Thursday, 5 September 2013

Banking Terminology 5/8

Drawee: Person or bank asked to make payment by the drawer.

Easy Money: Refers to a general state of ease and cheapness of borrowing in the financial system. It may result from policy action to reduce interest rates, increase liquidity of the banking system, and release any non price restrictions on lending like credit ceilings and restrictive conditions on hire purchase contracts.

Fiat Money: Money which the state declares to be legal tender.

Finance: It is applicable to funds from almost any source which is used to undertake any kind of expenditure.

Financial Inclusion: Covering the financially excluded sectors by financial assistance either from Government or through banks.
Fixed Deposits: Here, a lump sum amount will be deposited and the depositor cannot withdraw the amount before the due date, a higher rate of interest is paid in this account as compared to savings account.

Hot Money: Money that moves across country or borders in response to interest rate differences and that which moves away when the interest rate differential disappears.

Hypothecation: Refers to the pledging of securities as collateral; for example to secure the debit balance in a margin account.

Idle Money: Inactive money that does not contribute to productive assets in an economy. It results from what Keynes called ‘liquidity preference’ i.e. the desire to whole money rather than risk it on interest-earnings assets, or goods which may have little utility.

Inflation: Production of goods are less in market purchasing capacity of public is more hence people try to buy goods at a higher rate, it leads to price rise.

Insolvent: Means the state of being unable to pay one’s debts.

Internet Banking: Service through Internet, in which the customer can view their account balance, statements, request cheque books, transfer funds etc.

Interest: A payment by a borrower for the use of a sum of money for a period of time. It is the reward for the use of capital in the process of production.

Lease: The term used for an agreement in which one agent obtains the right of use of some property owned by another agent for a given period of time in return for an agreed fixed charge (which is generally paid in periodic installments)


Letter of Credit: A document which is issued by a bank on behalf of customer which guarantees payment by the bank of cheques drawn by the customer, or more commonly today of bills drawn on that customer by parties from whom he has bought goods. Letters of credit are used largely in association with bills of exchange, to which they give added security in the financing of foreign trade.

Continued...6

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COPY-WRITE OWNED BY PRAMOD KUMAR

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