Manav needs a loan to set up a small business. On what basis will Manav decide
whether to borrow from the bank or the moneylender? Discuss.
Answers
Answer:
(i) Firstly, he must have a collateral or asset which can guarantee his loan. If he lacks such an asset, he cannot get a loan from the bank. In this scenario, he will have to go to a moneylender, even though the latter charges a higher interest rate.
(ii) Secondly, if Manav is not aware of the banes of borrowing from the informal sector, he might not even consider taking a bank loan.
(iii) Thirdly, if there are no banks in or near his area of residence or work place, then he will borrow from a moneylender.
(iv) Comparison of rate of interest of banks and money lenders which will allow him to choose the one with lower rate of interest.
Hope it helps!!!!!!!!!
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ʜᴇʀᴇ ɪs ᴜʀ ᴀɴsᴡᴇʀ ⏬⏬
ᴛʜᴇ sᴀʟɪᴇɴᴛ ᴘᴏɪɴᴛs ɴᴇᴇᴅ ᴛᴏ ʙᴇ ᴄᴏɴsɪᴅᴇʀᴇᴅ ᴛᴏ ᴅᴇᴄɪᴅᴇ ᴡʜᴇᴛʜᴇʀ ʟᴏᴀɴ ᴛᴏ ʙᴇ ʙᴏʀʀᴏᴡᴇᴅ ғʀᴏᴍ ʙᴀɴᴋ ᴏʀ ᴍᴏɴᴇʏ ʟᴇɴᴅᴇʀ ᴀʀᴇ sᴛᴀᴛᴇᴅ ʙᴇʟᴏᴡ:
1)ᴅᴏᴄᴜᴍᴇɴᴛs ᴀɴᴅ sᴏᴍᴇᴛʜɪɴɢ ᴛᴏ ʙᴇ ᴍᴏʀᴛɢᴀɢᴇᴅ ᴀs sᴇᴄᴜʀɪᴛʏ ғᴏʀ ʀᴇᴘᴀʏᴍᴇɴᴛ ᴏғ ᴀ ʟᴏᴀɴ ᴀʀᴇ ʀᴇϙᴜɪʀᴇᴅ ʙʏ ʙᴀɴᴋs. ᴛʜɪs ᴅᴏᴄᴜᴍᴇɴᴛᴀᴛɪᴏɴ ᴍᴀʏ ɴᴏᴛ ʙᴇ ᴘᴏssɪʙʟᴇ ғᴏʀ ᴀ ᴘᴏᴏʀ ғᴀʀᴍᴇʀ ᴏʀ ᴘᴇʀsᴏɴ.
2) ᴄᴏᴍᴘᴀʀɪsᴏɴ ᴏғ ʀᴀᴛᴇ ᴏғ ɪɴᴛᴇʀᴇsᴛ ʙᴇᴛᴡᴇᴇɴ ᴛʜᴇ ʙᴀɴᴋ ᴀɴᴅ ᴍᴏɴᴇʏ ʟᴇɴᴅᴇʀ.
3) ᴍᴏᴅᴇ ᴏғ ʀᴇᴘᴀʏᴍᴇɴᴛ ʟɪᴋᴇ ᴍᴏɴᴛʜʟʏ ʙᴀsɪs ᴏʀ ʏᴇᴀʀʟʏ ʙᴀsɪs.
4) ʀᴇᴘᴀʏᴍᴇɴᴛ ʙʏ ᴄᴀsʜ ᴏʀ ɪɴ sᴏᴍᴇ ᴏᴛʜᴇʀ ғᴏʀᴍ.
5)ᴘᴇɴᴀʟᴛʏ ᴀᴘᴘʟɪᴄᴀʙʟᴇ ɪɴ ᴄᴀsᴇ ᴏғ ᴅᴇғᴀᴜʟᴛᴇʀ.