Financial Awareness - Risk, Stability & Emerging Finance
Which of the following statements about Local Area Banks (LABs) in India is CORRECT?
Which of the following statements about Local Area Banks (LABs) in India is CORRECT?
hard Q9 of 15
Step-by-Step Solution
Step 1: Understand Local Area Banks
Local Area Banks are Non-Scheduled Banks that operate in limited geographical areas with restricted functions.Step 2: Analyze options
They are Non-Scheduled Banks with limited area of operation. correctly states their status. They are NOT included in the Second Schedule, cannot operate anywhere freely, and have different capital requirements than Scheduled Banks.Step 3: Why other options are wrong
They are included in the Second Schedule of the RBI Act, 1934. is wrong because LABs are Non-Scheduled. They can operate anywhere in India without restrictions. is incorrect due to geographical restrictions. They have the same capital requirements as Scheduled Banks. is wrong as capital norms differ.Final Answer:
They are Non-Scheduled Banks with limited area of operation. → Option AQuick Check:
Local Area Banks = Non-Scheduled, limited operation area ✅
Quick Trick: LABs = Non-Scheduled Banks with restricted geography.
Common Mistakes:
- Assuming LABs have same status and freedom as Scheduled Banks.
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