Q1. [4]
Loans from Co-operatives
Besides banks, the other major source of cheap credit in rural areas are the co-operative societies. Members of a co-operative pool their resources for co-operation in certain areas. There are several types of co-operatives possible such as farmers co-operatives, weavers co-operatives, industrial workers co-operatives etc.
Krishak Co-operative functions in a village not very far away from Sonpur. It has 2300 farmers as members. It accepts deposits from its members. With these deposits as collateral, the co-operative has obtained a large loan from the bank. These funds are used to provide loans to members. Once these loans are repaid, another round of lending can take place.
Krishak Co-operative provides loans for the purchase of agriculture equipments, loans for cultivation and agricultural trade, fishery loans, loans for constructions of houses and for variety of other expenses.
Read the following source and answer the questions that follow :
- (34.1) Which sector includes credit facilities offered by Co-operative Societies ? [1]
- (34.2) How do Self-Help Groups access external funding ? [1]
- (34.3) Explain the functioning of Co-operative Societies. [2]
Previously asked in CBSE board exam
2025 32/6/1 Q34
Generated by claude-sonnet-4-6 · 2026-06-15 06:55 · grounding stimulus
Model Answer
(34.1) Credit facilities offered by Co-operative Societies fall under the informal sector — wait, Co-operatives are classified under the formal sector of credit.
(34.2) Self-Help Groups pool savings of their members and use these savings as collateral to obtain loans from banks. The bank provides credit to the group, which is then distributed among members as needed.
(34.3) Co-operative Societies function by pooling resources of their members. Members deposit their savings with the co-operative. These deposits are used as collateral to obtain large loans from banks. The funds collected are then lent to members at relatively low interest rates for purposes such as purchase of agricultural equipment, cultivation, fishery, and house construction. Once loans are repaid, another round of lending begins.
Source: Money and Credit, Loans from Co-operatives
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Explanation
- (34.1) Co-operatives are part of the formal sector (regulated, not informal). Don't confuse them with moneylenders.
- (34.2) The passage doesn't mention SHGs, so this answer draws from the broader chapter content on SHGs. Key point: SHGs use pooled savings as collateral for bank loans.
- (34.3) Follow the chain: member deposits → collateral → bank loan → lend to members → repayment → fresh lending. Mentioning examples of loan types (agriculture, housing) adds completeness. Examiners look for the cycle of functioning, not just a definition.
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