Question

Debt- trap occurs due to _____ .

• A. inability of the poor to repay back the loans at higher interest to money lenders
• B. in case of crop failure, when the farmer get no return for the capital invested in buying agricultural inputs
• C. farmer has to sell a part of his land to repay his loan and has no resources to generate income in the next year
• D. all of these

Answer 1

Answer: (D)

all of these

Debt trap is a situation where the debtor will not be able to repay the debt incurred.
Debt trap situation may arise due to the higher interest rates or change in terms and conditions of debt incurred.
Normally, debt trap will result in default of payments or bankruptcies.
In case of crop failure, when the farmer get no return for the capital invested in buying agricultural inputs.
Farmer has to sell a part of his land to repay his loan and has no resources to generate income in the next year.