Скачать или смотреть Economic chapter 4 - Money and credit

To understand the concept of money and credit in Class 10 Economics, let's break down the key points:

What is Money?

Money serves as a medium of exchange, unit of account, and store of value. It eliminates the need for double coincidence of wants, making trade easier.

Types of Credit

*Formal Credit*: Loans from banks and cooperatives, regulated by the Reserve Bank of India (RBI). These loans have reasonable interest rates and are supervised by the RBI.
*Informal Credit*: Loans from moneylenders, traders, relatives, and friends. These loans have high interest rates and are not regulated by any organization ¹ ².

Terms of Credit

*Interest Rate*: The borrower pays an interest rate on the loan amount.
*Collateral*: An asset used as a guarantee to secure the loan.
*Documentation*: Proper documents are required for formal loans.

Importance of Formal Credit

Reduces dependence on informal lenders with high interest rates.
Promotes financial inclusion and economic growth.
Provides affordable credit for investments and emergencies.

Challenges with Informal Credit

High interest rates lead to debt traps.
Lack of regulation allows unfair practices.
Borrowers may lose assets or face exploitation.

Self-Help Groups (SHGs)

Small groups of people that pool savings and provide loans to members.
Encourage financial discipline and provide a safety net.
Offer an alternative to informal credit sources ² ³.

Role of RBI

Regulates formal credit sources, including banks and cooperatives.
Ensures banks maintain cash reserves and lend to priority sectors.
Monitors credit activities to prevent unfair practices ¹.