KEY FINANCIAL TERMS :- APR: It stands for Annual Percentage Rate. APR is a percentage that is calculated on the basis of the amount financed, the finance charges, and the term of the loan. ABS: Asset-Backed Securities. It means a type of security that is backed by a pool of bank loans, leases, and other assets. EPS: Earnings Per Share means the amount of annual earnings available to common stockholders as stated on a per share basis. CHAPS: Clearing House Automated Payment System. It’s a type of electronic bank-to-bank payment system that guarantees same-day payment. IPO: Initial Public Offerings is defined as the event where the company sells its shares to the public for the first time. (or the first sale of stock by a private company to the public.) FPO: Follow on Public Offerings: An issuing of shares to investors by a public company that is already listed on an exchange. An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process. Difference: IPO is for the companies which have not been listed on an exchange and FPO is for the companies which have already been listed on an exchange but want to raise funds by issuing some more equity shares. RTGS: Real Time Gross Settlement systems is a funds transfer system where transfer of money or securities takes place from one bank to another on a “real time”. (‘Real time’ means within a fraction of seconds.) The minimum amount to be transferred through RTGS is Rs 2 lakh. Processing charges/Service charges for RTGS transactions vary from bank to bank. NEFT: National Electronic Fund Transfer. This is a method used for transferring funds across banks in a secure manner. It usually takes 1-2 working days for the transfer to happen. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. (Note: RTGS is much faster than NEFT.) CAR: Capital Adequacy Ratio. It’s a measure of a bank’s capital. Also known as “Capital to Risk Weighted Assets Ratio (CRAR)”, this ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. It is decided by the RBI. NPA: Non-Performing Asset. It means once the borrower has failed to make interest or principal payments for 90 days, the loan is considered to be a non-performing asset. Presently it is 2.39%. IMPS: Inter-bank Mobile Payment Service. It is an instant interbank electronic fund transfer service through mobile phones. Both the customers must have MMID (Mobile Money Identifier Number). For this service, we don’t need any GPS-enabled cell phones. BCBS: Basel Committee on Banking Supervision is an institution created by the Central Bank governors of the Group of Ten nations. RSI: Relative Strength Index. IFSC code: Indian Financial System Code. The code consists of 11 characters for identifying the bank and branch where the account in actually held. The IFSC code is used both by the RTGS and NEFT transfer systems. MSME and SME: Micro Small and Medium Enterprises (MSME), and SME stands for Small and Medium Enterprises. This is an initiative of the government to drive and encourage small manufacturers to enjoy facilities from banks at concessional rates. LIBOR: London InterBank Offered Rate. An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank market. LIBID: London Interbank Bid Rate. The average interest rate at which major London banks borrow Eurocurrency deposits from other banks. ECGC: Export Credit Guarantee Corporation of India. This organisation provides risk as well as insurance cover to the Indian exporters. SWIFT: Society for Worldwide Interbank Financial Telecommunication. It operates a worldwide financial messaging network which exchanges messages between banks and other financial institutions. STRIPS: Separate Trading for Registered Interest & Principal Securities. CIBIL: Credit Information Bureau of India Limited. CIBIL is India’s first credit information bureau. Whenever a person applies for new loans or credit card(s) to a financial institution, they generate the CIBIL report of the said person or concern to judge the credit worthiness of the person and also to verify their existing track record. CIBIL actually maintains the borrower’s history. CRISIL: Credit Rating Information Services of India Limited. Crisil is a global analytical company providing ratings, research, and risk and policy advisory services. AMFI: Association of Mutual Funds of India. AMFI is an apex body of all Asset Management Companies (AMCs) which have been registered with SEBI. (Note: AMFI is not a mutual funds regulator) FCCB: Foreign Currency Convertible Bond. A type of convertible bond issued in a currency different from the issuer’s domestic currency. CAC: Capital Account Convertibility. It is the freedom to convert local financial assets into foreign financial assets and vice versa. This means that capital account convertibility allows anyone to freely move from local currency into foreign currency and back, or in other words, transfer of money from current account to capital account. BANCASSURANCE: Is the term used to describe the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products. Balloon payment: Is a specific type of mortgage payment, and is named “balloon payment” because of the structure of the payment schedule. For balloon payments, the first several years of payments are smaller and are used to reduce the total debt remaining in the loan. Once the small payment term has passed (which can vary, but is commonly 5 years), the remainder of the debt is due - this final payment is the one known as the “balloon” payment, because it is larger than all of the previous payments. CPSS: Committee on Payment and Settlement Systems FCNR Accounts: Foreign Currency Non-Resident accounts are the ones that are maintained by NRIs in foreign currencies like USD, DM, and GBP. M3 in banking: It’s a measure of money supply. It is the total amount of money available in an economy at a particular point in time. OMO: Open Market Operations. The buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. Open market operations are the principal tools of monetary policy. RBI uses this tool in order to regulate the liquidity in economy. Umbrella Fund: A type of collective investment scheme. A collective fund containing several sub-funds, each of which invests in a different market or country. ECS: Electronic Clearing Facility is a type of direct debit. Tobin tax: Suggested by Nobel Laureate economist James Tobin, was originally defined as a tax on all spot conversions of one currency into another. Z score is a term widely used in the banking field. POS: Point Of Sale, also known as Point Of Purchase, a place where sales are made and also sales and payment information are collected electronically, including the amount of the sale, the date and place of the transaction, and the consumer’s account number. LGD: Loss Given Default. Institutions such as banks will determine their credit losses through an analysis of the actual loan defaults. Junk Bonds: Junk bonds are issued generally by smaller or relatively less well-known firms to finance their operations, or by large and well-known firms to fund leveraged buyouts. These bonds are frequently unsecured or partially secured, and they pay higher interest rates: 3 to 4 percentage points higher than the interest rate on blue chip corporate bonds of comparable maturity period. ARM: Adjustable Rate Mortgage is basically a type of loan where the rate of index is calculated on the basis of the previously selected index rate. ABO: Accumulated Benefit Obligation, ABO is a measure of liability of pension plan of an organisation and is calculated when the pension plan is terminated. Absorption: A term related to real estate, it is a process of renting a real estate property which is newly built or recently approved. AAA: A type of grade that is used to rate a particular bond. It is the highest rated bond that gives maximum returns at the time of maturity. DSCR: Debt Service Coverage Ratio, DSCR is a financial ratio that measures the company’s ability to pay their debts. FSDC: Financial Stability and Development Council, India’s apex body of the financial sector. ITPO: India Trade Promotion Organisation is the nodal agency of the Government of India for promoting the country’s external trade. FLCC: Financial Literacy and Counseling Centres. ANBC: Adjusted Net Bank Credit is Net Bank Credit added to investments made by banks in non-SLR bonds. Priority sector lending: Some areas or fields in a country depending on its economic condition or government interest are prioritised and are called priority sectors i.e. industry, agriculture. M0, M1, M2 AND M3: These terms are nothing but money supply in banking field. BIFR: Bureau of Industrial and Financial Reconstruction.
Posted on: Mon, 05 Aug 2013 09:30:17 +0000
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