Question

Give any two examples of the informal sector of credit

Answer 1

Two examples of informal credit are:

1. Moneylender

2. Friend or relative

Their terms of credit are flexible for the personal benefit of the lenders and condition of borrowers.

• The credit activities of the formal sector are supervised by the Reserve Bank of India.
• There is no government or private organisation that manages or check the credit activities performed by informal sources.
• Formal sector loans are such loans which are taken either from the banks or the co-operatives.
• Measures must be taken to increase dependency on the formal sources of credit, so that it would benefit the development of the country on a wider scale.