1.
Which is the main source of credit for urban househ
olds?
Ans.Banks and Cooperatives
2. Name the agency from whom Arun took loan to meet he r expenses
Ans.Bank
3. Give one reason to deposit money with the banks.
Ans.To save money and to earn interest
4. Give a special feature the Tughlaq Coins.
Ans.These are square in shape and words of a parti cular language are written on it.
5. Explain the different types of objects used as mone y before the introduction of coins?
Ans.. Before the introduction of coins, a variet y of objects was used as money.
B. For example since the very early ages. Indians used grains and cattle as money.
C. There after came the use of metallic coins-gol d, silver, copper coins- a phase which continued well into the last century.
6. Can an Indian shopkeeper refused the payment made i n rupees? Give reason to justify your answer?
Ans.A. In India, the Reserve bank of India issues currency notes on behalf of the central government.
B. As per Indian law, no other individual or organiza tion is allowed to issue currency.
C. Moreover the law legalizes the use of rupee as a me dium of payment that cannot be refused in settling transactions on India.
D. So individual in India can legally refuse a payment made in rupees. Hence, the rupee is widely accepted as a medium of exchange.
7. Can you identify the reasons why banks give interest on the deposits made by people?
Ans.A. The business of banks totally dependent on th e deposits.
B. Banks keeps a small portion of deposits as cash wi th themselves.
C. Banks use the major portion of deposits to extend loans.
D. Banks charge very high interest of the loans given to the borrowers. This is the main profit of Banks.
E. There is a huge demand for loan for various economi c activities. Banks need money to meet the loan requirements.
F. Just to increase the funds and to attract the depos itors, banks give interest on the deposits made by people.
8. “Money plays very important role in our everyday li fe” Explain.
Ans.A. The use of money expands a very important role in o ur everyday life. No transaction is possible without the use of money.
B. Goods are bought and sold with the use of money.
C. The objective of each and every person is to earnin g money. All human beings are working day and night to earn money.
D. If we want to purchase any thing if it is tiny or l arge we need money.
9. What is Barter system? Explain this system with an example.
Ans.A. Barter System: In a barter system where goods are d irectly exchanged without the use of money, double coincidence of wants is an ess ential feature. When both parties have to agree to sell, buy and ready to exc hange each other’s commodities are called double coincidence of wants.
B. Example: A Shoe seller sells his shoe in exchange o f wheat. In this case, both parties i.e., shoe seller and wheat producers have to agree to sell and buy each other’s commodities. This is barter system and this system requires double coincidence of want.
10. Mention the short comings of the barter system that led to the evolution of money?
Ans.A. Exchanging of goods was difficult. Demand of two pe rsons for each other’s commodity should have risen at the same time, other wise exchange was not possible. This is known as double coincidence of wa nt.
B. It is a time consuming process.
C. Exact valuation of goods may not be take place at t he time of exchange of goods.
D. It is difficult to get the product on the spot and at the right time.
11. Mention the reasons for which the informal sources of credit preferred in rural area?
Ans.A. The rural area people are unable to provide collate ral.
B. There is no need of paper work which the rural poor people are not able to provide.
C. In rural areas moneylenders, traders and rich landl ords have no objection to defaulters even if the previous loan is unpaid.
D. Poor people hesitant and are not confident about th e functioning of the banks.
E. Banks are not accessible to the villages of poor pe ople.
F. The procedure by which moneylenders and rich la ndlords is very simple.
12. How does Reserve bank of India lay a crucial role i n controlling the formal sector loans? Explain.
Ans.A. The Reserve bank of India supervises the func tioning of formal sources of credit of India.
B. The RBI monitors that the banks actually main tain a minimum cash balance out of the deposits they receive.
C. RBI ensures that the banks give loans not just to profit making business and traders but also to small cultivators, small-scale industri es, small borrowers etc.
D. Periodically banks have to submit information to the RBI on how much they are lending to whom at what interest rates etc. E. RBI is the central bank of India.
1. Give one reason why the banks and cooperatives are are popular lending agencies?
Ans.Because these agencies provide loan at very le ss interest rates.
2. What is ‘Debt Trap’?
Ans.Debt trap is situation in which a borrower is unable pay back the loan and he has to sell is any asset to repay back the borrowed money. Credit in such case pushes the borrower in to a situation from which the recovery is very painful.
3. Name the agency from whom Rama took loan to meet he r expenses.
Ans.Her employer, a medium land lord
4. In which year Professor Muhammad Yunas received the Nobel Prize for Peace?
Ans.In 2006
5. Is there any criterion to make payments without usi ng cash? Explain.
Ans.We have heard about payments being made by che ques instead of cash.
A. For payment through cheque, the payer who has an account with the bank makes out a cheque for a specific amount.
B. A cheque is a paper instructing the bank to pay a specific amount from the person in whose name the cheque has been made.
6. What facts show that modern forms of money are defe rent from the early forms of money?
Ans.A. Modern forms of money are including curr ency-paper notes and coins.
B. Unlike the things that were used as money ea rlier, modern currency is not made of precious metal such as gold, silver and copper.
C. And unlike grain and cattle, they are neith er of everyday use.
D. The modern currency is without any use of i ts own.
7. “Cheap and affordable credit is essential for poor households both in rural and urban areas”. In the light of given statement expla in the economic and social values attached to it.
Ans.A. Economic value: Cheap and affordable credit will p rovide the economic development opportunities to the poor households. I t will increase the income of the poor. With the help of loan they can start thei r any small trade. Gradually they will return the credit and become self dependent.
B. Social Value: The poor can live with dignity in the society if they will become self dependent. They are free from the clutches of money lender and traders of their locality.
8. Suggest some way to increase the approachability of formal sources of credit in the rural areas?
Ans.A. Government has to take some initiative by making so me public welfare policies.
B. More Banks should be open in rural areas.
C. Credit should be provided at low interest rate to t he needy and hardworking poor house hold of the rural areas.
D. Awareness should be spread among the people of rura l areas by conducting seminars.
E. The procedure of giving loans should be made easy a nd simpler.
9. What is meant by Informal Sources of Credit? Mentio n the drawbacks of this system.
Ans.A. Informal source of Credit includes the credit from money lenders, friends, traders, employers and relatives. There are no rules and reg ulations of government are applied on these institutions.
B. These institutions charge very high interest rates
. C. There is no government organization to supervise th e functioning of these sources of credit.
D. The sources of credit some time use unfair means to get their money back.
10. Explain the different requirements of rural people for which they need credit.
Ans.A. They need credit to meet the expenses of cultivatio n.
B. If crop fails they need credit to purchase agricult ural implements
C. They need credit to purchase pesticides and fertili zers.
D. Sometime they need credit to meet their household e xpenses.
E. Sometimes they need credit to repay back the previo us credit.
11. How would you describe the organization and functio ning of Self Help Group?
Ans.A. Self Help Groups are the groups organized by the po or needy persons themselves, especially women to fulfill their credit and loan n eeds. A typical Self Help Group has 15 to 20 members, who meet and save regularly.
B. Saving per member varies from Rs 25 to 100 or more, depending in the ability of the people to save.
C. Members can take small loans from the group itself to meet their needs.
D. The group charges interest on these loans but this is still less than what the money lenders charges.
E. After a year or two, if the group is regular in sav ing, it becomes eligible foe availing loan from the bank.
F. Loan is sanctioned in the name of group and is m eant to create self-employment opportunities for the members.
12. Elucidate the developments in the forms of currency since early times.
Ans. A. Barter system was the earliest method to buy an d sell products.
B. Before the introduction of coins, a variety of objects was used as money.
C. For example since the very early ages. Indians used grains and cattle as money.
D. There after came the use of metallic coins-gold , silver, copper coins- a phase which continued well into the last century.
E. Modern forms of money include currency- paper no tes and coins. Unlike the things that were used as money earlier, modern currency is not made of precious metals.
The modern currency is without any use of its own. F. Currency notes, cheques, are the examples of mo dern forms of Currency notes.
1. Which is the main source of credit for rich urban h ouseholds in India?
Ans.Formal sources of credit are the main source
2. Name the system by which exchange of goods is done without uses of money?
Ans.Barter System
3. How much percent of rural ho usehold in India is dependent upon money lenders for credit during 2003?
Ans.30 percent
4. How many members a typical self help group should h ave?
Ans.15-20 members
5. How will you justify that interest on loans is a ma in source of income of the banks?
Ans.Banks mediate between those who have surplus f unds and those who are in need of these funds. It means that a bank mediates between borrowers and depositors. Banks charges very high interest rate on loans than what they offer to the depositors. The difference between what is charged from borrowers a nd what is paid to depositors is their main source of income. These days’ banks star ted so many schemes just to attract the borrowers. Banks offer loans at attractive inte rest rate. The main motive behind all these steps of banks is to earn huge profits.
6. How far it is corr ect to say that the modern currency is without any use of its own as a commodity? Give reasons to support your answer
Ans.A. Modern forms of money include currency-pape r notes and coins.
B. Unlike the things that were used as money earli er, modern currency is not made of precious metals such as gold, silver and copper. An d unlike grain and cattle, they are neither of everyday use.
C. The modern currency is merely a paper currency and it is accepted a medium of exchange because it is authorized by the government of the country. So the modern currency is without any use of its own.
7. What facts would you use to explain the role of cre dit for the development?
Ans.A. Credit meets the working capital for production.
B. Credit helps the producers to meet the ongoing exp enses of production.
C. Farmers and industrialists need credit to expand th eir business and to purchase new tools and equipments.
D. With the help of credit a person can purchase a hou se, bike, car and other house hold implements
8. Mention the requirements a borrower has to fulfill before taking a house loan?
Ans.A. A Person has to submit documents showing his employ ment record and salary record.
B. Person has to submit his identity proof and residen tial proof.
C. Borrower has to produce a guarantor.
D. Collateral is a very important condition which a ba rrower has to submit in the bank.
9. “I promise to pay the bearer the sum of ten Rupees” . Where is this statement written and what do you understand from this statem ent?
Ans.A. This statement is written on the ten rupees note.
B. The meaning of statement is that the Reserve bank o f India has been authorized by the Central Government to issue 10 Rupees note and the governor of RBI promises to pay rupees 10 to the person who has this note. W ithout this authority given by the central government the 10 Rupees note is mere a piece of paper and nothing else. In India the Reserve Bank of India issues cur rency notes on behalf of the central government.
10. Why there is a need to supervise the banking system by RBI?
Ans. Reserve bank of India supervises the Bankin g system due to the following reasons:
A. The RBI monitors that the banks maintain a minimum cash balance.
B. RBI ensures that the banks give loan not just to th e profit making businessmen and traders but also to small cultivators, small scale industries and small borrowers.
C. Banks have to submit the information to the RBI on how much they are lending, to whom, at what interest rates etc.
11. Hig hlight the contribution of the Krishak Cooperative societies to overcome the problem of credit in rural areas?
Ans. Besides banks the other major source of cheap credit in rural areas are the cooperative societies. The members of a cooperative pool their resources for cooperation in certain areas.
A. Krishak Cooperatives functions in a village not ver y far away from Sonpur.
B. It has 2300 farmers as members. It accepts deposits from its members.
C. With these deposits as collateral, the cooperative has obtained a large loan from bank.
D. These funds are used to provide loans to members. O nce these loans are repaid, another round of lending can take place.
E. Krishak cooperatives provides loans for the purchas e of agricultural implements, loans for cultivation and agricultural trade, fishe ry loans, loans for construction of houses and for a variety of other expenses.
12. Why do you think that credit plays a positive role in the situation of Swapna, where as it plays a negative role in the situation of Salim? Explain.
Ans. Swapna is a small farmer and grows groundnuts on her three acres. She takes loan from the money lender to meet the expenses of cultivatio n, hoping that her harvest would help repay the loan. Mid way through the season the crop is hit by pests and the crop fails. Though Swapna sprays her crops with expensiv e pesticides, it makes little difference. She is unable to repay the moneylender and the debt grows over the year into large. In this way credit put swapna in to worse co nditions. During festival season Salim, a shoe manufacturer has received an order from a large trader in town for 3000 pairs of shoes to be delive red in a month time. To complete production on time Salim has to hire a few more wor kers for stitching and pasting work. He has to purchase the raw material. To meet his ex penses Salim obtain loan from two different sources. At the end of the month, Salim i s able to deliver the order, make a good profit, and repay the money that he had borrowed. H e had also earned huge profit. In this way credit helps Salim to improve his business .
1. Who takes the decision in SHG regarding savings and loan activities?
Ans.Members of Self Help Group
2. How much percentage of total deposits banks hold as cash reserves?
Ans.15% of total cash reserves
3. Give one special feature that disting uish formal sector from informal sector.
Ans. RBI supervises the functioning of the formal s ources of credit while no organization is there to supervises the lending activities if infor mal sources of credit.
4. Name the system in which double coincidence of want s is essential feature.
Ans.Barter System
5. Suggest some ways by which small farmers can get ch eap credit.
Ans.ollowing are the two ways by which the small farmers can get cheap loan:
A. Small farmers can get cheap credit by forming co operatives. They can form cooperatives which can obtain large loan from the b ank.
B. The cooperatives use the bank loan to provide lo ans to members at cheaper rates than the moneylenders.
C. Small farmers can also get loan from the banks i f they are able to provide collateral to the banks.
D. Small farmers can also get loan from Self Help G roups by becoming members of it.
6. Elaborate the reasons why the banks might not be re ad y to lend to the certain borrowers?
Ans. A. Bank loans require proper documentation and collateral.
B. People who do not apply for loan with proper do cumentations and collateral are refused by the bank.
C. The poor people and land less farmers fall in th is category.
D. Absence of collateral is one of the main causes for not sanctioning loans to the poor people and land less people.
7. With the help of one example can you explain the ro le of credit for development?
Ans.A. Credit helps in increasing economic activities of the borrower.
B. If credit is provided at reasonable rate of intere st they can improve their economic condition. This will help them to improve their sta tus.
C. With the help of credit people could increase their agricultural production, do business, set up small scale industries.
Example: During festival season Salim, a shoe manuf acturer has received an order from a large trader in town for 3000 pairs of shoes to be delivered in a month time. To complete production on time Salim has to hire a few more workers for stitching and pasting work. He has to purchase the raw material. To meet his expenses Salim obtain loan from two different sources. At the end of the month, Salim is able to deliver the order, make a good profit, and repay the money that he had borrowed. He had also earned huge profit. In this way credit helps Salim to improve his business.
8. What are Self Help Groups? Explain the aims of Self Help Groups.
Ans.Self Help Groups: Self Help Groups is an organi zation of 15-20 members belonging to one neighborhood, who meet and save money regularly . Aim of Self Help Groups: The main aim of Self Help Group is to oganise rural poor, women in particular and collect their savings and t o take loans from the group to meet their needs. The group takes loan from the bank to create self employment opportunities for the members.
9. Which is the most important term of credit accordin g to your views? Explain.
Ans.Collateral is the most important term of credit . Collateral is an asset that the borrower owns. Such as land, building, vehicles, livestock, deposits with bank are some examples of collateral. These items are used as a guarantee to a lender until the loan is repaid. If the borrower fails to pay the loan the lender has t he right to sell the asset or collateral to obtain payment. The poor people and land less pe ople have no collateral. This prevents them to take loan from formal sources of c redit. Banks first ask for the collateral than they issue loans to the people. So due to the above reason collateral is the most important term of credit.
10. Name any two formal and informal sources of credit in India? Which one is the most preferred by the farmers of the rural area?
Ans.A. Cooperatives and commercial banks are the two examp les of the formal sources of credit.
B. Money lenders and friends are the two examples of t he informal sources of credit.
C. The most preferred source of credit to the farmers is money lenders. About 30% of loan requirements are covered from moneylenders by the rural households in India according to the survey of 2003.
11. What is debt trap? Why is it more rampant in rural areas? Give reasons.
Ans.Debt Trap: Debt trap is a condition where the credit pushes the borrower into a situation from which the recovery is very painful, it is called debt trap. Here the borrower fails to repay the borrowed money to the l ender and he has to sell his small portion of land to repay the loan. It is rampant in rural areas because of the following
reasons: A. Rural areas small farmers give preference to the in formal sources to take loan. The interest rates if these sources are very high.
B. Farmers take loan for crop production, equipment, f ertilizers. If crop fails due to any reason they become unable to pay back the loan.
C. There is unusually absence of any kind of support t o the farmers in case of crop failure.
D. The main source of their income is production of cr ops. If it fails than they don’t have any other source of income from which they can repa y their borrowings.
12. Why do you think that the formal sources of credit prov ide loans at reasonable interest rates?
Ans.A. Formal sources of credit work according to the norms of Reserve Banks of India.
B. The RBI monitors that the banks give loans not just to the profit-making businessmen and traders. But also to small cultivat ors, small scale industries, to small borrowers etc.
C. Rates of interest are fixed by RBI according to the instructions given by central government. Indian government is a welfare state.
D. The formal sources to provide loan at low interest rate because people can increase their income and help them in the overall developme nt of the country.
E. Low interest rate helps the poor people to increase their
1. At what interest rate Shamlal borrow money from the village moneylender?
Ans. 5% per month or 60% per annum
2. What is NABARD?
Ans.National Bank for Agriculture and Rural Develo pment
3. Name the organization that conducted All India Debt and Investment Survay, 2003.
Ans.NSSO
4. Write a special feature of the Gupta coins.
Ans. Gupta coins were not fully circular in shape a nd a picture of a king or a person was depicted on it.
5. Banks are present everywhere, but it is very diffic ult for poor households to get loan from the bank than taking a loan from informal source? Why is it so?
Ans.Banks are present everywhere, but it is very d ifficult for poor households to get loan from the bank than taking a loan from informal sour ce. Poor house hold give preference to informal sources of credit because ba nk loans require proper documentation and collateral which is rarely availa ble with poor households and it prevents them from getting loans. Sometimes banks h esitate to give loans to poor households. On the other hand, Informal source of c redit like Money lenders personally know the borrowers and willing to give loans withou t collateral. The documentation process of money lenders is not very rigid.
6. Why do lenders ask for collateral while lending?
Ans. Lenders asked for collateral while lend ing money to the borrowers due to the following reasons:
A. Lenders demand collateral against loan be cause it is a security against loan.
B. Collateral is an asset that the borrower owns a nd uses this as a guarantee to lender until the loan repaid.
C. If the borrower fails to repay the loan, the len der has the right to sell the asset or collateral to obtain payment.
D. Property such as land titles, deposits with bank s, livestock, gold, are some common examples of collateral.
7. How will you justify that credit is a crucial eleme nt in economic life?
Ans.redit plays a crucial role in economic life. S ome time it plays a negative role some time positive. Positive Role:
A. Sometimes credit helps to increase earnings makes the person better than before.
B. Credit helps the person to enhance his business hi s economic condition. Negative role:
A. Some time person borrow money to increase his busin ess or for personal use.
B. If the borrower fails to pay back the borrowed mone y, it pushes the person in to bank trap.
C. To repay the loan the borrower has to sell his land or the lender detained the collateral.
8. For what purpose banks keeps a small portion of the deposits as cash with themselves?
Ans.A. Banks keep only a small proportion of their deposit s as cash with themselves.
B. Banks in India these days hold 15 percent of their cash deposits as cash.
C. This is kept as provision to pay the depositors who might come to withdraw money from the bank on any given day.
D. Since on any particular day, only some of its many depositors come to withdraw cash, the bank is able to manage with this cash.
9. Explain the intermediary function of Money? Elabora te with example.
Ans.Money by providing the crucial intermediate step el iminates the need for double coincidence of wants. It is no longer necessary for the shoe manufacturer to look for a farmer who will buy his shoes and at the same time sell him wheat. All he has to do is find a buyer for his shoes. Once he has exchanged h is shoes for money, he can purchase wheat or any other commodity in the market. Since m oney acts as an intermediate in the exchange process, it is called a medium of exch ange.
10. What motives are there to deposit money the bank by depositors?
Ans.A. Money in banks is safe.
B. Depositor gets interest on it.
C. People also have provision to withdraw the money as and when they need.
11. What is Bank? Can you illustrate the functions of a Bank?
Ans. Banks are institutions which accept the deposi ts from the public withdraw able by cheques and by demand deposits and advances loans o f various types to the borrowers is called a Bank. Following are the functions of Ba nk:
A. It accepts the deposits from customers. It can be i n the form of saving account
deposits, current account and fixed deposits. B. It gives interests on the savings to the customers.
C. It provides withdrawal facility to the customers.
D. It gives loans and advances to the borrowers and ch arge interest
E. It provides agency function like transfer of funds, collection of funds, payment of various items, purchase and sale of shares and secu rities.
12. Describe the role played by Grameen Bank of Banglad esh in improvement of the condition of poor particularly women.
Ans. Grameen Bank of Bangladesh was started in the 1970s. It has now over 6 million borrowers in about 40,000 villages. Almost all the borrowers are women and belong to poorest sections of the society. These borrowers ha ve proved that not only are poor women reliable borrowers, but they can start and ru n a variety of small income generating activities successfully. Thus the Gramee n bank has played a significant role in the improvement of the condition of the poor women in Bangladesh. Professor Muhammad Yunus, the founder of Grameen Bank and reci pient of 2006 Nobel Peace prize for peace has stated that,” if credit can be made available to the poor people on terms and conditions that are appropriate and reaso nable these million of small people with their millions of small pursuits can add up to create the biggest development wonder”.
Ans.Banks and Cooperatives
2. Name the agency from whom Arun took loan to meet he r expenses
Ans.Bank
3. Give one reason to deposit money with the banks.
Ans.To save money and to earn interest
4. Give a special feature the Tughlaq Coins.
Ans.These are square in shape and words of a parti cular language are written on it.
5. Explain the different types of objects used as mone y before the introduction of coins?
Ans.. Before the introduction of coins, a variet y of objects was used as money.
B. For example since the very early ages. Indians used grains and cattle as money.
C. There after came the use of metallic coins-gol d, silver, copper coins- a phase which continued well into the last century.
6. Can an Indian shopkeeper refused the payment made i n rupees? Give reason to justify your answer?
Ans.A. In India, the Reserve bank of India issues currency notes on behalf of the central government.
B. As per Indian law, no other individual or organiza tion is allowed to issue currency.
C. Moreover the law legalizes the use of rupee as a me dium of payment that cannot be refused in settling transactions on India.
D. So individual in India can legally refuse a payment made in rupees. Hence, the rupee is widely accepted as a medium of exchange.
7. Can you identify the reasons why banks give interest on the deposits made by people?
Ans.A. The business of banks totally dependent on th e deposits.
B. Banks keeps a small portion of deposits as cash wi th themselves.
C. Banks use the major portion of deposits to extend loans.
D. Banks charge very high interest of the loans given to the borrowers. This is the main profit of Banks.
E. There is a huge demand for loan for various economi c activities. Banks need money to meet the loan requirements.
F. Just to increase the funds and to attract the depos itors, banks give interest on the deposits made by people.
8. “Money plays very important role in our everyday li fe” Explain.
Ans.A. The use of money expands a very important role in o ur everyday life. No transaction is possible without the use of money.
B. Goods are bought and sold with the use of money.
C. The objective of each and every person is to earnin g money. All human beings are working day and night to earn money.
D. If we want to purchase any thing if it is tiny or l arge we need money.
9. What is Barter system? Explain this system with an example.
Ans.A. Barter System: In a barter system where goods are d irectly exchanged without the use of money, double coincidence of wants is an ess ential feature. When both parties have to agree to sell, buy and ready to exc hange each other’s commodities are called double coincidence of wants.
B. Example: A Shoe seller sells his shoe in exchange o f wheat. In this case, both parties i.e., shoe seller and wheat producers have to agree to sell and buy each other’s commodities. This is barter system and this system requires double coincidence of want.
10. Mention the short comings of the barter system that led to the evolution of money?
Ans.A. Exchanging of goods was difficult. Demand of two pe rsons for each other’s commodity should have risen at the same time, other wise exchange was not possible. This is known as double coincidence of wa nt.
B. It is a time consuming process.
C. Exact valuation of goods may not be take place at t he time of exchange of goods.
D. It is difficult to get the product on the spot and at the right time.
11. Mention the reasons for which the informal sources of credit preferred in rural area?
Ans.A. The rural area people are unable to provide collate ral.
B. There is no need of paper work which the rural poor people are not able to provide.
C. In rural areas moneylenders, traders and rich landl ords have no objection to defaulters even if the previous loan is unpaid.
D. Poor people hesitant and are not confident about th e functioning of the banks.
E. Banks are not accessible to the villages of poor pe ople.
F. The procedure by which moneylenders and rich la ndlords is very simple.
12. How does Reserve bank of India lay a crucial role i n controlling the formal sector loans? Explain.
Ans.A. The Reserve bank of India supervises the func tioning of formal sources of credit of India.
B. The RBI monitors that the banks actually main tain a minimum cash balance out of the deposits they receive.
C. RBI ensures that the banks give loans not just to profit making business and traders but also to small cultivators, small-scale industri es, small borrowers etc.
D. Periodically banks have to submit information to the RBI on how much they are lending to whom at what interest rates etc. E. RBI is the central bank of India.
1. Give one reason why the banks and cooperatives are are popular lending agencies?
Ans.Because these agencies provide loan at very le ss interest rates.
2. What is ‘Debt Trap’?
Ans.Debt trap is situation in which a borrower is unable pay back the loan and he has to sell is any asset to repay back the borrowed money. Credit in such case pushes the borrower in to a situation from which the recovery is very painful.
3. Name the agency from whom Rama took loan to meet he r expenses.
Ans.Her employer, a medium land lord
4. In which year Professor Muhammad Yunas received the Nobel Prize for Peace?
Ans.In 2006
5. Is there any criterion to make payments without usi ng cash? Explain.
Ans.We have heard about payments being made by che ques instead of cash.
A. For payment through cheque, the payer who has an account with the bank makes out a cheque for a specific amount.
B. A cheque is a paper instructing the bank to pay a specific amount from the person in whose name the cheque has been made.
6. What facts show that modern forms of money are defe rent from the early forms of money?
Ans.A. Modern forms of money are including curr ency-paper notes and coins.
B. Unlike the things that were used as money ea rlier, modern currency is not made of precious metal such as gold, silver and copper.
C. And unlike grain and cattle, they are neith er of everyday use.
D. The modern currency is without any use of i ts own.
7. “Cheap and affordable credit is essential for poor households both in rural and urban areas”. In the light of given statement expla in the economic and social values attached to it.
Ans.A. Economic value: Cheap and affordable credit will p rovide the economic development opportunities to the poor households. I t will increase the income of the poor. With the help of loan they can start thei r any small trade. Gradually they will return the credit and become self dependent.
B. Social Value: The poor can live with dignity in the society if they will become self dependent. They are free from the clutches of money lender and traders of their locality.
8. Suggest some way to increase the approachability of formal sources of credit in the rural areas?
Ans.A. Government has to take some initiative by making so me public welfare policies.
B. More Banks should be open in rural areas.
C. Credit should be provided at low interest rate to t he needy and hardworking poor house hold of the rural areas.
D. Awareness should be spread among the people of rura l areas by conducting seminars.
E. The procedure of giving loans should be made easy a nd simpler.
9. What is meant by Informal Sources of Credit? Mentio n the drawbacks of this system.
Ans.A. Informal source of Credit includes the credit from money lenders, friends, traders, employers and relatives. There are no rules and reg ulations of government are applied on these institutions.
B. These institutions charge very high interest rates
. C. There is no government organization to supervise th e functioning of these sources of credit.
D. The sources of credit some time use unfair means to get their money back.
10. Explain the different requirements of rural people for which they need credit.
Ans.A. They need credit to meet the expenses of cultivatio n.
B. If crop fails they need credit to purchase agricult ural implements
C. They need credit to purchase pesticides and fertili zers.
D. Sometime they need credit to meet their household e xpenses.
E. Sometimes they need credit to repay back the previo us credit.
11. How would you describe the organization and functio ning of Self Help Group?
Ans.A. Self Help Groups are the groups organized by the po or needy persons themselves, especially women to fulfill their credit and loan n eeds. A typical Self Help Group has 15 to 20 members, who meet and save regularly.
B. Saving per member varies from Rs 25 to 100 or more, depending in the ability of the people to save.
C. Members can take small loans from the group itself to meet their needs.
D. The group charges interest on these loans but this is still less than what the money lenders charges.
E. After a year or two, if the group is regular in sav ing, it becomes eligible foe availing loan from the bank.
F. Loan is sanctioned in the name of group and is m eant to create self-employment opportunities for the members.
12. Elucidate the developments in the forms of currency since early times.
Ans. A. Barter system was the earliest method to buy an d sell products.
B. Before the introduction of coins, a variety of objects was used as money.
C. For example since the very early ages. Indians used grains and cattle as money.
D. There after came the use of metallic coins-gold , silver, copper coins- a phase which continued well into the last century.
E. Modern forms of money include currency- paper no tes and coins. Unlike the things that were used as money earlier, modern currency is not made of precious metals.
The modern currency is without any use of its own. F. Currency notes, cheques, are the examples of mo dern forms of Currency notes.
1. Which is the main source of credit for rich urban h ouseholds in India?
Ans.Formal sources of credit are the main source
2. Name the system by which exchange of goods is done without uses of money?
Ans.Barter System
3. How much percent of rural ho usehold in India is dependent upon money lenders for credit during 2003?
Ans.30 percent
4. How many members a typical self help group should h ave?
Ans.15-20 members
5. How will you justify that interest on loans is a ma in source of income of the banks?
Ans.Banks mediate between those who have surplus f unds and those who are in need of these funds. It means that a bank mediates between borrowers and depositors. Banks charges very high interest rate on loans than what they offer to the depositors. The difference between what is charged from borrowers a nd what is paid to depositors is their main source of income. These days’ banks star ted so many schemes just to attract the borrowers. Banks offer loans at attractive inte rest rate. The main motive behind all these steps of banks is to earn huge profits.
6. How far it is corr ect to say that the modern currency is without any use of its own as a commodity? Give reasons to support your answer
Ans.A. Modern forms of money include currency-pape r notes and coins.
B. Unlike the things that were used as money earli er, modern currency is not made of precious metals such as gold, silver and copper. An d unlike grain and cattle, they are neither of everyday use.
C. The modern currency is merely a paper currency and it is accepted a medium of exchange because it is authorized by the government of the country. So the modern currency is without any use of its own.
7. What facts would you use to explain the role of cre dit for the development?
Ans.A. Credit meets the working capital for production.
B. Credit helps the producers to meet the ongoing exp enses of production.
C. Farmers and industrialists need credit to expand th eir business and to purchase new tools and equipments.
D. With the help of credit a person can purchase a hou se, bike, car and other house hold implements
8. Mention the requirements a borrower has to fulfill before taking a house loan?
Ans.A. A Person has to submit documents showing his employ ment record and salary record.
B. Person has to submit his identity proof and residen tial proof.
C. Borrower has to produce a guarantor.
D. Collateral is a very important condition which a ba rrower has to submit in the bank.
9. “I promise to pay the bearer the sum of ten Rupees” . Where is this statement written and what do you understand from this statem ent?
Ans.A. This statement is written on the ten rupees note.
B. The meaning of statement is that the Reserve bank o f India has been authorized by the Central Government to issue 10 Rupees note and the governor of RBI promises to pay rupees 10 to the person who has this note. W ithout this authority given by the central government the 10 Rupees note is mere a piece of paper and nothing else. In India the Reserve Bank of India issues cur rency notes on behalf of the central government.
10. Why there is a need to supervise the banking system by RBI?
Ans. Reserve bank of India supervises the Bankin g system due to the following reasons:
A. The RBI monitors that the banks maintain a minimum cash balance.
B. RBI ensures that the banks give loan not just to th e profit making businessmen and traders but also to small cultivators, small scale industries and small borrowers.
C. Banks have to submit the information to the RBI on how much they are lending, to whom, at what interest rates etc.
11. Hig hlight the contribution of the Krishak Cooperative societies to overcome the problem of credit in rural areas?
Ans. Besides banks the other major source of cheap credit in rural areas are the cooperative societies. The members of a cooperative pool their resources for cooperation in certain areas.
A. Krishak Cooperatives functions in a village not ver y far away from Sonpur.
B. It has 2300 farmers as members. It accepts deposits from its members.
C. With these deposits as collateral, the cooperative has obtained a large loan from bank.
D. These funds are used to provide loans to members. O nce these loans are repaid, another round of lending can take place.
E. Krishak cooperatives provides loans for the purchas e of agricultural implements, loans for cultivation and agricultural trade, fishe ry loans, loans for construction of houses and for a variety of other expenses.
12. Why do you think that credit plays a positive role in the situation of Swapna, where as it plays a negative role in the situation of Salim? Explain.
Ans. Swapna is a small farmer and grows groundnuts on her three acres. She takes loan from the money lender to meet the expenses of cultivatio n, hoping that her harvest would help repay the loan. Mid way through the season the crop is hit by pests and the crop fails. Though Swapna sprays her crops with expensiv e pesticides, it makes little difference. She is unable to repay the moneylender and the debt grows over the year into large. In this way credit put swapna in to worse co nditions. During festival season Salim, a shoe manufacturer has received an order from a large trader in town for 3000 pairs of shoes to be delive red in a month time. To complete production on time Salim has to hire a few more wor kers for stitching and pasting work. He has to purchase the raw material. To meet his ex penses Salim obtain loan from two different sources. At the end of the month, Salim i s able to deliver the order, make a good profit, and repay the money that he had borrowed. H e had also earned huge profit. In this way credit helps Salim to improve his business .
1. Who takes the decision in SHG regarding savings and loan activities?
Ans.Members of Self Help Group
2. How much percentage of total deposits banks hold as cash reserves?
Ans.15% of total cash reserves
3. Give one special feature that disting uish formal sector from informal sector.
Ans. RBI supervises the functioning of the formal s ources of credit while no organization is there to supervises the lending activities if infor mal sources of credit.
4. Name the system in which double coincidence of want s is essential feature.
Ans.Barter System
5. Suggest some ways by which small farmers can get ch eap credit.
Ans.ollowing are the two ways by which the small farmers can get cheap loan:
A. Small farmers can get cheap credit by forming co operatives. They can form cooperatives which can obtain large loan from the b ank.
B. The cooperatives use the bank loan to provide lo ans to members at cheaper rates than the moneylenders.
C. Small farmers can also get loan from the banks i f they are able to provide collateral to the banks.
D. Small farmers can also get loan from Self Help G roups by becoming members of it.
6. Elaborate the reasons why the banks might not be re ad y to lend to the certain borrowers?
Ans. A. Bank loans require proper documentation and collateral.
B. People who do not apply for loan with proper do cumentations and collateral are refused by the bank.
C. The poor people and land less farmers fall in th is category.
D. Absence of collateral is one of the main causes for not sanctioning loans to the poor people and land less people.
7. With the help of one example can you explain the ro le of credit for development?
Ans.A. Credit helps in increasing economic activities of the borrower.
B. If credit is provided at reasonable rate of intere st they can improve their economic condition. This will help them to improve their sta tus.
C. With the help of credit people could increase their agricultural production, do business, set up small scale industries.
Example: During festival season Salim, a shoe manuf acturer has received an order from a large trader in town for 3000 pairs of shoes to be delivered in a month time. To complete production on time Salim has to hire a few more workers for stitching and pasting work. He has to purchase the raw material. To meet his expenses Salim obtain loan from two different sources. At the end of the month, Salim is able to deliver the order, make a good profit, and repay the money that he had borrowed. He had also earned huge profit. In this way credit helps Salim to improve his business.
8. What are Self Help Groups? Explain the aims of Self Help Groups.
Ans.Self Help Groups: Self Help Groups is an organi zation of 15-20 members belonging to one neighborhood, who meet and save money regularly . Aim of Self Help Groups: The main aim of Self Help Group is to oganise rural poor, women in particular and collect their savings and t o take loans from the group to meet their needs. The group takes loan from the bank to create self employment opportunities for the members.
9. Which is the most important term of credit accordin g to your views? Explain.
Ans.Collateral is the most important term of credit . Collateral is an asset that the borrower owns. Such as land, building, vehicles, livestock, deposits with bank are some examples of collateral. These items are used as a guarantee to a lender until the loan is repaid. If the borrower fails to pay the loan the lender has t he right to sell the asset or collateral to obtain payment. The poor people and land less pe ople have no collateral. This prevents them to take loan from formal sources of c redit. Banks first ask for the collateral than they issue loans to the people. So due to the above reason collateral is the most important term of credit.
10. Name any two formal and informal sources of credit in India? Which one is the most preferred by the farmers of the rural area?
Ans.A. Cooperatives and commercial banks are the two examp les of the formal sources of credit.
B. Money lenders and friends are the two examples of t he informal sources of credit.
C. The most preferred source of credit to the farmers is money lenders. About 30% of loan requirements are covered from moneylenders by the rural households in India according to the survey of 2003.
11. What is debt trap? Why is it more rampant in rural areas? Give reasons.
Ans.Debt Trap: Debt trap is a condition where the credit pushes the borrower into a situation from which the recovery is very painful, it is called debt trap. Here the borrower fails to repay the borrowed money to the l ender and he has to sell his small portion of land to repay the loan. It is rampant in rural areas because of the following
reasons: A. Rural areas small farmers give preference to the in formal sources to take loan. The interest rates if these sources are very high.
B. Farmers take loan for crop production, equipment, f ertilizers. If crop fails due to any reason they become unable to pay back the loan.
C. There is unusually absence of any kind of support t o the farmers in case of crop failure.
D. The main source of their income is production of cr ops. If it fails than they don’t have any other source of income from which they can repa y their borrowings.
12. Why do you think that the formal sources of credit prov ide loans at reasonable interest rates?
Ans.A. Formal sources of credit work according to the norms of Reserve Banks of India.
B. The RBI monitors that the banks give loans not just to the profit-making businessmen and traders. But also to small cultivat ors, small scale industries, to small borrowers etc.
C. Rates of interest are fixed by RBI according to the instructions given by central government. Indian government is a welfare state.
D. The formal sources to provide loan at low interest rate because people can increase their income and help them in the overall developme nt of the country.
E. Low interest rate helps the poor people to increase their
1. At what interest rate Shamlal borrow money from the village moneylender?
Ans. 5% per month or 60% per annum
2. What is NABARD?
Ans.National Bank for Agriculture and Rural Develo pment
3. Name the organization that conducted All India Debt and Investment Survay, 2003.
Ans.NSSO
4. Write a special feature of the Gupta coins.
Ans. Gupta coins were not fully circular in shape a nd a picture of a king or a person was depicted on it.
5. Banks are present everywhere, but it is very diffic ult for poor households to get loan from the bank than taking a loan from informal source? Why is it so?
Ans.Banks are present everywhere, but it is very d ifficult for poor households to get loan from the bank than taking a loan from informal sour ce. Poor house hold give preference to informal sources of credit because ba nk loans require proper documentation and collateral which is rarely availa ble with poor households and it prevents them from getting loans. Sometimes banks h esitate to give loans to poor households. On the other hand, Informal source of c redit like Money lenders personally know the borrowers and willing to give loans withou t collateral. The documentation process of money lenders is not very rigid.
6. Why do lenders ask for collateral while lending?
Ans. Lenders asked for collateral while lend ing money to the borrowers due to the following reasons:
A. Lenders demand collateral against loan be cause it is a security against loan.
B. Collateral is an asset that the borrower owns a nd uses this as a guarantee to lender until the loan repaid.
C. If the borrower fails to repay the loan, the len der has the right to sell the asset or collateral to obtain payment.
D. Property such as land titles, deposits with bank s, livestock, gold, are some common examples of collateral.
7. How will you justify that credit is a crucial eleme nt in economic life?
Ans.redit plays a crucial role in economic life. S ome time it plays a negative role some time positive. Positive Role:
A. Sometimes credit helps to increase earnings makes the person better than before.
B. Credit helps the person to enhance his business hi s economic condition. Negative role:
A. Some time person borrow money to increase his busin ess or for personal use.
B. If the borrower fails to pay back the borrowed mone y, it pushes the person in to bank trap.
C. To repay the loan the borrower has to sell his land or the lender detained the collateral.
8. For what purpose banks keeps a small portion of the deposits as cash with themselves?
Ans.A. Banks keep only a small proportion of their deposit s as cash with themselves.
B. Banks in India these days hold 15 percent of their cash deposits as cash.
C. This is kept as provision to pay the depositors who might come to withdraw money from the bank on any given day.
D. Since on any particular day, only some of its many depositors come to withdraw cash, the bank is able to manage with this cash.
9. Explain the intermediary function of Money? Elabora te with example.
Ans.Money by providing the crucial intermediate step el iminates the need for double coincidence of wants. It is no longer necessary for the shoe manufacturer to look for a farmer who will buy his shoes and at the same time sell him wheat. All he has to do is find a buyer for his shoes. Once he has exchanged h is shoes for money, he can purchase wheat or any other commodity in the market. Since m oney acts as an intermediate in the exchange process, it is called a medium of exch ange.
10. What motives are there to deposit money the bank by depositors?
Ans.A. Money in banks is safe.
B. Depositor gets interest on it.
C. People also have provision to withdraw the money as and when they need.
11. What is Bank? Can you illustrate the functions of a Bank?
Ans. Banks are institutions which accept the deposi ts from the public withdraw able by cheques and by demand deposits and advances loans o f various types to the borrowers is called a Bank. Following are the functions of Ba nk:
A. It accepts the deposits from customers. It can be i n the form of saving account
deposits, current account and fixed deposits. B. It gives interests on the savings to the customers.
C. It provides withdrawal facility to the customers.
D. It gives loans and advances to the borrowers and ch arge interest
E. It provides agency function like transfer of funds, collection of funds, payment of various items, purchase and sale of shares and secu rities.
12. Describe the role played by Grameen Bank of Banglad esh in improvement of the condition of poor particularly women.
Ans. Grameen Bank of Bangladesh was started in the 1970s. It has now over 6 million borrowers in about 40,000 villages. Almost all the borrowers are women and belong to poorest sections of the society. These borrowers ha ve proved that not only are poor women reliable borrowers, but they can start and ru n a variety of small income generating activities successfully. Thus the Gramee n bank has played a significant role in the improvement of the condition of the poor women in Bangladesh. Professor Muhammad Yunus, the founder of Grameen Bank and reci pient of 2006 Nobel Peace prize for peace has stated that,” if credit can be made available to the poor people on terms and conditions that are appropriate and reaso nable these million of small people with their millions of small pursuits can add up to create the biggest development wonder”.
NO DOUT
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