[[1]] take undue advantage of borrowers' helplessness by charging a high rate of interest.

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Informal lenders take undue advantage of borrowers' helplessness by charging a high rate of interest.
Informal sources include lenders like friends, relatives, and employers, among many others. These lenders don't follow any rules and regulations, and the RBI doesn't supervise their functioning. Thus, informal lenders have purely profit-making objectives. For this reason, they charge whatever rates they want to, and no one can stop them from using unfair means to get their money back. The absence of collateral is a major reason that prevents the poor from taking loans from formal sources. Informal sources take advantage of this situation and charge high rates of interest.

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