Question

What are formal sources of creadit preferred over the informal source of creadit ? Give three reasons

Answer 1

Formal sources of credit is prefered over informal because:-

1} They charge less intrest as compared to informal sources of credit.

2} They give loan for productive processes, so their is no chance of debt trap.

3} They are supervised under RBI

Answer 2

1. Interest rate is fixed comparatively low.

2. Possibility of debt trap is less.

3. There is no exploitatation as in the case of informal sector.

4. It offers cheap and affordable credit.