INTRODUCTION:

As the name of the chapter shows, we shall study the importance of money and credit in the economic development of the country along with formal sector loans provided by banks and cooperatives and informal sector loans provided by moneylenders, traders, employees, relatives and friends.

MONEY : In simple words, money means wealth around

which the whole economic activities of every country revolves. OR It is a thing that is utilized as a means of exchange of goods without any hesitation.

It is a system of older days by which the people of that time get goods by exchanging their goods with others. EX-suppose someone has wheat and he wants shoes. So he will find a person who have shoe and wants wheat.

Double coincidence:This is a problem which is caused by barter system. This occurs when two different people wants different goods and one have find a people of his demands.

I can give milk but I want meat of chicken

I want milk and will give wheat.
I can give you milk but instead of this I want wheat.

Following are the needs of money:1> it reduces the problems caused by barter system. 2> it can be exchanged. 3>it measures the value of things. 4>it reduces the problem of double coincidence. 5>it can be stored as property.

Needs of money(functions):-

A credit card is a system of payment named after the small plastic card issued to users of the system where the issuer lends money to the consumer/user to be paid later to the merchant.
There are different types of cards: Credit Card Secured Credit Cards Prepaid Credit Cards Charge Card DID YOU KNOW? The credit card was first referred to in the 1880sbut not a reality until the 1920sthe first type of card used to pay multiple merchants came about in the 1950s (Diners Club, Carte Blanche, and American Express)

TH CHEQUE It is a modern money or the paper money by it the clients instructs his bank to pay this amount to the person to whom the cheque is signed. So the cheque taker will get money from the bank.

Coins : Coins are the part of currency from older

days. In past times they were made with precious metals like gold, silver, copper etc. But they are now made with none precious metals like steel.

 In

economics term designating all the circulating media of exchange of a country. In this sense, a currency includes coins and paper money.

The banks are those authorities which provide their costumers loan for their requirements and offers them to repay the money later with some interest included. They also deposit the costumers savings and then profit as per the deposit.

Reserve bank of India: It is the bank which issue the currency of India . It is

also known as the central bank of India. It supervises the other banks or the commercial banks.

Commercial banks: These are those banks which are nationalizes and

recognizes banks. These banks are private banks so not operated by the government like the central bank. EX-state bank, ICICI, HDFC, PNb etc.

SELF HELP GROUP:

These are the group of the people who deposit there saving to make it a huge amount and so give loan to there members in low interests.

 In

commerce and finance, term used to denote transactions involving the transfer of money or other property on promise of repayment, usually at a fixed future date.

1> Formal source of credit: These are those sources which are legal. These sources includes of the banks which are assured by the government. The banks provides loan at fixed interest by government . The taker can get loan by giving the ID proof and security deposit.

 2>

Informal source of credit-

These are those source which are not approved by government. This means that you get credit from your known persons like moneylenders , employee, relative etc. In this type of credit the taker get loans only by meeting the lenders . But the interest of such loans are high.

QUESTIONS N ANSWERS:Q.1 what are difference between central and commercial banks? Ans 1> central bank is controlled by government but the commercial banks are private. 2> central bank has no direct connection like the commercial banks have. 3> central banks supervise the commercial banks.

Q.2 how does the central bank supervise the other banks? Ans 1> it is essential for the banks to deposit there some of the amount collected. 2> central bank also checks that banks are not discriminating the people on their earning. 3> central bank fixes the rate of interest taken with the loan.

 Q.3 Why do most of the villagers dont get loans from the banks. Ans 1> the poor people dont have their income certificate to present. 2> no one wants to become the security of the poor. 3>banks dont give them loan cause they think they might not pay their returns.

 Given below is the data of source of credit for rural

people in India in 2003 :Sales

7% 25% 31% others moneylenders 27% 7% relative and friends commercial banks cooperative societies

traders

3%

 Q. 4 what are the aims of self help group.

Ans 1. to develop the habit of saving.

2. they also give loans to their members at low interest. 3. to minimize or to improve the problems of the poor.

Q.5 what are differences between formal and informal sources of credit. Ans 1. the rate of interest in formal is less then in informal. 2. there is no unnecessary conditions in formal unless like in the informal. 3 ex of formal is banks and cooperative society and ex of informal are moneylenders, friends, relative etc.

 What

is written on the top of a ten rupee

note. Ans . The written material on the top of a Indian ten rupee note is given below : reserve bank of India it also contains some statements that are guaranteed by central government, it means that no one can denied to accept this note.

1. who issue currency in India. ans. Reserve bank of India. 2. what is the currency of India. ans. Rupee 3. what is the currency of USA. ans. Dollar { $ }. 4. name a commercial bank. ans. State bank of India

M.C.Q. :-

 5. what is the full form of S.H.G.

ans. Self help group. 6. name a formal source of credit. ans. Banks 7. name a informal source of credit. ans. Moneylenders. 8. mostly who are involved in shg. Ans. women.