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Class 10 › Economics › Money and Credit
CBSE2026Class Class 10 · Economics1 Marks · Long✅ Verified
Read the given case and choose the correct option :
Swapna, a small farmer grows groundnut on her three acres of land. She takes a loan from the moneylender to meet the expenses of cultivation but midway due to flood, crop fails and her debt increased. Again she has to take loan to manage crops.
Suggest Swapna, which of the following sources of loan would be suitable for her.
✅ Answer & Solution
Step 1 - Identify the problem : Swapna borrowed from a moneylender, the crop failed, and her debt increased. This is the beginning of a DEBT TRAP - the credit pushed her into a situation from which recovery is very painful.
Step 2 - Why informal sources are unsuitable : moneylenders charge a very high rate of interest, there is no supervision of their activities, and a higher cost of borrowing means a larger part of her earnings is used to repay the loan.
Step 3 - Why banks are suitable : formal sources such as BANKS charge a much lower rate of interest, are supervised by the Reserve Bank of India, and are required to lend to small cultivators as well. Cheap and affordable credit is crucial for the country's development.
