Economics

Money and Credit

Question:

In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Answer:

The Reserve Bank of India supervises the functioning of formal sources of loans in banks. The banks have to maintain a minimum cash balance out of the deposits they receive. The RBI monitors that the banks actually maintain the cash balance. The RBI also sees that the banks give loans not just to profit-making businesses and traders but also to small cultivators, small scale industries, and to small borrowers. Periodically, banks have to submit information to the RBI on how much they are lending, to whom, and at what interest rate.

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Money and Credit

Q 1.

What is Collateral ?

Q 2.

What were the objects that were used before the use of currency?

Q 3.

What are ˜demand deposits'?

Q 4.

What is a cheque?

Q 5.

In situations with high risks, credit might create further problems for the borrower. Explain.

Q 6.

What are the reasons why the banks might not be willing to lend to certain borrowers?

Q 7.

Why do we need to expand formal sources of credit in India?

Q 8.

Manav needs a loan to set up a small business. On what basis will Manav decide whether to borrow from the bank or the moneylender? Discuss.

Q 9.

How do cooperatives function?

Q 10.

What is the basic idea behind the SHGs for the poor? Explain in your own words.

Q 11.

What are the transactions involving money ?

Q 12.

What is the barter system and double coincidence of wants?

Q 13.

Write a short note on ˜cheques'.

Q 14.

In India, about 80 per cent of farmers are small farmers, who need credit for cultivation.
(a) Why might banks be unwilling to lend to small farmers?
(b) What are the other sources from which the small farmers can borrow?
(c) Explain with an example how the terms of credit can be unfavourable for the small farmer.
(d) Suggest some ways by which small farmers can get cheap credit.

Q 15.

Analyse the role of credit for development.

Q 16.

What are Demand Deposits?

Q 17.

In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Q 18.

What is called the ˜terms of deposit' ?

Q 19.

Look at a 10 rupee note. What is written on top? Can you explain this statement?

Q 20.

In what ways does the Reserve Bank of India supervise the functioning of banks? Why is this necessary?

Q 21.

How does money solve the problem of double coincidence of wants? Explain with an example of your own.

Q 22.

Write about the functioning of Krishak Cooperative society.

Q 23.

How do banks mediate between those who have surplus money and those who need money?

Q 24.

Cheap and affordable credit is crucial for the countries development . Discuss.