RBSE Guide
Social ·Class 7 Social Science

Banks and the Magic of Finance Class 7 Notes

R
RBSEGuide
· Jul 02, 2026 · Reviewed & updated Sep 17, 2026 · 4 min read

Banks and the Magic of Finance Class 7 Notes

Banks and the Magic of Finance Class 7 Notes


1. Bank: A financial institution that collects money from people in the form of deposits and lends money to people or borrowers as loans.


2. Deposit: Money placed in a bank account that can be withdrawn later. Deposits often earn interest over time.


3. Quarterly: It means occurring four times a year, at the end of every three months.


4. Interest: It is the amount charged for borrowing money or the amount gained by lending money, which is usually expressed as a percentage.


5. Debit: Taking money out of an account.


6. Credit: Receiving money in an account.


7. Loan: An amount of money borrowed from a bank or financial institution, which must be paid back later with interest.


8. Interest: The extra money paid to the bank for borrowing money (loan) or the money earned from the bank for keeping money in a savings account. It is usually expressed as a percentage.


9. Savings Account: A type of bank account where individuals can save money and earn interest. There are limits on how often money can be withdrawn.


10. Benchmark interest rate: The base interest rate that the RBI fixes for lending money to commercial banks.


11. Payment system: A mechanism that facilitates the clearing and settlement of financial transactions, allowing individuals, businesses, and organisations to transfer funds between each other.


12. PIN: A numeric code (usually 4 to 6 digits) used for authentication and security in various applications, especially for financial transactions like ATMs, debit cards, etc.


13. Borrower: A person or organisation that takes a loan from a bank or financial institution and agrees to pay it back with interest.


14. Depositor: A person who puts money into a bank account, allowing the bank to use that money for lending to others.


15. Share: A share is a unit of ownership in a company, representing a portion of its capital stock.


16. Investment: The act of putting resources in assets expected to gain value over time.


17. Stock exchange: Marketplace where financial securities like stocks are traded.


18. Economic shocks: Sudden unexpected events that cause big changes in a country's economy.


19. Tax rules: Tax is a compulsory contribution given by individuals and businesses respectively to the government on income and profit. It is also added to the cost of some goods, services, and transactions. The government sets rules regarding the payment of various taxes.


20. One-Time Password (OTP): A unique code sent to a user's mobile phone or email for verifying identity or authorising transactions. It is used to enhance security in banking transactions.


21. Financial Infrastructure

  1. A system that includes banks, payment systems, stock markets, and financial institutions.
  2. Helps individuals, businesses, and governments save, spend, invest, and borrow money.
  3. Ensures smooth flow of money in the economy.


22. Banks

  1. Banks are financial institutions that collect deposits, give loans, and facilitate transactions.
  2. Act as intermediaries between people who save money and those who need money.


23. Functions

  1. Saving: Accept deposits and pay interest.
  2. Withdrawing: Allow customers to withdraw money anytime.
  3. Borrowing: Provide loans for personal and business needs.
  4. Transactions: Enable safe transfer of money.


24. Types of Bank Accounts Savings Account

  1. For individuals to save money.
  2. Earns interest.
  3. Limited withdrawals per month.


25. Current Account

  1. For businesses and traders.
  2. Usually no interest.
  3. Unlimited transactions.


26. Fixed Deposit (FD)

  1. One-time deposit for a fixed period.
  2. Higher interest rate.
  3. Money locked until maturity.


27. Saving, Interest & Compounding

  1. Deposits: Money kept in a bank.
  2. Interest: Extra money paid by banks on savings.
  3. Passbook: Physical or digital record of deposits, withdrawals, and balance.


28. Compounding

  1. Interest is earned on both principal and previous interest.
  2. Shows how small savings grow big over time.


29. Loans and Credit

  1. Banks provide loans for homes, vehicles, education, farming, and business.
  2. Depositors get lower interest; borrowers pay higher interest.
  3. Bank profit comes from the difference between these interest rates.


30. Financial Inclusion

Jan Dhan Yojana (2014)

  1. Provides banking access to low-income people.
  2. Zero-balance accounts allowed.
  3. Over 50 crore accounts opened.

Benefits

  1. Direct transfer of wages, pensions, and scholarships.
  2. Reduced dependence on cash and middlemen.


31. Indian Post Offices

Financial Services

  1. National Savings Certificates (NSC)
  2. Sukanya Samriddhi Account for girls
  3. KisanVikas Patra that doubles investment


32. Advantages

  1. Wide network in rural and remote areas.
  2. Highly trusted for savings.


33. Other Financial Institutions

IFCI

  1. Finances large industrial projects.
  2. Supports sectors like power and textiles.


34. NABARD

  1. Focuses on rural and agricultural development.
  2. Provides loans for farming and village industries.
  3. Funds infrastructure like roads and irrigation.


35. Reserve Bank of India (RBI)

  1. Central bank of India.
  2. Regulates banks and controls money supply.
  3. Prints currency and fixes interest rates.
  4. Acts like Kubera, the manager of national wealth.


36. Ancient Banking

  1. Temples acted as banks.
  2. Loans recorded on copper plates.
  3. Shows early financial systems in India.


37. Risks and Fraud Prevention

  1. Digital payments can face fraud.
  2. Never share OTPs or passwords.
  3. Avoid unknown links and fake calls.
  4. Report fraud on 1930 or cybercrime portal.


38. Payment Modes

Cash

  1. Physical money.
  2. Immediate and widely accepted.


39. Cheques

  1. Paper-based fund transfer.
  2. Time-consuming process.


40. Debit Cards

  1. Linked to bank accounts.
  2. Used for purchases and ATM withdrawals.
  3. Protected by PIN.


41. Digital Payments

  1. UPI: Instant payments via QR code or phone number.
  2. Net Banking: Online account management.
  3. Mobile Apps: BHIM and other apps for quick payments.


42. Withdrawal Methods

  1. Withdrawal Slip: Filled at bank counter.
  2. ATM: 24/7 self-service cash withdrawal.


43. Payment Systems

  1. Systems that clear and settle transactions.
  2. Reduce cash usage and promote digital economy.


44. UPI Process

  1. User initiates payment → Bank → NPCI → Receiver gets money instantly.


45. Global Impact

  1. Adopted by Nepal, UAE, France, Mauritius.
  2. Fast, secure, and easy to use.


46. Stock Market

  1. Market where company shares are bought and sold.
  2. Like an online store, but for shares.


47. Shares

  1. Represent part ownership in a company.
  2. More shares mean more ownership.


48. Stock-Collection of shares owned by a person.

Stock Exchange

  1. Platform like BSE (1875).
  2. Shifted from paper to digital trading.


49. Price Changes

  1. Depend on company performance, economy, and government policies.
  2. Boom means rising prices; crash means falling prices.