Phase-2 Official Information Handout - Solved Paper - Oliveboard
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RBI GRADE B 2021
Phase-2 Official
Information Handout -
Solved Paper
FOR RBI GRADE B EXAM
RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
RBI GRADE B 2021
Phase-2 Solved Information Handout
Descriptive Questions:
Please Note:
In the Information Handout released for RBI Gr B 2021 Phase 2 Exam (to be held on 1 st
April 2021), the following word limit has been mentioned:
15 Marker Question – 600 Words
10 Marker Question – 400 Words
Paper-I: Economic and Social Issues - Descriptive type
Discuss the impact of inflation on Purchasing Power.
Inflation is the persistent rise in the general level of prices of goods and services over a
period of time.
It can be mainly of two types:
1. Demand Pull Inflation: Caused by an increase in demand for goods and services
over the available supply.
The demand arises due to higher disposable incomes, increase in money supply.
It occurs when increase in production lags behind the increase in money supply.
2. Cost Push Inflation:
Increase in prices due to rise in input costs like raw material, wages, profit margin,
disputes, calamities etc.
The impact of inflation can be understood as follows:
1. Redistribution of income and wealth:
Inflation redistributes income from one hand to another hand. For some it may
cause a profit or for some others it might cause a loss.
a. Debtors’ vs Creditors:
In inflationary situation, Debtor is the gainer and creditor is the loser.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
For example, if I borrowed 100 at 4% a day and I am a vendor. I have to pay 104
the next day.
The price of the apple I sell is 10rs on day one. The next day it became 15. So, I
can sell 10 apples for Rs. 150 on day 2.
I can repay my debt by selling only 7 apples. So, my gain is 45Rs or 3 apples.
The creditor can buy only 7 apples with the 105Rs that he got.
b. Producers’ vs Consumers:
In inflationary situation, producers stand to gain, and consumers lose.
Producer’s profit will increase, and the purchasing power of money held by
consumer falls. Income of consumers gets transferred from consumers to
producers.
c. Flexible Income vs Fixed Income
Flexible income group like sellers, self-employed, private companies’
employees whose salary is adjusted are not affected. Fixed income people like
daily wage earners lose as their income declines.
2. Effects on production and consumption:
Inflation may lead to fall in demand for goods and services. It may lead to
reallocation of resources.
In packaged items, producers reduce the quantity or quality to maintain the same
price.
3. Others
a. High prices reduce the number of exports and increases import. So,
unfavourable BoP.
b. High import, low export will lead to demand for foreign currency. Hence
domestic currency will see a fall.
c. Higher inflation will lead to social and political tensions.
Inflation is an important problem for policy makers, economies and common man. A rise
or fall in this figure will cause economies to tumble or rise. Hence the governments and
economists are very cautious with the approach they follow to deal with inflation.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Paper-II – English (Writing Skills) - Descriptive Paper
Three effective measures to eradicate illiteracy in India. Explain how the measures
suggested by you will be effective.
The development in the country has moved from 'roti, kapda aur makaan' to basic social
infrastructure like health, education and livelihoods.
• As per Census 2011, 26% of India is still illiterate.
• Literacy rate in India as per Census 2011: 74%.
• Literacy rate: Male: 82.1%; Female: 65.5%
A pyramidal Structure
1. Pre-primary level: 5-6 years of age.
2. Primary (elementary) level: 6-14 years of age. Sarva Shiksha Abhiyan (SSA) under
the Right to Education (RTE) Act is implemented for this level.
3. Secondary level: Age group between 14-18. SSA extended to secondary level in
the form of the Rashtriya Madhyamik Shiksha Abhiyan.
4. Higher education: UG/PG/M.Phil/Ph.D. Rashtriya Uchhattar Shiksha Abhiyan
(RUSA) is under this program.
Early Childhood:
1. Integrated Child Development Scheme (ICDS) through Anganwadis lack regulation.
2. Multiple service providers, unregulated private channel led to commercialization
of ECE.
Primary level:
1. About 50% of India’s population has only primary education or less
2. The curriculum and the fees need to be cognitive and flexible.
3. Activity-based learning should be adopted.
4. The supply side problem has increased.
5. Improving math and cognitive skills at the school level to make a difference at the
higher level.
6. RTE and SSA have resulted in over access but low-quality primary level education.
As per the Kasturirangan committee report it should be integrated into complexes.
Example is the ‘Adarsh’ system of Rajasthan. This addresses resource scarcity,
teacher shortages and secondary schools.
Secondary level:
1. RTE to expand to 14-18 age groups.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
2. Skill education necessary for this level.
3. Dropout rates to be reduced. The main reasons are lack of interest and financial
constraints.
Higher education
1. Dual problem of quality and quantity. Gross enrolment ratio (GER) in higher
education is only 24.5.
2. Lack of additional funds.
3. Low philanthropic investment, R&D and dependent only on government funding.
4. The recommendations of Narayana Murthy committee on the role of corporate
sector in higher education could be implemented.
5. Financial Institutions to give attention to this level.
6. UGC and AICTE to act as facilitators instead of controllers.
7. Investigator-led Research for funding science research. Science and Engineering
Research Board (SERB) 2008 is a step in the right direction. 50:50 partnerships with
SERB for industry-relevant research under the Ucchatar Avishkar Yojana (UAY) is
the right way to go forward.
8. Private sector to be incentivized for undertaking R&D. National Research
Foundation, to fund, coordinate, and promote research.
The modern Indian education system is crying for a revamp. There are various
government initiatives targeting each level of the education system in India. Higher
Education System is given a greater focus these days.
It is often said that computerization results in unemployment. Do you agree? Explain.
In 18th Century, we all saw the industrial revolution. Where big machineries were set up
to enhance the production capabilities and streamline the overall process of
manufacturing. During this period, the labours were replaced with skilled engineers who
were responsible for operating, maintaining and servicing these machines. These include
automobiles, textiles, FMCG and everything else.
Today it is seen that in industrialized economies there has been a significant rise in the
average duration of unemployment. Some blame it on the phenomenon of information
technology “revolution,” Computers are very important and part of all our lives in the
world today. People across the world today use it for most of their work due to speed,
accuracy and reliability. These include from basic computers at home to industrial robots
used to manufacturing high end carbon fibre cars.
The computers are everywhere because of the following reasons:RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
1. Multitasking: Computers are known for multitasking and that too at a much rapid pace.
They have replaced humans in the production, packaging and sorting business, so hence
probing us towards more unemployment.
2. Easy and convenient: Computers can always make the tasks look simpler, easy and
convenient and, hence reducing multiple manual efforts. In sectors like analytics, quality
control, quality checks and services where they hold important role. Due to this,
unemployment prevail stance.
3. Dependability: Machines and technology were invented to bring the dependability and
predictability of the same process time and again. Today we sometimes do not want to
perform rather want the computers to do the same.
In the last decade, the biggest multibillion-dollar gainers and largest companies are the IT
based companies like Google, Microsoft, Facebook, Amazon etc. The important question
to ask self is that these companies are run by computers? Do they have humans employed
to run them?
Answer is yes, humans run these big IT companies with state-of-the-art infrastructure
working on their computer and not necessarily involving in hardship labour works.
To conclude, there had been a paradigm shift in the way industries today operate and the
pace at which it works. This has happened in the past and will continue to change in
future. There is a shift in the role of humans in these industries. Our new role is to run
these computers which in turn run these industries, make developments in the computer
systems, provide computer services, bring advanced interfaces between technology and
humans. The future is making the best use of technology (computers) for the welfare of
humans.
High Rise Buildings: Infrastructural and Environmental Issues
Urbanization in modern cities due to concentrated population is resulting in ever high
rising skyscrapers. Near to workplace and low cost are the prime reasons for boom in the
high-rise buildings.
Initially the high-rise buildings were economic decisions initiated by business needs
and driven by innovative engineering. The idea was to provide a solution for high land
rates and adding prestige quotients. Over decades humans have mastered the art of high
rise and build names like Empire Estate to Burj Khalifa. Primary build for residential
purposes, now host offices, hotels, helicopter pads, pools and clubs.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
These oversized buildings are now a threat to nature including humans. Also, increased
burden on roads, utilities like electricity, sewage and water systems for surrounding
houses, Fire incidents and earthquake damages are higher and more fatal in these high-
rise buildings.
In recent times the people living in these high-rise buildings have reported feeling of
isolation, disengagement from nature, and loss in productivity and health problems.
High rise buildings are heat trappers, blocking breeze and sunlight too. In terms of
economics the high-rise buildings are made of highly intensive energy materials as the
requirements.
The high-rise buildings are highly dependent on technology for lighting, elevators, fire
systems, cooling systems which add to the risk factor compared to small housing options.
High rise buildings also have advantages of overall ownership low costs, amenities,
security, low-cost maintenance, prestige status and design.
Many developers are coming up with the eco-friendly high-rise buildings to cut down on
the impact on the environment by providing more open spaces, green zones, open to sky
for ventilation and sunlight which basically corrects the above highlights.
To conclude, high rise buildings are the need of the society and will continue to be. Going
forward we need to minimize the negative effects and enrich further on positive points.
Paper-III – Finance and Management- Descriptive Type
Discuss the effectiveness of the quantitative and qualitative tools of credit control by
RBI.
RBI controls the money supply by control of interest rates or other factors to maintain
price stability and achieve economic growth.
The money supply is regulated in two ways:
Quantitative measures:
Used to control the volume of supply.
Statutory liquidity ratio
Reserves that are kept in the form of approved Govt. securities (Govt. bonds) and gold.
Banks earn from their reserves in SLR.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
1) Increase in SLR
- less money for banks to lend and hence fall in inflation
- demand for Govt. bonds
2) Decrease in SLR
- To induce growth
- confidence in fiscal management.
Liquidity Adjustment Facility
Avail liquidity in case of requirement or park excess funds against government securities
through repurchase agreements.
Repo Rate
Rate at which RBI buys govt. securities from bank in exchange, i.e., govt lends money to
bank at Repo rate for short term.
If RBI wants banks to lend less money it increases the Repo rates, thus increasing the
borrowing cost for banks which in turn pass this on to the customers, lending decreases,
spending decreases and hence the inflation. Similarly, Repo rates are reduced to boost
growth of the economy. The current Repo is 4%
Reverse Repo Rate
Reverse Repo is an instrument for lending funds by purchasing of Central Govt with an
agreement to resell it later. Thus, banks lend funds by buying securities and earn interest
till the period they keep them.
The current Reverse Repo rate is 3.35%.
An increase in Reverse Repo means banks to lend more to the govt and hence less to the
customers draining the liquidity out of the system, leading to less spending and control of
inflation. Cut in Reverse Repo is usually done for growth.
Open Market Operations
Excess liquidity is often sucked back by RBI by means of selling govt securities, similarly,
when liquidity is assumed to be low, RBI increases it simply by buying back securities.
Bank Rate
Bank rate is the long-term rate at which RBI lends money to the banks. Bank rate has not
been used much by RBI for monetary policies.
Credit ceiling
The RBI puts up a limit or indicates that banks would be given loans to a certain limit, thus
tightening the banks’ position to disburse loans.
Qualitative MeasuresRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Used to control particular or selective use of credit.
Credit regulation
During inflation or deflation RBI may regulate the consumer credit on certain products
which are affected.
Margin Requirements
In order to control the money supply flow RBI may at its discretion increase or decrease
the margin requirements for a particular loan.
Moral Suasion
It is more like RBI requesting banks to follow certain practices and measures. Like not
giving loan to a certain sector owing to bad economy, etc.
Credit Rationing
Ceiling and Limiting the maximum amount of loans that can be sanctioned based on a
particular category or need.
Discuss Performance Appraisal methods used by organizations and their impact on
organizational climate and culture
Performance Appraisal is the systematic evaluation of the performance of employees and
to understand the abilities of a person for further growth and development.
The techniques are as under:
1. Ranking:
Assigns a ranking to employees from highest to lowest by comparing them with
others.
For ex. If there are 5 employees, ranking will be assigned from 1 to 5.
Limitations:
• Becomes difficult for a large no. of employees
• No relative comparison
• Subjective in nature
2. Paired Comparison:
Each employee is compared with all others on the basis of a single trait.
Total no. of comparisons done is n(n-1)/ 2 (where n is total no. of employees
evaluated).
No. of times a worker has been rated better gives the respective score.
Limitation is it becomes tedious to evaluate when no of employees increases.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
3. Forced distribution:
Rater has to distribute employees on all points in a scale.
Disadvantage is the central tendency.
4. Critical Incident:
Rater is focused towards those critical behaviors which make a difference in the
job done.
1. A list of specific incidents is prepared.
2. A weight is assigned to these incidents based on their criticality to job.
3. Finally, an evaluation in the form of checklist (as to which behaviors both
good/bad, were demonstrated by the employee) is shared.
Drawback is it is subjective and time consuming.
5. Check List Method:
Checklist of individual’s characteristics in the form of Yes/ No, is prepared. Rater
selects the appropriate response and HR department calculates the score based
on the weight given to each statement and answer selected by rater. While
preparing questions, consistency is kept in mind i.e., there are same questions in
different forms and the rate’s response to both these questions is evaluated.
Limitations:
• Difficult to assemble and weigh a large set of statements about employee
traits.
• Becomes costly and inefficient if large number of job categories are
involved.
6. Graphic Rating Scale Method:
A printed appraisal form is used for appraising employees. The form lists a range
of job performance characteristics (from a low performance to outstanding) and
traits of employees (like reliability, quality, discipline etc.) The rater checks the
rating which best describes employee’s respective behaviour.
Drawback is the responses of the rater may be biased.
7. Behaviorally Anchored Rating Scales (BARS):
This method describes various degrees of demonstrated behaviors with respect to
a specific performance dimension. It combines benefits of critical incidents,
narratives and quantified ratings through a quantified scale to behavioral examples
of good or bad examples.
8. Forced Choice Method:RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
A series of statements are given in two or more blocks and the rater has to make
a forced choice (yes/no). Out of those statements depending on how closely a
statement relates to the individual being rated. Each statement carries a weight
not known to the rater. Final score is evaluated basis the response given.
Drawback is the statements may be wrongly framed and is time consuming.
9. Field Review Method:
Used to eliminate rater’s bias. Review process done by HR.
Drawback is Time consuming, and the supervisors do not approve the interference
of staff.
Objective Type Questions:
Economics and Social Issues (ESI) – Objective Type Questions
Q.1) According to Socio Economic and Caste Census (SECC) exercise that started in
2011. the total number of households in India are around _____.
(1) 17.39 crore
(2) 19.39 crore
(3) 21.39 crore
(4) 24.39 crore
(5) 27.39 crore
Answer key: 4
Solution:
• According to SECC, there are a total number of 24.39 crore households in India.
Q.2.Which of the following types of initiatives by the Government cannot be classified
as an anti-poverty programmes?
(1) Urban poverty alleviation programme
(2) Castes based reservation in jobs
(3) Self-employment programmes
(4) Social Security programmes
(5) Wage employment programme
Answer key: 2RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Solution:
• The poverty alleviation programmes in India can be categorized based on whether
it is targeted either for rural areas or for urban areas in the country.
• Most of the programmes are designed to target rural poverty as the prevalence of
poverty is high in rural areas. Also targeting poverty is a great challenge in rural
areas due to various geographic and infrastructure limitations.
• The programmes can be mainly grouped into
✓ Wage employment programmes
✓ Self-employment programmes
✓ Food security programmes
✓ Social security programmes
✓ Urban poverty alleviation programmes.
✓ Skill India programmes for employment.
Q.3. The Millennium Development Goals Report 2015 lists eight Goals numbered as 1
to 8. Which of the following is Not in the Goals 1 to 4?
(1) Achieve Universal Primary Education
(2) Eradicate extreme poverty and hunger
(3) Global partnership for development
(4) Reduce chill Mortality
(5) Promote Gender equality and empower women
Answer key: 3
Solution:
• Millennium Development Goals (MDGs)
• Eradicate Extreme Hunger and Poverty
• Achieve Universal Primary Education
• Promote Gender Equality and Empower Women
• Reduce Child Mortality
• Improve Maternal Health
• Combat HIV/AIDS, Malaria and Other Diseases
• Ensure Environmental Sustainability
• Develop a Global Partnership for DevelopmentRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Q.4. Which one of the following is not a part of ‘Food Based Safety Nets’ in India?
(1) Public distribution System
(2) Mahatma Gandhi National Rural employment Programme (MGNREGS)
(3) Mid-day Meals Programme
(4) Integrated Child Development Programme
(5) Food for Work Programme
Answer key: 2
Solution:
• Major food-based safety-net programs that help millions of household’s access
food, cash, and other support.
• Public Distribution System
• Mid-Day Meals
• Integrated child development services
• Support for daily wage earners, migrants, and other workers
Q.5. Self-help groups (SHGs) are generally facilitated by NGOs, and increasingly advise
and train members in a variety of on- and off-farm income-generating activities. Indeed,
in a number of recent projects, NGO were substituted by trained facilitators and
animators drawn from self-help groups. Which of the following are the major issues
confronting SHGs?
(a) Inadequate number of quality agencies for capacity building
(b) Lack of governance and challenges
(c) High management information
(d) Consistent reporting and supervision
(1) (a) and (d)
(2) (a) and (b)
(3) (c) and (d)
(4) (a) and (c)
(5) (b) and (c)
Answer key: 2
Solution:
• a and b are the major issues confronting SHGs as there are no quality agencies to
provide the required training to the people under SHGs and there is no proper
channel to govern the group.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Q.6. In order to overcome the challenges faced by SHGs, IFAD has contributed to the
mainstreaming and to financing programmes for promoting self-help groups in states
such as Tamil Nadu and Maharashtra. Which of the following is the main objective of
Maharashtra Rural Credit Project?
(1) To reduce rural poverty and promote rural development
(2) To improve financial services, including savings among rural people
(3) To improve their status by providing education.
(4) To increase marketing facilities
(5) To open Anganwadis and primary schools in rural areas
Answer key: 1
Solution:
• This project aimed to reduce rural poverty and promote rural development by
improving financial services, including savings, among rural poor people. The
project improved the services of formal financial institutions and built reception
capacity.
Q.7. The AD curve is downward sloping for a small economy in a fixed exchange rate
system because (A) ..................... weakens the country’s external competitiveness
which (B) ..................... for domestic goods—
(1) (A) positive domestic inflation (B) reduces domestic and foreign demand
(2) (A) positive domestic inflation (B) increases domestic demand
(3) (A) rising domestic inflation (B) reduces domestic and foreign demand
(4) (A) rising domestic inflation (B) increases domestic demand.
(5) (A) rising domestic inflation (B) increases domestic and foreign demand
Answer key: 3
Solution:
• The AD curve is downward sloping since an increase in prices appreciates the real
exchange rate, which reduces net exports, and therefore output. When it is
associated with fixed exchange rates there is no monetary policy channel, so the
money supply cannot be held fixed, as was done while deriving the AD curve in the
closed economy.
• Domestic demand will decrease with rising domestic inflation as people in the
native country will begin buying more of the relatively cheaper foreign goods.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
• The point is whether domestic inflation is greater or less than foreign inflation, not
whether it is positive or zero.
Q.8-10. Read the following passage and answer the given questions:
Data released earlier this year revealed a landmark event for the Indian economy that
went largely unnoticed: agricultural workers now comprise less than half the workforce
for the first time in the history of the Indian economy and its contribution to GDP is less
than 14 percent. However, in recent years even as the nonagricultural economy remains
weak, overall growth has been propped up to the extent it has by the growth of the overall
rural economy. And while within the rural economy itself, non-farm activities are
becoming increasingly significant, close to two of three workers depend on agriculture for
an important part of their income. Lower production from earlier years, higher cultivation
costs and weaker yields bode ill for farm incomes and by extension for the rural economy.
If rural incomes are hit, there could be bigger demand for work under the rural
employment guarantee scheme. Though there is a government proposal to restrict
MGNREGA to tribal districts only if farm incomes remain weak this feed into the rest of
the economy and the intention of the government to see this policy through could well
be tested.
Q. 8. What do the statistics regarding the agricultural sector cited in the passage
indicate?
(1) Farm incomes are likely to be hit by low global commodity prices and weak or
stagnant production
(2) Overall agricultural output will fall significantly this year despite sustained
government assistance
(3) Factors such as a weak monsoon have resulted in an agricultural deficit
(4) The agricultural sector is very important to the economy despite its falling
contribution to India’s GDP
(5) Agriculture must employ more workforce
Answer key: 5
Solution:
As per the passage it says that “However in recent years even as the non agricultural
economy remains weak, overall growth has been propped up to the extent it has by the
growth of the overall rural economy. And while within the rural economy itself, non-farm
activities are becoming increasingly significant, close to two of three workers depend onRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
agriculture for an important part of their income.” Which means agriculture should
employ more workforce.
Q.9.Which of the following is a welcome development?
(1) Bigger demand for work under rural employment guarantee scheme
(2) Non-agricultural economy remaining weak
(3) Agriculture workforce becoming less than half of the total workforce
(4) Higher cultivation costs
(5) Restricting MGNREGA to tribal district
Answer key: 3
Solution:
• As per the passage this is a landmark event “Data released earlier this year
revealed a landmark event for the Indian economy that went largely unnoticed:
agricultural workers now comprise less than half the workforce for the first time in
the history of the Indian economy and its contribution to GDP is less than 14
percent.”
Q.10. Which of the following best defines MGNREGA?
(1) Guaranteeing 100 days of wage-employment in a financial year to every rural
household whose adult member volunteer to do skilled work.
(2) Guaranteeing 100 days of wage-employment in a financial year to every rural
household whose adult member volunteer to work in farm sector.
(3) Guaranteeing 100 days of wage-employment in a financial year to an adult member
of a rural household
(4) Guaranteed regular employment of one adult member in rural areas in a farm or
non-farm sector
(5) Fixing minimum wages in the rural areas.
Answer key: 3
Solution:
• MGNREGA guarantees hundred days of wage employment in a financial year, to a
rural household whose adult members volunteer to do unskilled manual work.
• Permissible activities as stipulated in Para 1 of Schedule-I of Mahatma Gandhi
NREGA are as under:RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
• Union Rural Development Ministry has notified works under MGNREGA, majority
of which are related to agricultural and allied activities, besides the works that will
facilitate rural sanitation projects in a major way.
• The works have been divided into 10 broad categories like Watershed, Irrigation
and Flood management works, Agricultural and Livestock related works, Fisheries
and works in coastal areas and the Rural Drinking water and Sanitation related
works.
Q.11-12. Read the following paragraph and answer the given questions.
The resettlement home, where Velayudhan’s mother was admitted, has limited facilities
with one physically challenged old doctor to attend around 200 inmates. There are some
nurses deputed by the People’s Council for Social Justice, a not-for-profit organization.
The care-home lacks proper provisions, medicines and accessories like bed sheets and
cleaning materials. The condition of Velayudhan and his mother suggests a big gap in the
much-acclaimed decentralized anti-poverty programmes of the state and local self-
governments (LSG), said noted economist Prof K K George. “There is a need to go beyond
the BPL and APL categorization. What we need is a micro-level intervention to identify the
individual disabilities among the poor and the rich,” he said.
Q.11.While defining the poverty line:
(1) In 1979 based on the report of the Task Force (Y K Alagh) the Government adopted a
quantitative measure of poverty by estimating the poverty line corresponding to the
calorie requirements.
(2) The Expert Group (Tendulkar) had decided to anchor the poverty line to the then
available official calorie norms used in all poverty estimations since 1979.
(3) The Expert Group (Tendulkar) did not use the all-India urban poverty line basket as the
reference to derive state-level rural and urban poverty.
(4) The new poverty line worked out by Expert Group (Tendulkar) was, for a family of five,
monthly consumption expenditure of Rs.4860 in rural areas and Rs.7035 in urban areas.
(5) The Expert Group (Rangarajan) preferred consumption expenditure estimated based
on the National Accounts Statistics as against the estimates arrived by National Sample
Survey Organization.
Answer key: 1
Solution:RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
• The Expert Group (Tendulkar) had used the all-India urban poverty line basket as
the reference to derive state-level rural and urban poverty.
• The Expert Group (Tendulkar) had decided not to anchor the poverty line to the
then available official calorie norms used in all poverty estimations since 1979 as
it found a poor correlation between food consumed and nutrition outcomes.
• Estimates of consumption expenditure seen in the National Accounts Statistics and
as inferred from the sample surveys of the National Sample Survey Organisation
show a large and growing variance.
• The Expert Group (Rangarajan) prefers NSSO’s estimates and decides not to use
the NAS estimates. This is in line with the approach taken by Expert Group
(Lakdawala) and Expert Group (Tendulkar).
Q.12 Why do we need to ‘go beyond the BPL and APL categorization’?
(1) We need to provide benefits of anti-poverty programs to all BPL and APL population
(2) We need to identify only individual disabilities and categorize them to get the benefit
of anti-poverty program
(3) We need to consider individual disabilities to categorize them to get the benefit of
anti-poverty program
(4) Anti-poverty intervention is needed by both BPL and APL and rich
(5) Micro-level intervention is required by local self-governments
Answer key: 5
Solution:
• There are other factors which play a pivotal role in identifying poverty like digital
divide, income status, nutrition, health etc.
Q.13-14. Read the following paragraph and answer the given questions.
The Eighth Five Year Plan (1992-97) was launched keeping in mind the necessity of
implementing measures for stabilization and structural adjustment after the Balance of
Payments (BOP) crisis of 1991. The Plan considered the changes that were to be expected
in the economy on account of the adoption of these reform measures, while keeping in
mind the poor performance of the economy in the base
year,1991-92. In the base year, the rate of inflation was in double digits, while the overall
growth rate of GDP for that year was negligible.
Q.13.What is the unit of measurement of GDP?RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
(1) Percentage or proportion
(2) Absolute number of goods and services
(3) Monetary terms (Rupees, Dollars etc.)
(4) Absolute number per capita
(5) Other than those given as options
Answer key: 3
Solution:
• GDP, Gross Domestic Product is the total sum of goods and services produced
within country for given year.
• As the value of goods and services is calculated in terms of rupees so the unit of
GDP is also rupees in India, for America it is Dollar, for European country it is Euro.
so the unit of GDP is the currency of that particular country
Q.14.What is the role of Five-Year Plans in India?
(1) To control GDP and BOP only
(2) To plan for overall development of different production sectors
(3) To plan for overall development of different production sectors as well as human
development
(4) To plan for overall development of the country and approve budgetary allocation
(5) To plan for overall agricultural development of the country and allocate resources
Answer key: 4
Solution:
• Objectives of Five-Year Plans in India are:
• High Growth rate to improve the living standard of the residents of India.
• Economic stability for prosperity.
• Self-reliant economy.
• Social justice and reducing the inequalities.
• Modernization of the economy.
Finance and Management (FM) – Objective Type Questions
Q.1. Which of the following is not the object of Corporate Governance?
(1) Non-acceptance of Management’s own role as trustees on behalf of the shareholders
(2) Acceptance by management of the inalienable rights of shareholders as the true
owners of the corporationRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
(3) It is about commitment to values
(4) It is about ethical business conduct
(5) It is about making a distinction between personal & corporate funds in the
management of a company
Answer key: 1
Solution:
• Corporate governance ensures acceptance of Management’s role (as well as
employees) towards the organization.
• Hence option 1 is not the objective of the Corporate Governance.
Q.2. The halo error that tend to distort appraisals, refers to _____
(1) The tendency to mark high on all factors due to a high impression on some specific
factor
(2) The tendency to mark everyone high
(3) The tendency to give excellent ranking to those appraisee who very often wishes
halo to the appraiser
(4) The tendency to rate people higher than they deserve in order to see that poor
ratings do not harm the individual
(5) The tendency of the evaluator to rate high those employees who exhibit qualities
which they themselves possess
Answer key: 1
Solution:
• The halo effect is one of the most common errors in a performance appraisal.
• This happens when an appraiser generalises one of the employee’s traits and
extends it to all the other aspects under review.
Q.3. Which of the following is System 4 participating approach of leadership?
(1) Under this system managers have complete trust in their subordinates and always get
ideas from them and use those ideas constructively
(2) Under this system managers have a patronising trust in their subordinates and
motivate their people with rewards and some fear and punishment
(3) Under this system, managers concern themselves neither with people nor productionRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
(4) Under this system managers have a substantial but not complete trust in their
subordinates, use rewards for motivation and use punishment only occasionally
(5) Under this system managers are highly autocratic and motivate people through fear
and punishment
Answer key: 1
Solution:
• System 1 - Exploitative Authoritative: Responsibility lies in the hands of the people
at the upper echelons of the hierarchy. The superior has no trust and confidence
in subordinates. The decisions are imposed on subordinates and they do not feel
free at all to discuss things about the job with their superior. The teamwork or
communication is very little, and the motivation is based on threats.
• System 2 - Benevolent Authoritative: The responsibility lies at the managerial levels
but not at the lower levels of the organizational hierarchy. The superior has
condescending confidence and trust in subordinates (master-servant relationship).
Here again, the subordinates do not feel free to discuss things about the job with
their superior. The teamwork or communication is very little, and motivation is
based on a system of rewards.
• System 3 - Consultative: Responsibility is spread widely through the organizational
hierarchy. The superior has substantial but not complete confidence in
subordinates. Some amount of discussion about job related things takes place
between the superior and subordinates. There is a fair amount of teamwork, and
communication takes place vertically and horizontally. The motivation is based on
rewards and involvement in the job.
• System 4 - Participative: Responsibility for achieving the organizational goals is
widespread throughout the organizational hierarchy. There is a high level of
confidence that the superior has in his subordinates. There is a high level of
teamwork, communication, and participation.
Q.4. Which of the following is/ are functions of financial markets?
(1) Facilitate price discovery
(2) Provide liquidity to financial assets
(3) Reduce search costs
(4) Reduce information costsRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
(5) All of the above
Answer key: 5
Solution:
• Price Determination: The financial market performs the function of price discovery
of the different financial instruments which are traded between the buyers and
the sellers on the financial market. The prices at which the financial instruments
trade in the financial market are determined by the market forces i.e., demand and
supply in the market. So, the financial market provides the vehicle by which the
prices are set for both financial assets which are issued newly and for the existing
stock of the financial assets.
• Liquidity: The liquidity function of the financial market provides an opportunity for
the investors to sell their financial instruments at its fair value prevailing in the
market at any time during the working hours of the market.
• Easy Access: The industries require the investors for raising the funds and the
investors require the industries for investing its money and earning the returns
from them. So the financial market platform provides the potential buyer and
seller easily, which helps them in saving their time and money in finding the
potential buyer and seller.
• Reduce the Cost of Transaction: Financial market provides complete information
regarding price, availability and cost of various financial securities. So, investors
and companies do not have to spend much on getting this information as it is
readily available in financial markets.
Q.5. Which one of the following is not a function of the Reserve Bank of India?
(1) It provides currency and operates the clearing system for the banks
(2) It formulates and implements monetary and credit policies
(3) It supervises the operations of Commercial Banks
(4) It regulates foreign exchange transactions
(5) Register and regulate the working of mutual funds
Answer key: 5
Solution:
• Functions of RBI
• Issue currency notes:
• Banker to other banks:
• Banker, agent and financial advisor of the government:RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
• Exchange rate management and the custodian of Foreign Exchange Reserves:
• RBI as the bank of Central clearance, settlement, and transfer:
• Credit control function:
Q.6. The financial development of a country is commonly assessed in terms of all but
one of the following ratios:
(1) Finance ratio
(2) Cash ratio
(3) Financial interrelations ratio
(4) New issue ratio
(5) Intermediation ratio
Answer key: 2
Solution:
• Cash ratio is actually used for companies, it is the cash and cash equivalents to the
liabilities of the company, the growth of the country cannot be measured by the
cash and cash equivalent possessed by the govt., it has to consider broader factors.
• Finance ratio measures the total analysis of primary and secondary claims of
national income.
• Financial Interrelations ratio reveals about relationship between financial assets
and physical assets; therefore, it measures the ratio between the financial
structure and real assets structure of the economy.
• New issue ratios indicate the relationship between the primary issues and physical
capital formation in the country. Intermediation ratio indicates the ratio between
the secondary to the primary issues in the country. Hence Cash ratio is not used
for measuring the financial development of the country.
Q.7. Four major theories on motivation are: (a) Maslow's Hierarchy of Needs; (b)
Herzberg's Motivation/Hygiene (two factor) Theory; (c) McGregor's X Y Theories; and
(d) McClelland's Need for Assessment Theory. The study of these theories generally
validates that:
(1) McGregor's Theory Y matches much of Maslow's self-actualization level.
(2) Reward systems must not correspond to intrinsic factors if employees are to be
motivated.
(3) Satisfying extrinsic factors is not commonly attempted method for motivating
workers.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
(4) Motivation is irrelevant in management
(5) There is nothing common in these theories
Answer key: 1
Solution:
• Maslow states that people are motivated by unmet needs which are in a
hierarchical order that prevents people from being motivated by a need area
unless all lower-level needs have been met. Herzberg states that satisfaction and
dissatisfaction are not on the same continuum and are therefore not opposites. He
further states that the motivational factors can cause satisfaction or no satisfaction
while the hygiene factors cause dissatisfaction when absent and no dissatisfaction
when present, both having magnitudes of strength. McClelland's need for
achievement underlies Maslow's self-actualization.
• McGregor's Theory Y matches much of Maslow's self-actualization level of
motivation. It assumes that self-direction, self-control, and maturity control
motivation. Reward systems must correspond to intrinsic factors if employees are
to be motivated. Satisfying extrinsic factors is an all too commonly attempted
method for motivating workers, but theory shows that these efforts cannot lead
to motivated workers.
Q.8. Financial Statements are analysed and appraised with help of?
(1) Balance Sheet
(2) Profit and loss statements
(3) Ratio analysis of Balance sheet and profit and loss statements
(4) All of the given options
(5) None of the given options
Answer key: 4
Solution:
• The process of critical evaluation of the financial information contained in the
financial statements in order to understand and make decisions regarding the
operations of the firm is called ‘Financial Statement Analysis’.
• The most commonly used techniques of financial analysis are as follows:
• Comparative Statements: These are the statements showing the profitability and
financial position of a firm for different periods of time in a comparative form to
give an idea about the position of two or more periods. It usually applies to the
two important financial statements, namely, balance sheet and statement of profitRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
and loss prepared in a comparative form. The financial data will be comparative
only when same accounting principles are used in preparing these statements. If
this is not the case, the deviation in the use of accounting principles should be
mentioned as a footnote. Comparative figures indicate the trend and direction of
financial position and operating results. This analysis is also known as ‘horizontal
analyses.
• Ratio Analysis: It describes the significant relationship which exists between
various items of a balance sheet and a statement of profit and loss of a firm. As a
technique of financial analysis, accounting ratios measure the comparative
significance of the individual items of the income and position statements. It is
possible to assess the profitability, solvency and efficiency of an enterprise through
the technique of ratio analysis.
Q.9. DSCR (Debt Service Coverage Ratio) and the Debt Equity ratio respectively are
based on the logic of having adequate earning to cover debt servicing that shall neither
be in excess nor too meagre and the leverage is in proportion, are considered to be
thumb rule for the financial projection analysis. You are advised to select the optimal
ratios norms for the same from the following:
(1) Range of 2 to 3 and 1:2 respectively
(2) 2.5 and 3 respectively
(3) 1.5 to 2 and 2:1 respectively
(4) 1.5 and 1:1.5 respectively
(5) None of the given options
Answer key: 3
Solution:
• The Debt Service Coverage Ratio (DSCR) measures the ability of a company to use
its operating income to repay all its debt obligations, including repayment of
principal and interest on both short-term and long-term debt. This ratio is often
used when a company has any borrowings on its balance sheet such as bonds,
loans, or lines of credit. It is also a commonly used ratio in a leveraged buyout
transaction, to evaluate the debt capacity of the target company, along with other
credit metrics such as total debt/EBITDA multiple, net debt/EBITDA multiple,
interest coverage ratio, and fixed charge coverage ratio.
• Normally DSCR of 1.5 to 2 is satisfactory
• Debt-Equity Ratio measures the relationship between long-term debt and equity.
If debt component of the total long-term funds employed is small, outsiders feelRBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
more secure. From security point of view, capital structure with less debt and more
equity is considered favourable as it reduces the chances of bankruptcy. Normally,
it is considered to be safe if debt equity ratio is 2:1.
Q.10. The accounts of Government are kept in three parts viz. Consolidated Funds of
India, Contingency Funds of India and Public Account. The transactions in the Public
Account relate to debt other than those included in the Consolidated Fund of India and
the receipts under Public Account do not constitute normal receipts of Government.
Hence,
(1) Parliamentary authorisation for payments from the Public Account is, therefore, not
required
(2) Parliamentary authorisation for payments from the Public Account is, therefore,
required.
(3) Parliamentary authorisation to receipts from the Public Account is, therefore, not
required.
(4) Parliamentary authorisation to receipts from the Public Account is, therefore,
required.
(5) Parliamentary authorisation for payments and to receipts from the Public Account is,
therefore, required.
Answer key: 1
Solution:
• Article 266 of the Constitution defines the Public Account as being those funds that
are received on behalf of the Government of India.
• Money held by the government in a trust such as in the case of Provident Funds,
Small Savings collections, income of government set apart for expenditure on
specific objects like road development, primary education, reserve/special Funds,
etc. are kept in the Public Account. Public Account funds do not belong to the
government and have to be finally paid back to the persons and authorities that
deposited them.
• Parliamentary authorisation for such payments is not required. However, when
money is withdrawn from the Consolidated Fund with the approval of Parliament
and kept in the Public Account for expenditure for a specific purpose, it is
submitted for a vote in Parliament.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Q.11. There is enough anxiety over the fast-eroding capital of public sector banks in
India, especially that of lossmaking lenders. As the rising pile of toxic assets eat away
their capital, banks are struggling to do business. What could make the mess messier?
Banks are mandated to keep 9% of minimum capital adequacy ratio, out of which Basel-
III rules mandate a Tier-I capital ratio of 7%. A part of this Tier-I capital of lenders
consists of additional Tier-1 bonds. Called AT-1 bonds in market parlance, what may be
the biggest risk to the Public Sector Banks with AT-1 bonds:
(1) These are innovative debt instruments that have equity-like perpetuity and may dilute
the Government ownership in these banks.
(2) Given the massive losses that public sector lenders have piled up in 2015-16, some
banks are fast running out of distributable reserves to service these regular coupon
payments on their AT-1 bonds.
(3) May be callable at the initiative of the issuer only after a minimum of five years. To
exercise a call option a bank has to receive prior supervisory approval.
(4) Banks may find it difficult to repay these bonds (principal plus interest) at the time of
maturity, owing to dearer coupon on these bonds.
(5) Is neither secured nor covered by a guarantee of the issuer or related entity or other
arrangement that legally or economically enhances the seniority of the claim vis-à-vis
bank creditors.
Answer key: 2
Solution:
• Option 1 is not a risk to the public sector banks as such, even if the ownership is
being diluted, it does not contribute to any sort of risk.
• Option 5 is a risk to the buyers of the bonds, and not to the issuer of the bonds
(banks) themselves.
• Option 3 actually gives more flexibility to the banks, and hence that can be ruled
out.
• It is to be noted that AT-1 bonds have no maturity dates as such, they are perpetual
bonds, so option 4 is theoretically wrong.
• Hence option 2 is the actual risk which the banks have, as because of the
redistributable reserves being reduced, the coupons may have to be paid using the
capital which is nothing but erosion of capital as what the fear is stated in the
question. (Option 2)RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Q.12. Consider the current government budget where —
T is today’s net taxes.
D is government debt at the start of today.
G is today’s government spending.
r is the real interest rate on government debt.
All variables are positive. The Government is running a deficit today if —
(1) (G – T) > 0
(2) D (1 + r) > (T – G)
(3) r D > (T – G)
(4) ((G + D) r – T) > 0.
(5) (T-G-rD) >0
Answer key: 3
Solution:
Govt is running a deficit if its net income is less than its expenses.
Net Income = Taxes = T
Net expenses = G + rD
Therefore when (G+rD) > T or rD> T-G ie option (3), the Govt is running a deficit today.
(Option 3)
Q.13. The banking sector in India is fully regulated sector. The Reserve Bank of India
(RBI) established under the RBI Act, 1934 plays the role as central bank of the country
and performs the function of regulating, supervising and controlling banking in India.
The RBI is constituted and managed by a central board appointed by Government of
India. The Reserve Bank of India derives powers from various acts/laws enacted for
regulating banking in India and ensures that the banks function within the permitted
framework of laws, the main being Banking Regulation Act, 1949.
Can a commercial bank in India involve itself in a business to acquire, construct and
maintain building for indefinite period?
(1) No, it is not permitted as per Section 6(1) or any other section of the B.R. Act.
(2) Yes, it is possible as it is not prohibited u/s 8 of B.R. Act.
(3) Yes, this is permitted u/s 6(1) of B.R. Act
(4) Yes, this is permitted u/s 5 of B.R. Act
(5) Yes, it can be done with the approval of the Board of Directors of the Bank concerned.
Answer key: 3RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Solution:
Under Section 6, it is permitted that Banks can acquire, construct and maintain buildings
for the purpose of the company. This is self-understandable, as the banks would require
possessing assets for its own premises and so it is a part of business to acquire, maintain
and construct at cost which are profitable for the bank in the long run. Though option 2 is
also true, as Section 8 prohibits trading and not acquiring and maintaining buildings, but
section 6(1) clearly states that banks are permitted to do so, the most relevant option is
(Option 3)
Q.14-16. The Indian financial system has undergone a significant transformation in 1990s.
The deregulation of lending rate and free pricing of equity issues etc., have changed the
financial market scenario. Investors have shied away from equity market in last few year
due to capital market scams and low return. A comparative analysis of all emerging
economies confirms that most of the emerging economies have a corporate bond market.
However, the Bonds/debts market in India has not yet fully developed and turnover is
very low. The most popular Bonds include partly convertible debentures (PCDs), fully
convertible debentures (FCDs), deep discount bonds (DDBs), zero coupon bonds (ZCBs),
bonds with warrants, floating rate notes (FRNs) / bonds and secured premium notes
(SPNs). Of these instruments, fixed rate bonds emerge as the dominant option with
maximum volume transacted.
Q.14. Mrs. Laxmi bought 10% p.a. Bonds of ABC Limited for Rs.105/- each, the face value
being Rs.100/- each, with maturity date being exactly 3 years after the date of
acquisition. Assuming market rate of return being 12% p.a., the per bond present value
of the inflow will be:
(1) Rs. 130.00
(2) Rs. 95.30
(3) Rs. 102.70
(4) Rs. 87.90
(5) Rs. 114.40
Answer key: 2
Solution:
Here C = Coupon Value = 100 x 10% = Rs. 10/-
i = market rate of return or yield or IRR = 12%
n = 3 years
M = Maturity value = Rs. 100/-RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
Hence putting all these in the above formula we get,
P = [10 x {1 – 1/ {1+0.12)3}/0.12] + 100/ (1+0.12)3
P = [10 x {1 – 1/1.404928}/0.12] + 71.1780
P = [{10 x .2882}/0.12] + 71.1780
P = (2.882/0.12) + 71.1780
P = Rs 95.30 approx
Q.15. Vatsal Limited is operating at an EBIT of Rs.9 lacs, depreciation already charged
being Rs.2.00 lacs and Tax rate being 35%. The present borrowing is Rs.30 lacs by way
of Term loan at a cost of 12% p.a. and working capital limit fully utilized being Rs.10 lacs
at a cost of 10% p.a. What is the interest Coverage Ratio?
(1) 1.54
(2) 2.50
(3) 1.67
(4) 0.97
(5) 1.36
Answer key: 2
Solution:
Interest Coverage Ratio = EBIT/Interest Expenses = Rs. 9 Lakhs / Rs. 3.6 Lakhs = 2.5
Q.16. Mr. Mohan bought bonds of the face value of Rs.1000/- each at a discount of 10%
on face value, bearing coupon@ 10% p.a., residual tenure for redemption at par being
exactly 2 years from the date of acquisition. What is the IRR?
(1) 11.11%
(2) 18.12%
(3) 12.12%
(4) 16.18%
(5) 15.25%
Answer key: 4
Solution:
P = [C x {1 - 1/ (1+i) n}/ i] + M / (1+i) n
So, IRR is nothing but yield which is i in the above equation.
So, we have to calculate the value of i
Since nothing is mentioned again the payments are taken annually.RBI Gr. B 2021 Phase-2 Solved Info-Handout Free RBI Grade B e-book
C = Coupon Value = 1000 x 10% = 100
M = Maturity Value = 1000
n = No of years/period = 2 years
Bond Price, P = 10% discount on the face value = 1000 – (1000 x 10%) = 900
As calculator is allowed in the exam, we can find out the value of i by using trial and
error from the options and then checking it with our bond price which is 900.
So, when i = 11.11% we get, P = 981/-
i = 12.12, we get P = 964
Similarly, when we check with other options, we will get i value as 16.18% which is
option (4)
Q.17-18. At first, money was thought to be the only incentive and then a little later it
was thought that incentives include working conditions, security and perhaps a
demographic style of supervision. Subsequently the content of motivation was deemed
to be the so-called higher-level needs or motives such as esteem and self-actualization;
responsibility, recognition, achievement and advancement and finally including in its
purview growth and personal development.
Q.17. Achievement factor of motivating an individual is the contribution of which
theory and what another factor was considered along with it?
(1) Maslow’s theory and supervision factor
(2) Alderfer’s theory and recognition factor
(3) Vroom’s theory and responsibility factor
(4) Herzberg’s theory and advancement factor
(5) Equity theory and salary factor
Answer key: 4
Solution:
• Achievement factor of motivation definitely overrules salary as a motivation factor,
and though Maslow’s theory does have achievement in the esteem needs,
supervision is not the associated factor there as supervision has to do more with
power and not necessarily achievement.
• Alderfer’s theory focusses on Maslow’s theory itself – existence, relatedness and
growth, again growth may be related to achievement, but it focusses on more
intrinsic desire of development.You can also read
