NCERT Class 10 Social Science Economics Solutions: Chapter 3-Money and Credit Part 2 (For CBSE, ICSE, IAS, NET, NRA 2023)

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NCERT Class 10 Economics Chapter 3: Money and Credit (CRR, SLR & Repo Rate)

Question 6:

What is the basic idea behind the SHGs for the poor? Explain in your own words.

Answer:

The basic behind the SHGs is to provide a financial resource for the poor through organizing the rural poor especially women, into small Self Help Groups. They also provide timely loans at a responsible interest rate without collateral.

Thus, the main objectives of the SHGs are:

  • To organize rural poor especially women into small Sell Help Groups.
  • To collect savings of their members.
  • To provide loans without collateral.
  • To provide timely loans for a variety of purposes.
  • To provide loans at responsible rate of interest and easy terms.
  • Provide platform to discuss and act on a variety of social issues such education, health, nutrition, domestic violence etc.
Image Result for a SHGs for the Poor

Question 7:

What are the reasons why the banks might not be willing to lend to certain borrowers?

Answer:

The banks might not be willing to lend certain borrowers due to the following reasons.

  • Banks require proper documents and collateral as security against loans. Some persons fail to meet these requirements.
  • The borrowers who have not repaid previous loans, the banks might not be willing to lend them further.
  • The banks might not be willing to lend those entrepreneurs who are going to invest in the business with high risks.
  • One of the principle objectives of a bank is to earn more profits after meeting a number of expenses. For this purpose it has to adopt judicious loan and investment policies which ensure fair and stable return on the funds.

Question 8:

In what ways does the Reserve Bank of India supervise the functions of Banks? Why is this necessary?

Answer:

The Reserve Bank of India supervises the functions of banks in a number of ways:

  • The commercial banks are required to hold part of their cash reserves with their RBI. RBI ensures that the banks maintain a minimum cash balance out of the deposits they receive.
  • RBI observes that the banks give loans not just to profit making businesses and traders but also to small cultivators, small scale industries, small borrowers etc.
  • The commercial banks have to submit information to the RBI on how much they are lending, to whom, at what interest rate etc.

This is necessary to ensure equality in the economy of the country and protect especially small depositors, farmers, small scale industries, small borrowers etc. In this process RBI also acts as the lender of the last resort to the banks.

Question 9:

Analyse the role of credit for development.

Answer:

Cheap and affordable credit plays a crucial role for the country՚s development. There is a huge demand for loans for various economic activities. The credit helps people to meet the ongoing expenses of production and thereby develop their business. Many people could then borrow for a variety of different needs. They could grow crops, do business, set up industries etc. In this way credit plays a vital role in the development of a country.

Question 10:

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

Answer:

Manav will decide whether to borrow from the bank or the money lender on the basis of the following terms of credit:

  • Rate of interest
  • Requirements availability of collateral and documentation required by banker.
  • Mode of repayment.
  • Depending on these factors and of course, easier terms of repayment. Manav has to decide whether he has to borrow from the bank or the moneylender.