This research paper examines the various sources of credit available to the poorer sections of society and their impact on employment, GDP, and foreign direct investment in India. The formal sector meets only about half of the total credit needs of rural people, with the remaining needs being met by informal sources (World Bank, 2023). Formal credit must be distributed more equitably to benefit the poor with cheaper loans (RBI, 2023). Banks and cooperatives should increase their lending, particularly in rural areas, to reduce dependence on informal credit sources (Kohli, 2022). While the expansion of formal sector loans is necessary, ensuring that everyone receives these loans is equally important (Government of India, 2023).