UPSC Prelims 2017 · Question 65 of 99
UPSC Prelims 2017 question on Small Finance Banks
- ExamUPSC CSE
- Year2017
- PaperGeneral Studies Paper I
- SubjectIndian Economy
- TopicBanking
- DifficultyMedium
- TypeStatement
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:
Show answer
Answer: A. 1 and 2 only
Verdict
The answer is 1 and 2 only. Small Finance Banks supply credit to small business units and to small and marginal farmers, but encouraging rural young entrepreneurs is not among their stated objectives.
Analysis
Statements 1 and 2 are CORRECT. The objective of setting up Small Finance Banks is to further financial inclusion by providing savings vehicles and by supplying credit to small business units, small and marginal farmers, micro and small industries and other unorganised sector entities, through high technology and low cost operations. Statement 3 is INCORRECT as an objective of this category of bank. Encouraging young entrepreneurs in rural areas describes the aim of schemes such as Stand Up India rather than the licensing rationale for Small Finance Banks.
Source
Reserve Bank of India press release on Small Finance Banks.
How to crack it
Distinguish the mandate of a bank category from the objective of a credit scheme, because the two are drafted in different registers. A bank licence specifies who may be served and what business may be done; a scheme specifies a target group and a subsidy. Then keep the two differentiated bank categories apart: Payment Banks take deposits but cannot lend, while Small Finance Banks both take deposits and lend to the priority segments.