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| 1. |
Difference between formal and informal source of credit |
| Answer» Formal source of credit:a) Loans that are given by banks and co-operative institutions are called Formal sector of credit.b) The functioning of these banks and co-operative institutions are supervised by Reserve Bank of India – RBI.c) These institutions are required to report to the RBI the rate of interest, amount lending, etc.d) Borrower is required to submit collaterals and documents.Informal source of credit:a) Loans that are given by money lenders, friends and relatives are called Informal source of credit.b) They are not supervised by Reserve Bank of India – RBI.c) They can lend money at any interest rate and use any means to get back their money.d) Borrower is not required to submit collaterals and documents. | |