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…
Cheap and affordable credit is important for the country’s development because: It will help people to take credit for variety of reasons. It will help poor people to get rid of the problem of moneylenders and their high rate of interest. It will be easy for the people to repay the loan. Those having extra…
Credit plays a crucial role in the economy, providing individuals and businesses with the funds needed to invest, grow, and manage cash flows. Let’s discuss some examples that demonstrate the positive impact of credit: 1. Promoting Entrepreneurship: Credit enables aspiring entrepreneurs to start new businesses or expand existing ones. For instance, an individual might have…
The formal sector loans can be made beneficial for the poor farmers and workers by taking the following measures: 1. Simplifying Application Processes: The process to apply for formal sector loans can be complex and daunting, especially for those with low literacy levels. Simplifying the application process and providing assistance throughout can make these loans…
Those having extra cash open a bank account in their name and deposit the surplus money there. Their money is safe with the banks and they get some interest rate on the amount they have deposited. Out of the total money deposited with the banks 15% of it is kept as minimum cash balance to…
This is a new idea to organize rural poor particularly women who pool their savings. Generally, this group has 15-20 members. Members belong to the neighbourhood so that they can meet and save regularly. Saving per member varies from 25 to 100 or more, depending on the economic condition of the member. When the group…
Banks play an indispensable role in the Indian economy, providing a myriad of services that bolster both individual financial stability and the nation’s economic development. 1. Facilitating Savings and Safekeeping: Banks offer an organized mechanism for individuals to save their earnings. They provide a secure environment to deposit money, which not only safeguards the individuals’…
Credit is an agreement between the lender and the borrower in which the borrower promises to pay the lender in the future. Credit plays a positive role when the borrower is able to return the loan amount on time and also made some profit with the use of that money. For example: Salim, a shoe…
Due to the following reasons it is necessary for the banks and the cooperative societies to extend their lending activities in the rural areas: There is limited availability of the formal sector credit sources in the rural areas. The poor borrowers are bound to take loan from the moneylenders at high rate of interest Due…