Banking and payments terms, defined
Accounts, deposits, lending, UPI, cards and the settlement rails underneath them. Every term with a full definition, plus the calculator or scenario that applies it.
Banking vocabulary is mostly three things
Almost every banking term on this page belongs to one of three groups, and knowing which group a word sits in usually tells you what it does. Accounts and deposits cover where money sits and what it earns: savings, current, CASA, fixed and recurring deposits, sweep-in facilities. Lending covers what money costs and how that cost is set: MCLR, EBLR, repo linkage, spread, tenure, foreclosure, NPA classification. Payments and identity cover how money moves and how you are recognised when it does: NEFT, RTGS, IMPS, UPI, KYC, eKYC, IFSC.
The group that changes most often is lending, because India moved retail loans onto external benchmarks in 2019. That single change is why a floating rate loan now reprices on a defined cycle rather than at the lender’s discretion, and why the difference between MCLR and EBLR matters to anyone holding an older loan. Several terms below exist only because of that transition.
Where a term has a calculator behind it on this site, the definition carries a link to it. A definition tells you what an EMI is; the calculator tells you what yours will be.
157 banking and payments terms, A to Z
Definitions are unabridged. Worked examples for every term live in the interactive glossary.
Aadhaar eKYC
Aadhaar eKYC allows financial institutions to instantly verify a customer’s identity and address using Aadhaar’s biometric or OTP-based authentication — replacing physical document submission. It has revolutionised account opening in India — new bank accounts, mutual fund folios, and insurance policies can be opened within minutes using Aadhaar OTP.
Aadhaar-Linked Payment
Aadhaar-linked payment systems allow financial transactions to be authenticated using Aadhaar biometrics (fingerprint or iris scan), enabling banking services in remote areas through Aadhaar Enabled Payment System (AePS). This has been transformative for rural India — allowing MNREGA wage payments and Jan Dhan withdrawals without visiting bank branches.
Account Aggregator (AA)
Account Aggregator is an RBI-regulated data-sharing framework (NBFC-AA) that allows users to securely share their financial data — bank statements, investment holdings, insurance policies, and tax records — with lenders and other financial service providers with explicit consent. It enables frictionless credit assessment without physical document submission.
Amortisation Schedule
An amortisation schedule is a complete table showing every EMI payment for a loan — broken down into principal and interest components, and the outstanding balance after each payment. The interest component is highest in early EMIs and decreases over time as the principal reduces.
Annual Percentage Rate (APR)
APR is the true yearly cost of borrowing money, expressed as a percentage. It includes the interest rate plus all associated fees, processing charges, and other costs. APR gives borrowers a complete picture of the loan cost, making it easier to compare offers from different lenders.
Annual Percentage Yield (APY)
APY is the effective annual return on a deposit, accounting for the effect of compounding. Unlike the nominal interest rate, APY reflects how often interest is compounded — monthly, quarterly, or annually. Higher compounding frequency means higher APY.
API Banking
API (Application Programming Interface) banking allows third-party applications to access bank services (account data, payments, statements) securely through standardised interfaces. Enables fintech startups to build banking products on top of bank infrastructure. Foundation of open banking.
Balance Transfer (Credit Card)
Credit card balance transfer allows moving outstanding credit card balance from a high-interest card (36–48% per annum) to another card or personal loan offering a lower promotional rate (0–12% for 6–12 months). This helps borrowers reduce interest burden and repay faster. Processing fees (1–3%) apply.
Balance Transfer (Loan)
Balance transfer is the process of moving an existing loan (home loan, personal loan, or credit card balance) from one lender to another offering a lower interest rate. It helps reduce EMI or shorten loan tenure. Processing fees (0.5–1%) apply, so calculate break-even period to ensure it’s financially beneficial.
Should I Transfer? →Balloon Payment
A balloon payment is a large lump sum payment due at the end of a loan tenure — after smaller periodic payments throughout the loan term. Common in vehicle loans and some business loans. The balloon amount can be 30–50% of the original loan. It reduces initial EMIs but requires financial planning for the large terminal payment.
Bank Fixed Deposit (FD)
A bank fixed deposit (FD) is a savings instrument where a depositor places a lump sum with a bank for a predetermined tenure (7 days to 10 years) at a fixed interest rate, guaranteed by the bank. FDs are the most popular savings instrument in India — over ₹200 lakh crore in term deposit liabilities across Indian banks (2025). Key features: guaranteed principal and interest (unlike market-linked instruments); interest paid at maturity or periodically (quarterly, monthly options); premature withdrawal allowed with penalty (typically 0.5-1% interest rate reduction); FDs can be used as collateral for loans (typically 90% of FD value at FD interest rate + 1-2%). DICGC (Deposit Insurance and Credit Guarantee Corporation) insurance: all bank deposits (savings + FD + recurring) up to ₹5 lakh per depositor per bank are insured against bank failure. This limit was increased from ₹1 lakh to ₹5 lakh after the YES Bank and PMC Bank crises. Cooperative bank failures (PMC Bank, Lakshmi Vilas Bank) highlighted the importance of DICGC coverage — depositors with more than ₹5 lakh in failed cooperative banks lost amounts above the limit. Tax: FD interest is taxed as income at the depositor’s marginal slab rate (unlike LTCG on equity funds). TDS at 10% is deducted if annual FD interest exceeds ₹40,000 (₹50,000 for senior citizens). Form 15G/15H can be submitted by individuals with total income below the taxable limit to avoid TDS deduction. Small finance banks (Ujjivan, AU, Jana) offer FD rates 0.5-1.5% higher than major PSU banks — DICGC insured up to ₹5 lakh, making them safe for amounts within the insurance limit.
Bank Guarantee (BG)
A bank guarantee is a written commitment by a bank guaranteeing that a customer will fulfil their contractual obligations. If the customer defaults, the bank pays the guaranteed amount to the beneficiary. BGs are commonly used in government contracts, construction projects, and international trade. Banks charge guarantee commission (0.5–2% per annum) for issuing BGs.
Bank Rate
The Bank Rate is the rate at which RBI lends money to commercial banks (without collateral), serving as the ceiling rate of the LAF corridor. Unlike the repo rate (overnight collateralised lending), bank rate applies to long-term funds. In practice, the bank rate equals the MSF rate — currently 25 basis points above the repo rate.
Base Rate
Base Rate was the minimum interest rate set by the Reserve Bank of India below which banks could not lend (except in specific cases). Introduced in 2010, it replaced the Benchmark Prime Lending Rate (BPLR). Most new loans are now linked to MCLR or external benchmark rates, but existing pre-2016 loans may still reference the base rate.
Basel III Norms
Basel III is a comprehensive international regulatory framework for banks, developed by the Basel Committee on Banking Supervision (BCBS) at the Bank for International Settlements (BIS) in response to the deficiencies in financial regulation revealed by the 2007–2009 global financial crisis. Published in 2010–2011 and refined through subsequent updates (with final implementation guidelines often called “Basel III Endgame” or “Basel IV”), Basel III significantly strengthened the quantity and quality of capital that banks must hold, introduced liquidity standards for the first time, and created new macroprudential tools to address systemic risk. Basel III’s three main capital pillars: First, higher minimum capital requirements — Common Equity Tier 1 (CET1) ratio of at least 4.5% of risk-weighted assets (RWA), Total Tier 1 capital of 6%, and Total Capital (Tier 1 + Tier 2) of 8%, plus a 2.5% Capital Conservation Buffer and a countercyclical buffer of 0–2.5%. Second, new liquidity standards — the Liquidity Coverage Ratio (LCR) requires banks to hold enough high-quality liquid assets (HQLA, primarily government securities) to survive a 30-day stress scenario, and the Net Stable Funding Ratio (NSFR) requires banks to fund long-term assets with stable funding sources. Third, a non-risk-based leverage ratio (minimum 3%) to prevent excessive leverage regardless of risk-weighting models. For India, Basel III implementation has been managed by the RBI, which requires Indian banks to maintain capital ratios generally stricter than the international minimum (Indian banks target CET1 of 8%+). The large public sector banks (PSBs) struggled to meet Basel III requirements due to years of high non-performing assets (NPAs), necessitating massive government recapitalization — the government of India injected approximately ₹3.5 lakh crore into PSBs between 2017 and 2023 to meet Basel III capital norms. Private sector banks like HDFC Bank and ICICI Bank, with stronger internal capital generation, comfortably exceeded Basel III norms and benefited competitively as a result.
BIS (Bank for International Settlements)
The Bank for International Settlements (BIS), established in 1930 and headquartered in Basel, Switzerland, is often called the “central bank for central banks.” It is the world’s oldest international financial institution, originally created to manage German reparations payments after World War I. Today it serves as the primary forum for international monetary and financial cooperation, providing banking services to central banks and international organizations, and hosting key global standard-setting bodies. The BIS has 63 member central banks, covering countries representing approximately 95% of world GDP, including the US Federal Reserve, ECB, RBI, Bank of Japan, and People’s Bank of China. The BIS hosts three crucial standard-setting committees that shape global finance: the Basel Committee on Banking Supervision (BCBS), which develops the Basel Accords (the international banking regulatory framework); the Committee on Payments and Market Infrastructures (CPMI), which oversees global payment systems and financial market infrastructure; and the Financial Stability Board (FSB), which monitors systemic risk globally. The BIS Quarterly Review is one of the most authoritative publications on global financial stability. The BIS also provides banking services to central banks — holding approximately 6% of the world’s foreign exchange reserves in deposits — and conducts foreign exchange interventions for central banks. For India, the BIS and its committees are highly relevant. The RBI participates in BIS committees and implements the Basel Framework for Indian banks. BIS research and data on cross-border capital flows, global credit conditions, and foreign exchange markets directly informs RBI policy. BIS innovations in central bank digital currencies (CBDCs) — through its Innovation Hub — have influenced India’s own Digital Rupee (e-Rupee) project. India’s inclusion in BIS discussions of emerging market financial stability signals its growing importance in the global monetary system. BIS forex reserve data also reveals how global central banks are gradually diversifying away from the US dollar — a trend that has implications for India’s own reserve management strategy.
Business Correspondent (BC)
A Business Correspondent is a bank-authorised agent who provides banking services in unbanked and remote areas — account opening, cash deposits/withdrawals, micro-credit, and remittances. BCs carry mobile point-of-sale devices connected to bank servers via mobile network. They have been critical to Jan Dhan Yojana’s success in rural financial inclusion.
Business Loan
A business loan is credit extended to businesses for various purposes — working capital, equipment purchase, expansion, or inventory financing. Types include term loans, working capital loans, overdraft facilities, and MSME loans. Government schemes like MUDRA, CGTMSE (without collateral up to ₹5 crore), and Emergency Credit Line Guarantee Scheme (ECLGS) support MSME borrowing.
Buy Now Pay Later (BNPL)
BNPL allows consumers to purchase goods immediately and pay in instalments (often 3–6 EMIs) — sometimes interest-free for merchants who subsidise the cost. In India, BNPL has been regulated by RBI since 2022, requiring NBFCs to issue prepaid instruments.
CASA Ratio
CASA stands for Current Account and Savings Account deposits. The CASA ratio is the proportion of these low-cost deposits to a bank’s total deposits. A higher CASA ratio means cheaper funding for the bank, allowing it to lend at lower interest rates and maintain better net interest margins.
Cash Credit (CC) Facility
Cash Credit is a short-term bank credit facility allowing businesses to withdraw funds up to a sanctioned limit from their current account — secured by pledge/hypothecation of stock and debtors. Interest is charged only on the actual amount utilized per day. CC is the most common working capital instrument for Indian MSMEs and trading businesses.
Cashback (Credit Card)
Cashback is a credit card reward mechanism where a percentage of spending is credited back to the card or bank account — effectively reducing the cost of purchases. Popular in India: Axis Bank Flipkart Credit Card (up to 5% on Flipkart), SBI SimplyCLICK (1.5% on online spends), and Amazon Pay ICICI (5% on Amazon). Net benefit depends on annual fee vs cashback earned.
Central Bank Digital Currency (CBDC)
CBDC is a digital form of a country’s legal tender, issued and regulated by the central bank. India’s e-Rupee (e₹) was launched by RBI in 2022 — available in wholesale (e₹-W) and retail (e₹-R) variants. Unlike crypto, CBDC has government backing.
CERSAI (Central Registry of Securitisation)
CERSAI — the Central Registry of Securitisation Asset Reconstruction and Security Interest of India — is a government-mandated online registry established under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. It was operationalised in 2011 and is jointly owned by the Central Government (51% stake) and public sector banks and the National Housing Bank. Its primary purpose is to prevent fraud in mortgage lending by maintaining a centralised database of all security interests (mortgages, charges, hypothecations) created on property and assets by borrowers against loans taken from banks and financial institutions. Whenever a bank or NBFC creates a mortgage or charge on a property (as security for a home loan, loan against property, or any secured credit), the lender is legally mandated to register this security interest with CERSAI within 30 days of creation. Similarly, when the loan is fully repaid and the charge is satisfied, the lender must record the satisfaction on CERSAI. This registry is publicly searchable — any person (borrower, buyer, financial institution) can search the CERSAI database by property details (state, district, sub-registrar office, survey number) or by borrower Aadhaar or PAN to verify whether any existing mortgage or charge exists on a property. Charges apply for registration (₹50-500 depending on loan amount) and search (₹10 per search for individuals). CERSAI covers equitable mortgages, registered mortgages, charges on movable assets (hypothecation of vehicles, stock, machinery), and security interests created under assignment in favour of Asset Reconstruction Companies (ARCs). It is regulated by the Ministry of Finance and administered by CERSAI as a government company. CERSAI is critical for due diligence in property transactions — both buyers and lenders rely on it to verify that a property being purchased or mortgaged is free from existing financial encumbrances. As of 2024, over 10 crore security interests are registered on the CERSAI portal.
Certificate of Deposit (CD)
A Certificate of Deposit is a time-bound deposit instrument issued by scheduled commercial banks for a fixed period (7 days to 1 year) in dematerialised form. CDs are issued at a discount to face value and are freely tradeable in the secondary market. They are typically used by companies to park short-term surplus funds.
Certificates of Deposit (CD)
CDs are fixed-rate, time-deposit instruments issued by scheduled commercial banks (not cooperative banks) for 7 days to 1 year. Minimum denomination: ₹1 lakh. Tradeable in secondary market unlike regular FDs. Used for short-term surplus management.
Cheque Bounce
A cheque bounce (dishonour) occurs when a bank refuses to process a cheque due to insufficient funds, signature mismatch, or account closure. Under Section 138 of the Negotiable Instruments Act, cheque bounce is a criminal offence carrying imprisonment up to 2 years and/or fine up to twice the cheque amount.
Cheque Truncation System (CTS)
CTS is India’s electronic cheque clearing system where a digital image of the cheque (not the physical cheque) is transmitted between banks for clearing. Introduced nationally by 2014, CTS has reduced cheque clearing time from 3–5 days to same-day/next-day clearing. Physical cheques no longer travel between bank branches — images are processed by clearing houses.
CIBIL Score
CIBIL Score (now TransUnion CIBIL) is a 3-digit credit score ranging from 300 to 900 that reflects your creditworthiness based on your repayment history, credit utilisation, loan types, and enquiries. A score above 750 is considered excellent and qualifies you for the best loan rates. It is the most widely used credit score in India.
Debt-to-Income Calculator →CIBIL TransUnion Report
The CIBIL report is a detailed credit history document containing: personal information, credit summary (number and types of loans), account information (each loan’s history), enquiries (credit checks by lenders), and a 3-digit score (300–900). Individuals can access their free credit report once a year directly from the TransUnion CIBIL website.
Co-operative Bank
Co-operative banks in India are financial institutions owned and operated by their members, operating on cooperative principles. Urban cooperative banks (UCBs) and district cooperative banks serve urban and rural areas respectively. They are regulated by both RBI (for banking) and state Registrar of Cooperative Societies. Deposit insurance up to ₹5 lakh applies.
Collateral
Collateral is an asset pledged as security against a loan. If the borrower defaults, the lender can seize and sell the collateral to recover the outstanding loan. Common collateral types: property (home loan, LAP), gold (gold loan), stocks (margin funding), FD receipts (FD-backed OD), and LIC policies (policy loan).
Commercial Paper (CP)
Commercial Paper is a short-term unsecured promissory note issued by large corporations, primary dealers, and all-India financial institutions to raise working capital funds for periods of 7 to 365 days. CPs are issued at a discount and redeemed at face value. Minimum issue size is ₹5 lakh.
Consumer Court / NCDRC
Consumer courts (District, State, and National Consumer Disputes Redressal Commission — NCDRC) provide affordable legal recourse to consumers against unfair trade practices, deficient services, and product defects. Banking consumers can approach consumer courts for bank mis-selling, insurance claim rejection, and loan-related grievances — in addition to the Banking Ombudsman.
Core Banking System (CBS)
Core Banking System is centralised bank software enabling customers to access accounts, conduct transactions, and check balances from any branch nationwide. CBS replaced manual ledgers and siloed branch systems. Major CBS providers: Infosys Finacle, TCS BaNCS.
Corporate Debt Restructuring
CDR is the restructuring of a company’s debt obligations — extending loan tenure, reducing interest rates, converting debt to equity, or providing fresh working capital — to help financially stressed companies recover without formal insolvency. RBI’s Prudential Framework (2019) replaced the older CDR scheme with a more structured Resolution Framework governed by an inter-creditor agreement (ICA).
Correspondent Banking
Correspondent banking is an arrangement where one bank (correspondent) provides services on behalf of another bank (respondent) in a country where the respondent has no presence. Critical for international wire transfers (SWIFT).
Credit Card
A credit card is a revolving credit facility — the bank extends a credit limit (typically ₹20,000 to ₹25 lakh depending on income), allowing the cardholder to make purchases up to the limit without immediate cash outflow. The bank pays merchants immediately (charging them a merchant discount rate of 1-3%); the cardholder repays the bank within the interest-free grace period (typically 18-52 days from statement date) to avoid interest charges. If only the Minimum Amount Due (MAD, typically 5% of outstanding) is paid, the balance attracts interest at 24-42% per annum — among the highest lending rates in the formal financial system. Indian credit card market: 100+ million cards in circulation (2025), ₹2.5 lakh crore monthly spend. HDFC Bank (the largest issuer with 25%+ market share), SBI Card, Axis Bank, ICICI Bank, and Kotak dominate. Premium cards (Amex Platinum, HDFC Infinia, Axis Reserve) target HNIs with ₹10,000-30,000 annual fees but offer lounge access, concierge services, golf memberships, hotel benefits, and accelerated reward points worth 5-10% of annual spend. Responsible credit card use: pay full outstanding (not just MAD) every month before due date — this is the most important credit card rule; interest at 36-42% p.a. makes revolving credit financially catastrophic; use card primarily for spends already budgeted; never exceed 30% credit utilisation (maintains CIBIL score); check for hidden charges (forex markup fees for international transactions: 1-3.5%); and always activate transaction alerts to detect fraud instantly.
Credit Score
A credit score is a numerical representation (300–900 in India) of an individual’s creditworthiness, calculated by credit bureaus like TransUnion CIBIL, Equifax, Experian, and CRIF High Mark. It is based on repayment history, credit utilisation ratio, credit age, credit mix, and number of recent enquiries.
Debt-to-Income Calculator →CRIF High Mark
CRIF High Mark is one of India’s four licensed credit bureaus (alongside TransUnion CIBIL, Equifax, and Experian). It specialises in credit data for microfinance, rural lending, and thin-file borrowers. Lenders — especially MFIs and rural banks — use CRIF data to assess borrowers who may have limited credit history with larger commercial banks.
Cross-Selling (Banking)
Cross-selling is the practice of offering additional financial products to existing customers — a bank customer with a savings account is pitched a home loan, insurance policy, or mutual fund. SEBI and RBI have tightened cross-selling regulations to ensure customers receive only suitable products, not products that benefit the bank’s commission income.
CRR (Cash Reserve Ratio)
CRR is the percentage of a bank’s total deposits that it must hold in reserve with the RBI in the form of liquid cash — it cannot be lent out. The RBI uses CRR as a monetary policy tool to control money supply. A higher CRR reduces liquidity; a lower CRR boosts it.
Current Account
A current account is a type of bank account designed for businesses and high-frequency transactions. It offers unlimited deposits and withdrawals, an overdraft facility, and does not typically pay interest. Unlike savings accounts, current accounts are intended for regular business operations rather than savings.
Debt Recovery Tribunal (DRT)
DRT is a specialised quasi-judicial body under the Recovery of Debts and Bankruptcy Act, 1993, set up to facilitate faster recovery of dues above ₹20 lakh by banks and financial institutions from defaulting borrowers. DRT proceedings are faster than civil courts — designed to complete within 6 months but often take 2–3 years in practice.
Deposit Insurance (DICGC)
DICGC (Deposit Insurance and Credit Guarantee Corporation) is an RBI subsidiary that insures bank deposits up to ₹5 lakh per depositor per bank — covering savings, FD, RD, and current account balances. If a bank fails, DICGC pays up to ₹5 lakh within 90 days. Deposits above ₹5 lakh in any single bank are uninsured.
Digital Gold
Digital gold allows purchasing 24K gold in small denominations (₹1) online. Physical gold is stored in secure vaults by providers (MMTC-PAMP, SafeGold). RBI does not regulate digital gold — limited investor protection compared to Sovereign Gold Bonds.
Digital Rupee (e₹)
The Digital Rupee (e₹) is India’s Central Bank Digital Currency (CBDC) issued by RBI — a digital version of the Indian rupee. Unlike UPI (which moves existing bank money), e₹ is itself currency. RBI launched wholesale CBDC (e₹-W) in November 2022 and retail CBDC (e₹-R) pilots from December 2022. It aims to reduce cash handling costs and enable programmable money.
Dormant Account
A savings or current account is classified as dormant (inactive) if no customer-initiated transactions occur for 2 years. Banks stop processing transactions (except interest credit and bank-initiated charges) on dormant accounts. The balance is transferred to the Depositor Education and Awareness (DEA) Fund maintained by RBI after 10 years of inactivity.
e-RUPI
e-RUPI is a cashless, contactless, one-time use voucher for targeted government benefits — no bank account or smartphone needed. QR code or SMS-based. Guarantees the subsidy reaches the intended beneficiary and is used only for the designated purpose.
ECS (Electronic Clearing Service)
ECS was India’s earlier batch-based electronic payment system for recurring transactions — replaced by NACH (National Automated Clearing House) in 2016. ECS mandates for old SIPs, EMIs, and utility payments were migrated to NACH. ECS operated in two modes: ECS Credit (salary, dividend) and ECS Debit (EMI, SIP, insurance premium auto-debit).
Effective Interest Rate
Effective Interest Rate (EIR) is the true annual cost of a loan, incorporating the nominal interest rate plus all fees, charges, and the compounding effect. Under RBI’s IndAS 109 accounting standard, banks must recognise loan income using EIR method. For borrowers, EIR reveals the true cost — a 10% loan with 2% processing fee has EIR above 10%.
Embedded Finance
Embedded finance integrates financial services (loans, insurance, payments) into non-financial platforms. A ride-hailing app offering driver insurance, an e-commerce site offering BNPL checkout, or a payroll platform offering salary advances — all are embedded finance.
EMI (Equated Monthly Instalment)
EMI is the fixed monthly payment a borrower makes to repay a loan over a set tenure. Each EMI comprises two components: interest (higher in early months) and principal repayment (higher in later months). This schedule is called an amortisation table. Formula: EMI = P × r × (1+r)^n / [(1+r)^n − 1].
EMI Calculator →EMI Moratorium
An EMI moratorium is a temporary pause on loan repayments — interest continues to accrue but no EMI payment is required during the moratorium period. RBI announced a 6-month moratorium (March–August 2020) during COVID-19. Post-moratorium, the accrued interest was added to outstanding principal, increasing remaining EMIs or tenure.
Escrow Account
An escrow account is a third-party account where funds are held safely until specific conditions of a transaction are fulfilled. In real estate, RERA mandates developers to hold 70% of homebuyer funds in a dedicated escrow account, released only against certified construction milestones — protecting buyers from fund diversion.
Escrow Agent
An escrow agent is an independent third party (bank, lawyer, or designated institution) who holds funds, documents, or assets on behalf of two parties to a transaction — releasing them only when agreed conditions are met. Common in property transactions, M&A deals, and startup fundraising. Escrow protects both buyer and seller from counterparty risk.
External Benchmark Rate (EBLR)
Since October 2019, RBI mandated that retail loans (home, personal, MSME) be linked to external benchmarks like repo rate, T-bill yield, or FBIL overnight rate, rather than bank-internal rates. Transmission to borrowers is faster and more transparent.
FATCA Compliance
FATCA (Foreign Account Tax Compliance Act) is a US law requiring foreign financial institutions to report US persons’ accounts to the IRS. Indian banks must collect self-declaration from customers on US-person status and report to CBDT, which shares with IRS.
FATF (Financial Action Task Force)
The Financial Action Task Force (FATF) is an intergovernmental organization established in 1989 by the G7 summit in Paris, initially to combat money laundering. After the September 11, 2001 terrorist attacks in the US, FATF’s mandate was expanded to include combating the financing of terrorism. Today, FATF is the global standard-setter for anti-money laundering (AML) and counter-terrorist financing (CTF) policies. It currently has 40 member countries plus two regional organizations, covering most of the world’s major financial centers. FATF publishes 40 Recommendations that form the international standard for AML/CTF frameworks that countries are expected to implement. FATF conducts mutual evaluations of member countries, assessing the effectiveness of their AML/CTF systems. Countries that fail to meet FATF standards are placed on one of two lists: the “Grey List” (Jurisdictions Under Increased Monitoring) or the “Black List” (formally called the “High-Risk Jurisdictions Subject to a Call for Action”). Being “grey-listed” significantly increases the cost and complexity of international banking for a country’s institutions, as global banks face enhanced due diligence requirements for transactions with grey-listed country entities. This raises the cost of trade finance, correspondent banking relationships, and international capital flows. For India, FATF has been directly relevant in several dimensions. India became a full FATF member in 2010, a significant recognition of its financial regulatory capabilities. FATF’s grey-listing of Pakistan has had concrete effects on India-Pakistan cross-border financial flows (already minimal). Pakistan was grey-listed in 2018 and remained on the list until October 2022, during which period Pakistani banks faced higher scrutiny globally, making trade finance and remittances more expensive for Pakistan. This partially benefited India by reinforcing its own stronger regulatory standing. India has been working to implement FATF recommendations, including strengthening beneficial ownership disclosure, real estate sector AML compliance, and virtual asset regulation to maintain its standing in the global financial system.
FD (Fixed Deposit)
A Fixed Deposit is a financial instrument offered by banks and NBFCs where money is deposited for a fixed tenure at a pre-agreed interest rate. FD interest rates are currently in the range of 6.5–9% for most banks in India. The principal and interest are protected (insured up to ₹5 lakh per bank per depositor by DICGC).
Fd Calculator →FEMA (Foreign Exchange Management Act)
FEMA 1999 replaced FERA (Foreign Exchange Regulation Act) and governs all foreign exchange transactions in India. Unlike FERA (criminal penalties), FEMA violations attract civil penalties. FEMA regulates: NRI banking (NRE/NRO accounts), LRS (Liberalised Remittance Scheme), overseas investments, ECB (External Commercial Borrowings), and property transactions by NRIs.
Financial Inclusion
Financial inclusion is the process of ensuring access to affordable financial services — banking, credit, insurance, and investment — for all segments of society, especially the unbanked and underbanked. India’s PM Jan Dhan Yojana (2014) opened 50+ crore bank accounts for the previously unbanked, bringing financial services to rural, tribal, and marginalised communities.
Float Rate (Banking)
In banking, float refers to the brief period between when a payment is initiated and when it is actually settled in the recipient’s account — during which both parties may count the money. Digital payments have dramatically reduced float in India. Banks also use ‘float income’ — earnings on deposits held in transit.
Floating Rate Loan
A floating rate loan has an interest rate that changes periodically based on an external benchmark — currently the RBI Repo Rate or the bank’s MCLR. When the RBI cuts rates, EMIs fall; when rates rise, EMIs increase. Most home loans in India are floating rate linked to the Repo Rate + spread.
Floating vs Fixed →FOMC (Federal Open Market Committee)
The Federal Open Market Committee is the monetary policy-making body of the Federal Reserve System. It consists of twelve voting members: the seven members of the Federal Reserve Board of Governors, the president of the Federal Reserve Bank of New York (a permanent voting member due to New York’s role as the center of US financial markets), and four of the remaining eleven regional Federal Reserve Bank presidents, who rotate annual voting rights. The FOMC meets eight times per year in Washington, D.C., though it can convene emergency meetings in times of crisis. Its primary mandate is to set the target range for the federal funds rate and to direct open market operations. Each FOMC meeting concludes with a policy statement, and four times a year the Committee releases its Summary of Economic Projections (SEP), including the famous “dot plot,” which shows each member’s individual projections for the federal funds rate over the coming years. Financial markets hang on every word of these communications. Even subtle changes in language — from “patient” to “data-dependent” — can trigger significant market moves. The minutes of each meeting, released three weeks later, provide additional detail and are closely scrutinized by economists and traders globally. For global markets and India, FOMC decisions function as the world’s most important monetary policy signal. When the FOMC signals rate hikes, emerging market currencies including the rupee tend to depreciate as investors seek higher US yields. Indian bond markets see foreign outflows, the RBI faces currency defense pressures, and Indian corporates with dollar-denominated debt see their repayment costs rise. Conversely, FOMC dovishness (cutting or pausing rates) draws capital into emerging markets, strengthening the rupee and boosting Indian equities. The FOMC’s dot plot in particular has become a key input for global asset allocation decisions.
Foreclosure of Loan
Foreclosure is repaying a loan fully before the scheduled end date. RBI rules prohibit banks from charging foreclosure penalties on floating-rate home loans to individuals. Fixed-rate loans may have prepayment penalties of 1–2%.
Prepayment Calculator →Forex Card
A forex card (travel card/prepaid currency card) is loaded with foreign currency before travel and used like a debit card abroad. Rates are locked at loading time — protecting against currency fluctuation. More economical than exchanging cash or using regular debit/credit cards abroad.
Forward Contract (Currency)
A forward contract is an agreement to buy or sell a currency at a predetermined exchange rate on a future date. Indian exporters use forward contracts to lock in the current USD/INR rate for future USD receivables — protecting against rupee appreciation that would reduce their rupee income. RBI regulates currency derivatives in India.
Garnishee Order
A garnishee order is a court order directing a bank (garnishee) to freeze and pay the bank account balance of a judgment debtor to the creditor. The bank cannot release funds to the account holder until the court order is satisfied. A single garnishee order can freeze multiple accounts across all branches where the debtor holds accounts.
Gold Loan
A gold loan is a secured loan obtained by pledging gold jewellery or coins as collateral with a bank or NBFC (Muthoot Finance, Manappuram). Loan amounts are up to 75% of gold value (as per RBI norms). Interest rates range from 7–27%, processing is within 30 minutes, and tenure is typically 3–24 months.
Gross NPA Ratio
Gross NPA Ratio is total NPAs as a percentage of total loans — a key indicator of a bank’s loan portfolio quality. High GNPA indicates poor credit underwriting and collection efficiency. India’s banking sector reduced GNPA from 11.5% (FY18 peak) to below 4% (FY24) — a remarkable improvement driven by IBC resolutions, SARFAESI recoveries, and improved underwriting.
Guarantee (Personal)
A personal guarantee is a legal commitment by an individual (usually company director or promoter) to repay a business loan personally if the company defaults. Banks routinely require personal guarantees from MSME promoters as additional security. Post-IBC 2016, personal guarantee can be invoked even if the company goes through insolvency proceedings.
Home Loan EMI
A Home Loan Equated Monthly Instalment (EMI) is the fixed monthly payment that a borrower makes to a bank or housing finance company to repay a home loan over a specified tenure. The EMI comprises two components: the principal repayment and the interest charged on the outstanding loan balance. In the initial months, the EMI is predominantly interest with a small principal component. Over time, as the principal reduces, the interest component shrinks and the principal repayment accelerates — this structure is known as an amortizing loan and is the standard format for all retail home loans in India. The EMI is calculated using the formula: EMI = [P × r × (1+r)^n] / [(1+r)^n – 1], where P is the principal loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly instalments. Indian home loans are typically offered at floating rates linked to an external benchmark (since October 2019, mandatorily linked to the RBI’s Repo Rate for banks under RBI circular), meaning the EMI or loan tenure adjusts when the RBI changes the repo rate. Housing Finance Companies (HFCs) like HDFC, LIC Housing Finance, and PNB Housing Finance may price loans on internal benchmarks with different reset mechanisms. Key factors influencing home loan EMI in India include: the quantum of loan, the interest rate (currently ranging from 8.5% to 11% for most borrowers depending on credit score, loan-to-value ratio, and lender), the loan tenure (typically up to 30 years for salaried borrowers), and the applicant’s credit profile. A higher credit score (750+) typically fetches the best rates. Borrowers should note that prepayment of principal (partial or full) reduces the outstanding balance and thereby the future interest burden — this can be optimized by making lump-sum prepayments during the loan tenure. Banks cannot levy prepayment penalties on floating-rate home loans as per RBI guidelines.
Home Loan EMI Calculator →Hypothecation
Hypothecation is a form of charge on movable assets (vehicles, stocks, machinery) given to a lender as security for a loan — without transferring possession or ownership. The borrower retains use of the asset. Hypothecation charge is registered with CERSAI for vehicles and with MCA for companies.
IBC (Insolvency and Bankruptcy Code) Process
The IBC process begins when a creditor (financial or operational) files an application with NCLT for default of ₹1 crore+. NCLT admits the petition, appoints an Interim Resolution Professional (IRP), and declares a moratorium. The Committee of Creditors (CoC — led by financial creditors) runs the 180-day process to find a resolution applicant (acquirer). Unresolved cases go to liquidation.
IFSC Code
IFSC (Indian Financial System Code) is an 11-character alphanumeric code uniquely identifying a bank branch in India for electronic fund transfers. The first 4 characters represent the bank, the 5th is always 0 (reserved), and the last 6 identify the specific branch. NEFT, RTGS, and IMPS all require IFSC to route funds to the correct branch.
IMPS (Immediate Payment Service)
IMPS is an inter-bank electronic fund transfer system available 24×7, 365 days. Unlike NEFT (batch-based) and RTGS (minimum ₹2 lakh), IMPS handles transfers from ₹1 to ₹5 lakh instantly. Charges are minimal (₹5–25 per transaction). IMPS is operated by NPCI and is the backbone of UPI transactions.
Insolvency and Bankruptcy Code (IBC)
IBC 2016 is a landmark legislation providing a time-bound (180 days, extendable to 270 days) resolution process for corporate insolvency and bankruptcy in India. Creditors can initiate insolvency proceedings in the National Company Law Tribunal (NCLT) when a debtor defaults ₹1 crore or more. IBC dramatically changed the credit culture in India.
Interest Income (Bank)
Interest income is the primary revenue source for banks — earned by lending deposits at higher rates than paid on deposits. Net Interest Income (NII) = Interest Income − Interest Expense. Net Interest Margin (NIM) = NII ÷ Average Earning Assets. Indian banks target NIM of 3–4%. NIM is a critical banking profitability metric watched by equity analysts.
Jan Dhan Darshak App
Jan Dhan Darshak is a mobile app developed by DFS (Department of Financial Services) that maps the location of all banking service providers in India — bank branches, ATMs, BCs (Business Correspondents), and post offices. Citizens can find the nearest banking touchpoint to access government scheme benefits and financial services.
Joint Account
A joint bank account is owned by two or more people. Operation modes: Either or Survivor (any one can operate — simplest), Former or Survivor (primary holder must operate), and Jointly (all must sign). Joint accounts simplify succession — the survivor inherits automatically without going through probate or succession procedures.
Kisan Credit Card
Kisan Credit Card (KCC) provides revolving short-term credit to farmers for agricultural inputs and activities: seeds, fertilizers, pesticides, farm equipment maintenance, harvesting costs, and post-harvest requirements. Launched in 1998 on the recommendations of the R.V. Gupta Committee, with NABARD as the nodal agency. Unlike a traditional loan (fixed disbursement + repayment schedule), KCC works like a revolving credit line — farmers draw and repay within the sanctioned limit during the crop season. Interest rate: 7% per annum for limits up to ₹3 lakh (government interest subvention of 2% reduces the bank’s effective cost from 9% to 7%); additional 3% Prompt Repayment Incentive reduces effective rate to 4% for on-time repayers. This 4% effective rate is among the lowest formal credit rates in India — far below moneylender rates of 36-120% per annum that historically trapped farming families in debt cycles. Credit limit: based on land holding, crop pattern, and farm income — up to ₹3 lakh without collateral; above ₹3 lakh requires land as security. KCC coverage: 7.4+ crore accounts with ₹9+ lakh crore outstanding credit (2024). PM-Kisan + KCC convergence: all PM-Kisan beneficiaries are being enrolled for KCC in saturation missions conducted at gram panchayat level. Extended to allied activities (animal husbandry, fisheries) from 2020 — with a separate ₹2 lakh sub-limit for these non-crop requirements, recognising the diversified income nature of Indian farming households.
KYC (Know Your Customer)
KYC is a mandatory process by which financial institutions verify the identity and address of their customers before providing financial services. It is governed by RBI and SEBI guidelines to prevent money laundering and financial fraud. Documents typically required: Aadhaar, PAN, and a proof of address. CKYC is the centralised KYC registry.
LAP (Loan Against Property)
LAP is a secured loan taken by pledging residential or commercial property as collateral. Loan amounts are typically 50–70% of the property’s market value (LTV ratio). LAP carries lower interest rates than personal loans (typically 9–12%) and has longer tenures. The property remains with the borrower but can be seized on default.
Lap Calculator →Letter of Credit (LC)
A Letter of Credit is a bank’s written guarantee that a seller will receive payment from the buyer — as long as the seller fulfils the terms specified in the LC (delivery, documents, quality). LC is the most common trade finance instrument in international trade — critical for exports/imports where buyer and seller don’t know each other.
LIBOR / SOFR
LIBOR (London Interbank Offered Rate) was for nearly 50 years the world’s most important benchmark interest rate, representing the average rate at which major London-based banks reported they could borrow unsecured funds from each other in the interbank market for various currencies and tenors (overnight to 12 months). LIBOR underpinned an estimated $300 trillion worth of financial contracts globally — adjustable-rate mortgages, student loans, corporate loans, derivatives, floating-rate bonds, and credit cards. Published daily by the ICE Benchmark Administration for five currencies (USD, GBP, EUR, JPY, CHF), it became a cornerstone of global finance. LIBOR’s credibility was shattered by a massive manipulation scandal uncovered in 2012. Major banks including Barclays, Deutsche Bank, UBS, and others were found to have colluded to submit false LIBOR rates to benefit their trading positions. Settlements exceeded $9 billion globally. Regulators mandated a transition to more reliable, transaction-based benchmarks. In the US, the Federal Reserve’s Alternative Reference Rates Committee (ARRC) selected SOFR (Secured Overnight Financing Rate) as the USD LIBOR replacement. SOFR is based on actual overnight Treasury repo transactions — a $1 trillion-plus daily market — making it far more robust and manipulation-resistant. US dollar LIBOR was fully discontinued on June 30, 2023, completing one of the largest financial infrastructure transitions in history. For India, LIBOR’s phase-out affected the enormous stock of ECBs (External Commercial Borrowings) — dollar loans raised by Indian companies from international banks, typically tied to LIBOR. The RBI mandated Indian borrowers to transition their LIBOR-linked contracts to SOFR or other approved rates. Additionally, India has developed its own benchmark rate, MIBOR (Mumbai Interbank Offered Rate), for rupee-denominated lending. The LIBOR-to-SOFR transition required Indian banks and corporates to renegotiate thousands of loan contracts, update treasury systems, and hedge new SOFR-based exposures — a massive operational undertaking completed by 2023.
Lien
A lien is a legal right granted to a lender to hold or retain property belonging to the borrower until the debt is repaid. Banks place a lien on FD receipts when loans are taken against FDs — the FD cannot be prematurely closed until the lien is released. Credit card companies may place a lien on linked accounts for outstanding dues.
Loan Against Property (LAP)
Loan Against Property (LAP) is a secured loan where residential or commercial property serves as collateral. LAP offers significantly lower interest rates than personal loans (9-12% versus 12-24%) because the lender has clear title to the property as security. The Loan-to-Value (LTV) ratio — the loan amount as a percentage of property value — is typically 50-70% for LAP (conservative to provide buffer against property price declines). For a property worth ₹1 crore, the borrower can access ₹50-70 lakh. LAP is popular with business owners, self-employed professionals, and SMEs who need large capital for business expansion, working capital, or investment opportunities but whose income documentation may not support large unsecured loans. Unlike home loans (purpose-restricted to property purchase/construction), LAP proceeds can be used for any purpose. Tenure: 5-15 years; maximum loan amount: ₹5-25 crore depending on lender. Processing: 2-4 weeks (property valuation, legal title check, and income documentation required). Key risks: if the borrower defaults, the lender can invoke SARFAESI Act to seize and sell the property without court intervention (for defaults above ₹1 lakh). Given that the primary residence may be used as collateral, LAP defaults can result in homelessness — making LAP higher stakes than personal loans. CIBIL collateral registry and property title search are mandatory pre-disbursement. Banks typically charge prepayment penalty on LAP for the first 3 years (2-3% of prepaid amount), unlike home loans where prepayment on floating-rate loans is penalty-free.
LAP Calculator →Loan-to-Value Ratio (LTV)
The Loan-to-Value (LTV) ratio is a lending metric that expresses the home loan amount as a percentage of the appraised or market value of the property being purchased. In India, the Reserve Bank of India (RBI) prescribes maximum LTV ratios for home loans extended by banks and housing finance companies, as a prudential measure to maintain credit quality and limit systemic risk in the financial system. The LTV ratio determines how much of the property’s value the lender is willing to finance, with the remainder (the margin or down payment) to be funded by the borrower from their own resources. As per RBI guidelines applicable from 2015 and updated periodically, for home loans up to ₹30 lakh, the maximum LTV is 90% (meaning the borrower must bring a minimum of 10% as down payment). For loans between ₹30 lakh and ₹75 lakh, the maximum LTV is 80% (20% down payment). For loans above ₹75 lakh, the maximum LTV is 75% (25% down payment). These limits apply to the property’s value as assessed by the bank’s approved valuer, which may be lower than the transaction price — effectively forcing the buyer to fund the shortfall entirely from own resources. LTV calculations also have implications for mortgage insurance and risk weight assignments for banks. Beyond the RBI’s structural limits, individual banks further restrict LTV based on the applicant’s credit profile, income stability, employment type, age, and the property’s location and legal status. A high credit score (above 800) and stable salaried income may allow a borrower to access the maximum permissible LTV, while a self-employed applicant with irregular income may find the bank willing to finance only 65–70% of the property value. LTV also impacts the overall cost of borrowing — some banks charge a marginally higher interest rate for high-LTV loans — and determines whether the borrower needs to take mortgage guarantee insurance, which adds a one-time premium to the cost of the loan.
LRS (Liberalised Remittance Scheme)
LRS allows Indian resident individuals to remit up to $250,000 per financial year for any permissible current or capital account transaction — overseas education, travel, investments in foreign stocks/mutual funds, property purchase abroad, gifts, and maintenance of relatives. LRS requires PAN, and amounts above ₹7 lakh attract 5–20% TCS.
LTV Ratio (Loan-to-Value)
LTV ratio is the loan amount as a percentage of the asset’s market value, used primarily in home loans. RBI regulates LTV for home loans — up to 90% LTV for loans up to ₹30 lakh, 80% for ₹30–75 lakh, and 75% for above ₹75 lakh. Higher LTV means lower down payment but higher risk for the lender.
MCLR (Marginal Cost of Lending Rate)
MCLR is the minimum interest rate below which banks cannot lend, introduced by RBI in 2016 to replace the Base Rate system and ensure faster transmission of RBI rate cuts to borrowers. Banks calculate MCLR based on their marginal cost of funds, CRR impact, operating cost, and tenor premium. Most home loans are now linked to external benchmarks instead.
Merchant Discount Rate (MDR)
MDR is the fee charged to merchants for accepting card/digital payments, expressed as a percentage of transaction value. It is split between acquiring bank, issuing bank, and card network. RBI waived MDR on UPI and RuPay to promote digital payments.
Microfinance Institution (MFI)
MFIs provide small loans (typically ₹10,000–₹3 lakh) to low-income individuals and self-help groups — especially rural women without formal credit history. RBI regulates MFIs as NBFC-MFIs. Top Indian MFIs: Bandhan, CreditAccess, Ujjivan. Under JLG (Joint Liability Group) model, groups of 5–10 women guarantee each other’s loans — creating social collateral.
Minimum Balance (Bank Account)
Minimum balance (Average Monthly Balance — AMB) is the minimum amount a savings account must maintain on average each month — failing which banks charge non-maintenance fees (₹300–₹600 per quarter). Jan Dhan and zero-balance accounts have no minimum balance requirement. RBI regulates minimum balance requirements and has directed banks to be transparent about charges.
Mobile Banking vs Net Banking
Mobile banking uses a smartphone app to access banking services; net banking uses a web browser. Both enable the same core functions: balance enquiry, fund transfer (NEFT/RTGS/IMPS), bill payment, FD booking, credit card management, and account statements. Mobile banking has largely displaced net banking for individual customers (85%+ of digital banking transactions in India are now app-based), while net banking remains dominant for corporate banking and bulk transactions requiring keyboard-intensive data entry. Security architecture: mobile banking uses a layered security model — device binding (app registered to specific device), mPIN or biometric authentication, OTP verification for high-value transactions, and real-time anomaly detection (AI-based fraud alerts). Net banking uses username-password plus OTP. Common fraud vectors: SIM swap (criminal convinces telecom to port victim’s SIM, intercepts OTP), vishing (phone-based social engineering to extract OTP), phishing (fake bank websites), and remote access trojans (malware capturing credentials). Never share OTP with anyone — banks never ask for OTP on outbound calls. IMPS (Immediate Payment Service) — the underlying real-time settlement rail for mobile banking transfers — handles up to ₹5 lakh per transaction instantly 24×7. NEFT (National Electronic Funds Transfer) settles in half-hourly batches, 24×7 since December 2019. RTGS (Real Time Gross Settlement) handles large-value transactions (minimum ₹2 lakh) in real-time during banking hours. Understanding the appropriate channel for urgency and transaction size prevents both fraud exposure and unnecessary delays.
Monetary Policy
Monetary policy is the RBI’s use of interest rates, reserve requirements, and money supply tools to achieve price stability (inflation control) and economic growth. RBI’s Monetary Policy Committee (MPC) — 3 RBI members + 3 government nominees — meets every 2 months to decide the repo rate. MPC targets CPI inflation at 4% ±2%.
Money Laundering
Money laundering is the illegal process of concealing the origins of criminally obtained money — making it appear to come from legitimate sources. India’s Prevention of Money Laundering Act (PMLA) 2002 criminalises money laundering with imprisonment of 3–7 years. Banks must implement AML (Anti-Money Laundering) controls and report Suspicious Transaction Reports (STR) to FIU-India.
Money Market
The money market is a component of the financial market where short-term instruments (maturity up to 1 year) — treasury bills, commercial paper, certificates of deposit, repos, and call money — are traded. In India, RBI plays a central role in the money market through Liquidity Adjustment Facility (LAF) operations.
Moral Hazard
Moral hazard is the tendency of an insured or protected party to take greater risks than they otherwise would — because they are protected from the consequences. Classic examples: banks taking excessive risk knowing government will bail them out (too-big-to-fail); insured car owners driving more recklessly; companies with government guarantees making riskier loans.
Moratorium (Loan)
Loan moratorium is a temporary suspension of repayment obligation granted by lenders during financial distress — allowing borrowers time to recover without default classification. RBI announced a COVID moratorium (March–August 2020) for all term loans. Individual lenders also provide moratoriums for job loss, medical emergencies, or natural disasters.
NABARD (National Bank for Agriculture and Rural Development)
NABARD is the apex development finance institution for agriculture and rural development in India — providing refinance to rural cooperative banks, RRBs, and commercial banks for agricultural loans. It also directly funds rural infrastructure, watershed development, and tribal development through grants. NABARD grades and supervises State Cooperative Banks and District Cooperative Banks.
NACH (National Automated Clearing House)
NACH is an electronic clearing mechanism operated by NPCI used for bulk and repetitive payment transactions — salary credits, EMI debits, SIP deductions, utility bill payments, and dividend distributions. It replaces the older ECS (Electronic Clearing Service) and processes millions of transactions daily with T+1 settlement.
NACH Mandate
A NACH mandate is a pre-authorized debit instruction signed by an account holder — allowing a financial institution (AMC, NBFC, insurer, utility) to automatically debit a specified amount from their bank account on specified dates. NACH mandates for SIP, EMI, and insurance premiums ensure autopay without monthly manual action. Banks must process debit within 2 working days of mandate execution date.
NBFC (Non-Banking Financial Company)
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act that provides financial services — loans, credit, investment, leasing, hire-purchase — but does not hold a banking licence and cannot accept demand deposits (savings/current accounts). NBFCs bridge the credit gap that commercial banks cannot efficiently serve: informal businesses, rural borrowers, gold loan seekers, vehicle finance, MSME lending, microfinance. As of 2025, India has approximately 9,500 registered NBFCs with a combined balance sheet exceeding ₹60 lakh crore. RBI regulates NBFCs under Chapter III-B of the RBI Act 1934. Scale-Based Regulation (SBR) framework (2022): Top Layer (Systemically Important — ₹10 crore+ owned fund, 10 largest NBFCs identified as Upper Layer subjected to near-bank level regulation); Upper Layer; Middle Layer; and Base Layer (smaller NBFCs with lighter regulation). NBFCs cannot use “Bank” in their name and must clearly disclose “NBFC” status to customers. Key types: NBFC-MFI (Microfinance Institutions), NBFC-HFC (Housing Finance Companies), NBFC-P2P (Peer-to-Peer lending platforms), Investment Companies, Loan Companies, and Infrastructure Finance Companies. NBFC advantages over banks: faster loan processing (days vs weeks), flexible underwriting (considering alternative data beyond credit scores), willingness to lend to new-to-credit segments, innovative product structures. Risks: higher cost of funds (NBFCs borrow from banks/capital markets at higher rates than banks’ deposit rates, passing higher rates to borrowers), asset-liability mismatch vulnerability (IL&FS 2018 crisis), and weaker deposit insurance (NBFCs have no deposit guarantee unlike bank deposits covered up to ₹5 lakh by DICGC).
NEFT (National Electronic Funds Transfer)
NEFT is an electronic funds transfer system operated by RBI that allows individuals and businesses to transfer money between bank accounts in India. NEFT operates in half-hourly batches 24×7, and fund transfer typically credits within 2 hours. There is no minimum amount limit and maximum is decided by the sending bank.
NEFT vs RTGS vs IMPS vs UPI
India’s payment systems offer four primary fund transfer mechanisms, each suited to different use cases. NEFT (National Electronic Funds Transfer): batch-based, half-hourly settlement cycles, minimum ₹1, no maximum (practical limit set by banks), 24x7x365 since December 2019, charges: RBI mandated 0 charges for savings account holders. RTGS (Real Time Gross Settlement): real-time, minimum ₹2 lakh, no maximum, for high-value transactions (property purchase, corporate treasury), charges: ₹24.50-49.50 per transaction above ₹2 lakh. IMPS (Immediate Payment Service): real-time, 24×7, minimum ₹1, maximum ₹5 lakh, charges: ₹0-25 depending on bank. UPI: real-time, 24×7, minimum ₹1, maximum ₹5-10 lakh (₹1 lakh for first-time users, ₹5 lakh standard, ₹10 lakh for specific use cases), 0 MDR for P2P and small P2M. SWIFT is used for international wire transfers in foreign currency — typically takes 1-5 business days, charges $15-50 (sender) + correspondent bank charges + forex conversion spread. SWIFT is being supplemented by bilateral real-time payment corridors (India-Singapore via UPI-PayNow linkage enables instant cross-border transfers between Indian and Singapore banks). Cheque clearing (CTS — Cheque Truncation System): T+1 clearing for local cheques. Demand Draft (DD): prepaid instrument for high-trust situations (college admissions, government applications) where the recipient doesn’t accept personal cheques. Declining use but still relevant for specific formal institutional transactions where electronic trail alone is insufficient.
Negative Amortisation
Negative amortisation occurs when loan EMI payments are insufficient to cover even the interest — causing the outstanding principal to increase over time rather than decrease. This can happen with teaser-rate loans (low initial EMI) or when floating rates rise sharply but EMI is kept constant, leading to extended tenure or balloon payments.
Neo Bank
Neo banks are digital-only banks with no physical branches, offering accounts, cards, and loans entirely through apps. In India, they operate as banking partners of licensed banks (not independent). Examples: Jupiter, Fi, Niyo, Open (for businesses).
No Objection Certificate (NOC)
NOC (No Objection Certificate) is a document issued by a lender (bank or NBFC) confirming that a loan has been fully repaid and the lender has no further claim on the borrower or collateral. For home loans, the NOC enables removal of the lender’s mortgage charge from property records. Failure to obtain NOC can prevent future property sale or refinancing.
Nomination
Nomination is the process of designating a person (nominee) to receive the bank balance, FD proceeds, mutual fund corpus, or insurance sum assured in case of the account holder’s death. Unlike inheritance (governed by succession law), nomination enables quick, hassle-free transfer of financial assets to the nominee without court intervention.
Nominee vs Legal Heir
A nominee is a person designated to receive financial assets on the account holder’s death — not necessarily the legal owner. Legal heirs (as per succession law or Will) are the true owners. Nominees are obligated to hand over the assets to legal heirs. Supreme Court has clarified (2022) that nominees in bank accounts do not become absolute owners — they are ‘trustees’ for legal heirs.
Non-Performing Asset (NPA) Categories
NPAs are classified by duration of default: Sub-standard Assets (NPA for less than 12 months), Doubtful Assets (NPA for more than 12 months, further divided into D1, D2, D3), and Loss Assets (where loss has been identified and considered uncollectable). Banks must provision (set aside capital) progressively — 15% for sub-standard, 25–100% for doubtful, 100% for loss assets.
NPA (Non-Performing Asset)
An NPA is a loan or advance for which principal or interest payments have remained overdue for more than 90 days. Banks classify NPAs into Sub-standard, Doubtful, and Loss categories. High NPA ratios indicate poor loan quality and reduce bank profitability. Gross NPA ratios are closely tracked by RBI and investors.
NRE Account (Non-Resident External)
An NRE account is a rupee-denominated bank account for NRIs to park their foreign earnings in India. The principal and interest are fully repatriable (can be sent back abroad). Interest earned on NRE accounts is tax-free in India. NRE FDs typically offer higher interest than savings accounts.
NRO Account (Non-Resident Ordinary)
An NRO account is a rupee-denominated account for NRIs to manage income earned in India — rent, dividends, or interest. Unlike NRE, repatriation from NRO is limited to $1 million per financial year. Interest on NRO accounts is taxable in India (TDS at 30% for NRIs unless DTAA benefit claimed).
ONDC (Open Network for Digital Commerce)
ONDC is a government initiative creating an open, interoperable network for digital commerce — decoupling the buyer app from seller app. Any buyer on any app can discover any seller on any app. Aims to break e-commerce platform monopolies.
Overdraft (OD) Facility
An overdraft is a credit facility linked to a current or savings account allowing the account holder to withdraw more than the available balance, up to a sanctioned limit. Interest is charged only on the amount utilised per day. OD against FD, salary, property, or shares is a common, flexible short-term credit product.
P2P Lending
Peer-to-peer (P2P) lending platforms connect borrowers directly with lenders (individuals or institutions), bypassing banks. In India, P2P is regulated by RBI as NBFC-P2P. Platforms: Faircent, LenDenClub. Lender exposure: ₹50L aggregate cap.
Payment Gateway
A payment gateway is technology that securely captures, encrypts, and transmits payment data between merchant and bank during online transactions. In India, key gateways: Razorpay, PayU, Cashfree, CCAvenue. They support UPI, cards, net banking, and wallets.
Penalty Interest
Penalty interest is additional interest charged on overdue loan payments — the regular interest rate plus a penal charge (typically 1–3% per annum). RBI mandated from January 2024 that banks can only charge penal charges (fixed amount) instead of penal interest (compounded percentage) for loan defaults — protecting borrowers from compounding penalties.
Personal Loan
A personal loan is an unsecured loan (no collateral needed) provided by banks and NBFCs for personal expenses — medical emergencies, travel, home renovation, or debt consolidation. Interest rates range from 10.5% to 24% depending on CIBIL score, income, and lender. Tenure is typically 1–5 years.
Personal Loan EMI →Pledge and Hypothecation
Pledge involves physical transfer of possession of movable assets (gold, stocks) to the lender as security. Hypothecation involves creating a charge on movable assets without transferring possession — the borrower continues using the asset. Home loans use mortgage (immovable property); vehicle loans use hypothecation; gold loans use pledge; credit card spending is unsecured (no charge).
Pre-EMI
Pre-EMI is an interest-only payment made during the construction phase of an under-construction property — before the full home loan EMI kicks in. During pre-EMI, you pay only the interest on the disbursed loan amount, without principal repayment. Pre-EMI periods can last 2–5 years for large projects, causing significant interest outgo.
Pre-EMI vs Full EMI
When a home loan is taken for an under-construction property, banks disburse the loan amount in stages linked to construction milestones rather than in one lump sum. During this disbursement phase, borrowers have two choices for repayment: Pre-EMI or Full EMI. Understanding the financial difference between these two options is critical for minimizing the total cost of home ownership. Under the Pre-EMI option, the borrower pays only the interest on the amount disbursed so far — no principal repayment is made during the construction phase. For example, if ₹30 lakh has been disbursed out of a total ₹70 lakh loan, the borrower pays interest only on ₹30 lakh each month. As further tranches are disbursed, the Pre-EMI increases proportionally. Full EMI repayment begins only after the final disbursement or possession, whichever is earlier. While Pre-EMI reduces the monthly outgo during construction, no principal is being repaid — meaning the full loan tenure and interest burden commence only after possession, and total interest paid over the life of the loan is substantially higher. Under the Full EMI option, the borrower opts to start paying EMIs on the full loan amount from the beginning of disbursement, despite not yet being in possession of the property. This means paying full principal and interest immediately, which is financially challenging but dramatically reduces the total interest burden over the loan tenure. Tax implications also differ: both principal repayment (under Section 80C, up to ₹1.5 lakh per year) and interest paid (under Section 24(b), up to ₹2 lakh per year for self-occupied property) are deductible only after possession. However, pre-construction interest paid (Pre-EMI interest during the under-construction phase) is deductible in five equal instalments starting from the year of possession. This pre-construction interest benefit adds a layer of nuance — the total pre-construction interest paid is aggregated and then deducted in five equal parts post-possession, effectively providing a deferred tax benefit to those who chose the Pre-EMI route.
Pre-payment (Loan)
Prepayment is paying more than the scheduled EMI or making lump-sum payments to reduce outstanding principal before the scheduled loan tenure. For floating rate retail loans (home loans), RBI mandates zero prepayment penalty — banks cannot charge for partial or full prepayment. Fixed rate loans may carry prepayment charges (2–3%). Prepayment significantly reduces total interest cost.
Priority Sector Lending (PSL)
Priority Sector Lending (PSL) mandates that banks allocate 40% of their Adjusted Net Bank Credit (ANBC) to specified priority sectors: agriculture (18%, with 10% to small/marginal farmers), MSMEs, export credit, education, housing (up to ₹50 lakh in non-metros), social infrastructure, renewable energy, and weaker sections. PSL was introduced in 1974 to ensure credit flows to underserved but economically important sectors that might not attract commercial bank lending purely on profitability grounds. Banks that fall short of PSL targets must deposit the shortfall amount with NABARD/NHB/SIDBI under specified rural infrastructure funds at below-market rates — effectively penalising them for missing targets. Foreign banks with less than 20 branches are exempt from PSL mandates. RBI’s Priority Sector Lending Certificates (PSLCs) allow banks that exceed targets in one sub-sector to sell certificates to banks that are short in that sub-sector, creating a market mechanism for efficient PSL allocation without geographic constraints. MUDRA (Micro Units Development and Refinance Agency) loans (Shishu: up to ₹50,000; Kishore: ₹50,000-5 lakh; Tarun: ₹5-10 lakh) count toward PSL. PM SVANidhi (₹10,000-50,000 for street vendors) and Kisan Credit Card (KCC) are government schemes channelled through banks’ PSL obligations. PSL’s effectiveness is debated — banks often fulfil targets through indirect means (buying PSLCs, investing in NABARD/SIDBI bonds) rather than direct lending, raising questions about genuine credit flow improvement in target sectors.
Prompt Corrective Action (PCA)
PCA is RBI’s supervisory framework for weak banks — when a bank’s Capital Adequacy Ratio falls below 9%, Net NPA ratio exceeds 6%, or ROA falls below 0.25%, RBI places it under PCA. Restrictions imposed: no new branches, restricted dividends, restricted management compensation, and mandatory capital raising. PCA aims to nurse weak banks back to health.
Quantitative Easing (QE)
QE is an unconventional monetary policy where a central bank buys government bonds and other securities from the market — injecting liquidity when interest rate cuts alone are insufficient. India’s RBI used an indirect version through Government Securities Acquisition Programme (GSAP) during COVID — buying ₹1 lakh crore in G-Secs to maintain low yields and ensure credit availability.
RBI (Reserve Bank of India)
The Reserve Bank of India is India’s central bank, established in 1935, responsible for monetary policy, regulation of banks, issuance of currency, management of foreign exchange, and ensuring financial stability. RBI’s Monetary Policy Committee (MPC) meets 6 times a year to decide the repo rate — India’s benchmark interest rate.
RBI Guidelines on Loans
RBI issues detailed master circulars, directions, and guidelines governing bank lending: fair lending practices, interest rate transparency, asset classification, provisioning norms, KYC requirements, loan-to-value ratios, and customer rights. Recent guidelines include: ban on 1% processing fees for pre-payment of floating rate loans, mandatory loan amortisation schedules, and reset of EMI/tenure on rate changes.
RD (Recurring Deposit)
An RD is a bank deposit scheme where a fixed amount is deposited every month for a predetermined period (6 months to 10 years). Interest is compounded quarterly and paid at maturity along with the principal. RDs encourage disciplined monthly saving and are insured up to ₹5 lakh by DICGC.
Rd Calculator →Regtech (Regulatory Technology)
Regtech uses AI, ML, and big data to help financial institutions comply with regulations efficiently — automating AML checks, KYC verification, transaction monitoring, and regulatory reporting. Reduces compliance costs while improving accuracy.
Remittance
Remittance is the transfer of money by foreign workers to their home country. India is the world’s largest recipient of foreign remittances — receiving over $125 billion in FY 2024 — primarily from the US, UAE, UK, Saudi Arabia, and Singapore. Remittances support consumption, education, real estate, and rural livelihoods in India.
Repo Rate
The repo rate is the rate at which RBI lends short-term money to commercial banks against government securities. It is the primary tool for monetary policy — lowering repo rate reduces borrowing costs (stimulates economy); raising it increases costs (controls inflation). Home loan rates are directly linked to repo rate in India.
If Rates Rise →Repo Rate and Monetary Policy
The Repo Rate (Repurchase Agreement Rate) is the benchmark interest rate at which RBI lends overnight funds to commercial banks against government securities as collateral. It is the primary tool of India’s monetary policy, operated through the Liquidity Adjustment Facility (LAF). Changes in the repo rate by the Monetary Policy Committee (MPC) transmit through the financial system: banks’ cost of funds changes → lending rates (home loans, business loans) adjust → credit demand expands or contracts → economic activity and inflation respond. EBLR (External Benchmark Linked Rate, October 2019) mandates that all new retail loans (home, auto, personal) and MSME loans be linked to the repo rate. This ensures faster monetary policy transmission — a 25 bps repo cut is reflected in home loan EMIs within 3 months, versus 6-12 month lags under the previous MCLR system. India’s repo rate history: peaked at 8.5% (2013-14 Rajan era, combating current account crisis); cut to historic low 4.0% (May 2020, COVID stimulus); hiked 250 bps to 6.5% (May 2022-February 2023, inflation control); held at 6.5% through 2024. Real repo rate = Repo rate − Inflation. Positive real rates are contractionary (slow growth and inflation); negative real rates are expansionary (stimulate growth). During COVID, RBI ran deeply negative real rates (-3 to -4%) to support growth. The 2022-23 rate hike cycle aimed to restore positive real rates and anchor inflation expectations. India’s MPC (6 members: RBI Governor + 2 RBI nominees + 3 government nominees) meets bimonthly; decisions are published with individual voting records, improving monetary policy transparency.
Repo Rate vs MCLR vs EBLR
India’s bank lending rate system has evolved through three frameworks. BPLR (Benchmark Prime Lending Rate, until 2010): opaque, bank-specific, easily manipulated — banks kept BPLR high while lending to favoured corporates at sub-BPLR rates. Base Rate (2010-2016): minimum lending rate linked to cost of funds — more transparent but banks used different methodologies. MCLR (Marginal Cost of Funds based Lending Rate, 2016-2019): linked to the marginal cost of new deposits, including repo rate impact — improved transmission but still had lags of 6-12 months. EBLR (External Benchmark Linked Rate, October 2019): RBI mandated all new retail (home, auto, personal) and MSME loans to be linked to an external benchmark — RBI repo rate, 91-day T-bill rate, or 182-day T-bill rate. The bank adds a spread over the benchmark (based on borrower credit risk and business cost). EBLR loans reset every 3 months mandatorily, ensuring faster monetary policy transmission. When RBI cuts repo by 25 bps, EBLR home loan rates must fall within 3 months — versus 6-12 month lags under MCLR. Practical impact: Repo-linked home loans (RLLR — Repo-Linked Lending Rate) at 8.5% = Repo (6.5%) + Spread (2%). If repo falls to 6%, RLLR becomes 8%. Old MCLR-linked loans from 2018 might still be at 9-9.5% because full transmission hasn’t occurred. Borrowers on MCLR loans should check if switching to EBLR is beneficial — typically it is when the rate differential exceeds the switching cost (processing fee of 0.25-0.5% of outstanding).
Repo vs Reverse Repo
The Repo Rate and Reverse Repo Rate define the interest rate corridor within which India’s short-term money market operates. Repo (Repurchase Agreement): RBI lends funds to commercial banks against government securities as collateral. When banks need short-term liquidity, they approach RBI’s Liquidity Adjustment Facility (LAF) window and borrow at the repo rate. Higher repo rate = more expensive bank borrowing = banks lend less = credit tightens = inflation cools. Reverse Repo: banks park their excess short-term funds with RBI (the reverse: banks lend to RBI) and earn the reverse repo rate — historically 25-35 bps below the repo rate. In April 2022, RBI replaced the reverse repo as the lower bound with the Standing Deposit Facility (SDF) at repo minus 25 bps, allowing RBI to absorb excess liquidity without collateral (making it more flexible than the reverse repo). The width of the corridor (repo minus reverse repo/SDF) reflects RBI’s stance: a narrow corridor (25 bps) indicates tight liquidity management; a wide corridor signals more accommodation. The Market Stabilisation Scheme (MSS) and Open Market Operations (OMOs) supplement LAF operations for larger-scale liquidity management. Together, these tools allow RBI to manage daily liquidity, short-term rates, and inflation simultaneously.
Reverse Mortgage
A reverse mortgage allows senior citizens (60+) who own a home to receive monthly income from the bank by pledging their property — without selling it or leaving it. They continue to live in the house, and the loan (plus interest) is repaid after death by selling the property, with any surplus going to legal heirs.
RTGS (Real Time Gross Settlement)
RTGS is a funds transfer system in India that processes transactions individually in real time (not in batches like NEFT). It is available 24×7 and is used for high-value transfers — minimum ₹2 lakh with no upper limit. RTGS transfers settle immediately in the beneficiary’s account, making it ideal for urgent, large business payments.
RTGS Settlement Timing
RTGS (Real Time Gross Settlement) settles transactions individually and immediately — 24×7 including weekends and holidays since December 2020. Minimum ₹2 lakh, no maximum limit. Each transaction is independently settled in the central bank’s books in real time — unlike NEFT (batches) or IMPS (small amounts). Banks charge ₹25–50 per RTGS transaction.
RuPay Card
RuPay is India’s domestic card payment network, developed by the National Payments Corporation of India (NPCI) and launched in March 2012. It was created to provide an Indian alternative to international card networks like Visa and Mastercard, enabling affordable and accessible digital payments for millions of Indians — particularly those in rural areas and lower-income segments who were previously excluded from card-based banking. RuPay cards are issued as debit, credit, and prepaid cards and are accepted at all ATMs, Point-of-Sale (PoS) terminals, and e-commerce platforms across India that are integrated with the NFS (National Financial Switch) network. International acceptance is available on RuPay Global cards — in partnership with Discover, Diners Club, China UnionPay, JCB, and through NPCI International, RuPay cards are accepted in over 200 countries. The processing fees for RuPay transactions are significantly lower than those for Visa/Mastercard — banks pay lower interchange fees, and merchants pay lower MDR (Merchant Discount Rate) — making RuPay cards cost-effective for both issuers and acceptors. A key distinguishing feature of RuPay is its integration with the government’s financial inclusion ecosystem. Jan Dhan Yojana accounts are linked with RuPay debit cards by default, providing ₹2 lakh accidental insurance coverage free of cost. RuPay credit cards have been extended to Kisan Credit Card (KCC) holders and SHG (Self Help Group) members, bringing formal credit access to rural populations. NPCI facilitates RuPay’s interoperability with UPI — enabling Tap & Pay (NFC-based contactless payments on RuPay credit cards), UPI-linked RuPay credit card functionality, and offline payments through RuPay On-the-Go wearables. As of 2024, over 75 crore RuPay cards are in circulation, making it the most widely issued card in India.
SARFAESI Act
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002 allows banks and NBFCs to take possession of collateral (immovable property) and recover loans without going to court — after a 60-day default notice. This significantly reduced NPA recovery time from 10+ years to 2–3 years.
Savings Account
A savings account is the most basic bank account for individuals to deposit and withdraw money while earning a nominal interest rate (typically 2.7–4% per annum, with some small finance banks offering up to 7%). India has over 100 crore savings accounts — PM Jan Dhan Yojana has made bank access universal even in rural India.
Seeding (Aadhaar)
Aadhaar seeding is the process of linking one’s Aadhaar number to a bank account for receiving Direct Benefit Transfer (DBT) payments from the government — subsidies for LPG, MGNREGA wages, scholarships, and pension. Aadhaar seeding has transferred ₹30+ lakh crore directly to beneficiaries since 2013, eliminating intermediary leakage.
SLR (Statutory Liquidity Ratio)
SLR is the minimum percentage of a bank’s total deposits that must be maintained in the form of liquid assets — cash, gold, or approved government securities. Currently set at 18% by RBI, SLR ensures banks always maintain a minimum level of liquid assets to meet unexpected depositor demands. Unlike CRR, SLR assets earn returns.
Small Finance Bank
Small Finance Banks (SFBs) are a category of niche banks licensed by RBI to provide basic banking services (savings, loans, payment services) primarily to unserved/underserved segments — small businesses, farmers, and low-income households. They offer higher FD rates (8–9.5%) due to their cost structure but carry higher risk than large banks.
SWIFT (Banking)
SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a secure global messaging network used by banks to send international money transfer instructions. SWIFT does not transfer money itself — it transmits standardised messages between banks. Russia’s exclusion from SWIFT in 2022 was a major financial sanction.
SWIFT (Society for Worldwide Interbank Financial Telecommunication)
SWIFT is a global member-owned cooperative and messaging network that enables financial institutions worldwide to send and receive standardized financial messages — primarily payment instructions — securely and reliably. Founded in 1973 and headquartered in La Hulpe, Belgium, SWIFT serves over 11,000 financial institutions across more than 200 countries and territories, transmitting approximately 50 million messages daily. Crucially, SWIFT does not actually move money — it only communicates instructions between banks. The actual clearing and settlement of funds happens through correspondent banking relationships and local payment systems like Fedwire (US), CHAPS (UK), RTGS (India), TARGET2 (EU), and others. Each financial institution on the SWIFT network is identified by a unique BIC (Bank Identifier Code), also called a SWIFT code, which is used in international wire transfers. SWIFT messages are highly standardized using the ISO 20022 messaging format. The network is governed by a board of directors drawn from the member banks, and its infrastructure is co-located in multiple countries for redundancy. SWIFT processes international transactions ranging from correspondent banking wires to trade finance, securities settlement, and treasury operations. Without SWIFT access, banks are effectively cut off from the global financial system, which is why SWIFT disconnection has become a powerful financial sanctions tool. For India, SWIFT is the backbone of cross-border banking, including remittances from the Indian diaspora (India receives over $125 billion annually in remittances — the world’s largest), trade finance, and foreign investment flows. The RBI and Indian banks are active SWIFT participants. Geopolitically, India noted carefully the consequences of SWIFT disconnection when Russia was partially removed from SWIFT in 2022 following its invasion of Ukraine — this immediately disrupted Russian oil payment flows and accelerated the search for alternative payment channels. India developed its own UPI (Unified Payments Interface) and is actively promoting UPI-SWIFT interoperability for cross-border payments, while also exploring alternatives to reduce dependence on dollar-centric SWIFT-linked correspondent banking.
Tenure (Loan)
Loan tenure is the duration over which a loan is to be repaid in EMIs. Longer tenure means lower EMIs but higher total interest paid; shorter tenure means higher EMIs but lower total interest. For home loans, maximum tenure is 30 years. Choosing the right tenure involves balancing monthly cash flow with long-term interest cost.
Term Deposit
A term deposit is a bank deposit made for a fixed period at a fixed interest rate — another name for Fixed Deposit in Indian banking. Banks are not required to pay interest if the FD is broken before maturity, but typically pay interest at a reduced rate (0.5–1% below the contracted rate) as premature withdrawal penalty.
Treasury Bonds / T-Bills / T-Notes
US Treasury securities are debt instruments issued by the US Department of the Treasury to finance government spending. They come in three primary varieties based on maturity: Treasury Bills (T-Bills) with maturities of 4, 8, 13, 26, or 52 weeks; Treasury Notes (T-Notes) with maturities of 2, 3, 5, 7, or 10 years; and Treasury Bonds (T-Bonds) with maturities of 20 or 30 years. All are backed by the “full faith and credit” of the US government and are considered the world’s safest assets — the global risk-free rate benchmark. The US Treasury market, with over $27 trillion outstanding as of 2024, is the world’s largest and most liquid bond market. Treasury Bills are sold at a discount to face value and do not pay periodic interest — the return comes from the difference between the purchase price and face value at maturity. Treasury Notes and Bonds pay fixed semi-annual coupon interest. Yields on these instruments are set by auction and move inversely with their prices. The 10-year Treasury yield is the single most important interest rate in global finance — it forms the baseline for mortgage rates, corporate bond yields, and is used to discount the present value of future cash flows in virtually every financial model worldwide. T-Bills yields are closely tied to the federal funds rate. For India, US Treasuries are central to RBI’s foreign exchange reserve management. As of 2024, the RBI holds approximately $240 billion in US Treasury securities as part of India’s foreign exchange reserves, making it one of the largest foreign holders of US debt. The yield earned on these holdings directly affects India’s reserve income. More broadly, when Treasury yields spike globally, Indian government bond (G-Sec) yields also rise, increasing India’s domestic borrowing costs. Indian corporations, banks, and the government monitor Treasury yield movements daily as a leading indicator of domestic interest rate trends.
UPI (Unified Payments Interface)
UPI is India’s real-time digital payment system developed by NPCI, allowing instant bank-to-bank transfers using a Virtual Payment Address (VPA), QR code, or mobile number — 24×7, 365 days, free of charge. In April 2024, UPI processed over 13 billion transactions worth ₹20 lakh crore — the world’s most successful digital payment system.
UPI 123PAY
UPI 123PAY is RBI’s initiative enabling feature phone users (without smartphone) to make UPI payments through IVR (Interactive Voice Response), missed call, OTP-based app, or proximity sound (at merchants). This extends digital payments to 400 million feature phone users — the last mile in India’s financial inclusion journey.
UPI 2.0 Features
UPI 2.0 introduced: (1) Overdraft account linking, (2) One-time mandate (blocking funds in advance), (3) Invoice-in-inbox (view invoice before paying), (4) Signed intent and QR (authentication layer). These enable EMI over UPI, subscription billing, and B2B payments.
UPI Autopay
UPI Autopay is a recurring payment mandate on UPI that allows users to set up automatic debits for subscriptions, EMIs, insurance premiums, mutual fund SIPs, and utility bills — with pre-authorization and real-time notification. It replaced NACH mandates for small-ticket recurring payments (up to ₹1 lakh per transaction per day).
Variable Interest Rate
A variable (floating) interest rate loan has its interest rate linked to a benchmark (Repo Rate or MCLR) and changes periodically. When the benchmark rises, the rate and/or EMI/tenure increases; when it falls, borrowers benefit from lower EMIs. Most Indian home loans are on variable rates — mandated by RBI to be linked to external benchmarks.
Where banking terms turn into numbers
The tools and worked scenarios that operate on the vocabulary above.
Search all 928 terms, with worked examples
The 157 definitions above are the banking and payments set. The interactive glossary holds all 928 across every topic, with instant search and a worked example for each one showing the term applied to real Indian numbers.
Open the interactive glossary →The other fourteen glossary topics
Every topic follows the same shape: the terms A to Z with a full definition, then the Learn page, tools and worked scenarios where those terms are actually used.