What is the purpose of setting up of Small Finance Banks (SFBs) in India? 1. To supply credit to small business units 2. To supply credit to small and marginal farmers 3. To encourage young entrepreneurs to set up business particularly in rural areas. Select the correct answer using the code given below:

The correct answer is option A (1 and 2 only).

The objectives of setting up small finance banks include furthering financial inclusion by provision of savings vehicles and supply of credit to small business units, small and marginal farmers, micro and small industries, and other unorganised sector entities[1]. The small finance banks shall primarily undertake basic banking activities of acceptance of deposits and lending to unserved and underserved sections including small business units, small and marginal farmers, micro and small industries and unorganized sector entities[2].

Therefore, statements 1 and 2 are correct as they directly align with the stated purposes of SFBs. However, statement 3 is incorrect because the specific purpose of "encouraging young entrepreneurs to set up business particularly in rural areas" is not mentioned in the official objectives of Small Finance Banks. While SFBs do provide credit to small businesses and operate in underserved areas, their mandate is broader financial inclusion rather than specifically targeting young entrepreneurs in rural areas.

1. [1] https://en.wikipedia.org/wiki/Small_finance_bank
2. [2] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 21. Payment Banks: > p. 87