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Raju lives in the rural areas therefore he has less presence of banks in our country where Even if they are present, banks have a lot more paperwork involved and deal only if the person has proper documents, hindering the chances of Raju getting a loan. Since Raju belongs to a poor household, he may not have many assets to set aside as collateral for the bank.

Why did Raju have a hindrance in getting loans from formal sectors?

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Belong to poor households

Don't have proper document

Both 1 & 2

None of these

answer is C.

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Detailed Solution

Raju has a hindrance in getting loans from formal sectors because he belongs to a poor household and does not have proper documents.
Banks have less presence in the rural areas of our country where Raju lives. Even if they are present, banks have a lot more paperwork and will only deal with a person if they have the proper documents, hindering the chances of Raju getting a loan.
Since Raju is from a poor household, he may not have many assets to set aside as collateral for the bank. Since banks require collateral for giving out loans, Raju would most likely prefer to borrow money from his local money lender, as they know each other personally. The money lender would be willing to let Raju borrow money from him without collateral.

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