Important Banking Terms That frequently Asked in bank exam. Set H

June 12, 2014

NABARD: National Bank for Agriculture & Rural Development was setup in 1982 under the Act of 1981. NABARD finances and regulates rural financing and also is responsible for development agriculture and rural industries.


Negotiation: In the context of banking, negotiation means an act of transferring or assigning a money instrument from one person to another person in the course of business.


Net Asset Value: The underlying value of a share of stock in a particular mutual fund; also used with preferred stock.


Non-Fund Based Limits: Non-Fund Based Limits are those type of limits where banker does not part with the funds but may have to part with funds in case of default by the borrowers, like guarantees, letter of credit and acceptance facility.


Non-Resident: A person who is not a resident of India is a non-resident.


Non-Resident Accounts: Accounts of non-resident Indian citizens opened and maintained as per R.B.I. Rules.


Notary Public: A Lawyer who is authorized by Government to certify copies of documents .


NPA Account: If interest and instalments and other bank dues are not paid in any loan account within a specified time limit, it is being treated as non-performing assets of a bank.


Off Balance Sheet Items: Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.


Offer for Sale: An offer to the public by, or on behalf of, the holders of securities already in issue.


Offer for Subscription: The offer of new securities to the public by the issuer or by someone on behalf of the issuer.


Online Banking: Banking through internet site of the bank which is made interactive.


Open-end (Mutual) Fund: There is no limit to the number of shares the fund can issue. The fund issues new shares of stock and fills the purchase order with those new shares. Investors buy their shares from, and sell them back to, the mutual fund itself. The share prices are determined by their net asset value.


Open Offer: An offer to current holders of securities to subscribe for securities whether or not in proportion to their existing holdings.


Option: A security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.


Oversubscribed: When an Initial Public Offering has more applications than actual shares available. Investors will often apply for more shares than required in anticipation of only receiving a fraction of the requested number. Investors and underwriters will often look to see if an IPO is oversubscribed as an indication of the public’s perception of the business potential of the IPO company.


Pass Book: A record of all debit and credit entries in a customer's account. Generally all banks issue pass books to Savings Bank/Current Account Holders.


Par Bond: A bond selling at par (i.e. at its face value).


Par Value: The face value of a security.


Perpetual Bonds: Bonds which have no maturity date.


Placing: Obtaining subscriptions for, or the sale of, primary market, where the new securities of issuing companies are initially sold.


Personal Identification Number (PIN): Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .


Plastic Money: Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.


Pledge: A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.


Post-Dated Cheque: A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.


Power of Attorney: It is a document executed by one person - Donor or Principal, in favour of another person, Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.


Portfolio: A collection of investment vehicles assembled to meet one or more investment goals.


Preference Shares: A corporate security that pays a fixed dividend each period. It is senior to ordinary shares but junior to bonds in its claims on corporate income and assets in case of bankruptcy.

Premium (Warrants): The difference of the market price of a warrant over its intrinsic value.


Premium Bond: Bond selling above par.


Present Value: The amount to which a future deposit will discount back to present when it is depreciated in an account paying compound interest.


Present Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will discount back to present when it is depreciated in an account paying compound interest.


Price/Earnings Ratio (P/E): The measure to determine how the market is pricing the company’s common stock. The price/earnings (P/E) ratio relates the company’s earnings per share (EPS) to the market price of its stock.


Privatization: The sale of government-owned equity in nationalized industry or other commercial enterprises to private investors.


Prospectus: A detailed report published by the Initial Public Offering company, which includes all terms and conditions, application procedures, IPO prices etc, for the IPO


Put Option: The right to sell the underlying securities at a specified exercise price on of before a specified expiration date.


Premature Withdrawals: Term deposits like Fixed Deposits, Call Deposits, Short Deposits and Recurring Deposits have to mature on a particular day. When these deposits are sought to be withdrawn before maturity , it is premature withdrawal.


Prime Lending Rate (PLR): The rate at which banks lend to their best (prime) customers.


Priority Sector Advances : consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organisations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.


Promissory Note: Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.


Provisioning:  Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification and make appropriate provisions for likely losses in their balance sheets.


Public Sector Bank: A bank fully or partly owned by the Government.

Rate of Return: A percentage showing the amount of investment gain or loss against the initial investment.


Real Interest Rate: The net interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.


Redemption Value: The value of a bond when redeemed.


Reinvestment Value: The rate at which an investor assumes interest payments made on a bond which can be reinvested over the life of that security.


Relative Strength Index (RSI): A stock’s price that changes over a period of time relative to that of a market index such as the Standard & Poor’s 500, usually measured on a scale from 1 to 100, 1 being the worst and 100 being the best.


Repurchase Agreement: An arrangement in which a security is sold and later bought back at an agreed price and time.


Resistance Level: A price at which sellers consistently outnumber buyers, preventing further price rises.


Return: Amount of investment gain or loss.


Rescheduling of Payment: Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.


Restrictive Endorsement: Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.


Right of Appropriation: As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.


Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.


Rights Issue: An offer by way of rights to current holders of securities that allows them to subscribe for securities in proportion to their existing holdings.


Risk-Averse, Risk-Neutral, Risk-Taking:


Risk-averse describes an investor who requires greater return in exchange for greater risk.


Risk-neutral describes an investor who does not require greater return in exchange for greater risk.


Risk-taking describes an investor who will accept a lower return in exchange for greater risk.



Send Your Query