Payment & Small Banks — Set 4
Banking · पेमेंट और स्मॉल बैंक · Questions 31–40 of 70
The 'on-tap' licensing window for Small Finance Banks was opened by RBI in which year?
Correct Answer: B. 2019
RBI issued guidelines for 'on-tap' licensing of SFBs in December 2019. This means that interested and eligible entities can apply for a license at any time of the year. Previously, licenses were issued only during specific windows or rounds.
Which of the following is a primary source of income for a Payment Bank?
Correct Answer: B. Fees from payment services and commission on third-party products
Since Payment Banks cannot lend, they earn through transaction fees and commissions on selling insurance or mutual funds. They also earn interest from the government securities in which they are required to invest. Their business model relies on high transaction volumes.
A Small Finance Bank must maintain a minimum Liquidity Coverage Ratio (LCR) as per which global standards?
Correct Answer: C. Basel III norms
SFBs are required to maintain the Liquidity Coverage Ratio (LCR) as per the Basel III framework. LCR ensures that the bank has enough high-quality liquid assets to survive a 30-day stress scenario. This maintains systemic stability within the differentiated banking sector.
What is the maximum limit for a single loan/advance by a Small Finance Bank as a percentage of its capital fund?
Correct Answer: A. 10%
The exposure to a single borrower is capped at 10% of the SFB's capital fund. This ensures that the bank's survival is not dependent on the repayment performance of a few large borrowers. It reinforces the bank's mandate to serve small and diverse customers.
Payment Banks are allowed to issue which of the following instruments for cash withdrawal?
Correct Answer: D. Both Cheque books and Debit cards
Payment Banks are authorized to provide both physical debit cards and cheque book facilities to their account holders. This allows users to withdraw cash and perform offline transactions. It ensures that the bank can compete with traditional banks in basic service delivery.
Which section of the Banking Regulation Act, 1949 deals with the licensing of new banks like SFBs and Payment Banks?
Correct Answer: D. Section 22
Section 22 of the Banking Regulation Act, 1949 empowers the RBI to grant licenses to banking companies. Every new entity wishing to operate as a bank must obtain this license. The RBI uses this power to ensure only 'fit and proper' promoters enter the sector.
Small Finance Banks must maintain what percentage of their deposits as SLR (Statutory Liquidity Ratio)?
Correct Answer: D. Same as applicable to commercial banks
Small Finance Banks are required to follow the same SLR requirements as other scheduled commercial banks. SLR is the portion of deposits that banks must invest in government-approved securities. This ensures that the bank has enough liquid assets to meet its obligations.
Which differentiated bank model is often referred to as 'Narrow Banking' in its purest form?
Correct Answer: C. Payment Bank
Payment Banks are a form of narrow banking because they invest their deposits only in safe government securities and do not lend. This eliminates the risk of bad loans (NPAs) that traditional banks face. Their focus is solely on safe deposit keeping and transaction facilitation.
Which bank was previously the 'Jana Lakshmi Financial Services' before it became an SFB?
Correct Answer: A. Jana Small Finance Bank
Jana Lakshmi Financial Services was one of India's largest microfinance institutions before converting to Jana Small Finance Bank. It received its final license from the RBI in 2017. Conversion to SFB allowed it to accept public deposits and diversify its services.
Payment Banks are prohibited from accepting which type of deposits?
Correct Answer: C. Time deposits (FD/RD)
Payment Banks can only accept demand deposits; they are not allowed to take time deposits like Fixed Deposits or Recurring Deposits. Time deposits involve long-term commitments and different risk profiles. This restriction is a major differentiator between Payment Banks and SFBs.