BANKING TERMINOLOGY

BANKING TERMINOLOGY

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Do you know about Banking Terminology?

The banking industry uses a wide range of terms and terminologies. I would like to inform you. I have made a list of basic banking terminology that a Banking student must know.

1. What is AMB?

AMB mains Average Monthly Balance. Every Customer has to maintain some balance in his/ her Savings account as per the variant of the account. Average of the entire balance maintained in a particular month is known as AMB.

How to calculate the Average Monthly Balance.

this is a balance statement of MR. X.

1st January       14000             Average balance is sum total of day-end balances

2nd January      10000 

3rd Jan               15000                    14000+10000+15000+..........15000

4th Jan               10000                ------------------------------------------------------

5th Jan                9000                                                10 days 

6th Jan               4500

7th Jan               9500                     113000/10  = 11300

8th Jan               15000                   In the same way AMB is Calculated

9th Jan               11000

10th Jan             15000

2. What is AQB?

AQB stands for Average Quarterly Balance. A customer has to maintain some balance in his/ her Current account as per the variant of the account. Average of the entire balance maintained in a particular quarter is known as AQB. 

We can calculate AQB same as AMB=     sum of Amount of all days

                                                                   ------------------------------------------

                                                                               no. of  total days

3. What Is Non Maintenance charge?

• Charge imposed  in the customer’s account for Non-maintaining the required product AMB/AQB is known as non-maintenance charge. 

• It is Imposed on a monthly basis in Savings account and quarterly basis in Current account. 

RBI Guidelines on NMC.

• In the event of a default in maintenance of minimum balance/average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS/ email/ letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.

• In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under intimation to the account holder.

• The policy on penal charges to be so levied may be decided with the approval of Board of the bank. 

• The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference between the actual balance maintained and the minimum balance as agreed upon at the time of opening of an account. A suitable slab structure for recovery of charges may be finalized.

• It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.

• It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance. 

4. What is Home branch?

• The branch in which customer holds his/her account is known as Home Branch. For e.g, Mr. Hanif has an account with Kalkaji branch. So his home branch is Kalkaji.

5. What is non Home branch?

• All the other branches other than the home branch will be considered as non-home branch for the customer. 

6. What is DD?

• DD stands for Demand Draft. It is a pre-paid instrument, wherein Bank by whom the DD has been made undertakes the responsibility to make full payment on demand.

• DD is made by debiting customer’s account with the Bank. DD can also be made by accepting cash for an amount up to Rs.50000 (including charges) 

7. What is NEFT?

• National Electronic Funds Transfer (NEFT) system is a nation wide funds transfer system to facilitate the transfer of funds from any bank branch to any other bank branch.

• No limit on minimum/maximum value

• The beneficiary can expect to get credit for the NEFT transactions within two business hours

• Can be processed from the branch or through Net banking / Mobile banking

• Can be processed for even non-customers

• For Non-customers, a transaction can be processed in cash value less than Rs. 50000/- inclusive of charges

• Non customer must provide PAN card copy for transaction in cash 

8. What is RTGS?

• RTGS stands for “ Real-Time Gross settlement”. RTGS system is funds transfer a mechanism where a transfer of money takes place from one bank to another on a "real-time" and on "gross" basis

• This is the fastest possible money transfer system through the banking channel

• Min value of the transaction Rs.2 Lac, No maximum limit

• The beneficiary bank has to credit the beneficiary's account within 30 minutes of receiving the funds' transfer message.

• Can be processed from the branch or through Net banking / Mobile banking.

9. What is IMPS?

• Immediate Payment Service (IMPS) enables you to instantly transfer funds online safely from your bank account to accounts maintained with other banks participating in IMPS.

• This service is available 24x7, even on Sundays and any Bank holidays through Net Banking and Mobile Banking.

• IMPS fund transfer can be done in the following ways: 

• Fund Transfer using the account number and IFSC

• Fund Transfer using mobile number and MMID (Mobile Money Identifier)

What is Issuance charge?

• Charge levied at the time of issuance of card is known as Issuance charges

• It is a one time charge.

What is Annual charge?

• Charge levied on a yearly basis is known as Annual charge.

• It is debited from the savings account of the customer which is linked to the debit card. 

What is a Home Banking service?

• Banking services provided at the customer’s doorstep is known as Home Banking.

What is a Standing Instruction?

• Standing instruction is a way of making an automatic payment of a fixed amount to a loan, bill or credit card at the same time at a pre-decided frequency i.e weekly, monthly, etc.

• It can be made from your savings or current account and is most commonly used to make payments to a home loan, car loan or to pay bills.

• Amount set as Standing instruction is always fixed. 

What is an Account statement?

• Record of all transactions – debit or credit – in the customer account.

• Statements are sent to the customer by the Bank at a predetermined frequency.

• Customer can self generate the statements through digital channels like Net Banking and Mobile Banking.

What is DD revalidation?

• The validity of DD is 3 months

• Charge levied for revalidating an expired DD is known as revalidation charge.

For e.g Mr. A has got a DD created on 1st Jan 2016 to be payable to one of his vendors. Due to some reasons, he could not handover the DD till 10th April 2016. Mr A can ask his home branch to revalidate the DD and use it for payment to the vendor.

What is Stop Payment?

• Cheques which are issued by the customer can be stopped from the payment before they are presented. Single cheque, as well as a series of cheque, can be selected for a stop payment.

• Stop payment can be done through Net Banking, Phone Banking or visiting the branch.

What is Revocation of cheque?

• Revocation of cheque means cancellation of stop payment marked on the cheque.

• For exp. Customer lost his checkbook and has asked the bank for stop payment of all the cheques in that series. But after 2 days he found the checkbook in one of his drawers. In such a case customer can call Phone Banking or visit the nearest branch to revoke the stop payment of the cheques. 

Solvency Certificate

• A solvency certificate is proof of solvency which means that the person’s assets are more than his liabilities.

• Most often the solvency certificate is required by the companies for auditing purpose.

• A bank may issue solvency certificate to individuals stating the total amount of assets held by the individual.

Definition of Inactive account?

• Accounts that are not operated by the customer for a period of 12 months from the date of the last customer induced transactions are Inactive accounts.

• Post 12 months, the status of the account is changed to “Inactive” in the system. 

What is Inoperative/Dormant account?

• A savings, as well as current account, should be treated as inoperative/dormant if there are no transactions in the account for a period of more than 24 months from date of last customer induced transaction.

• This means an account will turn dormant on completion of 12 months from the date of change of status to inactive.

What is Unclaimed account?

• Account which is not operated for a period of 10 years is known as Unclaimed account

Cheque Truncation System (CTS)

• Cheque Truncation simply means the settlement of clearing transactions on the basis of images and electronic data without the physical movement of the instruments. The Clearing Cheque is truncated at the Presenting bank itself

• The cheque truncation system allows a financial institution to truncate cheques at the “Point of Capture” by providing the capabilities of presenting cheques to the “Paying Bank” electronically and process return cheques electronically. 

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