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August 01, 2014

Important Definitions and Terms for Banking Awareness


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Friends, here are some Important Terms and Definitions of Banking Awareness shared by our friend Santosh Kumar. This list will be helpful to you for RBI Grade B Officers and IBPS Bank PO and Clerical exams. You can download pdf version of the same from below link. Happy Reading :)

Useful Definitions and Terms for Banking Awareness

  1. Balance of Trade : the part of a nation's balance of payments (difference between foreign entities with domestic entities) that deals with merchandise (or visible) imports or exports. 
  2. Inflation : 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 more demand and less supply of the goods. 
  3. Deflation : 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. In Inflation we have two types demand pull (due to increase in demand), and cost push(due to increase in prices) 
  4. Equity : Equity is a one financial instrument by which company invite the public to invest their money in the company and investor can become a partner of the company. Generally, when the company have insufficient money to expand its business it comes with equity shares. Angel investors are the persons who will give financial help to a novice company to develop leaps and bounds. 
  5. Fiscal policy : Fiscal policy defines the use of government spending and revenue collection to influence the economy. 
  6. Monetary policy : It is the process by which the central bank or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest. 
  7. Foreign Direct Investment (FDI) : Investment of foreign assets directly into a domestic company's structures, equipment, and organizations. It does not include foreign investment into the stock markets 
  8. GDP : GDP stands for Gross Domestic Product. It is a method of measuring the size of economy of a country. We can define as the total market value of all the goods and services produced in a given period of time in a country. 
  9. GNP: The total value in money of all finished goods and services produced in an economy in one full year, and all net property income from abroad. The GNP growth rate is an important economic indicator for country’s economic development. 
  10. Tax : A fee charged by a government on a product, income, or activity. If tax is levied directly on personal or corporate income, then it is a direct tax. If tax is levied on the price of a good or service, then it is called an indirect tax. 
  11. Excise Tax : Tax imposed on specific goods and services, such as cigarettes and gasoline. Customs duty is levied on inter market boundaries, ‘cess’ is defined as tax on tax. 
  12. Sales tax : Taxes paid on the goods and services people buy, ‘Tobin tax’ is a tax which will be levied on spot conversion of currencies in between countries, used curtail the ‘drain of market’. 
  13. VAT (Value added tax): It is an indirect tax on the consumption of the goods, paid by its original producers upon the change in goods or upon the transfer of the goods to its ultimate consumers. It is based on the value of the goods, added by the transferor. It is the tax in relation to the difference of the value added by the transferor and not just a profit. All over the world, VAT is payable on the goods and services as they form a part of national GDP. 
  14. CGT (Capital gain tax): It is a direct tax that will be levied on sales and purchases of capital assets such as Shares, stakes, even costlier items which won’t have depreciation such as monuments, paintings. 
  15. GAAR (General anti avoidance rules): These are the provisions by which govt. Can restrict tax avoidance (some MNC’s deliberately avoid tax by doing transactions in tax heavens such as Mauritius, Luxembourg (Where Sahantha biotech fraud happened), Cayman Islands (where Vodafone fraud happened). Govt. India wants to plan these rules from 2016. 
  16. DTC (Direct tax code) : This is a provision that can replace age old Income tax act 1961.Since this act have loop holes (such as IT dept. Will have no jurisdiction over the fraud happened outside India even Indian company purchased or shares of Indian company sold), so by this code Govt. Will have power to curtail the menace of tax avoidance, and AAR (Authority for advanced ruling is a body by govt. Can act independently over these issues and grant permission for MNC’s that their ‘transfer of shares’,’ absorption/amalgamation’ is legitimate or not. 
  17. Transfer pricing : This is one tactic played by some fraudulent MNC’s which will have some suitcase companies in tax heavens and purchase the share value of some reputed companies in a country by its intermediary in that country so that pricing of transferred shares will not have exact value.
  18. UNCITRAL : United nations commission on International trade Law is an UN body looks after the peaceful trade among countries without any legal problems and is denoted as the appellate authority for legal violation of continental rules in trade and commerce. 
  19. WIPO : World intellectual property organization is a body looks after the issues of protection of Intellectual property rights of a country of owner of patent, Marrakesh treaty for ‘Blind rights’ is associated with this organization. 
  20. Subprime crisis: The banks which have obligation to facilitate money flow may get struck their revenue assets with insolvents and become toxic assets, the process is called subprime crisis. 
  21. Quantitative easing: This is the process at which govt. Can ease the money flow in to the system by buying the toxic assets of banks, this was happened in USA in past recession period by the chairman of the then Fed reserve “Ben Bernanke”. 
  22. Monetized debt : The govt. Can restore the original situation before economic crisis period by offering subsidies and royalties and different incentives to increase the total quality production of the country in stipulated time, US govt. Did it in 2010-11. 
  23. Participatory note : It is the economic instrument at which the FII’s not enlisted with the prime regulator of a country and use this tool to lift the money by means of forward trading/pricing and crate financial chaos in a particular country and SEBI of our India amended to stop this nonsense. 
  24. Fiscal consolidation : It is the process at which the govt. Undertake austerity measures to put restrictions on its economy such as de licensing of industries, disinvestment from stack etc. Our India is following under RBI, a perfect measure by FRBM act (fiscal responsibility and budgetary management act) 2003. 
  25. Financial inclusion : The purpose of this plan is ‘the fruits of development should be distributed among the masses and the deprived classes of the society’, so different actions were taken up, such as BSBDA accounts (Basic savings bank deposit accounts, general purpose accounts to provide for every citizen of country by 01-01-2016 as part of financial literacy, and no frill accounts (no restriction loans will be given) to bail out economically backward sections and alleviate them from poverty.
Note : You can download the pdf version of above list from here

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  1. Nalini RamachandranAugust 1, 2014 at 2:54 PM

    gr8 work santosh. now i can read these in my mobile :)

  2. Thanks Santosh...
    Friends, Does anyone know a good coaching class for ibps po in pune?


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