Question

difference between informal and formal sector of loans​

Answer 1

Answer:

here is you answer..........

Explanation:

• Formal sector loan is given by commercial bank whereas informal sector loan is given by money lenders, big merchants, etc.

• Formal sector loan required collateral where as informal sector loans does not require collateral.

• Formal sector loans has a low rate of interest where as informal sector loans has a very high rate of interest.

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Answer 2

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Formal source of credit:

(a)  Loans that are given by banks and co-operative institutions are called Formal sector of credit.

(b)  The functioning of these banks and co-operative institutions are supervised by Reserve Bank of India- RBI.

(c)  These institutions are required to report to the RBI the rate of interest, amount lending, etc.

(d)  Borrower is required to submit collaterals and documents.

Informal source of credit:

(a)  Loans that are given by money lenders, friends and relatives are called Informal source of credit.

(b)  They are not supervised by Reserve Bank of India - RBI.

(c)  They can lend money at any interest rate and use any means to get back their money.  

(d)  Borrower is not required to submit collaterals and documents

Explanation: