Social Science (087) — AI-generated practice question

Cooperative societies are a major formal source of cheap credit in rural areas. Members of a cooperative pool their resources by depositing money with the society. Using these deposits as collateral, the cooperative obtains a large loan from a bank. These funds are then lent to members at low interest rates for various purposes — purchase of agricultural implements, cultivation, house construction, and other expenses. Once members repay their loans, a fresh round of lending takes place, making credit continuously available.

Example: Krishak Cooperative has 2,300 farmer-members, accepts their deposits, and uses them to provide affordable loans for farming and other needs.

Source: Chapter 3, Loans from Cooperatives

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• Examiners expect three clear points for 3 marks: (1) pooling of resources/deposits, (2) using deposits as collateral to get bank loan, (3) lending to members at cheap rates for various purposes.
• Mention the Krishak Cooperative example briefly — it shows you've read the chapter and makes the answer concrete.
• Avoid writing about SHGs or moneylenders here; the question is specifically about cooperatives.