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FEDERAL COMMERCE GLOSSARY FOR MCOM MBA for G.D. pl remit rs.200 gpay 900...



Capital Funds

Equity contribution of owners. The basic approach of capital adequacy


framework is that a bank should have sufficient capital to provide a


stable resource to absorb any losses arising from the risks in its


business. Capital is divided into different tiers according to the


characteristics / qualities of each qualifying instrument.




Revaluation reserves are a part of Tier-II capital. These reserves arise


from revaluation of assets that are undervalued on the bank's books,


typically bank premises and marketable securities. The extent to which


the revaluation reserves can be relied upon as a cushion for


unexpected losses depends mainly upon the level of certainty that can


be placed on estimates of the market values of the relevant assets and


the subsequent deterioration in values under difficult market conditions


or in a forced sale.




Ratio of assets to capital.



Capital reserves

That portion of a company's profits not paid out as dividends to


shareholders. They are also known as undistributable reserves and are


ploughed back into the business.



BASEL Committee

The BASEL Committee is a committee of bank supervisors consisting of

on Banking

members from each of the G10 countries. The Committee is a forum for


discussion on the handling of specific supervisory problems. It


coordinates the sharing of supervisory responsibilities among national


authorities in respect of banks' foreign establishments with the aim of


ensuring effective supervision of banks' activities worldwide.



Risk Weighted

The notional amount of the asset is multiplied by the risk weight


assigned to the asset to arrive at the risk weighted asset number. Risk


weight for different assets vary e.g. 0% on a Government Dated


Security and 20% on a AAA rated foreign bank etc.



CRAR(Capital to

Capital to risk weighted assets ratio is arrived at by dividing the capital

Risk Weighted

of the bank with aggregated risk weighted assets for credit risk, market

Assets Ratio)

risk and operational risk. The higher the CRAR of a bank the better


capitalized it is.



Non Performing

An asset, including a leased asset, becomes non performing when it

Assets (NPA)

ceases to generate income for the bank.



Total income

Sum of interest/discount earned, commission, exchange, brokerage and


other operating income.



Net operating profit

Operating profit before provision minus provision for loan losses,


depreciation in investments, write off and other provisions.



Average Yield

(Interest expended on deposits and borrowings/Average interest


bearing liabilities)*100





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Return on Asset

Return on Assets (ROA) is a profitability ratio which indicates the net

(ROA)- After Tax

profit (net income) generated on total assets. It is computed by dividing


net income by average total assets. Formula- (Profit after tax/Av. Total





Net Interest Income

The NII is the difference between the interest income and the interest

( NII)




CASA Deposit

Deposit in bank in current and Savings account.



Liquid Assets

Liquid assets consists of: cash, balances with RBI, balances in current


accounts with banks, money at call and short notice, inter-bank


placements due within 30 days and securities under "held for trading"


and "available for sale" categories excluding securities that do not have


ready market.



Venture Capital

A fund set up for the purpose of investing in startup businesses that is


perceived to have excellent growth prospects but does not have access


to capital markets.



Held Till

The securities acquired by the banks with the intention to hold them up


to maturity.



Yield to maturity

The Yield to maturity (YTM) is the yield promised to the bondholder on

(YTM) or Yield

the assumption that the bond will be held to maturity and coupon


payments will be reinvested at the YTM. It is a measure of the return of


the bond.




Cash reserve ratio is the cash parked by the banks in their specified


current account maintained with RBI.




Statutory liquidity ratio is in the form of cash (book value), gold (current


market value) and balances in unencumbered approved securities.




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