What are the features of formal and informal sources of credit?
Answers
Features of formal sources of credit are :
-Formal sources of credit are provided by banks and cooperative societies to the borrowers.
- Reserve Bank of India (RBI) governs the functioning of formal source of credit. RBI periodically checks the interest rate and other details of these sources.
-They follow proper terms of credit which includes collateral, documentation, rate of interest and mode of repayment.
- They provide cheap and affordable credits with common terms of credit for all.
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Features of informal sources of credit are :
- Informal sources of credit are moneylenders, traders, employers, relatives, friends etc.
- There is no government or private organisation that manages or check the credit activities performed by informal sources.
- Their terms of credit are flexible for the personal benefit of the lenders and condition of borrowers.
- They generally charge higher rates of interest and exploit the borrowers for their own benefits.
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Features of formal sources of credit are :
-Formal sources of credit are provided by banks and cooperative societies to the borrowers.
- Reserve Bank of India (RBI) governs the functioning of formal source of credit. RBI periodically checks the interest rate and other details of these sources.
-They follow proper terms of credit which includes collateral, documentation, rate of interest and mode of repayment.
- They provide cheap and affordable credits with common terms of credit for all.
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Features of informal sources of credit are :
- Informal sources of credit are moneylenders, traders, employers, relatives, friends etc.
- There is no government or private organisation that manages or check the credit activities performed by informal sources.
- Their terms of credit are flexible for the personal benefit of the lenders and condition of borrowers.
- They generally charge higher rates of interest and exploit the borrowers for their own benefits.
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