Question

Which of the following is the source of non-institutional finance?

• A. Regional Rural Bank
• B. Land Development Bank
• C. Moneylender
• D. Cooperative Bank

Hint:

Institutional sources are regulated by the RBI, while non-institutional sources (like moneylenders and relatives) are unregulated and often charge higher interest.

Answer 1

The Correct Option is C

The question asks us to identify which among the given options is a source of non-institutional finance. Let's examine each option:

1. Regional Rural Bank: These are institutional sources of finance, primarily designed to meet the credit needs of the rural population. They operate under the supervision of the Reserve Bank of India (RBI) and are part of the formal financial sector.
2. Land Development Bank: These banks are part of the cooperative banking sector and provide long-term finance for agricultural development activities. They are institutional sources of finance.
3. Moneylender: Traditionally, moneylenders are individuals or small groups that offer finance at higher interest rates in rural and urban areas without specific regulation under the formal financial system. They are a prominent example of non-institutional finance.
4. Cooperative Bank: These banks are organized and run by their members and work within a legal framework. They form part of the institutional sources of finance.

Non-institutional finance typically includes those sources that operate outside the formal banking sector. Such sources are not regulated under the formal financial regulations like banks are.

Considering the options, Moneylender is the correct answer, as it represents a non-institutional source of finance, operating outside the purview of formal financial institutions.