Banking Terms

Invisible Export

An invisible export is an export that does not have a physical presence, and usually comes in the form of services provided. Some examples are tourism, banking, foreign investments, private transfers, and insurance. So basically, it's the trading of services dealing with the exchange of currency from one nation to another.

Banking Ombudsman

Banking Ombudsman is a quasi-judicial authority appointed by Reserve Bank of India introduced under Section 35 A of the Banking Regulation Act, 1949 for resolution of complaints relating to certain services rendered by banks.

·         It came to from 1995.

·         It was first setup in United Kingdom.

·         One can file a complaint before the Banking Ombudsman if the reply is not received from the bank within a period of one month after the bank concerned has received one’s representation, or the bank rejects the complaint, or if the complainant is not satisfied with the reply given by the bank.

Moratorium

Moratorium period refers to a period of time that is agreed on between the banks and the customer in which the loan and the interest is to be repaid

Small Industries Development Bank of India

SIDBI is the principle financial institution for the Promotion, Financing and Development of the Micro, Small and Medium Enterprise (MSME) sector set up on April 2, 1990 under an Act of Indian Parliament. It was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.

Regional Rural Banks

RRB’s were formed in 1975 October 2^nd . It is owned by Government of India, State Government and the sponsoring bank. The main purpose of RRB's is to mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural laborers and rural artisans.

Branchless Banking

Banks will reduce the number of branches and will conduct only a specified core business. Banks will operate/launch many delivery channels like ATM’s, mobile banking, Internet Banking etc… so that people are not required to visit any branch for their usual banking needs.

Green Tax

This tax was introduced with the aim of discouraging high consumption of petroleum products.

Consortium

When more than one bank is allowing credit facilities to one party in coordination with each other under a formal agreement it is known as consortium. Usually consortiums are formed to give loans to corporates.

Open Market Operations

Open Market Operations are the market operations conducted by the Reserve Bank of India to/ from the market to adjust the rupee liquidity conditions in the market. It is done by sale/ purchase of Government securities. When there is excess liquidity in the market, RBI resorts to sale securities and thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, the RBI will buy securities from the market, thereby releasing liquidity into the market.

What are government securities?

A Government security is a tradable instrument issued by the Central Government or the State Governments. It includes Cash Management Bills (CMBs), treasury Bills (T-bills), Dated Government Securities and State Development Loans (SDLs).

Treasury bills

Treasury bills or T-bills, are short term debt instruments issued by the Government of India They are issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest.

Cash Management Bills (CMBs)

It is a new short-term instrument issued by Government of India, in consultation with the Reserve Bank of India. They are issued for maturities less than 91 days.

State Development Loans (SDLs)

SDLs are dated securities issued through an auction similar to the auctions conducted for dated securities issued by the Central Government.

Why should one invest in Government securities?

·         Government securities offer the maximum safety

·         Government securities can be sold easily in the secondary market to meet cash requirements.

·         They can be held in book entry, i.e., dematerialized/ scripless form

·         Government securities are available in a wide range of maturities from 91 days to as long as 30 years to suit the duration of a bank's liabilities.

·         Government securities can also be used as collateral to borrow funds in the repo market.

How can Government Securities be held?

Government securities may be held by investors either as physical stock or in demat form. From May 20, 2002, it is mandatory for all the RBI regulated entities to hold and transact in Government securities only in dematerialized (SGL) form. Accordingly, UCBs are required to hold all Government securities in demat form.

Buyback of Government securities

Buyback of Government securities is a process whereby the Government of India and State Governments buy back their existing securities from the holders.

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