Micro credit in India comes under which one of the following activitie

Micro credit in India comes under which one of the following activities ?

[amp_mcq option1=”Commercial Banking” option2=”Cooperative Banking” option3=”Private Banking” option4=”Non-Banking Finance” correct=”option4″]

This question was previously asked in

UPSC Combined Section Officer – 2024

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The correct answer is Non-Banking Finance (D).

Micro credit in India is significantly provided by Microfinance Institutions (MFIs), many of which are registered as Non-Banking Financial Companies (NBFCs). While commercial and cooperative banks also offer microcredit, the non-banking finance sector, particularly dedicated MFIs, plays a crucial role in extending financial services to the unbanked or underbanked population, which is the primary target of microcredit.

NBFC-MFIs are a specific category of NBFCs regulated by the Reserve Bank of India (RBI) that primarily lend to low-income groups. They are distinct from traditional commercial, cooperative, or private banks, although these banking types can also offer microfinance products. The question asks what activity microcredit *comes under*, and given the prevalence of MFIs as NBFCs and the specialized nature of microfinance often operating outside traditional banking structures for wider reach, Non-Banking Finance is the most appropriate overarching category among the options provided that encompasses a large part of microcredit activity.

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