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With reference to Small Finance Banks (SFB), consider the following statements:
- They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- At least 25 percent of its branches shall be in unbanked rural centers.
- Priority sector must comprise 75% of their net credit.
Which of the statements given above is/are correct?
- a)1 and 2 only
- b)2 only
- c)1 and 3 only
- d)1, 2 and 3
Correct answer is option 'D'. Can you explain this answer?
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Most Upvoted Answer
With reference to Small Finance Banks (SFB), consider the following st...
- The Small Finance Bank (SFB) is a private financial institution intended to further 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 unorganized sector entities, but without any restriction in the area of operations, unlike Regional Rural Banks or Local Area Banks.
- Small Finance Banks were created pursuant to the announcement in Union Budget 2014-2015.
- Eligibility to Setup SFB:
- 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.
- Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.
- Conditions:
- The minimum capital for SFBs is prescribed at Rs. 100 crore with an initial contribution of 40% coming from the promoters, which over a period of 12 years, have to be reduced to 26%.
- Foreign Investment is permitted as in the case of other private sector commercial banks.
- After the small finance bank reaches the net worth of Rs.500 crore, listing its shares on a stock exchange will be mandatory within three years of reaching that net worth.
- Regulations:
- They are subject to all prudential norms and regulations of RBI as applicable to existing commercial banks like maintenance of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). Hence, statement 1 is correct.
- They are required to extend 75 percent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank. Hence, statement 3 is correct.
- At least 50 percent of its loan portfolio should constitute loans and advances of up to Rs. 25 lakh.
- It cannot set up subsidiaries to undertake non-banking financial services activities.
- It is stipulated that at least 25 percent of its branches shall be in unbanked rural centers. Hence, statement 2 is correct.
- Other function which can be performed by SFB:
- Distribution of mutual fund units, insurance products, pension products, etc.
- They can also become a Category II Authorized Dealer in foreign exchange business for its clients’ requirements.
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Community Answer
With reference to Small Finance Banks (SFB), consider the following st...
Explanation:
Small Finance Banks (SFB) are a type of banking institution in India that focus on providing basic banking services to underserved sections of the society, including small business units, micro and small industries, and the unorganized sector. Let's analyze each statement given in the question:
Statement 1: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- Cash Reserve Ratio (CRR) is the percentage of deposits that banks are required to keep with the Reserve Bank of India (RBI) in cash form. It is a monetary policy tool used by the RBI to control the money supply in the economy.
- Statutory Liquidity Ratio (SLR) is the percentage of deposits that banks are required to maintain in the form of liquid assets, such as cash, gold, or government securities. It is also a tool to ensure the stability of the banking system and control inflation.
- Both CRR and SLR are applicable to Small Finance Banks, just like any other commercial bank in India. Therefore, statement 1 is correct.
Statement 2: At least 25 percent of its branches shall be in unbanked rural centers.
- As per the guidelines issued by the RBI, at least 25 percent of the branches of Small Finance Banks should be in unbanked rural centers. This requirement ensures that banking services reach the rural areas and the financially excluded population.
- The objective is to promote financial inclusion and provide access to banking services to the underserved sections of the society. Therefore, statement 2 is correct.
Statement 3: Priority sector must comprise 75% of their net credit.
- Priority sector refers to sectors of the economy that have been identified as a priority for lending by banks, such as agriculture, micro, small and medium enterprises (MSMEs), education, housing, and others.
- Small Finance Banks are required to lend at least 75% of their net credit to the priority sector. This is in line with the government's objective of promoting inclusive growth and development of these sectors.
- By lending to the priority sector, Small Finance Banks contribute to the overall socio-economic development of the country. Therefore, statement 3 is correct.
Therefore, all the given statements (1, 2, and 3) are correct. The correct answer is option 'D'.
Small Finance Banks (SFB) are a type of banking institution in India that focus on providing basic banking services to underserved sections of the society, including small business units, micro and small industries, and the unorganized sector. Let's analyze each statement given in the question:
Statement 1: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- Cash Reserve Ratio (CRR) is the percentage of deposits that banks are required to keep with the Reserve Bank of India (RBI) in cash form. It is a monetary policy tool used by the RBI to control the money supply in the economy.
- Statutory Liquidity Ratio (SLR) is the percentage of deposits that banks are required to maintain in the form of liquid assets, such as cash, gold, or government securities. It is also a tool to ensure the stability of the banking system and control inflation.
- Both CRR and SLR are applicable to Small Finance Banks, just like any other commercial bank in India. Therefore, statement 1 is correct.
Statement 2: At least 25 percent of its branches shall be in unbanked rural centers.
- As per the guidelines issued by the RBI, at least 25 percent of the branches of Small Finance Banks should be in unbanked rural centers. This requirement ensures that banking services reach the rural areas and the financially excluded population.
- The objective is to promote financial inclusion and provide access to banking services to the underserved sections of the society. Therefore, statement 2 is correct.
Statement 3: Priority sector must comprise 75% of their net credit.
- Priority sector refers to sectors of the economy that have been identified as a priority for lending by banks, such as agriculture, micro, small and medium enterprises (MSMEs), education, housing, and others.
- Small Finance Banks are required to lend at least 75% of their net credit to the priority sector. This is in line with the government's objective of promoting inclusive growth and development of these sectors.
- By lending to the priority sector, Small Finance Banks contribute to the overall socio-economic development of the country. Therefore, statement 3 is correct.
Therefore, all the given statements (1, 2, and 3) are correct. The correct answer is option 'D'.
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With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer?
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With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer?.
With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to Small Finance Banks (SFB), consider the following statements: They are subject to the norms of Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR). At least 25 percent of its branches shall be in unbanked rural centers. Priority sector must comprise 75% of their net credit.Which of the statements given above is/are correct?a)1 and 2 onlyb)2 onlyc)1 and 3 onlyd)1, 2 and 3Correct answer is option 'D'. Can you explain this answer?.
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