Answer the following questions
Q 1. Give the meaning and functions of money.
Ans.Meaning of money: Money may be anything chosen by common consent as a medium of exchange and measure of value.
Functions of money:
I. Primary functions:
a Medium of exchange
a Medium of exchange
b Medium of value
II. Secondary functions:
III.Other functions
a.Basis of credit
b Liquidity
c.Maximum utilization of resources.
d.Distribution of National Income
b Liquidity
c.Maximum utilization of resources.
d.Distribution of National Income
Q 2. What monetary system does India follow?
1.India has adopted a representative paper currency in the form of rupee.
2.The monetary standard is synonymous with the standard money adopted.
3.Paper currency in India is used to settle debts and make payments against all transactions.
4.RBI (The Reserve Bank of India) issues all currency notes and coins except one rupee notes and coins which are issued by the ministry of finance.
5.The system governing note issues the minimum reserve system that is certain quantity of gold is kept in reserve.
Q 3. What is Banking? Give the main features of Commercial Banking.
Ans. Banking is defined as the accepting of deposits for the purpose of lending or investment of deposited money by the public, repayable on demand or otherwise and withdrawal by cheque, draft order or otherwise.
Main features of Commercial Banking are:
(i) It deals with money, it accepts deposits and advances loans.
(ii) It also deals with credit, it has the power to create credit.
(iii) It is a commercial institution, whose aim is to earn profit.
(iv) It is a unique financial institution that creates demand.
(v) It deals with the general public.
4. Highlight the formal and informal credit sources in India.
(A) Formal credit sources
1.Commercial Banks
1.Commercial Banks
2.Central Bank
3.Government Agency
4. LIC
5.Cooperatives
(B) Informal credit sources
Local moneylender
Local moneylender
1.Village mahajan and sarafs or gold smiths in the rural areas or in the cities.
2.Land lords: this class include the big, middle and small category land-lords. They accept as collateral, title
documents of agricultural land, dwelling unit, factories and issue loans to needy persons and companies.
3.Friends or relatives
2.Land lords: this class include the big, middle and small category land-lords. They accept as collateral, title
documents of agricultural land, dwelling unit, factories and issue loans to needy persons and companies.
3.Friends or relatives
5. What are main functions of Reserve Bank of India?
1.In India, the Reserve Bank of India issues currency notes on behalf of the central government.
1.In India, the Reserve Bank of India issues currency notes on behalf of the central government.
2.The Reserve Bank of India supervises the functioning of formal sources of loans.
3.The RBI monitors that the banks maintain the minimum cash balance.
4.The RBI sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, to small borrowers etc.
5.Periodically, banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate, etc.
Q 6. What are Self Help Groups?
1.A SHG has 15-20 members belonging to one neighbour hood, who meet and save regularly.
2.Saving per member varies from Rs 25 to Rs 100 or more, depending on the ability of the people to save.
3.Members can take small loans from the group itself to meet their
needs.
4.The group charges interest on these loans but this is still less than
what the moneylender charges.
5.After a year or two, if the group is regular in savings, it becomes eligible for availing loan from the bank.
6.Loan is sanctioned in the name of the group and is meant to create self employment opportunities for the members.
7.Small loans are provided to the members
a. for releasing mortgaged land,
b.for meeting working capital needs such as buying seeds,fertilisers, raw materials like bamboo and cloth etc
c.for housing materials, for acquiring assets like sewing machine, handlooms, cattle, etc.
8.Most of the important decisions regarding the savings and loan activities are taken by the group members.
9.The group decides abut the loans to be granted — the purpose, amount, interest to be charged, repayment schedule etc and it is the group which is responsible for the repayment of the loan.
10.Any case of non repayment of loan by any one member is followed up seriously by other members in the group.
11.Because of this feature, banks are willing to lend to the poor women when organised in SHGs, even though they have no collateral as such.Thus, the SHGs help borrowers overcome the problem of lack of collateral.
12.They can get timely loans for a variety of purposes and at a
reasonable interest rate.
13. SHGs are the building blocks of organisation of the rural poor:-
a.Not only does it help women to become financially self-reliant,
b.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.
Q 8.Why transactions are made in money?
1.Transactions are made in money because a person with money can easily exchange it for any commodity or service that he or she might want.
2.Thus everyone prefers to receive payments in money and then
exchange the money for things that they want.
Q 6. What are Self Help Groups?
1.A SHG has 15-20 members belonging to one neighbour hood, who meet and save regularly.
2.Saving per member varies from Rs 25 to Rs 100 or more, depending on the ability of the people to save.
3.Members can take small loans from the group itself to meet their
needs.
4.The group charges interest on these loans but this is still less than
what the moneylender charges.
5.After a year or two, if the group is regular in savings, it becomes eligible for availing loan from the bank.
6.Loan is sanctioned in the name of the group and is meant to create self employment opportunities for the members.
7.Small loans are provided to the members
a. for releasing mortgaged land,
b.for meeting working capital needs such as buying seeds,fertilisers, raw materials like bamboo and cloth etc
c.for housing materials, for acquiring assets like sewing machine, handlooms, cattle, etc.
8.Most of the important decisions regarding the savings and loan activities are taken by the group members.
9.The group decides abut the loans to be granted — the purpose, amount, interest to be charged, repayment schedule etc and it is the group which is responsible for the repayment of the loan.
10.Any case of non repayment of loan by any one member is followed up seriously by other members in the group.
11.Because of this feature, banks are willing to lend to the poor women when organised in SHGs, even though they have no collateral as such.Thus, the SHGs help borrowers overcome the problem of lack of collateral.
12.They can get timely loans for a variety of purposes and at a
reasonable interest rate.
13. SHGs are the building blocks of organisation of the rural poor:-
a.Not only does it help women to become financially self-reliant,
b.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.
Q 7. In situations with high risks, credit might create further problems for the
borrower. Explain.
1.In
situations with high risks, credit might create further problems for the
borrower because
2.Taking credit involves an
interest rate on the loan and if this is not paid back then the borrower is
forced to give up his collateral or other assets used as the guarantee, to the lender.
3.Therefore in such situations with high risks, the risks effect a borrower badly and he ends up losing more.
4.Thus borrower should try to avoid taking loans.
Q 8.Why transactions are made in money?
1.Transactions are made in money because a person with money can easily exchange it for any commodity or service that he or she might want.
2.Thus everyone prefers to receive payments in money and then
exchange the money for things that they want.
No comments:
Post a Comment