NCERT Notes For Class 10 Economics Chapter 3 Money And Credit

Class 10 Economics Chapter 3 Money And Credit

NCERT Notes For Class 10 Economics Chapter 3 Money And Credit, in this step-by-step answer guide. In some of State Boards and CBSE schools, students are taught thru NCERT books. As the chapter comes to an end, students are requested few questions in an exercising to evaluate their expertise of the chapter.

Students regularly want guidance managing those NCERT Notes. It’s most effective natural to get stuck withinside the exercises while solving them so that you can assist students score higher marks, we’ve provided step by step NCERT answers for all exercises of Class ten Economics so you can are looking for assist from them.

Students should solve those exercises carefully as questions withinside the final exams are requested from those, so these exercises immediately have an impact on students’ final score. Find all NCERT Notes for Class ten Economics below and prepare in your tests easily.

NCERT Notes For Class 10 Economics Chapter 3 Money And Credit

Class 10 Economics Chapter 3 Money And Credit

Money and credit

Money as a medium of exchange

  1. Money is an item which is used as a medium of exchange.
  2. In modern economy, money is work as an intermediary.
  3. It is used as a medium of exchange for goods and services.
  4. A person holding money can easily exchange it for any commodity or service that he or she might want.
  5. It is also used for payment of debts.

Batter system

  1. Introduction of money replaced the batter system.
  2. Before the introduction of money, Indians used grains and cattle as money.
  3. In a barter system, selling and purchasing of goods and services was done with “double coincidence of wants” i.e by fulfilling mutual wants without the use of money.
  4. In this system goods and services was exchanged for another goods and services.
  5. It was also known as CC economy i.e commodity for commodity economy.

Modern form of money

  1. In the early ages, Indians used grains and cattle as money.
  2. Thereafter came the use of metallic coins – gold, silver, copper coins – a phase which continued well into the last century.
  3. Now, the modern forms of money include currency – paper notes and coins.
  4. The modern forms of money – currency and deposits – are closely linked to the workings of the modern banking system.

(i) Currency

  1. The currency is authorized by the government of the country.
  2. So, it is used as a medium of exchange and accepted by the others.
  3. Modern forms of money include currency — paper notes and coins.
  4. The modern coins are not made with the precious metals like gold, silver.
  5. In India, Reserve bank of India has authority to issue currency notes on behalf of the central government.
  6. In India, Reserve bank of India has authority to issue currency notes on behalf of the central government.
  7. The real values of the modern coins are less than its face value.
  8. In India, no individual can legally refuse to accept the rupees issued by the Reserve bank of India.
  9. The rupee is widely accepted as a medium of exchange in India.

(ii) Deposits with Banks

  1. The other form in which people hold money is as deposits with banks.
  2. A person can deposit in the bank by opening an account on his/her name. People need only some money at a point of time.
  3. Banks accept the deposits and also pay an amount as interest on the deposits.
  4. Deposits with Banks are also a form of money.
  5. So, people can deposit extra money and earn extra money, which is given on money already depositing in bank.
  6. The deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.


  1. A facility of payment through cheque is also provided by the bank to their customers.
  2. Cheque work as an instrument for payment which is made by the paper.
  3. A person can directly transfer money to another person through cheque rather than in cash.

Loan activities of bank

  1. Banks keep only a small proportion of their deposits as cash with themselves.
  2. These days banks in India hold about 15% of their deposits as cash.
  3. This is kept as a provision to pay the depositors who might come to withdraw money from the bank on any given day.
  4. Banks use the major portion of the deposits to extend loans.
  5. Bank work as mediator between the depositors and the borrowers.
  6. A major portion of the deposited money is provided to those people who are needy of money for economic activities.
  7. In this case, money is provided as a loan with a higher rate of interest.
  8. The interest on borrowing money and the interest of deposited money is the income for the bank.

Two different credit situations

Credit is an agreement in which is created when a person gives money and goods to the needy person with the promise of to repay that with some rate of interest.

There are two types of credit situation

In the first situation:

  1. A person borrows money for production activities with the promise to repay the loan at the end of the year when production work will be completed.
  2. At the end of the year, he/she makes a good profit from production activities and he/she is able to pay the amount of loan. In this situation, credit helps to increase earnings and therefore the person is better off than before.

In the second situation:

  1. A person borrows money for production activities with the promise to repay the loan at the end of the year when production work will be completed.
  2. At the end of the year he/she unable to repay the loan due to loss in production.
  3. For this term, he/she come under the situation of debt trap. Therefore, that person becomes worse off than before.

Terms of credit

  1. The interest rate, collateral and some documents fulfill the requirements of the terms of credit.
  2. Interest rate is specified when a lender provides loan to the borrowers.
  3. A borrower will have to repay the amount taken from the lenders with the amount of interest.
  4. In some case, lenders may demand collateral against loans.

Collateral (security)

Collateral is an asset of the borrowers owns (such as land, building, vehicle, livestocks, deposits with banks) which is given to the lenders as security for the specified period.

A lender can use the assets which are held by him as security until the amount of loan is repaid.

If the borrower fails to repay the loan in a specified period, The lender has the right to sell the assets or collateral to obtain payment.

Formal sector credit in India

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

• There are two types of sources of credit in an economy.

(i) Formal sector

(ii) Informal sector

Formal sector loans:

  1. In the formal sector, loans from banks and cooperatives are included.
  2. The Reserve Bank of India supervises the functioning of formal sources of loans.
  3. Banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.

Informal sector loans:

  1. In the Informal sector, loans from moneylenders, traders, employers, relatives and friends are included.
  2. There is no organisation which supervises the credit activities of lenders in the informal sector.
  3. There is no one to stop them from using unfair means to get their money back.

Formal and informal credit

  • The formal sector meets only about half of the total credit needs of rural people.
  • The remaining credit needs are met from informal sources.
  • It is important that the formal credit is distributed more equally so that the poor can benefit from the cheaper loans.
  1. It is necessary that banks and cooperatives increase their lending, particularly in rural areas, so that the dependence on informal sources of credit reduces.
  2. While the formal sector loans need to expand, it is also necessary that everyone receives these loans.

In this chart, we can see sources of credit in rural areas are mostly dependent on professional and agriculture moneylenders in case of informal sources of loan.

For the development of a country, cheap and affordable credit is crucial.

Therefore, the government should facilitate formal sources of credit basically in rural areas.

Self-help groups for the poor

Facilities of banks are not available in all rural areas.

So, the poor are dependent on informal sector for borrowing loan.

The poor have to pay a high rate of interest to the moneylenders.

It is difficult to borrow loan from the bank. Because of the absence of the collateral and documents.

documents and collateral are required for a bank loan.

Informal lenders like, moneylenders are often willing to give a loan without collateral because they personally knew the borrowers.

  1. An organisation constituted to collect the savings of the poor which is known as self-help group.
  2. The aim of the organisation is to lend loan at less rate of interest compared to the rate of interest specified by the moneylenders.
  3. A self-help group has 15 – 20 members.
  4. Savings vary from member to member i.e Rs. 25 to Rs. 100 depending on the ability of the person to save.

Advantages of Self Help Group (SHG)

  1. It helps borrowers to overcome the problem of lack of collateral.
  2. People can get timely loans for a variety of purposes and at a reasonable interest rate.
  3. SHGs are the building blocks of organisation of the rural poor.
  4. It helps women to become financially self-reliant.
  5. The regular meetings of the group provide a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence, etc.
  6. The organisation also provides self-employment opportunity for the member by the way of sanctioning the group.
  7. For example, small loans are provided to the members for releasing mortgaged land, for meeting working capital needs, for housing materials, for acquiring assets.
  8. There is also a group for repayment of loan.
  9. In case of any non-repayment by the one member is followed by the other member of the organisation

Benefits of NCERT Notes

NCERT’s Class 10 Notes contains extremely important points, and for each chapter, each concept has been simplified to make it easier to remember and increase your chances of achieving excellent exam results. Exam Preparation References Here are some tips on how these Notes can help you prepare for the exam.

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Tips & Strategies for Class 10 Exam Preparation

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