Post on 14-Jun-2015
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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.
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.
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.
Money eliminates problems of the Barter System.
BORROWERS
People takeloans
People repayloans withinterest
DEPOSITORS
People makedeposits
People makewithdrawals andget interest
Banks mediate between the Depositors and the Borrowers.
NEED FOR CREDIT
ON THE BASIS OF TIME
ON THE BASIS OF PURPOSE
• SHORT TERM CREDIT
• MID TERM CREDIT
• LONG TERM CREDIT
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,IMPROVEMENT IN TECHNOLOGY
UNPRODUCTIVE LOANS:SOCIAL RELIGIOU CEREMONIES,SETTLING OF OLD LOANS
SOURCES OF CREDIT
FORMAL SOURCES
COMMERCIAL BANKSCOOPERATIVES
INFORMAL SOURCES
MONEY LENDERTRADERSEMPLOYERSRELATIVES &
FRIENDS LANDLORDS
OTHERS
FORMAL SOURCES
• COMMERCIAL BANKS
• LAND DEVELOPMENT BANK
• REGIONAL RURAL BANKS
• THE GOVERNMENT
• NABARD
• SHGs
TERMS OF CREDIT
Interest rate, Collateral and documentation
requirement, and mode of
repayment
CREDIT(LOAN)ACTIVITIES OF BANKSWhether 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, creditpushes the person intoa debt trap.
SOURCES OF CREDITfor Rural Households in India
30%
Moneylenders
25%CommercialBanks
27%
CooperativeSocieties
Landlords
3%
7%
7%
1%
Traders Relatives and Friends
Others
Why are Poor Households stilldependent 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.
Newer Ways of Providing Loans to the PoorSELF HELO\P 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 theyhave 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.
THANKS BY
J K DOGRAPGT ECO
KV NO-3,DELHI CANTT.