Question

Why formal sources of credit preferred informal sources of credit

Answer 1

Formal source of credit which includes loans from Bank Cooperative need to be expanded in India to save the poor household from exploitation informal source of credit there is no organisation to supervise this type of credit activities from lenders therefore they charge a higher interest on loans and people may fall to d e p t trap on the other hand formal source work under the supervision of RBI RBI ceased that Bank give loans to small borrowers also therefore is great need to expand formal sources of credit.


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