Money and Credit Class 10 important questions with answers

What comes in the exam

• Money and Credit is in Economics (Understanding Economic Development).
• Almost half the questions are 1-mark MCQs; then come 5-mark and 3-mark answers, and a 4-mark case study comes almost every year.
• Almost every year you get formal vs informal sources of credit, Self-Help Groups, the role of credit in development, why cheap credit matters, how banks use deposits and why the rupee is accepted.
• Terms of credit, the RBI's role and demand deposits also come almost every year, as MCQs, short answers or a case study.
• Assertion–Reason comes often.

Top 10 Money and Credit questions from board papers

Real CBSE questions, printed as they appeared. Open each answer to see the marking and the steps.

1. Q1 MCQ · 1 mark CBSE · 2026

   Statements on demand deposits

   Two statements I and II are given below. Read both the statements carefully and choose the correct option : Statement I : ‘Demand deposits’ can be withdrawn on demand. Statement II : ‘Demand deposits’ settle payments directly without the use of cash.

   • (A) Statement I is correct, but Statement II is incorrect.
   • (B) Statement I is incorrect, but Statement II is correct.
   • (C) Both Statement I and Statement II are correct.
   • (D) Both Statement I and Statement II are incorrect.
   Answer and marking

   Correct option: (C) Both Statement I and Statement II are correct.

   1. Check Statement I: demand deposits can be withdrawn on demand. True
   2. Check Statement II: cheques settle payments without cash. True
   3. So both statements are correct. Answer: (C) 1 mark

   Answer: (C) Both Statement I and Statement II are correct.

   Marks: Correct option 1

   For full marks: Judge each statement separately.

   Where students lose marks: Choosing (A), forgetting that cheques on demand deposits settle payments without cash.

   CBSE marking scheme

   (C) Both Statement I and Statement II are correct.

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2. Q2 Short answer · 3 marks CBSE · 2023

   Three functions of the RBI

   Explain any three functions of the Reserve Bank of India.

   Answer and marking

   1. Start with money itself. The RBI issues currency notes on behalf of the central government. 1 mark
   2. Show how it checks banks' cash. The RBI monitors that banks actually maintain a minimum cash balance. 1 mark
   3. Show how it checks banks' lending. The RBI sees that banks give loans also to small cultivators, small-scale industries and small borrowers. 1 mark

   Answer: Issues currency ; checks cash balance ; ensures loans to small borrowers

   Marks: Any three points 1 each

   For full marks: Write exactly three functions, each starting 'The RBI…'. Saying 'on behalf of the central government' completes the first point.

   Where students lose marks: Saying the RBI gives loans to ordinary people is wrong; it supervises the banks that do.

   CBSE marking scheme

   Any three (3x1): issues currency notes on behalf of the central government; supervises formal sources of loans; monitors that banks maintain cash balance; ensures banks lend also to small cultivators, small-scale industries, small borrowers; banks periodically report to RBI how much they lend, to whom, at what rate.

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3. Q3 Case study · 4 marks CBSE · 2026

   Case: demand deposit source

   Read the given source carefully and answer the questions that follow : Demand Deposit Demand deposits offer another interesting facility. It is this facility which lends it the essential characteristics of money (that of a medium of exchange). You would have heard of payments being made by cheques instead of cash. For payment through cheque, the payer who has an account with the bank, makes out a cheque for a specific amount. A cheque is a paper instructing the bank to pay a specific amount from the person's account to the person in whose name the cheque has been issued. (38.1) Define 'demand deposit'. (1) (38.2) Explain the benefits that banks derive from 'demand deposit'. (1) (38.3) Explain any two advantages of making payments by cheque. (2)

   Answer and marking

   1. (38.1) Give the meaning in one line. Demand deposits are deposits in bank accounts that can be withdrawn on demand. 1 mark
   2. (38.2) Say what banks do with this money to earn. Demand deposits are the main source of funds for banks; they lend this money and charge interest, their main income. 1 mark
   3. (38.3) Give the first advantage, about safety. No need to carry cash, so there is less risk of robbery. 1 mark
   4. Add a second, different advantage. Payment is easy: the payer just writes the amount, and the bank pays it from the account. 1 mark

   Answer: (38.1) Deposits withdrawable on demand / (38.2) Main source of funds for lending at interest / (38.3) Less risk of robbery ; easy to pay

   Marks: (38.1) 1 · (38.2) 1 · (38.3) Any two points 1 each

   For full marks: For 38.2 say how banks gain: they lend the deposits and earn interest. For 38.3 give two different advantages.

   Where students lose marks: In 38.2, writing only 'banks keep money safe' misses the mark; say banks lend the deposits and earn interest.

   CBSE marking scheme

   (38.1) Money deposited in banks that can be withdrawn on demand (1). (38.2) Demand deposits are the main source of funds for banks — they lend this money and charge interest, their main source of income; any other relevant point (1). (38.3) Any two, 1 each: less risk; easy to pay; less risk of fraud; less risk of robbery / no need to carry cash; any other relevant point. (1+1+2=4)

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4. Q4 Case study · 4 marks CBSE · 2026

   Case: cooperative credit source

   Read the given source carefully and answer the questions that follow : Loans from Cooperatives Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place. Krishak Cooperative provides loans for the purchase of agricultural implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses. 38.1 Under which source of credit do cooperative societies fall ? (1) 38.2 Mention the main source of credit of cooperative societies. (1) 38.3 Explain the role of cooperative societies in rural development. (2)

   Answer and marking

   1. (38.1) Decide whether cooperatives are supervised lenders or informal ones. Formal source of credit. 1 mark
   2. (38.2) Read where Krishak Cooperative got its large loan. Bank. 1 mark
   3. (38.3) Give the first role: what members do not need. Cooperatives enable rural people to get loans without collateral. 1 mark
   4. Give the second role from the source's list of loans. They give loans for agricultural implements, cultivation, agricultural trade, fishery, house construction and other expenses. 1 mark

   Answer: (38.1) Formal source (38.2) Bank (38.3) Loans without collateral ; loans for farming, fishery, houses

   Marks: 38.1 1 · 38.2 1 · 38.3 Any two points 1 each

   For full marks: Read the source first; 38.2 and 38.3 come straight from it.

   Where students lose marks: In 38.1, writing 'informal' because the cooperative is in a village loses the mark.

   CBSE marking scheme

   38.1 Formal source of credit (1). 38.2 Bank (1). 38.3 Any two, 1 each: (i) they enable rural people to get loans without collateral; (ii) they provide loans for agricultural implements, cultivation, agricultural trade, fishery, house construction and other expenses; (iii) any other relevant point.

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5. Q5 Case study · 4 marks CBSE · 2025

   Case: Arun's bank loan

   Read the given source and answer the questions that follow : Arun's Story Arun supervises the work of one farm labourer. Arun has seven acres of land. He is one of the few persons in Sonpur to receive bank loan for cultivation. The interest rate on the loan is 8·5 per cent per annum, and can be repaid anytime in the next three years. Arun plans to repay the loan after harvest by selling a part of the crop. He then intends to store the rest of the potatoes in a cold storage and apply for a fresh loan from the bank against the cold storage receipt. The bank offers this facility to farmers who have taken crop loan from them. (36.1) Under which source does Arun's loan come ? (1) (36.2) Mention one important term of credit for taking a loan from the bank. (1) (36.3) How is Arun's loan beneficial ? Explain any two reasons. (2)

   Answer and marking

   1. (i) Arun borrowed from a bank, so name that kind of source. Arun's loan comes from a formal source: a bank. 1 mark
   2. (ii) Name one condition every loan agreement sets. Interest rate: the borrower must pay interest along with the principal. 1 mark
   3. (iii) Read the rate given in the source. The rate of interest is low, 8.5 per cent per annum. 1 mark
   4. Now use the repayment time given in the source. It can be repaid easily anytime in the next three years, e.g. after harvest. 1 mark

   Answer: (i) Formal source (bank) ; (ii) Interest rate ; (iii) Low interest and easy repayment over three years

   Marks: (i) 1 · (ii) 1 · (iii) Two reasons 2

   For full marks: Answer each part from the source; quote the 8.5 per cent and three years. Part (iii) needs two separate reasons.

   Where students lose marks: In (i), writing 'cooperative' or 'informal source' is wrong; Arun took his loan from a bank.

   CBSE marking scheme

   (36.1) (1): Bank / formal source. (36.2) Any one (1): collateral; interest rate; documentation; mode of payment. (36.3) Any two (2x1): low rate of interest; can be repaid easily any time in the next three years; with low interest he saves capital to invest in other ventures or buy inputs next year.

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6. Q6 Case study · 4 marks CBSE · 2025

   Case: role of cooperatives

   Read the given source and answer the questions that follow : Loans From Cooperatives Besides banks, the other major source of cheap credit in rural areas are the cooperative societies (or cooperatives). Members of a cooperative pool their resources for cooperation in certain areas. There are several types of cooperatives possible such as farmers cooperatives, weavers cooperatives, industrial workers cooperatives, etc. Krishak Cooperative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the Cooperative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place. Krishak Cooperative provides loans for the purchase of agricultural implements, loans for cultivation and agricultural trade, fishery loans, loans for construction of houses and for a variety of other expenses. (36.1) Cooperative societies come under which source of credit ? (1) (36.2) Mention any two sources of capital of cooperative societies. (1/2+1/2=1) (36.3) Explain the role of cooperative societies in increasing the income of farmers. (2)

   Answer and marking

   1. (36.1) Name the source, using the first line of the passage. Cooperative societies come under formal sources of credit. 1 mark
   2. (36.2) Give the first source of funds the passage names. Deposits from members. 0.5 marks
   3. Add the second source, which uses those deposits. Large loans from the bank, taken with these deposits as collateral. 0.5 marks
   4. (36.3) Show how the loans raise farm output. Loans at low interest help farmers raise crop production, so their income rises. 1 mark
   5. Add how the many kinds of loans help. Loans for implements, cultivation, trade and fishery help farmers earn more. 1 mark

   Answer: (36.1) Formal source / (36.2) Members' deposits ; bank loans / (36.3) Low-interest loans raise output ; loans for many purposes raise income

   Marks: (36.1) 1 · (36.2) ½ + ½ · (36.3) Any two points 1 each

   For full marks: Read the passage first: the answers to 36.1 and 36.2 are in it. For 36.3, link each loan to higher income.

   Where students lose marks: For 36.1, writing 'informal' because cooperatives are local loses the mark; they are formal lenders.

   CBSE marking scheme

   (36.1) Formal sources of credit (1). (36.2) Any two (½+½): deposits from members; large bank loans obtained with these deposits as collateral; interest earned on loans given; any other relevant point. (36.3) Any two (1+1): loans at low interest rates used to raise crop production; interest on deposits promotes saving among farmers; loans for many purposes—implements, fishery etc.—raise farmers' income; any other relevant point.

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7. Q7 Long answer · 5 marks CBSE · 2026

   How SHGs function

   Explain the functioning of 'Self-Help Groups'.

   Answer and marking

   1. Begin with whom SHGs bring together. SHGs organise the rural poor, especially women. 1 mark
   2. Give the size and the saving habit. 15–20 members, usually of one neighbourhood, meet and save Rs 25 to Rs 100 or more regularly. 1 mark
   3. Explain who takes the decisions. Members decide the purpose, amount, interest and repayment schedule of loans. 1 mark
   4. Say how members borrow from the group. Members take small loans from the group at interest below the moneylender's. 1 mark
   5. End with the bank loan. After a year or two of regular saving, the group gets bank loans without collateral. 1 mark

   Answer: Organise poor women ; 15–20 members save Rs 25–100 ; members decide on loans ; small loans below moneylender's rate ; bank loans without collateral

   Marks: Any five points 1 each

   For full marks: 'Functioning' means how the group works step by step. Give numbers like 15–20 members to make points precise.

   Where students lose marks: Writing only benefits like 'women become self-reliant' without how the group works misses the functioning marks.

   CBSE marking scheme

   Any five (5x1=5): organise the rural poor, especially women; 15–20 members, usually of one neighbourhood, meet and save regularly (Rs 25–100 or more each); members take most decisions on savings and loans — purpose, amount, interest, repayment schedule; members take small loans from the group (release mortgaged land, working capital, housing materials, assets) at interest below moneylenders'; after a year or two of regular saving the group becomes eligible for bank loans, which banks give without collateral; the group also meets to discuss and act on social issues; any other relevant point.

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8. Q8 Long answer · 5 marks CBSE · 2023

   Why rural lending must grow

   (b) Why is it necessary for banks and co-operatives to extend their lending activities in rural areas ? Explain.

   Answer and marking

   1. Start with how cheap credit raises income. Cheap credit leads to higher incomes for rural people. 1 mark
   2. Show how it protects borrowers. People can borrow cheaply for many needs without falling into a debt trap. 1 mark
   3. Give examples of what they can do with it. They could grow crops, do business, or set up small-scale industries. 1 mark
   4. Compare with the informal lender. Informal loans carry very high interest and do little to raise income; more formal lending reduces dependence on them. 1 mark
   5. End with fairness in who gets credit. Today richer households get formal credit while the poor depend on informal sources, so formal credit must be spread more equally. 1 mark

   Answer: Higher incomes ; no debt trap ; crops, business, small industries ; less dependence on moneylenders ; fairer credit

   Marks: Any five points 1 each

   For full marks: Five separate points earn five marks. Compare formal and informal credit in at least one point.

   Where students lose marks: Only describing moneylenders, without saying why banks should lend more, misses the question.

   CBSE marking scheme

   Any five, 1 each: leads to higher incomes; people can borrow cheaply for many needs without falling into a debt trap; they could grow crops, do business, set up small-scale industries; cheap and affordable credit is crucial for the country’s development; informal loans carry very high interest and do little to raise income; increased lending reduces dependence on informal sources; at present richer households get formal credit while the poor depend on informal sources, so formal credit must be distributed more equally; any other relevant point.

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9. Q9 Long answer · 5 marks CBSE · 2023

   Why cheap credit matters

   “Cheap and affordable credit is crucial for the country’s development.” Justify the statement.

   Answer and marking

   1. Start with what cheap credit does to income. Cheap and affordable credit leads to higher incomes. 1 mark
   2. Say who it helps. Many people could borrow for a variety of needs. 1 mark
   3. Give examples of what people do with it. They could grow crops, do business, set up small-scale industries or trade in goods. 1 mark
   4. Say what banks should do. Banks and cooperatives should lend more in rural areas to reduce dependence on informal credit. 1 mark
   5. End with fairness. Formal credit should be distributed more equally so that the poor benefit from cheaper loans. 1 mark

   Answer: Higher incomes ; many can borrow ; crops, business, industries ; more rural lending ; fairer credit

   Marks: Any five points 1 each

   For full marks: Five separate points earn five marks. 'Justify' needs reasons why cheap credit helps, not just a definition.

   Where students lose marks: Writing 'grow crops' and 'do business' as two points counts as one; give five different ideas.

   CBSE marking scheme

   Any five, 1 each: cheap and affordable credit leads to higher incomes; many people could borrow for a variety of needs; they could grow crops, do business, set up small-scale industries; set up new industries or trade in goods; banks and cooperatives should lend more in rural areas to reduce dependence on informal credit; everyone should receive these loans; formal credit should be distributed more equally so the poor benefit from cheaper loans; any other relevant point.

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10. Q10 Long answer · 5 marks CBSE · 2023

    Positive and negative credit

    How does credit play a positive and a negative role ? Explain with examples.

    Answer and marking

    1. Give the positive role first: credit meets ongoing production costs. Positive: credit meets ongoing expenses of production, so the borrower completes work on time and earns more. 1 mark
    2. Support it with Salim's example from the book. Example: Salim, a shoe manufacturer, borrowed to complete an order of 3,000 pairs, made a good profit and repaid the loan. 1.5 marks
    3. Now give the negative role: when the crop fails, repayment is impossible. Negative: if the crop fails, repayment becomes impossible and the borrower falls into a debt trap. 1 mark
    4. Support it with Swapna's example from the book. Example: Swapna, a small farmer, borrowed for cultivation, her crop failed, she borrowed again, fell into a debt trap and sold land. 1.5 marks

    Answer: Positive: credit meets production costs (Salim) ; Negative: debt trap after crop failure (Swapna)

    Marks: Positive point 1 · Example 1½ · Negative point 1 · Example 1½

    For full marks: Each example carries 1½ marks, so tell Salim's and Swapna's stories in full: why they borrowed and what happened.

    Where students lose marks: Giving the positive and negative points without any example loses three of the five marks.

    CBSE marking scheme

    (2½+2½) Positive role — any one point (1) + example (1½): many daily transactions involve credit; credit meets ongoing production expenses; borrower repays on time and earns profit; leaves the person better off. Example: Salim, a shoe manufacturer, borrowed to complete an order of 3000 pairs, made a profit and repaid the loan. Negative role — any one point (1) + example (1½): crop failure makes repayment impossible; pushes the borrower into a situation hard to recover from; debt-trap; land sold to repay. Example: Swapna, a small farmer, borrowed for cultivation, the crop failed, she borrowed again and fell into a debt-trap.

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Free 10-question test: Money and Credit

MCQ and Assertion–Reason questions from CBSE papers. About 10 minutes. Your score shows straight away.

Common mistakes in Money and Credit

How to write for full marks

• For 'differentiate', write pairs or a two-column table, one pair for each mark.
• For terms of credit, name all four: interest rate, collateral, documentation and mode of repayment. Say what collateral is: an asset like land or a vehicle that the lender can sell if the loan is not repaid.
• For 'role of credit' or 'importance of SHGs', start each point with its effect: helps start a business, raises farm output, creates jobs, overcomes the lack of collateral.
• Keep to the word limits: 3 marks within 60 words, 5 marks within 120, the whole case study within 100.
• If a 3-mark question says 'any five points', three clear points are enough for full marks.

Questions students ask