Question

explain in detail the two different credit situation.

Answer 1

credit situation can be divided into two categories:
1. Formal sector- It includes banks and cooperative that extends loans to household for entrepreneurship and other personal needs . The rate of interest are charged by them is low.
2.Informal sector - It includes moneylenders traders employers relatives and friends .The moneylenders generally charge at a high rate of interest.

Answer 2

Answer:

These are as follows:

Formal Sector- It includes banks and cooperatives that extend loans to households for entrepreneurship and other personal needs. The rates of interest charged by them are low.

Informal Sector- It includes moneylenders, traders, employers, relatives, and friends.

Explanation:

Formal sources follow the sources of credit that are registered by the govt. and have to follow its rules and regulations whereas informal sources include those small and scattered units which are largely outside the control of the government.

In the formal sector, loans from banks and cooperatives are included. In the Informal sector, loans from moneylenders, traders, employers, relatives, and friends are included.