Which one's better? Direct or Indirect Lending ?

Although both are equally poised, it will depend greatly on the situation. Also, it depends whether you are a borrower or a lender. Suppose that I want to borrow a sum of Rs. 1 crore for my company. Since 1 crore is not that huge a sum, I would like to incur as less expenditure as possible in information gathering and would also like to avoid the costs involved in a public issue. Thus, I would go to a reputed bank and get my small or short-term loan, since borrowing would then become cheaper. Also, many borrowers do not have a reputation of being creditworthy and hence might not have an option but to go to a bank.
However, if a borrower has past reputation and wants to raise large sums of money, he might find the direct market as an easier path. Infact, it may not even be possible to borrow very large sums indirectly that is, from banks. Capacity of a direct market is much higher.

Again, when it comes to lenders, I have a less risk and more liquidity when I involve a bank. However, along with the lower chance of loss comes a lower chance of gain. You may get rich with a clever investment in stocks ( direct secondary market ) but you won't get rich by putting your money in a bank.

Again, banks have a specialization edge and hence, in case of trouble, can handle the situation better. They can actually tell when the problem faced by a borrower is temporary and when it is permanent and can make a wise decision. In a direct market, the people might not know much about the company's standing and might take a wrong decision, like forcing a company into bankruptcy over unnecessary fears, when the best thing could be to let the company run for some more time.