Since the last one year, after a 125 basis point reduction in repo rate by the Reserve Bank of India, banking institutions have been making a demand to reduce interest rates on small saving schemes. Finally, the government announced yesterday a reduction in interest rates on small saving schemes to bring them on par with fixed deposit interest rates. Which one of the following statements can be inferred from the given passage? A. Whenever the Reserve Bank reduces the repo rate, the interest rates on small saving schemes are also reduced. B. Interest rates on small saving schemes are always maintained on par with fixed deposit interest rates. C. The government sometimes takes into consideration the demands of banking institutions before reducing the interest rates on small saving schemes. D. A reduction in interest rates on small saving schemes follows only after a reduction in repo rate by the Reserve Bank of India.

GATE 2019 · General Aptitude · Verbal Reasoning · medium

Answer: Option C is the only valid inference: the government sometimes takes banking institution demands into consideration. Answer: C.

  1. Test option A: Whenever RBI reduces repo rate, small saving rates are also reduced: The passage gives one instance. 'Whenever' implies every time. A single case cannot establish a universal rule. Option A is NOT a valid inference.
  2. Test option B: Interest rates on small saving schemes are always on par with fixed deposit rates: The passage says the government reduced rates 'to bring them on par' — implying they were NOT on par before this action. 'Always' is contradicted by the passage itself. Option B is NOT valid.
  3. Test option C: Government sometimes considers banking institution demands: The passage clearly shows: banks demanded a cut, and the government then reduced rates. This one documented instance is enough to support 'sometimes'. Option C is a VALID inference.
  4. Test option D: Small saving rate reduction follows ONLY after RBI repo rate cut: 'Only after' is an exclusive condition. The passage only describes one scenario where repo rate was cut first. We cannot conclude that a repo cut is the only trigger for small saving rate cuts. Option D is NOT a valid inference.