CCE (Continuous and Comprehensive Evaluation) the flagship project of CBSE has clearly outlined the significance of speaking and listening skills as part of co-scholastic areas of achievement by every learner and also stresses the clear integration of assessment of speaking and listening skills as a part of the curriculum transaction.

During this exchange, while assessing students' speaking - listening skills, mark/s would be deducted for the first speaker, as the question is framed incorrectly.

• A modal verb is not used appropriately. Modal verbs are auxiliary verbs (also called helping verbs) like can, will, could, shall, must, would, might, and should. Modal verbs add meaning to the main verb in a sentence by expressing possibility, ability, permission, or obligation.
• Can and may can both be used to ask for permission, although "may" is considered more formal. 
• Thus. instead of the modal verb 'can', the speaker should have used the modal verb 'may'.
• The correct sentence would be May I borrow your pencil, please?

• The Listening Comprehension section tests the student’s ability to listen for basic interpersonal, instructional, and academic purposes. A number of sub-skills need to be developed in the everyday classroom transaction. The Listening Assessment comprises a variety of tasks. These tasks are graded according to the length of the task and the difficulty level.
• The Speaking skill had acquired a very important place as a communication skill. Like listening skills, a number of sub-skills of speaking need to be consciously developed among students.

Thus, it is concluded that Speaker 1: Can I borrow your pencil, please?

Speaker 2: Why not?

During this exchange, while assessing students' speaking-listening skills, mark/s would be deducted for the first speaker, as the question is framed incorrectly.