Notesale: Turn your study into money

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Chapter 3
Money and Credit
 Double Coincidence of Wants
It refers to a situation wherein what a person wishes to sell is exactly the same as that the
other person wishes to buy
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 Money
It is a medium of exchange
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 Forms of Money
 Ancient period: Grain and cattle were used as money
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 Modern period: Paper currency and coins are used as money
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 Money has value because it has got the sanction of the government
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 Bank Deposits
 People deposit their money in banks by opening a bank account
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 The deposited money can be withdrawn from banks as and when required on
demand
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 Bank deposits also facilitate easy transfers of money through cheques, demand drafts
or internet banking
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 Loans
Banks provide loans to people at some interest rate
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 Rest of the cash is extended as loans to those who need it (borrowers) at a specific
rate of interest
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This difference is the main source of income of banks
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to meet the specific requirements of borrowers
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He/she takes loans
for meeting his/her requirements and on being unable to pay back the loan, takes a fresh
loan to repay the old loan
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Collateral
It is an asset owned by the borrower such as land, building, vehicle, livestock etc
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In case of failure in
repaying the loan, the bank would have the right to sell the collateral to recover the loan
amount
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 The members of cooperatives pool their resources in the account of the cooperative
and then extend loans to those in need
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 There are several types of cooperatives such as krishak cooperatives, weaver’s
cooperatives, industrial workers’ cooperatives etc
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 They are not under the control of the RBI
 The rates of interests are exorbitant
 It comprises 48% of the credit in the country
 It is mostly taken by poor rural households
Self-Help Groups
SHGs are small groups of people who pool their savings and lend money to those members
who are in urgent need of money
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The rate of

interest charged on the loan is very low
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These groups are created with the purpose of creating selfemployment opportunities for the members
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 Grameen Bank
 Started in 1970s as a small bank in Bangladesh
 Formed by Professor Mohammad Yunus who was awarded the Nobel Peace Prize in
2006
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com, and
we’ll add it to this note under your name!



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