SEBA Class 10 Social Science Economics Chapter 1 Financial Literacy Question Answer

Long Answer Type Questions

Q1. Explain any four functions of the Central Bank.
Answer: The four important functions of the Central Bank are:

1. The Central Bank has the sole authority to issue currency notes in the country.
2. It controls the flow of credit in the economy by regulating the lending activities of commercial banks.
3. The Central Bank acts as a bank for commercial banks and helps them during financial difficulties.
4. It advises the government on financial matters and manages government accounts and budgetary requirements.

Q2. Explain the precautions to be taken for using Banking cards.
Answer: The following precautions should be taken while using banking cards:

1. We should always keep our ATM PIN secret and make sure nobody sees it while entering it.
2. We should keep banking cards in a safe place to avoid loss or misuse.
3. If a card is lost or stolen, we should immediately inform the bank so the card can be blocked.
4. We should never share PIN, CVV number, OTP, or other card details with anyone.
5. We should use strong PINs that are difficult to guess.
6. Credit cards should be used carefully, and dues should be paid on time to avoid extra charges.

Q3. What are the functions of the commercial banks?
Answer: The main functions of commercial banks are:

1. Commercial banks collect deposits from people in the form of savings accounts, current accounts, and fixed deposits.
2. They provide loans to farmers, businessmen, industrialists, and other sections of society.
3. Banks create credit by lending a major part of deposited money while keeping only a small amount as reserve.
4. Commercial banks also provide locker facilities and help customers keep valuable items and documents safely.

Q4. What is financial market/ State the role of financial market.
Answer: A financial market is a place where financial securities like shares and bonds are bought and sold. It helps companies and institutions raise money for business activities.

The roles of financial market are:

1. It converts people’s savings into productive investments.
2. It directs money towards industries and sectors that require financial support.
3. Investors can easily buy or sell securities and convert them into cash.
4. It provides financial support for the growth and modernization of industries.

Q5. What is mutual fund? State the reasons why investors prefer mutual funds?
Answer: A mutual fund pools money from different investors and invests it in various securities through a professional fund manager.

Investors prefer mutual funds because they are professionally managed and reduce investment risk through diversification. They also save investors from the difficulty of analyzing individual shares and allow people to start investing with a small amount of money.

Q6. Explain the following:

a) PAN card:
Answer: The Permanent Account Number (PAN) is a ten-digit alphanumeric number issued by the Income Tax Department. It is mainly used for tax-related and financial transactions. PAN card also acts as an important identity proof and is necessary for many banking activities.

b) Aadhaar card:
Answer: Aadhaar card is a 12-digit unique identification number issued by UIDAI. It contains biometric and demographic details of individuals and serves as proof of identity and address. Aadhaar is also useful for banking services and government schemes.

Q7. Briefly explain any two functions of each of the following:

a) IDBI:
Answer: The two functions of IDBI are –

1. IDBI offers financial assistance to industries.
2. It develops institutions related to the industrial development of the country.

b) RRBs:
Answer: The two functions of RRBs are –

1. RRBs provide loans at low interest rates to villagers.
2. They mobilise rural savings and invest them in productive activities.

c) NABARD:
Answer: The two functions of NABARD are –

1. NABARD acts as the apex financial institution for rural investment and production.
2. It coordinates rural development schemes started by the government and RBI.

d) SIDBI:
Answer: The two functions of SIDBI are –

1. SIDBI promotes modernization and improved technology in small industries.
2. It creates markets for products of small industries.

Q8. What are the precautions an individual needs to take for using Digital Payments?
Answer: The following precautions should be taken while using digital payments:

1. We should avoid making digital payments using public Wi-Fi networks because they are less secure.
2. We should download banking and payment apps only from trusted and verified sources.
3. We should regularly update apps to maintain proper security.
4. We should never share OTPs, passwords, UPI PINs, or banking details with anyone.
5. Before sending money, we should carefully check the recipient’s details.
6. We should remember that a UPI PIN is required only for sending money, not for receiving it.
7. We should never scan QR codes to receive money.