By the term banking we usually understand as the business activity of accepting for the purpose of lending or investment of deposits owned by other individuals and activities. But, banking these days include a whole lot of services and products which we are not aware of. Since banking plays a very important role in our business and personal life; therefore, it is essential for consumers to learn some of the common banking terms so that they can secure and manage their account way better. Today, in this article we are going to discuss about some of the most commonly used banking terms, banking products and services.
- ATM (Automated Teller Machine): An automated teller machine is an electronic banking outlet which dispense cash, receive cash, cheque deposits, bill payments and generate mini statements.
- Bank Account: A bank account is an arrangement by a bank in which customers can deposit money or its equivalent and subject to withdrawal of money. Bank accounts can be of different types. You can open an account with the bank based on your needs.
- Bank Rate: Bank rate is the rate of interest charged by the central bank i.e., the Reserve Bank of India for lending funds to commercial banks. At present the bank rate of RBI is 4.65%.
- Call Money: When money is lent for a day, it is called call money.
- Notice Money: When money is lent for more than a day to fourteen days it is called as notice money.
- Cheque: A cheque is an unconditional order addressed to a banker, signed by the person who has deposited money with a banker, requesting him to pay on demand a certain sum of money only to the order of the certain person or to the bearer of the instrument.
- CRR (Cash Reserve Ratio): Cash reserve ratio is a certain percentage of the total bank deposits that RBI has mandated all the commercial banks to maintain as reserves with the RBI.
- SLR (Statutory Liquid Ratio): Statutory liquidity ratio is the minimum percentage of deposits that commercial banks are required to maintain in the form of cash, gold reserves, PSU Bonds and Reserve.
- Repo Rate: Repo rate is the rate at which banks borrow money from RBI. The current repo rate in India is 4%.
- Reserve Repo Rate: Reserve repo rate is the rate of interest at which RBI borrows money from commercial banks.
- Debit cum ATM Card: Issued by banks to let the customers withdraw money and transfer funds from their accounts as well as perform cashless transactions. The payment is made online or by swiping the card in the machines at point of sales.
- Dishonour of Cheque: When on presenting a cheque if the bank refuses to pay the amount mentioned on the cheque to the payee due to certain reasons then it is said to be a dishonoured cheque.
- E- Banking: E- banking also known as electronic banking, online banking, internet banking or virtual banking. When financial or non-financial transactions transactions are held online via internet, then it is called as e-banking.
- Moratorium period: Moratorium period is that time period during when the loan term borrower is not required to make any repayment.
- Non-Performing Assets (NPA): Non-performing assets are those loans and advances for which the principal and interest payments remained overdue for the period of 90 days or more.
- Retail Banking: Retail banking helps the Indian banking sector by providing a whole lot of services directly to retail consumers rather than corporations and other banks. Retail banking is also known as consumer banking or personal banking.
- Wholesale Banking: Wholesale banking services provides complete banking solutions to corporates, mid-size companies, and institutional clients from private and public sector and services offered to other banks.
- Scheduled Bank: Scheduled banks are those banks which are included in the Second Schedule of RBI Act, 1934.
- Cash Credit: A Cash credit loan is a short term cash loan given to a company to meet its working capital requirements.
- Letter of Credit: A letter of credit is a written obligation of the bank that guarantees the buyer’s payment to the sellers.
- Bancassurance: Bancassurance is the concept of selling insurance products of insurance companies by banks. Banks earn revenue through this sale.
- DEMAT Account: A Demat account is an account to hold shares and securities in electronic form. The full form of demat account is dematerialized account.
- Insolvency: Insolvency is a state of being unable to meet the financial obligations in a timely way. Those who are in a state of insolvency are called insolvent. They can be a person or an entity.
- Bankruptcy: Bankruptcy is a legal declaration for people or businesses that are unable to repay their outstanding debts.
- MSME: MSME stands for micro, small and medium enterprises. A micro enterprise, where the investment does not exceed one crore rupees and turnover does not exceed five crore rupees; a small enterprise, where the investment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; a medium enterprise, where the investment does not exceed fufty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
- Small Finance Bank: Small finance bank is a specific segment of banking created by RBI to provide basic banking activities to unserved and underserved sections.
- FDI: Foreign direct investment is when an individual or a company who or which is non-indian invests in Indian companies.
- Credit Rating: Credit rating is the assessment of the ability of the borrower to pay back the loan along with interest.
- NEFT (National Electronic Fund Transfer): NEFT is an electronic fund transfer system from any bank branch to any individual having an account with any other bank branch in the country participating in the scheme.
- RTGS (Real Time Gross Settlement): RTGS can be defined as continuous (real-time) settlement of funds individually on an order by order basis. Real- time means the processing of instructions at the time they are received rather than at some later time. The RTGS system is basically meant for large-value transactions. The minimum amount to be transferred through RTGS is two lakhs rupees.
- IMPS (Immediate Payment Services): IMPS is an instant inter-bank fund transfer system. IT offers an electronic fund transfer service through mobile phones. Unlike, RTGS the service is available 24×7 throughout the year including bank holidays.
- Base Rate: Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers.
- Collateral: Collateral is an asset or a property that a lender accepts as security for extending a loan. A collateral can be in the form of land, gold etc.
- MICR Code: An MICR code is a 9-digit code that uniquely identifies the bank and branch participating in an Electronic Clearing System (ECS). This code varies from bank to bank and is an acronym for Magnetic Ink Character Recognition Technology.
- No-frills Account: This is a savings bank deposit account which offers certain minimum facilities, free of charge, to the holders of such account.
- KYC: KYC or Know Your Customer is a mandatory procedure that all banks undergo in order to establish the correct identity of the customer. This is to ensure that no fraudulent operations are taking place in the bank.
- Joint Account: A joint account is a bank account shared by two or more individuals having equal rights and liabilities.
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