BANKING AWARENESS

• BANKING AWARENESS 

Part I

1. Availability Policy : Bank's policy as to when funds deposited into an account will 
be available for withdrawal.
2. Escrow : A financial instrument held by a third party on behalf of the other two 
parties in a transaction. The funds are held by the escrow service until it receives 
the appropriate written or oral instructions-or until obligations have been fulfilled. 
Securities, funds, and other assets can be held in escrow.
3. Hold : Used to indicate that a certain amount of a customer's balance may not be 
withdrawn until an item has been collected, or until a specific check or debit is 
posted.
4. Open-End Credit : A credit agreement (typically a credit card) that allows a 
customer to borrow against a preapproved credit line when purchasing goods and 
services. The borrower is only billed for the amount that is actually borrowed plus 
any interest due. (Also called a charge account or revolving credit.)
5. Redlining : The alleged practice of certain lending institutions of not making 
mortgage, home improvement, and small business loans in certain neighborhoods-
usually areas that are deteriorating or considered by the lender to be poor 
investments.
6. Wire Transfer : A transfer of funds from one point to another by wire or network 
such the Federal Reserve Wire Network (also known as FedWire). 
7. Signature Card : A card signed by each depositor and customer of a bank which 
may be used as a means of identification. The signature card represents a contract 
between the bank and the depositor.
8. Preauthorized Payment : A system established by a written agreement under 
which a financial institution is authorized by the customer to debit the customer's 
account in order to pay bills or make loan payments.

BANKING AWARENESS
Part II

1. Closing Costs : The expenses incurred by sellers and buyers in transferring ownership 
in real property. The costs of closing may include the origination fee, discount points, 
attorneys' fees, loan fees, title search and insurance, survey charge, recordation fees, 
and the credit report charge. 
2. Furnisher : An entity that provides information about a consumer to a consumer 
reporting agency for inclusion in a consumer report. 
3. Insured Deposits : Deposits held in financial institutions that are guaranteed by the 
Federal Deposit Insurance Corporation (FDIC) against loss due to bank failure.
4. Local Check : A check payable by, at, or through a bank in the same check processing 
region as the location of the branch of the depository bank. The depository bank is the 
bank into which the check was deposited. As of February 27, 2010, the Federal 
Reserve consolidated its checking processing centers into one processing center. 
Therefore, all checks are now considered local.
5. Phishing : The activity of defrauding an online account holder of financial information 
by posing as a legitimate entity.
6. Regular Program Community : A community wherein a Flood Insurance Rate Map is 
in effect and full limits of coverage are available under the Flood Disaster Protection 
Act (FDPA or Act).
7. Bank Statement : Periodically the bank provides a statement of a customer's deposit 
account. It shows all deposits made, all checks paid, and other debits posted during 
the period (usually one month), as well as the current balance.
8. Amortization : The process of reducing debt through regular installment payments of 
principal and interest that will result in the payoff of a loan at its maturity.

BANKING AWARENESS
Part III

1. 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.
2. 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.
3. 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.
4. Money Laundering: When a customer uses banking channels to cover up his 
suspicious and unlawful financial activities, it is called money laundering.
5. Junk Bond: High-risk securities that have received low ratings (i.e. Standard & Poor’s 
BBB rating or below; or Moody’s BBB rating or below) and as such, produce high 
yields, so long as they do not go into default.
6. 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.
7. Execution of Documents: Execution of documents is done by putting signature of the 
person, or affixing his thumb impression or putting signature with stamp or affixing 
common seal of the company on the documents with or without signatures of directors 
as per articles of association of the company.
8. Derivative Call (Put) Warrants: Warrants issued by a third party which grant the 
holder the right to buy (sell) the shares of a listed company at a specified price.