Question

differentiate between formal and informal sector loans​

Answer 1

FORMAL SECTOR:

● It is given by banks

● It have a fixed rate of interest

● It benefits poor people a lot.

INFORMAL SECTOR:

●Given by friends or relatives or money lenders

● Don't have a fixed rate of interest

● Poor people fall in Debt traps

Answer 2

Hope it helps you...

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.Hope it helps..