Merits of formal sector credit in India:
- It provides cheap and affordable credit.
- Due to low cost of borrowing, the borrowers have to repay less and they will have more saving.
- The loan activities of the formal sector is supervised by the RBI.
Demerits of formal sector credit in India:
- Mostly people in the urban areas and the well-off households use it.
- Formal sector credit need proper documents and collateral before lending.