Being a bank customer and completing regular financial transactions can expose you to a variety of financial jargon and fundamental banking phrases. Even native english speakers occasionally find certain financial terminology to be alien, yet everyone may benefit from knowing them. Here are some of the most often used banking words to make things easier for you.
Base rate, set by the RBI, is the lowest interest rate below which banks are not permitted to lend to their clients. The decision is made in order to increase credit market transparency and make sure that banks pass along the lower cost of capital to their clients.
The amount that banks charge borrowers over and above the principle amount is known as the interest rate. Typically, a loan's interest rate is expressed as an annual percentage rate, or APR. An interest rate also pertains to the amount generated from a deposit account at a bank.
This is a numerical representation of an individual's credit history, ranging from 300 to 900. This is typically the key factor in determining whether someone gets approved for a loan or not. These details are gathered by credit bureaus on every person with a credit history.
Collateral is any security offered to the bank as payment for a loan. Gold, real estate, and other assets are examples of collateral. This is referred to as a secured loan and is less riskier for the lender than an unsecured loan. In the event of secured loans, the lender may sell the collateral at auction if the borrower defaults on the debt.
Know Your Customer is referred to as KYC. It is a procedure through which banks learn about the name and address of their clients. This procedure aids in preventing unauthorized usage of banks' services. Banks are required to complete the KYC process when creating new accounts and to update it on a regular basis.
MICR code is a code that is written on checks using MICR technology or magnetic ink character recognition technology. This makes it possible to identify the checks, which speeds up processing. It is a 9 digit code, used to specifically identify each bank and branch using an Electronic Clearing System.
The National Electronic Funds Transfer (NEFT) system is an electronic payment system that allows for direct one-to-one transfers throughout the country. With the help of this feature, you may electronically transfer money from any bank branch in the nation to a person who has an account with another bank branch that participates in the NEFT network.
The central bank uses the 11-digit Indian Financial System Code to uniquely identify bank branches inside the National Electronic Funds Transfer (NEFT) network. The bank is identified by the first four numbers of the IFSC, while the branch is identified by the final six characters. The 5th character is zero.