Chapter 3: Money and Credit

Important questions — the ones the board asked most (20)

1. Q1Case-based5 marksAsked: 2024, 2025

   36. Read the given source and answer the questions that follow : Loans From Cooperatives Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place. Krishak Cooperative provides loans for the purchase of agricultural implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses. (36.1) Cooperative societies come under which source of credit ? (36.2) Mention any two sources of capital of cooperative societies. (36.3) Explain the role of cooperative societies in increasing the income of farmers.

   

   Medha Ma’am

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   Watch it on the board · 160 s

   Model answer · Loans from cooperatives

   1. 1.(36.1) Cooperative societies come under the formal sources of credit. Formal sector loans include loans from banks and cooperatives.1 mark
   2. 2.(36.2) Cooperative societies get their capital from these sources: (i) Deposits from the members of the cooperative, because members pool their resources.0.5 marks
   3. 3.(ii) The cooperative uses these deposits as collateral and obtains a large loan from the bank.0.5 marks
   4. 4.(iii) It earns interest on the loans it gives to its members.0.5 marks
   5. 5.(iv) It gets back the money members repay on their loans, so another round of lending can take place.0.5 marks
   6. 6.(36.3) Cooperative societies are a major source of cheap credit in rural areas. They give loans at low interest rates for buying agricultural implements, for cultivation and agricultural trade, and for fishery. Farmers can use this money to increase crop production. Because less of their earnings goes into repaying loans, farmers have a higher income.1 mark
   7. 7.Cooperatives also pay interest on the deposits of their members. This encourages farmers to save small amounts regularly, and these savings add to their income and security.1 mark

   • For 36.1, write the exact words "formal sources of credit".
   • For 36.2, write that the cooperative uses members' deposits "as collateral" to get a large loan from the bank.
   • For 36.3, write two roles: loans at "low interest rates" to increase crop production, and interest on deposits, which helps farmers save small amounts.

   Marks split as in the board’s published marking scheme

2. Q2Short answer3 marksAsked: 2023, 2026

   Differentiate between formal and informal sources of credit.

   

   Medha Ma’am

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   Hear it from Medha Ma’am · 45 s

   Model answer · Formal and informal credit

   1. 1.(i) Formal sources: The Reserve Bank of India supervises the functioning of formal sources of loans; Informal sources: There is no organisation which supervises the informal credit sources.1 mark
   2. 2.(ii) Formal sources: These sources charge a minimal interest on loans; Informal sources: These sources charge a much higher interest on loans.1 mark
   3. 3.(iii) Formal sources: Low cost of borrowing, so borrowers get cheap credit; Informal sources: High cost of borrowing, so a larger part of the earnings of the borrowers is used to repay the loan.1 mark

   • Write the supervisor's full name: "The Reserve Bank of India supervises the functioning of formal sources of loans".
   • Write a second difference about interest: "minimal interest on loans" for formal sources and "much higher interest on loans" for informal sources.
   • End with the cost of borrowing: "Low cost of borrowing" for formal sources and "High cost of borrowing" for informal sources.

   Marks split as in the board’s published marking scheme

3. Q3Long answer5 marksAsked: 2026

   (a) Differentiate between the formal and informal sources of credit. OR (b) Explain the functioning of ‘Self-Help Groups’.

   

   Medha Ma’am

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   Hear it from Medha Ma’am · 125 s

   Model answer · Formal-informal credit, SHGs

   1. 1.(a) Formal sources are banks and cooperatives; informal sources are moneylenders, traders, employers, relatives and friends. OR (b) A self-help group has 15–20 members, usually women from one neighbourhood, who pool their savings.1 mark
   2. 2.The Reserve Bank of India supervises formal lenders; no one supervises informal lenders. OR Members take small loans from the group itself to meet their needs.1 mark
   3. 3.Formal sources charge lower interest; informal sources often charge very high interest. OR The group decides who gets a loan, for what purpose, and the terms of repayment.1 mark
   4. 4.A formal loan needs documents and collateral; informal lenders need no such procedure. OR After regular saving for a year or two, the group can get a bank loan in its own name without collateral.1 mark
   5. 5.So formal credit keeps the cost of borrowing low and fair, while informal lenders often exploit the borrower. OR So SHGs make women self-reliant and free them from moneylenders.1 mark

   Marks split from a structure derived from past papers (checked twice); not CBSE’s official scheme

4. Q4Long answer5 marksAsked: 2026

   (a) Analyse the importance of credit in the economic development of the country. OR (b) Analyse the importance of 'Self-Help Groups' in the rural development of the country.

   How the model answer begins

   1. (a) Credit helps producers meet the cost of production on time, so work goes on without interruption and their income rises. OR (b) Members of a self-help group pool their small savings as a group deposit.

   The full answer from Medha Ma’am →
5. Q5Long answer5 marksAsked: 2026

   (a) Analyse the positive role of credit in the economic development of India. OR (b) Analyse the negative impacts of informal sources of loans.

   How the model answer begins

   1. (a) Credit plays a positive role in India's development because economic activities require loans or credit. When banks and cooperative societies lend more, many people can borrow cheaply for many needs. This leads to…

   The full answer from Medha Ma’am →
6. Q6Long answer5 marksAsked: 2025

   (A) Imagine you are a part of a 'Self Help Group' (SHG). Explain the working system of the Self Help Group (SHG) to the new member. OR (B) Imagine you are a 'Village Development Officer' of a village. Clarify the usefulness of formal sources of credit for the farmers.

   How the model answer begins

   1. As the Village Development Officer, I would tell the farmers that formal sources of credit are very useful to them. Formal sources of credit include banks and cooperatives. Besides banks, cooperative societies (or…

   The full answer from Medha Ma’am →
7. Q7Long answer5 marksAsked: 2025

   (A) Analyse the role of credit in rural economy. OR (B) Analyse the differences between formal and informal sectors of credit.

   How the model answer begins

   1. (B) Formal and informal sectors of credit differ in their sources, supervision, interest rate, collateral and borrowers. Sources: Formal sector loans come from banks and cooperatives; informal sector loans come from…

   The full answer from Medha Ma’am →
8. Q8Long answer5 marksAsked: 2025

   (A) Analyse the role of banks in the economy of the Country. OR (B) Analyse the role of Self Help Groups in the development of rural areas in India.

   How the model answer begins

   1. (A) Banks accept deposits from savers, keep them safe and pay interest on them. OR (B) A self-help group has 15–20 members who pool their savings regularly.

   The full answer from Medha Ma’am →
9. Q9Long answer5 marksAsked: 2023

   (A) Justify the role of 'Self Help Groups' in the rural economy. OR (B) ''Cheap and affordable credit is crucial for the country's development.'' Justify the statement.

   How the model answer begins

   1. (A) An SHG brings together 15–20 rural poor, mostly women, who save small amounts regularly and pool them. OR (B) With cheap credit, less of the borrowed money is lost in interest, so the borrower's income rises.

   The full answer from Medha Ma’am →
10. Q10Long answer5 marksAsked: 2023

    (a) How does credit play a positive and a negative role ? Explain with examples. OR (b) What is a collateral ? Why is it a main reason to prevent the poor getting a loan from banks ? Explain.

11. Q11Case-based4 marksAsked: 2025

    Read the given source and answer the questions that follow : Arun's Story Arun supervises the work of one farm labourer. Arun has seven acres of land. He is one of the few persons in Sonpur to receive bank loan for cultivation. The interest rate on the loan is 8.5 per cent per annum, and can be repaid anytime in the next three years. Arun plans to repay the loan after harvest by selling a part of the crop. He then intends to store the rest of the potatoes in a cold storage and apply for a fresh loan from the bank against the cold storage receipt. The bank offers this facility to farmers who have taken crop loan from them. (36.1) Under which source does Arun's loan come ? (36.2) Mention one important term of credit for taking a loan from the bank. (36.3) How is Arun's loan beneficial ? Explain any two reasons.

    How the model answer begins

    1. Arun's loan falls under the formal source of credit because he has received the loan from a bank. Among the formal sector loans are loans from banks and cooperatives, and since Arun has borrowed directly from a bank for…

    The full answer from Medha Ma’am →
12. Q12Case-based4 marksAsked: 2025

    Read the given source and answer the questions that follow : Loans From Cooperatives [passage] (34.1) Cooperative societies come under which source of credit ? 1 (34.2) Mention any two sources of capital of cooperative societies. 1/2+1/2=1 (34.3) Explain the role of cooperative societies in increasing the income of farmers. 2

    How the model answer begins

    1. (34.1) Cooperative societies come under the formal sector (institutional) source of credit. Like banks, they are a major source of cheap credit in rural areas.

    The full answer from Medha Ma’am →
13. Q13Case-based4 marksAsked: 2025

    Read the given source and answer the questions that follow : [passage] (34.1) Under which source does Arun's loan come ? 1 (34.2) Mention one important term of credit for taking a loan from the bank. 1 (34.3) How is Arun's loan beneficial ? Explain any two reasons. 2

    How the model answer begins

    1. Arun's loan comes under the formal sector source of credit, because he took it from a bank. Loans from banks and cooperatives are formal sector loans.

    The full answer from Medha Ma’am →
14. Q14Case-based4 marksAsked: 2025

    Read the following source and answer the questions given below: Credit from Cooperative Societies Apart from banks, another source of cheap credit in rural areas is cooperative societies. Members of a cooperative society pool their resources for cooperation in certain areas. Many types of cooperative societies are possible, such as farmers, weavers, and industrial workers, etc. The Krishak Cooperative Society works in a village near Sonpur. It has 230 farmer members. It accepts deposits from its members. With these deposits as collateral, the cooperative society has obtained a large loan from the bank. This capital is used to provide loans to members. After these loans are repaid, another round of lending can be started. The Krishak Cooperative Society provides loans for the purchase of agricultural implements, cultivation and agricultural trade, fishing, construction of houses, and for various other types of expenses. (34.1) Under which sector does the credit provided by cooperative societies fall? (34.2) How do Self Help Groups obtain external funding? (34.3) Explain the working mechanism of cooperative societies.

    How the model answer begins

    1. (34.1) Credit from cooperative societies comes under the formal sector of credit, along with loans from banks.

    The full answer from Medha Ma’am →
15. Q15Case-based4 marksAsked: 2025

    Read the following source and answer the questions that follow : Loans from Co-operatives Besides banks, the other major source of cheap credit in rural areas are the co-operative societies. Members of a co-operative pool their resources for co-operation in certain areas. There are several types of co-operatives possible such as farmers co-operatives, weavers co-operatives, industrial workers co-operatives etc. Krishak Co-operative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the co-operative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place. Krishak Co-operative provides loans for the purchase of agriculture equipments, loans for cultivation and agricultural trade, fishery loans, loans for constructions of houses and for variety of other expenses. (36.1) Which sector includes credit facilities offered by Co-operative Societies ? (36.2) How do Self-Help Groups access external funding ? (36.3) Explain the functioning of Co-operative Societies.

    How the model answer begins

    1. (36.1) Credit facilities offered by cooperative societies belong to the formal sector. Like loans from banks, loans from cooperatives are formal sector loans, so a cooperative is a formal source of credit.

    The full answer from Medha Ma’am →
16. Q16Case-based4 marksAsked: 2025

    Read the following source and answer the questions that follow : [passage] (36.1) Which sector includes credit facilities offered by Co-operative Societies ? (1) (36.2) How do Self-Help Groups access external funding ? (1) (36.3) Explain the functioning of Co-operative Societies. (2)

    How the model answer begins

    1. (36.1) Credit given by cooperative societies falls under the formal sector of credit. Banks and cooperatives are the formal sources of credit.

    The full answer from Medha Ma’am →
17. Q17Case-based4 marksAsked: 2024

    Read the given source and answer the questions that follow : Loans from Cooperatives [passage] (35.1) 'Cooperative society' is an example of which source of 'credit' ? 1 (35.2) Explain the contribution of Cooperative Societies in rural development. 1 (35.3) Mention any two sources of capital for Self-Help Groups. 2x1=2

    How the model answer begins

    1. (35.1) A cooperative society is an example of a formal source of credit. Besides banks, the cooperative societies (or cooperatives) are the other major source of cheap credit in rural areas.

    The full answer from Medha Ma’am →
18. Q18Short answer3 marksAsked: 2026

    Explain the role of Reserve Bank in Indian economy.

    How the model answer begins

    1. In India, the Reserve Bank of India issues currency notes on behalf of the central government. As per Indian law, no other individual or organisation is allowed to issue currency.

    The full answer from Medha Ma’am →
19. Q19Short answer3 marksAsked: 2026

    Explain the different terms of credit.

    How the model answer begins

    1. Terms of credit include interest rate, collateral, documentation requirement, and the mode of repayment. The terms of credit vary substantially from one credit arrangement to another, depending on the nature of the…

    The full answer from Medha Ma’am →
20. Q20Short answer3 marksAsked: 2025

    Distinguish between formal and informal sources of credit in India with example.

    How the model answer begins

    1. Formal sources of credit include loans from banks and cooperatives. These are regulated by the Reserve Bank of India, which supervises the functioning of formal sources of loans. For example, the RBI sees that banks…

    The full answer from Medha Ma’am →

21 more questions of this chapter, each with its model answer, in the AskMedha app.

Objective questions with the board’s key (10)

1. 1. CBSE 2026

   Which one of the following is the purpose of collateral in a loan ?

   • (A) To increase the interest for the lender
   • (B) To secure the loan for the lender ✓
   • (C) To reduce paperwork for the lender
   • (D) To avoid repayment on the loan

   Answer: (B)

2. 2. CBSE 2026

   Why is the rupee widely accepted as a medium of exchange in India?

   • (A) Because it is issued by the Reserve Bank of India on behalf of the State Government.
   • (B) Because it is issued by the Reserve Bank of India on behalf of the Central Government. ✓
   • (C) Because it is issued by the State Bank of India on behalf of the Central Government.
   • (D) Because it is issued by the Reserve Bank of India on behalf of the World Bank.

   Answer: (B)

3. 3. CBSE 2026

   Two statements I and II are given below. Read both the statements carefully and choose the correct option : Statement I : 'Demand deposits' can be withdrawn on demand. Statement II : 'Demand deposits' settle payments directly without the use of cash.

   • (A) Statement I is correct, but Statement II is incorrect.
   • (B) Statement I is incorrect, but Statement II is correct.
   • (C) Both Statement I and Statement II are correct. ✓
   • (D) Both Statement I and Statement II are incorrect.

   Answer: (C)

4. 4. CBSE 2026

   Read the following case and choose the correct option : Megha has taken a loan of 5 lakhs from bank to purchase a house. The annual rate on the loan is 12% and loan is to be repaid in 5 years in monthly instalments. The 12% interest charged by the bank to Megha is related to which of the following ?

   • (A) Collateral
   • (B) Cost of Credit ✓
   • (C) Duration of Loan
   • (D) Documentation

   Answer: (B)

5. 5. CBSE 2026

   Read the following case and choose the correct option : Swapna owns a small farm in her village. She wants to take loan to meet the expense of cultivation. From which of the following sources should Swapna take the loan ?

   • (A) Reserve Bank of India
   • (B) Nearest nationalised bank ✓
   • (C) Moneylender of the village
   • (D) Agricultural trader

   Answer: (B)

6. 6. CBSE 2026

   Read the given case and choose the correct option : Swapna, a small farmer grows groundnut on her three acres of land. She takes a loan from the moneylender to meet the expenses of cultivation but midway due to flood, crop fails and her debt increased. Again she has to take loan to manage crops. Suggest Swapna, which of the following sources of loan would be suitable for her.

   • (A) Friends
   • (B) Relatives
   • (C) Moneylenders
   • (D) Banks ✓

   Answer: (D)

7. 7. CBSE 2025

   Arrange the following sources of credit in the most to least order to meet the credit requirement of rural households in India and choose the correct option : I. Government II. Cooperative Banks and Societies III. Moneylenders IV. Relatives and friends

   • (A) III, II, I, IV
   • (B) III, II, IV, I ✓
   • (C) I, III, II, IV
   • (D) I, III, IV, II

   Answer: (B)

8. 8. CBSE 2025

   Shyamal is a small farmer. Shyamal has got his ‘Kisan Card’ made. He needs a loan to grow new crops. Which of the following means will be easy and beneficial for this ?

   • (A) Cooperative Bank ✓
   • (B) Agricultural Traders
   • (C) Relatives
   • (D) Friends

   Answer: (A)

9. 9. CBSE 2025

   The problem of ‘Double Coincidence of Wants’ can be solved by which of the following ?

   • (A) By increasing the circulation of currency ✓
   • (B) By expanding the scope of markets
   • (C) By creating awareness amongst people
   • (D) By registering the buyer and seller

   Answer: (A)

10. 10. CBSE 2025

    Why does it become difficult for farmers in rural areas to take loans from government banks ? Read the following reasons and choose the most appropriate option : I. Lack of collateral II. Complicated procedure III. Higher cost of borrowing IV. Lack of awareness

    • (A) Only I, II and III are correct.
    • (B) Only II, III and IV are correct.
    • (C) Only I, II and IV are correct. ✓
    • (D) Only I, III and IV are correct.

    Answer: (C)

Questions parents and students ask

How many marks does "Money and Credit" carry in CBSE Class 10 Social Science?

In the CBSE papers of 2023–2026, this chapter carried about 5 marks and about 2 questions a year; by marks it ranks 4 in Social Science.

Which are the most important (VVI) questions of "Money and Credit"?

The 20 questions above are from the board’s real papers, each with the years it was asked; the most-asked come first with their full model answers. All 41 written questions of this chapter, with answers, are in the AskMedha app.

Do the answers follow the board’s marking scheme?

Yes. CBSE publishes its marking schemes; every model answer here is written point by point to the marks the board’s own scheme gives, and checked by a second, independent model.