Social Science — CBSE Class 10 board question

| Basis | Formal Sources | Informal Sources |
|---|---|---|
| Institutions | Banks, cooperatives | Moneylenders, traders, employers, relatives |
| Supervision | Regulated by RBI | No supervisory organisation |
| Interest Rate | Low (e.g., 8.5% p.a. for Arun) | Very high (e.g., 60% p.a. from moneylender) |
| Documentation | Requires collateral and documents | No collateral needed; personal basis |

Formal sources charge lower interest and are supervised by the RBI, which ensures fair practices. Informal lenders can charge any rate and may use unfair means to recover loans, often leading borrowers into a debt trap.

Source: Chapter 3 — Money and Credit, Formal Sector Credit in India

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• Examiners expect at least 2–3 clear points of distinction for 3 marks; a table format scores well and saves words.
• Always give examples (Arun's bank loan at 8.5% vs. Shyamal's moneylender at 60% p.a.) — the question explicitly asks for them.
• Key terms to include: RBI supervision, collateral, interest rate, debt trap.
• Don't write lengthy paragraphs; crisp contrasts backed by textbook examples are what examiners reward.