Why are the banks not advancing loans to the poor people?
Answers
Answer:
It is a misconception to say that poor people can not get loan from banks. Banks consider loans based on viability of the scheme for which the loan is sought, technical feasibility, economic viability, character/capacity/credit worthiness of the applicant etc. As a matter of fact, certain loan facilities and schemes are exclusively reserved for poor people. For example, loans under DIR(Differential Interest Rate) Scheme in which very low income group applicants alone can be considered and for such loans the prescribed rate of interest is a meager 4% simple interest. And banks are required to release loans under the DIR scheme at not less than 1% of their loans. Further all loans sponsored by the Government (where the Government provides subsidy) are given to people who are poor and economically underprivileged. Moreover sizeable part of loans given by banks under “priority sector advances” viz agricultural finance, small industries finance, small business finance etc are utilised by economically poor section of the society. Besides most of the education loans are utilised by students belonging to the economically disadvantaged section of the society. It is mandatory for banks to give loans for the priority sector at not less than say 40% of their loans and advances. Hence, it would not be fair to say that poor people are not getting loans from the banks.
Answer:
-poor people do not have anything to offer as collateral security.
-banks are not available in many rural areas.
-some banks do not consider the poor people as credit worthy.
-poor and ignorant people find it difficult to produce the required document