Banking Awareness Set 47 (Small Finance Bank)

Important Banking Awareness Questions on Small Finance Bank for SBI PO and Upcoming bank exams like NIACL Assistant, NICL AO, IBPS PO, IBPS RRB, etc. Small finance bank guidelines quiz

1. Resident individuals/professionals with ________ of experience in banking and finance will be eligible to set up small finance banks.
   A) 5 years
   B) 10 years
   C) 15 years
   D) 20 years
   
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   Option B
   Explanation: Resident individuals/professionals with 10 years of experience in banking and finance; and companies and societies owned and controlled by residents will be eligible to set up small finance banks. Existing Non-Banking Finance Companies (NBFCs), Micro Finance Institutions (MFIs), and Local Area Banks (LABs) that are owned and controlled by residents can also opt for conversion into small finance banks.
2. What is the minimum paid-up equity capital for small finance banks?
   A) Rs 100 crore
   B) Rs 500 crore
   C) Rs 800 crore
   D) Rs 1,000 crore
   
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   Option A
   Explanation: The minimum paid-up equity capital for small finance banks shall be Rs. 100 crore.
3. The promoter’s minimum initial contribution to the paid-up equity capital of small finance bank shall at least be 40 per cent and gradually brought down to _______ within 12 years from the date of commencement of business of the bank.
   A) 10 per cent
   B) 16 per cent
   C) 20 per cent
   D) 26 per cent
   
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   Option D
   Explanation: The promoter’s minimum initial contribution to the paid-up equity capital of such small finance bank shall at least be 40 per cent and gradually brought down to 26 per cent within 12 years from the date of commencement of business of the bank.
4. Small Finance Banks will have to extend what per cent of its credit to sectors classified under priority sector lending (PSL)?
   A) 26%
   B) 40%
   C) 75%
   D) 65%
   
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   Option C
   Explanation: The small finance banks will be required to extend 75 per cent of its Adjusted Net Bank Credit (ANBC) to the sectors eligible for classification as priority sector lending (PSL) by the Reserve Bank.
5. At least ________ of the loan portfolio of Small Finance Banks should constitute loans and advances of upto Rs. 25 lakh.
   A) 25 per cent
   B) 50 per cent
   C) 60 per cent
   D) 75 per cent
   
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   Option B
   Explanation: At least 50 per cent of its loan portfolio should constitute loans and advances of upto Rs. 25 lakh.
6. The decision to issue an in-principle approval for setting up of a Small Finance bank will be taken by _____
   A) Finance Ministry
   B) CBDT
   C) RBI
   D) SEBI in consultation with RBI
   
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   Option C
   Explanation: The decision to issue an in-principle approval for setting up of a bank will be taken by the Reserve Bank. The Reserve Bank’s decision in this regard will be final.
7. The in-principle approval for small finance banks given by RBI will remain valid for how many months?
   A) 12 months
   B) 15 months
   C) 18 months
   D) 24 months
   
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   Option C
   Explanation: The validity of the in-principle approval issued by the Reserve Bank will be eighteen months.
8. What is the Minimum Capital Requirement for Small Finance Banks under the Capital adequacy framework?
   A) 5%
   B) 10%
   C) 15%
   D) 20%
   
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   Option C
   Explanation: Minimum Capital Requirement : 15%
9. Identify the true statement about Small Finance Bank(SFB).
   A) SFBs are not required to maintain CRR
   B) SFBs cannot carry out lending activity
   C) SFBs will be covered by the Banking Ombudsman (BO) Scheme.
   D) SFBs can carry out all para-banking activity.
   
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   Option C
   Explanation: SFB has to maintain CRR and SLR, SFB can lend. SFBs will not be permitted to undertake any para-banking activity except that allowed as per the Licensing Guidelines and the related FAQs issued.
10. SFBs will be permitted to use IRF for the purpose of proprietary hedging. What does F stands for in IRF?
    A) Forwards
    B) Funding
    C) Futures
    D) Focus
    
    View Answer

    Option C
    Explanation: IRF- Interest Rate Futures

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