In the question given below there are 2 statements marked as Assertion (A) and Reason (R). Choose the correct alternative from the following options.

Assertion (A)- The rural poor fail to have sustainable access to the formal banking system in the region.

Reason (R)- Poor people in rural areas fail to submit collateral for taking loans.

Both (A) and (R) are true and (R) is the correct explanation.

The correct answer is option 1: Both (A) and (R) are true and (R) is the correct explanation.

Evaluation:

• Assertion (A) is true. The rural poor often face challenges in accessing formal banking systems due to various factors, including lack of infrastructure and financial services in remote areas.

• Reason (R) is also true. One of the significant barriers to accessing formal credit for the rural poor is the inability to provide collateral, which banks require as security for loans.

Explanation:

• Reason (R) correctly explains why the rural poor might not have sustainable access to the formal banking system. The lack of collateral is a primary reason that limits their ability to secure loans from formal institutions.