Master essential banking terminology for IBPS exams with clear definitions, examples, and real-world context!

🎯 How to Use This Glossary

For IBPS Exams:

• Focus on bold terms (most frequently asked)
• Understand the context, not just the definition
• Practice using terms in sentences
• Revise alphabetically for better retention

Expected Questions:

• IBPS Prelims: 10-15 questions from Banking Awareness
• IBPS Mains: 40 questions (General/Banking Awareness section)
• Direct term definitions or application-based questions

A - Banking Terms

Account

Definition: A record maintained by a bank to track financial transactions
of a customer

Types:
- Savings Account
- Current Account
- Fixed Deposit Account
- Recurring Deposit Account

Example: "She opened a savings account with an initial deposit of ₹5,000."

Aggregate Turnover

Definition: Total value of all taxable supplies, exempt supplies, exports,
and inter-state supplies made by a person

Used in: GST context, banking compliance

Example: "Companies with aggregate turnover above ₹40 lakhs must register for GST."

Amortization

Definition: Gradual reduction of a debt through periodic payments of principal
and interest

Common in: Home loans, car loans

Example: "The home loan is amortized over 20 years with monthly installments."

Annual Percentage Rate (APR)

Definition: Yearly interest rate charged on loans or earned on investments,
including fees

Formula: APR = (Interest + Fees / Principal) × (365 / Loan Term Days) × 100

Example: "The credit card has an APR of 36% per annum."

Arbitrage

Definition: Simultaneous buying and selling of an asset in different markets
to profit from price differences

Example: "Traders use arbitrage to profit from gold price differences between
markets."

Asset

Definition: Resource owned by a person or organization that has economic value

Types:
- Current Assets (cash, inventory)
- Fixed Assets (property, equipment)
- Intangible Assets (patents, goodwill)

Example: "The bank's total assets stood at ₹5 lakh crore."

ATM (Automated Teller Machine)

Definition: Electronic banking outlet allowing customers to complete basic
transactions without human assistance

Services: Cash withdrawal, balance inquiry, mini statement, PIN change

Example: "He withdrew ₹5,000 from the ATM near his office."

B - Banking Terms

Bad Debt / Non-Performing Asset (NPA)

Definition: Loan where principal or interest payment remains overdue
for 90 days or more

Classification:
- Substandard Assets: Overdue 90 days to 1 year
- Doubtful Assets: Overdue 1-3 years
- Loss Assets: Overdue more than 3 years

Example: "The bank's NPA ratio increased to 8% this quarter."

Balance of Payments (BoP)

Definition: Statement of all transactions between entities in one country
and the rest of the world

Components:
- Current Account (trade, services)
- Capital Account (investments)

Example: "India's BoP showed a surplus of $20 billion."

Bank Rate

Definition: Interest rate at which RBI lends money to commercial banks
(without collateral)

Current Rate (2025): 6.75%

Impact: Higher bank rate → Higher lending rates → Less borrowing

Example: "RBI increased the bank rate by 25 basis points to control inflation."

Bancassurance

Definition: Partnership between a bank and insurance company to sell
insurance products through bank branches

Example: "SBI sells life insurance policies through bancassurance with
SBI Life Insurance."

Base Rate

Definition: Minimum interest rate below which banks cannot lend
(except for certain categories)

Replaced by: MCLR (Marginal Cost of Funds based Lending Rate) in 2016

Example: "The bank's base rate is 8.5% per annum."

Basis Point (bps)

Definition: One-hundredth of a percentage point (0.01%)

Usage: Measuring interest rate changes

Example: "RBI cut repo rate by 25 basis points (0.25%)."

Bill of Exchange

Definition: Written order by one party to pay a specified sum to another
party on a specific date

Types:
- Demand Bill (payable on demand)
- Usance Bill (payable after specified period)

Example: "The exporter drew a bill of exchange on the importer for $10,000."

Bitcoin

Definition: Decentralized digital cryptocurrency using blockchain technology

Status in India: Not legal tender; RBI cautioned against crypto trading

Example: "Bitcoin price crossed $100,000 in 2024."

Bond

Definition: Fixed income instrument representing a loan made by an investor
to a borrower

Types:
- Government Bonds
- Corporate Bonds
- Municipal Bonds

Example: "The company issued 10-year bonds at 8% coupon rate."

Branch Banking

Definition: Operating multiple bank locations (branches) to provide
financial services across geographic areas

Example: "SBI has 24,000+ branches across India."

Bounced Cheque

Definition: Cheque dishonored by bank due to insufficient funds or other reasons

Penalty: ₹500-₹1,000 per bounced cheque + legal action under Sec 138 NI Act

Example: "His cheque bounced due to insufficient balance."

C - Banking Terms

Capital Adequacy Ratio (CAR)

Definition: Ratio of bank's capital to its risk-weighted assets, ensuring
bank can absorb losses

Formula: CAR = (Tier 1 Capital + Tier 2 Capital) / Risk-Weighted Assets × 100

Minimum Required (India): 9% (Basel III norms)

Example: "SBI's CAR stands at 13.5%, above the regulatory requirement."

Cash Credit (CC)

Definition: Short-term loan facility where borrower can withdraw up to
approved limit and interest charged only on withdrawn amount

Used by: Businesses for working capital

Example: "The company has a cash credit limit of ₹50 lakhs."

Cash Reserve Ratio (CRR)

Definition: Percentage of deposits that banks must keep with RBI in cash

Current Rate (2025): 4.50%

Purpose: Control money supply, ensure liquidity

Example: "RBI increased CRR by 50 bps to absorb excess liquidity."

Certificate of Deposit (CD)

Definition: Time deposit with fixed maturity date and specified interest rate

Tenure: 7 days to 1 year (banks), 1 year to 3 years (FIs)
Minimum: ₹1 lakh

Example: "He invested ₹5 lakhs in a 1-year CD at 7% interest."

Cheque

Definition: Written instruction to bank to pay specified amount from
drawer's account to payee

Types:
- Bearer Cheque
- Order Cheque
- Crossed Cheque
- Post-dated Cheque (PDC)

Example: "She issued a crossed cheque for ₹10,000."

Collateral

Definition: Asset pledged by borrower to secure a loan

Examples: Property, gold, securities, fixed deposits

Example: "He used his house as collateral for the business loan."

Consolidation

Definition: Combining multiple loans into single loan with one monthly payment

Benefits: Simplified repayment, potentially lower interest rate

Example: "He consolidated three credit card debts into one personal loan."

Core Banking Solutions (CBS)

Definition: Banking service infrastructure enabling customers to operate
account from any branch

Features:
- Anywhere banking
- Real-time processing
- Centralized database

Example: "With CBS, you can deposit money in Mumbai and withdraw in Delhi."

Credit Rating

Definition: Assessment of creditworthiness of borrower (individual/company)

Agencies in India:
- CRISIL
- ICRA
- CARE
- India Ratings

Ratings: AAA (highest) to D (default)

Example: "The company's bonds are rated AAA by CRISIL."

Credit Score

Definition: Numerical representation of individual's creditworthiness (300-900)

Bureaus in India:
- CIBIL
- Experian
- Equifax
- CRIF High Mark

Good Score: 750+

Example: "His CIBIL score of 780 helped him get a low-interest home loan."

Current Account

Definition: Deposit account for businesses/traders with unlimited transactions,
no interest

Features:
- No transaction limit
- Overdraft facility
- No interest paid

Example: "The company opened a current account for daily business transactions."

D - Banking Terms

Debit Card

Definition: Payment card linked to bank account, allowing spending from
available balance

Types:
- Visa Debit
- Mastercard Debit
- RuPay Debit

Example: "He used his debit card to withdraw ₹5,000 from ATM."

Demand Draft (DD)

Definition: Pre-paid negotiable instrument issued by bank, guaranteeing payment

Features:
- Cannot bounce
- Valid for 3 months
- Charges apply

Example: "She sent a DD of ₹50,000 for college admission fees."

Deposit Insurance

Definition: Insurance protecting bank depositors against loss of deposits
if bank fails

Coverage (India): ₹5 lakh per depositor per bank (DICGC)

Example: "Even if the bank fails, your deposits up to ₹5 lakh are insured."

Depreciation

Definition: Decrease in currency value relative to other currencies

Impact: Exports cheaper, imports costlier

Example: "Rupee depreciated from ₹75/$1 to ₹83/$1."

Differential Banking

Definition: Banking system offering different services/interest rates to
different customer segments

Types:
- Payment Banks
- Small Finance Banks

Example: "Payment banks like Paytm Payments Bank offer differential services."

Digital Signature

Definition: Electronic signature ensuring authenticity and integrity of
digital documents

Usage: Online banking, tax filing, company registrations

Example: "He signed the loan agreement using digital signature."

DICGC (Deposit Insurance and Credit Guarantee Corporation)

Definition: RBI subsidiary providing deposit insurance to bank depositors

Coverage: ₹5 lakh per depositor per bank (principal + interest)

Example: "DICGC protects small depositors from bank failures."

E - Banking Terms

Electronic Clearing Service (ECS)

Definition: Electronic fund transfer system for bulk/repetitive transactions

Types:
- ECS Credit (salary, dividend)
- ECS Debit (loan EMI, bill payment)

Example: "His salary is credited via ECS on the 1st of every month."

EMI (Equated Monthly Installment)

Definition: Fixed payment amount made by borrower to lender on specified
date each month

Formula: EMI = [P × R × (1+R)^N] / [(1+R)^N - 1]
Where: P = Principal, R = Monthly interest rate, N = Tenure in months

Example: "His home loan EMI is ₹25,000 per month for 20 years."

Endorsement

Definition: Signing the back of a negotiable instrument to transfer rights
to another person

Types:
- Blank Endorsement
- Full Endorsement
- Restrictive Endorsement

Example: "He endorsed the cheque to his business partner."

Equity

Definition: Ownership interest in a company represented by shares

Example: "She invested ₹1 lakh in equity shares of Reliance Industries."

Escheat

Definition: Transfer of unclaimed property/deposits to government after
specified period

Period: 10 years of inactivity (India)

Example: "Dormant accounts with no claims for 10 years may escheat to government."

Exchange Rate

Definition: Value of one currency expressed in terms of another currency

Types:
- Fixed Exchange Rate
- Floating Exchange Rate

Example: "The USD-INR exchange rate is ₹83 per dollar."

F - Banking Terms

Fiscal Deficit

Definition: Difference between government's total expenditure and total revenue
(excluding borrowings)

Formula: Fiscal Deficit = Total Expenditure - Total Revenue (excl. borrowings)

Target (India 2024-25): 5.1% of GDP

Example: "Government aims to reduce fiscal deficit to 4.5% by 2025-26."

Fixed Deposit (FD)

Definition: Investment where lump sum deposited for fixed tenure at fixed
interest rate

Tenure: 7 days to 10 years
Interest: 5-7% (varies by bank and tenure)

Example: "He invested ₹10 lakhs in a 5-year FD at 7.5% interest."

Foreclosure

Definition: Repaying entire outstanding loan amount before tenure ends

Charges: 2-5% of outstanding amount (varies by bank)

Example: "She foreclosed her personal loan after getting a bonus."

Foreign Direct Investment (FDI)

Definition: Investment by foreign entity in business located in another country

Sectors: Automatic route (100% FDI) or Government approval route

Example: "India attracted $83 billion FDI in 2023-24."

Foreign Exchange Reserves (Forex)

Definition: Foreign currencies held by central bank to back liabilities
and influence monetary policy

India's Reserves (2025): ~$650 billion

Components: Foreign currencies, gold, SDRs, reserve position in IMF

Example: "RBI uses forex reserves to stabilize rupee exchange rate."

G - Banking Terms

GDP (Gross Domestic Product)

Definition: Total monetary value of all goods and services produced within
a country in a specific period

India GDP (2024-25 estimate): ₹300 lakh crore

Example: "India's GDP growth rate is projected at 6.5% for FY 2024-25."

GNP (Gross National Product)

Definition: Total value of goods and services produced by a country's residents,
regardless of location

Formula: GNP = GDP + Net Factor Income from Abroad

Example: "GNP includes income earned by Indians working abroad."

Grace Period

Definition: Time period after due date during which payment can be made
without penalty

Credit Cards: Usually 15-21 days

Example: "The loan has a 7-day grace period after the EMI due date."

Guarantor

Definition: Person who agrees to repay loan if borrower defaults

Liability: Equal to borrower

Example: "His father stood as guarantor for the education loan."

H - Banking Terms

Hard Currency

Definition: Globally traded currency considered stable and reliable

Examples: USD, Euro, GBP, JPY

Example: "USD is the world's primary hard currency."

Hypothecation

Definition: Charge created on movable assets without transferring possession

Common in: Vehicle loans, machinery loans

Example: "The car is hypothecated to the bank until the loan is repaid."

I - Banking Terms

IFSC (Indian Financial System Code)

Definition: 11-character alphanumeric code identifying bank branch for
electronic fund transfers

Format: First 4 characters (bank code), 5th character (0), last 6 (branch code)

Example: "SBIN0001234" - SBI branch code for NEFT/RTGS

Inflation

Definition: Rate at which general price level of goods and services rises

Types:
- Demand-Pull Inflation
- Cost-Push Inflation

India Inflation (2025): ~5% (CPI)

Example: "High inflation reduces purchasing power of money."

Initial Public Offering (IPO)

Definition: Process by which private company offers shares to public
for first time

Example: "LIC's IPO in 2022 was India's largest ever."

Interest Rate

Definition: Percentage charged on principal by lender or paid to depositor

Types:
- Simple Interest
- Compound Interest

Example: "The savings account offers 4% interest rate per annum."

K - Banking Terms

KYC (Know Your Customer)

Definition: Process of verifying customer identity to prevent fraud and
money laundering

Documents Required:
- Identity proof (Aadhaar, PAN)
- Address proof
- Photograph

Example: "Complete KYC is mandatory for opening bank account."

L - Banking Terms

Letter of Credit (LC)

Definition: Bank's written guarantee to seller that payment will be made
if buyer defaults

Types:
- Revocable LC
- Irrevocable LC
- Confirmed LC

Example: "The exporter demanded an irrevocable LC from the importer's bank."

Lien

Definition: Legal claim on assets used as collateral to satisfy debt

Example: "Bank placed a lien on his FD against the overdraft facility."

Liquidity

Definition: Ease with which asset can be converted to cash without loss

Most Liquid: Cash
Example: "Stocks are more liquid than real estate."

Loan-to-Value Ratio (LTV)

Definition: Ratio of loan amount to value of asset purchased

Formula: LTV = (Loan Amount / Asset Value) × 100

Max LTV (India): 75-90% for home loans

Example: "For a ₹50 lakh house, with 80% LTV, loan is ₹40 lakhs."

M - Banking Terms

MCLR (Marginal Cost of Funds based Lending Rate)

Definition: Internal benchmark rate for pricing loans, replacing base rate

Components:
- Marginal cost of funds
- Operating costs
- Tenure premium

Example: "Bank's 1-year MCLR is 8.5%."

Merchant Banking

Definition: Banking services for corporations including IPO management,
mergers, acquisitions

Example: "ICICI Securities provided merchant banking services for the company's IPO."

MICR (Magnetic Ink Character Recognition)

Definition: 9-digit code printed on cheques for faster processing

Format: 3 digits (city), 3 digits (bank), 3 digits (branch)

Example: "400240002" - MICR code on Mumbai cheque

Moral Hazard

Definition: Tendency to take more risks when protected from consequences

Example: "Deposit insurance may create moral hazard for banks."

Mortgage

Definition: Loan secured by real property (land/building)

Types:
- Simple Mortgage
- Mortgage by Conditional Sale
- English Mortgage

Example: "He took a mortgage loan using his house as security."

N - Banking Terms

NACH (National Automated Clearing House)

Definition: Centralized system for bulk transactions like salary, dividend,
loan EMI

Replaced: ECS

Example: "EMIs are auto-debited via NACH mandate."

NASDAQ

Definition: American stock exchange, second-largest by market capitalization

Example: "Apple and Microsoft are listed on NASDAQ."

Nationalization

Definition: Transfer of private assets to government ownership

Bank Nationalization in India:
- 1969: 14 banks nationalized
- 1980: 6 more banks nationalized

Example: "Bank nationalization aimed at social banking and financial inclusion."

NEFT (National Electronic Funds Transfer)

Definition: Electronic fund transfer system operating on deferred net
settlement basis

Timing: 24×7 (since December 2019)
No Minimum/Maximum Limit

Example: "He transferred ₹50,000 via NEFT to his daughter's account."

Negotiable Instrument

Definition: Document guaranteeing payment of specific amount to specific
person or bearer

Types:
- Promissory Note
- Bill of Exchange
- Cheque

Example: "Cheque is the most common negotiable instrument."

Net Banking

Definition: Online platform for conducting banking transactions via internet

Services: Fund transfer, bill payment, account statements, investments

Example: "She paid electricity bill through net banking."

NPA (Non-Performing Asset) - See Bad Debt

NRI (Non-Resident Indian)

Definition: Indian citizen residing outside India for more than 182 days
in a financial year

Accounts:
- NRE (Non-Resident External)
- NRO (Non-Resident Ordinary)
- FCNR (Foreign Currency Non-Resident)

Example: "NRIs can open NRE account to park foreign earnings in India."

O - Banking Terms

Overdraft (OD)

Definition: Facility allowing withdrawal beyond available balance up to
approved limit

Interest: Charged only on utilized amount

Example: "He has an overdraft limit of ₹2 lakhs against his salary account."

Ombudsman

Definition: Official appointed to investigate complaints against banks

Banking Ombudsman Scheme: Launched by RBI in 1995

Example: "Customer filed complaint with Banking Ombudsman for unfair charges."

P - Banking Terms

PAN (Permanent Account Number)

Definition: 10-character alphanumeric unique identifier for taxpayers

Mandatory for: Opening bank account, high-value transactions, tax filing

Example: "ABCDE1234F" - PAN format

Payment Bank

Definition: Differentiated bank offering limited services (no lending)

Services: Savings accounts (max ₹2 lakh), payments, remittances

Examples: Paytm Payments Bank, India Post Payments Bank, Airtel Payments Bank

Example: "Payment banks promote financial inclusion in rural areas."

PLR (Prime Lending Rate)

Definition: Interest rate banks charge their most creditworthy customers

Example: "Bank's PLR is 9.5% per annum."

Power of Attorney

Definition: Legal authorization for someone to act on another's behalf

Types:
- General Power of Attorney
- Special Power of Attorney

Example: "He gave power of attorney to his wife to operate bank account."

Prompt Corrective Action (PCA)

Definition: RBI framework for weak banks with high NPAs, negative ROA,
or low capital

Restrictions: Lending curbs, branch expansion ban, dividend restrictions

Example: "RBI placed UCO Bank under PCA framework due to high NPAs."

R - Banking Terms

Recurring Deposit (RD)

Definition: Savings scheme with fixed monthly deposits for fixed tenure

Tenure: 6 months to 10 years
Interest: Similar to FD rates

Example: "She invests ₹5,000 monthly in 5-year RD at 7% interest."

Repo Rate

Definition: Rate at which RBI lends short-term money to commercial banks
against securities

Current Rate (2025): 6.50%

Impact: Lower repo rate → Cheaper loans → More borrowing

Example: "RBI cut repo rate by 25 bps to boost economic growth."

Reverse Repo Rate

Definition: Rate at which RBI borrows money from commercial banks

Current Rate (2025): 3.35%

Purpose: Absorb excess liquidity from market

Example: "Banks park surplus funds with RBI at reverse repo rate."

RTGS (Real Time Gross Settlement)

Definition: Real-time fund transfer system for large-value transactions

Timing: 24×7 (since December 2020)
Minimum: ₹2 lakh (earlier, now no minimum)

Example: "He transferred ₹10 lakh to buy property via RTGS."

S - Banking Terms

Savings Account

Definition: Interest-bearing deposit account for individuals

Interest: 3-4% per annum
Withdrawal: No limit

Example: "She maintains a savings account with minimum balance of ₹10,000."

SLR (Statutory Liquidity Ratio)

Definition: Percentage of deposits banks must invest in government securities,
cash, or gold

Current Rate (2025): 18%

Purpose: Ensure bank solvency, control credit growth

Example: "Banks must maintain 18% SLR of their net demand and time liabilities."

Standing Instruction

Definition: Pre-authorized instruction to bank for automatic recurring payments

Example: "He set standing instruction for monthly SIP of ₹10,000."

Subprime Lending

Definition: Lending to borrowers with poor credit history at higher interest rates

Example: "2008 financial crisis was triggered by subprime mortgage crisis in US."

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

Definition: Global messaging network for secure international money transfers

SWIFT Code: 8 or 11-character bank identifier

Example: "SBININBB" - SBI's SWIFT code

T - Banking Terms

Treasury Bills (T-Bills)

Definition: Short-term government securities with maturity less than 1 year

Tenure: 91 days, 182 days, 364 days
Issued at: Discount to face value

Example: "He invested in 91-day T-bills at 6.5% yield."

Term Loan

Definition: Loan for fixed amount with fixed repayment schedule

Types:
- Short-term: < 1 year
- Medium-term: 1-3 years
- Long-term: > 3 years

Example: "The business took a 5-year term loan for expansion."

U - Banking Terms

UPI (Unified Payments Interface)

Definition: Real-time instant payment system enabling inter-bank transactions
via mobile

Features:
- 24×7 availability
- Instant transfer
- Virtual Payment Address (VPA)

Example: "He paid ₹500 to shopkeeper via UPI using PhonePe."

Universal Banking

Definition: Bank offering both commercial and investment banking services

Example: "ICICI Bank practices universal banking."

W - Banking Terms

Working Capital

Definition: Capital used for day-to-day business operations

Formula: Working Capital = Current Assets - Current Liabilities

Example: "The company needs ₹50 lakhs working capital for operations."

🎯 Most Important Terms for IBPS Exams

Priority 1 (Must Know - 30 Terms):

1. Repo Rate & Reverse Repo Rate
2. CRR & SLR
3. Bank Rate
4. MCLR
5. NPA
6. Fiscal Deficit
7. CAR
8. GDP
9. Inflation
10. NEFT, RTGS, IMPS
11. KYC
12. Basel III
13. Payment Banks
14. Small Finance Banks
15. UPI
16. IFSC Code
17. MICR Code
18. Bancassurance
19. Priority Sector Lending
20. Financial Inclusion
21. DICGC
22. Letter of Credit
23. EMI
24. Credit Score
25. Fixed Deposit
26. Recurring Deposit
27. Overdraft
28. Cash Credit
29. Mortgage
30. Hypothecation

📝 Study Strategy

Week-wise Plan:

Week 1: Learn A-F terms (60 terms) Week 2: Learn G-N terms (60 terms) Week 3: Learn O-Z terms (60 terms) Week 4: Revision + Current updates

Daily Routine:

• Morning: Learn 10 new terms
• Afternoon: Revise previous day’s terms
• Evening: Practice MCQs

🔗 Related Resources

Banking Awareness:

• RBI Functions & Policies (coming soon)
• Important Banking Dates (coming soon)
• Banking Products & Services (coming soon)

Current Affairs:

• Monthly Banking Updates
• RBI Policy Changes
• New Banking Schemes

Practice:

• Banking Awareness MCQs
• Previous Year Questions

Master banking terminology - The foundation of Banking Awareness! 📖