Important Banking Terms

SLR (Statutory Liquidity Ratio): SLR is the amount a commercial banks needs to maintain in the form of cash, or gold, or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by RBI in order to control the expansion of the bank credit. Bank Rate: The interest rate charges by a central bank to commercial banks for very short term loans. CRR (Cash Reverse Ratio): CRR is the amount of funds that the banks have to keep with RBI. If RBI increases CRR, the available amount with the banks comes down. RBI is using this method (increase of CRR), to drain out the excessive money from the banks. Prime Lending Rate (PLR) : The rate of interest charged on loans by banks to their most creditworthy customers. Repo Rate: Whenever the banks have any shortage of funds they can borrow it form RBI. Repo rate is the rate at which commercial banks borrows rupees from RBI. A reduction in the repo rate will help banks to get money at cheaper rate. When the repo rate increases borrowing form RBI becomes more expensive. Reverse Repo Rate: Reverse Repo rate is the rate at which RBI borrows money from commercial banks. Banks are always happy to lend money to RBI since their money is in the safe hands with a good interest. An increase in reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates. Gross domestic product (GDP): It refers to the market value of all officially recognized final goods and services produced within a country in a given period, usually in one year. GDP per capita is often considered an indicator of a country's standard of livingbut is is not a measure of personal income. GDP per capita exactly equals the gross domestic income (GDI) per capita. Gross national product (GNP): It is the value of all final goods and services produced within a nation in a given year by labour and property supplied by the residents of a country. It adds income earned by its citizens abroad, minus income earned by foreigners from domestic production.

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International Monetary Fund (IMF): An international organisation that was created in the Bretton Woods Conference of 1944. Its main purpose is to regulate the international monetary exchange system, but has been modified since it creation. In particular, one of the central tasks of the IMF is to stabilize exchange rates of world currencies in a bid to alleviate severe balance of payments problems. Black Market: A black market or underground economy is a market in goods or services which operate outside the formal ones supported by established state power. Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat" or the state jurisdiction "the black market in China". Black Money: Proceeds, usually received in cash, from underground economic activity. Black money is earned through illegal activity and, as such, is not taxed. Recipients of black money must hide it, spend it only in the underground economy, or attempt to give it the appearance of legitimacy through illegal money laundering. NEFT: National Electronic Funds Transfer. MICR: Magnetic Ink Character Recognition or MICR is the bottom line on all checks. It is printed using a special font. SEBI: SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 Chaired by U K Sinha. Non-banking financial company (NBFC): A NBFC is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government. ATM: Automated Teller Machine is a machine uses a computer that verifies your account information and PIN (Personal Identification Number) and will dispense or deposit funds per your request)Annuity- Fixed amount of cash to be received every year for a specified period of time.

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Mobile Banking : With the help of M-Banking or mobile banking customer can check his bank balance, order a demand draft, stop payment of a cheque, request for a cheque book and have information about latest interest rates. Net Banking: Net banking, also called internet or online banking, is the process of conducting banking transactions over the Internet. Viewing bank statements and the status of a bank account online also comes under the definition of net banking. The bank updates accounts and records of transactions almost instantly on the Internet. This form of banking comes with both benefits and scams. Banks need to use enhanced security measures to ensure the safety and privacy of Internet transactions. Mutual funds: Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis. RTGS (Real Time Gross Settlement) : The continuous settlement of payments on an individual order basis without netting debits with credits across the books of a central bank. Basically, this is a system for large-value interbank funds transfers. This system lessens settlement risk because interbank settlement happens throughout the day, rather than just at the end of the day. Foreign institutional investors(FII) Institutional investors are organizations which pool large sums of money and invest those sums in securities and other investment assets. Foreign direct investment (FDI) Foreign investment refers to the net inflows of investment for a long period of time to acquire a lasting management interest (10 percent or more of voting stock) in an economy. LAF (Liquidity Adjustment Facility): A tool used in monetary policy that allows banks to borrow money through repurchase agreements. This arrangement allows banks to respond to liquidity pressures and is used by governments to assure basic stability in the financial markets. IFSC Code : Indian Financial System Code or IFSC code is an eleven character code assigned by RBI to identify every bank branches uniquely, that are participating in NEFT system in India.

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CVV: CVV is a new authentication procedure established by credit card companies to further efforts towards reducing fraud for internet transactions. It consists of requiring a card holder to enter the CVV number in at transaction time to verify that the card is on hand.The CVV code is a security feature for "card not present" transactions (e.g., Internet transactions). Bank Rate: The interest rate charges by a central bank to commercial banks for very short term loans. Direct Tax: A direct tax is that which is paid directly by someone to taxing authority. Income tax and property tax are an examples of direct tax. They are not shifted to somebody else. Indirect Tax: This type of tax is not paid by someone to the authorities and it is actually passed on to the other in the form of increased cost. They are levied on goods and services produced or purchased. Excise Tax, Sales Tax, Vat, Entertainment tax are indirect taxes Variable Rate: Any interest rate that may fluctuate over the life of the loan is a variable rate loan or credit agreement. This fluctuation then causes changes in either the payments or the length of the term. This variable rate is often tied to an index that reflects changes in market rates of interest. Bill of exchange: Often known as draft, Bill of Exchange is a document is a third party instrument (written, dated, and signed) containing an unconditional order by a drawer that directs a drawee to pay a definite sum of money to a payee on demand or at a specified future date. It is the most commonly used financial instrument in international trade.

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