Barter System : Goods are exchanged without use of money.
Double Coincidence of wants : In exchange of goods both parties have to agree to sell and buy each others commodities. In a barter system double coincidence of wants is an essential feature.
Medium of Exchange: Money act as an intermediate in the exchange process. Currency is authorised by the government as medium of exchange
Demand Draft: The deposits in the bank accounts can be withdrawn on demand, these deposits are called demand deposits.
Cheque : A check is a paper instructing the bank to pay a specific amount from the persons account to the person in whose name the cheque has been made
Bank extension of loans : Bank use the major portion of the deposits to extend loans.
Terms of credit : Interest rate, Collateral, documentation, mode of repayemet.
Interest rate: Every loan agreement specifies an interest rate which the borrower must pay to the lender along with the repayment of the principal addition
Collateral: Collateral is an asset that the borrower owns and uses this as a guarantee to a lender until the loan is repaid.
Documentation requirement : list of documents submission during the loan process.
The mode of repayment: repayment of loan as Monthly, EMI, cash, and duration of the repayment.
Formal Sector Credit – Loans from banks and co-operatives Functions of Reserve banks.
RBI – reserve bank of India
Informal Sector Loans – There is no organisation which supervise the credit activities of lenders.
Self-Help Groups The absence of collateral is one of the major resources which prevent the poor from getting the bank loans.
Co –operative banks : Cooperatives have many members. It accepts deposits from its members. With these deposits as collateral, the Cooperative obtains a large loan from the bank. These funds are used to provide loans to its members. Once these loans are repaid, another round of lending takes place.
Demand deposits : People need only some money for their day-to-day needs. So, people deposit the extra money with the banks by opening a bank account in their name. Banks accept the deposits and also pay an interest rate on the deposits
Modern forms of currency : plastic currency
Currency : In India, the Reserve Bank of India issues currency notes on behalf of the central government. No other individual or organisation is allowed to issue currency. The rupee is widely accepted as a medium of exchange in India.
Debt-Trap. Debt trap is a situation where the debtor will not be able to repay the debt incurred. Debt trap situation may arise due to the higher interest rates or change in terms and conditions of debt incurred. Normally, debt trap will result in default of payments or bankruptcies