Readers ask: Why Do We Need To Expand Formal Sources Of Credit In India?

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Why do we need to expand the formal sources of credit?

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.

Why do we need to expand formal sources of credit in India Brainly?

(1)to save from debt trap. (2)Its provide cheap and affortable dieaseas. (3)to save people from exploitation of informal sector. (4)the RBI supervise the functioning of formal source of loan.

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Why do we expand formal sources of credit in India 1×3 3?

(1) There is no organisation which supervises the credit activities of lenders in the informal sector. (2) There is no one to stop them from using unfair means to get their money back. ( 3 ) Formal sources of credit are less risky and they charge less rate of interest.

Why are formal sources of credit preferred over the informal sources of credit give three reason?

Formal sources of credit prefer over informal because final sources comprises of government organizations and collateral security, lower interest rates on its loans like co- operative bank & RBI but Informal sources comprises higher Interest on its loans does not provide collateral security & no organisation to

Which are the two major sources of formal sector in India why do we need to expand the formal sources of credit?

( i ) Banks and ( ii ) Cooperatives. Need to expand formal sources of credit are: ( i ) To save the poor farmers and workers from the exploitation by the informal sector credit. ( ii ) Informal sector charges a higher interest on loans which means that a large part of the earnings is used to repay the loan.

How do we expand formal sources of credit in rural areas?

. Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers. Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that the dependence of the poor on informal sources of credit reduces..

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Why do we need to expand formal?

Thus it is necessary that banks and cooperatives increase their lending particularly in the rural areas so that the dependence of the poor on informal sources of credit reduces. It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans.

What are the role of credit for development?

Explanation: (i) It helps in increasing economic activities of the country; thus, helps in its development. (ii) If credit is made available to the poor people at reasonable rates, they can improve their economic condition. (iii) Credit helped in the development of secondary sector or manufacturing sector.

What are the difference between formal and informal sources of credit?

The formal sources of loans that the government registers are followed by laws and regulations. The informal sources include all small and scattered units that are generally beyond the government’s control, they must obey its laws and regulations. Social welfare is the primary motive for formal sources.

What is the main source of income of a bank?

Interest received on various loans and advances to industries, corporates and individuals is bank’s main source of income. 1 Interest on loans: Banks provide various loans and advances to industries, corporates and individuals. The interest received on these loans is their main source of income.

What are the two main reasons for formal credit not being available to the rural poor Why is there a need to expand rural credit?

The two main reasons for formal credit not being available to rural poor are: (i) Absence of collateral and documentation is the main reason which prevents rural poor from getting bank loans. ( ii ) The arrangements of informal sector loans are flexible in terms of timelines, procedural requirements, interest rates etc.

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Why there is a need to expand rural credit?

(i) The expansion of formal sources of rural credit is essential to save poor from the high rate of interest of moneylenders and debt-trap. (ii) Cheap and easily available credit can encourage self employment like small scale industries or business.

Which is the better source of credit and why?

Financial institutions are among the best sources of credit, especially when it comes to personal loans, student loans, mortgages, personal lines of credit, overdraft protection and credit cards.

What are the three loan activities of banks?

The banks offer various types of loans to the borrowers which are categorized as Priority sector loans, corporate loans, Housing loans, Personal loans, student loans, etc. These loans are offered at different interest rates by the banks.

Why are informal sources of credit preferred in rural areas give five reasons?

Answer: Informal sources of credit are preferred in rural areas because people living there are poor and they have nothing to keep as collateral in banks so they take loans from money lenders who gives them loans without any collateral. In formal sources there is high rate of interest.

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