Various Banking Terms letter O-Z

This is the final post on Banking terms from letter O-Z

Obligation of borrower: The things which a borrower has to take care of after taking the loan. it includes proper repayment, providing the bans with post dated cheques and following terms of the loan written carefully.

Off Balance Sheet Items: Those items which affect the financial position of a business concern, but do not appear in the Balance Sheet E,g guarantees, letters of credit . The mention "off Balance Sheet items" is often found in Auditors Reports or Directors Reports.

Offer for Sale: An offer to the public by, or on behalf of, the holders of securities already in issue.

Offer for Subscription: The offer of new securities to the public by the issuer or by someone on behalf of the issuer.

Online Banking: Banking through internet site of the bank which is made interactive.

Open-end (Mutual) Fund: There is no limit to the number of shares the fund can issue. The fund issues new shares of stock and fills the purchase order with those new shares. Investors buy their shares from, and sell them back to, the mutual fund itself. The share prices are determined by their net asset value.

Open Offer: An offer to current holders of securities to subscribe for securities whether or not in proportion to their existing holdings.

Option: A security that gives the holder the right to buy or sell a certain amount of an underlying financial asset at a specified price for a specified period of time.

Outstanding Amount:The total amount that you owe on a credit card or other loan.

Outstanding Cheque: It is issued by the company but not yet cleared by bank. 

Outstation Cheque: Cheque deposited by the customer of a branch by credit to his /her account and not payable at other  local clearing center where the ban is situated.

Overdraft: When you do not have enough available funds in your account to cover a cheque or other withdrawal.

Over draft Protection: A service that allows an account to be linked to another one that helps provide protection against returned items or overdrafts.

Overdraw:To write a check for an amount that exceeds the amount on deposit in the account.

Over-limit:An open-end credit account in which the assigned dollar limit has been exceeded.

Over the Credit Limit: When the amount you owe is more than the limit on your credit line.

Oversubscribed: When an Initial Public Offering has more applications than actual shares available. Investors will often apply for more shares than required in anticipation of only receiving a fraction of the requested number. Investors and underwriters will often look to see if an IPO is oversubscribed as an indication of the public’s perception of the business potential of the IPO company.

 

 

Part Prepayment: The charges levied during prepayment towards the principal of loan account.

Pass Book: A record of all debit and credit entries in a customer's account. Generally all banks issue pass books to Savings Bank/Current Account Holders.

Par Bond: A bond selling at par (i.e. at its face value).

Par Value: The face value of a security.

Past Dues: The status of an account when minimum payment has not been received by the due date.

Penal Interest: Additional interest over and above the contracted rate that is levied by the lenders on the unpaid amount beyond the due date.

Perpetual Bonds: Bonds which have no maturity date.

Personal Identification Number (PIN): Generally a four-character number or word, the PIN is the secret code given to credit or debit cardholders enabling them to access their accounts. 

Placing: Obtaining subscriptions for, or the sale of, primary market, where the new securities of issuing companies are initially sold.

Periodic interest rate: The rate of interest assessed on a loan or investment over a set time period when compounding occurs more than once per year.

Personal Identification Number (PIN): Personal Identification Number is a number which an ATM card holder has to key in before he is authorized to do any banking transaction in a ATM .

Plastic Money: Credit Cards, Debit Cards, ATM Cards and International Cards are considered plastic money as like money they can enable us to get goods and services.

Pledge: A bailment of goods as security for payment of a debt or performance of a promise, e.g pledge of stock by a borrower to a banker for a credit limit. Pledge can be made in movable goods only.

Point of sale:It is the place where a retail transaction is completed. It is the point at which a customer makes a payment to the merchant in exchange for goods or services.

Post-Dated Cheque:  A Cheque which bears the date which is subsequent to the date when it is drawn. For example, a cheque drawn on 8th of February, 2007 bears the date of 12th February, 2007.

Power of Attorney: It is a document executed by one person - Donor or Principal, in favour of another person, Donee or Agent - to act on behalf of the former, strictly as per authority given in the document.

Portfolio: A collection of investment vehicles assembled to meet one or more investment goals.

Preference Shares: A corporate security that pays a fixed dividend each period. It is senior to ordinary shares but junior to bonds in its claims on corporate income and assets in case of bankruptcy.

Premature withdrawal from Fixed Deposit:It is withdrawing the money before the maturity expires.This may be necessary if you urgently require the funds or if there are better investment opportunities elsewhere.Also the same for RD,SD,CD.

Premium (Warrants): The difference of the market price of a warrant over its intrinsic value.

Premium Bond: Bond selling above par.

Present Value: The amount to which a future deposit will discount back to present when it is depreciated in an account paying compound interest.

Present Value of an Annuity: The amount to which a stream of equal cash flows that occur in equal intervals will discount back to present when it is depreciated in an account paying compound interest.

Price/Earnings Ratio (P/E): The measure to determine how the market is pricing the company’s common stock. The price/earnings (P/E) ratio relates the company’s earnings per share (EPS) to the market price of its stock.

Prime Rate: Prime rate or prime lending rate is a term applied in many countries to reference an interest rate used by banks.

Privatization: The sale of government-owned equity in nationalized industry or other commercial enterprises to private investors.

Prospectus: A detailed report published by the Initial Public Offering company, which includes all terms and conditions, application procedures, IPO prices etc, for the IPO

Put Option: The right to sell the underlying securities at a specified exercise price on of before a specified expiration date.

Prime Lending Rate (PLR): The rate at which banks lend to their best (prime) customers.

Priority Sector Advances : consist of loans and advances to Agriculture, Small Scale Industry, Small Road and Water Transport Operators, Retail Trade, Small Business with limits on investment in equipments, professional and self employed persons, state sponsored organizations for lending to SC/ST, Educational Loans, Housing Finance up to certain limits, self-help groups and consumption loans.

Promissory Note: Promissory Note is a promise / undertaking given by one person in writing to another person, to pay to that person , a certain sum of money on demand or on a future day.

Provisioning:  Provisioning is made for the likely loss in the profit and loss account while finalizing accounts of banks. All banks are supposed to make assets classification and make appropriate provisions for likely losses in their balance sheets.

Public Sector Bank: A bank fully or partly owned by the Government.

 

Rate of Return: A percentage showing the amount of investment gain or loss against the initial investment.

Real Interest Rate: The net interest rate over the inflation rate. The growth rate of purchasing power derived from an investment.

Recurring Billing: The credit card holder authorizes a merchant or vendor to charge his card on a regular basis.

Redemption Value: The value of a bond when redeemed.

Reference: A person who can vouch for your reliability, employment history etc needed for credit worthiness.

Refinancing: It refers to the replacement of an existing debt obligation with another debt obligation under different terms.

Reinvestment Value: The rate at which an investor assumes interest payments made on a bond which can be reinvested over the life of that security.

Relative Strength Index (RSI): A stock’s price that changes over a period of time relative to that of a market index such as the Standard & Poor’s 500, usually measured on a scale from 1 to 100, 1 being the worst and 100 being the best.

Repurchase Agreement: An arrangement in which a security is sold and later bought back at an agreed price and time.

Resistance Level: A price at which sellers consistently outnumber buyers, preventing further price rises.

Return: Amount of investment gain or loss.

Rescheduling of Payment:  Rearranging the repayment of a debt over a longer period than originally agreed upon due to financial difficulties of the borrower.

Restrictive Endorsement: Where endorser desires that instrument is to be paid to particular person only, he restricts further negotiation or transfer by such words as "Pay to Ashok only". Now Ashok cannot negotiate the instrument further.

Returned Cheque: When one does not have enough funds in account to cover a cheque, the bank may not pay the cheque and return it to the payee.

Right of Appropriation: As per Section 59 of the Indian Contract Act, 1972 while making the payment, a debtor has the right to direct his creditor to appropriate such amount against discharge of some particular debt. If the debtor does not do so, the banker can appropriate the payment to any debt of his customer.

Right of Set-Off : When a banker combines two accounts in the name of the same customer and adjusts the debit balance in one account with the credit balance in other account, it is called right of set-off. For example, debit balance of Rs.50,000/- in overdraft account can be set off against credit balance of Rs.75,000/- in the Savings Bank Account of the same customer, leaving a balance of Rs.25,000/- credit in the savings account.

Rights Issue: An offer by way of rights to current holders of securities that allows them to subscribe for securities in proportion to their existing holdings.

Risk-Averse, Risk-Neutral, Risk-Taking:

Risk-averse describes an investor who requires greater return in exchange for greater risk.

Risk-neutral describes an investor who does not require greater return in exchange for greater risk.

Risk-taking describes an investor who will accept a lower return in exchange for greater risk.

Safe Custody: When articles of value are given to a bank for safe keeping in its safe vault, it is called safe custody.. Bank charges a fee from its clients for such safe custody.

Savings Bank Account: All banks in India are having the facility of opening savings bank account with a nominal balance. This account is used for personal purposes and not for business purpose and there are certain restrictions on withdrawals from this type of account. Account holder gets nominal interest in this account. 

Secured Debt:Debt backed or secured by collateral to reduce the risk associated with lending. 

Senior Bond: A bond that has priority over other bonds in claiming assets and dividends.

Settlement: Conclusion of a securities transaction when a customer pays a broker/dealer for securities purchased or delivered, securities sold, and receive from the broker the proceeds of a sale.

Short Hedge: A transaction that protects the value of an asset held by taking a short position in a futures contract.

Short Position: Investors sell securities in the hope that they will decrease in value and can be bought at a later date for profit.

Short Selling: The sale of borrowed securities, their eventual repurchase by the short seller at a lower price and their return to the lender.

Speculation: The process of buying investment vehicles in which the future value and level of expected earnings are highly uncertain.

Statement: A summary of all transactions that occurred over the preceding month and could be associated with a deposit account or a credit card account.

Stock Splits: Wholesale changes in the number of shares. For example, a two for one split doubles the number of shares but does not change the share capital.

Stop Payment: When you ask bank not to pay a cheque or payment you have written or authorized. It is placed in case of lost or stolen cheques.

Subordinated Bond:  An issue that ranks after secured debt, debenture, and other bonds, and after some general creditors in its claim on assets and earnings. Owners of this kind of bond stand last in line among creditors, but before equity holders, when an issuer fails financially.

Substantial Shareholder: A person acquires an interest in relevant share capital equal to, or exceeding, 10% of the share capital.

Support Level: A price at which buyers consistently outnumber sellers, preventing further price falls.

Surcharge: It is an additional charge imposed for a specific service, product or purpose.

Terms: The period of time and the interest rate arranged between creditor and debtor to repay a loan. 

Teller : Teller is a staff member of a bank who accepts deposits, cash cheques and performs other banking services for the public.

Technical Analysis:A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future (usually short-term) market trends.

Time Horizon: The duration of time an investment is intended for.

Trading Rules: Stipulation of parameters for opening and intra-day quotations, permissible spreads according to the prices of securities available for trading and board lot sizes for each security.

Trust Deed: A formal document that creates a trust. It states the purpose and terms of the name of the trustees and beneficiaries.

ULIP: It is a type of life insurance where cash value varies according to current net asset value of the investment asset.

Unsecured asset: This debt is not guaranteed by collateral hence no assets are guaranteed in the event of default.

Underwriting : is an agreement by the underwriter to buy on a fixed date and at a fixed rate, the unsubscribed portion of shares or debentures or other issues. Underwriter gets commission for this agreement.

Underlying Security:  The security subject to being purchased or sold upon exercise of the option contract.

Universal Banking : When Banks and Financial Institutions are allowed to undertake all types of activities related to banking like acceptance of deposits, granting of advances, investment, issue of credit cards, project finance, venture capital finance, foreign exchange business, insurance etc. it is called Universal Banking.

Valuation: Process by which an investor determines the worth of a security using risk and return concept.

Virtual Banking: Virtual banking is also called internet banking, through which financial and banking services are accessed via internet's World Wide Web. It is called virtual banking because an internet bank has no boundaries of brick and mortar and it exists only on the internet.

Warrant: An option for a longer period of time giving the buyer the right to buy a number of shares of common stock in company at a specified price for a specified period of time.

Wholesale Banking: Wholesale banking is different from Retail Banking as its focus is on providing for financial needs of industry and institutional clients.

Window Dressing: Financial adjustments made solely for the purpose of accounting presentation, normally at the time of auditing of company accounts.

Yield (Internal rate of Return): The compound annual rate of return earned by an investment

Yield to Maturity: The rate of return yield by a bond held to maturity when both compound interest payments and the investor’s capital gain or loss on the security are taken into account.

Zero Balance: When the outstanding money is paid and there is no new charge or cash advances.

Zero Coupon Bond: A bond with no coupon that is sold at a deep discount from par value.

Zero Liability Protection: It is a bank guarantee. It is free and available to all consumers cards.