NCERT Class 10 Social Science Economics Solutions: Chapter 3-Money and Credit Part 3

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Question 11:

In India, about 80 percent of farmers are small farmers, who need credit for cultivation.

Why might banks be unwilling to lend to small farmers?

Answer:

Bank loans require proper documents and collateral as security against loans. But most of the times the small farmers lack in providing such documents and collateral Besides, at times they even fad to repair the loan in time because of the uncertainty of the crop. So, banks might be unwilling to lend to small farmers.

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Small Farmers

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What are the other sources from which the small farmers can borrow?

Answer: Apart from bank, the small farmers can borrow from local money lenders, agricultural traders, big landlords, cooperatives, SHGs etc.

Explain with an example how the terms of credit can be unfavorable for the small farmer.

Answer: The terms of credit can be unfavorable for the small farmer which can be explained by the following –

Ramu, a small farmer borrows from a local moneylender at a high rate of interest i.e. 3 percent to grow rice. But the crop is hit by drought and it fails. As a result Ramu has to sell a part of land to repay the loan. Now his condition becomes worse than before.

Suggest some ways by which small farmers can get cheap credit.

Answer:

The small farmers can get cheap credit from the different sources like - Banks, Agricultural Cooperatives, and SHGs

Question 12:

Fill in the blanks:

  1. Majority of the credit needs of the _________households are met from informal sources.

  2. __________costs of borrowing increase the debt-burden.

  3. __________issues currency notes on behalf of the Central Government.

  4. Banks charge a higher interest rate on loans than what they offer on __________.

  5. __________is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

Answer:

  1. Majority of the credit needs of the poor households are met from informal sources.

  2. High costs of borrowing increase the debt-burden.

  3. Reserve Bank of India issues currency notes on behalf of the Central Government.

  4. Banks charge a higher interest rate on loans than what they offer on deposits.

  5. Collateral is an asset that the borrower owns and uses as a guarantee until the loan is repaid to the lender.

Question 13:

Choose the most appropriate answer.

In a SHG most of the decisions regarding savings and loan activities are taken by

  1. Bank.

  2. Members.

  3. Non-government organisation.

Answer:

B. Members.

  1. Formal sources of credit does not include

  2. Banks.

  3. Cooperatives.

  4. Employers.

Answer:

C. Employers.