Should there be a supervisor, such as the Reserve Bank of India, that look into the loan activities of informal lenders? Why would its task be quite difficult?
Answers
Answer:
There should be a supervisor for checking the loan activities of Informal lenders. However, its task is quite difficult because informal sector constitutes many people who have different kind of business of their own, besides lending. They are not registered with the government.
Informal credit supervision
Explanation:
The informal credit system is not supervised. It would be nice if the government can establish a body to monitor these informal lenders and borrowers. Something similar to the Reserve Bank of India (RBI) that supervises the formal credit system. But the task would be quite difficult because the informal sector comprises of money lenders who are not registered entities. Also the transaction is paperless and does not involve any documents in many cases. There are no bank transfers to follow; most transactions happen in cash that's physically handed over.