Banking TermsA ATM An automated teller machine (ATM) is a computerised telecommunications device that provides the clients with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip that contains a unique card number and some security information such as an expiration date or CVV. Authentication is provided by the customer entering a personal identification number (PIN) Acceptance Assent of the drawee of a usance bill to pay the amount thereof on the due date.The assent is indicated by the signature of the drawee on the face or reverse of the bill. Acceptance should be unconditional. It is preferable to have the date of acceptance and place of payment indicated by the drawee at the time of his acceptance. B Bank Assurance It is the term used to describe the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products. Bank Rate This is the rate at which central bank (RBI) lends money to other banks or financial institutions. If the bank rate goes up, long-term interest rates also tend to move up, and vice-versa. Banking Ombudsmen Scheme The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. The Banking Ombudsman Scheme was first introduced in India in 1995, and was revised in 2002. The current scheme became operative from the 1 January 2006, and replaced and superseded the banking Ombudsman Scheme 2002. Bounced Cheque when the bank has not enough funds in the relevant account or the account holder requests that the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder. The beneficiary of the cheque will have not been paid. This normally incurs a fee from the bank. Book Debts Amounts receivable for sale of goods/ services and appearing as current asset in the books of the seller. These are also called as trade debts or sundry debtors. C Cheque Book A small, bound booklet of cheques. A cheque is a piece of paper produced by your bank with your account number, sort-code and cheque number printed on it. The account number distinguishes your account from other accounts; the sort-code is your bank's special code which distinguishes it from any other bank. Cheque Clearing This is the process of getting the money from the cheque-writer's account into the cheque receiver's account. Clearing Bank This is a bank that can clear funds between banks. For general purposes, this is any institution which we know of as a bank or as a provider of banking services. Consumer price Index(CPI) It is a measure estimating the average price of consumer goods and services purchased by households Credit Card A credit card is one of the systems of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. Credit Rating This is the rating which an individual (or company) gets from the credit industry. This is obtained by the individual's credit history, the details of which are available from specialist organizations like CRISIL in India. Credit-Worthiness This is the judgement of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another. Much depends on whether an organization is involved with high risk customers or not. CRR CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their deposits in the form of cash with Reserve Bank of India (RBI). This minimum ratio is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. Thus, When a bank’s deposits increase by Rs100, and if the cash reserve ratio is 9%, the banks will have to hold additional Rs 9 with RBI and Bank will be able to use only Rs 91 for investments and lending / credit purpose. Therefore, higher the ratio (i.e. CRR), the lower is the amount that banks will be able to use for lending and investment. This power of RBI to reduce the lendable amount by increasing the CRR makes it an instrument in the hands of a central bank through which it can control the amount that banks lend. Thus, it is a tool used by RBI to control liquidity in the banking system. Current Accounts These accounts are maintained by the corporate clients that may be operated any number of times in a day. There is a maintenance charge for the current accounts for which the holders enjoy facilities of easy handling, overdraft facility etc. D Debit Card Debit card allows for direct withdrawal of funds from customers bank accounts. The spending limit is determined by the available balance in the account. Demand Deposit A Demand deposit is the one which can be withdrawn at any time, without any notice or penalty; e.g. money deposited in a checking account or savings account in a bank. Demand Bill A bill of exchange which is payable by the drawee at sight or on presentation. Documents of Title to Goods Documents, the due possession of which gives title to the goods covered by them i.e. Bill of Lading, Railway Receipt, Delivery Order, Dock Warrant etc. D.A Bill/ Usance Bill A documentary usance bill of exchange, which carries a stipulation that the documents accompanying the bills are to be delivered to a drawee against acceptance of the bill. Deferred Payment Guarantee Deferred Payment Guarantees (DPG) is a way of raising long-term resources by the buyers of fixed assets/ capital goods, securing guarantees for repayment of principal and interest from their banker to the supplier of capital goods for supplier’s credit. It is a financial guarantee. F FCNR Accounts Foreign Currency Non-Resident accounts are the ones that are maintained by the NRIs in foreign currencies like USD, DM, and GBP etc. The account is a term deposit with interest rates linked to the international rates of interest of the respective currencies. Fixed Deposits FDs are the deposits that are repayable on fixed maturity date along with the principal and agreed interest rate for the period. Banks pay higher interest rates on FDs than the savings bank account. Financial Guarantees Bank Guarantees issued to guarantee the customer’s financial worth; credit worthiness and his capacity to take up financial risks are classified as ‘Financial Guarantees’. Such guarantees do not require any specific performance on the party of constituents on whose behalf Bank Guarantee is issued. Following guarantees to be treated as ‘Financial Guarantees’:- a) Guarantees favoring tax/ customs/ excise/ court authorities in respect of disputed claims, payment of taxes, customs and excise duties etc.b) Deferred Payment Guarantees. G Guarantees A “Contract of Guarantee” under the Indian Contract Act is a contract to perform the promise or discharge the liability of a third person in case of his default. Guarantees issued by the Bank can be broadly classified into three categories viz. Financial, Performance and Deferred Payment Guarantees. I Internet Banking Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by the bank. Interest The amount paid or charged on money over time. If you borrow money interest will be charged on the loan. If you invest money, interest will be paid (where appropriate to the investment). L Liquidity Adjustment Facility(LAF) A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets. Line of Credit Agreement entered into with banks for making available to the borrower credit facilities upto the ceiling of ‘line of credit’ in various forms to suit mutual convenience, by way of Overdraft, Cash Credit, Loan, Guarantee, Letter of Credit, etc. on agreed terms and conditions. Letter of Credit A document issued by the Bank authorising its branch or another banker to honour seller’s drafts for account of a buyer provided the terms and conditions of the letter of credit are satisfied. Loan A loan is a type of debt. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. There are different kinds of loan such as the house loan, auto loan etc. M Micro Credit It is a term used to extend small loans to very poor people for self-employment projects that generate income, allowing them to care for themselves and their families. N NRE Accounts Non-Resident External accounts are the ones in which NRIs remit money in any permitted foreign currency and the remittance is converted to Indian rupees for credit to NRE accounts. The accounts can be in the form of current, saving, FDs, recurring deposits. The interest rates and other terms of these accounts are as per the RBI directives. O OMO - Open Market Operation The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system by RBI. Open market operations are the principal tools of monetary policy Overdraft This is when a person has a minus figure in their account. It can be authorized (agreed to in advance or retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility). P Payee The person who receives a payment. This often applies to cheques. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer. Payer The person who makes a payment. This often applies to cheques. If you write a cheque you are the payer and the recipient of the cheque is the payee. R RBI The Reserve Bank of India is the apex bank of the country, which was constituted under the RBI Act, 1934 to regulate the other banks, issue of bank notes and maintenance of reserves with a view to securing the monetary stability in India. Recurring Deposits These are also called cumulative deposits and in recurring deposit accounts, a certain amounts of savings are required to be compulsorily deposited at specific intervals for a specified period. RTGS (Real Time Gross Settlement) RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a ‘real time’ and on ‘gross’ basis. This is the fastest possible money transfer system through the banking channel. Settlement in ‘real time’ means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. ‘Gross settlement’ means the transaction is settled on one to one basis without bunching with any other transaction. S Savings Account Savings account is an account generally maintained by retail customers that deposit money (i.e. their savings) and can withdraw them whenever they need. Funds in these accounts are subjected to low rates of interest. Security for Loans Where large loans are required the lending institution often needs to have a guarantee that the loan will be paid back. This takes the form of a large item of capital outlay (typically a house) which is owned or partly owned and the amount owned is at least equivalent to the loan required. SLR SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. Thus, we can say that it is ratio of cash and some other approved to liabilities (deposits). It regulates the credit growth in India Subsidy A subsidy is a form of financial assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or to encourage it to hire more labor T Time Deposit Time deposit is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term. Term Loan A loan granted for a period of 3 years and above, which in the normal course is repayable in agreed instalment(s). Treasury Bills Treasury Bills (T-Bills) are short term, Rupee denominated obligations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are thus useful in managing short-term liquidity. At present, the Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day. There are no treasury bills issued by State Governments. V Venture Capital Venture capital is money provided by an outside investor to finance a new, growing, or troubled business. The venture capitalist provides the funding knowing that there’s a significant risk associated with the company’s future profits and cash flow. Capital is invested in exchange for an equity stake in the business rather than given as a loan, and the investor hopes the investment will yield a better-than-average return. W Wholesale Price Index(WPI) The Wholesale Price Index (WPI) is the index used to measure the changes in the average price level of goods traded in wholesale market. A total of 435 commodity prices make up the index. It is available on a weekly basis. It is generally taken as an indicator of the inflation rate in the Indian economy. The Indian Wholesale Price Index (WPI) was first published in 1902, and was used by policy makers until it was replaced by the Producer Price Index (PPI) in 1978. |
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