Banking & Finance MCQs - 2026-08-14

Small Finance Banks (SFBs) were conceptualized by the RBI to further financial inclusion by providing basic banking services like deposits and lending to unserved and underserved sections of the population, which include small business units, small and marginal farmers, micro and small industries, and other unorganized sector entities.

The core objective of financial inclusion, especially in unbanked rural areas, is to provide access to a full range of affordable, useful, and safe financial products and services—including transactions, payments, savings, credit, and insurance—to all individuals and households, regardless of their income level or location.

Business Correspondents (BCs) and Business Facilitators (BFs) play a crucial role in extending banking services to remote and unbanked areas by acting as agents for banks, providing services like account opening, deposits, withdrawals, and remittances at the customer's doorstep or through local outlets.

The RBI guidelines clearly state that the Regulated Entity (RE) is ultimately responsible for all activities undertaken by the Lending Service Providers (LSPs) engaged by them. This ensures that REs maintain oversight and accountability for their digital lending operations.

RBI guidelines strictly prohibit digital lending apps from accessing phone contacts, call logs, and media galleries of borrowers. Access to camera, microphone, location, or storage is permitted only with explicit consent and for specific, justifiable purposes (e.g., KYC, video calls).

The RBI's digital lending guidelines mandate that the loan disbursement must be made directly into the borrower's bank account without any pass-through to the Lending Service Provider (LSP) or any third party. This ensures transparency and accountability.