MONEY AND CREDIT

Money ka Role

• Medium of Exchange: Money ek intermediate step provide karta hai exchange process mein. Isse goods aur services ko buy aur sell karna easy ho jaata hai.
• Universal Acceptance: Har koi money accept karta hai kyunki isse kuch bhi khareeda ja sakta hai. Money ki purchasing power sabse important hai.

Barter System

• Definition: Jab goods directly exchange kiye jaate hain bina money ke use ke, usse barter system kehte hain.
• Problem: Barter system mein sabse badi problem hai Double Coincidence of Wants.

Double Coincidence of Wants

• Meaning: Iska matlab hai ki jo cheez ek person bechna chahta hai, wahi cheez dusra person khareedna chahta ho, aur jo dusra person bechna chahta hai, wahi pehla person khareedna chahta ho. Dono parties ki wants match honi chahiye.
• Example: Agar shoe manufacturer ko wheat chahiye, toh use aisa farmer dhundhna padega jo wheat bechna chahta ho aur badle mein shoes kharidna chahta ho.
• Money ka Solution: Money is problem ko solve karta hai. Shoe manufacturer shoes bechkar money le sakta hai, aur us money se kisi bhi farmer se wheat kharid sakta hai. Ab use specific farmer dhundhne ki zaroorat nahi jo shoes bhi kharide.

Key Takeaway

• Money ne exchange process ko bahut efficient bana diya hai, jisse trade aur economic activities kaafi smooth ho gayi hain.

Money ke Early Forms

• Ancient Times: India mein pehle grains (anaaj) aur cattle (pashu) ko money ki tarah use kiya jata tha.
• Metallic Coins: Phir gold, silver, copper ke coins aaye, jo kaafi lambe time tak use hue.

Modern Forms of Money

Modern forms of money mein primarily do cheezein aati hain:

1. Currency
2. Deposits with Banks

1. Currency

• Components: Paper notes aur coins.
• Key Features:
• No Intrinsic Value: Unlike gold ya cattle, modern currency ki apni koi intrinsic value nahi hoti. Ye na precious metal se bani hai, na everyday use ki cheez hai.
• Acceptance: Iski acceptance government ke authorization par depend karti hai.
• Legal Tender: India mein, Reserve Bank of India (RBI) central government ki taraf se currency notes issue karta hai. Indian law ke according, koi aur individual ya organization currency issue nahi kar sakta.
• Mandatory Acceptance: Law rupee ko medium of payment legalise karta hai, jise India mein transactions settle karne ke liye refuse nahi kiya ja sakta. Koi bhi individual payment ko refuse nahi kar sakta jo rupees mein kiya gaya ho.

2. Deposits with Banks

• How it Works: Log apni extra cash banks mein deposit karte hain, bank account open karke.
• Benefits of Deposits:
• Safety: Money bank mein safe rehta hai.
• Interest: Banks deposits par interest bhi dete hain, jisse paisa badhta hai.
• Withdrawal Facility: Jab zaroorat ho, log apna paisa withdraw kar sakte hain.
• Demand Deposits:
• Definition: Bank accounts mein jo deposits hote hain jinhe demand par withdraw kiya ja sakta hai (jaise ATM se ya cheque se), unhe Demand Deposits kehte hain.
• Money ka Feature: Demand deposits mein money ka essential characteristic hai - medium of exchange.

Cheque Payments

• Definition: Cheque ek paper instruction hota hai bank ko, jismein bank ko bola jata hai ki ek specific amount payer ke account se us person ko pay kiya jaye jiske naam par cheque issue hua hai.
• Benefits:
• Cash ke bina payments settle karne ka convenient tareeka.
• Demand deposits aur cheques milkar modern economy mein money ka important part banate hain.
• Banks ka Role: Banks ke bina demand deposits aur cheque payments possible nahi hain. Modern money forms banking system se closely linked hain.

Banks ka Function

• Deposits Accept Karna: Banks public se deposits accept karte hain.
• Loans Extend Karna: In deposits ka major portion banks loans dene ke liye use karte hain.

Cash Reserve Ratio (CRR)

• Mechanism: Banks apne total deposits ka ek small proportion (India mein approximately 5%) cash ke roop mein apne paas rakhte hain. Isse Cash Reserve Ratio (CRR) kehte hain.
• Purpose: Ye cash un depositors ko pay karne ke liye rakha jata hai jo kisi bhi din apna paisa withdraw karne aa sakte hain. Daily basis par saare depositors ek saath paisa nikalne nahi aate, isliye banks itne cash se manage kar lete hain.

Mediation Role of Banks

• Depositors (Surplus Funds): Jin logon ke paas extra paisa hota hai, wo banks mein deposit karte hain.
• Borrowers (Need Funds): Jin logon ko funds ki zaroorat hoti hai (economic activities ke liye), wo banks se loan lete hain.
• Banks as Intermediaries: Banks in dono groups ke beech mediate karte hain, surplus funds ko need wale logon tak pahunchate hain.

Banks ki Income

• Interest Rate Difference: Banks depositors ko jo interest dete hain, usse zyada interest loans par charge karte hain.
• Main Income Source: Ye interest rate ka difference hi banks ki main source of income hoti hai.

Flowchart: Loan Activities of Banks

`mermaid graph TD A[Depositors] -- Deposit Money --> B(Banks) B -- Pay Interest on Deposits --> A B -- Keep Small Proportion as Cash --> C[Cash Reserve] B -- Extend Loans (Major Portion) --> D[Borrowers] D -- Repay Loans + Higher Interest --> B B -- Interest Difference --> E[Bank's Income] `

Credit (Loan) kya hai?

• Definition: Credit ek agreement hai jismein lender borrower ko money, goods ya services provide karta hai, future payment ke promise par.

Credit ke Positive Impacts

• Example: Salim (Shoe Manufacturer):
• Need: Festival season mein large order mila, production ke liye raw material aur extra workers chahiye the.
• Credit Source: Leather supplier se credit par leather liya, trader se advance payment (loan) liya.
• Outcome: Time par order complete kiya, good profit kamaya, aur loan repay kar diya.
• Learning: Is case mein, credit ne Salim ko working capital needs poori karne mein help ki, production badhaya aur earnings increase ki. Credit ne positive role play kiya.

Credit ke Negative Impacts (Debt Trap)

• Example: Swapna (Small Farmer):
• Need: Cultivation expenses ke liye moneylender se loan liya.
• Risk: Crop pests ki wajah se fail ho gayi, expensive pesticides bhi kaam nahi aaye.
• Outcome: Loan repay nahi kar payi, debt badhta gaya. Next year bhi earnings enough nahi thi old loan cover karne ke liye.
• Debt Trap: Swapna ko apna land ka ek part bechna pada loan repay karne ke liye. Credit ne uski situation ko aur kharab kar diya. Ye hai Debt Trap.
• Learning: Is case mein, crop failure jaise risks ki wajah se credit ne Swapna ko debt trap mein dhakel diya, jisse recovery bahut painful ho gayi.

Conclusion

• Credit useful hoga ya nahi, ye situation mein involved risks aur support systems par depend karta hai.
• Low Risk, Good Support: Positive outcome (Salim case).
• High Risk, No Support: Negative outcome, debt trap (Swapna case).

Comparison Table: Salim vs. Swapna

| Feature | Salim (Shoe Manufacturer) | Swapna (Small Farmer) | | :---------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Need for Credit | Production for large order, working capital | Cultivation expenses | | Risk Factor | Business risk, market demand | Crop failure due to pests/climate | | Outcome | Increased earnings, repaid loan, better off | Crop failure, unable to repay, fell into debt trap, sold land, worse off | | Role of Credit| Positive, helped achieve business goals | Negative, led to severe financial distress |

Terms of Credit ke Components

Terms of Credit wo conditions hoti hain jin par lender borrower ko loan deta hai. Ye conditions har loan arrangement mein vary karti hain. Main components hain:

1. Interest Rate

• Definition: Wo extra amount jo borrower principal amount ke saath lender ko pay karta hai.
• Importance: Har loan agreement mein interest rate specify kiya jata hai.

1. Collateral (Security)

• Definition: Ek asset jo borrower own karta hai (jaise land, building, vehicle, livestock, bank deposits) aur use lender ko guarantee ke roop mein deta hai jab tak loan repay na ho jaye.
• Purpose: Agar borrower loan repay nahi kar pata, toh lender ke paas collateral ko sell karke apna payment obtain karne ka right hota hai.
• Common Examples: Land titles, bank deposits, livestock, vehicles.

1. Documentation Requirement

• Meaning: Loan lene ke liye required papers aur proofs (jaise employment records, salary slips, address proof, identity proof, business plan, etc.).
• Importance: Banks aur formal lenders ko ye documents chahiye hote hain borrower ki repayment capacity aur credibility check karne ke liye.

1. Mode of Repayment

• Meaning: Loan ko wapas karne ka tareeka aur schedule.
• Examples: Monthly instalments, lump sum after harvest, specific duration mein.

Case Study: Megha ka House Loan

• Loan Amount: Rs 5 lakhs.
• Interest Rate: 12% per annum.
• Repayment Duration: 10 saal, monthly instalments mein.
• Documentation: Employment records aur salary slips.
• Collateral: New house ke papers bank ne retain kiye, jo loan repay hone par wapas milenge.

Terms of Credit ki Variability

• Terms of credit alag-alag loan arrangements mein kaafi vary karte hain.
• Ye lender aur borrower ke nature par bhi depend karte hain (e.g., bank vs. moneylender, rich vs. poor borrower).

Rural Areas mein Credit Demand

• Rural areas mein main demand for credit crop production ke liye hoti hai.
• Expenses: Seeds, fertilisers, pesticides, water, electricity, equipment repair, etc.
• Repayment: Farmers usually season ke start mein loan lete hain aur harvest ke baad repay karte hain. Repayment income from farming par depend karta hai.

Credit Sources ka Classification

Loans ko do main categories mein classify kiya ja sakta hai:

1. Formal Sector Loans
2. Informal Sector Loans

1. Formal Sector Loans

• Sources: Banks aur Cooperative Societies.
• Supervision: Reserve Bank of India (RBI) formal sources ke functioning ko supervise karta hai.
• RBI ka Role:
• Banks cash balance maintain kar rahe hain ya nahi, isko monitor karta hai.
• Ensure karta hai ki banks sirf profit-making businesses ko nahi, balki small cultivators, small scale industries aur small borrowers ko bhi loan dein.
• Banks ko RBI ko information submit karni hoti hai ki wo kitna loan de rahe hain, kisko, aur kis interest rate par.
• Interest Rates: Generally, formal lenders low interest rates charge karte hain.
• Terms of Credit: Fixed aur transparent terms of credit hote hain (collateral, documentation, repayment schedule clear hote hain).
• Benefits: Cheap aur affordable credit, debt trap ka risk kam.

2. Informal Sector Loans

• Sources: Moneylenders, traders, employers, relatives, friends, etc.
• Supervision: Informal lenders ki credit activities ko supervise karne ke liye koi organization nahi hai.
• Interest Rates: Ye apni marzi se interest rate charge karte hain, jo ki formal lenders se bahut zyada high hota hai.
• Terms of Credit: Flexible, but often exploitative. Collateral ki zaroorat nahi ho sakti, lekin repayment terms harsh ho sakte hain.
• Problems:
• High Cost of Borrowing: Borrower ki earnings ka bada hissa loan repay karne mein chala jata hai.
• Debt Trap: High interest rates ki wajah se borrower debt trap mein fas sakta hai.
• Unfair Means: Money wapas lene ke liye unfair means use kar sakte hain.
• No Records: Transactions ke records maintain nahi karte.

Formal vs. Informal Credit: Who Gets What?

• Rural Areas: India mein rural households ki credit needs ka lagbhag aadha hissa abhi bhi informal sources se poora hota hai.
• Urban Areas: Graph 2 shows:
• Poor Households: Urban areas mein poor households ke 54% loans informal sources se hote hain.
• Rich Households: Rich urban households ke sirf 17% loans informal sources se hote hain, jabki 83% formal sources se.
• Inequality: Rich households ko cheap formal credit easily mil jata hai, jabki poor households ko expensive informal sources par depend karna padta hai.

Why Expand Formal Credit?

• Development: Cheap aur affordable credit country ke development ke liye crucial hai.
• Income Growth: Formal credit se income badhti hai aur log naye enterprises shuru kar sakte hain.
• Reduce Debt Trap: Informal sources par dependence kam hone se debt trap ka risk kam hota hai.
• Equal Distribution: Formal credit ka distribution more equally hona chahiye taaki poor bhi iska benefit le sakein.

Poor Households ki Informal Credit par Dependence

• Reason 1: Banks ki Absence: Rural India mein banks har jagah available nahi hain.
• Reason 2: Collateral ki Kami: Banks se loan lene ke liye proper documents aur collateral chahiye hote hain, jo poor logon ke paas aksar nahi hote.
• Informal Lenders ka Advantage: Moneylenders borrowers ko personally jaante hain aur bina collateral ke bhi loan de dete hain, even purana loan repay na hua ho tab bhi.
• Informal Lenders ke Disadvantages: High interest rates, no records, aur harassment.

Self-Help Groups (SHGs) ka Concept

• Idea: Rural poor, especially women, ko small groups mein organize karna aur unki savings ko pool karna.
• Structure:
• Members: Typically 15-20 members, usually ek hi neighborhood se.
• Meetings: Regularly meet karte hain aur save karte hain.
• Savings: Har member Rs 25 se Rs 100 ya usse zyada save karta hai, apni capacity ke according.

SHGs ka Working

1. Internal Lending: Members group se hi small loans le sakte hain apni zarooraton ke liye.

• Interest: Group loans par interest charge karta hai, lekin ye moneylender se kaafi kam hota hai.

1. Bank Loans: Ek ya do saal tak regular savings aur repayment ke baad, group bank se loan lene ke liye eligible ho jaata hai.

• Loan in Group's Name: Loan group ke naam par sanction hota hai.
• Purpose: Self-employment opportunities create karna (e.g., mortgaged land release karna, seeds/fertilisers/raw materials kharidna, housing materials, sewing machine, cattle).

1. Decision Making: Savings aur loan activities se related important decisions group members khud lete hain (purpose, amount, interest, repayment schedule).
2. Repayment Responsibility: Loan repayment ki responsibility group ki hoti hai. Agar koi member repay nahi karta, toh baaki members seriously follow up karte hain.

SHGs ke Benefits

• Collateral Problem Solve Karna: Banks SHGs ko loan dene ke liye willing hote hain, even bina collateral ke, kyunki group repayment ki guarantee leta hai.
• Timely Loans: Poor logon ko timely loans mil jaate hain reasonable interest rates par.
• Financial Self-Reliance: Women ko financially self-reliant banne mein help karta hai.
• Social Platform: Regular meetings social issues (health, nutrition, domestic violence) par discuss aur act karne ka platform provide karte hain.
• Building Blocks: Rural poor ke organization ke building blocks hain.

Grameen Bank of Bangladesh

• Founder: Professor Muhammad Yunus (2006 Nobel Peace Prize winner).
• Success Story: Poor logon ko reasonable rates par credit provide karne ka ek bada success story.
• Reach: 1970s mein small project ke roop mein shuru hua, 2018 tak 9 million se zyada members aur 81,600 villages mein spread ho gaya.
• Target Group: Mostly women aur society ke poorest sections. Inhone prove kiya ki poor women reliable borrowers ho sakti hain aur successful income-generating activities chala sakti hain.