Question

Consider the following statements and choose the correct options given below.

1. The objective of financial inclusion by primarily undertake basic banking activities of acceptance of deposits and lending to un-served and underserved sections.

2. Can accept the deposit of any amount.

3. Can distribute financial services like mutual funds.

1. Regional Rural Bank
2. Small Finance Bank
3. NBFC
4. Exchange Banks
5. None of the above

Answer 1

Correct Answer - Option 2 : Small Finance Bank

The correct answer is Small Finance Bank.

• The Small Finance Bank (SFB) is a private financial institution intended to enhance the objective of financial inclusion by primarily undertake basic banking activities of acceptance of deposits and lending to un-served and underserved sections including small business units, small and marginal farmers, micro and small industries and un-organised sector entities, but without any restriction in the area of operations, unlike Regional Rural Banks or Local Area Banks.
• Resident individuals/professionals with 10 years of experience in banking and finance and companies and societies owned and controlled by residents will be eligible to set up small finance banks. 
• The minimum capital for SFBs is prescribed at, which over a period of 12 years, have to be reduced to 26%.Rs 200 crores with an initial contribution of 40% coming from the promoters.
• Features of Small Finance Banks:
  • can accept the deposit of any amount.
  • can lend, but largely to Small and Medium Enterprises (SME)  and farmers.
  • can issue ATM, debit and credit cards.
  • will have to ensure 50% of loans are in form of an advance of up to Rs 25 lakh.
  • can also provide remittance services.
  • can distribute financial services like mutual funds.