Economics · Rural Development
In the context of rural development, what is a critical challenge historically associated with traditional informal rural credit systems in India?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1High reliance on informal sources leads to exploitative interest rates and debt traps for farmers✓
- 2Formal banking institutions entirely replace informal lenders, eliminating local financial practices
- 3They provide excessive credit to rural households, leading to hyperinflation
- 4Interest rates are uniformly low, discouraging personal savings
Correct answer
High reliance on informal sources leads to exploitative interest rates and debt traps for farmers
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