Banking Vocabulary

Application Form

A form to be filled in and signed as per the Bank?s requirements to avail Banking facilities. Requirement of details to be filled in will vary for each facility. Applications may also require certain specified documents also to be attached.

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.

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.

Conveyance

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

Charge Back Period

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

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.

Disclosure

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

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.

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.

Cash Back Credit 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. vouchers, or hard cash.

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.

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.

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.

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.

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.

Banker's Check

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

Dormant Account (In operative account)

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

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.

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.

Certified Check

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

Canceled Check

A check that has been not paid and cancelled by the drawer ?Account holder.

Bounced Check

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

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.

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.

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.

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.

Annual Percentage Yield (APY)

A percentage rate reflecting the total amount of interest paid on a deposit account (savings, CDs etc.), based on the interest rate and the effect of interest compounding for one year.

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.

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.

Business Credit Card

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.

Biller

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

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.

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 negotiation.

Basis Point

A unit of measurement which is equal to 1/100th of 1%. This is used to measure changes in interest rates, stock-market indices or yield on fixed income securities. For example, if an interest rate is 1st March will end on 29th February if next year is a leap year at 28th of February.

Contract

A written, oral, partly written partly oral or behavioral agreement between two or more parties or people, which is legally binding, can be termed as a contract.

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.

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.

Custodial Account

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

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.

Debt Ratio/Debt Burden

An amount of money you owe to banks or credit issuers. It is the percentage of your in come 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.

Debt

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

Annual Fee

An annual amount charged by the credit card companies to maintain the credit card.

Automatic Payment

An arrangement that authorizes payments to be deducted automatically from a bank account (usually a savings/current account) to pay bills (such as insurance payments, rent, mortgage or loan payments). Payments are usually scheduled to be made on a certain day of the month.

Automatic Funds Transfer

An arrangement that moves funds from one account to another automatically on a pre-arranged schedule; for example, every payday or once a month.

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.

Check for 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 check.

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.

Certificate of Title (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.

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.

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.

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.

Attestation

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

Available Credit

Available credit is your credit limit minus your current balance. It is the unused portion of your credit line.

Check Purchase

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

Bill Pay Service

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.

Broker

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

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).

Card Holder

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

Cash Reserve Ratio (CRR)

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 liabilities.

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.

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 the 28th of February.

Anywhere Banking

Customer can deposit/withdraw cash at any branch other than the branch in which he holds the account. Anywhere banking frees the customer from geographical boundaries and limitations and gives the flexibility to the customer to use his account across the board.

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.

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.

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 utilized for payments like interest/dividend etc. in the accounts maintained with other banks by another bank.

Electronic Clearing Service (ECS)

Electronic Clearing Facility: An inter bank arrangement whereby 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.

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

Default

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

Deposit

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

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.

Deferred Payment

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

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.

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.

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.

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.

Arrears Outstanding

The arrears outstanding comprises of the unpaid EMI?s and other charges, if any, levied in the account.

Available Balance

The available balance is the account balance in the account that is available for immediate use at any given point of time

Average Daily Balance

The average balance in a deposit account, equals the sum of the daily account balances during an accounting period, usually a monthly or a quarterly cycle, divided by the number of days in the accounting period. Banks normally specify certain minimum average daily balance to be maintained in current and savings 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.

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.

Detailed Statement

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

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.

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.

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).

Documentation

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

Billing Cycle

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

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 check is called drawer.

Drawee

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

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.

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 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.

Check Return Fee/EMI return fee)

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

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.

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.

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.

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.

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.

Delinquency

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

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.

Credit-worthy

You are judged to be qualified to have credit.