Social Science (087) — CBSE Class 10 board question

Banks may not be willing to lend to certain borrowers due to the following reasons:

1. Lack of collateral: Many borrowers, especially the poor, do not possess assets like land, building, or deposits to offer as security against the loan.

1. Absence of proper documents: Banks require employment records, identity proof, and other documents. Poor or rural borrowers often cannot provide these.

1. Risk of non-repayment: Banks consider some borrowers as high-risk if they have low or irregular income, making repayment uncertain.

Due to these reasons, poor households are denied formal credit and are forced to depend on expensive informal sources.

Source: Money and Credit, Terms of Credit / Self-Help Groups for the Poor

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• The examiner expects 3 distinct points for 3 marks — one point per mark is safe.
• The key reasons come directly from the chapter: no collateral, no documents, and high repayment risk.
• Always link back to the consequence (dependence on informal credit) — it shows understanding and rounds off the answer neatly.
• Avoid writing a long paragraph; numbered points are cleaner and easier to mark.