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MONEY AND CREDIT I. TECHNICAL TERMS 1. Money 2. Credit 3. Financial system 4. Banking 5. Credit money 6. Standard money 7.

Barter system 8. Collateral 9. Cheque 10. Credit card 11. Bank rate 12. Saving 13. Landlords II. NCERT INTEXT QUESTIONS 1. How does the use of money make it easier to exchange things? ( text book page 40 ) Money provides better exchange facilities to eliminate the problem of barter system. In case of barter system there was the problem of double coincidence of wants. Now it is no longer necessary to the shoe manufacturer to look for a farmer. For exchange of goods with each other. All he has to do is to find a buyer for his shoe. After selling the shoes in the market he can buy wheat and any other luxury items. Therefore, money acts as an intermediate in the exchange process. 2. Can you think of some examples of good / services being exchanged or wages being paid through barter? ( text book page 40 ) For example, if a person who has surplus of wheat wants cloth and another person having surplus of cloth wants wheat. Both the person can meet and exchange their surplus through barter. In an another example, a person having surplus of shoes wants Horse carts for transport his shoes in the market then both can exchange through barter. 3. M. Salim wants to withdraw Rs. 20,000 in cash for making payments. How would he write a cheque to withdraw money? ( text book page 42) Date : 01/01/2006 PAY self .. or Bearer RUPEES ..Twenty Thousand only Rs. 20,000 /.. A/c No. 12692 Janta Co op Bank

( New Delhi ) Pataudi House Darya Ganj New Delhi 110002 424556 110003089, 000713 20

4. Tick the correct answer. After the transaction between Salim and Prem (i) Salims balance in his bank account increases and Prems balance increases. (ii) Salims balance in his bank account decreases and Prems balance increases. (iii) Salims balance in his bank account increases and Prems balance decreases. 5. Why are demand deposits considered as money? Demand deposits are payable on demand through cheques or withdrawal slips. Demand deposits also helpful for making payment to the other parties instead of cash payment. The payer who has an account with the bank makes out a cheque for a specific amount. A cheque is a paper instructing the bank to pay a specific amount from the persons account to the person is whose name the cheque has been made. So demand deposits considered as money. 6. Fill in the following table: Salim Swapna Why did they need credit? What was the risk? What was the outcome? Ans: Salim Swapna Why did they need credit? For shoes manufacturing To meet the expenses of cultivation What was the risk? Not delivering the good on time Crops can fail What was the outcome? At the end he was able to deliver She caught in debt and has to sell the order the part of land to repay the loan 7. Supposing Salim continues to get orders from traders. What would be his position after 6 years? If Salim continuous to get orders from traders then after 6 years he will be in a better financial position and one of the big shoe manufacturing in his locality. Therefore in this situation Salim need not to borrow money from any institution because he is able to deliver the order and can earn good profit. 8. What are the reasons that make Swapnas situation so risky? Discuss factors pesticides; role of moneylenders; climate. Following are the reasons that made Swapnas situation so risky: (i) Failure of crops. (ii) Inability to pay loan which pushed her into a debt trap. (iii) Swapna had to sell a part of her land to repay the loan. Pesticides: Pesticides are the fertilizers which protect crops from its failure by killing pests, who destroy the crop. Role of moneylenders: Moneylenders play a very crucial role for a small farmer. They can take loan from moneylender to meet the expenses of cultivation, hoping that their harvest would help to repay the loan.

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Climate: Climate of India varies from time to time so farmers sometime get benefits of climate and sometime they have to suffer for this. If the climate is in the bad condition then it can spoil the crops and the farmers will suffer loss. Why do lenders ask for collateral while lending? Collateral is an asset that the borrower owns ( such as, land, buildings, vehicle, deposits with banks ). Lender ask for collateral while lending because of security and it is a guarantee to a lender until the loan is repaid and in case of fail to pay the loan lender has the right to sell the assent or collateral to obtain payment. Given that a large number of people in our country are poor, does it in any way affect their capacity to borrow? Yes, if a large number of people in our country are poor it affects their capacity to borrow, because they dont have any assets or collateral security to pledge lender and know that they are not able to repay the loan so they dont want to borrow money. Fill in the blanks choosing the correct option from the brackets. While taking a loan, borrowers look for easy terms of credit. This means .. (low / high ) interest rate, . ( easy / tough ) conditions for repayment, (less /more) collateral and documentation requirements. Low, easy,less. List the various sources of credit in Sonpur. Following are the sources of credit in Sonpur; (i) Village Lender, (ii) Village Trader, (iii) Bank and (iv) Landowner. Compare the terms of credit for the small farmer, the medium farmer and the landless agricultural worker in Sonpur. Small farmers get loan from village lender at 50% interest rate and have to repay the loan in terms of money and by supplying crops to them. Medium farmers get loans from Bank at lower interest rate of 8.5% p.a. and can be repaid anytime in the next three years. Landless agricultural or labourer need credit to meet the daily expenses, so they have to depend on the borrowing from their landowner. The landowner charges 5% interest and the labourer repay the money by working for the landowner. Why will Arun have a higher income from cultivation compared to Shyamlal? Arun will have a higher income from cultivation because he has better credit terms than Shyamlal. Arun has to pay lower interest and can repay his loan in the next three years. Arun can also get the fresh loan against the cold storage receipt the potatoes. But on the other hand, Shyamlal has to pay more interst and he has to repaid when crops are ready for harvest and besides the interest, the farmers has to make promise to sell the crop to trader. Can everyone in Sonpur get credit at a cheap rate? Who are the people who can? No, everyone cannot get credit at a cheaper rate. The people who have more land and some storage of goods can provide collateral as security get loan at low rate of interest like Arun. Tick the correct answer (i) Over the years Ramas debt a) Will rise

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b) Will remain constant c) Will decline (ii) Arun is one of the few people in Sonpur to take a bank loan because a) Other people in the village prefer to borrow from the money lenders. b) Banks demand collateral which everyone cannot provide. c) Interest rate on bank loans is same as the interest rate charged by the traders. Ans: (i) A (ii) B What are the difference between formal and informal sources of credit? Difference between Formal and Informal sources of credit. Points of Difference Formal sources Informal sources 1. Interest rate In the formal sources the interest in the informal sources they on loan is less charge more interest on loan. 2. Sector Generally 90% rich people get 85% poor people get loan from loan from this sources of credit informal sources of credit 3. Examples Formal sources of credit are Bank Informal sources of credit are and cooperative societies moneylenders, trader, employers, relative and friends. Why should credit at reasonable rates be available for all? Higher cost of interest on borrowing means a larger part of the earnings of the borrowers is used to repay the loan. Hence, borrower have less income left for themselves. In certain cases, the high interest rate of borrowing can mean that the amount to be repaid is greater than the income of the borrower. This could lead to increasing debt and debt trap. Also, people who might wish to start on enterprise by borrowing may not do so because of the high cost of borrowing. Should there be a supervisor, such as the Reserve Bank of India, that looks into the loan activities of informal lenders? Why would its task be quite difficult? Yes, there should be a supervisor, such as the Reserve Bank of India, that looks into the loan activities of informal lenders. Its task is quite difficult because there is no organization which supervises the credit activities of lenders in the informal sector. They can lend at whatever interest rate they choose. Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer households? The share of formal sector credit is higher for the richer households because they are more education than rural people and know that bank charges low interst on borrowings. They also have assets and collateral security to deposit in the bank for loans. What do you mean by landlord as lender of money? Landlords: according to the A.I.R.C.S. the landlords provided a little more than 3 per cent of the agriculture finance. These figures are of 1951 52 when the bulk of landlords were still in India. In 1961 62, the share increased to 14.5 %. Though Zamindari has been abolished and landlords are no more officially, on the agricultural scene, yet the share of loan from them remains around 10 per cent. What is meant by local moneylenders? The professional moneylenders and the agriculturist money lenders who carried on moneylending as a side business have been the most important and popular source of rural credit in the past. They were popular in rural areas because of their easier procedure of lending and their willingness to lend for unproductive

purposes. These money lenders charged a very high rate of interest and cheated the illiterate and innocent farmers. 23. What is self help groups (SHGs) ? In order to help formal credit system SHGs have emerged recently. SHGs produce thrift by minimum contribution from each member. Credit is sanctioned to the needy members to be repayable in small instalments at reasonable rate of interest. The scheme has helped in improving the economic conditions of the rural people. 24. Why are banks willing to lend to women organized in SHGs? Any case on non repayment of loan by anyone member is followed up seriously by other members in the group and it is the group which is responsible for repayment of the loan. So, banks are willing to lend to the poor women when organized in SHGs. III. VERY SHORT ANSWER TYPE QUESTIONS 1. Define Barter System. Barter refers to the direct exchange of goods and services. In this way, barter system refers to that system by which one commodity is exchanged for antoher without use of money. 2. Define Money. Money may be anything chosen by common consent as a medium of exchange. 3. What are formal financial institutions? Commercial banks, cooperatives and the regional rural banks are the formal institutions of credit. 4. What is meant by informal financial institutions? The informal framework for deployment of credit and savings in India comprises the local moneylenders landlords, self help groups, chit fund and private finance companies. 5. What is meant by Commercial Bank? A commercial Bank is an establishment for safe custody of money, which it pays out on customerss demand order or otherwise. In other words, institutions accepting chequeable deposits and guaranteeing loans are called commercial banks. 6. Describe money as a medium of exchange. Money as a medium of exchange or medium of payments is used in the sale and purchase of goods and services. Anyone can get commodities in exchange of money. Money removed the problem of barter. Money offer freedom of choice. Its owner can use it at the article, place, time and the way he likes. 7. What is credit? Credit means giving money on loan to needy persons. 8. What is a cheque? A cheque is a paper instructing the banks to pay a specific amount from the persons account to the person in whose name the cheque has been written. 9. Which households take loans from the formal sector institutions? (i) Poor households (ii) Rich households 10. Modern form of money is linked with which system? Modern form of money is linked with banking system. 11. Name the founder of Grameen Bank. Professor Muhammad Yunus was the founder of Grameen Bank. 12. What does RBI stand for?

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RBI stands for Reserve Bank of India. What was the share of Commercial Banks in the rural credit in the year 2003? The share of Commercial Banks in the rural credit in the year 2003 and 25%. What is meant by Collateral? Collateral is an asset that the borrower owns, (such as land, building, etc.) and uses this as a guarantee to a lender until the loan is repaid. What do you mena by terms of credit? Interest rate, collateral and documentation requirement and the mode of repayment are known as terms of credit. The terms of credit vary substantially from one credit arrangement to another. Is there any organization or corporate body which supervises the credit activities of lenders in the informal sector? No, there is no organizations or corporate body. Even the government is unable to interfere in the activities of lenders in the informal sector. Name the source of credit available in India. Following are the source of credit available in India: Formal source of credit Informal source of credit Do you think that the banks and cooperative societies should increase their lending particularly in the rural areas? Yes, we think that the banks and cooperatives societies should increase their lending particularly in the rural areas. Because of this, the dependency of informal source of credit can easily be removed. What is meant by Currency? Currency is a modern form of money which consists of paper notes and coins. For example, Rupees, Dollar, Yen, Pound etc. What do you mean by the term money supply? Money supply means the total amount of money available in an economy at a particular time. What is meant by Chit Fund? Chit means a transaction under which a person enters into an agreement with the specified number of persons that everyone of them shall subscribe a certain amount of money by way of periodic installments over a definite period. The total collected amount is called Chit Fund. What is debt trap? It is a situation in which a person takes a loan and due to unavoidable circumstances he is not able to repay his loan. Now faces a difficult situation and has to take a tough decision, either he has to borrow a fresh loan or sell some part of his property to repay the earlier loan. Describe the term local moneylenders. Landlords: according to the A.I.R.C.S. the landlords provided a little more than 3 percent of the agriculture finance. These figures are of 1951 52 when the bulk of landlords were still in India. In 1961 62, the share increased to 14.5 %. Though Zamindari has been abolished and landlords are no more officially, on the agricultural scene, yet the share of loan from them remains around 10 per cent. What is meant by local moneylenders? The professional moneylenders and the agriculturist money lenders who carried on moneylending as a side business have been the most important and popular source of rural credit in the past. They were popular in rural areas because of their easier procedure of lending and their willingness to lend for unproductive

purposes. These money lenders charged a very high rate of interest and cheated the illiterate and innocent farmers. 25. What is self help groups (SHGs) ? In order to help formal credit system SHGs have emerged recently. SHGs produce thrift by minimum contribution from each member. Credit is sanctioned to the needy members to be repayable in small instalments at reasonable rate of interest. The scheme has helped in improving the economic conditions of the rural people. 26. Why are banks willing to lend to women organized in SHGs? Any case on non repayment of loan by anyone member is followed up seriously by other members in the group and it is the group which is responsible for repayment of the loan. So, banks are willing to lend to the poor women when organized in SHGs. IV. SHORT ANSWER TYPE QUESTIONS 1. Explain the problems of Barter System. Some important problems of barter system are: (i) Lack of Double Coincidence: Double coincidence is the most difficult problem of barter system. In barter system, a person having a surplus of one commodity should be able to find another person, who not only wants that commodity, but has something acceptable to offer in exchange. If wants are not matched exactly, no exchange will take place. (ii) Lack of Divisibility: There are certain costly goods, such as horse, cow, table etc., which can be useful as a whole. They will lose their identity and utility if these are cut into small pieces. These commodities cannot be exchanged in pieces for different things. (iii) Lack of Measure of Value: there is no common measure in the barter system. All commodities do not posses equal values. (iv) Problem of Store of Value: barter system does not provide any method of storing purchasing power. 2. Explain the classification of money. Money may be classified into three major headings: (i) Full Bodied Money: The money, whose value as a commodity for non monetary purposes is as great as its value as a money is known as full bodied money. (ii) Representative Full Bodied Money: Instead of actual metallic coins paper money is used. Though its non monetary value is negligible but it represents in circulation an amount of money with a commodity value equal to the value of money. The money which has higher face value than its intrinsic value is known as Representative Full Bodied Money. (iii) Credit Money: The money whose money value is greater than the commodity value of the material from which the money is made is known as credit money. It can be in the forms of token coins, representative money, circulating promissory notes, issued by central government and deposits at banks. 3. Explain the two functions of money. (i) Medium of exchange: Money as a medium of exchange or medium of payments is used in the sale and purchase of goods and services. Anyone can get commodities in exchange of money. It means that we can get goods and services in exchange of money available with us. In this way, money removes one of the problem of barter system. (ii) Store of value: Money serves as a store of value (i.e., wealth in liquid form). In modern world, people want to have some currency notes or coins in their pocket, home, bank accounts etc., to use any time for the purchase for anything. It is possible only with the help of money. We can store value in the form of generalized purchasing power and can use the moment we like.

4. The modern currency is without any use of its own as a commodity. Why is it accepted as money? No doubt, modern currency i.e., notes, and coins is without use as a commodity. Even then it is accepted as a money because it has got the sanction of the government of the country to be used as legal tender money. Though notes and coins do not have the real worth as a commodity. Notes carries declaration by the Reserve Bank of India I promised to pay the bearer the sum of money rupees. This statement is not written on 1 rupee notes. 5. (i) What is the share of formal sector in the total credit? (ii) Suggest two measures for improving the share of formal sector in total credit. (iii) Why is money lender still the largest single source of credit? (i) The share of formal sector in the total credit is 52.5 %. (ii) a) Reaching out to remote areas of the country: One of the most important areas of improvement is to get in touch with remote location not having proper banking facilities. b) Easy Procedures: The process of granting credit should be easy and quick. Also minimum documentation should be required for granting the credit to the borrower. (iii) Money lenders are the largest single source of credit because they are easily approachable and available. Also they have strong local influence to grant credit and recover it. 6. Name two formal and two informal sources of rural credit in India. State any two advantages of formal source of credit. Formal Sources of Rural Credit in India are: (i) Cooperative Society (ii) Commercial Banks Informal sources of Rural Credit in India (i) Money lenders (ii) Self Help group Following are the advantages of formal source of credit: (i) Government Concession: One of the most important advantages of formal credit is that the borrower can get concessional rate of interest based on government policy of rural development. (ii) Limitless Credit: Money lenders cannot provide high amount of credit which can be given by commercial bank or financial institutions. 7. Explain any two features each of formal sector loans and informal sector loans. Following are the two features of each formal sector and informal sector loans. (a) Formal Sector Loans (i) The terms of credit and interest are fixed. There is a transparency in terms and conditions. (ii) Loans can be obtained for any purpose after fulfilling the formalities. (b) Informal Sector Loans (i) Terms of credit and interest are not fixed. Interest can be charged at the rate which the lender choose. (ii) Loans can easily be obtained without any documentation. V. LONG ANSWER TYPE QUESTIONS 1. Discuss the role of money in an economy. Some important roles of money are given below:

(i) Role of money in consumptions: As we know that money is the medium of exchange. So we can exchange money with any commodity and services at any time and can satisfy our wants. (ii) Role of money in trade: With the help of money trading process becomes easy. Money can be given in the exchange of goods and received against the sale of goods. So money is also helpful in the process of trading. (iii) Role of money in budgeting: Government revenue and expenditure can be measured in terms of money. Economic policies of tax and interest on loan are also formulated on the basis of money. (iv) Role of money to measure national income: National income of the country is calculated in terms of money which shows the standard of living of people. Without money measurement of national income cannot be done. (v) Role of money in production: In production process entrepreneur has to compensate all factors of production for their contribution for which he pays rent to land, wages to labour, interest to capital and profit to enterprise. 2. Explain the functions of Commercial Banks. Following are the functions of Commercial Banks: (i) Accepting deposits: The most significant and traditional function of commercial bank is accepting deposits of public under saving account, current account and fixed deposits. They play the role of custodian of money. (ii) Providing loans: The second important functions of commercial bank is advancing loans to the public to fulfill their needs of money. Loan may be granted in the form of cash credit, ordinary loans, overdraft, discounting of bills etc. (iii) Credit Creation: Money deposited by the people is given to other people in the form of loan to satisfy their wants of money. People who take loan from banks, do not spend whole money, they also deposit money in their bank account. The process continues in this way, money multiplies and bank made a system of credit creation. (iv) Transfer of funds: Commercial banks are also able to transfer funds of a customers account through the cheques, drafts, credit card, cash order etc. (v) Agency functions: In modern time, commercial banks also act as an agent of the customer. They accept subscription for shares from various shareholders on behalf of their respective company. 3. How does a central bank control the availability of credit? The Central Bank controls the availability of credit in the following manner: (i) To encourage the priority sectors for overall growth. (ii) Facilitate the flow of adequate volume of bank credit to its industry, Agriculture and trade. (iii) To keep inflation pressure under check. (iv) To ensure that Credit is not diverted to undesirable purposes. (v) To facilitate the Development of Indian economic growth. Types of Credit Control a. Quantitative Method (i) Bank Rate Policy: by controlling the ways and means advances to the government. (ii) Open Market Operation: by controlling Short term liquidity in the market. (iii) Variation of cash reserve ratio: by increasing or reducing CRR or SLR. (iv) Fixation of lending rate: control by increasing or reducing the rate of primary or secondary lending rates (v) Credit squeeze: by controlling the amount of bank credit as a certain limit and fixing maximum limit for commercial borrowings. b. Qualitative Method

(i) Fixation of Margin Requirement (ii) Regulation of consumer credit (iii) Rationing of credit (iv) Prior authorization of schemes (v) Moral suasion (vi) Direct action 4. Whether the credit would be useful or not, depends on some factors. Explain them. Whether the credit would be useful or not, depends on a number of factors like (i) Risks involved in Repayment: whether there is some support against a loss, terms of credit etc. it is a fact that in situation with high risks, credit might create further problems for the borrower. For example, credit taken by farmers for cultivation might create problems for the farmer at sometimes. Crop production involves high costs on inputs such as HYV seeds, fertilizers, pesticides, irrigation etc. Farmers generally take loans at the loan repayment impossible. Then in order to repay the loan sometimes, they become bound to sell part of their land. So, their situations become worse than before. (ii) Fixed Interest Cost: There is a fixed interest cost involved in the repayment of the loan. This creates additional burden on the personal finances of the borrower. 5. Explain the drawbacks of informal source of credit and formal source of credit. The main sources of formal credits in India are Commercial Banks, Regional Rural Bank, Cooperatives etc. The main drawbacks of these sources of finance are: (i) Larger Processing Time: The processing time of these sources of credit is large and it takes a lot of time to get the loan disbursed from the bank. (ii) Larger Documentation Required: There is a lot of documentation required for availing loans from the banks. At times, these requirements are so difficult to meet that the borrower fails to get the required loan. (iii) Bribe: At times the borrower has to pay bribe to the official to get loan. This is more in rural and remote parts of the country. In the urban centres, this problem is not that huge. (iv) Security: most to the banks demand security for the loans disbursed. This makes it difficult for the people who cannot provide security to the bank. The main source of informal credit is Self Help Groups (SHGs), Non Governmental Organizations (NGOs), Landlord, Moneylender, Friends / Relatives etc. The main drawbacks of this source of credit are as follows: 1. High interest Rate: Due to higher risk involved, the rate of interest on those loans is usually high. This makes the loan very expensive and creates a lot of risk in the personal finances of the borrower. 2. Exploitation: There is exploitation where the loan is availed from the landlord or somebody with criminal background. There are threats and intimidation to the borrower in case he or she defaults in the repayment. 3. No Legal Recourse: in the case of informal sources of credit, there is any legal recourse as there is no written agreement between the lender and the borrower. This also leads to exploitation for which no legal help can be availed. 6. What is SHGs? Describe the functioning of SHGs. SHG is a group formed by the community women, which has specific number of members like 15 or 20. In such a group the poorest women would come together for emergency disaster, social reasons,

economic support to each other have ease of conversation, social interaction and economic interactions. Functions of SHGs To sensitize women of target area for the need of SHG and its relevance in their empowerment process. To create group feeling among women. To enhance the confidence and capabilities of women. To develop collective decision making among women. To encourage habit of saving among women and facilitate the accumulation of their own capital resource base. To motivate women taking up social responsibilities particularly related to women development. 7. Why are transactions made in money? Explain with suitable example. Transactions are made in money as it is the common medium of exchange. It helps in exchanging the goods or services which have different measure of quantity. Money has helped to remove the barter system in the economy which has cumbersome in the olden days. For example: if I have to buy a Golden Social Science X book then I need to determine the price of the book available in the market. I will have to arrange money for ht book which can be bought from the market. Imagine, if there was no money then I would have to get the book only by sacrificing some good available with me. This was the way it was done at the time of barter system. Hence, money as a medium of exchange has greatly helped in easing the transactions in the economy and across the world. VI. CHOOSE THE CORRECT ANSWER 1. A payment made by account payee cheque means a. Anyone can present the cheque and get payment from the bank. b. Only drawee can deposit the cheque and get credit in his bank account. c. The cheque can be given by drawee to third party who can get credit in his account d. None of these. 2. There is restriction of withdrawing money in a a. Savings account b. Current account c. Fixed deposit account d. None of these 3. Interest payment will be higher on a house loan on account of a. High tenure of loan b. High rate of interest c. High risk of borrower profile d. All of these 4. More money chasing less goods and services means a. Inflation b. Deflation c. Stagflation d. None of these

5. Formal source of credit comes form a. Landlord b. Relatives or friends c. Commercial banks d. Businessman 6. Which system has been replaced by money as a medium of exchange? a. Exchange system b. Commodity system c. Barter system d. Double coincidence of wants 7. Which of the following does not come under modern forms of money? a. Currency b. Cheque payments c. Demand deposits d. Loan payments 8. Collateral is an a. Asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid. b. Asset that the borrower owns and uses this at the time of the repayment of loan. c. Asset that the borrower owns and uses at the time of receiving a loan d. Asset that the borrower has to give to the lender till the time loan is repaid. 9. Informal sources of credit does not include a. Traders b. Relatives and friends c. Employers d. Cooperatives 10. SHGs stand for a. Self House Groups b. Self Help Groups c. Society Help Groups d. Social Help Groups 11. In Sonpur village, everyone is not able to get credit from a bank because a. They dont want to take a bank loan b. Banks demand collateral which everyone cannot provide c. Interest rate on bank loans are high d. None of the above 12. Moneylender is an example of a. Informal source of credit b. Formal source of credit c. Banks d. Reserve Bank of India 13. ATM stands for a. Automatic Time Machine b. Any Time Money c. Automatic Teller Machine

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d. Automated Teller Machine Which one of the following is an example of plastic money? a. Cheque b. Bank overdraft c. Credit card d. Demand draft Which one of the following is widely accepted in India? a. Dollar b. Yen c. Pound d. Rupees How much of bank deposits is kept by the commercial banks for their day to day transactions? a. 3.5% b. 9% c. 4.75% d. 15% Number of Central bank in a country is a. Two b. Three c. One d. Five The primary function of money is a. Medium of exchange b. Store of value c. Transfer of value d. Distribution of National Income The name of Central Bank of India is a. Bank of India b. SBI c. Central Bank d. RBI The main function of Reserve Bank of India is a. Providing loans b. Credit control c. Dealing with World Bank d. None of these Reserve Bank of India was nationalized on a. 1st April 1947 b. 1st April 1949 c. 1st April 1948 d. 1st April 1960 Credit creation is controlled by a. Central Government b. Central Bank

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c. Commercial Bank d. World Bank Which of the following method of exchange was used in the ancient time? a. Money method b. Barter system c. Credit method d. Accrual system Which of the following monetary system is followed by India? a. Credit currency standard b. Paper currency standard c. Plastic currency standard d. None of these Reserve Bank of India grants loans to a. General Public b. Private companies c. Commercial banks d. All of these The terms of credit includes a. Interest rate b. Collateral c. Documents required d. Mode of repayment e. All of these The share of cooperative societies in rural households in the year 2003 was a. 28% b. 27% c. 25% d. 22% Who is the founder of Grameen Bank? a. Prof. Coalborn b. Dr. Naseem Ahmad c. Prof. G.D.H. Cole d. Prof. Muhammad Yunus KEY 1. 2. 3. 4. 5. 6. 7. 8. 9.

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10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28.

B B A D C D D C A D B C A B B C E B D

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