GLOSSARY Balloon Payment A large, lump-sum payment scheduled at the end of a series of considerably smaller periodic payments. A balloon payment may be included in the payment schedule for a loan, lease or other stream of payments. Bancassurance Selling of insurance through the vast network of banks. It is part of what is today called as relationship banking. Bank An organisation, which does most or all of the following: receives demand and time deposits, honours instruments drawn on them, pays interest on them; discounts notes, makes loans and invests in securities; collects cheques, drafts and notes; certifies depositor’s cheques; and issues drafts. Bank Credit The borrowing capacity provided to an individual by the banking system in the form of credit or a loan. The total bank credit the individual has is the sum of the borrowing capacity each lender bank provides to the individual. Bank Discount The bank charge made for payment of a note prior to maturity, expressed as a percentage of the note’s face value. In short, front-end interest discounted on an instrument or the amount paid to the holder/bearer of the instrument (borrower) after interest is deducted. The full amount expressed in the instrument is collected as repayment. Bank Draft A cheque drawn by one bank against funds deposited into its account at another bank, authorising the second bank to make payment to the individual named in the draft. Bank Guarantee A guarantee from a bank ensuring that the liability of a debtor will be met. It is used in trade finance. Unlike a line of credit, the sum is only paid if the counterparty does not fulfill the stipulated obligations under the contract. Bank Rate The rate at which RBI lends long term loans to scheduled commercial banks. Bank Run It occurs when a large number of customers withdraw their deposits because they believe the bank is, or might become, insolvent. Bank Reconciliation The process of adjusting balance in an account reported by a bank to reflect transactions that have occurred since the reporting date. For instance, cheque issued by account holder may not yet reflect in the bank’s books but accounted for by the issuer. Hence, the need to know the likely balance. Banker’s Acceptance A written demand accepted by a bank to pay a specified amount at a future date. Banking In general terms, the business activity of accepting and safeguarding money owned by other individuals and entities and then lending out this money in order to earn a profit. Banking Code and Standards Board of India (BCSBI) It was set up in 2005 by the RBI as an independent and autonomous watch dog to monitor and ensure that the Banking Codes and Standards adopted by the banks are adhered to in true spirit. Banking Ombudsman The Banking Ombudsman is a senior official appointed by the RBI to redress customer complaints against deficiency in certain banking services. Banking Ombudsman Scheme It enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. Introduced in 1995 and revised in 2002 and 2006. Bankrupt A person, firm or corporation that has been declared insolvent through a court proceeding and is relieved from the payment of debts (or allowed to do so) after the surrender of all assets to a court-appointed trustee. Barter System It refers to a primitive exchange system where there is an exchange of goods or services without involving money. Base Currency The first currency quoted in a currency pair on foreign exchange. It is also typically considered the domestic currency or accounting currency. Base Effect The base effect refers to the impact of the rise in price level (ie last year’s inflation) in the previous year over the corresponding rise in price levels in the current year (ie current inflation). For example, if the price index had risen at a high rate in the corresponding period of the previous year, then a similar absolute increase in the Price index in current year will be relatively lower and vice-versa. Base Rate It is the minimum rate of interest that a bank is allowed to charge from its customers. It was recommended by Deepak Mohanty Committee in 2009-10 and has replaced Benchmark Prime Lending Rate (BPLR) since July 2010. Base Year In the construction of an index, the year from which the weights assigned to the different components of the index, is drawn is called Base Year. It is conventional to set the value of an index in its base year equal to 100. Basel Accords It refer to the banking supervision Accords prescribed by Basel Committee on Banking Supervision (BCBS). By far, BCBS has issued three accords known as Basel I, Basel II and Basel III. Basel Committee on Banking Supervision (BCBS) Under Bank for International Settlement, the BCBS provides a forum for regular cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve the quality of banking supervision worldwide. Basel-I It is the first international accord to develop standardised risk-based capital requirements for banks across countries. It became operational in 1988 and was replaced with a Basel-II in June 2004. Basel-II It is based on three mutually reinforcing pillars that allow banks and supervisors to evaluate various risks that banks face. These are: Piller-I Minimum Capital Requirements (MCR); Pillar-II Supervisory Review Process (SRP); and Pillar-III Market Discipline (MD). Basel-III It is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision in 2010-11. It was developed in a response to the deficiencies in financial regulation revealed by the late-2000s financial crisis. It, therefore, attempts to reduce risk in banking by increasing quality and quantity of capital.
Posted on: Thu, 10 Jul 2014 17:16:03 +0000
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