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⁞ Economics : Understanding Economic Development

NCERT Books ➤ Class 10 ➤

Class 10 Economics : Understanding Economic Development Chapter 3. Money and Credit Summary, Explanation, Question Answers (NCERT Solutions)

Money And Credit (3. Money and Credit) CBSE class 10 Economics : Understanding Economic Development Chapter 3. Money and Credit summary with detailed explanation of the lesson Money And Credit along with meanings of difficult words. Given here is the complete explanation of the lesson, along with summary, explanation and questions and answers of each topic of lesson 3. Money and Credit.

Economics : Understanding Economic Development (Chapter 3. Money and Credit) Solution
 Exercises

8. In what ways does the Reserve Bank of India supervise the functions of Banks? Why is this necessary?

Answer :


The Reserve Bank of India supervises the functions of banks in a number of ways:

● The commercial banks are required to hold part of their cash reserves with their RBI. RBI ensures that the banks maintain a minimum cash balance out of the deposits they receive.
● RBI observes that the banks give loans not just to profit making businesses and traders but also to small cultivators, small scale industries, small borrowers etc.
● The commercial banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate etc.

This is necessary to ensure equality in the economy of the country and protect especially small depositors, farmers, small scale industries, small borrowers etc. In this process RBI also acts as the lender of the last resort to the banks.


All Questions of Economics : Understanding Economic Development Chapter 3. Money and Credit
Exercises
1. In situations with high risks, credit might create further problems for the borrower. Explain.
2. How does money solve the problem of double coincidence of wants? Explain with an example of your own.
3. How do banks mediate between those who have surplus money and those who need money?
4. Look at a 10 rupee note. What is written on top? Can you explain this statement?
5. Why do we need to expand formal sources of credit in India?
6. What is the basic idea behind the SHGs for the poor? Explain in your own words.
7. What are the reasons why the banks might not be willing to lend to certain borrowers?
8. In what ways does the Reserve Bank of India supervise the functions of Banks? Why is this necessary?
9. Analyse the role of credit for development.
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.
11. 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.
12. Fill in the blanks:

(i) Majority of the credit needs of the __________households are met from informal sources.
(ii) __________costs of borrowing increase 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 guarantee until the loan is repaid to the lender.

13. Choose the most appropriate answer.
(i) In a SHG most of the decisions regarding savings and loan activities are taken by

(a) Bank.
(b) Members.
(c) Non-government organisation.

(ii) Formal sources of credit does not include

(a) Banks.
(b) Cooperatives.
(c) Employers.


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