IMPORTANT BANKING TERMS

Amortization – Adjusting expenses for intangible assets over a long span of time is

amortization.

Balloon Payment - as a balloon looks very little before filling air and seems bigger after filling with air. same way the payment will be very little at initial stage and later it will big enough.

Bank Rate - When RBI provides loan to the bank for long term (90 to 365 days).On that amount of loan RBI takes some interest i.e. called Bank Rate.

According to modern banking definition of BR (Bank Rate): Bank Rate is used by RBI to provide discount on his securities. So, Bank Rate is known as Discount or Exchange Rate.

Base Rate - This is the minimum lending rate, below this rate bank cannot provide loan to anyone.

Call Money - When one bank borrow money from another bank.

a. Valid for only one day

b. It is used to full fill the one day need of bank

CAMEL : CAMEL is the international model of rating the banks

 C – Capital Adequacy

 A – Assets

 M – Management

 E – Earning Profit

 L – Liquidity

CRR - (Cash Reserve Ratio):Bank have to maintain or reserve some part of their deposit in RBI in form of cash.

 CRR can be minimum no limit and maximum limit is 20%.Before some time back CRR was minimum 3% and maximum 15%

 CRR is calculated on daily bases

 No interest is paid by RBI on CRR

 Bank keep their CRR in currency chest

CD- Certificate of Deposit

 CD is issued by the bank

 Minimum amount of CD is 1 lakh

 Valid for minimum – 7 days

 Valid for maximum – 365 days

CP – Commercial Paper

 CP is issued by company

 Valid for minimum – 7 days

 Valid for maximum – 365 days