What is the Need for Small Finance Banks i Priority sector lending ii Financial inclu...........

Economic and social issues(Phase-I/II) Nature of Indian economy

The Reserve Bank of India (RBI) recently announced the final guidelines for on-tap licensing of private sector SFBs (small finance banks).Small Finance Banks (SFBs) offer basic banking services.These include accepting deposits and lending to un-served and underserved sections.It offers for small businesses, small and marginal farmers, micro and small industries, and the unorganized sector.Payments banks can apply for conversion into small finance banks (SFBs) after 5 years of operation, provided they meet the eligibility criteria.Recently data from the Reserve Bank of India (RBI) show that the small finance bank sector has been seeing remarkable growth in credit disbursement as well as deposits.Some of the operational Small Finance Banks in India are: Ujjivan SFB, Janalakshmi SFB, Equitas SFB, AU SFB, and Capital SFB.The small finance bank will 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.It can also undertake other non-risk sharing simple financial services activities such as the distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of the RBI.

What is the Need for Small Finance Banks?

i Priority sector lending

ii Financial inclusion of women

iii Social Impact

Select the correct answer using the code given below

i and ii only

i and iii only

ii and iii only

all of the above

none of these

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Explanation:

Need for Small Finance Banks are:

•Priority sector lending: SFBs play a key role in the priority sector lending space as their main focus is the unserved and underserved segment.

•Financial inclusion of women: Most of the Small Finance Banks were earlier microfinance companies - to provide loans to women. Now that these have become a bank, female customers can avail full banking solutions. Also, through different CSR initiatives, Small Finance Banks reach out to women customers and make them understand the need of financial planning and banking services.

•Social Impact: The SFBs are now looking beyond the simple metric of “income improvement” to other indicators of positive social impact, like customer employment characteristics, customer distribution between urban and rural markets and women’s engagement. SFBs not only serve to provide banking solutions but empower the socio-economic progress of its consumers. RBI states that small banks will act as a savings vehicle to these segments of the population.