Question

Why is there a great need to expand formal sector of credit in India? Explain with three reasons.​

Answer 1

We need formal sources of credit in order to reduce the dependence of farmers on informal sources of credit like money lenders.To reduce the higher risk associated with informal sources of credit because of fluctuating terms and conditions.

To avail cheaper credit to farmers in rural areas.

There is need to expand formal sources of credit in India as: (i)This would lead to higher incomes and many people could then borrow cheaply for a variety of needs. (ii)They could grow crops, do business, set up small-scale industries etc. (iii)They could set up new industries or trade in goods.

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