CBSE Class 10 SST: Money and Credit — Economics Notes 2026

Barter System and Money

• Barter: exchange of goods for goods; problem — double coincidence of wants (both parties must want what other has)
• Money eliminates double coincidence; acts as medium of exchange; store of value; unit of account
• Evolution: commodity money (cattle, grain) → metallic money (gold/silver coins) → paper money → digital money

Types of Money

• Currency: notes and coins issued by Reserve Bank of India; government guarantee makes it acceptable
• Demand deposits: money in savings/current accounts; cheques, NEFT, RTGS enable payments without physical cash
• Cheque: instrument to pay from demand deposit; not itself money but orders bank to pay

Credit and Terms of Credit

• Credit: lender provides resources (money, goods) to borrower who repays with interest later
• Terms of credit: interest rate, collateral (security), documentation required, mode of repayment
• Collateral: asset pledged by borrower (land, building, vehicle); bank takes possession if loan not repaid

Formal and Informal Credit Sources

• Formal: banks, cooperatives, NBFCs; regulated by RBI; lower interest rates; documentation required
• Informal: moneylenders, landlords, chit funds, traders; no regulation; interest rates often 30–50%/year or more
• India: 51% of agricultural credit from informal sources; rural poor most dependent on moneylenders

Self Help Groups and Microfinance

• SHG: 15–20 women; save ₹25–100/month; create pool; give small loans to members at low interest
• Grameen Bank model (Bangladesh, Muhammad Yunus Nobel Prize 2006): microfinance to rural poor without collateral
• India: ~12 million SHGs; NABARD supports; SHGs linked to banks for larger credit (SHG-Bank Linkage Programme)

Credit and Poverty Trap

• Debt trap: borrowing at high interest → can't repay → more borrowing → asset sale
• Reasons for high informal rates: no competition; lenders know borrowers' desperation; no enforcement of regulations
• Pradhan Mantri Jan Dhan Yojana (2014): zero-balance accounts for all; financial inclusion; 47+ crore accounts opened

CBSE Exam Tips

• Money and Credit: 3–5 marks; formal vs. informal credit comparison table is most effective
• SHG: explain how it works, benefits for rural poor; 3-mark question
• Terms of credit: define collateral, interest rate; explain why poor pay higher interest