Ans: (a)
The cheque number is a unique identifier for a specific cheque, typically found at the top right corner of the cheque. In the given options, the correct cheque number is (a) 362255, as it matches the format and position usually found on a cheque. The other options either have too many digits or do not fit the typical cheque numbering format.
Q2: Which one of the following banks in India controls the issuance of currency and regulates the credit system in the country? (CBSE 2024)
(a) Punjab National Bank
(b) Indian Bank
(c) Reserve Bank of India
(d) State Bank of India
Ans: (c)
The Reserve Bank of India (RBI) is the central bank of India, responsible for issuing currency and regulating the country's credit system. It manages monetary policy and ensures financial stability, making option (c) the correct answer. The other banks listed are commercial banks that operate under the regulations set by the RBI.
Q3: Explain the role of `Self Help Groups' in the rural society. (CBSE 2024)
Ans: The role of self help groups in a rural society/ economyis as follows:
(1) They organise rural poor, in particular women, into small Self Help Groups to pool their savings.
(2) Self-help groups provide a platform for the rural poor to interchange thoughts, ideas and opinions about various domestic and regional issues.
(3) It inculcates the habit of saving and investing.
(4) It also becomes a medium to borrow cheap loans easily from local banks. Loan is sanctioned in the name of the group and is meant to create self-employment opportunities for the members.
(5) It develops the power of decision-making and develops political and social opinion among the members.
Ans: Banks play an important role regarding the money they accept from the public
Q5: Explain any three functions of the Reserve Bank of India. (2023, Al 2019)
Ans: The Reserve Bank of India has many important roles that affect the common public:
Q6: "Cheap and affordable credit is crucial for the country’s development’.” Justify the statement. (CBSE 2023)
Ans: Cheap and affordable credit is crucial for a country's development due to the following factors:
Q7: Justify the role of 'Self Help Groups’ in the rural economy. (CBSE 2023)
Ans: (i) SHGs have emerged as building blocks of the rural poor as it is the group as a whole which is responsible of the repayment of the loan. In case of non-repayment, it is taken up in a serious manner by the group members.
(ii) The SHGs are organisations of the rural poor people especially women. They provide small loans on reasonable rates.
(iii) The members of SHGs pool their savings and take loans at nominal rates of interests.
(iv) This creates self employment opportunities for the members particularly rural poor women.
(v) The SHGs help poor borrov/ers to overcome the problem of lack of collateral.
Ans: A person holding money can easily exchange it for any commodity or service that he or she might want. Thus, everyone prefers to receive payments in money and then exchange the money for things that they want.
Q9: How does a bank work as a key component of the financial system? Explain. (Term-II, 2021-22)
Ans: Banks mediate between those v/ho have surplus funds (the depositors) and those who are in need of these funds (the borrowers). People need small amount of money for their day-to-day needs and deposit the surplus amount in the bank. Bank accepts the deposit and also pay an amount of interest on the deposits. In this way people’s money is safe and earns an amount as an interest.
Bank use the major portion of the deposits to meet the loan requirements of the people.
Q10: Analyse the situation in which credit pushes the borrower into a situation from which recovery is painful. (Term-II, 2021-22)
Ans: Bank usually refered as a formal source of credit and in some situations the borrower would not able to repay loan. This pushes them in the situation of dept trap. Example:
(i) In case of rural areas if crop fails due to natural factors it will be difficult for the farmers to pay loan.
(ii) In case of failure of a business. It will be difficult for the businessman to repay the credit.
(iii) In case of informal sector, rate of interest is very high. If due to crop failure previous loan is not repaid interest rate further mounts.
(iv) In case of high risk activities failure without some support can push borrower in painful situation.
(v) In many cases people has to sell their land and fixed assets to repay loan.
Q11: Explain with an example the role of credit for development. (Term-ll, 2021-22)
Ans: ‘Credit’ refers to an agreement in which the lender supplies the borrowers with money, goods or services in return for the promise of future payment. Credit plays vital role for development in different ways as:
(i) Credit helps people from all walks of life in setting up their business, increase their income and support their families.
(ii) To some people loan helps a lot in constructing their houses and get relief from monthly rent, to others it helps a lot in raising their standards of living.
(iii) Example of Salim: The credit helps him and he is able to meet the ongoing expenses of production, complete production on time and thereby increase his earning. 38. Banks play an important role in the economic development of the country.
(i) Capital formation : Banks offer very attractive schemes to attract the people to save their money with them and organised money market.
(ii) They mobilize the small savings of the people through their branches and make it available for productive purposes.
(iii) Credit creation leads to increased production, employment and caused faster economic development.
(iv) The banks help in the development of different type of industries by extending loans to concern persons.
(v) It ensures full utilisation of resources.
Q12: Read the following source and answer the questions that follow: (Term-II,2021-22)
A House Loan
Megha has taken a loan of Rs. 5 lakhs from the bank to purchase a house. The annual interest rate on the loan is 12 per cent and the loan is to be repaid in 10 years in monthly installments. Megha had to submit to the bank, documents showing her employment records and salary before the bank agreed to give her the loan. The bank retained as collateral the papers of the new house, which will be returned to Megha only when she repays the entire loan with interest.
(i) From which source of credit Megha has taken loan?
View AnswerAns: Formal source
(ii) Explain the terms of credit given in the source.
Ans: Terms of credit given in the source are
Document required - Salary slip and employment record.
Interest rate - 2% per annum
Mode of repayment - Monthly instalment
Collateral - New house papers
Q13: Dhananjay is a government employee and belongs to a rich household, whereas Raju is a construction worker and comes from a poor rural household. Both are in need and wish to take a loan. Create a list of argument explaining who between the two would successfully be able to arrange money from a formal source. Why? (Term-II,2021-22 C, 2016)
Ans: Dhananjay will be able to get a loan from a formal source.
Arguments:
Ans: (a)
The exchange of goods with a commodity is known as "double coincidence of wants." This term means that for a trade to happen, each party must want what the other has to offer at the same time. Therefore, option (a) is the correct answer, as it specifically describes this type of barter system. The other options refer to different types of trade but do not capture this specific concept.
Q15: Which of the following authorities of India issues currency notes on behalf of the Central Government? (2021 C)
(a) The State Bank of India
(b) The Reserve Bank of India
(c) The Allahabad Bank
(d) The Punjab National Bank
Ans: (b)
The Reserve Bank of India (RBI) is the authority responsible for issuing currency notes on behalf of the Central Government. It manages the country's monetary policy and ensures the supply of currency in the economy. Therefore, option (b) is the correct answer, while the other banks listed are commercial banks that do not have this authority.
Q16: "The use of money spans a very large part of our everyday life". Support the statement. (2021 C)
Ans: In everyday lives, we use money to fulfill our requirement in different ways:
(i) To buy goods and services like in market, money can be used to buy clothes, vegetables etc.
(ii) To deposit in banks so that money can be saved and used for future use. For example : If a labourer deposits his monthly salary in his bank account, then, he can use it in installments during the entire month.
(iii) As a store value. For instance, we cannot store perishable goods like milk, grain etc. to exchange; but v/e can keep money for future use.
Ans: Demand deposits are considered as money because:
Q18: Read the information given below and select the correct option. (2020 C)
Rohan has taken a loan of Rs.5 lakhs from the bank to purchase a house on 12% rate of interest. He has to submit papers of new house and salary record to the bank. What is this process called as?
(a) Interest Rate
(b) Collateral
(c) Principal Amount
(d) Installments
Ans: (b)
The process described is called "collateral," which refers to the assets (like the house Rohan is purchasing) that a borrower offers to the bank as security for a loan. If Rohan fails to repay the loan, the bank can take possession of the collateral. Therefore, option (b) is the correct answer, while the other options refer to different aspects of loans and interest.
Q19: Krishna is working in a neighbouring field with very less wages. Expenses on sudden illnesses or functions in the family are also met through loans. The landowner charges an interest rate of 5 per cent per month. At present she owes the landowner Rs. 5,000.
Analyse the credit arrangements given above. (CBSE 2020)
Ans: Credit arrangement-informal sources of credit / No intervention of government in controlling the credit activities carried out by informal sources.
Q20: Why do lenders ask for collateral while lending? Explain. (CBSE 2020)
Ans: Lenders ask for collateral while lending because:
Q21: "The Reserve Bank of India supervises the functioning of formal sources of loans." Support the statement with examples. (2020)
Ans: The Reserve Bank of India (RBI) supervises the functioning of formal sources of loans in the following ways:
Q22: "Bank plays an important role in the economic development of the country”. Support the statement with an example. (2020)
Ans: Banks play an important role in the economic development of the country.
(i) Capital formation : Banks offer very attractive schemes to attract the people to save their money with them and organised money market.
(ii) They mobilize the small savings of the people through their branches and make it available for productive purposes.
(iii) Credit creation leads to increased production, employment and caused faster economic development.
(iv) The banks help in the development of different type of industries by extending loans to concern persons.
(v) It ensures full utilisation of resources.
Q23: “Credit sometimes pushes the borrower into a situation from which recovery is very painful”. Support the statement with examples. (2020)
Ans: (i) In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilisers, pesticides, water, electricity, repair of equipment, etc.
(ii) There is a minimum stretch of three to four months between the time when the farmers buy these inputs and when they sell the crop.
(iii) Farmers usually take crop loans at the beginning of the season and repay the loan after harvest.
(iv) Repayment of the loan is crucially dependent on the income from farming.
(v) Example of credit which is painful for a borrower: A farmer picks up the loan from a money lender to meet the expenses of cultivation. But unfortunately crops hit by the pests and fails. So, he is unable to repay the loan and ; debt grows larger with interest. Next year, he picks up a fresh loan and is able to have a normal crop that year. But earnings are not enough to pay the earlier loan. He can repay the loan, only after selling a part of the land. So we can say that "Credit sometimes pushes the borrower into a situation from which recovery is very painful”.
Q24: Self-Help Groups are the building blocks of organisation of the rural poor. Suggest any three ways to make them popular for social issues. (2020 C)
Ans: Ways to make SHGs popular for social issues:
Ans: Demand deposits are considered as money, because they can be withdrawn when required and the money withdrawn can be used for making payments. So, they are also considered as money in the modern economy.
Q26: How is 'double coincidence of wants' not appreciable in the contemporary scenario? (CBSE 2019)
Ans: For double coincidence of wants to work out, an individual must require what the other person is willing to give away and vice-versa. If this situation is not reached exchange of goods does not happen. This problem is eliminated by the use of money.
Q27: Why is money called a medium of exchange? (AI2019)
OR
How does money act as medium of exchange? (2015)
Ans: Money acts as an intermediate in the transaction and the exchange process . We can buy things with the help of money.
Q28: Describe the bad effects of informal sources of credit on borrowers. (Delhi 2019)
Ans: The informal sector consists of money lenders, traders, employers, friends, relatives, merchants, and landlords. There is no organization that supervises the credit activities of lenders in the informal sector.
Q29: Explain the three important terms of credit. (CBSE 2019)
Ans: The three important terms of credit are:
Q30: Describe the vital and positive role of credit with examples. (2019, Delhi 2016)
Ans: 'Credit' refers to an agreement in which the lender supplies the borrower with money to buy, goods or services in return for the promise of future payment. Credit plays a vital and positive role a s :
(i) Credit helps people from all walks of life in setting up their busiess, increases their income and support their families.
(ii) To some people loan helps in constructing their houses and get relief from monthly rent.
(iii) To other it helps in raising their living standards,
(iv) Example :Sheela has joined a job. She has taken a loan to buy a scooty that she can attend office conveniently and build a career. Without the loan she would have to travel in bus which takes more time. Thus she would not be able to attend evening classes.
Q31: Describe the importance of formal sources of credit in economic development. (Delhi 2019)
Ans: The formal source of credit comprises of banks and cooperative societies. The Reserve Bank of India supervises the functioning of formal sources of loans.
The importance of formal sources of credit in economic development are:
Q32: Give one example each of modern currency and older currency. (CBSE 2019)
Ans: Examples of modern currency are paper bills/notes, coins, credit cards etc., whereas examples of older currency are coins made of precious metals like gold or silver, terracotta coins, etc.
Q33: Examine any three situations in which credit helps in the development of agriculturists. (CBSE 2019)
Ans: Credit helps in the development of agriculturists:
(1) The credit helps him to meet the ongoing expenses of production.
(2) It helps in purchasing raw material and equipment.
(3) It helps in irrigation.
Q34: Examine any three situations in which credit pushes the borrower into a debt-trap. (CBSE 2019)
Ans: Credit leads borrowers into debt traps in these situations:
(1) Loans from informal sector could lead to debt trap.
(2) Lack of planning results in debt.
(3) Difficulty in repaying loans due to certain circumstances.
Q35: Why do banks and cooperative societies need to lend more? Explain. (CBSE 2019)
Ans: Banks and cooperatives should increase their lending in rural areas because:
(1) India largely depends on agriculture for export revenues. Farmers and agricultural workers in rural areas deserve special attention as they lack capital and resources to invest in their work.
(2) Most of the people in rural areas are illiterate and informal money lenders exploit and cheat them for their benefit. People need a reliable source for credit.
(3) Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers.
(4) Banks and co-operative societies provide loans to the rural households at cheap rates and are backed by the government, which helps them boost their income. Incentives are also given to farmers for quick repayment.
(5) Most of the people in urban areas depend upon the rural people for their food and raw material requirements. For better production and to boost their income sources, easy credit is required.
Ans: Two examples of the informal sector of credit are moneylenders and relatives/friends who provide loans.
Ans:
Q38: "Banks are an efficient medium of exchange." Support the statement with arguments. (Delhi 2017)
Ans:
Q39: Illustrate with examples the role of 'loan' in 'business'. (Foreign 2017)
Ans: Loan or credit plays a crucial role in business. By sanctioning loans to developing industries and trade, banks provide them with the necessary aid for functioning, developing, and expanding business. This leads to an increase in production, profits, and employment.
For this reason, it is important that the formal sector gives out more loans so that borrowers are not duped by money lenders and can ultimately contribute to national development.
Q40: Review any three merits and any two demerits of 'Formal sector of credit' in India. (Foreign 2017)
Ans: Merits of the formal sector of credit in India:
Demerits of the formal sector of credit in India:
Q41: How is money beneficial in transactions? (Foreign 2017)
Ans: Money is beneficial in transactions because it eliminates the inconvenience of the double coincidence of wants. In a barter system, individuals would have to find someone who has what they want and is willing to accept what they have to offer in exchange. This can be inefficient and time-consuming. However, with the introduction of money, people can simply exchange their goods or services for money and then use that money to purchase whatever they desire from anyone willing to accept it. Money provides a common medium of exchange that simplifies and accelerates transactions.
Q42: Explain the inherent problem of the ‘barter system’. (CBSE 2017, 15)
Ans: The inherent problem of the barter system is that it is not necessary that when one person is willing to exchange his/her goods, the person he/she wants to exchange with is also willing to do the same.
Q43: Why is it necessary that banks and cooperatives increase their lending in rural areas? Explain. (CBSE 2017)
Ans: Banks and cooperatives should increase their lending in rural areas because:
(1) India largely depends on agriculture for export revenues. Farmers and agricultural workers in rural areas deserve special attention as they lack capital and resources to invest in their work.
(2) Most of the people in rural areas are illiterate and informal money lenders exploit and cheat them for their benefit. People need a reliable source for credit.
(3) Most loans from informal lenders carry a very high interest rate and do little to increase the income of the borrowers.
(4) Banks and co-operative societies provide loans to the rural households at cheap rates and are backed by the government, which helps them boost their income. Incentives are also given to farmers for quick repayment.
(5) Most of the people in urban areas depend upon the rural people for their food and raw material requirements. For better production and to boost their income sources, easy credit is required
Ans: One cannot refuse a payment made in rupees in India because the Indian rupee is the authorized and accepted medium of exchange in the country. The Government of India has established the Indian rupee as the official currency, and it is legally recognized as a valid form of payment. Therefore, individuals and businesses are required to accept payments made in rupees, and refusal to do so would be in violation of the accepted legal tender.
Q45: How does money eliminate the need for double coincidence? (2016)
Ans: Money eliminates the need for double coincidence by providing a crucial intermediate step in transactions. In a barter system, individuals would have to find someone who not only wants what they have to offer but also has what they desire in return. This double coincidence can be challenging to achieve. However, with the introduction of money, individuals can simply sell their goods or services for money and then use that money to purchase any other desired commodity available in the market. Money acts as a universally accepted medium of exchange, allowing individuals to acquire what they need without the requirement of a direct match between their wants and the wants of others.
Q46: How do the deposits with banks become their source of income? (CBSE 2016)
Ans: When we deposit our money in the bank we get an interest on it. However the bank uses that money to give loan to people. The bank charges an interest on its loan at a higher rate than what is paid to the depositors. Thus, the banks earn money from the deposits.
Q47: Why do banks maintain cash reserve? (2016)
Ans: Banks maintain cash reserve to ensure smooth daily withdrawal by depositors.
Q48: Prove with an argument that there is a great need to expand formal sources of credit in rural India. (2016)
Ans: The expansion of formal sources of credit in rural India is crucial because it ensures that the rural poor have access to credit at reasonable interest rates. This helps them meet their financial needs without falling into the trap of high-interest informal loans. Additionally, formal sources of credit provide better regulation and supervision, ensuring fair lending practices.
Q49: Why is the supervision of the functioning of formal sources of loans necessary? (2016)
Ans: The supervision of formal sources of loans is necessary to ensure that these institutions provide loans not only to the rich but also to the poor. It helps in preventing exploitation and ensures that the banks follow the proper procedures and regulations set by the Reserve Bank of India (RBI).
Q50: Why do farmers require credit? (CBSE 2016)
Ans: Farmers require credit to finance their agricultural activities. This credit is used to purchase agricultural inputs such as seeds, fertilizers, pesticides, and machinery. It helps farmers to manage their expenses and invest in their farming operations for better productivity.
Q51: How can money be used to easily exchange it for goods or services? Give examples to explain. (Delhi 2016)
Ans: Money acts as a medium of exchange itself for goods and services. A person holding money can easily exchange it for any commodity or service that he or she might want. Everyone prefers to receive payments in money and exchange the money for things they want.
For example, a shoemaker wants to sell shoes in the market and buy wheat. The shoemaker will first exchange shoes for money and then exchange the money for wheat. If the shoemaker had to directly exchange shoes for wheat without the use of money, he would have to look for a wheat-growing farmer who not only wants to sell wheat but also wants to buy the shoe in exchange. Both the parties have to agree to sell and buy each other's commodities. This process is very difficult, time-consuming, and unhealthy.
Q52: How is money transferred from one bank account to another bank account? Explain with an example. (Foreign 2016)
Ans: If a person has to make a payment to his or her friend and writes a cheque for a specific amount, this means that the person instructs his bank to pay this amount to his friend. His friend takes this cheque and deposits it in his account in the bank. This said amount is transferred from one bank account to another bank account.
Q53: Mention three points of difference between formal sector and informal sector loans. (2016)
Ans: Formal sector loans:
Informal sector loans:
Q54: How is the concept of Self Help Groups important for poor people? Give your viewpoint. (Foreign 2016)
Ans: Self Help Groups are known as SHGs:
Q55: Poor households still depend on informal sources of credit". Support the statement with examples. (2016)
Ans:
Q56: "The credit activities of the informal sector should be discouraged." Support the statement with arguments. (CBSE 2016)
Ans:
Q57: What are demand deposits? Explain any three features of it. (2016)
Ans: Demand deposits refer to the deposits made by individuals in banks that can be withdrawn on demand.
Three features of demand deposits are:
Q58: How can formal sector loans be made beneficial for poor farmers and workers? Suggest any five measures. (AI 2016)
Ans: Formal sector loans can be made beneficial for poor farmers and workers through the following measures:
Q59: Dhananjay is a Government employee and belongs to a rich household whereas Raju is a construction worker and comes from a poor rural household. Both are in need and wish to take loans. Create a list of arguments explaining who between the two will successfully be able to reach money from a formal source. Why? (CBSE 2016)
Ans: Out of the two, Dhananjay is more likely to lend money from formal sources.
(1) Dhananjay is more educated and rich and hence, he can understand the nuances of credit.
(2) He must have the required documentation.
(3) He must have assets to be submitted as the collateral.
(4) Raju is a poor construction worker. He is not educated enough.
(5) He might not have the required documentation.
(6) He might not have the required asset to be used as a collateral.
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