Formal sources of credit do not include:a)Banksb)Co-operativesc)Employersd)LICCorrect answer is option 'C'. Can you explain this answer?

Question

Answer

1. Formal sources of credit do not include employers as there is no role of these employers all these works are related to banks and the cooperatives.
2. Employers are there merely to serve the bank staff and do the work as it is asked to do by their owner.

Answer

Formal sources of credit do not include employers as there is no role of these employers all these works are related to banks and the cooperatives. Employers are there merely to serve the bank staff and do the work as it is asked to do by their owner. Lal the major decisions are taken by the cooperatives, employers have to just follow those rules and regulations set up by the banks.

Answer

Formal sources of credit refer to institutions or organizations that provide credit in a regulated and structured manner. These sources are usually established and recognized by the government or financial authorities. They play a crucial role in the economy by providing loans and credit facilities to individuals, businesses, and other entities.

In the given options, the correct answer is option 'C', which states that employers are not formal sources of credit. This means that employers do not typically provide loans or credit facilities to their employees.

To understand this further, let's examine each option in detail:

a) Banks: Banks are one of the most common and widely recognized formal sources of credit. They are financial institutions that accept deposits from customers and provide loans and credit facilities in return. Banks have specific regulations and guidelines for lending, and borrowers are required to meet certain criteria to be eligible for credit.

b) Co-operatives: Co-operatives are another formal source of credit. They are member-owned organizations that provide financial services to their members. Co-operatives can be formed for various purposes, including providing credit. Members pool their resources and savings to create a fund from which loans can be given to other members.

c) Employers: Employers, as mentioned earlier, are not formal sources of credit. While some employers may offer certain financial benefits or assistance to their employees, such as salary advances or employee loans, these are generally informal arrangements and not part of the formal credit system. Employers primarily focus on paying salaries and providing employment benefits rather than offering credit services.

d) LIC: LIC (Life Insurance Corporation of India) is a government-owned insurance company that primarily deals with life insurance policies. While LIC provides financial security through insurance, it is not a formal source of credit. LIC policyholders can avail of loans against their insurance policies, but this is a specific feature of insurance policies and not a primary function of LIC.

In summary, formal sources of credit include banks and co-operatives, while employers and LIC are not considered formal sources of credit.

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