Question

Q. What can be said about the Existence and the Perseverance of informal credit in India? (5)
Answer in about 200-300 words

Answer 1

Answer:

The exploitation of informal money lenders and huge debt burden on the rural labour force can’t be ignored across India till now. The study assesses the underlying causes of existence of informal credit along with available subsidized formal credit in rural areas in India. It builds up a simple theoretical approach based on specific assumptions on entrepreneurial choice intended for sources of credit as investment to their house-based industries and thus evaluates the theoretical frame-work to a self-surveyed data set. It is empirically tested that the decision of the entrepreneurs is formed, basically, by the interaction between the cost of access to formal credit and the relative efficiency of formal and informal lending mechanisms. Institutional credit can’t be effectively served until and unless a proper interlinked credit policy coupled with default management strategies, flexible terms and conditions along with wide branch networks sets up.

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