AIM

SIDBI Grade - A 2023 – Phase 1

Maximum marks (50) Time (60 mins.)

Instructions-
1) All questions are compulsory.
2) Figures to the right indicate maximum marks to each question.
3) Answers must be written only in English.
4) Marks will be deducted if word limit is not observed.
5) No copies shall be entertained after the last date of submission.

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Q.1 Write an Essay of about 200 words on any one of the following topics: - (20 Marks)
1. E-Commerce: Market Trend of the 21st Century.

Even today, some considerable time after the so called ‘Internet revolution’, Electronic
Commerce (E-Commerce) remains a relatively new, emerging and constantly changing
area of business management and information technology. It has revolutionized the way
companies do business. Consumers can buy almost anything online 24 hours a day.

In the 21st century, the rapid development of information technology and the rapid
increase in information exchange have brought new drives and innovative ideas to the
whole society. The wide adoption of information technology by the community has led to
great changes. The great development and acceptance of information technology,
computer network and Internet have transformed the mode of operation of many
businesses, and at the same time have brought along unprecedented business
opportunities. E-Commerce has become the market trend of the Century.

E-Commerce business is far less than expanding your business with more brick and
mortar locations. Fewer licenses and permits are required to start an online business
than that of a physical store location. You will also save money by using fewer employees
to perform operations such as managing inventory and billing customers. You won’t have
to search for an appropriate geographic location or worry about paying high utility costs
for the facility.

Then there is the issue of inability to feel the product physically or check it with your own
hands while buying. When making a purchase at a brick and mortar business, you get the
product when you pay for it. On the web, there may be a time lag from purchase to
actually being able to consume. The consumer will have to wait for delivery of physical
goods. Most of the disadvantages of electronic commerce today, however, stem from the
newness and rapidly developing pace of the underlying technologies. These
disadvantages will disappear as electronic commerce matures and becomes more
available to and accepted by the general population.

Not only the new generation, but also the older generation is getting a hold of
technology. They are adapting to the changing technologies and try to be up-to-date.
Therefore, E-Commerce is also making its way into their lives. It is true that going to
markets or malls to shop will never go out of fashion but E-Commerce is also here to stay
and become more and more popular as people realize its advantages and get
comfortable with it.

2. Young India: a boon or bane?

India, like many South Asian countries, has a young population. This is at once an
opportunity for future economic growth, but it presents policymakers with the challenge
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of creating employment. According to the World Bank, the projected increase in South
Asia’s working-age population during 2020-2050 is some 254.m accounting for 30.6% of
the increase worldwide. India alone will account for 16.5% of the increase. Meanwhile
China’s working-age population will decline over the same period by some 226m with
falls in most parts of the developed world.

Clearly generating new jobs in India and the rest of South Asia is critical for economic
growth and development, not just within the region but globally. But unemployment in
India has increased in recent years, leading to protests by the youth in many parts of the
country. Alongside the expansion of labour supply, increasing enrolment in education
and a growing exodus of young people from agriculture are swelling the jobless ranks. Of
all 15-29-year-old females in India, only 16.3% were attending schools or colleges in
2005. This proportion increased to 31.0% by 2018.

Until it was hit by the Covid-induced crisis, India’s economy was growing at relatively fast
rates. However, in 2020, the first year after the Covid-19 outbreak, India’s GDP growth
fell to negative rates (-7.3%), leaving millions of its informal sector workers without any
source of income. At the root of India’s employment crisis is stunted job creation in the
manufacturing sector. The size of the manufacturing workforce in India fell from 61.3m in
2012 to 58.6m in 2018. It rose marginally to 59.8 million in 2020. Most of the job losses
after 2012 occurred in micro and small industries.

Of India’s total workforce of 471.0 million, only 12.3% are regular workers who receive
some form of social security and are covered, at least partially, by laws that protect
labour rights. The rest are mostly casual workers or petty producers surviving under
various degrees of informality. One of the moving images of India’s national lockdown in
March 2020 during the Covid-19 outbreak was of thousands of poor migrant workers
walking hundreds of kilometers to return to their villages.

The rising numbers of the young in India as well as in other South Asian countries offer a
potential new source of demand that could revitalise the global economy. However,
translating this potential requires policies that help raise the incomes of poor workers.
These are policies that very often run counter to mainstream economics. Clearly,
significant change at policy level is needed if India is to capitalise on the advantages its
youthful population offers.

3. Why Is Rupee Falling And How Will It Impact The Indian Economy And People?

The Indian rupee has been on a downward spiral for the last few days and on
Wednesday, it hit a record low of 81 against the US dollar. This has sparked a debate

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among analysts about whether the domestic currency could see further decline amid
weak fundamentals.

The rupee is down nearly 6 per cent since January this year. Now, this is a double
whammy for the common man with the country reeling under high inflation and the
prices of everyday items drastically going up.

Union Finance Minister Nirmala Sitharaman, however, recently said that the Indian
currency is relatively better placed than other global currencies against the greenback.

The value of the Indian rupee to the US Dollar works on a demand and supply basis. If
there is a higher demand for the US Dollar, the value of the Indian rupee depreciates and
vice-versa.

If a country imports more than it exports, then the demand for the dollar will be higher
than the supply and the domestic currency like Rupee in India will depreciate against the
dollar.

The rupee's fall these days is mainly due to high crude oil prices, a strong dollar overseas,
and foreign capital outflows.

The rupee has been on the decline since early this year, especially after supply chain
disruptions in view of the Russia-Ukraine war, global economic challenges, inflation, and
high crude oil prices, among other issues.

Besides, there have been heavy foreign fund outflows from the domestic markets as the
foreign institutional investors (FIIs) have sold shares worth $28.4 billion so far this year,
outstripping the $11.8-billion sell-off seen during the Global Financial Crisis of 2008. The
rupee has depreciated 5.9 per cent versus the dollar so far this calendar year.

As money flows out of India, the rupee-dollar exchange rate gets impacted, depreciating
the rupee. Such depreciation puts considerable pressure on the already high import
prices of crude and raw materials, paving the path for higher imported inflation and
production costs besides higher retail inflation.

Meanwhile, the US Federal Reserve recently increased the interest rates, and the return
on dollar assets increased compared with those of emerging markets such as India.

Speculations are there could be more aggressive rate hikes by the US Fed and that may
further dent the Indian currency.

Since India mostly depends on imports, including crude oil, metals, electronics, etc. the
country makes payments in US dollars. Now if the rupee is weak, it has to pay more for
the same quantity of items. In such cases, the cost of raw materials and production goes
up which gets passed on to the consumers.

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On the other hand, a weakening domestic currency boosts exports as shipments get
more competitive and foreign buyers gain more purchasing power. However, in the
current scenario of weak global demand and persistent volatility, exporters are not
supportive of the currency fall.

The falling rupee's biggest impact is on inflation, given India imports over 80 per cent of
its crude oil, which is the country's biggest import. The global crude prices have sustained
at over $100 a barrel since Russia's invasion of Ukraine in February this year. High oil
prices and a weaker rupee will only add to inflationary pressures in the economy.

4. NPAs: their causes and impacts.

Non-performing assets (NPAs) are categorised as the loans that are in risk of default. A
loan is considered as a non-performing asset once the borrower fails to make interest or
principal payments for 90 days.

In general terms, NPAs are assets/projects that are unable to generate cash flow in the
period and to the extent originally expected. By translation alone, banks may not be able
to timely recover the entire amount lent and hence, set aside certain amount for a
known liability in future. However, in reality, the factors causing rise in NPAs are wrong
assumptions/inefficiencies, genuine reasons and violation of law.

CAUSES OF RISING NPAs

In reality, factors that cause rise in NPAs are wrong assumptions/inefficiencies, genuine
reasons and violation of law. These could be classified as external and internal
environment.

The causes in the external environment category are global slowdown, drop in domestic
demand, setback in policy and disputed contracts.

The factors causing NPA rise under the internal environment category are as follows:

• Banking sector: Poor credit appraisal; weak risk management; governance deficit,
all debt-no equity; chasing quick growth; power-faulty FSAs, infra financing particularly
highways—‘gold plated’ contracts; pass through arrangement, termination payments;
pretend and extend.

• Beyond corporate universe: Small/medium enterprises—lack of timely support and

delayed payments; Kisan Credit Card and agriculture distress vis-a-vis crop insurance.

• Corporate India: High leverage; complex web-holding company; overseas

acquisitions; step down entities; unhedged exposures; siphoning, diversion and so on.

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• Value sale versus distress sale: Minsky’s Financial Instability Hypothesis—three
types of borrowers (Hedge, Speculative and Ponzi).

EFFECTS OF RISING NPAs

• A major chunk of NPA is formed by the public sector banks, which provide around
80 per cent of the credit to various industries. Last year, SBI provided a huge amount of
loan to Kingfisher, which was marred in financial crisis, but it is unable to recover from it.

• The falling of any Indian industry into crisis is bound to impact the banking sector
causing their NPA to rise.

• Not only PSBs but the economic policy of the government and the politician-
corporate nexus are behind the rise in NPAs of banking industry.

• The consistent rise of NPAs in the present scenario as in case of Kotak Mahindra or
Union Bank will lead to closing of bank, thus, creating a serious economic crisis in the
nation.

• One of the critical factors behind the rising NPA is relaxed lending norms,
especially for corporate chiefs. Often, a proper analysis of their financial status and credit
rating is not carried out. Moreover, in the face of competition, banks are resorting to
hugely selling unsecured loans that causes a rise in the level of NPAs.

• Global economy can cause a very minor impact on banking sector. The policies of
RBI and government can, however, improve the situation.

• There is a need to keep the NPAs in check otherwise a bank may go bankrupt. This
would result in the dismantling of entire credit distribution structure of the economy
causing a major financial turmoil in the country.

• When the financial crisis hit the United States, it was because of the lenient
lending norms and due to huge number of loan defaulters in banks. The US economy
went into panic when big banks filed for bankruptcy. Thus, NPA problem should be
seriously taken.

Q.2 Write an Essay of about 200 words on any one of the following topics: - (20 Marks)

1. Sustained Economic Development: role of Ecology and Environment

Today, economy of a country holds great significance, especially when every country is
endeavouring hard in its efforts to take the lead for its survival and emergence as a
supreme power. The development of any country is associated with its overall economic
development. The country need to assign priority to the things associated with the

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upliftment of economy in order to match the pace of the world. The market value, shares
and dividends are preferable to the priceless emotions, affection and love. Many
ecological and environmental factors are responsible for such an economic development.

The ecological and environmental resources available in a country yield the per capita
income that provide the impetus to thrust its economy forward. All the biotic and non-
biotic things of any community or country taken combined comes under the wide sectors
of ecology and environment. Both the terms ‘ecology’ and ‘environment’ has a very thin
line separating them and coincide their inference at many inferences. We briefly examine
what constitutes ecology and the environment, which has a deep- rooted impact on the
economic growth.

Ecology: The interaction between the biotic and abiotic community amongst themselves
and to their surroundings is called ecology, thereby giving an entirety called ecosystem.
Ecology comprises various forms of life and species, their utilisation in the environmental
affairs, effects on the atmosphere and every possible aspect that can be collated to
express a sound interaction. For the existence and survival of species, the ecological
aspect of life holds utmost significance.

Environment: Environment similar to ecology deals with the existence of various

resources, its utilisation by the living species and their impact. Environment, which is
more of an abstract term, is better explainable by the words like atmosphere or
surroundings in physical world; or situation or circumstances, in terms of vitality. It is the
space, the void which enables the life providing them a comfortable atmosphere to
reside.

Being acquainted with a brief account of environment, we now elaborate on the core
issue, the role of ecology and environment in economic development.

In conclusion, we may compare the economic development with an open sword, which
calls for a tentative management in order to protect the available resources. Economic
development provide opportunities that appear lucrative always, but a reasonable mind
should be able to evaluate and examine the positives and negatives associated with the
measure taken. A prudent approach would be to make a steady economic growth,
preserving our ecological and environmental resources, which will always render us with
their goodness.

2. Global Warming: an alarming situation.

Our planet Earth has a freezing temperature & life without Sun is not possible here. Sun
rays are absorbed by land & ocean and some of them are reflected back to the
atmosphere which are in turn absorbed by the Green House Gases (GHGs) thereby
providing an ambient habitat. However, as the Human became greedy, the amount of

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these GHGs increased to very high levels in the atmosphere thereby trapping more heat.
This lead to abnormal increase in earth's temperature which is called as "Global
Warming".

Human race has always been towards advancement. Past decades have seen
industrialization growth which releases effluents in water reservoir thereby polluting it.
Advancement of human kind resulted in deforestation, mass transportation, excessive
burning of fossil fuels to generate energy. All this released immense amount of Carbon
Dioxide (CO2) and methane gases which are the GHGs. Natural disasters occurance has
increased such as rapid floods, cyclones and earthquake, etc. Also, due to this increased
temperature of the globe, the glaciers are melting thereby furthering the temperature
rise.

Global warming has now being considered as a topic of concern at national as well as
international levels. Various initiatives have been taken such as shifting to renewable
source of energy such as hydro, wind, and solar energy. Paris agreement was adopted in
2015 at the Conference of Parties (COP). At the recent COP26 held at Glasgow, UK, the
Indian Prime Minister Sh. Narendra Modi announced India's vision to attain Net Zero
Carbon emission by the year 2070 as a revolutionary step. Accordingly, several initiatives
were announced such as Lifestyle for Environment (LIFE) Movement and One Sun-One
World-One Grid (OSOWOG), etc. In line with this vision of the nation, hundreds of
thousands of missions are being taken at various levels in the nation.

In India the nature is considered as mother and therefore it's the sole duty of its national
to preserve & conserve the nature to bring prosperity now & to the future generations.
The government shall continue making efforts to achieve its goal of becoming carbon
neutral and reduce the global warming thereby preserving our future generations from
the menace it brings.

3. Brain Drain - A Need for Reversal

Brain drain is a global phenomenon that refers to flow of human resource in bulk from
one country to another. With the beginning of globalisation, ideas, opinions, skills in the
form of labour started being exchanged between nations. This is primarily due to the
fact that developing countries like India have failed utterly in providing the right kind
of opportunities to its youth.

This, in turn, is leading to a great loss of national wealth. In the past few decades, a lot of
Indian professionals too migrated to other countries. The human capital in terms of skills,
ideas, labour and intelligence is being transferred to countries abroad from India since
ages. This has become a characteristic more of the intelligentsia of the nation—the
doctors, engineers, scientists, MBA’s, CA’s, lawyers and other professionals.

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The facilities, packages, scholarships etc., provided by these nations are far better than
what India can provide them. While this is the case of young students/ professionals, the
academically well qualified people prefer going abroad for a higher research because
they don’t get the best chances, resources and facilities for research in India.

As many as 12% scientists and 38% doctors in the US are Indians, and in NASA, 36% or
almost 4 out of 10 scientists are Indians. Awakening to this fact, Indian Government is
putting the best foot forward to curb brain drain. In lieu with consistent economic
growth, India will see robust hiring and there is an expected double-digit salary increase
across all sectors—IT, manufacturing, finance, insurance and real estate.

Both, government and private firms are aiming towards a better and friendlier
atmosphere to create better conditions for their employees. Discrimination and bias at
work places are checked by making laws and strictly implementing them.

We can use the best potential of the country to accelerate our own progress in socio-
economic fields. We need to give deserving jobs to students, who return to India after
completing their education.

4. Draining Natural resources.

As human's population is dramatically rising every year, people's requirements are

increasing too. We need more food, more fresh water, more places to live. As a result of
this many parts of the world are losing essential and sometimes irreplaceable resources,
such as forest, animals, or fresh water. In this essay I will focus on the threat of
disappearing many wild animals.

The reason why I think that animals should be preserved is that all living creatures on this
planet are connected with each other. So, the disappearance of only one species can
cause dramatic changes in the planet and even death of many other living creatures. For
example, the disappearance of bats will cause the huge increasing of insect population
and this will reflect on all animals and plants. Another example is that if the population of
bats increases, the population of insects will decrease significantly, and this will cause the
disappearance of many plants because insects are the main pollinators. So, I think it is
very important to preserve all species on our planet and live in harmony with our
environment

Another important reason why I think that animals should be saved is that I, personally,
do not want my child to learn about different animals from books and not be able to see
them alive. I think it is shameful for humankind to explain our children that we are the
reason why those animals disappeared.

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In conclusion, I would like to say that the issue about losing important natural resources
is topical and open for debate nowadays. I believe that together people can make a
difference. From my point of view, the first problem we should find a solution for is
human's overpopulation. As I mentioned above people's demands are growing and this
means we consume more and more natural resources. The second question, which is on
the list of most important issues, is pollution including the air pollution, water pollution,
etc.

Q.3 Write a letter in about 150 words on the topic give below. - (10 Marks)

1. Write a letter as a Branch manager of a bank to an NPA asking for Loan repayment
invoking contractual obligations. (Formal Letter)

The Branch Manager,

Axis Bank,

Mumbai – 400020.

16th October 2022.

To,

Mr. Rohit Verma,

ABC Housing Solutions Ltd.,

Mumbai – 400087.

Subject: Repayment of loan overdue of Account number – 1050xxxx8235.

Dear Sir,

With reference to the above loan, we are writing this letter to inform you about the
pending loan repayment and invocation of contractual obligations as the account has
turned into an NPA i.e. Non-Performing Asset.

Our Bank had disbursed Rs. 1 crore loan to your organization on 1st April 2020. The terms
and conditions of the Loan agreement had a fixed repayment schedule which was
scheduled on 01st July 2022. We had sent reminders to your department for the
repayment but there was no repayment transaction. As 90 days has passed on 30th
September 2022, the loan account became an NPA. As of date, as per the loan
agreement, we are bound to invoke guarantee obligations as per the loan agreement. We
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request the loan repayment to be executed at the earliest. Otherwise, we would have no
other option to move the matter to the Company Law Tribunal.

We expect immediate recovery of the dues to avoid further escalation of the matter.

Thanking you,

Avinash,

Branch Manager.

Office Tel: 022-25638234.

2. Write a letter of resignation to your employer. (Formal Letter).

#363, Pashchim Vihar,

New Delhi.

July 15, 2022

To,

The Manager,

Smart Marketing Agency,

Madhya Marg,

New Delhi.

Subject – Letter of Resignation.

Dear Sir,

I would like to inform you that I am resigning from my position as Account Executive for
the Smart Marketing Agency, effective July 29, 2022.

Thank you very much for the opportunities for professional and personal development
that you have provided me during the last five years. I have enjoyed working for the
agency and appreciate the support provided me during my tenure with the company.

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If I can be of any help during this transition, please let me know.

Sincerely,

Keerat Kaur.

3. Write a letter to your friend to invite them for a summer vacation trip. (Informal
Letter)

13, Vaishali Nagar,

Near Old Post Office,

Jaipur-220022.

4th November, 2021

Dear Rajesh,

How are you buddy? I hope this letter finds you in good health. I am very happy to know
that our college has closed for summer vacation and a one and a half month vacation has
started so it is time to plan for the trip. Some of us planned to go to Himachal Pradesh as
we can’t bear the scorching heat of Rajasthan in the summer.

This will be a seven-day trip with a group of twenty friends. We have booked the bus,
also will pre book the hotel rooms because this is the peak season and we will not get
tickets easily; most of the hotels are already full. Shimla, Manali, Dalhousie and
Dharamshala should be covered in this trip. Trekking, rafting, skiing is the most common
attraction of Himachal.

I am so excited for this adventurous trip, and I am sure after reading you were also
planning to join us. I am waiting for your response. This will be an enjoyable experience
for you. Give wishes to your parents.

Your Friend,

Piyush Sharma.

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