Important Banking Terminologies

Important Banking Terminologies You Should Know

1. Repo Rate (Repurchase Rate)

The rate at which the Reserve Bank of India (RBI) lends short-term funds to commercial banks against government securities.

2. Reverse Repo Rate

The rate at which the RBI borrows money from commercial banks to absorb excess liquidity from the banking system.

3. CRR (Cash Reserve Ratio)

The percentage of a commercial bank’s total Net Demand and Time Liabilities (NDTL) that must be maintained as cash reserves with the RBI.

4. SLR (Statutory Liquidity Ratio)

The minimum percentage of NDTL that banks are required to maintain in the form of liquid assets like cash, gold, or approved government securities before providing credit.

5. NPA (Non-Performing Asset)

A loan or advance is classified as NPA if the interest or installment of principal remains overdue for more than 90 days.

6. MCLR (Marginal Cost of Funds based Lending Rate)

The minimum interest rate below which a bank is not permitted to lend, except in some cases allowed by RBI.

7. Basel Norms

International banking regulations issued by the Basel Committee on Banking Supervision to promote stability in the international financial system.

8. CASA (Current Account Savings Account) Ratio

The proportion of a bank’s total deposits held in current and savings accounts. A higher CASA ratio indicates lower cost of funds.

9. Priority Sector Lending (PSL)

Mandatory lending by banks to specified sectors of the economy like agriculture, MSMEs, education, housing, and weaker sections.

10. NBFC (Non-Banking Financial Company)

A company registered under the Companies Act engaged in financial services but does not hold a banking license.

11. RTGS (Real Time Gross Settlement)

A real-time fund transfer system where the transfer of funds occurs individually without netting.

12. NEFT (National Electronic Funds Transfer)

A nation-wide centralized payment system enabling one-to-one funds transfer between bank accounts.

13. IMPS (Immediate Payment Service)

An instant interbank electronic fund transfer service available 24x7 through mobile, internet banking, and ATMs.

14. UPI (Unified Payments Interface)

An instant real-time payment system developed by NPCI, facilitating inter-bank transactions via mobile platforms.

15. Inflation

A sustained increase in the general price level of goods and services in an economy over a period of time.