Vital For CBSE Class X Board Exam

1. MADATSST
&
MUKUND INGLE
PRESENTS

2. Mr. Mukund B.
Ingle

3. CONTIAN OF THE CHAPTER
 Barter System & its challenges & how
money helps to solve
 How Bank mediates between Deposits
& Credit
 Credit System of the Bank
 Types of Loans & role of RBI
 SHGs – functions & importance

4. BARTER SYSTEM & ITS CHALLENGES
 Definition – Exchanging goods with each other in olden time when
people did not have money as a medium of exchange was called
‘Barter System’.
 Problems faced by this system were –
 Double co-incidence of wants: it means both the parties should be ready to
exchange each other goods or trading would not take place.
 Fixing of values was the regular challenge in that system as there were no
specific system or methods to do that
 No Uniformity – there was no uniformity in all over the region or country as
the value fixed for the particular thing had its own local, social and cultural
importance
 No legal protection – this system had no legal protection or guarantee

5. MONEY – Medium of Exchange
 In Barter system, Double Co-incidence of wants was the
major issue as everyone had to find out the person who
could be ready to exchange that good. Till the right person
was not found, Barter System would not take place.
 In recent economy, money provides the crucial
intermediate step to solve the problem of ‘Double Co-
incidence of Wants’ as It is no longer necessary for the
shoe manufacturer to look for a farmer who will buy his
shoes and at the same time sell him wheat.
 Since money acts as an intermediate in the exchange
process, it is called a medium of exchange.

6. CURRENCY
 Today, every nation has its own currency that is in the form of
paper or metal but not in the form of gold or silver.
 That currency is used as the medium of exchange in that
particular nation as it is decided to be the National Currency.
 It is being legally protected, guaranteed and authorized by the
government of that country. As only RBI in India has the right to
print the currency on behalf of government.
 It is being widely accepted as medium of exchange and no
one can deny to have transaction through rupee in India.

7. DEPOSITS
 Deposits
 The excessive amount at the beginning of the
month is kept in bank by the people. That
amount is called as ‘Deposits’.
 Depositors
 The person who deposits is called as ‘Depositor’
 Demand Deposits
 The deposits in the bank accounts can be
withdrawn on demand; these deposits are called
demand deposits

8. CHEQUE
 A cheque is a paper instructing the bank to pay a
specific amount from the person’s account to the
person in whose name the cheque has been issued.
 Precautions to be taken while transacting trough
Cheque –
 No rubbing & cutting
 Signature should match with the signature given in the
bank
 Amount to be written in numbers and words
 Making cheque as account payee
 Be aware the amount available in the account

9. CHEQUE & Its Advantages
 Safe and secure mode of transaction
 Each transaction is being recorded &
help to prevent ‘Black Money’
 It is a legal method of transaction

10. BANK AS A MEDIATOR
 Bank works as mediator between the people who
have excessive amount and the people who need
that.
 People deposit their excessive amount in the bank.
As amount increases and becomes huge, banks take
some of the amount of it and give loans to people
who need that on the more interest rate than they
give to depositors.
 People repay the loan amount and so bank is able to
give the depositors their amount back whenever they
require.

11. LOAN ACTIVITIES OF THE BANK
 Banks hold some of the amount from their deposits as cash for
day to day withdrawal as depositors comes to ask for cash and
some of the amount from those deposits can be used for loan
activity.
 Borrowers repay their loan back to bank and bank can give
depositors their money back.
 Banks give interest rate to depositors and charge the interest to
borrowers. But the interest charged to borrowers is more than
the interest given to depositors. This is the main income of the
bank and bank is able to manage their daily expenses from that.
 It means that taking loan is not that easy work. There are lots
for things to be completed and banks don’t give the loan to
everyone.

12. TERMS OF CREDIT
 The procedure to be completed while taking loan
 Documentation Requirements: While applying for loan
borrower has to fulfill many different types of documents
such as address proof, id proof, income proof etc.
 Interest Rate: Interest charged on loan varies according to
loan type. That is charged annually.
 Collateral: Collateral is an asset that the borrower owns
(such as land, building, vehicle, live stocks, deposits with
banks) and uses this as a guarantee to a lender until the
loan is repaid.
 Mode of repayment: How the loan can be returned to bank
& in how many days.

13. Credit can have Positive Effect
 Positive Impacts
○ If borrower takes the loan for the
manufacturing purpose to buy raw material,
equipment and after production completed
he/she repays the loan to bank. We can say
that loan is working positive here as his
capacity of production has increased and he is
able to return the loan due the guarantee of
output.

14. Credit can have Negative Effect
 Negative Impacts
○ If borrower takes the loan for agriculture purpose
to buy quality seeds, fertilizer. He puts good
source of irrigation but due to some reasons,
production decreases so he is not able to give the
loan back. Next year he takes loan, same thing
happens and he still fails to repay. So he is debt-
trap as h continues to repay the loan. In this case
loan is working as negative factor due to no
guarantee of output here.

15. TYPES OF CREDIT
Formal Source of Credit Informal Source of credit
1. Loan taken from Banks &
Cooperatives
1. Loan taken from friends, relatives,
money lenders & landlords
2. Charge low interest rate 2. Charge high interest rate
3. No use of unfair practices 3. More use of unfair practices
4. No exploitation of borrowers 4. More exploitation of borrowers
5. Controlled by RBI 5. No control of any legal institution

16. FUNCTIONS OF - RBI
 Regulate the entire banking system in India
 RBI is called the Creator, Operator and Destroyer of
the banking system in India
 Printing of Currency
 Finalizing the percentage of cash balance with the
bank
 Check the documents of the each bank ON regular
basis
 See that bank gives the loan to each and every one,
not only the profit-making business and traders

17. NEED OF CHEAP CREDIT
 It is said that cheap and affordable credit is crucial for the development of
the country. Examples are as follow:
 Unemployed Person: If unemployed person is provided with loan on less
interest, if could start his own business or job and earn some amount
from that. In future he could not only increase his own income but help to
generate more employment.
 Farmer: The farmer who could do the agriculture only during rainy
season is give loan to buy irrigation facilities. Now he is able to cultivate
during winter as well as summer. With cheap credit he I has increased
his production and helped to remove seasonal unemployment.
 Businessman: If any businessman or industrialist is provided with loan,
he can start his new venture. That will help to increase his income and
by creating more new jobs he can help to grow national GDP also

18. RURAL CREDIT
 In rural area still, informal source of credit has the largest share.
The reasons are as follow:
 Availability: After 70 years of independent, still any our country many villages
don’t have cooperatives and banks. As formal source of credit is not available
poor people have left with no choice but approaching to informal source of
credit.
 Documents: To get the loan from formal sources, person as to complete
different types of papers and most the people in rural area are illiterate.
 Time Consuming: The procedure of taking loan from formal sources is time
consuming and farmers wait for monsoon and they need loan to purchase
seeds. At informal sources they get loan faster.
 Familiars: Money lenders are local people and well known people of that rural
area. Even borrowers are known to them. But the banks are outsider.

19. SELF-HELP GROUPS
 15 to 20 members especially women, from neighborhood come
together and save some of the amount from their weekly income and
submit with the group.
 As money is collected, they start giving loans to members charging
them low interest rate and loan is given without collateral. Decision
regarding loan lies with the members of the group.
 After a year or two, if the group is regular in savings, it becomes eligible
for availing loan from the bank. This provides them opportunity to start
their own business and make themselves economically independent.
 Moreover, SHGs are the building blocks of organization of the rural
poor. Not only does it help women to become financially self-reliant, 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.

20. Grameen Bank of Bangladesh
 Project started by Muhammad Yunus in 1970,
for reaching the poor to fulfil their credit
requirements. He believed that if poor are
given loan, they could improve their economic
status.
 By 2014, this bank has already reached to
8.63 million members and 81,390 villages in
Bangladesh and customers are especially
women. For this work, he was awarded with
Noble Prize for Peace

21. Tips to study Economics
 Focus more on understanding than
mugging up.
 Don’t forget to read ‘Sources for
Information’.
 Keep solving the questions from ‘Let’s
Work These Out’.

22. THANK YOU
&
BEST OF LUCK