Debt Trap

Q.

Describe the work of a farmer with 1 hectare of land.

Q. Why are some banks reluctant to sanction loans to small farmers?

1. There is high risk involved in farming. Thus, the money may not be repaid.
2. Farmers cannot initiate the paperwork required for the loan.
3. The banks have have policies against lending money to farmers.
4. The banks feel that farmers do not really require money.

Q.

In situations with high risks, credit might create further problems for the borrower. Explain.

Q. What can the government do to ease the loan burden when a farmer's crops fail, if the crop failure is properly documented?

1. They can reduce interest.
2. They can ask the farmer to repay later without increasing the interest.
3. They can ask the farmer not to pay in the worst cases.
4. Governments cannot provide any relief to the farmers.

Q. The situation where farmers face loss due to crop failure and become unable to pay loans, is known as _______.

1. debt trap
2. loan trap
3. debt loan
4. loan debt

Q. Why do small and medium farmers fall into indebtedness?

1. Small and medium farmers borrow money from moneylenders.
2. Small and medium farmers do not easily get loans from banks.
3. Small and medium farmers sell their produce to the moneylenders and tillers at the price quoted by them.
4. Small and medium farmers pay commission to middlemen.

Q. A farmer borrows from a trader before cultivation and he is forced to sell his produce to the same trader at a very discounted price. After harvest, the farmer ends up paying the principal amount back with high interest and suffers a loss because of selling at a discounted price. What has the farmer gotten himself into?

1. A debt trap
2. A phish
3. Paavala vaddi
4. Self-help group loan

Q. Kanthaari, a chilly trader incurred a loss. What could have happened?

1. Price fluctuation
2. Increase in fuel prices
3. Caught in a debt trap
4. Poor produce

Q. How can the debt of a farmer be decreased?

1. The government can pay part of the loan or interest.
   
2. They should borrow from landlords instead of banks.
   
3. Farmers can be provided loans at lower interest rate.
   
4. They should take a loan to pay the previous loan.

Q. Why do small and medium farmers fall into indebtedness?

1. Small and medium farmers borrow money from moneylenders.
2. Small and medium farmers do not easily get loans from banks.
3. Small and medium farmers sell their produce to the moneylenders and tillers at the price quoted by them.
4. Small and medium farmers pay commission to middlemen.

Q. Mohan, a small farmer hailing from Andhra Pradesh chooses to approach a money lender even though he knows the burden of a debt trap. Why would Mohan do that?

1. Banks are reluctant to lend money to small farmers.
2. Mohan is least bothered about his future.
3. Mohan is not a part of a Self-help Group.
4. Mohan has an urgent expenditure.

Q. A loan is a sum of money borrowed by farmers, from landlords, to meet their needs. They are expected to repay it with interest.

1. False
2. True

Q. Why are street vendors chronically in debt?

1. They pay interest after borrowing money from moneylenders.
2. Banks do not lend money to street vendors.
3. They borrow money from banks.
4. They do not have access to facilities like refrigerators to preserve unsold produce.

Q. A farmer borrows from a trader before cultivation and he is forced to sell his produce to the same trader at a very discounted price. After harvest, the farmer ends up paying the principal amount back with high interest and suffers a loss because of selling at a discounted price. What has the farmer gotten himself into?

1. Paavala vaddi
2. Self-help group loan
3. A debt trap
4. A phish