There is a great need to expand formal sources of credit in rural areas because?

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The informal sector is not supervised by any organisation

The rate of interest is very high in the informal sector

To earn profit

both 1 & 2

answer is D.

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Detailed Solution

There is a great need to expand the formal sector in rural areas because the informal sector is not supervised by any organization, and the interest rate is very high in the informal sector. At the same time, the formal sector is governed by the Reserve Bank of India. The informal sector is mainly said to be the money lenders' charge of a high-interest rate to the borrower, which, if he is not able to pay back, will lead him into a debt trap, and it is complicated to come out of it. The formal sector charges meagre interest as compared to the informal sector. That's why there is a need for the legal industry to expand into rural areas for the betterment of society and the economy.

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