Banking Terms

SELF HELP GROUP

Self help group is a small volunteer association of poor people preferably from the same socio Economic background. They come together for the purpose of solving their common problems through self help and mutual help. The self help group promotes small saving among the members. The savings are kept with the Bank. This common fund is in the name of SHG. Usually the number of members in one SHG doesn’t exceed 20. The NABARD and NGOs the promoters of this group.

KISAN CREDIT CARD

Provision timely and adequate credit has one of the major challenges for Banks in India in dispension of agriculture and rural credit to the farmers in order to achieve the AIM. KCC are now a new concept in the field of agriculture banking in India. The KCC scheme was started by the GOI in conciliation with the RBI and NABARD in 1998-99. The eligibility criteria for KCC is the borrower must be with a good track record of the 2 years would be the prime customer and a farmer who has the operational land holding certificate from the PATWARI. The maximum amount of KCC is up to Rs. 10000 and each withdrawal to be paid within 12 months and KCC is valid for 3 years subject to annual renewal. All branches engaged in agriculture banking could issue KCC. In very special conditions Bank canprovide up to Rs. 25000 loan and the interest rate on KCC is 11%.

KISAN GOLD CARD

This is hassle free term loan card that enable to avail loan for agricultural implements, land development, repair of farm machinery and consumption need farmers have the choice in regard to amount, time and purpose. The amount of loan is 5 times the annual form income with the maximum limit of Rs. 5 Lakhs. For the consumption purpose is should not exceed 20% of the limit.

MICROCREDIT OR MICROFINANCE

Micro credit is the extension of very small loans to the unemployed to poor Endeavour and to others living in poverty who are not considered bankable. These individuals lack collateral steady employment and variable credit history and therefore cannot meet even the most minimal qualification to gain excess to traditional credit.

Microcredit is a part of microfinance which is the provision of the wider range of the financial services to the very poor. Microcredit is the financial innovation which originated inBangladesh where it has successfully enabled to extremely impoverish people to engage itself employment project. The founder of this microcredit is Prof. Mohammad Yunus in mid 1970s. He is also the founder of grami8n bank of Bangladesh with which Mr. Yunus has received the Noble Peace Price 2006 and to pay respect towards microcredit the united nation organization has declared year 2005 “The International Year of Microcredit.”

MUTUAL FUND

A Mutual Fund is the professionally manage firm of collective investments that pools money from many investors in stock market, bonds, short term, money market instruments and in other securities. In mutual fund is a fund manager who is also called Portfolio manager trades the fund underlined Securities. The value of the share of mutual fund is called the net asset value which is calculated daily wage on a total value divided be a number of shares, issued and outstanding there are two types of Mutual Fund. • Open Ended Mutual Fund

• Closed Ended Mutual Fund

BULLION MARKET

A market where the trading of precious metals held like: Gold, Silver, Diamond, Platinum and Crystal.

STOCK MARKET

A stock market is a private or public market for trading of company, stock and derivatives of company stock at an agreed price. Both of these are securities listed on stock exchange as well as those only traded privately.

BULL

Bull is an investor who thinks the market a specific security or an industry will raise. Bulls are the optimistic investors presently predicting good things of the market and bullish is a habit to purchase that share which is in profit they are responsible to Rose in stock exchanges.

BEAR

It is an investor who believes that a particular security or market is headed downward. Bears attempt to profit from a decline in prices. A Bear is generally pessimistic about the state of the given market.

STAG

A Stag is an investor or speculator who subscribes to a new issue with the intention of selling them soon after allotment to realize for quick profit.

ADR (AMERICAN DEPOSITORY RECEIPTS)

An ADR represents an ownership in the share on Owner Company trading in US trading in US financial market. ADR enable US investors to buy share in foreign companies without undertaking cross border transaction. ADR’s carry prices in US Dollars and can be traded as share of US based company.

GDR (GLOBAL DEPOSITORY RECEIPT)

GDR is a bank certificate issued in more than one country for shares in a foreign company. These shares are held by a foreign branch of an International bank. These shares are trades as domestic shares but are offered for sale globally through the various bank branches. A GDR is a very similar to an American Depository Receipt.

SDR (SPECIAL DRAWING RIGHTS)

This is the depth instrument credit be IMF in 1969 to provide the assistance and loan to their member countries. The value of the SDR was initially defined as equivalent to 0.8888671 gram of fine gold which was at that time equivalent to 1 US$.

MONEY MARKET

Money Market is the global financial market for short term borrowings and lendings. It provides short term liquid funding for global financial system. In Money Market short term obligations such as treasury bills, commercial papers and Banker’s acceptance are bought and sold. The Money Market instruments are bank drafts, time deposits, time deposits, short term loans, promissory notes, ADR, GDR, Municipal notes, treasury bills and mutual funds.

CAPITAL MARKET

The Capital Market is the market for securities where companies and government can raise long term fund. The Capital Market includes the stock market and the Bond Market.

CALL MONEY

Cal Money Market is the market in which broker and dealers borrow money to satisfy their credit needs either to finance their own inventory or to cover their customer margin Accounts.

ICOR (INCREMENTAL CAPITAL OUTPUT RATIO)

ICOR is the Ratio of investment to growth which equals to one, divided by the marginal product of Capital. The higher the ICOR indicates lower the productivity of capital and lower the ICOR reflects high productivity of Capital. ICOR is the topic or instrument by which the Economic growth rate of company decided.

DEBIT CARD

Debit Card is also known as gift card. It is a type of plastic money which provides an alternative payment method for cash withdrawals through automated tailor machine and this is a prepaid ATM card.

CREDIT CARD

A Credit Card allows you to borrow money when you purchases. It doesn’t directly debit from your bank account at the time of purchase instead you are sent a bill every month for the sum of total of your purchase. In other words this Post Paid Money Card.

SMART CARD

A Smart Card or chip card or integrated circuit card is defined as a pocket sized card with embedded integrated circuit which can process information. This is a card with all personal information of any individual in financial and Money Market.

MASTER CARD

Master Card international is a multinational corporation based in purchase throughout the world. Its principal business is to process payment between bank of merchants and the bank of purchase that used its master card I.E. Master Card is a service provider company Master Card international incorporated has been a publicity traded company since 2006 with the brand name Master Card. All financial institutions in banks are the member of this Master Card international for service providing except bank of America. Bank of Americahas its own service proving company named as VISA international.

VISA CARD

Visa Card is a type of debit card on Visa network. It has VISA logo and can be accepted to pay for the things and the money is drawn directly from your account. These are the debit cards, which are subject to a daily limit, and/or a maximum limit equal to the current/checking account balance from which it draws funds.

KYC (KNOW YOUR CUSTOMERS)

KYC is a term commonly used for customer identification process or these are the guidelines issued by the RBI and SEBI for financial institutions. The intention behind the KYC is to check the money laundering. For the mutual funds MIN (Mutual Fund Identification Number) is the tool of KYC. For Demat Account Pan Card is essential and for band account-

 Residential Proof

 Identity Proof

 Referee/Introducer

 Signature Attestation

CBS

Core or centralized banking solution is a heart of banking system. This is a process by which a bank has interconnect their maximum branches through wide area network and only this system provide a facility of any branch or any time banking.

FINANCIAL INCLUSION

It is a delivery of banking services at an affordable cost to the vast section of disadvantage or low income group or this is a facility provided by the banking sector to connect each and every individual to the financial network and the main component of this financial inclusion is no-full account and simplification of know your customers.

BOND

Bond is a debt security in which the authorized issuer owes the holders a debt and s oblique to repaid the principal with interest at the later date and termed maturity.

DEBENTURES

It is a long term debit instrument issued by government and large companies to obtained funds. It is very similar to bonds except the securisation condition is different.

CAMELS

This is the rating system of RBI for banking recommended by Padmanabhan Committee.

 C- Capital Adequacy

A- Assets Quality or Level of NPA.

 M- Management Effectiveness.

 E- Earning of Profitability.

 L- Liquidity

 S- System and Controls.

EFT- ELECTRONIC FUND TRANSFER

 It refers to computer based system use to perform financial transaction electronically. This term is use for the number of different concept

 Card holder initiated transaction, where the card holder makes use of a payment card.

 Electronic payment by business including salary payment

 Electronic cheque clearing.

MORTGAGE

A Mortgage is a method of using property as a security for the performance of an obligation, usually the payment of a debt. The term Mortgage refers to a legal device used for this purpose and it is also commonly used to refer to a debt secure by the Mortgage.

BANK

According To Banking Encyclopedia Bank Is A Financial Institution Which Receives Deposits From The Public And Lends Them For Investment Purpose I.E, Deposits Of Money And Advances of The Main Function Of Banks,

OVERSEAS BANKING

Banking with Foreign operation that means if a domestic Bank is working in abroad with his many branches.

OFFSHORE BANKING

An offshore Bank Account will allow you to safely and privately explore, with few restrictions, the far reaches of the vast and diverse financial universe.

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction (or tax haven) that provides financial and legal advantages. These advantages typically  include some or all of

 Strong Privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)

 Less Restrictive Legal Regulation

 Low or No Taxation (i.e. tax havens)

 Easy access to deposits (at least in terms of regulation)

 Protection against Local Political or Financial Instability

PARALLEL BANKING

Parallel banks are defined as banks licensed in different jurisdictions that, while not being part of the same financial group for regulatory consolidation purposes, have the same beneficial owner (s), and consequently, often share common management and interlinked businesses. The owner(s) may be an individual or a family, a group of private shareholders, or a holding company or other entity that is not Subject to banking supervision. Parallel banking relationships may exist, unknown to the supervisors of the parallel banks. Such structures may be established for a variety of reasons, among others to take advantage of different tax arrangements; to avoid legal restrictions in some countries on the ownership of foreign subsidiaries by domestic banks; or to diversify risk outside countries that are considered economically or politically unstable. In some cases, the motivation may be an attempt to evade regulatory constraints or consolidated supervision from the home country.

MERCHANT BANKING

In banking, a merchant bank is a traditional term for an investment bank. It can also be used to describe the private equity activities' of banking developed by merchants, from the Middle Ages onwards.

DOOR TO DOOR BANKING

Doorstep banking is to deliver Banking and Financial Services at the doorsteps of the common man.

ISLAMIC BANKING

Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (SHARIA) principles and guided by Islamic economics. Particular Islamic law Prohibits usury, the Collection and payment of interest, also commonly called RIBA in Islamic discourse in addition, Islamic law prohibits investing in businesses' that are considered unlawful, or HARAAM (such as Businesses that sell alcohol or pork, or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values). In the late 20th century, a number of Islamic Banks were created, to cater to this particular banking market.

RELATIONSHIP BANKING

Relationship banking is an attempt to advance the sales culture in bank marketing beyond order taking to a more pro-active form of direct selling instead of selling financial services. One at a Time, an account officer attempts to gain an understanding of the consumer's needs and offer services that fulfill those needs. Commercial banks and other financial institutions have attempted to apply the concept of relationship banking through personal banker and private banking.

UNIVERSAL BANKING

Banking that includes investment services in addition to services related to savings and loans.

VIRTUAL BANKING

A virtual bank is a bank with a very small or nonexistent branch network. It offers financial Services by:

 Telephone Banking

 Online Banking

 Automated Teller Mac Hines (Often Through Interbank Network Alliances)

 Mail Banking

 Mobile Banking

By Eliminating The Costs Associated With Retail Banking, Particularly Bank Branches, Virtual Banks May Offer Higher Interest Rates And Lower Service Charges On Their Savings Accounts Than Their Competitors.

GLOBAL BANKING

International Banking activities frequently result in financial instability and serious economic downturns as financial markets become more open and deregulated. Competition from multinational bank has reduced the availability of credit to small- and medium- sized enterprises, to low- and middle-income consumers, and to farmers. While Economies experience financial instabilities and declining credit, governments are losing the means to protect their domestic markets.

ACCOUNTS

It is a record of financial transaction in the form of stock or flows. It is an arrangement between seller and a buyer under which a period of credit is allowed before payment.

There are two types of accounts in the banking sector:’

DEPOSIT ACCOUNT

It is a bank account in which deposits earn interest, and withdrawal from which require notice. There are two types of deposits account.

DEMAND DEPOSITS

The money which is kept in our saving accounts is like a medium of exchange and this is called Demand Deposits. It is also known as CASA (Current Account and Saving Account)

 Current Account

 Saving Account

SAVING ACCOUNT

Saving account are made for the household saving purpose and interest rate of this account is decide by the RBI and presently it is 3.5%. the saving account are also known as individual account. Through this account, the account holders get cheque. There is lot of flexibility for deposits and withdrawal of funds from the these types of account

CURRENT ACCOUNT

Current accounts are made for the business class persons and account holders can made many transaction in a day. The current account attracts no interest rate sometimes Banks can charge some charges from this account. The deposits in current account are the most liquid deposits and there are no limits for number of transactions or the amount of transactions in a day.

LOAN ACCOUNT OR ADVANCES OF BANK

There are two types of lending or advances in the banking sector.

1. SHORT TERM LENDING- up to 4 years. Like – Priority Sector Lending

 Consumer loan

 Vehicle loans and personal loans

2. LONG TERM LENDING- 4 years and above. Like-

 Industrial Lending

 Housing Loans

 Commercial Lending

 Educational Loan

PRIORITY SECTOR LENDING *PSL’S+

As India is a democracy so Government of India has some social responsibilities and the fulfillment of these Social responsibilities the GOI has set some priorities, so the sectors decided for GOI by Landings are known as priority sector lending and The Some Sectors are

 Agriculture

 Minority Education

 Animal Husbandry

 Fisheries

 Agriculture Allied

 Small Scale Industries

 Cottage Industries

 Handicrafts

 Houses for the Poor

The Bankers are bound to lend their 40% of the total lending in priority sector r and 18% of their total lending for agriculture. The PSL attract very reduced or less interest rate and if farmers are unable to repay this, loan GOI is bound to waive this loan because of Social Responsibility.

REPO RATE

Repo Rate is the Tool by which RBI in flews liquidity in the financial system. Or it is the rate of interest at which RBI. Provide short term loans to the scheduled commercial Bank against the government securities. (Maximum-90 days)

BANK RATE

Bank Rate is the rate of interest at which RBI provide loan to the scheduled Commercial banks for productive purpose & for long term period (more than 4 year]

CRR

CRR is the ratio of banks total deposits for which they are bound to keep with the RBI. It could be between minimum 3% to maximum 15% & CRR is the most effective measure to check inflation if CRR increases bank are bound to keep more money with the RBI & the liquidity in market decreases & the value of money increases & inflation come down.

SLR

SLR is the ratio of banks total deposits for which banks are required to keep with themselves If might be in form of cash, gold, government securities and deposits in other banks as current account.

DEFICIT FINANCING

The concept of deficit financing is propounded by Prof. J. M. Kenes in his book "how to pay for war 1940" Deficit financing is a practice adopted by all popular government for bridging the gap between their revenue and expenditure i.e. it is plan excess of expenditure over revenue.

SEZ

SEZ means Special Economic Zone is the one of the part of government’s policies in India. A special Economic zone is a geographical region that economic laws which are more liberal than the usual economic laws in the country. The basic motto behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of the people.

Non-Banking Financial Company (NBFC)

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/construction of immovable property. A non-banking institution which is a company and has principal business of receiving deposits under any scheme or arrangement in one lump sum or in installments by way of contributions or in any other manner, is also a non-banking financial company (Residuary non-banking company).

Cheque and Demand Draft

Cheque: Cheuqe is a negotiable instrument instructing a bank to pay a specific amount from a specific account held in the maker/depositor name with that Bank.

Demand Draft: A demand draft is an instrument used for effecting transfer of money. It is a negotiable instrument.

BSBDA

Under the guidelines issued on August 10, 2012 by RBI: Any individual, including poor or those from weaker section of the society, can open zero balance account in any bank. BSBDA guidelines are applicable to "all scheduled commercial banks in India, including foreign banks having branches in India".

All the accounts opened earlier as 'no-frills' account should be renamed as BSBDA. Banks are required to convert the existing 'no-frills' accounts’ into 'Basic Savings Bank Deposit Accounts'.

The 'Basic Savings Bank Deposit Account' should be considered as a normal banking service available to all customers, through branches .

The aim of introducing 'Basic Savings Bank Deposit Account' is very much part of the efforts of RBI for furthering Financial Inclusion objectives.

DeMat Account

DeMat is nothing but a dematerialized account. If one has to save money or make cheque payments, then he/she needs to open a bank account. Similarly, one needs to open a DeMat account if he/she wants to buy or sell stocks. Thus, DeMat account is similar to a bank account wherein the actual money is being replaced by shares. In order to open a DeMat account, one needs to approach the Depository Participants [DPs].

Fiscal Policy

Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine public revenue and public expenditure.

FII

FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII's generally buy in large volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance Companies, Banks, etc.

FDI

FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in a Indian Company.

IPO

IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock exchanges.

GDP

The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period; classically a year.

GNP

Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market.

Revenue deficit

It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received by the government.

Disinvestment

The Selling of the government stake in public sector undertakings.

Fiscal Deficit

It is the difference between the government’s total receipts (excluding borrowings) and total expenditure.

National Income

National Income is the money value of all goods and services produced in a Country during the year.

Cheque Truncation:

i. Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch.

ii. In its place an electronic image of the cheque is transmitted to the drawee branch by the clearing house, along with relevant information like data on the MICR band, date of presentation, presenting bank, etc.

iii. Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the scope for clearing-related frauds or loss of instruments in transit, lowers the cost of collection of cheques, and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole.

Crossing on Cheque: Two parallel lines drawn on the top left corner of the cheque.

Account payee cheque: Account payee cheques can be routed only through accounts.

Post dated cheque: The date on the cheque beyond today’s date then cheque becomes post dated.

Stale cheque: Cheque is valid for 3 months. If the date on the cheque is before 3 months, then the cheque becomes stale cheque.

Mutilated cheque: It is a damaged cheque.

 At Par cheque: It is payable anywhere in India.

Multi city cheque: A cheque which is payable in any branch of a particular bank

(i) "soiled note:" means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note.

(ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces.

(iii) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote.

Currency chest-

i. To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled banks to establish Currency Chests.

ii. These are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank. As on June 30, 2006, there were 4428 Currency Chests and 4102 Small Coin Depots.

iii. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of operation.

Internet Banking -The accessing of bank information, accounts and transactions with the help of a computer through the financial institution's website on the Internet is called online banking. It is also called Internet banking or e-banking

Bhartiya Mahila Bank (BMB) is an Indian financial services banking company based in New Delhi, India.India's Prime Minister Manmohan Singh inaugurated the system on 19 November 2013 on the occasion of the 94th birth anniversary of former Indian Prime Minister Indira Gandhi.

Headquarter – New Delhi. Bank will get an initial capital of Rs 1,000 crore.

Usha Ananthasubramanian – The First CEO/Chairperson of Bhartiya Mahila Bank

National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme.

There is no limit – either minimum or maximum – on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.

The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time; 'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable.

The minimum amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for RTGS transactions.