With reference to Small Finance Banks SFBs consider the following statements 1 Foreign individuals p...........

Economic Affairs Types of Banks and Banking

Download Solution PDF

With reference to Small Finance Banks (SFBs), consider the following statements:

1. Foreign individuals/professionals with 10 years of experience in banking and finance are allowed to open SFBs.

2. SFBs cannot undertake lending functions.

Which of the statements given above is/are correct?

1 only

2 only

Both 1 and 2

Neither 1 nor 2

छोटे Courses बड़े Results

Master Types of Banks and Banking

Prepare through Micro-courses

Try Now

Explanation:

The Small Finance Bank shall be registered as a public limited company under the Companies Act, 2013. It will be licensed under Section 22 of the Banking Regulation Act, 1949 and governed by the provisions of the Banking Regulation Act, 1949. The minimum paid-up equity capital for small finance banks shall be Rs. 100 crores. Key features of the Small Finance Bank guidelines are:

Scope of activities:

There will not be any restriction in the area of operations of small finance banks.

Eligible promoters:

Statement 1 is incorrect. Resident individuals/professionals (not foreign) 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.

Statement 2 is incorrect. The Small Finance Bank shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganised sector entities.