Question

Explain the term formal sources of credit? Write its any two characteristics.

Answer 1

Formal sources of credit

Explanation:

The formal credit sector is regulated by the Reserve Bank of India (RBI). Banks and cooperatives form the formal sector. They have to maintain proper records as per the rules and regulations of the RBI. The interest rates for loans are low compared to the informal sector and they require a collateral in most cases. The rich and the urban people have easy access to the formal credit sector as the network is extensive in urban locations than the rural areas.