Question

Poor household still deemed on informal sources of credit. Explain ​

Answer 1

(i) Banks are not present everywhere in rural India. (ii) Even when they are present, getting a loan from a bank is much more difficult than taking a loan from informal sources. ... (iv) Informal lenders like moneylenders, know the borrower personally and hence, are often willing to.....

Answer 2

Answer:

Poor households are still dependent on informal sources of credit due to the following reasons -

• Banks are not present everywhere in rural India. Even when they are present, getting  loan from bank is much more difficult than taking a loan from informal sources.
• Bank loans require proper documents and collateral which poor people in India cannot produce to the bank.
• Informal lenders such as moneylenders know the borrowers personally and hence are often wiling to give a loan without collateral.
• The borrowers can approach the moneylenders even without repaying their previous loans.
• Banks do not sanction any loan to the borrowers if they have not cleared the previous loans.