CHSE Odisha Banking & Insurance key terms

A financial institution licensed to accept deposits from the public, lend money, and provide payment services. In India it operates under RBI rules and must maintain specified reserves.

India's central bank, which issues currency, conducts monetary policy, regulates banks and non-bank lenders, and supervises payment systems. It is also the banking regulator under the Banking Regulation Act, 1949.

A bank that accepts demand and time deposits from the public and uses those funds to give loans and advances for profit. Examples are public sector, private sector and foreign banks in India.

A bank owned and controlled by its members on cooperative principles, registered under state or central cooperative laws. It provides credit and deposit services, mainly to members, and is regulated by RBI and the registrar concerned.

A bank set up under the Regional Rural Banks Act, 1976 to serve rural and semi-urban areas. Ownership is shared by the central government, the state government and a sponsor bank.

A bank licensed by RBI mainly to serve small businesses, small farmers, micro and small industries and unorganised sector borrowers. It must meet prescribed priority sector lending and branch targets.

A differentiated bank licensed by RBI that accepts small deposits and provides payment and remittance services. It cannot give loans or issue credit cards.

The legal relationship created when a person opens an account with a bank. It is generally that of debtor and creditor for deposits, with the banker also acting as agent and trustee in certain transactions.

The process by which a bank verifies a customer's identity and address before opening an account or allowing certain transactions, using prescribed documents and due diligence. It is meant to prevent money laundering and fraud.

Laws, rules and procedures that require banks and other institutions to detect and report transactions that may involve the proceeds of crime. Customer due diligence, record keeping and suspicious transaction reporting are core elements.

The right of a banker to retain goods or securities belonging to a customer until a debt owed to the bank is paid, where there is no contract inconsistent with that right. It does not apply to deposits held in the customer's account.

Money placed with a bank for safekeeping and earning interest or for payment convenience. The bank becomes the debtor and must repay the amount under the agreed terms.

A deposit that the customer can withdraw at any time on demand, usually through a cheque, ATM or electronic transfer. Savings and current account balances are demand deposits and generally carry little or no interest.

A sum placed with a bank for a fixed period at an agreed interest rate. It usually cannot be withdrawn before maturity without a penalty or conditions specified by the bank.

A deposit scheme in which the customer pays a fixed amount every month for an agreed period, and the bank pays interest on the accumulating balance. The maturity amount is paid at the end of the term.

A deposit held for a fixed period rather than repayable on demand. Fixed deposits and recurring deposits are common forms, and they usually earn higher interest than savings accounts.

Money lent by a bank to a borrower on agreed terms of interest and repayment. The borrower is liable to repay principal and interest, and the loan may be secured or unsecured.

A working capital facility in which a bank allows a borrower to draw up to a sanctioned limit from time to time. Interest is charged on the amount actually used, not on the whole limit.

A facility allowing a current account holder to withdraw more than the available balance, up to an approved limit. Interest is charged on the excess amount used, usually for a short period.

An asset pledged or mortgaged to a bank to secure a loan, which the bank may sell if the borrower defaults. It reduces the lender's risk and may lower the interest rate charged.

A loan or advance on which the borrower has stopped paying interest or principal for a prescribed period, normally more than 90 days. Banks must classify such assets and make provisions for them.

A rule requiring banks to lend a minimum share of their credit to specified sectors such as agriculture, micro and small enterprises, education, housing and weaker sections. RBI sets the targets and categories.

The share of a bank's net demand and time liabilities that it must hold as cash with RBI. It is a monetary policy tool used to influence the money supply and credit creation.

The minimum share of a bank's net demand and time liabilities that it must hold in liquid assets such as cash, gold or approved government securities. It is prescribed by RBI under the Banking Regulation Act, 1949.

The rate at which RBI lends short-term funds to banks against government securities, used as the main signal of monetary policy. Changes in it influence borrowing costs and deposit rates across the economy.

A deposit account meant for businesses and frequent transactions, offering unlimited withdrawals and no interest. It may come with an overdraft facility and requires higher minimum balances than savings accounts.

A deposit account for individuals that earns interest on the balance and allows limited withdrawals. It is intended to encourage saving rather than business use.

A written order directing a bank to pay a stated sum from the drawer's account to the payee or bearer. It is a negotiable instrument governed by the Negotiable Instruments Act, 1881.

A document that entitles its holder to a sum of money and can be transferred by delivery or endorsement so that the transferee may sue in their own name. Cheques, promissory notes and bills of exchange are examples.

A payment instrument issued by a bank branch, drawn on another branch or bank, and payable on demand. It is prepaid by the purchaser and is generally safer than a personal cheque for unknown payees.

The act of signing the back of a negotiable instrument, sometimes with instructions, to transfer rights to another person. The signature and wording determine how further transfer may be made.

Refusal by the drawee bank to pay a cheque, for example due to insufficient funds, a stop payment instruction or a signature mismatch. Dishonour for insufficient funds can attract criminal liability under the Negotiable Instruments Act, 1881.

A contract in which one party pays a premium and the insurer agrees to compensate for specified losses or pay a stated sum on a specified event. It spreads risk across many policyholders.

The amount paid by the policyholder to the insurer for cover under an insurance policy. It may be paid once or periodically and is calculated from the risk and sum assured.

A financial or legal interest that a person has in the subject matter of insurance, such that loss or damage would cause them loss. It is required for a valid insurance contract.

The written document setting out the terms of an insurance contract, including the cover, exclusions, premium and conditions. It is the main evidence of the agreement between insurer and insured.

The amount stated in a life insurance policy that the insurer will pay on the insured event, such as death or maturity. It is the basis for calculating the premium.

Insurance that pays a benefit on the death of the insured person or on survival to a stated date. It protects dependants against loss of income and may also build savings.

The right of a policyholder to name a person who will receive the policy money on the insured's death. The nominee is entitled to receive the amount but is not necessarily the legal owner of it.

Insurance that covers loss or damage to property, liability and other non-life risks, such as fire, marine, motor and health. Policies usually run for one year and are renewed periodically.

Insurance bought by an insurer to transfer part of its risk to another insurer, called the reinsurer. It protects the original insurer against very large or accumulated claims.

A person licensed by IRDAI to solicit and procure insurance business for one or more insurers. The agent must follow the code of conduct and disclose commissions to the prospect.

The Insurance Regulatory and Development Authority of India, which licenses insurers and intermediaries, frames regulations and protects policyholders. It was established under the IRDA Act, 1999.

A person or firm that arranges insurance business between the insurer and the customer, such as an agent, broker, corporate agent or web aggregator. Intermediaries must be registered or licensed by IRDAI.