About Rural Credit

In India's rural areas, agriculture is the major source of revenue. Farmers and peasants must invest a significant amount of money each year to secure a decent crop. Their fundamental requirements must be met before harvest season, when they may make money from selling their crops, thus they frequently borrow money from banks and other financial organizations.

As a result, any loan obtained in India's rural areas for agricultural activities or small home enterprises is referred to as a Rural Credit.

Sources of Rural Credit

  • Land Development Banks
  • Co-operative Credit Societies
  • Regional Rural Banks
  • Commercial Banks
  • Government

Types of Rural Credits

  1. Short-term loan/credit: A short-term loan or credit is a type of rural credit that is used to meet a temporary private or commercial capital need. It is a form of credit that calls for the repayment of the borrowed principal amount as well as the interest percentage on or before a specified date at the end of a period that can last for as long as a year at most.
  2. Medium-term loan/credit: A medium-term loan is one with a repayment period of two to five years, but not more than ten years. Medium-term loans are a great alternative for small businesses searching for a traditional way of credit with predetermined repayment terms and amounts.
  3. Long-term loan/credit: Long-term loans typically have a repayment period of 5 to 20 years, with certain exceptions. Long-term financing is necessary for any firm to generate long-term assets that will pay off in the future.

Following are some of the multiple choice questions on the Rural Credit with answers that will help the students in developing their knowledge.

Rural Credit MCQ

1. What is the main difference between a village and a hamlet?

  • Hamlets have more people than villages
  • Hamlets only engage in secondary activities
  • Villages have more people than hamlets
  • Villages only engage in secondary activities

2. By March end 2003, more than __ SHGs had reportedly been credit linked.

  • 7 lakhs
  • 8 lakhs
  • 9 lakhs
  • None of these

3. The problem faced in rural banking are

  • insufficient rural credit
  • growing overdues
  • inadequate amount of sanction
  • all of these

4. Which one of the following is not an non- institutional source of credit?

  • Money lenders
  • Relatives
  • Traders
  • Land Development Banks

5. During 2007-12, agriculture output has grown at__.

  • 3%
  • 3.2%
  • 2%
  • None of these

6. What were the earliest form of objects used as money in India?

  • grains and cattle
  • Coins
  • Jewels
  • Land

7. Credit taken for a period of 15 years is known as

  • short term credit
  • medium term credit
  • long term credit
  • all of these

8. Which one of the following is the important characteristic of modern form of currency?

  • It is made from precious metal
  • It is made from thing of everyday use
  • It is authorised by the commercial banks
  • It is authorised by the Government of the country

9. Which of the following is not true regarding the in convenience of Barter Exchange?

  • Lack of double coincidence of want
  • Absence of divisibility
  • Difficulty in storing wealth
  • Availability of money as a medium of exchange.

10. Most of small farmers borrow money from -

  • Banks
  • Post office
  • Village money lenders or traders
  • None of these

11. Which of the following is not an advantage of self-help group?

  • Grant of timely loans
  • Reasonable interests
  • A platform to discuss various issues
  • Does not help women to become self-reliant.

12. State whether true or false•• Collection forest produce and diary provide additional income to villagers.

  • True
  • False

13. Central government organisation, who are involved in agricultural marketing

  • IARI
  • FCI
  • IGBI

14. Imagine you are a member of a fishing family and you are discussing whether to take a loan from the bank for an engine. What would you say?

  • Take loans from money lenders
  • Take loans from local businessman
  • Arrange money by selling the own property
  • Take loans from the banks

15. Since money acts as an intermediate in the exchange process, it is called _______

  • Medium of trade
  • Medium of Exchange
  • Medium of Business
  • Medium of transaction

16. When both parties agree to sell and buy each others commodities it is known as:

  • measure of value
  • double coincidence of wants
  • store of value
  • credit

17. What kind of loans do members of SHG take?

  • Individual loans
  • Group loans
  • Society loans
  • None of the above

18. People also have the provision to withdraw the money as and when they require the deposits in the bank accounts to be withdrawn, what are these deposits called?

  • Fixed deposits
  • Savings
  • Demand deposits
  • Demand drafts

19. _________costs of borrowing increase the debt-burden?

  • high
  • low
  • equal
  • none

20. Which is one of the major reasons which prevent the poor from getting bank loans?

  • Illiteracy
  • Lack of availability of banks in rural areas
  •  Absence of collateral
  • Shy to approach formal organizations

21. In rural areas, the main demand for credit is for _________

  • Industry
  • Crop production.
  • Irrigation
  • Cultivation

22. Which one of the following is the main source of credit for the rich households?

  • Informal
  • Formal
  • Both formal and informal
  • Neither Formal nor informal

23. Terms of credit are with respect to :

  • interest rate
  • collateral
  • documentation
  • all the above

24. Banks use the major portion of the deposit to:

  • Keep reserve so that people may withdraw
  • Meet their routine expenses
  • Extend loans
  • Meet renovation of the bank

25. Which one of the following is a major reason that prevents the poor from getting loans from the banks?

  • Lack of capital
  • Not affordable due to high rate of interest
  • Absence of collateral security
  • Absence of mediators

26. Credit or loan refers to an agreement between:

  • lender and borrower
  • consumer and producer
  • government and tax payer
  • all the above

27. Rate of interest charged by moneylenders as compared to that charged by banks is:

  • lower
  • same
  • slightly higher
  • much higher

28. Money

  • eliminates double-coincidence of wants
  • acts as a common measure of value
  • acts as a standard of deferred payments
  • all the above

29. Which body (authority) supervises the functioning of formal sources of loans?

  • Finance Ministry
  • Head Office of each Bank
  • Reserve Bank
  • Cooperative Societies

30. Many farmers are suffering from debts because of

  • When it rains a lot or it doesn't rain they can't do farming that time to run the family they need money
  • They need money for supplies
  • They want to start new business
  • Both A & B

31. In which months farming is done ?

  • From June - December
  • Whole year
  • From January - June
  • All of above

32. What type of farmers hire other farmers to work in their farms ?

  • Landless Farmers
  • Small farmers
  • Big farmers
  • Cultivation farmers

33. Where does Ramalingam take loan for his rice mill?

  • From a friend
  • From moneylender
  • From bank
  • From a trader

34. State whether true or false•• Collecting forest produce and diary provide additional income to villagers.

  • True
  • False

35. Where do the majority of people who live in rural areas come from?

  • MEDC
  • LEDC
  • Developing countries
  • It doesn't matter what type of country it is

36. Which of the following are factors that would stop people from living in an area?

  • At the bottom of a hill
  • Near a natural bridge
  • The crops can be sheltered by mountains/trees
  • Marshy land

37. Which of the following are factors that would draw people to live in a certain area?

  • Good supply of wood.
  • Flat land
  • Steep slopes
  • Both A & B

38. Which of the following are examples of how rural settlements can be shaped?

  • Nucleated
  • Dispersed
  • Linear
  • All of above

39. What is situation?

  • the location of a settlement in relation to the area around it
  • the location of a settlement in relation to the activities around it
  • the actual land occupied by the settlement
  • the shape of the village

40. What is shape?

  • the actual land occupied by the settlement
  • the shape of the village e.g. linear
  • the location of the settlement in relation to the area around it
  • the shape of the village e.g. defence

41. What is site?

  • the actual land occupied by the settlement
  • the shape of the village
  • the main activities of the settlement
  • the location of the settlement in relation to the area around it

42. What is function?

  • the actual land occupied by the settlement
  • the shape of the village
  • the main activities of the settlement e.g. defence
  • the main activities of the settlement e.g. hilltop

43. Which of the following is an example of a linear settlement pattern?

  • None of these
  • Urbaniseringen skal tøjles
  • Dispersed Settlements
  • Linear settlement

44. Rural settlements can be found in which country/ies?

  • France
  • South Africa
  • Germany
  • Ethiopia
  • All of above

45. Indian agriculture contribution to the national gross domestic product (GDP) is about ---------- per cent.

  • 10
  • 25
  • 50
  • 75

46. India is an agricultural country and -------- population depends on the agricultural sector directly or indirectly

  • one forth
  • one third
  • half
  • three forth

47. The ‘Golden Revolution’ was a period of very high productivity in:

  • food grain production
  • horticulture
  • fishing
  • agriculture

48. Short term credit is needed for

  • period of 15 months
  • period of 1 year
  • period of 15 years
  • period of 20 years

49. A regulated market has many controls over the farmers.

  • True
  • False

50. The scheme of "Micro Finance" is extended through:

  • Self Help Groups
  • Land Development Banks
  • Regional Rural Banks

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