Social Science — CBSE Class 10 board question

Formal sector loans can be made beneficial for poor farmers and workers in the following ways:

1. Expand bank and cooperative credit in rural areas so that dependence on costly informal lenders (moneylenders, employers) is reduced.
2. Equal distribution of formal credit — at present, rich households get most formal loans; banks must ensure poor farmers and labourers also receive cheap credit.
3. Self-Help Groups (SHGs) — organising poor women into SHGs helps them overcome the problem of lack of collateral and get timely loans at reasonable interest rates.
4. RBI supervision ensures banks lend not just to profit-making businesses but also to small cultivators and small borrowers at affordable rates.

Cheap and affordable credit is crucial for the country's development.

Source: Chapter 3 — Money and Credit, Formal Sector Credit in India / Self-Help Groups for the Poor

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• Examiners expect 3–4 distinct points for a 3-mark answer.
• Key terms to use: collateral, SHGs, RBI supervision, cooperative societies, cheap/affordable credit.
• Avoid writing a long essay; each point should be crisp and distinct.
• The question asks "how," so every point must suggest a concrete measure, not just describe a problem.