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Banking & Financial Awareness

Banking Terminology

  • Adjustable- Rate Mortgages (ARMS) –

It is also known as variable-rate mortgages. The initial interest rate is usually below that of conventional fixed-rate loans. The interest rate may change over the life of the loan as market conditions change.  There is typically a maximum (or ceiling) and a minimum (or floor) defined in the loan agreement. If interest rates rise, so does the loan payment. If interest rates fall, the loan payment may as well.

  • Anywhere Banking

Anywhere Banking means that the customer can deposit/ withdraw cash at any branch other than the branch in which he holds the account. Anywhere banking frees the customer from geographical boundaries and limitations and gives the flexibility to the customer to use his account across the board. All major banks in India have brought in core banking in their operations to make banking truly anywhere banking.

  • Automated Clearing House

ACH enables you to electronically collect payments from your customers for either single-entry or recurring payments by directly debiting your customer’s checking or saving accounts. In banking, ACH stands for Automated Clearing House, which is a network that coordinates electronic payments and automated money transfers. ACH is a way to move money between banks without using paper checks, wire transfers, credit card networks, or cash.

Following are the benefits of ACH Payments-

  • Provide your customers with an alternative to credit cards and checks.
  • Offer lower-cost payment than either checks or credit cards.
  • Faster payments than using checks.
  • Core Banking Solutions

Core banking refers to a centralized system established by a bank which allows its customers to conduct their business irrespective of the bank’s branch. Thus, it removes the impediments of geo-specific transactions. In fact, CORE is an acronym for “Centralized Online Real-time Exchange”, thus the bank’s branches can access applications from centralized data centers.

  • Green Banking

Green Banking means promoting environment- friendly practices. It is a form of banking from which the country and nation gets environmental benefits. A conventional bank becomes a green bank by directing its core operations towards the betterment of the environment. Green Banking has become a buzz word in today’s banking world. It is also called as an ethical bank or sustainable bank.

  • Balloon Mortgage

 A balloon mortgage is a type of loan that requires a borrower to fulfil repayment in a lump sum. These types of mortgages are typically issued with a short-term duration. Balloon mortgages may be payment free or they may require interest-only instalment payments.

  • Direct Debit

Direct Debit is a financial activity in which one person withdraws funds from another person’s bank account. It is a facility in which the payee withdraws the amount from the payer’s accounts, the payer has instructed the bank to allow the payee directly withdraw the amount from the account.

  • Clean note policy of RBI

 The Reserve Bank of India (RBI) has informed that the object of ‘Clean Note Policy‘ is withdrawal of soiled and mutilated notes from circulation and putting adequate quantity of fresh notes into circulation. Due to the implementation of Clean Note Policy, most of the notes in circulation are clean and genuine.

  • Equity linked savings scheme

An equity linked savings scheme (ELSS) is a type of equity fund and the only mutual fund which qualifies for a tax deduction under Section 80C of the Income Tax Act. It comes with a statutory lock-in period of 3 years and qualifies for tax exemption of up to Rs. 1.5 lakh. ELSS can be invested using both SIP (Systematic Investment Plan) and lump sums investment options.

  • Loan-to-value

The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. The term is commonly used by banks and building societies to represent the ratio of the first mortgage line as a percentage of the total appraised value of real property.