Money and Credit 10th Notes KSEEB Social Science

→ “Every branch of knowledge has its fundamental discovery. In mechanics it is the wheel, in science it is the fire, in politics the vote, similarly in economics, in the whole commercial side of man’s social existence, money is the essential invention on which all the rest is based” – Geoffery Crowther

→ ‘Money’ is anything which is widely accepted in payments for goods or in discharge of other business obligations” -Robertson (English Economist)

→ The exchange of goods for goods is known as “Barter system”

→ Commodities exchanged for other goods is known as “commodity money”

→ Precious metals such as Gold; Silver, Bronze used as money known as “Metallic Money”

Money and Credit Class 10 Notes KSEEB 10th Social Science

→ Written documents or “Promissory notes” or currency were also exchanged for goods. (Also called ‘Paper Money’

→ The central bank established by governments started printing ‘Paper notes’ which were guaranteed by the government.

→ The “Instruments of exchange’ such as cheques, drafts, deposit and credit receipts are called ‘Bank Money’.

→ Credit and Debit cards issued by banks through which transactions and transfer on money can be done are called ‘Plastic Money’

→ Function of Money

→ A ‘Banking Company is any company which transacts the business of banking in India’ Indian Banking Regulation Act of 1949.

→ Banking’ is defined as ‘Accepting; for the purpose of lending or investment of deposits of money from the public repayable or otherwise withdrawable by cheque, draft, order or otherwise.’

→ All banks in India are regulated by the ‘Reserve Bank of India’.

→ Banks play an important role in the development of the economy of a country.

→ The,‘Reserve Bank of India’ is the ‘Central’ Bank of India and was established on 1st April 1935 and nationalized on 1st January 1949.

Money and Credit Class 10 Notes KSEEB 10th Social Science

→ The functions of RBI are :

  • Monopoly of currency note issue
  • Banker to Government
  • Banker’s Bank
  • National Clearing House
  • Controller of Credit
  • Custodian of Foreign Exchange of Reserves.
  • Promotion of Banking habits.

→ ‘Riks Bank’ the Central Bank of Sweden is the oldest existing bank established in 1668.

→ Bank of England was established in 1694.

→ Federal Reserve Bank of USA was established 1913.

→ In India four measures of money supply are used to measure monetary stock. They are

  • M1 = currency notes and coins + net demand deposits held in commercial banks:
  • M2 =M1 + Savings deposits with Post Office savings Banks;
  • M3 = Ml + Net time deposits of commercial bank; and
  • M4 = M3 + Total deposits with Post Office savings banks.

→ The measures taken to regulate credit, overall money supply in the economy and interest rates are together called ‘Monetary Policy’.

→ The ‘Credit Control Measures’ are broadly classified as

  • Quantitative control measures,
  • Qualitative or selective control measures.

→ ‘Quantitative credit control measures’ comprise of

  • Bank Rate Policy
  • Open market operations
  • Varying reserve requirements (Legal Reserve Ratio)

→ The ‘Qualitative credit control measures’ are

  • change in lending margins
  • ceiling on credit or credit rationing
  • Moral suasion
  • Direct action.

Money and Credit Class 10 Notes KSEEB 10th Social Science

→ PROMISSORY NOTES: A sighed document containing a written promise to pay a stated sum to a specified person or the bearer of a specified date or on demand.

→ LEGAL TENDER: Coins or back notes that must be accepted if offered in payment of debt.

→ DEFERRED: Put off to a Latter time or date

→ REPO RATE: The rate of which RBI lends money to its clients against Government Securities.

→ REVERSE REPO RATE: The rate at which RBI borrows money from the commercial banks.

→ LEGAL RESERVE RATIO (LRR): The legal minimum fraction of deposits which the banks are mandate to keep as cash with themselves is

→ CASH RESERVE RATIO: (CRR) Is the amount of funds that the banks are bound to keep with RBI as a portion of their Net Demand and Time Liabilities (NDTL) to ensure the liquidity and solvency of banks.

→ CONCOMITANT: Associated naturally

→ STATUTORY LIQUIDITY RATIO (SLR): The legal and compulsory reserve requirement that the commercial banks in India are required to maintain in the form of cash, gold reserves, Government approved securities be¬fore providing credit to customers.

→ COLLATERAL SECURITY: An asset which a borrower is required to deposit with or pledge to a lender as a condition of obtaining a loan, which can be sold off if the loan is not repaid.

→ 1668: The central bank of Sweden ‘Risk Bank’ established.

→ 1694: The Central Bank of England was established.

→ 1913: The Central ‘Federal Reserve System’ of USA was established

→ 1935: Reserve Bank of India, The Central Bank of India was established.

→ 1949: The ‘Reserve Bank of India’ was nationalised.

KSEEB 10th Social Science Notes

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