Question

3. Read the information given below and select the correct option – (1) Arun has seven acres of land. He is one of the few persons in sonpur to receive bank loan for cultivation. The interest rate on the loan is 8.5per cent annum, and can be repaid anytime in the next three years. Arun plans to repay the loan after harvest by selling a part of the crop. He then intends to store the rest of the potatoes in a cold storage and apply for a fresh loan from the bank against the cold storage receipt. The bank offers this facility to farmers who have taken crop loan from them. Arun is one of the few people in sonpur to take a bank loan loan because a) Other people in the village prefer to borrow from the moneylenders. b) Banks demand collateral which everyone cannot provide. c) Interest rate on bank loans is same as the interest rate charged by the trader

Answer 1

Answer:

The correct answer is Banks demand collateral which everyone cannot provide.

Explanation:

The correct answer is Banks demand collateral which everyone cannot provide because most of the farmers are poor and have small lands or do not even have lands. But arun has 7 acres of land and can cultivate it and this becomes his collateral which he can submit  in the bank. But on the other hand, farmers are mostly landless labourers and do not have anything to give as a collateral. Hence, they ask loans from money lenders which offer high interest rates.

Hope it was helpful