The various differences between formal and informal sources of credit are shown in the following table:
Formal Sources of Credit
1. They cover those sources of credit which are registered by the Government and have to follow its rules and regulations e.g. Banks, Cooperatives.
2. The RBI supervises the functioning of formal sources of credit.
3. Apart from profit-making, they have also an objective of social welfare.
4. The rate of interest charged by formal sources is always much lower than that of informal sources.
5. The terms of credit are also fair and reasonable.
Informal Sources of Credit
1. They include those small and scattered units which are outside the control of the Government e.g. individual moneylenders, traders, employers, etc.
2. There is no organizational supervision or adherence to rules and regulations in the credit extending activities in this sector.
3. Their only motive is to extract profit as much as possible.
4. They charge random and much higher interests in comparison to formal sectors.
5. They impose very tough and sometimes even, unreasonable terms of credit on the borrower.

Terms of credit are the requirements need to be satisfied for any credit arrangements. It includes interest rate, collateral, documentation and mode of repayment. However the terms of credit vary depending upon the nature of lender, borrower and loan.

When I buy fish, I always doubt that he under weighs the fish. I have cross-checked at my home and found my doubt to be true. Whenever I have tried to argue with the fish-seller, he tends to become too aggressive.

The functions of consumer protection councils are:
(a) They guide consumers on how file a case in the consumer court as the consumers are not well versed with the legal aspects of the complaint.
(b) Many a time, they represent individual consumers in the consumer court, when the consumer in unable to attend the court.
(c) These councils are voluntary organisations and receive financial support from the government for creating awareness among the people.
(d) They create awareness in the public about consumer rights.

The concept of Self-Help Groups (SHGs) is very important for poor people. Self-Help Groups are required because:
(a) They help the borrowers to overcome the problem of lack of collateral.
(b) They help the rural poor (especially women) to become financially self-reliant.
(c) They provide a platform to hold regular meetings and thus, discuss issues such as health, nutrition and domestic violence.

(a) Banks provide loans after collateral and documentation securities, which generally the small farmers failed to comply with. Therefore, banks are unwilling to lend loans to small farmers.
(b) There are several informal sources of credit like landlords, moneylenders, traders, relatives and friends etc.
(c) Terms of informal credit can put the small farmers into debt-traps. Higher rate of interest and unfavourable conditions expiate farmers by the situation of multiple loans.
(d) Farmers can get cheap and safe loans from formal credit providers i.e., banks and cooperative societies.

(i) The transformation of markets in recent years has come because of legal institutions helping consumers in getting compensation and upholding their rights as consumers.
(ii) The awareness of being a well-informed consumer which arose out of consumer movement has also shifted the responsibility of ensuring quality of goods and services on the sellers.
(iii) The producers in the market need to strictly follow the required safety rules and regulations. The manufacturer in the market is now required to display information about the ingredients used, price, batch number, date of manufacture, expiry date and the address of the manufacturer.
For example, pressure cookers have safety valves and manufacturers have to ensure its high quality. While buying medicines the 'directions for use' and information relating to side effects and risk associated with its usage are to be mentioned on the packets.

Collateral is an asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid. Collaterals can be land, building, vehicle, stocks, cattle, bank deposits etc.

International Organization for Standardization

Due to consumer awareness, when we purchase various goods and services, after having complete information about their price, quantity, quality etc. We make an informed choice.

National Commission

A cheque is an instrument instructing the bank to pay a specific amount from the person's account to the person in whose name the cheque has been issued.

Banks provide loans after collateral and documentation securities, which generally the small farmers fail to comply with. Therefore, banks are unwilling to give loans to small farmers.

Right to seek redressal

In India, the currency notes are issued by the Reserve Bank of India (RBI) on behalf of the central government.