Question

difference betwen formal and informal source of credit?​

Answer 1

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Formal sources follow the sources of credit that are registered by the govt. and have to follow its rules and regulations whereas in informal sources include those small and scattered units which are largely outside the control of the government

Answer 2

Answer:

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.

Explanation: