Question

explain two features each of formal sector loans and informal sector loans​

Answer 1

Two features of Formal Sector resources : ‐

1. These are those resources which work under the supervision of RBI ( Reserves Bank Of India ) and follow rules and regulations formed by it

2. They offer liw rate of Interest and hence theres no exploitation from Lender's side

Two Features of Informal Sector Resources : ‐

1. These are those sector who arent under any Govt. Organization and so not follow rules and regulations formed by the Govt.

2. High Rate of interest is charged and use unfair means to get their money back and in most of the cases they exploit the borrower , eventually putting him into debt trap

Answer 2

Features of formal sector loans are:

(i) Formal sectors provide cheap and affordable loans and their rate of interest is monitored by Reserve Bank of India.

(ii) Formal sector strictly follows the terms of credit, which include interest rate, collateral, documentation and the mode of repayment.

Features of informal sector loans are:

(i) Their credit activities are not governed by any organisation, therefore they charge a higher rate of interest.

(ii) Informal sector loan providers know the borrowers personally, and hence they provide loans on easy terms without collateral and documentation.