OR
What are the two categories of sources of credit? Mention four features of each.OR
Mention three points of difference between formal sector and informal sector loans.| S.NO | Formal Sources of Credit | Informal Sources of Credit |
| (i) | The Reserve Bank of India supervises the functioning of formal sources of loans. | There is no organisation which supervises the credit activities of lenders in the informal sector. |
| (ii) | They provide loans at a fixed rates and terms. | Rates of interest are not fixed moneylenders can charge whatever interest rate they choose. |
| (iii) | They give loans not just to profit making business and traders but also to small cultivators, small-scale industries too small borrowers, etc. | They give loans to small cultivators only to earn profit. These is no one to stop them from using unfair means to get their money back. |
| (iv) | Banks and cooperatives come under the category of formal sources of credit. | The informal lenders includes moneylenders, traders, employers, relatives and friends. |
The moneylenders charge very high rates of interest keep no records of transactions and harass the poor borrowers.
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| Sector | Organised | Unorganised | Total |
| Primary | 2 | | 242 |
| Secondary | 9 | 54 | 63 |
| Tertiary | 17 | 76 | 93 |
| Total | 28 | | |
| Total in percentage | | 100% |