Question

Which of the following is included as a formal source for loaning?

• A. Bank
• B. Money-lender
• C. Employer
• D. Businessman

Hint:

Banks are formal sources of loans as they are regulated by government bodies and provide loans at standardized interest rates.

Answer 1

The Correct Option is A

Step 1: Understanding Formal vs Informal Sources of Loaning
Formal sources of loaning are legal and regulated institutions that provide loans to individuals, businesses, and governments.

Step 2: Banks as Formal Sources of Loaning
Banks are formal financial institutions that are regulated by government bodies. They provide loans at regulated interest rates, and their operations are governed by laws. Banks offer services like savings accounts, fixed deposits, and loans. Thus, banks are considered a formal source for loaning.

Step 3: Why the other options are incorrect
- (B) Money-lender: Money-lenders are informal sources of loaning, often operating without regulatory oversight.
- (C) Employer: Employers may offer loans to their employees, but these are typically informal and may not be subject to regulations.
- (D) Businessman: Like employers, businessmen may provide loans, but they are not formal financial institutions.
Thus, the correct answer is option (A) Bank.