Test: Money & Credit - 1 - Class 10 MCQ

One of the advantages of Self Help Groups (SHGs) highlighted is that they help women become financially self-reliant. By engaging in group savings and loan activities, women in SHGs can access financial resources, develop financial independence, and participate in economic activities that contribute to their empowerment and self-sufficiency.

Emphasizes that banks and cooperative societies need to lend more to support small borrowers, including small cultivators, small-scale industries, and other individuals in need of credit. By increasing lending to these segments, banks can help raise incomes, enable borrowing at lower interest rates, and facilitate the growth of various economic activities such as agriculture, small-scale industries, and trade. This expanded access to credit can have a positive impact on economic development and financial inclusion.

Collateral refers to an asset owned by the borrower, such as land, building, vehicle, livestock, or deposits with banks, that is offered as security to the lender until the loan is repaid. In the event of loan default, the lender has the right to sell the collateral to recover the outstanding amount. Collateral provides a level of assurance to the lender and reduces the risk associated with lending, making it a common practice in credit agreements.

In rural areas, the predominant demand for credit is often related to crop production. Farmers require credit to cover expenses associated with agricultural activities such as purchasing seeds, fertilizers, pesticides, and other inputs necessary for cultivation. The timing of credit usage is crucial, with farmers typically obtaining loans at the beginning of the season and repaying them after the harvest, highlighting the seasonal nature of agricultural credit needs.

One key recommendation to reduce the dependence on informal sources of credit in India is for banks and cooperatives to increase their lending activities, particularly in rural areas. By expanding formal sector loans, the accessibility of affordable credit can be improved, benefiting individuals who would otherwise resort to informal credit options.

Demand deposits are deposits in bank accounts that can be withdrawn by the account holders at any time they require. This flexibility makes them highly liquid and easily accessible, allowing for transactions to be settled without the need for physical cash.

Banks primarily safeguard deposits and pay interest to depositors. This process ensures the safety of people's money while allowing it to earn interest. Banks play a crucial role in managing deposits and providing the option for withdrawal as needed by the depositors.

The primary source of income for banks is the difference between the interest they charge on loans and the interest they offer on deposits. By charging a higher interest rate on loans than what they pay on deposits, banks earn revenue that contributes significantly to their profitability.

Credit, in the context of a loan, serves the purpose of assisting the borrower in meeting their financial needs by providing money, goods, or services with the agreement of future repayment. It enables individuals like Salim to manage working capital requirements, complete production, and boost earnings. However, as seen in Swapna's case, credit can also lead to adverse outcomes such as being trapped in debt, emphasizing the importance of evaluating risks and support systems when utilizing credit effectively.