What is the role of formal sector for loan in rural area
Answers
Explanation:
This is generally related to the concept of how there are formal and informal sectors in country's and how to take credit from them in the shape of a loan.
The loan which is given by the banks is known as the formal sector.
So banks indeed play a vital role in giving out loans to rural and urban areas both. However one is more important than the other one due to policy and schemes and development factors.
90% of the loan which is given out in urban sectors is done through the formal sector, i.e banks.
According to statistics gathered in 2003, in the Indian economy 85% of loans in the rural areas was taken from informal sector. Informal sectors being friends, family, acquaintances, etc.
Answer:
Loans disbursed by formal sector banks are monitored by Reserve Bank of India. RBI ensures that poorer section of the citizens of India staying in rural areas comprising farmers, agricultural laborers, and other poorer section can get the loan at the lower interest as fixed by RBI from time to time.
Cooperative rural banks are formed and operated in the rural area to disburse the loan. This is for the welfare of the poorer section to keep them safe from informal money launders who charge a higher interest from the rural poor farmers.