Question

Distinguish between formal and informal sector of credit

Answer 1

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.
 

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Answer 2

1...formal sector include banks and society coperatives....but informal include relatives ,moneylenders.....
2...there is high interest in informal sector and low intrest in formal sector....