Banking Terms – 2
Guarantee :
A contract between guarantor and beneficiary to ensure performance of a promise or discharge the liability of a third person. If promise is broken or not performed, the guarantor pays contracted amount to the beneficiary.
A contract between guarantor and beneficiary to ensure performance of a promise or discharge the liability of a third person. If promise is broken or not performed, the guarantor pays contracted amount to the beneficiary.
Holder :
Holder means
any person entitled in his own name to the possession of the cheque, bill of
exchange or promissory note and who is entitled to receive or recover the
amount due on it from the parties. For example, if I give a cheque to my friend
to withdraw money from my bank, he becomes holder of that cheque. Even if he
loses the cheque, he continues to be holder. Finder cannot become the holder.
Holder in due course :
A person who
receives a Negotiable Instrument for value, before it was due and in good
faith, without notice of any defect in it, he is called holder in due course as
per Negotiable Instrument Act. In the earlier example if my friend lends some
money to me on the basis of the cheque, which I have given to him for
encashment, he becomes holder-in-due course.
Hypothecation:
Charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. In pledge, possession of property is passed on to the lender but in hypothecation, the property remains with the borrower in trust for the lender.
Identification:
When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.
Indemnifier:
When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others' actions.
Indemnity:
Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.
Insolvent:
Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.
Interest Warrant:
When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.
International Banking:
involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.
Introduction:
Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.
JHF Account:
Joint Hindu Family Account is account of a firm whose business is carried out by Karta of the Joint family, acting for all the family members.. The family members have common ancestor and generally maintain a common residence and are subject to common social, economic and religious regulations.
Joint Account:
When two or more individuals jointly open an account with a bank.
Karta:
Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.
Kiosk Banking:
Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.
KYC Norms:
Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.
Law of Limitation:
Limitation Act of 1963 fixes the limitation period of debts and obligations including banks loans and advances. If the period fixed for particular debt or loan expires, one cannot file a suit for is recovery, but the fact of the debt or loan is not denied. It is said that law of limitation bars the remedy but does not extinguish the right.
Lease Financing:
Financing for the business of renting houses or lands for a specified period of time and also hiring out of an asset for the duration of its economic life. Leasing of a car or heavy machinery for a specific period at specific price is an example.
Letter of Credit:
A document issued by importers bank to its branch or agent abroad authorizing the payment of a specified sum to a person named in Letter of Credit (usually exporter from abroad). Letters of Credit are covered by rules framed under Uniform Customs and Practices of Documentary Credits framed by International Chamber of Commerce in Paris.
Limited Companies Accounts:
Accounts of companies incorporated under the Companies Act, 1956 . A company may be private or public. Liability of the shareholders of a company is generally limited to the face value of shares held by them
.
Mandate:
Written authority issued by a customer to another person to act on his behalf, to sign cheques or to operate a bank account.
Material Alteration:
Alteration in an instrument so as to alter the character of an instrument for example when date, amount, name of the payee are altered or making a cheque payable to bearer from an order one or opening the crossing on a cheque.
Merchant Banking:
When a bank provides to a customer various types of financial services like accepting bills arising out of trade, arranging and providing underwriting, new issues, providing advice, information or assistance on starting new business, acquisitions, mergers and foreign exchange.
Micro Finance:
Micro Finance aims at alleviation of poverty and empowerment of weaker sections in India. In micro finance, very small amounts are given as credit to poor in rural, semi-urban and urban areas to enable them to raise their income levels and improve living standards.
Minor Accounts:
A minor is a person who has not attained legal age of 18 years. As per Contract Act a minor cannot enter into a contract but as per Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive payment on a Negotiable Instrument so as to bind all the persons, except him. In order to boost their deposits many banks open minor accounts with some restrictions.
Mobile Banking: With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates.
Hypothecation:
Charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. In pledge, possession of property is passed on to the lender but in hypothecation, the property remains with the borrower in trust for the lender.
Identification:
When a person provides a document to a bank or is being identified by a person, who is known to the bank, it is called identification. Banks ask for identification before paying an order cheque or a demand draft across the counter.
Indemnifier:
When a person indemnifies or guarantees to make good any loss caused to the lender from his actions or others' actions.
Indemnity:
Indemnity is a bond where the indemnifier undertakes to reimburse the beneficiary from any loss arising due to his actions or third party actions.
Insolvent:
Insolvent is a person who is unable to pay his debts as they mature, as his liabilities are more than the assets . Civil Courts declare such persons insolvent. Banks do not open accounts of insolvent persons as they cannot enter into contract as per law.
Interest Warrant:
When cheque is given by a company or an organization in payment of interest on deposit , it is called interest warrant. Interest warrant has all the characteristics of a cheque.
International Banking:
involves more than two nations or countries. If an Indian Bank has branches in different countries like State Bank of India, it is said to do International Banking.
Introduction:
Banks are careful in opening any account for a customer as the prospective customer has to be introduced by an existing account holder or a staff member or by any other person known to the bank for opening of account. If bank does not take introduction, it will amount to negligence and will not get protection under law.
JHF Account:
Joint Hindu Family Account is account of a firm whose business is carried out by Karta of the Joint family, acting for all the family members.. The family members have common ancestor and generally maintain a common residence and are subject to common social, economic and religious regulations.
Joint Account:
When two or more individuals jointly open an account with a bank.
Karta:
Manager of a Hindu Undivided Family (HUF) who handles the family business. He is usually the eldest male member of the undivided family.
Kiosk Banking:
Doing banking from a cubicle from which food, newspapers, tickets etc. are also sold.
KYC Norms:
Know your customer norms are imposed by R.B.I. on banks and other financial institutions to ensure that they know their customers and to ensure that customers deal only in legitimate banking operations and not in money laundering or frauds.
Law of Limitation:
Limitation Act of 1963 fixes the limitation period of debts and obligations including banks loans and advances. If the period fixed for particular debt or loan expires, one cannot file a suit for is recovery, but the fact of the debt or loan is not denied. It is said that law of limitation bars the remedy but does not extinguish the right.
Lease Financing:
Financing for the business of renting houses or lands for a specified period of time and also hiring out of an asset for the duration of its economic life. Leasing of a car or heavy machinery for a specific period at specific price is an example.
Letter of Credit:
A document issued by importers bank to its branch or agent abroad authorizing the payment of a specified sum to a person named in Letter of Credit (usually exporter from abroad). Letters of Credit are covered by rules framed under Uniform Customs and Practices of Documentary Credits framed by International Chamber of Commerce in Paris.
Limited Companies Accounts:
Accounts of companies incorporated under the Companies Act, 1956 . A company may be private or public. Liability of the shareholders of a company is generally limited to the face value of shares held by them
.
Mandate:
Written authority issued by a customer to another person to act on his behalf, to sign cheques or to operate a bank account.
Material Alteration:
Alteration in an instrument so as to alter the character of an instrument for example when date, amount, name of the payee are altered or making a cheque payable to bearer from an order one or opening the crossing on a cheque.
Merchant Banking:
When a bank provides to a customer various types of financial services like accepting bills arising out of trade, arranging and providing underwriting, new issues, providing advice, information or assistance on starting new business, acquisitions, mergers and foreign exchange.
Micro Finance:
Micro Finance aims at alleviation of poverty and empowerment of weaker sections in India. In micro finance, very small amounts are given as credit to poor in rural, semi-urban and urban areas to enable them to raise their income levels and improve living standards.
Minor Accounts:
A minor is a person who has not attained legal age of 18 years. As per Contract Act a minor cannot enter into a contract but as per Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive payment on a Negotiable Instrument so as to bind all the persons, except him. In order to boost their deposits many banks open minor accounts with some restrictions.
Mobile Banking: With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates.
Money Laundering:
When a customer uses banking channels to cover up his suspicious and unlawful financial activities, it is called money laundering.
Money Market:
Money market is not an organized market like Bombay Stock Exchange but is an informal network of banks, financial institutions who deal in money market instruments of short term like CP, CD and Treasury bills of Government.
Moratorium:
R.B.I. imposes moratorium on operations of a bank; if the affairs of the bank are not conducted as per banking norms. After moratorium R.B.I. and Government explore the options of safeguarding the interests of depositors by way of change in management, amalgamation or take over or by other means.
Mortgage:
Transfer of an interest in specific immovable property for the purpose of offering a security for taking a loan or advance from another. It may be existing or future debt or performance of an agreement which may create monetary obligation for the transferor (mortgagor)
NABARD:
National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.
Negotiation:
In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.
Non-Fund Based Limits:
Non-Fund Based Limits are those types of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.
Non-Resident:
A person who is not a resident of India is a non-resident.
Non-Resident Accounts:
Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.
Notary Public:
A Lawyer who is authorized by Government to certify copies of documents.
NPA Account:
If interest and installments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.
Off Balance Sheet Items:
Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.
Online Banking:
Banking through internet site of the bank which is made interactive.
National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.
Negotiation:
In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.
Non-Fund Based Limits:
Non-Fund Based Limits are those types of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.
Non-Resident:
A person who is not a resident of India is a non-resident.
Non-Resident Accounts:
Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.
Notary Public:
A Lawyer who is authorized by Government to certify copies of documents.
NPA Account:
If interest and installments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.
Off Balance Sheet Items:
Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.
Online Banking:
Banking through internet site of the bank which is made interactive.
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