Unorganized Sector of Money Market

                The economy on one hand performs through organized sector and on other hand in rural areas there is continuance of unorganized, informal and indigenous sector. The unorganized money market mostly finances short-term financial needs of farmers and small businessmen. The main constituents of unorganized money market are:

1) Indigenous Bankers (IBs)

                Indigenous bankers are individuals or private firms who receive deposits and give loans and thereby operate as banks. IBs accept deposits as well as lend money. They mostly operate in urban areas, especially in western and southern regions of the country. The volume of their credit operations is however not known. Further their lending operations are completely unsupervised and unregulated. Over the years, the significance of IBs has declined due to growing organized banking sector.

2) Money Lenders (MLs)

                They are those whose primary business is money lending. Money lending in India is very popular both in urban and rural areas. Interest rates are generally high. Large amount of loans are given for unproductive purposes. The operations of money lenders are prompt, informal and flexible. The borrowers are mostly poor farmers, artisans, petty traders and manual workers. Over the years the role of money lenders has declined due to the growing importance of organized banking sector.