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

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Chapter 3: Money & Credit

Money Versus Barter

  • Barter System – Double coincidence of wants

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

Image of Money Versus Barter For Economics

Image of Money Versus Barter for Economics

Image of Money Versus Barter For Economics

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  • Deposit with Banks – to earn interest for extra money; demand deposit (withdrawn on demand) – Cheque rather than Cash

Image of Forms of Money For Economics

Image of Forms of Money for Economics

Image of Forms of Money For Economics

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

Image of Depositor vs. Borrower For Economics

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

Image of Marginal Standing Facility For Economics

Image of Marginal Standing Facility for Economics

Image of Marginal Standing Facility For Economics

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

If CRR more – bank can use less for spending

Image of Cash Reserve Ratio (CRR) For Economics

Image of Cash Reserve Ratio (CRR) for Economics

Image of Cash Reserve Ratio (CRR) For Economics

Image of Repo Rates And Deposit Rates For Economics

Image of Repo Rates and Deposit Rates for Economics

Image of Repo Rates And Deposit Rates For Economics