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August 27, 2014

Important Banking Awareness Topics for IBPS PO IV and Clerks IV Online Exams


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Friends, here are some Important Basics you should know about Banking Awareness for upcoming IBPS PO and Clerks Online Exams. In this, we tried to cover almost all the basic terminology of banking awareness in simple language so that you can pick the synopsis in a single glance. It hardly will take 15 to 20 minutes to complete reading this post. But we assure you that it helps you a lot. If you have time, you can refer to our complete short notes on Banking Awareness Here.

Bank Rate
Bank rate, also referred to as the discount rate, is the rate of interest which a central bank charges on the loans and advances that it extends to commercial banks and other financial intermediaries. Changes in the bank rate are often used by central banks to control the money supply.
Present Bank Rate –9%

Repo Rate
Repo rate is the rate at which our banks borrow rupees from RBI. Whenever the banks have any shortage of funds they can borrow it from RBI. A reduction in the repo rate will help banks to get money at a cheaper rate. When the repo rate increases, borrowing from RBI becomes more expensive.
 Present Repo Rate - 8%

Reverse Repo Rate
This is exact opposite of Repo rate. Reverse Repo rate is the rate at which Reserve Bank of India (RBI) borrows money from banks. RBI uses this tool when it feels there is too much money floating in the banking system. Banks are always happy to lend money to RBI since their money is in safe hands with a good interest. An increase in Reverse repo rate can cause the banks to transfer more funds to RBI due to this attractive interest rates.
Present Reverse Repo Rate – 7%

CRR Rate
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with RBI. If RBI decides to increase the percent of this, the available amount with the banks comes down. RBI is using this method (increase of CRR rate), to drain out the excessive money from the banks.
Present CRR – 4%

SLR Rate
SLR (Statutory Liquidity Ratio) is the amount a commercial bank needs to maintain in the form of cash, or gold or govt. approved securities (Bonds) before providing credit to its customers. SLR rate is determined and maintained by the RBI (Reserve Bank of India) in order to control the expansion of bank credit. SLR is determined as the percentage of total demand and percentage of time liabilities. Time Liabilities are the liabilities a commercial bank liable to pay to the customers on their anytime demand. SLR is used to control inflation and propel growth. Through SLR rate tuning the money supply in the system can be controlled efficiently.
Present SLR – 22%

Inflation is as an increase in the price of bunch of Goods and services that projects the Indian economy. An increase in inflation figures occurs when there is an increase in the average level of prices in Goods and services. Inflation happens when there are fewer Goods and more buyers; this will result in increase in the price of Goods, since there is more demand and less supply of the goods.

Deflation is the continuous decrease in prices of goods and services. Deflation occurs when the inflation rate becomes negative (below zero) and stays there for a longer period.

The Prime Interest Rate is the interest rate charged by banks to their most creditworthy customers (usually the most prominent and stable business customers). The rate is almost always the same amongst major banks. Adjustments to the prime rate are made by banks at the same time; although, the prime rate does not adjust on any regular basis. The Prime Rate is usually adjusted at the same time and in correlation to the adjustments of the Fed Funds Rate.  Some banks use the name "Reference Rate" or "Base Lending Rate" to refer to their Prime Lending Rate.

Deposit Rate
Interest Rates paid by a depository institution on the cash on deposit.

FII (Foreign Institutional Investor) used to denote an investor, mostly in the form of an institution. An institution established outside India, which proposes to invest in Indian market, in other words buying Indian stocks. FII's generally buy in large volumes which has an impact on the stock markets. Institutional Investors includes pension funds, mutual funds, Insurance Companies, Banks, etc..

FDI (Foreign Direct Investment) occurs with the purchase of the “physical assets or a significant amount of ownership (stock) of a company in another country in order to gain a measure of management control” (Or) A foreign company having a stake in a Indian Company.

IPO is Initial Public Offering. This is the first offering of shares to the general public from a company wishes to list on the stock exchanges.

The Selling of the government stake in public sector undertakings.

Fiscal Deficit
It is the difference between the government’s total receipts (excluding borrowings) and total expenditure. Present Fiscal Deficit is 5.3%

Revenue deficit
It defines that, where the net amount received (by taxes & other forms) fails to meet the predicted net amount to be received by the government

The Gross Domestic Product or GDP is a measure of all of the services and goods produced in a country over a specific period; classically a year.

Gross National Product is measured as GDP plus income of residents from investments made abroad minus income earned by foreigners in domestic market.

National Income
National Income is the money value of all goods and services produced in a country during the year.

Per Capita Income
The national income of a country, or region, divided by its population. Per capita income is often used to measure a country's standard of living.

Vote on Account
A vote-on account is basically a statement ,where the government presents an estimate of a sum required to meet the expenditure that it incurs during the first three to four months of an election financial year until a new government is in place, to keep the machinery running.

Difference between Vote on Account and Interim Budget
Vote-on-account deals only with the expenditure side of the government's budget, an interim Budget is a complete set of accounts, including both expenditure and receipts.

The SDR (Special Drawing Rights) is an artificial currency created by the IMF in 1969. SDRs are allocated to member countries and can be fully converted into international currencies so they serve as a supplement to the official foreign reserves of member countries. Its value is based on a basket of key international currencies (U.S. dollar, euro, yen and pound sterling).

SEZ means Special Economic Zone is the one of the part of government’s policies in India. A special Economic zone is a geographical region that economic laws which are more liberal than the usual economic laws in the country. The basic motto behind this is to increase foreign investment, development of infrastructure, job opportunities and increase the income level of the people.

Corporate governance
The way in which a company is governed and how it deals with the various interests of its customers, shareholders, employees and society at large. Corporate governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled.Is defined as the general set of customs, regulations, habits, and laws that determine to what end a firm should be run.

RBI Functions
The Reserve Bank of India is the central bank of India, was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.To regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage." Banker to the Government: performs merchant banking function for the central and the state governments; also acts as their banker.Banker to banks: maintains banking accounts of all scheduled banks.

Monetary policy
A Monetary policy is the process by which the government, central bank, of a country controls
(i)                 the supply of money,
(ii)               (ii) availability of money, and
(iii)             (iii) cost of money or rate of interest,
In order to attain a set of objectives oriented towards the growth and stability of the economy.

Fiscal Policy
Fiscal policy is the use of government spending and revenue collection to influence the economy. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is an additional method to determine public revenue and public expenditure.

Core Banking Solutions
Core banking is a general term used to describe the services provided by a group of networked bank branches. Bank customers may access their funds and other simple transactions from any of the member branch offices. It will cut down time, working simultaneously on different issues and increasing efficiency. The platform where communication technology and information technology are merged to suit core needs of banking is known as Core Banking Solutions.

Bank, its Features and Types
A bank is a financial organization where people deposit their money to keep it safe.Banks play an important role in the financial system and the economy. As a key component of the financial system, banks allocate funds from savers to borrowers in an efficient manner. Regional Rural Banks were established with an objective to ensure sufficient institutional credit for agriculture and other rural sectors. The RRBs mobilize financial resources from rural / semi-urban areas and grant loans and advances mostly to small and marginal farmers, agricultural labourers and rural artisans.
(i)                 The area of operation of RRBs is limited to the area as notified by GoI covering one or more districts in the State.
(ii)               ii. Banking services for individual customers is known as retail banking.
(iii)             iii. A bank that deals mostly in but international finance, long-term loans for companies and underwriting. Merchant banks do not provide regular banking services to the general public
(iv)             iv. Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank.
(v)               v. Mobile Banking is a service that allows you to do banking transactions on your mobile phone without making a call , using the SMS facility. Is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone.
(vi)             vi. Traditional banking is the normal bank accounts we have. Like, put your money in the bank and they act as a security and you will get only the normal interests (decided by RBI in our case, FED bank in US).
(vii)           vii. Investment banking is entirely different. Here, people who are having so much money (money in excess which will yield only less interest if in Banks) will invest their money and get higher returns. For example, If i have more money instead of taking the pain of investing in share market, buying properties etc. I will give to investment banks and they will do the money management and give me higher returns when compared to traditional banks.

E-Governance is the public sector’s use of information and communication technologies with the aim of improving information and service delivery, encouraging citizen participation in the decision-making process and making government more accountable,transparent and effective.

Right to information Act
The Right to Information act is a law enacted by the Parliament of India giving citizens of India access to records of the Central Government and State overnments.The Act applies to all States and Union Territories of India, except the State of Jammu and Kashmir - which is covered under a State-level law. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October 2005.

Credit Rating Agencies in India
The credit rating agencies in India mainly include ICRA and CRISIL. ICRA wasformerly referred to the Investment Information and Credit Rating Agency of India Limited. Their main function is to grade the different sector and companies in terms of performance and offer solutions for up gradation. The credit rating agencies in India mainly include ICRA and CRISIL(Credit Rating Information Services of India Limited)

Cheque is a negotiable instrument instructing a Bank to pay a specific amount from a specified account held in the maker/depositor's name with that Bank.A bill of exchange drawn on a specified banker and payable on demand.“Written order directing a bank to pay money”.

Demand Draft
A demand draft is an instrument used for effecting transfer of money. It is a Negotiable Instrument. Cheque and Demand-Draft both are used for Transfer of money. You can 100% trust a DD. It is a banker's check. A check may be dishonored for lack of funds a DD can not. Cheque is written by an individual and Demand draft is issued by a bank. People believe banks more than individuals.

A non-banking financial company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by government, but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.
NBFCs are doing functions akin to that of banks; however there are a few differences:
(i)                 (i)A NBFC cannot accept demand deposits (demand deposits are funds deposited at a depository institution that are payable on demand -- immediately or within a very short period -- like your current or savings accounts.)
(ii)               it is not a part of the payment and settlement system and as such cannot issue cheques to its customers; and
(iii)             Deposit insurance facility of DICGC is not available for NBFC depositors unlike in case of banks.

Diff between banking & Finance
Finance is generally related to all types of financial, this could be accounting, insurances and policies. Whereas banking is everything that happens in a bank only.The term Banking and Finance are two very different terms but are often associated together. These two terms are often used to denote services that a bank and other financial institutions provide to its customers.

The National Association of Software and Services Companies (NASSCOM), the Indian chamber of commerce is a consortium that serves as an interface to the Indian software industry and Indian BPO industry. Maintaining close interaction with the Government of India in formulating National IT policies with specific focus on IT software and services maintaining a state of the art information database of IT software and services related activities for use of both the software developers as well as interested companies overseas.
Mr. Som Mittal – President
Chairman - M R Chandrasekaran

The Associated Chambers of Commerce and Industry of India (ASSOCHAM), India's premier apex chamber covers a membership of over 2 lakh companies and professionals across the country. It was established in 1920 by promoter chambers, representing all regions of India. As an apex industry body, ASSOCHAM represents the interests of industry and trade, interfaces with Government on policy issues and interacts with counterpart international organizations to promote bilateral economic issues. President-Rana Kapoor

NABARD was established by an act of Parliament on 12 July 1982 to implement the National Bank for Agriculture and Rural Development Act 1981. It replaced the Agricultural Credit Department (ACD) and Rural Planning and Credit Cell (RPCC) of Reserve Bank of India, and Agricultural Refinance and Development Corporation (ARDC). It is one of the premiere agency to provide credit in rural areas. NABARD is set up as an apex Development Bank with a mandate for facilitating credit flow for promotion and development of agriculture, small-scale industries, cottage and village industries, handicrafts and other rural crafts.
Chariman - Harsh Kumar Bhanwala

The Small Industries Development Bank of India is a state-run bank aimed to aid the growth and development of micro, small and medium scale industries in India. Set up in 1990 through an act of parliament, it was incorporated initially as a wholly owned subsidiary of Industrial Development Bank of India.
Chairman - S Munhot

SENSEX is the short term for the words "Sensitive Index" and is associated with the Bombay (Mumbai) Stock Exchange (BSE). The SENSEX was first formed on 1-1-1986 and used the market capitalization of the 30 most traded stocks of BSE. Where as NSE has 50 most traded stocks of NSE. SENSEX IS THE INDEX OF BSE. AND NIFTY IS THE INDEX OF NSE. BOTH WILL SHOW DAILY TRADING MARKS. Sensex and Nifty both are an "index”. An index is basically an indicator it indicates whether most of the stocks have gone up or most of the stocks have gone down.

SEBI is the regulator for the Securities Market in India. Originally set up by the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired by U.K. Sinha.

Mutual funds
Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies. The mutual fund will have a fund manager that trades the pooled money on a regular basis. The net proceeds or losses are then typically distributed to the investors annually.

Asset Management Companies
A company that invests its clients' pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. Mutual funds, hedge funds and pension plans are all run by asset management companies. These companies earn income by charging service fees to their clients.

Non-perfoming assets
Non-performing assets, also called non-performing loans, are loans,made by a bank or finance company, on which repayments or interest payments are not being made on time. A debt obligation where the borrower has not paid any previously agreed upon interest and principal repayments to the designated lender for an extended period of time. The nonperforming asset is therefore not yielding any income to the lender in the form of principal and interest payments.

A true economic recession can only be confirmed if GDP (Gross Domestic Product)growth is negative for a period of two or more consecutive quarters.

Foreign exchange reserves
Foreign exchange reserves (also called Forex reserves) in a strict sense are only the foreign currency deposits and bonds held by central banks and monetary authorities.However, the term in popular usage commonly includes foreign exchange and gold,SDRs and IMF reserve positions.

International Monetary Fund (IMF) is an international organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rates and the balance of payments. It is an organization formed to stabilize international exchange rates and facilitate development. 
MD - Christine Lagarde

    Please share this information with your friends, if you feel our efforts are useful to you. All the Best

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    1. Thanks a lot Mam...You are really helping us a lot

    2. Thanks for great help rendered to all the IBPS aspirants ..........

    3. mam can you please tell me what are negotiable and non negotiable intruments


      1. A Negotiable Instrument is a written instrument, signed by the maker or drawer of the instrument, that contains an unconditional promise or order to pay an exact sum of money (with or without interest in a specified amount or at a specified rate) on demand or at an exact future time to a specific person, or to order, or to its bearer.

        A Non Negotiable Instrument is an Instrument relating to the price of a good or security which is firmly established and cannot be adjusted. In simple words When an asking price is considered non-negotiable, it means that you cannot try to change the price as it has been firmly established.

        Hope it helps

        All The Best :)

      2. In interview , they ask so typical questions which we can't find in any studied material..

        my brother had gone for IBPS po interview and they asked him how to check the identity

        of muslim woman wearing burka in the bank if there is no lady employee present .....


    4. Thank you very mutch mam. realy you are great mam. thanks a lot....

    5. thanks for u r help mam

    6. U r doing a really great job.. Thanks a lot for ur help.. I have my exam tomorrow.. n ur blog is helping a lot.. Thank u once again..

    7. Thanks Team. :) A heartfelt gratitude from my side. :) Take care!
      All the best to everyone here, for the IBPS clerk exam...

    8. thanks a lot mam ..

    9. thanx a lot mam really this is gr8888.u r hlpng us sooo mchh frm sch blogssss

    10. thnx mam it helps me a lot. gud job

    11. really i dont know how to praise this site this is simply aweeeeeeeeesssssoooooommmmeeeeeee

    12. Big thankssssssssssssssssssssssssssssss

    13. shivaniji please agar basic banking like type of account n their terms ..type of loans... checks etc upload kiya hai to link dijie...

    14. plz can we get some of the materials related with united nation organisation.....

      1. Already updated friend. Please have a look at the below link.
        United Nations Organization (UNO)

        Hope it helps

        All The Best :)

    15. You are doing great help by providing study materials

    16. really very very thank ful to me. and very thank ful to you,

    17. mam pl explain the difference between bank rate and repo rate...these looks similar to explain the difference...thanks a lot for ur efforts...the material u provide is excellent...

      1. Ok, i will try to simplify the definitions... see Bank rate and repo rate have different purposes.

        Bank rate is the rate at which RBI lends to the commercial banks and other financial intermediaries. Bank rates imply a long term outlook on the interest rates and are an outcome of a long term monetary policy. It is the bank rate based on which the commercial banks decide the lending rates to the customers. Hence, any change in the bank rates have direct bearing on the lending rates to the customers.

        A repo transaction involves borrowing by the commercial banks from the RBI as a result of working capital mismatches and short term liquidity needs. This involves bank selling securities to RBI to borrow the money with an agreement to repurchase them at a later date and at a predetermined price. Hence, repo represents short term outlook.

        the main Differences between Bank Rate and Repo Rate are...

        - Repo rate is meant for short term basis. Bank rate is meant for long term basis.

        - In repo rate, there is need of securities submission. In bank rate, there is no need of security submission.

        hope it helps

        All the Best

    18. nice job shiv.........keep it

    19. Really Im confident....Thank u very much g....

    20. gr8888888888.i love tis website

    21. thank u very much...

    22. Priceless guidance to all! Simply thanks a lot to admin ! Outstanding contribution toward betterment of education system!

    23. Can any body say the difference between nationalised bank and public sector bank

    24. why is 1 rupee note is responsibility of finance ministry???

    25. Hi,
      Can u please explain the difference between FDI and FII. I am very much confused between these two terms. Both FDI and FII are the investment in the company's share/stake of India????

    26. Hi,
      Can u please explain the difference between FDI and FII. I am very much confused between these two terms. Both FDI and FII are the investment in the company's share/stake of India????

    27. Hi,
      Can u please explain the difference between FDI and FII. I am very much confused between these two terms. Both FDI and FII are the investment in the company's share/stake of India????

    28. Please tell me, in investment banking, what rate of interest i can get?

    29. what is encapsulation?????

    30. Thanks
      Very good information

    31. thank uuuuuuuuuuuuuuuu mam

    32. Nice very good
      Keep are doing a good job

    33. ya...the answer provided is wrong...

    34. Plss upolad the ga material for rrb eaxmination.............

    35. Nice work team. Thanks a ton :-)

    36. Please upload RRB SCALE-1 previous paper..

    37. please provide quick guides for RRB officer and Office assistant exam as you have provided last time...thank you

    38. thanks a lot mam,,,best site ever for banking aspirants .....

    39. sbi po result will be declared today....

    40. hello mam.. i have already posted a comment regarding dmrc(Customer Relations Assistant CRA) xam. i really need some help from you..mam plz reply asap coz my xam is on 31st aug. plz provide some information about level and pattern of xam. mam atleast reply once..

    41. thank u mam very useful

    42. some banking awareness for rrb po exam,

    43. good work..thnx GA :)

    44. Before watch Gr8AmbitionZ.Com Website i have seen some other websites which are giving baking information.but this website is giving full of information compare to other websites.Im very happy to get this website to update my skills day to day ..keep it up

    45. thanks mam, i need an article to explain mathematical inequalities

    46. Thanks a ton to @Gr8AmbitionZ

    47. Working on a PDF fiel friend. You will get it soon

    48. Thanks a lot @

    49. Plz provide rrb office scale 1 quick reference. Gude soonn...exam starting frm 6 it soon

    50. plz increase font size

    51. pls provide this by way of pdf

    52. Ma'am cn u plz provide info regarding the merger and acquisitions of banks.

    53. please tell me how to find out errors related to tenses in spotting error questions??????????

    54. bank of hindusthan was started in 1770...Pls correct it

    55. very simple and clear to understand..thanks..

    56. very nice ,before this i couldn't understand about tense. good explanation .

    57. bank of hindustan was started in 1970 ... not in 1979....

    58. sir could u pls send me a pdf copy of english would be more efficeint for me to study...if u could do so then pls send it to me...i'll be very thankful to u..

    59. iske samne to bankersadda ekdm bkwas hai

    60. your study materials are very good..........thank u mam


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