Describe the functions of money.

OR

Why should credit at reasonable rates be available for all? Explain why the supervision of the functioning of formal sources of loans is necessary?

The functions of money are:

a. Act as a medium of exchange for purchasing products: Influx of money has nullified the previously functioning barter system. People could purchase any item by paying the money of its value.

b. It is a store of value: To be a medium of exchange, the money must have some value. Money is more liquid.

c. Provides a common measure of the value: Knowing the price of the goods makes it easier for the supplier and consumer in selling and buying respectively.

OR

80% of farmers in India are small farmers, as they are depended upon seasons for the sowing of crops. Sometimes when there is inadequate rainfall, they fail at cropping and are in debt. This problem could be solved if they get credits from banks at low-interest rates.

A. By providing credits at reasonable rates, the banks would be of great help to these farmers.

B. Farmers along with cropping also need to sell their crops so that they could earn money and could repay their loan.

C. For selling the crops, they need easily available and cheap transport facility.

D. They had to buy fertilizers, seed, equipment, etc.

E. If they receive loans at a reasonable price, they could avail all the above easily.

Low level of inclusiveness towards banking defer the farmers from taking a loan from banks, and they sometimes borrow from big traders and money lenders. These traders sometimes charge too high and even seize their land when unable to repay — these informal sources of credit act as a burden for these small farmers.

Hence supervision of the functioning of formal sources of loans is necessary.