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Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 1


Acceptance Letter
Acceptance letter is the letter that a borrower or applicant gives to the lender after reading the terms of the loan. This letter denotes the borrower’s willingness to accept the loan offer within a particular time frame.

Account balance
Opening Account Balance / Beginning of the Day (BOD) Balance: The balance in an account at the beginning of each business day; includes all deposits and withdrawals that were posted from the previous night, whether or not funds have been collected.
Closing Account Balance / End of the Day (EOD) Balance: The account balance computed at the end of the business day, and is the adjusted balance of the credits and debits during the business day in the account of the customer.

Account statement
Periodic statement of all the debit and credit transactions on an account for a given statement cycle.

Acquirers are banks and financial institutions that collaborate with businesses to accept credit/debit card payments.

Active account
A bank account in which there are regular transactions. A bank account that is not dormant or inoperative or under an attachment order of the court or enforcement authorities.

Additional cardholder
Another member added to an existing card thus extending its usage is called an additional cardholder. Thus by adding an additional cardholder the existing cardholder allows him/ her to make purchases and use the credit card. However, the responsibility to repay the monthly outstanding balance rests with the original (principal) cardholder.

Administrative Fee
A one time non-refundable levy to bank's customers for meeting expenses related to appraisal of loan proposals.

Advance EMI
Number of equated monthly installments, paid in advance at the time of disbursal of loan.

Affinity Card
Credit cards linked to special organizations like sports clubs, exclusive clubs and charities. Affinity credit cards can also help raise funds, when a part of income from every transaction goes toward the benefit of relevant organization.

Amortization is the repayment of Principal and Interest components of a Loan, over a period of time. Certain category of expenses or charges are also amortized over a period of time.
Annual Fee
An  annual  amount  charged  by  the  credit  card  companies  to maintain the credit card.
Annual percentage yield (APY)
A percentage rate reflecting the total amount of interest paid on a deposit account (savings, CDs etc.), based on the interest rate and the effect of interest compounding for one year.
Anywhere Banking
Customer can deposit/ withdraw cash at any branch other than the branch in which he holds the account. Anywhere banking frees the customer from geographical boundaries and limitations and gives the flexibility to the customer to use his account across the board.
Application Form
A form to be filled in and signed as per the Bank’s requirements to avail Banking facilities. Requirement of details to be filled in will vary for each facility. Applications may also require certain specified documents also to be attached.
Arrears Outstanding
The arrears outstanding comprises of the unpaid EMI’s and other charges, if any, levied in the account.
Cash or anything you own that can be turned into cash. This includes property, goods, savings or investments.
These are things that people own such as buildings,  vehicles, shares and money in the bank. The opposite is liabilities. For a bank, its assets are mainly the loans it makes
Acronym for automated teller machine, a machine at a bank branch or other location, which enables a customer to perform basic banking activities (checking one's balance, withdrawing or transferring funds) even when the bank is closed.
Authentication of signatures of a customer of the branch required by the customer for any legal purposes.
Automatic Funds Transfer
An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every payday or once a month.
Automatic payment
An arrangement that authorizes payments to be deducted automatically from a bank account (usually a savings/current account) to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments are usually scheduled to be made on a certain day of the month.
Available balance
The available balance is the account balance in the account that is available for immediate use at any given point of time

Available Credit
Available credit is your credit limit minus your current balance. It is the unused portion of your credit line.

Average daily balance
The average balance in a deposit account, equals the sum of the daily account balances during an accounting period, usually a monthly or a quarterly cycle, divided by the number of days in the accounting period. Banks normally specify certain minimum average daily balance to be maintained in current and savings accounts.

Bad Credit
A term used to describe a poor credit rating including an account in default. Common practices which can damage your credit rating include late or missed payments, exceeding the limit on cards, defaulting on loans or declaring bankruptcy. "Bad Credit" can result in the denial of future credit.

Balance Transfer
Transferring balances from one credit card to another, usually to take advantage of a lower interest rate. Transfers are limited to the available credit on the receiving card.

Bank Draft
An instrument issued by one branch of a bank on another branch of the bank containing an order to pay a certain sum on demand to the person named on the draft. It is used to transfer funds and to settle outstanding balances between banks, or to provide a customer with funds payable at a bank in a different location. Bank drafts are valid for certain period, generally, for 6 months, as indicated over face of draft.

Banker's Cheque
A cheque issued by a branch of a  bank against consideration received. Banker's cheque are valid for a certain period as indicated on the face of the cheque. (also called Pay Order).

A legal action, in which a person who is not able to repay his loans satisfactorily, is declared bankrupt by a court order. The collateral or security in this case becomes liable to be attached by administration to satisfy creditors.

Base Rate
New reference rate used by banks for loan pricing w.e.f July 2010. Base rate captures cost of deposits, cost of capitals and unallocable (common) overheads. Banks are not allowed to lend base rate except for certain specified category or borrowers.

Basis Point
A unit of measurement which is equal to 1/100th of 1%. This is used to measure changes in interest rates, stock-market indices or yield on fixed income securities. For example, if an interest rate is

reduced by 50 basis points it means an effective reduction of 0.5%.

Bill discounting
Under this type of lending, Bank takes the bill drawn by borrower on his (borrower's) customer and pay him immediately deducting some amount as discount/commission. The Bank then presents the Bill to the borrower's customer on the due date of the Bill and collect the total amount. If the bill is delayed, the borrower or his customer pay the Bank a pre-determined interest depending upon the terms of transaction.

Bill Pay Service
Bill Pay is a service of Online Banking from bank that allows you to pay your bills online. In addition you can elect to receive e-Bills
- electronic versions of your paper bills - from your bank credit card and a variety of companies currently offering e-Bills.

A service provider who bills his/her services at specified intervals and has facilitated receipt of payment from his customers through online banking.

Billing Cycle
The number of days between your last statement date and your current statement date. Most service providers follow a monthly billing cycle.

Billing Statement
A monthly bill from your credit card issuer which describes and summarizes the activity on your account including the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.

The person/legal entity who is taking the loan with the promise to repay it back with interest under the credit or loan agreement.

Bounced cheque
A  cheque,  which  a  bank  returns  unpaid  because  there  is  not enough available balance in the account or for other reasons.

Broker is an individual who, for a commission or a fee, brings two parties together and assists in negotiating contracts between them.

The financial record you use to keep track of the money you earn, how much you spend and what you spend it on. Your budget also includes savings and how much you pay to your creditors.

Business Credit Card
A reward credit card, that comes with special features and rewards for corporate users. Business credit card builds credit history for the associated business. They are a good way to separate business expenses from personal ones.

Calendar Year
Commencing from the day and month of a year to the previous day and month of the next year.  A calendar year commencing on

1st March will end on 29th February if next year is a leap year at 28th February.

Canceled cheque
A cheque that has been not paid and cancelled by the drawer – Account holder.

Capital Adequacy Ratio
Capital Adequacy Ratio is the capital to assets ratio which banks are required to maintain against risks. It is also known as Capital to Risk (Weighted) Assets Ratio (CRAR).

Card Holder
Cardholder is a person who owns a debit or credit card issued by a credit card company, financial institution or bank.

Card Issuer
A bank, financial institution, credit union, or agency that issues a credit card to public or its members is called a card issuer.

Card member Agreement
The issuer's terms and conditions  relating to  your credit  card account. The Card member Agreement is between the customer and the card issuing company and is a legal document. (When you sign up for a credit card understand the terms and Conditions).

Carpet Area
The area inside the walls of a room, measured from wall to wall including the door jams. In simple terms it is the area usable as floor level inside a room.

Cash Advance (Credit Card)
Applies to an advance taken against a credit card account. The advance may be through a cash withdrawal at an automated teller machine, bank teller or by use of a convenience check. This cash is an instant loan from your credit card account. The credit card company will apply finance charges from the day you take the advance until the day you pay it off. A transaction fee may also be charged based on the amount of your withdrawal.

Cash Advance Fee
A one-time fee for cash advances in addition to normal finance charges. This fee is usually a percentage of the advance amount.

Cash Back Credit Card
It is a special type of reward credit card, which pays back in cash. Whenever you use your cash back credit card to make purchases, a percentage of it is returned back to you. The cash back rewards can be redeemed as gift vouchers, or hard cash.

Cash Reserve Ratio (CRR)
Cash Reserve Ratio is the amount of mandatory funds that commercial banks have to keep with RBI. It is always fixed as a percentage of total demand and time liabilites.

Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 1 Reviewed by Manohar Veera on 9:19:00 PM Rating: 5

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