☰
Money and Credit
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.
(a) Small farmers have no collateral against loans. Collateral is an asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid. That is why banks have no interest to lend to small farmers.
(b)These small farmers take loans from informal lenders including moneylenders, traders, employers, relatives and friends etc.
(c)The terms of credit can be unfavourable for the small farmers because of the crop failure. In this situation credit pushes the farmers into debt trap.
(d)The idea is to organise rural poor, in particular women, into small Self Help Groups (SHGs) and pool (collect) their savings.
Sponsor Area
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.
In a SHG most of the decisions regarding savings and loan activities are taken by:
Formal sources of credit does not include:
Why do we need to expand formal sources of credit in India?
Why is money accepted as a medium of exchange in India?
Answer the questions asked below:
(i)Why are transactions are made in money?
(ii)Why is money is called a medium of exchange?
(iii)What is the most significant feature of the barter system?
Sponsor Area
Sponsor Area