AP State Syllabus AP Board 9th Class Social Studies Important Questions Chapter 9 Credit in the Financial System.
AP State Syllabus 9th Class Social Studies Important Questions 9th Lesson Credit in the Financial System
9th Class Social 9th Lesson Credit in the Financial System 1 Mark Important Questions and Answers
Expand NABARD. (SA-III : 2015-16)
Explain the term NABARD. (SA-II : 2017-18)
National Bank for Agricultural and Rural Development.
9th Class Social 9th Lesson Credit in the Financial System 2 Marks Important Questions and Answers
500 and 1000 rupees notes were demonetized recently. How far is this helpful for Indian economy in your opinion? (SA-III : 2016-17)
The decision of the government to scrape 500 and 1000 currency notes is affecting different class of society in a different way.
Poor class :
This class is affected adversely immediately. Because they use debit or credit card is very less.
Temporarily they face problem but they become normal within month.
Middle class :
They too have to stand on a big queue for short time because they still need the 100 rupee note, for making petty payments.
Upper class :
They too may face trouble for few days but their life would become normal very soon.
Long term benefits :
- Developmental activities would pick up significantly as the tax revenue increases.
- Corruption would reduce.
- Government can reduce rates of taxes.
- Illegal activities would reduce.
- Dowry and other social practices like extravagant marriages would reduce due to white economy.
What do the banks do with the deposits which they collect from the public? (SA-III : 2016-17)
- Banks keep only a small proportion of their deposits as cash with themselves.
- Banks in India these days hold about 15% of their deposits as cash.
- This is kept as provision to pay the depositors who might come to withdraw money from the bank on any given day.
- Banks use the major portion of the deposits to extend loans.
- There is a huge demand for loans for various economic activities.
Financial literacy is the process of equipping oneself with knowledge and information on financial matters. Taking interest in financial literacy helps one to goals and protect oneself from frauds and debts traps. It aims inculate savings habits improve the understanding of financial products leading to effective use of financial services and thus helps better money management further financial literacy facilitates easy access to financial services.
“Financial literacy is an important for consumer protection and financial stability”? Comment on it. (SA-II : 2016-17)
Importance of Consumer protection and Financial literacy :
- Ensure that financial markets are deep and serve the broad population.
- Provide access to financial services for low income households and
- Ensure long-term stability in the financial system.
- Financial markets help to build consumer trust in financial institutions and ensure that financial institutions reach out to serve the needs of the population, including low-income households that often lack access to basic financial services.
Appreciate the role of self-help groups to fulfill the financial needs of poor women. (SA-II : 2016-17)
Self help groups are the building blocks of organisation of the rurql and urban poor. Not only do women become financially self reliant, it is a platform to discuss and act on a variety of social issues such as health, nutrition, domestic violence etc.”
Do you agree with the above statement? Explain your answer. (SA-II : 2018-19)
- The Self Help Groups played a very significant role in empowering rural women in India.
- Self Gelp Group fulfill the commercial requirements of poor women members by doing the small amount of daily savings and making contributions for few months till the time there is sufficient funds in the group to start lending.
- To empower the women they provide buffaloes on loan, sewing machines, and provide loan for small general stores etc.
- Not only these the SHG group protect the women from domestic violence and from social abuse etc.
- SHG’s work for rural and urban poor women.
9th Class Social 9th Lesson Credit in the Financial System 4 Marks Important Questions and Answers
“There are some major differences between the way formal and informal credit providers operate in India. While the formal credit providers follow certain rules and regulations framed by government, informal credit providers do not follow such rules. When the borrower could not repay as per the agreed terms, formal credit providers cannot use any illegal ways to get back the credit, whereas informal credit providers use many coercive and illegal ways which at times lead to borrowers committing suicides. Compared to the formal lenders, most of the informal lenders charge a much higher interest on loans. Banks and cooperative societies need to lend more. This would lead to higher incomes because many people could then borrow cheaply for a variety of different needs. They could grow crops, do business, set up small-scale industries etc. They could set up new industries or engage in business activity. Cheap and affordable credit for all is crucial for the country’s development.”
Q. “The rich households are availing cheap credit from formal lenders whereas the poor households have to pay a heavy price for borrowing from informal sources” – Comment in your own words. (SA-III : 2016-17)
The main reason behind poor house holds depends on informal lenders/sources because banks do not wish to give loans to the poor, who have no collateral. Bank loans require proper documents and collateral. Banks prefer not to lend money to the poor farmers and landless labourers, because more often than not they don’t have the required documents to take loan.
But rich people have more properties, they should submits proper documents to banks for loan.
According to this, rich people are benefited with low rate of interest but poor people are suffered with high rate of interest.
So formal sector loans need to expand in rural areas for the development of poor.
What are the various services provided by the bank to the customers? (SA-II : 2018-19)
Financial institutions means banks may differ in the type and number of services they provide to customers.
The services most often provided include a variety of checking accounts, savings accounts; certificates of deposits, and loans, including car loans and home mortgages.
Additional services may include safe deposit boxes and investment related services. Education loans to students also.
9th Class Social 9th Lesson Credit in the Financial System Important Questions and Answers
What are the two important functions of Banks?
All commercial banks perform the following two functions.
- Banks accept deposits from the customers and pay an interest on the deposits.
- Banks lend loans to the customers and charge interest on the loans.
What is the primary source of income for banks?
The difference between what is charged from borrowers and what is paid to the depositors is the primary source of income for banks.
What is meant by the term ’credit1 (loan)?
- Credit refers to an agreement in which the lender supplies the borrower with money, goods or services in turn for the promise of future payment.
- Credit helps us to meet our needs or expenses.
What is meant by the term collateral?
Collateral is an asset that the borrower owns (such as land, building, vehicles, livestock, deposits with bank) and uses this as a guarantee to a lender until the loan is repaid.
What are formal and informal sources of credit in India?
- The various types of loans can be conveniently grouped as formal sector loans and informal sector loans.
- Among them, formel are loans from banks and cooperatives.
- The informal lenders include moneylenders, traders, employers, relatives and friends, etc.
What is meant by the word ’financial literacy’?
- Financial literacy is the process of equipping oneself with knowledge and understanding on financial matters and to take right financial decisions leading to financial confidence.
- Simply, taking efforts to equip oneself with knowledge on financial matter.
Where do we get information regarding financial literacy?
- Financial literacy material is available on the website of Reserve Bank of India.
- In addition, for the benefit of word illiterate persons in rural and urban and remote areas, State Level Bankers Committee (SLBC), AP has prepared an audio CD on the benefits of saving with banks.
What are “the terms of credit”?
Interest rate, collateral and documentation requirement and the mode of repayment together comprise what is called the terms of credit.
Why do you think bank deposits are called ‘demand deposits’?
- Banks accept the deposits and also pay an amount as interest on the deposits.
- People have the right to withdraw the money as and when they require.
- Since the deposits in the bank accounts can be withdrawn on demand, these deposits are called ‘demand deposits’.
Why do you think the people in rural areas demand for credit?
- In the rural areas, the main demand for credit is for crop production.
- Crop production involves considerable costs on seeds, fertilizers, pesticides, water, electricity, repair of equipment, etc.
- Farmers usually take crop loans at the beginning of the season and repay the loan after harvest.
- There is usually 3 to 4 months gap between farmers buying inputs and selling the crop.
- Repayment crucially depends on income from farming.
Read the passage and answer the following questions.
|The RBI has now initiated processes of improving the financial access to people in rural areas. All banks would be opening rural accounts using Business Facilitators and Business Correspondents. These correspondents would encourage people in rural areas to open bank accounts so that they can save their money and also use loan facilities of the bank. These facilitators would help them connect with the local branch. Electronic identification systems would be used to open these accounts.
Recently, the government initiated providing Unique Identification Number to every citizen of India. All those who have enrolled themselves and given a card called Aadhaar. Those who have this number can open the bank account easily and also get the benefits and services provided by government. Earlier banks used to make it mandatory to put a minimum amount while opening an account.
Nowadays, can open account and there is no compulsion to keep any minimum amount. This is called ‘Basic Savings Bank Deposit Account’ (BSBDA).
1) What has RBI initiated?
The RBI has now initiated processes of improving the financial access to people in rural areas.
2) What would be the uses of RBI’s steps?
They would encourage people in rural areas to open bank accounts, to save money ’ and also use loan facilities of the banks.
3) What initiations has the government taken recently?
Recently, the government initiated providing unique identification number to every citizen of India.
4) What is the name of the card?
5) Is there any mandatory to put a minimum account?
Now, there is no compulsion to keep a minimum amount. This is called ‘Basic Savings Bank Deposit Account’.
Understand the Pie diagram and fiSi the table.
Sources of credit for rural Households in India in 2003
Read the above table and Answer the following questions.
1) Note the change in the loans issued by all formal organizations for the last three decades.
The loans issued by formal organizations has increased from 15.8% in 1961 to 52% in 2003. There is an increase of 36.2%.
2) What was the difference in the loans issued by all informal organizations for the last three decades?
The loans issued by informal organizations have been reduced from 84.0 to 48%. There is a decrease of 36%
What are the reasons for farmers distress in Andhra Pradesh?
- Most of the farmers take loans to meet the expenses of cultivation.
- When crops fail, they cannot repay the loans.
- Again they take a fresh loan from informal lenders.
- Finally fallen in debt-trap and this leads to distress among them.
What are the reasons for the poor notable to get bank loans, nowadays?
- Bank loans require proper documents and collateral.
- Absence of collateral is one of the major reasons which prevent the poor from getting bank loans.
- They have a few assets to keep as collateral.
- They are going to easily accessible informal loans.
How is cheap and affordable credit for all, crucial for the country’s development nowadays?
- Borrowing at higher rates of interest makes borrowers to have left with less income for themselves.
- In somecases it may be more than his income and leading to debt trap.
- For this reasons, banks and cooperatives need to lend more.*
- As these offer loans at lower rate of interest, borrowers use them for a variety of needs.
- Thus the availability of cheap and affordable credit for all is crucial for the country’s development nowadays.
Study the following pie-chart.
1) What does the above chart describe?
It describes the distribution of credit among different households.
2) Describe the pie-chart.
- Out of total credit, poor households take 40% of the credit.
- Out of total credit, rich households take 21% of the credit.
- Well-off households take 32% of credit and stood 2nd place in availing credit.
- Households with few assets take least percentage of loans, i.e. only 7%.
What is the measure taken by government and Non-governmental Organizations to organize rural poor?
- In recent years government and NGOs have found new way for providing loans to the poor.
- The idea is to organize rural poor, particularly women into small Self Help Groups (SHGs) and pool their savings.
- SHGs with 15-20 members save Rs. 25 to Rs. 100, at least for 2 years.
- They can take small loans from group itself to meet their needs.
- Group charges small interest on borrowing members.
- After a year or two, they can get loan from bank without collateral.
What are the measures taken by RBI to help rural agriculture?
1) The Reserve Bank of India sees that banks give loans not just to profit making business and traders but also to small cultivators, small scale industries, to small borrowers, etc.
2) In recent times, besides RBI, NABARD (National Bank for Agricultural and Rural Development) facilitates formal credit organisations in Rural India.