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 :

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YESPYQ · Accepted Answer

Correct answer: 1 and 2 only. The Small Finance Banks (SFBs) were established by the Reserve Bank of India (RBI) to further financial inclusion by providing essential banking services to underserved and un- served segments of the population. Statement 1 is correct : Small Finance Banks (SFBs) focus on extending credit to micro and small enterprises, thereby sup- porting entrepreneurship and economic growth at the grassroots level. Statement 2 is correct : SFBs aim to meet the unique needs of small and marginal farmers by offering tailored financial prod- ucts and services which enhances agricultural productivity and rural development. Statement 3 is incorrect : Though SFBs support small business units and micro-entrepreneurs but the specific emphasis on “young entrepreneurs” is not explicitly stated in the RBI’s guidelines.  To ensure outreach to underserved regions, SFBs are mandated to have at least 25% of their branches in unbanked rural centers.  SFBs are required to maintain a minimum capital adequacy ratio of 15% of their risk-weighted assets which ensures financial stability

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