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

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. The Barter System

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. 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. Money eliminates problems of the
Barter System.

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. NEED FOR CREDIT
ON THE
BASIS OF
TIME
ON THE
BASIS OF
PURPOSE
• SHORT TERM
CREDIT
• MID TERM
CREDIT
• LONG TERM
CREDIT

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. SOURCES OF CREDIT
FORMAL SOURCES
COMMERCIAL BANKS
COOPERATIVES
INFORMAL SOURCES
MONEY LENDER
TRADERS
EMPLOYERS
RELATIVES &
FRIENDS
LANDLORDS
OTHERS

10. FORMAL SOURCES
• COMMERCIAL BANKS
• LAND DEVELOPMENT BANK
• REGIONAL RURAL BANKS
• THE GOVERNMENT
• NABARD
• SHGs

11. TERMS OF CREDIT
Interest rate,
Collateral and
documentation
requirement, and
mode of
repayment

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. 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. 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. 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. THANKS
BY
J K DOGRA
PGT ECO
KV NO-3,DELHI CANTT.