Chapter 3 : Money and Credit

The Lifeline of Economic Transactions Money and Credit explores the evolution of money from the barter system's 'double coincidence of wants' to modern currency forms like paper notes, coins, and demand deposits. It explains the banking system's mechanism, detailing how banks mediate between depositors and borrowers, maintaining a Cash Reserve Ratio (CRR) while extending credit. The chapter critically analyzes the two faces of credit: it can be an asset that boosts income (as in the case of a manufacturer) or a debt trap (as often seen with small farmers). It contrasts Formal Sector Loans (Banks, Cooperatives) with Informal Sector Loans (Moneylenders, Traders), highlighting the latter's exploitative interest rates. The rise of Self-Help Groups (SHGs) is presented as a revolutionary step in empowering rural women and providing access to credit without collateral.