{"id":1775,"date":"2024-03-29T21:19:57","date_gmt":"2024-03-29T15:49:57","guid":{"rendered":"https:\/\/lotusarise.com\/qna\/?p=1775"},"modified":"2024-04-03T07:11:21","modified_gmt":"2024-04-03T01:41:21","slug":"q-what-is-the-purpose-of-setting-up-of-small-finance-banks-sfbs-in-india","status":"publish","type":"post","link":"https:\/\/lotusarise.com\/qna\/upsc\/q-what-is-the-purpose-of-setting-up-of-small-finance-banks-sfbs-in-india","title":{"rendered":"Q.\u00a0What is the purpose of setting up of Small Finance Banks (SFBs) in India?"},"content":{"rendered":"\n
    \n
  1. To supply credit to small business units<\/li>\n\n\n\n
  2. To supply credit to small and marginal farmers<\/li>\n\n\n\n
  3. To encourage young entrepreneurs to set up business particularly in rural areas.<\/strong><\/li>\n<\/ol>\n\n\n\n

    Select the correct answer using the code given below:<\/p>\n\n\n\n

      \n
    • 1 and 2 only<\/li>\n\n\n\n
    • 2 and 3 only<\/li>\n\n\n\n
    • 1 and 3 only<\/li>\n\n\n\n
    • 1, 2 and 3<\/li>\n<\/ul>\n\n\n\n
      \n

      Answer:<\/strong> (a) 1 and 2 only<\/strong><\/p>\n<\/blockquote>\n\n\n\n

      Small Finance Banks (SFBs)<\/strong>:<\/h5>\n\n\n\n
        \n
      • SFBs are specialized banks <\/strong>that are licensed by RBI<\/strong> to provide financial services<\/strong> and products to low-income individuals and underserved communities<\/strong>, including microfinance and micro-enterprise services, as well as other basic banking services. <\/li>\n\n\n\n
      • Aim<\/strong>:\n
          \n
        • To provide financial inclusion to these segments<\/strong> of the population who are often excluded from the traditional banking system. <\/li>\n\n\n\n
        • SFBs help them to have access to financial products<\/strong> such as small loans, savings, insurance, and other basic banking services.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
        • Regulation:<\/strong>\n
            \n
          • SFBs are registered as public limited companies under the Companies Act, 2013<\/strong> and governed by Banking Regulations Act, 1949<\/strong>; RBI Act, 1934<\/strong> and other relevant Statutes and Directives from time to time. <\/li>\n\n\n\n
          • All prudential norms and regulations of the RBI as applicable to\u00a0existing commercial banks,<\/strong>\u00a0including the requirement of maintenance of\u00a0CRR and SLR<\/strong>\u00a0are also applicable to SFBs.\n
              \n
            • Also, according to RBI, if an SFB aspires to transit into a universal bank,<\/strong> it has to have a satisfactory track record of performance for a minimum period of 5 years.<\/strong><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n
            • The guidelines for SFBS were introduced in 2014 by RBI.\u00a0RBI Guidelines on SFBs in India are:<\/strong>\n
                \n
              • SFBs are granted the scheduled bank status<\/strong> after being operational and are deemed suitable under section 42 of the RBI Act,1934.<\/strong> <\/li>\n\n\n\n
              • SFBs are required to primarily focus on providing <\/strong>access to financial services to the unbanked and underbanked <\/strong>segments of the population.<\/li>\n\n\n\n
              • They are required to maintain a minimum Capital to Risk-Weighted Assets Ratio (CRAR) of 15%.<\/strong><\/li>\n\n\n\n
              • They are required to extend 75% of their Adjusted Net Bank Credit to Priority Sector Lending.<\/strong><\/li>\n\n\n\n
              • SFBs are required to open at least 25% of their total branches in unbanked rural areas.<\/strong><\/li>\n\n\n\n
              • The minimum paid-up voting equity capital<\/strong> for small finance banks shall be Rs.200 crore.<\/strong><\/li>\n\n\n\n
              • SFBs are required to maintain at least 50% of their loan portfolio as microfinance<\/strong> and advances of up to Rs. 25,00,000.<\/strong><\/li>\n\n\n\n
              • SFBs are required to comply with various prudential norms and regulations<\/strong> related to income recognition, asset classification, and provisioning.<\/li>\n\n\n\n
              • SFBs are encouraged to adopt technology to improve their operational efficiency<\/strong> and reach the target segments.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
              • Eligibility:<\/strong>\n
                  \n
                • Resident individuals\/ professionals (Indian citizens)<\/strong>, singly or jointly, each having at least 10 years of experience in banking and finance at a senior level.<\/strong><\/li>\n\n\n\n
                • Companies and societies<\/strong> owned and controlled by residents.<\/li>\n\n\n\n
                • Entities such as\u00a0microfinance institutions, non-banking financial companies (NBFCs)<\/strong>,\u00a0local area banks and payment banks<\/strong>\u00a0that are controlled by residents can also convert into Small Finance Banks.\n
                    \n
                  • Also, Urban Cooperative Banks(UCBs)<\/strong> desirous of converting to SFB may convert to SFB after ensuring compliance with the guidelines.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n\n\n\n
                  • Paid Up Capital Requirement:<\/strong>\n
                      \n
                    • The minimum paid-up voting equity capital for small finance banks shall be Rs.200 crore,<\/strong> except for such small finance banks which are converted from UCBs.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"

                      Select the correct answer using the code given below: Answer: (a) 1 and 2 only Small Finance Banks (SFBs):<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_kad_blocks_custom_css":"","_kad_blocks_head_custom_js":"","_kad_blocks_body_custom_js":"","_kad_blocks_footer_custom_js":"","_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[1,3],"tags":[38],"years":[56],"class_list":["post-1775","post","type-post","status-publish","format-standard","hentry","category-upsc","category-prelims","tag-indian-economy","years-56"],"acf":[],"taxonomy_info":{"category":[{"value":1,"label":"UPSC"},{"value":3,"label":"Prelims"}],"post_tag":[{"value":38,"label":"Indian Economy"}],"years":[{"value":56,"label":"2017"}]},"featured_image_src_large":false,"author_info":{"display_name":"LotusArise","author_link":"https:\/\/lotusarise.com\/qna\/author\/team-lotusarise"},"comment_info":0,"category_info":[{"term_id":1,"name":"UPSC","slug":"upsc","term_group":0,"term_taxonomy_id":1,"taxonomy":"category","description":"","parent":0,"count":1269,"filter":"raw","cat_ID":1,"category_count":1269,"category_description":"","cat_name":"UPSC","category_nicename":"upsc","category_parent":0},{"term_id":3,"name":"Prelims","slug":"prelims","term_group":0,"term_taxonomy_id":3,"taxonomy":"category","description":"","parent":1,"count":1251,"filter":"raw","cat_ID":3,"category_count":1251,"category_description":"","cat_name":"Prelims","category_nicename":"prelims","category_parent":1}],"tag_info":[{"term_id":38,"name":"Indian Economy","slug":"indian-economy","term_group":0,"term_taxonomy_id":38,"taxonomy":"post_tag","description":"","parent":0,"count":225,"filter":"raw"}],"_links":{"self":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1775","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/comments?post=1775"}],"version-history":[{"count":0,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/posts\/1775\/revisions"}],"wp:attachment":[{"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/media?parent=1775"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/categories?post=1775"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/tags?post=1775"},{"taxonomy":"years","embeddable":true,"href":"https:\/\/lotusarise.com\/qna\/wp-json\/wp\/v2\/years?post=1775"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}