Money and Credit Class 10 Notes: CBSE | Chapter 3 | Economics

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Money and Credit Class 10 Notes

Introduction of the Money and Credit:- Money and Credit this is chapter 3 of CBSE economics. In Money and Credit notes, we cover every topic from your NCERT book like Limitation of a Barter System, Formal Sector of Credit in India, About Self-Help Groups, Grameen Bank of Bangladesh and so many other topics we cover in Money and Credit class 10 notes. So let’s start the Money and Credit chapter with a simple question: What is Money?


  • It is anything(instrument) that act as mediumof exchange, store of value and unit of accounting to facilitate, e.g. paper notes and coins.
  • In early time under the barter system variety of objects were used as money like grains, cattel, gold, silver, copper coins etc.
  • Feature of money:-
    • Medium of exchange,
    • It help in store of a value,
    • Measure of a value,
    • Transfer of a value,
    • Standard for deferned payment.


  • In India, R.B.I. issue currency notes on behalf of the central government. So, it is thoney supreme instution of India fincial system.
  • No other individuals or organisation is allowed to issue currency.
  • The rupee is widely accepted as a medium of exchange in India cannot be refused in settling transctions in India.
Money and Credit Class 10 Notes
Money and Credit Class 10 Notes

Drawback or Limitation of a Barter system

  • The drawback or limitation of barter system are:-
  • Barter system is a system in which goods are exchange for goods.
  • Double coincidence of wants is not occurs.
  • It is not for store of a value this is biggest problem and not for transfer of a value.
  • It is not standard for deferned payment.

Supplies of Money

  1. RBI(Reserve Bank of India):-
    • RBI(Reserve Bank of India) in 1935. It issue notes.
    • The currency is issued on the basis of Minimum Reserve Policy.
    • Rbi kept with him RS. 200 Crore. In which RS. 115 Crore is present in the form of _ and RS. 85 Crore for the foreign security.
  2. Finance ministry:-
    • It issue all coins and one rupees notes also.
  3. Commercial Banks:-
    • It creates money by its demand deposits.

Modern Form of Money

  • Notes(paper currency)
    • These are legal tenders, these are accepted as medium of exchange. R.B.I. issued notes.
  • Coins
  • Demand deposits
    • Deposit in the bank accounts can be withdrawal on demand by depositors(a person who deposits money in bank), so these deposits are called demand deposits, one important feature of demand deposits is cheque.
  • Cheques
    • It is a paper instructing the bank to pay a specific amount from the person account to the issued person in whose name to cheque has been issued.

Word Meaning:-

When the commodity value is equal to money values is called full-bodied money.
When the commodity value is less than money value is called credit money.
Fiat money is issued on the order of government by RBI.
Fiduciary money is accepted on the basis of trust between the payer and payee like a cheque.

Loan Activities of Banks

  • Banks keep a samll porportion of money as cash with themselves to pay the depositer, who might to withdraw money from the bank on any given day.
  • Bank use the major portion of the depositer to extend loans.
  • In the way bank meditior between these who have surplus funds those who are in need of there funds( the borrowers.)
  • Banks charge a higher interest rate on loans than what they offer the deposits.
  • The difference between what is charge for borrowers and what is paid to depositor in their main source of income bank.

The rupee is accepted as a medium of exchange. Explain?

  • It is accpeted as a medium of exchange because the currency is authorised by the government of country.
  • In the India, the R.B.I. issue the currency notes an behalf of the central government fiet is a medium of deferned payment.


  • It is an asset owned by the borrower such as land, building, livestocks, gold etc. which kept with the blank as a guarantee against a plan untile the loan is required.
  • In case of failure in repaying the loan,the bank would have the right to sell the collateral to recover the loan amount.
debt trap
Debt Trap

Debt Trap

  • It is a situation in which a person is caught in the vicious cycle of debt or debt is an amount of money borrowed by one party to another and a debt trap is a situation in which a debt is difficult or impossible to repay.
  • He/she takes a loan for meeting his/her requirement and on beings unable to pay back the loan, take a fresh loan to repay the old loan.
  • This leaves him/her indebted all through his/her life.


  • Credit is an agreement that 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 credits situation:-
  • First situation:-
    • In the first situation a person narrows money for production activities with the promise to repay the loan at the end of the year when production work will be complete at the end of the year, he makes a good profit from the production activities and he is able to pay the amount of loan. Therefore, that person becomes better off than before.
  • Second situation:-
    • On the other hand, a person is unable to pay the loan due to the loss in the production, for this term he/she comes under the situation of debt. Therefore, the person becomes worse off than before.

Terms of Credit

  • Interest rate, collateral and documentation requirement and the mode of repayment together comprise is called term of credit.
  • Terms of credit:-
    • Loan amount
    • Duration of loan
    • Documentation requirement
    • Collateral(security)
    • Interest rate
    • Mode of repayment.

Formal Sector of Credit in India

  1. This sector authorized by the government.
  2. Example Books, cooperatives, financial institution.
  3. Documentation required when they give credit.
  4. In this sector collateral requires.
  5. Take moderate interest rate.
  6. The main objective of this sector is earning profit and doing social welfare.
  7. Terms of credit is fair and goods.
  8. And they are supervised by RBI.

Informal Sector of Credit in India

  1. This sector is not authorize by government.
  2. Example relatives, friends, trade money lenders.
  3. Documentation not required when they give credit.
  4. Collateral is not requires.
  5. Takes high interest rate.
  6. The main objective is to earning more and more profit.
  7. Unreasonable terms of credit.
  8. And they are not supervised by anyone.

Reason for dependence on informal sector for credit. Explain

  • Banks are not available everywhere. Getting loans from bank is very difficult but easy from informal sector. In this sector no needs of documents. In this sectors no needs of collateral. Source of credit per Rs. 1000 of rural household in India in 2012. Other non-institutional agencies – 2%, Relatives and friends – 8%, Government – 1%, Land Lord – 1%.
  • Self-help groups for the poor.
  • Facilities of banks are not available all rural areas. So, the poor are depend on informal sector for borrowing loan.
  • The poor have to pay a high rate of interest to the money lenders.
  • It is difficult to borrow loan form bank because of the absence of the bank collateral and documents.
  • Informal lenders like money lenders are often willing to give a loan without collateral because they personally knew the borrowers.

Self Help Groups

Self Help Groups

  • An organisation constituted to collect the saving of the poor, which is known as self-help gourps.
  • The aim of the organisation is to lend loan at less rate of interest compared to the money lenders.
  • A self help groups has 15-20 members. Saving vary from members to members e.g. Rs. 25 to 100 depending on the ability of the person to save.
  • The organisation also provide self-employment opportunity.
  • For example: Small loan are provided to the members for releasing mortgaged land, for meeting working capital needs for housing materials etc.
  • There is also a group for repayment of loan.
  • In case of any non-repayment by the one member is followed by the other members of the organisation.

Importance of Self Help Groups

  • The Self-help borrowers overcome the problem of lack of collateral.
  • They can get timely loans for a variety of purpose and at a reasonable interest rate.
  • Self-help groups are the building blocks of organisation of the rural areas poor.
  • Self-help groups also help women to become financial self-reliant.
  • The regular meetings of the groups provides platform to discuss and act on a variety social issues such as health, nutrition, domestic violence etc.

Grameen Bank of Bangladesh

  • Grameen Bank of Bangladesh is one of the biggest success stories in reaching the poor to meet their credit need at reasonable.
  • It is founded by Professor Muhammad Yunus.
  • He receive noble prize for peace in 2006 and this bank is started in the 1970s as a small project.
  • Grameen Bank in October 2014 has over 8.63 million members in about 81,390 villages spread across Bangladesh.
  • Almost all the borrowers are women and belong to poorest sections of society.

About- Money and Credit Class 10 Notes

In Money and Credit Class 10 Notes, we read about Currency, Money, Barter System, Self Help Groups, Grameen Bank of Bangladesh, Debt Trap and so many other topics we read in Money and Credit class 10 notes. So if you like Money and Credit class 10 economic chapter, so please give your valuable feedback in the comment box(below).

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