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Question
Explain, why the banks do not lend credit to certain borrowers.
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Solution
- Banks do not lend to borrowers who do not have collateral, as it serves as a guarantee and can be sold if the borrower fails to repay.
- Banks typically do not lend to borrowers without enough proof, such as salary or collateral.
- Banks do not extend credit to persons who have not paid previous debts or are already defaulters.
- Banks typically avoid lending to borrowers who intend to engage in risky firms.
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RELATED QUESTIONS
Which one of the following is NOT an informal sector loans for poor rural household in India?
Farmers usually take crop loans at the beginning of the season and repay the loan after ______.
Interest rate, security and documentation requirement, and the mode of repayment together comprise what is called the ______.
Most of the informal lenders charge ______.
The rich households are availing cheap credit from formal lenders whereas the poor households ______.
An agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment is called ______.
In rural areas, the main demand for credit is for ______.
Read the information given below and select the correct option.
Rohan has taken a loan of Rs.5 lakhs from the bank to purchase a house at a 12% rate of interest. He has to submit papers about the new house and salary records to the bank. What is this process called?
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A House Loan Megha has taken a loan of 75 lakhs from the bank to purchase a house. The annual interest rate on the loan is 12 percent and the loan is to be repaid in 10 years in monthly instalments. Megha had to submit to the bank, documents showing her employment records and salary before the bank agreed to give her the loan. The bank retained as collateral the papers of the new house, which will be returned to Megha only when she repays the entire loan with interest. |
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- Explain the terms of credit given in the source.
Read the given source and answer the questions that follow:
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Loans from Cooperatives Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives and industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place. Krishak Cooperative provides loans for the purchase of agricultural implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses. |
- 'Cooperative society' is an example of which source of 'credit'? (1)
- Explain the contribution of Cooperative Societies in rural development. (1)
- Mention any two sources of capital for Self-Help Groups. (2)
