10TH CBSE SST ow does the credit vary substantially between formal and informal lenders? Explain with examples

 

Ans:
Formal lenders:
1. Sources of formal lending are loans from banks and cooperatives.
2. The Reserve Bank of India supervises the functioning of formal sources of loans.
3. Charge low interest.
4. Collateral is must.
5. Mainly taken by urban people.

Informal lenders:
1. Sources of informal loans are moneylenders, traders, employers, relatives, friends, etc.
2. There is no organisation which supervises the credit activities in the informal sector.
3. High rate of interest.
4. Sometimes collateral is asked.
5. Mainly taken by the rural people.