Banking Abbreviations and Terms

Banking Abbreviations and Terms

Banking abbreviations and terms are important in the financial world, helping to make complex processes easier to understand. Terms like ATM (Automated Teller Machine) and NEFT (National Electronic Funds Transfer) are commonly used to simplify communication and improve efficiency in banking. It is important for anyone working in the banking industry or preparing for banking exams to know these terms. This article provides key banking terms you need to know to feel confident in understanding banking processes.

1. ATM (Automated Teller Machine)

An ATM is a machine that allows bank customers to perform basic financial transactions such as withdrawing cash, checking account balances or transferring money between accounts, without the need for human interaction.

2. NEFT (National Electronic Fund Transfer)

NEFT is a nationwide payment system used to transfer funds from one bank account to another. It operates on the basis of delayed net settlement, which means that transactions are processed in batches at specific intervals.

3. RTGS (Real Time Gross Settlement)

RTGS is a real-time payment system that allows large value money transfers between banks, usually involving amounts above a certain limit. Settlement of transactions is done in real-time, ensuring voice trading.

4. IMPS (Immediate Payment Service)

IMPS is a real time interbank electronic funds transfer service. It enables customers to transfer money instantly through mobile phones, ATMs and internet banking, available 24/7.

5. KYC (Know Your Customer)

KYC refers to the process by which banks and financial institutions verify the identity of their customers. This is a regulatory requirement to prevent fraud and money laundering. KYC involves submitting personal identification documents like Aadhaar card, passport or voter ID card.

6. BPLR (Benchmark Prime Lending Rate)

BPLR is the minimum interest rate that banks charge their most creditworthy customers. It serves as a benchmark for calculating interest rates on loans and advances. However, in many cases it has been replaced by MCLR (Marginal Cost of Funds Lending Rate).

7. MCLR (Marginal Cost of Money Lending Rate)

MCLR is the minimum interest rate set by banks for lending to borrowers. It is based on the marginal cost of funds, which includes the cost for the bank to borrow the money. MCLR aims to make lending rates more transparent and responsive to market conditions.

8. FD (Fixed Deposit)

Fixed deposit is a financial instrument offered by banks where a lump sum amount is deposited for a fixed period at a predetermined interest rate. It provides a safe and low-risk investment option with a higher interest rate than a regular savings account.

9. CD (Certificate of Deposit)

A certificate of deposit is a short-term deposit account issued by banks with a fixed maturity date and interest rate. It is similar to a fixed deposit but is usually negotiable and can be sold before maturity.

10. CIBIL (Credit Information Bureau (India) Limited)

CIBIL is a credit rating agency that collects and maintains credit records of individuals and businesses. It is responsible for generating a credit score that reflects an individual’s creditworthiness, which is used by banks to assess loan eligibility.

11. NPA (Non-Performing Asset)

NPA refers to a loan or advance on which the borrower has stopped making payments (principal or interest) for a period of more than 90 days. It is an important indicator of the financial health of a bank.

12. SBI (State Bank of India)

SBI is the largest public sector bank in India. It offers a wide range of banking services including savings accounts, loans and investment products. As a major player in the Indian banking sector, SBI plays a vital role in the country’s economy.

13. MICR (Magnetic Ink Character Recognition)

MICR is a technology used for processing checks. It involves printing letters using magnetic ink, which can be read by machines, making check processing more efficient and secure.

14. SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT is a global messaging network used by banks and financial institutions to securely send information about financial transactions. It facilitates international payments and foreign exchange transactions between banks.

15. RBI (Reserve Bank of India)

The Reserve Bank of India is the central bank of India and the regulator of the country’s financial system. It controls monetary policy, issues currency, and supervises financial institutions, among other responsibilities.

16. BFSI (Banking, Financial Services and Insurance)

BFSI refers to the collective term for all companies that are involved in the banking, financial services and insurance sectors. These include commercial banks, non-banking financial companies (NBFCs) and insurance providers.

17. CASA (Current Account Savings Account)

CASA is a combined term used for both current and savings accounts in banks. These accounts are non-fixed deposits that offer high liquidity and can be used for everyday banking transactions.

18. PSU (Public Sector Undertaking)

PSU is a government owned corporation or enterprise. Many public sector banks in India are also known as PSUs, such as State Bank of India (SBI), Punjab National Bank (PNB), and others.

19. CC (Cash Credit)

Cash credit is a short-term loan given by banks to businesses, allowing them to borrow money up to a certain limit to meet working capital requirements. It is usually offered against the pledge of assets such as inventory or receivables.

20. EMI (Equated Monthly Installment)

EMI is a fixed payment amount made by a borrower to the lender on a specified date in every calendar month. This is a common method used to repay loans like home loan, personal loan and car loan.