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Money And Credit

Question

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Why do we need to expand formal sources of credit in India?

Solution

There is need to expand formal sources of credit in India as:

(i)This would lead to higher incomes and many people could then borrow cheaply for a variety of needs.

(ii)They could grow crops, do business, set up small-scale industries etc.

(iii)They could set up new industries or trade in goods. Cheap and affordable credit is crucial for the country’s development.

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.

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