Highlight the formal and informal credit sources in india?
Answers
The loan extended by the banks or the other financial institutions is called formal credit. This kind of credit is generally less and is paid in installments. Such formal credits by financial institutions is under supervision of the Reserve Bank of India. The R.B.I. controls and checks the method of payment, period of credit, interest rate etc.
The informal method of credit is when the credit is borrowed from friends, relatives or money lenders. This informal credit method is difficult because there is no regulation in regard to the interest paid. They charge more rate of interest than a person's income. It becomes very difficult for the borrower to pay the loan.
Following is a straightforward answer:
Formal - Banks, National Bank for Agriculture and Rural Development (NABARD) etc.
Informal - People who give credits for mortgage, self-help groups, friends, landlords, etc.
Hope this helps!
Regards,
Soham Patil.
Answer:
HERE IS YOUR ANSWER DEAR...
Explanation:
(A) Formal credit sources
(i) Commercial Banks (ii) Central Bank (iii) Government Agency (iv) LIC (v) Registered Chit Fund Companies (vi) UTI (vii) Mutual Fund Institution
Above mentioned all formal financial institutions accept savings and sanction loans to the people, companies and other agencies.
(B) Informal credit sources
(i) Local moneylenders: village mahajan and sarafs or gold smiths in the rural areas or in the cities.
(ii) Land lords: this class include the big, middle and small category land-lords. They accept as collateral, title documents of agricultural land, dwelling unit, factories and issue loans to needy persons and companies.
(iii) Self help groups: thrift and credit societies, union of government servants, cooperative societies andfarmers, labourers, domestic helpers and housewives organizations. Theyalso accept savings fromdifferent people and help their needy members.
(iv) Chit fund companies and private finance companies are very powerful informalfinancial institutions. Some of them are working very effectively in villages and cities and all pay more interest to depositors than the formal agencies and institutions.