PODAR INTERNATIONAL SCHOOL (CBSE)

Practice Sheet-1
Grade: X Topic: Ch3 Money and Credit
Subject: Social Answer Scheme Maximum Marks: 25
Science

Question 1
(a) When does credit play a positive role? [1]
When the loan repayment is done on time and profits are
made.
Textbook Page No. 43

(b) What is the meaning of barter system? [1]

The exchange of goods properties, services, etc. for other
goods etc without using money is known as ‘barter
system.’
Textbook Page No. 39

(c) Who supervises the functioning of formal source of loans? [1]

Reserve Bank of India.
Textbook Page No. 48

(d) Why credit is mainly demanded in rural areas? [1]

In rural areas, the main demand for credit is for crop
production.
Textbook Page No. 44

(e) What are demand deposits? [1]

The deposits in the bank that can be withdrawn on
demand.
Textbook Page No. 40

(f) What do banks do with the money that is deposited there? [1]
Banks keep only a small proportion of their deposit as
cash with themselves. They use the major portion of
deposit to extend loans and therefore it becomes their
source of income.
Textbook Page No. 40

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 Question 2
(a) How does RBI supervise the functioning of banks in giving out [3]
loans?
The Reserve Bank of India supervises the functioning of
formal sources of loans. For instance, we have seen that
the banks maintain a minimum cash balance out of the
deposits they receive. The RBI monitors that the banks
actually maintain the cash balance. Similarly, the RBI sees
that the banks give loans not just to profit-making
businesses and traders but also to small cultivators, small
scale industries, to small borrowers etc. Periodically,
banks have to submit information to the RBI on how much
they are lending, to whom, at what interest rate, etc.
Textbook Page No. 48

(b) What are demand deposits? Which interesting facility do they [3]
offer?
When people deposit money in the bank they also have
the provision 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withdrawn on demand, these deposits are called demand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. Demand deposits offer another interesting
facility. It is this facility which lends it the essential
characteristics of money (that of a medium of exchange).
People can use cheques instead of cash for their
payments.
Textbook Page No. 40

(c) Which are the two major sources of credit for rural household [3]
of India? Which one of them is the most dominant source of
credit for rural household?
Moneylenders and cooperative societies are the two major
sources of credit for the rural households in India.
Money lenders are he most dominant source of credit for
the house-holds in rural India.
Textbook Page No. 44
Question 3
(a) Why is money called a medium of exchange? Why is it [5]
accepted as a medium of exchange in India
Since money acts as an intermediate in the exchange
process, it is called a medium of exchange.
In India, the Reserve Bank of India issues currency notes
on behalf of the central government. As per Indian
law, no other individual or organisation is allowed to issue
currency. Moreover, the law legalizes the use of rupee as a
medium of payment that cannot be refused in settling

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 transactions in India. No individual in India can legally
refuse a payment made in rupees. Hence, the rupee is
widely accepted as a medium of exchange.
Textbook Page No. 39

(b) Explain the functioning of co-operatives society in India. [5]

In India besides banks, the other major source of cheap
credit in rural areas are the cooperative societies (or
cooperatives). Members of a cooperative pool their
resources for cooperation in certain areas. There are
several types of cooperatives possible such as farmers
cooperatives, weavers cooperatives, industrial workers
cooperatives, etc. Krishak Cooperative functions in a
village not very far away from Sonpur. It has 2300 farmers
as members. It accepts deposits from its members. With
these deposits as collateral, the Cooperative has obtained
a large loan from the bank. These funds are used to
provide loans to members. Once these loans are repaid,
another round of lending can take place.
Krishak Cooperative provides loans for the purchase
of agricultural implements, loans for cultivation
and agricultural trade, fishery loans, loans for
construction of houses and for a variety of other
expenses.
Textbook Page No. 47
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