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Distinguish between formal and informal credit sources 5 marks question |
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Answer» Informal sector credit: ◆Includes moneylenders, traders, friends, relatives etc. ◆Repeated borrowing can lead to debt trap. ◆They impose very tough unreasonable terms of credit on borrowers. ◆No collateral is required. ◆There is no organisation to supervise its functioning. Formal sector credit: ◆Includes bank and cooperatives. ◆Reasonable rate of interest is charged. ◆Terms of credit are fair and reasonable. ◆Banks require collateral and proper documentation for getting a loan. ◆The RBI supervises its functioning. |
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