CBSE SST Economics Class 10 Ch 3 Money & Credit Notes 2025 & Study Material

The chapter "Money and Credit" introduces students to the role of money and credit in economic activities. It explains the evolution of money, the concept of credit, and its implications on individuals and the economy. The chapter also highlights the functioning of financial institutions and the importance of ethical and regulated credit practices.

Here’s an overview of the key concepts, types, examples, and significance of money and credit. The class 10 Economics Chapter 3 notes, question banks, and other study materials are made to help students understand concepts clearly, regardless of their learning style.

CBSE Class 10 Ch 3 Money and Credit Notes

Below, you’ll find links to downloadable PDFs of Class 10 Economics Ch 3 notes, organized by each type of question format.

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CBSE Class 10 Ch 3 Money and Credit Experiential Activities

Below are links to downloadable PDFs for Experiential Learning Activities in Class 10 Economics Ch 3, helping students connect their understanding of Money And Credit to real-life contexts.

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CBSE Class 10 Ch 3 Economics  Important Questions

Below, we’ve provided essential questions for Class 10 Economics Ch 3 on Money and Credit, covering all critical areas for a thorough review.

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CBSE Class 10 Ch 3 Money and Credit Mind maps

Below are links to Class 10 Economics Ch 3 Mind Maps that visually break down the key concepts of money and credit.

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CBSE Class 10 Ch 3 Economics Question Bank

Below are links to comprehensive question banks for Class 10 Economics Ch 3, offering varied question types and detailed explanations of money and credit in one place.

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CBSE Class 10 Ch 3 Money And Credit Support Material

Below, you’ll find links to Class 10 Economics Ch 3 Support Materials that include case study-based questions from NCERT topics in Money and Credit.

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CBSE Class 10 Ch 3 Money And Credit DoE Worksheets

Below are Class 10 Economics Ch 3 worksheets from the Department of Education, featuring case study-based questions to reinforce various concepts from the NCERT chapters on Money and Credit.

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Brief Summary of Money And Credit Economics Chapter 3

This chapter sheds light on the significance of money and credit in driving economic activities. It highlights the advantages and challenges of credit, emphasising the need for regulated financial systems and inclusive banking practices.

Evolution of Money

Money, in its various forms, has been central to economic activities for centuries.

Barter System and its Limitations

Before the invention of money, goods and services were exchanged directly through barter. While this system allowed trade, it depended on the double coincidence of wants—both parties needing what the other offered. This limitation often made transactions inconvenient and inefficient.

Introduction of Money

To address these challenges, money was introduced as a common medium of exchange. It resolved the inefficiencies of the barter system and provided several key functions, such as:

• Medium of Exchange: Facilitates trade.
• Store of Value: Allows wealth to be stored for future use.
• Unit of Account: Provides a standard for pricing goods and services.
• Standard of Deferred Payment: Enables future transactions, such as loans.

Modern Forms of Money 

Money today exists in the form of currency (notes and coins) and digital transactions. Currency is issued by the Reserve Bank of India (RBI) and is guaranteed as legal tender. Additionally, digital transactions through platforms like UPI and mobile wallets have transformed the way people conduct transactions, reducing dependence on physical currency.

Role of Banks in the Economy

Banks are vital financial institutions that ensure the smooth functioning of the economy by facilitating the flow of money.

Deposits and Lending

People save money by depositing it in banks, where it earns interest. Banks, in turn, use these deposits to lend money to individuals and businesses for various purposes.

Credit Creation

Banks lend out more money than they receive in deposits, effectively creating credit. This credit fuels economic activities like investment, production, and consumption.

Example

A factory owner deposits surplus money in a bank. The bank uses this deposit to grant a loan to another entrepreneur, enabling them to start a new business. This cycle sustains economic growth.

Credit: Meaning and Types

Credit refers to an agreement in which a borrower receives goods, services, or money with the promise to repay in the future.

Types of Credit

Formal Credit Sources

• Includes banks, cooperatives, and financial institutions regulated by the government.

Advantages

• Lower interest rates.
• Legal protection for borrowers.
• Transparent terms and conditions.

Informal Credit Sources

• Includes moneylenders, traders, and acquaintances.

Drawbacks

• High interest rates that often lead to exploitation.
• No legal recourse if disputes arise.

Example
A farmer borrows from a cooperative bank to purchase seeds, benefiting from lower interest rates and fair terms. Conversely, another farmer borrowing from a moneylender may face exorbitant interest rates and exploitative practices.

Terms of Credit

Credit agreements include specific conditions that borrowers must adhere to. These are called the terms of credit.

• Interest Rate: The cost of borrowing, expressed as a percentage.
• Collateral: Assets like land, property, or vehicles that borrowers pledge as security for a loan. If the borrower fails to repay, the lender can seize the collateral.
• Documentation: Legal paperwork outlining the terms of the loan.
• Mode of Repayment: Specifies how the loan will be repaid (installments, lump sum, etc.).

Understanding these terms is essential to avoid financial risks.

The Importance and Impact of Credit

Credit plays a dual role in the economy. On one hand, it can fuel growth, while on the other, it can lead to challenges if mismanaged.

Positive Impacts

• Farmers can buy seeds and equipment to improve crop yields.
• Entrepreneurs can use loans to establish or expand businesses.
• Traders can purchase goods in bulk to increase sales and profits.

Risks of Credit

• Debt Traps: Borrowers unable to repay loans may fall into a cycle of borrowing to clear old debts.
• High-interest informal loans can lead to the loss of collateral and financial distress.

Example

A farmer taking a bank loan for seeds can generate income after a successful harvest. However, a failed harvest due to poor weather can lead to difficulty in repaying the loan, creating a debt trap.

Self-Help Groups (SHGs)

SHGs are small groups of people, especially in rural areas, who save money collectively and provide loans to members.

Benefits

• Promotes financial independence, especially among women.
• Reduces dependence on informal credit sources.
• Serves as a bridge to formal banking institutions.

Example: A women's SHG pools savings to fund members' small businesses, boosting livelihoods and community development.

Financial Inclusion and its Significance

Financial inclusion ensures that even the poorest and most marginalized individuals have access to financial services like credit, savings, and insurance.

Government Initiatives:

• The Pradhan Mantri Jan Dhan Yojana encouraged zero-balance bank accounts for millions of Indians.
• Expanding banking infrastructure in remote areas ensures wider access to formal credit.

By promoting financial inclusion, the government aims to reduce poverty and inequality, enabling economic growth across all sectors.

Digital Revolution in Banking and Credit

Technology has revolutionized banking and credit systems, making them more efficient and accessible.

Online Banking: Enables customers to transfer funds, pay bills, and apply for loans online.

UPI and Mobile Wallets: Platforms like Google Pay and Paytm allow instant transactions, reducing reliance on cash.

Digital Lending: Fintech companies are providing loans with minimal paperwork and quick disbursal, especially benefiting small businesses.

Role of the RBI in Regulating Financial Systems

The Reserve Bank of India ensures that the banking system operates efficiently and ethically.

Issuance of Currency: RBI regulates the supply of money to maintain economic stability.

Supervision of Banks: Ensures that banks follow guidelines, protecting depositors and borrowers.

Control of Inflation: By regulating interest rates, the RBI manages inflation and economic growth.

By understanding the interconnection between money, credit, and economic development, students can appreciate the importance of financial systems in shaping societies and ensuring equitable progress.

Important Points from Chapter 3: Money And Credit

Barter System

• Initially, people exchanged goods and services without money.
• This system faced challenges like the double coincidence of wants (both parties needed to want what the other offered).

Introduction of Money

• To overcome the limitations of barter, money was introduced.
• Money serves as a medium of exchange, a store of value, a standard of deferred payment, and a unit of account.

Modern Forms of Money

• Includes coins, currency notes, and digital money.
• The Reserve Bank of India (RBI) issues currency, ensuring it is legal tender.

Role of Banks in the Economy

Banks act as financial intermediaries, facilitating the flow of money in the economy.

Deposit and Lending Functions

• People deposit their savings in banks, earning interest.
• Banks use these deposits to provide loans to individuals and businesses.

Credit Creation

• Banks lend more money than they receive as deposits, creating credit and promoting economic activities.

Credit: Meaning and Types

Credit refers to the agreement in which a borrower receives money or goods now and agrees to repay in the future.

Formal Credit Sources:

Includes banks, cooperatives, and financial institutions regulated by the government.

Benefits

• Lower interest rates.
• Better protection for borrowers.

Informal Credit Sources:

• Includes moneylenders, traders, and relatives.

Drawbacks

• Higher interest rates.
• No legal protection, often leading to exploitation.

Example
A farmer takes a loan from a bank at a reasonable interest rate to buy seeds. This is formal credit. In contrast, borrowing from a moneylender with high-interest rates represents informal credit.

Importance of Credit

• Credit enables individuals and businesses to expand and grow.
• It allows farmers to buy seeds, traders to purchase goods, and industries to invest in production.

However, credit can also lead to debt traps when repayment is not managed responsibly.

Terms of Credit

The terms of credit are the conditions under which loans are provided. These include:

• Interest Rate: The cost of borrowing.
• Collateral: An asset pledged by the borrower, which can be seized if the loan is not repaid.
• Documentation: Legal paperwork ensuring the terms are agreed upon.
• Mode of Repayment: Specifies how and when the borrower will repay.

Debt Traps and their Implications

A debt trap occurs when a borrower cannot repay a loan and has to borrow again to repay the initial debt.

• This often happens with informal credit sources due to high-interest rates.
• Debt traps can lead to poverty and the loss of collateral assets like land or houses.

Self-Help Groups (SHGs)

SHGs are small groups of people, especially in rural areas, who pool their savings and lend money to group members.

Benefits of SHGs

• Empower rural women by providing financial independence.
• Enable access to formal credit systems through group guarantees.

Example

Women in a village form an SHG, save money collectively, and use these funds to support one another's small businesses.

Financial Inclusion

Financial inclusion ensures that everyone, especially the poor, has access to affordable and timely credit and financial services.

The government promotes financial inclusion through policies and schemes like:

• Opening zero-balance accounts under the Pradhan Mantri Jan Dhan Yojana.
• Expanding banking services to remote areas.

Digital Transactions and Modern Banking

With advancements in technology, banking has become more accessible.

Online Banking: Enables transfers, payments, and loan applications through digital platforms.

UPI and Mobile Wallets: Simplify payments and reduce reliance on physical money.

Role of RBI in Regulating Banks

The Reserve Bank of India plays a vital role in:

• Regulating the issuance of money.
• Ensuring the stability of the banking sector.
• Supervising formal credit practices to prevent exploitation.

How Does this Chapter-by-Chapter Content Support Students' Learning?

The use of chapter-by-chapter content is a widely adopted strategy in education because it provides a structured approach to learning. Students can benefit significantly from this method, as it breaks down information into smaller sections that are easier to absorb. 

Clear Learning Path

Chapter-by-chapter content provides students with a clear, step-by-step learning path. By following the sequence of chapters, students can see their progress and understand how each new chapter builds upon the previous one, making the entire learning experience more logical and coherent.

Facilitates Active Learning

As students move through each chapter, they engage with the material more actively. Whether it’s through practice exercises, discussions, or assignments, chapter-wise content encourages active participation, which is proven to improve understanding and retention of the material.

Reduced Cognitive Load

Instead of taking in all information at once, chapter-by-chapter learning reduces cognitive overload. Students can process one chapter at a time, allowing their brains to focus on the key points without getting overwhelmed by too much information.

Provides a Sense of Accomplishment

Completing each chapter gives students a sense of achievement, boosting their confidence and motivation. This sense of progress is important for maintaining a positive attitude towards learning, especially during challenging subjects.

Chapter-by-chapter content is a powerful tool for supporting students’ learning by offering a structured approach, reducing cognitive load, and encouraging active participation. With its clear learning path and manageable pace, this method helps students build knowledge step by step, leading to better overall performance. Happy learning!

Frequently Asked Questions

What is money?

Money is anything that is widely accepted as a medium of exchange. It can be in the form of currency, coins, or even digital money.

What are the different types of credit?

The two main types of credit are Formal Credit (offered by banks and financial institutions) and Informal Credit (borrowed from moneylenders, friends, or relatives).

How does money play a role in the economy?

Money facilitates the exchange of goods and services, acts as a store of value, and provides a standard measure of value, thereby helping in economic transactions.

What is the role of banks in the credit system?

Banks act as intermediaries by accepting deposits and providing loans to individuals and businesses, thus helping to circulate money and credit in the economy.

What is the importance of formal credit in India’s economy?

Formal credit from banks and financial institutions provides lower interest rates and ensures better regulation. It is vital for economic development, especially in rural and agricultural sectors.