The two main sources of India's formal sector are (i) banks and (ii) cooperatives. We need to increase the formal sources of credit in India due to the following reasons-

(i) Everyone can get a loan from the bank at a low rate of interest.

(ii)The loan can be repaid in the next three years.

(iii) Bank loans at low rates of interest increase the income of the borrowers and borrowers can easily repay it. Due to these facilities the borrower can take the loan for the second time as well.

(iv) Formal sources of credit can keep people away from moneylenders, traders etc. who always find an opportunity to keep people in their clutches. The reason behind the organization of self-help groups may be indebtedness.

(v) Formal sources of credit can protect people from moneylenders, traders etc. who always find opportunities to trap people.