(a) "Cheap and affordable credit is crucial for the country's development." Explain the statement. 1 × 5=5

(i) Cheap and affordable credits would lead to higher income.

(ii) Many people could borrow for a variety of needs.

(iii) It encourages people to invest in agriculture, do business, set up small- scale industries, etc.

(iv) It enables more investment which will lead to acceleration of economic activities.

(v) Affordable credit would also end the cycle of debt-trap.

(vi) It helps in the development of all the sectors of economy.

(b) Explain various functions of banks in India.

(i) People hold money as deposits with banks which pay an interest rate on them.

(ii) The banks hold only certain percent ($\displaystyle 15$%) of their deposits as cash with themselves to pay depositors who may come to withdraw.

(iii) They use a major portion of the deposits to extend loans to those who need money.

(iv) The banks make use of deposits to meet the loan requirements of the people.

(v) Banks act as mediator between those who have surplus money and those who need money.

(vi) Banks charge a higher interest rate on loans than what they offer on deposits.

(vii) The difference between the two is the main source of income of the banks.