Banking and finance has become vital part of our lives. Earning is important but more important is learning the ways to save it. When we say save your money then banks and banking automatically are included in our topic. There are banking terms that has evolved along with the developments in Banking Domain. One cannot be aware of all the banking terms in technology as the list of banking terms is indefinite. So, it is better to learn some banking terms which will help you in your finance life and will yield more profits.
Here are the 10 most common banking terms that everyone should know.
Many would have come across this abbreviation when using online banking. National Electronic Funds Transfer helps you to transfer funds within the same bank or inter-banks. Whenever fund transfer is carried via computer, ATM, telephone etc. (i.e. via electronic terminal) it is termed as NEFT. The minimum amount that can be transferred via NEFT is Rs.100.
When you apply for loan, you need to provide some kind of security. Such security assets are termed collateral. This collateral is one the most significant banking terms that everyone should know. If you fail to repay the debt, the lender/bank has the right to seize the property used as collateral. E.g. if you get housing loan, the bank’s collateral is your house.
IFSC code is 11 char code which is assigned by RBI to every bank branch. This IFSC code is a unique code as well as one of the important banking terms which helps in identifying the bank branches. Indian Financing System Code is used in fund transfers and cheque clearance. It is also found in cheque. The first four character represents bank, next is zero and it is reserved for future use. The last 6 characters represents bank branch code.
Not many of us know about the abbreviation of this banking term. Real Time Gross Settlement System facility is used when fund transfer is in large amount (usually 2 lakhs and above). It enables fast and smooth fund transfer within the same bank/ inter-bank. A nominal fee is collected when fund transfer is made via RTGS. One among the must noted banking terms.
Co-maker or co-signer is a person who signs to guarantee a loan repayment for a loan given to another person. The co-signer becomes fully liable for the loan repayment amount. Co-sign or co-maker is asked only when the borrower’s credit history is poor. This is one of the banking terms to know for those who apply especially for loans.
An individual’s borrowing and the re-payment time of his debt are recorded and an account of all his past and open details are maintained. The banks refer to the credit history of the borrower by lending. Credit-history helps the bank to know the individual’s late repayment or defaults if any. Credit-history can be obtained from CIBIL/ Credit bureau. CIBIL is one of the crucial banking terms in every financial transactions if an individual decides to borrow money from bank.
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Magnetic Ink Character Recognition. MICR code is essential for check clearance. MICR code is found in the bottom right side of cheque. This is a 9 digit unique code and varies for each bank branch. MICR code is different banking term and it is not the same as IFSC code.
One account linked to the other account in the same bank are called linked accounts. Electronic Funds Transfer can be made between accounts.
When the amount/ money withdrawn is more than the actual available money in a bank account, the excess amount withdrawn is said to be an overdraft. The account is known called overdrawn. Overdraft facility can be authorized/ unauthorized by banks in advance.
Card Verification Value is a number on your credit card or debit card. One of the most important banking terms which are playing a crucial role in our everyday life whenever a transaction ask for this number. It is a three digit number mentioned on the back side of the card. It proves to the online merchant that the physical card is present during your transaction. This CVV during online transaction helps in preventing online frauds.
Banking is an ocean and to mastering all the banking terms is not a piece of cake. But these banking terms listed above will help you to swim with ease in this ocean of changing currents.