Important words that are related with banking & financial sector.



Acquirer: A credit card processing bank; merchants receive credit for credit card receipts less a processing fee. OR The financial institution that dispenses cash in automated teller machines and collects a fee from the bank that issued the credit card.

AML: AML stands for Anti Money Laundering. These three letters are used to describe the body of legislation that seeks to combat money laundering of funds from illegal activities, and which could be used to finance terrorist or criminal activities.

International concern over terrorist financing, especially in recent months due to the terrorist attacks in Paris and the acts of a lone wolf in San Bernardino, California, has led to the creation of stricter rules for financial operations. The fintech industry is aware that it must make its authentication procedures tougher and more sophisticated given the stricter legislation around the world.

API: API comes from Application Programming Interface. It is a combination of functions or procedures used by computer programs to access the services of the operational system, software libraries or other systems. Put in less technical terms, we could define them as the computer procedures that establish how one software program can communicate with another.

APR: Annual percentage rate: the percentage that a bank makes you pay in interest when you borrow money from it, calculated over a period of one year.

Assets: anything of material value or usefulness that is owned by a person or company

A run on something: A time when a lot of people take their money out of a bank at the same time.

Automated Teller Machine (ATM): ATM is the machine that dispense cash and also provides mini statements to the customer. When the customer opens bank account in the bank, s/he will be provided ATM card. By using this card s/he can withdraw money from any ATM machines.

ASBA: ASBA stands for Application Supported by Blocked Amount. It is the system through which the account holder can apply for shares (IPOs and FPOs). The value of aplied share will be in the same bank account but will be blocked or freezed. Once the share is allotted, only the allotted amount will be deducted from that bank account.

Bancassurance: Bancassurance is the selling of the insurance policies and products of insurance companies by banks as a corporate agent through their branches.

Bank Draft: An order to pay someone that is sent from one bank to another bank, usually in a different country.

Banknote: A piece of paper money (especially one issued by a central bank).

Bank Rate : Bank rate is the rate of interest that is charged on the amount lent by the Central Bank to the banks and financial institutions.

Bank Statement: Bank statement is the summary record of all the transaction of an account holder of a particular bank showing all the debits (withdrawals) and credits (deposits).

Base Rate : Base rate is the minimum rate of interest on which bank can issue loans. Base rate is calculated as per the formula provided by the Central Bank.

BIPS : Bank Internet payment system: an electronic system for making payments by moving money directly into a bank account over the Internet.

Bond: An agreement to borrow money to buy a house, or the money that you borrow; a mortgage.

Bounced Cheque: It refers to the unsuccessful processing of the cheque. A situation where the account of the person does not have enough balance in his/her bank account to cash the amount written in cheque.

Capital Market: Capital market is the financial market where the long-term financial instruments like stocks, bonds and others are traded. These instruments generally have maturity period of more than a year.

Cardholder : Someone who owns a credit card or debit card for buying things with.

Cashback: Money from your bank account that you can get from a shop when you pay for goods with a debit card.

Cash Reserve Ratio (CRR):CRR is the certain rate of amount of the cash that the bank and financial institutions should hold as reserves in the Central Bank. Currently in fiscal year 2018/19 Nepal Rastra Bank has decreased the CRR rate from 6% to 4% for the commercial banks.

CCD Ratio: CCD ratio stands for the credit to core capital plus deposit ratio. It is the limit till which the banks are allowed to issue the loans and advances. In Nepal, the CCD ratio limit is set at 80% by NRB and remaining 20% is held by the banks for maintaining the liquidity. If a bank has Rs 100 as a sum of core capital and deposit, then it can provide loan only up to Rs 80 and remaining Rs 20 should be held as liquidity.

Cheque: Cheque is a document that orders a bank to pay a specific amount of money from a person’s account to the entity whose name the cheque has been issued. When a bank account is opened, the bank provides the cheque book to the account holder. There are three parties involved in cheque i.e. Drawer. Drawee and Payee.

CHIPS : Clearing house interbank payment system: an electronic system for making international payments in dollars and for changing money from one currency to another.

Collateral: Property that you agree to give to a bank if you fail to pay back money that you have borrowed.

Commission : An extra amount of money that you have to pay to a bank or other organization when they provide a service for you.

Compound Interest: It is the system or process of calculating the interest where interest receivable or accumulated is added with principle that will give the compound amount and the interest is charged back on that compound amount. The interest amount is higher than the simple interest.

Cost of Fund: Cost of fund refers to the rate of interest that the bank and financial institutions has to bear while collecting the funds. In other words, it is the weighted average of the all types of interest rates paid to various types of deposit accounts (short term and long term).

Credit : An arrangement to receive goods from a shop or money from a bank and pay for it later.

Credit: An amount of money that you add to an account. An amount of money that you take out of an account is a debit.

Credit Crunch: Credit crunch is the condition where banks are in a tight position to offer loans. During credit crunch the demand of loan is high but supply of deposit is very low or negligible.

Credit Limit : The maximum amount of money that a customer can borrow using a particular credit card account.

Credit Line: An amount of money that a person or company can borrow from a bank or other financial institution.

Credit Rating: Financial information about someone that a bank or shop uses for deciding whether to lend them money or to give them credit.

Credit Transfer : Payment made directly from one bank account to another.

Debit: An amount of money taken from a bank account.

Debit Card: A card (usually plastic) that enables the holder to withdraw money or to have the cost of purchases charged directly to the holder’s bank account.

Demat Account: Demat Account is the account in which the investors can hold their shares in electronic form.

Deposit : An amount of money that you pay into a bank account.

Depositor : Someone who pays money into a bank.

Deposit Account: A savings account in which the deposit is held for a fixed term or in which withdrawals can be made only after giving notice or with loss of interest.

Direct Debit : An order to a bank to regularly pay money from your account to a person or organization.

Digital Wallet / E-Wallet: Digital wallet is an application or system that allows the customer to perform financial transaction (receive and payment) in the electronic medium. You will have unique user id where you can load money through bank account and the make payments in exchange of goods and services to supplier/seller.

Direct Deposit: Which your salary is always put directly into your bank account.

Discount Rate : The rate of interest that a central bank charges another bank that borrows from it.

Drawer: The person writing the cheque or the bank account holder.

Drawee: Bank who is responsible to make payment

E-Banking: E-banking is an electronic system which allows customers of bank and financial institution to conduct their banking transaction, check the bank statements and other available services through their respective banks website. It is also popularly known as online banking and internet banking. The use of e-banking in Nepal is also increasing as it is easy to use and saves time.

Electronic Fund Transfer: Electronic fund transfer (EFT) is electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions, without the direct intervention of bank staff.

EFTPOS : Electronic funds transfer at point of sale: a system of paying for goods by moving money by computer from the customer’s bank account to the account of the company or person they have bought from.

Finance: The commercial activity of providing funds and capital. OR The management of money and credit and banking and investments. OR The branch of economics that studies the management of money and other assets.

Fiscal Policy: Fiscal policy is the policy of the government which adjusts its spending levels (expenditure) in different sectors on the basis of its priority and tax rates (revenue) to influence the economy.

Fund: A financial institution that sells shares to individuals and invests in securities issued by other companies.

goAML : goAML is UNODC’s unique fully integrated software designed specifically for Financial Intelligence Units. The goAML application is one of UNODC’s strategic responses to financial crime including money laundering and terrorist financing.

In Credit: To have more money in an account than the amount that you have taken out.

Insurtech: This term and its synonym, instech, come from combining the words “insurance” and “technology”. Both are related to how technology is changing the insurance business.

Interest : Business money that a person or institution such as a bank charges you for lending you money.

Interest : Money that you receive from an institution such as a bank when you keep money in an account there.

Interest Rate : The percentage that an institution such as a bank charges or pays you in interest when you borrow money from it or keep money in an account.

Interest Rate Corridor: Interest rate corridor is the system or framework that is designed by the Central Bank to stabilize the short term interest rates by implementing on short term monetary instruments like interbank rate, repo rate, treasury bills and others by setting the upper limit and lower limit of the interest rate.

In The Black : With money in your bank account, or with more money than you owe.

Initial Public Offering (IPO): Initial Public offering is an act of raising the investment capital by offering the stock of a company on a public stock exchange for the first time. In Nepal the face value of IPOs are generally Rs 100.

IVR: (Interactive Voice Response) is a technology that automates interactions with telephone callers. An efficient IVR System reduces the cost of common sales, service, collections, inquiry, and support calls to and from the company. The banking sector sees it as a highly useful service.

KYC: Know Your Customer. This term is used in several different economic areas, but it is especially important in the financial sector. In the banking and fintech industries, KYC refers to the rules that institutions must follow regarding customer identity and the legality of their funds.

KBA: KBA stands for Knowledge-Based-Authentication. It’s another way to try to verify digital identify – something we are now so used to like that personal question an online service asks us to make sure we are who we say we are.

Lender: Someone who lends money or gives credit in business matters.

Lending: Disposing of money or property with the expectation that the same thing (or an equivalent) will be returned.

Lending Rate: A percentage that a bank charges a customer who borrows money.

Liquidity: Liquidity refers to the ability of converting (selling or buying) the liquid assets into the cash without affecting the assets price.

Loan: A thing that is borrowed, especially a sum of money that is expected to be paid back with interest.

Merchant: A businessperson engaged in retail trade.

Merchant Bank: A credit card processing bank; merchants receive credit for credit card receipts less a processing fee.

Money Market: Business activities in which banks and other financial institutions make money by lending money to other organizations.

Monetary: Relating to or involving money.

Monetary Policy: Monetary policy is the policy that is introduced by the Central Bank of the country which controls the money supply using the interest rates in the market in order to maintain the normal inflation rate to ensure the price stability and maintain the financial stability in the country.

Money Market: Money market is the market where the short term financial instruments which are highly liquid are traded. These money market instruments have maturity less than a year and possess less risk.

Mortgage : A legal agreement in which you borrow money from a bank in order to buy a house. You pay back your mortgage by making monthly payments.

Mutual Funds: Mutual fund is the professionally managed investment fund that is collected from many small and large investors for the purpose of investing in the securities such as stocks, bonds, money market instruments etc.

Night Safe : A metal container in the wall of a bank that you can put money into when the bank is closed.

Non-Performing Assets (NPA): NPA refers to those kinds of loans and advances issued by the banks which are default or about to be default where borrowers are not paying their loan principle as well as interest.

Online Banking: A system that allows you to communicate with your bank on the Internet.

Overdraft : An agreement with your bank that allows you to spend money when you have no money left in your account.

Overdraft: The amount of money that someone owes their bank because they have used this agreement.

Overdrawn : If you are overdrawn, or if your bank account is overdrawn, you owe your bank money that you have spent when there was no money in your account.

Passbook: A small book showing the amounts of money that you put into and take out of your account in a building society.

Paying-in Slip: A piece of paper on which you write information when you put money into a bank account.

Payee: Party receiving the payment whose name is written in the cheque.

Plastic Money: Plastic Money refers to the hard plastic cards like credit cards, debit cards, cash cards, dollar cards and other similar cards that is being used in everyday life for making payments and replacing the use of paper cash.

Point of sale (POS): Point of sale (POS) also known as point of purchase is the time and place where a customer completes its retail transaction by making payment in exchanges of goods and services. Point of Sale (POS) terminal/ Process Data Quickly (PDQ) machine. A point of sale terminal (POS terminal) is an electronic hand held device used to process card payments at retail location and prints a receipt.

Premium Rate: In banking, premium is the cost or reward of the risk borne or taken by banks while issuing the loans to its customers. It is the percentage that is added with base rate of the particular bank which gives interest rate for lending. Premium rate differs from one customer to another and also on different package and sector.

Prime Interest Rate: Prime interest rate is the lowest rate of interest charged by banks to its largest, most secure, and most creditworthy customers on short-term loans. This rate is used as a guide for computing interest rates for other borrowers.

P2P Lending: P2P is the acronym for peer to peer – a network of computers without customers or fixed servers, made up of a series of nodes without any hierarchy. In this case, we’re referring to loans among individuals, from peer to peer, with no intervention from a financial institution. These “social loans”, as they are also called, have beenregulated in Spain since last year as part of the crowdfunding phenomenon.

Real-time Authorization
A system that can check whether a customer’s credit card is acceptable in a few seconds, so that an Internet shop can process an order immediately.

Robosigning
The practice, especially in financial institutions, of signing large numbers of documents without checking that they are accurate, often done by people without the necessary authority.

Repo Rate: The word “repo” means repurchase agreement. Repo rate is the rate at which the Central Bank of a country lends money to its commercial banks against securities in the event of any shortfall of funds.

Reserve Repo Rate: Reserve Repo is just the opposite if the repo where the Central Bank borrows money from the commercial banks. So the reverse repo rate is the rate at which the central bank of the country borrows money from its commercial banks for short term purposes.

Retail Banking: Retail banking is the services that is provided by bank to general public on individual basis. It is also known as consumer banking.

Real Time Gross Settlement (RTGS): RTGS is a form of electronic fund transfer system that transfers or clear and settle the high value funds or cheques from one bank to other banks within a country in few seconds.

Reserve: The trait of being uncommunicative; not volunteering anything more than necessary.

SaaS: These are the initials for Software as a Service. It is a software distribution model where logical support and data are stored in the servers of an IT company, and customers access the service online.SaaS is very useful for fintech firms because it allows them tosimplify their structures and reduce software licensing costs. SaaS infrastructure is also easily scalable.

Saver : Someone who regularly puts money in a bank or building society so that they can use it later.

Savings :Money that you have saved in a bank or invested so that you can use it later.

Savings Ratio: a measurement of how much money people in a country are saving, which compares the amount of money they have available to spend with the amount of money they do spend.

Statutory Liquidity Ratio (SLR): SLR is a provision of reserve requirement set by the central bank to its bank and financial institutions for maintaining some liquidity in the form of cash, government bonds or other convertible assets. At present, NRB has provisioned 10% SLR for commercial banks

Sort Code : A number that is used, for example on cheques, for recognizing the particular office of a bank where someone keeps their account.

Standing Order : An instruction that you give a bank to take a particular amount of money out of your account on a particular day, usually each month, to pay a person or organization for you. A direct debit is a similar arrangement, except that the amount can change and is decided by the person who you are paying.

Statement : An official document that lists the amounts of money that have been put in or taken out of a bank account.

Stress Test : Economics a test used to find out if a bank or other financial institution is likely to fail or have serious problems in a difficult economic situation.

Strongroom: A room, often in a bank, for protecting money and other valuable things from being stolen or burned in a fire.

Sub-prime : Used to describe lending at a higher than usual rate of interest because it involves borrowers who are less likely to be able to pay back their loan.

SWIFT: SWIFT stands for Society for Worldwide Interbank Financial Telecommunication. SWIFT is an electronic system that connects financial institutions all over the world to through a network and allows to perform the financial transaction (receive and payment) internationally.

Telebanking : A way of doing business with a bank by using your telephone or computer.

Telephone Banking: Banking services provided to customers by telephone.

Teller: Teller is the staff of the bank who cashes cheques, accepts deposits and performs different banking services for customers.

Treasury: A depository (a room or building) where wealth and precious objects can be kept safely OR the government department responsible for collecting and managing and spending public revenues.

Unsecured : Business an unsecured loan is money that a bank lends someone without making them promise to give property to the bank if they cannot pay the money back.

Vault : A strongly protected room in a bank where money, gold etc is kept.

Wholesale Banking: Wholesale Banking is the services that is provided by bank to companies or corporation or institutions. It is also known as commercial banking.

Withdrawal :The process of taking an amount of money out of your bank account, or the amount of money that you take out.

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1 thought on “Important words that are related with banking & financial sector.”

  1. Like!! Thank you for publishing this awesome article.

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