Causation in banking co-operative context: Loan stoppage vs. deposit withdrawals — identify the correct cause–effect relationship with precise logical evaluation.

Given data

• I: The local co-operative credit society stops giving loans to farmers immediately.
• II: Many members withdraw major portions of their deposits.

Concept/Approach

• Stopping lending reduces the institution's usefulness and signals risk, which can trigger deposit withdrawals.

Step-by-Step reasoning
1) Lending halt (I) → perceived loss of benefits / trust.2) Members react by withdrawing deposits (II).3) Therefore (I) causes (II).

Verification/Alternative

• If (II) caused (I), withdrawals would precede and force loan stoppage; but I explicitly states a policy decision first.

Common pitfalls

• Assuming simultaneous independent shocks without necessity.

Final Answer
Statement I is the cause and statement II is its effect.