Question
How can the formal sector loans be made beneficial for poor farmers and workers? Suggest any five measures.
Solution
The formal sector loans can be made beneficial for poor farmers and workers in the following ways:-
- Formal sector credit includes loans from banks and cooperatives which are regulated by RBI.
- The rate of interest in formal sector is very low compared to informal sector.
- Informal sector tries to exploit and cheat the poor people by charging high rate of interest and unreasonable terms of credit, but on the other hand, banks encourage the poor people to come together as Self Help Groups (SHGs) to inculcate into them the habit of savings and get easy loans from the banks.
- The difficult terms and conditions underlying the loans should be relaxed so that the poor do not resort to private money lenders who often charge exorbitant rate of interest.
