IBP JAIBP Stage II flashcards

33 cards. Read the term and the definition here. The deck at the top of this page is optional.

Maker-checker control

Segregation requiring one officer to originate a transaction and a different officer to authorize it, applied to cash posting, account opening, and limit changes to prevent unilateral error or fraud.

Dormant account

An account with no customer-initiated debit transaction for the prescribed period. Debits are blocked until the customer completes fresh identity verification and reactivation formalities at the branch.

Currency chest

A designated storage point for cash held on behalf of the central bank, from which linked branches draw and to which they surrender surplus cash above their retention limit.

Cheque return memo

A document stating the reason an instrument was dishonoured, such as insufficient funds, signature mismatch, or payment stopped, and returned to the presenting bank through clearing.

Debt service coverage ratio

Net operating income divided by total debt service. A value below 1.0 indicates operating cash flow is insufficient to meet scheduled principal and interest obligations without external support.

Debt burden ratio

Total monthly debt obligations divided by net disposable income. Consumer lending caps this ratio, so affordability constrains approval before collateral quality does.

Drawing power

The amount a borrower may actually utilize, computed from current stock and receivables after margin, which may be lower than the sanctioned limit as security values change.

Hypothecation charge

A charge created over movable assets such as stock and receivables without transferring possession; it must be registered with the registrar to be enforceable against third parties.

Loan classification

Assignment of advances into overdue buckets such as substandard, doubtful, and loss based on days past due, which determines the specific provision charged against profit.

CIB report

A central bank credit information report showing a borrower's aggregate borrowing and repayment history across banks, used to assess willingness to repay before sanction.

Return on assets

Net profit divided by average total assets. It measures how efficiently the asset base generates earnings and allows comparison across banks of different sizes.

Cost-to-income ratio

Operating expenses divided by operating income. A rising ratio signals that costs are growing faster than revenue, compressing profitability and prompting efficiency review.

Suspense account

A temporary ledger holding unclassified or unreconciled entries pending investigation; persistent balances indicate weak reconciliation and may conceal errors or misappropriation.

CAMEL rating

A supervisory framework grading Capital adequacy, Asset quality, Management, Earnings, and Liquidity, used to assess the soundness of a bank or the credit strength of a borrower.

Current ratio

Current assets divided by current liabilities. It tests short-term liquidity but ignores the timing of cash inflows and the collectability of the underlying receivables.

Loan loss provision

An expense recognized in the income statement with a matching allowance against loans on the balance sheet, reflecting expected credit losses from classified advances.

Customer lifetime value

Average annual margin from a customer multiplied by expected retention years. It justifies acquisition spending only where the payback period is shorter than the relationship.

Share of wallet

The proportion of a customer's total financial need captured by the bank. Higher share raises switching cost, deepens the relationship, and reduces attrition risk.

Market segmentation

Dividing a customer base by demographic, geographic, psychographic, or behavioral traits so products and pricing can be targeted; behavioral variables predict banking churn best.

Service quality gap

The difference between what a customer expects and what the customer perceives as delivered. It drives dissatisfaction more strongly than absolute service speed.

Cross-selling

Selling additional products to an existing customer. It increases products per customer, raises switching cost, and improves relationship profitability at lower acquisition cost.

Channel richness

The capacity of a communication channel to convey cues and give immediate feedback. Face-to-face ranks highest; written notices rank lowest but create an auditable record.

Conflict of interest

A situation where personal interest could improperly influence a professional decision. The standard response is to disclose the interest and withdraw from the decision.

Customer confidentiality duty

The obligation to keep customer information secret, permitting disclosure only under legal compulsion, regulatory requirement, or express customer consent, and only on a need-to-know basis.

Bad-news message structure

A message pattern using context, a clear statement of the refusal, supporting reasons, and offered alternatives, so the decision is unambiguous without being unnecessarily damaging.

Two-factor authentication

Access control combining two independent factors, such as a password with a one-time code or biometric, so a single compromised credential cannot authorize a transaction alone.

Recovery time objective

The maximum acceptable duration to restore a system after disruption. It sets the design target for disaster recovery and business continuity planning in core banking operations.

Recovery point objective

The maximum acceptable data loss measured in time before a disruption. It determines backup frequency and replication design for transaction systems.

Phishing

A social-engineering attack using fraudulent messages to obtain credentials or authorize payments. Callback verification on changed payment instructions is the standard defence.

Least privilege

Granting users only the system access required for their role. It limits the damage from compromised credentials and supports segregation of duties in banking applications.

Real interest rate

The nominal interest rate minus inflation. A negative real rate reduces depositor returns in purchasing-power terms and encourages movement into alternative assets.

Policy rate transmission

The process by which a central bank policy rate change flows into interbank rates, deposit pricing, and lending markup, with repricing lagging on fixed-rate books.

Crowding out

Heavy government borrowing from the banking system absorbs available funds, reducing credit available to private borrowers and pushing market yields upward.