Features of formal sources of credit are :

-Formal sources of credit are provided by banks and cooperative SOCIETIES to the borrowers.

- Reserve Bank of INDIA (RBI) governs the functioning of formal source of credit. RBI PERIODICALLY checks the interest rate and other details of these sources.

-They follow PROPER terms of credit which includes collateral, documentation, rate of interest and mode of repayment.

- They provide cheap and affordable credits with common terms of credit for all.

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Features of informal sources of credit are :

- Informal sources of credit are moneylenders, traders, employers, relatives, friends etc.

- There is no government or private organisation that manages or check the credit activities performed by informal sources.

- Their terms of credit are flexible for the personal benefit of the lenders and condition of borrowers.

- They generally charge higher rates of interest and exploit the borrowers for their own BENEFITS.

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