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Class 10 Money and Credit: cheat sheet
CBSE Social Science. Barter and money, modern forms of money, how banks link savers and borrowers, terms of credit, formal and informal loans, and self-help groups.
Key ideas
- Barter needs a double coincidence of wants; money removes that need by acting as a medium of exchange.
- Modern money is currency, issued by the RBI, and bank deposits, which can be withdrawn on demand, for example by cheque.
- Banks keep only a small part of deposits as cash and lend the rest at a higher interest rate.
- Terms of credit are the interest rate, collateral, documents and the mode of repayment.
- Formal lenders (banks, cooperatives) are supervised by the RBI and charge less; informal lenders (moneylenders, traders, relatives) often charge much more.
- Credit helps when the loan earns more than it costs, but can push a borrower into a debt trap when things go wrong.
- Self-help groups of about 15–20 people, mostly women, save together and lend to members without collateral.
Remember
| Simple interest | principal × rate × time (rate and time in the same unit) |
| Collateral | an asset pledged as a guarantee: land, a building, livestock |
| Formal sources | banks, cooperatives |
| Informal sources | moneylenders, traders, relatives, friends |
| Grameen Bank | Bangladesh, founded by Muhammad Yunus |
Watch out
- Mixing a monthly rate with a yearly one: 5% a month is 60% a year.
- Thinking banks keep all their deposits as cash.
- Calling a moneylender a formal source of credit.
Worked example
₹21,000 is borrowed for 12 months. Compare the simple interest at a moneylender’s 5% a month and a bank’s 9% a year.
Working: 21,000 × 5% × 12; 21,000 × 9% × 12/12
Answer: moneylender ₹12,600, bank ₹1,890
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