UPSC Prelims 2019 CSAT Paper II · Q47 of 79 Comprehension medium

Passage

Passage – 6 India has banking correspondents, who help bring people in the hinterland into the banking fold. For them to succeed, banks cannot crimp on costs. They also cannot afford to ignore investing in financial education and literacy. Banking correspondents are way too small to be viewed as a systemic risk. Yet India's banking regulator has restricted them to serving only one bank, perhaps to prevent arbitrage. Efforts at banking outreach may succeed only if there are better incentives at work for such last-mile workers and also those providers who ensure not just basic bank accounts but also products such as accident and life insurance and micro pension schemes.

Which one of the following is the most logical, rational and crucial inference that can be derived from the above passage ?

  1. (a) Efforts to bring people in India's hinterland into the banking system are not successful.
  2. (b) For meaningful financial inclusion, India's banking system needs more number of banking correspondents and other such last-mile workers.
  3. (c) Meaningful financial inclusion in India requires that banking correspondents have diverse skills. ✓ UPSC's answer
  4. (d) Better banking outreach would be impossible unless each banking correspondent is allowed to serve a number of banks.

Why the answer is (c)

• The passage states that banking correspondents (BCs) must not ignore investing in financial education and literacy to succeed in bringing hinterland people into the banking fold.

• It further notes that outreach succeeds only if providers ensure not just basic accounts but also complex products like accident/life insurance and micro pension schemes.

• Handling these diverse products and providing financial education implies that BCs must possess a wide range of competencies beyond basic transaction processing.

• Therefore, the crucial inference is that meaningful financial inclusion requires BCs to have diverse skills to manage these varied services and educational responsibilities.

• This aligns with option (c), as the text emphasizes the multifaceted nature of the BC's role in achieving successful outreach.

Why the other options are wrong

(a) Efforts to bring people in India's hinterland into the banking system are not successful.
The passage discusses conditions for success and does not state that current efforts are unsuccessful.
(b) For meaningful financial inclusion, India's banking system needs more number of banking…
The passage focuses on the quality of incentives and skills, not on increasing the quantity of banking correspondents.
(d) Better banking outreach would be impossible unless each banking correspondent is allowed…
The passage mentions the restriction to one bank as a regulatory measure but does not infer that serving multiple banks is a necessary condition for successful outreach.

Asked in the CSAT Paper II of the UPSC Civil Services Preliminary Examination 2019, held on 2 June 2019. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.

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