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

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

Chapter 3: Money & Credit

Money Versus Barter

  • Barter System – Double coincidence of wants

  • Money – eliminates double coincidence of wants; Medium of EXCHANGE

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Image of Money Versus Barter for Economics

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Forms of Money

  • Currency: Paper notes and coins – authorized by Govt. (India – RBI)

  • Deposit with Banks – to earn interest for extra money; demand deposit (withdrawn on demand) – Cheque rather than Cash

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Image of Forms of Money for Economics

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Depositor vs. Borrower

  • Bank hold 15% of total deposit as cash

  • B/w surplus & those who need

  • Extend loans

  • Higher interest rate on loan

  • Diff. = INCOME for bank

Image of Depositor vs. Borrower For Economics

Image of Depositor vs. Borrower for Economics

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Credit (Loan) Situation

  • Lender supplies the borrower in return for promise of future payment

  • For industry, housing, crop production

  • Can push borrower in further credit (crop failure)

Terms of Credit

  • Interest + Principal = Repayment

  • Collateral: asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid

  • Interest rate + collateral + documentation + mode of repayment = Terms of Credit

Formal Sector Credit

  • Formal sector loan – bank & cooperative – 90% rich household

  • Informal sector loan - moneylenders, traders, employers, relatives and friends – not supervised & charge any amount (usually higher) – 85% poor households

  • Formal – Supervised by RBI – Looks into

    • Cash maintained by banks

    • Loan not only to profit making businesses but others

  • High borrowing cost implies most money goes in loan repayment

  • Need for cheap & affordable credit

  • 50% rural credit needs by formal sector

Self-Help Groups

  • Organize rural poor in groups and collect money

  • Members take loan from group

  • Group charges interest

  • If group is regular in saving – can take bank loans

  • Loan given in name of group – self-employment opportunities

  • Overcome problem of collaterals

  • Grameen bank (Bangladesh) – 1970s – 6 million borrowers in 40,000 villages

Marginal Standing Facility – in Acute Shortage (Emergency Situation) – MSF Rate > Repo Rate

Lends Money

Repo Rate – Short term

Bank rate – Long term

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Image of Marginal Standing Facility for Economics

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Cash Reserve Ratio (CRR) – Bank Hold Deposit as Cash with RBI

If CRR more – bank can use less for spending

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Image of Cash Reserve Ratio (CRR) for Economics

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Image of Repo Rates And Deposit Rates For Economics

Image of Repo Rates and Deposit Rates for Economics

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