A lot of our daily activities are linked to banks and the services provided by them; thus, every individual needs to understand at least the basic banking terms and abbreviations. Also, for the people preparing for banking exams and for every person interested in knowing about banks, it is important to understand the terms and abbreviations prevalent in the banking world. In this article, let’s develop a fundamental understanding of these terms and Banking abbreviations. 

Banking terms

Just as the technical term for a bank is that of a financial institution licensed to accept deposits from and advance loans to the individuals and institutions in need; Banking terms refer to the technical terms that are a crucial part of the banking world all around the world. Some important and widely used banking terms are listed below that anyone associated with the Indian Banking system should be aware of: 

Banking terms and their meanings

  1. Available Balance: The amount of money available in your account.
  2. Balance: the difference between the credits and debits in an account. 
  3. Branch: Local office or bureau of a bank.
  4. Base Rate: the minimum interest rate at which banks can lend money to their customers.
  5. Bank Charges: the money paid to a bank for its services. 
  6. Cashback: A kind of cash incentive offered by banks or retailers to their customers on shopping with credit cards.
  7. Credit History: indication of your past history in terms of borrowings and loans.
  8. Collateral: Any valuable asset such as land or gold that a borrower provides to the bank in exchange for a loan.
  9. Compound interest: when interest paid on the deposited money plus the interest accrued previously.
  10. Demat account( short for the Dematerialised account): Used for trading in securities (such as shares, bonds, etc.) and to define the physical ownership of them.
  11. Overdraft: This facility allows the bank holders to borrow over and above their bank balances. It’s a form of short-term loan. 
  12. Plastic money: it refers to either a debit card or a credit card. A debit card allows you to spend money from your bank accounts up to the amount that you have deposited in your account. A credit card, on the other hand, allows you to borrow money from the card issuer up to a certain limit. 
  13. Cash Equivalents: Highly liquid financial assets, which can be converted into cash easily. 
  14. Solvency: when an account holder is able to pay off their dues.
  15. Insolvency: When an account holder is unable to pay their dues. 
  16. Savings Account: The most commonly used type of bank account paying a decent interest rate on deposits allowing limited transactions.
  17. Current Accounts: These kinds of accounts are mainly used by institutions. These accounts allow unlimited daily transactions.
  18. ETF( Electronic Fund Transfer): It is the process of transferring funds between banks, institutions and individuals.
  19. Investments: These are financial assets bought and sold by investors.
  20. Grace Period: the time period wherein a borrower can avoid paying back the loan or credit amount without being charged with a penalty.  

Banking Abbreviations

Apart from being important for our general knowledge, banking abbreviations or bank statement abbreviations are also helpful generally. Especially for Banking aspirants, these banking abbreviations are a very important part of the syllabus and are the most frequently asked. Moving ahead, let’s take a look at some of the most important and commonly used abbreviations.

Abbreviations

  • AFS – Annual Financial Statement
  • ADB- Asian Development Bank
  • ATM- Automated Teller Machine
  • BOP – Balance of Payments
  • BD – Bank Draft
  • BSE- Bombay Stock Exchange
  • BPO – Business Process Outsourcing
  • CD – Certificate of Deposit
  • DER – Debt Equity Ratio
  • CRR – Cash Reserve Ratio
  • DTL – Deferred Tax Liability
  • EBITDA – Earnings Before interest, taxes, depreciation, and amortisation.
  • FinTech- Financial Technology
  • Forex- Foreign Exchange
  • PV – Present Value
  • RTGS- Real Time Gross Settlement.

Conclusion

In the above article, we learned about the significance and utility of Banking terms and abbreviations. We learned how they are very important for various entrance exams and for understanding the day-to-day working of commercial banks. The article also has a list of a number of key banking terms and abbreviations and along with their explanations and abbreviations. In the end, there’s a list of potential questions a reader might have after reading the above paragraph.