How do banks work?

A bank is like a giant, very safe piggy bank. When grown-ups have money they don't want to keep at home, they take it to a bank and the bank looks after it.

So what does the bank do with the money?

The bank doesn't just leave it sitting in a vault. It lends some of it to other people — for example, someone who needs money to buy a house or start a shop. Those people pay the bank back with a little extra called interest.

And the bank shares some of that with you

Because you let the bank use your money, the bank pays you a little interest too. So if you put ₹1,000 in a bank that pays 5% interest a year, after one year you would have ₹1,050 — that extra ₹50 came just from letting the money sit there.

The big idea

• You give the bank your money.
• The bank lends most of it to other people.
• Those people pay the bank interest.
• The bank shares some of that interest with you.