Money and credit

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MONEY AND CREDIT
LESSON NO.3 ECONOMICS (CBSE)
MR. D.B.GAEKWAD (TGT/S.STDS.)
JAWAHAR NAVODAYA VIDYALAYA PARBHANI 431402 MAHARASHTRA

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Money and credit

  1. 1. WELCOME IN THE CLASS OF ECONOMICS CLASS :- X MR.D.B.GAEKWAD (TGT/S.STDS.)JAWAHAR NAVODAYA VIDYALAYA PARBHANI431402 MS Powerpoint Templates Page 1
  2. 2. 3. MONEY AND CREDIT CLASS :- XTH. Powerpoint Templates Page 2
  3. 3. DEFINITION OF MONEY Money is any good that is widely used and accepted in transactions involving the transfer of goods and services from one person to another. ROBERTSON :- “ANY COMMODITY THAT FULL FILLS THE RESPONSIBILTY OF PAYMENT AND OCCUPATION IS CALLED MONEY” G.D.H.KAUL :-“ANY GOODS WHICH IS READILY ACCEPTED TOWRDS PAYMENTS AND CREDIT IS CALLED MONEY.” KENT :- “ANY THING WHICH IS READILY ACCEPTED A NEASURE OF VALUE DURING TRANSACTION IS CALLED MONEY.” Powerpoint Templates Page 3
  4. 4. DEFINITION OF MONEY ACCORDING TO THE RESERVE BANK OF INDIA RESERVE MONEY (M0):- CURRENCY IN CIRCULATION+ DEPOSITS OF COMMERCIAL BANKS IN RBI- LOANS GRANTED BY RBI TO THE GOVT. + ASSESTS OF THE RBI ABROAD - IT IS THE MOST LIQUID STATE OF MONEY WHERE IN THE ASSESTS COULD BE READILY CONVERTED INTO MONEY. (M1):- M0 + THE AMOUNT OF MONEY DEPOSITED BY THE CUSTOMERS IN DIFFERNT BANKS IN DIFFERNT ACCCOUNTS VIZ., SAVING, CURRENT RECURRING, TIME DEPOSITS ETC. (M2):- M1 + AMOUNT OF MONEY DEPOSITED BY THE CUSTOMER IN THE POST OFFICE IN POSTAL ACCOUNTS SUBJECT TO THE MAXIMUM LIMITS OF Rs.100,000. (M3):- M1 +ALL TYPES OF THE TERM DEPOSITS +GOVT. BONDS, SHARES DEBENTURES, SECURITIES ETC. (M4):- M3 +ALL SORTS OF SAVING ACCOUNTS IN THE POST OFFICE EXCEPT NATIONAL SAVING CERTIFICATES. Powerpoint Templates Page 4
  5. 5. COUNTRIES AND THEIR CURRENCIESS.NO. COUNTRIES CURRENCY 1 CHINA YUAN 2 RUSSIA ROUBLE 3 BELGIUM BELGIAN FRANC 4 JAPAN YEN 5 SUDAN POUND Powerpoint Templates Page 5
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  11. 11. HISTORIC ERA CURRENCIES AKBAR ERA GOLDEN COIN MUHHMED TUGLAQ ERA COINS. SAMUDRAGUPTA PERIOD COINS MODERN ERA INDIAN CURRENCY Powerpoint Templates Page 11
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  16. 16. CLASSIFICATION OF MONEY Powerpoint Templates Page 16
  17. 17. FULL BODIED MONEYFull-bodied money is money whose value as a commodity for non-monetary purposes (i.e, the value of metal coined it) is as great as its value as money. The main full-bodied monies in modern economies have been the coins of standard metals like Gold and Silver. Powerpoint Templates Page 17
  18. 18. REPRSENTATIVE FULL BODIED MONEY Representative Full-bodied money is usually made of Paper. It is equivalent to a circulating warehouse receipt for full-bodied coins or their equivalent in bullion. The paper money itself has no value as a commodity, but it represents in circulation an amount of money with a commodity value equal to the value of money.For example NSC. Powerpoint Templates Page 18
  19. 19. CREDIT MONEY It is that money whose value of money (face-value) is greater than the commod-ity value (intrinsic value) of money. Token coins and promissory notes are part of credit money. Token coins. Representative Token Money: Promissory Notes issued by Central Banks. Bank Deposits. Powerpoint Templates Page 19
  20. 20. FUNCTIONS OF MONEY PRIMARY FUNCTION MEANS OF TRANSACTON. MEASURE OF VALUE. SECONDARY FUNCTION OF MONEY STORE OF VALUE. HELPFUL IN DEFFERED PAYMENT. TRANSFER OF VALUE. Powerpoint Templates Page 20
  21. 21. FUNCTIONS OF MONEYCONTIGENT FUNCTIONS OF MONEY:- BASIS OF CREDIT LIQUIDITY. GUARANTER OF SOLVENCY. DISTRIBUTION OF NATIONAL INCOME. Powerpoint Templates Page 21
  22. 22. IS IT POSSIBLE TO PERFORM THE FUNCTION OF BUYING AND SELLING WITH OUT MAKING USE OF A MONEY MEDIUM Powerpoint Templates Page 22
  23. 23.  YES, IT IS POSSIBLE THROUGH THE BARTER SYSTEM Powerpoint Templates Page 23
  24. 24. BARTER SYSTEMI’LL GIVE YOU CLOTHESFOR YOUR WHEAT. I WANT CLOTHES. BUT I DON’T HAVE WHEAT.I DON’T NEED CLOTHES. I NEED SHOES Powerpoint Templates Page 24
  25. 25. BANKS’S CREDIT/LOANS RELATED ACTIVITIES DEPOSITORS BORROWERSPeople make People takedeposits loans People make People repay withdrawals loans with and interest get interest 1. ACCEPTS DEPOSITS FROM THE PEOPLE 2. RENDERS LOANS TO THE NEEDY 3. RAISE CREDITS 4. TRANSFER ACCOUNTS Powerpoint Templates Page 25
  26. 26. HOW DOES BANK CREATE CREDIT? Powerpoint Templates Page 26
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  28. 28. CREDIT CREATION BY BANKS DEPOSITS IN THE COMMERCIAL BANKS. AIDS FROM THE RESRVE BANK OF INDIA. INVESTMENTS OF THE BANKS IN THE STOCK MARKET. INTERST EARNED BYTHE BAKNS UPON THE SANCTIONED LOANS. Powerpoint Templates Page 28
  29. 29. NEED FOR THE CREDIT TIME BASED PURPOSE ORIENTED  PRODUCTIVE LOANS• SHORT TERM :-FOR THE PURCHASE OF :-LESS THEN 15 NEW TECHONLOGY, MONTHS FERTILIZERS,• MID TERM:-15 AGRICULTURE EQUIPMENTS ETC. MONTHS TO 5  UNPRODUCTIVE LOANS YEARS :-FOR PERFORMING SOCI-• LONG TERM :- RELIGIOUS CERMONIES MORE THAN 5 NAD RIGHTS, YEARS REDEMPTION OF OLD Powerpoint Templates Page 29 LOANS
  30. 30. CONDITIONS OF CREDIT/LOANSLOAN FORMALITIES ARE THE CONDITINS UPON WHCIH A BANK SANCTIONS A CREDIT TO ITS CUSTOMER:- RATE OF INTERST MORTGAGE MODE OF PAYMENTS Powerpoint Templates Page 30
  31. 31. TYPES OF LOANS AGRICULTURAL LOANS PERSONAL LOANS HOME LOANS EDUCATIONAL LOANS MEDICAL LOANS Powerpoint Templates Page 31
  32. 32. SOURCES OF CREDITS/LOANS Powerpoint Templates Page 32
  33. 33. SOURCES OF LOANS FORMAL SOURCESFORMAL SOURCES:- RESERVE BANK OF INDIA KEEP A VIGIL OVER THE WORKING OF THE ACTIVITIES OF ALL THE COMMERCIAL BANKS. IT IS MANDATORY FOR THE COMMERCIAL BANKS TO GIVE AN ACCOUNT OF, THAT BESIDES PROFIT MAKING CORPORATE HOUSES HOW MUCH LOANS THEY HAVE DISBURSED TO THE POOR AND NEEDY FARMERS.IN AYEAR .WHAT WAS THE RATE OF INTERSET AND TERM OF REDEMPTION . Powerpoint Templates Page 33
  34. 34. RESERVE BANK OF INDIA MONETARY POLICY :- is the process by which monetary authority of a country, generally a central bank controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth. In India, the central monetary authority is the Reserve Bank of India (RBI). is so designed as to maintain the price stability in the economy. RBI takes into account the following monetary policies:- CASH RESERVE RATIO REPO RATE REVERSE REPO RATE STATUTORY LIQUIDITY RATIO. Powerpoint Templates Page 34
  35. 35. CASH RESERVE RATIO(CRR)• The Reserve Bank of India (Amendment) Bill, 2006 has been enacted and has come into force with its gazette notification. Consequent upon amendment to sub-Section 42(1), the Reserve Bank, having regard to the needs of securing the monetary stability in the country, RBI can prescribe Cash Reserve Ratio (CRR) for scheduled banks without any floor rate or ceiling rate ( [Before the enactment of this amendment, in terms of Section 42(1) of the RBI Act, the Reserve Bank could prescribe CRR for scheduled banks between 3 per cent and 20 per cent of total of their demand and time liabilities].• RBI uses CRR either to drain excess liquidity or to release funds needed for the growth of the economy from time to time. Increase in CRR means that banks have less funds Powerpoint Templates available and money is sucked out of circulation. Page 35
  36. 36. REPO RATE• Repo (Repurchase) rate is the rate at which the RBI lends shot-term money to the banks against securities. When the repo rate increases borrowing from RBI becomes more expensive. Therefore, we can say that in case, RBI wants to make it more expensive for the banks to borrow money, it increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate. Powerpoint Templates Page 36
  37. 37. REVERSE REPO RATE• Reverse Repo rate is the rate at which banks park their short-term excess liquidity with the RBI.• The banks use this tool when they feel that they are stuck with excess funds and are not able to invest anywhere for reasonable returns.• An increase in the reverse repo rate means that the RBI is ready to borrow money from the banks at a higher rate of interest. As a result, banks would prefer to keep more and more surplus Powerpoint Templates Page 37 funds with RBI.
  38. 38. RESERVE BANK OF INDIAFISCAL POLICY :-word Fiscal is taken from French word Fisc it means treasure of Govt. So we can define fiscal policy as the revenue and expenditure policy of Govt. of India .Through this policy , Govt. collects money from his different resources and utilize it in different expenditure . Thus fiscal policy is related to development policy . Techniques of Fiscal Policy Taxation Govt. Expenditure Policy Deficit Financing Policy Public Debt Policy Powerpoint Templates Page 38
  39. 39. SOURCES OF CREDIT/LOANS INFORMAL SOURCES INFORMAL SOURCES :-THERE IS NO INSTITUTION TO CHECK THE WORKING AND CREDIT DISBURSING CONDITIONS OF THIS SOURCE.FLEXIBLE RATE OF INTEREST WITH OUT GIVING PRIOR INTIMATION . IT MAY VARY PERSON TO PERSON EXORBITANT RATE OF INTEREST. ILLEGAL MODE OF REMDEMPTION OF LOANS , INTERST FROM THE CUSTOMER Powerpoint Templates Page 39
  40. 40. SELF HELP GROUPA self-help group (SHG) is a village-based financial intermediary usually composed of 10–20 local women.This organisation accepts minimum amount as a deposits from the memberEASY LOANS AT A SUSIDIED RATE. UNTIL MARCH 2003 THERE WERE 7,17360 SELF HELP GROUPS.NABARD estimates that there are 2.2 million SHGs in India Powerpoint Templates Page 40
  41. 41. What is the importance of self help group in india?1.improve efficiency of the credit system2.channel of financial conclusion3.resource mobilization4.promote savings and banking habit5.improve the living condition of the poor6.empowerment of women7.promote social and economic justice8.community actions9.develop individual skills of the communitymembers10.livelihood finance and employment generation11.reduce influence of unorganised sector12.benificial to the financial sector Powerpoint Templates Page 41
  42. 42. QUICK REVIEW Money is any good that is widely used and accepted in transactions involving the transfer of goods and services from one person to another. ROBERTSON :- “ANY COMMODITY THAT FULL FILLS THE RESPONSIBILTY OF PAYMENT AND OCCUPATION IS CALLED MONEY” G.D.H.KAUL :-“ANY GOODS WHICH IS READILY ACCEPTED TOWRDS PAYMENTS AND CREDIT IS CALLED MONEY.” KENT :- “ANY THING WHICH IS READILY ACCEPTED A NEASURE OF VALUE DURING TRANSACTION IS CALLED MONEY.” Powerpoint Templates Page 42
  43. 43. RECAPITULATION What is a money? What are the functions of money What are the formal source of credit? What are the informal source of credit? What is CRR? What is a Repo rate? Powerpoint Templates Page 43
  44. 44. THANKS YOU Powerpoint Templates Page 44

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