Banking Terminology

PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS
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Top 20 banking terms you should know 1. National Electronic Funds Transfer (NEFT Transfer of funds initiated by electronic means such as an electronic terminal, telephone, computer, or ATM. The NEFT facilitates the process of fund transfer within the same bank or inter-bank transfers. The minimum amount that can be transferred is as low as Rs !!. 2. !inked "ccount Any account linked to another account in the same bank where funds can be transferred electronically between accounts and carry out other specified ser"ices as well. #. Tra$ellers% &he'ue #he$ues issued by a bank and function as cash but are protected a%ainst loss or theft when tra"ellin%. (. )ase *ate &t is the minimum rate a bank char%es its most credit worthy customer. The bank cannot lend below this rate 'with an e(ception to banks employees, loans to bank)s depositors a%ainst their own deposits, albeit with the sub"ention of the central bank*. For a retail customer, the +ase Rate will co"er all loans from auto, personal to home loans effecti"e from ,uly , -! !. +. )alance Transfer +alance transfer is an option included under credit card payments and is useful for persons holdin% more than one card. .n a"ailin% this facility, the cardholder can transfer the balance amount outstandin% on card one to card two and "ice "ersa, if he/she is not able to make full payment that is due on a particular card. &n any case, the payment due date is only delayed but the payment has to be made at the scheduled time as stated in card two. +alance transfer facility is useful in reducin% the interest out%o 'on card one* and e(tendin% the payment due date on the ori%inal card. ,. )anking -mbudsman +ankin% .mbudsman is an unbiased forum formed to resol"e complaints re%istered by bank customers with respect to the ser"ices pro"ided by banks. The R+& introduced this scheme under 0ection 12A of +ankin% Re%ulation Act, 343. &n case one has not been satisfactorily ser"iced by their bank, they should first re%ister a complaint with the bank customer ser"ice department.
R.D. Kulakarni Complex, Near Shivala a, !ali al Roa", Srina#ar, Dharwa". Contact No% (&'()* +,,,-.' / '-&.+ 0,-.- / ,+0-$ &(.-, E1mail% pace"harwa"2#mail.com

&f they are not happy with the bank)s response, then they can approach the bankin% ombudsman for an unbiased resolution. .. &ashback The term )cashback) is used with reference to credit cards. #ashback means %i"in% back some portion of money 'spent by the cardholder throu%h the credit card* to the cardholder himself. The cashback is made in terms of points earned5 for e(ample, the bank may say one point will be earned for e"ery Rs !! spent by the cardholder and at the end of the year, the money worth of the points earned 'say Rs for point* will be credited back into the cardholder)s account. /. &redit 0istory #redit history is an account of an indi"idual)s past borrowin%s by way of loans, credit cards and all other debt that needs to be repaid/has been repaid. #redit history in &ndia is currently bein% pro"ided by #&+&6 '#redit &nformation +ureau of &ndia 6imited* and contains records of an indi"idual)s open and past accounts of loans and credit cards. Throu%h the #&+&6 report, the bank 'lender* can know if the indi"idual 'borrower* had made any late payments or defaults. 7ou can %et your own credit history report from #&+&6 for a nominal fee. 1. &ollateral A borrower needs to pro"ide some kind of security to the bank in case of hi%h ticket loans 'e(cept home loans where the property is the security*. 0uch security is called )collateral). &n case the borrower fails to repay the loan, the bank has the authority to attach the collateral to the loan and claim its dues. 10. 2ocumentation34rocessing Fee +ank re$uires certain documents from the borrower to look into his creditworthiness and char%es a fee for the same. These char%es are known as documentation char%es. 8rocessin% Fee is char%ed by the bank upon sanctionin% of loan to the borrower. 11. 2ormant35nacti$e "ccount &f an indi"idual has not made any transactions in his/her account 'e(cept for interest payments credited by the bank* for more than two years, the sa"in%s/current account is declared as dormant/inacti"e. 12. Fi6ed *ate

Fi(ed rate is the interest rate that remains constant for the full term of the loan.
1#. Floating *ate An interest rate that is referenced to a market rate and is re"ised as per the chan%e in the interest rates in the economy. 9hen interest rates in the economy rise, floatin% rates rise and "ice "ersa. 1(. 75&* &ode M&#R stands for Ma%netic &nk #haracter Reco%nition. M&#R #ode comprises 3 di%its %i"en at the bottom 'ri%ht side* of the che$ue number. &t is a uni$ue code and "aries between each bank branch. M&#R #ode is re$uired for che$ue clearance. M&#R #ode is different from the &F0# code, which is also mentioned on a che$ue. 1+. No8frills "ccount This account is a basic sa"in%s account pro"ided by banks to make bankin% simpler and more accessible for all customers. &n a no-frills account, you do not ha"e to maintain minimum balance and en:oy basic bankin% facilities such as electronic funds transfer 'EFT*, netbankin%, free che$ue book issuance. 1,. Electronic &learing 9er$ice (E&9 &t is a ser"ice pro"ided by the banks to facilitate direct debit from your bank account towards an in"estment account 'such as a mutual fund 0&8* and/or payin% re%ular loan EM&s. .ne can %i"e a standin% instruction '0&* to the bank to transfer the specified amount e"ery month for a specified period. Alternati"ely, you can direct a one-time transfer of funds throu%h NEFT/RT;0 'e(plained ne(t*. 1.. 4rocessing Fee +ank le"ies processin% fee in order to process the loan application of the borrower. This fee is a small percenta%e 'e(ample< -.2 per cent* of the loan amount sanctioned and is usually wai"ed off durin% festi"al time to attract more borrowers. 1/. *T:9

The RT;0 or Real Time ;ross 0ettlement 0ystem facilitates fund transfer within same bank or inter-bank transfers, but unlike NEFT, RT;0 ensures the fund transfer fast and smooth in )real-time) for a nominal fee. The minimum transfer amount is hi%her than NEFT 'usually Rs - lakh and abo"e*.
11. 5F9& &F0# code is useful in bank fund transfers and che$ue clearance. &t is an character code assi%ned by R+& to identify e"ery bank branch uni$uely. The first part is the first 4 alphabet characters representin% the bank. Ne(t character is ! '=ero* and is reser"ed for future use. The last > characters is the branch code. 20. ;<& ?7# or ?now 7our #ustomer norms are imposed by R+& on banks and other financial institutions to ensure that the correct identity of the banks) customers is established and to ensure that banks deal only in le%itimate bankin% operations and not in money launderin% or frauds. 21. "nytime )anking = 9ith introduction of ATMs, Tele-+ankin% and internet bankin%, customers can conduct their business anytime of the day and ni%ht. The )+ankin% @ours) is not a constraint for transactin% bankin% business. 22. "nywhere )anking = Refers to bankin% not only by ATMs, Tele-+ankin% and internet bankin%, but also to core bankin% solutions brou%ht in by banks where customer can deposit his money, che$ues and also withdraw money from any branch connected with the system. All ma:or banks in &ndia ha"e brou%ht in core bankin% in their operations to make bankin% truly anywhere bankin%. 2#. "T7 = ATMs are Automatic Teller Machines, which do the :ob of a teller in a bank throu%h #omputer Network. ATMs are located on the branch premises or off branch premises. ATMs are useful to dispense cash, recei"e cash, accept che$ues, %i"e balances in the accounts and also %i"e mini-statements to the customers. 2(. )ank -mbudsman = +ank .mbudsman is the authority to look into complaints a%ainst +anks in the main areas of collection of che$ue / bills, issue of demand drafts, non-adherence to prescribed hours of workin%, failure to honour %uarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and ad"ances where banks flout directions / instructions of R+&. This 0cheme was announced in 332 and is functionin% with new %uidelines from -!!A. This scheme co"ers all scheduled banks, the RR+s and co-operati"e banks. 2+. )ancassurance= +ancassurance refers to the distribution of insurance products and the insurance policies of insurance companies which may be life policies or non-life policies like home insurance - car insurance, medi-policies and others, by banks as

corporate a%ents throu%h their branches located in different parts of the country by char%in% a fee. 2,. )anker%s !ien= +ankers lien is a special ri%ht of lien e(ercised by the bankers, who can retain %oods bailed to them as a security for %eneral balance of account. +ankers can ha"e this ri%ht in the absence of a contract to the contrary. 2.. )anking= Acceptin% for the purpose of lendin% or in"estment of deposits of money from 8ublic, Repayable on demand or otherwise and withdrawable by che$ues, drafts, order, etc. 2/. )asel855 = The #ommittee on +ankin% Re%ulations and 0uper"isory 8ractices, popularity known as +asel #ommittee, submitted its re"ised "ersion of norms in ,une, -!!4. Bnder the re"ised accord the capital re$uirement is to be calculated for credit, market and operational risks. The minimum re$uirement continues to be CD of capital fund 'Tier & E && #apital* Tier && shall continue to be not more than !!D of Tier & #apital. 21. )rick > 7ortar )anking = +rick and Mortar +ankin% refers to traditional system of bankin% done only in a fi(ed branch premises made of brick and mortar. Now there are bankin% channels like ATM, &nternet +ankin%,tele bankin% etc. #0. )usiness of )anking = Acceptin% deposits, borrowin% money, lendin% money, in"estin%, dealin% in bills, dealin% in Forei%n E(chan%e, @irin% 6ockers, .penin% 0afe #ustody Accounts, &ssuin% 6etters of #redit, Tra"eller)s #he$ues, doin% Mutual Fund business, &nsurance +usiness, actin% as Trustee or doin% any other business which #entral ;o"ernment may notify in the official ;a=ette. #1. )ouncing of a che'ue = 9here an account does not ha"e sufficient balance to honour the che$ue issued by the customer , the che$ue is returned by the bank with the reason Ffunds insufficientF or FE(ceeds arran%ementF.This is known as )+ouncin% of a che$ue) . #2. &ertificate of 2eposit =. #ertificate of Geposits are ne%otiable receipts in bearer form which can be freely traded amon% in"estors. This is also a money market instrument,issued for a period ran%in% from A days to f one year .The minimum deposit amount is Rs. lakh and they are transferable by endorsement and deli"ery. ##. &he'ue = #he$ue is a +ill of E(chan%e drawn on a specified banker orderin% the banker to pay a certain sum of money to the drawer of che$ue or another person. Money is %enerally withdrawn by clients by che$ues. #he$ue is always payable on demand. #(. &he'ue Truncation = #he$ue truncation, truncates or stops the flow of che$ues throu%h the bankin% system. ;enerally truncation takes place at the collectin% branch, which sends the electronic ima%e of the che$ues to the payin% branch throu%h the clearin% house and stores the paper che$ues with it. #+. &ollecting )anker = Also called recei"in% banker, who collects on instruments like a che$ue, draft or bill of e(chan%e, lod%ed with himself for the credit of his customer)s account.

#,. &onsumer 4rotection "ct = &t is implemented from 3CA to enforce consumer ri%hts throu%h a simple le%al procedure. +anks also are co"ered under the Act. A consumer can file complaint for deficiency of ser"ice with #onsumer Gistrict Forum for amounts upto Rs.-! 6acs in Gistrict #ourt, and for amounts abo"e Rs.-! 6acs to Rs. #rore in 0tate #ommission and for amounts abo"e Rs. #rore in National #ommission. #.. &o8operati$e )ank = An association of persons who collecti"ely own and operate a bank for the benefit of consumers / customers, like 0araswat #o-operati"e +ank or Abhyudaya #o-operati"e +ank and other such banks. #/. &o8operati$e 9ociety = 9hen an association of persons collecti"ely own and operate a unit for the benefit of those usin% its ser"ices like Apna +a=ar #o-operati"e 0ociety or 0ahakar +handar or a #o-operati"e @ousin% 0ociety. #1. &ore )anking 9olutions (&)9 = #ore +ankin% 0olutions is a bu== word in &ndian bankin% at present, where branches of the bank are connected to a central host and the customers of connected branches can do bankin% at any breach with core bankin% facility. (0. &reditworthiness= &t is the capacity of a borrower to repay the loan / ad"ance in time alon%with interest as per a%reed terms. (1. &rossing of &he'ues = #rossin% refers to drawin% two parallel lines across the face of the che$ue.A crossed che$ue cannot be paid in cash across the counter, and is to be paid throu%h a bank either by transfer, collection or clearin%.A %eneral crossin% means that che$ue can be paid throu%h any bank and a special crossin%, where the name of a bank is indicated on the che$ue, can be paid only throu%h the named bank. (2. &urrent "ccount= #urrent account with a bank can be opened %enerally for business purpose. There are no restrictions on withdrawals in this type of account. No interest is paid in this type of account. (#. &ustomer= A person who maintains any type of account with a bank is a bank customer. #onsumer 8rotection Act has a wider definition for consumer as the one who purchases any ser"ice for a fee like purchasin% a demand draft or a pay order. The term customer is defined differently by 6aws, softwares and countries.

Banking Terminology

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Banking Terminology

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PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS

PACE.run with pace of time

PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS

PACE.run with pace of time

PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS

PACE.run with pace of time

PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS

PACE.run with pace of time

PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS

PACE.run with pace of time

PARSHWANATH ACADEMY FOR COMPETITIVE EXAMS

PACE.run with pace of time

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