12/6/2020 Banking, Economics & Finance Awareness Notes 1 - GKmojo
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Protected: Banking, Economics & Finance Awareness Notes 1
Banking Terminology
Assets and Liabilities
Demand Liabilities
They are liabilities which are payable on demand. For example: Current Deposits,
Savings bank deposits, Balances in overdue fixed deposits, Outstanding TTs, MTs, DDs,
Unclaimed deposits etc.
Time Liabilities
They are liabilities which are payable other than on demand. For example: Fixed
deposits, cash certificates, cumulative and recurring deposits, time liabilities portion of
savings bank deposits, staff security deposits etc.
Non-performing Asset
An asset, including a leased asset, becomes non performing when it ceases to generate
income for the bank. A loan on which instalment has been due for a specified period is a
non-performing asset.
Funds Transfer
National Electronic Funds Transfer (NEFT)
It is a nation-wide payment system facilitating one-to-one funds transfer. Under this
Scheme, individuals can electronically transfer funds from any bank branch to any
individual having an account with any other bank branch in the country participating in
the Scheme.
There is no limit – either minimum or maximum – on the amount of funds that can be
transferred using NEFT. However, maximum amount per transaction is limited to
Rs.50,000/- for cash-based remittances and remittances to Nepal.
Real Time Gross Settlement (RTGS)
It is a continuous (real-time) settlement of funds transfers individually on an order
order basis. While the funds under NEFT are transferred in batches, funds under RTGS
are settled without netting. ‘Real Time’ means the processing of instructions at the time
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12/6/2020 Banking, Economics & Finance Awareness Notes 1 - GKmojo
they are received rather than at some later time; ‘Gross Settlement’ means the
settlement of funds transfer instructions occurs individually (on an instruction
instruction basis).
The minimum amount to be remitted through RTGS is Rs. 2 lakh. There is no upper
ceiling for RTGS transactions.
IMPS (Immediate Payment service)
A customer can instantly transfer rupee funds to anybody anywhere anytime. Per
transaction limit for IMPS using account number is 2 lakh.
Instruments
Cheque
A “cheque” is a bill of exchange drawn on a specified banker and not expressed to be
payable otherwise than on demand. (Section 6 of Negotiable Instruments Act, 1881).
The maker of a cheque is called the ‘drawer’, and the person directed to pay is the
‘drawee’. The person named in the instrument, to whom or to whose order the money is,
the instrument directed, to be paid, is called the ‘payee’.
Ante Dated Cheque: Cheques which have been written the maker, and dated
at some point in the past.
Bounced Cheque: Check that cannot be processed because the writer has
insufficient funds.
Crossed Cheque: These cheques can only be deposited directly into a bank
account and cannot be immediately cashed a bank or any other credit institution.
Post Dated Cheque: Cheque that is written the drawer (payer) for a date in
the future.
Stale Cheque: A cheque which a bank will not accept and exchange for money
or payment because it was written more than a certain number of months ago.
Cheque Truncation System
In the normal process of cheque clearance, a cheque is physically delivered the
presenting bank to the drawee bank through a clearing house. In the Cheque Truncation
System, the movement of the physical cheque is stopped and in its place an electronic
image of the cheque is transmitted to the drawee branch through the clearing house,
along with relevant information like data on the MICR band, date of presentation,
presenting bank, etc. This system eliminates the cost of movement of the physical
cheques and also reduces the time required for their collection.
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Demand Draft
The Demand Draft is a pre-paid Negotiable Instrument, wherein the drawee bank
undertakes to make payment in full when the instrument is presented the payee for
payment. The demand draft is made payable on a specified branch of a bank at a
specified centre.
Bankers Cheque
It is similar to Demand Draft. The issuing bank undertakes to make the payment in full
when the instrument is presented the payee for payment. In practice it is used within
local clearing jurisdiction unlike demand draft which is issued for any place.
Plastic Money: It is a term used in reference to the hard plastic cards we use every day in
place of actual bank notes.
Example: Credit card, Debit Card
Banking Ombudsman: Banking Ombudsman is a quasi-judicial authority, which
functions under India’s Banking Ombudsman Scheme 2006. It was created Government of
India with a purpose to deal with the complaints of customers of the banks related to various
services rendered the banks.
Deflation: It is a decrease in the general price level of goods and services.
Inflation: It can be defined as a sustained increase in the general level of prices for goods
and services.
Commercial Bills: A bill of exchange issued a commercial organization to raise money for
short-term needs.
Commercial Papers: An unsecured, short-term debt instrument issued a corporation for
the financing of accounts receivable, inventories and meeting short-term liabilities.
Debentures: A long-term security bearing a fixed rate of interest, issued a company and
secured against assets.
Core Banking Solution (CBS): It is networking of branches, which enables Customers to
operate their accounts, and avail banking services from any branch of the Bank on CBS
network, regardless of where he maintains his account.
KYC Norms: The process of Banks verifying the identity of its clients.
Virtual Banking: Handling all transactions of banks via the Web, e-mail, mobile check
deposit and ATM machines.
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Wholesale Banking: Banking services between merchant banks and other financial
institutions.
NRE Accounts (For NRIs): A Non-Resident External Account is a bank account
particularly framed for NRIs to save their foreign income in India. NRE account is opened
in India those who live outside in India for a minimum of 180 days in the previous year.
NRO Accounts (For NRIs): Non Residency Ordinary Account is a bank account is
intended to manage the income earned in India from sources like pension, dividend, rent,
interest etc. NRO account is opened the citizen of India who temporarily shifted to a foreign
country.
Abbreviation list
1) Related to economy:-
IMT: instant money transfer
UPI: Unified Payment Interface
CBS: Core Banking solution
MIBOR: Mumbai interbank offer rate
NEFT: National Electronic Fund transfer
RTGS: Real time Gross settlement
UBI: Universal basic Income
OBOR: One belt One road
FTZ: Free trade zone
PAN: Permanent Account Number
IPO: Initial Public Offer
BIFR: Board for industrial and financial Reconstruction
ATM: Automated Teller Machine
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EPZ: Export Processing zones
FIPB: Foreign Investment Promotion Board
FSDC: Financial stability development council
KYC: Know Your customer
NPA: Non- Performing Asset
SEBI: Securities and Exchange board of india
SDR: Special drawing Rights
SIDBI: small industries development bank of India
PIN: Personal Identification Number
RRB: Regional Rural Banks
RTGS: Real time Gross settlement
SDR: Special Drawing Rights
SHG: Self help Group
KCC: Kisan Credit Card
NPA: Non Performing Assets
OMO: Open Market Operations
TDS: Tax Deduction at Source
IFSC: Indian financial system code
GATT: General Agreement on Tariffs And Trade
EMI: Equated Monthly Installment
BPL: Below Poverty Line
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2) Related to government:-
PMUY: Pradhan Mantri Ujjwala Yojana
APY: Atal pension Yojana
DDUGJY: Deen dayal upadhyay Gram Jyoti Yojana
PMFBY: Pradhan Mantri fasal bima Yojana
PMSBY: Pradhan Mantri suraksha bima Yojana
JAM: Jan Dhan, Aadhar and Mobile
IRNSS: Indian regional navigation satellite system
NITI (Aayog): National institution for transforming India
UDAN (scheme): Ude desh ka Aam Nagrik
BPL: Below Poverty line
3) International Institution based:-
APEC: Asia Pacific Economic Cooperation
ADB: Asian development Bank
BIS: Bank for International settlements
FAO: Food and Agriculture Organization
GATT: General Agreement on tariffs and Trade
IAEA: International Atomic Energy Agency
Interpol: International Police organization
NATO: North Atlantic Treaty Organization
OPEC: Organization of petroleum exporting countries
SAARC: South Asian Association for regional Co-operation
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UNESCO: United nations education, scientific and cultural organization
UNICEF: united nations international children’s emergency fund
WEF: World economic forum
List of Countries and their Capitals & Currencies
COUNTRY CAPITAL CURRENCY
Afghanistan Kabul Afghani
Albania Tirana Lek
Algeria Algiers Dinar
Austria Vienna Euro
Azerbaijan Baku Manat
Bahrain Manama Dinar
Bangladesh Dhaka Taka
Belgium Brussels Euro
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Bhutan Thimphu Ngultrum
Croatia Zagreb Kuna
Czech Republic Zagreb koruna
Denmark Copenhagen Krone
Hungary Budapest Forint
Indonesia Jakarta Rupiah
Iran Tehran Rial
Iraq Baghdad Dinar
Ireland Dublin Euro
Italy Rome Euro
Kazakhstan Alma-Ata Tenge
Kuwait Kuwait City Dinar
Kyrgyzstan Bishkek Som
Lia Tripoli Dinar
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Malta Valletta Euro
Malaysia Kuala Lumpur Ringgit
Maldives Male Rufiyaa
Poland Warsaw Zloty
Portugal Lisbon Euro
Qatar Doha Riyal
Romania Bucharest Leu
Saudi Arabia Riyadh Riyal
Senegal Dakar CFA Frank
Sierra Leone Freetown Leone
Somalia Mogadishu Shilling
Spain Madrid Euro
Sweden Stockholm krona
Syria Damascus Pound
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Tajikistan Dushanbe Rouble
Turkey Ankara Lira
Turkmenistan Ashkhabad Manat
Uganda Kampala Uganda Shilling
United Arab Emirates Abu Dhabi Dirham
ATMs
An automated teller machine (ATM) is an electronic telecommunications device that
enables customers of financial institutions to perform financial transactions, such as cash
withdrawals, deposits, funds transfers, or account information inquiries, at any time and
without the need for direct interaction with bank staff.
The brainchild of Scottish inventor Shepherd-Barron, the first ATM (automated teller
machine) was opened on June 27, 1967 at a branch of Barclays bank in Enfield, north
London.
First bank to introduce ATM in India was HSBC in 1987, Mumbai.
Types of ATMs:
White Label ATM: The ATMs that are set up Non-Banking Financial Companies and offer
services are known as White Label ATMs.
Yellow Label ATM: for E-Commerce reasons.
Brown Label ATM: A service provider owns the hardware and lease of the machine but a
bank manages the cash and connectivity to bank network. In this case, the ATM is termed
Brown Label.
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Orange Label ATM: for share transactions.
Pink Label ATM: Meant only for Women.
Green Label ATM: for agricultural transactions.
SARFAESI Act 2002
Non-Performing Assets are loans given a Bank or financial institutions where the
borrower defaults or delays interest or principal payments.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities
Interest Act, 2002 (also known as the SARFAESI Act) is an Indian law. It allows banks
and other financial institution to auction residential or commercial properties (of Defaulter)
to recover loans.
The SARFAESI Act sanctions three processes to recover Non-Performing Assets
as follows:
Securitization
Asset reconstruction
Security Enforcement without court’s intervention
The Act employs three significant tools for asset management of financial institutions –
asset securitization, asset reconstruction and powers for security interest enforcement. The
readers should be aware of what these terms actually mean in order to understand the
SARFAESI Act.
Banks Board Bureau
BBB is an autonomous body of Union Government of India tasked to improve the
governance of Public Sector Banks, recommend selection of chiefs of government-owned
banks and financial institutions and to help banks in developing strategies and capital
raising plans.
It is situated at RBI’s Central Office in Mumbai.
In February 2016, the NDA government approved the proposal for setting up BBB and it
started functioning from April 2016.
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The BBB works as step towards governance reforms in Public Sector Banks (PSBs) as
recommended P.J. Nayak Committee.
Bhanu Pratap Sharma is the new Chairman of the Mumbai based Bureau.
The bureau was announced as part of the seven-point Indradhanush plan to revamp
public sector banks.
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