Question

why is the necessary for the the banks and cooperative societies to increase their lending facilities in rural areas? explain

Answer 1

so people in rural areas can avoid dependency on informal sources of credit

Answer 2

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

• In absence of banks in rural areas, farmers and the poor have to borrow money from money lenders at a very high rate of interest. Thus, the cost of borrowing is extremely high.

• Since the interest is high, a large part of the earnings of borrower is used in repaying loans. This reduces their income.

• Because of high interest rates, the farmers usually are not ale to repay the loans and have to sell their lands to repay the loans.

• Banks and cooperatives give money to farmers on low interest rates. This improves the financial conditions of the rural poor as they do not have to spend a large part of their income on paying interests.

• Banks and cooperatives also give loans to rural people to start their business or a small scale industry. This makes them self sufficient.