General Awareness-Important Banking Terms for Bank Exams

Every banking aspirant should be aware of the terminologies used in the job he/she aspires for. In this post, Oliveboard brings to you 30 important banking terms for bank exams that will be beneficial for your upcoming banking exams. This post will also help you ace the Exam Interview. Some of the banking terms for bank exams are as follows:

Repo rate: When anyone says ‘important banking terms for bank exams’, the first one that comes to our mind is the repo rate. It is the rate at which the Reserve Bank of India lends money to commercial banks in the event of any shortfall of funds.

Cash Reserve Ratio: It is the percentage of deposits which commercial banks are required to keep as cash according to the directions of the central bank. It is also known as the Reserve Ratio.

Statutory Liquidity Ratio: The ratio of liquid assets (cash, gold, and unencumbered securities) to net demand and time liabilities (NDTL).

Bank rate: It is the rate charged by the Reserve Bank of India for lending funds to commercial banks. It is also known as Discount Rate.

Base rate: It is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to their customers.

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No-frills Account: This is a rudimentary savings account that requires no minimum balance to enjoy benefits like net banking, online fund transfer, etc.

Soft Loan: It is a loan on comparatively lenient terms and conditions as compared to other loans available in the market. These easier conditions might be in the form of lower interest rates, prolonged repayment duration, etc.

Reverse repo rate: It is the rate at which the Reserve Bank of India borrows money from commercial banks within the country. This is one of the important banking terms for bank exams that you should memorize for sure.

Securitization: It is a process by which a company clubs it’s different financial assets/debts to form a consolidated financial instrument that is issued to investors.

Non-Performing Asset (NPA): It is a loan or advance for which the principal or interest payment remained overdue for 90 days.

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Payments bank: It is like any other bank but can’t advance loans or issue credit cards. It can accept demand deposits up to Rs 1 lakh.

Monetary policy: It is the macroeconomic policy laid down by the RBI. It involves the management of money supply and interest rate and is the demand side economic policy used by the government.

Capital Adequacy Ratio: It is the ratio of a bank’s capital in relation to its risk weighted assets and current liabilities. It is decided by central banks and bank regulators to prevent commercial banks from taking excess leverage and becoming insolvent in the process.

Bank Ombudsman: A bank ombudsman is the authority to look into complaints if in case other modes of complaints haven’t worked out for the customer.

Call Money: It refers to the borrowing or lending of funds for 1 day.

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Notice Money: Where money is borrowed or lend for a period between 2 days and 14 days.

Term Money: It refers to the borrowing/lending of funds for a period exceeding 14 days.

Mumbai Interbank Bid Rate: It is the rate of interest that a bank would be willing to pay to secure a deposit from another bank in the Indian interbank market.

London Interbank Offer Rate: It is the global reference rate for unsecured short-term borrowing in the interbank market. It acts as a benchmark for short-term interest rates.

Plastic Money: This is a reference to currency used by individuals other than hard cash. Mostly it is used to refer to debit and credit cards.

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Special Drawing Rights: It is a kind of reserve of foreign exchange assets comprising leading currencies globally and created by the International Monetary Fund in the year 1969.

RTGS: Real Time Gross Settlement is a fund transfer technology used by banks for the same bank or interbank fund transfer

Balloon mortgage: It is a loan that has an initial period of low or no monthly payments, at the end of which the borrower is required to pay off the full balance in a lump sum.

Marginal standing facility: It is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.

Letter of credit: It is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount.

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Nostro account: It refers to an account that a bank holds in a foreign currency in another bank.

Vostro account: Itis an account a correspondent bank holds on behalf of another bank.

Returned Item Fee: In case a cheque has bounced due to insufficient funds or another reason, the account holder will be penalized with a fee. This fee is called the returned item fee.

On-lending: It means loans sanctioned by banks to eligible intermediaries for onward lending for the creation of priority sector assets.

Currency Deposit Ratio: It shows the amount of currency that people hold as a proportion of aggregate deposits.

Dear reader, we are certain that this article would help you in more ways than one in your upcoming exams. Do revise these important banking terms for bank exams. Oliveboard wishes you all the success in your upcoming banking exam.

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