Table of Contents
Money and Credit Notes class 10
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61.’Credit has its own unique role for development.’ Justify the statement with arguments.
Ans. Credit has a unique role in the economic development of the country. It is needed by all the three sectors of the economy. In urban sector, big businessmen and small manufacturers need loans either to expand their enterprises, bring new technology or diversifying their businesses.
In rural sector, the main demand for credit is for crop production. Crop production involves cost of seeds, fertilizers, pesticides, water, electricity, repair of equipments. Cheap credit would thus lead to increase in production.
Even tertiary sector needs loans to buy the latest equipments and technology. Thus, we can say that credit has a unique role in the development of a country.
62. Explain why the supervision of the functioning so formal sources of loans is necessary?
Ans. The supervision of the functioning of formal sources of loans is necessary to check
- Whether the banks actually maintain the cash balance.
- Whether the banks give loans not just to profit making businesses and traders but also to small cultivators, small-scale industries and small borrowers.
- How much banks are lending, to whom and at what interest rate.
63. Why do the poor households rely on informal credit till today? Explain
Ans. Poor households, till today, rely mainly on informal sources of credit, like moneylenders, because of the following reasons.
(a) Lack of banking facilities.
(b) Even if banks are established in some rural areas, it is very difficult to get credit from them due to a lot of paperwork involved, which makes taking credit from the bank very cumbersome.
(c) Informal creditors like moneylenders, happen to know the borrowers personally, so they provide them the loan without collateral.
64. Prove with an argument that there is a great need to expand formal sources of credit in rural India.
Ans. There is a great need to expand the formal sources of credit in rural India because:
(a) There is no organisation to supervise credit activities of the informal sector.
(b) It could lead to increasing debt among the borrowers.
(c) The rate of interest is very high in informal sector.
65. Compare formal sector loans with informal sector loans regarding rate of interest.
Or
Why are service conditions of formal sector loans better than informal sector? Explain.
Ans. In formal sector, the rate of interest is low. It is fixed by the Reserve Bank of India, who supervises the functioning of formal sources of loan.
In informal sector, the rate of interest is very high as there is no organisation to supervise the functioning of informal sources of loan.
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66.”Most of the poor households still depend on the informal sector for loans, both in rural and urban areas of India.” Support the statement with three con examples.
Or
“Poor households still depend on informal sources of credit.” Support the statement with examples.
Ans. Poor households still depend on informal sources of credit because:
- Bank loans require proper documentation and collateral which is rarely available with poor households.
- Informal sources of credit such as moneylenders know the borrowers personally and are often willing to give a loan without a collateral.
- Sometimes, if the borrowers are unable to return the loan, they can get additional loans from moneylenders.
67. How is the concept of Self-Help Groups (SHGs) important for poor people? Give your viewpoint.
Ans. The concept of Self-Help Groups (SHGs) is very important for poor people. Self-Help Groups are required because:
- They help the borrowers to overcome the problem of lack of collateral.
- They help the rural poor (especially women) to become financially self-reliant.
- They provide a platform to hold regular meetings and thus, discuss issues such as health, nutrition and domestic violence.
68. Describe any three advantages of the Self-Help Groups (SHGs) for the poor.
Ans. The three advantages of the SHGS for the poor are as follows.
- These groups help the rural poor, in particular women, to get organised to handle the money collected and sanction loans.
- These groups help the women to become financially self-reliant.
- These groups create self-employment opportunities for the members and thus save the poor from the clutches of the moneylenders.
68.How do SHGs help borrowers to overcome the problem of lack of collateral? Explain with an example.
Ans. SHGs help borrowers to overcome the problem of lack of collateral in the following ways:
- It is the group that is responsible for the repayment of loan.
- Any case of non-payment of loan by any member is followed up seriously by other members.
- The formal sector is willing to lend to the members of SHGs because of their good track record of managing the credit.
69.How do banks play an important role in the economy of India? Explain.
Ans. Banks play an important role in developing the economy of India by taking the following steps:
- Banks keep money of the people in safe custody to be used by the depositors in future.
- They provide excellent saving and investments options to the depositors and thus help the nation.
- Banks also increase the savings of the depositors by paying interest on the money deposited.
- Banks mediate between people who have surplus and those who need money. This is done through granting loans. People avail themselves of these loan facilities to increase production and income.
Banks, being the formal source of credit, give loans at a very low rate of interest at flexible terms and conditions.
Special provisions are made through banks for the upliftment of agriculture and industry like waiving of loans of the farmers.
70.Why are the deposits in the banks called ‘demand deposits’? What are the benefits of deposits with the banks?
Ans. People deposit the surplus or extra money in the banks. The banks keep the money safe and provide interest on it. The deposits can be drawn at any time on demand by the depositors. That is why they are called demand deposits.
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