Formal and Informal Credit

Q.

How do the medium and large farmers obtain capital for farming? How is it different from the small farmers?

Q. Most of the credit needs of poor households are met from informal sources of credit. The dependence of richer households on informal sources of credit is less.

Identify the reasons for this situation.

1. Lack of awareness
2. Lack of willingness
3. Lack of education
4. Lack of collateral

Q. Manav needs a loan to set up a small business. On what basis will he decide whether to borrow from a bank or a local moneylender?

1. Availability of collateral
2. Interest rate
3. Purpose of loan
4. Duration of loan

Q. Which of the following differences between formal and informal sources of credit are correct?

1. The RBI regulates the activities of formal sources of credit, but there is no agency to regulate the activities of informal sources of credit.
2. The RBI regulates the activities of both formal sources of credit and informal sources of credit.
3. The primary motive of informal sources of credit is providing service, but the primary motive of formal sources of credit is earning profit.
4. The primary motive of formal sources of credit is providing service, but the primary motive of informal sources of credit is earning profit.

Q. What would happen if all the depositors went and asked for their money at the same time?

Q. Who among these have access to formal sources of credit?

1. Rural poor
2. Urban poor
3. Richer households
4. Poor households

Q. Which source of credit includes the proper terms of credit and collateral?

1. Formal source
2. Informal source
3. Credit from moneylenders
4. Credit from friends and relatives

Q. Loan from bank is one of the major sources of informal credit.

1. True
2. False

Q. Determine the informal source of credit.

1. Banks
2. Moneylenders
3. Cooperatives
4. Financial institutions

Q. People require credit for consumption and to manage many socio-cultural situations. Ramesh approaches his friend Sagar and seeks Rs. 50000 for his sister's marriage. Which source of credit is this?

1. Formal
2. Informal
3. Regular
4. Irregular

Q. Aman is a farmer with limited land in a village in India. His son is a brilliant student and has completed his higher secondary with distinction. Aman wants his son to pursue higher studies. He needs to take loan for it. He is advised to approach a formal credit source.

Who should he approach for funding of the college fee?

1. Moneylender
2. Relatives
3. Banks
4. Friends

Q. In India, about 75% of farmers are small and landless. They need credit for cultivation. What is the main hindrance in granting them formal loan?

1. Banks charge high interest rate
2. Farmers do not approach banks
3. Farmers lack of awarness
4. Farmers lack of collateral

Q. Formal credit is mostly availed by the poor people in the rural areas.

1. True
2. False

Q. Which of these are correct in relation to an informal source of credit?

1. Govt. intervenes
2. Collaterals
3. High interest
4. No colleteral
5. Moneylenders
6. Friends
7. Relatives
8. RBI

Q. Sagar is a farmer growing sugarcane in his field. He takes a loan of Rs. 30000 from a moneylender. What kind of credit does this fall under?

1. Formal
2. Informal
3. Both
4. None