BANKING TERMS

1. Bank: A bank is a commercial institution which deals with money and credit.

2. Co-operative banks: Co-operative banks are a group of financial institutions organised under the provisions of the Co-operative Societies Act of the states.

3. Commercial banks: The banks which perform all kinds of banking business and generally finance trade and commerce are called “commercial banks.”

4. Exchange banks: Banks which deal in foreign exchange and specialise in financing foreign trade are called “exchange banks.”

5. Central bank: Central bank is the apex institution which controls, regulates and supervises the monetary and credit system of the country.

6. Industrial banks: Bank which provide long-term credit to industries for the purchase of machinery, equipts etc., are known as “industrial banks.”

7. Demand deposits: Deposits which can be withdrawn by the depositor at any time by means of cheques are known as “demand deposits.”

8. Time deposits: Deposits which are repayable after the expiry of a specific period are known as “time deposits.”

9. Cash credit: It is a type of loan which is given to the borrower against his current assets, such as shares, stocks, bonds etc.

10. Branch banking: It is banking system under which a big bank as a single institution and under single ownership operates through a network of branches spread all over the country.

11. Unit banking system: It is a system under which a single bank operates through a single office.

12. Chain banking: Chain banking refers to the system in which two or more banks are brought under common control by a device other than the holding company.

13. Group banking: Group banking refers to a system of banking in which two or more banks are directly controlled by a corporation or an association or a business trust.

14. Mixed banking: When the commercial banks provide both short-term and longterm finance to commerce and industry, it is called “mixed banking.”

15. Credit creation: The power of commercial banks to expand deposits through loans, advances and investments is known as “credit creation.”

16. Scheduled banks: Scheduled banks are those commercial banks which are included in the second schedule of the Reserve Bank of India Act, 1934 and have a paid-up capital and reserves of not less than Rs. 5 lakhs.

17. Non-scheduled banks: Non-scheduled banks are trade banks. Their paid-capital and reserves less than Rs. 5 lakhs and are not included in the second schedule of the Reserve Bank of India Act, 1934.

18. Public sector banks: These are owned and controlled by the Government.

19. Private sector banks: These banks are owned by the private individuals or corporations but not by the Government or co-operative societies.

20. NABARD: National Bank for Agriculture and Rural Development is essentially a development bank for promoting agricultural and rural development.

21. Regional rural banks: Regional Rural Banks are a new category of banks set up with the objective of increasing the local involvement of banks to meet the credit requirements of weaker sections and small entrepreneurs in the rural areas.

22. Land Development Bank: It is a co-operative bank which provides long-term agricultural credit.

23. Indigenous banker: An indigenous banker is an individual or private firm receiving deposits and dealing in hundies or lending money.

24. Money-lender: The money-lenders are those whose primary business is money lending.

25. Development banks: A development bank is a multi-purpose financial institution which is concerned mainly with providing financial assistance to business units.

26. Money market: Money market is the market in which short-term funds are borrowed and lent.

27. Capital market: Capital market is the market in which medium-term and long-term bonds are borrowed and lent.

28. Bill market: Bill market refers to the market for short-term bills generally of three months duration.

29. Treasury bill: A treasury bill is a kind of financial bill or promissory note issued by the Government to raise short-term funds.

30. Commercial paper: Commercial paper is a short-term negotiable money market instrument.

31. Discount and Finance House of India: Discount and Finance House of India is set up in 1988 as the apex body in the Indian market for developing a secondary market for money instruments.

32. Certificate of Deposit: It is a money market instrument introduced in India in June 1989, with a view to further widen the range of money market instruments and to give investors flexibility in the development of their short-term funds.

33. Lead bank: The Lead bank is the bank which adopts a district and integrate its schemes with district plans for an effective distribution of credit, along with the expanded banking facilities as per the local needs.

34. State co-operative bank: It is the apex institution in the three-tier co-operative credit structure, operating at the district level.

35. Central co-operative bank: It is in the middle of the three-tier co-operative credit structure, operating at the district level.

36. Derivative deposits: Deposits which arise on account of granting loans or purchase of assets by a bank are called “derivative deposits.”

37. Primary deposits: Deposits which arise when cash or cheques are deposited by customers in a bank are called “primary deposits.”

38. Innovative banking: Innovative banking implies the application of new techniques, new methods and novel schemes in the areas of deposit mobilisation, deployment of credit and bank management.

39. Merchant banking: Merchant banking refers to specialisation in financing and promotion of projects, investment management and advisory services.

40. Deposit mobilisation: It implies tapping of potential savings and putting them into banking sector for productive uses.

41. Lien: A lien is the right of person or a bank to retain the goods or securities in his possession until the  debt due to him is settled.

42. Negative lien: It is non-possessory lien.

43. Lunatic: A lunatic is a person of unsound mind.

44. Negotiable instrument: Negotiable instrument means promissory note, bill of exchange or cheque payable either to order or to bearer.

45. Post-dated cheque: A cheque which bears a date subsequent to the date of issue is said to be post-dated.

46. Ante-dated cheque: A cheque, which bears a date before the date of issue, is said to be ante-dated.

47. Banker’s cheques: A banker’s cheque is one which is drawn by a banker upon himself.

48. Bank draft: A bank draft is an order to pay money drawn by one office of a bank upon another office of the same bank for a sum of money payable to order or on demand.

49. Stale cheque: A cheque is regarded overdue or stale when it has been in circulation for an unreasonable period of time.

50. Negotiation: Negotiation is the process by which the ownership of the credit instrument is transferred from one person to another.

51. Assignment: Assignment means transfer of ownership in the article by means of a written and stamped document according to the provisions of the transfer of property act.

52. Endorsement: Endorsement means “writing of a person’s name on the back of the
instrument or on any paper attached to it for the purpose of negotiation.”

53. Crossing: The act of drawing two transverse parallel lines on the face of a cheque is called “crossing of the cheque.”

54. Holder: A holder means any person entitled in his own name to the possession of the negotiable instrument and to recover or receive the amount due thereon from the parties liable thereto.

55. Material alteration: An alteration which alters the business effects of the instruments if used for any business purpose is called “material alteration.”

56. Countermands the payment: Countermand means “the instruction conveyed by the drawer of a cheque to drawee bank not to pay the cheque, when it is presented for payment.”

57. Conversion: Conversion is the unlawful taking, using, disposing or destroying of goods, which is inconsistent with the owner’s right of possession.

58. Noting: Noting is the authentic and official proof presentment and dishonour of a negotiable instrument.

59. Protest: Protest is a formal certificate of dishonour issued by the Notary public to the holder of a bill or promote, on his demand.

60. Escrow: A negotiable instrument delivered to a person conditionally or for safe custody, but not for the purpose of negotiation, is called “escrow.”

61. Inchoate instrument: It is an incomplete instrument.

62. Margin: Margin means the excess of market value of the security over the advance granted against it.

63. Documents of title to goods: Documents, which in the ordinary course of trade, are regarded as proof of the possession or control of goods are called “documents of title to goods.”

64. Stock exchange securities: Securities which are regularly bought and sold in a stock exchange are called “stock exchange securities.”

65. Consortium advances: If several banks join together according to their capacities in meeting the credit needs of large borrowers, such advances are known as “consortium advances.”

66. Garnishee order: Garnishee order is a judicial order served on a bank to suspend its dealings with a customer.

67. Term loans: Loans given for long periods are called “term loans.”