Collateral and Rural Credit
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Question (English)
Why were a vast proportion of poor rural households excluded from the credit network?
- They did not want loans
- Some kind of collateral was required ✓ Correct
- Banks were not present in rural areas
- Interest rates were too low
Explanation:
Correct Answer Explanation
Since some kind of collateral is required, vast proportion of poor rural households were automatically out of the credit network.
Key Points:
- This gap led to the emergence of Self-Help Groups (SHGs).
- The formal credit delivery mechanism proved inadequate.
- It was not fully integrated into rural social and community development.
- SHGs provide credit without traditional collateral requirements.
Why Other Options Are Wrong
- A: Poor households needed credit but couldn't access it.
- C: Banks existed but had collateral requirements.
- D: High interest rates from informal sources was the problem.
📚 About this Topic — CH-5: RURAL DEVELOPMENT
This multiple choice question is from CH-5: RURAL DEVELOPMENT, Indian Economic Development, NCERT Books. It has 4 options with a detailed explanation of the correct answer. Practice more MCQs from CH-5: RURAL DEVELOPMENT to strengthen your preparation.
