Economics • Banking & FinanceMedium
What is the primary objective of establishing 'Small Finance Banks' in India as per RBI guidelines?
A. To handle foreign trade transactions and international sovereign debt issuances exclusively.
B. To provide financial inclusion to unserved and underserved sections, including small business units, micro and small industries, and marginal farmers.✓ Correct Answer
C. To act as primary dealers in government bond auctions and manage central government accounts.
D. To consolidate distressed cooperative banks into large regional financial hubs.
💡 Solution & Explanation
Small Finance Banks were established under RBI guidelines primarily to advance financial inclusion by catering to unserved and underserved segments, including marginal farmers, micro industries, and small business units. They differ fundamentally from wholesale or foreign banks which focus on large corporate finance or international trade.
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