explain any three reasons for the banks and cooperative societies to increase their landing facilities in rural areas
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Answer:
Banks and cooperatives should increase lending facilities in rural areas:
1. The informal sector lends at a high-interest rate in rural areas so the cost for the borrower is much more.
2. When the cost of borrowing of more, large portion of income goes in repaying loans rather than investing it.
3. Often it leads to debt trap where the amount to be repaid is more than the borrower's income and he has to borrow more.
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Reasons for the banks and cooperative societies to increase their landing facilities in rural areas
- To protect the rural people from the high-interest rates charged by the informal sources.
- To create awareness about the formal government sources for loans.
- If the cost of borrowing more, a more portion of income works in repaying loans moderately than investing it.
Explanation:
- Banks and co-operative societies are the formal sectors who makes loans, deposits and provides other financial services to the people.
- These organisations are providing interests for loans at reasonable value.
- To provide cheap loans and credit schemes all over India, banks and co-operative societies are increasing their branches in rural remote areas.
- We need to motivate the people in rural areas to start small businesses with reasonable interests.
- By giving loans at cheaper interest rate or zero –EMI cost, they encourage the agricultural activities, small scale industries.
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