $30 billion at the end of August 2012 and $41 billion on August 27, 2014.
One reason for growing foreign investor interest in Indian debt was the liberalization of policy with regard to permitting foreign portfolio investment in the debt market. It was in 1995 that the Securities and Exchange Board of India permitted FIIs to invest in debt markets, subject to the 70:30 rules, which specified that 70 per cent of an investor’s exposure should be to equity and only 30 per cent to debt. The cap on total FII investment in debt was set at $1-1.5 billion.
Soon, in 1996, a category of FIIs that were allowed to invest only in debt instruments were permitted into the country’s capital markets, with 100 per cent exposure to debt securities (including corporate bonds) subject to the aggregate ceiling of $1-1.5 billion. In 1998, such investment was permitted in unlisted securities as well or through the private placement market. Even as recently as 2004, the limit on aggregate debt was at $1 billion, with a cap of $100 million for investments under the 70-30 route and $900 million under the 100 per cent route.
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1.What conditions was/were placed before a certain category of FIIs in 1996?
(A) They were allowed 70% exposure to debt securities.
(B) They were allowed to invest only in debt instruments.
(C) They were allowed to invest in debt instruments subject to the aggregate ceiling of $1-1.5
billion.
A. Only (A) and (B)
B. Only (B) and (C)
C. Only (A) and (C)
D. Only (A)
E. Only (B)
2. What is/are the reasons behind the growth of foreign investors’ interest in India?
A. The ability of Indian entrepreneurs to convince the government for PPP model of investment
B. The realisation of importance of FDI in Indian economy for better infrastructure
C. Increase in opportunities in the private placement market
D. Liberalisation of policy with regard to permitting foreign portfolio investment in the debt market
E. All the above
3. Which of the following statements is/are false according to the given passage?
A. After the global fiscal crisis the presence of foreign investors in India’s debt market has increased.
B. The increase in foreign investors can be seen as the result of increase in liquidity in the international financial system.
C. The exit of portfolio capital led to financial crisis in the Securities and Exchange Board of India.
D. The exit of FPIs from the debt market in 2013 was related to the fears of liquidity generated in the US.
E. All the above
4. What, according to the passage, is the effect of exit of portfolio capital from Indian economy?
A. Acceleration of inflow of capital
B. Strengthening of Indian rupee
C. Increase in outflow
D. Increase in foreign investment
E. None of these
5. Which of the following statements is/are true on the basis of the facts mentioned in the given passage?
(A) There was sharp increase in liquidity in the international financial system due to the
monetary and fiscal policies adopted in response to the financial crisis.
(B) Despite the reversal in flows in 2013, the number of foreign portfolio investors in India has increased.
(C) The SEBI permitted Flls to invest in equity 70 per cent of their investment.
A. Only (A) and (B)
B. Only (B) and (C)
C. Only (A) and (C)
D. All (A), (B) and (C)
E. None of these
6. Choose the word which is MOST similar in meaning to the word printed in bold color as used in the passage.
corollary
A. Sardonic
B. Furious
C. bizarre
D. Sizzle
E. Squall
7.Choose the word which is MOST similar in meaning to the word printed in bold color as used in the passage.
abnormal
A. concealed
B. perceptible
C. respectable
D. peculiar
E. invisible
8.Choose the word which is MOST opposite in meaning to the word printed in bold color as used in the passage.
exposure
A. concealment
B. Courtesy
C. Whimsy
D. Lightness
E. Gaiety
Click here for Reading Comprehension for IBPS PO 2017: Set – 26
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