Why are service conditions of formal sector loans better than informal

1.	Why are service conditions of formal sector loans better than informal sector ? Explain.
Answer» Formal sector loans : These resources work under the supervision of the Reserve Bank of India. The rate of interest is very low. Commercial banks, cooperative societies are the main source of formal source of credit. They provide ensured services and also have a set protocol for deliverance of loan activities . In formal sector interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit. The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

Why are service conditions of formal sector loans better than informal sector ? Explain.

Answer»

Formal sector loans :

These resources work under the supervision of the Reserve Bank of India. The rate of interest is very low. Commercial banks, cooperative societies are the main source of formal source of credit. They provide ensured services and also have a set protocol for deliverance of loan activities . In formal sector interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit. The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

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