Banking Qus

7/27/2019 Banking Qus

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Banking Terms for Bank PO/Clerk interview After cracking IBPS PO CWE PT we are preparing for Interview. We know Personalinterview plays a very crucial role in final selection & for Bank PO’s interview it isnecessary to to familiar with basic banking terms which are used in our day to day life.These terms are useful for your general knowledge as well as for your interview.

Knowing basic banking terms not only gives you an edge over other candidates but alsoshows your interest for the banking job.

RBI – The Reserve Bank of India is the apex bank of the country, which was constitutedunder the RBI Act, 1934 to regulate the other banks, issue of bank notes andmaintenance 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Demand Deposit – A Demand deposit is the one which can be withdrawn at any time,without any notice or penalty; e.g. money deposited in a checking account or savingsaccount in a bank.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withdrawn for a certain "term" or period of time.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 bewithdrawn or it can be held for another term.

Fixed Deposits – FDs are the deposits that are repayable on fixed maturity date alongwith the principal and agreed interest rate for the period. Banks pay higher interest rateson FDs than the savings bank account.

Recurring Deposits – These are also called cumulative deposits and in recurringdeposit accounts, a certain amounts of savings are required to be compulsorilydeposited 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 theyneed. Funds in these accounts are subjected to low rates of interest.

Liquidity:- Assets which can easily be converted into cash money are said to haveliquidity. Land does not possess liquidity at it takes longer time to get converted intocash.

Liquidity Ratio:- The commercial banks under banking regulations have to maintain acertain specified proportion of their total deposits of various categories in liquid assets.This maintainable proportion is called liquidity ratio.

VAT (Value Added Tax):- VAT seeks to tax the value added at every stage of manufacturing and sale, with a provision of refunding the amount of VAT already paid at

the earlier stages to avoid double taxation. In other words, the tax already paid can beclaimed at the next stage of value addition.

FCNR Accounts – Foreign Currency Non-Resident accounts are the ones that aremaintained by the NRIs in foreign currencies like USD, DM, and GBP etc. The accountis a term deposit with interest rates linked to the international rates of interest of therespective currencies.



NRE Accounts – Non-Resident External accounts are the ones in which NRIs remitmoney in any permitted foreign currency and the remittance is converted to Indianrupees 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.

Bounced Cheque - when the bank has not enough funds in the relevant account or theaccount holder requests that the cheque is bounced (under exceptional circumstances)then the bank will return the cheque to the account holder. The beneficiary of thecheque will have not been paid. This normally incurs a fee from the bank.

Current Accounts – These accounts are maintained by the corporate clients that maybe operated any number of times in a day. There is a maintenance charge for thecurrent accounts for which the holders enjoy facilities of easy handling, overdraft facilityetc.

Commercial Bank:- Commercial Bank is an institution of finance. It deals with thebanking services through its branches in whole of the country. Operation of current

accounts, deposits, granting of loans to individuals and companies etc. are variousfunctions of the commercial bank.

Dear Money:- Dear money is that money which can only be borrowed at a high rate of interest. In dear money policy, bank rate and other rates of interest are high and as aresult borrowing becomes expensive. Dear money policy is deliberate policy which isadopted by the monetary authorities to check inflation in the economy.

Giffin Goods:- Giffin goods have the positive relationship between price and quantitydemanded and as a result demand curve of Giffin goods slopes upward from left toright. This phenomenon was first observed by Sir Robert Giffin in relation to the demandfor bread by poor labours.

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; thesort-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'saccount into the cheque receiver's account.

Clearing Bank - This is a bank that can clear funds between banks. For generalpurposes, this is any institution which we know of as a bank or as a provider of bankingservices.

Credit Rating - This is the rating which an individual (or company) gets from the creditindustry. This is obtained by the individual's credit history, the details of which areavailable from specialist organisations like CRISIL in India.

Credit-Worthiness - This is the judgement of an organization which is assessingwhether or not to take a particular individual on as a customer. An individual might beconsidered credit-worthy by one organisation but not by another. Much depends onwhether an organization is involved with high risk customers or not.



Interest - The amount paid or charged on money over time. If you borrow moneyinterest will be charged on the loan. If you invest money, interest will be paid (whereappropriate to the investment).

Disinflation- The process or policy of removing pressures on the economy which are

forcing prices upwards and the real value of the monetary unit downwards. Pressuremay be removed by curtailing expenditure through credit restrictions and a dear moneypolicy, and by taxation.

Overdraft - This is when a person has a minus figure in their account. It can beauthorized (agreed to in advance or retrospect) or unauthorized (where the bank hasnot agreed to the overdraft either because the account holder represents too great arisk to lend to in this way or because the account holder has not asked for an overdraftfacility).

Payee - The person who receives a payment. This often applies to cheques. If youreceive a cheque you are the payee and the person or company who wrote the cheque

is the payer.

Accounting period- The period of time covered by business, financial andmanagement accounts. Financial accounts are generally prepared once or twice intwelve calendar months, but the interval of management accounts must be muchshorter in order to ensure adequate management control over the regular operations.

Payer - The person who makes a payment. This often applies to cheques. If you write acheque you are the payer and the recipient of the cheque is the payee.

Wholesale Price Index:- Wholesale Price Index is that index which is calculated onthe basis of wholesale prices. It is calculated in a similar way to the Retail Price Index.

Security for Loans - Where large loans are required the lending institution often needsto have a guarantee that the loan will be paid back. This takes the form of a large itemof capital outlay (typically a house) which is owned or partly owned and the amountowned is at least equivalent to the loan required.

Internet Banking - Online banking (or Internet banking) allows customers to conductfinancial transactions on a secure website operated by the bank.

Elasticity of Demand- A measurement of economics of the degree of response of achange in one factor to a change in a related factor, expressed in a price demand, pricesupply or demand income relationships.

Credit Card - A credit card is one of the systems of payments named after the smallplastic card issued to users of the system. It is a card entitling its holder to buy goodsand services based on the holder's promise to pay for these goods and services.

Budget Deficit:- Budget may take a shape of deficit when the public revenue falls shortto public expenditure. Budget deficit is the difference between the estimated publicexpenditure and public revenue. The government meets this deficit by way of printingnew currency or by borrowing.



Debit Card – Debit card allows for direct withdrawal of funds from customers bankaccounts. 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 anamount 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 tomove up, and vice-versa.

CRR - CRR means Cash Reserve Ratio. Banks in India are required to hold a certainproportion of their deposits in the form of cash with Reserve Bank of India (RBI). Thisminimum ratio is stipulated by the RBI and is known as the CRR or Cash ReserveRatio. Thus, When a bank’s deposits increase by Rs100, and if the cash reserve ratio is9%, the banks will have to hold additional Rs 9 with RBI and Bank will be able to useonly 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 andinvestment. This power of RBI to reduce the lendable amount by increasing the CRRmakes it an instrument in the hands of a central bank through which it can control theamount that banks lend. Thus, it is a tool used by RBI to control liquidity in the bankingsystem.

SLR - SLR stands for Statutory Liquidity Ratio. This term is used by bankers andindicates 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 andsome other approved to liabilities (deposits). It regulates the credit growth in India.

Floating Capital- Funds available for carrying on a business, including funds employedin marketable investments.

ATM - An automated teller machine (ATM) is a computerised telecommunicationsdevice that provides the clients with access to financial transactions in a public spacewithout the need for a cashier, human clerk or bank teller. On most modern ATMs, thecustomer is identified by inserting a plastic ATM card with a magnetic stripe or a plasticsmart card with a chip, that contains a unique card number and some securityinformation such as an expiration date or CVV. Authentication is provided by thecustomer entering a personal identification number (PIN)

Golden Handshake- Compensation paid to an executive of a company on hisdisplacement and especially on his retirement.

Bridge Loan:- A loan made by a bank for a short period to make up for a temporaryshortage of cash. On the part of borrower, mostly the companies for example, abusiness organization wants to install a new company with new equipments etc. whilehis present installed company / equipments etc. are not yet disposed off. Bridge loancovers this period between the buying the new and disposing of the old one.



Gross Domestic Product- The value of goods and services produced in an economy.The value may be measured by aggregating market values of goods and services or byaggregating incomes from employment, profits, dividends, etc. (i.e., factor cost, which isequivalent to market values less purchase tax plus subsidies). It is equivalent to grossnational product less the value of net property abroad.

Gross National Product- The total monetary value of all the goods and servicesproduced by a country in a year, expressed either at factor cost or at market prices.

Inflation- The rate at which prices grow in an economy. Thus, reduced rate of inflationwould mean that the rate at which prices will rise has slowed down, but not that theprices will fall.

Blue Chip:- It is concerned with such equity shares whose purchase is extremely safe.It is a safe investment. It does not involve any risk.

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Banking Qus