Home › SBI PO › Banking Awareness › Rural Development › Why were many poor rural households excluded fro…
Why were many poor rural households excluded from formal credit?
AThey had no farming land use
BThey could not provide collateral
CThey were barred by law
DThey refused bank accounts
Answer & Solution
Correct answer: B. They could not provide collateral
1. Formal lenders require security against a loan.
2. Poor households typically have no asset to pledge.
3. Because **collateral is required**, a vast proportion were automatically outside the credit network.
4. Self-Help Groups emerged precisely to fill that gap, lending from pooled member savings instead.
_Source: NCERT Class 11 Indian Economic Development, Ch 5 "Rural Development", section 5.3 CREDIT AND MARKETING IN RURA L_
Related questions
At the time of independence, small farmers and landless labourers were kept in a debt-trapUnder the Jan-Dhan Yojana, account holders can get an overdraft facility ofWhich problem is identified as chronic in the rural banking system?In the critical appraisal of rural banking, which institution is the noted exception on deThe Green Revolution changed rural credit chiefly by shifting the portfolio towardsBy May 2019, roughly how many women were members of women's Self-Help Groups in India?Small credit provisions routed through Self-Help Groups are generally calledSelf-Help Groups build their lending pool mainly from