☰
Money and Credit
What are the two categories of sources of credit? Mention four features of each.
The two categories of credit sources are ‘formal’ and ‘informal’.
The following are four features of formal sources of credit:
i. The most important in this category are banks and cooperative societies. Loans can be obtained from these.
ii. The Reserve Bank of India supervises the functioning of these formal sources. Informal sources of credit:
i. In the informal field, money can be borrowed from a person, friend, relative, moneylender, trader and employer.
ii. There is no regulatory or supervisory body in this sector.
iii. Loans from this sector of credit do not require any collateral.
Sponsor Area
How do banks mediate between those who have surplus money and those who need money?
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.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 ________.
Sponsor Area
Sponsor Area