what do you know about formal and informal sources of cradit india.
Answers
The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. The RBI supervises the functioning of formal sources of credit in India, The RBI monitors the banks in maintaining cash balance. Similarly, the RBI sees that the banks give loans not just to profit making businesses and traders but also to small cultivators, small scale industries etc. There is no such organisation which supervises the credit activities of lenders in the informal sector. They can lend at what ever interest rate that they choose. Cheap and affordable credit is crucial for the country's development. Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that the dependence on informal sources of credit reduces.
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Formal sources of credit are those which follow every condition n regulations to provide loans to people. they give loan on colletral. there's a reserve Bank to govern these sectors.
ex == cooperative society n banks.
Informal sources of credit are those which cannot follow indian rules n regulations. they just give loan to people without colletral. there's no governing body.
ex == money landers n landlord
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