NCERT Solutions for Class 7th Social Science Chapter 20 The chapter in two points — Before we move on …

Book page 210 Updated on2026-09-19

Q1.

Financial infrastructure comprises financial institutions like banks, payment systems, the stock market and so on. These help with the flow of money among people, businesses, and the government by enabling smooth financial transactions.

Answer

The sentence names the parts, and then names the job they do together — the flow of money. Take the two halves separately.

1. The parts

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 institutions	Post offices with NSC, Kisan Vikas Patra and Sukanya Samriddhi accounts; the 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 systems	Cash, cheques, debit cards, ATMs, POS machines, netbanking, BHIM and UPI
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.

Answer

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

Word	How financial infrastructure promotes it	The chapter’s example
Savings	A bank keeps money safe and pays interest on it, so saving becomes worth doing. “Through this, banks encourage individuals to save.”	₹1000 at 6% grows to ₹1060, then ₹1123.60, and to ₹2012.20 in 12 years by compounding
Credit	Those savings are lent onward to people who need money before they have earned it	Rima borrows for her bamboo business; farmers borrow to expand their agricultural activities
Investment	Money is placed “in assets expected to gain value over time” — and companies get the funds they need	Shares issued on the Bombay Stock 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.

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