Ans) . Banks mediate between people with extra currency and those in need in following ways:-

1. People deposit the excess cash by opening an account in their own name in the bank.
2. Banks accept deposits and also pay interest on it.
3. In this way, money of people remains safe with the banks and they get interest also on it. The facility of disbursement of money is also available to the people according to their needs.
4. Banks use a large part of deposited amount to give loans. There is a great demand for loans for the purpose of economic activities.
5. Banks make use of the deposits to meet the loan requirements of the people.
6. Banks charge a higher interest rate on loans than what they offer on deposits. The difference between what is charged from borrowers and what is paid to depositors is their main source of income.

In this way, banks mediate between those who have surplus funds (the depositors) and those who are in need of these funds (the borrowers).

Ans) In risky circumstances, debt can create problems for the borrower. For example, Ramu, a small farmer, grows cotton on 2 acres of land. He takes loan from the moneylender for the expenses of farming on the hope that he will repay the loan when the crop is ready. The attack of pests destroys the crop. Since Ramu had sprayed expensive pesticides on the crop, it did not make much difference. He is unable to repay the loan of the moneylender and within a year, this loan becomes a huge amount. Next year, Ramu again borrows money for farming. This year the crop is fine but he does not earn enough to repay his loan. He gets stuck in debt. He has to sell some part of his land to pay off the debt. The debt, instead of increasing Ramu earnings, made his conditions worse. It is called debt-trap in common language. In this case, the debt pushes the borrower into a position from which it is very painful to come out.

Ans) . Modern forms of money include currency-paper notes and coins. Unlike the things that were used as money earlier, modern currency is not made of precious metal such as gold, silver and copper. And unlike grain and cattle, they are neither of daily use. The modern currency is without any use of its own.

It is accepted as a medium of exchange because the currency is authorised by the government of the country.

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. Moreover, the law legalises the use of rupee as a medium of payment that cannot be refused in settling transactions in India. No individual in India can legally refuse a payment made in rupees. Hence, the rupee is widely accepted as a medium of exchange.

Ans) People save their money by opening an account in banks. The money deposited in the bank accounts can be withdrawn on demand basis, hence these accounts are also known as demand deposit. Its main characteristics are as follows:-

1. Bank accepts the deposits and also pays the interest on the deposits. In this way, money is safe and there is income also in the form of interest.
2. The facility of writing cheques against demand drafts make it possible to make direct payments without any use as demand deposits are widely accepted movement along with currency.
3. It is authorised by the government of the country.
4. Its demand and supply is controlled by the Reserve Bank of India.

Ans) Self Help Group is a voluntary, group of poor people. These groups are formed to solve their problems by mutual co-operation. This group encourages small savings among its members. These balances are deposited in the bank. The account of the bank in which the amount is deposited is in the name of the group. Generally, the maximum number of members of a group is 20.

Generally group members are such individuals who do not have access to financial institutions like banks etc. Therefore, the group teaches such method of saving to the members which is suitable to meet the needs of the members. This group averages small loans to the members at a low interest rate. These groups have played an important role in the direction of women empowerment. The purpose of banking related activities of the group is to connect those poor and backward persons of the society with banks which have been ignored till now. Self Help Groups in the country may be of women, may be of men or may be a combination of both men and women, but it has been observed that women self help groups have been more successful.

The formation of Self Help group can have the following objectives:-

1. To develop the spirit of working collectively.
2. To develop the habit of saving among the members for a better future.
3. To develop the spirit of self-reliance among the members.
4. To create awareness about issues like health, nutrition, education and domestic violence.
5. To create opportunities for self employment by providing loans to the members.
6. Welfare with the help of government, banks and other voluntary organizations conducting activities, etc.

Ans) The main functions of money are as follows:-

1. Medium of Exchange- This is a very important function of money. By this function money has made the system of exchange systematic and simple by removing the difficulty of absence of double coincidence of wants, i.e., each person receives money for his commodity and then fulfills his needs with that money. According to Prof. Marshall, “Money is acquired not only because it is valuable in itself but because it can be used to obtain goods and services as it has normal purchasing power.”
2. Measure of Value- The second important function of money as a measure of value has been to measure the exchange power of various goods and services. Under barter, measuring the value of different goods in the form of other goods was a difficult task. This difficulty has now been removed with the introduction of money and the value of all goods and services can be measured in terms of money. According to Prof. Colbourne, this measurement or comparison is very important, because on this basis only the estimates of profit and loss in the entire economy are made.
3. Basis of Value Accumulation- Everyone considers it necessary to save to meet the future needs. If this collection is done in the form of objects then it is clear that things will be destroyed after sometime. The invention of currency solved this problem. At present, every person saves money because money has the power to buy things.
4. Transfer of Value- Transfer of value by money can be done easily from one person to another and from one place to another, because it has the quality of general acceptance. Suppose a person wants to leave Agra and settle in Allahabad, so by selling the house and other property located in Agra in currency, he can buy a new house and property in Allahabad with the same currency.

With this, the process of credit transactions through money has become very simple. The consumer gets maximum satisfaction through money and the producer increases the quality of his output. In short, money performs many important functions in human life.

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