Question

why do we need to expand formal sources of credit in india?

Answer 1

we need to expand formal sources of credit in india because:-

(1) There is no organisation which supervises the credit activities of lenders in the informal sector.

(2) There is no one to stop them from using unfair means to get their money back.

(3) Formal sources of credit are less risky and they charge less rate of interest .

(4) The RBI supervises the functioning of formal sourcesif loans.

Answer 2

We need to expand formal sources of credit in India because-

1. Formal sources of credits like established banks are always a safer option to avail loans because they are authenticated and verified financial institutions that provide loans with proper formal documentation.

2. The rate of interest is reasonable at formal sources of credit whereas the interest charged at informal sources is quite inflated and excessive.

3. Informal sources of credit are often linked to illegal procedures and do not provide a hundred percent safe validation about the source of money.