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Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 3




No.
TERM
DEFINITION

101
Documentation
The legal or other papers to be signed and presented during the loan process. It is also called the loan papers.
102
Dormant Account
(In operative account)
A bank account in which there have not been any transactions for two years.
103
Down Payment
The amount, which has to be paid by the borrower upfront while taking a loan. This amount is generally 10% -15% of the total fund required. It is also called the margin amount or margin money.
104
Draft
A written, signed and dated order from one Branch of a Bank to another , to pay a sum of money to a specific party.
105
Drawee
The person or entity on whom a draft/bill is drawn by the drawer.
106
Drawer
The party who draws or issues the draft/bill. In a Letter of Credit it is the  Beneficiary. The person who makes or draws a  bill of exchange or cheque is called drawer.
107
Due Date
The day a payment is due to a payee/creditor. After that date, a late fee can be charged, the payment can be recorded as late, and the account considered overdue/delinquent.
108
Early Repayment Charge (Prepayment charge)
Charge that banks and financial institutions levy on borrowers when they prepay the loan amount before the end of loan tenure. Early repayment charge is also called prepayment penalty.
109
Electronic Clearing Service (ECS)
Electronic Clearing Facility: An inter bank arrangement where by a customer can give instructions to his bank where he holds a current or savings account to pay the monthly installments of payments due on loans/credit cards held with another bank.
110
Electronic Clearing Service (ECS) Credit
ECS Credit is used for affording credit to a large  number  of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment.
ECS Credit can be utilised for payments like interest / dividend etc. in the accounts maintained with other banks by another bank.
111
Electronic Clearing Service (ECS) Debit
ECS Debit is used for raising debits to a number of accounts of consumers/ account holders for crediting a particular institution.
It is a scheme under which an account holder with a bank can


authorise an ECS user to recover an amount at a prescribed frequency by raising a debit in his account. The ECS user has to collect an authorisation, which is called ECS mandate for raising such debits. These mandates have to be endorsed by the bank branch maintaining the account.
ECS Debit is normally used for collections, which include payment of utility bills (electricity, telephone), collection of taxes etc.
112
Electronic Funds Transfer (EFT)
Any transfer of funds initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.
113
EMI
This refers to the Equated Monthly Installment (EMI) to be paid to the Bank towards the loan taken by the borrowers on a monthly basis. The EMI comprises of Interest and Principal component.
114
EMI Due date
The payment due date assigned for the loan account to recover the EMI.
115
E-Payment
On line payment system that facilitates payment online from the customer's account.
116
Expired Card
A credit card whose validity date has passed is an expired credit card.
117
Fiscal Year
A fiscal year is a 12-month accounting period used by any company and it does not necessarily follow the calendar year. India fiscal year is April to March.
118
Fixed Deposit
A deposit of funds in a bank under an agreement stipulating that the funds must be kept on deposit for a stated period of time at a predefined interest rate.
119
Fixed Rate
Also called the fixed interest rate, it is a fixed amount of interest, which is chargeable for a specified duration or for the entire tenure of the loan.
120
Floating Rate
Floating rate or variable interest rate as it is also called doesn't remain fixed for the entire tenure of the loan. It varies according to the market conditions. This rate is linked to an external, market determined benchmark e.g. LIBOR. The lending is expressed with a spread above or below the benchmark rate. Repricing takes place after a predetermined period say, 6 months when the lending rate will be revised with reference to the benchmark rate as on that day.
121
Floor Limit (Credit Card)
Floor limit is the maximum amount; credit card brands like Visa and MasterCard have set forth for a single transaction for specific types  of  merchants,  outlets  and  branches.  An  authorization  is


required, usually via a phone call to exceed the floor limit.
122
Foreclosure
Foreclosure is a legal procedure whereby property pledged as security for a debt is sold by the lender to pay the debt in the event of default in repayment.
123
Fraudulent Transaction (Credit Card)
A fraudulent credit card transaction is one in which the rules and regulations are not properly followed. Generally such transactions are unauthorized by credit card holders and involve a lost, stolen, fabricated, counterfeit and fraudulent processing of a credit card.
124
Guarantee
A legal contract in which a person (termed as guarantor) agrees to become liable for repayment of loan taken by another person (termed as primary borrower) subject to the condition that the primary borrower must be legally bound to repay the debt.
125
Half Year
A period of 182 days if computed in days or six complete calendar months.
126
Hire Purchase Price
The total money to be paid by the hirer under the hire-purchase agreement so as to complete the purchase of vehicle/machinery/goods etc.
127
Hirer
The person who takes the good on hire. If you purchase a car under hire-purchase agreement with a finance company, then you become the hirer.
128
Home Branch
The branch where  customer has opened his account after due compliance with KYC norms.
129
Household Income
Income from     all         sources            including           wages,            commissions, bonuses, dividends and interest of the members of a family.
130
Hypothecation
Hypothecation is a charge that is created on movable asset as security for a debt. However, the ownership as well as possession of the asset is retained with the borrower.
131
Installment Loan
A loan that you promise to pay back by paying the same amount of money on a regular basis, usually monthly, for a specific period of time. (Eg: EMI loan).
132
Interest
Interest is the periodic amount credited/debited to a deposit/loan account by a Bank based on accepted agreed terms and conditions by the depositor and the Bank / the loanee and the Bank. Interest is calculated at a specified percentage of the principal amount.
133
Interest and Principal
A certificate issued  for  the loan  confirming the details  of the interest paid and principal repaid for a completed financial year.

certificate

134
Interest Category
This refers to the interest category of the loan that was sanctioned by the Bank. The interest category is allocated by the Bank based on the customer’s request.
Variable (Floating)
The interest rates of the loans sanctioned under variable interest rate category will be changed during the tenure of the loan at specified intervals (see floating rate).
Semi Fixed
The interest rates of the loans sanctioned under semi fixed interest rate category remains fixed for the period ‘stipulated’ by the Bank in the terms and conditions of the agreement and/or sanction letter. After the said period, the loan will be re-priced as agreed to specified.
Fixed
The interest rates of the loans sanctioned under fixed interest rate category remain fixed throughout the tenure of the loan.
135
Interest Rate
The rate paid on an interest-bearing account, such as savings and term deposit, also the rate charged on a loan or line of credit. Different types of accounts and loans pay or charge different rates of interest. Interest rate is specified in percentage term alson with periodicity of calculation (say 8% per annum)
136
Introductory Rate
The Annual Percentage Rate (APR) applied for a specific introductory period. The intro rate is usually lower than the regular APR. After the introductory period is over the rate switches to the regular APR.
137
Inward Remittances
Fund     received            through banking            channels            electronically     or otherwise for credit to a designated identifiable account.
138
Joint account
Any account owned by two or more people. Joint accounts can be operated jointly or by any one/more or survivor(s) or any other mode mandated by the accountholders. Change in the mode of operation requires the mandate of all accountholders
139
Late Payment
Most charge and credit card bills list the date by which payments are due. If you miss the due date, the account is considered past due and you may be charged a late fee. Late payments may be reflected on your credit report. If you have paid late numerous times, it may be difficult to get additional credit.
140
Late      Payment Charges (fee)
When the payment towards credit card bill is missed beyond due date or monthly installment towards repayment of a loan is delayed the Card Issuing Bank / financier collects the payment / installment along with the late payment charges.


The late payment charge is also known as the delayed payment charges or the overdue payment charges. The late payment charges are fixed at the time of signing the finance contract.
141
Ledger Folio
A set of 40 consecutive transactions in an account.
142
Legal Checks (Scrutiny of Title Deeds)
Before disbursal of a Home loan or loan against any property, usually the bank conducts a legal check on the property being offered as collateral. It involves screening all the documents etc related to the property. This is done to ensure that the property in question has a clear title.
143
Legal Judgment
A court verdict that requires a person to do something, such as pay a debt.
144
Liability
Liability is the responsibility for a loan or credit account. When applying for credit, a borrower agrees to be liable for any charges to his or her account, including interest, fees and finance charges. The liabilities are resources (sources of funds) which the business mobilizes  to  acquire  assets  for  running  income.  Like  assets, liabilities may also be of long term nature or short term nature.
145
Linked account
Any account linked to another account at the same financial institution so that funds may be transferred electronically between accounts, and, in some cases, the combined balance may be used to help meet the balance required to waive a monthly service charge on one of the accounts.
146
Loan Agreement
It is a written contract between the borrower and the bank or financial institution providing the loan. The loan agreement details the various aspects and terms and condition of the loan. The borrower must read the loan agreement carefully as once he enters into a legal contract with the bank by signing the loan agreement, the terms become binding.
147
Loan Disbursement
This is the second stage of the loan processing. Post sanction of the loan, the Bank conducts necessary verification and validation as per its credit criteria. The disbursal will be done on meeting the credit criteria set by the Bank.
148
Loan Sanction
This is the first stage of the loan processing. The ‘Loan Sanction letter’ (Arrangement letter) is a confirmation to the customer on the sanction of the loan facility.
(see credit appraisal).
149
Mandate
The beneficiary communicates to the ECS user the details of his/her bank branch and account particulars. Such authorisation form is called a mandate. The beneficiary has to furnish a mandate


giving his consent to avail of the ECS facility.
It is a letter of authority given by an account holder to his banker to allow certain named person to operate his/her account on his/her behalf.
150
Margin Amount
Margin Amount is the difference between the total cost of a project and the sanctioned loan amount.


Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 3 Reviewed by Manohar Veera on 10:57:00 PM Rating: 5

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