READ THE SOURCE GIVEN BELOW AND ANSWER THE QUESTION THAT FOLLOW:
The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. you can see the various sources of credit to rural households in India. Is more credit coming from the formal sector or the informal sector? The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. Similarly the RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. Higher cost of borrowing means a larger part of the earnings of the borrowers is used to repay the loan. Hence, borrowers have less income left for themselves (as we saw for Shyamal in Sonpur). In certain cases, the high interest rate for borrowing can mean that the amount to be repaid is greater than the income of the borrower. This could lead to increasing debt (as we saw for Rama in Sonpur) and debt trap. Also, people who might wish to start an enterprise by borrowing may not do so because of the high cost of borrowing.
to be granted — the purpose, amount, interest to be charged, repayment schedule etc. Also, it is the group which is responsible for the repayment of the loan. Any case of nonrepayment of loan by any one member is followed up seriously by other members in the group. Because of this feature, banks are willing to lend to the poor women when organised in SHGs, even though they have no collateral as such. Thus, the SHGs help borrowers overcome the problem of lack of collateral. They can get timely loans for a variety of purposes and at a reasonable interest rate. Moreover, SHGs are the building blocks of organisation of the rural poor. Not only does it help women to become financially self-reliant, the regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.
ANSWER THE FOLLOWING MCQs BY CHOOSING THE MOST APPROPRIATE OPTION:
Q1= how many types of loan are there?
Two
Three
Four
One
2=who are including in informal landers?
Moneylanders
Traders
Friends
All of above
3=who charged much higher interest rate on loan?
Informal lander
Formal landers
Bank
None of the above
4=why people does start the enterprice?
Low cost of borrowing
High cost of borrowing
Mid cost of borrowing
All of these.
Answers
Answered by
0
Answer:
1 a. Two
2d. All of the above
3a. Informal lender
4a. Low cost of borrowing
Explanation:
1 a. The two types of loans are:
- formal sector loans
- informal sector loans
2d. Moneylenders, traders, friends all come under informal lenders.
3a. Informal lender charges the highest rate of interest since there are no regulating bodies to keep a check.
4a. Low cost of borrowing is a benefit for people who want to start an enterprise.
Similar questions