Question

Differentiate between formal sector credit andinformalsectorcredit​

Answer 1

Answer:

1). Formal sector- These resources work under the supervision of RBI.

Informal sector- They do not work under any government organisations.

2). Formal sector- The rate of interest is very high.

Informal- The rate of interest is very low.

3). Formal sector- Commercial banks, cooperative banks are main source of formal credit.

Informal- Relative,money lender and land lords are main source of informal credit.

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Answer 2

Answer:

Formal sources:

1.These sources of credit are registered by the government and have to follow its rules and regulations.

2.RBI supervises the functioning of formal sources of credit.

3.They generally charge lower rates of interest.

4.Their main motive is social welfare.

Example: Banks and cooperatives.

Informal sources:

1.These include those small and scattered units which are largely outside the control of the government.

2.There is no organisation which supervises the credit activities.

3.They charge much higher rates of interest.

4.Their main motive is profit-making.

Example: Moneylenders, traders, employees, relatives and friends, etc.