Maharashtra HSC Vocational BFSI key terms

The interest rate at which the Reserve Bank of India lends short-term funds to commercial banks against government securities. Raising it makes borrowing costlier and helps control inflation.

The rate at which the Reserve Bank of India absorbs surplus cash from banks by borrowing against securities. It is normally set below the repo rate and helps drain excess liquidity.

The share of a bank's net demand and time liabilities that must be kept as cash with the Reserve Bank of India. It earns no interest and cannot be used for lending.

The minimum portion of net demand and time liabilities that a bank must hold in approved liquid assets such as government securities, cash or gold before lending the rest.

Money placed with a bank that the customer can withdraw on demand, without prior notice, such as a savings or current account balance. The bank pays little or no interest on it.

Money deposited with a bank for a fixed period at an agreed interest rate, such as a fixed deposit or recurring deposit. Early withdrawal usually attracts a penalty.

The mandatory process by which a bank or insurer verifies a customer's identity, address and source of funds before opening an account or selling a product, to prevent fraud and money laundering.

Laws, rules and internal procedures that financial institutions follow to detect and report attempts to disguise the origin of illegally obtained money, including suspicious transaction reporting to authorities.

Ongoing checks a financial institution performs on a customer, including identity verification, risk categorisation and periodic review of transactions, so that unusual activity can be identified and examined.

A cheque clearing method in which an image of the cheque and its data are transmitted electronically between banks instead of the physical cheque being moved, speeding up clearing and reducing fraud.

A signature and instruction written on the back of a negotiable instrument, such as a cheque, that transfers the right to receive payment to another person or makes the instrument payable to the bearer.

Refusal by the paying bank to make payment on a cheque or draft, for example because of insufficient funds, a signature mismatch or a stale date, which is recorded and notified to the presenting bank.

The interbank process of exchanging cheques or payment instructions, settling the net amounts due between banks, and confirming which payments will be honoured on a given day.

National Electronic Funds Transfer, a Reserve Bank of India retail payment system that moves funds between bank accounts in batches through a central clearing house, settling in half-hourly cycles.

Real Time Gross Settlement, a payment system in which large-value fund transfers are settled one by one, immediately and irrevocably, rather than being netted against other transactions.

Immediate Payment Service, an interbank electronic transfer system available all day, every day, which lets customers send money instantly through mobile banking, net banking or bank branches.

Unified Payments Interface, a platform that links bank accounts to a virtual payment address so users can send and receive money instantly from a smartphone without entering account details each time.

A technology service that securely captures card or account details during an online purchase, encrypts them, and passes the payment request to the bank for authorisation and settlement.

The business of signing up shops and businesses to accept card or digital payments, providing them with a terminal or gateway, and settling the collected amounts after deducting fees.

The fee a merchant pays to the acquiring bank or payment provider for accepting a card or digital payment, usually calculated as a small percentage of the transaction value.

The ease with which an asset can be converted into cash quickly without a significant loss of value. Cash is most liquid; property and long-term bonds are far less liquid.

The segment of the financial system where short-term instruments, generally maturing within one year, are bought and sold, such as treasury bills, commercial paper and certificates of deposit.

A short-term government security issued at a discount to face value and redeemed at par on maturity, used by the government to borrow money for periods of up to one year.

A negotiable short-term instrument issued by a bank or financial institution acknowledging a deposit for a fixed period at a specified rate, tradable in the money market before maturity.

Bonds issued by the central or state government to raise long-term funds, paying periodic interest and returning principal on maturity. They are considered low-risk because they carry sovereign backing.

A pooled investment vehicle that collects money from many investors and invests it in shares, bonds or other assets according to a stated objective, managed by a professional asset management company.

The value of one unit of a mutual fund, calculated by subtracting the fund's liabilities from the market value of its assets and dividing the result by the number of units outstanding.

A facility that lets an investor put a fixed amount into a mutual fund at regular intervals, usually monthly, buying units at the prevailing NAV and averaging out the purchase cost over time.

The amount stated in a life insurance policy that the insurer agrees to pay on the occurrence of the insured event, before any bonuses or deductions are applied.

The amount a policyholder pays to an insurer, monthly, quarterly, annually or as a single payment, in exchange for the insurance cover provided under the policy.

The amount an insurer refunds to a policyholder who ends a savings-type life policy early, before maturity. It is usually lower than the total premiums paid.

The situation where an insurance policy stops providing cover because the policyholder has not paid the premium within the allowed grace period, leaving the insurer free of liability.

An addition to the sum assured in a participating life insurance policy, declared periodically by the insurer out of accumulated surplus and paid along with the claim or at maturity.

The arrangement under which a bank sells insurance products to its customers, often through its branch network, acting as a corporate agent or referral partner for one or more insurers.

The actions taken by a central bank to manage the supply of money and the cost of credit, mainly through interest rates and reserve requirements, in order to influence inflation and growth.

A system of recording every transaction in two accounts, one debited and one credited, so that total debits always equal total credits and the books remain balanced.

The main book of accounts in which all transactions are posted account by account, showing debits and credits and allowing the closing balance of each account to be worked out.

A statement listing the closing balances of all ledger accounts at a given date, used to check that total debits equal total credits before final accounts are prepared.

A sum placed with a bank for a chosen term at a fixed interest rate, which generally earns more than a savings account but restricts withdrawal until maturity or charges a penalty for early closure.

A bank account meant for businesses, offering unlimited withdrawals and payments by cheque or transfer, paying no interest but providing high liquidity and overdraft facilities.