* Anything which is used as a medium of exchange, store of value and standard of differed payments is called money * 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. * Commercial Banks, co-operative societies and Regional Rural Banks constitute the formal sector of credit * The Reserve Bank of India supervises the functioning of formal sources of loans. * They collect low rate of interest. * They follow some well defined rules and procedures WHY ARE THE BANKS NOT ADVANCING LOANS TO THE POOR PEOPLE? SELF HELP GROUP

1. By: Jay Parekh

2. The use of money spans a large part of our
everyday life. In transactions, goods are
being bought and sold with use of money.
Money acts as an intermediate in the
exchange process, it is also called a medium
of exchange. Money has become the
currency of exchange.
Before introduction of money, people
would barter system to obtain the goods and
services they want.

3. If you have wheat but need fruits, you must find
someone who not only has fruits but also the
desire for wheat. What if you find someone who
has the need for wheat but no fruits and can only
offer you flowers and banana?
To get your wheat, he or she must find someone
who has fruits and wants flowers.

4.  It is a system in which goods are
exchanged for other goods.

8. •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. Since the deposits in the
bank accounts can be withdrawn on demand, these deposits are
called demand deposits.
•A cheque is a paper instructing the bank to pay a specific
amount from the person’s account to person in whose name
cheque has made. The modern form of money- currency and
deposits- are closely linked to the working of the modern
banking system.

10. DEPOSITORS BORROWERS
People make
deposits People take loans
People make
withdrawals and
get interest
People repay loans
With interest

11. •Collateral security
•Documentation required
•Term of the loan
•Mode of repayment
•Rate of interest

12. Reserve Bank of India

15. •Poor people do not have anything to offer as
collateral security
•Banks are not available in many rural areas
•Banks do not consider the poor people as credit
worthy.
•Poor and ignorant people find it difficult to produce
the needed documents.

16.  Banks are not present everywhere in rural India. Even
they are, getting a loan from bank is much more
difficult than taking a loan from the informal
sources.
 In recent years, people have tried out some new ways
of providing loans to the poor. SHG is one of them. A
typical SHG has 15-20 members, usually belonging to
one neighborhood, who meet and save regularly.