Statement: An increasing number of farmers prefer loans from local moneylenders rather than banks because bank paperwork is complicated. Courses of Action: I. Local moneylenders who charge interest rates lower than banks should be punished. II. Banks should simplify loan procedures to suit farmers. Which course(s) of action logically follow(s)?

Introduction / Context:The switch to informal credit due to complicated bank procedures indicates a service-design failure. Logical action should remove access frictions at banks rather than punish lenders merely for offering loans—especially when they charge lower rates.

Given Data / Assumptions:

• Observation: Farmers choose moneylenders to avoid bank paperwork.
• Implied barrier: Documentation, turnaround time, branch access, KYC hurdles.
• Goal: Increase formal financial inclusion with farmer-friendly processes.

Concept / Approach:We evaluate for relevance, fairness, and efficacy. Punishing moneylenders for low interest (I) is illogical and perverse; the problem is banks’ complexity. Simplification (II) targets the real bottleneck.

Step-by-Step Solution:

Verification / Alternative check:Successful interventions include Kisan Credit Cards, banking correspondents, simplified documentation, and time-bound approvals—consistent with II.

Why Other Options Are Wrong:

Common Pitfalls:Confusing the existence of informal credit with wrongdoing; the core issue here is bank process friction, not interest undercutting.

Final Answer:Only II follows.