Question

What is the difference between formal and informal sector of credit?

Answer 1

formal

1. less interest

2.follow rules

3. Recognized by govt.

informal

1. more interest

2.do not follow rules

3.not recognized by govt.

Answer 2

hey buddy,

here is your answer ..

$formal \: sources.$

•These sources of credit are registered by the government and have to follow its rules and regulations.

•RBI supervises the functioning of formal sources of credit.

•They generally charge lower rates of interest.

•Their main motive is social welfare.

Example: Banks and cooperatives.

$informal \: sources.$

•These include those small and scattered units which are largely outside the control of the government.

•There is no organisation which supervises the credit activities.

•They charge much higher rates of interest.

•Their main motive is profit-making.

:- Example: Moneylenders, traders, employees, relatives and friends, etc.

I hope it helps you

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