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?
A
Formal
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B
Informal
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C
Regular
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D
Irregular
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Solution
The correct option is B Informal A loan from friends and relatives is an informal source of credit. Since informal sources can be people you trust, the trust eliminates the need for government intervention, collateral, and terms of credit. However, the interest rates are much higher in informal sources than formal sources.