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A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly by loaning or indirectly through capital markets. A bank links together customers that have capital deficits and customers with capital surpluses.
2. What is the difference between
Cheque and Demand Draft?
Cheque: Cheuqe is a negotiable instrument instructing a bank to pay
a specific amount from a specific account held in the maker/depositor
name with that Bank.
Demand Draft: A demand
draft is an instrument used for effecting transfer of money. It is a negotiable
instrument.
3. What is a Non-Banking
Financial Company (NBFC)?
A Non-Banking Financial Company
(NBFC) is a company registered under the Companies Act, 1956 engaged in the
business of loans and advances, acquisition of
shares/stocks/bonds/debentures/securities issued by Government or local
authority or other marketable securities of a like nature, leasing,
hire-purchase, insurance business, chit business but does not include any
institution whose principal business is that of agriculture activity, industrial
activity, purchase or sale of any goods (other than securities) or providing
any services and sale/purchase/construction of immovable property. A
non-banking institution which is a company and has principal business of
receiving deposits under any scheme or arrangement in one lump sum or in
installments by way of contributions or in any other manner, is also a
non-banking financial company (Residuary non-banking company).
4. NBFCs are doing
functions similar to banks. What is difference between banks & NBFCs ?
NBFCs lend and make investments and
hence their activities are akin to that of banks; however there are a few
differences as given below:
- NBFC cannot accept demand deposits;
- NBFCs do not form part of the payment and settlement system and cannot issue cheques drawn on itself;
- deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available to depositors of NBFCs, unlike in case of banks.
5 . What is Private
Banking?
Banking services offered to high
net-worth individuals. Private banking institution
assists the high net-worth
individual in investing his/her money in exchange for
commissions and fees. The term
"private" refers to the customer service being
rendered on a more personal basis.
6. What is BSBDA?
Under the guidelines issued on
August 10, 2012 by RBI: Any individual, including poor or those from
weaker section of the society, can open zero balance account in any bank. BSBDA
guidelines are applicable to "all scheduled commercial banks in India,
including foreign banks having branches in India".
All the accounts opened earlier as
'no-frills' account should be renamed as BSBDA. Banks are required to convert
the existing 'no-frills' accounts’ into 'Basic Savings Bank Deposit Accounts'.
The 'Basic Savings Bank Deposit
Account' should be considered as a normal banking service available to all
customers, through branches .
The aim of introducing 'Basic
Savings Bank Deposit Account' is very much part of the efforts of RBI for
furthering Financial Inclusion objectives.
7. What is BPS (Basis
Points)?
BPS (Basis point) : - BPS is an acronym for basic points is used to indicate
changes in rate of interest and other financial instrument.
1 BASIC POINT IS EQUAL TO 0.01%
So when we say that repo rate has
been increased by 25 bps, it means that the rate has been increased by 0.25%
8. What is KYC?
The
Reserve Bank of India (RBI) has advised banks to follow ‘KYC guidelines’,
wherein certain personal information of the account-opening prospect or the
customer is obtained. The objective of doing so is to enable the Bank to have
positive identification of its customers. This is also in the interest of
customers to safeguard their hard earned money.
The
KYC guidelines of RBI mandate banks to collect three proofs from their
customers. They are-
- Photograph
- Proof of identity
- Proof of address
9. What is Sub-prime
crisis?
The current Subprime crisis is due
to sub-prime lending. These are the loans given
to the people having low credit rating.
10. What is Base Rate?
It is the minimum rate of interest that a bank is allowed to charge from its
customers. Unless mandated by the government, RBI rule stipulates that no bank
can offer loans at a rate lower than BR to any of its customers.
It is
effective from, July 1, 2010. However, all existing loans, including home loans
and car loans, will continue to be at the current rate. Only the new loans
taken on or after July 1 and old loans being renewed after this date will be
linked to BR.
11. What is SWIFT?
SWIFT :- Society for worldwide Interbank financial tele-
communication.
- India was 74th Nation to join SWIFT Network.
- SWIFT Code is a standard format of bank Identifier code. This code is used particularly in International transfer of money between banks.
- A majority of FOREX related message are sent to correspondent banks abroad through SWIFT.
- SWIFT Code consist 8 or 11 character when code is 8 digit, It is referred to primary office 4 – bank code
2 – country code
2 – location code
3 – branch code (optional).
12. What is
Swabhimaan Yojana?
Swabhimaan is a financial inclusion
plan of bank to take banking to the door steps of the remote village where
banking facility are not available.
13. What is NOSTRO and VOSTRO
account?
NOSTRO Account: A NOSTRO account is maintained by an Indian bank in the
foreign countries.
VOSTRO Account: a
vostro a/c is maintained by a foreign bank in India with their corresponding
bank.
14. What is a DeMat
Account?
DeMat is nothing but a
dematerialized account. If one has to save money or make cheque payments, then
he/she needs to open a bank account. Similarly, one needs to open a DeMat
account if he/she wants to buy or sell stocks. Thus, DeMat account is similar
to a bank account wherein the actual money is being replaced by shares. In
order to open a DeMat account, one needs to approach the Depository Participants
[DPs].
In India, a DeMat account is a type
of banking account that dematerializes paper-based physical stock shares. The
DeMat account is used to avoid holding of physical shares: the shares are
bought as well as sold through a stock broker. In this case, the advantage is
that one does not need any physical evidence for possessing these shares. All
the things are taken care of by the DPs.
This account is very popular in
India. Physically only 500 shares can be traded as per the provision given by
SEBI. From April 2006, it has become mandatory for any person holding a DeMat
account to possess a Permanent Account Number (PAN).
15. What is RuPay Card?
RuPay is the Indian domestic
card payment network set up by National Payments Corporation of India (NPCI) at
the behest of banks in India. The RuPay project had been conceived by Indian
Banks Association (IBA) and had the approval of Reserve Bank of India (RBI).
RuPay LogoNational Payments
Corporation of India (NPCI) has a plan to provide a full range of card payment
services including the RuPay ATM, RuPay MicroATM, Debit, Prepaid and Credit
Cards which will be accepted in India and abroad, across various channels like
POS, Internet, IVR and mobile etc.
The initial focus of NPCI
would be to approach those banks who have not been issuing any payment card at
all more specifically – Regional Rural Banks (RRBs) and urban co-operative
banks.
All Public Sector Undertakings
(PSU) banks set to join RuPay system by the end of year 2012. RuPay-based debit
cards can be used by the consumers on the Internet from September, 2012.
The government of India had
launched India’s first domestic payment card network, RuPay, to compete with
Visa Inc and Mastercard Inc.
16. What is foreign
exchange reserves?
Foreign exchange reserves (also
called Forex reserves) in a strict sense are only
the foreign currency deposits and
bonds held by central banks and monetary
authorities.However, the term in
popular usage commonly includes foreign
exchange and gold,SDRs and IMF
reserve positions.
17. What is Bancassurance ?
Bancassurance stands for
distribution of financial products particularly the
insurance policies (both the life
and non-life), also called referral business, by
banks as corporate agents, through
their branches located in different parts of the
country.
18. What is Money Laundering ?
Money laundering is the processes of
concealing the source of obtain money. Money or funds obtained through illegal
activities are presented as legitimate.
19. What is the difference
between Nationalized bank and Private Bank ?
A Nationalized bank is one that is
owned by the government of the country. Since
the people decide who the government
is, they are also referred to as public sector
banks. The government is responsible
for the money deposited into the accounts of
these banks. Where as a private
sector bank is one that is owned by an independent
individual or a company that is
controlled by a few individuals. In short, the bank
is owned by someone else and they
run the bank. The person owning/running the
bank is responsible for the money
deposited into the accounts of these banks.
20. What are non-perfoming
assets?
A classification used by
financial institutions that refer to loans that are in jeopardy of default.
Once the borrower has failed to make interest or principal payments for 90 days
the loan is considered to be a non-performing asset.
Also known as "non-performing
loan".
21. What is the Functions
of RBI?
The Reserve Bank of India is the
central bank of India, was established on April 1,
1935 in accordance with the
provisions of the Reserve Bank of India Act, 1934.
The Reserve Bank of India was set up
on the recommendations of the Hilton
Young Commission. The commission
submitted its report in the year 1926, though
the bank was not set up for nine
years.To regulate the issue of Bank Notes and
keeping of reserves with a view to
securing monetary stability in India and
generally to operate the currency and
credit system of the country to its
advantage." Banker to the
Government: performs merchant banking function for
the central and the state
governments; also acts as their banker.Banker to banks:
maintains banking accounts of all
scheduled banks. 29 What is monetary policy?
A Monetary policy is the process by
which the government, central bank, of a
country controls
(i) the supply of money,
(ii) availability of money, and
(iii) cost of money or rate of
interest, in order to attain a set of objectives
oriented towards the growth and
stability of the economy.
22. What is SEZ?
SEZ means Special Economic Zone is
the one of the part of government’s policies
in India. A special Economic zone is
a geographical region that economic laws
which are more liberal than the
usual economic laws in the country. The basic
motto behind this is to increase
foreign investment, development of infrastructure,
job opportunities and increase the
income level of the people.
23. What is SIDBI?
The Small Industries Development
Bank of India is a state-run bank aimed to aid
the growth and development of micro,
small and medium scale industries in India.
Set up in 1990 through an act of
parliament, it was incorporated initially as a
wholly owned subsidiary of
Industrial Development Bank of India.
24. What is TREASURY BILLS
(TB)?
Treasury bills (T-Bills) are the
short term liabilities of the central government .theoretically government of
India issued three types of T-bills through auctions, namely 91 days,
182days,and 364 days. There are no treasury bills issued by state government.
Minimum amount of T –Bills is Rs. 2500and in multiple of RS. 2500.T-bills are
issued at a discount and are redeemed at par from 1st April 1997 treasury bills
have been replaced by WAYS AND MEANS ADVANCES .
25. What is COMMERCIAL PAPER (CP)?
commercial paper was introduced by
RBI in 1991. It is a short term money market instrument issued in the form of
promissory note .Corporate; primary dealers and the all India financial
institution are eligible to issue CP. The maturity period of each commercial
paper is 7days to 1year from the date of issue .CP can be issued denominations
of Rs. 5lakh or multiples thereof. Only a schedule bank can act as an issuing
and paying agent (IPA) for issuance of CP.
26. What is CRM?
Customer Relationship Management
(CRM) refers to the ability to understand,
anticipate and manage the needs of
the customer, interaction and relationship
resulting in increased profitability
through revenue and margin growth and
operational efficiencies.
27. What is Right to
information Act?
The Right to Information act is a
law enacted by the Parliament of India giving
citizens of India access to records
of the Central Government and State
overnments.The Act applies to all
States and Union Territories of India, except the
State of Jammu and Kashmir - which
is covered under a State-level law. This law
was passed by Parliament on 15 June
2005 and came fully into force on 13
October 2005.
28. What is
Recession?
A true economic recession can only
be confirmed if GDP (Gross Domestic
Product)growth is negative for a
period of two or more consecutive quarters.
29. What is
dematerialization ?
Dematerialization is a process by
which the paper certificates of an investor are
taken back by the company/registrar
and actually destroyed and an equivalent
number of securities are credited in
electronic holdings of that investor.
30. What is Derivative ?
A derivative is a financial contract
that derives its value from another financial
product/commodity (say spot rate)
called underlying (that may be a stock, stock
index, a foreign currency, a
commodity). Forward contract in foreign exchange
transaction, is a simple form of a
derivative.
31. What is LAF ?
Liquidity Adjustment Facility (LAF)
was introduced by RBI during June, 2000 in
phases, to ensure smooth transition
and keeping pace with technological
upgradation.
32. What is a Repo
Rate?
Repo rate is the rate at which our
banks borrow rupees from RBI. Whenever the
banks have any shortage of funds
they can borrow it from RBI. A reduction in the
repo rate will help banks to get
money at a cheaper rate. When the repo rate
increases, borrowing from RBI
becomes more expensive
33. What is Reverse Repo
Rate?
This is exact opposite of Repo rate.
Reverse Repo rate is the rate at which Reserve
Bank of India (RBI) borrows money
from banks. RBI uses this tool when it feels
there is too much money floating in
the banking system. Banks are always happy
to lend money to RBI since their
money is in safe hands with a good interest. An
increase in Reverse repo rate can
cause the banks to transfer more funds to RBI
due to this attractive interest
rates.
34. What is CRR Rate?
Cash reserve Ratio (CRR) is the
amount of funds that the banks have to keep with
RBI. If RBI decides to increase the
percent of this, the available amount with the
banks comes down. RBI is using this
method (increase of CRR rate), to drain out
the excessive money from the banks.
35. What is Bank Rate?
Bank rate, also referred to as the
discount rate, is the rate of interest which a
central bank charges on the loans
and advances that it extends to commercial
banks and other financial
intermediaries. Changes in the bank rate are often used
by central banks to control the
money supply.
36. What is PLR?
The Prime Interest Rate is the
interest rate charged by banks to their most
creditworthy customers (usually the
most prominent and stable business
customers). The rate is almost
always the same amongst major banks. Adjustments
to the prime rate are made by banks
at the same time; although, the prime rate
does not adjust on any regular
basis. The Prime Rate is usually adjusted at the
same time and in correlation to the
adjustments of the Fed Funds Rate. The rates
reported below are based upon the
prime rates on the first day of each respective
month. Some banks use the name
"Reference Rate" or "Base Lending Rate" to
refer to their Prime Lending Rate.
37. what is Bitcoin?
Bitcoin is a consensus network that
enables a new payment system and a completely digital money. It is the first
decentralized peer-to-peer payment network that is powered by its users with no
central authority or middlemen. From a user perspective, Bitcoin is pretty much
like cash for the Internet. Bitcoin can also be seen as the most prominent
triple entry bookkeeping system in existence.
38. What is SLR Rate?
SLR (Statutory Liquidity Ratio) is
the amount a commercial bank needs to maintain in the form of cash, or gold or
govt. approved securities (Bonds) before providing credit to its customers. SLR
rate is determined and maintained by the RBI (Reserve Bank of India) in order
to control the expansion of bank credit. SLR is determined as the percentage of
total demand and percentage of time liabilities. Time Liabilities are the
liabilities a commercial bank liable to pay to the customers on their anytime
demand. SLR is used to control inflation and propel growth.
Through SLR rate tuning the money
supply in the system can be controlled efficiently.
39. What is Deposit Rate?
Interest Rates paid by a depository
institution on the cash on deposit.
40. What is Fiscal Policy?
Fiscal policy is the use of
government spending and revenue collection to
influence the economy. These
policies affect tax rates, interest rates and
government spending, in an effort to
control the economy. Fiscal policy is an
additional method to determine
public revenue and public expenditure.
41. What is the Banking
Ombudsman Scheme?
The Banking Ombudsman Scheme enables
an expeditious and inexpensive forum to bank customers for resolution of
complaints relating to certain services rendered by banks. The Banking
Ombudsman Scheme is introduced under Section 35 A of the Banking Regulation
Act, 1949 by RBI with effect from 1995.
42. Which are the banks
covered under the Banking Ombudsman Scheme, 2006?
All Scheduled Commercial Banks,
Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under
the Scheme.
43. What is
Inflation?
Inflation is as an increase in the
price of bunch of Goods and services that projects
the Indian economy. An increase in
inflation figures occurs when there is an
increase in the average level of
prices in Goods and services. Inflation happens
when there are fewer Goods and more
buyers; this will result in increase in the
price of Goods, since there is more
demand and less supply of the goods.
44. What is Deflation?
Deflation is the continuous decrease
in prices of goods and services. Deflation
occurs when the inflation rate
becomes negative (below zero) and stays there for a
longer period.
45. What is FII?
FII (Foreign Institutional Investor)
used to denote an investor, mostly in the form
of an institution. An institution
established outside India, which proposes to invest
in Indian market, in other words
buying Indian stocks. FII's generally buy in large
volumes which has an impact on the
stock markets. Institutional Investors includes
pension funds, mutual funds,
Insurance Companies, Banks, etc.
46. What is FDI?
FDI (Foreign Direct Investment)
occurs with the purchase of the “physical assets
or a significant amount of ownership
(stock) of a company in another country in
order to gain a measure of
management control” (Or) A foreign company having a
stake in a Indian Company.
47. What is IPO?
IPO is Initial Public Offering. This
is the first offering of shares to the general
public from a company wishes to list
on the stock exchanges.
48. What is GDP?
The Gross Domestic Product or GDP is
a measure of all of the services and goods
produced in a country over a
specific period; classically a year.
49. What is GNP?
Gross National Product is measured
as GDP plus income of residents from
investments made abroad minus income
earned by foreigners in domestic market.
50. What is Revenue
deficit?
It defines that, where the net
amount received (by taxes & other forms) fails to
meet the predicted net amount to be
received by the government.
51. What is Disinvestment?
The Selling of the government stake
in public sector undertakings.
52. What is Fiscal Deficit?
It is the difference between the
government’s total receipts (excluding borrowings)
and total expenditure.
53. What is National
Income?
National Income is the money value
of all goods and services produced in a
Country during the year.
54. What is bank and
its features and types?
A bank is a financial organization
where people deposit their money to keep it
safe.Banks play an important role in
the financial system and the economy. As a
key component of the financial
system, banks allocate funds from savers to
borrowers in an efficient manner.
55. What are Mutual funds?
Mutual funds are investment
companies that pool money from investors at large
and offer to sell and buy back its
shares on a continuous basis and use the capital
thus raised to invest in securities
of different companies. The mutual fund will
have a fund manager that trades the
pooled money on a regular basis. The net
proceeds or losses are then
typically distributed to the investors annually. A
company that invests its clients'
pooled fund into securities that match its declared
financial objectives. Asset
management companies provide investors with more
diversification and investing options
than they would have by themselves. Mutual
funds, hedge funds and pension plans
are all run by asset management companies.
These companies earn income by
charging service fees to their clients.
56. What is Cheque?
Cheque is a negotiable instrument
instructing a Bank to pay a specific amount
from a specified account held in the
maker/depositor's name with that Bank.A bill
of exchange drawn on a specified
banker and payable on demand.“Written order
directing a bank to pay money”.
57. What is demand Draft?
A demand draft is an instrument used
for effecting transfer of money. It is a
Negotiable Instrument. Cheque and
Demand-Draft both are used for Transfer of
money. You can 100% trust a DD. It
is a banker's check. A check may be
dishonored for lack of funds a DD
can not. Cheque is written by an individual and
Demand draft is issued by a bank.
People believe banks more than individuals.
58. What is NABARD?
NABARD was established by an act of
Parliament on 12 July 1982 to implement
the National Bank for Agriculture
and Rural Development Act 1981. It replaced
the Agricultural Credit
Department (ACD) and Rural Planning and Credit Cell
(RPCC) of Reserve Bank of India, and
Agricultural Refinance and Development
Corporation (ARDC). It is one of the
premiere agency to provide credit in rural
areas. NABARD is set up as an apex
Development Bank with a mandate for
facilitating credit flow for
promotion and development of agriculture, small-scale
industries, cottage and village
industries, handicrafts and other rural crafts.
59. What is SENSEX
and NIFTY?
SENSEX is the short term for the
words "Sensitive Index" and is associated with
the Bombay (Mumbai) Stock Exchange
(BSE). The SENSEX was first formed on
1-1-1986 and used the market capitalization
of the 30 most traded stocks of BSE.
Where as NSE has 50 most traded
stocks of NSE.SENSEX IS THE INDEX OF
BSE. AND NIFTY IS THE INDEX OF
NSE.BOTH WILL SHOW DAILY
TRADING MARKS. Sensex and Nifty both
are an "index”. An index is basically
an indicator it indicates whether
most of the stocks have gone up or most of the
stocks have gone down.
60. What is SEBI?
SEBI is the regulator for the
Securities Market in India. Originally set up by the
Government of India in 1988, it
acquired statutory form in 1992 with SEBI Act
1992 being passed by the Indian
Parliament. Chaired by C B Bhave.
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