Mention three points of difference between formal sector and informal sector loans.
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FORMAL sector loan include banks and cooperatives whereas, the informal lenders includes money lenders, traders, employees, relatives and friends. ... Formal sources of loan are less risky.
Formal sector loans:
(i) Loans from banks and cooperatives.
(ii) Under supervision of the Reserve Bank of India.
(iii) Reasonable rates of interest.
Informal sector loans:
(i) Loans from moneylenders, relatives, friend, traders, etc.
(ii) No supervision of any institution.
(iii) Very high rates of interest.
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