SSC CGL 2023 PYQ — Question 49

The correct answer is option 4 i.e. A microfinance loan should be linked with a lien on the deposit account of the borrower.

These loans are aimed at promoting financial inclusion and supporting small businesses, self-employment, and other income-generating activities.

Correct Statements:

• A microfinance loan is given to a household having an annual household income up to Rs. 3,00,000: This is correct, as the Reserve Bank of India (RBI) defines eligibility for microfinance loans based on the annual income of the household. The income limit ensures that microfinance loans target low-income families.
• A microfinance loan is a collateral-free loan: This is correct. Microfinance loans are typically unsecured loans, meaning they do not require any collateral from the borrower. This makes them accessible to people who do not have assets to pledge.
• When giving a micro-loan, a household means an individual family unit, i.e., husband, wife, and their unmarried children: This is correct. The definition of a household in this context includes the basic family unit, which is important for determining eligibility and loan limits.

Incorrect Statement:

• A microfinance loan should be linked with a lien on the deposit account of the borrower: This is incorrect because microfinance loans are designed to be accessible and collateral-free. Linking a microfinance loan with a lien on the deposit account would contradict the purpose of microfinance, which is to provide financial assistance to those who may not have significant savings or assets. This requirement would impose an additional burden on borrowers and could discourage them from seeking microfinance services.

Microfinance institutions are meant to empower low-income households by providing them with the necessary financial support without stringent conditions like liens or collateral, thereby promoting financial inclusion.