Question

Who supervise the credit activities of lenders in formal and informal sector?

Answer 1

The Reserve Bank of India supervises the credit activity of lenders in formal and informal sectors.

But there is no organization which can control or supervises the informal sectors and they can charge higher rate of interests to their customers according to their own terms.

RBI basically supervises the credit balance of the banks and monitor on banks that they should not give the loans or credit to earn higher rate of interest and they must maintain the public interest also.  

Answer 2

The Reserve Bank of India supervises the credit activity of lenders in the formal sector and in the informal sectors there is no organization that supervises the credit activities of lenders in the informal sector.

Explanation:

• In the formal sectors, the loans are given by the banks and other cooperative agencies managed by the government.  

• The Reserve Banks of India supervises the working of formal sources of loans. The RBI monitors the cash balance of the commercial banks.  

• In the informal sectors, the private agencies can lend at whatever interest rate they choose.

• The informal sector charge higher interest on the loans in comparison to the formal sectors.

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