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Question : 27
Total: 37
Distinguish between formal and informal sources of credit.
Solution:
The differences between formal and informal sector of credit are as under:
| Formal sector of credit | Informal sector of credit |
|---|---|
| RBI monitors the formal sector of credit | There is no organisation which supervise the credit activities of lenders. |
| They charge a normal interest rate on loans. | They can lend at whatever interest rate they choose. |
| E.g., Banks and cooperative societies. | E.g., Local moneylenders, traders and relatives etc. |
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