Formal Sector (i) Formal sector sources sources are banks and cooperatives. (ii) The banks and cooperatives charge less rate of interest i.e., about 10 per cent per annum or so. (iii) It results in more income and better condition of the borrower. There is improvements in his financial conditions. (Read more
Formal Sector
(i) Formal sector sources sources are banks and cooperatives.
(ii) The banks and cooperatives charge less rate of interest i.e., about 10 per cent per annum or so.
(iii) It results in more income and better condition of the borrower. There is improvements in his financial conditions.
(iv) Reserve Bank of India supervises the functioning of formal sources of loans.
Informal Sectors
(i) Informal sector sources are moneylenders, traders employers, relative and and friends.
(ii) Informal sector sources charges higher interest i.e., 3 to 5 per cent month.
(iii) Higher rate of interest of interest result in less income for the borrowers. It sometimes leads to debt-trap.
(iv) There is no organisation which supervises the credit activities of the lenders in the informal sector. They do whatever is in their interest.
Two different credit situations where credit plays a positive and a negative role are as given below: (i) Credit and a positive role: A traders obtains credit to meet the working capital needs of production. The credit helps him to meet the one going expenses of production, complete production on tRead more
Two different credit situations where credit plays a positive and a negative role are as given below:
(i) Credit and a positive role: A traders obtains credit to meet the working capital needs of production. The credit helps him to meet the one going expenses of production, complete production on time and thereby increase his earnings. Thus he is a able to repay the loans that the had borrowed in time. In such a situation credit plays a positive role and the borrower is able to improve his condition.
(ii) Credit and a negative role: A farmer takes a loan to meet the expenses of cultivation hoping that there would be goods harvest and he would repay the loan. The harvest, however, fails and the farmer is unable to repay the loan. Next year again he takes loan but the crop is not good and loan repayment can not be made. The borrower has no option but to sell a part of his land to pay off the loan. Loan/credit instead of helping the farmer improve his condition left him worse off. He falls into dept-trap. Credit in this case pushes the borrower into a situation from which recovery is very painful. Thus, in one situation credit helps to increase earnings and person is better off than before. In the second situation credit pushes the person into a debt trap and he has to sell a part of his land.
If a person has to make a payment he issue a cheque for a specific amount in his name such a TPDDL. The TPDDL will deposit the cheque in their own account in the banks Thereafter, the money is transferred from one bank to another bank account in a couple of days. Thus, transaction takes place withoRead more
If a person has to make a payment he issue a cheque for a specific amount in his name such a TPDDL. The TPDDL will deposit the cheque in their own account in the banks Thereafter, the money is transferred from one bank to another bank account in a couple of days. Thus, transaction takes place without any payments of cash from one bank account to another bank account.
(a) Collateral is an asset that the borrow owns and uses this as a guarantee to a lenders until the loans is rapid. (b) If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment. (c) Property such as land titles, deposits with banks, livestocRead more
(a) Collateral is an asset that the borrow owns and uses this as a guarantee to a lenders until the loans is rapid.
(b) If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.
(c) Property such as land titles, deposits with banks, livestock are some common examples of collateral used for borrowing.
Modern currency accepted as the medium of exchange without any use of its own due to reason as mentioned below: (i) In India, the Reserve Bank of India issues currency notes on behalf of the central government. (ii) As per Indian law, no other individual or organisation is allowed to issue currency.Read more
Modern currency accepted as the medium of exchange without any use of its own due to reason as mentioned below:
(i) In India, the Reserve Bank of India issues currency notes on behalf of the central government.
(ii) As per Indian law, no other individual or organisation is allowed to issue currency.
(iii) The law legalises the use of rupee as a medium of payment that cannot be refused in settling transaction in India.
(iv) No individual in India can legally refuse a payment made in rupee. Hence the rupee is widely accepted as the medium of exchange.
Explain any two features each of formal sector loans and informal sector loans.
Formal Sector (i) Formal sector sources sources are banks and cooperatives. (ii) The banks and cooperatives charge less rate of interest i.e., about 10 per cent per annum or so. (iii) It results in more income and better condition of the borrower. There is improvements in his financial conditions. (Read more
Formal Sector
(i) Formal sector sources sources are banks and cooperatives.
(ii) The banks and cooperatives charge less rate of interest i.e., about 10 per cent per annum or so.
(iii) It results in more income and better condition of the borrower. There is improvements in his financial conditions.
(iv) Reserve Bank of India supervises the functioning of formal sources of loans.
Informal Sectors
(i) Informal sector sources are moneylenders, traders employers, relative and and friends.
(ii) Informal sector sources charges higher interest i.e., 3 to 5 per cent month.
(iii) Higher rate of interest of interest result in less income for the borrowers. It sometimes leads to debt-trap.
(iv) There is no organisation which supervises the credit activities of the lenders in the informal sector. They do whatever is in their interest.
See lessDescribe the positive role of credit with examples.
Two different credit situations where credit plays a positive and a negative role are as given below: (i) Credit and a positive role: A traders obtains credit to meet the working capital needs of production. The credit helps him to meet the one going expenses of production, complete production on tRead more
Two different credit situations where credit plays a positive and a negative role are as given below:
(i) Credit and a positive role: A traders obtains credit to meet the working capital needs of production. The credit helps him to meet the one going expenses of production, complete production on time and thereby increase his earnings. Thus he is a able to repay the loans that the had borrowed in time. In such a situation credit plays a positive role and the borrower is able to improve his condition.
(ii) Credit and a negative role: A farmer takes a loan to meet the expenses of cultivation hoping that there would be goods harvest and he would repay the loan. The harvest, however, fails and the farmer is unable to repay the loan. Next year again he takes loan but the crop is not good and loan repayment can not be made. The borrower has no option but to sell a part of his land to pay off the loan. Loan/credit instead of helping the farmer improve his condition left him worse off. He falls into dept-trap. Credit in this case pushes the borrower into a situation from which recovery is very painful. Thus, in one situation credit helps to increase earnings and person is better off than before. In the second situation credit pushes the person into a debt trap and he has to sell a part of his land.
See lessDescribe how cheque payments are made and realised.
If a person has to make a payment he issue a cheque for a specific amount in his name such a TPDDL. The TPDDL will deposit the cheque in their own account in the banks Thereafter, the money is transferred from one bank to another bank account in a couple of days. Thus, transaction takes place withoRead more
If a person has to make a payment he issue a cheque for a specific amount in his name such a TPDDL. The TPDDL will deposit the cheque in their own account in the banks Thereafter, the money is transferred from one bank to another bank account in a couple of days. Thus, transaction takes place without any payments of cash from one bank account to another bank account.
See lessWhat is a collateral? What happens if a borrower fails to repay the loan? Give some examples of colllateral.
(a) Collateral is an asset that the borrow owns and uses this as a guarantee to a lenders until the loans is rapid. (b) If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment. (c) Property such as land titles, deposits with banks, livestocRead more
(a) Collateral is an asset that the borrow owns and uses this as a guarantee to a lenders until the loans is rapid.
(b) If the borrower fails to repay the loan, the lender has the right to sell the asset or collateral to obtain payment.
(c) Property such as land titles, deposits with banks, livestock are some common examples of collateral used for borrowing.
See lessWhy is modern currency accepted as a medium of exchanges without any use of its own? Find out the reason?
Modern currency accepted as the medium of exchange without any use of its own due to reason as mentioned below: (i) In India, the Reserve Bank of India issues currency notes on behalf of the central government. (ii) As per Indian law, no other individual or organisation is allowed to issue currency.Read more
Modern currency accepted as the medium of exchange without any use of its own due to reason as mentioned below:
(i) In India, the Reserve Bank of India issues currency notes on behalf of the central government.
(ii) As per Indian law, no other individual or organisation is allowed to issue currency.
(iii) The law legalises the use of rupee as a medium of payment that cannot be refused in settling transaction in India.
(iv) No individual in India can legally refuse a payment made in rupee. Hence the rupee is widely accepted as the medium of exchange.
See less