Choose the given statement is True/False

Formal sources of credit include traders and moneylenders while informal sources include banks.

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True

False

answer is B.

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Detailed Solution

The statement is False.
Formal sources of credit include banks, cooperatives, and rural banks. The formal sources of credit are under the control of the Reserve Bank of India. They also have to follow certain rules and regulations while giving credit. The formal sources of credit save people from getting exploited by money lenders and other informal sources of credit. Traders, moneylenders, landowners, and informal credit sources are provided. The moneylenders especially charge exorbitant rates of interest, especially in rural areas, for the money they give. This has led to the exploitation of many poor farmers. Formal sources of credit are more trustworthy in this regard.
The correct statement should be that formal sources of credit include banks, cooperatives, and rural banks, and informal sources include traders and moneylenders.

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