NOTES FOR THE TEACHER

CHAPTER 3 : MONEY AND CREDIT

Money is a fascinating subject and full of a collage of the major areas where people use
curiosities. It is important to capture this digital and cash transactions which are
element for the students. The history of legitimate and legal. They can also discuss the
money and how various forms were used at transactions which are legal and why. It is also
different times is an interesting story. At this important to intimate students that different
stage the purpose is to allow students to types of plastic cards are used in place of cash
realise the social situation in which these transactions but not all of them money per se.
forms were used. Modern forms of money are
Credit is a crucial element in economic
linked to the banking system. This is the
life and it is, therefore, important to first
central idea of the first part of the chapter.
understand this in a conceptual manner.
The present situation in India, where What are the aspects that one looks at in
newer forms of money are slowly spreading any credit arrangement and how this affects
with computerisation of the banking system, people is the main focus of the second part
offers many opportunities to students to of the chapter. The world around us offers a
explore on their own. We need not get into a tremendous variety of such arrangements
formal discussion of the ‘functions of money’ and it would be ideal to explain these
but let it come up as questions. There are aspects of credit from situations that are
certain areas that are not covered, such as familiar to your students. The other crucial
‘creation of money’ (money multiplier) or the issue of credit is its availability to all,
backing of the modern system that may be especially the poor, and on reasonable
discussed if you desire. terms. We need to emphasise that this is a
As you would see in the chapter, the stock right of the people and without which a large
of money consists of currency held by the section of them would be kept out of the
public and the demand deposits that they hold development process. There are many
with the banks. This is the money that people innovative interventions, such as that of
can use as they wish and the government has Grameen Bank, of which students may be
to ensure that the system works smoothy. made familiar with but it is important to
What would happen when the government realise that we don’t have answers to all
declares that some of the currency notes used questions. We need to find new ways and
by people would be made invalid and would be this is one of the social challenges that
replaced by new currency? In India, during developing countries face.
November 2016, currency notes in the Sources for Information
denomination of Rs. 500 and Rs. 1,000 were
declared invalid. People were asked to The data on formal and informal sector credit
surrender these notes to the bank by a specific used in this chapter is drawn from the
period and receive new Rs. 500, Rs. 2,000 or survey on rural debt by the National Sample
Survey Organisation (All India Debt and
other currency notes. This is known as
Investment Survey, 77 th Round 2019,
‘demonetisation’. Since then, people were also
conducted by NSSO) now known as National
encouraged to use their bank deposits rather
Statistical Office (NSO). The information and
than cash for transactions. Hence, digital
data on Grameen Bank is taken from
transactions started by using bank-to-bank newspaper reports and websites. In order
transfer through the internet or mobile to get the details of bank-related statistics
phones, cheques, ATM cards, credit cards, or a particular detail of a bank, you can log
and Point of Sale (POS) swipe machines at on to the websites of the Reserve Bank of
shops. This is promoted to reduce the India ([Link]) and the concerned
requirement of cash for transactions and also banks. Data on self-help groups is provided
control corruption. Students could be asked on the website of the National Bank for
to debate on the process and the impact of Agriculture and Rural Development
demonetisation. They can be guided to make (NABARD) ([Link]).

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 CHAPTER 3

MONEY AND

CREDIT
MONEY AS A MEDIUM OF EXCHANGE

Money ka use hamare roz ke Ek example lo — ek shoe

life ka ek important part ban manufacturer shoes sell karna
chuka hai. Apne aas-paas dekho, chahta hai aur wheat kharidna.
tum asani se aise kai transactions Pehle wo shoes bechega aur fir
dekh sakte ho jahan money use money se wheat lega. Socho agar I DON’T NEED
ho raha ho. Kya tum inme se kuch I’LL GIVE use seedha wheat ke liye SHOES. I NEED
YOU SHOES shoes exchange karne
CLOTHES.
examples likh sakte ho? Aksar in
transactions mein goods buy aur FOR YOUR hote, to kitna mushkil hota!
sell hote hain with money. Kabhi- WHEAT. Shoe manufacturer ko
kabhi services bhi money ke badle aise farmer ko
li jaati hain. Kabhi-kabhi actual dhoondhna padta jo not
money transfer nahi hota, balki only wheat sell karta ho,
bad mein dene ka promise balki shoes bhi kharidna
hota hai. chahta ho. Dono parties
ko ek dusre ki cheez
Kya tumne kabhi socha hai kharidni aur bechni hoti — I WANT SHOES.
ki saare transactions money isse kehte hain double BUT I DON’T HAVE
mein kyun hote hain? Reason coincidence of wants. Barter WHEAT.
simple hai — ek person jo system mein jahan bina money
money hold karta hai, usse ke goods directly exchange hote
koi bhi cheez ya service hain, wahan yeh double
exchange kar sakta hai. Isiliye coincidence hona zaroori hota hai.
sabhi log prefer karte hain ki
unhe money mein payment mile, Lekin jahan money use hota hai,
taaki wo baad mein usse apni wahan yeh zarurat khatam ho
zarurat ki cheez le saken. jaati hai. Money ek beech ka
madhyam ban jaata hai jisse seller
aur buyer dono ke liye process easy ho
jaata hai. Ab shoe manufacturer ko aise
farmer ko dhoondhne ki zarurat nahi jo
shoes kharide aur saath hi wheat beche.
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 Jaise hi usne apne shoes ko money se
exchange kar liya, ab wo market mein
wheat ya koi aur cheez kharid sakta hai.
Kyunki money ek beech ka madhyam
ban jaata hai exchange process mein,
isiliye ise medium of exchange kaha
jata hai.

LET’S WORK THESE OUT

1. How does the use of money make it easier to exchange things?
2. Can you think of some examples of goods / services being exchanged or wages being
paid through barter?

MODERN FORMS OF MONEY

Hume pata chala ki money ek India mein Reserve Bank of India
aisi cheez hai jo exchange currency notes issue karta hai
mein madhyam ban sakti hai. Central Government ke behalf pe.
Early punch- Coins ke aane se pehle, log alag- Indian law ke according, koi bhi
marked coins alag cheezein money ke roop individual ya organization
(may be 2500 mein use karte the. Jaise pehle currency issue nahi kar sakti.
years old)
zamane mein log grains aur Law ke hisab se rupee ek medium
cattle ko money ki tarah use of payment hai jise koi reject nahi
karte the. Uske baad aaya kar sakta. Isiliye rupee widely
metallic coins ka time — gold, accepted hota hai.
silver, copper coins — jo kaafi
Gupta samay tak chalte rahe.
coins Deposits with Banks
Currency
Dusra form jisme log money ko hold
Aaj ke time mein money ka karte hain wo hai deposits with banks.
form hota hai currency — Har waqt logon ko sirf apni daily
paper notes aur coins. Pehle needs ke liye thoda paisa chahiye
jo cheezein money ke roop hota hai. Jaise workers apni salary
Tughlaq
mein use hoti thi, unke mahine ke end mein paate hain, to
coin opposite modern currency unke paas mahine ke starting mein
kisi precious metal (jaise extra cash hota hai. Us cash ka kya
gold, silver) se nahi banti. karte hain? Log use banks mein
Gold Aur grains ya cattle ki tarah deposit kar dete hain apne account
Mohar iska koi apna use bhi nahi mein. Banks un deposits ko accept
from hota. Fir bhi ye accepted hoti karte hain aur uspe interest bhi
Akbar’s hai kyunki isse sarkar dete hain. Is tarah logon ka paisa
reign
authorize karti hai. banks mein safe rehta hai aur unhe
interest bhi milta hai. Jab zarurat
hoti hai to log apna paisa wapas bhi
nikaal sakte hain. Isiliye in deposits
ko demand deposits kaha jata hai.

Modern coin

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 Demand deposits ek aur interesting Jab payment cheque ke through hota
facility offer karte hain. Ye facility hai, toh jis insaan ka bank mein
money ke essential features ko poora account hota hai, wo ek cheque likhta
karti hai (jaise ki ek medium of exchange hai ek specific amount ke liye. Cheque
banna). Tumne suna hoga ki kai baar ek paper hota hai jisme bank ko
payments cheques se kiye jaate hain cash instruction diya jata hai ki ek fixed
ke bajay. amount us person ke account se nikaal
kar us person ke account mein daala
UNDERSTAND jaye jiske naam pe cheque issue hua hai.
LET US TRY AND
YM ENTS ARE
HOW CHEQUE PA
RE ALISED WITH
MADE AND
AN EXAMPLE.

Cheque Payments
Ek shoe manufacturer, M. Salim, ko leather supplier ko payment karna hai. Iske
liye wo ek specific amount ka cheque likhta hai. Iska matlab hai ki manufacturer
ne bank ko bola hai ki wo amount supplier ko de de. Supplier wo cheque lekar
apne bank account mein deposit karta hai. Paise ek bank account se doosre bank
account mein kuch dino mein transfer ho jaate hain. Is poore process mein cash
ka koi use nahi hota.

Account number

Bank branch
code

Cheque number Coding used by banks

Toh hum dekhte hain ki demand Tumhein yaad rakhna hoga ki ismein
deposits bhi money ke essential banks ka important role hota hai. Agar
features share karte hain. Cheques banks na ho, toh na hi demand deposits
ki facility ke through, demand hote, aur na hi unpe cheque payments.
deposits se cash ke bina hi payment Aaj ke modern time mein money ke jo
possible ho jaata hai. Kyunki forms hain — currency aur deposits —
demand deposits bhi widely accept wo modern banking system se closely
kiye jaate hain payment ke form mein, linked hain.
wo bhi modern economy mein money
ka form ban jaate hain.

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 LET’S WORK THESE OUT
1. M. Salim wants to withdraw Rs 20,000 in cash for making payments. How would he
write a cheque to withdraw money?
2. Tick the correct answer.
After the transaction between Salim and Prem,
(i) Salim’s balance in his bank account increases, and Prem’s balance increases.
(ii) Salim’s balance in his bank account decreases and Prem’s balance increases.
(iii) Salim’s balance in his bank account increases and Prem’s balance decreases.
3. Why are demand deposits considered as money?

LOAN ACTIVITIES OF BANKS

Chalo ab banks ki kahani ko aur Baaki major part of deposits ka use
aage le jaate hain. Jab public apne banks loan dene ke liye karte hain.
paise ko deposit karti hai, toh banks Loans ki demand kaafi hoti hai kai
us paise ka kya karte hain? Ek tarah ke economic activities ke liye.
interesting system yahaan kaam Hum iske baare mein aage aur
karta hai. Banks sirf ek chhota sa padhenge. Banks un logon ke
hissa apne paas cash ke form mein beech mein link ka kaam karte
rakhte hain. Aaj kal India ke banks hain jinke paas extra paisa hota
apne total deposits ka lagbhag 5% hi hai (depositors) aur jinko paise ki
cash ke roop mein rakhte hain. Ye zarurat hoti hai (borrowers).
isliye hota hai taaki agar kuch log ek Banks jo interest loan par charge
din mein paise withdraw karne karte hain wo zyada hota hai uss
aayein, toh bank unhe de sake. interest se jo wo deposits par dete
Kyunki ek particular din mein hain. Ye difference hi bank ki
sabhi depositors paisa nahi income ka main source hota hai.
nikaalte, isliye bank itne cash se
manage kar leta hai.
What do you think wo
uld happen
if all the depositors
went to ask
for their money at th
e same time?

DEPOSITORS BORROWERS
People make People take
deposits loans

People make People repay

withdrawals and loans with
get interest interest

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 TWO DIFFERENT CREDIT SITUATIONS
Hamari roz ki life mein kai baar aise transactions hote
hain jisme credit yaani udhaar ka use hota hai. Credit
(loan) ka matlab hai ek aise agreement se jisme lender
borrower ko paisa, saman ya service deta hai future
mein payment ke promise par. Aayiye do examples se
samjhte hain kaise credit kaam karta hai.

(1) Festival Season Pehla, woh leather supplier se leather

abhi leta hai aur promise karta hai
Festival season do mahine baad aane baad mein paisa dega. Dusra, woh
wala hai aur shoe manufacturer Salim large trader se cash mein loan leta hai
ko ek bade trader se 3000 jodi jooton ka 1000 jooton ke advance ke roop mein,
order mila hai, jo ek mahine mein aur poora order end of month tak
deliver karna hai. Time pe production deliver karne ka promise karta hai.
complete karne ke liye Salim ko naye
workers rakhne padte hain stitching Mahine ke end tak Salim order deliver
aur pasting ke liye. Raw materials lene kar deta hai, accha profit kamaata hai,
ke liye Salim ko paisa chahiye. Iske liye aur liya hua paisa wapas kar deta hai.
woh do sources se loan leta hai.

Is case mein, Salim ka credit uski working capital

ki zarurat puri karta hai. Usse timely production
mein madad milti hai, aur uski income bhi badhti hai.
Credit yahaan ek positive role play karta hai.

(2) Swapna’s Problem

Swapna, ek chhoti farmer hai jo apni 3 acre zameen
par groundnut ugati hai. Wo ek moneylender se
loan leti hai cultivation ke kharche ke liye, sochti
hai ki uski crop achhi hogi aur loan chuka degi.
Par season ke beech mein uski crop ko pests lag
jaate hain aur wo fail ho jaati hai. Swapna
mehngi pesticide use karti hai par koi fayda
nahi hota. Wo moneylender ka paisa wapas
nahi kar paati aur uska debt badhta jaata hai.
Next year, Swapna phir se naye loan leti hai.
Is baar crop normal hoti hai, lekin uski
income purane loan ko cover karne ke liye
kaafi nahi hoti. Ab Swapna debt mein
phans jaati hai. Usse apni zameen ka
ek hissa bechna padta hai loan
chukane ke liye.

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Gramin areas mein credit ki demand Swapna ke case mein, uski crop fail ho
zyada tar crop production ke liye hoti gayi jis wajah se wo loan repayment
hai. Crop production mein seeds, nahi kar payi. Usse apni zameen ka ek
fertilisers, pesticides, water, electricity, hissa bechna pada loan chukane ke liye.
equipment repair jaise kaafi kharche Credit ne uski earnings badhane ke bajaye
hote hain. Farmers season ke start mein usse aur mushkil situation mein daal diya.
crop loan lete hain aur harvest ke baad Ye situation commonly debt-trap kehlaati
usse chukate hain. Loan chukane kaafi hai. Credit in this case pushes the borrower
had tak farming se hone wali income par into a situation from which recovery is very
depend karta hai. painful.

Ek situation mein credit earning badhane

mein help karta hai, jisse borrower ki
LET’S WORK THESE OUT condition improve hoti hai.
Dusri situation mein, jaise
1. Fill the following table. crop failure, credit borrower
ko debt trap mein daal deta hai.
Salim Swapna Swapna ko apni zameen bechni
Why did they need credit? padti hai. Uski condition pehle
What was the risk?
se bhi kharaab ho jaati hai.
Credit useful ya harmful hoga
What was the outcome? ya nahi, ye situation ke risks
aur kisi support par depend
2. Supposing Salim continues to get orders from karta hai.
traders. What would be
his position after 6 years?
3. What are the reasons that make Swapna’s situation so risky? Discuss
factors – pesticides; role of moneylenders; climate.

TERMS OF CREDIT
Har loan agreement mein ek Iske alawa, lender kuch collateral
interest rate mention hota hai jo (security) bhi maang sakta hai.
borrower ko lender ko principal ke Collateral wo asset hota hai jo
saath pay karna hota hai. borrower ke paas hota hai (jaise
land, building, vehicle, livestock,
bank deposits) aur usse loan ke
guarantee ke roop mein use kiya
jata hai. Agar borrower loan repay
nahi karta, toh lender us asset ko
bech kar paisa vasool kar sakta hai.
Common collateral examples hain:
land titles, deposits with banks,
livestock, etc.

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 A House Loan
Megha ne ek loan liya hai ₹5 lakh ka bank se
apna ghar kharidne ke liye. Is loan par
annual interest rate 12% hai aur ye loan
10 saalon mein monthly instalments ke
through chukana hai. Megha ko bank ko
apne employment records aur salary
documents dikhane pade, tabhi bank ne
loan dene ki permission [Link] ne naye ghar
ke kagaz apne paas collateral ke roop mein
rakhe hain, jo Megha ko tabhi wapas milenge
jab wo poora loan with interest chuka degi.
Fill the following details of Megha’s housing loan.
Loan amount (in Rupees)
Duration of loan
Documents required
Interest rate
Mode of repayment
Collateral

Interest rate, collateral aur documents ki

requirement, aur repayment ka tareeka
milkar banate hain terms of credit. Terms
of credit alag-alag credit arrangements
mein different hote hain. Ye depend karta
hai ki lender aur borrower ka nature kaisa
hai. Aage ke section mein hum different
credit arrangements ke terms of credit ke
examples dekhenge.

LET’S WORK THESE OUT

1. Why do lenders ask for collateral while lending?
2. Given that a large number of people in our country are poor, does it in any way
affect their capacity to borrow?
3. Fill in the blanks choosing the correct option from the brackets.
While taking a loan, borrowers look for easy terms of credit. This
means __________ (low/high) interest rate, ______________(easy/
tough) conditions for repayment, ___________(less/more) collateral
and documentation requirements.

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 Variety of Credit Arrangements
Example of a Village

15th Nov, 2019

. rm er s a n d
r th e fi el d s w h er e m o s t fa The fields
tl y fo e day.
W e h ea d d ir ec be working at this time of th hyamal, a small
ou ld ee t S
labourers w We first m
e plan ted w it h potato crops. d village.
ar te
er in S on pu r, a small irriga
farm

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Loans from Cooperatives

LET’S WORK THESE OUT

1. List the various sources of credit in Sonpur.
2. Underline the various uses of credit in Sonpur in the above passages.
3. Compare the terms of credit for the small farmer, the medium farmer and the landless
agricultural worker in Sonpur.
4. Why will Arun have a higher income from cultivation compared to Shyamal?
5. Can everyone in Sonpur get credit at a cheap rate? Who are the people who can?
6. Tick the correct answer.
(i) Over the years, Rama’s debt
· will rise.
· will remain constant.
· will decline.
(ii) Arun is one of the few people in Sonpur to take a bank loan because
· other people in the village prefer to borrow from the moneylenders.
· banks demand collateral which everyone cannot provide.
· interest rate on bank loans is same as the interest rate charged by
the traders.
7. Talk to some people to find out the credit arrangements that exist in your area. Record
your conversation. Note the differences in the terms of credit across people.

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 FORMAL SECTOR CREDIT IN INDIA
Humne upar wale
examples mein dekha ki
log alag-alag sources se Graph 1 : Sources of Credit in Rural India, 2019
loan lete hain. In loans
ko do groups mein Other Informal
divide kiya ja sakta hai: Relatives and
Agencies, 3%

formal sector loans aur Friends, 7%

informal sector loans.
Formal loans banks aur
cooperatives se hote hain.
Informal lenders mein Moneylenders, Commercial
aate hain: moneylenders, 23% Banks, 51%
traders, employers,
relatives aur friends.
Graph 1 mein aap dekh Landlords, 1%

sakte hain ki rural India Other Formal

mein alag-alag sources Agencies, 5%
of credit kya hain. Toh Cooperative Banks
zyada credit formal and Society, 10%

sector se aa raha hai ya

informal sector se?
Isi tarah RBI ye bhi dekhta hai ki banks
sirf profit kamaane wale businesses aur
Reserve Bank of India (RBI) traders ko hi nahi, balki chhote cultivators,
formal sources of loan ki small-scale industries aur small borrowers
functioning ko supervise ko bhi loans dein. Banks ko RBI ko batana
karta hai. Jaise ki humne padta hai ki wo kisko loan de rahe hain,
dekha hai ki banks apne kis interest rate pe de rahe hain, aur kitni
total deposits ka ek hissa amount de rahe hain.
minimum cash balance ke
roop mein rakhte hain. RBI Lekin informal sector mein kisi bhi
ensure karta hai ki banks ye organisation ka control nahi hota.
rule follow karein. Isliye lenders apni marzi ka interest
BUT WHY SHOULD
rate charge kar sakte hain, unko koi
A BANK WANT US TO control nahi karta.
HAVE A HIGHER INCOME?

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Jab log informal lenders se loan lete hain, Formal and Informal Credit:
toh wo kisi bhi interest rate pe paisa de Who gets what?
sakte hain. Unko rokne wala koi nahi hota
agar wo unfair tareeke se apna paisa vasool Graph 2 mein urban areas ke logon ke
karein. liye formal aur informal credit ka
comparison dikhaya gaya hai. Logon
Formal lenders ke comparison mein, ko 4 groups mein divide kiya gaya hai –
informal lenders loan pe zyada interest poor se rich tak. Aap dekh sakte hain ki
charge karte hain. Isliye, informal loans poor households ke 54% loans informal
borrower ke liye kaafi mehange padte hain. sources se hain. Lekin rich households
ke sirf 17% loans informal hain, baaki
Jab interest rate zyada hota hai, toh 83% formal sources se hain.
borrower ki kamaai ka bada hissa loan
chukane mein chala jata hai. Is wajah se Yani jo ameer log hain, wo cheap loan
unke paas apne liye kam paisa bachta hai formal sector se le lete hain, jabki garib
(jaise Sonpur ki Shyama ka case tha). logon ko zyada paisa dena padta hai
Kabhi-kabhi toh interest itna zyada hota loan ke liye kyunki wo informal sources
hai ki loan ki total repayment unki aamdani se lete hain.
se bhi zyada ho jaati hai. Aise mein unki
debt trap mein phasne ki sambhaavna badh
jaati hai (jaise Sonpur ki Rama ke saath hua
tha). Jo log naye business shuru karna chahte
hain, wo bhi high borrowing cost ki wajah se
loan lene se darte hain.

Is wajah se zaroori hai ki banks aur

cooperative societies aur zyada logon ko
loan dein. Isse logon ki aamdani badhegi,
aur log sasta loan le kar alag-alag kaamon
jaise kheti, chhoti industries ya business ke
liye paisa laga paayenge. Cheap and affordable
credit desh ke vikas ke liye bahut zaroori hai.

Graph 2 : Of all the loans taken by urban households, what

percentage was formal and what percentage was informal?

Poor Households Well-off Rich

Households with a few assets Households Households

BLUE : Per cent of loans from the FORMAL sector

ORANGE: Per cent of loans from the INFORMAL sector

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 Zyada loans jo informal lenders se liye Doosri baat yeh hai ki sirf formal
jaate hain, unpe interest rate bahut sector loans badhane se kaam nahi
zyada hota hai aur borrowers ki income chalega, balki sabhi logon tak unka
badhne mein koi madad nahi hoti. pahunch hona chahiye. Aaj ki date
Isliye zaroori hai ki banks aur mein sirf richer households hi formal
cooperatives apna lending rural areas credit le paate hain, jabki poor
mein badhaayein, taaki informal households ko informal sources pe
sources pe dependence kam ho sake. dependent rehna padta hai. Zaroori
hai ki formal credit ko zyada equally
distribute kiya jaaye, taaki poor log bhi
saste loans ka faayda utha saken.
LET’S WORK THESE OUT
1. What are the differences between formal and informal sources of credit?
2. Why should credit at reasonable rates be available for all?
3. Should there be a supervisor, such as the Reserve Bank of India, that looks into the
loan activities of informal lenders? Why would its task be quite difficult?
4. Why do you think that the share of formal sector credit is higher for the richer households
compared to the poorer households?
A worker
stitching a quilt

DO YOU THINK A BANK

WILL GIVE ME A
LOAN?

SELF-HELP GROUPS FOR THE POOR

Pichhle section mein humne dekha Jaise ki Megha ke case mein dekha
ki poor households abhi bhi tha, bank loans ke liye proper
informal sources of credit pe documents aur collateral chahiye
dependent hain. Aisa kyun? hota hai. Poor logon ke paas
Sabse pehle toh banks har jagah collateral nahi hota, isi wajah se
rural India mein present nahi hote. unhe bank se loan milna mushkil
Aur agar hote bhi hain, toh bank se ho jaata hai. Informal lenders
loan lena informal source ke jaise moneylenders, borrower ko
comparison mein zyada mushkil hota personally jaante hain aur bina
hai. collateral ke bhi kabhi-kabhi loan
de dete hain. Borrower agar
repay nahi bhi karein, toh bhi
wo firse loan le sakte hain.
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Pichhle kuch saalon mein logon ne Kitni amount ka loan hoga, Interest
gareebon ko loan dene ke naye tareeke rate kya hoga, Aur repayment
try kiye hain. Idea yeh hai ki rural poor, schedule kya [Link] koi
khaaskar women ko organize kiya jaaye member loan repay nahi karta,
chhoti chhoti Self Help Groups (SHGs) toh group ke dusre members usse
mein aur sab milkar apni savings collect seriously follow-up karte hain. Is
karein. Ek typical SHG mein 15-20 wajah se banks bhi SHGs ko loan
members hote hain, jo usually ek hi area dene ke liye ready hote hain, chahe
se hote hain, regular milte hain aur paise unke paas collateral na ho.
bachate hain. Har member ki saving Rs 25
se Rs 100 ya usse zyada ho sakti hai, unki Is tareeke se, SHGs un borrowers
saving capacity ke hisaab se. Members ki help karte hain jinke paas
apni zarurat ke liye group se small loan collateral nahi hota. Unhe timely
le sakte hain. Group in loans par interest loan mil jaata hai sahi interest rate
charge karta hai jo ki moneylender ke pe aur kai purposes ke liye. SHGs
comparison mein kaafi kam hota hai. Agar rural poor ke liye ek strong
group ek saal tak regularly saving kare, toh foundation ban gaye hain. Isse
wo bank loan ke liye eligible ban jaata hai. women financially self-reliant banti
Loan group ke naam pe sanctioned hota hai hain. Group ki regular meetings mein
aur iska purpose hota hai members ke liye health, nutrition, domestic violence
self-employment opportunities create karna. jaise social issues pe bhi discussion
Jaise ki, loan diya jaata hai: Mortgaged land hota hai.
chhudwaane ke liye, Working capital needs
jaise seeds, fertilisers, bamboo, cloth purchase
ke liye, Ya housing materials aur assets jaise
sewing machine, cattle, handlooms kharidne
A women’s self-help group
ke liye. meeting in Gujarat

Group ke important
decisions, jaise saving
aur loan related, SHG
ke members khud milkar
lete hain. Group yeh bhi
decide karta hai ki:
Loan kis purpose ke liye
milega

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 Grameen Bank of Bangladesh
Grameen Bank of Bangladesh ek badi
success story hai jo gareeb logon tak
unki credit needs ko reasonable rates
par pohochane mein kaafi safal rahi hai.
1970s mein ek chhote project ke roop mein
shuru hua, Grameen Bank ne 2018 tak
81,600 villages mein 9 million se zyada
members bana liye the. Inmein se zyada
tar borrowers women hain aur society ke
sabse gareeb hisso se belong karti hain. In Professor Muhammad Yunus,
borrowers ne yeh prove kiya hai ki wo sirf the founder of Grameen Bank,
reliable borrowers hi nahi hain, balki wo and recipient of 2006 Nobel
Prize for Peace
kai tarah ke income-generating activities ko
successfully run bhi kar sakti hain.

SUMMING UP
Iss chapter mein humne dekha ki Aaj ke time mein, zyada tar rich
modern forms of money kis tarah se households formal credit lete
banking system se linked hain. Ek hain, jabki poor logon ko
side par depositors hain jo apna paisa informal sources par dependent
banks mein rakhte hain, aur doosri rehna padta hai. Isliye yeh
taraf borrowers jo unhi banks se loans zaruri hai ki formal credit ka
lete hain. Har economic activity mein hissa badhaya jaaye, taaki
credit ki zarurat hoti hai. Jaise humne informal aur mehenga credit
dekha, credit ka positive impact bhi ho par nirbharata kam ho. Gareeb
sakta hai, lekin kuch situations mein yeh logon ko banks, cooperative
borrower ko nuksaan bhi pahucha sakta societies se sasta credit milna
hai. chahiye. Dono steps desh ke
development ke liye important
Credit alag-alag sources se milta hai— hain.
yeh ya toh formal sources se ho sakta hai
ya informal sources se. Terms of credit
formal aur informal lenders ke beech kaafi
different hoti hain.
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?

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 8. In what ways does the Reserve Bank of India supervise the functioning 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.

ADDITIONAL PROJECT / ACTIVITY

The following table shows people in a variety of occupations in urban areas. What
are the purposes for which the following people might need loans? Fill in the column.
Occupations Reason for needing a Loan
Construction worker
Graduate student who is computer literate
A person employed in government service
Migrant labourer in Delhi
Household maid
Small trader
Autorickshaw driver
A worker whose factory has closed down
Next, classify the people into two groups based on whom you think might get a bank
loan and those who might not. What is the criterion that you have used for classification?

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