Name : Shubham Kumar Class : 10th B Roll No. : 32Topic : MONEY AND CREDITSchool: Kendriya

Vidyalaya Palampur

SOCIAL SCIENCE POWER-POINT PRESENTATION

MONEY AND CREDIT

MEDIUM OF EXCHANGE

Barter System: Before the advent of money, people used to follow the barter system of exchange. i.e. somebody has surplus vegetables and he needs wheat in lieu of that then he could find a person who has surplus wheat and needs vegetables.

BARTER SYSTEM

Barter is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange,

LIMITATIONS OF BARTER SYSTEM

• Lack of double coincidence of wants

• Difficulty of storing value.

• Differed payments are difficult

• Some goods are indivisible

EXAMPLE OF BARTER SYSTEM

The major feature or rather drawback of the barter system was the coincidence of wants. It used to be difficult to find a person who can fulfill the coincidence of wants. Moreover, it was impractical and difficult to carry heavy goods for barter. This restricted the economic activity.

Double Coincidence of wants

OLD FORM OF MONEY

MODERN FORMS OF MONEY

Deposits with Banks: The other form in which people hold money is as deposits with banks. At a point of time, people need only some currency for their day-to-day needs. Banks accept the deposits and also pay an interest rate on the deposits. In this way people’s money is safe with the banks and it earns an interest. People also have the provision to withdraw the money as and when they require. Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.

OTHER FORMS OF MONEY

Terms of creditEvery loan agreement specifies an

interest rate which the borrower must pay to the lender along with the In rural areas, the main demand for credit is for crop production. Crop production involves considerable costs on seeds, fertilizers, pesticides, water, electricity, repair of equipment, etc. There is a minimum stretch of three to four months between the time when the farmers buy these inputs and when they sell the crop. Farmers usually take crop loans at the beginning of the season and repay the loan after harvest. Repayment of the loan is crucially dependent on the income from farming.

LOAN ACTIVITIES OF BANKSBanks keep only a small proportion of their deposits as cash with themselves. For example, banks in India these days hold about 15 per cent of their deposits as cash. This is kept as provision to pay the depositors who might come to withdraw money from the bank on any given day. Since, on any particular day, only some of its many depositors come to withdraw cash, the bank is able to manage with this cash. Banks use the major portion of the deposits to extend loans. There is a huge demand for loans for various economic activities.

CollateralCollateral is an asset that the borrower owns (such as land, building, vehicle, livestock, deposits with banks) and uses this 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. Property such as land titles, deposits with banks, livestock are some common examples of collateral used for borrowing.

Terms of CreditInterest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit. The terms of credit vary substantially from one credit arrangement to another. They may vary depending on the nature of the lender and the borrower.

CREDIT

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

SOURCES OF CREDIT

Formal Sector: The formal Sector comprises of banks and cooperative societies.

Informal Sector: The informal sector consists of money lenders and friends and relatives, merchants and landlords.

MONEY

Anything which is used as a medium of exchange, store of value and standard of differed payments is called money.

IT IS THE MOST WIDELY USED MEDIUM OF EXCHANGE

RESERVE BANK OF INDIA

The Reserve Bank of India is India's central banking institution, which controls the monetary policy of the Indian rupee. It commenced its operations on 1 April 1935 during the British Rule in accordance with the provisions of the Reserve Bank of India Act, 1934.The original share capital was divided into shares of 100 each fully paid, which were initially owned entirely by private shareholders.Following India's independence on 15 August 1947, the RBI was nationalised on 1 January 1949.

RESERVE BANK OF

INDIAThe RBI plays an important part in the Development Strategy of the Government of India. It is a member bank of the Asian Clearing Union. The general superintendence and direction of the RBI is entrusted with the 21-member Central Board of Directors: theGovernor (Dr. Raghuram Rajan),

RESERVE BANK OF

INDIA

FUNCTIONS OF RBI• Financial Supervision• Regulator and supervisor of the financial system• Managerial of exchange control• Issue of currency• Banker's bank

Financial Supervision

It’s aims is to upgrading the quality of the statutory audit and internal audit functions in banks and financial institutions. The audit sub-committee includes Deputy Governor as the chairman and two Directors of the Central Board as members.

Regulator and supervisor of the financial system

It also the regulate and supervises the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions. Its objectives are to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public.

Managerial of exchange control

The central bank manages to reach different goals of the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India

ISSUE OF CURRENCY

The bank issues and exchanges currency notes and coins and destroys the same when they are not fit for circulation. The objectives are to issue bank notes and giving public adequate supply of the same, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves.

Banker's bank

RBI also works as a central bank where commercial banks are account holders and can deposit money. RBI maintains banking accounts of all scheduled banks. Commercial banks create credit. It is the duty of the RBI to control the credit through the CRR, bank rate and open market operations.

Banker's bankAs banker's bank, the RBI facilitates the clearing of cheques between the commercial banks and helps inter-bank transfer of funds. It can grant financial accommodation to schedule banks. It acts as the lender of the last resort by providing emergency advances to the banks. It supervises the functioning of the commercial banks and take action against it if need arises.

INDIA’S FIRST TEN RUPEES NOTE IN 1938