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Bank Terms


sudhakar ca cwa (service)     17 November 2010

sudhakar ca cwa
service 
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REPO RATE: - Under repo transaction the borrower places with the lender certain acceptable securities against funds received and agree to reverse this transaction on a predetermined future date at agreed interest cost. Repo rate is also called (repurchase agreement or repurchase option).

REVERSE REPO RATE: - is the interest rate earned by the bank for lending money to the RBI in exchange of govt. securities or "lender buys securities with agreement to sell them back at a predetermined rate".

CASH RESERVE RATIO: - specifies the percentage of their total deposits the commercial bank must keep with central bank or RBI. Higher the CRR lower will be the capacity of bank to create credit.

SLR: - known as Statutorily Liquidity Ratio. Each bank is required statutorily maintain a prescribed minimum proportion of its demand and time liabilities in the form of designated liquid asset.
OR
"Every bank has to maintain a percentage of its demand and time liabilities by way of cash, gold etc".

BANK RATE: - is the rate of interest which is charged by RBI on its advances to commercial banks. When reserve bank desires to restrict expansion of credit it raises the bank rate there by making the credit costlier to commercial bank.

OVERDRAFT:- It is the loan facility on customer current account at a bank permitting him to overdraw up to a certain agreed limit for a agreed period ,interest is payable only on the amount of loan taken up.

PRIME LENDING RATE: It is the rate at which commercial banks give loan to its prime customers.]

 

Demand Liabilities

These liabilities include all liabilities which are payable on demand and they include current deposits, balances in overdue fixed deposits, cash certificates and cumulative/recurring deposits, Mail Transfer (MTs), Demand Drafts (DDs), unclaimed deposits, credit balances in the Cash Credit account and deposits held as security for advances which are payable on demand.

Time Liabilities

Time Liabilities are those which are payable otherwise than on demand and they include fixed deposits, cash certificates, cumulative and recurring deposits, staff security deposits, deposits held as securities for advances which are not payable on demand, India Millennium Deposits and Gold Deposits.

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sudhakar ca cwa (service)     17 November 2010

sudhakar ca cwa
service 
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Types of Banking

1. Retail Banking :

Banking in which banking institutions directly with consumers rather than corporations . Service offers include saving and checking accounts , mortgages , personnel loans , debit cards , credit cards and so forth.

2. Social banking :

Social banking process caters to the development needs of the poor in sharp contrast with conventional commercial banking. Grameen bank is the best example of Social Banking.Accoding to the founder of Grammen Bank , Mr Muhammad Yunus, the poor are like “bonsai”, which could have grown into taller trees if given proper soil. The society has not given the poor a chance. “

3. Wholesale Banking :

Providing banking services to large corporations and institutions. Services are not provided to individuals or small businesses.ING is one of the wholesale bank in India.

 

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sudhakar ca cwa (service)     17 November 2010

sudhakar ca cwa
service 
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1. SLR (Statutory Liquidity Ratio)

It is the amount any scheduled commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit.

According to RBI (SLR is defined as following):

In terms of Section 24 (2-A) of the B.R. Act, 1949 all Scheduled Commercial Banks, in addition to the average daily balance which they are required to maintain under Section 42 of the RBI Act, 1934, are required to maintain in India,

a) in cash, or
b) in gold valued at a price not exceeding the current market price,
or
c) in unencumbered approved securities valued at a price as specified by the RBI from time to time.

an amount of which shall not, at the close of the business on any day, be less than 25 per cent or such other percentage not exceeding 40 per cent as the RBI may from time to time, by notification in gazette of India, specify, of the total of its demand and time liabilities in India as on the last Friday of the second preceding fortnight

At present, all Scheduled Commercial Banks are required to maintain a uniform
SLR of 24 per cent of the total of their demand and time liabilities in India as on the last Friday of the second preceding fortnight which is stipulated under section 24 of the B.R. Act, 1949.

2. CRR (Cash reserve Ratio)

It is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.

According to RBI , CRR is defined as following :

In terms of Section 42(1) of the RBI Act 1934, Scheduled Commercial Banks are required to maintain with RBI an average cash balance, the amount of which shall not be less than 3 per cent of the total of the Net Demand and Time Liabilities (NDTL) in India, on a fortnightly basis and RBI is empowered to increase the said rate of CRR to such higher rate not exceeding twenty percent of the Net Demand and Time Liabilities (NDTL) under the RBI Act, 1934. At present, effective from the fortnight beginning June 14, 2003, the rate of CRR is 5 per cent of the NDTL.

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CA CS Himanshu Khandelwal (SAP FICO Consultant)     17 November 2010

CA CS Himanshu Khandelwal
SAP FICO Consultant 
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Nice info..

I learnt the chapter banking accounts still was not having the exact clarity of all these terms.

Tnxs 4 sharing..

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CA. SANAT PYNE (F.C.A. & M.COM)     17 November 2010

CA. SANAT PYNE
F.C.A. & M.COM 
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NICE INFORMATION .

THANKS FOR SHARING.......................


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