Very Short Answer Questions: Bank and the Magic of Finance

Q1: What is financial infrastructure?

Ans: 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.

Q2: What is a bank?

Ans: A bank is a financial institution that collects money from people in the form of deposits and lends money to people or borrowers as loans.

Q3: What are deposits?

Ans: Deposits are money placed in a bank account that can be withdrawn as per the bank's terms and often earns interest over a regular period.

Q4: What is interest?

Ans: Interest is the amount charged for borrowing money or the amount gained by lending money, usually expressed as a percentage of the principal amount.

Q5: What type of account is a savings account?

Ans: A savings account is for individuals who save regularly and earn interest on such savings. It opens with a minimum deposit and allows money to be added or withdrawn.

Q6: What is a current account used for?

Ans: A current account is for businesses and traders who often make and receive payments. It doesn't earn interest and generally has no limits on deposits or withdrawals.

Q7: What is a fixed deposit account?

Ans: A fixed deposit account is a one-time deposit kept for a fixed period, like three or five years. After that time, the bank returns the original amount plus interest.

Q8: What is compounding?

Ans: Compounding is earning interest not just on the original amount but on the amount including interest earned in previous years. This helps money grow exponentially over time.

Q9: What is a passbook?

Ans: A passbook is a diary-like document that the bank provides to keep a record of all receipts and payment transactions. It can be updated regularly at the bank.

Q10: What is a loan?

Ans: A loan is an amount borrowed from banks or financial institutions, with the obligation to repay it with interest at a later time for specific purposes.

Q11: How do banks earn money?

Ans: Banks pay lower interest rates on savings deposits to depositors and charge higher interest rates on loans to borrowers. This difference in interest rate is their income source.

Q12: What was the Pradhan Mantri Jan Dhan Yojana?

Ans: Pradhan Mantri Jan Dhan Yojana was launched in 2014 to give every Indian, especially low-income earners, access to a bank account with no minimum balance or fees required.

Q13: What is the Reserve Bank of India?

Ans: The Reserve Bank of India is the bank that supervises the Indian banking system. It is also called India's central bank and has been functioning as banker to banks since 1949.

Q14: What does the RBI do?

Ans: The RBI maintains accounts of other banks, facilitates exchange of funds between banks, provides loans to banks and the government, and sets rules regarding printing currency and fixing benchmark interest rates.

Q15: What is a payment system?

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

Q16: What is an ATM?

Ans: An ATM is an Automated Teller Machine, a self-service machine like a mini-bank, available twenty-four hours at public places where customers can withdraw cash using their debit cards.

Q17: What is a cheque?

Ans: A cheque is a paper instrument that allows you to pay someone directly from your bank account. You write the amount, the recipient's name, and your signature for the bank to process.

Q18: How does a debit card work at a POS machine?

Ans: Customers use their debit card by swiping or inserting it into a POS machine, input the amount and enter the PIN. The amount is instantly deducted from their account.

Q19: What is UPI?

Ans: UPI is the Unified Payments Interface, a fast and secure digital payment system that enables the transfer of funds using a QR code or phone number of the recipient.

Q20: When was UPI launched in India?

Ans: UPI was launched in 2016 by the National Payments Corporation of India. It changed the way people transfer money by making digital transactions effortless and user-friendly in multiple languages.

Q21: What is a share?

Ans: A share is a unit of ownership in a company, representing a portion of its capital stock. When you buy a share, you become a part-owner of that company.

Q22: What is a stock exchange?

Ans: A stock exchange is a marketplace where financial securities like stocks are traded. The Bombay Stock Exchange, established in 1875, is one of the oldest stock exchanges in the world.

Q23: What factors affect share prices?

Ans: Share prices are affected by company performance and external factors. If a company does well, shares become more valuable. Government policy changes, wars, and economic shocks also affect prices.

Q24: What is a stock market crash?

Ans: A stock market crash is when the share prices of many companies fall simultaneously. Trading shares can bring gains or losses as their prices fluctuate due to many factors.

Q25: How can people prevent financial fraud?

Ans: People must beware of fraud and scams by not sharing bank details or OTPs through fake calls or messages. In case of fraud, report via helpline 1930 or the National Cybercrime Reporting Portal.