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Identify the formal source of credit.
[2011 (T-2)]
  • a)
    Cooperative societies
  • b)
    Moneylenders
  • c)
    Traders
  • d)
    Landlords
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
Identify the formal source of credit.[2011 (T-2)]a)Cooperative societi...
Formal Source of Credit:

Cooperative societies

Explanation:


  • Cooperative societies are formal institutions that provide credit to individuals and groups.

  • They are registered under the Cooperative Societies Act and operate under specific regulations.

  • Cooperative societies collect savings from their members and provide them with loans at reasonable interest rates.

  • They promote financial inclusion and provide credit to individuals who may not have access to formal banking services.

  • Cooperative societies often focus on specific sectors, such as agriculture, small-scale industries, and housing.

  • They have a democratic structure, with members having a say in the decision-making process.

  • Cooperative societies also provide other services like insurance, marketing, and training.

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Identify the formal source of credit.[2011 (T-2)]a)Cooperative societi...
Formal Source of Credit

Cooperative societies are the formal source of credit.

Explanation

Cooperative societies are organizations that are formed by individuals with similar economic needs and goals. They operate on the principle of mutual cooperation and provide financial assistance to their members. These societies are registered under the Cooperative Societies Act and are governed by certain rules and regulations.

Advantages of Cooperative Societies as a Formal Source of Credit:

1. Easy access to credit: Cooperative societies provide credit facilities to their members without any discrimination. This ensures that individuals who are in need of credit for various purposes, such as agriculture, small businesses, or personal needs, can easily access it.

2. Lower interest rates: Cooperative societies generally charge lower interest rates compared to other formal sources of credit. This makes it affordable for borrowers to repay their loans without burdening themselves with high interest costs.

3. Flexible repayment terms: Cooperative societies understand the financial constraints of their members and offer flexible repayment terms. They take into consideration the income patterns and cash flows of the borrowers, allowing them to repay the loan in installments that suit their financial situation.

4. No collateral requirement: Unlike traditional financial institutions, cooperative societies do not require collateral for providing credit. This makes it easier for individuals who do not possess valuable assets to obtain credit.

5. Member participation: Cooperative societies provide an opportunity for members to actively participate in the decision-making process. This ensures that the credit facilities offered by the society are tailored to the needs of the members and are in line with their preferences.

6. Social benefits: Apart from providing credit, cooperative societies also aim to uplift the social and economic status of their members. They provide training programs, technical assistance, and guidance to improve the skills and knowledge of their members, thereby empowering them to become self-reliant.

Conclusion

Cooperative societies serve as an important formal source of credit, particularly for individuals who do not have access to traditional financial institutions. They provide affordable credit facilities, flexible repayment terms, and promote member participation, making them an effective means of financial inclusion and empowerment.
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Read the source given below and answer the questions that follows:Banks use the major portion of the deposits to extend loans. There is a huge demand for loans for various economic activities. Banks make use of the deposits to meet the loan requirements of the people. In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers). Banks charge a higher interest rate on loans than what they offer on deposits. A large number of transactions in our day-to-day activities involve credit in some form or the other. Credit (loan) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment. In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc. The various types of loans can be conveniently grouped as formal sector loans and informal sector loans. Among the former are loans from banks and cooperatives. The informal lenders include moneylenders, traders, employers, relatives and friends, etc. The Reserve Bank of India supervises the functioning of formal sources of loans. For instance, we have seen that the banks maintain a minimum cash balance out of the deposits they receive. The RBI monitors the banks in actually maintaining cash balance. There is no organisation which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. There is no one to stop them from using unfair means to get their money back. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Thus, the cost to the borrower of informal loans is much higher. In recent years, people have tried out some newer ways of providing loans to the poor. The idea is to organise rural poor, in particular women, into small Self-Help Groups (SHGs) and pool (collect) their savings.Answer the following MCQs by choosing the most appropriate optionQ. Formal sector loans include loans from(i) Banks(ii) Moneylenders(iii) Cooperatives(iv) Traders

Read the source given below and answer the questions that follows:In the countryside, rich peasant communities – like the Patidars of Gujarat and the Jats of Uttar Pradesh – were active in the movement. Being producers of commercial crops, they were very hard hit by the trade depression and falling prices. As their cash income disappeared, they found it impossible to pay the government’s revenue demand. And the refusal of the government to reduce the revenue demand led to widespread resentment. These rich peasants became enthusiastic supporters of the Civil Disobedience Movement, organising their communities, and at times forcing reluctant members to participate in the boycott programmes. For them the fight for swaraj was a struggle against high revenues. But they were deeply disappointed when the movement was called off in 1931 without the revenue rates being revised. So, when the movement was restarted in 1932, many of them refused to participate. The poorer peasantry were not just interested in the lowering of the revenue demand. Many of them were small tenants cultivating land they had rented from landlords. As the Depression continued and cash incomes dwindled, the small tenants found it difficult to pay their rent. They wanted the unpaid rent to the landlord to be remitted. They joined a variety of radical movements, often led by Socialists and Communists. Apprehensive of raising issues that might upset the rich peasants and landlords, the Congress was unwilling to support ‘no rent’ campaigns in most places. So, the relationship between the poor peasants and the Congress remained uncertain.Answer the following MCQs by choosing the most appropriate optionQ. Patidars and Jats are rich Peasants of which State?

Read the source given below and answer the questions that follows:In the countryside, rich peasant communities – like the Patidars of Gujarat and the Jats of Uttar Pradesh – were active in the movement. Being producers of commercial crops, they were very hard hit by the trade depression and falling prices. As their cash income disappeared, they found it impossible to pay the government’s revenue demand. And the refusal of the government to reduce the revenue demand led to widespread resentment. These rich peasants became enthusiastic supporters of the Civil Disobedience Movement, organising their communities, and at times forcing reluctant members to participate in the boycott programmes. For them the fight for swaraj was a struggle against high revenues. But they were deeply disappointed when the movement was called off in 1931 without the revenue rates being revised. So, when the movement was restarted in 1932, many of them refused to participate. The poorer peasantry were not just interested in the lowering of the revenue demand. Many of them were small tenants cultivating land they had rented from landlords. As the Depression continued and cash incomes dwindled, the small tenants found it difficult to pay their rent. They wanted the unpaid rent to the landlord to be remitted. They joined a variety of radical movements, often led by Socialists and Communists. Apprehensive of raising issues that might upset the rich peasants and landlords, the Congress was unwilling to support ‘no rent’ campaigns in most places. So, the relationship between the poor peasants and the Congress remained uncertain.Answer the following MCQs by choosing the most appropriate optionQ. Congress was unwilling to support_________ campaigns in most places.

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