Which of the following is not a feature of the informal source of credit?

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It is supervised by the Reserve Bank of India.

Rate of interest is not fixed.

Terms of credit are very flexible.

Traders, employers, friends, relatives, etc., provide informal credit sources.

answer is A.

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Detailed Solution

“The Reserve Bank of India supervises it” is not a feature of the informal source of credit.
Any rules and regulations do not govern informal sources of credit. Since they are usually between moneylenders, family lenders, etc., they do not have any provision for supervision by the RBI. On the other hand, the formal sector is governed by regulations and is bound to follow the same. The terms of credit in the case of the informal sector are also highly flexible and depend on the nature of the borrower. Formal sources of credit require collateral and proper paperwork to avail of a loan. But, informal sources of credit usually charge a much higher rate of interest, and it is not fixed either, whereas formal sources of credit have a fixed interest rate.

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