Question

why do we need to expand formal sources of credit in India. Explain
plz answer​

Answer 1

Explanation:

Thus it is necessary that banks and cooperatives increase their lending particularly in the rural areas so that the dependence of the poor on informal sources of credit reduces

Answer 2

Answer:

The cost of informal loans is much higher and often leads to a debt trap. Also people who might wish to start a new enterprise by borrowing may not do so because of the high cost of borrowing in such a case. ii. Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers. Thus it is necessary that banks and cooperatives increase their lending particularly in the rural areas so that the dependence of the poor on informal sources of credit reduces. iii. It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans.