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HCS (Haryana)Prelims2026General Studies
Question
Consider the following statements: 1. Formal credit sources are regulated by government sources. 2. Expansion of Institutional credit reduces dependence on money lenders. 3. Informal lenders generally charge lower rate of interest due to competition among themselves. How many of the statements given above are correct?
Options
- A Only one
- B Only two
- C All three
- D None
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Correct Answer
B Only two
Model Answer
- Formal sources of credit such as banks and cooperative societies function under the supervision of the Reserve Bank of India, which monitors the rate of interest charged and the manner in which they lend. Hence, statement 1 is correct.
- The expansion of formal or institutional credit at reasonable rates of interest, particularly through cooperatives and self help groups in rural areas, frees the poor from the clutches of moneylenders. Hence, statement 2 is correct.
- Informal lenders such as moneylenders, traders and employers are not supervised by any organisation. They charge a much higher rate of interest, which leads to a higher cost of borrowing and often to a debt trap. Hence, statement 3 is incorrect.
- Therefore, only two statements are correct.