Why do we need to expand formal sources of credit in India

• Money & Credit (C10)

Why do we need to expand formal sources of credit in India? Explain.

Answer

Expand formal sources

1. To save people from the exploitation of Informal sector

2. Formal charge a low interest on loans.

3. To save from debt trap.

4. It provides cheap and affordable credit.

5. RBI also supervises the formal sector credit through various rules and regulations which ensures that banks give loans to small cultivators, small borrowers, etc. and not just to profit making business and traders.