Economics • Banking & FinanceMedium
Under the regulatory purview of the Reserve Bank of India, what is the primary structural characteristic of 'Small Finance Banks' (SFBs)?
A. They are prohibited from accepting retail deposits and can only raise wholesale institutional funds
B. They are required to extend a minimum of 75 percent of their Adjusted Net Bank Credit (ANBC) to priority sector lending✓ Correct Answer
C. They operate exclusively as foreign exchange dealers and cannot open domestic savings bank accounts
D. They are permitted to underwrite corporate bonds but cannot issue debit or credit cards to customers
💡 Solution & Explanation
Small Finance Banks must allocate at least seventy-five percent of their Adjusted Net Bank Credit to priority sector lending to promote grassroots financial inclusion. Universal commercial banks are generally required to maintain a forty percent priority sector lending target. These niche banks bridge credit gaps for micro-industries, marginal farmers, and unorganized sector participants.
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