Chapter-3 Money and Credit Solutions

Explanation:

Credit could make things worse for the borrower in high-risk circumstances. In  order to obtain credit, a borrower must obtain a predetermined loan amount from a lender at a  high interest rate. If there is a failure and there is a loss for the borrower, they further fall into  the credit trap. It's referred to as a debt trap. The borrower is further caught in the credit trap  and has more problems as a result of having to return the credit plus interest charged by the  lender. 

Explanation:

What's known as a "double coincidence of wants" occurs when someone wants to  sell exactly what the other person wants to acquire. As people could use money as an  intermediary to buy or sell goods when it was invented, the issue of double coincidence of  demands was resolved. There was no need for a specific buyer or seller to exchange things. For instance, a trader wants to sell 10 full sacks of rice and anticipates receiving five full  sacks of cereal in exchange. Finding a reliable customer to acquire the rice sacks for cereals  would be fairly challenging.

Explanation:

 Banks serve as a middleman between those who lack money and those who do by  giving loans to people in need (borrowers). Individuals can open bank accounts, and the  banks utilise that money to fund customers' loan requests. The depositor obtains interest for  making deposits from that profit while the borrower pays a higher interest rate.

Explanation:

The words "Reserve Bank of India" and "Guaranteed by the Central Government"  are written on top of a 10 rupee note. India's Reserve Bank of India, which serves as the  nation's central bank, is responsible for issuing the country's currency. These two  organisations are the only ones in India with the authority to issue currency on behalf of the  Central Government.

Explanation:

The usage of legal credit is essential in India since unregistered informal sources,  which lend money to people at outrageous interest rates, are unjust and should not be  employed. If formal sources of credit are increased, people will be able to borrow money at  reduced interest rates and without having to do more labour for the lender. 

Explanation:

Self Help Groups (SHGs) were established in India with the intention of assisting  the rurally impoverished, particularly women. These organisations offer loans to anyone who  need money in an emergency or other time of need. They demand the borrowers pay a  minimal interest rate. The SHG is also qualified to apply for bank loans once they have  managed to save a specific sum of money. The primary goal of establishing these Self Help  Organizations was to expand small-scale job options for the rural population, allowing them  to launch new businesses and establish a living. 

Explanation:

The following list includes the explanations for why banks could be reluctant to  extend loans to specific borrowers: 

1. Some applicants for loans fail to submit the necessary paperwork. 

2. Because it increases the likelihood that loans won't be repaid, irregular salaries and the lack  of a stable work are another factor. 

3. A list of NPAs is updated to include specific borrowers. 

4. It is risky to grant loans to business owners.

Explanation:

The Reserve Bank of India is the nation's central bank and regulates all other public  sector banks' operations. 

1. It keeps track of the bank's efforts to keep the cash balance. 

2. Loans are provided to small businesses as well as profit-making organisations, including  small farmers and cottage industries. 

3. Regarding the quantity of loans made to individuals, the RBI keeps an ongoing report of  other banks. 

4. It also regularly keeps an eye on the interest rates set for loans in public sector banks.

Explanation:

The ability to access affordable loans is crucial to the nation's prosperity. For a  variety of reasons, people need loans, and in order to satisfy this demand, credit is crucial.  Credit is particularly important in agricultural activities since a large portion of the people in  India is involved in farming. Crops can be grown using modern farming techniques, which  are more dependable than conventional farming techniques, and people can borrow money to  do so. In addition to this, there are numerous additional small-scale enterprises, industries,  and areas where credit can benefit people and ultimately lead to national development.

Explanation:

Manav wants to launch a modest company. He needs to keep the following in mind  while deciding whether to borrow money from a bank or a money lender: 

1. He must contrast the interest rates the bank and the moneylender charge. He should select  whoever charges less. 

2. He should assess whether he possesses all the acceptable paperwork needed by the banks  to grant his loan. 

3. His strategies for repaying the lender. 

Explanation:

Banks could be reluctant to lend money to small farms because of the high risk. If  the crop is harmed, they might not be able to receive the installment payments on time.

However, obtaining a loan from the bank requires adequate documentation, which small scale farmers might not have access to. 

Explanation:

 If small farmers are not taking out loans from banks, they can turn to unofficial  sources of credit. Moneylenders, agricultural dealers, and other informal lenders are among  these sources of loans.

Explanation:

A small-scale farmer who borrows money from a bank must pay it back with a set  interest rate. For instance, if a farmer borrows money from the bank and, during harvest, his  or her crops are destroyed, he or she will not be able to return the bank's loan and would  further get caught in the debt cycle.

Explanation:

 a: Poor 

b: High 

c: Reserve Bank of India 

d: Deposits 

e: Collateral