Garnishee Order : When
a Court directs a bank to attach the funds to the credit of customer's
account under provisions of Section 60 of the Code of Civil Procedure, 1908.
General Lien : A right of the creditors to retain possession of all
goods given in security to him by the debtor for any outstanding debt.
Guarantee : A contract between guarantor and beneficiary to ensure
performance of a promise or discharge the liability of a third person. If
promise is broken or not performed, the guarantor pays contracted amount to
the beneficiary.
Holder : Holder means any
person entitled in his own name to the possession of the cheque, bill of
exchange or promissory note and who is entitled to receive or recover the
amount due on it from the parties. For example, if I give a cheque to my
friend to withdraw money from my bank,he becomes holder of that cheque. Even
if he loses the cheque, he continues to be holder. Finder cannot become the
holder.
Holder in due course : A person who receives a Negotiable Instrument
for value, before it was due and in good faith, without notice of any defect
in it, he is called holder in due course as per Negotiable Instrument Act. In
the earlier example if my friend lends some money to me on the basis of the
cheque, which I have given to him for encashment, he becomes holder-in-due
course.
Hypothecation : Charge against property for an amount of debt where
neither ownership nor possession is passed to the creditor. In pledge,
possession of property is passed on to the lender but in hypothecation, the
property remains with the borrower in trust for the lender.
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Identification :
When a person provides a document to a bank or is being identified by a
person, who is known to the bank, it is called identification. Banks ask for
identification before paying an order cheque or a demand draft across the
counter.
Indemnifier : When a person indemnifies or guarantees to make good any
loss caused to the lender from his actions or others' actions.
Indemnity : Indemnity is a bond where the indemnifier undertakes to
reimburse the beneficiary from any loss arising due to his actions or third
party actions.
Insolvent : Insolvent is a person who is unable to pay his debts as
they mature, as his liabilities are more than the assets . Civil Courts
declare such persons insolvent. Banks do not open accounts of insolvent
persons as they cannot enter into contract as per law.
Interest Warrant : When cheque is given by a company or an
organization in payment of interest on deposit , it is called interest
warrant. Interest warrant has all the characteristics of a cheque.
International Banking : involves more than two nations or countries.
If an Indian Bank has branches in different countries like State Bank of
India, it is said to do International Banking.
Introduction : Banks are careful in opening any account for a customer
as the prospective customer has to be introduced by an existing account
holder or a staff member or by any other person known to the bank for opening
of account. If bank does not take introduction, it will amount to negligence
and will not get protection under law.
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JHF Account : Joint
Hindu Family Account is account of a firm whose business is carried out by
Karta of the Joint family, acting for all the family members.. The family
members have common ancestor and generally maintain a common residence and
are subject to common social, economic and religious regulations.
Joint Account : When two or more individuals jointly open an account
with a bank.
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Karta : Manager of a Hindu
Undivided Family (HUF) who handles the family business. He is usually the
eldest male member of the undivided family.
Kiosk Banking : Doing banking from a cubicle from which food,
newspapers, tickets etc. are also sold.
KYC Norms : Know your customer norms are imposed by R.B.I. on banks
and other financial institutions to ensure that they know their customers and
to ensure that customers deal only in legitimate banking operations and not
in money laundering or frauds.
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Law of Limitation : Limitation
Act of 1963 fixes the limitation period of debts and obligations including
banks loans and advances. If the period fixed for particular debt or loan
expires, one can not file a suit for is recovery, but the fact of the debt or
loan is not denied. It is said that law of limitation bars the remedy but
does not extinguish the right.
Lease Financing : Financing for the business of renting houses or
lands for a specified period of time and also hiring out of an asset for the
duration of its economic life. Leasing of a car or heavy machinery for a
specific period at specific price is an example.
Letter of Credit : A document issued by importers bank to its branch
or agent abroad authorizing the payment of a specified sum to a person named
in Letter of Credit (usually exporter from abroad). Letters of Credit are
covered by rules framed under Uniform Customs and Practices of Documentary
Credits framed by International Chamber of Commerce in Paris.
Limited Companies Accounts : Accounts of companies incorporated under
the Companies Act, 1956 . A company may be private or public. Liability of
the shareholders of a company is generally limited to the face value of
shares held by them.
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Mandate : Written authority
issued by a customer to another person to act on his behalf, to sign cheques
or to operate a bank account.
Material Alteration : Alteration in an instrument so as to alter the
character of an instrument for example when date, amount, name of the payee
are altered or making a cheque payable to bearer from an order one or opening
the crossing on a cheque.
Merchant Banking : When a bank provides to a customer various types of
financial services like accepting bills arising out of trade, arranging and
providing underwriting, new issues, providing advice, information or
assistance on starting new business, acquisitions, mergers and foreign
exchange.
Micro Finance: Micro Finance aims at alleviation of poverty and
empowerment of weaker sections in India. In micro finance, very small amounts
are given as credit to poor in rural, semi-urban and urban areas to enable
them to raise their income levels and improve living standards.
Minor Accounts : A minor is a person who has not attained legal age of
18 years. As per Contract Act a minor cannot enter into a contract but as per
Negotiable Instrument Act, a minor can draw, negotiate, endorse, receive
payment on a Negotiable Instrument so as to bind all the persons, except
himself. In order to boost their deposits many banks open minor accounts with
some restrictions.
Mobile Banking : With the help of M-Banking or mobile banking customer
can check his bank balance, order a demand draft, stop payment of a cheque,
request for a cheque book and have information about latest interest rates.
Money Laundering : When a customer uses banking channels to cover up
his suspicious and unlawful financial activities, it is called money laundering.
Money Market : Money market is not an organized market like Bombay
Stock Exchange but is an informal network of banks, financial institutions
who deal in money market instruments of short term like CP, CD and Treasury
bills of Government.
Moratorium : R.B.I. imposes moratorium on operations of a bank; if the
affairs of the bank are not conducted as per banking norms. After moratorium
R.B.I. and Government explore the options of safeguarding the interests of
depositors by way of change in management, amalgamation or take over or by
other means.
Mortgage : Transfer of an interest in specific immovable property for
the purpose of offering a security for taking a loan or advance from another.
It may be existing or future debt or performance of an agreement which may
create monetary obligation for the transferor (mortgagor).
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NABARD : National Bank for
Agriculture & Rural Development was setup in 1982 under the Act of 1981.
NABARD finances and regulates rural financing and also is responsible for development
agriculture and rural industries.
Negotiation : In the context of banking, negotiation means an act of
transferring or assigning a money instrument from one person to another
person in the course of business.
Non-Fund Based Limits : Non-Fund Based Limits are those type of limits
where banker does not part with the funds but may have to part with funds in
case of default by the borrowers, like guarantees, letter of credit and
acceptance facility.
Non-Resident : A person who is not a resident of India is a
non-resident.
Non-Resident Accounts : Accounts of non-resident Indian citizens opened and
maintained as per R.B.I. Rules.
Notary Public : A Lawyer who is authorized by Government to certify
copies of documents .
NPA Account : If interest and instalments and other bank dues are not
paid in any loan account within a specified time limit, it is being treated
as non-performing assets of a bank.
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Off Balance Sheet Items :
Those items which affect the financial position of a business concern, but do
not appear in the Balance Sheet E,g guarantees, letters of credit . The
mention "off Balance Sheet items" is often found in Auditors
Reports or Directors Reports.
Online Banking : Banking through internet site of the bank which is
made interactive.
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Pass Book : A
record of all debit and credit entries in a customer's account. Generally all
banks issue pass books to Savings Bank/Current Account Holders.
Personal Identification Number (PIN) : Personal Identification Number
is a number which an ATM card holder has to key in before he is authorized to
do any banking transaction in a ATM .
Plastic Money : Credit Cards, Debit Cards, ATM Cards and International
Cards are considered plastic money as like money they can enable us to get
goods and services.
Pledge : A bailment of goods as security for payment of a debt or
performance of a promise, e.g pledge of stock by a borrower to a banker for a
credit limit. Pledge can be made in movable goods only.
Post-Dated Cheque : A Cheque which bears the date which is subsequent
to the date when it is drawn. For example, a cheque drawn on 8th of February,
2007 bears the date of 12th February, 2007.
Power of Attorney : It is a document executed by one person - Donor or
Principal, in favour of another person , Donee or Agent - to act on behalf of
the former, strictly as per authority given in the document.
Premature Withdrawals : Term deposits like Fixed Deposits, Call
Deposits, Short Deposits and Recurring Deposits have to mature on a
particular day. When these deposits are sought to be withdrawn before
maturity , it is premature withdrawal.
Prime Lending Rate (PLR) : The rate at which banks lend to their best
(prime) customers.
Priority Sector Advances : consist of loans and advances to
Agriculture, Small Scale Industry, Small Road and Water Transport Operators,
Retail Trade, Small Business with limits on investment in equipments,
professional and self employed persons, state sponsored organisations for lending
to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help
groups and consumption loans.
Promissory Note : Promissory Note is a promise / undertaking given by
one person in writing to another person, to pay to that person , a certain
sum of money on demand or on a future day.
Provisioning : Provisioning is made for the likely loss in the profit
and loss account while finalizing accounts of banks. All banks are supposed
to make assets classification . and make appropriate provisions for likely
losses in their balance sheets.
Public Sector Bank : A bank fully or partly owned by the Government.
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Rescheduling of Payment :
Rearranging the repayment of a debt over a longer period than originally
agreed upon due to financial difficulties of the borrower.
Restrictive Endorsement : Where endorser desires that instrument is to
be paid to particular person only, he restricts further negotiation or
transfer by such words as "Pay to Ashok only". Now Ashok cannot
negotiate the instrument further.
Right of Appropriation : As per Section 59 of the Indian Contract Act,
1972 while making the payment, a debtor has the right to direct his creditor
to appropriate such amount against discharge of some particular debt. If the
debtor does not do so, the banker can appropriate the payment to any debt of
his customer.
Right of Set-Off : When a banker combines two accounts in the name of
the same customer and adjusts the debit balance in one account with the
credit balance in other account, it is called right of set-off. For example,
debit balance of Rs.50,000/- in overdraft account can be set off against
credit balance of Rs.75,000/- in the Savings Bank Account of the same customer,
leaving a balance of Rs.25,000/- credit in the savings account.
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Safe Custody :
When articles of value like jewellery, boxes, shares, debentures, Government
bonds, Wills or other documents or articles are given to a bank for safe
keeping in its safe vault,it is called safe custody.. Bank charges a fee from
its clients for such safe custody.
Savings Bank Account : All banks in India are having the facility of
opening savings bank account with a nominal balance. This account is used for
personal purposes and not for business purpose and there are certain
restrictions on withdrawals from this type of account. Account holder gets
nominal interest in this account.
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Teller : Teller is a staff
member of a bank who accepts deposits, cashes cheques and performs other
banking services for the public.
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Underwriting : is
an agreement by the underwriter to buy on a fixed date and at a fixed rate,
the unsubscribed portion of shares or debentures or other issues. Underwriter
gets commission for this agreement.
Universal Banking : When Banks and Financial Institutions are allowed
to undertake all types of activities related to banking like acceptance of
deposits, granting of advances, investment, issue of credit cards, project finance,
venture capital finance, foreign exchange business, insurance etc. it is
called Universal Banking.
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Virtual Banking :
Virtual banking is also called internet banking, through which financial and
banking services are accessed via internet's world wide web. It is called
virtual banking because an internet bank has no boundaries of brick and
mortar and it exists only on the internet.
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Wholesale Banking :
Wholesale banking is different from Retail Banking as its focus is on providing
for financial needs of industry and institutional clients.
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