Question

why is it necessary for banks and cooperatives to extend their lending activities in rural areas?

Answer 1

It is necessary for banks and cooperatives to increase their lending in rural areas because the money lenders in rural areas are charging higher rate of interest and the rural people were unable to bear the interest cost.

It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans .

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Answer 2

Answer:

The formal credit system is very much needed in rural areas. It would help to develop backward regions, improve literacy, create employment, and protect the people’s hard-earned money.

Explanation:

It is necessary for banks and Cooperative societies to increase their lending facilities in rural areas because:

• The money lenders in rural areas charge a very high rate of interest.
• People in rural areas are generally poor and due to high rates their condition worsens even more
• Moneylenders also exploit them financially and physically.
• It is important for India’s financial system to provide loans to those in need.
• This will encourage small businesses and start-ups to kick start with the right kind of help.