What is the purpose of setting up of Small Finance Banks (SFBs) in India ? 1. To supply credit to small business units 2. To supply credit to small and marginal farmers 3. To encourage young entrepreneurs to set up business particularly in rural areas. Select the correct answer using the code given below :
- (a) 1 and 2 only ✓ UPSC's answer
- (b) 2 and 3 only
- (c) 1 and 3 only
- (d) 1, 2 and 3
Why the answer is (a)
• The RBI licensed Small Finance Banks (2015) to further financial inclusion by providing savings facilities and credit to small business units, small and marginal farmers, micro and small industries and unorganised-sector entities (items 1 and 2).
• They must lend 75% of credit to priority sectors and keep 50% of loans below ₹25 lakh.
• Encouraging young rural entrepreneurs (3) is not a stated objective of SFBs; that falls under schemes like MUDRA and Start-up India.
• Hence 1 and 2 only, option (a).
Why the other options are wrong
- (b) 2 and 3 only
- Item 3 is not an SFB objective; item 1 is.
- (c) 1 and 3 only
- Item 3 is not an SFB objective; item 2 is.
- (d) 1, 2 and 3
- Item 3 is not part of the SFB mandate.
Asked in the GS Paper I of the UPSC Civil Services Preliminary Examination 2017, held on 18 June 2017. Question and answer key: Union Public Service Commission. Explanation: UPSC Answer Check.