Class10 Eco3 Money and Credit
Class10 Eco3 Money and Credit
Types of Credit
the sum of
Ten Rupees 000 000000
Signed
Governor of the Reserve Bank
money-related activities.
Q5. Why
Wh do uwe need to expand formal sources of credit in India?
Ans
1 ) Com pared to the formal lenders
most of the intformal
the cost to
lenders
charge
the borrower of the
a mue
info mal
that
loans. It means
nigher interest on
The high rate of interest borrower and this could lead to increasinc paid is
of the
greater than the income
debt-trap. to start
an enterprise by borrowing may not d so because
liu People who might wish
t h e high cost of borrowing
and
atives need to lend more. This wo
cooperat.
) For thes
se reasons
banks
ould then borrow cheaply for a ead to
higher incomes and many people
coul
variety of
needs.
MONEY AND O
(vi They could grow crops, do business, set up smal|-scale industries, etc. They cout
set up new industries or trade in g0ods.
ould
(vinCheap and affordable credit is important for the country's development. Hence
it
is necessary to expand formal sources of credit in our country.
Q6. What is the hasic idea hehind the SHGs for the poorP Explain in your ouwn words
Ans. consist of certain members who their savings
Self- Help Groups
constitute a fund
(SHGs)
which is further used in making finance
pool and
and advances to othe
members. This helps to reduce the functioning of informal sectors of credit. The
SHGs heclp borrowers overcome the problem of lack ofcollateral. They can get timely
loans at a reasonable intercst rate. They help women to become self-reliant.
97. What are the reasons why the banks might not he willing to lend to certain horrowers
Ans. The banks are sometimes not willing to lend to certain borrowers because of the
following reasons
() Some persons are not able to produce certificate of their earning.
(i There are some people who have a history of non-repayment of loans.
(ii) There are other people who are not able to produce documents of their employment
(u Some persons have nothing to give to bank as collateral
(v) There are a few others who fail to produce two persons who can stand as surety
in case he is unable to repay the loan.
98. In what ways does the Reserve Bank of India supervise the functioning of banks
Why is this necessary?
Ans. (i) The Reserve Bank of India supervises the functioning of formal sources of loans
(i) It monitors the banks in actually maintaining cash balance.
(1i) It sees that the banks give loans not just to profit making businesses and traders
but also to small cultivators, small-scale industries, to small borrowers, etc.
(iu) Periodically banks have to submit information to the RBI on how much they are
lending, to whom, at what interest rate, etc.
99. Analyse the role of credit for development.
Ans. (i Credit refers to an agreement in which lender supplies the borrowers with money
goods and services in return for the promise of future payments.
) Whether credit will be useful or not, depends
upon the risks in the situation an
on whether there is some
support in
case of loss.
(in When a borrower takes a loan from the bank for increasing the production of goods
and it and pay the loan back to the bank within
he/she isable to increase
given tine limit, then credit has played a positive role in making him/her
the
Also see Q.13. wealt
(Short Answer Type questions)
Q10. Manav needs a loan to set up a small business. On what basis will Manav dec
whether to borrouw from the bank or the moneylender? Discuss.
Ans. Manav needs a loan to set up a snall business. Manav will decide on whether to
borrow from the bank or the moneylender on the basis of various factors:
() Firstly, he must have a collateral or asset which can guarantee his loan. If he lacks
such an asset, he can't get a loan from the bank. In this scenario, he will have to
go to a moneylender, even though the latter charges a higher interest rate.
(i) Secondly, if Manav is not aware of the banes of borrowing from the informal secto
he might not even consider taking a bank loan.
Majority of the credit needs of the households are met from informal
. ...
sources.
c o s t s of borrowing increase the debt-burden.
(im .. 1Ssues currency notes on behalf of the Central Government.
Banks charge a higher interest rate on loans than what they offer on ..
. is an asset that the borrower owns and uses as a guarantee until the loan
Is
repaid to the lender.
ns. () poor (in Reserve Bank of India
(ii) High
(u) deposits (u) Collateral.
G.Choose the most appropriate answer.
1 In a SHG most of the decisions regarding savings and loan activities are taken by
Central Bank of India Q7. What are the modern forms of money?
d None of these Ans. The modern forms of
money include
l0. Which one currency paper notes and coins.
of the following does not
Q8. What is the chief feature of the modem
Come under terms of credit?
la) Interest rate currency?
Ans. The modern currency is without
b) Employment any
use of its own.
c Collateral
Q9. What do people do with extra money?
d Mode of repayment Ans. They deposit it with the banks by
Ans. 1-(a)
2-(b) 3- 4-(c opening a bank account in their name.
5-(a) 6- 7-d 8-() Q10.Why do we consider demand deposits
9-b 110-(b) as money?
Ans. Demand deposit constitute money in
.Very
:
deposits. The difference of interest isAns. Cheap and affordable credit is cru
the main s o u r c e of income of banks for the country's development rucial
Q13. Why do people in nural a r e a s demand 021. Which segment of the society receet1e
formal credit?
for credi
Ans. They demand for credit f0r crop Ans. It is the richer segment of sorie
which receives formal credit
production
the lender do in case the 922. Which segment of the society depend
Q14 What would
borrouer fails to repay the loan? on the formal sources)
Or Ans. The poor depend on the forma
sources.
Whu do lender ask for collateral while
Q23. Mention one of the major reasn
iendng which prevents the poor from getting
Ans.1f the borrower fails to repay the loan.
the lender has the right to sell the bank loans.
asset or collateral to obtain payment. Ans. Absence of collateral is one of the
major reasons which prevents
Q15. G1ue some common examples of
collateral used for borrouing.
poor from getting bank loans.
Ans. Property such as land titles, deposits Q24. What are the difficulties from which
with banks. livestock are some barter system of exchange sufers
common examples of collateral used Ans. () Lack of double coincidence of wants
for borrowing (1) Valuations of all the goods cannot be
Q16. While taking a loan, borrowers look done easily.
for easy terms of credit. What does its (m) Certain products cannot be divded
mean? Q25. What are the benefits that you can
Ans Its means low interest rate, easy by depositing your extra money tn
conditions for repayment and less banks
collateTal and documnentations Ans. () Safety
Tequirements () Earn interest
917 People obtain loans from various ( t ) Can make payments easily threu
tsources Name them
Ans
cheques
Formal sector Banks and Q26. How do the SHGs help
oooperatives borroueT
lnformal sector Muneylenders, Ans. The SHGs help borrowers overc
Uaders cnployeIb, Telatives, fnends the problem ot lack of collatera
Q18 Hou du the 1nfurmul lenders take Q27. How does money ehminate the
uthduc net
udvuntuge uf Ife burrowers for double cotncidence of uan
helpieshfiebbr CBSE 2ul
Ans. They chargr high nteicsl n loas Ans.If we have money in our pocket we
As a result he 0sl tu Ue lornower Purchase any thing at anvtime as*
of iniomal luaiib ib alau Very hugh WIsh
Q19. What does hugher oost of borowing 928. What the two
are
forms of mo
mean?
currency CBSE 2
Ans. This means a largr part of the earnings Ans. Two form of modern currency a
of the borrowers 1s used to Iepay the 19 Paper notes
loan. Hence, borTOwers have less
( Coins
Q29. Why one cannot
refuse a pant
income left for thhemselves LCade n
npees in India?[CBSE 2
One cannot efuse a
payment made
Ans.
loans.
933. Why
Why i s the supervision of the
o/ loans
Junctioning of formal sources