Question

It is a 5 mark question.

Answer 1

Answer:

Absence of collateral is one of the major reasons which prevents the poor from getting bank loans. . Informal lenders like moneylenders know the borrower personally and hence, are often willing to give a loan without a collateral.

Reason;

1) Banks are not present everywhere in rural India.

2) Even if they are present, getting a loan from a bank is much more difficult than taking a loan

from informal sources.

3) Bank loans require proper documents and a collateral. Absence of collateral is one of the major reasons which prevents the poor from getting bank loans.

4) Informal lenders like moneylenders know the borrower personally and hence, are often willing to give a loan without a collateral.

5) The borrowers can, if necessary, approach the moneylender even without repaying their earlier loans.

6) However, the moneylenders charge very high rates of interest, keep no records of the transactions and harass the poor borrowers.

hope it helps you!!