Question

1. Which are the two major sources of credit for rural households in India?
2.Which one of them is the most dominant source of credit for rural households?
3. Why is it the most dominant source of credit?

Answer 1

the two major sources of credit are formal sources of credit and informal sources of credit

1)formal source of credit- the loan that we get from banks and cooperatives and have lower interest rate as compared to informal sources. the working of this type of credit is supervised by the reserve bank of india. they often demand a collateral

2) informal sources of credit- the loan that we get from relatives friends and employers is called informal sources of credit. they have a higher interest rate as compared to formal sources as htere is no one to supervise the credit activities. also people may use some violent methods to get back their loans. there is no collateral