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Question
Distinguish between formal and informal sources of credit.
Solution
| Formal sector of credit | Informal sector of credit |
| RBI monitors the formal sector of credit. | There is no organisation which supervise the credit activities of lenders. |
| They charge a normal interest rate on loans. | They can lend at whatever interest rate they choose. |
| E.g., Banks and cooperative societies. | E.g., Local money lenders, traders and relatives etc. |
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