Social Science (087) — AI-generated practice question

Cooperative societies are a major source of cheap credit in rural areas. Members pool their resources and deposits together. Using these deposits as collateral, the cooperative obtains a large loan from the bank. These funds are then used to provide loans to members at low interest rates.

For example, Krishak Cooperative provides loans for purchasing agricultural implements, cultivation, agricultural trade, fishery, house construction, and other expenses. Once loans are repaid, another round of lending begins, making credit continuously available to rural farmers and households.

Source: Chapter 3, Loans from Cooperatives

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• Examiners look for: (1) how cooperatives work — members pool deposits, (2) how they get funds — use deposits as collateral to borrow from banks, (3) how they help — provide low-interest loans for multiple rural purposes.
• Mention the example of Krishak Cooperative to show real-world application — it adds precision.
• Avoid over-explaining; 3 marks = 3 clear points in concise sentences.