Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 1
No.
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TERM
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DEFINITION
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1
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Acceptance Letter
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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.
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2
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Account balance
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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.
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3
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Account statement
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Periodic statement of all the debit and
credit transactions on an account for a given statement cycle.
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4
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Acquirer
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Acquirers are banks and financial institutions
that collaborate with businesses to accept credit/debit card payments.
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5
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Active account
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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.
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6
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Additional cardholder
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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.
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7
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Administrative Fee
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A one time non-refundable levy to bank's
customers for meeting expenses related to appraisal of loan proposals.
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8
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Advance EMI
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Number of equated monthly installments,
paid in advance at the time of disbursal of loan.
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9
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Affinity Card
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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.
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10
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Amortization
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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.
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11
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Annual Fee
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An annual amount charged by the
credit card companies
to maintain the credit card.
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12
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Annual percentage yield (APY)
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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.
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13
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Anywhere Banking
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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.
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14
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Application Form
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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.
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15
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Arrears Outstanding
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The arrears outstanding comprises of
the unpaid EMI’s and other charges, if any, levied in the account.
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16
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Asset
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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
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17
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ATM
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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.
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18
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Attestation
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Authentication of signatures of a customer
of the branch required by the customer for any legal purposes.
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19
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Automatic Funds Transfer
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An arrangement that moves funds from
one account to another automatically on a pre-arranged schedule; for example,
every payday or once a month.
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20
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Automatic payment
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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.
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21
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Available balance
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The available balance is the account
balance in the account that is available for immediate use at any given point
of time
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22
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Available Credit
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Available credit is your credit limit
minus your current balance. It is the unused portion of your credit line.
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23
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Average daily balance
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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.
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24
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Bad Credit
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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.
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25
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Balance Transfer
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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.
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26
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Bank Draft
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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.
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27
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Banker's Cheque
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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).
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28
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Bankruptcy
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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.
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Base Rate
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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.
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29
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Basis Point
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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
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reduced by 50 basis points it means an
effective reduction of 0.5%.
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30
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Bill discounting
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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.
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31
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Bill Pay Service
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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.
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32
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Biller
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A service provider who bills his/her
services at specified intervals and has facilitated receipt of payment from his
customers through online banking.
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33
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Billing Cycle
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The number of days between your last
statement date and your current statement date. Most service providers follow
a monthly billing cycle.
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34
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Billing Statement
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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.
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35
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Borrower
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The person/legal entity who is taking
the loan with the promise to repay it back with interest under the credit or loan
agreement.
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36
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Bounced cheque
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A cheque, which a bank
returns unpaid because there is not
enough available balance in the account or for other reasons.
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37
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Broker
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Broker is an individual who, for a commission
or a fee, brings two parties together and assists in negotiating contracts between
them.
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38
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Budget
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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.
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39
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Business Credit Card
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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.
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40
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Calendar Year
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Commencing from the day and month of
a year to the previous day and month of the next year. A calendar year commencing on
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1st March will end on 29th February if
next year is a leap year at 28th February.
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41
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Canceled cheque
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A cheque that has been not paid and cancelled
by the drawer – Account holder.
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42
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Capital Adequacy Ratio
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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).
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43
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Card Holder
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Cardholder is a person who owns a debit
or credit card issued by a credit card company, financial institution or bank.
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44
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Card Issuer
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A bank, financial institution, credit
union, or agency that issues a credit card to public or its members is called
a card issuer.
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45
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Card member Agreement
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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).
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46
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Carpet Area
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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.
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47
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Cash Advance (Credit Card)
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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.
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48
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Cash Advance Fee
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A one-time fee for cash advances in addition
to normal finance charges. This fee is usually a percentage of the advance amount.
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49
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Cash Back Credit Card
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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.
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50
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Cash Reserve Ratio (CRR)
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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.
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