(verified by loppers)

Modern
Banking System
credit Modern forms of Money

f-
Teomsotereditt
if:p:%IYwitn Banks

Cheque facility

Money and
Credit

credit sources in India

self Help Groups
-

f-
-
formal sector

Informal sector
 BARTER SYSTEM
A system in which goods are directly exchanged without use of money . Here both
parties agree to sell and buy each other 's commodity This is .
known as double
coincidence wants of .

Modern forms of money

Money is
something that can act as a medium of exchange in transactions .

# CURRENCY : f Cbse 20197

°

Currency is a
generally accepted form of money
Bank of India (RBI) issues
, including coins and paper notes .

°
In India Reserve , currency notes on behalf of the
central
government
rupee F) as a medium of payment that cannot
.

'

legalise
'
°
The law s the of use
be refused in transactions in India
setting .

Therefore the rupee Fl is widely accepted as a medium of exchange

' '
°
,
.

# DEPOSITS WITH BANKS :

°
Banks other form in which people hold money
-

°
Money deposited in Banks is safe with the bank and people also interest
get
on the deposited amount .

°
The deposits in the bank accounts can be withdrawn on demand Hence, these .

deposits are also called demand deposits .

# CHEQUE FACILITY :
A
cheque is a paper instructing the bank to pay a specific amount from the
person 's account the person in whose name the cheque has been issued .

Facility of cheque
make it possible to settle payments directly without use of
,
cash .

Modern
Banking system
o Banks mediate between those who have extra funds (the depositors) and those
who are in need of those fund (the borrowers) .

o
Bank charge a higher interest rate on loans than what they offer on deposits This .

difference between interest is banks main source of income .

°
In India only 15% of deposit Ps kept with the bank itself , the rest is out as given
loans .

CREDIT
credit ( loans) refers to an argument in which the lender supplies the borrower with
service in return for the promise of future payment
money ,
goods or .

o ans are both good

and bad , in one situation it can increase a person 's earnings
Yon other situation , it may the person into debt trap push .
 Debt trap is situation in which a loan is
a
difficult or impossible to repay it is,

mainly caused due to high interest .

# 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 .

° Collateral (
and uses this as a
security
) is an asset that the borrower owns such as land vehicle etc
to a lender until the loan is repay ed
guarantee .

°
If the borrower fails to repay the loan, the lender has the right to sell the asset
or collateral to obtain payment .

In village there may be different credit

, arrangement for different categories
of borrowers -

→
loan from moneylenders
→ Loan from Traders
-
Loan from Banks
→ loan from employers
→
loan from
cooperatives
credit sources in India

FORMAL SECTOR INFORMAL SECTOR

°
The formal are loans from banks and 0
The informal lenders include money -

cooperatives -

lenders traders , employers , relatives

, ,

friends etc .

°
The Reserve Bank of India supervises o
There is no which supervises
organisation
of the credit activities of lenders in the
the
loans
functioning of formal sources
informal sector .
.

that the banks

°
The RBI sees
loans not just to profit
give 0
They can lend at whatever interest rate
making they choose
-

business and traders but also to

small cultivators , small scale industry,
to small borrowers etc .

°
Periodically,
banks have to submit °
There is no one to stop them from unfair
information to the RBI on how much means to get their money back .

they are lending , to whom , at what

interest rate etc ,
.

o
The cost to the borrower of informal loans
as no record of the trans
is much
-
higher
actions are kept and poor are harassed
-

.
 SELF HELP GROUPS ( SH Gs for Poor s )
o SH G s have 15-20 members who meet regularly and pool their savings saving ,

varies from 25 or too or more

depending on ability of person
the .

After it it becomes eligible for loan from bank

a
year two
regular savings
° or
,
.

S HGS help borrowers to overcome the

problem of lack of collateral .

Decision
regarding loan use is taken by members of the group Like interest
°
.
.
,

duration , purpose, amount etc .

°
It a member fails to repay other members can pay for his share because
,
of this
feature , banks are willing to lend to SH Gs
Members can take small loan from Regular meetings of the group
group itself
°
.

provide platform to discuss and act on a variety of social issues .

IMPORTANT P Yds
cbse
rot
IH
ans -1

close
wtf Why do we need to expand formal sources of credit in India ?
OR
why Banks and cooperative societies need to lend more ? ↳I
 Yost E Explain the reason for
necessity of supervision by the Reserve
Bank of India of formal sources of loans .

Cbse 2018
¥ Give any 2
examples of informal sector of credit .

and - Is money lenders

% Traders
obese 2019
.

''

E Average income is useful for comparison but it may hide

disparities Explain
"
.
.

se
(b

Toya
close
and ÷ Is Banks
provide
loans for various economic activities
.

fig Banks intermediate between those who have surplus funds and
those who are in need of these funds .

Ciii Banks offer very less interest on deposits than what they demand
on loans .

dost
golf
ans
:
Avg .
Income =
Totaltncome
No .
of members
5,000
2904002
=

Cbse
WE

close
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