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Banking & Financial Awareness

Banking Terminology

Bitcoin

Bitcoin() is a cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need of intermediaries.

 Inflation

Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time. It is the constant rise in the general level of prices where a unit of currency buys less than it did in prior periods. Often expressed as a percentage, inflation indicates a decrease in the purchasing power of a nation’s currency.

Money Laundering

Money laundering is the process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. The money from the criminal activity is considered dirty, and the process “launders” it to make it look clean. Money laundering is itself a crime.

CAMELS Rating System

CAMELS is a recognized international rating system that bank supervisory authorities use in order to rate financial institutions according to six factors represented by its acronym. Supervisory authorities assign each bank a score on a scale. A rating of one is considered the best, and a rating of five is considered the worst for each factor.

Masala Bonds

Masala bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency. Masala is an Indian word and it means spices. The issuance of rupee denominated bonds transfers risk associated with currency fluctuations to investors and not to the issuers. The term was used by the International Finance Corporation (IFC) to evoke the culture and cuisine of India.

UPI

Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

Bancassurance

Bancassurance is an arrangement between a bank and an insurance company allowing the insurance company to sell its products to the bank’s client base. This partnership arrangement can be profitable for both companies. Banks earn additional revenue by selling insurance products, and insurance companies expand their customer bases without increasing their sales force or paying agent and broker commissions.

Banking Ombudsman

The Banking Ombudsman Scheme was implemented by the RBI to redress the complaints of customers on certain types of banking services provided by banks and to facilitate the settlement of those complaints. The Scheme was introduced under the Banking Regulation Act of 1949 by RBI with effect from 1995. Later it was legally refined and modified through the introduction of regulations under Banking Ombudsman Scheme 2006. The latest version was made in 2017. The banking Ombudsman actually is a senior official appointed by the RBI.

Credit Crunch

A credit crunch is an economic condition in which investment capital is hard to secure. Banks and investors become wary of lending funds to individuals and corporations, which drives up the price of debt products for borrowers. Often an extension of a recession, a credit crunch makes it nearly impossible for companies to borrow because lenders are scared of bankruptcies or defaults, resulting in higher rates.

 Currency Chest

Currency chests are branches of selected banks where bank notes and rupee coins are stored on behalf of the Reserve Bank of India for further distribution of these notes and coins across the country through bank branches in their area of operation. The RBI has set up over 4,075 currency chests all over the country.