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What is formal source of credit? |
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Answer» Formal sources of credit consist of commercial banks, regional rural banks, cooperative credit societies etc.The Reserve Bank of India supervises the functioning of formal sources of loans.For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive.\xa0The RBI monitors that the banks actually maintain the cash balance.Periodically banks have to submit information to the RBI on how much they are lending to whom,at what interest rate etc. Formal credit is generally available with the banks and cooperative. They charge lesser of interest than informal institutions. The Reserve Bank of India (RBI) supervises the functioning of formal sources of loan. |
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