Money and Credit Class 10 Notes | Economics Chapter 3 Class 10 Notes

 Money and Credit Class 10 Notes | Economics Chapter 3 Class 10 Notes. On this page, you can view notes for Money and Credit Class 10 Notes | Economics Chapter 3 Class 10 Notes.

Money and Credit Class 10 Notes

Money and Credit Class 10 Notes

Money as a medium of exchange

Money acts as an intermediate in the Exchange process it is called a medium of Exchange A person holding money can Easily Exchange it for any Commodity OR Service that he OR she might want.

Modern Form of Money

In early ages, Indians used Grains and cattle as money. After that came the use of Metallic coins - Gold, Silver, and Copper coins a phase that continued well into the last century.

Now the modern form of Money includes Currency - paper notes and coins.

The modern forms of money - Currency and deposits are closely linked to the working of the current banking system.


In, India, the Reserve Bank of India issues currency notes on behalf of the Central Government.

No, Other individual 012 Organisation is allowed to issue currency.

The rupee is widely accepted as a medium of Exchange in India.

Deposits in Bank

The other form in Which people hold money is deposited with banks People deposit their Extra cash with the banks by Opening a bank account with their name Banks accept the deposits and pay an amount as INTEREST on the Deposits.

The deposits in the bank accounts can be withdrawn on demand these deposits are Called Demand Deposits. The payments are made by Cheque instead of cash.

A cheque is a paper instructing the bank to pay a specific amount from the person's account to the person whose name the cheque has been issued.

Loan Activities of Bank

Banks use the major portion of the deposits to Extend loans There is a huge demand for loans for Various Economic activities.

They charge higher interest rest on loans than what they offer on deposits.

The difference between them is the source of main income for banks.

Two Different Credit Situations

Credit (loan) refers to an agreement in which the lender supplies the borrower with money, Goods on services in return for the promise of future payment.

Here are 2 Examples that help You to Understand how credit works.

1) Festive Season

In this case, Salim Obtains Credit to meet the working capital needs of production.

The Credit helps him to meet the ongoing expenses of production, complete production on time, and thereby increase his Earnings.

In this situation, Credit helps to increase Earnings and therefore the person has a better profit.

2) Swapna’s Problem

In Swapna's Case , The failure of crop made loan repayment impossible she had to sell part of his land to repay the loan.

Credit, instead of helping Swapna improve her Earning.

This is an example of Debt trap credit in this case pushes the borrower into a situation from where recovery was very painful.

Terms of Credit

Every loan agreement specifies an interest rate that the borrower must pay to the lender along with the Interest In addition, lenders also demand collateral Against loans.


Collateral CSecurity) is an asset that the borrower Owns C Such as land, building, Vehicle, livestock, or deposits with Banks) and use this stuff as a guarantee to a lender Until the loan is repaid.

If the borrower fails to repay the loan , the lender has the right to sell the asset or collateral to obtain payment.

Sectors for loans in India

1) Formal Sector

These are the loans from banks and Cooperatives . The Reserve Bank of India supervises the functioning of formal sources of loans.

Banks have to submit information to the RBI on how much they are lending to whom, at what interest rate, etc.

2) Informal Sector

These loans are from moneylenders, traders, Employers, relatives, and friends, etc.

There is no Organisation that supervises the credit activities of lenders in the informal sector.

There is no to stop them from using unfair means to get their money back.

Formal Sector VS Informal Sector

The formal Sector meets Only About Half Of the total Credit needs of rural people The remaining credit needs are met from informal sources Itis important that the formal credit is distributed more Equally so that the poor can benefit from the cheaper loans.

(1) It is necessary that banks and cooperatives increase their landing , particularly in rural Areas.

2 While the formal Sector loans need to Expand It is also necessary that Everyone Receives these loans.

Self-Help Groups for the Poor

Poor households are still dependent on informal sources of credit because of the following reasons

  • Banks are not present Everywhere in rural India.
  • Even if banks are present. Getting a loan from a bank is much more difficult as it requires proper documents and Collateral.

To Overcome these problems, people Created Self Help Groups CSHGD, and SHGS are small Groups of poor people that promote small savings among their members.

A typical SHG has IS-20 Members, Usually belonging to one neighborhood who meet and save Regularly.

Advantages of self-help groups SHGs

1. Help borrowers to overcome the problem Of lack of collateral.

2. People can Get timely loans for a variety of purposes and at a Reasonable Interest Rate

3. SHGS are the building blocks of the Organisation of the Rural Poor.

4. Helps women to become financially self Reliant

5. The regular meeting of the group provides a Platform to discuss and Act on a variety of social issues such as health nutrition, domestic violence, etc.

The Money and Credit Class 10 Notes cover the third chapter of Economics for class 10 students. This chapter delves into the concept of money, its functions, and the role of credit in the economy. The notes begin by explaining the characteristics of money and how it facilitates economic transactions. It also explains the various forms of money, such as currency, coins, and bank deposits.

The chapter then goes on to discuss the role of banks in the economy and the process of credit creation. It covers topics such as the functions of commercial banks, the concept of reserve ratio, and the multiplier effect of credit creation. The notes also explain the advantages and disadvantages of credit, including its role in promoting economic growth but also the risks associated with over-borrowing.

Overall, these notes provide a comprehensive understanding of the concepts of money and credit in the economy. They are essential for students to gain a strong foundation in economics and to understand how the financial system works.