Unregulated credit market in less developed countries

Unregulated credit market

Unregulated credit market is the market which are not directly controlled or regulated  by the R.B.I (Reserve bank of india).

Unregulated credit market create serious problems of credit control for the monetary authority, both at the aggregate level and at the level of credit allocation.

That doesn't mean that these market are fully out of control by the R.B.I if they tighten their Monetary policies its indirectly effect that.


Unregulated credit market in less developed countries 

• These market meet a large part of the working capital  needs of serval segments of the indian economy such as whole sale,jute industries etc.
• These markets contribute almost 30%to35% of total credit used by the Indian market.
• These market play important role which is both competitive and complementary to the banks. 
• They provide credit facilities to the market with low rate of interest as compare to the commercial banks that increase the demand of these markets.

They help in the development of rural areas by providing loans to them at low interest rate and increase productivity of small scale businesses .


Demerits of unregulated credit market 

• Unregulated credit markets create serious problems of credit control for the monetary authority. 
• These are not controlled by regulated markets that reduce the effectiveness of the government from the market.
• Its reduce the demand of commercial bank which are the used by RBI to control the credit creation  and cash flow in the market.

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