(a) Analyse the positive role of credit in the economic development of India.

(i) Credit plays a vital and positive role in the economic development.

(ii) Credit helps people to start new businesses and small-scale industries.

(iii) People can invest in agriculture, industries, education and infrastructure with the help of easy access to credit which boosts economic growth.

(iv) Farmers can take credit to buy seeds, fertilizers, machinery which increase agricultural productivity.

(v) When businesses expand with the help of credit, they create more job opportunities for people.

(vi) People can use credit to buy houses, vehicles etc to improve their quality of life.

(vii) Industries need large funds for buying machinery, technology and raw material which can be arranged through credit.

(b) Analyse the negative impacts of informal sources of loans.

(i) The sources of informal loans are landlords, money-lenders, relatives and friends who are not liable to rules of credit.

(ii) Generally informal sources charge high rate of interest.

(iii) The credit activities in this sector are not supervised by Reserve Bank of India (RBI).

(iv) There is no cap on the interest rate.

(v) There is high risk of losing the collateral by the borrower.

(vi) There are high chances of borrowers getting exploited.