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Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 4


No.
TERM
DEFINITION

151
Market Value
The value or price of the property prevailing in the market.

152
Marketable Title
The  title  of  a  property,  which  is  clear,  and  the  owner  of  the property have proper authority and rights to transfer the same.

153
Maturity Date
Maturity date in respect of a fixed deposit account is the date on which the proceeds will become liable for payment by the Bank.

154
MICR Code
A unique 9-digit code assigned to each Bank branch by Reserve Bank of India to facilitate sorting in clearing of instruments using the Magnetic Ink Character Recognition Technology.

155
Minimum Amount Due/Minimum Payment
The smallest amounts you can pay by the due date and still meet the terms of your card agreement.

156
Minimum daily balance
The lowest end-of-day balance in an account during a statement cycle. It is often required to be kept in an account each day to earn interest, avoid a service charge or qualify for special services. (also see average daily balance)

157
Money Laundering
Money laundering means acquiring, owning, possessing or transferring any proceeds (or money) of crime or knowingly entering into any transaction related to proceeds of the crime either directly or indirectly or concealing or aiding in the concealment of the proceeds or gains of cirme, within or outside India. It is a process for conversion of money obtained illegally to appear to have originated from legitimate sources.

158
Money Order
A financial instrument, issued by a bank or other institutions like post office, allowing the individual named on the order to receive a specified amount of cash on demand. Often used by people who do not have saving accounts.

159
Monopoly
Monopoly is a form of market structure where there is solely one company that provides a particular product or service, dominating that market and generally exerting powerful control over it.

160
Monthly
A  monthly  report  prepared  by  a  lender  about  the  transaction


Statement
carried on a particular loan account, outstanding balances, current balances, fees and other charges, minimum payments (if applicable) and other details. This written document is mailed to the borrower.

161
Mortgage
Mortgage is a written constructive pledge of property that is used as security for the repayment of a loan.

162
Multicity Cheque
Cheque issued by a customer under a pre - approved arrangement with the Bank whereby the Bank agrees to pay them at designated centres and branches in the country.

163
National Clearing Cheque
Those cheque that are drawn on other banks and payable at major cities of the country (as Per RBI list of centres participating in national clearing) are called as National Clearing Cheque.

164
National Electronic Funds Transfer  (NEFT)
An Electronic Payment System in which payment  instructions between banks are processed and settled on deferred net settlement (DNS) basis, which settles transactions in batches at fixed times during the day.
RBI acts as the service provider and transfers the credit to the other bank's account. Customer can send funds from any bank branch to other bank-branches, which have IFS Code, and joined in NEFT network. NEFT is enabled only in specific bank branches across India. A list of these branches is available in the RBI website.

165
Net Worth
Net worth is equal to all that you own less all that you owe. It is the total of all assets minus the total liabilities of an individual or company.

166
No Dues/ No Objection Certificate
A certificate issued on closure of the  Loan/Overdraft account, where the Bank affirms that the dues have been paid towards loan/overdraft facility and also a confirmation that the Bank has no objection in releasing the charge on the security or other banks considering sanction of loan to the person concerned.

167
Nomination facility
Section 45zA of the Banking Regulations Act, 1949 provides that a depositor or depositors of a banking company may nominate one person to receive the deposit in the event of the death of the depositor(s). Nomination facility is also provided for articles in safe custody with banks and in safe deposit lockers.

168
Non-bank ATM (white lablled ATM)
An ATM or cash machine that does not prominently display a bank's name or logo. Fees generally apply to cash withdrawals at non-bank ATMs. Non-bank ATMs generally do not accept deposits. In India Non-banks ATMs are not permitted

169
Non-Home Branch
The other networked branches of a Bank under the Core Banking system that facilitate conducting of transactions to a customer having his account with a 'Home' branch.
170
Non-performing Assets (NPA)
Any loan account that has been classified by a bank or financial institution as sub-standard, doubtful or loss assets in terms of asset classification norms of RBI.
171
Non-taxable Income
Money you earn that is not taxed by the Government. This money can come from several sources including disability pay or legal settlements due to personal injury.
172
Obligation of the Borrower
The things, which a borrower has to take, care of after taking the loan. These include proper repayment, providing the banks with post-dated cheque and  following the terms written in the loan agreement carefully.
173
Online Banking
A service that allows the account holder to access their account information and conduct a set of pre defined banking transactions, such as  bill payment, fund transfer using the Internet  facility. However, a customer needs to have Customer ID and a unique Net Banking Password in order to undertake this facility.
174
Outstanding Balance
The total amount that you owe on a credit card or other loan.
175
Outstanding Cheque
Outstanding cheque is issued by the company but not yet cleared by the bank. In preparing the bank reconciliation, it is deducted from the bank balance. The exception is an uncleared Certified cheque, which is not considered outstanding since both parties, the company and the bank, know about it and have subtracted it.
176
Outstation Cheque
Cheque deposited by the customer of a branch for credit to his/her account and not payable at Local clearing at the centre where the branch is situated.
177
Outward Remittances
Remittance of funds from the account maintained by a customer or separately on his instructions to another account with the same bank or another banks in the manner indicated by the customer (Demand drafts, electronic  funds transfer, telegraphic  transfers etc.). Banks may levy service charges for  affecting  the remittances.
178
Over the Credit Limit
(Credit Card)
When the amount you owe is more than the limit on your credit line. Any combination of purchases, cash advances, fees or finance charges may cause you to exceed your credit limit.
For example, you will be over the credit limit if you spend Rs. 20,000 when you have Rs. 10,000 of your credit line left. If you go


over your credit limit, you will be charged an extra fee each month until the amount of money you owe is less than or equal to your credit line.
179
Overdraft
An overdraft occurs when you do not have enough available funds in your account to cover a cheque or other withdrawal, but the bank pays the items and overdraws your account.
180
Overdraft Protection
A service that allows a account to be linked to another account that helps provide protection against returned items or overdrafts. When your checking account does not have sufficient available funds to cover a cheque, funds are automatically transferred from the available balance in the linked account to cover the cheque. Choices can include using a savings account, credit card or a line of credit account as the linked account to provide protection.
181
Overlimit Fees
Whenever a credit card holder crosses his credit limits an overlimit fees is charged on his account.
182
Part- prepayment
Making  Partial  prepayment  towards  the  Principal  of  the  loan account.
183
Part- prepayment fee
The quantum of charges levied at the time of Part pre-payment.
184
Passbook
Book issued by a bank or financial institutions to record deposits, withdrawals, and interest earned in a savings account.
185
Past Due
The status of an account when the minimum payment has not been received by the due date.
186
Payee (Drawee)
The person who receives a payment. This often applies to cheque. If you receive a cheque  you are the payee and the person or company who wrote the cheque is the payer or drawer.
187
Payer (Drawer)
The person who makes a payment. This often applies to cheque. If you write a cheque you are the payer and the recipient of the cheque is the payee.
188
Penal interest
Additional interest, over and above the contracted rate, that is levied by lenders on amounts that remain unpaid beyond the due date and / or non-adherence to the terms of sanction.
189
Penalty on Premature Withdrawal of Fixed Deposit
It is a penalty on the premature breakage of a Fixed Deposit. If a customer keeps a deposit with a bank for a fixed tenure and in the event of the depositor withdrawing the deposit before the due maturity date, the banks can charge a Penalty sum on premature withdrawal.
190
Periodic Rate
The interest rate described in relation to a specific amount of time.


For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.
191
Personal Identification Number (PIN)
Personal identification number (PIN) is a secret number given to an account holder to be used when they put their credit card or cash card into an automatic teller machine (ATM). If the number they use is correct they will be allowed to access their account.
192
Plinth area
The external area of the whole building including the balconies but excluding the common area in apartment blocks, commercial buildings and spaces.
193
Point Of Sale (POS)
Point of Sale refers to the location at which a payment of a card transaction occurs, usually by way of a device such as a credit card terminal or cash register.
194
Post Dated Cheque (PDCs) Mode of Repayment
A  payment  mode  wherein  the  customer  provides  Post  Dated Cheque (PDCs) for the repayment of the loan dues.
195
Postal Charges
Charges for dispatch of instruments for collection/remittances on behalf of a customer. Normally postal charges are recovered from instrument on actual basis.
196
Posting Date
The date that a purchase, cash advance, fee, service charge or payment is recorded on your charge or credit account.
197
Power of Attorney
It is an instrument of law empowering a specified person or persons to act for and in the name of the person executing it. The person for whom the act is done or who is so represented is called principal. The person who is so authorized to do or represent is called agent. It may be either notarized or registered depending on the transaction.
198
Pre-Approved Credit
Credit card or a line of credit that is approved based upon available data without further information supplied by the potential Card member.
199
Pre-Closure
Closure  of  the  loan  account  prior  to  the  tenure  fixed  for  the account.
200
Prepayment
When a portion or the entire amount of the principal of a loan is paid before it is due.
201
Previous Balance
The total balance due at the end of the last billing cycle.
202
Prime Lending Rate
The minimum short-term interest rate charged by commercial banks to their most creditworthy clients. It is a reference interest rate used by banks for its lending purposes.
Note: The Benchmark Prime Lending Rate (BPLR) used by banks for loan pricing till June 30, 2010 was different from this as BPLR was a reference rate based on average cost).
203
Prime Rate
The Prime Rate is the rate on which each bank fixes its own prime lending rate for advances.
204
Principal Outstanding
The  balance  principal  amount  in  the  loan  (i.e.  Loan  amount disbursed less Principal repaid till date) taken from the Bank.
205
Processing Date (card transaction)
It is the date on which the transaction is processed by the acquiring bank.
206
Processing Fee
The charges colleted by the Bank to process the customer’s loan application.
207
Promissory Note
A promissory note is a binding legal document that a borrower signs to obtain a loan. It lists your rights and responsibilities under the loan agreement, including how and when the loan must be repaid. Rights and responsibilities for credit card accounts are listed in the Card member Agreement.
208
Property Tax
The tax levied by local corporations, municipal bodies on a property. This tax has to be paid by the legal owner of the property.
209
Provisional
A certificate issued informing the ‘projected’ interest payment and
Interest and
principal  repayment  for  the  loan  account  for  the  upcoming
Principal
financial  year  based  on  the  current  financial  year.  This  helps
Certificate
borrower in tax planning.
210
Real Time Gross Settlement (RTGS)
RTGS is a system through which electronic instructions can be given by banks to transfer funds from their account to the account of another bank. The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer between banks takes place on a ‘real time’ basis. Therefore, money can reach the beneficiary instantaneously and the beneficiary’s bank has the responsibility to credit the beneficiary’s account within two hours.
211
Recurring Billing
In recurring billing the credit card holder authorizes a merchant or vendor to charge his credit card on a regular basis.
212
Reference
A person who can vouch for your reliability, employment history


or  other  factor  needed  to  determine  your  creditworthiness/ employability.
213
Refinancing
Repayment of existing loan by a fresh loan, usually on better terms and conditions. In case of loans secured through mortgage of property etc., the same asset is taken over as security. Banks also refinance their loans to certain category of borrowers through specified refining agencies which provide refinance with matching repayment schedule.
214
Repayment
The process of returning of the borrowed loan amount. The repayment has to be made for the entire tenure of the loan amount. Based on fixed or floating interest rates on the loan amount, the banks or financial institution decides on an EMI which has to be paid on or before a date mentioned in the loan agreement every month.
215
Repayment Holiday / Moratorium period
A specified period of time during which recovery of loan remains suspended under a mutual agreement between the lender and the borrower. Interest continues to be charged on the loan during this period.
216
Repayment Mode
It refers to the payment instruction given by the customer for the repayment of the loan dues. Cash, cheque, ECS and other electronic channels are the primary payment modes.
217
Repayment Schedule (amortization schedule)
The repayment schedule provides the details of the interest and principal components of the EMIs payable by the customer on a monthly basis.
218
Repo Rate
Repo Rate is the interest rate for secured overnight or short term financing involving the sale and repurchase of securities. It is basically the rate at which RBI lends to commercials banks for meeting the short term deficits. RBI varies Repo rate from time to time to achieve its monetary policy objectives.
219
Rests
Rests refers to the length of time between the dates on which the interest (on loans and deposits) is compounded. Eg: monthely, quarterly, half-yearly, yearly.
220
Returned Cheque
When you do not have enough available funds in your account (including any overdraft protection transfer from another account) to cover a cheque, the bank may decide not to pay the cheque and to return it to the payee. A returned item fee may be charged to your account.
221
Revalidation
Duly     authenticated    extension          of         the        validity  period            for negotiation/payment of cheque/draft or a negotiable instrument.
222
Reverse Mortgage
A financial product, which provides senior citizens with funds against their home equity. Senior citizens can get a regular amount monthly, quarterly or as a lump sum. They can live in their homes for their lifetime and after that banks can recover the amount by selling the property or if the heirs of the property want they can claim it by repaying the dues to the bank.
223
Revolving Credit
A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available again to use for another purchase or cash advance.
224
Reward Points (Cards)
A loyalty scheme that supplies benefits based upon the card's usage. Benefits are usually in the form of points that can be redeemed for gift vouchers, gift items or services, such as airline tickets, discounts on purchases or cash refunds. The credits accumulated toward these benefits are often a percentage of each purchase.
225
Safe Custody
Documents and articles placed with the Bank for safe keeping under mutually agreed terms and conditions and payment of fee/rent on a regular basis.
226
Sale deed
It is a legal document, which transfers the ownership of the property or objects for a mentioned price. Every sale deed has to be registered with appropriate authority.
227
Savings Account
An account maintained by a customer with a bank for the purpose of accumulating funds over a period of time. Only the account owner or a duly authorized agent may withdraw funds deposited in a savings account. It attracts a modest rate of interest, which is fixed by RBI and is considerably lower than the rates applicable on the Fixed Deposits. There is generally a limit on the number of transactions that can be done without attracting a charge.
229
Secured Card
A credit card that is guaranteed by a cash deposit held in a special savings account or certificate of deposit. The deposit must remain in the account until the credit line is closed or the issuer decides security is no longer necessary. The credit line on the card is usually equal to the amount of the deposit. If the Card member defaults on the card, the issuer will apply the deposit toward the outstanding balance.
229
Secured Debt
Debt  for  which  repayment  is  guaranteed  through  collateral property of equal or greater value than the amount of the loan. If


you do not repay the loan, the issuer may take possession of the collateral. Collateral may be an asset such as a car or a home or, in the case of a secured credit card, a cash deposit held by the issuer. For example, a mortgage is a secured debt in which the home is collateral. If the person fails to repay the loan, the bank may take the home as payment.
230
Security Documents
This refers to the list of original documents to be collected from the customer towards the security of the loan amount sanctioned/disbursed
231
Service Charges
Charges levied by a Bank for providing various banking services. (The Tariff Schedule for commonly availed banking services is displayed on the Branch Notice Board and on the Bank's Website.)
232
Simple Interest
Simple interest is calculated solely as a percentage of the principal sum from the date of the availment to the date of repayment (also see compount interest).
233
Stamp Duty
It is the duty to be paid to appropriate authority on the different documents used in the loan process. Stamp duty varies from state to state and the stamp duty should be adequate enough so as to make the documents valid and enforceable.
234
Standing Instruction
Signed instructions given by a customer to his/her Bank to make regular transfer of funds for specified purposes and valid for the period indicated by the customer until the instruction is withdrawn.
235
Statutory Liquidity Ratio (SLR)
SLR is the portion that banks need to invest in the form of cash, gold or government approved securities. The quantum is specified as some percentage of the total demand and time liabilities of the bank and is set by the  Reserve  Bank of India (also see Cash Reserve Ratio).
236
Stop Payment
When you ask a bank not to pay a cheque or payment you have written or authorized. Stop payments are generally placed on lost or stolen cheques or on cheques related to disputed purchases. Banks usually levy charges for registering stop payment instructions.
237
Stored-Value Card
Stored-value card is a special type of credit card, which has a stored money value. Stored value card can be reloadable, in which case more money can be added to the stored value card and can be reused.
238
Surcharge
Surcharge is an additional charge imposed for a specific service, product or purpose. It is a fee charged on a card transaction by the


acceptor to cover the additional cost of taking a card rather than cash or cheque.
239
Taxable Income
Any money you earn or  receive - such as salary, bonuses or interest from investments - that can be taxed by the government. Taxable income is the Total Income net of permissible deductions.
240
Tenure of         the Loan
The repayment period assigned for the account.
Total Tenure - The period for which the loan has been granted Balance Tenure - The balance period for which the EMIs need to be paid. Personal loans, car loans, education loans have shorter tenures as compared to home loans. Some banks and financial institutions extend the loan tenure for an extra fee or a slight increase in interest rates.
241
Tenure of Fixed Deposit
It is the period for which a customer deposits a sum of amount with a Bank. This tenure is generally fixed and the customer cannot withdraw his deposit before the tenure expires. The amount can be withdrawn before the fixed tenure by paying pre-payment penalty.
242
Time deposit
An account for a fixed term with the understanding that the funds will remain on deposit until the end of the term. Penalties for early withdrawals may apply.
243
Transaction Account Linked Home Loans
A special home loan that allows the customer to link a transaction account to his/her loan account. The interest is then calculated periodically on the loan outstanding less balance maintained in the transaction account. These loans help the customer reduce their interest payment  by parking their extra liquidity in the linked account. Majority of the Home Loan players today offer this product under different names.
244
Transaction Date
The date a purchase is made or cash is withdrawn. Some companies assess interest from the transaction date, others from the posting date. (See processing date)
245
Transaction Fee
An extra charge for various credit activities such as using an ATM or receiving a cash advance.
246
Transfer of funds
A movement of funds from one account to another.
247
Travelers cheque
Travellers' cheque - are issued through banks acting as sales agents, or sold directly to the public. The purchaser pays for the cheque in advance, and signs them twice - once when ordering the cheque and once when cashing them. The cheques are payable by the issuing company, sold in numerous foreign currencies, and are insured against loss or theft



248
Uncollected funds
Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn
249
Unsecured Debt
This is debt that is not guaranteed by collateral; therefore, no assets are committed in the event of default. If the issuer is unable to collect on the loan, its value is lost. Most credit cards are unsecured.
(As the Card member’s promise is the only guarantee, credit card issuers require more information regarding income and credit history than with a secured loan.)
A loan where no collateral or security is given or charged to the lender. Unsecured lending is viewed as higher risk than secured lending and interest rates are generally higher to reflect this.
250
Valuation
Before disbursal of a loan against a property, usually the bank conducts a valuation check on the property being offered as collateral. This is done to find out the market value of the property. The value of the property will be a factor considered while granting the loan.
251
Variable Expenses
Variable expenses are those that can change from month to month. Variable expenses include necessities that can be reduced (such as food and utilities)  and non-essentials that could be eliminated (e.g., long distance telecall charges, cable, magazine subscriptions, etc). Reducing these expenses is the simplest step in getting control of your finances.
252
Variable Interest Rate
An interest rate that is not fixed but can vary within a pre-fixed band by the loan-issuing bank. For example some credit card issuers charge variable Interest rate on the outstanding un-paid balance depending upon the credit score or credit behavior/payment pattern of the customer.
An interest rate that is not fixed but can vary within a pre-fixed band by the loan-issuing bank. For example some credit card issuers charge variable Interest rate on the outstanding un-paid balance depending upon the credit score or credit behavior/payment pattern of the customer. (See floating rates)
253
Wire transfer
An electronic payment service for transferring funds by wire (for example, through the Federal Reserve Wire Network or the Clearing House Inter Bank Payments System).
254
Withdrawal
A removal of funds from an account.
255
Zero Balance
Zero balance is when the total outstanding balance is paid and there are no new charges or cash advances during a billing cycle.
256
Zero Liability Protection
A bank guarantee. If your card is lost or stolen, you may not be responsible for unauthorized purchases made with your card if you report the theft promptly. The Zero Liability Protection program is free and automatically available on all bank consumer credit cards.


READ PART I here

READ PART II here

READ PART III here

READ PART IV here

Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 4 Reviewed by Manohar Veera on 10:59:00 PM Rating: 5

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