Highlight the formal and informal credit sources in India.
(A) Formal credit sources
(i) Commercial Banks (ii) Central Bank (iii) Government Agency (iv) LIC
(v) Registered Chit Fund Companies (vi) UTI (vii) Mutual Fund Institution
Above mentioned all formal financial institutions accept savings and sanction loans to the people, companies and other agencies.
(B) Informal credit sources
(i) Local moneylenders: village mahajan and sarafs or gold smiths in the rural areas or in the cities.
(ii) Land lords: this class include the big, middle and small category land-lords. They accept as collateral, title documents of agricultural land, dwelling unit, factories and issue loans to needy persons and companies.
(iii) Self help groups: thrift and credit societies, union of government servants, cooperative societies and farmers, labourers, domestic helpers and housewives organizations. They also accept savings from
different people and help their needy members.
(iv) Chit fund companies and private finance companies are very powerful informal
financial institutions. Some of them are working very effectively in villages and cities and all pay more interest to depositors than the formal agencies and institutions.
