NCERT Solutions Class 7 Social Science Chapter 20 Banks and the Magic of Finance

F R E E S T U D Y M AT E R I A L F O R E V E R Y S T U D E N T

CLASS 7 · SOCIAL SCIENCE

NCERT Solutions

Chapter 20: Banks and the Magic
of Finance

NCERT Textbook — Exploring Society: India And Beyond (Part I)

BOOK PAGES SECTIONS QUESTIONS MEDIUM

Part II, 193 – 212 12 31 English

Solutions, notes, sample papers & more at 39 pages

Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

CLASS 7 · SOCIAL SCIENCE · EXPLORING SOCIETY: INDIA AND BEYOND (PART I)

NCERT Solutions — Chapter 20: Banks and the Magic of
Finance
Complete NCERT Solutions for Class 7 Social Science Chapter 20 Banks and the Magic of Finance — the last
chapter of Theme E, Economic Life Around Us, and the last chapter of the Grade 7 course, in Exploring Society:
India and Beyond (Part 2). Every question the chapter asks is answered here: the three Big Questions, the
LET’S EXPLORE box on page 194, all five THINK ABOUT IT boxes (pages 196, 198, 202, 207 and 209), Before
we move on …, the twelve end-of-chapter Questions and activities, and every question asked in the running
text on pages 194, 201 and 207. The DON’T MISS OUT box on page 199 carries no question, so its interest
example is worked out inside the answers and in the revision table below. The passbook (Fig. 8.7), the bank-
earnings diagram (Fig. 8.8), the cheque (Fig. 8.14), the ATM steps (Fig. 8.13), the UPI flow (Fig. 8.18) and the
cash withdrawal slip (Fig. 8.24) have all been read off the printed pages, and every interest calculation has
been worked out again.

TEXTBOOK BOOK PAGES

Exploring Society: India and Beyond (Part I) (Class Part II, 193 – 212
7)

SECTIONS QUESTIONS

12 31

MEDIUM

English

The Big Questions — Page 193
Chapter opening — Theme E, Economic Life Around Us

THE BIG QUESTIONS

Q1 What is financial infrastructure, and what does it comprise?

Financial infrastructure is “a network of banks, payment systems, stock markets, and
other financial institutions that help people, businesses, and the government facilitate
financial transactions and manage money”. Those are the chapter’s own words on page 194.
Chapter 19 dealt with physical infrastructure — roads, railways, telecommunication. Those carry
goods, people and messages. Financial infrastructure carries something you cannot load on a
truck: money. And it is also the answer to the question the chapter asks at the start — “how is
the development and maintenance of the vast physical infrastructure funded?”
It comprises four kinds of parts, each of which the chapter takes up in turn:

Page 1 of 39

Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

PART WHAT IT DOES THE CHAPTER’S EXAMPLES

Banks Hold deposits, pay interest on The bank that takes Navdeep’s ₹3000 and lends to Rima;
them, and lend that money out savings, current and fixed deposit accounts (Fig. 8.4)
as loans

Other financial Serve savers and sectors that Post offices (NSC, Kisan Vikas Patra, Sukanya Samriddhi);
institutions ordinary banks may not reach the Industrial Finance Corporation of India for power and
textiles; NABARD for farming, village industries, roads
and irrigation

Payment Move money from one person Cash, cheques, debit cards, ATMs, POS machines,
modes and or account to another netbanking, BHIM and UPI
systems

Stock market Lets companies raise money The Bombay Stock Exchange, established in 1875
by issuing shares, and lets
people invest their savings in
them

Above all of these sits the Reserve Bank of India, the central bank, which supervises the
banking system, prints and distributes currency and fixes the benchmark interest rate —
because, as the chapter puts it, “with numerous banks and financial institutions, it is essential to
have clear rules and regulations that everyone follows”.

Why it happens: a shopkeeper pays a worker, the worker buys rice, the rice-seller
pays the farmer. Every one of those steps is a transaction, and each one needs
somewhere safe to keep money, some way to move it, and someone willing to lend
when a person has an idea but not the cash. Financial infrastructure is simply the
standing arrangement that makes all three possible without the two people having
to know or trust each other personally.

Q2 What are the main functions performed by banks and how do they impact people’s
lives?

A bank does two main things, and they are two halves of one action: it holds deposits and
it offers loans or credit. The chapter gives each of these its own heading.
1. Hold deposits. “A bank accepts and holds money (deposits) that people put into the bank
account. They not only keep it safe for us but also lend it to businesses or other people. In
return, the banks give us some extra money over a regular period (say quarterly or monthly or
annually) in the form of ‘interest’.” To use any of this you must first open an account and
become a bank account holder. Fig. 8.4 gives three types:

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

ACCOUNT WHO IT IS FOR INTEREST WITHDRAWALS

Savings Individuals who save Yes Allowed, but there are limits on how
account regularly often each month; opens with a
minimum deposit

Current Businesses and traders No Generally no limit on how many times
account who often make and money is deposited or withdrawn
receive payments

Fixed deposit Anyone who can lock Yes — usually higher A one-time deposit; the amount plus
account money away for 3 or 5 than a savings interest comes back at the end of the
years account period

2. Offer loans or credit. “Banks lend money to borrowers as loans for specific purposes such as
buying a house or vehicle, funding education, etc. Businesses borrow money for purchasing
new machinery and raw materials, transporting products, launching new products in markets.”
The borrower repays the loan amount along with interest.
How the two halves join. The money the bank lends is the money it has taken in. Navdeep’s
₹3000 does not lie in a locker — it becomes the loan that lets Rima buy bamboo and run her
business.

deposit loan

Navdeep BANK Rima
depositor keeps a reserve borrower

lower interest higher interest
paid out paid in

The bank stands between a saver and a borrower. It pays a lower rate on the deposit than it charges
on the loan — that gap is its income (Fig. 8.8 in the book).

How this changes people’s lives. The chapter answers this through the Jan Dhan Yojana
account on page 200:

Safety. Money at home can be lost, stolen or spent; money in a bank is safe and can be
tracked in a passbook.
Growth. Savings earn interest, and with compounding they grow year after year.
Opportunity. Farmers borrow to start a small business or expand their farming; a bamboo-
worker like Rima can take an order she could not otherwise afford.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Direct benefits. Workers receive wages straight into their accounts, and students receive
co m
se
scholarships into theirs. “Such direct transfers have reduced middlemen and ensure the
m.
o m l a
g Pradhan Mantri Jan
.c 2014 only 15 crore Indians had bank accounts; since the
timely disbursement of funds.”
Reach.m a
seYojana, over 50 crore accounts have been opened — mainly by women — with no
Before
l a
ag
Dhan
minimum balance or fees.

co m
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How does financial infrastructure contribute to a nation’s progress?
a
Q3

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It turns idle money into working money. Before we move on … puts it in onem .
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infrastructure la activity, and
om“promotes savings, credit and investment that boostsaeconomic
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ultimately
la chapter shows this happening in four ways.
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WHAT IT DOES HOW THE CHAPTER SHOWS IT

a s em
glcapital, and her bamboo business grows. Multiply that by crores of
Moves savings to Navdeep’s surplus salary would do nothing in his cupboard. Through the bank it becomes
the people who can
use them
a
Rima’s working
accounts and it becomes the country’s investment.

. com
m to heavy reliance on
discouraged a majority of people from using banking services,eleading
Makes transactions Before UPI, transfers meant filling a cheque and visiting a bank — “time-consuming and

m a s
co glwithout a record”. UPI, launched
quick, cheap and

m .
recorded
a
cash due to which billions of rupees were used every day

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by NPCI in 2016, made the same transfer instant and traceable.

a g
m
Lets companies “Issuing shares help companies raise funds for their operations.” A company that needs a

a se
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raise funds new factory need not find one very rich lender; it can sell small pieces of ownership to

.
many people through the stock exchange.
a g
e m
g l as “even in remote locations”; NABARD funds banks that lend for
a village industries and rural infrastructure; the Jan Dhan Yojana put over 50
Includes people who Post offices reach
were left out farming,
crore people inside the banking system.

co m
m .
o m l a se
ag ₹3000 rarely has a
.calmost never in the same hands. The person with a spare
Why it happens: the money a nation saves and the money it needs to invest are

sem
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a
business plan, and the person with a business plan rarely has spare cash. Financial

.c
m
infrastructure is the bridge between them. Wherever that bridge is missing, savings

m a s e
co agl
sit dead in cupboards and good ideas never start — which is exactly why the chapter

m .
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calls it infrastructure, just like a road.

g l as
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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Did you know? The chapter opens with Joseph Schumpeter’s line that the banker “is
the producer of a vital service, enabling entrepreneurs to transform ideas into reality
through credit”. Credit does not create the idea — it lets the idea start before the
money for it has been earned.

In-text Questions — Page 194
Introduction — from physical infrastructure to financial infrastructure

Q1 Do you recall the flow of money from shopkeepers to workers as salaries, who
further spent it on essential items (chapter ‘From Barter to Money’ in Part 1 of
Grade 7 textbook)?

Yes — money moves in a circle, and every rupee that is spent becomes somebody else’s
income.
In that chapter the flow ran like this: a shopkeeper earns money by selling goods → he pays
part of it as salaries to the people who work for him → those workers spend their salaries on
essential items like food, clothes and school things → that spending becomes the income of
other shopkeepers and producers → who again pay salaries. The same rupee keeps travelling.

shopkeeper’s sales → salaries to workers

workers’ salaries → spending on essentials

spending → income of other sellers and producers

… and the circle begins again

This chapter picks up exactly where that one stopped. If money is always on the move, then
something has to hold it, keep it safe and carry it between all these hands. That something is
financial infrastructure.

Q2 How do these monetary transactions take place between people?

Through the banks and payment systems that make up financial infrastructure. Money
passes between people in two broad ways.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

WAY HOW IT WORKS WHERE THE
CHAPTER EXPLAINS
IT

Cash Notes and coins handed over directly; withdrawn at the bank Page 203, Fig. 8.13
counter with a withdrawal slip, or from an ATM with a debit
card and PIN

Cheque A paper instruction to your bank to pay a named person from Page 204, Fig. 8.14
your account; the amount is debited from you and credited to
them

Debit card at a Swipe or insert the card, enter the amount and the PIN; Pages 204–205, Fig. 8.15
POS machine money moves instantly from the customer to the shop

Netbanking Check balances and transfer money through the bank’s Page 205, Fig. 8.16
website or app on a computer or smartphone

UPI on a mobile Scan a QR code or use the receiver’s phone number, enter the Pages 205–207, Fig. 8.18
phone amount and the UPI PIN; the money reaches the other
account at once

Behind every one of these, both people need a bank account — which is why the chapter says
that to use a bank’s services “one first needs to open a bank account”.

Q3 Also, how is the development and maintenance of the vast physical infrastructure
funded?

Out of the savings that financial infrastructure collects and lends. Roads, bridges, railways
and power lines cost far more than any one person or company has in hand, so the money has
to be gathered from many savers and lent to those who build.
The chapter names the routes by which this happens:

Banks lend. Deposits from crores of account holders become loans to businesses “for
purchasing new machinery and raw materials, transporting products” and similar work.
The RBI lends to the government. As banker to banks and to the government, the RBI “also
provides loans to banks and the government”.
Special institutions fund special sectors. The Industrial Finance Corporation of India
funds businesses in areas like power and textiles. NABARD funds banks that give loans for
farming, village industries, “and infrastructure like roads and irrigation”.
Companies raise money from the public. By issuing shares on a stock exchange, a
company can collect small amounts from many investors and use the total for large projects.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Taxes. The chapter’s margin note on page 209 defines tax as “a compulsory contribution
given by individuals and businesses… to the government on income and profit”. Government
spending on infrastructure comes from this pool.

Why it happens: a bridge earns nothing on the day it is built — the benefit comes
over the thirty years after. So it must be paid for now out of money that someone
else has saved, and repaid later out of the benefit. Financial infrastructure is the
machinery that makes such a long swap possible; without it, a country can only build
what it can pay for today in cash.

LET’S EXPLORE — Page 194
Fig. 8.2, inside a bank branch

LET’S EXPLORE

Q1 This picture is from a bank. What do you think the people are doing? Ask your
family members if they have visited a bank and learn more about the activities
there.

The picture (Fig. 8.2) shows an ordinary working morning inside a bank branch, and
almost every service named in this chapter is visible in it.
What is going on in the picture

At the counter on the right, customers stand in a queue in front of the tellers. This is the
cash counter — where a withdrawal slip is handed in and cash is paid out, and where cash
and cheques are deposited.
An electronic display board glows above the counter, showing figures — the kind of board a
branch uses for token numbers and rates.
At the desks, bank officers sit facing customers and hand them papers. This is where an
account is opened, where a loan is discussed, and where forms are signed.
In the front, an officer is passing a form and a card across to a woman customer — very
likely a new account holder receiving her debit card or passbook.
A customer waiting her turn is using her phone — netbanking and UPI now sit alongside
the counter.

How to do the “ask your family” part

1. Ask a family member for one specific visit: what did you go to the bank for?
2. Ask what they had to carry (passbook, cheque book, ID proof, a filled slip) and roughly how
long it took.
3. Ask what they now do on the phone instead of at the branch — and what still needs a visit.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

4. Note the answers under three headings: deposit / withdrawal, loan or account opening,
payment or transfer.

Sample answer: “My mother visited our branch last month to open a fixed deposit account for
three years. She carried her passbook, her Aadhaar card and the money. The officer at the desk
filled a form, took her signature and gave her a receipt showing the amount, the period and the
rate of interest. She said the queue at the cash counter was long, but her own work was done at
a desk in about twenty minutes. She added that she now checks her balance on the phone and
uses UPI at the vegetable market, so she goes to the branch only three or four times a year —
mainly for a passbook update or for something that needs a signature.”

Tip: if you visit a branch yourself, look for the four things named in this chapter —
the cash counter, the ATM outside, the passbook-updating machine, and the notice
board showing interest rates on savings and fixed deposits.

THINK ABOUT IT — Page 196
After the story of Navdeep’s deposit and Rima’s loan (Fig. 8.3)

THINK ABOUT IT

Q1 Why does Navdeep think that saving at the bank is better than keeping cash at
home?

Because at home ₹3000 stays ₹3000 and can be lost; at the bank it is safe and it grows. The
chapter’s own reason comes first: “Saving all that money in his cupboard might not be safe.”

₹3000 IN THE CUPBOARD ₹3000 IN THE BANK

Safety Can be stolen, burnt, lost or damaged; The bank keeps it safe, in his name
no one can replace it

Growth Stays exactly ₹3000 for ever Earns interest quarterly, monthly or annually — and
with compounding, interest on interest

Record Nothing written down; easy to spend Every rupee in and out is entered in the passbook (Fig.
without noticing 8.7)

Use Only usable as cash, in person Can be paid out by cheque, debit card, netbanking or
UPI, and withdrawn at any ATM 24×7

Discipline Money in the cupboard is easy to dip A savings account has limits on how often money can be
into withdrawn each month

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

There is a further reason the chapter adds later, and it matters: money kept at home helps
co m
nobody else. Money deposited in a bank is lent onwards — to Rima, to a farmer, to a student —
em.
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.co g
so it does work while it waits for Navdeep.

em a
a s
gl it happens: a bank can pay Navdeep interest only because it does not keep his
anotes
Why
lying in a vault. It lends them at a higher rate and passes part of that back to

co m
him. So the safety and the growth come from the same fact — the bank puts his
money to work while promising to return it.
em . ag
g l as
a

co m
m.
Q2 Can Navdeep and Rima lend to each other directly without the bank? What could
happen in that case? Discuss.
m as e
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se m
l a

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a Yes, they can — people have always lent to each other — but it works only if a great deal
s
goes right, and that is exactly why banks exist. The chapter itself says Rima turned to a bank
m a
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when “friends and family couldn’t help as much as required”.

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What could go wrong in a direct loan

a g
They may never meet. Navdeep has ₹3000 to spare; Rima needs money for bamboo.
Nothing tells either of them that the other exists.

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The amounts may not match. Rima may need much more than one person’s savings — the

m a s em
gl next month; Rima can only
chapter says the bank “provides Rima with the remaining amount she needs”.

. cotiming may not match. Navdeep may want his money back
a
em
The

g l as repay after she sells her products.
a Trust and information. Navdeep has no way of knowing whether Rima’s business will do
well. A bank checks the borrower’s purpose and capacity before lending.
se m
com g l a
. a
No proof and no rules. A private loan often has nothing in writing — no agreed rate, no
m
ase
repayment date. If there is a quarrel, there is no record. In the bank both sides get written

a gl
terms and entries in a passbook.
The whole risk falls on one person. If Rima cannot repay, Navdeep loses his entire savings.
A bank spreads its lending over very many borrowers, and it also keeps reserve money
co m
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e
instead of lending everything out.
m l as
.co a g
a s em Why it happens: a bank is doing something a single lender cannot do — it is

agl pooling. It collects small deposits from thousands of Navdeeps, and lends larger
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sums to many Rimas. Because deposits keep coming in while loans are being repaid,

m a s e
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the bank can promise every depositor his money back even though the money itself

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is out working. That is why a bank can serve both people at once, and a direct loan
can serve only one.
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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Discuss in class: ask whether a village moneylender solves the same problem as a
bank. What does he offer that a bank does not — and what does a bank offer that he
does not?

THINK ABOUT IT — Page 198
After the compounding example and the story of the king and the sage

THINK ABOUT IT

Q1 How does one track so many transactions of deposits and withdrawals? The bank
provides a diary-like document called a passbook that keeps a record of all the
receipts and payment transactions. This can be updated regularly at the bank.

Through the passbook — the bank’s written diary of your account. The chapter supplies the
answer inside the question, so the work here is to understand what the passbook actually
records and why that is enough to track everything.
A passbook has one line for every transaction, and each line carries the same six particulars.
These are the column headings printed in Fig. 8.7:

COLUMN WHAT IT TELLS YOU

Date When the transaction happened

Particulars What it was — salary transfer, rent, a UPI payment, SMS charges, interest

Cheque no. Filled only when a cheque was used

Debit Money going out of the account

Credit Money coming in

End balance What is left after that line

Because each line ends with a fresh balance, you never have to add up the whole year to know
where you stand — the last line always tells you. The chapter’s margin notes give the two key
words: debit is “taking money out of an account” and credit is “receiving money in an account”.
Today the same record is available in other forms too, which the chapter mentions on page 205:
netbanking shows “balances and transaction history”, and a UPI app “reduces the need for
physical passbook updates” because it “allows users to check balances and track transactions
anytime on their phone”.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Check it yourself: the passbook is worth updating at the bank even if you use an
app — it is the only version that carries the bank’s own printing, and it is what you
produce as proof.

Q2 Look at the passbook in Fig. 8.7. Observe all the particulars under outflow of cash
(debit) for the expenses and inflow of cash for (credit) income. Why is keeping
records of financial transactions important? Discuss in the class.

First, what Fig. 8.7 actually shows. Here are the seven entries exactly as printed in the book,
with the debits and credits placed in their own columns.

DATE PARTICULARS CHEQUE DEBIT CREDIT END
NO. (OUT) (IN) BALANCE

13.01.25 TRF/company salary 10500.00 15000.00
account

17.01.25 TRF/1252/payment of 10523 6000.00 9000.00
rent

28.01.25 UPI/DR/Regal cinema 1500.00 7500.00

29.01.25 UPI/DR/Coffee house 400.00 7100.00

03.02.25 Cash deposit self 500.00 7600.00

15.02.25 SMS Charges 12.00 7588.00

31.03.25 Interest credit 1327.00 8915.00

Check the balances yourself — every line follows from the one above it:

Page 11 of 39

Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Before the salary: ₹15,000 − ₹10,500 = ₹4,500

₹15,000 − ₹6,000 (rent) = ₹9,000

₹9,000 − ₹1,500 (cinema) = ₹7,500
₹7,500 − ₹400 (coffee house) = ₹7,100

₹7,100 + ₹500 (cash deposit) = ₹7,600

₹7,600 − ₹12 (SMS charges) = ₹7,588

₹7,588 + ₹1,327 (interest) = ₹8,915

Total debits ₹7,912 · total credits ₹12,327

Read across the page and the account tells a small life story: one salary in, rent out by cheque,
two UPI spends on outings, a little cash added back, a ₹12 service charge — and, on 31 March,
the bank’s own interest credit of ₹1,327.
Why keeping records matters

You can see where the money went. ₹1,900 went on the cinema and coffee house in two
days. Nobody notices that without a record.
It is proof. A rent paid, a fee paid, a scholarship received — the passbook proves it with the
bank’s own entry, cheque number and date.
It catches mistakes and fraud. An entry you do not recognise is the first sign that
something is wrong. The chapter’s warning about frauds on page 210 depends on people
noticing exactly this.
Small charges become visible. ₹12 of SMS charges looks like nothing; twelve months of it is
₹144.
It lets you plan and borrow. A bank looks at how regularly money comes in and goes out
before giving a loan; a business must keep such records to know whether it is making a
profit.

Why it happens: memory is a poor accountant. We remember the salary and forget
the ₹400. A record removes the argument entirely, because the balance after every
line is arithmetic, not opinion — which is why every business, every temple that lent
money in ancient India, and every bank today has kept written accounts.

In-text Question — Page 201

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

End of ‘Other Financial Institutions’

Q1 With numerous banks and financial institutions, it is essential to have clear rules
and regulations that everyone follows. But who sets these regulations?

The Reserve Bank of India — India’s central bank, and the “banker to banks”.
The chapter’s account of it:

“The Reserve Bank of India (RBI) is the bank that supervises the Indian banking system. It is
also called India’s central bank.” Several countries have such central banks.
It was established in 1935 and performed some of the functions of a central bank. After
Independence the RBI was transferred to the Government of India, and has been
functioning as the banker of banks, the central bank, since 1949.
It “maintains accounts of other banks and facilitates exchange of funds between them”, and
“provides loans to banks and the government”.

The rules it sets (page 202) concern:

AREA WHAT THE RBI DECIDES

Currency Printing and distributing Indian currency like banknotes

Interest Fixing the benchmark interest rate — “the base interest rate that the RBI fixes for lending money
rates to commercial banks”

Why it happens: the benchmark rate is the base on which every other rate is built. If
the RBI lends to a bank more cheaply, the bank can lend to Rima more cheaply, and
it can also afford to pay Navdeep a little more on his deposit. One rate at the top
therefore moves rates all across the country — which is why it must be set by an
institution answerable to the nation and not by any single bank.

Did you know? The entrance of the RBI office in Delhi is flanked by statues of a
yakṣha and a yakṣiṇi. In Hindu mythology yakṣhas are demigods who guard the
treasures of Kubera, the God of Wealth — a fitting image for the one institution with
the sole right of issuing currency.

THINK ABOUT IT — Page 202

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Temples as the banks of ancient India
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em.
m as
THINK ABOUT IT

.co a g l
s m India, temples acted like banks. Although they did not accept public
eancient
gl aIn
a
Q1
deposits like modern banks, they lent money to artisans, merchants, and the local
government for building infrastructure. Contracts between the temples and the

co m
. ag
concerned party were etched on copper plates. These have survived to give us a
glimpse of how they functioned. em
g l as
a

. c om
The point to think about is that the idea of credit is very old in India — only the institution
m does, and did
has changed. A temple in ancient India did one of the two things a modernebank
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o same spirit.
it in muchcthe gl a
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a s em
agl ANCIENT TEMPLE MODERN BANK

m a s
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Took deposits No — the chapter is careful to say they “did not accept public Yes — deposits are the

m
from the deposits like modern banks”. Their funds came from offerings, bank’s main source of
public? endowments and grants
l a se money

Lent money? a g
Yes — to artisans, merchants and the local government Yes — to individuals,

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businesses and the

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government

m l a seHouses, vehicles,
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For what? Craft and trade, and “for building infrastructure”

a s em education, machinery, raw

agl materials

Charged Yes — the Kodumbalur inscription records an agreement to Yes
se m
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interest? pay interest

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ase
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Where the Etched on copper plates (Fig. 8.11, Pandya kingdom) Loan documents, and
terms were entries in a passbook
written

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Why it happens: a lender must be three things — rich enough to lend, permanent
ag A large temple was all
.cenough to be repaid years later, and trusted by both sides.
m three. It held wealth, it was not going to disappear, and no borrower would lightly
l a se
ag break a promise made to it. Modern banks earn that same trust in a different way:
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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Did you know? Copper was chosen for these contracts precisely because it lasts. A
palm-leaf agreement would have rotted centuries ago; the copper plates are why we
can still read the terms today.

Q2 One such example is an inscription from Kodumbalur in Tamil Nadu, dating back to
the 13th century, which refers to communities that borrowed money from the
Tirumudukunramudaiya-Nayanar temple with an agreement to pay interest.

This one inscription contains every element of a modern loan. Set it beside the chapter’s
definition of a loan — “an amount borrowed from banks or financial institutions, with the
obligation to repay it with interest at a later time” — and the parts line up exactly.

PART OF A LOAN IN THE KODUMBALUR INSCRIPTION

Lender The Tirumudukunramudaiya-Nayanar temple

Borrower Communities of the locality — not one individual but a whole group, jointly responsible

Terms An agreement to pay interest

Record Cut into stone and copper, so that it could be checked by anyone, at any time

Date 13th century, in Tamil Nadu

Why historians value it. An inscription is evidence of a kind that a story is not. It was written at
the time, by the people involved, for a practical purpose — and it was meant to be public. That is
why the chapter says these plates “have survived to give us a glimpse of how they functioned”:
we are not guessing that temples lent money, we are reading their own record of it.

Why it happens: the borrowers here are communities, and that tells us something
about the risk. When a whole community stands behind a debt, the lender is far
safer than when one person does — the same logic a bank uses today when it
spreads its lending over thousands of borrowers instead of one.

In-text Question — Page 207

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

After the UPI transaction between Kumar and Piyush (Fig. 8.18)

Q1 Did you notice how effortlessly UPI allowed a digital transaction between Kumar
and Piyush?

Yes — and what makes it feel effortless is that four of the five steps happen without
either person doing anything. Fig. 8.18 sets them out in order:

STEP WHAT HAPPENS WHO DOES IT

1 Kumar scans the QR code of Piyush, a vegetable vendor, on a payment Kumar — this is the
application on his mobile phone, enters the amount to be sent, and then his only manual step
UPI PIN

2 The application sends a payment request to Kumar’s bank — the payer’s The app and the bank
bank — which forwards the request to NPCI

3 NPCI decrypts the request, verifies the user’s UPI PIN and processes the NPCI
transfer

4 Funds are received by the payee’s bank (Piyush’s) The banks

5 Piyush receives the payment in his bank account Piyush — who only has
to look at his phone

Compare that with the old way, which the chapter describes on page 206: “transferring funds
from one person’s bank account to another person’s account required filling out the cheque
with the details of the receiver, dropping it into the bank’s drop box or handing it over to a bank
official. It was time-consuming and discouraged a majority of people from using banking
services.” A vegetable vendor could never have been paid by cheque at all.
The chapter names three more reasons the system spread so fast: it worked during the COVID-
19 pandemic, when social distancing made cashless payment essential; its design is user-
friendly and available in multiple languages, so it is “accessible to everyone”; and it leaves a
record, where the cash it replaced left none.

Why it happens: the effort has not disappeared — it has moved. Verifying who you
are, checking that the money is there and settling the amount between two different
banks all still happen, but NPCI does them in a second, in the background. Good
infrastructure is precisely this: the hard part is done where the user cannot see it.

THINK ABOUT IT — Page 207

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

UPI beyond India’s borders

THINK ABOUT IT

Q1 India’s digital payment revolution is expanding rapidly across borders. Nepal was
the first country to adopt India’s UPI as a payment platform in 2022. Today, nations
such as the United Arab Emirates, France, Sri Lanka, Bhutan, Mauritius and so on
have adopted it, and more countries are increasingly showing interest. This instant,
efficient and secure system is truly India’s gift to the world of payment systems!

What is worth thinking about here is that India is exporting a system, not a product. The
facts first, as the chapter gives them:

FACT DETAIL

Who built it The National Payments Corporation of India (NPCI), which launched UPI in 2016

First country to Nepal, in 2022
adopt it

Others named United Arab Emirates, France, Sri Lanka, Bhutan, Mauritius — “and more countries are
increasingly showing interest”

Why it travels well It is “instant, efficient and secure”, and its multilingual, user-friendly design makes it
“accessible to everyone”

Why this matters for the countries that adopt it

Indian travellers and Indian workers abroad can pay, and send money home, without
cheques or costly transfer services.
Small shopkeepers in those countries get the same benefit Piyush gets — payment without
cash, without owning a card machine.
A country that adopts a ready system saves the years and cost of building its own.

Why it happens: a payment system is only as valuable as the number of people
already on it — a QR code is useless if nobody can scan it. UPI reached that scale
inside India first, and scale is what makes it worth adopting elsewhere. This is also
why the chapter calls it a gift: what is being shared is the design and the standard,
not a machine that has to be sold.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Tip: in an answer, connect this box back to the sentence on page 207 about billions
of rupees moving “every day without a record”. UPI’s real achievement is not speed
alone — it is speed with a record.

THINK ABOUT IT — Page 209
After the account of share prices, booms and crashes

THINK ABOUT IT

Q1 Why do companies issue shares, and why do people buy them? Are there any
benefits of owning shares?

Companies issue shares to raise money for their operations; people buy them to own a
piece of a company and to put their savings where they expect the value to rise. The
chapter states both sides in one sentence: “Holding stocks allows individuals to put their savings
where they expect to see an increase in their value when the share price increases; on the other
hand, issuing shares help companies raise funds for their operations.”
Start from the chapter’s own example. You own a small restaurant and want to expand it with
a variety of cuisines, but you do not have enough money. You can borrow from friends “in
exchange for a share of profits, for which they become part-owners of your business”. A share in
a company works exactly like that — “a ‘share’ is a part-ownership in a company”. If a company
is like a big chapati, each share is one piece; the more pieces you hold, the bigger your
ownership.

THE COMPANY’S SIDE THE BUYER’S SIDE

What it Funds for its operations — a new branch, Part-ownership of the company, in proportion to
gets new machines, a new product the shares held

Why this It can collect small amounts from very many A small saver can invest a small sum; the
route people instead of finding one huge lender chapter’s investment means “putting resources in
assets expected to gain value over time”

Where it The stock exchange — in India the Bombay The same place; once done with paper tickets
happens Stock Exchange, established in 1875, one of (Fig. 8.20), now by digital transactions
the oldest in the world

Benefits of owning shares, as the chapter presents them: you become a part-owner of the
company; your savings are placed where they may increase in value if the share price rises;
and it is a way of taking part in the growth of businesses without running one yourself.

Page 18 of 39

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But the chapter is equally clear about the other side. “Trading shares can bring gains or
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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

PART ITS JOB IN THE CHAPTER

Banks Hold deposits (savings, current and fixed deposit accounts) and offer loans; pay interest to
depositors and charge it from borrowers

Other financial Post offices with NSC, Kisan Vikas Patra and Sukanya Samriddhi accounts; the
institutions Industrial Finance Corporation of India; NABARD for rural development

The RBI Central bank and banker to banks — prints currency, fixes the benchmark interest rate,
supervises the whole system

Payment modes and Cash, cheques, debit cards, ATMs, POS machines, netbanking, BHIM and UPI
systems

Stock market Where shares are issued and traded, at a stock exchange such as the BSE

2. The flow of money — the chapter names three groups, and the flow runs between all of
them:

People → deposit savings → banks → lend → businesses

Businesses → pay wages → people; people pay for goods → businesses

Government → transfers wages and scholarships straight into accounts

People and businesses → pay taxes → government → builds infrastructure

“Smooth” is the important word. Every one of these steps used to be slow — a cheque had to be
carried to a bank, wages had to be handed out in cash through a middleman. The chapter’s
examples of smoothness are UPI (instant transfer by QR code) and the Jan Dhan Yojana (direct
transfers that “reduced middlemen and ensure the timely disbursement of funds”).

Q2 It also promotes savings, credit and investment that boosts economic activity, and
ultimately contributes to the nation’s prosperity.

Three words carry this sentence — savings, credit and investment — and the chapter has
shown each of them at work.

Page 20 of 39

Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

WORD HOW FINANCIAL INFRASTRUCTURE THE CHAPTER’S EXAMPLE
PROMOTES IT

Savings A bank keeps money safe and pays interest on it, so ₹1000 at 6% grows to ₹1060, then
saving becomes worth doing. “Through this, banks ₹1123.60, and to ₹2012.20 in 12 years
encourage individuals to save.” by compounding

Credit Those savings are lent onward to people who need Rima borrows for her bamboo
money before they have earned it business; farmers borrow to expand
their agricultural activities

Investment Money is placed “in assets expected to gain value over Shares issued on the Bombay Stock
time” — and companies get the funds they need Exchange; NABARD funding rural
roads and irrigation

And then economic activity. Rima’s loan buys bamboo, which is income for the bamboo seller;
she makes products, which she sells; she employs help and repays the loan with interest, which
lets the bank lend again. Each rupee that goes through this loop is counted more than once as
somebody’s income — which is what “boosts economic activity” means.

Why it happens: prosperity is not the same as having money; it is money being
used. A country whose savings lie in cupboards is poorer than a country with the
same savings flowing through banks, because in the second country the same
money is also building a workshop, a road and a school. Financial infrastructure is
what keeps money moving, and this is why the chapter places it beside roads and
railways as infrastructure.

Questions and activities — Pages 211–212
End-of-chapter exercise

Q1 What is financial infrastructure? How does it complement physical infrastructure?

Financial infrastructure is the network of banks, payment systems, stock markets and
other financial institutions that help people, businesses and the government carry out
financial transactions and manage money (page 194).
How it complements physical infrastructure — the two need each other, and the chapter
shows this in three ways.

Page 21 of 39

Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

PHYSICAL INFRASTRUCTURE FINANCIAL INFRASTRUCTURE (THIS
(CHAPTER 19) CHAPTER)

What it Goods, people, electricity, water, Money
moves messages

Made of Roads, bridges, railways, pipelines, Banks, payment systems, stock exchanges, the RBI
telecom towers

Examples NH44, the Dhola Sadiya bridge, metros, Savings and loan accounts, UPI, the Bombay Stock
ports Exchange, NABARD

1. Financial infrastructure pays for physical infrastructure. This is the question the chapter
opens with — “how is the development and maintenance of the vast physical infrastructure
funded?” The answer runs through banks, the RBI’s loans to the government, institutions like
NABARD (which funds “infrastructure like roads and irrigation”) and taxes.
2. Physical infrastructure carries financial infrastructure. UPI needs mobile networks and
internet; an ATM needs electricity and a road to reach it; a post office savings scheme needs
the postal network that reaches “even in remote locations”.
3. Together they complete a transaction. A farmer’s tomatoes reach the market by road —
that is physical. He is paid for them by UPI and takes a loan for next season’s seed — that is
financial. Remove either one and the sale does not happen.

Why it happens: every economic act has two sides — something goes one way and
money goes the other. Physical infrastructure carries the first, financial infrastructure
the second. That is why they are called complements: neither is useful alone, and a
country needs both to grow.

Q2 How does having a bank account help people? Should everyone be required to have
a bank account?

A bank account turns money from something you merely hold into something you can
keep safe, grow, prove, move and borrow against.
How it helps, in the chapter’s own examples

Safety. Navdeep’s ₹3000 in a cupboard “might not be safe”; in an account it cannot be stolen
or lost.
Growth. A savings account earns interest — quarterly, monthly or annually — and with
compounding the interest itself earns interest.
A record. The passbook (Fig. 8.7) keeps every receipt and payment with a date and a
running balance.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Access to credit. Farmers borrow “to start a small business or expand their agricultural
activities”; Rima borrows for her bamboo business.
Direct benefit transfers. Workers receive wages directly into their accounts and good
students receive scholarships into theirs — which “reduced middlemen and ensure the
timely disbursement of funds”.
Easy payments. An account is the gateway to a debit card, an ATM, netbanking and UPI.

Should everyone be required to have one? Both sides can be argued, and a good answer
takes a clear position.

FOR UNIVERSAL ACCOUNTS POINTS TO WEIGH

Without an account a person cannot receive wages, Some people live far from a branch, or may find
scholarships or government benefits directly, and must forms and PINs difficult — access must come
depend on middlemen with help, not only with a rule

Cash leaves no record; the chapter notes that billions of Digital accounts bring exposure to fraud, which
rupees moved daily “without a record” is why the chapter devotes a whole section to
staying safe

The Jan Dhan Yojana removed the two real barriers — An unused account helps nobody; what matters is
minimum balance and fees — and over 50 crore accounts that people can and do use it
followed, mainly opened by women

A reasoned position: the chapter’s evidence suggests that everyone should be able to have a
bank account and should be encouraged to open one, because so many benefits now arrive
only through an account. The Jan Dhan experience shows that when the barriers were removed,
people came forward in crores without being forced. So the sensible aim is universal access — a
branch, post office or banking point within reach, no minimum balance, no fees, and help in
using it — rather than compulsion.

Q3 What could be the possible advantages and disadvantages of compound interest for
savers and borrowers?

Compounding is the same rule seen from two sides: it makes a saver’s money grow faster,
and it makes a borrower’s debt grow faster. The chapter defines it as “earning interest on
previous interest”.
See it working first — the chapter’s own example, recomputed year by year:

Page 23 of 39

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

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Year 1: 6% of ₹1000 = ₹60 → balance ₹1060
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amount it is charged on keeps rising. Had the interest been paid only on the original ₹1000 each

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year, twelve years would have given ₹1000 + (12 × ₹60) = ₹1720. Compounding adds ₹292.20
more.
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or held at the start. Whichever side of the loan you stand on, the sum keeps re-

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doubling one grain of rice looks harmless on square one and is over 210 crore
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crore, which is the “over 210 crore” the chapter mentions.

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Q4 How does financial infrastructure enable the flow of money between households
and businesses? Can you think of how the government can facilitate this flow?

It closes the circle: money leaves households as savings and comes back to them as
wages, and financial infrastructure is what carries it both ways.
The flow, step by step

Households earn wages → deposit the surplus in a bank

The bank lends those deposits to a business as a loan

The business buys raw material and machinery, and employs people

The business pays wages — into bank accounts
Households spend by cash, cheque, debit card or UPI, at the business

The business repays the loan with interest; the bank pays interest to households

Each arrow needs a specific piece of financial infrastructure. The deposit needs an account; the
loan needs a bank willing to lend and reserve money to lend it from; the wage payment and the
shopping need payment systems; and if the business wants money it need not repay, it can
issue shares on a stock exchange and households can buy them.
How the government can facilitate this flow — using what this chapter shows:

Bring everyone inside the system. The Pradhan Mantri Jan Dhan Yojana (2014) gave
accounts without a minimum balance or fees; over 50 crore accounts followed.
Build the payment rails. The NPCI launched UPI in 2016; the BHIM app runs on it. Transfers
that once took a cheque and a trip to the bank are now instant.
Pay people directly. Wages and scholarships credited straight into accounts, which “reduced
middlemen and ensure the timely disbursement of funds”.
Regulate through the RBI. Supervising banks, issuing currency and fixing the benchmark
interest rate keeps the system trustworthy — and trust is what makes people deposit at all.
Fund the sectors banks may neglect. NABARD for farming, village industries, roads and
irrigation; the Industrial Finance Corporation of India for power and textiles; post office
schemes reaching remote locations.
Protect users. The cybercrime helpline 1930 and the National Cybercrime Reporting Portal,
so that fear of fraud does not push people back to cash.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Q5 What could be the reason for the higher interest rate earned on fixed deposits as
compared to a savings account?

Because a fixed deposit gives the bank something a savings account does not — certainty
about how long it can keep the money.
Set the two accounts side by side, exactly as Fig. 8.4 describes them:

SAVINGS ACCOUNT FIXED DEPOSIT ACCOUNT

The deposit Money can be added or withdrawn A one-time deposit kept for a fixed
period, “like 3 or 5 years”

What the bank Nothing for certain — the depositor may Exactly how much it has and for
knows withdraw within the monthly limits at any time exactly how long

What the bank Must keep more of it ready to be paid out Can lend it for a long term — a house
can do with it loan, a factory’s machinery

Interest Lower Higher — “usually higher than what a
savings account offers”

Two reasons follow from that.

1. The bank can lend it for longer, and long loans earn more. Money that may be withdrawn
next week cannot be lent for five years. A fixed deposit can, so it earns the bank more — and
the bank shares more of it back.
2. The depositor gives up something. In a savings account you keep the freedom to take your
money out; in a fixed deposit you surrender it for the agreed period. The extra interest is the
reward for that.

Why it happens: remember the rule the chapter gives in DON’T MISS OUT — a bank
earns the difference between what it charges borrowers and what it pays depositors.
Anything that makes the bank’s job easier or safer widens what it can afford to pay.
Certainty of time is exactly such a thing, which is why the same bank pays one rate
on a savings account and a higher one on a five-year deposit. It is also why the
current account — the most flexible of the three — pays no interest at all.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Q6 Sahil received ₹10,000 as a prize in a poster-making competition. His father
promises to pay him 12 per cent interest per year if he does not spend the amount.
After 3 years, how much money would Sahil have?

₹14,049.28 after three years, if the interest compounds the way the chapter’s own ₹1000
example does. The condition “if he does not spend the amount” is the same condition the
chapter attaches to compounding, so the interest is added to the amount each year and the
next year’s 12% is charged on the new total.

Year 1: 12% of ₹10,000 = (12/100 × 10000) = ₹1,200

Amount after year 1 = ₹10,000 + ₹1,200 = ₹11,200

Year 2: 12% of ₹11,200 = (12/100 × 11200) = ₹1,344

Amount after year 2 = ₹11,200 + ₹1,344 = ₹12,544

Year 3: 12% of ₹12,544 = (12/100 × 12544) = ₹1,505.28

Amount after year 3 = ₹12,544 + ₹1,505.28 = ₹14,049.28

Total interest earned = ₹14,049.28 − ₹10,000 = ₹4,049.28.
Notice the interest rising each year — ₹1,200, then ₹1,344, then ₹1,505.28 — for exactly the
reason the chapter gives on page 197: “you earn an interest not just on the original amount…
but on the amount including interest earned in previous years”.

Check it yourself: if instead the ₹1,200 were paid out to Sahil each year and only the
original ₹10,000 kept earning, he would have ₹10,000 + (3 × ₹1,200) = ₹13,600.
Compounding gives him ₹449.28 more over the same three years at the same rate.
The chapter teaches compounding, so ₹14,049.28 is the answer expected here —
but write one line saying which way you have taken it, as done above.

Q7 How does the stock market help mobilise the savings of individuals? In what ways
do companies benefit by issuing shares to people?

The stock market “mobilises” savings by giving small savers a place to put money into
companies that need it — turning idle household savings into business capital.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

1. How individuals’ savings are mobilised

A share is “a unit of ownership in a company, representing a portion of its capital stock”.
Buying one makes you a part-owner — “if a company is like a big chapati, its each share is
one piece”.
Because ownership is cut into small pieces, a person with modest savings can take part. You
do not need to be rich enough to fund a whole company.
The chapter defines investment as “putting resources in assets expected to gain value over
time” — and “holding stocks allows individuals to put their savings where they expect to see
an increase in their value when the share price increases”.
The actual buying and selling happens at a stock exchange — in India the Bombay Stock
Exchange, established in 1875, one of the oldest in the world. Once done by hand with
paper tickets (Fig. 8.20), it is now digital, so anyone with an internet connection can take part.

2. How companies benefit

BENEFIT WHAT IT MEANS

Funds for operations “Issuing shares help companies raise funds for their operations” — new machinery, a
new branch, a new product

Many small sums instead Like the restaurant owner in the chapter who borrows from several friends “in
of one large one exchange for a share of profits”, rather than finding one person with the whole
amount

No fixed repayment date Unlike a loan, which must be repaid with interest after a specified period,
shareholders become part-owners and share in the company’s fortunes

Growth follows the With funds raised, the company can expand — and if it does well, its share price
money rises, which is what its shareholders were hoping for

Why it happens: savings and business needs are mismatched in size. One
household saves a few thousand rupees; one factory needs a few crore. Dividing
ownership into shares solves the mismatch from both ends — the company adds up
many small amounts, and the saver risks only a small amount. The chapter is careful
to add the other side of this: share prices “rise and fall”, and trading “can bring gains
or losses”.

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How the fraud actually works (page 210). Fraudsters trick people “through fake calls or
messages to download harmful apps
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phone
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debit card PINs on devices taken over or lost

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agl And if it still happens: “report via helpline 1930 or the National Cybercrime Reporting Portal”
(cybercrime.gov.in). Reporting quickly matters, and it also warns others.
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given to a stranger, never left lying about. Check the passbook or app history regularly, so an
unfamiliar entry is noticed early. And the responsibility is shared: users stay alert, banks and
NPCI keep the system secure, and the government provides the helpline and the reporting
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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Q9 Ask your family members or neighbours about— how they save money? whether
they use UPI, ATM or cheques, the kinds of transactions they perform through UPI;
do they find UPI better than using cash or not, and why. if they or their
acquaintance have experienced digital fraud, for instance, through a fake call or
message asking for bank details. What did they do when they realised it was a
scam, and what did they learn from that experience? Summarise your findings in a
table or short report. Share one surprising insight with your class.

This is a field survey, so the answer must be your own findings. Here is the method, what a
good report must contain, and a model you can adapt.
Method

1. Pick five to eight people of different ages — a grandparent, a parent, an older cousin, a
shopkeeper, a neighbour. Age is the variable that will show the sharpest differences.
2. Ask permission first, and promise not to write down any account number, PIN or name they
wish kept private. Record habits, not details.
3. Use the same three questions for everyone, in the same order, so the answers can be
compared.
4. Write the answers down during the conversation, not afterwards from memory.
5. Put everything into one table, then write three or four sentences of what the table shows.

What a good report must contain

One row per person, with age group — the pattern only appears when the rows are
compared.
How they save: savings account, fixed deposit, post office scheme (NSC, Kisan Vikas Patra,
Sukanya Samriddhi), cash at home, gold, a chit fund.
What they use: UPI, ATM, cheque, cash — and for which kind of payment (vegetables, rent,
school fees, sending money to relatives).
Their reason for preferring UPI or cash, in their own words.
Fraud experience, if any: what the fake call or message said, what they did on realising,
whether they reported it, what they learnt.
One surprising insight at the end, in a single sentence.

Sample answer:

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

PERSON HOW THEY WHAT THEY UPI BETTER FRAUD EXPERIENCE
SAVE USE THAN CASH?

Grandmother, Post office Passbook and Prefers cash — None; does not answer
68 savings and a 5- cash; a cheque “I can see what unknown calls
year fixed for the electricity is left”
deposit bill

Father, 44 Savings account UPI, ATM, Yes — no need Got an SMS about a
and a recurring netbanking; to keep change, “blocked account”;
monthly saving cheque for the and every ignored it
house rent payment is
recorded

Mother, 41 Fixed deposit UPI for the Yes — the None
and a Sukanya vegetable seller, vendor gets
Samriddhi milkman and exact payment
account school fees instantly

Neighbour, 35 Current account UPI QR code at Yes — but keeps A caller claimed his QR
(shopkeeper) for the shop, the counter, ATM some cash for code needed “re-
savings account twice a month customers who activation” and asked for
at home ask for it an OTP; he refused and
called his bank

Cousin, 19 Savings Only UPI Yes — has not Clicked an unknown link
account; saves used cash in once; the phone slowed
whatever is left months down, so the app was
of pocket deleted at once
money

What the table shows. Everyone under forty-five uses UPI for daily spending, while cash and
cheques survive mainly with the oldest person and for a few large or fixed payments. Nobody in
the group lost money, but three of the five had been approached by a fraudster — the attempt
is far more common than the loss. The shopkeeper’s reply was the best defence: he did not
argue with the caller, he called his own bank.
One surprising insight to share with the class: “My grandmother saves the largest share of
her income of anyone I asked — and she uses the least technology. Convenience makes
spending easy; it does not by itself make saving easy.”

Tip: when you present, read out one sentence in the speaker’s own words. A quoted
line convinces a class far more than a summary does.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Q10 Create a Financial Safety Poster. Design a poster with dos and don’ts of digital
banking safety (for example, not sharing OTPs, reporting frauds). Include
emergency numbers or websites like cybercrime.gov.in or 1930 helpline. Hang the
posters in school corridors or the library.

This is a making activity, so the answer is a plan and the content the poster must carry.
Method

1. Take a chart paper in landscape. Decide the one line a passer-by should remember —
everything else supports it.
2. Divide the sheet into three bands: a heading strip, two columns (DO in green, DON’T in red),
and a bottom strip for the helpline.
3. Write in large letters. A corridor poster is read from three metres away, so use at most six
points per column.
4. Draw simple symbols beside each point — a phone, a lock, a crossed-out link. Take the
chapter’s BEWARE box (Fig. 8.23) as the model.
5. Check every number and web address before writing it. A wrong helpline number on a safety
poster is worse than no poster.
6. Get permission before putting it up, and fix it where people wait — outside the office, near
the library door.

What the poster must contain — all of it straight from the chapter:

✔ DO ✘ DON’T

Keep your PIN and passwords to yourself Never share personal information — phone number, account
number, home address, passwords or OTPs — with strangers

Check your passbook or app history Don’t click unknown links or videos received through messages
regularly for entries you do not recognise

If a call or message sounds urgent, hang up Don’t store account passwords or debit card PINs on your phone or
and call your own bank computer

Cover the keypad while entering a PIN at Don’t download an app that a caller asks you to install
an ATM or POS machine

Report fraud at once Don’t stay silent out of embarrassment — delay helps the fraudster

The bottom strip, in the largest type on the poster:

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Cybercrime helpline: 1930

National Cybercrime Reporting Portal: cybercrime.gov.in

Sample answer — a poster in words:

Heading: “YOUR OTP IS YOUR MONEY. NEVER GIVE IT AWAY.”
Left column (DO), green tick: Keep PINs secret · Check your passbook · Call your bank
yourself · Cover the ATM keypad · Report immediately.
Right column (DON’T), red cross: No OTPs to strangers · No unknown links · No PINs saved
on the phone · No apps installed on a caller’s instruction.
Bottom strip, bold: “Cheated? Call 1930 or report at cybercrime.gov.in — the same day.”

Q11 Cheques are often used to pay utility bills. Ask your parents to allow you to fill out
the cheques for a few monthly payments.

This is a practice activity to be done at home under a parent’s supervision — a cheque is a
real instruction to a bank, so it must be filled with care and signed only by the account
holder.
What to fill, using the labels in Fig. 8.14

PART OF THE WHAT GOES THERE
CHEQUE

Date The date on which you wish to issue the cheque, in the DD MM YYYY boxes

Pay The name of the person or company you wish to pay — for a utility bill, the exact
name printed on the bill

Rupees The amount of money in words, ending with “only”

₹ box The same amount of money in numbers

Signature space Where the cheque issuer needs to sign — this must be the account holder, in their
bank’s signature

Already printed on the The cheque number, the issuer’s account number, and the MICR code in the MICR
cheque band at the bottom

Points to be careful about

The amount in words and the amount in figures must match exactly.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Write the name and the words close to the printed line and leave no gap that could be filled
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in later; some people rule a line through the empty space.
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Do not overwrite. If you make a mistake, tell your parent — a corrected cheque may be
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refused.
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Cheques
Note the counterfoil or keep a note of the cheque number, date, payee and amount — this

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is the record that will later appear in the passbook, exactly as the ₹6,000 rent with cheque
no. 10523 appears in Fig. 8.7.
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Sample answer (what to write in your notebook after doing it): “I filled the cheque for our
electricity bill of ₹2,450 for the month of July. I wrote the date as 05 07 2025, the payee as the

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name of the electricity company printed on the bill, ‘Two thousand four hundred fifty only’ on
co
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the Rupees line, and ‘2,450/-’ in the box. My father checked both amounts and signed it. I copied

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the cheque number, the date and the amount into a small notebook. Two days later my father
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showed me with the same

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cheque

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Why it happens: the chapter says that paying by cheque “requires physically visiting
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a bank and takes time”, while UPI is instant. Filling one yourself shows you why —
agl so that a human being at a bank can verify it, and
every detail on a cheque exists
verification by hand takes days that a digital system does in a second.

com
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Fill each blank on the slip in this order — this is the specimen printed as Fig. 8.24, which is
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already filled in for exactly ₹10,000.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

FIELD ON THE SLIP WHAT YOU WRITE AS SHOWN IN
FIG. 8.24

Branch (शाखा) The name of your bank branch. The AABBC DDEEF
slip notes it is “Usable at Base
Branch Only”

Date (िदनांक ) The day you are making the 00/00/0000
withdrawal

Pay to self / us the sum of Rupees The amount in words, ending with TEN THOUSAND
“only” RUPEES ONLY

The ₹ box, and the figure at the start of the line The same amount in figures ₹ 10,000/-

Savings Bank A/c No. Your account number, one digit per 000000XXXX
box XXXXXX

Name(s) of A/c Holder(s) Your full name as it appears in the AAAAA BBBBB
bank’s records CCCCC

Signature of A/c Holder Your signature, matching the one A.B.Ccccc
the bank has on record

For Office Use — Trans ID, Token No., Pay to Leave blank. The bank’s own staff Empty in the
Sh./Smt./Ms., Signature of Passing Officer, fill these in specimen
Signature of Paying Official

Then: take the slip with your passbook to the cash counter, hand it in, wait for your token
number, and collect ₹10,000 at the counter. The slip carries a printed warning worth noticing —
“This Form is not a Cheque”: it only lets you draw your own money, it cannot be used to pay
anybody else.

Amount in figures: ₹10,000/-
Amount in words: Ten thousand rupees only

Both must say the same thing — the bank will refuse the slip if they differ

Tip: the other route to the same ₹10,000 is the ATM, and Fig. 8.13 numbers those
four steps — 1 insert card, 2 type the amount to be withdrawn, 3 input the PIN, 4
collect the cash. The slip needs your signature; the ATM needs your PIN. Both are
ways of proving that the person asking for the money is the account holder.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Chapter at a glance
Financial infrastructure is “a network of banks, payment systems, stock markets, and
other financial institutions that help people, businesses, and the government
facilitate financial transactions and manage money”. Chapter 19 was about physical
infrastructure — roads, railways, telecom. This chapter is about the money side. Physical
infrastructure moves goods and people; financial infrastructure moves money, and also
pays for the physical infrastructure itself.
A bank has two faces, and they are joined. It holds deposits — money people put in, kept
safe and earning interest — and it offers loans out of that same money. Navdeep deposits
₹3000 of his salary; Rima, who makes bamboo products, borrows what she needs. The bank
stands between them. It offers three kinds of accounts: a savings account (earns interest,
limits on withdrawals each month), a current account (for businesses and traders, no
interest, no limit on transactions) and a fixed deposit account (one-time deposit for 3 or 5
years, higher interest).
Interest works on both sides, and the gap is the bank’s income. Anand deposits ₹200 at
2%; the bank lends that ₹200 to Shreya at 5%. Shreya repays ₹200 + ₹10 = ₹210; Anand
receives ₹200 + ₹4 = ₹204; the bank keeps ₹6 (Fig. 8.8). The chapter adds an important
caution: banks keep reserve money and do not lend out all the deposits.
Compounding is the “magic” in the chapter’s title. ₹1000 at 6% becomes ₹1060 after one
year. In the second year the 6% is charged on ₹1060, not on ₹1000, so the interest rises
from ₹60 to ₹63.60 and the balance to ₹1123.60. Keep going for 12 years and ₹1000
becomes ₹2012.20 — it has doubled. The story of the Ambalappuzha king and the sage says
the same thing with rice grains: doubling reaches 128 grains on the 8th square, 32,768 on
the 16th and over 210 crore on the 32nd.
The Reserve Bank of India is the banker to banks. Set up in 1935, transferred to the
Government of India after Independence and working as India’s central bank since 1949,
the RBI keeps the accounts of other banks, lends to banks and to the government, prints
and distributes currency, and fixes the benchmark interest rate. Other institutions serve
special needs: post offices (NSC, Kisan Vikas Patra, Sukanya Samriddhi), the Industrial
Finance Corporation of India for power and textiles, and NABARD for farming, village
industries and rural roads and irrigation.
Payments have moved from paper to the phone. A cheque pays from your account but
needs a visit to the bank; debit cards withdraw cash at ATMs and pay at POS machines;
netbanking and mobile apps like BHIM transfer money instantly. UPI, launched by the
NPCI in 2016, made this ordinary — a QR code, an amount, a UPI PIN, and the money is in
Piyush’s account. Nepal was the first country to adopt UPI, in 2022. Alongside sit the
stock market, where a share is part-ownership of a company, and the duty to guard against
fraud — never share an OTP, and report fraud on helpline 1930 or at the National
Cybercrime Reporting Portal.

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

Quick revision

TERM OR FACT WHAT IT MEANS WHERE IT WORTH REMEMBERING
APPEARS IN
THE CHAPTER

Financial A network of banks, payment systems, Page 194, The money-side twin of the
infrastructure stock markets and other financial opening physical infrastructure of
institutions that help people, businesses Chapter 19
and the government carry out financial
transactions and manage money

Bank A financial institution that collects Margin note, Two faces of one business:
money from people in the form of page 194 take in and lend out
deposits and lends money to people or
borrowers as loans

Deposits Money placed in a bank account that Margin note, Your deposit does not sit idle
can be withdrawn as per the terms of the page 196 — it is lent to someone else
bank and often earns interest

Savings account For individuals who save regularly and Fig. 8.4, page Earns interest, but
earn interest; opens with a minimum 196 withdrawals are capped
deposit; limits on how often money can
be withdrawn each month

Current account For businesses and traders who often Fig. 8.4, page No interest — you are paying
make and receive payments; earns no 196 for freedom of movement
interest; generally no limit on deposits
or withdrawals

Fixed deposit A one-time deposit kept for a fixed Fig. 8.4, page Locked money earns more,
account period like 3 or 5 years; the bank returns 196 because the bank can plan on
the original amount plus interest, it
usually higher than a savings account

Interest The amount charged for borrowing Margin note, Paid to depositors and
money, or gained by lending money, page 197 charged from borrowers
usually expressed as a percentage

Compounding Earning interest on the interest already Page 197 ₹1000 at 6% → ₹1060 →
earned in previous years ₹1123.60 → … → ₹2012.20 in
12 years

Quarterly Occurring four times a year, at the end Margin note, One of the periods over
of every three months page 197 which banks pay interest

Loan An amount borrowed from banks or Margin note, A house, a vehicle, education;
financial institutions, with the obligation page 199 machinery and raw material

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Class 7 Social Science Chapter 20 Banks and the Magic of Finance AglaSem · NCERT Solutions

TERM OR FACT WHAT IT MEANS WHERE IT WORTH REMEMBERING
APPEARS IN
THE CHAPTER

to repay it with interest at a later time for a business

The bank’s Banks pay a lower rate to depositors DON’T MISS ₹210 repaid − ₹204 paid out =
income and charge a higher rate to borrowers; OUT, page 199 ₹6 earned; banks also keep
the difference is their income and Fig. 8.8, reserve money
page 200

Debit and credit Debit is taking money out of an account; Margin note, In Fig. 8.7 the salary of
credit is receiving money in an account page 198; Fig. ₹10,500 is a credit; the ₹6000
8.7 rent is a debit

Passbook A diary-like document from the bank Page 198 Your own written proof of
that keeps a record of all receipts and every rupee in and out
payment transactions, updated at the
bank

Pradhan Mantri 2014 scheme giving every Indian, Page 200 15 crore account holders
Jan Dhan Yojana especially low-income earners, a bank before 2014 → over 50 crore
account with no minimum balance or accounts since, mainly
fees women

Reserve Bank of India’s central bank — the bank that Page 201 Established 1935; central
India (RBI) supervises the Indian banking system bank of independent India
and is banker to the banks since 1949

Benchmark The base interest rate that the RBI fixes Margin note, RBI also prints and
interest rate for lending money to commercial banks page 202 distributes banknotes

NABARD National Bank for Agriculture and Rural Page 201 Post offices, IFCI and
Development — funds banks that lend NABARD reach where
for farming, village industries, roads and ordinary banks may not
irrigation

Payment system A mechanism that allows the clearing Margin note, Cash, cheque and debit card
and settlement of financial transactions page 203 are modes; UPI is a system
so individuals, businesses and
organisations can transfer funds

UPI and NPCI Unified Payments Interface, launched Pages 206–207 Nepal adopted it first, in
by the National Payments Corporation 2022; UAE, France, Sri Lanka,
of India in 2016, transfers funds Bhutan, Mauritius followed
instantly using a QR code or phone
number

Share and stock A share is a unit of ownership in a Pages 207–208 Bombay Stock Exchange,
exchange company; the buying and selling of 1875 — one of the oldest in

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TERM OR FACT WHAT IT MEANS WHERE IT WORTH REMEMBERING

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APPEARS IN

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THE CHAPTER
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shares takes place at a stock exchange the world

Stock market Share prices of many companies rising Figs. 8.21 and Causes: company

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boom and crash together is a boom; falling together is a 8.22, page 209 performance, new laws, tax

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crash rules, political instability,

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wars, economic shocks

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A One-Time Password is a temporary Page 210 Never share it — an OTP

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1930 code used to verify identity or authorise given away is money given

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a transaction; frauds are reported on away

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helpline 1930 or the National
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Cybercrime Reporting Portal
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