Explain the importance of formal sector loans in India.



Points to Remember:

  • Low-interest Rate
  • Regulated by RBI
  • No exploitation

Answer to be written:

  • Formal sources of loans include Banks and cooperatives .
  • Formal sector is regulated and monitored by the RBI and hence the interest rates and cost of borrowing are controlled and are less as compared to the informal sector.
  • Unlike the informal source of loans, lenders in the formal sector do not exploit their borrowers and anyone can borrow from the formal sector from profitable businesses to small-scale enterprises and farmers .

(Any two points)

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Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 14 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.