Small finance banks - GS questions based on daily current affairs

1)   Which of the following statements is/are correct about Local Area Banks (LABs)?

1. LABs were required to have a minimum capital of Rs. 5 crore.
2. In 2014, RBI has permitted LABs to be converted into small finance banks subject to them meeting the prescribed eligibility criteria.

a. Only 1
b. Only 2
c. Both
d. None
Answer  Explanation 

ANSWER: Both

Explanation:
- LABs were set up to enable the mobilization of rural savings by local institutions and at the same time, to make them available for investments in the local areas.
- The area of operation of LAB is limited to a maximum of three geographically contiguous districts and are allowed to open branches only in its area of operation.
2)   Which of the following statements is/ are correct about small finance bank?

1. They can lend to big corporates and groups
2. They Cannot open branches with prior RBI approval for first five years

a. Only 1
b. Only 2
c. Both
d. None
Answer  Explanation 

ANSWER: Only 2

Explanation:
Small finance banks are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending. Small finance banks can not lend to big corporates and groups.

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