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Banking Glossary
MUHAMMAD UMAIR JAVEDTUESDAY, 30 AUGUST 2016

Banking Glossary: Glossary of Some Banking Terminologies


This endeavor aims to help consumers in understanding some
important banking terminologies. These definitions explain the
meaning of words and terms used in day to day banking
transactions and these are not precise legal or technical
definitions.
Accumulated interest: The cumulative interest that is due and not
yet paid and booked as an expense along with a corresponding
liability for the unpaid amount. Annual Percentage Rate (APR) The
term Annual Percentage Rate describe the interest rate for a whole
year (annualized), rather than just a monthly fee/rate, as applied on
a loan, mortgage loan, credit card, etc. The annual rate that is
charged for borrowing (or made by investing), expressed as a single
percentage number that represents the actual yearly cost of funds
over the term of a loan.
Altered Cheque A cheque or another negotiable instrument that
has been materially and maliciously altered to affect a fraud. Usually

either the name of the payee or the amount of cheque is changed.


Account Holder One who maintains a deposit account with the
bank to make deposits and withdrawal by cheques or cash as per
agreed terms and condition; a person, a firm, or a company
maintaining accounts with banks for deposits and withdrawals as per
agreed terms and conditions. Advances A general term embracing
various categories of lending by the banks; in business, advance
may also means payment made before receipt of goods and
services. Automated Teller Machine (ATM) Machines installed by
banks to dispenses cash withdrawal to the account holders like a
bank teller; computerized machines linked with the database of the
bank, enabling customers to draw down cash without the need to
line up at the bank counter, by using magnetically encoded bank
card that verifies the customers through specific identification
numbers, checks available account balance or line of credit on an
account, and dispenses cash withdrawal; specially useful to
customers in non banking hours Bad Debt A debt for which
repayments of principles or interest are long overdue and is
unrecoverable because of worthless collateral, or insolvency or
effective bankruptcy of the borrower; the loan may have to be
removed from the bank portfolio and charged to loan loss reserves if
any, or written off by the lender and charged to profits, retained
earnings or banks capital Balance Transfer A balance transfer is
an option offered by many credit card issuers which enables the card
holder to use their available credit from one card to pay off the
balances due on one or more other cards. Usually the interest rate
on the amount borrowed is lower than the rate of the cards that are
being paid off by the balance transfer.
Balance-Transfer Fee A balance transfer fee is charged when you
make a balance transfer. That is, when you transfer the balance
from one credit card to another. Balance transfer fees are typically

expressed in percentage terms of the balance being transferred, but


there may also be a flat fee or a minimum balance transfer fee.
Balloon Payment A large payment due at the maturity of the loan;
the principle amount and interest on a loan repaid in one lump sum;
interest payment may be withheld until the end of the loan period,
when both interest and principal repaid together. Bank Cheque A
cheque issued by an account holder on his account maintained with
the bank; it is payable on demand and does not require acceptance
of drawee bank. Bank Draft A type of instrument where the
payment is guaranteed to be available by issuing bank. Typically,
bank will review the bank draft requester's account to see if
sufficient funds are available for the cheque to clear. Once it has
been confirmed that sufficient funds are available, the bank
effectively sets aside the funds from the person's account to be
given out when the bank draft is used.
Bankers General Lien A right of the bank to retain any goods or
securities of the debtor against any debt due, which comes to its
lawful possession in the ordinary course of business, in the absence
of an agreement in contrary. Such a right is also called implied
pledge and gives the banker the power to sell the goods or
securities with reasonable notice to the debtor.
Benchmark Rate The benchmark interest rate is the lowest interest
rate that an investor will accept for a non-treasury investment. The
benchmark interest rate is also known as the base interest rate or
the threshold interest rate since the benchmark interest rate is the
threshold below which investors refuse to invest funds. The
benchmark interest rate is tied to the interest rate offered on the
most recently-issued (on-the-run) Treasury security. Often investors
demand that the benchmark interest rate carries a premium over
the most recently-issued Treasury security. Since it is generally
possible for investors to find investments paying a greater rate than
the benchmark interest rate, one of the hallmarks of an investment

which pays the benchmark interest rate is safety. The benchmark


interest rate is often associated with conservative and safe
investments.
Blocked Funds Funds that cannot be withdrawn or transacted from
an account due to prior claim, liability, a dispute, a court injunction
or a directive of the authorities concerned.
Blocked Account A bank account which cannot be used, usually
because a government has forbidden its use.
Bankruptcy A legal proceeding involving a person or business that
is unable to repay outstanding debts. The bankruptcy process begins
with a petition filed by the debtor (most common) or on behalf of
creditors (less common). All of the debtor's assets are measured and
evaluated, whereupon the assets are used to repay a portion of
outstanding debt. Upon the successful completion of bankruptcy
proceedings, the debtor is relieved of the debt obligations incurred
prior to filing for bankruptcy.
Bounced Cheque A word for a cheque that cannot be processed
because the drawer has insufficient funds. A bounced cheque will
often be returned to the drawer along with a penalty fee for nonsufficient funds. Passing bad cheques is illegal, and the crime can
range from a misdemeanor to a felony, depending on the amounts
involved.
Cards A general term for any card that can be used to access
electronic banking services such as: (i) Credit Cards - Card that
allows customers to buy on credit and/or to obtain cash advance as
bank grants a certain line of credit to the consumer. Customer
receives monthly statements from the bank and may pay the
balance in full or in part. There is usually a specified minimum
payment and annual charge. Mark up is charged on the amount of
any balance you still owe.

(ii) Debit Cards - Card that can be used to access your account to
obtain cash or make a payment at a point of sale. The money is
transferred electronically, usually within three days. Customers
accounts are debited electronically for these transactions.
(iii) ATM/ Cash Cards - this card is for making cash withdrawals from
ATMs. It also provides many additional functions such as account
information and mobile phone top-ups. Card Holder A card holder
is a person in whose name card has been issued who is authorized
to use it.
Cash-Advance A cash advance is an amount of cash borrowed
against your credit card limit. You can take out a cash advance by
using your PIN at ATM. Cash advances don't have a grace period,
meaning interest begins accruing on the balance as soon as you
borrow it. Cash Advance Fee Cash advances come with fees and
typically have higher interest rates than the interest rate for
purchases. The cash advance fee can be charged as a percentage of
the cash advance. Some card issuers charge a flat fee regardless of
the amount of your cash advance. You'll always pay a finance charge
on a cash advance even if you pay it in full when your billing
statement comes. To reduce the amount of interest you pay on a
cash advance, pay it as soon as possible, even before you are billed
for it. Certificate of Deposits (CDs) A deposit Instrument; receipt
issued by a bank as an evidence of deposit specifying the amount,
the period of deposit and rate of interest. There are several types of
deposit certificates issued in domestic or foreign currency; since CDs
are negotiable instruments; these are freely traded in secondary
money market.
Checking Accounts A transactional deposit account held at a bank
or financial institution that allows for withdrawals and deposits.
Money held in a checking account is very liquid, and can be
withdrawn using cheque, automated cash machines and electronic
debits, among other methods.

Clearing The collection of funds which a cheque is drawn on, and


the payment of those funds to the bearer. This also refers as
exchanging of cheques and other instruments, etc. and balancing of
accounts between the banks. Clearing Cheque Clearing a cheque
means processing it so that funds are deducted from the payer's
account and put into the payee's account. Clearing bank A
commercial bank that is part of a network of banks that can clear
cheques for its clients regardless of whether or not the cheque
originates from the same commercial bank. Clearing House A
nationwide electronic funds transfer network which enables
participating banks/financial institutions to distribute electronic
credit and debit entries to bank accounts and to settle such entries.
Commission The fee charged for banking services by a bank or
financial institution. Collateral A term synonymous to security for a
loan; a security tendered to obtain a loan; an asset pledged for
borrowing funds; the backing provided for securing a credit; cash,
financial assets or valuable assigned as security for a debt, loan or
credit; the guarantee offered by borrower, or the backer of the loan,
and acceptable to the lender as a viable collateral. Credit
Agreement A legal contract in which a bank arranges to loan a
customer a certain amount of money for a specified period of time.
The credit agreement outlines all the rules and regulations
associated with the contract. This includes the interest that must be
paid on the loan. A credit agreement can be a lengthy and detailed
document that explains all the terms of the contract. For the most
part, all types of loans (ranging from credit cards to mortgages)
have some sort of credit agreement, which must be signed and
agreed upon by both the bank or lender and the customer - the
contract does not come into effect until the document has been
signed by both parties.
Credit Application A request for grant of credit in written form. The
request must follow the lender's request procedures in order to be

valid. The application must legally contain all pertinent information


relating to the cost of the credit, including the annual percentage
yield (APY) and all associated fees.
Credit Insurance Credit Insurance is an insurance policy associated
with a specific loan or line of credit which pays back some or all of
any money owed if certain things happen to the borrower, such as
death, disability, or unemployment, due to which the borrower is
unable to pay his loan. The costs (called a "premium") for this are
usually charged monthly, depending on the balance owed.
Credit Limit The amount of credit that a bank or financial
institution extends to a client. Credit limit also refers to the
maximum amount a credit card issuer will allow someone to borrow
on a single card.
Credit-Limit-Increase Fee A fee charged if you ask for and receive
an increase in your credit limit.
Compound interest: Interest which is calculated not only on the
initial principal but also the accumulated interest of prior periods.
Compound interest differs from simple interest in that simple
interest is calculated solely as a percentage of the principal sum.
Consumer Credit Information Report: All individuals and sole
proprietors are categorized under the category of consumer
borrowers in Electronic Credit Information Bureau (eCIB) database.
Consumer Credit Information Report (CCIR) represents the summary
of accumulated credit obligation of a particular individual from all
banks and financial institutions in Pakistan. CCIR contains credit
details with limits, outstanding financial obligations, status of
overdue loan and credit history of last twelve months.
Corporate Credit Information Report: All partnerships and
corporate entities (Private Limited/Public Limited) are categorized
under corporate borrowers category in eCIB database. The CCIR
contains aggregate information related to outstanding financial

obligations (Fund/non-fund based), amount in number of days


overdue (past due 90 and 365 days) and other material information
related to write-off and restructuring of loan and amount under
litigation.
Credit History A history of a consumer borrower's payment
behavior kept by credit bureau against its record. eCIB database
reports reflect consumer borrower credit history of past twelve
months. The very purpose of sharing credit history of consumer
borrowers is to provide a mechanism of risk management to all its
member financial institutions. This helps to evaluate the credit
worthiness of existing and prospective borrowers and to make
critical lending decisions to most vulnerable segment of borrower.
Credit Transfer This is an order from the account holder to the
bank to transfer a sum of money to another account. It can be made
on paper, by telephone (using call center services) or by online
banking.
Crossed Cheque Any cheque that is crossed with two parallel lines,
through the top left hand corner of the cheque with or without the
words 'not negotiable' or A/c payee between them. A crossed
cheque must be paid into payees bank account only. It cannot be
cashed over the counter and provides protection against its
fraudulent payment.
Days Past Due A loan payment that has not been made as of its
due date. A borrower who is past due may be subject to late fees,
unless the borrower is still within a grace period. Failure to repay a
loan on time could have negative implications for the borrower's
credit status or cause the loan terms to be permanently adjusted.
Debt The amount of money borrowed from the lender for a period of
time at a rate of interest and at terms of repayment as agreed
between the borrower and lender, backed by a collateral or a loan

security; as an obligation, the term debt is synonymous to loan,


credit and borrowing.
Debit Card A card issued to a client for making payments for goods
or services, and such payments are then debited to the card holders
account with the seller; it is a similar to credit card and issued in a
similar way to account holders.
Debt Rescheduling A practice that involves restructuring the
terms of an existing loan in order to extend the repayment period.
Debt rescheduling may mean a delay in the due date(s) of required
payments or reducing payment amounts by extending the payment
period and increasing the number of payments.
Debt Restructuring Adjustment or realignment of debt structure
reflecting concessions granted by creditors, to give the debtor a
more practical arrangement for meeting financial obligations.
Restructuring is needed when the debtor has severe financial
problems. The agreement to restructure may result from legal action
or simply be an agreement to which parties consent.
Default The failure to promptly pay interest or principal when due.
Default occurs when a debtor is unable to meet the legal obligation
of debt repayment. Borrowers may default when they are unable to
make the required payment or are unwilling to honor the debt.
Delinquency on a Loan Failure to pay an obligation when due.
Consumer loans are normally considered delinquent if two
consecutive payments are missed; such as a bank credit card, is
often treated as a delinquent account if a payment is not received
within the allowed 15- to 25-days grace period. A delinquent loan
payment is subject to a late charge penalty and can be noted on the
borrower's credit report as a past due payment. Loans with more
than two missing payments (60 to 90 days past due) are regarded
as seriously delinquent and debt collection efforts are initiated to
recover the amount due.

Deposits To place cash, cheques, drafts for credit to a bank


account. Direct Credit Arrangements by which payments, such as
salaries, are directly credited to customers bank accounts. Direct
Debit When a customer authorizes the bank to make payments
directly from his account. Direct debits are typically used to make
regular payments for debts or paying bills such as credit cards,
utility bills and insurance payments. The amounts can be fixed or
variable.
Dormant Account When there has been no financial activity for a
long period of time, other than posting of interest, an account can
be classified as dormant. Statute of limitations usually does not
apply to dormant accounts, and funds can be claimed by the owner
or beneficiary at any time.
Electronic Credit Information Bureau (eCIB) eCIB is a database
which collects and collates borrowers credit information of all banks
and member financial institutions (FIs). eCIB shares consolidated
credit information online with its member financial institutions for
assessing the credit worthiness of the existing and prospective
borrowers. eCIB data also facilitates the banks/FIs in the process of
credit risk management and making prudent and informed lending
decisions.
Early Repayment Penalty Banks and financial institutions impose
a financial penalty on customers who pay off their loans and
advances. This may be a percentage of the total advance, the sum
repaid or the balance outstanding.
Effective Date The date a contractual agreement is in effect; the
commencement date; the date a loan is available for disbursement;
the date a payment or a financial transaction can be conducted
Expiration date The date when a contract, or transaction, a
financial obligation or instrument, a benefit, a guarantee, or a
commitment ceases to be valid.

Fixed Rate Where the markup rate is set at the start for the
duration of the loan. The rate will not change whether market rates
rise or fall. The advantage is that you know the exact amount of
each repayment in advance. The disadvantage is that the loan may
prove expensive if interest rates fall and there may be a penalty
charge for early repayment.
Financial Instrument Financial papers and documents
acknowledging financial commitment or obligation; contractual
agreements specifying legally enforceable financial liabilities; paper
facilitating financial transaction, transfers, payments and
settlements.
Financial Services A range of services which directly or indirectly
facilitate financial intermediation; include a variety of banking
services, and services of investment and finance institutions such as
investment finances, factoring, forfeiting and bill discounting;
insurance and reinsurance; facilitation of trading in securities market
and currency markets; financial consultancy, and financial advisory
services.
Floating Interest Rate A variable rate of interest which is based
on combination of a fixed premium over a fluctuating benchmark
market interest.
Fraud A major risk in business, finance and banking, requiring
sophisticated anti fraud protection procedures, safeguards, cross
checques, layered approval processes and installation of expensive
monitoring devices; a major cost item for financial institution;
several types of frauds depending on line of activity and target
institution concerned.
Fund Transfer A remittance or transfer of funds from one person to
another or in case of a bank, from one account to another which
may be in the same branch of the bank or with another branch or
bank in the same city, country, or abroad.

Guarantees To accept responsibility for an obligation if the entity


with primary responsibility for the obligation does not meet it. Its a
guarantee from a lending institution ensuring that the liabilities of a
debtor will be met. In other words, if the debtor fails to settle a debt,
the bank will cover it.
Guarantor One who issues a guarantee and undertake that debt,
obligation and commitments of the guaranteed party will be paid or
fulfilled by the guarantor in case there is a default.
Grace Period Specified time period allowed to the borrower by the
lender as a moratorium on repayments due; a period when no
repayment of principle or interest is due on the loan to enable the
borrower to generate cash flow or income through the use of loan
proceeds and consolidate his financial position; a breathing space
offered by the creditor before repayment demand on a loan.
Holder An entity or a person who holds or has possession in the
context of a financial instrument, it mean payee or endorsee in
possession of a bill of exchange or a promissory note who is entitled
to receive payment on the instrument or to endorse at further if the
transfer has not been restricted.
Installment A fixed periodic repayment of the principle, less than
the whole amount due, paid by a debtor at successive periods, in
partial liquidation of debt, as stipulated in the loan agreement.
Interest It is the users charge for borrowed money. It is a fixed
amount of money, predetermined in ex-ante manner, payable by the
user for a specified amount of funds borrowed as a loan or credit,
the principle, for a specified period of time. It is expressed as a rate,
a percentage, typically for a year.
Investment The acquisition of financial, physical or technology
based assets by an investor for their potential future income,
returns, yield, profits, or capital gains, which, unlike interest rate

cannot be predetermined or guaranteed in ex-ante manner, instead


are determined or realized ex-post only if the venture, the business
or the investment activity is successful and generates positive cash
flows, income, return on profits; in the process, the investor accepts
a variety of risk and a potential of loss associated with the
investment being undertaken.
KIBOR (Karachi Interbank Offer Rate) The Karachi Interbank
Offer Rate, or KIBOR, is a benchmark average interest rate at which
term deposits are offered between prime banks in the Pakistani
wholesale money market or interbank market. The State Bank of
Pakistan issues daily KIBOR rates for tenor of 1 and 2 week, 1-3-6
and 9 months and for 1-2& 3 years.
Letter of credit (L/C) A binding document that a buyer can request
from his bank in order to guarantee that the payment for goods will
be transferred to the seller. Basically, a letter of credit gives the
seller reassurance that he will receive the payment for the goods. In
order for the payment to occur, the seller has to present the bank
with the necessary shipping documents confirming the shipment of
goods within a given time frame. It is often used in international
trade to eliminate risks such as unfamiliarity with the foreign
country, customs, or political instability.
Lease It is a contract whereby the owner of an assets, the lessor,
gives the hirer, the lessee, the right to use the asset for a specified
period in exchange of rental payments. The ownership of the leased
asset during the lease period remained with the lessor.
Lessor One who grants a lease; a party to a lease agreement
granting lease of a property to another.
Lessee The tenant or user under lease agreement having a lease
hold right; one to whom a lease of moveable or immovable property
is granted.

Lender A bank, a financial institution, a company or an individual


engaged in the business of lending money
Liability Obligation to pay money, transfer assets or provide
services in the present or future as result of the transaction or
contractual commitment; the funds a bank owes to depositors and
its lender; debt or pecuniary obligations owed to creditors; the
amount a debtor is liable for; a liability may be actual, also called
real, if it actually exist, although its amount may not be definite; or it
may be contingent, which may or may not become due depending
on the occurrence or non-occurrence of a specified event.
Loan-To-Value (LTV) Ratio A lending risk assessment ratio that
financial institutions and others lenders examine before approving a
mortgage. Typically, assessments with high LTV ratios are generally
seen as higher risk and, therefore, if the mortgage is accepted, the
loan will generally cost the borrower more to borrow or he or she will
need to purchase mortgage insurance.
Maturity The length of time until the principal amount of a
loan/fixed deposit/bond must be repaid. In other words, the maturity
is the date the borrower must pay back the money he or she
borrowed through the issue of a bond.
Minimum Balance Requirement Lowest balance required by the
bank that must be maintained in the account by the account holder
to keep it operational. If the balance falls below prescribed level,
additional service charges are levied by the bank.
Mobile Banking Mobile banking is a new way to check your
account balance, view your mini-statement, recharge mobile
connections, and pay utility and other bills and transfer funds to
other accounts
Negotiable: A financial instrument is considered negotiable on
demand or at a future date if it can be endorsed or is marked as

Negotiable; or is transferable; or is payable to the holder or bearer of


the instrument under the terms of negotiability, if specified; or is
acceptable in payments or transactions.
Negotiable Instrument: A financial instrument such as bills of
exchange, promissory notes and drafts, certificate of deposits,
cheques, payment orders or payment instruments, if labeled as
Negotiable, they are negotiable instruments through endorsement
or delivery to the bearer, transferee or to the holder of instrument
who then has unrestricted claims and legally recognized title to the
instrument.
Negative confirmation/verification: At times the statements of
accounts sent by the banks to the customers has a verification or
the confirmation clause; if the bank does not hear anything from the
customer, it is assumed as entries recorded in the statement stand
confirmed by the account holder; however, such a clause carries no
legal validity.
Non-negotiable A financial instrument is nonnegotiable if it cannot
be transacted, or if it is marked or classified non-negotiable though
it may still be transferable.
Non-payment: When a loan, liability or a commitment is not paid
on the due date, or when payment is demanded.
Note: A promissory note or legal undertaking signed by borrowers
to secure a loan, pledging collateral, and committing to perform as
specified with regard to repayment of the loan. Online Banking The
performance of banking activities via the internet. It is also known as
"internet banking" or "web banking". A good online banking system
offers just about every traditional service available through a local
branch.
Overdraft A line of credit pre approved by a bank to an account
holder, up to a designated limit on short term interest rates;

allowing cash draw downs or cheques in excess of credit balance on


the account to provide a cover to cheques issued; to provide ready
liquidity as and when needed.
Payment The fulfillment of a promise to pay in discharge of an
obligation, or a debt, or a liability, or a commitment.
Payment Order Instructions to transfer funds sent via paper and/or
electronic means to pay a specified sum of money to the order of a
specified person. Usually issued by the bank on its own and against
receipt of full money so cannot be returned due to insufficient funds.
Payer An entity or a person who pays a bill of exchange, promissory
note or a claim; payment could be for goods and services acquired
or to satisfy a liability or an obligation or to satisfy a commitment.
Payee An entity or a person in whose favor a bill of exchange,
promissory note, or a cheque is made or drawn; to whom or to
whose order a bill, note, or cheque is made payable; one to whom
money is to be paid or one who is entitled to receive a payment.
Payable to Bearer A payment due and payable to the bearer of the
instrument; or payable to the order of the bearer if properly
endorsed.
Payable to Oder An instrument is payable to order when by its
term or endorsement it is payable to the payee or to the order of
another party specified in the payment order.
Penalty Financial penalty imposed by a bank, or by under law in
court cases for violation of rules and regulation or failure in
compliance.
Post-Dated Cheques A cheque delivered prior to its date, but
payable at sight or on presentation on or after date shown on the
cheque.

Positive Confirmation Any act or omission construed as a positive


confirmation; for example, silence of an account holder to notify
discrepancy in the advised account within a stated period would
mean that entries in the account are correct and are acceptable to
the account holder.
Premature Encashment Penalty A penalty imposed by the bank
on the depositors for withdrawal of their deposits prior to the agreed
date. It is calculated on the principal amount at a penalty stipulated
by the bank at the time of accepting the deposits. The penalty is
calculated for the period from the date of withdrawal to the date
previously agreed with the bank.
Revolving lines of credit A line of credit which is available up to
an agreed amount for a stated period, where the borrower may draw
down, under the line, at any time or repay it in full without
restriction or penalty.
Repayment Period A period of time mutually agreed upon by the
lender and borrower at the time of loan agreement concerning the
repayment of loan; or a period of time extended by the lender
subsequently. Repayment Schedule A time based scheduled
mutually agreed upon by the lender and borrower for repayment of
a debt in installments of fixed of varying amounts with full and final
adjustment by a certain date
Remittance Transfer a payment of money through various
instruments.
Renewal of Credit Extending a loan agreement or a credit facility for
a further period with or without changes in the terms and conditions
originally agreed upon.
Refinancing Refinancing of liabilities such as raising funds by
creating new liabilities in order to discharge maturing liabilities; the
amount of finance obtained from or made available by an external

source to replenish the outflow of finance; for example, if a bank


finance exports and obtained refinance from the central bank, then
the banks own lending funds are not involved in export financing.
Secured Loans A loan which is backed by assets belonging to the
borrower in order to decrease the risk assumed by the lender. The
assets may be forfeited to the lender if the borrower fails to make
the necessary payments
Security An asset pledged to guarantee the repayment of a loan,
satisfaction of an obligation, or in compliance of an agreement.
Security gives a lender a legal right of access to the pledged asset
and to take their possession and title in case of default for a
foreclosure sale.
Service Charges A fee charged by bank to render certain services
to its customers; such charges may be on flat rate or on a
percentage basis tied to the value of the services provided.
Service Fee Fee charges by a bank to provide certain banking
services; these charges are of a general nature, for example, for
correspondence with other banks to sort out customers problems or
to provide services other than those for which fixed charges are
prescribed such as fee on advances, commission on remittances,
opening of L/C and guarantees.
Set-Off In order to cover a loan in default, a bank has a legal right
to seize funds of a guarantor or the debtor. A settlement of mutual
debt between a creditor and a debtor through offsetting transaction
claims is also known as setoff.
Stale Cheque A stale cheque is a cheque that has been
outstanding for an unreasonable time. A cheque may be outstanding
for more than six months and a bank may under its discretion refuse
to honor such a cheque. A bank is under no obligation to a customer
to pay a cheque, other than a certified cheque, after more than six

months of its date, but it can charge its customer's account for a
payment made thereafter in good faith.
Standing Order A standing order is a standing instruction that a
customer gives to his/her bank to pay a specified amount at regular
intervals to another account. Usually, the amount is paid on a
particular day of every month. The amount can be paid into any
bank account, and need not belong to an organization vetted by the
payer's bank. Standing orders are used typically for recurring, fixedamount expenses such as insurance premiums, mortgage
installments, and subscriptions. A standing order is not usually
suitable for paying variable bills such as credit card, or gas and
electricity bills. A standing order can be canceled at an account
holder's option. Stop Payment Instructions An order to a bank not to
honor the payment of a cheque after it has been delivered but
before it has been cashed.
Tenor The amount of time left for the repayment of a loan or
contract or the initial term length of a loan. Tenor can be expressed
in years, months or days. For example, if a bank loan is initially
extended with a five-year tenor, after three years, the loan will be
said to have a tenor of two years. Tenor is sometimes used
interchangeably with "maturity", although tenor is not often used to
describe the terms of fixed-income instruments such as government
bonds and corporate bonds. Instead, non-standardized contracts like
insurance policies and bank loans tend to be described in terms of
tenor.
Term Loan A medium to long term loan with the maturity of more
than one year; a long term loan. A term loan is granted for a specific
purpose, for a fixed term and generally repaid monthly. The interest
rate may be fixed or variable and differs from lender to lender.
Unsecured Loans Loan extended only on the basis of the
borrower's financial position, creditworthiness, credit history, and

general reputation and is not connected to any specific piece of


property. The borrower signs a promissory note but does not pledge
any specific asset as collateral.
Unclaimed Deposit/instruments A debt payable either in
Pakistani currency or any other (foreign) currency is owing by a
banking company by reason of a deposit (time/demand deposit, or
any other kind of deposit) or a financial instrument (pay slips / pay
orders / D.Ds / T.Ts / M.Ts, or any other financial instrument), not
being recorded in the name of a minor or a government or a court of
law, in respect of which no transaction has taken place and no
statement of account has been requested or acknowledged by the
creditor during a period of ten years as reckoned under Sub
section(1) of Section 31 of BCO 1962, will be classified as unclaimed
deposit/instrument.
Variable Rate Loan A loan advanced on variable interest rate
based on a pre agreed formula such as KIBOR plus rate or SBP
discount rate; in contrast to a fixed rate loan where the rate of
interst is fixed for the maturity of loan.
Valuation Determination of value of assets through various
methods and accepted procedures of valuation, assessment and
appraisal; valuation of securities, companies and businesses,
corporations and enterprises for sale, mergers, acquisition and
liquidation; assessment of net worth
Voucher An internal accounting control document containing key
information about a transaction authorizing payment and debit or
credit entry to the specified account; certain documents, like paid
cheques or remittance instruments, are normally treated as
vouchers after due processing and authorization.
Waiver Waiver of a claim, a right, a covenant in an agreement, or
an exemption clause, effectively alters the terms and condition as

stipulated originally, depending on the type of the contractual


agreement.
Willful Default Deliberate default of a borrower on loan from the
agreed terms of repayment; despite having a ability or the means to
repay or perform according to the commitment made.
Withdrawal Draw down of funds from bank accounts; if substantial
over a short period, it may create severe liquidity crises fro bank
concerned
Withholding Tax Withholding is an act of deduction or collection of
tax at source, at the specified rate which has generally been in the
nature of an advance tax payment.
Write-Off Write-off is to reduce the book value of an asset fully or
partially so as to reflect the amount of loss to be carried on the
accounts; if the entire value is written-off it is also known as charged
off against reserves or profit; if the book value is partially written off,
it is the difference between the book value and the releasable value
or market value of the asset. In banking, it means the amount of
loan which is not recoverable, and is to be written off against the
provision for loan losses maintained for classified non-performing
loans.
Yield Yield is the return on an invested amount, usually expressed
as annualized percentage return.
Zero Interest Loan A loan requiring no payment of principle on
periodic basis or in installments; instead, a single payment is made
on the due date including the interest accrued during the loan
period and the original amount borrowed.

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