1) What is bank? What are the types of banks?
A bank is a fiscal institution licensed as a receiver of cash deposits. There are two types of banks, commercial banks and investment banks. In most of the countries, banks are regulated by the national government or central bank.
2) What is investment banking?
investment bank manages portfolios of fiscal assets, commodity and currency, fix income, corporate finance, corporate advisory services for mergers and acquisitions, debt and equity spell etc .
3) What is commercial bank?
commercial bank is owned by the group of individuals or by a extremity of Federal Reserve System. The commercial bank put up services to individuals, they are primarily concerned with receiving deposits and lend to commercial enterprise. such savings bank earns money by imposing interest on the loanword borrowed by the borrower. The money that is deposited by the customer will be used by the bank to give clientele lend, car loanword, mortgages and home repair loans .
4) What are the types of Commercial Banks?
a ) Retail or consumer trust
It is a small to mid-sized outgrowth that directly deals with consumer ’ second transaction preferably than bodied or early banks
barn ) Corporate or business bank
bodied bank deals with cash management, underwrite, finance and write out of stocks and bonds
c ) Securities and Investment banking
investment deposit manages portfolios of fiscal assets, commodity and currentness, fix income, corporate finance, corporate advisory services for mergers and acquisitions, debt and fairness compose etc .
d ) Non-traditional options
There are many non-bank entities that offer fiscal services like that of the bank. The entities include credit card companies, credit rating card report agencies and credit card issuers
5) What is consumer bank?
Consumer bank is a new addition in the trust sector, such deposit exist merely in countries like U.S.A and Germany. This savings bank provides loans to their customer to buy T.V, Car, furniture etc. and give the option of easy payment through episode .
6) What are the types of accounts in banks?
a ) Checking account : You can access the explanation as the saving explanation but, unlike saving account, you can not earn sake on this account. The benefit of this account is that there is no restrict for withdrawal .
b-complex vitamin ) Saving account : You can save your money in such account and besides earn interest on it. The number of withdrawal is limited and need to maintain the minimal amount of libra in the account to remain active .
c ) money commercialize Account : This report gives benefits of both saving and checking accounts. You can withdraw the total and so far you can earn higher interest on it. This history can be opened with a minimal balance .
vitamin d ) compact disk ( Certificate of Deposits ) account : In such account you have to deposit your money for the fixate period of time ( 5-7 years ), and you will earn the interest on it. The rate of interest is decided by the bank, and you can not withdraw the funds until the fixed period expires .
7) What are the different ways you can operate your accounts?
You can operate your bank accounts in unlike ways like
a ) internet banking
bacillus ) Telephone or Mobile bank
deoxycytidine monophosphate ) outgrowth or Over the antagonistic service
d ) ATM ( Automated Teller Machine )
8) What are the things that you have to keep in concern before opening the bank accounts?
Before opening a bank report, if it is a saving report, you have to check the interest rate on the deposition and whether the concern rate remains coherent for the time period. If you have the crack history, then look for how many cheques are spare to use. Some banks may charge you for using newspaper cheques or ordering new check books. besides, check for different debit card option that is provided on opening an bill and on-line banking features .
9) What is ‘Crossed Cheque’ ?
A cross cheque indicates the measure should be deposited into the payees account and can not be cashed by the bank over the counter. here in the picture, number # 2, you can see two cross-lines on the forget side corner of the check that indicates cross check .
10) What is overdraft protection?
overdraft auspices is a service that is provided by a bank to their customer. For case, if you are holding two accounts, saving and credit report, in the lapp bank. now if one of your accounts does not have enough cash to process the cheques, or to cover the purchases. The bank will transfer money from one report to another score, which does not have cash so to prevent check fall or to clear your shopping or electricity bills .
11) Do bank charge for ‘overdraft protection’ service?
Yes, bank will charge on ‘ overdraft protection ’ services but the charges will be applicable only when you start using the service .
12) What is (APR) Annual Percentage Rate?
APR stands for annual Percentage Rate, and it is a charge or interest that the bank imposes on their customers for using their services like loans, credit cards, mortgage loan etc. The sake rate or fees imposed is calculated per annum .
13) What is ‘prime rate’?
basically, ‘ premier rate ’ is the rate of interest that is decided by nations ( U.S.A ) largest banks for their favored customers, having a good credit grade. much ‘ variable star ’ interest depends on the ‘ prime rates ’. For example, the ‘ APR ’ ( annual Percentage Rate ) on a credit poster is 10 % plus premier rate, and if the choice rate is 3 %, the stream ‘ APR ’ on that credit card would be 13 % .
14) What is ‘Fixed’ APR and ‘Variable’ APR?
‘ APR ’ ( annual Percentage Rate ) can be ‘ Fixed ’ or ‘ Variable ’ type. In ‘ Fixed APR ’, the interest rate remains same throughout the condition of the loan or mortgage, while in ‘ Variable APR ’ the matter to rate will change without notice, based on the early factors like ‘ prime rate ’ .
15) What are the different types of banking software applications are available in the Industry?
There are many types of bank software applications and few are listed below
a ) Internet banking system : Internet deposit allows the customers and fiscal institution to conduct final examination transaction using banks or fiscal establish web site .
b ) ATM bank ( Automated Teller Machine ) : It is an electronic bank exit, which allows customers to complete basic transaction .
c ) Core bank system : core bank is a overhaul provided by a network bank branches. With this, customer can withdraw money from any branch .
vitamin d ) Loan management system : The database collects all the information and keeps the cut about the customers who borrows the money .
einsteinium ) Credit management system : Credit management system is a system for handling credit accounts, assessing risks and determining how much citation to offer to the customer .
degree fahrenheit ) Investment management system : It is a serve of managing money, including investments, bank, budget and taxes .
gravitational constant ) Stock market management system : The malcolm stock market management is a system that manages fiscal portfolio like securities and bonds .
henry ) Financial management system : Financial management organization is used to govern and keep a read of its income, expense and assets and to keep the accountability of its profit .
16) What is the ‘cost of debt’?
When any company borrows funds, from a fiscal institution ( bank ) or other resources the sake paid on that sum is known as ‘ cost of debt ’ .
17) What is ‘balloon payment’?
The ‘ balloon payment ’ is the concluding hunk sum payment that is due. When the entire loan payment is not amortized over the life of the loanword, the remaining balance is due as the final refund to the lender. Balloon payment can occur within an adjustable rate or fixed rate mortgage .
18) What is ‘Amortization’?
The repayment of the loan by installment to cover principal come with pastime is known as ‘ Amortization ’ .
19) What is negative Amortization?
When repayment of the loanword is less than the loans accumulated interest, then minus Amortization occurs. It will increase the lend amount rather of decreasing it. It is besides known as ‘ deferred interest ’ .
20) What is the difference between ‘Cheque’ and ‘Demand draft’?
Both are used for the transfer of the sum between two accounts of same banks or different trust. ‘ Cheque ’ is issued by an individual who holds the report in a bank, while ‘ Demand draft ’ is issued by the bank on request, and will charge you for the serve. besides, demand blueprint can not be cancelled, while cheques can be cancelled once issued .
21) What is debt-to-Income ratio?
The debt-to-income ratio is calculated by dividing a loan applicant ’ s total debt requital by his megascopic income .
22) What is adjustment credit?
Adjustment credit rating is a short-run loanword made by the Federal Reserve Bank ( U.S ) to the commercial bank to maintain reserve requirements and support short term lending, when they are short of cash .
23) What do you mean by ‘foreign draft’?
Foreign enlist is an alternative to foreign currentness ; it is broadly used to send money to a extraneous nation. It can be purchased from the commercial banks, and they will charge according to their banks rules and norms. People opt for ‘ foreign conscription ’ for sending money as this method acting of sending money is cheaper and safer. It besides enables recipient to access the funds quicker than a check or cash transfer .
24) What is ‘Loan grading’?
The classification of loanword based on assorted risks and parameters like refund risk, borrower ’ s credit history etc. is known as ‘ loan grading ’. This system places loan on one to six categories, based on the stability and risk associated with the loan .
25) What is ‘Credit-Netting’?
A system to reduce the number of credit checks on fiscal transaction is known as credit-netting. such agreement occurs normally between large banks and other fiscal institutions. It places all the future and current transaction into one agreement, removing the necessitate for credit cheques on each transaction .
26) What is ‘Credit Check’?
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A accredit arrest or a credit report is done by the bank on a basis of an person ’ s fiscal credit. It is done in order to make surely that an individual is capable enough of meeting the fiscal duty for its business or any other monetary transaction. The recognition check is done keeping few aspects in concern like your liabilities, assets, income etc .
27) What is inter-bank deposit?
Any deposit that is held by one bank for another bank is known as inter-bank lodge. The bank for which the depository is being held is referred as the analogous bank .
28) What is ILOC (Irrevocable Letter Of Credit)?
It is a letter of recognition or a contractual agreement between fiscal institute ( Bank ) and the party to which the letter is handed. The ILOC letter can not be cancelled under any context and, guarantees the requital to the party. It requires the bank to pay against the drafts meeting all the terms of ILOC. It is valid upto the express menstruation of time. For example, if a little business wanted to abridge with an abroad supplier for a specify item they would come to an agreement on the terms of the sale like choice standards and pricing, and ask their respective banks to open a letter of credit for the transaction. The buyer ’ s savings bank would forward the letter of credit to the seller ’ s savings bank, where the payment terms would be finalized and the cargo would be made .
29) What is the difference between bank guarantee and letter of credit?
There is not much difference between bank guarantee and letter of credit as they both take the liability of requital. A bank guarantee contains more hazard for a deposit than a letter of credit as it is protecting both parties the buyer and seller .
30) What is cashier’s cheque?
A cashier check issued by the bank on behalf of the customer and takes the guarantee for the payment. The requital is done from the bank ’ s own funds and signed by the cashier. The cashier cheque is issued when rapid settlement is necessary .
31) What do you mean by co-maker?
A person who signs a note to guarantee the payment of the loan on behalf of the main loanword applicant ’ randomness is known as co-maker or co-signer .
32) What is home equity loan?
Home equity loanword, besides known as the irregular mortgage, enables you to borrow money against the value of equity in your home. For model, if the respect of the home is $ 1, 50,000 and you have paid $ 50,000. The remainder owed on your mortgage is $ 1, 00,000. The sum $ 50,000 is an equity, which is the dispute of the actual value of the home and what you owe to the bank. Based on equity the lender will give you a loanword. normally, the applicant will get 85 % of the lend on its fairness, considering your income and accredit score. In this case, you will get 85 % of $ 50,000, which is $ 42,500 .
33) What is Line of credit?
Line of credit is an agreement or arrangement between the bank and a borrower, to provide a certain sum of loans on borrower ’ sulfur demand. The borrower can withdraw the amount at any moment of time and pay the interest merely on the amount bow out. For model, if you have $ 5000 line of credit, you can withdraw the wax measure or any measure less than $ 5000 ( say $ 2000 ) and lone pay the interest for the total adjourn ( in this case $ 2000 ) .
34) How bank earns profit?
The bank earns profit in respective ways
a ) Banking respect chain
b-complex vitamin ) Accepting deposit
c ) Providing funds to borrowers on interest
vitamin d ) Interest spread
vitamin e ) Additional charges on services like checking history maintenance, on-line charge payment, ATM transaction
35) What are payroll cards?
payroll cards are types of smart cards issued by banks to facilitate wage payments between employer and employees. Through payroll tease, employer can load wage payments onto an employee ’ s smart calling card, and employee can withdraw the wage even though he/she doesn ’ thymine have an account in the bank .
36) What is the card based payments?
There are two types of poster payments
a ) Credit Card
b ) Debit Card
37) What ACH stands for?
ACH stands for Automated Clearing House, which is an electronic transfer of funds between banks or fiscal institutions .
38) What is ‘Availability Float’?
Availability Float is a time remainder between deposits made, and the funds are actually available in the explanation. It is fourth dimension to process a physical check into your account .
For example, you have $ 20,000 already in your explanation and a check of another $ 10,000 dollar is deposited in your account but your account will show balance of $ 20,000 alternatively of $ 30,000 till your $ 10,000 dollar check is cleared this work time is known as handiness float .
39) What do you mean by term ‘Loan Maturity’ and ‘Yield’?
The date on which the principal amount of a lend becomes due and account payable is known as ‘ Loan Maturity ’. give is normally referred as the dividend, interest or return the investor receives from a security like stock or attachment, interest on sterilize lodge etc. For example, any investment for $ 10,000 at interest rate of 4.25 %, will give you a output of $ 425 .
40) What is Cost Of Funds Index (COFI)?
COFI is an index that is used to determine interest rates or changes in the matter to rates for certain types of Loans .
41) What is Convertibility Clause?
For certain loan, there is a provision for the borrower to change the interest rate from fixed to variable and frailty versa is referred as Convertibility Clause .
42) What is Charge-off?
charge off is a resolution by a lender to a borrower for non-payment of the remaining sum, when borrower badly falls into debt. The amateur come is settled as a bad debt .
43) What ‘LIBOR’ stands for?
‘ LIBOR ’ stands for London Inter-Bank Offered Rate. As the name suggest, it is an modal concern rate offered for U.S dollar or Euro dollar deposited between groups of London banks. It is an international sake rate that follows worldly concern economic condition and used as a base rate by banks to set interest rate. LIBOR comes in 8 maturities from overnight to 12 months and in 5 different currencies. once in a day LIBOR announces its matter to rate .
44) What do you mean by term ‘Usury’?
When a loanword is charged with high pastime rate illegally then it is referred as ‘ Usury ’. usury rates are generally set by State Law .
45) What is Payday loan?
A pay-day lend is broadly, a modest sum and a short-run lend available at high interest rate. A borrower normally writes post-dated cheques to the lender in obedience to the amount they wish to borrow .
46) What do you mean by ‘cheque endorsing’?
‘ Endorsing check ’ ensures that the cheque get deposited into your history alone. It minimizes the gamble of larceny. normally, in endorsing cheque, the cashier will ask you to sign at the bet on of the cheque. The touch should match the payee. The effigy over here shows the certify cheque .
47) What are the different types of Loans offered by banks?
The unlike types of loans offered by banks are :
a ) Unsecured Personal Loan
b ) Secured Personal Loan
deoxycytidine monophosphate ) Auto Loans
d ) mortgage Loans
einsteinium ) Small business Loans
48) What are the different types of ‘Fixed Deposits’?
There are two unlike types of ‘ Fixed Deposits ’
special Term Deposits : In this type of ‘ Fixed Deposits ’, the earn interest on the situate is added to the star total and compounded quarterly. This amount is accumulated and repaid with the star amount on adulthood of the situate .
ordinary Term Deposits : In this character of ‘ Fixed Deposits ’, the earned recognition is credited to the investor ’ randomness account, once in a quarter. In some cases, sake may be credited on a monthly footing .
The earn interest on fixed deposits is non-taxable. You can besides take a loan against your repair deposit .
49) What are the different types of Loans offered by Commercial Banks?
This type of Loan is offered to borrower to start their commercial enterprise and can be used to build a shopfront, to acquire inventory or pay franchise fees to get a commercial enterprise wheel .
Line of Credit
Lines of credit are another type of business loan provided by commercial banks. It is more like a security for your business ; the depository financial institution allows the customer to withdraw the come from promptly available funds in an adverse time. customer or company can pay back over time and withdraw money again without going into the lend process .
Small Business Administration Loans
It is a union Agency ( U.S ) that gives funding to small businesses and entrepreneurs. SBA ( Small Business Administration ) loans are made through banks, credit unions and early lenders who partners with SBA .
50) What is ‘Bill Discount’?
‘ Bill Discount ’ is a settlement of the bill, where your electricity bill or natural gas bill is sold to a bank for early requital at less than the face value and the bank will recover the fully sum of the bill from you before bill due date. For model, electricity bill for XYZ is $ 1000 ; the electricity placard company will sell the bill to the depository financial institution for 10 % to 20 % discount to the face value. here, the bank will buy the electricity charge for $ 900 whose face value is $ 1000, now the savings bank will recover, full sum of bill from the customer i.e $ 1000. If the customer fails to pay the bill, the bank will put interest on the great bill and ask the customer for the payment .
51) What is ‘Bill Purchase’?
In ‘ Bill Purchase ’ the loan will be created for the full value of the draft and the concern will be recovered when the actual payment comes. For case, a ‘ Sight draft ’ is presented for which the loanword is created for 100 % of the conscription value. The money is received after 7 days, and then the matter to will be recovered for 7 days along with the chief amount.
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52) What is ‘Cheque Discount’?
Cheque discount service is offered lone by few banks. For example, if you have a cheque of $ 3000 outstation and the cheque will take 7 seven days for headroom, then bank will offer you a serve for early payment. The bank can make an early on requital, but they will pay entirely for certain share of the actual come, here they will pay you $ 2000 but they will charge interest on it and the remaining $ 1000 will be paid, once the outstation cheques get acquit .