CBSE Class 10 Social Science Economics Revision Notes Chapter 3

CBSE Class 10 Economics Chapter 3 Notes – Money and Credit

The Class 10 Economics Chapter 3 Notes are designed for the students preparing for the board examination. All the important questions and topics are included as per the official CBSE guidelines. Extramarks recommends that students should read the revision notes with NCERT Books to score well in the examination. One can access several study materials such as CBSE sample papers, CBSE previous year question papers, CBSE extra questions, including many more from the website of Extramarks to prepare for the board examination. 

CBSE Class 10 Social Science Economics Revision Notes for the Year 2022-23

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Access Class 10 Economics Chapter 3 – Money and Credit

Money as a Medium of Exchange

Candidates studying from Class 10 Economics Chapter 3 Notes will be able to understand that money can be termed as a medium of exchange, as it operates as an intermediate in the exchange of goods and services among people. 

Modern Forms of Money

After accessing the Class 10 Chapter 3 Economics Notes, candidates will get to know that grains and cattle were used in earlier times as a mode of exchange by Indians. In later periods, coins of copper, gold and silver were used in the exchange procedures. In today’s time, people use currency paper notes and coins to purchase goods and services. In addition, one can withdraw or deposit money for various purposes in the banking system. 

Loan Activities of Banks

• Banks are considered one of the most important financial assets in India. The country maintains approximately 15% of the deposits in cash in banks. These cash deposits are reserved for the people who may come back to withdraw their money. 
• Most of the cash received from the banks is extended as loans by the banks. Users use loans to perform several business activities. Banks earn money through loans by charging a particular interest rate. 
• The major source of money that banks earn comes from the interest rate on loans. 

Two Different Credit Situations

There are mainly two types of credit situations. They are as follows: 

• In the first case, when a person borrows money, they promise to repay the loan at the end of the year when the work is done and the required money is successfully earned. So the person who has taken the loan is in a better position and can easily repay the debts. 
• In the second case when a person borrows money for various economic activities with a promise of repaying the loan at year-end but he/she is not able to do so due to a financial crisis. Hence, the person who took the loan is in a worse situation and may have difficulty paying for the borrowed money. 

Terms of Credit

Most money lenders want collateral in exchange for the loan. The conditions related to it are as follows: 

• Collateral is considered an asset that a borrower gives such as land, building, properties, vehicle, etc. which the lenders use as a guarantee until the loan is repaid properly. In case the borrower fails to repay the required amount of the loan, the lender has the right to sell the asset or collateral to recover the money. 
• The terms included are interest rate, documentation requirements and collateral. In addition, it requires a particular form of loan repayment. 

 Formal Sector Credit in India

There are many types of loans that can be divided into various categories. They are as follows: 

• Formal sector loans: These loans involve banks and cooperatives. The Reserve Bank of India [RBI] is the official in charge of investigating various activities related to formal loan sources. All the banks should report to RBI disclosing the amounts of the lending, interest rate and other aspects related to the loans. 
• Informal sector loans: The loans from the informal sector include friends, family, employers, traders and moneylenders. There is no regulatory body that looks into the activities of informal lenders. In addition, no activity can stop these informal loan lenders from obtaining their repayment by unethical means. 

Formal and Informal Credit

Formal credit: 

The RBI is the official source of loans that includes bodies such as cooperatives and banks. All the banks should maintain a minimum cash balance and must give loans to small growers, small-scale industries, small borrowers and so on, according to the official guidelines. The actions of the banks are reported to the RBI regularly. 

Informal credit: 

Many examples can be included in informal credit, such as friends, relatives, employers, traders and lenders. There is no formation of any monitoring body that can look closely at the activities of the informal credit practices in society. 

Advantages of Self-Help Group (SHG)

• Frequent meeting of the groups allows the participants to discuss various topics such as domestic violence, health and nutrition. 
• These groups can help women in becoming financially self-sufficient. 
• Self-help groups allow people to receive loans on a schedule and at a fair interest rate for several purposes. 
• They can be the foundation of rural poor organizations. 
• It can help the borrowers in overcoming the issues related to the collateral. 

Important Questions and Answers

Q1. Why are demand deposits considered money? 

• Demand deposits are the type of deposits that can act as a means of exchange, just like money. 
• The individual who needs to be paid receives a check. The check allows the bank to deduct a particular sum of money from the individual issuing the payment from their deposits. 

In the case of a demand deposit, the transaction has occurred without the usage of actual currency. Hence demand deposits are seen as money.

Q2. Why do lenders seek collateral while lending money? 

Lenders may ask for collateral for several reasons. Some of them are as follows: 

• It acts as a guarantee for the loan. 
• In case the borrower fails to repay the loan, the lender can seize the collateral as per the agreement. 

Collateral acts as a guarantee that the loan will be repaid in any of the possible circumstances. 

Money as a Medium of Exchange 

The Modern Form of Money 

Currency

RBI issues currency notes according to the guidelines issued by the Central Government so that people can use them in exchange for goods and services. 

Deposits in Banks

Through the Chapter 3 Economics Class 10 Notes students will be able to get proper concept clearance related to deposits in banks. One can deposit the extra cash in the banks by opening accounts. The banks, in return for deposits, pay interest rates to people. These deposits can be withdrawn according to the requirement and are known as demand deposits. The payment for the same is made through cheque. 

Activities Related to Loan –  

Credit

The CBSE revision notes of Class 10 Chapter 3 will help students in understanding the concepts behind the term credit. It is an agreement in which a lender gives the money, services or other aspects to the borrower in return for the guarantee of future payment. 

Terms of Credit 

Do You Know?

In this section of Class 10, Economics Notes Chapter 3 students will acquire an understanding of different types of loans. The two main types of loans are: 

• Informal sector loans
• Formal sector loans