Tag: introduction to money - barter system

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  1:Credit refers to a loan, an agreement in which the lender supplies the borrower with money, goods or services which is to be returned in future
  2:Terms of credit include interest rate, collateral (security) and documentation related to the lending of money.

The loan extended by banks and co-operative institutions constitutes formal sector of credit. The functioning of these financial institutions is supervised by the Reserve Bank of India.

• About 60% of the Indian population is dependent on agriculture.
• Most of the Indian farmers are small and marginal farmers.
• Rural farmers savings are very less.
• Rural farmers seek credit for the production of crops as there are no savings left with them from the last year.
  

1:Collateral is a type of a security/guarantee taken by the banks from its customers.
2:Usually collateral are taken by the banks for lending money to its customers.
3:Collateral can be in the form of fixed deposit documents, property, documents, etc.

Money helps to facilitate trade because people in the economy generally recognize it as valuable. Money is called medium of exchange because money is a widely accepted token that can be used for exchange of any good or service. In old days, barter system was used as medium of exchange and later it was gold.

When a poor person takes a loan he does find it convenient to go to a bank basically because he is uneducated and even does not have a collateral to present in a bank.
Hence he reaches out to the informal sources of credit which are basically the moneylenders. When he goes to moneylenders the rates of interest charged by them is very high but since the borrower is in need he has no other option.

• Credit means agreement between borrower and lender by which borrower lends money, goods and services in return for the promise of future payment.
• If credit not repaid by the borrower then they are termed as defaulters.
• Credit history of the borrowers will be affected.
• In India, RBI supervises the credit of banking system.
  

Credit means agreement between borrower and lender by which borrower lends money, goods and services in return for the promise of future payment.
Economic growth is crucial for the economic development of the country.
Cheap and affordable credit (cheap interest rates) is crucial for economic growth of any country.

• Money lenders are the indigenous bankers of India.
• Usually, they lend money on short term basis. 
  
• Collateral in form of gold is taken from borrowers.
• Money lenders are not supervised or controlled by RBI in India.