Money and credit
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* 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
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This presentation tells you about the various aspects of money and also the credit i.e,loan business of the banks and the people in the formal and the informal sectors.
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The document discusses money, credit, and different sources of loans. It explains that money serves as a medium of exchange, store of value, and standard for deferred payments. Credit refers to loans where borrowers receive money, goods, or services and promise future repayment. Formal sources of loans like banks charge lower interest than informal sources like money lenders. Self-help groups help address access to credit for poor and rural communities by forming groups that can obtain bank loans.
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1. The document discusses various topics related to money including its history, modern forms like currency and bank deposits, its functions as a medium of exchange, credit and loans.
2. It notes that modern currency is fiat money authorized by governments and not backed by precious metals, while bank deposits also serve as money since they can be used to directly settle payments via checks.
3. Credit is discussed in the context of both positive impacts like helping businesses meet costs, as well as potential debt traps especially for poor farmers who may not be able to repay loans if crops fail.
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Money serves as a medium of exchange, unit of account, and store of value. In ancient times, barter systems were used where goods and services were directly exchanged. This required a double coincidence of wants which was difficult. Different materials then served as early forms of money. Modern currencies take the form of coins and banknotes issued by national governments. People deposit extra money in banks which pay interest and allow withdrawals. Banks lend out most deposits and earn income from interest rate spreads. Loans may require collateral and come from various sources like banks, cooperatives, microfinance groups, and money lenders. Credit arrangements can help or trap borrowers.
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Medium of exchange and money developed to overcome the limitations of barter systems. Money takes the form of coins, currency notes, and bank deposits. Banks act as intermediaries between depositors and borrowers, lending out most deposits while keeping a small reserve. Formal credit sources include banks and cooperatives, while informal sources are money lenders, merchants, and relatives. Self-help groups help the poor access credit at reasonable rates by pooling savings and guaranteeing each other's loans.
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The document discusses sources of credit in India, both formal and informal. It notes that the main formal sources of credit are commercial banks, cooperative societies, and regional rural banks, which are supervised by the Reserve Bank of India and charge lower interest rates. The main informal sources are moneylenders, traders, relatives and friends, who charge higher interest rates without regulation. It recommends expanding formal sector loans and access to banks in rural areas to reduce dependence on costly informal credit.
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The document discusses money, credit, and different sources of loans. It explains that money serves as a medium of exchange, store of value, and standard for deferred payments. Credit refers to loans where borrowers receive money, goods, or services and promise future repayment. Formal sources of loans like banks charge lower interest than informal sources like money lenders. Self-help groups help address access to credit for poor and rural communities by forming groups that can obtain bank loans.
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1. The document discusses various topics related to money including its history, modern forms like currency and bank deposits, its functions as a medium of exchange, credit and loans.
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Medium of exchange and money developed to overcome the limitations of barter systems. Money takes the form of coins, currency notes, and bank deposits. Banks act as intermediaries between depositors and borrowers, lending out most deposits while keeping a small reserve. Formal credit sources include banks and cooperatives, while informal sources are money lenders, merchants, and relatives. Self-help groups help the poor access credit at reasonable rates by pooling savings and guaranteeing each other's loans.
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Money and credit are important topics in economics. The document discusses the history of money from barter systems to modern forms of currency and banking. It also examines the role of credit, comparing formal sources like banks and cooperatives to informal sources like money lenders. While formal credit can provide loans at reasonable rates, many poor households rely on high-interest informal lenders due to lack of access or collateral. To address this, self-help groups were formed to help the poor access small loans and savings opportunities.
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This document provides an overview of monetary and banking systems. It defines money and discusses its origins, characteristics, types, and functions. It examines the demand for money, including transactions, precautionary, and speculative demand. It also discusses the money supply in Sri Lanka and classifies it into different monetary aggregates like M1 (narrow money supply), M2 (broad money supply), and M2b (consolidated broad money). Finally, it discusses the role of the central bank in providing monetary aggregates and regulating the financial system.
PPT-MONEY AND CREDIT (1).pptx
The document discusses the barter system, limitations of barter, and the role of money and credit. It describes money as anything used as a medium of exchange, store of value, and standard for deferred payments. Credit refers to loans with terms like collateral, repayment schedules, and interest rates. Formal credit sources like banks are supervised and charge lower rates, while informal sources like money lenders charge higher rates without oversight. Self-help groups help rural people access small loans at low rates from banks.
Money and supply of money
1. The document discusses different aspects of money and the supply of money in India. It defines money and its key functions as a medium of exchange, measure of value, store of value, and standard for deferred payments.
2. It describes the different forms of money including legal tender money, optional money, near money, narrow money, broad money, and credit money. It also discusses the demand and supply factors that determine the quantity of money in the economy.
3. The monetary system in India is currently managed by the Reserve Bank of India, which issues currency notes and regulates the supply of money according to a minimum reserve system. Money supply is measured using various aggregates including M1, M2, M3
Money and credit by Yatharth
Money serves several functions as a medium of exchange in modern economies. Previously, barter was used which allowed direct exchange of goods and services without money, but it had disadvantages like the lack of a common measure of value and difficulty storing value. This led to the development of money, which must have characteristics like durability and acceptability. In modern systems, there are three main forms of money: metallic money like coins, paper money issued by central banks as legal tender, and deposit money held in bank accounts. Banks lend out most deposits as loans while keeping only a fraction as reserves.
Money and credit
The document discusses the history and evolution of money and credit systems. It explains that early barter systems were inefficient, as it was difficult to find someone who wanted to trade your goods for theirs. The introduction of money addressed this problem of "double circulation of wants" by acting as a portable, universal medium of exchange. Over time, modern forms of currency and banking systems developed that allowed for easier transactions and the extension of credit through loans, though informal credit sources sometimes charge excessive interest rates that trap borrowers in debt.
Money and Credit.pptx
### Money:
Money serves as a universal medium of exchange, a unit of account, and a store of value in economic transactions. It facilitates the exchange of goods and services by providing a commonly accepted medium that reduces the complexities of barter systems. Modern economies use various forms of money, including coins, banknotes, and digital currencies.
#### Functions of Money:
1. **Medium of Exchange:** Money facilitates the buying and selling of goods and services, simplifying transactions compared to barter systems.
2. **Unit of Account:** Money provides a standard measure for expressing the value of goods and services, aiding in price comparisons.
3. **Store of Value:** Money allows individuals to store wealth and access it later. It retains its value over time.
4. **Standard of Deferred Payment:** Money enables agreements for future transactions, serving as a reliable medium for deferred payments.
#### Types of Money:
1. **Commodity Money:** Has intrinsic value (e.g., gold, silver).
2. **Fiat Money:** Has no intrinsic value but is recognized as legal tender by the government.
3. **Representative Money:** Represents a claim on a commodity (e.g., gold certificates).
4. **Digital or Cryptocurrency:** Exists only in electronic form (e.g., Bitcoin), providing decentralized and secure transactions.
### Credit:
Credit is a financial arrangement where a borrower receives something of value (usually money) with the promise to repay it in the future. It plays a crucial role in modern economies, allowing individuals and businesses to access resources, make investments, and manage cash flows.
#### Components of Credit:
1. **Principal:** The initial amount borrowed.
2. **Interest:** The cost of borrowing, expressed as a percentage of the principal.
3. **Term:** The duration for which the credit is extended.
#### Types of Credit:
1. **Revolving Credit:** Allows borrowers to repeatedly borrow up to a certain limit and repay, such as credit cards.
2. **Installment Credit:** Involves fixed, periodic payments over a specified term, common in auto loans and mortgages.
3. **Open-End Credit:** Similar to revolving credit, offering flexibility in borrowing and repayment.
4. **Closed-End Credit:** Involves a fixed amount borrowed with structured repayment, typical in personal loans.
#### Importance of Credit:
1. **Access to Resources:** Credit enables individuals and businesses to access resources, facilitating investment and economic growth.
2. **Smoothing Consumption:** Allows individuals to smooth out consumption by borrowing during periods of low income and repaying during high-income periods.
3. **Entrepreneurship:** Supports entrepreneurs by providing capital for business start-ups and expansions.
4. **Economic Activity:** Credit plays a vital role in stimulating economic activity by encouraging spending and investment.
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- 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.