why is the unorganised sector in india considered to be more developed? class 10
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Answer:
It is believed that the unorganized manufacturing sector of industries is starved of capital and since they fail to get access to the organized sources of finance, they borrow from the unorganized credit market often at high interest rates. It is felt that there is urgent need for the state to intervene in order to raise their capital. In response to this demand the state has become quiet active over the past few decades in promoting institutional finances for this unorganized sector. Public and private commercial banks and central and state level term lending institutions, cooperative societies etc. are directed/ encouraged by the state to provide loans to the unorganized manufacturers at low interest rates. Over the years, the share of these institutional sources in total outstanding loans of the unorganized manufacturing sector has increased steadily.
The informal financial sources generally include funds available from the family or moneylenders who operate outside the legal and policy framework of banks. Apart from this, the chit fund is another form of credit source operated by groups of people for mutual benefit; but this approach has its own limitations. Credit in the informal system is usually available on tap. The loans are granted mostly without collateral and lengthy documentation formalities as the lender depends mainly on the personal knowledge of, and contact with, the borrower. However, over the years, a few NGOs have engaged themselves in activities related to community mobilisation for savings and credit-related operations targeted at some groups in the rural sector.
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