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. Knowing these terms is important for anyone working in the banking industry or preparing for Banking Exams. 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 Funds Transfer)

NEFT is a nationwide payment system used for transferring funds from one bank account to another. It operates on a deferred net settlement basis, meaning 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 transfers of funds between banks, typically involving amounts above a certain threshold. The transactions are settled in real-time, ensuring viiocessing.

4. IMPS (Immediate Payment Service)

IMPS is a real-time interbank electronic fund 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 an Aadhaar card, passport, or voter ID.

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 the interest rates on loans and advances. However, it has been replaced by MCLR (Marginal Cost of Funds Lending Rate) in many cases.

7. MCLR (Marginal Cost of Funds 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 of borrowing funds for the bank. MCLR aims to make lending rates more transparent and responsive to market conditions.

8. FD (Fixed Deposit)

A Fixed Deposit is a financial instrument offered by banks where a lump sum amount is deposited for a fixed tenure at a predetermined interest rate. It provides a safe and low-risk investment option with a higher rate of interest 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 credit scores that reflect a person’s creditworthiness, which is used by banks to assess loan eligibility.

11. NPA (Non-Performing Asset)

An NPA refers to a loan or advance on which the borrower has stopped making payments (principal or interest) for a period exceeding 90 days. It is a crucial 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 the processing of cheques. It involves printing characters using magnetic ink, which can be read by machines, making cheque 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 India’s central bank 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 deal with 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 to refer to both current and savings accounts in banks. These accounts are non-term deposits that offer higher liquidity and can be used for day-to-day banking transactions.

18. PSU (Public Sector Undertaking)

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

19. CC (Cash Credit)

Cash Credit is a short-term loan extended by banks to businesses, allowing them to borrow money up to a certain limit to meet working capital requirements. It is typically offered against the pledge of assets like inventory or receivables.

20. EMI (Equated Monthly Installment)

EMI is a fixed payment amount made by a borrower to a lender at a specified date each calendar month. It is a common method used to repay loans like home loans, personal loans, and car loans.