Banking Awarness For Ibps Po 2014

http://gkexamz.blogspot.
in Prepared By Nil Faldu

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Banking Notes for RBI & SBI exams Part - I

FII: Foreign Institutional Investment - The term is used most commonly in India to
refer to outside companies investing in the financial markets of India. International
institutional investors must register with the Securities and Exchange Board of India to
participate in the market.

FDI: Foreign Direct Investment - It is a direct investment into production or
business in a country by an individual or company of another country, either by buying a
company in the target country or by expanding operations of an existing business in that
country.

MSF: Marginal Standing Facility - Under this scheme, banks will be able to borrow
upto 1% of their respective net demand and time liabilities. The rate of interest on the
amount accessed from this facility will be 100 basis points (i.e. 1%) above the repo rate.
This scheme is likely to reduce volatility in the overnight rates and improve monetary
transmission.

FIU: Financial Intelligence Unit - set by the Government of India on 18 November
2004 as the central national agency responsible for receiving, processing, analysing and
disseminating information relating to suspect financial transactions.

SEBI: Securities and Exchange Board of India - SEBI is the primary
governing/regulatory body for the securities market in India. All transactions in the
securities market in India are governed and regulated by SEBI. Its main functions are:
1. New issues (Initial Public Offering or IPO)
2. Listing agreement of companies with stock exchanges
3. Trading mechanisms
4. Investor protection
5. Corporate disclosure by listed companies etc.
Note: SEBI is also known as capital regulator or mutual funds regulator or market
regulator. SEBI also created investors protection fund and SEBI is the only organization
which regulates the credit rating agencies in India. (CRISIL and CIBIL).

IRDA: Insurance Regulatory and Development Authority - It is an autonomous
apex statutory body which regulates and develops the insurance industry in India.

Financial Regulators in India - RBI, SEBI, FMCI (Forward Market Commission of
India), IRDA etc.
http://gkexamz.blogspot.in Prepared By Nil Faldu

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ASBA: Application Supported by Blocked Amount - It is a process developed
by the SEBI for applying to IPO. In ASBA, an IPO applicants account doesnt get debited
until shares are allotted to him.

DEPB Scheme: Duty Entitlement Pass Book - It is a scheme which is offered by
the Indian government to encourage exports from the country. DEPB means Duty
Entitlement Pass Book to neutralise the incidence of basic and special customs duty on
import content of export product.

LLP: Limited Liability Partnership - is a partnership in which some or all partners
(depending on the jurisdiction) have limited liability.

Balance sheet - A financial statement that summarises a companys assets, liabilities
and shareholders equity at a specific point in time.

TAN: Tax Account Number - is a unique 10-digit alphanumeric code allotted by the
Income Tax Department to all those persons who are required to deduct tax at the
source of income.

PAN: Permanent Account Number - as per section 139A of the Act obtaining PAN
is a must for the following persons:-

Any person whose total income or the total income of any other person in respect
of which he is assessable under the Act exceeds the maximum amount which is
not chargeable to tax.

Any person who is carrying on any business or profession whose total sales,
turnover or gross receipts are or are likely to exceed Rs. 5 lakh in any previous year.

Any person who is required to furnish a return of income under section 139(4) of
the Act.

JLG: Joint Liability Group - when two or more persons are both responsible for a
debt, claim or judgment.

IRR: Internal Rate of Return - is a rate of return used in capital budgeting to
measure and compare the profitability of investments.


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MICR: Magnetic Ink Character Recognition - A 9-digit code which actually shows
whether the cheque is real or fake.

UTR Number: Unique Transaction Reference number - A unique number which
is generated for every transaction in RTGS system. UTR is a 16-digit alphanumeric code.
The first 4 digits are a bank code in alphabets, the 5th one is the message code, the 6th
and 7th mention the year, the 8th to 10th mentions the date and the last 6 digits
mention the days serial number of the message.

RRBs: Regional Rural Banks - As its name signifies, RRBs are specially meant for
rural areas, capital share being 50% by the central government, 15% by the state
government and 35% by the scheduled bank.

MFI: Micro Finance Institutions - Micro Finance means providing credit/loan
(micro credit) to the weaker sections of the society. A microfinance institution (MFI) is
an organisation that provides financial services to the poor.

PRIME LENDING RATE - PLR is the rate at which commercial banks give loans to its
prime customers (most creditworthy customers).

BASE RATE - A minimum rate that a bank is allowed to charge from the customer.
Base rate differs from bank to bank. It is actually a minimum rate below which the bank
cannot give loan to any customer. Earlier base rate was known as BPLR (Base Prime
Lending Rate).

EMI: Equated Monthly Installment - It is nothing but a repayment of the loan
taken. A loan could be a home loan, car loan or personal loan. The monthly payment is
in the form of post dated cheques drawn in favour of the lender. EMI is directly
proportional to the loan taken and inversely proportional to time period. That is, if the
loan amount increases the EMI amount also increases and if the time period increases
the EMI amount decreases.

Basis points (bps) - A basis point is a unit equal to 1/100th of a percentage point. i.e.
1 bps = 0.01%. Basis points are often used to measure changes in or differences
between yields on fixed income securities, since these often change by very small
amounts.

Liquidity - It refers to how quickly and cheaply an asset can be converted into cash.
Money (in the form of cash) is the most liquid asset.


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P-NOTES - P means participatory notes. These are the instruments issued by
registered foreign institutional investors (FII) to overseas investors, who wish to invest in
the Indian stock markets without registering themselves with the market regulator, the
Securities and Exchange Board of India - SEBI.

Certificate of Deposit (CD) - is a negotiable money market instrument and issued in
dematerialised form for funds deposited at a bank or other eligible financial institution
for a specified time period.

Commercial Paper (CP) - is an unsecured money market instrument issued in the
form of a promissory note. It was introduced in India in 1990. Corporates and the All-
India Financial Institutions are eligible to issue CP.

REER - Real Effective Exchange Rate.

NEER - Nominal Effective Exchange Rate.

LIBOR - London Inter Bank Offer Rate.

MIBOR - Mumbai Inter Bank Offer Rate.

EFT Electronic Fund Transfer

NEFT National Electronic Funds Transfer

RTGS Real Time Gross Settlement

ATM Automated Teller Machine

CBS Core Banking Solution

CORE in CBS stands for Centralized Online Real-time Exchange.

Banking Notes for RBI & SBI exams Part I

RBI - he Reserve Bank of India was established on April 1, 1935 in accordance with the
provisions of the RBI Act, 1934. RBI was nationalized in 1949 and it is fully owned by the
Government of India. RBI was established on the recommendation of the Hilton Young
Commission.

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RBIs FUNCTIONS:

Issue of currency notes
Controlling the monetary policy
Regulator and supervisor of the financial system
Banker to other banks
Banker to the government
Granting licenses to banks
Control over NBFIs (Non Banking Financial Institutions)
Manager of Foreign Exchange of India (also known as FOREX)

RBI And Monentry Policy - Monetary policy refers to the use of instruments under
the control of the central bank to regulate the availability, cost and use of money and
credit.

The main objectives of monetary policy in India are:

Maintaining price stability.
Ensuring adequate flow of credit to the productive sectors of the economy to
support economic growth
Financial stability.
There are several direct and indirect instruments that are used in the formulation and
implementation of monetary policy.
Direct Instruments :

Cash Reserve Ratio (CRR): The share of net demand and time liabilities that
banks must maintain as cash balance with the Reserve Bank.

Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities that
banks must maintain in safe and liquid assets, such as government securities,
cash and gold.

Refinance facilities: Sector-specific refinance facilities (e.g., against lending to
export sector) provided to banks.

Indirect Instruments :


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Liquidity Adjustment Facility (LAF): Consists of daily infusion or absorption of
liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo
(liquidity absorption) auction operations, using government securities as
collateral.

Open Market Operations (OMO): Outright sales/purchases of government
securities, in addition to LAF, as a tool to determine the level of liquidity over the
medium term.

Market Stabilisation Scheme (MSS): This instrument for monetary management
was introduced in 2004. Liquidity of a more enduring nature arising from large
capital flows is absorbed through sale of short-dated government securities and
treasury bills. The mobilised cash is held in a separate government account with
the Reserve Bank.

Repo/reverse repo rate: These rates under the Liquidity Adjustment Facility (LAF)
determine the corridor for short-term money market interest rates. In turn, this
is expected to trigger movement in other segments of the financial market and
the real economy.

Bank rate: It is the rate at which the Reserve Bank is ready to buy or rediscount
bills of exchange or other commercial papers. It also signals the medium-term
stance of monetary policy.

Some Key Financial Terms :

APR - It stands for Annual Percentage Rate. APR is a percentage that is
calculated on the basis of the amount financed, the finance charges, and the
term of the loan.

ABS - Asset-Backed Securities. It means a type of security that is backed by a
pool of bank loans, leases, and other assets.

EPS - Earnings Per Share means the amount of annual earnings available to
common stockholders as stated on a per share basis.

CHAPS - Clearing House Automated Payment System. Its a type of electronic
bank-to-bank payment system that guarantees same-day payment.


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IPO - Initial Public Offerings is defined as the event where the company sells its
shares to the public for the first time. (or the first sale of stock by a private
company to the public.)

FPO - Follow on Public Offerings: An issuing of shares to investors by a public
company that is already listed on an exchange. An FPO is essentially a stock issue
of supplementary shares made by a company that is already publicly listed and
has gone through the IPO process.(Difference: IPO is for the companies which
have not been listed on an exchange and FPO is for the companies which have
already been listed on an exchange but want to raise funds by issuing some
more equity shares.)

RTGS - Real Time Gross Settlement systems is a funds transfer system where
transfer of money or securities takes place from one bank to another on a real
time. (Real time means within a fraction of seconds.) The minimum amount to
be transferred through RTGS is Rs 2 lakh. Processing charges/Service charges for
RTGS transactions vary from bank to bank.

NEFT - National Electronic Fund Transfer. This is a method used for transferring
funds across banks in a secure manner. It usually takes 1-2 working days for the
transfer to happen. NEFT is an electronic fund transfer system that operates on a
Deferred Net Settlement (DNS) basis which settles transactions in batches. (Note:
RTGS is much faster than NEFT.)

CAR - Capital Adequacy Ratio. Its a measure of a banks capital. Also known
as Capital to Risk Weighted Assets Ratio (CRAR), this ratio is used to protect
depositors and promote the stability and efficiency of financial systems around
the world. It is decided by the RBI.

NPA - Non-Performing Asset. It means once the borrower has failed to make
interest or principal payments for 90 days, the loan is considered to be a non-
performing asset. Presently it is 2.39%.

IMPS - Immediate Payment Service. It is an instant interbank electronic fund
transfer service through mobile phones. Both the customers must have MMID
(Mobile Money Identifier Number). For this service, we dont need any GPS-
enabled cell phones.

BCBS - Basel Committee on Banking Supervision is an institution created by the
Central Bank governors of the Group of Ten nations.

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IFSC code - Indian Financial System Code. The code consists of 11 characters for
identifying the bank and branch where the account in actually held. The IFSC
code is used both by the RTGS and NEFT transfer systems.

MICR Code - Magnetic ink character recognition (MICR) is a character-
recognition technology used mainly by the banking industry to ease the
processing and clearance of cheques and other documents. It is at the bottom of
cheques and other vouchers and typically includes the document-type indicator,
bank code, bank account number, cheque number, cheque amount, and a control
indicator.

MSME and SME - Micro Small and Medium Enterprises (MSME), and SME stands
for Small and Medium Enterprises. This is an initiative of the government to drive
and encourage small manufacturers to enjoy facilities from banks at concessional
rates.

LIBOR - London InterBank Offered Rate. An interest rate at which banks can
borrow funds, in marketable size, from other banks in the London interbank
market.

LIBID - London Interbank Bid Rate. The average interest rate at which major
London banks borrow Eurocurrency deposits from other banks.

ECGC - Export Credit Guarantee Corporation of India. This organisation provides
risk as well as insurance cover to the Indian exporters.

SWIFT - Society for Worldwide Interbank Financial Telecommunication. It
operates a worldwide financial messaging network which exchanges messages
between banks and other financial institutions.

STRIPS - Separate Trading for Registered Interest & Principal Securities.

CRISIL - Credit Rating Information Services of India Limited. Crisil is a global
analytical company providing ratings, research, and risk and policy advisory
services.

CIBIL - Credit Information Bureau of India Limited. CIBIL is Indias first credit
information bureau. Whenever a person applies for new loans or credit card(s) to
a financial institution, they generate the CIBIL report of the said person or

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concern to judge the credit worthiness of the person and also to verify their
existing track record. CIBIL actually maintains the borrowers history.
Economic Concept- C Rangarajan committee on
Poverty - A Brief insight

Recently C Rangarajan committee was in news and is an important topic in view
of upcoming examinations. So let's understand what is this committee all about,
it's recommendations and it's effects.

C Rangarajan committee-

Who is he? - Mr. Rangarajan is a noted economist, and resigned recently from
the post of the chairman of Prime ministers economic advisory council (PMEAC).

Why the committee was constituted - The Planning Commission in May 2012 had
constituted the expert group to review the Tendulkar Committee methodology
for estimating poverty, following uproar over the number of poor in the country.

What changes the committee proposed
Rangarajan committee proposed the changes in current benchmarks for the
categorisation of poors in India ,the current standards which were set by the
recommendations of the Tendulkar committee were
Expenditure of Rs 816 per person per month (Rs 27.2 per person per day) in
rural areas.
Expenditure of Rs 1000 per person per month (Rs 33.3 per person per day) in
urban areas.
Total numbers of poor were 269.8 million (21.9% of the total
population) according to Tendulkar committee report.

The changes proposed by the Rangarajan panels are as follows-

Expenditure of Rs 972 per person per month(Rs 32.4 per person per month) in
rural areas.

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Expenditure of Rs 1407 per person per month(Rs 46.9 per person per month) in
urban areas.
Total number of poor will rise to 363 million (29.6% of total
population) according to C. Rangarajan panel recommendations

What will be the effects of the Rangarajan committee proposals on the
economy?

More people will come under the ambit of below poverty line standards.
This will increase the number of beneficiaries who can claim the benefits given to
the BPL families.
The step will create more burden on their fiscal budget to help BPL families under
the different PDS (public distribution schemes), Rashtriya Swastha Bima Yojana,
Swarnajayanti Gram Swarojgar Yojna etc.
More deserving people who were out of the reckoning due to previous
benchmarks would come under the benefits
What are NPAs (Non Performing Assets)
A mortgage in default would be considered non-performing, after a prolonged period of
non-payment(90 days).
The lender will force the borrower to liquidate any assets that were pledged as part of
the debt agreement. If no assets were
pledged, the lenders might write-off the asset as a bad debt and then sell it at a discount
to a collections agency.

Here is an example to help you understand what NPAs are and how
Banks counter it-
Mr. X decided to start a business for that he needed money (the fuel) , X had 25% of the
money in his pocket, he decided to go through the route of Initial Public Offering(IPO)
to generate 25% more by offering his company shares to public , the remaining 50% he
borrowed from Lena bank by mortgaging his papas land.
Days passed and the company started to do badly then to worse and the loan
installments lapsed month on month, Lena bank issued warning but X continued the bad
practice for more than 90 days (condition for NPA) and the bank labeled X as defaulter
and the loan as a Non Performing Asset.


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Now what X will do?
He could take his case against the bank to Debt recovery tribunal (DRT- A court for
such cases).
What are Lena banks options? - In 2002, Govt. gave banks a lifeline called
as SARFAESI Act (Securitization and Reconstruction of Financial Assets and
Enforcement of security interest Act)\

With this Act Lena bank has the power to take possession of Mr.Xs property or
can transfer this to some other ownership

What bank will do with the acquired property?

Bank can use this for their own purpose like , opening a new branch on it,
installing of ATMs etc.
Bank can advertise in newspapers for the auction of the property acquired and
could auction them on any pre decided day.
Bank can sell the property to ARC (Asset Reconstruction Company), these are
registered companies under RBI, they buy such assets from banks and sell them
at higher prices to gain profits.
NOTE- Total amount of NPAs are around 4.4% of the total assets of banks in India and
expected to increase to 4.7% till the end of FY15

Inflation and RBI
PART-I
To understand RBI monetary policy we have to understand why RBI has to do all this
mehnat, RBI has a biggest villain standing against him called as INFLATION.
Inflation
Inflation is the biggest parasite in the Indian economy. In the condition of inflation there
is flow of extra money in the economy creating excess of demand in the market for the
products as compared to supply in midst of all this maara maari the producers grab this
opportunity with both arms and if possible with legs too (too greedy these fellows), they
mark higher prices for the goods that are excess in demand and this creates a rise in
price of the products resulting in inflation.
Inflation has the following adverse effects on the economy:

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Here is story of Mr. Bechara(common man)
Inflation and Purchasing Products-

Purchasing Power -The value of a currency expressed in terms of the amount
of goods or services that one unit of money can buy. Purchasing power is
important because, all else being equal, inflation decreases the amount of goods
or services you'd be able to purchase. Mr.Bechara is fetching a salary of Rs.20K
monthly, he was doing his best to keep up to the expectations his over sized wife
and extra demanding kids, Now in inflation his salary is the same but his 20K will
now cannot complete the demands of his family, because that 20K has become
equivalent to say, 18K and now they can have less resources in the same prices,
This will result in the debt conditions , lesser purchase of goods and services(due
to higher prices) and will directly hurt the economy.

Inflation and Debt-
Price inflation is a debtor's best friend and a creditor's worst enemy. Lets see how, our
Mr. Bechara gave Rs. 10K to a debtor in 2006 for a period of three years, after two years
inflation occurred, now the value of that 10k becomes equivalent to 8k (loss in the value
of Rs), The effect of inflation on debtors is positive because debtors can pay their debts
with money that is less valuable.
Other negative impacts

Black-marketing - Expecting inflation many mafias start to collect the onions
and kerosene in their backyards for releasing these when the inflation strikes,
hence they will make big bucks in no time and our Mr. Bechara has to pay more
than hefty amount for the daily ka aaloo ,pyazz..

Unemployment - Inflation comes along with a gift package of unemployment,
companies with limited resources will start to fire people on the name of cost
cutting and also the new recruitments will not happen resulting in not so aache
din for aspirants.

Different stages of Inflation-

Creeping Inflation - Creeping or mild inflation is when prices rise 3% a year or
less.

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Walking Inflation - This type of strong, or pernicious, inflation is between 3-
10% a year. It is harmful to the economy because it heats up economic growth
too fast.

Galloping Inflation - When inflation rises to ten percent or greater, it wreaks
absolute havoc on the economy. Money loses value so fast that business and
employee income can't keep up with costs and prices. Foreign investors avoid the
country.

Hyperinflation - Hyperinflation is when the prices skyrocket, the currency
becomes a piece of trash, Zimbabwe experienced a similar conditions in previous
years.

Calculation of Inflation - In India inflation is calculated by the help of
CPI(Consumer Price Index),previously it was calculated by WPI(Wholesale Price
Index), CPI as a scale was adopted by RBI ,due the recommendations of Urijit
Patel committee.

RBI and Inflation:
Part II

Now we have a brief knowledge about Inflation and its effect on the economy, So as
customary there will always be a hero against a villain ,fighting for supremacy and
sabotaging it to ashes.For the purpose we have our own homegrown Mr.007 and the
name is Rajan Raghuram Rajan, RBI with the help of its periodically revised monetary
policy try to fight against inflation.
MONETARY POLICY
Monetary policy consists of two tools-
A) DIRECT TOOLS
B) INDIRECT TOOLS

A) DIRECT TOOLS - these tools are the special powers of RBI through which it can
direct and control the amount of flow of money in the market, these consists of SLR
(statutory liquidity ratio) and CRR (Cash reserve ratio), lets understand them
individually.

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CRR- CRR is 4% of NDTL(Net Demand and Time Liability), this the amount of
money banks park with RBI in the form of cash.(must for banks)

SLR- SLR is 22.5% of NDTL, this the amount that the banks has to maintain in the
form of gold or govt. securities before lending to the public.(must for banks).
NOTE: NDTL is the sum of all the demand (current account and savings account sum in
bank ) and time (fixed deposits or recurring deposits etc. which are to be paid on
maturation), these are assets for us but a liability(debt) for the banks.
Here is an example to show the effect of CRR and SLR.
Let say our Lena Bank had 100 Rs as NDTL they can give this much amount of loan to the
needy hence 100Rs will flow in the market(can cause inflation), so Rajan(RBI) said keep
4% with us and 22.5% as SLR in the form of govt securities and gold(which cant be given
as loans) so theLena bank is left with only 73.5%(100-22.5-4) of the NDTL resulting in
less money to be given as loans and then in market resulting in check on inflation.
B) INDIRECT TOOLS/OMO (Open Market Operations) - An open market
operation (also known as OMO) is an activity by a central bank to buy or sell
government bonds on the open market. these tools indirectly help in controlling
inflation. Different methods in OMOs are-
LAF (Liquidity Adjustment Facility) - These contains Repo rate and Reverse Repo
rate

REPO RATE (Repurchase Agreements) - this is the rate at which the banks
borrow the money from RBI to meet their sudden demands, these are done with
the help of repurchase agreements (these are govt securities which has a date
on it claiming to be re bought at some certain date).

How RBI controls inflation with this-RBI increase the Repo rate in the conditions of
high inflations so that banks are not encouraged to borrow money from RBI and release
them in to the market resulting in lesser flow of money and hence inflations decreases.
RBI decreases the REPO rate when the inflation is under control .

Current REPO rate stands at 8% of NDTL.

Reverse Repo This is the opposite of the repo rate and is the rate at which banks
park their excess money with RBI which in turn gives the govt. securities under
repurchase agreement . Banks do this because their money is in safe hands and they
get a healthy rate of interest against the park amount.

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Current Reverse Repo rate is at 7% of NDTL(-1% of REPO rate)

Bank Rate-When banks borrow long term funds from RBI. Theyve to pay this much
interest rate to RBI.

Current Bank Rate is at 9% of NDTL(+1% of Repo rate)

MSF(Marginal Standing Facility)- the difference between Repo and MSF is that there is a
minimum amount of Rs 1 cr to be borrowed by banks. And this facility is only for
Scheduled Commercial Banks (SCBs).this is done to balance the daily mismatches of
banks.

Current MSF is at 9 % of NDTL(+1 % of Repo rate) .
With the help of these, our 007(RBI) try to control inflation.
Computer Quick Notes For SBI Clerk Exam
A collection of 8 bits is called Byte. A bit is the smallest unit of storage.
The first computer architecture was introduced by John Von Neumann.
A website containing periodic posts is called Blog.
Starting up on operating system is called Booting.
Restarting a computer that is already on, is referred to as Warm Booting.
A program used to browse the web is called Browser.
The code for a Web page is written using Hypertext Markup language (HTML).
A series of instructions that tells a computer what to do and how to do it is called
a Program.
The device which is used with a computer to display or store data is
called Peripherals.
The mechanical, magnetic, electronic and electrical components that comprises a
computer system such as the Central Processing Unit (CPU), monitor, keyboard,
etc. is known as Hardware.
A set of instructions that tells the computer about the tasks to be performed and
how these tasks are to performed, is known as Software.
Executing is the process of carrying out commands.
The rectangular area of the screen that displays a program, data, and or
information is a Window.

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Downloading means to receive data to a local system from a remote system, or
to initiate such a data transfer.
Uploading refers to the sending of data from a local system to a remote system
such as a server or another client with the intent that the remote system should
store a copy of the data being transferred.
An email attachment is a computer file sent along with an email message. One or
more files can be attached to any email message, and be sent along with it to the
recipient.
CC (Carbon Copy) in e mail indicates those who are to receive a copy of a
message addressed primarily to another. The list of CCed recipients is visible to
all other recipients of the message.
An additional BCC (Blind Carbon Copy) field is available for hidden notification;
recipients listed in the BCC field receive a copy of the message, but are not shown
on any other recipient's copy (including other BCC recipients).
Disk drive is the part of the computer helps to store information.
Arithmetic operations include addition, subtraction, multiplication, and division.
The most important or powerful computer in a typical network is Network
Server.
The primary purpose of software is to turn data into information.
A collection of related files is called Record.
Storage that retains its data after the power is turned off is referred to as Non-
Volatile Storage. ROM is an example of this type of storage.
Virtual memory is memory on the hard disk that the CPU uses as an extended
RAM.
Computers use the Binary Number System to store data and perform
calculations.
When sending an e-mail, the Subject line describe the contents of the message.
The Operating System tells the computer how to use its components.
During the cutting and pasting of an item, the part which is cut, is temporarily
stored in Clipboard.
The blinking symbol on the computer screen is called the Cursor.
Magnetic tape is not practical for applications where data must be quickly
recalled because tape is a sequential access medium.
Information travels between components on the motherboard through Buses.

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A Website Address is a unique name that identifies a specific web site on the
web.
Alt, Ctrl & Shift keys in a keyboard are known as: Modifier keys.
Caps lock, Num lock & Scroll lock in a keyboard are known as: Toggle keys.
F1 to F12 keys in a keyboard are known as: Function keys.
A person who uses his or her expertise to gain access to other peoples
computers to get information illegally or do damage is a Hacker.
A Computer Virus is a malware program that, when executed, replicates by
inserting copies of itself (possibly modified) into other computer programs, data
files, or the boot sector of the hard drive; when this replication succeeds, the
affected areas are then said to be "infected".
Antivirus Software is used to scan the hard disk to remove the virus from them.
The assembly language program is translated into machine code by a separate
program known as an Assembler.
A Backup, or the process of backing up, refers to the copying and archiving of
computer data so it may be used to restore the original after a data loss event. It
contains a copy of every program data and system file on a computer.
Rail Budget Highlights 2014

The new government led by Prime Minister Narendra Modi presented its maiden budget
-- its first big policy statement on how it intends to overhaul an economy saddled with
slow growth and weak public finances.

Railway Minister Sadananda Gowda presented the Rail Budget in the Parliament today.
Here are some highlight
Indian railways to become the largest freight carrier in the world.
Social obligation of Railways in 2013-14 was Rs 20,000 crore.
Gross traffic receipts in 2013-14 was Rs 12,35,558 crore; operating ratio was 94 per
cent.
Focus in past has been on sanctioning projects rather than completing them, Railway
minister says.
Indian Railways spent Rs 41,000 crore on laying of 3,700 km of new lines in last 10
years.
Fare revision will bring in Rs.8,000 crore; need another Rs.9,000 crore for golden
quadrilateral project.

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Railways also proposes to set up Food Courts at major stations.
Need to explore alternative sources of resource mobilisation and not depend on fare
hike alone, Railway minister says.
Spend 94 paisa of every rupee earned, leaving a surplus of only 6 paisa.
With 12,500 trains, railways move 23 million passengers every day; equivalent to
moving Australia's population.
Separate housekeeping wing at 50 major stations.
CCTV to monitor cleanliness activities.
Mechanized laundry will be introduced.
Dedicated freight corridor on Eastern and Western corridors.
5400 unmanned level crossing removed.
Tourist trains to be introduced to link all major places of tourist interests across the
country.
4,000 women constables to be recruited to ensure safety of women. 17,000 RPF
constables to provide safety to passengers.
Setting up of Railway University for technical and non-technical study.
Ultrasonic system to detect problem in track.
Proposal to start Bullet trains in MumbaiAhmedabad route. Speed of important
trains will be also raised.
Diamond Quadrilateral project of high speed trains to connect all major metros.
E-ticketing system to be improved. Future e-ticketing to support 7200 tickets per
minute & to allow 120,000 simultaneous users
Wifi in A1 and A category stations and in select trains. Internet-based platform and
unreserved tickets.
GIS mapping and digitization of Railway Land. Extension of logistics support to
various e-Commerce Companies.
Bulk of future projects will be financed through PPP mode.
Facilitate transport of milk through rail. Special milk transportation trains in
association with Amul and National Dairy Association Board.
One ticket to reach from Delhi to Srinagar. Uddhampur to Banihal by bus and Banihal
to Srinagar by train.
Mumbai local to get 860 new, state-of-the art coaches. 64 new EMUs to be
introduced.
Train connectivity to Char Dham.
Paperless office of Indian railways in 5 years. Digital reservation charts at stations.
Ready-to-eat meals to be introduced in phased manners.
27 Express trains to be introduced.
5 Jansadharan , 5 Premium AC trains to be introduced.


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Banking Concepts - FDI in retail

So now when Carrefour ,the French retail giant is planning to exit all the retail
businesses in India and only Tesco(UK setup) is planning to invest in India the question
that looms largely over India is, Is this the right strategy of Modi regime to discourage
FDI in retail ?

So here are the pro and cons of the introduction of FDI in retail-

Ill effects of FDI :

It will lead to closure of small scale shops across the country and endanger
livelihood of some million people.
It may bring down prices initially, but this will be a predatory pricing scheme by
multinational companies to get a stronghold in the retail market later they will
increase the prices once the competition dries up, hence Small and medium
enterprises will become victims of predatory pricing policies of multinational
retailers
Farmers may be given remunerative prices initially, but eventually they will be at
the mercy of big retailers
It will disintegrate established supply chains by encouraging monopolies of global
retailers

FDI as a boon to India:

It will cut intermediaries between farmers and the retailers, thereby helping
them get more money for their produce
It will help in bringing down prices at retail level and calm inflation
Big retail chains will invest in supply chains which will reduce wastage, estimated
at 40 percent in the case of fruits and vegetables
Small and medium enterprises will have a bigger market, along with better
technology and branding
It will bring much-needed foreign investment into the country, along with
technology and global best-practices
It will actually create employment than displace people engaged in small stores
It will induce better competition in the market, thus benefiting both producers
and consumers.

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This is an open debate for one and all to discuss pro and cons of FDI according to you and till
what extent our govt. is by not being in favour of FDI in retail.

Indian economy to expand 5.4-5.9 per cent this fiscal:
Economic Survey

The Economic Survey for 2013-14 tabled in Parliament by Finance Minister Arun Jaitley
on Wednesday - prepared by senior economic advisor Ila Patnaik - on the state of Asia's
third-largest economy a day before Modi's new government presents its first budget.

Following are key highlights of the report:
1. Growth: GDP growth seen at 5.4 - 5.9 percent in 2014/15
- Economic growth of 7-8 percent not seen before 2016/17
2. Fiscal Health: Fiscal deficit for 2013-14 contained at 4.5% of the GDP
3. Inflation:
- Government needs to move towards low and stable inflation through fiscal
consolidation
- Wholesale Price Index (WPI) inflation expected to moderate by end-2014
- Consumer Price Index (CPI) inflation showing signs of moderation
4. Current Account Deficit: 2014/15 current account deficit may be contained to around
$45 billion or to 2.1 percent of GDP
5. Balance of Payments: Improvement in balance of payments position during late
2013-14 was swift thanks to import restrictions and economic slowdown
- Need to adjust to advanced economies' eventual exit from accommodative monetary
policy stance
6. Taxation: Government needs to move towards simple tax regime, fewer tax
exemptions and single rate of goods and services tax (GST)
- GST to play vital role in indirect tax reform
- Direct Taxes Code (DTC) required to replace existing income tax laws; will reduce
compliance costs and boost tax collection
7. Agriculture: India ranks first in the world in productivity of grapes, banana, cassava,
peas, and papaya

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- Agriculture sector growth rate 4.7% in the year 2013-14
- Agriculture exports grow by 5.1% in the year 2013-14
- Exports of marine products show a growth rate of 45% in the year 2013-14
8. Industrial Performance: Industry grew by just 1.0 percent in 2012-13 and slowed
further in 2013-14, posting a modest increase of 0.4 percent.
- During 2013-14, FDI inflow (including equity inflows, reinvested earnings and other
capital) was USD 36.4 billion.
- Overall gross bank credit flow to industry has increased by 14.9 percent in 2013-14.
9. Services: India ranked 12th in terms of services GDP among the worlds top 15
countries
- India has the second fastest growing services sector with its CAGR at 9.0 percent, just
below China
- The growth rate of the combined category of trade, hotels, restaurants, transport,
storage, and communications decelerated to 3.0 percent
- Financing, insurance, real estate, and business services grew robustly at 12.9 percent
- Services constitute a 57 percent share in GDP at factor cost in 2013-14

TAXES

Taxes are the amount of money government impose on an individual or corporates
directory or indirectly so as to generate revenue or to keep in check any black money
activities in india
There Are Two Categories of Taxes in India, These Are :
1) Direct Taxes
2) Indirect Taxes
Direct Taxes :

Income Tax
CorporatationTax
Securities Transaction Tax
Wealth Tax

1) Direct Taxes :

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These taxes are levied directly on the presons.
These contributes major chunk of the total taxes collected in India.
Some of the direct taxes are-
Income Tax :
This is a type of tax levied on the individuals whose income falls under the taxable
category (2.5 lakhs per annum). The Indian Income Tax Department is governed by CBDT
and is part of the Department of Revenue under the Ministry of Finance, Govt. of India.
Income tax is a key source of funds that the government uses to fund its activities and
serve the public.
Corporate Income Tax :
This is the tax levied on the profits a corporate house earned in a year. In India, the
Corporate Income tax rate is a tax collected from companies. Its amount is based on the
net income companies obtain while exercising their business activity, normally during
one business year.
Securities Transaction Tax :
Introduced in 2004, STT is levied on the sale and purchase of equities. more clearly, The
income a individual generate through the securities market be it through reseling of
shares or through debentures is taxed by the government of India and the same tax is
called as Securities Transaction Tax.
Banking Cash Transaction Tax :
A bank transaction tax is a tax levied on debit (and/or credit) entries on bank accounts.
It can be automatically collected by a central counterparty in the clearing or settlement
process.
2) Indirect Taxes :
You go to a super market to buy goods or to a restaurant to have a mouthful there at
the time of billing you often see yourself robbed by some more amount than what you
enjoyed of , these extra amounts are indirect taxes, which are collected by the
intermediaries and when govt tax the income of the intermediaries this extra amount
goes in to governments kitty, hence as the name suggests these are levied indirectly on
common people.
Some examples of Indirect Taxes are-

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Value Added Tax-
When we pay an extra amount of price for the goods and services we consume or buy,
that extra amount of money is called as VAT. This taxes is about to be replaced by Goods
and Services Tax.
Current rate :
On agricultural goods-4%
On luxury items- 20%

Customs Duty :
Customs Duty is a type of indirect tax levied on goods imported into India as well as on
goods exported from India. In India, the basic law for levy and collection of customs duty
is Customs Act, 1962. It provides for levy and collection of duty on imports and exports.

Excise Duty :
An excise or excise tax is an inland tax on the sale, or production for sale, of specific
goods or a tax on a good produced for sale, or sold, within a country or licenses for
specific activities. Excises are distinguished from customs duties, which are taxes on
import.
Service Tax-
Service Tax is a tax imposed by Government of India on services provided in India. The
service provider collects the tax and pays the same to the government. It is charged on
all services except the services in the negative list of services.
Current rate- 12.36%


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Acronyms Corners -
CBDT Central Board of Direct Taxes
CBEC Central Board of Excise and Customs
FBT Fringe Benefits Tax
STT Securities Transaction Tax
GST Goods and Services Tax
VAT Value Added Tax

BRICKS BANK

The 6th BRICS summit is the sixth annual diplomatic meeting of the BRICS, a grouping of
major emerging economies that includes Brazil, Russia, India, China and South Africa.
It is hosted by Brazil, as the first host country of the current five-year summit cycle the
host city is Fortaleza.
The theme chosen for our discussions was "Inclusive Growth: Sustainable Solutions.

Leaders of the BRICS emerging market nations have agreed to create a multilateral New
Development Bank (NDB) for infrastructure needs.
The New Development Bank (NDB), formerly referred to as the BRICS Development
Bank, is a proposed multilateral development bank operated by the BRICS states (Brazil,
Russia, India, China and South Africa) as an alternative to the existing World Bank and
International Monetary Fund.
The Bank is setup to foster greater financial and development cooperation among the
five emerging markets. It would be headquartered in Shanghai, China and the first chief
executive will come from India.
What is New Development Bank (NDB)?

It is a bank set up by the worlds leading emerging economies aimed at funding
infrastructure projects in developing nations.

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What is the contingent reserve arrangement (CRA)?

The five countries will set up a $100 bn pool of currency reserves to help countries
forestall short-term liquidity pressures.
How will be the CRA be funded?

China, the regions largest economy, will contribute $41 bn to the CRA. Russia, India,
Brazil will contribute $18 bn each, while South Africa will contribute $5 bn.
Where will be the bank based?

The New Development Bank will be based in Shanghai, China.
How will it be governed?

India will preside over its operations for the first five years, followed by Brazil and then
Russia. It is scheduled to start lending in 2016.
How will it be funded?
The bank will begin with $50 bn divided equally between its five founder members.
Another $50 bn will come from new members.
New areas of cooperation to be explored
Mutual recognition of Higher Education Degrees and Diplomas
Labor and Employment, Social Security, Social Inclusion Public Policies
Foreign Policy Planning Dialogue
Insurance and reinsurance
Seminar of Experts on E-commerce.

ITS GLOBAL PEERS

1. International Monetary Fund (IMF)
History:

The IMF was conceived in July 1944 when representatives of 45 countries met in Bretton
Woods in the US to establish a framework for International economic cooperation.


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Mandate:
Its mandate to oversee the international monetary system and promote excahanhe
stability among its members countries.

Member Countries 182
Employees 2,300
Headquarter Washington DC, US
2. World Bank
History
Conceived in July 1944, it is initially focused on electric power and transportation
projects, but later diversified its activities, acquiring new insights into the development
process.
Mandate:
It seeks to promote economic development projects of the worlds poorer countries
thorugh long term financing.

Member countries 180
Employees 7,000
Headquarter Washington DC, US
3. Asian Development Bank (ADB)
History
Conceived in the early 1960s to foster economic growth and cooperation in the Asian
region, ADB opened on December 19, 1966 with 31 members.

Mandate:

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ADB provides loans for developing member countries in 5 core areas: infrastructure,
environment, regional cooperation and integration, finance sector development,
education.
Member Countries 67
Employees 3,062
Headquarter Manila, Philippines

Economic glossary

Union Budget-

Under Article 112 of the constitution, a statement of estimated receipts and
expenditure, called the Annual Financial Statement, has to be placed before Parliament
for each financial year.
This Statement is the main budget document. It is an estimate of the Governments
revenue and expenditure at the end of a fiscal year, which runs from April 1 to March
31.
A Union Budget is the most comprehensive report of the Governments finances, in
which revenues from all sources and outlays to all activities are consolidated. The
budget also contains estimates of the Governments accounts for the next fiscal, called
budgeted estimates.
Capital Budget -

The capital budget consists of capital receipts and payments. Capital receipts are
Government loans raised from the public, Government borrowings from the Reserve
Bank and treasury bills, divestment of equity holding in public sector enterprises, loans
received from foreign Governments and bodies, securities against small savings, State
provident funds, and special deposits.
Capital payments refer to capital expenditures on construction of capital projects and
acquisition of assets like land, buildings machinery and equipment.

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It also includes investments in shares, and loans and advances granted by the Central
Government to State Governments, Government companies, corporations and other
parties.
Revenue Budget-

The revenue budget consists of revenue receipts of the Government and its
expenditure. Revenue receipts are divided into tax and non-tax revenue. Tax revenues
constitute taxes like income tax, corporate tax, excise, customs, service and other duties
that the Government levies.

The non-tax revenue sources include interest on loans, dividend on investments etc.

Revenue expenditure is the expenditure incurred on the day-to-day running of the
Government and its various departments, and for services that it provides.

It also includes interest on its borrowings, subsidies and grants given to State
Governments and other parties.

This expenditure does not result in the creation of assets. In case the difference
between revenue receipts and revenue expenditure is negative, there is a revenue
deficit.

It shows the shortfall of the Governments current receipts over current expenditure. If
the capital expenditure and capital receipts are taken into account too, there will be a
gap between the receipts and expenditure in a year. This gap constitutes the overall
budgetary deficit, and it is covered by issuing 91-day Treasury Bills, mostly held by the
Reserve Bank.

Revenue surplus is the excess of revenue receipts over revenue expenditure.

Fiscal Deficit -
This is the gap between the Governments total spending and the sum of its revenue
receipts and non-debt capital receipts.

It represents the total amount of borrowed funds required by the Government to
completely meet its expenditure. The gap is bridged through additional borrowing from
the Reserve Bank of India, issuing Government securities etc. Fiscal deficit is one of the
major contributors to inflation.


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Primary Defici -
The primary deficit is the fiscal deficit minus interest payments. It tells how much of the
Governments borrowings are going towards meeting expenses other than interest
payments.

Finance Bill -
The Government proposals for the levy of new taxes, alterations in the present tax
structure, or continuance of the current tax structure are placed before the Parliament
in this bill. The bill contains amendments proposed to direct and indirect taxes.

Direct and Indirect Taxes -
Direct taxes are levied on the incomes of individuals and corporates. For example,
income tax, corporate tax etc. Indirect taxes are paid by consumers when they buy
goods and services. These include excise duty, customs duty etc.

Some Other Terms

Central plan outlay -
It refers to the allocation of monetary resources among the different sectors in the
economy and the ministries of the Government.

Public account
The Government acts like a banker for transactions relating to provident funds, small
savings collection etc.

The funds that the Government thus receives from its bank like operations are kept in
the public account, from which the related disbursements are made.

These funds do not belong to the Government and have to be paid back to the persons
and authorities who have deposited them.

Ad-valorem duties
These are the duties determined as a certain percentage of the price of products.
Balance of payments
Balance of payments is the difference between the demand for, and supply of, a
countrys currency on the foreign exchange market.


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Budget estimates
It is an estimate of fiscal and revenue deficits for the year. The term is associated with
the estimates of the Centres spending during the financial year and the income
received through taxes.

Capital receipt -
Loans raised by the Centre from the market. Government borrowings from the Reserve
Bank and other parties, sale of Treasury Bills, and loans received from foreign
governments form a part of capital receipt.

Other items that also fall under this category include recovery of loans granted by the
Centre to State Governments and proceeds from disinvestments of Government stake in
public sector undertakings.

Consolidated fund -
Under this, the Government pools all its funds together.

It includes all Government revenues, loans raised, and recoveries of loans granted.

All expenditure of the Government is incurred from the consolidated fund and no
amount can be withdrawn from the fund without authorisation of the Parliament.

Contingency fund -
This is a fund used for meeting emergencies where the Government cannot wait for an
authorisation of the Parliament. The Government subsequently obtains Parliamentary
approval for the expenditure. The amount spent from the contingency fund is returned
to the fund later.

Monetary policy
This comprises actions taken by the central bank to regulate the level of money or
liquidity in the economy, or change the interest rates.


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RBI Grade - B Exam - A brief of Capital Market
Financial Market-
Any marketplace where buyers and sellers participate in the trade of assets such as
equities, bonds, currencies and derivatives. Financial markets are typically defined by
having transparent pricing, basic regulations on trading, costs and fees and market
forces determining the prices of securities that trade.

Money Market-
A segment of the financial market in which financial instruments with high liquidity and
for very short time are traded. The money market is used by participants as a means for
borrowing and lending in the short term, from several days to just under a year. Money
market securities consist of negotiable certificates of deposit (CDs), Treasury bills,
commercial paper and repurchase agreements (repos).

Capital Market-
These are the financial market for buying and selling of funds for long terms, these
consists of Shares, Debentures, equities etc,
Capital market is regulated by- SEBI (Securities and Exchange Board of India)

Lets understand Capital Market instruments in deep :

Capital Market consists of two main blocks, they are-
Primary Market
Secondary Market


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Primary Market (New Issue Market)-
A market that issues new securities on an exchange. Companies, governments and other
groups obtain financing through debt or equity based securities.
Secondary Market-
Secondary market is basically a reselling market , Here the stocks that are already sold in
the primary market are resold mostly by the stockholders or companies to gain more
returns.
Mr. Bye Bye (rival of Tata) decided to enter in the Retail industry for this he had 50
percent of funds with him, to raise the remaining amount he decided to take the route
of Primary market, He offered his company shares to public and this step of offering the
securities for the first time in the Capital market is called as Initial Public Offering (IPO),
He can raise the money by the following means-
Bonds and Debentures
The common man which invested in the bond agreement of Mr. Bye Byes company will
receive a bond/Debt agreement , this will say that the common man will get the same
amount of money plus interests by Mr. Bye after the specified time limit . The person
subscribing the Bond instrument does not have a ownership in the company. As a
debenture holder, you provide unsecured loan to the company. It carries a higher rate
of interest as the company does not give any collateral to you for your money. For this
reason bond holders receive a lower rate of interest but are more secure.
Shares/Equities-
Companies usually divide their capital into small parts of equal value. This smallest part
is known as a share. Companies usually issue shares in the public to raise capital. People
who buy or are allotted shares are called shareholders. If a person is subscribing the
equities issued by Mr. Bye then he will get the same amount of money that he
subscribed plus he will get the additional amount that will depand on the profit of the
company, equity means you are a part of the company and will get your due if the
company earns a big amount of profit in the financial year, but you are in a danger to
loose if the company does not do well, equities are more dangerous and high returns
oriented than the bonds.
ACRONYMS CORNER-
SEBI- Securities and Exchange Board of India
IPO- Initial Public Offerings


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Some Important Banking Notes

GDP: It is the money value of all the final goods and services produced within the
geographical boundaries of the country during a given period of time.

GNP: It refers to the money value of total output or production of find goods and
service produced by the nationals of a country during a given period of time.

Producers Price Index: It is the cost incurred by the producer in producing single unit in
terms of GDP. It does not include any indirect taxes.

Credit Control: By credit control we mean to regulate the volume of credit created by
banks in India. It is the principal function of Reserve Bank of India. The basic objective of
credit control mechanism is to realize both price stability and exchange stability in the
economy. RBI uses two types of methods to control credit: (i) Quantitative Methods,
and (ii) Qualitative Methods.
1. Quantitative Measures are used to control the volume of credit or indirectly to
control inflationary and deflationary pressures caused by expansion and
contraction of credit. These are also known as general credit measures. These
consist of Bank Rate, Cash Reserve Ratio, Statutory Liquidity Ratio and Open
Market Operations.

2. Qualitative Measures are used to control the quantum as well as purpose for
which credits are given by banks. RBI uses measures like Publicity, Rationing of
Credit, Regulation of consumer credit, Moral suasion and Variation in margin
requirement for qualitative credit control.
Bank Rate: Bank rate is the rate at which the RBI is prepared to buy or re-discount
eligible bills of exchange or other commercial papers. In simple words, bank rate is the
rate at which RBI extends advises (Credit) to commercial banks. A change in the bank
rate will result in a change in the prime lending rate of banks and thus act as an
independent instrument of monetary control.
Cash Reserve Ratio (CRR): Cash reserve ratio is the cash parked by the banks in their
specified current account maintained with RBI. In other words, it is the percentage of
deposit (both demand and time deposit) which a bank has to keep with the RBI. RBI was
empowered to vary the CRR between 3% to 15%. But now there is no minimum limit of
CRR in India but the maximum limit is still retained at 15%. The purpose of reducing CRR
is to leave large cash reserve with banks so as to enable them to expand bank credit.

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Similarly increasing of CRR means squeezing the cash reserve of the banks and limits
their credit providing capacity.

Statutory liquidity Ratio (SLR): Statutory liquidity ratio is the liquid assets commercial
banks maintain with the RBI in the form of cash (book value), gold (current market
value) and balances in unencumbered approved securities. The maximum limit of SLR is
40% and minimum limit of SLR is 23% In India. RBI can change SLR from time to time.
Both CRR and SLR reduce or increase the capacity to expand credit to business and
industry. Thus both of these are anti-inflationary.

Open Market Operations (OMO): The buying and selling of eligible securities in the
money market by RBI for the purpose of curtailing or expanding the volume of credit. By
selling securities the RBI can absorb funds, and buying the securities can release funds
also into the market. The purpose of OMO is to influence the volume of cash reserves
with the commercial banks and thus influence the volume of loans and advances they
can make to the industrial and commercial sector.

Selective Credit Controls: Under the Banking Regulation Act 1949, section 21 empowers
RBI to issue directives to the banking companies regarding their advance in order to
check speculation and rising prices. The controls are selective as they are used to control
and check the rising tendency of price and hording of certain individual commodities of
common use. However, while imposing selective control, RBI takes care that bank credit
for production and transportation of commodities and exports is not affected. These are
mainly focused on credit to traders who use such credit for financing hoarding and
speculation. Since 1956-57 RBI is employing this method.

Prime Lending Rate (PLR): It is rate of interest of which commercial banks lend to their
prime high profile blue chip corporate borrowers. (From 1990s banks are free to
determine PLR).

Repo Rate: Repurchasing option is traded in this market for a short time periods. Repo
is Repurchasing by RBI.

Priority Sector Lending: Priority sector refers to those sectors of the economy which
may not get timely and adequate credit in the absence of this special dispensation.
Typically, these are small value loans to farmers for agriculture and allied activities,
micro and small enterprises, poor people for housing, students for education and other
low income groups and weaker sections.


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Market Stabilization Scheme: It is a scheme under which RBI buys and sells Government
of India securities in order to control liquidity.

Money in Circulation: Money in use to finance current transactions as distinct from idle
money.

Investment Bank: A Bank that provides long term fixed capital for industry, generally by
taking up shares in limited companies.

Regional Rural Bank: It was established in 1975 under the provision of RRB Act 1976,
with a view to develop rural economy.

Lead Banking Scheme: Under this scheme all the nationalized banks and few private
sector banks were allowed specially and were asked to play the Lead Role. The lead
banks act as a leader to bring about co-ordination of cooperative banks, commercial
banks and other financial institutions in their respective demises to bring about rapid
economic development

CAMELS: Capital Adequacy, Asset Quality, Management, Earnings Liquidity and Systems.

Capital Adequacy Ratio (CAR): It is the ratio of total capital fund of a bank to its risk
weighted assets. It is an indicator of banks financial health.

Over Heating of Economy: When the supply is not able to keep phase with demand, it is
as called over heating of economy. It leads to inflation and shortage goods.

Cost-push Inflation: General prices of goods and services in the economy rises due to an
increase in production cost. Such types of Inflation are caused by three factors (i) an
increase in wages, (ii) an increase in profit and (iii) imposition of heavy tax.

Demand- pull inflation: The most common cause of inflation is the pressure of ever-
rising demand on a less rapidly increasing supply of goods and services. The expansion in
aggregate demand may be the result of rapidly increasing private investment and/or
spending government money for war or for economic development.

Forward Market Commission: It is a regulatory body for commodity futures, and
forward trade in India. It was set up under Forward Contract (Regulation) Act 1952. Its
headquarter is in Mumbai.


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CARE: Credit Analysis and Research Ltd. It was started in November 1993. It was set up
by IDBI.

ICRA: Investment Information and Credit Rating Agents of India Limited. It was
established in 1991. It primarily rates short, medium and long debt instruments. But,
since 1995 it has been doing equity rating also.

NSDL: National Securities Depository Limited

CDSL: Central Depository Services Limited.
Banking Act
Often in exams we come across questions related to banking acts, so we are providing
you a brief summary of some important acts and years in which they came in action.


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Some Key Financial Terms for Various Exams

APR: It stands for Annual Percentage Rate. APR is a percentage that is calculated on the
basis of the amount financed, the finance charges, and the term of the loan.

ABS: Asset-Backed Securities. It means a type of security that is backed by a pool of
bank loans, leases, and other assets.

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EPS: Earnings Per Share means the amount of annual earnings available to common
stockholders as stated on a per share basis.

CHAPS: Clearing House Automated Payment System. Its a type of electronic bank-to-
bank payment system that guarantees same-day payment.

IPO: Initial Public Offerings is defined as the event where the company sells its shares to
the public for the first time. (or the first sale of stock by a private company to the
public.)

FPO: Follow on Public Offerings: An issuing of shares to investors by a public company
that is already listed on an exchange. An FPO is essentially a stock issue of
supplementary shares made by a company that is already publicly listed and has gone
through the IPO process.

Difference: IPO is for the companies which have not been listed on an exchange and
FPO is for the companies which have already been listed on an exchange but want to
raise funds by issuing some more equity shares.

RTGS: Real Time Gross Settlement systems is a funds transfer system where transfer of
money or securities takes place from one bank to another on a real time. (Real time
means within a fraction of seconds.) The minimum amount to be transferred through
RTGS is Rs 2 lakh. Processing charges/Service charges for RTGS transactions vary from
bank to bank.

NEFT: National Electronic Fund Transfer. This is a method used for transferring funds
across banks in a secure manner. It usually takes 1-2 working days for the transfer to
happen. NEFT is an electronic fund transfer system that operates on a Deferred Net
Settlement (DNS) basis which settles transactions in batches. (Note: RTGS is much faster
than NEFT.)

CAR: Capital Adequacy Ratio. Its a measure of a banks capital. Also known as Capital
to Risk Weighted Assets Ratio (CRAR), this ratio is used to protect depositors and
promote the stability and efficiency of financial systems around the world. It is decided
by the RBI.

NPA: Non-Performing Asset. It means once the borrower has failed to make interest or
principal payments for 90 days, the loan is considered to be a non-performing asset.
Presently it is 2.39%.

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IMPS: Inter-bank Mobile Payment Service. It is an instant interbank electronic fund
transfer service through mobile phones. Both the customers must have MMID (Mobile
Money Identifier Number). For this service, we dont need any GPS-enabled cell phones.

BCBS: Basel Committee on Banking Supervision is an institution created by the Central
Bank governors of the Group of Ten nations.

RSI: Relative Strength Index.

IFSC code: Indian Financial System Code. The code consists of 11 characters for
identifying the bank and branch where the account in actually held. The IFSC code is
used both by the RTGS and NEFT transfer systems.

MSME and SME: Micro Small and Medium Enterprises (MSME), and SME stands for
Small and Medium Enterprises. This is an initiative of the government to drive and
encourage small manufacturers to enjoy facilities from banks at concessional rates.

LIBOR: London InterBank Offered Rate. An interest rate at which banks can borrow
funds, in marketable size, from other banks in the London interbank market.

LIBID: London Interbank Bid Rate. The average interest rate at which major London
banks borrow Eurocurrency deposits from other banks

ECGC: Export Credit Guarantee Corporation of India. This organisation provides risk as
well as insurance cover to the Indian exporters.

SWIFT: Society for Worldwide Interbank Financial Telecommunication. It operates a
worldwide financial messaging network which exchanges messages between banks and
other financial institutions.

STRIPS: Separate Trading for Registered Interest & Principal Securities.

CIBIL: Credit Information Bureau of India Limited. CIBIL is Indias first credit information
bureau. Whenever a person applies for new loans or credit card(s) to a financial
institution, they generate the CIBIL report of the said person or concern to judge the
credit worthiness of the person and also to verify their existing track record. CIBIL
actually maintains the borrowers history.


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CRISIL: Credit Rating Information Services of India Limited. Crisil is a global analytical
company providing ratings, research, and risk and policy advisory services.

AMFI: Association of Mutual Funds of India. AMFI is an apex body of all Asset
Management Companies (AMCs) which have been registered with SEBI. (Note: AMFI is
not a mutual funds regulator)

FCCB: Foreign Currency Convertible Bond. A type of convertible bond issued in a
currency different from the issuers domestic currency.

CAC: Capital Account Convertibility. It is the freedom to convert local financial assets
into foreign financial assets and vice versa. This means that capital account convertibility
allows anyone to freely move from local currency into foreign currency and back, or in
other words, transfer of money from current account to capital account.

BANCASSURANCE: Is the term used to describe the partnership or relationship between
a bank and an insurance company whereby the insurance company uses the bank sales
channel in order to sell insurance products.

Balloon payment: Is a specific type of mortgage payment, and is named balloon
payment because of the structure of the payment schedule. For balloon payments, the
first several years of payments are smaller and are used to reduce the total debt
remaining in the loan. Once the small payment term has passed (which can vary, but is
commonly 5 years), the remainder of the debt is due - this final payment is the one
known as the balloon payment, because it is larger than all of the previous payments.

CPSS: Committee on Payment and Settlement Systems

FCNR Accounts: Foreign Currency Non-Resident accounts are the ones that are
maintained by NRIs in foreign currencies like USD, DM, and GBP.

M3 in banking: Its a measure of money supply. It is the total amount of money
available in an economy at a particular point in time.

OMO: Open Market Operations. The buying and selling of government securities in the
open market in order to expand or contract the amount of money in the banking
system. Open market operations are the principal tools of monetary policy. RBI uses this
tool in order to regulate the liquidity in economy.


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Umbrella Fund: A type of collective investment scheme. A collective fund containing
several sub-funds, each of which invests in a different market or country.

ECS: Electronic Clearing Facility is a type of direct debit.

Tobin tax: Suggested by Nobel Laureate economist James Tobin, was originally defined
as a tax on all spot conversions of one currency into another.

Z score is a term widely used in the banking field.

POS: Point Of Sale, also known as Point Of Purchase, a place where sales are made and
also sales and payment information are collected electronically, including the amount of
the sale, the date and place of the transaction, and the consumers account number.

LGD: Loss Given Default. Institutions such as banks will determine their credit losses
through an analysis of the actual loan defaults.

Junk Bonds: Junk bonds are issued generally by smaller or relatively less well-known
firms to finance their operations, or by large and well-known firms to fund leveraged
buyouts. These bonds are frequently unsecured or partially secured, and they pay
higher interest rates: 3 to 4 percentage points higher than the interest rate on blue chip
corporate bonds of comparable maturity period.

ARM: Adjustable Rate Mortgage is basically a type of loan where the rate of index is
calculated on the basis of the previously selected index rate.

ABO: Accumulated Benefit Obligation, ABO is a measure of liability of pension plan of an
organisation and is calculated when the pension plan is terminated.

Absorption: A term related to real estate, it is a process of renting a real estate property
which is newly built or recently approved.

AAA: A type of grade that is used to rate a particular bond. It is the highest rated bond
that gives maximum returns at the time of maturity.

DSCR: Debt Service Coverage Ratio, DSCR is a financial ratio that measures the
companys ability to pay their debts.


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FSDC: Financial Stability and Development Council, Indias apex body of the financial
sector.

ITPO: India Trade Promotion Organisation is the nodal agency of the Government of
India for promoting the countrys external trade.

FLCC: Financial Literacy and Counseling Centres.

ANBC: Adjusted Net Bank Credit is Net Bank Credit added to investments made by banks
in non-SLR bonds.

Priority sector lending: Some areas or fields in a country depending on its economic
condition or government interest are prioritised and are called priority sectors i.e.
industry, agriculture.

M0, M1, M2 AND M3: These terms are nothing but money supply in banking field.

BIFR: Bureau of Industrial and Financial Reconstruction.

FRBM Act 2003: Fiscal Responsibility and Budget Management act was enacted by the
Parliament of India to institutionalise financial discipline, reduce Indias fiscal deficit,
improve macroeconomic management and the overall management of the public funds
by moving towards a balanced budget.

The main objectives of FRBM Act are:-
1. To reduce fiscal deficit.
2. To adopt prudent debt management.
3. To generate revenue surplus.

Gold Standard: A monetary system in which a countrys government allows its currency
unit to be freely converted into fixed amounts of gold and vice versa.

Fiat Money: Fiat money is a legal tender for settling debts. It is a paper money that is
not convertible and is declared by government to be legal tender for the settlement of
all debts.

BCSBI: The Banking Codes and Standards Board of India is a society registered under the
Societies Registration Act, 1860 and functions as an autonomous body, to monitor and

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assess the compliance with codes and minimum standards of service to individual
customers to which the banks agree to.

OLTAS: On-Line Tax Accounting System.

EASIEST: Electronic Accounting System in Excise and Service Tax.

SOFA: Status of Forces Agreement, SOFA is an agreement between a host country and a
foreign nation stationing forces in that country.

CALL MONEY: Money loaned by a bank that must be repaid on demand. Unlike a term
loan, which has a set maturity and payment schedule, call money does not have to
follow a fixed schedule. Brokerages use call money as a short-term source of funding to
cover margin accounts or the purchase of securities. The funds can be obtained quickly.

Scheduled bank: Scheduled Banks in India constitute those banks which have been
included in the Second Schedule of RBI Act, 1934 as well as their market capitalisation is
more than Rs 5 lakh. RBI in turn includes only those banks in this schedule which satisfy
the criteria laid down vide section 42 (6) (a) of the Act.

FEDAI: Foreign Exchange Dealers Association of India. An association of banks
specialising in the foreign exchange activities in India.

PPF: Public Provident Fund. The Public Provident Fund Scheme is a statutory scheme of
the Central Government of India. The scheme is for 15 years. The minimum deposit is Rs
500 and maximum is Rs 70,000 in a financial years

SEPA: Single Euro Payment Area.

GAAP: Generally Accepted Accounting Principles. The common set of accounting
principles, standards and procedures that companies use to compile their financial
statements.

Indian Depository Receipt: Foreign companies issue their shares and in return they get
the depository receipt from the National Security Depository in return of investing in
India.


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Hot Money: Money that is moved by its owner quickly from one form of investment to
another, as to take advantage of changing international exchange rates or gain high
short-term returns on investments.

NMCEX: National Multi-Commodity Exchange.

PE RATIO: Price to Earnings Ratio, a measure of how much investors are willing to pay
for each dollar of a companys reported profits.
CASA: Current Account, Savings Account.

CAMELS: CAMELS is a type of Bank Rating System. (C) stands for Capital Adequacy, (A)
for Asset Quality, (M) for Management ,(E) for Earnings, (L) for Liquidity and (S) for
Sensitivity to Market Risk.

OSMOS: Off-site Monitoring and Surveillance System.

Free market: A market economy based on supply and demand with little or no
government control.

Retail banking: It is mass-market banking in which individual customers use local
branches of larger commercial banks.

Eurobond: A bond issued in a currency other than the currency of the country or market
in which it is issued.

PPP: Purchasing Power Parity is an economic technique used when attempting to
determine the relative values of two currencies.

FEMA Act: Foreign Exchange Management Act, it is useful in controlling HAWALA.

Hawala transaction: Its a process in which large amount of black money is converted
into white.

Teaser Loans: Its a type of home loans in which the interest rate is initially low and then
grows higher. Teaser loans are also called terraced loans.

ECB: External Commercial Borrowings, taking a loan from another country. Limit of ECB
is $500 million, and this is the maximum limit a company can get.


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CBS: Core Banking Solution. All the banks are connected through internet, meaning we
can have transactions from any bank and anywhere. (e.g. deposit cash in PNB, Delhi
branch and withdraw cash from PNB, Gujarat)

CRAR: For RRBs it is more than 9% (funds allotted 500 cr) and for commercial banks it is
greater than 8% (6000 cr relief package).

NBFCs: NBFC is a company which is registered under Companies Act, 1956 and whose
main function is to provide loans. NBFC cannot accept deposit or issue demand draft like
other commercial banks. NBFCs registered with RBI have been classified as AssetFinance
Company (AFC), Investment Company (IC) and Loan Company (LC).

IIFCL: India Infrastructure Finance Company Limited. It gives guarantee to infra bonds.

IFPRI: International Food Policy Research Institute. It identifies and analyses policies for
meeting the food needs of the developing world.

Currency swap: It is a foreign-exchange agreement between two parties to exchange
aspects (namely the principal and/or interest payments) of a loan in one currency for
equivalent aspects of an equal in net present value loan in another currency. Currency
swap is an instrument to manage cash flows in different currency.

WPI: Wholesale Price Index is an index of the prices paid by retail stores for the
products they ultimately resell to consumers. New series is 2004 2005. (The new series
has been prepared by shifting the base year from 1993-94 to 2004-05). Inflation in India
is measured on WPI index.

MAT: Minimum Alternate Tax is the minimum tax to be paid by a company even though
the company is not making any profit.

Future trading: Its a future contract/agreement between the buyers and sellers to buy
and sell the underlying assets in the future at a predetermined price.

Reverse mortgage: Its a scheme for senior citizens.

Basel 2nd norms: BCBS has kept some restrictions on bank for the maintenance of
minimum capital with them to ensure level playing field. Basel II has got three pillars:

Pillar 1- Minimum capital requirement based on the risk profile of bank.

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Pillar 2- Supervisory review of banks by RBI if they go for internal ranking.
Pillar 3- Market discipline.

Microfinance institutions: Those institutions that provide financial services to low-
income clients. Microfinance is a broad category of services, which includes microcredit.
Microcredit is provision of credit services to poor clients.

NPCI: National Payments Corporation of India.

DWBIS: Data Warehousing and Business Intelligence System, a type of system which is
launched by SEBI. The primary objective of DWBIS is to enhance the capability of the
investigation and surveillance functions of SEBI.

TRIPS: Trade Related Intellectual Property Rights is an international agreement
administered by the World Trade Organisation (WTO) that sets down minimum
standards for many forms of intellectual property (IP) regulation as applied to nationals
of other WTO Members.

TRIMs: Trade Related Investment Measures. A type of agreement in WTO.

SDR: Special Drawing Rights, SDR is a type of monetary reserve currency, created by the
International Monetary Fund. SDR can be defined as a basket of national currencies.
These national currencies are Euro, US dollar, British pound and Japanese yen. Special
Drawing Rights can be used to settle trade balances between countries and to repay the
IMF. American dollar gets highest weightage.

LTD: Loan-To-Deposit Ratio. A ratio used for assessing a banks liquidity by dividing the
banks total loans by its total deposits. If the ratio is too high, it means that banks might
not have enough liquidity to cover any fund requirements, and if the ratio is too low,
banks may not be earning as much as they could be.

CAD: Current Account Deficit. It means when a countrys total imports of goods, services
and transfers is greater than the countrys total export of goods, services and transfers.

LERMS: Liberalized Exchange Rate Management System.

FRP: Fair and Remunerative Price, a term related to sugarcane. FRP is the minimum
price that a sugarcane farmer is legally guaranteed. However sugar Mills Company gives
more than FRP price.

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STCI: Securities Trading Corporation of India Limited was promoted by the Reserve Bank
of India (RBI) in 1994 along with Public Sector Banks and All India Financial Institutions
with the objective of developing an active, deep and vibrant secondary debt market.

IRR: Internal Rate of Return. It is a rate of return used in capital budgeting to measure
and compare the profitability of investments.

CMIE: Centre for Monitoring Indian Economy. It is Indias premier economic research
organisation. It provides information solutions in the form of databases and research
reports. CMIE has built the largest database on the Indian economy and companies.

TIEA: Tax Information Exchange Agreement. TIEA allows countries to check tax evasion
and money laundering. Recently India has signed TIEA with Cayman Islands.

Contingency Fund: Its a fund for emergencies or unexpected outflows, mainly
economic crises. A type of reserve fund which is used to handle unexpected debts that
are outside the range of the usual operating budget.

FII: Foreign Institutional Investment. The term is used most commonly in India to refer
to outside companies investing in the financial markets of India. International
institutional investors must register with the Securities and Exchange Board of India to
participate in the market.

P-NOTES: P means participatory notes.

MSF: Marginal Standing Facility. Under this scheme, banks will be able to borrow upto
1% of their respective net demand and time liabilities. The rate of interest on the
amount accessed from this facility will be 100 basis points (i.e. 1%) above the repo rate.
This scheme is likely to reduce volatility in the overnight rates and improve monetary
transmission.

FIU: Financial Intelligence Unit set by the Government of India on 18 November 2004 as
the central national agency responsible for receiving, processing, analysing and
disseminating information relating to suspect financial transactions.

SEBI: Securities and Exchange Board of India. SEBI is the primary governing/regulatory
body for the securities market in India. All transactions in the securities market in India
are governed and regulated by SEBI. Its main functions are:

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1. New issues (Initial Public Offering or IPO)
2. Listing agreement of companies with stock exchanges
3. Trading mechanisms 4. Investor protection
5. Corporate disclosure by listed companies etc.

Note: SEBI is also known as capital regulator or mutual funds regulator or market
regulator. SEBI also created investors protection fund and SEBI is the only organization
which regulates the credit rating agencies in India. (CRISIL and CIBIL).

ASBA: Application Supported by Blocked Amount. It is a process developed by the SEBI
for applying to IPO. In ASBA, an IPO applicants account doesnt get debited until shares
are allotted to him.

DEPB Scheme: Duty Entitlement Pass Book. It is a scheme which is offered by the Indian
government to encourage exports from the country. DEPB means Duty Entitlement Pass
Book to neutralise the incidence of basic and special customs duty on import content of
export product.

LLP: Limited Liability Partnership, is a partnership in which some or all partners
(depending on the jurisdiction) have limited liability.
Balance sheet: A financial statement that summarises a companys assets, liabilities and
shareholders equity at a specific point in time.

TAN: Tax Account Number, is a unique 10-digit alphanumeric code allotted by the
Income Tax Department to all those persons who are required to deduct tax at the
source of income.

PAN: Permanent Account Number, as per section 139A of the Act obtaining PAN is a
must for the following persons:-

Any person whose total income or the total income of any other person
in respect of which he is assessable under the Act exceeds the maximum
amount which is not chargeable to tax.

Any person who is carrying on any business or profession whose total
sales, turnover or gross receipts are or are likely to exceed Rs. 5 lakh
in any previous year.

Any person who is required to furnish a return of income under section 139(4) of
the Act.

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JLG: Joint Liability Group, when two or more persons are both responsible for a debt,
claim or judgment.

REER: Real Effective Exchange Rate.

NEER: Nominal Effective Exchange Rate.

Contingent Liability: A liability that a company may have to pay, but only if a certain
future event occurs.

IRR: Internal Rate of Return, is a rate of return used in capital budgeting to measure and
compare the profitability of investments.

MICR: Magnetic Ink Character Recognition. A 9-digit code which actually shows whether
the cheque is real or fake.

UTR Number: Unique Transaction Reference number. A unique number which is
generated for every transaction in RTGS system. UTR is a 16-digit alphanumeric code.
The first 4 digits are a bank code in alphabets, the 5th one is the message code, the 6th
and 7th mention the year, the 8th to 10th mentions the date and the last 6 digits
mention the days serial number of the message.

RRBs: Regional Rural Banks. As its name signifies, RRBs are specially meant for rural
areas, capital share being 50% by the central government, 15% by the state government
and 35% by the scheduled bank.

MFI: Micro Finance Institutions. Micro Finance means providing credit/loan (micro
credit) to the weaker sections of the society. A microfinance institution (MFI) is an
organisation that provides financial services to the poor.

PRIME LENDING RATE: PLR is the rate at which commercial banks give loans to its prime
customers (most creditworthy customers).

BASE RATE: A minimum rate that a bank is allowed to charge from the customer. Base
rate differs from bank to bank. It is actually a minimum rate below which the bank
cannot give loan to any customer. Earlier base rate was known as BPLR (Base Prime
Lending Rate).


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EMI: Equated Monthly Installment. It is nothing but a repayment of the loan taken. A
loan could be a home loan, car loan or personal loan. The monthly payment is in the
form of post dated cheques drawn in favour of the lender. EMI is directly proportional
to the loan taken and inversely proportional to time period. That is, if the loan amount
increases the EMI amount also increases and if the time period increases the EMI
amount decreases.

Basis points (bps): A basis point is a unit equal to 1/100th of a percentage point. i.e. 1
bps = 0.01%. Basis points are often used to measure changes in or differences between
yields on fixed income securities, since these often change by very small amounts.

Liquidity: It refers to how quickly and cheaply an asset can be converted into cash.
Money (in the form of cash) is the most liquid asset.

Certificate of Deposit (CD) is a negotiable money market instrument and issued in
dematerialised form for funds deposited at a bank or other eligible financial institution
for a specified time period.

Commercial Paper (CP) is an unsecured money market instrument issued in the form of
a promissory note. It was introduced in India in 1990. Corporates and the All-India
Financial Institutions are eligible to issue CP.


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Some Basic Banking Terms

1) RBI The Reserve Bank of India is the apex bank of the country, which was
constituted under the RBI Act, 1934 to regulate the other banks, issue of bank notes and
maintenance of reserves with a view to securing the monetary stability in India.

2) Demand Deposit A Demand deposit is the one which can be withdrawn at any
time, without any notice or penalty; e.g. money deposited in a checking account or
savings account in a bank.

3) Time Deposit Time deposit is a money deposit at a banking institution that cannot
be withdrawn for a certain "term" or period of time. When the term is over it can be
withdrawn or it can be held for another term.

4) Fixed Deposits FDs are the deposits that are repayable on fixed maturity date
along with the principal and agreed interest rate for the period. Banks pay higher
interest rates on FDs than the savings bank account.

5) Recurring Deposits These are also called cumulative deposits and in recurring
deposit accounts, a certain amounts of savings are required to be compulsorily
deposited at specific intervals for a specified period.

6) Savings Account Savings account is an account generally maintained by retail
customers that deposit money (i.e. their savings) and can withdraw them whenever
they need. Funds in these accounts are subjected to low rates of interest.

7) Current Accounts These accounts are maintained by the corporate clients that
may be operated any number of times in a day. There is a maintenance charge for the
current accounts for which the holders enjoy facilities of easy handling, overdraft facility
etc.

8) FCNR Accounts Foreign Currency Non-Resident accounts are the ones that are
maintained by the NRIs in foreign currencies like USD, DM, and GBP etc. The account is a
term deposit with interest rates linked to the international rates of interest of the
respective currencies.


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9) NRE Accounts Non-Resident External accounts are the ones in which NRIs remit
money in any permitted foreign currency and the remittance is converted to Indian
rupees for credit to NRE accounts. The accounts can be in the form of current, saving,
FDs, recurring deposits. The interest rates and other terms of these accounts are as per
the RBI directives.

10) Cheque Book - A small, bound booklet of cheques. A cheque is a piece of paper
produced by your bank with your account number, sort-code and cheque number
printed on it. The account number distinguishes your account from other accounts; the
sort-code is your bank's special code which distinguishes it from any other bank.

11) Cheque Clearing - This is the process of getting the money from the cheque-
writer's account into the cheque receiver's account.

12) Clearing Bank - This is a bank that can clear funds between banks. For general
purposes, this is any institution which we know of as a bank or as a provider of banking
services.

13) Bounced Cheque - when the bank has not enough funds in the relevant account or
the account holder requests that the cheque is bounced (under exceptional
circumstances) then the bank will return the cheque to the account holder.

14) Credit Rating - This is the rating which an individual (or company) gets from the
credit industry. This is obtained by the individual's credit history, the details of which are
available from specialist organisations like CRISIL in India.

15) Credit-Worthiness - This is the judgement of an organization which is assessing
whether or not to take a particular individual on as a customer. An individual might be
considered credit-worthy by one organisation but not by another. Much depends on
whether an organization is involved with high risk customers or not.

16) Interest - The amount paid or charged on money over time. If you borrow money
interest will be charged on the loan. If you invest money, interest will be paid (where
appropriate to the investment).
17) Overdraft - This is when a person has a minus figure in their account. It can be
authorized (agreed to in advance or retrospect) or unauthorized (where the bank has
not agreed to the overdraft either because the account holder represents too great a

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risk to lend to in this way or because the account holder has not asked for an overdraft
facility).
18) Payee - The person who receives a payment. This often applies to cheques. If you
receive a cheque you are the payee and the person or company who wrote the cheque
is the payer.

19) Payer - The person who makes a payment. This often applies to cheques. If you
write a cheque you are the payer and the recipient of the cheque is the payee.

20) Security for Loans - Where large loans are required the lending institution often
needs to have a guarantee that the loan will be paid back. This takes the form of a large
item of capital outlay (typically a house) which is owned or partly owned and the
amount owned is at least equivalent to the loan required.

21) Internet Banking - Online banking (or Internet banking) allows customers to
conduct financial transactions on a secure website operated by the bank.

22) Credit Card - A credit card is one of the systems of payments named after the small
plastic card issued to users of the system. It is a card entitling its holder to buy goods
and services based on the holder's promise to pay for these goods and services.

23) Debit Card Debit card allows for direct withdrawal of funds from customers bank
accounts. The spending limit is determined by the available balance in the account.

24) Loan - A loan is a type of debt. In a loan, the borrower initially receives or borrows
an amount of money, called the principal, from the lender, and is obligated to pay back
or repay an equal amount of money to the lender at a later time. There are different
kinds of loan such as the house loan, auto loan etc.

25) Bank Rate - This is the rate at which central bank (RBI) lends money to other banks
or financial institutions. If the bank rate goes up, long-term interest rates also tend to
move up, and vice-versa.

26) CRR - Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep
with RBI. If RBI decides to increase the percent of this, the available amount with the
banks comes down. RBI is using this method (increase of CRR rate), to drain out the

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excessive money from the banks.

27) SLR - SLR stands for Statutory Liquidity Ratio. This term is used by bankers and
indicates the minimum percentage of deposits that the bank has to maintain in form of
gold, cash or other approved securities. Thus, we can say that it is ratio of cash and
some other approved to liabilities (deposits). It regulates the credit growth in India.

28) ATM - An automated teller machine (ATM) is a computerised telecommunications
device that provides the clients with access to financial transactions in a public space
without the need for a cashier, human clerk or bank teller. On most modern ATMs, the
customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic
smart card with a chip, that contains a unique card number and some security
information such as an expiration date or CVV. Authentication is provided by the
customer entering a personal identification number (PIN)

29) REPO RATE: - Under repo transaction the borrower places with the lender certain
acceptable securities against funds received and agree to reverse this transaction on a
predetermined future date at agreed interest cost. Repo rate is also called (repurchase
agreement or repurchase option).

30) REVERSE REPO RATE: is the interest rate earned by the bank for lending money
tothe RBI in exchange of govt. securities or "lender buys securities with agreement to
sell them back at a predetermined rate".

31) CASH RESERVE RATIO: specifies the percentage of their total deposits the
commercial bank must keep with central bank or RBI. Higher the CRR lower will be the
capacity of bank to create credit.

32) SLR: known as Statutorily Liquidity Ratio. Each bank is required statutorily maintain
a prescribed minimum proportion of its demand and time liabilities in the form of
designated liquid asset.
OR
"Every bank has to maintain a percentage of its demand and time liabilities by way of
cash, gold etc".

33) BANK RATE: is the rate of interest which is charged by RBI on its advances to
commercial banks. When reserve bank desires to restrict expansion of credit it raises
the bank rate there by making the credit costlier to commercial bank.

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34) OVERDRAFT: It is the loan facility on customer current account at a bank
permitting him to overdraw up to a certain agreed limit for a agreed period ,interest is
payable only on the amount of loan taken up.

35) PRIME LENDING RATE: It is the rate at which commercial banks give loan to its
prime customers.

36) IFSC: IFSC stands for Indian Financial System Code.
i. It is an alpha-numeric code that uniquely identifies a bank-branch participating in the
NEFT system.

ii. This is an 11 digit code with the first 4 alpha characters representing the bank, The
5th character is 0 (zero) and the last 6 characters representing the bank branch.

iii. IFSC is used by the NEFT system to identify the originating / destination banks /
branches and also to route the messages appropriately to the concerned banks /
branches.

For ex: SBIN0015986 :
(a) First 4 character SBIN refers to State Bank of India.
(b) 0 is a - control number.
(c) Last six characters (015986) represents the SBI branch name.

37) MICR : MICR stands for Magnetic Ink Character Recognition. MICR Code is a 9
numeric digit code which uniquely identifies a bank branch participating in the ECS
Credit scheme. MICR code consists of 9 digits e.g 400229128

i. First 3 digits represent the city (400)
ii. Next 3 digits represent the bank (229)
iii. Last 3 digits represent the branch (128)

The MICR Code allotted to a bank branch is printed on the MICR band of cheque leaves
issued by bank branches.

38) Cheque Truncation:
i. Truncation is the process of stopping the flow of the physical cheque issued by a
drawer at some point with the presenting bank en-route to the drawee bank branch.

ii. In its place an electronic image of the cheque is transmitted to the drawee branch by

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the clearing house, along with relevant information like data on the MICR band, date of
presentation, presenting bank, etc.

iii. Cheque Truncation speeds up the process of collection of cheques resulting in better
service to customers, reduces the scope for clearing-related frauds or loss of
instruments in transit, lowers the cost of collection of cheques, and
removes reconciliation-related and logistics-related problems, thus benefiting the
system as a whole.

Some basics you need to know about NEFT & RTGS

Q1. What is RTGS System?
Ans. The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined
as the continuous (real-time) settlement of funds transfers individually on an order by
order basis (without netting).
'Real Time' means the processing of instructions at the time they are received rather
than at some later time; 'Gross Settlement' means the settlement of funds transfer
instructions occurs individually (on an instruction by instruction basis). Considering that
the funds settlement takes place in the books of the Reserve Bank of India, the
payments are final and irrevocable.
Q2. How RTGS is different from National Electronics Funds Transfer
System (NEFT)?
Ans. NEFT is an electronic fund transfer system that operates on a Deferred Net
Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement
takes place with all transactions received till the particular cut-off time. These
transactions are netted (payable and receivables) in NEFT whereas in RTGS the
transactions are settled individually. For example, currently, NEFT operates in hourly
batches. [There are twelve settlements from 8 am to 7 pm on week days and six
settlements from 8 am to 1 pm on Saturdays.]
Any transaction initiated after a designated settlement time would have to wait till the
next designated settlement time Contrary to this, in the RTGS transactions are
processed continuously throughout the RTGS business hours.

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Q3. Is there any minimum / maximum amount stipulation for RTGS
transactions?

Ans. The RTGS system is primarily meant for large value transactions. The minimum
amount to be remitted through RTGS is Rs. 2 lakh. There is no upper ceiling for RTGS
transactions.
Q4. What is the time taken for effecting funds transfer from one account to
another under RTGS?
Ans. Under normal circumstances the beneficiary branches are expected to receive the
funds in real time as soon as funds are transferred by the remitting bank. The
beneficiary bank has to credit the beneficiary's account within 30 minutes of receiving
the funds transfer message.
Q5. Would the remitting customer receive an acknowledgement of money
credited to the beneficiary's account?
Ans. The remitting bank receives a message from the Reserve Bank that money has
been credited to the receiving bank. Based on this the remitting bank can advise the
remitting customer through SMS that money has been credited to the receiving bank.
BASEL - III - It's aftermath and effects
What are the Basel-III norms?
These are rules written by the Bank of International Settlement's Committee on Banking
Supervision (BCBS) whose mandate is to define the reform agenda for the global
banking community as a whole. The new rule prescribes how to assess risks, and how
much capital to set aside for banks in keeping with their risk profile.
What are the changes which have been made to the way in which capital is
defined?

Going by the new rules, the predominant component of capital is common equity and
retained earnings. The new rules restrict inclusion of items such as deferred tax assets,
mortgage-servicing rights and investments in financial institutions to no more than 15%
of the common equity component. These rules aim to improve the quantity and quality
of the capital.

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What do these new rules say?
While the key capital ratio has been raised to 7% of risky assets, according to the new
norms, Tier-I capital that includes common equity and perpetual preferred stock will be
raised from 2-4.5% started in phases from January 2013 to be completed by January
2015. In addition, banks will have to set aside another 2.5% as a contingency for future
stress. Banks that fail to meet the buffer would be unable to pay dividends, though they
will not be forced to raise cash.
How different is the approach now?
The new norms are based on renewed focus of central bankers on macro-prudential
stability. The global financial crisis following the crisis in the US sub-prime market has
prompted this change in approach. The previous set of guidelines, popularly known as
Basel II focused on macro-prudential regulation. In other words, global regulators are
now focusing on financial stability of the system as a whole rather than micro regulation
of any individual bank.
How will these norms impact Indian banks?
Indian banks are not likely to be impacted by the new capital rules. The aggregate
capital to risk-weighted assets ratio of the Indian banking system stood at 13.4%, of
which Tier-I capital constituted 9.3%. As such, RBI does not expect our banking system
to be significantly stretched in meeting the proposed new capital rules, both in terms of
the overall capital requirement and the quality of capital. There may be some negative
impact arising from shifting some deductions from Tier-I and Tier-II capital to common
equity.


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