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Question
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?
Options
Interest Rate
Collateral
Principal Amount
Instalments
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Solution
Collateral
Explanation:
Collateral is an asset that the borrower owns (such as land, building, vehicle, livestock, and deposits with banks) and uses this as a guarantee to a lender until the loan is repaid.
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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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Assertion (A): Banks are not ready to lend money to certain borrowers.
Reason (R): Some people do not have collateral.
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)
