Why is it being considered necessary to replace the private moneylenders by institutional sources of credit?

Question

Download our app for free and get started

Solution

It has been considered necessary to replace the private moneylenders by institutional sources of credit because:

The supply of credit was irregular and depended largely on personal relations between the borrower and the lender
The moneylenders often took advantage of the ignorance and helplessness of the cultivator to exploit him.
Since, the borrower was generally illiterate, the moneylender often resorted to downright cheating such as failure to record the repayments in full.
The landless tenants and farm workers, who had no land to offer as security, found it difficult to borrow. The loans were available on very difficult terms, and the borrowers were often burdened with permanent debt.

Download our app
and get started for free