ECONOMICS – MONEY AND CREDIT

Ridhima: Money is a fascinating subject and full of curiosities. Modern forms of

money are linked to the banking system. Credit is a crucial element in economic life
and it is, therefore, important to first understand this in a conceptual manner with
that being said Good morning Áarti Grover ma’am and My dear fellow classmates,
today we are presenting a skit on Money and Credit.

Scene 1
Have you ever wondered why transactions are made in money? The reason is simple.
So let's find out

(PaP)Shoe seller: I want to sell my shoes in the market and buy wheat
(PrP)Wheat seller: I want to sell my wheat in the market and buy clothes
(RgS)Clothes seller: I want to sell my clothes in the market and buy shoes

R2: Both parties have to agree to sell and buy other commodities. This is known as
double coincidence of Wants. It is an essential feature of BARTER SYSTEM
Ridhima: In contrast, in an economy where money is in use It is no longer necessary
for the shoes manufacturer to look for a farmer to buy his shoes at the same time sell
him wheat.

Scene 2
R2: A cheque is a paper instructing the bank to pay a specific amount from the
persons account to the person in whose name the cheque has been issued

Mohd. Salim: I have to make a payment to the leather supplier, since it is a huge
amount so instead of cash, I will give him a cheque of rupees 2,50,000
Leather supplier: (#takes the cheques goes to bank) Thank you Salim (DEPOSITS IT IN
BANK)

R2: The money is transferred from the bank account to another bank account in
couple of days. the transaction is complete without any payment of cash.

Scene 3

Ridhima: There is an interesting mechanism at work here. Bank keeps only a small
proportion of their deposits as cash with themselves. for example banks in India these
days hold about 15% of that deposits as cash.

(Depositor) Prarath: (deposits ₹5,00,000) I have kept the money in bank, so that it’s
safe and I will get interest
(Banker) ___________: (receives ₹5,00,00) Thank you, Your money has been added
to your account and you will get an interest of 3.50% p.a.
(Borrower) Raghav: Hello, I am Raghav and I want a sum of ₹5lakhs as loan for my
new house at L.A. and will return it after 5 years with interest (Signs some paper
work). Here is my documents of my new house in L.A. as collateral.

Narrator: every loan agreement specifies an interest rate which the borrower must
pay to the lender along with the repayment of the principal. In addition, lender may
demand collateral against loans.
Collateral is an asset that the borrower owns and uses this as a guarantee to a lender
until the loan is repaid.

Banker: Please show your employment records and salary before the bank
Banker: Congratulations! You will get house loan will be at 12% p.a.
Borrower(RgS): Thank you Mr. Banker, I will repay the loan in sometime(5 years)
Banker: (Keeps the documents of new house as collateral)

Narrator: After 5 years

Borrower: Here is your ₹6,67,000 rupees with interest

Banker: Thank you Mr. Raghav for working with us

Narrator: The depositer (prarath) comes to withdraw Rupees 5,00,000 which he gave
to the bank 5 years ago

Depositor: I want to withdraw the money in my account

Banker: Your account balance is ₹5,15,000

Depositor: Yes, Please give me 5.15 lakhs in cash

Narrator: The Depositor submitted 5,00,000 in the bank at 3% p.a. and the bank gave
5 lakhs as loan to Borrower at (12% p.a.). After 5 years, the borrower returns
₹5,00,000 with interest of 12% i.e. ₹1,67,000
Then the depositor withdraws money with Interest of 3% p.a. and gets rupees
5,15,000
The difference between what is charged from borrowers and what is paid to the
depositors is the main source of income of banks
So, the calculations is 1,67,000-15,000=1,52,000
1,52,000 is the income of bank.

Scene 4
Narrator: Raghav is a poor farmer and wants loans of ₹10,000 for buying Seeds,
fertilisers, raw materials Etc and he meets prarath and parth whose condition is
almost same.

Raghav: I want 10k but banks are not ready to give me loan as I don’t have any
guarantee or collateral
Prarath: I am not that well-to-do to get loan from banks, so I have to go to
moneylenders who takes interest rate of 69% p.a.
Parth: My condition is also same as yours 

Narrator: They find 15 more people who are in same condition

Raghav: Lets form a SHG in which we will save Rs. 25-100 per person Depending on
the ability of the people to save.
Prarath: And anyone in need will get the collected amount without any collateral but
very small interest rate of 0.5% p.a.

Narrator: More people joins this SHG & is now named SHAPURA FARMERS
ASSOCIATION of 120+ farmers and is backed by government also.

Narrator: In this skit we have looked at the modern forms of money and how they are
linked with the banking system will stop on one side are the depositors who keep their
money in in the banks and on the other side are the borrowers who take loan from
the banks. Also, the poor should get a much greater share of formal loans from
banks, corporative societies etc As these steps are important for development.

With that being said we will wrap off this skit, thank you everyone and especially
Raghav who wrote this wonderful script.

#This is written by RAGHAV SONI🫡

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