JAIIB AFM key terms

The interest rate at which the central bank lends short-term funds to commercial banks against government securities, used as a main tool to control liquidity and inflation in the economy.

The rate at which the central bank absorbs surplus liquidity from banks by borrowing against government securities; usually lower than the repo rate and used to drain excess money supply.

The percentage of a bank's net demand and time liabilities that must be held as cash balances with the central bank, earning no interest and directly reducing lendable resources.

The minimum share of net demand and time liabilities a bank must hold in liquid assets such as cash, gold, or approved government securities, maintained before extending credit.

The aggregate of demand deposits, time deposits, and other liabilities owed to outsiders, net of assets held with the banking system; it forms the base for computing reserve requirements.

Buying or selling of government securities by the central bank in the market to inject or absorb liquidity, thereby influencing short-term interest rates and credit conditions.

The minimum lending rate below which a bank may not price loans, computed from cost of funds, operating expenses, and a profit margin; replaced the earlier benchmark prime lending rate.

A benchmark lending rate built from marginal cost of funds, negative carry on reserves, operating cost, and tenor premium; loan pricing must be at or above this floor for most borrowers.

A mandated share of bank credit directed to sectors such as agriculture, micro and small enterprises, education, housing, and weaker sections, with shortfalls attracting contribution to a development fund.

The mandatory process of identifying and verifying a customer's identity and address through documents and due diligence before opening accounts or allowing transactions, aimed at preventing money laundering.

Policies, procedures, and reporting obligations that banks follow to detect and prevent the disguising of proceeds of crime, including suspicious transaction reports to the financial intelligence unit.

Ongoing risk-based scrutiny of a customer's identity, source of funds, and transaction pattern, intensified for high-risk accounts and refreshed periodically under the bank's AML policy.

An independent grievance-redressal authority under the central bank that hears customer complaints against banks on specified grounds and can award compensation, subject to appeal.

A set of voluntary standards adopted by banks covering transparency in pricing, fair treatment of borrowers, and disclosure of charges, with the board responsible for overseeing compliance.

A system recording every transaction in at least two accounts, one debit and one credit of equal value, so that total debits always equal total credits in the ledger.

A statement listing all ledger account balances at a date, split into debit and credit columns, used to test arithmetical accuracy before preparing final accounts.

The first record of a transaction, showing date, accounts debited and credited, amounts, and a narration explaining the business event before posting to ledgers.

The transfer of amounts from journal entries to the relevant individual accounts in the ledger, building a classified record of each asset, liability, income, or expense.

A financial statement showing assets, liabilities, and capital at a specific date, revealing the financial position and the sources and uses of funds of an entity.

A statement summarizing revenues and expenses for a period to arrive at net profit or loss, prepared before the balance sheet and closed to capital or retained earnings.

The accounting assumption that income and expenses are recorded when earned or incurred, regardless of when cash moves, matching costs to the periods they relate to.

The rule that expenses incurred to generate a period's revenue must be recognized in the same period, guiding adjustments such as depreciation and provisions for doubtful debts.

A charge against profit created for advances or receivables whose recovery is uncertain, reflecting expected credit loss and reducing the carrying value of the asset.

A loan or advance on which principal or interest has remained overdue for more than ninety days, requiring classification, provisioning, and income recognition changes by the bank.

A non-performing asset that has remained overdue for twelve months or less, attracting a higher provisioning percentage than a standard asset because of elevated credit risk.

A non-performing asset that has remained substandard for more than twelve months, classified further by the period overdue, with provisioning rising as recovery prospects weaken.

An advance identified as unrecoverable or of negligible value by the bank, auditors, or inspectors, requiring full or near-full provisioning and write-off consideration.

The ratio of a bank's eligible capital to its risk-weighted assets, ensuring sufficient cushion against credit, market, and operational risks as prescribed by prudential regulators.

Total credit exposure multiplied by risk weights assigned according to counterparty type and security quality, forming the denominator for capital adequacy computation.

Core capital comprising paid-up equity, reserves, and retained earnings net of specified deductions; it absorbs losses without triggering insolvency and must meet a minimum ratio.

Supplementary capital including revaluation reserves, general provisions, and subordinated debt, which counts toward capital adequacy within limits set by the regulator.

A document promising or ordering payment of money that can be transferred by delivery or endorsement, giving the holder a right to sue in their own name.

A bill of exchange drawn on a specified banker and payable on demand, including electronic images of a truncated cheque; crossing and endorsement affect how it is paid.

A written instrument containing an unconditional order, signed by the maker, directing a person to pay a certain sum to a specified person or bearer.

A written instrument containing an unconditional undertaking, signed by the maker, to pay a certain sum to a specified person or bearer; unlike a bill, it involves two parties.

The signing of a negotiable instrument, usually on the back, by the holder to transfer rights to another person, with liability passing to the endorser if the instrument is dishonoured.

The right of a banker to retain goods or securities belonging to a customer until a debt due to the bank is discharged, unless there is a contract inconsistent with that right.

A banker's right to combine two accounts of the same customer, one in credit and one in debit, to adjust the balance, subject to notice and legal restrictions.

A court order attaching money held by a bank on behalf of a judgment debtor, requiring the bank to pay the creditor or freeze the account as directed.

Advisory and product services that help clients grow, protect, and transfer assets through financial planning, portfolio construction, tax efficiency, and estate considerations.

Dividing a portfolio among asset classes such as equity, debt, and cash to balance risk and return in line with the investor's goals, horizon, and tolerance for loss.

A structured assessment of an investor's willingness and ability to bear loss, based on income, horizon, experience, and attitude, used to select a suitable product mix.

The obligation to recommend only products appropriate to a client's risk profile, objectives, and financial situation, supported by documented rationale and periodic review.

Spreading investments across assets, sectors, or issuers so that poor performance in one holding does not disproportionately damage the overall portfolio's value.

A facility to invest a fixed amount in a mutual fund at regular intervals, averaging purchase cost across market cycles and building discipline through rupee-cost averaging.

A pooled investment vehicle that collects money from many investors and invests it per a stated objective, issuing units valued at net asset value.

The per-unit value of a mutual fund scheme, calculated as total assets minus liabilities divided by units outstanding, declared at the close of each business day.