Professional Documents
Culture Documents
ATM FRAUDS
Frauds in ATM are taking place all over the world. Here are
some of the modus operandi
OFFICIAL LANGUAGE
01. The Official Language Policy came in force with effect
from 26.01.1950. The act was passed in the year, 1963
02. The Parliamentary Committee on Official Language has to
be constituted with 30 members 20 from Lok sabha and 10
from Rajya Sabha
03. Official Language rules were framed in 1976
04. Official Language Rules are applicable to all states and
union territories except Tamil Nadu
05. Under Rule 5, all letters received in Hindi have to replied
to in Hindi only
06. As per Rule 10c of Official Language act, a letter received
in Hindi is to be replied in Hindi only
07. It is the responsibility of administrative head of each
branch/office/department to ensure that the p;rovisions of
Official Language act are complied with (rule 12(1)
08. Canara Bank Rajabasha Akshay Yojana award to
branches/offices for useage of Hindi
09. Canara Bank Rajabasha Puraskar Yojana award to
employees for using of Hindi in day to day official work
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BANK PROMOTIONS - INDIAN CONTEXT - RAPID READING
EXERCISE: PART: 011
FOREX AT A GLANCE
48. FEMA 1999 came into effect from 01.06.1999
49. Schedule I prohibited TXN
50. Schedule II Central Government permission required
51. Schedule III deals with purpose, limits where RBI
permission is required in cases like gifts exceeding
USD 5000; donations exceeding USD 5000; Private visits
exceeding USD 10000 per financial year; private visits
exceeding USD 25000 per occasion
FCNR(B)
86. LIBOR swap rate prevailing on last day of the month
applicable to respective currency for corresponding
period plus 100 basis points
87. Banks are generally permitted to open accounts in
US dollars,GBP, Euro, AUD, CAD, YEN
88. FCNR (B) accounts not opened in Yen in Canara Bank
89. FCNR FDR minimum one year
90. FCNR KDR minimum one year + one day
91. FCNR FDR Interest payable at the time of maturity if
accepted for a minimum one year
92. If interest is to be paid before maturity date like
monthly/quarterly interest etc minimum period is one
year + one day
93. No interest is payable if closed before one year
94. Joint deposits If one party dies and the account is
closed, no penalty is levied
95. Latest guidelines party is closing FCNR account
before maturity in US dollar; but want to invest in EURO,
then penalty will be 0.5%(however normally penalty is
1%)
53. Break even point means the point where the unit
meets total cost by total sales revenues
54. Contribution in break even analysis is surplus available
in sales revenue after meeting all the variable costs
55. Holding level of raw materials is related to consumption
of raw materials
56. Holding level of stock in process is calculated in relation
to cost of production
57. Level of finished goods is in relation to cost of goods
sold
58. Level of sundry debtors is in direct relation - to gross
sales
59. In funds flow analysis, any increase in sundry creditors for
goods is treated as sources of short term funds
60. Increase in gross block of fixed assets is uses of long
term funds
61. In funds flow analysis, diversion of fund means long
term deficit funded by short term surplus
62. In case of subordination of unsecured loans is available,
then such unsecured loans shall be treated as long term
funds
63. Chargeable current assets are inventories and
receivables
64. The ratio of long term loans to networth of the company is
called debt equity ratio
65. Term loans are considered as long term liabilities whereas
instalments in term loan which are payable within a period
of twelve months are called current liabilities
66. The liquidity of the bank is determined by converting its
assets to cash quickly and at good costs
67. A banks own premises, investments in subsidiaries
represent- fixed assets
18. What is the ceiling of subsidy under SGSY scheme for self
help group ? Rs. 1.25 lakhs
19. In case of KCC, what will be the quantum of insurance in
case of death of the borrower(farmer) ? Rs. 50000.00
20. Vehicle loan financed by banks are registered with Road
Transport Authority with the sole objective of getting the
charge in favour of the bank so that borrower can not
sell the vehicle without the permission of the bank
21. Under Credit Guarantee Fund scheme, the maximum
amount of claim for non fund based limits is none
22. For group exposure purpose, the non fund based limit
sanctioned to a borrower are to be reckoned at which of the
following 100%
23. A company is having stock of Rs. 20 lakhs stored at its
godown. It is insured for Rs. 10 lakhs. The company has sent
stocks for Rs. 4 lakhs for processing at some distant place
where it gets destroyed at the place of processing by
fire. What amount of claim will be adminissible ? Nil
24. Contribution in break even point is equal to selling price
less variable cost
25. Which of the following is the objective of introduction of
KYC ? Check undesirable customers and stop money
laundering
26. XYZ Limited, a company, has paid capital and free
reserves of Rs. 100 crores and it has already borrowed a
sum of Rs. 150 crore on long term basis. It wants to raise
debentures of seven years. What statutory compliance, the
company will need to make ? The companys
shareholders will be required to pass a resolution in the
general body meeting authorizing the board of directors
for the proposed borrowing
the bank do ? The bank will not pay the cheque as the
authority comes to an end with the death of principal
90. In an account a cheque with forged signatures was passed
because the forgery was done in such a way that the same
could not detected despite best efforts. Thereafter, the bank
had sent the statement of the account to the customer who
did not object the debit. Later on he contests the debit.
Under the circumstances, what is the liability of the bank ?
The bank shall be liable as a cheque with forged
signatures is nullity in law
91. What is the responsibility of legal heirs for the
debts ? - They are liable to the extent of assets
inherited by them
92. If a depositor other than Senior citizen desires that TDS
should not be deducted from interest payable on term
deposit, he will be required to submit a declaration on
Form 15G
93. A minor can be granted loan for necessaries of life as
per his status
94. A bill of lading is treated as stale if it is not presented to
the negotiating bank within 21 days from the date of its
issue
95. Inspection of banks by RBI is done under Section 35 of
Banking Regulation act 1949
96. In the call money market, lending and borrowing is done
for overnight
97. In which type of accounts nomination facility is not
permitted ? Safe custody accounts in the name of more
than one person
98. The limitation for TOD is three years from the date of
loan
05.
16.
01. Access:
44. Boot disk: A diskette from which you can boot your
computer
45. Buffer: A place, especially in RAM, for the temporary
storage of data for the purpose of speeding up an operation
such as printing or disk access
46. Browser: It is a software used for viewing pages on the
web
47. Bus: A collection of wires through which data is
transmitted from one part of a computer to another
48. Catche: A special block of fast memory used for
temporary storage of data for quick retrieval
49. CD-ROM: Compact Disc Read Only Memory an optical
storage medium that can hold about 700 MB of data and is
accessed with lasers
50. CGA: Stands for Color Graphics Adapter: CGA allowed a
maximum of four colours at a resolution of 320 x 200 or two
colours at 640 x 200.
51. Clock Speed: The clock speed is the frequency which
determines how fast devices that are connected to the
system bus operate. The speed is measured in millions of
cycles per second
52. Clustering: A technique in which two or more servers
are interconnected and can access a common storage pool
RISK-FENCING:
When a regulated public utility business financially
separates itself from a parent company that engages in nonregulated business. This is done mainly to protect
consumers of essential services such as power, water and
basic telecommunications from financial instability or
bankruptcy in the parent company resulting from losses in
their open market activities. Ring fencing also keeps
customer information within the public utility business
private from the for-profit efforts of the parent companys
other business.
ASSET-LIABILITY MISMATCH:
Banks primary source of funds is deposits, which typically
have short-to medium-term maturities. They need to be paid
back to the investor in 3 to 5 years. In contrast banks
usually provide loans for a longer period to borrowers. Home
loans, for instance, can have a tenure of up to 20 years.
Providing such long term loans from much shorter maturity
funds is called asset-liability mismatch.
KEY RATE DURATION:
Holding all other maturities constant, this measures the
sensitivity of a security or the value of a portfolio to a 1%
change in yield for a given maturity
The calculation is as follows:
Key duration =
Where:
P1 P2
2 x 1% x P3
MACMILLAN COMMITTEE:
In 1929, Lord Macmillan headed Committee of exports,
banking and finance appointed by Government for looking
into banking finance and credit and give recommendations
for development of trade, commerce and employment of
labour.
MACRO:
Very large, covering a wide area e.g. Macro economics
refers to study of the economics of a whole industry or area
or whole group of the population or of whole country to help
economic planning
MALAFIDES:
LABOUR BANKS:
In ordinary parlance, these are bank owned by
workers/labour unions. Mainly they perform saving functions.
They were founded as early as in 1920 in United States of
LEAP YEAR:
A year with 366 days including 29 Feb as an intercalary day.
It occurs after every four years
LEASE:
It is a contract between lessor and lessee for the use of a
specific asset for a predetermined fixed term by the lessee
on payment of a consideration called rentals. The lessor
retains the ownership of the asset and the lessee has
possession and use of the asset over a specified period
LEASE AGREEMENT:
Contains clauses about lease rentals and their payability,
repairs and maintenance of the assets, insurance and return
on expiry of the lease term etc. It is to be stamped as per
concerned State Stamp Act
LEASE HOLD:
The right given in a lease to a person called the lessee to
own and use land or buildings for a stated period of time in
return for payment of rent or premium
LEEWARD:
The side of the ship facing the quarter towards which the
wind is blowing
LEGACY(BEQUEST):
A gift of personal property made in a Will. There are four
types of legacy:
1.
Special legacy a gift of a particular piece of
property
2.
LOCUS STANDI:
A right to be heard or the legal capacity to challenge some
decision
LOK ADALAT:
A statutory forum in India for conciliatory settlement of
legal disputes. The awards passed by it are enforceable like
the decrees of a civil court and the order is final
LONDON INTER BANK OFFERED RATE(LIBOR):
It is the rate at which banks offer to lend funds in the
London International Inter-Bank market by obtaining
quotations from International Banks with specific reference
to periods
KAFFIRS:
The shares of gold company of South Africa. The extraction
of gold in this company has a longstanding history and the
mines here are also famous for diamond and other jewels
KANGAROOS
A stock exchange learn for shares or securities in
Australias land mining and tobacco companies
KARTA
He is the head of a Joint Hindu Family and usually the eldest
male member. A Joint Hindu Family is recognized as a legal
entity and transactions with others is by Karta. In law, the
Karta has implied powers to do various acts such as to open
bank accounts, borrow money, execute documents and
pledge securities on behalf of Hindu Undivided Family and
for the family business
KAWACHA:
Currency of Zambia Capital Lusaka
KAWANGA:
Currency of Angola Capital Luanda
KENYAN SHILLING:
Currency of Kenya Capital Nairobi
KERB TRADING:
It is the malpractice of buying and selling securities, outside
the brokers office and prescribed working hours. It is an
illegal act
KEY FINANCIAL INDICATORS:
In banking the following are considered as important key
financial indicators Average deposits, average advances,
average business, average investments, Interest spread,
operating expenses, gross profit, net profit etc
KEY INDUSTRY:
Basic industry because of unique characteristic holds major
importance in the countrys economy. Eg. Steel,
automobiles, tea, cement etc. If the production is stopped
many other small industries and ancillary industries would
be affected adversely
KEYMAN INSURANCE:
Is the insurance taken by companies to provide
compensation for the loss incurred by way of death,
accident or ill health of a vital employee
KHARIFF CROPS:
KITTY:
Money which has been collected by a group of people to be
used later either for an office party or a get together
KLEINWORT BENSON:
Great Britains biggest Merchant Bank founded in the 1830s
by Mr Alexander Kleinwort, a German Trader in Cuban Sugar
Trade
KNOCK-OFF:
To reduce the price by some amount i.e. certain amount of
the price for cash by virtue of some discount
KNOT:
One nautical mile per hour. This terminology is used by
mariners
KNOW-HOW:
Special skill or knowledge in planning and doing something
new expertise. In foreign collaborations this is of utmost
importance as to whether there is a clause for transfer of
knowhow to other countrys counterparts
KOBO:
A monetary unit of Nigeria worth one hundredth of a naira
KOPEK:
A monetary unit of Russia and Belarus worth one hundredth
of a rouble.
KOPIYKA:
A monetary unit of Ukraine worth one hundredth of a hyvna
KORUNA:
The standard monetary unit of the Czech Republic capital
Prague and Slovakia, capital Bratislava
KRONA:
The standard monetary unit of Sweden and Iceland
KRONE:
The standard monetary unit of Denmark, capital
Copenhagen and Norway, capital Oslo
KRUGERAND:
A South African gold coin that contains exactly one ounce of
pure gold
KUBALIAYAT:
It is a document executed by the lessee accepting the terms
of the lease and undertaking to abide by them
KUDOS
Honour, distinction, tribute, glory, prestige expressed in
terms of appreciation
KUNA:
A standard monetary unit of Croatia divided into 100 Lipas
KURUS:
A monetary unit of Turkey worth one hundredth of a Pira
KWATCHA:
JETTISON:
The act of throwing overboard from a ship a part or all the
cargo so as to lighten and to save when in great danger of
sinking or in an emergency. An ocean carrier as usually
indicated by the bill of lading does not assume liability for
JUSTICE:
The quality of being fair right and just. Title given to judges
particularly to judges of Supreme Court and High Court
JUSTIFY:
Give reasons, for give grounds for e.g. justify the
expenditure
JUVENILE:
Young, teenage, underage, childish, immature behavior
JUXTAPOSED:
Papers or matters placed side by side
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The time limit envisaged under the act is not being adhered
to in disposing off the suits because of inadequate
infrastructure and shortage of recovery personnel with the
DRTs. Nonetheless, the DRT act and subsequent amendment
in 2000 have provided a great improvement over the normal
legal forum
LOK ADALATS:
It is a legal forum for expeditious settlement of loan dues on
consensus arrived between the bank and the borrowers
mediated by the Lok Adalat
SECURITISATION ACT:
The securitisation and financial assets and enforcement of
security interest SARFAESI act 2002 aims to empower
banks as secured creditors to take possession, manage and
sell the securities without the intervention of court/tribunal.
It also aims at Asset Reconstruction by securitization or
reconstruction company. However, loan with balance below
Rs. 1 lakh unsecured loans and loans against collateral of
agricultural land are exempted from the purview of this act.
YIELD CURVE:
It is a single curve that captures the relationship among the
various interest rates that exists in the financial market of a
country. The yield curve is arrived at by joining together
interest rates offered by similar securities of different
tenures. Similarity of the underlying securities is very
important because interest rates on dissimilar securities are
not comparable. So the return on a one year corporate bond
SUBPRIME LENDING:
Subprime lending is a term applying to loans made to those
borrowers who do not have a good credit history. It may be
noted that the term subprime applies to the borrower/s and
not to the loan. It refers to the credit status of the borrower
(less than creditworthy) and has nothing to do with the
amount of loan or type of loan. It refers to the credit history
of the borrower/s which could be quite bad. This is why
subprime borrowers get loans at not the best/lowest rates of
interest but at substantially higher rates of interest.
Subprime loans can be made in any segment-mortgage, car
loans and even credit cards
CONTRARIAN:
In finance, a contrarian is a person who goes against the
general behaviour of the market when it comes to investing,
in the hope of making profit. So, if for example, the
market(or the brokers/investors) takes a pessimistic view of
a stock and sells it wholesale (thereby causing its price to
fall) a contrarian investor will buy the stock at that point.
This behaviour is contrary to the market behaviour. The
contrarian investor behaves like this deliberately because
he/she believes that the market has undervalued the
potential of the company/its stock and that the company/its
stock is likely to bring him/her profits in the future
SYSTEM RISK:
The possibility that the failure to settle by one participant in
a private network would so jeopardize the financial
condition of its net creditors on the network that they in
BUSINESS CORRESPONDENT:
A business correspondent (BC) is an agent who works on
behalf of the banks on an outsourcing basis for taking
banking services to the hitherto non banked centres. The
banking services provided include rural credit disbursement,
delivery of savings and insurance products, small value
payments and remittances. BC is an intermediary between
the bank and the people who are outside the banking sector.
The BC idea has its origin in Brazil where retail vendors,
lottery outlets and post offices double as bank branches
INNOVATIVE PERPETUAL DEBT INSTRUMENT:
To enhance their capital raising options, Reserve Bank of
India allows banks to raise Innovative Perpetual Debt
Instruments (IPDI) which will be eligible for inclusion as
Tier-I capital. Such debt will not have any maturity and will
be perpetual like equity shares. Claims of investors in
Perpetual Debt will be superior to that of equity share
investors and subordinated to that of all other investors.
There is always a restriction on the share of PDI to Tier-I
capital.
VALUE AT RISK (VAR):
Value at Risk (VAR) is an estimate of the maximum loss
possible given in predetermined probability or confidence
level and time horizon. It is commonly used by broking firms
or investment banks to measure the market risk of their
asset portfolios. It is one of the examples of application of
the concept of VAR. The time horizon here would refer to the
time period for which the broking house or investment bank
wishes to hold its portfolio. Typical periods are 1 day, 10
days or 1 year. The confidence level is the probability at
2.
BANKING GLOSSARY PART: 004(IIB)
BRIC COUNTRIES:
BRIC stands for Brazil, Russia, India and China. It is an
acronym that was coined by Goldman Sachs in 2001 to refer
to the fast growing developing countries of Brazil, Russia,
India and China. One of the major arguments put forth by
Goldman Sachs in their report is that by 2050 the output in
the BRIC economies would surpass those of the current
richest countries. These countries are known to encompass
over twentyfive percent of the worlds land coverage, forty
percent of the worlds population and hold a combined GDP
(PPP) of 15.435 trillion dollars. These factors make it very
plausible for these economies to overtake the current
developed countries by 2050
NOSTRO ACCOUNT:
Transactions in foreign exchange take place through bank
accounts. For example, if an export bill of an Indian exporter
sent on a collection basis has to be credited in a bank
account in New York of a bank of India. For this the bank in
India has to have an account in the foreign bank in New
PREFERENCE SHARES:
Preference shares are more like bonds because they always
offer a fixed return known as dividend. This is in contrast
with ordinary shares which may or may not pay out a
dividend. However, preference shares rank ahead of
ordinary shares in terms of dividend payout. If a company is
liquidated, preference shareholders are paid out before
ordinary shareholders. In terms of riskness, therefore,
preference shares are less risky than ordinary shares.
FACTORING:
It is a form of financing in which an arrangement for
obtaining finance is made by selling receivables to a
specialized financing agency (the factor) generally without
recourse. This is done by selling invoice receipts to the
factor. Usually, a factor pays up to a certain amount (upto
80%) of the invoice value to the client upon receipt of the
copy of the invoice relating to goods delivered. The
remaining is paid after receiving the amount due from the
firms customer. To ensure timely collection, the factor
bears the responsibility and attendant risk of collecting the
dues from the companys customers.
CREDIT DERIVATIVES:
Credit derivatives can be defined as arrangements that
allow one party (protection buyer or originator) to transfer,
for a premium, the defined credit risk, or all credit risk,
computed with reference to a notional value, of a reference
asset or assets, which it may or may not own, to one or
more other parties (the protection sellers). Thus in a credit
derivative, only the risk is transferred and not the underlying
IPO:
Initial Public Offer (IPO) is the first sale of a companys
common shares to the public. Common shares are the usual
and most commonly held form of stock(or shares) held in the
corporation. It signals a companys floatation on the stock
exchange. An IPO also binds a company to stock exchange.
An IPO also binds a company to standards of financial
reporting and makes it responsible to its shareholders.
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BANKING GLOSSARY PART:003(IIB)
CREDIT SCORE:
Credit score is a three-digit number used by lenders to
evaluate an individuals creditworthiness. A good credit
score means that a person can avail of credit at an interest
rate lower than that offered to others. The score is based on
a set of criteria that includes, among other things, past loan
history, number and amount of loans taken, number and
FUTURES CONTRACT
Futures contract or simply futures, refers to a contract to
trade any asset (equities, commodities etc) on a future date.
While futures and forward contracts are both a contract to
trade on a future date, there are a few differences between
the two, which are as follows:
1) Futures are always traded on an exchange, whereas
forwards always trade over the counter.
2) Futures are highly stantardised, whereas each forward is
unique.
3) The price of which the contract is finally settled is
different futures are settled at the settlement price fixed
on the last trading date of the contract (i.e. at the end)
whereas forwards are settled at the forward price agreed on
the trade date (i.e. at the beginning)
4) The credit risk of futures is much lower than that of
forwards as the profit or loss on a futures position is
exchanged in cash every day. After this, the credit exposure
is again zero. However, the profit or loss on a forward
contract is only realized at the time of settlement, so the
credit exposure can keep on increasing.
MONEY CHANGERS:
Money Changers are persons/entities who are authorized to
deal in India (to a limited extent) in foreign currencies or
securities. Money Changer licenses are usually granted to
those businesses which are engaged in the activities of
travel agents, hotels, antique shops, jewellery shops, etc,
that cater to the needs of foreign tourists or visitors and
thereby help in earning foreign exchange for the country.
Money Changers are permitted to deal in foreign currencies
in the following manner:
1.
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SAMURAI BONDS:
Samurai Bonds are offered in the Japanese domestic market
by a non-Japanese entity. Lower incidence of withholding
tax is a major attraction for raising funds in the Japanese
markets. Although there is only a small quantum of savings
between the interest charges of a straight Libor-linked
borrowing and Yen-borrowing linked to a Dollar swap, the
withholding tax factor is what makes a significant
difference.
LIQUIDITY ADJUSTMENT FACILITY:
Liquidity Adjustment Facility is a monetary tool used by the
RBI to modulate the very short term liquidity (daily) in the
system. It does so through repo(repurchase agreement) and
reverse repo transactions. The RBI uses repo operations in
the LAF window to inject liquidity in the system by buying
CBLO:
Collateralised Borrowing and Lending Obligation CBLO is a
money market instrument developed for the benefit of the
entities who have either been phased out from inter bank
call money market or have restricted participation in terms
of ceiling on call borrowing and lending transactions. It is
also meant for those who do not have access to the call
money market but need to borrow/lend funds for short-term.
The word "obligation" in the instrument is important
because a CBLO is an obligation on the part of the borrower
to return the money at a specified future date. In India the
eligible securities for CBLO are central government
also give the bondholder the option to convert the bond into
stock. These types of bonds are attractive to both investors
and issuers. The investors receive the safety of guaranteed
payments on the bond and are also able to take advantage
of any large price appreciation in the companys stock.
(Bondholders take advantage of this appreciation by means
of warrants attached to the bonds, which are activated
when the price of the stock reaches a certain point) Due to
the equity side of the bond, which adds value, the coupon
payments on the bond are lower for the company, thereby
reducing its debt financing costs.
FINANCIAL STABILITY FORUM:
The Financial Stability Forum (FSF) is a forum of senior
representatives of national financial authorities viz., central
banks, supervisory activities and treasury departments,
international financial institutions, international regulatory
and supervisory groupings, committees of central bank
experts and European Central Bank. The FSF is serviced by
a small secretariat housed at the Bank for International
Settlement in Basel, Switzerland. It was convened in April
1999 to promote international financial stability through
information exchange and international co-operation in
financial supervision and surveillance.
NET PRESENT VALUE:
A net present value (NPV) gives the time value of money.
Very simply it gives the value of tomorrows money as it
stands today. It is most commonly used in measuring the
profitability of any investment opportunity. Using a discount
TIER-II BONDS:
Bonds that are issued based on the Tier-II capital of the
banks. The capital of a bank includes Tier-I capital or core
capital, Tier-II capital and Tier-III capital. Tier-II or
supplementary capital comprises subordinated debt of more
than 5 years maturity, loan loss reserves, investment
fluctuation reserves and limited life preference shares. TierII capital is restricted to 100% of Tier-I capital and long term
subordinated debt may not exceed 50% of the Tier-I capital
CAPITAL ADEQUACY RATIO:
Capital Adequacy is a measure of the banks strength,
Minimum capital ratios are set forth by the bank regulators.
Capital has to be maintained as a certain proportion of the
total assets. Currently, a risk-based capital (RBC) framework
agreed to by the Basel Committee(an international group of
central banks and supervisory agencies) applies to banks
around the world. Each country establishes its own
guidelines within the RBC framework. These are known as
IN THE MONEY:
It is a phrase used to describe an option that has positive
intrinsic value. For a call option, this means the current
price of the underlying asset or contract covered by the
option exceeds the option strike (exercise) price. For a put
option, this means the current price of the underlying asset
or contract covered by the option is below the option strike
(exercise) price.
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What is a charge ?
A charge can be defined as a right to have the security made
available through an order of the court
How is charge created ?
Since a charge is nothing but a device to create a security
which is enforceable in a court of law, it is not necessary to
employ any technical or any particular form of expression,
all that is required is that there should be an agreement,
express or implied, to make a particular property as a
security for the payment of money
What is crystallization and when does a charge
crystallizes ?
Crystallisation of a charge means that the floating charge
which was hovering ovr the property has attached itself to
the property. In other words, it has become a fixed charge.
What is the interse priority among charges filed with
Registrar of Companies ?
Ordinarily, when a document is required to be registered
with Registrar of Companies, the rights and liabilities of the
parties to the document relate back to the date of execution
of the document
IMMEDIATE PARTIES:
INTESTATE:
When a person dies without making a will he/she is said to
have died intestate. Under such situation, Court will appoint
an administrator for settlement of the estate/assets of the
person dying intestate
INVENTORY:
A detailed list of things accounted in the process of taking
stock. The various forms in which inventories exist in a
manufacturing company are: raw materials, work in process
and finished goods
INVOICE:
An itemized statement used in business giving complete
summary of a transaction involving the sale of goods with
description of quantity sent to the consignee with a request
for payment
IRREVOCABLE:
Not capable of being revoked or taking back the
commitment. A mandate for salary deduction is treated as
irrevocable which means the same cannot be withdrawn
IRREDEEMABLE:
Lacking any provision for a date for repayment in kind or to
charge for something of equal value.e.g. A debenture with
no dates given for repayment at the time of issue
High Sea Sales are sale of goods while they are in mid-seas
before they arrive at shores. Such sales take place by
transfer/endorsement of documents of title to goods. Import
policy recognizes such sales by canalizing agencies to endusers/actual users
HIRE PURCHASE:
A method of selling goods. It is an operation where the
financier plays the role of a lender. The asset is purchased
by the client and the financier merely finances the purchase
stipulating a margin to be provided by the client. The
interest payment is made along with the instalment and the
aggregate amount is paid in EMIs during the period of the
contract
HIVE OFF:
To split off part of a large company to form a small
subsidiary giving shares in the subsidiary to its existing
shareholders
HOARDING:
To collect for the sake of accumulating e.g. buying
something in bulk quantity in anticipation of a price rise
HOLDER:
The person in possession of a bill of exchange or promissory
note. This person may by the payee, endorsee or a bearer
GAIN:
Any profit, benefit or advantage as opposed to a loss,
appreciation in value of property, difference between cost
and sale price
GALA
The difference between the actual price of a transaction by
a broker and the price quoted to the client
GAMBLING
Making a bet in respect of occurrence of an event in terms
of financial consideration by one person with another
GARNISHEE ORDER
An order of the court obtained by a judgement creditor
attaching funds in the hands of the third party (Banker) who
owes the judgement debtor (customer). The banker
(garnishee) is directed not to release money attached until
further orders. The order contains two parts i.e. order
Nishee and order Absolute,. Order Nishee is a direction
to the banker not to release money until further orders and
order Absolute is for remitting money attached to the court
GDP:
Abbreviation for Gross Domestic Product and it represents
money value of all goods and services produced within a
nations borders but excluding net income from abroad
GENERAL ACCEPTANCE:
One which assents without qualification to the order of the
drawer i.e. where the drawee signs his name on the bill with
i) Guarantor Banker
ii) Principal Debtor Customer
iii) Beneficiary third party
GUARDIAN
One who takes care the charge or custody of any person
(minor) not legally capable of managing his own affairs.
Father and mother are considered as natural guardians and
in their absence a person appointed by a competent court is
the guardian of the minor.
GUILT
Confession by the defendant that he has committed the
offence with which he is charged
GOVERNMENT COMPANY
Means any company in which not less than fifty one percent
of the paid up share capital is held by the Central
Government or by any State Government or partly by central
and partly by state government
GAP (FEX)
The period in foreign exchange transactions, between the
maturities for purchase and the maturities for sale of each
foreign currency
GREEN CLAUSE LETTER OF CREDIT
A refinement of the red clause credit which not only permits
FACTOR:
A factor is a mercantile agent employed to buy, sell or deal
with goods. He has an authority to buy and sell goods in his
own name on the usual terms of credit, and to receive
payment so as to bind his principal. He has a general lien
upon the goods and he has an insurable interest in them.
The general lien, however, is available only for debts due to
him as a factor.
FACSIMILE:
An exact copy of printing picture, handwriting, signature
etc., prescribing the marks of the original.
FICTITIOUS ASSETS:
A fictituous asset is an asset which cannot be brought
within the two other categories of assets viz., Fixed Assets
and Current Assets. Certain expenses are incurred in a new
project such as preliminary expenses (or formation
court for a decree for the sale of property. The court first
passes a preliminary decree which is a decree against the
mortgager giving him time to redeem the property. On his
failure to redeem the property within the stipulated time
given by the court, a final decree is passed. It is a decree
ordering the sale of the mortgaged property. A final decree
completely disposes off the suit.
FINANCIAL GUARANTEE:
As the name itself suggests, this is a type of guarantee,
whereby a financial liability is undertaken by the banker.
Normally, all types of guarantees executed by the banker
involve the banker in financial liability. However, where
under the contract entered into by the customer of the
banker, cash deposits or earnest moneys are required to be
deposited by the customer for due performance of his part
of the contract, it is stipulated that the customer may, in
lieu of cash deposit or earnest money, give his bankers
guarantee. The guarantee, so executed by the banker is
usually known as a financial guarantee.
FIRM:
A firm is a business house or partnership. A firm can be a
sole proprietory concern or a partnership concern. Persons
who have entered into partnership with one another are
individually called partners and collectively a firm.
The term firm is merely a commercial notion. Law does
not invest the firm with a legal personality apart from its
partners, except for the purposes of assessment of income
tax.
FISHBOWL:
A technique to improve communication and collaboration
between two interfacing groups. The groups meet and are
arranged in two concentric circles, one group in the inner
circle and one in the outer. The inner group discusses its
own problems and its problems with the other group, while
the group in the outer circle listens and observes. Then the
groups reverse positions and the process is repeated with
the new inner group doing the talking.
FISCAL DEFICIT
It is the difference between revenue receipt plus non-debt
capital receipts on one side and total expenditure including
loans, net of repayment on the other side.
FIXED ASSETS:
Fixed assets are what a concern owns for the purpose of
production and are not normally available for sale. They are
essentially of a permanent nature and are in constant use to
carry on the business. These are the land buildings, plant
and machinery, tools and equipment, furniture and fixtures,
motor cars and delivery vans and so on. Fixed assets are
employed continuously and remain their particular form or
shape until depreciated, sold off, thrown away or pulled
down.
FIXED CAPITAL:
and risks till the goods are loaded on board the ship
FREE PORT
A port where ships of all countries can load or unload free of
customs duty on either imports or exports
FRINGE BENEFIT
Benefits granted by an employer to an employee in addition
to the basic wage or salary
FREIGHT
A charge paid to a carrier for the carriage of goods in a ship
or by rail, air, road or water
FREE ZONE
An area within a country regarded as being outside its
customers territory. Importers may bring goods of foreign
origin into such zones without paying customs duties and
taxes pending processing procedure.
FUNDS FLOW STAEMENT:
Funds flow statement is a useful tool in the financial
managers analytical kit. It is a report of the financial
operations of the company. The basic purpose of the
statement is to indicate on a historical basis where cash
came from and where it was used. It is often regarded as a
counterpart to the cash budget. The cash budget is a
EARNEST MONEY:
Earnest Money is a security deposit which a person is
required to make at the time of his fliing a tender with the
Government Department, public bodies, etc., Earnest Money
is liable to be forfeited for non-fulfilment of terms of
contract by the person if his tender is accepted.
Bank term deposit receipts are also acceptable to the
government departments etc., in lieu of cash as earnest
money.
ECONOMIC FEASIBILITY:
Term lending institutions have to critically analyse the data
obtained from the borrower to ensure that the project meets
the minimum criteria, before granting any term loan for the
project.
The economic feasibility of a project has reference to the
earning capacity of the project. It is essentially an analysis
of the market for the product to be manufactured. Since
earnings depend on the volume of sales, it is necessary to
determine by an economic feasibility study, how much
output of the new unit or the additional production from an
established unit is likely to be absorbed at a given price in
the market.
EFFECTS NOT CLEARED:
This phrase is used while returning a cheque in those cases
where the drawer has given certain cheques, drafts, etc., for
collection and the same have not yet been collected and
therefore the banker is not in position to meet the cheque
drawn on account of insufficiency of funds in the drawers
account at the moment.
EITHER OR SURVIVOR:
Where two persons jointly open an account with a bank,
they may opt for the style Either or Survivor for the
purpose of operating the account. (The other three options
available to the joint account holders are Former or
Survivor, Latter or Survivor and jointly) In joint deposit
accounts the mandate of either or survivor is being
accepted by commercial banks to provide operational
flexibilities to the joint accountholders so that they can
operate the account singly (individually) i.e. either of the
joint accountholders
ENCUMBRANCE:
A claim or lien or other liability attaching to real property
which diminishes the owners equity in the property. For
considering advance against property accepted as security,
it should be free from any encumbrance
ENDORSEE:
Endorsee is the person in whose favour an endorsement is
made in a negotiable instrument, by its maker or holder. If
the endorser signs his name only, the endorsement is said to
be in blank and if he adds a direction to pay the amount
mentioned in the instrument to, or to the order of a specified
person the endorsement is said tobe infull and the person
so specified is called the endorsee of the instrument.
ENDORSEMENT:
The word endorsement in its literal sense, imports a
writing of ones name on the back thereof, with the intent of
transferring the rights therein. Endorsements may be of any
of the following kinds:
i) General or blank ii) Special or in full iii)partial iv)
restrictive v) conditional
a) Sans Recourse b) Faculatative c) Sans Frais d) Liability
dependent upon a contingency
ENDOWMENT POLICY:
The two commonest forms of life insurance are 1) whole life
ESTATE DUTY:
Death taxes may be levied in two forms viz., estate duty and
inheritance tax. The term estate duty or estate tax is used
to describe a levy payable on the value of all property, real
or personal passing on to an heir following the death of a
person
These taxes are an important source of revenue in most
countries of the world today. Estate duty is to be imposed on
the entire estate of a deceased person. The term estate
includes cash, bullion, jewellery, household effects,
securities, business assets, debts due, house property,
agricultural land, etc. To determine the value of property,
bonafide debts incurred by the deceased are to be deducted
from the assets
ESTOPPEL:
A rule of evidence whereby a man is not allowed to
disapprove facts in the truth of which he has by words or
conduct inducted others to believe, knowing that they might
or would act on such belief. A man is not permitted to resist
an inference which a reasonable person would necessarily
draw from his words or conduct. Where one by his words or
conduct willfully causes another to believe the existence of
a certain state of things and induces him to act in that belief
so as to alter his own previous position, the former is
prevented from averting against the latter a different stage
of things as existing at the same time.
EURO DOLLARS:
The term Euro-dollar began to be used in the late 1950s.
Euro-dollars are basically US dollar balances held with
banks located outside the USA. The prefix Euro is used
because the main markets for these dollars were in Europe.
The principal sources of Euro dollars and other Euro
currencies are central banks who hold large amounts of
foreign currencies as reserves, multinational companies,
investment institutions and more recently the oil exporting
countries wishing to invest their large foreign currency
earnings. The Euro-dollars is the most important currency
dealt in on the Euro-currency markets. The Euro-currency
market is commonly referred to as the Euro-dollar market
because the United States Dollar is the central currency
EURO MARKET:
The Euro- market is an international money and capital
market that trades currencies which are outside their
country of origin. This means that Euro-dollars are dollars
required by banks outside the borders of the United States.
All movements on the Euro-market that are dominated in any
currency will ultimately lead to transfer of assets and
liabilities in the countries where the respective currency
originated.
EXCEEDS ARRANGEMENT:
When a cheque drawn by a customer is returned for want of
funds, the bank gives one of the two reasons i.e. exceeds
arrangement or refer to draweron the cheque returning
DEL CREDERE:
A Del Credere commission is an extra commission paid by
the principal to an agent when the agent guarantees the
solvency of a customer to whom he has sold goods on
credit.
DEPONENT:
A person who makes an affidavit to any statement of fact, or
who gives evidence upon oath, is known as Deponent.
DEPRECIATION:
It is the diminution in value due to various reasons such as
wear and tear, passage of time, obsolescence, etc. through
constant use of such assets as building, plant, machinery,
tools, motor vehicles, etc. It thus, becomes necessary for
every company to set aside each year sums for the eventual
replacement of ageing and inefficient assets. Depreciation
is a loss. If it is not taken into account, the profit and loss
account will not show the correct net profit or net loss.
Further, if the depreciation is not taken into consideration
the asset will be overvalued and so, the balance sheet will
not reveal the true financial position of the concern.
DISSOLUTION OF A PARTNERSHIP:
A partnership is deemed to be terminated when (a) the
purpose of business becomes unlawful, (b) all but one of the
partners lose their capacity to contract (death, insanity,
insolvency or retirement of the other partners) (c) the
DOMICILED BILL:
When a bill of exchange is accepted payable at some place
other than the acceptors private or business address,
usually the acceptors bank, it is known as a domiciled bill.
A drawer may, if he wish, name the domicile or place of
payment in the body of the bill or below the drawees name.
The acceptance in a domiciled bill will be made in writing on
the bill itself in the following form:
Accepted payable at State Bank of India__________branch
Sd/- date
DONATIO MORTIS CAUSA:
A gift made in anticipation of and conditional on the death of
the donor and intended to take effect only in that event is
known as donation mortis causa. The gift is revocable if
the death of the donor does not take place contemplated
and, also, if the donee dies before the donor.
DOUBLE CROSSING:
When a cheque bears two separate special crossings-it is
said to have been doubly crossed. According to Section 127
of the Negotiable Instruments Act, where a cheque is
crossed specially to more than one banker, except when
crossed to an agent for the purpose of collection, the banker
on whom it is drawn shall refuse payment thereon. Thus a
paying banker shall pay a cheque doubly crossed only when
the second banker is acting only as the agent of the first
CALL DEPOSITS:
Deposits accepted from fellow bankers that are repayable
on demand. Interest on call deposit depends upon the
demand for money and its supply
CAPITAL ADEQUACY:
As part of the deregulation process, the necessity for a
uniform prescription for minimum capital requirements has
resulted in the adoption of Basle Committee guidelines on
the basis of a weighted risk assets formula, to ensure that
the advances (assets) made by the Banks bear relation to
capital base.
CAPITAL GAIN:
A financial gain resulting from the sale of a capital asset at
a higher price than what was paid and in case of increase in
value of property, it attracts payment of tax.
CAPITAL RESERVE:
Reserves created out of retained profits derived from nontrading operations of the company is called capital reserves.
CASH ACCRUALS:
Adding back of depreciation and other provisions made in
the Profit and Loss account to net profit, which helps in
finding the actual cash generation in the unit.
CASH FLOW STATEMENT:
It is a statement depicting change in cash position from one
period to another. It indicates efficient cash management by
the borrower.
CASH RESERVE RATIO (CRR)
Banks are required to adhere to statutory requirements
regarding maintenance of liquid assets. Every scheduled
bank is required to maintain with RBI an average daily
balance equal to its demand and time liabilities. This is to
ensure safeguarding the interest of depositors and
soundness of the Banking system.
CERTIFICATE OF INCORPORATION:
Each Public or Private Limited company is required to be
registered under Companies Act. The Registrar of
Companies issues a certificate of incorporation which is a
conclusive evidence having legal existence
BAILMENT:
Section 148 of the Indian Contract Act defines Bailment as
BANKERS CHEQUE:
In accordance with the recommendations of the Working
Group on Customer Service, Bankers cheque was
introduced in State Bank of India in 1976. A bankers cheque
is issued for local payments of and by customers, like
examination fees, electricity bills, municipal bills, etc., in
the place of payment orders or local drafts, which do not
of goods. Along with the Bill of Entry, the importer also has
to produce documents, such as Purchase Order/ Contract,
Suppliers Invoice, Packing List, Import Licence and Bill of
Lading. There is a system of pinpointing the duty amount in
the Bills of Entry and after completion of this action the
importer will have to pay the duty in the customs treasury
either by cash or by bank draft or by Bankers Cheque. After
collecting the duty, the original copy of the bill of entry is
detached and the duplicate, triplicate and quadruplicate
along with the other documents are returned to the
importer. Thereafter, the importer will have to take all the
documents to the Docks and the Appraising Officers posted
there examine the goods and issue Passed Out of Charge
Order. The importer then presents the duplicate copy to the
Port Authorities who will deliver the goods after collecting
the port dues.
BILL OF EXCHANGE:
Section 5 of the Negotiable Instruments Act defines a Bill of
Exchange as, an instrument in writing containing an
unconditional order, signed by the maker, directing a certain
person to pay a certain sum of money only to, or to other of
a certain person or to the bearer of the instrument
A bill of exchange therefore, is a written acknowledgment of
the debt, written by the creditor and accepted by the debtor.
There are usually three parties to a bill of exchange, drawer,
acceptor or drawee and payee. The drawer himself may be
the payee.
BILL OF LADING:
::::::::::::::::::::::::::::
BANKING TERMS A SERIES
ACCEPTANCE:
A Bill is presented for acceptance which has two parties.i.e.
drawer and drawee.Acceptance is writing the name of the
drawee across the face of the bill by which drawee agrees
to the order of the drawer.
Bills payable after sight require presentation for acceptance
in order to fix the date of the maturity of the bill.
Acceptance should be given by the drawee on the bill itself
across the face of the bill, by putting signature, as a token
of acceptance. The concept of acceptance is completed
only when the drawee after accepting the bill delivers it
back to the holder.
ACCEPTOR:
When the drawee in a bill agrees to the order of the drawer
he shows his ascent by signing his name across the bill for
acceptance, and when it is done he is called the acceptor.
The acceptor is the person who is expected to retire the bill
on mautiry.
ACCEPTOR FOR HONOUR:
Generally no person other than the drawee or drawee in
case of need specified in the bill can accept it. However, in
case the original drawee refuses to accept the bill to furnish
better security when demanded by the notary any person
not liable on the bill who wishes that the bill should not be
dishonoured without acceptance by the drawee, may accept
it with the consent of the holder to honour the bill. Such an
acceptor is called as Acceptor for honour
ACCEPTANCE FOR HONOUR:
When the bill is noted or protested for non-acceptance by
the named drawee the acceptor shall declare in writing on
the bill for having honoured the bill. The usual form of such
acceptance is Accepted for the honour of XY-AB
ACCOMMODATION BILL:
A bill which is drawn to accommodate another person
without receiving any consideration is called as
accommodation bill. The main objective of such bill is to
facilitate the drawer to raise funds. Such bills are also
ADMINISTRATION:
Administrator is a person appointed by the court to manage
the property of the deceased. There are two
circumstances/situations:
Where the person dies intestate, i.e. without leaving a will.
In this situation the court appoints a person usually the next
of kin to manage the property of the deceased, called as an
administrator.
Where the person does leaving a will.
i) but does name any one to act as executor
ii) The executor named therein died before the testator.
iii) The executor named therein refuses to act
The court appoints an administrator granting Letter of
Administration with will annexed, to it
AD VALOREM:
It is a Latin word meaning According to the value, and
used in connection with duties and customs on some goods
by stamp duties, relating to the value of the subject matter
to which the document pertains to.
AFFIDAVIT:
It is a written declaration given on oath before an authority
who administers the oath as a solicitor, a magistrate consul
or notary public. Such authority is conferred by the state or
central government. The affidavit should be on a stamp
AMORTISATION:
The gradual reduction of any amount such as the retirement
of a debt by serial payments to the creditor is called
amortization.
ANAMALOUS INSTRUMENT:
Instrument which does not fall within the purview of the
Negotiable Instruments Act but possesses characteristics
akin to negotiable instruments are called anomalous
instruments e.g. dividend warrants, interest warrants,
coupons, pension payment order etc.,
APPARENT TENOR:
It means what appears on the face of the instrument to be
the intention of the parties such as date, amount in words
and figures, signature, cheque serial number, branch name,
crossing etc. Payment in accordance with apparent tenor is
treated as payment in due course and paying banker gets
protection accordingly.
APPROVED SECURITIES:
Securities such as Government of India loans, state
government loans and other trustee securities as defined
under section 20 of the Indian Trust Act, 1882 are called
approved securities, for the purpose of computing the SLR
to be maintained.
ARBITRATION:
APARTMENT:
A separate and self contained premises (being part of a
building) useful for residence, office, show room, shop or
godown. A part of the building which can be occupied
independent of the rest of the parts. However, it may be
accessed through a common area
BETTERMENT CHARGES:
This term indicates the rate per unit area for the land
together with the structure standing thereon
COMPARATIVE SALES METHOD:
In this method, a comparison is made between the property
under valuation with other similar properties that have been
sold
DEPRECIATION:
It represents a loss caused by factors like decay, wear and
tear, obsolescence etc.,
DISTRESS:
In difficulty, needing help
DISTRESS VALUE;
A property is said to have distress value when it can fetch
lower value than the prevailing market value
EASEMENT:
It is a right which the owner or occupier of certain land,
possesses, as such, for the beneficial enjoyment of that
land, to do and continue to do something or to prevent and
continue to prevent something being done, in or upon or in
respect of certain other land not his own
ECONOMIC LIFE:
Beneficial life period ( of a building or its component) The
period during which the economic return from a property is
more than the expenditure on its maintenance and upkeep.
The period upto which it is more beneficial to keep the
building (or the component, as the case may be) than to
FAIR RENT:
It is the rent payable by a tenant under existing rules of the
Rent control act
FREE HOLD PROPERTY
LEASE:
A lease is the outcome of the rightful separation of
ownership and possession
MARKET APPROACH TO VALUE:
Procedure to determine the fair market value of a property
from the sale prices of similar properties
MARKET VALUE:
It is the amount in terms of money which a willing purchaser
is ready to pay for a particular asset and for which a willing
seller is ready to sell his asset under normal circumstances
in an open market
OBSOLESCENCE:
Being no longer beneficial, It is outdated or outmodelled
PARTITION:
Surrender of the joint ownership right in favour of a right of
individual ownership of a part of the property
PLOT COVERAGE:
It is the ratio between the plinth area of the ground floor of
the building and the extent of the land. It is often expressed
in percentage
PROPERTY:
A physical entity bestowing a bundle of rights
PROFIT METHOD:
The procedure consists of determining the annual profit,
SPONSOR:
Sponsor is the promoter of mutual fund. To be a sponsor, the
following eligibility norms are to be complied with:
a) Must carry on business in financial services for a period
of not less than 5 years.
b) Having a positive net worth in all intermediately
preceding five years
c) Has to contribute at least 40% to the networth of AMC
d) Should be a fit and proper person
TRUST:
Indian Trust act of 1882 is applicable and managed by Board
of Trustees having a trust deed. Two third of the trustees
will be independent persons
AMC:
Asset Management Company approved by SEBI manages the
funds by making investments in various types of securities.
Minimum networth Rs. 10 crores and shall have 50%
BALANCED SCHEME:
Investments both in equity and debt instruments in the
proportion indicated in the offer document
MONEY MARKET OR LIQUID SCHEME:
Investments in short term Government securities; aimed to
provide easy liquidity, preservation of capital and moderate
income
GILT SCHEME:
Investments in Government securities
INDEX SCHEMES:
Investments in the securities in the same weightage
comprising a particular index such as BSE sensitive index,
NIFTY etc.,
MONEY MARKET:
Mutual funds invest for a very short period in instruments
like Treasury Certificate, Commercial Paper, Certificate of
period of call money market etc. Here the risk is lowest and
so also the returns
DEBT MARKET:
Mutual funds invest in instruments like Government
securities, PSU bonds, Corporate debentures, floating rate
bond etc. Here the risk is slightly more than in case of
money market and so also the return
EQUITY MARKET:
LAW OF LIMITATION:
The object of law of limitation is to prescribe the period
within which existing rights can be enforced in a Court of
Law. The limitation act however does not of itself create an
obligation or a right to sue where there is no case to do so,
:::::::::::::
BANKING TERMS - LEASING
PASS-THROUGH CONTRACTS:
The public investors have direct ownership of the underlying
portfolio of assets through equitable assignment. The bank
collects the interest and principal payments on the original
loans and passes on the amounts to the public investors
through the SPV
TRADABLE ASSETS:
They are investments in government securities that can be
liquidated before maturity by selling off in the market and
hence they are liquid
NON TRADABLE ASSETS:
They are loans and advances that cannot be liquidated until
the loans are fully repaid by the borrowers and hence they
are illiquid
SECURITISATION:
It can be described as a process by which the illiquid assets
like the loans and advances are pooled together and the
pool is sold to the investors in the market
ASSET BACKED BONDS (ABB)
In asset backed bonds, the Bank sells the assets to its own
subsidiary created for the purpose. The ownership is
retained with the corporate group.The subsidiary creates
bonds and sells to the public investors. Thus the assets get
transferred to the balance sheet of the subsidiary from the
Banks balance sheet. The bonds are secured by the assets
of the subsidiary. The ownership of the underlying securities
is not transferred to the public investors. The subsidiary
collects revenues from the assets and transfers to a Trustee
for disbursement to the public investors
PAY-THROUGH:
It is similar to asset backed bonds. The only difference is
that in ABB the revenues are not dedicated to payment to
the public investors. In pay-through the revenues are
dedicated for payment to the public investors
CREATIVE ACCOUNTING:
As per the Companies Act, it is a legal requirement for
companys accounts to give a true and fare view. However,
there is some scope for managerial judgement in the
preparation of accounts, so that balance sheet figures and
reported income can to some extent be manipulated up or
down by adopting accounting policies what is known as
CREATIVE ACCOUNTING.
HIRE PURCHASE:
It is a type of instalment credit under which the hire
purchaser, called the hirer, agrees to take the goods on hire
at a stated rental, which is inclusive of the repayment of
principal as well as interest, with an option to purchase. The
Hire Purchase Act-1972 defines a hire purchase agreement
as an an agreement under which goods are let on hire and
under which the hirer has an option to purchase them in
accordance with the terms of the agreement
DIFFERENCES BETWEEN LEASING AND HIRE PURCHASE
LEASING
HIRE PURCHASE
Depreciation and investment allowance cannot be claimed
by the lessee
Depreciation and investment allowance can be claimed by
the hirer
The entire lease rental is a tax deductible expense
Only the interest component of the hire purchase instalment
is tax deductible
The lessee, not being the owner of the asset, does not enjoy
the salvage value of the asset
The hirer, being the owner of the asset, enjoys the salvage
value of the asset
LEASING:
It is defined as a contract between the owner of the asset
(lessor) and its actual user (lessee) wherein the user of the
asset (lessee) agrees to pay to the owner of the asset
(lessor) a specified agreed sum at periodical intervals (lease
rentals)
OPERATING LEASE:
The lease period of operating lease or service lease is short
term in nature, which is significantly shorter that the usual
life of the leased asset.In view of this the lease rentals
payable during the lease period are not sufficient to cover
fully the cost of the equipment along with a
reasonable/acceptable rate of return. The operating lease is
usually cancelable at short notice by both the parties viz.,
the lessor and the lessee. It will be the responsibility of the
lessor to maintain the asset, obtain insurance and pay the
taxes and also to absorb obsolescence risk
FINANCIAL LEASE:
It is called as a capital lease and is essentially a form of
borrowing. The period of lease is for an intermediate term to
long term and the lease arrangement is non-cancellable in
nature. During the primary lease period (initial lease period)
of say 3 to 5 years or exceptionally 3 to 8 years, lease
cannot be cancelled. The lessee is responsible for
maintenance of the leased asset, its insurance and payment
of taxes thereon.
LEVERAGED LEASE:
In this arrangement, the asset is financed by a third
party(lender) say to the extent of 70% to 80% of the value of
the asset and the balance 20% to 30% is financed by the
lessor. The lender has full recourse against the lessee
whereas against the lessor, the lender has no recourse at
all. The lessor being the owner of the leased asset is
entitled to the capital allowances on the entire asset even
though his contribution is only the extent of 20% to 30% as
cited above
PUT OPTION:
The right to sell specified amount of one currency against
another currency is known as put option
BUYER:
The person gets the right to buy or a sell specified amount
of one currency against another currency
SELLER(WRITER):
The person who sells the right to buy or sell specified
amount of one currency against another currency
PREMIUM:
The amount paid by the buyer of an option to the seller of an
option. It is non-refundable
STRIKE PRICE:
This represents the pre determined price at which the
option can be exercised
EXERCISE DATE:
A date for delivery of foreign exchange notified by the buyer
to the seller
EXPIRATION DATE:
The last date upto which the option can be exercised
AMERICAN OPTION:
An option which can be exercised at any time between the
initial deal date and the expiry date
EURUPEAN OPTION:
An option which can be exercised only on the expiry date.
IN THE MONEY:
If by exercising option, the buyer has an advantage the
option is called In the Money
AT THE MONEY:
If by exercising option, the buyer has neither advantage nor
disadvantage the option is called At the money
OUT OF MONEY:
If by exercising the option, the buyer has a disadvantage, it
is called out of the money
INTRINSIC VALUE:
The difference between current exchange rate and the
strike price is called Intrinsic value
EXTRINSIC VALUE:.
The total premium paid less intrinsic value is called
extrinsic value.
DIFFERENCES BETWEEN FORWARDS AND OPTIONS
FORWARD
OPTIONS
Forward contracts once entered into shall be binding on the
parties concerned
Options confer rights for the buyer to buy or sell but without
any obligation
Forward contracts are available at premium/discount which
is basically dependent on the interest rate differentials
between the two currencies involved
Premium charged by the writer of the option is for the
services, risks involved and it is non-refundable
By cancelling forward contract normally a no loss no profit
situation is reached
By exercising option to buy or sell, the loss is limited but the
buyer stands to get profits unlimited
FUTURES:
A future contract is a firm obligation to give or take delivery
of a commodity of specific quantity and quality at a specific
date at an agreed price
FORFAITING:
The forfaiter discounts on without recourse basis, the
deferred receivables evidenced by Bills of
Exchange/promissory notes duly co accepted/guaranteed by
the buyers bankers
The exporter thus gets the proceeds on cash sale basis from
the forfaiting agency for their exports on deferred credit
terms at the cost to be borne by the buyer
EXTERNAL COMMERCIAL BORROWINGS:
External commercial borrowings are defined to include
commercial bank loans, buyers credit, suppliers credit,
securitized instruments such as Floating Rate Notes and
Fixed Rate Bonds etc. credit from official export credit
PREFERENCE SHARES:
Preference shares are a kind of hybrid security, containing
features of debt and equity shares. In the event of
liquidation, a preferred share holders claim on assets
comes after that of creditors but before that of ordinary
shareholders. Usually, this claim restricted to the face value
of the share. For example, if the face of a preference share
is Rs. 100/- the investor will entitled to a maximum of
liability of Rs. 100/- in settlement of the principal amount.
Although preference shares carries a stipulated dividend,
the actual payment of dividend is a discretionary, rather
than a fixed obligation of the company. The omission of a
dividend will not result in a default of the obligation of
insolvency of the company. The board of directors has full
power to omit dividend on preference shares if it so
chooses.
CREDITORSHIP SECURITIES:
Creditorship securities, represented in the form of
debentures and bonds, have got a definite and significant
place in the financial plan of a company. A company has to
tap this source of finance for its initial financial
requirements and also for its expansion and development
schemes. It invites the investors to lend money as a loan
instead of contributing it as a part of capital
DEBENTURES:
A debenture is a creditorship security. It may be defined as a
written acknowledgment of debt under the seal of a
company. Debenture carries a fixed rate of interest and
usually secured by a change on the companys assets. The
debentures may be either repayable within a specified
LEASE FINANCING:
This means of financing has developed rapidly in the
decades of sixties and seventies. At present this means of
financing gained considerable importance due to its wide
variety of applications and has gained a substantial increase
in the sheer volume of transactions. Although this type of
financing can be long-term, most lease financing is for
periods of less than ten years. Under the subject of finance
our concern is with financial leases rather than with
operating leases.
LEASE:
A lease is a means by which a firm can acquire the
economic use of an asset for a specific period of time. A
financial lease is a noncanceleable contractual commitment
on the part of a lessee to make a series of payments to a
lesser for the use of an asset. With the help of financial
lease, the lessee requires most of the economic values
SPECIFIC RESERVES:
If the purpose of creating the reserves by setting aside a
portion of the profits every year is specific or definite. Such
reserve is called Specific Reserve. E.g. Reserve for
equalization of dividend. Reserve Redemption of Debentures
etc.
GOING CONCERN VALUE:
This value is the price which a firm could realize if it is sold
as an operating business. This value depends upon the
soundness of the business, presently and in future. The
reputation enjoyed by the firm from the people and from its
customers is considered as goodwill of the firm. The going
concern value is the difference between the firms
liquidation value and its goodwill . The value of the goodwill
of a firm will be positive when it is sold as a going concern.
The going concern value will be always higher than the
liquidation value.
BOOK OR BREAK-UP VALUE:
Book value is determined by the asset values shown the
firms balance sheet. The book value of the firm will be
realistic only when the balance sheet is prepared in
accordance with the generally accepted accounting
principles and conventions. This book value will be different
from the cost value concept of an asset and its presence
true value concept. This is so as the assets are shown in
balance sheet, generally, at original cost minus
depreciation. For various reasons the real value of an asset
will change from time to time but the book value of an asset
does not reveal its real value or its current market value.
REPLACEMENT VALUE:
The book value of assets based on historical costs may not
be relevant in present and future periods. This so due to
changes in price level and value of an assets as on date will
be different to its value of a future date. To avoid the
problem of changing price levels it is often suggested that
assets should be valued on the basis of replacement cost
rather than historical cost. The replacement value of an
asset refers to that amount which the firm would has to
spend if it were to replace its assets.in the current
condition. Replacement cost is estimated by competent
engineering authorities by breaking down property into
various component units for purposes of detailed
examination. This concept of value is significant in case of
public utility concerns where it sometimes becomes a factor
in the determination of tariff rates by government.
PREFERENCE SHARES:
Preference shares are those which carry preferential rights
in the receipts of dividends. It has also got a preferential
right for the replacement of capital, when the company
winds up the rate of dividend is fixed for these shares. But
this dividend on Preference Shares must be paid before any
dividend is paid on other shares. If a company fails to earn
profit in a particular year, the preference shareholders will
not be paid dividend in that year
PLOUGHING BACK OF PROFITS:
The creation of reserves by the company out of is profits
and their utilization for meeting the financial requirements
of the company from time to time is known as Ploughing
back of profits.
When the profits earned by a company, instead of being
distributed to shareholders in the form of dividends are
retained in the business as additional capital, it is called
ploughing back of profits. This process is also known as the
internal financing of self-financing.
SELF FINANCING:
Self financing is a policy pursued by any company having a
sound financial plan, since it creates no problems or
complications as does borrowing either from banks or from
the public. The creation of reserves out of profits and their
utilsation for meeting the financial requirements of the
company from time to time will, no doubt, affect the
payment of dividend to some extent.
::::::::::::
BANKING TERMS - FINANCIAL STATEMENTS
GROSS PROFIT:
Gross Profit is obtained by deducting from turnover, the cost
of raw materials, stores and spares consumed, salaries and
wages and other manufacturing expenses including
depreciation. It shows the income earned by the firm at the
point of production of goods
GP RATIO:
GP Ratio indicates the competitiveness of a firms products
and the efficiency in use of production facilities. A declining
GP ratio may be the result of
a) fall in prices of products
b) increase in input costs not compensated by matching
price increase
c) decline in efficiency in production
d) idle capacity
OPERATING PROFIT:
Operating profit, which is obtained by deducting interest,
administration and selling expenses from Gross Profit,
shows the profits that are entirely due to the working result
of the firm. A firm which has incurred an operating loss can
still produce a net profit through other income, such as
profit on sale of fixed assets
NET PROFIT:
It is obtained by adjusting operating profit for other
income/expenses and thus shows the net results. Provisions
such as for taxes and investment allowance reserve need
not be deducted and net profit may be uniformly arrived at
Profit before tax
::::::::::::::::
BANKING TERMS COST ACCOUNTING
MANAGEMENT ACCOUNTING:
A system of accounting and other data for the purpose of
decision making by management and for planning and
controlling activities
FINANCIAL ACCOUNTING:
A system of recording monetary transactions on double
entry basis for the purpose of knowing the assets and
liabilities as of a given data and the profit/loss made during
the period
COST ACCOUNTING:
A branch of accounts classifying and reclassifying
accounting data for the purpose of cost funding, cost control
and cost studies
CONTROLLER:
A person overall in-charge of accounts department
BUDGET:
A detailed plan of action for future one year containing
quantitative data. Budget is an instrument of planning,
REGRESSION ANALYSIS:
Statistical methods to measure the average amount of
change in the dependent variable that is associated with
unit change in the amounts of one or more dependent
variables
RESPONSIBILITY ACCOUNTING:
Assembly of his expenses according to person in charge of
division/territory/function
ECONOMIC ORDER QUANTITY:
Purchase order determined by minimizing ordering and
carrying costs
CASH FLOW ACCOUNTING:
Evaluation of cash flows both inflow and outflow to a base
point to enable comparision of projects
BETA:
An index of systematic risk. It measures the sensitivity of a
shares returns to the changes in returns on the market
portfolio
BUSINESS RISK:
The relationship between firms sales and its earnings
before interest and taxes (EBIT). In case of operating
leverage increases the firms business risk
CAPITAL:
Long term funds of the firm
DECENTRALISATION:
An organizational structure in which authority
responsibility is delegated to lower levels. It is the opposite
of centralization
GOAL CONGRUENCE:
Harmony of goals at different levels of an organization
SUB-OPTIMISATION:
Less than best result due to goal incongruence
EFFICIENCY:
Right way of doing things. It results in optimal utilization of
available resources
EFFECTIVENESS:
Doing right things
GROSS BURDEN:
All non interest expenses of a branch
NET BURDEN:
Difference between non interest expenses and non interest
income
CONTRIBUTION:
It is the excess of selling price over variable cost
BREAK EVEN ANALYSIS:
It refers to the system of determining that level of activity
where income of a concern exactly equals its expenses
COMMAND AREA:
The geographical area beyond which it may not be
economical for a business concern to extend its operational
activity
INTEREST SPREAD:
Total interest revenue minus total interest cost
NET PROFIT:
Gross profit plus total contribution or total contribution
minus gross loss
NON PERFORMING ASSETS;
Assets which do not generate any income
BUDGET:
A quantitative expression of managements goals and
objectives and a means of monitoring progress towards their
achievement
BUDGET FORMULA:
The required information for a particular budget, stated as a
formula, or equation, such as required production equals
estimated sales plus desired ending finished goods
inventory less beginning finished goods inventory
BUDGETED BALANCE SHEET:
A statement that begins with the current balance sheet
adjusted by information from the pertinent budgets. The
statement can spotlight potentially serious future financial
problems
FINANCIAL ANALYSIS:
The process of reducing a large amount of historical
financial data to a similar set of more useful information for
decision-making purposes
FINANCIAL LEVERAGE:
The use of fixed-promise financing (debt) rather than equity
to finance some portion of firms assets
FINANCIAL LEVERAGE RATIOS:
A set of ratios used to measure the degree of financial
leverage. These ratios are divided into two groups-those
that measure relative amounts of debt and equity and those
that measure promised financial charges relative to
operating income
LIQUIDITY:
Reflects the ability of the firm to meet short term liabilities
as they come due. An asset is said to be liquid if it can
quickly be converted into cash at a relatively certain price
LIQUIDITY RATIOS:
A set of ratios used to measure the ability of the firm to
meet short term liabilities as they become due
PROFITABILITY:
A profitability investment is one that has an expected rate of
return greater than the rate of return required by the
market. In the context of ratio analysis, profitability is
reflected by the Rupees return per unit of investment. The
typical measure of profitability are return onj net worth and
PRINCIPAL CREDITOR:
The person to whom the guarantee is given for due
fulfillment of contract by principal debtor. Principal creditors
is also sometimes referred to as beneficiary
GUARANTOR OR SURETY:
The person who gives the guarantee
FINANCIAL GUARANTEE:
Guarantees to discharge financial obligations to the
customers
PERFORMANCE GUARANTEE:
Guarantees for due performance of a contract by customers
CASH CYCLE:
The time path between the points at which cash is invested
in raw materials until cash is received from customer
payments on credit sales by the firm
CASH FLOW EFFECT:
The change in operating cash flow accompanying a change
in working capital management policy
EQUITY SHARE:
A security which represents ownership interest in a
company
PREFERENCE SHARE:
A share which bears a stated dividend and has priority of
claim over equity shares in the matter of dividend and
assets in the event of liquidation of the company
DEBENTURE:
A long term debt-security issued by a company, having a
fixed maturity and bearing a stated coupon rate (i.e. annual
interest rate on the par value of debenture)
VENTURE CAPITAL:
Long tem funds in equity or quasi-equity forms to finance
high-tech projects involving high risks but having potential
of high profitability
EURO-ISSUE:
A issue of bearer securities issued in a currency other than
that of the country of issue and sold internationally to raise
funds
GLOBAL DEPOSITORY RECEIPTS:
A Global Depository Receipt (GDR) is a negotiable
certificate, denominated in foreign currency, representing a
companys one or more ordinary shares, which is created by
Overseas Depository Bank, authorized by the issue company
OFFSHORE:
Outside the jurisdiction of a particular country
WITHHOLDING TAX:
A tax, deducted in certain countries, on interest payable to
non residents
FINANCIAL INSTITUTION:
A non-banking financial intermediary (a
company/corporation/cooperative society)carrying on
BRIDGE LOAN:
A short term loan given by commercial bank to a borrower
to tide over temporary funds shortage due to delay in
receipt of a sanctioned term loan or proceeds of a public
issue
ESCROW ACCOUNT:
Accounts for which a bank acts as an uninterested third
party(custodian/depository) to ensure compliance with the
terms of the deed between two parties only upon the
fulfillment of some stated conditions. A bank holds such an
account in which funds accumulate to pay taxes, insurance,
instalments, other dues etc.,
LEASE:
It is a method of financing where contractually the
owner(lessor) of an asset grants to a party(lessee) the use
of the asset for a specified period of time (lease period) for
an agreed sum of periodical rent(lease rentals). But
ownership rests with lessor, unless otherwise provided in
the contract
HIRE PURCHASE:
Like leasing it is also method of financing in which the
ownership of assets automatically passes on to the hirer on
payment of all the instalments
FINANCIAL LEASE:
Whenever the lease contract has the objective of
transferring ownership and the risk,reward and
responsibility associated with it to the lessee, it is called a
financial lease or capital lease
OPERATING LEASE:
If under the lease contract, the lessor grants the temporary
possession and use of an asset to the lessee, usually for a
specified period significantly less than assets economic life
for periodic rentals, it is an operating lease
LEVERAGED LEASE:
It is a type of financial lease in which lessor (equity
participant) obtains finance from outside. Financier (debtparticipant) by way of non-recourse debt(where the lender
cannot look to the lessor in the vent of non payment by the
lessee) Most leases are leveraged
NET PRESENT VALUE:
When we discount the future cash inflows at pre-determined
rate and sum then we obtain the Present Value of those
cash inflows. If we deduct the sum of the discounted cash
outflow (which generates the future cash inflow) from this
Present Value, we obtain Net Present Value.
INTERNAL RATE OF RETURN:
It is rate of return in which the sum of the discounted cash
inflows equals the sum of discounted cash outflow. It is the
rate at which Net Present Value is zero.
NET OWNED FUNDS:
It is owners equity and free reserves net of accumulated
loss/intangible assets/deferred revenue expenditure
computed on the basis of last audited Balance Sheet of a
concern
RECEIVABLES:
Any trade debt arising from the sale of goods/services by
client to customer on credit
CREDIT PERIOD:
Funding period accepted by Factor in favour of client
ELIGIBLE DEBT:
Debt approved by Factor for making prepayment
ACTIONABLE CLAIM:
It is a claim to an unsecured debt as defined in Section 3 of
Transfer of Property Act.
LETTER OF DISCLAIMER:
Letter in which the financing bank agrees to waive its
change in respect of the receivables purchased by the
Factor
DEBT TURN AROUND: (DTA)
It indicates the period within which the customers are
making payment of invoices of the clients. Lower DTA may
ensure higher turnover which increase the income of the
Factor
FUNDS-IN-USE (FIU):
It denotes the actual amount lent by a factor or outstanding
amount in the account at any given point of time and
normally within the sanctioned prepayment limit
PREPAYMENT LIMIT
LIBOR:
London Interbank Offered Rate. It is an average of the
interest rates at which leading international banks are
prepared to offer term Euro Dollar deposits to each other. It
is also used as a reference rate in quoting interest rates on
various loans in interbank market.
CAPITAL CHARGE:
Capital Charge denotes the capital funds required to meet
certain regulatory requirements. Capital fund is the
networth of any organizations. It includes owners
contribution and free reserves. For meeting Capital
Adequacy Ratio, subordinated debts are also included under
Tier-II capital
BASLE COMMITTEE:
This committee on banking regulations and supervisory
practices, set up by BIS at Basle, under the Chiarmanship of
Peter Cooks, released in July, 1988, a framework for
achieving international convergence in the measurement of
banks capital and in capital standards. It recommended a
minimum capital to Risk Weighted Assets Ratio of 8% by end
1992
TIER-I CAPITAL:
It represents the core capital. It consists of the banks paid
up capital, statutory reserves and other disclosed free
reserves after deducting equity investments in subsidiaries,
intangible assets and losses
TIER II CAPITAL:
DRAWING LIMIT:
Limit upto which the borrower is permitted to draw,
calculated based on the available security less margin
subject to a maximum of sanctioned limit
STANDARD ASSET:
It is a performing asset and carries not more than normal
credit risk inherent in lending
SUBSTANDARD ASSET:
An NPA of less than two years of age. A term loan with
instalments in arrears for 1 years
LOSS ASSET:
Where the asset is unrealizable because of non-availability
of credit cover or significant level of security
APPROVED SECURITIES:
Securities which are eligible for fulfilling Statutory Liquidity
obligations. For example Dated Central/State Government
securities, Treasury Bills, PSU bonds etc.,
MARKET TO MARKET:
It means comparing the value of a security against the
market value or else against the safe list of RBI or YTM
prescribed by RBI and making depreciation thereon if the
security value is low.
YIELD TO MATURITY:
YTM of an investment is the rate at which the sum of the
present values of future receivables is equal to the price (or
the investment)
AUTHORISED CAPITAL:
The maximum limit of share capital which a company is
authorized to have under its memorandum
PAID UP CAPITAL:
The amount of share capital of a company which is
subscribed and paid up. Place of business any office, suboffice, pay office, sub-pay office and any place at which
deposits are received, cheques cashed or moneys lent.
SUBSTANTIAL INTEREST:
Beneficial interest in a company or firm exceeding the limit
specified in Section 2 of the Banking Regulation Act.
SUBSCRIBED CAPITAL:
The amount of share capital of a company which is issued
and subscribed
SUBSIDIARY:
A company is the subsidiary of another company if the
composition of its Board of Directors is controlled by the
other company of more than half of equity shares is held by
the other company or it is the subsidiary of any company
which is the others subsidiary as provided in Section 4 of
the Companies Act.
AMALGAMATION:
The process of merging one or more companies with
another or two or more existing companies into a new
company
MORATORIUM:
Authorisation under the law for a debtor to postpone
payment of dues for a specified time
SCRUTINY:
An examination of the affairs of any banking company and
its books and accounts by the officers of Reserve Bank
under Section 35(1A) of the Banking Regulation Act.
WINDING UP:
Closing up a companys concerns and settling accounts and
liquidating assets for the purpose of making distribution and
dissolving the company
APPARENT TENOR OF THE INSTRUMENT:
According to what appears on the face of the instrument to
be the intention of the parties
MATERIAL ALTERATION:
Any alteration of an instrument which varies the rights,
liabilities or legal position of the parties
AGREEMENT:
Every promise and every set of promises forming the
consideration of each other
COERCION:
Committing or threatening to commit any act forbidden by
the Indian Postal Code of the unlawful detaining or
threatening to detain any property with an intention of
causing any person to enter into agreement
AGENT:
A person employed to act as an intermediary for another
BAILEE:
The person to whom the goods are delivered
BAILOR:
The person who delivers the goods for bailment
CONTRACT OF AGENCY:
A contract whereby a person acts as an intermediary for
another
CONTRACT OF BAILMENT:
A contract wherein certain goods are delivered by one
person to another for a specific purpose and to be returned
after such purpose or disposed of as directed
CONTINGENT CONTRACT:
A contract the performance of which is dependent on the
happening or non-happening of an event
EXECUTED CONTRACT:
A contract where an offer has become a promise, on being
accepted by the person to whom it is made
EXECUTORY CONTRACT:
A contract where the offer made by one person is yet to be
accepted by the other party to whom it is made
GUARANTEE:
To perform the promise or discharge the liability of a third
BANK GUARANTEE:
A guarantee given by a Bank to a person, to pay him a
certain sum on behalf of the customer, on the customer
failing to fuifill any contractual or legal obligation towards
the said person
BENEFICIARY:
The person to whom the bank gives the guarantee, also
called the creditor
COUNTER GUARANTEE:
A guarantee given by the customer favouring the bank in
turn for the bank giving a guarantee on behalf of the
customer to a third party. This is more or less a guarantee
cum indemnity
DEBTOR:
In a bank guarantee the banks customer on whose behalf
the guarantee is given is the debtor
ACCEPTANCE CREDIT:
A letter of credit where payment is made after a certain
period on the acceptance by the buyer
ADVISING BANK
The bank that advises the credit to the beneficiary
AIRWAY BILL
The document which evidences that the goods have been
received by an airline company or its agent
APPLICANT:
charges.
INVOICE:
The document under a LC that gives details of the sale
ISSUING BANK
The bank that issues the LC
NEGOTIATING BANK
The bank that makes payment on the bills drawn by the
seller, also called the paying bank
RED CLAUSE CREDIT:
Where the beneficiary is entitled to advance payment before
production of documents
REIMBURSING BANK
Bank which reimburses the negotiating/paying/confirming
bank
REVOCABLE CREDIT:
Where the credit terms can be unilaterally altered or
cancelled by the issuing bank
REVOLVING CREDIT:
Where the amount is fixed but can beutilised again and
again as and when the earlier bills drawn are paid
TRANSFERABLE CREDIT:
Where rights under a LC can be transferred to third parties
UCP 500
A document published by the International Chamber of
Commerce which lays down the rights and liabilities of all
parties to an LC transaction
WITH RECOURSE CREDIT:
Where the beneficiary is liable on a bill drawn by him under
a LC
WITHOUT RECOURSE CREDIT:
Where the beneficiary is not liable on a bill drawn by him
under a LC
DEFERRED PAYMENT:
Payment by instalments of the price of goods or services
with interest
DEFERRED PAYMENT GUARANTEE:
A guarantee issued by a bank assuring payment of
instalments and interest on due dates
ARTICLES OF ASSOCIATION:
Rules and regulations governing the internal management of
a company
COMPANY
A juristic person created by law, having a perpetual
succession and Common Seal distinct from its members
HINDU UNDIVIDED FAMILY
A group of persons consisting of male members descended
linealty from a common male ancestor, together with their
any of them
22. External commercial borrowings can be raised under
automatic approval by companies
23. Borrowing power of board of directors, in case of a joint
stock company, is described in articles of association
24. A company has borrowed certain monies from the bank
for an activity which it is not authorised to undertake, as per
its memorandum of association it is ultra vires borrowing
and cannot be recovered from the company
25. Loan of Rs. 25000/- has been obtained by the depositor
against a fixed deposit. Minor is to be appointed in the
account Can be done after repayment of the loan. Terms of
deposit account will not be allowed to be changed during
currency of the loan
26. The number of members in SHG in SGSY, in normal cases
can be between a range of 10 to 20
27. Authorised capital of a company is Rs. 10 lakhs and the
paid up capital Rs 6 lakhs. The loss of previous year is Rs. 1
lakhs and loss in current year is Rs. 2 lakhs. The tangible
networth is Rs. 3 lakhs
28. Net working capital of a firm is Rs. 80000.00 Its current
ratio is 3:1. The current assets will be 120000.000
29. CDR in case of SME account is allowed in for corporate
account from many banks for amount above Rs. 10 lakhs
June 29. The limitation period starts from june 30, 2007
48. In CAMELS, the word C stands for CAPITAL ADEQUACY
RATIO
49. A partner wants to retire from the firm XYZ. He has to
get consent of other partners
50. Service Area Approach guidelines withdrawn by RBI
except of Government Sponsored Schemes as per
recommendations of VS Vyas Committee
51. Government shareholding in public sector banks cannot
be below 51%
52. Registration of partnership firm is not compulsory but
banks prefer registered firms because- they can file suit
against their debtors
53. The limitation period under section 138 NI act begins
from date of cause of action
54. Company increases its networth by revaluation of assets
by Rs. 50000.00. Existing debt equity ratio was 2:1. If long
term liabilities are Rs. 80000.00, the new debt equity ratio
would be 0.9:1
55. If BCTT is not deposited on time, the penalty for nondeposit is Rs. 1000 per day for period of default plus 1p.m.
interest
56. BCTT is chargeable in the account of a private limited
portfolio.
Total business growth ratio i.e. current period?s business
divided by last period?s business. An increasing trend shows
improvement.
Priority sector ratio i.e. PS advances divided by total
advances X 100. The ratio shows the advances mix.
Aggregate deposits are the total deposits of a bank at the
close of the accounting year. These include deposits from
public and deposits from banks. From a different angle, the
aggregate deposits equal the total of all demand and time
deposits. A high deposit figure signifies a bank?s brand
equity, branch network and deposit mobilisation strength.
Average working funds (awf) The AWF at the beginning and
at the close of an accounting year or at times worked out as
fortnight or monthly average.
Working funds These are total resources (total liabilities or
total assets) of a bank as on a particular date. Total
resources include capital, reserves and surplus, deposits,
borrowings, other liabilities and provision. A high AWF
shows a bank?s total resources strength. There is a school
of theory which maintains that working funds are equal to
aggregate deposits plus borrowing. However, more
pragmatic view in consonance with capital adequacy
calculations is, to include all resources and not just deposits
and borrowings.
Net profits are the profits net of provisions, amortization and
taxes.
Operating profits Net profits before provisions and
contingencies are called operating profits. This is an
indicator of a bank?s profitability at the operating level.
Total debt Total debt equals total borrowings plus aggregate
deposits. Total borrowings include borrowings in India and
funds.
Net profit to net worth The ratio is equivalent of the return
on net worth ratio used in other industries. It is indicator of
profitability and return on shareholders? funds.
Operating profits to net worth This is a corollary to NP/NW
ratio and is another indicator of shareholders? return.
Capital adequacy ratio This ratio relates a bank?s core net
worth to its risk-weighted assets. The ratio is internationally
accepted risk-driven measure of a bank?s degree of
capitalization. A higher ratio indicates that a bank is well
capitalized vis-a-vis its perceived risks. It is an excellent
indicator of a bank?s long term solvency.
Risk adjusted net interest margin is refinement of net intt.
margin which factors into provisions made against loan
losses. RANIM represents NII, net of provisions for probable
loan losses as a percentage to total earning assets.
Business is equal to aggregate deposits plus aggregate
advances.
Equity multiplier measures financial leverage and represents
both a profit and risk measurement. It compares assets with
equity and large values indicate a large amount of debt
financing in comparison to equity. It has impact on return on
assets. A critical scrutiny of EM helps to evaluate whether
capital support is proportionate to the risks assumed in the
balance sheet.
BANKING TERMINOLOGY A GLOSSARY
COMPUTER ENVIRONMENT
01. Access: To store or retrieve data
02. Add-on: Circuits, systems, or hardware devices that can
be attached to a computer
to increase its memory or improves its performance
03. Application: A system, such as a payroll, that has been
area
82. LCD: Abbreviation of liquid crystal display, a type of
display used in digital watches and many portable
computers
83. Linux: A version of UNIX that runs on a variety of
hardware platforms. It is open source software, which is
freely available
84. Kilobyte: This is about thousand bytes of space. It is two
to the 10th power of 1024 bytes
85. MPEG: Motion Picture Experts Group
86. Peer to Peer: A type of network in which each
workstation has equivalent capabilities and responsibilities
87. Pen drive: A small device that can be used to easily
transfer files between USB-compatible systems
88. Processor: A processor is a device that processes
programmed instructions and performs tasks
89. RAM: Random Access Memory
90. ROM: Read Only Memory
91. Serial Port: A port or interface that can be used for serial
communication, in which only 1 bit is transmitted at a time
92. SMTP: Simple Mail Transfer Protocol
93. Spam: This is to transmit unwanted messages, usually
over email, to a great many people
94. SLIP: Serial Line Interface Protocol
95. Switch: In networks, a device that filters and forwards
packets between LAN segments. LANs that use switches to
join segments are called switched LANs or, in the case of
Ethernet networks, switched Ethernet LANs
96. WWW: World Wide Web
97. Virus: A program or piece of code that is loaded into the
computer without the knowledge of the computer user and
runs against the wishes of the user
of a bond issue
INDEXED BOND: Bonds whose payments are linked to an
index such as a consumer price index.
INDEX FUND: Investment fund designed to match the returns
on a stock market index.
BOUNCE PROTECTION: California has introduced "bounce
protection" a kind of short term, high-interest credit, for its
local banks. Banks can attach it to current accounts without
authorization. The customer may be charged a fee of as
much as $5 each day, if the account is overdrawn or may
have to pay interest on the amount of insufficient funds
REAL EFFECTIVE EXCHANGE RATE: It is an indicator to
grasp a country's international competitiveness in terms of
its foreign exchange rate, as this cannot be known by
examining individual exchange rates between the domestic
and other currencies. It is the product of nominal bilateral
exchange rate between countries and their relative price
differentials. It is a trade-weighted index which gives an
indication of a country's export competitiveness vis--vis
the rest of the world taking into account the effect of its
exchange rate as well as price differentials vis--vis its
trading partners.
INTERNAL RATE OF RETURN: It is the discount rate at which
net present value of cash inflows and cash outflows is zero.
In case of debt instruments, it is the rate at which
instrument's future cash flows, discounted back to today,
equals its price. In a project evaluation IRR should be equal
to the cost of capital or threshold rate of return.
ASSET LIABILITY MANAGEMENT SYSTEM: it is a system to
manage the assets and liabilities of a bank. It aims at
achieving maximum returns while maintaining adequate
liquidity at all times. ALM involves assessment of various