Money and Credit

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

Access to affordable and low-cost credit plays a pivotal role in a nation’s economic development. The credit landscape can be divided into two sectors: formal and informal. The formal sector comprises institutional lenders such as banks and cooperatives, while the informal sector includes moneylenders, traders, employers, and even friends and family. Formal sector loans typically…

What are the various sources of credit in rural areas? Which one of them is the most dominant source of credit and why?

Several distinct sources of credit exist in rural areas, and they can be categorized into formal and informal sources: 1. Cooperative Societies: These are formal sources of credit, where members pool resources to aid each other. Examples include Farmers’ Cooperatives and Weavers’ Cooperatives. They offer affordable loans to their members, and the repaid loans are…

Explain any three loan activities of banks in India.

Banks in India play a pivotal role in the country’s financial ecosystem by channelling savings into productive investments. Here are three core loan activities undertaken by these institutions: 1. Reserve Maintenance: Banks maintain a fraction of the total deposits as a reserve. This is a precautionary measure to address any immediate withdrawal requests by depositors….

“Banks are efficient medium of exchange.” Support the statement with arguments.

Banks indeed play a vital role as an efficient medium of exchange, facilitating economic activity within a country and globally. The primary function of banks is to mobilize savings and channel them into productive uses, creating a seamless flow of funds from those who have surplus to those in need. Firstly, banks accept deposits from…

Illustrate with examples the role of loan in business.

Loans play a critical role in business for various reasons. It can provide businesses with the financial flexibility to start, grow, manage everyday operations, seize opportunities, and weather unexpected challenges. Here are some short examples to illustrate their significance: 1. Starting a Business: A new entrepreneur may lack the funds to start a business. Taking…

How can money be easily exchanged for goods and services? Give an example to explain.

Money can be easily exchanged for goods and services because it is a universally accepted medium of exchange. When people accept money as a form of payment, they do so with the confidence that they can, in turn, use that money to purchase goods and services they want or need. Example: Imagine you’re a farmer…

Describe the utility of cheque.

A cheque is a widely recognized financial instrument that facilitates non-cash transactions, serving multiple utilities for both individuals and businesses. Here’s an enhanced description of its utility: 1. Secure Mode of Payment: A cheque eliminates the need to carry large amounts of cash, reducing the risk of theft or loss. It provides a safer way…

The credit activities of the informal sector should be discouraged. Support the statement with arguments.

The argument that the credit activities of the informal sector should be discouraged is supported by several compelling reasons: 1. Exorbitant Interest Rates: Unlike the formal sector which is regulated and bound by official interest rate guidelines, the informal sector often charges significantly higher interest rates. This makes borrowing from such sources a costly affair….

Deposits with the banks are beneficial to the depositors as well as to the nation. Examine the statement.

Depositing surplus money in banks serves multiple purposes, catering to both individual and national interests. 1. Security and Assurance for Depositors: By opening a bank account, individuals have a secure place to store their money. Banks, regulated by stringent standards, ensure that depositors’ funds are protected from theft or potential losses. Moreover, most banks offer…