question_answer

  "The rich households are availing cheap credit from formal lenders whereas the poor households have to pay a heavy price for borrowing." Comment.

Answer:

                  (i) The formal sector still meets only about half of the total credit needs of the rural people. (ii) The remaining credit needs are met from informal sources. (iii) Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers. (iv) Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that the dependence on informal sources of credit reduces. (v) While formal sector loans need to expand, it is also necessary that everyone receives these loans. (vi) At present, it is the rich households who receive formal credit whereas the poor have to depend on the informal sources.