Money and credit BY J K Dogra K V Delhi Cantt NO 3

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BY :- J K Dogra K V Delhi Cantt NO 3

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Money and credit BY J K Dogra K V Delhi Cantt NO 3

  1. 1. WHY TRANSACTIONS ARE MADE IN MONEY? I DON’T NEED CLOTHES. I NEED SHOES. I WANT CLOTHES. BUT I DON’T HAVE WHEAT. I’LL GIVE YOU CLOTHES FOR YOUR WHEAT.
  2. 2. The Barter System
  3. 3. WHY IS IT ACCEPTED AS(MONEY) A MEDIUM OF EXCHANGE? Money acts as an intermediate in the exchange process. It is called medium of exchange. Money as a Means of Payment.
  4. 4. MODERN FORMS OF MONEY ARE LINKED TO THE BANKING SYSTEM. TRANSACTIONS ARE MADE IN MONEY DUE TO :----  Money can exchange easily any commodity/service.  Everyone prefers to receive payments in money  To eliminates the need for double coincidence of wants. MONEY SUPPLY IN INDIA  M1= Currency held by public+Demand deposits with Bank+Other deposits with RBI  Modern forms of money include  Currency---Paper notes and coins.  Deposits with Banks.
  5. 5. Money eliminates problems of the Barter System.
  6. 6. BORROWERS People take loans People repay loans with interest DEPOSITORS People make deposits People make withdrawals and get interest Banks mediate between the Depositors and the Borrowers.
  7. 7. NEED FOR CREDIT ON THE BASIS OF TIME ON THE BASIS OF PURPOSE • SHORT TERM CREDIT • MID TERM CREDIT • LONG TERM CREDIT
  8. 8. NEED FOR CREDIT BASIS OF TIME  SHORT TERM:LESS THAN 15 MONTHS  MID TERM:15 MONTH TO 5 YEARS  LONG TERM:MORE THAN 5 YEARS BASIS OF PURPOSE  PRODUCTIVE LOANS PURCHASE OF SEEDS FERTILISERS,IMPROV EMENT IN TECHNOLOGY  UNPRODUCTIVE LOANS:SOCIAL RELIGIOU CEREMONIES,SETTLIN G OF OLD LOANS
  9. 9. SOURCES OF CREDIT FORMAL SOURCES COMMERCIAL BANKS COOPERATIVES INFORMAL SOURCES MONEY LENDER TRADERS EMPLOYERS RELATIVES & FRIENDS LANDLORDS OTHERS
  10. 10. FORMAL SOURCES • COMMERCIAL BANKS • LAND DEVELOPMENT BANK • REGIONAL RURAL BANKS • THE GOVERNMENT • NABARD • SHGs
  11. 11. TERMS OF CREDIT Interest rate, Collateral and documentation requirement, and mode of repayment
  12. 12. CREDIT(LOAN)ACTIVITIES OF BANKS Whether Credit would be useful or not? Depends on the Risk in the situation. 1.Festival Season 2.Credit is for Crop Production Credit plays a vital and positive role if made a good profit. If crop failure, credit pushes the person into a debt trap.
  13. 13. SOURCES OF CREDIT for Rural Households in India 30% Moneylenders 25% Commercial Banks 27% Cooperative Societies Landlords 3% 7% 7% 1% Traders Relatives and Friends Others
  14. 14. Why are Poor Households still dependent on Informal Sources of credit.?  Banks are not present everywhere in rural India.  Loan from a bank is much more difficult than taking a loan from informal sources.  Bank loans require proper documents and collateral.  Informal lenders know the borrowers personally and give a loan without collateral.
  15. 15. Newer Ways of Providing Loans to the Poor SELF HELOP GROUPS A women’s self-help group meeting in Gujarat. 1.Banks are willing to lend to the poor women when organized in SHGs, even though they have no collateral as such. 2.The poor should get a much greater share of formal loans from banks, cooperative societies etc. Both these steps are important for development.
  16. 16. THANKS BY J K DOGRA PGT ECO KV NO-3,DELHI CANTT.

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