Glossary of banking terms in India | Banking Dictionary | Important Banking terms to be known every Bank aspirant - PART 3
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TERM
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DEFINITION
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101
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Documentation
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The legal or other papers to be signed
and presented during the loan process. It is also called the loan papers.
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102
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Dormant Account
(In operative account)
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A bank account in which there have not
been any transactions for two years.
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103
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Down Payment
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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.
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104
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Draft
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A written, signed and dated order from
one Branch of a Bank to another , to pay a sum of money to a specific party.
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105
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Drawee
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The person or entity on whom a draft/bill
is drawn by the drawer.
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106
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Drawer
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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.
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107
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Due Date
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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.
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108
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Early Repayment Charge (Prepayment charge)
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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.
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109
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Electronic Clearing Service (ECS)
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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.
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110
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Electronic Clearing Service (ECS) Credit
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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.
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111
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Electronic Clearing Service (ECS) Debit
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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
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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.
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112
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Electronic Funds Transfer (EFT)
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Any transfer of funds initiated by electronic
means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.
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113
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EMI
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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.
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114
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EMI Due date
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The payment due date assigned for the
loan account to recover the EMI.
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115
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E-Payment
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On line payment system that facilitates
payment online from the customer's account.
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116
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Expired Card
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A credit card whose validity date has
passed is an expired credit card.
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117
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Fiscal Year
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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.
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118
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Fixed Deposit
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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.
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119
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Fixed Rate
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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.
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120
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Floating Rate
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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.
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121
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Floor Limit (Credit Card)
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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
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required, usually via a phone call to
exceed the floor limit.
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122
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Foreclosure
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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.
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123
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Fraudulent Transaction (Credit Card)
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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.
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124
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Guarantee
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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.
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125
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Half Year
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A period of 182 days if computed in days
or six complete calendar months.
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126
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Hire Purchase Price
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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.
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127
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Hirer
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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.
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128
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Home Branch
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The branch where customer has opened his account after due compliance
with KYC norms.
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129
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Household Income
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Income from all sources including wages, commissions, bonuses, dividends and
interest of the members of a family.
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130
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Hypothecation
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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.
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131
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Installment Loan
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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).
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132
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Interest
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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.
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133
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Interest and Principal
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A certificate issued for the
loan confirming the details of the interest paid and principal repaid for
a completed financial year.
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certificate
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134
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Interest Category
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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.
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135
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Interest Rate
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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)
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136
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Introductory Rate
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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.
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137
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Inward Remittances
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Fund received through banking channels electronically or otherwise for credit to a designated identifiable
account.
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138
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Joint account
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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
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139
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Late Payment
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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.
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140
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Late Payment Charges
(fee)
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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.
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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.
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141
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Ledger Folio
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A set of 40 consecutive transactions
in an account.
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142
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Legal Checks (Scrutiny of Title Deeds)
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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.
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143
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Legal Judgment
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A court verdict that requires a
person to do something, such as pay a debt.
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144
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Liability
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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.
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145
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Linked account
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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.
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146
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Loan Agreement
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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.
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147
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Loan Disbursement
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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.
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148
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Loan Sanction
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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).
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149
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Mandate
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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
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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.
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150
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Margin Amount
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Margin Amount is the difference between
the total cost of a project and the sanctioned loan amount.
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