✓ Board-verified
Social Science · 2026 · 3 marks
CBSE 2026 · Region 1 · Set 1 · Q36
Differentiate between formal and informal sources of credit.
Differentiate between formal and informal sources of credit.
Marking-scheme solution
| Formal sources of credit | Informal sources of credit |
| (i) The Reserve Bank of India supervises the functioning of formal sources of loans. | (i) There is no organisation which supervises the informal credit sources. |
| (ii) These sources charge a minimal interest on loans. | (ii) These sources charge a much higher interest on loans. |
| (iii) Low cost of borrowing. | (iii) High cost of borrowing. |
| (iv) Chances of debt trap is low. | (iv) May lead to debt trap. |
| (v) The formal sources are loans from banks and cooperatives. | (v) The informal sources are moneylenders, traders, employers, relatives and friends. |
More from Money and Credit
- 'Formal sector of credit better than informal sector.' Give arguments in support of your answer.2024
- Explain any three terms of Credit.2023
- Read the following source and answer the questions that follow: Megha has taken a loan of ₹ 5 lakhs from the bank to purchase a house. The annual…2022
- In one of the small villages, a farmer borrows money from the village moneylender at a high monthly interest rate but is not able to repay it back.…2024
- Explain, why the banks do not lend credit to certain borrowers? OR Explain the functions of "Self Help Group".2022
- Which of the following groups in urban India depend on informal sources to meet their credit needs?2025
- Why is it necessary to expand formal sources of credit in rural areas? Explain.2026
- Read the given source and answer the questions that follow: Arun supervises the work of one farm labourer. Arun has seven acres of land. He is one of…2025
CBSE Class 10 Social Science past-paper question from the 2026 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.