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Heyy, Differentiate between formal and informal sector in three points :-) ?
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Heyy, Differentiate between formal and informal sector in three points...
FORMAL:-1.These resources work under the supervision of RBI.
2.Rate of interest is very low.
3. Commercial banks, cooperative societies, etc are the main sources of formal credit.

INFORMAL:-
1.These resources do not work under the supervision of any government organization.
2. Rate of interest is very high.
3. Relatives, moneylenders, etc are the main sources of the informal credit.
Community Answer
Heyy, Differentiate between formal and informal sector in three points...
Definition and Structure
The formal sector refers to the part of the economy that is regulated by the government, which includes businesses that are registered and follow legal requirements. In contrast, the informal sector consists of unregistered and unregulated businesses that operate outside of government oversight.

Regulation and Compliance
- Formal Sector: Businesses in this sector comply with labor laws, tax regulations, and safety standards, which ensures worker rights and benefits.
- Informal Sector: These businesses often do not adhere to formal regulations, resulting in a lack of job security and benefits for workers.

Employment Conditions
- Formal Sector: Employees typically enjoy better job security, stable wages, and access to benefits such as healthcare and pensions.
- Informal Sector: Workers may face precarious employment conditions, with irregular income and no social safety nets.

Economic Impact
- Formal Sector: This sector contributes significantly to national GDP and tax revenues, which fund public services and infrastructure.
- Informal Sector: While it can provide livelihoods for many, it often operates outside the tax system, reducing its contribution to public finances and economic stability.
In summary, the formal and informal sectors differ in terms of regulation, employment conditions, and economic contributions. Understanding these differences is vital for policymakers aiming to promote inclusive economic growth and improve labor conditions.
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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. Compared to the formal lenders, most of the informal lenders charge a much ................... interest on loans

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

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