10TH CBSE SST What is a collateral? Why is it a main reason to prevent the poor getting a loan from banks? Explain.

 

Ans:
A- Collateral
1. Collateral is an asset that the borrower owns and uses this as a guarantee to lenders until the loans are
repaid. Property such as land, deposits with banks, livestock are some examples of collateral used for
borrowing.
1. Absence of collateral with the poor.
2. Absence of documents with them.
3. Absence of formal sources of credit in rural area.
4. Lack of education and awareness among them.