CG Board Class 10 Social Science Chapter 18 Solutions: Money and Credit (मुद्रा एवं साख) (2026-27)

Regina only has Rs 20,000 in her savings account, which is insufficient to cover the Rs 40,000 cheque. Before issuing the cheque, she must either transfer required funds from her fixed deposit (FD) into her savings account or prematurely withdraw a portion of her fixed deposit to raise her savings account balance to at least Rs 40,000. If she issues the cheque without doing so, it will bounce due to insufficient funds.

Savings Account*: Used by individuals to deposit surplus savings. Money can be deposited and withdrawn at any time (via ATM, cheque, etc.). It earns a lower rate of interest.

• Fixed Deposit Account: Money is deposited for a fixed tenure (e.g., 1 year, 5 years) and cannot be withdrawn before maturity without a penalty. It earns a higher interest rate compared to a savings account.

Yes, cash usage will decrease while bank transactions (debit cards, credit cards, UPI, net banking, RTGS, NEFT) will increase because digital payments are faster, safer, transparent, easier to track, and eliminate the risk of theft associated with physical cash.

Money can be transferred electronically using internet banking or mobile apps through NEFT (National Electronic Funds Transfer) for batch-processed transfers and RTGS (Real Time Gross Settlement) for high-value immediate fund transfers directly from one bank account to another using the beneficiary’s account number and IFSC code.

Convenience*: Electronic transfers happen instantly or within hours without physical movement to a bank branch, eliminating cheque clearing delays and paper handling.

• Dangers: Risks include cyber fraud, phishing, online hacking, sharing confidential passwords/OTPs, and input errors in account numbers leading to wrong transfers.

A credit card is a plastic card issued by a bank that allows the cardholder to borrow funds up to a pre-approved limit to pay for goods and services or withdraw cash, with the agreement to repay the borrowed amount along with applicable interest within a specified grace period.

Money is any legally recognized instrument that serves as a universally accepted medium of exchange, a standard unit of account for measuring prices, and a store of value for future transactions.

Shopkeepers offer toffees/chocolates when they lack small denomination coins (like Re 1 or Rs 2) as loose change. While it is an informal adjustment, it is not a universally accepted or legal currency arrangement because customers cannot use those toffees as legal tender elsewhere.

Money provides a common numerical standard in which the value of all goods and services is expressed (price tag). Because it enjoys universal legal sanction and public trust, money enables instant exchange without double coincidence of wants and serves as a reliable unit for deferring debt repayments into the future.

No. Country Currency Issuing Bank

1. India Rupee Reserve Bank of India
2. Bangladesh Taka Bangladesh Bank
3. Russia Rouble Bank of Russia
4. Afghanistan Afghani Central Bank of Afghanistan
5. China Yuan (Renminbi) People’s Bank of China
6. United States of America Dollar Federal Reserve System
7. Japan Yen Bank of Japan
8. (RBI)

2.

3.

4.

5.

6.

7.

Report Summary**

1. Commercial banks decide interest rates based on RBI’s repo rate guidelines and Monetary Policy framework.
2. Banks must maintain mandatory reserves with RBI: Cash Reserve Ratio (CRR) (e.g., 4% of total deposits) and Statutory Liquidity Ratio (SLR).
3. Savings deposits and fixed deposit interest rates are deregulated within RBI limits, but banks must offer non-discriminatory, transparent rates for similar deposit tenures and amounts.

They are called “commercial banks” because they operate as commercial business enterprises whose primary purpose is to earn profit by accepting deposits from the public at a lower interest rate and advancing loans to borrowers at a higher interest rate, keeping the interest margin as their earnings.

Swapna took a loan from an informal moneylender at a very high compound interest rate. When crop failure occurred due to pest attacks, she could not repay the principal. Accumulating high interest over time, combined with taking a second loan for the next crop season, trapped her in a debt trap, forcing her to sell a portion of her land.

Principal Amount (P) = Rs 10,000

• Monthly Interest Rate = 5% per month
• Annual Interest Rate (R) = 5\% × 12 = 60\% per annum
• Simple Interest (SI) for 1 year = (P × R × T)/(100) = (10000 × 60 × 1)/(100) = Rs 6,000
• Total Amount to Repay = Principal + Interest = Rs 10,000 + Rs 6,000 = Rs 16,000.

Self-Help Groups (SHGs) bypass the requirement of individual collateral (security) because the entire group takes collective responsibility for loan sanction and repayment. Banks grant loans to the SHG based on the group’s regular small savings history and social trust among members rather than physical assets.

d) Reserve Bank of India**

c) Bank savings account

c) Trader (Informal credit source)

c) Fixed deposit

The primary purpose of credit is to provide immediate financial liquidity to borrowers to meet current production expenses, invest in income-generating assets (such as buying machinery, seeds, houses), and fulfill personal or trade requirements before actual income is earned.

A common measure for money is essential because without a standard unit of account, it is impossible to evaluate, compare, and determine the exact price of different goods and services, leading to confusion and inefficiencies like those in the barter system.

Demand deposits (money stored in savings and current accounts) allow account holders to safely store surplus cash and withdraw or transfer funds at any time on demand using cheques, ATMs, or digital banking without pre-notice to the bank.

The main types of bank accounts are

1. Savings Account: For individuals to save surplus income; offers moderate interest and easy withdrawal.
2. Current Account: For businessmen and commercial firms; allows unlimited daily transactions but yields no interest.
3. Fixed Deposit Account (FD): Money deposited for a fixed period; earns the highest interest rate but cannot be withdrawn prematurely without penalty.

In 30 years, physical paper currency and plastic cards may be largely replaced by fully digital Central Bank Digital Currencies (CBDC), biometric payment systems (using palm/retina scans), microchip implant payments, and decentralized secure digital ledgers where cash transactions become extremely rare.

To ensure universal loan access

1. Expand bank branches and regional rural cooperative banks in remote rural areas.
2. Simplify documentation procedures and relax rigid collateral requirements.
3. Promote Self-Help Groups (SHGs) and micro-credit institutions for landless labourers and poor women.
4. Enforce RBI targets requiring 40% priority sector lending to agriculture and small artisans.

A loan helps when invested in productive work yielding higher returns than the interest cost (e.g., buying a shop machine or building a house). However, if the investment fails due to unforeseen risks (e.g., Swapna’s crop destruction by pests or business failure) or if loans are taken at exorbitant interest from informal moneylenders, the borrower must borrow again to pay interest, getting trapped in a cumulative debt trap where assets must be sold.

Terms and conditions protect both lender and borrower

1. Interest Rate: Pay rent for using lender’s capital (e.g., 10% per annum on housing loan).
2. Time Period: Defines repayment schedule (e.g., 10-year tenure for home loan).
3. Collateral/Mortgage: Security asset pledged to recover dues if borrower defaults (e.g., mortgaging house documents or gold).
4. Documentation: Legal proof of identity and income capacity.

Without RBI oversight

1. Commercial banks might charge exorbitant interest rates and lend only to wealthy profit-making corporations, ignoring poor farmers.
2. Banks might not maintain adequate cash reserves (CRR/SLR), leading to bank failures during heavy cash withdrawals and loss of public trust.
3. Fraudulent activities and speculative investments in share markets would collapse the national monetary stability.

1. Agricultural Trade: A farmer takes a short-term crop loan to buy seeds and fertilizers before sowing season and repays after selling harvest.
2. Business Expansion: A trader takes a commercial bank loan to buy raw materials and inventory to fulfill large customer orders.
3. Personal Expenditure: A salaried employee takes an educational or housing loan to fund children’s higher education or construct a family house.

Bank deposits (demand deposits) are treated as money because

1. They are universally accepted as a medium of payment through cheques, debit cards, and electronic transfers without using physical cash.
2. They can be converted into liquid cash at any time on demand.
3. They enjoy legal sanction and government backing through the banking framework monitored by the Reserve Bank of India.