Money and Credit Class 10 Notes

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money and credit class 10 notes

Class 10 Social Science syllabus is mainly constituted of four major disciplines, i.e. History, Geography, Political Science and Economics. These subject areas impart students with knowledge of the world in different contexts, from the physical world to our historical past and how society functions in the economic and political context. While studying class 10 economics, you will come across an interesting chapter titled Money and Credit which explores the key features of these two concepts. If you are looking for a summary of this chapter, this blog brings you Money and Credit Class 10 notes covering all the essential topics and pointers explained in this unit.

What is Money?

Money is something that can be used as a means of payment, a measure of value, or a medium of exchange. For example, currency notes, metal coins, demand deposits, etc.

Money as a Medium of Exchange

The use of money has removed the problem of double coincidence of wants. The exchange has now become convenient and straightforward. In ancient times when the concept of money was not evolved, people used to transact through the barter system of exchange. 

Barter is a system of exchange where participants in transactions directly exchange goods or services for other goods and services of their needs. But there were some disadvantages of the barter system such as the double coincidence of wants, complicated and time-consuming process,  undefined method of valuation of goods, etc., because of which it cannot be used for long in the growing capitalistic world. 

As stated in the chapter on Money and Credit, the use of money as a medium of exchange has removed all the problems that existed in the barter system of exchange. The exchange has now become simple and convenient. A person holding money can easily exchange it for any goods and services that he wants.

Money and Credit Class 10 Notes: Modern Form of Money

As per the chapter, there are two major modern forms of money, i.e. currency and bank deposits. Let us take a deeper look into these terms:


Currency includes paper notes and coins. In ancient times coins were made of precious metals like gold, silver, and platinum. Nowadays, ferritic stainless steel, cupro-nickel, nickel-brass, and bimetallic metal compositions are used for making coins. Notes are made with paper. Both types of currencies are used as a medium of exchange in the country. The real values of currency notes and coins are less than their face values. 

In India, the Reserve Bank of India (RBI) is the regulatory body that has the authority to issue and circulate currency on behalf of the government. No one can refuse to accept it.

Bank Deposits

It is the most widely used form of money in the world. Bank deposit has been well discussed in the class 10 economics chapter money and credit. Bank deposits include money held by the people in saving accounts, current accounts, and fixed deposits with the bank. Deposits in the bank can be withdrawn anytime on demand.

Banks accept deposits from people and also pay interest on them. The benefit of this form of money is that people get free from the risk of theft of physical currencies held with them at home. The safety of the money of people becomes the responsibility of the banks. Earlier, money was withdrawn from the banks by account holders through cheques and withdrawal forms only. Now people have the facility of withdrawing money through Automated Teller Machines (ATMs) also.

The chapter on Money and Credit defines a cheque as a paper that instructs the bank to pay the amount mentioned in the cheque to the person in whose name the cheque has been drawn.

What is Credit?

Going through the money and credit class 10 notes, the next topic that we will discuss is credit. Credit is an arrangement whereby the lender transfers money to the borrower in consideration of a promise to pay the amount so transferred in the future along with interest at the rate mutually agreed between them. In short, credit is the activity of borrowing and lending money between two parties. A lender can be a bank or an individual also. The purpose for which people take credit is growth and expansion of business, day to day cash needs of the business, education of children, purchase, and expansion of the house, marriage or family members, etc.

Money and Credit Class 10 Notes: Terms of Credit

Source: Padhaku Vimaan

Borrowers intending to take credit facilities have to agree with the lender, which contains certain terms and conditions. These terms of credit include the rate of interest, collateral, mode of repayment, frequency of repayment, etc. These terms of credit bounds a borrower to repay the credit that he or she has taken along with the interest as agreed between them on time. If the borrower fails to comply with the terms and conditions of the credit, the lender can resort to legal action against the borrower.

Collateral is an asset (generally house property, land, shop, gold, vehicle, fixed deposits, etc.) which is owned by the borrower and is used as a security to the lender until the borrower fully repays the loan. If the borrower makes a default or refuses to repay the loan, the lender gets the right to sell the collateral and obtain his payment.

Formal and Informal Sectors of Credit

While studying the money and credit class 10 notes, you must also explore the two major sectors of credit. Here are two types of sources for obtaining credit facilities:

Formal Sector– Formal sector includes banks, NBFCs, cooperative societies, etc. The formal sector is governed and controlled by the government through RBI.

Informal Sector– Informal sector comprises money lenders, landlords, merchants, friends, relatives, etc. The main disadvantage of the informal sector is that the government has very less, or no control over it, and also the rate of interest charged by the informal sector is very high.

Money and Credit Class 10 Notes: Self-Help Groups (SHG)

The self-help group is the modern form of financing the small finance needs of borrowers who cannot obtain loans from banks because of their inadequate financial documents and lack of collateral. A self-help group is a small group of people, usually ranging from 15 to 20 persons belonging to the same neighbourhood that promotes small savings among their members. The members pool their savings, and the amount so collected is utilized to lend it to any member who needs it. The terms of credit in self-help groups are much easier as compared to any other form of finance. Also, the self-help groups have helped extensively in saving the poor from the debt trap of informal sectors. 

Money and Credit Important Questions

Here are the most important exam questions on Money and Credit Class 10:

  1. Who issues the Indian currency notes on behalf of the country’s government?
  2. Name the major informal credit source for Indian rural households.
  3. Explain the barter system with a suitable example.
  4. What is the difference between the formal sector and informal sector loans in terms of interest?
  5. Explain demand deposits.
  6. What is the major issue in the concept of double coincidence of wants?
  7. What is money? Explain why modern money currency has become the main source of monetary exchange.
  8. What are the main components of ‘terms of credit’?
  9. How do banks use the deposits that their customer submit?
  10. Define investment.
  11. What is a cheque?
  12. Can anyone refuse payments in rupees in India? If no, then why?
  13. Why do we need to expand formal sources of credit in rural India?
  14. Why do the banks require collateral from an individual applying for a loan?
  15. Why can’t poor households get formal loans in India?
  16. What role does money play in the exchange of things?
  17. Define the modern forms of money with suitable examples.
  18. What is the use of money in everyday life?
  19. What are the roles played by banks for the common public?
  20. What are the main objectives of Self Help Groups? Explain their advantages.

Hence, we hope that this blog summarizing Money and Credit Class 10 notes help you get a comprehensive understanding of this chapter. If you are a student of class 10 and are facing difficulty in which stream to choose, our experts at Leverage Edu are there to assist you in choosing the right path for the future. Register for a free counselling session with us today!

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