Scribd Logo
Upload

Welcome to Scribd!

  • 111 views

    Money and Credit One Shot

    Uploaded by

    mrsnightmare76
    1) Money acts as a medium of exchange and has evolved from barter systems to modern forms like currency notes, coins, and demand deposits in banks. 2) Banks play a major role in money and credit by accepting deposits and using most of those deposits to issue loans to borrowers, with the difference in interest rates charged and paid being the banks' main source of income. 3) There are both formal and informal sources of credit. Formal sources like banks are supervised but often do not meet all credit needs, so many poor households rely on informal sources that typically charge higher interest rates and use unfair means to recover loans. Expanding formal credit, especially to rural areas,

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Money and Credit One Shot

    Uploaded by

    mrsnightmare76
    111 views13 pages
    1) Money acts as a medium of exchange and has evolved from barter systems to modern forms like currency notes, coins, and demand deposits in banks. 2) Banks play a major role in money and credit by accepting deposits and using most of those deposits to issue loans to borrowers, with the difference in interest rates charged and paid being the banks' main source of income. 3) There are both formal and informal sources of credit. Formal sources like banks are supervised but often do not meet all credit needs, so many poor households rely on informal sources that typically charge higher interest rates and use unfair means to recover loans. Expanding formal credit, especially to rural areas,

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    1) Money acts as a medium of exchange and has evolved from barter systems to modern forms like currency notes, coins, and demand deposits in banks. 2) Banks play a major role in money and credit by accepting deposits and using most of those deposits to issue loans to borrowers, with the difference in interest rates charged and paid being the banks' main source of income. 3) There are both formal and informal sources of credit. Formal sources like banks are supervised but often do not meet all credit needs, so many poor households rely on informal sources that typically charge higher interest rates and use unfair means to recover loans. Expanding formal credit, especially to rural areas,

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    111 views13 pages

    Money and Credit One Shot

    Uploaded by

    mrsnightmare76
    1) Money acts as a medium of exchange and has evolved from barter systems to modern forms like currency notes, coins, and demand deposits in banks. 2) Banks play a major role in money and credit by accepting deposits and using most of those deposits to issue loans to borrowers, with the difference in interest rates charged and paid being the banks' main source of income. 3) There are both formal and informal sources of credit. Formal sources like banks are supervised but often do not meet all credit needs, so many poor households rely on informal sources that typically charge higher interest rates and use unfair means to recover loans. Expanding formal credit, especially to rural areas,

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 13

    Money and Credit

    Money as a Medium of Exchange

    Importance of money. Situation before the invention of money.

    Barter Exchange

    Double coincide of wants was a prerequisite


    Challenge
    condition for barter exchange.

    ஃ Money acts as an intermediate in the exchange process.

    Medium of exchange.
    Money and Credit
    Modern forms of Money

    Money Medium of exchange in the transaction.

    Evolution Currency Paper notes and coins (Currency).

    Modern currency is without any use of its own.

    Then why do we accept it?

    Because it is authorized by the government. [RBI]

    Rupee ₹ is widely accepted as a medium of exchange.


    ● The Reserve Bank of India issues currency notes on behalf of the central government.
    ● No other individual or organization is allowed to issue currency.
    ● No individual in India can legally refuse a payment made in rupees.
    Money and Credit

    Deposits with Banks Also a type of money.

    Extra cash People deposit it with bank (Bank account).

    Can be withdrawn on demand Demand Deposits

    ➔ Demand deposits offer another interesting facility. Cheque

    A cheque is a paper instructing the


    bank to pay a specific amount from
    the person’s account to the person
    in whose name the cheque has
    been issued.
    Money and Credit
    Loan activities of banks

    The major part of the deposit is


    Banks Keep a Cash Reserve used to extend the loan. Borrowers take loan

    The difference between what is charged from borrowers and what is paid to depositors is their
    main source of income.
    Money and Credit
    Two Different Credit Situation

    Credit Loan Need?

    An agreement in which the lender supplies the


    borrower with money, goods or services in return for
    the promise of future payment.

    Festival Season: Story of Salim Swapna's problem

    Credit plays a vital and ● In this situation, credit pushes the


    positive role in this situation. borrower into a situation from which
    recovery is painful.
    ● Debt-trap
    Money and Credit
    Terms of Credit

    All those terms and conditions which are agreed upon by the borrower and lender.

    Collateral Terms of credit

    Collateral is an asset that the DOCOMO internet


    borrower owns. [land, building,
    vehicle, livestocks, deposits with
    banks] and uses this as a guarantee ● Documentation required collateral, mode of
    to a lender until the loan is repaid. repayment and interest rate together
    comprises terms of credit.
    ● Terms of credit may vary depending on the
    Use of it nature of the lender and the borrower.
    Money and Credit
    Variety of Credit Arrangement

    Small Farmers Stories in the Chapter

    Money Lenders Advantages and Disadvantages.

    Employers Advantages and Disadvantages.

    Loans from cooperatives Advantages and Disadvantages.

    Banks Advantages and Disadvantages.

    Case with large farmers


    Money and Credit
    Formal Sector Credit in India

    Formal Sector Loans Informal Sector Loans

    Meaning Meaning

    ● Banks ● Moneylenders, traders


    ● Cooperatives ● Relatives and friends
    Reserve Bank of India supervising the functioning of
    formal source of loans. No organization which supervise it

    Work of RBI ● Interest rate is high.


    ● Lender use unfair means to get their
    money back.
    Interest rate Cost of borrowing
    Large part of the earnings of the borrowers is used to repay the loan.(Dept Trap)

    Cheap and affordable credit is crucial for the country's development.


    Money and Credit
    Formal and Informal Credit: Who gets What?

    Why do poor household borrows from informal sector?

    The formal sector still meets only about half


    of the total credit needs of the rural people. Solution

    ● It is necessary that banks and cooperatives


    increase their lending, particularly in the rural
    areas, so that the dependence on informal source
    of credit reduces.
    ● While formal sector loans need to expand, it is also
    necessary that everyone receives these loans.
    Analysis
    ➔ Majority of poor household gets loans from informal sector.
    ➔ Majority of rich household gets loan from formal sector.
    Money and Credit
    Self-Help Group for the Poor

    Meaning

    Emerged as an alternative against the challenges of borrowing from banks. How?

    ● Self Help Groups (SHGs) pool (collect) their savings. A typical SHG has 15-20 members,
    usually belonging to one neighbourhood, who meet and save regularly. Saving per
    member varies from Rs 25 to Rs 100 or more, depending on the ability of the people to
    save. Members can take small loans from the group itself to meet their needs.
    ● Decisions regarding the savings and loan activities are taken by the group members.
    ● SHGS are the building blocks of organisation of the rural poor.
    ➢ Grameen Bank of Bangladesh. → Muhammad Yunus.
    Join our telegram channel

    Team - DSR
    Connect with us on Instagram

    Digraj Singh Rajput

    You might also like

    pFad - Phonifier reborn

    Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

    Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


    Alternative Proxies:

    Alternative Proxy

    pFad Proxy

    pFad v3 Proxy

    pFad v4 Proxy