UPSC Prelims 2018 · Question 96 of 99

UPSC Prelims 2018 question on SBI Associate Banks Merger

With reference to the governance of public sector banking in India, consider the following statements:

1. Capital infusion into public sector banks by the Government of India has steadily increased in the last decade.

2. To put the public sector banks in order, the merger of associate banks with the parent State Bank of India has been affected.

Which of the statements given above is/are correct?

  1. 1 only
  2. 2 only
  3. Both 1 and 2
  4. Neither 1 nor 2
Show answer

Answer: B. 2 only

Verdict

Only statement 2 is correct, so the answer is (b) 2 only.

Statement by statement

Statement 1 is INCORRECT. Capital infusion into public sector banks by the Government of India has not steadily increased over the last decade. Infusion has varied with the fiscal position and the recapitalisation packages of particular years rather than following a steady upward path.

Statement 2 is CORRECT. The merger of the associate banks with the State Bank of India, effected under Section 35 of the State Bank of India Act, 1955, was intended to create a stronger merged entity, minimise vulnerability to the geographic concentration risks faced by subsidiary banks, deliver operational efficiency and economies of scale, and improve risk management and unified treasury operations.

Source

PIB release on the merger of associate banks with SBI; Indian Express ten year review of public sector bank equity returns.

How to crack it

The word steadily is doing the work in statement 1, and it is a much stronger claim than merely increased. A steady rise means a rise in every period, which fiscal transfers almost never show. Whenever a statement about government spending or infusion uses steadily, consistently or continuously, treat it as a claim about the shape of the series and not just its direction.

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