Economics • Banking & FinanceHard
What is the operational mandate and scope of 'Small Finance Banks' in the Indian financial architecture?
A. To provide basic banking services to unserved and underserved sections including small businesses and marginal farmers through high-tech low-cost operations✓ Correct Answer
B. To undertake large-scale corporate underwriting and foreign exchange derivative trading in global financial centers
C. To act as the exclusive clearing agency for government securities and treasury bill auctions conducted by the Reserve Bank of India
D. To provide long-term venture capital financing exclusively to technology start-ups and artificial intelligence research firms
💡 Solution & Explanation
Small Finance Banks are niche banking entities mandated to provide basic banking and financial services to unserved and underserved segments, including micro industries, small farmers, and unorganized entities. Distractors incorrectly attribute large corporate underwriting, government securities clearing, or venture capital financing mandates to them. They are required to extend seventy-five percent of their net bank credit to priority sector lending targets. Unlike payment banks, small finance banks are permitted to lend and issue loans to customers.
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