What are the reasons why the banks might not be willing to lend to certain borrowers?
Banks might not be willing to lend to certain borrowers because getting a loan from a bank is much more difficult than taking a loan from informal sources. Banks require borrowers to submit proper documents, which many poor individuals may not possess.
The most significant reason, however, is the absence of collateral. Banks demand collateral as security against the loan. Since poor households often do not have assets to offer as collateral, banks are unwilling to lend to them. This is unlike informal lenders who know the borrowers personally and are willing to lend without collateral.
Explanation
The provided context explicitly identifies two main reasons why banks hesitate to lend to certain borrowers, particularly the poor. First, the text states that 'bank loans require proper documents,' which acts as a barrier. Second, it highlights that the 'absence of collateral is one of the major reasons which prevents the poor from getting bank loans.' The answer combines these points to explain the bank's unwillingness.