Money and Economy Notes Class 10 Geography Chapter 5 Kerala Syllabus Questions and Answers

Students often refer to SCERT Class 10 Social Science Notes Kerala Syllabus and Class 10 Geography Chapter 5 Money and Economy Notes Questions and Answers English Medium that include all exercises in the prescribed syllabus.

SSLC Geography Chapter 5 Notes Pdf English Medium Money and Economy

SCERT Class 10 Social Science Geography Chapter 5 Money and Economy Notes Question Answer Kerala Syllabus

Class 10 Geography Chapter 5 Notes Kerala Syllabus Money and Economy

Question 1.
Observe the pictures. Picture 5.2 shows that money is used to buy goods. Similarly, all the pictures show the various activities that money does. Discuss with your friends and explain pictures 5.3, 5.4 and 5.5.

Answer:

• Figure 5.3 – Money as a Unit of Value: The girl tells her father that the pen cost ten rupees and the pencil cost seven rupees. This shows that money acts as a measure of value, helping us to know the price of goods. It provides a standard way to compare the value of different items, which helps people make decisions while buying.
• Figure 5.4 – Money as a Store of Value: Here, it is said that Noomi’s father sold land and deposited the money in the bank for her higher education.
  This illustrates that money can be saved and stored for future use. Banks help keep money safe and allow people to use it wtien needed, such as for education or other important expenses.
• Figure 5.5 – Money as a Means of Deferred Payment: In this scene, the vendor promises to pay for the paddy next week. This shows that money can be used for payments in the future, even if the goods are delivered today. This is known as deferred payment, where trust and credit play an important role in trade.

Question 2.
What were the transactions of goods and services using money in your household in the past month? Prepare a list in consultation with your parents.
Answer:
(Hint: Prepare the list with the help of your parents by following the given steps)

1. Step 1: Ask your parents about the things bought or paid for last month.
2. Step 2: Write down the goods and services and how much was spent.
3. Step 3: Note the payment method (cash, card, or UPI).
4. Step 4: Make a clear list or table.
5. Step 5: Check with your parents to make sure it’s correct.

Question 3.
Characteristics of Money
A key characteristic of money is that it is generally recognised and accepted. What other characteristics should money possess? Discuss and complete the list.
Answer:

1. Generally accepted
2. Durable
3. Portable
4. Stable in value
5. Medium for measuring value

Question 4.
Write down the various functions of money.
Answer:

1. Medium of Exchange
2. Measure of Value
3. Store of Value
4. Standard of Deferred Payment
5. Transfer of Value

Question 5.
My trail
I am a hundred rupee note. At 9 am today, a student took me to a shop and bought two notebooks worth Rs. 50 each. Using your imagination, complete my journey by writing down how many transactions I would have undergone by 5 pm, fully utilising my value. How many transactions have taken place in my journey according to you? What is the total value of these transactions?
Answer:
(Example)
a) 9:00 AM: The student walked into a stationery shop and bought two notebooks worth Rs. 50 each. I was handed over to the shopkeeper in full, and in return, he gave the notebooks to the student.

b) 9:30 AM: The shopkeeper went to have his breakfast at a small eatery. He paid Rs. 40 for his meal, and I changed hands again. Now I was with the tea shop owner, along with Rs. 60 change returned to the shopkeeper.

c) 10:30 AM: The tea shop owner used me to buy milk and sugar from a nearby grocery store worth Rs. 100.1 was gone again!

d) 11:00 AM: The grocery store owner used me to pay his delivery boy’s weekly wages – yes, exactly Rs. 100. Now the delivery boy had me!

e) 1:00 PM: Hungry after work, the delivery boy went to a food stall and bought a meal for Rs. 70. The stall owner gave him Rs. 30 back and took me.

f) 2:00 PM: The food stall owner gave me to his vegetable vendor to buy vegetables worth Rs. 100. Another transaction done!

g) 4:00 PM: The vegetable vendor went to a mobile recharge shop and recharged his phone for Rs. 100. I moved again!

h) 5:00 PM: Finally, the mobile recharge shopkeeper placed me in the day’s earnings to deposit in hisbank.

Number of transactions: 8
Total value of all transactions: Rs. 100 × 8 = Rs. 800

Question 6.
Find some news stories related to inflation and present them before the class. List the causes mentioned in each news story.
Answer:
(Hints: Collect more news stories related to inflation and identify the causes)

Question 7.
Inflation based on the General Consumer Price Index in August 2023 and September 2023 is given below. What was the change in inflation in September 2023 compared to the inflation rate in August 2023?

Answer:

• In India, the overall inflation rate decreased from 6.83% in August 2023 to 5.02% in September 2023, showing a drop of 1.81 percentage points.
• In urban areas, inflation fell from 7.02% to 5.33%, while in rural areas, it went down from 6.59% to 4.65%.
• In Kerala, the total inflation rate reduced from 6.26% in August to 4.72% in September, a decrease of 1.54 percentage points. Urban Kerala saw a decline from 6.40% to 4.59%, and rural Kerala from 6.08% to 4.93%.
• Overall, the data shows that inflation reduced in both India and Kerala in September 2023 compared to August 2023, with the sharpest decline observed in rural India.

Question 8.
The repo rates for different periods are given below
June 2022 4.90%
December 2022 6.25%
September 2023 6.50%

a) Find out the trend in the repo rate.
b) Discuss how the repo rate affected the credit and savings in the period from June 2022 to December 2022.
Answer:
a) The repo rate has shown a consistent upward trend from June 2022 to September 2023.
It increased from 4.90% in June 2022 to 6.25% in December 2022 and 6.50% in September 2023.

b) From June 2022 to December 2022, the repo rate increased from 4.90% to 6.25%. As a result of the higher repo rate, borrowing became more expensive for banks. Consequently, banks increased their lending rates, which led to a decrease in credit or borrowing by individuals and businesses. At the same time, banks also raised interest rates on deposits to attract more savings. This encouraged people to save more. Therefore, during this period, there was a decline in credit growth and a rise in savings due to the increase in the repo rate.

Question 9.
Visit the Reserve Bank of India website and find out the current repo rate, reverse repo rate, and cash reserve ratio and present them in the class.
Answer:
(Hint: Follow the given steps to find out the rates)
Step 1 : Access the Official RBI Website (URL: https://www.rbi.org.in)
Step 2: Locate the Latest Monetary Policy Information
Step 3: Identify the Required Rates (Current repo rate, reverse repo rate and cash reserve ratio)

Question 10.
Analyse the functions of the Reserve Bank and explain how it regulates economic activities in India. Answer:
The Reserve T3 and of India (RBI) is the central bank of the country and plays a vital role in regulating economic activities. One of its main functions is to control the supply of money in the economy through monetary policy by adjusting key interest rates like the repo rate and the reverse repo rate. By doing so, the RBI manages inflation and ensures economic stability. It also acts as a regulator and supervisor of the banking system to maintain public confidence and ensure the safety of the financial system. The RBI issues currency, manages foreign exchange reserves, and acts as a banker to the government. It also promotes financial inclusion and ensures smooth payment and settlement systems across the country. Through these functions, the RBI influences credit, investment, and consumption patterns in the economy, thereby regulating overall economic activity in India.

Question 11.
Find out which banks operate in your area and list the category they fall into.
Answer:
(Hint)
Step 1: Identify your local area
Step 2: Search online to find the names of banks nearby.
Step 3: Make a list of the banks you find
Step 4: Find out the Cctegory of each Bank (Public banks, Private banks, Co-operative banks etc)
Step 5: Prepare your final list
Eg: State Bank of India (SBI) – Public Sector Bank
HDFC Bank – Private Sector Bank
Federal Bank – Private Sector Bank

Question 12.
Why do banks offer higher interest rates on fixed deposits than on savings deposits?
Answer:
Banks offer higher interest rates on fixed deposits than on savings deposits because fixed deposits involve locking in money for a specific period, which gives banks more certainty and stability in managing their funds. When a customer puts money in a fixed deposit, they agree not to withdraw it before the maturity date, allowing the bank to use that money for lending or investment over a longer term. In contrast, savings deposits can be withdrawn at any time, so banks must keep more cash readily available and cannot use those funds as freely. To encourage customers to commit their money for longer durations, banks offer higher interest rates on fixed deposits as a reward for locking in their funds.

Question 13.
Anu and Manu are students of Class 9. Anu won a prize of Rs. 25,000 in a state-level elocution competition. Manu receives National Meritcum-Means Scholarship of Rs. 12,000 every year from Class 9 to 12. Both of them want to deposit this money in a bank for their higher education. Which bank accounts would you suggest for Anu and Manu to deposit this money?
Answer:

• For Anu, a Fixed Deposit account is ideal as it offers higher interest and is suitable for long-term saving.
• For Manu, a Recurring Deposit account works best for regular deposits, or he could choose a Savings Account for flexibility, though with lower interest.

Question 14.
Identify and prepare notes on various loans offered by commercial banks.
Answer:
(Hints: Find more loans offered by commercial banks and prepare notes)

Personal Loan

• Purpose: For personal needs such as weddings, vacations, medical emergencies, or home renovations.
• Features: Unsecured loan (no collateral required), Flexible use of funds, Higher interest rates compared to secured loans.
• Repayment: Generally paid in EMls over 1 – 5 years.

Car Loan

• Purpose: To purchase a new or used car.
• Features: Secured loan (the car serves as collateral), Short to medium repayment tenure (1 – 7 years),
  Lower interest rate compared to personal loans.
• Repayment: Paid through monthly EMIs.

Question 15.
Visit three banks in your area and find out the rates they charge as interest for various loans and complete the table.

a) Identify the type of loan for which banks charge the lowest rate of interest.
b) List the collateral that the banks accept for various loans.
Answer:

a) Home loan
b) Residential Property, Commercial Property, Gold Ornaments or Gold Coins etc.

Question 16.
How do commercial banks influence economic activity?
Answer:
Commercial banks play a vital role in influencing economic activity by acting as financial intermediaries between savers and borrowers. They mobilize savings from individuals and businesses through deposit schemes and lend these funds to those in need, such as entrepreneurs, farmers, industries, and consumers. By offering credit for productive purposes, commercial banks help increase investment, boost production, and generate employment. They also facilitate trade by providing services like issuing letters of credit, enabling digital payments, and offering foreign exchange services. Moreover, through their lending policies, they help control inflation and maintain price stability in coordination with the central bank. In this way, commercial banks actively contribute to the growth and development of the economy.

Question 17.
Organize an interview with a bank official to create awareness about the possible frauds that can occur while using banking services online and the steps we need to take against it. Prepare a questionnaire for this purpose.
Answer:
(Hints: Conduct an interview with a bank official by using the given questions)

• Can you tell us about your role and responsibilities in the bank?
• What are some of the most common online banking frauds today?
• What is SIM swapping, and how can it affect a person’s bank account?
• Why should we avoid using public Wi-Fi for banking transactions?
• How can someone recognize a fake banking app or website?
• What steps should customers take to protect their online banking accounts?
• What should a person do immediately if they notice an unauthorised transaction?

Question 18.
The sources of credit in Kerala during various periods are given in the table.

a) Find out the reason for the decrease in loan share from banks and increase in loan share from SHGs during 2019 – 21.
b) Discuss the influence of local moneylenders on the credit system in Kerala.
Answer:
a) Reason for Decrease in Loan Share from Banks and Increase in Loan Share from Self-Help Groups (SHGs) (2019 – 2021):
From the data:

• Bank credit fell from 68.55% in 2019 to 44.51% in 2021.
• SHG credit rose sharply from 8.8% in 2019 to 41.53% in 2021.

Reasons:
COVID-19 Pandemic Impact (2020 – 21):

• Banks tightened credit due to increased risk and uncertainty.
• Formal procedures and documentation may have made bank loans less accessible.

Accessibility of SHGs:

• SHGs provided quicker, more flexible loans with minimal paperwork.
• They became a lifeline for many during economic hardships, especially in rural areas.

Government and NGO Support:

• During the pandemic, government schemes promoted SHG involvement in microcredit.
• SHGs were encouraged to support vulnerable communities, boosting their role.

b) From the data: Share of local moneylenders dropped from 8.04% in 2019 to 4.43% in 2021.
Traditional Role: Local moneylenders have historically been a convenient source of credit, especially in rural areas with limited banking access.
Issues with High Interest Rates: They often charge very high, unregulated interest rates, leading to debt traps.
Declining Influence: Due to better access to SHGs and microfinance institutions, reliance on moneylenders has decreased. Awareness and financial literacy may also contribute to their reduced role.
Still Relevant in Emergencies: Despite decline, they remain important for emergency loans where formal options are not feasible.

Question 19.
What are the different sources of credit in India? Discuss in class how they function in the economy. Answer:
In India, the main sources of credit can be broadly categorized into formal and informal sources. Formal sources include banks and cooperatives, which are regulated by the government and provide loans at reasonable interest rates with proper documentation. These institutions support economic activities by offering credit to farmers, businesses, and individuals for various needs like agriculture, education, and housing. Informal sources, such as moneylenders, traders, employers, and friends or relatives, operate outside government regulation. Though they are easily accessible, they often charge high interest rates and may exploit borrowers. In the economy, formal credit promotes growth and stability, while dependence on informal credit can lead to debt traps. It is important to increase access to formal credit to ensure fair and inclusive economic development.

Question 20.
Credit deposit ratio in public sector banks in various states is given.

a) Find out the reasons why the credit deposit ratio is high in some states and low in others.
b) Examine the credit deposit ratio from March 2021 to March 2023.
Answer:
a)

• Economic Activity and Industrial Development
• Banking Infrastructure and Financial Inclusion
• Population Density and Urbanization
• Agricultural Dependence and Credit Risk
• Migration and Remittances
• Policy and Regulatory Factors

b)

• Andhra Pradesh shows a consistent increase from 136.20 (2021) to 155.40 (2023), indicating growing credit disbursal and economic activity.
• Assam also shows a steady rise from 37.69 to 47.27, suggesting gradual financial inclusion and economic growth.
• Tamil Nadu experienced a slight dip in 2022 but recovered in 2023, showing a stable credit environment.
• Kerala showed steady growth from 64.74 to 72.05, indicating improved lending practices and utilization of deposits.
• Punjab, however, saw a continuous decline from 44.56 to 41.92, which may point to economic slowdown, credit risk, or conservative lending behavior in the state.

Question 21.
What are the steps the government has taken to promote financial inclusion?
Answer:

• Pradhan Mantri Jan Dhan Yojana (PMJDY): Launched in 2014, this is one of the largest financial inclusion programs in the world. It aims to provide every household with a bank account, along with a debit card, accidental insurance, and over draft facility.
• Direct Benefit Transfer (DBT): Under this system, government subsidies and welfare payments are directly transferred into beneficiaries’ bank accounts, reducing leakages and ensuring transparency.
• Digital Payment Platforms: The government has promoted platforms like BHIM app, UPI (Unified Payments Interface), Rupay cards, and mobile wallets to encourage digital transactions and reduce dependence on cash.
• Financial Literacy Programs: The RBI and other government bodies regularly conduct awareness campaigns to educate people about savings, credit, insurance, and digital banking.
• MUDRA Yojana: Through the Micro Units Development and Refinance Agency (MUDRA), the government provides loans to small and micro enterprises, especially to those who don’t have access to traditional banking.
• Jan Suraksha Schemes: These include affordable insurance and pension schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY), and Atal Pension Yojana (APY).
• Small Finance Banks and Payments Banks: The RBI has licensed these banks to focus on underserved areas, offering basic banking services to low-income groups.

Std 10 Geography Chapter 5 Notes Kerala Syllabus – Extended Activities

Question 1.
Visit the website of Reserve Bank of India and prepare a class report on its various publications
Answer:
(Hints for Class Report on RBI Publications)
Introduction:

• RBI is India’s central bank.
• It manages money, banks, and inflation.
• Shares information through regular publications.

Types of RBI Publications:
a. Annual Report

• Published once a year.
• Explains RBI’s work and future plans.
• Shows how the economy performed.

b. Financial Stability Report (FSR)

• Talks about safety of banks.
• Tells if the financial system is stable.

c. Monetary Policy Report

• Explains RBI’s decisions on interest rates.
• Focuses on inflation and money control.

d. Report on Currency and Finance

• Gives deep analysis of economic topics.
• Useful for researchers and policymakers.

e. RBI Bulletin

• Monthly magazine-like report.
• Contains articles, data, and news.

f. Handbook of Statistics

• Lots of economic and banking data.
• Useful for students and economists.

g. Consumer Education Material

• Guides for the public.
• Topics: digital banking, fraud safety, etc. Conclusion

Question 2.
Visit a Commercial bank in your area and understand their various activities and services provided. Prepare a chart showing the credit deposit ratio, various loans and deposits and their interest rates.
Answer:
(Hints)
Class Report : Visit a Commercial Bank
Bank Visited : State Bank of India (SBI) – [Insert your local branch name]
Date of Visit : (Insert date)

Type of Service	Details
Deposits	Savings Account, Current Account, Fixed Deposit (FD), Recurring Deposit (RD)
Loans	Home Loan, Personal Loan, Car Loan, Education Loan, Business Loan
Other Services	ATM services, Internet Banking, Mobile Banking, Debit/Credit Cards, UPI
Customer Support	Help Desk, KYC Updating, Account Opening Assistance

These are the common activities in a bank. Also, try to find the various deposits (savings deposits, current deposits, fixed deposits), loans (Home loan, personal loan, car loan) and their interest rates.

Question 3.
Visit a production unit and prepare a report containing the following information.
■ Operating sector (primary, secondary or tertiary)
■ Services provided by the bank to this production unit
■ Relation with other sectors
Answer:
(Hints: Visit to a Production Unit and Prepare Report)
Operating Sector

• Identify what the unit produces: goods (like clothes, food, machinery) or services.
• If it makes physical goods, it is in the Secondary Sector.
• If it grows raw materials (like farming, fishing), it’s Primary Sector.
• If it provides services (like banking, IT, education), it’s Tertiary Sector.

Bank Services Provided (Ask or find out about)

• Loans: Working capital loan, machinery loan, or building loan?
• Bank accounts: Current account for business use?
• Digital services: Internet banking, mobile banking?

Relation with Other Sectors

• From whom do they buy raw materials? (Primary Sector)
• Who helps them sell or deliver products? (Tertiary Sector)
• Do they use transport, advertising, or software?

Money and Economy Class 10 Notes Pdf

INTRODUCTION

This chapter “Money and Economy” explores the crucial role that money plays in the functioning of a modern economy. It begins by explaining the concept of money, its functions, and how it serves as a medium of exchange. The chapter then highlights the role of the Central Bank, especially the Reserve Bank of India, in regulating the supply of money and maintaining economic stability. It also discusses the functioning of banks and non-banking financial institutions, which provide vital financial services to individuals and businesses. With the advancement of technology in banking, digital transactions and online banking have become more accessible and efficient. The chapter further examines the sources of credit in India, both formal and informal, and emphasises the significance of financial inclusion ensuring that banking services reach all sections of society, including the rural and marginalized. Together, these topics help students understand the interconnected nature of money, financial institutions, and economic development.

Money

• Anything accepted in the exchange of goods and services can generally be called money.
• Money stimulates the economic activities of production, distribution and consumption and strengthens the economy by making the transactions faster.
• The number of times a unit of money is exchanged in a given period of time is known as the velocity of circulation of money.
• General functions of Money:
  • Medium of Exchange
  • Measure of Value
  • Store of Value
  • Means of Deferred Payments

Money and Central Bank

• The Reserve Bank of India (RBI) is the central bank of India and it is headed by its Governor. It was established on 1 April 1935 in Kolkata under the Reserve Bank of India Act, 1934.
• In 1937, the headquarters of the Reserve Bank was shifted to Mumbai. It was nationalized in 1949.
• The Reserve Bank sees the total amount of money in our economy in the form of Ml, M2, M3 and M4.
• Fiscal policy is the policy regarding taxation and government spending.
• Monetary policy is the policy regarding the supply of money and the rate of interest.

Banks and Non-banking Financial Institutions

• Banks and non-banking financial institutions are institutions that provide financial services to individuals, organizations, and businesses in the economy.
• Banks can be broadly classified into commercial banks and cooperative banks.
• Commercial banks are licensed by the RBI to provide banking services and are included in the Second Schedule of the RBI Act, 1934.
• Commercial banks that were allowed to operate in India after the financial reforms of the 1990s are known as new generation banks.
• Unlike banks, non-banking financial institutions cannot accept savings and deposits from the public.

Banks and Technology

• Technology is helpful in increasing the speed of transactions.
• With the advent of mobile banking and online banking, customers have been able to access various banking services using smartphones and computers.
• Some of the payment systems that have emerged in the banking sector as a result of technology are:
  • National Electronic Fund Transfer System
  • Real Time Gross Settlement
  • Core Banking
  • Universal Payment Interface

Sources of Credit in India

• Credit can be considered as the main source for the financing of development activities.
• Sources of credit in India can be classified into formal and informal sources of credit.
• Formal sources of credit are the organized, institutionalized and regulated systems.
• Informal sources of credit are the unorganized and non-institutionalized systems.
• Credit Deposit Ratio measures the proportion of a bank’s deposits that are used for loans.

Financial Inclusion

• Financial inclusion and inclusive economic growth accelerate when banking services reach the common man, the rural population and the marginalised people.
• Government has taken various steps for this.
  • Nationalisation of Banks
  • Co-operative Banking Systems
  • Microfinance
  • Jan Dhan Account

MONEY

• The exchanges of goods and services between individuals, and between production units became easier
  with the advent of money.
• Anything accepted in the exchange of goods and services can generally be called money.

It is money that made the exchange of goods and services faster and made specialization possible. For example, rubber farmers are able to focus solely on their production because they can convert their product, which is rubber, into money and use that money to buy other goods and services he needs. Forms of money change day by day. This is because money influences human life at different levels such as consumers, producers, and suppliers. Banks play a major role in facilitating the activities of money in the economy. Money helps people to buy and sell goods and services, compare the prices of different goods and services, store the value of savings and assets, and lend and borrow money.

GENERAL FUNCTIONS OF MONEY
a) Medium of Exchange: Goods and services can be sold for money, and the money can be used to purchase the goods and services that are needed. For example, labour can be supplied and its reward can be received in the form of money. The same money can be used to purchase goods and services. In this way money is crucial for making countless transactions in the economy.

b) Measure of value: The value of all goods can be expressed in monetary terms. In the barter system, it was not easy to compare the value of one good with the value of another. Money made it easy to compare the values of two goods. The value of a good is the price that is assigned to it in the transaction process. Just as the value of good is measured in monetary terms, the value of money can also be expressed in terms of other goods. The value of money is its purchasing power. When the price of goods increases, the purchasing power of money will decrease, and when the price of goods decreases, the purchasing power of money will increase. Changes in the purchasing power of money are keenly felt when there is inflation or deflation in the economy.

c) Store of Value: When money became something that was acceptable to everyone, it had become possible to store the value of any good in the form of money. This was not possible in the barter system. Through this it is possible to convert the value of goods, including that of perishable items, into money or asset and it can be used in the future.

d) Means of Deferred Payments: In the modem times many business activities are carried out with ease because of the advantage of settling the financial transactions at a later date. Both buyers and sellers generally agree that the cash settlement of the transactions of goods and services can be cleared later. It is possible to measure the value of borrowing and lending in the form of money. This is very helpful for short and longterm business transactions.

How does money work in the economy?

• It is money that moves the economy and speeds up its functioning.
• Money stimulates the economic activities of production, distribution and consumption and strengthens the economy by making the transactions faster.
• Eg: Rice production is an economic activity in the primary sector. A farmer who produces rice may need fertilisers, seeds, pesticides, machinery, and labour. When money is spent on fertilizers and machinery, it becomes a source of income for the producers in the industrial sector. When the rice producers depend upon transportation facilities to get the rice to the market, it becomes a source of income for service providers.

The money received as income by the industrial and service sectors is pumped back into the economy. In this way, each currency spent in the economy changes hands again and again. As the number of exchanges increase, the transactions in the economy also increase. The number of times a unit of money is exchanged in a given period of time is known as the velocity of circulation of money. An increase in the velocity of circulation money indicates an acceleration in economic growth, while a decrease in the velocity of circulation money indicates a slowdown in economic growth. In the economies where growth rate is high, producers and consumers have more chances to spend money, while in the economies where growth rate is low, producers and consumers have limited chances to spend money.Banks and financial institutions play a major role in facilitating money transactions and also in regulating the economic activities. Every country has its own banking system.

MONEY AND CENTRAL BANK
In each country, the respective central banks will be the ultimate authority of the money. The Reserve Bank of India (RBI) is the central bank of India and it is headed by its Governor. It was established on 1 April 1935 in Kolkata under the Reserve Bank of India Act, 1934. In 1937, the headquarters of the Reserve Bank was shifted to Mumbai. It was nationalized in 1949.The central bank regulates and coordinates the activities of banks and nonbanking financial institutions in the economy.

FUNCTIONS OF THE RESERVE BANK OF INDIA
a) Printing and Issuing Currency: As per the Reserve Bank of India Act 1934, only the Reserve Bank of India has the power to print and issue all currencies except coins and one rupee notes. The coins and one rupee notes are printed and issued by the Ministry of Finance, Government of India. The Reserve Bank of India is responsible for designing, incorporating the security features, printing, and distributing the currency. Currency notes are printed at the Government of India’s printing presses at Nasik (Maharashtra) and Dewas (Madhya Pradesh). It is also printed at two presses at Mysore (Karnataka) and Salboni (West Bengal) by Bharatiya Reserve Bank Note Mudran Limited (BRBNML), owned by RBI. Coins are minted at the Government of India’s mints at Mumbai, Hyderabad, Kolkata and Noida. Based on the government’s instructions, the Reserve Bank of India can withdraw the currency notes in circulation. This is known as demonetization.

b) Bankers’ Bank: The Reserve Bank acts as the bankers’ bank. It provides emergency loans to banks in the times of crisis, maintains the reserves of banks, and helps to settle transactions between banks.

c) Controls the supply of money and credit: When the supply of money increases and the production of goods and services does not increase proportionately, there arises a situation where there are fewer goods and services and more money in the economy. This causes the prices of goods and services to rise. An increase in the general price level of goods and services is known as inflation. Inflation in India is measured using the Consumer Price Index (CPI), which is prepared by the National Statistical Office under the Ministry of Statistics and Programme Implementation (MOSPI).

If inflation increases in the economy without any control, it causes a decrease in the purchasing power of money. It adversely affects economic growth and production. Therefore, inflation must be controlled. One of the reasons behind inflation is the increase in the quantity of money supply. The total amount of money in an economy is the total amount of money held by the public and money held by banks and non¬banking financial institutions.The Reserve Bank sees the total amount of money in our economy in the form of M1, M2, M3 and M4.

M1 = Coins and currency notes held by the public and the savings deposits in commercial banks
M2 = M1 + savings deposits in post office savings banks
M3 = M1 + net fixed deposits in commercial banks
M4 = M3 + total deposits in post offices (excluding National Savings Certificates)
where M1 and M2 are known as narrow money and M3 and M4 are known as broad money.

Uncontrolled lending by banks leads to the increase in the money supply in the economy and also inflation. This needs to be controlled. RBI uses quantitative and qualitative measures to control credit.

Inflation is controlled by changing bank rates and changing the reserve ratio, by RBI. The important bank rates are the repo rate and the reverse repo.

For example when inflation increases unchecked, RBI increases repo rate and reverse repo rate. When RBI increases these rates, the commercial banks also change these rates. When these rates are increased, the money available with the commercial banks for lending fall because at a higher rate of interest the commercial banks will take less loans from RBI and deposit more in the RBI. In the same way the loan taken by the public will also be less. So the money available in the economy also would be less. When the rate of interest is high, people will prefer to save more money rather than spend, because the reward for not consuming is greater. The money held by the public Rows to commercial banks and from there to the Reserve Bank. The amount of money in the economy decreases and the inflation comes under control.

• Reserve Bank of India controls the credit and supply of money by changing the Cash Reserve Ratio (CRR).
• This is the amount of money the banks must keep as reserves with the Reserve Bank out of the money they receive as deposits.
• When the reserve ratio decreases, the amount of money available with banks to lend increases and the availability of credit increases. This increases the money available with the people.
• However, when the reserve ratio increases, amount of money available with banks to lend will decrease. This reduces the availability of credit and reduces the amount of money people have.

Repo Rate: The rate of interest charged by the Reserve Bank of India on the loans taken by commercial banks from the RBI.
Reverse Repo Rate: The rate of interest given by the Reserve Bank of India on the deposits by the commercial banks.

d) Acts as the government’s bank: The Reserve Bank of India is responsible for maintaining government accounts, providing banking services, and implementing financial management. It also advises the government on matters such as fiscal and monetary policy.

e) Custodian of foreign exchange reserves: The foreign exchange reserves of our economy are the sum total of foreign currencies and gold reserves. RBI is the custodian of all these.

f) Publication of Reports: RBI publishes various reports at different periods such as Banking Trends in India, Monetary Policy Reports, Consumer Surveys, RBI Bulletin and Statistical Supplements.

Who prints one rupee note and coins?
Before 1835, the rupee, coins and other forms of money were used in India. There are historical reasons why the Government of India prints one rupee note and coins.

• The historical convention of 1835 allowed the East India Company, on the basis of Paper Currency Act of 1835, to print paper currency in British India.
• The intention was to facilitate trade and commerce.
• The Coinage Act of 1906 and the Coinage Act of 2011 gave the central government the power to mint coins.
• The Government of India retains this power and therefore prints one rupee note and coins.

Demonetization
The most recent demonetization was implemented in India was effected on 8 November 2016. The aim was to prevent corruption, black money, terrorism, and counterfeit currencies. The existing currency notes of Rs 500 and Rs 1,000 were declared as no longer legal tender. New currency notes of Rs 500 and Rs 2,000 were printed. The public had the opportunity to deposit old currency notes, without declaration till 31 December 2016 in banks and with declaration till 31 March 2017 in the RBI.

Fiscal policy and Monetary policy

• Fiscal policy is the policy regarding taxation and government spending.
• Monetary policy is the policy regarding the supply of money and the rate of interest.

BANKS AND NON-BANKING FINANCIAL INSTITUTIONS

• Banks and non-banking financial institutions are institutions that provide financial services to individuals, organizations, and businesses in the economy.
• Banks can be broadly classified into commercial banks and cooperative banks.
• While the operations of commercial banks are controlled by shareholders, the ownership of cooperative banks is vested with the members of the cooperative societies.
• Kerala Bank is an example of a cooperative bank.

COMMERCIAL BANKS
Commercial banks are licensed by the RBI to provide banking services and are included in the Second Schedule of the RBI Act, 1934. Public sector banks, private sector banks, small finance banks, payment banks, specialized banks, regional rural banks, and foreign banks are some examples of commercial banks.
Eg: NABARD,SBI,Canara Bank
Commercial banks that were allowed to operate in India after the financial reforms of the 1990s are known as new generation banks.
Eg: Axis Bank, Mahindra Bank, Yes Bank and Indus Bank.

Functions of Commercial Banks
The main functions of commercial banks are to accept deposits from the public and to provide loans. Banks act as a safe haven for savings. They are able to convert the money deposited in banks into various types of loans and make them available to entrepreneurs.

a) Accepting Deposits
Various types of deposit accounts offered to the public by commercial banks are:
Savings Deposit: This is a deposit that instills the habit of saving in individuals and allows them to withdraw money according to their needs. The depositor has the opportunity to withdraw money from such deposits, subject to restrictions. The number of times money can be withdrawn within a period and the limit on the amount that can be withdrawn varies from bank to bank. Banks often offer low interest rates on savings deposits.

Current Deposit: A current account is an account intended for business transactions. There is no limit to the number of transactions that can be made from such accounts in a single day. Banks do not pay interest on the money in this account. Overdraft facility is provided for this account. An overdraft is a system that allows you to withdraw more than the amount in the current account within a predetermined limit.

Term Deposit or Fixed Deposit Account: Money that is not needed to be withdrawn immediately can be deposited in such accounts. Banks pay more interest on such deposits than on money in a savings bank account. If money is withdrawn from these deposits before the maturity period, the interest rate received by the depositors may be reduced. The interest can be withdrawn upon maturity along with the deposits, or at various periods determined by the depositor.

Recurring Deposits: Recurring deposits are deposits of a fixed amount of money at regular intervals for a specific period of time. Such deposits earn higher interest rates than savings deposits. However, they are lower than the interest rates on fixed deposits. At the end of the tenure, the accumulated amount can be withdrawn along with interest.

b) Lending Loans
It is the Commercial banks that provide various loans to individuals and institutions for various financial activities. Commercial banks act as intermediaries between depositors and borrowers. Banks keep a portion of the deposits received as reserves and lend the rest to entrepreneurs. Commercial banks charge interest on the various loans they provide to their customers. The interest rate charged to borrowers is higher than the interest rate paid to depositors. The difference between the interest paid to depositors and the interest charged from borrowers is the income of banks. This is known as the spread. Banks provide loans by accepting various collaterals. They accept gold, land documents, salary certificates, etc. as collateral.

c) Other functions Providing various services.
Commercial banks provide various banking services to the public.

• Credit Card,Debit Card
• ATM Services
• Locker Facility

NON-BANKING FINANCIAL INSTITUTIONS

• These are financial institutions that operate in the banking sector but perform only some of the functions of a bank.
• Unlike banks, non-banking financial institutions cannot accept savings and deposits from the public.
• Money cannot be withdrawn by using cheques from such financial institutions.

Non-banking financial institutions are regulated by institutions such as the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDA), and National Housing Bank (NHB). Insurance companies (e.g. LIC, GIC), mutual fund companies (e.g. UTI), and nonbanking financial institutions (e.g. KSFE) are all examples of non-banking financial institutions.

KSFE
KSFE is a non-banking financial company in Kerala. It was established in 1969 to provide financial services to the people of Kerala. It provides various services like gold loans, personal loans, business loans, vehicle loans, housing loans, microfinance and chits, through its various branches. KSFE has a strong presence in Kerala through its network of branches and the strong support of its customers.

BANKS AND TECHNOLOGY
Technology is helpful in increasing the speed of transactions. With the advent of mobile banking and online banking, customers have been able to access various banking services using smartphones and computers. Online banking is a system where bank transactions are available through the internet. Banking services that were available only at certain times and days are now available 365 days a year, anywhere in the world, due to the intervention of technology. Some of the payment systems that have emerged in the banking sector as a result of technology :

• National Electronic Fund Transfer System (NEFT)
  This is a system introduced by the Reserve Bank of India to make bank transactions between account holders easier and faster. Funds are transferred using the Indian Financial System Code (IFSC).
• Real Time Gross Settlement (RTGS)
  RTGS is a system introduced by the RBI to transfer large amounts of money between account holders. The feature of this is that transactions can be completed in a very short time.
• Core Banking
  Core banking is a system that enables an account holder of a bank to carry out financial transactions from any of its branches. There is no need to go to the specific branch where the customer holds the account for the bank transactions. It is conv enient for the customers.
• Universal Payment Interface (UPI)
  UPI is a payment system developed by the National Payments Corporation of India (NPCI). It enables realtime money transfers between bank accounts. Users can connect their various bank accounts through a mobile application and make simple and secure transactions. Some of the popular UPI apps are Google Pay, Paytm, Phone Pay, BIM UPI, and Amazon Pay.

The use of cyber technology can help deliver personalized services and reduce costs, but it also poses significant challenges to security.

SOURCES OF CREDIT IN INDIA
Entrepreneurs need money to start new ventures, to expand existing ventures and to enable firms to adopt new technologies. A large percentage of this comes from banks and non-banking financial institutions. Credit can be considered as the main source for the financing of development activities. Sources of credit in India can be classified into formal and informal sources of credit. Formal sources of credit are the organized, institutionalized and regulated systems. Informal sources of credit are the unorganized and non-institutionalized systems. The mutual coexistence and operational success of both are necessary for the growth of the economy.

Credit Deposit Ratio : Credit Deposit Ratio measures the proportion of a bank’s deposits that are used for loans. It is monitored by the RBI. A high credit deposit ratio indicates that banks have lent out a large portion of the deposits they have received. A low credit deposit ratio indicates that banks are lending out a smaller portion of the deposits they have received.

FINANCIAL INCLUSION
Financial inclusion and inclusive economic growth accelerate when banking services reach the common man, the rural population and the marginalised people.Government has taken various steps for this.

a) Nationalization of Banks
In order to bring the functioning of banks to different parts of the country and to more people, 14 banks were nationalized in 1969 and 6 banks, in 1980. The main objectives of bank nationalization are:

• To expand banking facilities in rural areas
• To provide credit to farmers at lower rates
• To ensure equitable distribution of credit
• To prevent the concentration of economic power in a few people.

b) Co-operative Banking Systems: Co-operative banks play a crucial role in activating the rural economy by providing banking facilities to villagers and ordinary farmers. They operate on the principles of cooperation, self-help and mutual assistance. The objectives of co-operative banks are to inculcate the habit of saving among the villagers, to protect the common people from private money lenders, and to provide low-cost loans to farmers and small businessmen.

c) Microfinance: Microfinance aims to provide financial services to low-income individuals, families, and businesses who do not have access to conventional banking services. Poverty alleviation, empowerment of women and the marginalized, promotion of entrepreneurship and ensuring job creation, and improvement of quality of life are all goals set by micro finance. The Grameen Bank, founded by Professor Muhammad Yunus in Bangladesh in 1983, is a good example of microfinance. Kudumbashree in Kerala works on the concept of microfmance. The work done by Kudumbashree in Kerala for poverty alleviation and w omen empowerment has repeatedly attracted world attention. These systems work by accepting small deposits through Neighborhood Groups and Self Help Groups (NHGS, SHGS) and by providing loans as per the need.

d) Jan Dhan Account: The Prime Minister Jan Dhan Account is a scheme to open an account for all those w ho do not have a bank account in the country. Its aim is to bring all the people of the country under the ambit of banking services. Zero minimum balance account is the special feature of this scheme. It also aims to provide financial services to the low-income group, promote financial literacy and inculcate the banking habit.

• Digital currency has been the latest trend in financial transactions.
• The government is also promoting Aadhaar based payment system, e-wallet and National Finance
  Switch to reduce the use of physical currencies and increase the use of digital currencies, thus moving towards a cashless economy.

Money plays a vital role in enabling the economic activities of production, consumption and distribution. As money turned digital, the number and magnitude of the transactions also increased. New currencies are emerging, keeping in with the changes in the world order. Money channelled into the market for consumption goes directly to producers and distributors while money set aside for saving goes to the entrepreneurs as loans through banks and non-banking financial institutions. Banks and non-banking financial institutions play a significant role in accelerating economic growth rate by promoting transactions. The proliferation and use of technology has promoted cashless transactions and succeeded in bringing those remote areas that have hither to no access to banks into the banking network.

Kerala Bank
The history of Kerala Bank starts with the registration of Thiruvananthapuram Central Co-operative Bank in 1915 through the Travancore co-operative society regulation act of His Highness Sree Moolam Thirunal in 1914. It started functioning as a bank on 18 January 1916. It was included in the Second Schedule of the Reserve Bank of India Act in July 1966. In 2019, the thirteen district cooperative banks of Kerala were merged into the Kerala State Co-operative Bank and became known as Kerala Bank. Kerala Bank operates in all 14 districts of Kerala with 823 branches. The main objectives of Kerala Bank are to provide better banking services, ensure financial inclusion and to accelerate the economic development of the state. Social commitment, rural development and providing support to the marginalized community are also the objectives of the bank. 40% of the bank’s shares are held by the Government of Kerala, 30% by District Co-operative Bank and 30% by others. Kerala Bank provides many banking services to its beneficiaries. This includes accepting deposits, providing loans and making other monetary transactions. The bank provides many facilities to its customers with ATM services across Kerala, modern banking technology and digital platform.