Haryana State Board HBSE 10th Class Social Science Notes Economics Chapter 3 Money and Credit Notes
Haryana Board 10th Class Social Science Notes Economics Chapter 3 Money and Credit
→ Terms of Credit
- Terms of credit is a set of conditions under which a loan is given. It may include method of payment, rate of interest, duration of credit and other related conditions like, collateral, documentation requirement and the mode of repayment.
- The term of credit may very according to the situation of the lender and the borrower.
- Collateral is a security against loans. It is an asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid.
- If the borrower fails to repay the loan, the lender has the right to sell the asset (collaterall) to obtain payment.
- Money is a fascinating subject and full of curiosities.
Class 10 Social Science Economics Chapter 3 Notes HBSE
→ Money as a Medium of Exchange
- Money is used in our everyday life. The goods are bought and sold through money.
- When both parties agree to sell and buy each other’s commodities, this is called double co-incidence of wants.
- In barter system, goods are exchanged without the use of money.
- Money acts as an intermediate in the exchange process, that is why it is called a medium of exchange.
- It is used for sale and purchase goods and services.
- Money has solved the problem of double co-incidence of wants.
→ Modern Forms of Money
- Money has many modern forms, in which, currency, paper note and coins are the main.
- In India, the Reserve Bank of India issues currency notes, on behalf of the central government.
- Banks obtain money from those people who have surplus money by opening their account in the bank and paying them interest on the deposits.
- A cheque is a paper, ordering the bank to pay a specific amount from the person’s account to the person, in whose ‘name the cheque has been issued.
Cheque is considered as money in the modern economy.
- Payments can be made with the use of cheque instead of cash.
- The modern forms of money, i.e. currency and deposits, are closely linked to the working of the modern banking system.
Class 10th Economics Chapter 1 Notes HBSE
→ Loan Activities of Banks
- Banks, accept deposits of the people, In this way, they collect a large amounts as deposits. They keep only a small portion of deposits (in India, it is 15%) as cash.
- This is kept for those depositors who wish to withdraw money from their accounts. Rest of the deposits are given as loans by the banks.
- The difference between what is charged from borrowers and what is paid to depositors is the main source of income of banks.
- Banks charge a higher interest rate on loans than what they give on deposits. Two Different Credit Situations
- Credit or loan refers to an agreement in which the tenderer supplies money, goods or services to borrower with the promise of future payment.
- In the first situation, credit is used to meet the production expenses. When the production is complete then it increases earnings.
- In the second situation, credit pushes the borrower into a situation from which recovery is very difficult and painful.
- Some example of collateral security used for borrowing are land titles, deposits with banks, livestock, etc.
→ Sectors of Credit in India
- The two categories of source of credit are formal sector loans and informal sector loans.
- The formal sector comprises banks and cooperative societies. The informal sector may consist of moneylenders, friends and relatives, traders, landowners, large farmers, etc.
- The Reserve Bank of India supervises the functioning of formal sources of loans.
- There is no organisation which supervises the credit activities of lenders in the informal sector.
- Compared to the formal lenders most of the informal lenders charge a much higher interest on loans.
- Cheap and affordable credit is crucial for the country1 development.
→ Formal and Informal Credit : Who Gets What?
- The formal sector still meets only about half of the total credit needs of the rural people. The remaining credit needs are met from informal sources.’
- Most loans from informal lenders carry a very high interest rate and do little to increase the income of the barriers.
- It is necessary that banks and cooperatives increase such lending particularly in the rural areas. So that the dependence on informal sources of credit reduces.
- While formal sector loans need to expand, it is also necessary that everyone receives these loans.
- At present only the richer households get loans form the formal sector, while the poor have to depend on the informal sector.
Economics Chapter 3 Class 10 Notes HBSE
→ Self-Help Groups for the Poor
- Self-help same group is a group of people usually belonging to one neighbourhood having same social and economic backgrounds.
- They meet and save money regularly as per their ability.
- Members of the group can take small loans from the group itself to meet their needs.
- In rural areas, the main demand of credit is for crop production.
- Every loan agreement specifies an interest rate, which the borrower must pay to the lender, along with the repayment of the principal.
- The co-operative societies are the other important sources of cheap credit in rural areas, besides banks.
- The various types of loans can be classified into two groups:
(i) Formal sector loans,
(ii) Informal sector loans. - The loans from banks and co-operative societies are grouped as formal sector loans.
- The informal sector loans include loans by moneylenders, traders, employers, relatives and friends etc.
- In our country, Reserve Bank of India supervises the functioning of formal sources of loans. ,
- There is no organisation, which supervises the credit activities of lenders, in the informal loan sector.
- At present, only the rich get loans from the formal sector, while the poor have to depend on the informal sector.
- Self-Help Groups help borrowers, overcome the problem of lack of collateral.
- Self-Help Groups basically save money of their own members and a member can take loan from that money, to meet his/her needs.
Chapter 3 Money And Credit Notes HBSE 10th Class
→ Important Terms
1. Money-Money means that legal thing, which is used as a medium of exchange.
2. Credit (Loan)-It refers to an agreement, in which, the lender supplies the borrower with money, goods or services, in return for the
promise of future payment.
3. Exchange-Giving and taking of goods and services between two parties is known as exchange.
4. Double Coincidence of Wants-It means both parties, i.e. the buyer and the seller, have to agree to sell and buy each other’s commodities.
5. Barter System-The system, by which, one commodity is exchanged for another, without the use of money, is called barter system.
6. Money System-In money system, commodities are exchanged through money.
7. Currency-Currency is the modern form of money. For example- paper note and coins.
8. Reserve Bank of India (RBI)-It is the Central Bank of India, established on 1st April, 1935. It makes the monetary policy of the economy.
9. Demand Deposit-The deposit in the bank accounts, that can be withdrawn on demand by customers, is known as demand deposit.
10. Cheque-A cheque is a paper, ordering the bank to pay a specific amount, from the person’s account to the person, in whose name the cheque has been issued.
11. Commercial Bank-An institution, which accepts deposits from people and withdraws their deposits on their demand. It is regulated by the RBI in India.
12. Capital-Capital is a main means of production. It covers money and commodities, which are used for production.
Class 10 Economics Chapter 3 Notes HBSE
13. Collateral-Collateral is an asset that the borrowers own, such as-land, building, vehicle, livestocks etc., and use this as a guarantee to a lender, until the loan is repaid.
14. Terms of Credit-Interest rate, collateral and documentation requirement and the mode of repayment, together, comprise of, what is known as the terms of credit.
15. Co-operative Society-It is a voluntary organisation of people, in which, people work co-operatively, to fulfil their economic interests.
16. Krishak Co-operative Societies-Krishak Co-operative Societies provide loans for the purchase of agricultural implements, cultivation and agricultural trade, fishery, construction of houses etc.
17. Landlords-They are the people who own farmland in villages, on which, poor farmers cultivate the crops.
18. Self-Help Groups (SHGs)-These are the groups generally formed in villages, where the money is collected from the members and given as loan to the member, at a minimum rate of Interest.