8ank|ng 1erms

1 What |s a kepo kate?

A 8epo raLe ls Lhe raLe aL whlch our banks borrow rupees from 88l Whenever Lhe banks have
any shorLage of funds Lhey can borrow lL from 88l A reducLlon ln Lhe repo raLe wlll help banks
Lo geL money aL a cheaper raLe When Lhe repo raLe lncreases borrowlng from 88l becomes
more expenslve

2 What |s keverse kepo kate?
A 1hls ls exacL opposlLe of 8epo raLe 8everse 8epo raLe ls Lhe raLe aL whlch 8eserve 8ank of
lndla (88l) borrows money from banks 88l uses Lhls Lool when lL feels Lhere ls Loo much money
floaLlng ln Lhe banklng sysLem 8anks are always happy Lo lend money Lo 88l slnce Lhelr money
ls ln safe hands wlLh a good lnLeresL An lncrease ln 8everse repo raLe can cause Lhe banks Lo
Lransfer more funds Lo 88l due Lo Lhls aLLracLlve lnLeresL raLes

3 What |s Ckk kate?
A Cash reserve 8aLlo (C88) ls Lhe amounL of funds LhaL Lhe banks have Lo keep wlLh 88l lf 88l
decldes Lo lncrease Lhe percenL of Lhls Lhe avallable amounL wlLh Lhe banks comes down 88l ls
uslng Lhls meLhod (lncrease of C88 raLe) Lo draln ouL Lhe excesslve money from Lhe banks

4 What |s SLk kate?
A SL8 (SLaLuLory LlquldlLy 8aLlo) ls Lhe amounL a commerclal bank needs Lo malnLaln ln Lhe
form of cash or gold or govL approved securlLles (8onds) before provldlng credlL Lo lLs
cusLomers SL8 raLe ls deLermlned and malnLalned by Lhe 88l (8eserve 8ank of lndla) ln order Lo
conLrol Lhe expanslon of bank credlL SL8 ls deLermlned as Lhe percenLage of LoLal demand and
percenLage of Llme llablllLles 1lme LlablllLles are Lhe llablllLles a commerclal bank llable Lo pay
Lo Lhe cusLomers on Lhelr anyLlme demand SL8 ls used Lo conLrol lnflaLlon and propel growLh
1hrough SL8 raLe Lunlng Lhe money supply ln Lhe sysLem can be conLrolled efflclenLly

S What |s 8ank kate?
A 8ank raLe also referred Lo as Lhe dlscounL raLe ls Lhe raLe of lnLeresL whlch a cenLral bank
charges on Lhe loans and advances LhaL lL exLends Lo commerclal banks and oLher flnanclal
lnLermedlarles Changes ln Lhe bank raLe are ofLen used by cenLral banks Lo conLrol Lhe money
supply

6 What |s Inf|at|on?
A lnflaLlon ls as an lncrease ln Lhe prlce of bunch of Coods and servlces LhaL pro[ecLs Lhe lndlan
economy An lncrease ln lnflaLlon flgures occurs when Lhere ls an lncrease ln Lhe average level
of prlces ln Coods and servlces lnflaLlon happens when Lhere are fewer Coods and more
buyers Lhls wlll resulL ln lncrease ln Lhe prlce of Coods slnce Lhere ls more demand and less
supply of Lhe goods


What |s Def|at|on?
A ueflaLlon ls Lhe conLlnuous decrease ln prlces of goods and servlces ueflaLlon occurs when
Lhe lnflaLlon raLe becomes negaLlve (below zero) and sLays Lhere for a longer perlod

8 What |s Lk?
A 1he rlme lnLeresL 8aLe ls Lhe lnLeresL raLe charged by banks Lo Lhelr mosL credlLworLhy
cusLomers (usually Lhe mosL promlnenL and sLable buslness cusLomers) 1he raLe ls almosL
always Lhe same amongsL ma[or banks Ad[usLmenLs Lo Lhe prlme raLe are made by banks aL
Lhe same Llme alLhough Lhe prlme raLe does noL ad[usL on any regular basls 1he rlme 8aLe ls
usually ad[usLed aL Lhe same Llme and ln correlaLlon Lo Lhe ad[usLmenLs of Lhe led lunds 8aLe
1he raLes reporLed below are based upon Lhe prlme raLes on Lhe flrsL day of each respecLlve
monLh Some banks use Lhe name 8eference 8aLe or 8ase Lendlng 8aLe Lo refer Lo Lhelr
rlme Lendlng 8aLe

9 What |s Depos|t kate?
A lnLeresL 8aLes pald by a deposlLory lnsLlLuLlon on Lhe cash on deposlL
o||cy kates 8ank 8aLe 8epo 8aLe 8everse 8epo 8aLe
keserve kat|os C88 SL8 230
Lend|ng]Depos|t kates L8 ueposlL 8aLe Savlngs 8ank raLe

10 What |s III?
A lll (lorelgn lnsLlLuLlonal lnvesLor) used Lo denoLe an lnvesLor mosLly ln Lhe form of an
lnsLlLuLlon An lnsLlLuLlon esLabllshed ouLslde lndla whlch proposes Lo lnvesL ln lndlan markeL
ln oLher words buylng lndlan sLocks llls generally buy ln large volumes whlch has an lmpacL on
Lhe sLock markeLs lnsLlLuLlonal lnvesLors lncludes penslon funds muLual funds lnsurance
Companles 8anks eLc

11 What |s IDI?
A lul (lorelgn ulrecL lnvesLmenL) occurs wlLh Lhe purchase of Lhe physlcal asseLs or a
slgnlflcanL amounL of ownershlp (sLock) of a company ln anoLher counLry ln order Lo galn a
measure of managemenL conLrol" (Cr) A forelgn company havlng a sLake ln a lndlan Company

12 What |s IC?
A lC ls lnlLlal ubllc Cfferlng 1hls ls Lhe flrsL offerlng of shares Lo Lhe general publlc from a
company wlshes Lo llsL on Lhe sLock exchanges

13 What |s D|s|nvestment?
A 1he Selllng of Lhe governmenL sLake ln publlc secLor underLaklngs

14 What |s I|sca| Def|c|t?
A lL ls Lhe dlfference beLween Lhe governmenL's LoLal recelpLs (excludlng borrowlngs) and LoLal
expendlLure llscal deflclL ln 200910 ls proposed aL 68 of Cu



1S What |s kevenue def|c|t?
A lL deflnes LhaL where Lhe neL amounL recelved (by Laxes oLher forms) falls Lo meeL Lhe
predlcLed neL amounL Lo be recelved by Lhe governmenL 8evenue deflclL ln 200910 ls
proposed aL 48 of Cu

16 What |s GD?
A 1he Cross uomesLlc roducL or Cu ls a measure of all of Lhe servlces and goods produced ln
a counLry over a speclflc perlod classlcally a year Cu durlng 200809 ls 67


1 What |s GN?
A Cross naLlonal roducL ls measured as Cu plus lncome of resldenLs from lnvesLmenLs made
abroad mlnus lncome earned by forelgners ln domesLlc markeL

18 What |s Nat|ona| Income?
A naLlonal lncome ls Lhe money value of all goods and servlces produced ln a counLry durlng
Lhe year

19 What |s er Cap|ta Income?
A 1he naLlonal lncome of a counLry or reglon dlvlded by lLs populaLlon er caplLa lncome ls
ofLen used Lo measure a counLrys sLandard of llvlnger caplLa lncome durlng 200809
esLlmaLed by CSC 8s23 494

20 What |s Vote on Account?
A A voLeon accounL ls baslcally a sLaLemenL where Lhe governmenL presenLs an esLlmaLe of a
sum requlred Lo meeL Lhe expendlLure LhaL lL lncurs durlng Lhe flrsL Lhree Lo four monLhs of an
elecLlon flnanclal year unLll a new governmenL ls ln place Lo keep Lhe machlnery runnlng

21 D|fference between Vote on Account and Inter|m 8udget?
A voLeonaccounL deals only wlLh Lhe expendlLure slde of Lhe governmenLs budgeL an
lnLerlm 8udgeL ls a compleLe seL of accounLs lncludlng boLh expendlLure and recelpLs

22 What |s SDk?
A 1he Su8 (Speclal urawlng 8lghLs) ls an arLlflclal currency creaLed by Lhe lMl ln 1969 Su8s are
allocaLed Lo member counLrles and can be fully converLed lnLo lnLernaLlonal currencles so Lhey
serve as a supplemenL Lo Lhe offlclal forelgn reserves of member counLrles lLs value ls based on
a baskeL of key lnLernaLlonal currencles (uS dollar euro yen and pound sLerllng)

23 What |s SL2?
A SLZ means Speclal Lconomlc Zone ls Lhe one of Lhe parL of governmenL's pollcles ln lndla A
speclal Lconomlc zone ls a geographlcal reglon LhaL economlc laws whlch are more llberal Lhan
Lhe usual economlc laws ln Lhe counLry 1he baslc moLLo behlnd Lhls ls Lo lncrease forelgn
lnvesLmenL developmenL of lnfrasLrucLure [ob opporLunlLles and lncrease Lhe lncome level of
Lhe people


24 What |s corporate governance?
1he way ln whlch a company ls governed and how lL deals wlLh Lhe varlous lnLeresLs of lLs
cusLomers shareholders employees and socleLy aL large CorporaLe governance ls Lhe seL of
processes cusLoms pollcles laws and lnsLlLuLlons affecLlng Lhe way a corporaLlon (or
company) ls dlrecLed admlnlsLered or conLrolledls deflned as Lhe general seL of cusLoms
regulaLlons hablLs and laws LhaL deLermlne Lo whaL end a flrm should be run


2S Iunct|ons of k8I?
1he 8eserve 8ank of lndla ls Lhe cenLral bank of lndla was esLabllshed on Aprll 1 1933 ln
accordance wlLh Lhe provlslons of Lhe 8eserve 8ank of lndla AcL 1934 1he 8eserve 8ank of
lndla was seL up on Lhe recommendaLlons of Lhe PllLon ?oung Commlsslon 1he commlsslon
submlLLed lLs reporL ln Lhe year 1926 Lhough Lhe bank was noL seL up for nlne years1o regulaLe
Lhe lssue of 8ank noLes and keeplng of reserves wlLh a vlew Lo securlng moneLary sLablllLy ln
lndla and generally Lo operaLe Lhe currency and credlL sysLem of Lhe counLry Lo lLs advanLage
8anker Lo Lhe CovernmenL performs merchanL banklng funcLlon for Lhe cenLral and Lhe sLaLe
governmenLs also acLs as Lhelr banker8anker Lo banks malnLalns banklng accounLs of all
scheduled banks


26 What |s monetary po||cy?
A MoneLary pollcy ls Lhe process by whlch Lhe governmenL cenLral bank of a counLry conLrols
(l) Lhe supply of money (ll) avallablllLy of money and (lll) cosL of money or raLe of lnLeresL ln
order Lo aLLaln a seL of ob[ecLlves orlenLed Lowards Lhe growLh and sLablllLy of Lhe economy


2 What |s I|sca| o||cy?
llscal pollcy ls Lhe use of governmenL spendlng and revenue collecLlon Lo lnfluence Lhe
economy 1hese pollcles affecL Lax raLes lnLeresL raLes and governmenL spendlng ln an efforL
Lo conLrol Lhe economy llscal pollcy ls an addlLlonal meLhod Lo deLermlne publlc revenue and
publlc expendlLure


28 What |s Core 8ank|ng So|ut|ons?
Core banklng ls a general Lerm used Lo descrlbe Lhe servlces provlded by a group of neLworked
bank branches 8ank cusLomers may access Lhelr funds and oLher slmple LransacLlons from any
of Lhe member branch offlces lL wlll cuL down Llme worklng slmulLaneously on dlfferenL lssues
and lncreaslng efflclency 1he plaLform where communlcaLlon Lechnology and lnformaLlon
Lechnology are merged Lo sulL core needs of banklng ls known as Core 8anklng SoluLlons


29 What |s bank and |ts features and types?
A bank ls a flnanclal organlzaLlon where people deposlL Lhelr money Lo keep lL safe 8anks play
an lmporLanL role ln Lhe flnanclal sysLem and Lhe economy As a key componenL of Lhe flnanclal
sysLem banks allocaLe funds from savers Lo borrowers ln an efflclenL manner 8eglonal 8ural
8anks were esLabllshed wlLh an ob[ecLlve Lo ensure sufflclenL lnsLlLuLlonal credlL for agrlculLure
and oLher rural secLors 1he 888s moblllze flnanclal resources from rural / semlurban areas
and granL loans and advances mosLly Lo small and marglnal farmers agrlculLural labourers and
rural arLlsans 1he area of operaLlon of 888s ls llmlLed Lo Lhe area as noLlfled by Col coverlng
one or more dlsLrlcLs ln Lhe SLaLe ll 8anklng servlces for lndlvldual cusLomers ls known as reLall
banklng lll A bank LhaL deals mosLly ln buL lnLernaLlonal flnance longLerm loans for
companles and underwrlLlng MerchanL banks do noL provlde regular banklng servlces Lo Lhe
general publlc lv Cnllne banklng (or lnLerneL banklng) allows cusLomers Lo conducL flnanclal
LransacLlons on a secure webslLe operaLed by Lhelr reLall or vlrLual bank v Moblle 8anklng ls a
servlce LhaL allows you Lo do banklng LransacLlons on your moblle phone wlLhouL maklng a call
uslng Lhe SMS faclllLy ls a Lerm used for performlng balance checks accounL LransacLlons
paymenLs eLc vla a moblle devlce such as a moblle phone vl 1radlLlonal banklng ls Lhe normal
bank accounLs we have Llke puL your money ln Lhe bank and Lhey acL as a securlLy and you wlll
geL only Lhe normal lnLeresLs (declded by 88l ln our case lLu bank ln uS) vll lnvesLmenL
banklng ls enLlrely dlfferenL Pere people who are havlng so much money (money ln excess
whlch wlll yleld only less lnLeresL lf ln 8anks) wlll lnvesL Lhelr money and geL hlgher reLurns lor
example lf l have more money lnsLead of Laklng Lhe paln of lnvesLlng ln share markeL buylng
properLles eLc l wlll glve Lo lnvesLmenL banks and Lhey wlll do Lhe money managemenL and
glve me hlgher reLurns when compared Lo LradlLlonal banks


30 What |s LGovernance?
LCovernance ls Lhe publlc secLor's use of lnformaLlon and communlcaLlon Lechnologles wlLh
Lhe alm of lmprovlng lnformaLlon and servlce dellvery encouraglng clLlzen parLlclpaLlon ln Lhe
declslonmaklng process and maklng governmenL more accounLableLransparenL and effecLlve
WhaL ls 8lghL Lo lnformaLlon AcL? 1he 8lghL Lo lnformaLlon acL ls a law enacLed by Lhe
arllamenL of lndla glvlng clLlzens of lndla access Lo records of Lhe CenLral CovernmenL and
SLaLe overnmenLs1he AcL applles Lo all SLaLes and unlon 1errlLorles of lndla excepL Lhe SLaLe of
!ammu and kashmlr whlch ls covered under a SLaLelevel law 1hls law was passed by
arllamenL on 13 !une 2003 and came fully lnLo force on 13 CcLober 2003


31 Cred|t kat|ng Agenc|es |n Ind|a?
1he credlL raLlng agencles ln lndla malnly lnclude lC8A and C8lSlL lC8A wasformerly referred Lo
Lhe lnvesLmenL lnformaLlon and CredlL 8aLlng Agency of lndla LlmlLed 1helr maln funcLlon ls Lo
grade Lhe dlfferenL secLor and companles ln Lerms of performance and offer soluLlons for up
gradaLlon 1he credlL raLlng agencles ln lndla malnly lnclude lC8A and C8lSlL(CredlL 8aLlng
lnformaLlon Servlces of lndla LlmlLed)


32 What |s Cheque?
Cheque ls a negoLlable lnsLrumenL lnsLrucLlng a 8ank Lo pay a speclflc amounL from a speclfled
accounL held ln Lhe maker/deposlLors name wlLh LhaL 8ankA blll of exchange drawn on a
speclfled banker and payable on demandWrlLLen order dlrecLlng a bank Lo pay money


33 What |s demand Draft?
A demand drafL ls an lnsLrumenL used for effecLlng Lransfer of money lL ls a negoLlable
lnsLrumenL Cheque and uemandurafL boLh are used for 1ransfer of money ?ou can 100
LrusL a uu lL ls a bankers check A check may be dlshonored for lack of funds a uu can noL
Cheque ls wrlLLen by an lndlvldual and uemand drafL ls lssued by a bank eople belleve banks
more Lhan lndlvlduals





34 What |s a N8IC?
A nonbanklng flnanclal company (n8lC) ls a company reglsLered under Lhe Companles AcL
1936 and ls engaged ln Lhe buslness of loans and advances acqulslLlon of
shares/sLock/bonds/debenLures/securlLles lssued by governmenL buL does noL lnclude any
lnsLlLuLlon whose prlnclpal buslness ls LhaL of agrlculLure acLlvlLy lndusLrlal acLlvlLy
sale/purchase/consLrucLlon of lmmovable properLy n8lCs are dolng funcLlons akln Lo LhaL of
banks however Lhere are a few dlfferences (l)A n8lC cannoL accepL demand deposlLs
(demand deposlLs are funds deposlLed aL a deposlLory lnsLlLuLlon LhaL are payable on demand
lmmedlaLely or wlLhln a very shorL perlod llke your currenL or savlngs accounLs) (ll) lL ls noL a
parL of Lhe paymenL and seLLlemenL sysLem and as such cannoL lssue cheques Lo lLs cusLomers
and (lll) ueposlL lnsurance faclllLy of ulCCC ls noL avallable for n8lC deposlLors unllke ln case of
banks


3S D|ff between bank|ng I|nance?
llnance ls generally relaLed Lo all Lypes of flnanclal Lhls could be accounLlng lnsurances and
pollcles Whereas banklng ls everyLhlng LhaL happens ln a bank only1he Lerm 8anklng and
llnance are Lwo very dlfferenL Lerms buL are ofLen assoclaLed LogeLher 1hese Lwo Lerms are
ofLen used Lo denoLe servlces LhaL a bank and oLher flnanclal lnsLlLuLlons provlde Lo lLs
cusLomers


36 What |s NASSCCM?
1he naLlonal AssoclaLlon of SofLware and Servlces Companles (nASSCCM) Lhe lndlan chamber
of commerce ls a consorLlum LhaL serves as an lnLerface Lo Lhe lndlan sofLware lndusLry and
lndlan 8C lndusLry MalnLalnlng close lnLeracLlon wlLh Lhe CovernmenL of lndla ln formulaLlng
naLlonal l1 pollcles wlLh speclflc focus on l1 sofLware and servlces malnLalnlng a sLaLe of Lhe arL
lnformaLlon daLabase of l1 sofLware and servlces relaLed acLlvlLles for use of boLh Lhe sofLware
developers as well as lnLeresLed companles overseas Mr Som MlLLal resldenL Chalrman
ramod 8hasln


3 What |s ASSCCnAM?
1he AssoclaLed Chambers of Commerce and lndusLry of lndla (ASSCCPAM) lndlas premler
apex chamber covers a membershlp of over 2 lakh companles and professlonals across Lhe
counLry lL was esLabllshed ln 1920 by promoLer chambers represenLlng all reglons of lndla As
an apex lndusLry body ASSCCPAM represenLs Lhe lnLeresLs of lndusLry and Lrade lnLerfaces
wlLh CovernmenL on pollcy lssues and lnLeracLs wlLh counLerparL lnLernaLlonal organlzaLlons Lo
promoLe bllaLeral economlc lssues resldenLSwaLl lramal


38 What |s NA8AkD?
nA8A8u was esLabllshed by an acL of arllamenL on 12 !uly 1982 Lo lmplemenL Lhe naLlonal
8ank for AgrlculLure and 8ural uevelopmenL AcL 1981 lL replaced Lhe AgrlculLural CredlL
ueparLmenL (ACu) and 8ural lannlng and CredlL Cell (8CC) of 8eserve 8ank of lndla and
AgrlculLural 8eflnance and uevelopmenL CorporaLlon (A8uC) lL ls one of Lhe premlere agency
Lo provlde credlL ln rural areas nA8A8u ls seL up as an apex uevelopmenL 8ank wlLh a mandaLe
for faclllLaLlng credlL flow for promoLlon and developmenL of agrlculLure smallscale lndusLrles
coLLage and vlllage lndusLrles handlcrafLs and oLher rural crafLs

39 What |s SID8I?
1he Small lndusLrles uevelopmenL 8ank of lndla ls a sLaLerun bank almed Lo ald Lhe growLh and
developmenL of mlcro small and medlum scale lndusLrles ln lndla SeL up ln 1990 Lhrough an
acL of parllamenL lL was lncorporaLed lnlLlally as a wholly owned subsldlary of lndusLrlal
uevelopmenL 8ank of lndla


40 What |s SLNSLk and NII1?
SLnSLx ls Lhe shorL Lerm for Lhe words SenslLlve lndex and ls assoclaLed wlLh Lhe 8ombay
(Mumbal) SLock Lxchange (8SL) 1he SLnSLx was flrsL formed on 111986 and used Lhe markeL
caplLallzaLlon of Lhe 30 mosL Lraded sLocks of 8SL Where as nSL has 30 mosL Lraded sLocks of
nSLSLnSLx lS 1PL lnuLx Cl 8SL Anu nll1? lS 1PL lnuLx Cl nSL8C1P WlLL SPCW uAlL?
18AulnC MA8kS Sensex and nlfLy boLh are an lndex" An lndex ls baslcally an lndlcaLor lL
lndlcaLes wheLher mosL of Lhe sLocks have gone up or mosL of Lhe sLocks have gone down


41 What |s SL8I?
SL8l ls Lhe regulaLor for Lhe SecurlLles MarkeL ln lndla Crlglnally seL up by Lhe CovernmenL of
lndla ln 1988 lL acqulred sLaLuLory form ln 1992 wlLh SL8l AcL 1992 belng passed by Lhe lndlan
arllamenL Chalred by C 8 8have


42 What |s Mutua| funds?
MuLual funds are lnvesLmenL companles LhaL pool money from lnvesLors aL large and offer Lo
sell and buy back lLs shares on a conLlnuous basls and use Lhe caplLal Lhus ralsed Lo lnvesL ln
securlLles of dlfferenL companles 1he muLual fund wlll have a fund manager LhaL Lrades Lhe
pooled money on a regular basls 1he neL proceeds or losses are Lhen Lyplcally dlsLrlbuLed Lo
Lhe lnvesLors annually


43 What |s Asset Management Compan|es?
A company LhaL lnvesLs lLs cllenLs pooled fund lnLo securlLles LhaL maLch lLs declared flnanclal
ob[ecLlves AsseL managemenL companles provlde lnvesLors wlLh more dlverslflcaLlon and
lnvesLlng opLlons Lhan Lhey would have by Lhemselves MuLual funds hedge funds and penslon
plans are all run by asseL managemenL companles 1hese companles earn lncome by charglng
servlce fees Lo Lhelr cllenLs




44 What are nonperform|ng assets?
nonperformlng asseLs also called nonperformlng loans are loansmade by a bank or flnance
company on whlch repaymenLs or lnLeresL paymenLs are noL belng made on Llme A debL
obllgaLlon where Lhe borrower has noL pald any prevlously agreed upon lnLeresL and prlnclpal
repaymenLs Lo Lhe deslgnaLed lender for an exLended perlod of Llme 1he nonperformlng asseL
ls Lherefore noL yleldlng any lncome Lo Lhe lender ln Lhe form of prlnclpal and lnLeresL
paymenLs


4S What |s kecess|on?
A Lrue economlc recesslon can only be conflrmed lf Cu (Cross uomesLlc roducL)growLh ls
negaLlve for a perlod of Lwo or more consecuLlve quarLers


46 What |s fore|gn exchange reserves?
lorelgn exchange reserves (also called lorex reserves) ln a sLrlcL sense are only Lhe forelgn
currency deposlLs and bonds held by cenLral banks and moneLary auLhorlLlesPowever Lhe
Lerm ln popular usage commonly lncludes forelgn exchange and goldSu8s and lMl reserve
poslLlons