BANKING TERMS

1. NEFT (National Electronic Funds Transfer) – NEFT is an electronic means to

transfer money from one bank to another or within the same branch. Depending on
the bank, NEFT charges and the minimum amount that can be transferred may vary.
2. Linked Account – An account that is linked to your account for the purpose of fund
transfer is called a linked account.
3. Base Rate – This is the minimum rate at which a bank can lend to its customers. It
cannot lend below the base rate. All interest rates determined for various loans will
use the base rate as the benchmark.
4. Balance Transfer – This is a credit card payment option for people using more than
one credit card. Like the name suggests, balance transfer is when you transfer the
balance of one credit card to another. This is useful when a card holder is unable to
make full payment on his/her card, or if the second credit card offers a lesser rate of
interest.
5. Cashback – Cashback is an offer provided primarily by credit card companies where
they offer some amount of money back to the cardholder that he/she has spent on the
card. Each spend made on the card will be rewarded with points, and the pints can
then later be redeemed for money.
6. Credit History – Credit history is the past behavioural patterns of a customer with
regard to loans. A credit bureau will collect the information of a customer and then
translate it to a number between 300 and 900. This is known as your credit score and
the higher the credit score, the better your chances are to avail a loan or a credit card.
7. Collateral – Any security provided to the bank in exchange for a loan is known as
collateral. A collateral can be in the form of land, gold, etc. This is called a secured
loan and is less risky than an unsecured loan for the lender. In case of secured loans,
the lender may auction off the collateral if the borrower fails to pay off his/her loan.
8. Documentation Fee – Before lending money, lenders have to gauge the credit
worthiness of a customer. Customers will usually be charged for this service, also
known as documentation fee.
9. Fixed Rate – A fixed rate is when the rate of interest for a loan remains constant
throughout the entire tenure.
10. Floating Rate – Opposite of fixed rate, a floating rate of interest are interest rates
that change during the tenure of the loan. These interest rates change as per the
changes of interest rates in the economy.
11. MICR Code – This is a nine-digit code found in the bottom right-hand corner of a
cheque leaf. This code varies from bank to bank and is an acronym for Magnetic Ink
Character Recognition.
12. No-frills Account – This is a rudimentary savings account that requires no minimum
balance to enjoy benefits like net banking, online fund transfer, etc.
13. Electronic Clearing Service – This is a technology used by banks wherein a certain
amount of money is directly debited from your account on a specified date every
month towards the payment of a loan, mutual fund account, etc.
14. Processing Fee – In order to process a loan application of a customer, banks usually
charge a fee. This fee is known as a processing fee.
15. RTGS – RTGS (Real Time gross Settlement) is a fund transfer technology used by
banks for same bank or interbank fund transfer. Contrasting NEFT or RTGS,
transferring funds with RTGS is instantaneous and more nominal with regard to the
costs incurred.
16. KYC – KYC (Know Your Customer) is a procedure that all banks undergo in order
to establish the correct identity of a customer. This is to ensure that no fraudulent
operations are taking place in the bank.
17. Routing Number – This is a number that can identify your bank based on the
geographical location of the institution. Bigger banks may have several routing
numbers while smaller ones have only one.
18. APR – Annual Percentage Rate (APR) is the yearly interest you earn by depositing
your money your money into an account. This does not take into consideration the
compound interest.
19. Compound Interest – Simple interest is the interest earned on a deposit. Compound
interest is the interest earned on the deposit plus the interest earned on the same
deposit previously. For example, if you’ve deposited Rs.1 lakh into a bank, and the
bank promises to pay you a 10% interest, you will earn an interest of Rs.10,00. The
next year however, you will be receiving an interest on Rs.1, 10, 000, i.e., the initial
amount deposited plus the interest earned on that amount.
20. Returned Item Fee – In case a cheque has bounced due to insufficient funds or
another reason, the account holder will be penalized with a fee. This fee is called
returned item fee.
21. Overdraft Fee – In the event, that you run out of money in your account, certain
banks under certain schemes allow you to withdraw more money than you have in
your account. This is a loan, in a sense, and the bank will charge you a fee on
repayment. This fee is called overdraft fee.
22. Liquidity – The ability to sell an asset in the market without affecting its price is
called liquidity.
23. Monetary Policies – This refers to the rules and regulations that the Reserve Bank
of India have put in place in order to standardize banking procedures in the nation.
24. Plastic Money – This is a reference to currency used by individuals other than hard
cash. Mostly it is used to refer to debit and credit cards.
25. Cash Reserve Ratio (CRR) – RBI has mandated all banks to maintain a certain
percentage of the total bank deposits in cash. This percentage with regard to the total
deposits is called cash reserve ratio.
26. Statutory Liquidity Ratio (SLR) – The minimum reserve required by the bank to
maintain in the form of gold is called statutory liquidity ratio.
27. Bank Rate – This is the rate of interest that the RBI levies on banks if they wish to
borrow money.
28. Basis Point – This is one hundredth of a percentage. This is usually used to indicate
change in interest rates.
29. Capital Gain – This is a profit or gain attained by a bank by sale of investments or
properties.
30. Debtor – A debtor is an individual or organization that owes money to the bank or
any other financial institution.
31. Joint Account – A joint account is an account where in two or more people have
equal rights and liabilities of a single account.
32. APY – Annual percentage yield (APY) is the percentage of interest you gain on
interest every year, excluding compound interest. This is the same as Annual
Percentage Rate (APR).
33. Bank Ombudsman – A bank ombudsman is the authority to look into complaints if
in case other modes of complaints haven’t worked out for the customer.
34. Credit Rating – This is an assessment of an individual’s past credit history equated
into a number between 300 and 900. This is usually the main determinant of whether
 an individual attains a loan or not. Credit bureaus collect this data on all individuals
that have a history of credit.
35. Micro Finance – Small loans provided to the poor in urban, rural and sub-urban parts
of the country in order to help them raise their income level is known as micro
financing.
36. Mobile Banking – Availing banking services with the help of a mobile phone is
referred to as mobile banking.
37. IMPS – India’s Immediate Payment Services
38. UPI – Unified Payment Interface is system that powers multiple bank accounts into
a single mobile application (of any participating bank), merging several banking
features, seamless fund routing & merchant payments into one hood. The mobile
number on the device is required to be registered with the bank. NPCI conducted a
pilot launch with 21 member banks. The pilot launch was on 11th April 2016 by Dr.
Raghuram G Rajan, Governor, RBI at Mumbai. Banks have started to upload their
UPI enabled Apps on Google Play store from 25th August, 2016 onwards. As of
September 2022, there were 358 banks available on the platform.
39. Apart from various third-party apps such as Google Pay (previously Tez), PhonePe,
Paytm, MobiKwik, Amazon Pay, Samsung Pay, WhatsApp Pay, NPCI manages its
own app, BHIM
40. BHIM - is an Indian mobile payment app developed by the National Payments
Corporation of India (NPCI), based on the Unified Payments Interface (UPI).
Launched on 30 December 2016
41. NPCI – National Payment Corporation of India
42. Anti-Money Laundering (AML) And Countering the Financing of Terrorism
(CFT) landscape raise tremendous stakes for financial institutions.
43. CVV – Card Verification Value
44. Assets of a bank – Loans (Because the banks earn interest on that)
45. Liabilities of a bank – Deposits (Because the banks need to pay back the same and
has to pay back interest on deposits)
46. HNI – High Net worth Individual - HNIs or high net-worth individuals (HNIs)
belong to the financial services sector where a class of individuals has an investible
surplus of more than Rs 5 crore. Such investors are categorised as retail as they are
measured by their net worth in the financial industry.
47. Types of HNIs
High-net-worth individuals (HNWIs): Investors who own liquid assets valued between
Rs 5 lakh and Rs 5 crore

Very-high-net-worth individuals (VHNWIs): Investors who possess liquid assets

valued between Rs 5 crore and Rs 25 crore

Ultra-high-net-worth individuals (UHNWIs): Investors who own more than Rs 25 crore

in liquid assets.

48. CIBIL score – Credit Information Bureau (India) Limited

49. Heads of RBI; SEBI; IRDA; NSE; BSE; Finance Minister; SBI Head; Federal Bank
Head; President of India; Vice President of India; Loksabha/ Rajya Sabha Speakers;
State Minster for Finance; Kerala Assembly Speaker; Chief Justice of India
50. SBI Merger.
 TYPES OF BANKS IN INDIA

• Indian Banks are broadly classified into two types – scheduled and non-scheduled.
• These banks could be commercial, small finance, payments and cooperative banks.
• Private, public, foreign and regional rural are common types of commercial banks.
• Small finance and cooperative banks deal with small-scale clients.
• RBI permits payment banks to only offer limited deposit facilities.

Scheduled Banks are listed in the second schedule of the Reserve Bank of India (RBI) Act,
1934. The paid-up capital and collected funds of scheduled banks must be 5 Lakh and above.
The RBI grants loans at the bank rate, and these banks are eligible to become clearing house
members.
Non-Scheduled Banks are banks not listed in the second schedule of the RBI Act, 1934. The
paid-up capital and collected funds are less than INR 5 Lakh. Such banks need not borrow
funds from the RBI.
Commercial Banks
Commercial banks can be scheduled or non-scheduled and are regulated under the Banking
Regulation Act, 1949. These banks accept deposits and grant loans to the general public,
businesses, and even the Government. Commercial types of banking systems are:
Public Sector Banks: More than 75% of the total banking business in India comes under the
public sector, also known as nationalised banks. The Indian Government and RBI are the major
stakeholders in this sector. (Example: SBI
Private Sector Banks: Most stakeholders of Private Sector Banks are individual investors, not
the RBI or Indian Government. Nevertheless, these banks must adhere to all the RBI
regulations for their operations.
Foreign Banks: Foreign Banks have their headquarters in a foreign country but operate as a
private entity in India. They abide by the regulations of their home country and the country in
which they operate.
Regional Rural Banks: These scheduled commercial banks serve the economically weaker
sections, such as marginal farmers, agricultural labourers, and small businesses. Operating at
regional levels, RRBs offer banking facilities like debit cards, bank lockers, complimentary
insurance etc.
Small Finance Banks: Licensed under section 22 of the Banking Regulation Act, 1949, these
types of banking systems cater to sections of societies not usually served by large banks. They
serve micro and cottage industries and small business units.
Payments Banks: RBI restricts these banks to offer deposit facilities only, with a deposit limit
of INR 1 Lakh per customer. You can avail of debit cards and e-banking facilities.
Cooperative Banks: These banks are registered under the Cooperative Societies Act, 1912,
and function on a no-profit no-loss basis. They offer banking services to entrepreneurs, small
businesses, and industries.

TYPES OF BANK ACCOUNTS IN INDIA

PREVAILING BANKING RATES AND EXPLANATIONS
1. Repo Rate - Repo rate and reverse repo rate are monetary policies used by RBI to
maintain economic stability in the country. It is the interest rate at which the central
bank of a country lends money to commercial banks. Suppose if there is a cash crunch
in the economy (which causes material impact on spending) RBI reduces Repo rate so
that commercial banks can borrow more and lend money to the public.

2. Standing Deposit Facility. This will allow the RBI to absorb surplus funds from
banks without collateral. Banks too continue to earn interest (though possibly lower
than the existing reverse repo rate). In effect, it will empower the RBI to suck out as
much liquidity as needed.

3. Marginal Standing Facility – is a window for banks to borrow from the RBI in an
emergency when inter-bank liquidity dries up completely. The MSF is a facility
launched in 2011 – 12.
SDF – the rate will be below the reverse repo rate and MSF – the rate will be above the
repo rate

4. Bank Rate - The minimum rate of interest, which a central bank charges (in India's
case - Reserve Bank of India), while lending loans to domestic banks is called "Bank
Rate". When a bank suffers fund deficiency, it can borrow money from RBI to continue
services. When Bank Rate is increased by the central bank, a commercial bank’s
borrowing costs hikes, which reduce the supply of money in the market.
5. Base rate is the minimum rate set by the Reserve Bank of India below which banks
are not allowed to lend to its customers. The credit market in the earlier days was not
that transparent. There used to be some segments that were hidden or closed. There was
no clear information about how much interest rate a bank actually charged for a loan.
To bring transparency to the credit field and to make sure that the banks charge a lower
interest rate, the RBI implemented the notion of base rate across all banks in India.
6. The MCLR refers to the minimum interest rate below which financial institutions
can't lend, except in certain cases. Marginal cost of funds-based lending rate defines
the process used to determine the minimum home loan rate of interest. The MCLR
method was introduced in the Indian financial system by the Reserve Bank of India in
the year 2016.
The MCLR system has replaced the base rate system that was introduced in the year
2010. Thus, renewal of credit limits and sanctioning of loans is done as per MCLR
norms.
 FINANCIAL MARKETS IN INDIA

Money Market & Capital Market

Money market – short-term borrowing and lending (T bills, Commercial Paper, Certificate of
Deposits etc)
Capital Market – Long-term borrowing and lending (Equity, Debentures, Bonds, Mutual Funds
etc.)
Capital Market divided into two - Primary Market and Secondary Market
 REGULATORS OF FINANCIAL MARKETS IN INDIA
1. RBI (Reserve Bank of India) – For banking and non banking financial institutions and
money markets; OTC market; Forex market;
2. SEBI (Securities Exchange Board of India) - For capital markets (primary and secondary
markets); Commodity Markets; Derivatives Markets; Bond Market; Mutual Fund Market
3. IRDA (Insurance Regulatory and Development Authority) – Insurance sector
A few important terms
1. AMFI - The Association of Mutual Funds in India (AMFI) is dedicated to developing the
Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and
maintain standards in all areas with a view to protecting and promoting the interests of mutual
funds and their unit holders.
AMFI, the association of all the Asset Management Companies of SEBI registered mutual
funds in India, was incorporated on August 22, 1995, as a non-profit organisation. As of now,
43 Asset Management Companies that are registered with SEBI, are its members.
2. Stock Exchanges - Stock Exchange market is a vital component of a stock market. It
facilitates the transaction between traders of financial instruments and targeted buyers. A stock
exchange in India adheres to a set of rules and regulations directed by Securities and Exchange
Board of India.
3. No. of stock exchanges in India – Seven (7)
4. Major Stock Exchanges in India – BSE and NSE
5. Indices of BSE and NSE
BSE – Sensex (Sensitivity Index) – No of stocks included in this – 30 stocks
NSE – Nifty – (National Stock Exchange Fifty) – No of stocks included in this – 50 stocks
6. First Stock Exchange of India – BSE
7. Largest Stock Exchange of India – NSE
8. Largest Stock Exchange in the World – New York Stock Exchange
9. Dalal Street – Street in Mumbai where Bombay Stock Exchange is located.
10. Wall Street – Street in New York where New York Stock Exchange is located.