BankingDomainKnowledgeforTesters

BankingDomainKnowledgeforSoftwareEngineers

WhatisDomain?
Itisanarea,ITindustrypointviewitisproject'sbusinessarea,example:BFSI,ERP,ECommerce,
Healthcare,TelecomandRetailMarketetc

DomainKnowledge
Itisknowledgeaboutaspecificfieldofinterest/subject.ConsideringasoftwareDevelopmentcase,
domainknowledgeisknowledgeabouttheenvironmentinwhichthetargetsystemoperates.

BankingDomain:

AbankisabusinessbankssellfinancialservicessuchasVehicleloans,homemortgageloans,business
loans,checkingaccounts,creditcardservices,certificatesofdeposit,andindividualretirementaccounts
etc...

Somepeoplegotobanksinsearchofasafeplacetokeeptheirmoney.Othersareseekingtoborrow
moneytobuyahouseoracar,startabusiness,expandafarm,payforcollege,ordootherthingsthat
requireborrowingmoney.

Wheredobanksgetthemoneytolend?
Theygetitfrompeoplewhoopenaccounts.Banksactasgobetweensforpeoplewhosaveandpeople
whowanttoborrow.Ifsaversdidntputtheirmoneyinbanks,thebankswouldhavelittleornomoneyto
lend.

TypesofBanks:

a)SavingBanks

Savingbanksareestablishedtocreatesavinghabitamongthepeople.Thesebanksarehelpfulfor
salariedpeopleandlowincomegroups.Thedepositscollectedfromcustomersareinvestedinbonds,
securities,etc.Atpresentmostofthecommercialbankscarrythefunctionsofsavingsbanks.Postal
departmentalsoperformsthefunctionsofsavingbank.

b)CommercialBanks

Commercialbanksareestablishedwithanobjectivetohelpbusinessmen.Thesebankscollectmoneyfrom
generalpublicandgiveshorttermloanstobusinessmenbywayofcashcredits,overdrafts,etc.
Commercialbanksprovidevariousserviceslikecollectingcheques,billofexchange,remittancemoney
fromoneplacetoanotherplace.

c)IndustrialBanks

IndustrialorDevelopmentbankscollectcashbyissuingshares&debenturesandprovidinglongtermloans
toindustries.Themainobjectiveofthesebanksistoprovidelongtermloansforexpansionand
modernizationofindustries.

d)LandMortgageBanks

LandMortgageorLandDevelopmentbanksarealsoknownasAgriculturalBanksbecausetheseare
formedtofinanceagriculturalsector.Theyalsohelpinlanddevelopment.

e)Central/Federal/NationalBank

Everycountryoftheworldhasacentralbank.InIndia,ReserveBankofIndia,inU.S.A,FederalReserve
andinU.K,BankofEngland.Thesecentralbanksarethebankersoftheotherbanks.Theyprovide
specializedfunctionsi.e.issueofpapercurrency,workingasbankersofgovernment,supervisingand
controllingforeignexchange.Acentralbankisanonprofitmakinginstitution.Itdoesnotdealwiththe
publicbutitdealswithotherbanks.TheprincipalresponsibilityofCentralBankisthoroughcontrolon
currencyofacountry.

f)CooperativeBanks

Cooperativebanksgenerallygivecreditfacilitiestosmallfarmers,salariedemployees,smallscale
industries,etc.CooperativeBanksareavailableinruralaswellasinurbanareas.Thefunctionsofthese
banksarejustsimilartocommercialbanks.
g)ExchangeBanks
Thesebanksaremainlyconcernedwithfinancingforeigntrade.
FollowingarethevariousfunctionsofExchangeBanks:
1.Remittingmoneyfromonecountrytoanothercountry,
2.Discountingofforeignbills,
3.BuyingandSellingGoldandSilver,and
4.HelpingImportandExportTrade.

h)ConsumersBanks

Consumersbankisanewadditiontotheexistingtypeofbanks.Suchbanksareusuallyfoundonlyin
advancedcountrieslikeU.S.A.andGermany.Themainobjectiveofthisbankistogiveloansto
consumersforpurchaseofthedurableslikeMotorcar,televisionset,washingmachine,furniture,etc.The
consumershavetorepaytheloansineasyinstallments.

TypesofBankAccounts

Savingsaccounts:

Theyareforpeoplewhowanttokeeptheirmoneyinasafeplaceandearninterestatthesametime.We
dontneedalotofmoneytoopenasavingsaccount.

Certificatesofdeposit:

Theyaresavingsdepositsthatrequireyoutokeepacertainamountofmoneyinthebankforafixed
periodoftime.Usuallybankschargeapenaltyifwewithdrawourmoneyearly.
Individualretirementaccounts:Theyaresavingsdepositsthatofferanexcellentwaytosaveforourlater
years.

CheckingaccountsorCurrentaccounts:

Theyoffersafetyandconvenience.Wekeepourmoneyintheaccountandwriteacheckwhenwewantto
payabillortransfersomeofourmoneytosomeoneelse.Bankssometimeschargeafeeforchecking
accounts,manybanksalsooffernofeecheckingandcheckingaccountsthatearninterestifyouagreeto
keepacertainamountofmoneyaminimumbalanceintheaccount.

Moneymarketdepositaccounts:

Theyaresimilartocheckingaccountsthatearninterest,exceptthattheyusuallypayahigherrateof
interestandrequireahigherminimumbalance.

TypesofLoans

PersonalLoans

PersonalBankLoansarethecreditswhichabankofferstoitscustomertomeethisinstantpersonal
requirementsrangingfromhomerenovationtopurchasingofnewlaptop,agetawaywithfamilyorfor
reimbursingthecreditcardliabilities,forbuyinganewcarorforchild'seducation,etc.Personalloan
simplifiesthecashflowofthecustomerbesideshandlingitsimmediateneeds.

HomeLoans

Almosteveryonewillrequireahomeloaniftheyarelookingtobuyahouseoftheirown.Infactproviding
thatwecanaffordit,gettingahomeloanisoneofthebestinvestmentdecisionsthatwecanmake.

TaxBenefitsonHomeLoans:

AnypersonwhooptsforhomeloanisentitledfortaxbenefitsunderIncomeTaxAct,1961onprincipal
andtheinterestamountintheformofdeductionsfromthechargeableearnings.

BankLoansagainstProperty:

PropertyLoanorLoanagainstpropertyisakindofloanwhichisallowedbythebankontheconditionof
keepingthecustomer'scurrentassetsasasecuritywiththem.Theseloansareveryusefulwhenother
resourcesoffinancinggetexhausted.

BusinessLoans:

Beforestartingabusiness,theentrepreneurshouldbementallyandfinanciallypreparedtoencounterthe
fiscalsetbacksduringtheprocess.Tobailthecompaniesoutfromthefiscalcrunch,severalbanksinIndia
offersbusinessLoansbothformeetingurgentofficialgrowthandexpenses.OtherdetailsofBusiness
LoansofferedbyBanksinIndiaare:

CarLoans:

Everyindividualwanttoownacar.Hence,theneedforcarloansemergesatsomepointortheother.
Whileselectingacarloanitisalwayswisetoscrutinizethevariousoptionsaccessibleinthemarket
besidesanalyzingitsfiscalsuitability.

EducationLoans

EducationLoansofferedbyvariousbanksinIndiaprovidemuchrequiredassistancetofundyourchild's
educationwhenallotherresourcesoffinancegetexhausted.EducationLoansareofferedbyalmostevery
IndianbankthusprovidingampleopportunitytostudentstoundergohighereducationbothinIndiaand
abroad.

TypesofDeposits

a)Savingsaccount

Thesearethesimplestofdeposits.Wedepositmoneyintoouraccountandwecanwithdrawitanytime.
Therewouldbeasmalllimitationonthenumberoftimeswecanwithdrawmoneyfromouraccount.

b)Currentaccount

ThesearesimilartoSavingsaccountswithtwosmalldifferences.Oneis,themoneyinacurrentaccount
doesnotearninterestandtwois,youcanwithdrawanynumberoftimes.Thisaccountisforbusiness
peoplewhowouldhavehighnumberoftransactionsinonesingleday.

c)FixedDeposit

Thisisadepositproductwherewedepositacertainsumofmoneywiththebankforaspecificdurationof
time.Asperthedepositagreementweareexpectedtoletthemoneybewiththebankbasedonthe
deposittenure.Hencetheinterestofferedonsuchdepositsishigherthannormaldeposits.Alsowewill
attractapenaltychargeforpreclosingsuchdeposits

d)RecurringDeposits

Thesearesimilartofixeddepositswithadifferencebeing,youdepositasmallamountofmoneyevery
monthintothisaccountforaspecifieddurationoftimeandthebankwouldcompoundtheinterestevery
monthandpayyouinlumpattheendofthetenure.

BankingTerms:

AccountHolder:
Anypersondesignatedandauthorizedtotransactbusinessonbehalfofanaccount.Eachaccountholder's
signatureneedstobeonfilewiththebank.Thesignatureauthorizesthatpersontoconductbusinesson
behalfoftheaccount.

Affidavit:
Aswornstatementinwritingbeforeaproperofficial,suchasanotarypublic.

AnnualPercentageRate(APR):
Thecostofcreditonayearlybasis,expressedasapercentage.

Application:
Anoralorwrittenrequestforanextensionofcreditthatismadeinaccordancewiththeprocedures
establishedbyacreditorforthetypeofcreditrequested.

Appraisal:
Theactofevaluatingandsettingthevalueofaspecificpieceofpersonalorrealproperty.

AutomatedTellerMachine(ATM):
Amachine,activatedbyamagneticallyencodedcardorothermedium,thatcanprocessavarietyof
bankingtransactions.Theseincludeacceptingdepositsandloanpayments,providingwithdrawals,and
transferringfundsbetweenaccounts.

AutomaticBillPayment:
Achecklesssystemforpayingrecurringbillswithoneauthorizationstatementtoafinancialinstitution.For
example,thecustomerwouldonlyhavetoprovideoneauthorizationform/letter/documenttopaythe
cablebilleachmonth.ThenecessarydebitsandcreditsaremadethroughanAutomatedClearingHouse
(ACH).

AvailableBalance:
Thebalanceofanaccountlessanyhold,uncollectedfunds,andrestrictionsagainsttheaccount.

BalanceTransfer:
Theprocessofmovinganoutstandingbalancefromonecreditcardtoanother.Thisisusuallydoneto
obtainalowerinterestrateontheoutstandingbalance.TransfersaresometimessubjectedtoaBalance
TransferFee.

BankStatement:
Periodicallythebankprovidesastatementofacustomer'sdepositaccount.Itshowsalldepositsmade,all
checkspaid,andotherdebitspostedduringtheperiod(usuallyonemonth),aswellasthecurrentbalance.

BusinessDay:
Anydayonwhichofficesofabankareopentothepublicforcarryingonsubstantiallyallofthebank's
business.

Cashier'sCheck:
Acheckdrawnonthefundsofthebank,notagainstthefundsinadepositor'saccount.However,the
depositorpaidforthecashier'scheckwithfundsfromtheiraccount.Theprimarybenefitofacashier's
checkisthattherecipientofthecheckisassuredthatthefundsareavailable.

CertificateofDeposit:
Anegotiableinstrumentissuedbyabankinexchangeforfunds,usuallybearinginterest,depositedwith
thebank.

Check:
Awrittenorderinstructingafinancialinstitutiontopayimmediatelyondemandaspecifiedamountof
moneyfromthecheckwriter'saccounttothepersonnamedonthecheckor,ifaspecificpersonisnot
named,towhoeverbearsthechecktotheinstitutionforpayment.

CheckTruncation:
Theconversionofdataonacheckintoanelectronicimageafteracheckenterstheprocessingsystem.
Checktruncationeliminatestheneedtoreturncanceledcheckstocustomers.

CheckingAccount:
Ademanddepositaccountsubjecttowithdrawaloffundsbycheck.

CoMaker:
Apersonwhosignsanotetoguaranteealoanmadetoanotherpersonandisjointlyliablewiththemaker
forrepaymentoftheloan.(AlsoknownasaCosigner.)

CreditLifeInsurance:
Atypeoflifeinsurancethathelpsrepayaloanifyoushoulddiebeforetheloanisfullyrepaid.Thisis
optionalcoverage.

CreditLimit:
Themaximumamountofcreditthatisavailableonacreditcardorotherlineofcreditaccount.

Debit:
Adebitmaybeanaccountentryrepresentingmoneyyouowealenderormoneythathasbeentakenfrom
yourdepositaccount.

DebitCard:
Adebitcardallowstheaccountownertoaccesstheirfundselectronically.Debitcardsmaybeusedto
obtaincashfromautomatedtellermachinesorpurchasegoodsorservicesusingpointofsalesystems.
Theuseofadebitcardinvolvesimmediatedebitingandcreditingofconsumers'accounts.

DemandDeposit:
Adepositoffundsthatcanbewithdrawnwithoutanyadvancenotice.

Draft:
Asigned,writtenorderbywhichoneparty(thedrawer)instructsanotherparty(thedrawee)topaya
specifiedsumtoathirdparty(thepayee),atsightorataspecificdate.Typicalbankdraftsarenegotiable
instrumentsandaresimilarinmanywaystochecks.
Drawee:
Theperson(orbank)whoisexpectedtopayacheckordraftwhenitispresentedforpayment.

Draweebank:
Thebankuponwhichacheckisdrawn.

Drawer:
Thepersonwhowritesacheckordraftinstructingthedraweetopaysomeoneelse.

ElectronicBanking:

Aservicethatallowsanaccountholdertoobtainaccountinformationandmanagecertainbanking
transactionsthroughapersonalcomputerviathefinancialinstitution'sWebsiteontheInternet.(Thisis
alsoknownasInternetoronlinebanking.)

ElectronicFundsTransfer(EFT):

Thetransferofmoneybetweenaccountsbyconsumerelectronicsystemssuchasautomatedteller
machines(ATMs)andelectronicpaymentofbillsratherthanbycheckorcash.(Wiretransfers,checks,
drafts,andpaperinstrumentsdonotfallintothiscategory.)

FirstMortgage:

Arealestateloanwhichisinafirstlienposition,takingpriorityoverallotherliens.Incaseofa
foreclosure,thefirstmortgagewillberepaidbeforeanyothermortgages.

FixedRateLoan:

Theinterestrateandthepaymentremainthesameoverthelifeoftheloan.Theconsumermakesequal
monthlypaymentsofprincipalandinterestuntilthedebtispaidinfull.

FixedRateMortgage:
Amortgagewithpaymentsthatremainthesamethroughoutthelifeoftheloanbecausetheinterestrate
andothertermsarefixedanddonotchange.

Float:
Theamountofuncollectedfundsrepresentedbychecksinthepossessionofonebankbutdrawnonother
banks

ForeignTransactionFees:
Afeeassessedbyyourbankformakingatransactionatanotherbank'sATM.

ForgedCheck:
Acheckonwhichthedrawer'ssignaturehasbeenforged.

Forgery:
Thefraudulentsigningoralterationofanother'snametoaninstrumentsuchasadeed,mortgage,or
check.Theintentoftheforgeryistodeceiveordefraud.
Guarantor:
Apartywhoagreestoberesponsibleforthepaymentofanotherparty'sdebtsshouldthatpartydefault.

HomeEquityLoan:
Ahomeequityloanallowsyoutotapintoyourhome'sbuiltupequity,whichisthedifferencebetweenthe
amountthatyourhomecouldbesoldforandtheamountthatyoustillowe.

InactiveAccount:
Anaccountthathaslittleornoactivityneitherdepositsnorwithdrawalshavingbeenpostedtothe
accountforasignificantperiodoftime.

IndividualAccount:
Anaccountinthenameofoneindividual.

InsufficientFunds:
Whenadepositor'scheckingaccountbalanceisinadequatetopayacheckpresentedforpayment.

Interest:
Theterminterestisusedtodescribethecostofusingmoney,aright,share,ortitleinproperty.

JointAccount:
Anaccountownedbytwoormorepersons.Eitherpartycanconducttransactionsseparatelyortogetheras
setforthinthedepositaccountcontract.

Lender:
Anindividualorfinancialinstitutionthatlendsmoneywiththeexpectationthatthemoneywillbereturned
withinterest.

LineofCredit:
Apreapprovedloanauthorizationwithaspecificborrowinglimitbasedoncreditworthiness.Alineof
creditallowsborrowerstoobtainanumberofloanswithoutreapplyingeachtimeaslongasthetotalof
borrowedfundsdoesnotexceedthecreditlimit.

LoanFee:
Afeechargedbyalendertomakealoan(inadditiontotheinterestchargedtotheborrower).

LocalCheck:
Acheckpayableby,at,orthroughabankinthesamecheckprocessingregionasthelocationofthe
branchofthedepositorybank.Thedepositorybankisthebankintowhichthecheckwasdeposited.:

Maturity:
Thedateonwhichtheprincipalbalanceofaloan,bond,orotherfinancialinstrumentbecomesdueand
payable.

MinimumBalance:
Theamountofmoneyrequiredtobeondepositinanaccounttoqualifythedepositorforspecialservices
ortowaiveaservicecharge.

MinimumPayment:
Theminimumdollaramountthatmustbepaideachmonthonaloan,lineofcredit,orotherdebt.

MissingPayment:
Apaymentthathasbeenmadebutnotcreditedtotheappropriateaccount.

Mortgage:
Adebtinstrumentusedinarealestatetransactionwherethepropertyisthecollateralfortheloan.A
mortgagegivesthelenderarighttotakepossessionofthepropertyiftheborrowerfailstopayoffthe
loan.

MortgageLoan:
Aloanmadebyalendertoaborrowerforthefinancingofrealproperty.

Mortgagee:
Thelenderinamortgageloanrelationship.

Mortgagor:
Theborrowerinamortgageloanrelationship.(Propertyisusedascollateraltomakepayment.)

MutualFund:
Afundoperatedbyaninvestmentcompanythatraisesmoneyfromshareholdersandinvestsitinstocks,
bonds,options,commodities,ormoneymarketsecurities.Thesefundsofferinvestorstheadvantagesof
diversificationandprofessionalmanagement.

OfficialCheck:
Acheckdrawnonabankandsignedbyanauthorizedbankofficial.(Alsoknownasacashier'scheck.)

OnlineBanking:
Aservicethatallowsanaccountholdertoobtainaccountinformationandmanagecertainbanking
transactionsthroughapersonalcomputerviathefinancialinstitution'swebsiteontheInternet.(Thisis
alsoknownasInternetorelectronicbanking.)

OutstandingCheck:
Acheckwrittenbyadepositorthathasnotyetbeenpresentedforpaymenttoorpaidbythedepositor's
bank.

Overdraft:
Whentheamountofmoneywithdrawnfromabankaccountisgreaterthantheamountactuallyavailable
intheaccount,theexcessisknownasanoverdraft,andtheaccountissaidtobeoverdrawn.

Overdraw:
Towriteacheckforanamountthatexceedstheamountondepositintheaccount.
Overlimit:
Anopenendcreditaccountinwhichtheassigneddollarlimithasbeenexceeded.

Passbook:
Abookinledgerforminwhicharerecordedalldeposits,withdrawals,andearningsofacustomer's
savingsaccount.

Payee:
Thepersonororganizationtowhomacheck,draft,ornoteismadepayable.

Paying(Payor)Bank:
Abankuponwhichacheckisdrawnandthatpaysacheckorotherdraft.

PaymentDueDate:
Thedateonwhichaloanorinstallmentpaymentisdue.Itissetbyafinancialinstitution.Anypayment
receivedafterthisdateisconsideredlatefeesandpenaltiescanbeassessed.

Payoff:
Thecompleterepaymentofaloan,includingprincipal,interest,andanyotheramountsdue.Payoffoccurs
eitheroverthefulltermoftheloanorthroughprepayments.

PersonalIdentificationNumber(PIN):
Generallyafourcharacternumberorword,thePINisthesecretcodegiventocreditordebitcardholders
enablingthemtoaccesstheiraccounts.Thecodeiseitherrandomlyassignedbythebankorselectedby
thecustomer.Itisintendedtopreventunauthorizeduseofthecardwhileaccessingafinancialservice
terminal.

Prepayment:
Thepaymentofadebtbeforeitactuallybecomesdue.

Refund:
Anamountpaidbackbecauseofanoverpaymentorbecauseofthereturnofanitempreviouslysold.

Renewal:
Aformofextendinganunpaidloaninwhichtheborrower'sremainingunpaidloanbalanceiscarriedover
(renewed)intoanewloanatthebeginningofthenextfinancingperiod.

Statement:
Asummaryofalltransactionsthatoccurredovertheprecedingmonthandcouldbeassociatedwitha
depositaccountoracreditcardaccount.

StopPayment:
Anordernottopayacheckthathasbeenissuedbutnotyetcashed.Ifrequestedsoonenough,thecheck
willnotbedebitedfromthepayer'saccount.Mostbankschargeafeeforthisservice.
Terms:
Theperiodoftimeandtheinterestratearrangedbetweencreditoranddebtortorepayaloan.

TimeCertificateofDeposit:
Atimedepositevidencedbyanegotiableornonnegotiableinstrumentspecifyinganamountandmaturity.

UncollectedFunds:
Aportionofadepositbalancethathasnotyetbeencollectedbythedepositorybank.

WireTransfer:
AtransferoffundsfromonepointtoanotherbywireornetworksuchtheFederalReserveWireNetwork
(alsoknownasFedWire).