Question

“Most of the poor households are still dependent on informal sources of credit”. Why ? Did you see the effectiveness of Indian banking system in this situation?
(Class 10 SSt Sample Question Paper)

Answer 1

SOLUTION:

Banks are not present everywhere in rural India where is informal sources like money lenders are easily available. Money lenders provide loans to the poor people without any collateral. Formal sources like banks give loans only for productive purposes where is informal sources provide credit for always reasons. The methods of running business of formal sources are complicated and poor households cannot meet their conditions. So most of them are still dependent on informal sources of credit. Yes this situation shows in effectiveness of Indian banking system.

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