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Indian Settlement Systems: India has two main electronic funds settlement systems for
one to one trans
actions: the real time gross settlement (RTGS) and the national electronic fund transfer
(NEFT) systems.
Real Time Gross Settlement: The term RTGS stands for real time gross settlement,
and Reserve Bank of India maintains this payment network. RTGS system is a funds
transfer mechanism where transfer of money takes place from one bank to another on a
real time and on gross basis. This is the fastest possible money transfer system
through the banking channel.
National Electronic Fund Transfer: The national electronic fund transfer (NEFT)
system is a nationwide system that facilitates individuals, firms and corporate to
electronically transfer funds from any bank branch to any individual, firm or corporate
having an account with any other bank branch in the country. IFSC or Indian financial
system code is required to perform a transaction using NEFT or RTGS and can be found
out on RBI website.
Automated Teller Machine or Automatic Teller Machine (ATM), is a computerized
device that provides customers of a financial institution with access to financial
transactions in a public space without the need for a cashier, clerk or bank teller.
Letter of Credit: One of the terms of supply is that buyer will establish a letter of credit
in favour of the seller through his bank. The seller should furnish proof of dispatch of
goods or services and submit all the documents required under the L/C. Then, the
buyers bank will pay the amount of bill drawn by the seller on the buyer under this
agreement. International letter of credit is by and large, irrevocable.
Remittance: A facility, by which its customers at one place makes funds available to the
bank and the bank in exchange, makes the funds available to the customer or any other
specified party at the required place, within the same country or abroad. Remittance can
be in the form of Demand Draft (DD), Mail Transfer (MT), Telegraphic Transfer (TT),
Electronic Mail transfer (EMT) through computer networking (or satellite channel),
International Money Order (IMO) etc.
MICR: Magnetic Ink Character Recognition is a 9 digit number printed on banking
instruments such as a cheque or a demand draft using a special type of ink made of
magnetic material. The first 3 digits denote the city, the 4th to 6th digits denote the bank,
while the last 3 digits denote the branch number. The code can be read by a machine,
minimising the chances of error in clearing of cheques, thereby making funds transfer
faster.
Payable At Par or MCC: Multi City Cheques (MCC) or Payable at Par (PAP) can be
encashed anywhere in India irrespective of the city they were issued in. They are treated
as local clearing cheques across India, the amount is credited in the account the same
day and there is no inter-city collection charges associated with a normal cheques being
encashed in another city.
Fixed Deposits: FDs are deposits that are repayable on fixed maturity date along with
the principal and agreed interest rate for the period. Banks pay higher interest rates on
FDs than the savings bank account.
Recurring Deposits: These are also called cumulative deposits and in recurring deposit
accounts, a certain amounts of savings are required to be compulsorily deposited at
specific intervals for a specified period.
Credit Rating: It is the rating which an individual (or company) gets from the credit
industry depending on the individuals credit history. The details of which are available
from specialist organisations like CRISIL in India.
Bill of Exchange: An order written by the seller of goods instructing the purchaser to
pay the seller (or bearer of the bill) a specified amount on a specified future date.
Dividends: Company earnings that may be paid out to shareholders according to the
number of shares or stocks they hold. Dividends can be earned on stocks as also units
of mutual funds.
Inflation: A percentage rate of change in the price level.
Non Performing Assets (NPA): When due payments in credit facilities remain overdue
above specified period, then such credit facilities are classified as NPA.
Reconciliation: Checking all bank account papers to make sure that the banks records
and customers records ar in sync.
Cash Flow: The cash flow is often defined as the liquid balance of cash as well as the
bank balance that is available with an organization or a corporation. In some cases, the
cash flow is also defined as the net amount of cash that is generated by the net income
that has been generated by an organization or corporation in a particular time period.
Endorsement: Endorsement is basically the handing over of rights of a financial/legal
document or a negotiable instrument to another person. The person who hands over
his/her rights is known as the endorser, and the person to whom the rights have been
transferred is known as the endorsee.
Government Bonds: A government bond, which is also known as a government
security, is basically any security that is held with the government and has the highest
possible rate of interest.
Lock-in Period: A guarantee given by the lender that there will be no change in the
quoted mortgage rates for a specified period of time, which is called the lock-in period.
Mortgage: A mortgage is a legal agreement between the lender and borrower where
real estate property is used as collateral for the loan, in order to secure the payment of
the debt. According to the mortgage agreement, the lender of the loan is authorized to
confiscate the property, the moment the borrower stops paying the installments.