Compare and contrast the conditions for taking loan from formal and informal sources
Answers
Answer:
Explanation:
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Answer:
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Formal sector:-
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=> Includes banks and cooperatives.
=> The Reserve Bank of India supervises the functioning of formal sources of loans.
=> Charges a low interest rate.
=> Cannot use unfair means.
=> Borrowers have larger income left for themselves.
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Informal sector:-
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=> Includes moneylenders, traders, employers, relatives and friends, etc.
=> There is no organisation which supervises the credit activities of lenders in the informal sector.
=> Charges very high interest rates.
=> There is no one to stop them from using unfair means to get their money back.
=> Borrowers have less income left for themselves.
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NOTE:-
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=> For the rural poor, only formal sources of credit are deemed best but for the purpose the banks and co operatives have to expand their reach in the rural areas.
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