Class -- 10. Sub - Economics
Money and Credit Full Notes
Money and Credit Class 10 Notes Social Science Economics Chapter 3 SST Pdf free download is part of Class 10 Social Science Notes for Quick Revision. Here we have given Money and Credit Class 10 Economics Chapter 3 Notes.
#Barter System
The system in which goods are directly exchanged without the use of money.
e.g :- exchange of Shoe with wheat
#Problem with this system
Double coincidence of wants
When what a person desires to sell is exactly the same other wishes to buy and vice versa.
Such a coincidence is called double coincidence of wants.
e.g:- when a shoe manufacturer had to directly exchange shoes for wheat without the use of money.
It would be very difficult for him to find for a wheat growing farmer who do not only want to sell but also want to buy the shoes in exchange.
#Money solve the matter
Money eliminates the need of double coincidence of wants by acting as a medium of exchange.
With money all shoemakers has to do is find a buyer for his shoes. Once he has exchanged his shoes for money , he can purchase wheat in the market
Modern forms of money
Before the introduction of coins different kinds of object were used as Money (Medium of Exchange ).
e.g :- grains , cattles
Then came the Metallic coins of gold, silver and copper
Types of modern forms of money
a) Currency
➡️ it includes paper nets notes and coins
➡️ Modern Currency is not made up of precious metals such as gold , silver and copper.
➡️ They are neither things of daily use like grains and cattles.
➡️ The Modern currency has no intrinsic value like Gold and Silver coins which means it has no use of its own .
Why it is accepted as medium of exchange ?
➡️ It is accepted as a medium of exchange because the currency is authorised by the government of the country.
➡️ In India Reserve Bank of India issues the currency notes on behalf of the central government .
#More important facts about Currency
➡️ No individual or organisation is allowed to issue currency as per Indian law
➡️The use of rupees as a medium of payment has been made legal , which means no person in India can legally refuse a payment made in rupees .
Note -- The Rupees is widely accepted as medium of exchange in India .
b) Deposit with banks
➡️ This is other form of holding money by people
➡️ The extra cash that people keep in banks is called Deposit with Banks. For this they must have an account in the concerning bank with their names.
Benefits
i. Their money remains safe from theft , robbery etc .
ii. They also get some interests from the bank on the amount deposited by them.
iii. They can withdraw the money when they require , that is why this deposit in the bank is also called demand deposits .
why it is considered as money ?
➡️ It is considered so because of the facility of demand deposits.
➡️ People generally use cheque for payments instead of cash.Since It acts as a medium of exchange ,it can be considered modern forms of money.
Cheque
➡️ It comes from Arabic word sak.
➡️ It is a paper that gives instruction to the bank. The instruction is to pay specific amount from the person's account .
➡️ it is to be paid to the person in whose name the cheque has been issued.
Loan activities of the bank
The bank do the following with the deposits:
a) Banks Keep only a small portion of their deposits as cash with themselves.
This is kept to pay the person who may come to withdraw money from the bank on any day.
b)Banks use the major portion of the deposits to extend loans .
Income of Banks
Banks charge a higher interest rate on loans than what they offer on deposits.
The difference between what is charged from the borrower and what is paid to the depositors is their main source of income.
Two Different Credit Situations
Credit -- It refers to an agreement in which the lender supplies the borrower with money, goods or services.And it is done in return for the promise of future payment.
1. Story of Salim
Salim ,the shoe manufacturer has received an order from large traders in town . The order is there for 3000 pairs of shoes to be delivered in a month time.
Work Ahead :- To complete production on time
a) Salim has to hire few more workers for stitching and pasting work .
b) To purchase the raw material
loan taken -- He took loans from 2 sources.
a) he asked the weather supply to supply leather now promise into pay later
b) He took the loans in cash from the large trader as advance payment for 1000 pair of shoes.
Result :-
At the end of the month Salim is able to deliver the order , make a good profit and repair the money that he had borrowed.
Role of credit in the case of Salim
credit therefore plays a vital and positive role in this situation .
2. Story of Swapna
Swapna is a small farmer grows groundnut on her 3 acres of land.
she takes a loan from the money lender for cultivation hoping that her harvest would help her repay the loan.
Unfortunate incident
Midway through the season the crop failed due to invention of paste
Result
➡️ She is unable to pay the money lender and the debt grows into a large amount.
➡️Next years she takes fresh loan for cultivation . Due to normal crop this year the earnings are not enough to cover the old loan .
so she has to sell a part of the land to pay off the debt.
Conclusion
in case of Sapna the credit pushes her into a debt trap.
To repay the loan she has to sell a portion of a land.
she is much worse off than before.
conclusion of both stories
the usefulness of credit depends on the a) risk in the situation
b) support in case of loss
Terms of Credit
The terms required for obtaining the credit from the formal sector are called terms of credit .
There are four terms of credit .
a) Documents :- It may be salary slip , bank account statements and residential certificates.
b) Collateral ( security against loan )
c) Mode of Repayment
d) Interest Rate
#Collateral
➡️ it is an asset that is owned by the borrower.
➡️ it is used as a guarantee until the loan is repaid.
e.g:- Land , building , vehicles, livestocks and deposit with banks .
➡️In case of non-payment of loans the lender has the right to sell the assets to obtain the payment .
Note -- The term of credit vary from one credit arrangement to another.
It depends on the nature of the lender and the borrower.
Sources of the Credit
There are generally two types of sources of the credit .
a) Formal Sectors
b) Informal Sectors
a) Formal Sectors
➡️ They include banks and cooperatives.
➡️ They charge less interest rate as compared to informal sectors.
Role of RBI
➡️ The formal sectors are supervised by the RBI .
➡️ The RBI monitors the bank in actually maintaining cash balance .
➡️ They also see that the banks give loans to not just profit making businesses and traders but also to small scale industries.
➡️ Periodically Banks have to submit information to RBI regarding the loan activities.
b) Informal Sectors
➡️ They include friends , relatives , Boss and money lenders .
➡️They do not seek collateral while issuing credit .
➡️They charge very high interest rate
➡️ Nobody supervises the credit activities of the money lender
➡️ In the informal sector there is no one to stop them from using unfair means to get their money back.
Demerits
➡️ Higher cost of borrowing means a large part of earning of the borrower is used to repay the loan.
➡️ In certain cases the amount to be paid is greater than the income of the borrower.
➡️ This could lead to increasing debt and debt trap .
Q. Why banks and Cooperatives need to lend more ?
Banks and Cooperative Societies need to lend more due to the following reasons :
a) Informal sector provides loan at very high interest rate which does little to increase the income of the borrower.
b) Getting loan from banks and cooperatives will help them in gaining higher incomes.
Q. Why the poor households are mostly dependent on informal sources of credit ?
The poor households are mostly dependent on informal sources of credit due to the following reasons :
a) Mostly banks are not present everywhere in the rural India.
b) They required Collateral and documents.
The poor are not able to get bank loan due to absence of collateral .
Self Help Groups
This refers to a group of nearly 15-20 members belonging to the same neighbourhood .
They meet and save regularly according to their ability.
They are generally composed in rural areas by poor women.
features
➡️ Small Loan
Group members can take a small loan from the group itself to meet their needs.
They charge interest on these loans but this is still less than what the money lender charges .
➡️ Loan from the banks
If the group is regular in saving , it becomes eligible for getting loans from the bank.
The loan is sanctioned in the name of the group and helps to create self employment opportunities for the members.
➡️ Decision-making
Most of the important decisions regarding the savings and loan activities are taken by the group members.
In case of non payment of loan by any one member is followed up seriously by other members in the group .
Advantages
➡️ They help overcome the problem of lack of collateral .
➡ ️They can get loans at reasonable interest rate .
➡️ Self help groups are building blocks of organisation of the rural poor .
➡️ It helped the women to become financially self dependent .
➡️ It also provided a platform to discuss or act on many social issues like health and domestic violence etc...
# Example of Grameen Bank Of Bangladesh
➡️ Grameen Bank of Bangladesh is one of the biggest success stories in reaching the poor to meet their credit needs at reasonable rates.
➡️ It was started in 1970 as a small project but spread very soon in large number of villages across Bangladesh.
~ Seminary Classes
Tag :- Money and Credit Full Notes,
money and credit notes class 10,
money and credit notes class 10 cbse,
money and credit notes of class 10th,
money and credit notes cbse,
notes of chapter money and credit class 10,
money and credit important notes,
money and credit notes class 10th,
money and credit notes for class 10,
money and credit notes of class 10,
money and credit notes 10,
notes of money and credit class 10,
chapter 3 money and credit notes,
money and credit note
1 Comments
Pura likh liya
ReplyDelete