differentiate between formal and informal sector
Answers
Answer:
The formal sector consists of the businesses, enterprises and economic activities that are monitored, protected and taxed by the government, whereas the informal sector is comprised of the workers and enterprises that are not under government regulation.
formal sector are activities which are taxed and monitored by the government and the activities involved are included in the Gross Domestic Product(GDP). In contrast to formal economy is the informal sector which is neither taxed nor included in the GDP and Gross national product (GNP) of a country.
in formal sector collateral is required while in informal there is no requirement of any collateral......
Answer:
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