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:
Answer & explanation
Answer: (a) 1 and 2 only
The RBI set up Small Finance Banks to further financial inclusion: to give people safe savings options and to supply credit to small business units, small and marginal farmers, micro and small industries and other unorganised-sector entities. Encouraging young entrepreneurs in rural areas is not among the stated objectives.
- ✓ 1. Credit to small business units is named in the RBI's 2014 licensing guidelines as an objective of SFBs.
- ✓ 2. Credit to small and marginal farmers is named in the same objective.
- ✗ 3. The guidelines list savings vehicles and credit to small businesses, farmers, micro and small industries and unorganised-sector entities. Promoting young rural entrepreneurs is not a listed objective.
Remember · SFBs (RBI licensing guidelines, 27 November 2014): financial inclusion through savings vehicles and credit to small businesses, small and marginal farmers, micro and small industries, and the unorganised sector.
Sources
- RBI releases Guidelines for Licensing of Small Finance Banks in the Private Sector, Press Release 2014-2015/1090, 27 November 2014 ↗ “The objectives of setting up of small finance banks will be to further financial inclusion by (a) provision of savings vehicles, and (ii) 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.”
Question and answer: UPSC's official GS Paper I (2017, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·