QUIZ – 2020: INSIGHTS STATIC , 1 July 2021 – Economy – INSIGHTSIAS

Solution: d)

A recession is a period of decline in general economic activity, typically defined when an economy experiences a decrease in its gross domestic product for two consecutive quarters.

Major traits of recession may be summed up as follows:

(i) there is a general fall in demand as economic activities takes a downturn;

(ii) inflation remains lower or/and shows further signs of falling down;

(iii) employment rate falls/unemployment rate grows;

(iv) Industries resort to ‘price cuts’ to sustain their business.

Solution: c)

The eight Core Industries in decreasing order of their weightage: Refinery Products> Electricity> Steel> Coal> Crude Oil> Natural Gas> Cement> Fertilizers.

Solution: a)

Capital adequacy ratio:

What this is: It is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities.
What it means: This is a measure of a bank’s ability to meet its obligations. A high CAR means the bank can absorb losses without diluting capital.

Solution: c)

Net interest margin

What this is: This is the difference between interest earned by a bank on loans and the interest it pays on deposits.
What it means: NIM will be high for banks with higher low-cost deposits or high lending rates. Low NIM and high NPA is a bad combination.

Solution: c)

Wilful default broadly covered the following:

1. a) Deliberate non-payment of the dues despite adequate cash flow and good networth;
2. b) Siphoning off of funds to the detriment of the defaulting unit;
3. c) Assets financed either not been purchased or been sold and proceeds have been misutilised;
4. d) Misrepresentation / falsification of records;
5. e) Disposal / removal of securities without bank’s knowledge;
6. f) Fraudulent transactions by the borrower.