Banking • Topic 1 of 3

Banking Transactions

What is a Banking Transaction? A banking transaction is any activity that involves moving money into or out of a bank account. This includes depositing money, withdrawing cash, transferring funds, paying bills, or checking your account balance.

How do banks work? Banks are financial institutions that keep our money safe, give loans, and help us make payments. When you deposit money, the bank pays you interest (extra money) for keeping your funds with them. When you take a loan, you pay interest to the bank.

Common Banking Transactions:

  • Deposit: Adding money to your account (cash or cheque)
  • Withdrawal: Taking money out (ATM, cheque, or bank teller)
  • Transfer: Moving money between accounts (NEFT, RTGS, IMPS)
  • Cheque: A written instruction to pay a specific amount
  • Online payment: Paying bills or shopping using internet banking
  • ATM transaction: Using a debit card to withdraw cash or check balance

Important Banking Terms:

  • Principal (P): The amount of money deposited or borrowed
  • Interest: Extra money earned or paid for using money
  • Rate of interest (R): Percentage charged or paid per year
  • Time period (T): Duration for which money is deposited or borrowed
  • Maturity amount: Principal + Interest earned
Three kinds of banking transactions: deposits, withdrawals and transfers Banking transactions Deposits Withdrawals Transfers Cash & cheque Salary credit Money in ATM / debit card Cheque / teller Money out NEFT / RTGS IMPS / UPI A/c to A/c + − ⇄ balance up balance down moved How simple interest builds up over three years on a deposit How interest grows: ₹10,000 at 5% per year ₹10,000 ₹10,500 ₹11,000 ₹11,500 start year 1 year 2 year 3 +₹500 +₹500 +₹500 Total interest in 3 years = ₹1,500
Solved Examples
1
Worked Example
Rohan deposits ₹5,000 in his savings account. The bank pays 4% simple interest per year. How much interest will he earn in 2 years?
Solution
  1. Principal (P) = ₹5,000
  2. Rate (R) = 4% per year
  3. Time (T) = 2 years
  4. Simple Interest = (P × R × T)/100
  5. = (5000 × 4 × 2)/100
  6. = (40000)/100 = ₹400

Answer: ₹400 interest.

2
Worked Example
Priya withdraws ₹2,000 from her ATM. The bank charges ₹20 per transaction at other bank ATMs. If she uses another bank's ATM, what is the total amount deducted from her account?
Solution
  1. Withdrawal amount = ₹2,000
  2. Transaction fee = ₹20
  3. Total deduction = ₹2,000 + ₹20 = ₹2,020

Answer: ₹2,020 will be deducted.

3
Worked Example
A businessman deposits ₹25,000 in his account. He issues a cheque for ₹18,500 to a supplier. Later, he deposits another ₹10,000. What is his final balance if he started with ₹40,000?
Solution
  1. Starting balance = ₹40,000
  2. Add first deposit: ₹40,000 + ₹25,000 = ₹65,000
  3. Subtract cheque payment: ₹65,000 - ₹18,500 = ₹46,500
  4. Add second deposit: ₹46,500 + ₹10,000 = ₹56,500

Answer: Final balance = ₹56,500.

Key Points

  • A banking transaction is any movement of money in or out of an account.
  • Deposits add money; withdrawals remove money.
  • Banks pay interest on deposits and charge interest on loans.
  • Common transactions include ATM, cheque, online transfer, and UPI.
  • Always check for transaction fees when using other bank ATMs.
Quick Check — 4 MCQs
Tap an option to check your answer0 / 4
Q1.Simple interest is given by:
Explanation: SI $=\tfrac{PRT}{100}$.
Q2.In a recurring deposit, money is deposited:
Explanation: Regular monthly installments.
Q3.Maturity value equals:
Explanation: Deposit plus interest.
Q4.Banks pay ___ on customer deposits.
Explanation: Interest.
Practice more MCQs → 📝 Assignment · 35 marks