GS PrelimsEconomyBanking2017

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:

A

1 and 2 only

B

2 and 3 only

C

1 and 3 only

D

1, 2 and 3

Correct Answer: Option A

Explanation

1. Statement 1 is correct. A primary purpose of setting up Small Finance Banks (SFBs) in India is to further financial inclusion by providing basic banking services and supplying credit to underserved sections, including small business units. 2. Statement 2 is correct. Another key objective of SFBs is to provide credit to small and marginal farmers, micro and small industries, and other unorganised sector entities, which often lack access to formal banking channels. 3. Statement 3 is not a primary, explicitly stated objective. While SFBs' activities might indirectly encourage young entrepreneurs, including in rural areas, their main mandated purpose is broader financial inclusion focused on underserved segments like small businesses and farmers, rather than specifically targeting young entrepreneurs. 4. Therefore, statements 1 and 2 accurately reflect the main purposes of establishing SFBs.

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