Choose given statement True/False:

The two sources of credit are formal and informal.

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True

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answer is A.

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Detailed Solution

The above statement is True.
The two sources of credit are formal and informal. They differ in many ways. In the 'formal' credit sector, the Reserve Bank of India supervises the functioning of 'formal' sources of loans. There is no such supervising organisation in the informal sector. The former provides loans at fixed rates, while the latter charges irregular and high-interest rates. The 'formal' sector lends to people for productive purposes. They take care of the small traders and borrowers and lend to them at low-interest rates. But, greedy moneylenders and traders lend to small farmers only to earn a profit, and if the farmers fail to repay the loan, these moneylenders use unfair practices to get their money back.

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