Question

measures to expand formal sector credit in india

Answer 1

The people in the rural areas are depending upon informal sources of credit.

The moneylenders take a huge tax from them.As there is no other banks they r willing to take money frm them.

As most of the people in rural areas are illiterate they can easily be cheated by the moneylenders or landlords.

The people in rural areas do not hv any choice to get loan frm any formal sector.

Answer 2

(i) High cost of borrowing leads to a major share of earnings going into payment of interest on the loan.
(ii) Sometimes the higher interest rate leads to the requirement to pay more than the earnings, thus falling into a debt-trap.
(iii) Borrowers falling into debt-traps discourage more people from borrowing, thus reducing development of the country.
(iv)Banks and cooperative societies lending to more borrowers will lead to higher incomes and many people could then borrow cheaply for a variety of needs like growing crops, set-up business or small-scale industries.