Banking terms

AIDB- All India Development Bank

ATM- Automated Teller Machine is a machine uses a computer that verifies your account information and PIN (Personal Identification Number) and will dispense or deposit funds per your request) Annuity- Fixed amount of cash to be received every year for a specified period of time

Asset/Liability Risk- A risk that current obligations/ liabilities cannot be met with current assets. 

Assets- Things that one owns which have value in financial terms.

Banking Cash Transaction Tax (BCTT) - BCTT is a small tax on cash withdrawal from bank exceeding a particular amount in a single day

Bank Credit – Bank Credit includes Term Loans, Cash Credit, Overdrafts, Bills purchased & discounted, Bank Guarantees, Letters of Guarantee, Letters of credit.

Bank Debits - Sum of the value of all cheques and other instruments charged against the deposited funds of a bank’s customer.

Bank Rate - Interest rate paid by major banks if they borrow from RBI, the Central Bank of the country.

Bank Statement - A periodic record of a customer’s account that is issued at regular intervals, showing all transactions recorded for the period in question

Basis Point- Basis Point is one-hundredth of one percentage point (i.e. 0.01%), normally used for indicating spreads or cost of finance.

Balance of Payment (BoP) – BoP is a statement showing the country’s trade and financial transactions (all economic transactions), in terms of net outstanding receivable or payable from other countries, with the rest of the world for a period of time

BR Act - Banking Regulation Act

Cash reserve Ratio (CRR) - CRR is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks comes down

CAD- current account deficit

Capital Adequacy Ratio (CAR) – CRR is a ratio of total capital divided by risk-weighted assets and risk-weighted off-balance sheet items. 

Cash Credit (CC) - An arrangement whereby the bank gives a short-term loan against the self-liquidating security

Certificate of Deposit (CD) - CD is a negotiable instrument issued by a bank evidencing time deposit

Cheque - A written order on a bank instrument for payment of a certain amount of money. 

C-D ratio- Credit- Deposit Ratio

Corporate Banking - Banking services for large firms

CRAR - Capital to Risk-Weighted Assets Ratio

Credit Crunch - Fall in supply of credit even though there is sufficient demand for it

Cross default - Two loan agreements connected by a clause that allows one lender to recall the loan if the borrower defaults with another, and vice versa.

Deposit: A check or cash that is put into your bank account.

Endorse: To sign the back of your check before cashing or depositing it, as proof that you are the person the check was written out to.

Equitable  mortgage - Mortgage under which one still owns the property which is security for the mortgage. The owner can occupy or live in the property

Exchange Rate - The rate at which one currency may be exchanged for another

FRNs - Floating Rate Notes

Fixed assets - Assets such as land, buildings, machinery or property used in operating a business that will not be consumed or converted into cash during the current accounting period

Fixed Rate - A predetermined rate of interest applied to the principal of a loan or credit agreement

IFSC Code - Indian Financial System Code or IFSC code is an eleven character code assigned by RBI to identify every bank branches uniquely, that are participating in NEFT system in India

Liquidation – Liquidation is divestment of all the assets of a firm so that the firm ceases to exist

Liquidity- The extent to which or the ease with which an asset may quickly be converted into cash with the least administrative and other costs

Letter of Credit (LC) - A formal document issued by a bank on behalf of a customer, stating the conditions under which the bank will honour the commitments of the customer

Line of Credit - pre-approved credit facility (usually for one year) enabling a bank customer to borrow up to the specified maximum amount at any time during the relevant period of time.

MICR- Magnetic Ink Character Recognition or MICR is the bottom line on all checks. It is printed using a special font.

Monthly Statement: statement received by customers at the end of the month about the account’s activity (what went in and what came out) from the previous month.

NEFT- national electronic funds transfer 

Non Performing Assets (NPA) - When due payments in credit facilities remain overdue above a specified period, then such credit facilities are classified as NPA.

NBFCs- Non-banking Finance Companies

NHB- National Housing Bank

Overdraw: To write a check for more money than what is present in the account. Usually there is a fee (known as NSF/non-sufficient funds)

Principal- Principal is the amount of debt that must be repaid. Also means a person who deals in securities on his own account and not as a broker

Prime Lending Rate (PLR) - The rate of interest charged on loans by banks to their most creditworthy customers

PSB - Public Sector Bank

Repo rate- the rate at which the RBI lends money to banks

Reverse repo rate- Reverse Repo rate is the rate at which the RBI borrows money from commercial banks

SCBs - Scheduled Commercial Banks 

Statutory Liquidity Ratio- SLR is Statutory Liquidity Ratio. It’s the percentage of Demand and Time Maturities that banks need to have in any or combination of the following forms:
i) Cash
ii) Gold valued at a price not exceeding the current market price,
iii) Unencumbered approved securities (G Secs or Gilts come under this) valued at a price as specified by the RBI from time to time

Standby Letter of Credit - A guarantee issued by a bank, on behalf of a buyer that protects the seller against non-payment for goods shipped to the buyer

Securitization - Securitization is a process of transformation of a bank loan into tradable securities

Selective Credit Control (SCC) - Control of credit flow to borrowers dealing in some essential commodities to discourage hoarding and black-marketing

Tier 1 Capital - Refers to core capital consisting of Capital, Statutory Reserves, Revenue and other reserves, Capital Reserves (excluding Revaluation Reserves) and un-allocated surplus/ profit but excluding accumulated losses, investments in subsidiaries and other intangible assets

Tier 2 Capital - Comprises Property Revaluation Reserves, Undisclosed Reserves, Hybrid Capital, Subordinated Term Debt and General Provisions. This is Supplementary Capital.
Withdrawal: To take money out of your bank account. To make a withdrawal is the opposite of making a deposit