The existence/establishment of formal financial institutions that offer safe, reliable and alternative financial instruments is fundamental in mobilising 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, smoothen 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 mobilise their savings. 2) Poor households tend to spend their earnings/savings due to lack of access to appropriate financial instruments. Which of the statements given above is/are correct?

The correct answer is B because only statement 2 is supported by the passage. Analysis of Statement 1: "Indian financial institutions do not offer any financial instruments to rural households to mobilise their savings." This statement is incorrect. The passage states that "Such access is not always available to all people in developing countries like India and more so, in rural areas." This implies that access is limited or not universal, but it does not mean that financial institutions offer *no* instruments at all. Many banks, post offices, and microfinance institutions do offer various financial instruments (like savings accounts) in rural areas, even if access remains a challenge for a significant portion of the population. The word "any" makes this statement too absolute and false. Analysis of Statement 2: "Poor households tend to spend their earnings/savings due to lack of access to appropriate financial instruments." This statement is correct and directly supported by the passage. The passage explicitly states, "Poor households without access to a formal savings mechanism encourage immediate spending temptations." Lack of access to appropriate financial instruments is a key component of not having a formal savings mechanism, and "immediate spending temptations" aligns with the idea that they "tend to spend their earnings/savings."