Choose the given statement is true/false:

A large number of poor people are unable to avail loans from banks.

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True

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Detailed Solution

The given statement is true.
Most poor households do not have much collateral to provide and hence are unable to secure loans from banks, as most banks need collateral to provide a loan. An informal source of credit may give out loans without demanding collateral. Poor households living in rural areas do not have access to banks nearby, as banks are not present everywhere in rural India. Moneylenders provide loans to poor people without much paperwork or the requirement of documents. In contrast, banks require proper documents for giving loans to people, which increases the difficulty of getting a loan from a bank for people, and thus, they prefer informal sources of credit. Often, formal sources of credit provide loans for a specific purpose, mostly related to productivity, and require proof of work to lend out loans. In contrast, informal sources of credit do not ask for a reason while giving out loans.

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