Lesson 2 - ROLE OF MONEY

Finance is for enterprise

Like life giving air’s presence

Honest financial management,

Will ensure long existence.

UDYAM SHASTRA—chapter 9 verse 8


Reading this module and doing the students activities will enable the students :

  • To develop understanding about money.

  • To develop understanding of currency.

  • To develop understanding of monitory transactions.

  • To help students to distinguish between money and promissory notes.


(Basic instruction regarding E.CONCEPTS to trainers: The trainer is requested to first read and follow the ‘Basic instructions regarding Enterprise Concepts to trainers’ and proceed further thereafter. The trainer should ask a series of leading and thought provoking questions to elicit answers from the students.These answers are expected to make the students understand these E.Concepts in their own words that they recognize and know).

Definitions of the E. CONCEPTS of the module “Role of Money”

MONEY : A medium that can be exchanged for goods and services and is used as a measure of their values on the market. Forms of money could include : a commodity such as gold; an officially issued coin or note; or a deposit in a checking account or other readily liquefiable account. The official currency, coins, and negotiable paper notes are issued by a government.

CURRENCY : Money in any form when in actual use as a medium of exchange, especially circulating paper money. Transmission from person to person as a medium of exchange; circulation: coins now in currency.

RESERVE BANK OF INDIA (R.B.I) : Established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. Central Office at Mumbai since inception Though originally privately owned, since nationalization in 1949 fully owned by the Government of India.

The Preamble prescribes the objective as: “ to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.”

Main Function

Monetary Authority:

Formulates implements and monitors the monetary policy.

Objective: maintaining price stability and ensuring adequate flow of credit to productive sectors.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the country’s banking and financial system functions.

Objective: maintain public confidence in the system, protect depositors’ interest and provide cost-effective banking services to the public.

Manager of Exchange Control:

Manages the Foreign Exchange Management Act, 1999.

Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

Issuer of currency:

Issues and exchanges or destroys currency and coins not fit for circulation.

Objective: to give the public adequate quantity of supplies of currency notes and coins and in good quality.

Developmental role: Performs a wide range of promotional functions to support national objectives.

Related Functions:

Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.

Banker to banks: maintains banking accounts of all scheduled banks.

Offices: Has 22 regional offices, most of them in state capitals. Head office in Mumbai

CREDIT CARD: A plastic card having a magnetic strip, issued by a bank or business authorizing the holder to buy goods or services on credit, also called a charge card.

DEBIT CARD: A bankcard used to make an electronic withdrawal from funds on deposit in a bank, as in purchasing goods or obtaining cash advances.

ENTERPRISE SKILLS: E.SKILLS of the module “Role of Money” The students activity is designed to clarify the CONCEPTS of

the module and develop some ‘ENTERPRISE SKILLS’ (E. Skills). The E.Skills included in a module may not be exhaustive but

are only indicative. E.Skills stated in modules elsewhere may also get addressed through the activities of a module.:

(Basic instruction regarding E.SKILLS to trainers: The trainer is requested to first read and follow the ‘Basic instructions regarding

Enterprise Skills to trainers’ and proceed further thereafter).

EXPLORATION : Ability to look for information or things needed.

ANALYZING INFORMATION: To be able to simplify the facts. Distinguishing between essential and extra information. •

HANDLING MONEY : Ability to keep money safely, feeling responsible for it, give or take them carefully.

MONITORY TRANSACTION : Ability to give or receive the exact amount of money depending upon the situation.


Activity 1- “CURRENCY”

Keep Paper currency of RUPEE ONE ready and distribute them to the groups Keep the notes of RS 10 and Rs 20& Rs 50 ready and distribute them to groups The teacher may tell the students to bring the notes. This will help to arouse interest in the activity. The students will also feel responsibility while handling money. The understanding about money and its importance will make

students more confident and responsible.

Instruction to Students

            • Form groups with the help of teacher.

            • Take a close look at the Rupee One note given by the teacher.

            • Take a close look at the notes of 10, 20, 50 denominations provided by the teacher.

            • Read the questions and discuss them in the group.

            • Write down your answers in the work sheet.

            • After completing the activity, each group should present and share its main discussion points with the rest of the class.


In ancient times there was no money. There were no metals to make coins and no paper to print. How did people manage their lives and business without money? The lives of people in those days were simple. They needed very few things like food, clothing and shelter. The farmer grew grains. The carpenter cut wood and built houses and carts. The shepherds reared animals and so on. The farmer exchanged his extra crop for building or repair of his house. The shepherd gave milk in return of grains. People exchanged things to meet their needs. This was called barter system. The concept of gold coins and other metals coins came

much later. ......Till when paper and printing technology was invented...... and then came what we now call as money? Have you seen a ONE RUPEE? Have you seen five rupees or 10 rupees notes? Observe them carefully and try to find the differences.

Q.1. Have you seen a credit card or debit card ?

Yes No

Q.2. Can credit card also be called a kind of Money?

Yes No

Q.3 Have you seen a traveler’s check?

Yes No

Q.4.Who has issued the Rupee one , Rs five ,Rs.ten,Rs.twenty or other Currency?


Q.5.In how many languages do you read RUPEE value written on a note?


Q.6. Who has issued or printed the rupees 10 and 20 notes ?


Q.7. What is written on these notes by the person who has issued them?


Q.8. What is the difference between say Rupee five note and other notes


Q.9. What is a mint?


Q.10. Can government or reserve Bank go on printing as much as they want ?


Activity 2- “RESERVE BANK”

Have a follow up discussion in the class. Let the students share the information. If any vital information is missing, try and give it in the most interesting way. You may try to take picture of mint, the location of Reserve Bank and show photograph if possible. The additional input from the teacher will motivate the students to look for more information in future activities.

Instruction to Students:

            • This is a ‘home work sheet’.

            • Try to answer these questions with the help of friends, parents or relatives.

            • You may take the help of other classmates or teacher.

            • After completing the activity, each group should present and share its main discussion points with the rest of the class.

Q.1.) What is Reserve Bank?


Q.2.Can we save our money or open an account with reserve bank?


Q.3. How is reserve bank different from other banks?