Question

"The rich households are availing cheap credit from formal lenders whereas the poor households have to pay a heavy price for borrowing." Comment.

Answer 1

Answer:

(i) The formal sector still meets only about half of the total credit needs of the rural people.

(ii) The remaining credit needs are met from informal sources.

(iii) Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers.