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Test Today 14 July Economics

The document is a test on Money and Credit for Class 10 Social Science, focusing on the differences between formal and informal loan sources, particularly highlighting the role of Self Help Groups (SHGs) in providing accessible loans. It includes multiple-choice questions and explanations regarding loan processes, the impact of credit on development, and the requirements for obtaining loans from banks. The test also addresses the challenges faced by poorer households in accessing formal credit compared to richer households.

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Pooja Pearl
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2 views4 pages

Test Today 14 July Economics

The document is a test on Money and Credit for Class 10 Social Science, focusing on the differences between formal and informal loan sources, particularly highlighting the role of Self Help Groups (SHGs) in providing accessible loans. It includes multiple-choice questions and explanations regarding loan processes, the impact of credit on development, and the requirements for obtaining loans from banks. The test also addresses the challenges faced by poorer households in accessing formal credit compared to richer households.

Uploaded by

Pooja Pearl
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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1

Class 10 - Social Science


Money and Credit Test 01

1. Read the text carefully and answer the questions: (4)


Getting a loan from bank is much more difficult than taking loan from informal sources. Absence of collateral security
and documentation prevents the poors from getting bank loans. Self Help Group is a group of people usually belonging
to one neighbourhood having same social and economic backgrounds. They meet and save money regularly as per their
ability. Members of the group can take small loans from the group itself to meet their needs. The group charges interest
less than moneylenders on these loans. After one or two years, if the group is regular in savings, it becomes eligible for
availing loan from the bank. Loan is sanctioned in the name of group and is meant to create self employment
opportunities.
i. What is the most essential requirement for taking loan from informal sources?
a) Bribe
b) Source from a top officer
c) None of these
d) Collateral security
ii. SHG is a group of people usually belonging to
a) different villages
b) the same caste
c) one neighbourhood
d) nearby villages
iii. What facilities do the members have who are in the same group?
a) No facility is given to them.
b) They can take small loans from the group itself to meet their needs.
c) They are debarred from the group.
d) They are not given any facility.
iv. What benefits are there for a SHG that is regular in savings?
a) They are entitled to raise loan from bank in the name of SHG.
b) The dispute arise after sometimes.
c) They get jobs in government departments.
d) They are rewarded by the government.
2. A debt trap means: (1)
a) Ability to pay the credit amount
b) Overspending till no money is left
c) None of these
d) Inability to repay the credit amount
3. How does cheap and affordable credit contribute to the development of the country? (1)
a) Banks could increase their profit
b) People could borrow cheaply
c) Society would develop
d) Efforts of government would be lauded
4. Banks have to submit the information on how much they are lending to whom at what interest rate, etc. to: (1)
a) Union Bank of India
b) Indian Bank
c) State Bank of India

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d) Reserve Bank of India (RBI)
5. Gold mohar, a coin so named was brought in circulation by: (1)
a) Sher Shah Suri
b) Shivaji
c) Ashok
d) Akbar
6. What is the positive impact of credit? (1)
a) Increase in tax collection of government
b) Continuation of business
c) People fall in debt trap
d) Increase in profit of lenders
7. Assertion (A): Banks keep only a small proportion of their deposits as cash with themselves. (1)
Reason (R): Banks in India these days hold about 15 percent of their deposits as cash.
a) Both A and R are true and R is the correct explanation of A.
b) Both A and R are true but R is not the correct explanation of A.
c) A is true but R is false.
d) A is false but R is true.
8. At what interest rate Shyamal borrow money from the village moneylender? (1)
9. Why payments made in rupees cannot be refused in India? (2)
10. Which documents are required to be submitted to the bank for taking a home loan? (2)
11. Why do you think that the share of formal sector credit is higher for the richer households compared to the poorer
households? (2)
12. Explain features each of formal sector loans and informal sector loans. (3)

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Class 10 - Social Science
Money and Credit Test 01

Solution

1. i. (d) Collateral security


Explanation: Collateral security
ii. (c) one neighbourhood
Explanation: one neighbourhood having same social and economic backgrounds
iii. (b) They can take small loans from the group itself to meet their needs.
Explanation: They can take small loans from the group itself to meet their needs.
iv. (a) They are entitled to raise loan from bank in the name of SHG.
Explanation: They are entitled to raise loan from bank in the name of SHG.
2. (d) Inability to repay the credit amount
Explanation: A 'Debt-Trap’ is a situation where a person is unable to repay his loans and falls into a trap from which
recovery is difficult. The agricultural sector is more prone to Debt-Traps as it is subject to more risks like crop failure,
exploitation by the money lenders.
3. (b) People could borrow cheaply
Explanation: If banks and cooperative societies lend more it would lead to higher incomes and many people could then
borrow cheaply for a variety of needs. They could grow crops, do business, set up small-scale industries etc. They
could set up new industries or trade in goods. Cheap and affordable credit is crucial for the country’s development.
4. (d) Reserve Bank of India (RBI)
Explanation: Reserve Bank of India was established in the year 1935. It is the central bank of India and supervises the
functioning of all the banks and sees that the banks give loans not just to profit making businesses and traders but also to
small cultivators, small scale industries, etc.
5. (d) Akbar
Explanation: Akbar
6. (b) Continuation of business
Explanation: Credit helps the borrower in meeting the ongoing expenses of production and complete production on
time. The economic needs of agricultural, commercial, and industrial sectors of the economy are adequately met by the
credit.
7. (b) Both A and R are true but R is not the correct explanation of A.
Explanation: Banks keep only a small proportion of their deposits as cash with themselves and uses a major portion
of their deposits to extend loans because there is a huge demand for Loans for various economic activities. Banks in
India these days hold about 15 percent of their deposits as cash. This is kept as a provision to pay the depositors who
might come to withdraw money from the bank on any given day. Both the statements are correct but the reason is not
justified.
8. Shyamal borrow money from the village moneylender at the interest rate of 5% per month or 60% per annum.
9. Rupees as in Indian currency is issued by the Reserve Bank of India. The law has legalized the use of rupee as a medium
of exchange that cannot be refused by anyone as a form of payment.
10. Following documents are required by the bank for giving a house loan:
i. Employment record of the borrower.
ii. Ownership/purchase documents of the new home and
iii. Salary slip of the borrower.
iv. Identify proof and Residential proof.
v. Liabilities statement and Personal Assets.

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11. The share of the formal sector credit is higher for the richer households due to the reasons mentioned below:
Formal sector credit requires proper documents and collateral as security against loans. But poor
people lack in providing such things which affect their capacity to get loans from the formal sector.
The richer households are in a better position to provide collateral and other necessary documents
which are required by the banks and cooperatives. Hence, absence of collateral is one of the major
reasons which prevents the poor from getting
banks loans.
Richer households have means to exert pressure on banks and cooperatives to sanction loans. These
households have greater capacity to repay the loans compared to the poor households.
12. Formal Sector Loans: Include loans from banks and cooperatives. Features of formal sector loans are
mentioned below:
i. Formal sectors provide cheap and affordable loans and their rate of interest is monitored by Reserve
Bank of India. Comparatively rate of interest charged is lower than that of the informal sector loans.
ii. Formal sector strictly follows the terms of credit, which include interest rate, collateral, documentation
and the mode of repayment.
iii. Rich urban households depend largely on formal sources of credit.

Informal Sector Loans: Include loans from moneylenders, traders, employers, relatives, friends etc.
Features of informal sector loans are mentioned below:
i. Informal Sector's credit activities are not governed by any organisation, therefore they charge a higher rate
of interest.
ii. Informal sector loan providers know the borrowers personally, and hence they provide loans on easy
terms without collateral and documentation.
iii. Poor households largely depend on informal sources.

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