ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Formal sector is the main source of credit for rich urban households in India. The Reserve Bank of India supervises the functioning of formal sources of loans. The banks maintain a minimum cash balance out of the deposits they receive. The rest of the money is given out as loans.

Detailed explanation-2: -Rural credit. Compare this with the rich urban households. Only 10 per cent of their loans are from informal sources, while 90 per cent are from formal sources. A similar pattern is also found in rural areas.

Detailed explanation-3: -Answer: The share of the formal sector credit is higher for the richer households because the richer households are in a better position to provide collateral and other necessary documents which are required by the banks and co-operatives.

Detailed explanation-4: -Money lenders are the main informal source of credit for rural household in India. Because in rural areas people do not have access to banks and other financial institutions.

Detailed explanation-5: -Money Lenders provide the largest credit among Rural Households in India.