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Clerk & PO : Important Quiz for Bank Part-02

Banking: Accepting for the purpose of lending
or investment of deposits of money from
Public, Repayable on demand or otherwise and
withdraw able by cheques, drafts, order, etc.
Bank Ombudsman: Bank Ombudsman is the
authority to look into complaints against Banks
in the main areas of collection of cheque /
bills, issue of demand drafts, non-adherence to
prescribed hours of working, failure to honour
guarantee / letter of credit commitments,
operations in deposit accounts and also in the
areas of loans and advances where banks flout
directions / instructions of RBI. This Scheme
was announced in 1995 and is functioning with
new guidelines from 2007. This scheme covers
all scheduled banks, the RRBs and co-operative
banks.
Bancassurance: Bancassurance refers to the
distribution of insurance products and the
insurance policies of insurance companies
which may be life policies or non-life policies
like home insurance - car insurance, medi-
policies and others, by banks as corporate
agents through their branches located in
different parts of the country by charging a
fee.
Banker's Lien: Bankers lien is a special right
of lien exercised by the bankers, who can
retain goods bailed to them as a security for
general balance of account. Bankers can have
this right in the absence of a contract to the
contrary.
Basel-II: The Committee on Banking
Regulations and Supervisory Practices,
popularity known as Basel Committee,
submitted its revised version of norms in June,
2004. Under the revised accord the capital
requirement is to be calculated for credit,
market and operational risks. The minimum
requirement continues to be 8% of capital
fund (Tier I & II Capital) Tier II shall continue
to be not more than 100% of Tier I Capital.
Brick & Mortar Banking: Brick and Mortar
Banking refers to traditional system of banking
done only in a fixed branch premises made of
brick and mortar. Now there are banking
channels like ATM, Internet Banking, tele
banking etc.
Business of Banking : Accepting deposits,
borrowing money, lending money, investing,
dealing in bills, dealing in Foreign Exchange,
Hiring Lockers, Opening Safe Custody
Accounts, Issuing Letters of Credit, Travelers’
Cheques, doing Mutual Fund business,
Insurance Business, acting as Trustee or doing
any other business which Central Government
may notify in the official Gazette.
Bouncing of a cheque: Where an account
does not have sufficient balance to honour the
cheque issued by the customer, the cheque is
returned by the bank with the reason "funds
insufficient" or "Exceeds arrangement”. This is
known as 'Bouncing of a cheque’.
Basis Point: One hundredth of 1%. A measure
normally used in the statement of interest rate
e.g., a change from 5.75% to 5.81% is a
change of 6 basis points. Bear Markets:
Unfavorable markets associated with falling
prices and investor pessimism.
Bid-ask Spread: The difference between a
dealers’s bid and ask price.
Bid Price: The highest price offered by a dealer
to purchase a given security.
Blue Chips: Blue chips are unsurpassed in
quality and have a long and stable record of
earnings and dividends. They are issued by
large and well-established firms that have
impeccable financial credentials.
Bond: Publicly traded long-term debt
securities, issued by corporations and
governments, whereby the issuer agrees to pay
a fixed amount of interest over a specified
period of time and to repay a fixed amount of
principal at maturity.
Book Value: The amount of stockholders’
equity in a firm equals the amount of the
firm’s assets minus the firm’s liabilities and
preferred stock.
Broker: Individuals licensed by stock
exchanges to enable investors to buy and sell
securities.
Brokerage Fee: The commission charged by a
broker.
Bull Markets: Favorable markets associated
with rising prices and investor optimism.
Call Option: The right to buy the underlying
securities at a specified exercise price on or
before a specified expiration date.
Callable Bonds: Bonds that give the issuer the
right to redeem the bonds before their stated
maturity.
Capital Gain: The amount by which the
proceeds from the sale of a capital asset
exceed its original purchase price.
Capital Markets: The market in which long-
term securities such as stocks and bonds are
bought and sold.
Certificate of Deposits (CDs): Savings
instrument in which funds must remain on
deposit for a specified period and premature
withdrawals incur interest penalties.
Certificate of Deposit:. Certificate of Deposits
are negotiable receipts in bearer form which
can be freely traded among investors. This is
also a money market instrument,issued for a
period ranging from 7 days to f one year .The
minimum deposit amount is Rs. 1 lakh and
they are transferable by endorsement and
delivery.
Cheque: Cheque is a bill of exchange drawn
on a specified banker ordering the banker to
pay a certain sum of money to the drawer of
cheque or another person. Money is generally
withdrawn by clients by cheques. Cheque is
always payable on demand.
Cheque Truncation: Cheque truncation
truncates or stops the flow of cheques through
the banking system. Generally truncation takes
place at the collecting branch, which sends the
electronic image of the cheques to the paying
branch through the clearing house and stores
the paper cheques with it.
Closed-end (Mutual) Fund: A fund with a
fixed number of shares issued, and all trading
is done between investors in the open market.
The share prices are determined by market
prices instead of their net asset value.
Collateral: A specific asset pledged against
possible default on a bond. Mortgage bonds
are backed by claims on property. Collateral
trusts bonds are backed by claims on other
securities. Equipment obligation bonds are
backed by claims on equipment.
Commercial Paper: Short-term and unsecured
promissory notes issued by corporations with
very high credit standings.
Common Stock: Equity investment
representing ownership in a corporation; each
share represents a fractional ownership
interest in the firm.
Compound Interest: Interest paid not only on
the initial deposit but also on any interest
accumulated from one period to the next.
Contract Note: A note which must
accompany every security transaction which
contains information such as the dealer’s name
(whether he is acting as principal or agent) and
the date of contract.
Controlling Shareholder: Any person who is,
or group of persons who together are, entitled
to exercise or control the exercise of a certain
amount of shares in a company at a level
(which differs by jurisdiction) that triggers a
mandatory general offer, or more of the voting
power at general meetings of the issuer, or
who is or are in a position to control the
composition of a majority of the board of
directors of the issuer.
Convertible Bond: A bond with an option,
allowing the bondholder to exchange the bond
for a specified number of shares of common
stock in the firm. A conversion price is the
specified value of the shares for which the
bond may be exchanged. The conversion
premium is the excess of the bond’s value over
the conversion price.
Corporate Bond: Long-term debt issued by
private corporations.
Coupon: The feature on a bond that defines
the amount of annual interest income.
Coupon Frequency: The number of coupon
payments per year.
Coupon Rate: The annual rate of interest on
the bond’s face value that a bond’s issuer
promises to pay the bondholder. It is the
bond’s interest payment per dollar of par
value.
Covered Warrants: Derivative call warrants
on shares which have been separately
deposited by the issuer so that they are
available for delivery upon exercise.
Credit Rating: An assessment of the likelihood
of an individual or business being able to meet
its financial obligations. Credit ratings are
provided by credit agencies or rating agencies
to verify the financial strength of the issuer
for investors.
Collecting Banker: Also called receiving
banker, who collects on instruments like a
cheque, draft or bill of exchange, lodged with
himself for the credit of his customer's
account.
Consumer Protection Act: It is implemented
from 1987 to enforce consumer rights through
a simple legal procedure. Banks also are
covered under the Act. A consumer can file
complaint for deficiency of service with
Consumer District Forum for amounts upto
Rs.20 Lacs in District Court, and for amounts
above Rs.20 Lacs to Rs.1 Crore in State
Commission and for amounts above Rs.1 Crore
in National Commission.
Co-operative Bank : An association of persons
who collectively own and operate a bank for
the benefit of consumers / customers, like
Saraswat Co-operative Bank or Abhyudaya Co-
operative Bank and other such banks.
Co-operative Society : When an association of
persons collectively own and operate a unit for
the benefit of those using its services like Apna
Bazar Co-operative Society or Sahakar Bhandar
or a Co-operative Housing Society.
Core Banking Solutions (CBS): Core Banking
Solutions is a buzz word in Indian banking at
present, where branches of the bank are
connected to a central host and the customers
of connected branches can do banking at any
breach with core banking facility.
Creditworthiness: It is the capacity of a
borrower to repay the loan / advance in time
along with interest as per agreed terms.
Crossing of Cheques: Crossing refers to
drawing two parallel lines across the face of
the cheque. A crossed cheque cannot be paid
in cash across the counter, and is to be paid
through a bank either by transfer, collection
or clearing. A general crossing means that
cheque can be paid through any bank and a
special crossing, where the name of a bank is
indicated on the cheque, can be paid only
through the named bank.
Customer: A person who maintains any type
of account with a bank is a bank customer.
Consumer Protection Act has a wider definition
for consumer as the one who purchases any
service for a fee like purchasing a demand
draft or a pay order. The term customer is
defined differently by Laws, softwares and
countries.
Current Account: Current account with a
bank can be opened generally for business
purpose. There are no restrictions on
withdrawals in this type of account. No
interest is paid in this type of account.
Currency Board: A monetary system in which
the monetary base is fully backed by foreign
reserves. Any changes in the size of the
monetary base have to be fully matched by
corresponding changes in the foreign reserves.
Current Yield: A return measure that indicates
the amount of current income a bond provides
relative to its market price. It is shown as:
Coupon Rate divided by Price multiplied by
100%.
Custody of Securities: Registration of
securities in the name of the person to whom
a bank is accountable, or in the name of the
bank’s nominee; plus deposition of securities
in a designated account with the bank’s
bankers or with any other institution providing
custodial services.

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