What is the purpose of setting up of Small Finance Banks SFBs in India 1 To supply credit to small b...........

Economic and Social Issues Rural Banking and financial institutions

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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:

1 and 2 only

2 and 3 only

1 and 3 only

1, 2 and 3

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Explanation:

Small finance banks are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending.

The objective of setting up of small finance banks is to further financial inclusion by provision of savings vehicles and supply of credit to small business units; small and marginal farmers; micro and small industries; and other unorganised sector entities, through high technology-low cost operations.

However, apart from the provision of credit, there is no explicit provision that SFBs have been setup to encourage setting of businesses in rural areas. Statement 3 will be considered wrong.