Question

Mention the 3 points of difference between formal and informal

Answer 1

Formal sectors- 1.Poor people who do not have assets can be pledged

2.Very high rate of interest

3.Eg: Traders and moneylenders

Informal sectors- 1.Rich people who have assets can be pledged

2.Low rate of interest

3.E.g.: Banks and cooperative societies

Answer 2

FORMAL SECTOR : 
1. It consist loans from banks and cooperatives . 
2. These loans are supervised by the RBI
3. Terms of credit is fixed.
4. Collateral is compulsory 
5. Rate of interest is not very high.
6. It compromises 52 % of the total loans given in the country.

But , many people from rural are prefer informal sector rather than formal sector because they lack collateral.

INFORMAL SECTOR :
1. It consist of moneylender , your family , friends etc.
2. They are not under the supervision of RBI
3. Terms of credit is not fixed
4. rate of interest is high 
5. It compromises 48 % of the credit.

Since informal sectors are not under the supervision of RBI , many times they misuse their power and charge hight interest rate due to which poor people suffer from DEBT TRAP