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Being a bank customer and handling daily financial transactions can expose you to fundamental banking words as well as a lot of financial jargon. Do you understand the distinction between APR and APY? What about a money market account and a CD (certificate of deposit)? Here are some banking terminology you should be familiar with in order to make smarter financial decisions.
Definitions of Banking
A bank is a type of financial institution that is permitted to accept deposits and provide loans. Financial services such as wealth management, currency exchange, and safe deposit boxes may be offered by banks. Retail banks, commercial or corporate banks, and investment banks are among the several types of banks. Banks are governed by the national government or central bank in most nations.
Banking Terms
Repo Rate
Repo Rate In India, the repo rate is the interest rate at which the Reserve Bank of India lends money to commercial banks in need in chevaliers chevaliers chevaliers chevaliers chevaliers chevaliers chevaliers chevaliers cheval This predicament frequently arises during an inflationary period. In India, the repo rate is now at 40%. The bank rate is similar, but it does not demand collateral to provide loans. 4.25 percent is the current bank rate.
Rate of Reverse Repo
The rate at which the Reserve Bank of India borrows money from commercial banks in India. It’s frequently done to keep the market’s money supply under control. 3.35 percent is the current reverse repo rate.
Statutory Liquidity Ratio
Indian banks must hold a specific quantity of cash, gold, and other assets on hand before lending money to customers. The Statutory Liquidity Ratio is what it’s called. This exists to limit the country’s credit expansion. The rate of SLR is 18.50 percent.
Cash Reserve Ratio
All banks in India are required to keep a specific level of funds with the Reserve Bank of India. The Cash Reserve Ratio is the term for this. When the RBI seeks to manage market liquidity, it normally raises it. The CRR rate is now at 3%.
Retail Banking
Many banks across the country provide this service. This allows every customer to easily manage their accounts, access their credit, and secure their funds. Consumer banking is another term for this.
Bitcoin
It is a type of cryptocurrency that may be sent directly from one person to another. The RBI is not in charge of it.
Call Money
It’s a short-term loan with a high interest rate. This has a maturation time of 1 to 14 days. The lender has the right to request the money at any moment. It becomes call money if it is repaid within a day. If it is not repaid within a day, it is considered notice money.
Capital Market / Money Market
Long-term debts are dealt with on the capital market. It raises funds by trading stocks, bonds, and other long-term investments. In both primary and secondary markets, it is feasible. On the other hand, the money market deals with short-term funds. Typically, the maturity time is fewer than 365 days.
Scheduled Bank
The Reserve Bank of India Act of 1934 established the Reserve Bank of India. There are sections to this statute. The Act’s Second Schedule contains a list of banks known as Scheduled Banks. Non-Scheduled Banks are those that aren’t listed.
Non Performing Assets
Any loan that has been overdue for more than 90 – 180 days is considered past due by Indian banks. When a payment or interest is missing, the debt goes into default. The bank’s asset is no longer earning income, making it a non-performing asset.
Types of Banking
Types of Banks | Description |
Branch Banking | It is a common style of banking that is still regarded as an important aspect of Indian banking because many individuals still prefer cash transactions and going to the bank in person for routine banking procedures. Bank branches are the bank’s front desks, where consumers can come in and speak with staff about new investment plans, loans, other banking services, policies, and so on. |
Unit Banking | It is a limited banking practise in which banks serve the local population from a single branch (or a few branches in a given area). Unit banking first appeared in the United States. |
Mixed Banking | Mixed banking refers to when banks combine investment and commercial banking services. Rapid industrialization is aided by mixed banking. |
Chain Banking | It is a system in which three or more independently chartered banks are owned and controlled by a group of people. Individuals accumulate enough stock to gain control of the banking institutions in question. The bank’s management might be established by a board of directors. |
Wholesale banking | It comprises financial services for high-net-worth individuals and businesses, as well as corporate and commercial banks. Wholesaling, joint ventures, underwriting, mergers & acquisitions, consultancy, and other services are available in wholesale banking. |
Relationship banking | Relationship banking entails going above and beyond standard services to understand the needs of customers before recommending a specific product. All banks require information on their current and potential customers. |
Conclusion
A bank account is about more than just saving money; it’s about managing money as well. Opening an account is a wise decision since it gives you access to a service that may help you manage your money and possibly help you borrow money if you need it in the future.
