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  • Newer forms of money are slowly spreading with computerisation of the banking system.
  • The Reserve Bank of India issues currency notes on behalf of the central government in India.
  • 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 made.
  • Banks use the major portion of the deposits to extend loans. In this way, banks mediate between those who have surplus funds (the depositors) those who are in need of these funds (the borrowers).
  • Credit (loan) refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment.
  • Interest rate, collateral and documentation requirement, and the mode of repayment together comprise what is called the terms of credit.
  • Besides banks, the other major source of cheap credit in rural areas is the cooperative societies (or cooperatives).
  • The various types of loans can be conveniently grouped as:-

The formal sector loans

(i) Loans from banks

(ii) Loans from cooperatives.

The informal sector

(i) Loans from money lenders

(ii) Loans from traders.

  • Poor households are still dependent on informal sources of credit.

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