A
Provide cheap credit.
B
Regulated by the government.
C
Affordable rate
D
All of the above
Solution:
The importance of formal sources of credit in economic development is that it is regulated by the government and provides cheap credit at affordable rates.
The RBI oversees the formal sources' operations. The RBI keeps an eye on how well banks manage their cash balances and lend money to small farmers and cultivators. The RBI determines the interest rate in the formal sectors. Therefore, the interest rate is typically low. If a borrower already has a loan, needs more cash at the bank, or doesn't have any assets that can serve as security, banks might not be prepared to extend credit to them. The creation of formal sources of credit may be beneficial in such circumstances.
