Money & Banking

BUILDING ECONOMICS

SUBMITTED TO :
AR. ANUBHAV MITTAL

SUBMITTED BY :
RAHUL VYAS
B.ARCH. VI SEM. III YEAR
1
SOA, AGI, JAIPUR

History

(Barter System)

o In the beginning of trading system there is only barter, a

relationship between two people each of whom has something
which the other wants; for E.g. If a hunter could exchange animal
skins with a farmer for grain, or a fisherman could exchange
decorative seashells for a polished stone axe with a hunter.
o But this system needs the double coincident relationship of both
people. And due to which treading is very difficult. For e.g. if the
hunter need grains in exchange of animal skin but the farmer
doesn't need the animal skin in exchange of grains he need a pair
of shoes for him so in this situat5ion the trade is not possible.

Meaning of Money & its

Types
o

Money (money supply)anything that is generally accepted in payment for

goods or services or in the repayment of debts; a stock concept. Money supply is
the total amount of money available in the economy. (stock)

Wealththe total collection of pieces of property that serve to store value (stock)

Incomeflow of earnings per unit

of time (flow)

Generally the classification of money is based on the material that is being used for
the purpose. According to the material used, the money can be classified as:
1. Metallic Money
o

Full Bodied Coin

Full bodied coin is the one, the face value of which is equal to the quantity of metal
used in it. In this case the face value of the coins is equal to its intrinsic value.
o

Token Coins

A token coin or money is the one whose face value is higher than the value of the
metal contained in it. It is usually as a subsidiary unit or coin. In token coin the
face value is higher than the intrinsic value.

Types of Money
2. Paper money
oRepresentative

Paper Money

When the paper money is backed by an exactly equal amount of in gold or silver
kept in reserve by the issuing authority it is known as representative money. Such
notes could be exchanged for coins when needed and did nothing more then to
represent coins.
oConvertible

Paper Money

The currency notes which can be exchanged for full bodied or standard coins is
called convertible money. Its value is backed by a proportionate reserve of some
precious metal and the confidence in the word of eh issuing authority. It is also
called fiduciary money.
oInconvertible

Paper Money

The currency notes that cannot be converted in full-bodied coins. The issuing
authority gives no promise for its conversion. It can also be called fiat money.

Types of Money
3. Bank or Credit money
Bank money consist of demand deposit, which is drawn by cheques. A deposit is
like any other medium of exchange and being payable, on demand, serves as a
standard of value or unit of an account as it is convertible into standard of value
i.e. money or crash at fixed terms. In the words of J.M. Keynes.

Bank money is simply an acknowledgment of a private debt expressed in the

money of account which is used by passing from one hand to another as an
alternative of money to settle transactions.

Coins
o

The primary social goals for a welfare evaluation of the operation

of an economic system might be maximum freedom of choice for
individual distribution of income, and optimum standards of living
for all individuals as determined by their preferences and
restricted only by available resources and technology. It is obvious
that the goals of a welfare economy can be achieved only in a
money economy.

Money helps the producers and the consumers to spend their

resources with some degree of rationality. In the it is a medium of
exchange for trade. It can be a medium of exchange because it
has a clear value that is trusted by everyone. Money is also a way
to store value for the future.

Functions of Money
o

o
o

Medium of Exchangepromotes economic efficiency by minimizing the

time spent in exchanging goods
and services. Facilitates specialization and division of labor. A good medium
of exchange
o Must be easily standardized
o Must be widely accepted
o Must be divisible
o Must be easy to carry
o Must not deteriorate quickly
Unit of Accountused to measure value in
the economy: assets, goods, services.
Store of Valueused to save purchasing power; allows intertemporal
substitution of income
o most liquid of all assets but High inflation diminishes its store of value
function.

Evolution of the Payments

System
o
o
o
o
o
o

Commodity Money: Gold, Silver, other precious metals, certain

stones, Cigarettes, etc.
Representative money that is backed 100 % by precious metals
(bank notes )
Fiat Money: No consumption or investment use: intrinsically
useless pieces of paper.
Checks
Electronic Payments: EFTs, wire transfers.
E-money: Debit cards (POS), etc.

Definitions of Money
o

From most liquid (narrow) to the least liquid (broad), M0, M1, M2,
M2Y, M3..
o M0 = paper currency and coins
o M1 = M0+ Checking Accounts+ Traveler Checks
o M2 = M1 + Savings Accounts
o M2Y = M2 + Forex Accounts

Banking
Banking can be defined as the business activity of accepting and safeguarding
money owned by other individuals and entities, and then lending out this
money in order to earn a profit.
However, with the passage of time, the
activities covered by banking business have widened and now various other
services are also offered by banks.
Bank
In simple words, we can say that Bank is a financial institution that
undertakes the banking activity ie.it accepts deposits and then lends the same
to earn certain profit.
Banking Company
Any company, which transacts the business of banking defined above is
termed as Banking company
Banking System
Banking systems can be defined as a mechanism through which the money
supply of the country is created and controlled.
10

Working of Bank
Trust is the most important element for a bank to survive. People keep money in a bank
only when they trust that it will be given back to them as and when they demand the same
on at least on the date of maturity in case the same has been given in the shape of fixed
deposits. Of course, there are other reasons also for which people prefer to keep money in
a bank rather than keep at home in their own safe. They can earn some extra money when
the money is kept in saving or fixed deposits. Moreover, they can make payment by
issuance of cheque and need not carry money for their day to day needs.
Cost Indices
The Planning Commission, Government of India, jointly with the Indian construction
industry has set up Construction Industry Development Council (CIDC) to take up activities
for the development of the Indian construction industry.
CIDC has been publishing the Construction Cost Indices since 1998. Construction Cost
Indices monitor variations in overall cost of construction for various types of projects such
as buildings, roads, bridges, railway construction, dams, power plants, industrial structures
including factories etc.
This is done because each sector has a unique pattern of consumption of inputs. The data is
collected across the nation. The data pertains to construction materials, oil, fuel and
lubricants, wages and salaries.
11

Credit
It essentially involves borrowing money by a prior agreement with a bank or
financial organization to pay it back at a later date. How much you can
borrow, and the repayment conditions within which you must pay it back, may
be determined by your credit history and your individual circumstances.
Credit Card
Credit cards are a type of credit that allow users to borrow money from a
bank or credit card issuing company to purchase goods and services or to
withdraw cash. There are countless credit card types, and various forms of
charge cards, store cards, rewards cards and balance transfer cards available.
Here at aqua we offer three different types of credit cards The Classic,
Reward and Advance cards to suit your individual financial needs.
Bank Loan
Other types of credit include loans, which can be paid off in monthly
installments over a particular period. Mortgages are a type of credit often
used to purchase property. They are secured against a property and are
usually paid off in monthly payments over an extended period of time.

12

Credit
Overdrafts
Overdraft facilities are another type of credit that, because of a pre-arranged
agreement authorized by your bank, allow you to withdraw money after the
bank account balance reaches zero. An overdraft has a limit depending on
your account history and needs. They are helpful in providing a safety net to
cover short-term arrears and to compensate for a temporary lack of cash flow.
Be aware that overdrafts incur interest and, depending on your agreement,
may include an administration fee or monthly payment charges.
Higher Purchase & Personal Loans
Other types of credit include: a higher purchase agreement is a mechanism
for borrowing money in order to purchase goods. Once the purchase is paid
off you then rightly own it, but if you don't make regular payments, creditors
can ask you to return the goods. Personal loans allow you to borrow an
agreed amount and pay it back with interest over a fixed period of time.

13

Bibliography

www.unhabitat.org

www.timesofindia.com

www.academia.com

www.Indianeconomic.com

www.worldeco.com

14

Thank You

15