Compare Formal sector loans and Informal sectors loan
Answers
Answer:
Formal loan :-
Less interest
Supervised by RBI
Requires more document work
Harrassment is not done for recovery
Formal sector generally grang loan for the productive purpose
Collateral is required
Explanation:
Informal:-
Answer:
People obtain loans from various sources. The various types of loans are grouped as formal sector loans and
informal sector loans.
Formal Source:
(i) These include loans from banks and cooperatives.
(ii) The Reserve Bank of India supervises the functioning of formal sources of loans.
(iii) The rich households avail cheap credit from formal lenders.
Informal Source:
(i) It includes moneylenders, traders, employers, relatives and friends, etc.
(ii) There is no organisation which supervises the credit activities of lenders in the informal sector. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans.
(iii) The poor households to pay a heavy price for borrowing from informal sources.
Explanation: