what do you mean by formal and informal credit

1.	what do you mean by formal and informal credit
Answer» Formal source of credit: a)Loans that are given by banks and co-operativeinstitutions are called Formal sector of credit. b)The functioning of these banks and co-operativeinstitutions are supervised by Reserve Bank of India – RBI. c)These institutions are required to report tothe RBI the rate of interest, amount lending, etc. d)Borrower is required to submit collaterals anddocuments. Informal source of credit: a)Loans that are given by money lenders, friendsand relatives are called Informal source of credit. b)They are not supervised by Reserve Bank ofIndia – RBI. c)They can lend money at any interest rate anduse any means to get back their money. d)Borrower is not required to submit collateralsand documents.

Answer»

Formal source of credit:

a)Loans that are given by banks and co-operativeinstitutions are called Formal sector of credit.

b)The functioning of these banks and co-operativeinstitutions are supervised by Reserve Bank of India – RBI.

c)These institutions are required to report tothe RBI the rate of interest, amount lending, etc.

d)Borrower is required to submit collaterals anddocuments.

Informal source of credit:

a)Loans that are given by money lenders, friendsand relatives are called Informal source of credit.

b)They are not supervised by Reserve Bank ofIndia – RBI.

c)They can lend money at any interest rate anduse any means to get back their money.

d)Borrower is not required to submit collateralsand documents.

Discussion