Banking Terms for Banking Examination
Anytime Banking :
With introduction of ATMs, Tele-Banking and internet banking, customers
can conduct their business anytime of the day and night. The 'Banking
Hours' is not a constraint for transacting banking business.
Anywhere Banking :
Refers to banking not only by ATMs, Tele-Banking and internet banking,
but also to core banking solutions brought in by banks where customer
can deposit his money, cheques and also withdraw money from any branch
connected with the system. All major banks in India have brought in core
banking in their operations to make banking truly anywhere banking.
Bank Ombudsman :
Bank Ombudsman is the authority to look into complaints against Banks in
the main areas of collection of cheque / bills, issue of demand drafts,
non-adherence to prescribed hours of working, failure to honour
guarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and advances where banks flout directions / instructions of RBI. This Scheme was announced in 1995 and is functioning with new guidelines from 2007. This scheme covers all scheduled banks, the RRBs and co-operative banks.
guarantee / letter of credit commitments, operations in deposit accounts and also in the areas of loans and advances where banks flout directions / instructions of RBI. This Scheme was announced in 1995 and is functioning with new guidelines from 2007. This scheme covers all scheduled banks, the RRBs and co-operative banks.
Bancassurance :
Bancassurance 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, medipolicies and
others, by banks as corporate agents through their branches located in
different parts of the country by
charging a fee.
charging a fee.
Banker's Lien :
Bankers lien is a special right of lien exercised by the bankers, who can retain goods bailed to them as a security for general balance of account. Bankers can have this right in the absence of a contract to the contrary.
Bankers lien is a special right of lien exercised by the bankers, who can retain goods bailed to them as a security for general balance of account. Bankers can have this right in the absence of a contract to the contrary.
Banking :
Accepting for the purpose of lending or investment of deposits of money from Public, Repayable on demand or otherwise and with-drawable by cheques, drafts, order, etc.
Basel-II :
The Committee on Banking Regulations and Supervisory Practices, popularity known as Basel Committee, submitted its revised version of norms in June, 2004. Under the revised accord the capital requirement is to be calculated for credit, market and operational risks. The minimum requirement continues to be 8% of capital fund (Tier I & II Capital) Tier II shall continue to be not more than 100% of Tier I Capital.
The Committee on Banking Regulations and Supervisory Practices, popularity known as Basel Committee, submitted its revised version of norms in June, 2004. Under the revised accord the capital requirement is to be calculated for credit, market and operational risks. The minimum requirement continues to be 8% of capital fund (Tier I & II Capital) Tier II shall continue to be not more than 100% of Tier I Capital.
Brick & Mortar Banking :
Brick and Mortar Banking refers to traditional system of banking done only in a fixed branch premises made of brick and mortar. Now there are banking channels like ATM, Internet Banking,tele banking etc.
Business of Banking :
Accepting deposits, borrowing money, lending money, investing, dealing in bills, dealing in Foreign Exchange, Hiring Lockers, Opening Safe Custody Accounts, Issuing Letters of Credit, Traveller's Cheques, doing Mutual Fund business, Insurance Business, acting as Trustee or doing any other business which Central Government may notify in the official Gazette.
Bouncing of a cheque :
Where an account does not have sufficient balance to honour the cheque issued by the customer , the cheque is returned by the bank with the reason "funds insufficient" or "Exceeds arrangement".This is known as 'Bouncing of a cheque'.
Where an account does not have sufficient balance to honour the cheque issued by the customer , the cheque is returned by the bank with the reason "funds insufficient" or "Exceeds arrangement".This is known as 'Bouncing of a cheque'.
Certificate of Deposit :
Certificate of Deposits are negotiable receipts in bearer form which can be freely traded among investors. This is also a money market instrument,issued for a period ranging from 7 days to f one year .The minimum deposit amount is Rs. 1 lakh and they are transferable by endorsement and delivery.
Cheque :
Cheque is a Bill of Exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.
Certificate of Deposits are negotiable receipts in bearer form which can be freely traded among investors. This is also a money market instrument,issued for a period ranging from 7 days to f one year .The minimum deposit amount is Rs. 1 lakh and they are transferable by endorsement and delivery.
Cheque :
Cheque is a Bill of Exchange drawn on a specified banker ordering the banker to pay a certain sum of money to the drawer of cheque or another person. Money is generally withdrawn by clients by cheques. Cheque is always payable on demand.
Cheque Truncation :
Cheque truncation, truncates or stops the flow of cheques through the banking system.
Generally truncation takes place at the collecting branch, which sends the electronic image of the cheques to the paying branch through the clearing house and stores the paper cheques with it.
Cheque truncation, truncates or stops the flow of cheques through the banking system.
Generally truncation takes place at the collecting branch, which sends the electronic image of the cheques to the paying branch through the clearing house and stores the paper cheques with it.
Collecting Banker :
Also called receiving banker, who collects on instruments like a cheque, draft or bill of exchange,lodged with himself for the credit of his customer's account.
Consumer Protection Act :
It is implemented from 1987 to enforce consumer rights through a simple
legal procedure. Banks also are covered under the Act. A consumer can file complaint for deficiency of service with Consumer District Forum for amounts upto Rs.20 Lacs in District Court, and for amounts above Rs.20 Lacs to Rs.1 Crore in State Commission and for amounts above Rs.1 Crore in National Commission.
Co-operative Bank :
An association of persons who collectively own and operate a bank for the benefit of consumers/ customers, like Saraswat Co-operative Bank or Abhyudaya Co-operative Bank and other such banks.
An association of persons who collectively own and operate a bank for the benefit of consumers/ customers, like Saraswat Co-operative Bank or Abhyudaya Co-operative Bank and other such banks.
Co-operative Society :
When an association of persons collectively own and operate a unit for the benefit of those using its services like Apna Bazar Co-operative Society or Sahakar Bhandar or a Co-operative Housing Society.
Core Banking Solutions (CBS) :
Core Banking Solutions is a buzz word in Indian banking at present, where branches of the bank are connected to a central host and the customers of connected branches can do banking at any breach with core banking facility.
Creditworthiness :
It is the capacity of a borrower to repay the loan / advance in time alongwith interest as per agreed terms.
Crossing of Cheques :
Crossing refers to drawing two parallel lines across the face of the cheque.A crossed cheque cannot be paid in cash across the counter, and is to be paid through a bank either by transfer, collection or clearing.A general crossing means that cheque can be paid through any bank and a special crossing, where the name of a bank is indicated on the cheque, can be paid only through the named bank.
Current Account :
Current account with a bank can be opened generally for business purpose. There are no
restrictions on withdrawals in this type of account. No interest is paid in this type of account.
Customer :
A person who maintains any type of account with a bank is a bank customer. Consumer Protection Act has a wider definition for consumer as the one who purchases any service for a fee like purchasing a demand draft or a pay order. The term customer is defined differently by Laws, softwares and countries.
A person who maintains any type of account with a bank is a bank customer. Consumer Protection Act has a wider definition for consumer as the one who purchases any service for a fee like purchasing a demand draft or a pay order. The term customer is defined differently by Laws, softwares and countries.
Debit Card :
A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.
A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.
Debtor :
A person who takes some money on loan from another person.
Demand Deposits : Deposits which are withdrawn on demand by customers.E.g. savings bank and current account deposits.
Demat Account :
Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.
Dishonour of Cheque :
Non-payment of a cheque by the paying banker with a return memo giving reasons for the non-payment.
Debit Card :
A plastic card issued by banks to customers to withdraw money electronically from their accounts. When you purchase things on the basis of Debit Card the amount due is debited immediately to the account . Many banks issue Debit-Cum-ATM Cards.
Debtor :
A person who takes some money on loan from another person.
A person who takes some money on loan from another person.
Demand Deposits :
Deposits which are withdrawn on demand by customers.E.g. savings bank and current account deposits.
Demat Account :
Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this demat Account.
Demat Account concept has revolutionized the capital market of India. When a depository company takes paper shares from an investor and converts them in electronic form through the concerned company, it is called Dematerialization of Shares. These converted Share Certificates in Electronic form are kept in a Demat Account by the Depository Company, like a bank keeps money in a deposit account. Investor can withdraw the shares or purchase more shares through this 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 :
E-Banking or electronic banking is a form of banking where funds are transferred through exchange of electronic signals between banks and financial institution and customers ATMs, Credit Cards, Debit Cards, International Cards, Internet Banking and new fund transfer devices like SWIFT, RTGS belong to this category.
EFT - (Electronic Fund Transfer) :
EFT is a device to facilitate automatic transmission and processing of messages as well as funds from one bank branch to another bank branch and even from one branch of a bank to a branch of another bank. EFT allows transfer of funds electronically with debit and credit to relative accounts.
Either or Survivor :
Refers to operation of the account opened in two names with a bank. It means that any one of the account holders have powers to withdraw money from the account, issue cheques, give stop payment instructions etc. In the event of death of one of the account holder, the surviving account holder gets all the powers of operation.
Refers to operation of the account opened in two names with a bank. It means that any one of the account holders have powers to withdraw money from the account, issue cheques, give stop payment instructions etc. In the event of death of one of the account holder, the surviving account holder gets all the powers of operation.
Electronic Commerce (E-Commerce):
E-Commerce is the paperless commerce where the exchange of business takes place by Electronic means.
Endorsement :
When a Negotiable Instrument contains, on the back of the instrument an endorsement, signed by the holder or payee of an order instrument, transferring the title to the other person, it is called endorsement.
Endorsement in Blank :
Where the name of the endorsee or transferee is not mentioned on the instrument.
Endorsement in Full :
Where the name of the endorsee or transferee appears on the instrument while making endorsement.
Where the name of the endorsee or transferee is not mentioned on the instrument.
Endorsement in Full :
Where the name of the endorsee or transferee appears on the instrument while making endorsement.
Execution of Documents :
Execution of documents is done by putting signature of the person, or affixing his thumb impression or putting signature with stamp or affixing common seal of the company on the documents with or without signatures of directors as per articles of association of the company.
Factoring :
Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.
Foreign Banks :
Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.
Forfaiting :
In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.
Forgery :
When a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.
Garnishee Order :
When a Court directs a bank to attach the funds to the credit of customer's account under
provisions of Section 60 of the Code of Civil Procedure, 1908.
General Lien :
A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt.
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.
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 can not 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 himself. 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 type 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 instalments 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.
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 equipments, professional and self employed persons, state sponsored organisations 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 jewellery, 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 :
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.
Banking and Finance terms in India
What is 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 at 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.
Functions of RBI?
The Reserve Bank of India is the central bank of India, was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.To regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.” Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.Banker to banks: maintains banking accounts of all scheduled banks.
What is monetary policy?
A Monetary policy is the process by which the government, central bank, of a country controls
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy.
What is 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.
What is Core Banking Solutions?
Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. It will cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions.
What is bank and its features and types?
A bank is a financial organization where people deposit their money to keep it safe.Banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner.
Regional Rural Banks were established with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. The RRBs mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans. The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State.
ii. Banking services for individual customers is known as retail banking.
iii. A bank that deals mostly in but international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public
iv. Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank.
v. Mobile Banking is a service that allows you to do banking transactions on your mobile phone without making a call , using the SMS facility. Is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone.
vi. Traditional banking is the normal bank accounts we have. Like, put your money in the bank and they act as a security and you will get only the normal interests (decided by RBI in our case, FED bank in US).
vii. Investment banking is entirely different. Here, people who are having so much money (money in excess which will yield only less interest if in Banks) will invest their money and get higher returns. For example, If i have more money instead of taking the pain of investing in share market, buying properties etc. I will give to
investment banks and they will do the money management and give me higher returns when compared to traditional banks.
What is E-Governance?
E-Governance is the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable,transparent and effective.
What is Right to information Act?
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State overnments.The Act applies to all States and Union Territories of India, except the State of Jammu and Kashmir – which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October 2005.
Credit Rating Agencies in India?
The credit rating agencies in India mainly include ICRA and CRISIL. ICRA wasformerly referred to the Investment Information and Credit Rating Agency of India Limited. Their main function is to grade the different sector and companies in terms of performance and offer solutions for up gradation. The credit rating agencies in India mainly include ICRA and CRISIL(Credit Rating Information Services of India Limited)
What is demand Draft?
A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft both are used for Transfer of money. You can 100% trust a DD. It is a banker’s check. A check may be dishonored for lack of funds a DD can not. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than individuals.
What is a NBFC?
A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government, but does not include any institution whose principal business is that of agriculture ctivity, industrial activity, sale/purchase/construction of immovable property. NBFCs are doing functions akin to that of banks; however there are a few differences:
(i)A NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand — immediately or within a very short period — like your current or savings accounts.)
(ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and
(iii) Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.
Diff between banking & Finance?
Finance is generally related to all types of financial, this could be accounting, insurances and policies. Whereas banking is everything that happens in a bank only.The term Banking and Finance are two very different terms but are often associated together. These two terms are often used to denote services that a bank and other financial institutions provide to its customers.
What is NASSCOM ?
The National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce is a consortium that serves as an interface to the Indian software industry and Indian BPO industry. Maintaining close interaction with the Government of India in formulating National IT policies with specific focus on IT software and services maintaining a state of the art information database of IT software and services related activities for use of both the software developers as well as interested companies overseas. Mr. Som Mittal – President. Chairman- Pramod Bhasin
What is ASSOCHAM?
The Associated Chambers of Commerce and Industry of India (ASSOCHAM), India’s premier apex chamber covers a membership of over 2 lakh companies and professionals across the country. It was established in 1920 by promoter chambers, representing all regions of India. As an apex industry body, ASSOCHAM represents the interests of industry and trade, interfaces with Government on policy issues and interacts with counterpart international organizations to promote bilateral economic issues. President-Swati Piramal
What is NABARD?
NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.
What is SIDBI?
The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro, small and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.
What is SENSEX and NIFTY?
SENSEX is the short term for the words “Sensitive Index” and is associated with the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE. Where as NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL SHOW DAILY TRADING MARKS. Sensex and Nifty both are an “index”. An index is basically an indicator it indicates whether most of the stocks have gone up or most of the stocks have gone down.
What is SEBI?
SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave.
What is Mutual funds?
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.
What is Asset Management Companies?
A company that invests its clients’ pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.
What are non-perfoming assets?
Non-performing assets, also called non-performing loans, are loans,made by a bank or finance company, on which repayments or interest payments are not being made on time. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.
What is Recession?
A true economic recession can only be confirmed if GDP (Gross Domestic Product)growth is negative for a period of two or more consecutive quarters.
What is foreign exchange reservers?
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities.However, the term in popular usage commonly includes foreign exchange and gold,SDRs and IMF reserve positions.
Business of buying trade debts at a discount and making a profit when debt is realized and also taking over collection of trade debts at agreed prices.
Foreign Banks :
Banks incorporated outside India but operating in India and regulated by the Reserve Bank of India (RBI),. e..g., Barclays Bank, HSBC, Citibank, Standard Chartered Bank, etc.
Forfaiting :
In International Trade when an exporter finds it difficult to realize money from the importer, he sells the right to receive money at a discount to a forfaiter, who undertakes inherent political and commercial risks to finance the exporter, of course with assumption of a profit in the venture.
Forgery :
When a material alteration is made on a document or a Negotiable Instrument like a cheque, to change the mandate of the drawer, with intention to defraud.
Garnishee Order :
When a Court directs a bank to attach the funds to the credit of customer's account under
provisions of Section 60 of the Code of Civil Procedure, 1908.
General Lien :
A right of the creditors to retain possession of all goods given in security to him by the debtor for any outstanding debt.
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.
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 can not 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 himself. 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 type 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 instalments 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.
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 equipments, professional and self employed persons, state sponsored organisations 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 jewellery, 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 :
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.
Banking and Finance terms in India
What is 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 at 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.
Functions of RBI?
The Reserve Bank of India is the central bank of India, was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.To regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage.” Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.Banker to banks: maintains banking accounts of all scheduled banks.
What is monetary policy?
A Monetary policy is the process by which the government, central bank, of a country controls
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of interest, in order to attain a set of objectives oriented towards the growth and stability of the economy.
What is 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.
What is Core Banking Solutions?
Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. It will cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions.
What is bank and its features and types?
A bank is a financial organization where people deposit their money to keep it safe.Banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner.
Regional Rural Banks were established with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. The RRBs mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans. The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State.
ii. Banking services for individual customers is known as retail banking.
iii. A bank that deals mostly in but international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public
iv. Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank.
v. Mobile Banking is a service that allows you to do banking transactions on your mobile phone without making a call , using the SMS facility. Is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone.
vi. Traditional banking is the normal bank accounts we have. Like, put your money in the bank and they act as a security and you will get only the normal interests (decided by RBI in our case, FED bank in US).
vii. Investment banking is entirely different. Here, people who are having so much money (money in excess which will yield only less interest if in Banks) will invest their money and get higher returns. For example, If i have more money instead of taking the pain of investing in share market, buying properties etc. I will give to
investment banks and they will do the money management and give me higher returns when compared to traditional banks.
What is E-Governance?
E-Governance is the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable,transparent and effective.
What is Right to information Act?
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State overnments.The Act applies to all States and Union Territories of India, except the State of Jammu and Kashmir – which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October 2005.
Credit Rating Agencies in India?
The credit rating agencies in India mainly include ICRA and CRISIL. ICRA wasformerly referred to the Investment Information and Credit Rating Agency of India Limited. Their main function is to grade the different sector and companies in terms of performance and offer solutions for up gradation. The credit rating agencies in India mainly include ICRA and CRISIL(Credit Rating Information Services of India Limited)
What is demand Draft?
A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft both are used for Transfer of money. You can 100% trust a DD. It is a banker’s check. A check may be dishonored for lack of funds a DD can not. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than individuals.
What is a NBFC?
A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government, but does not include any institution whose principal business is that of agriculture ctivity, industrial activity, sale/purchase/construction of immovable property. NBFCs are doing functions akin to that of banks; however there are a few differences:
(i)A NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand — immediately or within a very short period — like your current or savings accounts.)
(ii) it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and
(iii) Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.
Diff between banking & Finance?
Finance is generally related to all types of financial, this could be accounting, insurances and policies. Whereas banking is everything that happens in a bank only.The term Banking and Finance are two very different terms but are often associated together. These two terms are often used to denote services that a bank and other financial institutions provide to its customers.
What is NASSCOM ?
The National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce is a consortium that serves as an interface to the Indian software industry and Indian BPO industry. Maintaining close interaction with the Government of India in formulating National IT policies with specific focus on IT software and services maintaining a state of the art information database of IT software and services related activities for use of both the software developers as well as interested companies overseas. Mr. Som Mittal – President. Chairman- Pramod Bhasin
What is ASSOCHAM?
The Associated Chambers of Commerce and Industry of India (ASSOCHAM), India’s premier apex chamber covers a membership of over 2 lakh companies and professionals across the country. It was established in 1920 by promoter chambers, representing all regions of India. As an apex industry body, ASSOCHAM represents the interests of industry and trade, interfaces with Government on policy issues and interacts with counterpart international organizations to promote bilateral economic issues. President-Swati Piramal
What is NABARD?
NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.
What is SIDBI?
The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro, small and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.
What is SENSEX and NIFTY?
SENSEX is the short term for the words “Sensitive Index” and is associated with the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE. Where as NSE has 50 most traded stocks of NSE.SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE.BOTH WILL SHOW DAILY TRADING MARKS. Sensex and Nifty both are an “index”. An index is basically an indicator it indicates whether most of the stocks have gone up or most of the stocks have gone down.
What is SEBI?
SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by C B Bhave.
What is Mutual funds?
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.
What is Asset Management Companies?
A company that invests its clients’ pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.
What are non-perfoming assets?
Non-performing assets, also called non-performing loans, are loans,made by a bank or finance company, on which repayments or interest payments are not being made on time. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.
What is Recession?
A true economic recession can only be confirmed if GDP (Gross Domestic Product)growth is negative for a period of two or more consecutive quarters.
What is foreign exchange reservers?
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities.However, the term in popular usage commonly includes foreign exchange and gold,SDRs and IMF reserve positions.
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