Wednesday , May 18 2022

Money and credit: 10th CBSE Economics

Question: Why should the banks and cooperative societies provide more loan facilities to the rural households in India? Given four reasons.


Most of the farmers are very poor, they do not have any surplus money.

  1. Moneylenders use charge very high rate of interest. This leads to increasing debt and trap.
  2. Moneylenders use unfair means to get their money back.
  3. Cheap and affordable credit is must for rural development.
  4. Cheap credit helps in lowering the cost of production.

Question: Describe four major sources of credit for rural household in India.


  1. Cooperatives and commercial banks: Though up-to 1990’s informal lenders like money lenders, relatives and traders were the major sources of credit for the rural people, but with the introduction of commercial and rural banks this trends cooperatives and commercial banks are the major sources for the rural household credit is financed by cooperatives and commercial banks.
  2. Professional and agriculture money lenders: Professional and agriculture money-lenders are still the major source for rural credit for the poor households. About 18% of the rural households are still dependent on them for their credit needs. Though they charge high rate of interest but as they provide loan without any collateral so people approach them for loan requirements.
  3. Government and other formal sources: Union Government and State governments also provide sreadit to the farmers through various schemes (Kisan Credit Card) and banks like Regional Bank for Rural and Agricultural Developmental.
  4. Self Help Groups: It is another source of credit for rural household though their share is very less but they rised the living standard of women.
  5. Relatives and Friends: Relatives and friends are another important source of credit for rural households. Approx. 7% of the rural households depend upon relatives and friends for their credit needs.

Question: How can the formal sector loans be made beneficial for poor farmers and workers? Suggest any five measures.

  1. Formal sector loans include commercial banks, cooperatives ect.
  2. Cheap and affordable loans should be provided to the farmers and the workers.
  3. Poor farmers and workers may be exempted from any kind of collateral.
  4. Government can encourage to from several types of cooperatives like weavers cooperatives, workers cooperatives etc.
  5. Formal credit should be distributed more equally.

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