Money and Credit | Class 10 Social Science Notes

MODERN FORMS OF MONEY

Money has evolved over time from barter items such as grains and cattle to metallic coins and now to modern currency and bank deposits. Early Indians used grains and cattle as money because they had intrinsic value and were widely accepted. Later, metallic coins made of gold, silver, and copper became common and were used well into the last century. Modern currency, however, consists of paper notes and coins that are not made of precious metals and do not have intrinsic use. They are accepted as money because they are authorised and issued by the government. In India, the Reserve Bank of India (RBI) issues currency notes on behalf of the central government. By law, no other individual or organisation can issue currency, and the rupee is legal tender, meaning it must be accepted for settling transactions. Besides currency, people also hold money as deposits in banks. These demand deposits can be withdrawn anytime and are used for making payments through cheques. Cheques are written instructions from the account holder to the bank to pay a specific amount to another person. Demand deposits along with currency form the modern money supply. The banking system plays a crucial role in enabling these modern forms of money.

📊 Diagram: Images of Gupta coins, Tughlaq coin, and modern coins illustrating the evolution of money; Figure showing cheque payment process.

🧪 Activity: Students are asked how M. Salim would write a cheque to withdraw Rs 20,000 and to identify why demand deposits are considered money.

🔗 Connection: This section sets the foundation for understanding the role of banks and cheque payments, leading to the next section on loan activities of banks.