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Question
Why do most of the rural households still remain dependent on the informal sources of credit? Explain.
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Solution
- Limited availability of Banks in rural areas.
- People in rural areas face problems with regard to documentation.
- Absence of collateral is one of the major reasons which prevents the poor from getting bank loans.
- Rural people get easy loans from richer households through informal ways.
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RELATED QUESTIONS
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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. |
- From which source of credit Megha has taken loan?
- Explain the terms of credit given in the source.
Explain, why the banks do not lend credit to certain borrowers.
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Assertion (A): Banks are not ready to lend money to certain borrowers.
Reason (R): Some people do not have collateral.
