Answer: Money is anything generally accepted as a medium of exchange for goods and services, a unit of account and a store of value.

Answer: Main functions — medium of exchange, unit of account (measure of value), store of value, and standard of deferred payments.

Answer: Money provides a common measure to express prices and value of goods and services, enabling comparison and accounting (e.g., price of pen ₹20, book ₹200).

Answer: Money eliminates the need for double coincidence of wants. Example: Instead of swapping wheat for shoes directly, a farmer sells wheat for money and buys shoes with that money.

Answer: Durability (should not wear out easily) and divisibility (can be divided into smaller units for varied transactions). Portability and acceptability are other acceptable points.

Answer: Money facilitates trade by acting as a medium of exchange, so producers can specialise in tasks and sell output for money to buy other goods. This expands markets, raises productivity and encourages division of labour (example: a cobbler specialising in shoes sells for money and buys grain).

Answer: Currency (notes & coins), demand deposits (bank balances), debit/credit cards (plastic money), and digital payments/mobile wallets (e.g., UPI, mobile wallets).

Answer: A demand deposit is a bank balance withdrawable on demand (e.g., savings/current account). Use: it can be used for payments via cheque, card or electronic transfer.

Answer: A cheque is a written instruction to a bank to pay a specified amount from the drawer's account to the payee. It facilitates non-cash payments, provides transaction record and is useful for business transfers where large cash payments are impractical.

Answer: Instant transfers and convenience (no need to carry cash); better record-keeping and lower risk of theft.

Answer: Plastic money refers to debit and credit cards. Example: Debit card linked to a bank account.

Answer: Because deposits can be transferred and used for payments just like cash (via cheques, cards, UPI), increasing the effective money available for transactions.

Answer: Credit creation is the process by which banks lend a portion of deposits, which when redeposited, allows further rounds of lending and increases the total deposits (money supply).

Answer: Short-term loans — crop loans to farmers (for seeds/fertiliser). Long-term loans — home mortgage for purchasing a house. (Also medium-term for equipment or business expansion.)

Answer: Banks check identity documents (KYC), income proofs or cash-flows, credit history (repayment track record), purpose of loan and collateral (if any) to assess repayment capacity and risk.

Answer: Interest is the cost of borrowing. Higher interest raises repayment burden and can deter borrowing, while lower interest encourages productive investment. Interest compensates banks for cost of funds and lending risk.

Answer: Collateral is an asset pledged to secure a loan. It reduces lender’s risk so collateralised loans often get larger amounts and lower interest rates compared to unsecured loans.

Answer: Creditworthiness is a borrower’s ability to repay a loan, judged by income, credit history, stability of employment/business and collateral availability.

Answer: Productive credit is used for income-generating activities (e.g., loan for seeds/machinery) that increase capacity to repay. Unproductive credit is for consumption (e.g., weddings), not creating returns, increasing default risk.

Answer: Borrowing for consumption or high-interest informal loans can lead to inability to repay, forcing repeated borrowing at higher costs — a debt trap. Solutions: access to formal credit, financial literacy and flexible repayment schedules.

Answer: Provide subsidised interest for agriculture and priority sector lending; promote microfinance and SHG linkages that support small enterprises.

Answer: Join an SHG to use group guarantee, approach microfinance institutions that offer unsecured microloans, or apply for government priority schemes with relaxed collateral norms.

Answer: EMI depends on principal, interest rate and tenure. Higher interest or shorter tenure increases EMI; longer tenure reduces EMI but increases total interest paid. Borrowers must balance affordability with total cost.

Answer: A repayment schedule specifies instalment amounts and dates. It helps borrowers plan cash flows and lenders ensure timely recovery, reducing default risk.

Answer: Good credit history signals timely repayment and leads to easier access, larger loans and lower interest; poor history increases perceived risk and costs or restricts access.

Answer: Commercial banks — mobilise deposits and provide diverse loans; Cooperative banks — credit to farmers and small borrowers; Regional Rural Banks (RRBs) — rural credit distribution; NBFCs — flexible loans and asset finance for niche sectors.

Answer: Advantage — lower interest and legal protection; Limitation — documentation and collateral requirements exclude the poorest without assets or formal income proofs.

Answer: Priority sector lending mandates banks to allocate credit to sectors like agriculture, micro-enterprises and social sectors. It promotes inclusive growth by directing funds to underserved areas and sectors crucial for development.

Answer: SHGs are small voluntary groups (often women) who save regularly and lend internally. After establishing savings discipline, they seek bank linkage for loans to the group, which on-lends to members. SHGs reduce dependence on informal lenders, provide social collateral and improve the poor’s access to formal credit.

Answer: Formal sources (banks, cooperatives, RRBs, NBFCs) are regulated, offer lower interest, structured repayment and legal protection, but require documentation and collateral — which can exclude the poorest. Informal sources (moneylenders, traders, relatives) are easily accessible with flexible terms and little paperwork but often charge high interest and lack consumer protection, risking exploitation and debt traps. Formal credit supports long-term development; informal credit may solve urgent needs but can trap borrowers in high-cost debt. Combining SHG linkages and financial literacy helps transition borrowers from informal to formal credit, improving welfare and stability.