Banking Nd Finance Terms

8/6/2019 Banking Nd Finance Terms

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RBI Annual Policy Statement 2010-11

The RBI on Tuesday(20-04-10) hiked short-term lending andborrowing rates(Repo and Reverse repo Rates) and the portion of money banks deposit with it by 25 basis points each, in a move aimed

at controlling the double digit inflation.

The below list shows the present and increased key rates:

PolicyRates/Reserve Ratios

Presentrate

Increasedrates

1. Bank Rate 6.00% Unchanged

2. Repo Rate 5.00% 5.25%3. Reverse Repo

Rate

3.50% 3.75%

4. Cash ReserveRatio

5.75% 6.00%

5. Statutory LiquidRatio

25.0% unchanged

Cash Reserve Ratio (CRR) is the amount of funds that the bankshave to keep with the Reserve Bank of India. If RBI decides to increase

the percent of this, the available amount with the banks comes down.RBI is using this method (increase of CRR rate), to drain out theexcessive money from the banks. The hike in CRR, which will come intoeffect from April 24.

As a result of the increase in the CRR, about Rs 12,500 crore of excess liquidity will be absorbed from the banking system.

With the RBI deciding that banks now need to increase theamount of cash they have to keep with the central bank (the cashreserves), the problem is that banks will not earn any interest on thisamount.

So banks will be left with little option but to hike interest rates tomake up for that loss of interest they would normally have earned hadCRR been lower.

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So Home loan, car loan and personal loans are likely to risemarginally that might burden for the common man.

Why RBI was forced to hike rates?

The RBI said that the Indian economy is firmly on the recoverypath. Exports have been expanding since October 2009, a trend that isexpected to continue.

On balance, under the assumption of a normal monsoon andsustenance of good performance of the industrial and services sectorson the back of rising domestic and external demand, for policypurposes the baseline projection of real GDP growth for 2010-11 isplaced at 8.0 per cent with an upside bias.(Inputs from: Rediff)

Assuring that the policy actions would not halt the recovery, theRBI pegged the FY'11 GDP growth at 8 per cent. It also pegged thewholesale inflation, which is currently hovering close to the double-digits (9.9 per cent in March), at 5.5 per cent for FY' 11.

Banking and Finance terms in India - 2010

What is Open Market operations(OMO)?

The buying and selling of government securities in the open market inorder to expand or contract the amount of money in the banking system byRBI. Open market operations are the principal tools of monetary policy.

What is Micro Credit?

It is a term used to extend small loans to very poor people for self-employment projects that generate income, allowing them to care forthemselves and their families.

What is Liquidity Adjustment Facility(LAF)?

A tool used in monetary policy that allows banks to borrow moneythrough repurchase agreements. This arrangement allows banks to respondto liquidity pressures and is used by governments to assure basic stability inthe financial markets.

What is RTGS System?

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The acronym 'RTGS' stands for Real Time Gross Settlement. RTGSsystem is a funds transfer mechanism where transfer of money takes placefrom one bank to another on a 'real time' and on 'gross' basis. This is thefastest possible money transfer system through the banking channel.Settlement in 'real time' means payment transaction is not subjected to any

waiting period. The transactions are settled as soon as they are processed.'Gross settlement' means the transaction is settled on one to one basiswithout bunching with any other transaction.

What is Bancassurance?

It is the term used to describe the partnership or relationship betweena bank and an insurance company whereby the insurance company uses thebank sales channel in order to sell insurance products.

What is Wholesale Price Index(WPI)?

The Wholesale Price Index (WPI) is the index used to measure thechanges in the average price level of goods traded in wholesale market. Atotal of 435 commodity prices make up the index. It is available on a weekly

basis. It is generally taken as an indicator of the inflation rate in the Indianeconomy. The Indian Wholesale Price Index (WPI) was first published in1902, and was used by policy makers until it was replaced by the ProducerPrice Index (PPI) in 1978.

What is Consumer price Index(CPI)?

It is a measure estimating the average price of consumergoods and services purchased by households.

What is Venture Capital?

Venture capital is money provided by an outside investor to finance anew, growing, or troubled business. The venture capitalist provides thefunding knowing that there’s a significant risk associated with the company’sfuture profits and cash flow. Capital is invested in exchange for an equitystake in the business rather than given as a loan, and the investor hopes theinvestment will yield a better-than-average return.



What is a Treasury Bills?

Treasury Bills (T-Bills) are short term, Rupee denominated obligationsissued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are thus useful in managing short-term liquidity. At present, the

Government of India issues three types of treasury bills through auctions,namely, 91-day, 182-day and 364-day. There are no treasury bills issued byState Governments.

What is Banking Ombudsmen Scheme?

The Banking Ombudsman Scheme enables an expeditious andinexpensive forum to bank customers for resolution of complaints relating tocertain services rendered by banks.

The Banking Ombudsman is a senior official appointed by the ReserveBank of India to redress customer complaints against deficiency in certainbanking services.

The Banking Ombudsman Scheme was first introduced in India in1995, and was revised in 2002. The current scheme became operative fromthe 1 January 2006, and replaced and superseded the banking OmbudsmanScheme 2002.

What is Subsidy?

A subsidy is a form of financial assistance paid to a business oreconomic sector. Most subsidies are made by the government to producersor distributors in an industry to prevent the decline of that industry or anincrease in the prices of its products or to encourage it to hire more labor.

What is a Debenture? How many types of debentures are

there? What are they?

A debenture is basically an unsecured loan to a corporation. A type of

debt instrument that is not secured by physical asset. Debentures arebacked only by the general creditworthiness and reputation of the issuer.

i)Convertible Debentures: Any type of debenture that can beconverted into some other security or it can be converted into stock..



ii)Non-Convertibility Debentures(NCB): Non Convertible Debenturesare those that cannot be converted into equity shares of the issuingcompany, as opposed to Convertible debentures. Non-convertibledebentures normally earn a higher interest rate than convertible debenturesdo.

What is a hedge fund?

‘Hedge’ means to reduce financial risk.

A hedge fund is an investment fund open to a limited range of investors and requires a very large initial minimum investment. It isimportant to note that hedging is actually the practice of attempting toreduce risk, but the goal of most hedge funds is to maximize return oninvestment.

What is FCCB?

A Foreign Currency Convertible Bond (FCCB) is a type of convertiblebond issued in a currency different than the issuer’s domestic currency. Inother words, the money being raised by the issuing company is in the formof a foreign currency. A company may issue an FCCB if it intends to make alarge investment in a country using that foreign currency.

What is Capital Account Convertibility(CAC)?

It is the freedom to convert local financial assets into foreign financialassets and vice versa at market determined rates of exchange. This meansthat capital account convertibility allows anyone to freely move from localcurrency into foreign currency and back.

The Reserve Bank of India has appointed a committee to set out theframework for fuller Capital Account Convertibility.

Capital account convertibility is considered to be one of the major

features of a developed economy. It helps attract foreign investment. capitalaccount convertibility makes it easier for domestic companies to tap foreignmarkets.

What is Current Account Convertibility?



It defines at one can import and export goods or receive or makepayments for services rendered. However, investments and borrowings arerestricted.

What is Arbitrage?

The opportunity to buy an asset at a low price then immediately sellingit on a different market for a higher price.

What is Capitalism?

Capitalism as an economy is based on a democratic political ideologyand produces a free market economy, where businesses are privately ownedand operated for profit; in capitalism, all of the capital investments anddecisions about production, distribution, and the prices of goods, services,and labor, are determined in the free market and affected by the forces of supply and demand.

What is Socialism?

Socialism as an economy is based on a collectivist type of politicalideology and involves the running of businesses to benefit the common goodof a vast majority of people rather than of a small upper class segment of society.

SOME MORE BANKING TERMS

CERTIFICATE OF DEPOSITS

This scheme was introduced in July 1989, to enable the banking system tomobilise bulk deposits from the market, which they can have at competitiverates of interest.

The major features are:Who can issue Scheduled commercial banks (except RRBs) and All IndiaFinancial Institutions within their `Umbrella limit’.CRR/SLR Applicable on the issue price in case of banksInvestors Individuals (other than minors), corporations, companies, trusts,funds, associations etcMaturity Min: 7 days Max : 12 Months (in case of FIs minimum 1 year and



maximum 3 years).Amount Min: Rs.1 lac, beyond which in multiple of Rs.1 lac Intt. rate Marketrelated. Fixed or floating Loan Against collateral of CD not permitted Pre-mature cancellation Not allowed Transfer Endorsement & delivery. Any timeNature Usance Promissory note. Can be issued in Dematerialisation form

only only wef June 30, 2002 Other conditions• If payment day is holiday, to be paid on next preceding business day• Issued at a discount to face value• Duplicate can be issued after giving a public notice & obtaining indemnity

CORE BANKING SOLUTIONS

Core Banking Solutions (CBS) or Centralised Banking Solutions is theprocess which is completed in a centralized environment i.e. under which theinformation relating to the customer’s account (i.e. financial dealings,profession, income, family members etc.) is stored in the Central Server of the bank (that is available to all the networked branches) instead of thebranch server. Depending upon the size and needs of a bank, it could be forthe all the operations or for limited operations. This task is carried throughan advance software by making use of the services provided by specializedagencies.Due to its benefits, a no. of banks in India in recent years have taken stepsto implement the CBS with a view to build relationship with the customerbased on the information captured and offering to the customer, the

customised financial products according to their need.Advantages: The CBS process is advantageous both to the customers andthe banks in thefollowing manner:Customer:• Transaction of business from any branch, ATM that offers him anytimeanywhere banking facility.• Lower incidence of errors. Hence accuracy in transactions.• Better funds management due to immediate availability of funds.Banks:• Standardisation of process within the bank.

• Better customer service leading to retention of customer and increasedcustomer traffic.• Availability of accurate data & Better use of available infrastructure• Better MIS and reporting to external agencies such as Govt., RBI etc.• Increased business volume with better asset liability management and riskmanagement.



DERIVATIVES

A derivative is a financial contract that derives its value from anotherfinancial product/commodity (say spot rate) called underlying (that may bea stock, stock index, a foreign currency, a commodity). Forward contract inforeign exchange transaction, is a simple form of a derivative.Objectives and instruments of derivates: The major purpose that is servedby derivatives is to hedge the risk. Futures, forwards, options, swaps etc.are the common instruments of derivatives. The derivatives do not haveany independent existent and are based on the underlying assets that couldbe a stock index, a foreign currency, a commodity or an individual stocks.

Operators in the derivative market : There are various kinds of operators inthe derivative market such as hedgers (which manage the risk), thespeculators (who undertake risk for realization of profit) and the arbitrageurs(who make purchase and sales simultaneously but in different market totake benefit of price differentials). The players in option market includedevelopment finance institutions, mutual funds, institutional investors,brokers, retail investors.Components: The derivatives have components such as Options, Futures-forwards and Swaps. Option It is contract that provides a right but does notimpose any obligation to buy or sell a financial instrument, say a share orsecurity. It can be exercised by the owner. Options offer the buyers, profitsfrom favourable movement of prices say of shares or foreign exchange.Variants of option: There are two variants of options i.e. European (wherethe holder can exercise his right on the expiry date) and American (wherethe holder can exercise the right, anytime between purchase date and theexpiry date). It is important to note that option can be exercised by theowner (the buyer, who has the right to buy or sell), who has limited liabilitybut possibility of realization of profits from favourable movement in therates. Option writers on the other hand have high risk and they cover theirrisk through counter buying.Components of options: Options have two components i.e. call option and

put option. The owner’s liability is restricted to the premium he is to pay.Call option : The owner i.e. the buyer, has the right to purchase and theseller has to obligation to sell, a specified no. of instruments say shares at aspecified price during the time prior to expiry date.Put option : Owner or the buyer has the right to sell and the seller has theobligation to buyduring a particular period. Futures and forwardsThe futures are the contracts between sellers and buyers under which thesellers (termed ‘short’) have to deliver, a pre-fixed quantity, at a pre-fixed

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time in future, at a pre-fixed price, to the buyers (known as ‘long’). It is alegally binding obligation between two parties to give/take delivery at acertain point of time in future. The main features of a futures contract arethat these are traded in organised exchanges, regulated by institutions suchas SEBI, they need only margin payment on a daily basis. The future

positions can be closed easily. Futures contract are made primarily forhedging, speculation, price determination and allocation of resources.The forward on the other hand is a contract that is traded off-the-stockexchange, is self regulatory and has certain flexibility unlike future whichare traded at stock exchange only, do not have flexibility of quantity andquality of commodity to be delivered and these are regulated bySEBI, RBI or other agencies.

Futures and options.

Futures can also be distinguished from options because in futures, both theparties have to perform the contract and no premium is required to be paidby either party, where as in case of option, only the writer has to performwhile the buyers makes payment of the premium to the seller inconsideration for his performance. In addition, in futures the contract is tobe performed on the settlement date and not before that whereas in case of option the buyer can exercise the option any time prior to the expiry date.

Credit derivatives.

Credit derivatives are over the counter financial contracts (i.e. off-balance

sheet) through which the transferor can transfer the credit risk to anotherparty without actually selling the asset. It can be defined as a contract onthe basis of which one party has to make payment to another party on thebasis of performance of a specified underlying credit assets. In a creditderivative there are two parties i.e. protection seller and protection buyer.Protection seller assumes the credit risk in consideration of premium that theprotection buyer pays. Protection buyer on the other hand transfer the riskto the protection seller for a premium.Under the arrangement, the protection seller makes the payment to theprotection buyer on credit event (such as failure to pay, insolvency,

bankruptcy, repudiation, price decline etc. of the underlying asset) takingplace.

CUSTOMER RELATIONSHIP MANAGEMENT

Customer satisfaction is the degree of happiness a customer realises with aproduct or serviceand is the most important driving force for retention of an

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existing customer which in turn results in growth of any businessorganisation including banks, since it determines the size of cash flowsinto the business. The satisfied customers always help in improving thetoplines (i.e. business turnover) through referrals and positive publicitywhich lead to improvement in bottomlines. In order to maintain their

position, while the business organisations have to retain their existingcustomers, but for better growth in future, fresh customers are also requiredto be added.

New vis-à-vis old customerIt needs to be borne in mind that to attract new customers involves hugecost in terms of set up costs, promotion costs, advertising cost, follow upcost etc. Due to these costs the operating cost for new customer is generallyhigher for new customers. As a result, the longer relationship of a customerbrings better returns to the business. The defection by customers is a majorfactor for loss of revenue to the business and it should be appreciated thathigher the rate of defection causing lower average length of relationship,higher would be the rate of reduction in profits.

Emergence of CRM

Hence, every deregulated market has to veer around to retaining existingcustomers besides identifying and attracting new customers. In USdecreasing interest in traditional marketing was witnessed as early as 1980swhen returns dipped to 3%, companies had to look for an alternativeto mass marketing through ads and promos. This led to a finer segmentation

of the market. The technological innovation like data warehouses and callcentres allowed a micro approach i.e. a segment called customer relationshipmanagement or CRM and eCRM. With the size, location or past history notbeing that relevant which it used to be in the past and the market forcesbeing in favour of the customer, the organisations caring for customers arelikely to be the winners.The availability of information technology tools are arousing additionalexpectations of the customer which these organisation can think of ignoring.

Customer Relationship Management (CRM) refers to the ability to

understand, anticipate and manage the needs of the customer, interactionand relationship resulting in increased profitability through revenue andmargin growth and operational efficiencies. eCRM can address otherfactors like personalisation, customization, one to many and many to manytransactions. It permit business speed, agility and real time response tocustomers or markets through the new tools such as eMail, internettelephony, chat facility etc. It reduces the cost of customer contract.



BANKING VISION 2010

An IBA’s Committee prepared a vision report in the backdrop of globalisationof Indian economy,developments taking place in and around the globe andthose that are expected as per theprojections made in the Planning

Commission’s India Vision Document 2020 & 10th Five Year Plan, the on-going reforms measures, expected Basel II needs and the expected pace of expansion in the balance sheets of banks.

Focus of banking: The focus of banking has to move in favour of cost controlas that would be the key factor to higher profits in future. The cost will haveto be determined as revenue minus profit which would necessitate efficientuse of resources including manpower resources with proper reconfigurationof human minds, as the increase in productivity would determine thewinners and laggards. Financial services system could see the emergence of highly varied financial products, tailored to meet specific needs of thecustomers in the retail as well as corporate segments. The advent of newtechnologies could see the emergence of new financial players doingfinancial intermediation (such as utility service providers offering billpayment services or supermarkets or retailers doing basic lendingoperations).

Specialisation : Some players might emerge as specialists in mortgageproducts, credit cards etc. whereas some could choose to concentrate onparticular segments of business system, while outsourcing all otherfunctions. Some other banks may concentrate on SME segments or

high net worth individuals by providing specially tailored services beyondtraditional banking offerings to satisfy the needs of customers theyunderstand better than a more generalist competitor.

Growth with quality : The future growth of banking business has to focus onthe qualitative aspects rather than quantitative only. Total assets of theScheduled Commercial Banks by March 2010 would be at Rs.40,90,000 cr.Bank assets are expected to increase at annual compounded rate of 13.4%till March 2010 compared with 16.7% increase during 1995-2003 period.Deposits are expected to grow from Rs.1356000 cr to Rs.3500000 cr i.e.

14.5% CAGR and investments with a CAGR of 23.6%.

Need for consolidation: Consolidation of banking institutions is expectedthrough mergers and acquisitions, globalisation of their operations,development of new technology and universalisation of banking.There would be greater presence of international players in the Indianfinancial system. Some of the leading Indian banks, may emerge as globalplayers since there are opportunities available to Indian banks abroad to



expand their business. The market led mergers between private banksand also between public sector banks, are not ruled out This could see theemergence of 4-5 world class Indian Banks.

Risk and reward : For success of banking transactions, the ability of the

banking institutions to perceive risk and take suitable steps to manage therisk, will have to be ensured. The risk managers could prosper and the risktakers are likely to survive. The risk management has to be givensubstantial attention and this has to be initiated at the branch level insteadof corporate offices.

Information technology: Faster decision making and faster appraisal arelikely to be in place with faster information and data flow. This could helpbanks to improve their credit management effectively in addition toreduction in transaction cost and improved revenues.

What is Retail Banking?

Banking services for individual customers. Retail banking refers tobanking in which banking institutions execute transactions directly withconsumers. Services offered include: savings and checking accounts,mortgages, personal loans, debit cards, credit cards, and so forth.

What is Private Banking?

Banking services offered to high net-worth individuals. Private bankinginstitution assists the high net-worth individual in investing his/her money inexchange for commissions and fees. The term "private" refers to thecustomer service being rendered on a more personal basis.

What is an Investment Bank and Commercial Bank and what is

the difference between them?

Investment Bank: A financial institution that deals primarily withraising capital, corporate mergers and acquisitions, and securities trades. It

aids companies in acquiring funds.

Commercial Bank: An institution which accepts deposits, makesbusiness loans, and offers related services. Commercial banks also allow fora variety of deposit accounts, such as checking, savings, and time deposit.These institutions are run to make a profit and owned by a group of individuals.



A Commercial bank is commonly referred to as simply a bank. Theterm ‘Commercial’ is used to distinguish it from an investment bank. Theterm ‘Commercial’ is used to refer to any banking organization or divisionthat deals with the deposits and loans of business organizations.

Traditionally, banks either engaged in commercial banking orinvestment banking. In commercial banking, the institution collects depositsfrom clients and gives direct loans to businesses and individuals.

Through investment banking, an institution generates funds in twodifferent ways. They may draw on public funds through the capital marketby selling stock in their company, and they may also seek out venturecapital or private equity in exchange for a stake in their company.

Examples of Investment Banks: Bank of America, J P Morgan Chase,Citigroup.

What is Private Equity?

Private equity is money invested in companies that are not publiclytraded on a stock exchange. Instead, they normally seek equity stakes (thatis partial ownership) in private companies. Venture capital is a specializedsubcategory of private equity. Both are high risk, high reward investmentapproaches.

What is Globalization?

Globalization is a process of interaction and integration among thepeople, companies, and governments of different nations.

Advantages of Globalization:

i)It can reduce Poverty,

ii) It promotes world peace.

iii)It is allowing access to technology in developing countries and etc.

What is Privatization?

Privatization can also be called denationalization or disinvestment.Privatization refers to of ownership from the government(public sector) tothe private business sector either partially or totally.



What is Liberalization?

The process of reducing or removing restrictions on internationaltrade. This may include the reduction or removal of tariffs, abolition orenlargement of import quotas, abolition of multiple exchange rates, and

removal of requirements for administrative permits for imports orallocations.

What is Marketization?

It is an economic system based on the principles of the market,including supply, demand, choice and competition.

What is Micro Finance?

Microfinance offers poor people access to basic financial services suchas loans, savings, money transfer services and micro insurance. People livingin poverty, like everyone else, need a diverse range of financial services torun their businesses, build assets, smooth consumption, and manage risks.

What is Free Market economy?

A market economy based on supply and demand with little or nogovernment control is said to be free market economy.

What is Stock Market/ Share market?

A market where securities are bought and sold. Its basic function is toenable public companies, governments and local authorities to raise capitalby selling securities to investors.

What is Equity?

Ownership interest in a corporation in the form of stock.

What is Stock?

The capital raised by a corporation through the issue of sharesentitling holders to an ownership interest (equity).

What is National Electronic Fund Transfer system (NEFT)? What

is the difference between RTGS and NEFT?

National Electronic Fund Transfer (NEFT) is an online system fortransferring funds of Indian financial institution (especially banks). This



facility is used mainly to transfer funds below Rs. 1,00,000. The ReserveBank of India has instructed banks that they should not use RTGS foramounts below Rs 1 lakh.

The key difference between RTGS and NEFT is that while RTGS is on

gross settlement basis, NEFT is on net settlement basis. The minimumtransaction value for RTGS is Rs. 1,00,000, whereas there is no minimumvalue for NEFT.

What is DICGC?

Deposit Insurance is nothing but the protection of deposit amountinvested in banks under the Act of Deposit Insurance and Credit GuaranteeCorporation (DICGC). If a bank fails then a limited amount of protection isprovided by the government to depositors. All commercial banks,cooperative banks are covered under the Deposit Insurance in India.

What is IRDA?

To protect the interests of the policyholders, to regulate, promote andensure orderly growth of the insurance industry and for matters connectedtherewith or incidental thereto. Headquartered in Hyderabad. Hari Narayanis the chairman of IRDA.

What is Balance of Payments?

A balance of payments is a strategy used to analyze the relationshipbetween money that is flowing into a country and money that is going out of that same country. The BOP is divided into three main categories: thecurrent account, the capital account and the financial account.

What is Balance of Trade?

The difference between a country's imports and its exports.

What is Global Warming?

Global warming refers to an average increase in the Earth'stemperature, which in turn causes changes in climate. It happens whengreenhouse gases (carbon dioxide, water vapor, nitrous oxide, sulphurhexafluoride and methane) trap heat and light from the sun in the earth’satmosphere, which increases the temperature.

What is Kyoto Protocol?



It is an international agreement aimed at controlling the greenhouseemissions, mainly Carbon Dioxide.

What is Savings Account?

A savings account typically refers to an account in which one placesmoney to earn a small amount of interest.

What is Debit Card?

A debit card is a plastic card issued by banks to customers. The cardallows instant purchase, removing the correct balance from the user’sattached bank account.

What is Credit Card?

A card issued by a financial company giving the holder an option toborrow funds, usually at point of sale

About SBI:

State Bank of India(SBI) is the largest bank in India.

The origin of the State Bank of India goes back to the first decade of the

nineteenth century with the establishment of the Bank of Calcutta in Calcutta on 2 June

1806. The Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843)

followed the Bank of Bengal. These three banks remained at the apex of modern bankingin India till their amalgamation as the Imperial Bank of India on 27 January 1921. The

Government of India nationalized the Imperial Bank of India in 1955.

The State Bank Group having more than 17000 branches. SBI alone holds 12,448 branches. SBI has over 21,000 ATMs.

The bank has 141 overseas offices spread over 32 countries.

Symbol and Logo:

Symbol is the Key Hole, whose meaning is "Welcome to SBI".

Slogans are:



1) The Nation banks on us

2) Pure banking nothing else

3) The Banker to every Indian

4) With you all the way.

State Bank of India has the following six Associate Banks (ABs):

1. State Bank of Bikaner and Jaipur (SBBJ)

2. State Bank of Hyderabad (SBH)

3. State Bank of Indore (SBIr)

4. State Bank of Mysore (SBM)

5. State Bank of Patiala (SBP)

6. State Bank of Travancore (SBT)

The six ABs have a combined network of 4502 branches in India which are fully

computerized and 2410 ATMs.

12. How can you find the fake currency note?

H: Don’t know.

Ways to detect a fake note

Optical Variable Ink: The colour of the numeral 1000 appears green when the

banknote is held flat but would change to blue when the banknote is held at an angle. The

font size is also reduced.

Latent Image: When the note is head horizontally, the vertical band on the right

shows an image of the number 1000.

Security Thread: The note also has a three millimeter wide security thread with the

inscriptions: one thousand, the word 'Bharat' in Hindi and RBI.

Micro lettering: The 'RBI' and the numeral, "1000" - which can be viewed with the

help of a magnifying glass - are between the Mahatma Gandhi portrait and the vertical

band.



Watermark: When the note is held against the light, the picture of Gandhi and an

electrolyte mark showing the number 1000 appear in the white space.

1. Why do you want to enter banking?

Banking is one of the fastest growing sectors in India with more stable and highgrowth and more over providing wide range of career opportunities for graduates. So I

want to take an opportunity to join in a bank.

2. Have you applied to any other areas apart from banking?

No.

3. What is the difference between Cheque and Demand Draft?

Both are used for transfer the amount b/w two accounts of same or different Bank.

Cheque is written by an individual and withdrawn from the account whereas Demand

draft is issued by a bank where you have to pay before issuing.

4. What are NBFCs and difference between NBFCs and Bank?

Non-bank financial companies (NBFCs) are financial institutions that provide

banking services, but do not hold a banking license. NBFCs do offer all sorts of banking

services, such as loans and credit facilities, retirement planning, money markets,

underwriting, and merger activities. These institutions are not allowed to take depositsfrom the public.

5. What is Free Market economy?

A market economy based on supply and demand with little or no government

control is said to be free market economy.

6. What are the functions of Nabard?

National Bank for Agriculture and Rural Development(NABARD) is one of the

premiere agency to provide credit in rural areas. It provides credit flow for the

development of agriculture, small-scale industries, cottage and village industries,handicrafts and other rural crafts.

7. Is there any specialized company for home finance in India?

National Housing Bank(NHB)

8. Do you think that you are over qualified for this position?



No, I don’t think so, but I am very well qualified for this position.

9. 2 years down the line if you would be offered 50k or 70k by other

organization, Will you leave this organizations? If not why?

10. What is National Electronic Fund Transfer system (NEFT)? What is thedifference between RTGS and NEFT?

National Electronic Fund Transfer (NEFT) is an online system for transferring

funds of Indian financial institution (especially banks). This facility is used mainly to

transfer funds below Rs. 1,00,000. The Reserve Bank of India has instructed banks that

they should not use RTGS for amounts below Rs 1 lakh.

The key difference between RTGS and NEFT is that while RTGS is on gross

settlement basis, NEFT is on net settlement basis. The minimum transaction value for

RTGS is Rs. 1,00,000, whereas there is no minimum value for NEFT.

11. What is Private Banking?

Banking services offered to high net-worth individuals. Private banking institution

assists the high net-worth individual in investing his/her money in exchange for

commissions and fees. The term "private" refers to the customer service being rendered

on a more personal basis.

12. What is an Investment Bank and Commercial Bank and what is the

difference between them?

Investment Bank: A financial institution that deals primarily with raising capital,

corporate mergers and acquisitions, and securities trades. It aids companies in acquiring

funds.

Commercial Bank: An institution which accepts deposits, makes business loans,

and offers related services. Commercial banks also allow for a variety of deposit

accounts, such as checking, savings, and time deposit. These institutions are run to make

a profit and owned by a group of individuals.

A Commercial bank is commonly referred to as simply a bank. The term‘Commercial’ is used to distinguish it from an investment bank. The term ‘Commercial’

is used to refer to any banking organization or division that deals with the deposits and

loans of business organizations.

Traditionally, banks either engaged in commercial banking or investment banking.

In commercial banking, the institution collects deposits from clients and gives direct

loans to businesses and individuals.



Through investment banking, an institution generates funds in two different ways.

They may draw on public funds through the capital market by selling stock in their

company, and they may also seek out venture capital or private equity in exchange for a

stake in their company.

Examples of Investment Banks: Bank of America, J P Morgan Chase, Citigroup.

Documents

Banking Nd Finance Terms