Two major sources of formal credit in India are banks and ____

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Detailed Solution

Two major sources of formal credit in India are banks and cooperatives.
Loans from banks and cooperatives form a part of the formal credit sector. They are called traditional sources as the RBI supervises their activities. They also charge lower rates of interest as compared to informal sources. On the other hand, the informal sources of credit follow no rules and regulations, which leads to them charging an excessive amount from poor farmers and workers. This also leads to the exploitation of these people. Thus, there is a need to expand traditional sources like banks and cooperatives to enable financial inclusion. Proper credit should be distributed equally so that the poor can also benefit from cheap loans.

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