The main drawbacks of barter system are:
(a) Double-coincidence of wants. It is a major drawbacks of the barter system as it essentially requires the two individuals under study to possess both the goods which they are willing to exchange, for the satisfaction of their respective wants. It indeed is a very cumbersome task which hinders the mutual exchange.
(b) Lack of a common unit of value. The absence of a common unit of measurement to evaluate the goods and services for exchange made proper accounting impossible.
(c) Lack of store of value. Barter system lacked any method, by which the purchasing power could be stored, to be used in future. It could be stored only in terms of commodities which in turn required huge storage space, thereby high storage cost and also faced the difficulty in the disposing of these commodities.
(d) Lack of standard for deferred payments. Barter system lacked any satisfactory unit to be used in contracts which involved payments to be made in future. Contractual payments or future payments were very difficult to ascertain under barter system of exchange.

The supervision of the functioning of formal sources of loans is necessary to check
(a) Whether the banks actually maintain the cash balance.
(b) Whether the banks give loans not just to profit-making businesses and traders but also to small cultivators, small-scale industries and small borrowers.
(c) How much banks are lending, to whom and what interest rate.

Banks and cooperatives are needed to increase their lending facilities in rural areas due to the following reasons
People in rural areas take credit from moneylenders and traders who charge very high rate of interest.
Rural people are exploited by using unfair means, thus leading them to debt traps.
Formal sources of credit could provide cheap and affordable credit in rural areas without any undue exploitation.

There is great need to expand formal sources of credit in rural India because:
(i) There is no organisation that supervises the credit activities of lenders in the informal sector. They lend at whatever interest rate they choose.
(ii) No one can stop rural money-lenders from using unfair means to get their money back.

People with surplus money or extra amount deposit it in banks. The banks keep the money safe and give an interest on it. The deposits can be drawn at any time on demand by the depositors. That is why they are called 'deposits'.
(i) The demand deposits encashable by issuing cheques have the essential features of money
(ii) They make it possible to directly settle payments without the use of cash.
(iii) Since demand drafts/cheque are widely accepted as a means of payment along with currency, they constitute money in the modern economy.

Cooperatives accept deposits from its members which becomes the basis (collateral) to obtain huge loan from the banks. These amounts are used to provide loans to members for purposes such as purchase of agriculture implements, loans for cultivation, construction of houses and a variety of other expenses. Another round of lending can take place after existing loans are repaid. There are different types of cooperatives such as farmers cooperatives, weavers cooperatives, etc.

Cheap and affordable credit plays a crucial role for the country's development. There is a huge demand for loans for various economic activities. The credit helps people to meet the ongoing expenses of production and thereby develop their business. Many people could then borrow for a variety of different needs. They could grow crops, do business, set up industries etc. In this way credit plays a vital role in the development of a country.

The various differences between formal and informal sources of credit are shown in the following table:
Formal Sources of Credit
1. They cover those sources of credit which are registered by the Government and have to follow its rules and regulations e.g. Banks, Cooperatives.
2. The RBI supervises the functioning of formal sources of credit.
3. Apart from profit-making, they have also an objective of social welfare.
4. The rate of interest charged by formal sources is always much lower than that of informal sources.
5. The terms of credit are also fair and reasonable.
Informal Sources of Credit
1. They include those small and scattered units which are outside the control of the Government e.g. individual moneylenders, traders, employers, etc.
2. There is no organizational supervision or adherence to rules and regulations in the credit extending activities in this sector.
3. Their only motive is to extract profit as much as possible.
4. They charge random and much higher interests in comparison to formal sectors.
5. They impose very tough and sometimes even, unreasonable terms of credit on the borrower.

The reasons for Swapna's situation being risky are
(i) Failure of crop due to either poor rainfall (climate problem) or attack on the crop by pests will reduce swapna's earning drastically. Here adding pesticides will reduce or eliminate the attack by pests and good rainfall will eliminate the risk due to climate.
(ii) Another risk is the loan taken from moneylenders. They charge high interest rates and may also take away part of Swapna's land if she is not able to repay the loan. This will reduce her earning propects in the future also.

The use of money makes it easier to exchange things because
(i) it is accepted as a medium of exchange.
(ii) it serves as a unit of value.
(iii) it solves the problem of double coincidence of wants.

(i) Lack of double coincidence of wants— Here, a seller has to find out a person who wants to buy seller's goods and at the same time who must have what the seller wants. This is the main drawback of barter exchange.
(ii) Absence of common measure of value—When thousands of articles are produced and exchanged, these will be unlimited number of exchange ratios. Absence of a common denominator in order to express exchange ratios creates many difficulties. 
(iii) Lack of divisibility—If a person wants to purchase wheat equal to the value of half of his horse, he cannot do so without killing his horse. Thus lack of divisibility makes barter exchange impossible.
(iv) Difficulty in storing wealth—Holding of stocks of goods like cattle, wheat, potatoes, etc. involve costly storage and deterioration.
(v) Lack of satisfactory unit to engage in contracts—It is difficult to engage in contracts which involve future payments due to lack of any satisfactory unit. 

Various sources of credit in rural areas are:
(i) Agricultural traders
(ii) Moneylenders
(iii) Commercial banks
(iv) Cooperative societies and 
(v) Relatives and friends.
The most convenient source of credit is a moneylender. It is most convenient because of the following two reasons: (i) There is no need of documentation process while taking loan from informal sources (moneylenders).
(ii) No collateral is required. Collateral is an asset that the borrower owns (such as land, building, livestock etc.) and uses this as a guarantee to the lender until the loan is repaid.

A typical SHG usually comprises 15-20 members.

In India, the currency notes are issued by the Reserve Bank of India (RBI) on behalf of the central government.

Collateral is an asset, such as land, vehicle, building, livestock and deposits with banks, that the borrower owns and uses this as a guarantee to a lender until the loan is repaid.

Gold, silver and copper coins were used for making coins in later stages in India.

One cannot refuse a payment made in rupees in India because it is authorised by the Indian government.