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Consider the following statements regarding Small Finance Banks: 
1. They shall primarily undertake basic banking activities of accepting deposits and lending to small farmers and small businesses. 
2. They are not subjected to the prudential norms and RBI regulations that apply to existing commercial banks, including maintenance of CRR and SLR. 
Which of the statements given above is/are correct?
  • a)
    1 only
  • b)
    2 only
  • c)
    Both 1 and 2
  • d)
    Neither 1 and 2
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
Consider the following statementsregarding Small Finance Banks:1. They...
They are subjected to the rbi regulations and prudential norms. CRR and SLR limits both apply to these banks
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Consider the following statementsregarding Small Finance Banks:1. They...
Small Finance Banks:

Small Finance Banks (SFBs) are a new category of banks in India. They are different from other commercial banks in their objectives, customers, and regulatory requirements.

Statement 1:

The first statement is correct. SFBs are mandated to primarily undertake basic banking activities of accepting deposits and lending to small farmers and small businesses. This is in line with their objective of financial inclusion and serving the unbanked and underbanked segments of the population.

Statement 2:

The second statement is incorrect. SFBs are subject to the same prudential norms and RBI regulations as other commercial banks. This includes the maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). The CRR is the amount of deposits that banks have to keep with the RBI as a percentage of their net demand and time liabilities, while the SLR is the amount of deposits that banks have to maintain in safe and liquid assets such as government securities.

Conclusion:

In conclusion, only statement 1 is correct, while statement 2 is incorrect. SFBs are subject to the same regulatory requirements as other commercial banks, including the maintenance of CRR and SLR.
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Consider the following statementsregarding Small Finance Banks:1. They shall primarily undertake basic bankingactivities of accepting deposits and lending tosmall farmers and small businesses.2. They are not subjected to the prudential normsand RBI regulations that apply to existingcommercial banks, including maintenance ofCRR and SLR.Which of the statements given above is/arecorrect?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 and 2Correct answer is option 'A'. Can you explain this answer?
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