NCERT Solutions for Class 7th Social Science Chapter 20 End-of-chapter exercise — Questions and activities

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.

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.

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.
• 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.

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.

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:

Notice that the yearly interest itself keeps rising — ₹60, then ₹63.60, then ₹67.42 — because the amount it is charged on keeps rising. Had the interest been paid only on the original ₹1000 each year, twelve years would have given ₹1000 + (12 × ₹60) = ₹1720. Compounding adds ₹292.20 more.

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

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.

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:

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.

₹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.

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”.

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.

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

By keeping the convenience and removing the one thing frauds depend on — a careless user. The chapter is clear that digital payments “have made life easier, but users must beware of fraud and scams”. It does not ask us to go back to cash; it asks us to use the system properly.

How the fraud actually works (page 210). Fraudsters trick people “through fake calls or messages to download harmful apps or mislead people into sharing bank details or One-Time Passwords (OTPs)”. That gives them access to the person’s mobile or computer, “enabling them to steal personal data from the device and draining money from the bank accounts”. Notice that in every step it is the user who is tricked into opening the door — the payment system itself is not broken into.

The chapter’s three rules — the BEWARE box, Fig. 8.23

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.

The balance, stated as an answer: keep using UPI, cards and netbanking for their speed and their record, but treat the PIN and the OTP the way you would treat cash in your hand — never 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 portal.

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:

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.”

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:

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

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.”

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

Points to be careful about

• The amount in words and the amount in figures must match exactly.
• Write the name and the words close to the printed line and leave no gap that could be filled in later; some people rule a line through the empty space.
• Do not overwrite. If you make a mistake, tell your parent — a corrected cheque may be refused.
• Cheques are “valid for 3 months only”, as printed on the specimen in Fig. 8.14.
• Note the counterfoil or keep a note of the cheque number, date, payee and amount — this 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.

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 name of the electricity company printed on the bill, ‘Two thousand four hundred fifty only’ on the Rupees line, and ‘2,450/-’ in the box. My father checked both amounts and signed it. I copied the cheque number, the date and the amount into a small notebook. Two days later my father showed me the entry in the bank app — the same amount had been debited, with the same cheque number. I understood why the passbook has a separate ‘cheque no.’ column: it is how one particular payment can be traced later.”

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

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.