Cause–Effect reasoning: Identify the relationship between Statement I and Statement II. S1: The Reserve Bank of India has recently imposed restrictions on a few small banks. S2: Small private and co-operative banks are not in a position to withstand competition from bigger public sector banks. Choose the correct cause–effect option.
Verbal Reasoning
Cause and Effect
Difficulty: Medium
Choose an option
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AStatement I is the cause and Statement II is its effect.
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BStatement II is the cause and Statement I is its effect.
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CBoth statements I and II are independent causes.
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DBoth statements I and II are effects of independent causes.
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EBoth statements I and II are effects of a common cause.
Answer
Correct Answer: Statement II is the cause and Statement I is its effect.
Explanation
Given data
- S1: RBI restrictions on some small banks.
- S2: Structural weakness/competitiveness issues of small banks vs public sector banks.
Concept / Approach Regulatory restrictions are typically reactive to prudential concerns—capital adequacy, liquidity stress, or competitiveness/viability issues. Hence S2 provides a plausible rationale for S1.
Option check B: Bank fragility (S2) ⇒ supervisory restrictions (S1). ✔ A/C/D/E: Do not fit the supervisory–risk sequence described.
Final Answer Statement II is the cause and Statement I is its effect.