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What is a collateral… (Class 10 Social Science 2023, Q33b)

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Social ScienceCBSE Class 10 · Board exam 2023, set 32/5/1 · 5 marks · Long answer

CBSE Class 10 Social Science 2023: question 33(b)

Set in the CBSE Class 10 board exam of 2023, paper 32/5/1, section D, question 33(b), for 5 marks. Try it first; the hints and our step-by-step solution are below.

Q33(b) · 5 marks · Long answerMoney and Credit

What is a collateral ? Why is it a main reason to prevent the poor getting a loan from banks ? Explain. (1+4=5)

Source: official question paper from cbse.gov.in (PDF). See it in the full 2023 board paper, set 32/5/1.

Hints

Open one hint at a time and try again before the next.

Hint 1

Collateral is a guarantee that protects the lender.

Hint 2

Ask what the poor own that a bank would accept as security.

Hint 3

Consider documents, the availability of banks in villages, and awareness.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. Collateral: It is an asset that the borrower owns, such as land, buildings, vehicles, livestock or bank deposits. It is used as a guarantee to the lender until the loan is repaid. If the borrower fails to repay, the lender can sell the collateral to recover the money.

    1 mark

  2. The poor usually have no assets to offer as collateral, so banks refuse to lend to them.

    1 mark

  3. The poor often lack the documents that banks require, such as proof of land ownership, income or address.

    1 mark

  4. There are few formal sources of credit, such as banks, in rural areas. The poor are therefore pushed to moneylenders, who charge high interest.

    1 mark

  5. Lack of education and awareness makes the poor unfamiliar with banking procedures and unable to complete the formalities.

    1 mark

Answer: Collateral is an asset pledged as a guarantee for repayment of a loan. The poor cannot get bank loans because they have no collateral or documents, formal credit is scarce in rural areas, and they lack awareness.

Where the marks are

  • Defines collateral with examples (1 mark)
  • Four valid reasons why the poor cannot get loans, such as no collateral, no documents, no formal credit sources or lack of awareness (4 × 1 mark)

Revise the chapter

  • Chapter: Money and Credit (notes, formulas, where marks are lost and every past question)
Practise this chapterBoard-style questions from Money and Credit, one at a time, marked against the answer key and marking points.Back to the full paper2023 board paper, set 32/5/1: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.