Statement:\nAn increasing number of farmers prefer loans from local moneylenders rather than banks because bank paperwork is complicated.\n\nCourses of Action:\nI. Local moneylenders who charge interest rates lower than banks should be punished.\nII. Banks should simplify loan procedures to suit farmers.\n\nWhich 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.