Explain the different formal and informal credit arrangements.

Credit arrangements in financial management play a crucial role in ensuring liquidity and capital availability for individuals, businesses, and governments. These arrangements can broadly be classified into formal and informal credit systems, each with its distinct characteristics, advantages, and limitations.

Formal Credit Arrangements
Formal credit arrangements involve financial institutions that are regulated by legal and financial authorities. These institutions include banks, non-banking financial companies (NBFCs), cooperative societies, microfinance institutions (MFIs), and government-backed credit agencies. Formal credit is characterized by standardized procedures, legal contracts, credit assessment, and regulatory oversight.

1. Commercial Banks – Commercial banks are the most significant providers of formal credit. They offer various loan products, including personal loans, business loans, housing loans, and working capital loans. The interest rates, repayment terms, and eligibility criteria are regulated by central banking authorities such ________ __________ __________ ______ _________ ________ _________ _________ _____ _________ ___.
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