Why is money called a medium of exchange?

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Why do banks ask for collateral while giving loans?

Money is widely accepted as a medium of exchange. Reserve Bank of India (RBI) is the institution that authorizes the money as a medium of exchange. RBI is the central bank of India. RBI is the central authority that can authorize and issue the currency note and coins which are widely accepted as the medium of exchange. They act on behalf of the central government in most of the financial perspective of the country

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Collateral is an asset that borrower owns. The collateral can be anything that has monetary value in it. The bank demands the collateral for the guarantee against their repayment for the credit. Collateral can be land, building, gold, vehicle etc.