General Studies · Banking Regulations & SFBs
In terms of Priority Sector Lending (PSL) and loan distribution, what are the mandatory requirements for a Small Finance Bank (SFB) to maintain its license?
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- 1An SFB must allocate 100% of its credit to the priority sector for the first five years of operation and can only accept deposits from individuals and not from corporate entities.
- 2An SFB must maintain a Capital to Risk-Weighted Assets Ratio of 9% and ensure that its total credit to a single business group does not exceed 10% of its capital funds.
- 3An SFB must allocate 75% of its Adjusted Net Bank Credit to the priority sector and at least 50% of its loan portfolio should constitute loans and advances of up to 25,00,000 Rupees.✓
- 4An SFB must allocate 40% of its Adjusted Net Bank Credit to the priority sector and ensure that 25% of its branches are in unbanked rural centers.
Correct answer
An SFB must allocate 75% of its Adjusted Net Bank Credit to the priority sector and at least 50% of its loan portfolio should constitute loans and advances of up to 25,00,000 Rupees.
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