Grade 10 Economics||Money, Banking & Non-Banking Financial Institutions|| Notes

Unit 1: Barter System

1.1 Definition of Barter System

Barter System is the direct exchange of goods and services without using money.

Example: A farmer exchanges rice for clothes with a weaver.

1.2 Difficulties of Barter System

Unit 2: Money

2.1 Definition of Money

Money is anything generally accepted as:

1. Medium of exchange
2. Measure of value
3. Store of value
4. Standard for deferred payments

According to Prof. Crowther:
"Money is anything that is generally acceptable as a means of exchange and acts as a measure and store of value."

2.2 Evolution of Money

1. Commodity Money → Goods used as money (salt, cattle, grains)
2. Metallic Money → Gold, silver, copper coins
3. Paper Money → Currency notes issued by central bank
4. Bank Money → Cheques, credit cards, digital money
5. Plastic Money → Debit cards, credit cards
6. Digital Money → Mobile banking, e-wallets

2.3 Types of Money

A. Based on Authority:

B. Based on Material:

2.4 Functions of Money

Primary Functions:

1. Medium of Exchange → Facilitates buying-selling
2. Measure of Value → Measures worth of goods

Secondary Functions:

1. Store of Value → Can save for future
2. Standard of Deferred Payments → Future contracts possible
3. Transfer of Value → Transfer wealth between places

Contingent Functions:

1. Basis of Credit → Basis for loans
2. Distribution of National Income → Divides income among factors
3. Liquidity → Can convert to goods anytime

Unit 3: Banking System

3.1 Definition of Bank

Bank is a financial institution that:

1. Accepts deposits from public
2. Lends money to borrowers
3. Provides other financial services

According to C.R. Crowther:
"A banker is a dealer in debts – his own and of other people."

3.2 Classification of Banks in Nepal

A. Central Bank:

• Name: Nepal Rastra Bank (NRB)
• Established: 2016 BS (1956 AD)
• Functions:

1. Issues currency
2. Banker to government
3. Banker to other banks
4. Controls credit
5. Manages foreign exchange

B. Commercial Banks:

• Number: 28 (as of 2078 BS)
• Examples: Nepal Bank Ltd., Rastriya Banijya Bank, Nabil Bank, etc.
• Functions:

1. Accept deposits (saving, current, fixed)
2. Provide loans
3. Remittance services
4. Issue cheques
5. Safe deposit lockers

C. Development Banks:

• Number: 36
• Examples: Agricultural Development Bank, Nepal Industrial Development Corp.
• Purpose: Provide long-term loans for development projects

D. Finance Companies:

• Number: 25
• Function: Provide credit facilities

E. Microfinance Institutions:

Number: 64

Purpose: Provide small loans to poor people

3.3 Types of Bank Accounts

Unit 4: Credit Instruments

4.1 Definition

Credit Instruments are documents that create credit/money.

4.2 Types of Credit Instruments

4.3 Importance of Credit Instruments

1. Reduces use of cash
2. Safe and convenient
3. Promotes banking habits
4. Facilitates trade
5. Basis for economic development

Unit 5: Money Market vs Capital Market

5.1 Money Market

• Period: Short-term (up to 1 year)
• Instruments: Treasury bills, commercial papers, call money
• Purpose: Meet short-term financial needs
• Participants: Commercial banks, finance companies

5.2 Capital Market

• Period: Long-term (more than 1 year)
• Instruments: Shares, bonds, debentures
• Purpose: Meet long-term investment needs
• Participants: Development banks, stock market

5.3 Differences:

Unit 6: Non-Banking Financial Institutions (NBFIs)

6.1 Definition

NBFIs are financial institutions that don't have full banking license but provide financial services.

6.2 Types of NBFIs in Nepal

A. Insurance Companies:

• Life Insurance: Covers human life risk
• Non-Life Insurance: Covers property, vehicles, health

Major Insurance Companies in Nepal:

1. Nepal Insurance Company Ltd.
2. National Life Insurance Company
3. MetLife Nepal
4. Prime Life Insurance
5. Asian Life Insurance

B. Finance Companies:

Provide loans for various purposes

C. Cooperatives:

Provide financial services to members

6.3 Importance of NBFIs

1. Provide specialized services
2. Promote savings
3. Provide credit facilities
4. Risk management through insurance
5. Financial inclusion

Key Terms & Definitions

1. Barter System: Direct exchange of goods without money
2. Money: Generally accepted medium of exchange
3. Bank: Financial institution accepting deposits and lending money
4. Cheque: Written order to bank to pay money
5. Credit: Trust allowing deferred payment
6. Insurance: Protection against financial loss
7. Interest: Payment for using borrowed money
8. Deposit: Money placed in bank account
9. Loan: Money borrowed from bank
10. Digital Banking: Banking through electronic means

Important Points about Nepal

1. Central Bank: Nepal Rastra Bank (established 2016 BS)
2. First Commercial Bank: Nepal Bank Ltd. (established 1994 BS)
3. Currency: Nepalese Rupee (Rs.)
4. Currency Notes: Rs. 5, 10, 20, 50, 100, 500, 1000
5. Insurance Regulator: Insurance Board of Nepal
6. Stock Exchange: Nepal Stock Exchange (NEPSE)