NCERT SOLUTION CLASS 10 SOCIAL SCIENCE

SOCIAL SCIENCE CLASS 10 (ECONIMS)

CHAPTER -03
MONEY AND CREDIT

QUESTION NO 1

    In situation with high risks,credit might creat further problem for the borrower. Explain.

ANSWER

In a siuation of high interest rate when the repaymen of the loan becomes difficult and credit instead of improving the earnings,pushes the borrower into a situaion from which recovery is very difficult and painful.This situaion is called debt trap. in this situation borrower is forced to give up his collateral or asset used as a guranee to the lender.

QUESTION NO 2

 How does money solve the problem of double coincidence of wants? Explain with an example of your own.

ANSWER

In double coincidence of wants both parties have to agree to sell and buy each others commodities. But problem arise in this system when one person does not have the requirement of commodity offered by other.It can be understand with he following example suppose one person want to sell shoes and required rice but buer have he rice but does not required shoes to buy in this case  transaction cannot be settled.
Money solves the problem of double coincidence of wants by acting as a medium of exchange. The transaction are made in money because a person holding money can easily exchange it for any commodity or service that he or she wants.

QUESTION NO 3

How do banks mediate between those who have surplus money and those who need money?

ANSWER

Bank mediate between those who have surplus money and hose who need money in the following way--

1. Banks keep only a small proporion of their deposits as cash with themselves,as a provision to pay to depositers who might come to withdraw from the bank on any given day.

2. Banks use their major portion of the deposits to extend loan who are in need of money. Hence the bank act as a mediator between the people who have surplus money (depositors) and those who are in need of money ( borrowers).

3.They charge higher rate of inerest on the loan comparatively what they offer on deposits. The  difference between interes charged from the borrowers and  interest paid to depositors is the profit of the bank.

QUESTION NO 4

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

ANSWER

After seeing the 10 rupees note it is observed that following words are written on top --

RESERVE BANK OF INDIA

Guranteed by the central government

I promise to pay the bearer

the sum of Ten rupees

Signaure

Governer

Explanation  -

A ten rupee note has ''Resrve bank of India''and guranteed by central government written on the top it means that it is issued by the Reserve Bank of India on behalf of central government which is the cenral bank and monitoring agency of the financial sectors of India.

Reserve Bank of India promise that he will pay the bearer the Ten rupees it proves the authenticity of currency hence no one can deny to accept this note.

QUESTION NO 5

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

ANSWER

 There are so many reasons which indicates that formal source of credit should be expand.

1. Most of the borrowers are farmers in rural areas which borrow money for their agriculural needs and try o pay after harvesting of crop. Informal lenders charge a very high interest rate on loan.It means that the borrowing cost will be higher.

2. Higher cost of borrowing means a larger portion of earning of the borrower is used to repay the loan and they have less income left with themselves.

3. Farmers needs every year some amount as a loan for their agricultural needs. Continue borrowing at higher interest rate leads to increasing debt and finally debt trap.

4.People who might wish to start an enterprise by borrowing may not be able to do so because of the high cost of borrowing.

5. For participation of farmer in agriculture sector and for small scale industry it is necessity that banks and cooperatives must lend more at reasonable interest rate.

6. Cheap and affordable credit is important for the country's development.Hence it is necessary to expand formal sources of credit in our country. 

QUESTION NO 6

What is the basic idea behind the SHGs for the poors?Explain in your own words.

ANSWER

Self-Help Groups consist of certain members who collect their savings and constitute a fund which is used in making finance to others needy members.Members of the SHGs group get credit at reasonal interest rate like formal sectors and it helps borrowers overcome the problem of lack collateral.Hence will not be in debt trap due to very high interest rate charged by informal sectors. It helps women to become self -reliant.

QUESTION NO 7

What are the reasons why the banks might not be willing to lend to certain borrowers?

ANSWER

The banks are sometimes not willing to lend to certain borrowers because of the following reasons--

1. Some people are not able to produce certificate of their earning.

2. There are some people who have a history of non -repayment of loans.

3. Banks seek collateral before giving the loan. Those who failed to provide colateral banks denied to give loan for them.

4. Banks required guranters for disbursing loan.Bank denied to give loan in case of non availability of guranters.

QUESTION NO 8

In what ways does theReserve Bank of India supervise the functioning of banks?

ANSWER

 The Reserve Bank of India supervises the functioning of bank in the following way-

1. The Reserve Bank of India supervises the functioning of the formal sources of loans.

2. It monitors the banks that how much they are maintaining cash balance.

3. It monitors the banks abou the loan giving not just to profit making business but also farmers,small scale industries,small borrowers etc because these people plays important role in the growth of the economy.

4.Periodically banks have to submit information to the RBI that how much they are lending,to whom they are lending and at what interest rate etc.

QUESTION NO 9

Analyse the role of credit for development.

ANSWER

The formal sectors such as banks and coperative societies need to lend more.Because of the lower interest rate borrowers would lead to higher incomes and many people can borrow cheaply for various needs. They can take loan for crops,for doing business,to set up small scale industries etc.They could set up new industries or trades in goods.These people and sector helps in the growth of economy of the country.Hence cheap and affordable credit is crucial for the country's development.

QUESTION NO 10

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.

ANSWER

Manav will decide on whether to borrow from the bank or the money lender on the basis of following factors--

1. For getting loan from bank he must have a collateral or asset that can be kept as a gurantee. If he does not have such as asset,he can't get a loan from the bank. In this situation he will have to go to moneylender for getting loan.

2. If there are no banks near his area or workplace,then he will borrow from a moneylender.

3. In case of unawareness of the consequences of borrowing of loan from the informal sector,he might not even consider taking a bank loan.

4. In case of not having the proper document required by bank he may approach to moneylender for loan.

QUESTION NO 11

In India,about 80 percent 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 farmer can borrow?

(c) Explain with an example how the term of credit can be unfavourable for he small farmers.

(d) Sugges some was by which small farmers can get cheap credit.

ANSWER

(a) Banks might be unwilling to lend to small farmers because they uaually lack of proper documents and collateral or asset.

(b) The other sources from which the small farmers can borrow are moneylenders,relative,friends,self-help group and cooperative banks.

(c) The term of credit can be unfavourable for the small farmers if he has a bad crop,and is forces to either surrender his collateral, if  he has borrowed from the bank or sell a part of land (if he borrowed from the informal sector),in order to repay his loan.

(d) Self-help groups and cooperaive banks do not require collateral as a gurantee,hence they can provide cheap credit to the small farmers.

QUESION NO 12

Fill in the blanks;

(i) Majority of the credit needs of the ----------------------------------household are met from informal source.

(ii) -------------------  cost of borrowing increases the debt burden.  

(iii) --------------issues currency notes on behalf of the Central government.
(iv) Banks charge a higher interest rate on loans than what they offer on-----------.
(v) ----------------  is an asset that the borrower owns and uses as a gurantee until the loan is repaid to the lender.

ANSWER

(i) poor
(ii) High
(iii) Reserve Bank of india
(iv) deposits
(v) collateral

QUESTION NO 13 

Choose he most appropriate answer.

(i) In a SHGs most of the decisions regarding saving and loan activities are taken by

(a) Bank

(b) Members

(c) Non-governmen organisation

(ii) Formal source of credit does not include 

(a) Banks

(b) Cooperaives

(c) Employers

ANSWER

(i) (b) Members
(ii) (c) Employers