Question

Should there be a supervisor, such as the Reserve Bank of India, that looks into the loan activities of informal lenders? Why would its task be quite difficult?

Answer 1

Yes, there should be a supervisor, such as the Reserve Bank of India, who monitors the credit activities of informal lenders, but this comes with many challenges.

1. Informal lenders are numerous and work in a variety of professions, making it difficult to monitor their operations.
2. Informal lending lacks sufficient records, which makes supervision challenging.
3. There may be cultural resistance to formalising the traditional lending arrangements, which are frequently strongly ingrained in local conventions and practices.