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Different between formal loan and informal loan? |
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Answer» Informal loan - 1) These include those small and scattered units which are largely outside the control of government. 2) There is no organization which supervises the credit activities. 3) They charge much higher rates of interest. 4) The main motive is profit- making. For example- Moneylender, trader, etc. Formal sources - 1) These sources are registered by the government and have to follow its rule and regulations. 2) RBI supervises the functioning of formal sources of credit. 3) They generally charge lower rates of interest. 4) Their main motive is social welfare. Exp- Banks and cooperatives. |
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