Money And Credit
Ques 1. In situations with high risks, credit might create further problems for the borrower. Explain.
Ans. In situations with high risks, credit might create further problems for the borrower. Credit involves a certain amount of loan that is taken by a borrower from a lender at a high-interest rate. In case there is a failure, and the borrower faces loss, then he further falls into the trap of credit. This is known as a debt trap.
The borrower has to repay the credit along with interest applied by the lender, and he further falls into the trap of credit, increasing the problems for the borrower. The borrower also has to sell a part of his or her land to repay the loan.
Ques 2. How does money solve the problem of double coincidence of wants? Explain with an example of your own.
Ans. The ‘double coincidence of wants’ mean both parties, i.e., the buyer and the seller have to agree to sell and buy each other’s commodities. In a barter system where goods are directly exchanged without the use of money, double coincidence of wants is an essential feature.
Money solved the problem of double coincidence of wants because after the introduction of money, people could use money as an intermediate to buy or sell things and no specific buyer or seller was required for interchanging of products. For example, a trader wishes to sell 10 sacks full of rice and expects to get it in exchange for five sacks of cereal. To find a suitable buyer to sell the sacks of rice in exchange for cereals would be very tough. However, the money will solve this problem, and the trader can sell the sacks of rice to someone who needs it and in return, buy cereals from the money he gets from the buyer of rice.
Ques 3. How do banks mediate between those who have surplus money and those who need money?
Ans. Banks mediate between those who have surplus funds (the depositors) and those who are in need of funds (the borrowers) by lending money to people who are in need. People can open accounts in banks and banks make use of that money to fulfill the loan requirements of the people. A higher interest rate is charged for the borrower and that profit is given to the depositor as interest for offering deposits.
Ques 4. Look at a 10 rupee note. What is written on top? Can you explain this statement?
Ans. “Reserve Bank of India” and “Guaranteed by the Central Government” are written on the top of a 10 rupee note. Currency in India is issued by the central bank of the country, in the case India, the Reserve Bank of India is the central bank of the country. This currency is issued on behalf of the central government, and these two are the only authorities that are responsible for issuing notes and currency in India.
Ques 5. Why do we need to expand formal sources of credit in India?
Ans. i) Formal sector credit which includes loans from banks and cooperatives need to be expanded in India so as to save people and especially poor farmers and workers from the exploitation, of the informal sector credit.
ii) Informal sector charges a higher interest on loans which means that a large part of the earnings of the borrower is used to repay the loan.
iii) A borrower may fall into a debt trap. As compared to it, the formal sector lends at a reasonable rate of interest which is very cheap as compared to informal credit.
iv) Formal credit can fulfill various needs of the people through providing cheap and affordable
v) RBI also supervises the formal credit through various rules and regulations which ensures that banks give loans to small cultivators, small borrowers, etc., and not just to profit-making businesses and traders.
vi) All this necessitates expanding formal credit in India so as to reduce dependence on informal sources of credit.
Ques 6. What is the basic idea behind the SHGs for the poor? Explain in your own words.
Ans. It helps pool the savings of the members, who are poor women. Members can get timely loans for a variety of purposes and at a reasonable rate of interest. It helps borrowers to overcome the problem of lack of collateral. It also provides a platform to discuss a variety of social issues of their concern.
i) A typical SHG can have 15 to 20 members usually belonging to the same village.,
ii) The main motive of the SHG is to pool the savings of poor people.
iii) Saving per member can vary from Rs 25 to Rs 100 or more depending on the ability of the people, and the strength of the group.
iv) The SHGs provide loans to their members at a reasonable rate.
v) After a year or two, if the group is regular in savings, it becomes eligible for bank loans.
vi) Loan is sanctioned in the name of the group with the main motive to create self-employment opportunities for the members.
vii) The most important feature of SHGs is that most of these groups are being organized by women. These are helping women to become financially, self-reliant.
viii) The regular meetings of the groups provide a platform to discuss and act on a variety of social issues such as dowry, domestic violence, child marriage, etc.
Ques 7. What are the reasons why the banks might not be willing to lend to certain borrowers?
Ans. The reasons why banks might not be willing to lend money to certain borrowers are given below:
i. Some people fail to provide the required set of documents/ collaterals to get a loan
ii. Irregular wages and no fixed job is also one reason because it increases the chances of non-repayment of loans
iii. Certain borrowers are added to the list of NPAs
iv. There is a high risk in approving loans to entrepreneurs
Ques 8. In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?
Ans. The Reserve Bank of India is the central bank of India, and all the other public sector banks work under the supervision of the Reserve Bank of India. It manages the functioning of the banks in the following ways:
i. It monitors the bank in maintaining the cash balance.
ii. Loans are not just given to profit-making organizations but also to small cultivators and small-scale industries.
iii. RBI maintains a periodic report of other banks regarding the amount loaned to people.
iv. It also keeps a regular check on the interest rates set for loans in public sector banks.
Ques 9. Analyze the role of credit for development.
Ans. i. Credit is one of the most major aspects of the development of a country. Affordable credit plays a very important role in the country’s development. People need loans for different reasons and to meet this requirement credit is very important.
ii. In India, a major part of the population is engaged in agricultural activities; credit plays a very crucial role in agricultural activities. People can borrow money and use modern farming methods to grow crops that are more reliable than the traditional methods of growing crops.
iii. Apart from this, there are small-scale industries, businesses, and various other sectors where credit can help people and ultimately result in the development of the country.
Ques 10. Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.
Ans. Manav will decide whether to borrow from the bank or the moneylender on the basis of the following terms of credit:
i. Rate of interest
ii. Requirements availability of collateral and documentation required by the banker.
iii. Mode of repayment.
Depending on these factors and of course, easier terms of repayment, Manav has to decide whether he has to borrow from the bank or the moneylender.
Ques 11. In India, about 80 percent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(a) Bank loans require proper documents and collateral as security against loans. But most of the small farmers lack in providing such documents and collateral. Besides, at times they fail to repay the loan due to the uncertainty of the crop production. So, banks might be unwilling to lend to small farmers.
(b) What are the other sources from which the small farmers can borrow?
(b) Apart from banks, the small farmers can borrow from local money lenders, agricultural traders, big landlords, cooperatives, SHGs, etc.
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
(c) The terms of credit can be unfavorable for the small farmer which can be explained by the following –
Ramu, a small farmer borrows from a local moneylender at a high rate of interest i.e. 3 percent to grow rice. But the crop is hit by drought and it fails. As a result, Ramu has to sell a part of the land to repay the loan. Now his condition becomes worse than before.
(d) Suggest some ways by which small farmers can get cheap credit.
(d) The small farmers can get cheap credit from different sources like – Banks, Agricultural Cooperatives, and SHGs.
Ques 12. Fill in the blanks:
(i) Majority of the credit needs of the _________________households are met from informal sources.
(ii) ___________________costs of borrowing increase the debt-burden.
(iii) __________________ issues currency notes on behalf of the Central Government.
(iv) Banks charge a higher interest rate on loans than what they offer on __________.
1. _______________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.
Ans. i: poor
Answer ii: high
Answer iii: Reserve Bank of India
Answer iv: deposits
Answer v : collateral
Ques 13. Choose the most appropriate answer.
(i) In a SHG most of the decisions regarding savings and loan activities are taken by
(a) Bank.
(b) Members.
(c) Non-government organization.
Ans. B
(ii) Formal sources of credit do not include
(a) Banks.
(b) Cooperatives.
(c) Employers.
Ans. C
NCERT Solutions For Economics Class 10 Chapter 3: Understanding Economic Development Free PDF Download: Money And Credit – CBSE Term II
INFINITY LEARN’s subject experts have created NCERT Solutions for Class 10 Economics Chapter 3 Money and Credit in accordance with the CBSE Board’s newest syllabus and norms. Money is an enthralling subject for children, who are eager to learn more about it. As a result, this chapter has been introduced to Class 10 Economics to capture this element for pupils. This chapter discusses the history of money and how different forms were employed at different times. They will also comprehend the relationship between current forms of money and the banking system. Students will find workout questions at the end of this chapter when they have finished reading it. In the form of a PDF, we have prepared the NCERT Solutions to those questions.
Students would undoubtedly benefit from studying NCERT Solutions Class 10 Economics Social Science Chapter 3: Money and Credit in order to achieve good grades in Social Science. Aside from this Chapter, students studying for the CBSE Term II exam can access the entire collection of NCERT Solutions for Class 10 Social Science.
NCERT Solutions for Class 10 Economics Chapter 3 Money and Credit are available to download.
Are NCERT Solutions for Class 10 Economics Chapter 3 essential for learning about money and credit?
Will the NCERT Solutions for Class 10 Economics Chapter 3 help you master the CBSE Term-II examinations?
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NCERT Solutions for Class 10 Economics Chapter 3: Frequently Asked Questions
- What are the main points covered in Chapter 3 of NCERT Solutions for Class 10 Economics?
- Are NCERT Solutions for Class 10 Economics Chapter 3 essential for learning about money and credit?
- Will the NCERT Solutions for Class 10 Economics Chapter 3 help you master the CBSE Term-II examinations?
Q. What are the main points covered in Chapter 3 of NCERT Solutions for Class 10 Economics?
Ans. Money and credit are two crucial parts of the economy. Money is a method of the transaction between people, as students will discover in this chapter. Also, how credit is allocated among a country’s citizens. This chapter covers a variety of topics, including Double Coincidence of Wants, Modern Forms of Money, Barter System, and Credit Situations. All of these topics are taught in plain English to help students achieve high grades in the CBSE Term II exams.
Q. Are NCERT Solutions for Class 10 Economics Chapter 3 essential for learning about money and credit?
Ans. Money is a significant item that is used to pay for products and services. It is a key part of a country’s economy.
It’s also critical to comprehend money’s primary roles, which include serving as a medium of exchange, a unit of account, a store of value, and occasionally as a deferred payment standard. Learning about the country’s credit status and credit terms, on the other hand, aids in the country’s development.
Q. Will the NCERT Solutions for Class 10 Economics Chapter 3 help you master the CBSE Term-II examinations?
Ans. It’s critical that students grasp the chapter’s fundamentals and essential concepts before moving on to the exercise questions. Students will be able to analyze the themes on which they need to focus more after answering various types of questions. Students will be prepared to excel in their CBSE Term II exams by referring to these NCERT Solutions offered by subject specialists at INFINITY LEARN’S.
