ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Absence of collateral security prevents the poor from getting bank loans.

Detailed explanation-2: -Absence of collateral is one of the major reasons which prevent the poor from getting bank loans.

Detailed explanation-3: -Collateral is money or property which is used as a guarantee that someone will repay a loan. [formal] Many people use personal assets as collateral for small business loans. Most people here cannot borrow from banks because they lack collateral.

Detailed explanation-4: -The two main reasons for formal credit not being available to rural poor are : (i) Absence of collateral and documentation is the main reason which prevents rural poor from getting bank loans. (ii) The arrangements of informal sector loans are flexible in terms of timelines, procedural requirements, interest rates etc.

Detailed explanation-5: -Collateral is an asset that the borrower owns such as livestock, buildings, vehicles, and deposits with banks) and uses this as a guarantee to a lender until the loan is repaid. Usually, poor people or farmers may not have sufficient collateral to get loans from the banks.