Question

There is urgent need to expand formal source of credit. Analyse the statement class 10

Answer 1

There is an urgent need to expand the formal source of credit as the informal sources of credit have been increasing and resulting in debt traps.

Explanation:

• The formal source of credit is the major source of improving the economic position and money supply in the economy.
• It normally includes financial institutions such as NABARD and banks.
• With the increasing ease of doing business in any country, there is a requirement for more credit.
• When formal sources are not there, people resort to informal sources which not only exploit the borrowers but also charge a hefty amount of interest.
• To prevent small borrowers from falling into the traps, an urgent need to expand formal sources of credit is there.