General Knowledge

TERMS USED IN BANKING

Important Banking Terminology

ATM(Automatic teller Machines)

They are machines that dispense cash, receive cash, accept cheques, give balance details and mini statements to the customers through Computer network

Bancaassurance

It is the distribution of insurance products and the insurance policies of insurance companies by banks as corporate agents through their branches. Banks charge a fee for this service from insurance companies

TREASURY BILLS

These are the instruments of short term borrowing by the central/state govt.teey are promissory notes issued at discount and for a fixed period.these were first issued in india in 1917.

Minimum amount value rs.1 lac and in multiples there of,maturity of these billa 91 days, 182 days and 364 days

Bouncing of a cheque

When an account has insufficient funds the cheque is not payable and is returned by the bank with a reason “Exceeds arrangement” or “funds insufficient”.

Bank Account

It is account of nominal interest which can only be used for personal purpose and which has some restrictions on withdrawl

Bank Rate

It is the rate of interest charged by a central bank to commercial banks on the advances and the loans it extend

Base rate

It is the rate of interest on which banks base their lending rates. Usually loans are given at a rate higher than the base rates and saving rate is below the base rate

Basis point

One-hundredth of 1% point normally used for indicating cost of finance

Call Money

It is a loan that is made for a very short period of a few days only with a low rate of interest

Cheque

It is written by an individual to transfer amount between two accounts of the same bank or a different bank and the money is withdrawn from the account.

Core Banking

It is a general term used to describe the services provided by a group of networked bank branches

Core Banking Solutions (CBS)

In this all the branches of the bank are connected together and the customer can access his/her funds or transactions from any other branch.

CRR(Cash Reverse Ratio)

The amount of funds that a bank keep with the RBI. If the percentage of CRR increases then the amount with the bank comes down.

Current Account

It is an account that can be opened generally for business purposes with no restrictions on withdrawls and no interest paid

Debit Card

It is a card issued by the bank so the customers can withdraw their money from their account electronically.

Demat Account

The way in which a bank keeps money in a deposit account in the same way the Depository company converts share certificates into electronic form and keep them in a Demat Account.

 

 

Dishonour of Cheque

Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.

E-Banking

It is a type of banking in which we can conduct financial transactions electronically. RTGS, Credit cards, Debit cards etc come under this category.

EFT-(Electronic Fund Transfer)

In this we use Automatic teller machine, wire transfer and computers to move funds between different accounts in different or same bank.

Fiscal Deficit

It is the amount of Funds borrowed by the government to meet the expenditures.

Inflation

It is an increase in the quantity of money in circulation without any corresponding increase in goods thus leading to an abnormal rise in the price level

Initial Publc Offering(IPO)

It is the time when a company makes the first offering of the shares to the public.

Kiosk Banking

Doing banking from a cubicle from which food, newspapers, tickets, etc are also sold

Leverage Ratio

It is a financial ratio which gives us an idea or a measure of a company’s ability to meet its financial losses.

Liquidity

It is the ability of converting an investment quickly into cash with no loss in value.

Market Capitalization

The product of the share price and number of the company’s outstanding ordinary shares

Mortgage

It is a kind of security which one offers for taking an advance or loan from someone.

Mutual Fund

These are investment schemes. It pools money from various investors in order to purchase securities.

FOREIGN DIRECT INVESTMENT (FDI)

Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company.

FOREIGN INSTITUTIONAL INVESTMENT (FII)

A  foreign  institutional investor (FII)  is an investor or investment  fund  registered  in  a country outside of the  one  in  which  it  is  investing. Institutional   investors  most notably include hedge funds, insurance companies,  pension funds and mutual funds.

Monetary Policy

It refers to the Central Government policy with respect to the quantity of money in the economy, the rate of interest and the exchange rate

Non-bank ATM/ White labeled ATM

An ATM or cash machine that does not prominently display a bank’s name or logo. A fee will be charged for cash withdrawls in these ATMs and they don’t accept deposits

Non-performing Assets (NPAs)

NPA or non-performing loans are loans given by a bank on which repayments or interest payments are not being made on time

Permanent Account Number(PAN)

PAN is a number issued by the Income Tax Department to their tax payers.

Plastic Money

Plastic Money is a name iven to Credit cards, Debit cards, ATM cards and International cards issued by banks

 

 

 

Point of Sale (poS)

poS refers to a location at which a bank gives loan to its most reliable customer i.e., customer with ‘zero risk’Pass Book .It is a book where all the bank transactions are recorded. They are mainly issued to Current or Savings Bank account holders.

CASA RATIO (CURRENT AND SAVINGS ACCOUNT)

The CASA ratio is the ratio of deposits in the current and savings accounts of a bank  to its total deposits.

Repo Rate

Commercial banks borrow funds by the RBI if there is any shortage in the form of rupees. If this rate increases it becomes expensive to borrow money from RBI and vice versa.

Reverse Repo Rate

It is the exact opposite of repo rate. It is the rate at which RBI borrows money from banks when it feels there istoo much money floating in the banking system

Special Drawing Rights(SDR)

It is a reserve asset (Paper Gold) created within the framework of the International Monetary Fund in an attempt to increase international liquidity

SLR(Statutory Liquidity Ratio)

It is amount that a commercial bank should have before giving credits to its customers which should be either in the form of gold, money or bonds.

WAYS AND MEANS ADVANCES

These are temporary extended  by rbi to the govt.section 17(5) of rbi act allows rbi to make wma both to the central and state govt.the interest rate on wma is at around bank rate and overfrdrafting if any carries 2% higher interest.

INFLATION : an increase in the price of a standardized good/service or a basket of goods/services over a specific period of time.

DEFLATION : decrease in prices,often caused by a reduction in the supply of money or credit.

 

 

BSBDA (basic saving s bank deposit account)

The 'Basic Savings Bank Deposit Account' would be subject to provisions of PML Act and Rules  and  RBI instructions  on  Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to time. BSBDA can also be opened with simplified KYC norms. BSBDA is launched  by the rbi.

Following are the main features of BSDBA

 The 'Basic Savings Bank Deposit Account' should be considered as a normal banking service available to all customers, through branches. BSBDA is applicable to all scheduled commercial banks in India including Foreign Banks having branches in India.

 The services available free in the 'Basic Savings Bank Deposit Account’ includes deposit and withdrawal of cash; receipt / credit of money through electronic payment channels or by means of deposit / collection of cheques at bank branches as well as atms.

Banks are advised not to impose restrictions like age and income criteria of the individual for opening BSBDA. An individual is eligible to have only one 'Basic Savings Bank Deposit Account' in one bank.

MUTUAL FUNDS

A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.

                                                                    OR

A small funds pooling from the public and again re-invest in the stock markets.

 NOTE : First in 1964  india  enters into the mutual fund business.

THE MAIN FEATURES OF MUTUAL FUND’S :

  1. LOW INVESTMENT
  2. STUDY RETURNS
  3. LOW RISK OF FUNDS
  4. CAPITAL APPRECIATION IN LONG TERM

 

 

 

 

INTERNATIONAL BANK ACCOUNTS FOR BANKERS

  1. NOSTRO ACCOUNT : A nostro account is maintained by an indian bank in foreighn countries
  2. VOSTRO ACCOUNT : A vostro account is maintained by a foreign bank in india with their corresponding bank

CAPITAL ADEQUACY RATIO :  Capital Adequacy Ratio (CAR) is also known as Capital to Risk (Weighted) Assets Ratio (CRAR), is the ratio of a bank's capital to its risk. National regulators track a bank's CAR to ensure that it can absorb a reasonable amount of loss and complies with statutory Capital requirements.

PRIMARY INTEREST RATE (PIR)  : The primary interest rate is the interest rate changed  by  banks  to their most credit worthy customers.

SOCIETY FOR WORLDWIDE INTERBANK FINANCIAL TELECOMPUNICATIONS (SWIFT)

A cooperative society that provides highly secure message communications  between banks. It does not transfer money or any other financial materials but provides only information. Founded in 1973 and HQ is in Belgium.

Teller

He/she is a staff member of the bank who cashes cheques, accepts deposits and perform different banking services for the general mass.

Universal Banking

When financial institutions and banks undertake activities related to banking like investment, issue of debit and credit card etc then it is known as universal banking.

Virtual Banking

Internet banking is sometimes known as virtual banking. It is called so because it has no bricks and boundaries. It is controlled by the world wide web.

Wholesale Banking

It is similar to retail banking with a slight difference that it mainly focuses on the financial needs of the institutional clients and the industry.

Zero Coupon Bond

It is a bond that is sold at good discount as it has no coupon.

LIQUIDITY ADJUSTMENT FACILITY

A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This agreement allows banks to respond to liquidity pressures and is used by govt to assure basic stability in the financial markets.

PLEDGE  : Transfer of asstes that means movable  properties  called  pledge

HYPOTHICATION  :  Loan  against  movable  and  immovable properties possession of the goods  held  by  the customer.

STOCK EXCHANGE :  A stock exchange is a form of exchange which provides services for stock brokers and traders to trade stocks, bonds, and other securities.

CREDIT BUREAU  :  This is a company that collects information from various sources  and  provides  customer  credit  information  on  individual consumers  for  a variety of uses.

GENERAL ANTI—AVOIDANCE RULES (GAAR)

The gaar proposed bt the union finance minister PRANAB  MUKHERJEE  during the annual budget 2012-13is anti-tax avoidance rule, drafted bt the union govt of india,which prevents tax evaders, from  routing  investments  through  tax  havens  like maturities, luxemburg, switzerland. From april  1st 2013 GAAR  came  into effect.