Formal sources of the credit do not include

By Mandeep Kumar|Updated : August 3rd, 2022

1. Cooperatives

2. Banks

3. Employee

4. Employers

Formal sources of credit incorporates banks, non-government establishments, and financial institutions. The functioning of formal sources of loans is regulated by the Reserve Bank of India (RBI). The most common formal source of loans for any business venture is banks.

Answer: Formal sources of credit do not include employers.

Banks and Cooperative charge lesser of interest than informal institutions. RBI looks after the banks actually maintain the cash balance. Banks are responsible for submitting the information to the RBI periodically.

On the other hand, any moneylender who would lend capital on a reliable and trustworthy basis is referred to as an informal source of credit. Traders, Moneylenders, Employers, friends, relatives, etc. are the informal sources of credit. The credit activities performed by informal sources are not checked by any government or private organization.

Features of the Formal Sources of the Credit

The features of the Formal sources of the credit have been elaborated below:

  • The interest rate and other details of these sources are checked by RBI.

  • The proper terms of credit include collateral, documentation, rate of interest, and mode of repayment.

  • Cheap and affordable credits are provided with common terms of credit for all.

Summary:

Formal sources of credit do not include

Out of the given options, employers are not included in the formal sources of the credit.

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