What is Money?
When both parties have to agree to sell and buy each others commodities this is known as Double coincidence of wants. Once he has exchanged his goods for money, he can purchase other goods in market. Since money as an intermediate in the exchange process. It is called a medium of exchange .
A recognized form of exchange can be a form of money or currency, a commodity like gold, or financial capital. To act as a store of value, these forms must be able to be saved and retrieved at a later time, and be predictably useful when retrieved.
Barter System
FORMS OF MONEY
Grains and Cattles, Metallic Coins —Gold, Silver and Copper
Paper Notes, Coins
It is not made of precious metals as Gold, Silver, and Copper. It is accepted as a medium of exchange because the currency is authorized by the Govt. Of India. I ndia.
The Reserve
Bank
of
India (RBI) RBI)
is
India's central
banking institution, which controls the monetary policy of the Indian rupee. It was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. The RBI plays an important
part
in
the
development
strategy
of
the Government of India. It is a member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member-strong Central Board Subbarao).
of
Directors—the Governor (currently Duvvuri
Demand Deposits
Loan Activities of Banks Banks keep only a small proportion of their deposits as cash with themselves. Banks use the major portion of the deposit to extend loans. Banks mediate between those have surplus funds and those who are in need of these funds. Banks charge a higher interest rate on loans than what they offer on deposits.
CREDIT
Credit refers to an agreement in which lender supplies the borrowers with money, goods, and services in return for the promise of future payments. 1)
Role of Credit
Whether credit will be useful or not depends upon the risks in the situation & on whether there is some support, in case of loss. loss. In the rural areas the main demand for the credit is for the crop production. Crop production involves considerable cost on seeds, fertilizers, pesticides, water, electricity, repair of equipment equipment etc. Farmers usually take crop loans at the beginning of the season and repay loan after harvest. Repayment of the loan is dependent on the income from farming. Sometimes repayment of the loan becomes difficult and credit instead of improving the earnings, pushes the borrower into a situation from which recovery is difficult. This situation is called 2)
Terms Of Credit Interest rate
Collateral Documentation Documentation requirement The mode of repayment
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Formal Sources of Credit Commercial Banks, co-operative societies and Regional Rural Banks constitute the formal sector of credit The Reserve Bank of India supervises the functioning of formal sources of loans. They collect low rate of interest. They follow some well defined rules and procedures. Informal Sources of Credit The informal lenders include moneylenders, traders, employers, relatives and friends, etc. There is no organization which supervises the credit activities of lenders in the informal sector. They collect high rate of interest. They do not follow any rules or procedures.
Self Help Groups •
Banks are not present everywhere in rural India. Even they are, getting a loan from bank is much more difficult than taking a loan from the informal sources. In recent years, people have tried out some new ways of providing loans to the poor. SHG is one of them.
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A typical SHG has 15-20 members, usually belonging to one neighborhood, who meet and save regularly. Members can get small amounts as loans from the group. Rate of interest is low and it is decided by the members. After 2 years the group can get loans from the bank.
Importance Of Self-Help Groups •
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Different Sources Of Credit 1%
Landlords 25%
30%
Banks Cooperative Societies Other Relatives & Friends Traders
3% 7%
Money Lender
27% 7%
Dollar Source of Value
Barter System
Old forms of money
unit of account
Modern forms of money
RBI
Cheque
activities of bank loan
Self help group
