Every time you save money, scan a QR code, or hear about loans, you are already connected to the world of finance. This chapter shows how banks and financial systems quietly support everyday life.
Chapter 8, Banks and the Magic of Finance is from the unit Economic Life Around Us in Exploring Society: India and Beyond, Grade 7 Part 2. It explains how banks collect savings, give loans, and help money move safely from one place to another. It also introduces students to digital payments, stock markets, and the role of the Reserve Bank of India.
Listed below are some of the important topics covered in the chapter 8:
- Financial infrastructure – Includes banks, payment systems, stock markets, and financial institutions.
- Banks – Collect deposits, keep money safe, and provide loans.
- Savings account – Lets people deposit and withdraw money when needed.
- Fixed deposits – Keep money for a set time and earn higher interest.
- Loans – Help people pay for homes, education, vehicles, and business needs.
- Interest – Banks pay interest on savings. On the other hand, it charges interest on loans.
- Bank income – Earned from the gap between deposit and loan interest.
- Post office savings – Offers NSC, Kisan Vikas Patra, and Sukanya accounts.
- NABARD – Supports rural development through loans for farming and infrastructure.
- RBI – Supervises banks. It acts as India’s central bank.
- 1935 – RBI was established to perform central banking functions.
- 1949 – RBI began functioning as India’s central bank under the government.
- Payment modes – Cash, cheques, debit cards, and digital systems help transfers.
- ATM use – Using debit/credit cards on can withdraw cash at any time.
- UPI – Makes digital payments quick, simple, and popular.
- Stock market – It helps companies raise money. People invest their savings here and they also make money.
- Cyber fraud – If a person is doing digital payments, they need to take care, be aware of the fraud that can affect their savings, and practice safe banking habits.
This chapter is important for students because money is part of daily life. Once students understand how banks and finance work, they can make better sense of saving, borrowing, spending, and using digital payments safely.
Practise what you have learned with these MCQ questions for Class 7 Social Science on Banks and the Magic of Finance.
Class 7 Banks and the Magic of Finance Part 2 MCQ Questions with Answers
Class 7 SST Chapter 8 Banks and the Magic of Finance Part 2 MCQ Questions
1. What is financial infrastructure?
a) A network of roads and railways only
b) A system of banks, payment systems, stock markets, and other financial institutions
c) A group of factories producing coins
d) A collection of shops and markets
Answer:
b) A system of banks, payment systems, stock markets, and other financial institutions
2. Why did Navdeep decide to deposit his money in a bank?
a) To buy shares immediately
b) To keep it safer than storing it at home
c) To avoid getting any interest
d) To close his salary account
Answer:
b) To keep it safer than storing it at home
3. What is the main role of a bank according to the chapter?
a) It only prints currency
b) It collects money as deposits and gives loans
c) It only runs stock markets
d) It only sells insurance
Answer:
b) It collects money as deposits and gives loans
4. Which type of bank account is mainly meant for individuals who save regularly and earn interest?
a) Current account
b) Fixed deposit account
c) Savings account
d) Business account
Answer:
c) Savings account
5. Which type of bank account usually has no limit on how many times money can be deposited or withdrawn?
a) Savings account
b) Current account
c) Fixed deposit account
d) Scholarship account
Answer:
b) Current account
6. In which type of account is money deposited one time for a fixed period and usually earns higher interest?
a) Current account
b) Savings account
c) Fixed deposit account
d) Salary account
Answer:
c) Fixed deposit account
7. What is compounding?
a) Taking a loan for many years
b) Earning interest on the original amount as well as previous interest
c) Depositing money in different banks
d) Paying tax on bank accounts
Answer:
b) Earning interest on the original amount as well as previous interest
8. If Rs 1000 earns 6% interest for one year, how much money will be there at the end of the first year?
a) Rs 1040
b) Rs 1050
c) Rs 1060
d) Rs 1100
Answer:
c) Rs 1060
9. What document helps account holders keep a record of receipts and payment transactions?
a) Cheque book
b) Passbook
c) Share certificate
d) Debit card
Answer:
b) Passbook
10. Why do banks charge borrowers a higher interest rate than they pay to depositors?
a) To punish borrowers
b) Because the difference is a source of income for banks
c) To avoid keeping records
d) Because depositors do not need money
Answer:
b) Because the difference is a source of income for banks
11. What was one major aim of the Pradhan Mantri Jan Dhan Yojana launched in 2014?
a) To stop digital payments
b) To give every Indian access to a bank account
c) To replace all post offices
d) To increase stock market trading
Answer:
b) To give every Indian access to a bank account
12. Which group opened a large share of Jan Dhan accounts according to the chapter?
a) Only traders
b) Mainly women
c) Only students
d) Mainly foreign citizens
Answer:
b) Mainly women
13. Which institution supports rural development by funding banks that give loans for farming, village industries, and infrastructure?
a) RBI
b) BSE
c) NABARD
d) NPCI
Answer:
c) NABARD
14. Which institution is called India’s central bank?
a) NABARD
b) RBI
c) NPCI
d) IFCI
Answer:
b) RBI
15. What is one important function of the RBI mentioned in the chapter?
a) Selling shares directly to people
b) Printing and distributing Indian currency
c) Running every ATM in India
d) Giving scholarships to students
Answer:
b) Printing and distributing Indian currency
16. What is the benchmark interest rate?
a) The tax charged on digital payments
b) The base interest rate fixed by the RBI for lending money to commercial banks
c) The rate used for stock market boom
d) The fee charged by ATMs
Answer:
b) The base interest rate fixed by the RBI for lending money to commercial banks
17. Which of the following is a payment mode mentioned in the chapter?
a) Commodity exchange
b) Cheque
c) Share market
d) Insurance bond
Answer:
b) Cheque
18. What is needed to withdraw money from an ATM using a debit card?
a) A stock certificate
b) A PIN
c) A tax receipt
d) A handwritten letter
Answer:
b) A PIN
19. What does a cheque allow a person to do?
a) Buy shares from the RBI
b) Pay someone directly from a bank account
c) Open a fixed deposit without money
d) Print new currency notes
Answer:
b) Pay someone directly from a bank account
20. What does internet banking allow account holders to do?
a) Build roads and bridges
b) Check balances, view transaction history, and transfer money
c) Print currency notes at home
d) Avoid all record keeping
Answer:
b) Check balances, view transaction history, and transfer money
21. BHIM is based on which payment system?
a) NSC
b) UPI
c) BSE
d) NABARD
Answer:
b) UPI
22. Which organisation launched UPI in 2016?
a) RBI
b) NPCI
c) NABARD
d) Post Office
Answer:
b) NPCI
23. What is a share in a company?
a) A tax paid to the government
b) A unit of ownership in a company
c) A reward given by banks
d) A type of debit card
Answer:
b) A unit of ownership in a company
24. Where does the buying and selling of shares actually take place?
a) ATM
b) Stock exchange
c) Post office
d) School bank
Answer:
b) Stock exchange
25. What should a person never share with strangers during digital transactions?
a) Favourite colour
b) OTPs and personal banking information
c) Name of school
d) Vegetable prices
Answer:
b) OTPs and personal banking information
Banks and the Magic of Finance Class 7 Part 2 Assertion-Reason Questions
1. Assertion (A): Banks encourage people to save money. Reason (R): Banks keep deposits safe and also pay interest on them.
a) Both A and R are true, and R is the correct explanation of A
b) Both A and R are true, but R is not the correct explanation of A
c) A is true, but R is false
d) A is false, but R is true
Answer:
a) Both A and R are true, and R is the correct explanation of A
2. Assertion (A): Fixed deposit accounts usually give higher interest than savings accounts. Reason (R): The money is kept in the bank for a fixed period.
a) Both A and R are true, and R is the correct explanation of A
b) Both A and R are true, but R is not the correct explanation of A
c) A is true, but R is false
d) A is false, but R is true
Answer:
a) Both A and R are true, and R is the correct explanation of A
3. Assertion (A): UPI became more popular during the COVID-19 pandemic. Reason (R): It supported cashless transactions when social distancing became important.
a) Both A and R are true, and R is the correct explanation of A
b) Both A and R are true, but R is not the correct explanation of A
c) A is true, but R is false
d) A is false, but R is true
Answer:
a) Both A and R are true, and R is the correct explanation of A
4. Assertion (A): RBI is called the banker to banks. Reason (R): It maintains accounts of other banks and facilitates exchange of funds between them.
a) Both A and R are true, and R is the correct explanation of A
b) Both A and R are true, but R is not the correct explanation of A
c) A is true, but R is false
d) A is false, but R is true
Answer:
a) Both A and R are true, and R is the correct explanation of A
5. Assertion (A): A stock market boom happens when share prices of many companies rise. Reason (R): Share prices never change once a company issues them.
a) Both A and R are true, and R is the correct explanation of A
b) Both A and R are true, but R is not the correct explanation of A
c) A is true, but R is false
d) A is false, but R is true
Answer:
c) A is true, but R is false
Banks and the Magic of Finance Class 7 Part 2 Fill in the blanks Questions
1. A bank accepts money from people in the form of __________.
Answer:
deposits
2. The extra money paid by a bank on savings is called __________.
Answer:
interest
3. Earning interest on previous interest is known as __________.
Answer:
compounding
4. Money taken out of an account is called a __________ entry.
Answer:
debit
5. Money received in an account is called a __________ entry.
Answer:
credit
6. The Pradhan Mantri Jan Dhan Yojana was launched in __________.
Answer:
2014
7. The Reserve Bank of India was established in __________.
Answer:
1935
8. The RBI fixes the benchmark __________ rate.
Answer:
interest
9. A debit card can be used to withdraw cash from an __________.
Answer:
ATM
10. OTP stands for One-Time __________.
Answer:
Password
Banks and the Magic of Finance Class 7 Part 2 True or False Questions
1. Financial infrastructure includes banks, payment systems, and stock markets.
Answer:
True
2. A savings account is mainly meant for businesses that make frequent payments and does not earn interest.
Answer:
False
3. A fixed deposit account usually offers higher interest than a savings account.
Answer:
True
4. Compounding means earning interest only on the original amount and never on earlier interest.
Answer:
False
5. Banks lend all the deposits they receive and keep no reserve money.
Answer:
False
6. Jan Dhan Yojana made banking services reach people from many walks of life.
Answer:
True
7. Indian post offices also offer financial services and savings schemes.
Answer:
True
8. NABARD mainly supports rural development.
Answer:
True
9. RBI became the central bank functioning as banker to banks after Independence from 1949.
Answer:
True
10. A cheque transfers money instantly without any bank process or time.
Answer:
False
11. UPI allows easier and quicker digital money transfers using a QR code or phone number.
Answer:
True
12. The Bombay Stock Exchange was established in 1975.
Answer:
False
13. A stock market crash happens when share prices of many companies fall at the same time.
Answer:
True
14. It is safe to share OTPs with strangers if they claim to be helping with bank work.
Answer:
False
Banks and the Magic of Finance Class 7 Part 2 Match the following Questions
Question 1
| Column A | Column B |
|---|---|
| 1. Savings account | A. One-time deposit for a fixed period |
| 2. Current account | B. Meant for regular savings with interest |
| 3. Fixed deposit account | C. Mainly for businesses and traders |
| 4. Passbook | D. Record of receipts and payment transactions |
| 5. Loan | E. Amount borrowed with repayment and interest |
Answer:
| Column A | Correct Answer |
|---|---|
| 1. Savings account | B. Meant for regular savings with interest |
| 2. Current account | C. Mainly for businesses and traders |
| 3. Fixed deposit account | A. One-time deposit for a fixed period |
| 4. Passbook | D. Record of receipts and payment transactions |
| 5. Loan | E. Amount borrowed with repayment and interest |
Question 2
| Column A | Column B |
|---|---|
| 1. RBI | A. Launched UPI in 2016 |
| 2. UPI | B. India’s central bank |
| 3. NPCI | C. Fast digital payment system |
| 4. Share | D. Unit of ownership in a company |
| 5. Stock exchange | E. Marketplace where shares are traded |
Answer:
| Column A | Correct Answer |
|---|---|
| 1. RBI | B. India’s central bank |
| 2. UPI | C. Fast digital payment system |
| 3. NPCI | A. Launched UPI in 2016 |
| 4. Share | D. Unit of ownership in a company |
| 5. Stock exchange | E. Marketplace where shares are traded |
