NCERT Solutions for Class 10 Social Science History Chapter 3
Social Science Class 10 Economics
Money and Credit 3
Important NCERT Questions Based on new NCERT Books for Session 2022-2023
Questions No: 11 Part: a
Why might banks be unwilling to lend to small farmers?
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Banks have their own set of rules when issuing loans and require proper documents and collateral as security against loans. Most of the times the small farmers lack in providing such documents and collateral. Sometimes because of uncertain nature of the monsoon and crops, they even fail to make timely repayments. Repayment of the loan is crucially dependent on the income from farming. Therefore, banks sometimes are unwilling to lend to small farmers.
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Reasons Banks Might Be Unwilling to Lend to Small Farmers:
1. High Risk: Small farmers often face unpredictable incomes due to factors like weather and market conditions. Banks might worry about the farmers’ ability to repay loans, considering this uncertainty.
2. Lack of Collateral: Banks typically require something valuable as collateral for loans. Small farmers might not have such assets to offer, making it difficult for banks to secure the loans.
3. Limited Credit History: Small farmers might not have a formal financial record or credit history. Banks use this information to decide if someone is eligible for a loan, and the absence of this history makes lending more challenging.
4. Costly Processing: Providing many small loans to individual farmers might be expensive for banks due to administrative costs, making it less profitable for them.
5. Seasonal Nature of Agriculture: Agriculture income is often seasonal. Farmers might need loans with flexible repayment terms that align with their harvest cycles, which banks might not readily offer.
6. Limited Access and Awareness: Farmers in remote areas might have difficulty accessing banks or understanding loan procedures, leading to limited access to credit.
7. Government Policies: Sometimes, government policies aimed at helping small farmers might have rigid rules or be challenging for banks to implement, affecting their willingness to lend.
These challenges show why banks might hesitate to lend to small farmers. Addressing these issues requires making lending procedures simpler, providing better access to financial services, offering flexible loan terms, and developing support systems for small farmers to encourage banks to lend more to this important sector.