Banking Related Terms PDF: A Complete Resource for Banking Industry

Having a comprehensive understanding of banking-related terms is crucial for professionals and individuals alike. This PDF guide is a one-stop-shop for anyone looking to brush up on their knowledge of banking terminology.

The guide covers a wide range of topics, from account types to financial regulations. You'll find definitions for key terms like "asset-liability management" and "credit risk assessment".

With this PDF, you'll be able to quickly look up definitions and explanations of banking-related terms. Whether you're a student, a professional, or simply someone looking to learn more about the banking industry, this guide is a valuable resource.

Financial Instruments are a crucial part of banking, allowing individuals and businesses to manage risk and achieve financial goals.

A deposit account is a type of financial instrument that allows individuals and businesses to deposit and withdraw funds at will, such as a checking or savings account.

Certificates of Deposit (CDs) are a type of financial instrument that earns a fixed interest rate for a specific period of time, typically ranging from a few months to several years.

Stocks and bonds are types of financial instruments that represent ownership or debt, respectively, in a company or government entity.

A futures contract is a type of financial instrument that obligates the buyer to purchase an asset at a set price on a specific date, often used for commodities like oil or gold.

Investors can use financial instruments like options to hedge against potential losses or speculate on price movements, but it's essential to understand the risks involved.

Financial instruments can be categorized into debt instruments, equity instruments, and derivative instruments, each with its unique characteristics and uses.

Banking services offer a range of financial products and solutions to individuals and businesses. These services can be accessed through traditional banks, online banks, or credit unions.

Online banking allows users to manage their accounts, pay bills, and transfer funds from anywhere with an internet connection. This convenience has become a standard feature in modern banking.

Mobile banking apps provide users with a secure and efficient way to perform banking tasks on their smartphones. Many banks also offer mobile deposit services, allowing users to deposit checks remotely.

Banking services also include investment options, such as stocks, bonds, and mutual funds. These investments can help individuals grow their wealth over time.

Credit cards, on the other hand, offer users a line of credit to make purchases or pay for expenses. Credit cards often come with rewards programs and cashback incentives.

Checking and savings accounts are the foundation of most banking services. These accounts allow users to store and manage their money safely and securely.

Business banking services cater to the financial needs of companies and entrepreneurs. These services include business loans, credit lines, and merchant services.

A debit card is essentially an ATM card that allows you to pay for goods at stores or businesses, online, and at ATMs.

One of the key differences between a debit card and a credit card is that a debit card draws the money directly from your checking account, whereas a credit card allows you to borrow the money and pay it back later.

You can use your debit card to make purchases in-person, online, or at ATMs, making it a convenient payment option.

A checking account is the basic account for easy access to your money, helping you manage day-to-day expenses and recurring bills.

You can use a checking account to make deposits, which are increases in a savings or checking account, such as a deposit made to the account.

A deposit can also refer to a person or company's ability to borrow money, with the expectation the money will be paid back in the future.

However, a debit is a decrease in a savings or checking account, such as a withdrawal or a check written against the account, which can affect your account balance.

You should keep an eye on your account balance to avoid overdrafts, which can happen when you don't have enough money in your account to cover a debit.

A mortgage loan is a loan used to purchase or refinance a home or real property.

The payments for a mortgage loan are usually spread over 10 to 30 years.

It's secured by real estate, such as the borrower's primary residence.

This means the lender has a claim on the property until the loan is fully paid off.

A mortgage loan is typically used for purchasing a home, but it can also be used to refinance an existing mortgage to get a better interest rate or lower monthly payments.

A bank account is a type of account that allows you to store your money securely. This is a fundamental banking concept that is essential to understand.

Banking hours refer to the specific times when a bank is open for business. Typically, banks are open Monday through Friday from 9am to 5pm, but this may vary depending on the location.

Interest rates are the fees charged by banks for lending money to customers. For example, if you borrow $100 from a bank at an interest rate of 5%, you will owe the bank $105 after one year.

Compound interest is a type of interest that is calculated on both the principal amount and any accrued interest. This means that your interest will earn interest, causing your balance to grow faster over time.

Banks also offer various types of accounts, such as checking and savings accounts, each with its own set of features and benefits.

Core Banking is essentially a system that allows banks to manage their customers' accounts electronically, just like how a Depository Company converts share certificates into electronic form and keeps them in a Demat account.

This system enables banks to keep track of customers' money and transactions in a seamless and efficient manner, making it easier for customers to access their accounts and perform various banking operations from anywhere.

By digitizing the way banks manage their customers' accounts, Core Banking reduces the need for physical paperwork and manual processing, saving time and resources for both the bank and its customers.

In simple terms, Core Banking is a modern and convenient way to manage your bank account, just like how you can easily access and manage your shares in a Demat account.

Virtual banking is basically online banking, which is controlled by the World Wide Web.

It's often called virtual banking because it doesn't have any physical branches or boundaries, allowing you to access your account from anywhere with an internet connection.

Internet banking is a perfect example of this, where you can manage your finances and perform transactions from the comfort of your own home.

Virtual banking offers a lot of convenience and flexibility, making it a popular choice for many people.

EFT – Electronic Fund Transfer is a convenient way to move funds between different accounts in different or same bank, using Automatic teller machine, wire transfer and computers.

You can use your debit or credit card to make an Electronic Fund Transfer, which is linked to your account through an ATM. This allows you to withdraw money from ATMs, as mentioned in Example 4.

To make an Electronic Fund Transfer, you'll need to have a checking account, which is the basic account for easy access to your money, as explained in Example 3. This account is helpful for managing day-to-day expenses and recurring bills.

You can also use Direct deposit, which is an automatic deposit to your account made by your employer or an outside agency, as mentioned in Example 6. These are usually recurring and spare you the hassle of depositing a paper check.

Scheduled transfers, as mentioned in Example 5, can be set up to move money from one account to another on a regular recurring basis, often monthly. This can be a helpful way to manage your finances and keep track of your expenses.

To make an Electronic Fund Transfer, you'll need to have a Personal identification number (PIN), which is a number issued with your debit or credit card, as explained in Example 4. This PIN should be memorized, never written down or disclosed to anyone else.

Plastic money, which includes Credit cards, Debit cards, ATM cards and International Cards, can also be used to make Electronic Fund Transfers, as mentioned in Example 2. This makes it easy to access your money and make transactions online or in person.

A credit card is a type of credit that allows you to spend up to a specific limit.

To avoid paying interest, it's essential to pay off your full balance each month.

Interest on the balance is assessed at the end of the monthly term, so make sure to clear your bill completely to save on interest charges.

You're allowed to charge up to your credit limit, but be aware that going over it can lead to additional fees and interest.

A certificate of deposit, or CD, is a savings product that locks in a fixed APY on deposits for a set period, until the maturity date.

The annual percentage yield, or APY, is the effective annual rate of return taking into account the compounding of interest on a savings, checking, CD, or money market account.

You can earn interest on your savings, but be aware that early withdrawal from a CD or IRA may come with a fee, known as an early withdrawal penalty.

To calculate interest, you can multiply the original amount by the interest rate, or use a compound interest formula that adds interest to the total amount as it accumulates.

The interest rate on a deposit account is the annual percentage yield, or APY, while the interest rate on a loan is the annual percentage rate, or APR.

Banks or other organizations report interest income on savings accounts, certificates of deposit, and money markets on Form 1099-INT.

Some accounts allow interest transfer, which lets you move interest earned on one account to another, like transferring interest from a CD to a money market account.

The prime rate is the interest rate that banks use to establish the indexed rate for certain loan products, and it's published in The Wall Street Journal.

A fixed rate is a rate of interest that doesn't vary for the entire term of the loan or deposit, which can provide stability and predictability.

The prime lending rate, or PLR, is the rate at which a bank gives loans to its most reliable customers, those with zero risk.

A money market account is a type of savings account that's FDIC-insured up to $250,000.

This means your funds are protected and you can access them when needed.

A Home Equity Line of Credit, or HELOC, is a line of credit based on the estimated value of your home, or on the amount of equity in your home.

You can borrow money from a HELOC, but be aware that you're putting your home at risk if you're unable to pay back the loan.

The amount you can borrow with a HELOC is determined by the lender, and it's usually based on a percentage of your home's value.

You'll typically have a set amount of time, often 5-10 years, to draw on the credit line and borrow money.

To avoid paying interest on a HELOC, try to pay off the full balance each month, just like you would with a credit card.

However, keep in mind that HELOCs often have variable interest rates, which can increase over time.

An auto loan is a loan for the purchase of a vehicle that you pay off over time. This type of loan is more expensive than buying a car outright because you're paying interest.

You get to use the car while you're paying for it, which can be a big advantage.

Auto loans are a popular option for many people because they allow you to drive a car while making payments.

Overdraft protection is an arrangement made between you and your bank that allows you to withdraw more than the balance in your account without incurring any penalties.

This type of protection can be a lifesaver in case of unexpected expenses or overdrafts.

It's essentially a safety net that helps you avoid fees and penalties associated with going over your account balance.

The bank will typically transfer funds from a linked account, such as a savings or credit account, to cover the overdraft amount.

Interest rates can be a bit confusing, but essentially it's the annual percentage paid on an interest-bearing savings account or CD, or the interest charged on loans.

The interest paid on a deposit account is called the annual percentage yield (APY), while the rate charged on a loan is called the annual percentage rate (APR).

Simple interest is calculated only on the principal balance, without compounding.

Compound interest, on the other hand, adds the interest to the total amount as it accumulates, making it a bit more complex.

Banks or other organizations that pay interest usually report it on Form 1099-INT, which you'll receive if you earn interest income.

Interest income includes earnings on savings accounts, certificates of deposit, and money markets.

A mortgage loan is a type of loan used to purchase or refinance a home or real property, with payments usually spread over 10 to 30 years.

The repo rate is the rate at which the RBI lends money to banks, while the reverse repo rate is the rate at which RBI borrows money from banks.

Monetary policy refers to the Central Government's policy with respect to the quantity of money in the economy, the rate of interest, and the exchange rate.

An indexed rate is a type of interest rate that's tied to an external benchmark, such as the prime rate or a specific market index.

This means the rate charged on an adjustable rate loan, like a HELOC or credit card, can fluctuate based on changes in the underlying index.

The indexed rate is usually calculated by adding a margin to the index value, resulting in the final interest rate the borrower pays.

For example, if the prime rate is 6% and the lender adds a 2% margin, the indexed rate would be 8%.

A dishonor of cheque occurs when a cheque is not paid by the paying banker, often due to insufficient funds in the account. This can be a frustrating experience for account holders.

Non-sufficient funds, or NSF, is the reason for this dishonor, which means the account balance is too low to cover the cheque. This can happen when a cheque is presented for payment, but the funds are not available.

The paying banker will return the cheque with a memo explaining the reason for the non-payment, which is usually NSF. This memo serves as a notice to the account holder that their cheque was not paid.

Point of Sale (PoS) is a location where a card transaction payment occurs. This is where you'll typically find a terminal or machine that processes your payment.

In a retail setting, the PoS is usually located at the checkout counter. It's where you hand over your credit or debit card to the cashier.

A PoS can be found in various locations, including retail stores, restaurants, and gas stations.

Non-Performing Assets (NPAs) are a major concern for banks, as they can lead to significant financial losses.

NPA or non-performing Assets are loans given by a bank on which repayments or interest payments are not being made on time.

A bank can classify a loan as NPA if the borrower fails to make payments for 90 days or more.

This can happen due to various reasons such as the borrower facing financial difficulties, the loan being mismanaged, or the borrower simply not having the funds to repay.

The bank then has to take steps to recover the loan, which can be a lengthy and costly process.

The Statutory Liquidity Ratio (SLR) is a crucial banking term that affects how banks manage their liquidity.

It's a percentage that banks must maintain as a reserve against their deposits.

In simple terms, it's like keeping a certain amount of cash in your wallet to ensure you can pay for things when needed.

Banks have to hold a portion of their deposits in liquid assets, such as cash or government securities, to meet this ratio.

The Leverage Ratio is a crucial concept in banking that determines how much credit a commercial bank can give to its customers. It's the amount of capital a bank must have before extending credit, and this capital can be in the form of gold, money, or bonds.

A bank's Leverage Ratio is essentially a safety net that prevents it from over-extending itself and taking on too much risk. This ratio is calculated by dividing the bank's capital by its total assets.

Commercial banks must maintain a minimum Leverage Ratio to ensure they have enough capital to cover potential losses. This is why the Leverage Ratio is a key factor in a bank's ability to lend money to its customers.

In simple terms, the Leverage Ratio is a measure of a bank's financial health and its ability to absorb potential losses.

The Repo rate is a crucial concept in banking. It's the rate at which commercial banks borrow funds from the Reserve Bank of India (RBI) if there's a shortage of rupees.

If the Repo rate increases, it becomes more expensive for banks to borrow money from the RBI. This can have a ripple effect on the entire banking system.

A higher Repo rate can make borrowing more costly for banks, which can lead to higher interest rates for consumers.

SDR is a reserve asset created within the framework of the International Monetary Fund.

It's essentially a digital equivalent of gold, often referred to as "paper gold".

SDR was created to increase international liquidity.

The EMV chip is a significant update to simple magnetic stripe cards. It encrypts data to prevent interception, making transactions more secure.

Developed as a joint effort by Europay, MasterCard, and Visa, the EMV chip ensures global acceptance. This standard was created to ensure security.

By using an EMV chip, you can rest assured that your data is protected.

A surcharge is an amount charged by the owner of an ATM, which usually applies to out-of-network ATMs.

This can be a surprise expense for some people, especially when traveling or using ATMs outside of their usual network.

You might be charged a fee for using a non-network ATM, so it's always a good idea to check with your bank before making a withdrawal.

ATM fees can sneak up on you, especially if you're not careful about where you use your debit card. Fees you're charged for using an out-of-network ATM can be a significant expense.

Out-of-network ATMs are those that don't belong to your bank or credit union. You might find them at other banks, convenience stores, or even some restaurants. Using one of these ATMs can cost you anywhere from $2 to $5 per transaction.

If you're lucky, your bank might offer a limited number of free ATM transactions per month. But if you exceed that limit, you'll likely face additional fees. These can range from $1 to $3 per transaction, depending on your bank's policies.

A surcharge is an amount charged by the owner of an ATM, which generally applies to out-of-network ATMs.

You might be surprised to see a fee added to your withdrawal, but it's a common practice at non-bank ATMs or white-labeled ATMs that don't display a bank's name or logo.

These surcharges can vary, but they're usually charged on top of the initial withdrawal fee.

If you're not aware of the surcharge, you might be caught off guard when you see the extra charge on your bank statement.

Banking operations are the backbone of any financial institution, and understanding them is crucial for making informed decisions about your money.

The core banking system is the central component of banking operations, responsible for managing and processing financial transactions.

Banking operations involve a range of activities, including account opening, loan processing, and transaction clearing.

A well-managed core banking system can significantly reduce the time and cost associated with these activities.

In addition to the core banking system, banking operations also involve the use of various software and technology solutions to streamline processes and improve efficiency.

These solutions can include online banking platforms, mobile banking apps, and digital payment systems.

Effective banking operations require a combination of human expertise and technology to ensure that transactions are processed accurately and efficiently.

This includes the use of data analytics to identify trends and patterns in customer behavior, and to anticipate and prevent potential issues.

Banking security is a top priority for any bank or financial institution. It's essential to protect customer data and prevent cyber threats.

To ensure banking security, banks use advanced technology such as encryption to safeguard customer information. This is a must-have in today's digital age.

One way banks protect their systems is by implementing firewalls, which block unauthorized access to the network. Firewalls are a crucial line of defense against cyber attacks.

Banks also use secure communication protocols like SSL/TLS to protect online transactions. This ensures that sensitive information remains confidential.

Regular security audits and penetration testing help identify vulnerabilities in the system, allowing banks to take corrective action. This proactive approach helps prevent security breaches.

Two-factor authentication adds an extra layer of security, requiring customers to provide a second form of verification before accessing their accounts. This makes it much harder for hackers to gain unauthorized access.

By investing in robust security measures, banks can provide a safe and secure banking experience for their customers.

Banking policy is a set of rules and guidelines that govern the operations of banks and financial institutions. These policies aim to ensure the stability and soundness of the financial system.

The Basel Accords, a set of international banking regulations, require banks to hold a minimum amount of capital against their assets. This is to prevent banks from taking on too much risk.

Banks are also subject to anti-money laundering (AML) and know-your-customer (KYC) regulations. These regulations require banks to verify the identity of their customers and report suspicious transactions.

The Bank Secrecy Act (BSA) requires banks to maintain records of cash transactions exceeding $10,000. This helps to prevent money laundering and terrorist financing.

The Dodd-Frank Act, passed in 2010, introduced stricter regulations on banks and financial institutions. This includes requirements for banks to hold more capital and to implement risk management policies.

Banks are also subject to consumer protection regulations, such as the Truth in Lending Act (TILA) and the Electronic Fund Transfer Act (EFTA). These regulations require banks to clearly disclose fees and charges to their customers.