Banking Terms - 3
Pass Book:
A record of all debit and credit entries in a customer's account. Generally all banks issue pass books to Savings Bank/Current Account Holders.
Personal Identification Number (PIN):
Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM.
Plastic Money:
Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.
Pledge:
A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.
Post-Dated Cheque:
A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.
Power of Attorney:
It is a document executed by one person - Donor or Principal, in favour of another person , Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.
Premature Withdrawals:
Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.
Prime Lending Rate (PLR): The rate at which banks lend to their best (prime) customers.
Priority Sector Advances:
consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipment, professional and self-employed persons, state sponsored organizations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.
Promissory Note:
Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person, a certain sum of money on demand or on a future day.
Provisioning:
Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification. and make appropriate provisions for likely losses in their balance sheets.
Public Sector Bank:
A bank fully or partly owned by the Government.
Rescheduling of Payment:
Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.
Restrictive Endorsement :
Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.
Right of Appropriation :
As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.
Right of Set-Off :
When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.
A record of all debit and credit entries in a customer's account. Generally all banks issue pass books to Savings Bank/Current Account Holders.
Personal Identification Number (PIN):
Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM.
Plastic Money:
Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.
Pledge:
A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.
Post-Dated Cheque:
A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.
Power of Attorney:
It is a document executed by one person - Donor or Principal, in favour of another person , Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.
Premature Withdrawals:
Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.
Prime Lending Rate (PLR): The rate at which banks lend to their best (prime) customers.
Priority Sector Advances:
consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipment, professional and self-employed persons, state sponsored organizations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.
Promissory Note:
Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person, a certain sum of money on demand or on a future day.
Provisioning:
Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification. and make appropriate provisions for likely losses in their balance sheets.
Public Sector Bank:
A bank fully or partly owned by the Government.
Rescheduling of Payment:
Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.
Restrictive Endorsement :
Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.
Right of Appropriation :
As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.
Right of Set-Off :
When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.
Safe Custody: When articles of value like jewelry, boxes,
shares, debentures, Government bonds, Wills or other documents or articles are
given to a bank for safe keeping in its safe vault, it is called safe custody..
Bank charges a fee from its clients for such safe custody.
Savings Bank Account:
All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account.
Teller: Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.
Underwriting:
is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.
Universal Banking :
When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.
Virtual Banking:
Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's world wide web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.
Wholesale Banking:
Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients.
What are Open Market operations (OMO)?
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.
What is 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.
What is 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.
What is RTGS System?
The acronym ‘RTGS’ stands for 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.
What is Bancassurance?
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.
What is 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.
What is Consumer price Index (CPI)?
It is a measure estimating the average price of consumer goods and services purchased by households.
What is 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.
What is a 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.
What is 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.
What is 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.
What is a Debenture? How many types of debentures are there? What are they?
A debenture is basically an unsecured loan to a corporation. A type of debt instrument that is not secured by physical asset. Debentures are backed only by the general creditworthiness and reputation of the issuer.
Savings Bank Account:
All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account.
Teller: Teller is a staff member of a bank who accepts deposits, cashes cheques and performs other banking services for the public.
Underwriting:
is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.
Universal Banking :
When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.
Virtual Banking:
Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's world wide web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.
Wholesale Banking:
Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients.
What are Open Market operations (OMO)?
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.
What is 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.
What is 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.
What is RTGS System?
The acronym ‘RTGS’ stands for 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.
What is Bancassurance?
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.
What is 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.
What is Consumer price Index (CPI)?
It is a measure estimating the average price of consumer goods and services purchased by households.
What is 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.
What is a 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.
What is 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.
What is 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.
What is a Debenture? How many types of debentures are there? What are they?
A debenture is basically an unsecured loan to a corporation. A type of debt instrument that is not secured by physical asset. Debentures are backed only by the general creditworthiness and reputation of the issuer.
i)Convertible Debentures: Any type of debenture that can be converted into some other security or it can be converted into stock.
ii)Non-Convertibility Debentures(NCB): Non-Convertible Debentures are those that cannot be converted into equity shares of the issuing company, as opposed to Convertible debentures. Non-convertible debentures normally earn a higher interest rate than convertible debentures do.
What is a hedge fund?
‘Hedge’ means to reduce financial risk.
A hedge fund is an investment fund open to a limited range of investors and requires a very large initial minimum investment. It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment.
What is FCCB?
A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued in a currency different than the issuer’s domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A company may issue an FCCB if it intends to make a large investment in a country using that foreign currency.
What is Capital Account Convertibility (CAC)?
It is the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. This means that capital account convertibility allows anyone to freely move from local currency into foreign currency and back.
The Reserve Bank of India has appointed a committee to set out the framework for fuller Capital Account Convertibility.
Capital account convertibility is considered to be one of the major features of a developed economy. It helps attract foreign investment. capital account convertibility makes it easier for domestic companies to tap foreign markets.
What is Current Account Convertibility?
It defines that one can import and export goods or receive or make payments for services rendered. However, investments and borrowings are restricted.
What is Arbitrage?
The opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.
What is Capitalism?
Capitalism as an economy is based on a democratic political ideology and produces a free market economy, where businesses are privately owned and operated for profit; in capitalism, all of the capital investments and decisions about production, distribution, and the prices of goods, services, and labor, are determined in the free market and affected by the forces of supply and demand.
What is Socialism?
Socialism as an economy is based on a collectivist type of political ideology and involves the running of businesses to benefit the common good of a vast majority of people rather than of a small upper class segment of society.
What is corporate governance?
The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Is defined as the general set of customs, regulations, habits, and laws that determine to what end a firm should be run.
A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued in a currency different than the issuer’s domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. A company may issue an FCCB if it intends to make a large investment in a country using that foreign currency.
What is Capital Account Convertibility (CAC)?
It is the freedom to convert local financial assets into foreign financial assets and vice versa at market determined rates of exchange. This means that capital account convertibility allows anyone to freely move from local currency into foreign currency and back.
The Reserve Bank of India has appointed a committee to set out the framework for fuller Capital Account Convertibility.
Capital account convertibility is considered to be one of the major features of a developed economy. It helps attract foreign investment. capital account convertibility makes it easier for domestic companies to tap foreign markets.
What is Current Account Convertibility?
It defines that one can import and export goods or receive or make payments for services rendered. However, investments and borrowings are restricted.
What is Arbitrage?
The opportunity to buy an asset at a low price then immediately selling it on a different market for a higher price.
What is Capitalism?
Capitalism as an economy is based on a democratic political ideology and produces a free market economy, where businesses are privately owned and operated for profit; in capitalism, all of the capital investments and decisions about production, distribution, and the prices of goods, services, and labor, are determined in the free market and affected by the forces of supply and demand.
What is Socialism?
Socialism as an economy is based on a collectivist type of political ideology and involves the running of businesses to benefit the common good of a vast majority of people rather than of a small upper class segment of society.
What is corporate governance?
The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled. Is defined as the general set of customs, regulations, habits, and laws that determine to what end a firm should be run.
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