Banking Terms A to Z for Bank Exams
Banking terms are the words used for bank accounts, loans, payments, RBI policy and bank regulation, and bank exams ask them as direct one-liners ("What is CASA?") or inside the GA and interview rounds. Below is an A to Z glossary of the terms that IBPS, SBI, RRB and RBI papers keep repeating, each explained in one or two plain sentences, with the current numbers checked against RBI sources.
🔥 Key Exam Takeaway (October 2026): Repo 5.50%, SDF 5.25%, MSF and Bank Rate 5.75%, CRR 3%, SLR 18%. A loan becomes an NPA after 90 days overdue. Deposit insurance (DICGC) covers up to ₹5 lakh per depositor per bank. RTGS minimum is ₹2 lakh; NEFT and RTGS both run 24×7.
Banking Terms Starting with A–C
| Term | Meaning in simple words |
|---|---|
| ALM (Asset Liability Management) | Managing the mismatch between what a bank owes (deposits) and what it owns (loans, investments) across time periods so that it never runs short of cash. |
| AML (Anti-Money Laundering) | Rules and checks that stop criminals from passing illegal money through banks. KYC is a part of AML. |
| ARC (Asset Reconstruction Company) | A company that buys bad loans (NPAs) from banks at a discount and tries to recover them. Registered with the RBI under the SARFAESI Act, 2002. |
| ATM | Automated Teller Machine. A White Label ATM is owned by a non-bank; a Brown Label ATM is owned by a service provider but branded by a bank. |
| Bancassurance | A bank selling insurance policies of an insurance company to its customers. |
| Bank Rate | The rate at which the RBI rediscounts bills / lends long term; used for penal rates. Kept equal to MSF: 5.75% now. |
| Base Rate | The minimum lending rate system from 1 July 2010 to 31 March 2016. Replaced by MCLR. |
| Basel norms | Global capital rules made by the Basel Committee on Banking Supervision (BCBS), which sits at the BIS in Basel, Switzerland. India follows Basel III. |
| Bad bank | An entity that takes over large NPAs from banks. India's is NARCL (National Asset Reconstruction Company Ltd). |
| BBPS | Bharat Bill Payment System, run by NPCI Bharat BillPay, for paying electricity, gas, water and other bills. |
| Capital Adequacy Ratio (CAR / CRAR) | Capital ÷ risk-weighted assets. RBI minimum is 9%, and with the 2.5% Capital Conservation Buffer it is 11.5%. |
| CASA | Current Account + Savings Account deposits. A high CASA ratio means cheaper funds for the bank. |
| Cash Credit (CC) | A running working-capital loan to businesses against stock or receivables, with a drawing limit. |
| CBDC (e₹) | Central Bank Digital Currency, the digital rupee issued by the RBI. Wholesale pilot began on 1 Nov 2022 and retail pilot on 1 Dec 2022. |
| CIBIL score | A three-digit credit score (300 to 900) from TransUnion CIBIL, a credit information company. Higher is better. |
| Cheque validity | A cheque, draft or pay order is valid for 3 months from its date. |
| Core Banking Solution (CBS) | All branches on one central system, so a customer can bank from any branch. |
| CRR (Cash Reserve Ratio) | The share of a bank's NDTL that it must keep with the RBI as cash, earning no interest. 3% now. |
| CTS (Cheque Truncation System) | Cheque clearing by image, without moving the physical cheque. |
Banking Terms Starting with D–I
| Term | Meaning in simple words |
|---|---|
| Demand Draft (DD) | A prepaid instrument issued by a bank, payable at another branch. It cannot bounce. |
| DICGC | Deposit Insurance and Credit Guarantee Corporation, an RBI subsidiary. Insures deposits up to ₹5 lakh per depositor per bank (since 4 Feb 2020). |
| Dormant / inoperative account | A savings or current account with no customer-induced transaction for 2 years. Unclaimed deposits of 10 years go to the RBI's DEA Fund. |
| DRT (Debt Recovery Tribunal) | A tribunal for banks to recover dues above ₹20 lakh. |
| EBLR (External Benchmark Lending Rate) | Floating retail and MSME loans linked to an external benchmark (mostly the repo rate) since 1 Oct 2019. |
| ECS / NACH | Electronic Clearing Service, now replaced by NPCI's National Automated Clearing House for bulk debits and credits like EMIs and salaries. |
| Escrow account | An account where money is held by a third party until conditions of a deal are met. |
| Factoring | A business sells its receivables (bills) to a factor at a discount to get cash now. Forfaiting is the same idea for medium-term export receivables, without recourse. |
| Fiscal deficit | Total government expenditure minus total receipts excluding borrowings. Shows how much the government must borrow. |
| Fixed Deposit (FD) / Term Deposit | Money kept for a fixed period at a fixed rate. |
| Hawala | Informal, illegal money transfer outside the banking system. |
| Haircut | The cut in the value of a security when it is used as collateral. |
| Hypothecation | A charge on movable goods (vehicle, stock) where the borrower keeps possession. In a pledge, the lender keeps possession (gold loan). A mortgage is for immovable property. A lien is the right to hold the property until dues are paid. |
| IFSC | Indian Financial System Code, 11 characters: 4 letters for the bank, then 0, then 6 for the branch. |
| IMPS | Immediate Payment Service by NPCI, 24×7 instant transfers up to ₹5 lakh per transaction. |
| Inflation (CPI) | Rise in the general price level. The RBI targets 4% CPI inflation with a band of 2% to 6%. |
| Inoperative account | See dormant account above. |
Banking Terms Starting with K–N
| Term | Meaning in simple words |
|---|---|
| KYC (Know Your Customer) | Identity and address checks before opening an account; periodic Re-KYC is required. |
| LAF (Liquidity Adjustment Facility) | The RBI's daily window to inject (repo) or absorb (SDF / reverse repo) money from banks. |
| LCR (Liquidity Coverage Ratio) | High-quality liquid assets must cover 30 days of net cash outflows: 100% requirement under Basel III. |
| Letter of Credit (LC) | A bank's promise to pay the seller (exporter) on behalf of the buyer if the documents are in order. |
| Bank Guarantee (BG) | A bank's promise to pay a third party if its customer fails to perform a contract. |
| MCLR | Marginal Cost of Funds based Lending Rate, from 1 April 2016; replaced the base rate. Still used for many corporate and older loans. |
| MICR | Magnetic Ink Character Recognition code on cheques: 9 digits (city 3, bank 3, branch 3). |
| Moratorium | A period during which a borrower need not pay instalments. |
| MSF (Marginal Standing Facility) | Emergency overnight borrowing for banks from the RBI, even against SLR securities. Repo + 0.25% = 5.75%. |
| MUDRA | Loans to micro units under the Pradhan Mantri Mudra Yojana (2015): Shishu up to ₹50,000, Kishore ₹50,000 to ₹5 lakh, Tarun ₹5 to ₹10 lakh, Tarun Plus ₹10 to ₹20 lakh. |
| NBFC | Non-Banking Financial Company. It lends and invests but cannot issue cheques drawn on itself and its deposits are not insured by DICGC. |
| NDTL | Net Demand and Time Liabilities: deposits and other liabilities on which CRR and SLR are calculated. |
| NEFT | National Electronic Funds Transfer, settled in half-hourly batches, 24×7 since 16 Dec 2019, no minimum or maximum limit set by the RBI. |
| NPA (Non-Performing Asset) | A loan whose interest or instalment is overdue for more than 90 days. |
| NPCI | National Payments Corporation of India (2008, Mumbai): runs UPI, IMPS, RuPay, NACH, AePS, FASTag (NETC), BHIM. |
| Nostro / Vostro | Nostro = "our account with you": an Indian bank's foreign-currency account abroad. Vostro = "your account with us": a foreign bank's rupee account in India. |
Banking Terms Starting with O–R
| Term | Meaning in simple words |
|---|---|
| OMO (Open Market Operations) | The RBI buying (injects money) or selling (absorbs money) government securities. |
| Overdraft (OD) | Permission to withdraw more than the balance in a current account, up to a limit. PMJDY accounts get an OD of up to ₹10,000. |
| Payments bank | A bank that accepts deposits up to ₹2 lakh per customer and offers payments and remittances, but cannot lend. |
| PMJDY | Pradhan Mantri Jan Dhan Yojana, launched 28 Aug 2014 for zero-balance basic savings accounts. |
| Priority Sector Lending (PSL) | A share of bank credit that must go to agriculture, MSMEs, weaker sections and others: 40% of ANBC for domestic scheduled commercial banks. |
| PSLC | Priority Sector Lending Certificates, traded on the RBI's e-Kuber portal to meet PSL shortfalls. |
| Repo rate | The rate at which the RBI lends to banks against securities: 5.50% since 7 Oct 2026. |
| Reverse repo | The rate at which the RBI absorbs money from banks; fixed at 3.35%. |
| RTGS | Real Time Gross Settlement for large transfers, minimum ₹2 lakh, no upper limit, 24×7 since 14 Dec 2020. |
| RRB | Regional Rural Bank, set up under the RRB Act, 1976 (first RRB: Prathama Bank, 2 Oct 1975). Shareholding: Centre 50%, sponsor bank 35%, state 15%. |
| Recurring Deposit (RD) | A fixed sum deposited every month for a fixed period. |
| Rupee Drawing Arrangement (RDA) | Tie-ups that let non-resident Indians send money home through Indian banks' partners abroad. |
Banking Terms Starting with S–Z
| Term | Meaning in simple words |
|---|---|
| SARFAESI Act, 2002 | Lets banks seize and sell secured assets of defaulters (for loans of ₹1 lakh and above) without going to court. |
| SDF (Standing Deposit Facility) | The RBI absorbs surplus money from banks without collateral; floor of the LAF corridor since April 2022. 5.25% now. |
| SLR (Statutory Liquidity Ratio) | The share of NDTL a bank must keep in liquid assets (cash, gold, approved securities). 18% now. |
| SMA (Special Mention Account) | Early warning before NPA: SMA-0 1 to 30 days overdue, SMA-1 31 to 60, SMA-2 61 to 90 days. |
| Small Finance Bank (SFB) | A bank for small borrowers and unserved areas; minimum paid-up capital ₹200 crore for new on-tap licences; priority sector target 60% of ANBC (cut from 75% by the RBI in January 2026). |
| SWIFT | The global messaging network banks use for cross-border payment instructions. |
| Sweep-in account | A savings account where the balance above a limit moves automatically into an FD. |
| Teaser loan | A loan with a low rate in the first years and a higher rate later. |
| Tier 1 / Tier 2 capital | Tier 1 = core capital (equity, reserves). Tier 2 = supplementary capital (subordinated debt, some provisions). |
| Treasury bill (T-bill) | Short-term central government debt of 91, 182 or 364 days, issued at a discount. |
| UPI | Unified Payments Interface by NPCI, launched in 2016, for instant mobile transfers using a VPA (UPI ID). |
| Universal banking | One bank offering banking, insurance, mutual funds and investment services. |
| Wilful defaulter | A borrower who can pay but does not, or diverts the funds. |
| Yield | The return earned on a bond or investment, as a percentage. |
| Zero-coupon bond | A bond that pays no periodic interest; it is sold at a discount and redeemed at face value. |
Priority-sector sub-targets for each type of bank are in the detailed Priority Sector Lending Targets note.
Banking Abbreviations and Full Forms for Bank Exams
| Abbreviation | Full form |
|---|---|
| ANBC | Adjusted Net Bank Credit |
| AePS | Aadhaar enabled Payment System |
| BCBS | Basel Committee on Banking Supervision |
| BIS | Bank for International Settlements |
| CRAR | Capital to Risk-weighted Assets Ratio |
| DEA Fund | Depositor Education and Awareness Fund |
| ECB | External Commercial Borrowing |
| FEMA | Foreign Exchange Management Act, 1999 |
| FRBM | Fiscal Responsibility and Budget Management Act, 2003 |
| IBC | Insolvency and Bankruptcy Code, 2016 |
| IFSC | Indian Financial System Code |
| MPC | Monetary Policy Committee |
| NABARD | National Bank for Agriculture and Rural Development (1982) |
| NACH | National Automated Clearing House |
| NARCL | National Asset Reconstruction Company Limited |
| NDTL | Net Demand and Time Liabilities |
| NSFR | Net Stable Funding Ratio |
| PCA | Prompt Corrective Action |
| SIDBI | Small Industries Development Bank of India (1990) |
| VPA | Virtual Payment Address |
How to Remember Banking Terms Quickly (Trick)
- Learn in pairs of opposites: repo vs reverse repo, Nostro vs Vostro, pledge vs hypothecation, NEFT (batches) vs RTGS (real time), factoring vs forfaiting.
- Anchor numbers to the term: 90 days (NPA), ₹5 lakh (DICGC), ₹2 lakh (RTGS minimum and payments bank deposit cap), 11 characters (IFSC), 9 digits (MICR), 3 months (cheque validity).
- Link rates to the repo: SDF = repo − 0.25%, MSF = Bank Rate = repo + 0.25%. Learn one number, get three.
- Revise from tests: after reading, attempt a banking awareness mock and re-read only the terms you got wrong.
Banking Terms Questions for Bank Exams (with Answers)
Q1. A loan account becomes an NPA when interest or instalment is overdue for more than: (a) 30 days (b) 60 days (c) 90 days (d) 180 days Answer: (c) 90 days.
Q2. An account overdue for 45 days is classified as: (a) SMA-0 (b) SMA-1 (c) SMA-2 (d) NPA Answer: (b) SMA-1 (31 to 60 days).
Q3. "Vostro account" means: (a) Our account with you (b) Your account with us (c) Their account with them (d) A dormant account Answer: (b) Your account with us (a foreign bank's rupee account held in India).
Q4. The minimum amount for an RTGS transfer is: (a) ₹50,000 (b) ₹1 lakh (c) ₹2 lakh (d) ₹5 lakh Answer: (c) ₹2 lakh.
Q5. In which charge does the borrower keep possession of the movable asset? (a) Pledge (b) Hypothecation (c) Lien (d) Assignment Answer: (b) Hypothecation.
Q6. How many characters are there in an IFSC code? (a) 9 (b) 10 (c) 11 (d) 12 Answer: (c) 11.
Q7. DICGC insures a depositor's money up to: (a) ₹1 lakh (b) ₹2 lakh (c) ₹5 lakh (d) ₹10 lakh Answer: (c) ₹5 lakh per depositor per bank.
Q8. Which of these cannot lend money? (a) Small Finance Bank (b) Regional Rural Bank (c) Payments Bank (d) Cooperative Bank Answer: (c) Payments Bank.
Q9. MCLR replaced the base rate system from: (a) 1 April 2014 (b) 1 April 2016 (c) 1 October 2019 (d) 1 July 2010 Answer: (b) 1 April 2016.
Q10. Which body runs UPI and RuPay? (a) RBI (b) SBI (c) NPCI (d) SEBI Answer: (c) NPCI.
Banking Terms FAQs
What are the most important banking terms for bank exams?
Repo, reverse repo, SDF, MSF, Bank Rate, CRR, SLR, NPA, SMA, CASA, CAR, KYC, NEFT, RTGS, IMPS, UPI, MCLR, EBLR, DICGC, SARFAESI, Basel III, priority sector lending and payments banks top the list.
Is there a banking terms A to Z PDF?
This page works as an A to Z list you can read online or print with your browser's "Save as PDF" option. It is kept updated with RBI's current rates.
What is the difference between NEFT and RTGS?
NEFT settles in half-hourly batches and has no minimum amount; RTGS settles each transaction instantly and needs a minimum of ₹2 lakh. Both run 24×7.
What is the difference between CRR and SLR?
CRR is kept as cash with the RBI and earns nothing (3%). SLR is kept by the bank itself in cash, gold or approved securities (18%).
What is CASA ratio?
CASA ratio = (current + savings deposits) ÷ total deposits. Because these deposits pay little or no interest, a higher ratio lowers the bank's cost of funds.
Related topics: revise current CRR and SLR rate 2026, payments banks list 2026, NPA classification and provisioning norms and types of cheques in banking next.
Practice Next
- Attempt the IBPS and SBI Clerk Banking Awareness Mock Test 01 and the IBPS and SBI PO Banking Awareness Mock Test 01.
- Practise the terms: NEFT, RTGS and Payment Systems Quiz 01, RBI Functions and Organisation Quiz 01 and Banking Acts and Financial Institutions Quiz 01.
- Related notes: Repo Rate History Year Wise, Banks Headquarters and Taglines 2026, Basel Norms 1, 2, 3 Difference and List of RBI Governors, plus NEFT, RTGS, IMPS and UPI difference, computer abbreviations for bank exams, plus important banking acts in India, plus national income concepts (GDP, GNP, NNP).
- Open recruitment: SBI Clerk Recruitment 2026.
- Browse all study notes.