BANKING THEORY & PRACTICE

1.WHAT IS SWIFT: SWIFT stands for Society of World Wide Inter bank Financial Telecommunication. It is a communication system that advices member banks to transfer funds from one member to another. It is not a payment system, but an information and instruction network. Based in Brussels, the SWIFT network of terminals links thousand five hundred banks in Europe, USA, Africa, Asia, Australia and Latin America.


2.WHAT IS SWAP: The means by which a barrower can exchange the type of founds must easily raised for the type of founds required usually through the intermediary of a bank. A swap will enable them to exchange the currency the interest-rate swap, in which borrowers exchange fixed-for floating-interest rates.
3.WHAT IS VOSTRO ACCOUNT: A local currency account held by a foreign bank with a bank in India itself.
4.WHAT IS NOSTRO ACCOUNT: A foreign currency account held by a bank at foreign country.
5.WHAT IS DEMAT ACCOUNT: An electronic form of keeping shares in an account is called demat account.
6.WHAT IS FORECLOSURE: The legal right of lender of money if the borrower fails to repay the money or part of if on due date. The lender must apply to court to be permitted to sell the property that has held us security for debt.
7.WHAT IS JOINT ACCOUNT: Account held by two or more persons jointly is called joint A/c.
8.WHAT IS RD: A deposit were a fixed amount is paid on monthly installment.
9.WHAT IS EMI & NEMI: Equated monthly installments (EMI) is an amount which represents the combination of interest + principle proposionatly.
10.WHAT IS LC : Letter of credit is performing bank guarantee. A letter from one banker to another authorizing the payment of specified sum to the person named in the letter under specified condition. Usually in a forex. Irrevocable letter of credit cannot be cancelled by the person who opens it or by the issuing bank without the beneficiary’s consent, whereas a revocable letter of credit can.
11.WHAT IS RTGS: Real time gross settlements. It is a elementary process were realize at pan takes place at some day.
12.WHAT IS DELINQUENCY: Failure to make a payment on a debt or obligation by the specified due date
13.WHAT IS FLEXI DEPOSIT: It is a deposit in which the interest rate can fluctuate based on the duration or time.
14.WHAT IS SWEEP: A service provided by a bank which automatically transfers funds above a certain level from a current account to a higher interest earning account.
15.WHAT IS TD: It is also called time deposit or term deposit. It is the period of time before a deposit security expires or is returned(renewed).
http://sivaninandu.blogspot.com/: Tax deduced at source. It denotes an amount that can be deductible from income or profits from a deposit in accordance with the tax legislation.
17.WHAT IS PLR: It stands for prime lending Rate. It is the rate of interest at which the banks lend money to first-class borrowers. It is similar in operation to the base rate.
18.WHAT IS OD: It represents an over draft. A lean made to a customer with a Cheque account at a bank in which the account is allowed to go into debit, usually up to a specified limit.
19.WHAT IS STANDING INSTRUCTION: An instruction by a customer to a bank to pay a specified amount of money on a specified date or dates to a specified payee.
20.WHAT IS ECS: It stands for electronic clearing system. The insurance premium payments and house electricity payment. It serves for utility bill payments.
21. What is EFT: It stands for electronic funds transfer. It represents the transfer of money from one bank account to another by means of communication. It is also for credit card payments.
22.WHAT IS ACCRUAL: It represents accrued charges. An amount incurred as a charge in a given accounting period but not paid by the end of that period.
23.WHAT IS MORTGAGE: An interest in property created as a security fro a loan or payment of a debit and terminated on payment of the loan or debit.
24.WHAT IS PLEDGE: An article given by a barrower (pledgeer) to a lender (pledge) as a security fro a debit. It remains in the ownership of the pledgeer although it is in the possession of the pledge until the debt is repaid.
25.WHAT IS HYPOTHECATION: An authority given to a banker, usually a letter of hypothecation to enable the bank to sell goods that have been pledged to them as security for loan.
26.WHAT IS BALANCE SHEET: A statement of the total assets and liabilities of an organization of a particular date, usually the last day of the accounting period.
27.WHAT IS DOUBLE ENTRY BOOK KEEPING: The records kept enable a profit and loss account and the balance sheet to be compiled. Most firms now use business software packages of programs to enable the books to be kept by computer.
28.WHAT IS NOMINAL ACCOUNT: A ledger account that is not a personal account in that it bears the name of a concept eg. Light of heat, bad debits, investments, etc.,
29.WHAT IS PERSONAL ACCOUNT: Account used to record transactions with persons, for example “debtors and creditors.
30.WHAT IS REAL ACCOUNT: A ledger account for some types of property (eg. Land & building, plat, investment, stock) to distinguish it from a nominal account, which would be for revenue or expense items.
31.WHAT IS DAY BOOK: A specialized journal or book of prime entry recording specific transactions. For example, the sales day book records invoice for sales, the purchase day book records invoices received from suppliers. Day book entries are transferred to memorandum ledgers, such as the debtors ledger and the creditors ledger, while totals of entries are transferred to the nominal ledger control accounts. Such as the debtors ledger control account and the creditors ledger control account.
32.WHAT IS LEDGER: A collection of accounts of a similar type. Traditionally, a ledger was a large book with separate pages for each account.
33.WHAT IS PAY ORDER: It is also called banker’s Cheque or Manager’s Cheque. It is a Cheque drawn by a banker on himself. It is payable only at the issuing bank to it is not transferable.
34.WHAT IS DEMAND DRAFT: It is an instrument drawn by one branch of a bank upon another branch of the same bank instructing the latter to pay a certain sum of money to the person named there in or to his order.
35.WHAT IS CHEQUE: A Cheque is a negotiable instrument and it is freely transferable from one person to another. It performs all the functions of a currency note through it is not a legal tender money. It is an instrument in writing containing an unconditional order, signed by the bearer directing a certain person to pay a certain money only to or order of a certain person.
36.WHAT IS CHEQUE GENERAL CROSSING: According to negotiable instrument action general crossing is where a Cheque bears across it’s face a addition of words and company or its abbreviation there of between two parallel traverse lines, simply, either with or without the words not negotiable.
37.WHAT IS CHEQUE SPECIAL CROSSING: Its where a Cheque bears across its face an addition of the name of a banker either with or without the words not negotiable that addition shall be deemed to be crossed specially.
38.WHAT IS ENDORSEMENT: According to negotiable instrument act when the maker or holder of a negotiable instrument signs the same, side of a Cheque for the purpose of negotiation.
39.WHAT IS ALLONGE: If the back side of the instrument is not sufficient to make endorsements, a piece of paper may be attached there to for making further endorsements. Such piece of paper is known as allonge.
40.WHAT IS ORDER CHEQUE/BEARER CHEQUE: A Cheque is an order Cheque if it is expressed to be payable to the order of a certain person or to a certain person without restricting its further transfer. A bearer Cheque is transferable by men delivery without endorsement. A bearer Cheque is always a bearer instrument but an order Cheque will become a bearer one when it is endorsed in black.
41.WHAT IS I/W CLNG: It is inward Cheques for collection for outward returns.
42.WHAT IS O/W CLNG: It includes outward cheques for booking collection and inward returns.
43.WHAT IS TELLER: The us name for a bank or building society cashier, ie., some one who accepts deposit and pays out cash over the counter to customer.
44.WHAT IS BANK GUARANTEE: An undertaking given by a bank to settle a debit should the debtor fails to do so. A bank guarantee can be used as a security for a loan but the banks themselves will require good cover in cash or certain indemnity before they issue.
45.WHAT IS DPN: Demand promissory note. It is promises to pay guarantee to or to the lending for society very week sectors such as agriculture and formers where the interest rate is low.
46.WHAT IS PRIORITY SECTOR LENDING: It is the lending for society very week sectors such as agriculture and formers where the interest rate is low.
47.WHAT IS SPREAD: It is spreading the areas of lending into different kinds of society where a loss in one society will be adjusted with the income from others.
48.WHAT IS CRR(Cash Reserve Ratio): Out of demand and time liabilities 10% is maintained as a cash in RBI.
49.WHAT IS SLR(Statutory Liquidity Ratio) : Out of demand and time liabilities some percent is kept as security in RBI.
50.WHAT IS LCD: It stands for low cast deposit. It includes a mixture of demand deposits ie., pure current & savings deposit.
51.WHAT IS INSURANCE: A Legal contract in which an insurer promises to pay a specified amount to another party , the insured , if a particular event such as Death (or) Loss of property happens.
52.WHAT IS MUTUAL FUND: A mutual fund is simply a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the pooled money into specific securities (usually stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of the mutual fund and become a shareholder of the fund
53.WHAT IS REFINANCING OR HIREPURCHASE: A method of buying goods in which the purchase takes possession of them as soon as an initial installment of the price( a deposit) has been paid ; ownership is obtained when all the agreed number of subsequent installments have been completed.
54.WHAT IS LIQUIDITY: The extent to which an organization assets are Liquid (Assets held in cash or in something that can be readily returned into cash), enabling it to pay its debts when they fall due and also to move into new investment opportunities .
55.WHAT IS PREMINUM: (a) The consideration payable for a contract of insurance (or) life assurance. (b) An amount in excess of the nominal value of a share , bond or other security.
56.WHAT IS BONUS: An extra amount of money additional to the proceeds, which is distributed to a policy holder by an insurer who has made a profit on the investment of a Life Assurance fund.
57.WHAT IS EQUITY: It represents the stocks & shares i.e., the ordinary shares of a company , especially those of a publicly owned quoted company.
58.WHAT IS FACE VALUE OF A STOCK: The nominal value (Nominal price ) printed on the face of a security . This is also known as the par value. It may be more (or) less than the market value.
59.WHAT IS STOCK BROKING & STOCK EXCHANGE: A stock broker is an agent who buys & sells securities on a stock exchange ( A market for the sale & purchase of securities in which prices are controlled by demand & supply ) on behalf of clients and receives remuneration in the form of commission.
60.WHAT IS FLEXI BOND: A bond in which the interest i.e., the coupon rate changes according to market is called Flexi Bond.
61.WHAT IS DIVIDEND WARRENT: The Cheque issued by a company to it share holders when paying dividends. It states the Tax deducted and the net amount paid. This document must be sent by non-taxpayers to the Inland Revenue, when claiming back the tax.
62.WHO IS A MINOR: A person who has not attained 18 years of age is a minor. But if a guardian is appointed by the court for a person during the period of minority, he will remain as a minor till he/she attain the age of 21 years.
63.WHO IS A TRUSTEE & BENEFICIARY: A trust is created to look after the properties of a person, usually a deceased . The person appointed to manage such properties is called a trustee and the person for whose benefit the trust is created is called beneficiary.
64.WHO IS AN ASSIGNOR & ASSIGNEE: Assignment means transfer of an existing or future right on property of debt by one person to another. The person who transfers the property is the assignor and the person to whom it is transferred is the assignee.
65.WHAT IS INDEMNITY BOND: An undertaking by a bank’s client who has lost a document (such as a share certificate (or) bill of lading) that the bank will be held harmless against any consequences of the document’s absence if it proceeds to service the documents that have not been mislaid.
66.WHAT IS DEFERRED PAYMENT: It refers the Hire Purchase , a method of buying goods in which the ownership passes when the contract is signed.
67.WHAT IS GRANISHEE ORDER: An order made by a judge on behalf of a judgment creditor restraining a third party (often a bank) called a garnishee from paying money to the judgment debtor until sanctioned to do so by the court.
68.WHAT IS CASH CREDIT: A cash credit is an arrangement by which a customer is allowed by a banker to borrow money up to a certain limit. Such an arrangement is made against the security of tangible assets or guarantees. The amount of cash credit sanctioned need not be drawn by the customer at once. He may draw such amount as and when required. Further he can pay back the amount so withdrawn whenever he has a surplus. The interest will be charged on the actual amount utilized and for the period of utilization only. The cash credit system is for commercial and industrial concerns to get long term funds for doing regular business.
69.WHAT IS SECURED OVER DRAFT: Under A customer is allowed to withdraw over and above the credit balance in his current account upto certain limit . The interest will be charged only on the amount actually overdrawn by him.
70.WHAT IS A CREDIT CARD: A plastic card issued by a bank (or) finance organization to enable holders to obtain credit in shops , hotels , restaurants , petrol stations etc., The retailer (or) trader receives monthly payments from the credit card company equal to its total sales in the month by means of that credit card ,less a service charge.
71.WHAT IS DEBIT CARD: A plastic card issued by a bank to enable its customers with Cheque accounts to pay for goods (or) service at certain retail outlets by using the telephone network to debit their Cheque accounts directly. It is also known as payment card.
72.WHO IS SOLE PROPEREITOR: A single person owns the assets of the company . He is held responsible for his company’s liabilities.
73.WHO IS A PARTNER: 1. Partners share equally in the profit (or) loss of the partnership 2. Partners are not entitled to receive salaries. 3.Patners are not entitled to interest on their capital . 4. On dissolution the assets is settled for the creditors first and then to partners.
74.CAN A MINOR BE A PARTNER: A minor may be admitted as a partner to the benefits of a partnership firm with the consent of all partners. But he/she is not personally liable for the debts of the firm except to the extent of his share in the profits and properties of the firm.
75.WHAT IS PRIVATE LIMITED COMPANY: Any limited company that is not a public limited company. Such a company is not permitted to offer its shares for sale to public and it is free from the rules that apply to public limited companies.
76.WHAT IS PUBLIC LIMITED COMPANY: A company registered under Companies Act 1980 as a public company . It may offer shares and securities to the public . Regulation of such companies is
77.WHAT IS MEANT BY PCL: PCL stands for Packing Credit Loan. It’s the loan given for the manufacture & export of goods & its expenses made for the export of the commodity.
78.WHAT IS Pre-Shipment & Post Shipment FINANCE: The finance charges for the Pre-Shipment expenses & finance charges for the post shipment activities.
79.WHAT IS DISCOUNTING & PURCHASING OF A BILL: The term “Purchase “ is used in case of demand bills which are payable in demand , whereas the term ‘discounting’ is used in case of Usance bills which are payable on due dates. In both cases the amount of the bill less bank charges will be credited to customer’s account.
80.WHAT IS INCUMBERANCE CERTIFICATE: A lien or claim on property. A liability on real property. For example, a mortgage encumbers title to real estate because the lender has an interest in the property. a claim (as a lien) against property; specifically : an interest or right (as an easement or a lease) in real property that may diminish the value of the estate but does not prevent the conveyance of the estate
81.WHAT IS A JOINT STOCK COMPANY: A company in which the members pool their stock and trade on the basis of their joint stock. This differs from the earliest type of company . The merchant corporations (or) regulated companies of 14th century in which members tracked their own stock subject to the rules of the company.
82.WHAT IS MERCHANT BANKING: A bank that formerly specialized in financing foreign trade , an activity that often grew out of its own merchanting business they function as accepting houses.
83.WHAT IS CHIT FUND: A collection of members called a chit group makes their contribution in the form of money to collect a chit amount and they bid in an auction to be awarded with the prized money which is equal to the chit amount minus the discount and the foreman's commission.
84.WHAT IS MEANT BY NEGOTIABLE INSTRUMENT: A document of title that can be freely negotiated. Such documents are cheques and bills of exchange in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee(or) making the document ‘open’ by endorsing it on the reverse.
85.WHAT IS ANTE-DATED CHEQUE: A Cheque which bears a date prior to the date of its issue is known as ante-dated Cheque.
86.WHAT IS POST-DATED CHEQUE: A Cheque which bears a date subsequent to the date of its issue is called a post-dated Cheque.
87.WHAT IS STALE CHEQUE: If a Cheque bears a date before 6 months from the current date, then the Cheque becomes invalid and it’s called Stale Cheque.
88.WHAT IS LIEN: The right of one person to retain possession of goods owned by another until the possessions claim against the owner has been satisfied.
89.WHAT IS A FORGED INSTRUMENT: An instrument which illegally bears a signature of the maker of the Cheque without the knowledge of the maker (Drawer) of the Cheque.
90.WHAT IS ASSIGMENT: The act of transferring, or a document (a deed of assignment) transferring property to some other person . Examples of assignment include the transfer of rights under a contract or benefits under a trust to another person.
91.WHAT IS WAREHOUSE LOAN: It is a Loan against the security of a warehouse receipt . By this receipt a warehouse keeper acknowledges the receipt of goods for warehousing & promises to deliver them to the person mentioned their on request.
92.WHAT IS BILL OF LADING: A document acknowledging the shipment of a consignor’s goods for carriage by sea. It is used primarily when the ship is carrying goods belonging to a number of consignors (a general ship). In this case, each consignor receives a bill issued (normally by the master of the ship)on behalf of either the shipowner or a character under a charterparty. The bill serves three functions: it is a receipt for the goods it summarizes the terms of the contract of carriage; and it acts as a document of title to the goods.
93.WHAT IS BILL OF EXCHANGE: An unconditional order in writing addressed by one person (that is the drawer ) to another (drawee) and signed by the person giving it requiring the drawee to pay on demand or at a fixed or determinable future time a specified sum of money to or to the order of a specified person (the payee) or to the bearer. If the bill is payable at a future time the drawee signifies acceptance, which makes the drawee the party primarily liable upon the bill; the drawer and endorsers may also be liable upon a bill. The use of bills of exchange enables one person to transfer another an enforceable right to a sum of money. A bill of exchange in not only transferable but also negotiable , since , if a person without an enforceable right to the money transfers a bill to a holder in due course , the latter obtains a good title to it.
94.WHAT IS BILL OF ENTRY: It is the customs control copy for the proof of a foreign transaction held for the clearance of the imported goods.
95.WHO IS CALLED AUTHORISED DEALER: A bank which is licensed to hold any foreign exchange transaction by itself is referred to as authorized dealer of a foreign exchange.
96.WHAT IS TRAVELLERS CHEQUE: A Cheque issued by a Bank , Travel Agency , Credit – Card company etc., to enable a traveler to obtain cash in a foreign currency in abroad . They may be cashed at banks, exchange bureaus, restaurants etc., in abroad on proof identity.
97.WHAT IS FOREIGN EXCHANGE: A trade between two different countries which involves a transaction in foreign currency . In simple terms foreign exchange means buying and selling of currencies ( Say Dollars).
98.WHAT IS NRO ACCOUNT: When a Resident becomes a Non-Resident , the domestic resident account of the resident becomes Non-Resident Ordinary (NRO)Account . (a) Can be in the form of savings, Term Deposit. (b) Non- Repatriable.(c) Credit comes by foreign remittance only.

99.WHAT IS NRE ACCOUNT: It is Non-Resident external rupee account . (a) It can be in the form savings , Term deposit (b) No local in-flow allowed. (c) It can be Repatriable(amount can be taken & spent abroad ). (d) Only by foreign remittance.
100.WHAT IS FCNR ACCOUNT: It is a foreign currency non-resident account. (a) It is maintained in foreign currency . (b) Can be Repatriable .(C) Mainted only as a term deposits. (d) Can be closed and converted to Indian rupee when needed.
101.WHAT IS FIXED EXCHANGE RATE: A rate of exchange between one currency and another that is fixed by government and maintained by that government buying or selling its currency to support or depress its currency.
102.WHAT IS FLOATING EXCHANGE RATE: A rate of exchange between one currency and another that is permitted to float according to market forces. Most major currencies and countries now have floating exchange rates but governments and central banks intervene buying or selling currencies when rates become too high or too low.
103.WHAT IS FIXED RATE LOAN: A loan in which the interest rate is fixed at the start of the loan. It is standard for bond issue, but unusual for bank borrowing.
104.WHAT IS FLOATING RATE LOAN: A loan that does not have a fixed interest rate throughout its life. Floating-rate loans can take various forms but they are all tied to short term market indicators in the UK this is usually the London Inter Bank Offered Rate.
105.WHAT IS ECGC: Export Credit Guarantee Corporation of India Limited, was established in the year 1957 by the Government of India to strengthen the export promotion drive by covering the risk of exporting on credit. Being essentially an export promotion organization, it functions under the administrative control of the Ministry of Commerce, Government of India. It is managed by a Board of Directors comprising representatives of the Government, Reserve Bank of India, banking, and insurance and exporting community. ECGC is the fifth largest credit insurer of the world in terms of coverage of national exports. The present paid-up capital of the company is Rs.500 crores and authorized capital Rs.1000 crores. The paid-up capital is expected to be enhanced to Rs.800 crores
106.WHAT IS MEANT BY CAT-A, CAT-B&CAT-C BRANCH: CAT –A branch deals mainly into foreign exchange and which got a dealing room for bidding on the inter-bank price rates. CAT –B branch deals mainly into foreign exchange in addition to its retail transactions and can make the payment directly. But a CAT – C branch cannot make the payment for the FOREX transaction directly. It has to route through the CAT – A branch.
107.WHAT IS MICR CLEARING: The ordinary clearing instrument which is encoded by the MICR codes(16 digits) is called MICR clearing instrument.
108. WHAT IS NON-MICR CLEARING: A clearing instrument without the MICR encodings and which is cleared the same day itself (it can be Inter Bank Clearing or High Value Clearing).
109.WHAT IS NON-INTEREST INCOME (NII): It represents the service charges collected from the customer for any kind of transaction held in a bank.
110.WHAT IS CALLED NI-ACT: A government act that represents the document of title that can be freely negotiated. Such documents are Cheques and bill of exchange in which the stated payee of the instrument can negotiate the instrument by either inserting the name of a different payee or making the document ‘open’ by endorsing it (signing once the name) usually on the reverse.
111.WHAT IS SUPER SAVINGS PACK: also called rainbow savings pack where a suitable amount above the minimum balance in savings account is transferred to term deposit account where they get higher rate of interest .it is the combination of savings account and fixed deposit account
112.WHAT IS TERM LOAN: A fixed-period loan usually for 1 to 10 years that is paid back by the borrower in regular installments with interest it may be secured or unsecured.
113.WHAT IS RUNNING LOAN: A loan or advance in which both credit and debit transactions takes place within the sanction limit is called running loan ( Drawing Power will be equivalent to sanctioned limit).
114.WHAT IS “DONATIO MORTIS CAUSA”: It means a gift made in contemplation of death. A fixed deposit receipt may also be made as a subject matter of such gift. Hence a holder of a fixed deposit receipt can give it as a gift to another person in anticipation of his death. In this case it will become valid and the donee will get a good title only on the death of the donor. On the other hand, if the donee dies before the death of the donor, it will become void.
115.WHAT IS BANK STATEMENT: A regular record, issued by a bank showing the credit and debit entries in a customer’s cheque account, together with the current balance. The frequency of issue will vary with the customer’s needs and the volume of transactions going through the account. Cash dispensers enable customers to ask for a statement whenever they are needed.