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.
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