Question

Explain with an example, how credit plays a vital and positive role for development.

Answer 1

Credit plays a crucial role in a country’s development. By sanctioning loans to developing industries and trade, banks provide them with the necessary aid for improvement.
This leads to increase in the production, profits and employment. However, caution must be exercised in the case of loans from the informal sector which include high interest rates that may be more harmful than good.
For this reason, it is important that the formal sector gives out more loans so that borrowers are not duped by moneylenders, and can ultimately contribute to national development.

For example- a loan given to a fresh post-graduate for setting up a business might contribute to employment generation, infrastructure development in the near future.

2)for eg:
A person who has enough calibre to start an industry but laks money can start it by taking loans and under favourable condition pays it and starts his industrial life.

A student who is unable to take admission in unversities but is a scholar can use loan as an opportunity.

Farmers can buy new machinery to fasten their production using loans

Answer 2

Credit plays a crucial role in a country’s development. By sanctioning loans to developing industries and trade, banks provide them with the necessary aid for improvement.
This leads to increase in the production, profits and employment. However, caution must be exercised in the case of loans from the informal sector which include high interest rates that may be more harmful than good.
For this reason, it is important that the formal sector gives out more loans so that borrowers are not duped by moneylenders, and can ultimately contribute to national development.
For example- a loan given to a fresh post-graduate for setting up a business might contribute to employment generation, infrastructure development in the near future.