Economics • Economic BasicsMedium
How does the unique land tenure system in certain parts of Sikkim, which restricts land alienation to outsiders, influence rural credit markets and capital formation?
A. It maximizes collateral availability for commercial bank loans.
B. It limits the use of agricultural land as collateral for institutional borrowings.✓ Correct Answer
C. It encourages foreign direct investment in large-scale agribusiness.
D. It abolishes interest rates on rural cooperative lending.
💡 Solution & Explanation
Legal protections restricting land transfer to non-sikkimese individuals safeguard indigenous ownership but restrict the use of land as negotiable collateral for formal credit institutions. This limitation requires alternative credit delivery mechanisms through cooperative societies and microfinance. State-specific tenancy laws preserve cultural identity while shaping financial inclusion parameters.
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