Points to Remember- Class 10 – Social Science -Economics-Chapter : 3 :Money and Credit

Points to Remember- Class 10 – Social Science -Economics-Chapter : 3 :Money and Credit

Money as a Medium of Exchange:

 Money serves as an intermediary in transactions, facilitating the exchange of goods and services.

Various forms of money have been used throughout history, including grains, cattle, metallic coins (gold, silver, copper), and modern currency (paper notes and coins).

In India, the Reserve Bank issues currency notes on behalf of the central government, and the rupee is widely accepted as a medium of exchange.

Deposits in Banks:

 Besides physical currency, people also hold money in the form of deposits with banks.

Banks accept deposits from individuals, paying interest on these deposits.

Deposits can be withdrawn on demand, and payments are often made via cheque instead of cash.

Loan Activities of Banks: 

Banks utilize a small portion of deposits as cash reserves and lend out the majority of deposits to borrowers.

Loans generate income for banks through the interest charged on them, which is higher than the interest paid to depositors.

Credit Situations: 

Credit involves the lender supplying money, goods, or services to the borrower with the promise of future payment.

Examples illustrate how credit can either improve or worsen a person’s financial situation based on various factors such as successful production or crop failure.

Terms of Credit: 

Loan agreements specify interest rates, collateral, documentation requirements, and repayment terms, collectively known as the terms of credit.

Collateral serves as security for the lender and can be seized if the borrower fails to repay the loan.

Formal Sector Credit in India: 

Formal sector loans come from banks and cooperatives, supervised by the Reserve Bank of India.

Informal sector loans include those from moneylenders, traders, employers, relatives, etc., without regulatory oversight.

Formal and Informal Credit: 

While the formal sector meets some credit needs, a significant portion is still met by informal sources, particularly in rural areas.

Expanding formal sector loans, especially in rural areas, can reduce dependence on informal sources and ensure broader access to affordable credit.

Self Help Groups (SHGs) for the Poor: 

SHGs are small groups of poor individuals who promote small savings among members and provide timely loans at reasonable interest rates.

Advantages of SHGs include overcoming collateral requirements, fostering financial self-reliance among women, and addressing social issues through regular group meetings.