Banking Terminologies

Banking terminologies are widely used by all types of banks in India. Knowing these terminologies can be helpful in understanding banking concepts and managing your finances effectively.

A-Z List of Banking Terminologies

1. Account: A running record of transactions between two parties, typically a bank and its customers.

2. ATM (Automated Teller Machine): A machine that allows customers to withdraw cash, deposit funds, and check their account balances.

3. Annuity: A fixed amount of money paid to someone each year, usually for the rest of their life.

4. Assets: Resources with economic value that an individual, corporation, or country owns or controls, expected to provide future benefits.

5. Bailout: A financial rescue of a company facing extreme financial difficulties.

6. Balance Sheet: A financial statement that reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time.

7. Bank Credit: Lending by banks to customers through loans, discounting of bills of exchange, etc.

8. Bank Deposits: Savings deposited with banks for safety or earning interest.

9. Banknote: A note issued by a bank promising to pay a specified amount of money when presented.

10. Bank Rate: The interest rate charged by a central bank to commercial banks on loans and advances.

11. Bankruptcy: A legal process where individuals or entities cannot repay debts to creditors and seek relief from some or all of their debts.

12. Bridge Loan: A short-term loan to cover a temporary shortage of cash.

13. Bancassurance: Distribution of insurance products and policies by banks as corporate agents through their branches.

14. Bouncing of a Cheque: When an account has insufficient funds, and a cheque is returned by the bank due to “Exceeds arrangement” or “funds insufficient.”

15. Base Rate: The interest rate on which banks generally base their lending rates.

16. Basis Point: One-hundredth of 1% point, commonly used for indicating the cost of finance.

17. Bills of Exchange: Written instruments containing an unconditional order to pay a certain amount of money to a specified person or bearer.

18. Call Money: A short-term loan for a few days with a low interest rate.

19. Capital Assets: Assets not bought or sold as part of the everyday business operations.

20. Cash: Money in the form of banknotes and coins.

21. Capital Expenditure: Non-recurring expenditure used in purchasing capital assets.

22. Cash Cow: Enterprises that yield high earnings but often have low growth potential.

23. Cheque: A written order by an individual to transfer an amount between two accounts of the same or different banks.

24. Core Banking: Services provided by a group of networked bank branches.

25. Core Banking Solutions (CBS): A system where all bank branches are connected, allowing customers to access funds and transactions from any branch.

26. Cash Reserve Ratio (CRR): The percentage of funds a bank must keep with the Reserve Bank of India (RBI).

Financial Terms and Concepts

27. Current Account:

• A bank account primarily used for business purposes, allowing unrestricted withdrawals without interest payments.

28. Cash Discount:

• A discount offered at the time of payment for goods or services.

29. Cash Flow:

• The movement of money into and out of a business as goods are bought and sold.

30. Cheap Money:

• Loans or credit with low-interest rates, often resulting from central bank policies.

31. Certificate of Deposit:

• A certificate issued by a bank to a depositor, indicating a specified amount of money deposited for a specific period at a fixed interest rate.

32. Collateral Security:

• An asset pledged by a borrower to a lender as a condition for obtaining a loan, which can be sold if the loan is not repaid.

33. Commercial Banks:

• Financial institutions that accept deposits, offer checking accounts, provide loans, and offer basic financial products to individuals and small businesses.

34. Credit Card:

• A payment card that allows users to pay for goods and services based on a promise to repay the card issuer the amount plus agreed charges.

35. Crossing the Cheque:

• Instructing the banker to pay a specified sum only through the banker, requiring the amount to be deposited directly into the payee’s bank account.

36. Debit Card:

• A card issued by a bank that allows customers to withdraw money from their accounts through digital banking.

37. Demat Account:

• A depository company converts share certificates into electronic form and keeps them in a demat account, similar to how a bank keeps money in a deposit account.

38. Dishonour of Cheque:

• The non-payment of a cheque by the paying banker, accompanied by a return memo stating the reasons for non-payment.

39. E-banking:

• A type of banking that allows individuals to conduct financial transactions digitally, including RTGS, credit cards, debit cards, UPI, and more.

40. EFT (Electronic Fund Transfer):

• A system that uses ATMs, wire transfers, and computers to move funds between different accounts within the same or different banks.

41. Fiscal Deficit:

• The amount of funds borrowed by the government to meet its expenditures.

42. Finance:

• The management, creation, and study of money and investments.

43. Flat Money:

• A currency established as money, often by government regulation, without intrinsic value.

44. Hot Money:

• Capital that investors move between economies and financial markets to profit from short-term interest rates.

45. Hypothecation:

• The practice of pledging collateral to secure a debt, usually through a letter of hypothecation.

46. Idle Money:

• Money that has not been invested and is not earning interest or investment income.

47. Insolvency:

• A state of financial distress where a person or business cannot pay its debts.

48. Interest:

• A payment made by a borrower or financial institution to a lender or depositor, calculated as a percentage of the principal sum.

49. Inflation:

• An increase in the quantity of money in circulation without a corresponding increase in goods, leading to higher prices.

50. Initial Public Offering (IPO):

• The first offering of shares to the public by a company.

51. Kiosk Banking:

• Banking services provided from a cubicle where food, newspapers, etc., are also sold.

52. Leverage Ratio:

• A financial ratio that measures a company’s ability to meet financial losses.

53. Letter of Credit:

• A letter issued by a bank to another bank, usually in a different country, serving as a guarantee for payments made to a specified person under specific conditions.

54. Liabilities:

• Amounts owed by a person or company, usually in the form of money.

55. Lien:

• A right to keep possession of property belonging to another person until a debt owed by that person is discharged.

56. Liquid Assets:

• Assets that can be easily converted into cash in a short period.

57. Liquidity:

• The ability to convert an investment into cash quickly without losing value.

58. Lease:

• A legal agreement that allows the use of a building or land for a fixed period in exchange for rent.

59. Market Capitalization:

• The product of a company’s share price and the number of outstanding ordinary shares.

60. Mortgage:

• A type of security offered for an advance or loan from a lender.

61. Mutual Fund:

• Investment schemes that pool money from various investors to purchase securities.

62. Microfinance:

• Financial services targeting individuals and small businesses without access to conventional banking services.

63. Monetary Policy:

• Central bank policies concerning money supply, interest rates, and exchange rates.

64. Non Performing Assets (NPAs):

• Loans given by a bank on which repayments and/or interest payments are not made on time.

65. Near Money:

• Highly liquid assets that are not cash but can be easily converted into cash.

66. Negotiable Instruments:

• Documents guaranteeing the payment of a specific amount of money, either on demand or at a set time, with a named payer.

67. Overdraft:

• Occurs when money is withdrawn from a bank account, causing the available balance to go below zero.

68. Permanent Account Number (PAN):

• A number issued by the Income Tax department to taxpayers.

69. Plastic Money:

• A term for credit cards, ATM cards, debit cards, and international cards issued by banks.

70. Point of Sale (PoS):

• The location where payment of a card transaction occurs.

71. Prime Lending Rate (PLR):

• The interest rate at which a bank lends to its most reliable customers.

72. Pass Book:

• A book that records all bank transactions, primarily issued to current or savings bank account holders.

73. Repo Rate:

• The rate at which commercial banks borrow funds from the RBI when they have a shortage in reserves.

74. Reverse Repo Rate:

• The rate at which the RBI borrows money from banks when there is too much money in the banking system.

75. Special Drawing Rights (SDR):

• A reserve asset created by the IMF to increase international liquidity.

76. Teller:

• A bank staff member who cashes cheques, accepts deposits, and performs various banking services for customers.

Banking Terminologies

77. Universal Banking: When financial institutions and banks engage in activities related to banking, such as investments, issuing debit and/or credit cards, and more, it is commonly referred to as universal banking.

78. Virtual Banking: Internet banking is also known as virtual banking because it operates primarily through the internet, without physical branches or boundaries.

79. Wholesale Banking: Wholesale banking is similar to retail banking, but it focuses specifically on meeting the financial needs of institutional clients and industries.

80. Zero Coupon Bond: Zero coupon bonds are sold at a significant discount because they do not have any coupons attached.

Banking Terminologies FAQs

What is banking terminology?

Banking terminology refers to the terms and concepts commonly used by banks in India.

Why is it important to know banking terminologies?

Understanding banking terminologies is essential not only for banking and finance exams but also for practical knowledge and comprehension of the banking industry.

What are the most common banking terminologies used presently?

Some of the most common banking terminologies include UPI, ATM, debit card, bancassurance, repo rate, mortgage, PoS, Non Performing Assets, CRR, SLR, etc.

Which subject covers the questions asked on banking terminologies?

Banking terminologies are primarily covered in the Banking Awareness section of banking exams.

In which bank exams are the banking terminologies questions asked?

Banking terminology questions are included in various banking exams such as IBPS PO/Clerk, SBI PO/Clerk, RRB, and more.