Question

Find the incorrect option
A)The RBI supervises formal sources of loans
B)There is no organisation to supervise informal credit
C)Cost of borrowing in the formal sector is high
D)Banks are not present in every where in rural india

Answer 1

The incorrect option is cost of borrowing in the formal sector is high due to following reasons:

- According to the rate of interest cost of borrowing is higher in informal credit markets than in formal market as the basic objective of lending is earning the profit in both formal and informal market as it pursues weakly in formal sector .

- During sanctioning much attention is given to some aspects like target specific ,branch expansion.

- Public gives deposits to formal financial institutes which leads to huge liquid reserves.

So, option (C) is the answer