Question

Read the following statements – Assertion (A) and Reason (R). Choose the correct alternative from the options given below :
Assertion (A) : Under the financial sector reforms introduced in 1991, foreign investment limit in banks was raised up to around 74%.
Reason (R) : Foreign Institutional Investors (FIIs) were allowed to invest in Indian financial markets, post-1991.

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
• C. Assertion (A) is true, but Reason (R) is false.
• D. Assertion (A) is false, but Reason (R) is true.

Hint:

Financial reforms in India aimed at increasing foreign investments, improving market transparency, and liberalizing the economy.

Answer 1

The Correct Option is B

Assertion (A) is established as true; foreign investment caps in Indian banks were raised to 74% as part of the 1991 financial reforms.
Reason (R) is also factually correct, with Foreign Institutional Investors (FIIs) gaining permission to invest in Indian financial markets after 1991. Nevertheless, Reason (R) does not provide a direct causal link to Assertion (A), as the reforms involved a wider spectrum of financial liberalization beyond solely foreign investment.