📚 Comprehensive Banking Terms Glossary

🏦 Essential Banking Concepts

A

• Account Payee Cheque: A cheque that can only be deposited in the account of the person/company whose name is written on it
• Amortization: The process of paying off a debt over time through regular payments
• Annuity: A financial product that pays out a fixed stream of payments to an individual
• Arbitrage: The simultaneous purchase and sale of an asset to profit from a difference in price
• Asset: Anything of value owned by a person or company
• Audit: An official inspection of an individual’s or organization’s accounts

B

• Balance Sheet: A financial statement that reports a company’s assets, liabilities, and shareholders’ equity
• Bank Rate: The rate at which central bank lends money to commercial banks
• Base Rate: The minimum rate below which banks are not allowed to lend
• Bearer Cheque: A cheque payable to the person holding it
• Bill of Exchange: A written order by one person to another to pay a specified sum of money
• Bond: A fixed income instrument that represents a loan made by an investor to a borrower
• Branch Banking: Banking services provided through a network of branches
• Bridge Loan: Short-term financing used until a person or company secures permanent financing

C

• Capital Adequacy Ratio (CAR): Ratio of a bank’s capital to its risk-weighted assets
• Cash Reserve Ratio (CRR): Fraction of deposits that banks must maintain as cash with the central bank
• Ceiling: The maximum limit that can be reached or exceeded
• Clearance: The process of transferring funds from one account to another
• Collateral: Security pledged for the repayment of a loan
• Commercial Paper: Unsecured promissory notes issued by companies to meet short-term financing needs
• Compound Interest: Interest calculated on the initial principal and accumulated interest
• Credit: The ability of a customer to obtain goods or services before payment
• Credit Card: A plastic card that allows the holder to obtain goods on credit
• Credit Rating: Evaluation of the credit worthiness of a borrower
• Crossed Cheque: A cheque with two parallel lines across its face, making it payable only through a bank account

D

• Debit Card: A plastic card that allows the holder to make electronic payments by debiting their bank account
• Debt: Money owed by one party to another
• Debtor: A person or entity that owes money
• Demand Deposit: Funds deposited in a bank account that can be withdrawn at any time without notice
• Depositor: A person who places money in a bank account
• Derivative: A financial contract whose value derives from an underlying asset
• Direct Tax: Tax paid directly to the government by the taxpayer
• Discount Rate: The interest rate charged to commercial banks for borrowing funds from the central bank
• Dividend: A portion of a company’s profits paid to shareholders

E

• Electronic Clearing Service (ECS): An electronic mode of funds transfer
• Equity: Ownership interest in a company in the form of common stock or preferred stock
• Exchange Rate: The value of one currency in terms of another
• Export: Goods and services sold to foreign countries

F

• Face Value: The nominal value of a security stated by the issuer
• Finance: The management of large amounts of money, especially by governments or large companies
• Fiscal Year: A one-year period that companies and governments use for financial reporting and budgeting
• Fixed Deposit: A term deposit with a fixed interest rate and fixed maturity date
• Forex: Foreign exchange market where currencies are traded
• FPO (Follow-on Public Offer): When an already listed company makes a fresh issue of securities to the public

G

• GDP (Gross Domestic Product): Total monetary value of all final goods and services produced within a country
• GDR (Global Depository Receipt): A bank certificate issued in more than one country for shares in a foreign company
• Green Banking: Environmentally friendly banking practices
• Guarantor: A person who promises to pay a debt if the borrower defaults

H

• Hedge: An investment made to reduce the risk of adverse price movements
• Hypothecation: When a borrower pledges collateral to secure a loan without transferring possession

I

• IFSC (Indian Financial System Code): An alphanumeric code that identifies bank branches participating in electronic fund transfer
• IMPS (Immediate Payment Service): Instant real-time inter-bank electronic fund transfer service
• Import: Goods and services purchased from foreign countries
• Indirect Tax: Tax collected by an intermediary from the person who bears the ultimate economic burden
• Inflation: Rate at which the general level of prices for goods and services is rising
• Insurance: Protection against financial loss
• Interest: The cost of borrowing money or the return on investment
• IPO (Initial Public Offer): When a private company first sells shares to the public
• ITR (Income Tax Return): Form used to declare income and pay taxes

J

• Joint Account: A bank account held by two or more people
• Junk Bonds: High-yield bonds with lower credit ratings

L

• Lien: The legal right to keep possession of property belonging to another person until a debt owed by that person is discharged
• Liquidity: The ease with which an asset can be converted into cash without affecting its market price
• Loan: Money borrowed that must be repaid with interest
• Lock-in Period: The period during which an investor cannot sell their securities

M

• Market Capitalization: The total market value of a company’s outstanding shares
• Maturity Date: The date on which a bond or other debt instrument becomes due for payment
• MICR (Magnetic Ink Character Recognition): Technology used to verify the legitimacy of checks
• Mobile Banking: Banking services conducted through mobile devices
• Monetary Policy: Actions undertaken by a central bank to manipulate the money supply and credit conditions
• Money Market: Financial market for short-term borrowing and lending
• Mortgage: A loan secured by collateral of real estate property
• Mutual Fund: An investment program funded by shareholders that trades in diversified holdings

N

• NAV (Net Asset Value): The market value of a mutual fund’s total assets minus liabilities
• NEFT (National Electronic Funds Transfer): Nationwide payment system facilitating one-to-one funds transfer
• Negotiable Instrument: A document guaranteeing the payment of a specific amount of money
• Non-Performing Asset (NPA): A loan or advance for which interest or principal payment remains overdue

O

• Overdraft: An extension of credit from a lending institution when an account reaches zero
• Online Banking: Banking services conducted through the internet
• Operating Profit: Profit from business operations after deducting operating expenses

P

• Passbook: A book issued by a bank to record deposits and withdrawals
• Payee: The person to whom money is paid
• Penny Stock: Low-priced stock of small companies
• Personal Banking: Banking services for individual customers
• Plastic Money: Credit cards, debit cards, and other plastic payment methods
• Premium: The amount paid for an insurance policy
• Prime Lending Rate: The interest rate charged by banks to their most creditworthy customers
• Principal: The original sum of money borrowed or invested
• Promissory Note: A financial instrument containing a written promise by one party to pay another party

Q

• Quantitative Easing: Central bank policy of increasing money supply by purchasing government securities
• Quid Pro Quo: Something given in exchange for something else

R

• Recession: A period of temporary economic decline
• Recurring Deposit: A term deposit where people deposit a fixed amount every month
• Repo Rate: The rate at which the central bank lends money to commercial banks
• Reverse Repo Rate: The rate at which the central bank borrows money from commercial banks
• RTGS (Real Time Gross Settlement): Electronic funds transfer system on a real-time basis
• Rural Banking: Banking services provided to rural areas

S

• Savings Account: A deposit account held at a financial institution that provides principal security and modest interest rate
• SEBI (Securities and Exchange Board of India): Regulator of the securities market in India
• Securities: Financial instruments representing ownership in a company (stocks) or a creditor relationship (bonds)
• SLR (Statutory Liquidity Ratio): Percentage of deposits that banks must maintain in liquid form
• Standing Instruction: An order given to a bank to automatically debit or credit an account regularly
• Stock: A type of security that signifies proportionate ownership in a company
• Subsidy: Financial assistance provided by the government
• Sweep Account: A bank account that automatically transfers amounts above a certain level into an investment account

T

• Tax: A compulsory contribution to state revenue
• TDS (Tax Deducted at Source): Tax collected at source of income
• Time Deposit: A bank deposit with a specified maturity date
• Treasury Bills: Short-term government securities
• Trust: A fiduciary relationship in which one party holds property for the benefit of another

U

• UPI (Unified Payments Interface): Instant real-time payment system
• Usance: The time allowed for payment of a bill of exchange
• UTI (Unit Trust of India): First mutual fund set up in India

V

• Valuation: The process of determining the current worth of an asset or company
• Variable Rate: Interest rate that can change based on market conditions
• VAT (Value Added Tax): Consumption tax placed on a product whenever value is added

W

• Wholesale Banking: Banking services provided to large corporations and financial institutions
• Withdrawal: Taking money out of a bank account
• Working Capital: The capital of a business used in its day-to-day operations

Y

• Yield: The income return on an investment
• YTM (Yield to Maturity): The total return anticipated on a bond if held until it matures

Z

• Zero Balance Account: Bank account that does not require a minimum balance
• Zero Coupon Bond: A bond bought at a price lower than its face value

🏛️ Regulatory Bodies

Banking Regulators

• RBI (Reserve Bank of India): India’s central banking institution
• IRDA (Insurance Regulatory and Development Authority): Regulator for insurance industry
• PFRDA (Pension Fund Regulatory and Development Authority): Regulator for pension funds
• SEBI (Securities and Exchange Board of India): Securities market regulator
• FMC (Forward Markets Commission): Regulator for commodity markets (now merged with SEBI)

💰 Financial Instruments

Market Instruments

• Equity Shares: Ownership stakes in companies
• Debentures: Long-term debt instruments issued by companies
• Bonds: Debt securities issued by governments and corporations
• Derivatives: Financial contracts deriving value from underlying assets
• Options: Contracts giving the right but not obligation to buy/sell
• Futures: Contracts to buy/sell assets at predetermined future date
• Mutual Funds: Professionally managed investment portfolios
• ETFs (Exchange Traded Funds): Market-traded mutual funds

📊 Economic Indicators

Key Indicators

• GDP (Gross Domestic Product): Total economic output
• GNP (Gross National Product): GDP plus net income from abroad
• FDI (Foreign Direct Investment): Investment from foreign entities
• FII (Foreign Institutional Investment): Investment by foreign institutions
• CPI (Consumer Price Index): Measure of inflation based on consumer costs
• WPI (Wholesale Price Index): Measure of inflation based on wholesale prices
• Balance of Payments: Record of all economic transactions between countries
• Current Account Deficit: When imports exceed exports of goods and services
• Fiscal Deficit: When government expenditure exceeds revenue

📱 Banking Technology Terms

Digital Banking

• E-Banking: Electronic banking services
• M-Banking: Mobile banking services
• ATM (Automated Teller Machine): Electronic banking outlet
• POS (Point of Sale): Location where payment transactions occur
• QR Code: Machine-readable optical label containing information
• Biometric Authentication: Using biological characteristics for security
• Blockchain: Distributed ledger technology
• Cryptocurrency: Digital or virtual currency using cryptography

🎓 Important Formulas for Banking Exams

Interest Calculations

• Simple Interest: SI = (P × R × T) / 100
• Compound Interest: A = P(1 + R/100)^T
• Amount: A = P + SI
• Rate: R = (SI × 100) / (P × T)
• Time: T = (SI × 100) / (P × R)

Profit and Loss

• Profit: SP - CP
• Loss: CP - SP
• Profit %: (Profit / CP) × 100
• Loss %: (Loss / CP) × 100

Partnership

• Profit Sharing: Ratio of investments × Time
• Working Partner’s Share: (Total Profit × Working Share Ratio) / Total Ratio

Time and Work

• Work: 1 / Time
• Time: 1 / Work
• Combined Work: (1/Time₁) + (1/Time₂)

🏆 Quick Reference Guide

Most Frequently Asked Terms

1. CRR vs SLR: Both are ratios but CRR is maintained as cash with RBI, SLR in government securities
2. Repo vs Reverse Repo: RBI lends to banks (Repo) vs banks lend to RBI (Reverse Repo)
3. NEFT vs RTGS: Both are fund transfer systems, RTGS is for high-value real-time transfer
4. Debit Card vs Credit Card: Debit uses your money, Credit uses bank’s money
5. Cheque Types: Account Payee, Bearer, Crossed, Self Cheque

Important Banking Abbreviations

• CASA: Current Account Savings Account
• KYC: Know Your Customer
• AML: Anti-Money Laundering
• CBS: Core Banking Solution
• EMI: Equated Monthly Installment
• NPA: Non-Performing Asset
• PLR: Prime Lending Rate
• MCLR: Marginal Cost of Funds Based Lending Rate