Basic banking terms Online banking: Online banking enables you to access your personal and business accounts

via a computer connected to the Internet. This type of banking is secure and password-protected. Electronic bank transfer: This is an easy way to transfer money between your bank accounts as well as to an external account online. Electronic funds transfer (EFT): This is the process of transferring funds via electronic means, which includes using debit cards, ATMs and automatic withdrawals from a bank account. Basis Point: One hundredth of 1%. A measure normally used in the statement of interest rate e.g., a change from 5.75% to 5.81% is a change of 6 basis points. Open market operations: Buying and selling of government securities in open market in order to expand or contract the amount of money in banking system by RBI. These are principal tools of monetary policy. For example: If inflation needs to be controlled, the RBI will sell securities to bank so that their ability to lend thus the availability of money reduces. Micro credit: To extend very small loans (< Rs 50,000) S.NO. 1. 2. RTGS (Real time gross settlement) Faster method Settlement happens in Real Time means no waiting period for payment transaction. The bank has to credit the beneficiary account within two hours of receiving the fund transfer message. Settlement always on Gross basis means no bunching with other transactions. Always settled on one to one basis. Only for transactions above Rs 1 lac. NEFT (Net electronic fund transfer) As compared to RTGS slower method This settlement is done 6 times per day on weekdays and 3 times on Saturdays. It is net basis. It means bank club transactions together and only net amount is transferred. For transactions less than Rs 1 lac.

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Bank assurance: Partnership between bank and an insurance company in which the insurance company uses the bank sales channel for insurance products. Banking Ombudsmen scheme: For resolution of customers complaints related to services of bank. Banking ombudsmen is the senior official appointed by RBI to redress customer complaints. Introduced in 1995 and revised in 2002. The current scheme became operative from 1 January 2006.

Core Banking solutions (CBS): It is the process in which all the information related to the customer account are available on the centralized server rather than merely available on branch server. Cheque: A cheque is a paper instructing the bank to pay a specific amount from the person's account to the person in whose name the cheque has been made. It is a negotiable instrument. It is an unconditional order. It has a life of 3 months. Types of cheque: The cheques are of the following types: 1. Open cheques: These are paid across the counter of the bank. Open cheques may be bearer or order cheques. (a) Bearer cheques: If a drawer orders the bank to pay a stated sum of money to the bearer it is called a bearer cheque. Any person who possesses this is entitled to receive the payment. (b) Order cheque: If a cheque is to the order of a person in whose favor the cheque is drawn it is called order cheque. The order cheque is paid by the bank only when the bank is satisfied about the identity of the payee. 2. Crossed Cheques: If a cheque is crossed by drawing two parallel lines across the face of the cheque, with or without the words, it is called crossed cheque. The crossed cheque cannot be paid on the counter of the drawee bank. It will be deposited in the account of a person in whose order or favor it is drawn. Or in this the identity of the person possessing the cheque is first verified then only the payment is given. Other kind of cheques: Anti-dated cheque: It is a cheque which bears a date earlier than the date on which it is presented to the bank. It is valid only upto 3 months from the date on which it is issued. Post-dated cheque: It is the cheque which bears a date which is yet to come (future date). It cannot be honoured earlier than the date on the cheque. Stale cheque: If a cheque is presented in the bank after 3 months then it is called stale cheque. It cannot be honoured.

Clearing house: It is a voluntary association of banks under the management of a bank where the settlement accounts are maintained. Wherever Reserve Bank of India has its office (and a banking department), the clearing house is managed by it. In the absence of an office of the Reserve Bank, the clearing house is managed by the State Bank of India, its associate banks and in a few cases by public sector banks.

Cheque clearing procedure: For example: SBI gets thousands of cheques for clearing each day from its customers. These cheques may be drawing on different banks. So each bank will send a representative to a central place (i.e. clearing house) and exchange cheques drawn on each other. RBI acts as clearing house. But at places where RBI is not there SBI & associated banks and other public sector banks acts as clearing house. Suppose SBI brings 1000 cheques for Rs 50 lacs drawn on axis bank and axis bank brings 500 cheques for Rs 45 lacs drawn on SBI. So now axis bank should give 50 lacs to SBI and SBI should give 45 lacs to axis bank. So instead of giving full amount net difference which is of 5 lacs is payable by axis bank to SBI. Now the settlement bank i.e. RBI passes an entry by debiting axis bank and crediting SBI in their books. Axis bank should give 5 lacs to settlement bank for paying SBI and RBI will settle this amount. This kind of settlement is called as net settlement.

Demand Draft: These are the written order directing that payment be made, on sight, to a third party. Guaranteed payment is there as firstly your account balance is checked. They have a life span of 3 months. The person writing the draft is called the drawee The bank making the payment is the drawer, or the payor bank. The beneficiary of a demand draft, the person receiving the payment, is the payee. Difference between draft and cheque: S. No. 1. Particulars Meaning Cheque Unconditional order which directs bank to pay the amount to the person Only account holders get this facility To make payments. But there is no certainity of payment as can be dishonoured or stopped Customer of bank Bank may not charge for issuing cheque book Demand draft An order to pay money drawn by one office of a bank upon another office of the same bank for a sum of money payable to order on demand Issued to anyone (even non account holders) To transfer the money. Guarantee of payment is there. Bank Bank charges commission

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Facility Purpose Drawer Bank charges

Types of accounts: 1. Demand deposits: These are repayable on demand. Amount can be transferred from one person to other by means of cheques or electronic transfer. (a) Current deposit: In this no interest is paid and no restriction is there on the withdrawal. (b) Savings deposit: In this a specific rate of interest is paid. Interest is paid on daily balance. A restriction is there on withdrawals. 2. Term deposits: These are not repayable on demand. Payment is there on the maturity of the term. (a) Fixed deposit: Deposits a lumpsum amount at the starting only. Minimum period is 7 days and maximum period is 10 years. A fixed rate of interest is paid at fixed, regular intervals. While the principal is repaid on maturity. (b) Cumulative deposits: In this interest is paid on accrued interest i.e. compounding is there. At the end of maturity principal as well as interest is repaid. (c) Recurring deposits: In this instead of depositing lumpsum amount at the stating of maturity period, depositor credits a certain amount at regular interval. (d) Sweep in sweep out deposits: Combination of current and time deposits

Some other are: (i) (ii) CASA deposits (Current account saving account deposits) NRO: Non-resident ordinary accounts- It means the amount is kept in rupees and cannot be converted or repatriated back into foreign currency. In this INR as well as foreign currencies can be deposited while the withdrawal is only in INR. It is for the purpose of any rupee remittances which the NRI could be getting in India. Some examples are rent for his house, interest from rupee deposits, earning from rupee investment, sale of house etc. Balance in NRO account have limited repatriable eligibility. NRE: Non-resident external account- It means the amount kept in rupees can be converted and repatriated back into foreign currency. It allows only remittances in foreign currencies. Even if the account holder has an account in India, Rupee cannot be deposited, though it can be withdrawn. The account holder is free to remit them out of the country. Transfer from one NRE account to other NRE account is allowed now. Remitting INR is not allowed.

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FCNR: Foreign currency non-resident account: These are non-repatriable deposits. This is a Term Deposit Foreign Currency account and not a savings account. Period can be more than one year but less than 5 years. Currency in the account is convertible to Indian currency freely.

Loans: (a) Short term: Repayable within 12 months, for working capital requirements. (b) Medium term: Repayable within a period of more than 1 year but less than 3 years. Basically a demand loan and is for acquiring plant and machinery. (c) Long term: Repayable beyond 3 years. Basically a term loan and for acquiring land and construction of building