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Money and Credit
Question
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In situations with high risks, credit might create further problems for the borrower. Explain.

Answer

The situations with high risks, credit might create further problems for the borrower:

(i)The borrower had to pay interest on principal as well as on interest to lenders.

(ii)The lenders can go against the defaulT borrower in the court to recover his principal amount and interest thereupon. 

(iii) Sometimes, the lender can sell the security or the assets as collateral pledged with the banks or co-operative society or any informal agency of credit.

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Some More Questions From Money and Credit Chapter

Look at a 10 Rupee note. What is written on top? Can you explain this statement?

In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Analyse the role of credit for development.

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.

(a) Why might banks be unwilling to lend to small farmers?

(b) What are the other sources from which the small farmers can borrow?

(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.

(d) Suggest some ways by which small farmers can get cheap credit.

Majority of the credit needs of the _________ households are met from informal sources.

_________ costs of borrowing increase the debt-burden.

_________ issues currency notes on behalf of the Central Government.

Banks charge a higher interest rate on loans than what they offer on ________.

_________ is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.