Question

What is Difference between Formal or INformal Source of credit...

Answer 1

Formal source of credit:

 

a)   

Loans that are given by banks and co-operative

institutions are called Formal sector of credit.

b)   

The functioning of these banks and co-operative

institutions are supervised by Reserve Bank of India – RBI.

c)   

These institutions are required to report to

the RBI the rate of interest, amount lending, etc.

d)   

Borrower is required to submit collaterals and

documents.

  

Informal source of credit:

a)   

Loans that are given by money lenders, friends

and relatives are called Informal source of credit.

b)   

They are not supervised by Reserve Bank of

India – RBI.

c)   

They can lend money at any interest rate and

use any means to get back their money.

d)   

Borrower is not required to submit collaterals

and documents.

Answer 2

$\huge\mathfrak\purple{Hey}$

$\huge\mathfrak {Answer}$❤

$<b><font color=red>$

♦FORMAL SOURCE OF CREDIT➡

✔It is supervised by RBI

✔It follows some basic rules and regulations laid by govt.

✔It charges low rate of interest.

✔EXAMPLE -Banks ,cooperatives etc

$<b><font color=blue>$

♦INFORMAL SOURCE OF CREDIT➡

✔it is not supervised by RBI

✔Not bound to follow rules and regulations

✔Charge high rate of interest

✔EXAMPLE-moneylender etc.

THANK YOU❤