Important 2 Mark questions and answers

Bank
Bank is a financial institution which deals with money and credit. It
accepts deposit and lends money to those who are need of it.
Banking
According to Banking Regulation Act 1949, “a banking is one, which
transacts the business of banking which means the accepting for the
purpose of lending or investment of deposits of money from the
public, repayable on demand or otherwise and withdrawable by
cheque, draft, and order or otherwise.”
Banker
A person who owns a bank or who has an important job in the bank.
Commercial banks
Commercial banks are those types of banks, which accepts deposit
from public and lend money to trade and commerce.
Agricultural banks
Agricultural banks are those banks which provides finance to
agricultural purposes.
Local area banks (LAB)
Local area banks are those banks which is established for the
purpose of mobilizing the rural savings by local institutions.
Exchange banks
Exchange banks are those banks which deals with foreign exchange
and international trade.
Foreign bank
It is a type of bank which is owned by foreign investors.
Unit banking
Unit banking refers to a single, small bank that provide financial
services to its local community.
Mixed banking
Mixed banking is an approach where banks undertake both
commercial and industrial banking
Dormant account
Dormant account means inoperative or not functioning of a bank
account last two years.
KYC (Know Your Customer)
It is a process by which bank obtain information about the identity
and address of the customers.
FDR (Fixed Deposit Receipt)
After depositing money, the banker will issue a receipt to the
depositor is called fixed deposit receipt.
Demat banking
It is nothing but de-materialization. This is a recent extent in the
Indian banking sector. The customer who wants to invest in the stock
market need this account with commercial banks.
Money lenders
Money lenders are those person are those person who do not accept
deposits from the public but lend their own funds.
Indigenous bankers
It is an individual or private firm receiving deposits and dealing in
hundis or lending money.
Customer of a bank
A customer is a person who has an account in a bank in his name and
dealing between the banker and customer should be of regular
banking business.
Scheduled Bank
A scheduled bank is a bank which is included in the second schedule
of the RBI Act 1934.
Non-scheduled Bank
Commercial banks which have a paid-up share capital and reserves of
an aggregate value of less than 5 lakh is considered as non-scheduled
bank.
Cooperative banks
Cooperative banks are banks incorporated in the legal form of
cooperatives.
Primary credit societies
These are formed at the village or town level with borrowers and
non-borrowers residing in one locality.
Central cooperative banks
These are those banks operate at the district level having some of
the primary credit societies belonging to the same districts as their
members.
State cooperative banks
These are the highest level cooperative banks in all the states of the
country.
EXIM Bank (Export Import Bank)
Exim bank was set up in January 1982. It is a public sector financial
institution, it facilitates and finance foreign trade in India.
Micro finance institutions
Micro financial institutions are those financial institutions, which
provides financial services like micro credit, micro savings, and micro
insurance to poor people.
RRB (Regional Rural Bank)
Regional rural bank is a type of bank to enhance the local
participation of the bank to meet the credit requirements of weaker
section of the society.
Land Development Bank
It is a type of bank, which meet the long term credit requirement of
agriculturalist against security of their land.
Industrial finance
It is the financial support or assistance provided by the banks to the
industries.
BHIM Adhar
It is the common mobile introduced by NPCI for any merchant
associated with BHIM adhar pay service to allow them to accept
payment from a customer of any bank.
Gift cheque
The gift cheque is another banking instrument presented for gifting
money to the loved ones alternatively of hard cash.
Traveller’s cheque
It is a medium of exchange that can be used in place of hard
currency.
Letter of Credit
A letter of credit is a promise by a bank on behalf of the buyer. It is a
document from bank that guarantees payment.
Bankassurance
It means the delivery of insurance products through banking
channels.
Financial inclusion
Financial inclusion is the process of ensuring access to financial
products and services needed vulnerable groups at an affordable
cost in a transparent manner by institutional players.
Term loan
It is a monetary loan that is regular interval over a set of period of
time.
Money at call and short notice
It a short term loan that does not have a set of repayment schedule
but is payable immediately and in full upon demand.
Credit Control
This is one of the most important function the central bank to
control the volume of credit for maintaining price stability.
Credit ceiling
It is an operation of RBI, in which it issues prior information that
loans to the commercial banks will be given up to a certain limit.
Base rate
It is the minimum rate set by the RBI below which banks are not
allowed to lend to its customers.
Repo rate
It is the rate at which RBI lends money to commercial banks or
financial institutions in India against government securities.
Bank rate
It is the minimum rate at which RBI is ready to grant loans and
advances to commercial banks.
Open market operation
Open market operation means purchase and sale of government
securities in an open market.
Cash reserve ratio (CRR)
Every scheduled bank is required to maintain fixed percentage of
their time and demand deposit as cash reserve with RBI. It is called
cash reserve ratio.
Statutory Liquidity Ratio (SLR)
Every commercial bank is required to maintain not less than 255 of
its total time and demand liabilities in liquid assets in the form of
cash and gold with RBI. This is known as SLR.
Bank overdraft
It is a facility extended by a bank to its clients to withdraw funds
from their accounts in excess of the balance.
Negotiable Instruments
Negotiable instrument is a written document that promises the
payment of a sum of money to a specified person or bearer of the
instrument.
Promissory Notes
A Promissory note is a negotiable instrument. It contain a promise to
pay a certain sum of money to a specified person or bearer on
demand or on a future date.
Bill of exchange (BOE)
A bill of exchange is a negotiable instrument. It contain an order to
pay a certain sum of money to a specified person or bearer on
demand or on a future date.
Trade Bill
These bills are drawn and accepted against the sale and purchase of
goods on credit.
Cheque
A cheque is a negotiable instrument. It is transferable either by mere
delivery or by endorsement and delivery.
Bearer Cheque
A bearer cheque is always payable to bearer.
Order cheque
An order cheque is a cheque which is payable to a certain person.
MICR cheque
MICR (Magnetic Ink Character Recognition) cheque is a recent
innovation. Bank issue cheques in MICR format using the special
quality paper and printing specifications.
Truncated cheque
It is an electronic image of a paper cheque which means physical
cheque is scanned at the bank of first deposit.
Electronic cheque
It is simply refers to an electronic version of a paper cheque.
Ante- dated cheque
A cheque bear the date earlier to the date of issue is called ante-date
cheque.
Post-dated cheque
A cheque bears a date which is yet to come is called post-dated
cheque.
Stale cheque
A cheque which is not presented for payment within a reasonable
period of time is called stale cheque.
Mutilitated cheque
If a cheque is torn into two or more pieces, it is called mutilated
cheques.
Dishonour of cheques
It is a condition in which the bank refuses to pay the amount of
cheque to the payee.
Demand draft
It is an instrument used for transfer of money. It is a negotiable
instrument.
Endorsement
Endorsement means signing on the back of a negotiable instrument
for the purpose of negotiation.
Payment in due course
A payment in due course means a payment in accordance with the
apparent tenor of the instrument, in good faith and negligence to
any person in possession thereof.
Collecting banker
Collecting banker is one who collects the proceeds of a cheque for a
customer.
E - Banking
E-banking is a method of banking in which banking transactions are
done through electronically.
ATM (Automated Teller Machine)
ATM is a device that allow customers to perform routine banking
transactions by using ATM cards.
ATM card
It is a plastic card issued by a financial institution, which enables a
customer to access their financial accounts.
Credit card
A credit card is a plastic card, which can be used more than once to
borrow money or buy products and services on credit.
Debit card
Debit card is a plastic card, issued by the bank to their customers
who have maintained an account in the bank with sufficient credit
balance.
Smart card
A smart card is a plastic card that contains an embedded plastic chip
either a memory or microprocessor that transacts data.
Mchq product
It is a recently innovative banking product. It is nothing but a mobile
to mobile payment option.
Telephone banking/ Tele banking
Telephone banking is a service provided by a financial institution,
which allow customer to perform transactions over the telephone.
Internet banking
It is a method of banking in which transactions are conducted
electronically through internet.
Virtual banking
Virtual bank is an internet based financial institution that offers
deposit and withdrawal facilities, and other banking services through
ATM or other services.
Core banking
Core banking simply refers to doing all banking operations of
branches and head office by connecting to a central computer kept
at data centre.
SWIFT
SWIFT is the society for worldwide interbank financial
telecommunication, a member owned cooperative through which
the financial world conduct its business operations with speed,
certainty and confidence.
SPNS (Shared payment network system)
SPNS is a large network of ATMs spread in the city of Mumbai, Vashi
and Thane.
EDI (Electronic Data Interchange)
EDI is the electronic exchange of business information between two
concerns in a specified format.
Indian Financial Network (INFENET)
It is a very small aperture terminal based satellite network for
messaging, file transfer and chat services.
Automated clearing houses
The computerized centres where cheques are cleared are called
automated clearing houses.
Centralized funds management system (CFMS)
It is a system that aims at inter connecting the 17 deposit account
departments of RBI.
Home banking
Home banking is the practice of conducting banking transactions
from home. It is also called personal computer banking.
Electronic Fund Transfer (EFT)
EFT means speedier transfer of funds between different banks for
the bank customers electronically. It was introduced by RBI in 1996.
It is worked on the principle of “next day availability of funds."
National electronic fund transfer (NEFT)
It is a nation - wide payment system facilitating one to one fund
transfer.
Electronic clearing services (ECS)
It consist of electronic credit clearing and electronic debit clearing.
Real Time Gross Settlement System (RTGS)
RTGS is an online fund transfer mechanism provided by the RBI.
RTGS facilitates fund transfer from one bank account to other on real
Mobile banking (M –Banking)
Mobile banking is a system of providing service to a customer to
carry out banking transactions through a mobile phone.
Doorstep banking
Doorstep banking means bank allow you to take banking facilities to
your home.
E-Purse
E-purse is a plastic card with a small amount of money stored
electronically on it.
Social banking
It means banking policy to meet the socio-economic obligations of
the country.
Off shore banking
Off shore bank is a bank located outside the country of residence of
the depositor, typically in a low tax area.
Demate banking
It is nothing but de- materialization. This is the recent extent in the
Indian banking sector.
No frills accounts
It means accounts with nil balance or very low minimum balance.
Insurance
According to John Megi " Insurance is a plan where in persons
collectively share the losses of risk."
Insured
Insured is a person whose financial losses are covered by the
insurance policy.
Insurer
Insurer is a person or company that underwrites an insurance risk.
Utmost good faith
It is essential that there must be utmost good faith and mutual
confidence between the insured and insurer.
Insurable interest
The insured must have insurable interest in the subject matter of the
insurance.
Indemnity
A contract of insurance except contract of life insurance is contract
of indemnity. This means that insured in case of loss against which
the policy has been issued, shall be paid the actual amount of loss or
value of policy whichever is less.
Subrogation
Subrogation is the transfer of rights and remedies of the insured to
the insurer who has indemnified the insured in respect of loss.
Causa Proxima
Causa Proxima means the most immediate cause which results into a
definite loss.
Mitigation of loss
Mitigation of loss means to minimize or reduce the severity of loss.
Contribution
It is another outcome of principle of indemnity. Where there are two
or more insurance on one risk, the principle of contribution comes
into play. The aim of contribution is to distribute the actual amount
of loss.
Life insurance
Life insurance is a type of contract that pays out a sum of money
either on the death of the insured or a specified period.
Marine insurance
Marine insurance is a type of insurance that cover loss or damages of
ships or cargo from point of origin and final destination.
Fire insurance
Fire insurance is a type of insurance which protects people from cost
incurred from fire during a specified time.
Medical / Health insurance
Health insurance is a type of insurance that cover medical expenses
that arises due to an illness.
General insurance
An insurance which is not life insurance is called general insurance. It
includes vehicle and home owners insurance.
Social insurance
Social insurance are those insurance, which provides protection to
the weaker section of the society who is unable to pay the premium
for adequate insurance.
Miscellaneous/ Liability insurance
It refers to contract of insurance other than life insurance. It includes
fire, marine etc.
Property insurance
Property insurance is a type of insurance protection against risks of
the property.
Hull insurance
Hull insurance is a type of insurance policy especially designed for
covering ship damage expenses.
Burglary insurance
Burglary insurance means a type of crime insurance that covers
losses resulting from burglary.
Re - insurance
Re insurance simply means insurance for insurance company. It
means an insurance company purchase another insurance company.
Double insurance
When same subject matter is insured with two or more insurer is
called double insurance.
Insurance policy
Insurance policy is a contract of insurance. It describes the term,
coverage, premium and deductibles.
Claim
A claim is the payment made by the insurer to the insured on the
occurrence of the event specified in the contract.
No-claim bonus (NCB)
It is a reward given by an insurance company to an insured for not
raising any claim request during a policy year.
Nomination
A nomination is an important part of a life insurance. It is the
common to nominate a person usually spouse, child or one parent
while taking an insurance policy.
Assignment
Assignment of a policy means transfer of all rights, title and liabilities
of the life insurance policy in favour of the assignee.
Premium
An insurance premium is the amount of money an individual or
business pays for an insurance company.
Annuity
An annuity is a contract between an individual and life insurer aiming
at generating a regular income for life after retirement.
Assurance
Assurance refers to financial coverage that provides remuneration
for an event that is certain to happen.
Peril
It is an event that causes a personal or property loss by fire, flood,
windstorm, explosion, etc.
Hazard
Hazard is a condition that may create, increase or decrease the
chances of loss from a given peril.
Exposure
It is a measure of physical extend of the risk.
IRDA (Insurance Regulatory and Development Authority)
It is an autonomous apex statutory body which regulates and
develops the insurance industry in India.
Life insurance Corporation of India (LIC)
LIC is an Indian public sector life insurance company. It is India’s
largest insurance company. Its headquarters is at Mumbai. It is under
the ownership of government of India.
Popular insurance companies in India
1. Life insurance Corporation of India (LIC)
2. Bajaj Allianz general insurance
3. New India assurance
4. Reliance general insurance
5. HDFC life insurance
Laws relating to general insurance
 Insurance Act 1938
 Indian marine insurance Act 1963
 General insurance business Act, 1972
 The general insurance business amendment Act, 2002.
Laws relating to life insurance
 Insurance Act, 1938
 The life insurance corporation Act, 1956
 The IRDA Act, 1999

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RAHUL MURALI

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