question_answer

  Cheap and affordable credit is crucial for the country's development. Explain the statement with four points.   Or Why should credit at reasonable rates be available to all? Describe any four reasons. Or Why do we need to expand formal sources of credit in India?  Explain any four reasons.    

Answer:

                   The reasons for expanding credit are (i) High cost of borrowing leads to a major share of earnings going into payment of interest on the loan. (ii) Sometimes the higher interest rate leads to the requirement to pay more than the earnings, thus falling into a debt-trap. (iii) Borrowers falling into debt-traps discourages more people   from   borrowing,   thus   reducing development of the country. (iv) Banks and cooperative societies lending to more borrowers will lead to higher incomes and many people could then borrow cheaply for a variety of needs like growing crops, set up business or small-scale industries.