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Unit 4 Ch 3 : Money and Credit — Social Studies STD 10 — Question

CBSE BoardEnglish MediumSTD 10Social StudiesUnit 4 Ch 3 : Money and Credit5 Marks
Question
Differentiate between formal and informal sources of credit. Explain problems faced by borrowers of loan from informal sources.
OR
What are the two categories of sources of credit? Mention four features of each.

OR
Mention three points of difference between formal sector and informal sector loans.
✓

Answer

S.NO
Formal Sources of Credit
Informal Sources of Credit
(i)
The Reserve Bank of India supervises the functioning of formal sources of loans.
There is no organisation which supervises the credit activities of lenders in the informal sector.
(ii)
They provide loans at a fixed rates and terms.
Rates of interest are not fixed moneylenders can charge whatever interest rate they choose.
(iii)
They give loans not just to profit making business and traders but also to small cultivators, small-scale industries too small borrowers, etc.
They give loans to small cultivators only to earn profit. These is no one to stop them from using unfair means to get their money back.
(iv)
Banks and cooperatives come under the category of formal sources of credit.
The informal lenders includes moneylenders, traders, employers, relatives and friends.
The moneylenders charge very high rates of interest keep no records of transactions and harass the poor borrowers.

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