Previous Year UPSC Questions

Explanation

Option (c) is correct: Special Drawing Rights (SDR) is considered artificial currency as it is not a physical currency but a reserve asset created by the International Monetary Fund (IMF). It serves as a unit of account for IMF member countries and is used for international transactions and reserve management. The value of SDR is determined based on a basket of five major currencies: US Dollar, Euro, Chinese Yuan, Japanese Yen, and British Pound. Options (a), (b) and (d) are incorrect: ADR (American Depository Receipts) and GDR (Global Depository Receipts) are not currencies but financial instruments used by companies to raise capital from foreign markets. ADRs are financial instruments that represent shares of a foreign company, but they are traded on U.S. stock exchanges (like NYSE or NASDAQ). They allow U.S. investors to invest in non-U.S. companies without dealing with foreign markets or currencies. Example: An Indian company like Infosys can issue ADRs to let American investors buy its shares in the U.S. GDRs are similar to ADRs but are traded on multiple international markets, such as the London or Luxembourg stock exchanges. They help companies raise capital from investors worldwide, not limited to the U.S. Example:

Reliance Industries might issue GDRs to attract investors from Europe, Asia, or other regions.

Explanation

The National Rehabilitation and Resettlement Policy (NRRP), 2007 was introduced to address displacement caused by land acquisition for development projects.

Statement 1 is Incorrect: The NRRP, 2007 covers not only people displaced due to land acquisition but also those affected by involuntary displacement due to other reasons, such as government projects, natural disasters, or conflicts.

Statement 2 is Incorrect: The NRRP, 2007 was formulated by the Ministry of Rural Development, not the Ministry of Social Justice and Empowerment.

Explanation

Acid rain occurs when certain pollutants in the atmosphere react with water vapor to form acids, which then fall to the ground as rain, snow, or fog. The pollutants responsible for acid rain are primarily oxides of nitrogen and oxides of sulfur.

Option 1 is incorrect: Hydrogen itself does not form acidic oxides under typical environmental conditions. The concept of oxides of hydrogen is not commonly associated with acid rain.

Option 2 is correct: Nitrogen oxides, such as nitrogen dioxide, combine with water vapor in the atmosphere to form nitric acid, which contributes to acid rain.

Option 3 is correct: Sulfur oxides, such as sulfur dioxide, react with water vapor to form sulfuric acid, which is another major contributor to acid rain.

Explanation

When carbon monoxide (CO) is inhaled, it binds to hemoglobin in red blood cells with a much stronger affinity than oxygen. Hemoglobin normally binds to oxygen to transport it throughout the body, but CO binds more tightly, forming carboxyhemoglobin. This reduces the ability of hemoglobin to carry oxygen effectively, leading to a decrease in oxygen supply to vital organs and tissues. Carbon monoxide (CO) has approximately 200-250 times more affinity for hemoglobin than oxygen, which means it competes with oxygen for binding sites on hemoglobin.

Explanation

Statutory Liquidity Ratio (SLR) refers to the minimum percentage of a commercial bank’s net demand and time liabilities (NDTL) that it must maintain in the form of liquid assets such as government securities (G-Secs), cash, or gold before offering credit to customers. Commercial banks are required by the Reserve Bank of India (RBI) to maintain this percentage to ensure liquidity and stability in the financial system. Since banks invest in government securities to meet their SLR requirements, it effectively becomes a source of credit to the government, as the government raises funds through the issuance of bonds and securities. Options (a), (b) and (c) are incorrect:

Cash Credit Ratio (CRR) is the percentage of NDTL that banks must keep with the RBI in cash. Unlike SLR, CRR does not directly help in providing credit to the government because it is meant to control liquidity in the economy and not to finance government debt. Debt Service Obligation (DSO) refers to the government’s or an entity’s obligation to repay debt, including principal and interest. It is a measure of a borrower’s ability to repay loans but is not a mechanism used by banks to provide credit to the government. Liquidity Adjustment Facility (LAF) is a tool used by the RBI to manage liquidity in the banking system through repo and reverse repo operations. It is not specifically meant for providing credit to the government but rather for controlling short-term liquidity in the economy.

Explanation

A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 that provides banking services without holding a banking license. It is regulated by the RBI under the RBI Act, 1934. It engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit fund business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. Difference Between NBFCs and Banks Feature NBFCs Banks Regulator RBI (Non-Banking Financial Companies Division) RBI (Banking Regulation Act) Accepts Demand Deposits (Savings & Current Accounts)? No Yes Part of Payment and Settlement System? No Yes Can Issue Cheques? No Yes Lending Activities? Yes Yes

Statement 1 is incorrect: NBFCs can engage in the acquisition of government securities. Many NBFCs invest in government securities as part of their portfolio management and liquidity management strategies. The RBI allows NBFCs to invest in government securities, subject to certain regulations.

Statement 2 is correct: NBFCs are not allowed to accept demand deposits. They can only accept fixed deposits (FDs) with specific regulatory approvals from the Reserve Bank of India (RBI).

Explanation

In financial terminology, a "bear" refers to an investor who anticipates that the price of a particular security or the overall market will decline. Acting on this belief, such investors may engage in strategies like short selling, where they sell securities they do not currently own with the intention of re-purchasing them later at a lower price, thereby securing a profit. Options (b), (c) and (d) are incorrect:

An investor who expects prices to rise is called a bull, not a bear. Bulls are optimistic about the market and buy securities with the expectation of selling them at higher prices in the future. A shareholder or bondholder is simply an investor who owns shares or bonds, regardless of their market outlook. A lender or bondholder is not necessarily a bear. A bear is specifically an investor with a pessimistic outlook on the market or a security.

Explanation

Maize is widely cultivated for the production of ethanol, which is used as a biofuel. Ethanol is derived from the fermentation of sugars and starches found in maize kernels. The United States and Brazil are among the largest producers of maize-based ethanol, which serves as a renewable energy source and an alternative to fossil fuels. Options (a), (c), and (d) are incorrect:

Jatropha is primarily cultivated for its seeds, which contain oil that can be converted into biodiesel. It is not used for ethanol production because it does not contain significant amounts of starch or sugars that can be fermented into ethanol. Pongamia (also known as Millettia pinnata) is an oilseed crop. Its seeds contain oil that are used popularly for biodiesel for biodiesel production, not ethanol. Sunflower is primarily grown for edible oil production, sunflower does not have the starch or sugar content necessary for ethanol production.

Explanation

In India, the interest rates on savings accounts were de-regulated by the Reserve Bank of India (RBI) in 2011. This deregulation allowed individual banks to set their own interest rates on savings deposits. At the time when question was asked they were fixed by RBI, which now stands deregulated.

Explanation

Insectivorous plants like Venus flytraps and pitcher plants grow in nitrogen-poor, acidic, or waterlogged soils. They capture and digest insects to obtain essential nutrients such as nitrogen and phosphorus which are scarce in their environment. This adaptation allows them to thrive in nutrient-deficient habitats where other plants struggle. Though they perform photosynthesis but their carnivorous behavior supplements their nutritional needs which enables them to survive in challenging conditions.