Banking News

Bank Terminologies


Account: The recording of the financial transactions relating to receipts, expenditure, asset, liability in the ledger.

Accounting Period: The period of time, for which the books of accounts of an organization/company. The financial accounts, balance sheet and other statements summarized for the period stated.  (see Financial year, assessment year, calendar year)

Accounts Receivable: The amount of short term receivable (Debts) from individuals or parties to an establishment, but not yet paid for.  

Accounts Payable: The amount of short term debts owed to suppliers or service provider, but not yet paid for. 

Administrator: An Administrator is a person appointed by the Court to wind up the estate of the deceased   when a person dies intestate i.e without leaving behind a will.  Administrator is also appointed when testator (the deceased) has not mentioned the name of executor in the will or executor named in the will dies before the testator or refuse to act as Executor. 

Adjusted Net Bank Credit (ANBC): Net Bank Credit plus investments made by banks in non-SLR bonds held in HTM category. 

Affidavit: A written statement of a person given to a Magistrate or Notary public under oath. 

Alongee: The endorsement must be written on the bill itself or any paper annexed to the bill (alongee) and be signed by the endorser. Since there is no restriction for number of endorsement, there may not be space available in the instrument itself for further endorsement. Therefore endorsement made on a slip of paper annexed to the instrument is called alongee. The endorsement written on alongee is deemed to be written on the instrument itself. 

Annual General Meeting (AGM): The meeting of the shareholders and directors of a company that takes place once in a year. At AGM, annual reports, the audited profit and loss of accounts, audited balance sheet, future prospectus of the company will be presented. Approval of proposed dividend, Election or re-election for the post of directors to fill up the vacancies if any, appointment of auditors for the next financial year will also be passed in the meeting.

Ante-date: Date on cheque or bill of exchange indicates prior to the date it is actually signed. Such instruments are valid if otherwise in order. 

Appropriation: Appropriation/Apportion is the act of setting aside for particular purpose. Ex: A part of profit is set aside for payment of dividends and rest of the profit is transferred to Reserve and so on. 

Articles of Association:  The articles that sets out the internal rules governing a limited company. It lay down procedures as voting rights, elections of directors, duties of directors, operation of bank accounts, procedure to call general meetings etc. 

ASBA: Application supported by Blocked Amount (ASBA). Under ASBA, retail investors don’t have to allocate money separately for an IPO. The required amount will be blocked at the time of application in their account to be deducted only on allotment of shares. 

Assessment Year: The year immediately following the financial year wherein the income of the financial year is assessed is called “Assessment year”. (see Financial year,  calendar year). 

Asset: Anything cash, deposits, inventory, Receivables, all  movable and immovable properties of an entity

At Call: This expresses deposit placed by a bank or financial institution with the money market (discount house) on condition that the funds are repayable on demand. 

Authorised Dealer: Any person,(normally includes banks),authorized to deal in foreign exchange or foreign securities by the Central Bank ( Reserve Bank of India in India under Section 10(1) of FEMA, 1999). The Authorised Dealer can handle all kinds of foreign exchange transactions, viz. buying &selling foreign currencies, opening of LC and settlement of LC payment, handling of Inward & outward remittance, arrangement with foreign correspondent, investment in foreign trade etc, as per FER Act 1947 in terms of instructions from Central Bank.

Back-to-back credit: A back to back letter of credits refers to the issuance of an outward letter of credit issued by a bank against the backing of inward letter of credit issued by another bank in favour of intermediary. The intermediary is the middleman or broker. The intermediary is the beneficiary of first credit, who seeks to open a second credit in favour of the actual producer of goods on the strength of first credit. The second credit is separate and distinct from the first. Thus the beneficiary of original letter of credit (intermediary) becomes the applicant for the back to back letter of credit. 

Bad and doubtful debt: Debt means Money owed by one party to another. Bad debt means dues from a defaulter, which it has proved impossible to recover. When the recovery of debt in full or in part is uncertain it is called doubtful debt. Banks set aside sum of amount from their profits as a provision for bad and doubtful debts.

Bailee: A person or party who is in possession of the goods of the bailor (Person who delivered the goods to bailee) for the purpose of safe custody or repair. The bailee is not entitled to use the goods or property entrusted for safe custody or for a specific purpose as the bailor is the rightful owner to goods. The banker has no lien on the property kept in safe custody.

Balance of Payment: The term balance of payment imply that the balance of all financial exchanges between one country and the rest of the world, made up of the current account (visible and invisible trade) and capital account (capital movement) and financial transfers excluding Central Bank’s reserve. If the inward supply of funds such as export proceeds of goods and services exceeds use of such foreign exchange for the purpose of payment towards import of goods and services, then balance of payment is said to be surplus or positive. If the country is importing more than the export, its balance of payment is said to be in deficit or negative. The balance of payments usually summarized for a specific period mostly once in a year in terms of domestic currency of the country concerned.

Balance of Trade: It is the difference between the value of export and import of goods (goods traded in foreign exchange). The balance of trade is important component of Balance of payment.

Balance Sheet: Balance sheet is a position statement listing an organization’s assets, liabilities and shareholders’ equity at a given date. A balance sheet is called so because both left and right side of it balance. A balance sheet equates asset owned by an entity to all its liabilities and owner’s equity i.e. Assets = Liabilities + Shareholders’ Equity. It means the organization (company, industry, society, and so on) has acquired all its assets either by borrowing money (liabilities) or through owner’s equity. However Income and expenditure (Profit and Loss) statement is for the given period.

Bank:  It is a financial institution licensed from Central Bank (RBI) for acceptance of deposits of money from the public for the purpose of lending and investment.

Bank holding Company: A holding company which owns one or more banks is called Bank holding company. Bank holding companies are prevailing in USA. 

Bancassurance:   Banks are selling products of insurance companies and get commission from insurance company for the policies sold by them. This arrangement of banks acting as corporate agents and selling insurance products is called Bancassurance. Under current Bankassurance policy a bank can act as agent for only one life insurance and one non-life insurance company.

Bank Statement: A statement of a customer’s account with the bank showing opening balance (usually as at the beginning of the month) and subsequent deposits of cash, cheques, credit transfer and payment of cash, cheques, and debit transfer and balance at the end of the period (usually at the end of the month). 

Barter: The exchange of goods for goods in place of money.

Basic Travel Quota: Under Basic Travel Quota scheme, an Indian citizen is eligible to avail foreign exchange up to USD 5000 or its equivalent for undertaking one or more private visits to any country other than Nepal and Bhutan in any calendar year. Children below 2 years are also eligible for full quota under BTQ scheme. (For other purpose, please read article on Foreign Travel)

Base Rate:  The base rate has been introduced by RBI, in the Indian banking system with effect from 1 July 2010.  The base rate is designed to price bank loans on the actual cost of funds to individual bank. It replaces the earlier flawed benchmark prime lending rate (BPLR), which was introduced in 2003.

Under the benchmark rule, base rate is worked out on the basis of cost of one year deposits, plus levy of additional slab tenor interest as premiums. Additional slab of interest will be added to the base rate as premium over the base rate for over a year, risk premium, depending on the risk slot in which a bank

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