RBI Grade 'B' Officer Mains (Phase II) Exam - 2008
English Paper 1
Write an argumentative essay of about 500 words on any one of the
- What went wrong in Singur?
- The Role of Media in a Crisis.
- The Nuclear Deal.
- The Future of Peace in India.
- Can we host the Olympics?
Make a precis of the following passage in your own words,
reducing it to about 250 words, and give it a suitable title. Use the special
sheet provided for the purpose:
Look beyond the stock markets, especially at the seized-up
money markets, and there is little to see except bank failures, emergency
rescues and high anxiety in the credit markets. These forces are drawing the
financial system closer to disaster and the rich world to the edge of a nasty
The crisis is spreading in two directions across the Atlantic
to Europe, and out of the financial markets into the real economy. Governments
have been dealing with it disaster by disaster. They have struggled to gain
control not just because of the speed of contagion but also because
policymakers, and the public they serve have failed fully to grasp the breadth
and depth of the crisis.
Western Europe is not the limit of this the panic has also
struck banks in Hong Kong, Russia and now India. And it is not just the
geographical breadth of this crisis that is alarming, but also its economic
depth. Because it is rooted in the money markets, it will feed through to
businesses and households in every economy it hits.
Most of the time nobody notices the credit flowing through
the lungs of the economy, any more than people notice the air they breathe. But
everyone knows when credit stops circulating freely through markets to banks,
businesses and consumers. For almost a year the markets had worried about banks'
liquidity and solvency. After the bankruptcy of Lehman Brothers last month, amid
confusion about whom the state would save and on what terms, they panicked. The
markets for three-, six-and twelve-month paper are shut, so banks must borrow
even more money overnight than usual. Banks used to borrow from each other at
about 0.08 percentage points above official rates; on September 30th they paid
more than four percentage points more. In one auction to get dollar funds
overnight from the European Central Bank, banks were prepared to pay interest of
11% five times the pre-crisis rate. Astonishingly, rates scaled these extremes
even as the Federal Reserve promised $620 billion of extra funding. Bankers have
always earned their crust by committing money for long periods and financing
that with short-term deposits and borrowing. Today, that model has warped into
self-parody: many of the banks' assets are unsellable even as they have to
return to the market each day to ask for lenders to vote on their survival. No
wonder they are hoarding cash.
This is why those politicians who set the interests of Main
Street against those of Wall Street are so wrong. Sooner or later the money
markets affect every business. Companies face higher interest charges and the
fear that they may one day lose access to bank loans altogether. So they, too,
hoard cash, cancelling acquisitions and investments, in order to pay down debt.
Managers delay new products, leave factories unbuilt, pull the plug on
loss-making divisions, and cut costs and jobs. Carmakers and other manufacturers
will no longer extend credit and loans will become elusive and expensive.
Consumers will suffer. Unemployment will rise. Even if the credit markets work
well, the rich economies will slow as the asset-price bubble pops. If credit is
choked off, that slowdown could turn into a deep recession.
investments, in order to pay down debt. Managers delay new
products, leave factories unbuilt, pull the plug on loss-making divisions, and
cut costs and jobs. Carmakers and other manufacturers will no longer extend
credit and loans will become elusive and expensive. Consumers will suffer.
Unemployment will rise. Even if the credit markets work well, the rich economies
will slow as the asset-price bubble pops. If credit is choked off, that slowdown
could turn into a deep recession.
Governments need not just to communicate, but also to
co-ordinate. Past banking crises show that late, piecemeal rescues cost more and
work less well. Ad hoc mergers work for a while, but demands for help tend to
recur. Inconsistency sows uncertainty. Cross-border banking can make one
country's policies awkward for the neighbours : the Irish Government's guarantee
of all deposits threatens to suck in money from poorly protected British banks.
France’s suggestion on October 1st that Europe's governments should work
together was a good one; Germany's rejection of it was wrong. Central banks have
coordinated their liquidity operations. Now that oil prices have plunged and
worries about inflation are receding, interest-rate cuts are possible. They
would be more powerful if coordinated. But it is not only central banks that
need to combine, Whatever America's. Congress does, governments should work
together on principles to stabilize and recapitalize banks not just to stem
panic but also to save money. Even if, as the Europeans claim, the crisis was
made in America, it now belongs to everyone.
Answer the following questions on the passage, briefly and
in your own words:-10
What are the forces affecting the financial system?
How are the governments coping?
To what does the writer compare the flow of credit?
Examine the role of governments in the financial markets.
List a few problems faced by the banks.
Explain clearly the contextual meaning of any three of the
following expressions in the passage:-6
To gain control
Pull the plug
Attempt any one of the following in about 250 words:-20m
On behalf of the employees of your bank, draft a
representation to the management asking for improvements in infrastructure
for bettor work performance.
Draft a proposal to disburse funds and relief material to
the flood hit victims of Bihar
Imagine yourself to be the Governor of the Reserve Bank.
What measures would you adopt in the present financial crisis?