Question

Why are formal souraces of credit proffered over informal sources of credit ? Give any 3 reasons

Answer 1

(1)in formal credit the interest is cheaper. (2) formal credit is controlled by private cooperatives. but informal includes money lenders land lords etc. (3) there is a chance of debt trap in informal credit but in formal credit there is no chance of debt trap

Answer 2

Answer:

hope it helps:

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FORMAL SECTOR

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•We can get formal sector credit loans from Bank, LIC etc

•They are under the control of RBI

•If we don't pay the loan back the take legal action

•They give loan in reasonable interest

•Collateral is necessary

•This take more time for process

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INFORMAL SECTOR

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•We can get informal sector credit loans from Money lender, Trader, relatives etc

•They are not under the control of RBI

•If we don't pay back the loan they may take illegal action

•They give loan in high interest

•Collateral is not necessary ,it depends on the people's will and wish

•They actually don't take more time for the process

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