Question

Why it is necessary for banks and cooperatives to increase their lending facility in rural areas?

Answer 1

Answer:

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. Most of theri earnings are used for paying the interst.

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Answer 2

Answer:Banks and cooperatives should increase lending facilities in rural areas:

1. The informal sector lends at a high-interest rate in rural areas so the cost for the borrower is much more.

2. When the cost of borrowing of more, large portion of income goes in repaying loans rather than investing it.

3. Often it leads to debt trap where the amount to be repaid is more than the borrower's income and he has to borrow more.