Sign a PAP or MCC, even better do an NEFT or RTGS, but then you will need to know the IFSC.

Does this sentence make sense to you? Banking has become easier today than ever before, but banking jargons may still flummox you. If you havent encountered them already, you are bound to do so at some point soon. In fact, knowing them may make some of your banking tasks much simpler. Image: Stockxpert We spoke to six major banks in the country to simplify six common terms for you. MICR: Magnetic ink char acter recognition What is it: MICR code (pronounced my-ker) is a nine-digit number printed on banking instruments such as a cheque or a demand draft using a special type of ink made of magnetic material. The first three digits denote the city. The fourth to sixth digits denote the bank, while the last three digits denote the branch number. The code is read by a machine, minimizing the chances of error in clearing of cheques, thereby making funds transfer faster. For example, in the MICR code 400240019, 400 denotes Mumbai, 240 denotes HDFC Bank Ltd and 019 denotes the Colaba branch of the bank. You will find the number on the right of the cheque number at the bottom of the cheque leaf. When do you need it: MICR code allows money to drop directly into your bank account for payments such as salaries and dividends. Your tax refund will come to you faster if you remember to mention this on the refund form. Refunds of unwanted money in initial public offers, too, drop back if you put down your code on the application form. RTGS: Real time gross settlement What is it: Its a fund transfer mechanism that enables money to move from one bank to another on a real time and gross basis. Simply put, real time means the transaction is settled instantly without any waiting period and gross means that it is not bunched with any other transaction. You can transfer a minimum of Rs1 lakh through RTGS; there is no upper ceiling though. The bank will charge you Rs25-Rs50 for an outward RTGS transaction, inward transactions are free. RTGS is the fastest inter-bank money transfer facility available through secure banking channels in India. But not all branches in India are RTGS enabled. Visit the Reserve Bank of Indias (RBI) website for a list of branches where you will get this facility. When do you need it: This facility would be handy during an emergency, when you need to transfer funds quickly, imagine an ill child studying in another city or a parent in an emergency situation and needing money at once. You would be able to use this facility if you use Internet banking as a channel.

It is mostly used by high networth individuals and businessmen, who have at least Rs1 lakh to be transferred business associates or clients. NEFT: National electronic funds transfer What is it: NEFT enables funds transfer from one bank to another but works a bit differently than RTGS since the settlement takes place in batches rather than individually, making NEFT slower than RTGS. The transfer is not direct and RBI acts as the service provider to transfer the money from one account to another. You can transfer any amount through NEFT, even a rupee. You wont have to pay any fee for inward transfer of funds, but for outward transactions the charges can be from Rs5-Rs25 depending on the amount transferred. When do you need it: You can use this facility if you want to transfer funds online in a day or two. NEFT can make life easier for those who need to send money to their parents or children living in another city. It cuts the trouble of issuing a cheque or draft and posting it. NEFT, too, can be done only through Internet banking. Visit RBI website for a list of branches where you will get this facility. IFSC: India financial system code What is it: An 11-digit alphanumeric (letters and numbers) code that helps identify bank branches. The first four numbers represent the banks code (alphabetic), the fifth number is a control character (0), and the next six numbers denote a bank branch. For example, the IFSC for HDFC Bank Ltds Colaba branch in Mumbai reads as HDFC0000085. This code is mentioned on your cheque. Different banks mention it at different places on the cheque. When do you need it: When sending money through RTGS or NEFT, you need to know the IFSC of the receiving branch. CVV: Card verification value What is it: CVV is an anti-fraud security feature that helps verify that you are in possession of your credit card and making the transaction. CVV is usually a three-digit number printed on the signature panel at the back of your credit card. When do you need it: You need this number when shopping online or over the phone. You need to be careful with this number as it can make you a victim of fraud. Its best to remember this number and blacken it off from your card. PAP: Payable at par or MCC: Multi-city cheques What is it: PAP or MCC cheques can be encashed anywhere in India, irrespective of the city they were issued in. They are treated as local clearing cheques across the country. The amount is credited in the

account the same day and there are no inter-city collection charges associated with a normal cheques being encashed in another city. A cheque issued at a branch in Chennai, can be encashed at a branch in Dibrugarh as if it were a local cheque. There would be a notation on the top or the bottom of a cheque indicating its status as as PAP or MCC cheque. When do you need it: By issuing a PAP or MCC cheque, you can save demand draft or cheque clearing costs. Usually, these cheques are issued by companies to disburse dividends or redemption amounts.

Reserve Bank of India

From Wikipedia, the free encyclopedia

Reserve Bank of India

Seal of RBI

The RBI headquarters in Mumbai

Headquarters Coordinates

Mumbai, Maharashtra

18.93337N 72.836201ECoordinates: 18.93337N 72.836201E 1 April 1935 Established Duvvuri Subbarao Governor India Central bank of Indian rupee () Currency ISO 4217 Code INR US$30,210 crore (US$302.1 billion)[1][Note 1] Reserves Base borrowing 8.50% rate Base deposit rate 6.00% http://www.rbi.org.in Website The Reserve Bank of India (RBI) (Hindi: ) is the central banking institution of India and controls the monetary policy of the Indian rupee as well as US$30,210 crore (US$302.1 billion) of currency reserves (in 2011 dollars as of 2011).[1] The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. The share capital was divided into shares of 100 each fully paid which was entirely owned by private shareholders in the beginning.[2] Reserve Bank of India plays an important part in the development strategy of the government. It is a member bank of the Asian Clearing Union. Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of

20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government appointed for a term of four years to represent territorial and economic interests and the interests of co-operative and indigenous banks.

Contents
[hide]

1 History o 1.1 19351950 o 1.2 19501960 o 1.3 19601969 o 1.4 19691985 o 1.5 19851991 o 1.6 19912000 o 1.7 Since 2000 2 Structure o 2.1 Central Board of Directors o 2.2 Governors o 2.3 Supportive bodies o 2.4 Offices and branches 3 Main functions o 3.1 Bank of Issue o 3.2 Monetary authority o 3.3 Manager of exchange control o 3.4 Issuer of currency o 3.5 Developmental role o 3.6 Related functions 4 Policy rates and reserve ratios 5 Further reading 6 Notes 7 References 8 External links

[edit] History
[edit] 19351950

The old RBI Building in Mumbai The bank was founded in 1935 to respond to economic troubles after the first world war.[3] The Reserve Bank of India was set up on the recommendations of the Hilton-Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for another nine years. The Preamble of the Reserve Bank of India describes the basic functions of the Reserve Bank as to regulate the issue of bank notes, to keep reserves with a view to securing monetary stability in India and generally to operate the currency and credit system in the best interests of the country. The Central Office of the Reserve Bank was initially established in Kolkata, Bengal, but was permanently moved to Mumbai in 1937. The Reserve Bank continued to act as the central bank for Myanmar till Japanese occupation of Burma and later up to April 1947, though Burma seceded from the Indian Union in 1937. After partition, the Reserve Bank served as the central bank for Pakistan until June 1948 when the State Bank of Pakistan commenced operations. Though originally set up as a shareholders bank, the RBI has been fully owned by the government of India since its nationalization in 1949.[4]

[edit] 19501960
Between 1950 and 1960, the Indian government developed a centrally planned economic policy and focused on the agricultural sector. The administration nationalized commercial banks[5] and established, based on the Banking Companies Act, 1949 (later called Banking Regulation Act) a central bank regulation as part of the RBI. Furthermore, the central bank was ordered to support the economic plan with loans.[6]

[edit] 19601969
As a result of bank crashes, the reserve bank was requested to establish and monitor a deposit insurance system. It should restore the trust in the national bank system and was initialized on 7 December 1961. The Indian government founded funds to promote the economy and used the slogan Developing Banking. The Government of India restructured the national bank market and nationalized a lot of institutes. As a result, the RBI had to play the central part of control and support of this public banking sector.

[edit] 19691985

Between 1969 and 1980, the Indian government nationalized 6 more commercial banks, following 14 major commercial banks being nationalized in 1969 (as mentioned on the RBI website).[citation needed] The regulation of the economy and especially the financial sector was reinforced by the Government of India in the 1970s and 1980s.[7] The central bank became the central player and increased its policies for a lot of tasks like interests, reserve ratio and visible deposits.[8] The measures aimed at better economic development and had a huge effect on the company policy of the institutes. The banks lent money in selected sectors, like agri-business and small trade companies.[9] The branch was forced to establish two new offices in the country for every newly established office in a town.[10] The oil crises in 1973 resulted in increasing inflation, and the RBI restricted monetary policy to reduce the effects.[11]

[edit] 19851991
A lot of committees analysed the Indian economy between 1985 and 1991. Their results had an effect on the RBI. The Board for Industrial and Financial Reconstruction, the Indira Gandhi Institute of Development Research and the Security & Exchange Board of India investigated the national economy as a whole, and the security and exchange board proposed better methods for more effective markets and the protection of investor interests. The Indian financial market was a leading example for so-called "financial repression" (Mackinnon and Shaw).[12] The Discount and Finance House of India began its operations on the monetary market in April 1988; the National Housing Bank, founded in July 1988, was forced to invest in the property market and a new financial law improved the versatility of direct deposit by more security measures and liberalisation.[13]

[edit] 19912000
The national economy came down in July 1991 and the Indian rupee was devalued.[14] The currency lost 18% relative to the US dollar, and the Narsimahmam Committee advised restructuring the financial sector by a temporal reduced reserve ratio as well as the statutory liquidity ratio. New guidelines were published in 1993 to establish a private banking sector. This turning point should reinforce the market and was often called neo-liberal.[15] The central bank deregulated bank interests and some sectors of the financial market like the trust and property markets.[16] This first phase was a success and the central government forced a diversity liberalisation to diversify owner structures in 1998.[17] The National Stock Exchange of India took the trade on in June 1994 and the RBI allowed nationalized banks in July to interact with the capital market to reinforce their capital base. The central bank founded a subsidiary companythe Bharatiya Reserve Bank Note Mudran Limitedin February 1995 to produce banknotes.[18]

[edit] Since 2000

The Foreign Exchange Management Act from 1999 came into force in June 2000. It should improve the foreign exchange market, international investments in India and transactions. The

RBI promoted the development of the financial market in the last years, allowed online banking in 2001 and established a new payment system in 20042005 (National Electronic Fund Transfer).[19] The Security Printing & Minting Corporation of India Ltd., a merger of nine institutions, was founded in 2006 and produces banknotes and coins.[20] The national economy's growth rate came down to 5.8% in the last quarter of 20082009[21] and the central bank promotes the economic development.[22]

[edit] Structure
[edit] Central Board of Directors
The Central Board of Directors is the main committee of the central bank. The Government of India appoints the directors for a four-year term. The Board consists of a governor, four deputy governors, fifteen directors to represent the regional boards, one from the Ministry of Finance and ten other directors from various fields.

[edit] Governors
The current Governor of RBI is Duvvuri Subbarao. The RBI extended the period of the present governor up to 2013. There are four deputy governors, currently K. C. Chakrabarty, Subir Gokarn, Usha Thorat and Shymla Gopinath.

[edit] Supportive bodies

The Reserve Bank of India has four regional representations: North in New Delhi, South in Chennai, East in Kolkata and West in Mumbai. The representations are formed by five members, appointed for four years by the central government and servebeside the advice of the Central Board of Directorsas a forum for regional banks and to deal with delegated tasks from the central board.[23] The institution has 22 regional offices. The Board of Financial Supervision (BFS), formed in November 1994, serves as a CCBD committee to control the financial institutions. It has four members, appointed for two years, and takes measures to strength the role of statutory auditors in the financial sector, external monitoring and internal controlling systems. The Tarapore committee was set up by the Reserve Bank of India under the chairmanship of former RBI deputy governor S. S. Tarapore to "lay the road map" to capital account convertibility. The five-member committee recommended a three-year time frame for complete convertibility by 19992000. On 1 July 2007, in an attempt to enhance the quality of customer service and strengthen the grievance redressal mechanism, the Reserve Bank of India created a new customer service department.

[edit] Offices and branches

The Reserve Bank of India has 4 zonal offices.[24] It has 22 regional offices at most state capitals and at a few major cities in India. Few of them are located in Ahmedabad, Bangalore, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Lucknow, Mumbai, Nagpur, Patna, and Thiruvananthapuram. Besides it has sub-offices at Agartala, Dehradun, Gangtok, Kochi, Panaji, Raipur, Ranchi, Shimla and Srinagar. The bank has also two training colleges for its officers, viz. Reserve Bank Staff College at Chennai and College of Agricultural Banking at Pune. There are also four Zonal Training Centres at Belapur, Chennai, Kolkata and New Delhi.

[edit] Main functions

Reserve Bank of India regional office, Delhi entrance with the Yakshini sculpture depicting "Prosperity through agriculture".[25]

The RBI Regional Office in Delhi.

The regional offices of GPO (in white) and RBI (in sandstone) at Dalhousie Square, Kolkata.

[edit] Bank of Issue

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole right to issue bank notes of all denominations. The distribution of one rupee notes and coins and small coins all over the country is undertaken by the Reserve Bank as agent of the Government. The Reserve Bank has a separate Issue Department which is entrusted with the issue of currency notes. The assets and liabilities of the Issue Department are kept separate from those of the Banking Department. Originally, the assets of the Issue Department were to consist of not less than two-fifths of gold coin, gold bullion or sterling securities provided the amount of gold was not less than 40 crore (400 million) in value. The remaining three-fifths of the assets might be held in rupee coins, Government of India rupee securities, eligible bills of exchange and promissory notes payable in India. Due to the exigencies of the Second World War and the post-war period, these provisions were considerably modified. Since 1957, the Reserve Bank of India is required to maintain gold and foreign exchange reserves of 200 crore (2 billion), of which at least 115 crore (1.15 billion) should be in gold and 85 crore (850 million) in the form of Government Securities.[citation needed] The system as it exists today is known as the minimum reserve system.

[edit] Monetary authority

The Reserve Bank of India is the main monetary authority of the country and beside that the central bank acts as the bank of the national and state governments. It formulates, implements and monitors the monetary policy as well as it has to ensure an adequate flow of credit to productive sectors. Objectives are maintaining price stability and ensuring adequate flow of credit to productive sectors. The national economy depends on the public sector and the central bank promotes an expansive monetary policy to push the private sector since the financial market reforms of the 1990s.[26] The institution is also the regulator and supervisor of the financial system and prescribes broad parameters of banking operations within which the country's banking and financial system functions. Objectives are to maintain public confidence in the system, protect depositors' interest and provide cost-effective banking services to the public. The Banking Ombudsman Scheme has been formulated by the Reserve Bank of India (RBI) for effective addressing of complaints by bank customers. The RBI controls the monetary supply, monitors economic indicators like the gross domestic product and has to decide the design of the rupee banknotes as well as coins.[27]

[edit] Manager of exchange control

The central bank manages to reach the goals of the Foreign Exchange Management Act, 1999. Objective: to facilitate external trade and payment and promote orderly development and maintenance of foreign exchange market in India.

[edit] Issuer of currency

The bank issues and exchanges or destroys currency and coins not fit for circulation. The objectives are giving the public adequate supply of currency of good quality and to provide loans to commercial banks to maintain or improve the GDP. The basic objectives of RBI are to issue bank notes, to maintain the currency and credit system of the country to utilize it in its best advantage, and to maintain the reserves. RBI maintains the economic structure of the country so that it can achieve the objective of price stability as well as economic development, because both objectives are diverse in themselves.

[edit] Developmental role

The central bank had to perform a wide range of promotional functions to support national objectives and industries.[6] The RBI faces a lot of inter-sectoral and local inflation-related problems. Some of this problems are results of the dominant part of the public sector.[28]

[edit] Related functions

The RBI is also a banker to the government and performs merchant banking function for the central and the state governments. It also acts as their banker. The National Housing Bank (NHB) was established in 1988 to promote private real estate acquisition.[29] The institution maintains banking accounts of all scheduled banks, too.

[edit] Policy rates and reserve ratios

Policy rates, Reserve ratios, lending, and deposit rates as of 13th February, 2012 9.50% Bank Rate 8.50% Repo Rate 7.50% Reverse Repo Rate 5.5% Cash Reserve Ratio (CRR) 24.0% Statutory Liquidity Ratio (SLR) 10.00%10.75% Base Rate 4% Reserve Bank Rate 8.50%9.25% Deposit Rate Bank Rate: RBI lends to the commercial banks through its discount window to help the banks meet depositors demands and reserve requirements. The interest rate the RBI charges the banks

for this purpose is called bank rate. If the RBI wants to increase the liquidity and money supply in the market, it will decrease the bank rate and if it wants to reduce the liquidity and money supply in the system, it will increase the bank rate. As of 13 Feb, 2012 the bank rate was 9.5%. Cash Reserve Ratio (CRR): Every commercial bank has to keep certain minimum cash reserves with RBI. RBI can vary this rate between 3% and 15%. RBI uses this tool to increase or decrease the reserve requirement depending on whether it wants to affect a decrease or an increase in the money supply. An increase in Cash Reserve Ratio (CRR) will make it mandatory on the part of the banks to hold a large proportion of their deposits in the form of deposits with the RBI. This will reduce the size of their deposits and they will lend less. This will in turn decrease the money supply. The current rate is 5.5%. Statutory Liquidity Ratio (SLR): Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger proportion of their resources in liquid form and thus reduces their capacity to grant loans and advances, thus it is an anti-inflationary impact. A higher liquidity ratio diverts the bank funds from loans and advances to investment in government and approved securities. In well-developed economies, central banks use open market operationsbuying and selling of eligible securities by central bank in the money marketto influence the volume of cash reserves with commercial banks and thus influence the volume of loans and advances they can make to the commercial and industrial sectors. In the open money market, government securities are traded at market related rates of interest. The RBI is resorting more to open market operations in the more recent years. Generally RBI uses three kinds of selective credit controls: 1. Minimum margins for lending against specific securities. 2. Ceiling on the amounts of credit for certain purposes. 3. Discriminatory rate of interest charged on certain types of advances. Direct credit controls in India are of three types: 1. Part of the interest rate structure i.e. on small savings and provident funds, are administratively set. 2. Banks are mandatory required to keep 24% of their deposits in the form of government securities. 3. Banks are required to lend to the priority sectors to the extent of 40% of their advances.

RBI The Reserve Bank of India is the apex bank of the country, which was constituted under the RBI Act, 1934 to regulate the other banks, issue of bank notes and maintenance of reserves with a view to securing the monetary stability in India. Demand Deposit A Demand deposit is the one which can be withdrawn at any time, without any notice or penalty; e.g. money deposited in a checking account or savings account in a bank. Time Deposit Time deposit is a money deposit at a banking institution that cannot be withdrawn for a certain "term" or period of time. When the term is over it can be withdrawn or it can be held for another term. Fixed Deposits FDs are the deposits that are repayable on fixed maturity date along with the principal and agreed interest rate for the period. Banks pay higher interest rates on FDs than the savings bank account. Recurring Deposits These are also called cumulative deposits and in recurring deposit accounts, a certain amounts of savings are required to be compulsorily deposited at specific intervals for a specified period. Savings Account Savings account is an account generally maintained by retail customers that deposit money (i.e. their savings) and can withdraw them whenever they need. Funds in these accounts are subjected to low rates of interest. Current Accounts These accounts are maintained by the corporate clients that may be operated any number of times in a day. There is a maintenance charge for the current accounts for which the holders enjoy facilities of easy handling, overdraft facility etc. FCNR Accounts Foreign Currency Non-Resident accounts are the ones that are maintained by the NRIs in foreign currencies like USD, DM, and GBP etc. The account is a term deposit with interest rates linked to the international rates of interest of the respective currencies. NRE Accounts Non-Resident External accounts are the ones in which NRIs remit money in any permitted foreign currency and the remittance is converted to Indian rupees for credit to NRE accounts. The accounts can be in the form of current, saving, FDs, recurring deposits. The interest rates and other terms of these accounts are as per the RBI directives. Cheque Book - A small, bound booklet of cheques. A cheque is a piece of paper produced by your bank with your account number, sort-code and cheque number printed on it. The account number distinguishes your account from other accounts; the sort-code is your bank's special code which distinguishes it from any other bank. Cheque Clearing - This is the process of getting the money from the cheque-writer's account into the cheque receiver's account.

Clearing Bank - This is a bank that can clear funds between banks. For general purposes, this is any institution which we know of as a bank or as a provider of banking services. Bounced Cheque - when the bank has not enough funds in the relevant account or the account holder requests that the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder. The beneficiary of the cheque will have not been paid. This normally incurs a fee from the bank. Credit Rating - This is the rating which an individual (or company) gets from the credit industry. This is obtained by the individual's credit history, the details of which are available from specialist organisations like CRISIL in India. Credit-Worthiness - This is the judgement of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another. Much depends on whether an organization is involved with high risk customers or not. Interest - The amount paid or charged on money over time. If you borrow money interest will be charged on the loan. If you invest money, interest will be paid (where appropriate to the investment). Overdraft - This is when a person has a minus figure in their account. It can be authorized (agreed to in advance or retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility). Payee - The person who receives a payment. This often applies to cheques. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer. Payer - The person who makes a payment. This often applies to cheques. If you write a cheque you are the payer and the recipient of the cheque is the payee. Security for Loans - Where large loans are required the lending institution often needs to have a guarantee that the loan will be paid back. This takes the form of a large item of capital outlay (typically a house) which is owned or partly owned and the amount owned is at least equivalent to the loan required. Internet Banking - Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by the bank Credit Card - A credit card is one of the systems of payments named after the small plastic card issued to users of the system. It is a card entitling its holder to buy goods and services based on the holder's promise to pay for these goods and services. Debit Card Debit card allows for direct withdrawal of funds from customers bank accounts. The spending limit is determined by the available balance in the account.

Loan - A loan is a type of debt. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. There are different kinds of loan such as the house loan, auto loan etc. Bank Rate - This is the rate at which central bank (RBI) lends money to other banks or financial institutions. If the bank rate goes up, long-term interest rates also tend to move up, and vice-versa. CRR - CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their deposits in the form of cash with Reserve Bank of India (RBI). This minimum ratio is stipulated by the RBI and is known as the CRR or Cash Reserve Ratio. Thus, When a banks deposits increase by Rs100, and if the cash reserve ratio is 9%, the banks will have to hold additional Rs 9 with RBI and Bank will be able to use only Rs 91 for investments and lending / credit purpose. Therefore, higher the ratio (i.e. CRR), the lower is the amount that banks will be able to use for lending and investment. This power of RBI to reduce the lendable amount by increasing the CRR makes it an instrument in the hands of a central bank through which it can control the amount that banks lend. Thus, it is a tool used by RBI to control liquidity in the banking system. SLR - SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the bank has to maintain in form of gold, cash or other approved securities. Thus, we can say that it is ratio of cash and some other approved to liabilities (deposits). It regulates the credit growth in India. ATM - An automated teller machine (ATM) is a computerised telecommunications device that provides the clients with access to financial transactions in a public space without the need for a cashier, human clerk or bank teller. On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip, that contains a unique card number and some security information such as an expiration date or CVV. Authentication is provided by the customer entering a personal identification number (PIN)

AER Annual earnings rate on an investment. Annuity A life insurance product which pays income over the course of a set period. Deferred annuities allow assets to grow before the income is received and immediate annuities (usually taken from a year after purchase) allow payments to start from about a year after purchase. APR The annual percentage rate of interest, usually on a loan or mortgage, usually displayed in brackets and representing the true cost of the loan or mortgage as it shows any additional payments beyond the interest rate. Bank Statements This is a statement from the bank giving details of transactions in the relevant account. It can be requested at any intervals required, usually monthly. Bear Market A bear is somebody who believes that the market is falling and a bear market is a falling market. See bull market for the opposite.

Bounced Cheque when the bank has not enough funds in the relevant account or the account holder requests that the cheque is bounced (under exceptional circumstances) then the bank will return the cheque to the account holder. The beneficiary of the cheque will have not been paid. This normally incurs a fee from the bank. Bonds These are securities which pay interest at specified intervals and the principle amount of the loan is paid at maturity. Bull Market A bull is somebody who believes that the market is rising and a bull market is a rising market. See bear market for the opposite. Cashback Mortgages This is when the mortgage provider lends the money for the mortgage and, in addition, a lump sum to pay for, for example, building work to be carried out. Central Clearing Time (in England and Wales) This is the time that it takes for the monies from a cheque to be taken out of the payees account and put into the payers account. This is three working days in England and Wales, as long as the cheque was paid in before 16.30. Certified Documents These are photocopies of original documents that have been signed by a professional i.e. a solicitor, accountant, teacher, doctor or bank official. The professional also states, on the document, "original seen" since they must be able to verify that these are genuine copies and therefore have to have seen the original, they also date the document and put their full name, profession and their address. Charges This is the money paid to the bank for services rendered. Charges include overdraft fees, charges for bouncing cheques, interest on overdraft and any charges that a business account might normally incur. Charge Cards Cards which can be used like a credit card but the charge has to be paid off on the due date. They usually have a high limit or no limit. Cheque Book A small, bound booklet of cheques. A cheque is a piece of paper produced by your bank with your account number, sort-code and cheque number printed on it. The account number distinguishes your account from anyone elses, the sort-code is your banks special code which distinguishes it from any other bank. In times gone by, anything with the correct details and a verifiable signature could act as a cheque. Even an elephant was once used! Cheque Clearing This is the process of getting the money from the cheque-writers account into the cheque receivers account. CHIP and PIN A Chip is a small electronic insert placed into a cheque or credit card. The PIN is a four digit personal identification number which is used with the card by the card-holder. Clearing Bank This is a bank that can clear funds between banks. For general purposes, this is any institution which we know of as a bank or as a provider of banking services.

Contract Hire This is a way of hiring an item of large capital value where the maintenance is the responsibility of the company that hires out the item. A fixed monthly figure is paid and the item can be sold, usually to an unconnected third party. Credit Rating This is the rating which an individual (or company) gets from the credit industry. This is obtained by the individuals credit history, the details of which are available from specialist organisations (Equifax and Experian are the two big operators in the U.K. www.equifax.co.uk and www.experian.co.uk). Credit Scoring This is the process of assessing an individuals credit-worthiness. The process involves taking information from an individual on an application form (for example when applying for a store card) and weighting the answers given. Certain responses will attract higher scores than others and the total score will determine whether or nor the organization wants to do business with the individual, or if they represent too high a credit risk. Credit-Worthiness This is the judgement of an organization which is assessing whether or not to take a particular individual on as a customer. An individual might be considered credit-worthy by one organisation but not by another. Much depends on whether an organization is involved with high risk customers or not. County Court Judgement This is when a judge at a county or small claims court finds against an individual and they have a county court judgement made against them. This is recorded nationwide (and by the credit tracking organizations Experian and Equifax) so anyone wanting to know the credit-worthiness of an individual will know that the county court judgement exists. Once it is paid off then the record remains but it is shown as being paid which reduces the credit risk associated with the person with the county court judgement. Direct Debit An amount of money taken from a bank account, set up by the recipient and can vary in amount and exact time that it is taken from an account. Mortgages are usually direct debits. Endowment Mortgage Interest only is paid over the term of this sort of mortgage and the capital is repaid at the end of the term by using the monies from an endowment policy. Factoring This is when a business sells its invoices to a specialist company or bank which chases payment and pays a percentage of the invoice back to the original business. The business can then continue with its work and problems from cash-flow are reduced by having money from unpaid invoices up-front. Hire Purchase When an item of large capital value is bought over time by paying a deposit and fixing a period over which the loan will run (usually between 12 and 60 months) and then paying fixed and equal repayments over this period. Identity Theft This is when criminals use an innocent persons details to open or use an account to carry out financial transactions. It is very easy to do with an individuals personal details, which is why shredding confidential information is so important.

Identity Verification This is often used by financial institutions to verify the customer and usually takes the form of a pass-word and the answer to an obscure personal question such as the customers mothers maiden-name. Interest The amount paid or charged on money over time. If you borrow money interest will be charged on the loan. It you invest money, interest will be paid (where appropriate to the investment). Interest rates usually bear a close relationship to the Bank of Englands base rate. It is expressed in percent. ISAs This stands for Individual Savings Accounts. These are available to all UK residents over 18 (mini ISAs are available to 16 and 17-year-olds). Investment limits apply to the total contributions made in any tax year, not to the total in the ISA itself. ISAs can be cash, stocks and shares or life insurance. Lease Purchase This is an agreement made on an item of high capital outlay (for example, a car) where the ownership is transferred to the person who is leasing the item at the end of the contract, providing all the terms and conditions of the purchase have been fulfilled. Money Laundering This is when money gained from crime is put into a bank so that it can be accessed safely by the criminals and terrorists. It makes the proceeds of illegal activities easier to get to. Money Transfer This is the movement of money from one account to another. Money Transfer Abroad This is the movement of money from one account to another, the second being in a different country from the first. Offsetting This is when the credit balances in a current and savings account are netted off against the account holders borrowings (typically a mortgage) so that the rate paid on the borrowing is reduced as a result of the credit held in other accounts, which reduces the amount that is being borrowed. Overdraft This is when a person has a minus figure in their account. It can be authorized (agreed to in advance or retrospect) or unauthorized (where the bank has not agreed to the overdraft either because the account holder represents too great a risk to lend to in this way or because the account holder has not asked for an overdraft facility). Payee The person who receives a payment. This often applies to cheques. If you receive a cheque you are the payee and the person or company who wrote the cheque is the payer. Payer The person who makes a payment. This often applies to cheques. If you write a cheque you are the payer and the recipient of the cheque is the payee. PEP Personal Equity Plans have been replaced by ISAs. Existing PEPs can be retained but, since April 1999, no new ones can be opened.

Phishing This is when a criminal uses the internet to try to fraudulently obtain details of peoples accounts so that they can use these accounts themselves, usually to take money out of. Repayment mortgage This is a mortgage where the sum borrowed is paid off by the end of the mortgage term. It involves monthly repayments which consist of the interest on the loan plus some of the capital borrowed. Security for Loans Where large loans are required the lending institution often needs to have a guarantee that the loan will be paid back. This takes the form of a large item of capital outlay (typically a house) which is owned or partly owned and the amount owned is at least equivalent to the loan required. Standing Order A regular payment made out of a current account which is of a set amount and is originated by the account holder. Tessas Tax Exempt Special Savings Accounts.