conclusion of formal and informal sources of credit in India 9th class
Answers
FORMAL SOURCE OF CREDIT includes cooperative societies, rural banks etc. which are supervised by the RBI (RESERVE BANK OF INDIA). They charge low rate of interest and follow some specific rules and regulations whereas INFORMAL SOURCE OF CREDIT includes friends, relatives, moneylenders etc. which aren't supervised by anyone. They charge high rate of interest and work according to their needs. In other words, they don't follow any rules or regulations.
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Formal sources:
(i) They follow those sources of credit, which are registered by the government and have to follow its rules and regulations.
(ii) RBI supervises the functioning of formal sources of credit.
(iii) They generally charge lower rates of interest.
(iv) Their main motive is social welfare.
Example: Banks and cooperatives.
Informal sources:
(i) These include those small and scattered units which are largely outside the control of the government.
(ii) There is no organisation which supervises the credit activities.
(iii) They charge much higher rates of interest.
(iv) Their main motive is profit-making.
Example: Moneylenders, traders, employees, relatives and friends, etc.
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