Social Science (087) — AI-generated practice question

Reason for denial: Ramesh is a daily-wage labourer with no fixed or regular income. Banks require proper documents (such as employment records and salary slips) and collateral (an asset as security) before sanctioning a loan. Ramesh likely lacks both — he has no proof of stable income and probably owns no property to offer as collateral. Absence of collateral is one of the major reasons that prevents the poor from getting bank loans.

Alternative source: Ramesh will likely turn to an informal source of credit, such as a moneylender, who knows borrowers personally and lends without collateral — though at a very high rate of interest.

Source: Chapter 3 — Money and Credit, Terms of Credit; Self-Help Groups for the Poor

---

• The examiner expects two parts: (1) reason for denial — link it to collateral and/or documentation/stable income, and (2) the informal source Ramesh turns to.
• Use textbook vocabulary: "collateral," "informal sources," "moneylender."
• Don't just say "he is poor" — specify the mechanism (no collateral / no documents).
• Mentioning SHGs as an alternative would also earn credit, as the chapter presents them as a way for the poor to access loans without individual collateral.