In the rural areas, people are often found to borrow moneylenders which comprise the unorganized sectors. This usually increases the cost of borrowing which means a larger part of the earning of the borrowers is used to repay the loan. Hence, borrowers have less income left for themselves. This could lead to an increasing debt. Thus, it is necessary that banks and cooperatives increase their lending particularly in the rural areas, so that, the dependence on informal sources of credit reduces.
Borrowing from the organised sectors like banks and cooperatives would lead to the higher incomes and many people could then borrow cheaply for a variety of needs. They could grow crops, do business, set up small-scale industries etc. They could set up new industries or trade in goods. Cheap and affordable credit is crucial for the country's development. Thus, the formal sector loans need to expand moreover, it is also necessary that everyone receives these loans.