pyq/2015/csat/45

The existence/establishment of formal financial institutions that offer safe, reliable, and alternative financial instruments is fundamental in mobilizing savings. To save, individuals need access to safe and reliable financial institutions, such as banks, and to appropriate financial instruments and reasonable financial incentives. Such access is not always available to all people in developing countries like India and more so in rural areas. Savings help poor households manage volatility in cash flow, smooth consumption, and build working capital. Poor households without access to a formal savings mechanism encourage immediate spending temptations.

With reference to the above passage, consider the following statements:

1. Indian financial institutions do not offer any financial instruments to rural households to mobilize their savings.

2. Poor households tend to spend their earnings/savings due to a lack of access to appropriate financial instruments.

Which of the statements given above is/are correct?

(A) 1 only

(B) 2 only

(C) Both 1 and 2

(D) Neither 1 nor 2