Question

3. Why are financial institutions also known as Development Banks' ? Explain
any three limitations of raising loans from financial institutions. (4)​

Answer 1

Answer:

Financial Institutions

Financial institutions are established for the promotion and development of agriculture, industry and other key sectors. They satisfy the developmental needs of the economy.

Explanation:

Financial institutions aim at accelerating the rate of industrial and economic growth of the country.

Financial institutions provide medium and long term financial assistance to the business units in the form of loans, investments, underwriting, guarantee operation etc.

Limitations Of Raising Loans From Financial institutions

Three limitations of raising loan from Financial institutions are :-

• There is favouritism and nepotism in sanctioning loans.

• There is an unnecessary delay in granting loans and disbursing of funds.

• The backward regions do not get any financial assistance from the Financial institutions towards industrial development due to regional disparities.

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