UPSC Prelims Practice Questions — Cabinet approves equity support to Small Industries Development Bank of India

Q1. The Small Industries Development Bank of India was constituted under an Act of Parliament to function as which one of the following in India?

  • A. The Principal Financial Institution for the promotion, financing and development of the Micro, Small and Medium Enterprises sector
  • B. The apex regulator supervising all non-banking financial companies
  • C. The principal institution for agriculture and rural credit
  • D. The apex refinancing institution for the housing finance sector

Q2. In which year did the Small Industries Development Bank of India commence its operations?

  • A. 1988
  • B. 1989
  • C. 1990
  • D. 1991

Q3. With reference to the equity support to SIDBI approved by the Union Cabinet, consider the following statements: 1. The total equity capital infusion approved is Rs 5,000 crore. 2. The capital is to be infused by the Department of Financial Services, Ministry of Finance. 3. The infusion is staggered across three financial years from FY2025-26 to FY2027-28. 4. The largest single-year tranche of Rs 3,000 crore is scheduled for FY2027-28. Which of the statements given above is/are NOT correct?

  1. The total equity capital infusion approved is Rs 5,000 crore.
  2. The capital is to be infused by the Department of Financial Services, Ministry of Finance.
  3. The infusion is staggered across three financial years from FY2025-26 to FY2027-28.
  4. The largest single-year tranche of Rs 3,000 crore is scheduled for FY2027-28.
  • A. 1 and 2
  • B. 3 only
  • C. 2 and 4
  • D. 4 only

Q4. The rationale for the SIDBI equity infusion states that it will help SIDBI maintain its 'CRAR' above 10.50% under a high-stress scenario. In this context, CRAR refers to which one of the following?

  • A. Capital to Risk-weighted Assets Ratio
  • B. Credit to Rural Assets Ratio
  • C. Cash Reserve Adequacy Requirement
  • D. Current Ratio of Assets to Receivables

Q5. With reference to the ownership of SIDBI, consider the following statements: 1. The Government of India is the single largest shareholder of SIDBI. 2. State Bank of India is among the shareholders of SIDBI. 3. Life Insurance Corporation of India holds a stake in SIDBI. 4. IDBI is presently the majority owner of SIDBI. Which of the statements given above are correctly identified?

  1. The Government of India is the single largest shareholder of SIDBI.
  2. State Bank of India is among the shareholders of SIDBI.
  3. Life Insurance Corporation of India holds a stake in SIDBI.
  4. IDBI is presently the majority owner of SIDBI.
  • A. 1, 2 and 3
  • B. 1 and 4
  • C. 2, 3 and 4
  • D. 1, 2 and 4

Q6. SIDBI reaches the largest number of MSMEs principally through which one of the following modes of operation?

  • A. Indirect finance, by extending refinance to banks, SFBs, NBFCs and MFIs which on-lend to MSMEs
  • B. Direct term loans sanctioned to each individual MSME unit
  • C. Underwriting the initial public offerings of MSMEs on stock exchanges
  • D. Issuing sovereign guarantees on behalf of the Government of India

Q7. With reference to SIDBI's two channels of finance, consider the following statements: 1. Under direct finance, SIDBI lends straight to MSME units. 2. Under indirect finance, SIDBI provides refinance to banks, NBFCs, MFIs and other lending institutions. 3. Under its indirect refinance operations, SIDBI lends directly to individual borrowers, bypassing intermediary institutions. Which of the statements given above is/are correct?

  1. Under direct finance, SIDBI lends straight to MSME units.
  2. Under indirect finance, SIDBI provides refinance to banks, NBFCs, MFIs and other lending institutions.
  3. Under its indirect refinance operations, SIDBI lends directly to individual borrowers, bypassing intermediary institutions.
  • A. 1 only
  • B. 1 and 2 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q8. With reference to the revised classification of MSMEs effective from 1 April 2025, consider the following: 1. Micro enterprise — investment up to Rs 2.5 crore and turnover up to Rs 10 crore. 2. Small enterprise — investment up to Rs 25 crore and turnover up to Rs 100 crore. 3. Medium enterprise — investment up to Rs 125 crore and turnover up to Rs 500 crore. 4. Large enterprise — investment up to Rs 250 crore, introduced as a new category under the revised classification. Which of the above is/are NOT correctly stated?

  1. Micro enterprise — investment up to Rs 2.5 crore and turnover up to Rs 10 crore.
  2. Small enterprise — investment up to Rs 25 crore and turnover up to Rs 100 crore.
  3. Medium enterprise — investment up to Rs 125 crore and turnover up to Rs 500 crore.
  4. Large enterprise — investment up to Rs 250 crore, introduced as a new category under the revised classification.
  • A. 1 and 2
  • B. 3 only
  • C. 2 and 3
  • D. 4 only

Q9. The classification of enterprises as micro, small and medium, using composite criteria of investment and turnover, is governed under which one of the following?

  • A. The Micro, Small and Medium Enterprises Development Act, 2006
  • B. The Industries (Development and Regulation) Act, 1951
  • C. The Small Industries Development Bank of India Act, 1989
  • D. The Factories Act, 1948

Q10. SIDBI, NABARD, NHB, EXIM Bank and NaBFID are commonly classified as 'All India Financial Institutions (AIFIs)'. In this context, an AIFI is best described as which one of the following?

  • A. An apex development financial institution set up to provide long-term, sector-specific credit and regulated by the Reserve Bank of India
  • B. A scheduled commercial bank permitted to accept demand deposits from the public across India
  • C. A small finance bank mandated to serve unbanked rural areas
  • D. A non-banking financial company registered under the Companies Act to undertake retail lending

Q11. With reference to the projected outcomes of the SIDBI equity infusion, consider the following: 1. The number of MSMEs financed is expected to rise from 76.26 lakh at end-FY2025 to about 102 lakh by end-FY2028. 2. The scheme envisages a net addition of about 25.74 lakh new MSME beneficiaries. 3. Estimated employment generation is about 1.12 crore. 4. The number of MSMEs financed is targeted to reach 76.26 lakh by the end of FY2027-28. Which of the above is/are NOT correct?

  1. The number of MSMEs financed is expected to rise from 76.26 lakh at end-FY2025 to about 102 lakh by end-FY2028.
  2. The scheme envisages a net addition of about 25.74 lakh new MSME beneficiaries.
  3. Estimated employment generation is about 1.12 crore.
  4. The number of MSMEs financed is targeted to reach 76.26 lakh by the end of FY2027-28.
  • A. 1 and 2
  • B. 2 and 3
  • C. 3 only
  • D. 4 only