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

  • question_answer   Why are poor households still dependent on informal sources of credit?


                      Reasons: (i) Banks are not present everywhere in rural India. (ii) Even if they are present, getting a loan from a bank is much more difficult than taking a loan from informal sources. (iii) Bank loans require proper documents and a collateral. Absence of collateral is one of the major reasons which prevents the poor from getting bank loans. (iv) Informal lenders like moneylenders know the borrower personally and hence, are often willing to give a loan without a collateral. (v) The borrowers can, if necessary, approach the moneylender even without repaying their earlier loans. (vi) However, the moneylenders charge very high rates of interest, keep no records of the transactions and harass the poor borrowers.

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