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    The document discusses various topics related to money and credit. It first provides three points about how high-risk credit can create further problems for borrowers by trapping them in debt due to high interest rates charged by informal sources of credit. It then states that affordable credit is important for a country's development. It proceeds to differentiate between the formal and informal credit sectors in India, noting that formal sectors are regulated while informal sectors operate for profit without oversight. It explains that self-help groups aim to provide timely loans to the poor at reasonable rates to support self-employment. Finally, it provides details about a housing loan taken by Megha, including the loan amount, duration, documents required, interest rate, repayment mode, and collateral

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    The document discusses various topics related to money and credit. It first provides three points about how high-risk credit can create further problems for borrowers by trapping them in debt due to high interest rates charged by informal sources of credit. It then states that affordable credit is important for a country's development. It proceeds to differentiate between the formal and informal credit sectors in India, noting that formal sectors are regulated while informal sectors operate for profit without oversight. It explains that self-help groups aim to provide timely loans to the poor at reasonable rates to support self-employment. Finally, it provides details about a housing loan taken by Megha, including the loan amount, duration, documents required, interest rate, repayment mode, and collateral

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    © All Rights Reserved
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    8 views2 pages

    MONEY AND CREDIT-worksheet

    Uploaded by

    Javed
    The document discusses various topics related to money and credit. It first provides three points about how high-risk credit can create further problems for borrowers by trapping them in debt due to high interest rates charged by informal sources of credit. It then states that affordable credit is important for a country's development. It proceeds to differentiate between the formal and informal credit sectors in India, noting that formal sectors are regulated while informal sectors operate for profit without oversight. It explains that self-help groups aim to provide timely loans to the poor at reasonable rates to support self-employment. Finally, it provides details about a housing loan taken by Megha, including the loan amount, duration, documents required, interest rate, repayment mode, and collateral

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    of 2

    MONEY AND CREDIT

    WORKSHEET

    1. ‘High risks credit might create further problems for borrower’.


    Prove the statement with three valid points.

    Money borrowed on higher rates of interest will usually increase the debt burden or
    debt trap.
    Debt trap is a situation where the debtor will not be able to repay the debt incurred.
    Informal sources of credit charge higher rates of interest.

    2. Do you think cheap and affordable credit is important for our country?
    Yes, cheap and affordable credit is important for our country. It is crucial for a nation’s
    development.

    3. Differentiate between the formal and informal sectors of credit in India.

    FORMAL SECTOR INFORMAL SECTOR


    The formal sources of loans that the The informal sources include all small and
    government registers are followed by laws scattered units that are generally beyond the
    and regulations. government’s control, they must obey its
    laws and regulations.
    Social welfare is the primary motive for The profit-making is the primary motive for
    formal sources. informal sources.
    Examples: Banks and cooperatives Examples: Moneylenders, merchants,
    workers, relatives and friends etc.
    4. What is the basic idea behind the SHGs for the poor? Explicit in your own words.

    The basic idea behind the SHGs is meant to create self - employment opportunities
    for the poor. The SHGs help poor borrowers to overcome the problem of lack of
    collateral. They can get timely loans for a variety of purposes and at a reasonable
    interest rate. Moreover, SHGs are the building blocks of organizations of rural poor.

    5. A house loan Megha has taken a loan of Rs.5 Lakhs from the bank to purchase a
    house. The annual interest rate on the loan is 12% and the loan is to be repaid in
    10years in monthly instalments. Megha had to submit to the bank, documents
    showing her employment records and salary before the bank agreed to give her the
    loan. The bank retained as collateral the papers of the new house, which will be
    returned to Megha only when she repays the entire loan with interest.
    Fill the following detail of Megha’s housing loan:
    Loan amount (in Rupees) 5 lakhs
    Duration of loan 10 years
    Documents required Employment records and salary
    Interest rate 12%
    Mode of repayment Monthly instalments
    Collateral Papers of the new house

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