Question

Credit must be available to the poor people on appropriate and reasonable terms to respect certain essential values.Explain

Answer 1

1) In rural areas, the main demand for credit is for crop production. Interest rate, collateral and documentation requirement and the mode of repayment together comprise the terms of credit.

2) There are two types of loans such as formal sector loans and informal sector loans. In this, formal sector meets only about half of the total credit needs of rural areas. The remaining credit are met from informal sources

3) Most loans of rural sector are from informal sources like money lenders, who charge a very high rate of interest but do little to increase the income of the borrowers.

4) Thus, it becomes necessary for the cooperatives and banks to increase their lending activities particularly in rural areas to meet the requirements of rural people in appropriate time

5) Formal sector loans should be expanded and it is also necessary that everyone receives the loans. It is essential that formal sector credit is distributed equally so that the poor can benefit from cheaper loans