Rajasthan Board RBSE Class 10 Social Science Notes Chapter 17 Currency and Financial System
- Currency is one of the most important inventions of human being. Like fire and wheel, invention of currency also has played an amazing role in development of human race. Generally whatever we pay in exchange for goods and services is called as currency. It is an instrument of exchange.
- Belief of every person that it will be accepted by every one in the economy makes it as currency. So currency is all that thing which has a general acceptability for payment of goods and services.
- Exchange refers to the changing of goods and services against currency.
- Currency has many types which are used as instrument for payment but for a common man it means currency in terms of notes and coins.
- Indian payment system revolves around bank notes and coins.
- Indian currency is called as Indian national rupee. One rupee is equal to 100 paisa.
- Indian rupee is denoted by ?. This design is combination of Devanagari letter… and Latin letter R and have double horizontal lines. This symbol is designed by Dr. UdayKumar.
- English word money is derived from Latin word ‘Moneta’. Which is the name of goddess in Rome first mint was established near goddess moneta temple so it was called as money.
- India along with China is the countries which introduced the coins for the first time. First Indian coin was introduced by King Shershah Suri in 1540-45 A.D.
- Demonetization of 500 and 1000 rupee note was done on 8 Nov 2016.
- Demonetization refers to ending up the legal validity of current currency and removing it from the circulation.
- To provide financial education reserve bank of India has started a project called ‘Financial literacy’. Its objective is to provide information regarding central bank and general banking system to the targeted sector. It we want to gain knowledge about financial system then log on to: https://rbi. ora.in/financialeducation/home.aspx.
- Barter system is a system in which goods and services were exchanged against certain other goods and services. Due to drawbacks of barter system metal currency was introduced but it was also limited to sometime only as it was not so easy for exchange. It was a costly affair for production.
- Paper currency removed all the drawbacks of barter system and metal currency. Cost of production of paper currency is quite less and its exchange is also convenient.
- In future credit currency and rear money will play an important role in development of currency. Functions of money include medium of exchange, measure of value, standard of deferred payments, and store of value.
- In India we have institutional as well as non institutional sources of credit. Institutional sources of credit are the organizations which are working under government or RBI. They do not work only for earning profit.
- Financial inclusion refers to connecting poor, weak and backward people with financial services by giving them financial services at minimum cost.
- Commercial banks accept deposits from the people who have extra and lends to the people who requires for the purpose of production or consumption.
- Demand deposits refer to the deposits with the commercial bank which can be demanded any time when needed.
- Commercial banks are guided by their historical experience that all the depositors never withdraw their deposits at a single point of time. Therefore the banks find it safe to keep only a part of the deposits as reserves, and lend the rest as loans to the borrowers.
Importance of commercial bank includes following points:
- It inculcates the habit of savings among country men.
- It circulates the savings of people in productive activities.
- It helps in optimum allocation of resources.
Functions of commercial banks:
- Accept deposits
- Lending of money
- Other functions which includes – payment of bills, collection of bills and cheques, locker facility, collects statistical data.
- Self help groups are the group of 15-20 people generally women who pools their savings ranging from 25-100 rupees. Credit is given to the members of the groups at low interest rates.
- Chit fund is the special program for savings and lending in India. Under it people pool their savings and is given to the members by means of auction.