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18 views5 pages

Document 12

Uploaded by

Anish
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© © All Rights Reserved
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SET A

SECTION A - Multiple Choice Questions (1 mark each)

1. (b) 20
a. 20% of the poor households' credit in India comes from the formal sector.
2. (d) Depositors, borrowers
a. Banks take deposits and lend money to borrowers, acting as
intermediaries.
3. (d) Money
a. Money was developed as a new medium to make exchanging goods
easier.
4. (a) i - c, ii - d, iii - b, iv - a
a. Formal financial institutions: Commercial banks, cooperatives, rural
banks.
b. Informal financial institutions: Moneylenders, landlords.
c. Actual investment: Amount invested.
d. Deferred payments: Payments due in the future.
5. (d) None of the above
a. All the listed options are limitations of the barter system.
6. (a) If both A and R are true and R is the correct explanation of A
a. Banks keep only a small part of deposits as cash because they lend out
the rest.
7. (b) Formal source of loan
a. Megha’s loan from the bank is a formal source, requiring documents and
specific terms.
8. (a) It consists of 15 - 20 members or more
a. Self Help Groups (SHGs) typically have 15–20 members.
9. (b) Terms of credit
a. Terms of credit include details like interest rate, collateral, and
repayment plan.

SECTION B - Very Short Answer Type Questions (2 marks each)

10. Why are most poor households deprived of formal loans?


a. Poor households often lack the required documents or collateral, and
banks may consider them high-risk borrowers.

OR
Why is supervision of formal sources necessary?

b. It ensures fair lending practices, prevents excessive interest rates, and


protects borrowers.
11. How does money act as a medium of exchange?
a. Money allows people to easily buy goods and services without needing a
barter system where both parties want each other’s goods.

SECTION C - Short Answer Type Questions (3 marks each)

12. Impact of high borrowing costs on borrowers:


a. High borrowing costs make it hard for people to repay loans, trapping
them in debt and reducing their ability to invest in things like education or
farming tools.
13. Why do banks and cooperatives need to lend more?
a. Lending supports economic growth by helping people start businesses,
buy homes, and invest in farming, all of which boost development.
14. Dependence of poor households on informal credit:
a. Poor households rely on informal sources like moneylenders, who don’t
require strict documents or collateral but charge high-interest rates,
which can lead to debt traps.

SECTION D - Long Answer Type Questions (5 marks each)

15. Distinction between formal and informal sector loans:


a. Formal Loans: Offered by banks and cooperatives, require
documentation, have regulated interest rates, and are safe.
b. Informal Loans: Offered by moneylenders and landlords, don’t require
documents, have high-interest rates, and are not regulated, which can be
risky for borrowers.

OR

Benefits of bank deposits for individuals and the nation:

c. For Individuals: Deposits are safe, earn interest, and can be used to get
loans.
d. For the Nation: Banks can use deposits to lend to businesses, farmers,
and others, helping the economy grow.
16. Need for credit for Indian farmers:
a. Farmers need credit to buy seeds, fertilizers, and equipment to grow
crops. Credit helps them take on farming risks and improve their
productivity.

SECTION E - Case Based Questions (4 marks each)

17. Passage Analysis:


a. i) Major sources of formal loans: Banks and cooperatives.
b. ii) Reasons for exclusion: Poor households lack collateral and
documents.
c. iii) Informal lenders: Moneylenders and landlords.
18. Passage Analysis:
a. i) Collateral: An asset a borrower pledges to secure a loan.
b. ii) Credit: Borrowing money with the agreement to repay it later.
c. iii) Terms of credit: Interest rate, collateral, documents, and repayment
plan.

SET B

SECTION A - Multiple Choice Questions (1 mark each)

1. (a) Currency notes and coins


a. Modern money includes notes and coins, which are widely accepted.
2. (c) Barter system
a. The barter system is the exchange of goods without using money.
3. (b) Informal
a. Informal sector lenders are unregulated and can charge any interest rate.
4. (a) i - b, ii - c, iii - d, iv - a
a. The barter system involves exchanging goods directly.
b. Debt-trap: A difficult situation where one cannot repay a loan.
c. Formal loans come from banks and cooperatives.
d. The Reserve Bank of India supervises banks.
5. (d) Asset as guarantee for loan
a. Collateral is an asset pledged as security for a loan.
6. (b) If both A and R are true, but R is not the correct explanation of A
a. Modern currency is easy to carry but has value only as a medium of
exchange.
7. (c) Debt-trap
a. A debt-trap happens when someone borrows at high interest and can’t
repay, like Mahesh’s situation.
8. (c) Paper instructing the bank to pay a specific amount
a. A cheque is an instruction to the bank to pay someone a specified
amount.
9. (b) iii, iv, i, ii
a. Sequence: Spinning yarn, weaving fabric, transporting cloth, and sale in
shops.

SECTION B - Very Short Answer Type Questions (2 marks each)

10. Why do informal lenders provide loans without collateral?


a. Informal lenders charge high-interest rates to cover risks and often use
social pressure to ensure repayment.

OR

How do deposits become a bank's source of income?

b. Banks lend deposits to others at higher interest rates than they pay
depositors, earning income from the difference.
11. Major sources of formal loans for rural households:
a. Banks and cooperatives are main formal sources for rural credit.

SECTION C - Short Answer Type Questions (3 marks each)

12. Need to expand formal credit sources in India:


a. Expanding formal credit helps reduce reliance on costly informal loans
and supports financial inclusion, making borrowing fairer and safer.
13. Loan activities of banks:
a. Banks lend deposits to people and businesses, earning interest from
these loans, which helps the economy grow.

OR

Advantages of formal credit:

b. Formal sources like banks and cooperatives are regulated, have fairer
terms, and provide financial security.
14. How credit aids agriculture development:
a. Credit helps farmers buy seeds, tools, and fertilizers, allowing them to
grow more crops and increase their income.

SECTION D - Long Answer Type Questions (5 marks each)

15. Importance of formal credit in economic development:


a. Formal credit fuels economic growth by funding businesses, supporting
agriculture, and helping people make important investments, creating a
more stable economy.

OR

Bad effects of informal credit on borrowers:

b. Informal credit can lead to high debt due to high-interest rates, lack of
legal protections, and often coercive repayment practices.
16. Why are bank deposits called demand deposits, and what are their
benefits?
a. Demand deposits can be withdrawn any time. They are safe, earn
interest, and allow easy access to money through cheques or electronic
transactions.

SECTION E - Case Based Questions (4 marks each)

17. Passage Analysis:


a. i) Preference for payments in money: Money can be exchanged for any
desired goods or services.
b. ii) Double coincidence of wants: Both parties need to want each other’s
goods to trade in a barter system.
c. iii) Money as a medium of exchange: It’s universally accepted for buying
and selling.
18. Passage Analysis:
a. i) Why banks keep cash reserves: To allow depositors to withdraw their
money.
b. ii) Banks’ role in funds mediation: Banks lend surplus deposits to those in
need, creating a flow of money.
c. iii) Main income source for banks: Interest earned from loans given out.

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