• As per instructions received from RBI, all State Head of the banks, please ensure that coins of all denominations are freely accepted at all branches.        |

9, Arera Hills, Central Bank of India,
Zonal Office, Bhopal

1800 233 4035
smslbc@centralbank.co.in

Banking Glossary

Accretion to Equity

(Retained earnings / Total equity at the end of previous year)*100

Acceptance Letter

Acceptance letter is the letter that a borrower or applicant gives to the lender after reading the terms of the loan. This letter denotes the borrower's willingness to accept the loan offer within a particular time frame.

Account Balance

Opening Account Balance / Beginning of the Day (BOD) Balance : The balance in an account at the beginning of each business day; includes all deposits and withdrawals that were posted from the previous night, whether or not funds have been collected.

Closing Account Balance / End of the Day (EOD) Balance : The account balance computed at the end of the business day, and is the adjusted balance of the credits and debits during the business day in the account of the customer.

Account Statement

Periodic statement of all the debit and credit transactions on an account for a given statement cycle.

Acquirer

Acquirers are banks and financial institutions that collaborate with businesses to accept credit / debit card payments.

Active Account

A bank account in which there are regular transactions. A bank account that is not dormant or inoperative or under an attachment order of the court or enforcement authorities.

Activity Control Settings for Trades

Primary Members shall assign Buy and / or Sell privileges to each of the Transactional Users of their GAH through activity control settings.

Additional Cardholder

Another member added to an existing card thus extending its usage is called an additional cardholder. Thus by adding an additional cardholder the existing cardholder allows him / her to make purchases and use the credit card. However, the responsibility to repay the monthly outstanding balance rests with the original (principal) cardholder.

Administrative Fee

A one time non-refundable levy to bank's customers for meeting expenses related to appraisal of loan proposals.

Advance EMI

Number of equated monthly installments, paid in advance at the time of disbursal of loan.

Affinity Card

Credit cards linked to special organizations like sports clubs, exclusive clubs and charities. Affinity credit cards can also help raise funds, when a part of income from every transaction goes toward the benefit of relevant organization.

ALCO

Asset-Liability Management Committee (ALCO) is a strategic decision making body, formulating and overseeing the function of asset liability management (ALM) of a bank.

ALM

Asset Liability Management (ALM) is concerned with strategic balance sheet management involving all market risks. It also deals with liquidity management, funds management, trading and capital planning.

Amortization

Amortization is the repayment of Principal and Interest components of a Loan, over a period of time. Certain category of expenses or charges are also amortized over a period of time.

ATM

Acronym for automated teller machine, a machine at a bank branch or other location, which enables a customer to perform basic banking activities (checking one's balance, withdrawing or transferring funds) even when the bank is closed.

Attestation

Authentication of signatures of a customer of the branch required by the customer for any legal purposes.

Bad Credit

A term used to describe a poor credit rating including an account in default. Common practices which can damage your credit rating include late or missed payments, exceeding the limit on cards, defaulting on loans or declaring bankruptcy. "Bad Credit" can result in the denial of future credit.

Balance Transfer

Transferring balances from one credit card to another, usually to take advantage of a lower interest rate. Transfers are limited to the available credit on the receiving card.

Banking Book

The banking book comprises assests and liabilities, which are contracted basically on account of relationship or for steady income and statutory obligations and are generally held till maturity.

Bank Draft

An instrument issued by one branch of a bank on another branch of the bank containing an order to pay a certain sum on demand to the person named on the draft. It is used to transfer funds and to settle outstanding balances between banks, or to provide a customer with funds payable at a bank in a different location. Bank drafts are valid for certain period, generally, for 6 months, as indicated over face of draft.

Banker's Cheque

A cheque issued by a branch of a bank against consideration received. Banker's cheque are valid for a certain period as indicated on the face of the cheque. (also called Pay Order).

Bankruptcy

A legal action, in which a person who is not able to repay his loans satisfactorily, is declared bankrupt by a court order. The collateral or security in this case becomes liable to be attached by administration to satisfy creditors.

Bankruptcy Remote

The legal position with reference to the creation of the SPV should be such that the SPV and its assets would not be touched in case the originator of the securitization goes bankrupt and its assets are liquidated.

Base Rate

New reference rate used by banks for loan pricing w.e.f July 2010. Base rate captures cost of deposits, cost of capitals and unallocable (common) overheads. Banks are not allowed to lend base rate except for certain specified category or borrowers.

BASEL Committee on Banking Supervision

The BASEL Committee is a committee of bank supervisors consisting of members from each of the G10 countries. The Committee is a forum for discussion on the handling of specific supervisory problems. It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks' foreign establishments with the aim of ensuring effective supervision of banks' activities worldwide.

BASEL Capital Accord

The BASEL Capital Accord is an Agreement concluded among country representatives in 1988 to develop standardised risk-based capital requirements for banks across countries. The Accord was replaced with a new capital adequacy framework (BASEL II), published in June 2004. BASEL II is based on three mutually reinforcing pillars hat allow banks and supervisors to evaluate properly the various risks that banks face. These three pillars are :

  • Minimum capital requirements, which seek to refine the present measurement framework
  • Supervisory review of an institution's capital adequacy and internal assessment process;
  • market discipline through effective disclosure to encourage safe and sound banking practices

Basis Point

Is one hundredth of one percent. 1 basis point means 0.01%. Used for measuring change in interest rate / yield.

Bill Discounting

Under this type of lending, Bank takes the bill drawn by borrower on his (borrower's) customer and pay him immediately deducting some amount as discount / commission. The Bank then presents the Bill to the borrower's customer on the due date of the Bill and collect the total amount. If the bill is delayed, the borrower or his customer pay the Bank a pre-determined interest depending upon the terms of transaction.

Bill PayService

Bill Pay is a service of Online Banking from bank that allows you to pay your bills online. In addition you can elect to receive e-Bills - electronic versions of your paper bills - from your bank credit card and a variety of companies currently offering e-Bills.

Biller

A service provider who bills his / her services at specified intervals and has facilitated receipt of payment from his customers through online banking.

Billing Cycle

The number of days between your last statement date and your current statement date. Most service providers follow a monthly billing cycle.

Billing Statement

A monthly bill from your credit card issuer which describes and summarizes the activity on your account including the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.

Borrower

The person / legal entity who is taking the loan with the promise to repay it back with interest under the credit or loan agreement.

Bounced cheque

A cheque, which a bank returns unpaid because there is not enough available balance in the account or for other reasons.

Broker

Broker is an individual who, for a commission or a fee, brings two parties together and assists in negotiating contracts between them.

Budget

The financial record you use to keep track of the money you earn, how much you spend and what you spend it on. Your budget also includes savings and how much you pay to your creditors.

Business CreditCard

A reward credit card, that comes with special features and rewards for corporate users. Business credit card builds credit history for the associated business. They are a good way to separate business expenses from personal ones.

Calendar Year

Commencing from the day and month of a year to the previous day and month of the next year. A calendar year commencing on 1st March will end on 29th February if next year is a leap year at 28th February.

Canceled Cheque

A cheque that has been not paid and cancelled by the drawer - Account holder.

Capital Adequacy Ratio

Capital Adequacy Ratio is the capital to assets ratio which banks are required to maintain against risks. It is also known as Capital to Risk (Weighted) Assets Ratio (CRAR).

Capital Funds

Equity contribution of owners. The basic approach of capital adequacy framework is that a bank should have sufficient capital to provide a stable resource to absorb any losses arising from the risks in its business. Capital is divided into different tiers according to the characteristics / qualities of each qualifying instrument. For supervisory purposes capital is split into two categories : Tier I and Tier II.

Tier I Capital

A term used to refer to one of the components of regulatory capital. It consists mainly of share capital and disclosed reserves (minus goodwill, if any). Tier I items are deemed to be of the highest quality because they are fully available to cover losses Hence it is also termed as core capital.

Tier II Capital

Refers to one of the components of regulatory capital. Also known as supplementary capital, it consists of certain reserves and certain types of subordinated debt. Tier II items qualify as regulatory capital to the extent that they can be used to absorb losses arising from a bank's activities. Tier II's capital loss absorption capacity is lower than that of Tier I capital.

Capital Reserves

That portion of a company's profits not paid out as dividends to shareholders. They are also known as undistributable reserves and are ploughed back into the business.

Card Holder

Cardholder is a person who owns a debit or credit card issued by a credit card company, financial institution or bank.

Card Issuer

A bank, financial institution, credit union, or agency that issues a credit card to public or its members is called a card issuer.

Card member Agreement

The issuer's terms and conditions relating to your credit card account. The Card member Agreement is between the customer and the card issuing company and is a legal document. (When you sign up for a credit card understand the terms and Conditions).

Carpet Area

The area inside the walls of a room, measured from wall to wall including the door jams. In simple terms it is the area usable as floor level inside a room.

CASA Deposit

Deposit in bank in current and Savings account.

Cash Advance (Credit Card)

Applies to an advance taken against a credit card account. The advance may be through a cash withdrawal at an automated teller machine, bank teller or by use of a convenience check. This cash is an instant loan from your credit card account. The credit card company will apply finance charges from the day you take the advance until the day you pay it off. A transaction fee may also be charged based on the amount of your withdrawal.

Cash Advance Fee

A one-time fee for cash advances in addition to normal finance charges. This fee is usually a percentage of the advance amount.

Cash BackCredit Card

It is a special type of reward credit card, which pays back in cash. Whenever you use your cash back credit card to make purchases, a percentage of it is returned back to you. The cash back rewards can be redeemed as gift vouchers, or hard cash.

Cash ReserveRatio (CRR)M

Cash Reserve Ratio is the amount of mandatory funds that commercial banks have to keep with RBI. It is always fixed as a percentage of total demand and time liabilites.

Certificate ofTitle (Title Deed),/

An official document, showing the ownership or title of the property in question is called the certificate of title / title deeds. It describes various details about the property such as the area, location, registered owner and other factors and charges related to the property.

Certificate of Deposit (CD)

A time deposit that is payable at the end of a specified term. CDs generally pay a fixed interest rate and generally offer a different interest rate than other types of deposit accounts. If an early withdrawal from the CD prior to the end of the term is permitted, a penalty is usually assessed. CD is sold at discount value and being a money market instrument, can be transferred to other person through negotiaion.

Certified Cheque

A cheque for which the bank guarantees payment. Banks in India do not generally, certify cheques.

Charge Back

A credit card transaction, which is returned or not honored, is called a charge back. Usually done by the credit card holder in response to faulty products, credit card fraud, a dispute or non-compliance with the rules and regulations, charge back restores the funds back with the credit card.

Charge backPeriod

It is the time period from a particular credit card transaction within which, the credit card holder must initiate a charge back.

Charge Card

A card that requires full payment of the balance before the end of the billing period. It is not a line of credit and no interest is charged.

Chequefor Collection

An instrument drawn on another Bank or Branch tendered by a customer of a Bank or by his representative, at the branch or in the drop box provided for the purpose for collecting the amount of the cheque.

Cheque Purchase

Bank may, at its sole discretion, purchase local / outstation cheque tendered for collection at the specific request of the customer or as per prior arrangement subject to levy of service charges.

Cheque Return fee / EMI return fee

This is a 'service charge' that would be levied in the account due to return of cheque sent for collection / EMI cheque. Usually, both the collecting bank and paying bank leavy cheque return charges on their customers.

Clear Title

When the property in question is free from any doubt, is not disputed and is not having any encumbrances it is said to have a clear title.

Client Head (PM)

The 'Client Head' is the super user at the PM end. Only 'Client Head' has privileges to perform actions like create GAH users, modify users, suspend users, unlock, log-off users, reset the login password of users, set risk limits & take action on client bids etc. Only one user is possible in every PM environment.

Co-borrower

A person who applies for any loan with the primary borrower and takes on the responsibility for repayment of the debt. This is done to improve the eligibility for loan and simultaneously mitigating the risk of banks who can exercise the option of recovery from both parties- jointly as well as severally.

Co-Branded Card

It is a special type of credit card which is sponsored by both the credit card issuing company and the participating retail company or vendor. Co-branded credit card carries special deals and savings from the participating merchants.

Collateral

An asset pledged to a lender to guarantee repayment. Collateral could include savings, bonds, insurance policies, jewelry, property or other items that are pledged to pay off a loan if payments are not made according to the contract. Collateral is not required for unsecured credit card accounts.

Collected Balance

The balance in a deposit account, not including deposited items that have not yet been paid, or collected. See also Glossary term, "account balance." It is also known as cleared balance.

Combined Balance

Any combination of balances from linked accounts, such as savings, current and CDs. Can be used to meet the balance required to waive the monthly fee on some accounts.

Commercial Real Estate

commercial real estate is defined as "fund based and non-fund based exposures secured by mortgages on commercial real estates (office buildings, retail space, multi-purpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction etc.)"

Commitment Fee

It is an interest, which is charged on a loan applicant if he doesn't withdraw the sanctioned loan within a stipulated time period.

Common Areas

Areas such as staircase, lifts, sanitation ducts, electricity ducts, air-conditioning ducts etc. kept aside for common use by the property owners. This area is generally divided proportionately in relation to the size of property and charged accordingly.

Compound Interest

Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. The more frequently interest is compounded, the higher the effective rate. In India interest on loans and advances is compounded on monthly basis as per RBI order.

Consolidation Loan

If you owe money to several creditors, you can combine your payments and balances into a single account with one creditor. This can be done in several ways. For example, you can transfer several high interest credit card balances onto one card with a lower rate. If you own a home, you can consolidate your debt with a low-interest home equity loan. Or, you can get a loan specifically designed for this purpose.

Contact Point Verification

This refers to contact by bank staff on the phone numbers / address provided by the customer to establish correctness of the contact points. CPV is an important parameter in banks and a negative verification can lead to decline of the banking facilities sought.

Contract

This represents the rate of change of duration. It is the difference between actual price of a bond and the price estimated by modified duration.

Convexity

This represents the rate of change of duration. It is the difference between actual price of a bond and the price estimated by modified duration.

Conveyance

It is the process of legally transferring the ownership of interest in land.

Co-sign

To sign a credit agreement with someone and agree to share the debt with that person or assume the debt if the other person defaults and doesn't pay.

Co-signer (Co-obligant)

A co-signer is a person who signs a loan or credit card with the primary applicant, pledging to be responsible for repaying the loan or debt in the event the applicant is unable.

Cost Income Ratio (Efficiency Ratio)

The cost income ratio reflects the extent to which non-interest expenses of a bank make a charge on the net total income (total income - interest expense). The lower the ratio, the more efficient is the bank. Formula : Non interest expenditure / Net Total Income * 100.

Coverage Ratio

Equity minus net NPA divided by total assets minus intangible assets.

CRAR (Capital to Risk Weighted Assets Ratio)

Capital to risk weighted assets ratio is arrived at by dividing the capital of the bank with aggregated risk weighted assets for credit risk, market risk and operational risk. The higher the CRAR of a bank the better capitalized it is.

Credit Appraisal

This is the process for evaluating credit worthiness of any loan proposal. This helps establish the risks involved in the proposal and debt servicing capacity of the borrower. A wide range of criteria viz. age of borrower, credit score, existing loan obligations, nature / sources / stability of income etc. are taken into account. Credit History of the person is an important criteria for sanction of credit.

Credit Available

The amount of unused credit that is available. Your credit available is your outstanding balance subtracted from your total credit line. For example, if your credit line is Rs.50,000 and you have an outstanding balance of Rs.40,000, your credit available is Rs.10,000, which means that you have Rs.10,000 of credit left that you can use to make purchases with your credit card.

Credit Bureau(Credit Information Company)

A credit bureau is a company that collects and shares information about how you manage your credit. Many banks and credit issuers regularly update the credit bureaus about your payment habits and how much money you owe. Potential creditors may check your credit report when you apply for a loan or a credit card. Reporting to at least one Credit Bureau is mandatory in India.

Credit Card Debt

The total unpaid balances on all of your credit cards (not to be confused with the minimum amount you owe each month).

Credit Criteria

Factors used by lenders to rate the credit worthiness or ability to repay debt. They may include the following : income, amount of personal debt carried, number of accounts from other credit sources and credit history. A lender is free to use any credit-related information in approving or denying a credit application

Credit Enhancement

These are the facilities offered to an SPV to cover the probable losses from the pool of securitized assets. It is a credit risk cover given by the originator or a third party and meant for the investors in any securitization process.

Credit History

A financial profile of any person created by credit rating agencies based on how he repays his bills, clears his debt and the amount a person owes to various credit card companies and other lenders.

Credit Limit

It is the maximum amount of money one can draw on his account based on prior sanction or approval from the bank. Borrowing or drawing limit fixed by a bank for a customer depending on his credit history, repaying capacity and relationship with bank.

Credit Management

The way you handle the money you borrow from banks or credit issuers. A good credit management will ensure optimum utilization of borrowed funds and meet repayment obligations on time.

Credit Report

A credit report is a record of all of the information that credit bureau have collected about the way you've managed your finances over the last 5 years. It is the official record of how you pay the money you owe to your creditors. The information on your report can either qualify or disqualify you from obtaining credit cards, mortgages, loans etc. An individual can obtain credit report on himself from the credit bureau on payment of a fee.

Credit Risk

The risk that a party to a contractual agreement or transaction will be unable to meet its obligations or will default on commitments. Credit risk can be associated with almost any financial transaction. BASEL-II provides two options for measurement of capital charge for credit risk

  1. Standardised Approach (SA) : Under the SA, the banks use a risk-weighting schedule for measuring the credit risk of its assets by assigning risk weights based on the rating assigned by the external credit rating agencies.
  2. Foundation IRB (FIRB) : The bank estimates the Probability of Default (PD) associated with each borrower, and the supervisor supplies other inputs such as Loss Given Default (LGD) and Exposure At Default (EAD). The IRB approach, on the other hand, allows banks to use their own internal ratings of counterparties and exposures, which permit a finer differentiation of risk for various exposures and hence delivers capital requirements that are better aligned to the degree of risks. The IRB approaches are of two types :
    1. Foundation IRB (FIRB) : The bank estimates the Probability of Default (PD) associated with each borrower, and the supervisor supplies other inputs such as Loss Given Default (LGD) and Exposure At Default (EAD).
    2. Advanced IRB (AIRB) : In addition to Probability of Default (PD), the bank estimates other inputs such as EAD and LGD. The requirements for this approach are more exacting. The adoption of advanced approaches would require the banks to meet minimum requirements relating to internal ratings at the outset and on an ongoing basis such as those relating to the design of the rating system, operations, controls, corporate governance, and estimation and validation of credit risk components, viz., PD for both FIRB and AIRB and LGD and EAD for AIRB. The banks should have, at the minimum, PD data for five years and LGD and EAD data for seven years. In India, banks have been advised to compute capital requirements for credit risk adopting the SA.

Credit Risk Mitigation

Techniques used to mitigate the credit risks through exposure being collateralised in whole or in part with cash or securities or guaranteed by a third party.

CRR

Cash reserve ratio is the cash parked by the banks in their specified current account maintained with RBI.

Credit-worthy

You are judged to be qualified to have credit.

Current Account

An account used for commercial purpose. It attracts no rate of interest and is generally charged by the bank with maintenance charges. There is no limit to the number of transactions in this type of account.

Current Exposure Method

The credit equivalent amount of a market related off-balance sheet transaction is calculated using the current exposure method by adding the current credit exposure to the potential future credit exposure of these contracts. Current credit exposure is defined as the sum of the positive mark to market value of a contract. The Current Exposure Method requires periodical calculation of the current credit exposure by marking the contracts to market, thus capturing the current credit exposure. Potential future credit exposure is determined by multiplying the notional principal amount of each of these contracts irrespective of whether the contract has a zero, positive or negative mark-to-market value by the relevant add-on factor prescribed by RBI, according to the nature and residual maturity of the instrument.

Custodian

An entity, usually a bank that actually holds the receivables as agent and bailee of the trustee.

Custodial Account

An account created for the benefit of a minor with an adult as the custodian.

Daily Periodic Rate

The interest rate factor used to calculate the interest charges on a daily basis. The factor is computed by dividing the yearly rate by 365 days.

Debit Card

A plastic card issued by a Bank for cash withdrawal from a/c(s) through ATMs and payments at point of sale for purchases made. Debit Card denotes immediate debit to the customer's account.

Debt

An amount of money you owe to banks or credit issuers. More specifically, it is the amount of money that you have borrowed.

Debt Ratio / Debt Burden

An amount of money you owe to banks or credit issuers. It is the percentage of your income that goes to paying your debts every month. Debt ratio usually gives a clear picture of your overall financial well-being. To calculate your debt ratio, first add up all your monthly income including take-home pay (after taxes). Then add up all your monthly payments for interest bearing loans and accounts, such as mortgages, student loans, credit cards and car loans. If you rent your home, include that amount, but do not include utilities and telephone charges because they can vary on a monthly basis. Finally, divide your monthly payments by your income. Multiply the result by 100 and that number is your debt ratio percentage.

  • A low ratio is under 20%, which means that you are in good financial health and are doing a good job of managing your money.
  • A moderate ratio is between 21% and 40%. This means that you should look carefully at your monthly payments and start decreasing your overall level of debt, including credit cards.

A high debt burden is over 40%. You should immediately stop accumulating debt and start looking for ways to decrease your debt or increase your income.

Dedicated URL ndsind.com

Dedicated URL is a secure site, i.e., https// accessible only through deployment of requisite digital certificates and tokens (for non-repudiation of transactions). The issuance and management of digital certificates and security tokens would be the responsibility of the PM as part of GAH creation and activation process. Regular renewals thereof would also be the PM's responsibility.

Default

Failure to repay a loan according to the agreed upon terms.

Deferred Payment

Payments put off to a future date or extended over a period of time. Interest will usually still accumulate during deferment.

Deferred Tax Assets

Unabsorbed depreciation and carry forward of losses which can be set-off against future taxable income which is considered as timing differences result in deferred tax assets. The deferred Tax Assets are accounted as per the Accounting Standard 22.

Deferred Tax Liabilities

Deferred tax liabilities have an effect of increasing future year's income tax payments, which indicates that they are accrued income taxes and meet definition of liabilities.

Derivative

derivative instrument derives its value from an underlying product. There are basically three derivatives

  1. Forward Contract : A forward contract is an agreement between two parties to buy or sell an agreed amount of a commodity or financial instrument at an agreed price, for delivery on an agreed future date. Future Contract- Is a standardized exchange tradable forward contract executed at an exchange. In contrast to a futures contract, a forward contract is not transferable or exchange tradable, its terms are not standardized and no margin is exchanged. The buyer of the forward contract is said to be long on the contract and the seller is said to be short on the contract.
  2. Options : An option is a contract which grants the buyer the right, but not the obligation, to buy (call option) or sell (put option) an asset, commodity, currency or financial instrument at an agreed rate (exercise price) on or before an agreed date (expiry or settlement date). The buyer pays the seller an amount called the premium in exchange for this right. This premium is the price of the option.
  3. Swaps : Is an agreement to exchange future cash flow at pre-specified Intervals. Typically one cash flow is based on a variable price and other on affixed one.

Delinquency

When loan payments are not paid according to the terms of the agreement / promissory note. Late fees are often levied on delinquent accounts.

Deposit

Money placed in a customer's account at a Bank / Financial Institution.

Deposit at Call

Receipts issued to customers for amount deposited and repayable on demand. A facility normally extended for payment of earnest money deposits in tenders.

Depreciation

Depreciation means a decline in the value of capital asset. It represents a cost of ownership and the consumption of an asset over time.

Detailed Statement

The detailed statement of account depicts the details of the transactions in the account (ie. Loan disbursal, EMI credit, interest debit, unpaid return of EMI, penal interest debit, if any, etc.).

Digital Certificates and e-tokens (PM)

Digital certificates are digital signatures to be obtained by PM from any Government Recognized Certifying Authority designated by RBI, on behalf of GAH. For added security, the certificates need to be installed in an e-token as per specifications approved. The digital certificate and token specifications needs to be SHA 2 (2048 bit) compliant. Without the Digital certificate and e-token, the GAH cannot log in to the NDS OM web based module. The Primary member will be responsible for obtaining / renewal and intimating revocation to RBI / CCIL of the Digital Certificate for such GAH users.

Disclosure

Information pertaining to the account services, fees and regulatory requirements.

Disclosure Statement

A disclosure statement details the actual cost of a loan, including all estimated interest costs and loan fees. For credit card accounts, this information may be found in the Card member Agreement.

Disposable Income

Disposable income is the amount of income left after deductions such as income tax, pension contributions and personal insurance. It is often known as 'take home pay' - the actual pay a worker receives.

Documentation

The legal or other papers to be signed and presented during the loan process. It is also called the loan papers.

Dormant Account (In operative account)

A bank account in which there have not been any transactions for two years.

Doubtful Asset

An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. A loan classified as doubtful has all the weaknesses inherent in assets that were classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, - on the basis of currently known facts, conditions and values - highly questionable and improbable.

Down Payment

The amount, which has to be paid by the borrower upfront while taking a loan. This amount is generally 10%-15% of the total fund required. It is also called the margin amount or margin money.

Draft

A written, signed and dated order from one Branch of a Bank to another , to pay a sum of money to a specific party.

Drawee

The person or entity on whom a draft / bill is drawn by the drawer.

Drawer

The party who draws or issues the draft / bill. In a Letter of Credit it is the Beneficiary. The person who makes or draws a bill of exchange or cheque is called drawer.

Due Date

The day a payment is due to a payee / creditor. After that date, a late fee can be charged, the payment can be recorded as late, and the account considered overdue / delinquent.

Duration

Duration (Macaulay duration) measures the price volatility of fixed income securities. It is often used in the comparison of interest rate risk between securities with different coupons and different maturities. It is defined as the weighted average time to cash flows of a bond where the weights are nothing but the present value of the cash flows themselves. It is expressed in years. The duration of a fixed income security is always shorter than its term to maturity, except in the case of zero coupon securities where they are the same.

Early Repayment Charge (Prepayment charge)

Charge that banks and financial institutions levy on borrowers when they prepay the loan amount before the end of loan tenure. Early repayment charge is also called prepayment penalty.

Early Repayment Charge (Prepayment charge)

Charge that banks and financial institutions levy on borrowers when they prepay the loan amount before the end of loan tenure. Early repayment charge is also called prepayment penalty.

Electronic Clearing Service (ECS)

Electronic Clearing Facility : An inter bank arrangement where by a customer can give instructions to his bank where he holds a current or savings account to pay the monthly installments of payments due on loans / credit cards held with another bank.

Electronic Clearing Service (ECS) Credit

ECS Credit is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment.

ECS Credit can be utilised for payments like interest / dividend etc. in the accounts maintained with other banks by another bank.

Electronic Clearing Service (ECS) Debit

ECS Debit is used for raising debits to a number of accounts of consumers / account holders for crediting a particular institution.

It is a scheme under which an account holder with a bank can authorise an ECS user to recover an amount at a prescribed frequency by raising a debit in his account. The ECS user has to collect an authorisation, which is called ECS mandate for raising such debits. These mandates have to be endorsed by the bank branch maintaining the account.

ECS Debit is normally used for collections, which include payment of utility bills (electricity, telephone), collection of taxes etc.

Electronic Funds Transfer (EFT)

Any transfer of funds initiated by electronic means, such as an electronic terminal, telephone, computer, ATM or magnetic tape.

EMI

This refers to the Equated Monthly Installment (EMI) to be paid to the Bank towards the loan taken by the borrowers on a monthly basis. The EMI comprises of Interest and Principal component.

EMI Due date

The payment due date assigned for the loan account to recover the EMI.

E-Payment

On line payment system that facilitates payment online from the customer's account.

Expired Card

A credit card whose validity date has passed is an expired credit card.

First Loss Facility

First level of credit enhancement offered to an SPV as part of the process in bringing the securities issued by SPV to investment grade.

Fiscal Year

A fiscal year is a 12-month accounting period used by any company and it does not necessarily follow the calendar year. India fiscal year is April to March.

Fixed Deposit

A deposit of funds in a bank under an agreement stipulating that the funds must be kept on deposit for a stated period of time at a predefined interest rate.

Fixed Rate

Also called the fixed interest rate, it is a fixed amount of interest, which is chargeable for a specified duration or for the entire tenure of the loan.

Floating Rate

Floating rate or variable interest rate as it is also called doesn't remain fixed for the entire tenure of the loan. It varies according to the market conditions. This rate is linked to an external, market determined benchmark e.g. LIBOR. The lending is expressed with a spread above or below the benchmark rate. Repricing takes place after a predetermined period say, 6 months when the lending rate will be revised with reference to the benchmark rate as on that day.

Floor Limit (Credit Card)

Floor limit is the maximum amount; credit card brands like Visa and MasterCard have set forth for a single transaction for specific types of merchants, outlets and branches. An authorization is required, usually via a phone call to exceed the floor limit.

Foreclosure

Foreclosure is a legal procedure whereby property pledged as security for a debt is sold by the lender to pay the debt in the event of default in repayment.

Foreign Currency Convertible Bond

A bond issued in foreign currency abroad giving the investor the option to convert the bond into equity at a fixed conversion price or as per a pre-determined pricing formula.

Fraudulent Transaction (Credit Card)

A fraudulent credit card transaction is one in which the rules and regulations are not properly followed. Generally such transactions are unauthorized by credit card holders and involve a lost, stolen, fabricated, counterfeit and fraudulent processing of a credit card.

Fraud

Frauds have been classified as under, based mainly on the provisions of the Indian Penal Code

  1. Misappropriation and criminal breach of trust.
  2. Fraudulent encashment through forged instruments, manipulation of books of account or through fictitious accounts and conversion of property.
  3. Unauthorized credit facilities extended for reward or for illegal gratification.
  4. Negligence and cash shortages.
  5. Cheating and forgery.
  6. Irregularities in foreign exchange transactions.
  7. Any other type of fraud not coming under the specific heads as above.

Funding Limits Settings for Trades

Funding limits for trades represent the net aggregate settlement consideration amount up to which the concerned GAH can accumulate net long fund positions arising out of trades concluded on NDS-OM Web. This control shall be set for every GAH at the GAH user level. This limit constitutes a trading limit which shall get reinstated at the beginning of every trading session for every GAH.

Funding Volatility Ratio

Liquid assets [as above] to current and savings deposits - (Higher the ratio, the better)

Gilt Account Holders (GAHs)

Non-NDS members who have gilt account and current account with PMs are termed as GAHs. GAHs permitted by RBI include NBFCs, Provident Funds, Pension Funds, Mutual Funds, Insurance Companies, Cooperative Banks, Regional Rural Banks, Trusts, Corporates, Individuals etc.

Guarantee

A legal contract in which a person (termed as guarantor) agrees to become liable for repayment of loan taken by another person (termed as primary borrower) subject to the condition that the primary borrower must be legally bound to repay the debt.

Half Year

A period of 182 days if computed in days or six complete calendar months.

Held Till Maturity (HTM)

The securities acquired by the banks with the intention to hold them up to maturity.

Held for Trading (HFT)

Securities where the intention is to trade by taking advantage of short-term price / interest rate movements.

High Cost Deposit

Deposits accepted above card rate (for the deposits) of the bank.

Hire Purchase Price

The total money to be paid by the hirer under the hire-purchase agreement so as to complete the purchase of vehicle / machinery / goods etc.

Hirer

The person who takes the good on hire. If you purchase a car under hire-purchase agreement with a finance company, then you become the hirer.

Home Branch

The branch where customer has opened his account after due compliance with KYC norms.

Household Income

Income from all sources including wages, commissions, bonuses, dividends and interest of the members of a family.

Hybrid Debt Capital Instruments

In this category, fall a number of capital instruments, which combine certain characteristics of equity and certain characteristics of debt. Each has a particular feature, which can be considered to affect its quality as capital. Where these instruments have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation, they may be included in Tier II capital.

Hypothecation

Hypothecation is a charge that is created on movable asset as security for a debt. However, the ownership as well as possession of the asset is retained with the borrower.

Installment Loan

A loan that you promise to pay back by paying the same amount of money on a regular basis, usually monthly, for a specific period of time. (Eg : EMI loan).

Interest

Interest is the periodic amount credited / debited to a deposit / loan account by a Bank based on accepted agreed terms and conditions by the depositor and the Bank / the loanee and the Bank. Interest is calculated at a specified percentage of the principal amount.

Interest and Principal Certificate

A certificate issued for the loan confirming the details of the interest paid and principal repaid for a completed financial year.

Interest Category

This refers to the interest category of the loan that was sanctioned by the Bank. The interest category is allocated by the Bank based on the customer's request.

Variable (Floating)

The interest rates of the loans sanctioned under variable interest rate category will be changed during the tenure of the loan at specified intervals (see floating rate).

Semi Fixed

The interest rates of the loans sanctioned under semi fixed interest rate category remains fixed for the period 'stipulated' by the Bank in the terms and conditions of the agreement and / or sanction letter. After the said period, the loan will be re-priced as agreed to specified.

Fixed

The interest rates of the loans sanctioned under fixed interest rate category remain fixed throughout the tenure of the loan.

Interest Rate

The rate paid on an interest-bearing account, such as savings and term deposit, also the rate charged on a loan or line of credit. Different types of accounts and loans pay or charge different rates of interest. Interest rate is specified in percentage term also with periodicity of calculation (say 8% per annum)

Internal Capital Adequacy Assessment Process (ICAAP)

In terms of the guidelines on BASEL II, the banks are required to have a board-approved policy on internal capital adequacy assessment process (ICAAP) to assess the capital requirement as per ICAAP at the solo as well as consolidated level. The ICAAP is required to form an integral part of the management and decision-making culture of a bank. ICAAP document is required to clearly demarcate the quantifiable and qualitatively assessed risks. The ICAAP is also required to include stress tests and scenario analyses, to be conducted periodically, particularly in respect of the bank's material risk exposures, in order to evaluate the potential vulnerability of the bank to some unlikely but plausible events or movements in the market conditions that could have an adverse impact on the bank's capital.

Introductory Rate

The Annual Percentage Rate (APR) applied for a specific introductory period. The intro rate is usually lower than the regular APR. After the introductory period is over the rate switches to the regular APR.

Inward Remittances

Fund received through banking channels electronically or otherwise for credit to a designated identifiable account.

Joint Account

Any account owned by two or more people. Joint accounts can be operated jointly or by any one / more or survivor(s) or any other mode mandated by the accountholders. Change in the mode of operation requires the mandate of all accountholders.

Late Payment

Most charge and credit card bills list the date by which payments are due. If you miss the due date, the account is considered past due and you may be charged a late fee. Late payments may be reflected on your credit report. If you have paid late numerous times, it may be difficult to get additional credit.

Late Payment Charges (fee)

When the payment towards credit card bill is missed beyond due date or monthly installment towards repayment of a loan is delayed the Card Issuing Bank / financier collects the payment / installment along with the late payment charges.

The late payment charge is also known as the delayed payment charges or the overdue payment charges. The late payment charges are fixed at the time of signing the finance contract.

Ledger Folio

A set of 40 consecutive transactions in an account.

Legal Checks(Scrutiny of Title Deeds)

Before disbursal of a Home loan or loan against any property, usually the bank conducts a legal check on the property being offered as collateral. It involves screening all the documents etc related to the property. This is done to ensure that the property in question has a clear title.

Legal Judgment

A court verdict that requires a person to do something, such as pay a debt.

Leverage

Ratio of assets to capital.

Liability

Liability is the responsibility for a loan or credit account. When applying for credit, a borrower agrees to be liable for any charges to his or her account, including interest, fees and finance charges.

The liabilities are resources (sources of funds) which the business mobilizes to acquire assets for running income. Like assets, liabilities may also be of long term nature or short term nature.

LIBOR

London Inter Bank Offered Rate. The interest rate at which banks offer to lend funds in the interbank market.

Liquid Assets

Liquid assets consists of : cash, balances with RBI, balances in current accounts with banks, money at call and short notice, inter-bank placements due within 30 days and securities under "held for trading" and "available for sale" categories excluding securities that do not have ready market.

Linked Account

Any account linked to another account at the same financial institution so that funds may be transferred electronically between accounts, and, in some cases, the combined balance may be used to help meet the balance required to waive a monthly service charge on one of the accounts.

Loan Agreement

It is a written contract between the borrower and the bank or financial institution providing the loan. The loan agreement details the various aspects and terms and condition of the loan. The borrower must read the loan agreement carefully as once he enters into a legal contract with the bank by signing the loan agreement, the terms become binding.

Loan Disbursement

This is the second stage of the loan processing. Post sanction of the loan, the Bank conducts necessary verification and validation as per its credit criteria. The disbursal will be done on meeting the credit criteria set by the Bank.

Loan Sanction

This is the first stage of the loan processing. The 'Loan Sanction letter' (Arrangement letter) is a confirmation to the customer on the sanction of the loan facility.(see credit appraisal).

Loss Asset

A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. In other words, such an asset is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted although there may be some salvage or recovery value.

Mandate

The beneficiary communicates to the ECS user the details of his / her bank branch and account particulars. Such authorization form is called a mandate. The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility.

It is a letter of authority given by an account holder to his banker to allow certain named person to operate his / her account on his / her behalf.

Margin Amount

Margin Amount is the difference between the total cost of a project and the sanctioned loan amount.

Market Discipline

Market Discipline seeks to achieve increased transparency through expanded disclosure requirements for banks.

Market Value

The value or price of the property prevailing in the market.

Market Liability Ratio

Inter-bank and money market deposit liabilities to Average Total Assets

Market Risk

Market risk is defined as the risk of loss arising from movements in market prices or rates away from the rates or prices set out in a transaction or agreement. The capital charge for market risk was introduced by the BASEL Committee on Banking Supervision through the Market Risk Amendment of January 1996 to the capital accord of 1988 (BASEL I Framework). There are two methodologies available to estimate the capital requirement to cover market risks :

  1. The Standardized Measurement Method : This method, currently implemented by the Reserve Bank, adopts a 'building block' approach for interest-rate related and equity instruments which differentiate capital requirements for 'specific risk' from those of 'general market risk'. The 'specific risk charge' is designed to protect against an adverse movement in the price of an individual security due to factors related to the individual issuer. The 'general market risk charge' is designed to protect against the interest rate risk in the portfolio.
  2. The Internal Models Approach (IMA) : This method enables banks to use their proprietary in-house method which must meet the qualitative and quantitative criteria set out by the BCBS and is subject to the explicit approval of the supervisory authority.

Marketable Title

The title of a property, which is clear, and the owner of the property have proper authority and rights to transfer the same.

Maturity Date

Maturity date in respect of a fixed deposit account is the date on which the proceeds will become liable for payment by the Bank.

MICR Code

A unique 9-digit code assigned to each Bank branch by Reserve Bank of India to facilitate sorting in clearing of instruments using the Magnetic Ink Character Recognition Technology.

Minimum Amount Due / Minimum Payment

The smallest amounts you can pay by the due date and still meet the terms of your card agreement.

Minimum daily Balance

The lowest end-of-day balance in an account during a statement cycle. It is often required to be kept in an account each day to earn interest, avoid a service charge or qualify for special services.(also see average daily balance)

Modified Duration

Modified Duration = Macaulay Duration / (1+y/m), where 'y' is the yield (%), 'm' is the number of times compounding occurs in a year. For example if interest is paid twice a year m=2. Modified Duration is a measure of the percentage change in price of a bond for a 1% change in yield.

Money Laundering

Money laundering means acquiring, owning, possessing or transferring any proceeds (or money) of crime or knowingly entering into any transaction related to proceeds of the crime either directly or indirectly or concealing or aiding in the concealment of the proceeds or gains of crime, within or outside India. It is a process for conversion of money obtained illegally to appear to have originated from legitimate sources.

Money Order

A financial instrument, issued by a bank or other institutions like post office, allowing the individual named on the order to receive a specified amount of cash on demand. Often used by people who do not have saving accounts.

Monopoly

Monopoly is a form of market structure where there is solely one company that provides a particular product or service, dominating that market and generally exerting powerful control over it.

Monthly Statement

A monthly report prepared by a lender about the transaction carried on a particular loan account, outstanding balances, current balances, fees and other charges, minimum payments (if applicable) and other details. This written document is mailed to the borrower.

Mortgage

Mortgage is a written constructive pledge of property that is used as security for the repayment of a loan.

Mortgage Back Security

A bond-type security in which the collateral is provided by a pool of mortgages. Income from the underlying mortgages is used to meet interest and principal repayments.

Multicity Cheque

Cheque issued by a customer under a pre - approved arrangement with the Bank whereby the Bank agrees to pay them at designated centres and branches in the country.

National Clearing Cheque

Those cheque that are drawn on other banks and payable at major cities of the country (as Per RBI list of centres participating in national clearing) are called as National Clearing Cheque.

National Electronic Funds Transfer(NEFT)

An Electronic Payment System in which payment instructions between banks are processed and settled on deferred net settlement (DNS) basis, which settles transactions in batches at fixed times during the day.

RBI acts as the service provider and transfers the credit to the other bank's account. Customer can send funds from any bank branch to other bank-branches, which have IFS Code, and joined in NEFT network. NEFT is enabled only in specific bank branches across India. A list of these branches is available in the RBI website.

NDS OM Administrator (CCIL; NDS OM Admin)

The Administrator (CCIL) is the person who creates and activates the GAH in the web-based system on the request of the PM and also authorizes the employees of GAH (GAH Users created by PM) to access the system by generating login and password.

Net Interest Income (NII)

The NII is the difference between the interest income and the interest expenses.

Net Interest Margin

Net interest margin is the net interest income divided by average interest earning assets.

Net Non-Interest Income

The differential (surplus or deficit) between non-interest income and non-interest expenses as a percentage to average total assets.

Net NPA

Gross NPA - (Balance in Interest Suspense account + DICGC / ECGC claims received and held pending adjustment + Part payment received and kept in suspense account + Total provisions held).

Net Operating Profit

Operating profit before provision minus provision for loan losses, depreciation in investments, write off and other provisions.

Net Worth

Net worth is equal to all that you own less all that you owe. It is the total of all assets minus the total liabilities of an individual or company.

No Dues / NoObjection Certificate

A certificate issued on closure of the Loan / Overdraft account, where the Bank affirms that the dues have been paid towards loan / overdraft facility and also a confirmation that the Bank has no objection in releasing the charge on the security or other banks considering sanction of loan to the person concerned.

NominationFacility

Section 45ZA of the Banking Regulations Act, 1949 provides that a depositor or depositors of a banking company may nominate one person to receive the deposit in the event of the death of the depositor(s). Nomination facility is also provided for articles in safe custody with banks and in safe deposit lockers.

Non Performing Assets (NPA)

An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank.

Non-bank ATM (white lablled ATM)

An ATM or cash machine that does not prominently display a bank's name or logo. Fees generally apply to cash withdrawals at non-bank ATMs. Non-bank ATMs generally do not accept deposits. In India Non-banks ATMs are not permitted.

Non-Home Branch

The other networked branches of a Bank under the Core Banking system that facilitate conducting of transactions to a customer having his account with a 'Home' branch.

Non-performing Assets (NPA)

Any loan account that has been classified by a bank or financial institution as sub-standard, doubtful or loss assets in terms of asset classification norms of RBI.

Non-taxable Income

Money you earn that is not taxed by the Government. This money can come from several sources including disability pay or legal settlements due to personal injury.

Obligation of the Borrower

The things, which a borrower has to take, care of after taking the loan. These include proper repayment, providing the banks with post-dated cheque and following the terms written in the loan agreement carefully.

Off Balance Sheet Exposure

Off-Balance Sheet exposures refer to the business activities of a bank that generally do not involve booking assets (loans) and taking deposits. Off-balance sheet activities normally generate fees, but produce liabilities or assets that are deferred or contingent and thus, do not appear on the institution's balance sheet until and unless they become actual assets or liabilities.

Operating Profit before Provisions

Net of total income and total operating expenses.

Operational Risk

The revised BASEL II framework offers the following three approaches for estimating capital charges for operational risk :

  1. The Basic Indicator Approach (BIA) :This approach sets a charge for operational risk as a fixed percentage ("alpha factor") of a single indicator, which serves as a proxy for the bank's risk exposure.
  2. The Standardised Approach (SA) : This approach requires that the institution separate its operations into eight standard business lines, and the capital charge for each business line is calculated by multiplying gross income of that business line by a factor (denoted beta) assigned to that business line.
  3. Advanced Measurement Approach (AMA) : Under this approach, the regulatory capital requirement will equal the risk measure generated by the banks' internal operational risk measurement system. In India, the banks have been advised to adopt the BIA to estimate the capital charge for operational risk and 15% of average gross income of last three years is taken for calculating capital charge for operational risk.

Online Banking

A service that allows the account holder to access their account information and conduct a set of pre defined banking transactions, such as bill payment, fund transfer using the Internet facility. However, a customer needs to have Customer ID and a unique Net Banking Password in order to undertake this facility.

Outstanding Balance

The total amount that you owe on a credit card or other loan.

Outstanding Cheque

Outstanding cheque is issued by the company but not yet cleared by the bank. In preparing the bank reconciliation, it is deducted from the bank balance. The exception is an uncleared Certified cheque, which is not considered outstanding since both parties, the company and the bank, know about it and have subtracted it.

Outstation Cheque

Cheque deposited by the customer of a branch for credit to his / her account and not payable at Local clearing at the centre where the branch is situated.

Outward Remittances

Remittance of funds from the account maintained by a customer or separately on his instructions to another account with the same bank or another banks in the manner indicated by the customer (Demand drafts, electronic funds transfer, telegraphic transfers etc.). Banks may levy service charges for affecting the remittances.

Over the Credit LimitCredit Card)

When the amount you owe is more than the limit on your credit line. Any combination of purchases, cash advances, fees or finance charges may cause you to exceed your credit limit.

For example, you will be over the credit limit if you spend Rs.20,000 when you have Rs.10,000 of your credit line left. If you go over your credit limit, you will be charged an extra fee each month until the amount of money you owe is less than or equal to your credit line.

Overdraft

An overdraft occurs when you do not have enough available funds in your account to cover a cheque or other withdrawal, but the bank pays the items and overdraws your account.

Overdraft Protection

A service that allows a account to be linked to another account that helps provide protection against returned items or overdrafts. When your checking account does not have sufficient available funds to cover a cheque, funds are automatically transferred from the available balance in the linked account to cover the cheque. Choices can include using a savings account, credit card or a line of credit account as the linked account to provide protection.

Overlimit Fees

Whenever a credit card holder crosses his credit limits an overlimit fees is charged on his account.

Part-prepayment

Making Partial prepayment towards the Principal of the loan account.

Part-prepayment fee

The quantum of charges levied at the time of Part pre-payment.

Passbook

Book issued by a bank or financial institutions to record deposits, withdrawals, and interest earned in a savings account.

Past Due

The status of an account when the minimum payment has not been received by the due date.

Payee(Drawee)

The person who receives a payment. This often applies to cheque. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer or drawer.

Payer(Drawer)

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

Penal interest

Additional interest, over and above the contracted rate, that is levied by lenders on amounts that remain unpaid beyond the due date and / or non-adherence to the terms of sanction.

Penalty on Premature Withdrawal of Fixed Deposit

It is a penalty on the premature breakage of a Fixed Deposit. If a customer keeps a deposit with a bank for a fixed tenure and in the event of the depositor withdrawing the deposit before the due maturity date, the banks can charge a Penalty sum on premature withdrawal.

Periodic Rate

The interest rate described in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.

Personal Identification Number (PIN)

Personal identification number (PIN) is a secret number given to an account holder to be used when they put their credit card or cash card into an automatic teller machine (ATM). If the number they use is correct they will be allowed to access their account.

Plinth Area

The external area of the whole building including the balconies but excluding the common area in apartment blocks, commercial buildings and spaces.

Point of Sale(POS)

Point of Sale refers to the location at which a payment of a card transaction occurs, usually by way of a device such as a credit card terminal or cash register.

Post Dated Cheque (PDCs) Mode of Repayment

A payment mode wherein the customer provides Post Dated Cheque (PDCs) for the repayment of the loan dues.

Postal Charges

Charges for dispatch of instruments for collection / remittances on behalf of a customer. Normally postal charges are recovered from instrument on actual basis.

Posting Date

The date that a purchase, cash advance, fee, service charge or payment is recorded on your charge or credit account.

Power ofAttorney

It is an instrument of law empowering a specified person or persons to act for and in the name of the person executing it. The person for whom the act is done or who is so represented is called principal. The person who is so authorized to do or represent is called agent. It may be either notarized or registered depending on the transaction.

Primary Member (PM)

A member of NDS-OM (having Constituent Subsidiary General Ledger (CSGL) and current account with RBI) who authorizes their Gilt Account Holders to have direct access to the web enabled NDS-OM system.

Pre-Approved Credit

Credit card or a line of credit that is approved based upon available data without further information supplied by the potential Card member.

Pre-Closure

Closure of the loan account prior to the tenure fixed for the account.

Prepayment

When a portion or the entire amount of the principal of a loan is paid before it is due.

Previous Balance

The total balance due at the end of the last billing cycle.

Price / Yield Range Settings for Trades

NDS-OM Web shall validate that the price / yield of every order placed by a GAH user is within the range specified by the Primary Member vis-a-vis the last traded price / yield for the concerned security in the specific market.

Prime Lending Rate

The minimum short-term interest rate charged by commercial banks to their most creditworthy clients. It is a reference interest rate used by banks for its lending purposes.

Note : The Benchmark Prime Lending Rate (BPLR) used by banks for loan pricing till June 30, 2010 was different from this as BPLR was a reference rate based on average cost).

Prime Rate

The Prime Rate is the rate on which each bank fixes its own prime lending rate for advances.

Principal Outstanding

The balance principal amount in the loan (i.e. Loan amount disbursed less Principal repaid till date) taken from the Bank.

Processing Date (Card Transaction)

It is the date on which the transaction is processed by the acquiring bank.

Processing Fee

The charges colleted by the Bank to process the customer's loan application.

Profit After Tax (PAT)

Profit before tax - provision for tax.

Profit Before Tax (PBT)

(Net operating profit + / - realized gains / losses on sale of assets)

Promissory Note

A promissory note is a binding legal document that a borrower signs to obtain a loan. It lists your rights and responsibilities under the loan agreement, including how and when the loan must be repaid. Rights and responsibilities for credit card accounts are listed in the Card member Agreement.

Property Tax

The tax levied by local corporations, municipal bodies on a property. This tax has to be paid by the legal owner of the property.

Provisional Interest andPrincipalCertificate

A certificate issued informing the 'projected' interest payment and principal repayment for the loan account for the upcoming financial year based on the current financial year. This helps borrower in tax planning.

Real Time Gross Settlement (RTGS)

RTGS is a system through which electronic instructions can be given by banks to transfer funds from their account to the account of another bank. The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer between banks takes place on a 'real time' basis. Therefore, money can reach the beneficiary instantaneously and the beneficiary's bank has the responsibility to credit the beneficiary's account within two hours.

Recurring Billing

In recurring billing the credit card holder authorizes a merchant or vendor to charge his credit card on a regular basis.

Reference

A person who can vouch for your reliability, employment history or other factor needed to determine your creditworthiness / employability.

Refinancing

Repayment of existing loan by a fresh loan, usually on better terms and conditions. In case of loans secured through mortgage of property etc., the same asset is taken over as security. Banks also refinance their loans to certain category of borrowers through specified refining agencies which provide refinance with matching repayment schedule.

Repayment

The process of returning of the borrowed loan amount. The repayment has to be made for the entire tenure of the loan amount. Based on fixed or floating interest rates on the loan amount, the banks or financial institution decides on an EMI which has to be paid on or before a date mentioned in the loan agreement every month.

Repayment Holiday /Moratorium period

A specified period of time during which recovery of loan remains suspended under a mutual agreement between the lender and the borrower. Interest continues to be charged on the loan during this period.

Repayment Mode

It refers to the payment instruction given by the customer for the repayment of the loan dues. Cash, cheque, ECS and other electronic channels are the primary payment modes.

Repayment Schedule (Amortization Schedule)

The repayment schedule provides the details of the interest and principal components of the EMIs payable by the customer on a monthly basis.

Repo Rate

Repo Rate is the interest rate for secured overnight or short term financing involving the sale and repurchase of securities. It is basically the rate at which RBI lends to commercials banks for meeting the short term deficits. RBI varies Repo rate from time to time to achieve its monetary policy objectives.

Restructuring

A restructured account is one where the bank, grants to the borrower concessions that the bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments and rate of interest. It is a mechanism to nurture an otherwise viable unit, which has been adversely impacted, back to health.

Rests

Rests refers to the length of time between the dates on which the interest (on loans and deposits) is compounded. Eg : monthly, quarterly, half-yearly, yearly.

Retained Earnings

Profit after tax - dividend paid / proposed.

Return on Asset (ROA) - After Tax

Return on Assets (ROA) is a profitability ratio which indicates the net profit (net income) generated on total assets. It is computed by dividing net income by average total assets. Formula- (Profit after tax / Av. Total assets)*100

Return on Equity (ROE) - After Tax

Return on Equity (ROE) is a ratio relating net profit (net income) to shareholders' equity. Here the equity refers to share capital reserves and surplus of the bank. Formula- Profit after tax / (Total equity + Total equity at the end of previous year) / 2}*100

Returned Cheque

When you do not have enough available funds in your account (including any overdraft protection transfer from another account) to cover a cheque, the bank may decide not to pay the cheque and to return it to the payee. A returned item fee may be charged to your account.

Revalidation

Duly authenticated extension of the validity period for negotiation / payment of cheque / draft or a negotiable instrument.

Revaluation Reserves

Revaluation reserves are a part of Tier-II capital. These reserves arise from revaluation of assets that are undervalued on the bank's books, typically bank premises and marketable securities. The extent to which the revaluation reserves can be relied upon as a cushion for unexpected losses depends mainly upon the level of certainty that can be placed on estimates of the market values of the relevant assets and the subsequent deterioration in values under difficult market conditions or in a forced sale.

Reverse Mortgage

A financial product, which provides senior citizens with funds against their home equity. Senior citizens can get a regular amount monthly, quarterly or as a lump sum. They can live in their homes for their lifetime and after that banks can recover the amount by selling the property or if the heirs of the property want they can claim it by repaying the dues to the bank.

Revolving Credit

A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available again to use for another purchase or cash advance.

Reward Points(Cards)

A loyalty scheme that supplies benefits based upon the card's usage. Benefits are usually in the form of points that can be redeemed for gift vouchers, gift items or services, such as airline tickets, discounts on purchases or cash refunds. The credits accumulated toward these benefits are often a percentage of each purchase.

Risk Weighted Asset

The notional amount of the asset is multiplied by the risk weight assigned to the asset to arrive at the risk weighted asset number. Risk weight for different assets vary e.g. 0% on a Government Dated Security and 20% on a AAA rated foreign bank etc.

Safe Custody

Documents and articles placed with the Bank for safe keeping under mutually agreed terms and conditions and payment of fee / rent on a regular basis.

Sale deed

It is a legal document, which transfers the ownership of the property or objects for a mentioned price. Every sale deed has to be registered with appropriate authority.

Savings Account

An account maintained by a customer with a bank for the purpose of accumulating funds over a period of time. Only the account owner or a duly authorized agent may withdraw funds deposited in a savings account. It attracts a modest rate of interest, which is fixed by RBI and is considerably lower than the rates applicable on the Fixed Deposits. There is generally a limit on the number of transactions that can be done without attracting a charge.

Scenario Analysis

A method in which the earnings or value impact is computed for different interest rate scenario.

Second Loss Facility

Credit enhancement providing the second or subsequent tier of protection to an SPV against potential losses.

Secured Card

A credit card that is guaranteed by a cash deposit held in a special savings account or certificate of deposit. The deposit must remain in the account until the credit line is closed or the issuer decides security is no longer necessary. The credit line on the card is usually equal to the amount of the deposit. If the Card member defaults on the card, the issuer will apply the deposit toward the outstanding balance.

Secured Debt

Debt for which repayment is guaranteed through collateral property of equal or greater value than the amount of the loan. If you do not repay the loan, the issuer may take possession of the collateral. Collateral may be an asset such as a car or a home or, in the case of a secured credit card, a cash deposit held by the issuer. For example, a mortgage is a secured debt in which the home is collateral. If the person fails to repay the loan, the bank may take the home as payment.

Securitization

A process by which a single asset or a pool of assets are transferred from the balance sheet of the originator (bank) to a bankruptcy remote SPV (trust) in return for an immediate cash payment.

Security Documents

This refers to the list of original documents to be collected from the customer towards the security of the loan amount sanctioned / disbursed

Security Stock Balances Settings for Trades

Primary Members shall update the Security Stock Balances for each of their GAH. Once input, NDS-OM shall automatically update the security balances based on activity undertaken on NDS-OM Web on the same lines as that of NDS-OM. Adequacy of available free balances for each security shall be validated before accepting a sale order(s) for any security. If the balance is not adequate, the respective sale order shall be rejected.

Service Charges

Charges levied by a Bank for providing various banking services. (The Tariff Schedule for commonly availed banking services is displayed on the Branch Notice Board and on the Bank's Website.)

Simple Interest

Simple interest is calculated solely as a percentage of the principal sum from the date of the availment to the date of repayment (also see compount interest).

Single Order Limit (SOL) for Trades

SOL shall mean the maximum order quantity (in terms of face value) that can be placed by the concerned user through a single order.

Slippage Ratio

(Fresh accretion of NPAs during the year / Total standard assets at the beginning of the year)*100

SLR

Statutory liquidity ratio is in the form of cash (book value), gold (current market value) and balances in unencumbered approved securities.

Special Purpose Vehicle (SPV)

An entity which may be a trust, company or other entity constituted or established by a 'Deed' or 'Agreement' for a specific purpose.

Stamp Duty

It is the duty to be paid to appropriate authority on the different documents used in the loan process. Stamp duty varies from state to state and the stamp duty should be adequate enough so as to make the documents valid and enforceable.

Standing Instruction

Signed instructions given by a customer to his / her Bank to make regular transfer of funds for specified purposes and valid for the period indicated by the customer until the instruction is withdrawn.

Statutory Liquidity Ratio(SLR)

SLR is the portion that banks need to invest in the form of cash, gold or government approved securities. The quantum is specified as some percentage of the total demand and time liabilities of the bank and is set by the Reserve Bank of India (also see Cash Reserve Ratio).

Stop Payment

When you ask a bank not to pay a cheque or payment you have written or authorized. Stop payments are generally placed on lost or stolen cheques or on cheques related to disputed purchases. Banks usually levy charges for registering stop payment instructions.

Stored-Value Card

Stored-value card is a special type of credit card, which has a stored money value. Stored value card can be reloadable, in which case more money can be added to the stored value card and can be reused.

Stress Testing

Stress testing is used to evaluate a bank's potential vulnerability to certain unlikely but plausible events or movements in financial variables. The vulnerability is usually measured with reference to the bank's profitability and / or capital adequacy.

Subordinated Debt

Refers to the status of the debt. In the event of the bankruptcy or liquidation of the debtor, subordinated debt only has a secondary claim on repayments, after other debt has been repaid.

Substandard Assets

A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. Such an asset will have well defined credit weaknesses that jeopardize the liquidation of the debt and are characterised by the distinct possibility that the banks will sustain some loss, if deficiencies are not corrected.

Supervisory Review Process (SRP)

Supervisory review process envisages the establishment of suitable risk management systems in banks and their review by the supervisory authority. The objective of the SRP is to ensure that the banks have adequate capital to support all the risks in their business as also to encourage them to develop and use better risk management techniques for monitoring and managing their risks.

Surcharge

Surcharge is an additional charge imposed for a specific service, product or purpose. It is a fee charged on a card transaction by the acceptor to cover the additional cost of taking a card rather than cash or cheque.

Taxable Income

Any money you earn or receive - such as salary, bonuses or interest from investments - that can be taxed by the government. Taxable income is the Total Income net of permissible deductions.

Tenure of the Loan

The repayment period assigned for the account.

Total Tenure - The period for which the loan has been granted

Balance Tenure - The balance period for which the EMIs need to be paid. Personal loans, car loans, education loans have shorter tenures as compared to home loans. Some banks and financial institutions extend the loan tenure for an extra fee or a slight increase in interest rates.

Tenure of Fixed Deposit

It is the period for which a customer deposits a sum of amount with a Bank. This tenure is generally fixed and the customer cannot withdraw his deposit before the tenure expires. The amount can be withdrawn before the fixed tenure by paying pre-payment penalty.

Time deposit

An account for a fixed term with the understanding that the funds will remain on deposit until the end of the term. Penalties for early withdrawals may apply.

Total Income

Sum of interest / discount earned, commission, exchange, brokerage and other operating income.

Total Operating Expenses

Sum of interest expended, staff expenses and other overheads.

Trading Book

Investments in trading book are held for generating profits on the short term differences in prices / yields. Held for trading (HFT) and Available for sale (AFS) category constitute trading book.

Transaction AccountLinked HomeLoans

A special home loan that allows the customer to link a transaction account to his / her loan account. The interest is then calculated periodically on the loan outstanding less balance maintained in the transaction account. These loans help the customer reduce their interest payment by parking their extra liquidity in the linked account. Majority of the Home Loan players today offer this product under different names.

Transaction Date

The date a purchase is made or cash is withdrawn. Some companies assess interest from the transaction date, others from the posting date. (See processing date)

Transaction Fee

An extra charge for various credit activities such as using an ATM or receiving a cash advance.

Transactional' User (GAH)

These are GAH employees (GAH Users) who are authorized by PM to place, modify, cancel their bids, view status of their bids and view the limits set by the PM & along with the current utilization.

Transfer of Funds

A movement of funds from one account to another.

Travelers Cheque

Travellers' cheque - are issued through banks acting as sales agents, or sold directly to the public. The purchaser pays for the cheque in advance, and signs them twice - once when ordering the cheque and once when cashing them. The cheques are payable by the issuing company, sold in numerous foreign currencies, and are insured against loss or theft

Turnover Limits for Trades

Turnover limits represent the gross amount in face value terms computed by aggregating individual "buys" + "sells" orders inputted on behalf of a GAH across all its users. This value is expressed in consideration terms of the underlying security instrument and shall reflect the total aggregate value that can be undertaken by the GAH for that trading session. This control shall be set for every GAH at the user level. This limit constitutes a trading limit which shall get reinstated at the beginning of every trading session for every GAH;

Uncollected Funds

Refers to items deposited in an account that have not yet been collected, or paid, by the bank on which they were drawn.

Unsecured Debt

This is debt that is not guaranteed by collateral; therefore, no assets are committed in the event of default. If the issuer is unable to collect on the loan, its value is lost. Most credit cards are unsecured.

(As the Card member's promise is the only guarantee, credit card issuers require more information regarding income and credit history than with a secured loan.)

A loan where no collateral or security is given or charged to the lender. Unsecured lending is viewed as higher risk than secured lending and interest rates are generally higher to reflect this.

Valuation

Before disbursal of a loan against a property, usually the bank conducts a valuation check on the property being offered as collateral. This is done to find out the market value of the property. The value of the property will be a factor considered while granting the loan.

Value at Risk (VAR)

VAR is a single number (currency amount) which estimates the maximum expected loss of a portfolio over a given time horizon (the holding period) and at a given confidence level. VaR is defined as an estimate of potential loss in a position or asset / liability or portfolio of assets / liabilities over a given holding period at a given level of certainty. The following are the three main methodologies used to calculate VaR : Parametric Estimates - Estimates VaR using parameters such as volatility and correlation. Accurate for traditional assets and linear derivatives, but less accurate for non linear derivatives. Monte Carlo simulation- Estimates VaR by simulating random scenarios and revaluing positions in the portfolio. Appropriate for all types of instruments, linear and nonlinear. Historical simulation- Estimates VaR by reliving history; takes actual historical rates and revalues positions for each change in the market

Variable Expenses

Variable expenses are those that can change from month to month. Variable expenses include necessities that can be reduced (such as food and utilities) and non-essentials that could be eliminated (e.g., long distance telecall charges, cable, magazine subscriptions, etc). Reducing these expenses is the simplest step in getting control of your finances.

Variable Interest Rate

An interest rate that is not fixed but can vary within a pre-fixed band by the loan-issuing bank. For example some credit card issuers charge variable Interest rate on the outstanding un-paid balance depending upon the credit score or credit behavior/ payment pattern of the customer.

An interest rate that is not fixed but can vary within a pre-fixed band by the loan-issuing bank. For example some credit card issuers charge variable Interest rate on the outstanding un-paid balance depending upon the credit score or credit behavior/ payment pattern of the customer. (See floating rates)

Venture Capital Fund

A fund set up for the purpose of investing in startup businesses that is perceived to have excellent growth prospects but does not have access to capital markets.

'View Only' User (GAH)

These are GAH employees (GAH Users) who have been provided with 'View only' rights by the PM. These employees have an aggregated view of all the activities and risk limits of all transactional users under the respective GAH. It also includes view of issuance details and aggregate view of bidding and allocation details of all transactional users.

Wire Transfer

An electronic payment service for transferring funds by wire (for example, through the Federal Reserve Wire Network or the Clearing House Inter Bank Payments System).

Withdrawal

A removal of funds from an account.

Yield to Maturity (YTM) or Yield

The Yield to maturity (YTM) is the yield promised to the bondholder on the assumption that the bond will be held to maturity and coupon payments will be reinvested at the YTM. It is a measure of the return of the bond.

Zero Balance

Zero balance is when the total outstanding balance is paid and there are no new charges or cash advances during a billing cycle.

Zero Liability Protection

A bank guarantee. If your card is lost or stolen, you may not be responsible for unauthorized purchases made with your card if you report the theft promptly. The Zero Liability Protection program is free and automatically available on all bank consumer credit cards.

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