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Passage Financial markets in India have acquired greater depth and liquidity over the years, Steady reforms since 1991 have led to growing linkage ad integration of the Indian economy and its financial system with the global economy, and weak global economic financial markets therefore, have had their impact on the emerging market economies. Sovereign risk concerns, particularly in the Euro area, affected financial markets for the greater part of the year, with the contagion of Greece’s sovereign debt problem spreading to India and other economies by way of higher-than-normal levels of volatility. The funding constraints in international financial markets could impact both the availability and cost of foreign funding for banks and corporates. Since the India financial system is bank dominated, bank’s ability to withstand stress is critical to overall financial stability. Indian banks, however, remain robust, notwithstanding a decline in capital to risk-weighted assets ratio and a rise in non-performing asset levels in the recent past. Capital adequacy levels remain above the regulatory requirements. The financial market infrastructure continues to function without any major disruption. With further globalization, consolidation, deregulation and diversification of the financial system, the banking business may become more complex and riskier. Issues like risk and liquidity management and enhancing skill therefore assume greater significance.

1. According to the passage, the financial markets in the emerging market economies including India had the adverse impact in recent years due to
1. weak global economic prospects
2. uncertainties in the international financial markets.
3. sovereign risk concerns in the Euro area.
4. bad monsoons and the resultant crop loss.
Select the correct answer using the codes given below:
a) 1 and 2 only
b) 1, 2 and 3
c) 2 and 3 only
d) 2, 3 and 4 only

2. The Indian financial markets are affected by global changes mainly due to the
a) increased inflow of remittances from abroad.
b) enormous Increase in the foreign exchange reserves.
c) Growing global linkages and integration of the Indian financial markets.
d) Contagion of Greece’s sovereign debt problem.

3. According to the passage, in the Indian financial system, banks’ ability to withstand stress is critical to ensure overall financial stability because Indian financial system is
a) controlled by the Government of India.
b) less integrated with banks.
c) controlled by Reserve Bank of India.
d) dominated by banks.

4. Risk and liquidity management assumes more importance in the Indian banking system in future due to
1. further globalization.
2. more consolidation and deregulation of the financial system.
3. further diversification of the financial system.
4. more financial inclusion In the economy
Select the correct answer using the code given below:
a) 1, 2 and 3
b) 2, 3 and 4
c) 1 and 2 only
d) 3 and 4 only






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