Home Banking Awareness Banking Terminologies and Their Detailed Explanation – 250+ Bank Terms

Banking Awareness

Banking Terminologies and Their Detailed Explanation – 250+ Bank Terms

March 21, 2025

Table of Contents

Top 250 Banking Terminologies and Their Detailed Explanations by GovernmentAdda.com

Banking Terminologies – Understanding banking terminology is crucial for professionals, students, and anyone dealing with financial transactions. This article covers 250 essential banking terms, providing explanations and real-world examples.

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1. Account Balance

The amount of money in a bank account at a given time.
Example: If you deposit $500 and withdraw $200, your account balance is $300.

2. Annual Percentage Rate (APR)

The annual rate charged for borrowing or earned through an investment.
Example: If a loan has a 10% APR, you will owe $100 in interest annually on a $1,000 loan.

3. Automated Teller Machine (ATM)

A machine that allows bank customers to withdraw and deposit money without visiting a branch.
Example: You use an ATM to withdraw $100 from your checking account.

4. Bank Statement

A summary of all transactions in an account over a period.
Example: Your bank sends you a monthly statement showing all deposits, withdrawals, and fees.

5. Beneficiary

A person designated to receive funds from an account or insurance policy.
Example: You name your spouse as the beneficiary of your savings account.

6. Certificate of Deposit (CD)

A time deposit with a fixed interest rate and maturity date.
Example: A 5-year CD at 3% interest means your money is locked in for five years with a guaranteed return.

7. Clearinghouse

An intermediary that facilitates financial transactions between banks.
Example: When you write a check, a clearinghouse processes it before the funds are transferred.

8. Credit Score

A numerical representation of a person’s creditworthiness.
Example: A credit score of 750 makes you eligible for lower-interest loans.

9. Direct Deposit

The electronic transfer of a payment directly into a recipient’s bank account.
Example: Your employer deposits your salary directly into your checking account.

10. Electronic Funds Transfer (EFT)

The movement of money between accounts electronically.
Example: Paying bills online through a bank’s website is an EFT.

11. Equity

The ownership interest in an asset after deducting liabilities.
Example: If your home is worth $300,000 and you owe $200,000, your equity is $100,000.

12. Fixed Deposit

A type of savings account where money is deposited for a fixed term at a predetermined interest rate.
Example: You invest $5,000 in a 1-year fixed deposit at 4% interest.

13. Foreclosure

The legal process in which a lender takes possession of a property when the borrower fails to repay the loan.
Example: If you stop making mortgage payments, the bank may foreclose on your home.

14. Guarantor

A person who agrees to repay a loan if the borrower defaults.
Example: A parent co-signing a student loan for their child acts as a guarantor.

15. Interest Rate

The percentage charged on a loan or paid on savings.
Example: A savings account with a 2% interest rate earns $20 per year on a $1,000 balance.

16. Liquidity

The ease with which an asset can be converted into cash.
Example: Cash is highly liquid, while real estate is less liquid.

17. Mortgage

A loan used to purchase real estate, where the property itself serves as collateral.
Example: You take out a 30-year mortgage to buy a house.

18. Overdraft

A situation where a bank account balance goes below zero due to withdrawals exceeding deposits.
Example: If you have $50 in your account and withdraw $100, you incur a $50 overdraft.

19. Prime Rate

The interest rate that banks offer to their most creditworthy customers.
Example: If the prime rate is 5%, a highly qualified borrower might receive a loan at this rate.

20. Repo Rate

The rate at which a central bank lends money to commercial banks.
Example: If the repo rate is 4%, banks borrow money from the central bank at this rate.

21. Retail Banking

Banking services provided to individual consumers rather than businesses.
Example: Savings accounts, personal loans, and credit cards are part of retail banking.

22. Savings Account

A bank account that earns interest and is used for storing money.
Example: You open a savings account to set aside money for future needs.

23. Secured Loan

A loan backed by collateral, such as a house or car.
Example: A mortgage is a secured loan because the house acts as collateral.

24. Unsecured Loan

A loan that does not require collateral.
Example: A personal loan or credit card debt is an unsecured loan.

25. Variable Interest Rate

An interest rate that changes based on market conditions.
Example: A mortgage with a variable rate may have its interest adjusted annually.

26. Wire Transfer

An electronic transfer of money between banks.
Example: Sending money from your U.S. bank account to a European account via wire transfer.

27. Yield

The earnings generated on an investment over a period.
Example: A bond with a 5% yield returns $50 per year on a $1,000 investment.

28. Amortization

The process of gradually paying off a loan through regular payments that cover both principal and interest.
Example: A 30-year mortgage with equal monthly payments follows an amortization schedule.

29. Asset

Anything of value owned by an individual or company that can be converted into cash.
Example: Cash, real estate, and stocks are considered assets.

30. Balance Transfer

Moving outstanding debt from one credit card to another with a lower interest rate.
Example: Transferring a $5,000 balance from a 20% APR credit card to a 0% introductory APR card.

31. Bank Draft

A payment instrument issued by a bank that guarantees the funds are available.
Example: A customer uses a bank draft to pay for a car purchase securely.

32. Base Rate

The minimum interest rate set by a bank for lending to customers.
Example: A bank’s base rate is 3%, meaning loans will be issued at rates higher than this.

33. Bounced Check

A check that cannot be processed because the account holder has insufficient funds.
Example: Writing a $1,000 check with only $800 in the account results in a bounced check.

34. Call Option

A financial contract giving the holder the right to buy an asset at a specific price before expiration.
Example: An investor buys a call option to purchase stock at $50 per share.

35. Capital Gain

The profit earned from selling an investment at a higher price than its purchase cost.
Example: Buying stock at $100 and selling it at $150 results in a $50 capital gain.

36. Capital Loss

The loss incurred when an investment is sold for less than its purchase price.
Example: Selling a house for $200,000 after purchasing it for $250,000 results in a $50,000 capital loss.

37. Chargeback

A transaction reversal initiated by a bank when a customer disputes a charge.
Example: A credit card company reverses a fraudulent charge on a customer’s account.

38. Collateral

An asset pledged as security for a loan.
Example: A house used as collateral for a mortgage.

39. Compound Interest

Interest calculated on both the initial principal and accumulated interest.
Example: A savings account earning 5% annually will grow faster due to compound interest.

40. Credit Limit

The maximum amount a borrower can charge on a credit account.
Example: A credit card with a $10,000 limit restricts spending beyond that amount.

41. Debt Consolidation

Combining multiple debts into a single loan with a lower interest rate.
Example: Merging three credit card balances into one personal loan with a lower interest rate.

42. Default

Failure to meet the legal obligations of a loan repayment.
Example: A borrower who stops making payments on their student loan defaults.

43. Dividend

A portion of a company’s earnings distributed to shareholders.
Example: A company declares a $2 per share dividend to its stockholders.

44. Escrow

A financial arrangement where a third party holds and regulates funds on behalf of two parties.
Example: Money held in escrow during a home purchase until closing conditions are met.

45. FICO Score

A type of credit score used to evaluate a borrower’s creditworthiness.
Example: A FICO score of 800 indicates excellent credit history.

46. Financial Statement

A report summarizing a company’s financial performance and position.
Example: A bank reviews financial statements before approving business loans.

47. Fixed Interest Rate

An interest rate that remains the same throughout the loan term.
Example: A car loan with a 5% fixed interest rate ensures consistent monthly payments.

48. Grace Period

The time allowed before interest or penalties are charged on a loan or credit card.
Example: A 25-day grace period on a credit card allows the user to pay the balance without interest.

49. Inflation

The rate at which the general price level of goods and services rises over time.
Example: A 3% annual inflation rate increases the cost of living.

50. Interest-Only Loan

A loan where the borrower pays only the interest for a set period.
Example: A mortgage that requires interest-only payments for the first five years before principal repayment begins.

51. Leverage

The use of borrowed money to increase the potential return of an investment.
Example: An investor uses $10,000 of their own money and borrows $40,000 to buy more stocks.

52. Lien

A legal claim against an asset used as collateral for a debt.
Example: A bank places a lien on a house when the homeowner defaults on their mortgage.

53. Line of Credit

A flexible loan from a bank that allows borrowing up to a predetermined limit.
Example: A business has a $50,000 line of credit and withdraws only what is needed.

54. Liquidity Ratio

A financial metric used to determine a company’s ability to cover short-term liabilities with liquid assets.
Example: A high liquidity ratio indicates that a company can easily meet its short-term debts.

55. Margin Account

A brokerage account that allows investors to borrow money to buy securities.
Example: An investor buys stocks worth $10,000 using $5,000 of their own money and $5,000 borrowed from the broker.

56. Microfinance

Small loans and financial services provided to individuals and small businesses without access to traditional banking.
Example: A rural entrepreneur receives a $500 microloan to start a small business.

57. Money Market Account

A type of savings account that typically offers higher interest rates and limited transactions.
Example: A bank offers a money market account with a 2% interest rate.

58. Mutual Fund

A pool of money collected from many investors to invest in stocks, bonds, or other assets.
Example: An investor buys shares in a mutual fund that holds a diversified portfolio of stocks.

59. Nostro Account

A foreign currency account held by a bank in another country.
Example: A U.S. bank holds a Nostro account in euros with a European bank.

60. Over-the-Counter (OTC) Market

A decentralized market where securities are traded directly between parties without a centralized exchange.
Example: Penny stocks and some bonds are traded in the OTC market.

61. Par Value

The face value of a bond or stock as stated by the issuer.
Example: A bond with a par value of $1,000 pays interest based on that value.

62. Payday Loan

A short-term, high-interest loan intended to cover immediate expenses until the next paycheck.
Example: A borrower takes a $500 payday loan with a 15% fee due in two weeks.

63. Point of Sale (POS)

The location where a retail transaction occurs.
Example: A credit card payment at a grocery store checkout is processed through a POS system.

64. Portfolio

A collection of investments held by an individual or institution.
Example: A diversified portfolio includes stocks, bonds, and real estate.

65. Principal

The original sum of money borrowed or invested, excluding interest.
Example: If you take a $5,000 loan, the principal amount is $5,000.

66. Promissory Note

A written agreement in which one party promises to pay another a specified amount.
Example: A borrower signs a promissory note agreeing to repay a $10,000 loan.

67. Provisioning

The process by which banks set aside funds to cover potential losses on loans.
Example: A bank sets aside 5% of its loan portfolio as provisioning for bad debts.

68. Real Time Gross Settlement (RTGS)

A system that enables immediate and final settlement of financial transactions.
Example: Large-value transactions between banks are processed through RTGS.

69. Recurring Deposit (RD)

A type of savings plan where a fixed amount is deposited regularly for a predetermined period.
Example: A customer deposits $100 monthly in an RD for five years.

70. Redemption

The act of repaying or cashing out a financial instrument like a bond or mutual fund.
Example: A bondholder redeems a $1,000 bond at maturity.

71. Refinancing

The process of replacing an existing loan with a new one that has better terms.
Example: A homeowner refinances their mortgage to lower the interest rate.

72. Reserve Requirement

The minimum amount of reserves a bank must hold against customer deposits.
Example: If the reserve requirement is 10%, a bank with $1 million in deposits must keep $100,000 in reserve.

73. Reverse Mortgage

A loan that allows homeowners to convert home equity into cash without selling the property.
Example: A retiree receives monthly payments from a reverse mortgage.

74. Risk Management

The practice of identifying and minimizing financial risks.
Example: A bank diversifies its loan portfolio to reduce credit risk.

75. Secured Credit Card

A credit card backed by a cash deposit as collateral.
Example: A person with no credit history deposits $500 and receives a secured credit card with a $500 limit.

76. Settlement

The process of completing a financial transaction by transferring funds or securities.
Example: A stock trade is settled when the buyer receives the shares and the seller receives the payment.

77. Sovereign Bond

A bond issued by a national government.
Example: The U.S. Treasury issues sovereign bonds known as Treasury bonds.

78. Standing Instruction

A pre-authorized instruction to a bank to carry out a transaction at a regular interval.
Example: A customer sets up standing instructions to pay rent automatically every month.

79. SWIFT Code

A unique identifier used for international wire transfers between banks.
Example: A person sending money to a foreign account uses the recipient bank’s SWIFT code.

80. Time Deposit

A deposit that cannot be withdrawn before a specified maturity date.
Example: A customer invests in a 1-year time deposit earning 4% interest.

81. Trade Finance

Financial instruments and products used to facilitate international trade.
Example: A company uses a letter of credit to import goods from another country.

82. Treasury Bills (T-Bills)

Short-term government securities with maturities of one year or less.
Example: An investor buys a 3-month T-Bill at a discount and receives the full value upon maturity.

83. Underwriting

The process by which banks or insurers assess the risk of a financial transaction.
Example: A bank underwrites a mortgage loan by verifying the borrower’s creditworthiness.

84. Unsecured Loan

A loan that does not require collateral.
Example: A personal loan granted based on credit history rather than assets.

85. Variable Interest Rate

An interest rate that fluctuates based on market conditions.
Example: A mortgage loan with an interest rate that changes every six months.

86. Venture Capital

Investment in startups or small businesses with high growth potential.
Example: A venture capital firm invests $2 million in a tech startup.

87. Volatility

The degree of variation in the price of a financial asset over time.
Example: Stock prices of a startup company are highly volatile due to market speculation.

88. Wealth Management

Professional financial planning and investment advisory services.
Example: A high-net-worth individual hires a wealth manager to oversee their investments.

89. Wire Transfer

An electronic transfer of funds between financial institutions.
Example: A person sends $5,000 to a family member overseas via wire transfer.

90. Yield

The earnings generated on an investment over a particular period.
Example: A bond with a 5% annual yield pays $50 on a $1,000 investment.

91. Zero Balance Account (ZBA)

A bank account that maintains a zero balance and transfers funds as needed.
Example: A company uses a ZBA to manage payroll without holding excess cash.

92. Zombie Bank

A bank that continues operations despite being insolvent.
Example: A government supports a failing bank to prevent financial collapse.

93. Amortization

The process of gradually paying off a debt over time through regular payments.
Example: A mortgage loan with a 30-year term is amortized through monthly installments.

94. Asset-Backed Security (ABS)

A financial security backed by a pool of assets, such as loans or receivables.
Example: A bank issues an ABS backed by auto loans.

95. Bailout

Financial assistance given to a struggling company or bank to prevent failure.
Example: The government provides a bailout to a failing bank during an economic crisis.

96. Bankruptcy

A legal process in which an individual or business declares inability to repay debts.
Example: A company files for bankruptcy to restructure its debts.

97. Capital Adequacy Ratio (CAR)

A measure of a bank’s financial strength, calculated as capital to risk-weighted assets.
Example: A bank maintains a CAR of 12% to ensure stability.

98. Collateralized Debt Obligation (CDO)

A complex financial product backed by pooled debt obligations.
Example: An investment firm sells CDOs to investors based on mortgage-backed securities.

99. Credit Default Swap (CDS)

A financial contract that transfers credit risk between parties.
Example: An investor buys a CDS as insurance against a bond default.

100. Derivative

A financial contract whose value is based on an underlying asset.
Example: Futures contracts on commodities like oil and gold.

101. Exchange-Traded Fund (ETF)

A type of investment fund that is traded on stock exchanges.
Example: An investor buys shares of an S&P 500 ETF.

102. Fiduciary

A person or organization responsible for managing assets in the best interest of another party.
Example: A trustee managing a client’s investment portfolio.

103. Gross Domestic Product (GDP)

The total monetary value of goods and services produced within a country.
Example: A country’s GDP grows by 3% in a given year.

104. Hedge Fund

An investment fund that employs various strategies to generate high returns.
Example: A hedge fund uses short selling and leverage to maximize profits.

105. Inflation

The rate at which the general level of prices for goods and services rises.
Example: Inflation increases the cost of living over time.

106. Leverage Ratio

A financial metric that measures a company’s debt level relative to its assets or equity.
Example: A bank maintains a leverage ratio of 10% to manage risk.

107. Mortgage-Backed Security (MBS)

A financial instrument backed by a pool of mortgages.
Example: Investors buy MBS for income generated by mortgage payments.

108. Non-Performing Loan (NPL)

A loan in which the borrower has not made scheduled payments for a specific period.
Example: A bank classifies a loan as an NPL after 90 days of non-payment.

109. Overdraft

A condition where withdrawals exceed available funds in an account.
Example: A customer overdraws their checking account by $50 and incurs a fee.

110. Prime Rate

The interest rate that banks offer to their most creditworthy customers.
Example: A bank offers mortgages based on the prime rate plus 2%.

111. Quantitative Easing (QE)

A monetary policy in which a central bank purchases securities to increase money supply.
Example: The Federal Reserve implements QE to boost economic activity during a recession.

112. Repo Rate

The interest rate at which central banks lend money to commercial banks.
Example: If the repo rate is 4%, banks borrow from the central bank at this rate.

113. Reverse Repo Rate

The rate at which central banks borrow money from commercial banks.
Example: A higher reverse repo rate encourages banks to park surplus funds with the central bank.

114. Securitization

The process of pooling assets and selling them as securities.
Example: Mortgage-backed securities are created through securitization.

115. Shadow Banking

Financial activities conducted outside traditional banking regulations.
Example: Hedge funds engaging in lending without direct bank oversight.

116. Standing Deposit Facility (SDF)

A tool for central banks to absorb surplus liquidity without providing collateral.
Example: Banks park excess funds with the central bank under the SDF mechanism.

117. Stress Testing

A simulation to determine how financial institutions handle economic crises.
Example: A bank undergoes a stress test to assess its resilience against a financial downturn.

118. Subprime Loan

A loan offered to borrowers with poor credit scores at higher interest rates.
Example: A subprime mortgage has a higher rate due to the borrower’s credit risk.

119. Swap

A derivative contract where two parties exchange financial instruments.
Example: Interest rate swaps help companies manage interest rate fluctuations.

120. Systemic Risk

The risk of collapse of an entire financial system.
Example: The 2008 financial crisis was triggered by systemic risk in the banking sector.

121. Time Deposit

A deposit that cannot be withdrawn before a specified period.
Example: A fixed deposit account with a 5-year maturity.

122. Trust Fund

A legal entity holding assets for a beneficiary.
Example: A parent sets up a trust fund for their child’s education.

123. Usury

Charging excessively high-interest rates on loans.
Example: A lender imposing a 50% annual interest rate on personal loans.

124. Vostro Account

An account held by a foreign bank with a domestic bank.
Example: A UK bank maintains a vostro account in an Indian bank.

125. Working Capital

The difference between current assets and current liabilities.
Example: A company with $500,000 in current assets and $300,000 in liabilities has $200,000 in working capital.

126. Yield Curve

A graph showing interest rates of bonds with different maturities.
Example: An upward-sloping yield curve indicates economic growth expectations.

127. Zero-Coupon Bond

A bond that does not pay periodic interest but is sold at a discount.
Example: A zero-coupon bond with a face value of $1,000 is sold for $800.

128. Acceptance Credit

A type of credit where a bank guarantees payment for a bill of exchange.
Example: A company imports goods using acceptance credit from its bank.

129. Bank Reconciliation

The process of matching a company’s cash records with bank statements.
Example: A business identifies missing transactions through a bank reconciliation statement.

130. Call Money

Short-term funds lent or borrowed on a daily basis.
Example: Banks borrow call money for liquidity management.

131. Debit Note

A document indicating an outstanding payment owed.
Example: A supplier issues a debit note for underpaid invoices.

132. Escrow Account

A third-party account holding funds until transaction conditions are met.
Example: A real estate transaction uses an escrow account for payment security.

133. Factoring

The sale of accounts receivable to a third party for immediate cash.
Example: A company sells its unpaid invoices to a factoring company.

134. Green Banking

Environmentally friendly banking practices and sustainable financing.
Example: A bank finances renewable energy projects as part of green banking.

135. Hypothecation

Offering an asset as collateral without transferring ownership.
Example: A car loan where the car remains collateral but ownership stays with the borrower.

136. Initial Public Offering (IPO)

The first sale of a company’s shares to the public.
Example: A startup raises capital by launching an IPO.

137. Jumbo Loan

A mortgage that exceeds conventional loan limits.
Example: A $1 million mortgage classified as a jumbo loan.

138. Kiting

Illegal use of floating checks to gain unauthorized credit.
Example: A person writes checks from one account to another without sufficient funds.

139. Lien

A legal right over an asset as security for a debt.
Example: A bank places a lien on a house for an unpaid mortgage.

140. Market Capitalization

The total value of a company’s outstanding shares.
Example: A company with 10 million shares at $50 each has a market cap of $500 million.

141. Net Interest Margin (NIM)

The difference between interest earned and interest paid by banks.
Example: A bank earns a 3% NIM on its loan and deposit operations.

142. Operating Income

A bank’s revenue excluding interest and investment gains.
Example: Fees from credit cards and account services contribute to operating income.

143. Proprietary Trading

Banks trading with their own capital for profit.
Example: A bank invests in stocks and bonds using proprietary trading strategies.

144. Redemption

The repayment of a fixed-income security at maturity.
Example: A bondholder receives the principal amount upon redemption.

145. Statutory Liquidity Ratio (SLR)

The minimum percentage of a bank’s net demand and time liabilities held in liquid assets.
Example: Banks maintain SLR by holding government securities.

146. Term Loan

A loan granted for a fixed period, usually for capital expenditure.
Example: A business takes a 5-year term loan to purchase machinery.

147. Unclaimed Deposits

Bank deposits that remain untouched for a prolonged period.
Example: A dormant savings account with funds unclaimed for 10 years.

148. Venture Debt

A loan offered to startups in addition to venture capital.
Example: A startup receives venture debt to finance expansion.

149. Write-Off

Declaring a debt as uncollectible and removing it from accounts.
Example: A bank writes off a bad loan after years of non-payment.

150. Yield to Maturity (YTM)

The total return expected on a bond if held until maturity.
Example: An investor calculates YTM to assess the profitability of a bond investment.

151. Asset Liability Management (ALM)

A risk management technique to balance assets and liabilities.
Example: A bank uses ALM to ensure it has enough liquid assets to meet liabilities.

152. Basel Norms

International banking regulations to strengthen financial stability.
Example: Basel III requires banks to maintain a minimum capital adequacy ratio.

153. Bridge Loan

A short-term loan until long-term financing is secured.
Example: A company takes a bridge loan before issuing bonds.

154. Contingent Liability

A potential liability that may arise depending on an event.
Example: A bank guarantees a customer’s loan, which becomes a liability if they default.

155. Deferred Payment

A transaction where payment is postponed.
Example: A bank allows a borrower to defer loan payments during a crisis.

156. Economic Capital

The capital a bank needs to cover risks.
Example: A bank calculates economic capital to withstand unexpected losses.

157. Fixed Rate Loan

A loan with a constant interest rate.
Example: A home loan with a 30-year fixed rate of 5%.

158. Gross Domestic Product (GDP)

The total value of goods and services produced in a country.
Example: A rising GDP indicates economic growth.

159. Hedging

A risk management strategy using financial instruments.
Example: A company hedges currency risk by using forward contracts.

160. Interest Rate Risk

The risk of loss due to interest rate fluctuations.
Example: A bank’s bond portfolio loses value when interest rates rise.

161. KYC (Know Your Customer)

A process to verify a customer’s identity.
Example: A bank requires ID and address proof before opening an account.

162. Leverage Ratio

A measure of financial leverage in banking.
Example: A bank maintains a leverage ratio above regulatory requirements.

163. Microfinance

Small loans and financial services for low-income individuals.
Example: A rural entrepreneur receives a microloan to start a business.

164. Non-Performing Loan (NPL)

A loan where the borrower has stopped making payments.
Example: A mortgage overdue for six months is classified as an NPL.

165. Open Market Operations (OMO)

Central bank activities to control liquidity.
Example: The central bank buys government bonds to inject money into the economy.

166. Prime Rate

The lowest interest rate offered by banks to creditworthy customers.
Example: A top-tier corporate borrower receives a prime rate loan.

167. Quantum Fund

A hedge fund with large-scale investments.
Example: George Soros’ Quantum Fund gained fame for currency trading.

168. Risk-Weighted Assets (RWA)

A measure of a bank’s risk exposure.
Example: Higher-risk loans increase a bank’s RWA.

169. Structured Finance

Complex financial instruments designed for specific needs.
Example: Asset-backed securities fall under structured finance.

170. Time Value of Money (TVM)

The principle that money today is worth more than in the future.
Example: A $100 investment today grows to $110 in a year.

171. Underwriting

The process of evaluating financial risk for loans or insurance.
Example: A bank underwrites a mortgage before approval.

172. Virtual Banking

Banking services offered entirely online.
Example: Customers manage accounts and transfers through a digital-only bank.

173. Wholesale Banking

Banking services for large businesses and institutions.
Example: A bank provides trade finance and cash management for corporations.

174. X-Efficiency

A measure of how efficiently banks manage resources.
Example: A well-managed bank operates with minimal waste and costs.

175. Yield Spread

The difference between yields on different debt instruments.
Example: A corporate bond yields 6%, while a government bond yields 4%, creating a 2% spread.

176. Z-Score (Banking)

A model predicting the likelihood of bank failure.
Example: A high Z-score indicates financial stability.

177. Amortization Schedule

A table detailing loan payments over time.
Example: A mortgage schedule shows principal and interest breakdowns.

178. Blockchain in Banking

The use of blockchain for secure transactions.
Example: Cross-border payments using blockchain reduce transaction time.

179. Capital Buffer

Extra capital banks hold beyond minimum requirements.
Example: A bank maintains a buffer to absorb financial shocks.

180. Debt Restructuring

Modifying loan terms to help a borrower.
Example: A business facing financial distress negotiates lower interest rates.

181. Electronic Funds Transfer (EFT)

The digital movement of money.
Example: Salary payments made via direct deposit.

182. Forbearance

Temporary relief for borrowers facing hardship.
Example: A bank allows a mortgage borrower to defer payments for six months.

183. Green Bonds

Bonds issued to finance environmentally friendly projects.
Example: A city issues green bonds to fund solar energy projects.

184. Haircut (Banking)

A reduction in asset value used as collateral.
Example: A bank values a $100,000 bond at $90,000 for lending purposes.

185. Insolvency

A state where liabilities exceed assets.
Example: A company files for bankruptcy due to insolvency.

186. Job Work Loan

A loan granted for contract-based projects.
Example: A construction firm secures a loan to complete a government contract.

187. Leasing

Renting an asset instead of buying.
Example: A business leases office equipment instead of purchasing.

188. Money Multiplier

The effect of deposits on money supply expansion.
Example: A $1,000 deposit increases total money circulation through lending.

189. Negotiable Instrument

A document guaranteeing payment.
Example: A check is a negotiable instrument.

190. Operational Risk

The risk of loss from internal failures.
Example: A bank suffers a cyberattack causing financial loss.

191. Payment Gateway

A service enabling online payments.
Example: PayPal processes credit card transactions.

192. Quantum Computing in Banking

The potential use of quantum computing for financial modeling.
Example: Banks explore quantum technology for fraud detection.

193. Retail Banking

Banking services for individual consumers.
Example: A savings account falls under retail banking.

194. Secured Loan

A loan backed by collateral.
Example: A car loan is a secured loan.

195. Trade Finance

Financial services for international trade.
Example: A bank provides a letter of credit to an importer.

196. Unsecured Loan

A loan not backed by collateral.
Example: A personal loan granted based on creditworthiness.

197. Venture Capital

Funding provided to startups and small businesses with growth potential.
Example: A tech startup receives venture capital to expand operations.

198. Write-Off

When a bank considers a loan as a loss.
Example: A bank writes off a loan that is unlikely to be repaid.

199. Yield Curve

A graph showing interest rates of bonds with different maturities.
Example: An upward-sloping yield curve indicates future economic growth.

200. Zero-Coupon Bond

A bond that doesn’t pay periodic interest.
Example: Investors buy zero-coupon bonds at a discount and receive face value at maturity.

201. Anti-Money Laundering (AML)

Regulations to prevent illegal money transactions.
Example: A bank implements AML checks for large transactions.

202. Bank Run

When many customers withdraw deposits due to panic.
Example: A financial crisis causes a bank run.

203. Collateralized Debt Obligation (CDO)

A structured financial product backed by assets.
Example: Banks package loans into CDOs and sell them to investors.

204. Derivatives

Financial instruments derived from underlying assets.
Example: Options and futures contracts are derivatives.

205. Exchange-Traded Fund (ETF)

A marketable security tracking an index, commodity, or sector.
Example: Investors buy ETFs for diversified exposure.

206. Foreign Direct Investment (FDI)

Investment in a country by foreign entities.
Example: A US company builds a factory in India as FDI.

207. Global Depository Receipt (GDR)

A certificate representing shares in foreign companies.
Example: An Indian company issues GDRs for global investors.

208. Hawala

An informal money transfer system.
Example: Funds move internationally without physical cash transfer.

209. Inflation-Indexed Bonds

Bonds that adjust interest based on inflation.
Example: Investors buy inflation-linked bonds for protection.

210. Joint Account

A bank account shared by multiple individuals.
Example: A married couple opens a joint savings account.

211. Liquidity Coverage Ratio (LCR)

A measure ensuring banks maintain enough liquid assets.
Example: A bank holds high-quality liquid assets for 30 days of stress.

212. Merchant Banking

Financial services for businesses.
Example: A merchant bank helps a company raise capital.

213. Nominee Account

An account where assets are held on behalf of another party.
Example: Brokers use nominee accounts for client investments.

214. Overdraft Protection

A service preventing negative account balances.
Example: A bank covers a customer’s transaction to avoid overdraft fees.

215. Public Sector Bank

A bank owned by the government.
Example: State Bank of India (SBI) is a public sector bank.

216. Quasi-Bank

A financial institution providing banking-like services.
Example: Non-banking financial companies (NBFCs) act as quasi-banks.

217. Repo Rate

The rate at which central banks lend to commercial banks.
Example: The central bank reduces repo rate to boost lending.

218. Securitization

Pooling assets to issue securities.
Example: Banks securitize mortgages into mortgage-backed securities.

219. Treasury Bills (T-Bills)

Short-term government securities.
Example: Investors buy T-bills as low-risk investments.

220. Unbanked Population

Individuals without access to banking services.
Example: Many rural populations remain unbanked.

221. Volcker Rule

A regulation restricting speculative trading by banks.
Example: Banks cannot engage in proprietary trading under the Volcker Rule.

222. Wholesale Credit

Large-scale lending to businesses.
Example: A corporation secures wholesale credit for expansion.

223. Yield to Maturity (YTM)

The total return on a bond if held to maturity.
Example: A bond with a 5% YTM will yield that return upon maturity.

224. Zero Balance Account

A bank account with no minimum balance requirement.
Example: Employees receive salaries through zero-balance accounts.

225. Alternative Investment Fund (AIF)

A fund investing in non-traditional assets.
Example: Hedge funds fall under AIFs.

226. Banking Ombudsman

An official resolving banking disputes.
Example: A customer files a complaint with the banking ombudsman.

227. Central Counterparty (CCP)

An entity ensuring trade settlements.
Example: CCPs mitigate counterparty risks in financial markets.

228. Deposit Insurance

Protection for bank deposits up to a certain limit.
Example: Deposit Insurance covers up to $250,000 in the US.

229. Escrow Account

A third-party-held account for transaction security.
Example: Property buyers use escrow accounts for deposits.

230. Fiduciary Duty

An obligation to act in another’s best interest.
Example: Banks owe fiduciary duties to clients in investment decisions.

231. Green Banking

Environmentally sustainable banking practices.
Example: Banks promote paperless transactions and green loans.

232. Hedge Fund

A pooled investment fund with diverse strategies.
Example: Hedge funds engage in aggressive trading for returns.

233. Initial Coin Offering (ICO)

Cryptocurrency fundraising.
Example: Startups raise capital through ICOs by issuing tokens.

234. Jumbo Loan

A loan exceeding standard limits.
Example: A $1 million mortgage qualifies as a jumbo loan.

235. Kiosk Banking

Small-scale banking services at kiosks.
Example: Rural areas use kiosk banking for financial inclusion.

236. Loan-to-Value Ratio (LTV)

The ratio of loan amount to asset value.
Example: A 70% LTV mortgage means 70% of the house is financed.

237. Microcredit

Small loans for low-income individuals.
Example: A farmer receives microcredit for seeds and tools.

238. Non-Banking Financial Company (NBFC)

A financial institution that doesn’t have a banking license.
Example: NBFCs offer loans and insurance without full banking services.

239. Overnight Rate

The interest rate banks charge each other for overnight loans.
Example: Central banks influence monetary policy through overnight rates.

240. Prime Rate

The interest rate that commercial banks charge their most creditworthy customers.
Example: A business with an excellent credit score may get a loan at the prime rate.

241. Qualified Institutional Buyer (QIB)

Institutional investors with significant financial expertise and assets.
Example: Mutual funds and insurance companies are considered QIBs.

242. Retail Banking

Banking services offered to individual consumers.
Example: Checking accounts, personal loans, and credit cards fall under retail banking.

243. Special Purpose Vehicle (SPV)

A subsidiary created to isolate financial risk.
Example: A company forms an SPV to manage a securitized asset portfolio.

244. Treasury Bond (T-Bond)

Long-term government securities with fixed interest payments.
Example: Investors buy T-Bonds as a stable investment for long-term returns.

245. Universal Banking

A bank offering a wide range of financial services.
Example: A universal bank provides commercial banking, investment banking, and insurance services.

246. Vostro Account

An account a foreign bank holds in a domestic bank.
Example: A UK bank’s account with an Indian bank is a Vostro account.

247. Wholesale Banking

Banking services provided to large organizations and corporations.
Example: A multinational corporation secures a large loan through wholesale banking.

248. X-Efficiency

The ability of a bank to maximize output while minimizing costs.
Example: A bank improves X-efficiency by adopting digital banking solutions.

249. Yield Spread

The difference between yields of different securities.
Example: A corporate bond yielding 6% versus a government bond yielding 4% has a 2% yield spread.

250. Zoning Ordinance in Banking

Regulations governing the physical locations of banking institutions.
Example: A city’s zoning laws restrict banks from opening branches in residential areas.