10th Class Social Science Money and Credit Question Bank 10th CBSE Social Science Money and Credit

  • question_answer   What are the reasons why the banks might not be willing to lend to certain borrowers?  

    Answer:

                      A number of borrowers have no collateral to pledge against loans, particularly small farmers requiring crop loans. A collateral is an asset that the borrower owns and pledges as a guarantee to the lender until the loan is repaid. Repayment of such a loan is crucially dependent on the income from selling the crop. Since there is a risk involved (in case the crop yield is inadequate for any reason), banks are not willing to lend to such borrowers who cannot pledge collateral, which can be sold to recover the loan amount in case of default in paying the loan amount.


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