The two main reasons for formal credit not being available to rural poor are : (i) Absence of collateral and documentation is the main reason which prevents rural poor from getting bank loans. (ii) The arrangements of informal sector loans are flexible in terms of timelines, procedural requirements, interest rates etc. They are adjustable according to the needs and convenience of the borrower. There is a need to expand rural credit from the side of formal sector because : (i) Informal sectors exploit rural poors by putting them in debt-traps. (ii) Cheap and affordable credit for rural poors is important for the country’s overall development.