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Money and Credit Class 10 Notes: CBSE Economics Chapter 3

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CBSE Class 10 Economics Chapter 3 Notes - Download FREE PDF

Vedantu provides a clear overview of Class 10 Economics Chapter 3, "Money and Credit," which is essential for understanding how money and credit impact our economy. This chapter explains the different forms of money, such as coins, banknotes, and digital money, and their roles in facilitating transactions. It also covers the concept of credit, including how loans work and their importance for businesses and individuals. Class 10 Economics Revision Notes are especially useful for students struggling to create notes with their packed schedules.

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Table of Content
1. CBSE Class 10 Economics Chapter 3 Notes - Download FREE PDF
2. Access Economics Chapter 3 Class 10 Money and Credit Notes
    2.1Money as a Medium of Exchange
    2.2Modern Forms of Money
    2.3Loan Activities of Banks
    2.4Two Different Credit Situations
    2.5Terms of Credit
    2.6Formal Sector Credit in India
    2.7Formal and Informal Credit
    2.8Advantages of Self Help Group (SHG):
    2.9Do you Know?
3. 5 Important Topics of Class 10 Money and Credit Notes Chapter 3
4. Importance of Class 10th Economics Chapter 3 Notes
5. Tips for Learning the Economics Chapter 3 Class 10 notes
6. Related Study Materials for Class 10 Economics Chapter 3 Money and Credit
7. Chapter-wise Revision Notes Links for Class 10 Economics
8. Important Study Materials for Class 10 Economics
FAQs


Our notes are designed to simplify complex ideas, making it easier for you to grasp key concepts and prepare effectively for your exams according to the CBSE Class 10 Economics Syllabus. By exploring these concepts, students will learn about the functions of banks and the impact of money and credit on economic growth. Vedantu’s notes make these concepts easy to grasp, helping students see the real-world applications of money and credit in their everyday lives and in the broader economy.

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Access Economics Chapter 3 Class 10 Money and Credit Notes

Money as a Medium of Exchange

  • Money is referred to as a medium of exchange because it serves as an intermediary in the exchange process. 

  • A person who has money can readily swap it for whatever commodity or service he or she desires. 

Double Coincidence of Wants: It occurs when both parties agree to sell and buy each other's commodities at the same time in the trade. Double coincidence of wants is a key element of the barter system.

Modern Forms of Money

Indians utilised wheat and livestock as currency in the past. Following that came the use of metallic coinage, such as gold, silver, and copper coins, which lasted well into the twentieth century. Currency - paper notes and coins – are now modern forms of money. The current kinds of money - currency and deposits – are inextricably related to the modern banking system's operation.

Currency: The Reserve Bank of India, on behalf of the Indian government, issues currency notes. No other person or organisation is permitted to print money. In India, the rupee is generally recognised as a medium of exchange.

Deposit in Banks: People might also keep their money in the form of bank deposits. People put their surplus money in the bank by opening a bank account in their own name. Banks not only accept deposits, but they also pay interest on them. Deposits in bank accounts that can be withdrawn on demand are referred to as demand deposits. Cheques are used instead of cash to make payments.

Cheques: It's a piece of paper that instructs the bank to transfer a specified amount from a person's account to the person named on the check.

Loan Activities of Banks

  • Banks only hold a small amount of their deposits in cash on hand. In India, banks now maintain approximately 15% of their deposits in cash. This is retained as a reserve to pay depositors who may come to the bank on any given day to withdraw money.

  • The majority of deposits are used to extend loans by banks. Loans for numerous economic activities are in high demand. On loans, banks charge a greater interest rate than they do on deposits.

  • Banks' major source of income is the difference between what they charge borrowers and what they pay depositors.

Two Different Credit Situations

A credit (loan) arrangement is one in which the lender provides money, products, or services to the borrower in exchange for the promise of future payment.

There are two types of credit situations: one is where you have a lot of money and the other is where

i. In the first scenario, a person borrows money for production purposes with the promise of repaying the loan at the end of the year when the work is accomplished. And by the end of the year, he or she has made a big profit from manufacturing operations and is able to repay the loan. As a result, the person is in a better position than previously.

ii. In the second scenario, a person borrows money for production purposes with the promise of repaying the loan at the end of the year, when the production job is accomplished. And by the end of the year, he or she has fallen into a financial trap. As a result, that person is in a worse situation than before.

Terms of Credit

Every loan agreement stipulates an interest rate that must be paid to the lender in addition to the principal repayment. Lenders also want collateral (security) in exchange for loans.

1. Collateral is an asset that a borrower holds, such as land, a building, a vehicle, livestock, or bank savings, that the borrower uses as a guarantee to a lender until the loan is returned. If the borrower fails to repay the loan, the lender has the authority to sell the asset or collateral to recover payment.

2. The terms of credit include the interest rate, collateral and documentation requirements, as well as the form of repayment. It varies depending on the lender's and borrower's personalities.

Formal Sector Credit in India

Credit that is both cheap and accessible is critical for the country's prosperity. The numerous forms of loans can be divided into the following categories:

1. Formal Sector Loans: Loans from the formal sector include those from banks and cooperatives. The Reserve Bank of India (RBI) is in charge of overseeing the operation of formal loan sources. Banks must report to the RBI how much they are lending, to whom, and at what interest rate, among other things.

2. Informal Sector Loans: Loans from the informal sector include those from moneylenders, traders, employers, family, and friends, among others. There is no regulatory body that oversees the lending activities of informal lenders. There is no one to stop them from obtaining their money by unethical means.

Formal and Informal Credit

Formal Credit: The RBI oversees the operation of formal sources of loans, which includes banks and cooperatives. To ensure that the bank maintains a minimum cash balance and that loans are given not just to profit-making businesses and dealers, but also to small growers, small scale industries, small borrowers, and so on. Banks are required to report their actions to the RBI on a regular basis.

Informal Credit: Money lenders, traders, employers, relatives, and friends are just a few examples. There is no one in charge of monitoring their credit operations. They can charge any interest rate they want. There is no one to stop them from obtaining their money by unethical means.

Self Help Groups for the Poor

Poor households continue to rely on informal sources of financing for the following reasons:

  • In rural India, banks are not widely available.

  • Even if banks are present, obtaining a bank loan is substantially more difficult because adequate documentation and collateral are required.

Self-Help Groups were formed to address these issues (SHGs). SHGs are small groups of poor people who encourage their members to save small amounts of money. A typical SHG includes 15-20 members who meet and save on a regular basis, usually from the same neighbourhood. 

Advantages of Self Help Group (SHG):

  • It assists borrowers in overcoming the lack of collateral issues.

  • SHGs are the foundations of the rural poor's organisation.

  • People can receive loans on schedule and at a fair interest rate for a number of objectives.

  • It assists women in becoming financially self-sufficient.

  • The group's frequent meetings give a forum for discussing and taking action on a variety of social concerns such as health, nutrition, domestic violence, and so on.


Do you Know?

Ch 3 Economics Class 10 will tell you that the development of a country depends upon the affordability and availability of credit. The different types of loans are as follows:

  • Formal Sector Loans: Loans from banks and cooperatives are called formal sector loans. These are monitored by the Reserve Bank of India.

  • Informal Sector Loans: Loans from moneylenders, traders, relatives are called informal sector loans. This type of loan is monitored by none.


5 Important Topics of Class 10 Money and Credit Notes Chapter 3

S. No

Important Topics

1

Functions of Money

2

Types of Money (e.g., Commodity Money, Paper Money, Digital Money)

3

Credit and Its Forms (e.g., Loans, Credit Cards)

4

Role of Banks in Providing Credit

5

Impact of Credit on the Economy


Importance of Class 10th Economics Chapter 3 Notes

  • Class 10 Eco Ch 3 Notes help us quickly understand and remember key concepts before exams.

  • They save time by focusing on essential information and skipping unnecessary details.

  • These notes simplify complex topics, making them easier to understand and use.

  • They provide practical examples that show how theoretical knowledge is used in real-life situations.

  • Revision notes ensure thorough preparation by covering all important topics in a structured manner.

  • They increase confidence by clearly understanding what to expect in exams.

  • Accessible formats like PDFs allow for easy studying anytime and anywhere.


Tips for Learning the Economics Chapter 3 Class 10 notes

  • Start by learning the basic functions of money and the types of money, such as commodity money, paper money, and digital money.

  • Focus on how credit works, including different forms of credit like loans and credit cards. Understand the role of interest rates and repayment terms.

  • Study the role of banks in the credit system. Know how banks provide loans, accept deposits, and manage financial transactions.

  • Connect concepts to real-life scenarios. Think about how money and credit affect your own daily transactions and financial decisions.


Conclusion

Vedantu’s notes for Class 10 Economics Chapter 3, "Money and Credit," provide a comprehensive understanding of how money functions and the role of credit in the economy. This chapter explains the different forms of money, the mechanisms of credit, and the crucial role banks play in providing loans and managing financial transactions. By studying these concepts, students gain insight into how money and credit impact economic activities and personal finances. Vedantu’s clear explanations and examples make these concepts accessible, helping students connect theory with real-world applications. This foundation will not only aid in academic success but also enhance financial literacy for practical use in everyday life.


Related Study Materials for Class 10 Economics Chapter 3 Money and Credit


Chapter-wise Revision Notes Links for Class 10 Economics


Important Study Materials for Class 10 Economics

FAQs on Money and Credit Class 10 Notes: CBSE Economics Chapter 3

1. What is Formal and Informal Credit in Class 10 Economics Chapter 3?

You will comprehend the difference between official and informal credit if you attentively study the notes for Economics Class 10 Chapter 3. Just half of the total credit required by rural people is provided by the formal sector. The remainder of the credit is provided by the informal sector. The most important aspect is that formal credits be distributed in an equitable manner to disadvantaged individuals. Banks' primary responsibility must be to lessen their reliance on the informal sector.

2. What are the Self-Help Groups for in Class 10th Economics Chapter 3 Notes?

There is much dependence on informal sources of credit because of the following reasons:

  • There are not sufficient banks in rural India.

  • Even if the banks are present, due to lack of proper documents and collateral, obtaining a loan from the bank is very complicated.  

Due to these specific problems, self-help groups (SHG) are created by the people of rural India. Small groups of poor people which encourage small savings among the members are termed as SHG. Generally, an SHG consists of 15-20 members.

3. What is credit in class 10 economics chapter 3 money and credit?

Credit means loans. It refers to an agreement in which the money, goods or services are supplied to the borrower by the lender in return for future repayment. Cheap and affordable credit is very important for the growth of the country and economic development. Credit can fuel various kinds of economic activities, such as investing in a business or for buying luxury things like cars etc. It helps people living in rural areas develop cultivation by providing them funds to buy seeds, pesticides etc.

4. According to money and credit notes why is money needed?

Money plays an important role in our everyday life as it is used as a medium of exchange in transactions. It is needed for us to buy food, clothes, shelter and other basic necessities of life. It provides us with social security. It is also necessary for us to access services like transport, education, healthcare, entertainment and so on. Money is the basis of the working of an economy and facilitates business and trade.

5.  According to money and credit notes what is money?

Money literally means anything which has common acceptability by the people as a means of exchange. It refers to the medium of exchange in the form of coins or banknotes. It allows a person to easily buy or sell products. It allows us to buy anything we need for our livelihood and is used for lending loans. For a more detailed explanation, you can visit Vedantu for Notes of Chapter 3 Class 10 Economics and download it free of cost. 

6. Who are the informal money lenders?

Loans are made by informal money lenders to individuals. They might be a friend, family, moneylender, dealer, or employer. You are not required to provide collateral to informal moneylenders. There is no organisation to monitor their actions, and they demand excessive interest rates on loans.

7. What are the advantages of SHGs in money and credit class 10 notes?

SHGs or Self-Help Groups help people obtain timely loans for various purposes at a reasonable interest rate. They also help the woman become financially self-reliant and even assist people who have borrowed money to overcome the problem of lack of collateral. Self Help Groups are the building blocks of the organisation for the poor, living in rural areas. The group conducts regular meetings providing a platform to discuss and bring changes in various issues such as domestic violence, health, finances, etc.

8. What are the main functions of money in class 10 economics?

Money serves as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment.

9. In Money and Credit Notes, what are the different types of money?

The main types are commodity money (like gold), paper money (banknotes), and digital money (electronic forms of money).

10. How does credit work explained in Money and credit chapter class 10?

Credit involves borrowing money with an agreement to repay it with interest over time. Types of credit include loans, credit cards, and overdrafts.

11. How the role of banks play in providing credit explained in Class 10 Economics Class 10?

Banks provide credit by offering loans and credit facilities, accepting deposits, and managing financial transactions to support economic activities.

12. What is the impact of credit on the economy in Class 10?

Credit stimulates economic growth by enabling investments and consumption. However, excessive credit can lead to financial instability and debt.

13. How do interest rates affect loans and credit in money and credit class 10 notes?

Interest rates determine the cost of borrowing. Higher rates make loans more expensive, while lower rates make borrowing cheaper.

14. Why is it important to understand money and credit class 10 notes?

Understanding money and credit helps manage personal finances effectively, make informed decisions about borrowing, and comprehend broader economic impacts.