Question

how are formal and informal sources of credit different from each other​

Answer 1

Answer:

Formal and informal sources of credit is totally different from each other...by the following reasons::

• Formal sources: In this sector rules and regulations are be followed..Repayment of loan is easy.. In this sector Interest rate is low ...terms and conditions is not tough..
• Infomal sources: In this sector rules and regulations are not be followed.. repayment of loan is tough..In this sector Interest rate is high.. terms and conditions are rigid.....

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Answer 2

Answer:

Formal source of credit:

(a)  Loans that are given by banks and co-operative institutions are called Formal sector of credit.

(b)  The functioning of these banks and co-operative institutions are supervised by Reserve Bank of India- RBI.

(c)  These institutions are required to report to the RBI the rate of interest, amount lending, etc.

(d)  Borrower is required to submit collaterals and documents.

Informal source of credit:

(a)  Loans that are given by money lenders, friends and relatives are called Informal source of credit.    

(b)  They are not supervised by Reserve Bank of India - RBI.

(c)  They can lend money at any interest rate and use any means to get back their money.

(d)  Borrower is not required to submit collaterals and documents.

Explanation: