Money And Credit: Class 10 Economics NCERT Chapter 3

Key Features of NCERT Material for Class 10 Economics Chapter 3 –  Money And Credit

In the last chapter 2: Sectors of Indian Economy, you learned about 3 types of economy classifications of economy i.e essential/secondary/tertiary, composed/unorganized, and public/private.In this Chapter: Money and Credit, you will learn in detail about money and credit and its uses.

(Money And Credit: Class 10)


  1. A person holding Money. Money can trade it for any item or service that the individual may need. 
  2. Thus everybody prefers to get payments in MoneyMoney and afterward trade the MoneyMoney for things that they need. 
  3. The two players need to consent to sell and call each other commodities. This is known as a Double happenstance of desires. 
  4. What a person wishes to sell is exactly what different desires to purchase. 
  5. In a trade system where goods are legitimately traded without MoneyMoney, the twofold fortuitous event of wants is an essential element. 
  6. In contrast, in an economy where MoneyMoney is being used, MoneyMoney eliminates the requirement for twofold happenstance of desires by giving the critical halfway step. 
  7. Money acts as a halfway in the trade process, it is known as a mode of trade. This is known as the Barter System. 


  1. We have seen that Money is something that can act as a mode of trade-in transactions. 
  2. Before the presentation of coins, an assortment of objects was used as MoneyMoney. 
  3. For instance, since the early ages, Indians have used grains and steers as MoneyMoney. 


  1. Current forms of MoneyMoney incorporate cash – paper notes and coins. 
  2. Money is acknowledged as a trade mechanism because the nation’s administration approves the cash. 
  3. In India, the RBI issues money notes in the interest of the local government. 
  4. According to Indian law, no other individual or association is permitted to issue MoneyMoney. 
  5. No person in India can lawfully refuse an installment made in rupees. 

Deposits with Bank: 

  1. The other structure wherein individuals hold MoneyMoney is as deposits with the bank. 
  2. Individuals deposit MoneyMoney with the banks by opening a financial balance in their name. 
  3. Banks acknowledge the stakes and pay a sum as interest on the deposits. 
  4. Individuals also have the provision to pull back the Money when they require. 
  5. Since the deposits in the accounts can be pulled back on request, these deposits are called request deposits. 
  6. It is this office that lends it to the essential characteristics of Money. 
  7. You would have heard of payments being made by checks instead of cash. 
  8. For installment with a money order, the purchaser who has a record with the bank, makes out a check for a specific sum. 
  9. A check is a paper instructing the bank to pay a specific sum from the person’s record to the person whose name the check has been issued. 
  10. The office of check against request deposits makes it possible to settle payments without cash straightforwardly. 
  11. Since request deposits are generally acknowledged as a means of installment, they constitute MoneyMoney in the advanced economy alongside cash. 
  12. Yet, there would be no interest in the banks and no payments by checks against these deposits. The cutting edge forms of MoneyMoney – cash and deposits – are closely connected to the working of the advanced financial system. 


  1. Banks keep just a small extent of their wealth as cash with themselves. 
  2. This is controlled to pay the provision to pay the depositors who may come to pull back MoneyMoney from the bank on some random day. 
  3. Since, on a specific day, just some of its numerous depositors come to pull back cash, the bank is ready to deal with this cash. 
  4. Banks use a significant bit of the deposits to broaden loans. 
  5. There is an immense interest for loans for various monetary activities. 
  6. Banks utilize the deposits to meet the loan requirements of the individuals. 
  7. In this manner, banks intercede between those who have surplus funds and those needs. 
  8. Banks charge a comparatively higher interest rate on loans than what they offer on deposits. 
  9. The contrast between what is charged from borrowers and what is paid to depositors is their fundamental pay source. 


  1. Each loan understanding specifies an interest rate that the borrower must compensate to the moneylender alongside the major expansion; the lenders can request collateral against the loan. 
  2. Collateral is the vital asset that the borrower owns and uses it to assure a moneylender until the loan is reimbursed. 
  3. The interest rate, collateral and documentation prerequisite, and reimbursement method together comprise what is known as the terms of credit. 


  1. We have seen that individuals get loans from various sources. 
  2. The various types of loans can be advantageously gathered as the formal sector and informal sector loans. 
  3. Among the previous are loans from banks and cooperatives. 
  4. The casual lenders incorporate moneylenders, traders, employers, relatives and friends, and so on. 
  5. The Reserve Bank of India supervises the working of formal sources of loans. 
  6. For instance, we have seen that the banks keep up a base cash balance out of the deposits they get. 
  7. The RBI monitors the banks in actually keeping up a cash balance. 
  8. Intermittently, banks need to submit data to the RBI on the amount they are loaning, whom, at what interest rate, and so on. 
  9. No association supervises the credit activities of lenders in the informal sector. 
  10. They can loan at whatever interest rate they choose. 
  11. There is nobody to stop them from using unjustifiable means to get their MoneyMoney back. 
  12. Contrasted with the conventional lenders, most casual lenders charge a lot higher interest on loans. 
  13. Thus, the cost to the borrower of casual loans is a lot higher. 
  14. The Higher cost of obtaining means a large piece of the borrowers’ earnings is used to reimburse the loans. 
  15. Modest and moderate credit is critical for the nation’s turn of events. 

Formal and Informal Credit: Who gets what? 

  1. 85% of the loans taken by helpless households in the urban areas are from casual sources. 
  2. Urban households take just 10% of their loans from everyday sources, while 90% are from formal sources. 
  3. The affluent families are profiting modest credit from casual moneylenders whereas the helpless households need to pay a lot of money. 
  4. The conventional sector still meets just about the portion of the all-out credit needs of the country individuals. 
  5. The rest of the credit needs are completed from casual sources. 
  6. Thus, it is necessary that banks and cooperatives increase their loaning, especially in the rustic areas, so that the reliance on informal credit sources reduces. 
  7. While formal sector loans need to extend, it is also necessary that everybody receives these loans. 
  8. It is significant that the conventional credit is distributed with more excellent balance so that the poor can profit by the less expensive loans. 


  1. In the previous section, we have seen that helpless households are still reliant on casual sources of credit. 
  2. Banks are not present wherever in provincial India. 
  3. In any event, when they are present, getting a loan from a bank is substantially more troublesome than taking a loan from casual sources. 
  4. The absence of collateral is one of the significant resources which keep the poor from getting the bank loans. 
  5. Agreeable lenders such as moneylender, then again. Known the borrowers personally and consequently are regularly ready to give a loan without collateral. 
  6. Nonetheless, the moneylenders charge incredibly high-interest rates, keep no records of the transactions, and harass the helpless borrower
  7. Lately, individuals had evaluated some more up to date ways of giving loans to poor people.
REEII ©  All rights reserved.