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describe the role played by formal sources of credit in the economic development of a country. explain in 5 points.

The formal resources work under the supervision of RBI. The bank's maintain a minimum cash balance out of the deposits they receive. The RBI monitors that the banks actually maintain the cash balance . Banks give loans not just to profit making businessmen and traders but also to small cultivators, small scale industries , small borrowers etc.
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1.banks act as a mediator between those who have surplus money & those who are in a need of money. 2.banks benefit the depositors by keeping their money safe & also provide interest on it. 3.banks help the poor to set up their small businesses by providing them loans at less interest. 4.so when poor set up business it helps in reducing poverty & unemployment 5.reduction in poverty enhances the national economy.
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Formal sector
*. These consist of loans from banks and cooperatives.
*. These loans are supervised by the RBI.
*. The terms of credit are fixed
*. Rate of interest is not very high
*. It comprises 52% of the loans given in the country.
I hope you understand
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