The correct option is 2 only
Explanation
The credit market in India is broadly classified into two sectors: the formal sector (commercial banks, cooperative societies) and the informal sector (moneylenders, traders, employers, relatives, and friends). The regulatory framework differs significantly between these two sectors.
Statement-wise Analysis
- Statement 1 is Incorrect. The Reserve Bank of India (RBI) supervises the functioning of formal sources of loans, such as banks and cooperatives. The World Bank is an international financial institution that provides loans and grants to governments of low- and middle-income countries for the purpose of pursuing capital projects; it does not regulate domestic banking sectors.
- Statement 2 is Correct. There is no central organization that supervises the credit activities of lenders in the informal sector. While laws exist to prevent usury (excessive interest rates), there is no regulatory body to enforce them strictly or monitor day-to-day lending practices in the informal market. Consequently, lenders in this sector often charge much higher interest rates than the formal sector without oversight.
- Statement 3 is Incorrect. Banks are mandatorily required to submit periodic information to the RBI regarding their lending activities. This includes data on how much they are lending, to whom, and at what interest rates. This supervision ensures that banks maintain a minimum cash balance and provide credit not just to profit-making businesses but also to priority sectors like small cultivators and small-scale industries.
Key Takeaway
The Reserve Bank of India (RBI) is the sole regulator for the formal credit sector in India, ensuring compliance with lending norms, whereas the informal credit sector operates without any specific supervisory body.