Basic Banking Terms You Should Be Familiar With

Are you preparing for an interview in a bank or a financial institution? Or have you chosen a subject that is related to banking and finance. Or are you banking professional. You need to familiarize yourself with these banking terms. Even if you don’t belong to this industry, money and banking are an essential part of our daily lives that taking the time to learn some new phrases could yield profitable results.

Here, we present to you 20 most significant terms used in banking and finance:

Bank Rate

It is the rate of interest charged by a central bank to commercial banks on the advances and the loans it extends.

Cheque

It is written by an individual to transfer amount between two accounts of the same bank or a different bank and the money is withdrawn form the account.

Bouncing of a cheque

When an account has insufficient funds the cheque is not payable and is returned by the bank with a reason “Exceeds arrangement” or “funds insufficient”.

Credit cards

A credit card allows customers to spend up to a predefined credit limit. Interest on a credit card balance is not assessed until the end of the term, so it’s best to pay off your balance each month to avoid a fee.

Debit cards

It is a card issued by the bank so the customers can withdraw their money from their account electronically.

E-Banking

It is a type of banking in which we can conduct financial transactions electronically.

EFT – (Electronic Fund Transfer)

In this we use Automatic teller machine, wire transfer and computers to move funds between different accounts in different or same bank.

Fiscal Deficit

It is the amount of Funds borrowed by the government to meet the expenditures.

Initial Public Offering (IPO)

It is the time when a company makes the first offering of the shares to the pubic.

Leverage Ratio

It is a financial ratio which gives us an idea or a measure of a company’s ability to meet its financial losses.

Liquidity

It is the ability of converting an investment quickly into cash with no loss in value.

Market Capitalization

The product of the share price and number of the company’s outstanding ordinary shares.

Mortgage

It is a kind of security which one offers for taking an advance or loan from someone.

Mutual Fund

These are investment schemes. It pools money from various investors in order to purchase securities.

Savings Bank Account

It is account of nominal interest which can only be used for personal purpose and has some restrictions on withdrawal.

SLR (Statutory Liquidity Ratio)

It is amount that a commercial bank should have before giving credits to its customers which should be either in the form of gold, money or bonds.

Teller

Teller is a staff member of the bank who cashes cheques, accepts deposits and performs different banking services for the general mass.

Universal Banking

When financial institutions and banks undertake activities related to banking like investment, issue of debit and credit card etc then it is known as universal banking.

Virtual Banking

Internet banking is sometimes known as virtual banking. It is called so because it has no bricks and boundaries. It is controlled by the world wide web.

Compound interest

This refers to interest paid on the returns your money earns, so that your principal balance grows at a faster pace. Compounding is an important concept to understand, as it can play a vital role in achieving long-term financial goals, like saving for retirement.

Author: Bankstoday

A little too much known for his rigorous yet exceptional, expository yet artistic and descriptive yet engaging writing style; Muneel is a die-hard professional of writing blogs, web articles, SEO friendly content, story-board script and all the formal types. He has a sheer love for adding unique flavor to each of his works, the client-type.

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