Choose the given statement is true/false:

Rate of interest is common for all informal sources of credit.

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True

False

answer is B.

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Detailed Solution

The above statement is false.
The Rate of interest of all informal sources is not common, which makes the above statement false. The interest rate depends upon the moneylenders' choice, and they usually charge a high rate of interest. This is because no formal organisation like RBI regulates the functioning of the informal credit system. For the same reason, certain credit terms, like repayment, are also flexible. On the other hand, formal sources are governed by the RBI, and the Rate of interest on loans is common for all. The RBI periodically checks the lending details along with the rates of interest.
The correct statement would be, Rate of interest is not common for all informal sources of credit.

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