write the differences between formal and informal sources of credit
Answers
They generally charge lower rates of interest.
Informal :
They charge much higher rate of interest.
Answer:
Answer:
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Formal source of credit:
(a) Loans that are given by banks and co-operative institutions are called Formal sector of credit.
(b) The functioning of these banks and co-operative institutions are supervised by Reserve Bank of India- RBI.
(c) These institutions are required to report to the RBI the rate of interest, amount lending, etc.
(d) Borrower is required to submit collaterals and documents.
Informal source of credit:
(a) Loans that are given by money lenders, friends and relatives are called Informal source of credit.
(b) They are not supervised by Reserve Bank of India - RBI.
(c) They can lend money at any interest rate and use any means to get back their money.
(d) Borrower is not required to submit collaterals and documents
Explanation: