If another global financial crisis happens in the near future, which of the following actions/policies are most likely to give some immunity to India? 1. Not depending on short-term foreign borrowings 2. Opening up to more foreign banks 3. Maintaining full capital account convertibility Select the correct answer using the code given below:

This past-question frames 'opening up to more foreign banks' alongside other policies as a possible source of 'immunity' to a global financial crisis, implying it is widely considered one of the policy levers to affect resilience.

A student could use this to justify investigating mechanisms by which foreign banks might provide immunity (e.g., diversification of funding, expertise) and then check external data on those mechanisms.

Describes the typical functions of foreign banks in India (trade finance, wholesale lending, treasury, investment banking), indicating the kinds of services and capital flows foreign banks bring into the domestic system.

One could extend this by mapping how these services change domestic exposure to global shocks (e.g., treasury/investment banking links to global markets) using basic facts about global bank linkages.

States that foreign private banks with sizeable presence are mandated to follow priority sector lending rules, showing foreign banks would also be constrained by domestic regulatory obligations.

A student could combine this with the notion that regulatory parity may limit foreign banks' ability to move capital freely during crises, affecting resilience assessments.

Notes India's relatively small banking balance-sheet-to-GDP and low domestic bank credit to private sector compared to peers, implying scope/need for greater banking capacity.

One can extend this by reasoning that increasing foreign bank presence could raise overall banking capacity and diversification, potentially affecting shock-absorption; then check external data on credit growth and crisis transmission.

Lists benefits of larger, consolidated banks (greater ability to support larger lending, compete with global banks), offering an example that scale and global integration can change resilience and competitive dynamics.

A student might analogize that foreign banks bring global scale/skills and thus could enhance depth/competition, then test with external evidence on whether such features helped or hurt countries in past global crises.

States a general rule: full capital account convertibility can destabilize an economy via massive capital flows and makes exchange rates more volatile; prerequisites (stable macro parameters, adequate reserves) are recommended before moving to full convertibility.

A student could combine this with facts about India's current reserves, fiscal and external balances to judge whether full convertibility would likely increase or reduce resilience in a crisis.

Lists specific risks of capital account convertibility: exposure to global vulnerabilities, sudden capital flight, speculative attacks and contagion (transmission of foreign crises).

One could map these risks against historical episodes (e.g., crises with sudden stops) and India's exposure to FPI and external debt to infer likely impacts on resilience.

Presents a direct exam-style question asking which policies (not depending on short-term foreign borrowings, opening to more foreign banks, maintaining full capital account convertibility) give 'some immunity' to India from a global crisis—implying full convertibility is a contested factor.

A student could treat this as pointing to alternative protective policies and compare their mechanisms with full convertibility to weigh relative effectiveness in a crisis.

Describes Liberalized Remittance Scheme as 'baby steps' toward dismantling capital controls and notes that 'ideally capital controls have no place in a liberalised economy'—gives a policy trajectory and normative claim about controls.

Combine this with empirical knowledge of how partial liberalization behaved in other economies during crises to assess whether further liberalization (full convertibility) would help or hurt resilience.

Notes recent episodes (pandemic, Russia–Ukraine, monetary tightening and flight of capital from emerging economies) that led to capital flight—illustrating that global shocks have led to capital outflows from emerging markets.

A student could use this pattern of past capital flight during shocks to infer that opening the capital account might increase susceptibility to similar future outflows, reducing resilience.